IIB 

111TH CONGRESS 

2D SESSION H. R. 4173 

IN THE SENATE OF THE UNITED STATES 

JANUARY 20, 2010 

Received; read twice and referred to the Committee on Banking, Housing, and 

Urban Affairs 

AN ACT 

To provide for financial regulatory reform, to protect consumers and investors, to enhance Federal understanding 

of insurance issues, to regulate the over-the-counter derivatives markets, 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, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Wall Street Reform 

3 and Consumer Protection Act of 2009’’. 

4 SEC. 2. TABLE OF CONTENTS. 

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

Sec. 1. Short title. 

Sec. 2. Table of contents. 

TITLE I—FINANCIAL STABILITY IMPROVEMENT ACT 

Sec. 1000. Short title; definitions. 

Sec. 1000A. Restrictions on the Federal Reserve System pending audit report. 

Subtitle A—The Financial Services Oversight Council 

Sec. 1001. Financial Services Oversight Council established. 

Sec. 1002. Resolution of disputes among Federal financial regulatory agencies. 

Sec. 1003. Technical and professional advisory committees. 

Sec. 1004. Financial Services Oversight Council meetings and council governance. 

Sec. 1005. Council staff and funding. 

Sec. 1006. Reports to the Congress. 

Sec. 1007. Applicability of certain Federal laws. 

Sec. 1008. Oversight by GAO. 

Subtitle B—Prudential Regulation of Companies and Activities for Financial 

Stability Purposes 

Sec. 1100. Federal Reserve Board authority that of agent acting on behalf of 

Council. 

Sec. 1101. Council and Board authority to obtain information. 

Sec. 1102. Council prudential regulation recommendations to Federal financial 

regulatory agencies; agency authority. 

Sec. 1103. Subjecting financial companies to stricter prudential standards for 

financial stability purposes. 

Sec. 1104. Stricter prudential standards for certain financial holding companies 

for financial stability purposes. 

Sec. 1105. Mitigation of systemic risk. 

Sec. 1106. Subjecting activities or practices to stricter prudential standards for 

financial stability purposes. 

Sec. 1107. Stricter regulation of activities and practices for financial stability 

purposes. 

Sec. 1108. Effect of rescission of identification. 

Sec. 1109. Emergency financial stabilization. 

Sec. 1110. Additional related amendments. 

Sec. 1111. Corporation may receive warrants when paying or risking taxpayer 

funds. 

Sec. 1112. Examinations and enforcement actions for insurance and resolutions 

purposes. 

Sec. 1113. Study of the effects of size and complexity of financial institutions 

on capital market efficiency and economic growth. 


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Sec. 1114. Exercise of Federal Reserve authority. 

Sec. 1115. Stress tests. 

Sec. 1116. Contingent Capital. 

Sec. 1117. Restriction on proprietary trading by designated financial holding 

companies. 

Sec. 1118. Rule of construction. 

Sec. 1119. Antitrust savings clause. 

Subtitle C—Improvements to Supervision and Regulation of Federal 

Depository Institutions 

Sec. 1201. Definitions. 

Sec. 1202. Amendments to the Home Owners’ Loan Act relating to transfer of 

functions. 

Sec. 1203. Amendments to the revised statutes. 

Sec. 1204. Power and duties transferred. 

Sec. 1205. Transfer date. 

Sec. 1206. Expiration of term of comptroller. 

Sec. 1207. Office of Thrift Supervision abolished. 

Sec. 1208. Savings provisions. 

Sec. 1209. Regulations and orders. 

Sec. 1210. Coordination of transition activities. 

Sec. 1211. Interim responsibilities of office of the comptroller of the currency 

and office of thrift supervision. 

Sec. 1212. Employees transferred. 

Sec. 1213. Property transferred. 

Sec. 1214. Funds transferred. 

Sec. 1215. Disposition of affairs. 

Sec. 1216. Continuation of services. 

Sec. 1217. Contracting and leasing authority. 

Sec. 1218. Treatment of savings and loan holding companies. 

Sec. 1219. Practices of certain mutual thrift holding companies preserved. 

Sec. 1220. Implementation plan and reports. 

Sec. 1221. Composition of board of directors of the Federal Deposit Insurance 

Corporation. 

Sec. 1222. Amendments to section 3. 

Sec. 1223. Amendments to section 7. 

Sec. 1224. Amendments to section 8. 

Sec. 1225. Amendments to section 11. 

Sec. 1226. Amendments to section 13. 

Sec. 1227. Amendments to section 18. 

Sec. 1228. Amendments to section 28. 

Sec. 1229. Amendments to the Alternative Mortgage Transaction Parity Act of 

1982. 

Sec. 1230. Amendments to the Bank Holding Company Act of 1956. 

Sec. 1231. Amendments to the Bank Protection Act of 1968. 

Sec. 1232. Amendments to the Bank Service Company Act. 

Sec. 1233. Amendments to the Community Reinvestment Act of 1977. 

Sec. 1234. Amendments to the Depository Institution Management Interlocks 

Act. 

Sec. 1235. Amendments to the Emergency Homeowners’ Relief Act. 

Sec. 1236. Amendments to the Equal Credit Opportunity Act. 

Sec. 1237. Amendments to the Federal Credit Union Act. 

Sec. 1238. Amendments to the Federal Financial Institutions Examination 

Council Act of 1978. 


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Sec. 1239. Amendments to the Federal Home Loan Bank Act. 

Sec. 1240. Amendments to the Federal Reserve Act. 

Sec. 1241. Amendments to the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989. 

Sec. 1242. Amendments to the Housing Act of 1948. 

Sec. 1243. Amendments to the Housing and Community Development Act of 

1992 and the Federal Housing Enterprises Financial Safety 

and Soundness Act of 1992. 

Sec. 1244. Amendment to the Housing and Urban-Rural Recovery Act of 1983. 

Sec. 1245. Amendments to the National Housing Act. 

Sec. 1246. Amendments to the Right to Financial Privacy Act of 1978. 

Sec. 1247. Amendments to the Balanced Budget and Emergency Deficit Control Act of 1985. 

Sec. 1248. Amendments to the Crime Control Act of 1990. 

Sec. 1249. Amendment to the Flood Disaster Protection Act of 1973. 

Sec. 1250. Amendment to the Investment Company Act of 1940. 

Sec. 1251. Amendment to the Neighborhood Reinvestment Corporation Act. 

Sec. 1252. Amendments to the Securities Exchange Act of 1934. 

Sec. 1253. Amendments to title 18, United States Code. 

Sec. 1254. Amendments to title 31, United States Code. 

Sec. 1255. Requirement for Countercyclical Capital Requirements. 

Sec. 1256. Transfer of authority to the Board with respect to savings and loan 

holding companies. 

Sec. 1257. Effective date. 

Subtitle D—Further Improvements to the Regulation of Bank Holding 

Companies and Depository Institutions 

Sec. 1301. Treatment of industrial loan companies, savings associations, and 

certain other companies under the bank holding company act. 

Sec. 1302. Registration of certain companies as bank holding companies. 

Sec. 1303. Reports and examinations of bank holding companies; regulation of 

functionally regulated subsidiaries. 

Sec. 1304. Requirements for financial holding companies to remain well capitalized and well managed. 

Sec. 1305. Standards for interstate acquisitions. 

Sec. 1306. Enhancing existing restrictions on bank transactions with affiliates. 

Sec. 1307. Eliminating exceptions for transactions with financial subsidiaries. 

Sec. 1308. Lending limits applicable to credit exposure on derivative transactions, repurchase agreements, reverse repurchase agreements, and securities lending and borrowing transactions. 

Sec. 1309. Restriction on conversions of troubled banks and thrifts. 

Sec. 1310. Lending limits to insiders. 

Sec. 1311. Limitations on purchases of assets from insiders. 

Sec. 1312. Rules regarding capital levels of bank holding companies. 

Sec. 1313. Enhancements to factors to be considered in certain acquisitions. 

Sec. 1314. Elimination of elective investment bank holding company framework. 

Sec. 1315. Examination fees for large bank holding companies. 

Sec. 1316. Mutual national banks and Federal mutual bank holding companies 

authorized. 

Sec. 1317. Nationwide Deposit Cap for Interstate Acquisitions. 

Sec. 1318. De novo branching into states. 

Subtitle E—Improvements to the Federal Deposit Insurance Fund 


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Sec. 1401. Accounting for actual risk to the Deposit Insurance Fund. 

Sec. 1402. Creating a risk-focused assessment base. 

Sec. 1403. Elimination of procyclical assessments. 

Sec. 1404. Enhanced access to information for deposit insurance purposes. 

Sec. 1405. Transition reserve ratio requirements to reflect new assessment 

base. 

Subtitle F—Improvements to the Asset-Backed Securitization Process 

Sec. 1501. Short title. 

Sec. 1502. Credit risk retention. 

Sec. 1503. Periodic and other reporting under the Securities Exchange Act of 

1934 for asset-backed securities. 

Sec. 1504. Representations and warranties in asset-backed offerings. 

Sec. 1505. Exempted transactions under the Securities Act of 1933. 

Sec. 1506. Study on the macroeconomic effects of risk retention requirements. 

Subtitle G—Enhanced Dissolution Authority 

Sec. 1601. Short title; Purpose. 

Sec. 1602. Definitions. 

Sec. 1603. Systemic risk determination. 

Sec. 1604. Dissolution; stabilization. 

Sec. 1605. Judicial review. 

Sec. 1606. Directors not liable for acquiescing in appointment of receiver. 

Sec. 1607. Termination and exclusion of other actions. 

Sec. 1608. Rulemaking. 

Sec. 1609. Powers and duties of corporation. 

Sec. 1610. Clarification of prohibition regarding concealment of assets from receiver or liquidating agent. 

Sec. 1611. Office of Dissolution. 

Sec. 1612. Miscellaneous provisions. 

Sec. 1613. Amendment to Federal Deposit Insurance Act. 

Sec. 1614. Application of executive compensation limitations. 

Sec. 1615. Study on the effect of safe harbor provisions in insolvency cases. 

Sec. 1616. Treasury study. 

Sec. 1617. Priority of claims in federal deposit insurance act. 

Subtitle H—Additional Improvements for Financial Crisis Management 

Sec. 1701. Additional improvements for financial crisis management. 

Sec. 1702. Certain restrictions related to foreign currency swap authority. 

Sec. 1703. Additional oversight of financial regulatory system. 

Subtitle I—Miscellaneous 

Sec. 1801. Inclusion of minorities and women; Diversity in agency workforce. 

Sec. 1802. Federal Housing Finance Agency advisory role in FIEC. 

Subtitle J—International Policy Coordination 

Sec. 1901. International policy coordination. 

Subtitle K—International Financial Provisions 

Sec. 1951. Access to United States financial market by foreign institutions. 

Sec. 1952. Reducing TARP funds to offset costs. 


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Subtitle L—Securities Holding Companies 

Sec. 1961. Securities holding companies. 

TITLE II—CORPORATE AND FINANCIAL INSTITUTION 

COMPENSATION FAIRNESS ACT 

Sec. 2001. Short title. 

Sec. 2002. Shareholder vote on executive compensation disclosures. 

Sec. 2003. Compensation committee independence. 

Sec. 2004. Enhanced compensation structure reporting to reduce perverse incentives. 

TITLE III—DERIVATIVE MARKETS TRANSPARENCY AND 

ACCOUNTABILITY ACT 

Sec. 3001. Short title. 

Sec. 3002. Review of regulatory authority. 

Sec. 3003. International harmonization. 

Sec. 3004. Prohibition against government assistance. 

Sec. 3005. Studies. 

Sec. 3006. Recommendations for changes to insolvency laws. 

Sec. 3007. Abusive swaps. 

Sec. 3008. Authority to prohibit participation in swap activities. 

Sec. 3009. Memorandum. 

Subtitle A—Regulation of Swap Markets 

Sec. 3101. Definitions. 

Sec. 3102. Jurisdiction. 

Sec. 3103. Clearing and execution transparency. 

Sec. 3104. Public reporting of aggregate swap data. 

Sec. 3105. Swap repositories. 

Sec. 3106. Reporting and recordkeeping. 

Sec. 3107. Registration and regulation of swap dealers and major swap participants. 

Sec. 3108. Conflicts of interest. 

Sec. 3109. Swap execution facilities. 

Sec. 3110. Derivatives transaction execution facilities and exempt boards of 

trade. 

Sec. 3111. Designated contract markets. 

Sec. 3112. Margin. 

Sec. 3113. Position limits. 

Sec. 3114. Enhanced authority over registered entities. 

Sec. 3115. Foreign boards of trade. 

Sec. 3116. Legal certainty for swaps. 

Sec. 3117. FDICIA amendments. 

Sec. 3118. Enforcement authority. 

Sec. 3119. Enforcement. 

Sec. 3120. Retail commodity transactions. 

Sec. 3121. Large swap trader reporting. 

Sec. 3122. Segregation of assets held as collateral in swap transactions. 

Sec. 3123. Other authority. 

Sec. 3124. Antitrust. 

Sec. 3125. Review of prior actions. 

Sec. 3126. Expedited process. 

Sec. 3127. Effective date. 


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Subtitle B—Regulation of Security-Based Swap Markets 

Sec. 3201. Definitions under the Securities Exchange Act of 1934. 

Sec. 3202. Repeal of prohibition on regulation of security-based swaps. 

Sec. 3203. Amendments to the Securities Exchange Act of 1934. 

Sec. 3204. Registration and regulation of swap dealers and major swap participants. 

Sec. 3205. Reporting and recordkeeping. 

Sec. 3206. State gaming and bucket shop laws. 

Sec. 3207. Amendments to the Securities Act of 1933; treatment of securitybased swaps. 

Sec. 3208. Other authority. 

Sec. 3209. Jurisdiction. 

Sec. 3210. Effective date. 

Subtitle C—Improved Financial and Commodity Markets Oversight and 

Accountability 

Sec. 3301. Elevation of certain Inspectors General to appointment pursuant to 

section 3 of the Inspector General Act of 1978. 

Sec. 3302. Continuation of provisions relating to personnel. 

Sec. 3303. Corrective responses by heads of certain establishments to deficiencies identified by Inspectors General. 

Sec. 3304. Effective date; transition rule. 

Sec. 3305. Authority of the Commodity Futures Trading Commission to define 

‘‘commercial risk’’, ‘‘operating risk’’, and ‘‘balance sheet risk’’. 

Sec. 3306. Conflicts of interest in clearing organizations. 

Sec. 3307. Definitions of major swap participant and major security-based 

swap participant. 

TITLE IV—CONSUMER FINANCIAL PROTECTION AGENCY ACT 

Sec. 4001. Short title. 

Sec. 4002. Definitions. 

Subtitle A—Establishment of the Agency 

Sec. 4101. Establishment of the Consumer Financial Protection Agency. 

Sec. 4102. Director. 

Sec. 4103. Establishment and composition of the commission. 

Sec. 4104. Consumer Financial Protection Oversight Board. 

Sec. 4105. Executive and administrative powers. 

Sec. 4106. Administration. 

Sec. 4107. Consumer Advisory Board. 

Sec. 4108. Coordination. 

Sec. 4109. Reports to the Congress. 

Sec. 4110. GAO small business studies. 

Sec. 4111. Funding; fees and assessments; penalties and fines. 

Sec. 4112. Amendments relating to other administrative provisions. 

Sec. 4113. Oversight by GAO. 

Sec. 4114. Effective date. 

Subtitle B—General Powers of the Director and Agency 

Sec. 4201. Mandate and objectives. 

Sec. 4202. Authorities. 


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Sec. 4203. Examination and enforcement for small banks, thrifts, and credit 

unions. 

Sec. 4204. Simultaneous and coordinated supervisory action. 

Sec. 4205. Limitations on authority of agency and director. 

Sec. 4206. Collection of information; confidentiality regulations. 

Sec. 4207. Monitoring; assessments of significant regulations; reports. 

Sec. 4208. Authority to restrict mandatory predispute arbitration. 

Sec. 4209. Registration and supervision of nondepository covered persons. 

Sec. 4210. Effective date. 

Subtitle C—Specific Authorities 

Sec. 4301. Prohibiting unfair, deceptive, or abusive acts or practices. 

Sec. 4302. Disclosures. 

Sec. 4303. Sales practices. 

Sec. 4304. Pilot disclosures. 

Sec. 4305. Adopting operational standards to deter unfair, deceptive, or abusive 

practices. 

Sec. 4306. Duties. 

Sec. 4307. Consumer rights to access information. 

Sec. 4308. Prohibited acts. 

Sec. 4309. Treatment of remittance transfers. 

Sec. 4310. Effective date. 

Sec. 4311. No authority to require the offering of financial products or services. 

Sec. 4312. Appraisal independence requirements. 

Sec. 4313. Overdraft protection notice requirements. 

Sec. 4314. Review, report, and program with respect to exchange facilitators. 

Sec. 4315. Regulation of person-to-person lending. 

Sec. 4316. Treatment of reverse mortgages. 

Subtitle D—Preservation of State Law 

Sec. 4401. Relation to State law. 

Sec. 4402. Preservation of enforcement powers of States. 

Sec. 4403. Preservation of existing contracts. 

Sec. 4404. State law preemption standards for national banks and subsidiaries 

clarified. 

Sec. 4405. Visitorial standards. 

Sec. 4406. Clarification of law applicable to nondepository institution subsidiaries. 

Sec. 4407. State law preemption standards for Federal savings associations and 

subsidiaries clarified. 

Sec. 4408. Visitorial standards. 

Sec. 4409. Clarification of law applicable to nondepository institution subsidiaries. 

Sec. 4410. Effective date. 

Subtitle E—Enforcement Powers 

Sec. 4501. Definitions. 

Sec. 4502. Investigations and administrative discovery. 

Sec. 4503. Hearings and adjudication proceedings. 

Sec. 4504. Litigation authority. 

Sec. 4505. Relief available. 

Sec. 4506. Referrals for criminal proceedings. 

Sec. 4507. Employee protection. 


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Sec. 4508. No private right of action. 

Sec. 4509. Effective date. 

Subtitle F—Transfer of Functions and Personnel; Transitional Provisions 

Sec. 4601. Transfer of certain functions. 

Sec. 4602. Designated transfer date. 

Sec. 4603. Savings provisions. 

Sec. 4604. Transfer of certain personnel. 

Sec. 4605. Incidental transfers. 

Sec. 4606. Interim authority of the Secretary. 

Subtitle G—Regulatory Improvements 

Sec. 4701. Collection of deposit account data. 

Sec. 4702. Small business data collection. 

Sec. 4703. Annual financial autopsy. 

Sec. 4704. Reporting of mortgage data by State. 

Subtitle H—Conforming Amendments 

Sec. 4801. Amendments to the Inspector General Act of 1978. 

Sec. 4802. Amendments to the Privacy Act of 1974. 

Sec. 4803. Amendments to the Alternative Mortgage Transaction Parity Act of 

1982. 

Sec. 4804. Amendments to the Consumer Credit Protection Act. 

Sec. 4805. Amendments to the Expedited Funds Availability Act. 

Sec. 4806. Amendments to the Federal Deposit Insurance Act. 

Sec. 4807. Amendments to the Gramm-Leach-Bliley Act. 

Sec. 4808. Amendments to the Home Mortgage Disclosure Act of 1975. 

Sec. 4809. Amendments to division D of the Omnibus Appropriations Act, 

2009. 

Sec. 4810. Amendments to the Homeowners Protection Act of 1998. 

Sec. 4811. Amendments to the Real Estate Settlement Procedures Act of 1974. 

Sec. 4812. Amendments to the Right to Financial Privacy Act of 1978. 

Sec. 4813. Amendments to the Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 

Sec. 4814. Amendments to the Truth in Savings Act. 

Sec. 4815. Amendments to the Telemarketing and Consumer Fraud Abuse and 

Prevention Act. 

Sec. 4816. Membership in Financial Literacy and Education Commission. 

Sec. 4817. Effective date. 

Sec. 4818. Amendments to Truth in Lending Act. 

Subtitle I—Improvements to the Federal Trade Commission Act 

Sec. 4901. Amendments to the Federal Trade Commission Act. 

Subtitle J—Miscellaneous 

Sec. 4951. Requirements for State-licensed loan originators. 

TITLE V—CAPITAL MARKETS 

Subtitle A—Private Fund Investment Advisers Registration Act 

Sec. 5001. Short title. 

Sec. 5002. Definitions. 


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Sec. 5003. Elimination of private adviser exemption; Limited exemption for foreign private fund advisers; Limited intrastate exemption. 

Sec. 5004. Collection of data. 

Sec. 5005. Elimination of disclosure provision. 

Sec. 5006. Exemption of and reporting by venture capital fund advisers. 

Sec. 5007. Exemption of and reporting by certain private fund advisers. 

Sec. 5008. Clarification of rulemaking authority. 

Sec. 5009. GAO study. 

Sec. 5010. Effective date; Transition period. 

Sec. 5011. Qualified client standard. 

Subtitle B—Accountability and Transparency in Rating Agencies Act 

Sec. 6001. Short title. 

Sec. 6002. Enhanced regulation of nationally recognized statistical rating organizations. 

Sec. 6003. Standards for private actions. 

Sec. 6004. Issuer disclosure of preliminary ratings. 

Sec. 6005. Change to designation. 

Sec. 6006. Timeline for regulations. 

Sec. 6007. Elimination of exemption from fair disclosure rule. 

Sec. 6008. Advisory Board. 

Sec. 6009. Removal of statutory references to credit ratings. 

Sec. 6010. Review of reliance on ratings. 

Sec. 6011. Publication of rating histories on the EDGAR system. 

Sec. 6012. Effect of Rule 436(g). 

Sec. 6013. Studies. 

Subtitle C—Investor Protection Act 

Sec. 7001. Short title. 

PART 1—DISCLOSURE

Sec. 7101. Investor Advisory Committee established. 

Sec. 7102. Clarification of the Commission’s authority to engage in consumer 

testing. 

Sec. 7103. Establishment of a fiduciary duty for brokers, dealers, and investment advisers, and harmonization of regulation. 

Sec. 7104. Commission study and rulemaking on disclosure to retail customers 

before purchase of products or services. 

Sec. 7105. Beneficial ownership and short-swing profit reporting. 

Sec. 7106. Revision to recordkeeping rules. 

Sec. 7107. Study on enhancing investment adviser examinations. 

Sec. 7108. GAO study of financial planning. 

PART 2—ENFORCEMENT AND REMEDIES

Sec. 7201. Authority to restrict mandatory pre-dispute arbitration. 

Sec. 7202. Comptroller General study to review securities arbitration system. 

Sec. 7203. Whistleblower protection. 

Sec. 7204. Conforming amendments for whistleblower protection. 

Sec. 7205. Implementation and transition provisions for whistleblower protections. 

Sec. 7206. Collateral bars. 

Sec. 7207. Aiding and abetting authority under the Securities Act and the Investment Company Act. 


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Sec. 7208. Authority to impose penalties for aiding and abetting violations of 

the Investment Advisers Act. 

Sec. 7209. Deadline for completing examinations, inspections and enforcement 

actions. 

Sec. 7210. Nationwide service of subpoenas. 

Sec. 7211. Authority to impose civil penalties in cease and desist proceedings. 

Sec. 7212. Formerly associated persons. 

Sec. 7213. Sharing privileged information with other authorities. 

Sec. 7214. Expanded access to grand jury information. 

Sec. 7215. Aiding and abetting standard of knowledge satisfied by recklessness. 

Sec. 7216. Extraterritorial jurisdiction of the antifraud provisions of the Federal securities laws. 

Sec. 7217. Fidelity bonding. 

Sec. 7218. Enhanced SEC authority to conduct surveillance and risk assessment. 

Sec. 7219. Investment company examinations. 

Sec. 7220. Control person liability under the Securities Exchange Act. 

Sec. 7221. Enhanced application of anti-fraud provisions. 

Sec. 7222. SEC authority to issue rules on proxy access. 

PART 3—COMMISSION FUNDING AND ORGANIZATION

Sec. 7301. Authorization of appropriations. 

Sec. 7302. Investment adviser regulation funding. 

Sec. 7303. Amendments to section 31 of the Securities Exchange Act of 1934. 

Sec. 7304. Commission organizational study and reform. 

Sec. 7305. Capital Markets Safety Board. 

Sec. 7306. Report on implementation of ‘‘post-Madoff reforms’’. 

Sec. 7307. Joint Advisory Committee. 

PART 4—ADDITIONAL COMMISSION REFORMS

Sec. 7401. Regulation of securities lending. 

Sec. 7402. Lost and stolen securities. 

Sec. 7403. Fingerprinting. 

Sec. 7404. Equal treatment of self-regulatory organization rules. 

Sec. 7405. Clarification that section 205 of the Investment Advisers Act of 

1940 does not apply to State-registered advisers. 

Sec. 7406. Conforming amendments for the repeal of the Public Utility Holding 

Company Act of 1935. 

Sec. 7407. Promoting transparency in financial reporting. 

Sec. 7408. Unlawful margin lending. 

Sec. 7409. Protecting confidentiality of materials submitted to the Commission. 

Sec. 7410. Technical corrections. 

Sec. 7411. Municipal securities. 

Sec. 7412. Interested person definition. 

Sec. 7413. Rulemaking authority to protect redeeming investors. 

Sec. 7414. Study on SEC revolving door. 

Sec. 7415. Study on internal control evaluation and reporting cost burdens on 

smaller issuers. 

Sec. 7416. Analysis of rule regarding smaller reporting companies. 

Sec. 7417. Financial Reporting Forum. 

Sec. 7418. Investment advisers subject to State authorities. 

Sec. 7419. Custodial requirements. 

Sec. 7420. Ombudsman. 

Sec. 7421. Notice to missing security holders. 


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Sec. 7422. Short sale reforms. 

Sec. 7423. Streamlining of SEC filing procedures. 

PART 5—SECURITIES INVESTOR PROTECTION ACT AMENDMENTS

Sec. 7501. Increasing the minimum assessment paid by SIPC members. 

Sec. 7502. Increasing the borrowing limit on treasury loans. 

Sec. 7503. Increasing the cash limit of protection. 

Sec. 7504. SIPC as trustee in SIPA liquidation proceedings. 

Sec. 7505. Insiders ineligible for SIPC advances. 

Sec. 7506. Eligibility for direct payment procedure. 

Sec. 7507. Increasing the fine for prohibited acts under SIPA. 

Sec. 7508. Penalty for misrepresentation of SIPC membership or protection. 

Sec. 7509. Futures held in a portfolio margin securities account protection. 

Sec. 7510. Study and report on the feasibility of risk-based assessments for 

SIPC members. 

PART 6—SARBANES-OXLEY ACT AMENDMENTS

Sec. 7601. Public Company Accounting Oversight Board oversight of auditors 

of brokers and dealers. 

Sec. 7602. Foreign regulatory information sharing. 

Sec. 7603. Expansion of audit information to be produced and exchanged with 

foreign counterparts. 

Sec. 7604. Conforming amendment related to registration. 

Sec. 7605. Fair fund amendments. 

Sec. 7606. Exemption for nonaccelerated filers. 

Sec. 7607. Whistleblower protection against retaliation by a subsidiary of an 

issuer. 

Sec. 7608. Congressional access to information. 

Sec. 7609. Creation of ombudsman for the PCAOB. 

Sec. 7610. Auditing Oversight Board. 

PART 7—SENIOR INVESTMENT PROTECTION

Sec. 7701. Findings. 

Sec. 7702. Definitions. 

Sec. 7703. Grants to States for enhanced protection of seniors from being misled by false designations. 

Sec. 7704. Applications. 

Sec. 7705. Length of participation. 

Sec. 7706. Authorization of appropriations. 

PART 8—REGISTRATION OF MUNICIPAL FINANCIAL ADVISORS

Sec. 7801. Municipal financial adviser registration requirement. 

Sec. 7802. Conforming amendments. 

Sec. 7803. Effective dates. 

TITLE VI—FEDERAL INSURANCE OFFICE 

Sec. 8001. Short title. 

Sec. 8002. Federal Insurance Office established. 

Sec. 8003. Report on global reinsurance market. 

Sec. 8004. Study on modernization and improvement of insurance regulation in 

the United States. 


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Sec. 8005. Sense of Congress regarding simplified mortgage contract summaries. 

TITLE VII—MORTGAGE REFORM AND ANTI-PREDATORY LENDING 

ACT 

Sec. 9000. Short title; designation as enumerated consumer law. 

Subtitle A—Residential Mortgage Loan Origination Standards 

Sec. 9001. Definitions. 

Sec. 9002. Residential mortgage loan origination. 

Sec. 9003. Prohibition on steering incentives. 

Sec. 9004. Liability. 

Sec. 9005. Regulations. 

Sec. 9006. Study of shared appreciation mortgages. 

Subtitle B—Minimum Standards For Mortgages 

Sec. 9101. Ability to repay. 

Sec. 9102. Net tangible benefit for refinancing of residential mortgage loans. 

Sec. 9103. Safe harbor and rebuttable presumption. 

Sec. 9104. Liability. 

Sec. 9105. Defense to foreclosure. 

Sec. 9106. Additional standards and requirements. 

Sec. 9107. Rule of construction. 

Sec. 9108. Effect on State laws. 

Sec. 9109. Regulations. 

Sec. 9110. Amendments to civil liability provisions. 

Sec. 9111. Lender rights in the context of borrower deception. 

Sec. 9112. Six-month notice required before reset of hybrid adjustable rate 

mortgages. 

Sec. 9113. Required disclosures. 

Sec. 9114. Disclosures required in monthly statements for residential mortgage 

loans. 

Sec. 9115. Legal assistance for foreclosure-related issues. 

Sec. 9116. Effective date. 

Sec. 9117. Report by the GAO. 

Sec. 9118. State Attorney General enforcement authority. 

Subtitle C—High-Cost Mortgages 

Sec. 9201. Definitions relating to high-cost mortgages. 

Sec. 9202. Amendments to existing requirements for certain mortgages. 

Sec. 9203. Additional requirements for certain mortgages. 

Sec. 9204. Regulations. 

Sec. 9205. Effective date. 

Subtitle D—Office of Housing Counseling 

Sec. 9301. Short title. 

Sec. 9302. Establishment of Office of Housing Counseling. 

Sec. 9303. Counseling procedures. 

Sec. 9304. Grants for housing counseling assistance. 

Sec. 9305. Requirements to use HUD-certified counselors under HUD programs. 

Sec. 9306. Study of defaults and foreclosures. 


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Sec. 9307. Default and foreclosure database. 

Sec. 9308. Definitions for counseling-related programs. 

Sec. 9309. Accountability and transparency for grant recipients. 

Sec. 9310. Updating and simplification of mortgage information booklet. 

Sec. 9311. Home inspection counseling. 

Sec. 9312. Warnings to homeowners of foreclosure rescue scams. 

Subtitle E—Mortgage Servicing 

Sec. 9401. Escrow and impound accounts relating to certain consumer credit 

transactions. 

Sec. 9402. Disclosure notice required for consumers who waive escrow services. 

Sec. 9403. Real Estate Settlement Procedures Act of 1974 amendments. 

Sec. 9404. Truth in Lending Act amendments. 

Sec. 9405. Escrows included in repayment analysis. 

Subtitle F—Appraisal Activities 

Sec. 9501. Property appraisal requirements. 

Sec. 9502. Unfair and deceptive practices and acts relating to certain consumer 

credit transactions. 

Sec. 9503. Amendments relating to Appraisal Subcommittee of FIEC, Appraiser Independence Monitoring, Approved Appraiser Education, Appraisal Management Companies, Appraiser Complaint Hotline, Automated Valuation Models, and Broker Price 

Opinions. 

Sec. 9504. Study required on improvements in appraisal process and compliance programs. 

Sec. 9505. Equal Credit Opportunity Act amendment. 

Sec. 9506. Real Estate Settlement Procedures Act of 1974 amendment relating 

to certain appraisal fees. 

Subtitle G—Sense of Congress Regarding the Importance of Government 

Sponsored Enterprises Reform 

Sec. 9601. Sense of Congress regarding the importance of Government-sponsored enterprises reform to enhance the protection, limitation, 

and regulation of the terms of residential mortgage credit. 

Subtitle H—Reports and Data Collection 

Sec. 9701. GAO study report on government efforts to combat mortgage foreclosure rescue scams and loan modification fraud. 

Sec. 9702. Reporting of mortgage data by State. 

Subtitle I—Multifamily Mortgage Resolution 

Sec. 9801. Multifamily mortgage resolution program. 

Subtitle J—Study of Effect of Drywall Presence on Foreclosures 

Sec. 9901. Study of effect of drywall presence on foreclosures. 

Subtitle K—Home Affordable Modification Program 

Sec. 9911. Home Affordable Modification Program guidelines. 

Subtitle L—Making Home Affordable Program 


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Sec. 9921. Public availability of information. 

TITLE VIII—FORECLOSURE AVOIDANCE AND AFFORDABLE 

HOUSING 

Sec. 10001. Emergency mortgage relief. 

Sec. 10002. Additional assistance for Neighborhood Stabilization Program. 

TITLE IX—NONADMITTED AND REINSURANCE REFORM ACT 

Sec. 10051. Short title. 

Sec. 10052. Effective date. 

Subtitle A—Nonadmitted Insurance 

Sec. 10101. Reporting, payment, and allocation of premium taxes. 

Sec. 10102. Regulation of nonadmitted insurance by insured’s home state. 

Sec. 10103. Participation in national producer database. 

Sec. 10104. Uniform standards for surplus lines eligibility. 

Sec. 10105. Streamlined application for commercial purchasers. 

Sec. 10106. GAO study of nonadmitted insurance market. 

Sec. 10107. Definitions. 

Subtitle B—Reinsurance 

Sec. 10201. Regulation of credit for reinsurance and reinsurance agreements. 

Sec. 10202. Regulation of reinsurer solvency. 

Sec. 10203. Definitions. 

Subtitle C—Rule of Construction 

Sec. 10301. Rule of construction. 

Sec. 10302. Severability. 

TITLE X—INTEREST-BEARING TRANSACTION ACCOUNTS 

AUTHORIZED 

Sec. 11001. Interest-bearing transaction accounts authorized. 

1 TITLE I—FINANCIAL STABILITY 

2 IMPROVEMENT ACT 

3 SEC. 1000. SHORT TITLE; DEFINITIONS. 

4 (a) SHORT TITLE.—This title may be cited as the 

5 ‘‘Financial Stability Improvement Act of 2009’’. 

6 (b) DEFINITIONS.—For purposes of this title, the fol7 lowing definitions shall apply: 

8 (1) The term ‘‘Board’’ means the Board of 

9 Governors of the Federal Reserve System. 


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1 (2) The term ‘‘Council’’ means the Financial 

2 Services Oversight Council established under section 

3 1001. 

4 (3) The term ‘‘Federal financial regulatory 

5 agency’’ means any agency that has a voting mem6 ber of the Council as set forth in section 1001(b)(1). 

7 (4) The term ‘‘financial company’’ means a 

8 company or other entity— 

9 (A) that is— 

10 (i) incorporated or organized under 

11 the laws of the United States or any State, 

12 territory, or possession of the United 

13 States, the District of Columbia, Common14 wealth of Puerto Rico, Commonwealth of 

15 Northern Mariana Islands, Guam, Amer16 ican Samoa, or the United States Virgin 

17 Islands; or 

18 (ii) a company incorporated in or or19 ganized in a country other than the United 

20 States that has significant operations in 

21 the United States (hereafter in this title 

22 referred to as a ‘‘foreign financial parent’’) 

23 after through— 

24 (I) a Federal or State branch or 

25 agency of a foreign bank as such 


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1 terms are defined in the International 

2 Banking Act of 1978 (12 U.S.C. 3101 

3 et seq.); or 

4 (II) a United States affiliate or 

5 other United States operating entity; 

6 (B) that is, in whole or in part, directly or 

7 indirectly, engaged in financial activities; and 

8 (C) that is not a Farm Credit System in9 stitution chartered under and subject to the 

10 provisions of the Farm Credit Act of 1971, as 

11 amended (12 U.S.C. 2001 et seq.). 

12 (5) FINANCIAL HOLDING COMPANY SUBJECT TO

13 STRICTER STANDARDS.—The term ‘‘financial holding 

14 company subject to stricter standards’’ means— 

15 (A) a financial company that has been sub16 jected to stricter prudential standards under 

17 subtitle B; or 

18 (B) in the case of a financial company de19 scribed in subparagraph (A) that is required to 

20 establish an intermediate holding company 

21 under section 6 of the Bank Holding Company 

22 Act, the section 6 holding company through 

23 which the financial company is required to con24 duct its financial activities. 


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1 (6) The term ‘‘primary financial regulatory 

2 agency’’ means the following: 

3 (A) The Comptroller of the Currency, with 

4 respect to any national bank, any Federal 

5 branch or Federal agency of a foreign bank, 

6 and, after the date on which the functions of 

7 the Office of Thrift Supervision and the Direc8 tor of the Office of Thrift Supervision are 

9 transferred under subtitle C, a Federal savings 

10 association. 

11 (B) The Board, with respect to— 

12 (i) any State member bank; 

13 (ii) any bank holding company and 

14 any subsidiary of such company (as such 

15 terms are defined in the Bank Holding 

16 Company Act), other than a subsidiary 

17 that is described in any other subpara18 graph of this paragraph to the extent that 

19 the subsidiary is engaged in an activity de20 scribed in such subparagraph; 

21 (iii) any financial holding company 

22 subject to stricter standards and any sub23 sidiary (as such term is defined in the 

24 Bank Holding Company Act) of such com25 pany, other than a subsidiary that is deVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 scribed in any other subparagraph of this 

2 paragraph to the extent that the subsidiary 

3 is engaged in an activity described in such 

4 subparagraph; 

5 (iv) after the date on which the func6 tions of the Office of Thrift Supervision 

7 are transferred under subtitle C, any sav8 ings and loan holding company (as defined 

9 in section 10(a)(1)(D) of the Home Own10 ers’ Loan Act) and any subsidiary (as such 

11 term is defined in the Bank Holding Com12 pany Act of 1956) of such company, other 

13 than a subsidiary that is described in any 

14 other subparagraph of this paragraph, to 

15 the extent that the subsidiary is engaged 

16 in an activity described in such subpara17 graph; 

18 (v) any organization organized and 

19 operated under section 25 or 25A of the 

20 Federal Reserve Act (12 U.S.C. 601 et 

21 seq. or 611 et seq.); and 

22 (vi) any foreign bank or company that 

23 is treated as a bank holding company 

24 under subsection (a) of section 8 of the 

25 International Banking Act of 1978 and 


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1 any subsidiary (other than a bank or other 

2 subsidiary that is described in any other 

3 subparagraph of this paragraph) of any 

4 such foreign bank or company. 

5 (C) The Federal Deposit Insurance Cor6 poration, with respect to any State nonmember 

7 bank, any insured State branch of a foreign 

8 bank (as such terms are defined in section 3 of 

9 the Federal Deposit Insurance Act), and, after 

10 the date on which the functions of the Office of 

11 Thrift Supervision are transferred under sub12 title C, any State savings association. 

13 (D) The National Credit Union Adminis14 tration, with respect to any insured credit union 

15 under the Federal Credit Union Act (12 U.S.C. 

16 1751 et seq.). 

17 (E) The Securities and Exchange Commis18 sion, with respect to— 

19 (i) any broker or dealer registered 

20 with the Securities and Exchange Commis21 sion under the Securities Exchange Act of 

22 1934 (15 U.S.C. 78a et seq.); 

23 (ii) any investment company reg24 istered with the Securities and Exchange 

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1 pany Act of 1940 (15 U.S.C. 80a–1 et 

2 seq.); 

3 (iii) any investment adviser registered 

4 with the Securities and Exchange Commis5 sion under the Investment Advisers Act of 

6 1940 (15 U.S.C. 80b–1 et seq.) with re7 spect to the investment advisory activities 

8 of such company and activities incidental 

9 to such advisory activities; 

10 (iv) any clearing agency (as defined in 

11 section 3(a)(23) of the Securities Ex12 change Act of 1934); 

13 (v) a securities-based swap execution 

14 facility that is registered with the Securi15 ties and Exchange Commission under the 

16 Securities Exchange Act of 1934 (15 

17 U.S.C. 78a et seq.); 

18 (vi) any exchange registered as a na19 tional securities exchange with the Securi20 ties and Exchange Commission under the 

21 Securities Exchange Act of 1934 (15 

22 U.S.C. 78a et seq.); 

23 (vii) any credit rating agency reg24 istered with the Securities and Exchange 


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1 Commission under the Securities Exchange 

2 Act of 1934 (15 U.S.C. 78a et seq.); 

3 (viii) any securities information proc4 essor registered with the Securities and 

5 Exchange Commission under the Securities 

6 Exchange Act of 1934 (15 U.S.C. 78a et 

7 seq.); and 

8 (ix) any transfer agent registered with 

9 the Securities and Exchange Commission 

10 under the Securities Exchange Act of 1934 

11 (15 U.S.C. 78a et seq.). 

12 (F) The Commodity Futures Trading 

13 Commission, with respect to— 

14 (i) any futures commission merchant, 

15 any commodity trading adviser, any retail 

16 foreign exchange dealer, and any com17 modity pool operator registered with the 

18 Commodity Futures Trading Commission 

19 under the Commodity Exchange Act (7 

20 U.S.C. 1 et seq.) with respect to the com21 modities activities of such entity and ac22 tivities incidental to such commodities ac23 tivities; and 

24 (ii) any derivatives clearing organiza25 tion, designated contract market, or swap 


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1 execution facility (as defined in the Com2 modity Exchange Act). 

3 (G) The Federal Housing Finance Agency 

4 with respect to the Federal National Mortgage 

5 Association, the Federal Home Loan Mortgage 

6 Corporation, and the Federal home loan banks. 

7 (H) The State insurance authority of the 

8 State in which an insurance company is domi9 ciled, with respect to the insurance activities 

10 and activities incidental to such insurance ac11 tivities of an insurance company that is subject 

12 to supervision by the State insurance authority 

13 under State insurance law. 

14 (I) The Office of Thrift Supervision, with 

15 respect to any Federal savings association, 

16 State savings association, or savings and loan 

17 holding company, until the date on which the 

18 functions of the Office of Thrift Supervision are 

19 transferred under subtitle C. 

20 (7) TERMS DEFINED IN OTHER LAWS.— 

21 (A) AFFILIATE.—The term ‘‘affiliate’’ has 

22 the meaning given such term in section 2(k) of 

23 the Bank Holding Company Act of 1956. 

24 (B) STATE MEMBER BANK, STATE NON25 MEMBER BANK.—The terms ‘‘State member 


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1 bank’’ and ‘‘State nonmember bank’’ have the 

2 same meanings as in subsections (d)(2) and 

3 (e)(2), respectively, of section 3 of the Federal 

4 Deposit Insurance Act. 

5 SEC. 1000A. RESTRICTIONS ON THE FEDERAL RESERVE 

6 SYSTEM PENDING AUDIT REPORT. 

7 (a) IN GENERAL.—Notwithstanding any other provi8 sion of law, the Comptroller General of the United States 

9 shall perform an audit of all actions taken by the Board 

10 of Governors of the Federal Reserve System and the Fed11 eral reserve banks during the current economic crisis pur12 suant to the authority granted under section 13(c) of the 

13 Federal Reserve Act. Such audit shall be completed as ex14 peditiously as possible, but no later than 2 years, after 

15 the date of the enactment of the Financial Stability Im16 provement Act of 2009. 

17 (b) REPORT.— 

18 (1) REQUIRED.—Not later than the end of the 

19 90-day period beginning on the date the audit re20 ferred to in subsection (a) is completed, the Comp21 troller General of the United States shall submit a 

22 report to the Congress, and make such report avail23 able to the public. 

24 (2) CONTENTS.—The report under paragraph 

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1 ings and conclusion of the Comptroller General with 

2 respect to the audit that is the subject of the report, 

3 together with such recommendations for legislative 

4 or administrative action as the Comptroller General 

5 may determine to be appropriate. 

6 Subtitle A—The Financial Services 

7 Oversight Council 

8 SEC. 1001. FINANCIAL SERVICES OVERSIGHT COUNCIL ES9 TABLISHED. 

10 (a) ESTABLISHMENT.—Immediately upon enactment 

11 of this title, there is established a Financial Services Over12 sight Council. 

13 (b) MEMBERSHIP.—The Council shall consist of the 

14 following: 

15 (1) VOTING MEMBERS.—Voting members, who 

16 shall each have one vote on the Council, as follows: 

17 (A) The Secretary of the Treasury, who 

18 shall serve as the Chairman of the Council. 

19 (B) The Chairman of the Board of Gov20 ernors of the Federal Reserve System. 

21 (C) The Comptroller of the Currency. 

22 (D) The Director of the Office of Thrift 

23 Supervision, until the functions of the Director 

24 of the Office of Thrift Supervision are trans25 ferred pursuant to subtitle C. 


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1 (E) The Chairman of the Securities and 

2 Exchange Commission. 

3 (F) The Chairman of the Commodity Fu4 tures Trading Commission. 

5 (G) The Chairperson of the Federal De6 posit Insurance Corporation. 

7 (H) The Director of the Federal Housing 

8 Finance Agency. 

9 (I) The Chairman of the National Credit 

10 Union Administration. 

11 (J) The head of the Consumer Financial 

12 Protection Agency. 

13 (2) NONVOTING MEMBERS.—Nonvoting mem14 bers, who shall serve in an advisory capacity and 

15 shall not be excluded from any of the Council’s pro16 ceedings, meetings, discussions, and deliberations: 

17 (A) The Director of the Federal Insurance 

18 Office. 

19 (B) A State insurance commissioner, to be 

20 designated by a selection process determined by 

21 the State insurance commissioners, provided 

22 that the term for which a State insurance com23 missioner may serve shall last no more than the 

24 2-year period beginning on the date that the 

25 commissioner is selected. 


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1 (C) A State banking supervisor, to be des2 ignated by a selection process determined by 

3 the State bank supervisors, provided that the 

4 term for which a State banking supervisor may 

5 serve shall last no more than the 2-year period 

6 beginning on the date that the supervisor is se7 lected. 

8 (D) A State securities commissioner (or an 

9 officer performing like functions), to be des10 ignated by a selection process determined by 

11 such State securities commissioners, provided 

12 that the term for which a State securities com13 missioner may serve shall last no more than the 

14 2-year period beginning on the date that the 

15 commissioner is selected. 

16 (c) DUTIES.—The Council shall have the following 

17 duties: 

18 (1) To advise the Congress on financial domes19 tic and international regulatory developments, in20 cluding insurance and accounting developments, and 

21 make recommendations that will enhance the integ22 rity, efficiency, competitiveness, and stability of the 

23 United States financial markets. 


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1 (2) To monitor the financial services market2 place to identify potential threats to the stability of 

3 the United States financial system. 

4 (3) To identify potential threats to the stability 

5 of the United States financial system that do not 

6 arise out of the financial services marketplace. 

7 (4) To develop strategies (and conduct exercises 

8 in furtherance of those strategies) to prepare for po9 tential threats identified under paragraphs (2) and 

10 (3). In doing so, the Council shall collaborate with 

11 participants in the financial sector, financial sector 

12 coordinating councils, and any other parties the 

13 Council determines to be appropriate. 

14 (5) To subject financial companies and financial 

15 activities to stricter prudential standards in order to 

16 promote financial stability and mitigate systemic 

17 risk in accordance with subtitle B. 

18 (6) To issue formal recommendations that a 

19 Council member agency adopt stricter prudential 

20 standards for firms it regulates to mitigate systemic 

21 risk in accordance with subtitle B of this title. 

22 (7) To monitor international regulatory develop23 ments, including both insurance and accounting de24 velopments, and to identify those developments that 

25 may conflict with the policies of the United States 


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1 or place United States financial services firms or 

2 United States financial markets at a competitive dis3 advantage. 

4 (8) To facilitate information sharing and co5 ordination among the members of the Council re6 garding financial services policy development, 

7 rulemakings, examinations, reporting requirements, 

8 and enforcement actions. 

9 (9) To provide a forum for discussion and anal10 ysis of emerging market developments and financial 

11 regulatory issues among its members. 

12 (10) At the request of an agency that is a 

13 Council member, to resolve a jurisdictional dispute 

14 between that agency and another agency that is a 

15 Council member in accordance with section 1002. 

16 (11) To review and submit comments to the Se17 curities and Exchange Commission and any stand18 ards setting body with respect to an existing or pro19 posed accounting principle, standard, or procedure. 

20 SEC. 1002. RESOLUTION OF DISPUTES AMONG FEDERAL FI21 NANCIAL REGULATORY AGENCIES. 

22 (a) REQUEST FOR DISPUTE RESOLUTION.—The 

23 Council shall resolve a dispute among 2 or more Federal 

24 financial regulatory agencies if— 


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1 (1) a Federal financial regulatory agency has a 

2 dispute with another Federal financial regulatory 

3 agency about the agencies’ respective jurisdiction 

4 over a particular financial company or financial ac5 tivity or product (excluding matters for which a dis6 pute mechanism specifically has been provided under 

7 section 4204 or title III); 

8 (2) the disputing agencies cannot, after a dem9 onstrated good faith effort, resolve the dispute 

10 among themselves; and 

11 (3) any of the Federal financial regulatory 

12 agencies involved in the dispute— 

13 (A) provides all other disputants prior no14 tice of its intent to request dispute resolution 

15 by the Council; and 

16 (B) requests in writing, no earlier than 14 

17 days after providing the notice described in 

18 paragraph (A), that the Council resolve the dis19 pute. 

20 (b) COUNCIL DECISION.—The Council shall decide 

21 the dispute— 

22 (1) within a reasonable time after receiving the 

23 dispute resolution request; 

24 (2) after consideration of relevant information 

25 provided by each party to the dispute; and 


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1 (3) by agreeing with 1 of the disputants regard2 ing the entirety of the matter or by determining a 

3 compromise position. 

4 (c) FORM AND BINDING EFFECT.—A Council deci5 sion under this section shall be in writing and include an 

6 explanation and shall be binding on all Federal financial 

7 regulatory agencies that are parties to the dispute. 

8 SEC. 1003. TECHNICAL AND PROFESSIONAL ADVISORY 

9 COMMITTEES. 

10 The Council is authorized to appoint— 

11 (1) subsidiary working groups composed of 

12 Council members and their staff, Council staff, or a 

13 combination; and 

14 (2) such temporary special advisory, technical, 

15 or professional committees as may be useful in car16 rying out its functions, which may be composed of 

17 Council members and their staff, other persons, or 

18 a combination. 

19 SEC. 1004. FINANCIAL SERVICES OVERSIGHT COUNCIL 

20 MEETINGS AND COUNCIL GOVERNANCE. 

21 (a) MEETINGS.—The Council shall meet as fre22 quently as the Chairman deems necessary, but not less 

23 than quarterly. 

24 (b) VOTING.—Unless otherwise provided, the Council 

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1 ized to make by a majority of the total voting membership 

2 of the Council under section 1001(b)(1). 

3 SEC. 1005. COUNCIL STAFF AND FUNDING. 

4 (a) VOTING MEMBERS OF THE COUNCIL.—The Sec5 retary of the Treasury shall and all other voting members 

6 of the Council may, with the approval of the Council— 

7 (1) detail permanent staff from the Department 

8 of the Treasury to provide the Council (and any 

9 temporary special advisory, technical, or professional 

10 committees appointed by the Council) with profes11 sional and expert support; and 

12 (2) provide such other services and facilities 

13 necessary for the performance of the Council’s func14 tions and fulfillment of the duties and mission of the 

15 Council. 

16 (b) OTHER DEPARTMENTS AND AGENCIES.—In addi17 tion to the assistance prescribed in subsection (a), depart18 ments and agencies of the United States may, with the 

19 approval of the Council— 

20 (1) detail department or agency staff on a tem21 porary basis to provide additional support to the 

22 Council (and any special advisory, technical, or pro23 fessional committees appointed by the Council); and 


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1 (2) provide such services, and facilities as the 

2 other departments or agencies may determine advis3 able. 

4 (c) STAFF STATUS; COUNCIL FUNDING.— 

5 (1) STATUS.—Staff detailed to the Council by 

6 the Secretary of the Treasury and other United 

7 States departments or agencies shall— 

8 (A) report to and be subject to oversight 

9 by the Council during their assignment to the 

10 Council; and 

11 (B) be compensated by the department of 

12 agency from which the staff was detailed. 

13 (2) FUNDING.—The administrative expense of 

14 the Council shall be paid by the departments and 

15 agencies represented by voting members of the 

16 Council on an equal basis. 

17 SEC. 1006. REPORTS TO THE CONGRESS. 

18 (a) IN GENERAL.—Semiannually the Council shall 

19 submit a report to the Committee on Ways and Means, 

20 the Committee on Agriculture, and the Committee on Fi21 nancial Services of the House of Representatives and the 

22 Committee on Finance, the Committee on Agriculture, 

23 and the Committee on Banking, Housing, and Urban Af24 fairs of the Senate, and the Comptroller General of the 

25 United States that— 


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1 (1) describes significant financial and regu2 latory developments, including insurance and ac3 counting regulations and standards, and assesses the 

4 impact of those developments on the stability of the 

5 financial system; 

6 (2) recommends actions that will improve finan7 cial stability; 

8 (3) details the size, scale, scope, concentration, 

9 activities, and interconnectedness of the 50 largest 

10 financial institutions, by total assets, in the United 

11 States; 

12 (4) describes strategies developed by the Coun13 cil to respond to potential threats to the stability of 

14 the United States financial system and the outcome 

15 of exercises conducted in furtherance of those strate16 gies; 

17 (5) describes the nature and scope of any com18 pany or activities identified under subtitle B and 

19 steps taken to address them; and 

20 (6) describes any dispute resolutions under21 taken under section 1002 and the result of such res22 olutions. 

23 (b) EVALUATION OF ANNUAL REPORT BY GAO.— 

24 Not later than 120 days after receiving the report required 

25 by subsection (a), the Comptroller General of the United 


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1 States shall submit an evaluation of such report to the 

2 Committee on Ways and Means, the Committee on Agri3 culture, and the Committee on Financial Services of the 

4 House of Representatives and the Committee on Finance, 

5 the Committee on Agriculture, and the Committee on 

6 Banking, Housing, and Urban Affairs of the Senate. 

7 (c) STATEMENTS BY VOTING MEMBERS OF THE

8 COUNCIL.—At the time each report is submitted under 

9 subsection (a), each voting member of the Council shall— 

10 (1) if such member believes that the Council, 

11 the Government, and the private sector are taking 

12 all reasonable steps to ensure financial stability and 

13 to prevent systemic risk that would negatively affect 

14 the economy, submit a signed statement to the Com15 mittee on Ways and Means, the Committee on Agri16 culture, and the Committee on Financial Services of 

17 the House of Representatives and the Committee on 

18 Finance, the Committee on Agriculture, and the 

19 Committee on Banking, Housing, and Urban Affairs 

20 of the Senate stating such belief; or 

21 (2) if such member does not believe that all rea22 sonable steps described under paragraph (1) are 

23 being taken, submit a signed statement to the Com24 mittee on Ways and Means, the Committee on Agri25 culture, and the Committee on Financial Services of 


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1 the House of Representatives and the Committee on 

2 Finance, the Committee on Agriculture, and the 

3 Committee on Banking, Housing, and Urban Affairs 

4 of the Senate stating what actions such member be5 lieves need to be taken in order to ensure that all 

6 reasonable steps described under paragraph (1) are 

7 taken. 

8 (d) TESTIMONY BY THE CHAIRMAN.—The Chairman 

9 of the Council shall appear before the Committee on Fi10 nancial Services of the House of Representatives and the 

11 Committee on Banking, Housing, and Urban Affairs of 

12 the Senate at a semi-annual hearing, after the report is 

13 submitted under subsection (a)— 

14 (1) to discuss the efforts, activities, objectives, 

15 and plans of the Council; and 

16 (2) to discuss and answer questions concerning 

17 such report. 

18 (e) STUDY OF EFFECTS CONSUMER FINANCIAL PRO19 TECTION AGENCY REGULATIONS AND STANDARDS.— 

20 (1) STUDY REQUIRED.—The Council shall con21 duct a study of the effects that regulations and 

22 standards of the Consumer Financial Protection 

23 Agency will have on all covered persons (as such 

24 term is defined in section 4002(9)), including non25 depository institution covered persons. The Director 


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1 of the Consumer Financial Protection Agency shall 

2 take the findings of the study into account when 

3 issuing regulations. 

4 (2) VALUE OF NONBANK PRODUCTS.—The 

5 study shall include an evaluation and assessment of 

6 the appropriateness of using ‘‘APR’’ as a true meas7 ure of the value of all nonbank products. 

8 (3) SUBMISSION.—Not later than 240 days 

9 after the date of the enactment of this Act, the Di10 rector of the Consumer Financial Protection Agency 

11 shall submit the study to Congress and include any 

12 recommendations the Director may have for changes 

13 in law and regulations to improve consumer protec14 tions and maintain access to credit. 

15 SEC. 1007. APPLICABILITY OF CERTAIN FEDERAL LAWS. 

16 (a) The Federal Advisory Committee Act shall not 

17 apply to the Financial Services Oversight Council, or any 

18 special advisory, technical, or professional committees ap19 pointed by the Council (except that, if an advisory, tech20 nical, or professional committee has one or more members 

21 who are not employees of or affiliated with the United 

22 States government, the Council shall publish a list of the 

23 names of the members of such committee). 

24 (b) The Council shall not be deemed an ‘‘agency’’ for 

25 purposes of any State or Federal law. 


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1 SEC. 1008. OVERSIGHT BY GAO. 

2 (a) AUTHORITY TO AUDIT.—The Comptroller Gen3 eral of the United States may audit the activities and fi4 nancial transactions of— 

5 (1) the Council; and 

6 (2) any person or entity acting on behalf of or 

7 under the authority of the Council, to the extent 

8 such activities and financial transactions relate to 

9 such person’s or entity’s work for the Council. 

10 (b) ACCESS TO INFORMATION.— 

11 (1) IN GENERAL.—Notwithstanding any other 

12 provision of law, the Comptroller General of the 

13 United States shall have access, upon request and at 

14 such reasonable time and in such reasonable form as 

15 the Comptroller General may request, to— 

16 (A) any records or other information under 

17 the control of or used by the Council; 

18 (B) any records or other information under 

19 the control of a person or entity acting on be20 half of or under the authority of the Council, to 

21 the extent such records or other information is 

22 relevant to an audit under subsection (a); and 

23 (C) the officers, directors, employees, fi24 nancial advisors, staff, working groups, and 

25 agents and representatives of the Council (as 

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1 ties on behalf of the Council) at such reasonable 

2 times as the Comptroller General may request. 

3 (2) CERTAIN INFORMATION SPECIFIED.—Access 

4 under paragraph (1) includes access to— 

5 (A) information provided to the Council by 

6 its voting and nonvoting members under section 

7 1101; and 

8 (B) the identity of each financial holding 

9 company subject to stricter standards. 

10 (3) COPIES.—Comptroller General may make 

11 and retain copies of such books, accounts, and other 

12 records access to which is granted under this provi13 sion as the Comptroller General considers appro14 priate. 

15 (c) PERIODIC EVALUATIONS.—The Comptroller Gen16 eral of the United States shall periodically evaluate the 

17 processes and activities of the Council and the extent to 

18 which the Council is fulfilling its duties under this title. 

19 The Comptroller General shall submit to the Committee 

20 on Financial Services of the House of Representatives and 

21 the Committee on Banking, Housing, and Urban Affairs 

22 of the Senate a report on the results of each such evalua23 tion. 


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1 Subtitle B—Prudential Regulation 

2 of Companies and Activities for 

3 Financial Stability Purposes 

4 SEC. 1100. FEDERAL RESERVE BOARD AUTHORITY THAT OF 

5 AGENT ACTING ON BEHALF OF COUNCIL. 

6 For purposes of this subtitle, the Board of Governors 

7 of the Federal Reserve System shall act in the capacity 

8 of agent for the Council, acting on behalf of the Council. 

9 SEC. 1101. COUNCIL AND BOARD AUTHORITY TO OBTAIN 

10 INFORMATION. 

11 (a) IN GENERAL.—The Council and the Board are 

12 authorized to receive, and may request the production of, 

13 any data or information from members of the Council, as 

14 necessary— 

15 (1) to monitor the financial services market16 place to identify potential threats to the stability of 

17 the United States financial system; 

18 (2) to identify global trends and developments 

19 that could pose systemic risks to the stability of the 

20 economy of the United States or other economies; or 

21 (3) to otherwise carry out any of the provisions 

22 of this title, including to ascertain a primary finan23 cial regulatory agency’s implementation of rec24 ommended prudential standards under this subtitle. 


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1 (b) SUBMISSION BY COUNCIL MEMBERS.—Notwith2 standing any provision of law, any voting or nonvoting 

3 member of the Council is authorized to provide informa4 tion to the Council, and the members of the Council shall 

5 maintain the confidentiality of such information. 

6 (c) FINANCIAL COMPANY DATA COLLECTION.— 

7 (1) IN GENERAL.—The Council or the Board 

8 may require the submission of periodic and other re9 ports from any financial company solely for the pur10 pose of assessing the extent to which a financial ac11 tivity or financial market in which the financial com12 pany participates, or the company itself, poses a 

13 threat to financial stability. 

14 (2) MITIGATION OF REPORT BURDEN.—Before 

15 requiring the submission of reports from financial 

16 companies that are regulated by the primary finan17 cial regulatory agencies, the Council or the Board 

18 shall coordinate with such agencies and shall, when19 ever possible, rely on information already being col20 lected by such agencies. 

21 (3) MITIGATION REQUIREMENTS IN CASE OF

22 FOREIGN FINANCIAL PARENTS.—Before requiring 

23 the submission of reports from a company that is a 

24 foreign financial parent, the Council or the Board 

25 shall, to the extent appropriate, coordinate with any 


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1 appropriate foreign regulator of such company and 

2 any appropriate multilateral organization and, when3 ever possible, rely on information already being col4 lected by such foreign regulator or multilateral orga5 nizational with English translation. 

6 (d) CONSULTATION WITH AGENCIES AND ENTI7 TIES.—The Council or the Board, as appropriate, may 

8 consult with Federal and State agencies and other entities 

9 (including the Federal Insurance Office) to carry out any 

10 of the provisions of this subtitle. 

11 (e) ADDITIONAL PROVISIONS.— 

12 (1) DATA AND INFORMATION SHARING.—The 

13 Chairman of the Council, in consultation with the 

14 other members of the Council, may— 

15 (A) establish procedures to share data and 

16 information collected by the Council under this 

17 section with the members of the Council; 

18 (B) develop an electronic process for shar19 ing all information collected by the Council with 

20 the Chairman of the Board on a real-time basis; 

21 (C) issue any regulations necessary to 

22 carry out this subsection; and 

23 (D) designate the format in which re24 quested data and information must be sub25 mitted to the Council, including any electronic, 


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1 digital, or other format that facilitates the use 

2 of such data by the Council in its analysis. 

3 (2) APPLICABLE PRIVILEGES NOT WAIVED.—A 

4 Federal financial regulator, State financial regu5 lator, United States financial company, foreign fi6 nancial company operating in the United States, fi7 nancial market utility, or other person shall not be 

8 compelled to waive and shall not be deemed to have 

9 waived any privilege otherwise applicable to any data 

10 or information by transferring the data or informa11 tion to, or permitting that data or information to be 

12 used by— 

13 (A) the Council; 

14 (B) any Federal financial regulator or 

15 State financial regulator, in any capacity; or 

16 (C) any other agency of the Federal Gov17 ernment (as defined in section 6 of title 18, 

18 United States Code). 

19 (3) DISCLOSURE EXEMPTION.—Any informa20 tion obtained by the Council under this section shall 

21 be exempt from the disclosure requirements under 

22 section 552 of title 5, United States Code. 

23 (4) CONSULTATION WITH FOREIGN GOVERN24 MENTS.—Under the supervision of the President, 

25 and in a manner consistent with section 207 of the 


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1 Foreign Service Act of 1980 (22 U.S.C. 3927), the 

2 Chairman of the Council, in consultation with the 

3 other members of the Council, shall regularly consult 

4 with the financial regulatory entities and other ap5 propriate organizations of foreign governments or 

6 international organizations on matters relating to 

7 systemic risk to the international financial system. 

8 (5) REPORT.—Not later than 6 months after 

9 the date of the enactment of this title, the Chairman 

10 of the Council shall report to the Financial Services 

11 Committee of the House of Representatives and the 

12 Banking, Housing, and Urban Affairs Committee of 

13 the Senate the opinion of the Council as to whether 

14 setting up an electronic database as described in 

15 paragraph (1)(B) would aid the Council in carrying 

16 out this section. 

17 SEC. 1102. COUNCIL PRUDENTIAL REGULATION REC18 OMMENDATIONS TO FEDERAL FINANCIAL 

19 REGULATORY AGENCIES; AGENCY AUTHOR20 ITY. 

21 (a) IN GENERAL.—The Council is authorized to issue 

22 formal recommendations, publicly or privately, that a Fed23 eral financial regulatory agency adopt stricter prudential 

24 standards for firms it regulates to mitigate systemic risk. 


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1 (b) AGENCY AUTHORITY TO IMPLEMENT STAND2 ARDS.— 

3 (1) A Federal financial regulatory agency spe4 cifically may, in response to a Council recommenda5 tion under this section or otherwise, impose, require 

6 reports regarding, examine for compliance with, and 

7 enforce stricter prudential standards and safeguards 

8 for the firms it regulates to mitigate systemic risk. 

9 This authority is in addition to and does not limit 

10 any other authority of the Federal financial regu11 latory agencies. Compliance by an entity with ac12 tions taken by a Federal financial regulatory agency 

13 under this section shall be enforceable in accordance 

14 with the statutes governing the respective Federal fi15 nancial regulatory agency’s jurisdiction over the en16 tity as if the agency action were taken under those 

17 statutes. 

18 (2) APPLYING STANDARDS TO FOREIGN FINAN19 CIAL PARENTS.—In applying standards under para20 graph (1) to any foreign financial parent, or to any 

21 branch of, subsidiary of, or other operating entity 

22 related to such foreign financial parent that operates 

23 within the United States, the Federal financial regu24 latory agency shall— 


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1 (A) give due regard to the principles of na2 tional treatment and equality of competitive op3 portunity; and 

4 (B) take into account the extent to which 

5 the foreign financial parent is subject to com6 parable standards on a consolidated basis in the 

7 home country of such foreign financial parent 

8 that are administered by a comparable foreign 

9 supervisory authority. 

10 (c) AGENCY NOTICE TO COUNCIL.—A Federal finan11 cial regulatory agency shall, within 60 days of receiving 

12 a Council recommendation under this section, notify the 

13 Council in writing regarding— 

14 (1) the actions the Federal financial regulatory 

15 agency has taken in response to the Council’s rec16 ommendation, additional actions contemplated, and 

17 timetables therefore; or 

18 (2) the reason the Federal financial regulatory 

19 agency has failed to respond to the Council’s re20 quest. 

21 SEC. 1103. SUBJECTING FINANCIAL COMPANIES TO STRICT22 ER PRUDENTIAL STANDARDS FOR FINANCIAL 

23 STABILITY PURPOSES. 

24 (a) IN GENERAL.—The Council shall, in consultation 

25 with the Board and any other primary financial regulatory 


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1 agency that regulates the financial company or a sub2 sidiary of such company, and, in the case of a financial 

3 holding company subject to stricter standards that is an 

4 insurance company, the Federal Insurance Office, subject 

5 a financial company to stricter prudential standards under 

6 this subtitle if the Council determines that— 

7 (1) material financial distress at the company 

8 could pose a threat to financial stability or the econ9 omy; or 

10 (2) the nature, scope, size, scale, concentration, 

11 and interconnectedness, or mix of the company’s ac12 tivities could pose a threat to financial stability or 

13 the economy. 

14 (b) CRITERIA.—In making a determination under 

15 subsection (a), the Council shall consider the following cri16 teria: 

17 (1) The extent of the company’s leverage. 

18 (2) The extent and nature of the company’s off19 balance sheet exposures. 

20 (3) The extent and nature of the company’s 

21 transactions and relationships with other financial 

22 companies. 

23 (4) The company’s importance as a source of 

24 credit for households, businesses, and State and 


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1 local governments and as a source of liquidity for 

2 the financial system. 

3 (5) The company’s importance as a source of 

4 credit for low-income, minority, or underserved com5 munities and the impact the failure of such company 

6 would have on the availability of credit in such com7 munities. 

8 (6) The extent to which assets are simply man9 aged and not owned by the financial company and 

10 the extent to which ownership of assets under man11 agement is diffuse. 

12 (7) The nature, scope, and mix of the com13 pany’s activities. 

14 (8) The degree to which the company is already 

15 regulated by one or more Federal financial regu16 latory agencies or, in the case of a foreign financial 

17 parent, the extent to which such foreign parent is 

18 subject to prudential standards on a consolidated 

19 basis in the home country of such financial parent 

20 that are administered and enforced by a comparable 

21 foreign supervisory authority. 

22 (9) The amount and nature of the company’s fi23 nancial assets. 


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1 (10) The amount and nature of the company’s 

2 liabilities, including the degree of reliance on short3 term funding. 

4 (11) Any other factors that the Council deems 

5 appropriate. 

6 (c) NOTIFICATION OF DECISION.—The Board, in an 

7 executive capacity on behalf of the Council, shall imme8 diately upon the Council’s decision notify the financial 

9 company by order, which shall be public, that the financial 

10 company is subject to stricter prudential standards, as 

11 prescribed by the Board in accordance with section 1104. 

12 (d) PERIODIC REVIEW AND RESCISSION OF FIND13 INGS.— 

14 (1) SUBMISSION OF ASSESSMENT.—The Board 

15 shall periodically submit a report to the Council con16 taining an assessment of whether each company sub17 jected to stricter prudential standards should con18 tinue to be subject to such standards. 

19 (2) REVIEW AND RESCISSION.—The Council 

20 shall— 

21 (A) review the assessment submitted pur22 suant to paragraph (1) and any information or 

23 recommendation submitted by members of the 

24 Council regarding whether a financial holding 


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1 company subject to stricter standards continues 

2 to merit stricter prudential standards; and 

3 (B) rescind the action subjecting a com4 pany to stricter prudential standards if the 

5 Council determines that the company no longer 

6 meets the conditions for being subjected to 

7 stricter prudential standards in subsections (a) 

8 and (b). 

9 (e) APPEAL.— 

10 (1) ADMINISTRATIVE.—The Council and the 

11 Board, in an executive capacity on behalf of the 

12 Council, shall establish a procedure through which a 

13 financial company that has been subjected to stricter 

14 prudential standards in accordance with this section 

15 may appeal being subjected to stricter prudential 

16 standards. 

17 (2) JUDICIAL REVIEW.—Any financial company 

18 which has been subjected to stricter prudential 

19 standards may seek judicial review by filing a peti20 tion for such review in the United States Court of 

21 Appeals for the District of Columbia. 

22 (f) EFFECT OF COUNCIL DECISION.— 

23 (1) APPLICATION OF FEDERAL LAWS.— 

24 (A) APPLICATION OF BANK HOLDING COM25 PANY ACT AND FEDERAL DEPOSIT INSURANCE


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1 ACT.—A financial company subject to stricter 

2 standards that does not own a bank (as defined 

3 in section 2 of the Bank Holding Company Act 

4 of 1956) and that is not a foreign bank or com5 pany that is treated as a bank holding company 

6 under section 8 of the International Banking 

7 Act of 1978 shall be subject to section 4, sub8 sections (b), (c), (d), (e), (f), and (g) of section 

9 5, and section 8 of the Bank Holding Company 

10 Act of 1956, and section 8 of the Federal De11 posit Insurance Act in the same manner and to 

12 the same extent as if such financial holding 

13 company subject to stricter standards were a 

14 bank holding company that has elected to be a 

15 financial holding company (as such terms are 

16 defined in the Bank Holding Company Act of 

17 1956), its subsidiaries were subsidiaries of a 

18 bank holding company, and the Board was its 

19 appropriate Federal banking agency (as such 

20 term is defined under the Federal Deposit In21 surance Act). 

22 (B) BOARD AUTHORITY.—For purposes of 

23 administering and enforcing the provisions of 

24 this title, the Board may take any action with 

25 respect to a financial holding company subject 


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1 to stricter standards described in subparagraph 

2 (A) or its subsidiaries under the authorities de3 scribed in subparagraph (A) as if such financial 

4 holding company subject to stricter standards 

5 were a bank holding company that has elected 

6 to be a financial holding company (as such 

7 terms are defined in the Bank Holding Com8 pany Act of 1956), its subsidiaries were subsidi9 aries of a bank holding company, and the 

10 Board was its appropriate Federal banking 

11 agency (as such term is defined under the Fed12 eral Deposit Insurance Act). 

13 (2) APPLICATION OF ACTIVITY RESTRICTIONS

14 AND SECTION 6 HOLDING COMPANY REQUIRE15 MENTS.— 

16 (A) IN GENERAL.—Except as provided in 

17 subparagraphs (B) and (C)— 

18 (i) a financial holding company sub19 ject to stricter standards that conducts ac20 tivities that do not comply with section 4 

21 of the Bank Holding Company Act shall be 

22 required to establish or designate a section 

23 6 holding company in accordance with sec24 tion 6 of the Bank Holding Company Act 

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1 ties of the company that are determined to 

2 be financial in nature or incidental thereto 

3 under section 4(k) of the such Act; and 

4 (ii) such section 6 holding company 

5 shall be the financial holding company sub6 ject to stricter standards for purposes of 

7 this title. 

8 (B) EXCEPTIONS FROM SECTION 6 HOLD9 ING COMPANY REQUIREMENTS.— 

10 (i) GENERAL REQUIREMENT FOR

11 BOARD TO CONSIDER EXCEPTIONS.—Be12 fore such time as a financial holding com13 pany subject to stricter standards is re14 quired to establish or designate a section 6 

15 holding company under section 6 of the 

16 Bank Holding Company Act, and in con17 sultation with the financial holding com18 pany subject to stricter standards and any 

19 appropriate Federal or State financial reg20 ulators (and, in the case of a financial 

21 holding company subject to stricter stand22 ards that is an insurance company, the 

23 Federal Insurance Office)— 

24 (I) the Board shall consider 

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1 tions from the requirements applicable 

2 to section 6 holding companies under 

3 section 6(a)(6)(A) of the Bank Hold4 ing Company Act of 1956, in accord5 ance with that provision; and 

6 (II) the Board, at the request of 

7 a financial holding company subject to 

8 stricter standards that is predomi9 nantly engaged in activities that are 

10 determined to be financial in nature 

11 or incidental thereto under section 

12 4(k) of the Bank Holding Company 

13 Act, shall consider whether to exempt 

14 the financial holding company subject 

15 to stricter standards from the require16 ment to establish a section 6 holding 

17 company, taking into consideration 

18 paragraph (2)(D), and the extent to 

19 which the exemption would: facilitate 

20 the extension of credit to individuals, 

21 households and businesses; improve 

22 efficiency or customer service or result 

23 in other public benefits; potentially 

24 threaten the safety and soundness of 

25 the financial holding company or any 


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1 of its subsidiaries; potentially increase 

2 systemic risk or threaten the stability 

3 of the overall financial system; poten4 tially result in unfair competition; and 

5 potentially have anticompetitive ef6 fects that would not be outweighed by 

7 public benefits. 

8 (ii) BOARD DETERMINATION NOT TO

9 EXEMPT.— 

10 (I) IN GENERAL.—If the Board 

11 determines not to exempt the financial 

12 holding company subject to stricter 

13 standards from the requirement to es14 tablish a section 6 holding company, 

15 the financial holding company subject 

16 to stricter standards shall establish a 

17 section 6 holding company within 90 

18 days after the Board’s determination. 

19 (II) EXTENSION OF PERIOD.— 

20 The Board may extend the time by 

21 which the financial holding company 

22 subject to stricter standards is re23 quired to establish a section 6 holding 

24 company for an additional reasonable 


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1 period of time, not to exceed 180 

2 days. 

3 (iii) BOARD DETERMINATION TO EX4 EMPT.— 

5 (I) IN GENERAL.—If the Board 

6 grants the requested exemption from 

7 the requirement to establish a section 

8 6 holding company, the financial hold9 ing company subject to stricter stand10 ards shall at all times remain pre11 dominantly engaged in activities that 

12 are determined to be financial in na13 ture or incidental thereto under sec14 tion 4(k) of the Bank Holding Com15 pany Act of 1956, and shall be the fi16 nancial holding company subject to 

17 stricter standards for purposes of this 

18 title. 

19 (II) SUBSEQUENT LOSS OF EX20 EMPTION.—Upon a determination by 

21 the Board, in consultation with any 

22 relevant Federal or State regulators 

23 of the financial holding company sub24 ject to stricter standards, and, in the 

25 case of a financial holding company 


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1 subject to stricter standards that is an 

2 insurance company, the Federal In3 surance Office, that the financial 

4 holding company subject to stricter 

5 standards fails to comply with this 

6 subsection, the financial holding com7 pany subject to stricter standards 

8 shall lose the exemption from the sec9 tion 6 holding company requirement 

10 and shall establish a section 6 holding 

11 company within the time periods de12 scribed in clause (ii)(I). 

13 (C) ACTIVITIES CONDUCTED ABROAD.— 

14 Section 4 of the Bank Holding Company Act of 

15 1956 shall not apply to any activities that a for16 eign financial holding company subject to strict17 er standards conducts solely outside the United 

18 States if such activities are conducted solely by 

19 a company or other entity that is located out20 side the United States. 

21 (D) FLEXIBLE APPLICATION.—In applying 

22 the activity restrictions and ownership limita23 tions of section 4 of the Bank Holding Com24 pany Act of 1956 to financial holding compa25 nies subject to stricter standards described in 


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1 paragraph (1)(A), the Board shall flexibly 

2 adapt such requirements taking into account 

3 the usual and customary practices in the busi4 ness sector of the financial company subject to 

5 stricter standards so as to avoid unnecessary 

6 burden and expense. 

7 (3) LEVERAGE LIMITATION.—The Board shall 

8 require each financial holding company subject to 

9 stricter standards to maintain a debt to equity ratio 

10 of no more than 15 to 1, and the Board shall issue 

11 regulations containing procedures and timelines for 

12 how a financial holding company subject to stricter 

13 standards with a debt to equity ratio of more than 

14 15 to 1 at the time such company becomes a finan15 cial holding company subject to stricter standards 

16 shall reduce such ratio. 

17 SEC. 1104. STRICTER PRUDENTIAL STANDARDS FOR CER18 TAIN FINANCIAL HOLDING COMPANIES FOR 

19 FINANCIAL STABILITY PURPOSES. 

20 (a) STRICTER PRUDENTIAL STANDARDS.— 

21 (1) IN GENERAL.—To mitigate risks to finan22 cial stability and the economy posed by a financial 

23 holding company that has been subjected to stricter 

24 prudential standards in accordance with section 

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1 pose stricter prudential standards on such company. 

2 Such standards shall be designed to maximize finan3 cial stability taking costs to long-term financial and 

4 economic growth into account, be heightened when 

5 compared to the standards that otherwise would 

6 apply to financial holding companies that are not 

7 subjected to stricter prudential standards pursuant 

8 to this subtitle (including by addressing additional 

9 or different types of risks than otherwise applicable 

10 standards), and reflect the potential risk posed to fi11 nancial stability by the financial holding company 

12 subject to stricter standards. 

13 (2) STANDARDS.— 

14 (A) REQUIRED STANDARDS.—The stricter 

15 standards imposed by the Board under this sec16 tion shall include— 

17 (i) risk-based capital requirements 

18 and leverage limits, unless the Board de19 termines that such requirements are not 

20 appropriate for a financial holding com21 pany subject to stricter standards because 

22 of such company’s activities (such as in23 vestment company activities or assets 

24 under management) or structure, in which 

25 case the Board shall apply other standards 


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1 that result in appropriately stringent con2 trols. 

3 (ii) liquidity requirements; 

4 (iii) concentration requirements (as 

5 specified in subsection (c)); 

6 (iv) prompt corrective action require7 ments (as specified in subsection (e)); 

8 (v) resolution plan requirements (as 

9 specified in subsection (f)); and 

10 (vi) overall risk management require11 ments. 

12 (B) ADDITIONAL STANDARDS.—The 

13 heightened standards imposed by the Board 

14 under this section also may include short-term 

15 debt limits prescribed in accordance with sub16 section (d) and any other prudential standards 

17 that the Board deems advisable, including tak18 ing actions to mitigate systemic risk. 

19 (C) CONSULTATION WITH FEDERAL FI20 NANCIAL REGULATORY AGENCIES AND THE

21 FEDERAL INSURANCE OFFICE.—The Board, in 

22 developing stricter prudential standards under 

23 this subsection, shall consult with other Federal 

24 financial regulatory agencies with respect to 

25 any standard that is likely to have a significant 


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1 impact on a functionally regulated subsidiary, 

2 or a subsidiary depository institution, of a fi3 nancial holding company that is subject to 

4 stricter prudential standards under this title. 

5 With respect to a financial holding company 

6 subject to stricter standards that is an insur7 ance company or any insurance company sub8 sidiary of such a financial holding company 

9 subject to stricter standards, the Board shall 

10 also consult with the Federal Insurance Office. 

11 (3) APPLICATION OF REQUIRED STANDARDS.— 

12 In imposing prudential standards under this section, 

13 the Board— 

14 (A) may differentiate among financial 

15 holding companies subject to stricter standards 

16 on an individual basis or by category, taking 

17 into consideration their capital structure, risk, 

18 complexity, financial activities, the financial ac19 tivities of their subsidiaries, and any other fac20 tors that the Board deems appropriate; and 

21 (B) shall take into consideration whether 

22 and to what extent a financial holding company 

23 subject to stricter standards that is not a bank 

24 holding company or treated as a bank holding 

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1 tion and shall adapt the prudential standards 

2 applied to such company as appropriate in light 

3 of any predominant line of business of such 

4 company, including assets under management 

5 or other activities for which capital require6 ments are not appropriate. 

7 (4) WELL CAPITALIZED AND WELL MAN8 AGED.—A financial holding company subject to 

9 stricter standards shall at all times after it is subject 

10 to such standards be well capitalized and well man11 aged as defined by the Board. 

12 (5) APPLICATION TO FOREIGN FINANCIAL COM13 PANIES.—The Board shall prescribe regulations re14 garding the application of stricter prudential stand15 ards to a foreign financial parent and to a Federal 

16 or State branch, subsidiary, or operating entity that 

17 is owned or controlled by a foreign financial parent, 

18 giving due regard to principles of national treatment 

19 and equality of competitive opportunity and taking 

20 into account the extent to which the foreign financial 

21 parent is subject on a consolidated basis to home 

22 country standards comparable to those applied to fi23 nancial holding companies in the United States. 

24 (6) INCLUSION OF OFF BALANCE SHEET AC25 TIVITIES IN COMPUTING CAPITAL REQUIREMENTS.— 


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1 (A) IN GENERAL.—In the case of any fi2 nancial holding company subject to stricter 

3 standards, the computation of capital require4 ments shall take into account off balance sheet 

5 activities for such a company. 

6 (B) EXEMPTION.—If the Board determines 

7 that an exemption from the requirements under 

8 subparagraph (A) is appropriate, the Board 

9 may exempt a financial holding company sub10 ject to stricter standards from the requirements 

11 under subparagraph (A) or any transaction or 

12 transactions engaged in by such a company. 

13 (C) OFF BALANCE SHEET ACTIVITIES DE14 FINED.—For purposes of this paragraph, the 

15 term ‘‘off balance sheet activities’’ means a li16 ability that is not currently a balance sheet li17 ability but may become one upon the happening 

18 of some future event, including the following 

19 transactions, to the extent they may create a li20 ability: 

21 (i) Direct credit substitutes in which a 

22 bank substitutes its own credit for a third 

23 party, including standby letters of credit. 


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1 (ii) Irrevocable letters of credit that 

2 guarantee repayment of commercial paper 

3 or tax-exempt securities. 

4 (iii) Risk participation in bankers’ ac5 ceptances. 

6 (iv) Sale and repurchase agreements. 

7 (v) Asset sales with recourse against 

8 the seller. 

9 (vi) Interest rate swaps. 

10 (vii) Credit swaps. 

11 (viii) Commodity contracts. 

12 (ix) Forward contracts. 

13 (x) Securities contracts. 

14 (xi) Such other activities or trans15 actions as the Board may, by rule, define. 

16 (b) PRUDENTIAL STANDARDS AT FUNCTIONALLY

17 REGULATED SUBSIDIARIES AND SUBSIDIARY DEPOSI18 TORY INSTITUTIONS.— 

19 (1) BOARD AUTHORITY TO RECOMMEND STAND20 ARDS.—With respect to a functionally regulated sub21 sidiary (as such term is defined in section 5 of the 

22 Bank Holding Company Act) or a subsidiary deposi23 tory institution of a financial holding company sub24 ject to stricter standards, the Board may rec25 ommend that the relevant Federal financial reguVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00064 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 latory agency for such functionally regulated sub2 sidiary or subsidiary depository institution prescribe 

3 stricter prudential standards on such functionally 

4 regulated subsidiary or subsidiary depository institu5 tion. Any standards recommended by the Board 

6 under this section shall be of the same type as those 

7 described in subsection (a)(2) that the Board is re8 quired or authorized to impose directly on the finan9 cial holding company subject to stricter standards. 

10 (2) AGENCY AUTHORITY TO IMPLEMENT

11 HEIGHTENED STANDARDS AND SAFEGUARDS.—Each 

12 Federal financial regulatory agency that receives a 

13 Board recommendation under paragraph (1) is au14 thorized to impose, require reports regarding, exam15 ine for compliance with, and enforce standards 

16 under this subsection with respect to the entities 

17 such agency regulates as described in section 

18 1006(b)(6). This authority is in addition to and does 

19 not limit any other authority of the Federal financial 

20 regulatory agencies. Compliance by an entity with 

21 actions taken by a Federal financial regulatory agen22 cy under this section shall be enforceable in accord23 ance with the statutes governing the respective agen24 cy’s jurisdiction over the entity as if the agency ac25 tion were taken under those statutes. 


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1 (3) IMPOSITION OF STANDARDS.—Standards 

2 imposed by a Federal financial regulatory agency 

3 under this subsection shall be the standards rec4 ommended by the Board in accordance with para5 graph (1) or any other similar standards that the 

6 Board deems acceptable after consultation between 

7 the Board and the primary financial regulatory 

8 agency and, with respect to an insurance company, 

9 the Federal Insurance Office. 

10 (4) FEDERAL FINANCIAL REGULATORY AGENCY

11 RESPONSE; NOTICE TO COUNCIL AND BOARD.—A 

12 Federal financial regulatory agency shall notify the 

13 Council and the Board in writing on whether and to 

14 what extent the agency has imposed the stricter pru15 dential standards described in paragraph (3) within 

16 60 days of the Board’s recommendation under para17 graph (1). A Federal financial regulatory agency 

18 that fails to impose such standards shall provide 

19 specific justification for such failure to act in the 

20 written notice from the agency to the Council and 

21 Board. 

22 (c) CONCENTRATION LIMITS FOR FINANCIAL HOLD23 ING COMPANIES SUBJECT TO STRICTER STANDARDS.— 

24 (1) STANDARDS.—In order to limit the risks 

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1 nancial holding company subject to stricter stand2 ards and to the stability of the United States finan3 cial system, the Board, by regulation, shall prescribe 

4 standards that limit the risks posed by the exposure 

5 of a financial holding company subject to stricter 

6 standards to any other company. 

7 (2) LIMITATION ON CREDIT EXPOSURE.—The 

8 regulations prescribed by the Board shall prohibit 

9 each financial holding company subject to stricter 

10 standards from having credit exposure to any unaf11 filiated company that exceeds 25 percent of capital 

12 stock and surplus of the financial holding company 

13 subject to stricter standards, or such lower amount 

14 as the Board may determine by regulation to be nec15 essary to mitigate risks to financial stability. 

16 (3) CREDIT EXPOSURE.—For purposes of this 

17 subsection and with respect to a financial holding 

18 company subject to stricter standards, the term 

19 ‘‘credit exposure’’ to a company means— 

20 (A) all extensions of credit to the company, 

21 including loans, deposits, and lines of credit; 

22 (B) all repurchase agreements and reverse 

23 repurchase agreement with the company; 

24 (C) all securities borrowing and lending 

25 transactions with the company to the extent 


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1 that such transactions create credit exposure of 

2 the financial holding company subject to strict3 er standards to the company; 

4 (D) all guarantees, acceptances, or letters 

5 of credit (including endorsement or standby let6 ters of credit) issued on behalf of the company; 

7 (E) all purchases of or investment in secu8 rities issued by the company; 

9 (F) counterparty credit exposure to the 

10 company in connection with a derivative trans11 action between the financial holding company 

12 subject to stricter standards and the company; 

13 and 

14 (G) any other similar transactions that the 

15 Board by regulation determines to be a credit 

16 exposure for purposes of this section. 

17 (4) ATTRIBUTION RULE.—For purposes of this 

18 subsection, any transaction by a financial holding 

19 company subject to stricter standards with any per20 son is deemed a transaction with a company to the 

21 extent that the proceeds of the transaction are used 

22 for the benefit of, or transferred to, that company. 

23 (5) RULEMAKING.—The Board may issue such 

24 regulations and orders, including definitions con25 sistent with this subsection, as may be necessary to 


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1 administer and carry out the purpose of this sub2 section. 

3 (6) EXEMPTIONS.— 

4 (A) IN GENERAL.— 

5 (i) FEDERAL HOME LOAN BANKS.— 

6 This subsection shall not apply to any Fed7 eral home loan bank, but Federal home 

8 loan banks are not exempt from any other 

9 provision of this title except as specifically 

10 provided in this title. 

11 (ii) APPLICABILITY TO OTHER ENTI12 TIES.—The Federal National Mortgage As13 sociation and the Federal Home Loan 

14 Mortgage Corporation are not exempt from 

15 any provision of this title except as specifi16 cally provided in this title. 

17 (B) REGULATIONS.—The Board may, by 

18 regulation or order, exempt transactions, in 

19 whole or in part, from the definition of credit 

20 exposure if it finds that the exemption is in the 

21 public interest and consistent with the purpose 

22 of this subsection. 

23 (7) TRANSITION PERIOD.—This subsection and 

24 any regulations and orders of the Board under the 

25 authority of this subsection shall not take effect 


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1 until the date that is 3 years from the date of the 

2 enactment of this subsection. The Board may extend 

3 the effective date for up to 2 additional years to pro4 mote financial stability. 

5 (d) SHORT-TERM DEBT LIMITS FOR CERTAIN FI6 NANCIAL HOLDING COMPANIES.— 

7 (1) IN GENERAL.—In order to limit the risks 

8 that an overaccumulation of short-term debt could 

9 pose to financial holding companies and to the sta10 bility of the United States financial system, the 

11 Board may by regulation prescribe a limit on the 

12 amount of short-term debt, including off-balance 

13 sheet exposures, that may be accumulated by any fi14 nancial holding company subject to stricter stand15 ards for purposes of this title. 

16 (2) BASIS OF LIMIT.—Any limit prescribed 

17 under paragraph (1) shall be based on a financial 

18 holding company’s short-term debt as a percentage 

19 of its capital stock and surplus or on such other 

20 measure as the Board considers appropriate. 

21 (3) SHORT-TERM DEBT DEFINED.—For pur22 poses of this subsection, the term ‘‘short-term debt’’ 

23 means such liabilities with short-dated maturity that 

24 the Board identifies by regulation, except that such 

25 term does not include insured deposits. 


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1 (4) RULEMAKING AUTHORITY.—In addition to 

2 prescribing regulations under paragraphs (1) and 

3 (3), the Board may prescribe such regulations, in4 cluding definitions consistent with this subsection, 

5 and issue such orders as may be necessary to carry 

6 out this subsection. 

7 (5) AUTHORITY TO ISSUE EXEMPTIONS AND

8 ADJUSTMENTS.—Notwithstanding the Bank Holding 

9 Company Act of 1956 (12 U.S.C. 1841 et seq.), the 

10 Board may, if it determines such action is necessary 

11 to ensure appropriate heightened prudential super12 vision, with respect to a financial holding company 

13 that does not control an insured depository institu14 tion, issue to such company an exemption from or 

15 adjustment to the limit prescribed under paragraph 

16 (1). 

17 (e) PROMPT CORRECTIVE ACTION FOR FINANCIAL

18 HOLDING COMPANIES SUBJECT TO STRICTER STAND19 ARDS.— 

20 (1) PROMPT CORRECTIVE ACTION REQUIRED.— 

21 The Board shall take prompt corrective action to re22 solve the problems of financial holding companies 

23 subject to stricter standards. Except as specifically 

24 provided otherwise, this subsection shall apply only 


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1 to financial holding companies that are incorporated 

2 or organized under United States laws. 

3 (2) DEFINITIONS.—For purposes of this sec4 tion— 

5 (A) CAPITAL CATEGORIES.— 

6 (i) WELL CAPITALIZED.—A financial 

7 holding company subject to stricter stand8 ards is ‘‘well capitalized’’ if it exceeds the 

9 required minimum level for each relevant 

10 capital measure. 

11 (ii) UNDERCAPITALIZED.—A financial 

12 holding company subject to stricter stand13 ards is ‘‘undercapitalized’’ if it fails to 

14 meet the required minimum level for any 

15 relevant capital measure. 

16 (iii) SIGNIFICANTLY UNDERCAPITAL17 IZED.—A financial holding company sub18 ject to stricter standards is ‘‘significantly 

19 undercapitalized’’ if it is significantly below 

20 the required minimum level for any rel21 evant capital measure. The Board shall de22 fine by rule or regulation the term ‘‘signifi23 cantly undercapitalized’’ at a threshold the 

24 Board determines to be prudent for the efVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00072 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 fective monitoring, management and over2 sight of the financial system. 

3 (iv) CRITICALLY UNDERCAPITAL4 IZED.—A financial holding company sub5 ject to stricter standards is ‘‘critically 

6 undercapitalized’’ if it fails to meet any 

7 level specified in paragraph (4)(C)(i). 

8 (3) OTHER DEFINITIONS.— 

9 (A) AVERAGE.—The ‘‘average’’ of an ac10 counting item (such as total assets or tangible 

11 equity) during a given period means the sum of 

12 that item at the close of business on each busi13 ness day during that period divided by the total 

14 number of business days in that period. 

15 (B) CAPITAL DISTRIBUTION.—The term 

16 ‘‘capital distribution’’ means— 

17 (i) a distribution of cash or other 

18 property by a financial holding company 

19 subject to stricter standards to its owners 

20 made on account of that ownership, but 

21 not including any dividend consisting only 

22 of shares of the financial holding company 

23 subject to stricter standards or rights to 

24 purchase such shares; 


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1 (ii) a payment by a financial holding 

2 company subject to stricter standards to 

3 repurchase, redeem, retire, or otherwise ac4 quire any of its shares or other ownership 

5 interests, including any extension of credit 

6 to finance any person’s acquisition of those 

7 shares or interests; and 

8 (iii) a transaction that the Board de9 termines, by order or regulation, to be in 

10 substance a distribution of capital to the 

11 owners of the financial holding company 

12 subject to stricter standards. 

13 (C) CAPITAL RESTORATION PLAN.—The 

14 term ‘‘capital restoration plan’’ means a plan 

15 submitted under paragraph (6)(B). 

16 (D) COMPENSATION.—The term ‘‘com17 pensation’’ includes any payment of money or 

18 provision of any other thing of value in consid19 eration of employment. 

20 (E) RELEVANT CAPITAL MEASURE.—The 

21 term ‘‘relevant capital measure’’ means the 

22 measures described in paragraph (4). 

23 (F) REQUIRED MINIMUM LEVEL.—The 

24 term ‘‘required minimum level’’ means, with re25 spect to each relevant capital measure, the minVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00074 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 imum acceptable capital level specified by the 

2 Board by regulation. 

3 (G) SENIOR EXECUTIVE OFFICER.—The 

4 term ‘‘senior executive officer’’ has the same 

5 meaning as the term ‘‘executive officer’’ in sec6 tion 22(h) of the Federal Reserve Act (12 

7 U.S.C. 375b). 

8 (4) CAPITAL STANDARDS.— 

9 (A) RELEVANT CAPITAL MEASURES.— 

10 (i) IN GENERAL.—Except as provided 

11 in clause (ii)(II), the capital standards pre12 scribed by the Board under section 

13 1104(a)(2) shall include— 

14 (I) a leverage limit; and 

15 (II) a risk-based capital require16 ment. 

17 (ii) OTHER CAPITAL MEASURES.—The 

18 Board may by regulation— 

19 (I) establish any additional rel20 evant capital measures to carry out 

21 this section; or 

22 (II) rescind any relevant capital 

23 measure required under clause (i) 

24 upon determining that the measure is 


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1 no longer an appropriate means for 

2 carrying out this section. 

3 (B) CAPITAL CATEGORIES GENERALLY.— 

4 The Board shall, by regulation, specify for each 

5 relevant capital measure the levels at which a 

6 financial holding company subject to stricter 

7 standards is well capitalized, undercapitalized, 

8 and significantly undercapitalized. 

9 (C) CRITICAL CAPITAL.— 

10 (i) BOARD TO SPECIFY LEVEL.— 

11 (I) LEVERAGE LIMIT.—The 

12 Board shall, by regulation, specify the 

13 ratio of tangible equity to total assets 

14 at which a financial holding company 

15 subject to stricter standards is criti16 cally undercapitalized. 

17 (II) OTHER RELEVANT CAPITAL

18 MEASURES.—The Board may, by reg19 ulation, specify for 1 or more other 

20 relevant capital measures, the level at 

21 which a financial holding company 

22 subject to stricter standards is criti23 cally undercapitalized. 


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1 (ii) LEVERAGE LIMIT RANGE.—The 

2 level specified under clause (i)(I) shall re3 quire tangible equity in an amount— 

4 (I) not less than 2 percent of 

5 total assets; and 

6 (II) except as provided in sub7 clause (I), not more than 65 percent 

8 of the required minimum level of cap9 ital under the leverage limit. 

10 (5) CAPITAL DISTRIBUTIONS RESTRICTED.— 

11 (A) IN GENERAL.—A financial holding 

12 company subject to stricter standards shall 

13 make no capital distribution if, after making 

14 the distribution, the financial holding company 

15 subject to stricter standards would be under16 capitalized. 

17 (B) EXCEPTION.—Notwithstanding sub18 paragraph (A), the Board may permit a finan19 cial holding company subject to stricter stand20 ards to repurchase, redeem, retire, or otherwise 

21 acquire shares or ownership interests if the re22 purchase, redemption, retirement, or other ac23 quisition— 

24 (i) is made in connection with the 

25 issuance of additional shares or obligations 


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1 of the financial holding company subject to 

2 stricter standards in at least an equivalent 

3 amount; and 

4 (ii) will reduce the financial obliga5 tions of the financial holding company sub6 ject to stricter standards or otherwise im7 prove the financial condition of the finan8 cial holding company subject to stricter 

9 standards. 

10 (6) PROVISIONS APPLICABLE TO UNDER11 CAPITALIZED FINANCIAL HOLDING COMPANY SUB12 JECT TO STRICTER STANDARDS.— 

13 (A) MONITORING REQUIRED.—The Board 

14 shall— 

15 (i) closely monitor the condition of 

16 any undercapitalized financial holding com17 pany subject to stricter standards; 

18 (ii) closely monitor compliance by any 

19 undercapitalized financial holding company 

20 subject to stricter standards with capital 

21 restoration plans, restrictions, and require22 ments imposed under this section; and 

23 (iii) periodically review the plan, re24 strictions, and requirements applicable to 

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1 pany subject to stricter standards to deter2 mine whether the plan, restrictions, and 

3 requirements are effective. 

4 (B) CAPITAL RESTORATION PLAN RE5 QUIRED.— 

6 (i) IN GENERAL.—Any undercapital7 ized financial holding company subject to 

8 stricter standards shall submit an accept9 able capital restoration plan to the Board 

10 within the time allowed by the Board 

11 under clause (iv). 

12 (ii) CONTENTS OF PLAN.—The capital 

13 restoration plan shall— 

14 (I) specify— 

15 (aa) the steps the financial 

16 holding company subject to 

17 stricter standards will take to be18 come well capitalized; 

19 (bb) the levels of capital to 

20 be attained by the financial hold21 ing company subject to stricter 

22 standards during each year in 

23 which the plan will be in effect; 

24 (cc) how the financial hold25 ing company subject to stricter 


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1 standards will comply with the 

2 restrictions or requirements then 

3 in effect under this section; and 

4 (dd) the types and levels of 

5 activities in which the financial 

6 holding company subject to 

7 stricter standards will engage; 

8 and 

9 (II) contain such other informa10 tion that the Board may require. 

11 (iii) CRITERIA FOR ACCEPTING

12 PLAN.—The Board shall not accept a cap13 ital restoration plan unless it determines 

14 that the plan— 

15 (I) complies with clause (ii); 

16 (II) is based on realistic assump17 tions, and is likely to succeed in re18 storing the capital of the financial 

19 holding company subject to stricter 

20 standards; and 

21 (III) would not appreciably in22 crease the risk (including credit risk, 

23 interest-rate risk, and other types of 

24 risk) to which the financial holding 


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1 company subject to stricter standards 

2 is exposed. 

3 (iv) DEADLINES FOR SUBMISSION AND

4 REVIEW OF PLANS.—The Board shall, by 

5 regulation, establish deadlines that— 

6 (I) provide financial holding com7 panies subject to stricter standards 

8 with reasonable time to submit capital 

9 restoration plans, and generally re10 quire a financial holding company 

11 subject to stricter standards to submit 

12 a plan not later than 45 days after it 

13 becomes undercapitalized; and 

14 (II) require the Board to act on 

15 capital restoration plans expeditiously, 

16 and generally not later than 60 days 

17 after the plan is submitted. 

18 (C) ASSET GROWTH RESTRICTED.—An 

19 undercapitalized financial holding company sub20 ject to stricter standards shall not permit its 

21 average total assets during any calendar quar22 ter to exceed its average total assets during the 

23 preceding calendar quarter unless— 


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1 (i) the Board has accepted the capital 

2 restoration plan of the financial holding 

3 company subject to stricter standards; 

4 (ii) any increase in total assets is con5 sistent with the plan; and 

6 (iii) the ratio of tangible equity to 

7 total assets of the financial holding com8 pany subject to stricter standards increases 

9 during the calendar quarter at a rate suffi10 cient to enable it to become well capitalized 

11 within a reasonable time. 

12 (D) PRIOR APPROVAL REQUIRED FOR AC13 QUISITIONS AND NEW LINES OF BUSINESS.—An 

14 undercapitalized financial holding company sub15 ject to stricter standards shall not, directly or 

16 indirectly, acquire any interest in any company 

17 or insured depository institution, or engage in 

18 any new line of business, unless— 

19 (i) the Board has accepted the capital 

20 restoration plan of the financial holding 

21 company subject to stricter standards, the 

22 financial holding company subject to strict23 er standards is implementing the plan, and 

24 the Board determines that the proposed 


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1 action is consistent with and will further 

2 the achievement of the plan; 

3 (ii) the Board determines that the 

4 specific proposed action is appropriate; or 

5 (iii) the Board has exempted the fi6 nancial holding company subject to stricter 

7 standards from the requirements of this 

8 paragraph with respect to the class of ac9 quisitions that includes the proposed ac10 tion. 

11 (E) DISCRETIONARY SAFEGUARDS.—The 

12 Board may, with respect to any undercapital13 ized financial holding company subject to strict14 er standards, take actions described in any 

15 clause of paragraph (7)(B) if the Board deter16 mines that those actions are necessary. The 

17 Board, in determining whether to impose any 

18 requirement under this subparagraph that is 

19 likely to have a significant effect on a function20 ally regulated subsidiary, subsidiary depository 

21 institution, or insurance company subsidiary of 

22 a financial holding company subject to stricter 

23 standards, shall consult with the primary finan24 cial regulatory agency for such subsidiary. In 

25 the case of an insurance company subsidiary of 


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1 a financial holding company subject to stricter 

2 standards, the Board shall consult with the 

3 Federal Insurance Office. 

4 (7) PROVISIONS APPLICABLE TO SIGNIFICANTLY

5 UNDERCAPITALIZED FINANCIAL HOLDING COMPA6 NIES SUBJECT TO STRICTER STANDARDS AND

7 UNDERCAPITALIZED FINANCIAL HOLDING COMPA8 NIES SUBJECT TO STRICTER STANDARDS THAT FAIL

9 TO SUBMIT AND IMPLEMENT CAPITAL RESTORATION

10 PLANS.— 

11 (A) IN GENERAL.—This paragraph shall 

12 apply with respect to any financial holding com13 pany subject to stricter standards that— 

14 (i) is significantly undercapitalized; or 

15 (ii) is undercapitalized and— 

16 (I) fails to submit an acceptable 

17 capital restoration plan within the 

18 time allowed by the Board under 

19 paragraph (6)(B)(iv); or 

20 (II) fails in any material respect 

21 to implement a capital restoration 

22 plan accepted by the Board. 

23 (B) SPECIFIC ACTIONS AUTHORIZED.—The 

24 Board shall carry out this paragraph by taking 

25 1 or more of the following actions— 


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1 (i) REQUIRING RECAPITALIZATION.— 

2 Doing one or more of the following: 

3 (I) Requiring the financial hold4 ing company subject to stricter stand5 ards to sell enough shares or obliga6 tions of the financial holding company 

7 subject to stricter standards so that 

8 the financial holding company subject 

9 to stricter standards will be well cap10 italized after the sale. 

11 (II) Further requiring that in12 struments sold under subclause (I) be 

13 voting shares. 

14 (III) Requiring the financial 

15 holding company subject to stricter 

16 standards to be acquired by or com17 bine with another company. 

18 (ii) RESTRICTING TRANSACTIONS

19 WITH AFFILIATES.— 

20 (I) Requiring the financial hold21 ing company subject to stricter stand22 ards to comply with section 23A of 

23 the Federal Reserve Act (12 U.S.C. 

24 371c), as if it were a member bank. 


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1 (II) Further restricting the 

2 transactions of the financial holding 

3 company subject to stricter standards 

4 with affiliates and insiders. 

5 (iii) RESTRICTING ASSET GROWTH.— 

6 Restricting the asset growth of the finan7 cial holding company subject to stricter 

8 standards more stringently than paragraph 

9 (6)(C), or requiring the financial holding 

10 company subject to stricter standards to 

11 reduce its total assets. 

12 (iv) RESTRICTING ACTIVITIES.—Re13 quiring the financial holding company sub14 ject to stricter standards or any of its sub15 sidiaries to alter, reduce, or terminate any 

16 activity that the Board determines poses 

17 excessive risk to the financial holding com18 pany subject to stricter standards. 

19 (v) IMPROVING MANAGEMENT.—Doing 

20 one or more of the following: 

21 (I) NEW ELECTION OF DIREC22 TORS.—Ordering a new election for 

23 the board of directors of the financial 

24 holding company subject to stricter 

25 standards. 


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1 (II) DISMISSING DIRECTORS OR

2 SENIOR EXECUTIVE OFFICERS.—Re3 quiring the financial holding company 

4 subject to stricter standards to dis5 miss from office any director or senior 

6 executive officer who had held office 

7 for more than 180 days immediately 

8 before the financial holding company 

9 subject to stricter standards became 

10 undercapitalized. Dismissal under this 

11 clause shall not be construed to be a 

12 removal under section 8 of the Fed13 eral Deposit Insurance Act (12 U.S.C. 

14 1818). 

15 (III) EMPLOYING QUALIFIED

16 SENIOR EXECUTIVE OFFICERS.—Re17 quiring the financial holding company 

18 subject to stricter standards to employ 

19 qualified senior executive officers 

20 (who, if the Board so specifies, shall 

21 be subject to approval by the Board). 

22 (vi) REQUIRING DIVESTITURE.—Re23 quiring the financial holding company sub24 ject to stricter standards to divest itself of 

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1 termines that the subsidiary is in danger 

2 of becoming insolvent, poses a significant 

3 risk to the financial holding company sub4 ject to stricter standards, or is likely to 

5 cause a significant dissipation of the assets 

6 or earnings of the financial holding com7 pany subject to stricter standards. 

8 (vii) REQUIRING OTHER ACTION.—Re9 quiring the financial holding company sub10 ject to stricter standards to take any other 

11 action that the Board determines will bet12 ter carry out the purpose of this section 

13 than any of the actions described in this 

14 subparagraph. 

15 (C) PRESUMPTION IN FAVOR OF CERTAIN

16 ACTIONS.—In complying with subparagraph 

17 (B), the Board shall take the following actions, 

18 unless the Board determines that the actions 

19 would not be appropriate: 

20 (i) The action described in subclause 

21 (I) or (III) of subparagraph (B)(i) (relat22 ing to requiring the sale of shares or obli23 gations, or requiring the financial holding 

24 company subject to stricter standards to be 


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1 acquired by or combine with another com2 pany). 

3 (ii) The action described in subpara4 graph (B)(ii) (relating to restricting trans5 actions with affiliates). 

6 (D) SENIOR EXECUTIVE OFFICERS’ COM7 PENSATION RESTRICTED.— 

8 (i) IN GENERAL.—The financial hold9 ing company subject to stricter standards 

10 shall not do any of the following without 

11 the prior written approval of the Board: 

12 (I) Pay any bonus to any senior 

13 executive officer. 

14 (II) Provide compensation to any 

15 senior executive officer at a rate ex16 ceeding that officer’s average rate of 

17 compensation (excluding bonuses, 

18 stock options, and profit-sharing) dur19 ing the 12 calendar months preceding 

20 the calendar month in which the fi21 nancial holding company subject to 

22 stricter standards became under23 capitalized. 

24 (ii) FAILING TO SUBMIT PLAN.—The 

25 Board shall not grant any approval under 


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1 clause (i) with respect to a financial hold2 ing company subject to stricter standards 

3 that has failed to submit an acceptable 

4 capital restoration plan. 

5 (E) CONSULTATION WITH OTHER REGU6 LATORS.—Before the Board makes a deter7 mination under subparagraph (B)(vi) with re8 spect to a subsidiary that is a broker, dealer, 

9 government securities broker, government secu10 rities dealer, investment company, or invest11 ment adviser, the Board shall consult with the 

12 Securities and Exchange Commission and, in 

13 the case of any other subsidiary which is sub14 ject to any financial responsibility or capital re15 quirement, any other appropriate regulator of 

16 such subsidiary with respect to the proposed de17 termination of the Board and actions pursuant 

18 to such determination. 

19 (8) MORE STRINGENT TREATMENT BASED ON

20 OTHER SUPERVISORY CRITERIA.— 

21 (A) IN GENERAL.—If the Board deter22 mines (after notice and an opportunity for 

23 hearing) that a financial holding company sub24 ject to stricter standards is in an unsafe or un25 sound condition or, pursuant to section 8(b)(8) 


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1 of the Federal Deposit Insurance Act (12 

2 U.S.C. 1818(b)(8)), deems the financial holding 

3 company subject to stricter standards to be en4 gaging in an unsafe or unsound practice, the 

5 Board may— 

6 (i) if the financial holding company 

7 subject to stricter standards is well capital8 ized, require the financial holding company 

9 subject to stricter standards to comply 

10 with one or more provisions of paragraphs 

11 (6) and (7), as if the institution were 

12 undercapitalized; or 

13 (ii) if the financial holding company 

14 subject to stricter standards is under15 capitalized, take any one or more actions 

16 authorized under paragraph (7)(B) as if 

17 the financial holding company subject to 

18 stricter standards were significantly under19 capitalized, after consultation with the pri20 mary financial regulatory agency for any 

21 functionally regulated subsidiary, sub22 sidiary depository institution, or insurance 

23 company subsidiary that is likely to be sig24 nificantly affected by such actions. In the 

25 case of an insurance company subsidiary of 


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1 a financial holding company subject to 

2 stricter standards, the Board shall consult 

3 with the Federal Insurance Office. 

4 (B) CONTENTS OF PLAN.—A plan that 

5 may be required pursuant to subparagraph 

6 (A)(i) shall specify the steps that the financial 

7 holding company subject to stricter standards 

8 will take to correct the unsafe or unsound con9 dition or practice. 

10 (9) IMPLEMENTATION.—The Board shall pre11 scribe such regulations, issue such orders, and take 

12 such other actions the Board determines to be nec13 essary to carry out this subsection. 

14 (10) OTHER AUTHORITY NOT AFFECTED.—This 

15 section does not limit any authority of the Board, 

16 any other Federal regulatory agency, or a State to 

17 take action in addition to (but not in derogation of) 

18 that required under this section. 

19 (11) CONSULTATION.—The Board and the Sec20 retary of the Treasury shall consult with their for21 eign counterparts and through appropriate multilat22 eral organizations to reach agreement to extend 

23 comprehensive and robust prudential supervision and 

24 regulation to all highly leveraged and substantially 

25 interconnected financial companies. 


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1 (12) ADMINISTRATIVE REVIEW OF DISMISSAL

2 ORDERS.— 

3 (A) TIMELY PETITION REQUIRED.—A di4 rector or senior executive officer dismissed pur5 suant to an order under paragraph 

6 (7)(B)(v)(II) may obtain review of that order 

7 by filing a written petition for reinstatement 

8 with the Board not later than 10 days after re9 ceiving notice of the dismissal. 

10 (B) PROCEDURE.— 

11 (i) HEARING REQUIRED.—The Board 

12 shall give the petitioner an opportunity 

13 to— 

14 (I) submit written materials in 

15 support of the petition; and 

16 (II) appear, personally or 

17 through counsel, before 1 or more 

18 members of the Board or designated 

19 employees of the Board. 

20 (ii) DEADLINE FOR HEARING.—The 

21 Board shall— 

22 (I) schedule the hearing referred 

23 to in clause (i)(II) promptly after the 

24 petition is filed; and 


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1 (II) hold the hearing not later 

2 than 30 days after the petition is 

3 filed, unless the petitioner requests 

4 that the hearing be held at a later 

5 time. 

6 (iii) DEADLINE FOR DECISION.—Not 

7 later than 60 days after the date of the 

8 hearing, the Board shall— 

9 (I) by order, grant or deny the 

10 petition; 

11 (II) if the order is adverse to the 

12 petitioner, set forth the basis for the 

13 order; and 

14 (III) notify the petitioner of the 

15 order. 

16 (C) STANDARD FOR REVIEW OF DISMISSAL

17 ORDERS.—The petitioner shall bear the burden 

18 of proving that the petitioner’s continued em19 ployment would materially strengthen the abil20 ity of the financial holding company subject to 

21 stricter standards— 

22 (i) to become well capitalized, to the 

23 extent that the order is based on the cap24 ital level of the financial holding company 

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1 pany’s failure to submit or implement a 

2 capital restoration plan; and 

3 (ii) to correct the unsafe or unsound 

4 condition or unsafe or unsound practice, to 

5 the extent that the order is based on para6 graph (8)(A). 

7 (13) ENFORCEMENT AUTHORITY FOR FOREIGN

8 FINANCIAL HOLDING COMPANY SUBJECT TO STRICT9 ER STANDARDS.— 

10 (A) TERMINATION AUTHORITY.—If the 

11 Board believes that a condition, practice, or ac12 tivity of a foreign financial holding company 

13 subject to stricter standards does not comply 

14 with this title or the rules or orders prescribed 

15 by the Board under this title or otherwise poses 

16 a threat to financial stability, the Board may, 

17 after notice and opportunity for a hearing, take 

18 such actions as necessary to mitigate such risk, 

19 including ordering a foreign financial holding 

20 company subject to stricter standards in the 

21 United States to terminate the activities of such 

22 branch, agency, or subsidiary. 

23 (B) DISCRETION TO DENY HEARING.—The 

24 Board may issue an order under paragraph (1) 

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1 ing if the Board determines that expeditious ac2 tion is necessary in order to protect the public 

3 interest. 

4 (f) REPORTS REGARDING RAPID AND ORDERLY RES5 OLUTION AND CREDIT EXPOSURE.— 

6 (1) IN GENERAL.—The Board shall require 

7 each financial holding company subject to stricter 

8 standards incorporated or organized in the United 

9 States to report periodically to the Board on— 

10 (A) its plan for rapid and orderly resolu11 tion in the event of severe financial distress; 

12 (B) the nature and extent to which the fi13 nancial holding company subject to stricter 

14 standards has credit exposure to other signifi15 cant financial companies; and 

16 (C) the nature and extent to which other 

17 significant financial companies have credit ex18 posure to the financial holding company subject 

19 to stricter standards. 

20 (2) NO LIMITING EFFECT.—A rapid resolution 

21 plan submitted in accordance with this subsection 

22 shall not be binding on a receiver appointed under 

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1 nancial holding company subject to stricter stand2 ards or any of its subsidiaries or affiliates. 

3 (3) REPORTING TRIGGERED BY STRESS TEST

4 RESULTS.— 

5 (A) FINANCIAL HOLDING COMPANIES SUB6 JECT TO STRICTER STANDARDS.—Each time 

7 the results of a quarterly stress test under base8 line or adverse conditions conducted by a finan9 cial holding company subject to stricter stand10 ards under section 1114(a) or the results of a 

11 stress test of that financial holding company 

12 subject to stricter standards conducted by the 

13 Board under subsection (g) indicate that the fi14 nancial holding company subject to stricter 

15 standards is, in the determination of the Board, 

16 significantly or critically undercapitalized, that 

17 financial holding company subject to stricter 

18 standards shall submit a rapid resolution plan 

19 in accordance with this subsection that has 

20 been revised to address the causes of those re21 sults. 

22 (B) FINANCIAL COMPANIES THAT ARE NOT

23 FINANCIAL HOLDING COMPANIES SUBJECT TO

24 STRICTER STANDARDS.—Each time the results 

25 of a semiannual stress test under baseline or 


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1 adverse conditions conducted by a financial 

2 company under section 1114(b) indicate that 

3 the financial company is, in the determination 

4 of the Board, significantly or critically under5 capitalized, that financial company shall be re6 quired to report under this subsection. The 

7 Board shall prescribe regulations establishing 

8 expedited procedures for such reporting. 

9 (C) TRANSPARENCY.—Any rapid resolution 

10 plan submitted pursuant to this paragraph shall 

11 be subject to any restrictions regarding the dis12 closure of any other rapid resolution plan sub13 mitted pursuant to this subsection. 

14 (g) STRESS TESTS.— 

15 (1) The Board, in coordination with the appro16 priate primary financial regulatory agency, shall 

17 conduct annual stress tests of each financial holding 

18 company subject to stricter standards. The Board 

19 may, as the Board determines appropriate, conduct 

20 stress tests of financial companies that are not fi21 nancial holding companies subject to stricter stand22 ards. The Board shall publish a summary of the re23 sults of such stress tests. 

24 (2) The Board shall issue regulations to define 

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1 section. Such a definition shall provide for not less 

2 than 3 different sets of conditions under which a 

3 stress test should be conducted: baseline, adverse, 

4 and severely adverse scenarios. 

5 (h) AVOIDING DUPLICATION.—The Board shall take 

6 any action the Board deems appropriate to avoid imposing 

7 duplicative requirements under this subtitle for financial 

8 holding companies subject to stricter standards that are 

9 also bank holding companies. 

10 (i) RESOLUTION PLANS REQUIRED.— 

11 (1) IN GENERAL.—The Corporation and the 

12 Board, after consultation with the Council, shall 

13 jointly issue regulations requiring financial holding 

14 companies subject to stricter standards to develop 

15 plans designed to assist in the rapid and orderly res16 olution of the company. 

17 (2) STANDARDS FOR RESOLUTION PLANS.—The 

18 regulations required by paragraph (1) shall— 

19 (A) define the scope of financial holding 

20 companies subject to stricter standards covered 

21 by these requirements and may exempt finan22 cial holding companies subject to stricter stand23 ards from the requirements of this subsection if 

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1 mine that exemption is consistent with the pur2 poses of this title; 

3 (B) require each plan to demonstrate that 

4 any insured depository institution affiliated 

5 with a financial holding company subject to 

6 stricter standards is adequately insulated from 

7 the activities of any non-bank subsidiary of the 

8 institution or financial holding companies sub9 ject to stricter standards; 

10 (C) require that each plan include informa11 tion detailing— 

12 (i) the nature and extent to which the 

13 financial holding company subject to strict14 er standards has credit exposure to other 

15 significant financial companies; 

16 (ii) the nature and extent to which 

17 other significant financial companies have 

18 credit exposure to the financial holding 

19 company subject to stricter standards; 

20 (iii) full descriptions of the financial 

21 holding company subject to stricter stand22 ards’ ownership structure, assets, liabil23 ities, and contractual obligations; and 

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1 parties, and a process for determining 

2 where the financial holding company sub3 ject to stricter standards’ collateral is 

4 pledged; and 

5 (D) establish such other standards as the 

6 Corporation and the Board may jointly deem 

7 necessary to carry out this subsection. 

8 (3) REVIEW OF PLANS.— 

9 (A) SUBMISSION OF PLANS.—Each finan10 cial holding company subject to stricter stand11 ards that is subject to the requirement under 

12 paragraph (1) shall submit its plan to the Cor13 poration and the Board. 

14 (B) REVIEW.—Upon the submission of a 

15 plan pursuant to subparagraph (A), and not 

16 less often than annually thereafter, the Cor17 poration and the Board, after consultation with 

18 any Federal financial regulatory agencies with 

19 jurisdiction over the financial holding company 

20 subject to stricter standards (and, if the finan21 cial holding company subject to stricter stand22 ards is an insurance company, the Federal In23 surance Office), shall jointly review such plan 

24 and may require a financial holding company 

25 subject to stricter standards to revise its plan 


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1 consistent with the standards established pursu2 ant to paragraph (2). 

3 (4) ENFORCEMENT.— 

4 (A) IN GENERAL.—The Corporation, after 

5 consultation with the Board, shall have the au6 thority to take any enforcement action in sec7 tion 8 of the Federal Deposit Insurance Act (12 

8 U.S.C. 1818) against any financial holding 

9 company subject to stricter standards that fails 

10 to comply with the requirements of this section 

11 or any regulations issued pursuant to this sec12 tion. 

13 (B) NO LIMITATION ON BOARD AUTHOR14 ITY.—Nothing under this subsection shall be 

15 construed as limiting any enforcement authority 

16 available to the Board under any other provi17 sion of law. 

18 (5) NO LIMITING EFFECT ON RECEIVER.—A 

19 rapid resolution plan submitted under this section 

20 shall not be binding on a receiver appointed under 

21 subtitle G, a bankruptcy court, or any other author22 ity that is authorized or required to resolve the fi23 nancial holding company subject to stricter stand24 ards or any of its subsidiaries or affiliates. 


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1 (6) NO PRIVATE RIGHT OF ACTION.—No pri2 vate right of action may be based on any resolution 

3 plan submitted under this section. 

4 (j) RULE OF CONSTRUCTION REGARDING CONSUMER

5 PROTECTION STANDARDS.—The prudential standards im6 posed or recommended by the Board or the Council under 

7 this section shall not be construed as superseding— 

8 (1) any consumer protection standards promul9 gated under a State or Federal consumer protection 

10 law, including the Consumer Financial Protection 

11 Agency Act and the Federal Trade Commission Act; 

12 or 

13 (2) any investor protection standard that pro14 tects consumers (including public reporting require15 ments) imposed under State or Federal securities 

16 laws, including the Securities Act of 1933, the Secu17 rities Exchange Act of 1934, the Investment Com18 pany Act of 1944, and the Investment Advisors Act 

19 of 1944. 

20 (k) RULEMAKING AUTHORITY.—The Board may pre21 scribe such regulations and issue such orders as the 

22 Board, in consultation with the Council, determines to be 

23 necessary to carry out the provisions of this subtitle. 


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1 SEC. 1105. MITIGATION OF SYSTEMIC RISK. 

2 (a) COUNCIL AUTHORITY TO RESTRICT OPERATIONS

3 AND ACTIVITIES.—If the Council determines, after notice 

4 and an opportunity for hearing, that despite the higher 

5 prudential standards imposed pursuant to section 

6 1104(a)(2), the size of a financial holding company sub7 ject to stricter standards or the scope, nature, scale, con8 centration, interconnectedness, or mix of activities directly 

9 or indirectly conducted by a financial holding company 

10 subject to stricter standards poses a grave threat to the 

11 financial stability or economy of the United States, the 

12 Council shall require the company to undertake 1 or more 

13 mitigatory actions described in subsection (d). 

14 (b) CONSULTATION WITH FEDERAL FINANCIAL

15 REGULATORY AGENCIES.—The Council, in determining 

16 whether to impose any requirement under this section that 

17 is likely to have a significant impact on a functionally reg18 ulated subsidiary, or a subsidiary depository institution, 

19 of a financial holding company subject to stricter stand20 ards under this title, shall consult with the Federal finan21 cial regulatory agency for any such subsidiary. With re22 spect to any requirements under this section that is likely 

23 to have a significant effect on an insurance company, the 

24 Council shall consult with the Federal Insurance Office. 

25 (c) FACTORS FOR CONSIDERATION.—In reaching a 

26 determination described in subsection (a), the Council 


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1 shall take into consideration the following factors, as ap2 propriate— 

3 (1) the amount and nature of the company’s fi4 nancial assets; 

5 (2) the amount and nature of the company’s li6 abilities, including the degree of reliance on short7 term funding; 

8 (3) the extent and nature of the company’s off9 balance sheet exposures; 

10 (4) the company’s reliance on leverage; 

11 (5) the extent and nature of the company’s 

12 transactions, relationships, and interconnectedness 

13 with other financial and non-financial companies; 

14 (6) the company’s importance as a source of 

15 credit for households, businesses, and State and 

16 local governments and as a source of liquidity for 

17 the financial system; 

18 (7) the scope, nature, size, scale, concentration, 

19 interconnectedness and mix of the company’s activi20 ties; 

21 (8) the extent to which prudential regulations 

22 mitigate the risk posed; and 

23 (9) any other factors identified that the Council 

24 determines appropriate. 

25 (d) MITIGATORY ACTIONS.— 


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1 (1) IN GENERAL.—Mitigatory action may in2 clude— 

3 (A) modifying the stricter prudential 

4 standards imposed pursuant to section 1104(a); 

5 (B) terminating 1 or more activities; 

6 (C) imposing conditions on the manner in 

7 which a financial holding company subject to 

8 stricter standards conducts 1 or more activities; 

9 (D) limiting the ability to merge with, ac10 quire, consolidate with, or otherwise become af11 filiated with another company; 

12 (E) restricting the ability to offer a finan13 cial product or products; and 

14 (F) in the event the Council deems sub15 paragraphs (A) through (E) inadequate as a 

16 means to address the identified risks, selling, 

17 divesting, or otherwise transferring business 

18 units, branches, assets, or off-balance sheet 

19 items to unaffiliated companies. 

20 (2) INTERNATIONAL COMPETITIVENESS CON21 SIDERATIONS.—In making any decision pursuant to 

22 paragraph (1), the Council shall consider— 

23 (A) the need to maintain the international 

24 competitiveness of the United States financial 

25 services industry; and 


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1 (B) the extent to which other countries 

2 with a significant financial services industry 

3 have established corresponding regimes to miti4 gate threats to financial stability or the econ5 omy posed by financial companies. 

6 (e) DUE PROCESS.— 

7 (1) NOTICE AND HEARING.—The Council shall 

8 give notice to a financial holding company subject to 

9 stricter standards, and opportunity for hearing if re10 quested, that the financial holding company subject 

11 to stricter standards is being considered for mitiga12 tory action pursuant to subsection (a). The hearing 

13 shall occur no later than 30 days after the financial 

14 company receives notice of the proposed action from 

15 the Council. 

16 (2) NOTICE.—The Council shall notify the fi17 nancial holding company subject to stricter stand18 ards of the Council’s determination, and, if the 

19 Council determines that mitigatory action is appro20 priate, require the company to submit a plan to the 

21 Council to implement the required mitigatory action. 

22 (3) SUBMISSION OF PLAN.—The financial hold23 ing company subject to stricter standards shall sub24 mit its proposed plan to implement the required 

25 mitigatory action or actions to the Council within 60 


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1 days from the date it receives notice under para2 graph (2) or such shorter timeframe as the Council 

3 may require, if the Council determines an emergency 

4 situation merits expeditious implementation. 

5 (4) APPROVAL OR AMENDMENT OF THE

6 PLAN.—The Council shall review the plan submitted 

7 pursuant to paragraph (3) and determine whether 

8 the plan achieves the goal of mitigating a grave 

9 threat to the financial stability or the economy of 

10 the United States. The Council may approve or dis11 approve the plan with or without amendment. 

12 (5) EFFECT OF PLAN APPROVAL.—The Council 

13 shall— 

14 (A) notify a financial holding company 

15 subject to stricter standards by order, which 

16 shall be public, that the Council has approved 

17 the plan with or without amendment; and 

18 (B) direct the Board to require a financial 

19 holding company subject to stricter standards 

20 to comply with the plan to implement mitiga21 tory action or actions within a reasonable time22 frame after the Council’s approval and in ac23 cordance with such deadlines established in the 

24 plan. 


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1 (f) TREASURY SECRETARY CONCURRENCE.—Mitiga2 tory action imposed by the Council involving the sale, di3 vestiture, or transfer of more than $10,000,000,000 in 

4 total assets by a financial holding company subject to 

5 stricter standards shall require the Secretary of the Treas6 ury’s concurrence before the issuance of the notice in sub7 section (e)(5)(A). If the sale, divestiture, or transfer of 

8 total assets by a financial holding company subject to 

9 stricter standards exceeds $100,000,000,000, the Sec10 retary of the Treasury shall consult with the President be11 fore concurrence. The aforementioned amounts shall be in12 dexed to inflation. 

13 (g) FAILURE TO IMPLEMENT THE PLAN.—If a finan14 cial holding company subject to stricter standards fails to 

15 implement a plan for mitigatory action imposed pursuant 

16 to this section within a reasonable timeframe, the Council 

17 shall direct the Board to take such actions as necessary 

18 to ensure compliance with the plan. 

19 (h) JUDICIAL REVIEW.—For any plan required under 

20 this section, a financial holding company subject to strict21 er standards may, not later than 30 days after receipt of 

22 the Council’s notice under subsection (e)(2), bring an ac23 tion in the United States district court for the judicial dis24 trict in which the home office of such company is located, 

25 or in the United States District Court for the District of 


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1 Columbia, for an order requiring that the requirement for 

2 a mitigatory action be rescinded. Judicial review under 

3 this section shall be limited to the imposition of a mitiga4 tory action pursuant to subsection (e)(5). In reviewing the 

5 Council’s imposition of a mitigatory action, the court shall 

6 rescind or dismiss only those mitigatory actions it finds 

7 to be imposed in an arbitrary and capricious manner. 

8 (i) RULE OF CONSTRUCTION.—Nothing in subsection 

9 (h) shall be construed as limiting the authority of a Fed10 eral financial regulatory agency to take action with respect 

11 to a financial company subject to the jurisdiction of such 

12 agency pursuant to applicable law other than this section. 

13 SEC. 1106. SUBJECTING ACTIVITIES OR PRACTICES TO 

14 STRICTER PRUDENTIAL STANDARDS FOR FI15 NANCIAL STABILITY PURPOSES. 

16 (a) IN GENERAL.—The Council may subject a finan17 cial activity or practice to stricter prudential standards 

18 under this subtitle if the Council determines that the con19 duct, scope, nature, size, scale, concentration, or inter20 connectedness of such activity or practice could create or 

21 increase the risk of significant liquidity, credit, or other 

22 problems spreading among financial institutions or mar23 kets and local, minority, or underserved communities, and 

24 thereby threaten the stability of the financial system or 

25 economy. 


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1 (b) PERIODIC REVIEW OF ACTIVITY IDENTIFICA2 TIONS.— 

3 (1) SUBMISSION OF ASSESSMENT.—The Board 

4 shall periodically submit a report to the Council con5 taining an assessment of whether each activity or 

6 practice subjected to stricter prudential standards 

7 should continue to be subject to such standards. 

8 (2) REVIEW AND RECISION.—The Council 

9 shall— 

10 (A) review the assessment submitted pur11 suant to paragraph (1) and any information or 

12 recommendation submitted by members of the 

13 Council regarding whether a financial activity 

14 subjected to stricter prudential standards con15 tinues to merit stricter prudential standards; 

16 and 

17 (B) rescind the action subjecting an activ18 ity to heightened prudential supervision if the 

19 Council determines that the activity no longer 

20 meets the criteria in subsection (a). 

21 (c) PROCEDURE FOR SUBJECTING OR CEASING TO

22 SUBJECT AN ACTIVITY OR PRACTICE TO STRICTER PRU23 DENTIAL STANDARDS.— 

24 (1) COUNCIL AND BOARD COORDINATION.—The 

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1 sidering whether to subject or cease to subject an 

2 activity to stricter prudential standards in accord3 ance with this section. 

4 (2) NOTICE AND OPPORTUNITY FOR CONSIDER5 ATION OF WRITTEN MATERIALS.— 

6 (A) IN GENERAL.—The Board shall, in an 

7 executive capacity on behalf of the Council, pro8 vide notice to financial companies that the 

9 Council is considering whether to subject an ac10 tivity or practice to heightened prudential regu11 lation, and shall provide a financial company 

12 engaged in such activity or practice 30 days to 

13 submit written materials to inform the Coun14 cil’s decision. The Council shall decide, and the 

15 Board shall provide notice of the Council’s deci16 sion, within 60 days of the due date for such 

17 written materials. 

18 (B) EMERGENCY EXCEPTION.—The Coun19 cil may waive or modify the requirements of 

20 subparagraph (A) if the Council determines 

21 that such waiver or modification is necessary or 

22 appropriate to prevent or mitigate threats posed 

23 by an activity to financial stability. The Board 

24 shall, in an executive capacity on behalf of the 

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1 fication to financial companies as soon as prac2 ticable, which shall be no later than 24 hours 

3 after the waiver or modification. 

4 (3) FORM OF DECISION.—The Board shall pro5 vide all notices required under this subsection by 

6 posting a notice on the Board’s web site and pub7 lishing a notice in the Federal Register. 

8 SEC. 1107. STRICTER REGULATION OF ACTIVITIES AND 

9 PRACTICES FOR FINANCIAL STABILITY PUR10 POSES. 

11 (a) PRUDENTIAL STANDARDS.— 

12 (1) BOARD AUTHORITY TO RECOMMEND.— 

13 (A) IN GENERAL.—To mitigate the risks to 

14 United States financial stability and the United 

15 States economy posed by financial activities and 

16 practices that the Council identifies for stricter 

17 prudential standards under section 1106 the 

18 Board, as agent of the Council, shall rec19 ommend prudential standards to the appro20 priate primary financial regulatory agencies to 

21 apply to such identified activities and practices. 

22 (B) CONSULTATION WITH PRIMARY FINAN23 CIAL REGULATORY AGENCIES.—The Board, in 

24 developing recommendations under this sub25 section, shall consult with the relevant primary 


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1 financial regulatory agencies with respect to 

2 any standard that is likely to have a significant 

3 effect on entities described in section 

4 1000(b)(6). With respect to any standard that 

5 is likely to have a significant effect on insur6 ance companies, the Board also shall consult 

7 with the Federal Insurance Office. 

8 (2) CRITERIA.—The actions recommended 

9 under paragraph (1)— 

10 (A) shall be designed to maximize financial 

11 stability, taking costs to long-term financial and 

12 economic growth into account; and 

13 (B) may include prescribing the conduct of 

14 the activity or practice in specific ways (such as 

15 by limiting its scope, nature, size, scale, con16 centration, or interconnectedness, or applying 

17 particular capital or risk-management require18 ments to the conduct of the activity) or prohib19 iting the activity or practice altogether. 

20 (3) EXCEPTION.—The standards recommended 

21 by the Board and adopted by a primary financial 

22 regulatory agency pursuant to this section shall not 

23 apply to activities that a foreign financial parent 

24 conducts solely outside the United States if such ac25 tivities are conducted solely by a company or other 


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1 operating entity that is located outside the United 

2 States. 

3 (b) IMPLEMENTATION OF RECOMMENDED STAND4 ARDS.— 

5 (1) ROLE OF PRIMARY FINANCIAL REGULATORY

6 AGENCY.—Each primary financial regulatory agency 

7 is authorized to impose, require reports regarding, 

8 examine for compliance with, and enforce standards 

9 in accordance with this section with respect to those 

10 entities described in section 1000(b)(6) for which it 

11 is the primary financial regulatory agency. This au12 thority is in addition to and does not limit any other 

13 authority of the primary financial regulatory agen14 cies. Compliance by an entity with actions taken by 

15 a primary financial regulatory agency under this sec16 tion shall be enforceable in accordance with the stat17 utes governing the respective primary financial regu18 latory agency’s jurisdiction over the entity as if the 

19 agency action were taken under those statutes. 

20 (2) IMPOSITION OF STANDARDS.—Standards 

21 imposed under this subsection shall be the standards 

22 recommended by the Board in accordance with sub23 section (a) or any other similar standards that the 

24 Board deems acceptable after consultation between 


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1 the Board and the primary financial regulatory 

2 agency. 

3 (3) PRIMARY FINANCIAL REGULATORY AGENCY

4 RESPONSE.—A primary financial regulatory agency 

5 shall notify the Council and the Board in writing on 

6 whether and to what extent the agency has imposed 

7 the stricter prudential standards described in para8 graph (2) within 60 days of the Board’s rec9 ommendation. A primary financial regulatory agency 

10 that fails to impose such standards shall provide 

11 specific justification for such failure to act in the 

12 written notice from the agency to the Council and 

13 Board. 

14 SEC. 1108. EFFECT OF RESCISSION OF IDENTIFICATION. 

15 (a) NOTICE.—When the Council determines that a 

16 company or activity or practice no longer is subject to 

17 heightened prudential scrutiny, the Board shall inform the 

18 relevant primary financial regulatory agency or agencies 

19 (if different from the Board) of that finding. 

20 (b) DETERMINATION OF PRIMARY FINANCIAL REGU21 LATORY AGENCY TO CONTINUE.—A primary financial 

22 regulatory agency that has imposed stricter prudential 

23 standards for financial stability purposes under this sub24 title shall determine whether standards that it has im25 posed under this subtitle should remain in effect. 


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1 SEC. 1109. EMERGENCY FINANCIAL STABILIZATION. 

2 (a) IN GENERAL.—Upon the written determination 

3 of the Council that a liquidity event exists that could de4 stabilize the financial system (which determination shall 

5 be made upon a vote of not less than two-thirds of the 

6 members of the Council then serving) and with the written 

7 consent of the Secretary of the Treasury (after certifi8 cation by the President that an emergency exists), the 

9 Corporation may create a widely-available program de10 signed to avoid or mitigate adverse effects on systemic eco11 nomic conditions or financial stability by guaranteeing ob12 ligations of solvent insured depository institutions or sol13 vent depository institution holding companies (including 

14 any affiliates thereof), if necessary to prevent systemic fi15 nancial instability during times of severe economic dis16 tress, except that a guarantee of obligations under this 

17 section may not include provision of equity in any form. 

18 (b) POLICIES AND PROCEDURES.—Prior to exercising 

19 any authority under this section, the Corporation shall es20 tablish policies and procedures governing the issuance of 

21 guarantees. The terms and conditions of any guarantees 

22 issued shall be established by the Corporation with the ap23 proval of the Secretary of the Treasury and the Financial 

24 Stability Oversight Council. Such terms and conditions 

25 may include the Corporation requiring collateral as a con26 dition of any such guarantee. 


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1 (c) CAP FOR GUARANTEED AMOUNT.— 

2 (1) IN GENERAL.—In connection with any pro3 gram established pursuant to subsection (a) and 

4 subject to paragraph (2), the Corporation may not 

5 have guaranteed debt outstanding at any time of 

6 more than $500,000,000,000 (as indexed to reflect 

7 growth in assets of insured depository institutions 

8 and depository institution holding companies as de9 termined by the Corporation). 

10 (2) ADDITIONAL DEBT GUARANTEE AUTHOR11 ITY.—If the Corporation, with the concurrence of 

12 the Council and the Secretary (in consultation with 

13 the President), determines that the Corporation 

14 must guarantee debt in excess of $500,000,000,000 

15 (as indexed pursuant to paragraph (1)) to prevent 

16 systemic financial instability, the Corporation may 

17 transmit to the Congress a request for authority to 

18 guarantee debt in excess of $500,000,000,000 (as 

19 indexed pursuant to paragraph (1)). Such request 

20 shall be considered granted by Congress upon adop21 tion of a joint resolution approving such request. 

22 Such joint resolution shall be considered in the Sen23 ate under expedited procedures. 

24 (d) FUNDING.— 


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1 (1) ADMINISTRATIVE EXPENSES AND COST OF

2 GUARANTEES.—A program established pursuant to 

3 this section shall require funding only for the pur4 poses of paying administrative expenses and for pay5 ing a guarantee in the event that a guaranteed loan 

6 defaults. 

7 (2) FEES AND OTHER CHARGES.—The Corpora8 tion shall charge fees or other charges to all partici9 pants in such program established pursuant to this 

10 section to offset projected losses and administrative 

11 expenses. To the extent that a program established 

12 pursuant to this section has expenses or losses, the 

13 program will be funded entirely through fees or 

14 other charges assessed on participants in such pro15 gram. 

16 (3) EXCESS FUNDS.—If at the conclusion of 

17 such program there are any excess funds collected 

18 from the fees associated with such program, the 

19 funds will be deposited into the Systemic Dissolution 

20 Fund established pursuant to section 1609(n). 

21 (4) AUTHORITY OF CORPORATION.—For pur22 poses of conducting a program established pursuant 

23 to this section, the Corporation— 

24 (A) may borrow funds from the Secretary 

25 of the Treasury, which shall be repaid in full 


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1 with interest through fees and charges paid by 

2 participants in accordance with paragraph (2), 

3 and there shall be available to the Corporation 

4 amounts in the Treasury not otherwise appro5 priated, including for the payment of reasonable 

6 administrative expenses; 

7 (B) may not borrow funds from the De8 posit Insurance Fund established pursuant to 

9 section 11(a)(4) of the Federal Deposit Insur10 ance Act; and 

11 (C) may not borrow funds from the Sys12 temic Dissolution Fund established pursuant to 

13 section 1609(n). 

14 (5) BACK-UP SPECIAL ASSESSMENT.—To the 

15 extent that the funds collected pursuant to para16 graph (2) are insufficient to cover any losses or ex17 penses (including monies borrowed pursuant to 

18 paragraph (4)) arising from a program established 

19 pursuant to this section, the Corporation shall im20 pose a special assessment solely on participants in 

21 the program. 

22 (e) PLAN FOR MAINTENANCE OR INCREASE OF

23 LENDING.—In connection with any application or request 

24 to participate in such program authorized pursuant to this 

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1 gram shall be required to submit to the Corporation a plan 

2 detailing how the use of such guaranteed funds will facili3 tate the increase or maintenance of such solvent com4 pany’s level of lending to consumers or small businesses. 

5 (f) SUNSET OF CORPORATION’S AUTHORITY.—The 

6 Corporation’s authority under subsections (a) and (d) and 

7 the authority to borrow funds from the Treasury under 

8 section 1609(o) shall expire on December 31, 2013. 

9 (g) RULE OF CONSTRUCTION.—For purposes of this 

10 section, a guarantee of deposits held by insured depository 

11 institutions shall not be treated as a debt guarantee pro12 gram. 

13 (h) DEFINITIONS.—For purposes of this section, the 

14 following definitions apply: 

15 (1) CORPORATION.—The term ‘‘Corporation’’ 

16 means the Federal Deposit Insurance Corporation. 

17 (2) DEPOSITORY INSTITUTION HOLDING COM18 PANY.—The term ‘‘depository institution holding 

19 company’’ has the meaning given the term in section 

20 3 of the Federal Deposit Insurance Act (12 U.S.C. 

21 1813). 

22 (3) INSURED DEPOSITORY INSTITUTION.—The 

23 term ‘‘insured depository institution’’ has the mean24 ing given the term in section 3 of the Federal De25 posit Insurance Act (12 U.S.C. 1813). 


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1 (4) SOLVENT.—The term ‘‘solvent’’ means as2 sets are more than the obligations to creditors. 

3 SEC. 1110. ADDITIONAL RELATED AMENDMENTS. 

4 (a) FEDERAL DEPOSIT INSURANCE ACT RELATED

5 AMENDMENTS.— 

6 (1) SUSPENSION OF PARALLEL FEDERAL DE7 POSIT INSURANCE ACT AUTHORITY.—Effective upon 

8 the date of the enactment of this section through 

9 December 31, 2013, the Corporation may not exer10 cise its authority under section 13(c)(4)(G)(i) of the 

11 Federal Deposit Insurance Act (12 U.S.C. 

12 1823(c)(4)(G)(i)) to establish any widely-available 

13 debt guarantee program for which section 1109 

14 would provide authority. 

15 (2) FEDERAL DEPOSIT INSURANCE ACT AU16 THORITY PRESERVED.—Effective December 31, 

17 2013, the Corporation shall have the same authority 

18 pursuant to section 13(c)(4)(G)(i) of the Federal 

19 Deposit Insurance Act as the Corporation had prior 

20 to the date of enactment of this Act. 

21 (b) EFFECT OF DEFAULT ON AN FDIC GUAR22 ANTEE.—If an insured depository institution or depository 

23 institution holding company participating in a program 

24 under section 1109 or any participant in a debt guarantee 

25 program established pursuant to section 13(c)(4)(G)(i) of 


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1 the Federal Deposit Insurance Act defaults on any obliga2 tion guaranteed by the Corporation after the date of en3 actment of this Act, the Corporation may— 

4 (1) appoint itself as receiver for the insured de5 pository institution that defaults; 

6 (2) with respect to any other participating com7 pany that is not an insured depository institution 

8 that defaults— 

9 (A) require consideration of whether a de10 termination shall be made as provided in sec11 tion 1603 to resolve the company under subtitle 

12 G; and 

13 (B) if the Corporation is not appointed re14 ceiver pursuant to subtitle G within 30 days of 

15 the date of default, require the company to file 

16 a petition for bankruptcy under section 301 of 

17 title 11, United States Code, or file a petition 

18 for bankruptcy against the company under sec19 tion 303 of title 11, United States Code. 

20 (c) AUTHORITY TO FILE INVOLUNTARY PETITION

21 FOR BANKRUPTCY.—Section 303 of title 11, United 

22 States Code, is amended by adding at the end the fol23 lowing: 

24 ‘‘(m) Notwithstanding subsections (a) and (b), an in25 voluntary case may be commenced by the Federal Deposit 


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1 Insurance Corporation against a depository institution 

2 holding company as defined in section 3 of the Federal 

3 Deposit Insurance Act (12 U.S.C. 1813) or other company 

4 participating in a guarantee program established by the 

5 Corporation on the ground that the company has defaulted 

6 on a debt or obligation guaranteed by the Corporation.’’. 

7 (d) BANKRUPTCY PRIORITY FOR DEFAULTS ON

8 DEBT GUARANTEED PURSUANT TO SECTION 1109.—Sec9 tion 507(a)(9) of title 11, United States Code, is amended 

10 by inserting before the period at the end the following: 

11 ‘‘and allowed unsecured claims based upon any debt to 

12 the Federal Deposit Insurance Corporation that arose 

13 prior to the commencement of the case under this title, 

14 as a result of the debtor’s default on a guarantee provided 

15 by the Corporation pursuant to section 1109 of the Finan16 cial Stability Improvement Act of 2009 or the Federal De17 posit Insurance Act, under a program established by the 

18 Corporation after the date of enactment of the Financial 

19 Stability Improvement Act of 2009’’. 

20 SEC. 1111. CORPORATION MAY RECEIVE WARRANTS WHEN 

21 PAYING OR RISKING TAXPAYER FUNDS. 

22 (a) IN GENERAL.—In connection with any payment, 

23 credit extension, or guarantee or any commitment under 

24 section 1109 or 1604, the Corporation may obtain from 

25 the insured depository institution, depository institution 


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1 holding company (including any affiliates thereof), or cov2 ered financial company, as the case may be— 

3 (1) in the case of an insured depository institu4 tion, depository institution holding company (includ5 ing any affiliates thereof), or covered financial com6 pany, the securities of which are traded on a na7 tional securities exchange, a warrant giving the right 

8 to the Corporation to receive nonvoting common 

9 stock or preferred stock in such financial institution, 

10 or voting stock with respect to which, the Corpora11 tion agrees not to exercise voting power, as the Cor12 poration determines appropriate; or 

13 (2) in the case of any insured depository insti14 tution, depository institution holding company (in15 cluding any affiliates thereof), or covered financial 

16 company other than one described in paragraph (1), 

17 a warrant for common or preferred stock, or a sen18 ior debt instrument from such financial institution, 

19 as described in subsection (b)(3). 

20 (b) TERMS AND CONDITIONS.—The terms and condi21 tions of any warrant or senior debt instrument required 

22 under subsection (a) shall meet the following require23 ments: 

24 (1) PURPOSES.—Such terms and conditions 

25 shall, at a minimum, be designed— 


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1 (A) to provide for reasonable participation 

2 by the Corporation, for the benefit of taxpayers, 

3 in equity appreciation in the case of a warrant 

4 or other equity security, or a reasonable interest 

5 rate premium, in the case of a debt instrument; 

6 and 

7 (B) to provide additional protection for the 

8 taxpayer against losses from such payment, ex9 tension of credit, or guarantee by the Corpora10 tion under this title. 

11 (2) AUTHORITY TO SELL, EXERCISE, OR SUR12 RENDER.—The Corporation may sell, exercise, or 

13 surrender a warrant or any senior debt instrument 

14 received under this subsection, based on the condi15 tions established under paragraph (1). 

16 (3) CONVERSION.—The warrant shall provide 

17 that if, after the warrant is received by the Corpora18 tion under this subsection, the financial company 

19 that issued the warrant is no longer listed or traded 

20 on a national securities exchange or securities asso21 ciation, as described in subsection (a)(1), such war22 rants shall convert to senior debt, or contain appro23 priate protections for the Corporation to ensure that 

24 the Corporation is appropriately compensated for the 


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1 value of the warrant, in an amount determined by 

2 the Corporation. 

3 (4) PROTECTIONS.—Any warrant representing 

4 securities to be received by the Corporation under 

5 this subsection shall contain anti-dilution provisions 

6 of the type employed in capital market transactions, 

7 as determined by the Corporation. Such provisions 

8 shall protect the value of the securities from market 

9 transactions such as stock splits, stock distributions, 

10 dividends, and other distributions, mergers, and 

11 other forms of reorganization or recapitalization. 

12 (5) EXERCISE PRICE.—The exercise price for 

13 any warrant issued pursuant to this subsection shall 

14 be set by the Corporation, in the interest of the tax15 payers. 

16 (6) SUFFICIENCY.—The financial company 

17 shall guarantee to the Corporation that it has au18 thorized shares of nonvoting stock available to fulfill 

19 its obligations under this subsection. Should the fi20 nancial company not have sufficient authorized 

21 shares, including preferred shares that may carry 

22 dividend rights equal to a multiple number of com23 mon shares, the Corporation may, to the extent nec24 essary, accept a senior debt note in an amount, and 

25 on such terms as will compensate the Corporation 


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1 with equivalent value, in the event that a sufficient 

2 shareholder vote to authorize the necessary addi3 tional shares cannot be obtained. 

4 (c) EXCEPTIONS.— 

5 (1) The Corporation shall establish an exception 

6 to the requirements of this section and appropriate 

7 alternative requirements for any participating finan8 cial company that is legally prohibited from issuing 

9 securities and debt instruments, so as not to allow 

10 circumvention of the requirements of this section. 

11 (2) If the Corporation is providing a payment, 

12 extension of credit, or guarantee with regard to its 

13 authority under section 1604 and the Corporate de14 termines that it is certain that at the conclusion of 

15 the Resolution Process the shareholders of all classes 

16 shall lose their entire investment and receive nothing 

17 therefor, then the requirements of this section shall 

18 not apply. 

19 SEC. 1112. EXAMINATIONS AND ENFORCEMENT ACTIONS 

20 FOR INSURANCE AND RESOLUTIONS PUR21 POSES. 

22 (a) EXAMINATIONS FOR INSURANCE AND RESOLU23 TIONS PURPOSES.—Section 10(b)(3) of the Federal De24 posit Insurance Act (12 U.S.C. 1820(b)(3)) is amended 

25 by striking ‘‘whenever the Board of Directors determines’’ 


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1 and all that follows through the period and inserting ‘‘or 

2 financial holding company subject to stricter standards (as 

3 defined in section 1000(b)(5) of the Financial Stability 

4 Improvement Act of 2009) whenever the Board of Direc5 tors determines a special examination of any such deposi6 tory institution is necessary to determine the condition of 

7 such depository institution for insurance or such financial 

8 holding company subject to stricter standards for resolu9 tion purposes.’’. 

10 (b) ENFORCEMENT AUTHORITY.—Section 8(t) of the 

11 Federal Deposit Insurance Act (12 U.S.C. 1818(t)) is 

12 amended— 

13 (1) in paragraph (2)— 

14 (A) at the end of subparagraph (B), by 

15 striking ‘‘or’’; 

16 (B) at the end of subparagraph (C), by 

17 striking the period and inserting ‘‘; or’’; and 

18 (C) by inserting at the end the following 

19 new subparagraph: 

20 ‘‘(D) the conduct or threatened conduct 

21 (including any acts or omissions) of the deposi22 tory institution holding company poses a risk to 

23 the Deposit Insurance Fund.’’; and 

24 (2) by adding at the end the following new 

25 paragraph: 


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1 ‘‘(6) For purposes of this subsection: 

2 ‘‘(A) The Corporation shall have the same 

3 powers with respect to a depository institution 

4 holding company and its affiliates as the appro5 priate Federal banking agency has with respect 

6 to the holding company and its affiliates; and 

7 ‘‘(B) the holding company and its affiliates 

8 shall have the same duties and obligations with 

9 respect to the Corporation as the holding com10 pany and its affiliates have with respect to the 

11 appropriate Federal banking agency.’’. 

12 SEC. 1113. STUDY OF THE EFFECTS OF SIZE AND COM13 PLEXITY OF FINANCIAL INSTITUTIONS ON 

14 CAPITAL MARKET EFFICIENCY AND ECO15 NOMIC GROWTH. 

16 (a) STUDY REQUIRED.—The Chairman of the Coun17 cil shall carry out a study of the economic impact of pos18 sible financial services regulatory limitations intended to 

19 reduce systemic risk. Such study shall estimate the effect 

20 on the efficiency of capital markets, costs imposed on the 

21 financial sector, and on national economic growth, of— 

22 (1) explicit or implicit limits on the maximum 

23 size of banks, bank holding companies, and other 

24 large financial institutions; 


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1 (2) limits on the organizational complexity and 

2 diversification of large financial institutions; 

3 (3) requirements for operational separation be4 tween business units of large financial institutions in 

5 order to expedite resolution in case of failure; 

6 (4) limits on risk transfer between business 

7 units of large financial institutions; 

8 (5) requirements to carry contingent capital or 

9 similar mechanisms; 

10 (6) limits on commingling of commercial and fi11 nancial activities by large financial institutions; 

12 (7) segregation requirements between tradi13 tional financial activities and trading or other high14 risk operations in large financial institutions; and 

15 (8) other limitations on the activities or struc16 ture of large financial institutions that may be use17 ful to limit systemic risk. 

18 The study shall include recommendations for the optimal 

19 structure of any limits considered in paragraphs (1) 

20 through (5) in order to maximize their effectiveness and 

21 minimize their economic impact. 

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

23 period beginning on the date of the enactment of this title, 

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1 taining any findings and determinations made in carrying 

2 out the study required under subsection (a). 

3 SEC. 1114. EXERCISE OF FEDERAL RESERVE AUTHORITY. 

4 (a) NO DECISIONS BY FEDERAL RESERVE BANK

5 PRESIDENTS.—No provision of this title relating to the 

6 authority of the Board shall be construed as conferring 

7 any decision-making authority on presidents of Federal re8 serve banks. 

9 (b) VOTING DECISIONS BY BOARD.—The Board of 

10 Governors of the Federal Reserve System shall not dele11 gate the authority to make any voting decision that the 

12 Board is authorized or required to make under this title 

13 in contravention of section 11(k) of the Federal Reserve 

14 Act. 

15 SEC. 1115. STRESS TESTS. 

16 (a) A financial holding company subject to stricter 

17 standards shall— 

18 (1) conduct quarterly stress tests; and 

19 (2) submit a report on its quarterly stress test 

20 to the head of the primary financial regulatory agen21 cy and to the Board at such time, in such form, and 

22 containing such information as the head of the pri23 mary financial regulatory agency may require. 


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1 (b) A financial company that has more than 

2 $10,000,000,000 in total assets and is not a financial 

3 holding company subject to stricter standards shall— 

4 (1) conduct semiannual stress tests; and 

5 (2) submit a report on its semiannual stress 

6 test to the head of the primary financial regulatory 

7 agency and to the Board at such time, in such form, 

8 and containing such information as the head of the 

9 primary financial regulatory agency may require. 

10 (c) A stress test under this section shall provide for 

11 testing under each of the following sets of conditions: 

12 (1) Baseline. 

13 (2) Adverse. 

14 (3) Severely adverse. 

15 (d) The head of each primary financial regulatory 

16 agency, in coordination with the Board, shall issue regula17 tions to define the term ‘‘stress test’’ for purposes of this 

18 section. 

19 SEC. 1116. CONTINGENT CAPITAL. 

20 (a) IN GENERAL.—The Board, in coordination with 

21 the appropriate primary financial regulatory agency, may, 

22 after notice and opportunity for comment, promulgate reg23 ulations that require a financial holding company subject 

24 to stricter standards to maintain a minimum amount of 

25 long-term hybrid debt that is convertible to equity when— 


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1 (1) the Board determines that a specified finan2 cial company fails to meet prudential standards es3 tablished by the Board; or 

4 (2) the Board has determined that threats to 

5 United States financial system stability make such a 

6 conversion necessary. 

7 (b) FACTORS TO CONSIDER.—In establishing regula8 tions under this section, the Board shall consider— 

9 (1) an appropriate transition period for imple10 mentation of a conversion under this section; 

11 (2) capital requirements applicable to the speci12 fied financial company and its subsidiaries; and 

13 (3) any other factor that the Board deems ap14 propriate. 

15 (c) STUDY REQUIRED.—The Chairman of the Coun16 cil shall carry out a study to determine an optimal imple17 mentation of contingent capital requirements to maximize 

18 financial stability, minimize the probability of drawing on 

19 the Systemic Resolution Fund established under section 

20 1609(n) in a financial crisis, and minimize costs for finan21 cial holding companies subject to stricter standards. To 

22 the extent practicable, the study shall take place with 

23 input from industry participants and international finan24 cial regulators. Such study shall include— 


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1 (1) an evaluation of the characteristics and 

2 amounts of convertible debt that should be required, 

3 including possible tranche structure; 

4 (2) an analysis of possible trigger mechanisms 

5 for debt conversion, including violation of regulatory 

6 capital requirements, failure of stress tests, declara7 tion of systemic emergency by regulators, market8 based triggers and other trigger mechanisms; 

9 (3) an estimate of the costs of carrying contin10 gent capital; 

11 (4) an estimate of the effectiveness of contin12 gent capital requirements in reducing losses to the 

13 systemic resolution fund in cases of single-firm or 

14 systemic failure; and 

15 (5) recommendations for implementing legisla16 tion. 

17 (d) REPORT.—Not later than the end of the 180-day 

18 period beginning on the date of the enactment of this title, 

19 the Chairman of Council shall issue a report to the Con20 gress containing any findings and determinations made in 

21 carrying out the study required under subsection (c). 


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1 SEC. 1117. RESTRICTION ON PROPRIETARY TRADING BY 

2 DESIGNATED FINANCIAL HOLDING COMPA3 NIES. 

4 (a) IN GENERAL.—If the Board determines that pro5 priety trading by a financial holding company subject to 

6 stricter standards poses an existing or foreseeable threat 

7 to the safety and soundness of such company or to the 

8 financial stability of the United States, the Board may 

9 prohibit such company from engaging in propriety trading. 

10 (b) EXCEPTIONS PERMITTED.—The Board may ex11 empt from the prohibition of subsection (a) proprietary 

12 trading that the Board determines to be ancillary to other 

13 operations of such company and not to pose a threat to 

14 the safety and soundness of such company or to the finan15 cial stability of the United States, including— 

16 (1) making a market in securities issued by 

17 such company; 

18 (2) hedging or managing risk; 

19 (3) determining the market value of assets of 

20 such company; and 

21 (4) propriety trading for such other purposes 

22 allowed by the Board by rule. 

23 (c) RULEMAKING AUTHORITY.—The primary finan24 cial regulatory agencies of banks and bank holding compa25 nies shall jointly issue regulations to carry out this section. 


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1 (d) EFFECTIVE DATE.—The provisions of this sec2 tion shall take effect after the end of the 180-day period 

3 beginning on the date of the enactment of this title. 

4 (e) PROPRIETARY TRADING DEFINED.—For pur5 poses of this section and with respect to a company, the 

6 term ‘‘proprietary trading’’ means the trading of stocks, 

7 bonds, options, commodities, derivatives, or other financial 

8 instruments with the company’s own money and for the 

9 company’s own account. 

10 SEC. 1118. RULE OF CONSTRUCTION. 

11 (a) CONSTRUCTION.—The authorities granted to 

12 agencies under this subtitle are in addition to any rule13 making, report-related, examination, enforcement, or 

14 other authority that such agencies may have under other 

15 law and in no way shall be construed to limit such other 

16 authority, except that any standards imposed for financial 

17 stability purposes under this subtitle shall supersede any 

18 conflicting less stringent requirements of the primary fi19 nancial regulatory agency but only the extent of the con20 flict. 

21 (b) AGENT RESPONSIBILITIES.—For purposes of this 

22 subtitle, the term ‘‘agent’’ means the Board acting under 

23 section 1103(c) and coordinating with the Council in exer24 cising authority under sections 1104 and 1107. 


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1 SEC. 1119. ANTITRUST SAVINGS CLAUSE. 

2 Nothing in this subtitle shall be construed to modify, 

3 impair, or supercede the operation of any of the antitrust 

4 laws. For purposes of the preceding sentence, the term 

5 ‘‘antitrust laws’’ has the meaning given such term in sub6 section (a) of the first section of the Clayton Act, except 

7 that such term includes section 5 of the Federal Trade 

8 Commission Act to the extent that such section relates to 

9 unfair methods of competition. 

10 Subtitle C—Improvements to Su11 pervision and Regulation of 

12 Federal Depository Institutions 

13 SEC. 1201. DEFINITIONS. 

14 For purposes of this subtitle, the following definitions 

15 shall apply: 

16 (1) BOARD OF GOVERNORS.—The term ‘‘Board 

17 of Governors’’ means the Board of Governors of the 

18 Federal Reserve System. 

19 (2) CORPORATION.—The term ‘‘Corporation’’ 

20 means the Federal Deposit Insurance Corporation. 

21 (3) OFFICE OF THE COMPTROLLER OF THE

22 CURRENCY.—The term ‘‘Office of the Comptroller of 

23 the Currency’’ means the office established by sec24 tion 324 of the Revised Statutes (12 U.S.C. 1). 

25 (4) OFFICE OF THRIFT SUPERVISION.—The 

26 term ‘‘Office of Thrift Supervision’’ means the office 


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1 established by section 3 of the Home Owners’ Loan 

2 Act (12 U.S.C. 1462a). 

3 (5) SECRETARY.—The term ‘‘Secretary’’ means 

4 the Secretary of the Treasury. 

5 (6) TRANSFER DATE.—The term ‘‘transfer 

6 date’’ has the meaning provided in section 1205. 

7 (7) CERTAIN OTHER TERMS.—The terms ‘‘affil8 iate’’, ‘‘bank holding company’’, ‘‘control’’ (when 

9 used with respect to a depository institution), ‘‘de10 pository institution’’, ‘‘Federal banking agency’’, 

11 ‘‘Federal savings association’’, ‘‘including’’, ‘‘insured 

12 branch’’, ‘‘insured depository institution’’, ‘‘savings 

13 association’’, ‘‘State savings association’’, and ‘‘sub14 sidiary’’ have the same meanings as in section 3 of 

15 the Federal Deposit Insurance Act. 

16 SEC. 1202. AMENDMENTS TO THE HOME OWNERS’ LOAN 

17 ACT RELATING TO TRANSFER OF FUNCTIONS. 

18 (a) AMENDMENTS TO SECTION 2.—Section 2 of the 

19 Home Owners’ Loan Act (12 U.S.C. 1462) is amended— 

20 (1) by striking paragraph (1) and inserting the 

21 following new paragraph: 

22 ‘‘(1) BOARD OF GOVERNORS.—The term ‘Board 

23 of Governors’ means the Board of Governors of the 

24 Federal Reserve System.’’; and 


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1 (2) by striking paragraph (3) and inserting the 

2 following new paragraph: 

3 ‘‘(3) [repealed]’’. 

4 (b) AMENDMENTS TO SECTION 3.—Section 3 of the 

5 Home Owners’ Loan Act (12 U.S.C. 1462a) is amended— 

6 (1) by striking subsection (a) and inserting the 

7 following new subsection: 

8 ‘‘(a) ESTABLISHMENT OF DIVISION OF THRIFT SU9 PERVISION.—To carry out the purposes of this Act, there 

10 is hereby established the Division of Thrift Supervision, 

11 which shall be a division within the Office of the Comp12 troller of the Currency.’’; 

13 (2) in subsection (b)— 

14 (A) by striking paragraph (1) and insert15 ing the following new paragraph: 

16 ‘‘(1) IN GENERAL.—The Division of Thrift Su17 pervision shall be headed by a Senior Deputy Comp18 troller of the Currency who shall be subject to the 

19 general oversight of the Comptroller of the Cur20 rency.’’; 

21 (B) in paragraph (2), by striking ‘‘Direc22 tor’’ and inserting ‘‘Comptroller of the Cur23 rency’’; and 

24 (C) by striking paragraphs (3) and (4); 


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1 (3) by striking subsections (c), (d), and (e) and 

2 inserting the following new subsection: 

3 ‘‘(c) POWERS OF THE COMPTROLLER OF THE CUR4 RENCY.—The Comptroller of the Currency shall have all 

5 the powers, duties, and functions transferred by the Fi6 nancial Stability Improvement Act of 2009 to the Comp7 troller of the Currency to carry out this Act.’’; 

8 (4) by redesignating subsections (f) and (i) as 

9 subsections (d) and (e), respectively; 

10 (5) in subsection (d) (as so redesignated), by 

11 striking ‘‘Director’’ each place such term appears 

12 and inserting ‘‘Comptroller of the Currency’’; 

13 (6) by striking subsections (g), (h), and (j); and 

14 (7) in subsection (e) (as so redesignated), by 

15 striking ‘‘compensation of the Director and other 

16 employees of the Office and all other expenses there17 of’’ and inserting ‘‘expenses incurred by the Comp18 troller of the Currency in carrying out this Act’’. 

19 (c) AMENDMENTS TO SECTION 4.—Section 4 of the 

20 Home Owners’ Loan Act (12 U.S.C. 1463) is amended 

21 by striking ‘‘Director’’ each time it appears and inserting 

22 ‘‘Comptroller of the Currency’’. 

23 (d) AMENDMENTS TO SECTION 5.— 

24 (1) UNIVERSAL.—Section 5 of the Home Own25 ers’ Loan Act (12 U.S.C. 1464) is amended— 


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1 (A) by striking ‘‘Director’’ and ‘‘Director 

2 of the Office of Thrift Supervision’’ each place 

3 such terms appear and inserting ‘‘Comptroller 

4 of the Currency’’; and 

5 (B) by striking ‘‘Director’s’’ each place 

6 such term appears and inserting ‘‘Comptroller 

7 of the Currency’s’’. 

8 (2) SPECIFIC PROVISIONS.— 

9 (A) Section 5(d)(2)(E) of the Home Own10 ers’ Loan Act is amended by striking ‘‘or the 

11 Resolution Trust Corporation, as appropriate,’’ 

12 each place such term appears. 

13 (B) Section 5(d)(3)(B) of the Home Own14 ers’ Loan Act is amended by striking ‘‘or the 

15 Resolution Trust Corporation’’. 

16 (e) AMENDMENTS TO SECTIONS 8 AND 9.—Sections 

17 8 and 9 of the Home Owners’ Loan Act (12 U.S.C. 1466a 

18 and 1467) are each amended by striking ‘‘Director’’ each 

19 place such term appears and inserting ‘‘Comptroller of the 

20 Currency’’. 

21 (f) TECHNICAL AND CONFORMING AMENDMENTS.— 

22 (1) SECTION 3.—The heading for section 3 of 

23 the Home Owners’ Loan Act is amended by striking 

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1 VISION’’ and inserting ‘‘DIVISION OF THRIFT SU2 PERVISION’’. 

3 (2) SECTION 5.—The heading for paragraph 

4 (2)(E)(ii) of section 5(d) of the Home Owners’ Loan 

5 Act and the heading for paragraph (3)(B) of such 

6 section are each amended by striking ‘‘OR RTC’’. 

7 (g) CLERICAL AMENDMENT.—The table of contents 

8 section for the Home Owners’ Loan Act is amended by 

9 striking the item relating to section 3 and inserting the 

10 following new item: 

‘‘Sec. 3. Division of Thrift Supervision.’’. 

11 SEC. 1203. AMENDMENTS TO THE REVISED STATUTES. 

12 (a) AMENDMENT TO SECTION 324.—Section 324 of 

13 the Revised Statutes of the United States (12 U.S.C. 1) 

14 is amended to read as follows: 

15 ‘‘SEC. 324. COMPTROLLER OF THE CURRENCY. 

16 ‘‘There shall be in the Department of the Treasury 

17 a bureau, the chief officer of which bureau shall be called 

18 the Comptroller of the Currency, and shall perform the 

19 duties of the Comptroller of the Currency under the gen20 eral direction of the Secretary of the Treasury. The Comp21 troller of the Currency shall have the same authority over 

22 matters as were vested in the Director of the Office of 

23 Thrift Supervision or the Office of Thrift Supervision on 

24 the day before the date of enactment of the Financial Sta25 bility Improvement Act of 2009 other than those authoriVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00143 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ties with respect to savings and loan holding companies 

2 and any affiliate of any such company (other than a sav3 ings association) as were vested in the Director of the Of4 fice of Thrift Supervision on such date. The Secretary of 

5 the Treasury may not delay or prevent the issuance of any 

6 rule or the promulgation of any regulation by the Comp7 troller of the Currency and may not intervene in any mat8 ter or proceeding before the Comptroller of the Currency 

9 (including agency enforcement actions) unless otherwise 

10 specifically provided by law.’’. 

11 (b) AMENDMENTS TO SECTION 327.—Section 327 of 

12 the Revised Statutes of the United States (12 U.S.C. 4) 

13 is amended to read as follows: 

14 ‘‘SEC. 327. DEPUTY COMPTROLLERS. 

15 ‘‘(a) APPOINTMENT.—The Secretary of the Treasury 

16 shall appoint no more than 5 Deputy Comptrollers of the 

17 Currency— 

18 ‘‘(1) 1 of whom shall be designated the Senior 

19 Deputy Comptroller for National Banks, who shall 

20 oversee the regulation and supervision of national 

21 banks; and 

22 ‘‘(2) 1 of whom shall be designated the Senior 

23 Deputy Comptroller for Thrift Supervision, who 

24 shall oversee the regulation and supervision of Fed25 eral savings associations, and who shall coordinate 


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1 with the Office of Thrift Supervision pursuant to 

2 section 1211. 

3 ‘‘(b) PAY.—The Secretary of the Treasury shall fix 

4 the compensation of the Deputy Comptrollers of the Cur5 rency and provide such other benefits as the Secretary 

6 may determine to be appropriate. 

7 ‘‘(c) OATH OF OFFICE; DUTIES.—Each Deputy 

8 Comptroller shall take the oath of office and shall perform 

9 such duties as the Comptroller of the Currency shall di10 rect. 

11 ‘‘(d) SERVICE AS ACTING COMPTROLLER.—During a 

12 vacancy in the office or during the absence or disability 

13 of the Comptroller, each Deputy Comptroller shall possess 

14 the power and perform the duties attached by law to the 

15 Office of the Comptroller under such order of succession 

16 as the Comptroller shall direct.’’. 

17 (c) AMENDMENT TO SECTION 329.—Section 329 of 

18 the Revised Statutes of the United States (12 U.S.C. 11) 

19 is amended by inserting ‘‘or any Federal savings associa20 tion’’ before the period at the end. 

21 (d) AMENDMENT TO SECTION 5240.—The fourth 

22 sentence of the second undesignated paragraph of Section 

23 5240 of the Revised Statutes of the United States (12 

24 U.S.C. 481) is amended by striking ‘‘Secretary of the 

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1 tence, and inserting ‘‘Secretary of the Treasury; the em2 ployment and compensation of examiners, chief examiners, 

3 reviewing examiners, assistant examiners, and of the other 

4 employees of the office of the Comptroller of the Currency 

5 whose compensation is and shall be paid from assessments 

6 on banks or affiliates thereof or from other fees or charges 

7 imposed pursuant to this subchapter shall be set and ad8 justed pursuant to chapter 71 of title 5, United States 

9 Code and without regard to the provisions of other laws 

10 applicable to officers or employees of the United States.’’. 

11 (e) AMENDMENT TO SECTION 5240.—The first sen12 tence in the first undesignated paragraph of Section 5240 

13 of the Revised Statutes of the United States (12 U.S.C. 

14 482) is amended by inserting ‘‘pursuant to chapter 71 of 

15 title 5, United States Code,’’ after ‘‘shall,’’. 

16 (f) EFFECTIVE DATE.—Subsection (b) shall take ef17 fect on the date of the enactment of this Act. 

18 SEC. 1204. POWER AND DUTIES TRANSFERRED. 

19 (a) DIRECTOR OF THE OFFICE OF THRIFT SUPER20 VISION.— 

21 (1) TRANSFER OF FUNCTIONS.—Except as oth22 erwise provided in this subtitle, all functions of the 

23 Director of the Office of Thrift Supervision are 

24 transferred to the Office of the Comptroller of the 

25 Currency. 


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1 (2) COMPTROLLER’S AUTHORITY.—Except as 

2 otherwise provided in this subtitle, the Comptroller 

3 of the Currency shall succeed to all powers, authori4 ties, rights, and duties that were vested in the Direc5 tor of the Office of Thrift Supervision under Federal 

6 law, including the Home Owners’ Loan Act, on the 

7 day before the transfer date other than those pow8 ers, authorities, rights, and duties with respect to 

9 savings and loan holding companies and any affiliate 

10 of any such company (other than a savings associa11 tion) as were vested in the Director of the Office of 

12 Thrift Supervision on such date. 

13 (3) FUNCTIONS RELATING TO SUPERVISION OF

14 STATE SAVINGS ASSOCIATIONS.— 

15 (A) TRANSFER OF FUNCTIONS.—All func16 tions of the Director of the Office of Thrift Su17 pervision relating to the supervision and regula18 tion of State savings associations are trans19 ferred to the Corporation. 

20 (B) CORPORATION’S AUTHORITY.—The 

21 Corporation shall succeed to all powers, au22 thorities, rights, and duties that were vested in 

23 the Director of the Office of Thrift Supervision 

24 under Federal law, including the Home Owners’ 

25 Loan Act, on the day before the transfer date, 


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1 relating to the supervision and regulation of 

2 State savings associations. 

3 (4) FUNCTIONS RELATING TO SUPERVISION OF

4 SAVINGS AND LOAN HOLDING COMPANIES.— 

5 (A) TRANSFER OF FUNCTIONS.—All func6 tions of the Director of the Office of Thrift Su7 pervision relating to the supervision and regula8 tion of Savings and Loan Holding Companies 

9 are transferred to the Board. 

10 (B) BOARD AUTHORITY.—The Board shall 

11 succeed to all powers, authorities, rights, and 

12 duties that were vested in the Director of the 

13 Office of Thrift Supervision under Federal law, 

14 including the Home Owners’ Loan Act, on the 

15 day before the transfer date, relating to the su16 pervision and regulation of Savings and Loan 

17 Holding Companies. 

18 (b) APPROPRIATE FEDERAL BANKING AGENCY.— 

19 Section 3 of the Federal Deposit Insurance Act (12 U.S.C. 

20 1813) is amended in subsection (q)— 

21 (1) by amending paragraph (1) to read as fol22 lows: 

23 ‘‘(1) the Comptroller of the Currency in the 

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1 tion or any Federal branch or agency of a foreign 

2 bank;’’; 

3 (2) in paragraph (2)(E), by striking ‘‘and’’ at 

4 the end; 

5 (3) in paragraph (2)(F), by adding ‘‘and’’ at 

6 the end after the semicolon; 

7 (4) after paragraph (2)(F), by inserting the fol8 lowing new subparagraph: 

9 ‘‘(G) any savings and loan holding com10 pany and any subsidiary of a savings and loan 

11 holding company (other than a savings associa12 tion); and’’; 

13 (5) by amending paragraph (3) to read as fol14 lows: 

15 ‘‘(3) the Federal Deposit Insurance Corporation 

16 in the case of a State nonmember insured bank, a 

17 State savings association or a foreign bank having 

18 an insured branch.’’; and 

19 (6) by striking paragraph (4). 

20 (c) TRANSFER OF CONSUMER FINANCIAL PROTEC21 TION FUNCTIONS.—Nothing in subsection (a) or (b) shall 

22 affect any transfer of consumer financial protection func23 tions of the Comptroller of the Currency and the Director 

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1 cial Protection Agency as provided in the Consumer Fi2 nancial Protection Agency Act of 2009. 

3 (d) EFFECTIVE DATE.—Subsections (a) and (b) shall 

4 become effective on the transfer date. 

5 SEC. 1205. TRANSFER DATE. 

6 (a) IN GENERAL.—Except as provided in subsection 

7 (b), the date for the transfer of functions to the Office 

8 of the Comptroller of the Currency and the Corporation 

9 under section 1204 shall be 1 year after the date of enact10 ment of this title. 

11 (b) EXTENSION PERMITTED.— 

12 (1) NOTICE REQUIRED.—The Secretary, in con13 sultation with the Comptroller of the Currency and 

14 the Director of the Office of Thrift Supervision, may 

15 designate a calendar date for the transfer of func16 tions of the Office of Thrift Supervision to the Of17 fice of the Comptroller of the Currency, and the Cor18 poration under section 1204 that is later than 1 

19 year after the date of enactment of this title if the 

20 Secretary— 

21 (A) transmits to the Committee on Bank22 ing, Housing, and Urban Affairs of the Senate 

23 and the Committee on Financial Services of the 

24 House of Representatives— 


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1 (i) a written determination that or2 derly implementation of this subtitle is not 

3 feasible on the date that is 1 year after the 

4 date of enactment of this subtitle; 

5 (ii) an explanation of why an exten6 sion is necessary for the orderly implemen7 tation of this subtitle; and 

8 (iii) a description of the steps that will 

9 be taken to effect an orderly and timely 

10 implementation of this subtitle within the 

11 extended time period; and 

12 (B) publishes notice of that designated 

13 later date in the Federal Register. 

14 (2) EXTENSION LIMITED.—In no case shall any 

15 date designated under paragraph (1) be later than 

16 18 months after the date of enactment of this sub17 title. 

18 (3) EFFECT ON REFERENCES TO ‘‘TRANSFER

19 DATE’’.—If the Secretary takes the actions provided 

20 in paragraph (1) for designating a date for the 

21 transfer of functions to the Office of the Comptroller 

22 of the Currency, and the Corporation under section 

23 1204, references in this title to ‘‘transfer date’’ shall 

24 mean the date designated by the Secretary. 


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1 SEC. 1206. EXPIRATION OF TERM OF COMPTROLLER. 

2 (a) IN GENERAL.—Notwithstanding section 325 of 

3 the Revised Statutes of the United States, the term of the 

4 person serving as Comptroller on the date of the enact5 ment of this title shall terminate as of such date. 

6 (b) ACTING COMPTROLLER.—Subject to sections 

7 3345, 3346, and 3347 of title 5, United States Code, the 

8 President may designate a person to serve as acting 

9 Comptroller and perform the functions and duties of the 

10 Comptroller until a Comptroller has been appointed and 

11 qualified in the manner established in section 325 of the 

12 Revised Statutes of the United States. 

13 SEC. 1207. OFFICE OF THRIFT SUPERVISION ABOLISHED. 

14 Effective 90 days after the transfer date, the position 

15 of Director of the Office of Thrift Supervision and the Of16 fice of Thrift Supervision are abolished. 

17 SEC. 1208. SAVINGS PROVISIONS. 

18 (a) OFFICE OF THRIFT SUPERVISION.— 

19 (1) EXISTING RIGHTS, DUTIES, AND OBLIGA20 TIONS NOT AFFECTED.—Sections 1204(a) and 1207 

21 shall not affect the validity of any right, duty, or ob22 ligation of the United States, the Director of the Of23 fice of Thrift Supervision, the Office of Thrift Su24 pervision, or any other person, that existed on the 

25 day before the transfer date. 


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1 (2) CONTINUATION OF SUITS.—This subtitle 

2 shall not abate any action or proceeding commenced 

3 by or against the Director of the Office of Thrift Su4 pervision or the Office of Thrift Supervision before 

5 the transfer date, except that— 

6 (A) for any action or proceeding arising 

7 out of a function of the Director of the Office 

8 of Thrift Supervision transferred to the Comp9 troller of the Currency by this title, the Comp10 troller of the Currency or the Office of the 

11 Comptroller of the Currency shall be sub12 stituted for the Director of the Office of Thrift 

13 Supervision or the Office of Thrift Supervision, 

14 as the case may be, as a party to the action or 

15 proceeding as of the transfer date; and 

16 (B) for any action or proceeding arising 

17 out of a function of the Director of the Office 

18 of Thrift Supervision transferred to the Cor19 poration by this title, the Chairman of the Cor20 poration shall be substituted for the Director of 

21 the Office of Thrift Supervision as a party to 

22 the action or proceeding as of the transfer date. 

23 (b) CONTINUATION OF EXISTING OTS ORDERS, RES24 OLUTIONS, DETERMINATIONS, AGREEMENTS, REGULA25 TIONS, ETC.—All orders, resolutions, determinations, 


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1 agreements, and regulations, interpretative rules, other in2 terpretations, guidelines, procedures, and other advisory 

3 materials, that have been issued, made, prescribed, or al4 lowed to become effective by the Office of Thrift Super5 vision, or by a court of competent jurisdiction, in the per6 formance of functions that are transferred by this title and 

7 that are in effect on the day before the transfer date, shall 

8 continue in effect according to the terms of those orders, 

9 resolutions, determinations, agreements, and regulations, 

10 interpretative rules, other interpretations, guidelines, pro11 cedures, and other advisory materials, and shall be en12 forceable by or against— 

13 (1) the Office of the Comptroller of the Cur14 rency, in the case of a function of the Director of 

15 the Office of Thrift Supervision transferred to the 

16 Comptroller of the Currency, until modified, termi17 nated, set aside, or superseded in accordance with 

18 applicable law by the Office of the Comptroller of 

19 the Currency, by any court of competent jurisdic20 tion, or by operation of law; and 

21 (2) the Corporation, in the case of a function 

22 of the Director of the Office of Thrift Supervision 

23 transferred to the Corporation, until modified, termi24 nated, set aside, or superseded in accordance with 


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1 applicable law by the Corporation, by any court of 

2 competent jurisdiction, or by operation of law. 

3 (c) CONTINUATION OF EXISTING OTS ENFORCE4 MENT ACTIONS.—Any formal or informal enforcement ac5 tion taken by the Director of the Office of Thrift Super6 vision with respect to a savings and loan holding company, 

7 a subsidiary of a savings and loan holding company (other 

8 than a savings association) or an institution-affiliated 

9 party of a savings and loan holding company or such a 

10 subsidiary, that is in effect on the day before the date of 

11 the enactment of this title shall continue to be effective 

12 and enforceable against such company, subsidiary, or in13 stitution-affiliated party after such date as if— 

14 (1) such savings and loan holding company, or 

15 the savings and loan holding company related to 

16 such subsidiary or institution-affiliated party, had 

17 been a bank holding company on the effective date 

18 of the final enforcement action; and 

19 (2) the action had been taken by the Board, un20 less otherwise terminated or modified by the Board. 

21 (d) IDENTIFICATION OF REGULATIONS CONTIN22 UED.— 

23 (1) BY OFFICE OF THE COMPTROLLER OF THE

24 CURRENCY.—Not later than the transfer date, the 

25 Comptroller of the Currency shall— 


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1 (A) after consultation with the Chairperson 

2 of the Corporation, identify the regulations con3 tinued under subsection (b) that will be en4 forced by the Office of the Comptroller of the 

5 Currency; and 

6 (B) publish a list of such regulations in the 

7 Federal Register. 

8 (2) BY THE CORPORATION.—Not later than the 

9 transfer date, the Corporation shall— 

10 (A) after consultation with the Office of 

11 the Comptroller of the Currency, identify the 

12 regulations continued under subsection (b) that 

13 will be enforced by the Corporation; and 

14 (B) publish a list of such regulations in the 

15 Federal Register. 

16 (e) STATUS OF REGULATIONS PROPOSED OR NOT

17 YET EFFECTIVE.— 

18 (1) PROPOSED REGULATIONS.—Any proposed 

19 regulation of the Office of Thrift Supervision, which 

20 that agency, in performing functions transferred by 

21 this title, has proposed before the transfer date but 

22 has not published as a final regulation before that 

23 date, shall be deemed to be a proposed regulation of 

24 the Office of the Comptroller of the Currency, or the 

25 Corporation, as appropriate, according to its terms. 


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1 (2) REGULATIONS NOT YET EFFECTIVE.—Any 

2 interim or final regulation of the Office of Thrift Su3 pervision, which that agency, in performing func4 tions transferred by this title, has published before 

5 the transfer date but which has not become effective 

6 before that date, shall become effective as a regula7 tion of the Office of the Comptroller of the Cur8 rency, or the Corporation, as appropriate, according 

9 to its terms. 

10 SEC. 1209. REGULATIONS AND ORDERS. 

11 In addition to any powers transferred to the Comp12 troller of the Currency by this title, the Comptroller of 

13 the Currency may prescribe such regulations and issue 

14 such orders as the Comptroller of the Currency determines 

15 to be appropriate to carry out this title and the powers 

16 and duties transferred to the Comptroller of the Currency 

17 by this title. 

18 SEC. 1210. COORDINATION OF TRANSITION ACTIVITIES. 

19 Before the transfer date, the Comptroller of the Cur20 rency shall— 

21 (1) consult and cooperate with the Office of 

22 Thrift Supervision to facilitate the orderly transfer 

23 of functions to the Comptroller of the Currency; 

24 (2) determine and redetermine, from time to 

25 time— 


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1 (A) the amount of funds necessary to pay 

2 any expenses associated with the transfer of 

3 functions (including expenses for personnel, 

4 property, and administrative services) during 

5 the period beginning on the date of enactment 

6 of this title and ending on the transfer date; 

7 (B) what personnel are appropriate to fa8 cilitate the orderly transfer of functions by this 

9 title; and 

10 (C) what property and administrative serv11 ices are necessary to support the Office of the 

12 Comptroller of the Currency during the period 

13 beginning on the date of enactment of this title 

14 and ending on the transfer date; and 

15 (3) take such actions as may be necessary to 

16 provide for the orderly implementation of this title. 

17 SEC. 1211. INTERIM RESPONSIBILITIES OF OFFICE OF THE 

18 COMPTROLLER OF THE CURRENCY AND OF19 FICE OF THRIFT SUPERVISION. 

20 (a) IN GENERAL.—When requested by the Comp21 troller of the Currency to do so before the transfer date, 

22 the Office of Thrift Supervision shall— 

23 (1) pay to the Comptroller of the Currency, 

24 from funds obtained by the Office of Thrift Super25 vision through assessments, fees, or other charges 


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1 that the Office of Thrift Supervision is authorized 

2 by law to impose, such amounts that the Comp3 troller of the Currency determines to be necessary 

4 under section 1210(2)(A); 

5 (2) detail to the Office of the Comptroller of the 

6 Currency such personnel as the Comptroller of the 

7 Currency determines to be appropriate under section 

8 1210(2)(B); and 

9 (3) make available to the Office of the Comp10 troller of the Currency such property and provide 

11 the Office of the Comptroller of the Currency such 

12 administrative services as the Comptroller of the 

13 Currency determines to be necessary under section 

14 1210(2)(C). 

15 (b) NOTICE REQUIRED.—The Comptroller of the 

16 Currency shall give the Office of Thrift Supervision rea17 sonable prior notice of any request that the Office of the 

18 Comptroller of the Currency intends to make under sub19 section (a). 

20 SEC. 1212. EMPLOYEES TRANSFERRED. 

21 (a) IN GENERAL.— 

22 (1) OTS EMPLOYEES.— 

23 (A) IN GENERAL.—All employees of the 

24 Office of Thrift Supervision shall be transferred 


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1 to either the Comptroller of the Currency or the 

2 Corporation for employment. 

3 (B) ALLOCATING EMPLOYEES FOR TRANS4 FER TO RECEIVING AGENCIES.—The Director of 

5 the Office of Thrift Supervision, the Comp6 troller of the Currency, and the Chairperson of 

7 the Corporation shall— 

8 (i) jointly determine the number of 

9 employees of the Office of Thrift Super10 vision necessary to perform or support— 

11 (I) the functions of the Office of 

12 Thrift Supervision that are trans13 ferred to the Office of the Comptroller 

14 of the Currency by this title; and 

15 (II) the functions of the Office of 

16 Thrift Supervision that are trans17 ferred to the Corporation by this title; 

18 (ii) consistent with the numbers deter19 mined under clause (ii), jointly identify 

20 employees of the Office of Thrift Super21 vision for transfer to the Office of the 

22 Comptroller of the Currency or the Cor23 poration in a manner that the Director of 

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1 person of the Corporation, in their discre2 tion, deem equitable. 

3 (2) TRANSFER OF EMPLOYEES PERFORMING

4 CONSUMER FINANCIAL PROTECTION FUNCTIONS.— 

5 Nothing in paragraph (1) shall affect the transfer of 

6 employees performing or supporting consumer finan7 cial protection functions of the Comptroller of the 

8 Currency and the Director of the Office of Thrift 

9 Supervision to the Consumer Financial Protection 

10 Agency as provided in the Consumer Financial Pro11 tection Agency Act of 2009. 

12 (3) APPOINTMENT AUTHORITY FOR EXCEPTED

13 SERVICE TRANSFERRED.— 

14 (A) IN GENERAL.—In the case of employ15 ees occupying positions in the excepted service, 

16 any appointment authority established pursuant 

17 to law or regulations of the Office of Personnel 

18 Management for filling such positions shall be 

19 transferred, subject to subparagraph (B). 

20 (B) DECLINING TRANSFERS ALLOWED.— 

21 The Office of the Comptroller of the Currency 

22 and the Corporation may decline to accept a 

23 transfer of authority under subparagraph (A) 

24 (and the employees appointed pursuant thereto) 

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1 tions excepted from the competitive service be2 cause of their confidential, policy-making, pol3 icy-determining, or policy-advocating character. 

4 (b) TIMING OF TRANSFERS AND POSITION ASSIGN5 MENTS.—Each employee to be transferred under this sec6 tion shall— 

7 (1) be transferred not later than 90 days after 

8 the transfer date; and 

9 (2) receive notice of his or her position assign10 ment not later than 120 days after the effective date 

11 of his or her transfer. 

12 (c) TRANSFER OF FUNCTION.— 

13 (1) IN GENERAL.—Notwithstanding any other 

14 provision of law, the transfer of employees shall be 

15 deemed a transfer of functions for the purpose of 

16 section 3503 of title 5, United States Code. 

17 (2) PRIORITY OF THIS SUBTITLE.—If any pro18 vision of this subtitle conflicts with any protection 

19 provided to transferred employees under section 

20 3503 of title 5, United States Code, the provisions 

21 of this subtitle shall control. 

22 (d) EMPLOYEES’ STATUS AND ELIGIBILITY.—The 

23 transfer of functions and employees under this title, and 

24 the abolition of the Office of Thrift Supervision, shall not 

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1 ees of an agency of the United States under any provision 

2 of law. 

3 (e) EQUAL STATUS AND TENURE POSITIONS.—Each 

4 employee transferred from the Office of Thrift Supervision 

5 shall be placed in a position at either the Office of the 

6 Comptroller of the Currency or the Corporation with the 

7 same status and tenure as he or she held on the day before 

8 the transfer date. 

9 (f) NO ADDITIONAL CERTIFICATION REQUIRE10 MENTS.—Examiners transferred to the Office of the 

11 Comptroller of the Currency or the Corporation shall not 

12 be subject to any additional certification requirements be13 fore being placed in a comparable examiner’s position at 

14 the Office of the Comptroller of the Currency or the Cor15 poration examining the same types of institutions as they 

16 examined before they were transferred. 

17 (g) PERSONNEL ACTIONS LIMITED.— 

18 (1) 3-YEAR PROTECTION.— 

19 (A) IN GENERAL.—Except as provided in 

20 paragraph (2), each affected employee shall not, 

21 during the 3-year period beginning on the 

22 transfer date, be involuntarily separated, or in23 voluntarily reassigned outside his or her locality 

24 pay area as defined by the Office of Personnel 

25 Management. 


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1 (B) AFFECTED EMPLOYEES.—For pur2 poses of this paragraph, the term ‘‘affected em3 ployee’’ means— 

4 (i) an employee transferred from the 

5 Office of Thrift Supervision holding a per6 manent position on the day before the 

7 transfer date; and 

8 (ii) an employee of the Office of the 

9 Comptroller of the Currency holding a per10 manent position on the day before the 

11 transfer date. 

12 (2) EXCEPTIONS.—Paragraph (1) does not 

13 limit the right of the Office of the Comptroller of the 

14 Currency or the Corporation to— 

15 (A) separate an employee for cause or for 

16 unacceptable performance; or 

17 (B) terminate an appointment to a position 

18 excepted from the competitive service because of 

19 its confidential policy-making, policy-deter20 mining, or policy-advocating character. 

21 (h) PAY.— 

22 (1) 1-YEAR PROTECTION.—Except as provided 

23 in paragraph (2), each employee transferred from 

24 the Office of Thrift Supervision shall, during the 1- 

25 year period beginning on the transfer date, receive 


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1 pay at a rate not less than the basic rate of pay (in2 cluding any geographic differential) that the em3 ployee received during the 1-year period immediately 

4 before the transfer. 

5 (2) EXCEPTIONS.—Paragraph (1) does not 

6 limit the right of the Office of the Comptroller of the 

7 Currency or the Corporation to reduce a transferred 

8 employee’s rate of basic pay— 

9 (A) for cause; 

10 (B) for unacceptable performance; or 

11 (C) with the employee’s consent. 

12 (3) PROTECTION ONLY WHILE EMPLOYED.— 

13 Paragraph (1) applies to a transferred employee 

14 only while that employee remains employed by the 

15 Office of the Comptroller of the Currency or the 

16 Corporation. 

17 (4) PAY INCREASES PERMITTED.—Paragraph 

18 (1) does not limit the authority of the Office of the 

19 Comptroller of the Currency or the Corporation to 

20 increase a transferred employee’s pay. 

21 (i) BENEFITS.— 

22 (1) RETIREMENT BENEFITS FOR TRANSFERRED

23 EMPLOYEES.— 

24 (A) IN GENERAL.— 


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1 (i) CONTINUATION OF EXISTING RE2 TIREMENT PLAN.—Each employee trans3 ferred from the Office of Thrift Super4 vision may remain enrolled in his or her 

5 existing retirement plan or plans as long as 

6 he or she remains employed by the Office 

7 of the Comptroller of the Currency or the 

8 Corporation. 

9 (ii) EMPLOYER’S CONTRIBUTION.— 

10 The Office of the Comptroller of the Cur11 rency or the Corporation shall pay any em12 ployer contributions to the existing retire13 ment plan of each employee transferred 

14 from the Office of Thrift Supervision as 

15 required under that plan. 

16 (B) DEFINITION.—For purposes of this 

17 paragraph, the term ‘‘existing retirement plan’’ 

18 means, with respect to any employee trans19 ferred under this section, the particular retire20 ment plan (including the Financial Institutions 

21 Retirement Fund) and any associated thrift 

22 savings plan of the agency from which the em23 ployee was transferred, which the employee was 

24 enrolled in on the day before the transfer date. 


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1 (2) BENEFITS OTHER THAN RETIREMENT BEN2 EFITS.— 

3 (A) DURING 1ST YEAR.— 

4 (i) EXISTING PLANS CONTINUE.— 

5 Each transferred employee may, for 1 year 

6 after the transfer date, retain membership 

7 in any other employee benefit program of 

8 the Office of Thrift Supervision, including 

9 a dental, vision, long term care, or life in10 surance program, to which the employee 

11 belonged on the day before the transfer 

12 date. 

13 (ii) EMPLOYER’S CONTRIBUTION.— 

14 The Office of the Comptroller of the Cur15 rency or the Corporation shall pay any em16 ployer cost in continuing to extend cov17 erage in the benefit program to the em18 ployee as required under that program or 

19 negotiated agreements. 

20 (B) DENTAL, VISION, OR LIFE INSURANCE

21 AFTER 1ST YEAR.—If, after the 1-year period 

22 beginning on the transfer date, the Office of the 

23 Comptroller of the Currency or the Corporation 

24 decides not to continue participation in any 

25 dental, vision, or life insurance program of the 


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1 Office of Thrift Supervision, an employee trans2 ferred from the Office of Thrift Supervision 

3 pursuant to this title who is a member of such 

4 a program may, before the decision of the Of5 fice of the Comptroller of the Currency or the 

6 Corporation takes effect, elect to enroll, without 

7 regard to any regularly scheduled open season, 

8 in— 

9 (i) the enhanced dental benefits pro10 gram established by chapter 89A of title 5, 

11 United States Code; 

12 (ii) the enhanced vision benefits estab13 lished by chapter 89B of title 5, United 

14 States Code; and 

15 (iii) the Federal Employees Group 

16 Life Insurance Program established by 

17 chapter 87 of title 5, United States Code, 

18 without regard to any requirement of in19 surability. 

20 (C) LONG TERM CARE INSURANCE AFTER

21 1ST YEAR.—If, after the 1-year period begin22 ning on the transfer date, the Office of the 

23 Comptroller of the Currency or the Corporation 

24 decides not to continue participation in any 

25 long term care insurance program of the Office 


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1 of Thrift Supervision, an employee transferred 

2 from the Office of Thrift Supervision pursuant 

3 to this title who is a member of such a program 

4 may, before the decision of the Office of the 

5 Comptroller of the Currency or the Corporation 

6 takes effect, elect to apply for coverage under 

7 the Federal Long Term Care Insurance Pro8 gram established by chapter 90 of title 5, 

9 United States Code, under the underwriting re10 quirements applicable to a new active workforce 

11 member (as defined in Part 875, title 5, Code 

12 of Federal Regulations). 

13 (D) EMPLOYEE’S CONTRIBUTION.— 

14 (i) IN GENERAL.—Subject to clause 

15 (ii), an individual enrolled in the Federal 

16 Employees Health Benefits program under 

17 this subparagraph shall pay any employee 

18 contribution required by the plan. 

19 (ii) COST DIFFERENTIAL.—The dif20 ference in costs between the benefits that 

21 the Office of Thrift Supervision is pro22 viding on the date of enactment of this 

23 title and the benefits provided by this sec24 tion shall be paid by the Comptroller of the 

25 Currency or the Corporation. 


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1 (iii) FUNDS TRANSFER.—The Office 

2 of the Comptroller of the Currency or the 

3 Corporation shall transfer to the Federal 

4 Employees Health Benefits Fund estab5 lished under section 8909 of title 5, United 

6 States Code, an amount determined by the 

7 Director of the Office of Personnel Man8 agement, after consultation with the Office 

9 of the Comptroller of the Currency or the 

10 Corporation and the Office of Management 

11 and Budget, to be necessary to reimburse 

12 the Fund for the cost to the Fund of pro13 viding benefits under this subparagraph 

14 not otherwise paid for by the employee 

15 under clause (i). 

16 (E) SPECIAL PROVISIONS TO ENSURE CON17 TINUATION OF LIFE INSURANCE BENEFITS.— 

18 (i) IN GENERAL.—An annuitant (as 

19 defined in section 8901(3) of title 5, 

20 United States Code) who is enrolled in a 

21 life insurance plan administered by the Of22 fice of Thrift Supervision on the day before 

23 the transfer date shall be eligible for cov24 erage by a life insurance plan under sec25 tions 8706(b), 8714a, 8714b, and 8714c of 


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1 title 5, United States Code, or in a life in2 surance plan established by the Office of 

3 the Comptroller of the Currency or the 

4 Corporation, without regard to any regu5 larly scheduled open season and require6 ment of insurability. 

7 (ii) EMPLOYEE’S CONTRIBUTION.— 

8 (I) IN GENERAL.—Subject to 

9 subclause (II), an individual enrolled 

10 in a life insurance plan under this 

11 clause shall pay any employee con12 tribution required by the plan. 

13 (II) COST DIFFERENTIAL.—The 

14 difference in costs between the bene15 fits that the Office of Thrift Super16 vision is providing on the date of en17 actment of this title and the benefits 

18 provided by this section shall be paid 

19 by the Comptroller of the Currency or 

20 the Corporation. 

21 (III) FUNDS TRANSFER.—The 

22 Office of the Comptroller of the Cur23 rency or the Corporation shall trans24 fer to the Employees’ Life Insurance 

25 Fund established under section 8714 


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1 of title 5, United States Code, an 

2 amount determined by the Director of 

3 the Office of Personnel Management, 

4 after consultation with the Office of 

5 the Comptroller of the Currency or 

6 the Corporation and the Office of 

7 Management and Budget, to be nec8 essary to reimburse the Fund for the 

9 cost to the Fund of providing benefits 

10 under this subparagraph not other11 wise paid for by the employee under 

12 subclause (I). 

13 (IV) CREDIT FOR TIME EN14 ROLLED IN OTHER PLANS.—For em15 ployees transferred under this section, 

16 enrollment in a life insurance plan ad17 ministered by the Office of the Comp18 troller of the Currency, the Office of 

19 Thrift Supervision, or the Corporation 

20 immediately before enrollment in a life 

21 insurance plan under chapter 87 of 

22 title 5, United States Code, shall be 

23 considered as enrollment in a life in24 surance plan under that chapter for 


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1 purposes of section 8706(b)(1)(A) of 

2 title 5, United States Code. 

3 (j) EQUITABLE TREATMENT.—In administering the 

4 provisions of this section, the Office of the Comptroller 

5 of the Currency and the Corporation— 

6 (1) shall take no action that would unfairly dis7 advantage transferred employees relative to other 

8 employees of the Office of the Comptroller of the 

9 Currency or the Corporation based on their prior 

10 employment by the Office of Thrift Supervision; 

11 (2) may take such action as is appropriate in 

12 individual cases so that employees transferred under 

13 this section receive equitable treatment, with respect 

14 to those employees’ status, tenure, pay, benefits 

15 (other than benefits under programs administered by 

16 the Office of Personnel Management), and accrued 

17 leave or vacation time, for prior periods of service 

18 with any Federal agency; 

19 (3) shall, jointly with the Director of the Office 

20 of Thrift Supervision, develop and adopt procedures 

21 and safeguards designed to ensure that the require22 ments of this subsection are met; and 

23 (4) shall conduct a study detailing the position 

24 assignments of all employees transferred pursuant to 

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1 guards adopted pursuant to paragraph (3), and 

2 demonstrating that the requirements of this sub3 section have been met; and shall, not later than 365 

4 days after the transfer date, submit a copy of such 

5 study to Congress. 

6 SEC. 1213. PROPERTY TRANSFERRED. 

7 (a) IN GENERAL.—Not later than 90 days after the 

8 transfer date, all property of the Office of Thrift Super9 vision shall be transferred to the Office of the Comptroller 

10 of the Currency or the Corporation, allocated in a manner 

11 consistent with section 1212(a). 

12 (b) CONTRACTS RELATED TO PROPERTY TRANS13 FERRED.—All contracts, agreements, leases, licenses, per14 mits, and similar arrangements relating to property trans15 ferred to the Office of the Comptroller of the Currency 

16 or the Corporation by this section shall be transferred to 

17 the Office of the Comptroller of the Currency or the Cor18 poration together with that property. 

19 (c) PRESERVATION OF PROPERTY.—Property identi20 fied for transfer under this section shall not be altered, 

21 destroyed, or deleted before transfer under this section. 

22 (d) PROPERTY DEFINED.—For purposes of this sec23 tion, the term ‘‘property’’ includes all real property (in24 cluding leaseholds) and all personal property (including 

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1 counts, records, reports, files, memoranda, paper, reports 

2 of examination, work papers and correspondence related 

3 to such reports, and any other information or materials). 

4 SEC. 1214. FUNDS TRANSFERRED. 

5 Except to the extent needed to dispose of affairs 

6 under section 1215, all funds that, on the day before the 

7 transfer date, are available to the Director of the Office 

8 of Thrift Supervision to pay the expenses of the Office 

9 of Thrift Supervision shall be transferred to the Office of 

10 the Comptroller of the Currency or the Corporation, allo11 cated in a manner consistent with section 1212(a), on the 

12 transfer date. 

13 SEC. 1215. DISPOSITION OF AFFAIRS. 

14 (a) IN GENERAL.—During the 90-day period begin15 ning on the transfer date, the Director of the Office of 

16 Thrift Supervision— 

17 (1) shall, solely for the purpose of winding up 

18 the affairs of the agency related to any function 

19 transferred to the Office of the Comptroller of the 

20 Currency or the Corporation by this subtitle— 

21 (A) manage any employees of the Office of 

22 Thrift Supervision and provide for the payment 

23 of the compensation and benefits of any such 

24 employees that accrue before the transfer date; 

25 and 


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1 (B) manage any property of the Office of 

2 Thrift Supervision until the property is trans3 ferred under section 1213; and 

4 (2) may take any other action necessary to 

5 wind up the affairs of the Office of Thrift Super6 vision relating to the transferred functions. 

7 (b) AUTHORITY AND STATUS OF DIRECTOR.— 

8 (1) IN GENERAL.—Notwithstanding the trans9 fers of functions under this subtitle, the Director of 

10 the Office of Thrift Supervision shall, during the 90- 

11 day period beginning on the transfer date, retain 

12 and may exercise any authority vested in the Direc13 tor on the day before the transfer date that is nec14 essary to carry out the requirements of this subtitle 

15 during that period. 

16 (2) OTHER PROVISIONS.—For purposes of 

17 paragraph (1), the Director of the Office of Thrift 

18 Supervision shall, during the 90-day period begin19 ning on the transfer date, continue to be— 

20 (A) treated as an officer of the United 

21 States; and 

22 (B) entitled to receive compensation at the 

23 same annual rate of basic pay that he or she 

24 was receiving on the day before the transfer 

25 date. 


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1 SEC. 1216. CONTINUATION OF SERVICES. 

2 Any agency, department, or other instrumentality of 

3 the United States, and any successor to any such agency, 

4 department, or instrumentality, that was, before the trans5 fer date, providing support services to the Office of Thrift 

6 Supervision in connection with functions to be transferred 

7 to the Office of the Comptroller of the Currency or the 

8 Corporation, shall— 

9 (1) continue to provide those services, subject to 

10 reimbursement, until the transfer of those functions 

11 is complete; and 

12 (2) consult with any such agency to coordinate 

13 and facilitate a prompt and orderly transition. 

14 SEC. 1217. CONTRACTING AND LEASING AUTHORITY. 

15 In addition to any powers transferred to the Comp16 troller of the Currency by this subtitle, the Comptroller 

17 of the Currency may— 

18 (1) enter into and perform contracts, execute 

19 instruments, and acquire in any lawful manner such 

20 goods and services, or real or personal property, or 

21 interest in property, as the Comptroller of the Cur22 rency determines to be necessary or convenient to 

23 carry out the duties and responsibilities of the 

24 Comptroller of the Currency; and 

25 (2) hold, maintain, sell, lease, or otherwise dis26 pose of any real or personal property or interest in 


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1 property without regard to title 40, United States 

2 Code, title III of the Federal Properties and Admin3 istrative Services Act of 1949 (41 U.S.C. 251 et 

4 seq.), and other Federal laws of a similar type gov5 erning the procurement of goods and services or the 

6 acquisition or disposition of any property or interest 

7 in property by Federal agencies. 

8 SEC. 1218. TREATMENT OF SAVINGS AND LOAN HOLDING 

9 COMPANIES. 

10 Section 10 of the Home Owners’ Loan Act (12 U.S.C. 

11 1467a) is amended as follows: 

12 (1) In subsection (a)— 

13 (A) in paragraph (1)(A), by striking ‘‘Di14 rector’’ and inserting ‘‘Board’’; 

15 (B) in paragraph (1)(D), by striking clause 

16 (i) and inserting: ‘‘(i) In general.—. 

17 ‘‘(i) IN GENERAL.—Except as pro18 vided in clause (ii), the term ‘savings and 

19 loan holding company’ means any company 

20 that directly or indirectly controls a sav21 ings association or that controls any com22 pany that is a savings and loan holding 

23 company, and that is either— 


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1 ‘‘(I) a fraternal beneficiary soci2 ety, as defined in section 501(c)(8) of 

3 the Internal Revenue Code of 1986; or 

4 ‘‘(II) a company that is, together 

5 with all of its affiliates on a consoli6 dated basis, predominantly engaged in 

7 the business of insurance.’’; 

8 (C) in paragraph (1)(F), by striking ‘‘Di9 rector’’ and inserting ‘‘Board’’; 

10 (D) in paragraph (1), by inserting at the 

11 end the following new subparagraph: 

12 ‘‘(K) BOARD.—The term ‘Board’ means 

13 the Board of Governors of the Federal Reserve 

14 System.’’. 

15 (E) in paragraph (2)(D), by striking ‘‘Di16 rector’’ and inserting ‘‘Board’’; 

17 (F) in paragraph (3)(A), by striking ‘‘Di18 rector’’ and inserting ‘‘Board’’; and 

19 (G) in paragraph (4), by striking ‘‘Direc20 tor’’ and inserting ‘‘Board’’. 

21 (2) In subsection (b), by striking ‘‘Director’’ 

22 each place it appears and inserting ‘‘Board’’. 

23 (3) In subsection (c)— 

24 (A) in paragraph, (2)(F)(i)— 


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1 (i) by striking ‘‘of Governors of the 

2 Federal Reserve System’’; and 

3 (ii) by striking ‘‘Director’’ and insert4 ing ‘‘Board’’; 

5 (B) in paragraph (2)(G), by striking ‘‘Di6 rector’’ and inserting ‘‘Board’’; 

7 (C) in paragraph (4)(A), by striking ‘‘Di8 rector’’ and inserting ‘‘Board’’; 

9 (D) in paragraph (4)(B)— 

10 (i) in the heading, by striking ‘‘direc11 tor’’ and inserting ‘‘Board’’; and 

12 (ii) by striking ‘‘the Director shall’’ 

13 and inserting ‘‘the Board shall’’; 

14 (E) in paragraph (4)(C)— 

15 (i) in the heading, by striking ‘‘direc16 tor’’ and inserting ‘‘Board’’; and 

17 (ii) by striking ‘‘the Director may’’ 

18 and inserting ‘‘the Board may’’; 

19 (F) in paragraph (5), by striking ‘‘Direc20 tor’’ and inserting ‘‘Board’’; 

21 (G) in paragraph (6)(D)— 

22 (i) in the heading, by striking ‘‘direc23 tor’’ and inserting ‘‘Board’’; and 

24 (ii) by striking ‘‘Director’’ each place 

25 it appears and inserting ‘‘Board’’; 


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1 (H) in paragraph (9)(A)(ii), by inserting ‘‘, 

2 but only if the conditions for engaging in ex3 panded financial activities set forth in section 

4 4(l) of the Bank Holding Company Act of 1956 

5 have been met’’ after ‘‘1956’’; and 

6 (I) in paragraph (9)(E), by striking ‘‘Di7 rector’’ each place it appears and inserting 

8 ‘‘Board’’. 

9 (4) In subsection (e)— 

10 (A) in paragraph (1)(A)— 

11 (i) in clause (i), by striking ‘‘Direc12 tor’’ and inserting ‘‘Board’’; 

13 (ii) in clause (ii), by striking ‘‘Direc14 tor’’ and inserting ‘‘Board’’; 

15 (iii) in clause (iii), by striking ‘‘Direc16 tor’’ each place it appears and inserting 

17 ‘‘Board’’; and 

18 (iv) in clause (iv), by striking ‘‘Direc19 tor’’ each place it appears and inserting 

20 ‘‘Board’’; 

21 (B) in paragraph (1)(B), by striking ‘‘Di22 rector’’ each place it appears and inserting 

23 ‘‘Board’’; 


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1 (C) in paragraph (2), by striking ‘‘Direc2 tor’’ each place it appears and inserting 

3 ‘‘Board’’; 

4 (D) in paragraph (3), by striking ‘‘Direc5 tor’’ and inserting ‘‘Board’’; 

6 (E) in paragraph (4)(A), by striking ‘‘Di7 rector’’ and inserting ‘‘Board’’; and 

8 (F) in paragraph (5), by striking ‘‘Direc9 tor’’ each place it appears and inserting 

10 ‘‘Board’’. 

11 (5) In subsection (f), by striking ‘‘Director’’ 

12 each place it appears and inserting ‘‘Board’’. 

13 (6) In subsection (g), by striking ‘‘Director’’ 

14 each place it appears and inserting ‘‘Board’’. 

15 (7) In subsection (h)— 

16 (A) in paragraph (2), by striking ‘‘Direc17 tor’’ and inserting ‘‘Board’’; and 

18 (B) in paragraph (3), by striking ‘‘Direc19 tor’’ and inserting ‘‘Board’’. 

20 (8) In subsection (i)— 

21 (A) in paragraph (1)(A), by striking ‘‘Di22 rector’’ and inserting ‘‘Board’’; 

23 (B) in paragraph (2)(B), by striking ‘‘Di24 rector’’ and inserting ‘‘Board’’; 


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1 (C) in paragraph (2)(F), by striking ‘‘Di2 rector’’ and inserting ‘‘Board’’; 

3 (D) in paragraph (3)(B), by striking ‘‘Di4 rector’’ and inserting ‘‘Board’’; 

5 (E) in paragraph (3)(F), by striking ‘‘Di6 rector’’ and inserting ‘‘Board’’; 

7 (F) in paragraph (4), by striking ‘‘Direc8 tor’’ and inserting ‘‘Board’’; and 

9 (G) in paragraph (5), by striking ‘‘Direc10 tor’’ and inserting ‘‘Board’’. 

11 (9) In subsection (j), by striking ‘‘Director’’ 

12 each place it appears and inserting ‘‘Board’’. 

13 (10) In subsection (l)— 

14 (A) in paragraph (1), by striking ‘‘Direc15 tor’’ and inserting ‘‘Board, in consultation with 

16 the Comptroller of the Currency,’’; and 

17 (B) in paragraph (2), by striking ‘‘Direc18 tor’’ and inserting ‘‘Board, in consultation with 

19 the Comptroller of the Currency,’’. 

20 (11) In subsection (m)— 

21 (A) in paragraph (2), by striking ‘‘Direc22 tor’’ and inserting ‘‘Comptroller’’; 

23 (B) in paragraph (2), by striking ‘‘Director 

24 may grant’’ and inserting ‘‘Comptroller of the 

25 Currency may grant’’; 


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1 (C) in paragraph (2), by striking ‘‘the Di2 rector deems’’ and inserting ‘‘the Comptroller 

3 deems’’; 

4 (D) in paragraph (2)(A), by striking ‘‘Di5 rector’’ and inserting ‘‘Comptroller’’; 

6 (E) in paragraph (2)(B), by striking ‘‘Di7 rector’’ and inserting ‘‘Comptroller’’; 

8 (F) in paragraph (2)(B)(iii), by striking 

9 ‘‘Director’’ and inserting ‘‘Comptroller’’; 

10 (G) by striking subparagraph (A) of para11 graph (3) and inserting the following new sub12 paragraph: 

13 ‘‘(A) IN GENERAL.—A savings association 

14 that fails to become or remain a qualified thrift 

15 lender shall— 

16 ‘‘(i) immediately be subject to the re17 strictions in subparagraph (B); and 

18 ‘‘(ii) become one or more banks (other 

19 than a savings bank) within one year after 

20 the date on which the savings association 

21 should have become or ceases to be a quali22 fied thrift lender, except as provided in 

23 subparagraph (C)(i).’’; 


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1 (H) by striking subclause (III) of para2 graph (3)(B)(i) and inserting the following new 

3 subclause: 

4 ‘‘(III) DIVIDENDS.—The savings 

5 association shall be prohibited from 

6 paying dividends except for such divi7 dends— 

8 ‘‘(aa) as would be permis9 sible for a national bank; 

10 ‘‘(bb) that are necessary to 

11 meet obligations of a company 

12 that controls such savings asso13 ciation; and 

14 ‘‘(cc) that are specifically 

15 approved by the Comptroller and 

16 the Board of Governors after 

17 prior written request of at least 

18 30 days to the Comptroller and 

19 the Board of Governors.’’; 

20 (I) by striking clause (ii) of paragraph 

21 (3)(B); 

22 (J) by striking subparagraphs (C) and (D) 

23 of paragraph (3) and inserting the following 

24 new subparagraphs: 


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1 ‘‘(C) REGULATORY AUTHORITY.—A sav2 ings association that fails to become or remain 

3 a qualified thrift lender shall be deemed to have 

4 violated section 5 of the Home Owners’ Loan 

5 Act and subject to actions authorized by section 

6 5(d) of the Home Owners’ Loan Act. 

7 ‘‘(D) REQUALIFICATIONS.— 

8 ‘‘(i) A savings association that should 

9 have become or ceases to be a qualified 

10 thrift lender shall not be subject to sub11 paragraph (A)(ii) if the savings association 

12 becomes a qualified thrift lender by meet13 ing the qualified thrift lender requirement 

14 in paragraph (1) on a monthly average 

15 basis in 9 out of the preceding 12 months 

16 and remains a qualified thrift lender. 

17 ‘‘(ii) If the savings association re18 ferred to in clause (i) (or any savings asso19 ciation that acquired all or substantially all 

20 of its assets from that savings association) 

21 at any time thereafter ceases to be a quali22 fied thrift lender it shall immediately be 

23 subject to subparagraph (A)(ii) as if the 1- 

24 year time period provided for in subpara25 graph (A)(ii) already has expired, and as if 


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1 the exception in clause (i) was not applica2 ble or available to such savings associa3 tion.’’; 

4 (K) in paragraph (4)(D) by striking ‘‘Di5 rector’’ and inserting ‘‘Comptroller’’; 

6 (L) in paragraph (4)(E) by striking ‘‘Di7 rector’’ and inserting ‘‘Comptroller’’; and 

8 (M) in paragraph (7)(B) by striking ‘‘Di9 rector’’ and inserting ‘‘Comptroller’’. 

10 (12) In subsection (o)— 

11 (A) in paragraph (3) in the heading by 

12 striking ‘‘DIRECTOR’’ and inserting ‘‘BOARD’’; 

13 (B) in paragraph (3)(A) by striking ‘‘Di14 rector’’ and inserting ‘‘Board’’; 

15 (C) in paragraph (3)(B) by striking ‘‘Di16 rector’’ and inserting ‘‘Board’’; 

17 (D) in paragraph (3)(C) by striking ‘‘Di18 rector’’ and inserting ‘‘Board’’; 

19 (E) in paragraph (3)(D) by striking ‘‘Di20 rector’’ and inserting ‘‘Comptroller’’; 

21 (F) in paragraph (5)(E), by striking ‘‘ac22 tivities described in subsection (c)(2) or 

23 (c)(9)(A)(ii)’’ and inserting ‘‘activities otherwise 

24 permissible for the company pursuant to, and in 


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1 accordance with, section 4 of the Bank Holding 

2 Company Act of 1956’’; 

3 (G) in paragraph (7) by striking ‘‘char4 tered by the Director’’ and inserting ‘‘chartered 

5 by the Comptroller’’; and 

6 (H) in paragraph (7) by striking ‘‘regula7 tions as the Director may’’ and inserting ‘‘regu8 lations as the Board may’’. 

9 (13) In subsections (p), (q), (r), and (s), by 

10 striking ‘‘Director’’ each place it appears and insert11 ing ‘‘Board’’. 

12 SEC. 1219. PRACTICES OF CERTAIN MUTUAL THRIFT HOLD13 ING COMPANIES PRESERVED. 

14 (a) TREATMENT OF DIVIDENDS BY CERTAIN MU15 TUAL HOLDING COMPANIES.—Section 3(g) of the Bank 

16 Holding Company Act of 1956 (12 U.S.C. 1842(g)) is 

17 amended by adding at the end the following new para18 graphs: 

19 ‘‘(3) DECLARATION OF DIVIDENDS.—Every 

20 subsidiary savings association of a mutual holding 

21 company shall give the Board not less than 30 days 

22 advance notice of the proposed declaration by its di23 rectors of any dividend on its guaranty, permanent, 

24 or other nonwithdrawable stock. Such notice period 

25 shall commence to run from the date of receipt of 


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1 such notice by the Board. Any such dividend de2 clared within such period, or without the giving of 

3 such notice to the Board, shall be invalid and shall 

4 confer no rights or benefits upon the holder of any 

5 such stock. 

6 ‘‘(4) WAIVER OF DIVIDENDS.—Any mutual 

7 thrift holding company organized under section 

8 10(b) of the Home Owners’ Loan Act shall be per9 mitted to waive such company’s right to receive any 

10 dividend declared by a subsidiary, if— 

11 ‘‘(A) no insider of the mutual holding com12 pany, associate of an insider, or tax-qualified or 

13 non-tax-qualified employee stock benefit plan of 

14 the mutual holding company holds any share of 

15 the stock in the class of stock to which the 

16 waiver would apply; or 

17 ‘‘(B) the mutual holding company provides 

18 the Board with written notice of its intent to 

19 waive its right to receive dividends 30 days 

20 prior to the proposed date of payment of the 

21 dividend and the Board does not object. 

22 ‘‘(5) STANDARDS FOR WAIVER OF DIVIDEND.— 

23 The Board shall not object to a notice of intent to 

24 waive dividends under paragraph (4) if— 


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1 ‘‘(A) the waiver would not be detrimental 

2 to the safe and sound operation of the savings 

3 association; and 

4 ‘‘(B) the board of directors of the mutual 

5 holding company expressly determines that a 

6 waiver of the dividend by the mutual holding 

7 company is consistent with the directors’ fidu8 ciary duties to the mutual members of such 

9 company. 

10 ‘‘(6) RESOLUTION INCLUDED IN WAIVER NO11 TICE.—A dividend waiver notice shall include a copy 

12 of the resolution of the board of directors of the mu13 tual holding company, in form and substance satis14 factory to the Board, together with any supporting 

15 materials relied upon by the board of directors, con16 cluding that the proposed dividend waiver is con17 sistent with the board of director’s fiduciary duties 

18 to the mutual members of the mutual holding com19 pany. 

20 ‘‘(7) VALUATION.— 

21 ‘‘(A) IN GENERAL.—The Board shall con22 sider waived dividends in determining an appro23 priate exchange ratio in the event of a full con24 version to stock form. 


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1 ‘‘(B) EXCEPTION.—In the case of a sav2 ings association which has reorganized into a 

3 mutual thrift holding company under section 

4 10(b) of the Home Owners’ Loan Act and has 

5 issued minority stock either from its mid-tier 

6 stock holding company or its subsidiary stock 

7 savings association prior to December 1, 2009, 

8 the Board shall not consider waived dividends 

9 in determining an appropriate exchange ratio in 

10 the event of a full conversion to stock form.’’. 

11 SEC. 1220. IMPLEMENTATION PLAN AND REPORTS. 

12 (a) PLAN SUBMISSION.—Within 90 days of the enact13 ment of the Financial Stability Improvement Act of 2009, 

14 the Secretary and the Corporation, in consultation with 

15 the Office of the Comptroller of the Currency and the Of16 fice of Thrift Supervision, shall jointly submit a plan to 

17 the Congress and the Inspectors General of the Depart18 ment of the Treasury and of the Corporation detailing the 

19 steps the Secretary, the Corporation, the Office of the 

20 Comptroller of the Currency, and the Office of Thrift Su21 pervision will take to implement the provisions of sections 

22 1201 through 1216, and the provisions of the amendments 

23 made by such sections. 

24 (b) INSPECTORS GENERAL REVIEW OF THE PLAN.— 

25 Within 60 days of the date on which the Congress receives 


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1 the plan required under subsection (a), the Inspectors 

2 General of the Department of the Treasury and of the 

3 Corporation shall jointly provide a written report to the 

4 Secretary and the Corporation and shall submit a copy 

5 to the Congress detailing whether the plan conforms with 

6 the intent of the provisions of sections 1201 through 1216, 

7 and the provisions of the amendments made by such sec8 tions, including— 

9 (1) whether the plan sufficiently takes into con10 sideration the orderly transfer of personnel; 

11 (2) whether the plan describes procedures and 

12 safeguards to ensure that the Office of Thrift Super13 vision employees are not unfairly disadvantaged rel14 ative to employees of the Office of the Comptroller 

15 of the Currency and the Corporation; 

16 (3) whether the plan sufficiently takes into con17 sideration the orderly transfer of authority and re18 sponsibilities; 

19 (4) whether the plan sufficiently takes into con20 sideration the effective transfer of funds; 

21 (5) whether the plan sufficiently takes in con22 sideration the orderly transfer of property; and 

23 (6) any additional recommendations for an or24 derly and effective process. 


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1 (c) IMPLEMENTATION REPORTS.—Not later than 6 

2 months after the date on which the Congress receives the 

3 report required under subsection (b), and every 6 months 

4 thereafter until all aspects of the plan have been imple5 mented, the Inspectors General of the Department of the 

6 Treasury and the Corporation shall jointly provide a writ7 ten report on the status of the implementation of the plan 

8 to the Secretary and the Corporation and shall submit a 

9 copy to the Congress. 

10 SEC. 1221. COMPOSITION OF BOARD OF DIRECTORS OF THE 

11 FEDERAL DEPOSIT INSURANCE CORPORA12 TION. 

13 Section 2 of the Federal Deposit Insurance Act (12 

14 U.S.C. 1812) is amended— 

15 (1) in subsection (a)(1)— 

16 (A) in subparagraph (B), by striking ‘‘Di17 rector of the Office of Thrift Supervision’’ and 

18 inserting ‘‘Chairman of the Board of Governors 

19 of the Federal Reserve System, or such other 

20 member of the Board of Governors as the 

21 Chairman of the Board of Governors shall des22 ignate’’; 

23 (2) by amending subsection (d)(2) to read as 

24 follows: 


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1 ‘‘(2) ACTING OFFICIALS MAY SERVE.—In the 

2 event of a vacancy in the office of the Comptroller 

3 of the Currency and pending the appointment of a 

4 successor, or during the absence or disability of the 

5 Comptroller of the Currency, the acting Comptroller 

6 of the Currency shall be a member of the Board of 

7 Directors in the place of the Comptroller of the Cur8 rency.’’; and 

9 (3) in subsection (f)(2), by striking ‘‘or of the 

10 Office of Thrift Supervision’’. 

11 SEC. 1222. AMENDMENTS TO SECTION 3. 

12 Section 3 of the Federal Deposit Insurance Act (12 

13 U.S.C. 1813) is amended— 

14 (1) in subsection (b)(1)(C) (relating to the defi15 nition of the term ‘‘savings association’’), by striking 

16 ‘‘Director of the Office of Thrift Supervision’’ and 

17 inserting ‘‘Comptroller of the Currency’’; 

18 (2) in subsection (l)(5) (relating to the defini19 tion of the term ‘‘deposit’’), in the introductory text, 

20 by striking ‘‘Director of the Office of Thrift Super21 vision,’’; and 

22 (3) in subsection (z) (relating to the definition 

23 of the term ‘‘Federal banking agency’’), by striking 

24 ‘‘the Director of the Office of Thrift Supervision,’’. 


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1 SEC. 1223. AMENDMENTS TO SECTION 7. 

2 Section 7(a) of the Federal Deposit Insurance Act 

3 (12 U.S.C. 1817) is amended— 

4 (1) in paragraph (2)(A)— 

5 (A) in the first sentence, by striking ‘‘the 

6 Director of the Office of Thrift Supervision’’; 

7 (B) in the second sentence, by striking 

8 ‘‘the Director of the Office of Thrift Super9 vision,’’; 

10 (2) in paragraph (3), in the first sentence, by 

11 striking ‘‘, the Comptroller of the Currency, the 

12 Chairman of the Board of Governors of the Federal 

13 Reserve System, and the Director of the Office of 

14 Thrift Supervision’’ and inserting ‘‘Comptroller of 

15 the Currency and the Chairman of the Board of 

16 Governors of the Federal Reserve System’’; and 

17 (3) in paragraph (7), by striking ‘‘, the Director 

18 of the Office of Thrift Supervision,’’. 

19 SEC. 1224. AMENDMENTS TO SECTION 8. 

20 Section 8 of the Federal Deposit Insurance Act (12 

21 U.S.C. 1818) is amended— 

22 (1) in subsection (a)(8)(B)(ii), in the last sen23 tence— 

24 (A) by striking ‘‘Director of the Office of 

25 Thrift Supervision’’ each place it appears and 

26 inserting ‘‘Comptroller of the Currency’’; and 


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1 (B) by inserting ‘‘the Office of Thrift Su2 pervision, as a successor to’’ after ‘‘as a suc3 cessor to’’; 

4 (2) in subsection (o), by striking ‘‘Director of 

5 the Office of Thrift Supervision’’ and inserting 

6 ‘‘Comptroller of the Currency’’; and 

7 (3) in subsection (w)(3)(A), by striking ‘‘Office 

8 of Thrift Supervision’’ and inserting ‘‘Office of the 

9 Comptroller of the Currency’’. 

10 SEC. 1225. AMENDMENTS TO SECTION 11. 

11 Section 11 of the Federal Deposit Insurance Act (12 

12 U.S.C. 1821) is amended— 

13 (1) in subsection (c)(6)— 

14 (A) in the heading, by striking ‘‘DIRECTOR

15 OF THE OFFICE OF THRIFT SUPERVISION’’ and 

16 inserting ‘‘COMPTROLLER OF THE CURRENCY’’; 

17 (B) in subparagraph (A), by striking ‘‘Di18 rector of the Office of Thrift Supervision’’ and 

19 inserting ‘‘Comptroller of the Currency’’; 

20 (C) in subparagraph (B), by striking ‘‘Di21 rector of the Office of Thrift Supervision’’ and 

22 inserting ‘‘Comptroller of the Currency’’; 

23 (2) in subsection (d)— 

24 (A) in paragraph (17)(A)— 


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1 (i) by striking ‘‘, or the Director of 

2 the Office of Thrift Supervision’’; and 

3 (ii) by striking ‘‘appropriate’’; and 

4 (B) in paragraph (18)(B), by striking ‘‘or 

5 the Director of the Office of Thrift Super6 vision’’; and 

7 (3) in subsection (n)— 

8 (A) in paragraph (1)(A), by striking ‘‘the 

9 Director of the Office of Thrift Supervision, 

10 with respect to 1 or more insured’’; 

11 (B) in paragraph (2)(A), by striking ‘‘the 

12 Director of the Office of Thrift Supervision’’; 

13 (C) in paragraph (4)(D), by striking ‘‘and 

14 the Director of the Office of Thrift Supervision, 

15 as appropriate,’’; 

16 (D) in paragraph (4)(G), by striking ‘‘and 

17 the Director of the Office of Thrift Supervision, 

18 as appropriate,’’; and 

19 (E) in paragraph (12)(B), by striking ‘‘or 

20 the Director of the Office of Thrift Supervision, 

21 as appropriate,’’. 

22 SEC. 1226. AMENDMENTS TO SECTION 13. 

23 Section 13(k)(1)(A)(iv) of the Federal Deposit Insur24 ance Act (12 U.S.C. 1823(k)(1)(A)(iv)) is amended by 


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1 striking ‘‘Director of the Office of Thrift Supervision’’ and 

2 inserting ‘‘Comptroller of the Currency’’. 

3 SEC. 1227. AMENDMENTS TO SECTION 18. 

4 Section 18 of the Federal Deposit Insurance Act (12 

5 U.S.C. 1828) is amended— 

6 (1) in subsection (c)(2)— 

7 (A) in subparagraph (A), by striking 

8 ‘‘bank;’’ and inserting ‘‘bank or a savings asso9 ciation; and’’; 

10 (B) in subparagraph (B), by inserting 

11 ‘‘and’’ at the end after the semicolon; 

12 (C) in subparagraph (C), by striking 

13 ‘‘bank (except a savings bank supervised by the 

14 Director of the Office of Thrift Supervision); 

15 and’’ and inserting ‘‘bank or State savings as16 sociation.’’; and 

17 (D) by striking subparagraph (D); 

18 (2) in subsection (i)(2)— 

19 (A) by striking subparagraph (B) and in20 serting the following new subparagraph: 

21 ‘‘(B) the Corporation, if the resulting insti22 tution is to be a State nonmember insured bank 

23 or insured State savings association.’’; and 

24 (B) by striking subparagraph (C); and 

25 (3) in subsection (m)— 


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1 (A) in paragraph (1)— 

2 (i) in subparagraph (A), by striking 

3 ‘‘Director of the Office of Thrift Super4 vision’’ and inserting ‘‘Comptroller of the 

5 Currency’’; and 

6 (ii) in subparagraph (B), by striking 

7 ‘‘Director of the Office of Thrift Super8 vision’’ and inserting ‘‘Comptroller of the 

9 Currency’’; 

10 (B) in paragraph (2)— 

11 (i) in subparagraph (A), by striking 

12 ‘‘Director of the Office of Thrift Super13 vision’’ and inserting ‘‘Comptroller of the 

14 Currency’’; and 

15 (ii) in subparagraph (B)— 

16 (I) by striking ‘‘Director of the 

17 Office of Thrift Supervision’’ each 

18 place it appears and inserting ‘‘Comp19 troller of the Currency’’; and 

20 (II) by striking ‘‘Director may 

21 deem appropriate’’ and inserting 

22 ‘‘Comptroller may deem appropriate’’; 

23 and 

24 (C) in paragraph (3)— 


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1 (i) in subparagraph (A), by striking 

2 ‘‘Director of the Office of Thrift Super3 vision’’ and inserting ‘‘Comptroller of the 

4 Currency’’; and 

5 (ii) in subparagraph (B), by striking 

6 ‘‘Office of Thrift Supervision’’ and insert7 ing ‘‘Comptroller of the Currency’’. 

8 SEC. 1228. AMENDMENTS TO SECTION 28. 

9 Section 28 of the Federal Deposit Insurance Act (12 

10 U.S.C. 1831e) is amended— 

11 (1) in subsection (e)— 

12 (A) in paragraph (2)— 

13 (i) in subparagraph (A)(ii), by strik14 ing ‘‘Director of the Office of Thrift Su15 pervision’’ and inserting ‘‘Comptroller of 

16 the Currency’’; 

17 (ii) in subparagraph (C), by striking 

18 ‘‘Director of the Office of Thrift Super19 vision’’ and inserting ‘‘Comptroller of the 

20 Currency’’; and 

21 (iii) in subparagraph (F), by striking 

22 ‘‘Director of the Office of Thrift Super23 vision’’ and inserting ‘‘Comptroller of the 

24 Currency’’; and 

25 (B) in paragraph (3)— 


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1 (i) in subparagraph (A), by striking 

2 ‘‘Director of the Office of Thrift Super3 vision’’ and inserting ‘‘Comptroller of the 

4 Currency’’; and 

5 (ii) in subparagraph (B), by striking 

6 ‘‘Director of the Office of Thrift Super7 vision’’ and inserting ‘‘Comptroller of the 

8 Currency’’; and 

9 (2) in subsection (h)(2), by striking ‘‘Director 

10 of the Office of Thrift Supervision’’ and inserting 

11 ‘‘Comptroller of the Currency’’. 

12 SEC. 1229. AMENDMENTS TO THE ALTERNATIVE MORT13 GAGE TRANSACTION PARITY ACT OF 1982. 

14 (a) AMENDMENTS TO SECTION 802.—Section 

15 802(a)(3) of the Alternative Mortgage Transaction Parity 

16 Act of 1982 (12 U.S.C. 3801(a)(3)) is amended— 

17 (1) by striking ‘‘Comptroller of the Currency,’’ 

18 and inserting ‘‘Comptroller of the Currency and’’; 

19 and 

20 (2) by striking ‘‘, and the Director of the Office 

21 of Thrift Supervision’’. 

22 (b) AMENDMENTS TO SECTION 804.—Section 804(a) 

23 of the Alternative Mortgage Transaction Parity Act of 

24 1982 (12 U.S.C. 3803(a)) is amended— 


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1 (1) by amending paragraph (1) to read as fol2 lows: 

3 ‘‘(1) with respect to banks, savings associations, 

4 mutual savings banks, and savings banks, only to 

5 transactions made in accordance with regulations 

6 governing alternative mortgage transactions as pre7 scribed by the Comptroller of the Currency to the 

8 extent that such regulations are authorized by rule9 making authority granted to the Comptroller of the 

10 Currency under laws other than this section; and’’; 

11 (2) in paragraph (2), by striking ‘‘; and’’ and 

12 inserting a period; and 

13 (3) by striking paragraph (3). 

14 SEC. 1230. AMENDMENTS TO THE BANK HOLDING COM15 PANY ACT OF 1956. 

16 Section 4(f)(12)(A) of the Bank Holding Company 

17 Act of 1956 (12 U.S.C. 1843(f)(12)(A)) is amended strik18 ing ‘‘the Resolution Trust Corporation, the Federal De19 posit Insurance Corporation, or’’ and inserting ‘‘the Fed20 eral Deposit Insurance Corporation or’’. 

21 SEC. 1231. AMENDMENTS TO THE BANK PROTECTION ACT 

22 OF 1968. 

23 Section 2 of the Bank Protection Act of 1968 (12 

24 U.S.C. 1881) is amended— 


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1 (1) in paragraph (1), by striking ‘‘national 

2 banks,’’ and inserting ‘‘national banks and federal 

3 savings associations,’’; 

4 (2) in paragraph (2), by inserting ‘‘and’’ at the 

5 end; 

6 (3) in paragraph (3), by striking ‘‘, and’’ and 

7 inserting a period; and 

8 (4) by striking paragraph (4). 

9 SEC. 1232. AMENDMENTS TO THE BANK SERVICE COMPANY 

10 ACT. 

11 Section 1(b) of the Bank Service Company Act (12 

12 U.S.C. 1861(b)) is amended— 

13 (1) in paragraph (4), by striking ‘‘insured 

14 bank,’’ and inserting ‘‘insured bank or’’; 

15 (2) by striking ‘‘Director of the Office of Thrift 

16 Supervision’’ and inserting ‘‘Comptroller of the Cur17 rency’’; and 

18 (3) by striking ‘‘, the Federal Savings and Loan 

19 Insurance Corporation,’’. 

20 SEC. 1233. AMENDMENTS TO THE COMMUNITY REINVEST21 MENT ACT OF 1977. 

22 Section 803 of the Community Reinvestment Act of 

23 1977 (12 U.S.C. 2902) is amended— 

24 (1) in paragraph (1)— 


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1 (A) in subparagraph (A), by striking ‘‘na2 tional banks’’ and inserting ‘‘national banks or 

3 savings associations (the deposits of which are 

4 insured by the Federal Deposit Insurance Cor5 poration)’’; and 

6 (B) in subparagraph (B), by striking ‘‘and 

7 bank holding companies;’’ and inserting ‘‘, bank 

8 holding companies and savings and loan holding 

9 companies;’’; and 

10 (2) by striking the first paragraph (2) (relating 

11 to section 8 of the Federal Deposit Insurance Act). 

12 SEC. 1234. AMENDMENTS TO THE DEPOSITORY INSTITU13 TION MANAGEMENT INTERLOCKS ACT. 

14 (a) AMENDMENT TO SECTION 207.—Section 207 of 

15 the Depository Institution Management Interlocks Act (12 

16 U.S.C. 3206) is amended— 

17 (1) in paragraph (1), by striking ‘‘national 

18 banks,’’ and inserting ‘‘national banks and Federal 

19 savings associations (the deposits of which are in20 sured by the Federal Deposit Insurance Corpora21 tion),’’; 

22 (2) in paragraph (2), by striking ‘‘and bank 

23 holding companies,’’ and inserting ‘‘, bank holding 

24 companies, and savings and loan holding compa25 nies,’’; 


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1 (3) by striking paragraph (4); and 

2 (4) by redesignating paragraphs (5) and (6) as 

3 paragraphs (4) and (5), respectively. 

4 (b) AMENDMENT TO SECTION 209.—Section 209 of 

5 the Depository Institution Management Interlocks Act (12 

6 U.S.C. 3207) is amended— 

7 (1) in paragraph (1), by striking ‘‘national 

8 banks,’’ and inserting ‘‘national banks and Federal 

9 savings associations (the deposits of which are in10 sured by the Federal Deposit Insurance Corpora11 tion),’’; 

12 (2) in paragraph (2), by striking ‘‘and bank 

13 holding companies,’’ and inserting ‘‘, bank holding 

14 companies, and savings and loan holding compa15 nies,’’; 

16 (3) at the end of paragraph (3), by inserting 

17 ‘‘and’’ after the comma; 

18 (4) by striking paragraph (4); and 

19 (5) by redesignating paragraph (5) as para20 graph (4). 

21 (c) AMENDMENT TO SECTION 210.—Subsection 

22 210(a) of the Depository Institution Management Inter23 locks Act (12 U.S.C. 3208(a)) is amended— 

24 (1) by striking ‘‘his’’ and inserting ‘‘the’’; and 


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1 (2) by inserting ‘‘of the Attorney General’’ after 

2 ‘‘enforcement functions’’. 

3 SEC. 1235. AMENDMENTS TO THE EMERGENCY HOME4 OWNERS’ RELIEF ACT. 

5 Section 110 of the Emergency Homeowners’ Relief 

6 Act (12 U.S.C. 2709) is amended— 

7 (1) by striking the ‘‘Federal Home Loan Bank 

8 Board’’ and inserting ‘‘Federal Housing Finance 

9 Agency’’; and 

10 (2) by striking ‘‘the Federal Savings and Loan 

11 Insurance Corporation,’’. 

12 SEC. 1236. AMENDMENTS TO THE EQUAL CREDIT OPPOR13 TUNITY ACT. 

14 Section 704(a) of the Equal Credit Opportunity Act 

15 (15 U.S.C. 1691c(a)) is amended— 

16 (1) in paragraph (1)(A), by striking ‘‘and Fed17 eral branches and Federal agencies of foreign 

18 banks,’’ and inserting ‘‘Federal branches and Fed19 eral agencies of foreign banks, or a savings associa20 tion the deposits of which are insured by the Federal 

21 Deposit Insurance Corporation,’’; 

22 (2) by striking paragraph (2); and 

23 (3) by redesignating paragraphs (3) through 

24 (9) as paragraphs (2) through (8). 


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1 SEC. 1237. AMENDMENTS TO THE FEDERAL CREDIT UNION 

2 ACT. 

3 (a) AMENDMENTS TO SECTION 206.—Section 

4 206(g)(7) of the Federal Credit Union Act (12 U.S.C. 

5 1786(g)(7)) is amended— 

6 (1) in subparagraph (A)— 

7 (A) in clause (v), by inserting ‘‘and’’ after 

8 the semicolon; 

9 (B) in clause (vi)— 

10 (i) by striking ‘‘Federal Housing Fi11 nance Board’’ and inserting ‘‘Federal 

12 Housing Finance Agency’’; and 

13 (ii) by striking ‘‘; and’’ and inserting 

14 a period; and 

15 (C) by striking clause (vii); and 

16 (2) in subparagraph (D)— 

17 (A) in clause (iii), by inserting ‘‘and’’ after 

18 the semicolon; 

19 (B) in clause (iv), by striking ‘‘; and’’ and 

20 inserting a period; and 

21 (C) by striking clause (v). 

22 SEC. 1238. AMENDMENTS TO THE FEDERAL FINANCIAL IN23 STITUTIONS EXAMINATION COUNCIL ACT OF 

24 1978. 

25 (a) AMENDMENT TO SECTION 1002.—Section 1002 

26 of the Federal Financial Institutions Examination Council 


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1 Act of 1978 (12 U.S.C. 3301) is amended by striking 

2 ‘‘Federal Home Loan Bank Board’’ and inserting ‘‘Fed3 eral Housing Finance Agency’’. 

4 (b) AMENDMENT TO SECTION 1003.—Section 

5 1003(1) of the Federal Financial Institutions Examina6 tion Council Act of 1978 (12 U.S.C. 3302(1)) is amended 

7 by striking ‘‘the Office of Thrift Supervision,’’. 

8 (c) AMENDMENTS TO SECTION 1004.—Section 

9 1004(a) of the Federal Financial Institutions Examina10 tion Council Act of 1978 (12 U.S.C. 3303(a)) is amend11 ed— 

12 (1) by striking paragraph (4); and 

13 (2) by redesignating paragraphs (5) and (6) as 

14 paragraphs (4) and (5), respectively. 

15 SEC. 1239. AMENDMENTS TO THE FEDERAL HOME LOAN 

16 BANK ACT. 

17 (a) AMENDMENTS TO SECTION 18.—Section 18(c) of 

18 the Federal Home Loan Bank Act (12 U.S.C. 1438(c)) 

19 is amended— 

20 (1) by striking ‘‘Director of the Office of Thrift 

21 Supervision’’ each place it appears and inserting 

22 ‘‘Comptroller of the Currency’’; 

23 (2) in paragraph (1)(B), by striking ‘‘and the 

24 agencies under its administration or supervision’’; 

25 and 


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1 (3) in paragraph (5), by striking ‘‘and such 

2 agencies’’. 

3 (b) REPEAL OF SECTION 21A.—Section 21A of the 

4 Federal Home Loan Bank Act (12 U.S.C. 1441a) is here5 by repealed. 

6 SEC. 1240. AMENDMENTS TO THE FEDERAL RESERVE ACT. 

7 Section 19(b) of the Federal Reserve Act (12 U.S.C. 

8 461) is amended— 

9 (1) in paragraph (1)(F), by striking ‘‘the Direc10 tor of the Office of Thrift Supervision’’ and insert11 ing ‘‘the Comptroller of the Currency’’; and 

12 (2) in paragraph (4)(B), by striking ‘‘the Direc13 tor of the Office of Thrift Supervision’’ and insert14 ing ‘‘the Comptroller of the Currency’’. 

15 SEC. 1241. AMENDMENTS TO THE FINANCIAL INSTITUTIONS 

16 REFORM, RECOVERY, AND ENFORCEMENT 

17 ACT OF 1989. 

18 (a) AMENDMENTS TO SECTION 302.—Section 302(1) 

19 of the Financial Institutions Reform, Recovery, and En20 forcement Act of 1989 is amended by striking ‘‘Director 

21 of the Office of Thrift Supervision’’ and inserting ‘‘Comp22 troller of the Currency’’. 

23 (b) AMENDMENT TO SECTION 305.—Section 

24 305(b)(1) of the Financial Institutions Reform, Recovery, 

25 and Enforcement Act of 1989 is amended by striking ‘‘DiVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00209 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 rector of the Office of Thrift Supervision’’ and inserting 

2 ‘‘Comptroller of the Currency’’. 

3 (c) AMENDMENT TO SECTION 308.—Section 308(a) 

4 of the Financial Institutions Reform, Recovery, and En5 forcement Act of 1989 (12 U.S.C. 1463 note) is amended 

6 by striking ‘‘Director of the Office of Supervision’’ and 

7 inserting ‘‘Comptroller of the Currency’’. 

8 (d) AMENDMENTS TO SECTION 402.—Section 402 of 

9 the Financial Institutions Reform, Recovery, and Enforce10 ment Act of 1989 (12 U.S.C. 1437 note) is amended— 

11 (1) in subsection (a), by striking ‘‘Director of 

12 the Office of Thrift Supervision’’ and inserting 

13 ‘‘Comptroller of the Currency’’; 

14 (2) in subsection (b), by striking ‘‘Director of 

15 the Office of Thrift Supervision’’ and inserting 

16 ‘‘Comptroller of the Currency’’; and 

17 (3) in subsection (e)— 

18 (A) in paragraph (1), by striking ‘‘Office 

19 of Thrift Supervision’’ and inserting ‘‘Office of 

20 the Comptroller of the Currency’’; 

21 (B) in paragraph (2), by striking ‘‘Director 

22 of the Office of Thrift Supervision’’ each place 

23 it appears and inserting ‘‘Comptroller of the 

24 Currency’’; 


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1 (C) in paragraph (3), by striking ‘‘Director 

2 of the Office of Thrift Supervision’’ and insert3 ing ‘‘Comptroller of the Currency’’; and 

4 (D) in paragraph (4), by striking ‘‘Direc5 tor of the Office of Thrift Supervision’’ and in6 serting ‘‘Comptroller of the Currency’’. 

7 (e) AMENDMENT TO SECTION 1103.—Section 

8 1103(a)(2) of the Financial Institutions Reform, Recov9 ery, and Enforcement Act of 1989 (12 U.S.C. 3332(a)(2)) 

10 is amended by striking ‘‘and the Resolution Trust Cor11 poration’’. 

12 (f) AMENDMENTS TO SECTION 1205.—Subsection 

13 1205(b) of the Financial Institutions Reform, Recovery, 

14 and Enforcement Act of 1989 (12 U.S.C. 1818 note) is 

15 amended— 

16 (1) in paragraph (1)— 

17 (A) in subparagraph (B), by striking ‘‘Di18 rector of the Office of Thrift Supervision, or the 

19 Director’s designee’’ and inserting ‘‘Comptroller 

20 of the Currency, or the Comptroller’s designee’’; 

21 (B) by striking subparagraph (D); and 

22 (C) by redesignating subparagraphs (E) 

23 and (F) as subparagraphs (D) and (E), respec24 tively; 


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1 (2) in paragraph (2), by striking ‘‘paragraph 

2 (1)(F)’’ and inserting ‘‘paragraph (1)(E)’’; 

3 (3) in paragraph (3), by striking ‘‘paragraph 

4 (1)(F)’’ and inserting ‘‘paragraph (1)(E)’’; and 

5 (4) in paragraph (5), by striking ‘‘through (E)’’ 

6 and inserting ‘‘through (D)’’. 

7 (g) AMENDMENTS TO SECTION 1206.—Section 

8 1206(a) of the Financial Institutions Reform, Recovery, 

9 and Enforcement Act of 1989 (12 U.S.C. 1833b(a)) is 

10 amended— 

11 (1) by striking ‘‘the Oversight Board of the 

12 Resolution Trust Corporation’’ and inserting ‘‘and’’; 

13 and 

14 (2) by striking ‘‘, and the Office of Thrift Su15 pervision,’’. 

16 (h) AMENDMENTS TO SECTION 1216.—Section 1216 

17 of the Financial Institutions Reform, Recovery, and En18 forcement Act of 1989 (12 U.S.C. 1833e) is amended— 

19 (1) in subsection (a)— 

20 (A) by striking paragraphs (2), (5), and 

21 (6); 

22 (B) by redesignating paragraphs (3) and 

23 (4) as paragraphs (2) and (3), respectively; and 

24 (C) in paragraph (2) (as redesignated), by 

25 adding ‘‘and’’ at the end; 


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1 (2) in subsection (c)— 

2 (A) by striking ‘‘the Director of the Office 

3 of Thrift Supervision,’’ and inserting ‘‘and’’; 

4 and 

5 (B) by striking ‘‘, the Oversight Board of 

6 the Resolution Trust Corporation, and the Res7 olution Trust Corporation’’; and 

8 (3) in subsection (d)— 

9 (A) by striking paragraphs (3), (5), and 

10 (6); and 

11 (B) by redesignating paragraphs (4), (7), 

12 and (8) as paragraphs (3), (4), and (5), respec13 tively. 

14 SEC. 1242. AMENDMENTS TO THE HOUSING ACT OF 1948. 

15 Section 502(c) of the Housing Act of 1948 (12 

16 U.S.C. 1701c(c)) is amended in the introductory text by 

17 striking ‘‘Director of the Office of Thrift Supervision’’ and 

18 inserting ‘‘Comptroller of the Currency’’. 

19 SEC. 1243. AMENDMENTS TO THE HOUSING AND COMMU20 NITY DEVELOPMENT ACT OF 1992 AND THE 

21 FEDERAL HOUSING ENTERPRISES FINANCIAL 

22 SAFETY AND SOUNDNESS ACT OF 1992. 

23 (a) AMENDMENTS TO SECTION 543 OF THE HOUSING

24 AND COMMUNITY DEVELOPMENT ACT OF 1992.—Section 


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1 543 of the Housing and Community Development Act of 

2 1992 (12 U.S.C. 1707 note) is amended— 

3 (1) in subsection (c)(1)— 

4 (A) by striking subparagraphs (D) through 

5 (F); and 

6 (B) by redesignating subparagraphs (G) 

7 and (H) as subparagraphs (D) and (E), respec8 tively; and 

9 (2) in subsection (f)— 

10 (A) in paragraph (2)— 

11 (i) by striking ‘‘the Office of Thrift 

12 Supervision,’’; and 

13 (ii) in subparagraph (D), by striking 

14 ‘‘the Office of Thrift Supervision,’’; and 

15 (B) in paragraph (3)— 

16 (i) by striking ‘‘the Office of Thrift 

17 Supervision,’’; and 

18 (ii) in subparagraph (D), by striking 

19 ‘‘Office of Thrift Supervision,’’ and insert20 ing ‘‘Comptroller of the Currency,’’. 

21 (b) AMENDMENT TO SECTION 1315 OF THE FED22 ERAL HOUSING ENTERPRISES FINANCIAL SAFETY AND

23 SOUNDNESS ACT OF 1992.—Section 1315(b) of the Fed24 eral Housing Enterprises Financial Safety and Soundness 

25 Act of 1992 (12 U.S.C. 4515(b)) is amended by striking 


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1 ‘‘the Federal Deposit Insurance Corporation, and the Of2 fice of Thrift Supervision.’’ and inserting ‘‘and the Fed3 eral Deposit Insurance Corporation.’’. 

4 (c) AMENDMENT TO SECTION 1317 OF THE FED5 ERAL HOUSING ENTERPRISES FINANCIAL SAFETY AND

6 SOUNDNESS ACT OF 1992.—Section 1317(c) of the of the 

7 Federal Housing Enterprises Financial Safety and Sound8 ness Act of 1992 (12 U.S.C. 4517(c)) is amended by strik9 ing ‘‘the Federal Deposit Insurance Corporation, or the 

10 Director of the Office of Thrift Supervision’’ and inserting 

11 ‘‘or the Federal Deposit Insurance Corporation’’. 

12 SEC. 1244. AMENDMENT TO THE HOUSING AND URBAN13 RURAL RECOVERY ACT OF 1983. 

14 Section 469 of the Housing and Urban-Rural Recov15 ery Act of 1983 (12 U.S.C. 1701p–1) is amended in the 

16 first sentence by striking ‘‘Federal Home Loan Bank 

17 Board’’ and inserting ‘‘Federal Housing Finance Agency’’. 

18 SEC. 1245. AMENDMENTS TO THE NATIONAL HOUSING ACT. 

19 Section 202(f) of the National Housing Act is amend20 ed— 

21 (1) by amending paragraph (5) to read as fol22 lows: 

23 ‘‘(5) if the mortgagee is a national bank, a sub24 sidiary or affiliate of such a bank, a Federal savings 


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1 association or a subsidiary or affiliate of a savings 

2 association, the Comptroller of the Currency;’’; 

3 (2) in paragraph (6), by adding ‘‘and’’ at the 

4 end; 

5 (3) in paragraph (7)— 

6 (A) by inserting ‘‘or State savings associa7 tion’’ after ‘‘State bank’’; and 

8 (B) by striking ‘‘; and’’ and inserting a pe9 riod; and 

10 (4) by striking paragraph (8). 

11 SEC. 1246. AMENDMENTS TO THE RIGHT TO FINANCIAL 

12 PRIVACY ACT OF 1978. 

13 Section 1101(7) of the Right to Financial Privacy 

14 Act of 1978 (12 U.S.C. 3401(7)) is amended by striking 

15 subparagraph (B). 

16 SEC. 1247. AMENDMENTS TO THE BALANCED BUDGET AND 

17 EMERGENCY DEFICIT CONTROL ACT OF 1985. 

18 (a) AMENDMENTS TO SECTION 255.—Section 

19 255(g)(1)(A) of the Balanced Budget and Emergency 

20 Deficit Control Act of 1985 (2 U.S.C. 905(g)(1)(A)) is 

21 amended by striking ‘‘Office of Thrift Supervision (20– 

22 4108–0–3–373);’’. 

23 (b) AMENDMENTS TO SECTION 256.—Section 

24 256(h)(4) of the Balanced Budget and Emergency Deficit 

25 Control Act of 1985 (2 U.S.C. 906(h)(4)) is amended— 


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1 (1) by striking subparagraphs (C) and (G); and 

2 (2) by redesignating subparagraphs (D), (E), 

3 (F), and (H) as subparagraphs (C) through (G), re4 spectively. 

5 SEC. 1248. AMENDMENTS TO THE CRIME CONTROL ACT OF 

6 1990. 

7 (a) AMENDMENTS TO SECTION 2539.—Section 

8 2539(c)(2) of the Crime Control Act of 1990 (Public Law 

9 101–647) is amended by striking subparagraph (F) and 

10 redesignating subparagraphs (G) and (H) as subpara11 graphs (F) through (G), respectively. 

12 (b) AMENDMENT TO SECTION 2554.—Section 

13 2554(b)(2) of the Crime Control Act of 1990 (Public Law 

14 101–647) is amended by striking ‘‘Director of the Office 

15 of Thrift Supervision’’ and inserting ‘‘Comptroller of the 

16 Currency’’. 

17 SEC. 1249. AMENDMENT TO THE FLOOD DISASTER PROTEC18 TION ACT OF 1973. 

19 Section 3(a)(5) of the Flood Disaster Protection Act 

20 of 1973 (42 U.S.C. 4003(a)(5)) is amended by striking 

21 ‘‘the Office of Thrift Supervision,’’. 

22 SEC. 1250. AMENDMENT TO THE INVESTMENT COMPANY 

23 ACT OF 1940. 

24 Section 6(a)(3) of the Investment Company Act of 

25 1940 (15 U.S.C. 80a–6(a)(3)) is amended by striking 


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1 ‘‘Federal Savings and Loan Insurance Corporation’’ and 

2 inserting ‘‘Comptroller of the Currency’’. 

3 SEC. 1251. AMENDMENT TO THE NEIGHBORHOOD REIN4 VESTMENT CORPORATION ACT. 

5 Section 606(c)(3) of the Neighborhood Reinvestment 

6 Corporation Act is amended by striking ‘‘Federal Home 

7 Loan Bank Board’’ and inserting ‘‘Federal Housing Fi8 nance Agency’’. 

9 SEC. 1252. AMENDMENTS TO THE SECURITIES EXCHANGE 

10 ACT OF 1934. 

11 (a) AMENDMENTS TO SECTION 3.—Section 3(a)(34) 

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

13 78c(a)(34)) is amended— 

14 (1) in subparagraph (A)— 

15 (A) in clause (i), by striking ‘‘bank;’’ and 

16 inserting ‘‘bank, or a savings association (as de17 fined in section 3(b) of the Federal Deposit In18 surance Act (12 U.S.C. 1813(b))), the deposits 

19 of which are insured by the Federal Deposit In20 surance Corporation, a subsidiary or a depart21 ment or division of any such savings associa22 tion, or a savings and loan holding;’’; 

23 (B) in clause (iii), by adding ‘‘and’’ at the 

24 end; 

25 (C) by striking clause (iv); and 


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1 (D) by redesignating clause (v) as clause 

2 (iv); 

3 (2) in subparagraph (B)— 

4 (A) in clause (i), by striking ‘‘bank;’’ and 

5 inserting ‘‘bank, or a savings association (as de6 fined in section 3(b) of the Federal Deposit In7 surance Act (12 U.S.C. 1813 (b))), the deposits 

8 of which are insured by the Federal Deposit In9 surance Corporation, a subsidiary or a depart10 ment or division of any such savings associa11 tion, or a savings and loan holding;’’; 

12 (B) in clause (iii), by adding ‘‘and’’ at the 

13 end; 

14 (C) by striking clause (iv); and 

15 (D) by redesignating clause (v) as clause 

16 (iv); 

17 (3) in subparagraph (C)— 

18 (A) in clause (i), by striking ‘‘bank;’’ and 

19 inserting ‘‘bank, or a savings association (as de20 fined in section 3(b) of the Federal Deposit In21 surance Act (12 U.S.C. 1813 (b))), the deposits 

22 of which are insured by the Federal Deposit In23 surance Corporation, a subsidiary or a depart24 ment or division of any such savings associa25 tion, or a savings and loan holding;’’; 


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1 (B) in clause (iii), by adding ‘‘and’’ at the 

2 end; 

3 (C) by striking clause (iv); and 

4 (D) by redesignating clause (v) as clause 

5 (iv); and 

6 (4) in subparagraph (F)— 

7 (A) in clause (i), by striking ‘‘bank;’’ and 

8 inserting ‘‘or a savings association (as defined 

9 in section 3(b) of the Federal Deposit Insur10 ance Act (12 U.S.C. 1813 (b))), the deposits of 

11 which are insured by the Federal Deposit In12 surance Corporation;’’; 

13 (B) by striking clause (ii); and 

14 (C) redesignating clauses (iii), (iv), and (v) 

15 as clauses (ii), (iii) and (iv), respectively. 

16 (b) AMENDMENTS TO SECTION 15C.—Section 15C of 

17 the Securities Exchange Act of 1934 (15 U.S.C. 78o–5) 

18 is amended in subsection (g)(1) by striking ‘‘the Director 

19 of the Office of Thrift Supervision, the Federal Savings 

20 and Loan Insurance Corporation,’’. 

21 SEC. 1253. AMENDMENTS TO TITLE 18, UNITED STATES 

22 CODE. 

23 (a) AMENDMENT TO SECTION 212.—Section 

24 212(c)(2) of title 18, United States Code, is amended— 

25 (1) by striking subparagraph (C); and 


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1 (2) by redesignating subparagraphs (D) 

2 through (H) as subparagraphs (C) through (G), re3 spectively. 

4 (b) AMENDMENT TO SECTION 657.—Section 657 of 

5 title 18, United States Code, is amended by striking ‘‘Of6 fice of Thrift Supervision, the Resolution Trust Corpora7 tion,’’. 

8 (c) AMENDMENT TO SECTION 981.—Section 

9 981(a)(1)(D) of title 18, United States Code, is amend10 ed— 

11 (1) by striking ‘‘the Resolution Trust Corpora12 tion,’’; and 

13 (2) by striking ‘‘or the Office of Thrift Super14 vision’’. 

15 (d) AMENDMENT TO SECTION 982.—Section 

16 982(a)(3) of title 18, United States Code, is amended— 

17 (1) by striking ‘‘the Resolution Trust Corpora18 tion,’’; and 

19 (2) by striking ‘‘or the Office of Thrift Super20 vision’’. 

21 (e) AMENDMENT TO SECTION 1006.—Section 1006 

22 of title 18, United States Code, is amended— 

23 (1) by striking ‘‘Office of Thrift Supervision,’’; 

24 and 


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1 (2) by striking ‘‘the Resolution Trust Corpora2 tion,’’. 

3 (f) AMENDMENT TO SECTION 1014.—Section 1014 

4 of title 18, United States Code, is amended— 

5 (1) by striking ‘‘the Office of Thrift Super6 vision,’’; and 

7 (2) by striking ‘‘the Resolution Trust Corpora8 tion,’’. 

9 (g) AMENDMENT TO SECTION 1032.—Section 

10 1032(1) of title 18, United States Code, is amended— 

11 (1) by striking ‘‘the Resolution Trust Corpora12 tion,’’; and 

13 (2) by striking ‘‘or the Director of the Office of 

14 Thrift Supervision’’. 

15 SEC. 1254. AMENDMENTS TO TITLE 31, UNITED STATES 

16 CODE. 

17 (a) AMENDMENT TO SECTION 309.—Section 309 of 

18 title 31, United States Code, is amended to read as fol19 lows: 

20 ‘‘§ 309. Division of Thrift Supervision 

21 ‘‘The Division of Thrift Supervision established 

22 under section 3(a) of the Home Owners’ Loan Act shall 

23 be a division in the Office of the Comptroller of the Cur24 rency.’’. 


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1 (b) AMENDMENTS TO SECTION 321.—Section 321 of 

2 title 31, United States Code, is amended— 

3 (1) in subsection (c)— 

4 (A) in paragraph (1), by adding ‘‘and’’ at 

5 the end; 

6 (B) in paragraph (2), by striking ‘‘; and’’ 

7 and inserting a period; and 

8 (C) by striking paragraph (3); and 

9 (2) by striking subsection (e). 

10 (c) AMENDMENTS TO SECTION 714.—Section 714 of 

11 title 31, United States Code, is amended— 

12 (1) in subsection (a), by striking ‘‘the Office of 

13 the Comptroller of the Currency, and the Office of 

14 Thrift Supervision.’’ and inserting ‘‘and the Office of 

15 the Comptroller of the Currency.’’; 

16 (2) in subsection (b), by striking all after ‘‘has 

17 consented in writing.’’ and inserting the following: 

18 ‘‘Audits of the Federal Reserve Board and Federal 

19 reserve banks shall not include unreleased tran20 scripts or minutes of meetings of the Board of Gov21 ernors or of the Federal Open Market Committee. 

22 To the extent that an audit deals with individual 

23 market actions, records related to such actions shall 

24 only be released by the Comptroller General after 


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1 180 days have elapsed following the effective date of 

2 such actions.’’; 

3 (3) in subsection (c)(1), in the first sentence, by 

4 striking ‘‘subsection,’’ and inserting ‘‘subsection or 

5 in the audits or audit reports referring or relating 

6 to the Federal Reserve Board or Reserve Banks,’’; 

7 and 

8 (4) by adding at the end the following: 

9 ‘‘(f) AUDIT AND REPORT OF THE FEDERAL RESERVE

10 SYSTEM.— 

11 ‘‘(1) IN GENERAL.—An audit of the Board of 

12 Governors of the Federal Reserve System and the 

13 Federal reserve banks under subsection (b) shall be 

14 completed within 12 months of the enactment of the 

15 Financial Stability Improvement Act of 2009. 

16 ‘‘(2) REPORT.— 

17 ‘‘(A) REQUIRED.—A report on the audit 

18 referred to in paragraph (1) shall be submitted 

19 by the Comptroller General to the Congress be20 fore the end of the 90-day period beginning on 

21 the date on which such audit is completed and 

22 made available to— 

23 ‘‘(i) the Speaker of the House of Rep24 resentatives; 


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1 ‘‘(ii) the majority and minority leaders 

2 of the House of Representatives; 

3 ‘‘(iii) the majority and minority lead4 ers of the Senate; 

5 ‘‘(iv) the Chairman and Ranking 

6 Member of the committee and each sub7 committee of jurisdiction in the House of 

8 Representatives and the Senate; and 

9 ‘‘(v) any other Member of Congress 

10 who requests it. 

11 ‘‘(B) CONTENTS.—The report under sub12 paragraph (A) shall include a detailed descrip13 tion of the findings and conclusion of the 

14 Comptroller General with respect to the audit 

15 that is the subject of the report. 

16 ‘‘(3) CONSTRUCTION.—Nothing in this sub17 section shall be construed— 

18 ‘‘(A) as interference in or dictation of mon19 etary policy to the Federal Reserve System by 

20 the Congress or the Government Accountability 

21 Office; or 

22 ‘‘(B) to limit the ability of the Government 

23 Accountability Office to perform additional au24 dits of the Board of Governors of the Federal 


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1 Reserve System or of the Federal reserve 

2 banks.’’. 

3 SEC. 1255. REQUIREMENT FOR COUNTERCYCLICAL CAP4 ITAL REQUIREMENTS. 

5 Section 908(a) of the International Lending Super6 vision Act of 1983 (12 U.S.C. 3907(a)) is amended by 

7 adding at the end the following new paragraph: 

8 ‘‘(3) Each appropriate Federal banking agency 

9 shall, in establishing capital requirements under this 

10 Act or other provisions of Federal law for banking 

11 institutions, seek to make such requirements coun12 tercyclical so that the amount of capital required to 

13 be maintained by a banking institution increases in 

14 times of economic expansion and decreases in times 

15 of economic contraction, consistent with the safety 

16 and soundness of the institution.’’. 

17 SEC. 1256. TRANSFER OF AUTHORITY TO THE BOARD WITH 

18 RESPECT TO SAVINGS AND LOAN HOLDING 

19 COMPANIES. 

20 (a) TRANSFER OF FUNCTIONS.—Notwithstanding 

21 any other provision of this subtitle, all functions of the 

22 Director of the Office of Thrift Supervision with respect 

23 to savings and loan holding companies that are a fraternal 

24 beneficiary society, as defined in section 501(c)(8) of the 

25 Internal Revenue Code of 1986, or a company that is, toVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00226 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 gether with all of its affiliates on a consolidated basis, pre2 dominantly engaged in the business of insurance are 

3 transferred to the Board. 

4 (b) BOARD’S AUTHORITY.—Notwithstanding any 

5 other provision of this subtitle, the Board shall succeed 

6 to all powers, authorities, rights, and duties with respect 

7 to savings and loan holding companies that are a fraternal 

8 beneficiary society, as defined in section 501(c)(8) of the 

9 Internal Revenue Code of 1986, or a company that is, to10 gether with all of its affiliates on a consolidated basis, pre11 dominantly engaged in the business of insurance that were 

12 vested in the Director of the Office of Thrift Supervision 

13 under Federal law, including the Home Owners’ Loan Act, 

14 on the day before the transfer date. 

15 (c) SAVINGS AND LOAN HOLDING COMPANY DE16 FINED.—The term ‘‘savings and loan holding company’’ 

17 shall have the meaning given such term under section 10 

18 of the Home Owners’ Loan Act. 

19 SEC. 1257. EFFECTIVE DATE. 

20 Except as otherwise provided in this subtitle, the 

21 amendments made by sections 1221 through section 1253 

22 and 1256 and subsections (a), (b), and (c)(1) of section 

23 1254 shall take effect on the transfer date. 


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1 Subtitle D—Further Improvements 

2 to the Regulation of Bank Hold3 ing Companies and Depository 

4 Institutions 

5 SEC. 1301. TREATMENT OF INDUSTRIAL LOAN COMPANIES, 

6 SAVINGS ASSOCIATIONS, AND CERTAIN 

7 OTHER COMPANIES UNDER THE BANK HOLD8 ING COMPANY ACT. 

9 (a) DEFINITIONS.—Section 2 of the Bank Holding 

10 Company Act of 1956 (12 U.S.C. 1841) is amended— 

11 (1) by striking subsection (a)(1) and inserting 

12 the following: 

13 ‘‘(a) BANK HOLDING COMPANY.— 

14 ‘‘(1) IN GENERAL.—Except as provided in para15 graph (5), the term ‘bank holding company’ 

16 means— 

17 ‘‘(A) any company, other than a company 

18 described in section 4(p), which has control over 

19 any bank or over any company that is or be20 comes a bank holding company by virtue of this 

21 Act; and 

22 ‘‘(B) any section 6 holding company estab23 lished by a company described in section 

24 6(a)(1)(C).’’. 


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

2 the following new subparagraph: 

3 ‘‘(G) No company is a bank holding com4 pany by virtue of its ownership or control of a 

5 section 6 holding company or any subsidiary of 

6 a section 6 holding company, so long as the re7 quirements of sections 4(p) and 6 of this Act 

8 are met, as applicable, by the section 6 holding 

9 company;’’; 

10 (3) in subsection (c)(1)(A), by striking ‘‘insured 

11 bank’’ and inserting ‘‘insured depository institu12 tion’’, and by striking ‘‘section 3(h) of the Federal 

13 Deposit Insurance Act’’ and inserting ‘‘section 

14 3(c)(2) of the Federal Deposit Insurance Act’’; 

15 (4) in subsection (c)(2)— 

16 (A) in subparagraph (B), by inserting be17 fore the period the following: ‘‘that is controlled 

18 by a company that is a fraternal beneficiary so19 ciety, as defined in section 501(c)(8) of the In20 ternal Revenue Code of 1986, or a company 

21 that is, together with all of its affiliates on a 

22 consolidated basis, predominantly engaged in 

23 the business of insurance’’; and 

24 (B) in subparagraph (F)(i), by inserting 

25 before the semicolon the following: ‘‘, including 


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1 issuing credit cards and other credit devices (in2 cluding virtual or intangible devices) that func3 tion as credit cards’’; 

4 (C) in subparagraph (F)(v), by inserting 

5 before the semicolon the following: ‘‘, other 

6 than loans that otherwise meet the require7 ments of this subparagraph and are made to 

8 businesses that meet the criteria for a small 

9 business concern to be eligible for business 

10 loans under regulations established by the 

11 Small Business Administration under part 121 

12 of title 13, Code of Federal Regulations’’; and 

13 (D) by striking subparagraph (H) and in14 serting the following: 

15 ‘‘(H) An industrial loan company, indus16 trial bank, or other similar institution which— 

17 ‘‘(i) is an institution organized under 

18 the laws of a State which, on March 5, 

19 1987, had in effect or had under consider20 ation in such State’s legislature a statute 

21 which required or would require such insti22 tution to obtain insurance under the Fed23 eral Deposit Insurance Act; 

24 ‘‘(ii) either— 


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1 ‘‘(I) does not accept demand de2 posits that the depositor may with3 draw by check or similar means for 

4 payment to third parties; 

5 ‘‘(II) has total assets of less than 

6 $100,000,000; or 

7 ‘‘(III) the control of which is not 

8 acquired by any company after Au9 gust 10, 1987; 

10 ‘‘(iii) predominantly provides financial 

11 products and services to current and 

12 former members of the military and their 

13 families; and 

14 ‘‘(iv) is controlled by a savings and 

15 loan holding company, as defined in sec16 tion 10(a) of the Home Owners’ Loan Act. 

17 This subparagraph shall cease to apply to any 

18 institution which permits any overdraft (includ19 ing any intraday overdraft), or which incurs 

20 any such overdraft in such institution’s account 

21 at a Federal Reserve bank, on behalf of an af22 filiate, if such overdraft is not the result of an 

23 inadvertent computer or accounting error that 

24 is beyond the control of both the institution and 

25 the affiliate, or that is otherwise permissible for 


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1 a bank controlled by a company described in 

2 section 1843(f)(1) of this title.’’; and 

3 (5) by adding at the end the following new sub4 section: 

5 ‘‘(r) SECTION 6 HOLDING COMPANIES.—The term 

6 ‘section 6 holding company’ means a company that is re7 quired to be established as an intermediate holding com8 pany under section 6 of this Act.’’. 

9 (b) NONBANKING ACTIVITIES EXCEPTIONS.—Section 

10 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 

11 1843) is amended— 

12 (1) in subsection (f)(1)(B) by striking ‘‘for pur13 poses of this Act’’ and inserting ‘‘for purposes of 

14 section 4(a)’’; and 

15 (2) in subsection (f)(2)— 

16 (A) in subparagraph (B)(ii), by striking ‘‘; 

17 or’’ and inserting a semicolon; 

18 (B) in subparagraph (C), by striking the 

19 period and inserting ‘‘; or’’; and 

20 (C) by adding at the end the following new 

21 subparagraph: 

22 ‘‘(D) such company fails to— 

23 ‘‘(i) establish and register a section 6 

24 holding company pursuant to section 6 of 


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1 this Act within 180 days after the adoption 

2 of rules required by this section; and 

3 ‘‘(ii) conduct all such activities which 

4 are permissible for a financial holding com5 pany, as determined under section 4(k), 

6 through such section 6 holding company, 

7 other than— 

8 ‘‘(I) internal financial activities 

9 conducted for such company or any 

10 affiliate, including, but not limited to 

11 internal treasury, investment, and em12 ployee benefit functions, provided that 

13 with respect to any internal financial 

14 activity engaged in for the company or 

15 an affiliate and a nonaffiliate during 

16 the year prior to date of enactment, 

17 the company (or an affiliate not a 

18 subsidiary of the section 6 company) 

19 may continue to engage in that activ20 ity so long as the at least two-thirds 

21 of the assets or two-thirds of the reve22 nues generated from the activity are 

23 from or attributable to the company 

24 or an affiliate, subject to review by 

25 the Board to determine whether enVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00233 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 gaging in such activity presents undue 

2 risk to the section 6 company or 

3 undue systemic risk; and 

4 ‘‘(II) financial activities involving 

5 the provision of credit for the pur6 chase or lease of products or services 

7 from an affiliate or for the purchase 

8 or lease of products produced by an 

9 affiliate of such section 6 holding 

10 company that is not a subsidiary of 

11 such section six holding company, in 

12 accordance with regulations prescribed 

13 by or orders issued by the Board, pur14 suant to section 6 of this Act.’’; and 

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

16 subsections: 

17 ‘‘(p) CERTAIN COMPANIES NOT SUBJECT TO THIS

18 ACT.— 

19 ‘‘(1) IN GENERAL.—Except as provided in para20 graphs (6) and (7), any company which— 

21 ‘‘(A) was— 

22 ‘‘(i) on the date of enactment of the 

23 Financial Stability Improvement Act of 

24 2009, a unitary savings and loan holding 

25 company that continues to control not 


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1 fewer than one savings association that it 

2 controlled on May 4, 1999, or that it ac3 quired pursuant to an application pending 

4 before the Office of Thrift Supervision on 

5 or before that date, and that became a 

6 bank for purposes of the Bank Holding 

7 Company Act as a result of the enactment 

8 of section 1301(a)(3) of the Financial Sta9 bility Improvement Act of 2009; or 

10 ‘‘(ii) on November 23, 2009— 

11 ‘‘(I) controlled an institution 

12 which became a bank as a result of 

13 the enactment of section 

14 1301(a)(4)(B) of the Financial Sta15 bility Improvement Act of 2009; 

16 ‘‘(II) had an application pending, 

17 or approved but not executed, before 

18 the Federal Deposit Insurance Cor19 poration, that, if approved, would per20 mit the applicant to control an indus21 trial loan company, industrial bank, or 

22 other similar institution— 

23 ‘‘(aa) that is a federally in24 sured, State-chartered depository 

25 institution; 


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1 ‘‘(bb) that is organized 

2 under the laws of a State that on 

3 March 5, 1987, had in effect, or 

4 had under consideration in the 

5 legislature of such State, a stat6 ute that required such institution 

7 to obtain insurance under the 

8 Federal Deposit Insurance Act; 

9 and 

10 ‘‘(cc) that— 

11 ‘‘(AA) does not accept 

12 demand deposits that the 

13 depositor may withdraw by 

14 check or similar means for 

15 payment to third parties; or 

16 ‘‘(BB) maintains total 

17 assets of less than 

18 $100,000,000; or 

19 ‘‘(III) controlled an institution it 

20 has continuously controlled since 

21 March 5, 1987, which became a bank 

22 as a result of the enactment of the 

23 Competitive Equality Banking Act of 

24 1987, pursuant to subsection (f); 

25 ‘‘(B) was not on June 30, 2009— 


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1 ‘‘(i) a bank holding company; or 

2 ‘‘(ii) subject to the Bank Holding 

3 Company Act of 1956 by reason of section 

4 8(a) of the International Banking Act of 

5 1978 (12 U.S.C. 3106(a)); and 

6 ‘‘(C) on June 30, 2009, directly or indi7 rectly controlled shares or engaged in activities 

8 that did not, on the day before the date of en9 actment of the Financial Stability Act of 2009, 

10 comply with the activity or investment restric11 tions on financial holding companies in section 

12 4 in accordance with regulations prescribed by 

13 the Board, 

14 shall not be treated as a bank holding company for 

15 purposes of this Act solely by virtue of such com16 pany’s control of such institution and control of a 

17 section 6 holding company established pursuant to 

18 section 6. 

19 ‘‘(2) LOSS OF EXEMPTION.—A company de20 scribed in paragraph (1) shall no longer qualify for 

21 the exemption provided under that paragraph if— 

22 ‘‘(A) such company fails to— 

23 ‘‘(i) establish and register a section 6 

24 holding company pursuant to section 6 of 

25 this Act within 180 days after adoption of 


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1 rules required by this section, unless the 

2 Board grants an extension of such period 

3 for compliance which shall not exceed 180 

4 additional days; and 

5 ‘‘(ii) maintain a section 6 holding 

6 company in compliance with all the re7 quirements for a section 6 holding com8 pany under section 6 of this Act. 

9 ‘‘(B) such company directly or indirectly 

10 (including through the section 6 holding com11 pany it must form pursuant to this subsection 

12 and section 6 of this Act) acquires control of an 

13 additional bank or insured depository institu14 tion after June 30, 2009, provided that such 

15 company directly or indirectly (including 

16 through the section 6 holding company) may 

17 acquire— 

18 ‘‘(i) shares held as a bona fide fidu19 ciary (whether with or without the sole dis20 cretion to vote such shares); 

21 ‘‘(ii) shares held by any person as a 

22 bona fide fiduciary solely for the benefit of 

23 employees of either the company described 

24 in paragraph (1) or any subsidiary of that 


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1 company and the beneficiaries of those em2 ployees; 

3 ‘‘(iii) shares held temporarily pursu4 ant to an underwriting commitment in the 

5 normal course of an underwriting business; 

6 ‘‘(iv) shares held in an account solely 

7 for trading purposes; 

8 ‘‘(v) shares over which no control is 

9 held other than control of voting rights ac10 quired in the normal course of a proxy so11 licitation; 

12 ‘‘(vi) loans or other accounts receiv13 able acquired from an insured depository 

14 institution in the normal course of busi15 ness; 

16 ‘‘(vii) shares or assets acquired in se17 curing or collecting a debt previously con18 tracted in good faith, during the 2-year pe19 riod beginning on the date of such acquisi20 tion or for such additional time (not ex21 ceeding 3 years) as the Board may permit 

22 if the Board determines that such an ex23 tension will not be detrimental to the pub24 lic interest; 


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1 ‘‘(viii) shares or assets acquired di2 rectly or indirectly by a depository institu3 tion controlled by such company in a 

4 transaction involving an insured depository 

5 institution for which the Federal Deposit 

6 Insurance Corporation has been appointed 

7 as receiver or which has been found to be 

8 in danger of default (as defined in section 

9 3 of the Federal Deposit Insurance Act) by 

10 the appropriate Federal or State authority; 

11 ‘‘(ix) shares or assets of another in12 dustrial loan company meeting the require13 ments of this Act if such company continu14 ously controlled an industrial loan com15 pany since the date of enactment of the Fi16 nancial Stability Improvement Act of 

17 2009; and 

18 ‘‘(x) shares or assets of a savings as19 sociation acquired directly or indirectly by 

20 the savings association controlled by such 

21 company if such company continuously 

22 controlled a savings association since the 

23 date of enactment of the Financial Sta24 bility Improvement Act of 2009; 


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1 ‘‘(C)(i) the section 6 holding company re2 quired to be established by such company, or 

3 any subsidiary bank of such company undergoes 

4 a change in control after the date of enactment 

5 of the Financial Stability Improvement Act of 

6 2009, other than— 

7 ‘‘(I) the merger or whole acquisition 

8 of such parent company in a bona fide 

9 merger or acquisition (as shall be deter10 mined by the Board, which is authorized to 

11 find that a transaction is not a bona fide 

12 merger or acquisition and thus results in 

13 the loss of exemption), with a company 

14 that is predominantly engaged in activities 

15 not permissible for a financial holding com16 pany pursuant to section 4(k); 

17 ‘‘(II) a change of control of an indus18 trial bank, its section 6 holding company, 

19 or any entity that directly or indirectly 

20 controls the industrial bank, in a trans21 action other than a merger described in 

22 subclause (I), by an acquiring company 

23 that is predominately engaged in activities 

24 not permissible for a financial holding com25 pany pursuant to subsection (k), if— 


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1 ‘‘(aa) the transaction is approved 

2 by the appropriate Federal banking 

3 agency and the Board; and 

4 ‘‘(bb) the industrial bank does 

5 not thereafter establish a domestic 

6 branch as defined in section 3(o) of 

7 the Federal Deposit Insurance Act 

8 (12 U.S.C. 1813(o)); 

9 ‘‘(III) an inadvertent acquisition of 

10 control, as determined by the Board, if 

11 such inadvertent acquisition of control is 

12 reversed or rectified within 180 days of its 

13 discovery; or 

14 ‘‘(IV) the acquisition of additional 

15 shares by a company that owned or con16 trolled 7.5 percent or more of any class of 

17 such parent company’s outstanding voting 

18 stock on or before June 30, 2009, and con19 tinuously owned or controlled at least such 

20 7.5 percent since June 30, 2009. 

21 ‘‘(ii) Nothing in this subparagraph shall be 

22 construed as preventing the Board from requir23 ing compliance with this subsection, section 6 

24 or the requirements of the Change in Bank 

25 Control Act, as applicable to a company that is 


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1 permitted to acquire control without loss of the 

2 exemption in this subsection 4(p)(2); or 

3 ‘‘(D) any subsidiary bank of such company 

4 engages in any activity after the date of enact5 ment of the Financial Stability Improvement 

6 Act of 2009 which would have caused such in7 stitution to be a bank (as defined in section 

8 2(c) of this Act, as in effect before such date) 

9 if such activities had been engaged in before 

10 such date. 

11 ‘‘(3) DIVESTITURE IN CASE OF LOSS OF EX12 EMPTION.—If any company described in paragraph 

13 (1) fails to qualify for the exemption provided under 

14 paragraph (1) by operation of paragraph (2), such 

15 exemption shall cease to apply to such company and 

16 such company shall divest control of each bank it 

17 controls before the end of the 180-day period begin18 ning on the date on which the company receives no19 tice from the Board that the company has failed to 

20 continue to qualify for such exemption, unless, be21 fore the end of such 180-day period, the company 

22 has— 

23 ‘‘(A) either— 

24 ‘‘(i) corrected the condition or ceased 

25 the activity that caused the company to 


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1 fail to continue to qualify for the exemp2 tion; or 

3 ‘‘(ii) submitted a plan to the Board 

4 for approval to cease the activity or correct 

5 the condition in a timely manner (which 

6 shall not exceed 1 year); and 

7 ‘‘(B) implemented procedures that are rea8 sonably adapted to avoid the reoccurrence of 

9 such condition or activity. 

10 ‘‘(4) SUBSECTION CEASES TO APPLY UNDER

11 CERTAIN CIRCUMSTANCES.—This subsection shall 

12 cease to apply to any company described in para13 graph (1) if such company— 

14 ‘‘(A) registers as a bank holding company 

15 under section 2(a) of this Act; 

16 ‘‘(B) immediately upon such registration, 

17 complies with all of the requirements of this 

18 chapter, and regulations prescribed by the 

19 Board pursuant to this chapter, including the 

20 nonbanking restrictions of this section; and 

21 ‘‘(C) does not, at the time of such registra22 tion, control banks in more than one State, the 

23 acquisition of which would be prohibited by sec24 tion 3(d) of this Act if an application for such 


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1 acquisition by such company were filed under 

2 section 3(a) of this Act. 

3 ‘‘(5) INFORMATION REQUIREMENT.—Each com4 pany described in paragraph (1) shall, within 60 

5 days after the date of enactment of the Financial 

6 Stability Improvement Act of 2009, provide the 

7 Board with the name and address of such company, 

8 the name and address of each bank such company 

9 controls, and a description of each such bank’s ac10 tivities. 

11 ‘‘(6) EXAMINATIONS AND REPORTS.—The 

12 Board may, from time to time, examine a company 

13 described in paragraph (1) or a bank controlled by 

14 such a company, and may require reports under 

15 oath from a company described in paragraph (1), 

16 and appropriate officers or directors of such com17 pany, in each case solely for purposes of assuring 

18 compliance with the provisions of this subsection and 

19 enforcing such compliance. 

20 ‘‘(7) LIMITED ENFORCEMENT.— 

21 ‘‘(A) IN GENERAL.—In addition to any 

22 other power of the Board, the Board may en23 force compliance with the provisions of this sub24 section which are applicable to any company de25 scribed in paragraph (1), and any bank conVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00245 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 trolled by such company, under section 8 of the 

2 Federal Deposit Insurance Act, and such com3 pany or bank shall be subject to such section 

4 (for such purposes) in the same manner and to 

5 the same extent as if such company were a 

6 bank holding company. 

7 ‘‘(B) APPLICATION OF OTHER ACT.—Any 

8 violation of this subsection by any company de9 scribed in paragraph (1) or any bank controlled 

10 by such a company, may also be treated as a 

11 violation of the Federal Deposit Insurance Act 

12 for purposes of subparagraph (A). 

13 ‘‘(C) NO EFFECT ON OTHER AUTHOR14 ITY.—No provision of this paragraph shall be 

15 construed as limiting any authority of the 

16 Board or any other Federal agency under any 

17 other provision of law. 

18 ‘‘(8) UNITARY SAVINGS AND LOAN HOLDING

19 COMPANY DEFINED.—For purposes of this sub20 section, the term ‘unitary savings and loan holding 

21 company’ means a company that was a savings and 

22 loan holding company on May 4, 1999 (as then de23 fined), or that became a savings and loan holding 

24 company pursuant to an application pending before 


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1 the Office of Thrift Supervision on or before that 

2 date, and— 

3 ‘‘(A) that controls— 

4 ‘‘(i) only 1 savings association; or 

5 ‘‘(ii) more than 1 savings association, 

6 if all, or all but 1, of the savings associa7 tion subsidiaries of such company were ini8 tially acquired by the company pursuant to 

9 a supervisory transaction under section 

10 1823(c), 1823(i), or 1823(k) of this title, 

11 or section 408(m) of the National Housing 

12 Act (12 U.S.C. 1730a(m)); 

13 ‘‘(B) all of the savings association subsidi14 aries of such company are qualified thrift lend15 ers (as determined under section 10 of the 

16 Home Owners’ Loan Act); and 

17 ‘‘(C) that continues to control not fewer 

18 than 1 savings association that it controlled on 

19 May 4, 1999, or that it acquired pursuant to an 

20 application pending before the Office of Thrift 

21 Supervision on or before that date. 

22 ‘‘(q) PRESERVATION OF CERTAIN SAVINGS AND

23 LOAN HOLDING COMPANY AUTHORITIES.—Notwith24 standing subsection (a), a company that was a savings and 

25 loan holding company on June 30, 2009, that became a 


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1 bank holding company by operation of section 1301 of the 

2 Financial Stability Improvement Act of 2009 may con3 tinue to engage in the following activities in which such 

4 company was continuously engaged on June 30, 2009, 

5 through the day of enactment of the Financial Stability 

6 Improvement Act of 2009: 

7 ‘‘(1) Furnishing or performing management 

8 services for a savings association subsidiary of such 

9 company. 

10 ‘‘(2) Conducting an insurance agency or escrow 

11 business. 

12 ‘‘(3) Holding, managing, or liquidating assets 

13 owned or acquired from a savings association sub14 sidiary of such company. 

15 ‘‘(4) Holding or managing properties used or 

16 occupied by a savings association subsidiary of such 

17 company. 

18 ‘‘(5) Acting as trustee under deed of trust. 

19 ‘‘(6) Any other activity in which multiple sav20 ings and loan holding companies were authorized (by 

21 regulation) to directly engage on March 5, 1987.’’. 

22 (c) SECTION 6 HOLDING COMPANIES.—The Bank 

23 Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) 

24 is amended by inserting after section 5 the following new 

25 section: 


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1 ‘‘SEC. 6. SPECIAL-PURPOSE HOLDING COMPANIES. 

2 ‘‘(a) ESTABLISHMENT, PURPOSE AND REQUIRE3 MENTS OF SPECIAL PURPOSE HOLDING COMPANIES.— 

4 ‘‘(1) REQUIREMENT.—A special purpose hold5 ing company (hereafter in this section referred to as 

6 a ‘section 6 holding company’) shall be established 

7 and maintained by a company— 

8 ‘‘(A) described in section 4(f)(1) as re9 quired by section 4(f)(2)(D) of this Act; 

10 ‘‘(B) described in section 4(p)(1) as re11 quired by section 4(p)(2)(A) of this Act; or 

12 ‘‘(C) that— 

13 ‘‘(i) is subject to stricter prudential 

14 standards under section 1103 of the Fi15 nancial Stability Improvement Act of 

16 2009; 

17 ‘‘(ii) is not— 

18 ‘‘(I) a bank holding company; or 

19 ‘‘(II) subject to the Bank Hold20 ing Company Act by reason of section 

21 8(a) of the International Banking Act 

22 of 1978 (12 U.S.C. 3106(a)); and 

23 ‘‘(iii) directly or indirectly controlled 

24 shares or engaged in activities that did 

25 not, on the date the company is first sub26 ject to stricter prudential standards pursuVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00249 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ant to subtitle B of the Financial Stability 

2 Improvement Act of 2009, comply with the 

3 activity or investment restrictions on finan4 cial holding companies in section 4 in ac5 cordance with regulations prescribed by the 

6 Board. 

7 ‘‘(2) PURPOSE.— 

8 ‘‘(A) The purpose of this section is to pro9 vide for consolidated supervision of certain fi10 nancial companies by the Board. 

11 ‘‘(B) A company that is required to form 

12 a section a section 6 holding company shall con13 duct all such activities which are permissible for 

14 a financial holding company, as determined 

15 under section 4(k), through such section 6 hold16 ing company, other than— 

17 ‘‘(i) internal financial activities con18 ducted for such company or any affiliate, 

19 including, but not limited to internal treas20 ury, investment, and employee benefit 

21 functions, provided that with respect to 

22 any internal financial activity engaged in 

23 for the company or an affiliate and a non24 affiliate during the year prior to date of 

25 enactment, the company (or an affiliate 


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1 not a subsidiary of the section 6 company) 

2 may continue to engage in that activity so 

long as the at least 2⁄3 of the assets or 2 3 ⁄3

4 of the revenues generated from the activity 

5 are from or attributable to the company or 

6 an affiliate, subject to review by the Board 

7 to determine whether engaging in such ac8 tivity presents undue risk to the section 6 

9 company or undue systemic risk; and 

10 ‘‘(ii) financial activities involving the 

11 provision of credit for the purchase or 

12 lease of products or services from an affil13 iate or for the purchase or lease of prod14 ucts produced by an affiliate of such sec15 tion 6 holding company that is not a sub16 sidiary of such section 6 holding company, 

17 in accordance with regulations prescribed 

18 by or orders issued by the Board, pursuant 

19 to section 6 of this Act. 

20 ‘‘(C) A section 6 holding company shall be 

21 prohibited from conducting any nonbanking ac22 tivities or investing in any nonbank companies 

23 other than those permissible for a financial 

24 holding company under sections 3 and 4, unless 

25 the Board specifically determines otherwise in 


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1 accordance with paragraph (6), and provided 

2 that, for purposes of this paragraph, a company 

3 designated as a section 6 holding company and 

4 described under paragraph (4) (or any per5 mitted successor) is not prohibited from con6 tinuing to engage in any impermissible activity 

7 in which it was engaged continuously during the 

8 6 months prior to the date of enactment, from 

9 owning any shares or types of assets related to 

10 such activity, or continuing to own such other 

11 shares or assets that it owned on the date of 

12 enactment. 

13 ‘‘(3) REGISTRATION.— 

14 ‘‘(A) A section 6 holding company required 

15 to be established by a company described in 

16 paragraph (1)(A) shall be established, and such 

17 company shall register with the Board as a 

18 bank holding company, pursuant to the require19 ments in section 4(f). 

20 ‘‘(B) A section 6 holding company required 

21 to be established by a company described in 

22 paragraph (1)(B) shall be established, and such 

23 company shall register with the Board as a 

24 bank holding company, pursuant to the require25 ments in section 4(p). 


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1 ‘‘(C) A section 6 holding company required 

2 to be established by a company described in 

3 paragraph (1)(C) shall be— 

4 ‘‘(i) established, and such company 

5 shall register with the Board within 90 

6 days after such company or such com7 pany’s parent holding company has been 

8 notified by the Board that such company is 

9 subject to stricter prudential standards 

10 under section 1103 of the Financial Sta11 bility Improvement Act of 2009, unless the 

12 Board grants an extension of such period 

13 for compliance which shall not exceed 180 

14 additional days; 

15 ‘‘(ii) subject to the provisions of this 

16 Act and other Federal law as provided in 

17 section 1103(g) of the Financial Stability 

18 Improvement Act of 2009; and 

19 ‘‘(iii) subject to the authority of the 

20 Board to enforce compliance with the pro21 visions of this section under section 8 of 

22 the Federal Deposit Insurance Act in the 

23 same manner and to the same extent as if 

24 such company were a bank holding com25 pany. 


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1 ‘‘(4) RULE OF CONSTRUCTION.—For purposes 

2 of this section, designation of an already established 

3 intermediate holding company that will serve as the 

4 section 6 holding company shall satisfy the require5 ment to establish a section 6 holding company, pro6 vided that such existing intermediate holding com7 pany complies with all other provisions applicable to 

8 a section 6 holding company. 

9 ‘‘(5) LIMITATIONS ON AUTHORITY OF COMMER10 CIAL PARENT.—A company that is not a bank hold11 ing company or treated as a bank holding company 

12 pursuant to section 8(a) of the International Bank 

13 Act of 1978 that has been notified that it is a finan14 cial holding company subject to stricter standards, 

15 pursuant to section 1103 of the Financial Stability 

16 Improvement Act of 2009, shall— 

17 ‘‘(A) not be deemed to be, or treated as, a 

18 bank holding company, solely because of its 

19 ownership or control of a section 6 holding com20 pany; and 

21 ‘‘(B) not be subject to this Act, except for 

22 such provisions as are explicitly made applicable 

23 in this section. 

24 ‘‘(6) BOARD AUTHORITY.— 


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1 ‘‘(A) RULES AND EXEMPTIONS.—In addi2 tion to any other authority of the Board, the 

3 Board shall prescribe rules and regulations or 

4 issue orders providing for the establishment and 

5 registration of section 6 holding companies and 

6 shall provide exemptions from the requirements 

7 of this Act (including an order in response to 

8 a request from an affected company), including, 

9 but not limited to, exemptions— 

10 ‘‘(i) with respect to the requirement to 

11 conduct such activities which are financial 

12 in nature, as determined under section 

13 4(k), other than financial activities con14 ducted for such company or any affiliate, 

15 including any financial activity engaged in 

16 for both the company or an affiliate and a 

17 nonaffiliate as permitted under section 

18 4(f)(2)(D) or section 6(a)(2)(B) and finan19 cial activities involving the provision of 

20 credit for the purchase or lease of products 

21 or services from an affiliate or for the pur22 chase or lease of products produced by an 

23 affiliate of such section 6 holding company 

24 that is not a subsidiary of such section 6 

25 holding company, through such section 6 


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1 holding company, if the Board makes a 

2 finding that such exemption— 

3 ‘‘(I)(aa) would facilitate the ex4 tension of credit to individuals, house5 holds, and businesses; or 

6 ‘‘(bb) would allow for greater ef7 ficiency, improved customer service, or 

8 other public benefits in the conduct of 

9 financial activities by affected compa10 nies; 

11 ‘‘(II) would not threaten the 

12 safety and soundness of the section 6 

13 holding company, or of any insured 

14 depository institution or other sub15 sidiary of the section 6 holding com16 pany; 

17 ‘‘(III) would not increase sys18 temic risk or threaten the stability of 

19 the overall financial system; 

20 ‘‘(IV) would not, as applied to 

21 the activities that are the subject of 

22 the rule, order or request, result in 

23 substantially lessening competition, or 

24 to tend to create a monopoly, or which 

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1 straint of trade, unless the Board 

2 finds that the anticompetitive effects 

3 are outweighed in the public interest 

4 by the probable effect of the exemp5 tion in meeting the convenience and 

6 needs of the community to be served; 

7 and 

8 ‘‘(V) would meet the financial 

9 and managerial standards for finan10 cial holding companies described in 

11 subparagraphs (A) and (B) of section 

12 4(j)(4); and 

13 ‘‘(ii) from the affiliate transaction re14 quirements of subsection (b), including but 

15 not limited to exemptions that would facili16 tate extensions of credit to unaffiliated 

17 persons for the personal, household, or 

18 business purposes of such unaffiliated per19 sons, unless the Board makes a finding 

20 that such exemption— 

21 ‘‘(I) is not consistent with the 

22 purposes of section 23A and section 

23 23B of the Federal Reserve Act; 

24 ‘‘(II) would threaten the safety 

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1 ing company, or any insured deposi2 tory institution or other subsidiary of 

3 the section 6 holding company; 

4 ‘‘(III) would increase systemic 

5 risk or threaten the stability of the 

6 overall financial system; 

7 ‘‘(IV) would not, as applied to 

8 the activities that are the subject of 

9 the rule, order or request result in 

10 substantially lessening competition, or 

11 to tend to create a monopoly, or which 

12 in any other manner would be in re13 straint of trade, unless the Board 

14 finds that the anticompetitive effects 

15 are outweighed in the public interest 

16 by the probable effect of the exemp17 tion in meeting the convenience and 

18 needs of the community to be served; 

19 or 

20 ‘‘(V) would permit an unfair, de21 ceptive, abusive, or unsafe-and-un22 sound act or practice. 

23 ‘‘(B) PARENT COMPANY REPORTS.—The 

24 Board may, from time to time, require reports 

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1 tion 6 holding company, and appropriate offi2 cers or directors of such company, solely for 

3 purposes of ensuring compliance with the provi4 sions of this section (including assessing the 

5 company’s ability to serve as a source of finan6 cial strength pursuant to subsection (g)) and 

7 enforcing such compliance. 

8 ‘‘(C) LIMITED PARENT COMPANY EN9 FORCEMENT.— 

10 ‘‘(i) IN GENERAL.—In addition to any 

11 other power of the Board, the Board may 

12 enforce compliance with the provisions of 

13 this subsection which are applicable to any 

14 company described in paragraph (1), and 

15 any bank controlled by such company, 

16 under section 8 of the Federal Deposit In17 surance Act and such company or bank 

18 shall be subject to such section (for such 

19 purposes) in the same manner and to the 

20 same extent as if such company were a 

21 bank holding company. 

22 ‘‘(ii) APPLICATION OF OTHER ACT.— 

23 Any violation of this subsection by any 

24 company that controls a section 6 holding 

25 company or any bank controlled by such a 


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1 company, may also be treated as a viola2 tion of the Federal Deposit Insurance Act 

3 for purposes of clause (i). 

4 ‘‘(iii) NO EFFECT ON OTHER AUTHOR5 ITY.—No provision of this subparagraph 

6 shall be construed as limiting any author7 ity of the Board or any other Federal 

8 agency under any other provision of law. 

9 ‘‘(b) RESTRICTIONS ON AFFILIATE TRANS10 ACTIONS.— 

11 ‘‘(1) SECTION 23A AND 23B APPLICABILITY.— 

12 ‘‘(A) IN GENERAL.—Transactions between 

13 a section 6 holding company (or any nonbank 

14 subsidiary thereof) and any affiliate not con15 trolled by the section 6 holding company shall 

16 be subject to the restrictions and limitations 

17 contained in section 23A and section 23B of the 

18 Federal Reserve Act as if the section 6 holding 

19 company were a member bank, provided, that a 

20 transaction that otherwise would be a covered 

21 transaction shall not be a covered transaction if 

22 the transaction is in connection with the bona 

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1 ject to review under section 23A(f)(1) of such 

2 Act. 

3 ‘‘(B) COVERED TRANSACTIONS.—A deposi4 tory institution controlled by a section 6 holding 

5 company may not engage in a covered trans6 action (as defined in section 23A(b)(7) of the 

7 Federal Reserve Act) with any affiliate that is 

8 not the section 6 holding company or a sub9 sidiary of the section 6 holding company; pro10 vided that, for purposes of the prohibition, a 

11 transaction that otherwise would be a covered 

12 transaction shall not be a covered transaction if 

13 the transaction is in connection with the bona 

14 fide acquisition or lease by an unaffiliated per15 son of assets, goods or services, but shall be 

16 subject to review under section 23A(f)(1) of the 

17 Federal Reserve Act. 

18 ‘‘(2) RULE OF CONSTRUCTION.—No provision 

19 of this subsection shall be construed as exempting 

20 any subsidiary insured depository institution of a 

21 section 6 holding company from compliance with sec22 tion 23A or 23B of the Federal Reserve Act with re23 spect to each affiliate of such institution (as defined 

24 in section 23A or 23B of the Federal Reserve Act), 

25 including any affiliate that is the section 6 holding 


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1 company or subsidiary of the section 6 holding com2 pany. 

3 ‘‘(c) TYING PROVISIONS.—A company that directly or 

4 indirectly controls a section 6 holding company shall be— 

5 ‘‘(1) treated as a bank holding company for 

6 purposes of section 106 of the Bank Holding Com7 pany Act Amendments of 1970 and section 22(h) of 

8 the Federal Reserve Act and any regulation pre9 scribed under any such section; and 

10 ‘‘(2) subject to the restrictions of section 106 of 

11 the Bank Holding Company Act Amendments of 

12 1970, in connection with any transaction involving 

13 the products or services of such company or affiliate 

14 and those of a bank affiliate, as if such company or 

15 affiliate were a bank and such bank were a sub16 sidiary of a bank holding company. 

17 ‘‘(d) FINANCIAL HOLDING COMPANY REQUIRE18 MENTS.—A section 6 holding company shall be subject 

19 to— 

20 ‘‘(1) the conditions for engaging in expanded fi21 nancial activities in section 4(l); and 

22 ‘‘(2) the provisions applicable to financial hold23 ing companies that fail to meet certain requirements 

24 in section 4(m). 


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1 ‘‘(e) INDEPENDENCE OF SECTION 6 HOLDING COM2 PANY.— 

3 ‘‘(1) No less than 25 percent of the members 

4 of the board of directors of a section 6 holding com5 pany, and each subsidiary of a section 6 holding 

6 company, shall be independent of the parent com7 pany of the section 6 holding company and any sub8 sidiary of such parent company. For purposes of this 

9 subsection, a director shall be independent of the 

10 parent company if such person is not currently serv11 ing, and has not within the previous 2-year period 

12 served, as a director, officer, or employee of any af13 filiate of the section 6 holding company that is not 

14 a subsidiary of the section 6 holding company. 

15 ‘‘(2) No executive officer of a section 6 holding 

16 company or any subsidiary of a section 6 holding 

17 company may serve as a director, officer, or em18 ployee of an affiliate of the section 6 holding com19 pany that is not a subsidiary of the section 6 holding 

20 company. 

21 ‘‘(3) The Board shall issue regulations that re22 quire effective legal and operational separation of 

23 the functions of a section 6 holding company from 

24 its affiliates that are not subsidiaries of such section 

25 6 holding company, provided, however that such 


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1 rules shall not require operational separation of in2 ternal functions including, but not limited to, human 

3 resources management, employee benefit plans, and 

4 information technology. 

5 ‘‘(f) SOURCE OF STRENGTH.—A company that di6 rectly or indirectly controls a section 6 holding company 

7 shall serve as a source of financial strength to its sub8 sidiary section 6 holding company.’’. 

9 SEC. 1302. REGISTRATION OF CERTAIN COMPANIES AS 

10 BANK HOLDING COMPANIES. 

11 Section 5 of the Bank Holding Company Act of 1956 

12 (12 U.S.C. 1844) is amended by inserting at the end the 

13 following new subsection: 

14 ‘‘(h) CONVERSION TO BANK HOLDING COMPANY BY

15 OPERATION OF LAW.— 

16 ‘‘(1) CONVERSION BY OPERATION OF LAW.—A 

17 company that, on the day before the date of enact18 ment of the Financial Stability Improvement Act of 

19 2009, was not a bank holding company but which, 

20 by reason of section 1301 of the Financial Stability 

21 Improvement Act of 2009 becomes a bank holding 

22 company, other than a section 6 holding company, 

23 by operation of law, shall register as a bank holding 

24 company with the Board in accordance with section 


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1 5(a) within 90 days of the date of enactment of that 

2 Act. 

3 ‘‘(2) COMPLIANCE WITH BANK HOLDING COM4 PANY ACT.—With respect to any company described 

5 in paragraph (1), the Board may grant temporary 

6 exemptions or provide other appropriate temporary 

7 relief to permit such company to implement meas8 ures necessary to comply with the requirements 

9 under the Bank Holding Company Act.’’. 

10 SEC. 1303. REPORTS AND EXAMINATIONS OF BANK HOLD11 ING COMPANIES; REGULATION OF FUNCTION12 ALLY REGULATED SUBSIDIARIES. 

13 (a) REPORTS OF BANK HOLDING COMPANIES.—Sec14 tions 5(c)(1)(A) and (B) of the Bank Holding Company 

15 Act of 1956 (12 U.S.C. 1844(c)(1)(A) and (B)) are 

16 amended to read as follows: 

17 ‘‘(A) IN GENERAL.—The Board, from time 

18 to time, may require a bank holding company 

19 and any subsidiary of such company to submit 

20 reports under oath that the Board determines 

21 are necessary or appropriate for the Board to 

22 carry out the purposes of this chapter, prevent 

23 evasions thereof, and monitor compliance by the 

24 company or subsidiary with the applicable pro25 visions of law. 


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1 ‘‘(B) USE OF EXISTING REPORTS.— 

2 ‘‘(i) IN GENERAL.—The Board shall, 

3 to the fullest extent possible, use— 

4 ‘‘(I) reports that a bank holding 

5 company or any subsidiary of such 

6 company has been required to provide 

7 to other Federal or State regulatory 

8 agencies; 

9 ‘‘(II) information that is other10 wise required to be reported publicly; 

11 and 

12 ‘‘(III) externally audited financial 

13 statements. 

14 ‘‘(ii) AVAILABILITY.—A bank holding 

15 company or a subsidiary of such company 

16 shall promptly provide to the Board, at the 

17 request of the Board, a report referred to 

18 in clause (i)(I).’’. 

19 (b) FUNCTIONALLY REGULATED SUBSIDIARY.—Sec20 tion 5(c)(1) of the Bank Holding Company Act of 1956 

21 (12 U.S.C. 1844(c)(1)) is amended by inserting at the end 

22 the following new subparagraph: 

23 ‘‘(C) DEFINITION.—For purposes of this 

24 subsection and section 6, the term ‘functionally 

25 regulated subsidiary’ means any subsidiary 


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1 (other than a depository institution) of a bank 

2 holding company that is— 

3 ‘‘(i) a broker or dealer registered with 

4 the Securities and Exchange Commission 

5 under the Securities Exchange Act of 

6 1934, for which the Securities and Ex7 change Commission is the Federal regu8 latory agency; 

9 ‘‘(ii) an investment company reg10 istered with the Securities and Exchange 

11 Commission under the Investment Com12 pany Act of 1940, for which the Securities 

13 and Exchange Commission is the Federal 

14 regulatory agency; 

15 ‘‘(iii) an investment adviser registered 

16 with the Securities and Exchange Commis17 sion under the Investment Advisers Act of 

18 1940, for which the Securities and Ex19 change Commission is the Federal regu20 latory agency, with respect to the invest21 ment advisory activities of such investment 

22 adviser and activities incidental to such in23 vestment advisory activities; and 

24 ‘‘(iv) a futures commission merchant, 

25 commodity trading advisor, and commodity 


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1 pool operator registered with the Com2 modity Futures Trading Commission 

3 under the Commodity Exchange Act, for 

4 which the Commodity Futures Trading 

5 Commission is the Federal regulatory 

6 agency, with respect to the commodities 

7 activities of such entity and activities inci8 dental to such commodities activities.’’. 

9 (c) EXAMINATIONS OF BANK HOLDING COMPA10 NIES.—Sections 5(c)(2)(A) and (B) of the Bank Holding 

11 Company Act of 1956 (12 U.S.C. 1844(c)(2)(A) and (B)) 

12 are amended to read as follows: 

13 ‘‘(A) IN GENERAL.—The Board may make 

14 examinations of a bank holding company and 

15 any subsidiary of such a company to carry out 

16 the purposes of this chapter, prevent evasions 

17 thereof, and monitor compliance by the com18 pany or subsidiary with applicable provisions of 

19 law. 

20 ‘‘(B) FUNCTIONALLY REGULATED AND DE21 POSITORY INSTITUTION SUBSIDIARIES.—The 

22 Board shall, to the fullest extent possible, use 

23 reports of examination of functionally regulated 

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1 tions made by other Federal or State regulatory 

2 authorities.’’. 

3 (d) REGULATION OF FINANCIAL HOLDING COMPA4 NIES.—Section 5(c)(2) of the Bank Holding Company Act 

5 of 1956 (12 U.S.C. 1844(c)) is amended by striking sub6 paragraphs (C), (D), and (E). 

7 (e) AUTHORITY TO REGULATE FUNCTIONALLY REG8 ULATED SUBSIDIARIES OF BANK HOLDING COMPA9 NIES.—The Bank Holding Company Act of 1956 (12 

10 U.S.C. 1841 et seq.) is amended by striking section 10A 

11 (12 U.S.C. 1848a). 

12 SEC. 1304. REQUIREMENTS FOR FINANCIAL HOLDING COM13 PANIES TO REMAIN WELL CAPITALIZED AND 

14 WELL MANAGED. 

15 Section 4(l)(1) of the Bank Holding Company Act of 

16 1956 (12 U.S.C. 1843(l)(1)) is amended— 

17 (1) in subparagraph (B), by striking ‘‘and’’; 

18 (2) by redesignating subparagraph (C) as sub19 paragraph (D); 

20 (3) by inserting after subparagraph (B) the fol21 lowing new subparagraph: 

22 ‘‘(C) the bank holding company is well 

23 capitalized and well managed; and’’; and 

24 (4) in subparagraph (D) (as so redesignated) 

25 by amending clause (ii) to read as follows: 


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1 ‘‘(ii) a certification that the company 

2 meets the requirements of subparagraphs 

3 (A) through (C).’’. 

4 SEC. 1305. STANDARDS FOR INTERSTATE ACQUISITIONS. 

5 (a) BANK HOLDING COMPANY ACT OF 1956 AMEND6 MENT.—Section 3(d)(1)(A) of the Bank Holding Company 

7 Act of 1956 (12 U.S.C. 1842(d)(1)(A)) is amended— 

8 (1) by striking ‘‘adequately capitalized’’ and in9 serting ‘‘well capitalized’’; and 

10 (2) by striking ‘‘adequately managed’’ and in11 serting ‘‘well managed’’. 

12 (b) FEDERAL DEPOSIT INSURANCE ACT AMEND13 MENT.—Section 44(b)(4)(B) of the Federal Deposit In14 surance Act (12 U.S.C. 1831u(b)(4)(B)) is amended to 

15 read as follows: 

16 ‘‘(B) the responsible agency determines 

17 that the resulting bank will be well capitalized 

18 and well managed upon the consummation of 

19 the transaction.’’. 

20 SEC. 1306. ENHANCING EXISTING RESTRICTIONS ON BANK 

21 TRANSACTIONS WITH AFFILIATES. 

22 (a) Section 23A of the Federal Reserve Act (12 

23 U.S.C. 371c) is amended— 


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1 (1) in subsection (b)(1), by striking subpara2 graph (D) and inserting the following new subpara3 graph: 

4 ‘‘(D) any investment fund with respect to 

5 which a member bank or affiliate thereof is an 

6 investment adviser; and’’; 

7 (2) in subsection (b)(7)(A), by inserting ‘‘(in8 cluding a purchase of assets subject to an agreement 

9 to repurchase)’’ after ‘‘affiliate’’; 

10 (3) in subsection (b)(7)(C), by striking ‘‘, in11 cluding assets subject to an agreement to repur12 chase,’’; 

13 (4) in subsection (b)(7)(D)— 

14 (A) by inserting ‘‘or other debt obliga15 tions’’ after ‘‘acceptance of securities’’; and 

16 (B) by striking ‘‘or’’ after the semicolon; 

17 (5) in subsection (b)(7), by inserting at the end 

18 the following new subparagraphs: 

19 ‘‘(F) any securities borrowing and lending 

20 transactions with an affiliate to the extent that 

21 the transactions create credit exposure of the 

22 member bank to the affiliate; or 

23 ‘‘(G) current and potential future credit 

24 exposure to the affiliate on derivative trans25 actions with the affiliate;’’; 


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1 (6) in subsection (c)(1), by striking ‘‘at the 

2 time of the transaction,’’ and inserting ‘‘at all 

3 times’’; 

4 (7) in subsection (c)— 

5 (A) by striking paragraph (2); 

6 (B) by redesignating paragraphs (3), (4), 

7 and (5) as paragraphs (2), (3), and (4), respec8 tively; 

9 (8) in subsection (c)(3) (as so redesignated by 

10 paragraph (7)), by inserting ‘‘or other debt obliga11 tions’’ after ‘‘securities’’; 

12 (9) in subsection (f)(2), by inserting at the end 

13 the following: ‘‘The Board may not, by regulation or 

14 order, grant an exemption under this section unless 

15 the Board obtains the concurrence of the Chairman 

16 of the Federal Deposit Insurance Corporation.’’; and 

17 (10) in subsection (f)— 

18 (A) by redesignating paragraph (3) as 

19 paragraph (4); and 

20 (B) and inserting after paragraph (2) the 

21 following new paragraph: 

22 ‘‘(3) CONCURRENCE OF THE COMPTROLLER OF

23 THE CURRENCY.—With respect to a transaction or 

24 relationship involving a national bank or Federal 

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1 emption under this section unless the Board obtains 

2 the concurrence of the Comptroller of the Currency 

3 (in addition to obtaining the concurrence of the 

4 Chairman of the Federal Deposit Insurance Cor5 poration under paragraph (2)).’’. 

6 (b) TECHNICAL AND CONFORMING AMENDMENT.— 

7 Section 23B(e) of the Federal Reserve Act (12 U.S.C. 

8 371–1(e)), is amended by inserting at the end the fol9 lowing new paragraph: 

10 ‘‘(3) The Board may not grant an exemption or 

11 exclusion under this section unless the Board ob12 tains the concurrence of the Chairman of the Fed13 eral Deposit Insurance Corporation.’’. 

14 SEC. 1307. ELIMINATING EXCEPTIONS FOR TRANSACTIONS 

15 WITH FINANCIAL SUBSIDIARIES. 

16 Section 23A(e) of the Federal Reserve Act (12 U.S.C. 

17 371c(e)) is amended— 

18 (1) by striking paragraph (3); and 

19 (2) by redesignating paragraph (4) as para20 graph (3). 


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1 SEC. 1308. LENDING LIMITS APPLICABLE TO CREDIT EXPO2 SURE ON DERIVATIVE TRANSACTIONS, RE3 PURCHASE AGREEMENTS, REVERSE REPUR4 CHASE AGREEMENTS, AND SECURITIES 

5 LENDING AND BORROWING TRANSACTIONS. 

6 Section 5200 of the Revised Statutes of the United 

7 States (12 U.S.C. 84) is amended— 

8 (1) in subsection (b)(1), by striking ‘‘shall in9 clude all direct or indirect’’ and all that follows 

10 through ‘‘commitment;’’ and inserting: ‘‘shall in11 clude— 

12 ‘‘(A) all direct or indirect advances of 

13 funds to a person made on the basis of any ob14 ligation of that person to repay the funds or re15 payable from specific property pledged by or on 

16 behalf of the person; 

17 ‘‘(B) to the extent specified by the Comp18 troller of the Currency, such term shall also in19 clude any liability of a national banking associa20 tion to advance funds to or on behalf of a per21 son pursuant to a contractual commitment; and 

22 ‘‘(C) credit exposure to a person arising 

23 from a derivative transaction, repurchase agree24 ment, reverse repurchase agreement, securities 

25 lending transaction, or securities borrowing 


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1 transaction between the national banking asso2 ciation and the person;’’; 

3 (2) in subsection (b)(2) by striking the period 

4 at the end and inserting ‘‘; and’’; 

5 (3) in subsection (b), by inserting after para6 graph (2) the following new paragraph: 

7 ‘‘(3) the term ‘derivative transaction’ means 

8 any transaction that is a contract, agreement, swap, 

9 warrant, note, or option that is based, in whole or 

10 in part, on the value of, any interest in, or any 

11 quantitative measure or the occurrence of any event 

12 relating to, one or more commodities, securities, cur13 rencies, interest or other rates, indices, or other as14 sets.’’; and 

15 (4) in subsection (d), by inserting after para16 graph (2) the following new paragraph: 

17 ‘‘(3) The Comptroller of the Currency shall pre18 scribe rules to administer and carry out the pur19 poses of this section with respect to credit exposures 

20 arising from any derivative transaction, repurchase 

21 agreement, reverse repurchase agreement, securities 

22 lending transaction, or securities borrowing trans23 action. Rules required to be prescribed under this 

24 paragraph (3) shall take effect, in final form, not 


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1 later than 180 days after the date of enactment of 

2 the Financial Stability Improvement Act of 2009.’’. 

3 SEC. 1309. RESTRICTION ON CONVERSIONS OF TROUBLED 

4 BANKS AND THRIFTS. 

5 (a) CONVERSION OF A NATIONAL BANKING ASSOCIA6 TION TO A STATE BANK.—The National Bank Consolida7 tion and Merger Act (12 U.S.C. 215 et seq.) is amended 

8 by redesignating section 7 as section 8 and by inserting 

9 after section 6 the following: 

10 ‘‘SEC. 7. PROHIBITION ON CERTAIN CONVERSIONS. 

11 ‘‘A national bank may not convert to a State bank 

12 during any period of time in which it is subject to a cease 

13 and desist order, memorandum of understanding, or other 

14 enforcement action entered into with or issued by the 

15 Comptroller of the Currency.’’. 

16 (b) CONVERSION OF A STATE BANK TO A NATIONAL

17 BANK.—Section 5154 of the Revised Statutes (12 U.S.C. 

18 35) is amended by adding at the end the following new 

19 sentence: ‘‘The Comptroller of the Currency shall not ap20 prove the conversion of a State bank to a national bank 

21 during any period of time in which the State bank is sub22 ject to a cease and desist order, memorandum of under23 standing, or other enforcement action entered into or 

24 issued by a State bank supervisor, the Federal Deposit 


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1 Insurance Corporation, the Board of Governors of the 

2 Federal Reserve System or a Federal Reserve Bank.’’. 

3 (c) CONVERSION BETWEEN A FEDERAL SAVINGS AS4 SOCIATION AND A STATE SAVINGS ASSOCIATION.—Section 

5 5(i) of the Home Owners’ Loan Act (12 U.S.C. 1464(i)) 

6 is amended by adding at the end the following new para7 graph: 

8 ‘‘(6) PROHIBITION ON CERTAIN CONVER9 SIONS.—A Federal savings association may not con10 vert to a State savings association, and a State sav11 ings association may not convert to a Federal sav12 ings association, during any period of time in which 

13 such savings association is subject to a cease and de14 sist order, memorandum of understanding, or other 

15 enforcement action entered into with or issued by 

16 the Director of the Office of Thrift Supervision or 

17 a State savings association supervisor.’’. 

18 SEC. 1310. LENDING LIMITS TO INSIDERS. 

19 Section 22(h)(9)(D)(ii) of the Federal Reserve Act 

20 (12 U.S.C. 375b(h)(9)(D)(ii)) is amended by inserting ‘‘, 

21 except that a member bank shall be deemed to have ex22 tended credit to a person if the member bank has credit 

23 exposure to the person arising from a derivative trans24 action, repurchase agreement, reverse repurchase agree25 ment, securities lending transaction, or securities borVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00277 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 rowing transaction between the member bank and the per2 son’’ before the period at the end. 

3 SEC. 1311. LIMITATIONS ON PURCHASES OF ASSETS FROM 

4 INSIDERS. 

5 (a) Section 18 of the Federal Deposit Insurance Act 

6 (12 U.S.C. 1828) is amended by inserting at the end the 

7 following new subsection: 

8 ‘‘(y) GENERAL PROHIBITION.—An insured deposi9 tory institution shall not purchase an asset from, or sell 

10 an asset to, one of its executive officers, directors, or prin11 cipal shareholders or any related interest of such person 

12 (as such terms are defined in section 22(h) of Federal Re13 serve Act) unless the transaction is on market terms and, 

14 if the transaction represents more than 10 percent of the 

15 institution’s capital stock and surplus, the transaction has 

16 been approved in advance by a majority of the institution’s 

17 board of directors (with interested directors of the insured 

18 depository institution not participating in the approval of 

19 the transaction).’’. 

20 (b) FDIC RULEMAKING AUTHORITY.—The Federal 

21 Deposit Insurance Corporation may prescribe rules to im22 plement the requirements of subsection (a) and the 

23 amendments made by subsection (a). 


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1 (c) AMENDMENTS TO THE FEDERAL RESERVE

2 ACT.—Section 22 of the Federal Reserve Act (12 U.S.C. 

3 375) is amended by striking subsection (d). 

4 SEC. 1312. RULES REGARDING CAPITAL LEVELS OF BANK 

5 HOLDING COMPANIES. 

6 Section 5(b) of the Bank Holding Company Act of 

7 1956 (12 U.S.C. 1844(b)) is amended by inserting ‘‘, in8 cluding regulations relating to the capital levels of bank 

9 holding companies’’ before the period at the end. 

10 SEC. 1313. ENHANCEMENTS TO FACTORS TO BE CONSID11 ERED IN CERTAIN ACQUISITIONS. 

12 (a) BANK ACQUISITIONS.—Section 3(c) of the Bank 

13 Holding Company Act of 1956 (12 U.S.C. 1842(c)) is 

14 amended by inserting at the end the following new para15 graph: 

16 ‘‘(7) FINANCIAL STABILITY.— 

17 ‘‘(A) IN GENERAL.—In every case, the 

18 Board shall take into consideration the extent 

19 to which the proposed acquisition, merger, or 

20 consolidation may pose risk to the stability of 

21 the United States financial system or the econ22 omy of the United States, including the result23 ing scope, nature, size, scale, concentration, or 

24 interconnectedness of activities that are finan25 cial in nature. 


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1 ‘‘(B) STANDARDS FOR APPROVAL.—The 

2 Board may in its sole discretion disapprove any 

3 acquisition, merger, or consolidation of, or by, 

4 a financial holding company subject to stricter 

5 standards if the Board determines that the re6 sulting concentration of liabilities on a consoli7 dated basis is likely to pose a great threat to 

8 financial stability during times of severe eco9 nomic distress.’’. 

10 (b) NONBANK ACQUISITIONS.— 

11 (1) Section 4(j)(2)(A) of the Bank Holding 

12 Company is amended by— 

13 (A) striking ‘‘or’’ before ‘‘unsound banking 

14 practices’’; and 

15 (B) inserting before the period at the end 

16 the following: ‘‘, or risk to the stability of the 

17 United States financial system or the economy 

18 of the United States’’. 

19 (2) Section 4(k)(6) of the Bank Holding Com20 pany Act of 1956 is amended by striking subpara21 graph (B) and inserting the following new subpara22 graph: 

23 ‘‘(B) A financial holding company may 

24 commence any activity or acquire any company, 

25 pursuant to paragraph (4) or any regulation 


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1 prescribed or order issued under paragraph (5), 

2 without prior approval of the Board, except— 

3 ‘‘(i) for a transaction in which the 

4 total assets to be acquired by the financial 

5 holding company exceed $25 billion; and 

6 ‘‘(ii) as provided in subsection (j) with 

7 regard to the acquisition of a savings asso8 ciation.’’. 

9 (3) Section 4(j) of the Bank Holding Company 

10 Act of 1956 is amended by inserting after paragraph 

11 (4) the following new paragraph (and redesignating 

12 succeeding paragraphs accordingly): 

13 ‘‘(5) FINANCIAL STABILITY.— 

14 ‘‘(A) IN GENERAL.—In every case, the 

15 Board shall take into consideration the extent 

16 to which the proposed acquisition, merger, or 

17 consolidation may pose risk to the stability of 

18 the United States financial system or the econ19 omy of the United States, including the result20 ing scope, nature, size, scale, concentration, or 

21 interconnectedness of activities that are finan22 cial in nature. 

23 ‘‘(B) STANDARDS FOR APPROVAL.—The 

24 Board may, in the sole discretion of the Board, 

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1 dation of, or by, a financial holding company 

2 subject to stricter standards if the Board deter3 mines that the resulting concentration of liabil4 ities on a consolidated basis is likely to pose a 

5 great threat to financial stability during times 

6 of severe economic distress.’’. 

7 (c) BANK MERGER ACT TRANSACTIONS.—Section 

8 18(c)(5) of the Federal Deposit Insurance Act (12 U.S.C. 

9 1828(c)) is amended by— 

10 (1) in paragraph (5), by striking ‘‘and’’ before 

11 ‘‘the convenience and needs of the community to be 

12 served’’; 

13 (2) in paragraph (5), by inserting before the pe14 riod at the end the following: ‘‘, and the risk to the 

15 stability of the United States financial system and 

16 the economy of the United States based on, among 

17 other things, the scope, nature, size, scale, con18 centration, or interconnectedness of activities that 

19 are financial in nature’’; and 

20 (3) in paragraph (7)(B), by inserting ‘‘subpara21 graphs (A) and (B) of’’ before ‘‘paragraph’’. 

22 SEC. 1314. ELIMINATION OF ELECTIVE INVESTMENT BANK 

23 HOLDING COMPANY FRAMEWORK. 

24 Section 17 of the Securities Exchange Act of 1934 

25 (15 U.S.C. 78q) is amended— 


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1 (1) by striking subsection (i); and 

2 (2) by redesignating subsections (j) and (k) as 

3 subsections (i) and (j), respectively. 

4 SEC. 1315. EXAMINATION FEES FOR LARGE BANK HOLDING 

5 COMPANIES. 

6 The Bank Holding Company Act of 1956 is amended 

7 by inserting after section 5 the following new section: 

8 ‘‘SEC. 5A. EXAMINATION FEES. 

9 ‘‘The Board of Governors of the Federal Reserve Sys10 tem or the Federal Reserve Banks shall assess fees on 

11 bank holding companies with total consolidated assets of 

12 $10 billion or more. Such fees shall be sufficient to defray 

13 the cost of the examination of such bank holding compa14 nies.’’. 

15 SEC. 1316. MUTUAL NATIONAL BANKS AND FEDERAL MU16 TUAL BANK HOLDING COMPANIES AUTHOR17 IZED. 

18 (a) IN GENERAL.—Chapter one of title LXII of the 

19 Revised Statutes of the United States (12 U.S.C. 21 et 

20 seq.) is amended by inserting after section 5133 the fol21 lowing new sections: 

22 ‘‘SEC. 5133A. MUTUAL NATIONAL BANKS. 

23 ‘‘(a) IN GENERAL.—Notwithstanding the section des24 ignated the ‘Third’ of section 5134, in order to provide 

25 mutual institutions for the deposit of funds, the extension 


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1 of credit, and provision of other services, the Comptroller 

2 of the Currency may charter mutual national banks either 

3 de novo or through a conversion of any insured depository 

4 institution or any State mutual bank or credit union, sub5 ject to regulations prescribed by the Comptroller of the 

6 Currency in accordance with this section. The powers con7 ferred by this section are intended to provide for the cre8 ation and maintenance of mutual national banks as bodies 

9 corporate existing in perpetuity for the benefit of their de10 positors and the communities in which they operate. 

11 ‘‘(b) REGULATIONS.— 

12 ‘‘(1) REGULATIONS OF THE COMPTROLLER.— 

13 The Comptroller of the Currency is authorized to 

14 prescribe appropriate regulations for the organiza15 tion, incorporation, examination, operation, and reg16 ulation of mutual national banks. Except to the ex17 tent that such existing regulations conflict with sec18 tions 5133A and 5133B, mutual national banks 

19 shall be subject to the regulations of the Director of 

20 the Office of Thrift Supervision governing corporate 

21 organization, governance, and conversion of mutual 

22 institutions, as in effect on the date of the enact23 ment of the Wall Street Reform and Consumer Pro24 tection Act of 2009, including parts 543, 544, 546, 

25 563b, and 563c of chapter V of title 12, Code of 


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1 Federal Regulations (as in effect on that date), for 

2 up to 3 years beginning on the date of the enact3 ment of the Wall Street Reform and Consumer Pro4 tection Act of 2009. 

5 ‘‘(2) APPLICABILITY OF CAPITAL STOCK RE6 QUIREMENTS.—The Comptroller of the Currency 

7 shall prescribe regulations regarding the manner in 

8 which requirements of this title with respect to cap9 ital stock, and limitations imposed on national banks 

10 under this title based on capital stock, shall apply to 

11 mutual national banks. 

12 ‘‘(c) CONVERSIONS.— 

13 ‘‘(1) CONVERSION OF A MUTUAL DEPOSITORY

14 TO A MUTUAL NATIONAL BANK.—Subject to such 

15 regulations as the Comptroller of the Currency may 

16 prescribe for the protection of depositors’ rights and 

17 for any other purpose the Comptroller of the Cur18 rency may consider appropriate, any mutual deposi19 tory may convert to a mutual national bank by filing 

20 with the Comptroller of the Currency a notice of its 

21 election to convert on a specified date that is not 

22 earlier than 30 days after the date on which the no23 tice is filed, and the mutual depository shall be con24 verted to a mutual national bank charter on the date 

25 specified in the notice. 


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1 ‘‘(2) CONVERSION TO STOCK NATIONAL

2 BANK.—Subject to such regulations as the Comp3 troller of the Currency may prescribe for the protec4 tion of depositors’ rights and for any other purpose 

5 the Comptroller of the Currency may consider ap6 propriate, any national bank that is organized in the 

7 mutual form under subsection (a) may reorganize as 

8 a stock national bank. 

9 ‘‘(3) CONVERSION TO STATE BANKS.—Any na10 tional mutual bank may convert to a State bank 

11 charter in accordance with regulations prescribed by 

12 the Comptroller of the Currency and applicable 

13 State law. 

14 ‘‘(d) TERMINATING MUTUALITY.—If a mutual na15 tional bank elects to terminate mutuality, it must do so 

16 by— 

17 ‘‘(1) liquidating; or 

18 ‘‘(2) converting to a national banking associa19 tion operating in stock form. 

20 ‘‘(e) STATUS AND RIGHTS OF MEMBERS.— 

21 ‘‘(1) In general, the status of a member is pri22 marily that of a depositor and secondarily that of a 

23 holder of a contingent right to participate in the eq24 uity of a mutual national bank upon a liquidation or 

25 conversion. 


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1 ‘‘(2) Each member of a mutual national bank 

2 shall have the following rights: 

3 ‘‘(A) Such rights as may be agreed upon, 

4 by contract, between the member and the mu5 tual national bank. 

6 ‘‘(B) The right to vote for members of the 

7 board of directors of the mutual national bank. 

8 ‘‘(C) The right to attend any meeting of 

9 members properly called by the board of direc10 tors of a mutual national bank. 

11 ‘‘(D) In the event the board of directors, 

12 in its sole discretion, determines a conversion of 

13 a mutual national bank to a national banking 

14 association operating in stock form is in the 

15 best interests of the community in which the 

16 bank operates and the members approve the 

17 conversion through a special proxy, then the 

18 members as of a record date set by the board 

19 of directors shall have the first right to sub20 scribe for and purchase stock in the converted 

21 bank. 

22 ‘‘(E) In the event the board of directors, in 

23 its sole discretion, determines a liquidation of 

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1 ates and the members approve the liquidation, 

2 or if for any other reason the bank is liquidated 

3 by operation of law, then the members as of the 

4 date of liquidation shall have the right to have 

5 credited to their accounts, on a pro rata basis, 

6 any residual assets left after the liquidation of 

7 the mutual national bank. 

8 ‘‘(3) In the consideration of all questions re9 quiring action by the members of a national mutual 

10 bank, the bank may provide in its charter that each 

11 member shall be permitted (i) one vote per member, 

12 or (ii) to cast one vote for each $100, or fraction 

13 thereof, of the withdrawal value of the member’s ac14 count, but not more than 1,000 votes per member. 

15 ‘‘(f) PROXIES.— 

16 ‘‘(1) A member may give, in writing or elec17 tronically, a perpetual proxy to a committee of the 

18 board of directors of a mutual depository, provided 

19 that the member may revoke such a proxy in writing 

20 or electronically, with such revocation to take effect 

21 after 6 business days. 

22 ‘‘(2) Such proxies may be used to vote on any 

23 issue requiring approval of the members, including 

24 the conversion of a mutual depository into a mutual 

25 national bank and the reorganization of a mutual 


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1 national bank into a Federal mutual bank holding 

2 company, except that, without a prior finding by the 

3 regulator of the mutual national bank that such ac4 tion is needed to avoid loss to the Federal Deposit 

5 Insurance Corporation’s deposit insurance fund or to 

6 protect the stability of the United States financial 

7 system, such proxies may not be used to vote in 

8 favor of— 

9 ‘‘(A) terminating mutuality for a mutual 

10 national bank or a Federal mutual bank holding 

11 company; 

12 ‘‘(B) permitting the modification of a Fed13 eral mutual bank holding company; or 

14 ‘‘(C) issuing mutual capital certificates 

15 (except when used to found a mutual national 

16 bank or a Federal mutual bank holding com17 pany de novo). 

18 ‘‘(3) Proxies given by a member, in writing or 

19 electronically, to management of, or to a committee 

20 of the board of directors of, a mutual depository 

21 shall not be deemed to have been revoked solely be22 cause of, and shall continue to exist following, a con23 version to a mutual national bank and any concur24 rent or subsequent reorganization to a Federal mu25 tual bank holding company. 


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1 ‘‘(g) DEFINITIONS.—For purposes of this section, the 

2 following definitions shall apply: 

3 ‘‘(1) INSURED DEPOSITORY INSTITUTION.—The 

4 term ‘insured depository institution’ has the same 

5 meaning as in section 3 of the Federal Deposit In6 surance Act. 

7 ‘‘(2) MUTUAL NATIONAL BANK.—The term 

8 ‘mutual national bank’ means a national banking as9 sociation that operates in mutual form and is char10 tered by the Comptroller of the Currency under this 

11 section. 

12 ‘‘(3) MUTUAL DEPOSITORY.—The term ‘mutual 

13 depository’ means a depository institution that is or14 ganized in non-stock form, including a Federal non15 stock depository and any form of non-stock deposi16 tory provided for under State law, the deposits of 

17 which are insured by an instrumentality of the Fed18 eral Government. 

19 ‘‘(4) MUTUALITY.—The term ‘mutuality’ means 

20 the quality of being an insured depository institution 

21 organized under a Federal or State law providing for 

22 the organization of non-stock depository institutions, 

23 or a holding company organized under a Federal or 

24 State law providing for the organization of non-stock 


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1 entities that control one or more depository institu2 tions. 

3 ‘‘(5) MEMBER.—The term ‘member’ means 

4 each tax-liable depositor in a mutual depository’s 

5 savings, demand, or other authorized depository ac6 counts and each tax-liable depositor in such an ac7 count in a depository subsidiary of a Federal mutual 

8 bank holding company. 

9 ‘‘(6) TAX LIABLE DEPOSITOR.—The term ‘tax 

10 liable depositor’ means the single person responsible 

11 for paying any Federal taxes due on any interest 

12 paid on any deposits held within any savings, de13 mand, or other authorized depository account or ac14 counts with any mutual depository. 

15 ‘‘(7) MEMBERSHIP RIGHTS.—The term ‘mem16 bership rights’ means the rights of each member 

17 under this section. 

18 ‘‘(h) CONFORMING REFERENCES.—Unless otherwise 

19 provided by the Comptroller of the Currency— 

20 ‘‘(1) any reference in any Federal law to a na21 tional bank operating in stock form, including a ref22 erence to the term ‘national banking association’, 

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1 stitution’, or ‘depository institution’, shall be deemed 

2 to refer also to a mutual national bank; 

3 ‘‘(2) any reference in any Federal law to the 

4 term ‘board of directors’, ‘director’, or ‘directors’ of 

5 a national bank operating in stock form shall be 

6 deemed to refer also to the board of a mutual na7 tional bank; and 

8 ‘‘(3) any terms in Federal law that may apply 

9 only to a national bank operating in stock form, in10 cluding the terms ‘stock’, ‘shares’, ‘shares of stock’, 

11 ‘capital stock’, ‘common stock’, ‘stock certificate’, 

12 ‘stock certificates’, ‘certificates representing shares 

13 of stock’, ‘stock dividend’, ‘transferable stock’, ‘each 

14 class of stock’, ‘cumulate such shares’, ‘par value’, 

15 ‘preferred stock’ shall not apply to a mutual national 

16 bank, unless the Comptroller of the Currency deter17 mines that the context requires otherwise. 

18 ‘‘SEC. 5133B. FEDERAL MUTUAL BANK HOLDING COMPA19 NIES. 

20 ‘‘(a) REORGANIZATION OF MUTUAL NATIONAL BANK

21 AS A HOLDING COMPANY.— 

22 ‘‘(1) IN GENERAL.—Subject to approval under 

23 the Bank Holding Company Act of 1956, a mutual 

24 national bank may reorganize so as to become a 

25 Federal mutual bank holding company by submitting 


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1 a reorganization plan to the appropriate bank hold2 ing company regulator. 

3 ‘‘(2) PLAN APPROVAL.—Upon the approval of 

4 the reorganization plan by the appropriate bank 

5 holding company regulator and the issuance of the 

6 appropriate charters— 

7 ‘‘(A) the substantial part of the mutual na8 tional bank’s assets and liabilities, including all 

9 of the bank’s insured liabilities, shall be trans10 ferred to a national banking association, a ma11 jority of the shares of voting stock of which is 

12 owned, directly or indirectly, by the mutual na13 tional bank that is to become a Federal mutual 

14 bank holding company; and 

15 ‘‘(B) the mutual national bank shall be16 come a Federal mutual bank holding company. 

17 ‘‘(b) DIRECTORS AND CERTAIN ACCOUNT HOLDERS’ 

18 APPROVAL OF PLAN REQUIRED.—This subsection does 

19 not authorize a reorganization unless— 

20 ‘‘(1) a majority of the mutual national bank’s 

21 board of directors has approved the plan providing 

22 for such reorganization; and 

23 ‘‘(2) a majority of members has approved the 

24 plan at a meeting held at the call of the directors 


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1 under the procedures prescribed by the bank’s char2 ter and bylaws. 

3 ‘‘(c) OWNERSHIP OF DEPOSITORY SUBSIDIARIES.— 

4 To avoid terminating mutuality, a Federal mutual bank 

5 holding company must own, directly or indirectly, a major6 ity of the shares of voting stock of each of its depository 

7 subsidiaries. 

8 ‘‘(d) NO TERMINATION OF MUTUALITY.—Neither a 

9 reorganization of a mutual depository nor a modification 

10 of a Federal mutual bank holding company shall cause a 

11 termination of mutuality. 

12 ‘‘(e) RETENTION OF CAPITAL.—In connection with a 

13 transaction described in subsection (a), a mutual national 

14 bank may, subject to the approval of the appropriate bank 

15 holding company regulator, retain capital at the holding 

16 company level to the extent that the capital retained at 

17 the holding company level exceeds the amount of capital 

18 required for the national banking association chartered as 

19 a part of a transaction described in subsection (a) to meet 

20 all relevant capital standards established by the Comp21 troller of the Currency for national banking associations. 

22 ‘‘(f) TERMINATING MUTUALITY.—If a Federal mu23 tual bank holding company elects to terminate mutuality, 

24 it must do so by either liquidating or converting to a bank 

25 holding company operating in stock form. 


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1 ‘‘(g) MEMBERSHIP RIGHTS.—Holders of savings, de2 mand, or other authorized depository accounts in a deposi3 tory subsidiary of a Federal mutual bank holding company 

4 shall have the same membership rights with respect to the 

5 Federal mutual bank holding company as those holders 

6 would have had if the depository subsidiary of the Federal 

7 mutual bank holding company had been a mutual national 

8 bank. 

9 ‘‘(h) REGULATION.—A Federal mutual bank holding 

10 company shall be— 

11 ‘‘(1) chartered by the appropriate bank holding 

12 company regulator and shall be subject to such regu13 lations as the appropriate bank holding company 

14 regulator shall prescribe; and 

15 ‘‘(2) regulated under the Bank Holding Com16 pany Act of 1956 on the same terms and subject to 

17 the same limitations as any other company that con18 trols a bank. 

19 ‘‘(i) CAPITAL IMPROVEMENT.— 

20 ‘‘(1) PLEDGE OF STOCK OF NATIONAL BANK

21 SUBSIDIARY.—This section shall not prohibit a Fed22 eral mutual bank holding company from pledging all 

23 or a portion of the stock of the national banking as24 sociation chartered as part of a transaction deVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00295 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 scribed in subsection (a) to raise capital for such na2 tional banking association. 

3 ‘‘(2) ISSUANCE OF NONVOTING SHARES.—This 

4 section shall not prohibit a national banking associa5 tion chartered as part of a transaction described in 

6 subsection (a) from issuing any nonvoting shares or 

7 less than 50 percent of the voting shares of such 

8 bank to any person other than the Federal mutual 

9 bank holding company. 

10 ‘‘(j) INSOLVENCY AND LIQUIDATION.— 

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

12 provision of law, the appropriate bank holding com13 pany regulator may file a petition under chapter 7 

14 of title 11, United States Code, with respect to a 

15 Federal mutual bank holding company upon— 

16 ‘‘(A) the default of any national bank— 

17 ‘‘(i) the stock of which is owned by 

18 the Federal mutual bank holding company; 

19 and 

20 ‘‘(ii) that was chartered in a trans21 action described in subsection (a); or 

22 ‘‘(B) a foreclosure on a pledge by the Fed23 eral mutual bank holding company described in 

24 subsection (i)(1). 


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1 ‘‘(2) DISTRIBUTION OF NET PROCEEDS.—Ex2 cept as provided in paragraph (3), the net proceeds 

3 of any liquidation of any Federal mutual bank hold4 ing company under paragraph (1) shall be trans5 ferred to persons who hold membership interests in 

6 such Federal mutual bank holding company. 

7 ‘‘(3) RECOVERY BY FDIC.—If the Federal De8 posit Insurance Corporation incurs a loss as a result 

9 of the default of any insured bank subsidiary of a 

10 Federal mutual bank holding company that is liq11 uidated under paragraph (1), the Federal Deposit 

12 Insurance Corporation shall succeed to the interests 

13 of the depositors of the bank as members in the 

14 Federal mutual bank holding company, to the extent 

15 of the Federal Deposit Insurance Corporation’s loss. 

16 ‘‘(k) DEFINITIONS.— 

17 ‘‘(1) FEDERAL MUTUAL BANK HOLDING COM18 PANY.—The term ‘Federal mutual bank holding 

19 company’ means a holding company that is orga20 nized in mutual form and owns, directly or indi21 rectly, a majority of the shares of voting stock of 

22 one or more depository subsidiaries of a Federal mu23 tual bank holding company. 

24 ‘‘(2) DEPOSITORY SUBSIDIARY OF A FEDERAL

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1 pository subsidiary of a Federal mutual bank hold2 ing company’ means a depository institution orga3 nized in stock form that is insured by the Federal 

4 Deposit Insurance Corporation, the majority of the 

5 shares of voting stock of which are owned by the 

6 Federal mutual bank holding company or its wholly 

7 owned subsidiaries and none of the shares of stock 

8 of which are pledged or otherwise subjected to lien 

9 except as permitted in subsection (i). 

10 ‘‘(3) REORGANIZATION OF A MUTUAL DEPOSI11 TORY.—The term ‘reorganization of a mutual depos12 itory’ means the conversion of a mutual depository 

13 into a depository subsidiary of a Federal mutual 

14 bank holding company. 

15 ‘‘(4) MODIFICATION OF A FEDERAL MUTUAL

16 BANK HOLDING COMPANY.—The term ‘modification 

17 of a Federal mutual bank holding company’ means 

18 either: (A) the sale of shares of common or preferred 

19 stock in a depository subsidiary of a Federal mutual 

20 bank holding company to any party other than the 

21 subsidiary’s parent Federal mutual bank holding 

22 company or a wholly owned subsidiary of that par23 ent; or (B) the voluntary grant of a lien on shares 

24 of common or preferred stock in a depository sub25 sidiary of a Federal mutual bank holding company. 


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1 ‘‘(5) DEFAULT.—With respect to a national 

2 bank, the term ‘default’ means an adjudication or 

3 other official determination by any court of com4 petent jurisdiction, the Comptroller of the Currency, 

5 or other public authority pursuant to which a con6 servator, receiver, or other legal custodian is ap7 pointed for the national bank. 

8 ‘‘(l) CONFORMING REFERENCES.—Unless otherwise 

9 provided by the appropriate bank holding company regu10 lator— 

11 ‘‘(1) any reference in any Federal law to a bank 

12 holding company operating in stock form shall be 

13 deemed to refer also to a Federal mutual bank hold14 ing company; 

15 ‘‘(2) any reference in any Federal law to the 

16 term ‘board of directors’, ‘director’, or ‘directors’ of 

17 a national bank operating in stock form shall be 

18 deemed to refer also to the board of a Federal mu19 tual bank holding company; and 

20 ‘‘(3) any terms in Federal law that may apply 

21 only to a national bank operating in stock form, in22 cluding the terms ‘stock’, ‘shares’, ‘shares of stock’, 

23 ‘capital stock’, ‘common stock’, ‘stock certificate’, 

24 ‘stock certificates’, ‘certificates representing shares 

25 of stock’, ‘stock dividend’, ‘transferable stock’, ‘each 


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1 class of stock’, ‘cumulate such shares’, ‘par value’, 

2 ‘preferred stock’ shall not apply to a Federal mutual 

3 bank holding company, unless the appropriate bank 

4 holding company regulator determines that the con5 text requires otherwise.’’. 

6 (b) LIMITATION ON FEDERAL REGULATION OF

7 STATE BANKS.—Except as otherwise provided in Federal 

8 law, the Comptroller of the Currency, the Board of Gov9 ernors of the Federal Reserve System, and the Federal 

10 Deposit Insurance Corporation may not adopt or enforce 

11 any regulation that contravenes the corporate governance 

12 rules prescribed by State law or regulation for State banks 

13 unless the Director, Board, or Corporation finds that the 

14 Federal regulation is necessary to assure the safety and 

15 soundness of the State banks. 

16 (c) TECHNICAL AMENDMENT.—The table of sections 

17 for chapter one of title LXII of the Revised Statutes of 

18 the United States (12 U.S.C. 21 et seq.) is amended by 

19 inserting after the item relating to section 5133 the fol20 lowing new items: 

‘‘5133A. Mutual national banks. 

‘‘5133B. Federal mutual bank holding companies.’’. 

21 (d) APPROPRIATE FEDERAL BANKING AGENCY FOR

22 FEDERAL MUTUAL BANK HOLDING COMPANIES.—Sec23 tion 3(q)(1) of the Federal Deposit Insurance Act (12 


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1 U.S.C. 1813(q)(2)) is amended by inserting after subpara2 graph (F) the following new subparagraph: 

3 ‘‘(G) supervisory or regulatory proceedings 

4 arising from the authority given to the appro5 priate bank holding company regulator under 

6 section 5133B of the Revised Statutes of the 

7 United States.’’. 

8 (e) MUTUAL HOLDING COMPANY CONVERSION.— 

9 (1) IN GENERAL.—Any mutual holding com10 pany, including any form of mutual depository hold11 ing company provided for under State law, may con12 vert to a Federal mutual bank holding company by 

13 filing with the appropriate bank holding company 

14 regulator a notice of its election to convert on a 

15 specified date that is not earlier than 30 days after 

16 the date on which the notice is filed, and the mutual 

17 holding company shall be converted to a Federal mu18 tual holding company charter on the date specified 

19 in the notice. 

20 (2) DEFINITIONS.—For purposes of this sub21 section, the following definitions shall apply: 

22 (A) FEDERAL MUTUAL BANK HOLDING

23 COMPANY.—The term ‘‘Federal mutual bank 

24 holding company’’ has the same meaning as in 


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1 section 5133B of the Revised Statutes of the 

2 United States (as added by this section); and 

3 (B) MUTUAL HOLDING COMPANY.—The 

4 term ‘‘mutual holding company’’ has the same 

5 meaning as in section 10(o)(10)(A) of the 

6 Home Owners Loan Act as in effect on the day 

7 before the date of enactment of this Act. 

8 (f) EFFECTIVE DATE.—This section shall take effect 

9 on the date of enactment of this Act. 

10 SEC. 1317. NATIONWIDE DEPOSIT CAP FOR INTERSTATE AC11 QUISITIONS. 

12 (a) AMENDMENTS TO THE BANK HOLDING COMPANY

13 ACT OF 1956.— 

14 (1) CONCENTRATION LIMIT FOR BANK HOLDING

15 COMPANIES.—Section 3(d)(2)(A) of the Bank Hold16 ing Company Act (12 U.S.C. 1842(d)(2)(A)) is 

17 amended by striking ‘‘paragraph (1)(A)’’ and insert18 ing ‘‘subsection (a) of this section’’. 

19 (2) REMOVAL OF NONBANK SAVINGS ASSOCIA20 TION PROVISION IN LIGHT OF BEING DEFINED AS A

21 BANK.—Section 4 of the Bank Holding Company 

22 Act is amended by striking subsection (i) and insert 

23 the following new subsection: 

24 ‘‘(i) [Repealed.]’’. 


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1 (b) AMENDMENTS TO THE FEDERAL DEPOSIT IN2 SURANCE ACT.— 

3 (1) IN GENERAL.—Section 18(e) of the Federal 

4 Deposit Insurance Act (12 U.S.C. 1828(c)) is 

5 amended— 

6 (A) by redesignating paragraph (12) as 

7 paragraph (13); and 

8 (B) by inserting after paragraph (11), the 

9 following new paragraph: 

10 ‘‘(12) NATIONWIDE DEPOSIT CAP.—The respon11 sible agency may not approve an application for an 

12 interstate merger transaction if the resulting insured 

13 depository institution (including all insured deposi14 tory institutions which are affiliates of the resulting 

15 insured depository institution), upon consummation 

16 of the transaction, would control more than 10 per17 cent of, the total amount of deposits of insured de18 pository institutions in the United States.’’. 

19 (2) PARALLEL REQUIREMENT.—Section 

20 44(b)(2) of the Federal Deposit Insurance Act (12 

21 U.S.C. 1831u(b)(2)(A) is amended to read as fol22 lows: 

23 ‘‘(A) NATIONWIDE CONCENTRATION LIM24 ITS.—The responsible agency may not approve 

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1 action involving two or more insured depository 

2 institutions if the resulting insured depository 

3 institution (including all insured depository in4 stitutions which are affiliates of such institu5 tion), upon consummation of the transaction 

6 would control more than 10 percent of the total 

7 amount of deposits of insured depository insti8 tutions in the United States.’’. 

9 (c) AMENDMENTS TO THE HOME OWNERS’ LOAN

10 ACT.—Section 10(e)(2) of the Home Owners’ Loan Act 

11 (12 U.S.C. 467a(e)(2)) is amended— 

12 (1) by striking ‘‘or’’ at the end of subparagraph 

13 (C); and 

14 (2) by striking the period at the end of sub15 paragraph (D), the following new subparagraph: 

16 ‘‘(E) in the case of an application involving 

17 an interstate acquisition, if the applicant (in18 cluding all insured depository institutions which 

19 are affiliates of the applicant) controls, or upon 

20 consummation of the acquisition for which such 

21 application is filed would control, more than 10 

22 percent of the total amount of deposits of in23 sured depository institutions in the United 

24 States.’’. 


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1 SEC. 1318. DE NOVO BRANCHING INTO STATES. 

2 (a) NATIONAL BANKS.—Section 5155(g)(1)(A) of the 

3 Revised Statutes (12 U.S.C. 36(g)(1)(A)) is amended to 

4 read as follows: 

5 ‘‘(A) the law of the State where the branch 

6 is located, or is to be located, would permit es7 tablishment of the branch if the national bank 

8 were a state bank chartered by such State;’’. 

9 (b) STATE INSURED BANKS.—Section 18(d)(4)(A)(i) 

10 of the Federal Deposit Insurance Act (12 U.S.C. 

11 1828(d)(4)(A)(i)) is amended to read as follows: 

12 ‘‘(i) the law of the State where the 

13 branch is located, or is to be located, would 

14 permit establishment of the branch if the 

15 bank were a State bank chartered by such 

16 State;’’. 

17 Subtitle E—Improvements to the 

18 Federal Deposit Insurance Fund 

19 SEC. 1401. ACCOUNTING FOR ACTUAL RISK TO THE DE20 POSIT INSURANCE FUND. 

21 (a) Section 7(b)(1)(C) of the Federal Deposit Insur22 ance Act is amended to read as follows: 

23 ‘‘(C) ‘RISK-BASED ASSESSMENT SYSTEM’ 

24 DEFINED.—For purposes of this paragraph, the 

25 term ‘risk-based assessment system’ means a 


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1 system for calculating a depository institution’s 

2 assessment based on— 

3 ‘‘(i) the probability that the Deposit 

4 Insurance Fund will incur a loss with re5 spect to the institution; 

6 ‘‘(ii) the likely amount of any such 

7 loss; 

8 ‘‘(iii) the risks to the Deposit Insur9 ance Fund attributable to such depository 

10 institution, including risks posed by its af11 filiates to the extent the Corporation deter12 mines appropriate, taking into account— 

13 ‘‘(I) the amount, different cat14 egories, and concentrations of assets 

15 of the insured depository institution 

16 and its affiliates, including both on17 balance sheet and off-balance sheet 

18 assets; 

19 ‘‘(II) the amount, different cat20 egories, and concentrations of liabil21 ities, both insured and uninsured, con22 tingent and noncontingent, including 

23 both on-balance sheet and off-balance 

24 sheet liabilities, of the insured deposi25 tory institution and its affiliates; and 


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1 ‘‘(III) any other factors the Cor2 poration determines are relevant to 

3 assessing the risks; and 

4 ‘‘(iv) the revenue needs of the Deposit 

5 Insurance Fund.’’. 

6 (b) Section 7(b)(2) of the Federal Deposit Insurance 

7 Act is amended by striking subparagraph (D) and by re8 designating subparagraph (E) as subparagraph (D). 

9 SEC. 1402. CREATING A RISK-FOCUSED ASSESSMENT BASE. 

10 Section 7(b)(2) of such Act, as amended, is further 

11 amended by amending subparagraph (C) to read as fol12 lows: 

13 ‘‘(C) ASSESSMENT.—The assessment of 

14 any insured depository institution imposed 

15 under this subsection shall be an amount equal 

16 to the product of— 

17 ‘‘(i) an assessment rate established by 

18 the Corporation; and 

19 ‘‘(ii) the amount of the insured depos20 itory institution’s average total assets dur21 ing the assessment period minus the 

22 amount of the insured depository institu23 tion’s average tangible equity during the 

24 assessment period, minus additional deduc25 tions or adjustments necessary to establish 


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1 assessments consistent with the definition 

2 under section 7(b)(1)(C) of the Federal 

3 Deposit Insurance Act for custodial banks 

4 (as defined by the Corporation based on 

5 factors including percentage of total reve6 nues generated by custodial businesses and 

7 the level of assets under custody) or a 

8 bankers’ bank (as referred to in section 

9 5136 of the Revised Statutes of the United 

10 States).’’. 

11 SEC. 1403. ELIMINATION OF PROCYCLICAL ASSESSMENTS. 

12 Section 7(e) of the Federal Deposit Insurance Act is 

13 amended— 

14 (1) in paragraph (2)— 

15 (A) by amending subparagraph (B) to read 

16 as follows: 

17 ‘‘(B) LIMITATION.—The Board of Direc18 tors may, in its sole discretion, suspend or limit 

19 the declaration of payment of dividends under 

20 subparagraph (A).’’; 

21 (B) by amending subparagraph (C) to read 

22 as follows: 

23 ‘‘(C) NOTICE AND OPPORTUNITY FOR COM24 MENT.—The Corporation shall prescribe, by 

25 regulation, after notice and opportunity for 


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1 comment, the method for the declaration, cal2 culation, distribution, and payment of dividends 

3 under this paragraph’’; and 

4 (C) by striking subparagraphs (D) through 

5 (G); and 

6 (2) in paragraph (4)(A) by striking ‘‘para7 graphs (2)(D) and’’ and inserting ‘‘paragraphs (2) 

8 and’’. 

9 SEC. 1404. ENHANCED ACCESS TO INFORMATION FOR DE10 POSIT INSURANCE PURPOSES. 

11 (a) Section 7(a)(2)(B) of the Federal Deposit Insur12 ance Act is amended by striking ‘‘, after agreement with 

13 the Comptroller of the Currency, the Board of Governors 

14 of the Federal Reserve System, and the Director of the 

15 Office of Thrift Supervision, as appropriate,’’. 

16 (b) Section 7(b)(1)(E) of the Federal Deposit Insur17 ance Act is amended— 

18 (1) in clause (i), by striking ‘‘such as’’ and in19 serting ‘‘including’’; and 

20 (2) by striking clause (iii). 

21 SEC. 1405. TRANSITION RESERVE RATIO REQUIREMENTS 

22 TO REFLECT NEW ASSESSMENT BASE. 

23 (a) Section 7(b)(3)(B) of the Federal Deposit Insur24 ance Act is amended to read as follows: 


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1 ‘‘(B) MINIMUM RESERVE RATIO.—The re2 serve ratio designated by the Board of Direc3 tors for any year may not be less than 1.15 per4 cent of estimated insured deposits, or the com5 parable percentage of the assessment base set 

6 forth in paragraph (2)(C).’’. 

7 (b) Section 3(y)(3) of the Federal Deposit Insurance 

8 Act is amended by inserting ‘‘, or such comparable per9 centage of the assessment base set forth in section 

10 7(b)(2)(C)’’ before the period. 

11 (c) For a period of not less than 5 years after the 

12 date of the enactment of this title, the Federal Deposit 

13 Insurance Corporation shall make available to the public 

14 the reserve ratio and the designated reserve ratio using 

15 both estimated insured deposits and the assessment base 

16 under section 7(b)(2)(C) of the Federal Deposit Insurance 

17 Act. 

18 Subtitle F—Improvements to the 

19 Asset-backed Securitization 

20 Process 

21 SEC. 1501. SHORT TITLE. 

22 This subtitle may be cited as the ‘‘Credit Risk Reten23 tion Act of 2009’’. 


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1 SEC. 1502. CREDIT RISK RETENTION. 

2 (a) AMENDMENT.—The Securities Act of 1933 (15 

3 U.S.C. 77a et seq.) is amended by inserting after section 

4 28 the following new section: 

5 ‘‘SEC. 29. CREDIT RISK RETENTION. 

6 ‘‘(a) IN GENERAL.— 

7 ‘‘(1) INTEREST IN LOANS MADE BY CREDI8 TORS.—Within 180 days of the date of the enact9 ment of this section, the appropriate agencies shall 

10 prescribe regulations to require any creditor that 

11 makes a loan to retain an economic interest in a ma12 terial portion of the credit risk of any such loan that 

13 the creditor transfers, sells, or conveys to a third 

14 party, including for the purpose of including such 

15 loan in a pool of loans backing an issuance of asset16 backed securities. 

17 ‘‘(2) INTEREST IN ASSETS BACKING ASSET18 BACKED SECURITIES.—The appropriate agencies 

19 shall prescribe regulations to require any securitizer 

20 of asset-backed securities that are backed by assets 

21 not described in paragraph (1) to retain an economic 

22 interest in a material portion of any such asset used 

23 to back an issuance of securities. 

24 ‘‘(b) ALTERNATIVE RISK RETENTION FOR CREDIT

25 SECURITIZERS.—The appropriate agencies may apply the 

26 risk retention requirements of this section to securitizers 


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1 of loans or particular types of loans in addition to or in 

2 substitution for any or all of the requirements that apply 

3 to creditors that make such loans or types of loans, if the 

4 agencies determine that applying the requirements to such 

5 securitizers would— 

6 ‘‘(1) be consistent with helping to ensure high 

7 quality underwriting standards for creditors, taking 

8 into account other applicable laws, regulations, and 

9 standards; and 

10 ‘‘(2) facilitate appropriate risk management 

11 practices by such creditors, improve access of con12 sumers to credit on reasonable terms, or otherwise 

13 serve the public interest. 

14 ‘‘(c) STANDARDS FOR REGULATION.—Regulations 

15 prescribed under subsections (a) and (b) shall— 

16 ‘‘(1) prohibit a creditor or securitizer from di17 rectly or indirectly hedging or otherwise transferring 

18 the credit risk such creditor or securitizer is required 

19 to retain under the regulations; 

20 ‘‘(2) require a creditor or securitizer to retain 

21 5 percent of the credit risk on any loan that is 

22 transferred, sold, or conveyed by such creditor or 

23 securitized by such securitizer except— 

24 ‘‘(A) an appropriate agency may specify 

25 that the percentage of risk may be less than 5 


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1 percent of the credit risk, or exempt such cred2 itor or securitizer from the risk retention re3 quirement, if— 

4 ‘‘(i) the credit underwriting by the 

5 creditor or the due diligence by the 

6 securitizer meets such standards as an ap7 propriate agency prescribes; and 

8 ‘‘(ii) the loan that is transferred, sold, 

9 or conveyed by such creditor or securitized 

10 by such securitizer meets terms, condi11 tions, and characteristics that are deter12 mined by an appropriate agency to reflect 

13 loans with reduced credit risk, such as 

14 loans that meet certain interest rate 

15 thresholds, loans that are fully amortizing, 

16 and loans that are included in a 

17 securitization in which a third-party pur18 chaser specifically negotiates for the pur19 chase of the first-loss position and provides 

20 due diligence on all individual loans in the 

21 pool prior to the issuance of the asset22 backed securities, and retains a first-loss 

23 position; and 

24 ‘‘(B) an appropriate agency may specify 

25 that the percentage of risk may be more than 


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1 5 percent of the credit risk if the underwriting 

2 by the creditor or due diligence by the 

3 securitizer is insufficient; 

4 ‘‘(3) specify that the credit risk retained must 

5 be no less at risk for loss than the average of the 

6 credit risk not so retained; and 

7 ‘‘(4) set the minimum duration of the required 

8 risk retention. 

9 ‘‘(d) EXEMPTIONS AND ADJUSTMENTS.— 

10 ‘‘(1) IN GENERAL.—The appropriate agencies 

11 shall have authority to provide exemptions or adjust12 ments to the requirements of this section, including 

13 exemptions or adjustments relating to the percent14 age of risk retention required to be held and the 

15 hedging prohibition. 

16 ‘‘(2) APPLICABLE STANDARDS.—Any exemp17 tions or adjustments provided under paragraph (1) 

18 shall— 

19 ‘‘(A) be consistent with the purpose of en20 suring high quality underwriting standards for 

21 creditors, taking into account other applicable 

22 laws, regulations, or standards; and 

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1 cess for consumers to credit on reasonable 

2 terms, or otherwise serve the public interest. 

3 ‘‘(e) APPROPRIATE AGENCY DEFINED.—For pur4 poses of this section, the term ‘appropriate agency’ means 

5 any of the following agencies with regard to the respective 

6 loans and asset-backed securities: 

7 ‘‘(1) BANKING AGENCIES.—The Federal bank8 ing agencies, the National Credit Union Administra9 tion Board, and the Commission, with respect to any 

10 loan or asset-backed security for which there is no 

11 appropriate agency under paragraph (2). 

12 ‘‘(2) OTHER AGENCIES.— 

13 ‘‘(A) With regard to any mortgage insured 

14 under title II of the National Housing Act, the 

15 Secretary of Housing and Urban Development. 

16 ‘‘(B) With regard to any loan meeting the 

17 conforming loan standards of the Federal Na18 tional Mortgage Corporation or the Federal 

19 Home Loan Mortgage Corporation or any 

20 asset-backed security issued by either such cor21 poration, the Federal Housing Finance Agency. 

22 ‘‘(C) With regard to any loan insured by 

23 the Rural Housing Service, the Rural Housing 

24 Service. 


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1 ‘‘(f) JOINT APPROPRIATE AGENCY REGULATIONS.— 

2 All regulations prescribed by the agencies identified in 

3 subsection (e)(1) shall be prescribed jointly by such agen4 cies. 

5 ‘‘(g) ENFORCEMENT.— 

6 ‘‘(1) Compliance with the requirements imposed 

7 under this section shall be enforced under— 

8 ‘‘(A) section 8 of the Federal Deposit In9 surance Act (12 U.S.C. 1818), in the case of— 

10 ‘‘(i) national banks, and Federal 

11 branches and Federal agencies of foreign 

12 banks, by the Office of the Comptroller of 

13 the Currency; 

14 ‘‘(ii) member banks of the Federal 

15 Reserve System (other than national 

16 banks), branches and agencies of foreign 

17 banks (other than Federal branches, Fed18 eral agencies, and insured State branches 

19 of foreign banks), commercial lending com20 panies owned or controlled by foreign 

21 banks, and organizations operating under 

22 section 25 or 25A of the Federal Reserve 

23 Act, bank holding companies, and subsidi24 aries of bank holding companies (other 


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1 than insured depository institutions), by 

2 the Board; and 

3 ‘‘(iii) banks insured by the Federal 

4 Deposit Insurance Corporation (other than 

5 members of the Federal Reserve System) 

6 and insured State branches of foreign 

7 banks, by the Board of Directors of the 

8 Federal Deposit Insurance Corporation; 

9 ‘‘(B) section 8 of the Federal Deposit In10 surance Act (12 U.S.C. 1818), by the Director 

11 of the Office of Thrift Supervision, in the case 

12 of a savings association the deposits of which 

13 are insured by the Federal Deposit Insurance 

14 Corporation and a savings and loan holding 

15 company and to any subsidiary (other than a 

16 bank or subsidiary of that bank); and 

17 ‘‘(C) the Federal Credit Union Act (12 

18 U.S.C. 1751 et seq.), by the National Credit 

19 Union Administration Board with respect to 

20 any Federal credit union. 

21 ‘‘(2) Except to the extent that enforcement of 

22 the requirements imposed under this section is spe23 cifically committed to some other Federal agency 

24 under paragraph (1), the Commission shall enforce 

25 such requirements. 


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1 ‘‘(3) The authority of the Commission under 

2 this section shall be in addition to its existing au3 thority to enforce the securities laws. 

4 ‘‘(h) EXCLUSIONS.—Notwithstanding any other pro5 vision of this section, the requirements of this section shall 

6 not apply to any loan— 

7 ‘‘(1) insured, guaranteed, or administered by 

8 the Secretary of Education, the Secretary of Agri9 culture, the Secretary of Veterans Affairs, or the 

10 Small Business Administration; or 

11 ‘‘(2) made, insured, guaranteed, or purchased 

12 by any person that is subject to the supervision of 

13 the Farm Credit Administration, including the Fed14 eral Agricultural Mortgage Corporation. 

15 ‘‘(i) DEFINITIONS.—For purposes of this section: 

16 ‘‘(1) The term ‘asset-backed security’ has the 

17 meaning given such term in section 229.1101(c) of 

18 title 17, Code of Federal Regulations, or any suc19 cessor thereto. 

20 ‘‘(2) The term ‘Federal banking agencies’ 

21 means the Board of Governors of the Federal Re22 serve System, the Office of the Comptroller of the 

23 Currency, the Office of Thrift Supervision, and the 

24 Federal Deposit Insurance Corporation. 


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1 ‘‘(3) The term ‘insured depository institution’ 

2 has the meaning given such term in section 3(c) of 

3 the Federal Deposit Insurance Act (12 U.S.C. 

4 1813(c)). 

5 ‘‘(4) The term ‘securitization vehicle’ means a 

6 trust, corporation, partnership, limited liability enti7 ty, special purpose entity, or other structure that— 

8 ‘‘(A) is the issuer, or is created by the 

9 issuer, of pass-through certificates, participa10 tion certificates, asset-backed securities, or 

11 other similar securities backed by a pool of as12 sets that includes loans; and 

13 ‘‘(B) holds such loans. 

14 ‘‘(5) The term ‘securitizer’ means the person 

15 that transfers, conveys, or assigns, or causes the 

16 transfer, conveyance, or assignment of, loans, includ17 ing through a special purpose vehicle, to any 

18 securitization vehicle, excluding any trustee that 

19 holds such loans for the benefit of the securitization 

20 vehicle.’’. 

21 (b) STUDY ON RISK RETENTION.— 

22 (1) STUDY.—The Board, in coordination and 

23 consultation with the Comptroller of the Currency, 

24 the Office of Thrift Supervision, the Federal Deposit 

25 Insurance Corporation, and the Securities and ExVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00319 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 change Commission, shall conduct a study of the 

2 combined impact by each individual class of asset3 backed security of— 

4 (A) the new credit risk retention require5 ments contained in the amendment made by 

6 subsection (a); and 

7 (B) the Financial Accounting Statements 

8 166 and 167 issued by the Financial Account9 ing Standards Board. 

10 (2) REPORT.—Not later than 90 days after the 

11 date of enactment of this title, the Board shall sub12 mit to Congress a report on the study conducted 

13 under paragraph (1). Such report shall include stat14 utory and regulatory recommendations for elimi15 nating any negative impacts on the continued viabil16 ity of the asset-backed securitization markets and on 

17 the availability of credit for new lending identified 

18 by the study conducted under paragraph (1). 

19 SEC. 1503. PERIODIC AND OTHER REPORTING UNDER THE 

20 SECURITIES EXCHANGE ACT OF 1934 FOR 

21 ASSET-BACKED SECURITIES. 

22 Section 15(d) of Securities Exchange Act of 1934 (15 

23 U.S.C. 78o(d)) is amended— 

24 (1) by inserting ‘‘, other than securities of any 

25 class of asset-backed security (as defined in section 


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1 229.1101(c) of title 17, Code of Federal Regula2 tions, or any successor thereto),’’ after ‘‘securities of 

3 each class’’; 

4 (2) by inserting at the end the following: ‘‘The 

5 Commission may by rules and regulations provide 

6 for the suspension or termination of the duty to file 

7 under this subsection for any class of issuer of asset8 backed security upon such terms and conditions and 

9 for such period or periods as it deems necessary or 

10 appropriate in the public interest or for the protec11 tion of investors. The Commission may, for the pur12 poses of this subsection, classify issuers and pre13 scribe requirements appropriate for each class of 

14 issuer of asset-backed security.’’; and 

15 (3) by inserting after the fifth sentence the fol16 lowing: ‘‘The Commission shall adopt regulations 

17 under this subsection requiring each issuer of an 

18 asset-backed security to disclose, for each tranche or 

19 class of security, information regarding the assets 

20 backing that security. In adopting regulations under 

21 this subsection, the Commission shall set standards 

22 for the format of the data provided by issuers of an 

23 asset-backed security, which shall, to the extent fea24 sible, facilitate comparison of such data across secu25 rities in similar types of asset classes. The CommisVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00321 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 sion shall require issuers of asset-backed securities 

2 at a minimum to disclose asset-level or loan-level 

3 data necessary for investors to independently per4 form due diligence. Asset-level or loan-level data 

5 shall include data with unique identifiers relating to 

6 loan brokers or originators, the nature and extent of 

7 the compensation of the broker or originator of the 

8 assets backing the security, and the amount of risk 

9 retention of the originator or the securitizer of such 

10 assets.’’. 

11 SEC. 1504. REPRESENTATIONS AND WARRANTIES IN ASSET12 BACKED OFFERINGS. 

13 The Commission shall prescribe regulations on the 

14 use of representations and warranties in the asset-backed 

15 securities market that— 

16 (1) require credit rating agencies to include in 

17 reports accompanying credit ratings a description of 

18 the representations, warranties, and enforcement 

19 mechanisms available to investors and how they dif20 fer from representations, warranties, and enforce21 ment mechanisms in similar issuances; and 

22 (2) require disclosure on fulfilled repurchase re23 quests across all trusts aggregated by originator, so 

24 that investors may identify asset originators with 

25 clear underwriting deficiencies. 


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1 SEC. 1505. EXEMPTED TRANSACTIONS UNDER THE SECURI2 TIES ACT OF 1933. 

3 (a) IN GENERAL.—Section 4 of the Securities Act of 

4 1933 (15 U.S.C. 77d) is amended— 

5 (1) by striking paragraph (5); and 

6 (2) by redesignating paragraph (6) as para7 graph (5). 

8 (b) CONFORMING AMENDMENT.—Section 

9 3(a)(4)(B)(vii)(I) of the Securities Exchange Act of 1934 

10 (15 U.S.C. 78c(a)(4)(B)(vii)(I)) is amended by striking 

11 ‘‘4(6)’’ and inserting ‘‘4(5)’’. 

12 SEC. 1506. STUDY ON THE MACROECONOMIC EFFECTS OF 

13 RISK RETENTION REQUIREMENTS. 

14 (a) STUDY REQUIRED.—The Chairman of the Finan15 cial Services Oversight Council shall carry out a study on 

16 the macroeconomic effects of the risk retention require17 ments under this subtitle, and the amendments made by 

18 this subtitle, with emphasis placed on potential beneficial 

19 effects with respect to stabilizing the real estate market. 

20 Such study shall include— 

21 (1) an analysis of the effects of risk retention 

22 on real estate asset price bubbles, including a retro23 spective estimate of what fraction of real estate 

24 losses may have been averted had such requirements 

25 been in force in recent years; 


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1 (2) an analysis of the feasibility of minimizing 

2 real estate price bubbles by proactively adjusting the 

3 percentage of risk retention that must be borne by 

4 creditors and securitizers of real estate debt, as a 

5 function of regional or national market conditions; 

6 (3) a comparable analysis for proactively ad7 justing mortgage origination requirements; 

8 (4) an assessment of whether such proactive ad9 justments should be made by an independent regu10 lator, or in a formulaic and transparent manner; 

11 (5) an assessment of whether such adjustments 

12 should take place independently or in concert with 

13 monetary policy; and 

14 (6) recommendations for implementation and 

15 enabling legislation. 

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

17 period beginning on the date of the enactment of this title, 

18 the Chairman of the Financial Services Oversight Council 

19 shall issue a report to the Congress containing any find20 ings and determinations made in carrying out the study 

21 required under subsection (a). 


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1 Subtitle G—Enhanced Dissolution 

2 Authority 

3 SEC. 1601. SHORT TITLE; PURPOSE. 

4 (a) SHORT TITLE.—This subtitle may be cited as the 

5 ‘‘Dissolution Authority for Large, Interconnected Finan6 cial Companies Act of 2009’’. 

7 (b) PURPOSE.—The purpose of this subtitle is to pro8 tect the financial system of the United States in times of 

9 severe crisis by providing for the orderly resolution of 

10 large, interconnected financial companies whose failure 

11 could create, or increase, the risk of significant liquidity, 

12 credit, or other financial problems spreading among finan13 cial institutions or markets and thereby threaten the sta14 bility of the overall financial system of the United States. 

15 There shall be a strong presumption that resolution under 

16 the bankruptcy laws will remain the primary method of 

17 resolving financial companies, and the authorities con18 tained in this subtitle will only be used in the most exigent 

19 circumstances. 

20 SEC. 1602. DEFINITIONS. 

21 For purposes of this subtitle, the following definitions 

22 shall apply: 

23 (1) APPROPRIATE REGULATORY AGENCY.— 

24 (A) CORPORATION AND COMMISSION.—The 

25 term ‘‘appropriate regulatory agency’’ means— 


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1 (i) the Corporation; 

2 (ii) the Commission, if the financial 

3 company, or an affiliate thereof, is a 

4 broker or dealer registered with the Com5 mission under section 15(b) of the Securi6 ties Exchange Act of 1934 (15 U.S.C. 

7 78o(b) (other than an insured depository 

8 institution)); and 

9 (iii) if the financial company or an af10 filiate of the financial company is an insur11 ance company (other than an insured de12 pository institution), the applicable State 

13 insurance authority of the State in which 

14 the insurance company is domiciled. 

15 (B) RULES OF CONSTRUCTION.—More 

16 than 1 agency may be an appropriate regu17 latory agency with respect to any given finan18 cial company. In such instances, the Commis19 sion shall be the appropriate regulatory agency 

20 for purposes of section 1603 if the largest sub21 sidiary of the financial company is a broker or 

22 dealer as measured by total assets as of the end 

23 of the previous calendar quarter, the applicable 

24 State insurance authority of the State in which 

25 the insurance company is domiciled shall be the 


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1 appropriate regulatory agency for purposes of 

2 section 1603 if the financial company is an in3 surance company or if the largest subsidiary of 

4 the financial company is an insurance company 

5 as measured by total assets as of the end of the 

6 previous calendar quarter, and otherwise the 

7 Corporation shall be the appropriate regulatory 

8 agency for purposes of section 1603. 

9 (2) BRIDGE FINANCIAL COMPANY.—The term 

10 ‘‘bridge financial company’’ means a new financial 

11 company organized in accordance with section 

12 1609(h) by the Corporation. 

13 (3) COMMISSION.—The term ‘‘Commission’’ 

14 means the Securities and Exchange Commission. 

15 (4) CORPORATION.—The term ‘‘Corporation’’ 

16 means the Federal Deposit Insurance Corporation. 

17 (5) COVERED FINANCIAL COMPANY.—The term 

18 ‘‘covered financial company’’ means a financial com19 pany for which a determination has been made pur20 suant to and in accordance with section 1603(b). 

21 (6) COVERED SUBSIDIARY.—The term ‘‘covered 

22 subsidiary’’ means a subsidiary covered in paragraph 

23 (9)(B)(v). 


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1 (7) CUSTOMER PROPERTY.—The term ‘‘cus2 tomer property’’ has the meaning ascribed to it in 

3 the Securities Investor Protection Act of 1970. 

4 (8) FEDERAL RESERVE BOARD.—The term 

5 ‘‘Federal Reserve Board’’ means the Board of Gov6 ernors of the Federal Reserve System. 

7 (9) FINANCIAL COMPANY.—The term ‘‘financial 

8 company’’ means any company that— 

9 (A) is incorporated or organized under 

10 Federal law or the laws of any State; 

11 (B) is— 

12 (i) any bank holding company as de13 fined in section 2(a) of the Bank Holding 

14 Company Act of 1956 (12 U.S.C. 

15 1841(a)); 

16 (ii) any company that has been sub17 jected to stricter prudential regulation 

18 under section 1103; 

19 (iii) any insurance company; 

20 (iv) any company predominantly en21 gaged in activities that are financial in na22 ture or incidental thereto for purposes of 

23 section 4(k) of the Bank Holding Company 

24 Act of 1956 (12 U.S.C. 1843(k)) or activi25 ties that have been identified for stricter 


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1 prudential standards under section 1103 of 

2 this title; or 

3 (v) any subsidiary of companies de4 scribed in clauses (i) through (iv) (other 

5 than an insured depository institution or 

6 any broker or dealer registered with the 

7 Commission under section 15(b) of the Se8 curities Exchange Act of 1934 (15 U.S.C. 

9 78o(b)) that is a member of the Securities 

10 Investor Protection Corporation); 

11 (C) that is not a Farm Credit System in12 stitution chartered under and subject to the 

13 provisions of the Farm Credit Act of 1971, as 

14 amended (12 U.S.C. 2001 et seq.); 

15 (D) that is not a Federal home loan bank, 

16 the Federal National Mortgage Association, or 

17 the Federal Home Loan Mortgage Corporation; 

18 and 

19 (E) is not an insured depository institution 

20 (as defined in section 3(c) of the Federal De21 posit Insurance act), a Federal credit union or 

22 a State-chartered credit union (as such terms 

23 are defined in section 101 of the Federal Credit 

24 Union Act), or a government-sponsored enter25 prise (as such term is defined in section 1004(f) 


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1 of the Financial Institutions Reform, Recovery 

2 and Enforcement Act of 1989 (12 U.S.C. 1811 

3 note)). 

4 (10) FUND.—The term ‘‘Fund’’ means the Sys5 temic Dissolution Fund established in accordance 

6 with section 1609(n). 

7 (11) INSURANCE COMPANY.—The term ‘‘insur8 ance company’’ means any entity covered by a State 

9 law designed specifically to deal with the rehabilita10 tion, liquidation, or insolvency of an insurance com11 pany. 

12 (12) SECRETARY.—The term ‘‘Secretary’’ shall 

13 mean the Secretary of the Treasury. 

14 (13) STATE.—The term ‘‘State’’ means any 

15 State, commonwealth, territory, or possession of the 

16 United States, the District of Columbia, the Com17 monwealth of Puerto Rico, the Commonwealth of the 

18 Northern Mariana Islands, American Samoa, Guam, 

19 and the United States Virgin Islands. 

20 (14) CERTAIN OTHER TERMS.—The terms ‘‘af21 filiate’’, ‘‘company’’, ‘‘control’’, ‘‘deposit’’, ‘‘deposi22 tory institution’’, ‘‘foreign bank’’, ‘‘insured deposi23 tory institution’’, and ‘‘subsidiary’’ have the same 

24 meanings as in section 3 of the Federal Deposit In25 surance Act (12 U.S.C. 1813). 


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1 SEC. 1603. SYSTEMIC RISK DETERMINATION. 

2 (a) WRITTEN RECOMMENDATION OF THE FEDERAL

3 RESERVE BOARD AND THE APPROPRIATE REGULATORY

4 AGENCY.— 

5 (1) VOTE REQUIRED.— 

6 (A) IN GENERAL.—At the request of the 

7 Secretary, the Chairman of the Federal Reserve 

8 Board, or the appropriate regulatory agency, 

9 the Board and the appropriate regulatory agen10 cy shall, or on their own initiative the Board 

11 and the appropriate regulatory agency may, 

12 consider whether to make the written rec13 ommendation provided for in paragraph (2) 

14 with respect to a financial company. 

15 (B) TWO-THIRDS AGREEMENT.—Any rec16 ommendation under subparagraph (A) shall be 

17 made upon a vote of not less than two-thirds of 

18 the members of the Federal Reserve Board then 

19 serving and not less than two thirds of any 

20 members of the board or commission then serv21 ing of the appropriate regulatory agency, as ap22 plicable. 

23 (2) RECOMMENDATION REQUIRED.—Any writ24 ten recommendations made by the Federal Reserve 

25 Board and the appropriate regulatory agency under 

26 paragraph (1) shall contain the following: 


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1 (A) A description of the effect that the de2 fault of the financial company would have on 

3 economic conditions or financial stability in the 

4 United States. 

5 (B) A description of the effect that the de6 fault of the financial company would have on 

7 economic conditions or financial stability for 

8 low-income, minority, or underserved commu9 nities. 

10 (C) A recommendation regarding the na11 ture and the extent of actions that the Board 

12 and the appropriate regulatory agency rec13 ommend be taken under section 1604 regarding 

14 the financial company. 

15 (b) DETERMINATION BY THE SECRETARY.—Notwith16 standing any other provision of Federal law or the law 

17 of any State, if, upon the written recommendation of the 

18 Federal Reserve Board and the appropriate regulatory 

19 agency as provided for in subsection (a)(1), the Secretary 

20 (in consultation with the President) determines that— 

21 (1) the financial company is in default or is in 

22 danger of default; 

23 (2) the failure of the financial company and its 

24 dissolution under otherwise applicable Federal or 

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1 nancial stability or economic conditions in the 

2 United States; and 

3 (3) any action under section 1604 would avoid 

4 or mitigate such adverse effects, taking into consid5 eration the effectiveness of the action in mitigating 

6 potential adverse effects on the financial system or 

7 economic conditions, the cost to the general fund of 

8 the Treasury, and the potential to increase moral 

9 hazard on the part of creditors, counterparties, and 

10 shareholders in the financial company, 

11 then the Secretary must take action under section 

12 1604(a), the Corporation must act in accordance with sec13 tion 1604(b), and the Corporation may take 1 or more 

14 actions specified in section 1604(c) in accordance with the 

15 requirements of that subsection, except that, prior to the 

16 Secretary or Corporation taking any action under section 

17 1604, the Federal Reserve Board or the appropriate Fed18 eral regulatory agency shall take action to avoid or miti19 gate potential adverse effects on low-income, minority, or 

20 underserved communities affected by the failure of such 

21 financial company. 

22 (c) DOCUMENTATION AND REVIEW.— 

23 (1) IN GENERAL.—The Secretary shall— 

24 (A) document any determination under 

25 subsection (b); and 


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1 (B) retain the documentation for review 

2 under paragraph (2). 

3 (2) GAO REVIEW.—The Comptroller General of 

4 the United States shall review and report to the 

5 Congress on any determination under subsection (b), 

6 including— 

7 (A) the basis for the determination; 

8 (B) the purpose for which any action was 

9 taken pursuant thereto; and 

10 (C) the likely effect of the determination 

11 and such action on the incentives and conduct 

12 of financial companies and their creditors, 

13 counterparties, and shareholders. 

14 (3) REPORT TO CONGRESS.—Within 48 hours 

15 after a determination is made under subsection (b), 

16 the Secretary shall provide written notice of the de17 termination to the Committee on Banking, Housing, 

18 and Urban Affairs and the Committee on the Judici19 ary of the Senate and the Committee on Financial 

20 Services and the Committee on the Judiciary of the 

21 House of Representatives. The notice shall include a 

22 description of the basis for the determination. 

23 (d) DEFAULT OR IN DANGER OF DEFAULT.—For 

24 purposes of subsection (b), a financial company shall be 

25 considered to be in default or in danger of default if any 


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1 of the following conditions exist, as determined in accord2 ance with that subsection: 

3 (1) A case has been, or likely will promptly be, 

4 commenced with respect to the financial company 

5 under title 11, United States Code. 

6 (2) The financial company is critically under7 capitalized, as such term has been or may be defined 

8 by the Federal Reserve Board. 

9 (3) The financial company has incurred, or is 

10 likely to incur, losses that will deplete all or substan11 tially all of its capital, and there is no reasonable 

12 prospect for the company to avoid such depletion 

13 without assistance under section 1604. 

14 (4) The assets of the financial company are, or 

15 are likely to be, less than its obligations to creditors 

16 and others. 

17 (5) The financial company is, or is likely to be, 

18 unable to pay its obligations (other than those sub19 ject to a bona fide dispute) in the normal course of 

20 business. 

21 SEC. 1604. DISSOLUTION; STABILIZATION. 

22 (a) APPOINTMENT OF RECEIVER.— 

23 (1) IN GENERAL.—Upon the Secretary making 

24 a determination in accordance with section 1603(b), 


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1 the Secretary shall appoint the Corporation as re2 ceiver for the covered financial company. 

3 (2) TIME LIMIT ON RECEIVERSHIP AUTHOR4 ITY.—Any appointment of the Corporation as re5 ceiver under paragraph (1) shall terminate on the 

6 date that is the end of the 1-year period beginning 

7 on the date such appointment is made. 

8 (3) EXTENSION OF TIME LIMIT.—The time 

9 limit established in paragraph (2) may be extended 

10 by the Secretary for up to 1 additional year if— 

11 (A) the Corporation has not completed the 

12 dissolution of the company within the time pro13 vided in paragraph (2); and 

14 (B) the Secretary certifies in writing that 

15 continuation of the receivership is necessary— 

16 (i) to protect the best interests of the 

17 taxpayers of the United States; and 

18 (ii) to protect the stability of the fi19 nancial system and the economy of the 

20 United States. 

21 (4) FURTHER EXTENSION.—The time limit, as 

22 extended in paragraph (3), may be extended for up 

23 to 1 additional year if— 

24 (A) the conditions of paragraph (3) are 

25 met; and 


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1 (B) the Corporation submits a report to 

2 the Congress, no later than 60 days before the 

3 receivership will expire under the extended limit 

4 under paragraph (3), that describes in detail— 

5 (i) the basis for the determination by 

6 the Corporation that a second extension is 

7 necessary; and 

8 (ii) the specific plan of the Corpora9 tion for concluding the receivership before 

10 the end of the proposed additional year. 

11 (b) DISSOLUTION LIMITATIONS.— 

12 (1) IN GENERAL.—An insolvent financial com13 pany may be dissolved under this subtitle only if the 

14 failure and dissolution of such company under title 

15 11, United States Code, would be systemically desta16 bilizing, as determined by the appropriate Federal 

17 regulatory agencies and the Secretary of the Treas18 ury (in consultation with the President) in accord19 ance with section 1603(b). 

20 (2) LIQUIDATION.—A financial company that 

21 comes within coverage of this subtitle for dissolution 

22 shall be placed in liquidation, and the associated liq23 uidation costs shall be paid from the company’s as24 sets and borne by the shareholders and unsecured 

25 creditors of such company. 


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1 (3) ASSESSMENT FOR EXCESS LIQUIDATION

2 COSTS.—Any liquidation costs that exceed the 

3 amount of liquidated assets of the company shall be 

4 paid through assessments on large financial compa5 nies. 

6 (c) CONSULTATION.—The Corporation, as receiver— 

7 (1) shall consult with the regulators of the cov8 ered financial company and its covered subsidiaries 

9 for purposes of ensuring an orderly dissolution of 

10 the covered financial company; 

11 (2) may consult with, or under section 

12 1609(a)(1)(B)(v) or section 1609(a)(1)(K) acquire 

13 services of, any outside experts as appropriate to in14 form and aid the Corporation in the dissolution 

15 process; and 

16 (3) shall consult with the primary regulators of 

17 any subsidiaries of the covered financial company 

18 that are not covered subsidiaries as described in sec19 tion 1602(9)(B)(v) and coordinate with such regu20 lators regarding the treatment of such solvent sub21 sidiaries and the separate dissolution of any such in22 solvent subsidiaries under other governmental au23 thority, as appropriate. 

24 (d) EMERGENCY STABILIZATION AFTER APPOINT25 MENT OF RECEIVER.—Upon the Secretary appointing the 


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1 Corporation as receiver under subsection (a), the Corpora2 tion may, in its corporate capacity and as an agency of 

3 the United States, with the approval of the Secretary and 

4 subject to the conditions in subsections (f) through (g), 

5 take the following actions under such terms and conditions 

6 that the Corporation and the Secretary jointly deem ap7 propriate: 

8 (1) Making loans to, or purchasing any debt ob9 ligation of, the covered financial company or any 

10 covered subsidiary. 

11 (2) Purchasing assets of the covered financial 

12 company or any covered subsidiary directly or 

13 through an entity established by the Corporation for 

14 such purpose. 

15 (3) Assuming or guaranteeing the obligations of 

16 the covered financial company or any covered sub17 sidiary to one or more third parties. 

18 (4) Taking a lien on any or all assets of the 

19 covered financial company or any covered subsidiary, 

20 including a first priority lien on all unencumbered 

21 assets of the company or any covered subsidiary to 

22 secure repayment of any transactions conducted 

23 under this subsection. 

24 (5) Selling or transferring all, or any part 

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1 tions of the covered financial company or any cov2 ered subsidiary. 

3 (e) TREATMENT OF INSURANCE COMPANIES AND IN4 SURANCE COMPANY SUBSIDIARIES.— 

5 (1) IN GENERAL.—Notwithstanding subsection 

6 (a), if an insurance company covered by a State law 

7 designed specifically to deal with the rehabilitation, 

8 liquidation or insolvency of an insurance company is 

9 a covered financial company or a subsidiary of a cov10 ered financial company, resolution of such insurance 

11 company, and any subsidiary of such company, will 

12 be conducted as provided under such State law. 

13 (2) EXCEPTION FOR COVERED SUBSIDIARIES.— 

14 The requirement of paragraph (1) shall not apply 

15 with respect to any covered subsidiary of such an in16 surance company, that is not itself an insurance 

17 company. 

18 (3) BACKUP AUTHORITY.—Notwithstanding 

19 paragraph (1), with respect to a covered financial 

20 company described under paragraph (1), if, after the 

21 end of the 60-day period beginning on the date a de22 termination is made under section 1603(b) with re23 spect to such company, the appropriate regulatory 

24 agency has not filed the appropriate judicial action 

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1 pany into dissolution under the State’s laws and re2 quirements, the Corporation shall have the authority 

3 to stand in the place of the appropriate regulatory 

4 agency and file the appropriate judicial action in the 

5 appropriate State court to place such company into 

6 dissolution under the State’s laws and requirements. 

7 (f) MANDATORY TERMS AND CONDITIONS FOR ALL

8 STABILIZATION ACTIONS.—The Corporation as receiver is 

9 authorized to take the stabilization actions listed in sub10 section (d) only if— 

11 (1) the Secretary and the Corporation deter12 mine that such action is necessary for the purpose 

13 of financial stability and not for the purpose of pre14 serving the covered financial company; 

15 (2) the Corporation ensures that the share16 holders of a covered financial company do not re17 ceive payment until after all other claims are fully 

18 paid; 

19 (3) the Corporation ensures that any funds 

20 from taxpayers shall be repaid as part of the resolu21 tion process before payments are made to creditors; 

22 (4) the Corporation ensures that unsecured 

23 creditors bear losses; 

24 (5) the Corporation ensures that management 

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1 nancial company is removed (if such management 

2 has not already been removed at the time the Cor3 poration is appointed as receiver); and 

4 (6) the Corporation ensures that the members 

5 of the board of directors (or body performing similar 

6 functions) responsible for the failed condition of the 

7 covered financial company are removed (if such 

8 members have not already been removed at the time 

9 the Corporation is appointed as receiver). 

10 (g) RECOUPMENT OF FUNDS EXPENDED FOR SYS11 TEMIC STABILIZATION PURPOSES.—Amounts expended 

12 from the Fund by the Corporation under this section shall 

13 be repaid in full to the Fund only from the following 

14 sources: 

15 (1) DISSOLUTION PROCESS.—Amounts attrib16 utable to the proceeds of the sale of, or income from, 

17 the assets of the covered financial company. 

18 (2) INDUSTRY ASSESSMENTS.—If the sources 

19 described in paragraph (1) are insufficient to repay 

20 the amount of the stabilization action in full, the dif21 ference shall be recouped through assessments on fi22 nancial companies in accordance with section 

23 1609(o). 


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1 SEC. 1605. JUDICIAL REVIEW. 

2 If a receiver is appointed in accordance with section 

3 1604, the covered financial company may, not later than 

4 30 days thereafter, bring an action in the United States 

5 district court for the judicial district in which the home 

6 office of such covered financial company is located, or in 

7 the United States District Court for the District of Colum8 bia, for an order requiring that the receiver be removed, 

9 and the court shall, upon the merits, dismiss such action 

10 or direct the receiver to be removed. Review of such an 

11 action shall be limited to the appointment of a receiver 

12 under section 1604. 

13 SEC. 1606. DIRECTORS NOT LIABLE FOR ACQUIESCING IN 

14 APPOINTMENT OF RECEIVER. 

15 The members of the board of directors (or body per16 forming similar functions) of a covered financial company 

17 shall not be liable to the covered financial company’s 

18 shareholders or creditors for acquiescing in or consenting 

19 in good faith to— 

20 (1) the Secretary’s appointment of the Corpora21 tion as receiver for the covered financial company 

22 under section 1604; or 

23 (2) an acquisition, combination, or transfer of 

24 assets or liabilities under section 1609. 


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1 SEC. 1607. TERMINATION AND EXCLUSION OF OTHER AC2 TIONS. 

3 (a) TERMINATION AND EXCLUSION OF BANK4 RUPTCY.—The Corporation’s acting as receiver for a cov5 ered financial company under this subtitle shall imme6 diately, and by operation of law, terminate any case com7 menced with respect to the covered financial company 

8 under title 11, United States Code, or any proceeding 

9 under any State insolvency law with respect to the covered 

10 financial company, and no such case or proceeding may 

11 be commenced with respect to the covered financial com12 pany at any time while the Corporation acts as receiver 

13 for the covered financial company. 

14 (b) CONVERSION TO BANKRUPTCY.— 

15 (1) CONVERSION.—The Corporation may at any 

16 time, with the approval of the Secretary and after 

17 consulting with the Council, convert the receivership 

18 of a covered financial company to a proceeding 

19 under chapter 7 or 11 of title 11, United States 

20 Code, by filing a petition against the covered finan21 cial company under section 303(m) of such title. The 

22 Corporation may serve as the trustee for the covered 

23 financial company in bankruptcy. 

24 (2) BRIDGE FINANCIAL COMPANY.—The Cor25 poration’s exercise of authority under paragraph (1) 

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1 tion with regard to any bridge financial company es2 tablished under section 1609(h). 

3 (c) REPORTING TO THE CONGRESS.— 

4 (1) IN GENERAL.— 

5 (A) INITIAL REPORT.—Upon the appoint6 ment of the Corporation as receiver under sec7 tion 1604(a), the Corporation shall issue a re8 port on the issue described under paragraph 

9 (3)(A). 

10 (B) CONTINUING REPORTS.—At the end of 

11 each 180-day period after the appointment of 

12 the Corporation as receiver under section 

13 1604(a), and continuing while the Corporation 

14 is acting as receiver, the Corporation shall issue 

15 a report on the issues described under subpara16 graphs (A) through (C) of paragraph (3). 

17 (2) COMMITTEES TO RECEIVE REPORTS.—Re18 ports issued under this subsection shall be issued to 

19 the Committee on Banking, Housing, and Urban Af20 fairs and the Committee on the Judiciary of the 

21 Senate and the Committee on Financial Services and 

22 the Committee on the Judiciary of the House of 

23 Representatives. 

24 (3) REPORTING ISSUES.— 


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1 (A) Why the receivership should continue 

2 instead of converting the receivership into a 

3 proceeding under chapter 7 or 11 of title 11, 

4 United States Code. 

5 (B) The extent to which unsecured credi6 tors are likely to receive at least as much as 

7 they would receive if the receivership of the cov8 ered financial company was converted to a case 

9 under chapter 7 of title 11, United States Code. 

10 (C) An explanation of each instance where 

11 the Corporation as receiver of a covered finan12 cial company waived the requirement of 12 

13 CFR Part 366 with respect to conflicts of inter14 est by any person in the private sector who was 

15 retained to provide services to the Corporation 

16 in connection with such receivership. 

17 SEC. 1608. RULEMAKING. 

18 The Corporation may, after following the notice and 

19 comment rulemaking requirements under the Administra20 tive Procedure Act, prescribe such regulations as the Cor21 poration considers necessary or appropriate to implement 

22 the provisions of this title. 

23 SEC. 1609. POWERS AND DUTIES OF CORPORATION. 

24 (a) POWERS AND AUTHORITIES.— 

25 (1) GENERAL POWERS.— 


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1 (A) SUCCESSOR TO COVERED FINANCIAL

2 COMPANY.—The Corporation shall, upon ap3 pointment as receiver for a covered financial 

4 company under section 1604, and by operation 

5 of law, succeed to— 

6 (i) all rights, titles, powers, and privi7 leges of the covered financial company, and 

8 of any stockholder, member, officer, or di9 rector of such institution with respect to 

10 the covered financial company and the as11 sets of the covered financial company; and 

12 (ii) title to the books, records, and as13 sets of any previous receiver or other legal 

14 custodian of such covered financial com15 pany. 

16 (B) OPERATE THE COVERED FINANCIAL

17 COMPANY.—The Corporation as receiver for a 

18 covered financial company may— 

19 (i) take over the assets of and operate 

20 the covered financial company with all the 

21 powers of the members or shareholders, 

22 the directors, and the officers of the cov23 ered financial company and conduct all 

24 business of the covered financial company; 


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1 (ii) collect all obligations and money 

2 due the covered financial company; 

3 (iii) perform all functions of the cov4 ered financial company in the name of the 

5 covered financial company; 

6 (iv) preserve and conserve the assets 

7 and property of the covered financial com8 pany; and 

9 (v) provide by contract for assistance 

10 in fulfilling any function, activity, action, 

11 or duty of the Corporation as receiver. 

12 (C) FUNCTIONS OF COVERED FINANCIAL

13 COMPANY’S OFFICERS, DIRECTORS, AND SHARE14 HOLDERS.— 

15 (i) IN GENERAL.—The Corporation 

16 may provide for the exercise of any func17 tion by any member or stockholder, direc18 tor, or officer of any covered financial com19 pany for which the Corporation has been 

20 appointed as receiver under this section. 

21 (ii) PRESUMPTION.—There shall be a 

22 strong presumption that the Corporation, 

23 as receiver, will remove management re24 sponsible for the failed condition of the 

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1 agement has not already been removed at 

2 the time the Corporation is appointed as 

3 receiver). 

4 (D) ADDITIONAL POWERS AS RECEIVER.— 

5 The Corporation may, as receiver, and subject 

6 to all legally enforceable and perfected security 

7 interests, place the covered financial company 

8 in liquidation and proceed to realize upon the 

9 assets of the covered financial company in such 

10 manner as the Corporation deems appropriate, 

11 including through the sale of assets, the trans12 fer of assets to a bridge financial company es13 tablished under subsection (h), or the exercise 

14 of any other rights or privileges granted to the 

15 receiver under this section. 

16 (E) ORGANIZATION OF NEW COMPANIES.— 

17 The Corporation as receiver may organize a 

18 bridge financial company under subsection (h). 

19 (F) MERGER; TRANSFER OF ASSETS AND

20 LIABILITIES.— 

21 (i) IN GENERAL.—Subject to clause 

22 (ii), the Corporation as receiver may— 

23 (I) merge the covered financial 

24 company with another company; or 


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1 (II) transfer any asset or liability 

2 of the covered financial company (in3 cluding assets and liabilities associ4 ated with any trust or custody busi5 ness) without obtaining any approval, 

6 assignment, or consent with respect to 

7 such transfer. 

8 (ii) FEDERAL AGENCY APPROVAL; 

9 ANTITRUST REVIEW.— 

10 (I) IN GENERAL.—If a trans11 action described in clause (i) requires 

12 approval by a Federal agency, the 

13 transaction may not be consummated 

14 before the 5th calendar day after the 

15 date of approval by the Federal agen16 cy responsible for such approval with 

17 respect thereto. If, in connection with 

18 any such approval, a report on com19 petitive factors is required, the Fed20 eral agency responsible for such ap21 proval shall promptly notify the Attor22 ney General of the proposed trans23 action and the Attorney General shall 

24 provide the required report within 10 

25 days of the request. If notification 


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1 under section 7A of the Clayton Act is 

2 required with respect to such trans3 action, then the required waiting pe4 riod shall end on the 15th day after 

5 the date on which the Attorney Gen6 eral and the Federal Trade Commis7 sion receive such notification, unless 

8 the waiting period is terminated ear9 lier under subsection (b)(2) of such 

10 section, or is extended pursuant to 

11 subsection (e)(2) of such section. 

12 (II) EMERGENCY.—If the Sec13 retary in consultation with the Chair14 man of the Federal Reserve Board 

15 has found that the Corporation must 

16 act immediately to prevent the prob17 able failure of the covered financial 

18 company involved, the approval and 

19 prior notification referred to in sub20 clause (I) shall not be required and 

21 the transaction may be consummated 

22 immediately by the Corporation. The 

23 preceding sentence shall not otherwise 

24 modify, impair, or supercede the oper25 ation of any of the antitrust laws (as 


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1 defined in subsection (a) of the first 

2 section of the Clayton Act, except that 

3 such term includes section 5 of the 

4 Federal Trade Commission Act to the 

5 extent that such section 5 relates to 

6 unfair methods of competition). 

7 (G) PAYMENT OF VALID OBLIGATIONS.— 

8 The Corporation, as receiver, shall, to the ex9 tent funds are available, pay all valid obliga10 tions of the covered financial company that are 

11 due and payable at the time of the appointment 

12 of the Corporation as receiver in accordance 

13 with the prescriptions and limitations of this 

14 title. 

15 (H) SUBPOENA AUTHORITY.— 

16 (i) IN GENERAL.—The Corporation 

17 may, for purposes of carrying out any 

18 power, authority, or duty with respect to a 

19 covered financial company (including deter20 mining any claim against the covered fi21 nancial company and determining and real22 izing upon any asset of any person in the 

23 course of collecting money due the covered 

24 financial company), exercise any power es25 tablished under section 8(n) of the Federal 


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1 Deposit Insurance Act as if the covered fi2 nancial company were an insured deposi3 tory institution. 

4 (ii) RULE OF CONSTRUCTION.—This 

5 section shall not be construed as limiting 

6 any rights that the Corporation, in any ca7 pacity, might otherwise have to exercise 

8 any powers described in clause (i) under 

9 any other provision of law. 

10 (I) INCIDENTAL POWERS.—The Corpora11 tion, as receiver, may— 

12 (i) exercise all powers and authorities 

13 specifically granted to receivers under this 

14 section and such incidental powers as shall 

15 be necessary to carry out such powers; and 

16 (ii) take any action authorized by this 

17 section, which the Corporation determines 

18 is in the best interests of the covered fi19 nancial company, its customers, its credi20 tors, its counterparties, or the stability of 

21 the financial system. 

22 (J) UTILIZATION OF PRIVATE SECTOR.—In 

23 carrying out its responsibilities in the manage24 ment and disposition of assets from a covered 

25 financial company, the Corporation, as receiver, 


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1 may utilize the services of private persons, in2 cluding real estate and loan portfolio asset 

3 management, property management, auction 

4 marketing, legal, and brokerage services, if such 

5 services are available in the private sector and 

6 the Corporation determines utilization of such 

7 services is practicable, efficient, and cost effec8 tive. 

9 (K) SHAREHOLDERS AND CREDITORS OF

10 COVERED FINANCIAL COMPANY.—Notwith11 standing any other provision of law, the Cor12 poration as receiver for a covered financial com13 pany pursuant to this section and its succes14 sion, by operation of law, to the rights, titles, 

15 powers, and privileges described in subpara16 graph (A) shall terminate all rights and claims 

17 that the stockholders and creditors of the cov18 ered financial company may have against the 

19 assets of the covered financial company or the 

20 Corporation arising out of their status as stock21 holders or creditors, except for their right to 

22 payment, resolution, or other satisfaction of 

23 their claims, as permitted under this section. 

24 The Corporation shall ensure that shareholders 

25 and unsecured creditors bear losses, consistent 


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1 with the priority of claims provisions in section 

2 1609(b). 

3 (L) COORDINATION WITH FOREIGN FINAN4 CIAL AUTHORITIES.—The Corporation as re5 ceiver for a covered financial company shall co6 ordinate with the appropriate foreign financial 

7 authorities regarding the dissolution of subsidi8 aries of the covered financial company that are 

9 established in a country other than the United 

10 States. 

11 (M) APPOINTMENT OF CONSUMER PRIVACY

12 ADVISOR.— 

13 (i) APPOINTMENT.—Upon the ap14 pointment of the Corporation as receiver 

15 under section 1604(a), the Corporation 

16 shall appoint a Consumer Privacy Advisor. 

17 (ii) DUTIES.—The Consumer Privacy 

18 Advisor appointed under clause (i) shall 

19 advise the Corporation with respect to— 

20 (I) the covered financial com21 pany’s consumer privacy policies; 

22 (II) the potential losses or gains 

23 of privacy to consumers upon any 

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1 rial assets of the covered financial 

2 company; 

3 (III) the potential costs or bene4 fits to consumers upon any sale, lease, 

5 or other transfer of material assets of 

6 the covered financial company; and 

7 (IV) the potential alternatives 

8 that would mitigate potential privacy 

9 loses or potential costs to consumers. 

10 (2) AUTHORITY OF CORPORATION TO DETER11 MINE CLAIMS.— 

12 (A) IN GENERAL.—The Corporation may, 

13 as receiver, determine claims in accordance with 

14 the requirements of this subsection and regula15 tions prescribed under paragraph (3). 

16 (B) NOTICE REQUIREMENTS.—The re17 ceiver, in any case involving the liquidation or 

18 winding up of the affairs of a covered financial 

19 company, shall— 

20 (i) promptly publish a notice to the 

21 covered financial company’s creditors to 

22 present their claims, together with proof, 

23 to the receiver by a date specified in the 

24 notice which shall be not less than 90 days 

25 after the publication of such notice; and 


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1 (ii) republish such notice approxi2 mately 1 month and 2 months, respec3 tively, after the publication under clause 

4 (i). 

5 (C) MAILING REQUIRED.—The receiver 

6 shall mail a notice similar to the notice pub7 lished under subparagraph (B)(i) at the time of 

8 such publication to any creditor shown on the 

9 covered financial company’s books— 

10 (i) at the creditor’s last address ap11 pearing in such books; or 

12 (ii) upon discovery of the name and 

13 address of a claimant not appearing on the 

14 covered financial company’s books, within 

15 30 days after the discovery of such name 

16 and address. 

17 (3) RULEMAKING AUTHORITY RELATING TO DE18 TERMINATION OF CLAIMS.— 

19 (A) IN GENERAL.—Subject to subsection 

20 (b), the Corporation shall, after following the 

21 notice and comment rulemaking requirements 

22 under the Administrative Procedure Act, pre23 scribe rules and regulations regarding the al24 lowance or disallowance of claims by the Cor25 poration and providing for administrative deterVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00357 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 mination of claims and review of such deter2 mination. 

3 (B) EXISTING RULES.—The Corporation 

4 may elect to use the regulations adopted pursu5 ant to the provisions of section 11 of the Fed6 eral Deposit Insurance Act with respect to the 

7 determination of claims for a covered financial 

8 company as if the covered financial company 

9 were an insured depository institution. 

10 (4) PROCEDURES FOR DETERMINATION OF

11 CLAIMS.— 

12 (A) DETERMINATION PERIOD.— 

13 (i) IN GENERAL.—Before the end of 

14 the 180-day period beginning on the date 

15 any claim against a covered financial com16 pany is filed with the Corporation as re17 ceiver, the Corporation shall determine 

18 whether to allow or disallow the claim and 

19 shall notify the claimant of any determina20 tion with respect to such claim. 

21 (ii) EXTENSION OF TIME.—The period 

22 described in clause (i) may be extended by 

23 a written agreement between the claimant 

24 and the Corporation. 


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1 (iii) MAILING OF NOTICE SUFFI2 CIENT.—The requirements of clause (i) 

3 shall be deemed to be satisfied if the notice 

4 of any determination with respect to any 

5 claim is mailed to the last address of the 

6 claimant which appears— 

7 (I) on the covered financial com8 pany’s books; 

9 (II) in the claim filed by the 

10 claimant; or 

11 (III) in documents submitted in 

12 proof of the claim. 

13 (iv) CONTENTS OF NOTICE OF DIS14 ALLOWANCE.—If any claim filed under 

15 clause (i) is disallowed, the notice to the 

16 claimant shall contain— 

17 (I) a statement of each reason 

18 for the disallowance; and 

19 (II) the procedures available for 

20 obtaining agency review of the deter21 mination to disallow the claim or judi22 cial determination of the claim. 

23 (B) ALLOWANCE OF PROVEN CLAIM.—The 

24 Corporation shall allow any claim received on or 

25 before the date specified in the notice published 


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1 under paragraph (2)(B)(i) by the Corporation 

2 from any claimant which is proved to the satis3 faction of the Corporation. 

4 (C) DISALLOWANCE OF CLAIMS FILED

5 AFTER END OF FILING PERIOD.— 

6 (i) IN GENERAL.—Except as provided 

7 in clause (ii), claims filed after the date 

8 specified in the notice published under 

9 paragraph (2)(B)(i) shall be disallowed 

10 and such disallowance shall be final. 

11 (ii) CERTAIN EXCEPTIONS.—Clause 

12 (i) shall not apply with respect to any 

13 claim filed by any claimant after the date 

14 specified in the notice published under 

15 paragraph (2)(B)(i) and such claim may 

16 be considered by the receiver if— 

17 (I) the claimant did not receive 

18 notice of the appointment of the re19 ceiver in time to file such claim before 

20 such date; and 

21 (II) such claim is filed in time to 

22 permit payment of such claim. 

23 (D) AUTHORITY TO DISALLOW CLAIMS.— 

24 (i) IN GENERAL.—The Corporation 

25 may disallow any portion of any claim by 


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1 a creditor or claim of security, preference, 

2 or priority which is not proved to the satis3 faction of the Corporation. 

4 (ii) PAYMENTS TO LESS THAN FULLY

5 SECURED CREDITORS.—In the case of a 

6 claim of a creditor against a covered finan7 cial company which is secured by any prop8 erty or other asset of such covered finan9 cial company, the receiver— 

10 (I) may treat the portion of such 

11 claim which exceeds an amount equal 

12 to the fair market value of such prop13 erty or other asset as an unsecured 

14 claim against the covered financial 

15 company; and 

16 (II) may not make any payment 

17 with respect to such unsecured por18 tion of the claim other than in connec19 tion with the disposition of all claims 

20 of unsecured creditors of the covered 

21 financial company. 

22 (iii) EXCEPTIONS.—No provision of 

23 this paragraph shall apply with respect 

24 to— 


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1 (I) any extension of credit from 

2 any Federal Reserve bank, or the Cor3 poration, to any covered financial 

4 company; or 

5 (II) subject to clause (ii), any le6 gally enforceable or perfected security 

7 interest in the assets of the covered fi8 nancial company securing any such 

9 extension of credit. 

10 (iv) PAYMENTS TO FULLY SECURED

11 CREDITORS.—Notwithstanding any other 

12 provision of law, in any receivership of a 

13 covered financial company in which 

14 amounts realized from the dissolution are 

15 insufficient to satisfy completely any 

16 amounts owed to the United States or to 

17 the Fund, as determined in the receiver’s 

18 sole discretion, an allowed claim under a 

19 legally enforceable or perfected security in20 terest in assets of the covered financial 

21 company arising under a qualified financial 

22 contract (as defined under subsection 

23 (c)(8)(D)(i)) with an original term of 30 

24 days or less (except that, for a contract for 

25 a term linked to a calendar month, the 


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1 original term must be less than 1 calendar 

2 month), secured by collateral other than 

3 securities issued by the United States 

4 Treasury, the Board of Governors of the 

5 Federal Reserve System, any agency of the 

6 United States, any Federal Reserve bank, 

7 or any Government Sponsored Enterprise, 

8 that became a legally enforceable or per9 fected security interest after the date of 

10 the enactment of this clause, and that is 

11 not a security interest of the Federal Gov12 ernment in any of the assets of the covered 

13 financial company in receivership may be 

14 treated as an unsecured claim in the 

15 amount specified under clause (v) as nec16 essary to satisfy any amounts owed to the 

17 United States or to the Fund. Any balance 

18 of such claim that is treated as an unse19 cured claim under this subparagraph shall 

20 be paid as a general liability of the covered 

21 financial company. This clause shall not 

22 apply with respect to debt obligations se23 cured by real property. This clause may 

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1 solution of the covered financial company, 

2 no funds are available to satisfy, in whole 

3 or in part, any claims of unsecured credi4 tors or shareholders. 

5 (v) AMOUNT SPECIFIED.—For pur6 poses of clause (iv), the amount specified 

7 under this clause, in the case of a secured 

8 creditor, is the amount of up to 10 per9 cent. 

10 (E) NO JUDICIAL REVIEW OF DETERMINA11 TION PURSUANT TO SUBPARAGRAPH (D).—No 

12 court may review the Corporation determination 

13 pursuant to subparagraph (D) to disallow a 

14 claim. 

15 (F) LEGAL EFFECT OF FILING.— 

16 (i) STATUTE OF LIMITATION

17 TOLLED.—For purposes of any applicable 

18 statute of limitations, the filing of a claim 

19 with the Corporation shall constitute a 

20 commencement of an action. 

21 (ii) NO PREJUDICE TO OTHER AC22 TIONS.—Subject to paragraph (9), the fil23 ing of a claim with the Corporation shall 

24 not prejudice any right of the claimant to 

25 continue any action which was filed before 


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1 the appointment of the Corporation as re2 ceiver for the covered financial company. 

3 (5) PROVISION FOR JUDICIAL DETERMINATION

4 OF CLAIMS.— 

5 (A) IN GENERAL.—Before the end of the 

6 60-day period beginning on the earlier of— 

7 (i) the end of the period described in 

8 paragraph (4)(A)(i) (or, if extended by 

9 agreement of the Corporation and the 

10 claimant, the period described in para11 graph (4)(A)(ii)) with respect to any claim 

12 against a covered financial company for 

13 which the Corporation is receiver; or 

14 (ii) the date of any notice of disallow15 ance of such claim pursuant to paragraph 

16 (4)(A)(i), 

17 the claimant may file suit on a claim (or con18 tinue an action commenced before the appoint19 ment of the receiver) in the district or terri20 torial court of the United States for the district 

21 within which the covered financial company’s 

22 principal place of business is located or the 

23 United States District Court for the District of 

24 Columbia (and such court shall have jurisdic25 tion to hear such claim). 


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1 (B) STATUTE OF LIMITATIONS.—If any 

2 claimant fails to file suit on such claim (or con3 tinue an action commenced before the appoint4 ment of the receiver) before the end of the 60- 

5 day period described in subparagraph (A), the 

6 claim shall be deemed to be disallowed (other 

7 than any portion of such claim which was al8 lowed by the receiver) as of the end of such pe9 riod, such disallowance shall be final, and the 

10 claimant shall have no further rights or rem11 edies with respect to such claim. 

12 (6) EXPEDITED DETERMINATION OF CLAIMS.— 

13 (A) ESTABLISHMENT REQUIRED.—The 

14 Corporation shall establish a procedure for ex15 pedited relief outside of the routine claims proc16 ess established under paragraph (4) for claim17 ants who— 

18 (i) allege the existence of legally valid 

19 and enforceable or perfected security inter20 ests in assets of any covered financial com21 pany for which the Corporation has been 

22 appointed as receiver; and 

23 (ii) allege that irreparable injury will 

24 occur if the routine claims procedure is fol25 lowed. 


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1 (B) DETERMINATION PERIOD.—Before the 

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

3 any claim is filed in accordance with the proce4 dures established pursuant to subparagraph 

5 (A), the Corporation shall— 

6 (i) determine— 

7 (I) whether to allow or disallow 

8 such claim; or 

9 (II) whether such claim should be 

10 determined pursuant to the proce11 dures established pursuant to para12 graph (4); and 

13 (ii) notify the claimant of the deter14 mination, and if the claim is disallowed, 

15 provide a statement of each reason for the 

16 disallowance and the procedure for obtain17 ing judicial determination. 

18 (C) PERIOD FOR FILING OR RENEWING

19 SUIT.—Any claimant who files a request for ex20 pedited relief shall be permitted to file a suit, 

21 or to continue such a suit filed before the ap22 pointment of the Corporation as receiver, seek23 ing a determination of the claimant’s rights 

24 with respect to such security interest after the 

25 earlier of— 


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1 (i) the end of the 90-day period begin2 ning on the date of the filing of a request 

3 for expedited relief; or 

4 (ii) the date the Corporation denies 

5 the claim. 

6 (D) STATUTE OF LIMITATIONS.—If an ac7 tion described in subparagraph (C) is not filed, 

8 or the motion to renew a previously filed suit is 

9 not made, before the end of the 30-day period 

10 beginning on the date on which such action or 

11 motion may be filed in accordance with sub12 paragraph (B), the claim shall be deemed to be 

13 disallowed as of the end of such period (other 

14 than any portion of such claim which was al15 lowed by the receiver), such disallowance shall 

16 be final, and the claimant shall have no further 

17 rights or remedies with respect to such claim. 

18 (E) LEGAL EFFECT OF FILING.— 

19 (i) STATUTE OF LIMITATION

20 TOLLED.—For purposes of any applicable 

21 statute of limitations, the filing of a claim 

22 with the receiver shall constitute a com23 mencement of an action. 

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1 ing of a claim with the receiver shall not 

2 prejudice any right of the claimant to con3 tinue any action which was filed before the 

4 appointment of the Corporation as receiver 

5 for the covered financial company. 

6 (7) AGREEMENTS AGAINST INTEREST OF THE

7 RECEIVER.—No agreement that tends to diminish or 

8 defeat the interest of the Corporation as receiver in 

9 any asset acquired by the receiver under this section 

10 shall be valid against the receiver unless such agree11 ment is in writing and executed by an authorized of12 ficer or representative of the covered financial com13 pany. 

14 (8) PAYMENT OF CLAIMS.— 

15 (A) IN GENERAL.—The Corporation as re16 ceiver may, in its discretion and to the extent 

17 funds are available, pay creditor claims, in such 

18 manner and amounts as are authorized under 

19 this section, which are— 

20 (i) allowed by the receiver; 

21 (ii) approved by the Corporation pur22 suant to a final determination pursuant to 

23 paragraph (6); or 

24 (iii) determined by the final judgment 

25 of any court of competent jurisdiction. 


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1 (B) PAYMENT OF DIVIDENDS ON

2 CLAIMS.—The receiver may, in the receiver’s 

3 sole discretion and to the extent otherwise per4 mitted by this section, pay dividends on proven 

5 claims at any time, and no liability shall attach 

6 to the Corporation (in the Corporation’s capac7 ity as receiver), by reason of any such payment, 

8 for failure to pay dividends to a claimant whose 

9 claim is not proved at the time of any such pay10 ment. 

11 (C) RULEMAKING AUTHORITY OF COR12 PORATION.—The Corporation may prescribe 

13 such rules, including definitions of terms, as it 

14 deems appropriate to establish a single uniform 

15 interest rate for, or to make payments of post 

16 insolvency interest to creditors holding proven 

17 claims against the receivership estates of a cov18 ered financial company following satisfaction by 

19 the receiver of the principal amount of all cred20 itor claims. 

21 (9) SUSPENSION OF LEGAL ACTIONS.— 

22 (A) IN GENERAL.—After the appointment 

23 of the Corporation as receiver for a covered fi24 nancial company, the Corporation may request 

25 a stay for a period not to exceed 90 days in any 


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1 noncriminal judicial action or proceeding to 

2 which such covered financial company is or be3 comes a party. 

4 (B) GRANT OF STAY BY ALL COURTS RE5 QUIRED.—Upon receipt of a request by the Cor6 poration pursuant to subparagraph (A) for a 

7 stay of any non-criminal judicial action or pro8 ceeding in any court with jurisdiction of such 

9 action or proceeding, the court shall grant such 

10 stay as to all parties. 

11 (10) ADDITIONAL RIGHTS AND DUTIES.— 

12 (A) PRIOR FINAL ADJUDICATION.—The 

13 Corporation shall abide by any final 

14 unappealable judgment of any court of com15 petent jurisdiction which was rendered before 

16 the appointment of the Corporation as receiver. 

17 (B) RIGHTS AND REMEDIES OF RE18 CEIVER.—In the event of any appealable judg19 ment, the Corporation as receiver shall— 

20 (i) have all the rights and remedies 

21 available to the covered financial company 

22 (before the appointment of the receiver 

23 under section 1604) and the Corporation, 

24 including but not limited to removal to 

25 Federal court and all appellate rights; and 


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1 (ii) not be required to post any bond 

2 in order to pursue such remedies. 

3 (C) NO ATTACHMENT OR EXECUTION.—No 

4 attachment or execution may issue by any court 

5 upon assets in the possession of the receiver. 

6 (D) LIMITATION ON JUDICIAL REVIEW.— 

7 Except as otherwise provided in this subsection, 

8 no court shall have jurisdiction over— 

9 (i) any claim or action for payment 

10 from, or any action seeking a determina11 tion of rights with respect to, the assets of 

12 any covered financial company for which 

13 the Corporation has been appointed re14 ceiver, including any assets which the Cor15 poration may acquire from itself as such 

16 receiver; or 

17 (ii) any claim relating to any act or 

18 omission of such covered financial company 

19 or the Corporation as receiver. 

20 (E) DISPOSITION OF ASSETS.—In exer21 cising any right, power, privilege, or authority 

22 as receiver in connection with any covered fi23 nancial company for which the Corporation is 

24 acting as receiver under this section, the Cor25 poration shall, to the greatest extent pracVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00372 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ticable, conduct its operations in a manner 

2 which— 

3 (i) maximizes the net present value 

4 return from the sale or disposition of such 

5 assets; 

6 (ii) minimizes the amount of any loss 

7 realized in the resolution of cases; 

8 (iii) minimizes the cost to the general 

9 fund of the Treasury; 

10 (iv) mitigates the potential for serious 

11 adverse effects to the financial system and 

12 the United States economy; 

13 (v) ensures timely and adequate com14 petition and fair and consistent treatment 

15 of offerors; and 

16 (vi) prohibits discrimination on the 

17 basis of race, sex, or ethnic groups in the 

18 solicitation and consideration of offers. 

19 (11) STATUTE OF LIMITATIONS FOR ACTIONS

20 BROUGHT BY RECEIVER.— 

21 (A) IN GENERAL.—Notwithstanding any 

22 provision of any contract, the applicable statute 

23 of limitations with regard to any action brought 

24 by the Corporation as receiver shall be— 


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1 (i) in the case of any contract claim, 

2 the longer of— 

3 (I) the 6-year period beginning 

4 on the date the claim accrues; or 

5 (II) the period applicable under 

6 State law; and 

7 (ii) in the case of any tort claim, the 

8 longer of— 

9 (I) the 3-year period beginning 

10 on the date the claim accrues; or 

11 (II) the period applicable under 

12 State law. 

13 (B) DETERMINATION OF THE DATE ON

14 WHICH A CLAIM ACCRUES.—For purposes of 

15 subparagraph (A), the date on which the stat16 ute of limitations begins to run on any claim 

17 described in such subparagraph shall be the 

18 later of— 

19 (i) the date of the appointment of the 

20 Corporation as receiver under this title; or 

21 (ii) the date on which the cause of ac22 tion accrues. 

23 (C) REVIVAL OF EXPIRED STATE CAUSES

24 OF ACTION.— 


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1 (i) IN GENERAL.—In the case of any 

2 tort claim described in clause (ii) for which 

3 the statute of limitation applicable under 

4 State law with respect to such claim has 

5 expired not more than 5 years before the 

6 appointment of the Corporation as re7 ceiver, the Corporation may bring an ac8 tion as receiver on such claim without re9 gard to the expiration of the statute of lim10 itation applicable under State law. 

11 (ii) CLAIMS DESCRIBED.—A tort 

12 claim referred to in clause (i) is a claim 

13 arising from fraud, intentional misconduct 

14 resulting in unjust enrichment, or inten15 tional misconduct resulting in substantial 

16 loss to the covered financial company. 

17 (12) FRAUDULENT TRANSFERS.— 

18 (A) IN GENERAL.—The Corporation, as re19 ceiver for any covered financial company, may 

20 avoid a transfer of any interest of an institution 

21 affiliated party, or any person who the Corpora22 tion determines is a debtor of the covered finan23 cial company, in property, or any obligation in24 curred by such party or person, that was made 

25 within 5 years of the date on which the CorVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00375 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 poration was appointed receiver if such party or 

2 person voluntarily or involuntarily made such 

3 transfer or incurred such liability with the in4 tent to hinder, delay, or defraud the covered fi5 nancial company or the Corporation. 

6 (B) PREFERENTIAL TRANSFERS.—The 

7 Corporation as receiver for any covered finan8 cial company may avoid a transfer of an inter9 est of the covered financial company in property 

10 that— 

11 (i) was made to or for the benefit of 

12 a creditor; 

13 (ii) was made for or on account of an 

14 antecedent debt that was owed by the cov15 ered financial company before the transfer 

16 was made; 

17 (iii) was made while the covered fi18 nancial company was insolvent; 

19 (iv) was made— 

20 (I) on or within 90 days before 

21 the date on which the Corporation 

22 was appointed receiver; or 

23 (II) between 90 days and one 

24 year before the date that the Corpora25 tion was appointed receiver, if such 


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1 creditor at the time of the transfer 

2 was an insider, as that term is defined 

3 in section 101(31) of title 11, United 

4 States Code; and 

5 (v) enables such creditor to receive 

6 more than such creditor would receive in 

7 the liquidation of the covered financial 

8 company if— 

9 (I) the transfer had not been 

10 made; and 

11 (II) such creditor received pay12 ment of such debt to the extent pro13 vided by the provisions of this sub14 title. 

15 (C) POST-RECEIVERSHIP TRANSACTIONS.— 

16 The Corporation as receiver for any covered fi17 nancial company may avoid a transfer of prop18 erty of the receivership that occurred after the 

19 Corporation was appointed receiver that was 

20 not authorized under this title. 

21 (D) RIGHT OF RECOVERY.—To the extent 

22 that a transfer is avoided under subparagraph 

23 (A), (B) or (C), the Corporation may recover, 

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1 pany, the property transferred or, if a court so 

2 orders, the value of such property from— 

3 (i) the initial transferee of such trans4 fer or the entity for whose benefit such 

5 transfer was made; or 

6 (ii) any immediate or mediate trans7 feree of any such initial transferee. 

8 (E) RIGHTS OF TRANSFEREE OR OBLI9 GEE.—The Corporation may not recover under 

10 subparagraph (D)(ii)— 

11 (i) from a transferee that takes for 

12 value, including satisfaction or securing of 

13 a present or antecedent debt, in good faith, 

14 and without knowledge of the violability of 

15 the transfer avoided; or 

16 (ii) any immediate or mediate good 

17 faith transferee of such transferee. 

18 (F) DEFENSES.—A transferee or obligee 

19 from whom the Corporation seeks to recover a 

20 transfer or avoid an obligation under subpara21 graph (A), (B) or (C) shall have the same af22 firmative defenses and rights to liens on the 

23 property transferred to the extent they would be 

24 available to a transferee or obligee from whom 

25 a trustee under title 11 seeks to recover a 


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1 transfer under sections 547, 548, and 549 of 

2 title 11, United States Code. 

3 (G) LIMITATIONS ON AVOIDING POWERS.— 

4 The rights of the Corporation under subpara5 graph (A), (B) or (C) are restricted to the same 

6 extent as the rights of a trustee in bankruptcy 

7 under section 546(b)(1) of the Bankruptcy 

8 Code. 

9 (H) PRESUMPTION OF INSOLVENCY.—For 

10 purposes of subparagraph (B), the covered fi11 nancial company is presumed to have been in12 solvent on and during the 90 days immediately 

13 preceding the date on which the Corporation is 

14 appointed as receiver. 

15 (I) RIGHTS UNDER THIS SUBSECTION.— 

16 The rights of the Corporation as receiver for a 

17 covered financial company under this subsection 

18 shall be superior to any rights of a trustee or 

19 any other party (other than any party which is 

20 a Federal agency of a Federal Home Loan 

21 Bank) under title 11, United States Code. 

22 (J) RIGHT OF RECOVERY.—To the extent 

23 a transfer is avoided under subparagraph (A), 

24 the Corporation may recover, for the benefit of 

25 the covered financial company, the property 


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1 transferred or, if a court so orders, the value of 

2 such property (at the time of such transfer) 

3 from— 

4 (i) the initial transferee of such trans5 fer or the institution-affiliated party or 

6 person for whose benefit such transfer was 

7 made; or 

8 (ii) any immediate or mediate trans9 feree of any such initial transferee. 

10 (K) RIGHTS OF TRANSFEREE OR OBLI11 GEE.—The Corporation may not recover under 

12 subparagraph (B)— 

13 (i) any transfer that takes for value, 

14 including satisfaction or securing of a 

15 present or antecedent debt, in good faith; 

16 or 

17 (ii) any immediate or mediate good 

18 faith transferee of such transferee. 

19 (L) RIGHTS UNDER THIS SUBSECTION.— 

20 The rights of the Corporation as receiver of a 

21 covered financial company under this subsection 

22 shall be superior to any rights of a trustee or 

23 any other party (other than any party which is 

24 a Federal agency) under title 11, United States 

25 Code. 


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1 (M) DEFINITION.—For purposes of this 

2 subsection, the term ‘‘institution affiliated 

3 party’’ means— 

4 (i) any director, officer, employee, or 

5 controlling stockholder of, or agent for, a 

6 covered financial company; 

7 (ii) any shareholder, consultant, joint 

8 venture partner, and any other person as 

9 determined by the Corporation (by regula10 tion or otherwise) who participates in the 

11 conduct of the affairs of a covered finan12 cial company; and 

13 (iii) any independent contractor (in14 cluding any attorney, appraiser, or ac15 countant) who knowingly or recklessly par16 ticipates in— 

17 (I) any violation of any law or 

18 regulation; 

19 (II) any breach of fiduciary duty; 

20 or 

21 (III) any unsafe or unsound 

22 practice, 

23 which caused or is likely to cause more 

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1 nificant adverse effect on, the covered fi2 nancial company. 

3 (13) ATTACHMENT OF ASSETS AND OTHER IN4 JUNCTIVE RELIEF.—Subject to paragraph (14), any 

5 court of competent jurisdiction may, at the request 

6 of the Corporation, issue an order in accordance 

7 with Rule 65 of the Federal Rules of Civil Proce8 dure, including an order placing the assets of any 

9 person designated by the Corporation under the con10 trol of the court and appointing a trustee to hold 

11 such assets. 

12 (14) STANDARDS.— 

13 (A) SHOWING.—Rule 65 of the Federal 

14 Rules of Civil Procedure shall apply with re15 spect to any proceeding under paragraph (13) 

16 without regard to the requirement of such rule 

17 that the applicant show that the injury, loss, or 

18 damage is irreparable and immediate. 

19 (B) STATE PROCEEDING.—If, in the case 

20 of any proceeding in a State court, the court 

21 determines that rules of civil procedure avail22 able under the laws of such State provide sub23 stantially similar protections to such party’s 

24 right to due process as Rule 65 (as modified 

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1 graph (A)), the relief sought by the Corporation 

2 pursuant to paragraph (14) may be requested 

3 under the laws of such State. 

4 (15) TREATMENT OF CLAIMS ARISING FROM

5 BREACH OF CONTRACTS EXECUTED BY THE COR6 PORATION AS RECEIVER.—Notwithstanding any 

7 other provision of this subsection, any final and 

8 unappealable judgment for monetary damages en9 tered against the Corporation as receiver for a cov10 ered financial company for the breach of an agree11 ment executed or approved by the Corporation after 

12 the date of its appointment shall be paid as an ad13 ministrative expense of the receiver. Nothing in this 

14 paragraph shall be construed to limit the power of 

15 a receiver to exercise any rights under contract or 

16 law, including to terminate, breach, cancel, or other17 wise discontinue such agreement. 

18 (16) ACCOUNTING AND RECORDKEEPING RE19 QUIREMENTS.— 

20 (A) IN GENERAL.—The Corporation as re21 ceiver shall, consistent with the accounting and 

22 reporting practices and procedures established 

23 by the Corporation, maintain a full accounting 

24 of each receivership or other disposition of any 

25 covered financial company. 


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1 (B) ANNUAL ACCOUNTING OR REPORT.— 

2 With respect to each receivership to which the 

3 Corporation was appointed, the Corporation 

4 shall make an annual accounting or report, as 

5 appropriate, available to the Secretary and the 

6 Comptroller General of the United States. 

7 (C) AVAILABILITY OF REPORTS.—Any re8 port prepared pursuant to subparagraph (B) 

9 shall be made available by the Corporation upon 

10 request to any member of the public. 

11 (D) RECORDKEEPING REQUIREMENT.— 

12 (i) IN GENERAL.—Except as provided 

13 in clause (ii), after the end of the 6-year 

14 period beginning on the date the Corpora15 tion is appointed as receiver of a covered 

16 financial company the Corporation may de17 stroy any records of such covered financial 

18 company which the Corporation, in the 

19 Corporation’s discretion, determines to be 

20 unnecessary unless directed not to do so by 

21 a court of competent jurisdiction or gov22 ernmental agency, or prohibited by law. 

23 (ii) OLD RECORDS.—Notwithstanding 

24 clause (i), the Corporation may destroy 

25 records of a covered financial company 


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1 which are at least 10 years old as of the 

2 date on which the Corporation is appointed 

3 as the receiver of such company in accord4 ance with clause (i) at any time after such 

5 appointment is final, without regard to the 

6 6-year period of limitation contained in 

7 clause (i). 

8 (b) PRIORITY OF EXPENSES AND UNSECURED

9 CLAIMS.— 

10 (1) IN GENERAL.—Unsecured claims against a 

11 covered financial company, or the receiver for such 

12 covered financial company under this section, that 

13 are proven to the satisfaction of the receiver shall 

14 have priority in the following order: 

15 (A) Administrative expenses of the re16 ceiver. 

17 (B) Any amounts owed to the United 

18 States, unless the United States agrees or con19 sents otherwise. 

20 (C) Wages, salaries, or commissions, in21 cluding vacation, severance, and sick leave pay 

22 earned by an individual (other than manage23 ment responsible for the failed condition of the 

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1 ments contained in title 11, United States 

2 Code, including the amount (11 U.S.C. 

3 507(a)(4)) and restrictions on severance pay4 ments to insiders (11 U.S.C. 503(c)). 

5 (D) Contributions to employee benefit 

6 plans, subject to the limitations in title 11, 

7 United States Code (11 U.S.C. 507(a)(5)). 

8 (E) Any other general or senior liability of 

9 the covered financial company (which is not a 

10 liability described under subparagraph (F) or 

11 (G)). 

12 (F) Any obligation subordinated to general 

13 creditors (which is not an obligation described 

14 under subparagraph (G)). 

15 (G) Any obligation to shareholders, mem16 bers, general partners, limited partners or other 

17 persons with interests in the equity of the cov18 ered financial company arising as a result of 

19 their status as shareholders, members, general 

20 partners, limited partners or other persons with 

21 interests in the equity of the covered financial 

22 company. 

23 (2) POST-RECEIVERSHIP FINANCING PRI24 ORITY.—In the event that the Corporation as re25 ceiver is unable to obtain unsecured credit for the 


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1 covered financial company from commercial sources, 

2 the Corporation as receiver may obtain credit or 

3 incur debt on the part of the covered financial com4 pany which shall have priority over any or all admin5 istrative expenses of the receiver under paragraph 

6 (1)(A). 

7 (3) CLAIMS OF THE UNITED STATES.—Unse8 cured claims of the United States shall, at a min9 imum, have a higher priority than liabilities of the 

10 covered financial company that count as regulatory 

11 capital. 

12 (4) CREDITORS SIMILARLY SITUATED.—Subject 

13 to the priorities established under paragraphs (2) 

14 and (3), all claimants of a covered financial company 

15 that are similarly situated under paragraph (1) shall 

16 be treated in a similar manner, except that the re17 ceiver may take any action (including making pay18 ments) that does not comply with this subsection, 

19 if— 

20 (A) the Corporation determines that such 

21 action is necessary to maximize the value of the 

22 assets of the covered financial company, to 

23 maximize the present value return from the sale 

24 or other disposition of the assets of the covered 

25 financial company, to minimize the amount of 


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1 any loss realized upon the sale or other disposi2 tion of the assets of the covered financial com3 pany, or to contain or address serious adverse 

4 effects on financial stability or the U.S. econ5 omy; and 

6 (B) all claimants that are similarly situ7 ated under paragraph (1) receive not less than 

8 the amount provided in subsection (d)(2). 

9 (5) SECURED CLAIMS UNAFFECTED.—This sub10 section shall not affect secured claims, except to the 

11 extent that the security is insufficient to satisfy the 

12 claim and then only with regard to the difference be13 tween the claim and the amount realized from the 

14 security. 

15 (6) DEFINITIONS.—As used in this subsection, 

16 the term ‘‘administrative expenses of the receiver’’ 

17 includes— 

18 (A) the actual, necessary costs and ex19 penses incurred by the receiver in preserving 

20 the assets of a covered financial company or liq21 uidating or otherwise dissolving the affairs of a 

22 covered financial company for which the Cor23 poration has been appointed as receiver; and 

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1 tate the smooth and orderly liquidation or other 

2 dissolution of the covered financial company. 

3 (7) RULEMAKING.—The Corporation shall, 

4 after following the notice and comment rulemaking 

5 requirements under the Administrative Procedure 

6 Act, prescribe rules to carry out this section. 

7 (c) PROVISIONS RELATING TO CONTRACTS ENTERED

8 INTO BEFORE APPOINTMENT OF RECEIVER.— 

9 (1) AUTHORITY TO REPUDIATE CONTRACTS.— 

10 In addition to any other rights a receiver may have, 

11 the Corporation as receiver for any covered financial 

12 company may disaffirm or repudiate any contract or 

13 lease— 

14 (A) to which the covered financial company 

15 is a party; 

16 (B) the performance of which the receiver, 

17 in the receiver’s discretion, determines to be 

18 burdensome; and 

19 (C) the disaffirmance or repudiation of 

20 which the receiver determines, in the receiver’s 

21 discretion, will promote the orderly administra22 tion of the covered financial company’s affairs. 

23 (2) TIMING OF REPUDIATION.—The receiver 

24 appointed for any covered financial company under 

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1 cise the rights of repudiation under this subsection 

2 within a reasonable period following such appoint3 ment. 

4 (3) CLAIMS FOR DAMAGES FOR REPUDI5 ATION.— 

6 (A) IN GENERAL.—Except as otherwise 

7 provided in subparagraph (C) and paragraphs 

8 (4), (5), and (6), the liability of the receiver for 

9 the disaffirmance or repudiation of any contract 

10 pursuant to paragraph (1) shall be— 

11 (i) limited to actual direct compen12 satory damages; and 

13 (ii) determined as of— 

14 (I) the date of the appointment 

15 of the receiver; or 

16 (II) in the case of any contract 

17 or agreement referred to in paragraph 

18 (8), the date of the disaffirmance or 

19 repudiation of such contract or agree20 ment. 

21 (B) NO LIABILITY FOR OTHER DAM22 AGES.—For purposes of subparagraph (A), the 

23 term ‘‘actual direct compensatory damages’’ 

24 does not include— 

25 (i) punitive or exemplary damages; 


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1 (ii) damages for lost profits or oppor2 tunity; or 

3 (iii) damages for pain and suffering. 

4 (C) MEASURE OF DAMAGES FOR REPUDI5 ATION OF QUALIFIED FINANCIAL CONTRACTS.— 

6 In the case of any qualified financial contract 

7 or agreement to which paragraph (8) applies, 

8 compensatory damages shall be— 

9 (i) deemed to include normal and rea10 sonable costs of cover or other reasonable 

11 measures of damages utilized in the indus12 tries for such contract and agreement 

13 claims; and 

14 (ii) paid in accordance with this sub15 section and subsection (d) except as other16 wise specifically provided in this sub17 section. 

18 (4) LEASES UNDER WHICH THE COVERED FI19 NANCIAL COMPANY IS THE LESSEE.— 

20 (A) IN GENERAL.—If the receiver dis21 affirms or repudiates a lease under which the 

22 covered financial company was the lessee, the 

23 receiver shall not be liable for any damages 

24 (other than damages determined pursuant to 


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1 subparagraph (B)) for the disaffirmance or re2 pudiation of such lease. 

3 (B) PAYMENTS OF RENT.—Notwith4 standing subparagraph (A), the lessor under a 

5 lease to which such subparagraph applies 

6 shall— 

7 (i) be entitled to the contractual rent 

8 accruing before the later of the date— 

9 (I) the notice of disaffirmance or 

10 repudiation is mailed; or 

11 (II) the disaffirmance or repudi12 ation becomes effective, unless the les13 sor is in default or breach of the 

14 terms of the lease; 

15 (ii) have no claim for damages under 

16 any acceleration clause or other penalty 

17 provision in the lease; and 

18 (iii) have a claim for any unpaid rent, 

19 subject to all appropriate offsets and de20 fenses, due as of the date of the appoint21 ment which shall be paid in accordance 

22 with this subsection and subsection (d). 

23 (5) LEASES UNDER WHICH THE COVERED FI24 NANCIAL COMPANY IS THE LESSOR.— 


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1 (A) IN GENERAL.—If the receiver repudi2 ates an unexpired written lease of real property 

3 of the covered financial company under which 

4 the covered financial company is the lessor and 

5 the lessee is not, as of the date of such repudi6 ation, in default, the lessee under such lease 

7 may either— 

8 (i) treat the lease as terminated by 

9 such repudiation; or 

10 (ii) remain in possession of the lease11 hold interest for the balance of the term of 

12 the lease unless the lessee defaults under 

13 the terms of the lease after the date of 

14 such repudiation. 

15 (B) PROVISIONS APPLICABLE TO LESSEE

16 REMAINING IN POSSESSION.—If any lessee 

17 under a lease described in subparagraph (A) re18 mains in possession of a leasehold interest pur19 suant to clause (ii) of such subparagraph— 

20 (i) the lessee— 

21 (I) shall continue to pay the con22 tractual rent pursuant to the terms of 

23 the lease after the date of the repudi24 ation of such lease; 


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1 (II) may offset against any rent 

2 payment which accrues after the date 

3 of the repudiation of the lease, any 

4 damages which accrue after such date 

5 due to the nonperformance of any ob6 ligation of the covered financial com7 pany under the lease after such date; 

8 and 

9 (ii) the receiver shall not be liable to 

10 the lessee for any damages arising after 

11 such date as a result of the repudiation 

12 other than the amount of any offset al13 lowed under clause (i)(II). 

14 (6) CONTRACTS FOR THE SALE OF REAL PROP15 ERTY.— 

16 (A) IN GENERAL.—If the receiver repudi17 ates any contract (which meets the require18 ments of subsection (a)(7)) for the sale of real 

19 property and the purchaser of such real prop20 erty under such contract is in possession and is 

21 not, as of the date of such repudiation, in de22 fault, such purchaser may either— 

23 (i) treat the contract as terminated by 

24 such repudiation; or 


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1 (ii) remain in possession of such real 

2 property. 

3 (B) PROVISIONS APPLICABLE TO PUR4 CHASER REMAINING IN POSSESSION.—If any 

5 purchaser of real property under any contract 

6 described in subparagraph (A) remains in pos7 session of such property pursuant to clause (ii) 

8 of such subparagraph— 

9 (i) the purchaser— 

10 (I) shall continue to make all 

11 payments due under the contract after 

12 the date of the repudiation of the con13 tract; and 

14 (II) may offset against any such 

15 payments any damages which accrue 

16 after such date due to the non17 performance (after such date) of any 

18 obligation of the covered financial 

19 company under the contract; and 

20 (ii) the receiver shall— 

21 (I) not be liable to the purchaser 

22 for any damages arising after such 

23 date as a result of the repudiation 

24 other than the amount of any offset 

25 allowed under clause (i)(II); 


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1 (II) deliver title to the purchaser 

2 in accordance with the provisions of 

3 the contract; and 

4 (III) have no obligation under 

5 the contract other than the perform6 ance required under subclause (II). 

7 (C) ASSIGNMENT AND SALE ALLOWED.— 

8 (i) IN GENERAL.—No provision of this 

9 paragraph shall be construed as limiting 

10 the right of the receiver to assign the con11 tract described in subparagraph (A) and 

12 sell the property subject to the contract 

13 and the provisions of this paragraph. 

14 (ii) NO LIABILITY AFTER ASSIGNMENT

15 AND SALE.—If an assignment and sale de16 scribed in clause (i) is consummated, the 

17 receiver shall have no further liability 

18 under the contract described in subpara19 graph (A) or with respect to the real prop20 erty which was the subject of such con21 tract. 

22 (7) PROVISIONS APPLICABLE TO SERVICE CON23 TRACTS.— 

24 (A) SERVICES PERFORMED BEFORE AP25 POINTMENT.—In the case of any contract for 


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1 services between any person and any covered fi2 nancial company for which the Corporation has 

3 been appointed receiver, any claim of such per4 son for services performed before the appoint5 ment of the receiver shall be— 

6 (i) a claim to be paid in accordance 

7 with subsections (a), (b), and (d); and 

8 (ii) deemed to have arisen as of the 

9 date the receiver was appointed. 

10 (B) SERVICES PERFORMED AFTER AP11 POINTMENT AND PRIOR TO REPUDIATION.—If, 

12 in the case of any contract for services de13 scribed in subparagraph (A), the receiver ac14 cepts performance by the other person before 

15 the receiver makes any determination to exer16 cise the right of repudiation of such contract 

17 under this section— 

18 (i) the other party shall be paid under 

19 the terms of the contract for the services 

20 performed; and 

21 (ii) the amount of such payment shall 

22 be treated as an administrative expense of 

23 the receivership. 

24 (C) ACCEPTANCE OF PERFORMANCE NO

25 BAR TO SUBSEQUENT REPUDIATION.—The acVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00397 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ceptance by any receiver of services referred to 

2 in subparagraph (B) in connection with a con3 tract described in such subparagraph shall not 

4 affect the right of the receiver to repudiate such 

5 contract under this section at any time after 

6 such performance. 

7 (8) CERTAIN QUALIFIED FINANCIAL CON8 TRACTS.— 

9 (A) RIGHTS OF PARTIES TO CONTRACTS.— 

10 Subject to paragraphs (9) and (10) of this sub11 section and notwithstanding any other provision 

12 of this section (other than subsection (a)(7)), 

13 any other Federal law, or the law of any State, 

14 no person shall be stayed or prohibited from ex15 ercising— 

16 (i) any right such person has to cause 

17 the termination, liquidation, or acceleration 

18 of any qualified financial contract with a 

19 covered financial company which arises 

20 upon the appointment of the Corporation 

21 as receiver for such covered financial com22 pany at any time after such appointment; 

23 (ii) any right under any security 

24 agreement or arrangement or other credit 

25 enhancement related to one or more qualiVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00398 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 fied financial contracts described in clause 

2 (i); 

3 (iii) any right to offset or net out any 

4 termination value, payment amount, or 

5 other transfer obligation arising under or 

6 in connection with 1 or more contracts and 

7 agreements described in clause (i), includ8 ing any master agreement for such con9 tracts or agreements. 

10 (B) APPLICABILITY OF OTHER PROVI11 SIONS.—Subsection (a)(9) shall apply in the 

12 case of any judicial action or proceeding 

13 brought against any receiver referred to in sub14 paragraph (A), or the covered financial com15 pany for which such receiver was appointed, by 

16 any party to a contract or agreement described 

17 in subparagraph (A)(i) with such company. 

18 (C) CERTAIN TRANSFERS NOT AVOID19 ABLE.— 

20 (i) IN GENERAL.—Notwithstanding 

21 paragraph (11), section 5242 of the Re22 vised Statutes of the United States or any 

23 other provision of Federal or State law re24 lating to the avoidance of preferential or 

25 fraudulent transfers, the Corporation, 


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1 whether acting as such or as receiver of a 

2 covered financial company, may not avoid 

3 any transfer of money or other property in 

4 connection with any qualified financial con5 tract with a covered financial company. 

6 (ii) EXCEPTION FOR CERTAIN TRANS7 FERS.—Clause (i) shall not apply to any 

8 transfer of money or other property in con9 nection with any qualified financial con10 tract with a covered financial company if 

11 the Corporation determines that the trans12 feree had actual intent to hinder, delay, or 

13 defraud such company, the creditors of 

14 such company, or any receiver appointed 

15 for such company. 

16 (D) CERTAIN CONTACTS AND AGREE17 MENTS DEFINED.—For purposes of this sub18 section, the following definitions shall apply: 

19 (i) QUALIFIED FINANCIAL CON20 TRACT.—The term ‘‘qualified financial 

21 contract’’ means any securities contract, 

22 commodity contract, forward contract, re23 purchase agreement, swap agreement, and 

24 any similar agreement that the Corpora25 tion determines by regulation, resolution, 


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1 or order to be a qualified financial contract 

2 for purposes of this paragraph. 

3 (ii) SECURITIES CONTRACT.—The 

4 term ‘‘securities contract’’— 

5 (I) means a contract for the pur6 chase, sale, or loan of a security, a 

7 certificate of deposit, a mortgage loan, 

8 any interest in a mortgage loan, a 

9 group or index of securities, certifi10 cates of deposit, or mortgage loans or 

11 interests therein (including any inter12 est therein or based on the value 

13 thereof) or any option on any of the 

14 foregoing, including any option to 

15 purchase or sell any such security, 

16 certificate of deposit, mortgage loan, 

17 interest, group or index, or option, 

18 and including any repurchase or re19 verse repurchase transaction on any 

20 such security, certificate of deposit, 

21 mortgage loan, interest, group or 

22 index, or option (whether or not such 

23 repurchase or reverse repurchase 

24 transaction is a ‘‘repurchase agree25 ment,’’ as defined in clause (v)); 


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1 (II) does not include any pur2 chase, sale, or repurchase obligation 

3 under a participation in a commercial 

4 mortgage loan unless the Corporation 

5 determines by regulation, resolution, 

6 or order to include any such agree7 ment within the meaning of such 

8 term; 

9 (III) means any option entered 

10 into on a national securities exchange 

11 relating to foreign currencies; 

12 (IV) means the guarantee (in13 cluding by novation) by or to any se14 curities clearing agency of any settle15 ment of cash, securities, certificates of 

16 deposit, mortgage loans or interests 

17 therein, group or index of securities, 

18 certificates of deposit or mortgage 

19 loans or interests therein (including 

20 any interest therein or based on the 

21 value thereof) or option on any of the 

22 foregoing, including any option to 

23 purchase or sell any such security, 

24 certificate of deposit, mortgage loan, 

25 interest, group or index, or option 


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1 (whether or not such settlement is in 

2 connection with any agreement or 

3 transaction referred to in subclauses 

4 (I) through (XII) (other than sub5 clause (II)); 

6 (V) means any margin loan; 

7 (VI) means any extension of 

8 credit for the clearance or settlement 

9 of securities transactions; 

10 (VII) means any loan transaction 

11 coupled with a securities collar trans12 action, any prepaid securities forward 

13 transaction, or any total return swap 

14 transaction coupled with a securities 

15 sale transaction; 

16 (VIII) means any other agree17 ment or transaction that is similar to 

18 any agreement or transaction referred 

19 to in this clause; 

20 (IX) means any combination of 

21 the agreements or transactions re22 ferred to in this clause; 

23 (X) means any option to enter 

24 into any agreement or transaction re25 ferred to in this clause; 


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1 (XI) means a master agreement 

2 that provides for an agreement or 

3 transaction referred to in subclause 

4 (I), (III), (IV), (V), (VI), (VII), 

5 (VIII), (IX), or (X), together with all 

6 supplements to any such master 

7 agreement, without regard to whether 

8 the master agreement provides for an 

9 agreement or transaction that is not a 

10 securities contract under this clause, 

11 except that the master agreement 

12 shall be considered to be a securities 

13 contract under this clause only with 

14 respect to each agreement or trans15 action under the master agreement 

16 that is referred to in subclause (I), 

17 (III), (IV), (V), (VI), (VII), (VIII), 

18 (IX), or (X); and 

19 (XII) means any security agree20 ment or arrangement or other credit 

21 enhancement related to any agree22 ment or transaction referred to in this 

23 clause, including any guarantee or re24 imbursement obligation in connection 


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1 with any agreement or transaction re2 ferred to in this clause. 

3 (iii) COMMODITY CONTRACT.—The 

4 term ‘‘commodity contract’’ means— 

5 (I) with respect to a futures com6 mission merchant, a contract for the 

7 purchase or sale of a commodity for 

8 future delivery on, or subject to the 

9 rules of, a contract market or board 

10 of trade; 

11 (II) with respect to a foreign fu12 tures commission merchant, a foreign 

13 future; 

14 (III) with respect to a leverage 

15 transaction merchant, a leverage 

16 transaction; 

17 (IV) with respect to a clearing 

18 organization, a contract for the pur19 chase or sale of a commodity for fu20 ture delivery on, or subject to the 

21 rules of, a contract market or board 

22 of trade that is cleared by such clear23 ing organization, or commodity option 

24 traded on, or subject to the rules of, 

25 a contract market or board of trade 


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1 that is cleared by such clearing orga2 nization; 

3 (V) with respect to a commodity 

4 options dealer, a commodity option; 

5 (VI) any other agreement or 

6 transaction that is similar to any 

7 agreement or transaction referred to 

8 in this clause; 

9 (VII) any combination of the 

10 agreements or transactions referred to 

11 in this clause; 

12 (VIII) any option to enter into 

13 any agreement or transaction referred 

14 to in this clause; 

15 (IX) a master agreement that 

16 provides for an agreement or trans17 action referred to in subclause (I), 

18 (II), (III), (IV), (V), (VI), (VII), or 

19 (VIII), together with all supplements 

20 to any such master agreement, with21 out regard to whether the master 

22 agreement provides for an agreement 

23 or transaction that is not a com24 modity contract under this clause, ex25 cept that the master agreement shall 


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1 be considered to be a commodity con2 tract under this clause only with re3 spect to each agreement or trans4 action under the master agreement 

5 that is referred to in subclause (I), 

6 (II), (III), (IV), (V), (VI), (VII), or 

7 (VIII); or 

8 (X) any security agreement or 

9 arrangement or other credit enhance10 ment related to any agreement or 

11 transaction referred to in this clause, 

12 including any guarantee or reimburse13 ment obligation in connection with 

14 any agreement or transaction referred 

15 to in this clause. 

16 (iv) FORWARD CONTRACT.—The term 

17 ‘‘forward contract’’ means— 

18 (I) a contract (other than a com19 modity contract) for the purchase, 

20 sale, or transfer of a commodity or 

21 any similar good, article, service, 

22 right, or interest which is presently or 

23 in the future becomes the subject of 

24 dealing in the forward contract trade, 

25 or product or byproduct thereof, with 


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1 a maturity date more than 2 days 

2 after the date the contract is entered 

3 into, including a repurchase or reverse 

4 repurchase transaction (whether or 

5 not such repurchase or reverse repur6 chase transaction is a ‘‘repurchase 

7 agreement’’, as defined in clause (v)), 

8 consignment, lease, swap, hedge 

9 transaction, deposit, loan, option, allo10 cated transaction, unallocated trans11 action, or any other similar agree12 ment; 

13 (II) any combination of agree14 ments or transactions referred to in 

15 subclauses (I) and (III); 

16 (III) any option to enter into any 

17 agreement or transaction referred to 

18 in subclause (I) or (II); 

19 (IV) a master agreement that 

20 provides for an agreement or trans21 action referred to in subclauses (I), 

22 (II), or (III), together with all supple23 ments to any such master agreement, 

24 without regard to whether the master 

25 agreement provides for an agreement 


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1 or transaction that is not a forward 

2 contract under this clause, except that 

3 the master agreement shall be consid4 ered to be a forward contract under 

5 this clause only with respect to each 

6 agreement or transaction under the 

7 master agreement that is referred to 

8 in subclause (I), (II), or (III); or 

9 (V) any security agreement or ar10 rangement or other credit enhance11 ment related to any agreement or 

12 transaction referred to in subclause 

13 (I), (II), (III), or (IV), including any 

14 guarantee or reimbursement obliga15 tion in connection with any agreement 

16 or transaction referred to in any such 

17 subclause. 

18 (v) REPURCHASE AGREEMENT.—The 

19 term ‘‘repurchase agreement’’ (which defi20 nition also applies to a reverse repurchase 

21 agreement)— 

22 (I) means an agreement, includ23 ing related terms, which provides for 

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1 curities (as such term is defined in 

2 the Securities Exchange Act of 1934), 

3 mortgage loans, interests in mortgage4 related securities or mortgage loans, 

5 eligible bankers’ acceptances, qualified 

6 foreign government securities (which 

7 for purposes of this clause shall mean 

8 a security that is a direct obligation 

9 of, or that is fully guaranteed by, the 

10 central government of a member of 

11 the Organization for Economic Co12 operation and Development as deter13 mined by regulation or order adopted 

14 by the Federal Reserve Board) or se15 curities that are direct obligations of, 

16 or that are fully guaranteed by, the 

17 United States or any agency of the 

18 United States against the transfer of 

19 funds by the transferee of such certifi20 cates of deposit, eligible bankers’ ac21 ceptances, securities, mortgage loans, 

22 or interests with a simultaneous 

23 agreement by such transferee to 

24 transfer to the transferor thereof cer25 tificates of deposit, eligible bankers’ 


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1 acceptances, securities, mortgage 

2 loans, or interests as described above, 

3 at a date certain not later than 1 year 

4 after such transfers or on demand, 

5 against the transfer of funds, or any 

6 other similar agreement; 

7 (II) does not include any repur8 chase obligation under a participation 

9 in a commercial mortgage loan unless 

10 the Corporation determines by regula11 tion, resolution, or order to include 

12 any such participation within the 

13 meaning of such term; 

14 (III) means any combination of 

15 agreements or transactions referred to 

16 in subclauses (I) and (IV); 

17 (IV) means any option to enter 

18 into any agreement or transaction re19 ferred to in subclause (I) or (III); 

20 (V) means a master agreement 

21 that provides for an agreement or 

22 transaction referred to in subclause 

23 (I), (III), or (IV), together with all 

24 supplements to any such master 

25 agreement, without regard to whether 


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1 the master agreement provides for an 

2 agreement or transaction that is not a 

3 repurchase agreement under this 

4 clause, except that the master agree5 ment shall be considered to be a re6 purchase agreement under this sub7 clause only with respect to each agree8 ment or transaction under the master 

9 agreement that is referred to in sub10 clause (I), (III), or (IV); and 

11 (VI) means any security agree12 ment or arrangement or other credit 

13 enhancement related to any agree14 ment or transaction referred to in 

15 subclause (I), (III), (IV), or (V), in16 cluding any guarantee or reimburse17 ment obligation in connection with 

18 any agreement or transaction referred 

19 to in any such subclause. 

20 (vi) SWAP AGREEMENT.—The term 

21 ‘‘swap agreement’’ means— 

22 (I) any agreement, including the 

23 terms and conditions incorporated by 

24 reference in any such agreement, 

25 which is an interest rate swap, option, 


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1 future, or forward agreement, includ2 ing a rate floor, rate cap, rate collar, 

3 cross-currency rate swap, and basis 

4 swap; a spot, same day-tomorrow, to5 morrow-next, forward, or other for6 eign exchange, precious metals, or 

7 other commodity agreement; a cur8 rency swap, option, future, or forward 

9 agreement; an equity index or equity 

10 swap, option, future, or forward 

11 agreement; a debt index or debt swap, 

12 option, future, or forward agreement; 

13 a total return, credit spread or credit 

14 swap, option, future, or forward 

15 agreement; a commodity index or 

16 commodity swap, option, future, or 

17 forward agreement; weather swap, op18 tion, future, or forward agreement; an 

19 emissions swap, option, future, or for20 ward agreement; or an inflation swap, 

21 option, future, or forward agreement; 

22 (II) any agreement or transaction 

23 that is similar to any other agreement 

24 or transaction referred to in this 

25 clause and that is of a type that has 


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1 been, is presently, or in the future be2 comes, the subject of recurrent deal3 ings in the swap or other derivatives 

4 markets (including terms and condi5 tions incorporated by reference in 

6 such agreement) and that is a for7 ward, swap, future, option or spot 

8 transaction on one or more rates, cur9 rencies, commodities, equity securities 

10 or other equity instruments, debt se11 curities or other debt instruments, 

12 quantitative measures associated with 

13 an occurrence, extent of an occur14 rence, or contingency associated with 

15 a financial, commercial, or economic 

16 consequence, or economic or financial 

17 indices or measures of economic or fi18 nancial risk or value; 

19 (III) any combination of agree20 ments or transactions referred to in 

21 this clause; 

22 (IV) any option to enter into any 

23 agreement or transaction referred to 

24 in this clause; 


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1 (V) a master agreement that pro2 vides for an agreement or transaction 

3 referred to in subclause (I), (II), (III), 

4 or (IV), together with all supplements 

5 to any such master agreement, with6 out regard to whether the master 

7 agreement contains an agreement or 

8 transaction that is not a swap agree9 ment under this clause, except that 

10 the master agreement shall be consid11 ered to be a swap agreement under 

12 this clause only with respect to each 

13 agreement or transaction under the 

14 master agreement that is referred to 

15 in subclause (I), (II), (III), or (IV); 

16 and 

17 (VI) any security agreement or 

18 arrangement or other credit enhance19 ment related to any agreements or 

20 transactions referred to in subclause 

21 (I), (II), (III), (IV), or (V), including 

22 any guarantee or reimbursement obli23 gation in connection with any agree24 ment or transaction referred to in any 

25 such subclause. 


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1 (vii) DEFINITIONS RELATING TO DE2 FAULT.—When used in this paragraph and 

3 paragraph (10)— 

4 (I) The term ‘‘default’’ shall 

5 mean, with respect to a covered finan6 cial company, any adjudication or 

7 other official determination by any 

8 court of competent jurisdiction, or 

9 other public authority pursuant to 

10 which a conservator, receiver, or other 

11 legal custodian is appointed; and 

12 (II) The term ‘‘in danger of de13 fault’’ shall mean a covered financial 

14 company with respect to which the 

15 Corporation or appropriate State au16 thority has determined that— 

17 (aa) in the opinion of the 

18 Corporation or such authority— 

19 (AA) the covered finan20 cial company is not likely to 

21 be able to pay its obligations 

22 in the normal course of busi23 ness; and 

24 (BB) there is no rea25 sonable prospect that the 


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1 covered financial company 

2 will be able to pay such obli3 gations without Federal as4 sistance; or 

5 (CC) in the opinion of 

6 the Corporation or such au7 thority— 

8 (bb) the covered financial 

9 company has incurred or is likely 

10 to incur losses that will deplete 

11 all or substantially all of its cap12 ital; and 

13 (cc) there is no reasonable 

14 prospect that the capital will be 

15 replenished without Federal as16 sistance. 

17 (viii) TREATMENT OF MASTER AGREE18 MENT AS ONE AGREEMENT.—Any master 

19 agreement for any contract or agreement 

20 described in any preceding clause of this 

21 subparagraph (or any master agreement 

22 for such master agreement or agreements), 

23 together with all supplements to such mas24 ter agreement, shall be treated as a single 

25 agreement and a single qualified financial 


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1 contact. If a master agreement contains 

2 provisions relating to agreements or trans3 actions that are not themselves qualified fi4 nancial contracts, the master agreement 

5 shall be deemed to be a qualified financial 

6 contract only with respect to those trans7 actions that are themselves qualified finan8 cial contracts. 

9 (ix) TRANSFER.—The term ‘‘transfer’’ 

10 means every mode, direct or indirect, abso11 lute or conditional, voluntary or involun12 tary, of disposing of or parting with prop13 erty or with an interest in property, includ14 ing retention of title as a security interest 

15 and foreclosure of the covered financial 

16 company’s equity of redemption. 

17 (x) PERSON.—The term ‘‘person’’ in18 cludes any governmental entity in addition 

19 to any entity included in the definition of 

20 such term in section 1, title 1, United 

21 States Code. 

22 (E) CLARIFICATION.—No provision of law 

23 shall be construed as limiting the right or 

24 power of the Corporation, or authorizing any 

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1 ner, the right or power of the Corporation to 

2 transfer any qualified financial contract in ac3 cordance with paragraphs (9) and (10) of this 

4 subsection or to disaffirm or repudiate any such 

5 contract in accordance with subsection (c)(1) of 

6 this section. 

7 (F) WALKAWAY CLAUSES NOT EFFEC8 TIVE.— 

9 (i) IN GENERAL.—Notwithstanding 

10 the provisions of subparagraph (A) and 

11 sections 403 and 404 of the Federal De12 posit Insurance Corporation Improvement 

13 Act of 1991, no walkaway clause shall be 

14 enforceable in a qualified financial contract 

15 of a covered financial company in default. 

16 (ii) LIMITED SUSPENSION OF CERTAIN

17 OBLIGATIONS.—In the case of a qualified 

18 financial contract referred to in clause (i), 

19 any payment or delivery obligations other20 wise due from a party pursuant to the 

21 qualified financial contract shall be sus22 pended from the time the receiver is ap23 pointed until the earlier of— 

24 (I) the time such party receives 

25 notice that such contract has been 


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1 transferred pursuant to paragraph 

2 (10)(A); or 

3 (II) 5:00 p.m. (eastern time) on 

4 the business day following the date of 

5 the appointment of the receiver. 

6 (iii) WALKAWAY CLAUSE DEFINED.— 

7 For purposes of this subparagraph, the 

8 term ‘‘walkaway clause’’ means any provi9 sion in a qualified financial contract that 

10 suspends, conditions, or extinguishes a 

11 payment obligation of a party, in whole or 

12 in part, or does not create a payment obli13 gation of a party that would otherwise 

14 exist, solely because of such party’s status 

15 as a nondefaulting party in connection 

16 with the insolvency of a covered financial 

17 company that is a party to the contract or 

18 the appointment of or the exercise of rights 

19 or powers by a receiver of such covered fi20 nancial company, and not as a result of a 

21 party’s exercise of any right to offset, 

22 setoff, or net obligations that exist under 

23 the contract, any other contract between 

24 those parties, or applicable law. 


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1 (G) RECORDKEEPING.—The Corporation, 

2 in consultation with the Federal Reserve Board, 

3 may prescribe regulations requiring that the 

4 covered financial company maintain such 

5 records with respect to qualified financial con6 tracts (including market valuations) as the Cor7 poration determines to be necessary or appro8 priate in order to assist the receiver of the cov9 ered financial company in being able to exercise 

10 its rights and fulfill its obligations under this 

11 paragraph or paragraph (9) or (10). 

12 (9) TRANSFER OF QUALIFIED FINANCIAL CON13 TRACTS.— 

14 (A) IN GENERAL.—In making any transfer 

15 of assets or liabilities of a covered financial 

16 company in default which includes any qualified 

17 financial contract, the receiver for such covered 

18 financial company shall either— 

19 (i) transfer to one financial institu20 tion, other than a financial institution for 

21 which a conservator, receiver, trustee in 

22 bankruptcy, or other legal custodian has 

23 been appointed or which is otherwise the 

24 subject of a bankruptcy or insolvency pro25 ceeding— 


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1 (I) all qualified financial con2 tracts between any person or any af3 filiate of such person and the covered 

4 financial company in default; 

5 (II) all claims of such person or 

6 any affiliate of such person against 

7 such covered financial company under 

8 any such contract (other than any 

9 claim which, under the terms of any 

10 such contract, is subordinated to the 

11 claims of general unsecured creditors 

12 of such company); 

13 (III) all claims of such covered fi14 nancial company against such person 

15 or any affiliate of such person under 

16 any such contract; and 

17 (IV) all property securing or any 

18 other credit enhancement for any con19 tract described in subclause (I) or any 

20 claim described in subclause (II) or 

21 (III) under any such contract; or 

22 (ii) transfer none of the qualified fi23 nancial contracts, claims, property or other 

24 credit enhancement referred to in clause (i) 


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1 (with respect to such person and any affil2 iate of such person). 

3 (B) TRANSFER TO FOREIGN BANK, FINAN4 CIAL INSTITUTION, OR BRANCH OR AGENCY

5 THEREOF.—In transferring any qualified finan6 cial contracts and related claims and property 

7 under subparagraph (A)(i), the receiver for the 

8 covered financial company shall not make such 

9 transfer to a foreign bank, financial institution 

10 organized under the laws of a foreign country, 

11 or a branch or agency of a foreign bank or fi12 nancial institution unless, under the law appli13 cable to such bank, financial institution, branch 

14 or agency, to the qualified financial contracts, 

15 and to any netting contract, any security agree16 ment or arrangement or other credit enhance17 ment related to one or more qualified financial 

18 contracts, the contractual rights of the parties 

19 to such qualified financial contracts, netting 

20 contracts, security agreements or arrangements, 

21 or other credit enhancements are enforceable 

22 substantially to the same extent as permitted 

23 under this section. 

24 (C) TRANSFER OF CONTRACTS SUBJECT

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1 TION.—In the event that a receiver transfers 

2 any qualified financial contract and related 

3 claims, property, and credit enhancements pur4 suant to subparagraph (A)(i) and such contract 

5 is cleared by or subject to the rules of a clear6 ing organization, the clearing organization shall 

7 not be required to accept the transferee as a 

8 member by virtue of the transfer. 

9 (D) DEFINITIONS.—For purposes of this 

10 paragraph, the term ‘‘financial institution’’ 

11 means a broker or dealer, a depository institu12 tion, a futures commission merchant, a bridge 

13 financial company, or any other institution de14 termined by the Corporation by regulation to be 

15 a financial institution, and the term ‘‘clearing 

16 organization’’ has the same meaning as in sec17 tion 402 of the Federal Deposit Insurance Cor18 poration Improvement Act of 1991. 

19 (10) NOTIFICATION OF TRANSFER.— 

20 (A) IN GENERAL.—If— 

21 (i) the receiver for a covered financial 

22 company in default or in danger of default 

23 transfers any assets and liabilities of the 

24 covered financial company; and 


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1 (ii) the transfer includes any qualified 

2 financial contract, 

3 the receiver shall notify any person who is a 

4 party to any such contract of such transfer by 

5 5:00 p.m. (eastern time) on the business day 

6 following the date of the appointment of the re7 ceiver. 

8 (B) CERTAIN RIGHTS NOT ENFORCE9 ABLE.— 

10 (i) RECEIVERSHIP.—A person who is 

11 a party to a qualified financial contract 

12 with a covered financial company may not 

13 exercise any right that such person has to 

14 terminate, liquidate, or net such contract 

15 under paragraph (8)(A) of this subsection 

16 solely by reason of or incidental to the ap17 pointment under this section of a receiver 

18 for the covered financial company (or the 

19 insolvency or financial condition of the cov20 ered financial company for which the re21 ceiver has been appointed)— 

22 (I) until 5:00 p.m. (eastern time) 

23 on the business day following the date 

24 of the appointment of the receiver; or 


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1 (II) after the person has received 

2 notice that the contract has been 

3 transferred pursuant to paragraph 

4 (9)(A). 

5 (ii) NOTICE.—For purposes of this 

6 paragraph, the receiver for a covered fi7 nancial company shall be deemed to have 

8 notified a person who is a party to a quali9 fied financial contract with such covered fi10 nancial company if the receiver has taken 

11 steps reasonably calculated to provide no12 tice to such person by the time specified in 

13 subparagraph (A). 

14 (C) TREATMENT OF BRIDGE FINANCIAL

15 COMPANY.—For purposes of paragraph (9), a 

16 bridge financial company shall not be consid17 ered to be a financial institution for which a 

18 conservator, receiver, trustee in bankruptcy, or 

19 other legal custodian has been appointed or 

20 which is otherwise the subject of a bankruptcy 

21 or insolvency proceeding. 

22 (D) BUSINESS DAY DEFINED.—For pur23 poses of this paragraph, the term ‘‘business 

24 day’’ means any day other than any Saturday, 

25 Sunday, or any day on which either the New 


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1 York Stock Exchange or the Federal Reserve 

2 Bank of New York is closed. 

3 (11) DISAFFIRMANCE OR REPUDIATION OF

4 QUALIFIED FINANCIAL CONTRACTS.—In exercising 

5 the rights of disaffirmance or repudiation of a re6 ceiver with respect to any qualified financial contract 

7 to which a covered financial company is a party, the 

8 receiver for such covered financial shall either— 

9 (A) disaffirm or repudiate all qualified fi10 nancial contracts between— 

11 (i) any person or any affiliate of such 

12 person; and 

13 (ii) the covered financial company in 

14 default; or 

15 (B) disaffirm or repudiate none of the 

16 qualified financial contracts referred to in sub17 paragraph (A) (with respect to such person or 

18 any affiliate of such person). 

19 (12) CERTAIN SECURITY AND CUSTOMER IN20 TERESTS NOT AVOIDABLE.—No provision of this 

21 subsection shall be construed as permitting the 

22 avoidance of any— 

23 (A) legally enforceable or perfected secu24 rity interest in any of the assets of any covered 

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1 est is taken in contemplation of the company’s 

2 insolvency or with the intent to hinder, delay, or 

3 defraud the company or the creditors of such 

4 company; or 

5 (B) legally enforceable interest in customer 

6 property. 

7 (13) AUTHORITY TO ENFORCE CONTRACTS.— 

8 (A) IN GENERAL.—The receiver may en9 force any contract, other than a director’s or of10 ficer’s liability insurance contract or a financial 

11 institution bond, entered into by the covered fi12 nancial company notwithstanding any provision 

13 of the contract providing for termination, de14 fault, acceleration, or exercise of rights upon, or 

15 solely by reason of, insolvency or the appoint16 ment of or the exercise of rights or powers by 

17 a receiver. 

18 (B) CERTAIN RIGHTS NOT AFFECTED.— 

19 No provision of this paragraph may be con20 strued as impairing or affecting any right of the 

21 receiver to enforce or recover under a director’s 

22 or officer’s liability insurance contract or finan23 cial institution bond under other applicable law. 

24 (C) CONSENT REQUIREMENT.— 


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1 (i) IN GENERAL.—Except as otherwise 

2 provided by this section, no person may ex3 ercise any right or power to terminate, ac4 celerate, or declare a default under any 

5 contract to which the covered financial 

6 company is a party, or to obtain possession 

7 of or exercise control over any property of 

8 the covered financial company or affect 

9 any contractual rights of the covered finan10 cial company, without the consent of the 

11 receiver, as appropriate, of the covered fi12 nancial company during the 90-day period 

13 beginning on the date of the appointment 

14 of the receiver, as applicable. 

15 (ii) CERTAIN EXCEPTIONS.—No provi16 sion of this subparagraph shall apply to a 

17 director or officer liability insurance con18 tract or a financial institution bond, to the 

19 rights of parties to certain qualified finan20 cial contracts pursuant to paragraph (8), 

21 or to the rights of parties to netting con22 tracts pursuant to subtitle A of title IV of 

23 the Federal Deposit Insurance Corporation 

24 Improvement Act of 1991 (12 U.S.C. 4401 

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1 ting the receiver to fail to comply with oth2 erwise enforceable provisions of such con3 tract. 

4 (14) EXCEPTION FOR FEDERAL RESERVE

5 BANKS AND CORPORATION SECURITY INTEREST.— 

6 No provision of this subsection shall apply with re7 spect to— 

8 (A) any extension of credit from any Fed9 eral Reserve bank or the Corporation to any 

10 covered financial company; or 

11 (B) any security interest in the assets of 

12 the covered financial company securing any 

13 such extension of credit. 

14 (15) SAVINGS CLAUSE.—The meanings of terms 

15 used in this subsection are applicable for purposes of 

16 this subsection only, and shall not be construed or 

17 applied so as to challenge or affect the characteriza18 tion, definition, or treatment of any similar terms 

19 under any other statute, regulation, or rule, includ20 ing, but not limited, to the Gramm-Leach-Bliley Act, 

21 the Legal Certainty for Bank Products Act of 2000, 

22 the securities laws (as that term is defined in section 

23 3(a)(47) of the Securities Exchange Act of 1934), 

24 and the Commodity Exchange Act. 


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1 (16) AUTHORITY REGARDING COLLECTIVE BAR2 GAINING AGREEMENTS.—The Corporation as re3 ceiver for any covered financial company shall not 

4 disaffirm or repudiate any collective bargaining 

5 agreement to which the covered financial company is 

6 a party unless the Corporation determines that repu7 diation is necessary for the orderly resolution of the 

8 covered financial company after taking into consider9 ation the cost to taxpayers and the financial stability 

10 of the United States. 

11 (d) VALUATION OF CLAIMS IN DEFAULT.— 

12 (1) IN GENERAL.—Notwithstanding any other 

13 provision of Federal law or the law of any State, and 

14 regardless of the method which the Corporation de15 termines to utilize with respect to a covered financial 

16 company, including transactions authorized under 

17 subsection (h), this subsection shall govern the 

18 rights of the creditors of such covered financial com19 pany. 

20 (2) MAXIMUM LIABILITY.—The maximum li21 ability of the Corporation, acting as receiver or in 

22 any other capacity, to any person having a claim 

23 against the receiver or the covered financial com24 pany for which such receiver is appointed shall equal 

25 the amount such claimant would have received if— 


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1 (A) a determination had not been made 

2 under section 1603(b) with respect to the cov3 ered financial company; and 

4 (B) the covered financial company had 

5 been liquidated under title 11, United States 

6 Code, or any case related to title 11, United 

7 States Code (including a case initiated by the 

8 Securities Investor Protection Corporation with 

9 respect to a financial company subject to the 

10 Securities Investor Protection Act of 1970), or 

11 any State insolvency law. 

12 (3) ADDITIONAL PAYMENTS AUTHORIZED.— 

13 (A) IN GENERAL.—The Corporation may, 

14 as receiver and with the approval of the Sec15 retary, make additional payments or credit ad16 ditional amounts to or with respect to or for the 

17 account of any claimant or category of claim18 ants of a covered financial company if the Cor19 poration determines that such payments or 

20 credits are necessary or appropriate to— 

21 (i) minimize losses to the receiver 

22 from the dissolution of the covered finan23 cial company under this section; or 


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1 (ii) prevent or mitigate serious ad2 verse effects to financial stability or the 

3 United States economy. 

4 (B) MANNER OF PAYMENT.—The Corpora5 tion may make payments or credit amounts 

6 under subparagraph (A) directly to the claim7 ants or may make such payments or credit such 

8 amounts to a company other than a covered fi9 nancial company or a bridge financial company 

10 established with respect thereto in order to in11 duce such other company to accept liability for 

12 such claims. 

13 (e) LIMITATION ON COURT ACTION.—Except as pro14 vided in this section or at the request of the receiver ap15 pointed for a covered financial company, no court may 

16 take any action to restrain or affect the exercise of powers 

17 or functions of the receiver hereunder. 

18 (f) LIABILITY OF DIRECTORS AND OFFICERS.— 

19 (1) IN GENERAL.—A director or officer of a 

20 covered financial company may be held personally 

21 liable for monetary damages in any civil action de22 scribed in paragraph (2) by, on behalf of, or at the 

23 request or direction of the Corporation, which action 

24 is prosecuted wholly or partially for the benefit of 

25 the Corporation— 


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1 (A) acting as receiver of such covered fi2 nancial company; 

3 (B) acting based upon a suit, claim, or 

4 cause of action purchased from, assigned by, or 

5 otherwise conveyed by such receiver; or 

6 (C) acting based upon a suit, claim, or 

7 cause of action purchased from, assigned by, or 

8 otherwise conveyed in whole or in part by a cov9 ered financial company or its affiliate in con10 nection with assistance provided under section 

11 1604. 

12 (2) ACTIONS COVERED.—Paragraph (1) shall 

13 apply with respect to actions for gross negligence, 

14 including any similar conduct or conduct that dem15 onstrates a greater disregard of a duty of care (than 

16 gross negligence) including intentional tortious con17 duct, as such terms are defined and determined 

18 under applicable State law. 

19 (3) SAVINGS CLAUSE.—Nothing in this sub20 section shall impair or affect any right of the Cor21 poration under other applicable law. 

22 (g) DAMAGES.—In any proceeding related to any 

23 claim against a covered financial company’s director, offi24 cer, employee, agent, attorney, accountant, appraiser, or 

25 any other party employed by or providing services to a 


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1 covered financial company, recoverable damages deter2 mined to result from the improvident or otherwise im3 proper use or investment of any covered financial com4 pany’s assets shall include principal losses and appropriate 

5 interest. 

6 (h) BRIDGE FINANCIAL COMPANIES.— 

7 (1) ORGANIZATION.— 

8 (A) PURPOSE.—The Corporation, as re9 ceiver of one or more covered financial compa10 nies may organize one or more bridge financial 

11 companies in accordance with this subsection. 

12 (B) AUTHORITIES.—Upon the creation of 

13 a bridge financial company under subparagraph 

14 (A) with respect to a covered financial com15 pany, such bridge financial company may— 

16 (i) assume such liabilities (including 

17 liabilities associated with any trust or cus18 tody business but excluding any liabilities 

19 that count as regulatory capital) of such 

20 covered financial company as the Corpora21 tion may, in its discretion, determine to be 

22 appropriate; 

23 (ii) purchase such assets (including 

24 assets associated with any trust or custody 

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1 pany as the Corporation may, in its discre2 tion, determine to be appropriate; and 

3 (iii) perform any other temporary 

4 function which the Corporation may, in its 

5 discretion, prescribe in accordance with 

6 this section. 

7 (2) CHARTER AND ESTABLISHMENT.— 

8 (A) ESTABLISHMENT.—If the Corporation 

9 is appointed as receiver for a covered financial 

10 company, the Corporation may grant a Federal 

11 charter to and approve articles of association 

12 for one or more bridge financial company or 

13 companies with respect to such covered finan14 cial company which shall, by operation of law 

15 and immediately upon issuance of its charter 

16 and approval of its articles of association, be es17 tablished and operate in accordance with, and 

18 subject to, such charter, articles, and this sec19 tion. 

20 (B) MANAGEMENT.—Upon its establish21 ment, a bridge financial company shall be under 

22 the management of a board of directors ap23 pointed by the Corporation. 

24 (C) ARTICLES OF ASSOCIATION.—The arti25 cles of association and organization certificate 


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1 of a bridge financial shall have such terms as 

2 the Corporation may provide, and shall be exe3 cuted by such representatives as the Corpora4 tion may designate. 

5 (D) TERMS OF CHARTER; RIGHTS AND

6 PRIVILEGES.—Subject to and in accordance 

7 with the provisions of this subsection, the Cor8 poration shall— 

9 (i) establish the terms of the charter 

10 of a bridge financial company and the 

11 rights, powers, authorities and privileges of 

12 a bridge financial company granted by the 

13 charter or as an incident thereto; and 

14 (ii) provide for, and establish the 

15 terms and conditions governing, the man16 agement (including, but not limited to, the 

17 bylaws and the number of directors of the 

18 board of directors) and operations of the 

19 bridge financial company. 

20 (E) TRANSFER OF RIGHTS AND PRIVI21 LEGES OF COVERED FINANCIAL COMPANY.— 

22 (i) IN GENERAL.—Notwithstanding 

23 any other provision of Federal law or the 

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1 ceed to and assume any rights, powers, au2 thorities or privileges of the covered finan3 cial company with respect to which the 

4 bridge financial company was established 

5 and, upon such determination by the Cor6 poration, the bridge financial company 

7 shall immediately and by operation of law 

8 succeed to and assume such rights, powers, 

9 authorities and privileges. 

10 (ii) EFFECTIVE WITHOUT AP11 PROVAL.—Any succession to or assumption 

12 by a bridge financial company of rights, 

13 powers, authorities or privileges of a cov14 ered financial company under clause (i) or 

15 otherwise shall be effective without any 

16 further approval under Federal or State 

17 law, assignment, or consent with respect 

18 thereto. 

19 (F) CORPORATE GOVERNANCE AND ELEC20 TION AND DESIGNATION OF BODY OF LAW.—To 

21 the extent permitted by the Corporation and 

22 consistent with this section and any rules, regu23 lations or directives issued by the Corporation 

24 under this section, a bridge financial company 

25 may elect to follow the corporate governance 


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1 practices and procedures as are applicable to a 

2 corporation incorporated under the general cor3 poration law of the State of Delaware, or the 

4 State of incorporation or organization of the 

5 covered financial company with respect to which 

6 the bridge financial company was established, 

7 as such law may be amended from time to time. 

8 (G) CAPITAL.— 

9 (i) CAPITAL NOT REQUIRED.—Not10 withstanding any other provision of Fed11 eral or State law, a bridge financial com12 pany may, if permitted by the Corporation, 

13 operate without any capital or surplus, or 

14 with such capital or surplus as the Cor15 poration may in its discretion determine to 

16 be appropriate. 

17 (ii) NO CONTRIBUTION BY THE COR18 PORATION REQUIRED.—The Corporation is 

19 not required to pay capital into a bridge fi20 nancial company or to issue any capital 

21 stock on behalf of a bridge financial com22 pany established under this subsection. 

23 (iii) AUTHORITY.—If the Corporation 

24 determines that such action is advisable, 

25 the Corporation may cause capital stock or 


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1 other securities of a bridge financial com2 pany established with respect to a covered 

3 financial company to be issued and offered 

4 for sale in such amounts and on such 

5 terms and conditions as the Corporation 

6 may, in its discretion, determine. 

7 (3) INTERESTS IN AND ASSETS AND OBLIGA8 TIONS OF COVERED FINANCIAL COMPANY.—Notwith9 standing paragraph (1) or (2) or any other provision 

10 of law— 

11 (A) a bridge financial company shall as12 sume, acquire, or succeed to the assets or liabil13 ities of a covered financial company (including 

14 the assets or liabilities associated with any trust 

15 or custody business) only to the extent that 

16 such assets or liabilities are transferred by the 

17 Corporation to the bridge financial company in 

18 accordance with, and subject to the restrictions 

19 set forth in, paragraph (1)(B); and 

20 (B) a bridge financial company shall not 

21 assume, acquire, or succeed to any obligation 

22 that a covered financial company for which a 

23 receiver has been appointed may have to any 

24 shareholder, member, general partner, limited 

25 partner, or other person with an interest in the 


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1 equity of the covered financial company that 

2 arises as a result of the status of that person 

3 having an equity claim in the covered financial 

4 company. 

5 (4) BRIDGE FINANCIAL COMPANY TREATED AS

6 BEING IN DEFAULT FOR CERTAIN PURPOSES.—A 

7 bridge financial company shall be treated as a cov8 ered financial company in default at such times and 

9 for such purposes as the Corporation may, in its dis10 cretion, determine. 

11 (5) TRANSFER OF ASSETS AND LIABILITIES.— 

12 (A) TRANSFER OF ASSETS AND LIABIL13 ITIES.—The Corporation, as receiver, may 

14 transfer any assets and liabilities of a covered 

15 financial company (including any assets or li16 abilities associated with any trust or custody 

17 business) to one or more bridge financial com18 panies in accordance with and subject to the re19 strictions of paragraph (1)(B). 

20 (B) SUBSEQUENT TRANSFERS.—At any 

21 time after the establishment of a bridge finan22 cial company with respect to a covered financial 

23 company, the Corporation, as receiver, may 

24 transfer any assets and liabilities of such cov25 ered financial company as the Corporation may, 


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1 in its discretion, determine to be appropriate in 

2 accordance with and subject to the restrictions 

3 of paragraph (1)(B). 

4 (C) TREATMENT OF TRUST OR CUSTODY

5 BUSINESS.—For purposes of this paragraph, 

6 the trust or custody business, including fidu7 ciary appointments, held by any covered finan8 cial company is included among its assets and 

9 liabilities. 

10 (D) EFFECTIVE WITHOUT APPROVAL.— 

11 The transfer of any assets or liabilities, includ12 ing those associated with any trust or custody 

13 business of a covered financial company to a 

14 bridge financial company shall be effective with15 out any further approval under Federal or 

16 State law, assignment, or consent with respect 

17 thereto. 

18 (E) EQUITABLE TREATMENT OF SIMI19 LARLY SITUATED CREDITORS.—The Corpora20 tion shall treat all creditors of a covered finan21 cial company that are similarly situated under 

22 subsection (b)(1) in a similar manner in exer23 cising the authority of the Corporation under 

24 this subsection to transfer any assets or liabil25 ities of the covered financial company to one or 


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1 more bridge financial companies established 

2 with respect to such covered financial company, 

3 except that the Corporation may take actions 

4 (including making payments) that do not com5 ply with this subparagraph, if— 

6 (i) the Corporation determines that 

7 such actions are necessary to maximize the 

8 value of the assets of the covered financial 

9 company, to maximize the present value 

10 return from the sale or other disposition of 

11 the assets of the covered financial com12 pany, to minimize the amount of any loss 

13 realized upon the sale or other disposition 

14 of the assets of the covered financial com15 pany, or to contain or address serious ad16 verse effects to financial stability or the 

17 United States economy; and 

18 (ii) all creditors that are similarly sit19 uated under subsection (b)(1) receive not 

20 less than the amount provided in sub21 section (d)(2). 

22 (F) LIMITATION ON TRANSFER OF LIABIL23 ITIES.—Notwithstanding any other provision of 

24 law, the aggregate amount of liabilities of a cov25 ered financial company that are transferred to, 


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1 or assumed by, a bridge financial company from 

2 a covered financial company may not exceed the 

3 aggregate amount of the assets of the covered 

4 financial company that are transferred to, or 

5 purchased by, the bridge financial company 

6 from the covered financial company. 

7 (6) STAY OF JUDICIAL ACTION.—Any judicial 

8 action to which a bridge financial company becomes 

9 a party by virtue of its acquisition of any assets or 

10 assumption of any liabilities of a covered financial 

11 company shall be stayed from further proceedings 

12 for a period of up to 45 days (or such longer period 

13 as may be agreed to upon the consent of all parties) 

14 at the request of the bridge financial company. 

15 (7) AGREEMENTS AGAINST INTEREST OF THE

16 BRIDGE FINANCIAL COMPANY.—No agreement that 

17 tends to diminish or defeat the interest of the bridge 

18 financial company in any asset of a covered financial 

19 company acquired by the bridge financial company 

20 shall be valid against the bridge financial company 

21 unless such agreement is in writing and executed by 

22 an authorized officer or representative of the covered 

23 financial company. 

24 (8) NO FEDERAL STATUS.— 


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1 (A) AGENCY STATUS.—A bridge financial 

2 company is not an agency, establishment, or in3 strumentality of the United States. 

4 (B) EMPLOYEE STATUS.—Representatives 

5 for purposes of paragraph (1)(B), directors, of6 ficers, employees, or agents of a bridge financial 

7 company are not, solely by virtue of service in 

8 any such capacity, officers or employees of the 

9 United States. Any employee of the Corporation 

10 or of any Federal instrumentality who serves at 

11 the request of the Corporation as a representa12 tive for purposes of paragraph (1)(B), director, 

13 officer, employee, or agent of a bridge financial 

14 company shall not— 

15 (i) solely by virtue of service in any 

16 such capacity lose any existing status as 

17 an officer or employee of the United States 

18 for purposes of title 5, United States Code, 

19 or any other provision of law; or 

20 (ii) receive any salary or benefits for 

21 service in any such capacity with respect to 

22 a bridge financial company in addition to 

23 such salary or benefits as are obtained 

24 through employment with the Corporation 

25 or such Federal instrumentality. 


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1 (9) EXEMPT TAX STATUS.— 

2 (A) EXEMPTION FROM FEDERAL INCOME

3 TAX.—Subsection (l) of section 501 of the In4 ternal Revenue Code of 1986 is amended by 

5 adding at the end the following new paragraph: 

6 ‘‘(4) Any bridge financial company organized 

7 under section 1609(h) of the Financial Stability Im8 provement Act of 2009.’’. 

9 (B) EXEMPTION FROM CERTAIN OTHER

10 TAXES.—Notwithstanding any other provision 

11 of Federal or State law, a bridge financial com12 pany, its franchise, property, and income shall 

13 be exempt from all taxation now or hereafter 

14 imposed by any territory, dependency, or pos15 session of the United States, or by any State, 

16 county, municipality, or local taxing authority. 

17 (10) FEDERAL AGENCY APPROVAL; ANTITRUST

18 REVIEW.— 

19 (A) IN GENERAL.—If a transaction involv20 ing the merger or sale of a bridge financial 

21 company requires approval by a Federal agency, 

22 the transaction may not be consummated before 

23 the 5th calendar day after the date of approval 

24 by the Federal agency responsible for such ap25 proval with respect thereto. If, in connection 


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1 with any such approval a report on competitive 

2 factors from the Attorney General is required, 

3 the Federal agency responsible for such ap4 proval shall promptly notify the Attorney Gen5 eral of the proposed transaction and the Attor6 ney General shall provide the required report 

7 within 10 days of the request. If notification 

8 under section 7A of the Clayton Act is required 

9 with respect to such transaction, then the re10 quired waiting period shall end on the 15th day 

11 after the date on which the Attorney General 

12 and the Federal Trade Commission receive such 

13 notification, unless the waiting period is termi14 nated earlier under subsection (b)(2) of such 

15 section, or is extended pursuant to subsection 

16 (e)(2) of such section. 

17 (B) EMERGENCY.—If the Secretary, in 

18 consultation with the Chairman of the Federal 

19 Reserve Board, has found that the Corporation 

20 must act immediately to prevent the probable 

21 failure of the covered financial company in22 volved, the approval and prior notification re23 ferred to in subparagraph (A) shall not be re24 quired and the transaction may be con25 summated immediately by the Corporation. The 


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1 preceding sentence shall not otherwise modify, 

2 impair, or supercede the operation of any of the 

3 antitrust laws (as defined in subsection (a) of 

4 the first section of the Clayton Act, except that 

5 such term includes section 5 of the Federal 

6 Trade Commission Act to the extent that such 

7 section 5 relates to unfair methods of competi8 tion). 

9 (11) DURATION OF BRIDGE FINANCIAL COM10 PANY.—Subject to paragraphs (12), (13), and (14), 

11 the status of a bridge financial company as such 

12 shall terminate at the end of the 2-year period fol13 lowing the date it was granted a charter. The Cor14 poration may, in its discretion, extend the status of 

15 the bridge financial company as such for 3 addi16 tional 1-year periods. 

17 (12) TERMINATION OF BRIDGE FINANCIAL COM18 PANY STATUS.—The status of any bridge financial 

19 company as such shall terminate upon the earliest 

20 of— 

21 (A) the merger or consolidation of the 

22 bridge financial company with a company that 

23 is not a bridge financial company; 

24 (B) at the election of the Corporation, the 

25 sale of a majority of the capital stock of the 


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1 bridge financial company to a company other 

2 than the Corporation and other than another 

3 bridge financial company; 

4 (C) the sale of 80 percent, or more, of the 

5 capital stock of the bridge financial company to 

6 a person other than the Corporation and other 

7 than another bridge financial company; 

8 (D) at the election of the Corporation, ei9 ther the assumption of all or substantially all of 

10 the liabilities of the bridge financial company by 

11 a company that is not a bridge financial com12 pany, or the acquisition of all or substantially 

13 all of the assets of the bridge financial company 

14 by a company that is not a bridge financial 

15 company, or other entity as permitted under 

16 applicable law; and 

17 (E) the expiration of the period provided in 

18 paragraph (11), or the earlier dissolution of the 

19 bridge financial company as provided in para20 graph (14). 

21 (13) EFFECT OF TERMINATION EVENTS.— 

22 (A) MERGER OR CONSOLIDATION.—A 

23 merger or consolidation as provided in para24 graph (12)(A) shall be conducted in accordance 

25 with, and shall have the effect provided in, the 


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1 provisions of applicable law. For the purpose of 

2 effecting such a merger or consolidation, the 

3 bridge financial company shall be treated as a 

4 corporation organized under the laws of the 

5 State of Delaware (unless the law of another 

6 State has been selected by the bridge financial 

7 company in accordance with paragraph (2)(F)), 

8 and the Corporation shall be treated as the sole 

9 shareholder thereof, notwithstanding any other 

10 provision of State or Federal law. 

11 (B) CHARTER CONVERSION.—Following 

12 the sale of a majority of the capital stock of the 

13 bridge financial company as provided in para14 graph (12)(B), the Corporation may amend the 

15 charter of the bridge financial company to re16 flect the termination of the status of the bridge 

17 financial company as such, whereupon the com18 pany shall have all of the rights, powers, and 

19 privileges under its constituent documents and 

20 applicable State or Federal law. In connection 

21 therewith, the Corporation may take such steps 

22 as may be necessary or convenient to reincor23 porate the bridge financial company under the 

24 laws of a State and, notwithstanding any provi25 sions of State or Federal law, such State-charVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00450 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tered corporation shall be deemed to succeed by 

2 operation of law to such rights, titles, powers 

3 and interests of the bridge financial company as 

4 the Corporation may provide, with the same ef5 fect as if the bridge financial company had 

6 merged with the State-chartered corporation 

7 under provisions of the corporate laws of such 

8 State. 

9 (C) SALE OF STOCK.—Following the sale 

10 of 80 percent or more of the capital stock of a 

11 bridge financial company as provided in para12 graph (12)(C), the company shall have all of 

13 the rights, powers, and privileges under its con14 stituent documents and applicable State or Fed15 eral law. In connection therewith, the Corpora16 tion may take such steps as may be necessary 

17 or convenient to reincorporate the bridge finan18 cial company under the laws of a State and, 

19 notwithstanding any provisions of State or Fed20 eral law, the State-chartered corporation shall 

21 be deemed to succeed by operation of law to 

22 such rights, titles, powers and interests of the 

23 bridge financial company as the Corporation 

24 may provide, with the same effect as if the 

25 bridge financial company had merged with the 


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1 State-chartered corporation under provisions of 

2 the corporate laws of such State. 

3 (D) ASSUMPTION OF LIABILITIES AND

4 SALE OF ASSETS.—Following the assumption of 

5 all or substantially all of the liabilities of the 

6 bridge financial company, or the sale of all or 

7 substantially all of the assets of the bridge fi8 nancial company, as provided in paragraph 

9 (12)(D), at the election of the Corporation the 

10 bridge financial company may retain its status 

11 as such for the period provided in paragraph 

12 (11) or may be dissolved at the election of the 

13 Corporation. 

14 (E) AMENDMENTS TO CHARTER.—Fol15 lowing the consummation of a transaction de16 scribed in subparagraph (A), (B), (C), or (D) 

17 of paragraph (12), the charter of the resulting 

18 company shall be amended to reflect the termi19 nation of bridge financial company status, if ap20 propriate. 

21 (14) DISSOLUTION OF BRIDGE FINANCIAL COM22 PANY.— 

23 (A) IN GENERAL.—Notwithstanding any 

24 other provision of State or Federal law, if a 

25 bridge financial company’s status as such has 


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1 not previously been terminated by the occur2 rence of an event specified in subparagraph (A), 

3 (B), (C), or (D) of paragraph (12)— 

4 (i) the Corporation may, in its discre5 tion, dissolve the bridge financial company 

6 in accordance with this paragraph at any 

7 time; and 

8 (ii) the Corporation shall promptly 

9 commence dissolution proceedings in ac10 cordance with this paragraph upon the ex11 piration of the 2-year period following the 

12 date the bridge financial company was 

13 chartered, or any extension thereof, as pro14 vided in paragraph (11). 

15 (B) PROCEDURES.—The Corporation shall 

16 remain the receiver of a bridge financial com17 pany for the purpose of dissolving the bridge fi18 nancial company. The Corporation as such re19 ceiver shall wind up the affairs of the bridge fi20 nancial company in conformity with the provi21 sions of law relating to the liquidation of cov22 ered financial companies. With respect to any 

23 such bridge financial company, the Corporation 

24 as receiver shall have all the rights, powers, and 

25 privileges and shall perform the duties related 


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1 to the exercise of such rights, powers, or privi2 leges granted by law to a receiver of a covered 

3 financial company and, notwithstanding any 

4 other provision of law, in the exercise of such 

5 rights, powers, and privileges the Corporation 

6 shall not be subject to the direction or super7 vision of any State agency or other Federal 

8 agency. 

9 (15) AUTHORITY TO OBTAIN CREDIT.— 

10 (A) IN GENERAL.—A bridge financial com11 pany may obtain unsecured credit and issue un12 secured debt. 

13 (B) INABILITY TO OBTAIN CREDIT.—If a 

14 bridge financial company is unable to obtain 

15 unsecured credit or issue unsecured debt, the 

16 Corporation may authorize the obtaining of 

17 credit or the issuance of debt by the bridge fi18 nancial company— 

19 (i) with priority over any or all of the 

20 obligations of the bridge financial com21 pany; 

22 (ii) secured by a lien on property of 

23 the bridge financial company that is not 

24 otherwise subject to a lien; or 


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1 (iii) secured by a junior lien on prop2 erty of the bridge financial company that 

3 is subject to a lien. 

4 (C) LIMITATIONS.— 

5 (i) IN GENERAL.—The Corporation, 

6 after notice and a hearing, may authorize 

7 the obtaining of credit or the issuance of 

8 debt by a bridge financial company that is 

9 secured by a senior or equal lien on prop10 erty of the bridge financial company that 

11 is subject to a lien only if— 

12 (I) the bridge financial company 

13 is unable to otherwise obtain such 

14 credit or issue such debt; and 

15 (II) there is adequate protection 

16 of the interest of the holder of the lien 

17 on the property with respect to which 

18 such senior or equal lien is proposed 

19 to be granted. 

20 (D) BURDEN OF PROOF.—In any hearing 

21 under this subsection, the Corporation has the 

22 burden of proof on the issue of adequate protec23 tion. 

24 (16) EFFECT ON DEBTS AND LIENS.—The re25 versal or modification on appeal of an authorization 


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1 under this subsection to obtain credit or issue debt, 

2 or of a grant under this section of a priority or a 

3 lien, does not affect the validity of any debt so 

4 issued, or any priority or lien so granted, to an enti5 ty that extended such credit in good faith, whether 

6 or not such entity knew of the pendency of the ap7 peal, unless such authorization and the issuance of 

8 such debt, or the granting of such priority or lien, 

9 were stayed pending appeal. 

10 (i) SHARING RECORDS.—Whenever the Corporation 

11 has been appointed as receiver for a covered financial com12 pany, the Federal Reserve Board and the company’s pri13 mary appropriate regulatory agency, if any, shall each 

14 make all records relating to the company available to the 

15 receiver which may be used by the receiver in any manner 

16 the receiver determines to be appropriate. 

17 (j) EXPEDITED PROCEDURES FOR CERTAIN

18 CLAIMS.— 

19 (1) TIME FOR FILING NOTICE OF APPEAL.— 

20 The notice of appeal of any order, whether interlocu21 tory or final, entered in any case brought by the 

22 Corporation against a covered financial company’s 

23 director, officer, employee, agent, attorney, account24 ant, or appraiser or any other person employed by 

25 or providing services to a covered financial company 


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1 shall be filed not later than 30 days after the date 

2 of entry of the order. The hearing of the appeal shall 

3 be held not later than 120 days after the date of the 

4 notice of appeal. The appeal shall be decided not 

5 later than 180 days after the date of the notice of 

6 appeal. 

7 (2) SCHEDULING.—A court of the United 

8 States shall expedite the consideration of any case 

9 brought by the Corporation against a covered finan10 cial company’s director, officer, employee, agent, at11 torney, accountant, or appraiser or any other person 

12 employed by or providing services to a covered finan13 cial company. As far as practicable, the court shall 

14 give such case priority on its docket. 

15 (3) JUDICIAL DISCRETION.—The court may 

16 modify the schedule and limitations stated in para17 graphs (1) and (2) in a particular case, based on a 

18 specific finding that the ends of justice that would 

19 be served by making such a modification would out20 weigh the best interest of the public in having the 

21 case resolved expeditiously. 

22 (k) FOREIGN INVESTIGATIONS.—The Corporation, as 

23 receiver of any covered financial company and for pur24 poses of carrying out any power, authority, or duty with 

25 respect to a covered financial company— 


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1 (1) may request the assistance of any foreign fi2 nancial authority and provide assistance to any for3 eign financial authority in accordance with section 

4 8(v) of the Federal Deposit Insurance Act as if the 

5 covered financial company were an insured deposi6 tory institution, the Corporation were the appro7 priate Federal banking agency for the company and 

8 any foreign financial authority were the foreign 

9 banking authority; and 

10 (2) may maintain an office to coordinate for11 eign investigations or investigations on behalf of for12 eign financial authorities. 

13 (l) PROHIBITION ON ENTERING SECRECY AGREE14 MENTS AND PROTECTIVE ORDERS.—The Corporation 

15 may not enter into any agreement or approve any protec16 tive order which prohibits the Corporation from disclosing 

17 the terms of any settlement of an administrative or other 

18 action for damages or restitution brought by the Corpora19 tion in its capacity as receiver for a covered financial com20 pany. 

21 (m) LIQUIDATION OF CERTAIN COVERED FINANCIAL

22 COMPANIES OR BRIDGE FINANCIAL COMPANIES.—Not23 withstanding any other provision of law (other than a con24 flicting provision of this section), the Corporation, in con25 nection with the liquidation of any covered financial comVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00458 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 pany or bridge financial company with respect to which 

2 the Corporation has been appointed as receiver, shall— 

3 (1) in the case of any covered financial com4 pany or bridge financial company that is or has a 

5 subsidiary that is a stockbroker (as that term is de6 fined in section 101 of title 11 of the United States 

7 Code) but is not a member of the Securities Investor 

8 Protection Corporation, apply the provisions of sub9 chapter III of chapter 7 of title 11 of the United 

10 States Code in respect of the distribution to any 

11 ‘‘customer’’ of all ‘‘customer name securities’’ and 

12 ‘‘customer property’’ (as such terms are defined in 

13 section 741 of such title 11) as if such covered fi14 nancial company or bridge financial company were a 

15 debtor for purposes of such subchapter; or 

16 (2) in the case of any covered financial com17 pany or bridge financial company that is a com18 modity broker (as that term is defined in section 

19 101 of title 11 of the United States Code), apply the 

20 provisions of subchapter IV of chapter 7 of title 11 

21 of the United States Code in respect of the distribu22 tion to any ‘‘customer’’ of all ‘‘customer property’’ 

23 (as such terms are defined in section 761 of such 

24 title 11) as if such covered financial company or 


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1 bridge financial company were a debtor for purposes 

2 of such subchapter. 

3 (n) SYSTEMIC DISSOLUTION FUND.— 

4 (1) ESTABLISHMENT AND PURPOSE.— 

5 (A) IN GENERAL.—There is established in 

6 the Treasury a separate fund to be known as 

7 the ‘‘Systemic Dissolution Fund’’— 

8 (i) to facilitate and provide for the or9 derly and complete dissolution of any failed 

10 financial company or companies that pose 

11 a systemic threat to the financial markets 

12 or economy, as determined under 1603(b); 

13 and 

14 (ii) to ensure that any taxpayer funds 

15 utilized to facilitate such liquidations are 

16 fully repaid from assessments levied on fi17 nancial companies that have assets of 

18 $50,000,000,000, adjusted for inflation, or 

19 more. 

20 (B) ADJUSTMENT OF THRESHOLD.—The 

21 threshold referred to in subparagraph (A)(ii) 

22 shall be adjusted on an annual basis, based on 

23 the growth of assets owned or managed by fi24 nancial companies (as defined in section 

25 1602(9)). 


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1 (2) AUTHORITY.—The Systemic Dissolution 

2 Fund shall be administered by the Corporation, 

3 which shall have exclusive authority to— 

4 (A) impose assessments on covered finan5 cial companies in accordance with paragraphs 

6 (6) through (8); 

7 (B) maintain and administer the Fund in 

8 a manner so as to make clear to the general 

9 public that such Fund is unrelated to any other 

10 Fund maintained and administered by the Cor11 poration, including the Deposit Insurance 

12 Fund; 

13 (C) utilize the Fund to facilitate the dis14 solution of a covered financial company (as de15 fined by section 1602(5)) as provided in para16 graph (3), or take such other actions as are au17 thorized by this subtitle; 

18 (D) invest the Fund in accordance with 

19 section 13(a) of the Federal Deposit Insurance 

20 Act; and 

21 (E) exercise borrowing authority as pre22 scribed in subsection (o). 

23 (3) USES.— 


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1 (A) The Fund shall be available to the 

2 Corporation for use with respect to the dissolu3 tion of a covered financial company to— 

4 (i) cover the costs incurred by the 

5 Corporation, including as receiver, in exer6 cising its rights, authorities, and powers 

7 and fulfilling its obligations and respon8 sibilities under this section; 

9 (ii) repay such funds in accordance 

10 with subsection (o)(6); and 

11 (iii) cover the costs of systemic sta12 bilization actions, pursuant to subsections 

13 (d) and (f) of section 1604. 

14 (B) The Fund shall not be used in any 

15 manner to benefit any officer or director of 

16 such company removed pursuant to section 

17 1604(f)(6). 

18 (4) DEPOSITS TO FUND.—All amounts assessed 

19 against a financial company under this section shall 

20 be deposited into the Fund. 

21 (5) SIZE OF FUND.—The Corporation shall, by 

22 rule, establish the minimum size of the Fund con23 sistent with subparagraphs (C) and (D) of para24 graph (6). 

25 (6) ASSESSMENTS.— 


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1 (A) ASSESSMENTS TO MAINTAIN FUND.— 

2 The Corporation shall impose risk-based assess3 ments on financial companies in such amount 

4 and manner and subject to such terms and con5 ditions that the Corporation determines, by reg6 ulation and in consultation with the Council, 

7 are necessary for the amount in the Fund to at 

8 least equal the minimum size established pursu9 ant to paragraph (5). 

10 (B) ASSESSMENTS TO REPLENISH THE

11 FUND.—If the Fund falls below the minimum 

12 size established pursuant to paragraph (5), the 

13 Corporation shall impose assessments on finan14 cial companies in such amounts and manner 

15 and subject to such terms and conditions as the 

16 Corporation determines, by regulation and in 

17 consultation with the Council, are necessary to 

18 replenish the fund subject to the limitations in 

19 subparagraph (D). 

20 (C) MINIMUM ASSESSMENT THRESHOLD.— 

21 (i) IN GENERAL.—The Corporation 

22 shall not assess financial companies with 

23 less than $50,000,000,000, adjusted for in24 flation, of assets on a consolidated basis, 

25 subject to any differentiation as permitted 


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1 in paragraph (8) and shall assess financial 

2 companies with $50,000,000,000, adjusted 

3 for inflation, or more in assets in accord4 ance with paragraphs (7) and (8). 

5 (ii) HEDGE FUNDS.—The Corporation 

6 shall not assess financial companies that 

7 manage hedge funds (as defined by the 

8 Corporation for the purpose of this section, 

9 in consultation with the Securities and Ex10 change Commission) with less than 

11 $10,000,000,000, adjusted for inflation, of 

12 assets, under management on a consoli13 dated basis, subject to any differentiation 

14 as permitted in paragraph (8) and shall 

15 assess any financial companies that man16 age hedge funds with $10,000,000,000 or 

17 more of assets under management in ac18 cordance with paragraphs (7) and (8). 

19 (D) MAXIMUM SIZE OF FUND VIA ASSESS20 MENTS.— 

21 (i) IN GENERAL.—The Corporation 

22 shall suspend assessments on financial 

23 companies on the day after the date on 

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1 ments made pursuant to paragraph (2)(D), 

2 equals $150,000,000,000. 

3 (ii) EXCEPTIONS.—Any suspension of 

4 assessments under clause (i)— 

5 (I) may be set aside if the Fund 

6 falls below $150,000,000,000; and 

7 (II) shall be set aside if the Fund 

8 falls below the minimum level estab9 lished in subparagraph (C). 

10 (E) ADDITIONAL AUTHORIZED ASSESS11 MENTS.—The Corporation is authorized to con12 duct risk-based assessments on financial compa13 nies in such amount and manner and subject to 

14 terms and conditions that the Corporation de15 termines, with the concurrence of the Secretary 

16 of the Treasury and the Federal Reserve Board, 

17 are necessary to pay any shortfall in the Trou18 bled Asset Relief Program established by the 

19 Emergency Economic Stabilization Act of 2008 

20 that would add to the deficit or national debt, 

21 as identified by the Director of the Office of 

22 Management and Budget, in consultation with 

23 the Director of the Congressional Budget Office 

24 pursuant to section 134 of such Act (12 U.S.C. 

25 5239). 


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1 (7) FACTORS.—The Corporation, in consulta2 tion with the Council shall establish a risk matrix to 

3 be used in establishing assessments that takes into 

4 account— 

5 (A) the actual or expected risk of losses to 

6 the Fund; 

7 (B) economic conditions generally affecting 

8 financial companies so as to allow assessments 

9 and the Fund to increase during more favorable 

10 economic conditions and to decrease during less 

11 favorable economic conditions; 

12 (C) any assessments imposed on a finan13 cial company or an affiliate of a financial com14 pany that— 

15 (i) is an insured depository institu16 tion, assessed pursuant to section 7 or 

17 13(c)(4)(G) of the Federal Deposit Insur18 ance Act; 

19 (ii) is a member of the Securities In20 vestor Protection Corporation, assessed 

21 pursuant to section 4 of the Securities In22 vestor Protection Act of 1970 (15 U.S.C. 

23 78ddd); 

24 (iii) is an insured credit union, as25 sessed pursuant to section 202(c)(1)(A)(i) 


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1 of the Federal Credit Union Act (12 

2 U.S.C. 1782(c)(1)(A)(i)); or 

3 (iv) is an insurance company, assessed 

4 pursuant to applicable State law to cover 

5 (or reimburse payments made to cover) the 

6 costs of the rehabilitation, liquidation or 

7 other State insolvency proceeding with re8 spect to 1 or more insurance companies; 

9 (D) the risks presented by the financial 

10 company to the financial system and the extent 

11 to which the financial company has benefitted, 

12 or likely would benefit, from the dissolution of 

13 a financial company under this title, includ14 ing— 

15 (i) the amount, different categories, 

16 and concentrations of assets of the finan17 cial company and its affiliates, including 

18 both on-balance sheet and off-balance sheet 

19 assets; 

20 (ii) the activities of the financial com21 pany and its affiliates; 

22 (iii) the relevant market share of the 

23 financial company and its affiliates; 

24 (iv) the extent to which the financial 

25 company is leveraged; 


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1 (v) the potential exposure to sudden 

2 calls on liquidity precipitated by economic 

3 distress; 

4 (vi) the amount, maturity, volatility, 

5 and stability of the company’s financial ob6 ligations to, and relationship with, other fi7 nancial companies; 

8 (vii) the amount, maturity, volatility, 

9 and stability of the company’s liabilities, 

10 including the degree of reliance on short11 term funding, taking into consideration ex12 isting systems for measuring a company’s 

13 risk-based capital; 

14 (viii) the stability and variety of the 

15 company’s sources of funding; 

16 (ix) the company’s importance as a 

17 source of credit for households, businesses, 

18 and State and local governments and as a 

19 source of liquidity for the financial system; 

20 (x) the extent to which assets are sim21 ply managed and not owned by the finan22 cial company and the extent to which own23 ership of assets under management is dif24 fuse; and 


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1 (xi) the amount, different categories, 

2 and concentrations of liabilities, both in3 sured and uninsured, contingent and non4 contingent, including both on-balance sheet 

5 and off-balance sheet liabilities, of the fi6 nancial company and its affiliates; and 

7 (E) such other factors as the Corporation, 

8 in consultation with the Council, may determine 

9 to be appropriate. 

10 (8) REQUIREMENT FOR EQUITABLE TREAT11 MENT IN ASSESSMENTS.—In establishing the assess12 ment system for the Fund, the Corporation, by regu13 lation and in consultation with the Council, shall dif14 ferentiate among financial companies based on com15 plexity of operations or organization, interconnected16 ness, size, direct or indirect activities, and any other 

17 factors the Corporation or the Council may deem ap18 propriate to ensure that the assessments charged eq19 uitably reflect the risk posed to the Fund by par20 ticular classes of financial companies. 

21 (9) MINIMUM COMMENT PERIOD.—In order to 

22 ensure sufficient opportunity for public and congres23 sional review and evaluation of any assessment sys24 tem, any proposed regulations regarding the imple25 mentation of the assessment system under this subVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00469 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 title shall provide an opportunity for public comment 

2 during a period of not less than 60 days. 

3 (o) BORROWING AUTHORITY.— 

4 (1) BORROWING FROM TREASURY.— 

5 (A) IN GENERAL.—Subject to paragraphs 

6 (3), (4), and (5), the Corporation may borrow 

7 from the Treasury, and the Secretary of the 

8 Treasury is authorized to lend to the Corpora9 tion on such terms as may be fixed by the Cor10 poration and the Secretary, such funds as in 

11 the judgment of the Board of Directors of the 

12 Corporation are required, in addition to the 

13 funds available in the Systemic Dissolution 

14 Fund, to permit the orderly dissolution of 1 or 

15 more covered systemically significant financial 

16 companies, covered affiliates, or covered sub17 sidiaries under this title. 

18 (B) RATE OF INTEREST.—The rate of in19 terest to be charged in connection with any loan 

20 made pursuant to this subsection shall not be 

21 less than an amount determined by the Sec22 retary of the Treasury, taking into consider23 ation current market yields on outstanding 

24 marketable obligations of the United States of 

25 comparable maturities. 


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1 (2) PUBLIC DEBT ISSUANCES.—For the pur2 poses described in subsection (1), the Secretary of 

3 the Treasury may use as a public-debt transaction 

4 the proceeds of the sale of any securities hereafter 

5 issued under chapter 31 of title 31, and the pur6 poses for which securities may be issued under chap7 ter 31 of title 31 are extended to include such loans. 

8 All loans and repayments under this subsection shall 

9 be treated as public-debt transactions of the United 

10 States. 

11 (3) BORROWING AUTHORITY WHEN FUND AS12 SETS ARE LESS THAN $150,000,000,000.— 

13 (A) Subject to paragraph (B), the bor14 rowing authority granted in paragraph (1) shall 

15 be available to the Corporation where— 

16 (i) the value of the Fund is less than 

17 $150,000,000,000; 

18 (ii) the Corporation determines that 

19 the immediate dissolution of a financial 

20 company or financial companies requires 

21 more funds than are available in the Fund; 

22 and 

23 (iii) the Corporation has provided a 

24 specific plan for repayment under para25 graph (7)(A). 


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1 (B) The Corporation may borrow, and the 

2 Secretary may lend, any amount of funds that, 

3 when added to the amount available in the 

4 Fund on the date the Corporation makes a re5 quest to borrow funds, would not exceed 

6 $150,000,000,000. 

7 (C) For purposes of paragraph (1), the 

8 Corporation’s total debt may not exceed 

9 $150,000,000,000 (not including any funds bor10 rowed pursuant to subsection (s)). 

11 (4) ADDITIONAL BORROWING AUTHORITY.— 

12 (A) If at any time the Corporation antici13 pates that the dissolution of any financial com14 pany or financial companies will require funds 

15 in excess of $150,000,000,000— 

16 (i) the Corporation shall submit to the 

17 Secretary and the President a written re18 quest for additional borrowing authority 

19 subject to the limitation in subparagraph 

20 (5), which shall be accompanied by a cer21 tification indicating the anticipated amount 

22 needed, the basis on which such amount 

23 was determined, and any such information 

24 as the Secretary may deem necessary; and 


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1 (ii) the President shall transmit a re2 quest to the House of Representatives and 

3 the Senate requesting the additional bor4 rowing authority, which shall include the 

5 certification referred to in clause (i) and 

6 which includes a repayment schedule as 

7 outlined in paragraph (7). 

8 (B) Any request for borrowing authority 

9 under paragraph (A) shall be effective only if 

10 approved by affirmative vote of the House of 

11 Representatives and the Senate in accordance 

12 with subsection (s). 

13 (5) LIMITATIONS ON ADDITIONAL BORROWING

14 AUTHORITY.— 

15 (A) No request for borrowing authority is 

16 permitted under paragraph (4) unless the 

17 President, in consultation with the Council, cer18 tifies to the House of Representatives and the 

19 Senate that the borrowing authority is nec20 essary to avoid or mitigate an imminent finan21 cial emergency. 

22 (B) The amount of borrowing authority re23 quested under subparagraph (A)(i) may not ex24 ceed $50,000,000,000. 


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1 (6) PROCEEDS FROM LIQUIDATION, REPAYMENT

2 OF FUNDS.— 

3 (A) IN GENERAL.—The Corporation shall 

4 take such measures as may be appropriate to 

5 maximize the amount of funds from any dis6 solution that may be available for repayment 

7 under subparagraph (B) consistent with sys8 temic concerns. 

9 (B) REPAYMENT PRIORITY.—Amounts re10 alized from the dissolution of any financial com11 pany under this subtitle that are not otherwise 

12 utilized by the Corporation to dissolve a finan13 cial company under subsection (n)(3)(A) shall 

14 be paid— 

15 (i) first, to repay any costs incurred 

16 in exercising the borrowing authority 

17 granted in paragraph (1); and 

18 (ii) second, to recapitalize the Fund, 

19 subject to the requirements of section 

20 1604(g), to such level as the Corporation 

21 deems necessary, but not to exceed 

22 $150,000,000,000. 

23 (7) REPAYMENT PLAN AND SCHEDULES RE24 QUIRED FOR ANY BORROWING.— 


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1 (A) IN GENERAL.—No amount may be 

2 provided by the Secretary of the Treasury to 

3 the Corporation under paragraph (1) unless an 

4 agreement is in effect between the Secretary 

5 and the Corporation which— 

6 (i) provides a specific plan and sched7 ule for assessments under (n)(6) to achieve 

8 the repayment of the outstanding amount 

9 of any borrowing under such subsection; 

10 and 

11 (ii) demonstrates that income to the 

12 Corporation from assessments under this 

13 section will be sufficient to amortize the 

14 outstanding balance within the period es15 tablished in the repayment schedule and 

16 pay the interest accruing on such balance. 

17 (B) CONSULTATION WITH AND REPORT TO

18 CONGRESS.—The Secretary of the Treasury and 

19 the Corporation shall— 

20 (i) consult with the Committee on Fi21 nancial Services of the House of Rep22 resentatives and the Committee on Bank23 ing, Housing, and Urban Affairs of the 

24 Senate on the terms of any repayment 

25 schedule agreement; and 


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1 (ii) submit a copy of each repayment 

2 schedule agreement to the Committee on 

3 Financial Services of the House of Rep4 resentatives and the Committee on Bank5 ing, Housing, and Urban Affairs of the 

6 Senate before the end of the 30-day period 

7 beginning on the date any amount is pro8 vided by the Secretary of the Treasury to 

9 the Corporation under paragraph (1). 

10 (p) INFORMATION GATHERING AND VERIFICATION; 

11 PAYMENTS.— 

12 (1) IN GENERAL.—The Corporation may re13 quire each financial company to make available such 

14 information as the Corporation may require— 

15 (A) for purposes of— 

16 (i) determining the financial com17 pany’s assessment under this section; 

18 (ii) verifying the accuracy of informa19 tion; and 

20 (iii) preparing for dissolution, includ21 ing a dissolution plan as required by this 

22 section; and 

23 (B) for such other purposes as may be ap24 propriate and necessary to promote the orderly 

25 dissolution of the financial company. 


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1 (2) USE OF EXISTING REPORTS.—The Corpora2 tion shall, to the fullest extent possible, accept— 

3 (A) reports that a financial company has 

4 provided or been required to provide to other 

5 Federal or State supervisors or to appropriate 

6 self-regulatory organizations; 

7 (B) information that is otherwise required 

8 to be reported publicly; and 

9 (C) externally audited financial statements. 

10 (3) AUTHORITY FOR ON-SITE INSPECTION.— 

11 The Corporation may make on-site inspections of a 

12 financial company’s books and records as necessary 

13 to carry out the purposes of this subsection. 

14 (4) RULEMAKING.—The Corporation may pro15 mulgate such rules or regulations as are necessary 

16 or appropriate to implement this subsection. 

17 (5) PAYMENTS OF ASSESSMENTS REQUIRED.— 

18 (A) IN GENERAL.—Any financial company 

19 subject to an assessment under this section 

20 shall pay to the Corporation such assessment. 

21 (B) FORM OF PAYMENT.—The payments 

22 required under this section shall be made in 

23 such manner and at such time or times as the 

24 Corporation, in consultation with the Council, 

25 shall prescribe by regulation. 


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1 (6) PENALTY FOR FAILURE TO TIMELY PAY AS2 SESSMENTS.—Any financial company that fails or 

3 refuses to pay any assessment under this section 

4 shall be subject to a penalty under section 18(h) of 

5 the Federal Deposit Insurance Act, as if that finan6 cial company were an insured depository institution. 

7 (q) ASSESSMENT ACTIONS.— 

8 (1) IN GENERAL.—The Corporation, in any 

9 court of competent jurisdiction, shall be entitled to 

10 recover from any financial company the amount of 

11 any unpaid assessment lawfully payable by such 

12 company. 

13 (2) STATUTE OF LIMITATIONS.—Notwith14 standing any other provision in Federal law, or the 

15 law of any State— 

16 (A) any action by a financial company to 

17 recover from the Corporation the overpaid 

18 amount of any assessment shall be brought 

19 within 3 years after the date the assessment 

20 payment was due, subject to subparagraph (C); 

21 (B) any action by the Corporation to re22 cover from a financial company the underpaid 

23 amount of any assessment shall be brought 

24 within 3 years after the date the assessment 


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1 payment was due, subject to subparagraph (C); 

2 and 

3 (C) if a financial company has made a 

4 false or fraudulent statement with intent to 

5 evade any or all of its assessment, the Corpora6 tion shall have until 3 years after the date of 

7 discovery of the false or fraudulent statement in 

8 which to bring an action to recover the under9 paid amount. 

10 (r) REQUIREMENT TO MAINTAIN SYSTEMIC DIS11 SOLUTION FUND AS SEPARATE FUND.—The Systemic 

12 Dissolution Fund shall at all times be administered in a 

13 manner that is separate and distinct from the Deposit In14 surance Fund, and the Corporation shall take such actions 

15 as may be necessary to ensure that such distinction is 

16 made with respect to internal processes and procedures 

17 as well as with regard to any public information, discus18 sion or other communications involving either Fund. 

19 (s) CONGRESSIONAL APPROVAL OF ADDITIONAL

20 BORROWING AUTHORITY.— 

21 (1) INTRODUCTION.—On the day on which the 

22 request of the President is received by the House of 

23 Representatives and the Senate under subsection 

24 (o)(4)(A)(ii), a joint resolution specified in para25 graph (5) shall be introduced in the House by the 


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1 majority leader of the House and in the Senate by 

2 the majority leader of the Senate. If either House is 

3 not in session on the day on which such a request 

4 is received, the joint resolution with respect to such 

5 request shall be introduced in that House, as pro6 vided in the preceding sentence, on the first day 

7 thereafter on which that House is in session. 

8 (2) CONSIDERATION IN THE HOUSE OF REP9 RESENTATIVES.— 

10 (A) REPORTING AND DISCHARGE.—Any 

11 committee of the House of Representatives to 

12 which a joint resolution introduced under para13 graph (1) is referred shall report such joint res14 olution to the House not later than 5 calendar 

15 days after the applicable date of introduction of 

16 the joint resolution. If a committee fails to re17 port such joint resolution within that period, 

18 the committee shall be discharged from further 

19 consideration of the joint resolution and the 

20 joint resolution shall be referred to the appro21 priate calendar. 

22 (B) PROCEEDING TO CONSIDERATION.— 

23 After all committees authorized to consider a 

24 joint resolution have reported such joint resolu25 tion to the House or have been discharged from 


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1 its consideration, it shall be in order, not later 

2 than the sixth day after the applicable date of 

3 introduction of the joint resolution, for the ma4 jority leader to move to proceed to consider the 

5 joint resolution in the House. Such a motion 

6 shall not be in order after the House has dis7 posed of a motion to proceed on the joint reso8 lution and shall not be in order if the House 

9 has received a message from the Senate under 

10 paragraph (4)(C). The previous question shall 

11 be considered as ordered on the motion to its 

12 adoption without intervening motion. A motion 

13 to reconsider the vote by which the motion is 

14 disposed of shall not be in order. 

15 (C) CONSIDERATION.—The joint resolution 

16 shall be considered in the House and shall be 

17 considered as read. All points of order against 

18 a joint resolution and against its consideration 

19 are waived. The previous question shall be con20 sidered as ordered on the joint resolution to its 

21 passage without intervening motion except two 

22 hours of debate equally divided and controlled 

23 by the proponent and an opponent. A motion to 

24 reconsider the vote on passage of a joint resolu25 tion shall not be in order. 


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1 (3) CONSIDERATION IN THE SENATE.— 

2 (A) PLACEMENT ON CALENDAR.—Upon in3 troduction in the Senate, the joint resolution 

4 shall be placed immediately on the calendar. 

5 (B) FLOOR CONSIDERATION.— 

6 (i) IN GENERAL.—Notwithstanding 

7 rule XXII of the Standing Rules of the 

8 Senate, it is in order at any time during 

9 the period beginning on the fourth day 

10 after the applicable date of introduction in 

11 the Senate and ending on the sixth day 

12 after the applicable date of introduction in 

13 the Senate (even though a previous motion 

14 to the same effect has been disagreed to) 

15 to move to proceed to the consideration of 

16 the joint resolution, and all points of order 

17 against the joint resolution (and against 

18 consideration of the joint resolution) are 

19 waived. The motion to proceed is not de20 batable. The motion is not subject to a mo21 tion to postpone. A motion to reconsider 

22 the vote by which the motion is agreed to 

23 or disagreed to shall not be in order. If a 

24 motion to proceed to the consideration of 

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1 tion shall remain the unfinished business 

2 until disposed of. 

3 (ii) DEBATE.—Debate on the joint 

4 resolution, and on all debatable motions 

5 and appeals in connection therewith, shall 

6 be limited to not more than 10 hours, 

7 which shall be divided equally between the 

8 majority and minority leaders or their des9 ignees. A motion further to limit debate is 

10 in order and not debatable. An amendment 

11 to, or a motion to postpone, or a motion to 

12 proceed to the consideration of other busi13 ness, or a motion to recommit the joint 

14 resolution is not in order. 

15 (iii) VOTE ON PASSAGE.—The vote on 

16 passage shall occur immediately following 

17 the conclusion of the debate on a joint res18 olution, and a single quorum call at the 

19 conclusion of the debate if requested in ac20 cordance with the rules of the Senate. 

21 (iv) RULINGS OF THE CHAIR ON PRO22 CEDURE.—Appeals from the decisions of 

23 the Chair relating to the application of the 

24 rules of the Senate, as the case may be, to 


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1 the procedure relating to a joint resolution 

2 shall be decided without debate. 

3 (4) RULES RELATING TO SENATE AND HOUSE

4 OF REPRESENTATIVES.— 

5 (A) COORDINATION WITH ACTION BY

6 OTHER HOUSE.—If, before the passage by one 

7 House of a joint resolution of that House, that 

8 House receives from the other House a joint 

9 resolution, then the following procedures shall 

10 apply: 

11 (i) The joint resolution of the other 

12 House shall not be referred to a com13 mittee. 

14 (ii) With respect to the joint resolu15 tion of the House receiving the resolution, 

16 the procedure in that House shall be the 

17 same as if no such joint resolution had 

18 been received from the other House; but 

19 the vote on passage shall be on the joint 

20 resolution of the other House. 

21 (B) TREATMENT OF COMPANION MEAS22 URES.—If, following passage of a joint resolu23 tion in the Senate, the Senate then receives the 

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1 resentatives, the companion measure shall not 

2 be debatable. 

3 (C) FAILURE OF JOINT RESOLUTION IN

4 THE SENATE.— 

5 (i) If, in the Senate, the motion to 

6 proceed to the consideration of the joint 

7 resolution fails on adoption, the Secretary 

8 of the Senate shall transmit a message to 

9 that effect to the House of Representa10 tives. 

11 (ii) If, in the Senate, the joint resolu12 tion fails on passage, the Secretary of the 

13 Senate shall transmit a message to that ef14 fect to the House of Representatives. 

15 (D) RULES OF HOUSE OF REPRESENTA16 TIVES AND SENATE.—This paragraph and the 

17 preceding paragraphs are enacted by Con18 gress— 

19 (i) as an exercise of the rulemaking 

20 power of the Senate and House of Rep21 resentatives, respectively, and as such it is 

22 deemed a part of the rules of each House, 

23 respectively, but applicable only with re24 spect to the procedure to be followed in 

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1 tion, and it supersedes other rules only to 

2 the extent that it is inconsistent with such 

3 rules; and 

4 (ii) with full recognition of the con5 stitutional right of either House to change 

6 the rules (so far as relating to the proce7 dure of that House) at any time, in the 

8 same manner, and to the same extent as in 

9 the case of any other rule of that House. 

10 (5) DEFINITION.—In this section, the term 

11 ‘‘joint resolution’’ means only a joint resolution— 

12 (A) which does not have a preamble; 

13 (B) the title of which is as follows: ‘‘Joint 

14 resolution relating to the approval of request 

15 for borrowing authority under the Financial 

16 Stability Improvement Act of 2009.’’; and 

17 (C) the sole matter after the resolving 

18 clause of which is as follows: ‘‘That the Con19 gress approves the request for additional bor20 rowing authority transmitted to the Congress 

21 on lll by the President under section 

22 1609(o)(4)(A)(ii) of the Financial Stability Im23 provement Act of 2009.’’, the blank space being 

24 filled with the appropriate date. 

25 (t) NO FEDERAL STATUS.— 


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1 (1) AGENCY STATUS.—A covered financial com2 pany (or any covered subsidiary thereof) that is 

3 placed into receivership is not a department, agency, 

4 or instrumentality of the United States for purposes 

5 of statutes that confer powers on or impose obliga6 tions on government entities. 

7 (2) EMPLOYEE STATUS.—Interim directors, di8 rectors, officers, employees, or agents of a covered 

9 financial company that is placed into receivership 

10 are not, solely by virtue of service in any such capac11 ity, officers or employees of the United States. Any 

12 employee of the Corporation, acting as receiver or of 

13 any Federal agency who serves at the request of the 

14 receiver as an interim director, director, officer, em15 ployee, or agent of a covered financial company that 

16 is placed into receivership shall not— 

17 (A) solely by virtue of service in any such 

18 capacity lose any existing status as an officer or 

19 employee of the United States for purposes of 

20 title 5, United States Code, or any other provi21 sion of law, or; 

22 (B) receive any salary or benefits for serv23 ice in any such capacity with respect to a cov24 ered financial company that is placed into re25 ceivership in addition to such salary or benefits 


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1 as are obtained through employment with the 

2 Corporation or other Federal agency. 

3 (u) STUDY OF PAYMENT OF CONSUMER CLAIMS.— 

4 Not later than 6 months following the dissolution of a cov5 ered financial company under section 1603(b), the Comp6 troller General of the United States shall carry out a 

7 study, and report on such study to the Committee on 

8 Banking, Housing, and Urban Affairs and the Committee 

9 on the Judiciary of the Senate and the Committee on Fi10 nancial Services and the Committee on the Judiciary of 

11 the House of Representatives, regarding the satisfaction 

12 of claims arising from violations of the provisions of the 

13 Truth in Lending Act, if any, in instances where any as14 sets were transferred from such covered financial com15 pany. 

16 SEC. 1610. CLARIFICATION OF PROHIBITION REGARDING 

17 CONCEALMENT OF ASSETS FROM RECEIVER 

18 OR LIQUIDATING AGENT. 

19 (a) IN GENERAL.—Section 1032 of title 18, United 

20 States Code, is amended in paragraph (1) by deleting ‘‘or’’ 

21 before ‘‘the National Credit Union Administration 

22 Board,’’ and by inserting immediately thereafter ‘‘or the 

23 Corporation, as defined in section 1602 of the Dissolution 

24 Authority for Large, Interconnected Financial Companies 

25 Act of 2009,’’. 


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1 (b) CONFORMING CHANGE.—The heading of section 

2 1032 of title 18, United States Code, is amended by strik3 ing ‘‘of financial institution’’. 

4 SEC. 1611. OFFICE OF DISSOLUTION. 

5 (a) TRIGGER OF AND PLAN FOR ESTABLISHMENT.— 

6 (1) TRIGGER.—If the Secretary appoints the 

7 Corporation as receiver for a financial company 

8 under section 1604, the Inspector General of the 

9 Corporation shall, as soon as possible after such ap10 pointment, establish in accordance with this section 

11 the Office of Dissolution as an office within the Of12 fice of the Inspector General of the Corporation. 

13 (2) PLAN.—The Inspector General of the Cor14 poration shall, in consultation with the Council of 

15 Inspectors General on Financial Oversight estab16 lished under section 1702, formulate and maintain a 

17 plan to allow for the timely establishment of an Of18 fice of Dissolution in accordance with paragraph (1). 

19 The Inspector General of the Corporation shall make 

20 such plan available to the Financial Services Over21 sight Council established under section 1001. 

22 (b) SPECIAL DEPUTY INSPECTOR GENERAL.—The 

23 head of the Office of Dissolution is the Special Deputy 

24 Inspector General for Dissolution (in this section referred 

25 to as the ‘‘Special Deputy Inspector General’’), who shall 


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1 be appointed by and report to the Inspector General of 

2 the Corporation. 

3 (c) DUTIES.— 

4 (1) AUDITS AND INVESTIGATIONS.—It shall be 

5 the duty of the Special Deputy Inspector General, in 

6 consultation with and subject to the approval of the 

7 Inspector General of the Corporation, to conduct, 

8 supervise, and coordinate audits and investigations 

9 of the activities of the Corporation in its capacity as 

10 receiver for a financial company under section 1604, 

11 including by collecting the following information: 

12 (A) A description of each financial com13 pany for which the Corporation has been ap14 pointed as receiver under section 1604. 

15 (B) A description of the activities and fu16 ture plans of the Corporation with respect to 

17 each financial company for which it has been 

18 appointed as receiver, and an analysis of wheth19 er such activities and plans conform to the re20 quirements of this subtitle and other applicable 

21 law and are in the best interest of the overall 

22 stability of the financial system. 

23 (C) Such other information as the Special 

24 Deputy Inspector General considers appro25 priate, in consultation with and subject to the 


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1 approval of the Inspector General of the Cor2 poration. 

3 (2) ADDITIONAL DUTIES.— 

4 (A) SYSTEMS, PROCEDURES, AND CON5 TROLS.—The Special Deputy Inspector General 

6 shall establish, maintain, and oversee such sys7 tems, procedures, and controls as the Special 

8 Deputy Inspector General considers appro9 priate, in consultation with and subject to the 

10 approval of the Inspector General of the Cor11 poration, to discharge the duties under para12 graph (1). 

13 (B) REPORTING OF CRIMINAL VIOLATIONS

14 TO ATTORNEY GENERAL.—If the Special Dep15 uty Inspector General, in carrying out this sec16 tion, discovers facts that give the Special Dep17 uty Inspector General reasonable grounds to be18 lieve there has been a violation of Federal 

19 criminal law, the Special Deputy Inspector Gen20 eral shall expeditiously report such facts to the 

21 Attorney General. 

22 (C) MINIMIZING DUPLICATION OF EF23 FORT.—The Inspector General of the Corpora24 tion and the Special Deputy Inspector General 

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1 fort in the oversight of the Corporation’s activi2 ties as receiver for financial companies under 

3 section 1604. 

4 (3) DUTIES UNDER THE INSPECTOR GENERAL

5 ACT OF 1978.—In addition to the duties specified in 

6 paragraphs (1) and (2), the Special Deputy Inspec7 tor General shall assist the Inspector General of the 

8 Corporation in carrying out such duties and respon9 sibilities of inspectors general under the Inspector 

10 General Act of 1978 as the Inspector General of the 

11 Corporation considers appropriate. 

12 (d) AUTHORITIES UNDER THE INSPECTOR GENERAL

13 ACT OF 1978.—The Inspector General of the Corporation 

14 may confer on the Special Deputy Inspector General such 

15 authorities provided to the Inspector General of the Cor16 poration in section 6 of the Inspector General Act of 1978 

17 as the Inspector General of the Corporation considers nec18 essary to enable the Special Deputy Inspector General to 

19 carry out the duties specified in subsection (c). 

20 (e) PERSONNEL, FACILITIES, AND OTHER RE21 SOURCES.— 

22 (1) IN GENERAL.—The Special Deputy Inspec23 tor General may, in consultation with and subject to 

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1 lished under section 1609(n) as are necessary to 

2 carry out the duties described in subsection (c) and 

3 to submit the reports required by subsection (h). 

4 (2) ADDITIONAL FUNDS.—If the fund estab5 lished under section 1609(n) is insufficient to enable 

6 the Special Deputy Inspector General to begin car7 rying out the duties of the Special Deputy Inspector 

8 General in a timely fashion or later becomes insuffi9 cient to enable the Special Deputy Inspector General 

10 to carry out such duties, the Inspector General of 

11 the Corporation shall detail the necessary personnel, 

12 facilities, or other resources to the Special Deputy 

13 Inspector General. 

14 (f) CORRECTIVE RESPONSES TO AUDIT PROB15 LEMS.—The Chairman of the Corporation shall— 

16 (1) take action to address deficiencies identified 

17 by a report or investigation of the Special Deputy 

18 Inspector General; or 

19 (2) certify to the appropriate committees of 

20 Congress that no action is necessary or appropriate. 

21 (g) COOPERATION AND COORDINATION WITH OTHER

22 ENTITIES.—In carrying out the duties, responsibilities, 

23 and authorities of the Special Deputy Inspector General 

24 under this section, the Special Deputy Inspector General 

25 shall work with each of the inspectors general who is a 


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1 member of the Council of Inspectors General on Financial 

2 Oversight established under section 1703(a)(1), in order 

3 to avoid duplication of effort and ensure comprehensive 

4 oversight of the Corporation’s activities as a receiver ap5 pointed under section 1604. 

6 (h) REPORTS.— 

7 (1) IN GENERAL.—In lieu of the semiannual re8 ports required by section 5(a) of the Inspector Gen9 eral Act of 1978, the Special Deputy Inspector Gen10 eral shall submit to the appropriate committees of 

11 Congress at the following times a report prepared in 

12 consultation with and approved by the Inspector 

13 General of the Corporation: 

14 (A) Not later than 30 days after the ap15 pointment of the Special Deputy Inspector Gen16 eral. 

17 (B) During the first 3 years after such ap18 pointment, not later than 30 days after the end 

19 of each fiscal quarter during which the Cor20 poration acts as receiver for a financial com21 pany under section 1604. 

22 (C) During the 4th year after such ap23 pointment and each year thereafter, not later 

24 than 30 days after the end of the 2nd and the 

25 4th fiscal quarters, if the Corporation acts as 


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1 receiver for a financial company under section 

2 1604 during such semiannual period. 

3 (2) CONTENT OF REPORTS.—Each report re4 quired by paragraph (1) shall include a summary, 

5 for the period since the last required report (or, in 

6 the case of the first report, for the period since the 

7 Corporation was first appointed as a receiver under 

8 section 1604) of— 

9 (A) the activities of the Special Deputy In10 spector General; and 

11 (B) the activities and future plans of the 

12 Corporation with respect to each financial com13 pany for which it served as receiver. 

14 (i) TERMINATION.—The Office of Dissolution shall 

15 terminate 6 months after the Corporation ceases to serve 

16 as a receiver for any financial company under section 

17 1604, subject to reestablishment pursuant to subsection 

18 (a)(1). 

19 SEC. 1612. MISCELLANEOUS PROVISIONS. 

20 (a) BANKRUPTCY CODE AMENDMENTS.— 

21 (1) Section 109(b)(2) of title 11 of the United 

22 States Code is amended by inserting ‘‘covered finan23 cial company (as that term is defined in section 

24 1602(5) of the Dissolution Authority for Large, 


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1 Interconnected Financial Companies Act of 2009),’’ 

2 after ‘‘a domestic insurance company,’’. 

3 (2) Section 303 of title 11, United States Code, 

4 is amended— 

5 (A) in subsection (h)— 

6 (i) by striking ‘‘or’’ at the end of 

7 paragraph (1); 

8 (ii) by striking the period at the end 

9 of paragraph (2) and inserting ‘‘; or’’; and 

10 (iii) by adding at the end the fol11 lowing new paragraph: 

12 ‘‘(3) an involuntary case is filed against a cov13 ered financial company, as defined in section 

14 1602(5) of the Dissolution Authority for Large, 

15 Interconnected Financial Companies Act of 2009, by 

16 the Federal Deposit Insurance Corporation under 

17 section 1607 of that Act.’’; and 

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

19 subsection: 

20 ‘‘(m) Notwithstanding subsections (a) and (b) of this 

21 section and section 109(b)(2), an involuntary case may be 

22 commenced by the Federal Deposit Insurance Corporation 

23 against a covered financial company (as defined in section 

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1 untary case may be commenced by the Federal Deposit 

2 Insurance Corporation in accordance with section 1607 of 

3 that Act.’’. 

4 (3) Title 11, United States Code, is amended by 

5 inserting after section 303 the following new section: 

6 ‘‘SEC. 304. CASES INVOLVING FDIC DISSOLUTION AUTHOR7 ITY. 

8 ‘‘(a) APPOINTMENT.—In any case commenced by the 

9 Federal Deposit Insurance Corporation under section 

10 303(m), on the request of the Federal Deposit Insurance 

11 Corporation, such Corporation shall be appointed to serve 

12 as trustee in such case, notwithstanding any other provi13 sion of this title. 

14 ‘‘(b) QUALIFICATION.—Sections 321, 322, 324, and 

15 326 shall not apply with respect to the appointment or 

16 service of such Corporation as trustee in any case so com17 menced.’’. 

18 (b) FEDERAL DEPOSIT INSURANCE ACT AND FED19 ERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT

20 ACT OF 1991.— 

21 (1) Section 18(c)(4)(G)(i) of the Federal De22 posit Insurance Act (12 U.S.C. 1823(c)(4)(G)(i)) is 

23 amended by inserting at the end the following new 

24 sentence: ‘‘The determination with regard to the 

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1 paragraph shall apply to only an insured depository 

2 institution except when severe financial conditions 

3 exist which threaten the stability of a significant 

4 number of insured depository institutions.’’. 

5 (2) Section 403(a) of the Federal Deposit In6 surance Corporation Improvement Act of 1991 (12 

7 U.S.C. 4403(a)) is amended by inserting ‘‘section 

8 1609(c) of the Dissolution Authority for Large, 

9 Interconnected Financial Companies Act of 2009, 

10 section 1367 of the Federal Housing Enterprises Fi11 nancial Safety and Soundness Act of 1992 (12 

12 U.S.C. 4617(d)),’’ after ‘‘section 11(e) of the Fed13 eral Deposit Insurance Act,’’. 

14 SEC. 1613. AMENDMENT TO FEDERAL DEPOSIT INSURANCE 

15 ACT. 

16 The Federal Deposit Insurance Act (12 U.S.C. 1811 

17 et seq.) is amended by inserting after section 11A the fol18 lowing new section: 

19 ‘‘SEC. 11B. SYSTEMIC DISSOLUTION AUTHORITY AND FUND. 

20 ‘‘(a) SYSTEMIC DISSOLUTION AUTHORITY.—The 

21 Corporation shall establish a Systemic Dissolution Author22 ity, which shall function as a subsidiary of the Corpora23 tion. 

24 ‘‘(b) SYSTEMIC DISSOLUTION FUND.—Any fund es25 tablished for the purpose of facilitating the dissolution of 


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1 a financial company under subtitle G of the Financial Sta2 bility Improvement Act shall be called the Systemic Dis3 solution Fund, which shall be managed by the Corpora4 tion, through the Systemic Dissolution Authority. 

5 ‘‘(c) MANAGEMENT OF FUND.— 

6 ‘‘(1) SEPARATE MAINTENANCE.—The Systemic 

7 Dissolution Fund shall be separately maintained and 

8 not commingled with any other fund of the Corpora9 tion. 

10 ‘‘(2) TREATMENT OF AND ACCOUNTING FOR AS11 SETS.—The assets and liabilities of the Systemic 

12 Dissolution Fund— 

13 ‘‘(A) shall be the assets and liabilities of 

14 the Fund and not of the Corporation; and 

15 ‘‘(B) shall not be consolidated with the as16 sets and liabilities of the Deposit Insurance 

17 Fund or the Corporation for accounting, report18 ing, or any other purpose. 

19 ‘‘(d) RIGHTS, POWERS, AND DUTIES.— 

20 ‘‘(1) IN GENERAL.—The Corporation, in addi21 tion to any rights, powers, and duties under this Act 

22 or any other law, shall, through the Systemic Dis23 solution Authority, have all rights, powers, and du24 ties necessary to implement and maintain the Sys25 temic Dissolution Fund in accordance with subtitle 


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1 G of the Financial Stability Improvement Act of 

2 2009. 

3 ‘‘(2) POWERS AS RECEIVER FOR COVERED FI4 NANCIAL COMPANY.—When acting as receiver with 

5 respect to any covered financial company, as defined 

6 in subtitle G of the Financial Stability Improvement 

7 Act of 2009, the Corporation, through the Systemic 

8 Dissolution Authority, shall have all rights, powers, 

9 and duties that the Corporation has as receiver 

10 under such subtitle. 

11 ‘‘(3) SPECIFIC AND INCIDENTAL POWERS.—The 

12 Corporation, through the Systemic Dissolution Au13 thority, or any duly authorized officer or agent of 

14 the Authority, may exercise all powers specifically 

15 granted by the provisions of this Act and subtitle G 

16 of the Financial Stability Improvement Act and such 

17 incidental powers as shall be necessary to carry out 

18 the powers so granted and accomplish the purposes 

19 of subtitle G of the Financial Stability Improvement 

20 Act. 

21 ‘‘(e) STAFF AND RESOURCES.— 

22 ‘‘(1) IN GENERAL.—The Corporation shall as23 sign such staff, and provide such administrative and 

24 other support services to the Systemic Dissolution 


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1 Authority as is necessary to fulfill the statutory re2 sponsibilities of the Authority. 

3 ‘‘(2) ADMINISTRATIVE EXPENSES.—The cost 

4 of all personnel, services, and resources provided on 

5 behalf of the Systemic Dissolution Authority shall be 

6 paid from the Systemic Dissolution Fund.’’. 

7 SEC. 1614. APPLICATION OF EXECUTIVE COMPENSATION 

8 LIMITATIONS. 

9 At any time that the Corporation has borrowed from 

10 the Treasury pursuant to section 1609(o) to resolve a cov11 ered financial company, the Corporation shall apply the 

12 executive compensation limits under section 111 of the 

13 Emergency Economic Stabilization Act of 2008 to such 

14 company for so long as such company is in receivership. 

15 SEC. 1615. STUDY ON THE EFFECT OF SAFE HARBOR PROVI16 SIONS IN INSOLVENCY CASES. 

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

18 States shall conduct a study of the safe harbor provisions 

19 under Federal law for derivatives, swaps, and securities 

20 transactions addressing— 

21 (1) how the safe harbor provisions have been 

22 applied in insolvency cases; 

23 (2) how such provisions impact the rights of 

24 parties in interest in insolvency cases; 


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1 (3) whether these provisions impede or interfere 

2 with allowing a debtor a reasonable period of time 

3 to pursue rehabilitation and reorganization; and 

4 (4) whether these provisions had an adverse im5 pact on the financial marketplace. 

6 (b) REPORT TO THE CONGRESS.—Not later than 180 

7 days after the date of the enactment of this title, the 

8 Comptroller General shall submit to the President pro 

9 tempore of the Senate and the Speaker of the House of 

10 Representatives a report on the results of the study con11 ducted under subsection (a), together with any rec12 ommendations for legislation to address any adverse im13 pacts presented by the Federal safe harbor provisions. 

14 SEC. 1616. TREASURY STUDY. 

15 (a) STUDY REQUIRED.—The Secretary shall carry 

16 out a study analyzing how the resolution authority pro17 vided under this subtitle should be funded. Such study 

18 shall consider the following factors: 

19 (1) The consequences of any assessments on the 

20 overall recovery of the economy of the United States. 

21 (2) Any immediate or continuing consequences 

22 of assessments on other aspects of the economy of 

23 the United States, including job creation, public and 

24 private investments, small business loans, and gen25 eral credit availability. 


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1 (3) The consequences of any assessments on in2 dividual sectors of the financial services industry. 

3 (4) The consequences of any assessments on the 

4 financial integrity on individual firms within each 

5 sector of the financial services industry. 

6 (5) The appropriateness and effect of assess7 ments on firms that are subject to separate assess8 ments under existing State or Federal depositor, pol9 icyholder, or investor protection mechanisms and the 

10 consequences of any such assessments on these 

11 mechanisms themselves. 

12 (6) The implications of assessments on all rel13 evant stakeholders, including taxpayers, depositors, 

14 insurance policyholders, investors, counterparties, 

15 and creditors. 

16 (7) Evaluation of the appropriate assessment 

17 base, including but not limited to factors such as as18 sets and liabilities, assets under management, policy19 holder reserves, other reserves, statutory and regu20 latory capital requirements, trusteed assets, and de21 posits and inflationary factors. 

22 (b) REPORT.—Not later than the end of the 6-month 

23 period beginning on the date of the enactment of this sub24 title, the Secretary shall issue a report to the Congress 

25 containing all determinations and conclusions made by the 


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1 Secretary in carrying out the study required under sub2 section (a). 

3 SEC. 1617. PRIORITY OF CLAIMS IN FEDERAL DEPOSIT IN4 SURANCE ACT. 

5 Section 11(d)(11)(A) of the Federal Deposit Insur6 ance Act (12 U.S.C. 1821(d)(11)(A)) is amended— 

7 (1) by redesignating clauses (iii) through (v) as 

8 clauses (iv) through (vi), respectively; and 

9 (2) by inserting after clause (ii) the following 

10 new clause (iii): 

11 ‘‘(iii) Any obligation of the institution 

12 owed to the Corporation as a result of the 

13 institution’s default on a Corporation-guar14 anteed debt.’’. 

15 Subtitle H—Additional Improve16 ments for Financial Crisis Man17 agement 

18 SEC. 1701. ADDITIONAL IMPROVEMENTS FOR FINANCIAL 

19 CRISIS MANAGEMENT. 

20 Section 13 of the Federal Reserve Act (12 U.S.C. 

21 343) is amended by striking the 3rd undesignated para22 graph and inserting the following new subsection: 

23 ‘‘(c) FINANCIAL CRISIS MANAGEMENT.— 

24 ‘‘(1) IN GENERAL.—In unusual and exigent cir25 cumstances, the Board of Governors of the Federal 


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1 Reserve System, upon the written determination, 

2 pursuant to section 1109 of the Financial Stability 

3 Improvement Act of 2009, of the Financial Stability 

4 Oversight Council, that a liquidity event exists that 

5 could destabilize the financial system (which deter6 mination shall be made upon a vote of not less than 

7 two-thirds of the members of such Council then serv8 ing), and with the written consent of the Secretary 

9 of the Treasury (after certification by the President 

10 that an emergency exists), may authorize any Fed11 eral reserve bank, during such periods as the Board 

12 may determine and at rates established in accord13 ance with the provision designated as (d) of section 

14 14, to discount for an individual, partnership, or 

15 corporation, notes, drafts, and bills of exchange 

16 when such notes, drafts, and bills of exchange are 

17 indorsed or otherwise secured to the satisfaction of 

18 the Federal reserve bank and in conformance with 

19 regulations or guidelines issued by the Board of 

20 Governors regarding the quality of notes, drafts, and 

21 bills of exchange available for discount and of the se22 curity for those notes, drafts and bills of exchange, 

23 unless a joint resolution (as defined in paragraph 

24 (5)) is adopted. Upon making any determination 

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1 retary of the Treasury, the Financial Stability Over2 sight Council shall promptly submit a notice of such 

3 determination to the House of Representatives and 

4 the Senate. The amounts made available under this 

5 subsection shall not exceed $4,000,000,000,000. 

6 ‘‘(2) CLARIFICATION OF ‘SECURED TO THE SAT7 ISFACTION OF THE FEDERAL RESERVE BANK’.—No 

8 member of the Board of Governors of the Federal 

9 Reserve System shall vote to authorize any action 

10 permitted under paragraph (1) and the Secretary of 

11 the Treasury shall not provide the written consent 

12 required by paragraph (1) unless that member be13 lieves and the Secretary of the Treasury believes: 

14 ‘‘(A) that there is at least a 99 percent 

15 likelihood that all funds disbursed or put at risk 

16 by such action will be repaid to the Federal Re17 serve System; and 

18 ‘‘(B) that there is at least a 99 percent 

19 likelihood that all interest due on any funds dis20 bursed will also be paid to the Federal Reserve 

21 System. 

22 ‘‘(3) LOW QUALITY ASSETS EXCLUDED.—The 

23 notes, drafts, and bills of exchange available for dis24 count for purposes of paragraph (1), and the secu25 rity for those notes, drafts and bills of exchange may 


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1 only include any of the following assets if such asset 

2 is used to further enhance the security for those 

3 notes, drafts and bills of exchange which shall be 

4 fully secured with assets that are not any of the fol5 lowing assets: 

6 ‘‘(A) An asset (including a security) that 

7 would be classified as ‘‘substandard,’’ ‘‘doubt8 ful,’’ or ‘‘loss,’’ or treated as ‘‘special mention’’ 

9 or ‘‘other transfer risk problems,’’ in a report 

10 of examination or inspection of bank or an affil11 iate of a bank prepared by either a Federal or 

12 State supervisory agency or in any internal 

13 classification system used by such individual, 

14 partnership or corporation. 

15 ‘‘(B) An asset in a nonaccrual status. 

16 ‘‘(C) An asset on which principal or inter17 est payments are more than 30 days past due. 

18 ‘‘(D) An asset whose terms have been re19 negotiated or compromised due to the deterio20 rating financial condition of the obligor unless 

21 such asset has been performing for at least 6 

22 months since the renegotiation. 

23 ‘‘(4) NO SINGLE OR SPECIFIC BENE24 FICIARIES.—The Board of Governors of the Federal 

25 Reserve System may authorize a Federal reserve 


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1 bank to discount notes, drafts, or bills of exchange 

2 under this section only as part of a broadly available 

3 credit or other facility and may not authorize a Fed4 eral Reserve bank to discount notes, drafts, or bills 

5 of exchange for only a single and specific individual, 

6 partnership, or corporation. 

7 ‘‘(5) EVIDENCE OF UNAVAILABILITY OF CRED8 IT.—Before discounting any note, draft, or bill of ex9 change under this subsection for an individual, a 

10 partnership or corporation as part of a broadly 

11 available credit or other facility the Federal reserve 

12 bank shall obtain evidence that such individual, part13 nership, or corporation is unable to secure adequate 

14 credit accommodations from other banking institu15 tions. All discounts under this subsection for individ16 uals, partnerships, or corporations shall be subject 

17 to such limitations, restrictions, and regulations as 

18 the Board of Governors of the Federal Reserve Sys19 tem may prescribe. 

20 ‘‘(6) CONGRESSIONAL DISAPPROVAL OF ADDI21 TIONAL BORROWING AUTHORITY.— 

22 ‘‘(A) INTRODUCTION.—Within 90 days of 

23 the day on which notice from the Financial Sta24 bility Oversight Council is received by the 

25 House of Representatives and the Senate under 


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1 paragraph (1), a joint resolution specified in 

2 subparagraph (E) may be introduced in the 

3 House by the majority leader and in the Senate 

4 by the majority leader. 

5 ‘‘(B) CONSIDERATION IN THE HOUSE OF

6 REPRESENTATIVES.— 

7 ‘‘(i) REPORTING AND DISCHARGE.— 

8 Any committee of the House of Represent9 atives to which a joint resolution intro10 duced under subparagraph (A) is referred 

11 shall report such joint resolution to the 

12 House not later than 5 calendar days after 

13 the applicable date of introduction of the 

14 joint resolution. If a committee fails to re15 port such joint resolution within that pe16 riod, the committee shall be discharged 

17 from further consideration of the joint res18 olution and the joint resolution shall be re19 ferred to the appropriate calendar. 

20 ‘‘(ii) PROCEEDING TO CONSIDER21 ATION.—After all committees authorized to 

22 consider a joint resolution have reported 

23 such joint resolution to the House or have 

24 been discharged from its consideration, it 

25 shall be in order, not later than the sixth 


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1 day after the applicable date of introduc2 tion of the joint resolution, for the major3 ity leader to move to proceed to consider 

4 the joint resolution in the House. Such a 

5 motion shall not be in order after the 

6 House has disposed of a motion to proceed 

7 on the joint resolution and shall not be in 

8 order if the House has received a message 

9 from the Senate under subparagraph 

10 (D)(iii)(I). The previous question shall be 

11 considered as ordered on the motion to its 

12 adoption without intervening motion. A 

13 motion to reconsider the vote by which the 

14 motion is disposed of shall not be in order. 

15 ‘‘(iii) CONSIDERATION.—The joint 

16 resolution shall be considered in the House 

17 and shall be considered as read. All points 

18 of order against a joint resolution and 

19 against its consideration are waived. The 

20 previous question shall be considered as or21 dered on the joint resolution to its passage 

22 without intervening motion except two 

23 hours of debate equally divided and con24 trolled by the proponent and an opponent. 


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1 A motion to reconsider the vote on passage 

2 of a joint resolution shall not be in order. 

3 ‘‘(C) CONSIDERATION IN THE SENATE.— 

4 ‘‘(i) PLACEMENT ON CALENDAR.— 

5 Upon introduction in the Senate, the joint 

6 resolution shall be placed immediately on 

7 the calendar. 

8 ‘‘(ii) FLOOR CONSIDERATION.— 

9 ‘‘(I) IN GENERAL.—Notwith10 standing rule XXII of the Standing 

11 Rules of the Senate, it is in order at 

12 any time during the period beginning 

13 on the fourth day after the applicable 

14 date of introduction of the joint reso15 lution in the Senate and ending on 

16 the sixth day after the applicable date 

17 of introduction in the Senate (even 

18 though a previous motion to the same 

19 effect has been disagreed to) to move 

20 to proceed to the consideration of the 

21 joint resolution, and all points of 

22 order against the joint resolution (and 

23 against consideration of the joint reso24 lution) are waived. The motion to pro25 ceed is not debatable. The motion is 


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1 not subject to a motion to postpone. A 

2 motion to reconsider the vote by which 

3 the motion is agreed to or disagreed 

4 to shall not be in order. If a motion 

5 to proceed to the consideration of the 

6 resolution is agreed to, the joint reso7 lution shall remain the unfinished 

8 business until disposed of. 

9 ‘‘(II) DEBATE.—Debate on the 

10 joint resolution, and on all debatable 

11 motions and appeals in connection 

12 therewith, shall be limited to not more 

13 than 10 hours, which shall be divided 

14 equally between the majority and mi15 nority leaders or their designees. A 

16 motion further to limit debate is in 

17 order and not debatable. An amend18 ment to, or a motion to postpone, or 

19 a motion to proceed to the consider20 ation of other business, or a motion to 

21 recommit the joint resolution is not in 

22 order. 

23 ‘‘(III) VOTE ON PASSAGE.—The 

24 vote on passage shall occur imme25 diately following the conclusion of the 


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1 debate on a joint resolution, and a 

2 single quorum call at the conclusion of 

3 the debate if requested in accordance 

4 with the rules of the Senate. 

5 ‘‘(IV) RULINGS OF THE CHAIR

6 ON PROCEDURE.—Appeals from the 

7 decisions of the Chair relating to the 

8 application of the rules of the Senate, 

9 as the case may be, to the procedure 

10 relating to a joint resolution shall be 

11 decided without debate. 

12 ‘‘(D) RULES RELATING TO SENATE AND

13 HOUSE OF REPRESENTATIVES.— 

14 ‘‘(i) COORDINATION WITH ACTION BY

15 OTHER HOUSE.—If, before the passage by 

16 one House of a joint resolution of that 

17 House, that House receives from the other 

18 House a joint resolution, then the following 

19 procedures shall apply: 

20 ‘‘(I) The joint resolution of the 

21 other House shall not be referred to a 

22 committee. 

23 ‘‘(II) With respect to the joint 

24 resolution of the House receiving the 

25 resolution, the procedure in that 


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1 House shall be the same as if no such 

2 joint resolution had been received 

3 from the other House; but the vote on 

4 passage shall be on the joint resolu5 tion of the other House. 

6 ‘‘(ii) TREATMENT OF COMPANION

7 MEASURES.—If, following passage of a 

8 joint resolution in the Senate, the Senate 

9 then receives the companion measure from 

10 the House of Representatives, the com11 panion measure shall not be debatable. 

12 ‘‘(iii) FAILURE OF JOINT RESOLUTION

13 IN THE SENATE.— 

14 ‘‘(I) If, in the Senate, the motion 

15 to proceed to the consideration of the 

16 joint resolution fails on adoption, the 

17 Secretary of the Senate shall transmit 

18 a message to that effect to the House 

19 of Representatives. 

20 ‘‘(II) If, in the Senate, the joint 

21 resolution fails on passage, the Sec22 retary of the Senate shall transmit a 

23 message to that effect to the House of 

24 Representatives. 


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1 ‘‘(iv) RULES OF HOUSE OF REP2 RESENTATIVES AND SENATE.—This para3 graph and the preceding paragraphs are 

4 enacted by Congress— 

5 ‘‘(I) as an exercise of the rule6 making power of the Senate and 

7 House of Representatives, respec8 tively, and as such it is deemed a part 

9 of the rules of each House, respec10 tively, but applicable only with respect 

11 to the procedure to be followed in that 

12 House in the case of a joint resolu13 tion, and it supersedes other rules 

14 only to the extent that it is incon15 sistent with such rules; and 

16 ‘‘(II) with full recognition of the 

17 constitutional right of either House to 

18 change the rules (so far as relating to 

19 the procedure of that House) at any 

20 time, in the same manner, and to the 

21 same extent as in the case of any 

22 other rule of that House. 

23 ‘‘(E) DEFINITION.—In this paragraph, the 

24 term ‘joint resolution’ means only a joint reso25 lution— 


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1 ‘‘(i) which does not have a preamble; 

2 ‘‘(ii) the title of which is as follows: 

3 ‘Joint resolution relating to the use of au4 thority relevant to section 13(c) of the 

5 Federal Reserve Act under the Financial 

6 Stability Improvement Act of 2009.’; and 

7 ‘‘(iii) the sole matter after the resolv8 ing clause of which is as follows: ‘That the 

9 Congress disapproves the use of authority 

10 pursuant to section 13(c) of the Federal 

11 Reserve Act transmitted to the Congress 

12 on lll by the Board of Governors of 

13 the Federal Reserve System’, the blank 

14 space being filled with the appropriate 

15 date. 

16 ‘‘(F) NONSCORING OF JOINT RESOLUTIONS

17 OF DISAPPROVAL.—A joint resolution of dis18 approval shall be treated as having no budg19 etary effect by the Congressional Budget Office 

20 and the Office of Management and Budget for 

21 any purpose under the Rules of the House of 

22 Representatives, the Standing Rules of the Sen23 ate, the Congressional Budget Act of 1974, or 

24 any statutory pay-as-you-go requirement.’’. 


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1 SEC. 1702. CERTAIN RESTRICTIONS RELATED TO FOREIGN 

2 CURRENCY SWAP AUTHORITY. 

3 Section 14 of the Federal Reserve Act is amended 

4 by adding at the end the following new subsection: 

5 ‘‘(h) CERTAIN RESTRICTIONS RELATED TO FOREIGN

6 CURRENCY SWAP AUTHORITY.—A Federal reserve bank 

7 may not take any action pursuant to the authority pro8 vided under this section with respect to foreign currency 

9 swaps unless— 

10 ‘‘(1) such action is approved in advance by the 

11 affirmative vote of not less than five members of the 

12 Board of Governors of the Federal Reserve System; 

13 and 

14 ‘‘(2) such action is taken with the written con15 currence of the Secretary of the Treasury.’’. 

16 SEC. 1703. ADDITIONAL OVERSIGHT OF FINANCIAL REGU17 LATORY SYSTEM. 

18 (a) COUNCIL OF INSPECTORS GENERAL ON FINAN19 CIAL OVERSIGHT.— 

20 (1) ESTABLISHMENT AND MEMBERSHIP.— 

21 There is established a Council of Inspectors General 

22 on Financial Oversight (in this section referred to as 

23 the ‘‘Council of Inspectors General’’) chaired by the 

24 Inspector General of the Department of the Treas25 ury and composed of the inspectors general of the 

26 following: 


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1 (A) The Board of Governors of the Federal 

2 Reserve System. 

3 (B) The Commodity Futures Trading 

4 Commission. 

5 (C) The Department of Housing and 

6 Urban Development. 

7 (D) The Department of the Treasury. 

8 (E) The Federal Deposit Insurance Cor9 poration. 

10 (F) The Federal Housing Finance Agency. 

11 (G) The National Credit Union Adminis12 tration. 

13 (H) The Securities and Exchange Commis14 sion. 

15 (I) The Troubled Asset Relief Program 

16 (until the termination of the authority of the 

17 Special Inspector General for such program 

18 under section 121(h) of the Emergency Eco19 nomic Stabilization Act of 2008 (12 U.S.C. 

20 5231(h))). 

21 (2) DUTIES.— 

22 (A) MEETINGS.—The Council of Inspec23 tors General shall meet not less than once each 

24 quarter, or more frequently if the chair con25 siders it appropriate, to facilitate the sharing of 


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1 information among inspectors general and to 

2 discuss the ongoing work of each inspector gen3 eral who is a member of the Council of Inspec4 tors General, with a focus on concerns that may 

5 apply to the broader financial sector and ways 

6 to improve financial oversight. 

7 (B) ANNUAL REPORT.—The Council of In8 spectors General shall, each year within a time9 frame that permits consideration by the Finan10 cial Services Oversight Council (in this section 

11 referred to as the ‘‘Oversight Council’’) prior to 

12 the submission of its report for such year under 

13 section 1006, submit to the Oversight Council 

14 and to Congress a report including— 

15 (i) for each inspector general who is a 

16 member of the Council of Inspectors Gen17 eral, a section within the exclusive editorial 

18 control of such inspector general that high19 lights the concerns and recommendations 

20 of such inspector general in such inspector 

21 general’s ongoing and completed work, 

22 with a focus on issues that may apply to 

23 the broader financial sector; and 

24 (ii) a summary of the general observa25 tions of the Council of Inspectors General 


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1 based on the views expressed by each in2 spector general as required by clause (i), 

3 with a focus on measures that should be 

4 taken to improve financial oversight. 

5 (3) COUNCIL OF INSPECTORS GENERAL WORK6 ING GROUPS.— 

7 (A) WORKING GROUPS TO EVALUATE

8 OVERSIGHT COUNCIL.— 

9 (i) CONVENING A WORKING GROUP.— 

10 The Council of Inspectors General may, by 

11 majority vote, convene a Council of Inspec12 tors General Working Group to evaluate 

13 the effectiveness and internal operations of 

14 the Oversight Council. 

15 (ii) PERSONNEL AND RESOURCES.— 

16 The inspectors general who are members 

17 of the Council of Inspectors General may 

18 detail staff and resources to a Council of 

19 Inspectors General Working Group estab20 lished under this subparagraph to enable it 

21 to carry out its duties. 

22 (iii) REPORTS.—A Council of Inspec23 tors General Working Group established 

24 under this subparagraph shall submit reg25 ular reports to the Oversight Council and 


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1 to Congress on its evaluations pursuant to 

2 this subparagraph. 

3 (B) WORKING GROUPS FOR FINANCIAL

4 COMPANIES UNDERGOING RESOLUTION.— 

5 (i) CONVENING A WORKING GROUP.— 

6 The Council of Inspectors General shall 

7 convene a Council of Inspectors General 

8 Working Group for each financial company 

9 for which the Secretary of the Treasury 

10 appoints the Federal Deposit Insurance 

11 Corporation as receiver under section 

12 1604. 

13 (ii) PERSONNEL AND RESOURCES.— 

14 The inspectors general who are members 

15 of the Council of Inspectors General may 

16 detail staff and resources to a Council of 

17 Inspectors General Working Group estab18 lished under this subparagraph to enable it 

19 to carry out its duties. 

20 (iii) REPORTS.—Not later than 270 

21 days after the appointment of the Federal 

22 Deposit Insurance Corporation as receiver 

23 for the financial company for which a 

24 Council of Inspectors General Working 

25 Group is convened under clause (i), such 


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1 Working Group shall submit to the pri2 mary financial regulatory agency and to 

3 Congress a report that includes— 

4 (I) the reasons for such financial 

5 company’s failure; 

6 (II) the reasons for the Secretary 

7 of the Treasury’s appointment of the 

8 Federal Deposit Insurance Corpora9 tion as receiver for such financial 

10 company; and 

11 (III) recommendations for pre12 venting future failures of financial 

13 companies. 

14 (b) RESPONSE TO REPORT BY OVERSIGHT COUN15 CIL.—The Oversight Council shall include in its annual 

16 report under section 1006 responses to the concerns raised 

17 in the report of the Council of Inspectors General under 

18 subsection (a)(2)(B) for such year. 

19 Subtitle I—Miscellaneous 

20 SEC. 1801. INCLUSION OF MINORITIES AND WOMEN; DIVER21 SITY IN AGENCY WORKFORCE. 

22 (a) OFFICE OF MINORITY AND WOMEN INCLU23 SION.— 

24 (1) ESTABLISHMENT.—Not later than 180 days 

25 following the enactment of this title, each agency 


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1 shall establish an Office of Minority and Women In2 clusion (hereinafter in this section referred to as the 

3 ‘‘Office’’) that shall advise the agency administrator 

4 of the impact of policies and regulations of the agen5 cy on minority-owned and women-owned businesses 

6 (as such terms are defined in subsection (c)(1)), and 

7 shall be responsible for all matters of the agency re8 lating to diversity in management, employment, and 

9 business activities, including the coordination of 

10 technical assistance, in accordance with such stand11 ards and requirements as the Director of the Office 

12 shall establish. 

13 (2) CONSOLIDATION.—Each agency that has 

14 assigned these or comparable responsibilities to ex15 isting offices shall ensure that such responsibilities 

16 are consolidated within the Office. 

17 (b) DIRECTOR.— 

18 (1) IN GENERAL.—For each Office, the Presi19 dent shall appoint, by and with the advice and con20 sent of the Senate, a Director of Minority and 

21 Women Inclusion (hereinafter in this section re22 ferred to as the ‘‘Director’’), who shall also hold a 

23 title within such agency comparable to that of other 

24 senior level staff who are, as applicable, either ap25 pointed by the President, by and with the advice and 


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1 consent of the Senate, or act in a managerial capac2 ity that requires reporting directly to the agency ad3 ministrator. 

4 (2) DUTIES.—Each Director shall— 

5 (A) ensure equal employment opportunity 

6 and the racial, ethnic and gender diversity of 

7 the agency’s workforce and senior management; 

8 (B) increase the participation of minority9 owned and women-owned businesses in the pro10 grams and contracts of the agency; 

11 (C) provide guidance to the agency admin12 istrator to ensure that the policies and regula13 tions of the agency strengthen minority-owned 

14 and women-owned businesses; and 

15 (D) conduct an assessment, as part of the 

16 examination process for the entities regulated 

17 or monitored by the agency of the diversity and 

18 inclusion efforts by such entities. 

19 (c) INCLUSION IN ALL LEVELS OF BUSINESS ACTIVI20 TIES.— 

21 (1) IN GENERAL.—Each Director shall develop 

22 and implement standards and procedures to ensure, 

23 to the maximum extent possible, the inclusion and 

24 utilization of minorities (as such term is defined in 

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1 form, Recovery, and Enforcement Act of 1989 (12 

2 U.S.C. 1811 note)), women, and minority-owned and 

3 women-owned businesses (as such terms are defined 

4 in section 21A(r)(4) of the Federal Home Loan 

5 Bank Act (12 U.S.C. 1441a(r)(4)) (including finan6 cial institutions, investment banking firms, mortgage 

7 banking firms, asset management firms, broker-deal8 ers, financial services firms, underwriters, account9 ants, brokers, investment consultants, and providers 

10 of legal services) in all business and activities of the 

11 agency at all levels, including in procurement, insur12 ance, and all types of contracts (including, as appli13 cable, contracts for the issuance or guarantee of any 

14 debt, equity, or security, the sale of assets, the man15 agement of its assets, the making of its equity in16 vestments, and the implementation of programs to 

17 address economic recovery). 

18 (2) CONTRACTS.—The processes established by 

19 each agency for review and evaluation for contract 

20 proposals and to hire service providers shall include 

21 a component that gives consideration to the diversity 

22 of the applicant. 

23 (3) WRITTEN ASSURANCE.—All such contract 

24 proposals, provided such proposals are of an amount 

25 greater than $50,000 and the contractor employs 


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1 more than 50 employees, shall include a written as2 surance, in a form and substance that the Director 

3 shall prescribe, that the contractor shall ensure, to 

4 the maximum extent possible, the inclusion of mi5 norities and women in its workforce and, as applica6 ble, by its subcontractors. 

7 (4) TERMINATION.—A Director may terminate 

8 any contract upon a finding that the contractor has 

9 failed to make a good faith effort to comply with 

10 paragraph (3), except that a contractor may appeal 

11 such finding and termination to the agency adminis12 trator within a reasonable amount of time as deter13 mined by the Director. 

14 (d) APPLICABILITY.—This section shall apply to all 

15 contracts of an agency for services of any kind, including 

16 services that require the services of investment banking, 

17 asset management entities, broker-dealers, financial serv18 ices entities, underwriters, accountants, investment con19 sultants, and providers of legal services. 

20 (e) REPORTS.—Not later than 90 days before the end 

21 of each Federal fiscal year, each Director shall report to 

22 the Congress detailed information describing the actions 

23 taken by the agency and the Director pursuant to this sec24 tion, which shall— 


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1 (1) to the extent contracts exceed the contract 

2 amount and employment levels established in sub3 section (c)(3), include a statement of the total 

4 amounts paid by the agency to third party contrac5 tors since the last such report; 

6 (2) the percentage of such amounts paid to 

7 businesses described in subsection (c)(1); 

8 (3) the successes achieved and challenges faced 

9 by the agency in operating minority and women out10 reach programs; 

11 (4) the challenges the agency may face in hiring 

12 qualified minority and women employees and con13 tracting with qualified minority-owned and women14 owned businesses; and 

15 (5) such other information, findings, conclu16 sions, and recommendations for legislative or agency 

17 action, as the Director may determine to be appro18 priate to include in such report. 

19 (f) DIVERSITY IN AGENCY WORKFORCE.—Each 

20 agency shall take affirmative steps to seek diversity in its 

21 workforce at all levels of the agency consistent with the 

22 demographic diversity of the United States and the Fed23 eral government, which shall include— 

24 (1) heavily recruiting at historically black col25 leges and universities, Hispanic-serving institutions, 


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1 women’s colleges, and colleges that typically serve 

2 majority minority populations; 

3 (2) sponsoring and recruiting at job fairs in 

4 urban communities, and placing employment adver5 tisements in newspapers and magazines oriented to6 ward women and people of color; 

7 (3) partnering with organizations that are fo8 cused on developing opportunities for minorities and 

9 women to place talented young minorities and 

10 women in industry internships, summer employment, 

11 and full-time positions; 

12 (4) where feasible, partnering with inner-city 

13 high schools, girls’ high schools, and high schools 

14 with majority minority populations to establish or 

15 enhance financial literacy programs and provide 

16 mentoring; and 

17 (5) such other mass media communications that 

18 the Director determines are necessary. 

19 (g) DEFINITIONS.—For purposes of this section: 

20 (1) AGENCY.—The term ‘‘agency’’ means— 

21 (A) the Department of the Treasury; 

22 (B) the Federal Deposit Insurance Cor23 poration; 

24 (C) the Federal Housing Finance Agency; 

25 (D) each of the Federal reserve banks; 


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1 (E) the Board; 

2 (F) the National Credit Union Administra3 tion; 

4 (G) the Office of the Comptroller of the 

5 Currency; 

6 (H) the Office of Thrift Supervision; 

7 (I) the Securities and Exchange Commis8 sion; 

9 (J) the Consumer Financial Protection 

10 Agency; and 

11 (K) the Federal Insurance Office, 

12 and any successors to such entities. 

13 (2) AGENCY ADMINISTRATOR.—The term 

14 ‘‘agency administrator’’ means the head of an agen15 cy. 

16 SEC. 1802. FEDERAL HOUSING FINANCE AGENCY ADVISORY 

17 ROLE IN FIEC. 

18 After section 1007 of the Federal Financial Institu19 tions Examination Council Act of 1987 (12 U.S.C. 3306) 

20 insert the following new section: 

21 ‘‘SEC. 1007A. FEDERAL HOUSING FINANCE AGENCY ADVI22 SORY ROLE. 

23 ‘‘Whenever the Council takes any actions with respect 

24 to issues that relate to the Federal National Mortgage As25 sociation, the Federal Home Loan Mortgage Corporation, 


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1 or the Federal home loan banks, the Federal Housing Fi2 nance Agency shall participate in the Council’s pro3 ceedings in an advisory role.’’. 

4 Subtitle J—International Policy 

5 Coordination 

6 SEC. 1901. INTERNATIONAL POLICY COORDINATION. 

7 The President of the United States, or a designee of 

8 the President, shall coordinate through all available inter9 national policy channels similar policies as found in United 

10 States law related to limiting the scope, nature, size, scale, 

11 concentration, and interconnectedness of financial compa12 nies in order to protect financial stability and the global 

13 economy. 

14 Subtitle K—International Financial 

15 Provisions 

16 SEC. 1951. ACCESS TO UNITED STATES FINANCIAL MARKET 

17 BY FOREIGN INSTITUTIONS. 

18 (a) ESTABLISHMENT OF FOREIGN BANK OFFICES IN

19 THE UNITED STATES.—Subsection 7(d)(3) of the Inter20 national Banking Act of 1978 (12 U.S.C. 3105(d)(3)) is 

21 amended— 

22 (1) by striking ‘‘and’’ at the end of subpara23 graph (C); 

24 (2) by striking the period at the end of sub25 paragraph (D) and inserting ‘‘; and’’; and 


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1 (3) by adding at the end the following new sub2 paragraph: 

3 ‘‘(E) for a foreign bank that presents a 

4 systemic risk to the United States, whether the 

5 home country of the foreign bank has adopted, 

6 or is making demonstrable progress toward 

7 adopting, an appropriate system of financial 

8 regulation for the financial system of such 

9 home country to mitigate such systemic risk.’’. 

10 (b) TERMINATION OF FOREIGN BANK OFFICES IN

11 THE UNITED STATES.—Subsection 7(e)(1) of the Inter12 national Banking Act of 1978 (12 U.S.C. 3105(e)(1)) is 

13 amended— 

14 (1) by striking ‘‘or’’ at the end of subparagraph 

15 (A); 

16 (2) by striking the period at the end of sub17 paragraph (B) and inserting ‘‘; or’’; and 

18 (3) by inserting after subparagraph (B), the 

19 following new subparagraph: 

20 ‘‘(C) for a foreign bank that presents a 

21 systemic risk to the United States, the home 

22 country of the foreign bank has not adopted or 

23 made demonstrable progress toward adopting 

24 an appropriate system of financial regulation to 

25 mitigate such systemic risk.’’. 


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1 (c) REGISTRATION OR SUCCESSION TO UNITED

2 STATES BROKERAGE OR DEALER AND TERMINATION OF

3 SUCH REGISTRATION.—Section 15 of the Securities Ex4 change Act of 1934 (15 U.S.C. 78o) is amended by adding 

5 at the end the following new subsections: 

6 ‘‘(k) REGISTRATION OR SUCCESSION TO A UNITED

7 STATES BROKER OR DEALER.—In determining whether 

8 to permit a foreign person or an affiliate of a foreign per9 son to register as a United States broker or dealer, or 

10 succeed to the registration of a United States broker or 

11 dealer, the Securities and Exchange Commission may con12 sider whether, for a foreign person, or an affiliate of a 

13 foreign person that presents a systemic risk to the United 

14 States, the home country of the foreign person has adopt15 ed or made demonstrable progress toward adopting an ap16 propriate system of financial regulation to mitigate such 

17 systemic risk. 

18 ‘‘(l) TERMINATION OF A UNITED STATES BROKER

19 OR DEALER.—For a foreign person or an affiliate of a 

20 foreign person that presents such a systemic risk to the 

21 United States, the Securities and Exchange Commission 

22 may determine to terminate the registration of such for23 eign person or an affiliate of such foreign person as a 

24 broker or dealer in the United States if the Commission 

25 determines that the home country of the foreign person 


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1 has not adopted, or made demonstrable progress toward 

2 adopting, an appropriate system of financial regulation to 

3 mitigate such systemic risk.’’. 

4 SEC. 1952. REDUCING TARP FUNDS TO OFFSET COSTS. 

5 Section 115(a)(3) of the Emergency Economic Sta6 bilization Act of 2008 (12 U.S.C. 5225(a)(3)) is amended 

7 by striking ‘‘$700,000,000,000, as such amount is re8 duced by $1,259,000,000,, as such amount is reduced by 

9 $1,244,000,000, outstanding at any one time’’ and insert10 ing ‘‘$700,000,000,000, as such amount is reduced by 

11 $23,625,000,000, outstanding at any one time’’. 

12 Subtitle L—Securities Holding 

13 Companies 

14 SEC. 1961. SECURITIES HOLDING COMPANIES. 

15 (a) SUPERVISION OF A SECURITIES HOLDING COM16 PANY NOT HAVING A BANK OR SAVINGS ASSOCIATION

17 AFFILIATE.— 

18 (1) IN GENERAL.—A securities holding com19 pany that is required by a foreign regulator or for20 eign law to be subject to comprehensive consolidated 

21 supervision and that is not— 

22 (A) a financial holding company subject to 

23 stricter standards; 

24 (B) an affiliate of an insured bank (other 

25 than an institution described in subparagraphs 


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1 (D) or (G) of section 2(c)(2) of the Bank Hold2 ing Company Act of 1956) or a savings associa3 tion; 

4 (C) a foreign bank, foreign company, or 

5 company that is described in section 8(a) of the 

6 International Banking Act of 1978; 

7 (D) a foreign bank that controls, directly 

8 or indirectly, a corporation chartered under sec9 tion 25A of the Federal Reserve Act (12 U.S.C. 

10 611 et seq.); or 

11 (E) subject to comprehensive consolidated 

12 supervision by a foreign regulator, 

13 may register with the Board to become supervised, 

14 pursuant to paragraph (2). Any securities holding 

15 company filing such a registration shall be super16 vised in accordance with this section and comply 

17 with the rules and orders prescribed by the Board 

18 applicable to supervised securities holding compa19 nies. 

20 (2) REGISTRATION AS A SUPERVISED SECURI21 TIES HOLDING COMPANY.—A securities holding com22 pany described in paragraph (1) shall register by fil23 ing with the Board such information and documents 

24 concerning such securities holding company as the 

25 Board, by regulation, may prescribe as necessary or 


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1 appropriate in furtherance of the purposes of this 

2 section. Such supervision shall become effective 45 

3 days after the date of receipt of such registration by 

4 the Board or within such shorter time period as the 

5 Board, by rule or order, may determine. 

6 (b) SUPERVISION OF SECURITIES HOLDING COMPA7 NIES.— 

8 (1) RECORDKEEPING AND REPORTING.— 

9 (A) IN GENERAL.—Every supervised secu10 rities holding company and each affiliate of 

11 such company shall make and keep for pre12 scribed periods such records, furnish copies of 

13 records, and make such reports, as the Board 

14 determines to be necessary or appropriate for 

15 the Board to carry out the purposes of this sec16 tion, prevent evasions, and monitor compliance 

17 by the company or affiliate with applicable pro18 visions of law. 

19 (B) FORM AND CONTENTS.—Such records 

20 and reports shall be prepared in such form and 

21 according to such specifications (including cer22 tification by a registered public accounting 

23 firm), as the Board may require and shall be 

24 provided promptly at any time upon request by 


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1 the Board. Such records and reports may in2 clude— 

3 (i) a balance sheet and income state4 ment; 

5 (ii) an assessment of the consolidated 

6 capital of the supervised securities holding 

7 company; 

8 (iii) an independent auditor’s report 

9 attesting to the supervised securities hold10 ing company’s compliance with its internal 

11 risk management and internal control ob12 jectives; and 

13 (iv) reports concerning the extent to 

14 which the company or affiliate has com15 plied with the provisions of this section 

16 and any regulations prescribed and orders 

17 issued under this section. 

18 (2) USE OF EXISTING REPORTS.— 

19 (A) IN GENERAL.—The Board shall, to the 

20 fullest extent possible, accept reports in fulfill21 ment of the requirements under this paragraph 

22 that the supervised securities holding company 

23 or its affiliates have been required to provide to 

24 another appropriate regulatory agency or self25 regulatory organization. 


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1 (B) AVAILABILITY.—A supervised securi2 ties holding company or an affiliate of such 

3 company shall provide to the Board, at the re4 quest of the Board, any report referred to in 

5 subparagraph (A), as permitted by law. 

6 (3) EXAMINATION AUTHORITY.— 

7 (A) FOCUS OF EXAMINATION AUTHOR8 ITY.—The Board may make examinations of 

9 any supervised securities holding company and 

10 any affiliate of such company to carry out the 

11 purposes of this subsection, prevent evasions 

12 thereof, and monitor compliance by the com13 pany or affiliate with applicable provisions of 

14 law. 

15 (B) DEFERENCE TO OTHER EXAMINA16 TIONS.—For purposes of this subparagraph, the 

17 Board shall, to the fullest extent possible, use 

18 the reports of examination made by other ap19 propriate Federal or State regulatory authori20 ties with respect to any functionally regulated 

21 subsidiary, as defined under section 5(c)(1) of 

22 the Bank Holding Company Act of 1956 (12 

23 U.S.C. 1844(c)(1)), or an institution described 

24 in subparagraphs (D) or (G) of section 

25 1841(c)(2). 


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1 (c) CAPITAL AND RISK MANAGEMENT.— 

2 (1) The Board shall, by regulation or order, 

3 prescribe capital adequacy and other risk manage4 ment standards for a supervised securities holding 

5 company appropriate to protect the safety and 

6 soundness of the company and address the risks 

7 posed to financial stability by a supervised securities 

8 holding company. Standards imposed under this sub9 paragraph shall take account of differences among 

10 types of business activities and— 

11 (A) the amount and nature of the com12 pany’s financial assets; 

13 (B) the amount and nature of the com14 pany’s liabilities, including the degree of reli15 ance on short-term funding; 

16 (C) the extent and nature of the company’s 

17 off-balance sheet exposures; 

18 (D) the extent and nature of the com19 pany’s transactions and relationships with other 

20 financial companies; 

21 (E) the company’s importance as a source 

22 of credit for households, businesses, and State 

23 and local governments and as a source of li24 quidity for the financial system; and 


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1 (F) the nature, scope, and mix of the com2 pany’s activities. 

3 (2) In imposing standards under this sub4 section, the Board may differentiate among super5 vised securities holding companies on an individual 

6 basis or by category, taking into consideration the 

7 criteria specified above. 

8 (3) Any capital requirements imposed under 

9 this subsection shall not take effect until the expira10 tion of 180 days after a supervised securities holding 

11 company is provided notice of such requirement. 

12 (d) OTHER PROVISIONS.— 

13 (1) Subsections (b), (c) through (s), and (u) of 

14 section 8 of the Federal Deposit Insurance Act shall 

15 apply to any supervised securities holding company, 

16 and to any subsidiary (other than a bank) of a su17 pervised securities holding company, in the same 

18 manner as they apply to a bank holding company. 

19 For purposes of applying such subsections to a su20 pervised securities holding company or a subsidiary 

21 (other than a bank) of a supervised securities hold22 ing company, the Board shall be considered the ap23 propriate Federal banking agency for the supervised 

24 securities holding company or subsidiary. 


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1 (2) Except as the Board may otherwise provide 

2 by regulation or order, a supervised securities hold3 ing company shall be subject to the provisions of the 

4 Bank Holding Company Act of 1956 (12 U.S.C. 

5 1841 et seq.) in the same manner and to the same 

6 extent that bank holding companies are subject to 

7 such provisions, except that any such supervised se8 curities holding company shall not by reason of this 

9 subparagraph be deemed a bank holding company 

10 for purposes of section 4 of the Bank Holding Com11 pany Act of 1956. 

12 (e) DEFINITIONS.—For purposes of this section, the 

13 following definitions shall apply: 

14 (1) SECURITIES HOLDING COMPANY.—The term 

15 ‘‘securities holding company’’ means— 

16 (A) any person other than a natural per17 son that owns or controls one or more brokers 

18 or dealers as defined in section 3 of the Securi19 ties Exchange Act; and 

20 (B) the associated persons of the securities 

21 holding company. 

22 (2) SUPERVISED SECURITIES HOLDING COM23 PANY.—The term ‘‘supervised securities holding 

24 company’’ means any securities holding company 


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1 that is supervised by the Board pursuant to this sec2 tion. 

3 (3) OTHER BANKING TERMS.—The terms ‘‘af4 filiate’’, ‘‘bank’’, ‘‘bank holding company’’, ‘‘com5 pany’’, ‘‘control’’, ‘‘savings association’’, and ‘‘sub6 sidiary’’ have the same meanings as in section 2 of 

7 the Bank Holding Company Act of 1956. 

8 (4) INSURED BANK.—The term ‘‘insured bank’’ 

9 has the same meaning as in section 13 of the Fed10 eral Deposit Insurance Act. 

11 (5) FOREIGN BANK.—The term ‘‘foreign bank’’ 

12 has the same meaning as in section 1(b)(7) of the 

13 International Banking Act of 1978. 

14 (6) ASSOCIATED PERSONS.—The terms ‘‘person 

15 associated with a securities holding company’’ and 

16 ‘‘associated person of a securities holding company’’ 

17 mean any person directly or indirectly controlling, 

18 controlled by, or under common control with, a secu19 rities holding company. 

20 TITLE II—CORPORATE AND FI21 NANCIAL INSTITUTION COM22 PENSATION FAIRNESS ACT 

23 SEC. 2001. SHORT TITLE. 

24 This title may be cited as the ‘‘Corporate and Finan25 cial Institution Compensation Fairness Act of 2009’’. 


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1 SEC. 2002. SHAREHOLDER VOTE ON EXECUTIVE COM2 PENSATION DISCLOSURES. 

3 Section 14 of the Securities Exchange Act of 1934 

4 (15 U.S.C. 78n) is amended by adding at the end the fol5 lowing new subsection: 

6 ‘‘(i) ANNUAL SHAREHOLDER APPROVAL OF EXECU7 TIVE COMPENSATION.— 

8 ‘‘(1) ANNUAL VOTE.—Any proxy or consent or 

9 authorization (the solicitation of which is subject to 

10 the rules of the Commission pursuant to subsection 

11 (a)) for an annual meeting of the shareholders to 

12 elect directors (or a special meeting in lieu of such 

13 meeting) where proxies are solicited in respect of 

14 any security registered under section 12 occurring 

15 on or after the date that is 6 months after the date 

16 on which final rules are issued under paragraph (4), 

17 shall provide for a separate shareholder vote to ap18 prove the compensation of executives as disclosed 

19 pursuant to the Commission’s compensation disclo20 sure rules for named executive officers (which disclo21 sure shall include the compensation committee re22 port, the compensation discussion and analysis, the 

23 compensation tables, and any related materials, to 

24 the extent required by such rules). The shareholder 

25 vote shall not be binding on the issuer or the board 

26 of directors and shall not be construed as overruling 


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1 a decision by such board, nor to create or imply any 

2 additional fiduciary duty by such board, nor shall 

3 such vote be construed to restrict or limit the ability 

4 of shareholders to make proposals for inclusion in 

5 such proxy materials related to executive compensa6 tion. 

7 ‘‘(2) SHAREHOLDER APPROVAL OF GOLDEN

8 PARACHUTE COMPENSATION.— 

9 ‘‘(A) DISCLOSURE.—In any proxy or con10 sent solicitation material (the solicitation of 

11 which is subject to the rules of the Commission 

12 pursuant to subsection (a)) for a meeting of the 

13 shareholders occurring on or after the date that 

14 is 6 months after the date on which final rules 

15 are issued under paragraph (4), at which share16 holders are asked to approve an acquisition, 

17 merger, consolidation, or proposed sale or other 

18 disposition of all or substantially all the assets 

19 of an issuer, the person making such solicita20 tion shall disclose in the proxy or consent solici21 tation material, in a clear and simple form in 

22 accordance with regulations to be promulgated 

23 by the Commission, any agreements or under24 standings that such person has with any named 

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1 quiring issuer, if such issuer is not the acquir2 ing issuer) concerning any type of compensation 

3 (whether present, deferred, or contingent) that 

4 is based on or otherwise relates to the acquisi5 tion, merger, consolidation, sale, or other dis6 position of all or substantially all of the assets 

7 of the issuer and the aggregate total of all such 

8 compensation that may (and the conditions 

9 upon which it may) be paid or become payable 

10 to or on behalf of such executive officer. 

11 ‘‘(B) SHAREHOLDER APPROVAL.—Any 

12 proxy or consent or authorization relating to 

13 the proxy or consent solicitation material con14 taining the disclosure required by subparagraph 

15 (A) shall provide for a separate shareholder 

16 vote to approve such agreements or under17 standings and compensation as disclosed, unless 

18 such agreements or understandings have been 

19 subject to a shareholder vote under paragraph 

20 (1). A vote by the shareholders shall not be 

21 binding on the issuer or the board of directors 

22 of the issuer or the person making the solicita23 tion and shall not be construed as overruling a 

24 decision by any such person or issuer, nor to 


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1 create or imply any additional fiduciary duty by 

2 any such person or issuer. 

3 ‘‘(3) DISCLOSURE OF VOTES.—Every institu4 tional investment manager subject to section 13(f) 

5 shall report at least annually how it voted on any 

6 shareholder vote pursuant to paragraph (1) or (2) of 

7 this section, unless such vote is otherwise required to 

8 be reported publicly by rule or regulation of the 

9 Commission. 

10 ‘‘(4) RULEMAKING.—Not later than 6 months 

11 after the date of the enactment of the Corporate and 

12 Financial Institution Compensation Fairness Act of 

13 2009, the Commission shall issue final rules to im14 plement this subsection. 

15 ‘‘(5) EXEMPTION AUTHORITY.—The Commis16 sion may exempt certain categories of issuers from 

17 the requirements of this subsection, where appro18 priate in view of the purpose of this subsection. In 

19 determining appropriate exemptions, the Commis20 sion shall take into account, among other consider21 ations, the potential impact on smaller reporting 

22 issuers.’’. 

23 SEC. 2003. COMPENSATION COMMITTEE INDEPENDENCE. 

24 (a) STANDARDS RELATING TO COMPENSATION COM25 MITTEES.—The Securities Exchange Act of 1934 (15 


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1 U.S.C. 78a et seq.) is amended by inserting after section 

2 10A the following new section: 

3 ‘‘SEC. 10B. STANDARDS RELATING TO COMPENSATION COM4 MITTEES. 

5 ‘‘(a) COMMISSION RULES.— 

6 ‘‘(1) IN GENERAL.—Effective not later than 9 

7 months after the date of enactment of the Corporate 

8 and Financial Institution Compensation Fairness 

9 Act of 2009, the Commission shall, by rule, direct 

10 the national securities exchanges and national secu11 rities associations to prohibit the listing of any class 

12 of equity security of an issuer that is not in compli13 ance with the requirements of any portion of sub14 sections (b) through (f). 

15 ‘‘(2) OPPORTUNITY TO CURE DEFECTS.—The 

16 rules of the Commission under paragraph (1) shall 

17 provide for appropriate procedures for an issuer to 

18 have an opportunity to cure any defects that would 

19 be the basis for a prohibition under paragraph (1) 

20 before the imposition of such prohibition. 

21 ‘‘(3) EXEMPTION AUTHORITY.—The Commis22 sion may exempt certain categories of issuers from 

23 the requirements of subsections (b) through (f), 

24 where appropriate in view of the purpose of this sec25 tion. In determining appropriate exemptions, the 


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1 Commission shall take into account, among other 

2 considerations, the potential impact on smaller re3 porting issuers. 

4 ‘‘(b) INDEPENDENCE OF COMPENSATION COMMIT5 TEES.— 

6 ‘‘(1) IN GENERAL.—Each member of the com7 pensation committee of the board of directors of the 

8 issuer shall be independent. 

9 ‘‘(2) CRITERIA.—In order to be considered to 

10 be independent for purposes of this subsection, a 

11 member of a compensation committee of an issuer 

12 may not, other than in his or her capacity as a 

13 member of the compensation committee, the board 

14 of directors, or any other board committee accept 

15 any consulting, advisory, or other compensatory fee 

16 from the issuer. 

17 ‘‘(3) EXEMPTION AUTHORITY.—The Commis18 sion may exempt from the requirements of para19 graph (2) a particular relationship with respect to 

20 compensation committee members, where appro21 priate in view of the purpose of this section. 

22 ‘‘(4) DEFINITION.—As used in this section, the 

23 term ‘compensation committee’ means— 

24 ‘‘(A) a committee (or equivalent body) es25 tablished by and amongst the board of directors 


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1 of an issuer for the purpose of determining and 

2 approving the compensation arrangements for 

3 the executive officers of the issuer; and 

4 ‘‘(B) if no such committee exists with re5 spect to an issuer, the independent members of 

6 the entire board of directors. 

7 ‘‘(c) INDEPENDENCE STANDARDS FOR COMPENSA8 TION CONSULTANTS AND OTHER COMMITTEE ADVI9 SORS.—Any compensation consultant or other similar ad10 viser to the compensation committee of any issuer shall 

11 meet standards for independence established by the Com12 mission by regulation. 

13 ‘‘(d) COMPENSATION COMMITTEE AUTHORITY RE14 LATING TO COMPENSATION CONSULTANTS.— 

15 ‘‘(1) IN GENERAL.—The compensation com16 mittee of each issuer, in its capacity as a committee 

17 of the board of directors, shall have the authority, 

18 in its sole discretion, to retain and obtain the advice 

19 of a compensation consultant meeting the standards 

20 for independence promulgated pursuant to sub21 section (c), and the compensation committee shall be 

22 directly responsible for the appointment, compensa23 tion, and oversight of the work of such independent 

24 compensation consultant. This provision shall not be 

25 construed to require the compensation committee to 


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1 implement or act consistently with the advice or rec2 ommendations of the compensation consultant, and 

3 shall not otherwise affect the compensation commit4 tee’s ability or obligation to exercise its own judg5 ment in fulfillment of its duties. 

6 ‘‘(2) DISCLOSURE.—In any proxy or consent 

7 solicitation material for an annual meeting of the 

8 shareholders (or a special meeting in lieu of the an9 nual meeting) occurring on or after the date that is 

10 1 year after the date of enactment of the Corporate 

11 and Financial Institution Compensation Fairness 

12 Act of 2009, each issuer shall disclose in the proxy 

13 or consent material, in accordance with regulations 

14 to be promulgated by the Commission whether the 

15 compensation committee of the issuer retained and 

16 obtained the advice of a compensation consultant 

17 meeting the standards for independence promulgated 

18 pursuant to subsection (c). 

19 ‘‘(3) REGULATIONS.—In promulgating regula20 tions under this subsection or any other provision of 

21 law with respect to compensation consultants, the 

22 Commission shall ensure that such regulations are 

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1 mittees to retain the services of members of any 

2 such category. 

3 ‘‘(e) AUTHORITY TO ENGAGE INDEPENDENT COUN4 SEL AND OTHER ADVISORS.—The compensation com5 mittee of each issuer, in its capacity as a committee of 

6 the board of directors, shall have the authority, in its sole 

7 discretion, to retain and obtain the advice of independent 

8 counsel and other advisers meeting the standards for inde9 pendence promulgated pursuant to subsection (c), and the 

10 compensation committee shall be directly responsible for 

11 the appointment, compensation, and oversight of the work 

12 of such independent counsel and other advisers. This pro13 vision shall not be construed to require the compensation 

14 committee to implement or act consistently with the advice 

15 or recommendations of such independent counsel and 

16 other advisers, and shall not otherwise affect the com17 pensation committee’s ability or obligation to exercise its 

18 own judgment in fulfillment of its duties. 

19 ‘‘(f) FUNDING.—Each issuer shall provide for appro20 priate funding, as determined by the compensation com21 mittee, in its capacity as a committee of the board of direc22 tors, for payment of compensation— 

23 ‘‘(1) to any compensation consultant to the 

24 compensation committee that meets the standards 


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1 for independence promulgated pursuant to sub2 section (c); and 

3 ‘‘(2) to any independent counsel or other ad4 viser to the compensation committee.’’. 

5 (b) STUDY AND REVIEW REQUIRED.— 

6 (1) IN GENERAL.—The Securities and Ex7 change Commission shall conduct a study and review 

8 of the use of compensation consultants meeting the 

9 standards for independence promulgated pursuant to 

10 section 10B(c) of the Securities Exchange Act of 

11 1934 (as added by subsection (a)), and the effects 

12 of such use. 

13 (2) REPORT TO CONGRESS.—Not later than 2 

14 years after the rules required by the amendment 

15 made by this section take effect, the Commission 

16 shall submit a report to the Congress on the results 

17 of the study and review required by this paragraph. 

18 SEC. 2004. ENHANCED COMPENSATION STRUCTURE RE19 PORTING TO REDUCE PERVERSE INCEN20 TIVES. 

21 (a) ENHANCED DISCLOSURE AND REPORTING OF

22 COMPENSATION ARRANGEMENTS.— 

23 (1) IN GENERAL.—Not later than 9 months 

24 after the date of enactment of this title, the appro25 priate Federal regulators jointly shall prescribe reguVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00551 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 lations to require each covered financial institution 

2 to disclose to the appropriate Federal regulator the 

3 structures of all incentive-based compensation ar4 rangements offered by such covered financial institu5 tions sufficient to determine whether the compensa6 tion structure— 

7 (A) is aligned with sound risk manage8 ment; 

9 (B) is structured to account for the time 

10 horizon of risks; and 

11 (C) meets such other criteria as the appro12 priate Federal regulators jointly may determine 

13 to be appropriate to reduce unreasonable incen14 tives offered by such institutions for employees 

15 to take undue risks that— 

16 (i) could threaten the safety and 

17 soundness of covered financial institutions; 

18 or 

19 (ii) could have serious adverse effects 

20 on economic conditions or financial sta21 bility. 

22 (2) RULES OF CONSTRUCTION.—Nothing in 

23 this subsection shall be construed as requiring the 

24 reporting of the actual compensation of particular 

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1 strued to require a covered financial institution that 

2 does not have an incentive-based payment arrange3 ment to make the disclosures required under this 

4 subsection. 

5 (b) PROHIBITION ON CERTAIN COMPENSATION AR6 RANGEMENTS.—Not later than 9 months after the date 

7 of enactment of this title, and taking into account the fac8 tors described in subparagraphs (A), (B), and (C) of sub9 section (a)(1), the appropriate Federal regulators shall 

10 jointly prescribe regulations that prohibit any incentive11 based payment arrangement, or any feature of any such 

12 arrangement, that the regulators determine encourages in13 appropriate risks by covered financial institutions that— 

14 (1) could threaten the safety and soundness of 

15 covered financial institutions; or 

16 (2) could have serious adverse effects on eco17 nomic conditions or financial stability. 

18 (c) ENFORCEMENT.—The provisions of this section 

19 shall be enforced under section 505 of the Gramm-Leach20 Bliley Act and, for purposes of such section, a violation 

21 of this section shall be treated as a violation of subtitle 

22 A of title V of such Act. 

23 (d) DEFINITIONS.—As used in this section— 

24 (1) the term ‘‘appropriate Federal regulator’’ 

25 means— 


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1 (A) the Board of Governors of the Federal 

2 Reserve System; 

3 (B) the Office of the Comptroller of the 

4 Currency; 

5 (C) the Board of Directors of the Federal 

6 Deposit Insurance Corporation; 

7 (D) the Director of the Office of Thrift 

8 Supervision; 

9 (E) the National Credit Union Administra10 tion Board; 

11 (F) the Securities and Exchange Commis12 sion; and 

13 (G) the Federal Housing Finance Agency; 

14 and 

15 (2) the term ‘‘covered financial institution’’ 

16 means— 

17 (A) a depository institution or depository 

18 institution holding company, as such terms are 

19 defined in section 3 of the Federal Deposit In20 surance Act (12 U.S.C. 1813); 

21 (B) a broker-dealer registered under sec22 tion 15 of the Securities Exchange Act of 1934 

23 (15 U.S.C. 78o); 

24 (C) a credit union, as described in section 

25 19(b)(1)(A)(iv) of the Federal Reserve Act; 


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1 (D) an investment advisor, as such term is 

2 defined in section 202(a)(11) of the Investment 

3 Advisers Act of 1940 (15 U.S.C. 80b–2(a)(11)); 

4 (E) the Federal National Mortgage Asso5 ciation; 

6 (F) the Federal Home Loan Mortgage 

7 Corporation; and 

8 (G) any other financial institution that the 

9 appropriate Federal regulators, jointly, by rule, 

10 determine should be treated as a covered finan11 cial institution for purposes of this section. 

12 (e) EXEMPTION FOR CERTAIN FINANCIAL INSTITU13 TIONS.—The requirements of this section shall not apply 

14 to covered financial institutions with assets of less than 

15 $1,000,000,000. 

16 (f) LIMITATION.—No regulation promulgated pursu17 ant to this section shall be allowed to require the recovery 

18 of incentive-based compensation under compensation ar19 rangements in effect on the date of enactment of this title, 

20 provided such compensation agreements are for a period 

21 of no more than 24 months. Nothing in this title shall 

22 prevent or limit the recovery of incentive-based compensa23 tion under any other applicable law. 

24 (g) GAO STUDY.— 

25 (1) STUDY REQUIRED.— 


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1 (A) IN GENERAL.—The Comptroller Gen2 eral of the United States shall carry out a 

3 study to determine whether there is a correla4 tion between compensation structures and ex5 cessive risk taking. 

6 (B) FACTORS TO CONSIDER.—In carrying 

7 out the study required under subparagraph (A), 

8 the Comptroller General shall— 

9 (i) consider compensation structures 

10 used by companies from 2000 to 2008; and 

11 (ii) compare companies that failed, or 

12 nearly failed but for government assist13 ance, to companies that remained viable 

14 throughout the housing and credit market 

15 crisis of 2007 and 2008, including the 

16 compensation practices of all such compa17 nies. 

18 (C) DETERMINING COMPANIES THAT

19 FAILED OR NEARLY FAILED.—In determining 

20 whether a company failed, or nearly failed but 

21 for government assistance, for purposes of sub22 paragraph (B)(ii), the Comptroller General 

23 shall focus on— 

24 (i) companies that received excep25 tional assistance under the Troubled Asset 


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1 Relief Program under title I of the Emer2 gency Economic Stabilization Act of 2008 

3 (12 U.S.C. 5211 et seq.) or other forms of 

4 significant government assistance, includ5 ing under the Automotive Industry Financ6 ing Program, the Targeted Investment 

7 Program, the Asset Guarantee Program, 

8 and the Systemically Significant Failing 

9 Institutions Program; 

10 (ii) the Federal National Mortgage 

11 Association; 

12 (iii) the Federal Home Loan Mort13 gage Corporation; and 

14 (iv) companies that participated in the 

15 Security and Exchange Commission’s Con16 solidated Supervised Entities Program as 

17 of January 2008. 

18 (2) REPORT.—Not later than the end of the 1- 

19 year period beginning on the date of the enactment 

20 of this title, the Comptroller General shall issue a re21 port to the Congress containing the results of the 

22 study required under paragraph (1). 


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1 TITLE III—DERIVATIVE MAR2 KETS TRANSPARENCY AND 

3 ACCOUNTABILITY ACT 

4 SEC. 3001. SHORT TITLE. 

5 This title may be cited as the ‘‘Derivative Markets 

6 Transparency and Accountability Act of 2009’’. 

7 SEC. 3002. REVIEW OF REGULATORY AUTHORITY. 

8 (a) CONSULTATION.— 

9 (1) CFTC.—Before commencing any rule10 making or issuing an order regarding swaps, swap 

11 dealers, major swap participants, swap repositories, 

12 persons associated with a swap dealer or major swap 

13 participant, eligible contract participants, or swap 

14 execution facilities pursuant to subtitle A, the Com15 modity Futures Trading Commission shall consult 

16 with the Securities and Exchange Commission and 

17 the Prudential Regulators. 

18 (2) SEC.—Before commencing any rulemaking 

19 or issuing an order regarding security-based swaps, 

20 security-based swap dealers, major security-based 

21 swap participants, security-based swap repositories, 

22 persons associated with a security-based swap dealer 

23 or major security-based swap participant, eligible 

24 contract participants with regard to security-based 

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1 title B, the Securities and Exchange Commission 

2 shall consult with the Commodity Futures Trading 

3 Commission and the Prudential Regulators. 

4 (3) In developing and promulgating rules or or5 ders pursuant to this subsection, the Commodity Fu6 tures Trading Commission and the Securities and 

7 Exchange Commission shall consider each other’s 

8 views and the views of the Prudential Regulators. 

9 (4) In adopting a rule or order described in 

10 paragraph (1) or (2), the Commodity Futures Trad11 ing Commission and the Securities and Exchange 

12 Commission shall treat functionally or economically 

13 similar products or entities similarly. 

14 (5) Paragraph (4) shall not be construed to re15 quire the Commodity Futures Trading Commission 

16 or the Securities Exchange Commission to adopt a 

17 rule or order that treats functionally or economically 

18 similar products or entities identically. 

19 (b) LIMITATION.— 

20 (1) CFTC.—Nothing in this title, unless spe21 cifically provided, shall be construed to confer juris22 diction on the Commodity Futures Trading Commis23 sion to issue a rule, regulation, or order providing 

24 for oversight or regulation of— 

25 (A) security-based swaps; or 


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1 (B) with regard to their activities or func2 tions concerning security-based swaps— 

3 (i) security-based swap dealers; 

4 (ii) major security-based swap partici5 pants; 

6 (iii) security-based swap repositories; 

7 (iv) persons associated with a secu8 rity-based swap dealer or major security9 based swap participant; 

10 (v) eligible contract participants with 

11 respect to security-based swaps; or 

12 (vi) swap execution facilities. 

13 (2) SEC.—Nothing in this title, unless specifi14 cally provided, shall be construed to confer jurisdic15 tion on the Securities and Exchange Commission to 

16 issue a rule, regulation, or order providing for over17 sight or regulation of— 

18 (A) swaps; or 

19 (B) with regard to their activities or func20 tions concerning swaps— 

21 (i) swap dealers; 

22 (ii) major swap participants; 

23 (iii) swap repositories; 

24 (iv) persons associated with a swap 

25 dealer or major swap participant; 


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1 (v) eligible contract participants with 

2 respect to swaps; or 

3 (vi) swap execution facilities. 

4 (c) OBJECTION TO COMMISSION REGULATION.— 

5 (1) FILING OF PETITION FOR REVIEW.—If ei6 ther Commission referred to in this section believes 

7 that a final rule, regulation, or order of the other 

8 such Commission conflicts with subsection (a)(4) or 

9 (b), then the complaining Commission may obtain 

10 review thereof in the United States Court of Appeals 

11 for the District of Columbia Circuit by filing in the 

12 court, not later than 60 days after the date of publi13 cation of the final rule, regulation, or order, a writ14 ten petition requesting that the rule, regulation, or 

15 order be set aside. Any such proceeding shall be ex16 pedited by the Court of Appeals. 

17 (2) TRANSMITTAL OF PETITION AND

18 RECORD.—A copy of a petition described in para19 graph (1) shall be transmitted not later than 1 busi20 ness day after filing by the complaining Commission 

21 to the Secretary of the responding Commission. On 

22 receipt of the petition, the responding Commission 

23 shall file with the court a copy of the rule, regula24 tion, or order under review and any documents reVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00561 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ferred to therein, and any other materials prescribed 

2 by the court. 

3 (3) STANDARD OF REVIEW.—The court, giving 

4 deference to the views of neither Commission, shall 

5 determine to affirm or set aside a rule, regulation, 

6 or order of the responding Commission under this 

7 subsection, based on the determination of the court, 

8 as to whether the rule, regulation, or order is in con9 flict with subsection (a)(4) or (b), as applicable. 

10 (4) JUDICIAL STAY.—The filing of a petition by 

11 the complaining Commission pursuant to paragraph 

12 (1) shall operate as a stay of the rule, regulation, or 

13 order, until the date on which the determination of 

14 the court is final (including any appeal of the deter15 mination). 

16 (d) DEFINITIONS.—In this section, the terms ‘‘Pru17 dential Regulators’’, ‘‘swap’’, ‘‘swap dealer’’, ‘‘major swap 

18 participant’’, ‘‘swap repository’’, ‘‘person associated with 

19 a swap dealer or major swap participant’’, ‘‘eligible con20 tract participant’’, ‘‘swap execution facility’’, ‘‘security21 based swap’’, ‘‘security-based swap dealer’’, ‘‘major secu22 rity-based swap participant’’, ‘‘security-based swap reposi23 tory’’, and ‘‘person associated with a security-based swap 

24 dealer or major security-based swap participant’’ shall 

25 have the meanings provided, respectively, in the ComVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00562 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 modity Exchange Act, including any modification of the 

2 meanings under section 3101(b) of this Act. 

3 (e)(1) Notwithstanding subsections (b) and (c), the 

4 Commodity Futures Trading Commission and the Securi5 ties Exchange Commission shall jointly adopt rules to— 

6 (A) define the terms ‘‘security-based swap 

7 agreement’’ in section 3(a)(76) of the Securities Ex8 change Act of 1934 and ‘‘swap’’ in section 

9 1a(35)(A)(v) of the Commodity Exchange Act; 

10 (B) require the maintenance of records of all 

11 activities related to transactions defined in subpara12 graph (A) that are not cleared; and 

13 (C) make available to the Securities and Ex14 change Commission information relating to trans15 actions defined in subparagraph (A) that are 

16 uncleared. 

17 (2) In the event that the Commodity Futures Trading 

18 Commission and the Securities Exchange Commission fail 

19 to jointly prescribe rules pursuant to paragraph (1) in a 

20 timely manner, at the request of either Commission, the 

21 Financial Services Oversight Council shall resolve the dis22 pute— 

23 (A) within a reasonable time after receiving the 

24 request; 


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1 (B) after consideration of relevant information 

2 provided by each Commission; and 

3 (C) by agreeing with one of the Commissions 

4 regarding the entirety of the matter or by deter5 mining a compromise position. 

6 SEC. 3003. INTERNATIONAL HARMONIZATION. 

7 (a) In order to promote effective and consistent global 

8 regulation of contracts of sale of swaps and security-based 

9 swaps, the Commodity Futures Trading Commission, the 

10 Securities and Exchange Commission, and the Prudential 

11 Regulators (as defined in section 1a(42) of the Commodity 

12 Exchange Act), as appropriate, shall consult and coordi13 nate with foreign regulatory authorities on the establish14 ment of consistent international standards with respect to 

15 the regulation of contracts of sale of swaps and security16 based swaps, and may agree to such information-sharing 

17 arrangements as may be deemed to be necessary or appro18 priate in the public interest or for the protection of inves19 tors, swap counterparties, and security-based swap 

20 counterparties. 

21 (b) In order to promote effective and consistent global 

22 regulation of contracts of sale of a commodity for future 

23 delivery, the Commodity Futures Trading Commission 

24 shall consult and coordinate with foreign regulatory au25 thorities on the establishment of consistent international 


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1 standards with respect to the regulation of contracts of 

2 sale of a commodity for future delivery, and may agree 

3 to such information-sharing arrangements as may be 

4 deemed necessary or appropriate in the public interest for 

5 the protection users of contracts of sale of a commodity 

6 for future delivery. 

7 SEC. 3004. PROHIBITION AGAINST GOVERNMENT ASSIST8 ANCE. 

9 (a) IN GENERAL.—No provision of this title shall be 

10 construed to authorize Federal assistance to support clear11 ing operations or liquidation of a derivatives clearing orga12 nization described in the Commodity Exchange Act or a 

13 clearing agency described in the Securities Exchange Act 

14 of 1934, except where explicitly authorized by an Act of 

15 Congress. 

16 (b) DEFINITION.—For the purposes of this section, 

17 the term ‘‘Federal assistance’’ means the use of public 

18 funds for the purposes of— 

19 (1) making loans to, or purchasing any debt ob20 ligation of, a derivatives clearing organization, a 

21 clearing agency, or a subsidiary of either; 

22 (2) purchasing assets of a derivatives clearing 

23 organization, a clearing agency, or a subsidiary of ei24 ther; 


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1 (3) assuming or guaranteeing the obligations of 

2 a derivatives clearing organization, a clearing agen3 cy, or a subsidiary of either; or 

4 (4) acquiring any type of equity interest or se5 curity of a derivatives clearing organization, a clear6 ing agency, or a subsidiary of either. 

7 SEC. 3005. STUDIES. 

8 (a) STUDY ON EFFECTS OF POSITION LIMITS ON

9 TRADING ON EXCHANGES IN THE UNITED STATES.— 

10 (1) STUDY.—The Commodity Futures Trading 

11 Commission, in consultation with each entity that is 

12 a designated contract market under the Commodity 

13 Exchange Act, shall conduct a study of the effects 

14 (if any) of the position limits imposed pursuant to 

15 the other provisions of this title on excessive specula16 tion and on the movement of transactions from ex17 changes in the United States to trading venues out18 side the United States. 

19 (2) REPORT TO THE CONGRESS.—Within 12 

20 months after the imposition of position limits pursu21 ant to the other provisions of this title, the Com22 modity Futures Trading Commission, in consultation 

23 with each entity that is a designated contract mar24 ket under the Commodity Exchange Act, shall subVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00566 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 mit to the Congress a report on the matters de2 scribed in paragraph (1). 

3 (3) Within 30 legislative days after the submis4 sion to the Congress of the report described in para5 graph (2), the Committee on Agriculture of the 

6 House of Representatives shall hold a hearing exam7 ining the findings of the report. 

8 (4) In addition to the study required in para9 graph (1), the Chairman of the Commodity Futures 

10 Trading Commission shall prepare and submit to the 

11 Congress biennial reports on the growth or decline 

12 of the derivatives markets in the United States and 

13 abroad, which shall include assessments of the 

14 causes of any such growth or decline, the effective15 ness of regulatory regimes in managing systemic 

16 risk, a comparison of the costs of compliance at the 

17 time of the report for market participants subject to 

18 regulation by the United States with the costs of 

19 compliance in December 2008 for the market par20 ticipants, and the quality of the available data. In 

21 preparing the report, the Chairman shall solicit the 

22 views of, consult with, and address the concerns 

23 raised by, market participants, regulators, legisla24 tors, and other interested parties. 


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1 (b) STUDY ON FEASIBILITY OF REQUIRING USE OF

2 STANDARDIZED ALGORITHMIC DESCRIPTIONS FOR FI3 NANCIAL DERIVATIVES.— 

4 (1) IN GENERAL.—The Securities and Ex5 change Commission and the Commodity Futures 

6 Trading Commission shall conduct a joint study of 

7 the feasibility of requiring the derivatives industry to 

8 adopt standardized computer-readable algorithmic 

9 descriptions which may be used to describe complex 

10 and standardized financial derivatives. 

11 (2) GOALS.—The algorithmic descriptions de12 fined in the study shall be designed to facilitate com13 puterized analysis of individual derivative contracts 

14 and to calculate net exposures to complex deriva15 tives. The algorithmic descriptions shall be optimized 

16 for simultaneous use by: 

17 (A) commercial users and traders of de18 rivatives; 

19 (B) derivative clearing houses, exchanges 

20 and electronic trading platforms; 

21 (C) trade repositories and regulator inves22 tigations of market activities; and 

23 (D) systemic risk regulators. 

24 The study will also examine the extent to which the 

25 algorithmic description, together with standardized 


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1 and extensible legal definitions, may serve as the 

2 binding legal definition of derivative contracts. The 

3 study will examine the logistics of possible imple4 mentations of standardized algorithmic descriptions 

5 for derivatives contracts. The study shall be limited 

6 to electronic formats for exchange of derivative con7 tract descriptions and will not contemplate disclo8 sure of proprietary valuation models. 

9 (3) INTERNATIONAL COORDINATION.—In con10 ducting the study, the Securities and Exchange 

11 Commission and the Commodity Futures Trading 

12 Commission shall coordinate the study with inter13 national financial institutions and regulators as ap14 propriate and practical. 

15 (4) REPORT.—Within 8 months after the date 

16 of the enactment of this Act, the Securities and Ex17 change Commission and the Commodity Futures 

18 Trading Commission shall jointly submit to the 

19 Committees on Agriculture and on Financial Serv20 ices of the House of Representatives and the Com21 mittees on Agriculture, Nutrition, and Forestry and 

22 on Banking, Housing, and Urban Affairs of the Sen23 ate a written report which contains the results of the 

24 study required by paragraphs (1) through (3). 


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1 (c) STUDY OF DESIRABILITY AND FEASIBILITY OF

2 ESTABLISHING SINGLE REGULATOR FOR ALL TRANS3 ACTIONS INVOLVING FINANCIAL DERIVATIVES.— 

4 (1) IN GENERAL.—The Secretary of the Treas5 ury, the Commodity Futures Trading Commission, 

6 and the Securities and Exchange Commission shall 

7 conduct a joint study of the desirability and feasi8 bility of establishing, by January 1, 2012, a single 

9 regulator for all transactions involving financial de10 rivatives. 

11 (2) REPORT TO THE CONGRESS.—Not later 

12 than December 1, 2010, Secretary of the Treasury, 

13 the Commodity Futures Trading Commission, and 

14 the Securities and Exchange Commission shall joint15 ly submit to the Committees on Agriculture and on 

16 Financial Services of the House of Representatives 

17 and the Committees on Agriculture, Nutrition, and 

18 Forestry and on Banking, Housing, and Urban Af19 fairs of the Senate a written report that contains the 

20 results of the study required by paragraph (1). 

21 SEC. 3006. RECOMMENDATIONS FOR CHANGES TO INSOL22 VENCY LAWS. 

23 Not later than 180 days after the date of the enact24 ment of this Act, the Securities and Exchange Commis25 sion, the Commodity Futures Trading Commission, and 


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1 the Prudential Regulators (as defined in section 1a of the 

2 Commodity Exchange Act, as amended by section 3111 

3 of this Act) shall transmit to Congress recommendations 

4 for legislative changes to the Federal insolvency laws— 

5 (1) in order to enhance the legal certainty with 

6 respect to swap participants clearing non-proprietary 

7 swap positions with a swap clearinghouse, includ8 ing— 

9 (A) customer rights to recover margin de10 posits or custodial property held at or through 

11 an insolvent swap clearinghouse, or clearing 

12 participant; and 

13 (B) the enforceability of clearing rules re14 lating to the portability of customer swap posi15 tions (and associated margin) upon the insol16 vency of a clearing participant; 

17 (2) to clarify and harmonize the insolvency law 

18 framework applicable to entities that are both com19 modity brokers (as defined in section 101(6) of title 

20 11, United States Code) and registered brokers or 

21 dealers (as defined in section 3(a) of the Securities 

22 Exchange Act of 1934 (15 U.S.C. 78c(a))); and 

23 (3) to facilitate the portfolio margining of secu24 rities and commodity futures and options positions 

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1 sion merchants (as defined in section 1a of the Com2 modity Exchange Act) and registered brokers or 

3 dealers (as defined in section 3 of the Securities Ex4 change Act of 1934 (15 U.S.C. 78c(a))). 

5 SEC. 3007. ABUSIVE SWAPS. 

6 The Commodity Futures Trading Commission and 

7 the Securities and Exchange Commission may, by rule or 

8 order, jointly collect information as may be necessary con9 cerning the markets for any types of swap (as defined in 

10 section 1a(35) of the Commodity Exchange Act) or secu11 rity-based swap (as defined in section 1a(38) of such Act) 

12 and jointly issue a report with respect to any types of 

13 swaps or security-based swaps which the Commodity Fu14 tures Trading Commission and the Securities and Ex15 change Commission find are detrimental to the stability 

16 of a financial market or of participants in a financial mar17 ket. 

18 SEC. 3008. AUTHORITY TO PROHIBIT PARTICIPATION IN 

19 SWAP ACTIVITIES. 

20 If the Commodity Futures Trading Commission or 

21 the Securities and Exchange Commission determines that 

22 the regulation of swaps or security-based swaps markets 

23 in a foreign country undermines the stability of the United 

24 States financial system, either Commission, in consulta25 tion with the Secretary of the Treasury, may prohibit an 


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1 entity domiciled in that country from participating in the 

2 United States in any swap or security-based swap activi3 ties. 

4 SEC. 3009. MEMORANDUM. 

5 (a)(1) The Commodity Futures Trading Commission 

6 and the Federal Energy Regulatory Commission shall, not 

7 later than 180 days after the date of the enactment of 

8 this section, negotiate a memorandum of understanding 

9 to establish procedures for— 

10 (A) applying their respective authorities in a 

11 manner so as to ensure effective and efficient regula12 tion in the public interest; 

13 (B) resolving conflicts concerning overlapping 

14 jurisdiction between the two agencies; and 

15 (C) avoiding, to the extent possible, conflicting 

16 or duplicative regulation. 

17 (2) Such memorandum and any subsequent amend18 ments to the memorandum shall be promptly submitted 

19 to the appropriate committees of Congress. 

20 (b) The Commodity Futures Trading Commission 

21 and the Federal Energy Regulatory Commission shall, not 

22 later than 180 days after the date of the enactment of 

23 this section, negotiate a memorandum of understanding 

24 to share information that may be requested where either 

25 Commission is conducting an investigation into potential 


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1 manipulation, fraud, or market power abuse in markets 

2 subject to such Commission’s regulation or oversight. 

3 Shared information shall remain subject to the same re4 strictions on disclosure applicable to the Commission ini5 tially holding the information. 

6 Subtitle A—Regulation of Swap 

7 Markets 

8 SEC. 3101. DEFINITIONS. 

9 (a) AMENDMENTS TO DEFINITIONS IN THE COM10 MODITY EXCHANGE ACT.—Section 1a of the Commodity 

11 Exchange Act (7 U.S.C. 1a) is amended— 

12 (1) in paragraph (12)(A)— 

13 (A) in clause (vii)(III), by striking 

14 ‘‘$25,000,000’’ and inserting ‘‘$50,000,000’’; 

15 and 

16 (B) in clause (xi), by striking ‘‘total assets 

17 in an amount’’ and inserting ‘‘amounts invested 

18 on a discretionary basis’’; 

19 (2) in paragraph (29)— 

20 (A) in subparagraph (D), by striking 

21 ‘‘and’’; 

22 (B) by redesignating subparagraph (E) as 

23 subparagraph (G); and 

24 (C) by inserting after subparagraph (D) 

25 the following: 


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1 ‘‘(E) a swap execution facility registered 

2 under section 5h; 

3 ‘‘(F) a swap repository; and’’; and 

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

5 ‘‘(35) SWAP.— 

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

7 subparagraph (B), the term ‘swap’ means any 

8 agreement, contract, or transaction that— 

9 ‘‘(i) is a put, call, cap, floor, collar, or 

10 similar option of any kind for the purchase 

11 or sale of, or based on the value of, 1 or 

12 more interest or other rates, currencies, 

13 commodities, securities, instruments of in14 debtedness, indices, quantitative measures, 

15 or other financial or economic interests or 

16 property of any kind; 

17 ‘‘(ii) provides for any purchase, sale, 

18 payment, or delivery (other than a dividend 

19 on an equity security) that is dependent on 

20 the occurrence, non-occurrence, or the ex21 tent of the occurrence of an event or con22 tingency associated with a potential finan23 cial, economic, or commercial consequence; 

24 ‘‘(iii) provides on an executory basis 

25 for the exchange, on a fixed or contingent 


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1 basis, of 1 or more payments based on the 

2 value or level of 1 or more interest or other 

3 rates, currencies, commodities, securities, 

4 instruments of indebtedness, indices, quan5 titative measures, or other financial or eco6 nomic interests or property of any kind, or 

7 any interest therein or based on the value 

8 thereof, and that transfers, as between the 

9 parties to the transaction, in whole or in 

10 part, the financial risk associated with a 

11 future change in any such value or level 

12 without also conveying a current or future 

13 direct or indirect ownership interest in an 

14 asset (including any enterprise or invest15 ment pool) or liability that incorporates the 

16 financial risk so transferred, and includes 

17 any agreement, contract, or transaction 

18 commonly known as an interest rate swap, 

19 a rate floor, rate cap, rate collar, cross-cur20 rency rate swap, basis swap, currency 

21 swap, total return swap, equity index swap, 

22 equity swap, debt index swap, debt swap, 

23 credit spread, credit default swap, credit 

24 swap, weather swap, energy swap, metal 


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1 swap, agricultural swap, emissions swap, 

2 or commodity swap; 

3 ‘‘(iv) is, or in the future becomes, 

4 commonly known to the trade as a swap; 

5 ‘‘(v) meets the definition of ‘swap 

6 agreement’ as defined in section 206A of 

7 the Gramm-Leach-Bliley Act of which a 

8 material term of which is based on the 

9 price, yield, value, or volatility of any secu10 rity or any group or index of securities, or 

11 any interest therein; or 

12 ‘‘(vi) is any combination or permuta13 tion of, or option on, any agreement, con14 tract, or transaction described in any of 

15 clauses (i) through (v). 

16 ‘‘(B) EXCLUSIONS.—The term ‘swap’ does 

17 not include— 

18 ‘‘(i) any contract of sale of a com19 modity for future delivery (or any option 

20 on such a contract) or security futures 

21 product traded on or subject to the rules 

22 of any board of trade designated as a con23 tract market under section 5 or 5f; 

24 ‘‘(ii) any sale of a nonfinancial com25 modity or security for deferred shipment or 


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1 delivery, so long as the transaction is in2 tended to be physically settled; 

3 ‘‘(iii) any put, call, straddle, option, or 

4 privilege on any security, certificate of de5 posit, or group or index of securities, in6 cluding any interest therein or based on 

7 the value thereof, that is subject to the Se8 curities Act of 1933 (15 U.S.C. 77a et 

9 seq.) and the Securities Exchange Act of 

10 1934 (15 U.S.C. 78a et seq.); 

11 ‘‘(iv) any put, call, straddle, option, or 

12 privilege relating to foreign currency en13 tered into on a national securities exchange 

14 registered pursuant to section 6(a) of the 

15 Securities Exchange Act of 1934 (15 

16 U.S.C. 78f(a)); 

17 ‘‘(v) any agreement, contract, or 

18 transaction providing for the purchase or 

19 sale of 1 or more securities on a fixed basis 

20 that is subject to the Securities Act of 

21 1933 (15 U.S.C. 77a et seq.) and the Se22 curities Exchange Act of 1934 (15 U.S.C. 

23 78a et seq.); 

24 ‘‘(vi) any agreement, contract, or 

25 transaction providing for the purchase or 


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1 sale of 1 or more securities on a contingent 

2 basis that is subject to the Securities Act 

3 of 1933 (15 U.S.C. 77a et seq.) and the 

4 Securities Exchange Act of 1934 (15 

5 U.S.C. 78a et seq.), unless the agreement, 

6 contract, or transaction predicates the pur7 chase or sale on the occurrence of a bona 

8 fide contingency that might reasonably be 

9 expected to affect or be affected by the 

10 creditworthiness of a party other than a 

11 party to the agreement, contract, or trans12 action; 

13 ‘‘(vii) any note, bond, or evidence of 

14 indebtedness that is a security as defined 

15 in section 2(a)(1) of the Securities Act of 

16 1933 (15 U.S.C. 77b(a)(1)); 

17 ‘‘(viii) any agreement, contract, or 

18 transaction that is— 

19 ‘‘(I) based on a security; and 

20 ‘‘(II) entered into directly or 

21 through an underwriter (as defined in 

22 section 2(a)(11) of the Securities Act 

23 of 1933) (15 U.S.C. 77b(a)(11)) by 

24 the issuer of the security for the pur25 poses of raising capital, unless the 


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1 agreement, contract, or transaction is 

2 entered into to manage a risk associ3 ated with capital-raising; 

4 ‘‘(ix) any foreign exchange forward; 

5 ‘‘(x) any foreign exchange swap; 

6 ‘‘(xi) any agreement, contract, or 

7 transaction a counterparty of which is a 

8 Federal Reserve bank, the United States 

9 government or an agency of the United 

10 States government that is expressly backed 

11 by the full faith and credit of the United 

12 States; and 

13 ‘‘(xii) any security-based swap. 

14 ‘‘(C) RULE OF CONSTRUCTION REGARDING

15 MASTER AGREEMENTS.—The term ‘swap’ shall 

16 be construed to include a master agreement 

17 that provides for an agreement, contract, or 

18 transaction that is a swap pursuant to subpara19 graph (A), together with all supplements to any 

20 such master agreement, without regard to 

21 whether the master agreement contains an 

22 agreement, contract, or transaction that is not 

23 a swap pursuant to subparagraph (A), except 

24 that the master agreement shall be considered 

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1 ment, contract, or transaction under the master 

2 agreement that is a swap pursuant to subpara3 graph (A). 

4 ‘‘(D) FOREIGN EXCHANGE SWAPS AND

5 FORWARDS EXCEPTION.— 

6 ‘‘(i) IN GENERAL.—Notwithstanding 

7 clauses (ix) and (x) of subparagraph (B), 

8 foreign exchange swaps and foreign ex9 change forwards shall be considered swaps 

10 under this paragraph if the Commission 

11 makes a determination that either foreign 

12 exchange swaps or foreign exchange for13 wards or both should be regulated as 

14 swaps under this Act and the Secretary 

15 concurs with such determination. 

16 ‘‘(ii) SCOPE OF AUTHORITY.— 

17 ‘‘(I) The Commission and the 

18 Secretary shall jointly determine 

19 which of the authorities under this 

20 Act regarding swaps the Commission 

21 shall exercise over foreign exchange 

22 swaps and foreign exchange forwards. 

23 Such authorities shall subsequently be 

24 exercised solely by the Commission. 

25 The Commission and the Secretary 


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1 may jointly amend any previously 

2 made determination under this sub3 clause. 

4 ‘‘(II) Notwithstanding clause (i), 

5 the Commission and the Secretary of 

6 the Treasury may determine that ei7 ther foreign exchange swaps or for8 eign exchange forwards or both should 

9 not be regulated as swaps under this 

10 Act if such determination is jointly 

11 made. 

12 ‘‘(iii) REPORTING.—Notwithstanding 

13 clauses (ix) and (x) of subparagraph (B) 

14 and subparagraph (D)(ii), all foreign ex15 change swaps and foreign exchange for16 wards shall be reported to either a swap 

17 repository, or, if there is no swap reposi18 tory that would accept such swaps or for19 wards, to the Commission pursuant to sec20 tion 4r within such time period as the 

21 Commission may by rule or regulation pre22 scribe. 

23 ‘‘(iv) SECRETARY.—For purposes of 

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1 retary’ means the Secretary of the Treas2 ury. 

3 ‘‘(36) BOARD.—The term ‘Board’ means the 

4 Board of Governors of the Federal Reserve System. 

5 ‘‘(37) SECURITY-BASED SWAP.—The term ‘se6 curity-based swap’ has the same meaning as in sec7 tion 3(a)(68) of the Securities and Exchange Act of 

8 1934. 

9 ‘‘(38) SWAP DEALER.— 

10 ‘‘(A) IN GENERAL.—The term ‘swap deal11 er’ means any person who— 

12 ‘‘(i) holds itself out as a dealer in 

13 swaps; 

14 ‘‘(ii) makes a market in swaps; 

15 ‘‘(iii) regularly engages in the pur16 chase of swaps and their resale to cus17 tomers in the ordinary course of a busi18 ness; or 

19 ‘‘(iv) engages in any activity causing 

20 the person to be commonly known in the 

21 trade as a dealer or market maker in 

22 swaps. 

23 ‘‘(B) A person may be designated a swap 

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1 egory of swap and considered not a swap dealer 

2 for other types, classes, or categories of swaps. 

3 ‘‘(C) DE MINIMUS EXCEPTION.—The Com4 mission shall make a determination to exempt 

5 from designation as a swap dealer an entity 

6 that engages in a de minimus amount of swap 

7 dealing in connection with transactions with or 

8 on the behalf of its customers. 

9 ‘‘(39) MAJOR SWAP PARTICIPANT.— 

10 ‘‘(A) IN GENERAL.—The term ‘major swap 

11 participant’ means any person who is not a 

12 swap dealer, and— 

13 ‘‘(i) maintains a substantial net posi14 tion in outstanding swaps, excluding posi15 tions held primarily for hedging, reducing 

16 or otherwise mitigating its commercial 

17 risk, including operating and balance sheet 

18 risk; or 

19 ‘‘(ii) whose outstanding swaps create 

20 substantial net counterparty exposure 

21 among the aggregate of its counterparties 

22 that could expose those counterparties to 

23 significant credit losses. 

24 ‘‘(B) DEFINITION OF SUBSTANTIAL NET

25 POSITION.—The Commission shall define by 


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1 rule or regulation the terms ‘substantial net po2 sition’, ‘substantial net counterparty exposure’, 

3 and ‘significant credit losses’ at thresholds that 

4 the Commission determines prudent for the ef5 fective monitoring, management and oversight 

6 of entities which are systemically important or 

7 can significantly impact the financial system 

8 through counterparty credit risk. In setting the 

9 definitions, the Commission shall consider the 

10 person’s relative position in uncleared as op11 posed to cleared swaps. 

12 ‘‘(C) A person may be designated a major 

13 swap participant for 1 or more individual types 

14 of swaps without being classified as a major 

15 swap participant for all classes of swaps. 

16 ‘‘(40) MAJOR SECURITY-BASED SWAP PARTICI17 PANT.—The term ‘major security-based swap partic18 ipant’ has the same meaning as in section 3(a)(67) 

19 of the Securities Exchange Act of 1934. 

20 ‘‘(41) APPROPRIATE FEDERAL BANKING AGEN21 CY.—The term ‘appropriate Federal banking agency’ 

22 has the same meaning as in section 3(q) of the Fed23 eral Deposit Insurance Act (12 U.S.C. 1813(q)). 

24 ‘‘(42) PRUDENTIAL REGULATOR.—The term 

25 ‘Prudential Regulator’ means— 


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1 ‘‘(A) the Board in the case of a swap deal2 er, major swap participant, security-based swap 

3 dealer, or major security-based swap participant 

4 that is— 

5 ‘‘(i) a State-chartered bank that is a 

6 member of the Federal Reserve System; or 

7 ‘‘(ii) a State-chartered branch or 

8 agency of a foreign bank; 

9 ‘‘(B) the Office of the Comptroller of the 

10 Currency in the case of a swap dealer, major 

11 swap participant, security-based swap dealer, or 

12 major security-based swap participant that is— 

13 ‘‘(i) a national bank; or 

14 ‘‘(ii) a federally chartered branch or 

15 agency of a foreign bank; and 

16 ‘‘(C) the Federal Deposit Insurance Cor17 poration in the case of a swap dealer, major 

18 swap participant, security-based swap dealer, or 

19 major security-based swap participant that is a 

20 State-chartered bank that is not a member of 

21 the Federal Reserve System. 

22 ‘‘(43) SECURITY-BASED SWAP DEALER.—The 

23 term ‘security-based swap dealer’ has the same 

24 meaning as in section 3(a)(71) of the Securities Ex25 change Act of 1934. 


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1 ‘‘(44) FOREIGN EXCHANGE FORWARD.—The 

2 term ‘foreign exchange forward’ means a transaction 

3 that solely involves the exchange of 2 different cur4 rencies on a specific future date at a fixed rate 

5 agreed at the inception of the contract. 

6 ‘‘(45) FOREIGN EXCHANGE SWAP.—The term 

7 ‘foreign exchange swap’ means a transaction that 

8 solely involves the exchange of 2 different currencies 

9 on a specific date at a fixed rate agreed at the incep10 tion of the contract, and a reverse exchange of the 

11 same 2 currencies at a date further in the future 

12 and at a fixed rate agreed at the inception of the 

13 contract. 

14 ‘‘(46) PERSON ASSOCIATED WITH A SECURITY15 BASED SWAP DEALER OR MAJOR SECURITY-BASED

16 SWAP PARTICIPANT.—The term ‘person associated 

17 with a security-based swap dealer or major security18 based swap participant’ or ‘associated person of a 

19 security-based swap dealer or major security-based 

20 swap participant’ has the same meaning as in sec21 tion 3(a)(70) of the Securities Exchange Act of 

22 1934. 

23 ‘‘(47) PERSON ASSOCIATED WITH A SWAP

24 DEALER OR MAJOR SWAP PARTICIPANT.—The term 

25 ‘person associated with a swap dealer or major swap 


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1 participant’ or ‘associated person of a swap dealer or 

2 major swap participant’ means any partner, officer, 

3 director, or branch manager of a swap dealer or 

4 major swap participant (or any person occupying a 

5 similar status or performing similar functions), any 

6 person directly or indirectly controlling, controlled 

7 by, or under common control with a swap dealer or 

8 major swap participant, or any employee of a swap 

9 dealer or major swap participant, except that any 

10 person associated with a swap dealer or major swap 

11 participant whose functions are solely clerical or 

12 ministerial shall not be included in the meaning of 

13 the term other than for purposes of section 4s(b)(6). 

14 ‘‘(48) SWAP REPOSITORY.—The term ‘swap re15 pository’ means any person that collects, calculates, 

16 prepares or maintains information or records with 

17 respect to transactions or positions in or the terms 

18 and conditions of swaps entered into by third par19 ties. 

20 ‘‘(49) SWAP EXECUTION FACILITY.—The term 

21 ‘swap execution facility’ means a person or entity 

22 that facilitates the execution or trading of swaps be23 tween two persons through any means of interstate 

24 commerce, but which is not a designated contract 


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1 market, including any electronic trade execution or 

2 voice brokerage facility. 

3 ‘‘(50) DERIVATIVE.—The term ‘derivative’ 

4 means— 

5 ‘‘(A) a contract of sale of a commodity for 

6 future delivery; or 

7 ‘‘(B) a swap.’’. 

8 (b) AUTHORITY TO FURTHER DEFINE TERMS.—The 

9 Commodity Futures Trading Commission shall adopt a 

10 rule further defining the terms ‘‘swap’’, ‘‘swap dealer’’, 

11 ‘‘major swap participant’’, and ‘‘eligible contract partici12 pant’’ for the purpose of including transactions and enti13 ties that have been structured to evade this title. 

14 (c) EXEMPTIONS.—Section 4(c) of the Commodity 

15 Exchange Act (7 U.S.C. 4(c)) is amended by adding at 

16 the end the following: ‘‘The Commission shall not have 

17 the authority to grant exemptions from the provisions of 

18 sections 3101(a), 3101(c), 3104, 3105, 3106, 3107, 3109, 

19 3110, 3113, 3115, 3120, and 3121 of the Derivative Mar20 kets Transparency and Accountability Act of 2009, except 

21 as expressly authorized under the provisions of that Act. 

22 Notwithstanding the preceding sentence, the Commodity 

23 Futures Trading Commission may exempt from any provi24 sion of the Commodity Exchange Act, pursuant to this 

25 subsection, an agreement, contract, or transaction that is 


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1 entered into pursuant to a tariff approved by the Federal 

2 Energy Regulatory Commission, if the Commodity Fu3 tures Trading Commission determines that the exemption 

4 would be consistent with the public interest, and shall con5 sider and not unreasonably deny any request made by the 

6 Federal Energy Regulatory Commission for such an ex7 emption.’’. 

8 SEC. 3102. JURISDICTION. 

9 (a) EXCLUSIVE JURISDICTION.—Section 2(a)(1) of 

10 the Commodity Exchange Act (7 U.S.C. 2(a)(1)) is 

11 amended— 

12 (1) in the 1st sentence of subparagraph (A)— 

13 (A) by striking ‘‘(c) through (i)’’ and in14 serting ‘‘(c) and (f)’’; 

15 (B) by inserting ‘‘swaps, or’’ before ‘‘con16 tracts of sale’’; 

17 (C) by striking ‘‘derivatives transaction 

18 execution facility’’ and inserting ‘‘swap execu19 tion facility’’; and 

20 (D) by striking ‘‘5a’’ and inserting ‘‘5h’’; 

21 and 

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

23 ‘‘(G)(i) Nothing in this paragraph shall 

24 limit the jurisdiction conferred on the Securities 

25 and Exchange Commission by the Derivative 


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1 Markets Transparency and Accountability Act 

2 of 2009 with regard to security-based swap 

3 agreements as defined pursuant to section 

4 3002(e) of such Act, and security-based swaps. 

5 ‘‘(ii) In addition to the authority of the Se6 curities Exchange Commission described in 

7 clause (i), nothing in this subparagraph shall 

8 limit or affect any statutory authority of the 

9 Commission with respect to an agreement, con10 tract, or transaction described in clause (i). 

11 ‘‘(H)(i) Nothing in this Act shall limit or 

12 affect any statutory authority of the Federal 

13 Energy Regulatory Commission with respect to 

14 an agreement, contract, or transaction that is— 

15 ‘‘(I) not executed, traded, or cleared 

16 on a registered entity or trading facility; 

17 and 

18 ‘‘(II) entered into pursuant to a tariff 

19 or rate schedule approved by the Federal 

20 Energy Regulatory Commission. 

21 ‘‘(ii) In addition to the authority of the 

22 Federal Energy Regulatory Commission de23 scribed in clause (i), nothing in this subpara24 graph shall limit or affect any statutory author25 ity of the Commission with respect to an agreeVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00591 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ment, contract, or transaction described in 

2 clause (i).’’. 

3 (b) ADDITIONS.—Section 2(c)(2)(A) of such Act (7 

4 U.S.C. 2(c)(2)(A)) is amended— 

5 (1) in clause (i) by striking ‘‘or’’ at the end; 

6 (2) by redesignating clause (ii) as clause (iii); 

7 and 

8 (3) by inserting after clause (i) the following: 

9 ‘‘(ii) a swap; or’’. 

10 (c) Section 12(e) of such Act (7 U.S.C. 16(e)) is 

11 amended— 

12 (1) in paragraph (1)(B), by inserting ‘‘or (3)’’ 

13 after ‘‘paragraph (2)’’; 

14 (2) in paragraph (2), by striking subparagraphs 

15 (A) and (B) and inserting the following: 

16 ‘‘(A) a swap; and 

17 ‘‘(B) an agreement, contract, or trans18 action that is excluded from this Act under sec19 tion 2(c) or 2(f) of this Act or title IV of the 

20 Commodity Futures Modernization Act of 2000 

21 or exempted under section 4(c) of this Act (re22 gardless of whether any such agreement, con23 tract, or transaction is otherwise subject to this 

24 Act).’’; and 

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


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1 ‘‘(3) A swap may not be regulated as an insur2 ance contract under State law. 

3 ‘‘(4) The provisions of this Act relating to 

4 swaps that were enacted by the Derivative Markets 

5 Transparency and Accountability Act of 2009, in6 cluding any rule or regulation thereunder, shall not 

7 apply to activities outside the United States unless 

8 those activities— 

9 ‘‘(A) have a direct and significant connec10 tion with activities in or effect on United States 

11 commerce; or 

12 ‘‘(B) contravene such rules or regulations 

13 as the Commission may prescribe as necessary 

14 or appropriate to prevent the evasion of any 

15 provision of this Act that was enacted by the 

16 Derivative Markets Transparency and Account17 ability Act of 2009.’’. 

18 (d) Nothing in the Derivative Markets Transparency 

19 and Accountability Act of 2009 or the amendments to the 

20 Commodity Exchange Act made by such Act shall limit 

21 or affect any statutory enforcement authority of the Fed22 eral Energy Regulatory Commission pursuant to Section 

23 222 of the Federal Power Act and Section 4A of the Nat24 ural Gas Act that existed prior to the date of enactment 


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1 of the Derivative Markets Transparency and Account2 ability Act of 2009. 

3 SEC. 3103. CLEARING AND EXECUTION TRANSPARENCY. 

4 (a) CLEARING AND EXECUTION TRANSPARENCY RE5 QUIREMENTS.— 

6 (1) Section 2 of the Commodity Exchange Act 

7 (7 U.S.C. 2) is amended by striking subsections (d), 

8 (e), (g), and (h). 

9 (2)(A) Prior to the final effective dates in this 

10 title, a person may petition the Commodity Futures 

11 Trading Commission to remain subject to para12 graphs (3) through (7) of section 2(h) of the Com13 modity Exchange Act. 

14 (B) The Commodity Futures Trading Commis15 sion shall consider any petition submitted under sub16 paragraph (A) in a prompt manner and may allow 

17 a person to continue operating subject to paragraphs 

18 (3) through (7) of section 2(h) of the Commodity 

19 Exchange Act for up to one year after the effective 

20 date of this subtitle. 

21 (3) Section 2 of such Act (7 U.S.C. 2) is fur22 ther amended by inserting after subsection (c) the 

23 following: 

24 ‘‘(d) SWAPS.—Nothing in this Act (other than sub25 sections (a)(1)(A), (a)(1)(B), (c)(2)(A)(ii), (e), (f), (j), 


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1 and (k), sections 4a, 4b, 4b-1, 4c(a), 4c(b), 4o, 4r, 4s, 

2 4t, 5, 5b, 5c, 5h, 6(c), 6(d), 6c, 6d, 8, 8a, 9, 12(e)(2), 

3 12(f), 13(a), 13(b), 21, and 22(a)(4) and such other provi4 sions of this Act as are applicable by their terms to reg5 istered entities and Commission registrants) governs or 

6 applies to a swap. 

7 ‘‘(e) LIMITATION ON PARTICIPATION.—It shall be 

8 unlawful for any person, other than an eligible contract 

9 participant, to enter into a swap unless the swap is en10 tered into on or subject to the rules of a board of trade 

11 designated as a contract market under section 5.’’. 

12 (4) Section 2 of such Act (7 U.S.C. 2) is fur13 ther amended by inserting after subsection (i) the 

14 following: 

15 ‘‘(j) CLEARING REQUIREMENT.— 

16 ‘‘(1) IN GENERAL.— 

17 ‘‘(A) STANDARD FOR CLEARING.—A swap 

18 shall be submitted for clearing if a derivatives 

19 clearing organization that is registered under 

20 this Act will accept the swap for clearing, and 

21 the Commission has determined under para22 graph (2)(B)(ii) that the swap is required to be 

23 cleared. 


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1 ‘‘(B) OPEN ACCESS.—The rules of a de2 rivatives clearing organization described in sub3 paragraph (A) shall— 

4 ‘‘(i) prescribe that all swaps submitted 

5 to the derivatives clearing organization 

6 with the same terms and conditions are 

7 economically equivalent within the deriva8 tives clearing organization and may be off9 set with each other within the derivatives 

10 clearing organization; and 

11 ‘‘(ii) provide for non-discriminatory 

12 clearing of a swap executed bilaterally or 

13 on or through the rules of an unaffiliated 

14 designated contract market or swap execu15 tion facility. 

16 ‘‘(2) COMMISSION REVIEW.— 

17 ‘‘(A) COMMISSION-INITIATED REVIEW.— 

18 ‘‘(i) The Commission shall review each 

19 swap, or any group, category, type or class 

20 of swaps to make a determination as to 

21 whether the swap or group, category, type, 

22 or class of swaps should be required to be 

23 cleared. 

24 ‘‘(ii) The Commission shall provide at 

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1 garding any determination made under 

2 clause (i). 

3 ‘‘(B) SWAP SUBMISSIONS.— 

4 ‘‘(i) A derivatives clearing organiza5 tion shall submit to the Commission each 

6 swap, or any group, category, type or class 

7 of swaps that it plans to accept for clear8 ing, and provide notice to its members (in 

9 a manner to be determined by the Com10 mission) of the submission. 

11 ‘‘(ii) The Commission shall— 

12 ‘‘(I) make available to the public 

13 any submission received under clause 

14 (i); 

15 ‘‘(II) review each submission 

16 made under clause (i), and determine 

17 whether the swap, or group, category, 

18 type, or class of swaps described in 

19 the submission is required to be 

20 cleared; and 

21 ‘‘(III) provide at least a 30-day 

22 public comment period regarding its 

23 determination as to whether the clear24 ing requirement under paragraph 

25 (1)(A) shall apply to the submission. 


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1 ‘‘(C) DEADLINE.—The Commission shall 

2 make its determination under subparagraph 

3 (B)(ii) not later than 90 days after receiving a 

4 submission made under subparagraph (B)(i), 

5 unless the submitting derivatives clearing orga6 nization agrees to an extension for the time lim7 itation established under this subparagraph. 

8 ‘‘(D) DETERMINATION.— 

9 ‘‘(i) In reviewing a submission made 

10 under subparagraph (B), the Commission 

11 shall review whether the submission is con12 sistent with section 5b(c)(2). 

13 ‘‘(ii) In reviewing a swap, group of 

14 swaps, or class of swaps pursuant to sub15 paragraph (A) or a submission made under 

16 subparagraph (B), the Commission shall 

17 take into account the following factors: 

18 ‘‘(I) The existence of significant 

19 outstanding notional exposures, trad20 ing liquidity and adequate pricing 

21 data. 

22 ‘‘(II) The availability of rule 

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1 tract on terms that are consistent 

2 with the material terms and trading 

3 conventions on which the contract is 

4 then traded. 

5 ‘‘(III) The effect on the mitiga6 tion of systemic risk, taking into ac7 count the size of the market for such 

8 contract and the resources of the de9 rivatives clearing organization avail10 able to clear the contract. 

11 ‘‘(IV) The effect on competition, 

12 including appropriate fees and charges 

13 applied to clearing. 

14 ‘‘(V) The existence of reasonable 

15 legal certainty in the event of the in16 solvency of the relevant derivatives 

17 clearing organization or 1 or more of 

18 its clearing members with regard to 

19 the treatment of customer and swap 

20 counterparty positions, funds, and 

21 property. 

22 ‘‘(iii) In making a determination 

23 under subparagraph (B)(ii) that the clear24 ing requirement shall apply, the Commis25 sion may require such terms and condiVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00599 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tions to the requirement as the Commis2 sion determines to be appropriate. 

3 ‘‘(E) RULES.—Not later than 1 year after 

4 the date of the enactment of the Derivative 

5 Markets Transparency and Accountability Act 

6 of 2009, the Commission shall adopt rules for 

7 a derivatives clearing organization’s submission 

8 for review, pursuant to this paragraph, of a 

9 swap, or a group, category, type or class of 

10 swaps, that it seeks to accept for clearing. 

11 ‘‘(3) STAY OF CLEARING REQUIREMENT.— 

12 ‘‘(A) After a determination pursuant to 

13 paragraph (2)(B), the Commission, on applica14 tion of a counterparty to a swap or on its own 

15 initiative, may stay the clearing requirement of 

16 paragraph (1) until the Commission completes 

17 a review of the terms of the swap (or the group, 

18 category, type or class of swaps) and the clear19 ing arrangement. 

20 ‘‘(B) DEADLINE.—The Commission shall 

21 complete a review undertaken pursuant to sub22 paragraph (A) not later than 90 days after 

23 issuance of the stay, unless the derivatives 

24 clearing organization that clears the swap, or 

25 group, category, type or class of swaps, agrees 


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1 to an extension of the time limitation estab2 lished under this subparagraph. 

3 ‘‘(C) DETERMINATION.—Upon completion 

4 of the review undertaken pursuant to subpara5 graph (A), the Commission may— 

6 ‘‘(i) determine, unconditionally or sub7 ject to such terms and conditions as the 

8 Commission determines to be appropriate, 

9 that the swap, or group, category, type or 

10 class of swaps, must be cleared pursuant 

11 to this subsection if it finds that such 

12 clearing is consistent with paragraph 

13 (2)(D); or 

14 ‘‘(ii) determine that the clearing re15 quirement of paragraph (1) shall not apply 

16 to the swap, or group, category, type or 

17 class of swaps. 

18 ‘‘(D) RULES.—Not later than 1 year after 

19 the date of the enactment of the Derivative 

20 Markets Transparency and Accountability Act 

21 of 2009, the Commission shall adopt rules for 

22 reviewing, pursuant to this paragraph, a deriva23 tives clearing organization’s clearing of a swap, 

24 or a group, category, type or class of swaps, 

25 that it has accepted for clearing. 


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1 ‘‘(4) PREVENTION OF EVASION.—The Commis2 sion may prescribe rules under this subsection, or 

3 issue interpretations of the rules, as necessary to 

4 prevent evasions of this subsection. 

5 ‘‘(5) REQUIRED REPORTING.— 

6 ‘‘(A) IN GENERAL.—All swaps that are not 

7 accepted for clearing by any derivatives clearing 

8 organization shall be reported either to a swap 

9 repository described in section 21 or, if there is 

10 no repository that would accept the swap, to the 

11 Commission pursuant to section 4r within such 

12 time period as the Commission may by rule or 

13 regulation prescribe. Counterparties to a swap 

14 may agree which counterparty will report the 

15 swap as required by this paragraph. 

16 ‘‘(B) SWAP DEALER DESIGNATION.—With 

17 regard to swaps where only 1 counterparty is a 

18 swap dealer, the swap dealer shall report the 

19 swap as required by this paragraph. 

20 ‘‘(6) REPORTING TRANSITION RULES.—Rules 

21 adopted by the Commission under this section shall 

22 provide for the reporting of data, as follows: 

23 ‘‘(A) Swaps entered into before the date of 

24 the enactment of this subsection shall be re25 ported to a registered swap repository or the 


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1 Commission no later than 180 days after the 

2 effective date of this subsection; and 

3 ‘‘(B) Swaps entered into on or after such 

4 date of enactment shall be reported to a reg5 istered swap repository or the Commission no 

6 later than the later of— 

7 ‘‘(i) 90 days after such effective date; 

8 or 

9 ‘‘(ii) such other time after entering 

10 into the swap as the Commission may pre11 scribe by rule or regulation. 

12 ‘‘(7) CLEARING TRANSITION RULES.— 

13 ‘‘(A) Swaps entered into before the date of 

14 the enactment of this subsection are exempt 

15 from the clearing requirements of this sub16 section if reported pursuant to paragraph 

17 (6)(A). 

18 ‘‘(B) Swaps entered into before application 

19 of the clearing requirement pursuant to this 

20 subsection are exempt from the clearing re21 quirements of this subsection if reported pursu22 ant to paragraph (6)(B). 

23 ‘‘(8) EXCEPTIONS.— 


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1 ‘‘(A) IN GENERAL.—The requirements of 

2 paragraph (1) shall not apply to a swap if one 

3 of the counterparties to the swap— 

4 ‘‘(i) is not a swap dealer or major 

5 swap participant; 

6 ‘‘(ii) is using swaps to hedge or miti7 gate commercial risk, including operating 

8 or balance sheet risk; and 

9 ‘‘(iii) notifies the Commission, in a 

10 manner set forth by the Commission, how 

11 it generally meets its financial obligations 

12 associated with entering into non-cleared 

13 swaps. 

14 ‘‘(B) ABUSE OF EXCEPTION.—The Com15 mission may prescribe rules under this sub16 section, or issue interpretations of the rules, as 

17 necessary to prevent abuse of the exemption in 

18 subparagraph (A) by swap dealers and major 

19 swap participants. 

20 ‘‘(C) OPTION TO CLEAR.—The application 

21 of the clearing exception in subparagraph (A) is 

22 solely at the discretion of the counterparty to 

23 the swap that meets the conditions of clauses 

24 (i) through (iii) of subparagraph (A). 

25 ‘‘(k) EXECUTION TRANSPARENCY.— 


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1 ‘‘(1) REQUIREMENT.—A swap that is subject to 

2 the clearing requirement of subsection (j) shall not 

3 be traded except on or through a board of trade des4 ignated as a contract market under section 5, or on 

5 or through a swap execution facility registered under 

6 section 5h, that makes the swap available for trad7 ing. 

8 ‘‘(2) EXCEPTIONS.—The requirement of para9 graph (1) shall not apply to a swap if no designated 

10 contract market or swap execution facility makes the 

11 swap available for trading. 

12 ‘‘(3) AGRICULTURAL SWAPS.—No person shall 

13 offer to enter into, enter into or confirm the execu14 tion of, any swap in an agricultural commodity (as 

15 defined by the Commission) that is subject to para16 graphs (1) and (2) except pursuant to a rule or reg17 ulation of the Commission allowing the swap under 

18 such terms and conditions as the Commission shall 

19 prescribe. 

20 ‘‘(4) REQUIRED REPORTING.—If the exception 

21 of paragraph (2) applies and there is no facility that 

22 makes the swap available to trade, the counterpar23 ties shall comply with any recordkeeping and trans24 action reporting requirements that may be preVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00605 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 scribed by the Commission with respect to swaps 

2 subject to the requirements of paragraph (1). 

3 ‘‘(5) EXCHANGE TRADING.—In adopting rules 

4 and regulations, the Commission shall endeavor to 

5 eliminate unnecessary impediments to the trading on 

6 boards of trade designated as contract markets 

7 under section 5 of contracts, agreements, or trans8 actions that would be security-based swaps but for 

9 the trading of such contracts, agreements or trans10 actions on such a designated contract market.’’. 

11 (b) DERIVATIVES CLEARING ORGANIZATIONS.— 

12 (1) Subsections (a) and (b) of section 5b of 

13 such Act (7 U.S.C. 7a–1) are amended to read as 

14 follows: 

15 ‘‘(a) REGISTRATION REQUIREMENT.— 

16 ‘‘(1) IN GENERAL.—It shall be unlawful for any 

17 entity, unless registered with the Commission, di18 rectly or indirectly to make use of the mails or any 

19 means or instrumentality of interstate commerce to 

20 perform the functions of a derivatives clearing orga21 nization described in section 1a(10) of this Act with 

22 respect to— 

23 ‘‘(A) a contract of sale of a commodity for 

24 future delivery (or option on such a contract) or 


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1 option on a commodity, in each case unless the 

2 contract or option is— 

3 ‘‘(i) excluded from this Act by section 

4 2(a)(1)(C)(i), 2(c), or 2(f); or 

5 ‘‘(ii) a security futures product 

6 cleared by a clearing agency registered 

7 with the Securities and Exchange Commis8 sion under the Securities Exchange Act of 

9 1934 (15 U.S.C. 78a et seq.); or 

10 ‘‘(B) a swap. 

11 ‘‘(2) EXISTING BANKS AND CLEARING AGEN12 CIES.—A bank or a clearing agency registered with 

13 the Securities and Exchange Commission under the 

14 Securities Exchange Act of 1934 required to be reg15 istered as a derivatives clearing organization under 

16 this section is deemed to be registered under this 

17 section to the extent that the bank cleared swaps, as 

18 defined in this Act, as a multilateral clearing organi19 zation or the clearing agency cleared swaps, as de20 fined in this Act, before the enactment of this sub21 section. A bank to which this paragraph applies 

22 may, by the vote of the shareholders owning not less 

23 than 51 percent of the voting interests of the bank, 

24 be converted into a State corporation, partnership, 

25 limited liability company, or other similar legal form 


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1 pursuant to a plan of conversion, if the conversion 

2 is not in contravention of applicable State law. 

3 ‘‘(b) VOLUNTARY REGISTRATION.—A person that 

4 clears agreements, contracts, or transactions that are not 

5 required to be cleared under this Act may register with 

6 the Commission as a derivatives clearing organization.’’. 

7 (2) Section 5b of such Act (7 U.S.C. 7a–1) is 

8 amended by adding at the end the following: 

9 ‘‘(g) RULES.—Not later than 1 year after the date 

10 of the enactment of the Derivative Markets Transparency 

11 and Accountability Act of 2009, the Commission shall 

12 adopt rules governing persons that are registered as de13 rivatives clearing organizations for swaps under this sub14 section. 

15 ‘‘(h) EXEMPTIONS.— 

16 ‘‘(1) IN GENERAL.—The Commission may ex17 empt, conditionally or unconditionally, a derivatives 

18 clearing organization from registration under this 

19 section for the clearing of swaps if the Commission 

20 finds that the derivatives clearing organization is 

21 subject to comparable, comprehensive supervision 

22 and regulation on a consolidated basis by a Pruden23 tial Regulator or the appropriate governmental au24 thorities in the organization’s home country. 


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1 ‘‘(2) A person that is required to be registered 

2 as a derivatives clearing organization under this sec3 tion, whose principal business is clearing securities 

4 and options on securities and which is a clearing 

5 agency registered with the Securities Exchange 

6 Commission under the Securities Exchange Act of 

7 1934 (15 U.S.C. 78a et seq.), shall be uncondition8 ally exempt from registration under this section sole9 ly for the purpose of clearing swaps, unless the Com10 mission finds that the clearing agency is not subject 

11 to comparable, comprehensive supervision and regu12 lation by the Securities and Exchange Commission. 

13 ‘‘(i) DESIGNATION OF COMPLIANCE OFFICER.— 

14 ‘‘(1) IN GENERAL.—Each derivatives clearing 

15 organization shall designate an individual to serve as 

16 a compliance officer. 

17 ‘‘(2) DUTIES.—The compliance officer— 

18 ‘‘(A) shall report directly to the board or 

19 to the senior officer of the derivatives clearing 

20 organization; and 

21 ‘‘(B) shall— 

22 ‘‘(i) review compliance with the core 

23 principles in section 5b(c)(2). 

24 ‘‘(ii) in consultation with the board of 

25 the derivatives clearing organization, a 


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1 body performing a function similar to that 

2 of a board, or the senior officer of the de3 rivatives clearing organization, resolve any 

4 conflicts of interest that may arise; 

5 ‘‘(iii) be responsible for administering 

6 the policies and procedures required to be 

7 established pursuant to this section; and 

8 ‘‘(iv) ensure compliance with this Act 

9 and the rules and regulations issued under 

10 this Act; and 

11 ‘‘(C) shall establish procedures for remedi12 ation of non-compliance issues found during 

13 compliance office reviews, lookbacks, internal or 

14 external audit findings, self-reported errors, or 

15 through validated complaints. The procedures 

16 shall establish the handling, management re17 sponse, remediation, re-testing, and closing of 

18 non-compliant issues. 

19 ‘‘(3) ANNUAL REPORTS REQUIRED.—The com20 pliance officer shall annually prepare and sign a re21 port on the compliance of the derivatives clearing or22 ganization with this Act and the policies and proce23 dures of the derivatives clearing organization, includ24 ing the code of ethics and conflict of interest policies 

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1 ance with rules prescribed by the Commission. The 

2 compliance report shall accompany the financial re3 ports of the derivatives clearing organization that 

4 are required to be furnished to the Commission pur5 suant to this section and shall include a certification 

6 that, under penalty of law, the report is accurate 

7 and complete.’’. 

8 (3) Section 5b(c)(2) of such Act (7 U.S.C. 7a– 

9 1(c)(2)) is amended to read as follows: 

10 ‘‘(2) CORE PRINCIPLES FOR DERIVATIVES

11 CLEARING ORGANIZATIONS.— 

12 ‘‘(A) IN GENERAL.—To be registered and 

13 to maintain registration as a derivatives clear14 ing organization, a derivatives clearing organi15 zation shall comply with the core principles 

16 specified in this paragraph and any requirement 

17 that the Commission may impose by rule or 

18 regulation pursuant to section 8a(5). Except 

19 where the Commission determines otherwise by 

20 rule or regulation, a derivatives clearing organi21 zation shall have reasonable discretion in estab22 lishing the manner in which the organization 

23 complies with the core principles. 

24 ‘‘(B) FINANCIAL RESOURCES.— 


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1 ‘‘(i) The derivatives clearing organiza2 tion shall have adequate financial, oper3 ational, and managerial resources to dis4 charge the responsibilities of the organiza5 tion. 

6 ‘‘(ii) The financial resources of the de7 rivatives clearing organization shall at a 

8 minimum exceed the total amount that 

9 would— 

10 ‘‘(I) enable the organization to 

11 meet the financial obligations of the 

12 organization to the members of, and 

13 participants in, the organization, not14 withstanding a default by the member 

15 or participant creating the largest fi16 nancial exposure for the organization 

17 in extreme but plausible market condi18 tions; and 

19 ‘‘(II) enable the organization to 

20 cover the operating costs of the orga21 nization for a period of 1 year, cal22 culated on a rolling basis. 

23 ‘‘(C) PARTICIPANT AND PRODUCT ELIGI24 BILITY.— 


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1 ‘‘(i) The derivatives clearing organiza2 tion shall establish— 

3 ‘‘(I) appropriate admission and 

4 continuing eligibility standards (in5 cluding sufficient financial resources 

6 and operational capacity to meet obli7 gations arising from participation in 

8 the organization) for members of and 

9 participants in the organization; and 

10 ‘‘(II) appropriate standards for 

11 determining eligibility of agreements, 

12 contracts, or transactions submitted 

13 to the organization for clearing. 

14 ‘‘(ii) The derivatives clearing organi15 zation shall have procedures in place to 

16 verify that participation and membership 

17 requirements are met on an ongoing basis. 

18 ‘‘(iii) The participation and member19 ship requirements of the derivatives clear20 ing organization shall be objective, publicly 

21 disclosed, and permit fair and open access. 

22 ‘‘(D) RISK MANAGEMENT.— 

23 ‘‘(i) The derivatives clearing organiza24 tion shall have the ability to manage the 

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1 sponsibilities of a derivatives clearing orga2 nization through the use of appropriate 

3 tools and procedures. 

4 ‘‘(ii) The derivatives clearing organi5 zation shall measure the credit exposures 

6 of the organization to the members of, and 

7 participants in, the organization at least 

8 once each business day and shall monitor 

9 the exposures throughout the business day. 

10 ‘‘(iii) Through margin requirements 

11 and other risk control mechanisms, a de12 rivatives clearing organization shall limit 

13 the exposures of the organization to poten14 tial losses from defaults by the members 

15 of, and participants in, the organization so 

16 that the operations of the organization 

17 would not be disrupted and non-defaulting 

18 members or participants would not be ex19 posed to losses that they cannot anticipate 

20 or control. 

21 ‘‘(iv) Margin required from all mem22 bers and participants shall be sufficient to 

23 cover potential exposures in normal market 

24 conditions. 


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1 ‘‘(v) The models and parameters used 

2 in setting margin requirements shall be 

3 risk-based and reviewed regularly. 

4 ‘‘(E) SETTLEMENT PROCEDURES.—The 

5 derivatives clearing organization shall— 

6 ‘‘(i) complete money settlements on a 

7 timely basis, and not less than once each 

8 business day; 

9 ‘‘(ii) employ money settlement ar10 rangements that eliminate or strictly limit 

11 the exposure of the organization to settle12 ment bank risks, such as credit and liquid13 ity risks from the use of banks to effect 

14 money settlements; 

15 ‘‘(iii) ensure money settlements are 

16 final when effected; 

17 ‘‘(iv) maintain an accurate record of 

18 the flow of funds associated with each 

19 money settlement; 

20 ‘‘(v) have the ability to comply with 

21 the terms and conditions of any permitted 

22 netting or offset arrangements with other 

23 clearing organizations; and 

24 ‘‘(vi) for physical settlements, estab25 lish rules that clearly state the obligations 


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1 of the organization with respect to physical 

2 deliveries, including how risks from these 

3 obligations shall be identified and man4 aged. 

5 ‘‘(F) TREATMENT OF FUNDS.— 

6 ‘‘(i) The derivatives clearing organiza7 tion shall have standards and procedures 

8 designed to protect and ensure the safety 

9 of member and participant funds and as10 sets. 

11 ‘‘(ii) The derivatives clearing organi12 zation shall hold member and participant 

13 funds and assets in a manner whereby risk 

14 of loss or of delay in the access of the or15 ganization to the assets and funds is mini16 mized. 

17 ‘‘(iii) Assets and funds invested by the 

18 derivatives clearing organization shall be 

19 held in instruments with minimal credit, 

20 market, and liquidity risks. 

21 ‘‘(G) DEFAULT RULES AND PROCE22 DURES.— 

23 ‘‘(i) The derivatives clearing organiza24 tion shall have rules and procedures de25 signed to allow for the efficient, fair, and 


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1 safe management of events when members 

2 or participants become insolvent or other3 wise default on their obligations to the or4 ganization. 

5 ‘‘(ii) The default procedures of the de6 rivatives clearing organization shall be 

7 clearly stated, and they shall ensure that 

8 the organization can take timely action to 

9 contain losses and liquidity pressures and 

10 to continue meeting the obligations of the 

11 organization. 

12 ‘‘(iii) The default procedures shall be 

13 publicly available. 

14 ‘‘(H) RULE ENFORCEMENT.—The deriva15 tives clearing organization shall— 

16 ‘‘(i) maintain adequate arrangements 

17 and resources for the effective monitoring 

18 and enforcement of compliance with rules 

19 of the organization and for resolution of 

20 disputes; and 

21 ‘‘(ii) have the authority and ability to 

22 discipline, limit, suspend, or terminate the 

23 activities of a member or participant for 

24 violations of rules of the organization. 


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1 ‘‘(I) SYSTEM SAFEGUARDS.—The deriva2 tives clearing organization shall— 

3 ‘‘(i) establish and maintain a program 

4 of risk analysis and oversight to identify 

5 and minimize sources of operational risk 

6 through the development of appropriate 

7 controls and procedures, and the develop8 ment of automated systems, that are reli9 able, secure, and have adequate scalable 

10 capacity; 

11 ‘‘(ii) establish and maintain emer12 gency procedures, backup facilities, and a 

13 plan for disaster recovery that allows for 

14 the timely recovery and resumption of op15 erations and the fulfillment of the respon16 sibilities and obligations of the organiza17 tion; and 

18 ‘‘(iii) periodically conduct tests to 

19 verify that backup resources are sufficient 

20 to ensure continued order processing and 

21 trade matching, price reporting, market 

22 surveillance, and maintenance of a com23 prehensive and accurate audit trail. 

24 ‘‘(J) REPORTING.—The derivatives clear25 ing organization shall provide to the CommisVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00618 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 sion all information necessary for the Commis2 sion to conduct oversight of the organization. 

3 ‘‘(K) RECORDKEEPING.—The derivatives 

4 clearing organization shall maintain records of 

5 all activities related to the business of the orga6 nization as a derivatives clearing organization 

7 in a form and manner acceptable to the Com8 mission for a period of 5 years. 

9 ‘‘(L) PUBLIC INFORMATION.— 

10 ‘‘(i) The derivatives clearing organiza11 tion shall provide market participants with 

12 sufficient information to identify and 

13 evaluate accurately the risks and costs as14 sociated with using the services of the or15 ganization. 

16 ‘‘(ii) The derivatives clearing organi17 zation shall make information concerning 

18 the rules and operating procedures gov19 erning the clearing and settlement systems 

20 (including default procedures) of the orga21 nization available to market participants. 

22 ‘‘(iii) The derivatives clearing organi23 zation shall disclose publicly and to the 

24 Commission information concerning— 


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1 ‘‘(I) the terms and conditions of 

2 contracts, agreements, and trans3 actions cleared and settled by the or4 ganization; 

5 ‘‘(II) clearing and other fees that 

6 the organization charges the members 

7 of, and participants in, the organiza8 tion; 

9 ‘‘(III) the margin-setting method10 ology and the size and composition of 

11 the financial resource package of the 

12 organization; 

13 ‘‘(IV) other information relevant 

14 to participation in the settlement and 

15 clearing activities of the organization; 

16 and 

17 ‘‘(V) daily settlement prices, vol18 ume, and open interest for all con19 tracts settled or cleared by the organi20 zation. 

21 ‘‘(M) INFORMATION-SHARING.—The de22 rivatives clearing organization shall— 

23 ‘‘(i) enter into and abide by the terms 

24 of all appropriate and applicable domestic 


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1 and international information-sharing 

2 agreements; and 

3 ‘‘(ii) use relevant information obtained 

4 from the agreements in carrying out the 

5 risk management program of the organiza6 tion. 

7 ‘‘(N) ANTITRUST CONSIDERATIONS.—The 

8 derivatives clearing organization shall avoid— 

9 ‘‘(i) adopting any rule or taking any 

10 action that results in any unreasonable re11 straint of trade; or 

12 ‘‘(ii) imposing any material anti13 competitive burden. 

14 ‘‘(O) GOVERNANCE FITNESS STAND15 ARDS.— 

16 ‘‘(i) The derivatives clearing organiza17 tion shall establish governance arrange18 ments that are transparent in order to ful19 fill public interest requirements and to 

20 support the objectives of the owners of, 

21 and participants in, the organization. 

22 ‘‘(ii) The derivatives clearing organi23 zation shall establish and enforce appro24 priate fitness standards for the directors, 

25 members of any disciplinary committee, 


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1 and members of the organization, and any 

2 other persons with direct access to the set3 tlement or clearing activities of the organi4 zation, including any parties affiliated with 

5 any of the persons described in this sub6 paragraph. 

7 ‘‘(P) CONFLICTS OF INTEREST.—The de8 rivatives clearing organization shall establish 

9 and enforce rules to minimize conflicts of inter10 est in the decision-making process of the orga11 nization and establish a process for resolving 

12 the conflicts of interest. 

13 ‘‘(Q) COMPOSITION OF THE BOARDS.—The 

14 derivatives clearing organization shall ensure 

15 that the composition of the governing board or 

16 committee includes market participants. 

17 ‘‘(R) LEGAL RISK.—The derivatives clear18 ing organization shall have a well founded, 

19 transparent, and enforceable legal framework 

20 for each aspect of its activities.’’. 

21 (4) Section 5b of such Act (7 U.S.C. 7a–1) is 

22 further amended by adding after subsection (i), as 

23 added by this section, the following: 

24 ‘‘(j) REPORTING.— 


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1 ‘‘(1) IN GENERAL.—A derivatives clearing orga2 nization that clears swaps shall provide to the Com3 mission all information determined by the Commis4 sion to be necessary to perform the responsibilities 

5 of the Commission under this Act. The Commission 

6 shall adopt data collection and maintenance require7 ments for swaps cleared by derivatives clearing orga8 nizations that are comparable to the corresponding 

9 requirements for swaps accepted by swap reposi10 tories and swaps traded on swap execution facilities. 

11 The Commission shall share the information, upon 

12 request, with the Board, the Securities and Ex13 change Commission, the appropriate Federal bank14 ing agencies, the Financial Services Oversight Coun15 cil, and the Department of Justice or other persons 

16 the Commission deems appropriate, including for17 eign financial supervisors (including foreign futures 

18 authorities), foreign central banks, and foreign min19 istries that comply with the provisions of section 8. 

20 ‘‘(2) PUBLIC INFORMATION.—A derivatives 

21 clearing organization that clears swaps shall provide 

22 to the Commission, or its designee, such information 

23 as is required by, and in a form and at a frequency 

24 to be determined by, the Commission, in order to 


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1 comply with the public reporting requirements con2 tained in section 8(j). 

3 ‘‘(3) A derivatives clearing organization shall 

4 keep any such books and records relating to swaps 

5 defined in section 1a(35)(A)(v) open to inspection 

6 and examination by the Securities and Exchange 

7 Commission.’’. 

8 (5) Section 8(e) of such Act (7 U.S.C. 12(e)) 

9 is amended in the last sentence by inserting ‘‘central 

10 bank and ministries’’ after ‘‘department’’ each place 

11 it appears. 

12 (c) LEGAL CERTAINTY FOR IDENTIFIED BANKING

13 PRODUCTS.— 

14 (1) REPEAL.—Sections 402(d), 404, 407, 

15 408(b), and 408(c)(2) of the Legal Certainty for 

16 Bank Products Act of 2000 (7 U.S.C. 27(d), 27b, 

17 27e, 27f(b), and 27f(c)(2)) are repealed. 

18 (2) LEGAL CERTAINTY.—Section 403 of the 

19 Legal Certainty for Bank Products Act of 2000 (7 

20 U.S.C. 27a) is amended to read as follows: 

21 ‘‘SEC. 403. EXCLUSION OF IDENTIFIED BANKING PRODUCT. 

22 ‘‘(a) EXCLUSION.—Except as provided in subsection 

23 (b) or (c)— 

24 ‘‘(1) the Commodity Exchange Act shall not 

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1 mission shall not exercise regulatory authority under 

2 such Act with respect to, an identified banking prod3 uct; and 

4 ‘‘(2) the definitions of ‘security-based swap’ in 

5 section 3(a)(68) of the Securities Exchange Act of 

6 1934 and ‘security-based swap agreement’ in section 

7 3(a)(76) of the Securities Exchange Act of 1934 do 

8 not include any identified banking product. 

9 ‘‘(b) EXCEPTION.—An appropriate Federal banking 

10 agency may except an identified banking product of a 

11 bank under its regulatory jurisdiction from the exclusions 

12 in subsection (a) if the agency determines, in consultation 

13 with the Commodity Futures Trading Commission and the 

14 Securities and Exchange Commission, that the product— 

15 ‘‘(1) would meet the definition of swap in sec16 tion 1a(35) of the Commodity Exchange Act (7 

17 U.S.C. 1a(35)) or security-based swap in section 

18 3(a)(68) of the Securities and Exchange Act of 

19 1934; and 

20 ‘‘(2) has become known to the trade as a swap 

21 or security-based swap, or otherwise has been struc22 tured as an identified banking product for the pur23 pose of evading the provisions of the Commodity Ex24 change Act (7 U.S.C. 1 et seq.), the Securities Act 


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

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

3 ‘‘(c) EXCEPTION.—The exclusions in subsection (a) 

4 shall not apply to an identified banking product that— 

5 ‘‘(1) is a product of a bank that is not under 

6 the regulatory jurisdiction of an appropriate Federal 

7 banking agency; 

8 ‘‘(2) meets the definition of swap in section 

9 1a(35) of the Commodity Exchange Act or security10 based swap in section 3(a)(68) of the Securities and 

11 Exchange Act of 1934; and 

12 ‘‘(3) has become known to the trade as a swap 

13 or security-based swap, or otherwise has been struc14 tured as an identified banking product for the pur15 pose of evading the provisions of the Commodity Ex16 change Act (7 U.S.C. 1 et seq.), the Securities Act 

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

18 Exchange Act of 1934 (15 U.S.C. 78a et seq.).’’. 

19 SEC. 3104. PUBLIC REPORTING OF AGGREGATE SWAP 

20 DATA. 

21 Section 8 of the Commodity Exchange Act (7 U.S.C. 

22 12) is amended by adding at the end the following: 

23 ‘‘(j) PUBLIC REPORTING OF AGGREGATE SWAP

24 DATA.— 


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1 ‘‘(1) IN GENERAL.—The Commission, or a per2 son designated by the Commission pursuant to para3 graph (2), shall make available to the public, in a 

4 manner that does not disclose the business trans5 actions and market positions of any person, aggre6 gate data on swap trading volumes and positions 

7 from the sources set forth in paragraph (3). 

8 ‘‘(2) DESIGNEE OF THE COMMISSION.—The 

9 Commission may designate a derivatives clearing or10 ganization or a swap repository to carry out the 

11 public reporting described in paragraph (1). 

12 ‘‘(3) SOURCES OF INFORMATION.—The sources 

13 of the information to be publicly reported as de14 scribed in paragraph (1) are— 

15 ‘‘(A) derivatives clearing organizations 

16 pursuant to section 5b(j)(2); 

17 ‘‘(B) swap repositories pursuant to section 

18 21(c)(3); and 

19 ‘‘(C) reports received by the Commission 

20 pursuant to section 4r.’’. 

21 SEC. 3105. SWAP REPOSITORIES. 

22 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

23 is amended by inserting after section 20 the following: 

24 ‘‘SEC. 21. SWAP REPOSITORIES. 

25 ‘‘(a) REGISTRATION REQUIREMENT.— 


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1 ‘‘(1) IN GENERAL.—It shall be unlawful for any 

2 person, unless registered with the Commission, di3 rectly or indirectly to make use of the mails or any 

4 means or instrumentality of interstate commerce to 

5 perform the functions of a swap repository. 

6 ‘‘(2) INSPECTION AND EXAMINATION.—Reg7 istered swap repositories shall be subject to inspec8 tion and examination by any representative of the 

9 Commission. 

10 ‘‘(b) STANDARD SETTING.— 

11 ‘‘(1) DATA IDENTIFICATION.—The Commission 

12 shall prescribe standards that specify the data ele13 ments for each swap that shall be collected and 

14 maintained by each registered swap repository. 

15 ‘‘(2) DATA COLLECTION AND MAINTENANCE.— 

16 The Commission shall prescribe data collection and 

17 data maintenance standards for swap repositories. 

18 ‘‘(3) COMPARABILITY.—The standards pre19 scribed by the Commission under this subsection 

20 shall be comparable to the data standards imposed 

21 by the Commission on derivatives clearing organiza22 tions that clear swaps. 

23 ‘‘(c) DUTIES.—A swap repository shall— 

24 ‘‘(1) accept data prescribed by the Commission 

25 for each swap under subsection (b); 


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1 ‘‘(2) maintain the data in such form and man2 ner and for such period as may be required by the 

3 Commission; 

4 ‘‘(3) provide to the Commission, or its designee, 

5 such information as is required by, and in a form 

6 and at a frequency to be determined by, the Com7 mission, in order to comply with the public reporting 

8 requirements contained in section 8(j); and 

9 ‘‘(4) make available, on a confidential basis 

10 pursuant to section 8, all data obtained by the swap 

11 repository, including individual counterparty trade 

12 and position data, to the Commission, the appro13 priate Federal banking agencies, the Financial Serv14 ices Oversight Council, the Securities and Exchange 

15 Commission, and the Department of Justice or to 

16 other persons the Commission deems appropriate, 

17 including foreign financial supervisors (including for18 eign futures authorities), foreign central banks, and 

19 foreign ministries. 

20 ‘‘(d) RULES.—Not later than 1 year after the date 

21 of the enactment of the Derivative Markets Transparency 

22 and Accountability Act of 2009, the Commission shall 

23 adopt rules governing persons that are registered under 

24 this section, including rules that specify the data elements 

25 that shall be collected and maintained. 


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1 ‘‘(e) EXEMPTIONS.—The Commission may exempt, 

2 conditionally or unconditionally, a swap repository from 

3 the requirements of this section if the Commission finds 

4 that the swap repository is subject to comparable, com5 prehensive supervision and regulation on a consolidated 

6 basis by the Securities and Exchange Commission, a Pru7 dential Regulator or the appropriate governmental au8 thorities in the organization’s home country.’’. 

9 SEC. 3106. REPORTING AND RECORDKEEPING. 

10 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

11 is amended by inserting after section 4q the following: 

12 ‘‘SEC. 4r. REPORTING AND RECORDKEEPING FOR CERTAIN 

13 SWAPS. 

14 ‘‘(a) IN GENERAL.—Any person who enters into a 

15 swap and— 

16 ‘‘(1) did not have the swap cleared in accord17 ance with section 2(j)(1); and 

18 ‘‘(2) did not have data regarding the swap ac19 cepted by a swap repository in accordance with rules 

20 (including timeframes) adopted by the Commission 

21 under section 21, 

22 shall meet the requirements in subsection (b). 

23 ‘‘(b) REPORTS.—Any person described in subsection 

24 (a) shall— 


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1 ‘‘(1) make such reports in such form and man2 ner and for such period as the Commission shall pre3 scribe by rule or regulation regarding the swaps held 

4 by the person; and 

5 ‘‘(2) keep books and records pertaining to the 

6 swaps held by the person in such form and manner 

7 and for such period as may be required by the Com8 mission, which books and records shall be open to 

9 inspection by any representative of the Commission, 

10 an appropriate Federal banking agency, the Securi11 ties and Exchange Commission, the Financial Serv12 ices Oversight Council, and the Department of Jus13 tice. 

14 ‘‘(c) IDENTICAL DATA.—In adopting rules under this 

15 section, the Commission shall require persons described in 

16 subsection (a) to report the same or a more comprehensive 

17 set of data than the Commission requires swap reposi18 tories to collect under section 21.’’. 

19 SEC. 3107. REGISTRATION AND REGULATION OF SWAP 

20 DEALERS AND MAJOR SWAP PARTICIPANTS. 

21 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

22 is amended by inserting after section 4r (as added by sec23 tion 3106) the following: 


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1 ‘‘SEC. 4s. REGISTRATION AND REGULATION OF SWAP DEAL2 ERS AND MAJOR SWAP PARTICIPANTS. 

3 ‘‘(a) REGISTRATION.— 

4 ‘‘(1) It shall be unlawful for any person to act 

5 as a swap dealer unless the person is registered as 

6 a swap dealer with the Commission. 

7 ‘‘(2) It shall be unlawful for any person to act 

8 as a major swap participant unless the person is 

9 registered as a major swap participant with the 

10 Commission. 

11 ‘‘(b) REQUIREMENTS.— 

12 ‘‘(1) IN GENERAL.—A person shall register as 

13 a swap dealer or major swap participant by filing a 

14 registration application with the Commission. 

15 ‘‘(2) CONTENTS.—The application shall be 

16 made in such form and manner as prescribed by the 

17 Commission, giving any information and facts as the 

18 Commission may deem necessary concerning the 

19 business in which the applicant is or will be engaged. 

20 The person, when registered as a swap dealer or 

21 major swap participant, shall continue to report and 

22 furnish to the Commission such information per23 taining to the person’s business as the Commission 

24 may require. 


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1 ‘‘(3) EXPIRATION.—Each registration shall ex2 pire at such time as the Commission may by rule or 

3 regulation prescribe. 

4 ‘‘(4) RULES.—Except as provided in sub5 sections (c), (d) and (e), the Commission may pre6 scribe rules applicable to swap dealers and major 

7 swap participants, including rules that limit the ac8 tivities of swap dealers and major swap participants. 

9 Except with regard to subsection (d)(1)(A), the 

10 Commission may provide conditional or uncondi11 tional exemptions from some or all of the rules or 

12 requirements prescribed under this section for swap 

13 dealers and major swap participants. 

14 ‘‘(5) TRANSITION.—Rules adopted under this 

15 section shall provide for the registration of swap 

16 dealers and major swap participants no later than 1 

17 year after the effective date of the Derivative Mar18 kets Transparency and Accountability Act of 2009. 

19 ‘‘(6) STATUTORY DISQUALIFICATION.—Except 

20 to the extent otherwise specifically provided by rule, 

21 regulation, or order, it shall be unlawful for a swap 

22 dealer or a major swap participant to permit any 

23 person associated with a swap dealer or a major 

24 swap participant who is subject to a statutory dis25 qualification to effect or be involved in effecting 


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1 swaps on behalf of the swap dealer or major swap 

2 participant, if the swap dealer or major swap partici3 pant knew, or in the exercise of reasonable care 

4 should have known, of the statutory disqualification. 

5 ‘‘(c) RULES.— 

6 ‘‘(1) IN GENERAL.—Not later than 1 year after 

7 the date of the enactment of this section, the Com8 mission shall adopt rules for persons that are reg9 istered as swap dealers or major swap participants 

10 under this section. 

11 ‘‘(2) EXCEPTION FOR PRUDENTIAL REQUIRE12 MENTS.—The Commission shall not prescribe rules 

13 imposing prudential requirements on swap dealers or 

14 major swap participants for which there is a Pru15 dential Regulator. This provision shall not be con16 strued as limiting the authority of the Commission 

17 to prescribe appropriate business conduct, reporting, 

18 and recordkeeping requirements to protect investors. 

19 ‘‘(d) CAPITAL AND MARGIN REQUIREMENTS.— 

20 ‘‘(1) IN GENERAL.— 

21 ‘‘(A) BANK SWAP DEALERS AND MAJOR

22 SWAP PARTICIPANTS.—Each registered swap 

23 dealer and major swap participant for which 

24 there is a Prudential Regulator shall meet such 

25 minimum capital requirements and minimum 


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1 initial and variation margin requirements as the 

2 Prudential Regulators shall by rule or regula3 tion jointly prescribe that: 

4 ‘‘(i) help ensure the safety and sound5 ness of the swap dealer or major swap par6 ticipant; and 

7 ‘‘(ii) are appropriate for the risk asso8 ciated with the non-cleared swaps held as 

9 a swap dealer or major swap participant. 

10 ‘‘(B) NON-BANK SWAP DEALERS AND

11 MAJOR SWAP PARTICIPANTS.—Each registered 

12 swap dealer and major swap participant for 

13 which there is not a Prudential Regulator shall 

14 meet such minimum capital requirements and 

15 minimum initial and variation margin require16 ments as the Commission shall by rule or regu17 lation prescribe that— 

18 ‘‘(i) help ensure the safety and sound19 ness of the swap dealer or major swap par20 ticipant; and 

21 ‘‘(ii) are appropriate for the risk asso22 ciated with the non-cleared swaps held as 

23 a swap dealer or major swap participant. 

24 ‘‘(2) RULES.— 


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1 ‘‘(A) BANK SWAP DEALERS AND MAJOR

2 SWAP PARTICIPANTS.—No later than 1 year 

3 after the date of the enactment of the Deriva4 tive Markets Transparency and Accountability 

5 Act of 2009, the Prudential Regulators, in con6 sultation with the Commission, shall jointly 

7 adopt rules imposing capital and margin re8 quirements under this subsection for swap deal9 ers and major swap participants, with respect 

10 to their activities as a swap dealer or major 

11 swap participant for which there is a Prudential 

12 Regulator. 

13 ‘‘(B) NON-BANK SWAP DEALERS AND

14 MAJOR SWAP PARTICIPANTS.—No later than 1 

15 year after the date of the enactment of the De16 rivative Markets Transparency and Account17 ability Act of 2009, the Commission shall adopt 

18 rules imposing capital and margin requirements 

19 under this subsection for swap dealers and 

20 major swap participants for which there is no 

21 Prudential Regulator. 

22 ‘‘(3) AUTHORITY.—Nothing in this section shall 

23 limit the authority of the Commission to set capital 

24 requirements for a registered futures commission 


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1 merchant or introducing broker in accordance with 

2 section 4f. 

3 ‘‘(e) REPORTING AND RECORDKEEPING.— 

4 ‘‘(1) IN GENERAL.—Each registered swap deal5 er and major swap participant— 

6 ‘‘(A) shall make such reports as are pre7 scribed by the Commission by rule or regulation 

8 regarding the transactions and positions and fi9 nancial condition of the person; 

10 ‘‘(B) for which— 

11 ‘‘(i) there is a Prudential Regulator, 

12 shall keep books and records of all activi13 ties related to its business as a swap dealer 

14 or major swap participant in such form 

15 and manner and for such period as may be 

16 prescribed by the Commission by rule or 

17 regulation; 

18 ‘‘(ii) there is no Prudential Regulator, 

19 shall keep books and records in such form 

20 and manner and for such period as may be 

21 prescribed by the Commission by rule or 

22 regulation; 

23 ‘‘(C) shall keep the books and records open 

24 to inspection and examination by any represent25 ative of the Commission; and 


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1 ‘‘(D) shall keep any such books and 

2 records relating to swaps defined in section 

3 1a(35)(A)(v) open to inspection and examina4 tion by the Securities and Exchange Commis5 sion. 

6 ‘‘(2) RULES.—No later than 1 year after the 

7 date of the enactment of the Derivative Markets 

8 Transparency and Accountability Act of 2009, the 

9 Commission shall adopt rules governing reporting 

10 and recordkeeping for swap dealers and major swap 

11 participants. 

12 ‘‘(f) DAILY TRADING RECORDS.— 

13 ‘‘(1) IN GENERAL.—Each registered swap deal14 er and major swap participant shall maintain daily 

15 trading records of its swaps and all related records 

16 (including related cash or forward transactions) and 

17 recorded communications including but not limited 

18 to electronic mail, instant messages, and recordings 

19 of telephone calls, for such period as may be pre20 scribed by the Commission by rule or regulation. 

21 ‘‘(2) INFORMATION REQUIREMENTS.—The daily 

22 trading records shall include such information as the 

23 Commission shall prescribe by rule or regulation. 

24 ‘‘(3) CUSTOMER RECORDS.—Each registered 

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1 tain daily trading records for each customer or 

2 counterparty in such manner and form as to be 

3 identifiable with each swap transaction. 

4 ‘‘(4) AUDIT TRAIL.—Each registered swap deal5 er and major swap participant shall maintain a com6 plete audit trail for conducting comprehensive and 

7 accurate trade reconstructions. 

8 ‘‘(5) RULES.—No later than 1 year after the 

9 date of the enactment of the Derivative Markets 

10 Transparency and Accountability Act of 2009, the 

11 Commission shall adopt rules governing daily trad12 ing records for swap dealers and major swap partici13 pants. 

14 ‘‘(g) BUSINESS CONDUCT STANDARDS.— 

15 ‘‘(1) IN GENERAL.—Each registered swap deal16 er and major swap participant shall conform with 

17 business conduct standards as may be prescribed by 

18 the Commission by rule or regulation addressing— 

19 ‘‘(A) fraud, manipulation, and other abu20 sive practices involving swaps (including swaps 

21 that are offered but not entered into); 

22 ‘‘(B) diligent supervision of its business as 

23 a swap dealer; 

24 ‘‘(C) adherence to all applicable position 

25 limits; and 


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1 ‘‘(D) such other matters as the Commis2 sion shall determine to be necessary or appro3 priate. 

4 ‘‘(2) BUSINESS CONDUCT REQUIREMENTS.— 

5 Business conduct requirements adopted by the Com6 mission shall— 

7 ‘‘(A) establish the standard of care for a 

8 swap dealer or major swap participant to verify 

9 that any counterparty meets the eligibility 

10 standards for an eligible contract participant; 

11 ‘‘(B) require disclosure by the swap dealer 

12 or major swap participant to any counterparty 

13 to the transaction (other than a swap dealer or 

14 major swap participant) of— 

15 ‘‘(i) information about the material 

16 risks and characteristics of the swap; 

17 ‘‘(ii) for cleared swaps, upon the re18 quest of the counterparty, the daily mark 

19 from the appropriate derivatives clearing 

20 organization, and for non-cleared swaps, 

21 upon request of the counterparty, the daily 

22 mark of the swap dealer or major swap 

23 participant; and 

24 ‘‘(iii) any other material incentives or 

25 conflicts of interest that the swap dealer or 


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1 major swap participant may have in con2 nection with the swap; and 

3 ‘‘(C) establish such other standards and 

4 requirements as the Commission may determine 

5 are necessary or appropriate in the public inter6 est, for the protection of investors, or otherwise 

7 in furtherance of the purposes of this Act. 

8 ‘‘(3) RULES.—The Commission shall prescribe 

9 rules under this subsection governing business con10 duct standards for swap dealers and major swap 

11 participants no later than 1 year after the date of 

12 the enactment of the Derivative Markets Trans13 parency and Accountability Act of 2009. 

14 ‘‘(h) DOCUMENTATION STANDARDS.— 

15 ‘‘(1) IN GENERAL.—Each registered swap deal16 er and major swap participant shall conform with 

17 standards, as may be prescribed by the Commission 

18 by rule or regulation, addressing timely and accurate 

19 confirmation, processing, netting, documentation, 

20 and valuation of all swaps. 

21 ‘‘(2) RULES.—No later than 1 year after the 

22 date of the enactment of the Derivative Markets 

23 Transparency and Accountability Act of 2009, the 

24 Commission shall adopt rules governing the standVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00641 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ards described in paragraph (1) for swap dealers 

2 and major swap participants. 

3 ‘‘(i) DEALER RESPONSIBILITIES.—Each registered 

4 swap dealer and major swap participant at all times shall 

5 comply with the following requirements: 

6 ‘‘(1) MONITORING OF TRADING.—The swap 

7 dealer or major swap participant shall monitor its 

8 trading in swaps to prevent violations of applicable 

9 position limits. 

10 ‘‘(2) DISCLOSURE OF GENERAL INFORMA11 TION.—The swap dealer or major swap participant 

12 shall disclose to the Commission or to the Prudential 

13 Regulator for the swap dealer or major swap partici14 pant, as applicable, information concerning— 

15 ‘‘(A) terms and conditions of its swaps; 

16 ‘‘(B) swap trading operations, mechanisms, 

17 and practices; 

18 ‘‘(C) financial integrity protections relating 

19 to swaps; and 

20 ‘‘(D) other information relevant to its trad21 ing in swaps. 

22 ‘‘(3) ABILITY TO OBTAIN INFORMATION.—The 

23 swap dealer or major swap participant shall— 

24 ‘‘(A) establish and enforce internal systems 

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1 mation to perform any of the functions de2 scribed in this section; and 

3 ‘‘(B) provide the information to the Com4 mission or to the Prudential Regulator for the 

5 swap dealer or major swap participant, as ap6 plicable, upon request. 

7 ‘‘(4) CONFLICTS OF INTEREST.—The swap 

8 dealer and major swap participant shall implement 

9 conflict-of-interest systems and procedures that— 

10 ‘‘(A) establish structural and institutional 

11 safeguards to assure that the activities of any 

12 person within the firm relating to research or 

13 analysis of the price or market for any com14 modity are separated by appropriate informa15 tional partitions within the firm from the re16 view, pressure, or oversight of those whose in17 volvement in trading or clearing activities might 

18 potentially bias their judgment or supervision; 

19 and 

20 ‘‘(B) address such other issues as the 

21 Commission determines appropriate. 

22 ‘‘(5) ANTITRUST CONSIDERATIONS.—The swap 

23 dealer or major swap participant shall avoid— 


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1 ‘‘(A) adopting any processes or taking any 

2 actions that result in any unreasonable re3 straints of trade; or 

4 ‘‘(B) imposing any material anticompeti5 tive burden on trading.’’. 

6 SEC. 3108. CONFLICTS OF INTEREST. 

7 Section 4d of the Commodity Exchange Act (7 U.S.C. 

8 6d) is amended by— 

9 (1) redesignating subsection (c) as subsection 

10 (d); and 

11 (2) inserting after subsection (b) the following: 

12 ‘‘(c) CONFLICTS OF INTEREST.—The Commission 

13 shall require that futures commission merchants and in14 troducing brokers implement conflict-of-interest systems 

15 and procedures that— 

16 ‘‘(1) establish structural and institutional safe17 guards to assure that the activities of any person 

18 within the firm relating to research or analysis of 

19 the price or market for any commodity are separated 

20 by appropriate informational partitions within the 

21 firm from the review, pressure, or oversight of those 

22 whose involvement in trading or clearing activities 

23 might potentially bias their judgment or supervision; 

24 and 


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1 ‘‘(2) address such other issues as the Commis2 sion determines appropriate.’’. 

3 SEC. 3109. SWAP EXECUTION FACILITIES. 

4 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

5 is amended by inserting after section 5g the following: 

6 ‘‘SEC. 5h. SWAP EXECUTION FACILITIES. 

7 ‘‘(a) REGISTRATION.—A person may not operate a 

8 swap execution facility unless the facility is registered 

9 under this section or is registered with the Commission 

10 as a designated contract market under section 5 or a swap 

11 execution facility under section 5. 

12 ‘‘(b) REQUIREMENTS FOR TRADING.— 

13 ‘‘(1) A swap execution facility that is registered 

14 under subsection (a) may make available for trading 

15 any swap. 

16 ‘‘(2) RULES FOR TRADING THROUGH THE FA17 CILITY.—Not later than 1 year after the date of the 

18 enactment of the Derivative Markets Transparency 

19 and Accountability Act of 2009, the Commission 

20 shall adopt rules to allow a swap to be traded 

21 through the facilities of a designated contract mar22 ket or a swap execution facility. Such rules shall 

23 permit an intermediary, acting as principal or agent, 

24 to enter into or execute a swap, notwithstanding sec25 tion 2(k), if the swap is executed, reported, recorded, 


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1 or confirmed in accordance with the rules of the des2 ignated contract market or swap execution facility. 

3 ‘‘(3) AGRICULTURAL SWAPS.—A swap execution 

4 facility may not list for trading or confirm the exe5 cution of any swap in an agricultural commodity (as 

6 defined by the Commission) except pursuant to a 

7 rule or regulation of the Commission allowing the 

8 swap under such terms and conditions as the Com9 mission shall prescribe. 

10 ‘‘(c) TRADING BY CONTRACT MARKETS.—A board of 

11 trade that operates a contract market shall, to the extent 

12 that the board of trade also operates a swap execution fa13 cility and uses the same electronic trade execution system 

14 for trading on the contract market and the swap execution 

15 facility, identify whether the electronic trading is taking 

16 place on the contract market or the swap execution facil17 ity. 

18 ‘‘(d) CORE PRINCIPLES FOR SWAP EXECUTION FA19 CILITIES.— 

20 ‘‘(1) IN GENERAL.—To be registered as, and to 

21 maintain its registration as, a swap execution facil22 ity, the facility shall comply with the core principles 

23 specified in this subsection and any requirement that 

24 the Commission may impose by rule or regulation 

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1 mission determines otherwise by rule or regulation, 

2 the facility shall have reasonable discretion in estab3 lishing the manner in which it complies with these 

4 core principles. 

5 ‘‘(2) COMPLIANCE WITH RULES.—The swap 

6 execution facility shall— 

7 ‘‘(A) monitor and enforce compliance with 

8 any of the rules of the facility, including the 

9 terms and conditions of the swaps traded on or 

10 through the facility and any limitations on ac11 cess to the facility; and 

12 ‘‘(B) establish and enforce trading and 

13 participation rules that will deter abuses and 

14 have the capacity to detect, investigate, and en15 force those rules, including means to— 

16 ‘‘(i) provide market participants with 

17 impartial access to the market; and 

18 ‘‘(ii) capture information that may be 

19 used in establishing whether rule violations 

20 have occurred. 

21 ‘‘(3) SWAPS NOT READILY SUSCEPTIBLE TO MA22 NIPULATION.—The swap execution facility shall per23 mit trading only in swaps that are not readily sus24 ceptible to manipulation. 


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1 ‘‘(4) MONITORING OF TRADING.—The swap 

2 execution facility shall— 

3 ‘‘(A) establish and enforce rules or terms 

4 and conditions defining, or specifications detail5 ing, trading procedures to be used in entering 

6 and executing orders traded on or through its 

7 facilities; and 

8 ‘‘(B) monitor trading in swaps to prevent 

9 manipulation, price distortion, and disruptions 

10 of the delivery or cash settlement process 

11 through surveillance, compliance, and discipli12 nary practices and procedures, including meth13 ods for conducting real-time monitoring of trad14 ing and comprehensive and accurate trade re15 constructions. 

16 ‘‘(5) ABILITY TO OBTAIN INFORMATION.—The 

17 swap execution facility shall— 

18 ‘‘(A) establish and enforce rules that will 

19 allow the facility to obtain any necessary infor20 mation to perform any of the functions de21 scribed in this section; 

22 ‘‘(B) provide the information to the Com23 mission upon request; and 


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1 ‘‘(C) have the capacity to carry out such 

2 international information-sharing agreements as 

3 the Commission may require. 

4 ‘‘(6) POSITION LIMITS OR ACCOUNTABILITY.— 

5 ‘‘(A) To reduce the potential threat of 

6 market manipulation or congestion, especially 

7 during trading in the delivery month, a swap 

8 execution facility that is a trading facility shall 

9 adopt for each of its contracts made available 

10 for trading on the trading facility, where nec11 essary and appropriate, position limitations or 

12 position accountability for speculators who es13 tablish positions in the contract. 

14 ‘‘(B) For any contract of a swap execution 

15 facility that is subject to a position limitation 

16 established by the Commission pursuant to sec17 tion 4a(a), the swap execution facility— 

18 ‘‘(i) may set a position limitation at a 

19 level that is lower than the Commission 

20 limitation; and 

21 ‘‘(ii) shall monitor positions estab22 lished on or through the swap execution fa23 cility for compliance with the limit set by 

24 the Commission and the limit, if any, set 

25 by the swap execution facility. 


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1 ‘‘(7) FINANCIAL INTEGRITY OF TRANS2 ACTIONS.—The swap execution facility shall estab3 lish and enforce rules and procedures for ensuring 

4 the financial integrity of swaps entered on or 

5 through its facilities, including the clearance and 

6 settlement of the swaps pursuant to section 2(j)(1). 

7 ‘‘(8) EMERGENCY AUTHORITY.—The swap exe8 cution facility shall adopt rules to provide for the ex9 ercise of emergency authority, in consultation or co10 operation with the Commission, where necessary and 

11 appropriate, including the authority to liquidate or 

12 transfer open positions in any swap or to suspend or 

13 curtail trading in a swap. 

14 ‘‘(9) TIMELY PUBLICATION OF TRADING INFOR15 MATION.—The swap execution facility shall make 

16 public timely information on price, trading volume, 

17 and other trading data on swaps to the extent pre18 scribed by the Commission. The Commission shall 

19 evaluate the impact of public disclosure on market 

20 liquidity in the relevant market, and shall seek to 

21 avoid public disclosure of information in a manner 

22 that would significantly reduce market liquidity. The 

23 Commission shall not disclose information related to 

24 the internal business decisions of particular market 

25 participants. 


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1 ‘‘(10) RECORDKEEPING AND REPORTING.—The 

2 swap execution facility shall maintain records of all 

3 activities related to the business of the facility, in4 cluding a complete audit trail, in a form and manner 

5 acceptable to the Commission for a period of 5 

6 years, and report to the Commission all information 

7 determined by the Commission to be necessary or 

8 appropriate for the Commission to perform its re9 sponsibilities under this Act in a form and manner 

10 acceptable to the Commission. The swap execution 

11 facility shall keep any such records relating to swaps 

12 defined in section 1a(35)(A)(v) open to inspection 

13 and examination by the Securities and Exchange 

14 Commission. The Commission shall adopt data col15 lection and reporting requirements for swap execu16 tion facilities that are comparable to corresponding 

17 requirements for derivatives clearing organizations 

18 and swap repositories. 

19 ‘‘(11) ANTITRUST CONSIDERATIONS.—The 

20 swap execution facility shall avoid— 

21 ‘‘(A) adopting any rules or taking any ac22 tions that result in any unreasonable restraints 

23 of trade; or 


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1 ‘‘(B) imposing any material anticompeti2 tive burden on trading on the swap execution 

3 facility. 

4 ‘‘(12) CONFLICTS OF INTEREST.—The swap 

5 execution facility shall— 

6 ‘‘(A) establish and enforce rules to mini7 mize conflicts of interest in its decision-making 

8 process; and 

9 ‘‘(B) establish a process for resolving the 

10 conflicts of interest. 

11 ‘‘(13) FINANCIAL RESOURCES.— 

12 ‘‘(A) The swap execution facility shall have 

13 adequate financial, operational, and managerial 

14 resources to discharge its responsibilities. 

15 ‘‘(B) The financial resources of the swap 

16 execution facility shall be considered adequate if 

17 their value exceeds the total amount that would 

18 enable the facility to cover its operating costs 

19 for a period of 1 year, calculated on a rolling 

20 basis. 

21 ‘‘(14) SYSTEM SAFEGUARDS.—The swap execu22 tion facility shall— 

23 ‘‘(A) establish and maintain a program of 

24 risk analysis and oversight to identify and mini25 mize sources of operational risk, through the 


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1 development of appropriate controls and proce2 dures, and the development of automated sys3 tems, that are reliable, secure, and have ade4 quate scalable capacity; 

5 ‘‘(B) establish and maintain emergency 

6 procedures, backup facilities, and a plan for dis7 aster recovery that allow for the timely recovery 

8 and resumption of operations and the fulfill9 ment of the swap execution facility’s respon10 sibilities and obligation; and 

11 ‘‘(C) periodically conduct tests to verify 

12 that backup resources are sufficient to ensure 

13 continued order processing and trade matching, 

14 price reporting, market surveillance, and main15 tenance of a comprehensive and accurate audit 

16 trail. 

17 ‘‘(15) DESIGNATION OF COMPLIANCE OFFI18 CER.— 

19 ‘‘(A) IN GENERAL.—Each swap execution 

20 facility shall designate an individual to serve as 

21 a compliance officer. 

22 ‘‘(B) DUTIES.—The compliance officer— 

23 ‘‘(i) shall report directly to the board 

24 or to the senior officer of the facility; 

25 ‘‘(ii) shall— 


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1 ‘‘(I) review compliance with the 

2 core principles in this subsection; 

3 ‘‘(II) in consultation with the 

4 board of the facility, a body per5 forming a function similar to that of 

6 a board, or the senior officer of the 

7 facility, resolve any conflicts of inter8 est that may arise; 

9 ‘‘(III) be responsible for admin10 istering the policies and procedures 

11 required to be established pursuant to 

12 this section; and 

13 ‘‘(IV) ensure compliance with 

14 this Act and the rules and regulations 

15 issued under this Act, including rules 

16 prescribed by the Commission pursu17 ant to this section; and 

18 ‘‘(iii) shall establish procedures for re19 mediation of non-compliance issues found 

20 during compliance office reviews, 

21 lookbacks, internal or external audit find22 ings, self-reported errors, or through vali23 dated complaints, and for the handling, 

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1 testing, and closing of non-compliant 

2 issues. 

3 ‘‘(C) ANNUAL REPORTS REQUIRED.—The 

4 compliance officer shall annually prepare and 

5 sign a report on the compliance of the facility 

6 with this Act and its policies and procedures, 

7 including its code of ethics and conflict of inter8 est policies, in accordance with rules prescribed 

9 by the Commission. The compliance report shall 

10 accompany the financial reports of the facility 

11 that are required to be furnished to the Com12 mission pursuant to this section and shall in13 clude a certification that, under penalty of law, 

14 the report is accurate and complete. 

15 ‘‘(e) EXEMPTIONS.—The Commission may exempt, 

16 conditionally or unconditionally, a swap execution facility 

17 from registration under this section if the Commission 

18 finds that the facility is subject to comparable, comprehen19 sive supervision and regulation on a consolidated basis by 

20 the Securities and Exchange Commission, a Prudential 

21 Regulator or the appropriate governmental authorities in 

22 the organization’s home country. 

23 ‘‘(f) RULES.—No later than 1 year after the date of 

24 the enactment of the Derivative Markets Transparency 

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1 scribe rules governing the regulation of swap execution fa2 cilities under this section.’’. 

3 SEC. 3110. DERIVATIVES TRANSACTION EXECUTION FACILI4 TIES AND EXEMPT BOARDS OF TRADE. 

5 (a) Sections 5a and 5d of the Commodity Exchange 

6 Act (7 U.S.C. 1 et seq.) are repealed. 

7 (b)(1) Prior to the final effective dates in this title, 

8 a person may petition the Commodity Futures Trading 

9 Commission to remain subject to the provisions of section 

10 5d of the Commodity Exchange Act, as such provisions 

11 existed prior to the effective date of this subtitle. 

12 (2) The Commodity Futures Trading Commission 

13 shall consider any petition submitted under paragraph (1) 

14 in a prompt manner and may allow a person to continue 

15 operating subject to the provisions of section 5d of the 

16 Commodity Exchange Act for up to 1 year after the effec17 tive date of this subtitle. 

18 SEC. 3111. DESIGNATED CONTRACT MARKETS. 

19 (a) Section 5(d) of the Commodity Exchange Act (7 

20 U.S.C. 7(d)) is amended by striking paragraphs (1) and 

21 (2) and inserting the following: 

22 ‘‘(1) IN GENERAL.—To be designated as, and 

23 to maintain the designation of a board of trade as 

24 a contract market, the board of trade shall comply 

25 with the core principles specified in this subsection 


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1 and any requirement that the Commission may im2 pose by rule or regulation pursuant to section 8a(5). 

3 Except where the Commission determines otherwise 

4 by rule or regulation, the board of trade shall have 

5 reasonable discretion in establishing the manner in 

6 which it complies with the core principles. 

7 ‘‘(2) COMPLIANCE WITH RULES.— 

8 ‘‘(A) The board of trade shall monitor and 

9 enforce compliance with the rules of the con10 tract market, including access requirements, the 

11 terms and conditions of any contracts to be 

12 traded on the contract market and the contract 

13 market’s abusive trade practice prohibitions. 

14 ‘‘(B) The board of trade shall have the ca15 pacity to detect, investigate, and apply appro16 priate sanctions to, any person or entity that 

17 violates the rules. 

18 ‘‘(C) The rules shall provide the board of 

19 trade with the ability and authority to obtain 

20 any necessary information to perform any of 

21 the functions described in this subsection, in22 cluding the capacity to carry out such inter23 national information-sharing agreements as the 

24 Commission may require.’’. 


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1 (b) Section 5(d) of such Act (7 U.S.C. 7(d)) is 

2 amended by striking paragraphs (4) and (5) and inserting 

3 the following: 

4 ‘‘(4) PREVENTION OF MARKET DISRUPTION.— 

5 The board of trade shall have the capacity and re6 sponsibility to prevent manipulation, price distortion, 

7 and disruptions of the delivery or cash-settlement 

8 process through market surveillance, compliance, 

9 and enforcement practices and procedures, including 

10 methods for conducting real-time monitoring of trad11 ing and comprehensive and accurate trade recon12 structions. 

13 ‘‘(5) POSITION LIMITATIONS OR ACCOUNT14 ABILITY.— 

15 ‘‘(A) To reduce the potential threat of 

16 market manipulation or congestion, especially 

17 during trading in the delivery month, the board 

18 of trade shall adopt for each of its contracts, 

19 where necessary and appropriate, position limi20 tations or position accountability for specu21 lators. 

22 ‘‘(B) For any contract that is subject to a 

23 position limitation established by the Commis24 sion pursuant to section 4a(a), the board of 

25 trade shall set its position limitation at a level 


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1 no higher than the Commission-established limi2 tation.’’. 

3 (c) Section 5(d) of such Act (7 U.S.C. 7(d)) is 

4 amended by striking paragraph (7) and inserting the fol5 lowing: 

6 ‘‘(7) AVAILABILITY OF GENERAL INFORMA7 TION.—The board of trade shall make available to 

8 market authorities, market participants, and the 

9 public accurate information concerning— 

10 ‘‘(A) the terms and conditions of the con11 tracts of the contract market; and 

12 ‘‘(B) the rules, regulations and mecha13 nisms for executing transactions on or through 

14 the facilities of the contract market, and the 

15 rules and specifications describing the operation 

16 of the board of trade’s electronic matching plat17 form or other trade execution facility.’’. 

18 (d) Section 5(d) of such Act (7 U.S.C. 7(d)) is 

19 amended by striking paragraph (9) and inserting the fol20 lowing: 

21 ‘‘(9) EXECUTION OF TRANSACTIONS.— 

22 ‘‘(A) The board of trade shall provide a 

23 competitive, open, and efficient market and 

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1 tects the price discovery process of trading in 

2 the board of trade’s centralized market. 

3 ‘‘(B) The rules may authorize, for bona 

4 fide business purposes— 

5 ‘‘(i) transfer trades or office trades; 

6 ‘‘(ii) an exchange of— 

7 ‘‘(I) futures in connection with a 

8 cash commodity transaction; 

9 ‘‘(II) futures for cash commod10 ities; or 

11 ‘‘(III) futures for swaps; or 

12 ‘‘(iii) A futures commission merchant, 

13 acting as principal or agent, to enter into 

14 or confirm the execution of a contract for 

15 the purchase or sale of a commodity for fu16 ture delivery if the contract is reported, re17 corded, or cleared in accordance with the 

18 rules of the contract market or a deriva19 tives clearing organization.’’. 

20 (e) Section 5(d)(17) of such Act (7 U.S.C. 7(d)(17)) 

21 is amended by adding at the end the following: ‘‘The board 

22 of trade shall keep any such records relating to swaps de23 fined in section 1a(35)(A)(v) open to inspection and exam24 ination by the Securities and Exchange Commission.’’. 


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1 (f) Section 5(d) of such Act (7 U.S.C. 7(d)) is amend2 ed by adding at the end the following: 

3 ‘‘(19) FINANCIAL RESOURCES.—The board of 

4 trade shall have adequate financial, operational, and 

5 managerial resources to discharge the responsibil6 ities of a contract market. For the financial re7 sources of a board of trade to be considered ade8 quate, their value shall exceed the total amount that 

9 would enable the contract market to cover its oper10 ating costs for a period of 1 year, calculated on a 

11 rolling basis. 

12 ‘‘(20) SYSTEM SAFEGUARDS.—The board of 

13 trade shall— 

14 ‘‘(A) establish and maintain a program of 

15 risk analysis and oversight to identify and mini16 mize sources of operational risk through the de17 velopment of appropriate controls and proce18 dures, and the development of automated sys19 tems, that are reliable, secure, and give ade20 quate scalable capacity; 

21 ‘‘(B) establish and maintain emergency 

22 procedures, backup facilities, and a plan for dis23 aster recovery that allow for the timely recovery 

24 and resumption of operations and the fulfillVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00661 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ment of the board of trade’s responsibilities and 

2 obligations; and 

3 ‘‘(C) periodically conduct tests to verify 

4 that back-up resources are sufficient to ensure 

5 continued order processing and trade matching, 

6 price reporting, market surveillance, and main7 tenance of a comprehensive and accurate audit 

8 trail. 

9 ‘‘(21) DIVERSITY OF BOARDS OF DIRECTORS.— 

10 The board of trade, if a publicly traded company, 

11 shall endeavor to recruit individuals to serve on the 

12 board of directors and the other decision-making 

13 bodies (as determined by the Commission) of the 

14 board of trade from among, and to have the com15 position of the bodies reflect, a broad and culturally 

16 diverse pool of qualified candidates. 

17 ‘‘(22) DISCIPLINARY PROCEDURES.—The board 

18 of trade shall establish and enforce disciplinary pro19 cedures that authorize the board of trade to dis20 cipline, suspend, or expel members or market par21 ticipants that violate the rules of the board of trade, 

22 or similar methods for performing the same func23 tions, including delegation of the functions to third 

24 parties.’’. 


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1 (g) Section 5 of such Act (7 U.S.C. 7) is amended 

2 by striking subsection (b). 

3 SEC. 3112. MARGIN. 

4 (a) Section 8a(7)(C) of the Commodity Exchange Act 

5 (7 U.S.C. 12a(7)(C)) is amended by striking ‘‘, excepting 

6 the setting of levels of margin’’. 

7 (b) Section 8a(7) of such Act (7 U.S.C. 12a(7)) is 

8 amended by redesignating subparagraphs (D) through (F) 

9 as subparagraphs (E) through (G), respectively, and in10 serting after subparagraph (C) the following: 

11 ‘‘(D) margin requirements, provided that 

12 such rules, regulations, or orders shall— 

13 ‘‘(i) be limited to protecting the finan14 cial integrity of the derivatives clearing or15 ganization; 

16 ‘‘(ii) be designed for risk management 

17 purposes in order to protect the financial 

18 integrity of transactions; and 

19 ‘‘(iii) not set specific margin 

20 amounts.’’. 

21 SEC. 3113. POSITION LIMITS. 

22 (a) Section 4a(a) of the Commodity Exchange Act (7 

23 U.S.C. 6a(a)) is amended by— 

24 (1) inserting ‘‘(1)’’ after ‘‘(a)’’; 


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1 (2) striking ‘‘on electronic trading facilities with 

2 respect to a significant price discovery contract’’ in 

3 the first sentence and inserting ‘‘swaps that perform 

4 or affect a significant price discovery function with 

5 respect to registered entities’’; 

6 (3) inserting ‘‘, including any group or class of 

7 traders,’’ in the second sentence after ‘‘held by any 

8 person’’; 

9 (4) striking ‘‘on an electronic trading facility 

10 with respect to a significant price discovery con11 tract,’’ in the second sentence and inserting ‘‘swaps 

12 that perform or affect a significant price discovery 

13 function with respect to registered entities,’’; and 

14 (5) inserting at the end the following: 

15 ‘‘(2)(A) In accordance with the standards set 

16 forth in paragraph (1) of this subsection and con17 sistent with the good faith exception cited in sub18 section (b)(2), with respect to physical commodities 

19 other than excluded commodities as defined by the 

20 Commission, the Commission shall by rule, regula21 tion, or order establish limits on the amount of posi22 tions, as appropriate, other than bona fide hedge po23 sitions, that may be held by any person with respect 

24 to contracts of sale for future delivery or with re25 spect to options on the contracts or commodities 


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1 traded on or subject to the rules of a designated 

2 contract market. 

3 ‘‘(B)(i) For exempt commodities, the limits 

4 shall be established within 180 days after the date 

5 of the enactment of this paragraph. 

6 ‘‘(ii) For agricultural commodities, the limits 

7 shall be established within 270 days after the date 

8 of the enactment of this paragraph. 

9 ‘‘(C) In establishing the limits, the Commission 

10 shall strive to ensure that trading on foreign boards 

11 of trade in the same commodity will be subject to 

12 comparable limits and that any limits to be imposed 

13 by the Commission will not cause price discovery in 

14 the commodity to shift to trading on the foreign 

15 boards of trade. 

16 ‘‘(3) In establishing the limits required in para17 graph (2), the Commission, as appropriate, shall set 

18 limits— 

19 ‘‘(A) on the number of positions that may 

20 be held by any person for the spot month, each 

21 other month, and the aggregate number of posi22 tions that may be held by any person for all 

23 months; and 

24 ‘‘(B) to the maximum extent practicable, 

25 in its discretion— 


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1 ‘‘(i) to diminish, eliminate, or prevent 

2 excessive speculation as described under 

3 this section; 

4 ‘‘(ii) to deter and prevent market ma5 nipulation, squeezes, and corners; 

6 ‘‘(iii) to ensure sufficient market li7 quidity for bona fide hedgers; and 

8 ‘‘(iv) to ensure that the price dis9 covery function of the underlying market is 

10 not disrupted. 

11 ‘‘(4)(A) Not later than 150 days after the es12 tablishment of position limits pursuant to paragraph 

13 (2), and biannually thereafter, the Commission shall 

14 hold 2 public hearings, 1 for agriculture commodities 

15 and 1 for energy commodities as such terms are de16 fined by the Commission, in order to receive rec17 ommendations regarding the position limits to be es18 tablished in paragraph (2). 

19 ‘‘(B) Each public hearing held pursuant to sub20 paragraph (A) shall, at a minimum providing there 

21 is sufficient interest, receive recommendations 

22 from— 

23 ‘‘(i) 7 predominantly commercial short 

24 hedgers of the actual physical commodity for 

25 future delivery; 


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1 ‘‘(ii) 7 predominantly commercial long 

2 hedgers of the actual physical commodity for 

3 future delivery; 

4 ‘‘(iii) 4 non-commercial participants in 

5 markets for commodities for future delivery; 

6 and 

7 ‘‘(iv) each designated contract market 

8 upon which a contract in the commodity for fu9 ture delivery is traded. 

10 ‘‘(C) Within 60 days after each public hearing 

11 held pursuant to subparagraph (A), the Commission 

12 shall publish in the Federal Register its response to 

13 the recommendations regarding position limits heard 

14 at the hearing. 

15 ‘‘(5) SIGNIFICANT PRICE DISCOVERY FUNC16 TION.—In making a determination whether a swap 

17 performs or affects a significant price discovery 

18 function with respect to regulated markets, the Com19 mission shall consider, as appropriate: 

20 ‘‘(A) PRICE LINKAGE.—The extent to 

21 which the swap uses or otherwise relies on a 

22 daily or final settlement price, or other major 

23 price parameter, of another contract traded on 

24 a regulated market based upon the same under25 lying commodity, to value a position, transfer or 


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1 convert a position, financially settle a position, 

2 or close out a position; 

3 ‘‘(B) ARBITRAGE.—The extent to which 

4 the price for the swap is sufficiently related to 

5 the price of another contract traded on a regu6 lated market based upon the same underlying 

7 commodity so as to permit market participants 

8 to effectively arbitrage between the markets by 

9 simultaneously maintaining positions or exe10 cuting trades in the swaps on a frequent and 

11 recurring basis; 

12 ‘‘(C) MATERIAL PRICE REFERENCE.—The 

13 extent to which, on a frequent and recurring 

14 basis, bids, offers, or transactions in a contract 

15 traded on a regulated market are directly based 

16 on, or are determined by referencing, the price 

17 generated by the swap; 

18 ‘‘(D) MATERIAL LIQUIDITY.—The extent 

19 to which the volume of swaps being traded in 

20 the commodity is sufficient to have a material 

21 effect on another contract traded on a regulated 

22 market; and 

23 ‘‘(E) OTHER MATERIAL FACTORS.—Such 

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1 mine whether a swap serves a significant price 

2 discovery function with respect to a regulated 

3 market. 

4 ‘‘(6) ECONOMICALLY EQUIVALENT CON5 TRACTS.— 

6 ‘‘(A) Notwithstanding any other provision 

7 of this section, the Commission shall establish 

8 limits on the amount of positions, including ag9 gregate position limits, as appropriate, other 

10 than bona fide hedge positions, that may be 

11 held by any person with respect to swaps that 

12 are economically equivalent to contracts of sale 

13 for future delivery or to options on the con14 tracts or commodities traded on or subject to 

15 the rules of a designated contract market sub16 ject to paragraph (2). 

17 ‘‘(B) In establishing limits pursuant to 

18 subparagraph (A), the Commission shall— 

19 ‘‘(i) develop the limits concurrently 

20 with limits established under paragraph 

21 (2), and the limits shall have similar re22 quirements as under paragraph (3)(B); 

23 and 


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1 ‘‘(ii) establish the limits simulta2 neously with limits established under para3 graph (2). 

4 ‘‘(7) AGGREGATE POSITION LIMITS.—The Com5 mission shall, by rule or regulation, establish limits 

6 (including related hedge exemption provisions) on 

7 the aggregate number or amount of positions in con8 tracts based upon the same underlying commodity 

9 (as defined by the Commission) that may be held by 

10 any person, including any group or class of traders, 

11 for each month across— 

12 ‘‘(A) contracts listed by designated con13 tract markets; 

14 ‘‘(B) with respect to an agreement con15 tract, or transaction that settles against any 

16 price (including the daily or final settlement 

17 price) of 1 or more contracts listed for trading 

18 on a registered entity, contracts traded on a 

19 foreign board of trade that provides members or 

20 other participants located in the United States 

21 with direct access to its electronic trading and 

22 order matching system; and 

23 ‘‘(C) swap contracts that perform or affect 

24 a significant price discovery function with re25 spect to regulated entities. 


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1 ‘‘(8) EXEMPTIONS.—The Commission, by rule, 

2 regulation, or order, may exempt, conditionally or 

3 unconditionally, any person or class of persons, any 

4 swap or class of swaps, any contract of sale of a 

5 commodity for future delivery or class of such con6 tracts, any option or class of options, or any trans7 action or class of transactions from any requirement 

8 it may establish under this section with respect to 

9 position limits.’’. 

10 (b) Section 4a(b) of such Act (7 U.S.C. 6a(b)) is 

11 amended— 

12 (1) in paragraph (1), by striking ‘‘or derivatives 

13 transaction execution facility or facilities or elec14 tronic trading facility’’ and inserting ‘‘or swap exe15 cution facility or facilities’’; and 

16 (2) in paragraph (2), by striking ‘‘or derivatives 

17 transaction execution facility or facilities or elec18 tronic trading facility’’ and inserting ‘‘or swap exe19 cution facility’’. 

20 (c) Section 4a(c) of such Act is amended— 

21 (1) by inserting ‘‘(1)’’ after ‘‘(c)’’; and 

22 (2) by adding after and below the end the fol23 lowing: 

24 ‘‘(2) For the purposes of implementation of 

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1 livery or options on the contracts or commodities, 

2 the Commission shall define what constitutes a bona 

3 fide hedging transaction or position as a transaction 

4 or position that— 

5 ‘‘(A)(i) represents a substitute for trans6 actions made or to be made or positions taken 

7 or to be taken at a later time in a physical mar8 keting channel; 

9 ‘‘(ii) is economically appropriate to the re10 duction of risks in the conduct and manage11 ment of a commercial enterprise; and 

12 ‘‘(iii) arises from the potential change in 

13 the value of— 

14 ‘‘(I) assets that a person owns, pro15 duces, manufactures, processes, or mer16 chandises or anticipates owning, producing, 

17 manufacturing, processing, or merchan18 dising; 

19 ‘‘(II) liabilities that a person owns or 

20 anticipates incurring; or 

21 ‘‘(III) services that a person provides, 

22 purchases, or anticipates providing or pur23 chasing; or 

24 ‘‘(B) reduces risks attendant to a position 

25 resulting from a swap that— 


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1 ‘‘(i) was executed opposite a 

2 counterparty for which the transaction 

3 would qualify as a bona fide hedging trans4 action pursuant to subparagraph (A); or 

5 ‘‘(ii) meets the requirements of sub6 paragraph (A).’’. 

7 (d) This section shall become effective on the date 

8 of its enactment. 

9 SEC. 3114. ENHANCED AUTHORITY OVER REGISTERED EN10 TITIES. 

11 (a) Section 5c(a) of the Commodity Exchange Act (7 

12 U.S.C. 7a–2(a)) is amended— 

13 (1) in paragraph (1), by striking ‘‘5a(d) and 

14 5b(c)(2)’’ and inserting ‘‘5b(c)(2) and 5h(e)’’; and 

15 (2) in paragraph (2), by striking ‘‘shall not’’ 

16 and inserting ‘‘may’’. 

17 (b) Section 5c(b) of such Act (7 U.S.C. 7a–2(b)) is 

18 amended in each of paragraphs (1), (2), and (3) by insert19 ing ‘‘or swap execution facility’’ after ‘‘contract market’’ 

20 each place it appears. 

21 (c) Section 5c(c)(1) of such Act (7 U.S.C. 7a– 

22 2(c)(1)) is amended— 

23 (1) by inserting ‘‘(A)’’ after ‘‘IN GENERAL.—’’; 

24 and 

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


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1 ‘‘(B) The new rule or rule amendment shall be2 come effective, pursuant to the registered entity’s 

3 certification and notice of such certification to its 

4 members (in a manner to be determined by the 

5 Commission), 10 business days after the Commis6 sion’s receipt of the certification (or such shorter pe7 riod determined by the Commission by rule or regu8 lation) unless the Commission notifies the registered 

9 entity within such time that it is staying the certifi10 cation because there exist novel or complex issues 

11 that require additional time to analyze, an inad12 equate explanation by the submitting registered enti13 ty, or a potential inconsistency with this Act (includ14 ing regulations under this Act). 

15 ‘‘(C)(i) A notification by the Commission pursu16 ant to subparagraph (B) shall stay the certification 

17 of the new contract or instrument or clearing of the 

18 new contract or instrument, new rule or new amend19 ment for up to an additional 90 days from the date 

20 of the notification. 

21 ‘‘(ii) The Commission shall provide at least a 

22 30-day public comment period, within the 90-day pe23 riod in which the stay is in effect described in clause 

24 (i), whenever it reviews a rule or rule amendment 


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1 pursuant to a notification by the Commission under 

2 this paragraph.’’. 

3 (d) Section 5c(d) of such Act (7 U.S.C. 7a–2(d)) is 

4 repealed. 

5 SEC. 3115. FOREIGN BOARDS OF TRADE. 

6 (a) IN GENERAL.—Section 4 of the Commodity Ex7 change Act (7 U.S.C. 6) is amended by adding at the end 

8 the following: 

9 ‘‘(e) FOREIGN BOARDS OF TRADE.— 

10 ‘‘(1) IN GENERAL.—The Commission may not 

11 permit a foreign board of trade to provide to the 

12 members of the foreign board of trade or other par13 ticipants located in the United States direct access 

14 to the electronic trading and order-matching system 

15 of the foreign board of trade with respect to an 

16 agreement, contract, or transaction that settles 

17 against any price (including the daily or final settle18 ment price) of 1 or more contracts listed for trading 

19 on a registered entity, unless the Commission deter20 mines that— 

21 ‘‘(A) the foreign board of trade makes pub22 lic daily trading information regarding the 

23 agreement, contract, or transaction that is com24 parable to the daily trading information pub25 lished by the registered entity for the 1 or more 


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1 contracts against which the agreement, con2 tract, or transaction traded on the foreign 

3 board of trade settles; and 

4 ‘‘(B) the foreign board of trade (or the for5 eign futures authority that oversees the foreign 

6 board of trade)— 

7 ‘‘(i) adopts position limits (including 

8 related hedge exemption provisions) for the 

9 agreement, contract, or transaction that 

10 are comparable, taking into consideration 

11 the relative sizes of the respective markets, 

12 to the position limits (including related 

13 hedge exemption provisions) adopted by 

14 the registered entity for the 1 or more con15 tracts against which the agreement, con16 tract, or transaction traded on the foreign 

17 board of trade settles; 

18 ‘‘(ii) has the authority to require or 

19 direct market participants to limit, reduce, 

20 or liquidate any position the foreign board 

21 of trade (or the foreign futures authority 

22 that oversees the foreign board of trade) 

23 determines to be necessary to prevent or 

24 reduce the threat of price manipulation, 

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1 tion 4a, price distortion, or disruption of 

2 delivery or the cash settlement process; 

3 ‘‘(iii) agrees to promptly notify the 

4 Commission, with regard to the agreement, 

5 contract, or transaction that settles against 

6 any price (including the daily or final set7 tlement price) of 1 or more contracts listed 

8 for trading on a registered entity, of any 

9 change regarding— 

10 ‘‘(I) the information that the for11 eign board of trade will make publicly 

12 available; 

13 ‘‘(II) the position limits that the 

14 foreign board of trade or foreign fu15 tures authority will adopt and enforce; 

16 ‘‘(III) the position reductions re17 quired to prevent manipulation, exces18 sive speculation as described in sec19 tion 4a, price distortion, or disruption 

20 of delivery or the cash settlement 

21 process; and 

22 ‘‘(IV) any other area of interest 

23 expressed by the Commission to the 

24 foreign board of trade or foreign fu25 tures authority; 


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1 ‘‘(iv) provides information to the 

2 Commission regarding large trader posi3 tions in the agreement, contract, or trans4 action that is comparable to the large trad5 er position information collected by the 

6 Commission for the 1 or more contracts 

7 against which the agreement, contract, or 

8 transaction traded on the foreign board of 

9 trade settles; and 

10 ‘‘(v) provides the Commission with in11 formation necessary to publish reports on 

12 aggregate trader positions for the agree13 ment, contract, or transaction traded on 

14 the foreign board of trade that are com15 parable to the reports on aggregate trader 

16 positions for the 1 or more contracts 

17 against which the agreement, contract, or 

18 transaction traded on the foreign board of 

19 trade settles. 

20 ‘‘(2) EXISTING FOREIGN BOARDS OF TRADE.— 

21 Paragraph (1) shall not be effective with respect to 

22 any foreign board of trade to which the Commission 

23 has granted direct access permission before the date 

24 of the enactment of this subsection until the date 

25 that is 180 days after such date of enactment. 


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1 ‘‘(3) PERSONS LOCATED IN THE UNITED

2 STATES.—’’. 

3 (b) LIABILITY OF REGISTERED PERSONS TRADING

4 ON A FOREIGN BOARD OF TRADE.— 

5 (1) Section 4(a) of such Act (7. U.S.C. 6(a)) is 

6 amended by inserting ‘‘or by subsection (f)’’ after 

7 ‘‘Unless exempted by the Commission pursuant to 

8 subsection (c)’’; and 

9 (2) Section 4 of such Act (7 U.S.C. 6) is fur10 ther amended by adding at the end the following: 

11 ‘‘(f)(1) A person registered with the Commission, or 

12 exempt from registration by the Commission, under this 

13 Act may not be found to have violated subsection (a) with 

14 respect to a transaction in, or in connection with, a con15 tract of sale of a commodity for future delivery if the per16 son— 

17 ‘‘(A) has reason to believe that the transaction 

18 and the contract is made on or subject to the rules 

19 of a foreign board of trade that is— 

20 ‘‘(i) legally organized under the laws of a 

21 foreign country; 

22 ‘‘(ii) authorized to act as a board of trade 

23 by a foreign futures authority; and 

24 ‘‘(iii) subject to regulation by the foreign 

25 futures authority; and 


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1 ‘‘(B) has not been determined by the Commis2 sion to be operating in violation of subsection (a). 

3 ‘‘(2) Nothing in this subsection shall be construed as 

4 implying or creating any presumption that a board of 

5 trade, exchange, or market is located outside the United 

6 States, or its territories or possessions, for purposes of 

7 subsection (a).’’. 

8 (c) CONTRACT ENFORCEMENT FOR FOREIGN FU9 TURES CONTRACTS.—Section 22(a) of such Act (7 U.S.C. 

10 25(a)) is amended by adding at the end the following: 

11 ‘‘(5) CONTRACT ENFORCEMENT FOR FOREIGN

12 FUTURES CONTRACTS.—A contract of sale of a com13 modity for future delivery traded or executed on or 

14 through the facilities of a board of trade, exchange, 

15 or market located outside the United States for pur16 poses of section 4(a) shall not be void, voidable, or 

17 unenforceable, and a party to such a contract shall 

18 not be entitled to rescind or recover any payment 

19 made with respect to the contract, based on the fail20 ure of the foreign board of trade to comply with any 

21 provision of this Act.’’. 

22 SEC. 3116. LEGAL CERTAINTY FOR SWAPS. 

23 Section 22(a)(4) of the Commodity Exchange Act (7 

24 U.S.C. 25(a)(4)) is amended to read as follows: 


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1 ‘‘(4) CONTRACT ENFORCEMENT BETWEEN ELI2 GIBLE COUNTERPARTIES.— 

3 ‘‘(A) A hybrid instrument sold to any in4 vestor shall not be void, voidable, or unenforce5 able, and a party to such a hybrid instrument 

6 shall not be entitled to rescind, or recover any 

7 payment made with respect to, such a hybrid 

8 instrument under this section or any other pro9 vision of Federal or State law, based solely on 

10 the failure of the hybrid instrument to comply 

11 with the terms or conditions of section 2(f) or 

12 regulations of the Commission; and 

13 ‘‘(B) An agreement, contract, or trans14 action between eligible contract participants or 

15 persons reasonably believed to be eligible con16 tract participants shall not be void, voidable, or 

17 unenforceable, and a party thereto shall not be 

18 entitled to rescind, or recover any payment 

19 made with respect to, such an agreement, con20 tract, or transaction under this section or any 

21 other provision of Federal or State law, based 

22 solely on the failure of the agreement, contract, 

23 or transaction to meet the definition of a swap 

24 set forth in section 1a, be traded in the manner 

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1 ant to 2(j)(1) or regulations of the Commission 

2 pursuant thereto.’’. 

3 SEC. 3117. FDICIA AMENDMENTS. 

4 Sections 408 and 409 of the Federal Deposit Insur5 ance Corporation Improvement Act of 1991 (12 U.S.C. 

6 4421 and 4422) are repealed. 

7 SEC. 3118. ENFORCEMENT AUTHORITY. 

8 (a) The Commodity Exchange Act (7 U.S.C. 1 et 

9 seq.) is amended by inserting after section 4b the fol10 lowing: 

11 ‘‘SEC. 4b–1. ENFORCEMENT AUTHORITY. 

12 ‘‘(a) CFTC.—Except as provided in subsection (b), 

13 the Commission shall have exclusive authority to enforce 

14 the provisions of subtitle A of the Derivative Markets 

15 Transparency and Accountability Act of 2009 with respect 

16 to any person. 

17 ‘‘(b) PRUDENTIAL REGULATORS.—The Prudential 

18 Regulators shall have exclusive authority to enforce the 

19 provisions of section 4s(d) and other prudential require20 ments of this Act with respect to banks, and branches or 

21 agencies of foreign banks that are swap dealers or major 

22 swap participants. 

23 ‘‘(c) REFERRAL.—(1) If the Prudential Regulator for 

24 a swap dealer or major swap participant has cause to be25 lieve that the swap dealer or major swap participant may 


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1 have engaged in conduct that constitutes a violation of the 

2 nonprudential requirements of section 4s or rules adopted 

3 by the Commission thereunder, that Prudential Regulator 

4 may recommend in writing to the Commission that the 

5 Commission initiate an enforcement proceeding as author6 ized under this Act. The recommendation shall be accom7 panied by a written explanation of the concerns giving rise 

8 to the recommendation. 

9 ‘‘(2) If the Commission has cause to believe that a 

10 swap dealer or major swap participant that has a Pruden11 tial Regulator may have engaged in conduct that con12 stitutes a violation of the prudential requirements of sec13 tion 4s or rules adopted thereunder, the Commission may 

14 recommend in writing to the Prudential Regulator that 

15 the Prudential Regulator initiate an enforcement pro16 ceeding as authorized under this Act. The recommenda17 tion shall be accompanied by a written explanation of the 

18 concerns given rise to the recommendation.’’. 

19 (b)(1) Section 4c(a) of such Act (7 U.S.C. 6c(a)) is 

20 amended by adding at the end the following: 

21 ‘‘(3) DISRUPTIVE PRACTICES.—It shall be un22 lawful for any person to engage in any trading or 

23 practice on or subject to the rules of a registered en24 tity that— 


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1 ‘‘(A) violates bids and offers (intentionally 

2 bidding at a price higher than the lowest offer, 

3 or offering at a price lower than the highest 

4 bid); 

5 ‘‘(B) is, is of the character of, or is com6 monly known to the trade as ‘marking the 

7 close’ (bidding or offering during or near the 

8 market’s closing period with the intent to influ9 ence the settlement price); 

10 ‘‘(C) is, is of the character of, or is com11 monly known to the trade as ‘spoofing’ (bidding 

12 or offering with the intent to cancel the bid or 

13 offer before execution); or 

14 ‘‘(D) constitutes uneconomic trading (trad15 ing that has no legitimate economic purpose but 

16 for the effect on price). 

17 ‘‘(4) The Commission may make and promul18 gate such rules and regulations as, in the judgment 

19 of the Commission, are reasonably necessary to pro20 hibit any other trading practice that is disruptive of 

21 fair and equitable trading.’’. 

22 (2) The amendment made by paragraph (1) shall be23 come effective upon enactment. 


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1 SEC. 3119. ENFORCEMENT. 

2 (a) Section 4b(a)(2) of the Commodity Exchange Act 

3 (7 U.S.C. 6b(a)(2)) is amended by striking ‘‘or other 

4 agreement, contract, or transaction subject to paragraphs 

5 (1) and (2) of section 5a(g),’’ and inserting ‘‘or swap,’’. 

6 (b) Section 4b(b) of such Act (7 U.S.C. 6b(b)) is 

7 amended by striking ‘‘or other agreement, contract or 

8 transaction subject to paragraphs (1) and (2) of section 

9 5a(g),’’ and inserting ‘‘or swap,’’. 

10 (c) Section 4c(a) of such Act (7 U.S.C. 6c(a)) is 

11 amended by inserting ‘‘or swap’’ before ‘‘if the transaction 

12 is used or may be used’’. 

13 (d) Section 9(a)(2) of such Act (7 U.S.C. 13(a)(2)) 

14 is amended by inserting ‘‘or of any swap,’’ before ‘‘or to 

15 corner’’. 

16 (e) Section 9(a)(4) of such Act (7 U.S.C. 13(a)(4)) 

17 is amended by inserting ‘‘swap repository,’’ before ‘‘or fu18 tures association’’. 

19 (f) Section 9(e)(1) of such Act (7 U.S.C. 13(e)(1)) 

20 is amended by inserting ‘‘swap repository,’’ before ‘‘or reg21 istered futures association’’ and by inserting ‘‘, or swaps,’’ 

22 before ‘‘on the basis’’. 

23 (g) Section 8(b) of the Federal Deposit Insurance Act 

24 (12 U.S.C. 1818(b)) is amended by redesignating para25 graphs (6) through (10) as paragraphs (7) through (11), 


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1 respectively, and inserting after paragraph (5) the fol2 lowing: 

3 ‘‘(6) This section shall apply to any swap deal4 er, major swap participant, security-based swap 

5 dealer, major security-based swap participant, de6 rivatives clearing organization, swap repository, se7 curity-based swap repository, or swap execution fa8 cility, whether or not it is an insured depository in9 stitution, for which the Board, the Corporation, or 

10 the Office of the Comptroller of the Currency is the 

11 appropriate Federal banking agency or Prudential 

12 Regulator for purposes of the Derivative Markets 

13 Transparency and Accountability Act of 2009.’’. 

14 SEC. 3120. RETAIL COMMODITY TRANSACTIONS. 

15 (a) Section 2(c) of the Commodity Exchange Act (7 

16 U.S.C. 2(c)) is amended— 

17 (1) in paragraph (1), by striking ‘‘(other than 

18 section 5a (to the extent provided in section 5a(g)), 

19 5b, 5d, or 12(e)(2)(B))’’ and inserting ‘‘(other than 

20 section 5b or 12(e)(2)(B))’’; and 

21 (2) in paragraph (2), by inserting after sub22 paragraph (C) the following: 

23 ‘‘(D) RETAIL COMMODITY TRANS24 ACTIONS.— 


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1 ‘‘(i) This subparagraph shall apply to, 

2 and the Commission shall have jurisdiction 

3 over, any agreement, contract, or trans4 action in any commodity that is— 

5 ‘‘(I) entered into with, or offered 

6 to (even if not entered into with), a 

7 person that is not an eligible contract 

8 participant or eligible commercial en9 tity; and 

10 ‘‘(II) entered into, or offered 

11 (even if not entered into), on a lever12 aged or margined basis, or financed 

13 by the offeror, the counterparty, or a 

14 person acting in concert with the of15 feror or counterparty on a similar 

16 basis. 

17 ‘‘(ii) Clause (i) shall not apply to— 

18 ‘‘(I) an agreement, contract, or 

19 transaction described in paragraph (1) 

20 or subparagraphs (A), (B), or (C), in21 cluding any agreement, contract, or 

22 transaction specifically excluded from 

23 subparagraph (A), (B), or (C); 

24 ‘‘(II) any security; 

25 ‘‘(III) a contract of sale that— 


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1 ‘‘(aa) results in actual deliv2 ery within 28 days or such other 

3 longer period as the Commission 

4 may determine by rule or regula5 tion based upon the typical com6 mercial practice in cash or spot 

7 markets for the commodity in8 volved; or 

9 ‘‘(bb) creates an enforceable 

10 obligation to deliver between a 

11 seller and a buyer that have the 

12 ability to deliver and accept deliv13 ery, respectively, in connection 

14 with their line of business. 

15 ‘‘(IV) an agreement, contract, or 

16 transaction that is listed on a national 

17 securities exchange registered under 

18 section 6(a) of the Securities Ex19 change Act of 1934 (15 U.S.C. 

20 78f(a)); or 

21 ‘‘(V) an identified banking prod22 uct, as defined in section 402(b) of 

23 the Legal Certainty for Bank Prod24 ucts Act of 2000 (7 U.S.C. 27(b)). 


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1 ‘‘(iii) Sections 4(a), 4(b) and 4b shall 

2 apply to any agreement, contract or trans3 action described in clause (i), that is not 

4 excluded from clause (i) by clause (ii), as 

5 if the agreement, contract, or transaction 

6 were a contract of sale of a commodity for 

7 future delivery. 

8 ‘‘(iv) This subparagraph shall not be 

9 construed to limit any jurisdiction that the 

10 Commission may otherwise have under any 

11 other provision of this Act over an agree12 ment, contract, or transaction that is a 

13 contract of sale of a commodity for future 

14 delivery; 

15 ‘‘(v) This subparagraph shall not be 

16 construed to limit any jurisdiction that the 

17 Commission or the Securities and Ex18 change Commission may otherwise have 

19 under any other provisions of this Act with 

20 respect to security futures products and 

21 persons effecting transactions in security 

22 futures products; 

23 ‘‘(vi) For the purposes of this sub24 paragraph, an agricultural producer, pack25 er, or handler shall be considered an eligiVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00689 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ble commercial entity for any agreement, 

2 contract, or transaction for a commodity in 

3 connection with its line of business.’’. 

4 (b) The amendments made by subsection (a) shall be5 come effective on the date of the enactment of this section. 

6 SEC. 3121. LARGE SWAP TRADER REPORTING. 

7 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

8 is amended by inserting after section 4s (as added by sec9 tion 3107 of this Act) the following: 

10 ‘‘SEC. 4t. LARGE SWAP TRADER REPORTING. 

11 ‘‘(a) It shall be unlawful for any person to enter into 

12 any swap that performs or affects a significant price dis13 covery function with respect to registered entities if— 

14 ‘‘(1) the person directly or indirectly enters into 

15 such swaps during any 1 day in an amount equal to 

16 or in excess of such amount as shall be fixed from 

17 time to time by the Commission; and 

18 ‘‘(2) such person directly or indirectly has or 

19 obtains a position in such swaps equal to or in ex20 cess of such amount as shall be fixed from time to 

21 time by the Commission, 

22 unless the person files or causes to be filed with the prop23 erly designated officer of the Commission such reports re24 garding any transactions or positions described in para25 graphs (1) and (2) as the Commission may by rule or regVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00690 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ulation require and unless, in accordance with the rules 

2 and regulations of the Commission, the person keeps 

3 books and records of all such swaps and any transactions 

4 and positions in any related commodity traded on or sub5 ject to the rules of any board of trade, and of cash or 

6 spot transactions in, inventories of, and purchase and sale 

7 commitments of, such a commodity. 

8 ‘‘(b) The books and records shall show complete de9 tails concerning all transactions and positions as the Com10 mission may by rule or regulation prescribe. 

11 ‘‘(c) The books and records shall be open at all times 

12 to inspection and examination by any representative of the 

13 Commission. 

14 ‘‘(d) For the purpose of this subsection, the swaps, 

15 futures and cash or spot transactions and positions of any 

16 person shall include the transactions and positions of any 

17 persons directly or indirectly controlled by the person. 

18 ‘‘(e) In making a determination whether a swap per19 forms or affects a significant price discovery function with 

20 respect to regulated markets, the Commission shall con21 sider the factors set forth in section 4a(a)(3).’’. 


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1 SEC. 3122. SEGREGATION OF ASSETS HELD AS COLLAT2 ERAL IN SWAP TRANSACTIONS. 

3 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

4 is further amended by inserting after section 4t the fol5 lowing: 

6 ‘‘SEC. 4u. SEGREGATION OF ASSETS HELD AS COLLATERAL 

7 IN OVER-THE-COUNTER SWAP TRANS8 ACTIONS. 

9 ‘‘(a) SEGREGATION.—At the request of a swap 

10 counterparty who provides funds or other property to a 

11 swap dealer initial margin or collateral to secure the obli12 gations of the counterparty under a swap between the 

13 counterparty and the swap dealer that is not submitted 

14 for clearing to a derivatives clearing organization, the 

15 swap dealer shall segregate the funds or other property 

16 for the benefit of the counterparty, and maintain the ini17 tial margin or collateral in an account which is carried 

18 by an independent third-party custodian and designated 

19 as a segregated account for the counterparty, in accord20 ance with such rules and regulations as the Commission 

21 or Prudential Regulator may prescribe. If a swap 

22 counterparty is a swap dealer or major swap participant 

23 who owns more than 20 percent of, or has more than 50 

24 percent representation on the board of directors of a cus25 todian, the custodian shall not be considered independent 

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1 ceding sentence. This subsection shall not be interpreted 

2 to preclude commercial arrangements regarding the in3 vestment of the segregated funds or other property and 

4 the related allocation of gains and losses resulting from 

5 any such investment. 

6 ‘‘(b) FURTHER AUDIT REPORTING.—If a swap dealer 

7 does not segregate funds pursuant to the request of a 

8 swap counterparty in accordance with subsection (a), the 

9 swap dealer shall report to its counterparty on a quarterly 

10 basis that its procedures relating to margin and collateral 

11 requirements are in compliance with the agreement of the 

12 counterparties.’’. 

13 SEC. 3123. OTHER AUTHORITY. 

14 Unless otherwise provided by its terms, this subtitle 

15 does not divest any appropriate Federal banking agency, 

16 the Commission, the Securities and Exchange Commis17 sion, or other Federal or State agency, of any authority 

18 derived from any other applicable law. 

19 SEC. 3124. ANTITRUST. 

20 Nothing in the amendments made by this subtitle 

21 shall be construed to modify, impair, or supersede the op22 eration of any of the antitrust laws. For purposes of this 

23 subtitle, the term ‘‘antitrust laws’’ has the same meaning 

24 given the term in subsection (a) of the first section of the 

25 Clayton Act, except that the term includes section 5 of 


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1 the Federal Trade Commission Act to the extent that such 

2 section 5 applies to unfair methods of competition. 

3 SEC. 3125. REVIEW OF PRIOR ACTIONS. 

4 Notwithstanding any other provision of the Com5 modity Exchange Act, the Commodity Futures Trading 

6 Commission shall review, as appropriate, all regulations, 

7 rules, exemptions, exclusions, guidance, no action letters, 

8 orders, other actions taken by or on behalf of the Commis9 sion, and any action taken pursuant to the Commodity 

10 Exchange Act by an exchange, self-regulatory organiza11 tion, or any other registered entity, that are currently in 

12 effect, to ensure that such prior actions are in compliance 

13 with the provisions of this title. 

14 SEC. 3126. EXPEDITED PROCESS. 

15 The Commodity Futures Trading Commission may 

16 use emergency and expedited procedures (including any 

17 administrative or other procedure as appropriate) to carry 

18 out this title if, in its discretion, it deems it necessary to 

19 do so. 

20 SEC. 3127. EFFECTIVE DATE. 

21 (a) Unless otherwise provided, the provisions of this 

22 subtitle shall become effective the later of 270 days after 

23 the date of the enactment of this subtitle or, to the extent 

24 a provision of this subtitle requires rulemaking, no less 


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1 than 60 days after publication of a final rule or regulation 

2 implementing such provision of this subtitle. 

3 (b) Subsection (a) shall not preclude the Commodity 

4 Futures Trading Commission from any rulemaking re5 quired or directed under this subtitle to implement the 

6 provisions of this subtitle. 

7 Subtitle B—Regulation of Security8 Based Swap Markets 

9 SEC. 3201. DEFINITIONS UNDER THE SECURITIES EX10 CHANGE ACT OF 1934. 

11 (a) DEFINITIONS.—Section 3(a) of the Securities Ex12 change Act of 1934 (15 U.S.C. 78c(a)) is amended— 

13 (1) in paragraph (5)(A) and (B), by inserting 

14 ‘‘(but not security-based swaps, other than security15 based swaps with or for persons that are not eligible 

16 contract participants)’’ after the word ‘‘securities’’ 

17 in each place it appears; 

18 (2) in paragraph (10), by inserting ‘‘security19 based swap,’’ after ‘‘security future,’’; 

20 (3) in paragraph (13), by adding at the end the 

21 following: ‘‘For security-based swaps, such terms in22 clude the execution, termination (prior to its sched23 uled maturity date), assignment, exchange, or simi24 lar transfer or conveyance of, or extinguishing of 


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1 rights or obligations under, a security-based swap, 

2 as the context may require.’’; 

3 (4) in paragraph (14), by adding at the end the 

4 following: ‘‘For security-based swaps, such terms in5 clude the execution, termination (prior to its sched6 uled maturity date), assignment, exchange, or simi7 lar transfer or conveyance of, or extinguishing of 

8 rights or obligations under, a security-based swap, 

9 as the context may require.’’; 

10 (5) in paragraph (39)— 

11 (A) by striking ‘‘or government securities 

12 dealer’’ and adding ‘‘government securities 

13 dealer, security-based swap dealer or major se14 curity-based swap participant’’ in its place in 

15 subparagraph (B)(i)(I); 

16 (B) by adding ‘‘security-based swap dealer, 

17 major security-based swap participant,’’ after 

18 ‘‘government securities dealer,’’ in subpara19 graph (B)(i)(II); 

20 (C) by striking ‘‘or government securities 

21 dealer’’ and adding ‘‘government securities 

22 dealer, security-based swap dealer or major se23 curity-based swap participant’’ in its place in 

24 subparagraph (C); and 


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1 (D) by adding ‘‘security-based swap dealer, 

2 major security-based swap participant,’’ after 

3 ‘‘government securities dealer,’’ in subpara4 graph (D); and 

5 (6) by adding at the end the following: 

6 ‘‘(65) ELIGIBLE CONTRACT PARTICIPANT.—The 

7 term ‘eligible contract participant’ has the same 

8 meaning as in section 1a(12) of the Commodity Ex9 change Act (7 U.S.C. 1a(12)). 

10 ‘‘(66) MAJOR SWAP PARTICIPANT.—The term 

11 ‘major swap participant’ has the same meaning as in 

12 section 1a(39) of the Commodity Exchange Act (7 

13 U.S.C. 1a(39)). 

14 ‘‘(67) MAJOR SECURITY-BASED SWAP PARTICI15 PANT.— 

16 ‘‘(A) IN GENERAL.—The term ‘major secu17 rity-based swap participant’ means any person 

18 who is not a security-based swap dealer, and— 

19 ‘‘(i) maintains a substantial net posi20 tion in outstanding security-based swaps, 

21 excluding positions held primarily for hedg22 ing, reducing or otherwise mitigating its 

23 commercial risk, including operating and 

24 balance sheet risk; or 


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1 ‘‘(ii) whose outstanding security-based 

2 swaps create substantial net counterparty 

3 exposure among the aggregate of its 

4 counterparties that could expose those 

5 counterparties to significant credit losses. 

6 ‘‘(B) DEFINITION OF ‘SUBSTANTIAL NET

7 POSITION’.—The Commission shall define by 

8 rule or regulation the terms ‘substantial net po9 sition’, ‘substantial net counterparty exposure’, 

10 and ‘significant credit losses’ at thresholds that 

11 the Commission determines prudent for the ef12 fective monitoring, management and oversight 

13 of entities which are systemically important or 

14 can significantly impact the financial system 

15 through counterparty credit risk. In setting the 

16 definitions, the Commission shall consider the 

17 person’s relative position in uncleared as op18 posed to cleared swaps. 

19 ‘‘(C) A person may be designated a major 

20 security-based swap participant for 1 or more 

21 individual types of security-based swaps without 

22 being classified as a major security-based swap 

23 participant for all classes of security-based 

24 swaps. 

25 ‘‘(68) SECURITY-BASED SWAP.— 


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

2 subparagraph (B), the term ‘security-based 

3 swap’ means any agreement, contract, or trans4 action that would be a swap under section 

5 1a(35) of the Commodity Exchange Act, and 

6 that— 

7 ‘‘(i) is primarily based on an index 

8 that is a narrow-based security index, in9 cluding any interest therein or based on 

10 the value thereof; 

11 ‘‘(ii) is primarily based on a single se12 curity or loan, including any interest there13 in or based on the value thereof; or 

14 ‘‘(iii) is primarily based on the occur15 rence, non-occurrence, or extent of the oc16 currence of an event relating to a single 

17 issuer of a security or the issuers of securi18 ties in a narrow-based security index, pro19 vided that such event must directly affect 

20 the financial statements, financial condi21 tion, or financial obligations of the issuer. 

22 ‘‘(B) RULE OF CONSTRUCTION REGARDING

23 MASTER AGREEMENTS.—The term ‘security24 based swap’ shall be construed to include a 

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1 ment, contract, or transaction that is a secu2 rity-based swap pursuant to subparagraph (A), 

3 together with all supplements to any such mas4 ter agreement, without regard to whether the 

5 master agreement contains an agreement, con6 tract, or transaction that is not a security-based 

7 swap pursuant to subparagraph (A), except 

8 that the master agreement shall be considered 

9 to be a security-based swap only with respect to 

10 each agreement, contract, or transaction under 

11 the master agreement that is a security-based 

12 swap pursuant to subparagraph (A). 

13 ‘‘(C) EXCLUSION.—The term ‘security14 based swap’ does not include any agreement, 

15 contract, or transaction that meets the defini16 tion of a security-based swap only because it 

17 references, is based upon, or settles through the 

18 transfer, delivery, or receipt of an exempted se19 curity under section 3(a)(12) of the Securities 

20 Exchange Act of 1934 as in effect on the date 

21 of enactment of the Futures Trading Act of 

22 1982 (other than any municipal security as de23 fined in section 3(a)(29) as in effect on the date 

24 of enactment of the Futures Trading Act of 

25 1982), unless such agreement, contract, or 


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1 transaction is of the character of, or is com2 monly known in the trade as, a put, call, or 

3 other option. 

4 ‘‘(69) SWAP.—The term ‘swap’ has the same 

5 meaning as in section 1a(35) of the Commodity Ex6 change Act (7 U.S.C. 1a(35)). 

7 ‘‘(70) PERSON ASSOCIATED WITH A SECURITY8 BASED SWAP DEALER OR MAJOR SECURITY-BASED

9 SWAP PARTICIPANT.—The term ‘person associated 

10 with a security-based swap dealer or major security11 based swap participant’ or ‘associated person of a 

12 security-based swap dealer or major security-based 

13 swap participant’ means any partner, officer, direc14 tor, or branch manager of such security-based swap 

15 dealer or major security-based swap participant (or 

16 any person occupying a similar status or performing 

17 similar functions), any person directly or indirectly 

18 controlling, controlled by, or under common control 

19 with such security-based swap dealer or major secu20 rity-based swap participant, or any employee of such 

21 security-based swap dealer or major security-based 

22 swap participant, except that any person associated 

23 with a security-based swap dealer or major security24 based swap participant whose functions are solely 

25 clerical or ministerial shall not be included in the 


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1 meaning of such term other than for purposes of 

2 section 15F(e)(2). 

3 ‘‘(71) SECURITY-BASED SWAP DEALER.— 

4 ‘‘(A) IN GENERAL.—The term ‘security5 based swap dealer’ means any person that— 

6 ‘‘(i) holds itself out as a dealer in se7 curity-based swaps; 

8 ‘‘(ii) makes a market in security-based 

9 swaps; 

10 ‘‘(iii) regularly engages in the pur11 chase of security-based swaps and their re12 sale to customers in the ordinary course of 

13 a business; or 

14 ‘‘(iv) engages in any activity causing 

15 it to be commonly known in the trade as 

16 a dealer or market maker in security-based 

17 swaps. 

18 ‘‘(B) DESIGNATION BY TYPE OR CLASS.— 

19 A person may be designated a security-based 

20 swap dealer for a single type or single class or 

21 category of security-based swap and considered 

22 not a security-based swap dealer for other 

23 types, classes, or categories of security-based 

24 swaps. 


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1 ‘‘(C) DE MINIMUS EXCEPTION.—The Com2 mission shall make a determination to exempt 

3 from designation as a security-based swap deal4 er an entity that engages in a de minimus 

5 amount of security-based swap dealing in con6 nection with transactions with or on the behalf 

7 of its customers. 

8 ‘‘(72) APPROPRIATE FEDERAL BANKING AGEN9 CY.—The term ‘appropriate Federal banking agency’ 

10 has the same meaning as in section 3(q) of the Fed11 eral Deposit Insurance Act (12 U.S.C. 1813(q)). 

12 ‘‘(73) BOARD.—The term ‘Board’ means the 

13 Board of Governors of the Federal Reserve System. 

14 ‘‘(74) PRUDENTIAL REGULATOR.—The term 

15 ‘Prudential Regulator’ means— 

16 ‘‘(A) the Board in the case of a swap deal17 er, major swap participant, security-based swap 

18 dealer or major security-based swap participant 

19 that is— 

20 ‘‘(i) a State-chartered bank that is a 

21 member of the Federal Reserve System; or 

22 ‘‘(ii) a State-chartered branch or 

23 agency of a foreign bank; 

24 ‘‘(B) the Office of the Comptroller of the 

25 Currency in the case of a swap dealer, major 


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1 swap participant, security-based swap dealer or 

2 major security-based swap participant that is— 

3 ‘‘(i) a national bank; or 

4 ‘‘(ii) a federally chartered branch or 

5 agency of a foreign bank; and 

6 ‘‘(C) the Federal Deposit Insurance Cor7 poration in the case of a swap dealer, major 

8 swap participant, security-based swap dealer or 

9 major security-based swap participant that is a 

10 state-chartered bank that is not a member of 

11 the Federal Reserve System. 

12 ‘‘(75) SWAP DEALER.—The term ‘swap dealer’ 

13 has the same meaning as in section 1a(38) of the 

14 Commodity Exchange Act (7 U.S.C. 1a(38)). 

15 ‘‘(76) SECURITY-BASED SWAP AGREEMENT.— 

16 ‘‘(A) IN GENERAL.—For purposes of sec17 tions 10, 16, 20, and 21A of this Act, and sec18 tion 17 of the Securities Act of 1933 (15 

19 U.S.C. 77q), the term ‘security-based swap 

20 agreement’ means a swap agreement as defined 

21 in section 206A of the Gramm-Leach-Bliley Act 

22 (15 U.S.C. 78c note) of which a material term 

23 is based on the price, yield, value, or volatility 

24 of any security or any group or index of securi25 ties, or any interest therein. 


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1 ‘‘(B) EXCLUSIONS.—The term ‘security2 based swap agreement’ does not include any se3 curity-based swap. 

4 ‘‘(76) SECURITY-BASED SWAP REPOSITORY.— 

5 The term ‘security-based swap repository’ means any 

6 person that collects, calculates, prepares or main7 tains information or records with respect to trans8 actions or positions in, or the terms and conditions 

9 of, security-based swaps entered into by third par10 ties. 

11 ‘‘(77) SWAP EXECUTION FACILITY.—The term 

12 ‘swap execution facility’ means a person or entity 

13 that facilitates the execution or trading of security14 based swaps between two persons through any 

15 means of interstate commerce, but which is not a 

16 national securities exchange, including any electronic 

17 trade execution or voice brokerage facility.’’. 

18 (b) AUTHORITY TO FURTHER DEFINE TERMS.—The 

19 Securities and Exchange Commission may adopt a rule 

20 further defining the terms ‘‘security-based swap’’, ‘‘secu21 rity-based swap dealer’’, ‘‘major security-based swap par22 ticipant’’, and ‘‘eligible contract participant’’ with regard 

23 to security-based swaps (as such terms are defined in the 

24 amendments made by subsection (a)) for the purpose of 


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1 including transactions and entities that have been struc2 tured to evade this title. 

3 SEC. 3202. REPEAL OF PROHIBITION ON REGULATION OF 

4 SECURITY-BASED SWAPS. 

5 (a) REPEAL OF LAW.—Section 206B of the Gramm6 Leach-Bliley Act (15 U.S.C. 78c note) is repealed. 

7 (b) CONFORMING AMENDMENTS TO THE SECURITIES

8 ACT OF 1933.— 

9 (1) Section 2A(b) of the Securities Act of 1933 

10 (15 U.S.C. 77b–1) is amended by striking ‘‘(as de11 fined in section 206B of the Gramm-Leach-Bliley 

12 Act)’’ each place that such term appears. 

13 (2) Section 17 of the Securities Act of 1933 (15 

14 U.S.C. 77q) is amended— 

15 (A) in subsection (a)— 

16 (i) by inserting ‘‘(including security17 based swaps)’’ after ‘‘securities’’; and 

18 (ii) by striking ‘‘206B of the Gramm19 Leach-Bliley Act’’ and inserting ‘‘3(a)(76) 

20 of the Securities Exchange Act of 1934’’; 

21 and 

22 (B) in subsection (d), by striking ‘‘206B of 

23 the Gramm-Leach-Bliley Act’’ and inserting 

24 ‘‘3(a)(76) of the Securities Exchange Act of 

25 1934’’. 


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1 (c) CONFORMING AMENDMENTS TO THE SECURITIES

2 EXCHANGE ACT OF 1934.—The Securities Exchange Act 

3 of 1934 (15 U.S.C. 78a et seq.) is amended as follows: 

4 (1) Section 3A (15 U.S.C. 78c–1) is amended 

5 by striking ‘‘(as defined in section 206B of the 

6 Gramm-Leach-Bliley Act)’’ each place that the term 

7 appears. 

8 (2) Section 9(a) (15 U.S.C. 78i(a)) is amended 

9 by striking paragraphs (2) through (5) and insert10 ing: 

11 ‘‘(2) To effect, alone or with one or more other per12 sons, a series of transactions in any security registered 

13 on a national securities exchange or in connection with 

14 any security-based swap or security-based swap agreement 

15 with respect to such security creating actual or apparent 

16 active trading in such security, or raising or depressing 

17 the price of such security, for the purpose of inducing the 

18 purchase or sale of such security by others. 

19 ‘‘(3) If a dealer, broker, security-based swap dealer, 

20 major security-based swap participant or other person sell21 ing or offering for sale or purchasing or offering to pur22 chase the security, or a security-based swap or security23 based swap agreement with respect to such security, to 

24 induce the purchase or sale of any security registered on 

25 a national securities exchange or any security-based swap 


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1 or security-based swap agreement with respect to such se2 curity by the circulation or dissemination in the ordinary 

3 course of business of information to the effect that the 

4 price of any such security will or is likely to rise or fall 

5 because of market operations of any one or more persons 

6 conducted for the purpose of raising or depressing the 

7 price of such security. 

8 ‘‘(4) If a dealer, broker, security-based swap dealer, 

9 major security-based swap participant or other person sell10 ing or offering for sale or purchasing or offering to pur11 chase the security, or a security-based swap or security12 based swap agreement with respect to such security, to 

13 make, regarding any security registered on a national se14 curities exchange or any security-based swap or security15 based swap agreement with respect to such security, for 

16 the purpose of inducing the purchase or sale of such secu17 rity or such security-based swap or security-based swap 

18 agreement, any statement which was at the time and in 

19 the light of the circumstances under which it was made, 

20 false or misleading with respect to any material fact, and 

21 which he knew or had reasonable ground to believe was 

22 so false or misleading. 

23 ‘‘(5) For a consideration, received directly or indi24 rectly from a dealer, broker, security-based swap dealer, 

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1 ing or offering for sale or purchasing or offering to pur2 chase the security, or a security-based swap or security3 based swap agreement with respect to such security, to 

4 induce the purchase of any security registered on a na5 tional securities exchange or any security-based swap or 

6 security-based swap agreement with respect to such secu7 rity by the circulation or dissemination of information to 

8 the effect that the price of any such security will or is 

9 likely to rise or fall because of the market operations of 

10 any one or more persons conducted for the purpose of rais11 ing or depressing the price of such security.’’. 

12 (3) Section 9(i) (15 U.S.C. 78i(i)) is amended 

13 by striking ‘‘(as defined in section 206B of the 

14 Gramm-Leach-Bliley Act)’’; 

15 (4) Section 10 (15 U.S.C. 78j) is amended by 

16 striking ‘‘(as defined in section 206B of the Gramm17 Leach-Bliley Act)’’ each place that the term appears. 

18 (5) Section 15(c)(1) is amended— 

19 (A) in subparagraph (A), by striking ‘‘, or 

20 any security-based swap agreement (as defined 

21 in section 206B of the Gramm-Leach-Bliley 

22 Act),’’; and 

23 (B) in subparagraphs (B) and (C), by 

24 striking ‘‘agreement (as defined in section 206B 


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1 of the Gramm-Leach-Bliley Act)’’ in each place 

2 that the term appears. 

3 (6) Section 15(i) (15 U.S.C. 78o(i), as added 

4 by section 303(f) of the Commodity Futures Mod5 ernization Act of 2000 (Public Law 106–554; 114 

6 Stat. 2763A–455) is amended by striking ‘‘(as de7 fined in section 206B of the Gramm-Leach-Bliley 

8 Act)’’. 

9 (7) Section 16 (15 U.S.C. 78p) is amended— 

10 (A) in subsection (a)(2)(C), by striking 

11 ‘‘(as defined in section 206(b) of the Gramm12 Leach-Bliley Act (15 U.S.C. 78c note))’’; 

13 (B) in subsection (b), by striking ‘‘(as de14 fined in section 206B of the Gramm-Leach-Bli15 ley Act)’’ in each place that the term appears; 

16 and 

17 (C) in subsection (g), by striking ‘‘(as de18 fined in section 206B of the Gramm-Leach-Bli19 ley Act)’’; 

20 (8) Section 20 (15 U.S.C. 78t) is amended— 

21 (A) in subsection (d), by striking ‘‘(as de22 fined in section 206B of the Gramm-Leach-Bli23 ley Act)’’; and 


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1 (B) in subsection (f), by striking ‘‘(as de2 fined in section 206B of the Gramm-Leach-Bli3 ley Act)’’; and 

4 (9) Section 21A (15 U.S.C. 78u–1) is amend5 ed— 

6 (A) in subsection (a)(1), by striking ‘‘(as 

7 defined in section 206B of the Gramm-Leach8 Bliley Act)’’; and 

9 (B) in subsection (g), by striking ‘‘(as de10 fined in section 206B of the Gramm-Leach-Bli11 ley Act)’’. 

12 SEC. 3203. AMENDMENTS TO THE SECURITIES EXCHANGE 

13 ACT OF 1934. 

14 (a) CLEARING FOR SECURITY-BASED SWAPS.—The 

15 Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 

16 is amended by adding the following section after section 

17 3A: 

18 ‘‘SEC. 3B. CLEARING FOR SECURITY-BASED SWAPS. 

19 ‘‘(a) IN GENERAL.— 

20 ‘‘(1) STANDARD FOR CLEARING.—A security21 based swap shall be submitted for clearing if a clear22 ing agency that is registered under this Act will ac23 cept the security-based swap for clearing, and the 

24 Commission has determined under paragraph 


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1 (2)(B)(ii) of subsection (b) that the security-based 

2 swap is required to be cleared. 

3 ‘‘(2) OPEN ACCESS.—The rules of a clearing 

4 agency described in paragraph (1) shall— 

5 ‘‘(A) prescribe that all security-based 

6 swaps submitted to the clearing agency with the 

7 same terms and conditions are economically 

8 equivalent within the clearing agency and may 

9 be offset with each other within the clearing 

10 agency; and 

11 ‘‘(B) provide for non-discriminatory clear12 ing of a security-based swap executed bilaterally 

13 or on or through the rules of an unaffiliated na14 tional securities exchange or swap execution fa15 cility. 

16 ‘‘(b) COMMISSION REVIEW.— 

17 ‘‘(1) COMMISSION-INITIATED REVIEW.— 

18 ‘‘(A) The Commission shall review each se19 curity-based swap, or any group, category, type 

20 or class of security-based swaps to make a de21 termination that such security-based swap, or 

22 group, category, type or class of security-based 

23 swaps should be required to be cleared. 


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1 ‘‘(B) The Commission shall provide at 

2 least a 30-day public comment period regarding 

3 any determination under subparagraph (A). 

4 ‘‘(2) SWAP SUBMISSIONS.— 

5 ‘‘(A) A clearing agency shall submit to the 

6 Commission each security-based swap, or any 

7 group, category, type or class of security-based 

8 swaps that it plans to accept for clearing and 

9 provide notice to its members (in a manner to 

10 be determined by the Commission) of such sub11 mission. 

12 ‘‘(B) The Commission shall— 

13 ‘‘(i) make available to the public any 

14 submission received under subparagraph 

15 (A); 

16 ‘‘(ii) review each submission made 

17 under subparagraph (A), and determine 

18 whether the security-based swap, or group, 

19 category, type, or class of security-based 

20 swaps, described in the submission is re21 quired to be cleared; and 

22 ‘‘(iii) provide at least a 30-day public 

23 comment period regarding its determina24 tion whether the clearing requirement 


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1 under subsection (a)(1) shall apply to the 

2 submission. 

3 ‘‘(3) DEADLINE.—The Commission shall make 

4 its determination under paragraph (2)(B) not later 

5 than 90 days after receiving a submission made 

6 under paragraph (2)(A), unless the submitting clear7 ing agency agrees to an extension for the time limi8 tation established under this paragraph. 

9 ‘‘(4) DETERMINATION.— 

10 ‘‘(A) In reviewing a submission made 

11 under paragraph (2), the Commission shall re12 view whether the submission is consistent with 

13 section 5b(c)(2). 

14 ‘‘(B) In reviewing a security-based swap, 

15 group of security-based swaps or class of secu16 rity-based swaps pursuant to paragraph (1) or 

17 a submission made under paragraph (2), the 

18 Commission shall take into account the fol19 lowing factors: 

20 ‘‘(i) The existence of significant out21 standing notional exposures, trading liquid22 ity and adequate pricing data. 

23 ‘‘(ii) The availability of rule frame24 work, capacity, operational expertise and 

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1 ture to clear the contract on terms that are 

2 consistent with the material terms and 

3 trading conventions on which the contract 

4 is then traded. 

5 ‘‘(iii) The effect on the mitigation of 

6 systemic risk, taking into account the size 

7 of the market for such contract and the re8 sources of the clearing agency available to 

9 clear the contract. 

10 ‘‘(iv) The effect on competition, in11 cluding appropriate fees and charges ap12 plied to clearing. 

13 ‘‘(v) The existence of reasonable legal 

14 certainty in the event of the insolvency of 

15 the relevant clearing agency or 1 or more 

16 of its clearing members with regard to the 

17 treatment of customer and security-based 

18 swap counterparty positions, funds, and 

19 property. 

20 ‘‘(C) In making a determination under 

21 paragraph (2)(B) that the clearing requirement 

22 shall apply, the Commission may require such 

23 terms and conditions to the requirement as the 

24 Commission determines to be appropriate. 


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1 ‘‘(5) RULES.—Not later than 1 year after the 

2 date of the enactment of the Derivative Markets 

3 Transparency and Accountability Act of 2009, the 

4 Commission shall adopt rules for a clearing agency’s 

5 submission for review, pursuant to this subsection, 

6 of a security-based swap, or a group, category, type 

7 or class of security-based swaps, that it seeks to ac8 cept for clearing. 

9 ‘‘(c) STAY OF CLEARING REQUIREMENT.— 

10 ‘‘(1) After an determination pursuant to sub11 section (b)(2), the Commission, on application of a 

12 counterparty to a security-based swap or on its own 

13 initiative, may stay the clearing requirement of sub14 section (a)(1) until the Commission completes a re15 view of the terms of the security-based swap (or the 

16 group, category, type or class of security-based 

17 swaps) and the clearing arrangement. 

18 ‘‘(2) DEADLINE.—The Commission shall com19 plete a review undertaken pursuant to paragraph (1) 

20 not later than 90 days after issuance of the stay, un21 less the clearing agency that clears the security22 based swap, or group, category, type or class of se23 curity-based swaps, agrees to an extension of the 

24 time limitation established under this paragraph. 


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1 ‘‘(3) DETERMINATION.—Upon completion of 

2 the review undertaken pursuant to paragraph (1), 

3 the Commission may— 

4 ‘‘(A) determine, unconditionally or subject 

5 to such terms and conditions as the Commis6 sion determines to be appropriate, that the se7 curity-based swap, or group, category, type or 

8 class of security-based swaps, must be cleared 

9 pursuant to this subsection if it finds that such 

10 clearing is consistent with subsection (b)(4); or 

11 ‘‘(B) determine that the clearing require12 ment of subsection (a)(1) shall not apply to the 

13 security-based swap, or group, category, type or 

14 class of security-based swaps. 

15 ‘‘(4) RULES.—Not later than 1 year after the 

16 date of the enactment of the Derivative Markets 

17 Transparency and Accountability Act of 2009, the 

18 Commission shall adopt rules for reviewing, pursu19 ant to this subsection, a clearing agency’s clearing of 

20 a security-based swap, or a group, category, type or 

21 class of security-based swaps, that it has accepted 

22 for clearing. 

23 ‘‘(d) PREVENTION OF EVASION.—The Commission 

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1 pretations of the rules, as necessary to prevent evasions 

2 of this section. 

3 ‘‘(e) REQUIRED REPORTING.— 

4 ‘‘(1) IN GENERAL.—All security-based swaps 

5 that are not accepted for clearing by any clearing 

6 agency shall be reported either to a security-based 

7 swap repository described in subsection 13(n) or, if 

8 there is no security-based swap repository that 

9 would accept the security-based swap, to the Com10 mission pursuant to section 13A within such time 

11 period as the Commission may by rule or regulation 

12 prescribe. Counterparties to a security-based swap 

13 may agree which counterparty will report the secu14 rity-based swap as required by this paragraph. 

15 ‘‘(2) SWAP DEALER DESIGNATION.—With re16 gard to security-based swaps where only 1 

17 counterparty is a security-based swap dealer, the se18 curity-based swap dealer shall report the security19 based swap as required by this subsection. 

20 ‘‘(f) REPORTING TRANSITION RULES.—Rules adopt21 ed by the Commission under this section shall provide for 

22 the reporting of data, as follows: 

23 ‘‘(1) Security-based swaps entered into before 

24 the date of the enactment of this section shall be re25 ported to a registered security-based swap repository 


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1 or the Commission no later than 180 days after the 

2 effective date of this section; and 

3 ‘‘(2) Security-based swaps entered into on or 

4 after such date of enactment shall be reported to a 

5 registered security-based swap repository or the 

6 Commission no later than the later of— 

7 ‘‘(A) 90 days after such effective date; or 

8 ‘‘(B) such other time after entering into 

9 the security-based swap as the Commission may 

10 prescribe by rule or regulation. 

11 ‘‘(g) CLEARING TRANSITION RULES.— 

12 ‘‘(1) Security-based swaps entered into before 

13 the date of the enactment of this section are exempt 

14 from the clearing requirements of this subsection if 

15 reported pursuant to subsection (f)(1). 

16 ‘‘(2) Security-based swaps entered into before 

17 application of the clearing requirement pursuant to 

18 this section are exempt from the clearing require19 ments of this section if reported pursuant to sub20 section (f)(2). 

21 ‘‘(h) EXCEPTIONS.— 

22 ‘‘(1) IN GENERAL.—The requirements of sub23 section (a)(1) shall not apply to a security-based 

24 swap if one of the counterparties to the security25 based swap— 


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1 ‘‘(A) is not a security-based swap dealer or 

2 major security-based swap participant; 

3 ‘‘(B) is using security-based swaps to 

4 hedge or mitigate commercial risk, including 

5 operating or balance sheet risk; and 

6 ‘‘(C) notifies the Commission, in a manner 

7 set forth by the Commission, how it generally 

8 meets its financial obligations associated with 

9 entering into non-cleared security-based swaps. 

10 ‘‘(2) ABUSE OF EXCEPTION.—The Commission 

11 may prescribe rules under this subsection, or issue 

12 interpretations of the rules, as necessary to prevent 

13 abuse of the exemption in paragraph (1) by security14 based swap dealers and major security-based swap 

15 participants. 

16 ‘‘(3) OPTION TO CLEAR.—The application of 

17 the clearing exception in paragraph (1) is solely at 

18 the discretion the counterparty to the swap that 

19 meets the conditions of subparagraphs (A) through 

20 (C) of paragraph (1).’’. 

21 (b) CLEARING AGENCY REQUIREMENTS.—Section 

22 17A of the Securities Exchange Act of 1934 (15 U.S.C. 

23 78q) is amended by adding at the end the following new 

24 subsections: 


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1 ‘‘(g) REGISTRATION REQUIREMENT.—It shall be un2 lawful for a clearing agency, unless registered with the 

3 Commission, directly or indirectly to make use of the mails 

4 or any means or instrumentality of interstate commerce 

5 to perform the functions of a clearing agency with respect 

6 to a swap. 

7 ‘‘(h) VOLUNTARY REGISTRATION.—A person that 

8 clears agreements, contracts, or transactions that are not 

9 required to be cleared under this Act may register with 

10 the Commission as a clearing agency. 

11 ‘‘(i) EXISTING BANKS AND DERIVATIVES CLEARING

12 ORGANIZATIONS.—A bank or a derivatives clearing orga13 nization registered with the Commodity Futures Trading 

14 Commission under the Commodity Exchange Act required 

15 to be a registered as a clearing agency under this title, 

16 solely because it clears security-based swaps, is deemed to 

17 be a registered clearing agency under this title solely for 

18 the purpose of clearing security-based swaps to the extent 

19 that the bank cleared security-based swaps, as defined in 

20 this Act, as a multilateral clearing organization or the de21 rivatives clearing organization cleared security-based 

22 swaps, as defined in this title pursuant to an exemption 

23 from registration as a clearing agency, before the enact24 ment of this section. A bank or derivative clearing organi25 zation to which this subsection applies shall continue to 


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1 comply with the requirements in section 17A(b)(3) of this 

2 title. A bank to which this subsection applies may, by the 

3 vote of the shareholders owning not less than 51 percent 

4 of the voting interests of such bank, be converted into a 

5 State corporation, partnership, limited liability company, 

6 or other similar legal form pursuant to a plan of conver7 sion, if the conversion is not in contravention of applicable 

8 State law. 

9 ‘‘(j) REPORTING.— 

10 ‘‘(1) IN GENERAL.—A clearing agency that 

11 clears security-based swaps shall provide to the 

12 Commission all information determined by the Com13 mission to be necessary to perform its responsibil14 ities under this Act. The Commission shall adopt 

15 data collection and maintenance requirements for se16 curity-based swaps cleared by clearing agencies that 

17 are comparable to the corresponding requirements 

18 for security-based swaps accepted by security-based 

19 swap repositories and security-based swaps traded 

20 on swap execution facilities. Subject to section 24, 

21 the Commission shall share such information, upon 

22 request, with the Board, the Commodity Futures 

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1 sons the Commission deems appropriate, including 

2 foreign financial supervisors (including foreign fu3 tures authorities), foreign central banks, and foreign 

4 ministries. 

5 ‘‘(2) PUBLIC INFORMATION.—A clearing agency 

6 that clears security-based swaps shall provide to the 

7 Commission, or its designee, such information as is 

8 required by, and in a form and at a frequency to be 

9 determined by, the Commission, in order to comply 

10 with the public reporting requirements contained in 

11 section 13. 

12 ‘‘(k) DESIGNATION OF COMPLIANCE OFFICER.— 

13 ‘‘(1) IN GENERAL.—Each clearing agency that 

14 clears security-based swaps shall designate an indi15 vidual to serve as a compliance officer. 

16 ‘‘(2) DUTIES.—The compliance officer shall— 

17 ‘‘(A) report directly to the board or to the 

18 senior officer of the clearing agency; 

19 ‘‘(B) in consultation with the board of the 

20 clearing agency, a body performing a function 

21 similar to that of a board, or the senior officer 

22 of the clearing agency, resolve any conflicts of 

23 interest that may arise; 


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1 ‘‘(C) be responsible for administering the 

2 policies and procedures required to be estab3 lished pursuant to this section; 

4 ‘‘(D) ensure compliance with securities 

5 laws and the rules and regulations issued there6 under, including rules prescribed by the Com7 mission pursuant to this section; and 

8 ‘‘(E) establish procedures for remediation 

9 of non-compliance issues found during compli10 ance office reviews, lookbacks, internal or exter11 nal audit findings, self-reported errors, or 

12 through validated complaints. Procedures will 

13 establish the handling, management response, 

14 remediation, re-testing, and closing of non-com15 pliant issues. 

16 ‘‘(3) ANNUAL REPORTS REQUIRED.—The com17 pliance officer shall annually prepare and sign a re18 port on the compliance of the clearing agency with 

19 the securities laws and its policies and procedures, 

20 including its code of ethics and conflict of interest 

21 policies, in accordance with rules prescribed by the 

22 Commission. Such compliance report shall accom23 pany the financial reports of the clearing agency 

24 that are required to be furnished to the Commission 

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1 cation that, under penalty of law, the report is accu2 rate and complete. 

3 ‘‘(l) STANDARDS FOR CLEARING AGENCIES CLEAR4 ING SWAP TRANSACTIONS.—To be registered and to main5 tain registration as a clearing agency that clears swap 

6 transactions, a clearing agency shall comply with such 

7 standards as the Commission may establish by rule. In 

8 establishing any such standards, and in the exercise of its 

9 oversight of such a clearing agency pursuant to this title, 

10 the Commission may conform such standards or oversight 

11 to reflect evolving United States and international stand12 ards. Except where the Commission determines otherwise 

13 by rule or regulation, a clearing agency shall have reason14 able discretion in establishing the manner in which it com15 plies with any such standards. 

16 ‘‘(m) RULES.—Not later than 1 year after the date 

17 of the enactment of the Derivative Markets Transparency 

18 and Accountability Act of 2009, the Commission shall 

19 adopt rules governing persons that are registered as clear20 ing agencies for security-based swaps under this Act. 

21 ‘‘(n) EXEMPTIONS.— 

22 ‘‘(1) IN GENERAL.—The Commission may ex23 empt, conditionally or unconditionally, a clearing 

24 agency from registration under this section for the 

25 clearing of security-based swaps if the Commission 


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1 finds that such clearing agency is subject to com2 parable, comprehensive supervision and regulation 

3 on a consolidated basis by the Commodity Futures 

4 Trading Commission, a Prudential Regulator, or the 

5 appropriate governmental authorities in the organi6 zation’s home country or if necessary or appropriate 

7 in the public interest and consistent with the pur8 pose of this Act. 

9 ‘‘(2) A person that is required to be registered 

10 as clearing agency under this section, whose prin11 cipal business is clearing commodity futures and op12 tions on commodity futures transactions and which 

13 is a derivatives clearing organization registered with 

14 the Commodity Futures Trading Commission under 

15 the Commodity Exchange Act (7 U.S.C. 1 et seq.), 

16 shall be unconditionally exempt from registration 

17 under this section solely for the purpose of clearing 

18 security-based swaps, unless the Commission finds 

19 that such derivatives clearing organization is not 

20 subject to comparable, comprehensive supervision 

21 and regulation by the Commodity Futures Trading 

22 Commission.’’. 

23 (c) EXECUTION OF SECURITY-BASED SWAPS.—The 

24 Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 

25 is amended by inserting after section 5 the following: 


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1 ‘‘SEC. 5A. EXECUTION OF SECURITY-BASED SWAPS. 

2 ‘‘(a) EXECUTION TRANSPARENCY.— 

3 ‘‘(1) REQUIREMENT.—A security-based swap 

4 that is subject to the clearing requirement of section 

5 3B shall not be traded except on or through a na6 tional securities exchange or on or through an swap 

7 execution facility registered under section 5h, that 

8 makes the security-based swap available for trading. 

9 ‘‘(2) EXCEPTIONS.—The requirement of para10 graph (1) shall not apply to a security-based swap 

11 if no national securities exchange or swap execution 

12 facility makes the security-based swap available for 

13 trading. 

14 ‘‘(3) REQUIRED REPORTING.—If the exception 

15 of paragraph (2) applies and there is no national se16 curities exchange or swap execution facility that 

17 makes the security-based swap available to trade, 

18 the counterparties shall comply with any record19 keeping and transaction reporting requirements as 

20 may be prescribed by the Commission with respect 

21 to security-based swaps subject to the requirements 

22 of paragraph (1). 

23 ‘‘(b) EXCHANGE TRADING.—In adopting rules and 

24 regulations, the Commission shall endeavor to eliminate 

25 unnecessary impediments to the trading on national secu26 rities exchanges of contracts, agreements, or transactions 


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1 that would be swaps but for the trading of such contracts, 

2 agreements or transactions on such a national securities 

3 exchange.’’. 

4 (d) SWAP EXECUTION FACILITIES.—The Securities 

5 Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended 

6 by adding after section 3B (as added by subsection (a)) 

7 the following: 

8 ‘‘SEC. 3C. SWAP EXECUTION FACILITIES. 

9 ‘‘(a) REGISTRATION.—No person may operate a facil10 ity for the trading of security-based swaps unless the facil11 ity is registered as a swap execution facility under this 

12 section. 

13 ‘‘(b) REQUIREMENTS FOR TRADING.— 

14 ‘‘(1) IN GENERAL.—A swap execution facility 

15 that is registered under subsection (a) may list for 

16 trading any security-based swap. 

17 ‘‘(2) RULES FOR TRADING THROUGH THE FA18 CILITY.—Not later than 1 year after the date of the 

19 enactment of the Derivative Markets Transparency 

20 and Accountability Act of 2009, the Commission 

21 shall adopt rules to allow a security-based swap to 

22 be traded through the facilities of an exchange or a 

23 swap execution facility. Such rules shall permit an 

24 intermediary, acting as principal or agent, to enter 

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1 standing section 3B(b), if the security-based swap is 

2 reported, recorded, or confirmed in accordance with 

3 the rules of the exchange or swap execution facility. 

4 ‘‘(c) TRADING BY EXCHANGES.—An exchange shall, 

5 to the extent that the exchange also operates a swap exe6 cution facility and uses the same electronic trade execution 

7 system for trading on the exchange and the swap execu8 tion facility, identify whether the electronic trading is tak9 ing place on the exchange or the swap execution facility. 

10 ‘‘(d) CORE PRINCIPLES FOR SWAP EXECUTION FA11 CILITIES.— 

12 ‘‘(1) IN GENERAL.—To be registered as, and to 

13 maintain its registration as, a swap execution facil14 ity, the facility shall comply with the core principles 

15 specified in this subsection and any requirement that 

16 the Commission may impose by rule or regulation 

17 pursuant to section 8a(5). Except where the Com18 mission determines otherwise by rule or regulation, 

19 the facility shall have reasonable discretion in estab20 lishing the manner in which it complies with these 

21 core principles. 

22 ‘‘(2) COMPLIANCE WITH RULES.—The swap 

23 execution facility shall— 

24 ‘‘(A) monitor and enforce compliance with 

25 any of the rules of the facility, including the 


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1 terms and conditions of the swaps traded on or 

2 through the facility and any limitations on ac3 cess to the facility; and 

4 ‘‘(B) establish and enforce trading and 

5 participation rules that will deter abuses and 

6 have the capacity to detect, investigate, and en7 force those rules, including means to— 

8 ‘‘(i) provide market participants with 

9 impartial access to the market; and 

10 ‘‘(ii) capture information that may be 

11 used in establishing whether rule violations 

12 have occurred. 

13 ‘‘(3) SECURITY-BASED SWAPS NOT READILY

14 SUSCEPTIBLE TO MANIPULATION.—The swap execu15 tion facility shall permit trading only in security16 based swaps that are not readily susceptible to ma17 nipulation. 

18 ‘‘(4) MONITORING OF TRADING.—The swap 

19 execution facility shall— 

20 ‘‘(A) establish and enforce rules or terms 

21 and conditions defining, or specifications detail22 ing, trading procedures to be used in entering 

23 and executing orders traded on or through its 

24 facilities; and 


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1 ‘‘(B) monitor trading in swaps to prevent 

2 manipulation, price distortion, and disruptions 

3 of the delivery or cash settlement process 

4 through surveillance, compliance, and discipli5 nary practices and procedures, including meth6 ods for conducting real-time monitoring of trad7 ing and comprehensive and accurate trade re8 constructions. 

9 ‘‘(5) ABILITY TO OBTAIN INFORMATION.—The 

10 swap execution facility shall— 

11 ‘‘(A) establish and enforce rules that will 

12 allow the facility to obtain any necessary infor13 mation to perform any of the functions de14 scribed in this section; 

15 ‘‘(B) provide the information to the Com16 mission upon request; and 

17 ‘‘(C) have the capacity to carry out such 

18 international information-sharing agreements as 

19 the Commission may require. 

20 ‘‘(6) FINANCIAL INTEGRITY OF TRANS21 ACTIONS.—The swap execution facility shall estab22 lish and enforce rules and procedures for ensuring 

23 the financial integrity of security-based swaps en24 tered on or through its facilities, including the clearVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00731 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ance and settlement of the security-based swaps pur2 suant to section 3B. 

3 ‘‘(7) EMERGENCY AUTHORITY.—The swap exe4 cution facility shall adopt rules to provide for the ex5 ercise of emergency authority, in consultation or co6 operation with the Commission, where necessary and 

7 appropriate, including the authority to suspend or 

8 curtail trading in a security-based swap. 

9 ‘‘(8) TIMELY PUBLICATION OF TRADING INFOR10 MATION.—The swap execution facility shall make 

11 public timely information on price, trading volume, 

12 and other trading data to the extent prescribed by 

13 the Commission. The Commission shall evaluate the 

14 impact of public disclosure on market liquidity in the 

15 relevant market, and shall seek to avoid public dis16 closure of information in a manner that would sig17 nificantly reduce market liquidity. The Commission 

18 shall not disclose information related to the internal 

19 business decisions of particular market participants. 

20 ‘‘(9) RECORDKEEPING AND REPORTING.—The 

21 swap execution facility shall maintain records of all 

22 activities related to the business of the facility, in23 cluding a complete audit trail, in a form and manner 

24 acceptable to the Commission for a period of 5 

25 years, and report to the Commission all information 


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1 determined by the Commission to be necessary or 

2 appropriate for the Commission to perform its re3 sponsibilities under this Act in a form and manner 

4 acceptable to the Commission. The Commission shall 

5 adopt data collection and reporting requirements for 

6 swap execution facilities that are comparable to cor7 responding requirements for clearing agencies and 

8 security-based swap repositories. 

9 ‘‘(10) CONFLICTS OF INTEREST.—The swap 

10 execution facility shall— 

11 ‘‘(A) establish and enforce rules to mini12 mize conflicts of interest in its decision-making 

13 process; and 

14 ‘‘(B) establish a process for resolving the 

15 conflicts of interest. 

16 ‘‘(11) FINANCIAL RESOURCES.—The swap exe17 cution facility shall have adequate financial, oper18 ational, and managerial resources to discharge its 

19 responsibilities. Such financial resources shall be 

20 considered adequate if their value exceeds the total 

21 amount that would enable the facility to cover its op22 erating costs for a period of one year, calculated on 

23 a rolling basis. 

24 ‘‘(12) SYSTEM SAFEGUARDS.—The swap execu25 tion facility shall— 


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1 ‘‘(A) establish and maintain a program of 

2 risk analysis and oversight to identify and mini3 mize sources of operational risk, through the 

4 development of appropriate controls and proce5 dures, and the development of automated sys6 tems, that are reliable, secure, and have ade7 quate scalable capacity; 

8 ‘‘(B) establish and maintain emergency 

9 procedures, backup facilities, and a plan for dis10 aster recovery that allow for the timely recovery 

11 and resumption of operations and the fulfill12 ment of the swap execution facility’s respon13 sibilities and obligation; and 

14 ‘‘(C) periodically conduct tests to verify 

15 that backup resources are sufficient to ensure 

16 continued order processing and trade matching, 

17 price reporting, market surveillance, and main18 tenance of a comprehensive and accurate audit 

19 trail. 

20 ‘‘(13) DESIGNATION OF COMPLIANCE OFFI21 CER.— 

22 ‘‘(A) IN GENERAL.—Each swap execution 

23 facility shall designate an individual to serve as 

24 a compliance officer. 

25 ‘‘(B) DUTIES.—The compliance officer— 


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1 ‘‘(i) shall report directly to the board 

2 or to the senior officer of the facility; and 

3 ‘‘(ii) shall— 

4 ‘‘(I) review compliance with the 

5 core principles in section 3B(e). 

6 ‘‘(II) in consultation with the 

7 board of the facility, a body per8 forming a function similar to that of 

9 a board, or the senior officer of the 

10 facility, resolve any conflicts of inter11 est that may arise; 

12 ‘‘(III) be responsible for admin13 istering the policies and procedures 

14 required to be established pursuant to 

15 this section; and 

16 ‘‘(IV) ensure compliance with se17 curities laws and the rules and regula18 tions issued thereunder, including 

19 rules prescribed by the Commission 

20 pursuant to this section; and 

21 ‘‘(iii) shall establish procedures for re22 mediation of non-compliance issues found 

23 during compliance office reviews, 

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1 dated complaints and to establish the han2 dling, management response, remediation, 

3 re-testing, and closing of non-compliant 

4 issues. 

5 ‘‘(C) ANNUAL REPORTS REQUIRED.—The 

6 compliance officer shall annually prepare and 

7 sign a report on the compliance of the facility 

8 with the securities laws and its policies and pro9 cedures, including its code of ethics and conflict 

10 of interest policies, in accordance with rules 

11 prescribed by the Commission. Such compliance 

12 report shall accompany the financial reports of 

13 the facility that are required to be furnished to 

14 the Commission pursuant to this section and 

15 shall include a certification that, under penalty 

16 of law, the report is accurate and complete. 

17 ‘‘(e) EXEMPTIONS.—The Commission may exempt, 

18 conditionally or unconditionally, a swap execution facility 

19 from registration under this section if the Commission 

20 finds that such organization is subject to comparable, 

21 comprehensive supervision and regulation on a consoli22 dated basis by the Commodity Futures Trading Commis23 sion, a Prudential Regulator or the appropriate govern24 mental authorities in the organization’s home country or 


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1 if necessary or appropriate in the public interest and con2 sistent with the purpose of this Act. 

3 ‘‘(f) RULES.—Not later than 1 year after the date 

4 of the enactment of the Derivative Markets Transparency 

5 and Accountability Act of 2009, the Commission shall pre6 scribe rules governing the regulation of swap execution fa7 cilities under this section.’’. 

8 (e) SEGREGATION OF ASSETS HELD AS COLLATERAL

9 IN SWAP TRANSACTIONS.—The Securities Exchange Act 

10 of 1934 (15 U.S.C. 78a et seq.) is further amended by 

11 adding after section 3C (as added by subsection (b) the 

12 following: 

13 ‘‘SEC. 3D. SEGREGATION OF ASSETS HELD AS COLLATERAL 

14 IN SECURITY-BASED SWAP TRANSACTIONS. 

15 ‘‘(a) OVER-THE-COUNTER SWAPS.—At the request of 

16 a counterparty to a security-based swap who provides 

17 funds or other property to a security-based swap dealer 

18 as initial margin or collateral to secure the obligations of 

19 the counterparty under a security-based swap between the 

20 counterparty and the security-based swap dealer that is 

21 not submitted for clearing to a derivatives clearing agency, 

22 the security-based swap dealer shall segregate the funds 

23 or other property for the benefit of the counterparty, and 

24 maintain the funds or other property in an account which 

25 is carried by a third-party custodian and designated as 


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1 a segregated account for the counterparty, in accordance 

2 with such rules and regulations as the Commission or Pru3 dential Regulator may prescribe. If a security-based swap 

4 counterparty is a security-based swap dealer or major se5 curity-based swap participant who owns more than 20 per6 cent of, or has more than 50 percent representation on 

7 the board of directors of a custodian, the custodian shall 

8 not be considered independent from the security-based 

9 swap counterparties for purposes of the preceding sen10 tence. This subsection shall not be interpreted to preclude 

11 commercial arrangements regarding the investment of the 

12 segregated funds or other property and the related alloca13 tion of gains and losses resulting from any such invest14 ment. 

15 ‘‘(b) FURTHER AUDIT REPORTING.—If a security16 based swap dealer does not segregate funds pursuant to 

17 the request of a security-based swap counterparty in ac18 cordance with subsection (a), the security-based swap 

19 dealer shall report to its counterparty on a quarterly basis 

20 that its procedures relating to margin and collateral re21 quirements are in compliance with the agreement of the 

22 counterparties.’’. 

23 (f) TRADING IN SECURITY-BASED SWAPS.—Section 6 

24 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) 

25 is amended by adding at the end the following: 


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1 ‘‘(l) It shall be unlawful for any person to effect a 

2 transaction in a security-based swap with or for a person 

3 that is not an eligible contract participant unless such 

4 transaction is effected on a national securities exchange 

5 registered pursuant to subsection (b).’’. 

6 (g) ADDITIONS OF SECURITY-BASED SWAPS TO CER7 TAIN ENFORCEMENT PROVISIONS.—Paragraphs (1) 

8 through (3) of section 9(b) of the Securities Exchange Act 

9 of 1934 (15 U.S.C. 78i(b)(1)–(3)) are amended to read 

10 as follows: 

11 ‘‘(1) any transaction in connection with any se12 curity whereby any party to such transaction ac13 quires (A) any put, call, straddle, or other option or 

14 privilege of buying the security from or selling the 

15 security to another without being bound to do so; 

16 (B) any security futures product on the security; or 

17 (C) any security-based swap involving the security or 

18 the issuer of the security; or 

19 ‘‘(2) any transaction in connection with any se20 curity with relation to which he has, directly or indi21 rectly, any interest in any (A) such put, call, strad22 dle, option, or privilege; (B) such security futures 

23 product; or (C) such security-based swap; or 

24 ‘‘(3) any transaction in any security for the ac25 count of any person who he has reason to believe 


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1 has, and who actually has, directly or indirectly, any 

2 interest in any (A) such put, call, straddle, option, 

3 or privilege; (B) such security futures product with 

4 relation to such security; or (C) any security-based 

5 swap involving such security or the issuer of such se6 curity.’’. 

7 (h) RULEMAKING AUTHORITY TO PREVENT FRAUD, 

8 MANIPULATION AND DECEPTIVE CONDUCT IN SECURITY9 BASED SWAPS.—Section 9 of the Securities Exchange Act 

10 of 1934 (15 U.S.C. 78i) is amended by adding at the end 

11 the following: 

12 ‘‘(i) It shall be unlawful for any person, directly or 

13 indirectly, by the use of any means or instrumentality of 

14 interstate commerce or of the mails, or of any facility of 

15 any national securities exchange, to effect any transaction 

16 in, or to induce or attempt to induce the purchase or sale 

17 of, any security-based swap, in connection with which such 

18 person engages in any fraudulent, deceptive, or manipula19 tive act or practice, makes any fictitious quotation, or en20 gages in any transaction, practice, or course of business 

21 which operates as a fraud or deceit upon any person. The 

22 Commission shall, for the purposes of this paragraph, by 

23 rules and regulations define, and prescribe means reason24 ably designed to prevent, such transactions, acts, pracVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00740 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tices, and courses of business as are fraudulent, deceptive, 

2 or manipulative, and such quotations as are fictitious.’’. 

3 (i) POSITION LIMITS AND POSITION ACCOUNT4 ABILITY FOR SECURITY-BASED SWAPS.—The Securities 

5 Exchange Act of 1934 is amended by inserting after sec6 tion 10A (15 U.S.C. 78j–1) the following new section: 

7 ‘‘SEC. 10B. POSITION LIMITS AND POSITION ACCOUNT8 ABILITY FOR SECURITY-BASED SWAPS AND 

9 LARGE TRADER REPORTING. 

10 ‘‘(a) POSITION LIMITS.—As a means reasonably de11 signed to prevent fraud and manipulation, the Commission 

12 may, by rule or regulation, as necessary or appropriate 

13 in the public interest or for the protection of investors, 

14 establish limits (including related hedge exemption provi15 sions) on the size of positions in any security-based swap 

16 that may be held by any person. In establishing such lim17 its, the Commission may require any person to aggregate 

18 positions in— 

19 ‘‘(1) any security-based swap and any security 

20 or loan or group or index of securities or loans on 

21 which such security-based swap is based, which such 

22 security-based swap references, or to which such se23 curity-based swap is related as described in section 

24 3(a)(68), and any other instrument relating to such 


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1 security or loan or group or index of securities or 

2 loans; or 

3 ‘‘(2) any security-based swap and (A) any secu4 rity or group or index of securities, the price, yield, 

5 value, or volatility of which, or of which any interest 

6 therein, is the basis for a material term of such se7 curity-based swap as described in section 3(a)(76) 

8 and (B) any security-based swap and any other in9 strument relating to the same security or group or 

10 index of securities. 

11 ‘‘(b) EXEMPTIONS.—The Commission, by rule, regu12 lation, or order, may conditionally or unconditionally ex13 empt any person or class of persons, any security-based 

14 swap or class of security-based swaps, or any transaction 

15 or class of transactions from any requirement it may es16 tablish under this section with respect to position limits. 

17 ‘‘(c) SRO RULES.— 

18 ‘‘(1) IN GENERAL.—As a means reasonably de19 signed to prevent fraud or manipulation, the Com20 mission, by rule, regulation, or order, as necessary 

21 or appropriate in the public interest, for the protec22 tion of investors, or otherwise in furtherance of the 

23 purposes of this title, may direct a self-regulatory 

24 organization— 


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1 ‘‘(A) to adopt rules regarding the size of 

2 positions in any security-based swap that may 

3 be held by— 

4 ‘‘(i) any member of such self-regu5 latory organization; or 

6 ‘‘(ii) any person for whom a member 

7 of such self-regulatory organization effects 

8 transactions in such security-based swap; 

9 and 

10 ‘‘(B) to adopt rules reasonably designed to 

11 ensure compliance with requirements prescribed 

12 by the Commission under subsection (c)(1)(A). 

13 ‘‘(2) REQUIREMENT TO AGGREGATE POSI14 TIONS.—In establishing such limits, the self-regu15 latory organization may require such member or per16 son to aggregate positions in— 

17 ‘‘(A) any security-based swap and any se18 curity or loan or group or index of securities or 

19 loans on which such security-based swap is 

20 based, which such security-based swap ref21 erences, or to which such security-based swap is 

22 related as described in section 3(a)(68), and 

23 any other instrument relating to such security 

24 or loan or group or index of securities or loans; 

25 or 


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1 ‘‘(B)(i) any security-based swap; and 

2 ‘‘(ii) any security-based swap and any 

3 other instrument relating to the same security 

4 or group or index of securities. 

5 ‘‘(d) LARGE TRADER REPORTING.—The Commis6 sion, by rule or regulation, may require any person that 

7 effects transactions for such person’s own account or the 

8 account of others in any securities-based swap or 

9 uncleared security-based swap agreement and any security 

10 or loan or group or index of securities or loans as set forth 

11 in paragraphs (1) and (2) of subsection (a) under this sec12 tion to report such information as the Commission may 

13 prescribe regarding any position or positions in any secu14 rity-based swap or uncleared security-based swap agree15 ment and any security or loan or group or index of securi16 ties or loans and any other instrument relating to such 

17 security or loan or group or index of securities or loans 

18 as set forth in paragraphs (1) and (2) of subsection (a) 

19 under this section.’’. 

20 (j) PUBLIC REPORTING AND REPOSITORIES FOR SE21 CURITY-BASED SWAPS.—Section 13 of the Securities Ex22 change Act of 1934 (15 U.S.C. 78m) is amended by add23 ing at the end the following: 

24 ‘‘(m) PUBLIC REPORTING OF AGGREGATE SECURITY25 BASED SWAP DATA.— 


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1 ‘‘(1) IN GENERAL.—The Commission, or a per2 son designated by the Commission pursuant to para3 graph (2), shall make available to the public, in a 

4 manner that does not disclose the business trans5 actions and market positions of any person, aggre6 gate data on security-based swap trading volumes 

7 and positions from the sources set forth in para8 graph (3). 

9 ‘‘(2) DESIGNEE OF THE COMMISSION.—The 

10 Commission may designate a clearing agency or a 

11 security-based swap repository to carry out the pub12 lic reporting described in paragraph (1). 

13 ‘‘(3) SOURCES OF INFORMATION.—The sources 

14 of the information to be publicly reported as de15 scribed in paragraph (1) are— 

16 ‘‘(A) clearing agencies pursuant to section 

17 3A; 

18 ‘‘(B) security-based swap repositories pur19 suant to subsection (n); and 

20 ‘‘(C) reports received by the Commission 

21 pursuant to section 13A. 

22 ‘‘(n) SECURITY-BASED SWAP REPOSITORIES.— 

23 ‘‘(1) REGISTRATION REQUIREMENT.— 

24 ‘‘(A) IN GENERAL.—It shall be unlawful 

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1 istered with the Commission, directly or indi2 rectly to make use of the mails or any means 

3 or instrumentality of interstate commerce to 

4 perform the functions of a security-based swap 

5 repository. 

6 ‘‘(B) INSPECTION AND EXAMINATION.— 

7 Registered security-based swap repositories 

8 shall be subject to inspection and examination 

9 by any representatives of the Commission. 

10 ‘‘(2) STANDARD SETTING.— 

11 ‘‘(A) DATA IDENTIFICATION.—The Com12 mission shall prescribe standards that specify 

13 the data elements for each security-based swap 

14 that shall be collected and maintained by each 

15 security-based swap repository. 

16 ‘‘(B) DATA COLLECTION AND MAINTE17 NANCE.—The Commission shall prescribe data 

18 collection and data maintenance standards for 

19 security-based swap repositories. 

20 ‘‘(C) COMPARABILITY.—The standards 

21 prescribed by the Commission under this sub22 section shall be comparable to the data stand23 ards imposed by the Commission on clearing 

24 agencies that clear security-based swaps. 


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1 ‘‘(3) DUTIES.—A security-based swap reposi2 tory shall— 

3 ‘‘(A) accept data prescribed by the Com4 mission for each security-based swap under this 

5 paragraph (2); 

6 ‘‘(B) maintain such data in such form and 

7 manner and for such period as may be required 

8 by the Commission; 

9 ‘‘(C) provide to the Commission, or its des10 ignee, such information as is required by, and 

11 in a form and at a frequency to be determined 

12 by, the Commission, in order to comply with the 

13 public reporting requirements contained in sub14 section (m); and 

15 ‘‘(D) make available, on a confidential 

16 basis, all data obtained by the security-based 

17 swap repository, including individual 

18 counterparty trade and position data, to the 

19 Commission, the appropriate Federal banking 

20 agencies, the Commodity Futures Trading 

21 Commission, the Financial Services Oversight 

22 Council, and the Department of Justice or to 

23 other persons the Commission deems appro24 priate, including foreign financial supervisors 


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1 (including foreign futures authorities), foreign 

2 central banks, and foreign ministries. 

3 ‘‘(4) RULES.—Not later than 1 year after the 

4 date of the enactment of the Derivative Markets 

5 Transparency and Accountability Act of 2009, the 

6 Commission shall adopt rules governing persons that 

7 are registered under this section, including rules 

8 that specify the data elements that shall be collected 

9 and maintained. 

10 ‘‘(5) EXEMPTIONS.—The Commission may ex11 empt, conditionally or unconditionally, a security12 based swap repository from the requirements of this 

13 section if the Commission finds that such security14 based swap repository is subject to comparable, com15 prehensive supervision or regulation on a consoli16 dated basis by the Commodity Futures Trading 

17 Commission, a Prudential Regulator or the appro18 priate governmental authorities in the organization’s 

19 home country or if necessary or appropriate in the 

20 public interest and consistent with the purpose of 

21 this Act.’’. 


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1 SEC. 3204. REGISTRATION AND REGULATION OF SWAP 

2 DEALERS AND MAJOR SWAP PARTICIPANTS. 

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

4 et seq.) is amended by inserting after section 15E (15 

5 U.S.C. 78o–7) the following: 

6 ‘‘SEC. 15F. REGISTRATION AND REGULATION OF SECURITY7 BASED SWAP DEALERS AND MAJOR SECU8 RITY-BASED SWAP PARTICIPANTS. 

9 ‘‘(a) REGISTRATION.— 

10 ‘‘(1) It shall be unlawful for any person to act 

11 as a security-based swap dealer unless such person 

12 is registered as a security-based swap dealer with 

13 the Commission. 

14 ‘‘(2) It shall be unlawful for any person to act 

15 as a major security-based swap participant unless 

16 such person is registered as a major security-based 

17 swap participant with the Commission. 

18 ‘‘(b) REQUIREMENTS.— 

19 ‘‘(1) IN GENERAL.—A person shall register as 

20 a security-based swap dealer or major security-based 

21 swap participant by filing a registration application 

22 with the Commission. 

23 ‘‘(2) CONTENTS.—The application shall be 

24 made in such form and manner as prescribed by the 

25 Commission, giving any information and facts as the 

26 Commission may deem necessary concerning the 


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1 business in which the applicant is or will be engaged. 

2 Such person, when registered as a security-based 

3 swap dealer or major security-based swap partici4 pant, shall continue to report and furnish to the 

5 Commission such information pertaining to such 

6 person’s business as the Commission may require. 

7 ‘‘(3) EXPIRATION.—Each registration shall ex8 pire at such time as the Commission may by rule or 

9 regulation prescribe. 

10 ‘‘(4) RULES.—Except as provided in sub11 sections (c) and (d), the Commission may prescribe 

12 rules applicable to security-based swap dealers and 

13 major security-based swap participants, including 

14 rules that limit the activities of security-based swap 

15 dealers and major security-based swap participants. 

16 Except as provided in subsection (d)(1)(A), the 

17 Commission may provide conditional or uncondi18 tional exemptions from some or all of the rules or 

19 requirements prescribed under this section for secu20 rity-based swap dealers and major security-based 

21 swap participants. 

22 ‘‘(5) TRANSITION.—Rules adopted under this 

23 section shall provide for the registration of security24 based swap dealers and major security-based swap 

25 participants no later than 1 year after the effective 


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1 date of the Derivative Markets Transparency and 

2 Accountability Act of 2009. 

3 ‘‘(c) RULES.— 

4 ‘‘(1) IN GENERAL.—Not later than 1 year after 

5 the date of the enactment of the Derivative Markets 

6 Transparency and Accountability Act of 2009, the 

7 Commission shall adopt rules for persons that are 

8 registered as security-based swap dealers or major 

9 security-based swap participants under this Act. 

10 ‘‘(2) EXCEPTION FOR PRUDENTIAL REQUIRE11 MENTS.—The Commission shall not prescribe rules 

12 imposing prudential requirements on security-based 

13 swap dealers or major security-based swap partici14 pants for which there is a Prudential Regulator. 

15 This provision shall not be construed as limiting the 

16 authority of the Commission to prescribe appropriate 

17 business conduct, reporting, and recordkeeping re18 quirements to protect investors. 

19 ‘‘(d) CAPITAL AND MARGIN REQUIREMENTS.— 

20 ‘‘(1) IN GENERAL.— 

21 ‘‘(A) BANK SECURITY-BASED SWAP DEAL22 ERS AND MAJOR SECURITY-BASED SWAP PAR23 TICIPANTS.—Each registered security-based 

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1 lator shall meet such minimum capital require2 ments and minimum initial and variation mar3 gin requirements as the Prudential Regulators 

4 shall by rule or regulation jointly prescribe 

5 that— 

6 ‘‘(i) help ensure the safety and sound7 ness of the security-based swap dealer or 

8 major security-based swap participant; and 

9 ‘‘(ii) are appropriate for the risk asso10 ciated with the non-cleared swaps held as 

11 a swap dealer or major swap participant. 

12 ‘‘(B) NON-BANK SECURITY-BASED SWAP

13 DEALERS AND MAJOR SECURITY-BASED SWAP

14 PARTICIPANTS.—Each registered security-based 

15 swap dealer and major security-based swap par16 ticipant for which there is not a Prudential 

17 Regulator shall meet such minimum capital re18 quirements and minimum initial and variation 

19 margin requirements as the Commission shall 

20 by rule or regulation prescribe that— 

21 ‘‘(i) help ensure the safety and sound22 ness of the security-based swap dealer or 

23 major security-based swap participant; and 


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1 ‘‘(ii) are appropriate for the risk asso2 ciated with the non-cleared swaps held as 

3 the swap dealer or major swap participant. 

4 ‘‘(2) RULES.— 

5 ‘‘(A) BANK SECURITY-BASED SWAP DEAL6 ERS AND MAJOR SECURITY-BASED SWAP PAR7 TICIPANTS.—Not later than 1 year after the 

8 date of the enactment of the Derivative Markets 

9 Transparency and Accountability Act of 2009, 

10 the Prudential Regulators, in consultation with 

11 the Commission, shall jointly adopt rules impos12 ing capital and margin requirements under this 

13 subsection for security-based swap dealers and 

14 major security-based swap participants, with re15 spect to their activities as a security-based swap 

16 dealer or major security-based swap participant 

17 for which there is a Prudential Regulator. 

18 ‘‘(B) NON-BANK SECURITY-BASED SWAP

19 DEALERS AND MAJOR SECURITY-BASED SWAP

20 PARTICIPANTS.—Not later than 1 year after the 

21 date of the enactment of the Derivative Markets 

22 Transparency and Accountability Act of 2009, 

23 the Commission shall adopt rules imposing cap24 ital and margin requirements under this sub25 section for security-based swap dealers and 


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1 major security-based swap participants for 

2 which there is no Prudential Regulator. 

3 ‘‘(3) AUTHORITY.—Nothing in this section shall 

4 limit the authority of the Commission to set capital 

5 requirements for a broker or dealer registered in ac6 cordance with section 15 of this Act. 

7 ‘‘(e) REPORTING AND RECORDKEEPING.— 

8 ‘‘(1) IN GENERAL.—Each registered security9 based swap dealer and major security-based swap 

10 participant— 

11 ‘‘(A) shall make such reports as are pre12 scribed by the Commission by rule or regulation 

13 regarding the transactions and positions and fi14 nancial condition of such person; 

15 ‘‘(B) for which— 

16 ‘‘(i) there is a Prudential Regulator 

17 shall keep books and records of all activi18 ties related to its business as a security19 based swap dealer or major security-based 

20 swap participant in such form and manner 

21 and for such period as may be prescribed 

22 by the Commission by rule or regulation; 

23 ‘‘(ii) there is no Prudential Regulator 

24 shall keep books and records in such form 

25 and manner and for such period as may be 


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1 prescribed by the Commission by rule or 

2 regulation; and 

3 ‘‘(C) shall keep such books and records 

4 open to inspection and examination by any rep5 resentative of the Commission. 

6 ‘‘(2) RULES.—Not later than 1 year after the 

7 date of enactment of the Derivative Markets Trans8 parency and Accountability Act of 2009, the Com9 mission shall adopt rules governing reporting and 

10 recordkeeping for security-based swap dealers and 

11 major security-based swap participants. 

12 ‘‘(f) DAILY TRADING RECORDS.— 

13 ‘‘(1) IN GENERAL.—Each registered security14 based swap dealer and major security-based swap 

15 participant shall maintain daily trading records of 

16 its security-based swaps and all related records (in17 cluding related transactions) and recorded commu18 nications including but not limited to electronic mail, 

19 instant messages, and recordings of telephone calls, 

20 for such period as may be prescribed by the Com21 mission by rule or regulation. 

22 ‘‘(2) INFORMATION REQUIREMENTS.—The daily 

23 trading records shall include such information as the 

24 Commission shall prescribe by rule or regulation. 


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1 ‘‘(3) CUSTOMER RECORDS.—Each registered se2 curity-based swap dealer or major security-based 

3 swap participant shall maintain daily trading records 

4 for each customer or counterparty in such manner 

5 and form as to be identifiable with each security6 based swap transaction. 

7 ‘‘(4) AUDIT TRAIL.—Each registered security8 based swap dealer or major security-based swap par9 ticipant shall maintain a complete audit trail for 

10 conducting comprehensive and accurate trade recon11 structions. 

12 ‘‘(5) RULES.—Not later than 1 year after the 

13 date of the enactment of the Derivative Markets 

14 Transparency and Accountability Act of 2009, the 

15 Commission shall adopt rules governing daily trad16 ing records for security-based swap dealers and 

17 major security-based swap participants. 

18 ‘‘(g) BUSINESS CONDUCT STANDARDS.— 

19 ‘‘(1) IN GENERAL.—Each registered security20 based swap dealer and major security-based swap 

21 participant shall conform with business conduct 

22 standards as may be prescribed by the Commission 

23 by rule or regulation addressing— 

24 ‘‘(A) fraud, manipulation, and other abu25 sive practices involving security-based swaps 


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1 (including security-based swaps that are offered 

2 but not entered into); 

3 ‘‘(B) diligent supervision of its business as 

4 a security-based swap dealer; 

5 ‘‘(C) adherence to all applicable position 

6 limits; and 

7 ‘‘(D) such other matters as the Commis8 sion shall determine to be necessary or appro9 priate. 

10 ‘‘(2) BUSINESS CONDUCT REQUIREMENTS.— 

11 Business conduct requirements adopted by the Com12 mission shall— 

13 ‘‘(A) establish the standard of care for a 

14 security-based swap dealer or major security15 based swap participant to verify that any secu16 rity-based swap counterparty meets the eligi17 bility standards for an eligible contract partici18 pant; 

19 ‘‘(B) require disclosure by the security20 based swap dealer or major security-based swap 

21 participant to any counterparty to the security22 based swap (other than a security-based swap 

23 dealer or major security-based swap partici24 pant) of: 


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1 ‘‘(i) information about the material 

2 risks and characteristics of the security3 based swap; 

4 ‘‘(ii) for cleared security-based swaps, 

5 upon the request of the counterparty, the 

6 daily mark from the appropriate clearing 

7 agency, and for non-cleared security-based 

8 swaps, upon request of the counterparty, 

9 the daily mark of the security-based swap 

10 dealer or major security-based swap partic11 ipant; and 

12 ‘‘(iii) any other material incentives or 

13 conflicts of interest that the security-based 

14 swap dealer or major security-based swap 

15 participant may have in connection with 

16 the security-based swap; and 

17 ‘‘(C) establish such other standards and 

18 requirements as the Commission may determine 

19 are necessary or appropriate in the public inter20 est, for the protection of investors, or otherwise 

21 in furtherance of the purposes of this title. 

22 ‘‘(3) RULES.—The Commission shall prescribe 

23 rules under this subsection governing business con24 duct standards for security-based swap dealers and 

25 major security-based swap participants not later 


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1 than 1 year after the date of enactment of the De2 rivative Markets Transparency and Accountability 

3 Act of 2009. 

4 ‘‘(h) DOCUMENTATION STANDARDS.— 

5 ‘‘(1) IN GENERAL.—Each registered security6 based swap dealer and major security-based swap 

7 participant shall conform with standards, as may be 

8 prescribed by the Commission by rule or regulation, 

9 addressing timely and accurate confirmation, proc10 essing, netting, documentation, and valuation of all 

11 security-based swaps. 

12 ‘‘(2) RULES.—Not later than 1 year after the 

13 date of enactment of the Derivative Markets Trans14 parency and Accountability Act of 2009, the Com15 mission and the appropriate Federal banking agen16 cies, shall adopt rules governing the standards de17 scribed in paragraph (1) for security-based swap 

18 dealers and major security-based swap participants. 

19 ‘‘(i) DEALER RESPONSIBILITIES.—Each registered 

20 security-based swap dealer and major security-based swap 

21 participant at all times shall comply with the following re22 quirements: 

23 ‘‘(1) MONITORING OF TRADING.—The security24 based swap dealer or major security-based swap par25 ticipant shall monitor its trading in security-based 


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1 swaps to prevent violations of applicable position 

2 limits. 

3 ‘‘(2) DISCLOSURE OF GENERAL INFORMA4 TION.—The security-based swap dealer or major se5 curity-based swap participant shall disclose to the 

6 Commission or to the Prudential Regulator for such 

7 security-based swap dealer or major security-based 

8 swap participant, as applicable, information con9 cerning— 

10 ‘‘(A) terms and conditions of its security11 based swaps; 

12 ‘‘(B) security-based swap trading oper13 ations, mechanisms, and practices; 

14 ‘‘(C) financial integrity protections relating 

15 to security-based swaps; and 

16 ‘‘(D) other information relevant to its trad17 ing in security-based swaps. 

18 ‘‘(3) ABILITY TO OBTAIN INFORMATION.—The 

19 security-based swap dealer or major swap security20 based participant shall— 

21 ‘‘(A) establish and enforce internal systems 

22 and procedures to obtain any necessary infor23 mation to perform any of the functions de24 scribed in this section; and 


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1 ‘‘(B) provide the information to the Com2 mission or to the Prudential Regulator for such 

3 security-based swap dealer or major security4 based swap participant, as applicable, upon re5 quest. 

6 ‘‘(4) CONFLICTS OF INTEREST.—The security7 based swap dealer and major security-based swap 

8 participant shall implement conflict-of-interest sys9 tems and procedures that— 

10 ‘‘(A) establish structural and institutional 

11 safeguards to assure that the activities of any 

12 person within the firm relating to research or 

13 analysis of the price or market for any security 

14 are separated by appropriate informational par15 titions within the firm from the review, pres16 sure, or oversight of those whose involvement in 

17 trading or clearing activities might potentially 

18 bias their judgment or supervision; and 

19 ‘‘(B) address such other issues as the 

20 Commission determines appropriate. 

21 ‘‘(j) STATUTORY DISQUALIFICATION.—Except to the 

22 extent otherwise specifically provided by rule, regulation, 

23 or order of the Commission, it shall be unlawful for a secu24 rity-based swap dealer or a major security-based swap par25 ticipant to permit any person associated with a securityVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00761 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 based swap dealer or a major security-based swap partici2 pant who is subject to a statutory disqualification to effect 

3 or be involved in effecting security-based swaps on behalf 

4 of such security-based swap dealer or major security-based 

5 swap participant, if such security-based swap dealer or 

6 major security-based swap participant knew, or in the ex7 ercise of reasonable care should have known, of such stat8 utory disqualification. 

9 ‘‘(k) ENFORCEMENT AND ADMINISTRATIVE PRO10 CEEDING AUTHORITY.— 

11 ‘‘(1) PRIMARY ENFORCEMENT AUTHORITY.— 

12 ‘‘(A) SEC.—Except as provided in sub13 paragraph (B), the Commission shall have ex14 clusive authority to enforce the amendments 

15 made by subtitle B of the Derivative Markets 

16 Transparency and Accountability Act of 2009 

17 with respect to any person. 

18 ‘‘(B) PRUDENTIAL REGULATORS.—The 

19 Prudential Regulators shall have exclusive au20 thority to enforce the provisions of section 

21 15F(d) and other prudential requirements of 

22 this Act with respect to banks, and branches or 

23 agencies of foreign banks that are security24 based swap dealers or major security-based 

25 swap participants. 


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1 ‘‘(C) REFERRAL.— 

2 ‘‘(i) VIOLATIONS OF NONPRUDENTIAL

3 REQUIREMENTS.—If the Prudential Regu4 lator for a security-based swap dealer or 

5 major security-based swap participant has 

6 cause to believe that such security-based 

7 swap dealer or major security-based swap 

8 participant may have engaged in conduct 

9 that constitutes a violation of the non10 prudential requirements of section 15F or 

11 rules adopted by the Commission there12 under, that Prudential Regulator may rec13 ommend in writing to the Commission that 

14 the Commission initiate an enforcement 

15 proceeding as authorized under this Act. 

16 The recommendation shall be accompanied 

17 by a written explanation of the concerns 

18 giving rise to the recommendation. 

19 ‘‘(ii) VIOLATIONS OF PRUDENTIAL RE20 QUIREMENTS.—If the Commission has 

21 cause to believe that a securities-based 

22 swap dealer or major securities-based swap 

23 participant that has a Prudential Regu24 lator may have engaged in conduct that 

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1 quirements of section 15F(e) or rules 

2 adopted thereunder, the Commission may 

3 recommend in writing to the Prudential 

4 Regulator that the Prudential Regulator 

5 initiate an enforcement proceeding as au6 thorized under this Act. The recommenda7 tion shall be accompanied by a written ex8 planation of the concerns giving rise to the 

9 recommendation. 

10 ‘‘(2) CENSURE, DENIAL, SUSPENSION; NOTICE

11 AND HEARING.—The Commission, by order, shall 

12 censure, place limitations on the activities, functions, 

13 or operations of, or revoke the registration of any se14 curity-based swap dealer or major security-based 

15 swap participant that has registered with the Com16 mission pursuant to subsection (b) if it finds, on the 

17 record after notice and opportunity for hearing, that 

18 such censure, placing of limitations, or revocation is 

19 in the public interest and that such security-based 

20 swap dealer or major security-based swap partici21 pant, or any person associated with such security22 based swap dealer or major security-based swap par23 ticipant effecting or involved in effecting trans24 actions in security-based swaps on behalf of such se25 curity-based swap dealer or major security-based 


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1 swap participant, whether prior or subsequent to be2 coming so associated— 

3 ‘‘(A) has committed or omitted any act, or 

4 is subject to an order or finding, enumerated in 

5 subparagraph (A), (D), or (E) of paragraph (4) 

6 of section 15(b); 

7 ‘‘(B) has been convicted of any offense 

8 specified in subparagraph (B) of such para9 graph (4) within 10 years of the commencement 

10 of the proceedings under this subsection; 

11 ‘‘(C) is enjoined from any action, conduct, 

12 or practice specified in subparagraph (C) of 

13 such paragraph (4); 

14 ‘‘(D) is subject to an order or a final order 

15 specified in subparagraph (F) or (H), respec16 tively, of such paragraph (4); or 

17 ‘‘(E) has been found by a foreign financial 

18 regulatory authority to have committed or omit19 ted any act, or violated any foreign statute or 

20 regulation, enumerated in subparagraph (G) of 

21 such paragraph (4). 

22 ‘‘(3) ASSOCIATED PERSONS.—With respect to 

23 any person who is associated, who is seeking to be24 come associated, or, at the time of the alleged mis25 conduct, who was associated or was seeking to beVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00765 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 come associated with a security-based swap dealer or 

2 major security-based swap participant for the pur3 pose of effecting or being involved in effecting secu4 rity-based swaps on behalf of such security-based 

5 swap dealer or major security-based swap partici6 pant, the Commission, by order, shall censure, place 

7 limitations on the activities or functions of such per8 son, or suspend for a period not exceeding 12 

9 months, or bar such person from being associated 

10 with a security-based swap dealer or major security11 based swap participant, if the Commission finds, on 

12 the record after notice and opportunity for a hear13 ing, that such censure, placing of limitations, sus14 pension, or bar is in the public interest and that 

15 such person— 

16 ‘‘(A) has committed or omitted any act, or 

17 is subject to an order or finding, enumerated in 

18 subparagraph (A), (D), or (E) of paragraph (4) 

19 of section 15(b); 

20 ‘‘(B) has been convicted of any offense 

21 specified in subparagraph (B) of such para22 graph (4) within 10 years of the commencement 

23 of the proceedings under this subsection; 


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1 ‘‘(C) is enjoined from any action, conduct, 

2 or practice specified in subparagraph (C) of 

3 such paragraph (4); 

4 ‘‘(D) is subject to an order or a final order 

5 specified in subparagraph (F) or (H), respec6 tively, of such paragraph (4); or 

7 ‘‘(E) has been found by a foreign financial 

8 regulatory authority to have committed or omit9 ted any act, or violated any foreign statute or 

10 regulation, enumerated in subparagraph (G) of 

11 such paragraph (4). 

12 ‘‘(4) UNLAWFUL CONDUCT.—It shall be unlaw13 ful— 

14 ‘‘(A) for any person as to whom an order 

15 under paragraph (3) is in effect, without the 

16 consent of the Commission, willfully to become, 

17 or to be, associated with a security-based swap 

18 dealer or major security-based swap participant 

19 in contravention of such order; or 

20 ‘‘(B) for any security-based swap dealer or 

21 major security-based swap participant to permit 

22 such a person, without the consent of the Com23 mission, to become or remain a person associ24 ated with the security-based swap dealer or 

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1 travention of such order, if such security-based 

2 swap dealer or major security-based swap par3 ticipant knew, or in the exercise of reasonable 

4 care should have known, of such order.’’. 

5 SEC. 3205. REPORTING AND RECORDKEEPING. 

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

7 78a et seq.) is amended by inserting after section 13 the 

8 following section: 

9 ‘‘SEC. 13A. REPORTING AND RECORDKEEPING FOR CER10 TAIN SECURITY-BASED SWAPS. 

11 ‘‘(a) IN GENERAL.—Any person who enters into a se12 curity-based swap and— 

13 ‘‘(1) did not clear the security-based swap in 

14 accordance with section 3A; and 

15 ‘‘(2) did not have data regarding the security16 based swap accepted by a security-based swap repos17 itory in accordance with rules adopted by the Com18 mission under section 13(n), 

19 shall meet the requirements in subsection (b). 

20 ‘‘(b) REPORTS.—Any person described in subsection 

21 (a) shall— 

22 ‘‘(1) make such reports in such form and man23 ner and for such period as the Commission shall pre24 scribe by rule or regulation regarding the security25 based swaps held by the person; and 


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1 ‘‘(2) keep books and records pertaining to the 

2 security-based swaps held by the person in such 

3 form and manner and for such period as may be re4 quired by the Commission, which books and records 

5 shall be open to inspection by any representative of 

6 the Commission, an appropriate Federal banking 

7 agency, the Commodity Futures Trading Commis8 sion, the Financial Services Oversight Council, and 

9 the Department of Justice. 

10 ‘‘(c) IDENTICAL DATA.—In adopting rules under this 

11 section, the Commission shall require persons described in 

12 subsection (a) to report the same or more comprehensive 

13 data than the Commission requires security-based swap 

14 repositories to collect under subsection (n).’’. 

15 (b) BENEFICIAL OWNERSHIP REPORTING.— 

16 (1) Section 13(d)(1) of the Securities Exchange 

17 Act of 1934 (15 U.S.C. 78m(d)(1)) is amended by 

18 inserting ‘‘or otherwise becomes or is deemed to be19 come a beneficial owner of any of the foregoing upon 

20 the purchase or sale of a security-based swap or 

21 other derivative instrument that the Commission 

22 may define by rule, and’’ after ‘‘Alaska Native 

23 Claims Settlement Act,’’; and 

24 (2) Section 13(g)(1) of the Securities Exchange 

25 Act of 1934 (15 U.S.C. 78m(g)(1)) is amended by 


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1 inserting ‘‘or otherwise becomes or is deemed to be2 come a beneficial owner of any security of a class de3 scribed in subsection (d)(1) upon the purchase or 

4 sale of a security-based swap or other derivative in5 strument that the Commission may define by rule’’ 

6 after ‘‘subsection (d)(1) of this section’’. 

7 (c) REPORTS BY INSTITUTIONAL INVESTMENT MAN8 AGERS.—Section 13(f)(1) of the Securities Exchange Act 

9 of 1934 (15 U.S.C. 78m(f)(1)) is amended by inserting 

10 ‘‘or otherwise becomes or is deemed to become a beneficial 

11 owner of any security of a class described in subsection 

12 (d)(1) upon the purchase or sale of a security-based swap 

13 or other derivative instrument that the Commission may 

14 define by rule,’’ after ‘‘subsection (d)(1) of this section’’. 

15 (d) ADMINISTRATIVE PROCEEDING AUTHORITY.— 

16 Section 15(b)(4) of the Securities Exchange Act of 1934 

17 (15 U.S.C. 78o(b)(4)) is amended— 

18 (1) in subparagraph (C), by adding ‘‘security19 based swap dealer, major security-based swap partic20 ipant,’’ after ‘‘government securities dealer,’’; and 

21 (2) in subparagraph (F), by adding ‘‘, or secu22 rity-based swap dealer, or a major security-based 

23 swap participant’’ after ‘‘or dealer’’. 


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1 (e) DERIVATIVES BENEFICIAL OWNERSHIP.—Section 

2 13 of the Securities Exchange Act of 1934 (15 U.S.C. 

3 78m) is amended by adding at the end the following: 

4 ‘‘(o) BENEFICIAL OWNERSHIP.—For purposes of this 

5 section and section 16, a person shall be deemed to acquire 

6 beneficial ownership of an equity security based on the 

7 purchase or sale of a security-based swap or other deriva8 tive instrument only to the extent that the Commission, 

9 by rule, determines after consultation with the Prudential 

10 Regulators and the Secretary of the Treasury, that the 

11 purchase or sale of the security-based swap or other deriv12 ative instrument, or class of security-based swaps or other 

13 derivative instruments, provides incidents of ownership 

14 comparable to direct ownership of the equity security, and 

15 that it is necessary to achieve the purposes of this section 

16 that the purchase or sale of the security-based swaps or 

17 instrument, or class of security-based swap or instru18 ments, be deemed the acquisition of beneficial ownership 

19 of the equity security.’’. 

20 SEC. 3206. STATE GAMING AND BUCKET SHOP LAWS. 

21 Section 28(a) of the Securities Exchange Act of 1934 

22 (15 U.S.C. 78bb(a)) is amended to read as follows: 

23 ‘‘(a) Except as provided in subsection (f), the rights 

24 and remedies provided by this title shall be in addition 

25 to any and all other rights and remedies that may exist 


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1 at law or in equity; but no person permitted to maintain 

2 a suit for damages under the provisions of this title shall 

3 recover, through satisfaction of judgment in one or more 

4 actions, a total amount in excess of his actual damages 

5 on account of the act complained of. Except as otherwise 

6 specifically provided in this title, nothing in this title shall 

7 affect the jurisdiction of the securities commission (or any 

8 agency or officer performing like functions) of any State 

9 over any security or any person insofar as it does not con10 flict with the provisions of this title or the rules and regu11 lations thereunder. No State law which prohibits or regu12 lates the making or promoting of wagering or gaming con13 tracts, or the operation of ‘bucket shops’ or other similar 

14 or related activities, shall invalidate (1) any put, call, 

15 straddle, option, privilege, or other security subject to this 

16 title (except any security that has a pari-mutuel payout 

17 or otherwise is determined by the Commission, acting by 

18 rule, regulation, or order, to be appropriately subject to 

19 such laws), or apply to any activity which is incidental or 

20 related to the offer, purchase, sale, exercise, settlement, 

21 or closeout of any such security, (2) any security-based 

22 swap between eligible contract participants, or (3) any se23 curity-based swap effected on a national securities ex24 change registered pursuant to section 6(b). No provision 

25 of State law regarding the offer, sale, or distribution of 


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1 securities shall apply to any transaction in a security2 based swap or a security futures product, except that this 

3 sentence shall not be construed as limiting any State anti4 fraud law of general applicability. A security-based swap 

5 may not be regulated as an insurance contract under State 

6 law.’’. 

7 SEC. 3207. AMENDMENTS TO THE SECURITIES ACT OF 1933; 

8 TREATMENT OF SECURITY-BASED SWAPS. 

9 (a) DEFINITIONS.—Section 2(a) of the Securities Act 

10 of 1933 (15 U.S.C. 77b(a)) is amended— 

11 (1) in paragraph (1), by inserting ‘‘security12 based swap,’’ after ‘‘security future,’’; 

13 (2) in paragraph (3) by adding at the end the 

14 following: ‘‘Any offer or sale of a security-based 

15 swap by or on behalf of the issuer of the securities 

16 upon which such security-based swap is based or is 

17 referenced, an affiliate of the issuer, or an under18 writer, shall constitute a contract for sale of, sale of, 

19 offer for sale, or offer to sell such securities.’’; and 

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

21 ‘‘(17) The terms ‘swap’ and ‘security-based 

22 swap’ have the same meanings as provided in sec23 tions 1a(35) of the Commodity Exchange Act (7 

24 U.S.C. 1a(35)) and section 3(a)(68) of the Securi25 ties Exchange Act of 1934. 


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1 ‘‘(18) The terms ‘purchase’ or ‘sale’ of a secu2 rity-based swap shall be deemed to mean the execu3 tion, termination (prior to its scheduled maturity 

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

5 conveyance of, or extinguishing of rights or obliga6 tions under, a security-based swap, as the context 

7 may require.’’. 

8 (b) EXEMPTION FROM REGISTRATION.—Section 3(a) 

9 of the Securities Act of 1933 is amended by adding at 

10 the end the following: 

11 ‘‘(15) Any security-based swap, as defined in 

12 section 2(a)(17) that is not otherwise a security as 

13 defined in section 2(a)(1) and that satisfies such 

14 conditions as established by rule or regulation by the 

15 Commission consistent with the provisions of the 

16 Derivative Markets Transparency and Accountability 

17 Act of 2009. The Commission shall promulgate rules 

18 implementing this exemption.’’. 

19 (c) REGISTRATION OF SECURITY-BASED SWAPS.— 

20 Section 5 of the Securities Act of 1933 (15 U.S.C. 77e) 

21 is amended by adding at the end the following: 

22 ‘‘(d) Notwithstanding the provisions of section 3 or 

23 section 4, unless a registration statement meeting the re24 quirements of subsection (a) of section 10 is in effect as 

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1 son, directly or indirectly, to make use of any means or 

2 instruments of transportation or communication in inter3 state commerce or of the mails to offer to sell, offer to 

4 buy or purchase or sell a security-based swap to any per5 son who is not an eligible contract participant as defined 

6 in section 1a(12) of the Commodity Exchange Act (7 

7 U.S.C. 1a(12)).’’. 

8 SEC. 3208. OTHER AUTHORITY. 

9 Unless otherwise provided by its terms, this subtitle 

10 does not divest any appropriate Federal banking agency, 

11 the Commission, the Commodity Futures Trading Com12 mission, or other Federal or State agency, of any authority 

13 derived from any other applicable law. 

14 SEC. 3209. JURISDICTION. 

15 (a) Section 36 of the Securities Exchange Act of 

16 1934 (15 U.S.C. 78mm) is amended by adding at the end 

17 the following new subsection: 

18 ‘‘(c) DERIVATIVES.—The Commission shall not grant 

19 exemptions from the security-based swap provisions of the 

20 Derivative Markets Transparency and Accountability Act 

21 of 2009, except as expressly authorized under the provi22 sions of that Act.’’. 

23 (b) Section 30 of the Securities Exchange Act of 

24 1934 is amended by adding at the end the following: 


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1 ‘‘(c) No provision of this Act that was added by the 

2 Derivative Markets Transparency and Accountability Act 

3 of 2009 or any rule or regulation thereunder shall apply 

4 to any person insofar as such person transacts a business 

5 in security-based swaps without the jurisdiction of the 

6 United States unless he transacts such business in con7 travention of such rules and regulations as the Commis8 sion may prescribe as necessary or appropriate to prevent 

9 the evasion of any provision of this Act that was added 

10 by the Derivative Markets Transparency and Account11 ability Act of 2009. This subsection shall not be construed 

12 to limit the jurisdiction of the Commission under any pro13 vision of this Act as in effect prior to enactment of the 

14 Derivative Markets Transparency and Accountability Act 

15 of 2009.’’. 

16 SEC. 3210. EFFECTIVE DATE. 

17 (a) Unless otherwise provided, the provisions of this 

18 subtitle shall become effective the later of 270 days after 

19 the date of the enactment of this subtitle or, to the extent 

20 a provision of this subtitle requires rulemaking, no less 

21 than 60 days after publication of a final rule or regulation 

22 implementing such provision of this subtitle. 

23 (b) Subsection (a) shall not preclude the Securities 

24 Exchange Commission from any rulemaking required to 

25 implement the provisions of this subtitle. 


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1 Subtitle C—Improved Financial 

2 and Commodity Markets Over3 sight and Accountability 

4 SEC. 3301. ELEVATION OF CERTAIN INSPECTORS GENERAL 

5 TO APPOINTMENT PURSUANT TO SECTION 3 

6 OF THE INSPECTOR GENERAL ACT OF 1978. 

7 (a) INCLUSION IN CERTAIN DEFINITIONS.—Section 

8 12 of the Inspector General Act of 1978 (5 U.S.C. App.) 

9 is amended— 

10 (1) in paragraph (1), by striking ‘‘or the Fed11 eral Cochairpersons of the Commissions established 

12 under section 15301 of title 40, United States 

13 Code;’’ and inserting ‘‘the Federal Cochairpersons of 

14 the Commissions established under section 15301 of 

15 title 40, United States Code; the Chairman of the 

16 Board of Governors of the Federal Reserve System; 

17 the Chairman of the Commodity Futures Trading 

18 Commission; the Chairman of the National Credit 

19 Union Administration; the Director of the Pension 

20 Benefit Guaranty Corporation; the Chairman of the 

21 Securities and Exchange Commission; or the Direc22 tor of the Consumer Financial Protection Agency;’’; 

23 and 

24 (2) in paragraph (2), by striking ‘‘or the Com25 missions established under section 15301 of title 40, 


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1 United States Code,’’ and inserting ‘‘the Commis2 sions established under section 15301 of title 40, 

3 United States Code, the Board of Governors of the 

4 Federal Reserve System, the Commodity Futures 

5 Trading Commission, the National Credit Union Ad6 ministration, the Pension Benefit Guaranty Corpora7 tion, the Securities and Exchange Commission, or 

8 the Director of the Consumer Financial Protection 

9 Agency,’’. 

10 (b) EXCLUSION FROM DEFINITION OF DESIGNATED

11 FEDERAL ENTITY.—Section 8G(a)(2) of the Inspector 

12 General Act of 1978 (5 U.S.C. App.) is amended— 

13 (1) by striking ‘‘the Board of Governors of the 

14 Federal Reserve System,’’; 

15 (2) by striking ‘‘the Commodity Futures Trad16 ing Commission,’’; 

17 (3) by striking ‘‘the National Credit Union Ad18 ministration,’’; and 

19 (4) by striking ‘‘the Pension Benefit Guaranty 

20 Corporation, the Securities and Exchange Commis21 sion,’’. 


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1 SEC. 3302. CONTINUATION OF PROVISIONS RELATING TO 

2 PERSONNEL. 

3 (a) IN GENERAL.—The Inspector General Act of 

4 1978 (5 U.S.C. App.) is amended by inserting after sec5 tion 8L the following: 

6 ‘‘SEC. 8M. SPECIAL PROVISIONS CONCERNING CERTAIN ES7 TABLISHMENTS. 

8 ‘‘(a) DEFINITION.—For purposes of this section, the 

9 term ‘covered establishment’ means the Board of Gov10 ernors of the Federal Reserve System, the Commodity Fu11 tures Trading Commission, the National Credit Union Ad12 ministration, the Pension Benefit Guaranty Corporation, 

13 and the Securities and Exchange Commission. 

14 ‘‘(b) PROVISIONS RELATING TO ALL COVERED ES15 TABLISHMENTS.— 

16 ‘‘(1) PROVISIONS RELATING TO INSPECTORS

17 GENERAL.—In the case of the Inspector General of 

18 a covered establishment, subsections (b) and (c) of 

19 section 4 of the Inspector General Reform Act of 

20 2008 (Public Law 110–409) shall apply in the same 

21 manner as if such covered establishment were a des22 ignated Federal entity under section 8G. An Inspec23 tor General who is subject to the preceding sentence 

24 shall not be subject to section 3(e). 

25 ‘‘(2) PROVISIONS RELATING TO OTHER PER26 SONNEL.—Notwithstanding paragraphs (7) and (8) 


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1 of section 6(a), the Inspector General of a covered 

2 establishment may select, appoint, and employ such 

3 officers and employees as may be necessary for car4 rying out the functions, powers, and duties of the 

5 Office of Inspector General of such establishment 

6 and to obtain the temporary or intermittent services 

7 of experts or consultants or an organization of ex8 perts or consultants, subject to the applicable laws 

9 and regulations that govern such selections, appoint10 ments, and employment, and the obtaining of such 

11 services, within such establishment. 

12 ‘‘(c) PROVISION RELATING TO THE BOARD OF GOV13 ERNORS OF THE FEDERAL RESERVE SYSTEM.—The pro14 visions of subsection (a) of section 8D (other than the pro15 visions of subparagraphs (A), (B), (C), and (E) of para16 graph (1) of such subsection (a)) shall apply to the Inspec17 tor General of the Board of Governors of the Federal Re18 serve System and the Chairman of the Board of Governors 

19 of the Federal Reserve System in the same manner as 

20 such provisions apply to the Inspector General of the De21 partment of the Treasury and the Secretary of the Treas22 ury, respectively.’’. 

23 (b) CONFORMING AMENDMENT.—Paragraph (3) of 

24 section 8G(g) of the Inspector General Act of 1978 (5 

25 U.S.C. App.) is repealed. 


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1 SEC. 3303. CORRECTIVE RESPONSES BY HEADS OF CER2 TAIN ESTABLISHMENTS TO DEFICIENCIES 

3 IDENTIFIED BY INSPECTORS GENERAL. 

4 The Chairman of the Board of Governors of the Fed5 eral Reserve System, the Chairman of the Commodity Fu6 tures Trading Commission, the Chairman of the National 

7 Credit Union Administration, the Director of the Pension 

8 Benefit Guaranty Corporation, and the Chairman of the 

9 Securities and Exchange Commission shall each— 

10 (1) take action to address deficiencies identified 

11 by a report or investigation of the Inspector General 

12 of the establishment concerned; or 

13 (2) certify to both Houses of Congress that no 

14 action is necessary or appropriate in connection with 

15 a deficiency described in paragraph (1). 

16 SEC. 3304. EFFECTIVE DATE; TRANSITION RULE. 

17 (a) EFFECTIVE DATE.—This subtitle and the amend18 ments made by this subtitle shall take effect 30 days after 

19 the date of the enactment of this subtitle. 

20 (b) TRANSITION RULE.—An individual serving as In21 spector General of the Board of Governors of the Federal 

22 Reserve System, the Commodity Futures Trading Com23 mission, the National Credit Union Administration, the 

24 Pension Benefit Guaranty Corporation, or the Securities 

25 and Exchange Commission on the effective date of this 

26 subtitle pursuant to an appointment made under section 


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1 8G of the Inspector General Act of 1978 (5 U.S.C. 

2 App.)— 

3 (1) may continue so serving until the President 

4 makes an appointment under section 3(a) of such 

5 Act with respect to the Board of Governors of the 

6 Federal Reserve System, the Commodity Futures 

7 Trading Commission, the National Credit Union Ad8 ministration, the Pension Benefit Guaranty Corpora9 tion, or the Securities and Exchange Commission, as 

10 the case may be, consistent with the amendments 

11 made by section 301; and 

12 (2) shall, while serving under paragraph (1), re13 main subject to the provisions of section 8G of such 

14 Act which, immediately before the effective date of 

15 this subtitle, applied with respect to the Inspector 

16 General of the Board of Governors of the Federal 

17 Reserve System, the Commodity Futures Trading 

18 Commission, the National Credit Union Administra19 tion, the Pension Benefit Guaranty Corporation, or 

20 the Securities and Exchange Commission, as the 

21 case may be, and suffer no reduction in pay. 


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1 SEC. 3305. AUTHORITY OF THE COMMODITY FUTURES 

2 TRADING COMMISSION TO DEFINE ‘‘COMMER3 CIAL RISK’’, ‘‘OPERATING RISK’’, AND ‘‘BAL4 ANCE SHEET RISK’’. 

5 (a) IN GENERAL.—Section 1a of the Commodity Ex6 change Act (7 U.S.C. 1a), as amended by the preceding 

7 provisions of this Act, is amended by adding at the end 

8 the following: 

9 ‘‘(51) COMMERCIAL RISK; OPERATING RISK; 

10 BALANCE SHEET RISK.—The terms ‘commercial 

11 risk’, ‘operating risk’, and ‘balance sheet risk’ shall 

12 have such meanings as the Commission may pre13 scribe.’’. 

14 (b) EFFECTIVE DATE.—The amendment made by 

15 subsection (a) shall take effect as if included in subtitle 

16 A. 

17 SEC. 3306. CONFLICTS OF INTEREST IN CLEARING ORGANI18 ZATIONS. 

19 (a) COMMODITY EXCHANGE ACT.— 

20 (1) DEFINITION OF RESTRICTED OWNER.—Sec21 tion 1a of the Commodity Exchange Act (7 U.S.C. 

22 1a) (as amended by the preceding provisions of this 

23 Act) is further amended by adding at the end the 

24 following: 

25 ‘‘(51) RESTRICTED OWNER.—The term ‘re26 stricted owner’ means any swap dealer, securityVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00783 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 based swap dealer, major swap participant, or major 

2 security-based swap participant, that is an identified 

3 financial holding company as defined in Section 

4 1000(b)(5) of the Financial Stability Improvement 

5 Act of 2009, or a person associated with a swap 

6 dealer or a major swap participant that is an identi7 fied financial holding company, or a person associ8 ated with a security-based swap dealer or major se9 curity-based swap participant that is an identified fi10 nancial holding company.’’. 

11 (2) CONFLICTS OF INTEREST.— 

12 (A) Subparagraph (P) of section 5b(c)(2) 

13 of the Commodity Exchange Act (as added by 

14 the preceding provisions of this Act) is amended 

15 by adding at the end of such subparagraph the 

16 following: ‘‘The rules of the derivatives clearing 

17 organization that clears swaps shall provide 

18 that a restricted owner shall not be permitted 

19 directly or indirectly to acquire beneficial own20 ership of interests in the organization or in per21 sons with a controlling interest in the organiza22 tion, to the extent that such an acquisition 

23 would result in restricted owners being entitled 

24 to vote, cause the voting of, or cause the with25 holding of votes of, more than 20 percent of the 


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1 votes entitled to be cast on any matter by the 

2 holders of the ownership interests. The rules of 

3 the derivatives clearing organization shall pro4 vide that a majority of the directors of the or5 ganization shall not be associated with a re6 stricted owner. This subparagraph shall not be 

7 construed to require divestiture of any interest 

8 of a restricted owner in an established and 

9 operational derivatives clearing organization ac10 quired prior to January 1, 2010, provided that 

11 acquisitions by such restricted owner after such 

12 date shall be subject to this subparagraph. The 

13 Commission may determine whether any acqui14 sition by a restricted owner during any interim 

15 period prior to the date of the enactment of this 

16 Act has been made for the purpose of avoiding 

17 the effect of this subparagraph.’’. 

18 (B) Section 4s(g)(1) of the Commodity Ex19 change Act (as added by the preceding provi20 sions of this Act) is amended— 

21 (i) by striking ‘‘and’’ at the end of 

22 subparagraph (C); and 

23 (ii) by redesignating subparagraph 

24 (D) as subparagraph (E) and insert after 

25 subparagraph (C) the following: 


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1 ‘‘(D) the prevention of self-dealing, by lim2 iting the extent to which such a swap dealer or 

3 major swap participant may conduct business 

4 with a derivatives clearing organization, a board 

5 of trade, or an alternative swap execution facil6 ity that clears or trades swaps and in which 

7 such a swap dealer or major swap participant 

8 has a material debt or equity investment; and’’. 

9 (C) Paragraph (12) of section 5h(d) of the 

10 Commodity Exchange Act (as added by the pre11 ceding provisions of this Act) is amended by 

12 adding at the end the following new subpara13 graph: 

14 ‘‘(C) The rules of the swap execution facil15 ity shall provide that a restricted owner shall 

16 not be permitted directly or indirectly to ac17 quire beneficial ownership of interests in the fa18 cility or in persons with a controlling interest in 

19 the facility, to the extent that such an acquisi20 tion would result in restricted owners being en21 titled to vote, cause the voting of, or cause the 

22 withholding of votes of, more than 20 percent 

23 of the votes entitled to be cast on any matter 

24 by the holders of the ownership interests. This 

25 subparagraph shall not be construed to require 


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1 divestiture of any interest of a restricted owner 

2 in an established and operational swap execu3 tion facility acquired prior to January 1, 2010, 

4 provided that acquisitions by such restricted 

5 owner after such date shall be subject to this 

6 subparagraph. The Commission may determine 

7 whether any acquisition by a restricted owner 

8 during any interim period prior to the date of 

9 the enactment of this Act has been made for 

10 the purpose of avoiding the effect of this sub11 paragraph. 

12 ‘‘(D) The rules of the swap execution facil13 ity shall provide that a majority of the directors 

14 of the facility shall not be associated with a re15 stricted owner.’’. 

16 (D) Section 5(d) of the Commodity Ex17 change Act (as amended by the preceding provi18 sions of this Act) is further amended by strik19 ing paragraph (15) and inserting the following: 

20 ‘‘(15) CONFLICTS OF INTEREST.— 

21 ‘‘(A) The board of trade shall establish 

22 and enforce rules to minimize conflicts of inter23 est in the decisionmaking process of the con24 tract market, and establish a process for resolv25 ing any such conflicts of interest. 


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1 ‘‘(B) The rules of a board of trade that 

2 trades swaps shall provide that a restricted 

3 owner shall not be permitted directly or indi4 rectly to acquire beneficial ownership of inter5 ests in the board of trade or in persons with a 

6 controlling interest in the board of trade, to the 

7 extent that such an acquisition would result in 

8 restricted owners being entitled to vote, cause 

9 the voting of, or cause the withholding of votes 

10 of, more than 20 percent of the votes entitled 

11 to be cast on any matter by the holders of the 

12 ownership interests. This paragraph shall not 

13 be construed to require divestiture of any inter14 est of a restricted owner in an established and 

15 operational board of trade acquired prior to 

16 January 1, 2010, provided that acquisitions by 

17 such restricted owner after such date shall be 

18 subject to this paragraph. The Commission may 

19 determine whether any acquisition by a re20 stricted owner during any interim period prior 

21 to the date of the enactment of this Act has 

22 been made for the purpose of avoiding the ef23 fect of this paragraph. 

24 ‘‘(C) The rules of a board of trade that 

25 trades swaps shall provide that a majority of 


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1 the directors of the board of trade shall not be 

2 associated with a restricted owner.’’. 

3 (b) SECURITIES EXCHANGE ACT OF 1934.— 

4 (1) DEFINITION OF RESTRICTED OWNER.—Sec5 tion 3(a) of the Securities Exchange Act of 1934 

6 (15 U.S.C. 78c(a)) (as amended by the preceding 

7 provisions of this Act) is further amended by adding 

8 at the end the following: 

9 ‘‘(78) RESTRICTED OWNER.—The term ‘re10 stricted owner’ has the same meaning as in section 

11 1a(51) of the Commodity Exchange Act.’’. 

12 (2) CONFLICTS OF INTEREST.— 

13 (A) Paragraph (10) of section 3C(d) of the 

14 Securities Exchange Act of 1934 (as added by 

15 the preceding provisions of this Act) is amended 

16 by adding after subparagraph (B) the following: 

17 ‘‘The rules of the swap execution facility shall provide that 

18 a restricted owner shall not be permitted directly or indi19 rectly to acquire beneficial ownership of interests in the 

20 facility or in persons with a controlling interest in the fa21 cility, to the extent that such an acquisition would result 

22 in restricted owners being entitled to vote, cause the voting 

23 of, or cause the withholding of votes of, more than 20 per24 cent of the votes entitled to be cast on any matter by the 

25 holders of the ownership interests. The rules of the swap 


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1 execution facility shall provide that a majority of the direc2 tors of the facility shall not be associated with a restricted 

3 owner. This paragraph shall not be construed to require 

4 divestiture of any interest of a restricted owner in an es5 tablished and operational swap execution facility acquired 

6 prior to January 1, 2010, provided that acquisitions by 

7 such restricted owner after such date shall be subject to 

8 this paragraph. The Commission may determine whether 

9 any acquisition by a restricted owner during any interim 

10 period prior to the date of the enactment of this Act has 

11 been made for the purpose of avoiding the effect of this 

12 paragraph.’’. 

13 (B) Section 15F(g)(1) of the Securities 

14 Exchange Act of 1934 (as added by the pre15 ceding provisions of this Act) is amended— 

16 (i) in subparagraph (C), strike ‘‘and’’; 

17 and 

18 (ii) insert after subparagraph (C) the 

19 following (and redesignate the succeeding 

20 subparagraph accordingly): 

21 ‘‘(D) the prevention of self-dealing by lim22 iting the extent to which a security-based swap 

23 dealer or major security-based swap participant 

24 may conduct business with a clearing agency, 

25 an exchange, or an alternative swap execution 


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1 facility that clears or trades security-based 

2 swaps and in which such a dealer or participant 

3 has a material debt or equity investment; and’’. 

4 (C) Section 6(b) of the Securities Ex5 change Act of 1934 (15 U.S.C. 78f(b)) is 

6 amended by adding at the end the following 

7 new paragraphs: 

8 ‘‘(10) The rules of the exchange minimize con9 flicts of interest in its decision-making process and 

10 establish a process for resolving such conflicts of in11 terest. 

12 ‘‘(11) The rules of an exchange that trades se13 curity-based swaps provide that a majority of the di14 rectors of the exchange shall not be associated with 

15 a restricted owner. 

16 ‘‘(12) The rules of an exchange that trades se17 curity-based swaps provide that a restricted owner 

18 shall not be permitted directly or indirectly to ac19 quire beneficial ownership of interests in the ex20 change or in persons with a controlling interest in 

21 the exchange, to the extent that such an acquisition 

22 would result in restricted owners being entitled to 

23 vote, cause the voting of, or cause the withholding 

24 of votes of, more than 20 percent of the votes enti25 tled to be cast on any matter by the holders of the 


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1 ownership interests. This paragraph shall not be 

2 construed to require divestiture of any interest of a 

3 restricted owner in an established and operational 

4 exchange acquired prior to January 1, 2010, pro5 vided that acquisitions by such restricted owner 

6 after such date shall be subject to this paragraph. 

7 The Commission may determine whether any acqui8 sition by a restricted owner during any interim pe9 riod prior to the date of the enactment of this Act 

10 has been made for the purpose of avoiding the effect 

11 of this paragraph.’’. 

12 (D) Section 17A(b)(3) of the Securities 

13 Exchange Act of 1934 (15 U.S.C. 78f(b)) is 

14 amended by adding at the end the following 

15 new subparagraphs: 

16 ‘‘(J) The rules of a clearing agency that 

17 clears security-based swaps shall provide that a 

18 restricted owner shall not be permitted directly 

19 or indirectly to acquire beneficial ownership of 

20 interests in the agency or in persons with a con21 trolling interest in the agency, to the extent 

22 that such an acquisition would result in re23 stricted owners being entitled to vote, cause the 

24 voting of, or cause the withholding of votes of, 

25 more than 20 percent of the votes entitled to be 


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1 cast on any matter by the holders of the owner2 ship interests. This subparagraph shall not be 

3 construed to require divestiture of any interest 

4 of a restricted owner in an established and 

5 operational clearing agency acquired prior to 

6 January 1, 2010, provided that acquisitions by 

7 such restricted owner after such date shall be 

8 subject to this subparagraph. The Commission 

9 may determine whether any acquisition by a re10 stricted owner during any interim period prior 

11 to the date of the enactment of this Act has 

12 been made for the purpose of avoiding the ef13 fect of this subparagraph. 

14 ‘‘(K) The rules of the clearing agency shall 

15 provide that a majority of the directors of the 

16 agency shall not be associated with a restricted 

17 owner.’’. 

18 SEC. 3307. DEFINITIONS OF MAJOR SWAP PARTICIPANT 

19 AND MAJOR SECURITY-BASED SWAP PARTICI20 PANT. 

21 (a) MAJOR SWAP PARTICIPANT.—Section 1a(39) of 

22 the Commodity Exchange Act (7 U.S.C. 1a), as added by 

23 the preceding provisions of this Act, is amended to read 

24 as follows: 

25 ‘‘(39) MAJOR SWAP PARTICIPANT.— 


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1 ‘‘(A) IN GENERAL.—The term ‘major swap 

2 participant’ means any person who is not a 

3 swap dealer, and— 

4 ‘‘(i) maintains a substantial net posi5 tion in outstanding swaps, excluding posi6 tions held primarily for hedging, reducing 

7 or otherwise mitigating its commercial 

8 risk; or 

9 ‘‘(ii) whose outstanding swaps create 

10 substantial net counterparty exposure that 

11 could have serious adverse effects on the 

12 financial stability of the United States 

13 banking system or financial markets. 

14 ‘‘(B) DEFINITION OF SUBSTANTIAL NET

15 POSITION.—The Commission shall define by 

16 rule or regulation the term ‘substantial net po17 sition’ at a threshold that the Commission de18 termines prudent for the effective monitoring, 

19 management, and oversight of entities which 

20 are systemically important or can significantly 

21 impact the financial system. In setting the defi22 nitions, the Commission shall consider the per23 son’s relative position in uncleared as opposed 

24 to cleared swaps. 


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1 ‘‘(C) A person may be designated a major 

2 swap participant for 1 or more individual types 

3 of swaps without being classified as a major 

4 swap participant for all classes of swaps.’’. 

5 (b) MAJOR SECURITY-BASED SWAP PARTICIPANT.— 

6 Section 3(a)(67) of the Securities Exchange Act of 1934 

7 (15 U.S.C. 78c(a)), as added by the preceding provisions 

8 of this Act, is amended to read as follows: 

9 ‘‘(67) MAJOR SECURITY-BASED SWAP PARTICI10 PANT.— 

11 ‘‘(A) IN GENERAL.—The term ‘major secu12 rity-based swap participant’ means any person 

13 who is not a security-based swap dealer, and— 

14 ‘‘(i) maintains a substantial net posi15 tion in outstanding security-based swaps, 

16 excluding positions held primarily for hedg17 ing, reducing or otherwise mitigating its 

18 commercial risk; or 

19 ‘‘(ii) whose outstanding security-based 

20 swaps create substantial net counterparty 

21 exposure that could have serious adverse 

22 effects on the financial stability of the 

23 United States banking system or financial 

24 markets. 


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1 ‘‘(B) DEFINITION OF SUBSTANTIAL NET

2 POSITION.—The Commission shall define by 

3 rule or regulation the term ‘substantial net po4 sition’ at a threshold that the Commission de5 termines prudent for the effective monitoring, 

6 management, and oversight of entities which 

7 are systemically important or can significantly 

8 impact the financial system. In setting the defi9 nitions, the Commission shall consider the per10 son’s relative position in uncleared as opposed 

11 to cleared security-based swaps. 

12 ‘‘(C) A person may be designated a major 

13 security-based swap participant for 1 or more 

14 individual types of security-based swaps without 

15 being classified as a major security-based swap 

16 participant for all classes of security-based 

17 swaps.’’. 

18 (c) EFFECTIVE DATES.— 

19 (1) MAJOR SWAP PARTICIPANT.—The amend20 ment made by subsection (a)(1) shall take effect as 

21 if included in subtitle A. 

22 (2) MAJOR SECURITY-BASED SWAP PARTICI23 PANT.—The amendment made by subsection (a)(2) 

24 shall take effect as if included in subtitle B. 


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1 TITLE IV—CONSUMER FINAN2 CIAL PROTECTION AGENCY 

3 ACT 

4 SEC. 4001. SHORT TITLE. 

5 This title may be cited as the ‘‘Consumer Financial 

6 Protection Agency Act of 2009’’. 

7 SEC. 4002. DEFINITIONS. 

8 For the purposes of subtitles A through F of this 

9 title, the following definitions shall apply: 

10 (1) AFFILIATE.—The term ‘‘affiliate’’ means 

11 any person that controls, is controlled by, or is 

12 under common control with another person. 

13 (2) AGENCY.—The term ‘‘Agency’’ means— 

14 (A) before the Agency conversion date, the 

15 Consumer Financial Protection Agency; and 

16 (B) on and after the Agency conversion 

17 date, the commission established under section 

18 4103. 

19 (3) BANK HOLDING COMPANY.—The term 

20 ‘‘bank holding company’’ has the same meaning as 

21 in section 2(a) of the Bank Holding Company Act 

22 of 1956. 

23 (4) BOARD.—Except when used in connection 

24 with the term ‘‘Board of Governors’’, the term 


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1 ‘‘Board’’ means the Consumer Financial Protection 

2 Oversight Board. 

3 (5) BOARD OF GOVERNORS.—The term ‘‘Board 

4 of Governors’’ means the Board of Governors of the 

5 Federal Reserve System. 

6 (6) BUSINESS OF INSURANCE.—The term 

7 ‘‘business of insurance’’ means the writing of insur8 ance or the reinsuring of risks by an insurer, includ9 ing all acts necessary to such writing or reinsuring 

10 and the activities relating to the writing of insurance 

11 or the reinsuring of risks conducted by persons who 

12 act as, or are, officers, directors, agents, or employ13 ees of insurers or who are other persons authorized 

14 to act on behalf of such persons. 

15 (7) CONSUMER.—The term ‘‘consumer’’ means 

16 an individual or an agent, trustee, or representative 

17 acting on behalf of an individual. 

18 (8) CONSUMER FINANCIAL PRODUCT OR SERV19 ICE.—The term ‘‘consumer financial product or 

20 service’’ means any financial product, other than a 

21 Federal tax return, or service to be used by a con22 sumer primarily for personal, family, or household 

23 purposes. 

24 (9) COVERED PERSON.— 


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1 (A) IN GENERAL.—The term ‘‘covered per2 son’’ means any person who engages directly or 

3 indirectly in a financial activity, in connection 

4 with the provision of a consumer financial prod5 uct or service. 

6 (B) EXCLUSION.—The term ‘‘covered per7 son’’ shall not include the Secretary, the De8 partment of the Treasury, any agency or bu9 reau under the jurisdiction of the Secretary, or 

10 any person collecting Federal taxes for the 

11 United States to the extent such person is act12 ing in such capacity. 

13 (10) CREDIT.—The term ‘‘credit’’ means the 

14 right granted by a person to a consumer to defer 

15 payment of a debt, incur debt and defer its payment, 

16 or purchase property or services and defer payment 

17 for such purchase. 

18 (11) CREDIT UNION.—The term ‘‘credit union’’ 

19 means a Federal credit union or a State credit union 

20 as defined in section 101 of the Federal Credit 

21 Union Act. 

22 (12) DEPOSIT.—The term ‘‘deposit’’— 

23 (A) has the same meaning as in section 

24 3(l) of the Federal Deposit Insurance Act; and 


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1 (B) includes a share in a member account 

2 (as defined in section 101(5) of the Federal 

3 Credit Union Act) at a credit union. 

4 (13) DEPOSIT-TAKING, MONEY ACCEPTANCE, 

5 OR MONEY MOVEMENT ACTIVITY.—The term ‘‘de6 posit-taking, money acceptance, or money movement 

7 activities’’ means— 

8 (A) the acceptance of deposits, the mainte9 nance of deposit accounts, or the provision of 

10 services related to the acceptance of deposits; 

11 (B) the acceptance of money, the provision 

12 of other services related to the acceptance of 

13 money, or the maintenance of members’ share 

14 accounts by a credit union; or 

15 (C) the receipt of money or its equivalent, 

16 as the Director may determine by regulation or 

17 order, received or held by the covered person 

18 (or an agent for the person) for the purpose of 

19 facilitating a payment or transferring funds or 

20 value of funds by a consumer to a third party. 

21 (14) DESIGNATED TRANSFER DATE.—The term 

22 ‘‘designated transfer date’’ has the meaning pro23 vided in section 4602. 

24 (15) DIRECTOR.—The term ‘‘Director’’ 

25 means— 


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1 (A) before the Agency conversion date, the 

2 Director of the Agency; and 

3 (B) on and after the Agency conversion 

4 date, the commission established under section 

5 4103. 

6 (16) ENUMERATED CONSUMER LAWS.—The 

7 term ‘‘enumerated consumer laws’’ means each of 

8 the following: 

9 (A) The Alternative Mortgage Transaction 

10 Parity Act (12 U.S.C. 3801 et seq.). 

11 (B) The Electronic Funds Transfer Act 

12 (15 U.S.C. 1693 et seq.). 

13 (C) The Equal Credit Opportunity Act (15 

14 U.S.C. 1691 et seq.). 

15 (D) The Fair Credit Reporting Act (15 

16 U.S.C. 1681 et seq.), except with respect to sec17 tions 615(e) and 628 of such Act. 

18 (E) The Fair Debt Collection Practices Act 

19 (15 U.S.C. 1692 et seq.). 

20 (F) Subsections (b), (c), (d), (e), and (f) of 

21 section 43 of the Federal Deposit Insurance Act 

22 (12 U.S.C. 1831t). 

23 (G) Sections 502, 503, 504, 505, 506, 

24 507, 508, and 509 of the Gramm-Leach-Bliley 


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1 Act (15 U.S.C. 6802 et seq.) except for section 

2 505 as it applies to section 501(b). 

3 (H) The Homeowners Protection Act of 

4 1998. 

5 (I) The Home Mortgage Disclosure Act 

6 (12 U.S.C. 2801 et seq.). 

7 (J) The Real Estate Settlement Proce8 dures Act (12 U.S.C. 2601 et seq.). 

9 (K) The Secure and Fair Enforcement for 

10 Mortgage Licensing Act (12 U.S.C. 5101 et 

11 seq.). 

12 (L) The Truth in Lending Act (15 U.S.C. 

13 1601 et seq.). 

14 (M) The Truth in Savings Act (12 U.S.C. 

15 4301 et seq.). 

16 (N) Section 626 of the Omnibus Appro17 priations Act, 2009 (Public Law 111–8). 

18 (O) The Unlawful Internet Gambling En19 forcement Act of 2006. 

20 (17) FEDERAL BANKING AGENCY.—The term 

21 ‘‘Federal banking agency’’ means the Board of Gov22 ernors, the Comptroller of the Currency, the Direc23 tor of the Office of Thrift Supervision, the Federal 

24 Deposit Insurance Corporation, or the National 


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1 Credit Union Administration and the term ‘‘Federal 

2 banking agencies’’ means all of such agencies. 

3 (18) FAIR LENDING.—The term ‘‘fair lending’’ 

4 means fair, equitable, and nondiscriminatory access 

5 to credit for both individuals and communities. 

6 (19) FINANCIAL ACTIVITY.— 

7 (A) IN GENERAL.—The term ‘‘financial ac8 tivity’’ means any of the following activities: 

9 (i) Deposit-taking, money acceptance, 

10 or money movement activities. 

11 (ii) Extending credit and servicing 

12 loans, including— 

13 (I) acquiring, purchasing, selling, 

14 brokering, or servicing loans or other 

15 extensions of credit; and 

16 (II) engaging in any other activ17 ity usual in connection with extensions 

18 of credit or servicing loans, including 

19 performing appraisals of real estate 

20 and personal property. 

21 (iii) Check cashing and check-guar22 anty services, including— 

23 (I) authorizing a subscribing 

24 merchant to accept personal checks 

25 tendered by the merchant’s customers 


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1 in payment for goods and services; 

2 and 

3 (II) purchasing from a sub4 scribing merchant validly authorized 

5 checks that are subsequently dishon6 ored. 

7 (iv) Collecting, analyzing, maintain8 ing, and providing consumer report infor9 mation or other account information by 

10 covered persons, including information re11 lating to the credit history of consumers 

12 and providing the information to a credit 

13 grantor who is considering a consumer ap14 plication for credit or who has extended 

15 credit to the borrower, except that fur16 nishing a consumer report to another per17 son that it has reason to believe intends to 

18 use the information for employment pur19 poses, including for security investigations, 

20 government licensing and evaluating a con21 sumer’s residential or tenant history shall 

22 not be considered a financial activity. 

23 (v) Collection of debt related to any 

24 consumer financial product or service. 


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1 (vi) Providing real estate settlement 

2 services. 

3 (vii) Leasing personal or real property 

4 or acting as agent, broker, or adviser in 

5 leasing such property if— 

6 (I) the lease is on a non-oper7 ating basis; 

8 (II) the initial term of the lease 

9 is at least 90 days; and 

10 (III) in the case of leases involv11 ing real property, at the inception of 

12 the initial lease, the transaction is in13 tended to result in ownership of the 

14 leased property to be transferred to 

15 the lessee, subject to standards pre16 scribed by the Director. 

17 (viii) Acting as an investment adviser 

18 to any person (excluding an investment ad19 viser that is a person regulated by the 

20 Commodity Futures Trading Commission, 

21 the Securities and Exchange Commission, 

22 or a person regulated as an investment ad23 viser by any securities commission (or any 

24 agency or office performing like functions) 

25 of any State). 


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1 (ix) Acting as financial adviser to any 

2 person (excluding an investment adviser 

3 that is a person regulated by the Com4 modity Futures Trading Commission, the 

5 Securities and Exchange Commission, or 

6 any securities commission (or any agency 

7 or office performing like functions) of any 

8 State), including— 

9 (I) providing financial and other 

10 related advisory services; 

11 (II) providing educational 

12 courses, and instructional materials to 

13 consumers on individual financial 

14 management matters; 

15 (III) providing credit counseling 

16 or tax planning services to any person 

17 (excluding the preparation of returns, 

18 or claims for refund, of tax imposed 

19 by the Internal Revenue Code or ad20 vice with respect to positions taken 

21 therein, or services regulated by the 

22 Secretary of the Treasury under sec23 tion 330 of title 31, United States 

24 Code); or 


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1 (IV) providing services to assist a 

2 consumer with debt management or 

3 debt settlement, with modifying the 

4 terms of any extension of credit, or 

5 with avoiding foreclosure. 

6 (x) For purposes of this title, the fol7 lowing shall not be considered acting as fi8 nancial adviser: 

9 (I) Publishing any bona fide 

10 newspaper, news magazine or business 

11 or financial publication of general and 

12 regular circulation, including pub13 lishing market data, news, or data 

14 analytics or investment information or 

15 recommendations that are not tailored 

16 to the individual needs of a particular 

17 consumer. 

18 (II) Providing advice, analyses, 

19 or reports that do not relate to any 

20 securities other than securities which 

21 are direct obligations of or obligations 

22 guaranteed as to principal or interest 

23 by the United States, or securities 

24 issued or guaranteed by corporations 

25 in which the United States has a diVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00807 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 rect or indirect interest which shall 

2 have been designated by the Secretary 

3 of the Treasury, pursuant to section 

4 3(a)(12) of the Securities Exchange 

5 Act of 1934, as exempted securities 

6 for the purposes of that Act. 

7 (xi) Financial data processing by any 

8 technological means, including providing 

9 data processing, access to or use of data10 bases or facilities, or advice regarding 

11 processing or archiving, if the data to be 

12 processed, furnished, stored, or archived 

13 are financial, banking, or economic, except 

14 that it shall not be considered a ‘‘financial 

15 activity’’ with respect to financial data 

16 processing— 

17 (I) to the extent the person is 

18 providing interactive computer service, 

19 as defined in section 230 of the Com20 munications Act of 1934 (47 U.S.C. 

21 230); or 

22 (II) if the person— 

23 (aa) unknowingly or inciden24 tally transmits, processes, or 

25 stores financial data in a manner 


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1 that such data is undifferentiated 

2 from other types of data that the 

3 person transmits, processes, or 

4 stores; 

5 (bb) does not provide to any 

6 consumer a consumer financial 

7 product or service in connection 

8 with or relating to in any manner 

9 financial data processing; and 

10 (cc) does not provide a ma11 terial service to any covered per12 son in connection with the provi13 sion of a consumer financial 

14 product or service. 

15 (xii) Money transmitting. 

16 (xiii) Sale, provision or issuance of 

17 stored value, except that, in the case of a 

18 sale, only if the seller influences the terms 

19 or conditions of the stored value provided 

20 to the consumer. 

21 (xiv) Acting as a money services busi22 ness. 

23 (xv) Acting as a custodian of money 

24 or any financial instrument. 


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1 (xvi)(I) Any other activity that the Di2 rector defines, by regulation, as a financial 

3 activity after finding that— 

4 (aa) the activity is financial 

5 in nature or is otherwise a per6 missible activity for a bank or 

7 bank holding company, including 

8 a financial holding company, 

9 under any provision of Federal 

10 law or regulation applicable to a 

11 bank or bank holding company, 

12 including a financial holding 

13 company; 

14 (bb) the activity is incidental 

15 or complementary to any other fi16 nancial activity regulated by the 

17 Agency; or 

18 (cc) the activity is entered 

19 into or conducted as a subterfuge 

20 or with a purpose to evade any 

21 requirement under this title, the 

22 enumerated consumer laws, and 

23 the authorities transferred under 

24 subtitles F and H. 


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1 (II) For purposes of subclause (I)(bb), 

2 the following activities provided to a cov3 ered person shall not be ‘‘incidental or 

4 complementary’’: 

5 (aa) Providing information prod6 ucts or services to a covered person 

7 for identity authentication. 

8 (bb) Providing information prod9 ucts or services for fraud or identify 

10 theft detection, prevention, or inves11 tigation. 

12 (cc) Providing document retrieval 

13 or delivery services. 

14 (dd) Providing public records in15 formation retrieval. 

16 (ee) Providing information prod17 ucts or services for anti-money laun18 dering activities. 

19 (B) EXCEPTIONS.—The term ‘‘financial 

20 activity’’ shall not include the business of insur21 ance or the provision of electronic data trans22 mission, routing, intermediate or transient stor23 age, or connections to a system or network, 

24 where the person providing such services does 

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1 tronic data, is not the sender or the intended 

2 recipient of the data, and such person trans3 mits, routes, stores, or provides connections for 

4 electronic data, including financial data, in a 

5 manner that such financial data is undifferen6 tiated from other types of data that such per7 son transmits, routes, stores, or provides con8 nections. 

9 (20) FINANCIAL PRODUCT OR SERVICE.—The 

10 term ‘‘financial product or service’’ means any prod11 uct or service that, directly or indirectly, results 

12 from or is related to engaging in 1 or more financial 

13 activities. 

14 (21) FOREIGN EXCHANGE.—The term ‘‘foreign 

15 exchange’’ means the exchange, for compensation, of 

16 currency of the United States or of a foreign govern17 ment for currency of another government. 

18 (22) INSURED CREDIT UNION.—The term ‘‘in19 sured credit union’’ has the same meaning as in sec20 tion 101 of the National Credit Union Act. 

21 (23) INSURED DEPOSITORY INSTITUTION.—The 

22 term ‘‘insured depository institution’’ has the same 

23 meaning as in section 3 of the Federal Deposit In24 surance Act and shall include any uninsured branch 


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1 or agency of a foreign bank or a commercial lending 

2 company owned or controlled by a foreign bank. 

3 (24) MONEY SERVICES BUSINESS.—The term 

4 ‘‘money services business’’ means a person that— 

5 (A) receives currency, monetary value, or 

6 payment instruments for the purpose of ex7 changing or transmitting the same by any 

8 means, including transmission by wire, fac9 simile, electronic transfer, courier, the Internet, 

10 or through bill payment services, or other busi11 nesses that facilitate third-party transfers with12 in the United States or to or from the United 

13 States; or 

14 (B) issues payment instruments or stored 

15 value. 

16 (25) MONEY TRANSMITTING.—The term 

17 ‘‘money transmitting’’ means the receipt by a person 

18 of currency, monetary value, or payment instru19 ments for the purpose of transmitting the same to 

20 any third-party by any means, including trans21 mission by wire, facsimile, electronic transfer, cou22 rier, the Internet, or through bill payment services. 

23 (26) PAYMENT INSTRUMENT.—The term ‘‘pay24 ment instrument’’ means a check, draft, warrant, 

25 money order, traveler’s check, electronic instrument, 


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1 or other instrument, payment of money, or monetary 

2 value (other than currency). 

3 (27) PERSON.—The term ‘‘person’’ means an 

4 individual, partnership, company, corporation, asso5 ciation (incorporated or unincorporated), trust, es6 tate, cooperative organization, or other entity. 

7 (28) PERSON REGULATED BY A STATE INSUR8 ANCE REGULATOR.—The term ‘‘person regulated by 

9 a State insurance regulator’’ means any person who 

10 is— 

11 (A) engaged in the business of insurance; 

12 and 

13 (B) subject to regulation by any State in14 surance regulator, 

15 but only to the extent that such person acts in such 

16 capacity. 

17 (29) PERSON REGULATED BY THE COMMODITY

18 FUTURES TRADING COMMISSION.—The term ‘‘person 

19 regulated by the Commodity Futures Trading Com20 mission’’ means any futures commission merchant, 

21 commodity trading adviser, commodity pool oper22 ator, introducing broker, boards of trade, derivatives 

23 clearing organizations, multilateral clearing organi24 zations, retail foreign exchange dealer, or swap exe25 cution facility to the extent that such person’s acVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00814 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tions are subject to the jurisdiction of the Com2 modity Futures Trading Commission under the 

3 Commodity Exchange Act and any agent, employee, 

4 or contractor acting on behalf of, registered with, or 

5 providing services to such person but only to the ex6 tent the person, or the employee, agent, or con7 tractor of such person, acts in a registered capacity. 

8 (30) PERSON REGULATED BY THE SECURITIES

9 AND EXCHANGE COMMISSION.—The term ‘‘person 

10 regulated by the Securities and Exchange Commis11 sion’’ means— 

12 (A) a broker or dealer that is required to 

13 be registered under the Securities Exchange Act 

14 of 1934; 

15 (B) an investment adviser that is reg16 istered under the Investment Advisers Act of 

17 1940; 

18 (C) an investment company that— 

19 (i) is required to be registered under 

20 the Investment Company Act of 1940; or 

21 (ii) is excepted from the definition of 

22 investment company under section 3(c) of 

23 such Act, or any successor provision; 


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1 (D) a national securities exchange that is 

2 required to be registered under the Securities 

3 Exchange Act of 1934; 

4 (E) a transfer agent that is required to be 

5 registered under the Securities Exchange Act of 

6 1934; 

7 (F) a clearing corporation that is required 

8 to be registered under the Securities Exchange 

9 Act of 1934; 

10 (G) any municipal securities dealer that is 

11 registered with the Securities and Exchange 

12 Commission; 

13 (H) any self-regulatory organization that is 

14 registered with the Securities and Exchange 

15 Commission; 

16 (I) any national securities exchange or 

17 other entity that is required to be registered 

18 under the Securities Exchange Act of 1934; 

19 and 

20 (J) the Municipal Securities Rulemaking 

21 Board, 

22 and any employee, agent, or contractor acting on be23 half of, registered with, or providing services to, any 

24 such person, but only to the extent that any person 

25 described in any subparagraph of this paragraph, or 


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1 the employee agent, or contractor of such person, 

2 acts in a registered capacity, or, with respect to a 

3 person described in subparagraph (C)(ii), any em4 ployee, agent, or contractor acting on behalf of, or 

5 providing services to any such person, but only to 

6 the extent that such person, or the employee, agent, 

7 or contractor of such person acts in such exempt ca8 pacity. 

9 (31) PROVISION OF A CONSUMER FINANCIAL

10 PRODUCT OR SERVICE.—The terms ‘‘provision of a 

11 consumer financial product or service’’ and ‘‘pro12 viding a consumer financial product or service’’ 

13 mean the advertisement, marketing, solicitation, 

14 sale, disclosure, delivery, or account maintenance or 

15 servicing of a consumer financial product or service. 

16 (32) PERSON THAT PERFORMS INCOME TAX

17 PREPARATION ACTIVITIES FOR CONSUMERS.—The 

18 term ‘‘person that performs income tax preparation 

19 activities for consumers’’ means— 

20 (A) any tax return preparer (as defined in 

21 section 7701(a)(36) of the Internal Revenue 

22 Code of 1986), regardless of whether com23 pensated, but only to the extent that the person 

24 acts in such capacity; 


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1 (B) any person regulated by the Secretary 

2 of the Treasury under section 330 of title 31, 

3 United States Code, but only to the extent that 

4 the person acts in such capacity; and 

5 (C) any authorized IRS e-file Providers (as 

6 defined for purposes of section 7216 of the In7 ternal Revenue Code of 1986), but only to the 

8 extent that the person acts in such capacity. 

9 (33) RELATED PERSON.— 

10 (A) IN GENERAL.—The term ‘‘related per11 son’’, when used in connection with a covered 

12 person that is not a bank holding company, 

13 credit union, depository institution, means— 

14 (i) any director, officer, employee 

15 charged with managerial responsibility, or 

16 controlling stockholder of, or agent for, 

17 such covered person; 

18 (ii) any shareholder, consultant, joint 

19 venture partner, and any other person as 

20 determined by the Director (by regulation 

21 or on a case-by-case basis) who materially 

22 participates in the conduct of the affairs of 

23 such covered person; and 

24 (iii) any independent contractor (in25 cluding any attorney, appraiser, or acVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00818 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 countant), with respect to such covered 

2 person, who knowingly or recklessly par3 ticipates in any— 

4 (I) violation of any law or regula5 tion; or 

6 (II) breach of fiduciary duty. 

7 (B) TREATMENT OF A RELATED PERSON

8 AS A COVERED PERSON.—Any person who is a 

9 related person under subparagraph (A) shall be 

10 deemed to be a covered person for all purposes 

11 of this title, any enumerated consumer law, and 

12 any law for which authorities were transferred 

13 by subtitles F and H. 

14 (34) SECRETARY.—The term ‘‘Secretary’’ 

15 means the Secretary of the Treasury. 

16 (35) SERVICE PROVIDER.— 

17 (A) IN GENERAL.—The term ‘‘service pro18 vider’’ means any person who provides a mate19 rial service to a covered person in the provision 

20 of a consumer financial product or service, in21 cluding a person who— 

22 (i) facilitates the design of, or oper23 ations relating to the provision of, the con24 sumer financial product or service; 


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1 (ii) has direct interaction with a con2 sumer (whether in person or via tele3 communication device or other similar 

4 technology) regarding the consumer finan5 cial product or service; or 

6 (iii) processes transactions relating to 

7 the consumer financial product or service. 

8 (B) EXCEPTIONS.—The term ‘‘service pro9 vider’’ shall not apply to a person solely by vir10 tue of such person providing or selling to a cov11 ered person— 

12 (i) a support service of a type pro13 vided to businesses generally or a similar 

14 ministerial service; 

15 (ii) a service that does not materially 

16 affect the terms or conditions of the con17 sumer financial product or service, its per18 formance or operation, or the propensity of 

19 a consumer to obtain or use such product 

20 or service; or 

21 (iii) time or space for an advertise22 ment for a consumer financial product or 

23 service through print, newspaper, or elec24 tronic media. 


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1 (36) STATE.—The term ‘‘State’’ means any 

2 State, territory, or possession of the United States, 

3 the District of Columbia, Commonwealth of Puerto 

4 Rico, Commonwealth of the Northern Mariana Is5 lands, Guam, American Samoa, or the United States 

6 Virgin Islands or any federally recognized Indian 

7 tribe as defined by the Secretary of the Interior 

8 under section 104(a) of the Federally Recognized In9 dian Tribe List Act of 1994 (25 U.S.C. 479a–1(a)). 

10 (37) STORED VALUE.—The term ‘‘stored 

11 value’’— 

12 (A) means funds or monetary value rep13 resented in any electronic format, whether or 

14 not specially encrypted, and stored or capable 

15 of storage on electronic media in such a way as 

16 to be retrievable and transferred electronically; 

17 and 

18 (B) includes a prepaid debit card or prod19 uct (other than a card or product used solely 

20 for telephone services) or any other similar 

21 product, 

22 regardless of whether the amount of the funds or 

23 monetary value may be increased or reloaded. 


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1 (38) AGENCY CONVERSION DATE.—The term 

2 ‘‘Agency conversion date’’ means the date that is 2 

3 years after the designated transfer date. 

4 Subtitle A—Establishment of the 

5 Agency 

6 SEC. 4101. ESTABLISHMENT OF THE CONSUMER FINANCIAL 

7 PROTECTION AGENCY. 

8 (a) AGENCY ESTABLISHED.—There is established the 

9 Consumer Financial Protection Agency as an independent 

10 agency to regulate the provision of consumer financial 

11 products or services under this title, the enumerated con12 sumer laws, and the authorities transferred under sub13 titles F and H. 

14 (b) AGENCY STRUCTURE.— 

15 (1) INITIAL STRUCTURE.—The Agency shall be 

16 led by a Director or Acting Director, established 

17 pursuant to section 4102, until the day before the 

18 Agency conversion date. 

19 (2) SUBSEQUENT STRUCTURE.—On and after 

20 the Agency conversion date, the Agency shall consist 

21 of the commission established under section 4103. 

22 (c) PRINCIPAL OFFICE.—The principal office of the 

23 Agency shall be located in the city of Washington, District 

24 of Columbia, at 1 or more sites. 


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1 SEC. 4102. DIRECTOR. 

2 (a) ESTABLISHMENT OF POSITION.— 

3 (1) IN GENERAL.—There is hereby established 

4 the position of the Director of the Agency who shall 

5 be the head of the Agency. 

6 (2) AUTHORITY TO PRESCRIBE REGULA7 TIONS.—The Director may prescribe such regula8 tions and issue such orders in accordance with this 

9 title as the Director may determine to be necessary 

10 for carrying out this title and all other laws within 

11 the Director’s jurisdiction and shall exercise any au12 thorities granted under this title and all other laws 

13 within the Director’s jurisdiction. 

14 (b) APPOINTMENT; TERM.— 

15 (1) NOMINATION.—Within 60 days after the 

16 date of enactment of this title, the President shall 

17 nominate the Director, from among individuals 

18 who— 

19 (A) are citizens of the United States; and 

20 (B) have strong competencies and experi21 ences related to consumer financial protection. 

22 (2) APPOINTMENT SUBJECT TO CONFIRMA23 TION.—The Director nominated under paragraph 

24 (1) shall be appointed by and with the advice and 

25 consent of the Senate. 


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1 (3) ACTING DIRECTOR BEFORE SENATE CON2 FIRMATION.—The individual nominated pursuant to 

3 paragraph (1) shall serve as Acting Director with 

4 full authorities granted to the Director under this 

5 title until the Director is confirmed by the Senate. 

6 (4) TERM.—The Director shall be appointed for 

7 a term that ends on the Agency conversion date. 

8 (5) REMOVAL.—The Director may be removed 

9 before the end of a term only for cause. 

10 (6) VACANCY.— 

11 (A) IN GENERAL.—A vacancy in the posi12 tion of Director which occurs before the expira13 tion of the term for which a Director was ap14 pointed shall be filled in the manner established 

15 in paragraph (2) and the Director appointed to 

16 fill such vacancy shall be appointed only for the 

17 remainder of such term. 

18 (B) ACTING DIRECTOR.— 

19 (i) IN GENERAL.—In the event of va20 cancy or during the absence of the Direc21 tor (who has been confirmed by the Senate 

22 pursuant to paragraph (2)), an Acting Di23 rector shall be appointed in the manner 

24 provided in section 3345 of title 5, United 

25 States Code. 


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1 (ii) AUTHORITY OF ACTING DIREC2 TOR.—Any individual serving as Acting Di3 rector under this subparagraph shall be 

4 vested with all authority, duties, and privi5 leges of the Director. 

6 (7) SERVICE AFTER END OF TERM.—An indi7 vidual may serve as Director after the expiration of 

8 the term for which appointed until a successor Di9 rector has been appointed and qualified. 

10 (c) PROHIBITION ON FINANCIAL INTERESTS.—The 

11 Director shall not have a direct or indirect financial inter12 est in any covered person. 

13 (d) COMPENSATION.—The Director shall receive com14 pensation at the rate prescribed for Level I of the Execu15 tive Schedule under section 5313 of title 5, United States 

16 Code. 

17 SEC. 4103. ESTABLISHMENT AND COMPOSITION OF THE 

18 COMMISSION. 

19 (a) ESTABLISHMENT OF THE COMMISSION.— 

20 (1) IN GENERAL.—On the Agency conversion 

21 date, there shall be established a commission (here22 inafter in this section referred to as the ‘‘Commis23 sion’’) that shall by operation of law succeed to all 

24 of the authorities of the Director of the Agency 

25 granted under this title and any other law. 


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1 (2) AUTHORITY TO PRESCRIBE REGULA2 TIONS.—The Commission may prescribe such regu3 lations and issue such orders in accordance with this 

4 title as the Commission may determine to be nec5 essary for carrying out this title and all other laws 

6 within the Commission’s jurisdiction and shall exer7 cise any authorities granted under this title and all 

8 other laws within the Commission’s jurisdiction. 

9 (b) COMPOSITION OF THE COMMISSION.— 

10 (1) IN GENERAL.—The Commission shall be 

11 composed of 5 members who shall be appointed by 

12 the President, by and with the advice and consent 

13 of the Senate, from among individuals who— 

14 (A) are citizens of the United States; and 

15 (B) have strong competencies and experi16 ences related to consumer financial protection. 

17 (2) INITIAL APPOINTMENTS.— 

18 (A) IN GENERAL.—The initial members of 

19 the Commission, other than the initial Chair, 

20 may be appointed by the President, by and with 

21 the advice and consent of the Senate, prior to 

22 the Agency conversion date, but may not serve 

23 in their positions until such date. 

24 (B) STAGGERING.—Except as provided 

25 under subsection (d)(1), the members of the 


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1 Commission shall serve staggered terms, which 

2 initially shall be established by the President 

3 for terms of 1, 2, 4, and 5 years, respectively. 

4 (3) TERMS.— 

5 (A) IN GENERAL.—Except as provided in 

6 subsection (d)(1), each member of the Commis7 sion, including the Chair, shall serve for a term 

8 of 5 years. 

9 (B) REMOVAL FOR CAUSE.—The President 

10 may remove any member of the Commission 

11 only for inefficiency, neglect of duty, or malfea12 sance in office. 

13 (C) VACANCIES.—Any member of the 

14 Commission appointed to fill a vacancy occur15 ring before the expiration of the term to which 

16 that member’s predecessor was appointed (in17 cluding the Chair) shall be appointed only for 

18 the remainder of the term. 

19 (D) CONTINUATION OF SERVICE.—Each 

20 member of the Commission may continue to 

21 serve after the expiration of the term of office 

22 to which that member was appointed until a 

23 successor has been appointed by the President 

24 and confirmed by the Senate, except that a 

25 member may not continue to serve more than 1 


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1 year after the date on which that member’s 

2 term would otherwise expire. 

3 (E) OTHER EMPLOYMENT PROHIBITED.— 

4 No member of the Commission shall engage in 

5 any other business, vocation, or employment. 

6 (c) AFFILIATION.—With respect to members ap7 pointed pursuant to subsection (b), not more than 3 shall 

8 be members of any one political party. 

9 (d) CHAIR OF THE COMMISSION.— 

10 (1) APPOINTMENT.— 

11 (A) INITIAL CHAIR.—The first Chair of the 

12 Commission shall be the Director or Acting Di13 rector serving on the day before the Agency 

14 conversion date, and such individual shall serve 

15 in the position of Chair for a period of 3 years. 

16 (B) SUBSEQUENT CHAIRS.—Subsequent 

17 chairs shall be appointed by the President from 

18 among the members of the Commission to serve 

19 as the Chair. 

20 (2) AUTHORITY.—The Chair shall be the prin21 cipal executive officer of the Agency, and shall exer22 cise all of the executive and administrative functions 

23 of the Agency, including with respect to— 

24 (A) the appointment and supervision of 

25 personnel employed under the Agency (other 


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1 than personnel employed regularly and full time 

2 in the immediate offices of members of the 

3 Commission other than the Chair); 

4 (B) the distribution of business among per5 sonnel appointed and supervised by the Chair 

6 and among administrative units of the Agency; 

7 and 

8 (C) the use and expenditure of funds. 

9 (3) LIMITATION.—In carrying out any of the 

10 Chair’s functions under the provisions of this sub11 section the Chair shall be governed by general poli12 cies of the Commission and by such regulatory deci13 sions, findings, and determinations as the Commis14 sion may by law be authorized to make. 

15 (4) REQUESTS OR ESTIMATES RELATED TO AP16 PROPRIATIONS.—Requests or estimates for regular, 

17 supplemental, or deficiency appropriations on behalf 

18 of the Commission may not be submitted by the 

19 Chair without the prior approval of the commission. 

20 (e) NO IMPAIRMENT BY REASON OF VACANCIES.— 

21 No vacancy in the members of the Commission shall im22 pair the right of the remaining members of the Commis23 sion to exercise all the powers of the Commission. Three 

24 members of the Commission shall constitute a quorum for 

25 the transaction of business, except that if there are only 


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1 3 members serving on the Commission because of vacan2 cies in the Commission, 2 members of the Commission 

3 shall constitute a quorum for the transaction of business. 

4 If there are only 2 members serving on the Commission 

5 because of vacancies in the Commission, 2 members shall 

6 constitute a quorum for the 6-month period beginning on 

7 the date of the vacancy which caused the number of Com8 mission members to decline to 2. 

9 (f) SEAL.—The Commission shall have an official 

10 seal. 

11 (g) COMPENSATION.— 

12 (1) CHAIR.—The Chair shall receive compensa13 tion at the rate prescribed for level I of the Execu14 tive Schedule under section 5313 of title 5, United 

15 States Code. 

16 (2) OTHER MEMBERS OF THE COMMISSION.— 

17 The 4 other members of the Commission shall each 

18 receive compensation at the rate prescribed for level 

19 II of the Executive Schedule under section 5314 of 

20 title 5, United States Code. 

21 (h) INITIAL QUORUM ESTABLISHED.—During any 

22 time period prior to the confirmation of at least two mem23 bers of the Commission under subsection (b)(2), one mem24 ber of the Commission shall constitute a quorum for the 

25 transaction of business. Following the confirmation of at 


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1 least 2 additional commissioners, the quorum require2 ments of subsection (e) shall apply. 

3 (i) DEFINITIONS.—Notwithstanding section 4002, 

4 for purposes of this section: 

5 (1) AGENCY.—The term ‘‘Agency’’ means the 

6 Consumer Financial Protection Agency. 

7 (2) DIRECTOR.—The term ‘‘Director’’ means 

8 the Director of the Agency. 

9 SEC. 4104. CONSUMER FINANCIAL PROTECTION OVER10 SIGHT BOARD. 

11 (a) ESTABLISHED.—There is hereby established the 

12 Consumer Financial Protection Oversight Board as an in13 strumentality of the United States. 

14 (b) DUTIES AND POWERS.— 

15 (1) DUTY TO ADVISE DIRECTOR.—The Board 

16 shall advise the Director on— 

17 (A) the consistency of a proposed regula18 tion of the Director with prudential, market, or 

19 systemic objectives administered by the agencies 

20 that comprise the Board; 

21 (B) the overall strategies and policies in 

22 carrying out the duties of the Director under 

23 this title; and 


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1 (C) actions the Director can take to en2 hance and ensure that all consumers are subject 

3 to robust financial protection. 

4 (2) LIMITATION ON POWERS.—The Board may 

5 not exercise any executive authority, and the Direc6 tor may not delegate to the Board any of the func7 tions, powers, or duties of the Director. 

8 (c) COMPOSITION.—The Board shall be comprised of 

9 7 members as follows: 

10 (1) The Chairman of the Board of Governors. 

11 (2) The head of the agency responsible for 

12 chartering and regulating national banks. 

13 (3) The Chairperson of the Federal Deposit In14 surance Corporation. 

15 (4) The Chairman of the National Credit Union 

16 Administration. 

17 (5) The Chairman of the Federal Trade Com18 mission. 

19 (6) The Secretary of Housing and Urban Devel20 opment. 

21 (7) The Chairman of the liaison committee of 

22 representatives of State agencies to the Financial In23 stitutions Examination Council. 

24 (d) REPRESENTATIVE OF ADDITIONAL INTERESTS.— 


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1 (1) COMPOSITION.—Notwithstanding subsection 

2 (c), the President, by and with the advice and con3 sent of the Senate, shall appoint 5 additional mem4 bers of the Board from among experts in the fields 

5 of consumer protection, fair lending and civil rights, 

6 representatives of depository institutions that pri7 marily serve underserved communities, or represent8 atives of communities that have been significantly 

9 impacted by higher-priced mortgage loans, as such 

10 communities are identified by the Director through 

11 an analysis of data received by reason of the provi12 sions of the Home Mortgage Disclosure Act of 1975 

13 or other data on lending patterns. 

14 (2) AFFILIATION.—With respect to members 

15 appointed pursuant to paragraph (1), not more than 

16 3 shall be members of any one political party. 

17 (e) MEETINGS.— 

18 (1) IN GENERAL.—The Board shall meet upon 

19 notice by the Director, but in no event shall the 

20 Board meet less frequently than once every 3 

21 months. 

22 (2) SPECIAL MEETINGS.—Any member of the 

23 Board may, upon giving written notice to the Direc24 tor, require a special meeting of the Board. 


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1 (f) PROHIBITION ON ADDITIONAL COMPENSATION.— 

2 Members of the Board may not receive additional pay, al3 lowances, or benefits by reason of their service on the 

4 Board. 

5 (g) COMPLAINTS RELATED TO REQUIRED OFFERING

6 OF SPECIFIC FINANCIAL PRODUCTS OR SERVICES.—The 

7 Board shall establish procedures to receive and analyze 

8 complaints from any person claiming that the Director is 

9 not in compliance with the requirements under section 

10 4311. 

11 SEC. 4105. EXECUTIVE AND ADMINISTRATIVE POWERS. 

12 The Director may exercise all executive and adminis13 trative functions of the Agency, including to— 

14 (1) establish regulations for conducting the 

15 Agency’s general business in a manner not incon16 sistent with this title; 

17 (2) bind the Agency and enter into contracts; 

18 (3) direct the establishment of and maintain di19 visions or other offices within the Agency in order to 

20 fulfill the responsibilities of this title, the enumer21 ated consumer laws, and the authorities transferred 

22 under subtitles F and H, and to satisfy the require23 ments of other applicable law, except that the Direc24 tor shall not exercise any authorities that are grantVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00834 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ed to State insurance authorities under section 

2 505(a)(6) of the Gramm-Leach-Bliley Act; 

3 (4) coordinate and oversee the operation of all 

4 administrative, enforcement, and research activities 

5 of the Agency; 

6 (5) adopt and use a seal; 

7 (6) determine the character of and the necessity 

8 for the Agency’s obligations and expenditures, and 

9 the manner in which they shall be incurred, allowed, 

10 and paid; 

11 (7) delegate authority, at the Director’s discre12 tion, to any officer or employee of the Agency to 

13 take action under any provision of this title or under 

14 other applicable law; 

15 (8) to implement this title and the Agency’s au16 thorities under the enumerated consumer laws and 

17 under subtitles F and H through regulations, orders, 

18 guidance, interpretations, statements of policy, ex19 aminations, and enforcement actions; and 

20 (9) perform such other functions as may be au21 thorized or required by law. 

22 SEC. 4106. ADMINISTRATION. 

23 (a) OFFICERS.—The Director shall appoint the fol24 lowing officials: 


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1 (1) A secretary, who shall be charged with 

2 maintaining the records of the Agency and per3 forming such other activities as the Director directs. 

4 (2) A general counsel, who shall be charged 

5 with overseeing the legal affairs of the Agency and 

6 performing such other activities as the Director di7 rects. 

8 (3) An inspector general, who shall have the au9 thority and functions of an inspector general of an 

10 establishment under the Inspector General Act of 

11 1978 (5 U.S.C. App. 3). 

12 (4) An Ombudsperson, who shall— 

13 (A) develop and maintain expertise in and 

14 understanding of the law relating to consumer 

15 financial products; 

16 (B) at the request of a Federal agency or 

17 a State agency, and with the prior approval of 

18 the Director, advise such agency with respect to 

19 actions that may affect consumers; 

20 (C) advise consumers who may have a le21 gitimate potential or actual claim against a 

22 Federal agency involving the provision of con23 sumer financial products regarding their rights 

24 under this title; 


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1 (D) identify Federal agency actions that 

2 have potential implications for consumers and, 

3 if appropriate, and with the prior approval of 

4 the Director, advise the relevant Federal agen5 cies with respect to those implications; 

6 (E) provide information to private citizens, 

7 civic groups, Federal agencies, State agencies, 

8 and other interested parties regarding the 

9 rights of those parties under this title; 

10 (F) develop, maintain, and provide exper11 tise designed to assist covered persons, espe12 cially smaller depository institutions and other 

13 smaller entities to comply with regulations and 

14 other requirements issued to implement the pro15 visions of this title, and where such assistance 

16 for smaller depository institutions shall be pro17 vided jointly by the Agency and the appropriate 

18 Federal banking agency; 

19 (G) develop procedures to assist covered 

20 persons, especially smaller depository institu21 tions and other smaller entities, in responding 

22 to or challenging actions taken by the Director 

23 or the Agency to implement the provisions of 

24 this title and to ensure that safeguards exist to 


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1 preserve the confidentiality of covered persons 

2 using those procedures; and 

3 (H) perform such other duties as the Di4 rector may delegate to the Ombudsperson. 

5 (b) PERSONNEL.— 

6 (1) APPOINTMENT.—The Director may fix the 

7 number of, and appoint and direct, all employees of 

8 the Agency. 

9 (2) COMPENSATION.— 

10 (A) PAY.—The Director shall fix, adjust, 

11 and administer the pay for all employees of the 

12 Agency without regard to the provisions of 

13 chapter 51 or subchapter III of chapter 53 of 

14 title 5, United States Code. 

15 (B) BENEFITS.—The Director may provide 

16 additional benefits to Agency employees if the 

17 same type of benefits are then being provided 

18 by the Board of Governors or, if not then being 

19 provided, could be provided by the Board of 

20 Governors under applicable provisions of law or 

21 regulations. 

22 (C) MINIMUM STANDARD.—The Director 

23 shall at all times provide compensation and ben24 efits to classes of employees that, at a min25 imum, are equivalent to the compensation and 


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1 benefits provided by the Board of Governors for 

2 the corresponding class of employees in any fis3 cal year. 

4 (c) SPECIFIC FUNCTIONAL UNITS.— 

5 (1) RESEARCH.—The Agency shall establish a 

6 unit whose functions shall include— 

7 (A) conducting research on consumer fi8 nancial counseling and education, including— 

9 (i) on the topics of debt, credit, sav10 ings, financial product usage, and financial 

11 planning; 

12 (ii) exploring effective methods, tools, 

13 and approaches; and 

14 (iii) identifying ways to incorporate 

15 new technology for the delivery and evalua16 tion of financial counseling and education 

17 efforts; 

18 (B) researching, analyzing, and reporting 

19 on— 

20 (i) current and prospective develop21 ments in markets for consumer financial 

22 products or services, including market 

23 areas of alternative consumer financial 

24 products or services with high growth 

25 rates; 


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1 (ii) consumer awareness, under2 standing, and use of disclosures and com3 munications regarding consumer financial 

4 products or services; 

5 (iii) consumer awareness and under6 standing of costs, risks, and benefits of 

7 consumer financial products or services; 

8 (iv) consumer behavior with respect to 

9 consumer financial products or services, in10 cluding performance on mortgage loan; 

11 (v) experiences of traditionally under12 served consumers, including un-banked and 

13 under-banked consumers, regarding con14 sumer financial products or services, and 

15 the impact of Federal policies, including 

16 resource limits in means-tested Federal 

17 benefit programs (as defined in section 

18 318 of the Higher Education Act of 1965; 

19 20 U.S.C. 1059e), on such consumers in 

20 influencing banking behavior; and 

21 (vi) the nature, range, and size of 

22 variations between the credit scores sold to 

23 creditors and those sold to consumers by 

24 consumer reporting agencies that compile 

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1 tionwide basis (as defined in section 

2 603(p) of the Fair Credit Reporting Act; 

3 15 U.S.C. 1681a(p)), and whether such 

4 variations disadvantage consumers; 

5 (C) identifying priorities for consumer fi6 nancial education efforts, based on consumer 

7 complaints, research or analysis conducted pur8 suant to subparagraph (A), or other informa9 tion; and 

10 (D) testing and identifying methods of 

11 educating consumers to determine which meth12 ods are most effective. 

13 (2) COMMUNITY AFFAIRS.—The Director shall 

14 establish a unit whose functions shall include pro15 viding information, guidance, and technical assist16 ance regarding the provision of consumer financial 

17 products or services to traditionally underserved con18 sumers and communities. 

19 (3) CONSUMER COMPLAINTS.— 

20 (A) IN GENERAL.—The Director shall es21 tablish a unit whose functions shall include es22 tablishing a central database, or utilizing an ex23 isting database, for collecting and tracking in24 formation on consumer complaints about conVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00841 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 sumer financial products or services and resolu2 tion of complaints. 

3 (B) COORDINATION.—In performing the 

4 functions described in subparagraph (A), the 

5 Director shall coordinate with the Federal 

6 banking agencies, the Federal Trade Commis7 sion, other Federal agencies, and other regu8 latory agencies or enforcement authorities. 

9 (C) DATA SHARING REQUIRED.—To the 

10 extent permitted by law and the regulations 

11 prescribed by the Director regarding the con12 fidential treatment of information, the Director 

13 shall share data relating to consumer com14 plaints with Federal banking agencies, the Fed15 eral Trade Commission, other Federal agencies, 

16 and State regulators. To the extent permitted 

17 by law and the regulations prescribed by the 

18 Federal banking agencies and other Federal 

19 agencies regarding the confidential treatment of 

20 information, the Federal banking agencies and 

21 other Federal agencies, respectively, shall share 

22 data relating to consumer complaints with the 

23 Director and the Agency. 

24 (D) CONSUMER COMPLAINT WEB SITE.— 

25 The Director shall establish an Internet Web 


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1 site for consumer complaints and inquiries con2 cerning institutions regulated by the Agency. 

3 The Web site shall be interoperable with the 

4 database established under subparagraph (A). 

5 (4) CONSUMER FINANCIAL EDUCATION.— 

6 (A) IN GENERAL.—The Agency shall es7 tablish a unit to be named the Office of Finan8 cial Literacy, whose functions shall include ac9 tivities designed to facilitate the education of 

10 consumers on consumer financial products and 

11 services, including through the dissemination of 

12 materials to consumers on such topics. 

13 (B) DIRECTOR.—The Office of Financial 

14 Literacy shall be headed by a director. 

15 (C) DUTIES.—Such unit shall— 

16 (i) develop goals for programs to be 

17 provided by persons that provide consumer 

18 financial education and counseling, includ19 ing programs through which such per20 sons— 

21 (I) provide one-on-one financial 

22 counseling; 

23 (II) help individuals understand 

24 basic banking and savings tools; 


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1 (III) help individuals understand 

2 their credit history and credit score; 

3 (IV) assist individuals in efforts 

4 to plan for major purchases, reduce 

5 their debt, and improve their financial 

6 stability; and 

7 (V) work with individuals to de8 sign plans for long-term savings; 

9 (ii) develop recommendations regard10 ing effective certification of persons pro11 viding programs, or performing the activi12 ties, described in clause (i), including rec13 ommendations regarding— 

14 (I) certification processes and 

15 standards for certification; 

16 (II) appropriate certifying bodies; 

17 and 

18 (III) mechanisms for funding the 

19 certification processes; 

20 (iii) develop a technology tool to col21 lect data on financial education and coun22 seling outcomes; and 

23 (iv) conduct research to identify effec24 tive methods, tools, technoloy, and strate25 gies to educate and counsel consumers 


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1 about personal finance management, in2 cluding on the topics of debt, credit, sav3 ings, financial product usage, and financial 

4 planning. 

5 (D) COORDINATION.—Such unit shall co6 ordinate with other units within the Agency in 

7 carrying out its functions, including— 

8 (i) working with the unit established 

9 under paragraph (2) to— 

10 (I) provide information and re11 sources to community organizations, 

12 nonprofit organizations, and other en13 tities to assist in helping educate con14 sumers about consumer financial 

15 products and services; and 

16 (II) develop a marketing strategy 

17 to promote financial education and 

18 one-on-one counseling; and 

19 (ii) working with the unit established 

20 under paragraph (1) to conduct research 

21 related to consumer financial education 

22 and counseling. 

23 (d) SINGLE TOLL-FREE TELEPHONE NUMBER FOR

24 CONSUMER COMPLAINTS AND INQUIRIES.— 


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1 (1) CALL INTAKE SYSTEM.—The Consumer Fi2 nancial Protection Agency shall establish a single, 

3 toll-free telephone number for consumer complaints 

4 and inquiries concerning institutions regulated by 

5 such agencies and a system for collecting and moni6 toring complaints and, as soon as practicable, a sys7 tem for routing such calls to the Federal financial 

8 institution regulatory agency that primarily super9 vises the financial institution, or that is otherwise 

10 the appropriate Federal agency to address the sub11 ject of the complaint or inquiry. 

12 (2) ROUTING CALLS TO STATES.—To the extent 

13 practicable, State agencies may receive appropriate 

14 call transfers from the system established under 

15 paragraph (1) if— 

16 (A) the State agency’s system has the 

17 functional capacity to receive calls routed by the 

18 system; and 

19 (B) the State agency has satisfied any con20 ditions of participation in the system that the 

21 Council, coordinating with State agencies 

22 through the chairperson of the State Liaison 

23 Committee, may establish. 

24 (e) REPORT TO THE CONGRESS.—Before the end of 

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1 ment of this title, the Federal financial institution regu2 latory agencies shall submit a report to the Committee on 

3 Financial Services of the House of Representatives and 

4 the Committee on Banking, Housing, and Urban Affairs 

5 of the Senate describing the agencies’ efforts to estab6 lish— 

7 (1) a public interagency Web site for directing 

8 and referring Internet consumer complaints and in9 quiries concerning any financial institution to the 

10 Consumer Financial Protection Agency for purposes 

11 of collecting, monitoring, and responding to such 

12 complaints and, where appropriate, a system for re13 ferring complaints to the Federal financial institu14 tion regulatory agency, other Federal agency, or 

15 State agency that is otherwise the appropriate agen16 cy to address the subject of the complaint or inquiry; 

17 and 

18 (2) a system to expedite the prompt and effec19 tive rerouting of any misdirected consumer com20 plaint or inquiry documents between or among the 

21 agencies, with prompt referral of any complaint or 

22 inquiry to the appropriate Federal financial institu23 tion regulatory agency, and to participating State 

24 agencies. 


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1 (f) OFFICE OF FINANCIAL PROTECTION FOR OLDER

2 AMERICANS.— 

3 (1) ESTABLISHMENT.—Before the end of the 

4 180-day period beginning on the date of the enact5 ment of this title, the Director shall establish within 

6 the Agency the Office of Financial Protection for 

7 Older Americans, whose functions shall include ac8 tivities designed to facilitate the financial literacy of 

9 individuals who have attained the age of 62 years or 

10 more (in this paragraph, referred to as ‘‘seniors’’) 

11 on protection from unfair and deceptive practices 

12 and on current and future financial choices, includ13 ing through the dissemination of materials to seniors 

14 on such topics. 

15 (2) DIRECTOR.—The Office of Financial Pro16 tection for Older Americans shall be headed by a di17 rector. 

18 (3) DUTIES.—Such unit shall perform the fol19 lowing duties: 

20 (A) Develop goals for programs that pro21 vide seniors financial literacy and counseling, 

22 including programs that— 

23 (i) help seniors recognize warning 

24 signs of unfair and deceptive practices, 

25 protect themselves from such practices; 


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1 (ii) provide one-on-one financial coun2 seling on issues including long-term sav3 ings and later-life economic security; and 

4 (iii) provide personal consumer credit 

5 advocacy to respond to consumer problems 

6 caused by unfair and deceptive practices. 

7 (B) Monitor certifications or designations 

8 of financial advisors who advise seniors and 

9 alert the Securities and Exchange Commission 

10 and State regulators of certifications or des11 ignations that are identified as unfair or decep12 tive. 

13 (C) Not later than 18 months after the 

14 date of the establishment of the Office of Fi15 nancial Protection for Older Americans, submit 

16 to Congress and the Securities and Exchange 

17 Commission recommendations of the best prac18 tices for any legislative and regulatory— 

19 (i) disseminating information regard20 ing the legitimacy of certifications of finan21 cial advisers who advise seniors; 

22 (ii) methods in which a senior can 

23 identify the financial advisor most appro24 priate for the senior’s needs; and 


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1 (iii) methods in which a senior can 

2 verify a financial advisor’s credentials. 

3 (D) Conduct research to identify best prac4 tices and effective methods, tools, technology 

5 and strategies to educate and counsel seniors 

6 about personal finance management with a 

7 focus on— 

8 (i) protecting themselves from unfair 

9 and deceptive practices; 

10 (ii) long-term savings; and 

11 (iii) planning for retirement and long12 term care. 

13 (E) Coordinate consumer protection efforts 

14 of seniors with other Federal agencies and 

15 State regulators, as appropriate, to promote 

16 consistent, effective, and efficient enforcement. 

17 (F) Work with community organizations, 

18 non-profit organizations, and other entities that 

19 are involved with educating or assisting seniors 

20 (including the National Education and Re21 source Center on Women and Retirement Plan22 ning). 

23 (g) OFFICE OF FAIR LENDING AND EQUAL OPPOR24 TUNITY.— 


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1 (1) ESTABLISHMENT.—Before the end of the 

2 180-day period beginning on the date of the enact3 ment of this title, the Director shall establish within 

4 the Agency the Office of Fair Lending and Equal 

5 Opportunity. 

6 (2) FUNCTIONS.—The Office of Fair Lending 

7 and Equal Opportunity shall have such powers and 

8 duties as the Director may delegate the Office which 

9 shall include the following functions: 

10 (A) Providing oversight and enforcement of 

11 Federal laws intended to ensure the fair, equi12 table, and nondiscriminatory access to credit for 

13 both individuals and communities that are en14 forced by the Agency, including the Equal 

15 Credit Opportunity Act and the Home Mort16 gage Disclosure Act. 

17 (B) Coordinating fair lending enforcement 

18 efforts of the Agency with other Federal agen19 cies and State regulators, as appropriate, to 

20 promote consistent, efficient and effective en21 forcement of Federal fair lending laws. 

22 (C) Working with private industry, fair 

23 lending, civil rights, consumer and community 

24 advocates on the promotion of fair lending com25 pliance and education. 


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1 (D) Providing annual reports to the Con2 gress on the Agency’s efforts to fulfill its fair 

3 lending mandate. 

4 (3) ADMINISTRATION OF OFFICE.—There is 

5 hereby established the position of Assistant Director 

6 of the Agency for Fair Lending and Equal Oppor7 tunity who— 

8 (A) shall be appointed by the Director; 

9 (B) shall carry out such duties as the Di10 rector may delegate to such Assistant Director; 

11 and 

12 (C) shall serve as the Director of the Of13 fice of Fair Lending and Equal Opportunity. 

14 (4) PROHIBITIONS ON PARTICIPATION IN PRO15 GRAMS WITH RESPECT TO CERTAIN INDICTED ORGA16 NIZATIONS.— 

17 (A) PROHIBITION.—The Director of the 

18 Office of Fair Lending and Equal Opportunity 

19 may not allow a covered organization to partici20 pate in any program established by such Direc21 tor. 

22 (B) COVERED ORGANIZATION.—In this 

23 paragraph, the term ‘‘covered organization’’ 

24 means any of the following: 


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1 (i) Any organization that has been in2 dicted for a violation under any Federal or 

3 State law governing the financing of a 

4 campaign for election for public office or 

5 any law governing the administration of an 

6 election for public office, including a law 

7 relating to voter registration. 

8 (ii) Any organization that had its 

9 State corporate charter terminated due to 

10 its failure to comply with Federal or State 

11 lobbying disclosure requirements. 

12 (iii) Any organization that has filed a 

13 fraudulent form with any Federal or State 

14 regulatory agency. 

15 (iv) Any organization that— 

16 (I) employs any applicable indi17 vidual, in a permanent or temporary 

18 capacity; 

19 (II) has under contract or retains 

20 any applicable individual; or 

21 (III) has any applicable indi22 vidual acting on the organization’s be23 half or with the express or apparent 

24 authority of the organization. 


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1 (C) ADDITIONAL DEFINITIONS.—In this 

2 paragraph: 

3 (i) The term ‘‘organization’’ includes 

4 the Association of Community Organiza5 tions for Reform Now (in this paragraph 

6 referred to as ‘‘ACORN’’) and any 

7 ACORN-related affiliate. 

8 (ii) The term ‘‘ACORN-related affil9 iate’’ means any of the following: 

10 (I) Any State chapter of ACORN 

11 registered with the Secretary of 

12 State’s office in that State. 

13 (II) Any organization that shares 

14 directors, employees, or independent 

15 contractors with ACORN. 

16 (III) Any organization that has a 

17 financial stake in ACORN. 

18 (IV) Any organization whose fi19 nances, whether federally funded, 

20 donor-funded, or raised through orga21 nizational goods and services, are 

22 shared or controlled by ACORN. 

23 (iii) The term ‘‘applicable individual’’ 

24 means an individual who has been indicted 

25 for a violation under Federal or State law 


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1 relating to an election for Federal or State 

2 office. 

3 (D) REVISION OF FEDERAL ACQUISITION

4 REGULATION.—The Federal Acquisition Regu5 lation shall be revised to carry out the provi6 sions of this paragraph relating to contracts. 

7 (E) SEVERABILITY.—If any provision of 

8 this section or any application of such provision 

9 to any person or circumstance is held to be un10 constitutional, the remainder of this section and 

11 the application of the provision to any other 

12 person or circumstance shall not be affected. 

13 SEC. 4107. CONSUMER ADVISORY BOARD. 

14 (a) ESTABLISHMENT REQUIRED.—The Director shall 

15 establish a Consumer Advisory Board to advise and con16 sult with the Director in the exercise of the functions of 

17 the Director and the Agency under this title, the enumer18 ated consumer laws, and to provide information on emerg19 ing practices in the consumer financial products or serv20 ices industry. 

21 (b) MEMBERSHIP.— 

22 (1) IN GENERAL.—In appointing the members 

23 of the Consumer Advisory Board, the Director shall 

24 seek— 


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1 (A) to assemble experts in financial serv2 ices, community development, fair lending and 

3 civil rights, consumer protection, and consumer 

4 financial products or services; and 

5 (B) to represent the interests of covered 

6 persons and consumers. 

7 (2) PROHIBITION ON MEMBERSHIP WITH RE8 SPECT TO CERTAIN INDICTED ORGANIZATIONS.—The 

9 director may not appoint an employee of a covered 

10 organization (as defined in section 4105(f)(4)(B)) to 

11 the Consumer Advisory Board. 

12 (c) POLITICAL AFFILIATION.—Not more than 1 more 

13 than half of the members of the Consumer Advisory Board 

14 may be members of the same political party. 

15 (d) MEETINGS.—The Consumer Advisory Board shall 

16 meet from time to time at the call of the Director, but, 

17 at a minimum, shall meet at least twice in each year. 

18 (e) COMPENSATION AND TRAVEL EXPENSES.—Mem19 bers of the Consumer Advisory Board who are not full20 time employees of the United States shall— 

21 (1) be entitled to receive compensation at a rate 

22 fixed by the Director while attending meetings of the 

23 Consumer Advisory Board, including travel time; 

24 and 


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1 (2) be allowed travel expenses, including trans2 portation and subsistence, while away from their 

3 homes or regular places of business. 

4 SEC. 4108. COORDINATION. 

5 (a) COORDINATION WITH OTHER FEDERAL AGEN6 CIES AND STATE REGULATORS.—The Director shall co7 ordinate with the Securities and Exchange Commission, 

8 the Commodity Futures Trading Commission, the Sec9 retary of the Treasury, the Federal Trade Commission, 

10 and other Federal agencies and State regulators, as appro11 priate, to promote consistent regulatory treatment of, and 

12 enforcement related to, consumer and investment prod13 ucts, services, and laws. 

14 (b) COORDINATION OF CONSUMER EDUCATION INI15 TIATIVES.— 

16 (1) IN GENERAL.—The Director shall coordi17 nate with each agency that is a member of the Fi18 nancial Literacy and Education Commission estab19 lished by the Financial Literacy and Education Im20 provement Act (20 U.S.C. 9701 et seq.) to assist 

21 each agency in enhancing its existing financial lit22 eracy and education initiatives to better achieve the 

23 goals in paragraph (2) and to ensure the consistency 

24 of such initiatives across Federal agencies. 


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1 (2) GOALS OF COORDINATION.—In coordinating 

2 with the agencies described in paragraph (1), the 

3 Director shall seek to improve efforts to educate 

4 consumers about financial matters generally, the 

5 management of their own financial affairs, and their 

6 judgments about the appropriateness of certain fi7 nancial products. 

8 (c) COORDINATION.—The Agency may coordinate in9 vestigations, compliance examinations, information shar10 ing, and related activities in support of activities under11 taken pursuant to the Fair Housing Act by other Federal 

12 agencies. 

13 SEC. 4109. REPORTS TO THE CONGRESS. 

14 (a) REPORTS REQUIRED.—The Director shall pre15 pare and submit to the President and the appropriate 

16 committees of the Congress a report at the beginning of 

17 each regular session of the Congress, beginning with the 

18 session following the designated transfer date. 

19 (b) CONTENTS.—The reports required by subsection 

20 (a) shall include— 

21 (1) a list of the significant regulations and or22 ders adopted by the Director, as well as other sig23 nificant initiatives conducted by the Director, during 

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1 lations, orders, or other initiatives to be undertaken 

2 during the upcoming period; 

3 (2) an analysis of the major problems con4 sumers of financial products and services were con5 fronted with during the preceding year, including a 

6 description of the nature of such problems, and rec7 ommendations for such administrative and legislative 

8 action as may be appropriate to resolve such prob9 lems; 

10 (3) a list, with a brief statement of the issues, 

11 of the public supervisory and enforcement actions to 

12 which the Agency is a party (including adjudication 

13 proceedings conducted under subtitle E) during the 

14 preceding year; 

15 (4) the actions taken regarding regulations, or16 ders, and supervisory actions with respect to covered 

17 persons which are not credit unions or depository in18 stitutions, including descriptions of the types of such 

19 covered persons, financial activities, and consumer 

20 financial products or services affected by such regu21 lations, orders, and supervisory actions; 

22 (5) an appraisal of significant actions, including 

23 actions under Federal or State law, by State attor24 neys general or State regulators relating to this title, 


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1 the authorities transferred under subtitles F and H, 

2 and the enumerated consumer laws; 

3 (6) an analysis of the Agency’s efforts to in4 crease workforce and contracting diversity consistent 

5 with subtitle I of title I of this Act; 

6 (7) an analysis of the Agency’s efforts to fulfill 

7 the fair lending mission of the Agency; and 

8 (8) an appraisal of the regulatory and legal dif9 ficulties encountered by the Agency in carrying out 

10 the mission and duties of the Agency with respect to 

11 consumer protection, including a description of— 

12 (A) the difficulties and hardships encoun13 tered with respect to coordinating with other 

14 Federal and State government entities; 

15 (B) the regulatory and enforcement limita16 tions placed on the Agency by this title; 

17 (C) the practices of persons, covered and 

18 uncovered under this title, that allow such per19 sons to harm consumers and escape regulation 

20 or enforcement, including any trends identified; 

21 and 

22 (D) legislative and administrative rec23 ommendations with respect to solving or alle24 viating identified difficulties. 


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1 (c) ANNUAL APPEARANCE BEFORE THE CON2 GRESS.—The Director shall appear before the House 

3 Committee on Financial Services and the House Com4 mittee on Energy and Commerce at an annual hearing, 

5 after the report is submitted under subsection (a)— 

6 (1) to discuss the efforts, activities, objectives 

7 and plans of the Agency; and 

8 (2) discuss and answer questions concerning 

9 such report. 

10 SEC. 4110. GAO SMALL BUSINESS STUDIES. 

11 (a) STUDIES REQUIRED.—Not later than the end of 

12 the 3-year period beginning on the designated transfer 

13 date, and also 3 years thereafter, the Comptroller General 

14 of the United States shall carry out a study to examine 

15 the effects that regulations issued by the Agency have on 

16 small businesses. 

17 (b) REPORT.—At the conclusion of each study re18 quired under subsection (a), the Comptroller General of 

19 the United States shall issue a report to the Congress con20 taining the finding and determinations made by the Comp21 troller General in carrying out such study. 

22 SEC. 4111. FUNDING; FEES AND ASSESSMENTS; PENALTIES 

23 AND FINES. 

24 (a) TRANSFER OF FUNDS FROM THE BOARD OF

25 GOVERNORS.— 


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1 (1) TRANSFER REQUIRED.—Each year, begin2 ning on the designated transfer date, the Board of 

3 Governors shall transfer funds in an amount equal4 ing 10 percent of the Federal Reserve System’s total 

5 system expenses (as reported in the Budget Review 

6 of the Board of Governors most recent Annual Re7 port to Congress) to the Director for the purposes 

8 of carrying out the authorities granted in this title, 

9 under the enumerated consumer laws, and trans10 ferred under subtitles F and H. 

11 (2) PROCEDURES.—The Board of Governors, in 

12 consultation with the Agency, shall make appro13 priate arrangements to transfer funds to the Direc14 tor in accordance with this subsection. 

15 (b) FEES AND ASSESSMENTS.— 

16 (1) ASSESSMENT REQUIRED.— 

17 (A) IN GENERAL.—Taking into account 

18 such other sums available to the Agency and 

19 subject to the provisions of this subsection and 

20 subsection (d), the Director shall assess fees on 

21 covered persons to meet the Agency’s expenses 

22 for carrying out the duties and responsibilities 

23 of the Agency, including supervising such cov24 ered persons. 


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1 (B) BASIS FOR ASSESSMENT.—The Agency 

2 shall assess fees on covered persons pursuant to 

3 this subsection based on the size, complexity of, 

4 risk posed by, and the compliance record of the 

5 covered person under the enumerated consumer 

6 laws, the laws and authorities transferred under 

7 subtitles F and H, and this title. 

8 (2) REGULATIONS.— 

9 (A) IN GENERAL.—The Director shall pre10 scribe regulations to govern the imposition and 

11 collection of fees and assessments. 

12 (B) FACTORS REQUIRED TO BE AD13 DRESSED.—Regulations prescribed by the Di14 rector under this subsection shall specify and 

15 define— 

16 (i) the basis of fees or assessments 

17 (such as the outstanding number of con18 sumer credit accounts, off-balance sheet re19 ceivables attributable to the covered per20 son, total consolidated assets, total assets 

21 under management, or volume of consumer 

22 financial transactions or use of service pro23 viders); 

24 (ii) the amount and frequency of fees 

25 or assessments; and 


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1 (iii) such other factors that the Direc2 tor determines are appropriate, which shall 

3 include a covered person’s compliance 

4 record under the enumerated consumer 

5 laws, the authorities transferred under 

6 subtitles F and H, and this title. 

7 (3) ASSESSMENTS ON DEPOSITORY INSTITU8 TION COVERED PERSONS.— 

9 (A) DEPOSITORY INSTITUTION COVERED

10 PERSON DEFINED.—For purposes of this sec11 tion, the term ‘‘depository institution covered 

12 person’’ means a covered person that is an in13 sured depository institution or credit union. 

14 (B) ASSESSMENTS.— 

15 (i) FEES REQUIRED.—The Director 

16 shall assess fees for supervision as are ap17 propriate on depository institution covered 

18 persons, taking into account the size, com19 plexity of, risk posed by, and the compli20 ance record of the covered person under 

21 the enumerated consumer laws, the laws 

22 and authorities transferred under subtitles 

23 F and H, and this title. 

24 (ii) LIMITATION ON CERTAIN FEES.— 

25 The Agency shall not assess examination 


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1 fees on an institution referred to in section 

2 4203(a), or an institution whose examina3 tion responsibilities have been delegated to 

4 an appropriate agency, pursuant to section 

5 4202(c)(11). 

6 (iii) BASIS FOR FEE AMOUNTS.—Fees 

7 assessed by the Director under this sub8 paragraph may be established at levels nec9 essary to meet the Agency’s expenses for 

10 carrying out the duties and responsibilities 

11 of the Director and the Agency under this 

12 title with regard to depository institution 

13 covered persons. 

14 (C) COORDINATION DURING IMPLEMENTA15 TION PERIOD.—The Director and the agencies 

16 responsible for chartering and or supervising 

17 depository institution covered persons shall co18 ordinate on the levels of fees assessed on depos19 itory institution covered persons under this 

20 paragraph, so that levels of assessments under 

21 this subparagraph combined with levels of as22 sessments by agencies responsible for chartering 

23 and or supervising depository institution cov24 ered persons in each of the first 3 years fol25 lowing the date of enactment of this Act shall 


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1 be no more than the assessments such deposi2 tory institution covered person was required to 

3 pay for the calendar year immediately preceding 

4 the designated transfer date. 

5 (D) MARGINAL ASSESSMENT RATE.— 

6 (i) IN GENERAL.—In setting assess7 ment rates for depository institution cov8 ered persons, the Director shall not impose 

9 assessments that, on a risk-adjusted basis, 

10 result in higher marginal assessment rates 

11 for depository institution covered persons 

12 with assets of less than $25,000,000,000 

13 than the marginal rates for depository in14 stitutions covered persons with assets that 

15 exceed that amount. 

16 (ii) RULE OF CONSTRUCTION.— 

17 Clause (i) shall not be construed as lim18 iting or impairing the authority of the Di19 rector to set assessments that would result 

20 in higher marginal assessment rates on the 

21 larger depository institution covered per22 sons or to set assessments that would re23 sult in higher marginal assessments on the 

24 depository institution covered persons with 

25 assets of less than $25,000,000,000 if 


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1 based on the compliance record of or high2 er risks posed by such covered persons. 

3 (E) LIMITATIONS ON ASSESSMENTS.— 

4 (i) ASSESSMENTS FOR ADMINISTRA5 TIVE COSTS.—Notwithstanding any provi6 sion in this title, no depository institution 

7 covered person shall be charged an assess8 ment to be used for the supervision, exam9 ination, or enforcement activities by the 

10 Agency of nondepository covered persons. 

11 (ii) AMOUNTS PAID FOR CONSUMER

12 COMPLIANCE SUPERVISION.—Notwith13 standing any provision in this title, no de14 pository institution covered person shall 

15 pay more for consumer compliance super16 vision so that levels of assessments under 

17 this subparagraph combined with levels of 

18 assessments by an agency responsible for 

19 chartering and/or supervising the deposi20 tory institution covered person shall be no 

21 more than it paid before the date of enact22 ment of this title. 

23 (4) ASSESSMENTS ON NONDEPOSITORY COV24 ERED PERSONS.— 


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1 (A) NONDEPOSITORY COVERED PERSON

2 DEFINED.—For purposes of this section, the 

3 term ‘‘nondepository covered person’’— 

4 (i) means a covered person that is not 

5 a credit union or insured depository insti6 tution; and 

7 (ii) includes any bank holding com8 pany. 

9 (B) ASSESSMENTS.— 

10 (i) FEES REQUIRED.—The Director 

11 shall assess fees for registration, examina12 tion, and supervision of nondepository cov13 ered persons. 

14 (ii) BASIS FOR FEE AMOUNTS.—Fees 

15 assessed by the Director under this sub16 paragraph may be established at levels nec17 essary to meet the Agency’s expenses for 

18 carrying out the duties and responsibilities 

19 of the Director and the Agency, including 

20 supervising such covered persons, taking 

21 into account such other sums available to 

22 the Agency. 

23 (iii) REGISTRATION FEE MINIMUMS.— 

24 Registration fees imposed on a nondeposi25 tory covered person under this paragraph 


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1 shall, at a minimum, be imposed on such 

2 covered person at the time the person reg3 isters (or periodically renews any such reg4 istration) with the Agency, in accordance 

5 with regulations prescribed by the Direc6 tor. 

7 (C) NONDEPOSITORY COVERED PERSON

8 ASSESSMENT NOT LESS THAN FOR DEPOSITORY

9 COVERED PERSONS.—Assessment rates levied 

10 by the Director under this section on a non11 depository institution covered persons shall be 

12 no less than assessments levied by the Agency 

13 under this section on a depository institution 

14 covered person with similar characteristics. 

15 (D) OFFSETTING COLLECTIONS.—Fees as16 sessed under this paragraph— 

17 (i) shall not be collected for any fiscal 

18 year except to the extent provided in ad19 vance in appropriation Acts; and 

20 (ii) shall be deposited and credited as 

21 offsetting collections to the account pro22 viding appropriations to the Agency. 

23 (c) AUTHORIZATION OF APPROPRIATIONS.— 

24 (1) IN GENERAL.—For the purposes of carrying 

25 out the authorities granted in this title, under the 


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1 enumerated consumer laws, and the laws and au2 thorities transferred under subtitles F and H, there 

3 are authorized to be appropriated to the Director 

4 $200,000,000 for each of fiscal years 2010, 2011, 

5 2012, 2013, and 2014. 

6 (2) APPORTIONMENT.—Notwithstanding any 

7 other provision of law, such amounts shall be subject 

8 to apportionment under section 1517 of title 31, 

9 United States Code, and restrictions that generally 

10 apply to the use of appropriated funds in title 31, 

11 United States Code, and other laws. 

12 (3) OTHER AVAILABLE FUNDS TAKEN INTO AC13 COUNT.—Sums appropriated under this subsection 

14 shall take into account such other sums available to 

15 the Agency under this section. 

16 (d) CONSUMER FINANCIAL PROTECTION AGENCY

17 DEPOSITORY INSTITUTION FUND.— 

18 (1) ESTABLISHMENT.— 

19 (A) IN GENERAL.—There is established in 

20 the Treasury a separate fund to be known as 

21 the ‘‘Consumer Financial Protection Agency 

22 Depository Institution Fund’’ (hereafter in this 

23 section referred to as the ‘‘CFPA Depository 

24 Fund’’). 


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1 (B) AMOUNTS IN FUND NOT AVAILABLE

2 FOR CERTAIN PURPOSES.—Other than pursuant 

3 to subsection (f), amounts on deposit in the 

4 CFPA Depository Fund shall not be used in the 

5 supervision and examination of nondepository 

6 institution covered persons. 

7 (2) ALL TRANSFERRED FUNDS DEPOSITED.— 

8 All amounts transferred to the Agency under sub9 section (a) shall be deposited into the CFPA Deposi10 tory Fund or the CFPA Nondepository Fund, at the 

11 discretion of the Agency. 

12 (3) ALL APPLICABLE SUPERVISORY FEES AND

13 ASSESSMENTS DEPOSITED.—The Director shall de14 posit all amounts received from assessments under 

15 subsection (b)(3) in the CFPA Depository Fund. 

16 (e) CONSUMER FINANCIAL PROTECTION AGENCY

17 NONDEPOSITORY INSTITUTION FUND.— 

18 (1) ESTABLISHMENT.— 

19 (A) IN GENERAL.—There is established in 

20 the Treasury a separate fund called the Con21 sumer Financial Protection Agency Nondeposi22 tory Institution Fund (hereafter in this section 

23 referred to as the ‘‘CFPA Nondepository 

24 Fund’’). 


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1 (B) AMOUNTS IN FUND NOT AVAILABLE

2 FOR CERTAIN PURPOSES.—Other than pursuant 

3 to subsection (f), amounts on deposit in the 

4 CFPA Nondepository Fund shall not be used 

5 for the supervision and examination of deposi6 tory institution covered persons. 

7 (2) ALL APPLICABLE SUPERVISORY FEES AND

8 ASSESSMENTS DEPOSITED.—The Director shall de9 posit all amounts received from assessments under 

10 subsection (b)(4) in the CFPA Nondepository Fund. 

11 (f) GENERAL PROVISIONS RELATING TO FUNDS.— 

12 (1) MAINTENANCE OF FUNDS.— 

13 (A) AGENCY FUNDS MAINTAINED BY

14 TREASURY.—The Consumer Financial Protec15 tion Agency Depository Institution Fund estab16 lished under subsection (d) and the Consumer 

17 Financial Protection Agency Nondepository In18 stitution Fund established under subsection (e) 

19 shall each be— 

20 (i) maintained and administered by 

21 the Secretary; and 

22 (ii) maintained separately and not 

23 commingled. 

24 (B) AGENCY’S AUTHORITY.—Any provision 

25 of this title forbidding the commingling or use 


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1 of the CFPA Depository Fund and the CFPA 

2 Nondepository Fund shall not be construed as 

3 limiting or impairing the authority of the Agen4 cy to use the same facilities and resources in 

5 the course of conducting supervisory and regu6 latory functions with respect to depository insti7 tutions and nondepository institutions, or to in8 tegrate such functions. 

9 (C) ACCOUNTING REQUIREMENTS.— 

10 (i) ACCOUNTING FOR USE OF FACILI11 TIES AND RESOURCES.—The Agency shall 

12 keep a full and complete accounting of all 

13 costs and expenses associated with the use 

14 of any facility or resource used in the 

15 course of any function specified in sub16 paragraph (B) and shall allocate, in the 

17 manner provided in subparagraph (D), any 

18 such costs and expenses incurred by the 

19 Agency— 

20 (I) with respect to depository in21 stitution covered persons, to the 

22 CFPA Depository Fund; and 

23 (II) with respect to nondepository 

24 covered persons, to the CFPA Non25 depository fund. 


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1 (D) ALLOCATION OF ADMINISTRATIVE EX2 PENSES.—Any personnel, administrative, or 

3 other overhead expense of the Agency shall be 

4 allocated— 

5 (i) fully to the CFPA Depository 

6 Fund if the expense was incurred directly 

7 as a result of the Agency’s responsibilities 

8 solely with respect to depository institution 

9 covered persons; 

10 (ii) fully to the CFPA Nondepository 

11 Fund, if the expense was incurred directly 

12 as a result of the Agency’s responsibilities 

13 solely with respect to nondepository cov14 ered persons; 

15 (iii) between the CFPA Depository 

16 Fund and the CFPA Nondepository Fund, 

17 in amounts reflecting the relative degree to 

18 which the expense was incurred that are 

19 reasonably related as a general matter to 

20 activities of depository institution covered 

21 persons, and nondepository covered per22 sons; and 

23 (iv) if the Director is unable to make 

24 a complete allocation under clause (i), (ii), 

25 or (iii), between the CFPA Depository 


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1 Fund and the CFPA Nondepository Fund, 

2 in amounts reflecting the relative propor3 tion that, as of the end of the preceding 

4 year— 

5 (I) the aggregate assets of all de6 pository institution covered persons 

7 bears to the aggregate assets of all 

8 covered persons; and 

9 (II) the aggregate assets of all 

10 nondepository covered persons bears 

11 to the aggregate assets of all covered 

12 persons. 

13 (E) AGENCY FUND.—The ‘‘Agency fund’’ 

14 means the Consumer Financial Protection 

15 Agency Depository Institution Fund established 

16 under subsection (d), and, the Consumer Fi17 nancial Protection Agency Nondepository Insti18 tution Fund established under subsection (e), 

19 and the Consumer Financial Protection Agency 

20 Civil Penalty Fund established under subsection 

21 (g). 

22 (2) INVESTMENT.— 

23 (A) AMOUNTS IN FUNDS MAY BE IN24 VESTED.—The Director may request the Sec25 retary to invest the portion of any Agency fund 


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1 that, in the Director’s judgment, is not required 

2 to meet the current needs of such fund. 

3 (B) ELIGIBLE INVESTMENTS.—Invest4 ments pursuant to subparagraph (A) shall be 

5 made by the Secretary in obligations of the 

6 United States or obligations that are guaran7 teed as to principal and interest by the United 

8 States, with maturities suitable to the needs of 

9 the Agency fund involved, as determined by the 

10 Director. 

11 (C) INTEREST AND PROCEEDS CRED12 ITED.—The interest on, and the proceeds from 

13 the sale or redemption of, any obligations held 

14 in the respective Agency Fund shall be credited 

15 to and form a part of the respective Agency 

16 Fund. 

17 (3) EXCEPTION.—Notwithstanding paragraph 

18 (1), an attorney’s activities related to assisting an19 other person in preventing a foreclosure shall be 

20 subject to this title except to the extent such activi21 ties constitute, or are incidental to, the provision of 

22 legal services to a client of the attorney. 

23 (g) PENALTIES AND FINES.— 

24 (1) ESTABLISHMENT OF VICTIMS RELIEF

25 FUND.—There is established in the Treasury of the 


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1 United States a fund to be known as the ‘‘Consumer 

2 Financial Protection Agency Civil Penalty Fund’’ 

3 (hereafter in this section referred to as the ‘‘Civil 

4 Penalty Fund’’). 

5 (2) DEPOSITS.—If the Agency obtains a civil 

6 penalty against any person in any judicial or admin7 istrative action under this title, any law or authority 

8 transferred under subtitles F and H, or any enumer9 ated consumer law, the Agency shall deposit into the 

10 Civil Penalty Fund the amount of the penalty col11 lected. 

12 (3) PAYMENT TO VICTIMS.—Amounts in the 

13 Civil Penalty Fund shall be available to the Director, 

14 without fiscal year limitation, for payments to the 

15 victims of activities for which civil penalties have 

16 been imposed under this title, the law and authori17 ties transferred under subtitles F and H, or any 

18 enumerated consumer law. 

19 (4) FINANCIAL EDUCATION AND COUNSELING

20 PROGRAM.— 

21 (A) IN GENERAL.—To the extent such vic22 tims cannot be located or such payments are 

23 otherwise not practicable, 5 percent of the Vic24 tims Relief Fund shall be transferred, up to 

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1 retary of the Treasury so that the Secretary 

2 may carry out the Financial Education and 

3 Counseling Grant Program established under 

4 section 1132 of the Housing and Economic Re5 covery Act of 2008 (12 U.S.C. 1701). 

6 (B) MEMORANDUM OF UNDERSTANDING.— 

7 Not later than 12 months after the date of en8 actment of this subtitle, the Director shall enter 

9 into a memorandum of understanding with the 

10 Secretary of the Treasury to coordinate the re11 lease of Civil Penalty Fund amounts under sub12 paragraph (A). 

13 (C) ASSISTANCE FOR INDIVIDUALS AT FI14 NANCIAL RISK.—Section 1132 of the Housing 

15 and Economic Recovery Act of 2008 (12 U.S.C. 

16 1701) is amended— 

17 (i) in subsection (a), by striking ‘‘pro18 spective homebuyers’’ each place that term 

19 appears and inserting ‘‘individuals at fi20 nancial risk’’; 

21 (ii) in subsection (b)— 

22 (I) in paragraph (1), by striking 

23 ‘‘prospective homebuyers’’ and insert24 ing ‘‘individuals at financial risk’’; 

25 and 


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1 (II) by adding at the end the fol2 lowing: 

3 ‘‘(3) DETERMINATION OF FINANCIAL RISK.— 

4 For purposes of this section, the Director of the 

5 Consumer Financial Protection Agency shall estab6 lish the criteria used to determine whether an indi7 vidual is at financial risk, and the Secretary shall 

8 use such criteria when selecting organizations under 

9 paragraph (2).’’; and 

10 (iii) in subsection (c)(1)— 

11 (I) in subparagraph (A), by strik12 ing ‘‘or’’; 

13 (II) in subparagraph (B), by 

14 striking the period and inserting ‘‘; 

15 or’’; and 

16 (III) by adding at the end the 

17 following: 

18 ‘‘(C) a nonprofit corporation that— 

19 ‘‘(i) is exempt from taxation under 

20 section 501(c)(3) of the Internal Revenue 

21 Code of 1986; and 

22 ‘‘(ii) specializes or has expertise in 

23 working with individuals at financial 

24 risk.’’. 


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1 (h) ASSESSMENTS FOR CERTAIN NONDEPOSITORY

2 INSTITUTION COVERED PERSONS.— 

3 (1) IN GENERAL.—Notwithstanding any other 

4 provision of this Act, a nondepository institution 

5 covered person shall not be subject to assessments 

6 by the Agency if— 

7 (A) the assets that are financial activities 

8 of that nondepository covered person represent 

9 less than a substantial portion of its total as10 sets; and 

11 (B) the gross revenues derived from finan12 cial activities of that nondepository covered per13 son are less than a substantial portion of its 

14 gross revenues. 

15 (2) EXTENSIVE CONSUMER FINANCIAL PROD16 UCTS OR SERVICES OPERATIONS.—Paragraph (1) 

17 shall not apply to nondepository institution covered 

18 person that the Director determines has a level of 

19 assets or revenues derived from financial activities, 

20 a number of transactions in consumer financial 

21 products or services, or a number of accounts relat22 ing to consumer financial products or services that 

23 the Director determines represents an extensive con24 sumer financial products or services operation. 


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1 SEC. 4112. AMENDMENTS RELATING TO OTHER ADMINIS2 TRATIVE PROVISIONS. 

3 (a) ACT OF OCTOBER 28, 1974.—Section 111 of 

4 Public Law 93–495 (12 U.S.C. 250) is amended by insert5 ing ‘‘the Consumer Financial Protection Agency,’’ after 

6 ‘‘Federal Deposit Insurance Corporation,’’. 

7 (b) PAPERWORK REDUCTION ACT.—Section 2(5) of 

8 the Paperwork Reduction Act (44 U.S.C. 3502(5)) by in9 serting ‘‘the Consumer Financial Protection Agency,’’ 

10 after ‘‘the Securities and Exchange Commission,’’. 

11 SEC. 4113. OVERSIGHT BY GAO. 

12 (a) AUTHORITY.—The Comptroller General may 

13 audit the programs, activities, receipts, expenditures, and 

14 financial transactions of the Agency and of any agents and 

15 representatives of the Agency as related to the agent’s or 

16 representative’s activities on behalf of or under authority 

17 of the Agency. 

18 (b) ACCESS.—Notwithstanding any other provision of 

19 law, the Comptroller General shall have access, upon re20 quest, to any information, data, schedules, books, ac21 counts, financial records, reports, files, electronic commu22 nications, or other papers, things, or property belonging 

23 to or in use by the Agency, or any vehicles established 

24 by the Agency under this Act, and to the directors, offi25 cers, employees, independent public accountants, financial 

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1 atives of the Agency (as related to the agent’s or rep2 resentative’s activities on behalf of the Agency) or any ve3 hicle established by the Agency at such reasonable time 

4 as the Comptroller General may request. The Comptroller 

5 General may make and retain copies of such books, ac6 counts, and other records as the Comptroller General 

7 deems appropriate. 

8 SEC. 4114. EFFECTIVE DATE. 

9 This subtitle shall take effect on the date of the en10 actment of this title. 

11 Subtitle B—General Powers of the 

12 Director and Agency 

13 SEC. 4201. MANDATE AND OBJECTIVES. 

14 (a) MANDATE.—The Director shall seek to promote 

15 transparency, simplicity, fairness, accountability, and 

16 equal access in the market for consumer financial products 

17 or services. 

18 (b) OBJECTIVES.—The Director may exercise the au19 thorities granted in this title, in the enumerated consumer 

20 laws, and transferred under subtitles F and H for the pur21 poses of ensuring that, with respect to consumer financial 

22 products or services— 

23 (1) consumers have and can use the informa24 tion they need to make responsible decisions about 

25 consumer financial products or services; 


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1 (2) consumers are protected from abuse, unfair2 ness, deception, and discrimination; 

3 (3) markets for consumer financial products or 

4 services operate fairly and efficiently with ample 

5 room for sustainable growth and innovation; and 

6 (4) traditionally underserved consumers and 

7 communities have equal access to responsible finan8 cial services. 

9 SEC. 4202. AUTHORITIES. 

10 (a) IN GENERAL.—The Director may exercise the au11 thorities granted in this title, in the enumerated consumer 

12 laws, and transferred under subtitles F and H, to admin13 ister, enforce, and otherwise implement the provisions of 

14 this title, the authorities transferred in subtitles F and 

15 H, and the enumerated consumer laws. 

16 (b) RULEMAKING, ORDERS, AND GUIDANCE.— 

17 (1) IN GENERAL.—The Director may prescribe 

18 regulations and issue orders and guidance as may be 

19 necessary or appropriate to enable it to administer 

20 and carry out the purposes and objectives of this 

21 title, the authorities transferred under subtitles F 

22 and H, and the enumerated consumer laws, and to 

23 prevent evasions of this title, any such authority, 

24 and any such law. 


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1 (2) STANDARDS FOR RULEMAKING.—In pre2 scribing a regulation under this title or pursuant to 

3 the authorities transferred under subtitles F and H 

4 or the enumerated consumer laws, the Director 

5 shall— 

6 (A) consider the potential benefits and 

7 costs to consumers, covered persons, and the 

8 Federal Government, including the potential re9 duction of consumers’ access to consumer finan10 cial products or services, resulting from such 

11 regulation; and 

12 (B) consult with the Federal banking agen13 cies, State bank supervisors, the Federal Trade 

14 Commission, or other Federal agencies, as ap15 propriate, regarding the consistency of a pro16 posed regulation with prudential, consumer pro17 tection, civil rights, market, or systemic objec18 tives administered by such agencies or super19 visors and whether such regulation will have an 

20 inconsistent effect on nondepository institution 

21 covered persons and depository institution cov22 ered persons. 

23 (3) EXEMPTIONS.— 

24 (A) IN GENERAL.—The Director, by regu25 lation or order, may conditionally or uncondiVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00884 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tionally exempt any covered person, service pro2 vider, or any consumer financial product or 

3 service or any class of covered persons, class of 

4 service providers, or consumer financial prod5 ucts or services, from any provision of this title, 

6 any enumerated consumer law, or from any reg7 ulation under any such provision or law, as the 

8 Director deems necessary or appropriate to 

9 carry out the purposes and objectives of this 

10 title taking into consideration the factors in 

11 subparagraph (B). 

12 (B) FACTORS.—In issuing an exemption 

13 by regulation or order as permitted in subpara14 graph (A), the Director shall as appropriate 

15 take into consideration the following: 

16 (i) The total assets of the covered per17 son. 

18 (ii) The volume of transactions involv19 ing consumer financial products or services 

20 in which the covered person engages. 

21 (iii) The extent to which the covered 

22 person engages in 1 or more financial ac23 tivities. 

24 (iv) Existing laws or regulations which 

25 are applicable to the consumer financial 


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1 product or service and the extent to which 

2 such laws or regulations provide consumers 

3 with adequate protections. 

4 (C) RULE OF CONSTRUCTION.—No provi5 sion of this section shall be construed as alter6 ing, amending, or affecting any authority under 

7 sections 304(a), 304(i), 305(a), and 306(b) of 

8 the Home Mortgage Disclosure Act of 1975 and 

9 sections 703(a)(1), 703(a)(2), 703(a)(3), 

10 705(f), and 705(g) of the Equal Credit Oppor11 tunity Act for determining whether a covered 

12 person should be provided an exemption. 

13 (c) EXAMINATIONS AND REPORTS.— 

14 (1) IN GENERAL.—Except as provided under 

15 section 4203, the Director may on a periodic basis 

16 examine a covered person or service provider, with 

17 respect to any consumer financial product or service, 

18 for purposes of ensuring compliance with the re19 quirements of this title, the enumerated consumer 

20 laws, and any regulations prescribed by the Director 

21 under this title or pursuant to the authorities trans22 ferred under subtitles F and H, and enforcing com23 pliance with such requirements. 

24 (2) EXAMINATION PROGRAM.—The Director 

25 shall exercise any authority of the Director under 


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1 paragraph (1) in a manner designed to ensure that 

2 such authorities are exercised with respect to cov3 ered persons or service providers, without regard to 

4 charter or corporate form, based on the Director’s 

5 assessment of the risks posed to consumers in the 

6 relevant product markets and geographic markets, 

7 and taking into consideration, as applicable, the fol8 lowing factors: 

9 (A) The asset size of the covered persons. 

10 (B) The volume of transactions involving 

11 consumer financial products or services in 

12 which the covered persons engage. 

13 (C) The risks to consumers created by the 

14 provision of such consumer financial products 

15 or services. 

16 (D) In the case of State-chartered institu17 tions, the extent to which such institutions are 

18 subject to oversight by State authorities for 

19 consumer protection. 

20 (3) COORDINATION.—The Director shall coordi21 nate the Agency’s supervisory activities with the su22 pervisory activities conducted by the Federal bank23 ing agencies and the State bank supervisors, includ24 ing establishing their respective schedules for examVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00887 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ining covered persons and requirements regarding 

2 reports to be submitted by covered persons. 

3 (4) REPORTS.—The Director may require re4 ports from a covered person for purposes of ensuring 

5 compliance with the requirements of this title, the 

6 enumerated consumers laws, and any regulation pre7 scribed by the Director under this title or pursuant 

8 to the authorities transferred under subtitles F and 

9 H, and enforcing compliance with such require10 ments. 

11 (5) CONTENT OF REPORTS.—The reports au12 thorized in paragraph (4) may include such informa13 tion as necessary to keep the Agency informed as 

14 to— 

15 (A) the compliance systems or procedures 

16 of the covered person or any affiliate thereof, 

17 with applicable provisions of this title or any 

18 other law that the Agency has jurisdiction to 

19 enforce; and 

20 (B) matters related to the provision of con21 sumer financial products or services including 

22 the servicing or maintenance of accounts or ex23 tensions of credit. 

24 (6) USE OF EXISTING REPORTS.—In general, 

25 the Agency shall, to the fullest extent possible, use— 


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1 (A) reports that a covered person, or any 

2 affiliate thereof, or any service provider to such 

3 covered person or affiliate, has provided or been 

4 required to provide to a Federal or State agen5 cy; and 

6 (B) information that has been reported 

7 publicly. 

8 (7) ACCESS BY THE AGENCY TO REPORTS OF

9 OTHER REGULATORS.— 

10 (A) EXAMINATION AND FINANCIAL CONDI11 TION REPORTS.—Upon providing reasonable as12 surances of confidentiality, the Agency shall 

13 have access to any report of examination or fi14 nancial condition, including a report containing 

15 data regarding consumer complaints, made by a 

16 Federal banking agency or other Federal agen17 cy having supervision of a covered person, or a 

18 service provider, (other than returns and return 

19 information described in section 6103 of the In20 ternal Revenue Code of 1986) and to all revi21 sions made to any such report. 

22 (B) PROVISION OF OTHER REPORTS TO

23 AGENCY.—In addition to the reports described 

24 in subparagraph (A), a Federal banking agency 

25 may, in its discretion, furnish to the Agency 


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1 any other report or other confidential super2 visory information concerning any insured de3 pository institution, any credit union, or other 

4 entity examined by such agency under authority 

5 of any Federal law. 

6 (8) ACCESS BY OTHER REGULATORS TO RE7 PORTS OF THE AGENCY.— 

8 (A) EXAMINATION REPORTS.—Upon pro9 viding reasonable assurances of confidentiality, 

10 a Federal banking agency, a State regulator, or 

11 any other Federal agency having supervision of 

12 a covered person shall have access to any report 

13 of examination made by the Agency with re14 spect to the covered person or service provider, 

15 and to all revisions made to any such report. 

16 (B) PROVISION OF OTHER REPORTS TO

17 OTHER REGULATORS.—In addition to the re18 ports described in paragraph (A), the Agency 

19 may, in the discretion of the Agency, furnish to 

20 a Federal banking agency any other report or 

21 other confidential supervisory information con22 cerning any insured depository institution, any 

23 credit union, or other entity examined by the 

24 Agency under authority of any Federal law. 


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1 (9) PRESERVATION OF AUTHORITY.—No provi2 sion in paragraph (3) shall be construed as pre3 venting the Agency from conducting an examination 

4 authorized by this title or under the authorities 

5 transferred under subtitles F and H or pursuant to 

6 any enumerated consumer law. No provision of this 

7 title shall be construed as limiting the authority of 

8 the Director to require reports from a covered per9 son, as permitted under paragraph (4), regarding in10 formation owned or under the control of the covered 

11 person, regardless of whether such information is 

12 maintained, stored, or processed by another person. 

13 (10) REPORTS OF TAX LAW NONCOMPLI14 ANCE.—The Director shall provide the Commis15 sioner of Internal Revenue with any report of exam16 ination or related information identifying possible 

17 tax law noncompliance. 

18 (11) DELEGATION.— 

19 (A) IN GENERAL.—The Director may dele20 gate the examination authorities of the Agency 

21 under this title to any appropriate agency, as 

22 defined in section 4203, for any insured deposi23 tory institution or insured credit union that is 

24 not subject to section 4203 upon a petition by 

25 an appropriate agency. 


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1 (B) STANDARD FOR DELEGATION.—The 

2 Director shall provide such delegation if, in the 

3 Director’s sole discretion, the Director deter4 mines that— 

5 (i) the delegation is consistent with 

6 the public interest; 

7 (ii) the appropriate agency is capable 

8 of enforcing compliance with this title, and 

9 with any regulation prescribed under this 

10 title; and 

11 (iii) such capability is comparable to 

12 or superior to the capability of the Agency, 

13 in terms of expertise, demonstrated com14 mitment, and overall effectiveness, in en15 forcing such compliance. 

16 (C) EFFECT OF DELEGATION.—The in17 sured depository institution or insured credit 

18 union shall be subject to the examination proc19 ess described in section 4203(b). 

20 (D) NO EFFECT ON ENFORCEMENT.—The 

21 Director’s delegation authority under this para22 graph shall not apply to the Director’s enforce23 ment responsibilities under subsection (e). 

24 (d) EXCLUSIVE RULEMAKING AND EXAMINATION

25 AUTHORITY.—Notwithstanding any other provision of 


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1 Federal law other than section 4203 and subsections (f) 

2 and (h) of this section, to the extent that a Federal law 

3 authorizes the Director and another Federal agency to 

4 prescribe regulations, issue guidance, conduct examina5 tions, or require reports under a provision of that law for 

6 purposes of assuring compliance with this title, a provision 

7 of any enumerated consumer law, any provision of the 

8 laws for which authorities were transferred under subtitles 

9 F and H, and any regulations prescribed under this title 

10 or pursuant to any such authority, the Director shall have 

11 the exclusive authority under that provision of law to pre12 scribe regulations, issue guidance, conduct examinations, 

13 require reports, or issue exemptions with regard to any 

14 person subject to that law and with respect to any activity 

15 regulated under any enumerated consumer law. 

16 (e) PRIMARY ENFORCEMENT AUTHORITY.— 

17 (1) THE AGENCY TO HAVE PRIMARY ENFORCE18 MENT AUTHORITY.—To the extent that a Federal 

19 law authorizes the Agency and another Federal 

20 agency to enforce a provision of a law, the Agency 

21 shall have primary enforcement authority to enforce 

22 the provision of that Federal law with respect to any 

23 person in accordance with this subsection. 

24 (2) COORDINATION WITH THE FEDERAL TRADE

25 COMMISSION.— 


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1 (A) NOTICE.—If the Federal Trade Com2 mission is authorized to enforce any Federal 

3 law described in paragraph (1), or a regulation 

4 prescribed under any such Federal law, either 

5 the Agency or the Federal Trade Commission 

6 shall serve written notice to the other of any en7 forcement action prior to initiating such an en8 forcement action, except that if the agency or 

9 commission filing the action determines that 

10 prior notice is not feasible, that agency or com11 mission may provide notice immediately upon 

12 initiating such enforcement action. 

13 (B) INTERVENTION BY EITHER ENTITY.— 

14 Upon receiving any notice under subparagraph 

15 (A) with respect to an enforcement action, the 

16 Agency or Federal Trade Commission may in17 tervene in such enforcement action, and upon 

18 intervening— 

19 (i) be heard on all matters arising in 

20 such enforcement action; and 

21 (ii) file petitions for appeal in such 

22 enforcement action. 

23 (C) PENDENCY OF ACTION.—Whenever a 

24 civil action has been instituted by or on behalf 

25 of the Agency or the Federal Trade Commission 


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1 for any violation of any Federal law described 

2 in paragraph (1), or a regulation prescribed 

3 under any such Federal law, the other entity 

4 may not, during the pendency of that action, in5 stitute a civil action under such law or regula6 tion against any defendant named in the com7 plaint in such pending action for any violation 

8 alleged in the complaint. 

9 (D) AGREEMENTS BETWEEN ENTITIES.— 

10 (i) NEGOTIATIONS AUTHORIZED.— 

11 The Agency and the Federal Trade Com12 mission may negotiate an agreement to es13 tablish procedures to ensure that the en14 forcement actions of the 2 agencies are ap15 propriately coordinated. 

16 (ii) SCOPE OF NEGOTIATED AGREE17 MENT.—The terms of any agreement nego18 tiated pursuant to clause (i) may modify or 

19 supersede the provisions of subparagraphs 

20 (A), (B), and (C). 

21 (3) COORDINATION WITH OTHER FEDERAL

22 AGENCY.— 

23 (A) REFERRAL.—Any Federal agency 

24 (other than the Federal Trade Commission) 

25 that is authorized to enforce a Federal law deVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00895 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 scribed in paragraph (1) may recommend in 

2 writing to the Director that the Agency initiate 

3 an enforcement proceeding to the extent the 

4 Agency is authorized by that Federal law or by 

5 this title. The recommendation shall be accom6 panied by a written explanation of the concerns 

7 giving rise to the recommendation. 

8 (B) BACKSTOP ENFORCEMENT AUTHORITY

9 OF OTHER FEDERAL AGENCY.—If the Agency 

10 does not, before the end of the 120-day period 

11 beginning on the date on which the Director re12 ceives a recommendation under subparagraph 

13 (A), initiate an enforcement proceeding, the 

14 other agency referred to in subparagraph (A) 

15 may initiate an enforcement proceeding as per16 mitted by that Federal law. 

17 (4) INSTITUTIONS SUBJECT TO SPECIAL EXAM18 INATION AND ENFORCEMENT PROCEDURES.—This 

19 subsection shall not apply to institutions subject to 

20 section 4203. 

21 (f) PRESERVATION OF OTHER AUTHORITY.— 

22 (1) ATTORNEY GENERAL.—No provision of this 

23 title shall be construed as affecting any authority of 

24 the Attorney General. 


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1 (2) SECRETARY OF THE TREASURY.—No provi2 sion of this title shall be construed as affecting any 

3 authority of the Secretary of the Treasury, including 

4 with respect to prescribing regulations, initiating en5 forcement proceedings, or taking other actions with 

6 respect to a person providing tax planning or tax 

7 preparation services. 

8 (3) FAIR HOUSING ACT.—No provision of this 

9 title shall be construed as affecting any authority 

10 arising under the Fair Housing Act. 

11 (g) EFFECT ON OTHER AUTHORITY.—No provision 

12 of this section or section 4203 shall be construed as modi13 fying or limiting the authority of any appropriate Federal 

14 banking agency or the Director or Agency to interpret, 

15 or take enforcement action under, any law or regulation 

16 the interpretation or enforcement of which is committed 

17 to the banking agency or the Director or Agency, which 

18 shall include, in the case of the Director and the Agency, 

19 this title, the enumerated consumer laws, and the regula20 tions prescribed under this title or such laws. 

21 (h) PRESERVATION OF FEDERAL TRADE COMMIS22 SION AUTHORITY.—No provision of this title shall be con23 strued as modifying, limiting, or otherwise affecting the 

24 authority of the Federal Trade Commission under the 


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1 Federal Trade Commission Act or other laws other than 

2 the enumerated consumer laws. 

3 (i) PRESERVATION OF FARM CREDIT ADMINISTRA4 TION AUTHORITY.—No provision of this title shall be con5 strued as modifying, limiting, or otherwise affecting the 

6 authority of the Farm Credit Administration. 

7 SEC. 4203. EXAMINATION AND ENFORCEMENT FOR SMALL 

8 BANKS, THRIFTS, AND CREDIT UNIONS. 

9 (a) SCOPE OF INSTITUTIONS SUBJECT TO THIS SEC10 TION.— 

11 (1) INSTITUTIONS COVERED.—This section 

12 shall apply to— 

13 (A) any insured depository institution with 

14 total assets of $10,000,000,000 or less; or 

15 (B) any insured credit union with total as16 sets of $10,000,000,000 or less. 

17 (2) APPROPRIATE AGENCY.—For purposes of 

18 this title, the term ‘‘appropriate agency’’ means— 

19 (A) in the case of an insured depository in20 stitution, the appropriate Federal banking 

21 agency as such term is defined in section 3 of 

22 the Federal Deposit Insurance Act; and 

23 (B) in the case of an insured credit union, 

24 the National Credit Union Administration. 

25 (b) EXAMINATIONS.— 


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1 (1) IN GENERAL.—The appropriate agency 

2 shall on a periodic basis examine, or require reports 

3 from, an institution referred to in subsection (a) for 

4 purposes of ensuring compliance with the require5 ments of this title, the enumerated consumer laws, 

6 and any regulation prescribed by the Director under 

7 this title or pursuant to the authorities transferred 

8 under subtitles F and H, and enforcing compliance 

9 with such requirements. 

10 (2) AGENCY ROLE IN EXAMINATIONS.— 

11 (A) The appropriate agency shall provide 

12 all reports, records, and documentation related 

13 to the examination process to the Agency on a 

14 timely and ongoing basis. 

15 (B) The Director and Agency may, at its 

16 discretion, include an examiner on any examina17 tion conducted under paragraph (1). The ap18 propriate agency shall involve such Agency ex19 aminer in the entire examination process, in20 cluding setting the scope of an examination, 

21 participating in the examination, and providing 

22 input on the examination report, matters re23 quiring attention and examination ratings. 

24 (c) ENFORCEMENT.— 


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1 (1) IN GENERAL.—Notwithstanding any other 

2 provision of this title other than this subsection, the 

3 appropriate agency shall have primary authority to 

4 enforce violations identified at institutions referred 

5 to in subsection (a) of any of the requirements of 

6 this title, the enumerated consumers laws, and any 

7 regulation prescribed by the Director under this title 

8 or pursuant to the authorities transferred under 

9 subtitles F and H. 

10 (2) COORDINATION WITH APPROPRIATE AGEN11 CY.— 

12 (A) REFERRAL.— 

13 (i) IN GENERAL.—The Agency may 

14 recommend in writing to the appropriate 

15 agency that the appropriate agency initiate 

16 an enforcement proceeding to the extent 

17 the appropriate agency is authorized by 

18 that Federal law or by this title. 

19 (ii) EXPLANATION.—Any rec20 ommendation under clause (i) shall be ac21 companied by a written explanation of the 

22 concerns giving rise to the recommenda23 tion. 

24 (B) BACKSTOP ENFORCEMENT AUTHORITY

25 OF AGENCY.—If the appropriate agency does 


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1 not, before the end of the 120-day period begin2 ning on the date on which the appropriate 

3 agency receives a recommendation under sub4 paragraph (A), initiate an enforcement pro5 ceeding, the Agency may initiate an enforce6 ment proceeding as permitted by Federal law. 

7 (d) ACTIONS ARISING OUT OF CONSUMER COM8 PLAINT SYSTEM.—Notwithstanding any provision of this 

9 section, if through the consumer complaint system admin10 istered by the Agency under section 4105(c)(3), the Direc11 tor has reasonable cause to believe that an institution re12 ferred to in subsection (a) demonstrates noncompliance 

13 with any provision of this title, the enumerated consumer 

14 laws, or any regulation prescribed by the Director under 

15 this title or pursuant to the authorities transferred under 

16 subtitles F and H, the Director may directly investigate 

17 such institution for such noncompliance and take any ac18 tion permitted under subtitle E that the Director deems 

19 appropriate. 

20 (e) REMOVAL OF APPROPRIATE AGENCY FOR PAR21 TICULAR INSTITUTION.— 

22 (1) HEIGHTENED SUPERVISION.—The Direc23 tor— 


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1 (A) may provide notice to an appropriate 

2 agency that the Director is considering issuing 

3 a removal order under paragraph (2); and 

4 (B) shall have an Agency examiner partici5 pate in the examination process under sub6 section (b) for at least 1 examination cycle. 

7 (2) REMOVAL BY ORDER.—If, after the comple8 tion of at least 1 examination cycle following the 

9 provision of notice to an appropriate agency under 

10 paragraph (1), the Director determines in writing 

11 that the appropriate agency has failed to adequately 

12 conduct consumer compliance examinations or bring 

13 appropriate enforcement actions against an institu14 tion referred to in subsection (a), the Director may 

15 order the removal of the appropriate agency from its 

16 responsibilities under this section for such institu17 tion. 

18 (3) AGENCY AUTHORITY UPON REMOVAL.— 

19 Upon removal pursuant to paragraph (2), the Agen20 cy shall examine and enforce against such institution 

21 as if the institution were subject to section 4202. 

22 (4) EFFECTIVE DATE.—An order under para23 graph (2) shall take effect 30 days after a deter24 mination by the Secretary of the Treasury pursuant 

25 to paragraphs (5) and (6). 


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1 (5) AUTOMATIC APPEAL.—An order issued by 

2 the Director pursuant to paragraph (2) shall be 

3 automatically appealed to the Secretary. 

4 (6) DECISION BY THE SECRETARY OF THE

5 TREASURY.— 

6 (A) DETERMINATION.—The order issued 

7 pursuant to paragraph (2) shall be deemed af8 firmed unless the Secretary of the Treasury de9 nies the determination of the Director within 

10 120 days of the issuance of the order pursuant 

11 to paragraph (2). 

12 (B) RULE OF CONSTRUCTION.—Nothing in 

13 subparagraph (A) shall be construed as prohib14 iting the Secretary of the Treasury from mak15 ing a determination to either affirm or deny an 

16 order issued pursuant to paragraph (2) prior to 

17 the passage of the time period in subparagraph 

18 (A). 

19 (7) REGULATIONS.—By the transfer date, the 

20 Secretary shall issue regulations that establish the 

21 standards the Director shall apply in making a de22 termination to remove an appropriate agency and 

23 the process, procedures, and standards for an ap24 peal. Such standards shall require the Director to 

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1 moving an appropriate agency for an institution re2 ferred to in subsection (a)(1): 

3 (A) Reports of examination of such institu4 tion. 

5 (B) Any enforcement actions taken by an 

6 appropriate agency against such institution and 

7 the results of those actions. 

8 (C) Consumer complaints issued against 

9 such institution. 

10 (D) Actions taken by State attorneys gen11 eral and private rights of action against such 

12 institution. 

13 (f) POLICIES AND PROCEDURES.—Within 180 days 

14 after the designated transfer date, the Agency and the ap15 propriate agency shall develop policies and procedures for 

16 implementing this section. 

17 (g) ASSESSMENTS.— 

18 (1) LIMITATION ON CERTAIN FEES.—The Agen19 cy shall not assess examination fees on an institution 

20 referred to in subsection (a). 

21 (2) RULE OF CONSTRUCTION.—No provision of 

22 this section shall be construed as preventing the ap23 propriate agency from assessing fees on an institu24 tion referred to in paragraph (1) to meet the appro25 priate agency’s expenses for carrying out such examVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00904 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ination and supervision responsibilities pursuant to 

2 this section. 

3 (h) ASSISTIVE DIVISION FOR COMMUNITY FINANCIAL

4 INSTITUTIONS.— 

5 (1) ESTABLISHMENT; PURPOSE.—There is es6 tablished in the Agency an office to be known as the 

7 ‘‘Assistive Division for Community Financial Institu8 tions’’ to advise the Director on the impact of Agen9 cy policies and regulations on community financial 

10 institutions and to help ensure that the policies and 

11 regulations of the Agency do not unduly burden 

12 community financial institutions. 

13 (2) ADDITIONAL DUTIES.—The Assistive Divi14 sion for Community Financial Institutions shall 

15 also— 

16 (A) provide assistance to and respond to 

17 inquiries from community financial institutions 

18 regarding policies of the Agency and the effects 

19 of such policies on community financial institu20 tions; 

21 (B) provide educational materials, training 

22 aides, and support to community financial insti23 tutions with respect to any new regulatory obli24 gations the Agency establishes during the initial 

25 rule-making period; 


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1 (C) establish and maintain a toll-free tele2 phone number, to be available at least 8 hours 

3 a day and 7 days a week, at which community 

4 financial institution may make inquiries and re5 ceive assistance under subparagraph (A); and 

6 (D) perform other duties and exercise such 

7 other powers set by the Director. 

8 SEC. 4204. SIMULTANEOUS AND COORDINATED SUPER9 VISORY ACTION. 

10 (a) EXAMINATIONS.—A Federal banking agency and 

11 the Agency shall, with respect to each insured depository 

12 institution, credit union, or other covered person super13 vised by the Federal banking agency and the Agency, re14 spectively— 

15 (1) coordinate the scheduling of examinations of 

16 the insured depository institution, and credit union, 

17 or other covered person; 

18 (2) conduct simultaneous examinations of each 

19 insured depository institution, credit union or other 

20 covered person, unless such institution requests ex21 aminations to be conducted separately; 

22 (3) share each draft report of examination with 

23 the other agency and permit the receiving agency a 

24 reasonable opportunity (which shall not be less than 

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1 ment on the draft report before such report is made 

2 final; and 

3 (4) prior to issuing a final report of examina4 tion or taking supervisory action, an agency shall 

5 take into consideration concerns, if any, raised in 

6 the comments made by the other agency. 

7 (b) COORDINATION WITH STATE BANK SUPER8 VISORS.—The Agency shall pursue arrangements and 

9 agreements with State bank supervisors to coordinate ex10 aminations consistent with subsection (a). 

11 (c) RESOLUTION OF CONFLICT IN SUPERVISION.— 

12 (1) REQUEST OF DEPOSITORY INSTITUTION.— 

13 (A) IN GENERAL.—If the proposed mate14 rial supervisory determinations of the Agency 

15 and a Federal banking agency are conflicting, 

16 an insured depository institution, credit union, 

17 or other covered person may request the agen18 cies to coordinate and present a joint statement 

19 of coordinated supervisory action. 

20 (B) LIMITATION.—A request of an insured 

21 depository institution, credit union, or other 

22 covered person shall not be used to appeal a su23 pervisory rating or determination by the Agency 

24 or a Federal banking agency. 


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1 (2) JOINT STATEMENT.—The agencies receiving 

2 a request from an insured depository institution, 

3 credit union, or covered person under paragraph (1) 

4 shall provide a joint statement resolving the conflict 

5 under such subparagraph before the end of the 30- 

6 day period beginning on the date the agencies re7 ceive such request. 

8 (d) APPEALS TO GOVERNING PANEL.— 

9 (1) IN GENERAL.—If the agencies receiving a 

10 request from an insured depository institution, credit 

11 union, or covered person under subsection (c)(1) do 

12 not issue a joint statement under subsection (c)(2), 

13 or if either agency takes or attempts to take any su14 pervisory action relating to the request for the joint 

15 statement without the consent of the other agency, 

16 the insured depository institution, credit union, or 

17 other covered person may institute an appeal to a 

18 governing panel under this subsection. 

19 (2) TIMETABLE.—Any appeal under paragraph 

20 (1) with regard to a failure of agencies to issue a 

21 joint statement shall be filed before the end of the 

22 30-day period beginning at the end of the 30-day pe23 riod during which such joint statement was due 

24 under subsection (c)(2). 


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1 (e) COMPOSITION OF GOVERNING PANEL.—The gov2 erning panel for an appeal under this section shall be com3 posed of— 

4 (1) 2 individuals— 

5 (A) 1 of whom is a representative from the 

6 Agency; 

7 (B) 1 of whom is a representative of the 

8 Federal banking agency which received the re9 quest to which the appeal relates; and 

10 (C) neither of whom— 

11 (i) have participated in the material 

12 supervisory determinations under appeal; 

13 and 

14 (ii) report directly or indirectly to the 

15 individual who made the supervisory deter16 minations under appeal; and 

17 (2) 1 individual who is a representative from— 

18 (A) the Federal banking agency that heads 

19 the Financial Institution Examination Council; 

20 or 

21 (B) if the Financial Institutions Examina22 tion Council is headed by a Federal banking 

23 agency that is a party to the appeal, the Fed24 eral banking agency that is next scheduled to 


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1 head the Financial Institutions Examination 

2 Council. 

3 (f) CONDUCT OF APPEAL.— 

4 (1) CONTENT OF FILING APPEAL.—The insured 

5 depository institution, credit union, or other covered 

6 person which institutes an appeal under subsection 

7 (d)(1) shall include in the filing of such appeal all 

8 the facts and legal arguments pertaining to the mat9 ter appealed. 

10 (2) APPEARANCE.—The insured depository in11 stitution, credit union, or other covered person which 

12 institutes an appeal under this section may appear 

13 before the governing panel in person or by telephone, 

14 through counsel, employees, or representatives of, or 

15 for, such institution, credit union, or other covered 

16 person. 

17 (3) REQUESTS FOR ADDITIONAL INFORMA18 TION.—Any governing panel convened under this 

19 section may request the insured depository institu20 tion, credit union, or other covered person, the 

21 Agency, or the Federal banking agency to produce 

22 additional information relevant to the appeal. 

23 (4) FINAL WRITTEN DETERMINATIONS.—Any 

24 governing panel convened under this section, by a 

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1 vide a final determination, in writing, within 30 days 

2 of the filing of an informationally complete appeal, 

3 or such longer period as the panel and the insured 

4 depository institution, credit union, or other covered 

5 person may jointly agree. 

6 (5) PUBLIC INFORMATION.—A redacted copy of 

7 any determination by a governing panel convened 

8 under this section shall be made public upon the 

9 issuance of such determination. 

10 (g) PROHIBITION AGAINST RETALIATION.—The Di11 rector and the Federal banking agencies shall prescribe 

12 regulations to provide safeguards from retaliation against 

13 any insured depository institution, credit union, or other 

14 covered person which institutes an appeal under this sec15 tion, as well as against any officer or and employee of any 

16 such institution, credit union, or other person. 

17 (h) MATERIAL SUPERVISORY DETERMINATION DE18 FINED.—For purposes of this section, the term ‘‘material 

19 supervisory determination’’— 

20 (1) includes any action relating to any super21 vision or examinations; and 

22 (2) does not include— 

23 (A) a determination by any Federal bank24 ing agency to appoint a conservator or receiver 

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1 dating agent for an insured credit union, as the 

2 case may be, or a decision to take action pursu3 ant to section 38 of the Federal Deposit Insur4 ance Act or section 212 of the Federal Credit 

5 Union Act, as the case may be; or 

6 (B) any regulation or guidance, or order of 

7 general applicability. 

8 SEC. 4205. LIMITATIONS ON AUTHORITY OF AGENCY AND 

9 DIRECTOR. 

10 (a) EXCLUSION FOR MERCHANTS, RETAILERS, AND

11 SELLERS OF NONFINANCIAL SERVICES.— 

12 (1) IN GENERAL.—Notwithstanding any provi13 sion of this title (other than paragraph (4)) and sub14 ject to paragraph (2), the Director and the Agency 

15 may not exercise any rulemaking, supervisory, en16 forcement or other authority, including authority to 

17 order assessments, under this title with respect to— 

18 (A) credit extended directly by a merchant, 

19 retailer, or seller of nonfinancial goods or serv20 ices to a consumer, in a case in which the good 

21 or service being provided is not itself a con22 sumer financial product or service, exclusively 

23 for the purpose of enabling that consumer to 

24 purchase such goods or services directly from 


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1 the merchant, retailer, or seller of nonfinancial 

2 services; or 

3 (B) collection of debt, directly by the mer4 chant, retailer, or seller of nonfinancial services, 

5 arising from such credit extended. 

6 In the application of this paragraph, the extension 

7 of credit and the collection of debt described in sub8 paragraphs (A) and (B), respectively, shall not be 

9 considered a consumer financial product or service. 

10 (2) EXCEPTION FOR EXISTING AUTHORITY.— 

11 The Director may exercise any rulemaking authority 

12 regarding an extension of credit described in para13 graph (1)(A) or the collection of debt arising from 

14 such extension, as may be authorized by the enumer15 ated consumer laws or any law or authority trans16 ferred under subtitle F or H. 

17 (3) RULE OF CONSTRUCTION.—No provision of 

18 this title shall be construed as modifying, limiting, 

19 or superseding the authority of the Federal Trade 

20 Commission or any agency other than the Agency 

21 with respect to credit extended, or the collection of 

22 debt arising from such extension, directly by a mer23 chant or retailer to a consumer exclusively for the 

24 purpose of enabling that consumer to purchase 


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1 goods or services directly from the merchant or re2 tailer. 

3 (4) EXCLUSION NOT APPLICABLE TO CERTAIN

4 CREDIT TRANSACTIONS.—Paragraph (1) shall not 

5 apply to— 

6 (A) any credit transaction, including the 

7 collection of the debt arising from such exten8 sion, in which the merchant, retailer, or seller 

9 of nonfinancial services assigns, sells, or other10 wise conveys such debt owed by the consumer 

11 to another person; 

12 (B) any credit transaction— 

13 (i) in which the credit provided sig14 nificantly exceeds the market value of the 

15 product or service provided; and 

16 (ii) with respect to which the Director 

17 finds that the sale of the product or service 

18 is done as a subterfuge so as to evade or 

19 circumvent the provisions of this title; or 

20 (C) any credit transaction involving a per21 son who operates a line of business that in22 volves the extension of retail credit or retail 

23 leases involving motor vehicles, if— 


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1 (i) the extension of retail credit or re2 tail leases is provided directly to con3 sumers; and 

4 (ii) the contracts governing such ex5 tension of retail credit or retail leases are 

6 not assigned to a third party finance or 

7 leasing source, except on a de minimis 

8 basis. 

9 (b) EXCLUSION FOR PERSONS REGULATED BY THE

10 SECURITIES AND EXCHANGE COMMISSION.— 

11 (1) IN GENERAL.—No provision of this title 

12 shall be construed as altering, amending, or affect13 ing the authority of the Securities and Exchange 

14 Commission or any securities commission (or any 

15 agency or office performing like functions) of any 

16 State to adopt rules, initiate enforcement pro17 ceedings, or take any other action with respect to a 

18 person regulated by the Securities and Exchange 

19 Commission or any securities commission (or any 

20 agency or office performing like functions) of any 

21 State. The Director and Agency shall have no rule22 making, supervisory, enforcement or other authority, 

23 including the authority to order assessments, under 

24 this title with respect to a person regulated by the 

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1 ties commission (or any agency or office performing 

2 like functions) of any State. 

3 (2) CONSULTATION AND COORDINATION.—Not4 withstanding paragraph (1), the Securities and Ex5 change Commission shall consult and coordinate 

6 with the Director with respect to any rule (including 

7 any advance notice of proposed rulemaking) regard8 ing an investment product or service that is the 

9 same type of product as, or that competes directly 

10 with, a consumer financial product or service that is 

11 subject to the jurisdiction of the Agency under this 

12 title or under any other law. 

13 (c) EXCLUSION FOR PERSONS REGULATED BY THE

14 COMMODITY FUTURES TRADING COMMISSION.— 

15 (1) IN GENERAL.—No provision of this title 

16 shall be construed as altering, amending, or affect17 ing the authority of the Commodity Futures Trading 

18 Commission to adopt rules, initiate enforcement pro19 ceedings, or take any other action with respect to a 

20 person regulated by the Commodity Futures Trading 

21 Commission. The Director and the Agency shall 

22 have no authority to exercise any power to enforce 

23 this title with respect to a person regulated by the 

24 Commodity Futures Trading Commission. 


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1 (2) CONSULTATION AND COORDINATION.—Not2 withstanding paragraph (1), the Commodity Futures 

3 Trading Commission shall consult and coordinate 

4 with the Director with respect to any rule (including 

5 any advance notice of proposed rulemaking) regard6 ing a product or service that is the same type of 

7 product as, or that competes directly with, a con8 sumer financial product or service that is subject to 

9 the jurisdiction of the Agency under this title or 

10 under any other law. 

11 (d) PERSONS REGULATED BY A STATE SECURITIES

12 COMMISSION.— 

13 (1) IN GENERAL.—No provision of this title 

14 shall be construed as altering, amending, or affect15 ing the authority of any securities commission (or 

16 any agency or office performing like functions) of 

17 any State to adopt rules, initiate enforcement pro18 ceedings, or take any other action with respect to a 

19 person regulated by any securities commission (or 

20 any agency or office performing like functions) of 

21 any State. Except as permitted in paragraph (2) and 

22 subsection (m), the Director and the Agency shall 

23 have no authority to exercise any power to enforce 

24 this title with respect to a person regulated by any 

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1 forming like functions) of any State, but only to the 

2 extent that the person acts in such regulated capac3 ity. 

4 (2) DESCRIPTION OF ACTIVITIES.—Paragraph 

5 (1) shall not apply to any person to the extent such 

6 person is engaged in any financial activity described 

7 in any subparagraph of section 101(19) or is other8 wise subject to any enumerated consumer law or any 

9 law or authority transferred under subtitle F or H. 

10 (e) EXCLUSION FOR PERSONS REGULATED BY A

11 STATE INSURANCE REGULATOR.— 

12 (1) IN GENERAL.—No provision of this title 

13 shall be construed as altering, amending, or affect14 ing the authority of any State insurance regulator to 

15 adopt rules, initiate enforcement proceedings, or 

16 take any other action with respect to a person regu17 lated by any State insurance regulator. Except as 

18 provided in paragraphs (2) and (3), the Agency shall 

19 have no authority to exercise any power to enforce 

20 this title with respect to a person regulated by any 

21 State insurance regulator. 

22 (2) DESCRIPTION OF ACTIVITIES.—Paragraph 

23 (1) shall not apply to any person described in such 

24 paragraph to the extent such person is engaged in 

25 any financial activity described in any subparagraph 


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1 of section 4002(19) or is otherwise subject to any of 

2 the enumerated consumer laws or the authorities 

3 transferred under subtitle F or H. 

4 (3) PRESERVATION OF CERTAIN AUTHORI5 TIES.—No provision of this title shall be construed 

6 as limiting the authority of the Director and the 

7 Agency from exercising powers under this Act with 

8 respect to a person, other than a person regulated 

9 by a State insurance regulator, who provides a prod10 uct or service for or on behalf of a person regulated 

11 by a State insurance regulator in connection with a 

12 financial activity. 

13 (f) EXCLUSION FOR PERSONS REGULATED BY THE

14 FEDERAL HOUSING FINANCE AGENCY.—No provision of 

15 this title shall be construed as altering, amending, or af16 fecting the authority of the Federal Housing Finance 

17 Agency to adopt rules, initiate enforcement proceedings, 

18 or take any other action with respect to a person regulated 

19 by the Federal Housing Finance Agency. The Director 

20 and Agency shall have no authority to exercise any power 

21 to enforce this title with respect to a person regulated by 

22 the Federal Housing Finance Agency. For purposes of 

23 this subsection, the term ‘‘person regulated by the Federal 

24 Housing Finance Agency’’ means any Federal home loan 


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1 bank, and any joint office of 1 or more Federal home loan 

2 banks. 

3 (g) EXCLUSION FOR PERSONS REGULATED BY THE

4 FARM CREDIT ADMINISTRATION.—No provision of this 

5 title shall be constructed as altering, amending, or affect6 ing the authority of the Farm Credit Administration to 

7 adopt rules, institute enforcement proceedings, or take any 

8 other action with respect to a person regulated by the 

9 Farm Credit Administration. The Director and Agency 

10 shall have no authority to exercise any power to enforce 

11 this title, compel registration, or to order assessments with 

12 respect to a person regulated by the Farm Credit Adminis13 tration. For purposes of this subsection, the term ‘‘person 

14 regulated by the Farm Credit Administration’’ means any 

15 Farm Credit System Institution. 

16 (h) EMPLOYEE BENEFIT AND COMPENSATION PLANS

17 AND CERTAIN OTHER ARRANGEMENTS UNDER THE IN18 TERNAL REVENUE CODE OF 1986.— 

19 (1) AUTHORITY RETAINED BY OTHER AGEN20 CIES.—No provision of this title shall be construed 

21 as altering, amending, or affecting the authority of 

22 the Secretary of the Treasury, the Secretary of 

23 Labor, or the Commissioner of Internal Revenue to 

24 adopt regulations, initiate enforcement proceedings, 


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1 or take any actions with respect to any specified 

2 plan or arrangement. 

3 (2) ACTIVITIES NOT CONSTITUTING FINANCIAL

4 ACTIVITIES.—For the purposes of this title, a person 

5 shall not be treated as having engaged in a financial 

6 activity, as defined in section 4002(19), solely be7 cause such person is a specified plan or arrangement 

8 or is engaged in the activity of establishing or main9 taining, for the benefit of employees of such person 

10 (or for members of an employee organization), any 

11 specified plan or arrangement. 

12 (3) REGULATORY COORDINATION.—In the case 

13 of regulations promulgated under this title that ad14 dress any financial activity specifically pertaining to 

15 the administration and maintenance of a specified 

16 plan or arrangement, the Director shall coordinate 

17 with the Secretary of Labor and the Secretary of 

18 Treasury, as appropriate. 

19 (4) SPECIFIED PLAN OR ARRANGEMENT.—For 

20 purposes of this subsection, the term ‘‘specified plan 

21 or arrangement’’ means any plan, account, or ar22 rangement described in section 220, 223, 401(a), 

23 403(a), 403(b), 408, 408A, 529, or 530 of the Inter24 nal Revenue Code of 1986, or any employee benefit 

25 or compensation plan or arrangement, including a 


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1 plan that is subject to title I of the Employee Retire2 ment Income Security Act of 1974. 

3 (i) EXCLUSION FOR ACCOUNTANTS AND TAX PRE4 PARERS.— 

5 (1) IN GENERAL.—Except as permitted in para6 graph (2), the Director and the Agency may not ex7 ercise any rulemaking, supervisory, enforcement or 

8 other authority, including authority to order assess9 ments, over— 

10 (A) any person that is a certified public ac11 countant, permitted to practice as a certified 

12 public accounting firm, or certified or licensed 

13 for such purpose by a State, or any individual 

14 who is employed by or holds an ownership inter15 est with respect to a person described in this 

16 subparagraph when such person is performing 

17 or offering to perform customary and usual ac18 counting activities, including the provision of 

19 accounting, tax, advisory, other services that 

20 are subject to the regulatory authority of a 

21 state board of accountancy or a Federal author22 ity, or other services that are incidental to such 

23 customary and usual accounting activities, to 

24 the extent that such incidental services are not 

25 offered or provided by the person separate and 


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1 apart from such customary and usual account2 ing activities and are not offered or provided to 

3 consumers who are not receiving such cus4 tomary and usual accounting activities; or 

5 (B) any person other than a person de6 scribed in subparagraph (A) that performs in7 come tax preparation activities for consumers. 

8 (2) CERTAIN ACTIVITIES NOT EXCLUDED.— 

9 (A) IN GENERAL.—In no event shall para10 graph (1) apply to any activity which involves 

11 the sale of securities or extension of credit 

12 which is provided by a person described in para13 graph (1)(A). 

14 (B) DEFINITION.—For purposes of sub15 paragraph (A), the term ‘‘extension of credit’’ 

16 shall not include an ordinary account receivable. 

17 (3) DESCRIPTION OF ACTIVITIES.—Paragraph 

18 (1) shall not apply to— 

19 (A) any person described in paragraph 

20 (1)(A) to the extent such person is engaged in 

21 any activity which is not a customary and usual 

22 accounting activity described in paragraph 

23 (1)(A) or incidental thereto but which is a fi24 nancial activity described in any subparagraph 

25 of section 4002(19); 


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1 (B) any person described in paragraph 

2 (1)(B) to the extent such person is engaged in 

3 any activity which is a financial activity de4 scribed in any subparagraph of section 

5 4002(19); or 

6 (C) any person described in paragraph 

7 (1)(A) or (1)(B) that is otherwise subject to 

8 any of the enumerated consumer laws or the 

9 authorities transferred under subtitle F or H. 

10 (j) EXCLUSION FOR REAL ESTATE LICENSEES.— 

11 (1) IN GENERAL.—Except as permitted in para12 graph (2), the Director and the Agency may not ex13 ercise any rulemaking, supervisory, enforcement or 

14 other authority, including authority to order assess15 ments, over a person that is licensed or registered as 

16 a real estate broker, real estate agent, in accordance 

17 with State law, but only to the extent that such per18 son— 

19 (A) acts as a real estate agent or broker 

20 for a buyer, seller, lessor, or lessee of real prop21 erty; 

22 (B) brings together parties interested in 

23 the sale, purchase, lease, rental, or exchange of 

24 real property; 


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1 (C) negotiates, on behalf of any party, any 

2 portion of a contract relating to the sale, pur3 chase, lease, rental, or exchange of real prop4 erty (other than in connection with providing fi5 nancing with respect to any such transaction); 

6 (D) engages in any activity for which a 

7 person engaged in the activity is required to be 

8 registered or licensed as a real estate agent or 

9 real estate broker under any applicable law; or 

10 (E) offers to engage in any activity, or act 

11 in any capacity, described in subparagraph (A), 

12 (B), (C), or (D). 

13 (2) DESCRIPTION OF ACTIVITIES.—Paragraph 

14 (1) shall not apply to any person described in such 

15 paragraph to the extent such person is engaged in 

16 any financial activity described in any subparagraph 

17 of section 4002(19) or is otherwise subject to any of 

18 the enumerated consumer laws or the authorities 

19 transferred under subtitle F or H. 

20 (k) EXCLUSION FOR AUTO DEALERS.— 

21 (1) IN GENERAL.—The Director and the Agen22 cy may not exercise any rulemaking, supervisory, en23 forcement or any other authority, including author24 ity to order assessments, over a motor vehicle dealer 

25 that is primarily engaged in the sale and servicing 


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1 of motor vehicles, the leasing and servicing of motor 

2 vehicles, or both. 

3 (2) CERTAIN FUNCTIONS EXCEPTED.—The pro4 visions of paragraph (1) shall not apply to any per5 son to the extent that person— 

6 (A) provides consumers with any services 

7 related to residential mortgages; or 

8 (B) operates a line of business that in9 volves the extension of retail credit or retail 

10 leases involving motor vehicles, and in which— 

11 (i) the extension of retail credit or re12 tail leases is routinely provided directly to 

13 consumers; and 

14 (ii) the contract governing such exten15 sion of retail credit or retail leases is not 

16 routinely assigned to a third party finance 

17 or leasing source. 

18 (3) NO IMPACT ON PRIOR AUTHORITY.—Noth19 ing in this subsection shall be construed to modify, 

20 limit, or supersede the rulemaking or enforcement 

21 authority over motor vehicle dealers that could be 

22 exercised by any Federal department or agency on 

23 the day prior to the enactment of this title. 

24 (4) NO TRANSFER OF CERTAIN AUTHORITY.— 

25 Notwithstanding subtitle F or any other provision of 


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1 law under this title, the consumer financial protec2 tion functions of the Board of Governors and the 

3 Federal Trade Commission shall not be transferred 

4 to the Director or the Agency to the extent such 

5 functions are with respect to a person described 

6 under paragraph (1). 

7 (5) DEFINITIONS.—For purposes of this sub8 section: 

9 (A) MOTOR VEHICLE.—The term ‘‘motor 

10 vehicle’’ means any self-propelled vehicle de11 signed for transporting persons or property on 

12 a street, highway, or other road. 

13 (B) MOTOR VEHICLE DEALER.—The term 

14 ‘‘motor vehicle dealer’’ means any person resi15 dent in the United States or any territory of 

16 the United States, and licensed by a State, a 

17 territory of the United States, or the District of 

18 Columbia to engage in the sale of motor vehi19 cles. 

20 (l) NO AUTHORITY TO IMPOSE USURY LIMIT.—No 

21 provision of this title shall be construed as conferring au22 thority on the Director or the Agency to establish a usury 

23 limit applicable to an extension of credit offered or made 

24 by a covered person to a consumer, unless explicitly au25 thorized by law. 


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1 (m) EXCLUSION FOR MANUFACTURED HOME RE2 TAILERS AND MODULAR HOME RETAILERS.— 

3 (1) IN GENERAL.—The Director and the Agen4 cy may not exercise any rulemaking, supervisory, en5 forcement or other authority, including authority to 

6 order assessments, over a person to the extent such 

7 person— 

8 (A) acts as an agent or broker for a buyer 

9 or seller of a manufactured home or a modular 

10 home; 

11 (B) facilitates the purchase by a consumer 

12 of a manufactured home or modular home, by 

13 negotiating the purchase price or terms of the 

14 sales contract (other than providing financing 

15 with respect to such transaction); or 

16 (C) offers to engage in any activity de17 scribed in subparagraph (A) or (B). 

18 (2) DESCRIPTION OF ACTIVITIES.—Paragraph 

19 (1) shall not apply to any person described in such 

20 paragraph to the extent such person is engaged in 

21 any financial activity described in any subparagraph 

22 of section 4002(19) or is otherwise subject to any of 

23 the enumerated consumer laws or the authorities 

24 transferred under subtitle F or H. 


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1 (3) DEFINITIONS.—For purposes of this sub2 section: 

3 (A) MANUFACTURED HOME.—The term 

4 ‘‘manufactured home’’ has the meaning given 

5 such term in section 603 of the National Manu6 factured Housing Construction and Safety 

7 Standards Act of 1974 (42 U.S.C. 5402). 

8 (B) MODULAR HOME.—The term ‘‘mod9 ular home’’ means a house built in a factory in 

10 two or more modules that meet the State or 

11 local building codes where the house will be lo12 cated and where such modules are transported 

13 to the building site, installed on foundations, 

14 and completed. 

15 (n) EXCLUSION FOR PRACTICE OF LAW.— 

16 (1) IN GENERAL.—Except as provided under 

17 paragraph (2), nothing in this title shall apply with 

18 respect to an activity engaged in by an attorney, or 

19 engaged in under the direction of an attorney, as 

20 part of the practice of law under the laws of a State 

21 in which the attorney is licensed to practice law. 

22 (2) RULE OF CONSTRUCTION.— 

23 (A) IN GENERAL.—Paragraph (1) shall not 

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1 visory, enforcement, or other authority, includ2 ing authority to order assessments, regarding 

3 any activity that is a financial activity described 

4 in any subparagraph of section 4002(19) and is 

5 not engaged in as— 

6 (i) part of the practice of law; or 

7 (ii) incidental to the practice of law, 

8 to the extent that such activity is provided 

9 exclusively within the scope of the attor10 ney-client relationship and is not otherwise 

11 provided by or under the direction of the 

12 attorney to any consumer who is not re13 ceiving legal advice or services from the at14 torney in connection with such activity. 

15 (B) CONSTRUCTION.—Paragraph (1) shall 

16 not be construed to limit the authority of the 

17 Director and the Agency with respect to any ac18 tivity to the extent that such activity is other19 wise subject to any of the enumerated consumer 

20 laws or the authorities transferred under sub21 title F or H. 

22 (3) EXCEPTION.—Notwithstanding paragraph 

23 (1), an individual who provides legal advice or serv24 ices related to preventing a foreclosure shall be subVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00930 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ject to this title unless such individual provides fore2 closure prevention services in connection with— 

3 (A) the preparation and filing of a bank4 ruptcy petition; or 

5 (B) court proceedings to avoid a fore6 closure. 

7 (o) EXCLUSION FOR PAWNBROKERS.— 

8 (1) IN GENERAL.—The Director and the Agen9 cy may not exercise any rulemaking, supervisory, en10 forcement, or other authority, including authority to 

11 order assessments, under this title with respect to 

12 any pawnbroker licensed by a State or political sub13 division thereof, a territory of the United States, or 

14 the District of Columbia, but only to the extent that 

15 such person acts in such capacity and provides ei16 ther— 

17 (A) non-recourse credit secured by a 

18 possessory security interest in tangible goods 

19 physically delivered by the consumer to the 

20 pawnbroker for which the consumer does not 

21 provide a written or electronic promise, order or 

22 authorization to pay, or in any other manner 

23 authorize a debit of a deposit account, prior to 

24 or contemporaneously with the disbursement of 

25 the original proceeds; or 


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1 (B) credit or any other financial activity 

2 issued directly by a pawnbroker to a consumer, 

3 in a case in which the good or service being 

4 provided is not itself a consumer financial prod5 uct or service, exclusively for the purpose of en6 abling that consumer to purchase goods or serv7 ices directly from the pawnbroker. 

8 (2) RULE OF CONSTRUCTION.— 

9 (A) FTC AUTHORITY PRESERVED.—Ex10 cept as provided in subparagraph (B), no provi11 sion of this title shall be construed as modi12 fying, limiting, or superseding the authority of 

13 the Federal Trade Commission with respect to 

14 the activities described under paragraph (1). 

15 (B) EXERCISE OF RULEMAKING AUTHOR16 ITY.—The Director may exercise any rule17 making authority regarding the activities de18 scribed in paragraph (1) only as may be author19 ized by the enumerated consumer laws or any 

20 law or authority transferred under subtitle F or 

21 H. 

22 (p) EXCLUSION FOR CERTAIN CONSUMER REPORT23 ING AGENCIES.— 

24 (1) IN GENERAL.—Except as permitted in para25 graph (2), the Director and the Agency may not exVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00932 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ercise any rulemaking, supervisory, enforcement or 

2 other authority, including authority to order assess3 ments, over a person that is a consumer reporting 

4 agency, as such term is defined in section 603(f) of 

5 the Fair Credit Reporting Act (15 U.S.C. 1681a(f)), 

6 but only to the extent that such consumer reporting 

7 agency furnishes a consumer report to another per8 son that it has reason to believe intends to use the 

9 information for employment purposes, including for 

10 security investigations, government licensing and 

11 evaluating a consumer’s residential or tenant his12 tory. 

13 (2) DESCRIPTION OF ACTIVITIES.—Paragraph 

14 (1) shall not apply to any person described in such 

15 paragraph to the extent such person is engaged in 

16 any financial activity described in any subparagraph 

17 of section 4002(19) or is otherwise subject to any of 

18 the enumerated consumer laws or the authorities 

19 transferred under subtitle F or H. 

20 (q) LIMITED AUTHORITY OF THE AGENCY TO OB21 TAIN INFORMATION.—Notwithstanding subsections (a), 

22 (f), (g), (h), (i), and (k), the Director may request or re23 quire information from any person subject to or described 

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1 sibilities and functions of the Agency and in accordance 

2 with section 4206, 4501, or 4502. 

3 (r) EXCLUSION FOR ACTIVITIES RELATING TO CHAR4 ITABLE CONTRIBUTIONS.— 

5 (1) The Director and the Agency may not exer6 cise any rulemaking, supervisory, enforcement, or 

7 other authority, including authority to order assess8 ments or penalties, over any activities related to the 

9 solicitation or making of voluntary contributions to 

10 or through a tax-exempt organization as recognized 

11 by the Internal Revenue Service, by any agent, vol12 unteer or representative of such organizations to the 

13 extent the organization, agent, volunteer or rep14 resentative thereof is soliciting or providing advice, 

15 information, education or instruction to donor(s) or 

16 potential donor(s) relating to a contribution to or 

17 through the organization. 

18 (2) This exclusion shall not apply to other ac19 tivities not described in the paragraph above and are 

20 financial activities as described in any subparagraph 

21 of section 4002(19), or otherwise subject to any of 

22 the enumerated consumer laws, or the authorities 

23 transferred under subtitle F or H. 


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1 SEC. 4206. COLLECTION OF INFORMATION; CONFIDEN2 TIALITY REGULATIONS. 

3 (a) COLLECTION OF INFORMATION.— 

4 (1) IN GENERAL.—In conducting research on 

5 the provision of consumer financial products or serv6 ices, the Director shall have the power to gather in7 formation from time to time regarding the organiza8 tion, business conduct, and practices of covered per9 sons or service providers. 

10 (2) SPECIFIC AUTHORITY.—In order to gather 

11 such information, the Director shall have the 

12 power— 

13 (A) to gather and compile information; 

14 (B) to require persons to file with the 

15 Agency, in such form and within such reason16 able period of time as the Director may pre17 scribe, by regulation or order, annual or special 

18 reports, or answers in writing to specific ques19 tions, furnishing information the Director may 

20 require; and 

21 (C) to make public such information ob22 tained by it under this section as is in the pub23 lic interest in reports or otherwise in the man24 ner best suited for public information and use. 

25 (b) CONFIDENTIALITY REGULATIONS.—The Director 

26 shall prescribe regulations regarding the confidential 


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1 treatment of information obtained from persons in connec2 tion with the exercise of any authority of the Agency or 

3 Director under this title and the enumerated consumer 

4 laws and the authorities transferred under subtitles F and 

5 H. 

6 (c) PRIVACY CONSIDERATIONS.—In collecting infor7 mation from any person, publicly releasing information 

8 held by the Agency, or requiring covered persons to pub9 licly report information, the Director and the Agency shall 

10 take steps to ensure that proprietary, personal or con11 fidential consumer information that are protected from 

12 public disclosure under section 552(b) or 552a of title 5, 

13 United States Code, or any other provision of law are not 

14 made public under this title. 

15 SEC. 4207. MONITORING; ASSESSMENTS OF SIGNIFICANT 

16 REGULATIONS; REPORTS. 

17 (a) MONITORING.— 

18 (1) IN GENERAL.—The Agency shall monitor 

19 for risks to consumers in the provision of consumer 

20 financial products or services, including develop21 ments in markets for such products or services. 

22 (2) MEANS OF MONITORING.—Such monitoring 

23 may be conducted by examinations of covered per24 sons or service providers, analysis of reports ob25 tained from covered persons or service providers, asVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 00936 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 sessment of consumer complaints, surveys and inter2 views of covered persons, service providers, and con3 sumers, and review of available databases. 

4 (3) CONSIDERATIONS.—In allocating the re5 sources of the Agency to perform the monitoring re6 quired by this section, the Director may consider, 

7 among other factors— 

8 (A) likely risks and costs to consumers as9 sociated with buying or using a type of con10 sumer financial product or service; 

11 (B) consumers’ understanding of the risks 

12 of a type of consumer financial product or serv13 ice; 

14 (C) the state of the law that applies to the 

15 provision of a consumer financial product or 

16 service, including the extent to which the law is 

17 likely to adequately protect consumers; 

18 (D) rates of growth in the provision of a 

19 consumer financial product or service; 

20 (E) extent, if any, to which the risks of a 

21 consumer financial product or service may dis22 proportionately affect traditionally underserved 

23 consumers, if any; or 


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1 (F) types, number, and other pertinent 

2 characteristics of covered persons that provide 

3 the product or service. 

4 (4) REPORTS.—The Agency shall publish at 

5 least 1 report of significant findings of the moni6 toring required by paragraph (1) in each calendar 

7 year, beginning in the calendar year that is 1 year 

8 after the designated transfer date. 

9 (b) ASSESSMENT OF SIGNIFICANT REGULATIONS.— 

10 (1) IN GENERAL.—The Agency shall conduct an 

11 assessment of each significant regulation prescribed 

12 or order issued by the Director under this title, 

13 under the authorities transferred under subtitles F 

14 and H or pursuant to any enumerated consumer law 

15 that addresses, among other relevant factors, the ef16 fectiveness of the regulation in meeting the purposes 

17 and objectives of this title and the specific goals 

18 stated by the Director. 

19 (2) BASIS FOR ASSESSMENT.—The assessment 

20 shall reflect available evidence and any data that the 

21 Agency reasonably may collect. 

22 (3) REPORTS.—The Agency shall publish a re23 port of an assessment under this subsection not 

24 later than 3 years after the effective date of the reg25 ulation or order, unless the Director determines that 


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1 3 years is not sufficient time to study or review the 

2 impact of the regulation, but in no event shall the 

3 Agency publish a report of such assessment more 

4 than 5 years after the effective date of the regula5 tion or order. 

6 (4) PUBLIC COMMENT REQUIRED.—Before pub7 lishing a report of its assessment, the Agency shall 

8 invite, with sufficient time allotted, public comment 

9 on, and may hold public hearings on, recommenda10 tions for modifying, expanding, or eliminating the 

11 newly adopted significant regulation or order. 

12 (c) INFORMATION GATHERING.—In conducting any 

13 monitoring or assessment required by this section, the 

14 Agency may gather information through a variety of meth15 ods, including by conducting surveys or interviews of con16 sumers. 

17 SEC. 4208. AUTHORITY TO RESTRICT MANDATORY 

18 PREDISPUTE ARBITRATION. 

19 (a) IN GENERAL.—The Director, by regulation, may 

20 prohibit or impose conditions or limitations on the use of 

21 any agreement between a covered person and a consumer 

22 for a consumer financial product or service providing for 

23 arbitration of any future dispute between the parties if 

24 the Director finds that such a prohibition or imposition 

25 of conditions or limitations are in the public interest and 


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1 for the protection of consumers. This authority shall not 

2 prohibit or restrict a consumer from entering into a vol3 untary arbitration agreement with a covered person after 

4 a dispute has arisen. 

5 (b) EFFECTIVE DATE.—Notwithstanding any other 

6 provision of law, any regulation prescribed by the Director 

7 under subsection (a) shall apply, consistent with the terms 

8 of the regulation, to any agreement between a consumer 

9 and a covered person entered into after the end of the 

10 180-day period beginning on the effective date of the regu11 lation, as established by the Director. 

12 SEC. 4209. REGISTRATION AND SUPERVISION OF NON13 DEPOSITORY COVERED PERSONS. 

14 (a) RISK-BASED PROGRAMS.— 

15 (1) IN GENERAL.—The Agency shall develop 

16 risk-based programs to supervise covered persons 

17 that are not credit unions, depository institutions, or 

18 persons excluded under section 4205 by prescribing 

19 registration requirements, reporting requirements, 

20 and examination standards and procedures. 

21 (2) BASIS FOR PROGRAMS.—The risk-based su22 pervisory programs established pursuant to para23 graph (1) shall be based on— 


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1 (A) relevant registration and reporting in2 formation about such covered persons, as deter3 mined by the Agency; and 

4 (B) the Agency’s assessment of risks posed 

5 to consumers in the relevant geographic mar6 kets and markets for consumer financial prod7 ucts and services. 

8 (b) REGISTRATION.— 

9 (1) IN GENERAL.—The Director shall prescribe 

10 regulations regarding registration requirements for 

11 covered persons that are not credit unions or deposi12 tory institutions. 

13 (2) CONSULTATION WITH STATE AGENCIES.— 

14 In developing and implementing registration require15 ments under this subsection, the Agency shall con16 sult with State agencies regarding requirements or 

17 systems for registration (including coordinated or 

18 combined systems), where appropriate. 

19 (3) EXCEPTION FOR RELATED PERSONS.—The 

20 Agency shall not impose requirements regarding the 

21 registration of a related person. 

22 (4) REGISTRATION INFORMATION.—Subject to 

23 regulations prescribed by the Director, the Agency 

24 shall publicly disclose the registration information 

25 about a covered person which is not a bank holding 


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1 company, credit union, or depository institution for 

2 the purposes of facilitating the ability of consumers 

3 to identify the covered person as registered with the 

4 Agency. 

5 (c) REPORTING REQUIREMENTS.— 

6 (1) IN GENERAL.—The Agency may require re7 ports from covered persons that are not credit 

8 unions or depository institutions, or service providers 

9 thereto, for the purposes of facilitating supervision 

10 of such covered persons or service providers. 

11 (2) CONSISTENCY OF REPORTING REQUIRE12 MENTS AND RISK-BASED STANDARDS.—The Agency 

13 shall impose reporting requirements under this sub14 section that are consistent with the risk-based stand15 ards developed and implemented under this section 

16 and the registration information pertaining to the 

17 relevant types or classes of covered persons. 

18 (3) CONTENTS OF REPORTS.—Reporting re19 quirements imposed under this paragraph may in20 clude information regarding— 

21 (A) the nature of the covered person’s 

22 business; 

23 (B) the covered person’s name, legal form, 

24 ownership and management structure, and re25 lated persons; 


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1 (C) the covered person’s locations of oper2 ation; 

3 (D) the covered person’s types and number 

4 of consumer financial products and services 

5 provided by the covered person; 

6 (E) compliance with any requirement im7 posed or enforced by the Agency, including any 

8 requirement relating to registration, licensing, 

9 fees, or assessments; and 

10 (F) the financial condition of such covered 

11 person, including a related person, for the pur12 pose of assessing the ability of such person to 

13 perform its obligation to consumers. 

14 (4) CONSULTATION WITH THE FEDERAL TRADE

15 COMMISSION.—In developing and implementing re16 port requirements under this subsection, the Agency 

17 shall consult with the Federal Trade Commission, 

18 where appropriate. 

19 (5) EXCEPTION FOR RELATED PERSONS.— 

20 Other than reports permitted under paragraph 

21 (3)(F) or in connection with a supervisory action or 

22 examination or pursuant to the powers granted in 

23 subtitle E, the Agency shall not impose requirements 

24 regarding reports of any related person. 

25 (d) EXAMINATIONS.— 


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1 (1) EXAMINATIONS REQUIRED.—The Agency 

2 shall conduct examinations of covered persons that 

3 are not credit unions or depository institutions as 

4 part of the programs implemented under paragraphs 

5 (2) and (3) of section 4202(c). 

6 (2) EXAMINATION STANDARDS AND PROCE7 DURES.—The Director shall establish risk-based 

8 standards and procedures for conducting examina9 tions of covered persons required to be examined 

10 under paragraph (1), including the frequency and 

11 scope of such examinations, except that the Agency 

12 shall conduct examinations of such covered persons 

13 that are determined to pose the highest risk to con14 sumers based on factors determined by the Director, 

15 such as the operations, sales practices, or consumer 

16 financial products or services provided by such cov17 ered persons. 

18 (e) AUTHORITY TO COLLECT INFORMATION REGARD19 ING FEES OR ASSESSMENTS.—To the extent permitted by 

20 Federal law, the Agency may obtain from the Secretary 

21 of the Treasury information relating to a covered person 

22 which is not a bank holding company, credit union, or de23 pository institution, including information regarding com24 pliance with a reporting or registration requirement under 

25 the subchapter II of chapter 53 of title 31, United States 


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1 Code, for the purposes of, and only to the extent necessary 

2 in, investigating, determining, or enforcing compliance 

3 with a requirement relating to any fee or assessment im4 posed by the Agency under this title. 

5 SEC. 4210. EFFECTIVE DATE. 

6 This subtitle shall take effect on the designated 

7 transfer date. 

8 Subtitle C—Specific Authorities 

9 SEC. 4301. PROHIBITING UNFAIR, DECEPTIVE, OR ABUSIVE 

10 ACTS OR PRACTICES. 

11 (a) IN GENERAL.—The Agency may take any action 

12 authorized under subtitle E to prevent a person from com13 mitting or engaging in an unfair, deceptive, or abusive act 

14 or practice under Federal law in connection with any 

15 transaction with a consumer for a consumer financial 

16 product or service, or the offering of a consumer financial 

17 product or service. 

18 (b) REGULATIONS.— 

19 (1) IN GENERAL.—The Director may prescribe 

20 regulations identifying as unlawful unfair, deceptive, 

21 or abusive acts or practices in connection with any 

22 transaction with a consumer for a consumer finan23 cial product or service or the offering of a consumer 

24 financial product or service. 


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1 (2) INCLUDES PREVENTION MEASURES.—Regu2 lations prescribed under this section may include re3 quirements for the purpose of preventing such acts 

4 or practices. 

5 (c) UNFAIR, DECEPTIVE, OR ABUSIVE ACTS OR

6 PRACTICES DEFINED.— 

7 (1) UNFAIR ACTS OR PRACTICES.—Any deter8 mination by the Director and the Agency that an act 

9 or practice is unfair shall be consistent with the 

10 standard set forth under section 5 of the Federal 

11 Trade Commission Act and with the policy state12 ment adopted by the Federal Trade Commission 

13 pursuant to section 5 of the Federal Trade Commis14 sion Act and dated December 17, 1980. 

15 (2) DECEPTIVE ACTS OR PRACTICES.—Any de16 termination by the Director and the Agency that an 

17 act or practice is deceptive shall be consistent with 

18 the policy statement adopted by the Federal Trade 

19 Commission pursuant to section 5 of the Federal 

20 Trade Commission Act and dated October 14, 1983. 

21 (3) ABUSIVE ACTS OR PRACTICES.—The Direc22 tor and the Agency may determine that an act or 

23 practice is abusive only if the Director finds that— 

24 (A) the act or practice is reasonably likely 

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1 stand the terms and conditions of a financial 

2 product or service or to protect their own inter3 ests in selecting or using a financial product or 

4 service; and 

5 (B) the widespread use of the act or prac6 tice is reasonably likely to contribute to insta7 bility and greater risk in the financial system. 

8 (4) CONSIDER AS UNFAIR CERTAIN PRACTICES

9 WITH REGARD TO THE PROVISION OF CREDIT

10 SCORES.—Subject to regulations prescribed by the 

11 Director, it shall be considered unfair for any con12 sumer reporting agency that compiles and maintains 

13 files on consumers on a nationwide basis (as defined 

14 in section 603(p) of the Fair Credit Reporting Act; 

15 15 U.S.C. 1681a(p)) to make available for purchase 

16 by creditors any credit score for a consumer that is 

17 not also available for purchase by that consumer at 

18 the same price as other credit scores sold to con19 sumers by such agency. 

20 (d) CONSULTATION.—In prescribing any regulation 

21 under this section, the Director shall consult with the Fed22 eral banking agencies, State bank supervisors, the Federal 

23 Trade Commission, or other Federal agencies, as appro24 priate, regarding the consistency of a proposed regulation 

25 with prudential, consumer protection, civil rights, market, 


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1 or systemic objectives administered by such agencies or 

2 supervisors. 

3 SEC. 4302. DISCLOSURES. 

4 (a) IN GENERAL.—The Director may prescribe regu5 lations to ensure the timely, appropriate and effective dis6 closure to consumers of the costs, benefits, and risks asso7 ciated with any consumer financial product or service. 

8 (b) COORDINATION WITH OTHER LAWS.—In pre9 scribing regulations under subsection (a), the Director 

10 shall take into account disclosure requirements under 

11 other laws in order to enhance consumer compliance and 

12 reduce regulatory burden. 

13 (c) COMPLIANCE.— 

14 (1) MODEL DISCLOSURES.—The Agency may 

15 provide model disclosures to facilitate compliance 

16 with the requirements of regulations prescribed 

17 under this section. 

18 (2) PER SE COMPLIANCE.—Compliance by a 

19 covered person with the model disclosures issued by 

20 the Agency under this subsection shall per se con21 stitute compliance with the disclosure requirements 

22 of this section. 

23 (3) ADDITIONAL GUIDANCE.—The Agency may 

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1 ance to promote compliance with disclosures require2 ments of regulations prescribed under this section. 

3 (d) COMBINED MORTGAGE LOAN DISCLOSURE.— 

4 Within 1 year after the designated transfer date, the Di5 rector shall propose for public comment regulations and 

6 model disclosures that combine the disclosures required 

7 under the Truth in Lending Act and the Real Estate Set8 tlement Procedures Act into a single, integrated disclosure 

9 for mortgage loan transactions covered by those laws, un10 less the Director determines that any proposal issued by 

11 the Board of Governors and the Department of Housing 

12 and Urban Development carries out the same purpose. 

13 SEC. 4303. SALES PRACTICES. 

14 The Director may prescribe regulations and issue or15 ders and guidance regarding the manner, settings, and cir16 cumstances for the provision of any consumer financial 

17 products or services to ensure that the risks, costs, and 

18 benefits of the products or services, both initially and over 

19 the term of the products or services, are fully and accu20 rately represented to consumers. 

21 SEC. 4304. PILOT DISCLOSURES. 

22 (a) PILOT DISCLOSURES.—The Agency shall estab23 lish standards and procedures for approval of pilot disclo24 sures to be provided or made available by a covered person 

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1 sumer financial product or service, or the offering of a 

2 consumer financial product or service. 

3 (b) STANDARDS.—The procedures shall provide that 

4 a pilot disclosure must be limited in time and scope and 

5 reasonably designed to contribute materially to the under6 standing of consumer awareness and understanding of, 

7 and responses to, disclosures or communications about the 

8 risks, costs, and benefits of consumer financial products 

9 or services. 

10 (c) TRANSPARENCY.—The procedures shall provide 

11 for public disclosure of pilots, but the Agency may limit 

12 disclosure to the extent necessary to encourage covered 

13 persons to conduct effective pilots. 

14 SEC. 4305. ADOPTING OPERATIONAL STANDARDS TO 

15 DETER UNFAIR, DECEPTIVE, OR ABUSIVE 

16 PRACTICES. 

17 (a) AUTHORITY TO PRESCRIBE STANDARDS.—The 

18 States are encouraged to prescribe standards applicable 

19 to covered persons who are not insured depository institu20 tions or credit unions, or service providers, to deter and 

21 detect unfair, deceptive, abusive, fraudulent, or illegal 

22 transactions in the provision of consumer financial prod23 ucts or services, including standards for— 

24 (1) background checks for principals, officers, 

25 directors, or key personnel; 


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1 (2) registration, licensing, or certification; 

2 (3) bond or other appropriate financial require3 ments to provide reasonable assurance of ability to 

4 perform its obligations to consumers; 

5 (4) creating and maintaining records of trans6 actions or accounts; or 

7 (5) procedures and operations relating to the 

8 provision of, or maintenance of accounts for, con9 sumer financial products or services. 

10 (b) AGENCY AUTHORITY TO PRESCRIBE STAND11 ARDS.— 

12 (1) IN GENERAL.—The Director may prescribe 

13 regulations establishing minimum standards under 

14 this section for any class of covered persons other 

15 than covered persons which are subject to the juris16 diction of a Federal banking agency or a State bank 

17 supervisor, or for any service provider. 

18 (2) REGISTRATION AND LICENSING STAND19 ARDS.—In addition to prescribing standards for the 

20 purposes described in subsection (a), the Director 

21 may prescribe registration or licensing standards ap22 plicable to covered persons for the purposes of im23 posing fees or assessments in accordance with this 

24 title. 


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1 (3) ENFORCEMENT OF STANDARDS.—The Di2 rector may enforce under subtitle E compliance with 

3 standards adopted by the Director or a State pursu4 ant to this section for covered persons or service 

5 providers operating in that State. 

6 (c) CONSULTATION.—In prescribing minimum stand7 ards under this section, the Director shall consult with the 

8 Federal banking agencies, State bank supervisors, the 

9 Federal Trade Commission, or other Federal agencies, as 

10 appropriate, regarding the consistency of a proposed regu11 lation with prudential, consumer protection, civil rights, 

12 market, or systemic objectives administered by such agen13 cies or supervisors. 

14 SEC. 4306. DUTIES. 

15 (a) IN GENERAL.— 

16 (1) REGULATIONS ENSURING FAIR DEALING

17 WITH CONSUMERS.—The Director shall prescribe 

18 regulations imposing duties on a covered person, or 

19 an employee of a covered person, or an agent or 

20 independent contractor for a covered person, who 

21 deals or communicates directly with consumers in 

22 the provision of a consumer financial product or 

23 service, as the Director deems appropriate or nec24 essary to ensure fair dealing with consumers. 


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1 (2) CONSIDERATIONS FOR DUTIES.—In pre2 scribing such regulations, the Director shall consider 

3 whether— 

4 (A) the covered person, employee, agent, or 

5 independent contractor represents implicitly or 

6 explicitly that the person, employee, agent, or 

7 contractor is acting in the interest of the con8 sumer with respect to any aspect of the trans9 action; 

10 (B) the covered person, employee, agent, 

11 or independent contractor provides the con12 sumer with advice with respect to any aspect of 

13 the transaction; 

14 (C) the consumer’s reliance on or use of 

15 any advice from the covered person, employee, 

16 agent, or independent contractor would be rea17 sonable and justifiable under the circumstances; 

18 (D) the benefits to consumers of imposing 

19 a particular duty would outweigh the costs; and 

20 (E) any other factors as the Director con21 siders appropriate. 

22 (3) DUTIES RELATING TO COMPENSATION

23 PRACTICES.— 

24 (A) IN GENERAL.—The Director may pre25 scribe regulations establishing duties regarding 


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1 compensation practices applicable to a covered 

2 person, employee, agent, or independent con3 tractor who deals or communicates directly with 

4 a consumer in the provision of a consumer fi5 nancial product or service for the purpose of 

6 promoting fair dealing with consumers. 

7 (B) NO COMPENSATION CAPS.—The Direc8 tor may not prescribe a limit on the total dollar 

9 amount of compensation paid to any person. 

10 (C) DISPARITY TREATMENT PROHIB11 ITED.—The Director may not prescribe regula12 tions that directly or indirectly disparately 

13 treat, or are interpreted to disparately treat, or 

14 disparately impact any entity that employs cov15 ered persons. 

16 (4) REQUIREMENT TO INCLUDE DISCLAIMER ON

17 PUBLIC STATEMENTS.—The Director shall ensure 

18 that the Agency’s website, and any statement made 

19 by the Director or the Agency to the public, includes 

20 a disclaimer stating that the Agency does not en21 dorse any particular financial product or service and 

22 consumers are expected to exercise due diligence in 

23 deciding what financial products and services are ap24 propriate for them. 

25 (b) ADMINISTRATIVE PROCEEDINGS.— 


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1 (1) IN GENERAL.—Any regulation prescribed by 

2 the Director under this section shall be enforceable 

3 only by the Agency through an adjudication pro4 ceeding under subtitle E or by a State regulator 

5 through an appropriate administrative proceeding as 

6 permitted under State law. 

7 (2) EXCLUSIVITY OF REMEDY.—No action may 

8 be commenced in any court to enforce any require9 ment of a regulation prescribed under this section 

10 (other than by the Agency, or by a State regulator, 

11 as may be necessary to enforce an administrative 

12 order under this section), and no court may exercise 

13 supplemental jurisdiction over a claim asserted 

14 under a regulation prescribed under this section 

15 based on allegations or evidence of conduct that oth16 erwise may be subject to such regulation. 

17 (3) RULE OF CONSTRUCTION.—The Agency, 

18 the Attorney General, and any State attorney gen19 eral or State regulator shall not be precluded from 

20 enforcing any other Federal or State law against a 

21 person with respect to conduct that may be subject 

22 to a regulation prescribed by the Director under this 

23 section. 


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1 (c) EXCLUSIONS.—This section shall not be con2 strued as authorizing the Director to prescribe regulations 

3 applicable to— 

4 (1) an attorney licensed to practice law and in 

5 compliance with the applicable rules and standards 

6 of professional conduct, but only to the extent that 

7 the consumer financial product or service provided is 

8 within the attorney-client relationship with the con9 sumer; or 

10 (2) any trustee, custodian, or other person that 

11 holds a fiduciary duty in connection with a trust, in12 cluding a fiduciary duty to a grantor or beneficiary 

13 of a trust, that is subject to and in compliance with 

14 the applicable law relating to such trust. 

15 SEC. 4307. CONSUMER RIGHTS TO ACCESS INFORMATION. 

16 (a) IN GENERAL.—Subject to regulations prescribed 

17 by the Director, a covered person shall make available to 

18 a consumer, in an electronic form usable by the consumer, 

19 information in the control or possession of the covered per20 son concerning the consumer financial product or service 

21 that the consumer obtained from such covered person in22 cluding information relating to any transaction, series of 

23 transactions, or to the account including costs, charges 

24 and usage data. 


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1 (b) EXCEPTIONS.—A covered person shall not be re2 quired by this section to make available to the consumer— 

3 (1) any confidential commercial information, in4 cluding an algorithm used to derive credit scores or 

5 other risk scores or predictors; 

6 (2) any information collected by the covered 

7 person for the purpose of preventing fraud or money 

8 laundering, or detecting, or making any report re9 garding other unlawful or potentially unlawful con10 duct; 

11 (3) any information required to be kept con12 fidential by any other law (including section 6103 of 

13 the Internal Revenue Code of 1986); or 

14 (4) any information that the covered person 

15 cannot retrieve in the ordinary course of its business 

16 with respect to that information. 

17 (c) NO DUTY TO MAINTAIN RECORDS.—No provision 

18 of this section shall be construed as imposing any duty 

19 on a covered person to maintain or keep any information 

20 about a consumer. 

21 (d) STANDARDIZED FORMATS FOR DATA.—The Di22 rector, by regulation, shall prescribe standards applicable 

23 to covered persons to promote the development and use 

24 of standardized formats for information, including 


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1 through the use of machine readable files, to be made 

2 available to consumers under this section. 

3 (e) CONSULTATION.—The Director shall, when pre4 scribing any regulation under this section, consult with the 

5 Federal banking agencies, State bank supervisors, the 

6 Federal Trade Commission, and the Commissioner of In7 ternal Revenue to ensure that the regulations— 

8 (1) impose substantively similar requirements 

9 on covered persons; 

10 (2) take into account conditions under which 

11 covered persons do business both in the United 

12 States and in other countries; and 

13 (3) do not require or promote the use of any 

14 particular technology in order to develop systems for 

15 compliance. 

16 SEC. 4308. PROHIBITED ACTS. 

17 It shall be unlawful for any person— 

18 (1) to advertise, market, offer, sell, enforce, or 

19 attempt to enforce, any term, agreement, change in 

20 terms, fee, or charge in connection with a consumer 

21 financial product or service that is not in conformity 

22 with this title or applicable regulation prescribed or 

23 order issued by the Director or to engage in any un24 fair, deceptive, or abusive act or practice, except that 

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1 section solely by virtue of providing or selling time 

2 or space to a person placing an advertisement; 

3 (2) to fail or refuse to pay any fee or assess4 ment imposed by the Agency under this title, to fail 

5 or refuse to permit access to or copying of records, 

6 to fail or refuse to establish or maintain records, or 

7 to fail or refuse to make reports or provide informa8 tion to the Agency, as required by this title, an enu9 merated consumer law, or pursuant to the authori10 ties transferred by subtitles F and H, or any regula11 tion prescribed or order issued by the Director this 

12 title or pursuant to any such authority; or 

13 (3) to knowingly or recklessly provide substan14 tial assistance to another person in violation of the 

15 provisions of section 4301, or any regulation pre16 scribed or order issued under such section, and, not17 withstanding any other provision of this title, any 

18 such person shall be deemed to be in violation of 

19 that section to the same extent as the person to 

20 whom such assistance is provided. 

21

22 Nothing in this section shall be construed as limiting or 

23 superseding the protection provided to any provider or 

24 user qualifying for protection under section 230(c)(1) of 

25 the Communications Act of 1934 (47 U.S.C. 230(c)(1)). 


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1 SEC. 4309. TREATMENT OF REMITTANCE TRANSFERS. 

2 (a) DISCLOSURES REQUIRED FOR REMITTANCE

3 TRANSFERS.— 

4 (1) IN GENERAL.—Each remittance transfer 

5 provider shall make disclosures to consumers, as 

6 specified by this section and by regulation prescribed 

7 by the Director. 

8 (2) SPECIFIC DISCLOSURES.—In addition to 

9 any other disclosures applicable under this title, a 

10 remittance transfer provider shall— 

11 (A) disclose clearly and conspicuously, in 

12 writing and in a form that the consumer may 

13 keep, to each consumer who requests informa14 tion regarding the fees or exchange rate for a 

15 remittance transfer, prior to the consumer mak16 ing any payment in connection with the trans17 fer— 

18 (i) the total amount in United States 

19 dollars that will be required to be paid by 

20 the consumer in connection with the remit21 tance transfer; 

22 (ii) the amount of currency that the 

23 designated recipient of the remittance 

24 transfer will receive, using the values of 

25 the currency into which the funds will be 

26 exchanged; 


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1 (iii) the fee charged by the remittance 

2 transfer provider for the remittance trans3 fer; 

4 (iv) any exchange rate to be used by 

5 the remittance transfer provider for the re6 mittance transfer, unless the exchange rate 

7 is not fixed on send; 

8 (v) the amount of time for which the 

9 information specified in this subparagraph 

10 (A) will be in effect; 

11 (vi) the expected time interval within 

12 which the funds being transferred will be 

13 made available to the recipient; and 

14 (vii) the location where the funds 

15 being transferred will be made available to 

16 the recipient if the funds are to be made 

17 available only at one location, or if the re18 mittance transfer provider permits the re19 cipient to choose from multiple locations 

20 where the funds being transferred will be 

21 made available to the recipient, the remit22 tance transfer provider shall make avail23 able to the consumer or the recipient a re24 source that lists such locations; 


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1 (B) at the time at which the consumer 

2 makes payment in connection with the remit3 tance transfer, a receipt in writing disclosing 

4 clearly and conspicuously— 

5 (i) the information described in sub6 paragraph (A); 

7 (ii) the expected time interval within 

8 which the funds being transferred will be 

9 made available to the recipient, which shall 

10 be not more than ten days after the date 

11 the consumer makes payment in connec12 tion with the remittance transfer unless 

13 otherwise prohibited by applicable State or 

14 Federal law or the law of another country, 

15 or as may be specified by the consumer so 

16 long as the consumer has the choice to 

17 order that the funds be made available to 

18 the recipient not more than ten days after 

19 the consumer makes payment in connec20 tion with the remittance transfer; 

21 (iii) the location where the funds 

22 being transferred will be made available to 

23 the recipient if the funds are to be made 

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1 cipient to choose from multiple locations 

2 where the funds being transferred will be 

3 made available to the recipient, the remit4 tance transfer provider shall make avail5 able to the consumer or the recipient a re6 source that lists such locations; 

7 (iv) the name and telephone number 

8 or address of the designated recipient, if 

9 provided to the remittance transfer pro10 vider by the consumer; 

11 (v) information about the rights of the 

12 consumer under this section to cancel the 

13 remittance transfer, to resolve errors and 

14 to receive refunds; 

15 (vi) appropriate contact information 

16 for the remittance transfer provider; 

17 (vii) a transaction reference number 

18 unique to that remittance transfer; and 

19 (viii) information as to when the ex20 change rate will be calculated (for example, 

21 when the funds are received by the recipi22 ent), if the customer has been notified that 

23 the exchange rate is not fixed on send; 

24 (C) at the time at which the consumer ini25 tiates the remittance transfer, offer to provide 


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1 in writing, prior to making any payment in con2 nection with the transfer, the information listed 

3 in subparagraph (A); and 

4 (D) in the case of an exchange rate not 

5 fixed on send, the remittance provider shall also 

6 disclose, at the time at which the consumer ini7 tiates the remittance transfer, the range, using 

8 the high and low rates, for the prior 30 day pe9 riod, that the consumer would have received if 

10 a representative amount had been exchanged by 

11 the remittance transfer provider, as well as a 

12 clear and conspicuous notice that the actual ex13 change rate may vary. 

14 If the actual rate used for the transfer is known to 

15 the remittance provider, either because such rate 

16 was set by the remittance provider itself or because 

17 the remittance provider receives confirmation of the 

18 actual exchange rate used, the remittance provider 

19 shall make available to consumers written or elec20 tronic confirmation of the actual exchange rate used 

21 and the amount of currency that the recipient or the 

22 remittance transfer received, using the values of the 

23 currency into which the funds were exchanged. The 

24 Director shall within 2 years after the date of the 

25 enactment of the Consumer Financial Protection 


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1 Agency Act of 2009 prescribe consumer disclosures 

2 for transfers with rates not fixed on send that are 

3 functionally equivalent to those applicable to remit4 tances where the exchange rate is specified by the 

5 remittance transfer provider at the time the con6 sumer initiates the remittance transfer. To the 

7 greatest extent possible, the Director shall ensure 

8 that functional equivalence will enable remittance 

9 transfer providers to comply with all requirements in 

10 this title and provide consumers with information 

11 sufficient to compare services providers, to time 

12 their use of the product, to discover errors in trans13 mission and to seek remedies. 

14 (3) EXEMPTION.—Notwithstanding require15 ments under paragraph (2)(A)(ii), (2)(A)(iv), or 

16 (2)(B)(i), no such disclosure is required— 

17 (A) because of the requirements of another 

18 law, including the law of another country; 

19 (B) because the transfer is being routed 

20 through the Directo a Me ́xico offered by the 

21 Federal reserve banks; or 

22 (C) because of any other circumstance 

23 deemed permissible by regulation of the Direc24 tor; If the actual rate used for the transfer is 

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1 tance provider shall make available to con2 sumers written or electronic confirmation of the 

3 actual exchange rate used and the amount of 

4 currency that the recipient of the remittance 

5 transfer received, using the values of the cur6 rency into which the funds were exchanged. 

7 (4) PROVISION OF TOLL-FREE NUMBER AND

8 WEB ACCESS.— 

9 (A) In addition to providing the disclosures 

10 required by this section to a consumer at a re11 mittance transfer provider location, a remit12 tance transfer provider shall provide a toll-free 

13 telephone number or local number, and an 

14 Internet website that a consumer can access for 

15 which access no remittance transfer provider 

16 may assess a charge, to obtain the information 

17 required by paragraph (2)(A) for remittance 

18 transfers offered by that remittance transfer 

19 provider or information about the status of a 

20 remittance transfer for which a consumer has 

21 made payment. 

22 (B) A remittance transfer provider that on 

23 an aggregate basis originates 30,000 or fewer 

24 transfers on a calendar year basis (or such 

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1 rector) is not required to offer the web access 

2 prescribed in subparagraph (A), but is required 

3 to provide a toll-free telephone number or local 

4 number as prescribed in subparagraph (A). 

5 (5) ALTERNATIVE METHODS OF DISCLOSURE.— 

6 Subject to subsection (e)(2), a remittance transfer 

7 provider may— 

8 (A) if the transaction is conducted entirely 

9 by telephone (which shall include, but not be 

10 limited to, a mobile telephone) satisfy the re11 quirements of paragraph (2)(A) orally or, at the 

12 option of the consumer, electronically through a 

13 message sent to the consumer through any elec14 tronic means (including, but not limited to, an 

15 electronic mail address or a mobile telephone) 

16 as designated by the consumer; 

17 (B) satisfy the requirements of paragraph 

18 (2)(A) electronically if the transfer is initiated 

19 by the consumer electronically through the re20 mittance transfer provider’s website or through 

21 any other electronic means; and 

22 (C) satisfy the requirements of paragraph 

23 (2)(B) by mailing (or transmitting electronically 

24 if the transfer is initiated electronically by the 

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1 vider’s website or the consumer otherwise con2 sents in accordance with the provisions of sec3 tion 101 of the Electronic Signatures in Global 

4 and National Commerce Act) the information 

5 required under such paragraph to the consumer 

6 not later than one business day after the date 

7 on which the transaction is conducted, if the 

8 transaction is conducted entirely by telephone 

9 (or electronically) and the consumer requests a 

10 written receipt. 

11 (b) WRITTEN FOREIGN LANGUAGE DISCLOSURES.— 

12 (1) IN GENERAL.—The disclosures required 

13 under subsections (a)(2)(A) and (a)(2)(B)(i) shall be 

14 made in English and— 

15 (A) at each remittance transfer provider 

16 location, shall be made in the same languages 

17 principally used by the remittance transfer pro18 vider, or any of its agents, to advertise, solicit, 

19 or market its remittance transfers business, ei20 ther orally or in writing, at that location, if 

21 other than English, provided that such lan22 guages are those for which the Director has 

23 issued model disclosures as provided in sub24 section (g); or 


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1 (B) on a remittance transfer provider’s 

2 website, shall at a minimum be made in any 

3 other language for which the Director has 

4 issued model disclosures as provided in sub5 section (g) if the remittance transfer provider, 

6 or any of its agents, advertises, solicits, or mar7 kets its remittance transfers business in such 

8 language. 

9 (2) DISPUTES CONCERNING TERMS.—If a dis10 closure is required by this section to be in English 

11 and another language, the English version of the 

12 disclosure shall govern any dispute concerning the 

13 terms of the receipt. However, any discrepancies be14 tween the English version and any other version due 

15 to the translation of the receipt from English to an16 other language including errors or ambiguities shall 

17 be construed against the remittance transfer pro18 vider or its agent and the remittance transfer pro19 vider or its agent shall be liable for any damages 

20 caused by these discrepancies. 

21 (c) REMITTANCE TRANSFER CANCELLATIONS, RE22 FUNDS, AND ERRORS.— 

23 (1) CANCELLATIONS.— 


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1 (A) After receiving the receipt required 

2 under subsection (a)(2)(B), a consumer may 

3 cancel the currency transaction— 

4 (i) before leaving the premises of the 

5 remittance transfer provider where the 

6 consumer received the receipt; and 

7 (ii) not later than 30 minutes after 

8 the time the consumer initiated the remit9 tance transfer with the remittance transfer 

10 provider. 

11 (B) If a consumer cancels the transaction, 

12 the remittance transfer provider shall imme13 diately refund to the consumer the fees paid 

14 and the currency to be transferred, and issue a 

15 receipt indicating that the transaction has been 

16 cancelled. 

17 (C) A consumer may not cancel a remit18 tance transfer after the remittance transfer pro19 vider has sent the funds to the recipient. 

20 (D) A remittance transfer provider shall 

21 not be required to provide a refund if providing 

22 a refund would violate State or Federal law. 

23 (2) REFUNDS.— 

24 (A) If a remittance transfer provider re25 ceives written notice from the consumer within 


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1 10 days of the promised date of delivery of a 

2 remittance transfer that no amount of the 

3 funds to be remitted was made available to the 

4 designated recipient in the foreign country, the 

5 remittance transfer provider shall— 

6 (i) refund to the consumer the total 

7 amount in U.S. dollars that was paid by 

8 the consumer in connection with such re9 mittance transfer; 

10 (ii) promptly transmit the remittance 

11 transfer in accordance with the terms in 

12 the written receipt provided to the con13 sumer pursuant to subsection (a)(2)(B); 

14 (iii) provide such other remedy, as de15 termined appropriate by rule of the Direc16 tor for the protection of consumers; or 

17 (iv) demonstrate to the consumer that 

18 the proceeds of the remittance transfer 

19 were made available to the recipient of the 

20 remittance provider. 

21 (B) A remittance transfer provider shall 

22 not be required to provide a refund if providing 

23 a refund would violate State or Federal law. 

24 (3) ERROR RESOLUTION.— 


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1 (A) IN GENERAL.—If a remittance transfer 

2 provider receives written notice from the con3 sumer within 60 days of the promised date of 

4 delivery that an error occurred with respect to 

5 a remittance transfer, including that the full 

6 amount of the funds to be remitted was not 

7 made available to the designated recipient in 

8 the foreign country, the remittance transfer 

9 provider shall resolve the error pursuant to this 

10 paragraph. 

11 (B) REMEDIES.—Not later than 120 days 

12 after the date of receipt of a notice from the 

13 consumer pursuant to subparagraph (A), the 

14 remittance transfer provider shall— 

15 (i) as applicable to the error and as 

16 designated by the consumer— 

17 (I) refund to the consumer the 

18 total amount in United States dollars 

19 that was paid by the consumer in con20 nection with the remittance transfer 

21 that was not properly transmitted; 

22 (II) make available to the des23 ignated recipient, without additional 

24 cost to the designated recipient or to 


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1 the consumer, the amount appropriate 

2 to resolve the error; 

3 (III) provide such other remedy, 

4 as determined appropriate by regula5 tion of the Director for the protection 

6 of consumers; or 

7 (ii) demonstrate to the consumer that 

8 there was no error. 

9 (4) REGULATIONS.—The Director, in order to 

10 protect consumers, shall establish, by regulation, 

11 clear and appropriate standards for remittance 

12 transfer providers with respect to error resolution, 

13 cancellation and refunds. 

14 (d) ENFORCEMENT AUTHORITY.—The Director shall 

15 have the sole authority to enforce the provisions of this 

16 section, and any regulations established pursuant to this 

17 section. 

18 (e) APPLICABILITY OF OTHER PROVISIONS OF

19 LAW.— 

20 (1) APPLICABILITY OF TITLE 18 AND TITLE 31

21 PROVISIONS.—A remittance transfer provider that is 

22 a money transmitting business as defined in section 

23 5330 of title 31, United States Code, may provide 

24 remittance transfers only if such provider is in com25 pliance with the requirements of section 5330 of title 


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1 31, United States Code, and section 1960 of title 

2 18, United States Code, as applicable. 

3 (2) RULE OF CONSTRUCTION.—Nothing in this 

4 section shall be construed— 

5 (A) to affect the application to any trans6 action, to any remittance provider, or to any 

7 other person of any of the provisions of sub8 chapter II of chapter 53 of title 31, United 

9 States Code, section 21 of the Federal Deposit 

10 Insurance Act, or chapter 2 of title I of Public 

11 Law 91–508, or any regulations promulgated 

12 thereunder; or 

13 (B) to cause any fund transfer that would 

14 not otherwise be treated as such under para15 graph (2) to be treated as an electronic fund 

16 transfer, or as otherwise subject to this title, for 

17 the purposes of any of the provisions referred to 

18 in subparagraph (A) or any regulation pre19 scribed under such subparagraph. 

20 (f) DEFINITIONS.—For purposes of this section, the 

21 following definitions shall apply: 

22 (1) DEPOSITORY INSTITUTION.—the term ‘‘de23 pository institution’’ has the same meaning as in 

24 section 3 of the Federal Deposit Insurance Act and 

25 includes a credit union. 


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1 (2) NOT FIXED ON SEND.—The term ‘‘not fixed 

2 on send’’ when referring to an exchange rate used 

3 in a remittance transfer means an exchange rate 

4 that is not set by the remittance transfer provider 

5 at the time the consumer initiates the remittance 

6 transfer. 

7 (3) REMITTANCE TRANSFER.—The term ‘‘re8 mittance transfer’’ means the electronic (as defined 

9 in section 106(2) of the Electronic Signatures in 

10 Global and National Commerce Act) transfer of 

11 funds to be effected or used primarily for personal, 

12 family, or household purposes at the request of a 

13 consumer located in any State to a person in an14 other country that is initiated by a remittance trans15 fer provider, whether or not the consumer is an ac16 count holder of the remittance transfer provider or 

17 whether or not the remittance transfer is also an 

18 electronic fund transfer, as defined in section 903 of 

19 the Electronic Fund Transfer Act. 

20 (4) REMITTANCE TRANSFER PROVIDER.—The 

21 term ‘‘remittance transfer provider’’ means any per22 son or depository institution, or agent thereof, that 

23 originates remittance transfers on behalf of con24 sumers in the normal course of its business, whether 


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1 or not the consumer is an account holder of that 

2 person or depository institution. 

3 (g) MODEL DISCLOSURES.— 

4 (1) PUBLICATION.—Notwithstanding any provi5 sions of this title, the Director shall establish and 

6 publish model disclosure forms to facilitate compli7 ance with the disclosure requirements of this section 

8 and to aid the consumer in understanding the trans9 action to which the subject disclosure form relates. 

10 (2) LANGUAGES TO BE USED IN MODEL DIS11 CLOSURES.—The Director shall make these disclo12 sures available within 1 year of the effective date of 

13 this title— 

14 (A) in English; and 

15 (B) the ten most frequently spoken lan16 guages in the United States, other than 

17 English, used by consumers initiating remit18 tance transfers, as may be determined by the 

19 Director. 

20 (3) USE OF AUTOMATED EQUIPMENT.—In es21 tablishing model forms under this subsection, the 

22 Director shall consider the use by lessors of data 

23 processing or similar automated equipment. 

24 (4) USE OPTIONAL.—A remittance transfer pro25 vider may utilize a model disclosure form established 


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1 by the Director under this subsection for purposes 

2 of compliance with this section, at the discretion of 

3 the remittance transfer provider. 

4 (5) EFFECT OF USE.—Any remittance transfer 

5 provider that properly uses the material aspects of 

6 any model disclosure form established by the Direc7 tor under this subsection shall be deemed to be in 

8 compliance with the disclosure requirements to 

9 which the form relates. 

10 (h) REGULATION AND EXEMPTION AUTHORITY.— 

11 Notwithstanding any other provisions of this title, the Di12 rector, in the sole discretion of the Director, in consulta13 tion with relevant Federal and State government agencies 

14 may by regulation exempt from one or more requirements 

15 of this section, any category of remittance transfer pro16 vider if the Director determines that under applicable Fed17 eral or State law that such category of remittance transfer 

18 provider is subject to requirements substantially similar 

19 to those imposed under this section or that such law gives 

20 greater protection and benefit to the consumer, and that 

21 there is adequate provision for enforcement. 

22 (i) APPLICABILITY OF STATE LAW.— 

23 (1) This section does not annul, alter, affect, or 

24 exempt any person subject to the provisions of this 

25 section from complying with other applicable Federal 


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1 law and the laws of any State relating to remittance 

2 transfers and remittance transfer providers, except 

3 to the extent that those laws are inconsistent with 

4 the provisions of this section, and then only to the 

5 extent of the inconsistency. 

6 (2) Notwithstanding any other provisions of 

7 this title, the Director may determine whether such 

8 inconsistencies exist. A State law is not inconsistent 

9 with this section if the protection such law affords 

10 any consumer is greater than the protection afforded 

11 by this section. If the Director determines that a 

12 State requirement is inconsistent, remittance trans13 fer providers shall incur no liability under the law of 

14 that State for a good faith failure to comply with 

15 that law, notwithstanding that such determination is 

16 subsequently amended, rescinded, or determined by 

17 judicial or other authority to be invalid for any rea18 son. This section does not extend the applicability of 

19 any such law to any class of persons or transactions 

20 to which it would not otherwise apply. 

21 (3) This section does not annul, alter, or affect 

22 the laws of any State relating to the licensing or 

23 registration, supervision or examination of remit24 tance transfer providers. 


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1 (4) Nothing in this section shall be construed as 

2 limiting the authority of a State attorney general or 

3 State regulator to bring an action or other regu4 latory proceeding arising solely under the law of that 

5 State. 

6 (j) FEDERAL CREDIT UNION ACT AMENDMENT.— 

7 Paragraph (12)(A) of section 107 of the Federal Credit 

8 Union Act (12 U.S.C. 1757(12)(A)) is amended by insert9 ing ‘‘and remittance transfers, as defined in section 4309 

10 of the Consumer Financial Protection Agency Act of 

11 2009’’ after ‘‘and domestic electronic fund transfers’’. 

12 (k) AUTOMATED CLEARINGHOUSE SYSTEM.— 

13 (1) EXPANSION OF SYSTEM.—The Board of 

14 Governors of the Federal Reserve System shall work 

15 with the Federal reserve banks to expand the use of 

16 the automated clearinghouse system for remittance 

17 transfers to foreign countries, with a focus on coun18 tries that receive significant remittance transfers 

19 from the United States, based on— 

20 (A) the volume and dollar amount of re21 mittance transfers to those countries; 

22 (B) the significance of the volume of such 

23 transfers, relative to the external financial flows 

24 of the receiving country; and 

25 (C) the feasibility of such an expansion. 


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1 (2) REPORT TO THE CONGRESS.—Before the 

2 end of the 180-day period beginning on the date of 

3 the enactment of this title, and on April 30 bienni4 ally thereafter, the Board of Governors of the Fed5 eral Reserve System shall submit a report to the Di6 rector, the Committee on Banking, Housing, and 

7 Urban Affairs of the Senate, and the Committee on 

8 Financial Services of the House of Representatives 

9 on the status of the automated clearinghouse system 

10 and its progress in complying with the requirements 

11 of this section. 

12 (l) REGULATORY GUIDANCE ON REMITTANCE

13 TRANSFERS.— 

14 (1) PROVISION OF GUIDELINES TO INSTITU15 TIONS.—The Director shall provide guidelines to all 

16 remittance transfer providers regarding— 

17 (A) the offering of low-cost remittance 

18 transfers; 

19 (B) the availability of agency services to 

20 remittance transfer providers; 

21 (C) compliance with the provisions of this 

22 title; and 

23 (D) specific options that allow remittance 

24 transfer providers to take advantage of auto25 mated clearing systems, including the FedACH 


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1 International Services offered by the Board of 

2 Governors of the Federal Reserve System and 

3 the Federal reserve banks, to transmit remit4 tances at low cost. 

5 (2) CONTENT OF GUIDELINES.—Guidelines pro6 vided to remittance transfer providers under this 

7 section shall include— 

8 (A) information as to the methods of pro9 viding remittance transfer services; 

10 (B) the potential economic opportunities in 

11 providing low-cost remittance transfers; and 

12 (C) the potential value to depository insti13 tutions of broadening their financial bases to 

14 include persons that use remittance transfers. 

15 (3) ASSISTANCE TO FINANCIAL LITERACY COM16 MISSION.—The Secretary of the Treasury and each 

17 agency referred to in subsection (a) shall, as part of 

18 their duties as members of the Financial Literacy 

19 and Education Commission, assist that Commission 

20 in improving the financial literacy and education of 

21 consumers who send remittances. 

22 (m) REPORT ON FEASIBILITY OF AND IMPEDIMENTS

23 TO USE OF REMITTANCE HISTORY IN CALCULATION OF

24 CREDIT SCORE.—Before the end of the 365-day period 

25 beginning on the date of the enactment of this title, the 


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1 Director shall submit a report to the President, the Com2 mittee on Banking, Housing, and Urban Affairs of the 

3 Senate, and the Committee on Financial Services of the 

4 House of Representatives regarding— 

5 (1) the manner in which a consumer’s remit6 tance history could be used to enhance a consumer’s 

7 credit score; 

8 (2) the current legal and business model bar9 riers and impediments that impede the use of a con10 sumer’s remittance history to enhance the con11 sumer’s credit score; and 

12 (3) recommendations on the manner in which 

13 maximum transparency and disclosure to consumers 

14 of exchange rates for remittance transfers subject to 

15 this title may be accomplished, whether or not such 

16 exchange rates are known at the time of origination 

17 or payment by the consumer for the remittance 

18 transfer, including disclosure to the sender of the ac19 tual exchange rate used and the amount of currency 

20 that the recipient of the remittance transfer re21 ceived, using the values of the currency into which 

22 the funds were exchanged, as contained in section s 

23 919(a)(2)(D) and 919(a)(3) of the Electronic Fund 

24 Transfer Act (as amended by subsection (a)). 


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1 (n) EFFECTIVE DATE.—This section shall apply with 

2 respect to remittance transfers made after the end of the 

3 180-day period beginning on the date of the enactment 

4 of this title. 

5 SEC. 4310. EFFECTIVE DATE. 

6 This subtitle shall take effect on the designated 

7 transfer date. 

8 SEC. 4311. NO AUTHORITY TO REQUIRE THE OFFERING OF 

9 FINANCIAL PRODUCTS OR SERVICES. 

10 The Director may not prescribe any regulation, issue 

11 any order or guidance, or take any other action, including 

12 any enforcement action, the effect of which would be to 

13 require a covered person to offer to any consumer a spe14 cific financial product or service. 

15 SEC. 4312. APPRAISAL INDEPENDENCE REQUIREMENTS. 

16 (a) PROMULGATION OF NEW REQUIREMENTS.—The 

17 Director shall lead a Negotiated Rulemaking Committee 

18 under the Federal Advisory Committee Act and the Nego19 tiated Rulemaking Act to promulgate appraisal independ20 ence requirements for residential loan purposes, and such 

21 Committee shall promulgate such requirements not later 

22 than the end of the 60-day period beginning on the date 

23 of the enactment of this title. 


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1 (b) CERTAIN REGULATION REQUIREMENTS.—Regu2 lations promulgated by the Negotiated Rulemaking Com3 mittee under this section— 

4 (1) shall not prohibit lenders, the Federal Na5 tional Mortgage Association, or the Federal Home 

6 Loan Mortgage Corporation from accepting any ap7 praisal report completed by an appraiser selected, 

8 retained, or compensated in any manner by a mort9 gage loan originator— 

10 (A) licensed or registered in accordance 

11 with section 1501 et seq. of the SAFE Mort12 gage Licensing Act of 2008; and 

13 (B) subject to State or Federal laws that 

14 make it unlawful for a mortgage loan originator 

15 to make any payment, threat, or promise, di16 rectly or indirectly, to any appraiser of a prop17 erty, for the purposes of influencing the inde18 pendent judgment of the appraiser with respect 

19 to the value of the property, except that nothing 

20 in this section shall prohibit a person with an 

21 interest in a real estate transaction from asking 

22 an appraiser to— 

23 (i) consider additional, appropriate 

24 property information; 


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1 (ii) provide further detail, substan2 tiation, or explanation for the appraiser’s 

3 value conclusion; or 

4 (iii) correct errors in the appraisal re5 port; and 

6 (2) shall include a requirement that lenders and 

7 their agents compensate appraisers at a rate that is 

8 customary and reasonable for appraisal services per9 formed in the market area of the property being ap10 praised. 

11 (c) SUNSET.—Effective on the date the appraisal 

12 independence requirements are promulgated pursuant to 

13 subsection (a), the Home Valuation Code of Conduct an14 nounced by the Federal Housing Finance Agency on De15 cember 23, 2008, shall have no force or effect. 

16 SEC. 4313. OVERDRAFT PROTECTION NOTICE REQUIRE17 MENTS. 

18 Not later than 180 days after the date of the enact19 ment of this Act, the Director shall promulgate a new rule 

20 that requires banks to prominently place in each consumer 

21 branch office information regarding the fees and charges 

22 associated with enrollment in the bank’s overdraft protec23 tion program. 


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1 SEC. 4314. REVIEW, REPORT, AND PROGRAM WITH RE2 SPECT TO EXCHANGE FACILITATORS. 

3 (a) REVIEW.—The Director shall review all Federal 

4 laws and regulations relating to the protection of persons 

5 who utilize exchange facilitators. 

6 (b) REPORT.—Not later than 180 days after the ef7 fective date of this subtitle, the Director shall submit to 

8 Congress a report describing— 

9 (1) recommendations for legislation to ensure 

10 the appropriate protection of persons who utilize ex11 change facilitators; 

12 (2) recommendations for updating the regula13 tions of Federal departments and agencies to ensure 

14 the appropriate protection of such persons; and 

15 (3) recommendations for Agency regulations to 

16 ensure the appropriate protection of such persons. 

17 (c) PROGRAM.—Not later than 180 days after the 

18 date of the submission of the report under subsection (b), 

19 the Director shall establish and carry out a program, uti20 lizing the authorities of the Agency, to protect persons 

21 who utilize exchange facilitators. 

22 (d) EXCHANGE FACILITATOR DEFINED.—In this sec23 tion, the term ‘‘exchange facilitator’’ means a person 

24 that— 

25 (1) facilitates, for a fee, an exchange of like26 kind property by entering into an agreement with a 


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1 taxpayer by which the exchange facilitator acquires 

2 from the taxpayer the contractual rights to sell the 

3 taxpayer’s relinquished property and transfers a re4 placement property to the taxpayer as a qualified 

5 intermediary (within the meaning of Treasury Regu6 lations section 1.1031(k)–1(g)(4)) or enters into an 

7 agreement with the taxpayer to take title to a prop8 erty as an exchange accommodation titleholder 

9 (within the meaning of Revenue Procedure 2000–37) 

10 or enters into an agreement with a taxpayer to act 

11 as a qualified trustee or qualified escrow holder 

12 (within the meaning of Treasury Regulations section 

13 1.1031(k)–1(g)(3)); 

14 (2) maintains an office for the purpose of solic15 iting business as an exchange facilitator; or 

16 (3) purports to be an exchange facilitator by 

17 advertising any of the services listed in paragraph 

18 (1) or soliciting clients in printed publications, direct 

19 mail, television or radio advertisements, telephone 

20 calls, facsimile transmissions, or other electronic 

21 communications directed to the general public for 

22 purposes of providing any such services. 

23 SEC. 4315. REGULATION OF PERSON-TO-PERSON LENDING. 

24 (a) SCOPE OF EXEMPTION FROM FEDERAL SECURI25 TIES REGULATION.—Section 3(a) of the Securities Act of 


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1 1933 (15 U.S.C. 77c(a)) is amended by adding at the end 

2 the following new paragraph: 

3 ‘‘(15) PERSON-TO-PERSON LENDING.— 

4 ‘‘(A) IN GENERAL.—Any consumer loan, 

5 and any note representing a whole or fractional 

6 interest in any such loan, funded or sold 

7 through a person-to-person lending platform. 

8 ‘‘(B) DEFINITIONS.—For purposes of this 

9 paragraph: 

10 ‘‘(i) CONSUMER LOAN.—The term 

11 ‘consumer loan’ means a loan made to a 

12 natural person, the proceeds of which are 

13 intended primarily for personal, family, 

14 educational, household, or business use. 

15 ‘‘(ii) PERSON-TO-PERSON LENDING

16 PLATFORM.— 

17 ‘‘(I) IN GENERAL.—The term 

18 ‘person-to-person lending platform’ 

19 means an Internet website, the pri20 mary purpose of which is to provide a 

21 transaction platform for the funding 

22 or sale of individual consumer loans, 

23 or the sale of notes representing whole 

24 or fractional interests in individual 

25 consumer loans, by matching natural 


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1 persons who wish to obtain such loans 

2 with persons who wish to fund them, 

3 or by matching persons who wish to 

4 sell such loans or notes with persons 

5 who wish to purchase them. 

6 ‘‘(II) PROHIBITION ON MULTIPLE

7 LOANS IN A SINGLE TRANSACTION.— 

8 The term ‘person-to-person lending 

9 platform’ does not include any plat10 form on which multiple loans may be 

11 funded or sold in a single transaction, 

12 or on which a note representing an in13 terest in multiple loans or other debt 

14 obligations may be sold.’’. 

15 (b) REGULATION BY THE AGENCY.— 

16 (1) IN GENERAL.—Primary jurisdiction for the 

17 regulation of the lending activities of person-to-per18 son lending and person-to-person lending platforms 

19 is hereby vested in the Agency. 

20 (2) INTERIM REQUIREMENTS.—Until the Direc21 tor issues and adopts disclosure requirements with 

22 respect to the sale of consumer loans, or notes rep23 resenting whole or fractional interests therein, on 

24 person-to-person lending platforms, a person-to-per25 son lending platform that registers the offer and sale 


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1 of any such notes under the Securities Act of 1933 

2 shall, with respect to such registered offer and sale, 

3 provide the disclosure required under the Securities 

4 Act of 1933 to be contained in the registration 

5 statement and prospectus and provide such disclo6 sure required in any periodic reports required to be 

7 filed by such person-to-person lender pursuant to 

8 section 13 or section 15(d) of the Securities Ex9 change Act of 1934. 

10 (3) DEFINITIONS.—For purposes of this sub11 section, the terms ‘‘consumer loan’’, ‘‘person-to-per12 son lending platform’’, ‘‘prospectus’’, and ‘‘registra13 tion statement’’ shall have the meaning given such 

14 term under the Securities Act of 1933. 

15 (c) RULEMAKING.—The Director may prescribe such 

16 regulations and issue such orders as the Director con17 siders necessary or appropriate to implement the provi18 sions of this section and to provide borrower protection, 

19 lender protection, consumer choice, and expanded con20 sumer access to fair and reasonable credit choices. 

21 (d) EFFECTIVE DATE.—Notwithstanding section 

22 4310, this section shall take effect on the date of the en23 actment of this title. 


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1 SEC. 4316. TREATMENT OF REVERSE MORTGAGES. 

2 (a) IN GENERAL.—The Director shall examine the 

3 practices of covered persons in connection with any reverse 

4 mortgage transaction (as defined in section 103(bb) of the 

5 Truth in Lending Act (15 U.S.C. 1602)) and shall pre6 scribe regulations identifying any acts or practices as un7 lawful, unfair, deceptive, or abusive in connection with a 

8 reverse mortgage transaction or the offering of a reverse 

9 mortgage. 

10 (b) REGULATIONS.—In prescribing regulations under 

11 subsection (a), the Director shall ensure that such regula12 tions shall— 

13 (1) include requirements for— 

14 (A) the purpose of preventing unlawful, 

15 unfair, deceptive or abusive acts and practices 

16 in connection with a reverse mortgage trans17 action; and 

18 (B) the purpose of providing timely, appro19 priate, and effective disclosure to consumers in 

20 connection with a reverse mortgage transaction 

21 that are consistent with requirements pre22 scribed by the Director in connection with other 

23 consumer mortgage products or services under 

24 this title; 

25 (2) with respect to the requirements under 

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1 scribed by the Director in connection with other con2 sumer mortgage products or services under this title; 

3 and 

4 (3) provide for an integrated disclosure stand5 ard and model disclosures for reverse mortgage 

6 transactions, consistent with section 4302(d), that 

7 combines the relevant disclosures required under the 

8 Truth in Lending Act (15 U.S.C. 1601 et seq.) and 

9 the Real Estate Settlement Procedures Act, with the 

10 disclosures required to be provided to consumers for 

11 Home Equity Conversion Mortgages under section 

12 255 of the National Housing Act. 

13 (c) CONSULTATION.—In connection with the issuance 

14 of any regulations under this section, the Director shall 

15 consult with the Federal banking agencies, State bank su16 pervisors, the Federal Trade Commission, and the Depart17 ment of Housing and Urban Development, as appropriate, 

18 to ensure that any proposed regulation— 

19 (1) imposes substantially similar requirements 

20 on all covered persons; and 

21 (2) is consistent with prudential, consumer pro22 tection, civil rights, market or systemic objectives 

23 administered by such agencies or supervisors. 

24 (d) DEADLINE FOR RULEMAKING.—The Director 

25 shall commence the rulemaking required under subsection 


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1 (a) not later than 12 months after the date of the enact2 ment of this Act. 

3 Subtitle D—Preservation of State 

4 Law 

5 SEC. 4401. RELATION TO STATE LAW. 

6 (a) IN GENERAL.— 

7 (1) RULE OF CONSTRUCTION.—This title shall 

8 not be construed as annulling, altering, or affecting, 

9 or exempting any person subject to the provisions of 

10 this title from complying with, the laws, regulations, 

11 orders, or interpretations, in effect in any State, ex12 cept to the extent that such statute, regulation, 

13 order, or interpretation is inconsistent with the pro14 visions of this title and then only to the extent of the 

15 inconsistency. 

16 (2) GREATER PROTECTION UNDER STATE

17 LAW.—For the purposes of this subsection, a stat18 ute, regulation, order, or interpretation in effect in 

19 any State is not inconsistent with the provisions of 

20 this title if the protection such statute, regulation, 

21 order, or interpretation affords consumers is greater 

22 than the protection provided under this title. A de23 termination regarding whether a statute, regulation, 

24 order, or interpretation in effect in any State is in25 consistent with the provisions of this title may be 


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1 made by the Agency on its own motion or in re2 sponse to a nonfrivolous petition initiated by any in3 terested person. 

4 (b) RELATION TO OTHER PROVISIONS OF ENUMER5 ATED CONSUMER LAWS THAT RELATE TO STATE LAW.— 

6 No provision of this title, except as provided in section 

7 4803, shall be construed as modifying, limiting, or super8 seding the operation of any provision of an enumerated 

9 consumer law that relates to the application of a law in 

10 effect in any State with respect to such Federal law. 

11 (c) ADDITIONAL CONSUMER PROTECTION REGULA12 TIONS IN RESPONSE TO STATE ACTION.— 

13 (1) NOTICE OF PROPOSED RULE REQUIRED.— 

14 The Agency shall issue a notice of proposed rule15 making whenever a majority of the States has en16 acted a resolution in support of the establishment or 

17 modification of a consumer protection regulation by 

18 the Agency. 

19 (2) AGENCY CONSIDERATIONS REQUIRED FOR

20 ISSUANCE OF FINAL REGULATION.—Before pre21 scribing a final regulation based upon a notice 

22 issued pursuant to paragraph (1), the Agency shall 

23 take into account whether— 


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1 (A) the proposed regulation would afford 

2 greater protection to consumers than any exist3 ing regulation; 

4 (B) the intended benefits of the proposed 

5 regulation for consumers would outweigh any 

6 increased costs or inconveniences for con7 sumers, and would not discriminate unfairly 

8 against any category or class of consumers; and 

9 (C) a Federal banking agency has advised 

10 that the proposed regulation is likely to present 

11 an unacceptable safety and soundness risk to 

12 insured depository institutions. 

13 (3) EXPLANATION OF CONSIDERATIONS.—The 

14 Agency— 

15 (A) shall include a discussion of the con16 siderations required in subsection (b) in the 

17 Federal Register notice of a final regulation 

18 prescribed pursuant to this section; and 

19 (B) whenever the Agency determines not to 

20 prescribe a final regulation, shall publish an ex21 planation of such determination in the Federal 

22 Register, and provide a copy of such expla23 nation to each State that enacted a resolution 

24 in support of the proposed regulation, the Com25 mittee on Financial Services of the House of 


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1 Representatives, and the Committee on Bank2 ing, Housing, and Urban Affairs of the Senate. 

3 (4) RESERVATION OF AUTHORITY.—No provi4 sion of this section shall be construed as limiting or 

5 restricting the authority of the Agency to enhance 

6 consumer protection standards established pursuant 

7 to this title in response to its own motion or in re8 sponse to a request by any other interested person. 

9 (5) RULE OF CONSTRUCTION.—No provision of 

10 this section shall be construed as exempt the Agency 

11 from complying with subchapter II of chapter 5 of 

12 title 5, United States Code. 

13 (6) DEFINITION.—For purposes of this section, 

14 the term ‘‘consumer protection regulation’’ means a 

15 regulation that the Agency is authorized to prescribe 

16 under this title, the enumerated consumer laws, or 

17 any law or authority transferred under subtitle F or 

18 H. 

19 SEC. 4402. PRESERVATION OF ENFORCEMENT POWERS OF 

20 STATES. 

21 (a) IN GENERAL.— 

22 (1) ACTION BY STATE.—Any State attorney 

23 general may bring a civil action in the name of such 

24 State, as parens patriae on behalf of natural persons 

25 residing in such State, in any district court of the 


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1 United States or State court having jurisdiction of 

2 the defendant, to enforce and secure remedies under 

3 provisions of this title or regulations issued there4 under, or otherwise provided under other law. 

5 (2) RULE OF CONSTRUCTION.—No provision of 

6 this title shall be construed as modifying, limiting, 

7 or superseding the operation of any provision of an 

8 enumerated consumer law that relates to the author9 ity of a State attorney general or State regulator to 

10 enforce such Federal law. 

11 (b) CONSULTATION REQUIRED.— 

12 (1) NOTICE.— 

13 (A) IN GENERAL.—Before initiating any 

14 action in a court or other administrative or reg15 ulatory proceeding against any covered person 

16 to enforce any provision of this title, including 

17 any regulation prescribed by the Director under 

18 this title, a State attorney general or State reg19 ulator shall timely provide a copy of the com20 plete complaint to be filed and written notice 

21 describing such action or proceeding to the 

22 Agency, or the Agency’s designee. 

23 (B) EMERGENCY ACTION.—If prior notice 

24 is not practicable, the State attorney general or 

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1 plete complaint and the notice to the Agency 

2 immediately upon instituting the action or pro3 ceeding. 

4 (C) CONTENTS OF NOTICE.—The notifica5 tion required under this section shall, at a min6 imum, describe— 

7 (i) the identity of the parties; 

8 (ii) the alleged facts underlying the 

9 proceeding; and 

10 (iii) whether there may be a need to 

11 coordinate the prosecution of the pro12 ceeding so as not to interfere with any ac13 tion, including any rulemaking, undertaken 

14 by the Director or Agency or another Fed15 eral agency. 

16 (2) AGENCY RESPONSE.—In any action de17 scribed in paragraph (1), the Agency may— 

18 (A) intervene in the action as a party; 

19 (B) upon intervening— 

20 (i) remove the action to the appro21 priate United States district court, if the 

22 action was not originally brought there; 

23 and 

24 (ii) be heard on all matters arising in 

25 the action; and 


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1 (C) appeal any order or judgment to the 

2 same extent as any other party in the pro3 ceeding may. 

4 (c) REGULATIONS.—The Director shall prescribe reg5 ulations to implement the requirements of this section 

6 and, from time to time, provide guidance in order to fur7 ther coordinate actions with the State attorneys general 

8 and other regulators. 

9 (d) PRESERVATION OF STATE AUTHORITY.— 

10 (1) STATE CLAIMS.—No provision of this sec11 tion shall be construed as limiting the authority of 

12 a State attorney general or State regulator to bring 

13 an action or other regulatory proceeding arising sole14 ly under the law of that State. 

15 (2) STATE SECURITIES REGULATORS.—No pro16 vision of this title shall be construed as altering, lim17 iting, or affecting the authority of a State securities 

18 commission (or any agency or office performing like 

19 functions) under State law to adopt rules, initiate 

20 enforcement proceedings, or take any other action 

21 with respect to a person regulated by such commis22 sion or authority. 

23 (3) STATE INSURANCE REGULATORS.—No pro24 vision of this title shall be construed as altering, lim25 iting, or affecting the authority of a State insurance 


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1 commission or State insurance regulator under State 

2 law to adopt rules, initiate enforcement proceedings, 

3 or take any other action with respect to a person 

4 regulated by such commission or regulator. 

5 SEC. 4403. PRESERVATION OF EXISTING CONTRACTS. 

6 This title, and regulations, orders, guidance, and in7 terpretations prescribed, issued, and established by the 

8 Agency, shall not be construed to alter or affect the appli9 cability of any regulation, order, guidance, or interpreta10 tion prescribed, issued, and established by the Comptroller 

11 of the Currency or the Director of the Office of Thrift 

12 Supervision regarding the applicability of State law under 

13 Federal banking law to any contract entered into on or 

14 before the date of the enactment of this title, by national 

15 banks, Federal savings associations, or subsidiaries there16 of that are regulated and supervised by the Comptroller 

17 of the Currency or the Director of the Office of Thrift 

18 Supervision, respectively. 

19 SEC. 4404. STATE LAW PREEMPTION STANDARDS FOR NA20 TIONAL BANKS AND SUBSIDIARIES CLARI21 FIED. 

22 (a) IN GENERAL.—Chapter one of title LXII of the 

23 Revised Statutes of the United States (12 U.S.C. 21 et 

24 1 seq.) is amended by inserting after section 5136B the 

25 following new section: 


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1 ‘‘SEC. 5136C. STATE LAW PREEMPTION STANDARDS FOR NA2 TIONAL BANKS AND SUBSIDIARIES CLARI3 FIED. 

4 ‘‘(a) DEFINITIONS.—For purposes of this section, the 

5 following definitions shall apply: 

6 ‘‘(1) NATIONAL BANK.—The term ‘national 

7 bank’ includes— 

8 ‘‘(A) any bank organized under the laws of 

9 the United States; and 

10 ‘‘(B) any Federal branch established in ac11 cordance with the International Banking Act of 

12 1978. 

13 ‘‘(2) STATE CONSUMER FINANCIAL LAWS.—The 

14 term ‘State consumer financial law’ means a State 

15 law that does not directly or indirectly discriminate 

16 against national banks and that directly and specifi17 cally regulates the manner, content, or terms and 

18 conditions of any financial transaction (as may be 

19 authorized for national banks to engage in), or any 

20 account related thereto, with respect to a consumer. 

21 ‘‘(3) OTHER DEFINITIONS.—The terms ‘affil22 iate’, ‘subsidiary’, ‘includes’, and ‘including’ have the 

23 same meaning as in section 3 of the Federal Deposit 

24 Insurance Act. 

25 ‘‘(b) PREEMPTION STANDARD.— 


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1 ‘‘(1) IN GENERAL.—State consumer financial 

2 laws are preempted only if— 

3 ‘‘(A) application of a State consumer fi4 nancial law would have a discriminatory effect 

5 on national banks in comparison with the effect 

6 of the law on a bank chartered by that State; 

7 ‘‘(B) the State consumer financial law pre8 vents, significantly interferes with, or materially 

9 impairs the ability of an institution chartered as 

10 a national bank to engage in the business of 

11 banking. Any preemption determination under 

12 this subparagraph may be made by a court or 

13 by regulation or order of the Comptroller of the 

14 Currency in accordance with applicable law, on 

15 a case-by-case basis. Any such determination by 

16 a court shall comply with the standards set 

17 forth in subsection (d) of this section, with the 

18 court making the subsection (d) finding de 

19 novo; or 

20 ‘‘(C) the State consumer financial law is 

21 preempted by Federal law other than this Act. 

22 ‘‘(2) SAVINGS CLAUSE.—This Act does not pre23 empt or alter the applicability of any State law to 

24 any subsidiary or affiliate of a national bank (other 


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1 than an institution chartered as a national bank) 

2 that is not a depository institution. 

3 ‘‘(3) CASE-BY-CASE DETERMINATION.— 

4 ‘‘(A) DEFINITION.—The term ‘case-by-case 

5 determination pursuant to this section’ means a 

6 determination made by the Comptroller con7 cerning the impact of a particular State con8 sumer financial law on any national bank that 

9 is subject to that law, or the law of any other 

10 State with substantively equivalent terms. 

11 ‘‘(B) CONSULTATION.—When making 

12 case-by-case determination pursuant to this sec13 tion that a State consumer financial law of an14 other State has a substantively equivalent terms 

15 as one that the Comptroller is preempting, the 

16 Comptroller shall first consult with the Con17 sumer Financial Protection Agency and shall 

18 take such Agency’s views into account when 

19 making the determination. 

20 ‘‘(4) RULE OF CONSTRUCTION.—This Act does 

21 not occupy the field in any area of State law. 

22 ‘‘(5) STANDARDS OF REVIEW.— 

23 ‘‘(A) PREEMPTION.—A court reviewing 

24 any determinations made by the Comptroller re25 garding preemption of a State law by this Act 


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1 shall assess the validity of such determinations 

2 depending upon the thoroughness evident in the 

3 agency’s consideration, the validity of the agen4 cy’s reasoning, the consistency with other valid 

5 determinations made by the agency, and other 

6 factors which the court finds persuasive and rel7 evant to its decision. 

8 ‘‘(B) SAVINGS CLAUSE.—Except as pro9 vided in subparagraph (A), nothing in this sec10 tion shall affect the deference that a court may 

11 afford to the Comptroller in making determina12 tions regarding the meaning or interpretation of 

13 title LXII of the Revised Statutes of the United 

14 States or other Federal laws. 

15 ‘‘(6) COMPTROLLER DETERMINATION NOT DEL16 EGABLE.—Any regulation, order or determination 

17 made by the Comptroller of the Currency under sub18 section (b)(1)(B) shall be made by the Comptroller 

19 and shall not be delegable to another officer or em20 ployee of the Comptroller of the Currency. 

21 ‘‘(c) SUBSTANTIAL EVIDENCE.—No regulation or 

22 order of the Comptroller of the Currency prescribed under 

23 subsection (b)(1)(B), shall be interpreted or applied so as 

24 to invalidate, or otherwise declare inapplicable to a na25 tional bank, the provision of the State consumer financial 


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1 law unless substantial evidence, made on the record of the 

2 proceeding, supports the specific finding that the provision 

3 prevents, significantly interferes with, or materially im4 pairs the ability of a national bank to engage in the busi5 ness of banking. 

6 ‘‘(d) OTHER FEDERAL LAWS.—Notwithstanding any 

7 other provision of law, the Comptroller of the Currency 

8 may not prescribe a regulation or order pursuant to sub9 section (b)(1)(B) until the Comptroller of the Currency, 

10 after consultation with the Consumer Financial Protection 

11 Agency, makes a finding, in writing, that a Federal law 

12 provides a substantive standard, applicable to a national 

13 bank, which regulates the particular conduct, activity, or 

14 authority that is subject to such provision of the State 

15 consumer financial law. 

16 ‘‘(e) PERIODIC REVIEW OF PREEMPTION DETER17 MINATIONS.—The Comptroller of the Currency shall peri18 odically conduct a review, through notice and public com19 ment, of each determination that a provision of Federal 

20 law preempts a State consumer financial law. The agency 

21 shall conduct such review within the 5-year period after 

22 prescribing or otherwise issuing such determination, and 

23 at least once during each 5-year period thereafter. After 

24 conducting the review of, and inspecting the comments 

25 made on, the determination, the agency shall timely proVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01005 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 pose to continue, amend or rescind it, as may be appro2 priate, in accordance with the procedures set forth in sub3 sections (a) and (b) of section 5244 (12 U.S.C. 43(a) and 

4 (b)). 

5 ‘‘(f) APPLICATION OF STATE CONSUMER FINANCIAL

6 LAW TO SUBSIDIARIES AND AFFILIATES.—Notwith7 standing any provision of this title, a State consumer fi8 nancial law shall apply to a subsidiary or affiliate of a 

9 national bank to the same extent that the State consumer 

10 financial law applies to any person, corporation, or other 

11 entity subject to such State law. 

12 ‘‘(g) PRESERVATION OF POWERS RELATED TO

13 CHARGING INTEREST.—No provision of this title shall be 

14 construed as altering or otherwise affecting the authority 

15 conferred by section 5197 of the Revised Statutes of the 

16 United States (12 U.S.C. 85) for the charging of interest 

17 by a national bank at the rate allowed by the laws of the 

18 State, territory or district where the bank is located, in19 cluding with respect to the meaning of ‘interest’ under 

20 such provision. 

21 ‘‘(h) TRANSPARENCY OF OCC PREEMPTION DETER22 MINATIONS.—The Comptroller of the Currency shall pub23 lish and update no less frequently than quarterly, a list 

24 of preemption determinations by the Comptroller of the 

25 Currency then in effect that identifies the activities and 


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1 practices covered by each determination and the require2 ments and constraints determined to be preempted.’’. 

3 (b) CLERICAL AMENDMENT.—The table of sections 

4 for chapter one of title LXII of the Revised Statutes of 

5 the United States is amended by inserting after the item 

6 relating to section 5136B the following new item: 

‘‘5136C. State law preemption standards for national banks and subsidiaries 

clarified.’’. 

7 SEC. 4405. VISITORIAL STANDARDS. 

8 Section 5136C of the Revised Statutes of the United 

9 States (as added by section 4404) is amended by adding 

10 at the end the following new subsections: 

11 ‘‘(g) VISITORIAL POWERS.— 

12 ‘‘(1) RULE OF CONSTRUCTION.—No provision 

13 of this title which relates to visitorial powers or oth14 erwise limits or restricts the visitorial authority to 

15 which any national bank is subject shall be con16 strued as limiting or restricting the authority of any 

17 attorney general (or other chief law enforcement of18 ficer) of any State to bring any action in any court 

19 of appropriate jurisdiction— 

20 ‘‘(A) to enforce any applicable Federal or 

21 State law, as authorized by such law; or 

22 ‘‘(B) on behalf of residents of such State, 

23 to enforce any applicable provision of any Fed24 eral or nonpreempted State law against a naVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01007 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tional bank, as authorized by such law, or to 

2 seek relief as authorized by such law. 

3 ‘‘(2) CONSULTATION.—The attorney general (or 

4 other chief law enforcement officer) of any State 

5 shall consult with the head of the agency responsible 

6 for chartering and regulating national banks before 

7 acting under paragraph (1). 

8 ‘‘(h) ENFORCEMENT ACTIONS.—The ability of the 

9 head of the agency responsible for chartering and regu10 lating national banks to bring an enforcement action 

11 under this title or section 5 of the Federal Trade Commis12 sion Act shall not be construed as precluding private par13 ties from enforcing rights granted under Federal or State 

14 law in the courts.’’. 

15 SEC. 4406. CLARIFICATION OF LAW APPLICABLE TO NON16 DEPOSITORY INSTITUTION SUBSIDIARIES. 

17 Section 5136C of the Revised Statutes of the United 

18 States is amended by inserting after subsection (h) (as 

19 added by section 4405) the following new subsection: 

20 ‘‘(i) CLARIFICATION OF LAW APPLICABLE TO NON21 DEPOSITORY INSTITUTION SUBSIDIARIES AND AFFILI22 ATES OF NATIONAL BANKS.— 

23 ‘‘(1) DEFINITIONS.—For purposes of this sec24 tion, the following definitions shall apply: 


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1 ‘‘(A) DEPOSITORY INSTITUTION, SUB2 SIDIARY, AFFILIATE.—The terms ‘depository in3 stitution’, ‘subsidiary’, and ‘affiliate’ have the 

4 same meanings as in section 3 of the Federal 

5 Deposit Insurance Act. 

6 ‘‘(B) NONDEPOSITORY INSTITUTION.—The 

7 term ‘nondepository institution’ means any enti8 ty that is not a depository institution. 

9 ‘‘(2) IN GENERAL.—No provision of this title 

10 shall be construed as annulling, altering, or affecting 

11 the applicability of State law to any nondepository 

12 institution, subsidiary, other affiliate, or agent of a 

13 national bank.’’. 

14 SEC. 4407. STATE LAW PREEMPTION STANDARDS FOR FED15 ERAL SAVINGS ASSOCIATIONS AND SUBSIDI16 ARIES CLARIFIED. 

17 (a) IN GENERAL.—The Home Owners’ Loan Act (12 

18 U.S.C. 1461 et seq.) is amended by inserting after section 

19 5 the following new section: 

20 ‘‘SEC. 6. STATE LAW PREEMPTION STANDARDS FOR FED21 ERAL SAVINGS ASSOCIATIONS CLARIFIED. 

22 ‘‘(a) STATE CONSUMER FINANCIAL LAW DE23 FINED.—For purposes of this section, the term ‘State con24 sumer financial law’ means a State law that does not di25 rectly or indirectly discriminate against Federal savings 


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1 associations and that directly and specifically regulates the 

2 manner, content, or terms and conditions of any financial 

3 transaction (as may be authorized for Federal savings as4 sociations to engage in), or any account related thereto, 

5 with respect to a consumer. 

6 ‘‘(b) PREEMPTION STANDARD.— 

7 ‘‘(1) IN GENERAL.—State consumer financial 

8 laws are preempted only if— 

9 ‘‘(A) application of a State consumer fi10 nancial law would have a discriminatory effect 

11 on Federal savings associations in comparison 

12 with the effect of the law on a bank chartered 

13 by that State; 

14 ‘‘(B) the State consumer financial law pre15 vents, significantly interferes with, or materially 

16 impairs the ability of an institution chartered as 

17 a Federal savings association to engage in the 

18 business of banking. Any preemption deter19 mination under this subparagraph may be made 

20 by a court or by regulation or order of the Di21 rector of the Office of Thrift Supervision in ac22 cordance with applicable law, on a case-by-case 

23 basis. Any such determination by a court shall 

24 comply with the standards set forth in subVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01010 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 section (d) of this section, with the court mak2 ing the subsection (d) finding de novo; or 

3 ‘‘(C) the State consumer financial law is 

4 preempted by Federal law other than this Act. 

5 ‘‘(2) SAVINGS CLAUSE.—This Act does not pre6 empt or alter the applicability of any State law to 

7 any subsidiary or affiliate of a Federal savings asso8 ciation (other than an institution chartered as a 

9 Federal savings association) that is not a depository 

10 institution. 

11 ‘‘(3) CASE-BY-CASE DETERMINATION.— 

12 ‘‘(A) DEFINITION.—The term ‘case-by-case 

13 determination pursuant to this section’ means a 

14 determination made by the Director concerning 

15 the impact of a particular State consumer fi16 nancial law on any Federal savings association 

17 that is subject to that law, or the law of any 

18 other State with substantively equivalent terms. 

19 ‘‘(B) CONSULTATION.—When making 

20 case-by-case determination pursuant to this sec21 tion that a State consumer financial law of an22 other State has a substantively equivalent terms 

23 as one that the Director of the Office of Thrift 

24 Supervision is preempting, the Director shall 

25 first consult with the Consumer Financial ProVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01011 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tection Agency and shall take such Agency’s 

2 views into account when making the determina3 tion. 

4 ‘‘(4) RULE OF CONSTRUCTION.—This Act does 

5 not occupy the field in any area of State law. 

6 ‘‘(5) STANDARDS OF REVIEW.— 

7 ‘‘(A) PREEMPTION.—A court reviewing 

8 any determinations made by the Director re9 garding preemption of a State law by this Act 

10 shall assess the validity of such determinations 

11 depending upon the thoroughness evident in the 

12 agency’s consideration, the validity of the agen13 cy’s reasoning, the consistency with other valid 

14 determinations made by the agency, and other 

15 factors which the court finds persuasive and rel16 evant to its decision. 

17 ‘‘(B) SAVINGS CLAUSE.—Except as pro18 vided in subparagraph (A), nothing in this sec19 tion shall affect the deference that a court may 

20 afford to the Director in making determinations 

21 regarding the meaning or interpretation of the 

22 Home Owners’ Loan Act or other Federal laws. 

23 ‘‘(6) OTS DETERMINATION NOT DELEGABLE.— 

24 Any regulation, order, or determination made by the 

25 Director of the Office of Thrift Supervision under 


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1 subsection (b)(1)(B) shall be made by the Director 

2 and shall not be delegable to another officer or em3 ployee of the Director of the Office of Thrift Super4 vision. 

5 ‘‘(c) OTHER FEDERAL LAW.—Notwithstanding any 

6 other provision of law, the Director of the Office of Thrift 

7 Supervision may not prescribe any regulation or order 

8 pursuant to subsection (b)(1)(B) until such Director, after 

9 consultation with the Consumer Financial Protection 

10 Agency, makes a finding, in writing, that a Federal law 

11 provides a substantive standard, applicable to a Federal 

12 savings association, which regulates the particular con13 duct, activity, or authority that is subject to such provision 

14 of the State consumer financial law. 

15 ‘‘(d) SUBSTANTIAL EVIDENCE.—No regulation or 

16 order prescribed by the Director of the Office of Thrift 

17 Supervision issued under subsection (b)(1)(B) shall be in18 terpreted or applied so as to invalidate, or otherwise de19 clare inapplicable to a Federal savings association, the 

20 provision of the State consumer financial law unless sub21 stantial evidence, made on the record of the proceeding, 

22 supports the specific finding that the provision prevents, 

23 significantly interferes with, or materially impairs the abil24 ity of a Federal savings association to engage in the busi25 ness of banking. 


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1 ‘‘(e) PERIODIC REVIEW OF PREEMPTION DETER2 MINATIONS.—The Director of the Office of Thrift Super3 vision shall periodically conduct a review, through notice 

4 and public comment, of each determination that a provi5 sion of Federal law preempts a State consumer financial 

6 law. The agency shall conduct such review within the 5- 

7 year period after prescribing or otherwise issuing such de8 termination, and at least once during each 5-year period 

9 thereafter. After conducting the review of, and inspecting 

10 the comments made on, the determination, the agency 

11 shall timely propose to continue, amend or rescind it, as 

12 may be appropriate, in accordance with the procedures set 

13 forth in subsections (a) and (b) of section 5244 of the 

14 Revised Statutes of the United States (12 U.S.C. 43(a) 

15 and (b)). 

16 ‘‘(f) APPLICATION OF STATE CONSUMER FINANCIAL

17 LAW TO SUBSIDIARIES AND AFFILIATES.—Notwith18 standing any provision of this Act, a State consumer fi19 nancial law shall apply to a subsidiary or affiliate of a 

20 Federal savings association to the same extent that the 

21 State consumer financial law applies to any person, cor22 poration, or other entity subject to such State law and 

23 consistent with Federal law. 

24 ‘‘(g) PRESERVATION OF POWERS RELATED TO

25 CHARGING OF INTEREST.—No provision of this title shall 


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1 be construed as altering or otherwise affecting the author2 ity conferred by section 4(g) of the Home Owners’ Loan 

3 Act (12 U.S.C. 1463(g)) for the charging of interest by 

4 a Federal savings association at the rate allowed by the 

5 laws of the State, territory, or district where the bank is 

6 located, including with respect to the meaning of ‘interest’ 

7 under such provision. 

8 ‘‘(h) TRANSPARENCY OF OTS PREEMPTION DETER9 MINATIONS.—The Director of the Office of Thrift Super10 vision shall publish and update no less frequently than 

11 quarterly, a list of preemption determinations by such Di12 rector then in effect that identifies the activities and prac13 tices covered by each determination and the requirements 

14 and constraints determined to be preempted.’’. 

15 (b) CLERICAL AMENDMENT.—The table of sections 

16 for the Home Owners’ Loan Act (12 U.S.C. 1461 et seq.) 

17 is amended by striking the item relating to section 6 and 

18 inserting the following new item: 

‘‘Sec. 6. State law preemption standards for Federal savings associations clarified.’’. 

19 SEC. 4408. VISITORIAL STANDARDS. 

20 Section 6 of the Home Owners’ Loan Act (as added 

21 by section 4407 of this title) is amended by adding at the 

22 end the following new subsections: 

23 ‘‘(g) VISITORIAL POWERS.— 


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1 ‘‘(1) IN GENERAL.—No provision of this Act 

2 shall be construed as limiting or restricting the au3 thority of any attorney general (or other chief law 

4 enforcement officer) of any State to bring any action 

5 in any court of appropriate jurisdiction— 

6 ‘‘(A) to enforce any applicable Federal or 

7 State law, as authorized by such law; or 

8 ‘‘(B) on behalf of residents of such State, 

9 to enforce any applicable provision of any Fed10 eral or State law against a Federal savings as11 sociation, as authorized by such law, or to seek 

12 relief as authorized by such law. 

13 ‘‘(2) CONSULTATION.—The attorney general (or 

14 other chief law enforcement officer) of any State 

15 shall consult with the Director or any successor 

16 agency before acting under paragraph (1). 

17 ‘‘(h) ENFORCEMENT ACTIONS.—The ability of the 

18 Director or any successor officer or agency to bring an 

19 enforcement action under this Act or section 5 of the Fed20 eral Trade Commission Act shall not be construed as pre21 cluding private parties from enforcing rights granted 

22 under Federal or State law in the courts.’’. 


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1 SEC. 4409. CLARIFICATION OF LAW APPLICABLE TO NON2 DEPOSITORY INSTITUTION SUBSIDIARIES. 

3 Section 6 of the Home Owners’ Loan Act is amended 

4 by adding after subsection (h) (as added by section 4408) 

5 the following new subsection: 

6 ‘‘(i) CLARIFICATION OF LAW APPLICABLE TO NON7 DEPOSITORY INSTITUTION SUBSIDIARIES AND AFFILI8 ATES OF FEDERAL SAVINGS ASSOCIATIONS.— 

9 ‘‘(1) DEFINITIONS.—For purposes of this sec10 tion, the following definitions shall apply: 

11 ‘‘(A) DEPOSITORY INSTITUTION, SUB12 SIDIARY, AFFILIATE.—The terms ‘depository in13 stitution’, ‘subsidiary’, and ‘affiliate’ have the 

14 same meanings as in section 3 of the Federal 

15 Deposit Insurance Act. 

16 ‘‘(B) NONDEPOSITORY INSTITUTION.—The 

17 term ‘nondepository institution’ means any enti18 ty that is not a depository institution. 

19 ‘‘(2) IN GENERAL.—No provision of this title 

20 shall be construed as preempting the applicability of 

21 State law to any nondepository institution, sub22 sidiary, other affiliate, or agent of a Federal savings 

23 association.’’. 

24 SEC. 4410. EFFECTIVE DATE. 

25 This subtitle shall take effect on the designated 

26 transfer date. 


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1 Subtitle E—Enforcement Powers 

2 SEC. 4501. DEFINITIONS. 

3 For purposes of this subtitle, the following definitions 

4 shall apply: 

5 (1) AGENCY INVESTIGATION.—The term 

6 ‘‘Agency investigation’’ means any inquiry conducted 

7 by an Agency investigator for the purpose of 

8 ascertaining whether any person is or has been en9 gaged in any conduct that violates this title, any 

10 enumerated consumer law, or any regulation pre11 scribed or order issued by the Director under this 

12 title or under the authorities transferred under sub13 titles F and H. 

14 (2) AGENCY INVESTIGATOR.—The term ‘‘Agen15 cy investigator’’ means any attorney or investigator 

16 employed by the Agency who is charged with the 

17 duty of enforcing or carrying into effect any provi18 sions of this title, any enumerated consumer law, the 

19 authorities transferred under subtitles F and H, or 

20 any regulation prescribed or order issued under this 

21 title or pursuant to any such authority by the Direc22 tor. 

23 (3) COVERED EMPLOYEE.—The term ‘‘covered 

24 employee’’ means any individual performing tasks 


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1 related to the provision of a financial product or 

2 service to a consumer. 

3 (4) CUSTODIAN.—The term ‘‘custodian’’ means 

4 the custodian or any deputy custodian designated by 

5 the Agency. 

6 (5) DOCUMENTARY MATERIAL.—The term 

7 ‘‘documentary material’’ includes the original or any 

8 copy of any book, document, record, report, memo9 randum, paper, communication, tabulation, chart, 

10 log, electronic file, or other data or data compila11 tions stored in any medium. 

12 (6) VIOLATION.—The term ‘‘violation’’ means 

13 any act or omission that, if proved, would constitute 

14 a violation of any provision of this title, any enumer15 ated consumer law, any law for which authorities 

16 were transferred under subtitles F and H, or of any 

17 regulation prescribed or order issued by the Director 

18 under this title or pursuant to any such authority. 

19 SEC. 4502. INVESTIGATIONS AND ADMINISTRATIVE DIS20 COVERY. 

21 (a) JOINT INVESTIGATIONS.— 

22 (1) IN GENERAL.—The Agency or, where ap23 propriate, an Agency representative may engage in 

24 joint investigations and requests for information. 


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1 (2) FAIR LENDING.—The authority under para2 graph (1) includes matters relating to fair lending, 

3 and where appropriate, joint investigations and re4 quests for information with the Secretary of Hous5 ing and Urban Development, the Attorney General, 

6 or both. 

7 (b) SUBPOENAS.— 

8 (1) IN GENERAL.—The Agency or an Agency 

9 investigator may issue subpoenas for the attendance 

10 and testimony of witnesses and the production of 

11 relevant papers, books, documents, or other material 

12 in connection with hearings under this title. 

13 (2) FAILURE TO OBEY.—In case of contumacy 

14 or refusal to obey a subpoena issued pursuant to 

15 this paragraph and served upon any person, an ap16 propriate United States district court may, upon ap17 plication by the Agency or an Agency investigator 

18 and after notice to such person, issue an order re19 quiring such person to appear and give testimony or 

20 to appear and produce documents or other material, 

21 or both. 

22 (c) DEMANDS.— 

23 (1) IN GENERAL.—Whenever the Agency has 

24 reason to believe that any person may be in posses25 sion, custody, or control of any documentary mateVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01020 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 rial or tangible things, or may have any information, 

2 relevant to a violation, the Agency may, before the 

3 institution of any proceedings under this title or 

4 under any enumerated consumer law or pursuant to 

5 the authorities transferred under subtitles F and H, 

6 issue in writing, and cause to be served upon such 

7 person, a civil investigative demand requiring such 

8 person to— 

9 (A) produce such documentary material for 

10 inspection and copying or reproduction in the 

11 form or medium requested by the Agency; 

12 (B) submit such tangible things; 

13 (C) file written reports or answers to ques14 tions; 

15 (D) give oral testimony concerning docu16 mentary material or other information; or 

17 (E) furnish any combination of such mate18 rial, answers, or testimony. 

19 (2) REQUIREMENTS.—Each civil investigative 

20 demand shall state the nature of the conduct consti21 tuting the alleged violation which is under investiga22 tion and the provision of law applicable to such vio23 lation. 


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1 (3) PRODUCTION OF DOCUMENTS.—Each civil 

2 investigative demand for the production of documen3 tary material shall— 

4 (A) describe each class of documentary 

5 material to be produced under the demand with 

6 such definiteness and certainty as to permit 

7 such material to be fairly identified; 

8 (B) prescribe a return date or dates which 

9 will provide a reasonable period of time within 

10 which the material so demanded may be assem11 bled and made available for inspection and 

12 copying or reproduction; and 

13 (C) identify the custodian to whom such 

14 material shall be made available. 

15 (4) PRODUCTION OF THINGS.—Each civil inves16 tigative demand for the submission of tangible 

17 things shall— 

18 (A) describe each class of tangible things 

19 to be submitted under the demand with such 

20 definiteness and certainty as to permit such 

21 things to be fairly identified; 

22 (B) prescribe a return date or dates which 

23 will provide a reasonable period of time within 

24 which the things so demanded may be assem25 bled and submitted; and 


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1 (C) identify the custodian to whom such 

2 things shall be submitted. 

3 (5) DEMAND FOR WRITTEN REPORTS OR AN4 SWERS.—Each civil investigative demand for written 

5 reports or answers to questions shall— 

6 (A) propound with definiteness and cer7 tainty the reports to be produced or the ques8 tions to be answered; 

9 (B) prescribe a date or dates at which time 

10 written reports or answers to questions shall be 

11 submitted; and 

12 (C) identify the custodian to whom such 

13 reports or answers shall be submitted. 

14 (6) ORAL TESTIMONY.—Each civil investigative 

15 demand for the giving of oral testimony shall— 

16 (A) prescribe a date, time, and place at 

17 which oral testimony shall be commenced; and 

18 (B) identify a Agency investigator who 

19 shall conduct the investigation and the custo20 dian to whom the transcript of such investiga21 tion shall be submitted. 

22 (7) SERVICE.— 

23 (A) Any civil investigative demand may be 

24 served by any Agency investigator at any place 


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1 within the territorial jurisdiction of any court of 

2 the United States. 

3 (B) Any such demand or any enforcement 

4 petition filed under this section may be served 

5 upon any person who is not found within the 

6 territorial jurisdiction of any court of the 

7 United States, in such manner as the Federal 

8 Rules of Civil Procedure prescribe for service in 

9 a foreign nation. 

10 (8) METHOD OF SERVICE.—Service of any civil 

11 investigative demand or any enforcement petition 

12 filed under this section may be made upon a person, 

13 including any legal entity, by— 

14 (A) delivering a duly executed copy of such 

15 demand or petition to the individual or to any 

16 partner, executive officer, managing agent, or 

17 general agent of such person, or to any agent 

18 of such person authorized by appointment or by 

19 law to receive service of process on behalf of 

20 such person; 

21 (B) delivering a duly executed copy of such 

22 demand or petition to the principal office or 

23 place of business of the person to be served; or 

24 (C) depositing a duly executed copy in the 

25 United States mails, by registered or certified 


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1 mail, return receipt requested, duly addressed 

2 to such person at its principal office or place of 

3 business. 

4 (9) PROOF OF SERVICE.— 

5 (A) A verified return by the individual 

6 serving any civil investigative demand or any 

7 enforcement petition filed under this section 

8 setting forth the manner of such service shall 

9 be proof of such service. 

10 (B) In the case of service by registered or 

11 certified mail, such return shall be accompanied 

12 by the return post office receipt of delivery of 

13 such demand or enforcement petition. 

14 (10) PRODUCTION OF DOCUMENTARY MATE15 RIAL.—The production of documentary material in 

16 response to a civil investigative demand shall be 

17 made under a sworn certificate, in such form as the 

18 demand designates, by the person, if a natural per19 son, to whom the demand is directed or, if not a 

20 natural person, by any person having knowledge of 

21 the facts and circumstances relating to such produc22 tion, to the effect that all of the documentary mate23 rial required by the demand and in the possession, 

24 custody, or control of the person to whom the deVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01025 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 mand is directed has been produced and made avail2 able to the custodian. 

3 (11) SUBMISSION OF TANGIBLE THINGS.—The 

4 submission of tangible things in response to a civil 

5 investigative demand shall be made under a sworn 

6 certificate, in such form as the demand designates, 

7 by the person to whom the demand is directed or, 

8 if not a natural person, by any person having knowl9 edge of the facts and circumstances relating to such 

10 production, to the effect that all of the tangible 

11 things required by the demand and in the posses12 sion, custody, or control of the person to whom the 

13 demand is directed have been submitted to the cus14 todian. 

15 (12) SEPARATE ANSWERS.—Each reporting re16 quirement or question in a civil investigative demand 

17 shall be answered separately and fully in writing 

18 under oath, unless it is objected to, in which event 

19 the reasons for the objection shall be stated in lieu 

20 of an answer, and it shall be submitted under a 

21 sworn certificate, in such form as the demand des22 ignates, by the person, if a natural person, to whom 

23 the demand is directed or, if not a natural person, 

24 by any person responsible for answering each report25 ing requirement or question, to the effect that all inVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01026 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 formation required by the demand and in the posses2 sion, custody, control, or knowledge of the person to 

3 whom the demand is directed has been submitted. 

4 (13) TESTIMONY.— 

5 (A) PROCEDURE.— 

6 (i) OATH AND RECORDATION.—The 

7 examination of any person pursuant to a 

8 demand for oral testimony served under 

9 this subsection shall be taken before an of10 ficer authorized to administer oaths and 

11 affirmations by the laws of the United 

12 States or of the place where the examina13 tion is held. The officer before whom oral 

14 testimony is to be taken shall put the wit15 ness on oath or affirmation and shall per16 sonally, or by any individual acting under 

17 the direction of and in the presence of the 

18 officer, record the testimony of the witness. 

19 (ii) TRANSCRIPTIONS.—The testimony 

20 shall be taken stenographically and tran21 scribed. 

22 (iii) COPY TO CUSTODIAN.—After the 

23 testimony is fully transcribed, the officer 

24 before whom the testimony is taken shall 


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1 promptly transmit a copy of the transcript 

2 of the testimony to the custodian. 

3 (B) PARTIES PRESENT.—Any Agency in4 vestigator before whom oral testimony is to be 

5 taken shall exclude from the place where the 

6 testimony is to be taken all other persons ex7 cept the person giving the testimony, the attor8 ney for such person, the officer before whom 

9 the testimony is to be taken, an investigator or 

10 representative of an agency with which the 

11 Agency is engaged in a joint investigation, and 

12 any stenographer taking such testimony. 

13 (C) LOCATION.—The oral testimony of any 

14 person taken pursuant to a civil investigative 

15 demand shall be taken in the judicial district of 

16 the United States in which such person resides, 

17 is found, or transacts business, or in such other 

18 place as may be agreed upon by the Agency in19 vestigator before whom the oral testimony of 

20 such person is to be taken and such person. 

21 (D) ATTORNEY REPRESENTATION.— 

22 (i) IN GENERAL.—Any person com23 pelled to appear under a civil investigative 

24 demand for oral testimony pursuant to this 


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1 section may be accompanied, represented, 

2 and advised by an attorney. 

3 (ii) CONFIDENTIAL ADVICE.—The at4 torney may advise the person summoned, 

5 in confidence, either upon the request of 

6 such person or upon the initiative of the 

7 attorney, with respect to any question 

8 asked of such person. 

9 (iii) OBJECTIONS.—The person sum10 moned or the attorney may object on the 

11 record to any question, in whole or in part, 

12 and shall briefly state for the record the 

13 reason for the objection. 

14 (iv) REFUSAL TO ANSWER.—An objec15 tion may properly be made, received, and 

16 entered upon the record when it is claimed 

17 that the person summoned is entitled to 

18 refuse to answer the question on grounds 

19 of any constitutional or other legal right or 

20 privilege, including the privilege against 

21 self-incrimination, but such person shall 

22 not otherwise object to or refuse to answer 

23 any question, and shall not otherwise inter24 rupt the oral examination, directly or 

25 through such person’s attorney. 


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1 (v) PETITION FOR ORDER.—If such 

2 person refuses to answer any question, the 

3 Agency may petition the district court of 

4 the United States pursuant to this section 

5 for an order compelling such person to an6 swer such question. 

7 (vi) BASIS FOR COMPELLING TESTI8 MONY.—If such person refuses to answer 

9 any question on grounds of the privilege 

10 against self-incrimination, the testimony of 

11 such person may be compelled in accord12 ance with the provisions of section 6004 of 

13 title 18, United States Code. 

14 (E) TRANSCRIPTS.— 

15 (i) RIGHT TO EXAMINE.—After the 

16 testimony of any witness is fully tran17 scribed, the Agency investigator shall af18 ford the witness (who may be accompanied 

19 by an attorney) a reasonable opportunity 

20 to examine the transcript. 

21 (ii) READING THE TRANSCRIPT.—The 

22 transcript shall be read to or by the wit23 ness, unless such examination and reading 

24 are waived by the witness. 


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1 (iii) REQUEST FOR CHANGES.—Any 

2 changes in form or substance which the 

3 witness desires to make shall be entered 

4 and identified upon the transcript by the 

5 Agency investigator with a statement of 

6 the reasons given by the witness for mak7 ing such changes. 

8 (iv) SIGNATURE.—The transcript 

9 shall be signed by the witness, unless the 

10 witness in writing waives the signing, is ill, 

11 cannot be found, or refuses to sign. 

12 (v) AGENCY ACTION IN LIEU OF SIG13 NATURE.—If the transcript is not signed 

14 by the witness during the 30-day period 

15 following the date upon which the witness 

16 is first afforded a reasonable opportunity 

17 to examine it, the officer or the Agency in18 vestigator shall sign the transcript and 

19 state on the record the fact of the waiver, 

20 illness, absence of the witness, or the re21 fusal to sign, together with any reasons 

22 given for the failure to sign. 

23 (F) CERTIFICATION BY INVESTIGATOR.— 

24 The officer shall certify on the transcript that 

25 the witness was duly sworn by the investigator 


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1 and that the transcript is a true record of the 

2 testimony given by the witness, and the officer 

3 or the Agency investigator shall promptly de4 liver the transcript or send it by registered or 

5 certified mail to the custodian. 

6 (G) COPY OF TRANSCRIPT.—The Agency 

7 investigator shall furnish a copy of the tran8 script (upon payment of reasonable charges for 

9 the transcript) to the witness only, except that 

10 the Agency may for good cause limit such wit11 ness to inspection of the official transcript of 

12 the testimony of such witness. 

13 (H) WITNESS FEES.—Any witness appear14 ing for the taking of oral testimony pursuant to 

15 a civil investigative demand shall be entitled to 

16 the same fees and mileage which are paid to 

17 witnesses in the district courts of the United 

18 States. 

19 (d) CONFIDENTIAL TREATMENT OF DEMAND MATE20 RIAL.— 

21 (1) IN GENERAL.—Materials received as a re22 sult of a civil investigative demand shall be subject 

23 to requirements and procedures regarding confiden24 tiality, in accordance with regulations established by 

25 the Director. 


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1 (2) DISCLOSURE TO CONGRESS.—No regulation 

2 established by the Director regarding the confiden3 tiality of materials submitted to, or otherwise ob4 tained by, the Agency shall be intended to prevent 

5 disclosure to either House of the Congress or to an 

6 appropriate committee of the Congress, except that 

7 the Director may prescribe regulations allowing prior 

8 notice to any party that owns or otherwise provided 

9 the material to the Agency and has designated such 

10 material as confidential. 

11 (e) PETITION FOR ENFORCEMENT.— 

12 (1) IN GENERAL.—Whenever any person fails 

13 to comply with any civil investigative demand duly 

14 served upon such person under this section, or when15 ever satisfactory copying or reproduction of material 

16 requested pursuant to the demand cannot be accom17 plished and such person refuses to surrender such 

18 material, the Agency, through such officers or attor19 neys as the Director may designate, may file, in the 

20 district court of the United States for any judicial 

21 district in which such person resides, is found, or 

22 transacts business, and serve upon such person, a 

23 petition for an order of such court for the enforce24 ment of this section. 


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1 (2) SERVICE OF PROCESS.—All process of any 

2 court to which application may be made as provided 

3 in this subsection may be served in any judicial dis4 trict. 

5 (f) PETITION FOR ORDER MODIFYING OR SETTING

6 ASIDE DEMAND.— 

7 (1) IN GENERAL.—Not later than 20 days after 

8 the service of any civil investigative demand upon 

9 any person under subsection (b), or at any time be10 fore the return date specified in the demand, which11 ever period is shorter, or within such period exceed12 ing 20 days after service or in excess of such return 

13 date as may be prescribed in writing, subsequent to 

14 service, by any Agency investigator named in the de15 mand, such person may file with the Agency a peti16 tion for an order by the Agency modifying or setting 

17 aside the demand. 

18 (2) COMPLIANCE DURING PENDENCY.—The 

19 time permitted for compliance with the demand in 

20 whole or in part, as deemed proper and ordered by 

21 the Agency, shall not run during the pendency of 

22 such petition at the Agency, except that such person 

23 shall comply with any portions of the demand not 

24 sought to be modified or set aside. 


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1 (3) SPECIFIC GROUNDS.—Such petition shall 

2 specify each ground upon which the petitioner relies 

3 in seeking such relief, and may be based upon any 

4 failure of the demand to comply with the provisions 

5 of this section, or upon any constitutional or other 

6 legal right or privilege of such person. 

7 (g) CUSTODIAL CONTROL.—At any time during 

8 which any custodian is in custody or control of any docu9 mentary material, tangible things, reports, answers to 

10 questions, or transcripts of oral testimony given by any 

11 person in compliance with any civil investigative demand, 

12 such person may file, in the district court of the United 

13 States for the judicial district within which the office of 

14 such custodian is situated, and serve upon such custodian, 

15 a petition for an order of such court requiring the per16 formance by such custodian of any duty imposed upon 

17 such custodian by this section or regulation prescribed by 

18 the Director. 

19 (h) JURISDICTION OF COURT.— 

20 (1) IN GENERAL.—Whenever any petition is 

21 filed in any district court of the United States under 

22 this section, such court shall have jurisdiction to 

23 hear and determine the matter so presented, and to 

24 enter such order or orders as may be required to 

25 carry into effect the provisions of this section. 


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1 (2) APPEAL.—Any final order so entered shall 

2 be subject to appeal pursuant to section 1291 of title 

3 28, United States Code. 

4 SEC. 4503. HEARINGS AND ADJUDICATION PROCEEDINGS. 

5 (a) IN GENERAL.—The Agency may conduct hear6 ings and adjudication proceedings with respect to any per7 son in the manner prescribed by chapter 5 of title 5, 

8 United States Code in order to ensure or enforce compli9 ance with— 

10 (1) the provisions of this title, including any 

11 regulations prescribed by the Director under this 

12 title; and 

13 (2) any other Federal law that the Agency is 

14 authorized to enforce, including an enumerated con15 sumer law, and any regulations or order prescribed 

16 thereunder, unless such Federal law specifically lim17 its the Agency from conducting a hearing or adju18 dication proceeding and only to the extent of such 

19 limitation. 

20 (b) SPECIAL RULES FOR CEASE-AND-DESIST PRO21 CEEDINGS.— 

22 (1) ISSUANCE.— 

23 (A) NOTICE OF CHARGES.—If, in the opin24 ion of the Agency, any covered person or service 

25 provider is engaging or has engaged in an activVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01036 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ity that violates a law, regulation, or any condi2 tion imposed in writing on the person by the 

3 Agency, the Agency may issue and serve upon 

4 the person a notice of charges with respect to 

5 such violation. 

6 (B) CONTENTS OF NOTICE.—The notice 

7 shall contain a statement of the facts consti8 tuting any alleged violation and shall fix a time 

9 and place at which a hearing will be held to de10 termine whether an order to cease-and-desist 

11 there from should issue against the person. 

12 (C) TIME OF HEARING.—A hearing under 

13 this subsection shall be fixed for a date not ear14 lier than 30 days nor later than 60 days after 

15 service of such notice unless an earlier or a 

16 later date is set by the Agency at the request 

17 of any party so served. 

18 (D) NONAPPEARANCE DEEMED TO BE

19 CONSENT TO ORDER.—Unless the party or par20 ties so served shall appear at the hearing per21 sonally or by a duly authorized representative, 

22 they shall be deemed to have consented to the 

23 issuance of the cease-and-desist order. 

24 (E) ISSUANCE OF ORDER.—In the event of 

25 such consent, or if upon the record made at any 


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1 such hearing, the Agency shall find that any 

2 violation specified in the notice of charges has 

3 been established, the Agency may issue and 

4 serve upon the person an order to cease-and-de5 sist from any such violation or practice. 

6 (F) INCLUDES REQUIREMENT FOR COR7 RECTIVE ACTION.—Such order may, by provi8 sions which may be mandatory or otherwise, re9 quire the person to cease-and-desist from the 

10 same, and, further, to take affirmative action to 

11 correct the conditions resulting from any such 

12 violation. 

13 (2) EFFECTIVENESS OF ORDER.—A cease-and14 desist order shall take effect at the end of the 30- 

15 day period beginning on the date of the service of 

16 such order upon the covered person or service pro17 vider concerned (except in the case of a cease-and18 desist order issued upon consent, which shall take 

19 effect at the time specified therein), and shall re20 main effective and enforceable as provided therein, 

21 except to such extent as it is stayed, modified, termi22 nated, or set aside by action of the Agency or a re23 viewing court. 

24 (3) DECISION AND APPEAL.— 


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1 (A) PLACE OF AND PROCEDURES FOR

2 HEARING.—Any hearing provided for in this 

3 subsection shall be held in the Federal judicial 

4 district or in the territory in which the resi5 dence or home office of the person is located 

6 unless the person consents to another place, 

7 and shall be conducted in accordance with the 

8 provisions of chapter 5 of title 5 of the United 

9 States Code. 

10 (B) TIME LIMIT FOR DECISION.—After 

11 such hearing, and within 90 days after the 

12 Agency has notified the parties that the case 

13 has been submitted to it for final decision, the 

14 Agency shall— 

15 (i) render its decision (which shall in16 clude findings of fact upon which its deci17 sion is predicated) and shall issue; and 

18 (ii) serve upon each party to the pro19 ceeding an order or orders consistent with 

20 the provisions of this section. Judicial re21 view of any such order shall be exclusively 

22 as provided in this subsection. 

23 (C) MODIFICATION OF ORDER GEN24 ERALLY.—Unless a petition for review is timely 

25 filed in a court of appeals of the United States, 


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1 as hereinafter provided in paragraph (4), and 

2 thereafter until the record in the proceeding has 

3 been filed as so provided, the Agency may at 

4 any time, upon such notice and in such manner 

5 as it shall deem proper, modify, terminate, or 

6 set aside any such order. 

7 (D) MODIFICATION OF ORDER AFTER FIL8 ING RECORD ON APPEAL.—Upon such filing of 

9 the record, the Agency may modify, terminate, 

10 or set aside any such order with permission of 

11 the court. 

12 (4) APPEAL TO COURT OF APPEALS.— 

13 (A) IN GENERAL.—Any party to any pro14 ceeding under this subsection may obtain a re15 view of any order served pursuant to this sub16 section (other than an order issued with the 

17 consent of the person concerned) by the filing 

18 in the court of appeals of the United States for 

19 the circuit in which the principal office of the 

20 covered person is located, or in the United 

21 States Court of Appeals for the District of Co22 lumbia Circuit, within 30 days after the date of 

23 service of such order, a written petition praying 

24 that the order of the Agency be modified, termi25 nated, or set aside. 


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1 (B) TRANSMITTAL OF COPY TO THE AGEN2 CY.—A copy of such petition shall be forthwith 

3 transmitted by the clerk of the court to the 

4 Agency, and thereupon the Agency shall file in 

5 the court the record in the proceeding, as pro6 vided in section 2112 of title 28 of the United 

7 States Code. 

8 (C) JURISDICTION OF COURT.—Upon the 

9 filing of a petition under subparagraph (A), 

10 such court shall have jurisdiction, which upon 

11 the filing of the record shall except as provided 

12 in the last sentence of paragraph (3) be exclu13 sive, to affirm, modify, terminate, or set aside, 

14 in whole or in part, the order of the Agency. 

15 (D) SCOPE OF REVIEW.—Review of such 

16 proceedings shall be had as provided in chapter 

17 7 of title 5 of the United States Code. 

18 (E) FINALITY.—The judgment and decree 

19 of the court shall be final, except that the same 

20 shall be subject to review by the Supreme Court 

21 upon certiorari, as provided in section 1254 of 

22 title 28 of the United States Code. 

23 (5) NO STAY.—The commencement of pro24 ceedings for judicial review under paragraph (4) 


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1 shall not, unless specifically ordered by the court, 

2 operate as a stay of any order issued by the Agency. 

3 (c) SPECIAL RULES FOR TEMPORARY CEASE-AND4 DESIST PROCEEDINGS.— 

5 (1) ISSUANCE.— 

6 (A) IN GENERAL.—Whenever the Agency 

7 determines that the violation specified in the 

8 notice of charges served upon a person, includ9 ing a service provider, pursuant to subsection 

10 (b), or the continuation of such violation, is 

11 likely to cause the person to be insolvent or oth12 erwise prejudice the interests of consumers be13 fore the completion of the proceedings con14 ducted pursuant to subsection (b), the Agency 

15 may issue a temporary order requiring the per16 son to cease-and-desist from any such violation 

17 or practice and to take affirmative action to 

18 prevent or remedy such insolvency or other con19 dition pending completion of such proceedings. 

20 (B) OTHER REQUIREMENTS.—Any tem21 porary order issued under this paragraph may 

22 include any requirement authorized under this 

23 subtitle. 

24 (C) EFFECT DATE OF ORDER.—Any tem25 porary order issued under this paragraph shall 


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1 take effect upon service upon the person and, 

2 unless set aside, limited, or suspended by a 

3 court in proceedings authorized by paragraph 

4 (2) of this subsection, shall remain effective and 

5 enforceable pending the completion of the ad6 ministrative proceedings pursuant to such no7 tice and until such time as the Agency shall dis8 miss the charges specified in such notice, or if 

9 a cease-and-desist order is issued against the 

10 person, until the effective date of such order. 

11 (2) APPEAL.—Within 10 days after the person 

12 concerned has been served with a temporary cease13 and-desist order, the person may apply to the United 

14 States district court for the judicial district in which 

15 the home office of the person is located, or the 

16 United States District Court for the District of Co17 lumbia, for an injunction setting aside, limiting, or 

18 suspending the enforcement, operation, or effective19 ness of such order pending the completion of the ad20 ministrative proceedings pursuant to the notice of 

21 charges served upon the person under subsection 

22 (b), and such court shall have jurisdiction to issue 

23 such injunction. 

24 (3) INCOMPLETE OR INACCURATE RECORDS.— 


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1 (A) TEMPORARY ORDER.—If a notice of 

2 charges served under subsection (b) specifies, 

3 on the basis of particular facts and cir4 cumstances, that a person’s books and records 

5 are so incomplete or inaccurate that the Agency 

6 is unable to determine the financial condition of 

7 that person or the details or purpose of any 

8 transaction or transactions that may have a 

9 material effect on the financial condition of that 

10 person, the Agency may issue a temporary 

11 order requiring— 

12 (i) the cessation of any activity or 

13 practice which gave rise, whether in whole 

14 or in part, to the incomplete or inaccurate 

15 state of the books or records; or 

16 (ii) affirmative action to restore such 

17 books or records to a complete and accu18 rate state, until the completion of the pro19 ceedings under subsection (b)(1). 

20 (B) EFFECTIVE PERIOD.—Any temporary 

21 order issued under subparagraph (A)— 

22 (i) shall take effect upon service; and 

23 (ii) unless set aside, limited, or sus24 pended by a court in proceedings under 


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1 paragraph (2), shall remain in effect and 

2 enforceable until the earlier of— 

3 (I) the completion of the pro4 ceeding initiated under subsection (b) 

5 in connection with the notice of 

6 charges; or 

7 (II) the date the Agency deter8 mines, by examination or otherwise, 

9 that the person’s books and records 

10 are accurate and reflect the financial 

11 condition of the person. 

12 (d) SPECIAL RULES FOR ENFORCEMENT OF OR13 DERS.— 

14 (1) IN GENERAL.—The Agency may in its dis15 cretion apply to the United States district court 

16 within the jurisdiction of which the principal office 

17 of the person is located, for the enforcement of any 

18 effective and outstanding notice or order issued 

19 under this section, and such court shall have juris20 diction and power to order and require compliance 

21 herewith. 

22 (2) EXCEPTION.—Except as otherwise provided 

23 in this subsection, no court shall have jurisdiction to 

24 affect by injunction or otherwise the issuance or en25 forcement of any notice or order or to review, modVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01045 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ify, suspend, terminate, or set aside any such notice 

2 or order. 

3 (e) REGULATIONS.—The Director shall prescribe reg4 ulations establishing such procedures as may be necessary 

5 to carry out this section. 

6 SEC. 4504. LITIGATION AUTHORITY. 

7 (a) IN GENERAL.—If any person violates a provision 

8 of this title, any enumerated consumer law, any law for 

9 which authorities were transferred under subtitles F and 

10 H, or any regulation prescribed or order issued by the Di11 rector under this title or pursuant to any such authority, 

12 the Agency may commence a civil action against such per13 son to impose a civil penalty and to seek all appropriate 

14 legal and equitable relief including a permanent or tem15 porary injunction as permitted by law. 

16 (b) REPRESENTATION.—The Agency may act in its 

17 own name and through its own attorneys in enforcing any 

18 provision of this title, regulations under this title, or any 

19 other law or regulation, or in any action, suit, or pro20 ceeding to which the Agency is a party. 

21 (c) COMPROMISE OF ACTIONS.—The Agency may 

22 compromise or settle any action if such compromise is ap23 proved by the court. 

24 (d) NOTICE TO THE ATTORNEY GENERAL.—When 

25 commencing a civil action under this title, any enumerated 


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1 consumer law, any law for which authorities were trans2 ferred under subtitles F and H, or any regulation there3 under, the Agency shall notify the Attorney General. 

4 (e) APPEARANCE BEFORE THE SUPREME COURT.— 

5 The Agency may represent itself in its own name before 

6 the Supreme Court of the United States, if— 

7 (1) the Agency makes a written request to the 

8 Attorney General within the 10-day period which be9 gins on the date of entry of the judgment which 

10 would permit any party to file a petition for writ of 

11 certiorari; and 

12 (2) the Attorney General concurs with such re13 quest or fails to take action within 60 days of the 

14 Agency’s request. 

15 (f) FORUM.—Any civil action brought under this title 

16 may be brought in a United States district court or in 

17 any court of competent jurisdiction of a state in a district 

18 in which the defendant is located or resides or is doing 

19 business, and such court shall have jurisdiction to enjoin 

20 such person and to require compliance with this title, any 

21 enumerated consumer law, any law for which authorities 

22 were transferred under subtitles F and H, or any regula23 tion prescribed or order issued by the Director under this 

24 title or pursuant to any such authority. 

25 (g) TIME FOR BRINGING ACTION.— 


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1 (1) IN GENERAL.—Except as otherwise per2 mitted by law or equity, no action may be brought 

3 under this title more than 3 years after the date of 

4 the discovery of the violation to which an action re5 lates. 

6 (2) LIMITATIONS UNDER OTHER FEDERAL

7 LAWS.— 

8 (A) For purposes of this section, an action 

9 arising under this title shall not include claims 

10 arising solely under enumerated consumer laws. 

11 (B) In any action arising solely under an 

12 enumerated consumer law, the Agency may 

13 commence, defend, or intervene in the action in 

14 accordance with the requirements of that law, 

15 as applicable. 

16 (C) In any action arising solely under the 

17 laws for which authorities were transferred by 

18 subtitles F and H, the Agency may commence, 

19 defend, or intervene in the action in accordance 

20 with the requirements of that law, as applicable. 

21 SEC. 4505. RELIEF AVAILABLE. 

22 (a) ADMINISTRATIVE PROCEEDINGS OR COURT AC23 TIONS.— 

24 (1) JURISDICTION.—The court (or Agency, as 

25 the case may be) in an action or adjudication proVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01048 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ceeding brought under this title, any enumerated 

2 consumer law, or any law for which authorities were 

3 transferred by subtitles F and H, shall have jurisdic4 tion to grant any appropriate legal or equitable relief 

5 with respect to a violation of this title, any enumer6 ated consumer law, and any law for which authori7 ties were transferred by subtitles F and H, including 

8 a violation of a regulation prescribed or order issued 

9 under this title, any enumerated consumer law and 

10 any law for which authorities were transferred by 

11 subtitles F and H. 

12 (2) RELIEF.—Such relief may include— 

13 (A) rescission or reformation of contracts; 

14 (B) refund of moneys or return of real 

15 property; 

16 (C) restitution; 

17 (D) disgorgement or compensation for un18 just enrichment; 

19 (E) payment of damages; 

20 (F) public notification regarding the viola21 tion, including the costs of notification; 

22 (G) limits on the activities or functions of 

23 the person; and 

24 (H) civil money penalties under subsection 

25 (c). 


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1 (3) NO EXEMPLARY OR PUNITIVE DAMAGES.— 

2 Nothing in this subsection shall be construed as au3 thorizing the imposition of exemplary or punitive 

4 damages. 

5 (b) RECOVERY OF COSTS.—In any action brought by 

6 the Agency, a State attorney general, or a State bank su7 pervisor to enforce any provision of this title, any enumer8 ated consumer law, any law for which authorities were 

9 transferred by subtitles F and H, or any regulation pre10 scribed or order issued by the Director under this title 

11 or pursuant to any such authority, the Agency, State at12 torney general, or State bank supervisor may recover the 

13 costs incurred by such Agency, attorney general, or super14 visor in connection with prosecuting such action if the 

15 Agency, State attorney general, or State bank supervisors 

16 (as the case may be) is the prevailing party in the action. 

17 (c) CIVIL MONEY PENALTY IN COURT AND ADMINIS18 TRATIVE ACTIONS.— 

19 (1) Any person that violates, through any act or 

20 omission, any provision of this title, any enumerated 

21 consumer law, or any regulation prescribed or order 

22 issued by the Director under this title shall forfeit 

23 and pay a civil penalty pursuant to this subsection 

24 determined as follows: 


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1 (A) FIRST TIER.—For any violation of any 

2 law, regulation, final order or condition imposed 

3 in writing by the Agency, or for any failure to 

4 pay any fee or assessment imposed by the 

5 Agency (including any fee or assessment for 

6 which a related person may be liable), a civil 

7 penalty shall not exceed $5,000 for each day 

8 during which such violation continues. 

9 (B) SECOND TIER.—Notwithstanding 

10 paragraph (A), for any person that recklessly 

11 engages in a violation of this title, any enumer12 ated consumer law, or any regulation prescribed 

13 or order issued by the Director under this title, 

14 relating to the provision of an alternative con15 sumer financial product or service, a civil pen16 alty shall not exceed $25,000 for each day dur17 ing which such violation continues. 

18 (C) THIRD TIER.—Notwithstanding sub19 paragraphs (A) and (B), for any person that 

20 knowingly violates this title, any enumerated 

21 consumer law, or any regulation prescribed or 

22 order issued by the Director under this title, a 

23 civil penalty shall not exceed $1,000,000 for 

24 each day during which such violation continues. 


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1 (2) MITIGATING FACTORS.—In determining the 

2 amount of any penalty assessed under paragraph 

3 (1), the Agency or the court shall take into account 

4 the appropriateness of the penalty with respect to— 

5 (A) the size of financial resources and good 

6 faith of the person charged; 

7 (B) the gravity of the violation or failure 

8 to pay; 

9 (C) the severity of the risks to or losses of 

10 the consumer, which may take into account the 

11 number of products or services sold or provided; 

12 (D) the history of previous violations; and 

13 (E) such other matters as justice may re14 quire. 

15 (3) AUTHORITY TO MODIFY OR REMIT PEN16 ALTY.—The Agency may compromise, modify, or 

17 remit any penalty which may be assessed or had al18 ready been assessed under paragraph (1). The 

19 amount of such penalty, when finally determined, 

20 shall be exclusive of any sums owed by the person 

21 to the United States in connection with the costs of 

22 the proceeding, and may be deducted from any sums 

23 owing by the United States to the person charged. 

24 (4) NOTICE AND HEARING.—No civil penalty 

25 may be assessed with respect to a violation of this 


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1 title, any enumerated consumer law, or any regula2 tion prescribed or order issued by the Director, un3 less— 

4 (A) the Agency gives notice and an oppor5 tunity for a hearing to the person accused of 

6 the violation; or 

7 (B) the appropriate court has ordered such 

8 assessment and entered judgment in favor of 

9 the Agency. 

10 SEC. 4506. REFERRALS FOR CRIMINAL PROCEEDINGS. 

11 Whenever the Agency obtains evidence that any per12 son, either domestic or foreign, has engaged in conduct 

13 that may constitute a violation of Federal criminal law, 

14 the Agency shall transmit such evidence to the Attorney 

15 General, who may institute criminal proceedings under ap16 propriate law. No provision of this section shall be con17 strued as affecting any other authority of the Agency to 

18 disclose information. 

19 SEC. 4507. EMPLOYEE PROTECTION. 

20 (a) No covered person shall terminate or in any other 

21 way discriminate against, or cause to be terminated or dis22 criminated against, any covered employee or any author23 ized representative of covered employees by reason of the 

24 fact that such employee or representative whether at the 

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1 ployee’s duties (or any person acting pursuant to a request 

2 of the employee) has— 

3 (1) provided information to the Agency or to 

4 any other state, local, Federal, or tribal government 

5 entity, filed, instituted or caused to be filed or insti6 tuted any proceeding under this title, any enumer7 ated consumer law, any law for which authorities 

8 were transferred by subtitles F and H, or has testi9 fied or is about to testify in any proceeding resulting 

10 from the administration or enforcement of the provi11 sions of this title; or 

12 (2) objected to, or refused to participate in, any 

13 activity, policy, practice, or assigned task that the 

14 employee (or other such person) reasonably believed 

15 to be in violation of any law, rule, or regulation, or 

16 to be unfair, deceptive, or abusive and likely to cause 

17 specific and substantial injury to one or more con18 sumers. 

19 (b)(1) A person who believes that he or she has been 

20 discharged or otherwise discriminated against by any per21 son in violation of subsection (a) may, not later than 180 

22 days after the date on which such violation occurs, file 

23 (or have any person file on his or her behalf) a complaint 

24 with the Secretary of Labor alleging such discharge or dis25 crimination and identifying the person responsible for 


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1 such act. Upon receipt of such a complaint, the Secretary 

2 shall notify, in writing, the person named in the complaint 

3 of the filing of the complaint, of the allegations contained 

4 in the complaint, of the substance of evidence supporting 

5 the complaint, and of the opportunities that will be af6 forded to such person under paragraph (2). 

7 (2)(A) Not later than 60 days after the date of re8 ceipt of a complaint filed under paragraph (1) and after 

9 affording the complainant and the person named in the 

10 complaint an opportunity to submit to the Secretary a 

11 written response to the complaint and an opportunity to 

12 meet with a representative of the Secretary to present 

13 statements from witnesses, the Secretary shall initiate an 

14 investigation and determine whether there is reasonable 

15 cause to believe that the complaint has merit and notify, 

16 in writing, the complainant and the person alleged to have 

17 committed a violation of subsection (a) of the Secretary’s 

18 findings. If the Secretary concludes that there is reason19 able cause to believe that a violation of subsection (a) has 

20 occurred, the Secretary shall accompany the Secretary’s 

21 findings with a preliminary order providing the relief pre22 scribed by paragraph (3)(B). Not later than 30 days after 

23 the date of notification of findings under this paragraph, 

24 either the person alleged to have committed the violation 

25 or the complainant may file objections to the findings or 


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1 preliminary order, or both, and request a hearing on the 

2 record. The filing of such objections shall not operate to 

3 stay any reinstatement remedy contained in the prelimi4 nary order. Any such hearing shall be conducted expedi5 tiously. If a hearing is not requested in such 30-day pe6 riod, the preliminary order shall be deemed a final order 

7 that is not subject to judicial review. 

8 (B)(i) The Secretary shall dismiss a complaint filed 

9 under this subsection and shall not conduct an investiga10 tion otherwise required under subparagraph (A) unless the 

11 complainant makes a prima facie showing that any behav12 ior described in paragraphs (1) through (4) of subsection 

13 (a) was a contributing factor in the unfavorable personnel 

14 action alleged in the complaint. 

15 (ii) Notwithstanding a finding by the Secretary that 

16 the complainant has made the showing required under 

17 clause (i), no investigation otherwise required under sub18 paragraph (A) shall be conducted if the employer dem19 onstrates, by clear and convincing evidence, that the em20 ployer would have taken the same unfavorable personnel 

21 action in the absence of that behavior. 

22 (iii) The Secretary may determine that a violation of 

23 subsection (a) has occurred only if the complainant dem24 onstrates that any behavior described in paragraphs (1) 

25 through (4) of subsection (a) was a contributing factor 


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1 in the unfavorable personnel action alleged in the com2 plaint. 

3 (iv) Relief may not be ordered under subparagraph 

4 (A) if the employer demonstrates by clear and convincing 

5 evidence that the employer would have taken the same un6 favorable personnel action in the absence of that behavior. 

7 (3)(A) Not later than 120 days after the date of con8 clusion of any hearing under paragraph (2), the Secretary 

9 shall issue a final order providing the relief prescribed by 

10 this paragraph or denying the complaint. At any time be11 fore issuance of a final order, a proceeding under this sub12 section may be terminated on the basis of a settlement 

13 agreement entered into by the Secretary, the complainant, 

14 and the person alleged to have committed the violation. 

15 (B) If, in response to a complaint filed under para16 graph (1), the Secretary determines that a violation of 

17 subsection (a) has occurred, the Secretary shall order the 

18 person who committed such violation— 

19 (i) to take affirmative action to abate the viola20 tion; 

21 (ii) to reinstate the complainant to his or her 

22 former position together with compensation (includ23 ing back pay) and restore the terms, conditions, and 

24 privileges associated with his or her employment; 

25 and 


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1 (iii) to provide compensatory damages to the 

2 complainant. If such an order is issued under this 

3 paragraph, the Secretary, at the request of the com4 plainant, shall assess against the person against 

5 whom the order is issued a sum equal to the aggre6 gate amount of all costs and expenses (including at7 torneys’ and expert witness fees) reasonably in8 curred, as determined by the Secretary, by the com9 plainant for, or in connection with, the bringing of 

10 the complaint upon which the order was issued. 

11 (C) If the Secretary finds that a complaint under 

12 paragraph (1) is frivolous or has been brought in bad 

13 faith, the Secretary may award to the prevailing employer 

14 a reasonable attorneys’ fee, not exceeding $ 1,000, to be 

15 paid by the complainant. 

16 (4) If the Secretary has not issued a final decision 

17 within 210 days after the filing of the complaint, or within 

18 90 days after receiving a written determination, the com19 plainant may bring an action at law or equity for de novo 

20 review in the appropriate district court of the United 

21 States with jurisdiction, which shall have jurisdiction over 

22 such an action without regard to the amount in con23 troversy, and which action shall, at the request of either 

24 party to such action, be tried by the court with a jury. 

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1 dens of proof specified in paragraph (2)(B). The court 

2 shall have jurisdiction to grant all relief necessary to make 

3 the employee whole, including injunctive relief and com4 pensatory damages, including— 

5 (A) reinstatement with the same seniority sta6 tus that the employee would have had, but for the 

7 discharge or discrimination; 

8 (B) the amount of back pay, with interest; and 

9 (C) compensation for any special damages sus10 tained as a result of the discharge or discrimination, 

11 including litigation costs, expert witness fees, and 

12 reasonable attorney’s fees. 

13 (5)(A) Unless the complainant brings an action under 

14 paragraph (4), any person adversely affected or aggrieved 

15 by a final order issued under paragraph (3) may obtain 

16 review of the order in the United States Court of Appeals 

17 for the circuit in which the violation, with respect to which 

18 the order was issued, allegedly occurred or the circuit in 

19 which the complainant resided on the date of such viola20 tion. The petition for review must be filed not later than 

21 60 days after the date of the issuance of the final order 

22 of the Secretary. Review shall conform to chapter 7 of title 

23 5, United States Code. The commencement of proceedings 

24 under this subparagraph shall not, unless ordered by the 

25 court, operate as a stay of the order. 


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1 (B) An order of the Secretary with respect to which 

2 review could have been obtained under subparagraph (A) 

3 shall not be subject to judicial review in any criminal or 

4 other civil proceeding. 

5 (6) Whenever any person has failed to comply with 

6 an order issued under paragraph (3), the Secretary may 

7 file a civil action in the United States district court for 

8 the district in which the violation was found to occur, or 

9 in the United States district court for the District of Co10 lumbia, to enforce such order. In actions brought under 

11 this paragraph, the district courts shall have jurisdiction 

12 to grant all appropriate relief including, but not limited 

13 to, injunctive relief and compensatory damages. 

14 (7)(A) A person on whose behalf an order was issued 

15 under paragraph (3) may commence a civil action against 

16 the person to whom such order was issued to require com17 pliance with such order. The appropriate United States 

18 district court shall have jurisdiction, without regard to the 

19 amount in controversy or the citizenship of the parties, 

20 to enforce such order. 

21 (B) The court, in issuing any final order under this 

22 paragraph, may award costs of litigation (including rea23 sonable attorneys’ and expert witness fees) to any party 

24 whenever the court determines such award is appropriate. 


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1 (c) Any nondiscretionary duty imposed by this section 

2 shall be enforceable in a mandamus proceeding brought 

3 under section 1361 of title 28, United States Code. 

4 (d)(1) Except as provided under paragraph (3), the 

5 rights and remedies provided for in this section may not 

6 be waived by any agreement, policy, form, or condition of 

7 employment, including by any predispute arbitration 

8 agreement. 

9 (2) Except as provided under paragraph (3), no 

10 predispute arbitration agreement shall be valid or enforce11 able if it requires arbitration of a dispute arising under 

12 this section. 

13 (e) Notwithstanding paragraphs (1) and (2), an arbi14 tration provision in a collective bargaining agreement shall 

15 be enforceable as to disputes arising under paragraph 

16 (a)(2) of this section unless the Agency determines by rule 

17 that such provision is inconsistent with the purposes of 

18 this Act. 

19 (f) Any employer receiving covered funds shall post 

20 notice of the rights and remedies provided under this sec21 tion. 

22 SEC. 4508. NO PRIVATE RIGHT OF ACTION. 

23 Nothing in this title shall be construed to create a 

24 private right of action, but this section shall not be con25 strued or interpreted to deny any private right of action 


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1 arising under the enumerated consumer laws or the au2 thorities transferred under subtitle F or H. 

3 SEC. 4509. EFFECTIVE DATE. 

4 This subtitle shall take effect on the designated 

5 transfer date. 

6 Subtitle F—Transfer of Functions 

7 and Personnel; Transitional 

8 Provisions 

9 SEC. 4601. TRANSFER OF CERTAIN FUNCTIONS. 

10 (a) IN GENERAL.—Except as provided in subsection 

11 (b), consumer financial protection functions are trans12 ferred as follows: 

13 (1) BOARD OF GOVERNORS.— 

14 (A) TRANSFER OF FUNCTIONS.—All con15 sumer financial protection functions of the 

16 Board of Governors are transferred to the Di17 rector. 

18 (B) BOARD OF GOVERNORS’ AUTHORITY.— 

19 The Director shall have all powers and duties 

20 that were vested in the Board of Governors, re21 lating to consumer financial protection func22 tions, on the day before the designated transfer 

23 date. 

24 (C) RETENTION OF CONSUMER ADVISORY

25 COUNCIL.— 


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1 (i) RETENTION AND CONTINU2 ATION.—Notwithstanding the transfer of 

3 functions under subparagraph (A), the 

4 Consumer Advisory Council established by 

5 the Board of Governors pursuant to sec6 tion 703(b) of Public Law 90–321 (15 

7 U.S.C. 1691b(b)) shall continue as an enti8 ty within the Federal Reserve System. 

9 (ii) ADDITIONAL FUNCTIONS.—In ad10 dition to the functions performed by the 

11 Consumer Advisory Council as of the des12 ignated transfer date, the Consumer Advi13 sory Council shall— 

14 (I) submit to the Director (and 

15 make available to the public) an an16 nual set of recommendations for con17 sumer protection regulations and meet 

18 with the Director to discuss the an19 nual recommendations; 

20 (II) meet with the Board of Gov21 ernors of the Federal Reserve System 

22 at least once a year and provide oral 

23 or written representations concerning 

24 matters within the jurisdiction of the 

25 Board; and 


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1 (III) call for information and 

2 make recommendations in regard to 

3 consumer protection regulations. 

4 (iii) RESPONSE TO RECOMMENDA5 TIONS.—When the Chair of the Federal 

6 Reserve testifies before Congress, the 

7 Chair shall also testify about the rec8 ommendations of the Consumer Advisory 

9 Council under clause (ii)(II) and its rec10 ommendations for consumer protection 

11 regulations. 

12 (2) COMPTROLLER OF THE CURRENCY.— 

13 (A) TRANSFER OF FUNCTIONS.—All con14 sumer financial protection functions of the 

15 Comptroller of the Currency are transferred to 

16 the Director. 

17 (B) COMPTROLLER’S AUTHORITY.—The 

18 Director shall have all powers and duties that 

19 were vested in the Comptroller of the Currency, 

20 relating to consumer financial protection func21 tions, on the day before the designated transfer 

22 date. 

23 (3) DIRECTOR OF THE OFFICE OF THRIFT SU24 PERVISION.— 


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1 (A) TRANSFER OF FUNCTIONS.—All con2 sumer financial protection functions of the Di3 rector of the Office of Thrift Supervision are 

4 transferred to the Director. 

5 (B) DIRECTOR’S AUTHORITY.—The Direc6 tor shall have all powers and duties that were 

7 vested in the Director of the Office of Thrift 

8 Supervision, relating to consumer financial pro9 tection functions, on the day before the des10 ignated transfer date. 

11 (4) FEDERAL DEPOSIT INSURANCE CORPORA12 TION.— 

13 (A) TRANSFER OF FUNCTIONS.—All con14 sumer financial protection functions of the Fed15 eral Deposit Insurance Corporation are trans16 ferred to the Director. 

17 (B) CORPORATION’S AUTHORITY.—The Di18 rector shall have all powers and duties that 

19 were vested in the Federal Deposit Insurance 

20 Corporation, relating to consumer financial pro21 tection functions, on the day before the des22 ignated transfer date. 

23 (5) FEDERAL TRADE COMMISSION.— 

24 (A) TRANSFER OF FUNCTIONS.—Except as 

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1 nancial protection functions of the Federal 

2 Trade Commission that are contained within 

3 the enumerated consumer laws are transferred 

4 to the Agency, except as provided in section 

5 4202(e). This transfer shall not be subject to 

6 the provisions of section 3503 of title 5, United 

7 States Code. 

8 (B) FEDERAL TRADE COMMISSION AU9 THORITY.—The Agency shall have all powers 

10 and duties that were vested in the Federal 

11 Trade Commission that were contained within 

12 the enumerated statutes, except as provided in 

13 section 4202(e), on the day before the des14 ignated transfer date. 

15 (6) NATIONAL CREDIT UNION ADMINISTRA16 TION.— 

17 (A) TRANSFER OF FUNCTIONS.—All con18 sumer financial protection functions of the Na19 tional Credit Union Administration are trans20 ferred to the Director. 

21 (B) NATIONAL CREDIT UNION ADMINIS22 TRATION’S AUTHORITY.—The Director shall 

23 have all powers and duties that were vested in 

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1 tions, on the day before the designated transfer 

2 date. 

3 (7) SECRETARY OF HOUSING AND URBAN DE4 VELOPMENT.— 

5 (A) TRANSFER OF FUNCTIONS.—All con6 sumer protection functions of the Secretary of 

7 Housing and Urban Development relating to 

8 the Real Estate Settlement Procedures Act of 

9 1974 and the Secure and Fair Enforcement for 

10 Mortgage Licensing Act of 2008 are transferred 

11 to the Director. 

12 (B) SECRETARY OF HUD’S AUTHORITY.— 

13 The Director shall have all powers and duties 

14 that were vested in the Secretary of Housing 

15 and Urban Development relating to the Real 

16 Estate Settlement Procedures Act of 1974 and 

17 the Secure and Fair Enforcement for Mortgage 

18 Licensing Act of 2008, on the day before the 

19 designated transfer date. 

20 (b) TRANSFERS OF FUNCTIONS SUBJECT TO EN21 FORCEMENT AUTHORITY REMAINING WITH TRANSFEROR

22 AGENCIES.—The transfers of functions in subsection (a) 

23 shall not affect the authority of the agencies identified in 

24 subsection (a) from initiating enforcement proceedings 


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1 under the circumstances described in paragraph (2) or (3) 

2 of section 4202(e). 

3 (c) TERMINATION OF AUTHORITY OF TRANSFEROR

4 AGENCIES TO COLLECT FEES FOR CONSUMER FINAN5 CIAL PROTECTION PURPOSES.—Authorities of the agen6 cies identified in subsection (a) to assess and collect fees 

7 to cover the cost of conducting consumer financial protec8 tion functions transferred under subsection (a) shall ter9 minate on the day before the designated transfer date. 

10 (d) CONSUMER FINANCIAL PROTECTION FUNCTIONS

11 DEFINED.—For purposes of this subtitle, the term ‘‘con12 sumer financial protection functions’’ means research, 

13 rulemaking, issuance of orders or guidance, supervision, 

14 examination, and enforcement activities, powers, and du15 ties relating to the provision of consumer financial prod16 ucts or services, including the authority to assess and col17 lect fees for those purposes, except that such term shall 

18 not include any such function relating to an agency’s re19 sponsibilities under the Community Reinvestment Act of 

20 1977. 

21 (e) EFFECTIVE DATE.—Subsections (a) and (b) shall 

22 take effect on the designated transfer date. 

23 SEC. 4602. DESIGNATED TRANSFER DATE. 

24 The designated transfer date shall be 180 days after 

25 the date of enactment of this title. 


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1 SEC. 4603. SAVINGS PROVISIONS. 

2 (a) BOARD OF GOVERNORS.— 

3 (1) EXISTING RIGHTS, DUTIES, AND OBLIGA4 TIONS NOT AFFECTED.—Section 4601(a)(1) shall 

5 not affect the validity of any right, duty, or obliga6 tion of the United States, the Board of Governors 

7 (or any Federal reserve bank), or any other person 

8 that— 

9 (A) arises under any provision of law relat10 ing to any consumer financial protection func11 tion of the Board of Governors transferred to 

12 the Director by this title; and 

13 (B) existed on the day before the des14 ignated transfer date. 

15 (2) CONTINUATION OF SUITS.—this title shall 

16 not abate any proceeding commenced by or against 

17 the Board of Governors (or any Federal reserve 

18 bank) before the designated transfer date with re19 spect to any consumer financial protection function 

20 of the Board of Governors (or any Federal reserve 

21 bank) transferred to the Director by this title, ex22 cept that the Director shall be substituted for the 

23 Board of Governors (or Federal reserve bank) as a 

24 party to any such proceeding as of the designated 

25 transfer date. 

26 (b) FEDERAL DEPOSIT INSURANCE CORPORATION.— 


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1 (1) EXISTING RIGHTS, DUTIES, AND OBLIGA2 TIONS NOT AFFECTED.—Section 4601(a)(4) shall 

3 not affect the validity of any right, duty, or obliga4 tion of the United States, the Federal Deposit In5 surance Corporation, the Board of Directors of that 

6 Corporation, or any other person, that— 

7 (A) arises under any provision of law relat8 ing to any consumer financial protection func9 tion of the Federal Deposit Insurance Corpora10 tion transferred to the Director by this title; 

11 and 

12 (B) existed on the day before the des13 ignated transfer date. 

14 (2) CONTINUATION OF SUITS.—this title shall 

15 not abate any proceeding commenced by or against 

16 the Federal Deposit Insurance Corporation (or the 

17 Board of Directors of that Corporation) before the 

18 designated transfer date with respect to any con19 sumer financial protection function of the Federal 

20 Deposit Insurance Corporation transferred to the 

21 Director by this title, except that the Director shall 

22 be substituted for the Federal Deposit Insurance 

23 Corporation (or Board of Directors) as a party to 

24 any such proceeding as of the designated transfer 

25 date. 


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1 (c) FEDERAL TRADE COMMISSION.—Section 

2 4601(a)(5) shall not affect the validity of any right, duty, 

3 or obligation of the United States, the Federal Trade 

4 Commission, or any other person, that— 

5 (1) arises under any provision of law relating to 

6 any consumer financial protection function of the 

7 Federal Trade Commission transferred to the Direc8 tor by this title; and 

9 (2) existed on the day before the designated 

10 transfer date. 

11 (d) NATIONAL CREDIT UNION ADMINISTRATION.— 

12 (1) EXISTING RIGHTS, DUTIES, AND OBLIGA13 TIONS NOT AFFECTED.—Section 4601(a)(6) shall 

14 not affect the validity of any right, duty, or obliga15 tion of the United States, the National Credit Union 

16 Administration, the National Credit Union Adminis17 tration Board, or any other person, that— 

18 (A) arises under any provision of law relat19 ing to any consumer financial protection func20 tion of the National Credit Union Administra21 tion transferred to the Director by this title; 

22 and 

23 (B) existed on the day before the des24 ignated transfer date. 


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1 (2) CONTINUATION OF SUITS.—this title shall 

2 not abate any proceeding commenced by or against 

3 the National Credit Union Administration (or the 

4 National Credit Union Administration Board) before 

5 the designated transfer date with respect to any con6 sumer financial protection function of the National 

7 Credit Union Administration transferred to the Di8 rector by this title, except that the Director shall be 

9 substituted for the National Credit Union Adminis10 tration (or National Credit Union Administration 

11 Board) as a party to any such proceeding as of the 

12 designated transfer date. 

13 (e) COMPTROLLER OF THE CURRENCY.— 

14 (1) EXISTING RIGHTS, DUTIES, AND OBLIGA15 TIONS NOT AFFECTED.—Section 4601(a)(2) shall 

16 not affect the validity of any right, duty, or obliga17 tion of the United States, the Comptroller of the 

18 Currency, the Office of the Comptroller of the Cur19 rency, or any other person, that— 

20 (A) arises under any provision of law relat21 ing to any consumer financial protection func22 tion of the Comptroller of the Currency trans23 ferred to the Director by this title; and 

24 (B) existed on the day before the des25 ignated transfer date. 


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1 (2) CONTINUATION OF SUITS.—this title shall 

2 not abate any proceeding commenced by or against 

3 the Comptroller of the Currency (or the Office of the 

4 Comptroller of the Currency) with respect to any 

5 consumer financial protection function of the Comp6 troller of the Currency transferred to the Director 

7 by this title before the designated transfer date, ex8 cept that the Director shall be substituted for the 

9 Comptroller of the Currency (or the Office of the 

10 Comptroller of the Currency) as a party to any such 

11 proceeding as of the designated transfer date. 

12 (f) DIRECTOR OF THE OFFICE OF THRIFT SUPER13 VISION.— 

14 (1) EXISTING RIGHTS, DUTIES, AND OBLIGA15 TIONS NOT AFFECTED.—Section 4601(a)(3) shall 

16 not affect the validity of any right, duty, or obliga17 tion of the United States, the Director of the Office 

18 of Thrift Supervision, the Office of Thrift Super19 vision, or any other person, that— 

20 (A) arises under any provision of law relat21 ing to any consumer financial protection func22 tion of the Director of the Office of Thrift Su23 pervision transferred to the Director by this 

24 title; and 


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1 (B) that existed on the day before the des2 ignated transfer date. 

3 (2) CONTINUATION OF SUITS.—this title shall 

4 not abate any proceeding commenced by or against 

5 the Director of the Office of Thrift Supervision (or 

6 the Office of Thrift Supervision) with respect to any 

7 consumer financial protection function of the Direc8 tor of the Office of Thrift Supervision transferred to 

9 the Director by this title before the designated 

10 transfer date, except that the Director shall be sub11 stituted for the Director (or the Office of Thrift Su12 pervision) as a party to any such proceeding as of 

13 the designated transfer date. 

14 (g) SECRETARY OF HOUSING AND URBAN DEVELOP15 MENT.— 

16 (1) EXISTING RIGHTS, DUTIES, AND OBLIGA17 TIONS NOT AFFECTED.—Section 4601(a)(7) shall 

18 not affect the validity of any right, duty, or obliga19 tion of the United States, the Secretary of Housing 

20 and Urban Development, the Department of Hous21 ing and Urban Development, or any other person, 

22 that— 

23 (A) arises under any provision of law relat24 ing to any function of the Secretary of Housing 

25 and Urban Development under the Real Estate 


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1 Settlement Procedures Act of 1974 and the Se2 cure and Fair Enforcement for Mortgage Li3 censing Act of 2008 transferred to the Director 

4 by this title; and 

5 (B) that existed on the day before the des6 ignated transfer date. 

7 (2) CONTINUATION OF SUITS.—this title shall 

8 not abate any proceeding commenced by or against 

9 the Secretary of Housing and Urban Development 

10 (or the Department of Housing and Urban Develop11 ment) with respect to any consumer financial protec12 tion function of the Secretary of Housing and Urban 

13 Development transferred to the Director by this title 

14 before the designated transfer date, except that the 

15 Director shall be substituted for the Secretary of 

16 Housing and Urban Development (or such Depart17 ment) as a party to any such proceeding as of the 

18 designated transfer date. 

19 (h) CONTINUATION OF EXISTING ORDERS, REGULA20 TIONS, DETERMINATIONS, AGREEMENTS, AND RESOLU21 TIONS.—All orders, resolutions, determinations, agree22 ments, and regulations that have been issued, made, pre23 scribed, or allowed to become effective by the Board of 

24 Governors (or any Federal reserve bank), the Federal De25 posit Insurance Corporation, the Federal Trade CommisVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01075 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 sion, the National Credit Union Administration, the 

2 Comptroller of the Currency, the Director of the Office 

3 of Thrift Supervision, the Secretary of Housing and 

4 Urban Development, or by a court of competent jurisdic5 tion, in the performance of consumer financial protection 

6 functions that are transferred by this title and that are 

7 in effect on the day before the designated transfer date, 

8 shall continue in effect according to the terms of those 

9 orders, resolutions, determinations, agreements, and regu10 lations, and shall be enforceable by or against the Director 

11 until modified, terminated, set aside, or superseded in ac12 cordance with applicable law by the Director, by any court 

13 of competent jurisdiction, or by operation of law. 

14 (i) IDENTIFICATION OF REGULATIONS CONTIN15 UED.—Not later than the designated transfer date, the 

16 Director— 

17 (1) shall, after consultation with the Chairman 

18 of the Board of Governors, the Chairperson of the 

19 Federal Deposit Insurance Corporation, the Chair20 man of the Federal Trade Commission, the Chair21 man of the National Credit Union Administration 

22 Board, the Comptroller of the Currency, the Direc23 tor of the Office of Thrift Supervision, and the Sec24 retary of Housing and Urban Development identify 


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1 the regulations continued under subsection (g) that 

2 will be enforced by the Director; and 

3 (2) shall publish a list of such regulations in 

4 the Federal Register. 

5 (j) STATUS OF REGULATIONS PROPOSED OR NOT

6 YET EFFECTIVE.— 

7 (1) PROPOSED REGULATIONS.—Any proposed 

8 regulation of the Board of Governors, the Federal 

9 Deposit Insurance Corporation, the Federal Trade 

10 Commission, the National Credit Union Administra11 tion, the Comptroller of the Currency, the Director 

12 of the Office of Thrift Supervision, or the Secretary 

13 of Housing and Urban Development which that 

14 agency, in performing consumer financial protection 

15 functions transferred by this title, has proposed be16 fore the designated transfer date but has not pub17 lished as a final regulation before that date, shall be 

18 deemed to be a proposed regulation of the Director. 

19 (2) REGULATIONS NOT YET EFFECTIVE.—Any 

20 interim or final regulation of Board of Governors, 

21 the Federal Deposit Insurance Corporation, the Fed22 eral Trade Commission, the National Credit Union 

23 Administration, the Comptroller of the Currency, the 

24 Director of the Office of Thrift Supervision, or the 

25 Secretary of Housing and Urban Development which 


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1 that agency, in performing consumer financial pro2 tection functions transferred by this title, has pub3 lished before the designated transfer date but which 

4 has not become effective before that date, shall take 

5 effect as a regulation of the Director according to its 

6 terms. 

7 SEC. 4604. TRANSFER OF CERTAIN PERSONNEL. 

8 (a) IN GENERAL.— 

9 (1) CERTAIN FEDERAL RESERVE SYSTEM EM10 PLOYEES TRANSFERRED.— 

11 (A) IDENTIFYING EMPLOYEES FOR TRANS12 FER.—The Director and the Board of Gov13 ernors shall— 

14 (i) jointly determine the number of 

15 employees of the Board necessary to per16 form or support the consumer financial 

17 protection functions of the Board of Gov18 ernors that are transferred to the Director 

19 by this title; and 

20 (ii) consistent with the number deter21 mined under clause (i), jointly identify em22 ployees of the Board of Governors for 

23 transfer to the Agency in a manner that 

24 the Director and the Board of Governors, 

25 in their sole discretion, deem equitable. 


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1 (B) IDENTIFIED EMPLOYEES TRANS2 FERRED.—All employees of the Board of Gov3 ernors identified under subparagraph (A)(ii) 

4 shall be transferred to the Agency for employ5 ment. 

6 (C) FEDERAL RESERVE BANK EMPLOY7 EES.—Employees of any Federal reserve bank 

8 who, on the day before the designated transfer 

9 date, are performing consumer financial protec10 tion functions on behalf of the Board of Gov11 ernors shall be treated as employees of the 

12 Board of Governors for purposes of subpara13 graphs (A) and (B). 

14 (2) CERTAIN FDIC EMPLOYEES TRANS15 FERRED.— 

16 (A) IDENTIFYING EMPLOYEES FOR TRANS17 FER.—The Director and the Board of Directors 

18 of the Federal Deposit Insurance Corporation 

19 shall— 

20 (i) jointly determine the number of 

21 employees of that Corporation necessary to 

22 perform or support the consumer financial 

23 protection functions of the Corporation 

24 that are transferred to the Director by this 

25 title; and 


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1 (ii) consistent with the number deter2 mined under clause (i), jointly identify em3 ployees of the Corporation for transfer to 

4 the Agency in a manner that the Director 

5 and the Board of Directors of the Corpora6 tion, in their discretion, deem equitable. 

7 (B) IDENTIFIED EMPLOYEES TRANS8 FERRED.—All employees of the Corporation 

9 identified under subparagraph (A)(ii) shall be 

10 transferred to the Agency for employment. 

11 (3) CERTAIN NCUA EMPLOYEES TRANS12 FERRED.— 

13 (A) IDENTIFYING EMPLOYEES FOR TRANS14 FER.—The Director and the National Credit 

15 Union Administration Board shall— 

16 (i) jointly determine the number of 

17 employees of the National Credit Union 

18 Administration necessary to perform or 

19 support the consumer financial protection 

20 functions of the National Credit Union Ad21 ministration that are transferred to the Di22 rector by this title; and 

23 (ii) consistent with the number deter24 mined under clause (i), jointly identify em25 ployees of the National Credit Union AdVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01080 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ministration for transfer to the Agency in 

2 a manner that the Director and the Na3 tional Credit Union Administration Board, 

4 in their discretion, deem equitable. 

5 (B) IDENTIFIED EMPLOYEES TRANS6 FERRED.—All employees of the National Credit 

7 Union Administration identified under subpara8 graph (A)(ii) shall be transferred to the Agency 

9 for employment. 

10 (4) CERTAIN HUD EMPLOYEES TRANS11 FERRED.— 

12 (A) IDENTIFYING EMPLOYEES FOR TRANS13 FER.—The Director and the Secretary of Hous14 ing and Urban Development shall— 

15 (i) jointly determine the number of 

16 employees of the Department of Housing 

17 and Urban Development necessary to per18 form or support the consumer financial 

19 protection functions of the Secretary of 

20 Housing and Urban Development that are 

21 transferred to the Director by this title; 

22 and 

23 (ii) consistent with the number deter24 mined under clause (i), jointly identify em25 ployees of the Department of Housing and 


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1 Urban Development for transfer to the 

2 Agency in a manner that the Director and 

3 the Secretary of Housing and Urban De4 velopment, in their discretion, deem equi5 table. 

6 (B) IDENTIFIED EMPLOYEES TRANS7 FERRED.—All employees of the Department of 

8 Housing and Urban Development identified 

9 under subparagraph (A)(ii) shall be transferred 

10 to the Agency for employment. 

11 (5) APPOINTMENT AUTHORITY FOR EXCEPTED

12 SERVICE AND SENIOR EXECUTIVE SERVICE TRANS13 FERRED.— 

14 (A) IN GENERAL.—In the case of employ15 ees occupying positions in the excepted service 

16 or the Senior Executive Service, any appoint17 ment authority established pursuant to law or 

18 regulations of the Director of the Office of Per19 sonnel Management for filling such positions 

20 shall be transferred, subject to subparagraph 

21 (B). 

22 (B) DECLINING TRANSFERS ALLOWED.— 

23 An agency or entity may decline to make a 

24 transfer of authority under subparagraph (A) 

25 (and the employees appointed pursuant to such 


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1 subparagraph) to the extent that such authority 

2 relates to positions excepted from the competi3 tive service because of their confidential, policy4 making, policy-determining, or policy-advocating 

5 character, and non-career positions in the Sen6 ior Executive Service (within the meaning of 

7 section 3132(a)(7) of title 5, United States 

8 Code). 

9 (b) TIMING OF TRANSFERS AND POSITION ASSIGN10 MENTS.—Each employee to be transferred under this sec11 tion shall— 

12 (1) be transferred not later than 90 days after 

13 the designated transfer date; and 

14 (2) receive notice of such employee’s position 

15 assignment not later than 120 days after the effec16 tive date of the employee’s transfer. 

17 (c) TRANSFER OF FUNCTION.— 

18 (1) IN GENERAL.—Notwithstanding any other 

19 provision of law, the transfer of employees shall be 

20 deemed a transfer of functions for the purpose of 

21 section 3503 of title 5, United States Code. 

22 (2) PRIORITY OF THIS TITLE.—If any provi23 sions of this title conflict with any protection pro24 vided to transferred employees under section 3503 of 


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1 title 5, United States Code, the provisions of this 

2 title shall control. 

3 (d) EQUAL STATUS AND TENURE POSITIONS.— 

4 (1) EMPLOYEES TRANSFERRED FROM FDIC, 

5 FTC, HUD, NCUA, OCC, AND OTS.—Each employee 

6 transferred from the Federal Deposit Insurance Cor7 poration, the Federal Trade Commission, the De8 partment of Housing and Urban Development, the 

9 National Credit Union Administration, the Office of 

10 the Comptroller of the Currency, or the Office of 

11 Thrift Supervision shall be placed in a position at 

12 the Agency with the same status and tenure as he 

13 or she held on the day before the designated transfer 

14 date. 

15 (2) EMPLOYEES TRANSFERRED FROM THE

16 FEDERAL RESERVE SYSTEM.— 

17 (A) COMPARABILITY.—Each employee 

18 transferred from the Board of Governors or 

19 from a Federal reserve bank shall be placed in 

20 a position with the same status and tenure as 

21 that of employees transferring to the Agency 

22 from the Office of the Comptroller of the Cur23 rency who perform similar functions and have 

24 similar periods of service. 


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1 (B) SERVICE PERIODS CREDITED.—For 

2 purposes of this paragraph, periods of service 

3 with the Board of Governors or a Federal re4 serve bank shall be credited as periods of serv5 ice with a Federal agency. 

6 (e) ADDITIONAL CERTIFICATION REQUIREMENTS

7 LIMITED.—Examiners transferred to the Agency shall not 

8 be subject to any additional certification requirements be9 fore being placed in a comparable examiner’s position at 

10 the Agency examining the same types of institutions as 

11 the transferred examiners examined before such examiners 

12 were transferred. 

13 (f) PERSONNEL ACTIONS LIMITED.— 

14 (1) 5-YEAR PROTECTION.—Except as provided 

15 in paragraph (2), each transferred employee holding 

16 a permanent position on the day before the des17 ignated transfer date shall not, during the 5-year pe18 riod beginning on the designated transfer date, be 

19 involuntarily separated, or involuntarily reassigned 

20 outside such transferred employee’s local locality pay 

21 area as defined by the Director of the Office of Per22 sonnel Management. 

23 (2) EXCEPTIONS.—Paragraph (1) shall not be 

24 construed as limiting the right of the Director to— 


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1 (A) separate an employee for cause or for 

2 unacceptable performance; 

3 (B) terminate an appointment to a position 

4 excepted from the competitive service because of 

5 its confidential policy-making, policy-deter6 mining, or policy-advocating character; or 

7 (C) reassign a supervisory employee out8 side such employee’s locality pay area as de9 fined by the Director of the Office of Personnel 

10 Management when the Director determines that 

11 the reassignment is necessary for the efficient 

12 operation of the Agency. 

13 (g) PAY.— 

14 (1) 1-YEAR PROTECTION.—Except as provided 

15 in paragraph (2), each transferred employee shall, 

16 during the 1-year period beginning on the des17 ignated transfer date, receive pay at a rate not less 

18 than the basic rate of pay (including any geographic 

19 differential) that the employee received during the 1- 

20 year period immediately before the transfer. 

21 (2) EXCEPTIONS.—Paragraph (1) shall not be 

22 construed as limiting the right of the Agency to re23 duce the rate of basic pay of a transferred em24 ployee— 

25 (A) for cause; 


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1 (B) for unacceptable performance; or 

2 (C) with the employee’s consent. 

3 (3) PROTECTION ONLY WHILE EMPLOYED.— 

4 Paragraph (1) applies to a transferred employee 

5 only while that employee remains employed by the 

6 Agency. 

7 (4) PAY INCREASES PERMITTED.—Paragraph 

8 (1) shall not be construed as limiting the authority 

9 of the Agency to increase a transferred employee’s 

10 pay. 

11 (h) REORGANIZATION.— 

12 (1) BETWEEN 1ST AND 3RD YEAR.— 

13 (A) IN GENERAL.—If the Agency deter14 mines, during the period beginning 1 year after 

15 the designated transfer date and ending 3 years 

16 after the designated transfer date, that a reor17 ganization of the staff of the Agency is re18 quired— 

19 (i) that reorganization shall be 

20 deemed a ‘‘major reorganization’’ for pur21 poses of affording affected employees re22 tirement under section 8336(d)(2) or 

23 8414(b)(1)(B) of title 5, United States 

24 Code; 


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1 (ii) before the reorganization occurs, 

2 all employees in the same locality pay area 

3 as defined by the Director of the Office of 

4 Personnel Management shall be placed in a 

5 uniform position classification system; and 

6 (iii) any resulting reduction in force 

7 shall be governed by the provisions of 

8 chapter 35 of title 5, United States Code, 

9 except that the Agency shall— 

10 (I) establish competitive areas 

11 (as that term is defined in regulations 

12 issued by the Director of the Office of 

13 Personnel Management) to include at 

14 a minimum all employees in the same 

15 locality pay area as defined by the Of16 fice of Personnel Management; 

17 (II) establish competitive levels 

18 (as that term is defined in regulations 

19 issued by the Director of the Office of 

20 Personnel Management) without re21 gard to whether the particular em22 ployees have been appointed to posi23 tions in the competitive service or the 

24 excepted service; and 


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1 (III) afford employees appointed 

2 to positions in the excepted service 

3 (other than to a position excepted 

4 from the competitive service because 

5 of its confidential policy-making, pol6 icy-determining, or policy-advocating 

7 character) the same assignment rights 

8 to positions within the Agency as em9 ployees appointed to positions in the 

10 competitive service. 

11 (B) SERVICE CREDIT FOR REDUCTIONS IN

12 FORCE.—For purposes of this paragraph, peri13 ods of service with the Board of Governors, a 

14 Federal reserve bank, the Federal Deposit In15 surance Corporation, the National Credit Union 

16 Administration, or the Federal Home Loan 

17 Bank Board or any successor to such Board 

18 shall be credited as periods of service with a 

19 Federal agency. 

20 (2) AFTER 3RD YEAR.— 

21 (A) IN GENERAL.—If the Agency deter22 mines, at any time after the 3-year period be23 ginning on the designated transfer date, that a 

24 reorganization of the staff of the Agency is re25 quired, any resulting reduction in force shall be 


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1 governed by the provisions of chapter 35 of title 

2 5, United States Code, except that the Agency 

3 shall establish competitive levels (as that term 

4 is defined in regulations issued by the Office of 

5 Personnel Management) without regard to 

6 types of appointment held by particular employ7 ees transferred under this section. 

8 (B) SERVICE CREDIT FOR REDUCTIONS IN

9 FORCE.—For purposes of this paragraph, peri10 ods of service with the Board of Governors, a 

11 Federal reserve bank, the Federal Deposit In12 surance Corporation, the National Credit Union 

13 Administration, or the Federal Home Loan 

14 Bank Board or any successor to such Board 

15 shall be credited as periods of service with a 

16 Federal agency. 

17 (i) BENEFITS.— 

18 (1) RETIREMENT BENEFITS FOR TRANSFERRED

19 EMPLOYEES.— 

20 (A) IN GENERAL.— 

21 (i) CONTINUATION OF EXISTING RE22 TIREMENT PLAN.—Except as provided in 

23 subparagraph (B), each transferred em24 ployee shall remain enrolled in such em25 ployee’s existing retirement plan as long as 


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1 the employee remains employed by the 

2 Agency. 

3 (ii) EMPLOYER’S CONTRIBUTION.— 

4 The Director shall pay any employer con5 tributions to the existing retirement plan 

6 of each transferred employee as required 

7 under that plan. 

8 (B) OPTION FOR EMPLOYEES TRANS9 FERRED FROM FEDERAL RESERVE SYSTEM TO

10 BE SUBJECT TO FEDERAL EMPLOYEE RETIRE11 MENT PROGRAM.— 

12 (i) ELECTION.—Any transferred em13 ployee who was enrolled in a Federal Re14 serve System retirement plan on the day 

15 before the date of the employee’s transfer 

16 to the Agency may, during the period be17 ginning 6 months after the designated 

18 transfer date and ending 1 year after the 

19 designated transfer date, elect to be sub20 ject to the Federal employee retirement 

21 program. 

22 (ii) EFFECTIVE DATE OF COV23 ERAGE.—For any employee making an 

24 election under clause (i), coverage by the 

25 Federal employee retirement program shall 


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1 begin 1 year after the designated transfer 

2 date. 

3 (C) AGENCY PARTICIPATION IN FEDERAL

4 RESERVE SYSTEM RETIREMENT PLAN.— 

5 (i) SEPARATE ACCOUNT IN FEDERAL

6 RESERVE SYSTEM RETIREMENT PLAN ES7 TABLISHED.—A separate account in the 

8 Federal Reserve System retirement plan 

9 shall be established for Agency employees 

10 who do not make the election under sub11 paragraph (B). 

12 (ii) FUNDS ATTRIBUTABLE TO TRANS13 FERRED EMPLOYEES REMAINING IN FED14 ERAL RESERVE SYSTEM RETIREMENT

15 PLAN TRANSFERRED.—The proportionate 

16 share of funds in the Federal Reserve Sys17 tem retirement plan, including the propor18 tionate share of any funding surplus in 

19 that plan, attributable to a transferred em20 ployee who does not make the election 

21 under subparagraph (B), shall be trans22 ferred to the account established under 

23 clause (i). 

24 (iii) EMPLOYER CONTRIBUTIONS DE25 POSITED.—The Director shall deposit into 


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1 the account established under clause (i) 

2 the employer contributions that the Agency 

3 makes on behalf of employees who do not 

4 make the election under subparagraph (B). 

5 (iv) ACCOUNT ADMINISTRATION.—The 

6 Director shall administer the account es7 tablished under clause (i) as a partici8 pating employer in the Federal Reserve 

9 System retirement plan. 

10 (D) DEFINITIONS.—For purposes of this 

11 paragraph, the following definitions shall apply: 

12 (i) EXISTING RETIREMENT PLAN.— 

13 The term ‘‘existing retirement plan’’ 

14 means, with respect to any employee trans15 ferred under this section, the particular re16 tirement plan (including the Financial In17 stitutions Retirement Fund) and any asso18 ciated thrift savings plan of the agency or 

19 Federal reserve bank from which the em20 ployee was transferred, which the employee 

21 was enrolled in on the day before the des22 ignated transfer date. 

23 (ii) FEDERAL EMPLOYEE RETIRE24 MENT PLAN.—The term ‘‘Federal employee 

25 retirement program’’ means the retirement 


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1 program for Federal employees established 

2 by chapters 83 and 84 of title 5, United 

3 States Code. 

4 (2) BENEFITS OTHER THAN RETIREMENT BEN5 EFITS FOR TRANSFERRED EMPLOYEES.— 

6 (A) DURING 1ST YEAR.— 

7 (i) EXISTING PLANS CONTINUE.— 

8 Each transferred employee may, for 1 year 

9 after the designated transfer date, retain 

10 membership in any other employee benefit 

11 program of the agency or bank from which 

12 the employee transferred, including a den13 tal, vision, long-term care, or life insurance 

14 program, to which the employee belonged 

15 on the day before the designated transfer 

16 date. 

17 (ii) EMPLOYER’S CONTRIBUTION.— 

18 The Director shall reimburse the agency or 

19 bank from which an employee was trans20 ferred for any cost incurred by that agency 

21 or bank in continuing to extend coverage 

22 in the benefit program to the employee as 

23 required under that program or negotiated 

24 agreements. 


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1 (B) DENTAL, VISION, OR LIFE INSURANCE

2 AFTER 1ST YEAR.—If, after the 1-year period 

3 beginning on the designated transfer date, the 

4 Director decides not to continue participation in 

5 any dental, vision, or life insurance program of 

6 an agency or bank from which employees trans7 ferred, a transferred employee who is a member 

8 of such a program may, before the Director’s 

9 decision takes effect, elect to enroll, without re10 gard to any regularly scheduled open season, 

11 in— 

12 (i) the enhanced dental benefits estab13 lished by chapter 89A of title 5, United 

14 States Code; 

15 (ii) the enhanced vision benefits estab16 lished by chapter 89B of title 5, United 

17 States Code; and 

18 (iii) the Federal Employees Group 

19 Life Insurance Program established by 

20 chapter 87 of title 5, United States Code, 

21 without regard to any requirement of in22 surability. 

23 (C) LONG-TERM CARE INSURANCE AFTER

24 1ST YEAR.—If, after the 1-year period begin25 ning on the designated transfer date, the DirecVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01095 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tor decides not to continue participation in any 

2 long-term care insurance program of an agency 

3 or bank from which employees transferred, a 

4 transferred employee who is a member of such 

5 a program may, before the Director’s decision 

6 takes effect, elect to apply for coverage under 

7 the Federal Long Term Care Insurance Pro8 gram established by chapter 90 of title 5, 

9 United States Code, under the underwriting re10 quirements applicable to a new active workforce 

11 member (as defined in Part 875, title 5, Code 

12 of Federal Regulations). 

13 (D) EMPLOYEE’S CONTRIBUTION.—An in14 dividual enrolled in the Federal Employees 

15 Health Benefits program shall pay any em16 ployee contribution required by the plan. 

17 (E) ADDITIONAL FUNDING.—The Director 

18 shall transfer to the Federal Employees Health 

19 Benefits Fund established under section 8909 

20 of title 5, United States Code, an amount deter21 mined by the Director of the Office of Per22 sonnel Management, after consultation with the 

23 Director and the Director of the Office of Man24 agement and Budget, to be necessary to reimVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01096 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 burse the Fund for the cost to the Fund of pro2 viding benefits under this subparagraph. 

3 (F) CREDIT FOR TIME ENROLLED IN

4 OTHER PLANS.—For employees transferred 

5 under this section, enrollment in a health bene6 fits plan administered by the Comptroller of the 

7 Currency, the Director of the Office of Thrift 

8 Supervision, the Federal Deposit Insurance 

9 Corporation, the National Credit Union Admin10 istration, the Board of Governors, the Secretary 

11 of Housing and Urban Development, or a Fed12 eral reserve bank, immediately before enroll13 ment in a health benefits plan under chapter 89 

14 of title 5, United States Code, shall be consid15 ered as enrollment in a health benefits plan 

16 under that chapter for purposes of section 

17 8905(b)(1)(A) of title 5, United States Code. 

18 (G) SPECIAL PROVISIONS TO ENSURE CON19 TINUATION OF LIFE INSURANCE BENEFITS.— 

20 (i) IN GENERAL.—An annuitant (as 

21 defined in section 8901(3) of title 5, 

22 United States Code) who is enrolled in a 

23 life insurance plan administered by the 

24 Board of Governors of the Federal Reserve 

25 System, the Federal Deposit Insurance 


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1 Corporation, the Federal Trade Commis2 sion, the Secretary of Housing and Urban 

3 Development, the National Credit Union 

4 Administration, the Comptroller of the 

5 Currency, or the Director of the Office of 

6 Thrift Supervision on the day before the 

7 designated transfer date shall be eligible 

8 for coverage by a life insurance plan under 

9 sections 8706(b), 8714a, 8714b, and 

10 8714c of title 5, United States Code, or in 

11 a life insurance plan established by the 

12 Agency, without regard to any regularly 

13 scheduled open season and requirement of 

14 insurability. 

15 (ii) EMPLOYEE’S CONTRIBUTION.—An 

16 individual enrolled in a life insurance plan 

17 under this clause shall pay any employee 

18 contribution required by the plan. 

19 (iii) ADDITIONAL FUNDING.—The Di20 rector shall transfer to the Employees’ Life 

21 Insurance Fund established under section 

22 8714 of title 5, United States Code, an 

23 amount determined by the Director of the 

24 Office of Personnel Management, after 

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1 rector of the Office of Management and 

2 Budget, to be necessary to reimburse the 

3 Fund for the cost to the Fund of providing 

4 benefits under this subparagraph not oth5 erwise paid for by the employee under 

6 clause (ii). 

7 (iv) CREDIT FOR TIME ENROLLED IN

8 OTHER PLANS.—For employees transferred 

9 under this section, enrollment in a life in10 surance plan administered by the Board of 

11 Governors, the Federal Deposit Insurance 

12 Corporation, the Federal Trade Commis13 sion, the Secretary of Housing and Urban 

14 Development, the National Credit Union 

15 Administration, the Comptroller of the 

16 Currency, the Director of the Office of 

17 Thrift Supervision, or a Federal reserve 

18 bank immediately before enrollment in a 

19 life insurance plan under chapter 87 of 

20 title 5, United States Code, shall be con21 sidered as enrollment in a life insurance 

22 plan under that chapter for purposes of 

23 section 8706(b)(1)(A) of title 5, United 

24 States Code. 


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1 (j) IMPLEMENTATION OF UNIFORM PAY AND CLASSI2 FICATION SYSTEM.—Not later than 2 years after the des3 ignated transfer date, the Director shall implement a uni4 form pay and classification system for all transferred em5 ployees. 

6 (k) EQUITABLE TREATMENT.—In administering the 

7 provisions of this section, the Director— 

8 (1) shall take no action that would unfairly dis9 advantage transferred employees relative to each 

10 other based on their prior employment by the Board 

11 of Governors, the Federal Deposit Insurance Cor12 poration, the Federal Trade Commission, the Sec13 retary of Housing and Urban Development, the Na14 tional Credit Union Administration, the Office of the 

15 Comptroller of the Currency, the Office of Thrift 

16 Supervision, a Federal reserve bank, the Federal 

17 Home Loan Bank Board or any successor to such 

18 Board, a Federal home loan bank, or a joint office 

19 of the Federal home loan banks; and 

20 (2) may take such action as is appropriate in 

21 individual cases so that employees transferred under 

22 this section receive equitable treatment, with respect 

23 to those employees’ status, tenure, pay, benefits 

24 (other than benefits under programs administered by 

25 the Office of Personnel Management), and accrued 


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1 leave or vacation time, for prior periods of service 

2 with any Federal agency, including the Board of 

3 Governors of the Federal Reserve System, the Fed4 eral Deposit Insurance Corporation, the Federal 

5 Trade Commission, the Department of Housing and 

6 Urban Development, the National Credit Union Ad7 ministration, the Office of the Comptroller of the 

8 Currency, the Office of Thrift Supervision, a Federal 

9 reserve bank, the Federal Home Loan Bank Board 

10 or any successor to such Board, a Federal home 

11 loan bank, or a joint office of the Federal home loan 

12 banks. 

13 (l) IMPLEMENTATION.—In implementing the provi14 sions of this section, the Director shall work with the Di15 rector of the Office of Personnel Management and other 

16 entities with expertise in matters related to employment 

17 to ensure a fair and orderly transition for affected employ18 ees. 

19 SEC. 4605. INCIDENTAL TRANSFERS. 

20 (a) INCIDENTAL TRANSFERS AUTHORIZED.—The Di21 rector of the Office of Management and Budget, in con22 sultation with the Secretary, shall make such additional 

23 incidental transfers and dispositions of assets and liabil24 ities held, used, arising from, available, or to be made 

25 available, in connection with the functions transferred by 


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1 this title, as the Director may determine necessary to ac2 complish the purposes of this title. 

3 (b) SUNSET.—The authority provided in this section 

4 shall terminate 5 years after the date of the enactment 

5 of this title. 

6 SEC. 4606. INTERIM AUTHORITY OF THE SECRETARY. 

7 (a) IN GENERAL.—The Secretary is authorized to 

8 perform the functions of the Director under this subtitle 

9 until the appointment of the Director in accordance with 

10 section 4102. 

11 (b) INTERIM ADMINISTRATIVE SERVICES BY THE

12 DEPARTMENT OF THE TREASURY.—The Secretary of the 

13 Treasury may provide administrative services necessary to 

14 support the Agency during the 24-month period beginning 

15 on the date of the enactment of this title. 

16 (c) INTERIM FUNDING FOR THE DEPARTMENT OF

17 THE TREASURY.—For the purposes of carrying out the 

18 authorities granted in this section, there are appropriated 

19 to the Secretary of the Treasury such sums as are nec20 essary. Notwithstanding any other provision of law, such 

21 amounts shall be subject to apportionment under section 

22 1517 of title 31, United States Code, and restrictions that 

23 generally apply to the use of appropriated funds in title 

24 31, United States Code, and other laws. 


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1 Subtitle G—Regulatory 

2 Improvements 

3 SEC. 4701. COLLECTION OF DEPOSIT ACCOUNT DATA. 

4 (a) PURPOSE.—The purpose of this section is to pro5 mote awareness and understanding of the access of indi6 viduals and communities to financial services, and to iden7 tify business and community development needs and op8 portunities. 

9 (b) IN GENERAL.— 

10 (1) RECORDS REQUIRED.—For each branch, 

11 automated teller machine at which deposits are ac12 cepted, and other deposit taking service facility with 

13 respect to any financial institution, the financial in14 stitution shall maintain records of the number and 

15 dollar amounts of deposit accounts of customers. 

16 (2) GEO-CODED ADDRESSES OF DEPOSITORS.— 

17 The customers’ addresses maintained pursuant to 

18 paragraph (1) shall be geo-coded so that data shall 

19 be collected regarding the census tracts of the resi20 dence or business location of the customers. 

21 (3) IDENTIFICATION OF DEPOSITOR TYPE.—In 

22 maintaining records on any deposit account under 

23 this section, the financial institution shall also 

24 record whether the deposit account is for a residen25 tial or commercial customer. 


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1 (4) PUBLIC AVAILABILITY.— 

2 (A) IN GENERAL.—The following informa3 tion shall be publicly available on an annual 

4 basis— 

5 (i) the address and census tracts of 

6 each branch, automated teller machine at 

7 which deposits are accepted, and other de8 posit taking service facility with respect to 

9 any financial institution; 

10 (ii) the type of deposit account includ11 ing whether the account was a checking or 

12 savings account; 

13 (iii) data on the number and dollar 

14 amounts of the accounts, presented by cen15 sus tract location of the residential and 

16 commercial customers; and 

17 (iv) any other data deemed appro18 priate by the Director. 

19 (B) PROTECTION OF IDENTITY.—In the 

20 publicly available data, any personally identifi21 able data element shall be removed so as to pro22 tect the identities of the commercial and resi23 dential customers. 

24 (c) AVAILABILITY OF INFORMATION.— 


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1 (1) SUBMISSION TO AGENCIES.—The data re2 quired to be compiled and maintained under this 

3 section by any financial institution shall be sub4 mitted annually to the Agency, or to a Federal bank5 ing agency, in accordance with regulations pre6 scribed by the Director. 

7 (2) AVAILABILITY OF INFORMATION.—Informa8 tion compiled and maintained under this section 

9 shall be retained for not less than 3 years after the 

10 date of preparation and shall be made available to 

11 the public, upon request, in the form required under 

12 regulations prescribed by the Director. 

13 (d) AGENCY USE.—The Director— 

14 (1) shall assess the distribution of residential 

15 and commercial accounts at such financial institu16 tion across income and minority level of census 

17 tracts; and 

18 (2) may use the data for any other purpose as 

19 permitted by law. 

20 (e) REGULATIONS AND GUIDANCE.— 

21 (1) IN GENERAL.—The Director shall prescribe 

22 such regulations and issue guidance as may be nec23 essary to carry out, enforce, and compile data pursu24 ant to this section. 


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1 (2) DATA COMPILATION REGULATIONS.—The 

2 Director shall prescribe regulations regarding the 

3 provision of data compiled under this section to the 

4 Federal banking agencies to carry out the purposes 

5 of this section and shall issue guidance to financial 

6 institutions regarding measures to facilitate compli7 ance with the this section and the requirements of 

8 regulations prescribed under this section. 

9 (f) DEFINITIONS.—For purposes of this section, the 

10 following definitions shall apply: 

11 (1) AGENCY.—The term ‘‘Agency’’ means the 

12 Consumer Financial Protection Agency. 

13 (2) CREDIT UNION.—The term ‘‘credit union’’ 

14 means a Federal credit union or a State-chartered 

15 credit union (as such terms are defined in section 

16 101 of the Federal Credit Union Act). 

17 (3) DEPOSIT ACCOUNT.—The term ‘‘deposit ac18 count’’ includes any checking account, savings ac19 count, credit union share account, and other type of 

20 account as defined by the Director. 

21 (4) DIRECTOR.—The term ‘‘Director’’ means 

22 the Director of the Agency. 

23 (5) FEDERAL BANKING AGENCY.—The term 

24 ‘‘Federal banking agency’’ means the Board of Gov25 ernors of the Federal Reserve System, the head of 


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1 the agency responsible for chartering and regulating 

2 national banks, the Director of the Office of Thrift 

3 Supervision, the Federal Deposit Insurance Corpora4 tion, and the National Credit Union Administration; 

5 and the term ‘‘Federal banking agencies’’ means all 

6 of those agencies. 

7 (6) FINANCIAL INSTITUTION.—The term ‘‘fi8 nancial institution’’— 

9 (A) has the meaning given to the term ‘‘in10 sured depository institution’’ in section 3(c)(2) 

11 of the Federal Deposit Insurance Act; and 

12 (B) includes any credit union. 

13 (g) EFFECTIVE DATE.—This section shall take effect 

14 on the designated transfer date. 

15 SEC. 4702. SMALL BUSINESS DATA COLLECTION. 

16 (a) IN GENERAL.—The Equal Credit Opportunity 

17 Act (15 U.S.C. 1691 et seq.) is amended by inserting after 

18 section 704A the following new section: 

19 ‘‘§ 704B. Small business loan data collection 

20 ‘‘(a) PURPOSE.—The purpose of this section is to fa21 cilitate enforcement of fair lending laws and enable com22 munities, governmental entities, and creditors to identify 

23 business and community development needs and opportu24 nities of women- and minority-owned small businesses. 


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1 ‘‘(b) IN GENERAL.—Subject to the requirements of 

2 this section, in the case of any application to a financial 

3 institution for credit for a small business, the financial in4 stitution shall— 

5 ‘‘(1) inquire whether the business is a women6 or minority-owned business, without regard to 

7 whether such application is received in person, by 

8 mail, by telephone, by electronic mail or other form 

9 of electronic transmission, or by any other means 

10 and whether or not such application is in response 

11 to a solicitation by the financial institution; and 

12 ‘‘(2) maintain a record of the responses to such 

13 inquiry separate from the application and accom14 panying information. 

15 ‘‘(c) RIGHT TO REFUSE.—Any applicant for credit 

16 may refuse to provide any information requested pursuant 

17 to subsection (b) in connection with any application for 

18 credit. 

19 ‘‘(d) NO ACCESS BY UNDERWRITERS.— 

20 ‘‘(1) IN GENERAL.—Where feasible, no loan un21 derwriter or other officer or employee of a financial 

22 institution, or any affiliate of a financial institution, 

23 involved in making any determination concerning an 

24 application for credit shall have access to any infor25 mation provided by the applicant pursuant to a reVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01108 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 quest under subsection (b) in connection with such 

2 application. 

3 ‘‘(2) EXCEPTION.—If a financial institution de4 termines that loan underwriter or other officer or 

5 employee of a financial institution, or any affiliate of 

6 a financial institution, involved in making any deter7 mination concerning an application for credit should 

8 have access to any information provided by the ap9 plicant pursuant to a request under subsection (b), 

10 the financial institution will provide notice to the ap11 plicant of the access of the underwriter to this infor12 mation, along with notice that the financial institu13 tion may not discriminate on this basis of this infor14 mation. 

15 ‘‘(e) FORM AND MANNER OF INFORMATION.— 

16 ‘‘(1) IN GENERAL.—Each financial institution 

17 shall compile and maintain, in accordance with regu18 lations of the Agency, a record of the information 

19 provided by any loan applicant pursuant to a request 

20 under subsection (b). 

21 ‘‘(2) ITEMIZATION.—Information compiled and 

22 maintained under paragraph (1) shall also be 

23 itemized in order to clearly and conspicuously dis24 close the following: 


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1 ‘‘(A) The number of the application and 

2 the date the application was received. 

3 ‘‘(B) The type and purpose of the loan or 

4 other credit being applied for. 

5 ‘‘(C) The amount of the credit or credit 

6 limit applied for and the amount of the credit 

7 transaction or the credit limit approved for such 

8 applicant. 

9 ‘‘(D) The type of action taken with respect 

10 to such application and the date of such action. 

11 ‘‘(E) The census tract in which is located 

12 the principal place of business of the small busi13 ness loan applicant. 

14 ‘‘(F) The gross annual revenue of the busi15 ness in the last fiscal year of the small business 

16 loan applicant preceding the date of the appli17 cation. 

18 ‘‘(G) The race, sex, and ethnicity of the 

19 principal owners of the business. 

20 ‘‘(H) Any additional data the Agency de21 termines would aid in fulfilling the purposes of 

22 this section. 

23 ‘‘(3) INCLUSION OF PERSONALLY IDENTIFIABLE

24 INFORMATION PROHIBITED.—In compiling and 

25 maintaining any record of information under this 


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1 section, a financial institution may not include in 

2 such record the name, specific address (other than 

3 the census tract required under paragraph (1)(E)), 

4 telephone number, electronic mail address, and any 

5 other personally identifiable information concerning 

6 any individual who is, or is connected with, the small 

7 business loan applicant. 

8 ‘‘(4) DISCRETION TO DELETE OR MODIFY PUB9 LICLY AVAILABLE DATA.—The Agency may, in the 

10 discretion of the Agency, delete or modify data col11 lected under this section which is or will be available 

12 to the public if the Agency determines that the dele13 tion or modification of the data would advance a 

14 compelling privacy interest. 

15 ‘‘(f) AVAILABILITY OF INFORMATION.— 

16 ‘‘(1) SUBMISSION TO AGENCY.—The data re17 quired to be compiled and maintained under this 

18 section by any financial institution shall be sub19 mitted annually to the Agency. 

20 ‘‘(2) AVAILABILITY OF INFORMATION.— 

21 ‘‘(A) IN GENERAL.—Information compiled 

22 and maintained under this section shall be re23 tained for not less than 3 years after the date 

24 of preparation and shall be made available to 


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1 the public, upon request, in the form required 

2 under regulations prescribed by the Agency. 

3 ‘‘(B) ANNUAL DISCLOSURE TO THE PUB4 LIC.—In addition to the availability by request 

5 under subparagraph (A) of data compiled and 

6 maintained under this section, the Agency shall 

7 annually provide such data to the public. 

8 ‘‘(C) PROCEDURES.—The procedures for 

9 disclosing data compiled and maintained under 

10 this section to the public shall be determined by 

11 the Agency by regulation. 

12 ‘‘(3) COMPILATION OF AGGREGATE DATA.— 

13 ‘‘(A) IN GENERAL.—The Agency may, in 

14 the discretion of the Agency, compile for the 

15 Agency’s own use compilations of aggregate 

16 data. 

17 ‘‘(B) PUBLIC AVAILABILITY OF AGGRE18 GATE DATA.—The Agency may, in the discre19 tion of the Agency, make public compilations of 

20 aggregate data in such manner as the Agency 

21 may determine to be appropriate. 

22 ‘‘(g) DEFINITIONS.—For purposes of this section, the 

23 following definitions shall apply: 

24 ‘‘(1) FINANCIAL INSTITUTION.—The term ‘fi25 nancial institution’ means any partnership, comVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01112 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 pany, corporation, association (incorporated or unin2 corporated), trust, estate, cooperative organization, 

3 or other entity that engages in any financial activity. 

4 ‘‘(2) MINORITY-OWNED BUSINESS.—The term 

5 ‘minority-owned business’ means a business— 

6 ‘‘(A) more than 50 percent of the owner7 ship or control of which is held by 1 or more 

8 minority individuals; and 

9 ‘‘(B) more than 50 percent of the net prof10 it or loss of which accrues to 1 or more minor11 ity individuals. 

12 ‘‘(3) WOMEN-OWNED BUSINESS.—The term 

13 ‘women-owned business’ means a business— 

14 ‘‘(A) more than 50 percent of the owner15 ship or control of which is held by 1 or more 

16 women; and 

17 ‘‘(B) more than 50 percent of the net prof18 it or loss of which accrues to 1 or more women. 

19 ‘‘(4) MINORITY.—The term ‘minority’ has the 

20 meaning given to such term by section 1204(c)(3) of 

21 the Financial Institutions Reform, Recovery, and 

22 Enforcement Act of 1989. 

23 ‘‘(5) SMALL BUSINESS LOAN.—The term ‘small 

24 business loan’ shall be defined by the Agency, which 

25 may take into account— 


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1 ‘‘(A) the gross revenues of the borrower; 

2 ‘‘(B) the total number of employees of the 

3 borrower; 

4 ‘‘(C) the industry in which the borrower 

5 has its primary operations; and 

6 ‘‘(D) the size of the loan. 

7 ‘‘(h) AGENCY ACTION.— 

8 ‘‘(1) IN GENERAL.—The Agency shall prescribe 

9 such regulations and issue such guidance as may be 

10 necessary to carry out, enforce, and compile data 

11 pursuant to this section. 

12 ‘‘(2) EXCEPTIONS.—The Agency, by regulation 

13 or order, may adopt exceptions to any requirement 

14 of this section and may, conditionally or uncondi15 tionally, exempt any financial institution or class of 

16 institutions from the requirements of this section as 

17 the Agency determines to be necessary or appro18 priate to carry out the purposes and objectives of 

19 this section. 

20 ‘‘(3) GUIDANCE.—The Agency shall issue guid21 ance designed to facilitate compliance with the re22 quirements of this section, including assisting finan23 cial institutions in working with applicants to deter24 mine whether the applicants are women- or minor25 ity-owned for the purposes of this section.’’. 


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1 (b) TECHNICAL AND CONFORMING AMENDMENT.— 

2 Section 701(b) of the Equal Credit Opportunity Act (15 

3 U.S.C. 1691(b)) is amended— 

4 (1) by striking ‘‘or’’ after the semicolon at the 

5 end of paragraph (3); 

6 (2) by striking the period at the end of para7 graph (4) and inserting ‘‘; or’’; and 

8 (3) by inserting after paragraph (4), the fol9 lowing new paragraph: 

10 ‘‘(5) to make an inquiry under section 704B in 

11 accordance with the requirements of such section.’’. 

12 (c) CLERICAL AMENDMENT.—The table of sections 

13 for the Equal Credit Opportunity Act is amended by in14 serting after the item relating to section 704A the fol15 lowing new item: 

‘‘704B. Small business loan data collection.’’. 

16 (d) EFFECTIVE DATE.—This section shall take effect 

17 on the designated transfer date. 

18 SEC. 4703. ANNUAL FINANCIAL AUTOPSY. 

19 (a) STUDY REQUIRED.—Not later than March 31 of 

20 each calendar year, the Director shall— 

21 (1) conduct a scientific sampling of foreclosures 

22 and bankruptcies during the previous calendar year 

23 in each State or territory of the United States; and 

24 (2) identify any underlying causes of such 

25 bankruptcies or foreclosures, including any specific 


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1 financial products or services that have been the 

2 cause of substantial numbers of such bankruptcies 

3 or foreclosures. 

4 (b) REPORT.—After the completion of each study re5 quired under subsection (a), the Director shall submit a 

6 report to the Congress containing— 

7 (1) any conclusions made by the Director in 

8 carrying out such study; 

9 (2) any specific financial products or services 

10 that the Director has identified to have caused a 

11 substantial number of bankruptcies or foreclosures, 

12 as well as which companies or individuals provided 

13 such financial products or services; and 

14 (3) any recommendations the Director has for 

15 legislation that would reduce the underlying causes 

16 of bankruptcies and foreclosures identified in such 

17 study. 

18 SEC. 4704. REPORTING OF MORTGAGE DATA BY STATE. 

19 (a) IN GENERAL.—Section 104(a) of the Helping 

20 Families Save Their Homes Act of 2009 (division A of 

21 Public Law 111–22) is amended— 

22 (1) in paragraph (2), by striking ‘‘resulting’’ 

23 and inserting ‘‘in each State that result’’; 

24 (2) in paragraph (3), by inserting ‘‘each State 

25 for’’ after ‘‘modifications in’’; and 


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1 (3) in paragraph (4), by inserting ‘‘in each 

2 State’’ after ‘‘total number of loans’’. 

3 (b) CONFORMING AMENDMENT.—Section 

4 104(b)(1)(A) of such Act is amended by adding at the end 

5 the following sentence: ‘‘Not later than 60 days after the 

6 date of the enactment of the Wall Street Reform and Con7 sumer Protection Act of 2009, the Comptroller of the Cur8 rency and the Director of the Office of Thrift Supervision 

9 shall update such requirements to reflect amendments 

10 made to this section by such Act.’’. 

11 Subtitle H—Conforming 

12 Amendments 

13 SEC. 4801. AMENDMENTS TO THE INSPECTOR GENERAL 

14 ACT OF 1978. 

15 (a) ESTABLISHMENT.—Section 8G(a)(2) of the In16 spector General Act of 1978 (5 U.S.C. App.) is amended 

17 by inserting ‘‘the Consumer Financial Protection Agency,’’ 

18 before ‘‘the Consumer Product Safety Commission,’’. 

19 (b) EFFECTIVE DATE.—This section shall take effect 

20 on the date of the enactment of this title. 

21 SEC. 4802. AMENDMENTS TO THE PRIVACY ACT OF 1974. 

22 (a) APPLICABILITY.—Section 552a of title 5, United 

23 States Code, is amended by adding at the end the fol24 lowing new subsection: 


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1 ‘‘(w) APPLICABILITY TO CONSUMER FINANCIAL PRO2 TECTION AGENCY.—Except as provided in the Consumer 

3 Financial Protection Agency Act of 2009, this section 

4 shall apply with respect to the Consumer Financial Protec5 tion Agency.’’. 

6 (b) EFFECTIVE DATE.—This section shall take effect 

7 on the date of the enactment of this title. 

8 SEC. 4803. AMENDMENTS TO THE ALTERNATIVE MORT9 GAGE TRANSACTION PARITY ACT OF 1982. 

10 (a) SECTION 803(1).—Section 803(1) of the Alter11 native Mortgage Transaction Parity Act of 1982 (12 

12 U.S.C. 3802(1)) is amended by striking paragraphs (B) 

13 and (C). 

14 (b) SECTION 804(a).—Section 804(a) of the Alter15 native Mortgage Transaction Parity Act of l982 (12 

16 U.S.C. 3803(a)) is amended— 

17 (1) in paragraphs (1), (2), and (3), by inserting 

18 ‘‘on or before the designated transfer date, as deter19 mined in section 4602 of the Consumer Financial 

20 Protection Agency Act of 2009’’ after ‘‘transactions 

21 made’’ each place such term appears; 

22 (2) in paragraph (2), by striking ‘‘and’’ at the 

23 end; 

24 (3) in paragraph (3), by striking the period at 

25 the end and inserting ‘‘; and’’; and 


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1 (4) by adding at the end the following new 

2 paragraph: 

3 ‘‘(4) with respect to transactions made after the 

4 designated transfer date, as determined in section 

5 4602 of the Consumer Financial Protection Agency 

6 Act of 2009, only in accordance with regulations 

7 governing alternative mortgage transactions as 

8 issued by the Consumer Financial Protection Agency 

9 for federally chartered housing creditors, in accord10 ance with the rulemaking authority granted to the 

11 Consumer Financial Protection Agency with regard 

12 to federally chartered housing creditors under laws 

13 other than this section.’’. 

14 (c) SECTION 804.—Section 804 of the Alternative 

15 Mortgage Transaction Parity Act of l982 (12 U.S.C. 

16 3803) is amended— 

17 (1) by striking subsection (c) and inserting the 

18 following new subsection: 

19 ‘‘(c) EFFECT OF STATE LAW.— 

20 ‘‘(1) IN GENERAL.—An alternative mortgage 

21 transaction may be made by a housing creditor in 

22 accordance with this section, notwithstanding any 

23 State Constitution, law, or regulation that prohibits 

24 an alternative mortgage transaction. 


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1 ‘‘(2) RULE OF CONSTRUCTION.—For purposes 

2 of this subsection, a State Constitution, law, or reg3 ulation that prohibits an alternative mortgage trans4 action does not include any State Constitution, law, 

5 or regulation that regulates mortgage transactions 

6 generally, including any restriction on prepayment 

7 penalties or late charges.’’; and 

8 (2) by adding at the end the following new sub9 section: 

10 ‘‘(d) DUTIES OF CONSUMER FINANCIAL PROTECTION

11 AGENCY.—The Consumer Financial Protection Agency 

12 shall— 

13 ‘‘(1) review the regulations identified by the 

14 Comptroller of the Currency, the National Credit 

15 Union Administration, and the Director of the Office 

16 of Thrift Supervision (as those regulations exist on 

17 the designated transfer date, as determined in sec18 tion 4602 of the Consumer Financial Protection 

19 Agency Act of 2009) as applicable under paragraphs 

20 (1), (2), and (3) of subsection (a); 

21 ‘‘(2) determine whether such regulations are 

22 fair and not deceptive and otherwise meet the objec23 tives of section 4201 of the Consumer Financial 

24 Protection Agency Act of 2009; and 


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1 ‘‘(3) prescribe regulations under subsection 

2 (a)(4) after the designated transfer date, as deter3 mined under such Act.’’. 

4 (d) EFFECTIVE DATE AND SCOPE OF APPLICA5 TION.— 

6 (1) EFFECTIVE DATE.—This section shall take 

7 effect on the designated transfer date. 

8 (2) SCOPE OF APPLICATION.—The amendments 

9 made by subsection (a) shall not affect any trans10 action covered by the Alternative Mortgage Trans11 action Parity Act of l982 which is entered into on 

12 or before the designated transfer date. 

13 SEC. 4804. AMENDMENTS TO THE CONSUMER CREDIT PRO14 TECTION ACT. 

15 (a) TRUTH IN LENDING ACT.— 

16 (1) SECTION 103.—Section 103 of the Truth in 

17 Lending Act (15 U.S.C. 1602) is amended by strik18 ing subsection (b) and inserting the following new 

19 subsection: 

20 ‘‘(b) AGENCY DEFINITIONS.— 

21 ‘‘(1) BOARD.—The term ‘Board’ means the 

22 ‘Board of Governors of the Federal Reserve System’. 

23 ‘‘(2) AGENCY.—The term ‘Agency’ means the 

24 Consumer Financial Protection Agency.’’. 


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1 (2) UNIVERSAL AMENDMENT RELATING TO

2 BOARD OF GOVERNORS OF THE FEDERAL RESERVE

3 SYSTEM.— 

4 (A) IN GENERAL.—Except as provided in 

5 subparagraph (B), the Truth in Lending Act 

6 (15 U.S.C. 1601 et seq.) is amended by striking 

7 ‘‘Board’’ each place such term appears, includ8 ing in chapters 4 and 5 relating to credit billing 

9 and consumer leases, and inserting ‘‘Agency’’. 

10 (B) EXCEPTIONS.—The amendment de11 scribed in subparagraph (A) shall not apply to 

12 sections 108(a) (as amended by paragraph (4)) 

13 and 140(d) and shall not apply to the term 

14 ‘‘Board’’ when used in reference to the Federal 

15 Deposit Insurance Corporation or the National 

16 Credit Union Administration. 

17 (3) SECTION 105.—Section 105(b) of the Truth 

18 in Lending Act (15 U.S.C. 1604(b)) is amended by 

19 striking the first sentence and inserting the fol20 lowing: ‘‘The Agency shall publish a single, inte21 grated disclosure for mortgage loan transactions, in22 cluding real estate settlement cost statements, which 

23 include the disclosure requirements of this title, in 

24 conjunction with the disclosure requirements of the 

25 Real Estate Settlement Procedures Act that, taken 


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1 together, may apply to transactions subject to both 

2 or either law. The purpose of such model disclosure 

3 shall be to facilitate compliance with the disclosure 

4 requirements of those titles, and to aid the borrower 

5 or lessee in understanding the transaction by uti6 lizing readily understandable language to simplify 

7 the technical nature of the disclosures.’’. 

8 (4) SECTION 108.—Section 108 of the Truth in 

9 Lending Act (15 U.S.C. 1607) is amended— 

10 (A) by striking subsection (a) and insert11 ing the following new subsection: 

12 ‘‘(a) ENFORCING AGENCIES.—Subject to section 

13 4202 of the Consumer Financial Protection Agency Act 

14 of 2009, compliance with the requirements imposed under 

15 this title shall be enforced as follows: 

16 ‘‘(1) Under section 8 of the Federal Deposit In17 surance Act, in the case of— 

18 ‘‘(A) national banks, and Federal branches 

19 and Federal agencies of foreign banks, by the 

20 head of the agency responsible for chartering 

21 and regulating national banks; 

22 ‘‘(B) member banks of the Federal Reserve 

23 System (other than national banks), branches 

24 and agencies of foreign banks (other than Fed25 eral branches, Federal agencies, and insured 


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1 State branches of foreign banks), commercial 

2 lending companies owned or controlled by for3 eign banks, and organizations operating under 

4 section 25 or 25A of the Federal Reserve Act, 

5 by the Board; 

6 ‘‘(C) depository institution insured by the 

7 Federal Deposit Insurance Corporation (other 

8 than members of the Federal Reserve System, 

9 Federal savings associations, and savings and 

10 loan holding companies) and insured State 

11 branches of foreign banks, by the Board of Di12 rectors of the Federal Deposit Insurance Cor13 poration; and 

14 ‘‘(D) Federal savings associations and sav15 ings and loan holding companies, by the Direc16 tor of the Office of Thrift Supervision. 

17 ‘‘(2) Under subtitle E of the Consumer Finan18 cial Protection Agency Act of 2009, by the Agency. 

19 ‘‘(3) Under the Federal Credit Union Act, by 

20 the head of the agency responsible for chartering 

21 and regulating Federal credit unions. 

22 ‘‘(4) Under the Federal Aviation Act of 1958, 

23 by the Secretary of Transportation with respect to 

24 any air carrier or foreign air carrier subject to that 

25 Act. 


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1 ‘‘(5) Under the Packers and Stockyards Act, 

2 1921 (except as provided in section 406 of that Act), 

3 by the Secretary of Agriculture with respect to any 

4 activities subject to that Act. 

5 ‘‘(6) Under the Farm Credit Act of 1971, by 

6 the Farm Credit Administration with respect to any 

7 Federal land bank, Federal land bank association, 

8 Federal intermediate credit bank, or production 

9 credit association.’’; and 

10 (B) by striking subsection (c) and insert11 ing the following new subsection: 

12 ‘‘(c) OVERALL ENFORCEMENT AUTHORITY OF THE

13 FEDERAL TRADE COMMISSION.—Except to the extent 

14 that enforcement of the requirements imposed under this 

15 title is specifically committed to some other Government 

16 agency (other than the Consumer Financial Protection 

17 Agency) under subsection (a) and subject to section 4202 

18 of the Consumer Financial Protection Agency Act of 2009, 

19 the Federal Trade Commission shall enforce such require20 ments. For the purpose of the exercise by the Federal 

21 Trade Commission of its functions and powers under the 

22 Federal Trade Commission Act, a violation of any require23 ment imposed under this title shall be deemed a violation 

24 of a requirement imposed under that Act. All of the func25 tions and powers of the Federal Trade Commission under 


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1 the Federal Trade Commission Act are available to the 

2 Commission to enforce compliance by any person with the 

3 requirements under this title, irrespective of whether that 

4 person is engaged in commerce or meets any other juris5 dictional tests in the Federal Trade Commission Act.’’. 

6 (5) UNIVERSAL AMENDMENT RELATING TO THE

7 FEDERAL TRADE COMMISSION.— 

8 (A) IN GENERAL.—Except as provided in 

9 subparagraph (B) (and except for any insertion 

10 of ‘‘Federal Trade Commission’’ made by this 

11 subtitle), the Truth in Lending Act (15 U.S.C. 

12 1601 et seq.) is amended by striking ‘‘Federal 

13 Trade Commission’’ each place such term ap14 pears and inserting ‘‘Agency’’. 

15 (B) EXCEPTIONS.—The amendment de16 scribed in subparagraph (A) shall not apply to 

17 sections 108(c) (as amended by paragraph (4)) 

18 129(m) (as amended by paragraph (7)), 140A, 

19 or 149 (as amended by paragraph (8)). 

20 (6) SECTION 127.—Subparagraph (C) of section 

21 127(b)(11) of the Truth in Lending Act (15 U.S.C. 

22 1637(b)(11)) is amended to read as follows: 

23 ‘‘(C) Notwithstanding subparagraphs (A) 

24 and (B), in the case of a creditor with respect 

25 to which compliance with this title is enforced 


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1 by the Agency, the following statement, in a 

2 prominent location on the front of the billing 

3 statement, disclosed clearly and conspicuously: 

4 ‘Minimum Payment Warning: Making only the 

5 required minimum payment will increase the in6 terest you pay and the time it takes to repay 

7 your balance. For example, making only the 

8 typical 5 percent minimum monthly payment on 

9 a balance of $300 at an interest rate of 17 per10 cent would take 24 months to repay the balance 

11 in full. For an estimate of the time it would 

12 take to repay your balance, making only min13 imum monthly payments, call the Consumer Fi14 nancial Protection Agency at this toll-free num15 ber: lllllllll [the blank space to 

16 be filled in by the creditor].’ A creditor who is 

17 subject to this subparagraph shall not be sub18 ject to subparagraph (A) or (B).’’. 

19 (7) SECTION 129.—Section 129(m) of the Truth 

20 in Lending Act (15 U.S.C. 1639(m)) is amended to 

21 read as follows: 

22 ‘‘(m) CIVIL PENALTIES IN FEDERAL TRADE COM23 MISSION ENFORCEMENT ACTIONS.—For purposes of en24 forcement by the Federal Trade Commission, any violation 

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1 section (l)(2) of this section shall be treated as a violation 

2 of a regulation promulgated under section 18 of the Fed3 eral Trade Commission Act (15 U.S.C. 57a) regarding un4 fair or deceptive acts or practices.’’. 

5 (8) SECTION 149.—Section 149(b) of the Truth 

6 in Lending Act (15 U.S.C. 1665d(b)) is amended by 

7 inserting ‘‘the Federal Trade Commission,’’ after ‘‘in 

8 consultation with’’. 

9 (b) FAIR CREDIT REPORTING ACT.— 

10 (1) SECTION 603.—Section 603 of the Fair 

11 Credit Reporting Act (15 U.S.C. 1681a) is amend12 ed— 

13 (A) by redesignating subsections (w) and 

14 (x) as subsections (x) and (y), respectively; and 

15 (B) by inserting after subsection (v) the 

16 following new subsection: 

17 ‘‘(w) AGENCY.—The term ‘Agency’ means the Con18 sumer Financial Protection Agency.’’. 

19 (2) UNIVERSAL AMENDMENTS RELATING TO

20 THE FEDERAL TRADE COMMISSION.—Other than in 

21 connection with the amendment made by paragraphs 

22 (7)(B), (8)(A), (8)(C), and (8)(D) of this subsection 

23 (and except for any insertion of ‘‘Federal Trade 

24 Commission’’ made by this subtitle), the Fair Credit 

25 Reporting Act (15 U.S.C. 1681a) is amended— 


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1 (A) by striking ‘‘Federal Trade Commis2 sion’’ each place such term appears and insert3 ing ‘‘Agency’’; 

4 (B) by striking ‘‘Commission’’ each place 

5 such term appears (other than in connection 

6 with the term amended in subparagraph (A)) 

7 and inserting ‘‘Agency’’; and 

8 (C) by striking ‘‘Federal banking agencies, 

9 the National Credit Union Administration, and 

10 the Commission shall jointly’’ each place such 

11 term appears in sections 605(h)(2) and 

12 623(a)(8)(A) and inserting ‘‘Agency shall’’. 

13 (3) SECTION 603.—Section 603(k)(2) of the 

14 Fair Credit Reporting Act (15 U.S.C. 1681a(k)(2)) 

15 is amended by striking ‘‘Board of Governors of the 

16 Federal Reserve System’’ and inserting ‘‘Agency’’. 

17 (4) SECTION 604.—Subsection 604(g) of the 

18 Fair Credit Reporting Act (15 U.S.C. 1681b(g)) is 

19 amended— 

20 (A) by striking subparagraph (C) of para21 graph (3) and inserting the following new sub22 paragraph: 

23 ‘‘(C) as otherwise determined to be nec24 essary and appropriate, by regulation or order 

25 and subject to paragraph (6), by the Agency 


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1 (with respect to any covered person subject to 

2 the jurisdiction of such agency under paragraph 

3 (2) of section 621(b)), or the applicable State 

4 insurance authority (with respect to any person 

5 engaged in providing insurance or annuities).’’; 

6 and 

7 (B) by striking paragraph (5) and insert8 ing the following new paragraph: 

9 ‘‘(5) REGULATIONS REQUIRED.—The Agency 

10 may, after notice and opportunity for comment, pre11 scribe regulations that permit transactions under 

12 paragraph (2) that are determined to be necessary 

13 and appropriate to protect legitimate operational, 

14 transactional, risk, consumer, and other needs (and 

15 which shall include permitting actions necessary for 

16 administrative verification purposes), consistent with 

17 the intent of paragraph (2) to restrict the use of 

18 medical information for inappropriate purposes.’’. 

19 (5) SECTION 609.—Section 609(d)(1) of the 

20 Fair Credit Reporting Act (15 U.S.C. 1681g(d)(1)) 

21 is amended by inserting ‘‘the Federal Trade Com22 mission,’’ after ‘‘in consultation with’’. 

23 (6) SECTION 611.—Section 611(e) of the Fair 

24 Credit Reporting Act (15 U.S.C. 1681i(e)) is 

25 amended— 


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1 (A) by amending paragraph (2) to read as 

2 follows: 

3 ‘‘(2) EXCLUSION.—Complaints received or ob4 tained by the Agency pursuant to its investigative 

5 authority under the Consumer Financial Protection 

6 Agency Act of 2009 shall not be subject to para7 graph (1).’’; and 

8 (B) in the heading of paragraph (3) by in9 serting ‘‘CONSUMER REPORTING’’ before 

10 ‘‘AGENCY’’. 

11 (7) SECTION 615.—Section 615 of the Fair 

12 Credit Reporting Act (15 U.S.C. 1681m) is amend13 ed— 

14 (A) in subsection (d)(2)(B), by inserting 

15 ‘‘the Federal Trade Commission,’’ after ‘‘in 

16 consultation with’’; 

17 (B) in subsection (e)(1), by striking ‘‘and 

18 the Commission’’ and inserting ‘‘the Federal 

19 Trade Commission, the Securities and Ex20 change Commission, and the Commodities Fu21 tures Trading Commission’’; and 

22 (C) by striking subparagraph (A) of sub23 section (h)(6) and inserting the following: 

24 ‘‘(A) RULES REQUIRED.—The Agency 

25 shall prescribe rules.’’. 


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1 (8) SECTION 621.—Section 621 of the Fair 

2 Credit Reporting Act (15 U.S.C. 1681s) is amend3 ed— 

4 (A) by striking subsection (a) and insert5 ing the following new subsection: 

6 ‘‘(a) ENFORCEMENT BY FEDERAL TRADE COMMIS7 SION.— 

8 ‘‘(1) IN GENERAL.—Subject to section 4202 of 

9 the Consumer Financial Protection Agency Act of 

10 2009, compliance with the requirements imposed 

11 under this title shall be enforced under the Federal 

12 Trade Commission Act by the Federal Trade Com13 mission with respect to consumer reporting agencies 

14 and all other persons subject thereto, except to the 

15 extent that enforcement of the requirements imposed 

16 under this title is specifically committed to some 

17 other government agency (other than the Consumer 

18 Financial Protection Agency) under subsection (b) 

19 hereof. For the purpose of the exercise by the Fed20 eral Trade Commission of its functions and powers 

21 under the Federal Trade Commission Act, a viola22 tion of any requirement or prohibition imposed 

23 under this title shall constitute an unfair or decep24 tive act or practice in commerce in violation of sec25 tion 5(a) of the Federal Trade Commission Act and 


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1 shall be subject to enforcement by the Federal Trade 

2 Commission under section 5(b) of such Act with re3 spect to any consumer reporting agency or person 

4 subject to enforcement by the Federal Trade Com5 mission pursuant to this subsection, irrespective of 

6 whether that person is engaged in commerce or 

7 meets any other jurisdictional tests in the Federal 

8 Trade Commission Act. The Federal Trade Commis9 sion shall have such procedural, investigative, and 

10 enforcement powers (subject to section 4202 of the 

11 Consumer Financial Protection Agency Act of 

12 2009), including the power to issue procedural rules 

13 in enforcing compliance with the requirements im14 posed under this title and to require the filing of re15 ports, the production of documents, and the appear16 ance of witnesses as though the applicable terms and 

17 conditions of the Federal Trade Commission Act 

18 were part of this title. Any person violating any of 

19 the provisions of this title shall be subject to the 

20 penalties and entitled to the privileges and immuni21 ties provided in the Federal Trade Commission Act 

22 as though the applicable terms and provisions there23 of were part of this title. 

24 ‘‘(2) CIVIL MONEY PENALTIES.— 


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1 ‘‘(A) IN GENERAL.—Subject to section 

2 4202 of the Consumer Financial Protection 

3 Agency Act of 2009, in the event of a knowing 

4 violation, which constitutes a pattern or prac5 tice of violations of this title, the Commission 

6 may commence a civil action to recover a civil 

7 penalty in a district court of the United States 

8 against any person that violates this title. In 

9 such action, such person shall be liable for a 

10 civil penalty of not more than $2,500 per viola11 tion. 

12 ‘‘(B) FACTORS IN DETERMINING

13 AMOUNT.—In determining the amount of a civil 

14 penalty under subparagraph (A), the court shall 

15 take into account the degree of culpability, any 

16 history of prior such conduct, ability to pay, ef17 fect on ability to continue to do business, and 

18 such other matters as justice may require. 

19 ‘‘(3) EXCEPTION.—Notwithstanding paragraph 

20 (2), a court may not impose any civil penalty on a 

21 person for a violation of section 623(a)(1) unless the 

22 person has been enjoined from committing the viola23 tion, or ordered not to commit the violation, in an 

24 action or proceeding brought by or on behalf of the 

25 Federal Trade Commission or the Agency, as the 


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1 case may be, and has violated the injunction or 

2 order, and the court may not impose any civil pen3 alty for any violation occurring before the date of 

4 the violation of the injunction or order.’’; 

5 (B) by striking subsection (b) and insert6 ing the following new subsection: 

7 ‘‘(b) ENFORCEMENT BY OTHER AGENCIES.—Subject 

8 to section 4202 of the Consumer Financial Protection 

9 Agency Act of 2009, compliance with the requirements im10 posed under this title with respect to consumer reporting 

11 agencies, persons who use consumer reports from such 

12 agencies, persons who furnish information to such agen13 cies, and users of information that are subject to sub14 section (d) of section 615 shall be enforced as follows: 

15 ‘‘(1) Under section 8 of the Federal Deposit In16 surance Act, in the case of— 

17 ‘‘(A) national banks, and Federal branches 

18 and Federal agencies of foreign banks, by the 

19 head of the agency responsible for chartering 

20 and regulating national banks; 

21 ‘‘(B) member banks of the Federal Reserve 

22 System (other than national banks), branches 

23 and agencies of foreign banks (other than Fed24 eral branches, Federal agencies, and insured 

25 State branches of foreign banks), commercial 


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1 lending companies owned or controlled by for2 eign banks, and organizations operating under 

3 section 25 or 25A of the Federal Reserve Act, 

4 by the Board of Governors of the Federal Re5 serve System; 

6 ‘‘(C) banks insured by the Federal Deposit 

7 Insurance Corporation (other than members of 

8 the Federal Reserve System, Federal savings 

9 associations, and savings and loan holding com10 panies) and insured State branches of foreign 

11 banks, by the Board of Directors of the Federal 

12 Deposit Insurance Corporation; and 

13 ‘‘(D) Federal savings associations and sav14 ings and loan holding companies, by the Direc15 tor of the Office of Thrift Supervision. 

16 ‘‘(2) Under subtitle E of the Consumer Finan17 cial Protection Agency Act of 2009, by the Agency 

18 in the case of a covered person under that Act. 

19 ‘‘(3) Under the Federal Credit Union Act, by 

20 the National Credit Union Administration Board 

21 with respect to any Federal credit union. 

22 ‘‘(4) Under subtitle IV of title 49, United 

23 States Code, by the Secretary of Transportation, 

24 with respect to all carriers subject to the jurisdiction 

25 of the Surface Transportation Board. 


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1 ‘‘(5) Under the Federal Aviation Act of 1958, 

2 by the Secretary of Transportation with respect to 

3 any air carrier or foreign air carrier subject to that 

4 Act. 

5 ‘‘(6) Under the Packers and Stockyards Act, 

6 1921 (except as provided in section 406 of that Act), 

7 by the Secretary of Agriculture with respect to any 

8 activities subject to that Act. 

9 ‘‘(7) Under the Commodity Exchange Act, with 

10 respect to a person subject to the jurisdiction of the 

11 Commodity Futures Trading Commission. 

12 ‘‘(8) Under the Federal securities law and any 

13 other laws subject to the jurisdiction of the Securi14 ties and Exchange Commission, with respect to a 

15 person subject to the jurisdiction of the Securities 

16 and Exchange Commission. 

17 Any term used in paragraph (1) that is not defined in 

18 this title or otherwise defined in section 3(s) of the Federal 

19 Deposit Insurance Act shall have the meaning given to 

20 such term in section 1(b) of the International Banking Act 

21 of 1978.’’; 

22 (C) in paragraph (2) of subsection (c)— 

23 (i) by inserting ‘‘the Agency and’’ be24 fore ‘‘the Federal Trade Commission’’ in 

25 the first sentence; 


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1 (ii) by inserting ‘‘Agency and the Fed2 eral Trade’’ after ‘‘provide the’’; and 

3 (iii) by inserting ‘‘Agency,’’ before 

4 ‘‘Federal Trade Commission’’ in the sec5 ond sentence; 

6 (D) in paragraph (4) of subsection (c)— 

7 (i) by inserting ‘‘Agency’’, before ‘‘the 

8 Federal Trade Commission’’; and 

9 (ii) inserting ‘‘Agency, the Federal 

10 Trade’’ after ‘‘complaint of the’’; 

11 (E) in paragraph (2) of subsection (f), by 

12 inserting ‘‘the Federal Trade Commission’’ 

13 after ‘‘in consultation with’’; 

14 (F) by striking subsection (e) and inserting 

15 the following new subsection: 

16 ‘‘(e) REGULATORY AUTHORITY.—The Agency shall 

17 prescribe such regulations as necessary to carry out the 

18 purposes of this Act, except that, with respect to sections 

19 615(e) and 628 of this title, the agencies identified in sub20 sections (a) and (b) of this section shall prescribe such 

21 regulations as necessary to carry out the purposes of such 

22 sections with respect to entities within their enforcement 

23 authority under such subsections.’’; and 

24 (G) in the heading of subsection (g) by 

25 striking ‘‘FTC’’. 


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1 (8) SECTION 623.—Section 623 of the Fair 

2 Credit Reporting Act (15 U.S.C. 1681s–2) is 

3 amended— 

4 (A) by amending subparagraph (a)(7)(D) 

5 to read as follows: 

6 ‘‘(D) MODEL DISCLOSURE.— 

7 ‘‘(i) DUTY OF AGENCY TO PRE8 PARE.—The Agency shall prescribe a brief 

9 model disclosure a financial institution 

10 may use to comply with subparagraph (A), 

11 which shall not exceed 30 words. 

12 ‘‘(ii) USE OF MODEL NOT RE13 QUIRED.—No provision of this paragraph 

14 shall be construed as requiring a financial 

15 institution to use any such model form pre16 scribed by the Agency. 

17 ‘‘(iii) COMPLIANCE USING MODEL.—A 

18 financial institution shall be deemed to be 

19 in compliance with subparagraph (A) if the 

20 financial institution uses any such model 

21 form prescribed by the Agency, or the fi22 nancial institution uses any such model 

23 form and rearranges its format.’’. 

24 (B) by amending subsection (e) to read as 

25 follows: 


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1 ‘‘(e) ACCURACY GUIDELINES AND REGULATIONS RE2 QUIRED.— 

3 ‘‘(1) GUIDELINES.—The Agency shall, with re4 spect to the entities that are subject to its enforce5 ment authority under section 621— 

6 ‘‘(A) establish and maintain guidelines for 

7 use by each person that furnishes information 

8 to a consumer reporting agency regarding the 

9 accuracy and integrity of the information relat10 ing to consumers that such entities furnish to 

11 consumer reporting agencies, and update such 

12 guidelines as often as necessary; and 

13 ‘‘(B) prescribe regulations requiring each 

14 person that furnishes information to a con15 sumer reporting agency to establish reasonable 

16 policies and procedures or implementing the 

17 guidelines established pursuant to subpara18 graph (A). 

19 ‘‘(2) CRITERIA.—In developing the guidelines 

20 required by paragraph (1)(A), the Agency shall— 

21 ‘‘(A) identify patterns, practices, and spe22 cific forms of activity that can compromise the 

23 accuracy and integrity of information furnished 

24 to consumer reporting agencies; 


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1 ‘‘(B) review the methods (including techno2 logical means) used to furnish information re3 lating to consumers to consumer reporting 

4 agencies; 

5 ‘‘(C) determine whether persons that fur6 nish information to consumer reporting agen7 cies maintain and enforce policies to ensure the 

8 accuracy and integrity of information furnished 

9 to consumer reporting agencies; and 

10 ‘‘(D) examine the policies and processes 

11 that persons that furnish information to con12 sumer reporting agencies employ to conduct re13 investigations and correct inaccurate informa14 tion relating to consumers that has been fur15 nished to consumer reporting agencies.’’. 

16 (c) EQUAL CREDIT OPPORTUNITY ACT.— 

17 (1) SECTION 701.—Section 701 of the Equal 

18 Credit Opportunity Act (15 U.S.C. 1691) is amend19 ed by striking ‘‘Board’’ each place such term ap20 pears and inserting ‘‘Agency’’. 

21 (2) SECTION 702.—Section 702(c) of the Equal 

22 Credit Opportunity Act (15 U.S.C. 1691a) is 

23 amended to read as follows: 

24 ‘‘(c) The term ‘Agency’ means the Consumer Finan25 cial Protection Agency.’’. 


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1 (3) SECTION 703.—Section 703 of the Equal 

2 Credit Opportunity Act (15 U.S.C. 1691b) is 

3 amended— 

4 (A) by striking subsection (b); 

5 (B) in subsection (a)— 

6 (i) by striking ‘‘(1)’’; and 

7 (ii) by redesignating paragraphs (2), 

8 (3), (4), and (5) as subsections (b), (c), 

9 (d), and (e), respectively; 

10 (C) in subsection (c) (as so redesig11 nated)— 

12 (i) by striking ‘‘paragraph (2)’’ and 

13 inserting ‘‘subsection (b)’’; and 

14 (ii) by striking ‘‘such paragraph’’ and 

15 inserting ‘‘such subsection’’; 

16 (D) in subsection (d) (as so redesig17 nated)— 

18 (i) by striking ‘‘subsection’’ and in19 serting ‘‘section’’; 

20 (ii) by striking ‘‘Act’’ and inserting 

21 ‘‘title’’; and 

22 (iii) by striking ‘‘this paragraph’’ and 

23 inserting ‘‘this subsection’’; and 


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1 (E) by striking ‘‘Board’’ each place such 

2 term appears in such section and inserting 

3 ‘‘Agency’’. 

4 (4) SECTION 704.—Section 704 of the Equal 

5 Credit Opportunity Act (15 U.S.C. 1691c) is amend6 ed— 

7 (A) in subsection (a)— 

8 (i) in the matter preceding paragraph 

9 (1), by striking ‘‘Compliance’’ and insert10 ing ‘‘Subject to section 4202 of the Con11 sumer Financial Protection Agency Act of 

12 2009, compliance’’; 

13 (ii) in paragraph (1)(A), by striking 

14 ‘‘Office of the Comptroller of the Cur15 rency’’ and inserting ‘‘head of the agency 

16 responsible for chartering and regulating 

17 national banks’’; 

18 (iii) in paragraph (1)(B)— 

19 (I) by inserting ‘‘of Governors of 

20 the Federal Reserve System’’ after 

21 ‘‘Board’’; and 

22 (II) by striking ‘‘and’’ after the 

23 semicolon; 

24 (iv) in paragraph (1)(C), by inserting 

25 ‘‘and’’ after the semicolon; 


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1 (v) by inserting after subparagraph 

2 (C) of paragraph (1) the following new 

3 subparagraph: 

4 ‘‘(D) savings associations and savings and 

5 loan holding companies by the Director of the 

6 Office of Thrift Supervision;’’; and 

7 (vi) by amending paragraph (2) to 

8 read as follows: 

9 ‘‘(2) Subtitle E of the Consumer Financial Pro10 tection Agency Act of 2009, by the Agency.’’; 

11 (B) by striking subsection (c) and insert12 ing the following new subsection: 

13 ‘‘(c) OVERALL ENFORCEMENT AUTHORITY OF FED14 ERAL TRADE COMMISSION.—Except to the extent that en15 forcement of the requirements imposed under this title is 

16 specifically committed to some other Government agency 

17 (other than the Consumer Financial Protection Agency) 

18 under subsection (a) and subject to section 4202 of the 

19 Consumer Financial Protection Agency Act of 2009, the 

20 Federal Trade Commission shall enforce such require21 ments. For the purpose of the exercise by the Federal 

22 Trade Commission of its functions and powers under the 

23 Federal Trade Commission Act, a violation of any require24 ment imposed under this title shall be deemed a violation 

25 of a requirement imposed under that Act. All of the funcVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01144 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tions and powers of the Federal Trade Commission under 

2 the Federal Trade Commission Act are available to the 

3 Commission to enforce compliance by any person with the 

4 requirements imposed under this title, irrespective of 

5 whether that person is engaged in commerce or meets any 

6 other jurisdictional tests in the Federal Trade Commission 

7 Act, including the power to enforce any regulation pre8 scribed by the Director under this title in the same man9 ner as if the violation had been a violation of a Federal 

10 Trade Commission trade regulation rule.’’; and 

11 (C) in subsection (d), by striking ‘‘Board’’ 

12 and inserting ‘‘Agency’’. 

13 (5) SECTION 704a.—Section 704A(a)(1) of the 

14 Equal Credit Opportunity Act (15 U.S.C. 1691c– 

15 1(a)(1)) is amended in by striking ‘‘Board’’ and in16 serting ‘‘Agency’’. 

17 (6) SECTION 705.—Section 705 of the Equal 

18 Credit Opportunity Act (15 U.S.C. 1691d) is 

19 amended— 

20 (A) in subsection (f), by striking ‘‘Board’’ 

21 each place such term appears and inserting 

22 ‘‘Agency’’; and 

23 (B) in subsection (g), by striking ‘‘Board’’ 

24 and inserting ‘‘Agency’’. 


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1 (7) SECTION 706.—Section 706 of the Equal 

2 Credit Opportunity Act (15 U.S.C. 1691e) is amend3 ed— 

4 (A) in subsection (e)— 

5 (i) by striking ‘‘Board’’ each place 

6 such term appears and inserting ‘‘Agency’’; 

7 and 

8 (ii) by striking ‘‘Federal Reserve Sys9 tem’’ and inserting ‘‘Consumer Financial 

10 Protection Agency’’; 

11 (B) in subsection (f), by striking ‘‘two 

12 years’’ each place such term appears and insert13 ing ‘‘5 years’’; 

14 (C) in subsection (g)— 

15 (i) by striking ‘‘The agencies having’’, 

16 in the 1st sentence, and inserting ‘‘The 

17 Agency and the agencies having’’; 

18 (ii) by striking ‘‘Each agency re19 ferred’’, in the 2nd sentence, and inserting 

20 ‘‘The Agency and each agency referred’’; 

21 (iii) by striking ‘‘Each such agency’’, 

22 in the 3rd sentence, and inserting ‘‘The 

23 Agency and each such agency’’; and 

24 (iv) by striking ‘‘whenever the agen25 cy’’ in the 3rd sentence, and inserting 


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1 ‘‘whenever the Agency or an agency having 

2 responsibility for administrative enforce3 ment under section 704’’; and 

4 (D) in subsection (k)— 

5 (i) by striking ‘‘Whenever an agency’’ 

6 and inserting ‘‘Whenever the Agency or an 

7 agency’’; and 

8 (ii) by striking ‘‘the agency shall no9 tify’’ and inserting ‘‘the Agency, or an 

10 agency referred to in any such paragraph, 

11 as the case may be, shall notify’’. 

12 (8) SECTION 707.—Section 707 of the Equal 

13 Credit Opportunity Act (15 U.S.C. 1691f) is amend14 ed by striking ‘‘Board’’ each place such term ap15 pears and inserting ‘‘Agency’’. 

16 (d) FAIR DEBT COLLECTION PRACTICES ACT.— 

17 (1) SECTION 803.—Section 803 of the Fair 

18 Debt Collection Practices Act (15 U.S.C. 1692a) is 

19 amended— 

20 (A) by redesignating paragraphs (1), (2), 

21 (3), (4), (5), (6), (7), and (8) as paragraphs 

22 (2), (3), (4), (5), (6), (7), (8), and (9), respec23 tively; and 

24 (B) by inserting before paragraph (2) (as 

25 so redesignated) the following new paragraph: 


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1 ‘‘(1) The term ‘Agency’ means the Consumer 

2 Financial Protection Agency.’’. 

3 (2) SECTION 813.—Section 813(e) of the Fair 

4 Debt Collection Practices Act (15 U.S.C. 1692k(e)) 

5 is amended by striking ‘‘Commission’’ and inserting 

6 ‘‘Agency’’. 

7 (3) SECTION 814.—Section 814 of the Fair 

8 Debt Collection Practices Act (15 U.S.C. 1692l) is 

9 amended— 

10 (A) by striking subsection (a) and insert11 ing the following new subsection: 

12 ‘‘(a) FEDERAL TRADE COMMISSION.—Subject to sec13 tion 4202 of the Consumer Financial Protection Agency 

14 Act of 2009, compliance with this title shall be enforced 

15 by the Commission, except to the extent that enforcement 

16 of the requirements imposed under this title is specifically 

17 committed to another agency (other than the Consumer 

18 Financial Protection Agency) under subsection (b). For 

19 purpose of the exercise by the Commission of its functions 

20 and powers under the Federal Trade Commission Act, a 

21 violation of this title shall be deemed an unfair or decep22 tive act or practice in violation of that Act. All of the func23 tions and powers of the Commission under the Federal 

24 Trade Commission Act are available to the Commission 

25 to enforce compliance by any person with this title, irreVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01148 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 spective of whether that person is engaged in commerce 

2 or meets any other jurisdictional tests in the Federal 

3 Trade Commission Act, including the power to enforce the 

4 provisions of this title in the same manner as if the viola5 tion had been a violation of a Federal Trade Commission 

6 trade regulation rule.’’; 

7 (B) in subsection (b)— 

8 (i) in the matter preceding paragraph 

9 (1), by striking ‘‘Compliance’’ and insert10 ing ‘‘ENFORCEMENT BY OTHER AGEN11 CY.—Subject to section 4202 of the Con12 sumer Financial Protection Agency Act of 

13 2009, compliance’’; 

14 (ii) in paragraph (1)(A), by striking 

15 ‘‘Office of the Comptroller of the Cur16 rency;’’ and inserting ‘‘head of the agency 

17 responsible for chartering and regulating 

18 national banks;’’; 

19 (iii) in paragraph (1)(B), by striking 

20 ‘‘and’’ after the semicolon; 

21 (iv) in paragraph (1)(C), by inserting 

22 ‘‘and’’ after the semicolon; 

23 (v) by inserting after subparagraph 

24 (C) of paragraph (1) the following new 

25 subparagraph: 


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1 ‘‘(D) savings associations and savings and 

2 loan holding companies by the Director of the 

3 Office of Thrift Supervision;’’; and 

4 (vi) by striking paragraph (2) and in5 serting the following new paragraph: 

6 ‘‘(2) subtitle E of the Consumer Financial Pro7 tection Agency Act of 2009, by the Agency;’’; and 

8 (C) by striking subsection (d) and insert9 ing the following new subsection: 

10 ‘‘(d) REGULATIONS.—The Agency may prescribe reg11 ulations with respect to the collection of debts by any debt 

12 collector.’’. 

13 (4) SECTION 815.—Section 815 (15 U.S.C. 

14 1692m) is amended— 

15 (A) in the section heading, by striking 

16 ‘‘Commission’’ and inserting ‘‘Agency’’; 

17 and 

18 (B) by striking ‘‘Commission’’ each place 

19 such term appears and inserting ‘‘Agency’’. 

20 (5) SECTION 817.—Section 817 (15 U.S.C. 

21 1692o) is amended by striking ‘‘Commission’’ each 

22 place such term appears and inserting ‘‘Agency’’. 

23 (e) ELECTRONIC FUND TRANSFER ACT.— 


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1 (1) SECTION 903.—Section 903 of the Elec2 tronic Fund Transfer Act (15 U.S.C. 1693a) is 

3 amended— 

4 (A) by striking paragraph (3) and insert5 ing the following new paragraph: 

6 ‘‘(3) the term ‘Agency’ means the Consumer Fi7 nancial Protection Agency;’’; and 

8 (B) in paragraph (6), by striking ‘‘Board’’ 

9 and inserting ‘‘Agency’’. 

10 (2) SECTION 904.—Section 904 of the Elec11 tronic Fund Transfer Act (15 U.S.C. 1693b) is 

12 amended by striking ‘‘Board’’ each place such term 

13 appears and inserting ‘‘Agency’’. 

14 (3) SECTION 905.—Section 905 of the Elec15 tronic Fund Transfer Act (15 U.S.C. 1693c) is 

16 amended by striking ‘‘Board’’ each place such term 

17 appears and inserting ‘‘Agency’’. 

18 (4) SECTION 906.—Section 906(b) of the Elec19 tronic Fund Transfer Act (15 U.S.C. 1693d(b)) is 

20 amended by striking ‘‘Board’’ and inserting ‘‘Agen21 cy’’. 

22 (5) SECTION 907.—Section 907(b) of the Elec23 tronic Fund Transfer Act (15 U.S.C. 1693e(b)) is 

24 amended by striking ‘‘Board’’ and inserting ‘‘Agen25 cy’’. 


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1 (6) SECTION 908.—Section 908(f)(7) of the 

2 Electronic Fund Transfer Act (15 U.S.C. 

3 1693f(f)(7)) is amended by striking ‘‘Board’’ and in4 serting ‘‘Agency’’. 

5 (7) SECTION 910.—Section 910(a)(1)(E) of the 

6 Electronic Fund Transfer Act (15 U.S.C. 

7 1693h(a)(1)(E)) is amended by striking ‘‘Board’’ 

8 and inserting ‘‘Agency’’. 

9 (8) SECTION 911.—Section 911(b)(3) of the 

10 Electronic Fund Transfer Act (15 U.S.C. 

11 1693i(b)(3) is amended by striking ‘‘Board’’ and in12 serting ‘‘Agency’’. 

13 (9) SECTION 915.—Section 915(d) of the Elec14 tronic Fund Transfer Act (15 U.S.C. 1693m(d)) is 

15 amended— 

16 (A) by striking ‘‘Board’’ each place such 

17 term appears and inserting ‘‘Agency’’; and 

18 (B) by striking ‘‘Federal Reserve System’’ 

19 and inserting ‘‘Consumer Financial Protection 

20 Agency’’. 

21 (10) SECTION 917.—Section 917 of the Elec22 tronic Fund Transfer Act (15 U.S.C. 1693o) is 

23 amended— 

24 (A) in subsection (a)— 


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1 (i) by striking ‘‘Compliance’’ and in2 serting ‘‘Subject to section 4202 of the 

3 Consumer Financial Protection Agency Act 

4 of 2009, compliance’’; 

5 (ii) in paragraph (1)(A), by striking 

6 ‘‘Office of the Comptroller of the Cur7 rency’’ and inserting ‘‘head of the agency 

8 responsible for chartering and regulating 

9 national banks’’; 

10 (iii) in paragraph (l)(B), by inserting 

11 ‘‘of Governors of the Federal Reserve Sys12 tem’’ after ‘‘Board’’; and 

13 (iv) by striking paragraph (2) and in14 serting: 

15 ‘‘(2) subtitle E of the Consumer Financial Pro16 tection Agency Act of 2009, by the Agency;’’; and 

17 (B) by striking subsection (c) and insert18 ing the following new subsection: 

19 ‘‘(c) OVERALL ENFORCEMENT AUTHORITY OF THE

20 FEDERAL TRADE COMMISSION.—Except to the extent 

21 that enforcement of the requirements imposed under this 

22 title is specifically committed to some other Government 

23 agency (other than the Consumer Financial Protection 

24 Agency) under subsection (a) and subject to section 4202 

25 of the Consumer Financial Protection Agency Act of 2009, 


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1 the Federal Trade Commission shall enforce such require2 ments. For the purpose of the exercise by the Federal 

3 Trade Commission of its functions and powers under the 

4 Federal Trade Commission Act, a violation of any require5 ment imposed under this title shall be deemed a violation 

6 of a requirement imposed under that Act. All of the func7 tions and powers of the Federal Trade Commission under 

8 the Federal Trade Commission Act are available to the 

9 Commission to enforce compliance by any person subject 

10 to the jurisdiction of the Commission with the require11 ments imposed under this title, irrespective of whether 

12 that person is engaged in commerce or meets any other 

13 jurisdictional tests in the Federal Trade Commission 

14 Act.’’. 

15 (11) SECTION 918.—Section 918 of the Elec16 tronic Fund Transfer Act (15 U.S.C. 1693p) is 

17 amended by striking ‘‘Board’’ each place such term 

18 appears and inserting ‘‘Agency’’. 

19 (12) SECTION 919.—Section 919 of the Elec20 tronic Fund Transfer Act (15 U.S.C. 1693q) is 

21 amended by striking ‘‘Board’’ each place such term 

22 appears and inserting ‘‘Agency’’. 

23 (13) SECTION 920.—Section 920 of the Elec24 tronic Fund Transfer Act (15 U.S.C. 1693r) is 


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1 amended by striking ‘‘Board’’ each place such term 

2 appears and inserting ‘‘Agency’’. 

3 (f) AMENDMENTS TO HOEPA RELATING TO THE

4 TRUTH IN LENDING ACT.—Section 158 of the Home 

5 Ownership and Equity Protection Act of 1994 (15 U.S.C. 

6 1601 note) (relating to hearings on home equity lending) 

7 is amended— 

8 (1) in subsection (a), by striking ‘‘Board of 

9 Governors of the Federal Reserve System, in con10 sultation with the Consumer Advisory Council of the 

11 Board,’’ and inserting ‘‘Consumer Financial Protec12 tion Agency, in consultation with the Advisory 

13 Board to the Agency’’; and 

14 (2) in subsection (b), by striking ‘‘Board of 

15 Governors of the Federal Reserve System’’ and in16 serting ‘‘Consumer Financial Protection Agency’’. 

17 (g) AMENDMENT TO THE FAIR AND ACCURATE

18 CREDIT TRANSACTIONS ACT OF 2003 RELATING TO THE

19 FAIR CREDIT REPORTING ACT.—Section 214(b)(1) of the 

20 Fair and Accurate Credit Transactions Act of 2003 (15 

21 U.S.C. 1681s–3 note) is amended by striking ‘‘The Fed22 eral banking agencies, the National Credit Union Adminis23 tration, and the Commission, with respect to the entities 

24 that are subject to their respective enforcement authority 

25 under section 621 of the Fair Credit Reporting Act and’’ 


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1 and inserting ‘‘The Consumer Financial Protection Agen2 cy, with respect to a person subject to the enforcement 

3 authority of the Agency, the Commodity Futures Trading 

4 Commission, and’’. 

5 SEC. 4805. AMENDMENTS TO THE EXPEDITED FUNDS 

6 AVAILABILITY ACT. 

7 (a) SECTION 605.—Section 605(f)(1) of the Expe8 dited Funds Availability Act (12 U.S.C. 4004(f)(1)) is 

9 amended by inserting ‘‘, in consultation with the Director 

10 of the Consumer Financial Protection Agency,’’ after 

11 ‘‘Board’’. 

12 (b) SECTION 609.—Section 609(a) of the Expedited 

13 Funds Availability Act (12 U.S.C. 4008(a)) is amended 

14 by inserting ‘‘, in consultation with the Director of the 

15 Consumer Financial Protection Agency,’’ after ‘‘Board’’. 

16 SEC. 4806. AMENDMENTS TO THE FEDERAL DEPOSIT IN17 SURANCE ACT. 

18 (a) SECTION 8.—Section 8(t) the Federal Deposit In19 surance Act (12 U.S.C. 1818(t)), as amended by section 

20 1111(b)(2), is further amended by adding at the end the 

21 following new paragraph: 

22 ‘‘(7) REFERRAL TO CONSUMER FINANCIAL PRO23 TECTION COMMISSION.—Each appropriate Federal 

24 banking agency shall make a referral to the Con25 sumer Financial Protection Agency when the FedVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01156 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 eral banking agency has a reasonable belief that a 

2 violation of an enumerated consumer law, as defined 

3 in section 4202(e)(2) of the Consumer Financial 

4 Protection Agency Act of 2009, by any insured de5 pository institution or institution-affiliated party 

6 within the jurisdiction of that appropriate Federal 

7 banking agency.’’. 

8 (b) SECTION 43.—Section 43 of the Federal Deposit 

9 Insurance Act (12 U.S.C. 1831t) is amended— 

10 (1) in subsection (c), by striking ‘‘Federal 

11 Trade Commission’’ and inserting ‘‘Agency’’; 

12 (2) in subsection (d), by striking ‘‘Federal 

13 Trade Commission’’ and inserting ‘‘Agency’’; 

14 (3) in subsection (e)— 

15 (A) in paragraph (2)(B), by striking ‘‘Fed16 eral Trade Commission’’ and inserting ‘‘Agen17 cy’’; and 

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

19 paragraph: 

20 ‘‘(5) AGENCY.—The term ‘Agency’ means the 

21 Consumer Financial Protection Agency.’’. 

22 (c) SECTION 43(f).—Section 43(f) of the Federal De23 posit Insurance Act (12 U.S.C. 1831t(f)) is amended— 

24 (1) by striking paragraph (1) and inserting the 

25 following new paragraph: 


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1 ‘‘(1) LIMITED ENFORCEMENT AUTHORITY.— 

2 Compliance with the requirements of subsections (b), 

3 (c), and (e), and any regulation prescribed or order 

4 issued under such subsection, shall be enforced 

5 under the Consumer Financial Protection Agency 

6 Act of 2009 by the Agency with respect to any per7 son (and without regard to the provision of a con8 sumer financial product or service).’’; and 

9 (2) in paragraph (2), by striking subparagraph 

10 (C) and inserting the following new subparagraph: 

11 ‘‘(C) LIMITATION ON STATE ACTION

12 WHILE FEDERAL ACTION PENDING.—If the 

13 Agency has instituted an enforcement action for 

14 a violation of this section, no appropriate State 

15 supervisory may, during the pendency of such 

16 action, bring an action under this section 

17 against any defendant named in the complaint 

18 of the Agency for any violation of this section 

19 that is alleged in that complaint.’’. 

20 SEC. 4807. AMENDMENTS TO THE GRAMM-LEACH-BLILEY 

21 ACT. 

22 (a) SECTION 501.—Section 501(b) of the Gramm23 Leach-Bliley Act (15 U.S.C. 6801(b)) is amended by in24 serting ‘‘(other than the Consumer Financial Protection 

25 Agency)’’ after ‘‘title’’. 


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1 (b) SECTION 502.—Section 502(e)(5) of the Gramm2 Leach-Bliley Act (15 U.S.C. 6802(e)(5)) is amended by 

3 inserting ‘‘the Consumer Financial Protection Agency,’’ 

4 after ‘‘(including’’. 

5 (c) SECTION 503.—Section 503(e)(1) of the Gramm6 Leach-Bliley Act (15 U.S.C. 6803(e)(1)) is amended— 

7 (1) by inserting ‘‘Consumer Financial Protec8 tion Agency in consultation with the other’’ before 

9 ‘‘agencies’’; and 

10 (2) by striking ‘‘jointly’’. 

11 (d) SECTION 504.—Section 504(a)(1) of the Gramm12 Leach-Bliley Act (15 U.S.C. 6804(a)(1)) is amended— 

13 (1) by striking ‘‘The Federal banking agencies, 

14 the National Credit Union Administration, the Sec15 retary of the Treasury,’’ and inserting ‘‘The Con16 sumer Financial Protection Agency and’’; 

17 (2) by striking ‘‘, and the Federal Trade Com18 mission’’; and 

19 (3) by inserting ‘‘the Federal banking agencies, 

20 the National Credit Union Administration, the Sec21 retary of the Treasury, the Federal Trade Commis22 sion, and’’ before ‘‘representatives of State insurance 

23 authorities’’. 

24 (e) SECTION 505.— 


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1 (1) Section 505(a) of the Gramm-Leach-Bliley 

2 Act (15 U.S.C. 6805(a)) is amended— 

3 (A) in the matter preceding paragraph (1), 

4 by striking ‘‘This subtitle and the regulations 

5 prescribed thereunder shall be enforced by’’ and 

6 inserting ‘‘Subject to section 4202 of the Con7 sumer Financial Protection Agency Act of 

8 2009, this subtitle and the regulations pre9 scribed under this title shall be enforced by the 

10 Consumer Financial Protection Agency,’’; and 

11 (B) by inserting after paragraph (7) the 

12 following new paragraph: 

13 ‘‘(8) Under the Consumer Financial Protection 

14 Agency Act of 2009, by the Consumer Financial 

15 Protection Agency in the case of financial institu16 tions and other covered persons and service pro17 viders subject to the jurisdiction of the Agency 

18 under that Act, but not with respect to the stand19 ards under section 501.’’. 

20 (2) Section 505(b)(1) of the Gramm-Leach-Bli21 ley Act (15 U.S.C. 6805(b)(1)) is amended by in22 serting ‘‘, other than the Consumer Financial Pro23 tection Agency,’’ after ‘‘described in subsection (a)’’. 

24 (f) SECTION 507.—Subsection 507(b) of the Gramm25 Leach-Bliley Act (15 U.S.C. 6807(b)) is amended by strikVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01160 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ing ‘‘Federal Trade Commission’’ and inserting ‘‘Con2 sumer Financial Protection Agency, or in the case of a 

3 rule under section 501(b), the Federal Trade Commission 

4 or the Securities and Exchange Commission’’. 

5 SEC. 4808. AMENDMENTS TO THE HOME MORTGAGE DIS6 CLOSURE ACT OF 1975. 

7 (a) SECTION 303.—Section 303 of the Home Mort8 gage Disclosure Act of 1975 (12 U.S.C. 2802) is amend9 ed— 

10 (1) by redesignating paragraphs (1), (2), (3), 

11 (4), (5), and (6) as paragraphs (2), (3), (4), (5), 

12 (6), and (7), respectively; and 

13 (2) by inserting before paragraph (2) (as so re14 designated) the following new paragraph: 

15 ‘‘(1) The term ‘Agency’ means the Consumer 

16 Financial Protection Agency.’’. 

17 (b) UNIVERSAL AMENDMENT RELATING TO AGEN18 CY.—Except as provided in subsections (c), (d), (e), and 

19 (f), the Home Mortgage Disclosure Act of 1975 (12 

20 U.S.C. 2801–11) is amended by striking ‘‘Board’’ each 

21 place such term appears and inserting ‘‘Agency’’. 

22 (c) SECTION 304.—Section 304 of the Home Mort23 gage Disclosure Act of 1975 (12 U.S.C. 2803(h)) is 

24 amended— 

25 (1) in subsection (b)— 


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1 (A) by striking ‘‘and’’ after the semicolon 

2 at the end of paragraph (3); 

3 (B) by striking ‘‘and gender’’ in paragraph 

4 (4), and inserting ‘‘age, and gender’’; 

5 (C) by striking the period at the end of 

6 paragraph (4) and inserting a semicolon; and 

7 (D) by inserting after paragraph (4) the 

8 following new paragraphs: 

9 ‘‘(5) the number and dollar amount of mort10 gage loans grouped according to the following meas11 urements: 

12 ‘‘(A) the total points and fees payable at 

13 origination in connection with the mortgage as 

14 determined by the Agency, taking into account 

15 section 103(aa)(4) of the Truth in Lending Act 

16 (15 U.S.C. 1602(aa)(4)); 

17 ‘‘(B) the difference between the annual 

18 percentage rate associated with the loan and a 

19 benchmark rate or rates for all loans; 

20 ‘‘(C) the term in months of any prepay21 ment penalty or other fee or charge payable on 

22 repayment of some portion of principal or the 

23 entire principal in advance of scheduled pay24 ments; and 


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1 ‘‘(D) such other information as the Agency 

2 may require; and 

3 ‘‘(6) the number and dollar amount of mort4 gage loans and completed applications grouped ac5 cording to the following measurements: 

6 ‘‘(A) the value of the real property pledged 

7 or proposed to be pledged as collateral; 

8 ‘‘(B) the actual or proposed term in 

9 months of any introductory period after which 

10 the rate of interest may change; 

11 ‘‘(C) the presence of contractual terms or 

12 proposed contractual terms that would allow the 

13 mortgagor or applicant to make payments other 

14 than fully-amortizing payments during any por15 tion of the loan term; 

16 ‘‘(D) the actual or proposed term in 

17 months of the mortgage loan; 

18 ‘‘(E) the channel through which applica19 tion was made, including retail, broker, and 

20 other relevant categories; 

21 ‘‘(F) as the Agency may determine to be 

22 appropriate, a unique identifier that identifies 

23 the loan originator as set forth in section 1503 

24 of the Secure and Fair Enforcement for Mort25 gage Licensing Act of 2008; 


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1 ‘‘(G) as the Agency may determine to be 

2 appropriate, a universal loan identifier; 

3 ‘‘(H) as the Agency may determine to be 

4 appropriate, the parcel number that cor5 responds to the real property pledged or pro6 posed to be pledged as collateral; 

7 ‘‘(I) the credit score of mortgage appli8 cants and mortgagors in such form as the 

9 Agency may prescribe, except that the Agency 

10 shall modify or require modification of credit 

11 score data that is or will be available to the 

12 public to protect the compelling privacy interest 

13 of the mortgage applicant or mortgagors; and 

14 ‘‘(J) such other information as the Agency 

15 may require.’’; 

16 (2) by striking subsection (h) and inserting the 

17 following new subsection: 

18 ‘‘(h) SUBMISSION TO AGENCIES.— 

19 ‘‘(1) IN GENERAL.—The data required to be 

20 disclosed under subsection (b) shall be submitted to 

21 the Agency or to the appropriate agency for any in22 stitution reporting under this title, in accordance 

23 with regulations prescribed by the Agency. Institu24 tions will not be required to report new data re25 quired under section 4808(c) before the first JanuVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01164 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ary 1 that occurs after the end of the 9-month pe2 riod beginning on the date that regulations pre3 scribed by the Agency are prescribed in final form. 

4 ‘‘(2) REGULATIONS.—Notwithstanding the re5 quirement of section 304(a)(2)(A) for disclosure by 

6 census tract, the Agency, in cooperation with other 

7 appropriate regulators, including— 

8 ‘‘(A) the head of the agency responsible for 

9 chartering and regulating national banks for 

10 national banks and Federal branches, Federal 

11 agencies of foreign banks, and savings associa12 tions; 

13 ‘‘(B) the Federal Deposit Insurance Cor14 poration for depository institutions insured by 

15 the Federal Deposit Insurance Corporation 

16 (other than members of the Federal Reserve 

17 System, Federal savings associations, and sav18 ings and loan holding companies) and insured 

19 State branches of foreign banks; 

20 ‘‘(C) the Director of the Office of Thrift 

21 Supervision for Federal savings associations 

22 and savings and loan holding companies; 

23 ‘‘(D) the National Credit Union Adminis24 tration Board for credit unions; and 


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1 ‘‘(E) the Secretary of Housing and Urban 

2 Development for other lending institutions not 

3 regulated by an agency referred to in subpara4 graph (A), (B), (C), or (D), 

5 shall develop regulations prescribing the format for 

6 such disclosures, the method for submission of the 

7 data to the appropriate regulatory agency, and the 

8 procedures for disclosing the information to the pub9 lic. 

10 ‘‘(3) REQUIRED DISCLOSURES.—The regula11 tions prescribed under paragraph (2) shall require 

12 the collection of data required to be disclosed under 

13 subsection (b) with respect to loans sold by each in14 stitution reporting under this title, and, in addition, 

15 shall require disclosure of the class of the purchaser 

16 of such loans. 

17 ‘‘(4) ADDITIONAL DATA OR EXPLANATIONS.— 

18 Any reporting institution may submit in writing to 

19 the Agency or to the appropriate agency such addi20 tional data or explanations as it deems relevant to 

21 the decision to originate or purchase mortgage 

22 loans.’’; 

23 (3) in subsection (i), by striking ‘‘subsection 

24 (b)(4)’’ and inserting ‘‘paragraphs (4), (5), and (6) 

25 of subsection (b)’’; 


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1 (4) in subsection (j)— 

2 (A) by striking ‘‘(as’’ where such term ap3 pears in paragraph (1) and inserting ‘‘(con4 taining loan-level and application-level informa5 tion relating to disclosures required under sub6 sections (a) and (b) and as otherwise’’; 

7 (B) by striking ‘‘in the format in which 

8 such information is maintained by the institu9 tion’’ where such term appears in paragraph 

10 (2)(A), and inserting ‘‘in such formats as the 

11 Agency may require’’; and 

12 (C) by striking paragraph (3) and insert13 ing the following new paragraph: 

14 ‘‘(3) CHANGE OF FORM NOT REQUIRED.—A de15 pository institution meets the disclosure requirement 

16 of paragraph (1) if the institution provides the infor17 mation required under such paragraph in such for18 mats as the Agency may require.’’; and 

19 (5) by striking paragraph (2) of subsection (m) 

20 and inserting the following new paragraph: 

21 ‘‘(2) FORM OF INFORMATION.—In complying 

22 with paragraph (1), a depository institution shall 

23 provide the person requesting the information with 

24 a copy of the information requested in such formats 

25 as the Agency may require.’’. 


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1 (d) SECTION 305.—Section 305 of the Home Mort2 gage Disclosure Act of 1975 (12 U.S.C. 2804) is amend3 ed— 

4 (1) by striking subsection (b) and inserting the 

5 following new subsection: 

6 ‘‘(b) POWERS OF CERTAIN OTHER AGENCIES.—Com7 pliance with the requirements imposed under this title 

8 shall be enforced under— 

9 ‘‘(1) section 8 of the Federal Deposit Insurance 

10 Act, in the case of— 

11 ‘‘(A) national banks, and Federal branches 

12 and Federal agencies of foreign banks, by the 

13 head of the agency responsible for chartering 

14 and regulating national banks; 

15 ‘‘(B) member banks of the Federal Reserve 

16 System (other than national banks), branches 

17 and agencies of foreign banks (other than Fed18 eral branches, Federal agencies, and insured 

19 State branches of foreign banks), commercial 

20 lending companies owned or controlled by for21 eign banks, and organizations operating under 

22 section 25 or 25A of the Federal Reserve Act, 

23 by the Board; 

24 ‘‘(C) depository institutions insured by the 

25 Federal Deposit Insurance Corporation (other 


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1 than members of the Federal Reserve System, 

2 Federal savings associations, and savings and 

3 loan holding companies) and insured State 

4 branches of foreign banks, by the Board of Di5 rectors of the Federal Deposit Insurance Cor6 poration; and 

7 ‘‘(D) Federal savings associations, and 

8 savings and loan holding companies, by the Di9 rector of the Office of Thrift Supervision; 

10 ‘‘(2) subtitle E of the Consumer Financial Pro11 tection Agency Act of 2009, by the Agency; 

12 ‘‘(3) the Federal Credit Union Act, by the Ad13 ministrator of the National Credit Union Adminis14 tration with respect to any credit union; and 

15 ‘‘(4) other lending institutions, by the Secretary 

16 of Housing and Urban Development. The terms 

17 used in paragraph (1) that are not defined in this 

18 title or otherwise defined in section 3(s) of the Fed19 eral Deposit Insurance Act (12 U.S.C. 1813(s)) 

20 shall have the meaning given to them in section 1(b) 

21 of the International Banking Act of 1978 (12 U.S.C. 

22 3101). 

23 The terms used in paragraph (1) that are not defined in 

24 this title or otherwise defined in section 3(s) of the Federal 

25 Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the 


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1 meaning given to them in section 1(b) of the International 

2 Banking Act of 1978.’’; and 

3 (2) by inserting at the end of section 305 the 

4 following new subsection: 

5 ‘‘(d) OVERALL ENFORCEMENT AUTHORITY OF THE

6 CONSUMER FINANCIAL PROTECTION AGENCY.—Subject 

7 to section 4202 of the Consumer Financial Protection 

8 Agency Act of 2009, enforcement of the requirements im9 posed under this title is committed to each of the agencies 

10 under subsection (b). The Agency may exercise its authori11 ties under the Consumer Financial Protection Agency Act 

12 of 2009 to exercise principal authority to examine and en13 force compliance by any person with the requirements 

14 under this title.’’. 

15 (e) SECTION 306.—Subsection 306(b) of the Home 

16 Mortgage Disclosure Act of 1975 (12 U.S.C. 2805(b)) is 

17 amended to read as follows: 

18 ‘‘(b) The Agency may, by regulation, exempt from the 

19 requirements of this title any State chartered depository 

20 institution within any State or subdivision of any state if 

21 the Agency determines that, under the law of such State 

22 or subdivision, that institution is subject to requirements 

23 substantially similar to those imposed under this title, and 

24 that such law contains adequate provisions for enforce25 ment. Notwithstanding any other provision of this subVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01170 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 section, compliance with the requirements imposed under 

2 this subsection shall be enforced by the head of the agency 

3 responsible for chartering and regulating national banks 

4 under section 8 of the Federal Deposit Insurance Act in 

5 the case of national banks and savings association the de6 posits of which are insured by the Federal Deposit Insur7 ance Corporation.’’. 

8 (f) SECTION 307.—Section 307 of the Home Mort9 gage Disclosure Act of 1975 (12 U.S.C. 2806) is amended 

10 to read as follows: 

11 ‘‘SEC. 307. RESEARCH AND IMPROVED METHODS. 

12 ‘‘(a) ENHANCED COMPLIANCE IN ECONOMICAL MAN13 NER.— 

14 ‘‘(1) IN GENERAL.—The Director of the Con15 sumer Financial Protection Agency, with the assist16 ance of the Secretary, the Director of the Bureau of 

17 the Census, the Board of Governors of the Federal 

18 Reserve System, the Federal Deposit Insurance Cor19 poration, and such other persons as the Consumer 

20 Financial Protection Agency deems appropriate, 

21 shall develop or assist in the improvement of, meth22 ods of matching addresses and census tracts to fa23 cilitate compliance by depository institutions in as 

24 economical a manner as possible with the require25 ments of this title. 


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1 ‘‘(2) AUTHORIZATION OF APPROPRIATION.— 

2 There is authorized to be appropriated such sums as 

3 may be necessary to carry out this subsection. 

4 ‘‘(3) AUTHORITY OF AGENCY.—The Director of 

5 the Consumer Financial Protection Agency is au6 thorized to utilize, contract with, act through, or 

7 compensate any person or agency in order to carry 

8 out this subsection. 

9 ‘‘(b) RECOMMENDATIONS TO THE CONGRESS.—The 

10 Director of the Consumer Financial Protection Agency 

11 shall recommend to the Committee on Financial Services 

12 of the House of Representatives and the Committee on 

13 Banking, Housing, and Urban Affairs of the Senate such 

14 additional legislation as the Director of the Consumer Fi15 nancial Protection Agency deems appropriate to carry out 

16 the purpose of this title.’’. 

17 SEC. 4809. AMENDMENTS TO DIVISION D OF THE OMNIBUS 

18 APPROPRIATIONS ACT, 2009. 

19 (a) Section 626(a) of title VI of division D of the 

20 Omnibus Appropriations Act, 2009 (15 U.S.C. 1638 note) 

21 (as amended by the Credit Card Accountability Responsi22 bility and Disclosure Act of 2009) is amended— 

23 (1) by striking by paragraph (1) and inserting 

24 the following new paragraph: ‘‘(1) The Director of 

25 the Consumer Financial Protection Agency shall 


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1 have authority to prescribe regulations with respect 

2 to mortgage loans in accordance with section 553 of 

3 title 5, United States Code. Such rulemaking shall 

4 relate to unfair or deceptive acts or practices regard5 ing mortgage loans, which may include unfair or de6 ceptive acts or practices involving loan modification 

7 and foreclosure rescue services. Any violation of a 

8 regulation prescribed under this subsection shall be 

9 treated as a violation of a regulation prohibiting un10 fair, deceptive, or abusive acts or practices under the 

11 Consumer Financial Protection Agency Act of 

12 2009.’’; 

13 (2) by striking paragraph (2); 

14 (3) by striking paragraph (3); and 

15 (4) by striking paragraph (4) and inserting the 

16 following new paragraph: 

17 ‘‘(2) The Director of the Consumer Financial Protec18 tion Agency shall enforce the regulations issued under 

19 paragraph (1) in the same manner, by the same means, 

20 and with the same jurisdiction, powers, and duties as 

21 though all applicable terms and provisions of the Con22 sumer Financial Protection Agency Act of 2009 were in23 corporated into and made part of this section.’’. 

24 (b) Section 626(b) of title VI of division D of the 

25 Omnibus Appropriations Act, 2009 (15 U.S.C. 1638 note) 


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1 (as amended by the Credit Card Accountability Responsi2 bility and Disclosure Act of 2009) is amended by striking 

3 ‘‘primary Federal regulator’’ each place it appears and in4 serting ‘‘Consumer Financial Protection Agency’’. 

5 SEC. 4810. AMENDMENTS TO THE HOMEOWNERS PROTEC6 TION ACT OF 1998. 

7 Section 10 of the Homeowners Protection Act of 

8 1998 (12 U.S.C. 4909) is amended— 

9 (1) in the matter preceding paragraph (1) of 

10 subsection (a), by striking ‘‘Compliance’’ and insert11 ing ‘‘Subject to section 4202 of the Consumer Fi12 nancial Protection Agency Act of 2009, compliance’’; 

13 (2) in subsection (a)(2), by striking ‘‘and’’ after 

14 the semicolon at the end; 

15 (3) in subsection (a)(3), by striking the period 

16 at the end and inserting ‘‘; and’’; 

17 (4) by inserting after subsection (a)(3), the fol18 lowing new paragraph: 

19 ‘‘(4) subtitle E of the Consumer Financial Pro20 tection Agency Act of 2009, by the Consumer Fi21 nancial Protection Agency.’’; and 

22 (5) in subsection (b)(2), by inserting ‘‘, subject 

23 to section 4202 of the Consumer Financial Protec24 tion Agency Act of 2009’’ before the period at the 

25 end. 


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1 SEC. 4811. AMENDMENTS TO THE REAL ESTATE SETTLE2 MENT PROCEDURES ACT OF 1974. 

3 (a) SECTION 3.—Section 3 of the Real Estate Settle4 ment Procedures Act of 1974 (12 U.S.C. 2602) is amend5 ed— 

6 (1) in paragraph (7), by striking ‘‘and’’ after 

7 the semicolon at the end; 

8 (2) in paragraph (8), by striking the period at 

9 the end and inserting ‘‘; and’’; and 

10 (3) by adding at the end the following new 

11 paragraph: 

12 ‘‘(9) the term ‘Agency’ means the Consumer Fi13 nancial Protection Agency.’’. 

14 (b) SECTION 4.—Section 4 of the Real Estate Settle15 ment Procedures Act of 1974 (12 U.S.C. 2603) is amend16 ed— 

17 (1) in subsection (a), by striking the first sen18 tence and inserting the following: ‘‘The Agency shall 

19 publish a single, integrated disclosure for mortgage 

20 loan transactions, including real estate settlement 

21 cost statements, which include the disclosure re22 quirements of this title, in conjunction with the dis23 closure requirements of the Truth in Lending Act 

24 (15 U.S.C. 1601 note et seq.) that, taken together, 

25 may apply to transactions subject to both or either 

26 law. The purpose of such model disclosure shall be 


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1 to facilitate compliance with the disclosure require2 ments of those titles, and to aid the borrower or les3 see in understanding the transaction by utilizing 

4 readily understandable language to simplify the tech5 nical nature of the disclosures.’’; 

6 (2) by striking ‘‘Secretary’’ each place such 

7 term appears and inserting ‘‘Agency’’; and 

8 (3) by striking ‘‘form’’ each place such term ap9 pears and inserting ‘‘forms’’. 

10 (c) SECTION 5.—Section 5 of the Real Estate Settle11 ment Procedures Act of 1974 (12 U.S.C. 2604) is amend12 ed— 

13 (1) by striking ‘‘Secretary’’ each place such 

14 term appears, and inserting ‘‘Agency’’; and 

15 (2) by striking the first sentence of subsection 

16 (a), and inserting ‘‘The Agency shall prepare and 

17 distribute booklets jointly complying with the re18 quirements of the Truth in Lending Act (15 U.S.C. 

19 1601 note et seq.) and the provisions of this title, 

20 in order to help persons borrowing money to finance 

21 the purchase of residential real estate better to un22 derstand the nature and costs of real estate settle23 ment services.’’. 


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1 (d) SECTION 6.—Section 6(j)(3) of the Real Estate 

2 Settlement Procedures Act of 1974 (12 U.S.C. 2605(j)(3)) 

3 is amended— 

4 (1) by striking ‘‘Secretary’’ and inserting ‘‘Di5 rector of the Agency’’; and 

6 (2) by striking ‘‘by regulations that shall take 

7 effect not later than April 20, 1991,’’ and inserting 

8 ‘‘by regulation,’’. 

9 (e) SECTION 7.—Section 7 of the Real Estate Settle10 ment Procedures Act of 1974 (12 U.S.C. 2606) is amend11 ed by striking ‘‘Secretary’’ and inserting ‘‘the Director of 

12 the Agency’’. 

13 (f) SECTION 8.—Section 8 of the Real Estate Settle14 ment Procedures Act of 1974 (12 U.S.C. 2607) is amend15 ed— 

16 (1) in subsection (c)(5), by striking ‘‘prescribed 

17 by the Secretary’’ and inserting ‘‘prescribed by the 

18 Director of the Agency’’; and 

19 (2) in subsection (d)(4)— 

20 (A) by striking ‘‘The Secretary,’’ and in21 serting ‘‘The Agency, the Secretary,’’; and 

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

23 sentence: ‘‘However, to the extent that a Fed24 eral law authorizes the Agency and other Fed25 eral and State agencies to enforce or administer 


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1 the law, the Agency shall have primary author2 ity to enforce or administer that Federal law in 

3 accordance with section 4202 of the Consumer 

4 Financial Protection Agency Act of 2009.’’. 

5 (g) SECTION 10.—Section 10(d) of the Real Estate 

6 Settlement Procedures Act of 1974 (12 U.S.C. 2609(d)) 

7 is amended by striking ‘‘Secretary’’ and inserting ‘‘Agen8 cy’’. 

9 (h) SECTION 16.—Section 16 of the Real Estate Set10 tlement Procedures Act of 1974 (12 U.S.C. 2614) is 

11 amended by inserting ‘‘the Agency,’’ before ‘‘the Sec12 retary’’. 

13 (i) SECTION 18.—Section 18 of the Real Estate Set14 tlement Procedures Act of 1974 (12 U.S.C. 2616) is 

15 amended by striking ‘‘Secretary’’ each place such term ap16 pears and inserting ‘‘Agency’’. 

17 (j) SECTION 19.—Section 19 of the Real Estate Set18 tlement Procedures Act of 1974 (12 U.S.C. 2617) is 

19 amended— 

20 (1) in the section heading, by striking ‘‘SEC21 RETARY’’ and inserting ‘‘AGENCY’’; and 

22 (2) by striking ‘‘Secretary’’ each place such 

23 term appears and inserting ‘‘Agency’’. 


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1 SEC. 4812. AMENDMENTS TO THE RIGHT TO FINANCIAL 

2 PRIVACY ACT OF 1978. 

3 (a) AMENDMENTS TO SECTION 1101.—Section 1101 

4 of the Right to Financial Privacy Act of 1978 (12 U.S.C. 

5 3401) is amended— 

6 (1) by striking paragraph (1) and inserting the 

7 following new paragraph: 

8 ‘‘(1) ‘financial institution’ means any bank, sav9 ings association, card issuer as defined in section 

10 103(n) of the Truth in Lending Act, credit union, or 

11 consumer finance institution located in any State or 

12 territory of the United States, the District of Colum13 bia, Puerto Rico, Guam, American Samoa, or the 

14 Virgin Islands;’’; and 

15 (2) in paragraph (7), by inserting after sub16 paragraph (A) the following new subparagraph: 

17 ‘‘(B) the Consumer Financial Protection 

18 Agency;’’. 

19 (b) AMENDMENTS TO SECTION 1112.—Section 

20 1112(e) of the Right to Financial Privacy Act of 1978 

21 (12 U.S.C. 3412) is amended by striking ‘‘and the Com22 modity Futures Trading Commission is permitted’’ and in23 serting ‘‘the Commodity Futures Trading Commission, 

24 and the Consumer Financial Protection Agency is per25 mitted’’. 


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1 (c) AMENDMENTS TO SECTION 1113.—Section 1113 

2 of the Right to Financial Privacy Act of 1978 (12 U.S.C. 

3 3413) is amended by adding at the end the following new 

4 subsection— 

5 ‘‘(r) DISCLOSURE TO THE CONSUMER FINANCIAL

6 PROTECTION AGENCY.—Nothing in this chapter shall 

7 apply to the examination by or disclosure to the Consumer 

8 Financial Protection Agency of financial records or infor9 mation in the exercise of its authority with respect to a 

10 financial institution.’’. 

11 SEC. 4813. AMENDMENTS TO THE SECURE AND FAIR EN12 FORCEMENT FOR MORTGAGE LICENSING ACT 

13 OF 2008. 

14 (a) SECTION 1503.—Section 1503 of the Secure and 

15 Fair Enforcement for Mortgage Licensing Act of 2008 (12 

16 U.S.C. 5102) is amended— 

17 (1) by striking paragraph (9); 

18 (2) by redesignating paragraph (1) as para19 graph (4), and transferring paragraph (4) (as so re20 designated) and inserting such paragraph after 

21 paragraph (3) (as added by paragraph (5)); 

22 (3) by redesignating paragraphs (3), (4), (5), 

23 (6), (7), (8), (10), (11), and (12) as paragraphs (5), 

24 (6), (7), (8), (9), (10), (11), (12), and (13), respec25 tively; 


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1 (4) by inserting before paragraph (2) the fol2 lowing new paragraph: 

3 ‘‘(1) AGENCY.—The term ‘Agency’ means the 

4 Consumer Financial Protection Agency.’’; and 

5 (5) by inserting after paragraph (2) the fol6 lowing new paragraph: 

7 ‘‘(3) DIRECTOR.—The term ‘Director’ means 

8 the Director of the Agency.’’. 

9 (b) UNIVERSAL AMENDMENTS RELATING TO AGEN10 CY.—The Secure and Fair Enforcement for Mortgage Li11 censing Act of 2008 (12 U.S.C. 5101 et seq.) is amend12 ed— 

13 (1) by striking ‘‘Federal banking agencies’’ 

14 each place such term appears (other than in sub15 section (a)(4) (as so redesignated by subsection (a), 

16 relating to the definition of Federal banking agen17 cies) or in connection with a reference that is specifi18 cally amended by another provision of this section) 

19 and inserting ‘‘Agency’’; and 

20 (2) by striking ‘‘Secretary’’ each place such 

21 term appears (other than in connection with a ref22 erence that is specifically amended by another provi23 sion of this section) and inserting ‘‘Director’’. 


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1 (c) SECTION 1507.—Section 1507 of the Secure and 

2 Fair Enforcement for Mortgage Licensing Act of 2008 (12 

3 U.S.C. 5106) is amended— 

4 (1) in subsection (a)— 

5 (A) by striking paragraph (1) and insert6 ing the following new paragraph: 

7 ‘‘(1) IN GENERAL.—The Agency shall develop 

8 and maintain a system for registering employees of 

9 any depository institution, employees of a subsidiary 

10 that is owned and controlled by a depository institu11 tion and regulated by a Federal banking agency, or 

12 employees of an institution regulated by the Farm 

13 Credit Administration, as registered loan originators 

14 with the Nationwide Mortgage Licensing System and 

15 Registry. The system shall be implemented before 

16 July 30, 2010.’’; and 

17 (B) by striking ‘‘appropriate Federal bank18 ing agency and the Farm Credit Administra19 tion’’ in paragraph (2) and inserting ‘‘Agency’’; 

20 and 

21 (2) in subsection (b), by striking ‘‘Federal 

22 banking agencies, through the Financial Institutions 

23 Examination Council, and the Farm Credit Adminis24 tration’’ each place such term appears and inserting 

25 ‘‘Agency’’. 


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1 (d) SECTION 1508.— 

2 (1) IN GENERAL.—Section 1508 of the Secure 

3 and Fair Enforcement for Mortgage Licensing Act 

4 of 2008 (12 U.S.C. 5107) is amended by adding at 

5 the end the following new subsection: 

6 ‘‘(f) REGULATIONS.— 

7 ‘‘(1) IN GENERAL.—The Agency may prescribe 

8 regulations setting minimum net worth or surety 

9 bond requirements for residential mortgage loan 

10 originators and minimum requirements for recovery 

11 funds paid into by loan originators. 

12 ‘‘(2) FACTORS TAKEN INTO ACCOUNT.—Such 

13 regulations shall take into account the need to pro14 vide originators adequate incentives to originate af15 fordable and sustainable mortgage loans as well as 

16 the need to ensure a competitive origination market 

17 that maximizes consumers’ access to affordable and 

18 sustainable mortgage loans.’’. 

19 (2) CLERICAL AMENDMENT.—The heading for 

20 section 1508 of the Secure and Fair Enforcement 

21 for Mortgage Licensing Act of 2008 is amended by 

22 striking ‘‘SECRETARY OF HOUSING AND URBAN

23 DEVELOPMENT’’ and inserting ‘‘CONSUMER FI24 NANCIAL PROTECTION AGENCY’’. 


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1 (e) SECTION 1510.—Section 1510 of the Secure and 

2 Fair Enforcement for Mortgage Licensing Act of 2008 (12 

3 U.S.C. 5109) is amended to read as follows: 

4 ‘‘SEC. 1510. FEES. 

5 ‘‘The Agency and the Nationwide Mortgage Licensing 

6 System and Registry may charge reasonable fees to cover 

7 the costs of maintaining and providing access to informa8 tion from the Nationwide Mortgage Licensing System and 

9 Registry, to the extent that such fees are not charged to 

10 consumers for access to such system and registry.’’. 

11 (f) SECTION 1513.—Section 1513 of the Secure and 

12 Fair Enforcement for Mortgage Licensing Act of 2008 (12 

13 U.S.C. 5112) is amended to read as follows: 

14 ‘‘SEC. 1513. LIABILITY PROVISIONS. 

15 ‘‘The Agency, any State official or agency, or any or16 ganization serving as the administrator of the Nationwide 

17 Mortgage Licensing System and Registry or a system es18 tablished by the Director under section 1509, or any offi19 cer or employee of any such entity, shall not by subject 

20 to any civil action or proceeding for monetary damages 

21 by reason of the good faith action or omission of any offi22 cer or employee of any such entity, while acting within 

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1 cerning persons who are loan originators or are applying 

2 for licensing or registration as loan originators.’’. 

3 (g) SECTION 1514.—The heading for section 1514 

4 of the Secure and Fair Enforcement for Mortgage Licens5 ing Act of 2008 (12 U.S.C. 5113) is amended by striking 

6 ‘‘UNDER HUD BACKUP LICENSING SYSTEM’’ and in7 serting ‘‘BY THE AGENCY’’. 

8 SEC. 4814. AMENDMENTS TO THE TRUTH IN SAVINGS ACT. 

9 (a) SECTION 263.—Section 263 of the Truth in Sav10 ings Act (12 U.S.C. 4302) is amended in subsection (b) 

11 by striking ‘‘Board’’ each place such term appears and 

12 inserting ‘‘Agency’’. 

13 (b) SECTION 265.—Section 265 of the Truth in Sav14 ings Act (12 U.S.C. 4304) is amended by striking 

15 ‘‘Board’’ each place such term appears and inserting 

16 ‘‘Agency’’. 

17 (c) SECTION 266.—Section 266(e) of the Truth in 

18 Savings Act is amended (12 U.S.C. 4305) by striking 

19 ‘‘Board’’ and inserting ‘‘Agency’’. 

20 (d) SECTION 269.—Section 269 of the Truth in Sav21 ings Act (12 U.S.C. 4308) is amended by striking 

22 ‘‘Board’’ each place such term appears and inserting 

23 ‘‘Agency’’. 

24 (e) SECTION 270.—Section 270 of the Truth in Sav25 ings Act (12 U.S.C. 4309) is amended— 


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1 (1) in subsection (a)— 

2 (A) by striking ‘‘Compliance’’ and insert3 ing ‘‘Subject to section 4202 of the Consumer 

4 Financial Protection Agency Act of 2009, com5 pliance’’; 

6 (B) by striking subparagraph (A) of para7 graph (1) and inserting the following new sub8 paragraph: 

9 ‘‘(A) by the head of the agency responsible 

10 for chartering and regulating national banks for 

11 national banks, and Federal branches and Fed12 eral agencies of foreign banks;’’; and 

13 (C) by adding at the end, the following 

14 new paragraph: 

15 ‘‘(3) subtitle E of the Consumer Financial Pro16 tection Agency Act of 2009, by the Agency.’’; and 

17 (2) in subsection (c)— 

18 (A) in the subsection heading, by striking 

19 ‘‘BOARD’’ and insert ‘‘AGENCY’’; and 

20 (B) by striking ‘‘Board’’ and inserting 

21 ‘‘Agency’’. 

22 (f) SECTION 272.—Section 272 of the Truth in Sav23 ings Act (12 U.S.C. 4311) is amended— 

24 (1) in subsection (a), by striking ‘‘Board’’ and 

25 inserting ‘‘Agency’’; and 


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1 (2) in subsection (b), by striking ‘‘regulation 

2 prescribed by the Board’’ each place such term ap3 pears and inserting ‘‘regulation prescribed by the 

4 Agency’’. 

5 (g) SECTION 273.—Section 273 of the Truth in Sav6 ings Act (12 U.S.C. 4312) is amended in the last sentence 

7 by striking ‘‘Board’’ and inserting ‘‘Agency’’. 

8 (h) SECTION 274.—Section 274 of the Truth in Sav9 ings Act (12 U.S.C. 4313) is amended— 

10 (1) in paragraph (2) by striking ‘‘Board’’ and 

11 inserting ‘‘Agency’’; and 

12 (2) by striking paragraph (4) and inserting the 

13 following new paragraph: 

14 ‘‘(4) AGENCY.—The term ‘Agency’ means the 

15 Consumer Financial Protection Agency.’’. 

16 SEC. 4815. AMENDMENTS TO THE TELEMARKETING AND 

17 CONSUMER FRAUD ABUSE AND PREVENTION 

18 ACT. 

19 (a) Section 4 of the Telemarketing and Consumer 

20 Fraud Abuse and Prevention Act (15 U.S.C. 6102) is 

21 amended— 

22 (1) in subsection (b)— 

23 (A) by inserting ‘‘and the Consumer Fi24 nancial Protection Agency with respect to a 

25 person subject to the authority of that Agency 


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1 under the Consumer Financial Protection Agen2 cy Act’’ after ‘‘Commission’’ each of the first 2 

3 places it appears; and 

4 (B) by inserting ‘‘or the Consumer Finan5 cial Protection Agency’’ after ‘‘Commission’’ the 

6 last place it appears; and 

7 (2) in subsection (d), by inserting ‘‘or the Con8 sumer Financial Protection Agency’’ after ‘‘Commis9 sion’’ each place such term appears. 

10 (b) Section 5 of the Telemarketing and Consumer 

11 Fraud Abuse and Prevention Act (15 U.S.C. 6102) is 

12 amended— 

13 (1) in subsection (b)— 

14 (A) by inserting ‘‘and the Consumer Fi15 nancial Protection Agency with respect to a 

16 person subject to the authority of that Agency 

17 under the Consumer Financial Protection Agen18 cy Act’’ after ‘‘Commission’’ each of the first 2 

19 places it appears; and 

20 (B) by inserting ‘‘or the Consumer Finan21 cial Protection Agency’’ after ‘‘Commission’’ the 

22 last place it appears; and 

23 (2) in subsection (c), by inserting ‘‘or the Con24 sumer Financial Protection Agency’’ after ‘‘Commis25 sion’’ each place such term appears. 


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1 (c) Section 6 of the Telemarketing and Consumer 

2 Fraud Abuse and Prevention Act (15 U.S.C. 6102) is 

3 amended by redesignating subsection (c) as subsection (d) 

4 and inserting after subsection (b) the following: 

5 ‘‘(c) ENFORCEMENT BY THE CONSUMER FINANCIAL

6 PROTECTION AGENCY.—Subject to section 4202 of the 

7 Consumer Financial Protection Agency Act of 2009, this 

8 Act shall be enforced by the Consumer Financial Protec9 tion Agency, under subtitle E of that Act, with respect 

10 to a person subject to the authority of that Agency under 

11 that Act. For the purpose of the exercise by the Consumer 

12 Financial Protection Agency of its powers under subtitle 

13 E, a violation of any requirement imposed under this Act 

14 shall be deemed to be a violation of a requirement imposed 

15 under the Consumer Financial Protection Agency Act. In 

16 addition to its powers under subtitle E of that Act, the 

17 Agency may exercise, for the purpose of enforcing compli18 ance with any requirement imposed under this Act, any 

19 other authority conferred on it by law.’’. 

20 SEC. 4816. MEMBERSHIP IN FINANCIAL LITERACY AND 

21 EDUCATION COMMISSION. 

22 Section 513(c)(1) of the Financial Literacy and Edu23 cation Improvement Act (20 U.S.C. 9702(c)(1)) is amend24 ed— 


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1 (1) in subparagraph (B), by striking ‘‘and’’ at 

2 the end; 

3 (2) by redesignating subparagraph (C) as sub4 paragraph (D); and 

5 (3) by inserting after subparagraph (B) the fol6 lowing new subparagraph: 

7 ‘‘(C) the Director of the Consumer Finan8 cial Protection Agency; and’’. 

9 SEC. 4817. EFFECTIVE DATE. 

10 The amendments made by sections 4803 through 

11 4815 shall take effect on the designated transfer date. 

12 SEC. 4818. AMENDMENTS TO TRUTH IN LENDING ACT. 

13 (a) IN GENERAL.—Section 128(e) of the Truth in 

14 Lending Act is amended— 

15 (1) by striking paragraph (3) and inserting the 

16 following new paragraph (3): 

17 ‘‘(3) INSTITUTIONAL CERTIFICATION RE18 QUIRED.—(A) Except as provided in subparagraph 

19 (B), before a creditor may issue any funds with re20 spect to an extension of credit described in para21 graph (1), the creditor shall obtain from the relevant 

22 institution of higher education such institution’s cer23 tification— 

24 ‘‘(i) of the enrollment status of the bor25 rower; 


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1 ‘‘(ii) of the borrower’s cost of attendance 

2 at the institution as determined by the institu3 tion under part F of title IV of the Higher 

4 Education Act of 1965; 

5 ‘‘(iii) of the difference between the bor6 rower’s cost of attendance and the borrower’s 

7 estimated financial assistance received under 

8 title IV of the Higher Education Act of 1965 

9 and other assistance known to the institution, 

10 as applicable; and 

11 ‘‘(iv) that the institution has— 

12 ‘‘(I) informed the borrower— 

13 ‘‘(aa) about the availability of, 

14 and the borrower’s potential eligibility 

15 for, Federal financial assistance under 

16 this title, including disclosing the 

17 terms, conditions, and interest rates 

18 of Federal student loans; 

19 ‘‘(bb) of the borrower’s ability to 

20 select a private educational lender of 

21 the borrower’s choice; 

22 ‘‘(cc) about the impact of a pro23 posed private education loan on the 

24 borrowers’ potential eligibility for 

25 other financial assistance, including 


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1 Federal financial assistance under the 

2 Higher Education Act of 1965; and 

3 ‘‘(dd) about a borrower’s right to 

4 accept or reject a private education 

5 loan within the 30-day period fol6 lowing a private educational lender’s 

7 approval of a borrower’s application 

8 and about a borrower’s 3-day right to 

9 cancel altogether; 

10 ‘‘(II) determined whether the bor11 rower has applied for and exhausted the 

12 Federal financial assistance available to 

13 the borrower under the Higher Education 

14 Act of 1965 and informed the borrower ac15 cordingly; and 

16 ‘‘(III) counseled the borrower on the 

17 borrower’s financial aid options. 

18 ‘‘(B) A creditor may issue funds with respect to 

19 an extension of credit described in paragraph (1) 

20 without obtaining from the relevant institution of 

21 higher education such institution’s certification if 

22 such institution fails to provide such certification 

23 within 21 calendar days or 15 business days, which24 ever comes first, of the creditor’s request for such 

25 certification.’’; 


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1 (2) by redesignating paragraphs (9), (10), and 

2 (11) as paragraphs (10), (11), and (12), respec3 tively; and 

4 (3) by inserting after paragraph (8) the fol5 lowing new paragraph (9): 

6 ‘‘(9) PROVISION OF INFORMATION.—On or be7 fore the date a creditor issues any funds with re8 spect to an extension of credit described in para9 graph (1), the creditor shall notify the relevant insti10 tution of higher education, in writing, of the amount 

11 of the extension of credit and the student on whose 

12 behalf credit is extended. The form of such written 

13 notification shall be subject to the regulations of the 

14 Agency.’’. 

15 (b) REGULATIONS.— 

16 (1) DEADLINE FOR REGULATIONS.—Not later 

17 than 365 days after the date of enactment of this 

18 Act, the Agency shall issue regulations in final form 

19 to implement paragraphs (3) and (9) of section 

20 128(e) of the Truth in Lending Act, as amended by 

21 subsection (a). Such regulations shall become effec22 tive not later than 6 months after their date of 

23 issuance. 

24 (2) EFFECTIVE DATE.—The regulations in ef25 fect pursuant to section 128(e) of the Truth in 


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1 Lending Act as of the date of the enactment of this 

2 Act shall remain in effect until the effective date of 

3 the regulations issued under paragraph (1). 

4 (c) STUDY AND REPORT ON PRIVATE EDUCATION

5 LOANS AND PRIVATE EDUCATIONAL LENDERS.— 

6 (1) REPORT.—Not later than 2 years after the 

7 date of enactment of this Act, the Director and the 

8 Secretary of Education, in consultation with the 

9 Commissioners of the Federal Trade Commission, 

10 and the Attorney General, shall submit a report to 

11 the Committee on Financial Services and the Com12 mittee on Education and Labor of the House of 

13 Representatives and the Committee on Banking, 

14 Housing, and Urban Affairs and the Committee on 

15 Health Education, Labor, and Pensions of the Sen16 ate on private education loans (as that term is de17 fined in section 140 of the Truth in Lending Act (15 

18 U.S.C. 1650)) and private educational lenders (as 

19 that term is defined in such section). 

20 (2) CONTENT.—The report required by this 

21 subsection shall examine, at a minimum, the fol22 lowing: 

23 (A) the growth and changes of the private 

24 education loan market in the United States; 


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1 (B) factors influencing such growth and 

2 changes; 

3 (C) the extent to which students and par4 ents of students rely on private education loans 

5 to finance postsecondary education and the pri6 vate education loan indebtedness of borrowers; 

7 (D) the characteristics of private education 

8 loan borrowers, including the types of institu9 tions of higher education they attend, socio10 economic characteristics (including income and 

11 education levels, racial characteristics, geo12 graphical background, age, and gender), what 

13 other forms of financing borrowers use to pay 

14 for education, whether they exhaust their Fed15 eral loan options before taking out a private 

16 loan, whether such borrowers are dependent or 

17 independent students (as determined under part 

18 F of title IV of the Higher Education Act of 

19 1965) or parents of such students, whether 

20 such borrowers are students enrolled in a pro21 gram leading to a certificate, license or creden22 tial other than a degree, an associates degree, 

23 a baccalaureate degree, or a graduate or profes24 sional degree and, if practicable, employment 

25 and repayment behaviors; 


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1 (E) the characteristics of private edu2 cational lenders, including whether such credi3 tors are for-profit, non-profit, or institutions of 

4 higher education; 

5 (F) the underwriting criteria used by pri6 vate educational lenders, including the use of 

7 cohort default rate (as such term is defined in 

8 section 435(m) of the Higher Education Act of 

9 1965); 

10 (G) the terms, conditions, and pricing of 

11 private education loans; 

12 (H) the consumer protections available to 

13 private education loan borrowers, including the 

14 effectiveness of existing disclosures and require15 ments and borrowers’ awareness and under16 standing about terms and conditions of various 

17 financial products; 

18 (I) whether Federal regulators and the 

19 public have access to information sufficient to 

20 provide them with assurances that private edu21 cation loans are provided in accord with the 

22 Nation’s fair lending laws and that allows pub23 lic officials to determine lenders’ compliance 

24 with fair lending laws; and 


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1 (J) any statutory or legislative rec2 ommendations necessary to improve consumer 

3 protections for private education loan borrowers 

4 and to better enable Federal regulators and the 

5 public to ascertain private educational lender 

6 compliance with fair lending laws. 

7 (d) REPORT.—Not later than 18 months after the 

8 issuance of regulations under subsection (b)(1), the Con9 sumer Financial Protection Agency and the Secretary of 

10 Education shall jointly submit to Congress a report on the 

11 compliance of institutions and private educational lenders 

12 with the amendments made by this section. The report 

13 shall include the degree to which specific institutions uti14 lize certifications in effectively encouraging the exhaustion 

15 of Federal student loan eligibility and lowering student 

16 debt. 

17 Subtitle I—Improvements to the 

18 Federal Trade Commission Act 

19 SEC. 4901. AMENDMENTS TO THE FEDERAL TRADE COM20 MISSION ACT. 

21 (a) Section 5(m)(1)(A) of the Federal Trade Com22 mission Act (15 U.S.C. 45(m)(1)(A)) is amended— 

23 (1) by inserting ‘‘this Act or’’ after ‘‘violates’’ 

24 the first place such term appears; 


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1 (2) by inserting a comma after ‘‘under this 

2 Act’’; 

3 (3) by inserting a comma after ‘‘subsection 

4 (a)(1))’’; and 

5 (4) by inserting ‘‘a violation of this Act or is’’ 

6 before ‘‘prohibited’’. 

7 (b) Section 5 of the Federal Trade Commission Act 

8 (15 U.S.C. 45) is amended by adding at the end thereof 

9 the following new subsection: 

10 ‘‘(o) UNLAWFUL ASSISTANCE.—It is unlawful for any 

11 person, partnership, or corporation, knowingly or reck12 lessly, to provide substantial assistance to another in vio13 lating any provision of this Act or of any other Act en14 forceable by the Commission that relates to unfair or de15 ceptive acts or practices. Any such violation shall con16 stitute an unfair or deceptive act or practice described in 

17 section 5(a)(1) of this Act. Nothing in this section shall 

18 be construed as limiting or superseding the protection pro19 vided to any provider or user qualifying for protection 

20 under section 230(c)(1) of the Communications Act of 

21 1934 (47 U.S.C. 230(c)(1)).’’. 

22 (c) Section 18 of the Federal Trade Commission Act 

23 (15 U.S.C. 57a) is amended— 

24 (1) in subsection (a)(1), by striking ‘‘(h)’’ and 

25 inserting ‘‘(f)’’; 


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1 (2) by amending subsection (b) to read as fol2 lows: 

3 ‘‘(b) PROCEDURE APPLICABLE.—When prescribing a 

4 rule under subsection (a)(1)(B) of this section, the Com5 mission shall proceed in accordance with section 553 of 

6 title 5.’’; 

7 (3) by striking subsection (c); 

8 (4) in subsection (d), by striking ‘‘(d)(1) The 

9 Commission’s’’ and all that follows through the end 

10 of paragraph (2) and by redesignating paragraph (3) 

11 of such subsection as subsection (c); 

12 (5) In such subsection (c) (as so redesignated), 

13 by inserting ‘‘prescribed’’ after ‘‘any rule’’; 

14 (6) by striking subsections (f), (i), and (j) and 

15 redesignating subsections (e), (g), and (h) as sub16 sections (d), (e), and (f), respectively; 

17 (7) in subsection (c) (as redesignated), by in18 serting ‘‘prescribed’’ after ‘‘rule’’; and 

19 (8) in subsection (d) (as redesignated)— 

20 (A) in paragraph (1)(A) by striking ‘‘pro21 mulgated’’ and inserting ‘‘prescribed’’; 

22 (B) in paragraph (1)(B), by striking ‘‘the 

23 transcript required by subsection (c)(5),’’; 


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1 (C) in paragraph (3), by striking ‘‘The 

2 court shall hold unlawful’’ and all that follows 

3 through the end of the paragraph; and 

4 (D) by striking paragraphs (4) and (5) 

5 and inserting the following: 

6 ‘‘(4) The procedure set forth in this subsection for 

7 judicial review of a rule prescribed under subsection 

8 (a)(1)(B) is the exclusive means for such review, other 

9 than in an enforcement proceeding.’’; and 

10 (9) in subsection (e)(2) (as so redesignated), by 

11 striking ‘‘class or persons’’ and inserting ‘‘class of 

12 persons’’. 

13 (d) Section 16(a)(2) of the Federal Trade Commis14 sion Act (15 U.S.C. 56(a)(2)) is amended— 

15 (1) in subparagraph (D), by striking ‘‘; or’’ and 

16 inserting a semicolon; and 

17 (2) by inserting after subparagraph (E) the fol18 lowing: 

19 ‘‘(F) to obtain a civil penalty authorized 

20 under any provision of law enforced by the 

21 Commission.’’. 

22 (e) Section 5(l) of the Federal Trade Commission Act 

23 (15 U.S.C. 45(l)) is amended in the first sentence by in24 serting ‘‘the Commission or’’ after ‘‘brought by’’. 


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1 Subtitle J—Miscellaneous 

2 SEC. 4951. REQUIREMENTS FOR STATE-LICENSED LOAN 

3 ORIGINATORS. 

4 Paragraph (2) of section 1505 (b) of the S.A.F.E. 

5 Mortgage Licensing Act of 2008 (12 U.S.C. 5104(b)(2)) 

6 is amended by inserting after and below subparagraph 

7 (B), the following: 

8 ‘‘Notwithstanding the preceding sentence, a State 

9 loan originator supervisory authority may provide 

10 for review of applicants and for granting exceptions, 

11 on a case-by-case basis, to the minimum standard 

12 under subparagraph (B), but only to the extent that 

13 any such exception otherwise complies with the pur14 poses of this title.’’. 

15 TITLE V—CAPITAL MARKETS 

16 Subtitle A—Private Fund Invest17 ment Advisers Registration Act 

18 SEC. 5001. SHORT TITLE. 

19 This subtitle may be cited as the ‘‘Private Fund In20 vestment Advisers Registration Act of 2009’’. 

21 SEC. 5002. DEFINITIONS. 

22 Section 202(a) of the Investment Advisers Act of 

23 1940 (15 U.S.C. 80b–2(a)) is amended by adding at the 

24 end the following new paragraphs: 


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1 ‘‘(29) PRIVATE FUND.—The term ‘private fund’ 

2 means an issuer that would be an investment com3 pany under section 3(a) of the Investment Company 

4 Act of 1940 (15 U.S.C. 80a–3(a)) but for the excep5 tion provided from that definition by either section 

6 3(c)(1) or section 3(c)(7) of such Act. 

7 ‘‘(30) FOREIGN PRIVATE FUND ADVISER.—The 

8 term ‘foreign private fund adviser’ means an invest9 ment adviser who— 

10 ‘‘(A) has no place of business in the 

11 United States; 

12 ‘‘(B) during the preceding 12 months has 

13 had— 

14 ‘‘(i) in total, fewer than 15 clients and 

15 investors in the United States in private 

16 funds advised by the investment adviser; 

17 and 

18 ‘‘(ii) aggregate assets under manage19 ment attributable to clients and investors 

20 in the United States in private funds ad21 vised by the investment adviser of less 

22 than $25,000,000, or such higher amount 

23 as the Commission may, by rule, deem ap24 propriate in the public interest or for the 

25 protection of investors; and 


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1 ‘‘(C) neither holds itself out generally to 

2 the public in the United States as an invest3 ment adviser, nor acts as an investment adviser 

4 to any investment company registered under the 

5 Investment Company Act of 1940, or a com6 pany which has elected to be a business devel7 opment company pursuant to section 54 of the 

8 Investment Company Act of 1940 (15 U.S.C. 

9 80a–53) and has not withdrawn such election.’’. 

10 SEC. 5003. ELIMINATION OF PRIVATE ADVISER EXEMPTION; 

11 LIMITED EXEMPTION FOR FOREIGN PRIVATE 

12 FUND ADVISERS; LIMITED INTRASTATE EX13 EMPTION. 

14 (a) EXEMPTION.—Section 203(b) of the Investment 

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

16 (1) in paragraph (1), by inserting ‘‘, except an 

17 investment adviser who acts as an investment ad18 viser to any private fund,’’ after ‘‘any investment ad19 viser’’; 

20 (2) by amending paragraph (3) to read as fol21 lows: 

22 ‘‘(3) any investment adviser that is a foreign 

23 private fund adviser;’’; 

24 (3) in paragraph (5), by striking ‘‘or’’ at the 

25 end; 


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1 (4) in paragraph (6)— 

2 (A) in subparagraph (A), by striking ‘‘or’’; 

3 (B) in subparagraph (B), by striking the 

4 period at the end and adding ‘‘; or’’; and 

5 (C) by adding at the end the following new 

6 subparagraph: 

7 ‘‘(C) a private fund; or’’; and 

8 (5) by adding at the end the following: 

9 ‘‘(7) any investment adviser who solely ad10 vises— 

11 ‘‘(A) small business investment companies 

12 licensed under the Small Business Investment 

13 Act of 1958; 

14 ‘‘(B) entities that have received from the 

15 Small Business Administration notice to pro16 ceed to qualify for a license, which notice or li17 cense has not been revoked; or 

18 ‘‘(C) applicants, related to one or more li19 censed small business investment companies 

20 covered in subparagraph (A), that have applied 

21 for another license, which application remains 

22 pending.’’. 

23 (b) CONSIDERATION OF RISK.—Section 203(c) of the 

24 Investment Advisers Act of 1940 (15 U.S.C. 80b–3(c)) is 

25 amended by adding at the end the following: 


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1 ‘‘(3) The Commission shall take into account 

2 the relative risk profile of different classes of private 

3 funds as it establishes, by rule or regulation, the 

4 registration requirements for private funds.’’. 

5 SEC. 5004. COLLECTION OF DATA. 

6 Section 204 of the Investment Advisers Act of 1940 

7 (15 U.S.C. 80b–4) is amended— 

8 (1) by redesignating subsections (b) and (c) as 

9 subsections (c) and (d), respectively; and 

10 (2) by inserting after subsection (a) the fol11 lowing new subsection: 

12 ‘‘(b) RECORDS AND REPORTS OF PRIVATE FUNDS.— 

13 ‘‘(1) IN GENERAL.—The Commission is author14 ized to require any investment adviser registered 

15 under this Act to maintain such records of and file 

16 with the Commission such reports regarding private 

17 funds advised by the investment adviser as are nec18 essary or appropriate in the public interest and for 

19 the protection of investors or for the assessment of 

20 systemic risk as the Commission determines in con21 sultation with the Board of Governors of the Federal 

22 Reserve System. The Commission is authorized to 

23 provide or make available to the Board of Governors 

24 of the Federal Reserve System and to the Financial 

25 Services Oversight Council, those reports or records 


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1 or the information contained therein. The records 

2 and reports of any private fund, to which any such 

3 investment adviser provides investment advice, main4 tained or filed by an investment adviser registered 

5 under this Act, shall be deemed to be the records 

6 and reports of the investment adviser. 

7 ‘‘(2) REQUIRED INFORMATION.—The records 

8 and reports required to be maintained or filed with 

9 the Commission under this subsection shall include, 

10 for each private fund advised by the investment ad11 viser— 

12 ‘‘(A) the amount of assets under manage13 ment; 

14 ‘‘(B) the use of leverage (including off-bal15 ance sheet leverage); 

16 ‘‘(C) counterparty credit risk exposures; 

17 ‘‘(D) trading and investment positions; 

18 ‘‘(E) trading practices; and 

19 ‘‘(F) such other information as the Com20 mission, in consultation with the Board of Gov21 ernors of the Federal Reserve System, deter22 mines necessary or appropriate in the public in23 terest and for the protection of investors or for 

24 the assessment of systemic risk. 


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1 ‘‘(3) OPTIONAL INFORMATION.—The Commis2 sion may require the reporting of such additional in3 formation from private fund advisers as the Com4 mission determines necessary. In making such deter5 mination, the Commission, taking into account the 

6 public interest and potential to contribute to sys7 temic risk, may set different reporting requirements 

8 for different classes of private fund advisers, based 

9 on the particular types or sizes of private funds ad10 vised by such advisers. 

11 ‘‘(4) MAINTENANCE OF RECORDS.—An invest12 ment adviser registered under this Act is required to 

13 maintain and keep such records of private funds ad14 vised by the investment adviser for such period or 

15 periods as the Commission, by rule or regulation, 

16 may prescribe as necessary or appropriate in the 

17 public interest and for the protection of investors or 

18 for the assessment of systemic risk. 

19 ‘‘(5) EXAMINATION OF RECORDS.— 

20 ‘‘(A) PERIODIC AND SPECIAL EXAMINA21 TIONS.—All records of a private fund main22 tained by an investment adviser registered 

23 under this Act shall be subject at any time and 

24 from time to time to such periodic, special, and 

25 other examinations by the Commission, or any 


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1 member or representative thereof, as the Com2 mission may prescribe. 

3 ‘‘(B) AVAILABILITY OF RECORDS.—An in4 vestment adviser registered under this Act shall 

5 make available to the Commission or its rep6 resentatives any copies or extracts from such 

7 records as may be prepared without undue ef8 fort, expense, or delay as the Commission or its 

9 representatives may reasonably request. 

10 ‘‘(6) INFORMATION SHARING.—The Commission 

11 shall make available to the Board of Governors of 

12 the Federal Reserve System and to the Financial 

13 Services Oversight Council, copies of all reports, doc14 uments, records, and information filed with or pro15 vided to the Commission by an investment adviser 

16 under this subsection as the Board, or the Financial 

17 Services Oversight Council, may consider necessary 

18 for the purpose of assessing the systemic risk of a 

19 private fund. All such reports, documents, records, 

20 and information obtained by the Board, or such 

21 other entity, from the Commission under this sub22 section shall be kept confidential in a manner con23 sistent with confidentiality established by the Com24 mission pursuant to paragraph (8). 


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1 ‘‘(7) DISCLOSURES OF CERTAIN PRIVATE FUND

2 INFORMATION.—An investment adviser registered 

3 under this Act shall provide such reports, records, 

4 and other documents to investors, prospective inves5 tors, counterparties, and creditors, of any private 

6 fund advised by the investment adviser as the Com7 mission, by rule or regulation, may prescribe as nec8 essary or appropriate in the public interest and for 

9 the protection of investors or for the assessment of 

10 systemic risk. 

11 ‘‘(8) APPLICABLE PRIVILEGES NOT WAIVED.— 

12 An investment advisor, and investment advisor to a 

13 private fund, a private fund, foreign private fund ad14 visor, a foreign private fund, an advisor to a venture 

15 capital fund, a venture capital fund, or other person 

16 shall not be compelled to waive and shall not be 

17 deemed to have waived any privilege otherwise appli18 cable to any data or information by transferring the 

19 data or information to, or permitting that data or 

20 information to be used by— 

21 ‘‘(A) the Financial Services Oversight 

22 Council; 

23 ‘‘(B) the Commission; 

24 ‘‘(C) any Federal financial regulator or 

25 State financial regulator, in any capacity; or 


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1 ‘‘(D) any other agency of the Federal Gov2 ernment (as defined in section 6 of title 18, 

3 United States Code). 

4 ‘‘(9) NON-DISCLOSURE OF CERTAIN PROPRI5 ETARY INFORMATION AND CONFIDENTIALITY OF RE6 PORTS.—Any proprietary information of an invest7 ment adviser ascertained by the Commission from 

8 any report required to be filed with the Commission 

9 pursuant to this section 204(b) shall be subject to 

10 the same limitations on public disclosure as any 

11 facts ascertained during an examination as provided 

12 by section 210(b) of this title. The Commission may 

13 not compel the private fund to disclose such propri14 etary information to counterparties and creditors. 

15 For purposes of this section, proprietary information 

16 shall include sensitive, non-public information re17 garding the investment adviser’s investment or trad18 ing strategies, analytical or research methodologies, 

19 trading data, computer hardware or software con20 taining intellectual property, and any additional in21 formation that the Commission determines to be 

22 proprietary. Notwithstanding any other provision of 

23 law, the Commission shall not be compelled to dis24 close any report or information contained therein re25 quired to be filed with the Commission under this 


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1 subsection. Nothing in this paragraph shall author2 ize the Commission to withhold information from the 

3 Congress or to prevent the Commission from com4 plying with a request for information from any other 

5 Federal department or agency or any self-regulatory 

6 organization requesting the report or information for 

7 purposes within the scope of its jurisdiction, or com8 plying with an order of a court of the United States 

9 in an action brought by the United States or the 

10 Commission. For purposes of section 552 of title 5, 

11 United States Code, this paragraph shall be consid12 ered a statute described in subsection (b)(3)(B) of 

13 such section.’’. 

14 SEC. 5005. ELIMINATION OF DISCLOSURE PROVISION. 

15 Section 210 of the Investment Advisers Act of 1940 

16 (15 U.S.C. 80b–10) is amended by striking subsection (c). 

17 SEC. 5006. EXEMPTION OF AND REPORTING BY VENTURE 

18 CAPITAL FUND ADVISERS. 

19 Section 203 of the Investment Advisers Act of 1940 

20 (15 U.S.C. 80b–3) is amended by adding at the end the 

21 following new subsection: 

22 ‘‘(l) EXEMPTION OF AND REPORTING BY VENTURE

23 CAPITAL FUND ADVISERS.—The Commission shall iden24 tify and define the term ‘venture capital fund’ and shall 

25 provide an adviser to such a fund an exemption from the 


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1 registration requirements under this section (excluding 

2 any such fund whose adviser is exempt from registration 

3 pursuant to paragraph (7) of subsection (b)). The Com4 mission shall require such advisers to maintain such 

5 records and provide to the Commission such annual or 

6 other reports as the Commission determines necessary or 

7 appropriate in the public interest or for the protection of 

8 investors.’’. 

9 SEC. 5007. EXEMPTION OF AND REPORTING BY CERTAIN 

10 PRIVATE FUND ADVISERS. 

11 Section 203 of the Investment Advisers Act of 1940 

12 (15 U.S.C. 80b–3), as amended by section 5006, is further 

13 amended by adding at the end the following new sub14 sections: 

15 ‘‘(m) EXEMPTION OF AND REPORTING BY CERTAIN

16 PRIVATE FUND ADVISERS.— 

17 ‘‘(1) IN GENERAL.—The Commission shall pro18 vide an exemption from the registration require19 ments under this section to any investment adviser 

20 of private funds, if each of such investment adviser 

21 acts solely as an adviser to private funds and has as22 sets under management in the United States of less 

23 than $150,000,000. 

24 ‘‘(2) REPORTING.—The Commission shall re25 quire investment advisers exempted by reason of this 


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1 subsection to maintain such records and provide to 

2 the Commission such annual or other reports as the 

3 Commission determines necessary or appropriate in 

4 the public interest or for the protection of investors. 

5 ‘‘(n) REGISTRATION AND EXAMINATION OF MID6 SIZED PRIVATE FUND ADVISERS.—In prescribing regula7 tions to carry out the requirements of this section with 

8 respect to investment advisers acting as investment advis9 ers to mid-sized private funds, the Commission shall take 

10 into account the size, governance, and investment strategy 

11 of such funds to determine whether they pose systemic 

12 risk, and shall provide for registration and examination 

13 procedures with respect to the investment advisers of such 

14 funds which reflect the level of systemic risk posed by such 

15 funds.’’. 

16 SEC. 5008. CLARIFICATION OF RULEMAKING AUTHORITY. 

17 Section 211 of the Investment Advisers Act of 1940 

18 (15 U.S.C. 80b–11) is amended— 

19 (1) by amending subsection (a) to read as fol20 lows: 

21 ‘‘(a) The Commission shall have authority from time 

22 to time to make, issue, amend, and rescind such rules and 

23 regulations and such orders as are necessary or appro24 priate to the exercise of the functions and powers con25 ferred upon the Commission elsewhere in this title, includVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01213 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ing rules and regulations defining technical, trade, and 

2 other terms used in this title. For the purposes of its rules 

3 and regulations, the Commission may— 

4 ‘‘(1) classify persons and matters within its ju5 risdiction based upon, but not limited to— 

6 ‘‘(A) size; 

7 ‘‘(B) scope; 

8 ‘‘(C) business model; 

9 ‘‘(D) compensation scheme; or 

10 ‘‘(E) potential to create or increase sys11 temic risk; 

12 ‘‘(2) prescribe different requirements for dif13 ferent classes of persons or matters; and 

14 ‘‘(3) ascribe different meanings to terms (in15 cluding the term ‘client’, except the Commission 

16 shall not ascribe a meaning to the term ‘client’ that 

17 would include an investor in a private fund managed 

18 by an investment adviser, where such private fund 

19 has entered into an advisory contract with such ad20 viser) used in different sections of this title as the 

21 Commission determines necessary to effect the pur22 poses of this title.’’; and 

23 (2) by adding at the end the following new sub24 section: 


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1 ‘‘(e) The Commission and the Commodity Futures 

2 Trading Commission shall, after consultation with the 

3 Board of Governors of the Federal Reserve System, within 

4 12 months after the date of enactment of the Private 

5 Fund Investment Advisers Registration Act of 2009, joint6 ly promulgate rules to establish the form and content of 

7 the reports required to be filed with the Commission under 

8 sections 203(l), 203(m), and 204(b) and with the Com9 modity Futures Trading Commission by investment advis10 ers that are registered both under the Investment Advisers 

11 Act of 1940 (15 U.S.C. 80b–1 et seq.) and the Commodity 

12 Exchange Act (7 U.S.C. 1 et seq.).’’. 

13 SEC. 5009. GAO STUDY. 

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

15 the United States shall carry out a study to assess the 

16 annual costs on industry members and their investors due 

17 to the registration requirements and ongoing reporting re18 quirements under this subtitle and the amendments made 

19 by this subtitle. 

20 (b) REPORT TO THE CONGRESS.—Not later than the 

21 end of the 2-year period beginning on the date of the en22 actment of this title, the Comptroller General of the 

23 United States shall submit a report to the Congress con24 taining the findings and determinations made by the 


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1 Comptroller General in carrying out the study required 

2 under subsection (a). 

3 SEC. 5010. EFFECTIVE DATE; TRANSITION PERIOD. 

4 (a) EFFECTIVE DATE.—This subtitle, and the 

5 amendments made by this subtitle, shall take effect with 

6 respect to investment advisers after the end of the 1-year 

7 period beginning on the date of the enactment of this title. 

8 (b) TRANSITION PERIOD.—The Securities and Ex9 change Commission shall prescribe rules and regulations 

10 to the extent necessary to permit an investment adviser 

11 who will be required to register with the Securities and 

12 Exchange Commission by reason of this subtitle with the 

13 option of registering with the Securities and Exchange 

14 Commission before the date described under subsection 

15 (a). 

16 SEC. 5011. QUALIFIED CLIENT STANDARD. 

17 Section 205(e) of the Investment Advisers Act of 

18 1940 (15 U.S.C. 80b–5(e)) is amended by adding at the 

19 end the following: ‘‘With respect to any factor used in any 

20 rule or regulation by the Commission in making a deter21 mination under this subsection, if the Commission uses 

22 a dollar amount test in connection with such factor, such 

23 as a net asset threshold, the Commission shall, by order, 

24 not later than 1 year after the date of the enactment of 

25 the Private Fund Investment Advisers Registration Act of 


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1 2009, and every 5 years thereafter, adjust for the effects 

2 of inflation on such test. Any such adjustment that is not 

3 a multiple of $100,000 shall be rounded to the nearest 

4 multiple of $100,000.’’. 

5 Subtitle B—Accountability and 

6 Transparency in Rating Agen7 cies Act 

8 SEC. 6001. SHORT TITLE. 

9 This subtitle may be cited as the ‘‘Accountability and 

10 Transparency in Rating Agencies Act of 2009’’. 

11 SEC. 6002. ENHANCED REGULATION OF NATIONALLY REC12 OGNIZED STATISTICAL RATING ORGANIZA13 TIONS. 

14 (a) IN GENERAL.—Section 15E of the Securities Ex15 change Act of 1934 (15 U.S.C. 78o–7) is amended— 

16 (1) in subsection (a)— 

17 (A) by amending paragraph (1)(A) to read 

18 as follows: 

19 ‘‘(A) IN GENERAL.—Each credit rating 

20 agency shall register as a nationally recognized 

21 statistical rating organization for the purposes 

22 of this title (in this section referred to as the 

23 ‘applicant’), and shall file with the Commission 

24 an application for registration, in such form as 

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1 tion issued in accordance with subsection (n), 

2 and containing the information described in 

3 subparagraph (B).’’. 

4 (B) in paragraph (2)(A), by striking ‘‘fur5 nished to’’ and inserting ‘‘filed with’’; 

6 (C) in paragraph (2)(B)(i)(II), by striking 

7 ‘‘furnished to’’ and inserting ‘‘filed with’’; and 

8 (D) by adding at the end of paragraph (1) 

9 the following: 

10 ‘‘(F) EXEMPTIONS.—The registration re11 quirement in subparagraph (A) shall not apply 

12 to— 

13 ‘‘(i) a credit rating agency if the cred14 it rating agency— 

15 ‘‘(I) does not engage in the provi16 sion of credit ratings to issuers of se17 curities for a fee; and 

18 ‘‘(II) issues credit ratings only in 

19 any bona fide newspaper, news maga20 zine, or business or financial publica21 tion of general and regular circula22 tion; or 

23 ‘‘(ii) such other persons as the Com24 mission may designate by rules and regulaVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01218 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tions or order when in the public interest 

2 and for the protection of investors.’’. 

3 (2) in subsection (b)— 

4 (A) in paragraph (1)(A), by striking ‘‘fur5 nished’’ and inserting ‘‘filed’’ and by striking 

6 ‘‘furnishing’’ and inserting ‘‘filing’’; 

7 (B) in paragraph (1)(B), by striking ‘‘fur8 nishing’’ and inserting ‘‘filing’’; and 

9 (C) in the first sentence of paragraph (2), 

10 by striking ‘‘furnish to’’ and inserting ‘‘file 

11 with’’; 

12 (3) in subsection (c)— 

13 (A) paragraph (2)— 

14 (i) in the second sentence by inserting 

15 ‘‘including the requirements of this sec16 tion,’’ after ‘‘Notwithstanding any other 

17 provision of law,’’; and 

18 (ii) by inserting before the period at 

19 the end of the last sentence ‘‘, provided 

20 that this paragraph does not afford a de21 fense against any action or proceeding 

22 brought by the Commission to enforce the 

23 antifraud provision of the securities laws’’; 

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

25 paragraph: 


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1 ‘‘(3) REVIEW OF INTERNAL PROCESSES FOR

2 DETERMINING CREDIT RATINGS.— 

3 ‘‘(A) IN GENERAL.—The Commission shall 

4 examine credit ratings issued by, and the poli5 cies, procedures, and methodologies employed 

6 by, each nationally recognized statistical rating 

7 organization to review whether— 

8 ‘‘(i) the nationally recognized statis9 tical rating organization has established 

10 and documented a system of internal con11 trols, due diligence and implementation of 

12 methodologies for determining credit rat13 ings, taking into consideration such factors 

14 as the Commission may prescribe by rule; 

15 ‘‘(ii) the nationally recognized statis16 tical rating organization adheres to such 

17 system; and 

18 ‘‘(iii) the public disclosures of the na19 tionally recognized statistical rating orga20 nization required under this section about 

21 its credit ratings, methodologies, and pro22 cedures are consistent with such system. 

23 ‘‘(B) MANNER AND FREQUENCY.—The 

24 Commission shall conduct reviews required by 

25 this paragraph no less frequently than annually 


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1 in a manner to be determined by the Commis2 sion. 

3 ‘‘(4) PROVISION OF INFORMATION TO THE COM4 MISSION.—Each nationally recognized statistical rat5 ing organization shall make available and maintain 

6 such records and information, for such a period of 

7 time, as the Commission may prescribe, by rule, as 

8 necessary for the Commission to conduct the reviews 

9 under paragraph (3). 

10 ‘‘(5) DISCLOSURES WITH RESPECT TO STRUC11 TURED SECURITIES.— 

12 ‘‘(A) REGULATIONS REQUIRED.—The rules 

13 and regulations prescribed by the Commission 

14 pursuant to this section with respect to nation15 ally recognized statistical rating organizations 

16 shall, with respect to disclosure of the proce17 dures and methodologies by which any nation18 ally recognized statistical rating organization 

19 determines credit ratings for structured securi20 ties— 

21 ‘‘(i) specify the information required 

22 to be disclosed to such rating organizations 

23 by the sponsor, issuers, and underwriters 

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1 eral underlying such structured securities; 

2 and 

3 ‘‘(ii) establish and implement proce4 dures to collect and disclose information 

5 about the processes used by such sponsor, 

6 issuers, and underwriters to assess the ac7 curacy and integrity of their data and 

8 fraud detection. 

9 ‘‘(B) DEFINITION.—For purposes of this 

10 paragraph, the Commission shall, by rule or 

11 regulation, define the term ‘structured securi12 ties’ as appropriate in the public interest and 

13 for the protection of investors. 

14 ‘‘(6) HISTORICAL DEFAULT RATE DISCLO15 SURES.—The rules and regulations prescribed by the 

16 Commission pursuant to this section with respect to 

17 nationally recognized statistical rating organizations 

18 shall require each nationally recognized statistical 

19 rating organization to establish and maintain, on a 

20 publicly accessible Internet site, a facility to disclose, 

21 in a central database, the historical default rates of 

22 all classes of financial products rated by such orga23 nization.’’; 

24 (4) in subsection (d)— 


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1 (A) in the heading, by inserting ‘‘FINE,’’ 

2 after ‘‘CENSURE,’’; 

3 (B) by striking ‘‘shall censure’’ and all 

4 that follows through ‘‘revocation’’ and inserting 

5 the following: ‘‘shall censure, fine in accordance 

6 with section 21B(a), place limitations on the ac7 tivities, functions, or operations of, suspend for 

8 a period not exceeding 12 months, or revoke the 

9 registration of any nationally recognized statis10 tical rating organization (or with respect to any 

11 person who is associated, who is seeking to be12 come associated, or, at the time of the alleged 

13 misconduct, who was associated or was seeking 

14 to become associated with a nationally recog15 nized statistical rating organization, the Com16 mission, by order, shall censure, fine in accord17 ance with section 21B(a), place limitations on 

18 the activities or functions of such person, sus19 pend for a period not exceeding 12 months, or 

20 bar such person from being associated with a 

21 nationally recognized statistical rating organiza22 tion), if the Commission finds, on the record 

23 after notice and opportunity for hearing, that 

24 such censure, fine, placing of limitations, bar, 

25 suspension, or revocation’’; 


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1 (C) in paragraph (2), by striking ‘‘fur2 nished to’’ and inserting ‘‘filed with’’; 

3 (D) in paragraph (4)— 

4 (i) by striking ‘‘furnish’’ and inserting 

5 ‘‘file’’; and 

6 (ii) by striking ‘‘or’’ at the end; 

7 (E) in paragraph (5), by striking the pe8 riod at the end and inserting a semicolon; and 

9 (F) by adding at the end the following: 

10 ‘‘(6) has failed reasonably to supervise another 

11 person who commits a violation of the securities 

12 laws, the rules or regulations thereunder, or any 

13 rules of the Municipal Securities Rulemaking Board 

14 if such other person is subject to his or her super15 vision, except that no person shall be deemed to have 

16 failed reasonably to supervise any other person 

17 under this paragraph, if— 

18 ‘‘(A) there have been established proce19 dures, and a system for applying such proce20 dures, which would reasonably be expected to 

21 prevent and detect, insofar as practicable, any 

22 such violation by such other person; and 

23 ‘‘(B) such person has reasonably dis24 charged the duties and obligations incumbent 

25 upon him or her by reason of such procedures 


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1 and system without reasonable cause to believe 

2 that such procedures and system were not being 

3 complied with; or 

4 ‘‘(7) fails to conduct sufficient surveillance to 

5 ensure that credit ratings remain current, as appli6 cable.’’; 

7 (5) in subsection (e), by striking paragraph (1) 

8 and inserting the following new paragraph (1): 

9 ‘‘(1) VOLUNTARY WITHDRAWAL.—A nationally 

10 recognized statistical rating organization may, upon 

11 such terms and conditions as the Commission may 

12 establish as necessary in the public interest or for 

13 the protection of investors, withdraw from registra14 tion by furnishing a written notice of withdrawal to 

15 the Commission, provided that such nationally recog16 nized statistical rating organization certifies that it 

17 received less than $250,000,000 during its last full 

18 fiscal year in net revenue for providing credit ratings 

19 on securities and money market instruments issued 

20 in the United States.’’; 

21 (6) by amending subsection (h) to read as fol22 lows: 

23 ‘‘(h) CORPORATE GOVERNANCE, ORGANIZATION, AND

24 MANAGEMENT OF CONFLICTS OF INTEREST.— 

25 ‘‘(1) BOARD OF DIRECTORS.— 


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1 ‘‘(A) IN GENERAL.—Each nationally recog2 nized statistical rating organization shall have a 

3 board of directors. 

4 ‘‘(B) INDEPENDENT DIRECTORS.—At least 

1 5 ⁄3 of such board, but no less than 2 of the 

6 members of the board of directors, shall be 

7 independent directors. In order to be considered 

8 independent for purposes of this subsection, a 

9 director of a nationally recognized statistical 

10 rating organization may not, other than in his 

11 or her capacity as a member of the board of di12 rectors or any committee thereof— 

13 ‘‘(i) accept any consulting, advisory, 

14 or other compensatory fee from the nation15 ally recognized statistical rating organiza16 tion; or 

17 ‘‘(ii) be a person associated with the 

18 nationally recognized statistical rating or19 ganization or with any affiliated company 

20 thereof. 

21 ‘‘(C) COMPENSATION AND TERM.—The 

22 compensation of the independent directors shall 

23 not be linked to the business performance of the 

24 nationally recognized statistical rating organiza25 tion and shall be arranged so as to ensure the 


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1 independence of their judgment. The term of 

2 office of the independent directors shall be for 

3 a pre-agreed fixed period not exceeding 5 years 

4 and shall not be renewable. 

5 ‘‘(D) DUTIES.—In addition to the overall 

6 responsibility of the board of directors, the 

7 board shall oversee— 

8 ‘‘(i) the establishment, maintenance, 

9 and enforcement of policies and procedures 

10 for determining credit ratings; 

11 ‘‘(ii) the establishment, maintenance, 

12 and enforcement of policies and procedures 

13 to address, manage, and disclose any con14 flicts of interest; 

15 ‘‘(iii) the effectiveness of the internal 

16 control system with respect to policies and 

17 procedures for determining credit ratings; 

18 and 

19 ‘‘(iv) the compensation and promotion 

20 policies and practices of the nationally rec21 ognized statistical rating organization. 

22 ‘‘(2) ORGANIZATION POLICIES AND PROCE23 DURES.—Each nationally recognized statistical rat24 ing organization shall establish, maintain, and en25 force written policies and procedures reasonably deVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01227 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 signed, taking into consideration the nature of the 

2 business of the nationally recognized statistical rat3 ing organization and affiliated persons and affiliated 

4 companies thereof, to address, manage, and disclose 

5 any conflicts of interest that can arise from such 

6 business. 

7 ‘‘(3) COMMISSION RULES.—The Commission 

8 shall issue rules to prohibit, or require the manage9 ment and disclosure of, any conflicts of interest re10 lating to the issuance of credit ratings by a nation11 ally recognized statistical rating organization, includ12 ing rules regarding— 

13 ‘‘(A) conflicts of interest relating to the 

14 manner in which a nationally recognized statis15 tical rating organization is compensated by the 

16 obligor, or any affiliate of the obligor, for 

17 issuing credit ratings or providing related serv18 ices; 

19 ‘‘(B) conflicts of interest relating to busi20 ness relationships, ownership interests, and af21 filiations of nationally recognized statistical rat22 ing organization board members with obligors, 

23 or any other financial or personal interests be24 tween a nationally recognized statistical rating 

25 organization, or any person associated with 


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1 such nationally recognized statistical rating or2 ganization, and the obligor, or any affiliate of 

3 the obligor; 

4 ‘‘(C) conflicts of interest relating to any af5 filiation of a nationally recognized statistical 

6 rating organization, or any person associated 

7 with such nationally recognized statistical rat8 ing organization, with any person who under9 writes securities, money market instruments, or 

10 other instruments that are the subject of a 

11 credit rating; 

12 ‘‘(D) a requirement that each nationally 

13 recognized statistical rating organization dis14 close on such organization’s website a consoli15 dated report at the end of each fiscal year that 

16 shows— 

17 ‘‘(i) the percent of net revenue earned 

18 by the nationally recognized statistical rat19 ing organization or an affiliate of a nation20 ally recognized statistical rating organiza21 tion, or any person associated with a na22 tionally recognized statistical rating orga23 nization, to the extent determined appro24 priate by the Commission, for that fiscal 

25 year for providing services and products 


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1 other than credit rating services to each 

2 person who paid for a credit rating; and 

3 ‘‘(ii) the relative standing of each per4 son who paid for a credit rating that was 

5 outstanding as of the end of the fiscal year 

6 in terms of the amount of net revenue 

7 earned by the nationally recognized statis8 tical rating organization attributable to 

9 each such person and classified by the 

10 highest 5, 10, 25, and 50 percentiles and 

11 lowest 50 and 25 percentiles; 

12 ‘‘(E) the establishment of a system of pay13 ment for credit ratings issued by each nation14 ally recognized statistical rating organization 

15 that requires that payments are structured in a 

16 manner designed to ensure that the nationally 

17 recognized statistical rating organization con18 ducts accurate and reliable surveillance of credit 

19 ratings over time, as applicable, and that incen20 tives for reliable credit ratings are in place; 

21 ‘‘(F) a requirement that a nationally rec22 ognized statistical rating organization disclose 

23 with the publication of a credit rating the type 

24 and number of credit ratings it has provided to 

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1 son, the fees it has billed for the credit rating, 

2 and the aggregate amount of net revenue 

3 earned by the nationally recognized statistical 

4 rating organization in the preceding 2 fiscal 

5 years attributable to the person being rated and 

6 its affiliates; and 

7 ‘‘(G) any other potential conflict of inter8 est, as the Commission determines necessary or 

9 appropriate in the public interest or for the pro10 tection of investors. 

11 ‘‘(4) LOOK-BACK REQUIREMENT.— 

12 ‘‘(A) REVIEW BY THE NATIONALLY RECOG13 NIZED STATISTICAL RATING ORGANIZATION.— 

14 Each nationally recognized statistical rating or15 ganization shall establish, maintain, and enforce 

16 policies and procedures reasonably designed to 

17 ensure that, in any case in which an employee 

18 of a person subject to a credit rating of the na19 tionally recognized statistical rating organiza20 tion or the issuer, underwriter, or sponsor of a 

21 security or money market instrument subject to 

22 a credit rating of the nationally recognized sta23 tistical rating organization was employed by the 

24 nationally recognized statistical rating organiza25 tion and participated in any capacity in deterVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01231 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 mining credit ratings for the person or the se2 curities or money market instruments during 

3 the 1-year period preceding the date an action 

4 was taken with respect to the credit rating, the 

5 nationally recognized statistical rating organiza6 tion shall— 

7 ‘‘(i) conduct a review to determine 

8 whether any conflicts of interest of the em9 ployee influenced the credit rating; and 

10 ‘‘(ii) take action to revise the rating if 

11 appropriate, in accordance with such rules 

12 as the Commission shall prescribe. 

13 ‘‘(B) REVIEW BY COMMISSION.— 

14 ‘‘(i) IN GENERAL.—The Commission 

15 shall conduct periodic reviews of the poli16 cies described in subparagraph (A) and the 

17 implementation of the policies at each na18 tionally recognized statistical rating orga19 nization to ensure they are reasonably de20 signed and implemented to most effectively 

21 eliminate conflicts of interest. 

22 ‘‘(ii) TIMING OF REVIEWS.—The Com23 mission shall review the code of ethics and 

24 conflict of interest policy of each nationally 

25 recognized statistical rating organization— 


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1 ‘‘(I) not less frequently than an2 nually; and 

3 ‘‘(II) whenever such policies are 

4 materially modified or amended. 

5 ‘‘(5) REPORT TO COMMISSION ON CERTAIN EM6 PLOYMENT TRANSITIONS.— 

7 ‘‘(A) REPORT REQUIRED.—Each nationally 

8 recognized statistical rating organization shall 

9 report to the Commission any case such organi10 zation knows or can reasonably be expected to 

11 know where a person associated with such orga12 nization within the previous 5 years obtains em13 ployment with any obligor, issuer, underwriter, 

14 or sponsor of a security or money market in15 strument for which the organization issued a 

16 credit rating during the 12-month period prior 

17 to such employment, if such employee— 

18 ‘‘(i) was a senior officer of such orga19 nization; 

20 ‘‘(ii) participated in any capacity in 

21 determining credit ratings for such obligor, 

22 issuer, underwriter, or sponsor; or 

23 ‘‘(iii) supervised an employee de24 scribed in clause (ii). 


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1 ‘‘(B) PUBLIC DISCLOSURE.—Upon receiv2 ing such a report, the Commission shall make 

3 such information publicly available.’’; 

4 (7) by amending subsection (j) to read as fol5 lows: 

6 ‘‘(j) DESIGNATION OF COMPLIANCE OFFICER.— 

7 ‘‘(1) IN GENERAL.—Each nationally recognized 

8 statistical rating organization shall designate an in9 dividual to serve as a compliance officer. 

10 ‘‘(2) DUTIES.—The compliance officer shall— 

11 ‘‘(A) report directly to the board of the na12 tionally recognized statistical rating organiza13 tion; 

14 ‘‘(B) review compliance with policies and 

15 procedures to manage conflicts of interest and 

16 assess the risk that the compliance (or lack of 

17 such compliance) may compromise the integrity 

18 of the credit rating process; 

19 ‘‘(C) review compliance with the internal 

20 control system with respect to the procedures 

21 and methodologies for determining credit rat22 ings, including qualitative methodologies and 

23 quantitative inputs used in the rating process, 

24 and assess the risk that such internal control 


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1 system is reasonably designed to ensure the in2 tegrity and quality of the credit rating process; 

3 ‘‘(D) in consultation with the board of the 

4 nationally recognized statistical rating organiza5 tion, resolve any conflicts of interest that may 

6 arise; 

7 ‘‘(E) be responsible for administering the 

8 policies and procedures required to be estab9 lished pursuant to this section; 

10 ‘‘(F) ensure compliance with securities 

11 laws and the rules and regulations issued there12 under, including rules prescribed by the Com13 mission pursuant to this section; and 

14 ‘‘(G) establish procedures— 

15 ‘‘(i) for the receipt, retention, and 

16 treatment of complaints regarding credit 

17 ratings, models, methodologies, and com18 pliance with the securities laws and the 

19 policies and procedures required under this 

20 section; 

21 ‘‘(ii) for the receipt, retention, and 

22 treatment of confidential, anonymous com23 plaints by employees, obligors, issuers, and 

24 investors; 


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1 ‘‘(iii) for the remediation of non-com2 pliance issues found during compliance of3 fice reviews, the reviews required under 

4 paragraph (7), internal or external audit 

5 findings, self-reported errors, or through 

6 validated complaints; and 

7 ‘‘(iv) designed so that ratings that the 

8 nationally recognized statistical rating or9 ganization disseminates reflect consider10 ation of all information in a manner gen11 erally consistent with the nationally recog12 nized statistical rating organization’s pub13 lished rating methodology, including infor14 mation which is provided, received, or oth15 erwise obtained from obligor, issuer and 

16 non-issuer sources, such as investors, the 

17 media, and other interested or informed 

18 parties. 

19 ‘‘(3) LIMITATIONS.—The compliance officer 

20 shall not, while serving in that capacity— 

21 ‘‘(A) determine credit ratings; 

22 ‘‘(B) participate in the establishment of 

23 the procedures and methodologies or the quali24 tative methodologies and quantitative inputs 

25 used to determine credit ratings; 


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1 ‘‘(C) perform marketing or sales functions; 

2 or 

3 ‘‘(D) participate in establishing compensa4 tion levels, other than for employees working 

5 for the compliance officer. 

6 ‘‘(4) ANNUAL REPORTS REQUIRED.—The com7 pliance officer shall annually prepare and sign a re8 port on the compliance of the nationally recognized 

9 statistical rating organization with the securities 

10 laws and such organization’s internal policies and 

11 procedures, including its code of ethics and conflict 

12 of interest policies, in accordance with rules pre13 scribed by the Commission. Such compliance report 

14 shall accompany the financial reports of the nation15 ally recognized statistical rating organization that 

16 are required to be filed with the Commission pursu17 ant to this section and shall include a certification 

18 that, under penalty of law, the report is accurate 

19 and complete. 

20 ‘‘(5) COMPENSATION.—The compensation of 

21 the compliance officer shall not be linked to the 

22 business performance of the nationally recognized 

23 statistical rating organization and shall be arranged 

24 so as to ensure the independence of the officer’s 

25 judgment.’’; 


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1 (8) in subsection (k)— 

2 (A) by striking ‘‘, on a confidential basis,’’; 

3 (B) by striking ‘‘furnish to’’ and inserting 

4 ‘‘file with’’; 

5 (C) by striking ‘‘Each nationally’’ and in6 serting the following: 

7 ‘‘(1) IN GENERAL.—Each nationally’’; and 

8 (D) by adding at the end the following new 

9 paragraph: 

10 ‘‘(2) EXCEPTION.—The Commission may treat 

11 as confidential any information provided by a na12 tionally recognized statistical rating organization 

13 under this section consistent with applicable Federal 

14 laws or Commission rules.’’; 

15 (9) in subsection (l)(2)(A)(i), by striking ‘‘fur16 nished’’ and inserting ‘‘filed’’; 

17 (10) by amending subsection (p) to read as fol18 lows: 

19 ‘‘(p) ESTABLISHMENT OF SEC OFFICE.— 

20 ‘‘(1) IN GENERAL.—The Commission shall es21 tablish an office that administers the rules of the 

22 Commission with respect to the practices of nation23 ally recognized statistical rating organizations. 

24 ‘‘(2) STAFFING.—The office of the Commission 

25 established under this subsection shall be staffed 


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1 sufficiently to carry out fully the requirements of 

2 this section. 

3 ‘‘(3) RULEMAKING AUTHORITY.—The Commis4 sion shall— 

5 ‘‘(A) establish, by rule, fines and other 

6 penalties for any nationally recognized statis7 tical rating organization that violates the appli8 cable requirements of this title; and 

9 ‘‘(B) issue such rules as may be necessary 

10 to carry out this section with respect to nation11 ally recognized statistical rating organiza12 tions.’’; and 

13 (11) by adding after subsection (p) the fol14 lowing new subsections: 

15 ‘‘(q) TRANSPARENCY OF RATINGS PERFORMANCE.— 

16 ‘‘(1) RULEMAKING REQUIRED.—The Commis17 sion shall, by rule, require each nationally recognized 

18 statistical rating organization to publicly disclose in19 formation on initial ratings and subsequent changes 

20 to such ratings for the purpose of providing a gauge 

21 of the performance of ratings and allowing investors 

22 to compare performance of ratings by different na23 tionally recognized statistical rating organizations. 


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1 ‘‘(2) CONTENT.—The rules of the Commission 

2 under this subsection shall require, at a minimum, 

3 disclosures that— 

4 ‘‘(A) are comparable among nationally rec5 ognized statistical rating organizations, so that 

6 investors can compare rating performance 

7 across rating organizations; 

8 ‘‘(B) are clear and informative for a wide 

9 range of investor sophistication; 

10 ‘‘(C) include performance information over 

11 a range of years and for a variety of classes of 

12 credit ratings, as determined by the Commis13 sion; 

14 ‘‘(D) are published and made freely avail15 able by the nationally recognized statistical rat16 ing organization, on an easily accessible portion 

17 of its website and in written form when re18 quested by investors; and 

19 ‘‘(E) each nationally recognized statistical 

20 rating organization include an attestation with 

21 any credit rating it issues affirming that no 

22 part of the rating was influenced by any other 

23 business activities, that the rating was based 

24 solely on the merits of the instruments being 

25 rated, and that such rating was an independent 


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1 evaluation of the risks and merits of the instru2 ment. 

3 ‘‘(r) CREDIT RATINGS METHODOLOGIES.— 

4 ‘‘(1) IN GENERAL.—The Commission shall pre5 scribe rules, in the public interest and for the pro6 tection of investors, that require each nationally rec7 ognized statistical rating organization to establish, 

8 maintain, and enforce written procedures and meth9 odologies and an internal control system with respect 

10 to such procedures and methodologies that are rea11 sonably designed to— 

12 ‘‘(A) ensure that credit ratings are deter13 mined using procedures and methodologies, in14 cluding qualitative methodologies and quan15 titative inputs that are determined in accord16 ance with the policies and procedures of the na17 tionally recognized statistical rating organiza18 tion for developing and modifying credit rating 

19 procedures and methodologies; 

20 ‘‘(B) ensure that when major changes to 

21 credit rating procedures and methodologies, in22 cluding to qualitative methodologies and quan23 titative inputs, are made, that the changes are 

24 applied consistently to all credit ratings to 

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1 gies apply and, to the extent the changes are 

2 made to credit rating surveillance procedures 

3 and methodologies, they are applied to current 

4 credit ratings within a time period to be deter5 mined by the Commission by rule, and that the 

6 reason for the change is publicly disclosed; 

7 ‘‘(C) notify persons who have access to the 

8 credit ratings of the nationally recognized sta9 tistical rating organization, regardless of wheth10 er they are made readily accessible for free or 

11 a reasonable fee, of the procedure or method12 ology, including qualitative methodologies and 

13 quantitative inputs, used with respect to a par14 ticular credit rating; and 

15 ‘‘(D) notify persons who have access to the 

16 credit ratings of the nationally recognized sta17 tistical rating organization, regardless of wheth18 er they are made readily accessible for free or 

19 a reasonable fee, when a change is made to a 

20 procedure or methodology, including to quali21 tative methodologies and quantitative inputs, or 

22 an error is identified in a procedure or method23 ology that may result in credit rating actions, 

24 and the likelihood of the change resulting in 


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1 current credit ratings being subject to rating 

2 actions. 

3 ‘‘(2) SYMBOLS.—The Commission may pre4 scribe rules that require nationally recognized statis5 tical rating organizations to establish credit rating 

6 symbols that distinguish credit ratings for struc7 tured products from credit ratings for other prod8 ucts that the Commission determines appropriate or 

9 necessary in the public interest and for the protec10 tion of investors, provided such rules do not prevent 

11 public pension funds or other State regulated enti12 ties from investing in rated products. 

13 ‘‘(3) RATING CLARITY AND CONSISTENCY.— 

14 ‘‘(A) COMMISSION OBLIGATION.—Subject 

15 to subparagraphs (B) and (C), the Commission 

16 shall require, by rule, each nationally recognized 

17 statistical rating organization to establish, 

18 maintain, and enforce written policies and pro19 cedures reasonably designed— 

20 ‘‘(i) with respect to credit ratings of 

21 securities and money market instruments, 

22 to assess the risk that investors in securi23 ties and money market instruments may 

24 not receive payment in accordance with the 

25 terms of such securities and instruments; 


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1 ‘‘(ii) to define clearly any credit rating 

2 symbol used by that organization; and 

3 ‘‘(iii) to apply such credit rating sym4 bol in a consistent manner for all types of 

5 securities and money market instruments. 

6 ‘‘(B) ADDITIONAL CREDIT FACTORS.— 

7 Nothing in subparagraph (A)— 

8 ‘‘(i) prohibits a nationally recognized 

9 statistical rating organization from using 

10 additional credit factors that are docu11 mented and disclosed by the organization 

12 and that have a demonstrated impact on 

13 the risk an investor in a security or money 

14 market instrument will not receive repay15 ment in accordance with the terms of 

16 issuance; 

17 ‘‘(ii) prohibits a nationally recognized 

18 statistical rating organization from consid19 ering credit factors that are unique to mu20 nicipal securities; or 

21 ‘‘(iii) prohibits a nationally recognized 

22 statistical rating organization from using 

23 an additional symbol with respect to the 

24 ratings described in subparagraph (A)(i) 

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1 ings of a certain type of security or money 

2 market instrument from ratings of any 

3 other types of securities or money market 

4 instruments. 

5 ‘‘(C) COMPLEMENTARY RATINGS.—The 

6 Commission shall not impose any requirement 

7 under subparagraph (A) that prevents nation8 ally recognized statistical rating organizations 

9 from establishing ratings that are complemen10 tary to the ratings described in subparagraph 

11 (A)(i) and that are created to measure a dis12 crete aspect of the security’s or instrument’s 

13 risk. 

14 ‘‘(s) TRANSPARENCY OF CREDIT RATING METH15 ODOLOGIES AND INFORMATION REVIEWED.— 

16 ‘‘(1) IN GENERAL.—The Commission shall re17 quire, by rule, a nationally recognized statistical rat18 ing organization to include with the publication of 

19 each credit rating regardless of whether the credit 

20 rating is made readily accessible for free or a rea21 sonable fee a form that discloses information about 

22 the assumptions underlying the procedures and 

23 methodologies used, and the data relied on, to deter24 mine the credit rating in the format prescribed in 


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1 paragraph (2) and containing the information de2 scribed in paragraph (3). 

3 ‘‘(2) FORMAT.—The Commission shall prescribe 

4 a form for use under paragraph (1) that— 

5 ‘‘(A) is designed in a user-friendly and 

6 helpful manner for investors to understand the 

7 information contained in the report; 

8 ‘‘(B) requires the nationally recognized 

9 statistical rating organization to provide the 

10 content, as required by paragraph (3), in a 

11 manner that is directly comparable across secu12 rities; and 

13 ‘‘(C) the nationally recognized statistical 

14 rating organization certifies the information on 

15 the form as true and accurate. 

16 ‘‘(3) CONTENT.—The Commission shall pre17 scribe a form that requires a nationally recognized 

18 statistical rating organization to disclose— 

19 ‘‘(A) the main assumptions included in 

20 constructing procedures and methodologies, in21 cluding qualitative methodologies and quan22 titative inputs and assumptions about the cor23 relation of defaults across underlying assets 

24 used in rating certain structured products; 


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1 ‘‘(B) the potential shortcomings of the 

2 credit ratings, and the types of risks not meas3 ured in the credit ratings that the nationally 

4 recognized statistical rating organization is not 

5 commenting on, such as liquidity, market, and 

6 other risks; 

7 ‘‘(C) information on the certainty of the 

8 rating, including information on the reliability, 

9 accuracy, and quality of the data relied on in 

10 determining the ultimate credit rating and a 

11 statement on the extent to which key data in12 puts for the credit rating were reliable or lim13 ited, including any limits on the reach of histor14 ical data, limits in accessibility to certain docu15 ments or other forms of information that would 

16 have better informed the credit rating, and the 

17 completeness of certain information considered; 

18 ‘‘(D) whether and to what extent third 

19 party due diligence services have been utilized, 

20 and a description of the information that such 

21 third party reviewed in conducting due diligence 

22 services; 

23 ‘‘(E) a description of relevant data about 

24 any obligor, issuer, security, or money market 


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1 instrument that was used and relied on for the 

2 purpose of determining the credit rating; 

3 ‘‘(F) a statement containing an overall as4 sessment of the quality of information available 

5 and considered in producing a credit rating for 

6 a security in relation to the quality of informa7 tion available to the nationally recognized sta8 tistical rating organization in rating similar ob9 ligors, securities, or money market instruments; 

10 ‘‘(G) an explanation or measure of the po11 tential volatility for the credit rating, including 

12 any factors that might lead to a change in the 

13 credit rating, and the extent of the change that 

14 might be anticipated under different conditions; 

15 ‘‘(H) information on the content of the 

16 credit rating, including— 

17 ‘‘(i) the expected default probability; 

18 and 

19 ‘‘(ii) the loss given default; 

20 ‘‘(I) information on the sensitivity of the 

21 rating to assumptions made by the nationally 

22 recognized statistical rating organization, in23 cluding— 

24 ‘‘(i) 5 assumptions made in the rat25 ings process that, without accounting for 


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1 any other factor, would have the greatest 

2 impact on a rating if such assumptions 

3 were proven false or inaccurate; and 

4 ‘‘(ii) an analysis, using concrete exam5 ples, on how each of the 5 assumptions 

6 identified under clause (i) impacts a rat7 ing; 

8 ‘‘(J) where applicable, how the nationally 

9 recognized statistical rating organization used 

10 servicer or remittance reports, and with what 

11 frequency, to conduct surveillance of the credit 

12 rating; and 

13 ‘‘(K) such additional information as may 

14 be required by the Commission. 

15 ‘‘(4) DUE DILIGENCE SERVICES.— 

16 ‘‘(A) CERTIFICATION REQUIRED.—In any 

17 case in which third-party due diligence services 

18 are employed by a nationally recognized statis19 tical rating organization or an issuer, under20 writer, or sponsor in connection with the 

21 issuance of a credit rating, the firm providing 

22 the due diligence services shall provide to the 

23 nationally recognized statistical rating organiza24 tion written certification of such due diligence, 

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1 sion, and the issuer, underwriter, or sponsor 

2 shall provide any reports issued by the provider 

3 of such due diligence services to the nationally 

4 recognized statistical rating organization. 

5 ‘‘(B) FORMAT AND CONTENT.—The Com6 mission shall establish the appropriate format 

7 and content for written certifications required 

8 under subparagraph (A) to ensure that pro9 viders of due diligence services certify that they 

10 have conducted a thorough review of data, doc11 umentation, and other relevant information nec12 essary for the nationally recognized statistical 

13 rating organization to provide a reliable rating. 

14 ‘‘(C) DISCLOSURE OF CERTIFICATION.— 

15 The Commission shall adopt rules requiring a 

16 nationally recognized statistical rating organiza17 tion to disclose to persons who have access to 

18 the credit ratings of the nationally recognized 

19 statistical rating organization regardless of 

20 whether they are made readily accessible for 

21 free or a reasonable fee the certification de22 scribed in subparagraph (A) with the publica23 tion of the applicable credit rating in a manner 

24 that may permit the persons to determine the 


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1 adequacy and level of due diligence services pro2 vided by the third party. 

3 ‘‘(t) PROHIBITED ACTIVITIES.—Beginning 180 days 

4 from the date of enactment of the Accountability, Reli5 ability, and Transparency in Rating Agencies Act, it shall 

6 be unlawful for a nationally recognized statistical rating 

7 organization, or an affiliate of a nationally recognized sta8 tistical rating organization, or any person associated with 

9 a nationally recognized statistical rating organization, that 

10 provides a credit rating for an issuer, underwriter, or 

11 placement agent of a security to provide any non-rating 

12 service to that issuer, underwriter, or placement agent in 

13 determining a credit rating, including— 

14 ‘‘(1) risk management advisory services; 

15 ‘‘(2) advice or consultation relating to any 

16 merger, sales, or disposition of assets of the issuer; 

17 ‘‘(3) ancillary assistance, advice, or consulting 

18 services unrelated to any specific credit rating 

19 issuance; and 

20 ‘‘(4) such further activities or services as the 

21 Commission may determine as necessary or appro22 priate in the public interest or for the protection of 

23 investors.’’. 

24 (b) CONFORMING AMENDMENT.—Section 3(a)(62) of 

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1 ing subparagraph (A) and redesignating subparagraphs 

2 (B) and (C) as subparagraphs (A) and (B), respectively. 

3 SEC. 6003. STANDARDS FOR PRIVATE ACTIONS. 

4 (a) IN GENERAL.—Section 21D(b)(2) of the Securi5 ties Exchange Act of 1934 (15 U.S.C. 78u–4(b)(2)) is 

6 amended by inserting before the period at the end of the 

7 following: ‘‘, and in the case of an action brought under 

8 this title for money damages against a nationally recog9 nized statistical rating organization, it shall be sufficient 

10 for purposes of pleading any required state of mind for 

11 purposes of such action that the complaint shall state with 

12 particularity facts giving rise to a strong inference that 

13 the nationally recognized statistical rating organization 

14 was grossly negligent in violating the securities laws’’. 

15 (b) PLEADING STANDARD.—Section 15E(m) of the 

16 Securities Exchange Act of 1934 (15 U.S.C. 78o–7(m)) 

17 amended to read as follows: 

18 ‘‘(m) APPLICATION OF ENFORCEMENT PROVISIONS; 

19 PLEADING STANDARD IN PRIVATE RIGHTS OF ACTION.— 

20 Statements made by nationally recognized statistical rat21 ing organizations shall not be deemed forward looking 

22 statements for purposes of section 21E. In any private 

23 right of action commenced against a nationally recognized 

24 statistical rating organization under the securities laws, 

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1 ligence shall apply to the nationally recognized statistical 

2 rating organization as would apply to any other person 

3 in the same private right of action against such person.’’. 

4 (c) REQUIREMENTS FOR LIABILITY.—Section 21D of 

5 the Securities Exchange Act of 1934 (15 U.S.C. 78u–4) 

6 is amended— 

7 (1) by redesignating subsections (c) through (f) 

8 as subsections (d) through (g), respectively; and 

9 (2) by inserting after subsection (b) the fol10 lowing: 

11 ‘‘(c) REQUIREMENTS FOR LIABILITY.—A purchaser 

12 of a security given a rating by a nationally recognized sta13 tistical rating organization shall have the right to recover 

14 for damages if the process of determining the credit rating 

15 was— 

16 ‘‘(1) grossly negligent, based on the facts and 

17 circumstances at the time the rating was issued; and 

18 ‘‘(2) a substantial factor in the economic loss 

19 suffered by the investor. 

20 No action shall be maintained to enforce any liability cre21 ated under this subsection unless brought within 2 years 

22 after the discovery of the facts constituting the violation 

23 and within 3 years after the initial issuance of the rat24 ing.’’. 


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1 SEC. 6004. ISSUER DISCLOSURE OF PRELIMINARY RATINGS. 

2 The Securities and Exchange Commission shall adopt 

3 rules under authority of the Securities Act of 1933 (15 

4 U.S.C. 77a et seq.) to require issuers to disclose prelimi5 nary credit ratings received from nationally recognized 

6 statistical rating agencies on structured products and all 

7 forms of corporate debt. 

8 SEC. 6005. CHANGE TO DESIGNATION. 

9 The Securities Act of 1933 and the Securities Ex10 change Act of 1934 are each amended by striking ‘‘nation11 ally recognized statistical rating’’ each place it appears 

12 and inserting ‘‘nationally registered statistical rating’’. 

13 SEC. 6006. TIMELINE FOR REGULATIONS. 

14 Unless otherwise specified in this subtitle, the Securi15 ties and Exchange Commission shall adopt rules and regu16 lations, as required by the amendments made by this sub17 title, not later than 365 days after the date of enactment. 

18 SEC. 6007. ELIMINATION OF EXEMPTION FROM FAIR DIS19 CLOSURE RULE. 

20 Not later than 90 days after the date of enactment 

21 of this subtitle, the Securities Exchange Commission shall 

22 revise Regulation FD (17 CFR 243.100) to remove from 

23 such regulation the exemption for entities whose primary 

24 business is the issuance of credit ratings (17 CFR 

25 243.100(b)(2)(iii)). 


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1 SEC. 6008. ADVISORY BOARD. 

2 (a) ESTABLISHMENT.—Not later than 90 days after 

3 the date of the enactment of this subtitle, the Securities 

4 and Exchange Commission shall establish an advisory 

5 board to be known as the Credit Ratings Agency Advisory 

6 Board (in this section referred to as ‘‘the Board’’). 

7 (b) APPOINTMENT AND TERMS OF SERVICE.—The 

8 Board shall consist of 7 members appointed by the Com9 mission, no more than 2 of whom may be former employ10 ees of a credit rating agency. Members of the Board shall 

11 be prominent individuals of integrity and reputation who 

12 have a demonstrated commitment to the interests of inves13 tors and the public, and an understanding of the role that 

14 credit ratings play to a broad range of investors. Terms 

15 of service shall be staggered as determined by the Com16 mission. 

17 (c) DUTIES.—The Board shall— 

18 (1) advise the Commission concerning the rules 

19 and regulations required by the amendments made 

20 by this subtitle; 

21 (2) ensure that the Commission properly and 

22 fully executes its oversight functions and responsibil23 ities with the respect to nationally recognized statis24 tical rating organizations and individual partici25 pants; and 


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1 (3) issue an annual report to Congress detailing 

2 its work and recommending any additional Congres3 sional actions necessary to aid the Commission and 

4 such additional reports from time to time as appro5 priate when it feels that the Commission is not prop6 erly executing its oversight functions. 

7 SEC. 6009. REMOVAL OF STATUTORY REFERENCES TO 

8 CREDIT RATINGS. 

9 (a) FEDERAL DEPOSIT INSURANCE ACT.—The Fed10 eral Deposit Insurance Act (12 U.S.C. 1811 et seq.) is 

11 amended— 

12 (1) in section 28(d)— 

13 (A) in the subsection heading, by striking 

14 ‘‘NOT OF INVESTMENT GRADE’’; 

15 (B) in paragraph (1), by striking ‘‘not of 

16 investment grade’’ and inserting ‘‘that does not 

17 meet standards of credit-worthiness as estab18 lished by the Corporation’’; 

19 (C) in paragraph (2), by striking ‘‘not of 

20 investment grade’’; 

21 (D) by striking paragraph (3) and redesig22 nating paragraph (4) as paragraph (3); and 

23 (E) in paragraph (3) (as so redesig24 nated)— 


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1 (i) by striking subparagraph (A) and 

2 redesignating subparagraphs (B) and (C) 

3 as subparagraphs (A) and (B), respec4 tively; and 

5 (ii) in subparagraph (B) (as so redes6 ignated), by striking ‘‘not of investment 

7 grade’’ and inserting ‘‘that does not meet 

8 standards of credit-worthiness as estab9 lished by the Corporation’’; 

10 (2) in section 28(e)— 

11 (A) in the subsection heading, by striking 

12 ‘‘NOT OF INVESTMENT GRADE’’; 

13 (B) in paragraph (1), by striking ‘‘not of 

14 investment grade’’ and inserting ‘‘that does not 

15 meet standards of credit-worthiness as estab16 lished by the Corporation’’; and 

17 (C) in paragraphs (2) and (3), by striking 

18 ‘‘not of investment grade’’ each place that it ap19 pears and inserting ‘‘that does not meet stand20 ards of credit-worthiness established by the 

21 Corporation’’; and 

22 (3) in section 7(b)(1)(E)(i), by striking ‘‘credit 

23 rating entities, and other private economic’’ and in24 sert ‘‘private economic, credit,’’. 


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1 (b) FEDERAL HOUSING ENTERPRISES FINANCIAL

2 SAFETY AND SOUNDNESS ACT OF 1992.—Section 1319 

3 of the Federal Housing Enterprises Financial Safety and 

4 Soundness Act of 1992 (12 U.S.C. 4519) is amended— 

5 (1) in the section heading, by striking ‘‘BY

6 RATING ORGANIZATION’’; and 

7 (2) by striking ‘‘that is a nationally recognized 

8 statistical rating organization, as such term is de9 fined in section 3(a) of the Securities Exchange Act 

10 of 1934,’’. 

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

12 6(a)(5)(A)(iv)(I) Investment Company Act of 1940 (15 

13 U.S.C. 80a–6(a)(5)(A)(iv)(I)) is amended by striking ‘‘is 

14 rated investment grade by not less than 1 nationally recog15 nized statistical rating organization’’ and inserting ‘‘meets 

16 such standards of credit-worthiness that the Commission 

17 shall adopt’’. 

18 (d) REVISED STATUTES.—Section 5136A of title 

19 LXII of the Revised Statutes of the United States (12 

20 U.S.C. 24a) is amended— 

21 (1) in subsection (a)(2)(E), by striking ‘‘any 

22 applicable rating’’ and inserting ‘‘standards of cred23 it-worthiness established by the Comptroller of the 

24 Currency’’; 


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1 (2) in the heading for subsection (a)(3) by 

2 striking ‘‘RATING OR COMPARABLE REQUIREMENT’’ 

3 and inserting ‘‘REQUIREMENT’’; 

4 (3) subsection (a)(3), by amending subpara5 graph (A) to read as follows: 

6 ‘‘(A) IN GENERAL.—A national bank meets 

7 the requirements of this paragraph if the bank 

8 is one of the 100 largest insured banks and has 

9 not fewer than 1 issue of outstanding debt that 

10 meets standards of credit-worthiness or other 

11 criteria as the Secretary of the Treasury and 

12 the Board of Governors of the Federal Reserve 

13 System may jointly establish.’’. 

14 (4) in the heading for subsection (f), by striking 

15 ‘‘MAINTAIN PUBLIC RATING OR’’ and inserting 

16 ‘‘MEET STANDARDS OF CREDIT-WORTHINESS’’; and 

17 (5) in subsection (f)(1), by striking ‘‘any appli18 cable rating’’ and inserting ‘‘standards of credit-wor19 thiness established by the Comptroller of the Cur20 rency’’. 

21 (e) SECURITIES EXCHANGE ACT OF 1934.—Section 

22 3(a) Securities Exchange Act of 1934 (15 U.S.C. 

23 78a(3)(a)) is amended— 

24 (1) in paragraph (41), by striking ‘‘is rated in 

25 one of the two highest rating categories by at least 


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1 one nationally recognized statistical rating organiza2 tion’’ and inserting ‘‘meets standards of credit-wor3 thiness as defined by the Commission’’; and 

4 (2) in paragraph (53)(A), by striking ‘‘is rated 

5 in 1 of the 4 highest rating categories by at least 1 

6 nationally recognized statistical rating organization’’ 

7 and inserting ‘‘meets standards of credit-worthiness 

8 as defined by the Commission’’. 

9 (f) WORLD BANK DISCUSSIONS.—Section 3(a)(6) of 

10 the amendment in the nature of a substitute to the text 

11 of H.R. 4645, as ordered reported from the Committee 

12 on Banking, Finance and Urban Affairs on September 22, 

13 1988, as enacted into law by section 555 of Public Law 

14 100–461, (22 U.S.C. 286hh(a)(6)), is amended by striking 

15 ‘‘rating’’ and inserting ‘‘worthiness’’. 

16 (g) EFFECTIVE DATE.—The amendments made by 

17 this section shall take effect after the end of the 6-month 

18 period beginning on the date of the enactment of this sub19 title. 

20 SEC. 6010. REVIEW OF RELIANCE ON RATINGS. 

21 (a) AGENCY REVIEW.— 

22 (1) REVIEW.—Not later than 1 year after the 

23 date of the enactment of this subtitle, each Federal 

24 agency listed in paragraph (4) shall, to the extent 

25 applicable, review— 


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1 (A) any regulation issued by such agency 

2 that requires the use of an assessment of the 

3 credit-worthiness of a security or money market 

4 instrument; and 

5 (B) any references to or requirements in 

6 such regulations regarding credit ratings. 

7 (2) MODIFICATIONS REQUIRED.—Each such 

8 agency shall modify any such regulations identified 

9 by the review conducted under paragraph (1) to re10 move any reference to or requirement of reliance on 

11 credit ratings and to substitute in such regulations 

12 such standard of credit-worthiness as each respective 

13 agency shall determine as appropriate for such regu14 lations. In making such determination, such agencies 

15 shall seek to establish, to the extent feasible, uni16 form standards of credit-worthiness for use by each 

17 such agency, taking into account the entities regu18 lated by each such agency and the purposes for 

19 which such entities would rely on such standards of 

20 credit-worthiness. 

21 (3) REPORT.—Upon conclusion of the review 

22 required under paragraph (1), each Federal agency 

23 listed in paragraph (4) shall transmit a report to 

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1 tion of any regulation such agency made pursuant to 

2 paragraph (2). 

3 (4) APPLICABLE AGENCIES.—The agencies re4 quired to conduct the review and report required by 

5 this subsection are— 

6 (A) the Securities and Exchange Commis7 sion; 

8 (B) the Federal Deposit Insurance Cor9 poration; 

10 (C) the Office of Thrift Supervision; 

11 (D) the Office of the Comptroller of the 

12 Currency; 

13 (E) the Board of Governors of the Federal 

14 Reserve; 

15 (F) the National Credit Union Administra16 tion; and 

17 (G) the Federal Housing Finance Agency. 

18 (b) GAO REVIEW OF OTHER AGENCIES.— 

19 (1) REVIEW.—The Comptroller General shall 

20 conduct a comprehensive review of the use of credit 

21 ratings by Federal agencies other than those listed 

22 in subsection (a)(3), including an analysis of the 

23 provisions of law or regulation applicable to each 

24 such agency that refer to and require the use of 

25 credit ratings by the agency, and the policies and 


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1 practices of each agency with respect to credit rat2 ings. 

3 (2) REPORT.—Not later than 18 months after 

4 the date of the enactment of this subtitle, the Comp5 troller General shall transmit to Congress a report 

6 on the findings of the study conducted pursuant to 

7 paragraph (1), including recommendations for any 

8 legislation or rulemaking necessary or appropriate in 

9 order for such agencies to reduce their reliance on 

10 credit ratings. 

11 SEC. 6011. PUBLICATION OF RATING HISTORIES ON THE 

12 EDGAR SYSTEM. 

13 Not later than 180 days after the date of the enact14 ment of this subtitle, the Securities and Exchange Com15 mission shall revise its rules in section 240.17g–2(a) and 

16 (d) of title 17, Code of Federal Regulations, to require 

17 that the random sample of ratings histories of credit rat18 ings required under such rules to be disclosed on the 

19 website of a nationally recognized statistical rating organi20 zation also be provided to the Commission in a format con21 sistent with publication by the Commission on the 

22 EDGAR system. 


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1 SEC. 6012. EFFECT OF RULE 436(G). 

2 Rule 436(g), promulgated by the Securities and Ex3 change Commission under the Securities Act of 1933, 

4 shall have no force or effect. 

5 SEC. 6013. STUDIES. 

6 (a) GAO STUDY.— 

7 (1) IN GENERAL.—The Comptroller General 

8 shall conduct a study of— 

9 (A) the implementation of this subtitle and 

10 the amendments made by this subtitle by the 

11 Securities and Exchange Commission; 

12 (B) the appropriateness of relying on rat13 ings for use in Federal, State, and local securi14 ties and banking regulations, including for de15 termining capital requirements; 

16 (C) the effect of liability in private actions 

17 arising under the Securities Exchange Act of 

18 1934; 

19 (D) alternative means for compensating 

20 credit rating agencies that would create incen21 tives for accurate credit ratings and what, if 

22 any, statutory changes would be required to 

23 permit or facilitate the use of such alternative 

24 means of compensation; and 

25 (E) alternative methodologies to assess 

26 credit risk, including market-based measures. 


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1 (2) REPORT.—Not later than 30 months after 

2 the date of enactment of this subtitle, the Comp3 troller General shall submit to Congress and the Se4 curities Exchange Commission, a report containing 

5 the findings under the study required by subsection 

6 (a). 

7 (3) ACCESS.— 

8 (A) IN GENERAL.—For purposes of con9 ducting the study described in paragraph (1), 

10 the Comptroller General shall have access, upon 

11 request and with the consent of the Securities 

12 and Exchange Commission, to any information, 

13 data, schedules, books, accounts, financial 

14 records, reports, files, electronic communica15 tions, or other papers, things, or property be16 longing to or in use by each nationally recog17 nized statistical rating organization, and to the 

18 officers, directors, employees, independent pub19 lic accountants, financial advisors, staff and 

20 agents and representatives of the organization 

21 (as related to the agent’s or representative’s ac22 tivities on behalf of the organization) at such 

23 reasonable times as the Comptroller General 

24 may request. The Comptroller General may 

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1 counts, and other records as the Comptroller 

2 General deems appropriate. 

3 (B) CONFIDENTIALITY.—The Comptroller 

4 General may not disclose reasonably designated 

5 proprietary, trade secret or business confiden6 tial information obtained from the organization 

7 except that such information shall be disclosed 

8 by the Comptroller General— 

9 (i) to other Federal Government de10 partments, agencies, and officials for offi11 cial use upon request; 

12 (ii) to committees of Congress upon 

13 request; and 

14 (iii) to a court in any judicial pro15 ceeding under court order. 

16 Nothing in this provision shall be construed to 

17 limit the requirements imposed by section 1905 

18 of title 18, United States Code. 

19 (b) SEC STUDY ON ASSIGNING CREDIT RATING

20 AGENCIES ON A ROTATING BASIS.—The Securities and 

21 Exchange Commission shall undertake a study on creating 

22 a system whereby nationally recognized statistical rating 

23 organizations are assigned on a rotating basis to issuers 

24 and obligors seeking a credit rating. Not later than 1 year 

25 after the date of enactment of this subtitle, the Securities 


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1 and Exchange Commission shall transmit to Congress a 

2 report containing the findings of the study. 

3 (c) SEC STUDY ON EFFECT OF NEW REQUIRE4 MENTS ON NRSRO REGISTRATION.—The Securities and 

5 Exchange Commission shall conduct a study on the effect 

6 of the amendments made by section 2 on credit rating 

7 agencies seeking to register as nationally recognized sta8 tistical rating organizations, including whether the new re9 quirements in such amendments deter credit rating agen10 cies from registering as nationally recognized statistical 

11 rating organizations. Not later than 1 year after the date 

12 of enactment of this subtitle, the Commission shall trans13 mit to the Committee on Financial Services of the House 

14 of Representatives and the Committee on Banking, Hous15 ing, and Urban Affairs of the Senate a report on the find16 ings of such study. 

17 (d) STUDY OF CREDIT RATINGS OF DIFFERENT

18 CLASSES OF BONDS.— 

19 (1) STUDY.—The Securities and Exchange 

20 Commission shall conduct a study of the treatment 

21 of different classes of bonds (municipal versus cor22 porate) by the nationally recognized statistical rating 

23 organizations. Such study shall examine— 

24 (A) whether there are fundamental dif25 ferences in the treatment of different classes of 


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1 bonds by such rating organizations that cause 

2 some classes of bonds to suffer from undue dis3 crimination; 

4 (B) if there are such differences, what are 

5 the causes of such differences and how can they 

6 be alleviated; 

7 (C) whether there are factors other than 

8 risk of loss that are appropriate for the credit 

9 ratings agencies to consider when rating bonds, 

10 and do those factors vary across different sec11 tors; 

12 (D) the types of financing arrangement 

13 used by municipal issuers; 

14 (E) the differing legal and regulatory re15 gimes governing disclosures for corporate bonds 

16 and municipal bonds; 

17 (F) the extent to which retail investors 

18 could be disadvantaged by a single ratings 

19 scale; and 

20 (G) practices, policies, and methodologies 

21 by the nationally recognized statistical rating 

22 organizations with respect to rating municipal 

23 bonds. 

24 (2) REPORT.—Within 6 months after the date 

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1 change Commission shall submit a report on the re2 sults of the study required by paragraph (1) to the 

3 Committee on Financial Services of the House of 

4 Representatives and the Committee on Banking, 

5 Housing, and Urban Development of the Senate. 

6 Such report shall include as assessment of each of 

7 the issues and subjects described in subparagraphs 

8 (A) through (G) of paragraph (1). 

9 (e) SEC STUDY ON MEANINGFUL MULTI-DIGIT RAT10 ING SYMBOLS.— 

11 (1) STUDY.—The Securities and Exchange 

12 Commission shall conduct a study on the feasibility 

13 and desirability of implementing a standardized rat14 ing system whereby ratings symbols contain multiple 

15 characters, each representing a range of default 

16 probabilities and loss expectations under standard17 ized and increasingly severe levels of market stress. 

18 The study shall optimize the definitions of the sym19 bols to maximize their overall usefulness for users of 

20 credit ratings. 

21 (2) INITIAL EXAMPLE FOR GUIDANCE.—An ex22 ample to provide initial guidance for the study is a 

23 ratings symbol consisting of three digits, each of 

24 which corresponds to default probabilities under dif25 ferent levels of market stress as follows: 


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1 (A) The first digit represents the default 

2 probability under ‘‘normal’’ market stress, char3 acterized by normal economic fluctuations in 

4 addition to a 5 percent decline in asset value 

5 and 2 percent increase in unemployment. 

6 (B) The second digit represents the default 

7 probability under more severe market stress, 

8 characterized a 20 percent decline in asset 

9 value and 5 percent increase in unemployment. 

10 (C) The third digit represents the default 

11 probability under extreme market stress, char12 acterized by a 50 percent decline in asset value 

13 and 10 percent increase in unemployment. 

14 (3) REPORT.—Not later than 1 year after the 

15 date of the enactment of this subtitle, the Commis16 sion shall transmit to Congress a report of the study 

17 conducted pursuant to paragraph (1), including rec18 ommendations on whether the system similar to that 

19 described in paragraph (2) should be implemented 

20 and, if so, any necessary legislation required to im21 plement such a system. 

22 (f) SEC STUDY ON RATINGS STANDARDIZATION.— 

23 (1) IN GENERAL.—The Securities and Ex24 change Commission shall undertake a study on the 

25 feasability and desirability of— 


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1 (A) standardizing credit ratings termi2 nology, so that all credit rating agencies issue 

3 credit ratings using identical terms; 

4 (B) standardizing the market stress condi5 tions under which ratings are evaluated; 

6 (C) requiring a quantitative correspond7 ence between credit ratings and a range of de8 fault probabilities and loss expectations under 

9 standardized conditions of economic stress; and 

10 (D) standardizing credit rating termi11 nology across asset classes, so that named rat12 ings shall correspond to a standard range of de13 fault probabilities and expected losses inde14 pendent of asset class and issuing entity. 

15 (2) REPORT.—Not later than 1 year after the 

16 date of enactment of this subtitle, the Securities and 

17 Exchange Commission shall transmit to Congress a 

18 report containing the findings of the study and the 

19 recommendations of the Commission. 

20 Subtitle C—Investor Protection Act 

21 SEC. 7001. SHORT TITLE. 

22 This subtitle may be cited as the ‘‘Investor Protection 

23 Act of 2009’’. 


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1 PART 1—DISCLOSURE 

2 SEC. 7101. INVESTOR ADVISORY COMMITTEE ESTAB3 LISHED. 

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

5 et seq.) is amended by adding after section 4C the fol6 lowing new section: 

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

8 ‘‘(a) ESTABLISHMENT AND PURPOSE.—There is es9 tablished an Investor Advisory Committee (in this section 

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

11 the Commission on— 

12 ‘‘(1) regulatory priorities and issues regarding 

13 new products, trading strategies, fee structures and 

14 the effectiveness of disclosures; 

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

16 ‘‘(3) initiatives to promote investor confidence 

17 in the integrity of the marketplace. 

18 ‘‘(b) MEMBERSHIP.— 

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

20 Commission shall appoint the members of the Com21 mittee, which members shall— 

22 ‘‘(A) represent the interests of individual 

23 investors; 

24 ‘‘(B) represent the interests of institutional 

25 investors; and 


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1 ‘‘(C) use a wide range of investment ap2 proaches. 

3 ‘‘(2) MEMBERS NOT COMMISSION EMPLOY4 EES.—Members shall not be considered employees or 

5 agents of the Commission solely because of member6 ship on the Committee. 

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

8 time to time at the call of the Commission, but, at a min9 imum, shall meet at least twice each year. 

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

11 Members of the Committee who are not full-time employ12 ees of the United States shall— 

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

14 rate fixed by the Commission while attending meet15 ings of the Committee, including travel time; and 

16 ‘‘(2) be allowed travel expenses, including trans17 portation and subsistence, while away from their 

18 homes or regular places of business. 

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

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

21 findings or recommendations of the Committee. 

22 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There 

23 is authorized to be appropriated to the Commission such 

24 sums as are necessary for the activities of the Com25 mittee.’’. 


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1 SEC. 7102. CLARIFICATION OF THE COMMISSION’S AUTHOR2 ITY TO ENGAGE IN CONSUMER TESTING. 

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

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

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

7 ‘‘(e) For the purposes of evaluating its rules and pro8 grams and for considering, proposing, adopting, or engag9 ing in rules or programs, the Commission is authorized 

10 to gather information, communicate with investors or 

11 other members of the public, and engage in such tem12 porary or experimental programs as the Commission in its 

13 discretion determines is in the public interest or for the 

14 protection of investors. The Commission may delegate to 

15 its staff some or all of the authority conferred by this sub16 section.’’. 

17 (b) AMENDMENT TO SECURITIES EXCHANGE ACT OF

18 1934.—Section 23 of the Securities Exchange Act of 1934 

19 (15 U.S.C. 78w) is amended by redesignating subsections 

20 (b), (c), and (d) as subsections (c), (d), and (e), respec21 tively, and inserting after subsection (a) the following: 

22 ‘‘(b) For the purposes of evaluating its rules and pro23 grams and for considering proposing, adopting, or engag24 ing in rules or programs, the Commission is authorized 

25 to gather information, communicate with investors or 

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1 porary or experimental programs as the Commission in its 

2 discretion determines is in the public interest or for the 

3 protection of investors. The Commission may delegate to 

4 its staff some or all of the authority conferred by this sub5 section.’’. 

6 (c) AMENDMENT TO INVESTMENT COMPANY ACT OF

7 1940.—Section 38 of the Investment Company Act of 

8 1940 (15 U.S.C. 80a–38) is amended by adding at the 

9 end the following new subsection: 

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

11 of evaluating its rules and programs and for considering 

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

13 Commission is authorized to gather information, commu14 nicate with investors or other members of the public, and 

15 engage in such temporary or experimental programs as 

16 the Commission in its discretion determines is in the pub17 lic interest or for the protection of investors. The Commis18 sion may delegate to its staff some or all of the authority 

19 conferred by this subsection.’’. 

20 (d) AMENDMENT TO THE INVESTMENT ADVISERS

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

22 Act of 1940 (15 U.S.C. 80b–11) (as amended by section 

23 5008(2)) is further amended by adding at the end the fol24 lowing new subsection: 


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1 ‘‘(f) For the purposes of evaluating its rules and pro2 grams and for considering proposing, adopting, or engag3 ing in rules or programs, the Commission is authorized 

4 to gather information, communicate with investors or 

5 other members of the public, and engage in such tem6 porary or experimental programs as the Commission in its 

7 discretion determines is in the public interest or for the 

8 protection of investors. The Commission may delegate to 

9 its staff some or all of the authority conferred by this sub10 section.’’. 

11 SEC. 7103. ESTABLISHMENT OF A FIDUCIARY DUTY FOR 

12 BROKERS, DEALERS, AND INVESTMENT AD13 VISERS, AND HARMONIZATION OF REGULA14 TION. 

15 (a) IN GENERAL.— 

16 (1) SECURITIES EXCHANGE ACT OF 1934.—Sec17 tion 15 of the Securities Exchange Act of 1934 (15 

18 U.S.C. 78o) (as amended by section 1951(c)) is fur19 ther amended by adding at the end the following 

20 new subsections: 

21 ‘‘(m) STANDARD OF CONDUCT.— 

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

23 provision of this Act or the Investment Advisers Act 

24 of 1940, the Commission shall promulgate rules to 

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


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1 when providing personalized investment advice about 

2 securities to a retail customer (and such other cus3 tomers as the Commission may by rule provide), the 

4 standard of conduct for such broker or dealer with 

5 respect to such customer shall be the same as the 

6 standard of conduct applicable to an investment ad7 viser under section 211 of the Investment Advisers 

8 Act of 1940. The receipt of compensation based on 

9 commission or other standard compensation for the 

10 sale of securities shall not, in and of itself, be con11 sidered a violation of such standard applied to a 

12 broker or dealer. Nothing in this section shall re13 quire a broker or dealer or registered representative 

14 to have a continuing duty of care or loyalty to the 

15 customer after providing personalized investment ad16 vice about securities. 

17 ‘‘(2) DISCLOSURE OF RANGE OF PRODUCTS OF18 FERED.—Where a broker or dealer sells only propri19 etary or other limited range of products, as deter20 mined by the Commission, the Commission shall by 

21 rule require that such broker or dealer provide no22 tice to each retail customer and obtain the consent 

23 or acknowledgment of the customer. The sale of only 

24 proprietary or other limited range of products by a 

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1 ered a violation of the standard set forth in para2 graph (1). 

3 ‘‘(3) RETAIL CUSTOMER DEFINED.—For pur4 poses of this subsection, the term ‘retail customer’ 

5 means a natural person, or the legal representative 

6 of such natural person, who— 

7 ‘‘(A) receives personalized investment ad8 vice about securities from a broker or dealer; 

9 and 

10 ‘‘(B) uses such advice primarily for per11 sonal, family, or household purposes. 

12 ‘‘(n) OTHER MATTERS.—The Commission shall— 

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

14 disclosures to investors regarding the terms of their 

15 relationships with brokers, dealers, and investment 

16 advisers, including any material conflicts of interest; 

17 and 

18 ‘‘(2) examine and, where appropriate, promul19 gate rules prohibiting or restricting certain sales 

20 practices, conflicts of interest, and compensation 

21 schemes for brokers, dealers, and investment advis22 ers that the Commission deems contrary to the pub23 lic interest and the protection 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 7102(d), is further amended by 

2 adding at the end the following new subsections: 

3 ‘‘(g) STANDARD OF CONDUCT.— 

4 ‘‘(1) IN GENERAL.—The Commission shall pro5 mulgate rules to provide that the standard of con6 duct for all brokers, dealers, and investment advis7 ers, when providing personalized investment advice 

8 about securities to retail customers (and such other 

9 customers as the Commission may by rule provide), 

10 shall be to act in the best interest of the customer 

11 without regard to the financial or other interest of 

12 the broker, dealer, or investment adviser providing 

13 the advice. In accordance with such rules, any mate14 rial conflicts of interest shall be disclosed and may 

15 be consented to by the customer. Such rules shall 

16 provide that such standard of conduct shall be no 

17 less stringent than the standard applicable to invest18 ment advisers under section 206(1) and (2) of this 

19 Act when providing personalized investment advice 

20 about securities, except the Commission shall not as21 cribe a meaning to the term ‘customer’ that would 

22 include an investor in a private fund managed by an 

23 investment adviser, where such private fund has en24 tered into an advisory contract with such adviser. 

25 The receipt of compensation based on commission or 


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1 fees shall not, in and of itself, be considered a viola2 tion of such standard applied to a broker, dealer, or 

3 investment adviser. 

4 ‘‘(2) RETAIL CUSTOMER DEFINED.—For pur5 poses of this subsection, the term ‘retail customer’ 

6 means a natural person, or the legal representative 

7 of such natural person, who— 

8 ‘‘(A) receives personalized investment ad9 vice about securities from a broker, dealer, or 

10 investment adviser; and 

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

13 ‘‘(h) 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, including any material conflicts of interest; 

18 and 

19 ‘‘(2) examine and, where appropriate, promul20 gate rules prohibiting or restricting certain sales 

21 practices, conflicts of interest, and compensation 

22 schemes for brokers, dealers, and investment advis23 ers that the Commission deems contrary to the pub24 lic interest and the protection of investors.’’. 

25 (b) HARMONIZATION OF ENFORCEMENT.— 


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

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

4 adding at the end the following new subsection: 

5 ‘‘(o) HARMONIZATION OF ENFORCEMENT.—The en6 forcement authority of the Commission with respect to vio7 lations of the standard of conduct applicable to a broker 

8 or dealer providing personalized investment advice about 

9 securities to a retail customer shall include— 

10 ‘‘(1) the enforcement authority of the Commis11 sion with respect to such violations provided under 

12 this Act; and 

13 ‘‘(2) the enforcement authority of the Commis14 sion with respect to violations of the standard of 

15 conduct applicable to an investment advisor under 

16 the Investment Advisers Act of 1940, including the 

17 authority to impose sanctions for such violations, 

18 and 

19 the Commission shall seek to prosecute and sanction viola20 tors of the standard of conduct applicable to a broker or 

21 dealer providing personalized investment advice about se22 curities to a retail customer under this Act to same extent 

23 as the Commission prosecutes and sanctions violators of 

24 the standard of conduct applicable to an investment advi25 sor under the Investment Advisers Act of 1940.’’. 


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1 (2) INVESTMENT ADVISERS ACT OF 1940.—Sec2 tion 211 of the Investment Advisers Act of 1940, as 

3 amended by subsection (a)(2), is further amended by 

4 adding at the end the following new subsection: 

5 ‘‘(i) HARMONIZATION OF ENFORCEMENT.—The en6 forcement authority of the Commission with respect to vio7 lations of the standard of conduct applicable to an invest8 ment adviser shall include— 

9 ‘‘(1) the enforcement authority of the Commis10 sion with respect to such violations provided under 

11 this Act; and 

12 ‘‘(2) the enforcement authority of the Commis13 sion with respect to violations of the standard of 

14 conduct applicable to a broker or dealer providing 

15 personalized investment advice about securities to a 

16 retail customer under the Securities Exchange Act 

17 of 1934, including the authority to impose sanctions 

18 for such violations, and 

19 the Commission shall seek to prosecute and sanction viola20 tors of the standard of conduct applicable to an invest21 ment advisor under this Act to same extent as the Com22 mission prosecutes and sanctions violators of the standard 

23 of conduct applicable to a broker or dealer providing per24 sonalized investment advice about securities to a retail 

25 customer under the Securities Exchange Act of 1934.’’. 


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1 SEC. 7104. COMMISSION STUDY AND RULEMAKING ON DIS2 CLOSURE TO RETAIL CUSTOMERS BEFORE 

3 PURCHASE OF PRODUCTS OR SERVICES. 

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

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

6 provision of documents or information to retail customers 

7 prior to the purchase of investment products or services, 

8 and within 180 days after the date of the enactment of 

9 this subtitle, the Securities and Exchange Commission 

10 shall publish a study that examines— 

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

12 into consideration the definition in section 15(k) of 

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

14 78o), as amended by section 7103 of this subtitle; 

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

16 provided to retail customers, and the sellers or pro17 viders of such products and services, that are within 

18 the Commission’s jurisdiction; 

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

20 provided to retail customers, the fees charged for 

21 such products and services, and the conflicts of in22 terest that may arise during the sales process or 

23 provision of services; 

24 (4) information that retail customers should re25 ceive prior to purchasing each product or service, 


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1 and the appropriate person or entity to provide such 

2 information; and 

3 (5) ways to ensure that, where possible, reason4 ably similar products and services are subject to 

5 similar regulatory treatment, including with respect 

6 to information that must be provided to retail cus7 tomers prior to the purchase of such products or 

8 services and how such information is provided. 

9 (b) RULEMAKING.— 

10 (1) Notwithstanding any other provision of the 

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

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

13 80a–1 et seq.), following completion of the study re14 quired by subsection (a), the Commission is author15 ized to promulgate rules to require that the appro16 priate persons or entities provide designated docu17 ments or information to retail customers prior to the 

18 purchase of identified investment products or serv19 ices. Any such rules shall— 

20 (A) take into account the findings of the 

21 study conducted pursuant to subsection (a); 

22 (B) take into consideration, to the extent 

23 possible, the need for such documents and in24 formation to be consistent and comparable 


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1 across investment products or services sold or 

2 provided to retail customers; and 

3 (C) reduce, to the extent possible, disrup4 tions to the purchase process for investment 

5 products and services sold or provided to retail 

6 customers, by means such as permitting re7 quired disclosures to be made via the Internet. 

8 (2) Notwithstanding paragraph (1), the Com9 mission is authorized to promulgate rules in connec10 tion with— 

11 (A) the implementation of section 7103; 

12 and 

13 (B) disclosure to retail customers other 

14 than rules that require the provision of docu15 ments or information to retail customers prior 

16 to the purchase of investment products or serv17 ices. 

18 SEC. 7105. BENEFICIAL OWNERSHIP AND SHORT-SWING 

19 PROFIT REPORTING. 

20 (a) BENEFICIAL OWNERSHIP REPORTING.—Section 

21 13 of the Securities Exchange Act of 1934 (15 U.S.C. 

22 78m) is amended— 

23 (1) in subsection (d)(1)— 

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

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


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1 such shorter time as the Commission may es2 tablish by rule’’; and 

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

4 security at its principal executive office, by reg5 istered or certified mail, send to each exchange 

6 where the security is traded, and’’; 

7 (2) in subsection (d)(2)— 

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

9 issuer and the exchange, and’’; and 

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

11 the issuer and the exchange and’’; 

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

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

14 (4) in subsection (g)(2)— 

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

16 and 

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

18 the issuer and’’. 

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

20 16(a) of the Securities Exchange Act of 1934 (15 U.S.C. 

21 78p(a)) is amended— 

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

23 security is registered on a national securities ex24 change, also with the exchange)’’; and 


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1 (2) in paragraph (2)(B), by inserting after ‘‘of2 ficer’’ the following: ‘‘, or within such shorter time 

3 as the Commission may establish by rule’’. 

4 SEC. 7106. REVISION TO RECORDKEEPING RULES. 

5 (a) INVESTMENT COMPANY ACT OF 1940 AMEND6 MENTS.—Section 31 of the Investment Company Act of 

7 1940 (15 U.S.C. 80a–30) is amended— 

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

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

10 a registered investment company’s securities, depos11 its, or credits shall maintain and preserve all records 

12 that relate to the person’s custody or use of the reg13 istered investment company’s securities, deposits, or 

14 credits for such period or periods as the Commis15 sion, by rules and regulations, may prescribe as nec16 essary or appropriate in the public interest or for 

17 the protection of investors.’’; and 

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

19 following new paragraph: 

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

21 USE.— 

22 ‘‘(A) IN GENERAL.—Notwithstanding para23 graph (1), records of persons with custody or 

24 use of a registered investment company’s secu25 rities, deposits, or credits, that relate to such 


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

2 time to time, to such reasonable periodic, spe3 cial, or other examinations and other informa4 tion and document requests by representatives 

5 of the Commission as the Commission deems 

6 necessary or appropriate in the public interest 

7 or for the protection of investors. 

8 ‘‘(B) CERTAIN PERSONS SUBJECT TO

9 OTHER REGULATION.—Persons subject to regu10 lation and examination by a Federal financial 

11 institution regulatory agency (as such term is 

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

13 United States Code) may satisfy any examina14 tion request, information request, or document 

15 request described under subparagraph (A), by 

16 providing the Commission with a detailed list17 ing, in writing, of the registered investment 

18 company’s securities, deposits, or credits within 

19 such person’s custody or use.’’. 

20 (b) INVESTMENT ADVISERS ACT OF 1940 AMEND21 MENT.—Section 204 of the Investment Advisers Act of 

22 1940 (15 U.S.C. 80b–4) is amended by adding at the end 

23 the following new subsection: 

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

25 USE.— 


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

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

3 credits, that relate to such custody or use, are sub4 ject at any time, or from time to time, to such rea5 sonable periodic, special, or other examinations and 

6 other information and document requests by rep7 resentatives of the Commission as the Commission 

8 deems necessary or appropriate in the public interest 

9 or for the protection of investors. 

10 ‘‘(2) CERTAIN PERSONS SUBJECT TO OTHER

11 REGULATION.—Persons subject to regulation and ex12 amination by a Federal financial institution regu13 latory agency (as such term is defined under section 

14 212(c)(2) of title 18, United States Code) may sat15 isfy any examination request, information request, 

16 or document request described under paragraph (1), 

17 by providing the Commission with a detailed listing, 

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

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

20 SEC. 7107. STUDY ON ENHANCING INVESTMENT ADVISER 

21 EXAMINATIONS. 

22 (a) STUDY REQUIRED.— 

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

24 and analyze the need for enhanced examination and 

25 enforcement resources for investment advisers. 


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1 (2) AREAS OF CONSIDERATION.—The study re2 quired by this subsection shall examine— 

3 (A) the number and frequency of examina4 tions of investment advisers by the Commission 

5 over the 5 years preceding the date of the en6 actment of this subtitle; 

7 (B) the extent to which having Congress 

8 authorize the Commission to designate one or 

9 more self-regulatory organizations to augment 

10 the Commission’s efforts in overseeing invest11 ment advisers would improve the frequency of 

12 examinations of investment advisers; and 

13 (C) current and potential approaches to ex14 amining the investment advisory activities of 

15 dually registered broker-dealers and investment 

16 advisers or affiliated broker-dealers and invest17 ment advisers. 

18 (b) REPORT REQUIRED.—The Commission shall re19 port its findings to the Committee on Financial Services 

20 of the House of Representatives and the Committee on 

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

22 later than 180 days after the date of enactment of this 

23 subtitle, and shall use such findings to revise its rules and 

24 regulations, as necessary. The report shall include a dis25 cussion of regulatory or legislative steps that are recVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01290 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ommended or that may be necessary to address concerns 

2 identified in the study. 

3 SEC. 7108. GAO STUDY OF FINANCIAL PLANNING. 

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

5 the United States shall conduct a study on the regulation 

6 and oversight of financial planning. The study shall con7 sider— 

8 (1) the unique role of financial planners in pro9 viding comprehensive advice in investment planning, 

10 income tax planning, education planning, retirement 

11 planning, estate planning, risk management, and 

12 other areas with respect to the management of fi13 nancial resources; and 

14 (2) any gaps in the regulation of financial plan15 ners given existing State and Federal regulation of 

16 financial planning activities and the need to provide 

17 related consumer protections for such financial plan18 ning activities. 

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

20 period beginning on the date of the enactment of this sub21 title, the Comptroller General of the United States shall 

22 submit to the Congress a report containing the findings 

23 and determinations made by the Comptroller General in 

24 carrying out the study required under subsection (a), in25 cluding recommendations for the appropriate regulation 


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1 of, or standards for, financial planners as a profession and 

2 how such regulations or standards should be established. 

3 PART 2—ENFORCEMENT AND REMEDIES 

4 SEC. 7201. AUTHORITY TO RESTRICT MANDATORY PRE-DIS5 PUTE ARBITRATION. 

6 (a) AMENDMENT TO SECURITIES EXCHANGE ACT OF

7 1934.—Section 15 of the Securities Exchange Act of 1934 

8 (15 U.S.C. 78o), as amended by section 7103, is further 

9 amended by adding at the end the following new sub10 section: 

11 ‘‘(p) AUTHORITY TO RESTRICT MANDATORY PRE12 DISPUTE ARBITRATION.—The Commission, by rule, may 

13 prohibit, or impose conditions or limitations on the use 

14 of, agreements that require customers or clients of any 

15 broker, dealer, or municipal securities dealer to arbitrate 

16 any future dispute between them arising under the Fed17 eral securities laws, the rules and regulations thereunder, 

18 or the rules of a self-regulatory organization if it finds 

19 that such prohibition, imposition of conditions, or limita20 tions are in the public interest and for the protection of 

21 investors.’’. 

22 (b) AMENDMENT TO INVESTMENT ADVISERS ACT OF

23 1940.—Section 205 of the Investment Advisers Act of 

24 1940 (15 U.S.C. 80b–5) is amended by adding at the end 

25 the following new subsection: 


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1 ‘‘(f) 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 investment adviser to arbitrate any future dispute between 

6 them arising under the Federal securities laws, the rules 

7 and regulations thereunder, or the rules of a self-regu8 latory organization if it finds that such prohibition, impo9 sition of conditions, or limitations are in the public inter10 est and for the protection of investors.’’. 

11 SEC. 7202. COMPTROLLER GENERAL STUDY TO REVIEW SE12 CURITIES ARBITRATION SYSTEM. 

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

14 States shall conduct a study to review— 

15 (1) the costs to parties of an arbitration pro16 ceeding using the arbitration system operated by the 

17 Financial Industry Regulatory Authority and over18 seen by the Securities and Exchange Commission as 

19 compared to litigation; 

20 (2) the percentage of recovery of the total 

21 amount of a claim in an arbitration proceeding using 

22 the arbitration system operated by the Financial In23 dustry Regulatory Authority and overseen by the Se24 curities and Exchange Commission; and 


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1 (3) other additional issues as may be raised 

2 during the course of the study conducted under this 

3 subsection. 

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

5 of enactment of this subtitle, the Comptroller General of 

6 the United States shall submit to the Committee on Fi7 nancial Services of the House of Representatives and the 

8 Committee on Banking, Housing, and Urban Affairs of 

9 the Senate a report on the results of the study required 

10 by subsection (a), including in such report recommenda11 tions for improvements to the arbitration system ref12 erenced in such subsection. 

13 SEC. 7203. WHISTLEBLOWER PROTECTION. 

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

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

16 section 21E the following new section: 

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

18 PROTECTION. 

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

20 action brought by the Commission under the securities 

21 laws that results in monetary sanctions exceeding 

22 $1,000,000, the Commission, under regulations prescribed 

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

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

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


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1 action or related actions to one or more whistleblowers 

2 who voluntarily provided original information to the Com3 mission that led to the successful enforcement of the ac4 tion. Any amount payable under the preceding sentence 

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

6 ‘‘(b) DETERMINATION OF AMOUNT OF AWARD; DE7 NIAL OF AWARD.— 

8 ‘‘(1) DETERMINATION OF AMOUNT OF

9 AWARD.—The determination of the amount of an 

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

11 shall be in the sole discretion of the Commission. 

12 The Commission may take into account the signifi13 cance of the whistleblower’s information to the suc14 cess of the judicial or administrative action described 

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

16 by the whistleblower and any legal representative of 

17 the whistleblower in such action, the Commission’s 

18 programmatic interest in deterring violations of the 

19 securities laws by making awards to whistleblowers 

20 who provide information that leads to the successful 

21 enforcement of such laws, and such additional fac22 tors as the Commission may establish by rules or 

23 regulations. 

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

25 subsection (a) shall be made— 


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

2 the time he or she acquired the original infor3 mation submitted to the Commission, a mem4 ber, officer, or employee of any appropriate reg5 ulatory agency, the Department of Justice, the 

6 Public Company Accounting Oversight Board, 

7 law enforcement agency, or a self-regulatory or8 ganization; 

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

10 of a criminal violation related to the judicial or 

11 administrative action for which the whistle12 blower otherwise could receive an award under 

13 this section; 

14 ‘‘(C) to any whistleblower who gains the 

15 information through the performance of an 

16 audit of financial statements required under the 

17 securities laws; or 

18 ‘‘(D) to any whistleblower who fails to sub19 mit information to the Commission in such 

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

21 ‘‘(c) REPRESENTATION.— 

22 ‘‘(1) PERMITTED REPRESENTATION.—Any 

23 whistleblower who makes a claim for an award under 

24 subsection (a) may be represented by counsel. 


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1 ‘‘(2) REQUIRED REPRESENTATION.—Any whis2 tleblower who makes a claim for an award under 

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

4 whistleblower submits the information upon which 

5 the claim is based anonymously. Prior to the pay6 ment of an award, the whistleblower must disclose 

7 his or her identity and provide such other informa8 tion as the Commission may require. 

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

10 the Commission is necessary for any whistleblower to re11 ceive an award under subsection (a), unless the Commis12 sion, by rule or regulation, so requires. 

13 ‘‘(e) APPEALS.—Any determinations under this sec14 tion, including whether, to whom, or in what amounts to 

15 make awards, shall be in the sole discretion of the Com16 mission, and any such determinations shall be final and 

17 not subject to judicial review. 

18 ‘‘(f) INVESTOR PROTECTION FUND.— 

19 ‘‘(1) FUND ESTABLISHED.—There is estab20 lished in the Treasury of the United States a fund 

21 to be known as the ‘Securities and Exchange Com22 mission Investor Protection Fund’ (referred to in 

23 this section as the ‘Fund’). 

24 ‘‘(2) USE OF FUND.—The Fund shall be avail25 able to the Commission, without further appropriaVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01297 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tion or fiscal year limitation, for the following pur2 poses: 

3 ‘‘(A) Paying awards to whistleblowers as 

4 provided in subsection (a). 

5 ‘‘(B) Funding investor education initiatives 

6 designed to help investors protect themselves 

7 against securities fraud or other violations of 

8 the securities laws, or the rules and regulations 

9 thereunder. 

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

11 deposited into or credited to the Fund— 

12 ‘‘(A) any monetary sanction collected by 

13 the Commission in any judicial or administra14 tive action brought by the Commission under 

15 the securities laws that is not added to a 

16 disgorgement fund or other fund pursuant to 

17 section 308 of the Sarbanes-Oxley Act of 2002 

18 or otherwise distributed to victims of a violation 

19 of the securities laws, or the rules and regula20 tions thereunder, underlying such action, unless 

21 the balance of the Fund at the time the mone22 tary sanction is collected exceeds $100,000,000; 

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

24 disgorgement fund or other fund pursuant to 

25 section 308 of the Sarbanes-Oxley Act of 2002 


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1 that is not distributed to the victims for whom 

2 the disgorgement fund or other fund was estab3 lished, unless the balance of the Fund at the 

4 time the determination is made not to dis5 tribute the monetary sanction to such victims 

6 exceeds $100,000,000; and 

7 ‘‘(C) all income from investments made 

8 under paragraph (4). 

9 ‘‘(4) INVESTMENTS.— 

10 ‘‘(A) AMOUNTS IN FUND MAY BE IN11 VESTED.—The Commission may request the 

12 Secretary of the Treasury to invest the portion 

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

14 judgment, required to meet the current needs of 

15 the Fund. 

16 ‘‘(B) ELIGIBLE INVESTMENTS.—Invest17 ments shall be made by the Secretary of the 

18 Treasury in obligations of the United States or 

19 obligations that are guaranteed as to principal 

20 and interest by the United States, with matu21 rities suitable to the needs of the Fund as de22 termined by the Commission. 

23 ‘‘(C) INTEREST AND PROCEEDS CRED24 ITED.—The interest on, and the proceeds from 

25 the sale or redemption of, any obligations held 


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

2 part of, the Fund. 

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

4 October 30 of each year, the Commission shall 

5 transmit to the Committee on Banking, Housing, 

6 and Urban Affairs of the Senate, and the Committee 

7 on Financial Services of the House of Representa8 tives a report on— 

9 ‘‘(A) the Commission’s whistleblower 

10 award program under this section, including a 

11 description of the number of awards that were 

12 granted and the types of cases in which awards 

13 were granted during the preceding fiscal year; 

14 ‘‘(B) investor education initiatives de15 scribed in paragraph (2)(B) that were funded 

16 by the Fund during the preceding fiscal year; 

17 ‘‘(C) the balance of the Fund at the begin18 ning of the preceding fiscal year; 

19 ‘‘(D) the amounts deposited into or cred20 ited to the Fund during the preceding fiscal 

21 year; 

22 ‘‘(E) the amount of earnings on invest23 ments of amounts in the Fund during the pre24 ceding fiscal year; 


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1 ‘‘(F) the amount paid from the Fund dur2 ing the preceding fiscal year to whistleblowers 

3 pursuant to subsection (a); 

4 ‘‘(G) the amount paid from the Fund dur5 ing the preceding fiscal year for investor edu6 cation initiatives described in paragraph (1)(B); 

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

8 of the preceding fiscal year; and 

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

10 statements, including a balance sheet, income 

11 statement, and cash flow analysis. 

12 ‘‘(g) PROTECTION OF WHISTLEBLOWERS.— 

13 ‘‘(1) PROHIBITION AGAINST RETALIATION.— 

14 ‘‘(A) IN GENERAL.—No employer may dis15 charge, demote, suspend, threaten, harass, or in 

16 any other manner discriminate against an em17 ployee, contractor, or agent in the terms and 

18 conditions of employment because of any lawful 

19 act done by the employee, contractor, or agent 

20 in providing information to the Commission in 

21 accordance with subsection (a), or in assisting 

22 in any investigation or judicial or administrative 

23 action of the Commission based upon or related 

24 to such information. 

25 ‘‘(B) ENFORCEMENT.— 


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1 ‘‘(i) CAUSE OF ACTION.—An indi2 vidual who alleges discharge or other dis3 crimination in violation of subparagraph 

4 (A) may bring an action under this sub5 section in the appropriate district court of 

6 the United States for the relief provided in 

7 subparagraph (C). 

8 ‘‘(ii) SUBPOENAS.—A subpoena re9 quiring the attendance of a witness at a 

10 trial or hearing conducted under this sec11 tion may be served at any place in the 

12 United States. 

13 ‘‘(iii) STATUTE OF LIMITATIONS.—An 

14 action under this subsection may not be 

15 brought more than 6 years after the date 

16 on which the violation of subparagraph (A) 

17 occurred, or more than 3 years after the 

18 date when facts material to the right of ac19 tion are known or reasonably should have 

20 been known by the employee alleging a vio21 lation of subparagraph (A), but in no event 

22 after 10 years after the date on which the 

23 violation occurs. 

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

25 or agent prevailing in any action brought under 


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1 subparagraph (B) shall be entitled to all relief 

2 necessary to make that employee, contractor, or 

3 agent whole, including reinstatement with the 

4 same seniority status that the employee, con5 tractor, or agent would have had, but for the 

6 discrimination, 2 times the amount of back pay, 

7 with interest, and compensation for any special 

8 damages sustained as a result of the discrimi9 nation, including litigation costs, expert witness 

10 fees, and reasonable attorneys’ fees. 

11 ‘‘(2) CONFIDENTIALITY.— 

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

13 subparagraph (B), the Commission and any of14 ficer or employee of the Commission shall not 

15 disclose any information, including information 

16 provided by a whistleblower to the Commission, 

17 which could reasonably be expected to reveal 

18 the identity of a whistleblower, except in ac19 cordance with the provisions of section 552a of 

20 title 5, United States Code, unless and until re21 quired to be disclosed to a defendant or re22 spondent in connection with a public proceeding 

23 instituted by the Commission or any entity de24 scribed in subparagraph (B). For purposes of 

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


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1 paragraph shall be considered a statute de2 scribed in subsection (b)(3)(B) of such section 

3 552. 

4 ‘‘(B) AVAILABILITY TO GOVERNMENT

5 AGENCIES.—Without the loss of its status as 

6 confidential and privileged in the hands of the 

7 Commission, all information referred to in sub8 paragraph (A) may, in the discretion of the 

9 Commission, when determined by the Commis10 sion to be necessary to accomplish the purposes 

11 of this Act and protect investors, be made avail12 able to— 

13 ‘‘(i) the Attorney General of the 

14 United States, 

15 ‘‘(ii) an appropriate regulatory au16 thority, 

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

18 ‘‘(iv) State attorneys general in con19 nection with any criminal investigation, 

20 and 

21 ‘‘(v) any appropriate State regulatory 

22 authority, 

23 each of which shall not disclose such informa24 tion in accordance with subparagraph (A). 


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1 ‘‘(h) PROVISION OF FALSE INFORMATION.—Any 

2 whistleblower who knowingly and willfully makes any 

3 false, fictitious, or fraudulent statement or representation, 

4 or makes or uses any false writing or document knowing 

5 the same to contain any false, fictitious, or fraudulent 

6 statement or entry, shall not be entitled to an award under 

7 this section. 

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

9 shall have the authority to issue such rules and regulations 

10 as may be necessary or appropriate to implement the pro11 visions of this section. 

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

13 following terms have the following meanings: 

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

15 ‘original information’ means information that— 

16 ‘‘(A) is based on the direct and inde17 pendent knowledge or analysis of a whistle18 blower; 

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

20 any other source, unless the whistleblower is the 

21 initial source of the information; and 

22 ‘‘(C) is not based on allegations in a judi23 cial or administrative hearing, in a govern24 mental report, hearing, audit, or investigation, 

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1 blower is the initial source of the information 

2 that resulted in the judicial or administrative 

3 hearing, governmental report, hearing, audit, or 

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

5 allegations. 

6 ‘‘(2) MONETARY SANCTIONS.—The term ‘mone7 tary sanctions’, when used with respect to any judi8 cial or administrative action, means any monies, in9 cluding but not limited to penalties, disgorgement, 

10 and interest, ordered to be paid, and any monies de11 posited into a disgorgement fund or other fund pur12 suant to section 308(b) of the Sarbanes-Oxley Act of 

13 2002 (15 U.S.C. 7246(b)), as a result of such action 

14 or any settlement of such action. 

15 ‘‘(3) RELATED ACTION.—The term ‘related ac16 tion’, when used with respect to any judicial or ad17 ministrative action brought by the Commission 

18 under the securities laws, means any judicial or ad19 ministrative action brought by an entity described in 

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

21 original information provided by a whistleblower 

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

23 enforcement of the Commission action. 

24 ‘‘(4) WHISTLEBLOWER.—The term ‘whistle25 blower’ means an individual, or two or more individVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01306 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 uals acting jointly, who submit information to the 

2 Commission as provided in this section.’’. 

3 (b) ADMINISTRATION AND ENFORCEMENT.—The Se4 curities and Exchange Commission shall establish a sepa5 rate office within the Commission to administer and en6 force the provisions of section 21F of the Securities Ex7 change Act of 1934, as added by subsection (a). Such of8 fice shall report annually to Congress on its activities, 

9 whistleblower complaints, and the response of the Com10 mission to such complaints. 

11 SEC. 7204. CONFORMING AMENDMENTS FOR WHISTLE12 BLOWER PROTECTION. 

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

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

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

16 2002’’: 

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

18 1933 (15 U.S.C. 77t(d)(3)(A)). 

19 (2) Section 42(e)(3)(A) of the Investment Com20 pany Act of 1940 (15 U.S.C. 80a–41(e)(3)(A)). 

21 (3) Section 209(e)(3)(A) of the Investment Ad22 visers Act of 1940 (15 U.S.C. 80b–9(e)(3)(A)). 

23 (b) SECURITIES EXCHANGE ACT.—The Securities 

24 Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amend25 ed— 


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

2 78u(d)(3)(C)(i)), by inserting ‘‘and section 21F of 

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

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

5 1(d)(1))— 

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

7 (e))’’; and 

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

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

10 and 

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

12 and redesignating subsections (f) and (g) as sub13 sections (e) and (f), respectively. 

14 SEC. 7205. IMPLEMENTATION AND TRANSITION PROVI15 SIONS FOR WHISTLEBLOWER PROTECTIONS. 

16 (a) IMPLEMENTING RULES.—The Securities and Ex17 change Commission shall issue final regulations imple18 menting the provisions of section 21F of the Securities 

19 Exchange Act of 1934, as added by this part, no later 

20 than 270 days after the date of enactment of this subtitle. 

21 (b) ORIGINAL INFORMATION.—Information sub22 mitted to the Commission by a whistleblower in accord23 ance with regulations implementing the provisions of sec24 tion 21F of the Securities Exchange Act of 1934, as added 

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1 tion, as defined in subsection (i)(1) of such section, solely 

2 because the whistleblower submitted such information 

3 prior to the effective date of such regulations, provided 

4 such information was submitted after the date of enact5 ment of this subtitle, or related to insider trading viola6 tions for which a bounty could have been paid at the time 

7 such information was submitted. 

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

9 pursuant to section 21F of the Securities Exchange Act 

10 of 1934, as added by this part, regardless of whether any 

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

12 or regulation thereunder, underlying the judicial or admin13 istrative action upon which the award is based occurred 

14 prior to the date of enactment of this subtitle. 

15 SEC. 7206. COLLATERAL BARS. 

16 (a) SECTION 15 OF THE SECURITIES EXCHANGE ACT

17 OF 1934.—Section 15(b)(6)(A) of the Securities Ex18 change Act of 1934 (15 U.S.C. 78o(b)(6)(A)) is amended 

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

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

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

22 a broker, dealer, investment adviser, municipal securities 

23 dealer, transfer agent, municipal financial adviser, or na24 tionally recognized statistical rating organization,’’. 


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1 (b) SECTION 15B OF THE SECURITIES EXCHANGE

2 ACT OF 1934.—Section 15B(c)(4) of the Securities Ex3 change Act of 1934 (15 U.S.C. 78o–4(c)(4)) is amended 

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

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

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

7 associated with a broker, dealer, investment adviser, mu8 nicipal securities dealer, transfer agent, municipal finan9 cial adviser, or nationally recognized statistical rating or10 ganization,’’. 

11 (c) SECTION 17A OF THE SECURITIES EXCHANGE

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

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

14 amended by striking ‘‘twelve months or bar any such per15 son from being associated with the transfer agent,’’ and 

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

17 associated with any transfer agent, broker, dealer, invest18 ment adviser, municipal securities dealer, municipal finan19 cial adviser, or nationally recognized statistical rating or20 ganization,’’. 

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, municipal financial adviser, or na4 tionally recognized statistical rating organization,’’. 

5 SEC. 7207. 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 (b) 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. 7208. 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. 7209. DEADLINE FOR COMPLETING EXAMINATIONS, 

2 INSPECTIONS 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 7101) the following new section: 

6 ‘‘SEC. 4E. DEADLINE FOR COMPLETING ENFORCEMENT IN7 VESTIGATIONS AND COMPLIANCE EXAMINA8 TIONS AND INSPECTIONS. 

9 ‘‘(a) ENFORCEMENT INVESTIGATIONS.— 

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

11 after the date on which Commission staff provide a 

12 written Wells notification to any person, the Com13 mission staff shall either file an action against such 

14 person or provide notice to the Director of the Divi15 sion of Enforcement of its intent to not file an ac16 tion. 

17 ‘‘(2) EXCEPTIONS FOR CERTAIN COMPLEX AC18 TIONS.—Notwithstanding paragraph (1), if the Di19 rector of the Division of Enforcement of the Com20 mission or the Director’s designee determines that a 

21 particular enforcement investigation is sufficiently 

22 complex such that a determination regarding the fil23 ing of an action against a person cannot be com24 pleted within the deadline specified in paragraph (1), 

25 the Director of the Division of Enforcement of the 

26 Commission or the Director’s designee may, after 


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1 providing notice to the Chairman of the Commission, 

2 extend such deadline as needed for one additional 

3 180-day period. If after the additional 180-day pe4 riod the Director of the Division of Enforcement of 

5 the Commission or the Director’s designee deter6 mines that a particular enforcement investigation is 

7 sufficiently complex such that a determination re8 garding the filing of an action against a person can9 not be completed within the additional 180-day pe10 riod, the Director of the Division of Enforcement of 

11 the Commission or the Director’s designee may, 

12 after providing notice to and receiving approval of 

13 the Commission, extend such deadline as needed for 

14 one or more additional successive 180-day periods. 

15 ‘‘(b) COMPLIANCE EXAMINATIONS AND INSPEC16 TIONS.— 

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

18 after the date on which Commission staff completes 

19 the on-site portion of its compliance examination or 

20 inspection or receives all records requested from the 

21 entity being examined or inspected, whichever is 

22 later, Commission staff shall provide the entity being 

23 examined or inspected with written notification indi24 cating either that the examination or inspection has 

25 concluded, has concluded without findings, or that 


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1 the staff requests the entity undertake corrective ac2 tion. 

3 ‘‘(2) EXCEPTION FOR CERTAIN COMPLEX AC4 TIONS.—Notwithstanding paragraph (1), if the head 

5 of any division or office within the Commission re6 sponsible for compliance examinations and inspec7 tions or his designee determines that a particular 

8 compliance examination or inspection is sufficiently 

9 complex such that a determination regarding con10 cluding the examination or inspection, or regarding 

11 the staff requests the entity undertake corrective ac12 tion, cannot be completed within the deadline speci13 fied in paragraph (1), the head of any division or of14 fice within the Commission responsible for compli15 ance examinations and inspections or his designee 

16 may, after providing notice to the Chairman of the 

17 Commission, extend such deadline as needed for one 

18 additional 180-day period.’’. 

19 SEC. 7210. NATIONWIDE SERVICE OF SUBPOENAS. 

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

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

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

23 civil action instituted by the Commission under this title 

24 in a United States district court for any judicial district, 

25 subpoenas issued to compel the attendance of witnesses 


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1 or the production of documents or tangible things (or 

2 both) at any hearing or trial may be served at any place 

3 within the United States. Rule 45(c)(3)(A)(ii) of the Fed4 eral Rules of Civil Procedure does not apply to a subpoena 

5 so issued.’’. 

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

7 27 of the Securities Exchange Act of 1934 (15 U.S.C. 

8 78aa) is amended by inserting after the third sentence the 

9 following: ‘‘In any civil action instituted by the Commis10 sion under this title in a United States district court for 

11 any judicial district, subpoenas issued to compel the at12 tendance of witnesses or the production of documents or 

13 tangible things (or both) at any hearing or trial may be 

14 served at any place within the United States. Rule 

15 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure 

16 does not apply to a subpoena so issued.’’. 

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

18 44 of the Investment Company Act of 1940 (15 U.S.C. 

19 80a–43) is amended by inserting after the fourth sentence 

20 the following: ‘‘In any civil action instituted by the Com21 mission under this title in a United States district court 

22 for any judicial district, subpoenas issued to compel the 

23 attendance of witnesses or the production of documents 

24 or tangible things (or both) at any hearing or trial may 

25 be served at any place within the United States. Rule 


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1 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure 

2 does not apply to a subpoena so issued.’’. 

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

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

5 80b–14) is amended by inserting after the third sentence 

6 the following: ‘‘In any civil action instituted by the Com7 mission under this title in a United States district court 

8 for any judicial district, subpoenas issued to compel the 

9 attendance of witnesses or the production of documents 

10 or tangible things (or both) at any hearing or trial may 

11 be served at any place within the United States. Rule 

12 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure 

13 does not apply to a subpoena so issued.’’. 

14 SEC. 7211. AUTHORITY TO IMPOSE CIVIL PENALTIES IN 

15 CEASE AND DESIST PROCEEDINGS. 

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

17 8A of the Securities Act of 1933 (15 U.S.C. 77h–1) is 

18 amended by adding at the end the following new sub19 section: 

20 ‘‘(g) AUTHORITY TO IMPOSE MONETARY PEN21 ALTIES.— 

22 ‘‘(1) GROUNDS FOR IMPOSING.—In any cease23 and-desist proceeding under subsection (a), the 

24 Commission may impose a civil penalty on a person 


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

2 for hearing, that— 

3 ‘‘(A) such person— 

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

5 provision of this title, or any rule or regu6 lation thereunder; or 

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

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

9 regulation thereunder; and 

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

11 ‘‘(2) MAXIMUM AMOUNT OF PENALTY.— 

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

13 of penalty for each act or omission described in 

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

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

16 ‘‘(B) SECOND TIER.—Notwithstanding 

17 paragraph (A), the maximum amount of pen18 alty for each such act or omission shall be 

19 $75,000 for a natural person or $375,000 for 

20 any other person if the act or omission de21 scribed in paragraph (1) involved fraud, deceit, 

22 manipulation, or deliberate or reckless dis23 regard of a regulatory requirement. 

24 ‘‘(C) THIRD TIER.—Notwithstanding para25 graphs (A) and (B), the maximum amount of 


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1 penalty for each such act or omission shall be 

2 $150,000 for a natural person or $725,000 for 

3 any other person if— 

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

5 paragraph (1) involved fraud, deceit, ma6 nipulation, or deliberate or reckless dis7 regard of a regulatory requirement; and 

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

9 indirectly resulted in substantial losses or 

10 created a significant risk of substantial 

11 losses to other persons or resulted in sub12 stantial pecuniary gain to the person who 

13 committed the act or omission. 

14 ‘‘(3) EVIDENCE CONCERNING ABILITY TO

15 PAY.—In any proceeding in which the Commission 

16 may impose a penalty under this section, a respond17 ent may present evidence of the respondent’s ability 

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

19 discretion, consider such evidence in determining 

20 whether such penalty is in the public interest. Such 

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

22 ability to continue in business and the collectability 

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

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1 son’s assets and the amount of such person’s as2 sets.’’. 

3 (b) UNDER THE SECURITIES EXCHANGE ACT OF

4 1934.—Subsection (a) of section 21B of the Securities 

5 Exchange Act of 1934 (15 U.S.C. 78u–2(a)) is amend6 ed— 

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

8 TO ASSESS MONEY PENALTIES.—In any pro9 ceeding’’ and inserting the following: 

10 ‘‘(a) COMMISSION AUTHORITY TO ASSESS MONE11 TARY PENALTIES.— 

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

13 (2) by redesignating paragraphs (1) through 

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

15 (D), respectively, and moving such redesignated sub16 paragraphs and the matter following such subpara17 graphs 2 ems to the right; and 

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

19 following new paragraph: 

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

21 any proceeding instituted pursuant to section 21C of 

22 this title against any person, the Commission may 

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

24 notice and opportunity for hearing, that such per25 son— 


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1 ‘‘(A) is violating or has violated any provi2 sion of this title, or any rule or regulation 

3 thereunder; or 

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

5 any provision of this title, or any rule or regula6 tion thereunder.’’. 

7 (c) UNDER THE INVESTMENT COMPANY ACT OF

8 1940.—Paragraph (1) of section 9(d) of the Investment 

9 Company Act of 1940 (15 U.S.C. 80a–9(d)(1)) is amend10 ed— 

11 (1) by striking ‘‘(1) AUTHORITY OF COMMIS12 SION.—In any proceeding’’ and inserting the fol13 lowing: 

14 ‘‘(1) AUTHORITY OF COMMISSION.— 

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

16 (2) by redesignating subparagraphs (A) through 

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

18 respectively, and by moving such redesignated 

19 clauses and the matter following such subparagraphs 

20 2 ems to the right; and 

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

22 following new subparagraph: 

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

24 In any proceeding instituted pursuant to sub25 section (f) against any person, the Commission 


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

2 record after notice and opportunity for hearing, 

3 that such person— 

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

5 provision of this title, or any rule or regu6 lation thereunder; or 

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

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

9 regulation thereunder.’’. 

10 (d) UNDER THE INVESTMENT ADVISERS ACT OF

11 1940.—Paragraph (1) of section 203(i) of the Investment 

12 Advisers Act of 1940 (15 U.S.C. 80b–3(i)(1)) is amend13 ed— 

14 (1) by striking ‘‘(1) AUTHORITY OF COMMIS15 SION.—In any proceeding’’ and inserting the fol16 lowing: 

17 ‘‘(1) AUTHORITY OF COMMISSION.— 

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

19 (2) by redesignating subparagraphs (A) through 

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

21 respectively, and moving such redesignated clauses 

22 and the matter following such subparagraphs 2 ems 

23 to the right; and 

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

25 following new subparagraph: 


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

2 In any proceeding instituted pursuant to sub3 section (k) against any person, the Commission 

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

5 record after notice and opportunity for hearing, 

6 that such person— 

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

8 provision of this title, or any rule or regu9 lation thereunder; or 

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

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

12 regulation thereunder.’’. 

13 SEC. 7212. FORMERLY ASSOCIATED PERSONS. 

14 (a) MEMBER OR EMPLOYEE OF THE MUNICIPAL SE15 CURITIES RULEMAKING BOARD.—Section 15B(c)(8) of 

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

17 4(c)(8)) is amended by striking ‘‘any member or em18 ployee’’ and inserting ‘‘any person who is, or at the time 

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

20 (b) PERSON ASSOCIATED WITH A GOVERNMENT SE21 CURITIES BROKER OR DEALER.—Section 15C of the Se22 curities Exchange Act of 1934 (15 U.S.C. 78o–5) is 

23 amended— 

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

25 seeking to become associated,’’ and inserting ‘‘seekVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01323 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ing to become associated, or, at the time of the al2 leged misconduct, associated or seeking to become 

3 associated’’; 

4 (2) in subsection (c)(2)(A), by inserting ‘‘, seek5 ing to become associated, or, at the time of the al6 leged misconduct, associated or seeking to become 

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

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

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

10 alleged misconduct, associated or seeking to become 

11 associated’’ after ‘‘any person associated’’. 

12 (c) PERSON ASSOCIATED WITH A MEMBER OF A NA13 TIONAL SECURITIES EXCHANGE OR REGISTERED SECURI14 TIES ASSOCIATION.—Section 21(a)(1) of the Securities 

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

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

17 to act, while associated with a member, formerly associ18 ated’’ after ‘‘member or a person associated’’. 

19 (d) PARTICIPANT OF A REGISTERED CLEARING

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

21 Act of 1934 (15 U.S.C. 78u(a)(1)) is amended by insert22 ing ‘‘or, as to any act or practice, or omission to act, while 

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

24 person is a participant,’’. 


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

2 ORGANIZATION.—Section 19(h)(4) of the Securities Ex3 change Act of 1934 (15 U.S.C. 78s(h)(4)) is amended— 

4 (1) by striking ‘‘any officer or director’’ and in5 serting ‘‘any person who is, or at the time of the al6 leged misconduct was, an officer or director’’; and 

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

8 inserting ‘‘such person’’. 

9 (f) OFFICER OR DIRECTOR OF AN INVESTMENT COM10 PANY.—Section 36(a) of the Investment Company Act of 

11 1940 (15 U.S.C. 80a–35(a)) is amended— 

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

13 inserting ‘‘a person who is, or at the time of the al14 leged misconduct was, serving or acting’’; and 

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

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

17 the time of the alleged misconduct, so served or 

18 acted’’. 

19 (g) PERSON ASSOCIATED WITH A PUBLIC ACCOUNT20 ING FIRM.— 

21 (1) SARBANES-OXLEY ACT OF 2002 AMEND22 MENT.—Section 2(a)(9) of the Sarbanes-Oxley Act 

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

24 at the end the following new subparagraph: 


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1 ‘‘(C) INVESTIGATIVE AND ENFORCEMENT

2 AUTHORITY.—For purposes of the provisions of 

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

4 Board or Commission rules thereunder, except 

5 to the extent specifically excepted by such rules, 

6 the terms defined in subparagraph (A) shall in7 clude any person associated, seeking to become 

8 associated, or formerly associated with a public 

9 accounting firm, except— 

10 ‘‘(i) the authority to conduct an inves11 tigation of such person under section 

12 105(b) shall apply only with respect to any 

13 act or practice, or omission to act, while 

14 such person was associated or seeking to 

15 become associated with a registered public 

16 accounting firm; and 

17 ‘‘(ii) the authority to commence a pro18 ceeding under section 105(c)(1), or impose 

19 disciplinary sanctions under section 

20 105(c)(4), against such person shall apply 

21 only on— 

22 ‘‘(I) the basis of conduct occur23 ring while such person was associated 

24 or seeking to become associated with 

25 a registered public accounting firm; or 


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1 ‘‘(II) non-cooperation as de2 scribed in section 105(b)(3) with re3 spect to a demand in a Board inves4 tigation for testimony, documents, or 

5 other information relating to a period 

6 when such person was associated or 

7 seeking to become associated with a 

8 registered public accounting firm.’’. 

9 (2) SECURITIES EXCHANGE ACT OF 1934

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

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

12 amended by striking ‘‘or a person associated with 

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

14 with such a firm, or, as to any act, practice, or omis15 sion to act while associated with such firm, a person 

16 formerly associated with such a firm’’. 

17 (h) SUPERVISORY PERSONNEL OF AN AUDIT

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

19 2002 (15 U.S.C. 7215(c)(6)) is amended— 

20 (1) in subparagraph (A), by striking ‘‘the su21 pervisory personnel’’ and inserting ‘‘any person who 

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

23 supervise was, a supervisory person’’; and 

24 (2) in subparagraph (B)— 


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

2 and inserting ‘‘No current or former super3 visory person’’; and 

4 (B) by striking ‘‘any other person’’ and in5 serting ‘‘any associated person’’. 

6 (i) MEMBER OF THE PUBLIC COMPANY ACCOUNTING

7 OVERSIGHT BOARD.—Section 107(d)(3) of the Sarbanes8 Oxley Act of 2002 (15 U.S.C. 7217(d)(3)) is amended by 

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

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

11 SEC. 7213. SHARING PRIVILEGED INFORMATION WITH 

12 OTHER AUTHORITIES. 

13 Section 24 of the Securities Exchange Act of 1934 

14 (15 U.S.C. 78x) is amended— 

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

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

17 (2) in subsection (e), as redesignated, by strik18 ing ‘‘as provided in subsection (e)’’ and inserting ‘‘as 

19 provided in subsection (f)’’; and 

20 (3) by inserting after subsection (c) the fol21 lowing new subsection: 

22 ‘‘(d) SHARING PRIVILEGED INFORMATION WITH

23 OTHER AUTHORITIES.— 

24 ‘‘(1) PRIVILEGED INFORMATION PROVIDED BY

25 THE COMMISSION.—The Commission shall not be 


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1 deemed to have waived any privilege applicable to 

2 any information by transferring that information to 

3 or permitting that information to be used by— 

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

5 title 18, United States Code); 

6 ‘‘(B) any foreign securities authority; 

7 ‘‘(C) the Public Company Accounting 

8 Oversight Board; 

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

10 ‘‘(E) any foreign law enforcement author11 ity; or 

12 ‘‘(F) any State securities or law enforce13 ment authority. 

14 ‘‘(2) NON-DISCLOSURE OF PRIVILEGED INFOR15 MATION PROVIDED TO THE COMMISSION.—The Com16 mission shall not be compelled to disclose privileged 

17 information obtained from any foreign securities au18 thority, or foreign law enforcement authority, if the 

19 authority has in good faith determined and rep20 resented to the Commission that the information is 

21 privileged. 

22 ‘‘(3) NON-WAIVER OF PRIVILEGED INFORMA23 TION PROVIDED TO THE COMMISSION.— 

24 ‘‘(A) IN GENERAL.—Federal agencies, 

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1 ties, self-regulatory organizations, and the Pub2 lic Company Accounting Oversight Board shall 

3 not be deemed to have waived any privilege ap4 plicable to any information by transferring that 

5 information to or permitting that information 

6 to be used by the Commission. 

7 ‘‘(B) EXCEPTION WITH RESPECT TO CER8 TAIN ACTIONS.—The provisions of subpara9 graph (A) shall not apply to a self-regulatory 

10 organization or the Public Company Accounting 

11 Oversight Board with respect to information 

12 used by the Commission in an action against 

13 such organization. 

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

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

17 work-product privilege, attorney-client privilege, 

18 governmental privilege, or other privilege recog19 nized under Federal, foreign, or State law. 

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

21 authority’ means any foreign authority that is 

22 empowered under foreign law to detect, inves23 tigate or prosecute potential violations of law. 

24 ‘‘(C) The term ‘State securities or law en25 forcement authority’ means the authority of any 


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1 State or territory that is empowered under 

2 State or territory law to detect, investigate or 

3 prosecute potential violations of law.’’. 

4 SEC. 7214. EXPANDED ACCESS TO GRAND JURY INFORMA5 TION. 

6 Subsection (b) of section 3322 of title 18, United 

7 States Code, is amended— 

8 (1) in paragraph (1), by striking ‘‘matters oc9 curring before a grand jury’’ and inserting ‘‘grand 

10 jury information obtained’’; 

11 (2) by redesignating paragraph (2) as para12 graph (3); 

13 (3) in paragraph (3) (as so redesignated), by 

14 inserting ‘‘or (2)’’ after ‘‘(1)’’; and 

15 (4) by inserting after paragraph (1), the fol16 lowing new paragraph: 

17 ‘‘(2) Upon motion of an attorney for the gov18 ernment, a court may direct disclosure of grand jury 

19 information obtained during an investigation of a se20 curities law violation to identified personnel of the 

21 Securities and Exchange Commission— 

22 ‘‘(A) for use in relation to any matter 

23 within the jurisdiction of the Commission; or 


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1 ‘‘(B) to assist an attorney for the govern2 ment to whom matters have been disclosed 

3 under subsection (a).’’. 

4 SEC. 7215. AIDING AND ABETTING STANDARD OF KNOWL5 EDGE SATISFIED BY RECKLESSNESS. 

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

7 (15 U.S.C. 78t(e)) is amended by inserting ‘‘or recklessly’’ 

8 after ‘‘knowingly’’. 

9 SEC. 7216. EXTRATERRITORIAL JURISDICTION OF THE 

10 ANTIFRAUD PROVISIONS OF THE FEDERAL 

11 SECURITIES LAWS. 

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

13 22 of the Securities Act of 1933 (15 U.S.C. 77v(a)) is 

14 amended by adding at the end the following new sub15 section: 

16 ‘‘(c) EXTRATERRITORIAL JURISDICTION.—With re17 spect to any actions or proceedings brought or instituted 

18 by the Commission or the United States, this jurisdiction 

19 includes violations of section 17(a) of this title, and all 

20 suits in equity and actions at law under that section, in21 volving— 

22 ‘‘(1) conduct within the United States that con23 stitutes significant steps in furtherance of the viola24 tion, even if the securities transaction occurs outside 


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1 the United States and involves only foreign inves2 tors; or 

3 ‘‘(2) conduct occurring outside the United 

4 States that has a foreseeable substantial effect with5 in the United States.’’. 

6 (b) UNDER THE SECURITIES EXCHANGE ACT OF

7 1934.—Section 27 of the Securities Exchange Act of 1934 

8 (15 U.S.C. 78aa) is amended— 

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

10 following: 

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

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

13 subsection: 

14 ‘‘(b) EXTRATERRITORIAL JURISDICTION.—With re15 spect to any actions or proceedings brought or instituted 

16 by the Commission or the United States, this jurisdiction 

17 includes violations of the antifraud provisions of this title, 

18 and all suits in equity and actions at law under those pro19 visions, involving— 

20 ‘‘(1) conduct within the United States that con21 stitutes significant steps in furtherance of the viola22 tion, even if the securities transaction occurs outside 

23 the United States and involves only foreign inves24 tors; or 


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1 ‘‘(2) conduct occurring outside the United 

2 States that has a foreseeable substantial effect with3 in the United States.’’. 

4 (c) UNDER THE INVESTMENT ADVISERS ACT OF

5 1940.—Section 214 of the Investment Advisers Act of 

6 1940 (15 U.S.C. 80b–14) is amended— 

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

8 following: 

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

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

11 subsection: 

12 ‘‘(b) EXTRATERRITORIAL JURISDICTION.—With re13 spect to any actions or proceedings brought or instituted 

14 by the Commission or the United States, this jurisdiction 

15 includes violations of section 206, and all suits in equity 

16 and actions at law under that section, involving— 

17 ‘‘(1) conduct within the United States that con18 stitutes significant steps in furtherance of the viola19 tion, even if the violation is committed by a foreign 

20 adviser and involves only foreign investors; or 

21 ‘‘(2) conduct occurring outside the United 

22 States that has a foreseeable substantial effect with23 in the United States.’’. 


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1 SEC. 7217. FIDELITY BONDING. 

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

3 1940 (15 U.S.C. 80a–17(g)) is amended to read as fol4 lows: 

5 ‘‘(g) FIDELITY BONDING.— 

6 ‘‘(1) IN GENERAL.—The Commission is author7 ized to require that a registered management com8 pany provide and maintain a fidelity bond against 

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

10 securities or funds of the company, either directly or 

11 through authority to draw upon such funds or to di12 rect generally the disposition of such securities (un13 less the officer or employee has such access solely 

14 through his position as an officer or employee of a 

15 bank), in such form and amount as the Commission 

16 may prescribe by rule, regulation, or order for the 

17 protection of investors. 

18 ‘‘(2) DEFINITIONS.—For purposes of this sub19 section: 

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

21 ‘management company’ has the meaning given 

22 such term under section 4 of the Investment 

23 Company Act of 1940. 

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

25 ‘officer or employee’ means— 


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

2 management company; and 

3 ‘‘(ii) any officer or employee of any 

4 investment adviser to the management 

5 company, or of any affiliated company of 

6 any such investment adviser, as the Com7 mission may prescribe by rule, regulation, 

8 or order for the protection of investors. 

9 ‘‘(C) OTHER DEFINITIONS.—The terms 

10 ‘affiliated company’ and ‘investment adviser’ 

11 shall have the meaning given such terms under 

12 section 2 of the Investment Company Act of 

13 1940.’’. 

14 SEC. 7218. ENHANCED SEC AUTHORITY TO CONDUCT SUR15 VEILLANCE AND RISK ASSESSMENT. 

16 (a) SECURITIES EXCHANGE ACT OF 1934 AMEND17 MENTS.—Section 17(b) of the Securities Exchange Act of 

18 1934 (15 U.S.C. 78q(b)) is amended by adding at the end 

19 the following new paragraph: 

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

21 All persons described in subsection (a) of this sec22 tion are subject at any time, or from time to time, 

23 to such reasonable periodic, special, or other infor24 mation and document requests by representatives of 

25 the Commission as the Commission by rule or order 


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1 deems necessary or appropriate to conduct surveil2 lance or risk assessments of the securities markets, 

3 persons registered with the Commission under this 

4 title, or otherwise in furtherance of the purposes of 

5 this title.’’. 

6 (b) INVESTMENT COMPANY ACT OF 1940 AMEND7 MENTS.—Section 31(b) of the Investment Company Act 

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

9 7106(a)(2), is further amended by adding at the end the 

10 following new paragraph: 

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

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

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

14 periodic, special, or other information and document 

15 requests by representatives of the Commission as the 

16 Commission by rule or order deems necessary or ap17 propriate to conduct surveillance or risk assessments 

18 of the securities markets, persons registered with the 

19 Commission under this title, or otherwise in further20 ance of the purposes of this title.’’. 

21 (c) INVESTMENT ADVISERS ACT OF 1940 AMEND22 MENTS.—Section 204 of the Investment Advisers Act of 

23 1940 (15 U.S.C. 80b–4), as amended by section 7106(b), 

24 is further amended by adding at the end the following new 

25 subsection: 


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1 ‘‘(e) SURVEILLANCE AND RISK ASSESSMENT.—All 

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

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

4 special, or other information and document requests by 

5 representatives of the Commission as the Commission by 

6 rule or order deems necessary or appropriate to conduct 

7 surveillance or risk assessments of the securities markets, 

8 persons registered with the Commission under this title, 

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

10 SEC. 7219. INVESTMENT COMPANY EXAMINATIONS. 

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

12 1940 (15 U.S.C. 80a–30) is amended to read as follows: 

13 ‘‘(1) IN GENERAL.—All records of each reg14 istered investment company, and each underwriter, 

15 broker, dealer, or investment adviser that is a major16 ity-owned subsidiary of such a company, shall be 

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

18 reasonable periodic, special, or other examinations 

19 by representatives of the Commission as the Com20 mission deems necessary or appropriate in the public 

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

22 SEC. 7220. CONTROL PERSON LIABILITY UNDER THE SECU23 RITIES EXCHANGE ACT. 

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

25 (15 U.S.C. 78t(a)) is amended by inserting after ‘‘conVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01338 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 trolled person is liable,’’ the following: ‘‘including to the 

2 Commission in any action brought under paragraph (1) 

3 or (3) of section 21(d),’’. 

4 SEC. 7221. ENHANCED APPLICATION OF ANTI-FRAUD PRO5 VISIONS. 

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

7 et seq.) is amended— 

8 (1) in section 9— 

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

10 securities exchange’’ each place it appears and 

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

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

13 of any facility of a national securities ex14 change,’’; and 

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

16 ‘‘unlawful for any’’ the following: ‘‘broker, deal17 er, or’’; 

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

19 on a national securities exchange’’ and inserting 

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

21 (3) in section 15(c)(1)(A), by striking ‘‘other22 wise than on a national securities exchange of which 

23 it is a member’’. 


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1 SEC. 7222. SEC AUTHORITY TO ISSUE RULES ON PROXY AC2 CESS. 

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

4 (15 U.S.C. 78n(a)) is amended— 

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

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

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

8 rules and regulations under paragraph (1) includes rules 

9 and regulations that require the inclusion and set proce10 dures relating to the inclusion, in a solicitation of a proxy 

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

12 of a nominee or nominees submitted by shareholders to 

13 serve on the issuer’s board of directors.’’. 

14 PART 3—COMMISSION FUNDING AND 

15 ORGANIZATION 

16 SEC. 7301. AUTHORIZATION OF APPROPRIATIONS. 

17 Section 35 of the Securities Exchange Act of 1934 

18 (15 U.S.C. 78kk) is amended to read as follows: 

19 ‘‘SEC. 35. AUTHORIZATION OF APPROPRIATIONS. 

20 ‘‘In addition to any other funds authorized to be ap21 propriated to the Commission, there are authorized to be 

22 appropriated to carry out the functions, powers, and du23 ties of the Commission— 

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

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

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


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

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

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

4 SEC. 7302. INVESTMENT ADVISER REGULATION FUNDING. 

5 Section 203 of the Investment Advisers Act of 1940 

6 (15 U.S.C. 80b–3) (as amended by sections 5006 and 

7 5007) is further amended by adding at the end the fol8 lowing new subsection: 

9 ‘‘(o) ANNUAL ASSESSMENT.— 

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

11 accordance with this subsection, promulgate rules 

12 pursuant to which it may collect from investment 

13 advisers required to register with the Commission 

14 under this title, fees designed to help recover the 

15 cost of inspections and examinations of registered 

16 investment advisers conducted by the Commission 

17 pursuant to this title. 

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

19 adviser shall, at the time of registration with the 

20 Commission, and each fiscal year thereafter during 

21 which such adviser is so registered, pay to the Com22 mission a fair and reasonable fee determined by the 

23 Commission. In determining such fee, the Commis24 sion shall consider objective factors such as— 

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


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1 ‘‘(B) the number of clients of the invest2 ment adviser; 

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

4 adviser; and 

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

6 Commission determines to be appropriate. 

7 ‘‘(3) AMOUNT AND USE OF FEES.— 

8 ‘‘(A) MINIMUM AGGREGATE AMOUNT.— 

9 The aggregate amount of fees determined by 

10 the Commission under this subsection for any 

11 fiscal year shall be greater than the amount the 

12 Commission spent on inspections and examina13 tions of registered investment advisers during 

14 the 2009 fiscal year. 

15 ‘‘(B) EXCESS FEES.—The Commission 

16 may retain any excess fees collected under this 

17 subsection during a fiscal year for application 

18 towards the costs of inspections and examina19 tions of investment advisers in future fiscal 

20 years. 

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

22 The Commission may review fee rates established 

23 pursuant to this section before the end of any fiscal 

24 year and make any appropriate adjustments prior to 

25 collecting any such fee in the following fiscal year. 


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

2 prescribe by rule or regulation an additional fee to 

3 be assessed as a penalty for late payment of fees re4 quired by this subsection. 

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

6 in fees made pursuant to this section shall not be 

7 subject to judicial review.’’. 

8 SEC. 7303. AMENDMENTS TO SECTION 31 OF THE SECURI9 TIES EXCHANGE ACT OF 1934. 

10 Section 31 of the Securities Exchange Act of 1934 

11 (15 U.S.C. 78ee) is amended— 

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

13 30’’ and inserting ‘‘September 25’’; 

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

15 and inserting ‘‘August 31’’; and 

16 (3) in subsection (j)(2)— 

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

18 ‘‘4 months’’; and 

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

20 during such 5-month period and assessments 

21 collected under subsection (d))’’ and inserting 

22 ‘‘(including fees estimated to be collected under 

23 subsections (b) and (c) prior to the effective 

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1 ments estimated to be collected under sub2 section (d))’’. 

3 SEC. 7304. COMMISSION ORGANIZATIONAL STUDY AND RE4 FORM. 

5 (a) STUDY REQUIRED.— 

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

7 the 90-day period beginning on the date of the en8 actment of this subtitle, the Securities and Ex9 change Commission (hereinafter in this section re10 ferred to as the ‘‘SEC’’) shall hire an independent 

11 consultant of high caliber and with expertise in orga12 nizational restructuring and the operations of capital 

13 markets to examine the internal operations, struc14 ture, funding, and the need for comprehensive re15 form of the SEC, as well as the SEC’s relationship 

16 with and the reliance on self-regulatory organiza17 tions and other entities relevant to the regulation of 

18 securities and the protection of securities investors 

19 that are under the SEC’s oversight. 

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

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

22 include the study of— 

23 (A) the possible elimination of unnecessary 

24 or redundant units at the SEC; 


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1 (B) improving communications between 

2 SEC offices and divisions; 

3 (C) the need to put in place a clear chain4 of-command structure, particularly for enforce5 ment examinations and compliance inspections; 

6 (D) the effect of high-frequency trading 

7 and other technological advances on the market 

8 and what the SEC requires to monitor the ef9 fect of such trading and advances on the mar10 ket; 

11 (E) the SEC’s hiring authorities, work12 place policies, and personal practices, includ13 ing— 

14 (i) whether there is a need to further 

15 streamline hiring authorities for those who 

16 are not lawyers, accountants, compliance 

17 examiners, or economists; 

18 (ii) whether there is a need for further 

19 pay reforms; 

20 (iii) the diversity of skill sets of SEC 

21 employees and whether the present skill set 

22 diversity efficiently and effectively fosters 

23 the SEC’s mission of investor protection; 

24 and 


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1 (iv) the application of civil service 

2 laws by the SEC; 

3 (F) whether the SEC’s oversight and reli4 ance on self-regulatory organizations promotes 

5 efficient and effective governance for the securi6 ties markets; and 

7 (G) whether adjusting the SEC’s reliance 

8 on self-regulatory organizations is necessary to 

9 promote more efficient and effective governance 

10 for the securities markets. 

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

12 of the 150-day period after being retained, the inde13 pendent consultant hired pursuant to subsection (a)(1) 

14 shall issue a report to the SEC and the Congress con15 taining— 

16 (1) a detailed description of any findings and 

17 conclusions made while carrying out the study re18 quired under subsection (a)(1); and 

19 (2) recommendations for legislative, regulatory, 

20 or administrative action that the consultant deter21 mines appropriate to enable the SEC and other enti22 ties on which it reports to perform their statutorily 

23 or otherwise mandated missions. 

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

25 month period beginning on the date the consultant issues 


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1 the report under subsection (b), and every 6-months there2 after during the 2-year period following the date on which 

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

4 report to the Committee on Financial Services of the 

5 House of Representatives and the Committee on Banking, 

6 Housing, and Urban Affairs of the Senate describing the 

7 SEC’s implementation of the regulatory and administra8 tive recommendations contained in the consultant’s report. 

9 SEC. 7305. CAPITAL MARKETS SAFETY BOARD. 

10 There is established within the Securities and Ex11 change Commission an office to be known as the Capital 

12 Markets Safety Board whose purpose shall be to conduct 

13 investigations, at the direction of the Commission, of 

14 failed institutions registered with the Commission, to de15 termine what caused such institutions to fail. Upon the 

16 conclusion of an investigation, the Board shall make avail17 able on the Commission’s website a report of its findings, 

18 including recommendations regarding how others can 

19 avoid similar mistakes. No information that may com20 promise an ongoing Federal investigation shall be made 

21 available in any such report. 

22 SEC. 7306. REPORT ON IMPLEMENTATION OF ‘‘POST23 MADOFF REFORMS’’. 

24 (a) IN GENERAL.—Not later than 6 months after the 

25 date of the enactment of this subtitle, the Securities and 


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1 Exchange Commission shall provide to the Committee on 

2 Financial Services of the House of Representatives and 

3 the Committee on Banking, Housing, and Urban Affairs 

4 of the Senate a report describing the implementation of 

5 reforms outlined by the Commission in the wake of the 

6 discovery of fraud by Bernie Madoff. 

7 (b) CONTENTS OF REPORT.—The report required by 

8 subsection (a) shall include an analysis of— 

9 (1) how many of the post-Madoff reforms have 

10 been implemented and to what extent; and 

11 (2) whether there is overlap between any of the 

12 Commission’s reform proposals and those rec13 ommended by the Inspector General of the Commis14 sion. 

15 (c) PUBLICATION OF REPORT.—The Commission and 

16 the Committees referred to in subsection (a) shall publish 

17 the report required by such subsection on their Web sites. 

18 SEC. 7307. JOINT ADVISORY COMMITTEE. 

19 The Securities and Exchange Commission and the 

20 Commodities Futures Trading Commission may jointly 

21 form and operate a joint advisory committee composed of 

22 members of each Commission and industry experts and 

23 participants. The purposes of such an advisory committee 

24 include— 


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1 (1) considering and developing solutions to 

2 emerging and ongoing issues of common interest in 

3 the futures and securities markets; 

4 (2) identifying emerging regulatory risks and 

5 assess and quantify their implications for investors 

6 and other market participants, and provide rec7 ommendations for solutions; 

8 (3) serving as a vehicle for discussion and com9 munication on regulatory issues of mutual concerns 

10 affecting each Commission, the regulated markets, 

11 and the industry generally; and 

12 (4) reporting regularly to each Commission and 

13 to Congress on its activities. 

14 PART 4—ADDITIONAL COMMISSION REFORMS 

15 SEC. 7401. REGULATION OF SECURITIES LENDING. 

16 Section 10 of the Securities Exchange Act of 1934 

17 (15 U.S.C. 78j) is amended by adding at the end the fol18 lowing new subsection: 

19 ‘‘(c)(1) To effect, accept, or facilitate a transaction 

20 involving the loan or borrowing of securities in contraven21 tion of such rules and regulations as the Commission may 

22 prescribe as necessary or appropriate in the public interest 

23 or for the protection of investors. 

24 ‘‘(2) Nothing in paragraph (1) shall be construed to 

25 limit the authority of an appropriate Federal banking 


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1 agency (as defined in section 3 of the Federal Deposit In2 surance Act (12 U.S.C. 1813(q))), the National Credit 

3 Union Administration, or any other Federal department 

4 or agency identified under law as having a systemic risk 

5 responsibility from prescribing rules or regulations to im6 pose restrictions on transactions involving the loan or bor7 rowing of securities in order to protect the safety and 

8 soundness of a financial institution or to protect the finan9 cial system from systemic risk.’’. 

10 SEC. 7402. LOST AND STOLEN SECURITIES. 

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

12 1934 (15 U.S.C. 78q(f)(1)) is amended— 

13 (1) in subparagraph (A), by striking ‘‘missing, 

14 lost, counterfeit, or stolen securities’’ and inserting 

15 ‘‘securities that are missing, lost, counterfeit, stolen, 

16 cancelled, or any other category of securities as the 

17 Commission, by rule, may prescribe’’; and 

18 (2) in subparagraph (B), by striking ‘‘or sto19 len’’ and inserting ‘‘stolen, cancelled, or reported in 

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

21 prescribe’’. 

22 SEC. 7403. FINGERPRINTING. 

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

24 1934 (15 U.S.C. 78q(f)(2)) is amended— 


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1 (1) by striking ‘‘and registered clearing agen2 cy,’’ and inserting ‘‘registered clearing agency, reg3 istered securities information processor, national se4 curities exchange, and national securities associa5 tion’’; and 

6 (2) by striking ‘‘or clearing agency,’’ and insert7 ing ‘‘clearing agency, securities information proc8 essor, national securities exchange, or national secu9 rities association,’’. 

10 SEC. 7404. EQUAL TREATMENT OF SELF-REGULATORY OR11 GANIZATION RULES. 

12 Section 29(a) of the Securities Exchange Act of 1934 

13 (15 U.S.C. 78cc(a)) is amended by striking ‘‘an exchange 

14 required thereby’’ and inserting ‘‘a self-regulatory organi15 zation,’’. 

16 SEC. 7405. CLARIFICATION THAT SECTION 205 OF THE IN17 VESTMENT ADVISERS ACT OF 1940 DOES NOT 

18 APPLY TO STATE-REGISTERED ADVISERS. 

19 Section 205(a) of the Investment Advisers Act of 

20 1940 (15 U.S.C. 80b–5(a)) is amended— 

21 (1) by striking ‘‘, unless exempt from registra22 tion pursuant to section 203(b),’’ and inserting 

23 ‘‘registered or required to be registered with the 

24 Commission’’; 


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1 (2) by striking ‘‘make use of the mails or any 

2 means or instrumentality of interstate commerce, di3 rectly or indirectly, to’’; and 

4 (3) by striking ‘‘to’’ after ‘‘in any way’’. 

5 SEC. 7406. CONFORMING AMENDMENTS FOR THE REPEAL 

6 OF THE PUBLIC UTILITY HOLDING COMPANY 

7 ACT OF 1935. 

8 (a) SECURITIES EXCHANGE ACT OF 1934.—The Se9 curities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is 

10 amended— 

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

12 by striking ‘‘the Public Utility Holding Company 

13 Act of 1935 (15 U.S.C. 79a et seq.),’’; and 

14 (2) in section 12(k) (15 U.S.C. 78l(k)), by 

15 amending paragraph (7) to read as follows:

16 ‘‘(7) DEFINITION.—For purposes of this sub17 section, the term ‘emergency’ means— 

18 ‘‘(A) a major market disturbance charac19 terized by or constituting— 

20 ‘‘(i) sudden and excessive fluctuations 

21 of securities prices generally, or a substan22 tial threat thereof, that threaten fair and 

23 orderly markets; or 

24 ‘‘(ii) a substantial disruption of the 

25 safe or efficient operation of the national 


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1 system for clearance and settlement of 

2 transactions in securities, or a substantial 

3 threat thereof; or 

4 ‘‘(B) a major disturbance that substan5 tially disrupts, or threatens to substantially dis6 rupt— 

7 ‘‘(i) the functioning of securities mar8 kets, investment companies, or any other 

9 significant portion or segment of the secu10 rities markets; or 

11 ‘‘(ii) the transmission or processing of 

12 securities transactions.’’. 

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

14 by striking ‘‘section 18(c) of the Public Utility Hold15 ing Company Act of 1935,’’. 

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

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

18 amended— 

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

20 amending paragraph (17) to read as follows: 

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

22 ‘Securities Exchange Act of 1934’ shall be deemed 

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

24 whether amended prior to or after the enactment of 

25 this title.’’; 


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1 (2) in section 308 (15 U.S.C. 77hhh), by strik2 ing ‘‘Securities Act of 1933, the Securities Exchange 

3 Act of 1934, or the Public Utility Holding Company 

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

5 ‘‘Securities Act of 1933 or the Securities Exchange 

6 Act of 1934’’; 

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

8 subsection (c); 

9 (4) in section 311 (15 U.S.C. 77kkk) by strik10 ing subsection (c); 

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

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

13 Exchange Act of 1934, or the Public Utility Holding 

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

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

16 and 

17 (6) in section 326 (15 U.S.C. 77zzz), by strik18 ing ‘‘Securities Act of 1933, or the Securities Ex19 change Act of 1934, or the Public Utility Holding 

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

21 Act of 1933 or the Securities Exchange Act of 

22 1934’’. 

23 (c) INVESTMENT COMPANY ACT OF 1940.—The In24 vestment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) 

25 is amended— 


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

2 2(a)(44)), by striking ‘‘ ‘Public Utility Holding Com3 pany Act of 1935’,’’; 

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

5 amending paragraph (8) to read as follows: 

6 ‘‘(8) [Repealed]’’; 

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

8 striking ‘‘the Public Utility Holding Company Act of 

9 1935,’’; and 

10 (4) in section 50 (15 U.S.C. 80a–49), by strik11 ing ‘‘the Public Utility Holding Company Act of 

12 1935,’’. 

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

14 202(a)(21) of the Investment Advisers Act of 1940 (15 

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

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

17 SEC. 7407. PROMOTING TRANSPARENCY IN FINANCIAL RE18 PORTING. 

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

20 (1) Transparent and clear financial reporting is 

21 integral to the continued growth and strength of our 

22 capital markets and the confidence of investors. 

23 (2) The increasing detail and volume of ac24 counting, auditing, and reporting guidance pose a 

25 major challenge. 


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1 (3) The complexity of accounting and auditing 

2 standards in the United States has added to the 

3 costs and effort involved in financial reporting. 

4 (b) TESTIMONY REQUIRED ON REDUCING COM5 PLEXITY IN FINANCIAL REPORTING.—The Securities and 

6 Exchange Commission, the Public Company Accounting 

7 Oversight Board, and the standard setting body des8 ignated pursuant to section 19(b) of the Securities Act 

9 of 1933 shall annually provide oral testimony by their re10 spective Chairpersons or a designee of the Chairperson, 

11 beginning in 2010, and for 5 years thereafter, to the Com12 mittee on Financial Services of the House of Representa13 tives on their efforts to reduce the complexity in financial 

14 reporting to provide more accurate and clear financial in15 formation to investors, including— 

16 (1) reassessing complex and outdated account17 ing standards; 

18 (2) improving the understandability, consist19 ency, and overall usability of the existing accounting 

20 and auditing literature; 

21 (3) developing principles-based accounting 

22 standards; 

23 (4) encouraging the use and acceptance of 

24 interactive data; and 

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


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1 SEC. 7408. UNLAWFUL MARGIN LENDING. 

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

3 1934 (15 U.S.C. 78g(c)(1)(A)) is amended by striking ‘‘; 

4 and’’ and inserting ‘‘; or’’. 

5 SEC. 7409. PROTECTING CONFIDENTIALITY OF MATERIALS 

6 SUBMITTED TO THE COMMISSION. 

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

8 17(i) of the Securities Exchange Act of 1934 (as amended 

9 by section 1314(2)) is amended to read as follows: 

10 ‘‘(i) AUTHORITY TO LIMIT DISCLOSURE OF INFOR11 MATION.— 

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

13 provision of law, the Commission shall not be com14 pelled to disclose any information, documents, 

15 records, or reports that relate to an examination, 

16 surveillance, or risk assessment of a person subject 

17 to or described in this section, or the financial or 

18 operational condition of such persons, or any infor19 mation supplied to the Commission by any domestic 

20 or foreign regulatory agency or self-regulatory orga21 nization that relates to the financial or operational 

22 condition of such persons, of any associated person 

23 of such persons, or any affiliate of an investment 

24 bank holding company. 

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

26 subsection shall authorize the Commission to withVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01357 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 hold information from the Congress, prevent the 

2 Commission from complying with a request for infor3 mation from any other Federal department or agen4 cy, the Public Company Accounting Oversight 

5 Board, or any self-regulatory organization request6 ing the information for purposes within the scope of 

7 its jurisdiction, or prevent the Commission from 

8 complying with an order of a court of the United 

9 States in an action brought by the United States or 

10 the Commission against a person subject to or de11 scribed in this section to produce information, docu12 ments, records, or reports relating directly to the ex13 amination, surveillance, or risk assessment of that 

14 person or the financial or operational condition of 

15 that person or an associated or affiliated person of 

16 that person. 

17 ‘‘(3) TREATMENT UNDER SECTION 552 OF

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

19 section 552 of title 5, United States Code, this sub20 section shall be considered a statute described in 

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

22 ‘‘(4) CERTAIN INFORMATION TO BE CONFIDEN23 TIAL.—In prescribing regulations to carry out the 

24 requirements of this subsection, the Commission 

25 shall designate information described in or obtained 


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1 pursuant to subparagraphs (A), (B), and (C) of sub2 section (i)(3) as confidential information for pur3 poses of section 24(b)(2) of this title.’’. 

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

5 31(b) of the Investment Company Act of 1940 (15 U.S.C. 

6 80a–30(b)), as amended by sections 7106(a)(2) and 

7 7218(b)(4), is further amended by adding at the end the 

8 following new paragraph: 

9 ‘‘(6) CONFIDENTIALITY.— 

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

11 other provision of law, the Commission shall not 

12 be compelled to disclose any information, docu13 ments, records, or reports that relate to an ex14 amination, surveillance, or risk assessment of a 

15 person subject to or described in this section. 

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

17 this subsection shall authorize the Commission 

18 to withhold information from the Congress, pre19 vent the Commission from complying with a re20 quest for information from any other Federal 

21 department or agency, or the Public Company 

22 Accounting Oversight Board requesting the in23 formation for purposes within the scope of its 

24 jurisdiction, or prevent the Commission from 

25 complying with an order of a court of the 


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1 United States in an action brought by the 

2 United States or the Commission against a per3 son subject to or described in this section to 

4 produce information, documents, records, or re5 ports relating directly to the examination of 

6 that person or the financial or operational con7 dition of that person or an associated or affili8 ated person of that person. 

9 ‘‘(C) TREATMENT UNDER SECTION 552 OF

10 TITLE 5, UNITED STATES CODE.—For purposes 

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

12 this subsection shall be considered a statute de13 scribed in subsection (b)(3)(B) of that sec14 tion.’’. 

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

16 204 of the Investment Advisers Act of 1940 (15 U.S.C. 

17 80b–4), as amended by sections 7106(b) and 7218(c), is 

18 further amended by adding at the end the following new 

19 subsection: 

20 ‘‘(f) CONFIDENTIALITY.— 

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

22 provision of law, the Commission shall not be com23 pelled to disclose any information, documents, 

24 records, or reports that relate to an examination of 

25 a person subject to or described in this section. 


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

2 subsection shall authorize the Commission to with3 hold information from Congress, prevent the Com4 mission from complying with a request for informa5 tion from any other Federal department or agency, 

6 the Public Company Accounting Oversight Board, or 

7 a self-regulatory organization requesting the infor8 mation for purposes within the scope of its jurisdic9 tion, or prevent the Commission from complying 

10 with an order of a court of the United States in an 

11 action brought by the United States or the Commis12 sion against a person subject to or described in this 

13 section to produce information, documents, records, 

14 or reports relating directly to the examination of 

15 that person or the financial or operational condition 

16 of that person or an associated or affiliated person 

17 of that person. 

18 ‘‘(3) TREATMENT UNDER SECTION 552 OF

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

20 section 552 of title 5, United States Code, this sub21 section shall be considered a statute described in 

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

23 SEC. 7410. TECHNICAL CORRECTIONS. 

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

25 of 1933 (15 U.S.C. 77a et seq.) is amended— 


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1 (1) in section 3(a)(4) (15 U.S.C. 77c(a)(4)), by 

2 striking ‘‘individual;’’ and inserting ‘‘individual,’’; 

3 (2) in the matter following paragraph (5) of 

4 section 11(a), by striking ‘‘earning statement’’ and 

5 inserting ‘‘earnings statement’’; 

6 (3) in section 18(b)(1)(C) (15 U.S.C. 

7 77r(b)(1)(C)), by striking ‘‘is a security’’ and insert8 ing ‘‘a security’’; 

9 (4) in section 18(c)(2)(B)(i) (15 U.S.C. 

10 77r(c)(2)(B)(i)), by striking ‘‘State, or’’ and insert11 ing ‘‘State or’’; 

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

13 77s(d)(6)(A)), by striking ‘‘in paragraph (1) of (3)’’ 

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

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

16 2(c)(1)(B)(ii)), by striking ‘‘business entity;’’ and in17 serting ‘‘business entity,’’. 

18 (b) SECURITIES EXCHANGE ACT OF 1934.—The Se19 curities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is 

20 amended— 

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

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

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

24 78c(a)(55)(A)), by striking ‘‘section 3(a)(12) of the 


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1 Securities Exchange Act of 1934’’ and inserting 

2 ‘‘section 3(a)(12) of this Act’’; 

3 (3) in section 3(g) (15 U.S.C. 78c(g)), by strik4 ing ‘‘company, account person, or entity’’ and insert5 ing ‘‘company, account, person, or entity’’; 

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

7 1(i)(1)(B)(i)), by striking ‘‘nonaudit’’ and inserting 

8 ‘‘non-audit’’; 

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

10 by striking ‘‘earning statement’’ and inserting 

11 ‘‘earnings statement’’; 

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

13 (A) by striking the sentence beginning 

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

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

16 (B) by inserting such sentence in the mat17 ter following such subparagraph after ‘‘are sat18 isfied.’’; 

19 (7) in section 15C(a)(2) (15 U.S.C. 78o– 

20 5(a)(2))— 

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

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

23 (B) by striking the sentence beginning 

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


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1 membership.’’ in such subparagraph (B), as re2 designated; and 

3 (C) by inserting such sentence in the mat4 ter following such redesignated subparagraph 

5 after ‘‘are satisfied.’’; 

6 (8) in section 17(b)(1)(B) (15 U.S.C. 

7 78q(b)(1)(B)), by striking ‘‘15A(k) gives’’ and in8 serting ‘‘15A(k), give’’; and 

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

10 3(c)(2)), by striking ‘‘paragraph (1) subsection’’ and 

11 inserting ‘‘Paragraph (1)’’. 

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

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

14 amended— 

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

16 striking ‘‘section 2 of such Act’’ and inserting ‘‘sec17 tion 2(a) of such Act’’; 

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

19 77mmm(a)(4)) by striking ‘‘subsection (b) of section 

20 311’’ and inserting ‘‘section 311(b)’’; and 

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

22 77qqq(a)(1)), by striking ‘‘(1),’’ and inserting ‘‘(1)’’. 

23 (d) INVESTMENT COMPANY ACT OF 1940.—The In24 vestment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) 

25 is amended— 


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

2 2(a)(19)(B)) by striking ‘‘clause (vi)’’ both places it 

3 appears in the last two sentences and inserting 

4 ‘‘clause (vii)’’; 

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

6 9(b)(4)(B)), by inserting ‘‘or’’ after the semicolon at 

7 the end; 

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

9 12(d)(1)(J)), by striking ‘‘any provision of this sub10 section’’ and inserting ‘‘any provision of this para11 graph’’; 

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

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

14 the end; 

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

16 17(f)(4)), by striking ‘‘No such member’’ and insert17 ing ‘‘No member of a national securities exchange’’; 

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

19 17(f)(6)), by striking ‘‘company may serve’’ and in20 serting ‘‘company, may serve’’; and 

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

22 60(a)(3)(B)(iii))— 

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

24 205’’ and inserting ‘‘section 205(a)(1)’’; and 


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

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

3 (2)’’. 

4 (e) INVESTMENT ADVISERS ACT OF 1940.—The In5 vestment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.) 

6 is amended— 

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

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

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

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

11 sections 203(c)(1)(A), 203(k)(4)(B), 213(a), 222(b), 

12 and 222(c) (15 U.S.C. 80b–3(c)(1)(A), 80b– 

13 3(k)(4)(B), 80b–13(a), 80b–18a(b), and 80b– 

14 18a(c)); and 

15 (2) in section 206(3) (15 U.S.C. 80b–6(3)), by 

16 inserting ‘‘or’’ after the semicolon at the end. 

17 SEC. 7411. MUNICIPAL SECURITIES. 

18 Section 15B(b) of the Securities Exchange Act of 

19 1934 (15 U.S.C. 78o–4(b)) is amended— 

20 (1) by amending paragraph (1) to read as fol21 lows: 

22 ‘‘(1) COMPOSITION OF THE MUNICIPAL SECURI23 TIES RULEMAKING BOARD.—Not later than October 

24 1, 2010, the Municipal Securities Rulemaking Board 

25 (hereinafter in this section referred to as the 


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1 ‘Board’), shall be composed of members which shall 

2 perform the duties set forth in this section and shall 

3 consist of— 

4 ‘‘(A) a majority of independent public rep5 resentatives, at least one of whom shall be rep6 resentative of investors in municipal securities 

7 and at least one of whom shall be representative 

8 of issuers of municipal securities (which mem9 bers are hereinafter referred to as ‘public rep10 resentatives’); 

11 ‘‘(B) at least one individual who is rep12 resentative of municipal securities brokers and 

13 municipal securities dealers which are not 

14 banks or subsidiaries or departments or divi15 sions of banks (which members are hereinafter 

16 referred to as ‘broker-dealer representatives’); 

17 and 

18 ‘‘(C) at least one individual who is rep19 resentative of municipal securities dealers which 

20 are banks or subsidiaries or departments or di21 visions of banks (which members are herein22 after referred to as ‘bank representatives’).’’; 

23 and 

24 (2) by amending paragraph (2)(B) to read as 

25 follows: 


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1 ‘‘(B) Establish fair procedures for the nomina2 tion and election of members of the Board and as3 sure fair representation in such nominations and 

4 elections of municipal securities brokers and munic5 ipal securities dealers. Such rules— 

6 ‘‘(i) shall establish requirements regarding 

7 the independence of public representatives; 

8 ‘‘(ii) shall provide that the number of pub9 lic representatives of the Board shall at all 

10 times exceed the total number of broker-dealer 

11 representatives and bank representatives; 

12 ‘‘(iii) shall establish minimum knowledge, 

13 experience, and other appropriate qualifications 

14 for individuals to serve as public representa15 tives, which may include, among other things, 

16 prior work experience in the securities, munic17 ipal finance, or municipal securities industries; 

18 ‘‘(iv) shall specify the term members shall 

19 serve; and 

20 ‘‘(v) may increase or decrease the number 

21 of members which shall constitute the whole 

22 Board, but in no case may such number be an 

23 even number.’’. 


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1 SEC. 7412. INTERESTED PERSON DEFINITION. 

2 Section 2(a)(19)(A) of the Investment Company Act 

3 of 1940 (15 U.S.C. 80a–2(a)(19)(A)) is amended— 

4 (1) by striking clauses (v) and (vi); 

5 (2) by inserting after clause (iv) the following 

6 new clause: 

7 ‘‘(v) any natural person who is a 

8 member of a class of persons who the 

9 Commission, by rule or regulation, deter10 mines are unlikely to exercise an appro11 priate degree of independence as a result 

12 of— 

13 ‘‘(I) a material business or pro14 fessional relationship with such com15 pany or any affiliated person of such 

16 company; or 

17 ‘‘(II) a close familial relationship 

18 with any natural person who is an af19 filiated person of such company;’’; 

20 (3) by redesignating clause (vii) as clause (vi); 

21 and 

22 (4) in clause (vi), as redesignated, by striking 

23 ‘‘two completed fiscal years’’ and inserting ‘‘five 

24 completed fiscal years’’. 


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1 SEC. 7413. RULEMAKING AUTHORITY TO PROTECT RE2 DEEMING INVESTORS. 

3 Section 22(e) of the Investment Company Act of 

4 1940 (15 U.S.C. 80a–22(e)) is amended by adding at the 

5 end the following: ‘‘The Commission may, by rules and 

6 regulations, limit the extent to which a registered open7 end investment company may own, hold, or invest in il8 liquid securities or other illiquid property.’’. 

9 SEC. 7414. STUDY ON SEC REVOLVING DOOR. 

10 (a) GOVERNMENT ACCOUNTABILITY OFFICE

11 STUDY.—The Comptroller General of the United States 

12 shall conduct a study that will— 

13 (1) review the number of employees who leave 

14 the Securities and Exchange Commission to work 

15 for financial institutions regulated by such Commis16 sion; 

17 (2) determine how many employees who leave 

18 the Securities and Exchange Commission worked on 

19 cases that involved financial institutions regulated by 

20 such Commission; 

21 (3) review the length of time employees work 

22 for the Securities and Exchange Commission before 

23 leaving to be employed by financial institutions regu24 lated by such Commission; 

25 (4) review existing internal controls and make 

26 recommendations on strengthening such controls to 


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1 ensure that employees of the Securities and Ex2 change Commission who are later employed by fi3 nancial institutions did not assist such institutions 

4 in violating any rules or regulations of the Commis5 sion during the course of their employment with 

6 such Commission; 

7 (5) determine if greater post-employment re8 strictions are necessary to prevent employees of the 

9 Securities and Exchange Commission from being 

10 employed by financial institutions after employment 

11 with such Commission; 

12 (6) determine if the volume of employees of the 

13 Securities and Exchange Commission who are later 

14 employed by financial institutions has led to ineffi15 ciencies in enforcement; 

16 (7) determine if employees of the Securities and 

17 Exchange Commission who are later employed by fi18 nancial institutions assisted such institutions in cir19 cumventing Federal rules and regulations while em20 ployed by such Commission; 

21 (8) review any information that may address 

22 the volume of employees of the Securities and Ex23 change Commission who are later employed by fi24 nancial institutions, and make recommendations to 

25 Congress; and 


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1 (9) review other additional issues as may be 

2 raised during the course of the study conducted 

3 under this subsection. 

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

5 of the enactment of this subtitle, the Comptroller General 

6 of the United States shall submit to the Committee on 

7 Financial Services of the House of Representatives and 

8 the Committee on Banking, Housing, and Urban Affairs 

9 of the Senate a report on the results of the study required 

10 by subsection (a). 

11 SEC. 7415. STUDY ON INTERNAL CONTROL EVALUATION 

12 AND REPORTING COST BURDENS ON SMALL13 ER ISSUERS. 

14 (a) STUDY REQUIRED.—The Government Account15 ability Office shall conduct a study evaluating the costs 

16 and benefits of complying with section 404(b) of the Sar17 banes-Oxley Act of 2002 (15 U.S.C. 7262(b)) on issuers 

18 who are not accelerated or large accelerated filers as de19 fined by Commission Rule 12b–2. The study shall— 

20 (1) include recommendations, administrative re21 forms, and legislative proposals on implementation 

22 steps that could be taken to reduce compliance bur23 dens on these issuers; 


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1 (2) determine the efficacy of the Securities and 

2 Exchange Commission’s measures to limit the cost 

3 of compliance on smaller issuers; 

4 (3) determine how to reduce the burden of com5 plying with section 404(b) of the Sarbanes-Oxley Act 

6 of 2002 for companies whose market capitalization 

7 is less than $250,000,000 for the relevant reporting 

8 period while maintaining investor protections for 

9 such companies; and 

10 (4) determine whether various methods of re11 ducing the compliance burden or a complete exemp12 tion for such companies (whose market capitalization 

13 is less than $250,000,000 for the relevant reporting 

14 period) from such compliance would encourage com15 panies to list on exchanges in the United States in 

16 their initial public offerings. 

17 (b) REPORTS REQUIRED.—Not later than 9 months 

18 after the date of the enactment of this subtitle, the Gov19 ernment Accountability Office shall submit a report to 

20 Congress containing the findings and conclusions of the 

21 studies required under subsection (a), together with such 

22 recommendations for regulatory, legislative, or administra23 tive action as may be appropriate. 

24 (c) EFFECTIVE DATE CONTINGENT ON REPORTS.— 

25 Requirements under section 404(b) of the Sarbanes-Oxley 


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1 Act of 2002 on issuers described under subsection (a) shall 

2 not become effective until the results of the report are de3 livered, but in no case before June 1, 2011. 

4 SEC. 7416. ANALYSIS OF RULE REGARDING SMALLER RE5 PORTING COMPANIES. 

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

7 (1) Many small businesses in cutting-edge tech8 nology sectors require significant capital investment 

9 to develop new technologies related to clean energy, 

10 drug treatments for terminal diseases and food pro11 duction in hunger-stricken areas of the World. 

12 (2) Many technology companies conducting re13 search do not meet the definition of ‘‘smaller report14 ing company’’ under the Securities and Exchange 

15 Commission’s Rule 12b–2 due to unusually high 

16 public floats despite low or zero revenue. 

17 (3) The Final Report of the Advisory Com18 mittee on Smaller Public Companies to the Securi19 ties and Exchange Commission recommended that a 

20 company with a market capitalization of less than 

21 about $787,000,000 be considered a smallcap com22 pany and that the Commission provide exemptions 

23 from section 404(b) of the Sarbanes-Oxley Act to 

24 companies with less than $250,000,000 in annual 

25 revenues. 


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1 (b) STUDY OF USING REVENUE AS CRITERIA TO DE2 FINE SMALLER REPORTING COMPANY.—The Securities 

3 and Exchange Commission shall conduct a study of the 

4 inclusion of revenue as a criteria used in defining smaller 

5 reporting company as defined under the Commission’s 

6 Rule 12b–2 to account for smaller public companies with 

7 public floats less than $700,000,000 and revenues less 

8 than $250,000,000. Not later than 180 days after the date 

9 of enactment of this subtitle, the Commission shall provide 

10 the Committee on Financial Services of the House of Rep11 resentatives and the Committee on Banking, Housing and 

12 Urban Affairs of the Senate a report of the findings of 

13 the study. 

14 SEC. 7417. FINANCIAL REPORTING FORUM. 

15 (a) ESTABLISHMENT.—There is hereby established a 

16 Financial Reporting Forum (hereinafter referred to as the 

17 ‘‘Forum’’), which shall consist of— 

18 (1) the Chairman of the Securities Exchange 

19 Commission (hereinafter referred to as the ‘‘SEC’’); 

20 (2) the head of the Financial Accounting 

21 Standards Board; 

22 (3) the Chairman of the Public Company Ac23 counting Oversight Board; 

24 (4) the head of each appropriate Federal bank25 ing agency, as such term is defined under section 


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1 3(q) of the Federal Deposit Insurance Act (12 

2 U.S.C. 1813(q)); 

3 (5) the Administrator of the National Credit 

4 Union Administration; 

5 (6) the Secretary of the Treasury; 

6 (7) a representative of a non-financial institu7 tion, appointed by the SEC; 

8 (8) a representative of a financial institution, 

9 appointed by the SEC; 

10 (9) a representative of auditors, appointed by 

11 the SEC; and 

12 (10) a representative of investors, appointed by 

13 the SEC. 

14 (b) MEETINGS.—The Forum shall meet no less often 

15 than quarterly. 

16 (c) DUTIES.—The Forum shall meet to discuss im17 mediate and long-term issues critical to financial report18 ing. 

19 (d) REPORTING.—The Forum shall issue an annual 

20 report to the Congress detailing any determinations or 

21 findings made by the Forum during the previous year, in22 cluding any legislative recommendations the Forum may 

23 have related to financial reporting matters. 


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1 SEC. 7418. INVESTMENT ADVISERS SUBJECT TO STATE AU2 THORITIES. 

3 Section 203A(a) of the Investment Advisers Act of 

4 1940 (15 U.S.C. 80b–3a(a)) is amended— 

5 (1) by redesignating paragraph (2) as para6 graph (3); and 

7 (2) by inserting after paragraph (1) the fol8 lowing new paragraph: 

9 ‘‘(2) TREATMENT OF CERTAIN MID-SIZED IN10 VESTMENT ADVISERS.—Notwithstanding paragraph 

11 (1), an investment adviser that is not exempt from 

12 registration under section 203 and— 

13 ‘‘(A) is regulated and examined, or re14 quired to be regulated and examined, in the 

15 State where it maintains its principal office and 

16 place of business; and 

17 ‘‘(B) has assets under management be18 tween— 

19 ‘‘(i) the amount specified under sub20 paragraph (A) of paragraph (1), as such 

21 amount may have been adjusted by the 

22 Commission pursuant to that subpara23 graph; and 

24 ‘‘(ii) $100,000,000, or such higher 

25 amount as the Commission may, by rule, 


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1 deem appropriate in accordance with the 

2 purposes of this title, 

3 shall register with, and be subject to examina4 tion by, such State. The Commission shall pub5 lish a list of the States that regulate and exam6 ine, or require regulation and examination of, 

7 investment advisers to which the requirements 

8 of this paragraph apply. If no State in which an 

9 investment adviser described in subparagraph 

10 (B) is registered conducts such an examination, 

11 the investment adviser must register with the 

12 Commission. If, pursuant to this paragraph, an 

13 investment adviser would be required to register 

14 with 5 or more States, then the adviser may 

15 maintain its registration with the Commis16 sion.’’. 

17 SEC. 7419. CUSTODIAL REQUIREMENTS. 

18 (a) IN GENERAL.—Not later than 180 days after the 

19 date of the enactment of this title, the Securities and Ex20 change Commission shall adopt a rule pursuant to its au21 thority under section 211(a) of the Investment Advisers 

22 Act of 1940 making it unlawful under section 206(4) of 

23 that Act for an investment adviser registered under such 

24 Act to have custody of funds or securities of a client the 

25 value of which exceeds $10,000,000, unless— 


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1 (1) the funds and securities are maintained 

2 with a qualified custodian either in a separate ac3 count for each client under the client’s name, or in 

4 accounts that contain only client funds and securi5 ties under the name of the investment adviser as 

6 agent or trustee for the client; and 

7 (2) the qualified custodian does not directly or 

8 indirectly provide investment advice with respect to 

9 such funds or securities. 

10 (b) EXCEPTIONS.—The rule adopted under sub11 section (a) shall include such exceptions as the Commis12 sion determines in the public interest and consistent with 

13 the protection of investors. Any exemption granted under 

14 this subsection shall ensure that at least once per year, 

15 a client described in subsection (a) shall receive a report 

16 from an independent entity with a fiduciary responsibility 

17 to the client to verify that the assets in the client’s account 

18 are in accord with those stated on the client’s account 

19 statement. 

20 (c) NO LIMITS ON OTHER ACTIONS.—Nothing in this 

21 section shall be construed to limit other actions the Securi22 ties and Exchange Commission may take under this Act 

23 to require the protection of client assets. 


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1 SEC. 7420. OMBUDSMAN. 

2 (a) APPOINTMENT.—Not later than 180 days after 

3 the date of the enactment of this subtitle, the Chairman 

4 of the Securities and Exchange Commission shall appoint 

5 an Ombudsman who shall report directly to the Chairman. 

6 (b) DUTIES.—The Ombudsman appointed under sub7 section (a) shall— 

8 (1) act as a liaison between the Commission 

9 and any affected person with respect to any problem 

10 such person may have in dealing with the Commis11 sion resulting from the regulatory activities of the 

12 Commission; 

13 (2) review and make recommendations regard14 ing Commission policies and procedures to encour15 age persons to present questions to the Commission 

16 regarding compliance with Federal securities laws; 

17 and 

18 (3) assure that safeguards exist to maintain 

19 confidentiality of communications between such per20 sons and the Ombudsman. 

21 (c) LIMITATION.—In carrying out the duties under 

22 subsection (b), the Ombudsman shall utilize personnel of 

23 the Commission to the extent practicable. Nothing in this 

24 section shall be construed as replacing, altering, or dimin25 ishing the activities of any ombudsman or similar office 

26 in any other agency. 


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1 (d) REPORT.—Each year, the Ombudsman shall sub2 mit a report to the Commission for inclusion in the annual 

3 report that describes the activities and evaluates the effec4 tiveness of the Ombudsman during the preceding year. In 

5 that report, the Ombudsman shall include solicited com6 ments and evaluations from registrants in regard to the 

7 effectiveness of the Ombudsman. 

8 SEC. 7421. NOTICE TO MISSING SECURITY HOLDERS. 

9 Section 17A of the Securities Exchange Act of 1934 

10 (15 U.S.C. 78q–1) is amended by adding at the end the 

11 following new subsection: 

12 ‘‘(g) DUE DILIGENCE FOR THE DELIVERY OF DIVI13 DENDS, INTEREST, AND OTHER VALUABLE PROPERTY

14 RIGHTS.— 

15 ‘‘(1) REVISION OF RULES REQUIRED.—The 

16 Commission shall revise its regulations in section 

17 240.17Ad–17 of title 17, Code of Federal Regula18 tions, as in effect on December 8, 1997, to extend 

19 the application of such section to brokers and deal20 ers and to provide for the following: 

21 ‘‘(A) A requirement that the paying agent 

22 provide a single written notification to each 

23 missing security holder that the missing secu24 rity holder has been sent a check that has not 

25 yet been negotiated. The written notification 


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1 may be sent along with a check or other mailing 

2 subsequently sent to the missing security holder 

3 but must be provided no later than 7 months 

4 after the sending of the not yet negotiated 

5 check. 

6 ‘‘(B) An exclusion for paying agents from 

7 the notification requirements when the value of 

8 the not yet negotiated check is less than $25. 

9 ‘‘(C) A provision clarifying that the re10 quirements described in subparagraph (A) shall 

11 have no effect on State escheatment laws. 

12 ‘‘(D) For purposes of such revised regula13 tions— 

14 ‘‘(i) a security holder shall be consid15 ered a ‘missing security holder’ if a check 

16 is sent to the security holder and the check 

17 is not negotiated before the earlier of the 

18 paying agent sending the next regularly 

19 scheduled check or the elapsing of 6 

20 months after the sending of the not yet ne21 gotiated check; and 

22 ‘‘(ii) the term ‘paying agent’ includes 

23 any issuer, transfer agent, broker, dealer, 

24 investment adviser, indenture trustee, cus25 todian, or any other person that accepts 


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1 payments from the issuer of a security and 

2 distributes the payments to the holders of 

3 the security. 

4 ‘‘(2) RULEMAKING.—The Commission shall 

5 adopt such rules, regulations, and orders necessary 

6 to implement this subsection no later than 1 year 

7 after the date of enactment of this subsection. In 

8 proposing such rules, the Commission shall seek to 

9 minimize disruptions to current systems used by or 

10 on behalf of paying agents to process payment to ac11 count holders and avoid requiring multiple paying 

12 agents to send written notification to a missing secu13 rity holder regarding the same not yet negotiated 

14 check.’’. 

15 SEC. 7422. SHORT SALE REFORMS. 

16 (a) SHORT SALE DISCLOSURE.—Section 13(f) of the 

17 Securities Exchange Act of 1934 (15 U.S.C. 78m(f)) is 

18 amended by redesignating paragraphs (2), (3), (4), and 

19 (5) as paragraphs (3), (4), (5), and (6), respectively, and 

20 inserting after paragraph (1) the following: 

21 ‘‘(2)(A) Every institutional investment manager 

22 that effects a short sale of an equity security shall 

23 also file a report on a daily basis with the Commis24 sion in such form as the Commission, by rule, may 

25 prescribe. Such report shall include, as applicable, 


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1 the name of the institution, the name of the institu2 tional investment manager and the title, class, 

3 CUSIP number, number of shares or principal 

4 amount, aggregate fair market value of each secu5 rity, and any additional information requested by 

6 the Commission. For purposes of section 552 of title 

7 5, United States Code, this subparagraph shall be 

8 considered a statute described in subsection 

9 (b)(3)(B) of such section. The information contained 

10 in reports of an institutional investment manager 

11 filed with the Commission pursuant to this section, 

12 shall be subject to the same non-disclosure and con13 fidentiality protection provided under section 

14 204(b)(8) of the Investment Advisers Act of 1940. 

15 ‘‘(B) The Commission shall prescribe rules pro16 viding for the public disclosure of the name of the 

17 issuer and the title, class, CUSIP number, aggregate 

18 amount of the number of short sales of each secu19 rity, and any additional information determined by 

20 the Commission following the end of the reporting 

21 period. At a minimum, such public disclosure shall 

22 occur every month.’’. 

23 (b) SHORT SELLING ENFORCEMENT.—Section 9 of 

24 the Securities Exchange Act of 1934 (15 U.S.C. 78i) is 

25 amended— 


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1 (1) by redesignating subsections (d), (e), (f), 

2 (g), (h), and (i) as subsections (e), (f), (g), (h), (i), 

3 and (j), respectively; and 

4 (2) inserting after subsection (c), the following 

5 new subsection: 

6 ‘‘(d) TRANSACTIONS RELATING TO SHORT SALES OF

7 SECURITIES.—It shall be unlawful for any person, directly 

8 or indirectly, by the use of the mails or any means or in9 strumentality of interstate commerce, or of any facility of 

10 any national securities exchange, or for any member of 

11 a national securities exchange to effect, alone or with one 

12 or more other persons, a manipulative short sale of any 

13 security. The Commission shall issue such other rules as 

14 are necessary or appropriate to ensure that the appro15 priate enforcement options and remedies are available for 

16 violations of this subsection in the public interest or for 

17 the protection of investors.’’. 

18 (c) INVESTOR NOTIFICATION.—Section 15 of the Se19 curities Exchange Act of 1934 (15 U.S.C. 78o) is amend20 ed— 

21 (1) by redesignating subsections (e), (f), (g), 

22 (h), and (i) as subsections (f), (g), (h), (i), and (j), 

23 respectively; and 

24 (2) inserting after subsection (d) the following 

25 new subsection: 


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1 ‘‘(e) NOTICES TO CUSTOMERS REGARDING SECURI2 TIES LENDING.—Every registered broker or dealer shall 

3 provide notice to its customers that they may elect not 

4 to allow their fully paid securities to be used in connection 

5 with short sales. If a broker or dealer uses a customer’s 

6 securities in connection with short sales, the broker or 

7 dealer shall provide notice to its customer that the broker 

8 or dealer may receive compensation in connection with 

9 lending the customer’s securities. The Commission, by 

10 rule, as it deems necessary or appropriate in the public 

11 interest and for the protection of investors, may prescribe 

12 the form, content, time, and manner of delivery of any 

13 notice required under this paragraph.’’. 

14 SEC. 7423. STREAMLINING OF SEC FILING PROCEDURES. 

15 (a) APPROVAL PROCESS.—Section 19(b)(2) of the 

16 Securities Exchange Act of 1934 (15 U.S.C. 78s(b)(2)) 

17 is amended to read as follows: 

18 ‘‘(2) FILING PROCEDURES.— 

19 ‘‘(A) IN GENERAL.—Within thirty-five 

20 days of the date of publication of notice of the 

21 filing of a proposed rule change in accordance 

22 with paragraph (1) of this subsection, or within 

23 such longer period as the Commission may des24 ignate up to ninety days of such date if it finds 

25 such longer period to be appropriate and pubVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01386 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 lishes its reasons for so finding or as to which 

2 the self-regulatory organization consents, the 

3 Commission shall— 

4 ‘‘(i) by order approve such proposed 

5 rule change; or 

6 ‘‘(ii) institute proceedings under sub7 paragraph (B) to determine whether the 

8 proposed rule change should be dis9 approved. 

10 ‘‘(B) PROCEEDINGS.—Proceedings to de11 termine whether the proposed rule change 

12 should be disapproved shall include notice of 

13 the grounds for disapproval under consideration 

14 and opportunity for hearing and be concluded 

15 within 200 days from the date of receipt of a 

16 proper filing. At the conclusion of such pro17 ceedings the Commission, by order, shall ap18 prove or disapprove such proposed rule change. 

19 The Commission may extend the time for con20 clusion of such proceedings for up to 60 days 

21 if it finds good cause for such extension and 

22 publishes its reasons for so finding or for such 

23 longer period as to which the self-regulatory or24 ganization consents. The Commission shall ap25 prove a proposed rule change of a self-reguVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01387 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 latory organization if it finds that such pro2 posed rule change is consistent with the re3 quirements of this title and the rules and regu4 lations thereunder applicable to such organiza5 tion. The Commission shall disapprove a pro6 posed rule change of a self-regulatory organiza7 tion if it does not make such finding. The Com8 mission shall not approve any proposed rule 

9 change prior to the thirtieth day after the date 

10 of publication of notice of the filing thereof, un11 less the Commission finds good cause for so 

12 doing and publishes its reasons for so finding.’’. 

13 (b) RULES.—Not later than 12 months after the date 

14 of enactment of this Act, the Commission shall issue rules 

15 implementing a disapproval process for filings submitted 

16 on or after the effective date of such rules. 

17 PART 5—SECURITIES INVESTOR PROTECTION 

18 ACT AMENDMENTS 

19 SEC. 7501. INCREASING THE MINIMUM ASSESSMENT PAID 

20 BY 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 from the securities 

25 business of such member of SIPC’’. 


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1 SEC. 7502. 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 ‘‘the lesser 

6 of $2,500,000,000 or the target amount of the SIPC Fund 

7 specified in the bylaws of SIPC’’. 

8 SEC. 7503. INCREASING THE CASH LIMIT OF PROTECTION. 

9 Section 9 of the Securities Investor Protection Act 

10 of 1970 (15 U.S.C. 78fff–3) is amended— 

11 (1) in subsection (a)(1), by striking ‘‘$100,000 

12 for each such customer’’ and inserting ‘‘the standard 

13 maximum cash advance amount for each such cus14 tomer, as determined in accordance with subsection 

15 (d)’’; and 

16 (2) by adding the following new subsections: 

17 ‘‘(d) STANDARD MAXIMUM CASH ADVANCE AMOUNT

18 DEFINED.—For purposes of this section, the term ‘stand19 ard maximum cash advance amount’ means $250,000, as 

20 such amount may be adjusted after March 31, 2010, as 

21 provided under subsection (e). 

22 ‘‘(e) INFLATION ADJUSTMENT.— 

23 ‘‘(1) IN GENERAL.—No later than April 1, 

24 2010, and every 5 years thereafter, and subject to 

25 the approval of the Commission as provided under 

26 section 3(e)(2), the Board of Directors of SIPC shall 


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1 determine whether an inflation adjustment to the 

2 standard maximum cash advance amount is appro3 priate. If the Board of Directors of SIPC determines 

4 such an adjustment is appropriate, then the stand5 ard maximum cash advance amount shall be an 

6 amount equal to— 

7 ‘‘(A) $250,000 multiplied by 

8 ‘‘(B) the ratio of the annual value of the 

9 Personal Consumption Expenditures Chain10 Type Price Index (or any successor index there11 to), published by the Department of Commerce, 

12 for the calendar year preceding the year in 

13 which such determination is made, to the pub14 lished annual value of such index for the cal15 endar year preceding the year in which this 

16 subsection was enacted. 

17 The index values used in calculations under this 

18 paragraph shall be, as of the date of the calculation, 

19 the values most recently published by the Depart20 ment of Commerce. 

21 ‘‘(2) ROUNDING.—If the standard maximum 

22 cash advance amount determined under paragraph 

23 (1) for any period is not a multiple of $10,000, the 

24 amount so determined shall be rounded down to the 

25 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 stating the 

10 standard maximum cash advance amount. 

11 ‘‘(4) IMPLEMENTATION PERIOD.—Any adjust12 ment to the standard maximum cash advance 

13 amount shall take effect on January 1 of the year 

14 immediately succeeding the calendar year in which 

15 such adjustment is made. 

16 ‘‘(5) INFLATION ADJUSTMENT CONSIDER17 ATIONS.—In making any determination under para18 graph (1) to increase the standard maximum cash 

19 advance amount, the Board of Directors of SIPC 

20 shall consider— 

21 ‘‘(A) the overall state of the fund and the 

22 economic conditions affecting members of 

23 SIPC; 

24 ‘‘(B) the potential problems affecting mem25 bers of SIPC; and 


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1 ‘‘(C) such other factors as the Board of 

2 Directors of SIPC may determine appro3 priate.’’. 

4 SEC. 7504. SIPC AS TRUSTEE IN SIPA LIQUIDATION PRO5 CEEDINGS. 

6 Section 5(b)(3) of the Securities Investor Protection 

7 Act of 1970 (15 U.S.C. 78eee(b)(3)) is amended— 

8 (1) by striking ‘‘SIPC has determined that the 

9 liabilities of the debtor to unsecured general credi10 tors and to subordinated lenders appear to aggre11 gate less than $750,000 and that’’; and 

12 (2) by striking ‘‘five hundred’’ and inserting 

13 ‘‘five thousand’’. 

14 SEC. 7505. INSIDERS INELIGIBLE FOR SIPC ADVANCES. 

15 Section 9(a)(4) of the Securities Investor Protection 

16 Act of 1970 (15 U.S.C. 78fff–3(a)(4)) is amended by in17 serting ‘‘an insider,’’ after ‘‘or net profits of the debtor,’’. 

18 SEC. 7506. ELIGIBILITY FOR DIRECT PAYMENT PROCE19 DURE. 

20 Section 10(a)(4) of the Securities Investor Protection 

21 Act of 1970 (15 U.S.C. 78fff–4(a)(4)) is amended by 

22 striking ‘‘$250,000’’ and inserting ‘‘$850,000’’. 


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1 SEC. 7507. 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. 7508. 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 5 years. 

3 ‘‘(2) INJUNCTIONS.—Any court having jurisdic4 tion of a civil action arising under this Act may 

5 grant temporary injunctions and final injunctions on 

6 such terms as the court deems reasonable to prevent 

7 or restrain any violation of paragraph (1). Any such 

8 injunction may be served anywhere in the United 

9 States on the person enjoined, shall be operative 

10 throughout the United States, and shall be enforce11 able, by proceedings in contempt or otherwise, by 

12 any United States court having jurisdiction over that 

13 person. The clerk of the court granting the injunc14 tion shall, when requested by any other court in 

15 which enforcement of the injunction is sought, trans16 mit promptly to the other court a certified copy of 

17 all papers in the case on file in such clerk’s office.’’. 

18 SEC. 7509. FUTURES HELD IN A PORTFOLIO MARGIN SECU19 RITIES ACCOUNT PROTECTION. 

20 (a) SIPC ADVANCES.—Section 9(a)(1) of the Securi21 ties Investor Protection Act of 1970 (15 U.S.C. 78fff– 

22 3(a)(1)) is amended by inserting ‘‘or options on futures 

23 contracts’’ after ‘‘claim for securities’’. 

24 (b) DEFINITIONS.—Section 16 of such Act (15 

25 U.S.C. 78lll) is amended— 


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1 (1) by amending paragraph (2) to read as fol2 lows: 

3 ‘‘(2) CUSTOMER.— 

4 ‘‘(A) IN GENERAL.—The term ‘customer’ 

5 of a debtor means any person (including any 

6 person with whom the debtor deals as principal 

7 or agent) who has a claim on account of securi8 ties received, acquired, or held by the debtor in 

9 the ordinary course of its business as a broker 

10 or dealer from or for the securities accounts of 

11 such person for safekeeping, with a view to sale, 

12 to cover consummated sales, pursuant to pur13 chases, as collateral, security, or for purposes of 

14 effecting transfer. The term ‘customer’ includes 

15 any person who has a claim against the debtor 

16 arising out of sales or conversions of such secu17 rities. 

18 ‘‘(B) INCLUDED PERSONS.—The term 

19 ‘customer’ includes— 

20 ‘‘(i) any person who has deposited 

21 cash with the debtor for the purpose of 

22 purchasing securities; and 

23 ‘‘(ii) any person who has a claim 

24 against the debtor for, or a claim against 

25 the debtor arising out of sales or converVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01395 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 sions of, cash, securities, futures contracts, 

2 or options on futures contracts received, 

3 acquired, or held in a portfolio margining 

4 account carried as a securities account 

5 pursuant to a portfolio margining program 

6 approved by the Commission. 

7 ‘‘(C) EXCLUDED PERSONS.—The term 

8 ‘customer’ does not include— 

9 ‘‘(i) any person to the extent that the 

10 claim of such person arises out of trans11 actions with a foreign subsidiary of a mem12 ber of SIPC; 

13 ‘‘(ii) any person to the extent that 

14 such person has a claim for cash or securi15 ties which by contract, agreement, or un16 derstanding, or by operation of law, is part 

17 of the capital of the debtor, or is subordi18 nated to the claims of any or all creditors 

19 of the debtor, notwithstanding that some 

20 ground exists for declaring such contract, 

21 agreement, or understanding void or void22 able in a suit between the claimant and the 

23 debtor; or 

24 ‘‘(iii) any person to the extent such 

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1 purchase or open reverse repurchase agree2 ment. 

3 For purposes of this paragraph, the term ‘re4 purchase agreement’ means the sale of a secu5 rity at a specified price with a simultaneous 

6 agreement or obligation to repurchase the secu7 rity at a specified price on a specified future 

8 date.’’; 

9 (2) in paragraph (4), by inserting after the first 

10 sentence the following new sentence: ‘‘In the case of 

11 portfolio margining accounts of customers that are 

12 carried as securities accounts pursuant to a portfolio 

13 margining program approved by the Commission, 

14 such term shall also include futures contracts and 

15 options on futures contracts received, acquired, or 

16 held by or for the account of a debtor from or for 

17 such accounts, and the proceeds thereof.’’; 

18 (3) in paragraph (9), by inserting before ‘‘Such 

19 term’’ in the matter following subparagraph (L) the 

20 following: ‘‘The term includes revenues earned by a 

21 broker or dealer in connection with transactions in 

22 customers’ portfolio margining accounts carried as 

23 securities accounts pursuant to a portfolio margining 

24 program approved by the Commission.’’; and 

25 (4) in paragraph (11)— 


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1 (A) by amending subparagraph (A) to read 

2 as follows: 

3 ‘‘(A) calculating the sum which would have 

4 been owed by the debtor to such customer if the 

5 debtor had liquidated, by sale or purchase on 

6 the filing date— 

7 ‘‘(i) all securities positions of such 

8 customer (other than customer name secu9 rities reclaimed by such customer); and 

10 ‘‘(ii) all positions in futures contracts 

11 and options on futures contracts held in a 

12 portfolio margining account carried as a 

13 securities account pursuant to a portfolio 

14 margining program approved by the Com15 mission; minus’’; and 

16 (B) by inserting before ‘‘In determining’’ 

17 in the matter following subparagraph (C) the 

18 following: ‘‘A claim for a commodity futures 

19 contract received, acquired, or held in a port20 folio margining account pursuant to a portfolio 

21 margining program approved by the Commis22 sion, or a claim for a security futures contract, 

23 shall be deemed to be a claim for the mark-to24 market (variation) payments due with respect 


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1 to such contract as of the filing date, and such 

2 claim shall be treated as a claim for cash.’’. 

3 SEC. 7510. STUDY AND REPORT ON THE FEASIBILITY OF 

4 RISK-BASED ASSESSMENTS FOR SIPC MEM5 BERS. 

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

7 the United States shall conduct a study on whether the 

8 Securities Investor Protection Corporation (hereafter in 

9 this section referred to as ‘‘SIPC’’) should be required to 

10 impose assessments, on its member brokers and dealers, 

11 based on risk for the purpose of adequately maintaining 

12 the SIPC Fund and to provide additional levels of cov13 erage on an optional basis. 

14 (b) CONTENT.—The Comptroller General in con15 ducting this study shall— 

16 (1) identify and examine available approaches, 

17 including modeling, to measure broker and dealer 

18 operational risk; 

19 (2) analyze whether the available approaches to 

20 measure broker and dealer operational risk can be 

21 used in managing the aggregate risk to the SIPC 

22 Fund; 

23 (3) explore whether objective measures like the 

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1 latory bodies against the SIPC member, or the num2 ber of years the SIPC member has been in oper3 ation, among other factors, can be used to assess the 

4 probability the fund will incur a loss with respect to 

5 the SIPC member; 

6 (4) examine the impact that risk-based assess7 ments could have on large and small brokers and 

8 dealers; 

9 (5) examine the impact that risk-based assess10 ments could have on institutional and retail brokers 

11 and dealers; and 

12 (6) examine the feasibility of SIPC providing 

13 additional levels of coverage on an optional basis, 

14 what those additional levels of coverage should be, 

15 and the appropriate risked-based premium for pro16 viding additional coverage. 

17 (c) CONSULTATION.—The Comptroller General in 

18 planning and conducting this study shall consult with the 

19 Securities and Exchange Commission, the Federal Deposit 

20 Insurance Corporation, SIPC, the Financial Industry Reg21 ulatory Authority, and any other public or private sector 

22 organization that the Comptroller General considers ap23 propriate. 

24 (d) REPORT REQUIRED.—Not later than 1 year after 

25 the date of enactment of this subtitle, the Comptroller 


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1 general shall submit a report of the results of the study 

2 required by this section to the Committee on Banking, 

3 Housing, and Urban Affairs of the Senate and the Com4 mittee on Financial Services of the House of Representa5 tives. 

6 PART 6—SARBANES-OXLEY ACT AMENDMENTS 

7 SEC. 7601. PUBLIC COMPANY ACCOUNTING OVERSIGHT 

8 BOARD OVERSIGHT OF AUDITORS OF BRO9 KERS AND DEALERS. 

10 (a) DEFINITIONS.—(1) Title I of the Sarbanes-Oxley 

11 Act 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, procedures or controls, or notices, of any 

19 issuer, broker, or dealer by an independent public 

20 accounting firm in accordance with the rules of the 

21 Board or the Commission (or, for the period pre22 ceding the adoption of applicable rules of the Board 

23 under section 103, in accordance with then-applica24 ble generally accepted auditing and related stand25 ards for such purposes), for the purpose of expressVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01401 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ing an opinion on such financial statements, reports, 

2 documents, procedures or controls, 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 (2) The table of sections in section 1(b) of such Act 

18 is amended, by inserting after the item relating to section 

19 109 the following new item: 

‘‘Sec. 110. Definitions.’’. 

20 (b) ESTABLISHMENT AND ADMINISTRATION OF THE

21 PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD.— 

22 Section 101 of such Act is amended— 

23 (1) by striking ‘‘issuers’’ each place it appears 

24 and inserting ‘‘issuers, brokers, and dealers’’; 


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1 (2) in subsection (a), by striking ‘‘public com2 panies’’ and inserting ‘‘companies’’; and 

3 (3) in subsection (a), by striking ‘‘for compa4 nies the securities of which are sold to, and held by 

5 and for, public investors’’. 

6 (c) REGISTRATION WITH THE BOARD.—Section 102 

7 of such Act is amended— 

8 (1) in subsection (a), by striking ‘‘Beginning 

9 180 days after the date of the determination of the 

10 Commission under section 101(d), it’’ and inserting 

11 ‘‘It’’; 

12 (2) in subsections (a) and (b)(2)(G), by striking 

13 ‘‘issuer’’ each place it appears and inserting ‘‘issuer, 

14 broker, or dealer’’; and 

15 (3) in subsection (b)(2)(A), by striking 

16 ‘‘issuers’’ and inserting ‘‘issuers, brokers, and deal17 ers’’. 

18 (d) AUDITING AND INDEPENDENCE.—Section 103(a) 

19 of such Act is amended— 

20 (1) in paragraph (1), by striking ‘‘and such eth21 ics standards’’ and inserting ‘‘such ethics standards, 

22 and such independence standards’’; 

23 (2) in paragraph (2)(A)(iii), by striking ‘‘de24 scribe in each audit report’’ and inserting ‘‘in each 

25 audit report for an issuer, describe’’; and 


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1 (3) in paragraph (2)(B)(i), by striking 

2 ‘‘issuers’’ and inserting ‘‘issuers, brokers, and deal3 ers’’. 

4 (e) INSPECTIONS BY REGISTERED ACCOUNTING

5 FIRMS.—Subsection (a) of Section 104 of such Act is 

6 amended— 

7 (1) by striking ‘‘(a) IN GENERAL.—The Board 

8 shall’’ and inserting the following: 

9 ‘‘(a) IN GENERAL.— 

10 ‘‘(1) The Board shall’’; and 

11 (2) by adding at the end of such subsection the 

12 following: 

13 ‘‘(2) INSPECTIONS OF AUDIT REPORT FOR BRO14 KERS AND DEALERS.— 

15 ‘‘(A) The Board may, by rule, conduct and 

16 require a program of inspection in accordance 

17 with paragraph (a)(1), on a basis to be deter18 mined by the Board, of registered public ac19 counting firms that provide one or more audit 

20 reports for a broker or dealer. The Board, in 

21 establishing such a program, may allow for dif22 ferentiation among classes of brokers and deal23 ers, as appropriate. 

24 ‘‘(B) If the Board determines to establish 

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1 graph (A), the Board shall consider in estab2 lishing any inspection schedules whether dif3 fering schedules would be appropriate with re4 spect to registered public accounting firms that 

5 issue audit reports only for one or more brokers 

6 or dealers that do not receive, handle, or hold 

7 customer securities or cash or are not a mem8 ber of the Securities Investor Protection Cor9 poration. 

10 ‘‘(C) Any rules of the Board pursuant to 

11 this paragraph shall be subject to prior ap12 proval by the Commission pursuant to section 

13 107(b) before the rules become effective, includ14 ing an opportunity for public notice and com15 ment. 

16 ‘‘(D) Notwithstanding anything to the con17 trary in section 102 of this Act, a public ac18 counting firm shall not be required to register 

19 with the Board if the public accounting firm is 

20 exempt from the inspection program which may 

21 be established by the Board under subpara22 graph (a)(2)(A) of this section. 

23 ‘‘(3) CONFORMING AMENDMENT.—Section 17 

24 (e)(1)(A) of the Securities Exchange Act of 1934 

25 (15 U.S.C. 78q(e)(1)(A)) is amended by striking 


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1 ‘registered public accounting firm’ and inserting 

2 ‘independent public accounting firm or by a reg3 istered public accounting firm if registration is re4 quired under the Sarbanes-Oxley Act of 2002 as 

5 amended.’.’’. 

6 (f) INVESTIGATIONS AND DISCIPLINARY PRO7 CEEDINGS.—Section 105(c)(7)(B) of such Act is amend8 ed— 

9 (1) in the subparagraph heading, by inserting 

10 ‘‘, BROKER, OR DEALER’’ after ‘‘ISSUER’’; 

11 (2) by striking ‘‘any issuer’’ each place it ap12 pears and inserting ‘‘any issuer, broker, or dealer’’; 

13 and 

14 (3) by striking ‘‘an issuer under this sub15 section’’ and inserting ‘‘a registered public account16 ing firm under this subsection’’. 

17 (g) FOREIGN PUBLIC ACCOUNTING FIRMS.—Section 

18 106 of such Act is amended— 

19 (1) in subsection (a)(1), by striking ‘‘issuer’’ 

20 and inserting ‘‘issuer, broker, or dealer’’; and 

21 (2) in subsection (a)(2), by striking ‘‘issuers’’ 

22 and inserting ‘‘issuers, brokers, or dealers’’. 

23 (h) FUNDING.—Section 109 of such Act is amend24 ed— 


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1 (1) in subsection (c)(2), by striking ‘‘subsection 

2 (i)’’ and inserting ‘‘subsection (j)’’; 

3 (2) in subsection (d)(2), by striking ‘‘allowing 

4 for differentiation among classes of issuers, as ap5 propriate’’ and inserting ‘‘and among brokers and 

6 dealers in accordance with subsection (h), and allow7 ing for differentiation among classes of issuers and 

8 brokers and dealers, as appropriate’’; 

9 (3) in subsection (d), by inserting at the end 

10 the following new paragraph: 

11 ‘‘(3) BROKERS AND DEALERS.—The rules of 

12 the Board under paragraph (1) shall provide that 

13 the allocation, assessment, and collection by the 

14 Board (or an agent appointed by the Board) of the 

15 fee established under paragraph (1) with respect to 

16 brokers and dealers shall not begin until the first 

17 day of the first full fiscal year beginning after the 

18 date of the enactment of this paragraph.’’; 

19 (4) by redesignating subsections (h), (i), and (j) 

20 as subsections (i), (j), and (k), respectively; and 

21 (5) by inserting after subsection (g) the fol22 lowing new subsection: 

23 ‘‘(h) ALLOCATION OF ACCOUNTING SUPPORT FEES

24 AMONG BROKERS AND DEALERS.— 


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1 ‘‘(1) IN GENERAL.—Any amount due from bro2 kers and dealers (or a particular class of such bro3 kers and dealers) under this section to fund the 

4 budget of the Board shall be allocated among and 

5 payable by such brokers and dealers (or such bro6 kers and dealers in a particular class, as applicable). 

7 A broker or dealer’s allocation shall be in proportion 

8 to the broker or dealer’s net capital compared to the 

9 total net capital of all brokers and dealers, in ac10 cordance with the rules of the Board. 

11 ‘‘(2) OBLIGATION TO PAY.—Every broker or 

12 dealer shall pay the share of a reasonable annual ac13 counting support fee or fees allocated to such broker 

14 or dealer under this section.’’. 

15 (i) REFERRAL OF INVESTIGATIONS TO A SELF-REGU16 LATORY ORGANIZATION.—Section 105(b)(4)(B) of the 

17 Sarbanes-Oxley Act of 2002 is amended— 

18 (1) by redesignating clauses (ii) and (iii) as 

19 clauses (iii) and (iv), respectively; and 

20 (2) by inserting after clause (i) the following 

21 new clause: 

22 ‘‘(ii) to a self-regulatory organization, 

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1 er that is subject to the jurisdiction of 

2 such self-regulatory organization;’’. 

3 (j) USE OF DOCUMENTS RELATED TO AN INSPEC4 TION OR INVESTIGATION.—Section 105(b)(5)(B)(ii) of 

5 such Act is amended— 

6 (1) in subclause (III), by striking ‘‘and’’; 

7 (2) in subclause (IV), by striking the comma 

8 and inserting ‘‘; and’’; and 

9 (3) by inserting after subclause (IV) the fol10 lowing new subclause: 

11 ‘‘(V) a self-regulatory organiza12 tion, with respect to an audit report 

13 for a broker or dealer that is subject 

14 to the jurisdiction of such self-regu15 latory organization,’’. 

16 SEC. 7602. FOREIGN REGULATORY INFORMATION SHARING. 

17 (a) DEFINITION.—Section 2(a) of the Sarbanes18 Oxley Act of 2002 (15 U.S.C. 7201(a)) is amended by 

19 inserting after paragraph (16) the following: 

20 ‘‘(17) FOREIGN AUDITOR OVERSIGHT AUTHOR21 ITY.—The term ‘foreign auditor oversight authority’ 

22 means any governmental body or other entity em23 powered by a foreign government to conduct inspec24 tions of public accounting firms or otherwise to adVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01411 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 minister or enforce laws related to the regulation of 

2 public accounting firms.’’. 

3 (b) AVAILABILITY TO SHARE INFORMATION.—Sec4 tion 105(b)(5) of the Sarbanes-Oxley Act of 2002 (15 

5 U.S.C. 7215(b)(5)) is amended by adding at the end the 

6 following: 

7 ‘‘(C) AVAILABILITY TO FOREIGN OVER8 SIGHT AUTHORITIES.—When in the Board’s 

9 discretion it is necessary to accomplish the pur10 poses of this Act or to protect investors, and 

11 without the loss of its status as confidential and 

12 privileged in the hands of the Board, all infor13 mation referred to in subparagraph (A) that re14 lates to a public accounting firm within the in15 spection authority, or other regulatory or law 

16 enforcement jurisdiction, of a foreign auditor 

17 oversight authority may be made available to 

18 the foreign auditor oversight authority if the 

19 foreign auditor oversight authority provides 

20 such assurances of confidentiality as the Board 

21 determines appropriate.’’. 

22 (c) CONFORMING AMENDMENT.—Section 

23 105(b)(5)(A) of the Sarbanes-Oxley Act of 2002 (15 

24 U.S.C. 7215(b)(5)(A)) is amended by striking ‘‘subpara25 graph (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’. 


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1 SEC. 7603. EXPANSION OF AUDIT INFORMATION TO BE PRO2 DUCED AND EXCHANGED WITH FOREIGN 

3 COUNTERPARTS. 

4 Section 106 of the Sarbanes-Oxley Act of 2002 (15 

5 U.S.C. 7216) is amended— 

6 (1) by amending subsection (b) to read as fol7 lows: 

8 ‘‘(b) PRODUCTION OF DOCUMENTS.— 

9 ‘‘(1) PRODUCTION BY FOREIGN FIRMS.—If a 

10 foreign public accounting firm issues an audit re11 port, performs audit work, conducts interim reviews, 

12 or performs material services upon which a reg13 istered public accounting firm relies in the conduct 

14 of an audit or interim review, the foreign public ac15 counting firm shall produce its audit work papers 

16 and all other documents related to any such audit 

17 work or interim review to the Commission or the 

18 Board when requested by the Commission or the 

19 Board and the foreign public accounting firm shall 

20 be subject to the jurisdiction of the courts of the 

21 United States for purposes of enforcement of any re22 quest of such documents. 

23 ‘‘(2) OTHER PRODUCTION.—Any registered 

24 public accounting firm that relies, in whole or in 

25 part, on the work of a foreign public accounting firm 


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1 in issuing an audit report, performing audit work, or 

2 conducting an interim review, shall— 

3 ‘‘(A) produce the foreign public accounting 

4 firm’s audit work papers and all other docu5 ments related to any such work in response to 

6 a request for production by the Commission or 

7 the Board; and 

8 ‘‘(B) secure the agreement of any foreign 

9 public accounting firm to such production, as a 

10 condition of its reliance on the work of that for11 eign public accounting firm.’’; 

12 (2) by redesignating subsection (d) as sub13 section (g); and 

14 (3) by inserting after subsection (c) the fol15 lowing new subsections: 

16 ‘‘(d) SERVICE OF REQUESTS OR PROCESS.—Any for17 eign public accounting firm that performs work for a do18 mestically registered public accounting firm shall furnish 

19 to the domestically firm a written irrevocable consent and 

20 power of attorney that designates the domestic firm as an 

21 agent upon whom may be served any process, pleadings, 

22 or other papers in any action brought to enforce this sec23 tion. Any foreign public accounting firm that issues an 

24 audit report, performs audit work, performs interim re25 views, or performs other material services upon which a 


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1 registered public accounting firm relies in the conduct of 

2 an audit or interim review, shall designate to the Commis3 sion or the Board an agent in the United States upon 

4 whom may be served any process, pleading, or other pa5 pers in any action brought to enforce this section or any 

6 request by the Commission or the Board under this sec7 tion. 

8 ‘‘(e) SANCTIONS.—A willful refusal to comply, in 

9 whole in or in part, with any request by the Commission 

10 or the Board under this section, shall be a violation of 

11 this Act. 

12 ‘‘(f) OTHER MEANS OF SATISFYING PRODUCTION

13 OBLIGATIONS.—Notwithstanding any other provision of 

14 this section, the staff of the Commission or Board may 

15 allow foreign public accounting firms subject to this sec16 tion to meet production obligations under this section 

17 though alternate means, such as through foreign counter18 parts of the Commission or Board.’’. 

19 SEC. 7604. CONFORMING AMENDMENT RELATED TO REG20 ISTRATION. 

21 Section 102(b)(3)(A) of the Sarbanes-Oxley Act of 

22 2002 (15 U.S.C. 7212(b)(3)(A)) is amended by striking 

23 ‘‘by the Board’’ and inserting ‘‘by the Commission or the 

24 Board’’. 


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1 SEC. 7605. FAIR FUND AMENDMENTS. 

2 Section 308 of the Sarbanes-Oxley Act of 2002 (15 

3 U.S.C. 7246(a)) is amended— 

4 (1) by amending subsection (a) to read as fol5 lows: 

6 ‘‘(a) CIVIL PENALTIES TO BE USED FOR THE RE7 LIEF OF VICTIMS.—If in any judicial or administrative ac8 tion brought by the Commission under the securities laws 

9 (as such term is defined in section 3(a)(47) of the Securi10 ties Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), the 

11 Commission obtains a civil penalty against any person for 

12 a violation of such laws or the rules and regulations there13 under, or such person agrees in settlement of any such 

14 action to such civil penalty, the amount of such civil pen15 alty or settlement shall, on the motion or at the direction 

16 of the Commission, be added to and become part of a 

17 disgorgement fund or other fund established for the ben18 efit of the victims of such violation.’’; 

19 (2) in subsection (b), by— 

20 (A) striking ‘‘for a disgorgement fund de21 scribed in subsection (a)’’ and inserting ‘‘for a 

22 disgorgement fund or other fund described in 

23 subsection (a)’’; and 

24 (B) striking ‘‘in the disgorgement fund’’ 

25 and inserting ‘‘in such fund’’; and 

26 (3) by striking subsection (e). 


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1 SEC. 7606. EXEMPTION FOR NONACCELERATED FILERS. 

2 (a) EXEMPTION.—Section 404 of the Sarbanes-Oxley 

3 Act of 2002 is amended by adding at the end the fol4 lowing: 

5 ‘‘(c) EXEMPTION FOR SMALLER ISSUERS.—Sub6 section (b) shall not apply with respect to any audit report 

7 prepared for an issuer that is not an accelerated filer with8 in the meaning Rule 12b–2 of the Commission (17 CFR 

9 240.12b–2).’’. 

10 (b) STUDY.—The Securities and Exchange Commis11 sion shall conduct a study to determine how the Commis12 sion could reduce the burden of complying with section 

13 404(b) of the Sarbanes-Oxley Act of 2002 for companies 

14 whose market capitalization is between $75,000,000 and 

15 $250,000,000 for the relevant reporting period while 

16 maintaining investor protections for such companies. The 

17 study shall also consider whether any such methods of re18 ducing the compliance burden or a complete exemption for 

19 such companies from compliance with such section would 

20 encourage companies to list on exchanges in the United 

21 States in their initial public offerings. Not later than 9 

22 months after the date of the enactment of this subtitle, 

23 the Commission shall transmit a report of such study to 

24 Congress. 


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1 SEC. 7607. WHISTLEBLOWER PROTECTION AGAINST RETAL2 IATION BY A SUBSIDIARY OF AN ISSUER. 

3 Section 1514A(a) of title 18, United States Code, is 

4 amended by inserting ‘‘including any subsidiary or affil5 iate whose financial information is included in the consoli6 dated financial statements of such company,’’ after ‘‘(15 

7 U.S.C. 78o(d)),’’. 

8 SEC. 7608. CONGRESSIONAL ACCESS TO INFORMATION. 

9 Section 101 of the Sarbanes-Oxley Act of 2002 is 

10 amended by adding at the end the following: 

11 ‘‘(i) CONGRESSIONAL ACCESS TO INFORMATION.— 

12 Nothing in this section shall prevent the Board from re13 sponding to requests for reports from the Committee’s 

14 specified under subsection (h) about the activities or pro15 grams of the Board, provided that any confidential infor16 mation contained therein shall be subject to the provisions 

17 of section 105(b)(5).’’. 

18 SEC. 7609. CREATION OF OMBUDSMAN FOR THE PCAOB. 

19 (a) OMBUDSMAN.—Title I of the Sarbanes-Oxley Act 

20 of 2002 (15 U.S.C. 7211 et seq.), as amended by section 

21 7601(a)(1), is further amended by adding at the end the 

22 following new section: 

23 ‘‘SEC. 111. OMBUDSMAN. 

24 ‘‘(a) ESTABLISHMENT REQUIRED.—Not later than 

25 180 days after the date of enactment of the Investor Pro26 tection Act, the Board shall appoint an ombudsman for 


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1 the Board. The Ombudsman shall report directly to the 

2 Chairman. 

3 ‘‘(b) DUTIES OF OMBUDSMAN.—The ombudsman ap4 pointed in accordance with subsection (a) for the Board 

5 shall— 

6 ‘‘(1) act as a liaison between the Board and— 

7 ‘‘(A) any registered public accounting firm 

8 or issuer with respect to issues or disputes con9 cerning the preparation or issuance of any audit 

10 report with respect to that issuer; and 

11 ‘‘(B) any affected registered public ac12 counting firm or issuer with respect to— 

13 ‘‘(i) any problem such firm or issuer 

14 may have in dealing with the Board result15 ing from the regulatory activities of the 

16 Board, particularly with regard to the im17 plementation of section 404; and 

18 ‘‘(ii) issues caused by the relationships 

19 of registered public accounting firms and 

20 issuers generally; 

21 ‘‘(2) assure that safeguards exist to encourage 

22 complainants to come forward and to preserve con23 fidentiality; and 


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1 ‘‘(3) carry out such activities, and any other ac2 tivities assigned by the Board, in accordance with 

3 guidelines prescribed by the Board.’’. 

4 (b) CONFORMING AMENDMENT.—The table of sec5 tions in section 1(b) of such Act is amended, by inserting 

6 after the item relating to section 110 (as added by section 

7 601(a)(2)) the following new item: 

‘‘Sec. 111. Ombudsman.’’. 

8 SEC. 7610. AUDITING OVERSIGHT BOARD. 

9 The Sarbanes-Oxley Act of 2002 is amended— 

10 (1) in section 2(a)(5), by striking ‘‘Public Com11 pany Accounting Oversight Board’’ and inserting 

12 ‘‘Auditing Oversight Board’’; 

13 (2) in section 101(a), by striking ‘‘Public Com14 pany Accounting Oversight Board’’ and inserting 

15 ‘‘Auditing Oversight Board’’; and 

16 (3) in the heading of title I, by striking ‘‘PUB17 LIC COMPANY ACCOUNTING OVER18 SIGHT BOARD’’ and inserting ‘‘AUDITING 

19 OVERSIGHT BOARD’’. 

20 PART 7—SENIOR INVESTMENT PROTECTION 

21 SEC. 7701. FINDINGS. 

22 Congress finds that— 

23 (1) many seniors are targeted by salespersons 

24 and advisers using misleading certifications and pro25 fessional designations; 


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1 (2) many certifications and professional des2 ignations used by salespersons and advisers rep3 resent limited training or expertise, and may in fact 

4 be of no value with respect to advising seniors on fi5 nancial and estate planning matters, and far too 

6 often, such designations are obtained simply by at7 tending a weekend seminar and passing an open 

8 book, multiple choice test; 

9 (3) many seniors have lost their life savings be10 cause salespersons and advisers holding a misleading 

11 designation have steered them toward products that 

12 were unsuitable for them, given their retirement 

13 needs and life expectancies; 

14 (4) seniors have a right to clearly know whether 

15 they are working with a qualified adviser who under16 stands the products and is working in their best in17 terest or a self-interested salesperson or adviser ad18 vocating particular products; and 

19 (5) many existing State laws and enforcement 

20 measures addressing the use of certifications, profes21 sional designations, and suitability standards in sell22 ing financial products to seniors are inadequate to 

23 protect senior investors from salespersons and advis24 ers using such designations. 


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1 SEC. 7702. DEFINITIONS. 

2 For purposes of this part: 

3 (1) MISLEADING DESIGNATION.—The term 

4 ‘‘misleading designation’’— 

5 (A) means the use of a purported certifi6 cation, professional designation, or other cre7 dential, that indicates or implies that a sales8 person or adviser has special certification or 

9 training in advising or servicing seniors; and 

10 (B) does not include any legitimate certifi11 cation, professional designation, license, or 

12 other credential, if— 

13 (i) it has been offered by an academic 

14 institution having regional accreditation; or 

15 (ii) it meets the standards for certifi16 cations, licenses, and professional designa17 tions outlined by the North American Se18 curities Administrators Association (in this 

19 part referred to as the ‘‘NASAA’’) Model 

20 Rule on the Use of Senior-Specific Certifi21 cations and Professional Designations, as 

22 in effect on the date of the enactment of 

23 this subtitle, or any successor thereto, or it 

24 was issued by or obtained from any State. 

25 (2) FINANCIAL PRODUCT.—The term ‘‘financial 

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1 cluding insurance products which pay a return, 

2 whether fixed or variable), and bank and loan prod3 ucts. 

4 (3) MISLEADING OR FRAUDULENT MAR5 KETING.—The term ‘‘misleading or fraudulent mar6 keting’’ means the use of a misleading designation 

7 when selling to or advising a senior about the sale 

8 of a financial product. 

9 (4) SENIOR.—The term ‘‘senior’’ means any in10 dividual who has attained the age of 62 years or 

11 more. 

12 (5) STATE.—The term ‘‘State’’ means each of 

13 the 50 States, the District of Columbia, and the un14 incorporated territories of Puerto Rico and the U.S. 

15 Virgin Islands. 

16 SEC. 7703. GRANTS TO STATES FOR ENHANCED PROTEC17 TION OF SENIORS FROM BEING MISLED BY 

18 FALSE DESIGNATIONS. 

19 (a) GRANT PROGRAM.—The Securities and Exchange 

20 Commission (in this part referred to as the ‘‘Commis21 sion’’)— 

22 (1) shall establish a program in accordance with 

23 this part to provide grants to States— 

24 (A) to investigate and prosecute misleading 

25 and fraudulent marketing practices; or 


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1 (B) to develop educational materials and 

2 training aimed at reducing misleading and 

3 fraudulent marketing of financial products to4 ward seniors; and 

5 (2) may establish such performance objectives, 

6 reporting requirements, and application procedures 

7 for States and State agencies receiving grants under 

8 this part as the Commission determines are nec9 essary to carry out and assess the effectiveness of 

10 the program under this part. 

11 (b) USE OF GRANT AMOUNTS.—A grant under this 

12 part may be used (including through subgrants) by the 

13 State or the appropriate State agency designated by the 

14 State— 

15 (1) to fund additional staff to identify, inves16 tigate, and prosecute (through civil, administrative, 

17 or criminal enforcement actions) cases involving mis18 leading or fraudulent marketing of financial prod19 ucts to seniors; 

20 (2) to fund technology, equipment, and training 

21 for regulators, prosecutors, and law enforcement in 

22 order to identify salespersons and advisers who tar23 get seniors through the use of misleading designa24 tions; 


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1 (3) to fund technology, equipment, and training 

2 for prosecutors to increase the successful prosecution 

3 of those targeting seniors with the use of misleading 

4 designations; 

5 (4) to provide educational materials and train6 ing to regulators on the appropriateness of the use 

7 of designations by salespersons and advisers of fi8 nancial products; 

9 (5) to provide educational materials and train10 ing to seniors to increase their awareness and under11 standing of designations; and 

12 (6) to develop comprehensive plans to combat 

13 misleading or fraudulent marketing of financial 

14 products to seniors. 

15 (c) GRANT REQUIREMENTS.— 

16 (1) MAXIMUM.—The amount of a grant under 

17 this part may not exceed $1,000,000 per fiscal year 

18 per State, if all requirements of paragraphs (2), (3), 

19 (4), and (5) are met. Such amount shall be limited 

20 to $250,000 per fiscal year per State in any case in 

21 which the State meets the requirements of— 

22 (A) paragraphs (2) and (3), but not each 

23 of paragraphs (4) and (5); or 

24 (B) paragraphs (4) and (5), but not each 

25 of paragraphs (2) and (3). 


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1 (2) STANDARD DESIGNATION RULES FOR SECU2 RITIES.—A State shall have adopted rules on the ap3 propriate use of designations in the offer or sale of 

4 securities or investment advice, which shall meet or 

5 exceed the minimum requirements of the NASAA 

6 Model Rule on the Use of Senior-Specific Certifi7 cations and Professional Designations, as in effect 

8 on the date of the enactment of this subtitle, or any 

9 successor thereto. 

10 (3) SUITABILITY RULES FOR SECURITIES.—A 

11 State shall have adopted standard rules on the suit12 ability requirements in the sale of securities, which 

13 shall, to the extent practicable, conform to the min14 imum requirements on suitability imposed by self15 regulatory organization rules under the securities 

16 laws (as defined in section 3 of the Securities Ex17 change Act of 1934). 

18 (4) APPLICATION OF FIDUCIARY DUTY FOR

19 PERSONALIZED INVESTMENT ADVICE ABOUT SECURI20 TIES.—Nothing in this section shall diminish in any 

21 manner nor supersede the standard of conduct appli22 cable to all brokers, dealers and investment advisers 

23 providing personalized investment advice about secu24 rities as set forth in section 7103 of this Act. 


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1 (5) STANDARD DESIGNATION RULES FOR IN2 SURANCE PRODUCTS.—A State shall have adopted 

3 standard rules on the appropriate use of designa4 tions in the sale of insurance products, which shall 

5 meet or exceed minimum requirements of the Na6 tional Association of Insurance Commissioners 

7 Model Regulation on the Use of Senior-Specific Cer8 tifications and Professional Designations in the Sale 

9 of Life Insurance and Annuities, as in effect on the 

10 date of the enactment of this subtitle, or any suc11 cessor thereto. 

12 (6) SUITABILITY AND SUPERVISION RULES FOR

13 ANNUITY PRODUCTS.—A State shall have adopted 

14 rules that govern suitability requirements in the sale 

15 of annuities which shall meet or exceed the min16 imum requirements established by the National As17 sociation of Insurance Commissioners Suitability in 

18 Annuity Transactions Model Regulation in effect on 

19 the date of the enactment of this Act, or any suc20 cessor thereto. 

21 SEC. 7704. APPLICATIONS. 

22 To be eligible for a grant under this part, the State 

23 or appropriate State agency shall submit to the Commis24 sion a proposal to use the grant money to protect seniors 

25 from misleading or fraudulent marketing techniques in the 


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1 offer and sale of financial products, which application 

2 shall— 

3 (1) identify the scope of the problem; 

4 (2) describe how the proposed program will help 

5 to protect seniors from misleading or fraudulent 

6 marketing in the sale of financial products, includ7 ing, at a minimum— 

8 (A) by proactively identifying seniors who 

9 are victims of misleading and fraudulent mar10 keting in the offer and sale of financial prod11 ucts; 

12 (B) how the proposed program can assist 

13 in the investigation and prosecution of those 

14 using misleading or fraudulent marketing in the 

15 offer and sale of financial products to seniors; 

16 and 

17 (C) how the proposed program can help 

18 discourage and reduce future cases of mis19 leading or fraudulent marketing in the offer 

20 and sale of financial products to seniors; and 

21 (3) describe how the proposed program is to be 

22 integrated with other existing State efforts. 


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1 SEC. 7705. LENGTH OF PARTICIPATION. 

2 A State receiving a grant under this part shall be 

3 provided assistance funds for a period of 3 years, after 

4 which the State may reapply for additional funding. 

5 SEC. 7706. AUTHORIZATION OF APPROPRIATIONS. 

6 There are authorized to be appropriated to carry out 

7 this part, $16,000,000 for each of the fiscal years 2011 

8 through 2015. 

9 PART 8—REGISTRATION OF MUNICIPAL 

10 FINANCIAL ADVISORS 

11 SEC. 7801. MUNICIPAL FINANCIAL ADVISER REGISTRATION 

12 REQUIREMENT. 

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

14 1934 (as amended by section 3204) is amended by insert15 ing after section 15F (15 U.S.C. 78o–7) the following new 

16 section: 

17 ‘‘SEC. 15G. MUNICIPAL FINANCIAL ADVISER REGISTRATION 

18 REQUIREMENT. 

19 ‘‘(a)(1)(A) It shall be unlawful for any person to 

20 make use of the mails or any means or instrumentality 

21 of interstate commerce to act as a municipal financial ad22 viser unless such person is registered as a municipal finan23 cial adviser in accordance with subsection (b). 

24 ‘‘(B) Subparagraph (A) shall not apply to a natural 

25 person associated with a municipal financial adviser, as 


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1 long as such adviser is registered in accordance with sub2 section (b) and is not a natural person. 

3 ‘‘(2) The Commission, by rule or order, as it deems 

4 consistent with the public interest and the protection of 

5 investors, may conditionally or unconditionally exempt 

6 from paragraph (1) of this section any municipal financial 

7 adviser or class of municipal financial advisers specified 

8 in such rule or order. 

9 ‘‘(b)(1) A municipal financial adviser may be reg10 istered by filing with the Commission an application for 

11 registration in such form and containing such information 

12 and documents concerning such municipal financial ad13 viser and any persons associated with such municipal fi14 nancial adviser as the Commission, by rule, may prescribe 

15 as necessary or appropriate in the public interest or for 

16 the protection of investors. Within 45 days of the date of 

17 the filing of such application (or within such longer period 

18 as to which the applicant consents), the Commission 

19 shall— 

20 ‘‘(A) by order grant registration; or 

21 ‘‘(B) institute proceedings to determine whether reg22 istration should be denied. Such proceedings shall include 

23 notice of the grounds for denial under consideration and 

24 opportunity for hearing and shall be concluded within 120 

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1 istration. At the conclusion of such proceedings, the Com2 mission, by order, shall grant or deny such registration. 

3 The Commission may extend the time for conclusion of 

4 such proceedings for up to 90 days if it finds good cause 

5 for such extension and publishes its reasons for so finding, 

6 or for such longer period as to which the applicant con7 sents. 

8 The Commission shall grant such registration if 

9 the Commission finds that the requirements of 

10 this section are satisfied. The Commission shall 

11 deny such registration if it does not make such 

12 a finding or if it finds that if the applicant were 

13 so registered, its registration would be subject 

14 to suspension or revocation under paragraph 

15 (4). 

16 ‘‘(2) An application for registration of a municipal 

17 financial adviser to be formed or organized may be made 

18 by a municipal financial adviser to which the municipal 

19 financial adviser to be formed or organized is to be the 

20 successor. Such application, in such form as the Commis21 sion, by rule, may prescribe, shall contain such informa22 tion and documents concerning the applicant, the suc23 cessor, and any persons associated with the applicant or 

24 the successor, as the Commission, by rule, may prescribe 

25 as necessary or appropriate in the public interest or for 


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1 the protection of investors. The grant or denial of registra2 tion to such an applicant shall be in accordance with the 

3 procedures set forth in paragraph (1) of this subsection. 

4 If the Commission grants such registration, the registra5 tion shall terminate on the 45th day after the effective 

6 date thereof, unless prior thereto the successor shall, in 

7 accordance with such rules and regulations as the Com8 mission may prescribe, adopt the application for registra9 tion as its own. 

10 ‘‘(3) Any provision of this title (other than section 

11 5 and subsection (a) of this section) which prohibits any 

12 act, practice, or course of business if the mails or any 

13 means or instrumentality of interstate commerce is used 

14 in connection therewith shall also prohibit any such act, 

15 practice, or course of business by any registered municipal 

16 financial adviser or any person acting on behalf of such 

17 a municipal financial adviser, irrespective of any use of 

18 the mails or any means or instrumentality of interstate 

19 commerce in connection therewith. 

20 ‘‘(4) The Commission, by order, shall censure, place 

21 limitations on the activities, functions, or operations of, 

22 suspend for a period not exceeding 12 months, or revoke 

23 the registration of any municipal financial adviser if it 

24 finds, on the record after notice and opportunity for hear25 ing, that such censure, placing of limitations, suspension, 


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1 or revocation is in the public interest and that such munic2 ipal financial adviser, whether prior or subsequent to be3 coming such, or any person associated with such municipal 

4 financial adviser, whether prior or subsequent to becoming 

5 so associated— 

6 ‘‘(A) has willfully made or caused to be made 

7 in any application for registration or report required 

8 to be filed with the Commission or with any other 

9 appropriate regulatory agency under this title, or in 

10 any proceeding before the Commission with respect 

11 to registration, any statement which was at the time 

12 and in the light of the circumstances under which it 

13 was made false or misleading with respect to any 

14 material fact, or has omitted to state in any such 

15 application or report any material fact which is re16 quired to be stated therein; 

17 ‘‘(B) has been convicted within 10 years pre18 ceding the filing of any application for registration 

19 or at any time thereafter of any felony or mis20 demeanor or of a substantially equivalent crime by 

21 a foreign court of competent jurisdiction which the 

22 Commission finds— 

23 ‘‘(i) involves the purchase or sale of any 

24 security, the taking of a false oath, the making 

25 of a false report, bribery, perjury, burglary, any 


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1 substantially equivalent activity however de2 nominated by the laws of the relevant foreign 

3 government, or conspiracy to commit any such 

4 offense; 

5 ‘‘(ii) arises out of the conduct of the busi6 ness of a municipal financial adviser, broker, 

7 dealer, municipal securities dealer, government 

8 securities broker, government securities dealer, 

9 investment adviser, bank, insurance company, 

10 fiduciary, transfer agent, nationally recognized 

11 statistical rating organization, foreign person 

12 performing a function substantially equivalent 

13 to any of the above, or entity or person required 

14 to be registered under the Commodity Ex15 change Act (7 U.S.C. 1 et seq.) or any substan16 tially equivalent foreign statute or regulation; 

17 ‘‘(iii) involves the larceny, theft, robbery, 

18 extortion, forgery, counterfeiting, fraudulent 

19 concealment, embezzlement, fraudulent conver20 sion, or misappropriation of funds, or securities, 

21 or substantially equivalent activity however de22 nominated by the laws of the relevant foreign 

23 government; or 

24 ‘‘(iv) involves the violation of section 152, 

25 1341, 1342, or 1343 or chapter 25 or 47 of 


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1 title 18, United States Code, or a violation of 

2 a substantially equivalent foreign statute; 

3 ‘‘(C) is permanently or temporarily enjoined by 

4 order, judgment, or decree of any court of competent 

5 jurisdiction from acting as a municipal financial ad6 viser, investment adviser, underwriter, broker, deal7 er, municipal securities dealer, government securities 

8 broker, government securities dealer, transfer agent, 

9 nationally recognized statistical rating organization, 

10 foreign person performing a function substantially 

11 equivalent to any of the above, or entity or person 

12 required to be registered under the Commodity Ex13 change Act or any substantially equivalent foreign 

14 statute or regulation, or as an affiliated person or 

15 employee of any investment company, bank, insur16 ance company, foreign entity substantially equivalent 

17 to any of the above, or entity or person required to 

18 be registered under the Commodity Exchange Act or 

19 any substantially equivalent foreign statute or regu20 lation or from engaging in or continuing any con21 duct or practice in connection with any such activity, 

22 or in connection with the purchase or sale of any se23 curity; 

24 ‘‘(D) has willfully violated any provision of the 

25 Securities Act of 1933, the Investment Advisers Act 


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1 of 1940, the Investment Company Act of 1940, the 

2 Commodity Exchange Act, this title, the rules or 

3 regulations under any of such statutes, or the rules 

4 of the Municipal Securities Rulemaking Board, or is 

5 unable to comply with any such provision; 

6 ‘‘(E) has willfully aided, abetted, counseled, 

7 commanded, induced, or procured the violation by 

8 any other person of any provision of the Securities 

9 Act of 1933, the Investment Advisers Act of 1940, 

10 the Investment Company Act of 1940, the Com11 modity Exchange Act, this title, the rules or regula12 tions under any of such statutes, or the rules of the 

13 Municipal Securities Rulemaking Board, or has 

14 failed reasonably to supervise, with a view to pre15 venting violations of the provisions of such statutes, 

16 rules, and regulations, another person who commits 

17 such a violation, if such other person is subject to 

18 his supervision. For the purposes of this subpara19 graph, no person shall be deemed to have failed rea20 sonably to supervise any other person, if— 

21 ‘‘(i) there have been established proce22 dures, and a system for applying such proce23 dures, which would reasonably be expected to 

24 prevent and detect, insofar as practicable, any 

25 such violation by such other person; and 


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1 ‘‘(ii) such person has reasonably dis2 charged the duties and obligations incumbent 

3 upon him by reason of such procedures and sys4 tem without reasonable cause to believe that 

5 such procedures and system were not being 

6 complied with; 

7 ‘‘(F) is subject to any order of the Commission 

8 barring or suspending the right of the person to be 

9 associated with a municipal financial adviser; 

10 ‘‘(G) has been found by a foreign financial reg11 ulatory authority to have— 

12 ‘‘(i) made or caused to be made in any ap13 plication for registration or report required to 

14 be filed with a foreign financial regulatory au15 thority, or in any proceeding before a foreign fi16 nancial regulatory authority with respect to reg17 istration, any statement that was at the time 

18 and in the light of the circumstances under 

19 which it was made false or misleading with re20 spect to any material fact, or has omitted to 

21 state in any application or report to the foreign 

22 financial regulatory authority any material fact 

23 that is required to be stated therein; 

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1 tracts of sale of a commodity for future deliv2 ery, traded on or subject to the rules of a con3 tract market or any board of trade; or 

4 ‘‘(iii) aided, abetted, counseled, com5 manded, induced, or procured the violation by 

6 any person of any provision of any statutory 

7 provisions enacted by a foreign government, or 

8 rules or regulations thereunder, empowering a 

9 foreign financial regulatory authority regarding 

10 transactions in securities, or contracts of sale of 

11 a commodity for future delivery, traded on or 

12 subject to the rules of a contract market or any 

13 board of trade, or has been found, by a foreign 

14 financial regulatory authority, to have failed 

15 reasonably to supervise, with a view to pre16 venting violations of such statutory provisions, 

17 rules, and regulations, another person who com18 mits such a violation, if such other person is 

19 subject to his supervision; or 

20 ‘‘(H) is subject to any final order of a State se21 curities commission (or any agency or officer per22 forming like functions), State authority that super23 vises or examines banks, savings associations, or 

24 credit unions, State insurance commission (or any 

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1 propriate Federal banking agency (as defined in sec2 tion 3 of the Federal Deposit Insurance Act (12 

3 U.S.C. 1813(q))), or the National Credit Union Ad4 ministration, that— 

5 ‘‘(i) bars such person from association with 

6 an entity regulated by such commission, author7 ity, agency, or officer, or from engaging in the 

8 business of securities, insurance, banking, sav9 ings association activities, or credit union activi10 ties; or 

11 ‘‘(ii) constitutes a final order based on vio12 lations of any laws or regulations that prohibit 

13 fraudulent, manipulative, or deceptive conduct. 

14 ‘‘(5) Pending final determination whether any reg15 istration under this subsection shall be revoked, the Com16 mission, by order, may suspend such registration, if such 

17 suspension appears to the Commission, after notice and 

18 opportunity for hearing, to be necessary or appropriate in 

19 the public interest or for the protection of investors. Any 

20 registered municipal financial adviser may, upon such 

21 terms and conditions as the Commission deems necessary 

22 or appropriate in the public interest or for the protection 

23 of investors, withdraw from registration by filing a written 

24 notice of withdrawal with the Commission. If the Commis25 sion finds that any registered municipal financial adviser 


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1 is no longer in existence or has ceased to do business as 

2 a municipal financial adviser, the Commission, by order, 

3 shall cancel the registration of such municipal financial 

4 adviser. 

5 ‘‘(6)(A) With respect to any person who is associated, 

6 who is seeking to become associated, or, at the time of 

7 the alleged misconduct, who was associated or was seeking 

8 to become associated with a municipal financial adviser, 

9 the Commission, by order, shall censure, place limitations 

10 on the activities or functions of such person, or suspend 

11 for a period not exceeding 12 months, or bar such person 

12 from being associated with a broker, dealer, investment 

13 adviser, municipal securities dealer, transfer agent, na14 tionally recognized statistical rating organization, or mu15 nicipal financial adviser, if the Commission finds, on the 

16 record after notice and opportunity for a hearing, that 

17 such censure, placing of limitations, suspension, or bar is 

18 in the public interest and that such person— 

19 ‘‘(i) has committed or omitted any act, or is 

20 subject to an order or finding, enumerated in sub21 paragraph (A), (D), (E), (G), or (H) of paragraph 

22 (4) of this subsection; 

23 ‘‘(ii) has been convicted of any offense specified 

24 in subparagraph (B) of such paragraph (4) within 


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1 10 years of the commencement of the proceedings 

2 under this paragraph; or 

3 ‘‘(iii) is enjoined from any action, conduct, or 

4 practice specified in subparagraph (C) of such para5 graph (4). 

6 ‘‘(B) It shall be unlawful— 

7 ‘‘(i) for any person as to whom an order under 

8 subparagraph (A) is in effect, without the consent of 

9 the Commission, willfully to become, or to be, associ10 ated with a municipal financial adviser in contraven11 tion of such order; or 

12 ‘‘(ii) for any municipal financial adviser to per13 mit such a person, without the consent of the Com14 mission, to become or remain, a person associated 

15 with the municipal financial adviser in contravention 

16 of such order, if such municipal financial adviser 

17 knew, or in the exercise of reasonable care should 

18 have known, of such order. 

19 ‘‘(7) No registered municipal financial adviser shall 

20 act as such unless it meets such standards of operational 

21 capability and such municipal financial adviser and all 

22 natural persons associated with such municipal financial 

23 adviser meet such standards of training, experience, com24 petence, and such other qualifications as the Commission 

25 finds necessary or appropriate in the public interest or for 


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1 the protection of investors. The Commission shall establish 

2 such standards by rules and regulations, which may— 

3 ‘‘(A) specify that all or any portion of such 

4 standards shall be applicable to any class of munic5 ipal financial advisers and persons associated with 

6 municipal financial advisers; 

7 ‘‘(B) require persons in any such class to pass 

8 tests prescribed in accordance with such rules and 

9 regulations, which tests shall, with respect to any 

10 class of partners, officers, or supervisory employees 

11 (which latter term may be defined by the Commis12 sion’s rules and regulations) engaged in the manage13 ment of the municipal financial adviser, include 

14 questions relating to bookkeeping, accounting, super15 vision of employees, maintenance of records, and 

16 other appropriate matters; and 

17 ‘‘(C) provide that persons in any such class 

18 other than municipal financial advisers and partners, 

19 officers, and supervisory employees of municipal fi20 nancial advisers, may be qualified solely on the basis 

21 of compliance with such standards of training and 

22 such other qualifications as the Commission finds 

23 appropriate. 

24 The Commission, by rule, may prescribe reasonable fees 

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1 graph, including, but not limited to, fees for any test ad2 ministered by it or under its direction. 

3 ‘‘(c)(1)(A) No municipal financial adviser shall make 

4 use of the mails or any means or instrumentality of inter5 state commerce in connection with which such municipal 

6 financial adviser engages in any fraudulent, deceptive, or 

7 manipulative act or practice or violates such rules and reg8 ulations regarding conflicts of interest or fair practices, 

9 including but not limited to rules and regulations related 

10 to political contributions, as the Commission shall pre11 scribe in the public interest or for the protection of inves12 tors or to maintain fair and orderly markets. 

13 ‘‘(B) The Commission shall, for the purposes of this 

14 paragraph as the Commission finds necessary or appro15 priate in the public interest or for the protection of inves16 tors, by rules and regulations define, and prescribe means 

17 reasonably designed to prevent, such acts and practices 

18 as are fraudulent, deceptive, or manipulative. 

19 ‘‘(2) If the Commission finds, after notice and oppor20 tunity for a hearing, that any person subject to the provi21 sions of this section or any rule or regulation thereunder 

22 has failed to comply with any such provision, rule, or regu23 lation in any material respect, the Commission may pub24 lish its findings and issue an order requiring such person, 

25 and any person who was a cause of the failure to comply 


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1 due to an act or omission the person knew or should have 

2 known would contribute to the failure to comply, to com3 ply, or to take steps to effect compliance, with such provi4 sion or such rule or regulation thereunder upon such 

5 terms and conditions and within such time as the Commis6 sion may specify in such order. 

7 ‘‘(d) Every registered municipal financial adviser 

8 shall establish, maintain, and enforce written policies and 

9 procedures reasonably designed, taking into consideration 

10 the nature of such municipal financial adviser’s business, 

11 to prevent the misuse in violation of this title, or the rules 

12 or regulations thereunder, of material, nonpublic informa13 tion by such municipal financial adviser or any person as14 sociated with such municipal financial adviser. The Com15 mission, as it deems necessary or appropriate in the public 

16 interest or for the protection of investors, shall adopt rules 

17 or regulations to require specific policies or procedures 

18 reasonably designed to prevent misuse in violation of this 

19 title (or the rules or regulations thereunder) of material, 

20 nonpublic information. 

21 ‘‘(e) A municipal financial adviser and any person as22 sociated with such municipal financial adviser shall be 

23 deemed to have a fiduciary duty to any municipal securi24 ties issuer for whom such municipal financial adviser acts 

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1 viser may not engage in any act, practice, or course of 

2 business which is not consistent with a municipal financial 

3 adviser’s fiduciary duty. The Commission shall, for the 

4 purposes of this paragraph, by rules and regulations de5 fine, and prescribe means reasonably designed to prevent, 

6 such acts, practices, and courses of business as are not 

7 consistent with a municipal financial adviser’s fiduciary 

8 duty to its clients.’’. 

9 (b) DEFINITION.—Section 3(a) of the Securities Ex10 change Act of 1934 (15 U.S.C. 78c(a)) (as amended by 

11 section 3201(6)) is amended by adding at the end the fol12 lowing new paragraphs: 

13 ‘‘(78) MUNICIPAL FINANCIAL ADVISER.— 

14 ‘‘(A) The term ‘municipal financial adviser’ 

15 means a person who, for compensation, engages 

16 in the business of— 

17 ‘‘(i) providing advice to a municipal 

18 securities issuer with respect to— 

19 ‘‘(I) the issuance or proposed 

20 issuance of securities, including any 

21 remarketing of municipal securities 

22 directly or indirectly by or on behalf 

23 of a municipal securities issuer; 


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1 ‘‘(II) the investment of proceeds 

2 from securities issued by such munic3 ipal securities issuer; 

4 ‘‘(III) the hedging of any risks 

5 associated with subclause (I) or (II), 

6 including advice as to swap agree7 ments (as defined in section 206A of 

8 the Gramm-Leach-Bliley Act regard9 less of whether the counterparties 

10 constitute eligible contract partici11 pants); or 

12 ‘‘(IV) preparation of disclosure 

13 documents in connection with the 

14 issuance, proposed issuance, or pre15 vious issuance of securities issued by 

16 a municipal securities issuer, includ17 ing, without limitation, official state18 ments and documents prepared in 

19 connection with a written agreement 

20 or contract for the benefit of holders 

21 of such securities described in section 

22 240.15c2–12 of title 17, Code of Fed23 eral Regulations; 

24 ‘‘(ii) assisting a municipal securities 

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1 teed investment contracts or other invest2 ment products; or 

3 ‘‘(iii) assisting any municipal securi4 ties issuer in the primary offering of secu5 rities not involving a public offering. 

6 ‘‘(B) Such term does not include— 

7 ‘‘(i) an attorney, if the attorney is of8 fering advice or providing services that are 

9 of a traditional legal nature; 

10 ‘‘(ii) a nationally recognized statistical 

11 rating organization to the extent it is in12 volved in the process of developing credit 

13 ratings; 

14 ‘‘(iii) a registered broker-dealer when 

15 acting as an underwriter, as such term is 

16 defined in section 2(a)(11) of the Securi17 ties Act of 1933 (15 U.S.C. 77b(a)(11)); 

18 ‘‘(iv) a State or any political subdivi19 sion thereof; or 

20 ‘‘(v) the independent accountant that 

21 audits the financial statements of the mu22 nicipal securities issuer. 

23 ‘‘(79) MUNICIPAL SECURITIES ISSUER.—The 

24 term ‘municipal securities issuer’ means— 


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1 ‘‘(A) any entity that has the ability to 

2 issue a security the interest on which is exclud3 able from gross income under section 103 of the 

4 Internal Revenue Code of 1986 and the regula5 tions thereunder; or 

6 ‘‘(B) any person who receives the proceeds 

7 generated from the issuance of municipal secu8 rities. 

9 ‘‘(80) PERSON ASSOCIATED WITH A MUNICIPAL

10 FINANCIAL ADVISER; ASSOCIATED PERSON OF A MU11 NICIPAL FINANCIAL ADVISER.—The term ‘person as12 sociated with a municipal financial adviser’ or ‘asso13 ciated person of a municipal financial adviser’ means 

14 any partner, officer, director, or branch manager of 

15 such municipal financial adviser (or any person oc16 cupying a similar status or performing similar func17 tions), any person directly or indirectly controlling, 

18 controlled by, or under common control with such 

19 municipal financial adviser, or any employee of such 

20 municipal financial adviser, except that any person 

21 associated with a municipal financial adviser whose 

22 functions are solely clerical or ministerial shall not 

23 be included in the meaning of such term for pur24 poses of section 15G(b) (other than paragraph (6) 

25 thereof).’’. 


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1 SEC. 7802. CONFORMING AMENDMENTS. 

2 (a) SECURITIES EXCHANGE ACT OF 1934 .—The Se3 curities Exchange Act of 1934 is amended— 

4 (1) in section 15(b)(4)(B)(ii) (15 U.S.C. 

5 78o(b)(4)(B)(ii)), by inserting ‘‘municipal finance 

6 adviser,’’ after ‘‘nationally recognized statistical rat7 ing organization,’’; 

8 (2) in section 15(b)(4)(C) (15 U.S.C. 

9 78o(b)(4)(C)), by inserting ‘‘municipal finance ad10 viser,’’ after ‘‘nationally recognized statistical rating 

11 organization,’’; and 

12 (3) in section 17(a)(1) (15 U.S.C. 78q(a)(1)), 

13 by inserting ‘‘registered municipal financial adviser,’’ 

14 after ‘‘nationally recognized statistical rating organi15 zation,’’. 

16 (b) INVESTMENT COMPANY ACT OF 1940.—The In17 vestment Company Act of 1940 is amended— 

18 (1) in section 2(a) (15 U.S.C. 80a–2(a)), by in19 serting at the end the following new paragraph: 

20 ‘‘(54) The term ‘municipal finance adviser’ has 

21 the same meaning as in section 3 of the Securities 

22 Exchange Act of 1934.’’; 

23 (2) in section 9(a)(1) (15 U.S.C. 80a–9(a)(1)), 

24 by inserting ‘‘municipal finance adviser,’’ after 

25 ‘‘credit rating agency,’’; and 


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1 (3) in section 9(a)(2) (15 U.S.C. 80a–9(a)(2)), 

2 by inserting ‘‘municipal finance adviser,’’ after 

3 ‘‘credit rating agency,’’. 

4 (c) INVESTMENT ADVISERS ACT OF 1940.—The In5 vestment Advisers Act of 1940 is amended— 

6 (1) in section 202(a) (15 U.S.C. 80b–2(a)), by 

7 inserting at the end the following new paragraph: 

8 ‘‘(31) The term ‘municipal finance adviser’ has 

9 the same meaning as in section 3 of the Securities 

10 Exchange Act of 1934.’’; 

11 (2) in section 203(e)(2)(B) (15 U.S.C. 80b– 

12 3(e)(2)(B)), by inserting ‘‘municipal finance ad13 viser,’’ after ‘‘credit rating agency,’’; and 

14 (3) in section 203(e)(4) (15 U.S.C. 80b– 

15 3(e)(4)) is amended by inserting ‘‘municipal finance 

16 adviser,’’ after ‘‘credit rating agency,’’. 

17 SEC. 7803. EFFECTIVE DATES. 

18 (a) IN GENERAL.—The amendments made by this 

19 part shall take effect 30 days after the date of the enact20 ment of this subtitle. 

21 (b) EFFECTIVE DATE AND REQUIREMENTS FOR

22 REGULATIONS.—Notwithstanding subsection (a), the Se23 curities and Exchange Commission shall, within 120 days 

24 after the date of the enactment of this subtitle, publish 

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1 tially required to implement this part, and shall take final 

2 action with respect to such regulations not later than 270 

3 days after the date of enactment of this subtitle. 

4 (c) REGISTRATION DATE.—No person may continue 

5 to act as a municipal financial adviser, as such term is 

6 defined in section 3(a)(65) of the Securities Exchange Act 

7 of 1934 (as added by this part), after 30 days after the 

8 date the regulations described in subsection (b) become 

9 effective unless such person has been registered as re10 quired by the amendment made by section 7701 of this 

11 part. 

12 TITLE VI—FEDERAL INSURANCE 

13 OFFICE 

14 SEC. 8001. SHORT TITLE. 

15 This title may be cited as the ‘‘Federal Insurance Of16 fice Act of 2009’’. 

17 SEC. 8002. FEDERAL INSURANCE OFFICE ESTABLISHED. 

18 (a) ESTABLISHMENT OF OFFICE.—Subchapter I of 

19 chapter 3 of title 31, United States Code, is amended— 

20 (1) by transferring and inserting section 312 

21 after section 313; 

22 (2) by redesignating sections 313 and 312 (as 

23 so transferred) as sections 312 and 315, respec24 tively; and 


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1 (3) by inserting after section 312 (as so redes2 ignated) the following new sections: 

3 ‘‘SEC. 313. FEDERAL INSURANCE OFFICE. 

4 ‘‘(a) ESTABLISHMENT OF OFFICE.—There is estab5 lished the Federal Insurance Office as an office in the De6 partment of the Treasury. 

7 ‘‘(b) LEADERSHIP.—The Office shall be headed by a 

8 Director, who shall be appointed by the Secretary of the 

9 Treasury. The position of such Director shall be a career 

10 reserved position in the Senior Executive Service. 

11 ‘‘(c) FUNCTIONS.— 

12 ‘‘(1) AUTHORITY PURSUANT TO DIRECTION OF

13 SECRETARY.—The Office shall have the authority, 

14 pursuant to the direction of the Secretary, as fol15 lows: 

16 ‘‘(A) To monitor the insurance industry to 

17 gain expertise. 

18 ‘‘(B) To identify issues or gaps in the reg19 ulation of insurers that could contribute to a 

20 systemic crisis in the insurance industry or the 

21 United States financial system. 

22 ‘‘(C) To monitor the extent to which tradi23 tionally underserved communities and con24 sumers, minorities (as such term is defined in 

25 24 section 1204(c) of the Financial Institutions 


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1 Reform, Recovery, and Enforcement Act of 

2 1989 (12 U.S.C. 1811 note)), and low- and 

3 moderate-income persons have access to afford4 able insurance products regarding all lines of 

5 insurance, except health insurance. 

6 ‘‘(D) To recommend to the Financial Serv7 ices Oversight Council that it designate an in8 surer, including its affiliates, as an entity sub9 ject to stricter standards. 

10 ‘‘(E) To assist the Secretary in admin11 istering the Terrorism Insurance Program es12 tablished in the Department of the Treasury 

13 under the Terrorism Risk Insurance Act of 

14 2002 (15 U.S.C. 6701 note). 

15 ‘‘(F) To coordinate Federal efforts and de16 velop Federal policy on prudential aspects of 

17 international insurance matters, including rep18 resenting the United States as appropriate in 

19 the International Association of Insurance Su20 pervisors or any successor organization and as21 sisting the Secretary in negotiating covered 

22 agreements. 

23 ‘‘(G) To determine, in accordance with 

24 subsection (f), whether State insurance meas25 ures are preempted by covered agreements. 


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1 ‘‘(H) To consult with the States regarding 

2 insurance matters of national importance and 

3 prudential insurance matters of international 

4 importance. 

5 ‘‘(I) To perform such other related duties 

6 and authorities as may be assigned to it by the 

7 Secretary. 

8 ‘‘(2) ADVISORY FUNCTIONS.—The Office shall 

9 advise the Secretary on major domestic and pruden10 tial international insurance policy issues. 

11 ‘‘(3) ADVISORY CAPACITY ON COUNCIL.—The 

12 Director shall serve in an advisory capacity on the 

13 Financial Services Oversight Council established 

14 under the Financial Stability Improvement Act of 

15 2009. 

16 ‘‘(d) SCOPE.—The authority of the Office shall ex17 tend to all lines of insurance except health insurance, as 

18 determined by the Secretary in coordination with the Sec19 retary of the Department of Health and Human Services 

20 based on section 2791 of the Public Health Service Act 

21 (42 U.S.C. 300gg–91). 

22 ‘‘(e) GATHERING OF INFORMATION.— 

23 ‘‘(1) GENERAL.—In carrying out its functions 

24 under subsection (c), the Office may request, receive, 

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1 mation on and from the insurance industry and in2 surers, enter into information-sharing agreements, 

3 analyze and disseminate data and information, and 

4 issue reports regarding all lines of insurance except 

5 health insurance. 

6 ‘‘(2) COLLECTION OF INFORMATION FROM IN7 SURERS AND AFFILIATES.—Except as provided in 

8 paragraph (3) and subject to paragraph (4), the Of9 fice may require an insurer, or affiliate of an in10 surer, to submit such data or information that the 

11 Office may reasonably require in carrying out its 

12 functions under subsection (c). Notwithstanding sub13 section (p) and for the purposes of this paragraph 

14 only, the term ‘insurer’ means any entity that writes 

15 insurance or reinsures risks and issues contracts or 

16 policies in one or more States. 

17 ‘‘(3) EXCEPTION FOR SMALL INSURERS.—Para18 graph (2) shall not apply with respect to any insurer 

19 or affiliate thereof that meets a minimum size 

20 threshold that may be established by the Office by 

21 order or rule. Such threshold shall be appropriate to 

22 the particular request and need for the data or in23 formation. 

24 ‘‘(4) ADVANCE COORDINATION.—Before col25 lecting any data or information under paragraph (2) 


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1 from an insurer, or affiliate of an insurer, the Office 

2 shall coordinate with each relevant Federal agency 

3 and State insurance regulator (or other relevant 

4 Federal or State regulatory agency, if any, in the 

5 case of an affiliate of an insurer) and any publicly 

6 available sources to determine if the information to 

7 be collected is available from, or may be obtained in 

8 a timely manner by, such Federal agency or State 

9 insurance regulator, individually or collectively, other 

10 regulatory agency, or publicly available sources. If 

11 the Director determines that such data or informa12 tion is available, or may be obtained in a timely 

13 manner, from such an agency, regulator, regulatory 

14 agency, or source, the Director shall obtain the data 

15 or information from such agency, regulator, regu16 latory agency, or source. If the Director determines 

17 that such data or information is not so available, the 

18 Director may collect such data or information from 

19 an insurer (or affiliate) only if the Director complies 

20 with the requirements of subchapter I of chapter 35 

21 of title 44, United States Code (relating to Federal 

22 information policy; commonly known as the Paper23 work Reduction Act) in collecting such data or infor24 mation. Notwithstanding any other provision of law, 

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1 ance regulator or other Federal or State regulatory 

2 agency is authorized to provide to the Office such 

3 data or information. 

4 ‘‘(5) CONFIDENTIALITY.— 

5 ‘‘(A) The submission of any non-publicly 

6 available data and information to the Office 

7 under this subsection shall not constitute a 

8 waiver of, or otherwise affect, any privilege aris9 ing under Federal or State law (including the 

10 rules of any Federal or State Court) to which 

11 the data or information is otherwise subject. 

12 ‘‘(B) Any requirement under Federal or 

13 State law to the extent otherwise applicable, or 

14 any requirement pursuant to a written agree15 ment in effect between the original source of 

16 any non-publicly available data or information 

17 and the source of such data or information to 

18 the Office, regarding the privacy or confiden19 tiality of any data or information in the posses20 sion of the source to the Office, shall continue 

21 to apply to such data or information after the 

22 data or information has been provided pursuant 

23 to this subsection to the Office. 

24 ‘‘(C) Any data or information obtained by 

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1 surance regulators individually or collectively 

2 through an information sharing agreement that 

3 shall comply with applicable Federal law and 

4 that shall not constitute a waiver of, or other5 wise affect, any privilege under Federal or 

6 State law (including the rules of any Federal or 

7 State Court) to which the data or information 

8 is otherwise subject. 

9 ‘‘(D) Section 552 of title 5, United States 

10 Code, shall apply to any data or information 

11 submitted by an insurer or affiliate of an in12 surer. 

13 ‘‘(f) PREEMPTION OF STATE INSURANCE MEAS14 URES.— 

15 ‘‘(1) STANDARD.—A State insurance measure 

16 shall be preempted pursuant to this section or sec17 tion 314 if, and only to the extent that the Director 

18 determines, in accordance with this subsection, that 

19 the measure— 

20 ‘‘(A) directly results in less favorable treat21 ment of a non-United States insurer domiciled 

22 in a foreign jurisdiction that is subject to a cov23 ered agreement than a United States insurer 

24 domiciled, licensed, admitted, or otherwise au25 thorized in that State; and 


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1 ‘‘(B) is inconsistent with a covered agree2 ment that is entered into on a date after the 

3 date of the enactment of this Act. 

4 ‘‘(2) DETERMINATION.— 

5 ‘‘(A) NOTICE OF POTENTIAL INCONSIST6 ENCY.—Before making any determination of in7 consistency, the Director shall— 

8 ‘‘(i) notify and consult with the appro9 priate State regarding any potential incon10 sistency or preemption; 

11 ‘‘(ii) notify and consult with the 

12 United States Trade Representative re13 garding any potential inconsistency or pre14 emption; 

15 ‘‘(iii) cause to be published in the 

16 Federal Register notice of the issue re17 garding the potential inconsistency or pre18 emption, including a description of each 

19 State insurance measure at issue and any 

20 applicable covered agreement; 

21 ‘‘(iv) provide interested parties a rea22 sonable opportunity to submit written com23 ments to the Office; 

24 ‘‘(v) consider the effect of preemption 

25 on— 


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1 ‘‘(I) the protection of policy2 holders and policy claimants; 

3 ‘‘(II) the maintenance of the 

4 safety, soundness, integrity, and fi5 nancial responsibility of any entity in6 volved in the business of insurance or 

7 insurance operations; 

8 ‘‘(III) ensuring the integrity and 

9 stability of the United States financial 

10 system; and 

11 ‘‘(IV) the creation of a gap or 

12 void in financial or market conduct 

13 regulation of any entity involved in 

14 the business of insurance or insurance 

15 operations in the United States; and 

16 ‘‘(vi) consider any comments received. 

17 The Director shall provide the notifications re18 quired under clauses (i), (ii), and (iii) contem19 poraneously. 

20 ‘‘(B) SCOPE OF REVIEW.—For purposes of 

21 this section, the Director’s determination of 

22 State insurance measures shall be limited to the 

23 subject matter of the prudential measures ap24 plicable to the business of insurance contained 

25 within the covered agreement involved. 


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1 ‘‘(C) NOTICE OF DETERMINATION OF IN2 CONSISTENCY.—Upon making any determina3 tion of inconsistency, the Director shall— 

4 ‘‘(i) notify the appropriate State of 

5 the determination and the extent of the in6 consistency; 

7 ‘‘(ii) establish a reasonable period of 

8 time, which shall not be shorter than 90 

9 days, before the determination shall be10 come effective; and 

11 ‘‘(iii) notify the Committee on Finan12 cial Services of the House of Representa13 tives and the Committee on Banking, 

14 Housing, and Urban Affairs of the Senate 

15 of the inconsistency. 

16 ‘‘(3) NOTICE OF EFFECTIVENESS.—Upon the 

17 conclusion of the period referred to in paragraph 

18 (2)(C)(ii), if the basis for the determination of in19 consistency still exists, the determination shall be20 come effective and the Director shall— 

21 ‘‘(A) cause to be published notice in the 

22 Federal Register that the preemption has be23 come effective, as well as the effective date; and 

24 ‘‘(B) notify the appropriate State. 


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1 ‘‘(4) LIMITATION.—No State may enforce a 

2 State insurance measure to the extent that it has 

3 been preempted under this subsection. 

4 ‘‘(g) APPLICABILITY OF ADMINISTRATIVE PROCE5 DURE ACT.—Determinations of inconsistency pursuant to 

6 subsection (f)(2) shall be subject to the applicable provi7 sions of subchapter II of chapter 5 of title 5, United 

8 States Code (relating to administrative procedure), and 

9 chapter 7 of such title (relating to judicial review), except 

10 that in any action for judicial review of a determination 

11 of inconsistency, the court shall determine the matter de 

12 novo. 

13 ‘‘(h) REGULATIONS, POLICIES, AND PROCEDURES.— 

14 The Secretary may issue orders, regulations, policies and 

15 procedures to implement this section. 

16 ‘‘(i) CONSULTATION.—The Director shall consult 

17 with State insurance regulators, individually and collec18 tively, to the extent the Director determines appropriate, 

19 in carrying out the functions of the Office. 

20 ‘‘(j) SAVINGS PROVISIONS.—Nothing in this section 

21 shall— 

22 ‘‘(1) preempt any State insurance measure that 

23 governs any insurer’s rates, premiums, underwriting 

24 or sales practices, or State coverage requirements 


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1 for insurance, or to the application of the antitrust 

2 laws of any State to the business of insurance; 

3 ‘‘(2) preempt any State insurance measure gov4 erning the capital or solvency of an insurer, except 

5 to the extent that such State insurance measure di6 rectly results in less favorable treatment of a non7 United States insurer than a United States insurer; 

8 ‘‘(3) be construed to alter, amend, or limit the 

9 responsibility of the Consumer Financial Protection 

10 Agency; 

11 ‘‘(4) preempt any State insurance measure be12 cause of inconsistency with any agreement that is 

13 not a covered agreement (as such term in defined in 

14 subsection (p)); or 

15 ‘‘(5) affect the preemption of any State insur16 ance measure otherwise inconsistent with and pre17 empted by Federal law. 

18 ‘‘(k) RETENTION OF EXISTING STATE REGULATORY

19 AUTHORITY.—Nothing in this section or section 314 shall 

20 be construed to establish a general supervisory or regu21 latory authority of the Office or the Department of the 

22 Treasury over the business of insurance. 

23 ‘‘(l) RETENTION OF AUTHORITY OF FEDERAL FI24 NANCIAL REGULATORY AGENCIES.—Nothing in this sec25 tion or section 314 shall be construed to limit the authorVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01463 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ity of any Federal financial regulatory agency, including 

2 the authority to develop and coordinate policy, negotiate, 

3 and enter into agreements with foreign governments, au4 thorities, regulators, and multi-national regulatory com5 mittees and to preempt State measures to affect uni6 formity with international regulatory agreements. 

7 ‘‘(m) RETENTION OF AUTHORITY OF UNITED

8 STATES TRADE REPRESENTATIVE.—Nothing in this sec9 tion or section 314 shall be construed to affect the author10 ity of the Office of the United States Trade Representative 

11 pursuant to section 141 of the Trade Act of 1974 (19 

12 U.S.C. 2171) or any other provision of law, including au13 thority over the development and coordination of United 

14 States international trade policy and the administration 

15 of the United States trade agreements program. 

16 ‘‘(n) REPORTS TO CONGRESS.— 

17 ‘‘(1) ANNUAL REPORT.—Beginning September 

18 30, 2011, the Director shall submit a report on or 

19 before September 30 of each calendar year to the 

20 President and to the Committees on Financial Serv21 ices and Ways and Means of the House of Rep22 resentatives and the Committees on Banking, Hous23 ing, and Urban Affairs and Finance of the Senate 

24 on the insurance industry, any actions taken by the 


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1 office pursuant to subsection (f) (regarding preemp2 tion of inconsistent State insurance measures). 

3 ‘‘(2) OTHER REPORTS.—The Director shall sub4 mit to the President and the Committees referred to 

5 in paragraph (1) any other information or reports as 

6 deemed relevant by the Director or as requested by 

7 the Chairman or Ranking Member of any of such 

8 Committees. 

9 ‘‘(o) USE OF EXISTING RESOURCES.—To carry out 

10 this section, the Office may employ personnel, facilities, 

11 and other Department of the Treasury resources available 

12 to the Secretary and the Secretary shall dedicate specific 

13 personnel to the Office. 

14 ‘‘(p) DEFINITIONS.—For purposes of this section and 

15 section 314, the following definitions shall apply: 

16 ‘‘(1) AFFILIATE.—The term ‘affiliate’ means, 

17 with respect to an insurer, any person that controls, 

18 is controlled by, or is under common control with the 

19 insurer. 

20 ‘‘(2) COVERED AGREEMENT.—The term ‘cov21 ered agreement’ means a written bilateral or multi22 lateral recognition agreement that— 

23 ‘‘(A) is entered into between the United 

24 States and one or more foreign governments, 

25 authorities, or regulatory entities; and 


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1 ‘‘(B) provides for recognition of prudential 

2 measures with respect to the business of insur3 ance or reinsurance that achieves a level of pro4 tection for insurance or reinsurance consumers 

5 that is substantially equivalent to the level of 

6 protection achieved under State insurance or re7 insurance regulation. 

8 ‘‘(3) DETERMINATION OF INCONSISTENCY.— 

9 The term ‘determination of inconsistency’ means a 

10 determination that a State insurance measure is pre11 empted under subsection (f). 

12 ‘‘(4) FEDERAL FINANCIAL REGULATORY AGEN13 CY.—The term ‘Federal financial regulatory agency’ 

14 means the Department of the Treasury, the Board 

15 of Governors of the Federal Reserve System, the Of16 fice of the Comptroller of the Currency, the Office 

17 of Thrift Supervision, the Securities and Exchange 

18 Commission, the Commodity Futures Trading Com19 mission, the Federal Deposit Insurance Corporation, 

20 the Federal Housing Finance Agency, or the Na21 tional Credit Union Administration. 

22 ‘‘(5) INSURER.—The term ‘insurer’ means any 

23 person engaged in the business of insurance, includ24 ing reinsurance. 


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1 ‘‘(6) NON-UNITED STATES INSURER.—The term 

2 ‘non-United States insurer’ means an insurer that is 

3 organized under the laws of a jurisdiction other than 

4 a State, but does not include any United States 

5 branch of such an insurer. 

6 ‘‘(7) OFFICE.—The term ‘Office’ means the 

7 Federal Insurance Office established by this section. 

8 ‘‘(8) SECRETARY.—The term ‘Secretary’ means 

9 the Secretary of the Treasury. 

10 ‘‘(9) STATE.—The term ‘State’ means any 

11 State, commonwealth, territory, or possession of the 

12 United States, the District of Columbia, the Com13 monwealth of Puerto Rico, the Commonwealth of the 

14 Northern Mariana Islands, American Samoa, Guam, 

15 or the United States Virgin Islands. 

16 ‘‘(10) STATE INSURANCE MEASURE.—The term 

17 ‘State insurance measure’ means any State law, reg18 ulation, administrative ruling, bulletin, guideline, or 

19 practice relating to or affecting prudential measures 

20 applicable to insurance or reinsurance. 

21 ‘‘(11) STATE INSURANCE REGULATOR.—The 

22 term ‘State insurance regulator’ means any State 

23 regulatory authority responsible for the supervision 

24 of insurers. 


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1 ‘‘(12) UNITED STATES INSURER.—The term 

2 ‘United States insurer’ means— 

3 ‘‘(A) an insurer that is organized under 

4 the laws of a State; or 

5 ‘‘(B) a United States branch of a non6 United States insurer. 

7 ‘‘(q) AUTHORIZATION OF APPROPRIATIONS.—There 

8 are authorized to be appropriated for the Office such sums 

9 as may be necessary for each fiscal year. 

10 ‘‘SEC. 314. COVERED AGREEMENTS. 

11 ‘‘(a) AUTHORITY.—The Secretary and the United 

12 States Trade Representative are authorized, jointly, to ne13 gotiate and enter into covered agreements on behalf of the 

14 United States. 

15 ‘‘(b) REQUIREMENTS FOR CONSULTATION WITH

16 CONGRESS.— 

17 ‘‘(1) IN GENERAL.—Before initiating negotia18 tions to enter into a covered agreement under sub19 section (a), during such negotiations, and before en20 tering into any such agreement, the Secretary and 

21 the United States Trade Representative shall jointly 

22 consult with the Committee on Financial Services 

23 and the Committee on Ways and Means of the 

24 House of Representatives and the Committee on 


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1 Banking, Housing, and Urban Affairs and the Com2 mittee on Finance of the Senate. 

3 ‘‘(2) SCOPE.—The consultation described in 

4 paragraph (1) shall include consultation with respect 

5 to— 

6 ‘‘(A) the nature of the agreement; 

7 ‘‘(B) how and to what extent the agree8 ment will achieve the applicable purposes, poli9 cies, priorities, and objectives of section 313 

10 and this section; and 

11 ‘‘(C) the implementation of the agreement, 

12 including the general effect of the agreement on 

13 existing State laws. 

14 ‘‘(c) SUBMISSION AND LAYOVER PROVISIONS.—A 

15 covered agreement under subsection (a) may enter into 

16 force with respect to the United States only if— 

17 ‘‘(1) the Secretary and the United States Trade 

18 Representative jointly submit to the congressional 

19 committees specified in subsection (b)(1), on a day 

20 on which both Houses of Congress are in session, a 

21 copy of the final legal text of the agreement; and 

22 ‘‘(2) a period of 90 calendar days beginning on 

23 the date on which the copy of the final legal text of 

24 the agreement is submitted to the congressional 

25 committees under paragraph (1) has expired.’’. 


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1 (b) DUTIES OF SECRETARY.—Section 321(a) of title 

2 31, United States Code, is amended— 

3 (1) in paragraph (7), by striking ‘‘and’’ at the 

4 end; 

5 (2) in paragraph (8)(C), by striking the period 

6 at the end and inserting ‘‘; and’’; and 

7 (3) by adding at the end the following new 

8 paragraph: 

9 ‘‘(9) advise the President on major domestic 

10 and international prudential policy issues in connec11 tion with all lines of insurance except health insur12 ance.’’. 

13 (c) CLERICAL AMENDMENT.—The table of sections 

14 for subchapter I of chapter 3 of title 31, United States 

15 Code, is amended by striking the item relating to section 

16 312 and inserting the following new items: 

‘‘Sec. 312. Terrorism and Financial Intelligence. 

‘‘Sec. 313. Federal Insurance Office. 

‘‘Sec. 314. Covered agreements. 

‘‘Sec. 315. Continuing in office.’’. 

17 SEC. 8003. REPORT ON GLOBAL REINSURANCE MARKET. 

18 Not later than September 30, 2011, the Director of 

19 the Federal Insurance Office appointed under section 

20 313(b) of title 31, United States Code (as amended by 

21 section 8002(a)(3) of this title) shall submit to the Com22 mittee on Financial Services of the House of Representa23 tives and the Committee on Banking, Housing, and Urban 


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1 Affairs of the Senate a report describing the breadth and 

2 scope of the global reinsurance market and the critical role 

3 such market plays in supporting insurance in the United 

4 States. 

5 SEC. 8004. STUDY ON MODERNIZATION AND IMPROVEMENT 

6 OF INSURANCE REGULATION IN THE UNITED 

7 STATES. 

8 (a) STUDY.—The Director of the Federal Insurance 

9 Office appointed under section 313(b) of title 31, United 

10 States Code (as amended by section 8002(a)(3) of this 

11 title) shall conduct a study on how to modernize and im12 prove the system of insurance regulation in the United 

13 States. Such study shall include consideration of the fol14 lowing: 

15 (1) Effective systemic risk regulation with re16 spect to insurance. 

17 (2) Strong capital standards and an appro18 priate match between capital allocation and liabil19 ities for all risk. 

20 (3) Meaningful and consistent consumer protec21 tion for insurance products and practices. 

22 (4) Increased national uniformity through ei23 ther a Federal charter or effective action by the 

24 States. 


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1 (5) Improved regulation of insurance companies 

2 and affiliates on a consolidated basis, including af3 filiates outside of the traditional insurance business. 

4 (6) International coordination. 

5 (7) Geographic disparities in access to and cost 

6 of insurance products. 

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

8 of the enactment of this Act, the Director shall submit 

9 to the Committee on Financial Services of the House of 

10 Representatives and the Committee on Banking, Housing, 

11 and Urban Affairs of the Senate a report containing— 

12 (1) the results of the study conducted under 

13 subsection (a); and 

14 (2) any Federal or State legislative, administra15 tive, or regulatory recommendations that the Direc16 tor considers appropriate with respect to such study 

17 to modernize and improve the system of insurance 

18 regulation in the United States. 

19 (c) CONSULTATION.—In carrying out subsections (a) 

20 and (b), the Director shall consult with State insurance 

21 commissioners, consumer organizations, representatives of 

22 the insurance industry, policyholders, and other persons, 

23 as the Director considers appropriate. 


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1 SEC. 8005. SENSE OF CONGRESS REGARDING SIMPLIFIED 

2 MORTGAGE CONTRACT SUMMARIES. 

3 It is the sense of Congress that mortgage lenders 

4 should provide loan applicants with a simplified summary 

5 of their loan contracts, including an easy-to-read list of 

6 the basic loan terms, payment information, the existence 

7 of prepayment penalties or balloon payments, and escrow 

8 information. 

9 TITLE VII—MORTGAGE REFORM 

10 AND ANTI-PREDATORY LEND11 ING ACT 

12 SEC. 9000. SHORT TITLE; DESIGNATION AS ENUMERATED 

13 CONSUMER LAW. 

14 (a) SHORT TITLE.—This title may be cited as the 

15 ‘‘Mortgage Reform and Anti-Predatory Lending Act’’. 

16 (b) DESIGNATION AS ENUMERATED CONSUMER LAW

17 UNDER THE PURVIEW OF THE CONSUMER FINANCIAL

18 PROTECTION AGENCY.—Subtitles A, B, C, and E and sec19 tions 9501, 9502, and 9506, and the amendments made 

20 by such subtitles and sections, shall be enumerated con21 sumer laws, as defined in section 4002(16), and come 

22 under the purview of the Consumer Financial Protection 

23 Agency for purposes of title IV, including the transfer of 

24 functions and personnel under subtitle F of title IV and 

25 the savings provisions of such subtitle. 


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1 Subtitle A—Residential Mortgage 

2 Loan Origination Standards 

3 SEC. 9001. DEFINITIONS. 

4 Section 103 of the Truth in Lending Act (15 U.S.C. 

5 1602) is amended by adding at the end the following new 

6 subsection: 

7 ‘‘(cc) DEFINITIONS RELATING TO MORTGAGE ORIGI8 NATION AND RESIDENTIAL MORTGAGE LOANS.— 

9 ‘‘(1) COMMISSION.—Unless otherwise specified, 

10 the term ‘Commission’ means the Federal Trade 

11 Commission. 

12 ‘‘(2) FEDERAL BANKING AGENCIES.—The term 

13 ‘Federal banking agencies’ means the Board of Gov14 ernors of the Federal Reserve System, the Comp15 troller of the Currency, the Director of the Office of 

16 Thrift Supervision, the Federal Deposit Insurance 

17 Corporation, and the National Credit Union Admin18 istration Board. All rule writing by the ‘Federal 

19 banking agencies’ as designated by the Mortgage 

20 Reform and Anti-Predatory Lending Act will be co21 ordinated through the Financial Institutions Exam22 ination Council in consultation with the Chairman of 

23 the State Liaison Committee. 

24 ‘‘(3) MORTGAGE ORIGINATOR.—The term 

25 ‘mortgage originator’— 


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1 ‘‘(A) means any person who, for direct or 

2 indirect compensation or gain, or in the expec3 tation of direct or indirect compensation or 

4 gain— 

5 ‘‘(i) takes a residential mortgage loan 

6 application; 

7 ‘‘(ii) assists a consumer in obtaining 

8 or applying to obtain a residential mort9 gage loan; or 

10 ‘‘(iii) offers or negotiates terms of a 

11 residential mortgage loan; 

12 ‘‘(B) includes any person who represents 

13 to the public, through advertising or other 

14 means of communicating or providing informa15 tion (including the use of business cards, sta16 tionery, brochures, signs, rate lists, or other 

17 promotional items), that such person can or will 

18 provide any of the services or perform any of 

19 the activities described in subparagraph (A); 

20 ‘‘(C) does not include any person who is (i) 

21 not otherwise described in subparagraph (A) or 

22 (B) and who performs purely administrative or 

23 clerical tasks on behalf of a person who is de24 scribed in any such subparagraph, or (ii) an 

25 employee of a retailer of manufactured homes 


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1 who is not described in clause (i) or (iii) of sub2 paragraph (A) and who does not advise a con3 sumer on loan terms (including rates, fees, and 

4 other costs); 

5 ‘‘(D) does not include a person or entity 

6 that only performs real estate brokerage activi7 ties and is licensed or registered in accordance 

8 with applicable State law, unless such person or 

9 entity is compensated for performing such bro10 kerage activities by a lender, a mortgage 

11 broker, or other mortgage originator or by any 

12 agent of such lender, mortgage broker, or other 

13 mortgage originator; 

14 ‘‘(E) does not include, with respect to a 

15 residential mortgage loan, a person, estate, or 

16 trust that provides mortgage financing for the 

17 sale of 1 property in any 36-month period, pro18 vided that such loan— 

19 ‘‘(i) is fully amortizing; 

20 ‘‘(ii) is with respect to a sale for 

21 which the seller determines in good faith 

22 and documents that the buyer has a rea23 sonable ability to repay the loan; 

24 ‘‘(iii) has a fixed rate or an adjustable 

25 rate that is adjustable after 5 or more 


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1 years, subject to reasonable annual and 

2 lifetime limitations on interest rate in3 creases; and 

4 ‘‘(iv) meets any other criteria the 

5 Federal banking agencies may prescribe; 

6 and 

7 ‘‘(F) does not include a servicer or servicer 

8 employees, agents and contractors, including 

9 but not limited to those who offer or negotiate 

10 terms of a residential mortgage loan for pur11 poses of renegotiating, modifying, replacing and 

12 subordinating principal of existing mortgages 

13 where borrowers are behind in their payments, 

14 in default or have a reasonable likelihood of 

15 being in default or falling behind. 

16 ‘‘(4) NATIONWIDE MORTGAGE LICENSING SYS17 TEM AND REGISTRY.—The term ‘Nationwide Mort18 gage Licensing System and Registry’ has the same 

19 meaning as in the Secure and Fair Enforcement for 

20 Mortgage Licensing Act of 2008. 

21 ‘‘(5) OTHER DEFINITIONS RELATING TO MORT22 GAGE ORIGINATOR.—For purposes of this sub23 section, a person ‘assists a consumer in obtaining or 

24 applying to obtain a residential mortgage loan’ by, 

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1 gage loan terms (including rates, fees, and other 

2 costs), preparing residential mortgage loan packages, 

3 or collecting information on behalf of the consumer 

4 with regard to a residential mortgage loan. 

5 ‘‘(6) RESIDENTIAL MORTGAGE LOAN.—The 

6 term ‘residential mortgage loan’ means any con7 sumer credit transaction that is secured by a mort8 gage, deed of trust, or other equivalent consensual 

9 security interest on a dwelling or on residential real 

10 property that includes a dwelling, other than a con11 sumer credit transaction under an open end credit 

12 plan or, for purposes of sections 129B and 129C 

13 and section 128(a) (16), (17), and (18), and 128(f) 

14 and any regulations promulgated thereunder, an ex15 tension of credit relating to a plan described in sec16 tion 101(53D) of title 11, United States Code. 

17 ‘‘(7) SECRETARY.—The term ‘Secretary’, when 

18 used in connection with any transaction or person 

19 involved with a residential mortgage loan, means the 

20 Secretary of Housing and Urban Development. 

21 ‘‘(8) SECURITIZATION VEHICLE.—The term 

22 ‘securitization vehicle’ means a trust, corporation, 

23 partnership, limited liability entity, special purpose 

24 entity, or other structure that— 


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1 ‘‘(A) is the issuer, or is created by the 

2 issuer, of mortgage pass-through certificates, 

3 participation certificates, mortgage-backed secu4 rities, or other similar securities backed by a 

5 pool of assets that includes residential mortgage 

6 loans; and 

7 ‘‘(B) holds such loans. 

8 ‘‘(9) SECURITIZER.—The term ‘securitizer’ 

9 means the person that transfers, conveys, or assigns, 

10 or causes the transfer, conveyance, or assignment of, 

11 residential mortgage loans, including through a spe12 cial purpose vehicle, to any securitization vehicle, ex13 cluding any trustee that holds such loans solely for 

14 the benefit of the securitization vehicle. 

15 ‘‘(10) SERVICER.—The term ‘servicer’ has the 

16 same meaning as in section 6(i)(2) of the Real Es17 tate Settlement Procedures Act of 1974.’’. 

18 SEC. 9002. RESIDENTIAL MORTGAGE LOAN ORIGINATION. 

19 (a) IN GENERAL.—Chapter 2 of the Truth in Lend20 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

21 after section 129A the following new section: 

22 ‘‘§ 129B. Residential mortgage loan origination 

23 ‘‘(a) FINDING AND PURPOSE.— 

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1 tion, limitation, and regulation of the terms of resi2 dential mortgage credit and the practices related to 

3 such credit, while ensuring that responsible, afford4 able mortgage credit remains available to consumers. 

5 ‘‘(2) PURPOSE.—It is the purpose of this sec6 tion and section 129C to assure that consumers are 

7 offered and receive residential mortgage loans on 

8 terms that reasonably reflect their ability to repay 

9 the loans and that are understandable and not un10 fair, deceptive or abusive. 

11 ‘‘(b) DUTY OF CARE.— 

12 ‘‘(1) STANDARD.—Subject to regulations pre13 scribed under this subsection, each mortgage origi14 nator shall, in addition to the duties imposed by oth15 erwise applicable provisions of State or Federal 

16 law— 

17 ‘‘(A) be qualified and, when required, reg18 istered and licensed as a mortgage originator in 

19 accordance with applicable State or Federal 

20 law, including the Secure and Fair Enforcement 

21 for Mortgage Licensing Act of 2008; 

22 ‘‘(B) with respect to each consumer seek23 ing or inquiring about a residential mortgage 

24 loan, diligently work to present the consumer 

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1 ucts for which the consumer likely qualifies and 

2 which are appropriate to the consumer’s exist3 ing circumstances, based on information known 

4 by, or obtained in good faith by, the originator; 

5 ‘‘(C) make full, complete, and timely dis6 closure to each such consumer in writing, the 

7 receipt and understanding of which shall be ac8 knowledged by the signature of the mortgage 

9 originator and the consumer, of— 

10 ‘‘(i) the comparative costs and bene11 fits of each residential mortgage loan prod12 uct offered, discussed, or referred to by the 

13 originator (and such comparative costs and 

14 benefits for each such product shall be pre15 sented side by side and the disclosures for 

16 each such product shall have equal promi17 nence); 

18 ‘‘(ii) the nature of the originator’s re19 lationship to the consumer (including the 

20 cost of the services to be provided by the 

21 originator and a statement that the mort22 gage originator is or is not acting as an 

23 agent for the consumer, as the case may 

24 be); and 


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1 ‘‘(iii) any relevant conflicts of interest 

2 between the originator and the consumer; 

3 ‘‘(D) certify to the creditor, with respect to 

4 any transaction involving a residential mortgage 

5 loan, that the mortgage originator has fulfilled 

6 all requirements applicable to the originator 

7 under this section with respect to the trans8 action; and 

9 ‘‘(E) include on all loan documents any 

10 unique identifier of the mortgage originator 

11 provided by the Nationwide Mortgage Licensing 

12 System and Registry. 

13 ‘‘(2) CLARIFICATION OF EXTENT OF DUTY TO

14 PRESENT RANGE OF PRODUCTS AND APPROPRIATE

15 PRODUCTS.— 

16 ‘‘(A) NO DUTY TO OFFER PRODUCTS FOR

17 WHICH ORIGINATOR IS NOT AUTHORIZED TO

18 TAKE AN APPLICATION.—Paragraph (1)(B) 

19 shall not be construed as requiring— 

20 ‘‘(i) a mortgage originator to present 

21 to any consumer any specific residential 

22 mortgage loan product that is offered by a 

23 creditor which does not accept consumer 

24 referrals from, or consumer applications 


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1 submitted by or through, such originator; 

2 or 

3 ‘‘(ii) a creditor to offer products that 

4 the creditor does not offer to the general 

5 public. 

6 ‘‘(B) APPROPRIATE LOAN PRODUCT.—For 

7 purposes of paragraph (1)(B), a residential 

8 mortgage loan shall be presumed to be appro9 priate for a consumer if— 

10 ‘‘(i) the mortgage originator deter11 mines in good faith, based on then existing 

12 information and without undergoing a full 

13 underwriting process, that the consumer 

14 has a reasonable ability to repay and, in 

15 the case of a refinancing of an existing res16 idential mortgage loan, receives a net tan17 gible benefit, as determined in accordance 

18 with regulations prescribed under sub19 sections (a) and (b) of section 129C; and 

20 ‘‘(ii) the loan does not have predatory 

21 characteristics or effects (such as equity 

22 stripping and excessive fees and abusive 

23 terms) as determined in accordance with 

24 regulations prescribed under paragraph 

25 (4). 


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1 ‘‘(3) RULES OF CONSTRUCTION.—No provision 

2 of this subsection shall be construed as— 

3 ‘‘(A) creating an agency or fiduciary rela4 tionship between a mortgage originator and a 

5 consumer if the originator does not hold himself 

6 or herself out as such an agent or fiduciary; or 

7 ‘‘(B) restricting a mortgage originator 

8 from holding himself or herself out as an agent 

9 or fiduciary of a consumer subject to any addi10 tional duty, requirement, or limitation applica11 ble to agents or fiduciaries under any Federal 

12 or State law. 

13 ‘‘(4) REGULATIONS.— 

14 ‘‘(A) IN GENERAL.—The Federal banking 

15 agencies, in consultation with the Secretary, 

16 and the Commission, shall jointly prescribe reg17 ulations to— 

18 ‘‘(i) further define the duty estab19 lished under paragraph (1); 

20 ‘‘(ii) implement the requirements of 

21 this subsection; 

22 ‘‘(iii) establish the time period within 

23 which any disclosure required under para24 graph (1) shall be made to the consumer; 

25 and 


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1 ‘‘(iv) establish such other require2 ments for any mortgage originator as such 

3 regulatory agencies may determine to be 

4 appropriate to meet the purposes of this 

5 subsection. 

6 ‘‘(B) COMPLEMENTARY AND NONDUPLICA7 TIVE DISCLOSURES.—The agencies referred to 

8 in subparagraph (A) shall endeavor to make the 

9 required disclosures to consumers under this 

10 subsection complementary and nonduplicative 

11 with other disclosures for mortgage consumers 

12 to the extent such efforts— 

13 ‘‘(i) are practicable; and 

14 ‘‘(ii) do not reduce the value of any 

15 such disclosure to recipients of such disclo16 sures. 

17 ‘‘(5) COMPLIANCE PROCEDURES REQUIRED.— 

18 The Federal banking agencies shall prescribe regula19 tions requiring depository institutions to establish 

20 and maintain procedures reasonably designed to as21 sure and monitor the compliance of such depository 

22 institutions, the subsidiaries of such institutions, 

23 and the employees of such institutions or subsidi24 aries with the requirements of this section and the 

25 registration procedures established under section 


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1 1507 of the Secure and Fair Enforcement for Mort2 gage Licensing Act of 2008.’’. 

3 (b) CLERICAL AMENDMENT.—The table of sections 

4 for chapter 2 of the Truth in Lending Act is amended 

5 by inserting after the item relating to section 129 the fol6 lowing new items: 

‘‘129A. Fiduciary duty of servicers of pooled residential mortgages. 

‘‘129B. Residential mortgage loan origination.’’. 

7 SEC. 9003. PROHIBITION ON STEERING INCENTIVES. 

8 Section 129B of the Truth in Lending Act (as added 

9 by section 102(a)) is amended by inserting after sub10 section (b) the following new subsection: 

11 ‘‘(c) PROHIBITION ON STEERING INCENTIVES.— 

12 ‘‘(1) IN GENERAL.—For any mortgage loan, the 

13 total amount of direct and indirect compensation 

14 from all sources permitted to a mortgage originator 

15 may not vary based on the terms of the loan (other 

16 than the amount of the principal). 

17 ‘‘(2) RESTRUCTURING OF FINANCING ORIGINA18 TION FEE.— 

19 ‘‘(A) IN GENERAL.—For any mortgage 

20 loan, a mortgage originator may not arrange 

21 for a consumer to finance through rate any 

22 origination fee or cost except bona fide third 

23 party settlement charges not retained by the 

24 creditor or mortgage originator. 


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1 ‘‘(B) EXCEPTION.—Notwithstanding para2 graph subparagraph (A), a mortgage originator 

3 may arrange for a consumer to finance through 

4 rate an origination fee or cost if— 

5 ‘‘(i) the mortgage originator does not 

6 receive any other compensation from the 

7 consumer except the compensation that is 

8 financed through rate; and 

9 ‘‘(ii) the mortgage is a qualified mort10 gage. 

11 ‘‘(3) REGULATIONS.—The Federal banking 

12 agencies, in consultation with the Secretary and the 

13 Commission, shall jointly prescribe regulations to 

14 prohibit— 

15 ‘‘(A) mortgage originators from steering 

16 any consumer to a residential mortgage loan 

17 that— 

18 ‘‘(i) the consumer lacks a reasonable 

19 ability to repay (in accordance with regula20 tions prescribed under section 129C(a)); 

21 ‘‘(ii) in the case of a refinancing of a 

22 residential mortgage loan, does not provide 

23 the consumer with a net tangible benefit 

24 (in accordance with regulations prescribed 

25 under section 129C(b)); or 


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1 ‘‘(iii) has predatory characteristics or 

2 effects (such as equity stripping, excessive 

3 fees, or abusive terms); 

4 ‘‘(B) mortgage originators from steering 

5 any consumer from a residential mortgage loan 

6 for which the consumer is qualified that is a 

7 qualified mortgage (as defined in section 

8 129C(c)(3)) to a residential mortgage loan that 

9 is not a qualified mortgage; 

10 ‘‘(C) abusive or unfair lending practices 

11 that promote disparities among consumers of 

12 equal credit worthiness but of different race, 

13 ethnicity, gender, or age; 

14 ‘‘(D) mortgage originators from assessing 

15 excessive points and fees (as such term is de16 scribed under section 103(aa)(4) of the Truth 

17 in Lending Act (15 U.S.C. 1602(aa)(4))) to a 

18 consumer for the origination of a residential 

19 mortgage loan based on such consumer’s deci20 sion to finance all or part of the payment 

21 through the rate for such points and fees; and 

22 ‘‘(E) mortgage originators from— 

23 ‘‘(i) mischaracterizing the credit his24 tory of a consumer or the residential mort25 gage loans available to a consumer; 


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1 ‘‘(ii) mischaracterizing or suborning 

2 the mischaracterization of the appraised 

3 value of the property securing the exten4 sion of credit; or 

5 ‘‘(iii) if unable to suggest, offer, or 

6 recommend to a consumer a loan that is 

7 not more expensive than a loan for which 

8 the consumer qualifies, discouraging a con9 sumer from seeking a home mortgage loan 

10 secured by a consumer’s principal dwelling 

11 from another mortgage originator. 

12 ‘‘(4) RULES OF CONSTRUCTION.—No provision 

13 of this subsection shall be construed as— 

14 ‘‘(A) permitting any yield spread premium 

15 or other similar compensation that would, for 

16 any mortgage loan, permit the total amount of 

17 direct and indirect compensation from all 

18 sources permitted to a mortgage originator to 

19 vary based on the terms of the loan (other than 

20 the amount of the principal); 

21 ‘‘(B) affecting the mechanism for pro22 viding the total amount of direct and indirect 

23 compensation permitted to a mortgage origi24 nator; 


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1 ‘‘(C) limiting or affecting the amount of 

2 compensation received by a creditor upon the 

3 sale of a consummated loan to a subsequent 

4 purchaser; 

5 ‘‘(D) restricting a consumer’s ability to fi6 nance, at the option of the consumer, including 

7 through principal or rate, any origination fees 

8 or costs permitted under this subsection, or the 

9 mortgage originator’s ability to receive such 

10 fees or costs (including compensation) from any 

11 person, so long as such fees or costs were lim12 ited by agreement with the consumer and were 

13 fully and clearly disclosed to the consumer ear14 lier in the application process as required by 

15 129B(b)(1)(C)(i) and do not vary based on the 

16 terms of the loan (other than the amount of the 

17 principal) or the consumer’s decision about 

18 whether to finance such fees or costs; or 

19 ‘‘(E) prohibiting incentive payments to a 

20 mortgage originator based on the number of 

21 residential mortgage loans originated within a 

22 specified period of time.’’. 


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1 SEC. 9004. LIABILITY. 

2 Section 129B of the Truth in Lending Act is amend3 ed by inserting after subsection (c) (as added by section 

4 103) the following new subsection: 

5 ‘‘(d) LIABILITY FOR VIOLATIONS.— 

6 ‘‘(1) IN GENERAL.—For purposes of providing 

7 a cause of action for any failure by a mortgage origi8 nator to comply with any requirement imposed 

9 under this section and any regulation prescribed 

10 under this section, subsections (a) and (b) of section 

11 130 shall be applied with respect to any such failure 

12 by substituting ‘mortgage originator’ for ‘creditor’ 

13 each place such term appears in each such sub14 section. 

15 ‘‘(2) MAXIMUM.—The maximum amount of any 

16 liability of a mortgage originator under paragraph 

17 (1) to a consumer for any violation of this section 

18 shall not exceed the greater of actual damages or an 

19 amount equal to 3 times the total amount of direct 

20 and indirect compensation or gain accruing to the 

21 mortgage originator in connection with the residen22 tial mortgage loan involved in the violation, plus the 

23 costs to the consumer of the action, including a rea24 sonable attorney’s fee.’’. 


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1 SEC. 9005. REGULATIONS. 

2 (a) DISCRETIONARY REGULATORY AUTHORITY.— 

3 Section 129B of the Truth in Lending Act is amended 

4 by inserting after subsection (d) (as added by section 104) 

5 the following new subsection: 

6 ‘‘(e) DISCRETIONARY REGULATORY AUTHORITY.— 

7 ‘‘(1) IN GENERAL.—The Federal banking agen8 cies shall, by regulations issued jointly, prohibit or 

9 condition terms, acts or practices relating to residen10 tial mortgage loans that the agencies find to be abu11 sive, unfair, deceptive, predatory, inconsistent with 

12 reasonable underwriting standards, necessary or 

13 proper to ensure that responsible, affordable mort14 gage credit remains available to consumers in a 

15 manner consistent with the purposes of this section 

16 and section 129B, necessary or proper to effectuate 

17 the purposes of this section and section 129C, to 

18 prevent circumvention or evasion thereof, or to facili19 tate compliance with such sections, or are not in the 

20 interest of the borrower. 

21 ‘‘(2) APPLICATION.—The regulations prescribed 

22 under paragraph (1) shall be applicable to all resi23 dential mortgage loans and shall be applied in the 

24 same manner as regulations prescribed under section 

25 105. 


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1 ‘‘(f) Section 129B and any regulations promulgated 

2 thereunder do not apply to an extension of credit relating 

3 to a plan described in section 101(53D) of title 11, United 

4 States Code.’’. 

5 (b) EFFECTIVE DATE.—The regulations required or 

6 authorized to be prescribed under this subtitle or the 

7 amendments made by this subtitle— 

8 (1) shall be prescribed in final form before the 

9 end of the 12-month period beginning on the date of 

10 the enactment of this Act; and 

11 (2) shall take effect not later than 18 months 

12 after the date of the enactment of this Act. 

13 (c) TECHNICAL AND CONFORMING AMENDMENTS.— 

14 Section 129(l)(2) of the Truth in Lending Act (15 U.S.C. 

15 1639(l)(2)) is amended by inserting ‘‘referred to in section 

16 103(aa)’’ after ‘‘loans’’ each place such term appears. 

17 SEC. 9006. STUDY OF SHARED APPRECIATION MORTGAGES. 

18 (a) STUDY.—The Secretary of Housing and Urban 

19 Development, in consultation with the Secretary of the 

20 Treasury and other relevant agencies, shall conduct a com21 prehensive study to determine prudent statutory and regu22 latory requirements sufficient to provide for the wide23 spread use of shared appreciation mortgages to strengthen 

24 local housing markets, provide new opportunities for afVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01493 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 fordable homeownership, and enable homeowners at risk 

2 of foreclosure to refinance or modify their mortgages. 

3 (b) REPORT.—Not later than the expiration of the 

4 6-month period beginning on the date of the enactment 

5 of this Act, the Secretary of Housing and Urban Develop6 ment shall submit a report to the Congress on the results 

7 of the study, which shall include recommendations for the 

8 regulatory and legislative requirements referred to in sub9 section (a). 

10 Subtitle B—Minimum Standards 

11 For Mortgages 

12 SEC. 9101. ABILITY TO REPAY. 

13 (a) IN GENERAL.—Chapter 2 of the Truth in Lend14 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

15 after section 129B (as added by section 102(a)) the fol16 lowing new section: 

17 ‘‘§ 129C. Minimum standards for residential mortgage 

18 loans 

19 ‘‘(a) ABILITY TO REPAY.— 

20 ‘‘(1) IN GENERAL.—In accordance with regula21 tions prescribed jointly by the Federal banking agen22 cies, in consultation with the Commission, no cred23 itor may make a residential mortgage loan unless 

24 the creditor makes a reasonable and good faith de25 termination based on verified and documented inforVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01494 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 mation that, at the time the loan is consummated, 

2 the consumer has a reasonable ability to repay the 

3 loan, according to its terms, and all applicable taxes, 

4 insurance, and assessments. 

5 ‘‘(2) MULTIPLE LOANS.—If the creditor knows, 

6 or has reason to know, that 1 or more residential 

7 mortgage loans secured by the same dwelling will be 

8 made to the same consumer, the creditor shall make 

9 a reasonable and good faith determination, based on 

10 verified and documented information, that the con11 sumer has a reasonable ability to repay the com12 bined payments of all loans on the same dwelling ac13 cording to the terms of those loans and all applicable 

14 taxes, insurance, and assessments. 

15 ‘‘(3) BASIS FOR DETERMINATION.—A deter16 mination under this subsection of a consumer’s abil17 ity to repay a residential mortgage loan shall include 

18 consideration of the consumer’s credit history, cur19 rent income, expected income the consumer is rea20 sonably assured of receiving, current obligations, 

21 debt-to-income ratio, employment status, and other 

22 financial resources other than the consumer’s equity 

23 in the dwelling or real property that secures repay24 ment of the loan. 


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1 ‘‘(4) INCOME VERIFICATION.—In order to safe2 guard against fraudulent reporting, any consider3 ation of a consumer’s income history in making a 

4 determination under this subsection shall include the 

5 verification of such income by the use of— 

6 ‘‘(A) Internal Revenue Service transcripts 

7 of tax returns provided by a third party; or 

8 ‘‘(B) such other similar method that quick9 ly and effectively verifies income documentation 

10 by a third party as the Federal banking agen11 cies may jointly prescribe. 

12 ‘‘(5) NONSTANDARD LOANS.— 

13 ‘‘(A) VARIABLE RATE LOANS THAT DEFER

14 REPAYMENT OF ANY PRINCIPAL OR INTER15 EST.—For purposes of determining, under this 

16 subsection, a consumer’s ability to repay a vari17 able rate residential mortgage loan that allows 

18 or requires the consumer to defer the repay19 ment of any principal or interest, the creditor 

20 shall use a fully amortizing repayment schedule. 

21 ‘‘(B) INTEREST-ONLY LOANS.—For pur22 poses of determining, under this subsection, a 

23 consumer’s ability to repay a residential mort24 gage loan that permits or requires the payment 

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1 ment amount required to amortize the loan by 

2 its final maturity. 

3 ‘‘(C) CALCULATION FOR NEGATIVE AMOR4 TIZATION.—In making any determination under 

5 this subsection, a creditor shall also take into 

6 consideration any balance increase that may ac7 crue from any negative amortization provision. 

8 ‘‘(D) CALCULATION PROCESS.—For pur9 poses of making any determination under this 

10 subsection, a creditor shall calculate the month11 ly payment amount for principal and interest on 

12 any residential mortgage loan by assuming— 

13 ‘‘(i) the loan proceeds are fully dis14 bursed on the date of the consummation of 

15 the loan; 

16 ‘‘(ii) the loan is to be repaid in sub17 stantially equal monthly amortizing pay18 ments for principal and interest over the 

19 entire term of the loan with no balloon 

20 payment, unless the loan contract requires 

21 more rapid repayment (including balloon 

22 payment), in which case the calculation 

23 shall be made (I) in accordance with regu24 lations prescribed by the Federal banking 

25 agencies, with respect to any loan which 


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1 has an annual percentage rate that does 

2 not exceed the average prime offer rate for 

3 a comparable transaction, as of the date 

4 the interest rate is set, by 1.5 or more per5 centage points for a first lien residential 

6 mortgage loan; and by 3.5 or more per7 centage points for a subordinate lien resi8 dential mortgage loan; or (II) using the 

9 contract’s repayment schedule, with re10 spect to a loan which has an annual per11 centage rate, as of the date the interest 

12 rate is set, that is at least 1.5 percentage 

13 points above the average prime offer rate 

14 for a first lien residential mortgage loan; 

15 and 3.5 percentage points above the aver16 age prime offer rate for a subordinate lien 

17 residential mortgage loan; and 

18 ‘‘(iii) the interest rate over the entire 

19 term of the loan is a fixed rate equal to the 

20 fully indexed rate at the time of the loan 

21 closing, without considering the introduc22 tory rate. 

23 ‘‘(E) REFINANCE OF HYBRID LOANS WITH

24 CURRENT LENDER.—In considering any appli25 cation for refinancing an existing hybrid loan 


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1 by the creditor into a standard loan to be made 

2 by the same creditor in any case in which the 

3 sole net-tangible benefit to the mortgagor would 

4 be a reduction in monthly payment and the 

5 mortgagor has not been delinquent on any pay6 ment on the existing hybrid loan, the creditor 

7 may— 

8 ‘‘(i) consider the mortgagor’s good 

9 standing on the existing mortgage; 

10 ‘‘(ii) consider if the extension of new 

11 credit would prevent a likely default should 

12 the original mortgage reset and give such 

13 concerns a higher priority as an acceptable 

14 underwriting practice; and 

15 ‘‘(iii) offer rate discounts and other 

16 favorable terms to such mortgagor that 

17 would be available to new customers with 

18 high credit ratings based on such under19 writing practice. 

20 ‘‘(6) FULLY-INDEXED RATE DEFINED.—For 

21 purposes of this subsection, the term ‘fully indexed 

22 rate’ means the index rate prevailing on a residential 

23 mortgage loan at the time the loan is made plus the 

24 margin that will apply after the expiration of any in25 troductory interest rates. 


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1 ‘‘(7) REVERSE MORTGAGES.—This subsection 

2 shall not apply with respect to any reverse mort3 gage’’. 

4 (b) CLERICAL AMENDMENT.—The table of sections 

5 for chapter 2 of the Truth in Lending Act is amended 

6 by inserting after the item relating to section 129B (as 

7 added by section 102(b)) the following new item: 

‘‘129C. Minimum standards for residential mortgage loans.’’. 

8 SEC. 9102. NET TANGIBLE BENEFIT FOR REFINANCING OF 

9 RESIDENTIAL MORTGAGE LOANS. 

10 Section 129C of the Truth in Lending Act (as added 

11 by section 9101(a)) is amended by inserting after sub12 section (a) the following new subsection: 

13 ‘‘(b) NET TANGIBLE BENEFIT FOR REFINANCING OF

14 RESIDENTIAL MORTGAGE LOANS.— 

15 ‘‘(1) IN GENERAL.—In accordance with regula16 tions prescribed under paragraph (3), no creditor 

17 may extend credit in connection with any residential 

18 mortgage loan that involves a refinancing of a prior 

19 existing residential mortgage loan unless the creditor 

20 reasonably and in good faith determines, at the time 

21 the loan is consummated and on the basis of infor22 mation known by or obtained in good faith by the 

23 creditor, that the refinanced loan will provide a net 

24 tangible benefit to the consumer. 


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1 ‘‘(2) CERTAIN LOANS PROVIDING NO NET TAN2 GIBLE BENEFIT.—A residential mortgage loan that 

3 involves a refinancing of a prior existing residential 

4 mortgage loan shall not be considered to provide a 

5 net tangible benefit to the consumer if the costs of 

6 the refinanced loan, including points, fees and other 

7 charges, exceed the amount of any newly advanced 

8 principal without any corresponding changes in the 

9 terms of the refinanced loan that are advantageous 

10 to the consumer. 

11 ‘‘(3) NET TANGIBLE BENEFIT.—The Federal 

12 banking agencies shall jointly prescribe regulations 

13 defining the term ‘net tangible benefit’ for purposes 

14 of this subsection.’’. 

15 SEC. 9103. SAFE HARBOR AND REBUTTABLE PRESUMPTION. 

16 Section 129C of the Truth in Lending Act is amend17 ed by inserting after subsection (b) (as added by section 

18 9102) the following new subsection: 

19 ‘‘(c) PRESUMPTION OF ABILITY TO REPAY AND NET

20 TANGIBLE BENEFIT.— 

21 ‘‘(1) IN GENERAL.—Any creditor with respect 

22 to any residential mortgage loan, and any assignee 

23 or securitizer of such loan, may presume that the 

24 loan has met the requirements of subsections (a) 

25 and (b), if the loan is a qualified mortgage. 


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1 ‘‘(2) DEFINITIONS.—For purposes of this sub2 section, the following definitions shall apply: 

3 ‘‘(A) QUALIFIED MORTGAGE.—The term 

4 ‘qualified mortgage’ means any residential 

5 mortgage loan— 

6 ‘‘(i) that does not allow a consumer to 

7 defer repayment of principal or interest, or 

8 is not otherwise deemed a ‘non-traditional 

9 mortgage’ under guidance, advisories, or 

10 regulations prescribed by the Federal 

11 Banking Agencies; 

12 ‘‘(ii) that does not provide for a re13 payment schedule that results in negative 

14 amortization at any time; 

15 ‘‘(iii) for which the terms are fully 

16 amortizing and which does not result in a 

17 balloon payment, where a ‘balloon pay18 ment’ is a scheduled payment that is more 

19 than twice as large as the average of ear20 lier scheduled payments; 

21 ‘‘(iv) which has an annual percentage 

22 rate that does not exceed the average 

23 prime offer rate for a comparable trans24 action, as of the date the interest rate is 

25 set— 


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1 ‘‘(I) by 1.5 or more percentage 

2 points, in the case of a first lien resi3 dential mortgage loan having a origi4 nal principal obligation amount that is 

5 equal to or less than the amount of 

6 the maximum limitation on the origi7 nal principal obligation of mortgage in 

8 effect for a residence of the applicable 

9 size, as of the date of such interest 

10 rate set, pursuant to the sixth sen11 tence of section 305(a)(2) the Federal 

12 Home Loan Mortgage Corporation 

13 Act (12 U.S.C. 1454(a)(2)); 

14 ‘‘(II) by 2.5 or more percentage 

15 points, in the case of a first lien resi16 dential mortgage loan having a origi17 nal principal obligation amount that is 

18 more than the amount of the max19 imum limitation on the original prin20 cipal obligation of mortgage in effect 

21 for a residence of the applicable size, 

22 as of the date of such interest rate 

23 set, pursuant to the sixth sentence of 

24 section 305(a)(2) the Federal Home 


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1 Loan Mortgage Corporation Act (12 

2 U.S.C. 1454(a)(2)); and 

3 ‘‘(III) by 3.5 or more percentage 

4 points, in the case of a subordinate 

5 lien residential mortgage loan; 

6 ‘‘(v) for which the income and finan7 cial resources relied upon to qualify the ob8 ligors on the loan are verified and docu9 mented; 

10 ‘‘(vi) in the case of a fixed rate loan, 

11 for which the underwriting process is based 

12 on a payment schedule that fully amortizes 

13 the loan over the loan term and takes into 

14 account all applicable taxes, insurance, and 

15 assessments; 

16 ‘‘(vii) in the case of an adjustable rate 

17 loan, for which the underwriting is based 

18 on the maximum rate permitted under the 

19 loan during the first seven years, and a 

20 payment schedule that fully amortizes the 

21 loan over the loan term and takes into ac22 count all applicable taxes, insurance, and 

23 assessments; 

24 ‘‘(viii) that does not cause the con25 sumer’s total monthly debts, including 


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1 amounts under the loan, to exceed a per2 centage established by regulation of the 

3 consumer’s monthly gross income or such 

4 other maximum percentage of such income 

5 as may be prescribed by regulation under 

6 paragraph (4), and such rules shall also 

7 take into consideration the consumer’s in8 come available to pay regular expenses 

9 after payment of all installment and revolv10 ing debt; 

11 ‘‘(ix) for which the total points and 

12 fees payable in connection with the loan do 

13 not exceed 2 percent of the total loan 

14 amount, where ‘points and fees’ means 

15 points and fees as defined by Section 

16 103(aa)(4) of the Truth in Lending Act 

17 (15 U.S.C. 1602(aa)(4)); and 

18 ‘‘(x) for which the term of the loan 

19 does not exceed 30 years, except as such 

20 term may be extended under paragraph 

21 (4). 

22 ‘‘(B) AVERAGE PRIME OFFER RATE.—The 

23 term ‘average prime offer rate’ means an an24 nual percentage rate that is derived from aver25 age interest rates, points, and other loan pricVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01505 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ing terms currently offered to consumers by a 

2 representative sample of creditors for mortgage 

3 transactions that have low risk pricing charac4 teristics. 

5 ‘‘(C) REVERSE MORTGAGES.—For pur6 poses of this subsection, the term ‘qualified 

7 mortgage’ includes any reverse mortgage that is 

8 insured by the Federal Housing Administration 

9 or complies with the condition established in 

10 subparagraph (A)(iv). 

11 ‘‘(3) PUBLICATION OF AVERAGE PRIME OFFER

12 RATE AND APR THRESHOLDS.—The Board— 

13 ‘‘(A) shall publish, and update at least 

14 weekly, average prime offer rates; 

15 ‘‘(B) may publish multiple rates based on 

16 varying types of mortgage transactions; and 

17 ‘‘(C) shall adjust the thresholds of 1.50 

18 percentage points in paragraph (2)(A)(iv)(I), 

19 2.50 percentage points in paragraph 

20 (2)(A)(iv)(II), and 3.50 percentage points in 

21 paragraph (2)(A)(v)(III), as necessary to reflect 

22 significant changes in market conditions and to 

23 effectuate the purposes of the Mortgage Reform 

24 and Anti-Predatory Lending Act. 

25 ‘‘(4) REGULATIONS.— 


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1 ‘‘(A) IN GENERAL.—The Federal banking 

2 agencies shall jointly prescribe regulations to 

3 carry out the purposes of this subsection. 

4 ‘‘(B) REVISION OF SAFE HARBOR CRI5 TERIA.— 

6 ‘‘(i) IN GENERAL.—The Federal bank7 ing agencies may jointly prescribe regula8 tions that revise, add to, or subtract from 

9 the criteria that define a qualified mort10 gage upon a finding that such regulations 

11 are necessary or proper to ensure that re12 sponsible, affordable mortgage credit re13 mains available to consumers in a manner 

14 consistent with the purposes of this sec15 tion, necessary and appropriate to effec16 tuate the purposes of this section and sec17 tion 129B, to prevent circumvention or 

18 evasion thereof, or to facilitate compliance 

19 with such sections. 

20 ‘‘(ii) LOAN DEFINITION.—The fol21 lowing agencies shall, in consultation with 

22 the Federal banking agencies, prescribe 

23 rules defining the types of loans they in24 sure, guarantee or administer, as the case 

25 may be, that are Qualified Mortgages for 


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1 purposes of subsection (c)(1)(A) upon a 

2 finding that such rules are consistent with 

3 the purposes of this section and section 

4 129B, to prevent circumvention or evasion 

5 thereof, or to facilitate compliance with 

6 such sections— 

7 ‘‘(I) The Department of Housing 

8 and Urban Development, with regard 

9 to mortgages insured under title II of 

10 the National Housing Act (12 U.S.C. 

11 1707 et seq.); 

12 ‘‘(II) The Secretary of Veterans 

13 Affairs, with regard to a loan made or 

14 guaranteed by the Secretary of Vet15 erans Affairs; 

16 ‘‘(III) The Secretary of Agri17 culture, with regard loans guaranteed 

18 by the Secretary of Agriculture pursu19 ant to 42 U.S.C. 1472(h); 

20 ‘‘(IV) The Federal Housing Fi21 nance Agency, with regard to loans 

22 meeting the conforming loan stand23 ards of the Federal National Mort24 gage Corporation or the Federal 


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1 Home Loan Mortgage Corporation; 

2 and 

3 ‘‘(V) The Rural Housing Service, 

4 with regard to loans insured by the 

5 Rural Housing Service.’’. 

6 SEC. 9104. LIABILITY. 

7 Section 129C of the Truth in Lending Act is amend8 ed by inserting after subsection (c) (as added by section 

9 9103) the following new subsection: 

10 ‘‘(d) LIABILITY FOR VIOLATIONS.— 

11 ‘‘(1) IN GENERAL.— 

12 ‘‘(A) RESCISSION.—In addition to any 

13 other liability under this title for a violation by 

14 a creditor of subsection (a) or (b) (for example 

15 under section 130) and subject to the statute of 

16 limitations in paragraph (9), a civil action may 

17 be maintained against a creditor for a violation 

18 of subsection (a) or (b) with respect to a resi19 dential mortgage loan for the rescission of the 

20 loan, and such additional costs as the obligor 

21 may have incurred as a result of the violation 

22 and in connection with obtaining a rescission of 

23 the loan, including a reasonable attorney’s fee. 

24 ‘‘(B) CURE.—A creditor shall not be liable 

25 for rescission under subparagraph (A) with reVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01509 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 spect to a residential mortgage loan if, no later 

2 than 90 days after the receipt of notification 

3 from the consumer that the loan violates sub4 section (a) or (b), the creditor, acting in good 

5 faith, a cure. 

6 ‘‘(2) LIMITED ASSIGNEE AND SECURITIZER LI7 ABILITY.—Notwithstanding sections 125(e) and 131 

8 and except as provided in paragraph (3), a civil ac9 tion which may be maintained against a creditor 

10 with respect to a residential mortgage loan for a vio11 lation of subsection (a) or (b) may be maintained 

12 against any assignee or securitizer of such residen13 tial mortgage loan, who has acted in good faith, for 

14 the following liabilities only: 

15 ‘‘(A) Rescission of the loan. 

16 ‘‘(B) Such additional costs as the obligor 

17 may have incurred as a result of the violation 

18 and in connection with obtaining a rescission of 

19 the loan, including a reasonable attorney’s fee. 

20 ‘‘(3) ASSIGNEE AND SECURITIZER EXEMP21 TION.—No assignee or securitizer of a residential 

22 mortgage loan that has exercised reasonable due dili23 gence in complying with the requirements of sub24 sections (a) and (b), consistent with reasonable due 

25 diligence practices prescribed by the Federal banking 


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1 agencies, shall be liable under paragraph (2) with re2 spect to such loan if, no later than 90 days after the 

3 receipt of notification from the consumer that the 

4 loan violates subsection (a) or (b), the assignee or 

5 securitizer provides a cure so that the loan satisfies 

6 the requirements of subsections (a) and (b). 

7 ‘‘(4) ABSENT PARTIES.— 

8 ‘‘(A) ABSENT CREDITOR.—Notwith9 standing the exemption provided in paragraph 

10 (3), if the creditor with respect to a residential 

11 mortgage loan made in violation of subsection 

12 (a) or (b) has ceased to exist as a matter of law 

13 or has filed for bankruptcy protection under 

14 title 11, United States Code, or has had a re15 ceiver, conservator, or liquidating agent ap16 pointed, a consumer may maintain a civil action 

17 against an assignee to cure the residential 

18 mortgage loan, plus the costs and reasonable 

19 attorney’s fees incurred in obtaining such rem20 edy. 

21 ‘‘(B) ABSENT CREDITOR AND ASSIGNEE.— 

22 Notwithstanding the exemption provided in 

23 paragraph (3), if the creditor with respect to a 

24 residential mortgage loan made in violation of 

25 subsection (a) or (b) and each assignee of such 


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1 loan have ceased to exist as a matter of law or 

2 have filed for bankruptcy protection under title 

3 11, United States Code, or have had receivers, 

4 conservators, or liquidating agents appointed, 

5 the consumer may maintain the civil action re6 ferred to in subparagraph (A) against the 

7 securitizer. 

8 ‘‘(5) CURE DEFINED.—For purposes of this 

9 subsection, the term ‘cure’ means, with respect to a 

10 residential mortgage loan that violates subsection (a) 

11 or (b), the modification or refinancing, at no cost to 

12 the consumer, of the loan to provide terms that sat13 isfy the requirements of subsections (a) and (b) and 

14 the payment of such additional costs as the obligor 

15 may have incurred in connection with obtaining a 

16 cure of the loan, including a reasonable attorney’s 

17 fee. 

18 ‘‘(6) DISAGREEMENT OVER CURE.—If any cred19 itor, assignee, or securitizer and a consumer fail to 

20 reach agreement on a cure with respect to a residen21 tial mortgage loan that violates subsection (a) or (b), 

22 or the consumer fails to accept a cure proffered by 

23 a creditor, assignee, or securitizer— 

24 ‘‘(A) the creditor, assignee, or securitizer 

25 may provide the cure; and 


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1 ‘‘(B) the consumer may challenge the ade2 quacy of the cure during the 6-month period be3 ginning when the cure is provided. 

4 If the consumer’s challenge, under this paragraph, 

5 of a cure is successful, the creditor, assignee, or 

6 securitizer shall be liable to the consumer for rescis7 sion of the loan and such additional costs under 

8 paragraph (2). 

9 ‘‘(7) INABILITY TO PROVIDE OR OBTAIN RE10 SCISSION.—If a creditor, assignee, or securitizer 

11 cannot provide, or a consumer cannot obtain, rescis12 sion under paragraph (1) or (2), the liability of such 

13 creditor, assignee, or securitizer shall be met by pro14 viding the financial equivalent of a rescission, to15 gether with such additional costs as the obligor may 

16 have incurred as a result of the violation and in con17 nection with obtaining a rescission of the loan, in18 cluding a reasonable attorney’s fee. 

19 ‘‘(8) NO CLASS ACTIONS AGAINST ASSIGNEE OR

20 SECURITIZER UNDER PARAGRAPH (2).—Only indi21 vidual actions may be brought against an assignee 

22 or securitizer of a residential mortgage loan for a 

23 violation of subsection (a) or (b). 

24 ‘‘(9) STATUTE OF LIMITATIONS.—The liability 

25 of a creditor, assignee, or securitizer under this subVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01513 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 section shall apply in any original action against a 

2 creditor under paragraph (1) or an assignee or 

3 securitizer under paragraph (2) which is brought be4 fore— 

5 ‘‘(A) in the case of any residential mort6 gage loan other than a loan to which subpara7 graph (B) applies, the end of the 3-year period 

8 beginning on the date the loan is consummated; 

9 or 

10 ‘‘(B) in the case of a residential mortgage 

11 loan that provides for a fixed interest rate for 

12 an introductory period and then resets or ad13 justs to a variable rate or that provides for a 

14 nonamortizing payment schedule and then con15 verts to an amortizing payment schedule, the 

16 earlier of— 

17 ‘‘(i) the end of the 1-year period be18 ginning on the date of such reset, adjust19 ment, or conversion; or 

20 ‘‘(ii) the end of the 6-year period be21 ginning on the date the loan is con22 summated. 

23 ‘‘(10) TRUSTEES, POOLS, AND INVESTORS IN

24 POOLS EXCLUDED.—In the case of residential mort25 gage loans acquired or aggregated for the purpose of 


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1 including such loans in a pool of assets held for the 

2 purpose of issuing or selling instruments rep3 resenting interests in such pools including through a 

4 securitization vehicle, the terms ‘assignee’ and 

5 ‘securitizer’, as used in this section, do not include 

6 the securitization vehicle, any trustee that holds 

7 such loans solely for the benefit of the securitization 

8 vehicle, the pools of such loans or any original or 

9 subsequent purchaser of any interest in the 

10 securitization vehicle or any instrument representing 

11 a direct or indirect interest in such pool. 

12 ‘‘(e) OBLIGATION OF SECURITIZERS, AND PRESERVA13 TION OF BORROWER REMEDIES.— 

14 ‘‘(1) OBLIGATION TO RETAIN ACCESS.—Any 

15 securitizer of a residential mortgage loan sold or to 

16 be sold as part of a securitization vehicle shall, in 

17 any document or contract providing for the transfer, 

18 conveyance, or the establishment of such 

19 securitization vehicle, reserve the right and preserve 

20 the ability— 

21 ‘‘(A) to identify and obtain access to any 

22 such loan; 

23 ‘‘(B) to acquire any such loan in the event 

24 of a violation of subsection (a) or (b) of this 

25 section; and 


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1 ‘‘(C) to provide to the consumer any and 

2 all remedies provided for under this title for 

3 any violation of this title. 

4 ‘‘(2) ADDITIONAL DAMAGES.—Any creditor, as5 signee, or securitizer of a residential mortgage loan 

6 that is subject to a remedy under subsection (d) and 

7 has failed to comply with paragraph (1) shall be 

8 subject to additional exemplary or punitive damages 

9 not to exceed the original principal balance of such 

10 loan. 

11 ‘‘(3) CONTACT INFORMATION NOTICE.—The 

12 servicer with respect to a residential mortgage loan 

13 shall provide a written notice to a consumer identi14 fying the name and contact information of the cred15 itor or any assignee or securitizer who should be 

16 contacted by the consumer for any reason con17 cerning the consumer’s rights with respect to the 

18 loan. Such notice shall be provided— 

19 ‘‘(A) upon request of the consumer; 

20 ‘‘(B) whenever there is a change in owner21 ship of a residential mortgage loan; or 

22 ‘‘(C) on a regular basis, not less than an23 nually. 

24 ‘‘(f) RULES TO ESTABLISH PROCESS.—The Board 

25 shall promulgate rules to govern the rescission process esVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01516 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tablished for violations of subsections (a) and (b) of this 

2 section. Such rules shall provide that notice given to a 

3 servicer or holder is sufficient notice regardless of the 

4 identity of the party or the parties liable under this title.’’. 

5 SEC. 9105. DEFENSE TO FORECLOSURE. 

6 Section 129C of the Truth in Lending Act is amend7 ed by inserting after subsection (f) (as added by section 

8 9104) the following new subsections: 

9 ‘‘(g) DEFENSE TO FORECLOSURE.—Notwithstanding 

10 any other provision of law— 

11 ‘‘(1) when the holder of a residential mortgage 

12 loan or anyone acting for such holder initiates a ju13 dicial or nonjudicial foreclosure— 

14 ‘‘(A) a consumer who has the right to re15 scind under this section with respect to such 

16 loan against the creditor or any assignee or 

17 securitizer may assert such right as a defense 

18 to foreclosure or counterclaim to such fore19 closure against the holder, or 

20 ‘‘(B) if the foreclosure proceeding begins 

21 after the end of the period during which a con22 sumer may bring an action for rescission under 

23 subsection (d) and the consumer would have 

24 had a valid basis for such an action if it had 

25 been brought before the end of such period, the 


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1 consumer may seek actual damages incurred by 

2 reason of the violation which gave rise to the 

3 right of rescission, together with costs of the 

4 action, including a reasonable attorney’s fee 

5 against the creditor or any assignee or 

6 securitizer; and 

7 ‘‘(2) such holder or anyone acting for such 

8 holder or any other applicable third party may sell, 

9 transfer, convey, or assign a residential mortgage 

10 loan to a creditor, any assignee, or any securitizer, 

11 or their designees, subject to the rights of the con12 sumer described in this subsection, to effect a rescis13 sion or cure.’’. 

14 SEC. 9106. ADDITIONAL STANDARDS AND REQUIREMENTS. 

15 (a) IN GENERAL.—Section 129C of the Truth in 

16 Lending Act is amended by inserting after subsection (g) 

17 (as added by section 9105) the following new subsections: 

18 ‘‘(h) PROHIBITION ON CERTAIN PREPAYMENT PEN19 ALTIES.— 

20 ‘‘(1) PROHIBITED ON CERTAIN LOANS.—A resi21 dential mortgage loan that is not a ‘qualified mort22 gage’ may not contain terms under which a con23 sumer must pay a prepayment penalty for paying all 

24 or part of the principal after the loan is con25 summated. For purposes of this subsection, a ‘qualiVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01518 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 fied mortgage’ may not include a residential mort2 gage loan that has an adjustable rate. 

3 ‘‘(2) PHASED-OUT PENALTIES ON QUALIFIED

4 MORTGAGES.—A qualified mortgage (as defined in 

5 subsection (c)) may not contain terms under which 

6 a consumer must pay a prepayment penalty for pay7 ing all or part of the principal after the loan is con8 summated in excess of the following limitations: 

9 ‘‘(A) During the 1-year period beginning 

10 on the date the loan is consummated, the pre11 payment penalty shall not exceed an amount 

12 equal to 3 percent of the outstanding balance 

13 on the loan. 

14 ‘‘(B) During the 1-year period beginning 

15 after the period described in subparagraph (A), 

16 the prepayment penalty shall not exceed an 

17 amount equal to 2 percent of the outstanding 

18 balance on the loan. 

19 ‘‘(C) During the 1-year period beginning 

20 after the 1-year period described in subpara21 graph (B), the prepayment penalty shall not ex22 ceed an amount equal to 1 percent of the out23 standing balance on the loan. 

24 ‘‘(D) After the end of the 3-year period be25 ginning on the date the loan is consummated, 


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1 no prepayment penalty may be imposed on a 

2 qualified mortgage. 

3 ‘‘(3) OPTION FOR NO PREPAYMENT PENALTY

4 REQUIRED.—A creditor may not offer a consumer a 

5 residential mortgage loan product that has a prepay6 ment penalty for paying all or part of the principal 

7 after the loan is consummated as a term of the loan 

8 without offering the consumer a residential mort9 gage loan product that does not have a prepayment 

10 penalty as a term of the loan. 

11 ‘‘(i) SINGLE PREMIUM CREDIT INSURANCE PROHIB12 ITED.—No creditor may finance, directly or indirectly, in 

13 connection with any residential mortgage loan or with any 

14 extension of credit under an open end consumer credit 

15 plan secured by the principal dwelling of the consumer 

16 (other than a reverse mortgage), any credit life, credit dis17 ability, credit unemployment or credit property insurance, 

18 or any other accident, loss-of-income, life or health insur19 ance, or any payments directly or indirectly for any debt 

20 cancellation or suspension agreement or contract, except 

21 that— 

22 ‘‘(1) insurance premiums or debt cancellation or 

23 suspension fees calculated and paid in full on a 

24 monthly basis shall not be considered financed by 

25 the creditor; and 


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1 ‘‘(2) this subsection shall not apply to credit 

2 unemployment insurance for which the unemploy3 ment insurance premiums are reasonable, the cred4 itor receives no direct or indirect compensation in 

5 connection with the unemployment insurance pre6 miums, and the unemployment insurance premiums 

7 are paid pursuant to another insurance contract and 

8 not paid to an affiliate of the creditor. 

9 ‘‘(j) ARBITRATION.— 

10 ‘‘(1) IN GENERAL.—No residential mortgage 

11 loan and no extension of credit under an open end 

12 consumer credit plan secured by the principal dwell13 ing of the consumer, other than a reverse mortgage, 

14 may include terms which require arbitration or any 

15 other nonjudicial procedure as the method for resolv16 ing any controversy or settling any claims arising 

17 out of the transaction. 

18 ‘‘(2) POST-CONTROVERSY AGREEMENTS.—Sub19 ject to paragraph (3), paragraph (1) shall not be 

20 construed as limiting the right of the consumer and 

21 the creditor, any assignee, or any securitizer to 

22 agree to arbitration or any other nonjudicial proce23 dure as the method for resolving any controversy at 

24 any time after a dispute or claim under the trans25 action arises. 


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1 ‘‘(3) NO WAIVER OF STATUTORY CAUSE OF AC2 TION.—No provision of any residential mortgage 

3 loan or of any extension of credit under an open end 

4 consumer credit plan secured by the principal dwell5 ing of the consumer (other than a reverse mort6 gage), and no other agreement between the con7 sumer and the creditor relating to the residential 

8 mortgage loan or extension of credit referred to in 

9 paragraph (1), shall be applied or interpreted so as 

10 to bar a consumer from bringing an action in an ap11 propriate district court of the United States, or any 

12 other court of competent jurisdiction, pursuant to 

13 section 130 or any other provision of law, for dam14 ages or other relief in connection with any alleged 

15 violation of this section, any other provision of this 

16 title, or any other Federal law. 

17 ‘‘(k) MORTGAGES WITH NEGATIVE AMORTIZA18 TION.—No creditor may extend credit to a borrower in 

19 connection with a consumer credit transaction under an 

20 open or closed end consumer credit plan secured by a 

21 dwelling or residential real property that includes a dwell22 ing, other than a reverse mortgage, that provides or per23 mits a payment plan that may, at any time over the term 

24 of the extension of credit, result in negative amortization 

25 unless, before such transaction is consummated— 


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1 ‘‘(1) the creditor provides the consumer with a 

2 statement that— 

3 ‘‘(A) the pending transaction will or may, 

4 as the case may be, result in negative amortiza5 tion; 

6 ‘‘(B) describes negative amortization in 

7 such manner as the Federal banking agencies 

8 shall prescribe; 

9 ‘‘(C) negative amortization increases the 

10 outstanding principal balance of the account; 

11 and 

12 ‘‘(D) negative amortization reduces the 

13 consumer’s equity in the dwelling or real prop14 erty; and 

15 ‘‘(2) in the case of a first-time borrower with 

16 respect to a residential mortgage loan that is not a 

17 qualified mortgage, the first-time borrower provides 

18 the creditor with sufficient documentation to dem19 onstrate that the consumer received homeownership 

20 counseling from organizations or counselors certified 

21 by the Secretary of Housing and Urban Develop22 ment as competent to provide such counseling.’’. 

23 (b) CONFORMING AMENDMENT RELATING TO EN24 FORCEMENT.—Section 108(a) of the Truth in Lending 


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1 Act (15 U.S.C. 1607(a)) is amended by inserting after 

2 paragraph (6) the following new paragraph: 

3 ‘‘(7) sections 21B and 21C of the Securities 

4 Exchange Act of 1934, in the case of a broker or 

5 dealer, other than a depository institution, by the 

6 Securities and Exchange Commission.’’. 

7 (c) PROTECTION AGAINST LOSS OF ANTI-DEFI8 CIENCY PROTECTION.—Section 129C of the Truth in 

9 Lending Act is amended by inserting after subsection (k) 

10 (as added by subsection (a) of this section) the following 

11 new subsection (and designated succeeding subsections ac12 cordingly): 

13 ‘‘(l) PROTECTION AGAINST LOSS OF ANTI-DEFI14 CIENCY PROTECTION.— 

15 ‘‘(1) DEFINITION.—For purposes of this sub16 section, the term ‘anti-deficiency law’ means the law 

17 of any State which provides that, in the event of 

18 foreclosure on the residential property of a consumer 

19 securing a mortgage, the consumer is not liable, in 

20 accordance with the terms and limitations of such 

21 State law, for any deficiency between the sale price 

22 obtained on such property through foreclosure and 

23 the outstanding balance of the mortgage. 

24 ‘‘(2) NOTICE AT TIME OF CONSUMMATION.—In 

25 the case of any residential mortgage loan that is, or 


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1 upon consummation will be, subject to protection 

2 under an anti-deficiency law, the creditor or mort3 gage originator shall provide a written notice to the 

4 consumer describing the protection provided by the 

5 anti-deficiency law and the significance for the con6 sumer of the loss of such protection before such loan 

7 is consummated. 

8 ‘‘(3) NOTICE BEFORE REFINANCING THAT

9 WOULD CAUSE LOSS OF PROTECTION.—In the case 

10 of any residential mortgage loan that is subject to 

11 protection under an anti-deficiency law, if a creditor 

12 or mortgage originator provides an application to a 

13 consumer, or receives an application from a con14 sumer, for any type of refinancing for such loan that 

15 would cause the loan to lose the protection of such 

16 anti-deficiency law, the creditor or mortgage origi17 nator shall provide a written notice to the consumer 

18 describing the protection provided by the anti-defi19 ciency law and the significance for the consumer of 

20 the loss of such protection before any agreement for 

21 any such refinancing is consummated.’’. 

22 (d) POLICY REGARDING ACCEPTANCE OF PARTIAL

23 PAYMENT.—Section 129C of the Truth in Lending Act 

24 is amended by inserting after subsection (l) (as added by 

25 subsection (c)) the following new subsection: 


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1 ‘‘(m) POLICY REGARDING ACCEPTANCE OF PARTIAL

2 PAYMENT.—In the case of any residential mortgage loan, 

3 a creditor shall disclose prior to settlement or, in the case 

4 of a person becoming a creditor with respect to an existing 

5 residential mortgage loan, at the time such person be6 comes a creditor— 

7 ‘‘(1) the creditor’s policy regarding the accept8 ance of partial payments; and 

9 ‘‘(2) if partial payments are accepted, how such 

10 payments will be applied to such mortgage and if 

11 such payments will be placed in escrow.’’. 

12 SEC. 9107. RULE OF CONSTRUCTION. 

13 Except as otherwise expressly provided in section 

14 129B or 129C of the Truth in Lending Act (as added by 

15 this subtitle), no provision of such section 129B or 129C 

16 shall be construed as superseding, repealing, or affecting 

17 any duty, right, obligation, privilege, or remedy of any per18 son under any other provision of the Truth in Lending 

19 Act or any other provision of Federal or State law. 

20 SEC. 9108. EFFECT ON STATE LAWS. 

21 (a) IN GENERAL.—Except as provided in subsection 

22 (b), section 129C(d) of the Truth in Lending Act (as 

23 added by section 9104) shall supersede any State law to 

24 the extent that it provides additional remedies against any 

25 assignee, securitizer, or securitization vehicle for a violaVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01526 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tion of subsection (a) or (b) of section 129C of such Act 

2 or any other State law the terms of which address the 

3 specific subject matter of subsection (a) (determination of 

4 ability to repay) or (b) (requirement of a net tangible ben5 efit) of section 129C of such Act, and the remedies de6 scribed in section 129C(d) shall constitute the sole rem7 edies against any assignee, securitizer, or securitization 

8 vehicle for such violations. 

9 (b) RULES OF CONSTRUCTION.—No provision of this 

10 section shall be construed as limiting— 

11 (1) the application of any State law, or the 

12 availability of remedies under such law, against a 

13 creditor for a particular residential mortgage loan 

14 regardless of whether such creditor also acts as an 

15 assignee, securitizer, or securitization vehicle for 

16 such loan; 

17 (2) the application of any State law, or the 

18 availability of remedies under such law, against an 

19 assignee, securitizer, or securitization vehicle under 

20 State law, other than a provision of such law the 

21 terms of which address the specific subject matter of 

22 subsection (a) (determination of ability to repay) or 

23 (b) (requirement of a net tangible benefit) of section 

24 129C of such Act; 


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1 (3)(A) the application of any State law, or the 

2 availability of remedies under such law, against an 

3 assignee, securitizer or securitization vehicle for its 

4 participation in or direction of the credit or under5 writing decisions of a creditor relating to the making 

6 of a residential mortgage loan; or 

7 (B) the ability of a consumer to assert any 

8 rights against or obtain any remedies from an as9 signee, securitizer or securitization vehicle with re10 spect to a residential mortgage loan as a defense to 

11 foreclosure under section 129C(g); 

12 (4) the availability of any equitable remedies, 

13 including injunctive relief, under State law; or 

14 (5) notwithstanding paragraph (2), the avail15 ability of any remedies under State law against any 

16 assignee, securitizer or securitization vehicle that— 

17 (A) are in addition to those remedies pro18 vided for in section 129C; and 

19 (B) were in effect on the date of enactment 

20 of this Act. 

21 SEC. 9109. REGULATIONS. 

22 Regulations required or authorized to be prescribed 

23 under this subtitle or the amendments made by this sub24 title— 


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1 (1) shall be prescribed in final form before the 

2 end of the 12-month period beginning on the date of 

3 the enactment of this Act; and 

4 (2) shall take effect not later than 18 months 

5 after the date of the enactment of this Act. 

6 SEC. 9110. AMENDMENTS TO CIVIL LIABILITY PROVISIONS. 

7 (a) INCREASE IN AMOUNT OF CIVIL MONEY PEN8 ALTIES FOR CERTAIN VIOLATIONS.—Section 130(a)(2) of 

9 the Truth in Lending Act (15 U.S.C. 1640(a)(2)) is 

10 amended— 

11 (1) by striking ‘‘$100’’ and inserting ‘‘$200’’; 

12 (2) by striking ‘‘$1,000’’ and inserting 

13 ‘‘$2,000’’; and 

14 (3) by striking ‘‘$500,000’’ and inserting 

15 ‘‘$1,000,000’’. 

16 (b) STATUTE OF LIMITATIONS EXTENDED FOR SEC17 TION 129 VIOLATIONS.—Section 130(e) of the Truth in 

18 Lending Act (15 U.S.C. 1640(e)) is amended— 

19 (1) in the first sentence, by striking ‘‘Any ac20 tion’’ and inserting ‘‘Except as provided in the sub21 sequent sentence, any action’’; and 

22 (2) by inserting after the first sentence the fol23 lowing new sentence: ‘‘Any action under this section 

24 with respect to any violation of section 129 may be 

25 brought in any United States district court, or in 


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1 any other court of competent jurisdiction, before the 

2 end of the 3-year period beginning on the date of the 

3 occurrence of the violation.’’. 

4 SEC. 9111. LENDER RIGHTS IN THE CONTEXT OF BOR5 ROWER DECEPTION. 

6 Section 130 of the Truth in Lending Act is amended 

7 by adding at the end the following new subsection: 

8 ‘‘(k) EXEMPTION FROM LIABILITY AND RESCISSION

9 IN CASE OF BORROWER FRAUD OR DECEPTION.—In ad10 dition to any other remedy available by law or contract, 

11 no creditor, assignee, or securitizer shall be liable to an 

12 obligor under this section, nor shall it be subject to the 

13 right of rescission of any obligor under 129B, if such obli14 gor, or co-obligor, knowingly, or willfully and with actual 

15 knowledge furnished material information known to be 

16 false for the purpose of obtaining such residential mort17 gage loan.’’. 

18 SEC. 9112. SIX-MONTH NOTICE REQUIRED BEFORE RESET 

19 OF HYBRID ADJUSTABLE RATE MORTGAGES. 

20 (a) IN GENERAL.—Chapter 2 of the Truth in Lend21 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

22 after section 128 the following new section: 

23 ‘‘§ 128A. Reset of hybrid adjustable rate mortgages 

24 ‘‘(a) HYBRID ADJUSTABLE RATE MORTGAGES DE25 FINED.—For purposes of this section, the term ‘hybrid adVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01530 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 justable rate mortgage’ means a consumer credit trans2 action secured by the consumer’s principal residence with 

3 a fixed interest rate for an introductory period that ad4 justs or resets to a variable interest rate after such period. 

5 ‘‘(b) NOTICE OF RESET AND ALTERNATIVES.—Dur6 ing the 1-month period that ends 6 months before the date 

7 on which the interest rate in effect during the introductory 

8 period of a hybrid adjustable rate mortgage adjusts or 

9 resets to a variable interest rate or, in the case of such 

10 an adjustment or resetting that occurs within the first 6 

11 months after consummation of such loan, at consumma12 tion, the creditor or servicer of such loan shall provide a 

13 written notice, separate and distinct from all other cor14 respondence to the consumer, that includes the following: 

15 ‘‘(1) Any index or formula used in making ad16 justments to or resetting the interest rate and a 

17 source of information about the index or formula. 

18 ‘‘(2) An explanation of how the new interest 

19 rate and payment would be determined, including an 

20 explanation of how the index was adjusted, such as 

21 by the addition of a margin. 

22 ‘‘(3) A good faith estimate, based on accepted 

23 industry standards, of the creditor or servicer of the 

24 amount of the monthly payment that will apply after 


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1 the date of the adjustment or reset, and the assump2 tions on which this estimate is based. 

3 ‘‘(4) A list of alternatives consumers may pur4 sue before the date of adjustment or reset, and de5 scriptions of the actions consumers must take to 

6 pursue these alternatives, including— 

7 ‘‘(A) refinancing; 

8 ‘‘(B) renegotiation of loan terms; 

9 ‘‘(C) payment forbearances; and 

10 ‘‘(D) pre-foreclosure sales. 

11 ‘‘(5) The names, addresses, telephone numbers, 

12 and Internet addresses of counseling agencies or 

13 programs reasonably available to the consumer that 

14 have been certified or approved and made publicly 

15 available by the Secretary of Housing and Urban 

16 Development or a State housing finance authority 

17 (as defined in section 1301 of the Financial Institu18 tions Reform, Recovery, and Enforcement Act of 

19 1989). 

20 ‘‘(6) The address, telephone number, and Inter21 net address for the State housing finance authority 

22 (as so defined) for the State in which the consumer 

23 resides.’’. 

24 (b) CLERICAL AMENDMENT.—The table of sections 

25 for chapter 2 of the Truth in Lending Act is amended 


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1 by inserting after the item relating to section 128 the fol2 lowing new item: 

‘‘128A. Reset of hybrid adjustable rate mortgages.’’. 

3 SEC. 9113. REQUIRED DISCLOSURES. 

4 Section 128(a) of Truth in Lending Act (15 U.S.C. 

5 1638(a)) is amended by adding at the end the following 

6 new paragraphs: 

7 ‘‘(16) In the case of a variable rate residential 

8 mortgage loan for which an escrow or impound ac9 count will be established for the payment of all ap10 plicable taxes, insurance, and assessments— 

11 ‘‘(A) the amount of initial monthly pay12 ment due under the loan for the payment of 

13 principal and interest, and the amount of such 

14 initial monthly payment including the monthly 

15 payment deposited in the account for the pay16 ment of all applicable taxes, insurance, and as17 sessments; and 

18 ‘‘(B) the amount of the fully indexed 

19 monthly payment due under the loan for the 

20 payment of principal and interest, and the 

21 amount of such fully indexed monthly payment 

22 including the monthly payment deposited in the 

23 account for the payment of all applicable taxes, 

24 insurance, and assessments. 


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1 ‘‘(17) In the case of a residential mortgage 

2 loan, the aggregate amount of settlement charges for 

3 all settlement services provided in connection with 

4 the loan, the amount of charges that are included in 

5 the loan and the amount of such charges the bor6 rower must pay at closing, the approximate amount 

7 of the wholesale rate of funds in connection with the 

8 loan, and the aggregate amount of other fees or re9 quired payments in connection with the loan. 

10 ‘‘(18) In the case of a residential mortgage 

11 loan, the aggregate amount of fees paid to the mort12 gage originator in connection with the loan, the 

13 amount of such fees paid directly by the consumer, 

14 and any additional amount received by the originator 

15 from the creditor. 

16 ‘‘(19) In the case of a residential mortgage 

17 loan, the total amount of interest that the consumer 

18 will pay over the life of the loan as a percentage of 

19 the principal of the loan. Such amount shall be com20 puted assuming the consumer makes each monthly 

21 payment in full and on-time, and does not make any 

22 over-payments.’’. 


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1 SEC. 9114. DISCLOSURES REQUIRED IN MONTHLY STATE2 MENTS FOR RESIDENTIAL MORTGAGE 

3 LOANS. 

4 Section 128 of the Truth in Lending Act (15 U.S.C. 

5 1638) is amended by adding at the end the following new 

6 subsection: 

7 ‘‘(f) PERIODIC STATEMENTS FOR RESIDENTIAL

8 MORTGAGE LOANS.— 

9 ‘‘(1) IN GENERAL.—The creditor, assignee, or 

10 servicer with respect to any residential mortgage 

11 loan shall transmit to the obligor, for each billing 

12 cycle, a statement setting forth each of the following 

13 items, to the extent applicable, in a conspicuous and 

14 prominent manner: 

15 ‘‘(A) The amount of the principal obliga16 tion under the mortgage. 

17 ‘‘(B) The current interest rate in effect for 

18 the loan. 

19 ‘‘(C) The date on which the interest rate 

20 may next reset or adjust. 

21 ‘‘(D) The amount of any prepayment fee 

22 to be charged, if any. 

23 ‘‘(E) A description of any late payment 

24 fees. 


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1 ‘‘(F) A telephone number and electronic 

2 mail address that may be used by the obligor to 

3 obtain information regarding the mortgage. 

4 ‘‘(G) The names, addresses, telephone 

5 numbers, and Internet addresses of counseling 

6 agencies or programs reasonably available to 

7 the consumer that have been certified or ap8 proved and made publicly available by the Sec9 retary of Housing and Urban Development or a 

10 State housing finance authority (as defined in 

11 section 1301 of the Financial Institutions Re12 form, Recovery, and Enforcement Act of 1989). 

13 ‘‘(H) Such other information as the Board 

14 may prescribe in regulations. 

15 ‘‘(2) DEVELOPMENT AND USE OF STANDARD

16 FORM.—The Federal banking agencies shall jointly 

17 develop and prescribe a standard form for the disclo18 sure required under this subsection, taking into ac19 count that the statements required may be trans20 mitted in writing or electronically.’’. 

21 SEC. 9115. LEGAL ASSISTANCE FOR FORECLOSURE-RE22 LATED ISSUES. 

23 (a) ESTABLISHMENT.—The Secretary of Housing 

24 and Urban Development (hereafter in this section referred 

25 to as the ‘‘Secretary’’ shall establish a program for making 


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1 grants for providing a full range of foreclosure legal assist2 ance to low- and moderate-income homeowners and ten3 ants related to home ownership preservation, home fore4 closure prevention, and tenancy associated with home fore5 closure. 

6 (b) COMPETITIVE ALLOCATION.—The Secretary shall 

7 allocate amounts made available for grants under this sec8 tion to State and local legal organizations on the basis 

9 of a competitive process. For purposes of this subsection 

10 ‘‘State and local legal organizations’’ are those State and 

11 local organizations whose primary business or mission is 

12 to provide legal assistance. 

13 (c) PRIORITY TO CERTAIN AREAS.—In allocating 

14 amounts in accordance with subsection (b), the Secretary 

15 shall give priority consideration to State and local legal 

16 organizations that are operating in the 100 metropolitan 

17 statistical areas (as that term is defined by the Director 

18 of the Office of Management and Budget) with the highest 

19 home foreclosure rates. 

20 (d) LEGAL ASSISTANCE.— 

21 (1) IN GENERAL.—Any State or local legal or22 ganization that receives financial assistance pursu23 ant to this section may use such amounts only to as24 sist— 


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1 (A) homeowners of owner-occupied homes 

2 with mortgages in default, in danger of default, 

3 or subject to or at risk of foreclosure; and 

4 (B) tenants at risk of or subject to eviction 

5 as a result of foreclosure of the property in 

6 which such tenant resides. 

7 (2) COMMENCE USE WITHIN 90 DAYS.—Any 

8 State or local legal organization that receives finan9 cial assistance pursuant to this section shall begin 

10 using any financial assistance received under this 

11 section within 90 days after receipt of the assist12 ance. 

13 (3) PROHIBITION ON CLASS ACTIONS.—No 

14 funds provided to a State or local legal organization 

15 under this section may be used to support any class 

16 action litigation. 

17 (4) LIMITATION ON LEGAL ASSISTANCE.—Legal 

18 assistance funded with amounts provided under this 

19 section shall be limited to mortgage-related default, 

20 eviction, or foreclosure proceedings, without regard 

21 to whether such foreclosure is judicial or nonjudicial. 

22 (5) EFFECTIVE DATE.—Notwithstanding sec23 tion 9116, this subsection shall take effect on the 

24 date of the enactment of this Act. 


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1 (e) LIMITATION ON DISTRIBUTION OF ASSIST2 ANCE.— 

3 (1) IN GENERAL.—None of the amounts made 

4 available under this section shall be distributed to— 

5 (A) any organization which has been con6 victed for a violation under Federal law relating 

7 to an election for Federal office; or 

8 (B) any organization which employs appli9 cable individuals. 

10 (2) DEFINITION OF APPLICABLE INDIVID11 UALS.—In this subsection, the term ‘‘applicable indi12 vidual’’ means an individual who— 

13 (A) is— 

14 (i) employed by the organization in a 

15 permanent or temporary capacity; 

16 (ii) contracted or retained by the or17 ganization; or 

18 (iii) acting on behalf of, or with the 

19 express or apparent authority of, the orga20 nization; and 

21 (B) has been convicted for a violation 

22 under Federal law relating to an election for 

23 Federal office. 

24 (f) AUTHORIZATION OF APPROPRIATIONS.—There 

25 are authorized to be appropriated to the Secretary 


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1 $35,000,000 for each of fiscal years 2009 through 2012 

2 for grants under this section. 

3 SEC. 9116. EFFECTIVE DATE. 

4 The amendments made by this subtitle shall apply to 

5 transactions consummated on or after the effective date 

6 of the regulations specified in section 9109. 

7 SEC. 9117. REPORT BY THE GAO. 

8 (a) REPORT REQUIRED.—The Comptroller General 

9 shall conduct a study to determine the effects the enact10 ment of this Act will have on the availability and afford11 ability of credit for consumers, small businesses, home12 buyers, and mortgage lending, including the effect— 

13 (1) on the mortgage market for mortgages that 

14 are not within the safe harbor provided in the 

15 amendments made by this subtitle; 

16 (2) on the ability of prospective homebuyers to 

17 obtain financing; 

18 (3) on the ability of homeowners facing resets 

19 or adjustments to refinance—for example, do they 

20 have fewer refinancing options due to the unavail21 ability of certain loan products that were available 

22 before the enactment of this Act; 

23 (4) on minorities’ ability to access affordable 

24 credit compared with other prospective borrowers; 

25 (5) on home sales and construction; 


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1 (6) of extending the rescission right, if any, on 

2 adjustable rate loans and its impact on litigation; 

3 (7) of State foreclosure laws and, if any, an in4 vestor’s ability to transfer a property after fore5 closure; 

6 (8) of expanding the existing provisions of the 

7 Home Ownership and Equity Protection Act of 

8 1994; 

9 (9) of prohibiting prepayment penalties on 

10 high-cost mortgages; and 

11 (10) of establishing counseling services under 

12 the Department of Housing and Urban Development 

13 and offered through the Office of Housing Coun14 seling. 

15 (b) REPORT.—Before the end of the 1-year period be16 ginning on the date of the enactment of this Act, the 

17 Comptroller General shall submit a report to the Congress 

18 containing the findings and conclusions of the Comptroller 

19 General with respect to the study conducted pursuant to 

20 subsection (a). 

21 (c) EXAMINATION RELATED TO CERTAIN CREDIT

22 RISK RETENTION PROVISIONS.—The report required by 

23 subsection (b) shall also include an analysis by the Comp24 troller General of the effect on the capital reserves and 

25 funding of lenders of credit risk retention provisions for 


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1 non-qualified mortgages, including an analysis of the ex2 ceptions and adjustments authorized in section 

3 129C(l)(3)(A) of the Truth in Lending Act and a rec4 ommendation on whether a uniform standard is needed. 

5 (d) ANALYSIS OF CREDIT RISK RETENTION PROVI6 SIONS.—The report required by subsection (b) shall also 

7 include— 

8 (1) an analysis by the Comptroller General of 

9 whether the credit risk retention provisions have sig10 nificantly reduced risks to the larger credit market 

11 of the repackaging and selling of securitized loans on 

12 a secondary market; and 

13 (2) recommendations to the Congress on adjust14 ments that should be made, or additional measures 

15 that should be undertaken. 

16 SEC. 9118. STATE ATTORNEY GENERAL ENFORCEMENT AU17 THORITY. 

18 Section 130(e) of the Truth in Lending Act (15 

19 U.S.C. 1640(e)) is amended by striking ‘‘section 129 may 

20 also’’ and inserting ‘‘section 129, 129B, or 129C of this 

21 Act may also’’. 


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1 Subtitle C—High-Cost Mortgages 

2 SEC. 9201. DEFINITIONS RELATING TO HIGH-COST MORT3 GAGES. 

4 (a) HIGH-COST MORTGAGE DEFINED.—Section 

5 103(aa) of the Truth in Lending Act (15 U.S.C. 

6 1602(aa)) is amended by striking all that precedes para7 graph (2) and inserting the following: 

8 ‘‘(aa) HIGH-COST MORTGAGE.— 

9 ‘‘(1) DEFINITION.— 

10 ‘‘(A) IN GENERAL.—The term ‘high-cost 

11 mortgage’, and a mortgage referred to in this 

12 subsection, means a consumer credit trans13 action that is secured by the consumer’s prin14 cipal dwelling, other than a reverse mortgage 

15 transaction, if— 

16 ‘‘(i) in the case of a credit transaction 

17 secured— 

18 ‘‘(I) by a first mortgage on the 

19 consumer’s principal dwelling, the an20 nual percentage rate at consummation 

21 of the transaction will exceed by more 

22 than 6.5 percentage points (8.5 per23 centage points, if the dwelling is per24 sonal property and the transaction is 

25 for less than $50,000) the average 


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1 prime offer rate, as defined in section 

2 129C(c)(2)(B), for a comparable 

3 transaction; or 

4 ‘‘(II) by a subordinate or junior 

5 mortgage on the consumer’s principal 

6 dwelling, the annual percentage rate 

7 at consummation of the transaction 

8 will exceed by more than 8.5 percent9 age points the average prime offer 

10 rate, as defined in section 

11 129C(c)(2)(B), for a comparable 

12 transaction; 

13 ‘‘(ii) the total points and fees payable 

14 in connection with the transaction ex15 ceed— 

16 ‘‘(I) in the case of a transaction 

17 for $20,000 or more, 5 percent of the 

18 total transaction amount; or 

19 ‘‘(II) in the case of a transaction 

20 for less than $20,000, the lesser of 8 

21 percent of the total transaction 

22 amount or $1,000 (or such other dol23 lar amount as the Board shall pre24 scribe by regulation); or 


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1 ‘‘(iii) the credit transaction documents 

2 permit the creditor to charge or collect pre3 payment fees or penalties more than 36 

4 months after the transaction closing or 

5 such fees or penalties exceed, in the aggre6 gate, more than 2 percent of the amount 

7 prepaid. 

8 ‘‘(B) INTRODUCTORY RATES TAKEN INTO

9 ACCOUNT.—For purposes of subparagraph 

10 (A)(i), the annual percentage rate of interest 

11 shall be determined based on the following in12 terest rate: 

13 ‘‘(i) In the case of a fixed-rate trans14 action in which the annual percentage rate 

15 will not vary during the term of the loan, 

16 the interest rate in effect on the date of 

17 consummation of the transaction. 

18 ‘‘(ii) In the case of a transaction in 

19 which the rate of interest varies solely in 

20 accordance with an index, the interest rate 

21 determined by adding the index rate in ef22 fect on the date of consummation of the 

23 transaction to the maximum margin per24 mitted at any time during the transaction 

25 agreement. 


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1 ‘‘(iii) In the case of any other trans2 action in which the rate may vary at any 

3 time during the term of the loan for any 

4 reason, the interest charged on the trans5 action at the maximum rate that may be 

6 charged during the term of the trans7 action.’’. 

8 (b) ADJUSTMENT OF PERCENTAGE POINTS.—Section 

9 103(aa)(2) of the Truth in Lending Act (15 U.S.C. 

10 1602(aa)(2)) is amended by striking subparagraph (B) 

11 and inserting the following new subparagraph: 

12 ‘‘(B) An increase or decrease under sub13 paragraph (A)— 

14 ‘‘(i) may not result in the number of 

15 percentage points referred to in paragraph 

16 (1)(A)(i)(I) being less than 6 percentage 

17 points or greater than 10 percentage 

18 points; and 

19 ‘‘(ii) may not result in the number of 

20 percentage points referred to in paragraph 

21 (1)(A)(i)(II) being less than 8 percentage 

22 points or greater than 12 percentage 

23 points.’’. 

24 (c) POINTS AND FEES DEFINED.— 


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1 (1) IN GENERAL.—Section 103(aa)(4) of the 

2 Truth in Lending Act (15 U.S.C. 1602(aa)(4)) is 

3 amended— 

4 (A) by striking subparagraph (B) and in5 serting the following: 

6 ‘‘(B) all compensation paid directly or indi7 rectly by a consumer or creditor to a mortgage 

8 originator from any source, including a mort9 gage originator that originates a loan in the 

10 name of the creditor in a table-funded trans11 action;’’; 

12 (B) in subparagraph (C)(ii), by inserting 

13 ‘‘except where applied to the charges set forth 

14 in section 106(e)(1) where a creditor may re15 ceive indirect compensation solely as a result of 

16 obtaining distributions of profits from an affili17 ated entity based on its ownership interest in 

18 compliance with section 8(c)(4) of the Real Es19 tate Settlement Procedures Act of 1974’’ before 

20 the semicolon at the end; 

21 (C) in subparagraph (C)(iii), by striking ‘‘; 

22 and’’ and inserting ‘‘, except as provided for in 

23 clause (ii);’’; 

24 (D) by redesignating subparagraph (D) as 

25 subparagraph (G); and 


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1 (E) by inserting after subparagraph (C) 

2 the following new subparagraphs: 

3 ‘‘(D) premiums or other charges payable at 

4 or before closing for any credit life, credit dis5 ability, credit unemployment, or credit property 

6 insurance, or any other accident, loss-of-income, 

7 life or health insurance, or any payments di8 rectly or indirectly for any debt cancellation or 

9 suspension agreement or contract, except that 

10 insurance premiums or debt cancellation or sus11 pension fees calculated and paid in full on a 

12 monthly basis shall not be considered financed 

13 by the creditor; 

14 ‘‘(E) except as provided in subsection (cc), 

15 the maximum prepayment fees and penalties 

16 which may be charged or collected under the 

17 terms of the credit transaction; 

18 ‘‘(F) all prepayment fees or penalties that 

19 are incurred by the consumer if the loan refi20 nances a previous loan made or currently held 

21 by the same creditor or an affiliate of the cred22 itor; and’’. 

23 (2) CALCULATION OF POINTS AND FEES FOR

24 OPEN-END CONSUMER CREDIT PLANS.—Section 


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1 103(aa) of the Truth in Lending Act (15 U.S.C. 

2 1602(aa)) is amended— 

3 (A) by redesignating paragraph (5) as 

4 paragraph (6); and 

5 (B) by inserting after paragraph (4) the 

6 following new paragraph: 

7 ‘‘(5) CALCULATION OF POINTS AND FEES FOR

8 OPEN-END CONSUMER CREDIT PLANS.—In the case 

9 of open-end consumer credit plans, points and fees 

10 shall be calculated, for purposes of this section and 

11 section 129, by adding the total points and fees 

12 known at or before closing, including the maximum 

13 prepayment penalties which may be charged or col14 lected under the terms of the credit transaction, plus 

15 the minimum additional fees the consumer would be 

16 required to pay to draw down an amount equal to 

17 the total credit line.’’. 

18 (d) BONA FIDE DISCOUNT LOAN DISCOUNT

19 POINTS.—Section 103 of the Truth in Lending Act (15 

20 U.S.C. 1602) is amended by inserting after subsection (cc) 

21 (as added by section 101) the following new subsection: 

22 ‘‘(dd) BONA FIDE DISCOUNT POINTS AND PREPAY23 MENT PENALTIES.—For the purposes of determining the 

24 amount of points and fees for purposes of subsection (aa), 


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1 either the amounts described in paragraph (1) or (2) of 

2 the following paragraphs, but not both, shall be excluded: 

3 ‘‘(1) Up to and including 2 bona fide discount 

4 points payable by the consumer in connection with 

5 the mortgage, but only if the interest rate from 

6 which the mortgage’s interest rate will be discounted 

7 does not exceed by more than 1 percentage point— 

8 ‘‘(A) the required net yield for a 90-day 

9 standard mandatory delivery commitment for a 

10 reasonably comparable loan from either the 

11 Federal National Mortgage Association or the 

12 Federal Home Loan Mortgage Corporation, 

13 whichever is greater; or 

14 ‘‘(B) if secured by a personal property 

15 loan, the average rate on a loan in connection 

16 with which insurance is provided under title I 

17 of the National Housing Act (12 U.S.C. 1702 

18 et seq.). 

19 ‘‘(2) Unless 2 bona fide discount points have 

20 been excluded under paragraph (1), up to and in21 cluding 1 bona fide discount point payable by the 

22 consumer in connection with the mortgage, but only 

23 if the interest rate from which the mortgage’s inter24 est rate will be discounted does not exceed by more 

25 than 2 percentage points— 


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1 ‘‘(A) the required net yield for a 90-day 

2 standard mandatory delivery commitment for a 

3 reasonably comparable loan from either the 

4 Federal National Mortgage Association or the 

5 Federal Home Loan Mortgage Corporation, 

6 whichever is greater; or 

7 ‘‘(B) if secured by a personal property 

8 loan, the average rate on a loan in connection 

9 with which insurance is provided under title I 

10 of the National Housing Act (12 U.S.C. 1702 

11 et seq.). 

12 ‘‘(3) For purposes of paragraph (1), the term 

13 ‘bona fide discount points’ means loan discount 

14 points which are knowingly paid by the consumer for 

15 the purpose of reducing, and which in fact result in 

16 a bona fide reduction of, the interest rate or time17 price differential applicable to the mortgage. 

18 ‘‘(4) Paragraphs (1) and (2) shall not apply to 

19 discount points used to purchase an interest rate re20 duction unless the amount of the interest rate reduc21 tion purchased is reasonably consistent with estab22 lished industry norms and practices for secondary 

23 mortgage market transactions.’’. 


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1 SEC. 9202. AMENDMENTS TO EXISTING REQUIREMENTS 

2 FOR CERTAIN MORTGAGES. 

3 (a) PREPAYMENT PENALTY PROVISIONS.—Section 

4 129(c)(2) of the Truth in Lending Act (15 U.S.C. 

5 1639(c)(2)) is hereby repealed. 

6 (b) NO BALLOON PAYMENTS.—Section 129(e) of the 

7 Truth in Lending Act (15 U.S.C. 1639(e)) is amended to 

8 read as follows: 

9 ‘‘(e) NO BALLOON PAYMENTS.—No high-cost mort10 gage may contain a scheduled payment that is more than 

11 twice as large as the average of earlier scheduled pay12 ments. This subsection shall not apply when the payment 

13 schedule is adjusted to the seasonal or irregular income 

14 of the consumer or in the case of a balance due under 

15 the customary terms of a reverse mortgage.’’. 

16 SEC. 9203. ADDITIONAL REQUIREMENTS FOR CERTAIN 

17 MORTGAGES. 

18 (a) ADDITIONAL REQUIREMENTS FOR CERTAIN

19 MORTGAGES.—Section 129 of the Truth in Lending Act 

20 (15 U.S.C. 1639) is amended— 

21 (1) by redesignating subsections (j), (k) and (l) 

22 as subsections (n), (o) and (p) respectively; and 

23 (2) by inserting after subsection (i) the fol24 lowing new subsections: 

25 ‘‘(j) RECOMMENDED DEFAULT.—No creditor shall 

26 recommend or encourage default on an existing loan or 


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1 other debt prior to and in connection with the closing or 

2 planned closing of a high-cost mortgage that refinances 

3 all or any portion of such existing loan or debt. 

4 ‘‘(k) LATE FEES.— 

5 ‘‘(1) IN GENERAL.—No creditor may impose a 

6 late payment charge or fee in connection with a 

7 high-cost mortgage— 

8 ‘‘(A) in an amount in excess of 4 percent 

9 of the amount of the payment past due; 

10 ‘‘(B) unless the loan documents specifically 

11 authorize the charge or fee; 

12 ‘‘(C) before the end of the 15-day period 

13 beginning on the date the payment is due, or in 

14 the case of a loan on which interest on each in15 stallment is paid in advance, before the end of 

16 the 30-day period beginning on the date the 

17 payment is due; or 

18 ‘‘(D) more than once with respect to a sin19 gle late payment. 

20 ‘‘(2) COORDINATION WITH SUBSEQUENT LATE

21 FEES.—If a payment is otherwise a full payment for 

22 the applicable period and is paid on its due date or 

23 within an applicable grace period, and the only delin24 quency or insufficiency of payment is attributable to 

25 any late fee or delinquency charge assessed on any 


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1 earlier payment, no late fee or delinquency charge 

2 may be imposed on such payment. 

3 ‘‘(3) FAILURE TO MAKE INSTALLMENT PAY4 MENT.—If, in the case of a loan agreement the 

5 terms of which provide that any payment shall first 

6 be applied to any past due principal balance, the 

7 consumer fails to make an installment payment and 

8 the consumer subsequently resumes making install9 ment payments but has not paid all past due install10 ments, the creditor may impose a separate late pay11 ment charge or fee for any principal due (without 

12 deduction due to late fees or related fees) until the 

13 default is cured. 

14 ‘‘(l) ACCELERATION OF DEBT.—No high-cost mort15 gage may contain a provision which permits the creditor 

16 to accelerate the indebtedness, except when repayment of 

17 the loan has been accelerated by default in payment, or 

18 pursuant to a due-on-sale provision, or pursuant to a ma19 terial violation of some other provision of the loan docu20 ment unrelated to payment schedule. 

21 ‘‘(m) RESTRICTION ON FINANCING POINTS AND

22 FEES.—No creditor may directly or indirectly finance, in 

23 connection with any high-cost mortgage, any of the fol24 lowing: 


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1 ‘‘(1) Any prepayment fee or penalty payable by 

2 the consumer in a refinancing transaction if the 

3 creditor or an affiliate of the creditor is the 

4 noteholder of the note being refinanced. 

5 ‘‘(2) Any points or fees.’’. 

6 (b) PROHIBITIONS ON EVASIONS.—Section 129 of 

7 the Truth in Lending Act (15 U.S.C. 1639) is amended 

8 by inserting after subsection (p) (as so redesignated by 

9 subsection (a)(1)) the following new subsection: 

10 ‘‘(q) PROHIBITIONS ON EVASIONS, STRUCTURING OF

11 TRANSACTIONS, AND RECIPROCAL ARRANGEMENTS.—A 

12 creditor may not take any action in connection with a 

13 high-cost mortgage— 

14 ‘‘(1) to structure a loan transaction as an open15 end credit plan or another form of loan for the pur16 pose and with the intent of evading the provisions of 

17 this title; or 

18 ‘‘(2) to divide any loan transaction into sepa19 rate parts for the purpose and with the intent of 

20 evading provisions of this title.’’. 

21 (c) MODIFICATION OR DEFERRAL FEES.—Section 

22 129 of the Truth in Lending Act (15 U.S.C. 1639) is 

23 amended by inserting after subsection (q) (as added by 

24 subsection (b) of this section) the following new sub25 section: 


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1 ‘‘(r) MODIFICATION AND DEFERRAL FEES PROHIB2 ITED.— 

3 ‘‘(1) CREDITORS.—A creditor may not charge a 

4 consumer any fee to modify, renew, extend, or 

5 amend a high-cost mortgage, or to defer any pay6 ment due under the terms of such mortgage, unless 

7 the modification, renewal, extension or amendment 

8 results in a lower annual percentage rate on the 

9 mortgage for the consumer and then only if the 

10 amount of the fee is comparable to fees imposed for 

11 similar transactions in connection with consumer 

12 credit transactions that are secured by a consumer’s 

13 principal dwelling and are not high-cost mortgages. 

14 ‘‘(2) THIRD PARTIES.—A third-party may not 

15 charge a consumer any fee to— 

16 ‘‘(A) modify, renew, extend, or amend a 

17 high-cost mortgage, or defer any payment due 

18 under the terms of such mortgage; 

19 ‘‘(B) negotiate with a creditor on behalf of 

20 a consumer, the modification, renewal, exten21 sion, or amendment of a high-cost mortgage; or 

22 ‘‘(C) negotiate with a creditor on behalf of 

23 a consumer, the deferral of any payment due 

24 under the terms of such mortgage, 


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1 unless the modification renewal, extension or amend2 ment results in a significantly lower annual percent3 age rate on the mortgage, or a significant reduction 

4 in the amount of the outstanding principal on the 

5 mortgage, for the consumer and then only if the 

6 amount of the fee is comparable to fees imposed for 

7 similar transactions in connection with consumer 

8 credit transactions that are secured by a consumer’s 

9 principal dwelling and are not high-cost mortgages. 

10 ‘‘(3) ENFORCEMENT.—Section 130 shall be ap11 plied for purposes of paragraph (2) by— 

12 ‘‘(A) substituting ‘third party’ for 

13 ‘creditor’each place such term appears; and 

14 ‘‘(B) substituting ‘any fee charged by a 

15 third party’ for ‘finance charge’ each place such 

16 term appears.’’. 

17 (d) PAYOFF STATEMENT.—Section 129 of the Truth 

18 in Lending Act (15 U.S.C. 1639) is amended by inserting 

19 after subsection (r) (as added by subsection (c) of this 

20 section) the following new subsection: 

21 ‘‘(s) PAYOFF STATEMENT.— 

22 ‘‘(1) FEES.— 

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

24 subparagraph (B), no creditor or servicer may 

25 charge a fee for informing or transmitting to 


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1 any person the balance due to pay off the out2 standing balance on a high-cost mortgage. 

3 ‘‘(B) TRANSACTION FEE.—When payoff in4 formation referred to in subparagraph (A) is 

5 provided by facsimile transmission or by a cou6 rier service, a creditor or servicer may charge a 

7 processing fee to cover the cost of such trans8 mission or service in an amount not to exceed 

9 an amount that is comparable to fees imposed 

10 for similar services provided in connection with 

11 consumer credit transactions that are secured 

12 by the consumer’s principal dwelling and are 

13 not high-cost mortgages. 

14 ‘‘(C) FEE DISCLOSURE.—Prior to charging 

15 a transaction fee as provided in subparagraph 

16 (B), a creditor or servicer shall disclose that 

17 payoff balances are available for free pursuant 

18 to subparagraph (A). 

19 ‘‘(D) MULTIPLE REQUESTS.—If a creditor 

20 or servicer has provided payoff information re21 ferred to in subparagraph (A) without charge, 

22 other than the transaction fee allowed by sub23 paragraph (B), on 4 occasions during a cal24 endar year, the creditor or servicer may there25 after charge a reasonable fee for providing such 


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1 information during the remainder of the cal2 endar year. 

3 ‘‘(2) PROMPT DELIVERY.—Payoff balances shall 

4 be provided within 5 business days after receiving a 

5 request by a consumer or a person authorized by the 

6 consumer to obtain such information. 

7 ‘‘(3) SERVICES CONSIDERED ASSIGNEE.—For 

8 the purposes of this subsection, a servicer shall be 

9 considered an assignee under the Truth in Lending 

10 Act.’’. 

11 (e) PRE-LOAN COUNSELING REQUIRED.—Section 

12 129 of the Truth in Lending Act (15 U.S.C. 1639) is 

13 amended by inserting after subsection (s) (as added by 

14 subsection (d) of this section) the following new sub15 section: 

16 ‘‘(t) PRE-LOAN COUNSELING.— 

17 ‘‘(1) IN GENERAL.—A creditor may not extend 

18 credit to a consumer under a high-cost mortgage 

19 without first receiving certification from a counselor 

20 that is approved by the Secretary of Housing and 

21 Urban Development, or at the discretion of the Sec22 retary, a State housing finance authority, that the 

23 consumer has received counseling on the advisability 

24 of the mortgage. Such counselor shall not be emVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01559 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ployed by the creditor or an affiliate of the creditor 

2 or be affiliated with the creditor. 

3 ‘‘(2) DISCLOSURES REQUIRED PRIOR TO COUN4 SELING.—No counselor may certify that a consumer 

5 has received counseling on the advisability of the 

6 high-cost mortgage unless the counselor can verify 

7 that the consumer has received each statement re8 quired (in connection with such loan) by this section 

9 or the Real Estate Settlement Procedures Act of 

10 1974 with respect to the transaction. 

11 ‘‘(3) REGULATIONS.—The Board may prescribe 

12 such regulations as the Board determines to be ap13 propriate to carry out the requirements of paragraph 

14 (1).’’. 

15 (f) FLIPPING PROHIBITED.—Section 129 of the 

16 Truth in Lending Act (15 U.S.C. 1639) is amended by 

17 inserting after subsection (t) (as added by subsection (e)) 

18 the following new subsection: 

19 ‘‘(u) FLIPPING.— 

20 ‘‘(1) IN GENERAL.—No creditor may knowingly 

21 or intentionally engage in the unfair act or practice 

22 of flipping in connection with a high-cost mortgage. 

23 ‘‘(2) FLIPPING DEFINED.—For purposes of this 

24 subsection, the term ‘flipping’ means the making of 

25 a loan or extension of credit in the form a high-cost 


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1 mortgage to a consumer which refinances an existing 

2 mortgage when the new loan or extension of credit 

3 does not have reasonable, net tangible benefit (as de4 termined in accordance with regulations prescribed 

5 under section 129C(b)) to the consumer considering 

6 all of the circumstances, including the terms of both 

7 the new and the refinanced loans or credit, the cost 

8 of the new loan or credit, and the consumer’s cir9 cumstances. 

10 ‘‘(v) CORRECTIONS AND UNINTENTIONAL VIOLA11 TIONS.—A creditor or assignee in a high cost loan who, 

12 when acting in good faith, fails to comply with any re13 quirement under this section will not be deemed to have 

14 violated such requirement if the creditor or assignee estab15 lishes that either— 

16 ‘‘(1) within 30 days of the loan closing and 

17 prior to the institution of any action, the consumer 

18 is notified of or discovers the violation, appropriate 

19 restitution is made, and whatever adjustments are 

20 necessary are made to the loan to either, at the 

21 choice of the consumer— 

22 ‘‘(A) make the loan satisfy the require23 ments of this chapter; or 

24 ‘‘(B) in the case of a high-cost mortgage, 

25 change the terms of the loan in a manner beneVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01561 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ficial to the consumer so that the loan will no 

2 longer be a high-cost mortgage; or 

3 ‘‘(2) within 60 days of the creditor’s discovery 

4 or receipt of notification of an unintentional viola5 tion or bona fide error as described in subsection (c) 

6 and prior to the institution of any action, the con7 sumer is notified of the compliance failure, appro8 priate restitution is made, and whatever adjustments 

9 are necessary are made to the loan to either, at the 

10 choice of the consumer— 

11 ‘‘(A) make the loan satisfy the require12 ments of this chapter; or 

13 ‘‘(B) in the case of a high-cost mortgage, 

14 change the terms of the loan in a manner bene15 ficial so that the loan will no longer be a high16 cost mortgage.’’. 

17 SEC. 9204. REGULATIONS. 

18 (a) IN GENERAL.—The Board of Governors of the 

19 Federal Reserve System shall publish regulations imple20 menting this subtitle and the amendments made by this 

21 subtitle in final form before the end of the 6-month period 

22 beginning on the date of the enactment of this Act. 

23 (b) CONSUMER MORTGAGE EDUCATION.— 

24 (1) REGULATIONS.—The Board of Governors of 

25 the Federal Reserve System may prescribe regulaVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01562 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tions requiring or encouraging creditors to provide 

2 consumer mortgage education to prospective cus3 tomers or direct such customers to qualified con4 sumer mortgage education or counseling programs 

5 in the vicinity of the residence of the consumer. 

6 (2) COORDINATION WITH STATE LAW.—No re7 quirement established by the Board of Governors of 

8 the Federal Reserve System pursuant to paragraph 

9 (1) shall be construed as affecting or superseding 

10 any requirement under the law of any State with re11 spect to consumer mortgage counseling or education. 

12 SEC. 9205. EFFECTIVE DATE. 

13 The amendments made by this subtitle shall take ef14 fect at the end of the 6-month period beginning on the 

15 date of the enactment of this Act and shall apply to mort16 gages referred to in section 103(aa) of the Truth in Lend17 ing Act (15 U.S.C. 1602(aa)) for which an application is 

18 received by the creditor after the end of such period. 

19 Subtitle D—Office of Housing 

20 Counseling 

21 SEC. 9301. SHORT TITLE. 

22 This subtitle may be cited as the ‘‘Expand and Pre23 serve Home Ownership Through Counseling Act’’. 


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1 SEC. 9302. ESTABLISHMENT OF OFFICE OF HOUSING COUN2 SELING. 

3 Section 4 of the Department of Housing and Urban 

4 Development Act (42 U.S.C. 3533) is amended by adding 

5 at the end the following new subsection: 

6 ‘‘(g) OFFICE OF HOUSING COUNSELING.— 

7 ‘‘(1) ESTABLISHMENT.—There is established, 

8 in the Department, the Office of Housing Coun9 seling. 

10 ‘‘(2) DIRECTOR.—There is established the posi11 tion of Director of Housing Counseling. The Direc12 tor shall be the head of the Office of Housing Coun13 seling and shall be appointed by, and shall report to, 

14 the Secretary. Such position shall be a career-re15 served position in the Senior Executive Service. 

16 ‘‘(3) FUNCTIONS.— 

17 ‘‘(A) IN GENERAL.—The Director shall 

18 have primary responsibility within the Depart19 ment for all activities and matters relating to 

20 homeownership counseling and rental housing 

21 counseling, including— 

22 ‘‘(i) research, grant administration, 

23 public outreach, and policy development re24 lating to such counseling; and 

25 ‘‘(ii) establishment, coordination, and 

26 administration of all regulations, requireVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01564 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ments, standards, and performance meas2 ures under programs and laws adminis3 tered by the Department that relate to 

4 housing counseling, homeownership coun5 seling (including maintenance of homes), 

6 mortgage-related counseling (including 

7 home equity conversion mortgages and 

8 credit protection options to avoid fore9 closure), and rental housing counseling, in10 cluding the requirements, standards, and 

11 performance measures relating to housing 

12 counseling. 

13 ‘‘(B) SPECIFIC FUNCTIONS.—The Director 

14 shall carry out the functions assigned to the Di15 rector and the Office under this section and any 

16 other provisions of law. Such functions shall in17 clude establishing rules necessary for— 

18 ‘‘(i) the counseling procedures under 

19 section 106(g)(1) of the Housing and 

20 Urban Development Act of 1968 (12 

21 U.S.C. 1701x(h)(1)); 

22 ‘‘(ii) carrying out all other functions 

23 of the Secretary under section 106(g) of 

24 the Housing and Urban Development Act 

25 of 1968, including the establishment, operVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01565 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ation, and publication of the availability of 

2 the toll-free telephone number under para3 graph (2) of such section; 

4 ‘‘(iii) contributing to the preparation 

5 and distribution of home buying informa6 tion booklets pursuant to section 5 of the 

7 Real Estate Settlement Procedures Act of 

8 1974 (12 U.S.C. 2604); 

9 ‘‘(iv) carrying out the certification 

10 program under section 106(e) of the Hous11 ing and Urban Development Act of 1968 

12 (12 U.S.C. 1701x(e)); 

13 ‘‘(v) carrying out the assistance pro14 gram under section 106(a)(4) of the Hous15 ing and Urban Development Act of 1968, 

16 including criteria for selection of applica17 tions to receive assistance; 

18 ‘‘(vi) carrying out any functions re19 garding abusive, deceptive, or unscrupulous 

20 lending practices relating to residential 

21 mortgage loans that the Secretary con22 siders appropriate, which shall include con23 ducting the study under section 6 of the 

24 Expand and Preserve Home Ownership 

25 Through Counseling Act; 


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1 ‘‘(vii) providing for operation of the 

2 advisory committee established under para3 graph (4) of this subsection; 

4 ‘‘(viii) collaborating with community5 based organizations with expertise in the 

6 field of housing counseling; and 

7 ‘‘(ix) providing for the building of ca8 pacity to provide housing counseling serv9 ices in areas that lack sufficient services, 

10 including underdeveloped areas that lack 

11 basic water and sewer systems, electricity 

12 services, and safe, sanitary housing. 

13 ‘‘(4) ADVISORY COMMITTEE.— 

14 ‘‘(A) IN GENERAL.—The Secretary shall 

15 appoint an advisory committee to provide advice 

16 regarding the carrying out of the functions of 

17 the Director. 

18 ‘‘(B) MEMBERS.—Such advisory committee 

19 shall consist of not more than 12 individuals, 

20 and the membership of the committee shall 

21 equally represent the mortgage and real estate 

22 industry, including consumers and housing 

23 counseling agencies certified by the Secretary. 

24 ‘‘(C) TERMS.—Except as provided in sub25 paragraph (D), each member of the advisory 


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1 committee shall be appointed for a term of 3 

2 years. Members may be reappointed at the dis3 cretion of the Secretary. 

4 ‘‘(D) TERMS OF INITIAL APPOINTEES.—As 

5 designated by the Secretary at the time of ap6 pointment, of the members first appointed to 

7 the advisory committee, 4 shall be appointed for 

8 a term of 1 year and 4 shall be appointed for 

9 a term of 2 years. 

10 ‘‘(E) PROHIBITION OF PAY; TRAVEL EX11 PENSES.—Members of the advisory committee 

12 shall serve without pay, but shall receive travel 

13 expenses, including per diem in lieu of subsist14 ence, in accordance with applicable provisions 

15 under subchapter I of chapter 57 of title 5, 

16 United States Code. 

17 ‘‘(F) ADVISORY ROLE ONLY.—The advi18 sory committee shall have no role in reviewing 

19 or awarding housing counseling grants. 

20 ‘‘(5) SCOPE OF HOMEOWNERSHIP COUN21 SELING.—In carrying out the responsibilities of the 

22 Director, the Director shall ensure that homeowner23 ship counseling provided by, in connection with, or 

24 pursuant to any function, activity, or program of the 

25 Department addresses the entire process of homeVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01568 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ownership, including the decision to purchase a 

2 home, the selection and purchase of a home, issues 

3 arising during or affecting the period of ownership 

4 of a home (including refinancing, default and fore5 closure, and other financial decisions), and the sale 

6 or other disposition of a home.’’. 

7 SEC. 9303. COUNSELING PROCEDURES. 

8 (a) IN GENERAL.—Section 106 of the Housing and 

9 Urban Development Act of 1968 (12 U.S.C. 1701x) is 

10 amended by adding at the end the following new sub11 section: 

12 ‘‘(g) PROCEDURES AND ACTIVITIES.— 

13 ‘‘(1) COUNSELING PROCEDURES.— 

14 ‘‘(A) IN GENERAL.—The Secretary shall 

15 establish, coordinate, and monitor the adminis16 tration by the Department of Housing and 

17 Urban Development of the counseling proce18 dures for homeownership counseling and rental 

19 housing counseling provided in connection with 

20 any program of the Department, including all 

21 requirements, standards, and performance 

22 measures that relate to homeownership and 

23 rental housing counseling. 

24 ‘‘(B) HOMEOWNERSHIP COUNSELING.— 

25 For purposes of this subsection and as used in 


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1 the provisions referred to in this subparagraph, 

2 the term ‘homeownership counseling’ means 

3 counseling related to homeownership and resi4 dential mortgage loans. Such term includes 

5 counseling related to homeownership and resi6 dential mortgage loans that is provided pursu7 ant to— 

8 ‘‘(i) section 105(a)(20) of the Housing 

9 and Community Development Act of 1974 

10 (42 U.S.C. 5305(a)(20)); 

11 ‘‘(ii) in the United States Housing 

12 Act of 1937— 

13 ‘‘(I) section 9(e) (42 U.S.C. 

14 1437g(e)); 

15 ‘‘(II) section 8(y)(1)(D) (42 

16 U.S.C. 1437f(y)(1)(D)); 

17 ‘‘(III) section 18(a)(4)(D) (42 

18 U.S.C. 1437p(a)(4)(D)); 

19 ‘‘(IV) section 23(c)(4) (42 U.S.C. 

20 1437u(c)(4)); 

21 ‘‘(V) section 32(e)(4) (42 U.S.C. 

22 1437z–4(e)(4)); 

23 ‘‘(VI) section 33(d)(2)(B) (42 

24 U.S.C. 1437z–5(d)(2)(B)); 


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1 ‘‘(VII) sections 302(b)(6) and 

2 303(b)(7) (42 U.S.C. 1437aaa– 

3 1(b)(6), 1437aaa–2(b)(7)); and 

4 ‘‘(VIII) section 304(c)(4) (42 

5 U.S.C. 1437aaa–3(c)(4)); 

6 ‘‘(iii) section 302(a)(4) of the Amer7 ican Homeownership and Economic Oppor8 tunity Act of 2000 (42 U.S.C. 1437f note); 

9 ‘‘(iv) sections 233(b)(2) and 258(b) of 

10 the Cranston-Gonzalez National Affordable 

11 Housing Act (42 U.S.C. 12773(b)(2), 

12 12808(b)); 

13 ‘‘(v) this section and section 101(e) of 

14 the Housing and Urban Development Act 

15 of 1968 (12 U.S.C. 1701x, 1701w(e)); 

16 ‘‘(vi) section 220(d)(2)(G) of the Low17 Income Housing Preservation and Resident 

18 Homeownership Act of 1990 (12 U.S.C. 

19 4110(d)(2)(G)); 

20 ‘‘(vii) sections 422(b)(6), 423(b)(7), 

21 424(c)(4), 442(b)(6), and 443(b)(6) of the 

22 Cranston-Gonzalez National Affordable 

23 Housing Act (42 U.S.C. 12872(b)(6), 

24 12873(b)(7), 12874(c)(4), 12892(b)(6), 

25 and 12893(b)(6)); 


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1 ‘‘(viii) section 491(b)(1)(F)(iii) of the 

2 McKinney-Vento Homeless Assistance Act 

3 (42 U.S.C. 11408(b)(1)(F)(iii)); 

4 ‘‘(ix) sections 202(3) and 

5 810(b)(2)(A) of the Native American 

6 Housing and Self-Determination Act of 

7 1996 (25 U.S.C. 4132(3), 4229(b)(2)(A)); 

8 ‘‘(x) in the National Housing Act— 

9 ‘‘(I) in section 203 (12 U.S.C. 

10 1709), the penultimate undesignated 

11 paragraph of paragraph (2) of sub12 section (b), subsection (c)(2)(A), and 

13 subsection (r)(4); 

14 ‘‘(II) subsections (a) and (c)(3) 

15 of section 237 (12 U.S.C. 1715z–2); 

16 and 

17 ‘‘(III) subsections (d)(2)(B) and 

18 (m)(1) of section 255 (12 U.S.C. 

19 1715z–20); 

20 ‘‘(xi) section 502(h)(4)(B) of the 

21 Housing Act of 1949 (42 U.S.C. 

22 1472(h)(4)(B)); 

23 ‘‘(xii) section 508 of the Housing and 

24 Urban Development Act of 1970 (12 

25 U.S.C. 1701z–7); and 


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1 ‘‘(xiii) section 106 of the Energy Pol2 icy Act of 1992 (42 U.S.C. 12712 note). 

3 ‘‘(C) RENTAL HOUSING COUNSELING.— 

4 For purposes of this subsection, the term ‘rent5 al housing counseling’ means counseling related 

6 to rental of residential property, which may in7 clude counseling regarding future homeowner8 ship opportunities and providing referrals for 

9 renters and prospective renters to entities pro10 viding counseling and shall include counseling 

11 related to such topics that is provided pursuant 

12 to— 

13 ‘‘(i) section 105(a)(20) of the Housing 

14 and Community Development Act of 1974 

15 (42 U.S.C. 5305(a)(20)); 

16 ‘‘(ii) in the United States Housing 

17 Act of 1937— 

18 ‘‘(I) section 9(e) (42 U.S.C. 

19 1437g(e)); 

20 ‘‘(II) section 18(a)(4)(D) (42 

21 U.S.C. 1437p(a)(4)(D)); 

22 ‘‘(III) section 23(c)(4) (42 

23 U.S.C. 1437u(c)(4)); 

24 ‘‘(IV) section 32(e)(4) (42 U.S.C. 

25 1437z–4(e)(4)); 


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1 ‘‘(V) section 33(d)(2)(B) (42 

2 U.S.C. 1437z–5(d)(2)(B)); and 

3 ‘‘(VI) section 302(b)(6) (42 

4 U.S.C. 1437aaa–1(b)(6)); 

5 ‘‘(iii) section 233(b)(2) of the Cran6 ston-Gonzalez National Affordable Housing 

7 Act (42 U.S.C. 12773(b)(2)); 

8 ‘‘(iv) section 106 of the Housing and 

9 Urban Development Act of 1968 (12 

10 U.S.C. 1701x); 

11 ‘‘(v) section 422(b)(6) of the Cran12 ston-Gonzalez National Affordable Housing 

13 Act (42 U.S.C. 12872(b)(6)); 

14 ‘‘(vi) section 491(b)(1)(F)(iii) of the 

15 McKinney-Vento Homeless Assistance Act 

16 (42 U.S.C. 11408(b)(1)(F)(iii)); 

17 ‘‘(vii) sections 202(3) and 

18 810(b)(2)(A) of the Native American 

19 Housing and Self-Determination Act of 

20 1996 (25 U.S.C. 4132(3), 4229(b)(2)(A)); 

21 and 

22 ‘‘(viii) the rental assistance program 

23 under section 8 of the United States Hous24 ing Act of 1937 (42 U.S.C. 1437f). 


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1 ‘‘(2) STANDARDS FOR MATERIALS.—The Sec2 retary, in consultation with the advisory committee 

3 established under subsection (g)(4) of the Depart4 ment of Housing and Urban Development Act, shall 

5 establish standards for materials and forms to be 

6 used, as appropriate, by organizations providing 

7 homeownership counseling services, including any re8 cipients of assistance pursuant to subsection (a)(4). 

9 ‘‘(3) MORTGAGE SOFTWARE SYSTEMS.— 

10 ‘‘(A) CERTIFICATION.—The Secretary shall 

11 provide for the certification of various computer 

12 software programs for consumers to use in eval13 uating different residential mortgage loan pro14 posals. The Secretary shall require, for such 

15 certification, that the mortgage software sys16 tems take into account— 

17 ‘‘(i) the consumer’s financial situation 

18 and the cost of maintaining a home, in19 cluding insurance, taxes, and utilities; 

20 ‘‘(ii) the amount of time the consumer 

21 expects to remain in the home or expected 

22 time to maturity of the loan; and 

23 ‘‘(iii) such other factors as the Sec24 retary considers appropriate to assist the 

25 consumer in evaluating whether to pay 


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1 points, to lock in an interest rate, to select 

2 an adjustable or fixed rate loan, to select 

3 a conventional or government-insured or 

4 guaranteed loan and to make other choices 

5 during the loan application process. 

6 If the Secretary determines that available exist7 ing software is inadequate to assist consumers 

8 during the residential mortgage loan application 

9 process, the Secretary shall arrange for the de10 velopment by private sector software companies 

11 of new mortgage software systems that meet 

12 the Secretary’s specifications. 

13 ‘‘(B) USE AND INITIAL AVAILABILITY.— 

14 Such certified computer software programs 

15 shall be used to supplement, not replace, hous16 ing counseling. The Secretary shall provide that 

17 such programs are initially used only in connec18 tion with the assistance of housing counselors 

19 certified pursuant to subsection (e). 

20 ‘‘(C) AVAILABILITY.—After a period of ini21 tial availability under subparagraph (B) as the 

22 Secretary considers appropriate, the Secretary 

23 shall take reasonable steps to make mortgage 

24 software systems certified pursuant to this 

25 paragraph widely available through the Internet 


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1 and at public locations, including public librar2 ies, senior-citizen centers, public housing sites, 

3 offices of public housing agencies that admin4 ister rental housing assistance vouchers, and 

5 housing counseling centers. 

6 ‘‘(D) BUDGET COMPLIANCE.—This para7 graph shall be effective only to the extent that 

8 amounts to carry out this paragraph are made 

9 available in advance in appropriations Acts. 

10 ‘‘(4) NATIONAL PUBLIC SERVICE MULTIMEDIA

11 CAMPAIGNS TO PROMOTE HOUSING COUNSELING.— 

12 ‘‘(A) IN GENERAL.—The Director of Hous13 ing Counseling shall develop, implement, and 

14 conduct national public service multimedia cam15 paigns designed to make persons facing mort16 gage foreclosure, persons considering a 

17 subprime mortgage loan to purchase a home, el18 derly persons, persons who face language bar19 riers, low-income persons, minorities, and other 

20 potentially vulnerable consumers aware that it 

21 is advisable, before seeking or maintaining a 

22 residential mortgage loan, to obtain homeowner23 ship counseling from an unbiased and reliable 

24 sources and that such homeownership coun25 seling is available, including through programs 


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1 sponsored by the Secretary of Housing and 

2 Urban Development. 

3 ‘‘(B) CONTACT INFORMATION.—Each seg4 ment of the multimedia campaign under sub5 paragraph (A) shall publicize the toll-free tele6 phone number and website of the Department 

7 of Housing and Urban Development through 

8 which persons seeking housing counseling can 

9 locate a housing counseling agency in their 

10 State that is certified by the Secretary of Hous11 ing and Urban Development and can provide 

12 advice on buying a home, renting, defaults, 

13 foreclosures, credit issues, and reverse mort14 gages. 

15 ‘‘(C) AUTHORIZATION OF APPROPRIA16 TIONS.—There are authorized to be appro17 priated to the Secretary, not to exceed 

18 $3,000,000 for fiscal years 2009, 2010, and 

19 2011, for the development, implementation, and 

20 conduct of national public service multimedia 

21 campaigns under this paragraph. 

22 ‘‘(D) FORECLOSURE RESCUE EDUCATION

23 PROGRAMS.— 

24 ‘‘(i) IN GENERAL.—Ten percent of 

25 any funds appropriated pursuant to the 


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1 authorization under subparagraph (C) 

2 shall be used by the Director of Housing 

3 Counseling to conduct an education pro4 gram in areas that have a high density of 

5 foreclosure. Such program shall involve di6 rect mailings to persons living in such 

7 areas describing— 

8 ‘‘(I) tips on avoiding foreclosure 

9 rescue scams; 

10 ‘‘(II) tips on avoiding predatory 

11 lending mortgage agreements; 

12 ‘‘(III) tips on avoiding for-profit 

13 foreclosure counseling services; and 

14 ‘‘(IV) local counseling resources 

15 that are approved by the Department 

16 of Housing and Urban Development. 

17 ‘‘(ii) PROGRAM EMPHASIS.—In con18 ducting the education program described 

19 under clause (i), the Director of Housing 

20 Counseling shall also place an emphasis on 

21 serving communities that have a high per22 centage of retirement communities or a 

23 high percentage of low-income minority 

24 communities. 


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1 ‘‘(iii) TERMS DEFINED.—For pur2 poses of this subparagraph: 

3 ‘‘(I) HIGH DENSITY OF FORE4 CLOSURES.—An area has a ‘high den5 sity of foreclosures’ if such area is one 

6 of the metropolitan statistical areas 

7 (as that term is defined by the Direc8 tor of the Office of Management and 

9 Budget) with the highest home fore10 closure rates. 

11 ‘‘(II) HIGH PERCENTAGE OF RE12 TIREMENT COMMUNITIES.—An area 

13 has a ‘high percentage of retirement 

14 communities’ if such area is one of 

15 the metropolitan statistical areas (as 

16 that term is defined by the Director of 

17 the Office of Management and Budg18 et) with the highest percentage of 

19 residents aged 65 or older. 

20 ‘‘(III) HIGH PERCENTAGE OF

21 LOW-INCOME MINORITY COMMU22 NITIES.—An area has a ‘high percent23 age of low-income minority commu24 nities’ if such area contains a higher25 than-normal percentage of residents 


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1 who are both minorities and low-in2 come, as defined by the Director of 

3 Housing Counseling. 

4 ‘‘(5) EDUCATION PROGRAMS.—The Secretary 

5 shall provide advice and technical assistance to 

6 States, units of general local government, and non7 profit organizations regarding the establishment and 

8 operation of, including assistance with the develop9 ment of content and materials for, educational pro10 grams to inform and educate consumers, particularly 

11 those most vulnerable with respect to residential 

12 mortgage loans (such as elderly persons, persons 

13 facing language barriers, low-income persons, mi14 norities, and other potentially vulnerable con15 sumers), regarding home mortgages, mortgage refi16 nancing, home equity loans, home repair loans, and 

17 where appropriate by region, any requirements and 

18 costs associated with obtaining flood or other dis19 aster-specific insurance coverage.’’. 

20 (b) CONFORMING AMENDMENTS TO GRANT PRO21 GRAM FOR HOMEOWNERSHIP COUNSELING ORGANIZA22 TIONS.—Section 106(c)(5)(A)(ii) of the Housing and 

23 Urban Development Act of 1968 (12 U.S.C. 

24 1701x(c)(5)(A)(ii)) is amended— 


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1 (1) in subclause (III), by striking ‘‘and’’ at the 

2 end; 

3 (2) in subclause (IV) by striking the period at 

4 the end and inserting ‘‘; and’’; and 

5 (3) by inserting after subclause (IV) the fol6 lowing new subclause: 

7 ‘‘(V) notify the housing or mort8 gage applicant of the availability of 

9 mortgage software systems provided 

10 pursuant to subsection (g)(3).’’. 

11 SEC. 9304. GRANTS FOR HOUSING COUNSELING ASSIST12 ANCE. 

13 Section 106(a) of the Housing and Urban Develop14 ment Act of 1968 (12 U.S.C. 1701x(a)(3)) is amended 

15 by adding at the end the following new paragraph: 

16 ‘‘(4) HOMEOWNERSHIP AND RENTAL COUNSELING

17 ASSISTANCE.— 

18 ‘‘(A) IN GENERAL.—The Secretary shall make 

19 financial assistance available under this paragraph 

20 to HUD-approved housing counseling agencies and 

21 State housing finance agencies. 

22 ‘‘(B) QUALIFIED ENTITIES.—The Secretary 

23 shall establish standards and guidelines for eligibility 

24 of organizations (including governmental and nonVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01582 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 profit organizations) to receive assistance under this 

2 paragraph, in accordance with subparagraph (D). 

3 ‘‘(C) DISTRIBUTION.—Assistance made avail4 able under this paragraph shall be distributed in a 

5 manner that encourages efficient and successful 

6 counseling programs and that ensures adequate dis7 tribution of amounts for rural areas having tradi8 tionally low levels of access to such counseling serv9 ices, including areas with insufficient access to the 

10 Internet. In distributing such assistance, the Sec11 retary may give priority consideration to entities 

12 serving areas with the highest home foreclosure 

13 rates. 

14 ‘‘(D) LIMITATION ON DISTRIBUTION OF ASSIST15 ANCE.— 

16 ‘‘(i) IN GENERAL.—None of the amounts 

17 made available under this paragraph shall be 

18 distributed to— 

19 ‘‘(I) any organization which has been 

20 convicted for a violation under Federal law 

21 relating to an election for Federal office; or 

22 ‘‘(II) any organization which employs 

23 applicable individuals. 


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1 ‘‘(ii) DEFINITION OF APPLICABLE INDIVID2 UALS.—In this subparagraph, the term ‘appli3 cable individual’ means an individual who— 

4 ‘‘(I) is— 

5 ‘‘(aa) employed by the organiza6 tion in a permanent or temporary ca7 pacity; 

8 ‘‘(bb) contracted or retained by 

9 the organization; or 

10 ‘‘(cc) acting on behalf of, or with 

11 the express or apparent authority of, 

12 the organization; and 

13 ‘‘(II) has been convicted for a viola14 tion under Federal law relating to an elec15 tion for Federal office. 

16 ‘‘(E) GRANTMAKING PROCESS.—In making as17 sistance available under this paragraph, the Sec18 retary shall consider appropriate ways of stream19 lining and improving the processes for grant applica20 tion, review, approval, and award. 

21 ‘‘(F) AUTHORIZATION OF APPROPRIATIONS.— 

22 There are authorized to be appropriated 

23 $45,000,000 for each of fiscal years 2009 through 

24 2012 for— 


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1 ‘‘(i) the operations of the Office of Hous2 ing Counseling of the Department of Housing 

3 and Urban Development; 

4 ‘‘(ii) the responsibilities of the Director of 

5 Housing Counseling under paragraphs (2) 

6 through (5) of subsection (g); and 

7 ‘‘(iii) assistance pursuant to this para8 graph for entities providing homeownership and 

9 rental counseling.’’. 

10 SEC. 9305. REQUIREMENTS TO USE HUD-CERTIFIED COUN11 SELORS UNDER HUD PROGRAMS. 

12 Section 106(e) of the Housing and Urban Develop13 ment Act of 1968 (12 U.S.C. 1701x(e)) is amended— 

14 (1) by striking paragraph (1) and inserting the 

15 following new paragraph: 

16 ‘‘(1) REQUIREMENT FOR ASSISTANCE.—An or17 ganization may not receive assistance for counseling 

18 activities under subsection (a)(1)(iii), (a)(2), (a)(4), 

19 (c), or (d) of this section, or under section 101(e), 

20 unless the organization, or the individuals through 

21 which the organization provides such counseling, has 

22 been certified by the Secretary under this subsection 

23 as competent to provide such counseling.’’; 

24 (2) in paragraph (2)— 


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1 (A) by inserting ‘‘and for certifying organi2 zations’’ before the period at the end of the 

3 first sentence; and 

4 (B) in the second sentence by striking ‘‘for 

5 certification’’ and inserting ‘‘, for certification 

6 of an organization, that each individual through 

7 which the organization provides counseling shall 

8 demonstrate, and, for certification of an indi9 vidual,’’; 

10 (3) in paragraph (3), by inserting ‘‘organiza11 tions and’’ before ‘‘individuals’’; 

12 (4) by redesignating paragraph (3) as para13 graph (5); and 

14 (5) by inserting after paragraph (2) the fol15 lowing new paragraphs: 

16 ‘‘(3) REQUIREMENT UNDER HUD PROGRAMS.— 

17 Any homeownership counseling or rental housing 

18 counseling (as such terms are defined in subsection 

19 (g)(1)) required under, or provided in connection 

20 with, any program administered by the Department 

21 of Housing and Urban Development shall be pro22 vided only by organizations or counselors certified by 

23 the Secretary under this subsection as competent to 

24 provide such counseling. 


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1 ‘‘(4) OUTREACH.—The Secretary shall take 

2 such actions as the Secretary considers appropriate 

3 to ensure that individuals and organizations pro4 viding homeownership or rental housing counseling 

5 are aware of the certification requirements and 

6 standards of this subsection and of the training and 

7 certification programs under subsection (f).’’. 

8 SEC. 9306. STUDY OF DEFAULTS AND FORECLOSURES. 

9 The Secretary of Housing and Urban Development 

10 shall conduct an extensive study of the root causes of de11 fault and foreclosure of home loans, using as much empir12 ical data as are available. The study shall also examine 

13 the role of escrow accounts in helping prime and nonprime 

14 borrowers to avoid defaults and foreclosures, and the role 

15 of computer registries of mortgages, including those used 

16 for trading mortgage loans. Not later than 12 months 

17 after the date of the enactment of this Act, the Secretary 

18 shall submit to the Congress a preliminary report regard19 ing the study. Not later than 24 months after such date 

20 of enactment, the Secretary shall submit a final report re21 garding the results of the study, which shall include any 

22 recommended legislation relating to the study, and rec23 ommendations for best practices and for a process to iden24 tify populations that need counseling the most. 


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1 SEC. 9307. DEFAULT AND FORECLOSURE DATABASE. 

2 (a) ESTABLISHMENT.—The Secretary of Housing 

3 and Urban Development, in consultation with the Federal 

4 agencies responsible for regulation of banking and finan5 cial institutions involved in residential mortgage lending 

6 and servicing, shall establish and maintain a database of 

7 information on foreclosures and defaults on mortgage 

8 loans for one- to four-unit residential properties and shall 

9 make such information publicly available. 

10 (b) CENSUS TRACT DATA.—Information in the data11 base shall be collected, aggregated, and made available on 

12 a census tract basis. 

13 (c) REQUIREMENTS.—Information collected and 

14 made available through the database shall include— 

15 (1) the number and percentage of such mort16 gage loans that are delinquent by more than 30 

17 days; 

18 (2) the number and percentage of such mort19 gage loans that are delinquent by more than 90 

20 days; 

21 (3) the number and percentage of such prop22 erties that are real estate-owned; 

23 (4) number and percentage of such mortgage 

24 loans that are in the foreclosure process; 

25 (5) the number and percentage of such mort26 gage loans that have an outstanding principal obliVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01588 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 gation amount that is greater than the value of the 

2 property for which the loan was made; and 

3 (6) such other information as the Secretary 

4 considers appropriate. 

5 SEC. 9308. DEFINITIONS FOR COUNSELING-RELATED PRO6 GRAMS. 

7 Section 106 of the Housing and Urban Development 

8 Act of 1968 (12 U.S.C. 1701x), as amended by the pre9 ceding provisions of this subtitle, is further amended by 

10 adding at the end the following new subsection: 

11 ‘‘(h) DEFINITIONS.—For purposes of this section: 

12 ‘‘(1) NONPROFIT ORGANIZATION.—The term 

13 ‘nonprofit organization’ has the meaning given such 

14 term in section 104(5) of the Cranston-Gonzalez Na15 tional Affordable Housing Act (42 U.S.C. 

16 12704(5)), except that subparagraph (D) of such 

17 section shall not apply for purposes of this section. 

18 ‘‘(2) STATE.—The term ‘State’ means each of 

19 the several States, the Commonwealth of Puerto 

20 Rico, the District of Columbia, the Commonwealth 

21 of the Northern Mariana Islands, Guam, the Virgin 

22 Islands, American Samoa, the Trust Territories of 

23 the Pacific, or any other possession of the United 

24 States. 


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1 ‘‘(3) UNIT OF GENERAL LOCAL GOVERN2 MENT.—The term ‘unit of general local government’ 

3 means any city, county, parish, town, township, bor4 ough, village, or other general purpose political sub5 division of a State. 

6 ‘‘(4) HUD-APPROVED COUNSELING AGENCY.— 

7 The term ‘HUD-approved counseling agency’ means 

8 a private or public nonprofit organization that is— 

9 ‘‘(A) exempt from taxation under section 

10 501(c) of the Internal Revenue Code of 1986; 

11 and 

12 ‘‘(B) certified by the Secretary to provide 

13 housing counseling services. 

14 ‘‘(5) STATE HOUSING FINANCE AGENCY.—The 

15 term ‘State housing finance agency’ means any pub16 lic body, agency, or instrumentality specifically cre17 ated under State statute that is authorised to fi18 nance activities designed to provide housing and re19 lated facilities throughout an entire State through 

20 land acquisition, construction, or rehabilitation.’’. 

21 SEC. 9309. ACCOUNTABILITY AND TRANSPARENCY FOR 

22 GRANT RECIPIENTS. 

23 Section 106 of the Housing and Urban Development 

24 Act of 1968 (12 U.S.C. 1701x), as amended by the preVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01590 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ceding provisions of this subtitle, is further amended by 

2 adding at the end the following: 

3 ‘‘(i) ACCOUNTABILITY FOR RECIPIENTS OF COVERED

4 ASSISTANCE.— 

5 ‘‘(1) TRACKING OF FUNDS.—The Secretary 

6 shall— 

7 ‘‘(A) develop and maintain a system to en8 sure that any organization or entity that re9 ceives any covered assistance uses all amounts 

10 of covered assistance in accordance with this 

11 section or section 9115 of the Mortgage Reform 

12 and Anti-Predatory Lending Act, as applicable, 

13 the regulations issued under this section or 

14 such section 9115, as applicable, and any re15 quirements or conditions under which such 

16 amounts were provided; and 

17 ‘‘(B) require any organization or entity, as 

18 a condition of receipt of any covered assistance, 

19 to agree to comply with such requirements re20 garding covered assistance as the Secretary 

21 shall establish, which shall include— 

22 ‘‘(i) appropriate periodic financial and 

23 grant activity reporting, record retention, 

24 and audit requirements for the duration of 

25 the covered assistance to the organization 


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1 or entity to ensure compliance with the 

2 limitations and requirements of this section 

3 or section 9115 of the Mortgage Reform 

4 and Anti-Predatory Lending Act, as appli5 cable, the regulations under this section or 

6 such section 9115, as applicable, and any 

7 requirements or conditions under which 

8 such amounts were provided; and 

9 ‘‘(ii) any other requirements that the 

10 Secretary determines are necessary to en11 sure appropriate administration and com12 pliance. 

13 ‘‘(2) MISUSE OF FUNDS.—If any organization 

14 or entity that receives any covered assistance is de15 termined by the Secretary to have used any covered 

16 assistance in a manner that is materially in violation 

17 of this section or section 9115 of the Mortgage Re18 form and Anti-Predatory Lending Act, as applicable, 

19 the regulations issued under this section or such sec20 tion 9115, as applicable, or any requirements or con21 ditions under which such assistance was provided— 

22 ‘‘(A) the Secretary shall require that, with23 in 12 months after the determination of such 

24 misuse, the organization or entity shall reim25 burse the Secretary for such misused amounts 


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1 and return to the Secretary any such amounts 

2 that remain unused or uncommitted for use; 

3 and 

4 ‘‘(B) such organization or entity shall be 

5 ineligible, at any time after such determination, 

6 to apply for or receive any further covered as7 sistance. 

8 The remedies under this paragraph are in addition 

9 to any other remedies that may be available under 

10 law. 

11 ‘‘(3) COVERED ASSISTANCE.—For purposes of 

12 this subsection, the term ‘covered assistance’ means 

13 any grant or other financial assistance provided 

14 under— 

15 ‘‘(A) this section; or 

16 ‘‘(B) section 9115 of the Mortgage Reform 

17 and Anti-Predatory Lending Act.’’. 

18 SEC. 9310. UPDATING AND SIMPLIFICATION OF MORTGAGE 

19 INFORMATION BOOKLET. 

20 Section 5 of the Real Estate Settlement Procedures 

21 Act of 1974 (12 U.S.C. 2604) is amended— 

22 (1) in the section heading, by striking ‘‘SPE23 CIAL’’ and inserting ‘‘HOME BUYING’’; 

24 (2) by striking subsections (a) and (b) and in25 serting the following new subsections: 


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1 ‘‘(a) PREPARATION AND DISTRIBUTION.—The Direc2 tor of the Consumer Financial Protection Agency (here3 after in this section referred to as the ‘Director’) shall pre4 pare, at least once every 5 years, a booklet to help con5 sumers applying for federally related mortgage loans to 

6 understand the nature and costs of real estate settlement 

7 services. The Director shall prepare the booklet in various 

8 languages and cultural styles, as the Director determines 

9 to be appropriate, so that the booklet is understandable 

10 and accessible to homebuyers of different ethnic and cul11 tural backgrounds. The Director shall distribute such 

12 booklets to all lenders that make federally related mort13 gage loans. The Director shall also distribute to such lend14 ers lists, organized by location, of homeownership coun15 selors certified under section 106(e) of the Housing and 

16 Urban Development Act of 1968 (12 U.S.C. 1701x(e)) for 

17 use in complying with the requirement under subsection 

18 (c) of this section. 

19 ‘‘(b) CONTENTS.—Each booklet shall be in such form 

20 and detail as the Director shall prescribe and, in addition 

21 to such other information as the Director may provide, 

22 shall include in plain and understandable language the fol23 lowing information: 

24 ‘‘(1) A description and explanation of the na25 ture and purpose of the costs incident to a real esVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01594 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tate settlement or a federally related mortgage loan. 

2 The description and explanation shall provide gen3 eral information about the mortgage process as well 

4 as specific information concerning, at a minimum— 

5 ‘‘(A) balloon payments; 

6 ‘‘(B) prepayment penalties; 

7 ‘‘(C) the advantages of prepayment; and 

8 ‘‘(D) the trade-off between closing costs 

9 and the interest rate over the life of the loan. 

10 ‘‘(2) An explanation and sample of the uniform 

11 settlement statement required by section 4. 

12 ‘‘(3) A list and explanation of lending practices, 

13 including those prohibited by the Truth in Lending 

14 Act or other applicable Federal law, and of other un15 fair practices and unreasonable or unnecessary 

16 charges to be avoided by the prospective buyer with 

17 respect to a real estate settlement. 

18 ‘‘(4) A list and explanation of questions a con19 sumer obtaining a federally related mortgage loan 

20 should ask regarding the loan, including whether the 

21 consumer will have the ability to repay the loan, 

22 whether the consumer sufficiently shopped for the 

23 loan, whether the loan terms include prepayment 

24 penalties or balloon payments, and whether the loan 

25 will benefit the borrower. 


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1 ‘‘(5) An explanation of the right of rescission as 

2 to certain transactions provided by sections 125 and 

3 129 of the Truth in Lending Act. 

4 ‘‘(6) A brief explanation of the nature of a vari5 able rate mortgage and a reference to the booklet 

6 entitled ‘Consumer Handbook on Adjustable Rate 

7 Mortgages’, published by the Director, or to any 

8 suitable substitute of such booklet that the Director 

9 may subsequently adopt pursuant to such section. 

10 ‘‘(7) A brief explanation of the nature of a 

11 home equity line of credit and a reference to the 

12 pamphlet required to be provided under section 

13 127A of the Truth in Lending Act. 

14 ‘‘(8) Information about homeownership coun15 seling services made available pursuant to section 

16 106(a)(4) of the Housing and Urban Development 

17 Act of 1968 (12 U.S.C. 1701x(a)(4)), a rec18 ommendation that the consumer use such services, 

19 and notification that a list of certified providers of 

20 homeownership counseling in the area, and their 

21 contact information, is available. 

22 ‘‘(9) An explanation of the nature and purpose 

23 of escrow accounts when used in connection with 

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1 quirements under section 10 of this Act regarding 

2 such accounts. 

3 ‘‘(10) An explanation of the choices available to 

4 buyers of residential real estate in selecting persons 

5 to provide necessary services incidental to a real es6 tate settlement. 

7 ‘‘(11) An explanation of a consumer’s respon8 sibilities, liabilities, and obligations in a mortgage 

9 transaction. 

10 ‘‘(12) An explanation of the nature and purpose 

11 of real estate appraisals, including the difference be12 tween an appraisal and a home inspection. 

13 ‘‘(13) Notice that the Office of Housing of the 

14 Department of Housing and Urban Development has 

15 made publicly available a brochure regarding loan 

16 fraud and a World Wide Web address and toll-free 

17 telephone number for obtaining the brochure. 

18 The booklet prepared pursuant to this section shall take 

19 into consideration differences in real estate settlement pro20 cedures that may exist among the several States and terri21 tories of the United States and among separate political 

22 subdivisions within the same State and territory.’’; 

23 (3) in subsection (c), by inserting at the end 

24 the following new sentence: ‘‘Each lender shall also 

25 include with the booklet a reasonably complete or 


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1 updated list of homeownership counselors who are 

2 certified pursuant to section 106(e) of the Housing 

3 and Urban Development Act of 1968 (12 U.S.C. 

4 1701x(e)) and located in the area of the lender.’’; 

5 and 

6 (4) in subsection (d), by inserting after the pe7 riod at the end of the first sentence the following: 

8 ‘‘The lender shall provide the HUD-issued booklet in 

9 the version that is most appropriate for the person 

10 receiving it.’’. 

11 SEC. 9311. HOME INSPECTION COUNSELING. 

12 (a) PUBLIC OUTREACH.— 

13 (1) IN GENERAL.—The Secretary of Housing 

14 and Urban Development (in this section referred to 

15 as the ‘‘Secretary’’) shall take such actions as may 

16 be necessary to inform potential homebuyers of the 

17 availability and importance of obtaining an inde18 pendent home inspection. Such actions shall in19 clude— 

20 (A) publication of the HUD/FHA form 

21 HUD 92564–CN entitled ‘‘For Your Protec22 tion: Get a Home Inspection’’, in both English 

23 and Spanish languages; 

24 (B) publication of the HUD/FHA booklet 

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1 spection’’, in both English and Spanish lan2 guages; 

3 (C) development and publication of a HUD 

4 booklet entitled ‘‘For Your Protection—Get a 

5 Home Inspection’’ that does not reference 

6 FHA-insured homes, in both English and Span7 ish languages; and 

8 (D) publication of the HUD document en9 titled ‘‘Ten Important Questions To Ask Your 

10 Home Inspector’’, in both English and Spanish 

11 languages. 

12 (2) AVAILABILITY.—The Secretary shall make 

13 the materials specified in paragraph (1) available for 

14 electronic access and, where appropriate, inform po15 tential homebuyers of such availability through home 

16 purchase counseling public service announcements 

17 and toll-free telephone hotlines of the Department of 

18 Housing and Urban Development. The Secretary 

19 shall give special emphasis to reaching first-time and 

20 low-income homebuyers with these materials and ef21 forts. 

22 (3) UPDATING.—The Secretary may periodi23 cally update and revise such materials, as the Sec24 retary determines to be appropriate. 


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1 (b) REQUIREMENT FOR FHA-APPROVED LEND2 ERS.—Each mortgagee approved for participation in the 

3 mortgage insurance programs under title II of the Na4 tional Housing Act shall provide prospective homebuyers, 

5 at first contact, whether upon pre-qualification, pre-ap6 proval, or initial application, the materials specified in 

7 subparagraphs (A), (B), and (D) of subsection (a)(1). 

8 (c) REQUIREMENTS FOR HUD-APPROVED COUN9 SELING AGENCIES.—Each counseling agency certified 

10 pursuant by the Secretary to provide housing counseling 

11 services shall provide each of their clients, as part of the 

12 home purchase counseling process, the materials specified 

13 in subparagraphs (C) and (D) of subsection (a)(1). 

14 (d) TRAINING.—Training provided the Department 

15 of Housing and Urban Development for housing coun16 seling agencies, whether such training is provided directly 

17 by the Department or otherwise, shall include— 

18 (1) providing information on counseling poten19 tial homebuyers of the availability and importance of 

20 getting an independent home inspection; 

21 (2) providing information about the home in22 spection process, including the reasons for specific 

23 inspections such as radon and lead-based paint test24 ing; 


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1 (3) providing information about advising poten2 tial homebuyers on how to locate and select a quali3 fied home inspector; and 

4 (4) review of home inspection public outreach 

5 materials of the Department. 

6 SEC. 9312. WARNINGS TO HOMEOWNERS OF FORECLOSURE 

7 RESCUE SCAMS. 

8 (a) ASSISTANCE TO NRC.—Notwithstanding any 

9 other provision of law, of any amounts made available for 

10 any fiscal year pursuant to section 106(a)(4)(F) of the 

11 Housing and Urban Development Act of 1968 (12 U.S.C. 

12 1701x(a)(4)(F)) (as added by section 9304 of this title), 

13 10 percent shall be used only for assistance to the Neigh14 borhood Reinvestment Corporation for activities, in con15 sultation with servicers of residential mortgage loans, to 

16 provide notice to borrowers under such loans who are de17 linquent with respect to payments due under such loans 

18 that makes such borrowers aware of the dangers of fraud19 ulent activities associated with foreclosure. 

20 (b) NOTICE.—The Neighborhood Reinvestment Cor21 poration, in consultation with servicers of residential mort22 gage loans, shall use the amounts provided pursuant to 

23 subsection (a) to carry out activities to inform borrowers 

24 under residential mortgage loans— 


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1 (1) that the foreclosure process is complex and 

2 can be confusing; 

3 (2) that the borrower may be approached dur4 ing the foreclosure process by persons regarding sav5 ing their home and they should use caution in any 

6 such dealings; 

7 (3) that there are Federal Government and 

8 nonprofit agencies that may provide information 

9 about the foreclosure process, including the Depart10 ment of Housing and Urban Development; 

11 (4) that they should contact their lender imme12 diately, contact the Department of Housing and 

13 Urban Development to find a housing counseling 

14 agency certified by the Department to assist in 

15 avoiding foreclosure, or visit the Department’s 

16 website regarding tips for avoiding foreclosure; and 

17 (5) of the telephone number of the loan servicer 

18 or successor, the telephone number of the Depart19 ment of Housing and Urban Development housing 

20 counseling line, and the Uniform Resource Locators 

21 (URLs) for the Department of Housing and Urban 

22 Development Web sites for housing counseling and 

23 for tips for avoiding foreclosure. 


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1 Subtitle E—Mortgage Servicing 

2 SEC. 9401. ESCROW AND IMPOUND ACCOUNTS RELATING 

3 TO CERTAIN CONSUMER CREDIT TRANS4 ACTIONS. 

5 (a) IN GENERAL.—Chapter 2 of the Truth in Lend6 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

7 after section 129C (as added by section 9101) the fol8 lowing new section: 

9 ‘‘SEC. 129D. ESCROW OR IMPOUND ACCOUNTS RELATING 

10 TO CERTAIN CONSUMER CREDIT TRANS11 ACTIONS. 

12 ‘‘(a) IN GENERAL.—Except as provided in subsection 

13 (b), (c), or (d) , a creditor, in connection with the forma14 tion or consummation of a consumer credit transaction se15 cured by a first lien on the principal dwelling of the con16 sumer, other than a consumer credit transaction under an 

17 open end credit plan or a reverse mortgage, shall establish, 

18 before the consummation of such transaction, an escrow 

19 or impound account for the payment of taxes and hazard 

20 insurance, and, if applicable, flood insurance, mortgage in21 surance, ground rents, and any other required periodic 

22 payments or premiums with respect to the property or the 

23 loan terms, as provided in, and in accordance with, this 

24 section. 


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1 ‘‘(b) WHEN REQUIRED.—No impound, trust, or other 

2 type of account for the payment of property taxes, insur3 ance premiums, or other purposes relating to the property 

4 may be required as a condition of a real property sale con5 tract or a loan secured by a first deed of trust or mortgage 

6 on the principal dwelling of the consumer, other than a 

7 consumer credit transaction under an open end credit plan 

8 or a reverse mortgage, except when— 

9 ‘‘(1) any such impound, trust, or other type of 

10 escrow or impound account for such purposes is re11 quired by Federal or State law; 

12 ‘‘(2) a loan is made, guaranteed, or insured by 

13 a State or Federal governmental lending or insuring 

14 agency; 

15 ‘‘(3) the transaction is secured by a first mort16 gage or lien on the consumer’s principal dwelling 

17 having an original principal obligation amount 

18 that— 

19 ‘‘(A) does not exceed the amount of the 

20 maximum limitation on the original principal 

21 obligation of mortgage in effect for a residence 

22 of the applicable size, as of the date such inter23 est rate set, pursuant to the sixth sentence of 

24 section 305(a)(2) the Federal Home Loan 

25 Mortgage Corporation Act (12 U.S.C. 


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1 1454(a)(2)), and the annual percentage rate 

2 will exceed the average prime offer rate for a 

3 comparable transaction by 1.5 or more percent4 age points; or 

5 ‘‘(B) exceeds the amount of the maximum 

6 limitation on the original principal obligation of 

7 mortgage in effect for a residence of the appli8 cable size, as of the date such interest rate set, 

9 pursuant to the sixth sentence of section 

10 305(a)(2) the Federal Home Loan Mortgage 

11 Corporation Act (12 U.S.C. 1454(a)(2)), and 

12 the annual percentage rate will exceed the aver13 age prime offer rate for a comparable trans14 action by 2.5 or more percentage points; or 

15 ‘‘(4) so required pursuant to regulation. 

16 ‘‘(c) DURATION OF MANDATORY ESCROW OR IM17 POUND ACCOUNT.—An escrow or impound account estab18 lished pursuant to subsection (b), shall remain in existence 

19 for a minimum period of 5 years, beginning with the date 

20 of the consummation of the loan, and until such borrower 

21 has sufficient equity in the dwelling securing the consumer 

22 credit transaction so as to no longer be required to main23 tain private mortgage insurance, or such other period as 

24 may be provided in regulations to address situations such 


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1 as borrower delinquency, unless the underlying mortgage 

2 establishing the account is terminated. 

3 ‘‘(d) LIMITED EXEMPTIONS FOR LOANS SECURED BY

4 SHARES IN A COOPERATIVE AND FOR CERTAIN CONDO5 MINIUM UNITS.—Escrow accounts need not be established 

6 for loans secured by shares in a cooperative. Insurance 

7 premiums need not be included in escrow accounts for 

8 loans secured by condominium units, where the condo9 minium association has an obligation to the condominium 

10 unit owners to maintain a master policy insuring condo11 minium units. 

12 ‘‘(e) CLARIFICATION ON ESCROW ACCOUNTS FOR

13 LOANS NOT MEETING STATUTORY TEST.—For mort14 gages not covered by the requirements of subsection (b), 

15 no provision of this section shall be construed as pre16 cluding the establishment of an impound, trust, or other 

17 type of account for the payment of property taxes, insur18 ance premiums, or other purposes relating to the prop19 erty— 

20 ‘‘(1) on terms mutually agreeable to the parties 

21 to the loan; 

22 ‘‘(2) at the discretion of the lender or servicer, 

23 as provided by the contract between the lender or 

24 servicer and the borrower; or 


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1 ‘‘(3) pursuant to the requirements for the 

2 escrowing of flood insurance payments for regulated 

3 lending institutions in section 102(d) of the Flood 

4 Disaster Protection Act of 1973. 

5 ‘‘(f) ADMINISTRATION OF MANDATORY ESCROW OR

6 IMPOUND ACCOUNTS.— 

7 ‘‘(1) IN GENERAL.—Except as may otherwise 

8 be provided for in this title or in regulations pre9 scribed by the Board, escrow or impound accounts 

10 established pursuant to subsection (b) shall be estab11 lished in a federally insured depository institution. 

12 ‘‘(2) ADMINISTRATION.—Except as provided in 

13 this section or regulations prescribed under this sec14 tion, an escrow or impound account subject to this 

15 section shall be administered in accordance with— 

16 ‘‘(A) the Real Estate Settlement Proce17 dures Act of 1974 and regulations prescribed 

18 under such Act; 

19 ‘‘(B) the Flood Disaster Protection Act of 

20 1973 and regulations prescribed under such 

21 Act; and 

22 ‘‘(C) the law of the State, if applicable, 

23 where the real property securing the consumer 

24 credit transaction is located. 


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1 ‘‘(3) APPLICABILITY OF PAYMENT OF INTER2 EST.—If prescribed by applicable State or Federal 

3 law, each creditor shall pay interest to the consumer 

4 on the amount held in any impound, trust, or escrow 

5 account that is subject to this section in the manner 

6 as prescribed by that applicable State or Federal 

7 law. 

8 ‘‘(4) PENALTY COORDINATION WITH RESPA.— 

9 Any action or omission on the part of any person 

10 which constitutes a violation of the Real Estate Set11 tlement Procedures Act of 1974 or any regulation 

12 prescribed under such Act for which the person has 

13 paid any fine, civil money penalty, or other damages 

14 shall not give rise to any additional fine, civil money 

15 penalty, or other damages under this section, unless 

16 the action or omission also constitutes a direct viola17 tion of this section. 

18 ‘‘(g) DISCLOSURES RELATING TO MANDATORY ES19 CROW OR IMPOUND ACCOUNT.—In the case of any im20 pound, trust, or escrow account that is subject to this sec21 tion, the creditor shall disclose by written notice to the 

22 consumer at least 3 business days before the consumma23 tion of the consumer credit transaction giving rise to such 

24 account or in accordance with timeframes established in 

25 prescribed regulations the following information: 


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1 ‘‘(1) The fact that an escrow or impound ac2 count will be established at consummation of the 

3 transaction. 

4 ‘‘(2) The amount required at closing to initially 

5 fund the escrow or impound account. 

6 ‘‘(3) The amount, in the initial year after the 

7 consummation of the transaction, of the estimated 

8 taxes and hazard insurance, including flood insur9 ance, if applicable, and any other required periodic 

10 payments or premiums that reflects, as appropriate, 

11 either the taxable assessed value of the real property 

12 securing the transaction, including the value of any 

13 improvements on the property or to be constructed 

14 on the property (whether or not such construction 

15 will be financed from the proceeds of the trans16 action) or the replacement costs of the property. 

17 ‘‘(4) The estimated monthly amount payable to 

18 be escrowed for taxes, hazard insurance (including 

19 flood insurance, if applicable) and any other re20 quired periodic payments or premiums. 

21 ‘‘(5) The fact that, if the consumer chooses to 

22 terminate the account at the appropriate time in the 

23 future, the consumer will become responsible for the 

24 payment of all taxes, hazard insurance, and flood in25 surance, if applicable, as well as any other required 


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1 periodic payments or premiums on the property un2 less a new escrow or impound account is established. 

3 ‘‘(6) Such other information as the Federal 

4 banking agencies jointly determine necessary for the 

5 protection of the consumer. 

6 ‘‘(h) DEFINITIONS.—For purposes of this section, the 

7 following definitions shall apply: 

8 ‘‘(1) FLOOD INSURANCE.—The term ‘flood in9 surance’ means flood insurance coverage provided 

10 under the national flood insurance program pursu11 ant to the National Flood Insurance Act of 1968. 

12 ‘‘(2) HAZARD INSURANCE.—The term ‘hazard 

13 insurance’ shall have the same meaning as provided 

14 for ‘hazard insurance’, ‘casualty insurance’, ‘home15 owner’s insurance’, or other similar term under the 

16 law of the State where the real property securing the 

17 consumer credit transaction is located.’’. 

18 (b) IMPLEMENTATION.— 

19 (1) REGULATIONS.—The Board of Governors of 

20 the Federal Reserve System, the Comptroller of the 

21 Currency, the Director of the Office of Thrift Super22 vision, the Federal Deposit Insurance Corporation, 

23 the National Credit Union Administration Board, 

24 (hereafter in this title referred to as the ‘‘Federal 

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1 sion shall prescribe, in final form, such regulations 

2 as determined to be necessary to implement the 

3 amendments made by subsection (a) before the end 

4 of the 180-day period beginning on the date of the 

5 enactment of this Act. 

6 (2) EFFECTIVE DATE.—The amendments made 

7 by subsection (a) shall only apply to covered mort8 gage loans consummated after the end of the 1-year 

9 period beginning on the date of the publication of 

10 final regulations in the Federal Register. 

11 (c) CLERICAL AMENDMENT.—The table of sections 

12 for chapter 2 of the Truth in Lending Act is amended 

13 by inserting after the item relating to section 129C (as 

14 added by section 9101) the following new item: 

‘‘129D. Escrow or impound accounts relating to certain consumer credit transactions.’’. 

15 SEC. 9402. DISCLOSURE NOTICE REQUIRED FOR CON16 SUMERS WHO WAIVE ESCROW SERVICES. 

17 (a) IN GENERAL.—Section 129D of the Truth in 

18 Lending Act (as added by section 9401) is amended by 

19 adding at the end the following new subsection: 

20 ‘‘(i) DISCLOSURE NOTICE REQUIRED FOR CON21 SUMERS WHO WAIVE ESCROW SERVICES.— 

22 ‘‘(1) IN GENERAL.—If— 

23 ‘‘(A) an impound, trust, or other type of 

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1 surance premiums, or other purposes relating to 

2 real property securing a consumer credit trans3 action is not established in connection with the 

4 transaction; or 

5 ‘‘(B) a consumer chooses, and provides 

6 written notice to the creditor or servicer of such 

7 choice, at any time after such an account is es8 tablished in connection with any such trans9 action and in accordance with any statute, reg10 ulation, or contractual agreement, to close such 

11 account, 

12 the creditor or servicer shall provide a timely and 

13 clearly written disclosure to the consumer that ad14 vises the consumer of the responsibilities of the con15 sumer and implications for the consumer in the ab16 sence of any such account. 

17 ‘‘(2) DISCLOSURE REQUIREMENTS.—Any dis18 closure provided to a consumer under paragraph (1) 

19 shall include the following: 

20 ‘‘(A) Information concerning any applica21 ble fees or costs associated with either the non22 establishment of any such account at the time 

23 of the transaction, or any subsequent closure of 

24 any such account. 


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1 ‘‘(B) A clear and prominent notice that the 

2 consumer is responsible for personally and di3 rectly paying the non-escrowed items, in addi4 tion to paying the mortgage loan payment, in 

5 the absence of any such account, and the fact 

6 that the costs for taxes, insurance, and related 

7 fees can be substantial. 

8 ‘‘(C) A clear explanation of the con9 sequences of any failure to pay non-escrowed 

10 items, including the possible requirement for 

11 the forced placement of insurance by the cred12 itor or servicer and the potentially higher cost 

13 (including any potential commission payments 

14 to the servicer) or reduced coverage for the con15 sumer in the event of any such creditor-placed 

16 insurance. 

17 ‘‘(D) Such other information as the Fed18 eral banking agencies jointly determine nec19 essary for the protection of the consumer.’’. 

20 (b) IMPLEMENTATION.— 

21 (1) REGULATIONS.—The Federal banking agen22 cies and the Federal Trade Commission shall pre23 scribe, in final form, such regulations as such agen24 cies determine to be necessary to implement the 

25 amendments made by subsection (a) before the end 


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1 of the 180-day period beginning on the date of the 

2 enactment of this Act. 

3 (2) EFFECTIVE DATE.—The amendments made 

4 by subsection (a) shall only apply in accordance with 

5 the regulations established in paragraph (1) and be6 ginning on the date occurring 180-days after the 

7 date of the publication of final regulations in the 

8 Federal Register. 

9 SEC. 9403. REAL ESTATE SETTLEMENT PROCEDURES ACT 

10 OF 1974 AMENDMENTS. 

11 (a) SERVICER PROHIBITIONS.—Section 6 of the Real 

12 Estate Settlement Procedures Act of 1974 (12 U.S.C. 

13 2605) is amended by adding at the end the following new 

14 subsections: 

15 ‘‘(k) SERVICER PROHIBITIONS.— 

16 ‘‘(1) IN GENERAL.—A servicer of a federally re17 lated mortgage shall not— 

18 ‘‘(A) obtain force-placed hazard insurance 

19 unless there is a reasonable basis to believe the 

20 borrower has failed to comply with the loan 

21 contract’s requirements to maintain property 

22 insurance; 

23 ‘‘(B) charge fees for responding to valid 

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1 tions which the Secretary shall prescribe) under 

2 this section; 

3 ‘‘(C) fail to take timely action to respond 

4 to a borrower’s requests to correct errors relat5 ing to allocation of payments, final balances for 

6 purposes of paying off the loan, or avoiding 

7 foreclosure, or other standard servicer’s duties; 

8 ‘‘(D) fail to respond within 10 business 

9 days to a request from a borrower to provide 

10 the identity, address, and other relevant contact 

11 information about the owner assignee of the 

12 loan; or 

13 ‘‘(E) fail to comply with any other obliga14 tion found by the Secretary, by regulation, to 

15 be appropriate to carry out the consumer pro16 tection purposes of this Act. 

17 ‘‘(2) FORCE-PLACED INSURANCE DEFINED.— 

18 For purposes of this subsection and subsections (l) 

19 and (m), the term ‘force-placed insurance’ means 

20 hazard insurance coverage obtained by a servicer of 

21 a federally related mortgage when the borrower has 

22 failed to maintain or renew hazard insurance on 

23 such property as required of the borrower under the 

24 terms of the mortgage. 


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1 ‘‘(l) REQUIREMENTS FOR FORCE-PLACED INSUR2 ANCE.—A servicer of a federally related mortgage shall 

3 not be construed as having a reasonable basis for obtain4 ing force-placed insurance unless the requirements of this 

5 subsection have been met. 

6 ‘‘(1) WRITTEN NOTICES TO BORROWER.—A 

7 servicer may not impose any charge on any borrower 

8 for force-placed insurance with respect to any prop9 erty securing a federally related mortgage unless— 

10 ‘‘(A) the servicer has sent, by first-class 

11 mail, a written notice to the borrower con12 taining— 

13 ‘‘(i) a reminder of the borrower’s obli14 gation to maintain hazard insurance on the 

15 property securing the federally related 

16 mortgage; 

17 ‘‘(ii) a statement that the servicer 

18 does not have evidence of insurance cov19 erage of such property; 

20 ‘‘(iii) a clear and conspicuous state21 ment of the procedures by which the bor22 rower may demonstrate that the borrower 

23 already has insurance coverage; and 

24 ‘‘(iv) a statement that the servicer 

25 may obtain such coverage at the borrower’s 


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1 expense if the borrower does not provide 

2 such demonstration of the borrower’s exist3 ing coverage in a timely manner; 

4 ‘‘(B) the servicer has sent, by first-class 

5 mail, a second written notice, at least 30 days 

6 after the mailing of the notice under subpara7 graph (A) that contains all the information de8 scribed in each clause of such subparagraph; 

9 and 

10 ‘‘(C) the servicer has not received from the 

11 borrower any demonstration of hazard insur12 ance coverage for the property securing the 

13 mortgage by the end of the 15-day period be14 ginning on the date the notice under subpara15 graph (B) was sent by the servicer. 

16 ‘‘(2) SUFFICIENCY OF DEMONSTRATION.—A 

17 servicer of a federally related mortgage shall accept 

18 any reasonable form of written confirmation from a 

19 borrower of existing insurance coverage, which shall 

20 include the existing insurance policy number along 

21 with the identity of, and contact information for, the 

22 insurance company or agent. 

23 ‘‘(3) TERMINATION OF FORCE-PLACED INSUR24 ANCE.—Within 15 days of the receipt by a servicer 


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1 of confirmation of a borrower’s existing insurance 

2 coverage, the servicer shall— 

3 ‘‘(A) terminate the force-placed insurance; 

4 and 

5 ‘‘(B) refund to the consumer all force6 placed insurance premiums paid by the bor7 rower during any period during which the bor8 rower’s insurance coverage and the force-placed 

9 insurance coverage were each in effect, and any 

10 related fees charged to the consumer’s account 

11 with respect to the force-placed insurance dur12 ing such period. 

13 ‘‘(4) CLARIFICATION WITH RESPECT TO FLOOD

14 DISASTER PROTECTION ACT.—No provision of this 

15 section shall be construed as prohibiting a servicer 

16 from providing simultaneous or concurrent notice of 

17 a lack of flood insurance pursuant to section 102(e) 

18 of the Flood Disaster Protection Act of 1973. 

19 ‘‘(m) LIMITATIONS ON FORCE-PLACED INSURANCE

20 CHARGES.—All charges for force-placed insurance pre21 miums shall be bona fide and reasonable in amount.’’. 

22 (b) INCREASE IN PENALTY AMOUNTS.—Section 6(f) 

23 of the Real Estate Settlement Procedures Act of 1974 (12 

24 U.S.C. 2605(f)) is amended— 


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1 (1) in paragraphs (1)(B) and (2)(B), by strik2 ing ‘‘$1,000’’ each place such term appears and in3 serting ‘‘$2,000’’; and 

4 (2) in paragraph (2)(B)(i), by striking 

5 ‘‘$500,000’’ and inserting ‘‘$1,000,000’’. 

6 (c) DECREASE IN RESPONSE TIMES.—Section 6(e) of 

7 the Real Estate Settlement Procedures Act of 1974 (12 

8 U.S.C. 2605(e)) is amended— 

9 (1) in paragraph (1)(A), by striking ‘‘20 days’’ 

10 and inserting ‘‘5 days’’; 

11 (2) in paragraph (2), by striking ‘‘60 days’’ and 

12 inserting ‘‘30 days’’; and 

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

14 paragraph: 

15 ‘‘(4) LIMITED EXTENSION OF RESPONSE

16 TIME.—The 30-day period described in paragraph 

17 (2) may be extended for not more than 15 days if, 

18 before the end of such 30-day period, the servicer 

19 notifies the borrower of the extension and the rea20 sons for the delay in responding.’’. 

21 (d) PROMPT REFUND OF ESCROW ACCOUNTS UPON

22 PAYOFF.—Section 6(g) of the Real Estate Settlement 

23 Procedures Act of 1974 (12 U.S.C. 2605(g)) is amended 

24 by adding at the end the following new sentence: ‘‘Any 

25 balance in any such account that is within the servicer’s 


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1 control at the time the loan is paid off shall be promptly 

2 returned to the borrower within 20 business days or cred3 ited to a similar account for a new mortgage loan to the 

4 borrower with the same lender.’’. 

5 SEC. 9404. TRUTH IN LENDING ACT AMENDMENTS. 

6 (a) REQUIREMENTS FOR PROMPT CREDITING OF

7 HOME LOAN PAYMENTS.—Chapter 2 of the Truth in 

8 Lending Act (15 U.S.C. 1631 et seq.) is amended by in9 serting after section 129E (as added by section 9502) the 

10 following new section (and by amending the table of con11 tents accordingly): 

12 ‘‘SEC. 129F. REQUIREMENTS FOR PROMPT CREDITING OF 

13 HOME LOAN PAYMENTS. 

14 ‘‘(a) IN GENERAL.—In connection with a consumer 

15 credit transaction secured by a consumer’s principal dwell16 ing, no servicer shall fail to credit a payment to the con17 sumer’s loan account as of the date of receipt, except when 

18 a delay in crediting does not result in any charge to the 

19 consumer or in the reporting of negative information to 

20 a consumer reporting agency, except as required in sub21 section (b). 

22 ‘‘(b) EXCEPTION.—If a servicer specifies in writing 

23 requirements for the consumer to follow in making pay24 ments, but accepts a payment that does not conform to 


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1 the requirements, the servicer shall credit the payment as 

2 of 5 days after receipt.’’. 

3 (b) REQUESTS FOR PAYOFF AMOUNTS.—Chapter 2 

4 of such Act is further amended by inserting after section 

5 129F (as added by subsection (a)) the following new sec6 tion (and by amending the table of contents accordingly): 

7 ‘‘SEC. 129G. REQUESTS FOR PAYOFF AMOUNTS OF HOME 

8 LOAN. 

9 ‘‘A creditor or servicer of a home loan shall send an 

10 accurate payoff balance within a reasonable time, but in 

11 no case more than 7 business days, after the receipt of 

12 a written request for such balance from or on behalf of 

13 the borrower.’’. 

14 SEC. 9405. ESCROWS INCLUDED IN REPAYMENT ANALYSIS. 

15 Section 128(b) of the Truth in Lending Act (15 

16 U.S.C. 1638(b)) is amended by adding at the end the fol17 lowing new paragraph: 

18 ‘‘(4) REPAYMENT ANALYSIS REQUIRED TO IN19 CLUDE ESCROW PAYMENTS.— 

20 ‘‘(A) IN GENERAL.—In the case of any 

21 consumer credit transaction secured by a first 

22 mortgage or lien on the principal dwelling of 

23 the consumer, other than a consumer credit 

24 transaction under an open end credit plan or a 

25 reverse mortgage, for which an impound, trust, 


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1 or other type of account has been or will be es2 tablished in connection with the transaction for 

3 the payment of property taxes, hazard and flood 

4 (if any) insurance premiums, or other periodic 

5 payments or premiums with respect to the 

6 property, the information required to be pro7 vided under subsection (a) with respect to the 

8 number, amount, and due dates or period of 

9 payments scheduled to repay the total of pay10 ments shall take into account the amount of 

11 any monthly payment to such account for each 

12 such repayment in accordance with section 

13 10(a)(2) of the Real Estate Settlement Proce14 dures Act of 1974. 

15 ‘‘(B) ASSESSMENT VALUE.—The amount 

16 taken into account under subparagraph (A) for 

17 the payment of property taxes, hazard and flood 

18 (if any) insurance premiums, or other periodic 

19 payments or premiums with respect to the 

20 property shall reflect the taxable assessed value 

21 of the real property securing the transaction 

22 after the consummation of the transaction, in23 cluding the value of any improvements on the 

24 property or to be constructed on the property 

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1 nanced from the proceeds of the transaction), if 

2 known, and the replacement costs of the prop3 erty for hazard insurance, in the initial year 

4 after the transaction.’’. 

5 Subtitle F—Appraisal Activities 

6 SEC. 9501. PROPERTY APPRAISAL REQUIREMENTS. 

7 Chapter 2 of the Truth in Lending Act (15 U.S.C. 

8 1631 et seq.) is amended by inserting after 129G (as 

9 added by section 9404(b)) the following new section: 

10 ‘‘SEC. 129H PROPERTY APPRAISAL REQUIREMENTS. 

11 ‘‘(a) IN GENERAL.—A creditor may not extend credit 

12 in the form of a subprime mortgage to any consumer with13 out first obtaining a written appraisal of the property to 

14 be mortgaged prepared in accordance with the require15 ments of this section. 

16 ‘‘(b) APPRAISAL REQUIREMENTS.— 

17 ‘‘(1) PHYSICAL PROPERTY VISIT.—An appraisal 

18 of property to be secured by a subprime mortgage 

19 does not meet the requirement of this section unless 

20 it is performed by a qualified appraiser who con21 ducts a physical property visit of the interior of the 

22 mortgaged property. 

23 ‘‘(2) SECOND APPRAISAL UNDER CERTAIN CIR24 CUMSTANCES.— 


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1 ‘‘(A) IN GENERAL.—If the purpose of a 

2 subprime mortgage is to finance the purchase 

3 or acquisition of the mortgaged property from 

4 a person within 180 days of the purchase or ac5 quisition of such property by that person at a 

6 price that was lower than the current sale price 

7 of the property, the creditor shall obtain a sec8 ond appraisal from a different qualified ap9 praiser. The second appraisal shall include an 

10 analysis of the difference in sale prices, changes 

11 in market conditions, and any improvements 

12 made to the property between the date of the 

13 previous sale and the current sale. 

14 ‘‘(B) NO COST TO APPLICANT.—The cost 

15 of any second appraisal required under sub16 paragraph (A) may not be charged to the appli17 cant. 

18 ‘‘(3) QUALIFIED APPRAISER DEFINED.—For 

19 purposes of this section, the term ‘qualified ap20 praiser’ means a person who— 

21 ‘‘(A) is, at a minimum, certified or licensed 

22 by the State in which the property to be ap23 praised is located; and 

24 ‘‘(B) performs each appraisal in con25 formity with the Uniform Standards of ProfesVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01624 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 sional Appraisal Practice and title XI of the Fi2 nancial Institutions Reform, Recovery, and En3 forcement Act of 1989, and the regulations pre4 scribed under such title, as in effect on the date 

5 of the appraisal. 

6 ‘‘(c) FREE COPY OF APPRAISAL.—A creditor shall 

7 provide 1 copy of each appraisal conducted in accordance 

8 with this section in connection with a subprime mortgage 

9 to the applicant without charge, and at least 3 days prior 

10 to the transaction closing date. 

11 ‘‘(d) CONSUMER NOTIFICATION.—At the time of the 

12 initial mortgage application, the applicant shall be pro13 vided with a statement by the creditor that any appraisal 

14 prepared for the mortgage is for the sole use of the cred15 itor, and that the applicant may choose to have a separate 

16 appraisal conducted at their own expense. 

17 ‘‘(e) VIOLATIONS.—In addition to any other liability 

18 to any person under this title, a creditor found to have 

19 willfully failed to obtain an appraisal as required in this 

20 section shall be liable to the applicant or borrower for the 

21 sum of $2,000. 

22 ‘‘(f) SUBPRIME MORTGAGE DEFINED.—For purposes 

23 of this section, the term ‘subprime mortgage’ means a res24 idential mortgage loan, other than a reverse mortgage loan 

25 insured by the Federal Housing Administration, secured 


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1 by a principal dwelling with an annual percentage rate 

2 that exceeds the average prime offer rate for a comparable 

3 transaction, as of the date the interest rate is set— 

4 ‘‘(1) by 1.5 or more percentage points, in the 

5 case of a first lien residential mortgage loan having 

6 an original principal obligation amount that does not 

7 exceed the amount of the maximum limitation on the 

8 original principal obligation of mortgage in effect for 

9 a residence of the applicable size, as of the date of 

10 such interest rate set, pursuant to the sixth sentence 

11 of section 305(a)(2) the Federal Home Loan Mort12 gage Corporation Act (12 U.S.C. 1454(a)(2)); 

13 ‘‘(2) by 2.5 or more percentage points, in the 

14 case of a first lien residential mortgage loan having 

15 an original principal obligation amount that exceeds 

16 the amount of the maximum limitation on the origi17 nal principal obligation of mortgage in effect for a 

18 residence of the applicable size, as of the date of 

19 such interest rate set, pursuant to the sixth sentence 

20 of section 305(a)(2) the Federal Home Loan Mort21 gage Corporation Act (12 U.S.C. 1454(a)(2)); and 

22 ‘‘(3) by 3.5 or more percentage points for a 

23 subordinate lien residential mortgage loan.’’. 


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1 SEC. 9502. UNFAIR AND DECEPTIVE PRACTICES AND ACTS 

2 RELATING TO CERTAIN CONSUMER CREDIT 

3 TRANSACTIONS. 

4 (a) IN GENERAL.—Chapter 2 of the Truth in Lend5 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

6 after section 129D (as added by section 9401(a)) the fol7 lowing new section: 

8 ‘‘SEC. 129E. UNFAIR AND DECEPTIVE PRACTICES AND ACTS 

9 RELATING TO CERTAIN CONSUMER CREDIT 

10 TRANSACTIONS. 

11 ‘‘(a) IN GENERAL.—It shall be unlawful, in extending 

12 credit or in providing any services for a consumer credit 

13 transaction secured by the principal dwelling of the con14 sumer, to engage in any unfair or deceptive act or practice 

15 as described in or pursuant to regulations prescribed 

16 under this section. 

17 ‘‘(b) APPRAISAL INDEPENDENCE.—For purposes of 

18 subsection (a), unfair and deceptive practices shall in19 clude— 

20 ‘‘(1) any appraisal of a property offered as se21 curity for repayment of the consumer credit trans22 action that is conducted in connection with such 

23 transaction in which a person with an interest in the 

24 underlying transaction compensates, coerces, extorts, 

25 colludes, instructs, induces, bribes, or intimidates a 

26 person conducting or involved in an appraisal, or atVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01627 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tempts, to compensate, coerce, extort, collude, in2 struct, induce, bribe, or intimidate such a person, 

3 for the purpose of causing the appraised value as4 signed, under the appraisal, to the property to be 

5 based on any factor other than the independent 

6 judgment of the appraiser; 

7 ‘‘(2) mischaracterizing, or suborning any 

8 mischaracterization of, the appraised value of the 

9 property securing the extension of the credit; 

10 ‘‘(3) seeking to influence an appraiser or other11 wise to encourage a targeted value in order to facili12 tate the making or pricing of the transaction; and 

13 ‘‘(4) withholding or threatening to withhold 

14 timely payment for an appraisal report or for ap15 praisal services rendered. 

16 ‘‘(c) EXCEPTIONS.—The requirements of subsection 

17 (b) shall not be construed as prohibiting a mortgage lend18 er, mortgage broker, mortgage banker, real estate broker, 

19 appraisal management company, employee of an appraisal 

20 management company, consumer, or any other person 

21 with an interest in a real estate transaction from asking 

22 an appraiser to provide 1 or more of the following services: 

23 ‘‘(1) Consider additional, appropriate property 

24 information, including the consideration of addiVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01628 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tional comparable properties to make or support an 

2 appraisal. 

3 ‘‘(2) Provide further detail, substantiation, or 

4 explanation for the appraiser’s value conclusion. 

5 ‘‘(3) Correct errors in the appraisal report. 

6 ‘‘(d) PROHIBITIONS ON CONFLICTS OF INTEREST.— 

7 No certified or licensed appraiser conducting, and no ap8 praisal management company procuring or facilitating, an 

9 appraisal in connection with a consumer credit transaction 

10 secured by the principal dwelling of a consumer may have 

11 a direct or indirect interest, financial or otherwise, in the 

12 property or transaction involving the appraisal. 

13 ‘‘(e) MANDATORY REPORTING.—Any mortgage lend14 er, mortgage broker, mortgage banker, real estate broker, 

15 appraisal management company, employee of an appraisal 

16 management company, or any other person involved in a 

17 real estate transaction involving an appraisal in connection 

18 with a consumer credit transaction secured by the prin19 cipal dwelling of a consumer who has a reasonable basis 

20 to believe an appraiser is failing to comply with the Uni21 form Standards of Professional Appraisal Practice, is vio22 lating applicable laws, or is otherwise engaging in uneth23 ical or unprofessional conduct, shall refer the matter to 

24 the applicable State appraiser certifying and licensing 

25 agency. 


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1 ‘‘(f) NO EXTENSION OF CREDIT.—In connection with 

2 a consumer credit transaction secured by a consumer’s 

3 principal dwelling, a creditor who knows, at or before loan 

4 consummation, of a violation of the appraisal independ5 ence standards established in subsections (b) or (d) shall 

6 not extend credit based on such appraisal unless the cred7 itor documents that the creditor has acted with reasonable 

8 diligence to determine that the appraisal does not materi9 ally misstate or misrepresent the value of such dwelling. 

10 ‘‘(g) RULEMAKING PROCEEDINGS.—The Board, the 

11 Comptroller of the Currency, the Director of the Office 

12 of Thrift Supervision, the Federal Deposit Insurance Cor13 poration, the National Credit Union Administration 

14 Board, and the Federal Trade Commission— 

15 ‘‘(1) shall, for purposes of this section, jointly 

16 prescribe regulations no later than 180 days after 

17 the date of the enactment of this section, and where 

18 such regulations have an effective date of no later 

19 than 1 year after the date of the enactment of this 

20 section, defining with specificity acts or practices 

21 which are unfair or deceptive in the provision of 

22 mortgage lending services for a consumer credit 

23 transaction secured by the principal dwelling of the 

24 consumer or mortgage brokerage services for such a 


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1 transaction and defining any terms in this section or 

2 such regulations; and 

3 ‘‘(2) may jointly issue interpretive guidelines 

4 and general statements of policy with respect to un5 fair or deceptive acts or practices in the provision of 

6 mortgage lending services for a consumer credit 

7 transaction secured by the principal dwelling of the 

8 consumer and mortgage brokerage services for such 

9 a transaction, within the meaning of subsections (a), 

10 (b), (c), (d), (e), and (f). 

11 ‘‘(h) PENALTIES.— 

12 ‘‘(1) FIRST VIOLATION.—In addition to the en13 forcement provisions referred to in section 130, each 

14 person who violates this section shall forfeit and pay 

15 a civil penalty of not more than $10,000 for each 

16 day any such violation continues. 

17 ‘‘(2) SUBSEQUENT VIOLATIONS.—In the case of 

18 any person on whom a civil penalty has been im19 posed under paragraph (1), paragraph (1) shall be 

20 applied by substituting ‘$20,000’ for ‘$10,000’ with 

21 respect to all subsequent violations. 

22 ‘‘(3) ASSESSMENT.—The agency referred to in 

23 subsection (a) or (c) of section 108 with respect to 

24 any person described in paragraph (1) shall assess 


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1 any penalty under this subsection to which such per2 son is subject.’’. 

3 (b) CLERICAL AMENDMENT.—The table of sections 

4 for chapter 2 of the Truth in Lending Act is amended 

5 by inserting after the item relating to section 129D (as 

6 added by section 9401(c)) the following new item: 

‘‘129E. Unfair and deceptive practices and acts relating to certain consumer 

credit transactions.’’. 

7 SEC. 9503. AMENDMENTS RELATING TO APPRAISAL SUB8 COMMITTEE OF FIEC, APPRAISER INDEPEND9 ENCE MONITORING, APPROVED APPRAISER 

10 EDUCATION, APPRAISAL MANAGEMENT COM11 PANIES, APPRAISER COMPLAINT HOTLINE, 

12 AUTOMATED VALUATION MODELS, AND 

13 BROKER PRICE OPINIONS. 

14 (a) CONSUMER PROTECTION MISSION.— 

15 (1) PURPOSES.—Section 1101 of the Financial 

16 Institutions Reform, Recovery, and Enforcement Act 

17 of 1989 (12 U.S.C. 3331) is amended by inserting 

18 ‘‘and to provide the Appraisal Subcommittee with a 

19 consumer protection mandate’’ before the period at 

20 the end. 

21 (2) FUNCTIONS OF APPRAISAL SUB22 COMMITTEE.—Section 1103(a) of the Financial In23 stitutions Reform, Recovery, and Enforcement Act 

24 of 1989 (12 U.S.C. 3332(a)) is amended— 


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1 (A) by striking ‘‘and’’ at the end of para2 graph (3); and 

3 (B) by amending paragraph (4) to read as 

4 follows: 

5 ‘‘(4) monitor the efforts of, and requirements 

6 established by, States and the Federal financial in7 stitutions regulatory agencies to protect consumers 

8 from improper appraisal practices and the preda9 tions of unlicensed appraisers in consumer credit 

10 transactions that are secured by a consumer’s prin11 cipal dwelling; and’’. 

12 (3) THRESHOLD LEVELS.—Section 1112(b) of 

13 the Financial Institutions Reform, Recovery, and 

14 Enforcement Act of 1989 (12 U.S.C. 3341(b)) is 

15 amended by inserting before the period the fol16 lowing: ‘‘, and that such threshold level provides rea17 sonable protection for consumers who purchase 1–4 

18 unit single-family residences. In determining whether 

19 a threshold level provides reasonable protection for 

20 consumers, each Federal financial institutions regu21 latory agency shall consult with consumer groups 

22 and convene a public hearing’’. 

23 (b) ANNUAL REPORT OF APPRAISAL SUB24 COMMITTEE.—Section 1103(a) of the Financial Institu25 tions Reform, Recovery, and Enforcement Act of 1989 (12 


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1 U.S.C. 3332(a)) is amended at the end by inserting the 

2 following new paragraph: 

3 ‘‘(5) transmit an annual report to the Congress 

4 not later than January 31 of each year that de5 scribes the manner in which each function assigned 

6 to the Appraisal Subcommittee has been carried out 

7 during the preceding year. The report shall also de8 tail the activities of the Appraisal Subcommittee, in9 cluding the results of all audits of State appraiser 

10 regulatory agencies, and provide an accounting of 

11 disapproved actions and warnings taken in the pre12 vious year, including a description of the conditions 

13 causing the disapproval and actions taken to achieve 

14 compliance.’’. 

15 (c) OPEN MEETINGS.—Section 1104(b) of the Finan16 cial Institutions Reform, Recovery, and Enforcement Act 

17 of 1989 (12 U.S.C. 3333(b)) is amended by inserting ‘‘in 

18 public session after notice in the Federal Register’’ after 

19 ‘‘shall meet’’. 

20 (d) REGULATIONS.—Section 1106 of the Financial 

21 Institutions Reform, Recovery, and Enforcement Act of 

22 1989 (12 U.S.C. 3335) is amended— 

23 (1) by inserting ‘‘prescribe regulations after no24 tice and opportunity for comment,’’ after ‘‘hold 

25 hearings’’; and 


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1 (2) at the end by inserting ‘‘Any regulations 

2 prescribed by the Appraisal Subcommittee shall (un3 less otherwise provided in this title) be limited to the 

4 following functions: temporary practice, national reg5 istry, information sharing, and enforcement. For 

6 purposes of prescribing regulations, the Appraisal 

7 Subcommittee shall establish an advisory committee 

8 of industry participants, including appraisers, lend9 ers, consumer advocates, and government agencies, 

10 and hold meetings as necessary to support the devel11 opment of regulations.’’. 

12 (e) APPRAISALS AND APPRAISAL REVIEWS.—Section 

13 1113 of the Financial Institutions Reform, Recovery, and 

14 Enforcement Act of 1989 (12 U.S.C. 3342) is amended— 

15 (1) by striking ‘‘In determining’’ and inserting 

16 ‘‘(a) IN GENERAL.—In determining’’; 

17 (2) in subsection (a) (as designated by para18 graph (1)), by inserting before the period the fol19 lowing: ‘‘, where a complex 1-to-4 unit single family 

20 residential appraisal means an appraisal for which 

21 the property to be appraised, the form of ownership, 

22 the property characteristics, or the market condi23 tions are atypical’’; and 

24 (3) by adding at the end the following new sub25 section: 


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1 ‘‘(b) APPRAISALS AND APPRAISAL REVIEWS.—All ap2 praisals performed at a property within a State shall be 

3 prepared by appraisers licensed or certified in the State 

4 where the property is located. All appraisal reviews, in5 cluding appraisal reviews by a lender, appraisal manage6 ment company, or other third party organization, shall be 

7 performed by an appraiser who is duly licensed or certified 

8 by a State appraisal board.’’. 

9 (f) APPRAISAL MANAGEMENT SERVICES.— 

10 (1) SUPERVISION OF THIRD PARTY PROVIDERS

11 OF APPRAISAL MANAGEMENT SERVICES.—Section 

12 1103(a) of the Financial Institutions Reform, Recov13 ery, and Enforcement Act of 1989 (12 U.S.C. 

14 3332(a)) (as previously amended by this section) is 

15 further amended— 

16 (A) by amending paragraph (1) to read as 

17 follows: 

18 ‘‘(1) monitor the requirements established by 

19 States— 

20 ‘‘(A) for the certification and licensing of 

21 individuals who are qualified to perform ap22 praisals in connection with federally related 

23 transactions, including a code of professional 

24 responsibility; and 


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1 ‘‘(B) for the registration and supervision 

2 of the operations and activities of an appraisal 

3 management company;’’; and 

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

5 paragraph: 

6 ‘‘(7) maintain a national registry of appraisal 

7 management companies that either are registered 

8 with and subject to supervision of a State appraiser 

9 certifying and licensing agency or are operating sub10 sidiaries of a Federally regulated financial institu11 tion.’’. 

12 (2) APPRAISAL MANAGEMENT COMPANY MIN13 IMUM QUALIFICATIONS.—Title XI of the Financial 

14 Institutions Reform, Recovery, and Enforcement Act 

15 of 1989 (12 U.S.C. 3331 et seq.) is amended by 

16 adding at the end the following new section (and 

17 amending the table of contents accordingly): 

18 ‘‘SEC. 1124. APPRAISAL MANAGEMENT COMPANY MINIMUM 

19 QUALIFICATIONS. 

20 ‘‘(a) IN GENERAL.—The Appraiser Qualifications 

21 Board of the Appraisal Foundation shall establish min22 imum qualifications to be applied by a State in the reg23 istration of appraisal management companies. Such quali24 fications shall include a requirement that such compa25 nies— 


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1 ‘‘(1) register with and be subject to supervision 

2 by a State appraiser certifying and licensing agency 

3 in each State in which such company operates; 

4 ‘‘(2) verify that only licensed or certified ap5 praisers are used for federally related transactions; 

6 ‘‘(3) require that appraisals coordinated by an 

7 appraisal management company comply with the 

8 Uniform Standards of Professional Appraisal Prac9 tice; and 

10 ‘‘(4) require that appraisals are conducted inde11 pendently and free from inappropriate influence and 

12 coercion pursuant to the appraisal independence 

13 standards established under section 129E of the 

14 Truth in Lending Act. 

15 ‘‘(b) EXCEPTION FOR FEDERALLY REGULATED FI16 NANCIAL INSTITUTIONS.—The requirements of subsection 

17 (a) shall not apply to an appraisal management company 

18 that is a subsidiary owned and controlled by a financial 

19 institution and regulated by a federal financial institution 

20 regulatory agency. In such case, the appropriate federal 

21 financial institutions regulatory agency shall, at a min22 imum, develop regulations affecting the operations of the 

23 appraisal management company to— 

24 ‘‘(1) verify that only licensed or certified ap25 praisers are used for federally related transactions; 


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1 ‘‘(2) require that appraisals coordinated by an 

2 institution or subsidiary providing appraisal manage3 ment services comply with the Uniform Standards of 

4 Professional Appraisal Practice; and 

5 ‘‘(3) require that appraisals are conducted inde6 pendently and free from inappropriate influence and 

7 coercion pursuant to the appraisal independence 

8 standards established under section 129E of the 

9 Truth in Lending Act. 

10 ‘‘(c) REGISTRATION LIMITATIONS.—An appraisal 

11 management company shall not be registered by a State 

12 if such company, in whole or in part, directly or indirectly, 

13 is owned by any person who has had an appraiser license 

14 or certificate refused, denied, cancelled, surrendered in 

15 lieu of revocation, or revoked in any State. Additionally, 

16 each person that owns more than 10 percent of an ap17 praisal management company shall be of good moral char18 acter, as determined by the State appraiser certifying and 

19 licensing agency, and shall submit to a background inves20 tigation carried out by the State appraiser certifying and 

21 licensing agency. 

22 ‘‘(d) REGULATIONS.—The Appraisal Subcommittee 

23 shall promulgate regulations to implement the minimum 

24 qualifications developed by the Appraiser Qualifications 

25 Board under this section, as such qualifications relate to 


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1 the State appraiser certifying and licensing agencies. The 

2 Appraisal Subcommittee shall also promulgate regulations 

3 for the reporting of the activities of appraisal management 

4 companies in determining the payment of the annual reg5 istry fee. 

6 ‘‘(e) EFFECTIVE DATE.— 

7 ‘‘(1) IN GENERAL.—No appraisal management 

8 company may perform services related to a federally 

9 related transaction in a State after the date that is 

10 36 months after the date of the enactment of this 

11 section unless such company is registered with such 

12 State or subject to oversight by a federal financial 

13 institutions regulatory agency. 

14 ‘‘(2) EXTENSION OF EFFECTIVE DATE.—Sub15 ject to the approval of the Council, the Appraisal 

16 Subcommittee may extend by an additional 12 

17 months the requirements for the registration and su18 pervision of appraisal management companies if it 

19 makes a written finding that a State has made sub20 stantial progress in establishing a State appraisal 

21 management company registration and supervision 

22 system that appears to conform with the provisions 

23 of this title.’’. 

24 (3) STATE APPRAISER CERTIFYING AND LI25 CENSING AGENCY AUTHORITY.—Section 1117 of the 


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1 Financial Institutions Reform, Recovery, and En2 forcement Act of 1989 (12 U.S.C. 3346) is amended 

3 by adding at the end the following: ‘‘The duties of 

4 such agency may additionally include the registra5 tion and supervision of appraisal management com6 panies.’’. 

7 (4) APPRAISAL MANAGEMENT COMPANY DEFI8 NITION.—Section 1121 of the Financial Institutions 

9 Reform, Recovery, and Enforcement Act of 1989 

10 (12 U.S.C. 3350) is amended by adding at the end 

11 the following: 

12 ‘‘(11) APPRAISAL MANAGEMENT COMPANY.— 

13 The term ‘appraisal management company’ means, 

14 in connection with valuing properties collateralizing 

15 mortgage loans or mortgages incorporated into a 

16 securitization, any external third party authorized ei17 ther by a creditor of a consumer credit transaction 

18 secured by a consumer’s principal dwelling or by an 

19 underwriter of or other principal in the secondary 

20 mortgage markets, that oversees a network or panel 

21 of more than 15 certified or licensed appraisers in 

22 a State or 25 or more nationally within a given 

23 year— 

24 ‘‘(A) to recruit, select, and retain apprais25 ers; 


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1 ‘‘(B) to contract with licensed and certified 

2 appraisers to perform appraisal assignments; 

3 ‘‘(C) to manage the process of having an 

4 appraisal performed, including providing admin5 istrative duties such as receiving appraisal or6 ders and appraisal reports, submitting com7 pleted appraisal reports to creditors and under8 writers, collecting fees from creditors and un9 derwriters for services provided, and reimburs10 ing appraisers for services performed; or 

11 ‘‘(D) to review and verify the work of ap12 praisers.’’. 

13 (g) STATE AGENCY REPORTING REQUIREMENT.— 

14 Section 1109(a) of the Financial Institutions Reform, Re15 covery, and Enforcement Act of 1989 (12 U.S.C. 3338(a)) 

16 is amended— 

17 (1) by striking ‘‘and’’ after the semicolon in 

18 paragraph (1); 

19 (2) by redesignating paragraph (2) as para20 graph (4); and 

21 (3) by inserting after paragraph (1) the fol22 lowing new paragraphs: 

23 ‘‘(2) transmit reports on sanctions, disciplinary 

24 actions, license and certification revocations, and li25 cense and certification suspensions on a timely basis 


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1 to the national registry of the Appraisal Sub2 committee; 

3 ‘‘(3) transmit reports on a timely basis of su4 pervisory activities involving appraisal management 

5 companies or other third-party providers of apprais6 als and appraisal management services, including in7 vestigations initiated and disciplinary actions taken; 

8 and’’. 

9 (h) REGISTRY FEES MODIFIED.— 

10 (1) IN GENERAL.—Section 1109(a) of the Fi11 nancial Institutions Reform, Recovery, and Enforce12 ment Act of 1989 (12 U.S.C. 3338(a)) is amend13 ed— 

14 (A) by amending paragraph (4) (as modi15 fied by section 9503(g)) to read as follows: 

16 ‘‘(4) collect— 

17 ‘‘(A) from such individuals who perform or 

18 seek to perform appraisals in federally related 

19 transactions, an annual registry fee of not more 

20 than $40, such fees to be transmitted by the 

21 State agencies to the Council on an annual 

22 basis; and 

23 ‘‘(B) from an appraisal management com24 pany that either has registered with a State ap25 praiser certifying and licensing agency in acVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01643 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 cordance with this title or operates as a sub2 sidiary of a federally regulated financial institu3 tion, an annual registry fee of— 

4 ‘‘(i) in the case of such a company 

5 that has been in existence for more than a 

6 year, $25 multiplied by the number of ap7 praisers working for or contracting with 

8 such company in such State during the 

9 previous year, but where such $25 amount 

10 may be adjusted, up to a maximum of $50, 

11 at the discretion of the Appraisal Sub12 committee, if necessary to carry out the 

13 Subcommittee’s functions under this title; 

14 and 

15 ‘‘(ii) in the case of such a company 

16 that has not been in existence for more 

17 than a year, $25 multiplied by an appro18 priate number to be determined by the Ap19 praisal Subcommittee, and where such 

20 number will be used for determining the 

21 fee of all such companies that were not in 

22 existence for more than a year, but where 

23 such $25 amount may be adjusted, up to 

24 a maximum of $50, at the discretion of the 

25 Appraisal Subcommittee, if necessary to 


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1 carry out the Subcommittee’s functions 

2 under this title.’’; and 

3 (B) by amending the matter following 

4 paragraph (4), as redesignated, to read as fol5 lows: 

6 ‘‘Subject to the approval of the Council, the Appraisal 

7 Subcommittee may adjust the dollar amount of registry 

8 fees under paragraph (4)(A), up to a maximum of $80 

9 per annum, as necessary to carry out its functions under 

10 this title. The Appraisal Subcommittee shall consider at 

11 least once every 5 years whether to adjust the dollar 

12 amount of the registry fees to account for inflation. In 

13 implementing any change in registry fees, the Appraisal 

14 Subcommittee shall provide flexibility to the States for 

15 multi-year certifications and licenses already in place, as 

16 well as a transition period to implement the changes in 

17 registry fees. In establishing the amount of the annual 

18 registry fee for an appraisal management company, the 

19 Appraisal Subcommittee shall have the discretion to im20 pose a minimum annual registry fee for an appraisal man21 agement company to protect against the under reporting 

22 of the number of appraisers working for or contracted by 

23 the appraisal management company.’’. 

24 (2) INCREMENTAL REVENUES.—Incremental 

25 revenues collected pursuant to the increases required 


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1 by this subsection shall be placed in a separate ac2 count at the United States Treasury, entitled the 

3 ‘‘Appraisal Subcommittee Account’’. 

4 (i) GRANTS AND REPORTS.—Section 1109(b) of the 

5 Financial Institutions Reform, Recovery, and Enforce6 ment Act of 1989 (12 U.S.C. 3348(b)) is amended— 

7 (1) by striking ‘‘and’’ after the semicolon in 

8 paragraph (3); 

9 (2) by striking the period at the end of para10 graph (4) and inserting a semicolon; 

11 (3) by adding at the end the following new 

12 paragraphs: 

13 ‘‘(5) to make grants to State appraiser certi14 fying and licensing agencies to support the efforts of 

15 such agencies to comply with this title, including— 

16 ‘‘(A) the complaint process, complaint in17 vestigations, and appraiser enforcement activi18 ties of such agencies; and 

19 ‘‘(B) the submission of data on State li20 censed and certified appraisers and appraisal 

21 management companies to the National ap22 praisal registry, including information affirming 

23 that the appraiser or appraisal management 

24 company meets the required qualification criVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01646 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 teria and formal and informal disciplinary ac2 tions; and 

3 ‘‘(6) to report to all State appraiser certifying 

4 and licensing agencies when a license or certification 

5 is surrendered, revoked, or suspended.’’. 

6 Obligations authorized under this subsection may not ex7 ceed 75 percent of the fiscal year total of incremental in8 crease in fees collected and deposited in the ‘‘Appraisal 

9 Subcommittee Account’’ pursuant to subsection (h). 

10 (j) CRITERIA.—Section 1116 of the Financial Institu11 tions Reform, Recovery, and Enforcement Act of 1989 (12 

12 U.S.C. 3345) is amended— 

13 (1) in subsection (c), by inserting ‘‘whose cri14 teria for the licensing of a real estate appraiser cur15 rently meet or exceed the minimum criteria issued 

16 by the Appraisal Qualifications Board of The Ap17 praisal Foundation for the licensing of real estate 

18 appraisers’’ before the period at the end; and 

19 (2) by striking subsection (e) and inserting the 

20 following new subsection: 

21 ‘‘(e) MINIMUM QUALIFICATION REQUIREMENTS.— 

22 Any requirements established for individuals in the posi23 tion of ‘Trainee Appraiser’ and ‘Supervisory Appraiser’ 

24 shall meet or exceed the minimum qualification require25 ments of the Appraiser Qualifications Board of The ApVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01647 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 praisal Foundation. The Appraisal Subcommittee shall 

2 have the authority to enforce these requirements.’’. 

3 (k) MONITORING OF STATE APPRAISER CERTIFYING

4 AND LICENSING AGENCIES.—Section 1118 of the Finan5 cial Institutions Reform, Recovery, and Enforcement Act 

6 of 1989 (12 U.S.C. 3347) is amended— 

7 (1) by amending subsection (a) to read as fol8 lows: 

9 ‘‘(a) IN GENERAL.—The Appraisal Subcommittee 

10 shall monitor each State appraiser certifying and licensing 

11 agency for the purposes of determining whether such 

12 agency— 

13 ‘‘(1) has policies, practices, funding, staffing, 

14 and procedures that are consistent with this title; 

15 ‘‘(2) processes complaints and completes inves16 tigations in a reasonable time period; 

17 ‘‘(3) appropriately disciplines sanctioned ap18 praisers and appraisal management companies; 

19 ‘‘(4) maintains an effective regulatory program; 

20 and 

21 ‘‘(5) reports complaints and disciplinary actions 

22 on a timely basis to the national registries on ap23 praisers and appraisal management companies main24 tained by the Appraisal Subcommittee. 


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1 The Appraisal Subcommittee shall have the authority to 

2 remove a State licensed or certified appraiser or a reg3 istered appraisal management company from a national 

4 registry on an interim basis pending State agency action 

5 on licensing, certification, registration, and disciplinary 

6 proceedings. The Appraisal Subcommittee and all agen7 cies, instrumentalities, and Federally recognized entities 

8 under this title shall not recognize appraiser certifications 

9 and licenses from States whose appraisal policies, prac10 tices, funding, staffing, or procedures are found to be in11 consistent with this title. The Appraisal Subcommittee 

12 shall have the authority to impose sanctions, as described 

13 in this section, against a State agency that fails to have 

14 an effective appraiser regulatory program. In determining 

15 whether such a program is effective, the Appraisal Sub16 committee shall include an analyses of the licensing and 

17 certification of appraisers, the registration of appraisal 

18 management companies, the issuance of temporary li19 censes and certifications for appraisers, the receiving and 

20 tracking of submitted complaints against appraisers and 

21 appraisal management companies, the investigation of 

22 complaints, and enforcement actions against appraisers 

23 and appraisal management companies. The Appraisal 

24 Subcommittee shall have the authority to impose interim 

25 actions and suspensions against a State agency as an alVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01649 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 ternative to, or in advance of, the derecognition of a State 

2 agency.’’. 

3 (2) in subsection (b)(2), by inserting after ‘‘au4 thority’’ the following: ‘‘or sufficient funding’’. 

5 (l) RECIPROCITY.—Subsection (b) of section 1122 of 

6 the Financial Institutions Reform, Recovery, and Enforce7 ment Act of 1989 (12 U.S.C. 3351(b)) is amended to read 

8 as follows: 

9 ‘‘(b) RECIPROCITY.—A State appraiser certifying or 

10 licensing agency shall issue a reciprocal certification or li11 cense for an individual from another State when— 

12 ‘‘(1) the appraiser licensing and certification 

13 program of such other State is in compliance with 

14 the provisions of this title; and 

15 ‘‘(2) the appraiser holds a valid certification 

16 from a State whose requirements for certification or 

17 licensing meet or exceed the licensure standards es18 tablished by the State where an individual seeks ap19 praisal licensure.’’. 

20 (m) CONSIDERATION OF PROFESSIONAL APPRAISAL

21 DESIGNATIONS.—Section 1122(d) of the Financial Insti22 tutions Reform, Recovery, and Enforcement Act of 1989 

23 (12 U.S.C. 3351(d)) is amended by striking ‘‘shall not ex24 clude’’ and all that follows through the end of the sub25 section and inserting the following: ‘‘may include eduVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01650 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 cation achieved, experience, sample appraisals, and ref2 erences from prior clients. Membership in a nationally rec3 ognized professional appraisal organization may be a cri4 teria considered, though lack of membership therein shall 

5 not be the sole bar against consideration for an assign6 ment under these criteria.’’. 

7 (n) APPRAISER INDEPENDENCE.—Section 1122 of 

8 the Financial Institutions Reform, Recovery, and Enforce9 ment Act of 1989 (12 U.S.C. 3351) is amended by adding 

10 at the end the following new subsection: 

11 ‘‘(g) APPRAISER INDEPENDENCE MONITORING.— 

12 The Appraisal Subcommittee shall monitor each State ap13 praiser certifying and licensing agency for the purpose of 

14 determining whether such agency’s policies, practices, and 

15 procedures are consistent with the purposes of maintain16 ing appraiser independence and whether such State has 

17 adopted and maintains effective laws, regulations, and 

18 policies aimed at maintaining appraiser independence.’’. 

19 (o) APPRAISER EDUCATION.—Section 1122 of the 

20 Financial Institutions Reform, Recovery, and Enforce21 ment Act of 1989 (12 U.S.C. 3351) is amended by insert22 ing after subsection (g) (as added by subsection (l) of this 

23 section) the following new subsection: 

24 ‘‘(h) APPROVED EDUCATION.—The Appraisal Sub25 committee shall encourage the States to accept courses apVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01651 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 proved by the Appraiser Qualification Board’s Course Ap2 proval Program.’’. 

3 (p) APPRAISAL COMPLAINT HOTLINE.—Section 1122 

4 of the Financial Institutions Reform, Recovery, and En5 forcement Act of 1989 (12 U.S.C. 3351), as amended by 

6 this section, is further amended by adding at the end the 

7 following new subsection: 

8 ‘‘(i) APPRAISAL COMPLAINT NATIONAL HOTLINE.— 

9 If, 1 year after the date of the enactment of this sub10 section, the Appraisal Subcommittee determines that no 

11 national hotline exists to receive complaints of non-compli12 ance with appraisal independence standards and Uniform 

13 Standards of Professional Appraisal Practice, including 

14 complaints from appraisers, individuals, or other entities 

15 concerning the improper influencing or attempted im16 proper influencing of appraisers or the appraisal process, 

17 the Appraisal Subcommittee shall establish and operate 

18 such a national hotline, which shall include a toll-free tele19 phone number and an email address. If the Appraisal Sub20 committee operates such a national hotline, the Appraisal 

21 Subcommittee shall refer complaints for further action to 

22 appropriate governmental bodies, including a State ap23 praiser certifying and licensing agency, a financial institu24 tion regulator, or other appropriate legal authorities. For 

25 complaints referred to State appraiser certifying and liVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01652 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 censing agencies or to Federal regulators, the Appraisal 

2 Subcommittee shall have the authority to follow up such 

3 complaint referrals in order to determine the status of the 

4 resolution of the complaint.’’. 

5 (q) AUTOMATED VALUATION MODELS.—Title XI of 

6 the Financial Institutions Reform, Recovery, and Enforce7 ment Act of 1989 (12 U.S.C. 3331 et seq.), as amended 

8 by this section, is further amended by adding at the end 

9 the following new section (and amending the table of con10 tents accordingly): 

11 ‘‘SEC. 1125. AUTOMATED VALUATION MODELS USED TO 

12 VALUE CERTAIN MORTGAGES. 

13 ‘‘(a) IN GENERAL.—Automated valuation models 

14 shall adhere to quality control standards designed to— 

15 ‘‘(1) ensure a high level of confidence in the es16 timates produced by automated valuation models; 

17 ‘‘(2) protect against the manipulation of data; 

18 ‘‘(3) seek to avoid conflicts of interest; and 

19 ‘‘(4) require random sample testing and re20 views, where such testing and reviews are performed 

21 by an appraiser who is licensed or certified in the 

22 State where the testing and reviews take place. 

23 ‘‘(b) ADOPTION OF REGULATIONS.—The Appraisal 

24 Subcommittee and its member agencies, in consultation 

25 with the Appraisal Standards Board of the Appraisal 


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1 Foundation and other interested parties, shall promulgate 

2 regulations to implement the quality control standards re3 quired under this section. 

4 ‘‘(c) ENFORCEMENT.—Compliance with regulations 

5 issued under this subsection shall be enforced by— 

6 ‘‘(1) with respect to a financial institution, or 

7 subsidiary owned and controlled by a financial insti8 tution and regulated by a Federal financial institu9 tion regulatory agency, the Federal financial institu10 tion regulatory agency that acts as the primary Fed11 eral supervisor of such financial institution or sub12 sidiary; and 

13 ‘‘(2) with respect to other persons, the Ap14 praisal Subcommittee. 

15 ‘‘(d) AUTOMATED VALUATION MODEL DEFINED.— 

16 For purposes of this section, the term ‘automated valu17 ation model’ means any computerized model used by mort18 gage originators and secondary market issuers to deter19 mine the collateral worth of a mortgage secured by a con20 sumer’s principal dwelling.’’. 

21 (r) BROKER PRICE OPINIONS.—Title XI of the Fi22 nancial Institutions Reform, Recovery, and Enforcement 

23 Act of 1989 (12 U.S.C. 3331 et seq.), as amended by this 

24 section, is further amended by adding at the end the folVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01654 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 lowing new section (and amending the table of contents 

2 accordingly): 

3 ‘‘SEC. 1126. BROKER PRICE OPINIONS. 

4 ‘‘(a) GENERAL PROHIBITION.—In conjunction with 

5 the purchase of a consumer’s principal dwelling, broker 

6 price opinions may not be used as the primary basis to 

7 determine the value of a piece of property for the purpose 

8 of a loan origination of a residential mortgage loan se9 cured by such piece of property. 

10 ‘‘(b) BROKER PRICE OPINION DEFINED.—For pur11 poses of this section, the term ‘broker price opinion’ means 

12 an estimate prepared by a real estate broker, agent, or 

13 sales person that details the probable selling price of a 

14 particular piece of real estate property and provides a 

15 varying level of detail about the property’s condition, mar16 ket, and neighborhood, and information on comparable 

17 sales, but does not include an automated valuation model, 

18 as defined in section 1125(c).’’. 

19 (s) AMENDMENTS TO APPRAISAL SUBCOMMITTEE.— 

20 Section 1011 of the Federal Financial Institutions Exam21 ination Council Act of 1978 (12 U.S.C. 3310) is amend22 ed— 

23 (1) in the first sentence, by adding before the 

24 period the following: ‘‘and the Federal Housing Fi25 nance Agency’’; and 


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1 (2) by inserting at the end the following: ‘‘At 

2 all times at least one member of the Appraisal Sub3 committee shall have demonstrated knowledge and 

4 competence through licensure, certification, or pro5 fessional designation within the appraisal profes6 sion.’’. 

7 (t) TECHNICAL CORRECTIONS.— 

8 (1) Section 1119(a)(2) of the Financial Institu9 tions Reform, Recovery, and Enforcement Act of 

10 1989 (12 U.S.C. 3348(a)(2)) is amended by striking 

11 ‘‘council,’’ and inserting ‘‘Council,’’. 

12 (2) Section 1121(6) of the Financial Institu13 tions Reform, Recovery, and Enforcement Act of 

14 1989 (12 U.S.C. 3350(6)) is amended by striking 

15 ‘‘Corporations,’’ and inserting ‘‘Corporation,’’. 

16 (3) Section 1121(8) of the Financial Institu17 tions Reform, Recovery, and Enforcement Act of 

18 1989 (12 U.S.C. 3350(8)) is amended by striking 

19 ‘‘council’’ and inserting ‘‘Council’’. 

20 (4) Section 1122 of the Financial Institutions 

21 Reform, Recovery, and Enforcement Act of 1989 

22 (12 U.S.C. 3351) is amended— 

23 (A) in subsection (a)(1) by moving the left 

24 margin of subparagraphs (A), (B), and (C) 2 

25 ems to the right; and 


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1 (B) in subsection (c)— 

2 (i) by striking ‘‘Federal Financial In3 stitutions Examination Council’’ and in4 serting ‘‘Financial Institutions Examina5 tion Council’’; and 

6 (ii) by striking ‘‘the council’s func7 tions’’ and inserting ‘‘the Council’s func8 tions’’. 

9 SEC. 9504. STUDY REQUIRED ON IMPROVEMENTS IN AP10 PRAISAL PROCESS AND COMPLIANCE PRO11 GRAMS. 

12 (a) STUDY.—The Comptroller General shall conduct 

13 a comprehensive study on possible improvements in the 

14 appraisal process generally, and specifically on the consist15 ency in and the effectiveness of, and possible improve16 ments in, State compliance efforts and programs in ac17 cordance with title XI of the Financial Institutions Re18 form, Recovery, and Enforcement Act of 1989. In addi19 tion, this study shall examine the existing exemptions to 

20 the use of certified appraisers issued by Federal financial 

21 institutions regulatory agencies. The study shall also re22 view the threshold level established by Federal regulators 

23 for compliance under title XI and whether there is a need 

24 to revise them to reflect the addition of consumer protec25 tion to the purposes and functions of the Appraisal SubVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01657 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 committee. The study shall additionally examine the qual2 ity of different types of mortgage collateral valuations pro3 duced by broker price opinions, automated valuation mod4 els, licensed appraisals, and certified appraisals, among 

5 others, and the quality of appraisals provided through dif6 ferent distribution channels, including appraisal manage7 ment companies, independent appraisal operations within 

8 a mortgage originator, and fee-for-service appraisals. The 

9 study shall also include an analysis and statistical break10 down of enforcement actions taken during the last 10 

11 years against different types of appraisers, including cer12 tified, licensed, supervisory, and trainee appraisers. Fur13 thermore, the study shall examine the benefits and costs, 

14 as well as the advantages and disadvantages, of estab15 lishing a national repository to collect data related to real 

16 estate property collateral valuations performed in the 

17 United States. 

18 (b) REPORT.—Before the end of the 18-month period 

19 beginning on the date of the enactment of this Act, the 

20 Comptroller General shall submit a report on the study 

21 under subsection (a) to the Committee on Financial Serv22 ices of the House of Representatives and the Committee 

23 on Banking, Housing, and Urban Affairs of the Senate, 

24 together with such recommendations for administrative or 


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1 legislative action, at the Federal or State level, as the 

2 Comptroller General may determine to be appropriate. 

3 (c) ADDITIONAL STUDY REQUIRED.—The Comp4 troller General shall conduct an additional study to deter5 mine the effects that the changes to the seller-guide ap6 praisal requirements of Fannie Mae and Freddie Mac con7 tained in the Home Valuation Code of Conduct have on 

8 small business, like mortgage brokers and independent ap9 praisers, and consumers, including the effect on the— 

10 (1) quality and costs of appraisals; 

11 (2) length of time for obtaining appraisals; 

12 (3) impact on consumer protection, especially 

13 regarding maintaining appraisal independence, abat14 ing appraisal inflation, and mitigating acts of ap15 praisal fraud; 

16 (4) structure of the appraisal industry, espe17 cially regarding appraisal management companies, 

18 fee-for-service appraisers, and the regulation of ap19 praisal management companies by the states; and 

20 (5) impact on mortgage brokers and other small 

21 business professionals in the financial services indus22 try. 

23 (d) ADDITIONAL REPORT.—Before the end of the 6- 

24 month period beginning on the date of the enactment of 

25 this Act, the Comptroller General shall submit an addiVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01659 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 tional report to the Committee on Financial Services of 

2 the House of Representatives and the Committee on 

3 Banking, Housing, and Urban Affairs of the Senate con4 taining the findings and conclusions of the Comptroller 

5 General with respect to the study conducted pursuant to 

6 subsection (c). Such additional report shall take into con7 sideration the Small Business Administration’s views on 

8 how small businesses are affected by the Home Valuation 

9 Code of Conduct. 

10 SEC. 9505. EQUAL CREDIT OPPORTUNITY ACT AMENDMENT. 

11 Subsection (e) of section 701 of the Equal Credit Op12 portunity Act (15 U.S.C. 1691) is amended to read as 

13 follows: 

14 ‘‘(e) COPIES FURNISHED TO APPLICANTS.— 

15 ‘‘(1) IN GENERAL.—Each creditor shall furnish 

16 to an applicant a copy of any and all written ap17 praisals and valuations developed in connection with 

18 the applicant’s application for a loan that is secured 

19 or would have been secured by a first lien on a 

20 dwelling promptly upon completion, but in no case 

21 later than 3 days prior to the closing of the loan, 

22 whether the creditor grants or denies the applicant’s 

23 request for credit or the application is incomplete or 

24 withdrawn. 


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1 ‘‘(2) WAIVER.—The applicant may waive the 3 

2 day requirement provided for in paragraph (1), ex3 cept where otherwise required in law. 

4 ‘‘(3) REIMBURSEMENT.—The applicant may be 

5 required to pay a reasonable fee to reimburse the 

6 creditor for the cost of the appraisal, except where 

7 otherwise required in law. 

8 ‘‘(4) FREE COPY.—Notwithstanding paragraph 

9 (3), the creditor shall provide a copy of each written 

10 appraisal or valuation at no additional cost to the 

11 applicant. 

12 ‘‘(5) NOTIFICATION TO APPLICANTS.—At the 

13 time of application, the creditor shall notify an ap14 plicant in writing of the right to receive a copy of 

15 each written appraisal and valuation under this sub16 section. 

17 ‘‘(6) REGULATIONS.—The Board shall prescribe 

18 regulations to implement this subsection within 1 

19 year of the date of the enactment of this subsection. 

20 ‘‘(7) VALUATION DEFINED.—For purposes of 

21 this subsection, the term ‘valuation’ shall include 

22 any estimate of the value of a dwelling developed in 

23 connection with a creditor’s decision to provide cred24 it, including those values developed pursuant to a 

25 policy of a government sponsored enterprise or by an 


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1 automated valuation model, a broker price opinion, 

2 or other methodology or mechanism.’’. 

3 SEC. 9506. REAL ESTATE SETTLEMENT PROCEDURES ACT 

4 OF 1974 AMENDMENT RELATING TO CERTAIN 

5 APPRAISAL FEES. 

6 Section 4 of the Real Estate Settlement Procedures 

7 Act of 1974 is amended by adding at the end the following 

8 new subsection: 

9 ‘‘(c) The standard form described in subsection (a) 

10 shall include, in the case of an appraisal coordinated by 

11 an appraisal management company (as such term is de12 fined in section 1121(11) of the Financial Institutions Re13 form, Recovery, and Enforcement Act of 1989 (12 U.S.C. 

14 3350(11))), a clear disclosure of— 

15 ‘‘(1) the fee paid directly to the appraiser by 

16 such company; and 

17 ‘‘(2) the administration fee charged by such 

18 company.’’. 


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1 Subtitle G—Sense of Congress Re2 garding the Importance of Gov3 ernment Sponsored Enterprises 

4 Reform 

5 SEC. 9601. SENSE OF CONGRESS REGARDING THE IMPOR6 TANCE OF GOVERNMENT-SPONSORED EN7 TERPRISES REFORM TO ENHANCE THE PRO8 TECTION, LIMITATION, AND REGULATION OF 

9 THE TERMS OF RESIDENTIAL MORTGAGE 

10 CREDIT. 

11 (a) FINDINGS.—The Congress finds as follows: 

12 (1) The Government-sponsored enterprises, 

13 Federal National Mortgage Association (Fannie 

14 Mae) and the Federal Home Loan Mortgage Cor15 poration (Freddie Mac), were chartered by Congress 

16 to ensure a reliable and affordable supply of mort17 gage funding, but enjoy a dual legal status as pri18 vately owned corporations with Government man19 dated affordable housing goals. 

20 (2) In 1996, the Department of Housing and 

21 Urban Development required that 42 percent of 

22 Fannie Mae’s and Freddie Mac’s mortgage financing 

23 should go to borrowers with income levels below the 

24 median for a given area. 


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1 (3) In 2004, the Department of Housing and 

2 Urban Development revised those goals, increasing 

3 them to 56 percent of their overall mortgage pur4 chases by 2008, and additionally mandated that 12 

5 percent of all mortgage purchases by Fannie Mae 

6 and Freddie Mac be ‘‘special affordable’’ loans made 

7 to borrowers with incomes less than 60 percent of an 

8 area’s median income, a target that ultimately in9 creased to 28 percent for 2008. 

10 (4) To help fulfill those mandated affordable 

11 housing goals, in 1995 the Department of Housing 

12 and Urban Development authorized Fannie Mae and 

13 Freddie Mac to purchase subprime securities that 

14 included loans made to low-income borrowers. 

15 (5) After this authorization to purchase 

16 subprime securities, subprime and near-prime loans 

17 increased from 9 percent of securitized mortgages in 

18 2001 to 40 percent in 2006, while the market share 

19 of conventional mortgages dropped from 78.8 per20 cent in 2003 to 50.1 percent by 2007 with a cor21 responding increase in subprime and Alt-A loans 

22 from 10.1 percent to 32.7 percent over the same pe23 riod. 

24 (6) In 2004 alone, Fannie Mae and Freddie 

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1 gage securities, which accounted for 44 percent of 

2 the market that year, and from 2005 through 2007, 

3 Fannie Mae and Freddie Mac purchased approxi4 mately $1,000,000,000,000 in subprime and Alt-A 

5 loans, while Fannie Mae’s acquisitions of mortgages 

6 with less than 10 percent down payments almost tri7 pled. 

8 (7) According to data from the Federal Hous9 ing Finance Agency (FHFA) for the fourth quarter 

10 of 2008, Fannie Mae and Freddie Mac own or guar11 antee 75 percent of all newly originated mortgages, 

12 and Fannie Mae and Freddie Mac currently own 

13 13.3 percent of outstanding mortgage debt in the 

14 United States and have issued mortgage-backed se15 curities for 31.0 percent of the residential debt mar16 ket, a combined total of 44.3 percent of outstanding 

17 mortgage debt in the United States. 

18 (8) On September 7, 2008, the FHFA placed 

19 Fannie Mae and Freddie Mac into conservatorship, 

20 with the Treasury Department subsequently agree21 ing to purchase at least $200,000,000,000 of pre22 ferred stock from each enterprise in exchange for 

23 warrants for the purchase of 79.9 percent of each 

24 enterprise’s common stock. 


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1 (9) The conservatorship for Fannie Mae and 

2 Freddie Mac has potentially exposed taxpayers to 

3 upwards of $5,300,000,000,000 worth of risk. 

4 (10) The hybrid public-private status of Fannie 

5 Mae and Freddie Mac is untenable and must be re6 solved to assure that consumers are offered and re7 ceive residential mortgage loans on terms that rea8 sonably reflect their ability to repay the loans and 

9 that are understandable and not unfair, deceptive, or 

10 abusive. 

11 (b) SENSE OF THE CONGRESS.—It is the sense of 

12 the Congress that efforts to enhance by the protection, 

13 limitation, and regulation of the terms of residential mort14 gage credit and the practices related to such credit would 

15 be incomplete without enactment of meaningful structural 

16 reforms of Fannie Mae and Freddie Mac. 

17 Subtitle H—Reports and Data 

18 Collection 

19 SEC. 9701. GAO STUDY REPORT ON GOVERNMENT EFFORTS 

20 TO COMBAT MORTGAGE FORECLOSURE RES21 CUE SCAMS AND LOAN MODIFICATION 

22 FRAUD. 

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

24 States shall conduct a study of the current inter-agency 

25 efforts of the Secretary of the Treasury, the Secretary of 


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1 Housing and Urban Development, the Attorney General, 

2 and the Federal Trade Commission to crackdown on mort3 gage foreclosure rescue scams and loan modification fraud 

4 in order to advise the Congress to the risks and 

5 vulnerabilities of emerging schemes in the loan modifica6 tion arena. 

7 (b) REPORT.— 

8 (1) IN GENERAL.—The Comptroller General 

9 shall submit a report to the Congress on the study 

10 conducted under subsection (a) containing such rec11 ommendations for legislative and administrative ac12 tions as the Comptroller General may determine to 

13 be appropriate in addition to the recommendations 

14 required under paragraph (2). 

15 (2) SPECIFIC TOPICS.—The report made under 

16 paragraph (1) shall include— 

17 (A) an evaluation of the effectiveness of 

18 the inter-agency task force current efforts to 

19 combat mortgage foreclosure rescue scams and 

20 loan modification fraud scams; 

21 (B) specific recommendations on agency or 

22 legislative action that are essential to properly 

23 protect homeowners from mortgage foreclosure 

24 rescue scams and loan modification fraud 

25 scams; and 


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1 (C) the adequacy of financial resources 

2 that the Federal Government is allocating to— 

3 (i) crackdown on loan modification 

4 and foreclosure rescue scams; and 

5 (ii) the education of homeowners 

6 about fraudulent scams relating to loan 

7 modification and foreclosure rescues. 

8 SEC. 9702. REPORTING OF MORTGAGE DATA BY STATE. 

9 (a) IN GENERAL.—Section 104(a) of the Helping 

10 Families Save Their Homes Act of 2009 (division A of 

11 Public Law 111–22) is amended— 

12 (1) in paragraph (2), by striking ‘‘resulting’’ 

13 and inserting ‘‘in each State that result’’; 

14 (2) in paragraph (3), by inserting ‘‘each State 

15 for’’ after ‘‘modifications in’’; and 

16 (3) in paragraph (4), by inserting ‘‘in each 

17 State’’ after ‘‘total number of loans’’. 

18 (b) CONFORMING AMENDMENT.—Section 

19 104(b)(1)(A) of such Act is amended by adding at the end 

20 the following sentence: ‘‘Not later than 60 days after the 

21 date of the enactment of the Wall Street Reform and Con22 sumer Protection Act of 2009, the Comptroller of the Cur23 rency and the Director of the Office of Thrift Supervision 

24 shall update such requirements to reflect amendments 

25 made to this section by such Act.’’. 


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1 Subtitle I—Multifamily Mortgage 

2 Resolution 

3 SEC. 9801. MULTIFAMILY MORTGAGE RESOLUTION PRO4 GRAM. 

5 (a) ESTABLISHMENT.—The Secretary of Housing 

6 and Urban Development shall develop a program under 

7 this subsection to ensure the protection of current and fu8 ture tenants and at-risk multifamily properties, where fea9 sible, based on criteria that may include— 

10 (1) creating sustainable financing of such prop11 erties, that may take into consideration such factors 

12 as— 

13 (A) the rental income generated by such 

14 properties; and 

15 (B) the preservation of adequate operating 

16 reserves; 

17 (2) maintaining the level of Federal, State, and 

18 city subsidies in effect as of the date of the enact19 ment of this Act; 

20 (3) providing funds for rehabilitation; and 

21 (4) facilitating the transfer of such properties, 

22 when appropriate and with the agreement of owners, 

23 to responsible new owners and ensuring affordability 

24 of such properties. 


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1 (b) COORDINATION.—The Secretary of Housing and 

2 Urban Development may, in carrying out the program de3 veloped under this section, coordinate with the Secretary 

4 of the Treasury, the Federal Deposit Insurance Corpora5 tion, the Board of Governors of the Federal Reserve Sys6 tem, the Federal Housing Finance Agency, and any other 

7 Federal Government agency that the Secretary considers 

8 appropriate. 

9 (c) DEFINITION.—For purposes of this section, the 

10 term ‘‘multifamily properties’’ means a residential struc11 ture that consists of 5 or more dwelling units. 

12 Subtitle J—Study of Effect of 

13 Drywall Presence on Foreclosures 

14 SEC. 9901. STUDY OF EFFECT OF DRYWALL PRESENCE ON 

15 FORECLOSURES. 

16 (a) STUDY.—The Secretary of Housing and Urban 

17 Development, in consultation with the Secretary of the 

18 Treasury, shall conduct a study of the effect on residential 

19 mortgage loan foreclosures of— 

20 (1) the presence in residential structures sub21 ject to such mortgage loans of drywall that was im22 ported from China during the period beginning with 

23 2004 and ending at the end of 2007; and 


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1 (2) the availability of property insurance for 

2 residential structures in which such drywall is 

3 present. 

4 (b) REPORT.—Not later than the expiration of the 

5 120-day period beginning on the date of the enactment 

6 of this Act, the Secretary of Housing and Urban Develop7 ment shall submit to the Congress a report on the study 

8 conducted under subsection (a) containing its findings, 

9 conclusions, and recommendations. 

10 Subtitle K—Home Affordable 

11 Modification Program 

12 SEC. 9911. HOME AFFORDABLE MODIFICATION PROGRAM 

13 GUIDELINES. 

14 (a) NET PRESENT VALUE INPUT DATA.—The Sec15 retary of the Treasury (in this section referred to as the 

16 ‘‘Secretary’’) shall revise the supplemental directives and 

17 other guidelines for the Home Affordable Modification 

18 Program of the Making Home Affordable initiative of the 

19 Secretary of the Treasury, authorized under the Emer20 gency Economic Stabilization Act of 2008 (Public Law 

21 110–343), to require each mortgage servicer participating 

22 in such program to provide each borrower under a mort23 gage whose request for a mortgage modification under the 

24 Program is denied with all borrower-related and mort25 gage-related input data used in any net present value 


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1 (NPV) analyses performed in connection with the subject 

2 mortgage. Such input data shall be provided to the bor3 rower at the time of such denial. 

4 (b) WEB-BASED SITE FOR NPV CALCULATOR AND

5 APPLICATION.— 

6 (1) NPV CALCULATOR.—In carrying out the 

7 Home Affordable Modification Program, the Sec8 retary shall establish and maintain a site on the 

9 World Wide Web that provides a calculator for net 

10 present value analyses of a mortgage, based on the 

11 Secretary’s methodology for calculating such value, 

12 that mortgagors can use to enter information re13 garding their own mortgages and that provides a de14 termination after entering such information regard15 ing a mortgage of whether such mortgage would be 

16 accepted or rejected for modification under the Pro17 gram, using such methodology. 

18 (2) DISCLOSURE.—Such Web site shall also 

19 prominently disclose that each mortgage servicer 

20 participating in such Program may use a method for 

21 calculating net present value of a mortgage that is 

22 different than the method used by such calculator. 

23 (3) APPLICATION.—The Secretary shall make a 

24 reasonable effort to include on such World Wide 

25 Web site a method for homeowners to apply for a 


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1 mortgage modification under the Home Affordable 

2 Modification Program. 

3 (c) PUBLIC AVAILABILITY OF NPV METHODOLOGY, 

4 COMPUTER MODEL, AND VARIABLES.—The Secretary 

5 shall make publicly available, including by posting on a 

6 World Wide Web site of the Secretary— 

7 (1) the Secretary’s methodology and computer 

8 model, including all formulae used in such computer 

9 model, used for calculating net present value of a 

10 mortgage that is used by the calculator established 

11 pursuant to subsection (b); and 

12 (2) all variables used in such net present value 

13 analysis. 

14 Subtitle L—Making Home 

15 Affordable Program 

16 SEC. 9921. PUBLIC AVAILABILITY OF INFORMATION. 

17 (a) REVISIONS TO PROGRAM GUIDELINES.—The Sec18 retary of the Treasury (in this section referred to as the 

19 ‘‘Secretary’’) shall revise the guidelines for the Home Af20 fordable Modification Program of the Making Home Af21 fordable initiative of the Secretary of the Treasury, au22 thorized under the Emergency Economic Stabilization Act 

23 of 2008 (Public Law 110–343), to provide that the data 

24 being collected by the Secretary from each mortgage 


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1 servicer and lender participating in the Program is made 

2 public in accordance with subsection (b). 

3 (b) PUBLIC AVAILABILITY.—Data shall be made 

4 available according to the following guidelines: 

5 (1) Not more than 14 days after each monthly 

6 deadline for submission of data by mortgage 

7 servicers and lenders participating in the Program, 

8 reports shall be made publicly available by means of 

9 a World Wide Web site of the Secretary, and by sub10 mitting a report to the Congress, that shall includes 

11 the following information: 

12 (A) The number of requests for mortgage 

13 modifications under the Program that the 

14 servicer or lender has received. 

15 (B) The number of requests for mortgage 

16 modifications under the Program that the 

17 servicer or lender has processed. 

18 (C) The number of requests for mortgage 

19 modifications under the Program that the 

20 servicer or lender has approved. 

21 (D) The number of requests for mortgage 

22 modifications under the Program that the 

23 servicer or lender has denied. 

24 (2) Not more than 60 days after each monthly 

25 deadline for submission of data by mortgage 


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1 servicers and lenders participating in the Program, 

2 the Secretary shall make data tables available to the 

3 public at the individual record level. The Secretary 

4 shall issue regulations prescribing— 

5 (A) the procedures for disclosing such data 

6 to the public; and 

7 (B) such deletions as the Secretary may 

8 determine to be appropriate to protect any pri9 vacy interest of any mortgage modification ap10 plicant, including the deletion or alteration of 

11 the applicant’s name and identification number. 

12 TITLE VIII—FORECLOSURE 

13 AVOIDANCE AND AFFORD14 ABLE HOUSING 

15 SEC. 10001. EMERGENCY MORTGAGE RELIEF. 

16 (a) USE OF TARP FUNDS.—Using the authority 

17 available under sections 101(a) and 115(a) of division A 

18 of the Emergency Economic Stabilization Act of 2008 (12 

19 U.S.C. 5211(a), 5225(a)), the Secretary of the Treasury 

20 shall transfer to the Secretary of Housing and Urban De21 velopment $3,000,000,000, and the Secretary of Housing 

22 and Urban Development shall credit such amount to the 

23 Emergency Homeowners’ Relief Fund, which such Sec24 retary shall establish pursuant to section 107 of the Emer25 gency Housing Act of 1975 (12 U.S.C. 2706), as such 


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1 Act is amended by this section, for use for emergency 

2 mortgage assistance in accordance with title I of such Act. 

3 (b) REAUTHORIZATION OF EMERGENCY MORTGAGE

4 RELIEF PROGRAM.—Title I of the Emergency Housing 

5 Act of 1975 is amended— 

6 (1) in section 103 (12 U.S.C. 2702)— 

7 (A) in paragraph (2)— 

8 (i) by striking ‘‘have indicated’’ and 

9 all that follows through ‘‘regulation of the 

10 holder’’ and insert ‘‘have certified’’; 

11 (ii) by striking ‘‘(such as the volume 

12 of delinquent loans in its portfolio)’’; and 

13 (iii) by striking ‘‘, except that such 

14 statement’’ and all that follows through 

15 ‘‘purposes of this title’’; and 

16 (B) in paragraph (4), by inserting ‘‘or 

17 medical conditions’’ after ‘‘adverse economic 

18 conditions’’; 

19 (2) in section 104 (12 U.S.C. 2703)— 

20 (A) in subsection (b), by striking ‘‘, but 

21 such assistance’’ and all that follows through 

22 the period at the end and inserting the fol23 lowing: ‘‘. The amount of assistance provided to 

24 a homeowner under this title shall be an 

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1 sonably necessary to supplement such amount 

2 as the homeowner is capable of contributing to3 ward such mortgage payment, except that the 

4 aggregate amount of such assistance provided 

5 for any homeowner shall not exceed $50,000.’’; 

6 (B) in subsection (d), by striking ‘‘interest 

7 on a loan or advance’’and all that follows 

8 through the end of the subsection and inserting 

9 the following: ‘‘(1) the rate of interest on any 

10 loan or advance of credit insured under this 

11 title shall be fixed for the life of the loan or ad12 vance of credit and shall not exceed the rate of 

13 interest that is generally charged for mortgages 

14 on single-family housing insured by the Sec15 retary of Housing and Urban Development 

16 under title II of the National Housing Act at 

17 the time such loan or advance of credit is made, 

18 and (2) no interest shall be charged on interest 

19 which is deferred on a loan or advance of credit 

20 made under this title. In establishing rates, 

21 terms and conditions for loans or advances of 

22 credit made under this title, the Secretary shall 

23 take into account a homeowner’s ability to 

24 repay such loan or advance of credit.’’; and 


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1 (C) in subsection (e), by inserting after the 

2 period at the end of the first sentence the fol3 lowing: ‘‘Any eligible homeowner who receives a 

4 grant or an advance of credit under this title 

5 may repay the loan in full, without penalty, by 

6 lump sum or by installment payments at any 

7 time before the loan becomes due and pay8 able.’’; 

9 (3) in section 105 (12 U.S.C. 2704)— 

10 (A) by striking subsection (b); 

11 (B) in subsection (e)— 

12 (i) by inserting ‘‘and emergency mort13 gage relief payments made under section 

14 106’’ after ‘‘insured under this section’’; 

15 and 

16 (ii) by striking ‘‘$1,500,000,000 at 

17 any one time’’ and inserting 

18 ‘‘$3,000,000,000’’; 

19 (C) by redesignating subsections (c), (d), 

20 and (e) as subsections (b), (c), and (d), respec21 tively; and 

22 (D) by adding at the end the following new 

23 subsection: 

24 ‘‘(e) The Secretary shall establish underwriting 

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1 able for loans and advances insured under this section and 

2 for emergency relief payments made under section 106 

3 based on the likelihood that a mortgagor will be able to 

4 resume mortgage payments, pursuant to the requirement 

5 under section 103(5).’’; 

6 (4) in section 107— 

7 (A) by striking ‘‘(a)’’; and 

8 (B) by striking subsection (b); 

9 (5) in section 108 (12 U.S.C. 2707), by adding 

10 at the end the following new subsection: 

11 ‘‘(d) COVERAGE OF EXISTING PROGRAMS.—The Sec12 retary shall allow funds to be administered by a State that 

13 has an existing program that is determined by the Sec14 retary to provide substantially similar assistance to home15 owners. After such determination is made such State shall 

16 not be required to modify such program to comply with 

17 the provisions of this title.’’; 

18 (6) in section 109 (12 U.S.C. 2708)— 

19 (A) in the section heading, by striking 

20 ‘‘AUTHORIZATION AND’’; 

21 (B) by striking subsection (a); 

22 (C) by striking ‘‘(b)’’; and 

23 (D) by striking ‘‘1977’’ and inserting 

24 ‘‘2011’’; 


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1 (7) by striking sections 110, 111, and 113 (12 

2 U.S.C. 2709, 2710, 2712); and 

3 (8) by redesignating section 112 (12 U.S.C. 

4 2711) as section 110. 

5 SEC. 10002. ADDITIONAL ASSISTANCE FOR NEIGHBORHOOD 

6 STABILIZATION PROGRAM. 

7 Using the authority made available under sections 

8 101(a) and 115(a) of division A of the Emergency Eco9 nomic Stabilization Act of 2008 (12 U.S.C. 5211(a), 

10 5225(a)), the Secretary of the Treasury shall transfer to 

11 the Secretary of Housing and Urban Development 

12 $1,000,000,000, and the Secretary of Housing and Urban 

13 Development shall use such amounts for assistance to 

14 States and units of general local government for the rede15 velopment of abandoned and foreclosed homes, in accord16 ance with the same provisions applicable under the second 

17 undesignated paragraph under the heading ‘‘Community 

18 Planning and Development—Community Development 

19 Fund’’ in title XII of division A of the American Recovery 

20 and Reinvestment Act of 2009 (Public Law 111–5; 123 

21 Stat. 217) to amounts made available under such second 

22 undesignated paragraph, except as follows: 

23 (1) Notwithstanding the matter of such second 

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1 viso, amounts made available by this section shall re2 main available until expended. 

3 (2) The 3rd, 4th, 5th, 6th, 7th, and 15th pro4 visos of such second undesignated paragraph shall 

5 not apply to amounts made available by this section. 

6 (3) Amounts made available by this section 

7 shall be allocated based on a funding formula for 

8 such amounts established by the Secretary in ac9 cordance with section 2301(b) of the Housing and 

10 Economic Recovery Act of 2008 (42 U.S.C. 5301 

11 note), except that— 

12 (A) notwithstanding paragraph (2) of such 

13 section 2301(b), the formula shall be estab14 lished not later than 30 days after the date of 

15 the enactment of this Act; 

16 (B) the Secretary may not establish any 

17 minimum grant amount or size for grants to 

18 States; 

19 (C) the Secretary may establish a min20 imum grant amount for direct allocations to 

21 units of general local government located within 

22 a State, which shall not exceed $1,000,000; and 

23 (D) each State and local government re24 ceiving grant amounts shall establish proce25 dures to create preferences for the development 


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1 of affordable rental housing for properties as2 sisted with amounts made available by this sec3 tion. 

4 (4) Paragraph (1) of section 2301(c) of the 

5 Housing and Economic Recovery Act of 2008 shall 

6 not apply to amounts made available by this section. 

7 (5) Section 2302 of the Housing and Economic 

8 Recovery Act of 2008 shall not apply to amounts 

9 made available by this section. 

10 (6) The fourth proviso from the end of such 

11 second undesignated paragraph shall be applied to 

12 amounts made available by this section by sub13 stituting ‘‘2013’’ for ‘‘2012’’. 

14 (7) Notwithstanding section 2301(a) of the 

15 Housing and Economic Recovery Act of 2008, the 

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

17 the District of Columbia, the Commonwealth of 

18 Puerto Rico, the Commonwealth of the Northern 

19 Mariana Islands, Guam, the Virgin Islands, Amer20 ican Samoa, and other territory or possession of the 

21 United States for purposes of this section and title 

22 III of division B of such Act, as applied to amounts 

23 made available by this section. 

24 (8)(A) None of the amounts made available by 

25 this section shall be distributed to— 


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1 (i) any organization which has been con2 victed for a violation under Federal law relating 

3 to an election for Federal office; or 

4 (ii) any organization which employs appli5 cable individuals. 

6 (B) In this paragraph, the term ‘‘applicable in7 dividual’’ means an individual who— 

8 (i) is— 

9 (I) employed by the organization in a 

10 permanent or temporary capacity; 

11 (II) contracted or retained by the or12 ganization; or 

13 (III) acting on behalf of, or with the 

14 express or apparent authority of, the orga15 nization; and 

16 (ii) has been convicted for a violation 

17 under Federal law relating to an election for 

18 Federal office. 

19 TITLE IX—NONADMITTED AND 

20 REINSURANCE REFORM ACT 

21 SEC. 10051. SHORT TITLE. 

22 This title may be cited as the ‘‘Nonadmitted and Re23 insurance Reform Act of 2009’’. 


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1 SEC. 10052. EFFECTIVE DATE. 

2 Except as otherwise specifically provided in this title, 

3 this title shall take effect upon the expiration of the 12- 

4 month period beginning on the date of the enactment of 

5 this Act. 

6 Subtitle A—Nonadmitted Insurance 

7 SEC. 10101. REPORTING, PAYMENT, AND ALLOCATION OF 

8 PREMIUM TAXES. 

9 (a) HOME STATE’S EXCLUSIVE AUTHORITY.—No 

10 State other than the home State of an insured may require 

11 any premium tax payment for nonadmitted insurance. 

12 (b) ALLOCATION OF NONADMITTED PREMIUM

13 TAXES.— 

14 (1) IN GENERAL.—The States may enter into a 

15 compact or otherwise establish procedures to allocate 

16 among the States the premium taxes paid to an in17 sured’s home State described in subsection (a). 

18 (2) EFFECTIVE DATE.—Except as expressly 

19 otherwise provided in such compact or other proce20 dures, any such compact or other procedures— 

21 (A) if adopted on or before the expiration 

22 of the 330-day period that begins on the date 

23 of the enactment of this Act, shall apply to any 

24 premium taxes that, on or after such date of 

25 enactment, are required to be paid to any State 


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1 that is subject to such compact or procedures; 

2 and 

3 (B) if adopted after the expiration of such 

4 330-day period, shall apply to any premium 

5 taxes that, on or after January 1 of the first 

6 calendar year that begins after the expiration of 

7 such 330-day period, are required to be paid to 

8 any State that is subject to such compact or 

9 procedures. 

10 (3) REPORT.—Upon the expiration of the 330- 

11 day period referred to in paragraph (2), the NAIC 

12 may submit a report to the Committee on Financial 

13 Services and Committee on the Judiciary of the 

14 House of Representatives and the Committee on 

15 Banking, Housing, and Urban Affairs of the Senate 

16 identifying and describing any compact or other pro17 cedures for allocation among the States of premium 

18 taxes that have been adopted during such period by 

19 any States. 

20 (4) NATIONWIDE SYSTEM.—The Congress in21 tends that each State adopt nationwide uniform re22 quirements, forms, and procedures, such as an inter23 state compact, that provides for the reporting, pay24 ment, collection, and allocation of premium taxes for 

25 nonadmitted insurance consistent with this section. 


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1 (c) ALLOCATION BASED ON TAX ALLOCATION RE2 PORT.—To facilitate the payment of premium taxes 

3 among the States, an insured’s home State may require 

4 surplus lines brokers and insureds who have independently 

5 procured insurance to annually file tax allocation reports 

6 with the insured’s home State detailing the portion of the 

7 nonadmitted insurance policy premium or premiums at8 tributable to properties, risks or exposures located in each 

9 State. The filing of a nonadmitted insurance tax allocation 

10 report and the payment of tax may be made by a person 

11 authorized by the insured to act as its agent. 

12 SEC. 10102. REGULATION OF NONADMITTED INSURANCE BY 

13 INSURED’S HOME STATE. 

14 (a) HOME STATE AUTHORITY.—Except as otherwise 

15 provided in this section, the placement of nonadmitted in16 surance shall be subject to the statutory and regulatory 

17 requirements solely of the insured’s home State. 

18 (b) BROKER LICENSING.—No State other than an in19 sured’s home State may require a surplus lines broker to 

20 be licensed in order to sell, solicit, or negotiate non21 admitted insurance with respect to such insured. 

22 (c) ENFORCEMENT PROVISION.—With respect to sec23 tion 10101 and subsections (a) and (b) of this section, 

24 any law, regulation, provision, or action of any State that 

25 applies or purports to apply to nonadmitted insurance sold 


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1 to, solicited by, or negotiated with an insured whose home 

2 State is another State shall be preempted with respect to 

3 such application. 

4 (d) WORKERS’ COMPENSATION EXCEPTION.—This 

5 section may not be construed to preempt any State law, 

6 rule, or regulation that restricts the placement of workers’ 

7 compensation insurance or excess insurance for self-fund8 ed workers’ compensation plans with a nonadmitted in9 surer. 

10 SEC. 10103. PARTICIPATION IN NATIONAL PRODUCER 

11 DATABASE. 

12 After the expiration of the 2-year period beginning 

13 on the date of the enactment of this Act, a State may 

14 not collect any fees relating to licensing of an individual 

15 or entity as a surplus lines broker in the State unless the 

16 State has in effect at such time laws or regulations that 

17 provide for participation by the State in the national in18 surance producer database of the NAIC, or any other 

19 equivalent uniform national database, for the licensure of 

20 surplus lines brokers and the renewal of such licenses. 

21 SEC. 10104. UNIFORM STANDARDS FOR SURPLUS LINES 

22 ELIGIBILITY. 

23 A State may not— 

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1 surers domiciled in a United States jurisdiction, ex2 cept in conformance with such requirements and cri3 teria in sections 5A(2) and 5C(2)(a) of the Non-Ad4 mitted Insurance Model Act, unless the State has 

5 adopted nationwide uniform requirements, forms, 

6 and procedures developed in accordance with section 

7 10101(b) of this title that include alternative nation8 wide uniform eligibility requirements; and 

9 (2) prohibit a surplus lines broker from placing 

10 nonadmitted insurance with, or procuring non11 admitted insurance from, a nonadmitted insurer 

12 domiciled outside the United States that is listed on 

13 the Quarterly Listing of Alien Insurers maintained 

14 by the International Insurers Department of the 

15 NAIC. 

16 SEC. 10105. STREAMLINED APPLICATION FOR COMMER17 CIAL PURCHASERS. 

18 A surplus lines broker seeking to procure or place 

19 nonadmitted insurance in a State for an exempt commer20 cial purchaser shall not be required to satisfy any State 

21 requirement to make a due diligence search to determine 

22 whether the full amount or type of insurance sought by 

23 such exempt commercial purchaser can be obtained from 

24 admitted insurers if— 


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1 (1) the broker procuring or placing the surplus 

2 lines insurance has disclosed to the exempt commer3 cial purchaser that such insurance may or may not 

4 be available from the admitted market that may pro5 vide greater protection with more regulatory over6 sight; and 

7 (2) the exempt commercial purchaser has sub8 sequently requested in writing the broker to procure 

9 or place such insurance from a nonadmitted insurer. 

10 SEC. 10106. GAO STUDY OF NONADMITTED INSURANCE 

11 MARKET. 

12 (a) IN GENERAL.—The Comptroller General of the 

13 United States shall conduct a study of the nonadmitted 

14 insurance market to determine the effect of the enactment 

15 of this subtitle on the size and market share of the non16 admitted insurance market for providing coverage typi17 cally provided by the admitted insurance market. 

18 (b) CONTENTS.—The study shall determine and ana19 lyze— 

20 (1) the change in the size and market share of 

21 the nonadmitted insurance market and in the num22 ber of insurance companies and insurance holding 

23 companies providing such business in the 18-month 

24 period that begins upon the effective date of this 

25 Act; 


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1 (2) the extent to which insurance coverage typi2 cally provided by the admitted insurance market has 

3 shifted to the nonadmitted insurance market; 

4 (3) the consequences of any change in the size 

5 and market share of the nonadmitted insurance 

6 market, including differences in the price and avail7 ability of coverage available in both the admitted 

8 and nonadmitted insurance markets; 

9 (4) the extent to which insurance companies 

10 and insurance holding companies that provide both 

11 admitted and nonadmitted insurance have experi12 enced shifts in the volume of business between ad13 mitted and nonadmitted insurance; and 

14 (5) the extent to which there has been a change 

15 in the number of individuals who have nonadmitted 

16 insurance policies, the type of coverage provided 

17 under such policies, and whether such coverage is 

18 available in the admitted insurance market. 

19 (c) CONSULTATION WITH NAIC.—In conducting the 

20 study under this section, the Comptroller General shall 

21 consult with the NAIC. 

22 (d) REPORT.—The Comptroller General shall com23 plete the study under this section and submit a report to 

24 the Committee on Financial Services of the House of Rep25 resentatives and the Committee on Banking, Housing, and 


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1 Urban Affairs of the Senate regarding the findings of the 

2 study not later than 30 months after the effective date 

3 of this Act. 

4 SEC. 10107. DEFINITIONS. 

5 For purposes of this subtitle, the following definitions 

6 shall apply: 

7 (1) ADMITTED INSURER.—The term ‘‘admitted 

8 insurer’’ means, with respect to a State, an insurer 

9 licensed to engage in the business of insurance in 

10 such State. 

11 (2) AFFILIATE.—The term ‘‘affiliate’’ means, 

12 with respect to an insured, any entity that controls, 

13 is controlled by, or is under common control with the 

14 insured. 

15 (3) AFFILIATED GROUP.—The term ‘‘affiliated 

16 group’’ means any group of entities that are all af17 filiated. 

18 (4) CONTROL.—An entity has ‘‘control’’ over 

19 another entity if— 

20 (A) the entity directly or indirectly or act21 ing through one or more other persons owns, 

22 controls or has the power to vote 25 percent or 

23 more of any class of voting securities of the 

24 other entity; or 


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1 (B) the entity controls in any manner the 

2 election of a majority of the directors or trust3 ees of the other entity. 

4 (5) EXEMPT COMMERCIAL PURCHASER.—The 

5 term ‘‘exempt commercial purchaser’’ means any 

6 person purchasing commercial insurance that, at the 

7 time of placement, meets the following requirements: 

8 (A) The person employs or retains a quali9 fied risk manager to negotiate insurance cov10 erage. 

11 (B) The person has paid aggregate nation12 wide commercial property and casualty insur13 ance premiums in excess of $100,000 in the im14 mediately preceding 12 months. 

15 (C)(i) The person meets at least one of the 

16 following criteria: 

17 (I) The person possesses a net 

18 worth in excess of $20,000,000, as 

19 such amount is adjusted pursuant to 

20 clause (ii). 

21 (II) The person generates annual 

22 revenues in excess of $50,000,000, as 

23 such amount is adjusted pursuant to 

24 clause (ii). 


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1 (III) The person employs more 

2 than 500 full time or full time equiva3 lent employees per individual insured 

4 or is a member of an affiliated group 

5 employing more than 1,000 employees 

6 in the aggregate. 

7 (IV) The person is a not-for-prof8 it organization or public entity gener9 ating annual budgeted expenditures of 

10 at least $30,000,000, as such amount 

11 is adjusted pursuant to clause (ii). 

12 (V) The person is a municipality 

13 with a population in excess of 50,000 

14 persons. 

15 (ii) Effective on the fifth January 1 

16 occurring after the date of the enactment 

17 of this Act and each fifth January 1 occur18 ring thereafter, the amounts in subclauses 

19 (I), (II), and (IV) of clause (i) shall be ad20 justed to reflect the percentage change for 

21 such 5-year period in the Consumer Price 

22 Index for All Urban Consumers published 

23 by the Bureau of Labor Statistics of the 

24 Department of Labor. 

25 (6) HOME STATE.— 


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1 (A) IN GENERAL.—Except as provided in 

2 subparagraph (B), the term ‘‘home State’’ 

3 means, with respect to an insured— 

4 (i) the State in which an insured 

5 maintains its principal place of business or, 

6 in the case of an individual, the individ7 ual’s principal residence; or 

8 (ii) if 100 percent of the insured risk 

9 is located out of the State referred to in 

10 subparagraph (A), the State to which the 

11 greatest percentage of the insured’s tax12 able premium for that insurance contract 

13 is allocated. 

14 (B) AFFILIATED GROUPS.—If more than 

15 one insured from an affiliated group are named 

16 insureds on a single nonadmitted insurance con17 tract, the term ‘‘home State’’ means the home 

18 State, as determined pursuant to subparagraph 

19 (A), of the member of the affiliated group that 

20 has the largest percentage of premium attrib21 uted to it under such insurance contract. 

22 (7) INDEPENDENTLY PROCURED INSURANCE.— 

23 The term ‘‘independently procured insurance’’ 

24 means insurance procured directly by an insured 

25 from a nonadmitted insurer. 


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1 (8) NAIC.—The term ‘‘NAIC’’ means the Na2 tional Association of Insurance Commissioners or 

3 any successor entity. 

4 (9) NONADMITTED INSURANCE.—The term 

5 ‘‘nonadmitted insurance’’ means any property and 

6 casualty insurance permitted to be placed directly or 

7 through a surplus lines broker with a nonadmitted 

8 insurer eligible to accept such insurance. 

9 (10) NON-ADMITTED INSURANCE MODEL

10 ACT.—The term ‘‘Non-Admitted Insurance Model 

11 Act’’ means the provisions of the Non-Admitted In12 surance Model Act, as adopted by the NAIC on Au13 gust 3, 1994, and amended on September 30, 1996, 

14 December 6, 1997, October 2, 1999, and June 8, 

15 2002. 

16 (11) NONADMITTED INSURER.—The term 

17 ‘‘nonadmitted insurer’’ means, with respect to a 

18 State, an insurer not licensed to engage in the busi19 ness of insurance in such State. 

20 (12) QUALIFIED RISK MANAGER.—The term 

21 ‘‘qualified risk manager’’ means, with respect to a 

22 policyholder of commercial insurance, a person who 

23 meets all of the following requirements: 


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1 (A) The person is an employee of, or third 

2 party consultant retained by, the commercial 

3 policyholder. 

4 (B) The person provides skilled services in 

5 loss prevention, loss reduction, or risk and in6 surance coverage analysis, and purchase of in7 surance. 

8 (C) The person— 

9 (i)(I) has a bachelor’s degree or high10 er from an accredited college or university 

11 in risk management, business administra12 tion, finance, economics, or any other field 

13 determined by a State insurance commis14 sioner or other State regulatory official or 

15 entity to demonstrate minimum com16 petence in risk management; and 

17 (II)(aa) has three years of experi18 ence in risk financing, claims adminis19 tration, loss prevention, risk and in20 surance analysis, or purchasing com21 mercial lines of insurance; or 

22 (bb) has one of the following 

23 designations: 

24 (AA) a designation as a 

25 Chartered Property and 


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1 Casualty Underwriter (in 

2 this subparagraph referred 

3 to as ‘‘CPCU’’) issued by 

4 the American Institute for 

5 CPCU/Insurance Institute of 

6 America; 

7 (BB) a designation as 

8 an Associate in Risk Man9 agement (ARM) issued by 

10 the American Institute for 

11 CPCU/Insurance Institute of 

12 America; 

13 (CC) a designation as 

14 Certified Risk Manager 

15 (CRM) issued by the Na16 tional Alliance for Insurance 

17 Education & Research; 

18 (DD) a designation as 

19 a RIMS Fellow (RF) issued 

20 by the Global Risk Manage21 ment Institute; or 

22 (EE) any other des23 ignation, certification, or li24 cense determined by a State 

25 insurance commissioner or 


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1 other State insurance regu2 latory official or entity to 

3 demonstrate minimum com4 petency in risk management; 

5 (ii)(I) has at least seven years of ex6 perience in risk financing, claims adminis7 tration, loss prevention, risk and insurance 

8 coverage analysis, or purchasing commer9 cial lines of insurance; and 

10 (II) has any one of the designa11 tions specified in subitems (AA) 

12 through (EE) of clause (i)(II)(bb); 

13 (iii) has at least 10 years of experi14 ence in risk financing, claims administra15 tion, loss prevention, risk and insurance 

16 coverage analysis, or purchasing commer17 cial lines of insurance; or 

18 (iv) has a graduate degree from an 

19 accredited college or university in risk 

20 management, business administration, fi21 nance, economics, or any other field deter22 mined by a State insurance commissioner 

23 or other State regulatory official or entity 

24 to demonstrate minimum competence in 

25 risk management. 


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1 (13) PREMIUM TAX.—The term ‘‘premium tax’’ 

2 means, with respect to surplus lines or independently 

3 procured insurance coverage, any tax, fee, assess4 ment, or other charge imposed by a government en5 tity directly or indirectly based on any payment 

6 made as consideration for an insurance contract for 

7 such insurance, including premium deposits, assess8 ments, registration fees, and any other compensation 

9 given in consideration for a contract of insurance. 

10 (14) SURPLUS LINES BROKER.—The term ‘‘sur11 plus lines broker’’ means an individual, firm, or cor12 poration which is licensed in a State to sell, solicit, 

13 or negotiate insurance on properties, risks, or expo14 sures located or to be performed in a State with 

15 nonadmitted insurers. 

16 (15) STATE.—The term ‘‘State’’ includes any 

17 State of the United States, the District of Columbia, 

18 the Commonwealth of Puerto Rico, Guam, the 

19 Northern Mariana Islands, the Virgin Islands, and 

20 American Samoa. 

21 Subtitle B—Reinsurance 

22 SEC. 10201. REGULATION OF CREDIT FOR REINSURANCE 

23 AND REINSURANCE AGREEMENTS. 

24 (a) CREDIT FOR REINSURANCE.—If the State of 

25 domicile of a ceding insurer is an NAIC-accredited State, 


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1 or has financial solvency requirements substantially simi2 lar to the requirements necessary for NAIC accreditation, 

3 and recognizes credit for reinsurance for the insurer’s 

4 ceded risk, then no other State may deny such credit for 

5 reinsurance. 

6 (b) ADDITIONAL PREEMPTION OF

7 EXTRATERRITORIAL APPLICATION OF STATE LAW.—In 

8 addition to the application of subsection (a), all laws, regu9 lations, provisions, or other actions of a State that is not 

10 the domiciliary State of the ceding insurer, except those 

11 with respect to taxes and assessments on insurance com12 panies or insurance income, are preempted to the extent 

13 that they— 

14 (1) restrict or eliminate the rights of the ceding 

15 insurer or the assuming insurer to resolve disputes 

16 pursuant to contractual arbitration to the extent 

17 such contractual provision is not inconsistent with 

18 the provisions of title 9, United States Code; 

19 (2) require that a certain State’s law shall gov20 ern the reinsurance contract, disputes arising from 

21 the reinsurance contract, or requirements of the re22 insurance contract; 

23 (3) attempt to enforce a reinsurance contract 

24 on terms different than those set forth in the reinVerDate Nov 24 2008 04:13 Jan 21, 2010 Jkt 089200 PO 00000 Frm 01700 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.RFS H4173

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1 surance contract, to the extent that the terms are 

2 not inconsistent with this subtitle; or 

3 (4) otherwise apply the laws of the State to re4 insurance agreements of ceding insurers not domi5 ciled in that State. 

6 SEC. 10202. REGULATION OF REINSURER SOLVENCY. 

7 (a) DOMICILIARY STATE REGULATION.—If the State 

8 of domicile of a reinsurer is an NAIC-accredited State or 

9 has financial solvency requirements substantially similar 

10 to the requirements necessary for NAIC accreditation, 

11 such State shall be solely responsible for regulating the 

12 financial solvency of the reinsurer. 

13 (b) NONDOMICILIARY STATES.— 

14 (1) LIMITATION ON FINANCIAL INFORMATION

15 REQUIREMENTS.—If the State of domicile of a rein16 surer is an NAIC-accredited State or has financial 

17 solvency requirements substantially similar to the re18 quirements necessary for NAIC accreditation, no 

19 other State may require the reinsurer to provide any 

20 additional financial information other than the infor21 mation the reinsurer is required to file with its 

22 domiciliary State. 

23 (2) RECEIPT OF INFORMATION.—No provision 

24 of this section shall be construed as preventing or 

25 prohibiting a State that is not the State of domicile 


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1 of a reinsurer from receiving a copy of any financial 

2 statement filed with its domiciliary State. 

3 SEC. 10203. DEFINITIONS. 

4 For purposes of this subtitle, the following definitions 

5 shall apply: 

6 (1) CEDING INSURER.—The term ‘‘ceding in7 surer’’ means an insurer that purchases reinsurance. 

8 (2) DOMICILIARY STATE.—The terms ‘‘State of 

9 domicile’’ and ‘‘domiciliary State’’ means, with re10 spect to an insurer or reinsurer, the State in which 

11 the insurer or reinsurer is incorporated or entered 

12 through, and licensed. 

13 (3) REINSURANCE.—The term ‘‘reinsurance’’ 

14 means the assumption by an insurer of all or part 

15 of a risk undertaken originally by another insurer. 

16 (4) REINSURER.— 

17 (A) IN GENERAL.—The term ‘‘reinsurer’’ 

18 means an insurer to the extent that the in19 surer— 

20 (i) is principally engaged in the busi21 ness of reinsurance; 

22 (ii) does not conduct significant 

23 amounts of direct insurance as a percent24 age of its net premiums; and 


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1 (iii) is not engaged in an ongoing 

2 basis in the business of soliciting direct in3 surance. 

4 (B) DETERMINATION.—A determination of 

5 whether an insurer is a reinsurer shall be made 

6 under the laws of the State of domicile in ac7 cordance with this paragraph. 

8 (5) STATE.—The term ‘‘State’’ includes any 

9 State of the United States, the District of Columbia, 

10 the Commonwealth of Puerto Rico, Guam, the 

11 Northern Mariana Islands, the Virgin Islands, and 

12 American Samoa. 

13 Subtitle C—Rule of Construction 

14 SEC. 10301. RULE OF CONSTRUCTION. 

15 Nothing in this title or amendments to this title shall 

16 be construed to modify, impair, or supersede the applica17 tion of the antitrust laws. Any implied or actual conflict 

18 between this title and any amendments to this title and 

19 the antitrust laws shall be resolved in favor of the oper20 ation of the antitrust laws. 

21 SEC. 10302. SEVERABILITY. 

22 If any section or subsection of this title, or any appli23 cation of such provision to any person or circumstance, 

24 is held to be unconstitutional, the remainder of this title, 


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1 and the application of the provision to any other person 

2 or circumstance, shall not be affected. 

3 TITLE X—INTEREST-BEARING 

4 TRANSACTION ACCOUNTS AU5 THORIZED 

6 SEC. 11001. INTEREST-BEARING TRANSACTION ACCOUNTS 

7 AUTHORIZED. 

8 (a) REPEAL OF PROHIBITION ON PAYMENT OF IN9 TEREST ON DEMAND DEPOSITS.— 

10 (1) FEDERAL RESERVE ACT.—Section 19(i) of 

11 the Federal Reserve Act (12 U.S.C. 371a) is amend12 ed to read as follows: 

13 ‘‘(i) [Repealed]’’. 

14 (2) HOME OWNERS’ LOAN ACT.—The first sen15 tence of section 5(b)(1)(B) of the Home Owners’ 

16 Loan Act (12 U.S.C. 1464(b)(1)(B)) is amended by 

17 striking ‘‘savings association may not—’’ and all 

18 that follows through ‘‘(ii) permit any’’ and inserting 

19 ‘‘savings association may not permit any’’. 

20 (3) FEDERAL DEPOSIT INSURANCE ACT.—Sec21 tion 18(g) of the Federal Deposit Insurance Act (12 

22 U.S.C. 1828(g)) is amended to read as follows: 

23 ‘‘(g) [Repealed]’’. 


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1 (b) EFFECTIVE DATE.—The amendments made by 

2 subsection (a) shall take effect at the end of the 1-year 

3 period beginning on the date of the enactment of this Act. 

Passed the House of Representatives December 11, 

2009. 

Attest: LORRAINE C. MILLER, 

Clerk. 


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