I 

118TH CONGRESS 

1ST SESSION H. R. 500 

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. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 25, 2023 

Mrs. WAGNER (for herself, Mr. GOTTHEIMER, Mr. STEIL, Mr. HUIZENGA, and 

Mr. GREEN of Texas) introduced the following bill; which was referred 

to the Committee on Financial Services 

A BILL 

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, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Financial Exploitation 

5 Prevention Act of 2023’’. 


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1 SEC. 2. REDEMPTION OF CERTAIN SECURITIES POST2 PONED. 

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

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

5 adding at the end the following: 

6 ‘‘(h) REQUIREMENTS WITH RESPECT TO NON-INSTI7 TUTIONAL DIRECT AT-FUND ACCOUNTS.— 

8 ‘‘(1) ELECTION.— 

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

10 investment company and a transfer agent de11 scribed under paragraph (2) may elect to com12 ply with the requirements under paragraph (2) 

13 and subsection (i) by notifying the Commission 

14 of such election. 

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

16 (2) and subsection (i) shall only apply to a reg17 istered open-end investment company and a 

18 transfer agent that have made the election 

19 under subparagraph (A). 

20 ‘‘(2) REQUIREMENTS.—In the case of a cus21 tomer who is a holder of a non-institutional account 

22 held directly with a registered open-end investment 

23 company and serviced by a transfer agent (a ‘direct24 at-fund account’), the company and transfer agent 

25 shall— 


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

2 and contact information of at least one indi3 vidual who— 

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

5 adult; and 

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

7 such account; 

8 ‘‘(B) document and retain the information 

9 received pursuant to subparagraph (A); and 

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

11 (including through electronic delivery) that such 

12 company or transfer agent may contact an indi13 vidual specified pursuant to subparagraph (A) 

14 with respect to the account of such customer 

15 to— 

16 ‘‘(i) address possible financial exploi17 tation of such customer; 

18 ‘‘(ii) confirm the contact information 

19 or health status of the customer; or 

20 ‘‘(iii) identify any legal guardian, ex21 ecutor, trustee, or holder of a power of at22 torney of the customer. 

23 ‘‘(i) REDEMPTION OF CERTAIN SECURITIES POST24 PONED.— 


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

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

3 transfer agent acting on behalf of such company 

4 may postpone the date of payment or satisfaction 

5 upon redemption of any redeemable security in ac6 cordance with its terms for more than seven days 

7 after the tender of such security to such company or 

8 its agent designated for that purpose for redemption 

9 if such company or agent reasonably believes that— 

10 ‘‘(A) the redemption is requested by a se11 curity holder who is a specified adult; and 

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

13 occurring, or has been attempted with respect 

14 to such redemption. 

15 ‘‘(2) DURATION.— 

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

17 subparagraphs (B) and (C), a registered open18 end investment company or a transfer agent 

19 acting on behalf of such company may postpone 

20 the date of payment or satisfaction upon re21 demption of a redeemable security under para22 graph (1) for a period of not more than 15 

23 business days. 

24 ‘‘(B) EXTENSION UPON DETERMINATION

25 OF EXPLOITATION.—The period described in 


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1 subparagraph (A) may be extended by an addi2 tional 10 business days if the registered open3 end investment company or a transfer agent 

4 acting on behalf of such company— 

5 ‘‘(i) reasonably believes that— 

6 ‘‘(I) the redemption is requested 

7 by a security holder who is a specified 

8 adult; and 

9 ‘‘(II) financial exploitation has 

10 occurred, is occurring, or has been at11 tempted with respect to such redemp12 tion; 

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

14 later than 2 days after making a deter15 mination under clause (i), notifies the indi16 viduals specified by such security holder 

17 under subsection (h)(2)(A) in writing (in18 cluding through electronic delivery) of the 

19 extension of the period described in sub20 paragraph (A) under this subparagraph 

21 and the reason for such extension; 

22 ‘‘(iii) initiates an internal review of 

23 the facts and circumstances relating to the 

24 determination under clause (i); 


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1 ‘‘(iv) holds amounts related to the de2 layed payment or satisfaction upon re3 demption of the redeemable security in a 

4 demand deposit account; and 

5 ‘‘(v) documents and retains records 

6 related to carrying out clause (iv) and in7 cludes such records in the first required 

8 account statement of the security holder 

9 provided after the date on which the deter10 mination is made under clause (i). 

11 ‘‘(C) EXTENSION BY GOVERNMENT.—A 

12 State regulator, administrative agency of com13 petent jurisdiction, or court of competent juris14 diction may extend the period described in sub15 paragraph (A). 

16 ‘‘(D) NOTIFICATION.— 

17 ‘‘(i) EXCEPTION.—Subparagraph 

18 (B)(ii) shall not apply if a registered open19 end investment company or transfer agent 

20 acting on behalf of such company reason21 ably believes that an individual required to 

22 be notified under such subparagraph is, 

23 has been, or will subject the security holder 

24 who identified such individual under sub25 section (h)(2)(A) to financial exploitation. 


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1 ‘‘(ii) REASONABLE EFFORTS.—An 

2 open-end investment company or transfer 

3 agent acting on behalf of such company 

4 shall be considered in compliance with sub5 paragraph (B)(ii) if such company or 

6 transfer agent makes a reasonable effort to 

7 contact the individuals specified by a secu8 rity holder under subsection (h)(2)(A). 

9 ‘‘(E) INTERNAL PROCEDURES.—An open10 end investment company or transfer agent act11 ing on behalf of such company shall establish 

12 procedures to carry out the requirements under 

13 this subsection, including procedures— 

14 ‘‘(i) related to the identification and 

15 reporting of matters related to the finan16 cial exploitation of specified adults; 

17 ‘‘(ii) to determine whether to release 

18 or reinvest delayed redemption proceeds, 

19 taking into account the facts and cir20 cumstances of each case, should the inter21 nal review under subparagraph (B)(iii) 

22 support the reasonable belief described in 

23 subparagraph (B)(i); 

24 ‘‘(iii) identifying each employee of the 

25 company or transfer agent with authority 


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1 to establish, extend, or terminate a period 

2 described in paragraph (1) or subpara3 graph (A); 

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

5 that are reasonably designed to ensure that 

6 the employees of such transfer agent com7 ply with this subsection; and 

8 ‘‘(v) in the case of an open-end invest9 ment company, establishing periodic re10 porting requirements under which a trans11 fer agent acting on behalf of such company 

12 shall notify such company of— 

13 ‘‘(I) each extension under sub14 paragraph (B) authorized by such 

15 transfer agent; 

16 ‘‘(II) each finding by the transfer 

17 agent under subparagraph (B)(i); 

18 ‘‘(III) each notification under 

19 subparagraph (B)(ii) carried out by 

20 such transfer agent; and 

21 ‘‘(IV) the results of each internal 

22 review initiated by the transfer agent 

23 under subparagraph (B)(iii). 

24 ‘‘(F) INFORMATION INCLUDED IN CERTAIN

25 STATEMENTS.—An open-end investment comVerDate Sep 11 2014 21:32 Jan 27, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H500.IH H500

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1 pany shall include in each prospectus or state2 ment of additional information a notification 

3 that the company or transfer agent acting on 

4 behalf of such company may postpone redemp5 tion of certain securities under this subsection. 

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

7 investment company or transfer agent acting on 

8 behalf of such company shall— 

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

10 ‘‘(I) each postponement of re11 demption under subparagraph (A), 

12 (B), and (C); 

13 ‘‘(II) each finding under subpara14 graph (B)(i); 

15 ‘‘(III) the name and position of 

16 each employee described in subpara17 graph (E)(iii); 

18 ‘‘(IV) each notification carried 

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

20 ‘‘(V) the results of each internal 

21 review initiated under subparagraph 

22 (B)(iii); and 

23 ‘‘(ii) make such records available to 

24 the Commission at the request of the Com25 mission. 


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1 ‘‘(3) SPECIFIED ADULT DEFINED.—In this sub2 section, the term ‘specified adult’ means— 

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

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

5 registered open-end investment company or a 

6 transfer agent acting on behalf of such com7 pany reasonably believes has a mental or phys8 ical impairment that renders the individual un9 able to protect the individual’s own interests.’’. 

10 (b) RECOMMENDATIONS.— 

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

12 the date of the enactment of this section, the Securi13 ties and Exchange Commission, in consultation with 

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

15 to Congress a report that includes recommendations 

16 regarding the regulatory and legislative changes nec17 essary to address the financial exploitation of secu18 rity holders who are specified adults (as defined in 

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

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

21 by this section). 

22 (2) CONSULTATION.—The entities specified in 

23 this paragraph are as follows: 

24 (A) The Commodity Futures Trading 

25 Commission. 


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1 (B) The Director of the Bureau of Con2 sumer Financial Protection. 

3 (C) The Financial Industry Regulatory Au4 thority. 

5 (D) The North American Securities Ad6 ministrators Association. 

7 (E) The Board of Governors of the Fed8 eral Reserve System. 

9 (F) The Comptroller of the Currency. 

10 (G) The Federal Deposit Insurance Cor11 poration. 

Æ 


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