IIB 

118TH CONGRESS 

1ST SESSION H. R. 500 

IN THE SENATE OF THE UNITED STATES 

JANUARY 31, 2023 

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

Urban Affairs 

AN ACT 

To amend the Investment Company Act of 1940 to postpone 

the date of payment or satisfaction upon redemption 

of certain securities in the case of the financial exploitation of specified adults, 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 ‘‘Financial Exploitation 

3 Prevention Act of 2023’’. 

4 SEC. 2. REDEMPTION OF CERTAIN SECURITIES POST5 PONED. 

6 (a) IN GENERAL.—Section 22 of the Investment 

7 Company Act of 1940 (15 U.S.C. 80a–22) is amended by 

8 adding at the end the following: 

9 ‘‘(h) REQUIREMENTS WITH RESPECT TO NON-INSTI10 TUTIONAL DIRECT AT-FUND ACCOUNTS.— 

11 ‘‘(1) ELECTION.— 

12 ‘‘(A) IN GENERAL.—A registered open-end 

13 investment company and a transfer agent de14 scribed under paragraph (2) may elect to com15 ply with the requirements under paragraph (2) 

16 and subsection (i) by notifying the Commission 

17 of such election. 

18 ‘‘(B) EFFECT OF ELECTION.—Paragraph 

19 (2) and subsection (i) shall only apply to a reg20 istered open-end investment company and a 

21 transfer agent that have made the election 

22 under subparagraph (A). 

23 ‘‘(2) REQUIREMENTS.—In the case of a cus24 tomer who is a holder of a non-institutional account 

25 held directly with a registered open-end investment 

26 company and serviced by a transfer agent (a ‘directVerDate Sep 11 2014 23:34 Jan 31, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H500.RFS H500

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1 at-fund account’), the company and transfer agent 

2 shall— 

3 ‘‘(A) request from such customer the name 

4 and contact information of at least one indi5 vidual who— 

6 ‘‘(i) is at the time of such request an 

7 adult; and 

8 ‘‘(ii) may be contacted with respect to 

9 such account; 

10 ‘‘(B) document and retain the information 

11 received pursuant to subparagraph (A); and 

12 ‘‘(C) disclose to such customer in writing 

13 (including through electronic delivery) that such 

14 company or transfer agent may contact an indi15 vidual specified pursuant to subparagraph (A) 

16 with respect to the account of such customer 

17 to— 

18 ‘‘(i) address possible financial exploi19 tation of such customer; 

20 ‘‘(ii) confirm the contact information 

21 or health status of the customer; or 

22 ‘‘(iii) identify any legal guardian, ex23 ecutor, trustee, or holder of a power of at24 torney of the customer. 


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1 ‘‘(i) REDEMPTION OF CERTAIN SECURITIES POST2 PONED.— 

3 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

4 (e), a registered open-end investment company or a 

5 transfer agent acting on behalf of such company 

6 may postpone the date of payment or satisfaction 

7 upon redemption of any redeemable security in ac8 cordance with its terms for more than seven days 

9 after the tender of such security to such company or 

10 its agent designated for that purpose for redemption 

11 if such company or agent reasonably believes that— 

12 ‘‘(A) the redemption is requested by a se13 curity holder who is a specified adult; and 

14 ‘‘(B) financial exploitation has occurred, is 

15 occurring, or has been attempted with respect 

16 to such redemption. 

17 ‘‘(2) DURATION.— 

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

19 subparagraphs (B) and (C), a registered open20 end investment company or a transfer agent 

21 acting on behalf of such company may postpone 

22 the date of payment or satisfaction upon re23 demption of a redeemable security under para24 graph (1) for a period of not more than 15 

25 business days. 


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1 ‘‘(B) EXTENSION UPON DETERMINATION

2 OF EXPLOITATION.—The period described in 

3 subparagraph (A) may be extended by an addi4 tional 10 business days if the registered open5 end investment company or a transfer agent 

6 acting on behalf of such company— 

7 ‘‘(i) reasonably believes that— 

8 ‘‘(I) the redemption is requested 

9 by a security holder who is a specified 

10 adult; and 

11 ‘‘(II) financial exploitation has 

12 occurred, is occurring, or has been at13 tempted with respect to such redemp14 tion; 

15 ‘‘(ii) subject to subparagraph (D), not 

16 later than 2 days after making a deter17 mination under clause (i), notifies the indi18 viduals specified by such security holder 

19 under subsection (h)(2)(A) in writing (in20 cluding through electronic delivery) of the 

21 extension of the period described in sub22 paragraph (A) under this subparagraph 

23 and the reason for such extension; 


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1 ‘‘(iii) initiates an internal review of 

2 the facts and circumstances relating to the 

3 determination under clause (i); 

4 ‘‘(iv) holds amounts related to the de5 layed payment or satisfaction upon re6 demption of the redeemable security in a 

7 demand deposit account; and 

8 ‘‘(v) documents and retains records 

9 related to carrying out clause (iv) and in10 cludes such records in the first required 

11 account statement of the security holder 

12 provided after the date on which the deter13 mination is made under clause (i). 

14 ‘‘(C) EXTENSION BY GOVERNMENT.—A 

15 State regulator, administrative agency of com16 petent jurisdiction, or court of competent juris17 diction may extend the period described in sub18 paragraph (A). 

19 ‘‘(D) NOTIFICATION.— 

20 ‘‘(i) EXCEPTION.—Subparagraph 

21 (B)(ii) shall not apply if a registered open22 end investment company or transfer agent 

23 acting on behalf of such company reason24 ably believes that an individual required to 

25 be notified under such subparagraph is, 


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1 has been, or will subject the security holder 

2 who identified such individual under sub3 section (h)(2)(A) to financial exploitation. 

4 ‘‘(ii) REASONABLE EFFORTS.—An 

5 open-end investment company or transfer 

6 agent acting on behalf of such company 

7 shall be considered in compliance with sub8 paragraph (B)(ii) if such company or 

9 transfer agent makes a reasonable effort to 

10 contact the individuals specified by a secu11 rity holder under subsection (h)(2)(A). 

12 ‘‘(E) INTERNAL PROCEDURES.—An open13 end investment company or transfer agent act14 ing on behalf of such company shall establish 

15 procedures to carry out the requirements under 

16 this subsection, including procedures— 

17 ‘‘(i) related to the identification and 

18 reporting of matters related to the finan19 cial exploitation of specified adults; 

20 ‘‘(ii) to determine whether to release 

21 or reinvest delayed redemption proceeds, 

22 taking into account the facts and cir23 cumstances of each case, should the inter24 nal review under subparagraph (B)(iii) 


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1 support the reasonable belief described in 

2 subparagraph (B)(i); 

3 ‘‘(iii) identifying each employee of the 

4 company or transfer agent with authority 

5 to establish, extend, or terminate a period 

6 described in paragraph (1) or subpara7 graph (A); 

8 ‘‘(iv) in the case of a transfer agent, 

9 that are reasonably designed to ensure that 

10 the employees of such transfer agent com11 ply with this subsection; and 

12 ‘‘(v) in the case of an open-end invest13 ment company, establishing periodic re14 porting requirements under which a trans15 fer agent acting on behalf of such company 

16 shall notify such company of— 

17 ‘‘(I) each extension under sub18 paragraph (B) authorized by such 

19 transfer agent; 

20 ‘‘(II) each finding by the transfer 

21 agent under subparagraph (B)(i); 

22 ‘‘(III) each notification under 

23 subparagraph (B)(ii) carried out by 

24 such transfer agent; and 


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1 ‘‘(IV) the results of each internal 

2 review initiated by the transfer agent 

3 under subparagraph (B)(iii). 

4 ‘‘(F) INFORMATION INCLUDED IN CERTAIN

5 STATEMENTS.—An open-end investment com6 pany shall include in each prospectus or state7 ment of additional information a notification 

8 that the company or transfer agent acting on 

9 behalf of such company may postpone redemp10 tion of certain securities under this subsection. 

11 ‘‘(G) RECORD RETENTION.—An open-end 

12 investment company or transfer agent acting on 

13 behalf of such company shall— 

14 ‘‘(i) document and retain records of— 

15 ‘‘(I) each postponement of re16 demption under subparagraph (A), 

17 (B), and (C); 

18 ‘‘(II) each finding under subpara19 graph (B)(i); 

20 ‘‘(III) the name and position of 

21 each employee described in subpara22 graph (E)(iii); 

23 ‘‘(IV) each notification carried 

24 out under subparagraph (B)(ii); and 


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1 ‘‘(V) the results of each internal 

2 review initiated under subparagraph 

3 (B)(iii); and 

4 ‘‘(ii) make such records available to 

5 the Commission at the request of the Com6 mission. 

7 ‘‘(3) SPECIFIED ADULT DEFINED.—In this sub8 section, the term ‘specified adult’ means— 

9 ‘‘(A) an individual age 65 or older; or 

10 ‘‘(B) an individual age 18 or older who a 

11 registered open-end investment company or a 

12 transfer agent acting on behalf of such com13 pany reasonably believes has a mental or phys14 ical impairment that renders the individual un15 able to protect the individual’s own interests.’’. 

16 (b) RECOMMENDATIONS.— 

17 (1) IN GENERAL.—Not later than 1 year after 

18 the date of the enactment of this section, the Securi19 ties and Exchange Commission, in consultation with 

20 the entities specified in paragraph (2), shall submit 

21 to Congress a report that includes recommendations 

22 regarding the regulatory and legislative changes nec23 essary to address the financial exploitation of secu24 rity holders who are specified adults (as defined in 

25 subsection (i)(3) of section 22 of the Investment 


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1 Company Act of 1940 (15 U.S.C. 80a–22), as added 

2 by this section). 

3 (2) CONSULTATION.—The entities specified in 

4 this paragraph are as follows: 

5 (A) The Commodity Futures Trading 

6 Commission. 

7 (B) The Director of the Bureau of Con8 sumer Financial Protection. 

9 (C) The Financial Industry Regulatory Au10 thority. 

11 (D) The North American Securities Ad12 ministrators Association. 

13 (E) The Board of Governors of the Fed14 eral Reserve System. 

15 (F) The Comptroller of the Currency. 

16 (G) The Federal Deposit Insurance Cor17 poration. 

Passed the House of Representatives January 30, 

2023. 

Attest: CHERYL L. JOHNSON, 

Clerk. 


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