II 

110TH CONGRESS 

2D SESSION S. 3691 

To amend the Commodity Exchange Act to require reporting and recordkeeping for positions involving credit-default swaps, to grant the Federal 

Reserve Board authority over investment-bank holding companies, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 19, 2008 

Ms. COLLINS introduced the following bill; which was read twice and referred 

to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To amend the Commodity Exchange Act to require reporting 

and recordkeeping for positions involving credit-default 

swaps, to grant the Federal Reserve Board authority 

over investment-bank holding companies, 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 ‘‘Financial Regulation 

5 Reform Act of 2008’’. 


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1 SEC. 2. REPORTING AND RECORDKEEPING FOR POSITIONS 

2 INVOLVING CREDIT-DEFAULT SWAPS. 

3 (a) IN GENERAL.—Section 2(h) of the Commodity 

4 Exchange Act (7 U.S.C. 2(h)) is amended by adding at 

5 the end the following: 

6 ‘‘(8) REPORTING AND RECORDKEEPING FOR

7 POSITIONS INVOLVING CREDIT-DEFAULT SWAPS.— 

8 ‘‘(A) DEFINITIONS.—In this paragraph: 

9 ‘‘(i) CREDIT-DEFAULT SWAP.—The 

10 term ‘credit-default swap’ means a bilat11 eral derivative contract that transfers, in 

12 exchange for 1 or more lump-sum or other 

13 payments, from 1 party to another, the 

14 risk that an entity, regardless of whether 

15 owned by the buyer of the protection, may 

16 experience a loss of value from a credit 

17 event such as a default, credit downgrade, 

18 or other contractually agreed-upon adverse 

19 event. 

20 ‘‘(ii) CREDIT-DEFAULT SWAP TRADING

21 CLEARINGHOUSE.—The term ‘credit-de22 fault swap trading clearinghouse’ means an 

23 approved centralized clearinghouse for 

24 credit-default swap trading that is des25 ignated by the Securities and Exchange 

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1 modity Futures Trading Commission and 

2 the Chairman of the Board of Governors of 

3 the Federal Reserve System. 

4 ‘‘(iii) REPORTABLE CONTRACT.—The 

5 term ‘reportable contract’ means a con6 tract, agreement, or transaction involving a 

7 credit-default swap, executed through a 

8 credit-default swap trading clearinghouse. 

9 ‘‘(B) USE OF CREDIT-DEFAULT SWAP

10 TRADING CLEARINGHOUSES.—Each credit-de11 fault swap trading clearinghouse— 

12 ‘‘(i) shall be subject to regulation by 

13 the Commission; 

14 ‘‘(ii) shall be capitalized by partici15 pants in the credit-default swap trading 

16 clearinghouse at a level that is sufficient to 

17 guarantee payment for trading in credit18 default swaps; and 

19 ‘‘(iii) may assess participants in the 

20 credit-default swap trading clearinghouse 

21 in an amount necessary to maintain a de22 fault fund for the credit-default swap trad23 ing clearinghouse. 

24 ‘‘(C) RECORDKEEPING.—The Commission, 

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1 taining, or controlling any position in any re2 portable contract under this paragraph— 

3 ‘‘(i) to maintain such records as di4 rected by the Commission for a period of 

5 5 years, or longer, if directed by the Com6 mission; and 

7 ‘‘(ii) to provide such records upon re8 quest to the Commission, the Department 

9 of Justice, the Securities and Exchange 

10 Commission, or the Federal Reserve Sys11 tem, as applicable. 

12 ‘‘(D) REPORTING OF POSITIONS INVOLV13 ING CREDIT-DEFAULT SWAPS.—The Commis14 sion shall prescribe rules requiring such regular 

15 or continuous reporting of positions in report16 able contracts in accordance with such require17 ments regarding size limits for reportable posi18 tions and the form, timing, and manner of fil19 ing such reports under this paragraph, as the 

20 Commission shall determine.’’. 

21 (b) CONFORMING AMENDMENTS.—Section 4a(e) of 

22 the Commodity Exchange Act (7 U.S.C. 6a(e)) is amend23 ed— 

24 (1) in the first sentence— 


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1 (A) by inserting ‘‘, by any credit-default 

2 swap trading clearinghouse (as defined in sec3 tion 2(h)(8)(A)),’’ after ‘‘registered by the Com4 mission’’; and 

5 (B) by inserting ‘‘, credit-default swap 

6 trading clearinghouse,’’ after ‘‘derivatives trans7 action execution facility’’; and 

8 (2) in the second sentence, by inserting ‘‘, by 

9 any credit-default swap trading clearinghouse (as de10 fined in section 2(h)(8)(A)),’’ after ‘‘registered by 

11 the Commission’’. 

12 SEC. 3. FEDERAL RESERVE BOARD AUTHORITY OVER IN13 VESTMENT BANK HOLDING COMPANIES. 

14 (a) REGULATION BY THE BOARD OF GOVERNORS OF

15 THE FEDERAL RESERVE SYSTEM.— 

16 (1) RULEMAKING REQUIRED.—Not later than 

17 90 days after the date of enactment of this Act, the 

18 Board of Governors of the Federal Reserve System 

19 (in this section referred to as the ‘‘Board’’) shall 

20 issue final rules to provide for the examination of 

21 the safety and soundness of, and the extent of sys22 temic financial risk posed by, any investment bank 

23 holding company organized in or doing business in 

24 the United States. 


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1 (2) INFORMATION FROM INVESTMENT BANK

2 HOLDING COMPANIES.—The rules of the Board 

3 under this section shall provide for reasonable re4 porting of information by each investment bank 

5 holding company, to the extent necessary to carry 

6 out the purposes of this section. 

7 (b) RULE OF CONSTRUCTION.—Nothing in this sec8 tion shall be construed as negating or preempting the au9 thority of the Securities and Exchange Commission to ex10 ercise its authority over broker or dealer operations in ac11 cordance with applicable provisions of law. 

12 (c) EXCHANGE OF INFORMATION ON SYSTEMIC

13 RISK.—The Securities and Exchange Commission, the 

14 Commodity Futures Trading Commission, and other ap15 propriate Federal regulatory agencies shall provide to the 

16 Board all relevant information, as directed by the Board, 

17 on the activities of investment bank holding companies 

18 with respect to the prevention of systemic risks posed by 

19 such activities to the United States economy. 

20 (d) ENFORCEMENT PROVISIONS.—Any violation of 

21 this section or the rules of the Board under this section 

22 shall be subject to the enforcement and penalty provisions 

23 of the Bank Holding Company Act of 1956, in the same 

24 manner and to the same extent as those provisions are 


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1 applicable to violations of that Act by a bank holding com2 pany (as defined in that Act). 

3 (e) AUTHORIZATION OF APPROPRIATIONS.—There 

4 are authorized to be appropriated to the Board such sums 

5 as may be necessary to carry out this section. 

6 (f) DEFINITIONS.—For purposes of this section, the 

7 term ‘‘investment bank holding company’’ means— 

8 (1) any person other than a natural person that 

9 owns or controls one or more brokers or dealers (as 

10 those terms are defined in section 3 of the Securities 

11 Exchange Act of 1934 (15 U.S.C. 78c)); and 

12 (2) the associated persons thereof. 

13 (g) CONFORMING AMENDMENTS.—The Securities 

14 Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amend15 ed— 

16 (1) in section 6(g)(4)(A)(iv) (15 U.S.C. 

17 78f(g)(4)(A)(iv)), by striking ‘‘and (k)’’ and insert18 ing ‘‘and (i)’’; 

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

20 (A) in paragraph (11)(B)(vi), by striking 

21 ‘‘(h), and (i)’’ and inserting ‘‘and (h)’’; and 

22 (B) in paragraph (12)(B)(vi), by striking 

23 ‘‘(h), and (i)’’ and inserting ‘‘and (h)’’; 


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1 (3) in section 15A(k)(4)(C) (15 U.S.C. 78o– 

2 3(k)(4)(C)), by striking ‘‘and (k)’’ and inserting 

3 ‘‘and (i)’’; and 

4 (4) in section 17 (15 U.S.C. 78q)— 

5 (A) by striking subsections (i) and (j); and 

6 (B) by redesignating subsection (k) as sub7 section (i). 

8 SEC. 4. REGULATIONS ON CLEARINGHOUSE OPERATIONS 

9 AND FRAUDULENT, DECEPTIVE, AND MA10 NIPULATIVE ACTS. 

11 (a) RULEMAKING REQUIRED.—Not later than 90 

12 days after the date of enactment of this Act, the Securities 

13 and Exchange Commission, in consultation with the Board 

14 of Governors of the Federal Reserve System and the Com15 modity Futures Trading Commission, shall issue final 

16 rules— 

17 (1) to designate clearinghouses for credit-de18 fault swaps; and 

19 (2) to prohibit fraudulent, deceptive, or ma20 nipulative acts or practices in connection with credit21 default swaps. 

22 (b) CRITERIA.—Rules of the Commission under this 

23 section shall require that clearinghouses— 

24 (1) are capitalized by participants to a level 

25 adequate to guarantee payments; and 


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1 (2) are authorized to assess members for a de2 fault fund. 

3 (c) REQUIRED USE OF CLEARINGHOUSES.—Any per4 son that engages in a credit-default swap transaction shall 

5 utilize a clearinghouse designated by the Commission for 

6 such purpose in accordance with the rules issued under 

7 subsection (a). 

8 SEC. 5. ESTABLISHING AN INDEPENDENT, BIPARTISAN 

9 COMMISSION. 

10 (a) COMMISSION ESTABLISHMENT.—There is estab11 lished a temporary commission to be known as the Com12 mission on Financial Regulatory Reform (referred to in 

13 this section as the ‘‘Commission’’). The Commission shall 

14 review the financial regulatory structure and propose a 

15 comprehensive framework for fundamental reform of fi16 nancial regulation in the United States. 

17 (b) FUNCTIONS OF THE COMMISSION.— 

18 (1) IN GENERAL.—The Commission shall con19 duct a top-to-bottom review of the Nation’s existing 

20 financial regulatory structure and the contribution 

21 of the current structure to the stability or instability 

22 of financial markets, in order to develop a com23 prehensive framework for— 

24 (A) reforming the laws governing our Na25 tion’s financial markets; 


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1 (B) strengthening and reconstituting regu2 latory agencies; and 

3 (C) improving transparency and oversight. 

4 (2) ANALYSIS.—In the course of its activities, 

5 the Commission shall analyze— 

6 (A) the impact of the financial regulatory 

7 structure on the health and stability of the 

8 United States economy; 

9 (B) the strength, sustainability, and com10 petitiveness of the Nation’s financial institu11 tions; and 

12 (C) the financial well-being of American 

13 taxpayers, investors, and businesses. 

14 (3) CONSIDERATIONS.—The Commission shall 

15 review and consider all aspects of financial regula16 tion, including the regulation of— 

17 (A) bank holding companies, financial 

18 holding companies, commercial banks, invest19 ment banks, thrifts, credit unions, and indus20 trial loan companies; 

21 (B) payment and settlement systems; 

22 (C) hedge funds, private equity funds, and 

23 the markets for alternative investments; 

24 (D) special purpose vehicles and off-bal25 ance sheet financing for financial companies; 


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1 (E) the securitization of mortgages and 

2 other assets; 

3 (F) exchange-based, electronic, and over4 the-counter markets for financial derivative 

5 products; 

6 (G) the mortgage finance industry, includ7 ing mortgage brokers and mortgage lending in8 stitutions; 

9 (H) equity markets, including short-selling 

10 practices, and commodity futures markets; and 

11 (I) the insurance industry and its role in 

12 the financial markets. 

13 (c) POWERS OF THE COMMISSION.— 

14 (1) IN GENERAL.— 

15 (A) HEARINGS AND EVIDENCE.—The 

16 Commission or, on the authority of the Com17 mission, any subcommittee or member thereof, 

18 may, for the purpose of carrying out this Act— 

19 (i) hold such hearings and sit and act 

20 at such times and places, take such testi21 mony, receive such evidence, administer 

22 such oaths; and 

23 (ii) require the attendance and testi24 mony of such witnesses and the production 

25 of such books, records, correspondence, 


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1 memoranda, papers, and documents, as the 

2 Commission or such designated sub3 committee or designated member may de4 termine advisable. 

5 (B) FIRST MEETING.—The first meeting of 

6 the Commission shall occur not later than 30 

7 days after the date of enactment of this Act. 

8 (2) CONTRACTING.—The Commission may, to 

9 such extent and in such amounts as are provided in 

10 appropriation Acts, enter into contracts to enable 

11 the Commission to discharge its duties under this 

12 Act. 

13 (3) INFORMATION FROM FEDERAL AGENCIES.— 

14 (A) IN GENERAL.—The Commission is au15 thorized to secure directly from any executive 

16 department, bureau, agency, board, commission, 

17 office, independent establishment, or instrumen18 tality of the Government, information, sugges19 tions, estimates, and statistics for the purposes 

20 of this Act. Each department, bureau, agency, 

21 board, commission, office, independent estab22 lishment, or instrumentality shall, to the extent 

23 authorized by law, furnish such information, 

24 suggestions, estimates, and statistics directly to 

25 the Commission, upon request made by the 


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1 chairman, the chairman of any subcommittee 

2 created by a majority of the Commission, or 

3 any member designated by a majority of the 

4 Commission. 

5 (B) RECEIPT, HANDLING, STORAGE, AND

6 DISSEMINATION.—Information shall only be re7 ceived, handled, stored, and disseminated by 

8 members of the Commission and its staff con9 sistent with all applicable statutes, regulations, 

10 and Executive orders. 

11 (4) ASSISTANCE FROM FEDERAL AGENCIES.— 

12 (A) GENERAL SERVICES ADMINISTRA13 TION.—The Administrator of General Services 

14 shall provide to the Commission on a reimburs15 able basis administrative support and other 

16 services for the performance of the Commis17 sion’s functions. 

18 (B) OTHER DEPARTMENTS AND AGEN19 CIES.—In addition to the assistance prescribed 

20 in subparagraph (A), departments and agencies 

21 of the United States may provide to the Com22 mission such services, funds, facilities, staff, 

23 and other support services as they may deter24 mine advisable and as may be authorized by 

25 law. 


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1 (5) GIFTS.—The Commission may accept, use, 

2 and dispose of gifts or donations of services or prop3 erty. 

4 (6) POSTAL SERVICES.—The Commission may 

5 use the United States mails in the same manner and 

6 under the same conditions as departments and agen7 cies of the United States. 

8 (d) NON-APPLICABILITY OF FEDERAL ADVISORY

9 COMMITTEE ACT.— 

10 (1) IN GENERAL.—The Federal Advisory Com11 mittee Act (5 U.S.C. App.) shall not apply to the 

12 Commission. 

13 (2) PUBLIC MEETINGS AND RELEASE OF PUB14 LIC VERSIONS OF REPORTS.—The Commission 

15 shall— 

16 (A) hold public hearings and meetings to 

17 the extent appropriate; and 

18 (B) release public versions of the reports 

19 required under this Act. 

20 (3) PUBLIC HEARINGS.—Any public hearings of 

21 the Commission shall be conducted in a manner con22 sistent with the protection of information provided 

23 to or developed for or by the Commission as re24 quired by any applicable statute, regulation, or Ex25 ecutive order. 


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1 (e) COMPOSITION.— 

2 (1) IN GENERAL.—The Commission shall be 

3 composed of 12 members, selected not later than 15 

4 days after the date of enactment of this Act, of 

5 whom— 

6 (A) three persons shall be appointed by the 

7 majority leader of the Senate, after consultation 

8 with the Chairman of the Committee on Bank9 ing, Housing and Urban Affairs; 

10 (B) three persons shall be appointed by the 

11 minority leader of the Senate, after consultation 

12 with the ranking minority members of the Com13 mittee on Banking, Housing and Urban Affairs; 

14 (C) three persons shall be appointed by the 

15 Speaker of the House of Representatives, after 

16 consultation with the Chairman of the Com17 mittee on Financial Services; and 

18 (D) three persons shall be appointed by 

19 the minority leader of the House of Representa20 tives, after consultation with the ranking minor21 ity member of the Committee on Financial 

22 Services. 

23 (2) QUALIFICATIONS.—An individual appointed 

24 may not be an officer or employee of the Federal 

25 Government or any State or local government. It is 


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1 the sense of Congress that individuals appointed to 

2 the Commission should have national recognition as 

3 financial sector experts, and may include former 

4 government officials, private market participants, 

5 and representatives of the academic community, 

6 (3) OFFICERS.—Officers of the Commission are 

7 to be chosen by the Commission’s membership. 

8 (f) FINAL REPORT OF COMMISSION.—Not later than 

9 120 days after the date of the enactment of this Act, the 

10 Commission shall submit to the President and Congress 

11 a final report containing such findings, conclusions, and 

12 recommendations for corrective measures as have been 

13 agreed to by a majority of committee members. 

14 (g) COMPENSATION OF COMMISSION STAFF.— 

15 (1) IN GENERAL.— 

16 (A) APPOINTMENT AND COMPENSATION.— 

17 The chairman, in consultation with vice chair18 man, in accordance with rules agreed upon by 

19 the Commission, may appoint and fix the com20 pensation of a staff director and such other per21 sonnel as may be necessary to enable the Com22 mission to carry out its functions, without re23 gard to the provisions of title 5, United States 

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1 sions of chapter 51 and subchapter III of chap2 ter 53 of such title relating to classification and 

3 General Schedule pay rates, except that no rate 

4 of pay fixed under this subsection may exceed 

5 the equivalent of that payable for a position at 

6 level V of the Executive Schedule under section 

7 5316 of title 5, United States Code. 

8 (B) PERSONNEL AS FEDERAL EMPLOY9 EES.— 

10 (i) IN GENERAL.—The executive di11 rector and any personnel of the Commis12 sion who are employees shall be employees 

13 under section 2105 of title 5, United 

14 States Code, for purposes of chapters 63, 

15 81, 83, 84, 85, 87, 89, and 90 of that title. 

16 (ii) MEMBERS OF COMMISSION.—Sub17 paragraph (A) shall not be construed to 

18 apply to members of the Commission. 

19 (2) DETAILEES.—Any Federal Government em20 ployee may be detailed to the Commission without 

21 reimbursement from the Commission, and such 

22 detailee shall retain the rights, status, and privileges 

23 of his or her regular employment without interrup24 tion. 


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1 (3) CONSULTANT SERVICES.—The Commission 

2 is authorized to procure the services of experts and 

3 consultants in accordance with section 3109 of title 

4 5, United States Code, but at rates not to exceed the 

5 daily rate paid a person occupying a position at level 

6 IV of the Executive Schedule under section 5315 of 

7 title 5, United States Code. 

8 (h) COMPENSATION AND TRAVEL EXPENSES.— 

9 (1) COMPENSATION.—Each member of the 

10 Commission may be compensated at not to exceed 

11 the daily equivalent of the annual rate of basic pay 

12 in effect for a position at level IV of the Executive 

13 Schedule under section 5315 of title 5, United 

14 States Code, for each day during which that member 

15 is engaged in the actual performance of the duties 

16 of the Commission. 

17 (2) TRAVEL EXPENSES.—While away from 

18 their homes or regular places of business in the per19 formance of services for the Commission, members 

20 of the Commission shall be allowed travel expenses, 

21 including per diem in lieu of subsistence, in the 

22 same manner as persons employed intermittently in 

23 the Government service are allowed expenses under 

24 section 5703(b) of title 5, United States Code. 

25 (i) REPORTS OF COMMISSION; TERMINATION.— 


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1 (1) INTERIM REPORTS.—The Commission may 

2 submit to the President and Congress interim re3 ports containing such findings, conclusions, and rec4 ommendations for corrective measures as have been 

5 agreed to by a majority of Commission members. 

6 (2) FINAL REPORT.—Not later than 6 months 

7 after the date of the enactment of this Act, the 

8 Commission shall submit to the President and Con9 gress a final report containing such findings, conclu10 sions, and recommendations for corrective measures 

11 as have been agreed to by a majority of Commission 

12 members. 

13 (3) TERMINATION.— 

14 (A) IN GENERAL.—The Commission, and 

15 all the authorities of this Act, shall terminate 

16 60 days after the date on which the final report 

17 is submitted under paragraph (2). 

18 (B) ADMINISTRATIVE ACTIVITIES BEFORE

19 TERMINATION.—The Commission may use the 

20 60-day period referred to in subparagraph (A) 

21 for the purpose of concluding its activities, in22 cluding providing testimony to committees of 

23 Congress concerning its reports and dissemi24 nating the final report. 

25 (j) FUNDING.— 


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1 (1) TRANSFER FROM THE DEPARTMENT OF

2 THE TREASURY TARP PROGRAM.—Of the amounts 

3 authorized to be appropriated by this Act and made 

4 available in Public Law for the Troubled Asset Re5 lief Program established under the Emergency Eco6 nomic Stabilization Act of 2008, not to exceed 

7 $5,000,000 shall be available for transfer to the 

8 Commission for purposes of the activities of the 

9 Commission under this Act, and including assistance 

10 for participating Federal agencies. 

11 (2) DURATION OF AVAILABILITY.—Amounts 

12 made available to the Commission under paragraph 

13 (1) shall remain available until the termination of 

14 the Commission. 

Æ 


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