I

106TH CONGRESS

1ST SESSION H. R. 1340

To require brokers, dealers, investment companies, and investment advisers

to protect the confidentiality of financial information obtained concerning

their customers, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 25, 1999

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

Committee on Commerce

A BILL

To require brokers, dealers, investment companies, and investment advisers to protect the confidentiality of financial information obtained concerning their customers, and

for other purposes.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Securities Investors

5 Privacy Enhancement Act of 1999’’.
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1 SEC. 2. CONFIDENTIAL FINANCIAL INFORMATION OF CUS2 TOMERS OF BROKERS AND DEALERS.

3 Section 15A(b) of the Securities Exchange Act of

4 1934 (15 U.S.C. 78o–3(b)) is amended by adding at the

5 end the following new paragraph:

6 ‘‘(14) The rules of the association include rules

7 to require members of the association—

8 ‘‘(A) to protect the confidentiality of finan9 cial information of, and relating to, their cus10 tomers;

11 ‘‘(B) to inform their customers whenever—

12 ‘‘(i) financial information is being col13 lected that pertains to such customers; or

14 ‘‘(ii) a member intends (with the ap15 proval of the customer pursuant to sub16 paragraph (C)(ii)) to offer financial infor17 mation pertaining to such customer to any

18 other person, including an affiliate or

19 agent of such member; and

20 ‘‘(C) to refrain, and to take measures rea21 sonably designed to prevent their agents, from

22 using, disclosing, or permitting access to indi23 vidually identifiable financial information per24 taining to any customer except—

25 ‘‘(i) for the provision of the financial

26 services from which such information is de-
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1 rived, or services necessary to, or used in,

2 the provision of such services;

3 ‘‘(ii) upon the affirmative written re4 quest, or with the affirmative written con5 sent, of the customer to whom the infor6 mation pertains; or

7 ‘‘(iii) upon request of the Commission

8 or as otherwise required by law.’’.

9 SEC. 3. CONFIDENTIAL FINANCIAL INFORMATION OF

10 SHAREHOLDERS OF INVESTMENT COMPA11 NIES.

12 Section 38 of the Investment Company Act of 1940

13 (15 U.S.C. 80a–37) is amended by adding at the end the

14 following new subsection:

15 ‘‘(d) PRIVACY OF FINANCIAL INFORMATION.—The

16 Commission, as it deems necessary or appropriate in the

17 public interest or for the protection of investors, shall

18 adopt rules or regulations to require any investment

19 company—

20 ‘‘(1) to protect the confidentiality of financial

21 information of, and relating to, the beneficial owners

22 of the outstanding securities of the investment com23 pany;
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1 ‘‘(2) to inform a beneficial owner of the out2 standing securities of the investment company

3 whenever—

4 ‘‘(A) financial information is being col5 lected that pertains to such beneficial owner; or

6 ‘‘(B) the investment company intends

7 (with the approval of the beneficial owner pur8 suant to paragraph (3)(B)) to offer financial in9 formation pertaining to such beneficial owner to

10 any other person, including an affiliate or agent

11 of such investment company; and

12 ‘‘(3) to refrain, and to take measures reason13 ably designed to prevent their agents, from using,

14 disclosing, or permitting access to individually iden15 tifiable financial information pertaining to any such

16 beneficial owner except—

17 ‘‘(A) for the provision of the financial serv18 ices from which such information is derived, or

19 services necessary to, or used in, the provision

20 of such services;

21 ‘‘(B) upon the affirmative written request,

22 or with the affirmative written consent, of the

23 beneficial owner to whom the information per24 tains; or
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1 ‘‘(C) upon request of the Commission or as

2 otherwise required by law.’’.

3 SEC. 4. CONFIDENTIAL FINANCIAL INFORMATION OF CLI4 ENTS OF INVESTMENT ADVISERS.

5 Section 211 of the Investment Advisers Act of 1940

6 (15 U.S.C. 80b–11) is amended by adding at the end the

7 following new subsection:

8 ‘‘(e) PRIVACY OF FINANCIAL INFORMATION.—The

9 Commission, as it deems necessary or appropriate in the

10 public interest or for the protection of investors, shall

11 adopt rules or regulations to require any investment

12 adviser—

13 ‘‘(1) to protect the confidentiality of financial

14 information of, and relating to, the clients of the in15 vestment adviser;

16 ‘‘(2) to inform a client of the investment ad17 viser whenever—

18 ‘‘(A) financial information is being col19 lected that pertains to such client; or

20 ‘‘(B) the investment adviser intends (with

21 the approval of the client pursuant to para22 graph (3)(B)) to offer financial information

23 pertaining to such client to any other person,

24 including an affiliate or agent of such invest25 ment adviser; and
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1 ‘‘(3) to refrain, and to take measures reason2 ably designed to prevent their agents, from using,

3 disclosing, or permitting access to individually iden4 tifiable financial information pertaining to any such

5 client except—

6 ‘‘(A) for the provision of the financial serv7 ices from which such information is derived, or

8 services necessary to, or used in, the provision

9 of such services;

10 ‘‘(B) upon the affirmative written request,

11 or with the affirmative written consent, of the

12 client to whom the information pertains; or

13 ‘‘(C) upon request of the Commission or as

14 otherwise required by law.’’.

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