IIB

107TH CONGRESS

1ST SESSION H. R. 1408

IN THE SENATE OF THE UNITED STATES

NOVEMBER 7, 2001

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

Urban Affairs

AN ACT

To safeguard the public from fraud in the financial services

industry, to streamline and facilitate the antifraud information-sharing efforts of Federal and State regulators,

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; TABLE OF CONTENTS.

2 (a) SHORT TITLE.—This Act may be cited as the

3 ‘‘Financial Services Antifraud Network Act of 2001’’.

4 (b) TABLE OF CONTENTS.—The table of contents of

5 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Purposes.

TITLE I—ANTIFRAUD NETWORK

Subtitle A—Direction to Financial Regulators

Sec. 100. Creation and operation of the network.

Subtitle B—Potential Establishment of Antifraud Subcommittee

Sec. 101. Establishment.

Sec. 102. Purposes of the Subcommittee.

Sec. 103. Chairperson; term of chairperson; meetings; officers and staff.

Sec. 104. Nonagency status.

Sec. 105. Powers of the Subcommittee.

Sec. 106. Agreement on cost structure.

Subtitle C—Regulatory Provisions

Sec. 111. Agency supervisory privilege.

Sec. 112. Confidentiality of information.

Sec. 113. Liability provisions.

Sec. 114. Authorization for identification and criminal background check.

Sec. 115. Definitions.

Sec. 116. Technical and conforming amendments to other acts.

Sec. 117. Audit of State insurance regulators.

Subtitle D—Anti-Terrorism

Sec. 121. Preventing international terrorism.

TITLE II—SECURITIES INDUSTRY COORDINATION

Subtitle A—Disciplinary Information

Sec. 201. Investment Advisers Act of 1940.

Sec. 202. Securities Exchange Act of 1934.

Subtitle B—Preventing Migration of Rogue Financial Professionals to the

Securities Industry

Sec. 211. Securities Exchange Act of 1934.

Sec. 212. Investment Advisers Act of 1940.
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1 SEC. 2. PURPOSES.

2 The purposes of this Act are—

3 (1) to safeguard the public from fraud in the fi4 nancial services industry;

5 (2) to streamline the antifraud coordination ef6 forts of Federal and State regulators and prevent

7 failure to communicate essential information;

8 (3) to reduce duplicative information requests

9 and other inefficiencies of financial services regula10 tion;

11 (4) to assist financial regulators in detecting

12 patterns of fraud, particularly patterns that only be13 come apparent when viewed across the full spectrum

14 of the financial services industry; and

15 (5) to take advantage of Internet technology

16 and other advanced data-sharing technology to mod17 ernize the fight against fraud in all of its evolving

18 manifestations and permutations.

19 TITLE I—ANTIFRAUD NETWORK

20 Subtitle A—Direction to Financial

21 Regulators

22 SEC. 100. CREATION AND OPERATION OF THE NETWORK.

23 (a) SHARING OF PUBLIC INFORMATION.—The finan24 cial regulators shall, to the extent practicable and appro25 priate and in consultation with other relevant and appro26 priate agencies and parties—
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1 (1) develop procedures to provide for a network

2 for the sharing of antifraud information; and

3 (2) coordinate to further improve upon the anti4 fraud efforts of the participants in the network as

5 such participants deem appropriate over time.

6 (b) MINIMUM REQUIREMENTS.—The procedures de7 scribed in subsection (a) shall—

8 (1) provide for the sharing of public final dis9 ciplinary and formal enforcement actions taken by

10 the financial regulators that are accessible electroni11 cally relating to the conduct of persons engaged in

12 the business of conducting financial activities that is

13 fraudulent, dishonest, or involves a breach of trust

14 or relates to the failure to register with the appro15 priate financial regulator as required by law;

16 (2) include a plan for considering the sharing

17 among the participants of other relevant and useful

18 antifraud information relating to companies and

19 other persons engaged in conducting financial activi20 ties, to the extent practicable and appropriate when

21 adequate privacy, confidentiality, and security safe22 guards governing access to, and the use of, such in23 formation have been developed that—

24 (A) is accessible by the public; or
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1 (B) consists of information, that does not

2 include personally identifiable information on

3 consumers, on—

4 (i) licenses and applications, financial

5 affiliations and name-relationships, aggre6 gate trend data, appraisals, or reports filed

7 by a regulated entity with a participant; or

8 (ii) similar information generated by

9 or for a participant if—

10 (I) such information is being

11 shared for the purpose of verifying an

12 application or other report filed by a

13 regulated entity; and

14 (II) the participant determines

15 such information is factual and sub16 stantiated; and

17 (3) provide that, if a financial regulator takes

18 an adverse action against a person engaged in the

19 business of conducting financial activities on the

20 basis of information described in paragraph (1) or

21 (2) that was received from another participant

22 through the network, the regulator shall—

23 (A) notify the person of the identity of the

24 participant from whom such information was

25 received;
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1 (B) provide the person with a specific and

2 detailed description of the information that was

3 received from the other participant through the

4 network and would be relied on in taking the

5 adverse action; and

6 (C) notify the person of the right to a rea7 sonable opportunity to respond to such informa8 tion.

9 (c) PROVISIONS RELATING TO REQUIREMENTS.—

10 (1) TIME OF NOTICE.—The notice to any per11 son, and the opportunity to respond, under sub12 section (b)(3) shall be provided to the person a rea13 sonable period of time before any final action

14 against the person which is based on information re15 ferred to in such paragraph is completed, unless the

16 financial regulator determines that such advance no17 tice and opportunity to respond is impracticable or

18 inappropriate, in which case the notice and oppor19 tunity to respond shall be provided at the time of

20 such final action.

21 (2) VERIFICATION OR SUBSTANTIATION OF IN22 FORMATION.—With respect to subsection (b)(3), a

23 delay in the consideration of a license, application,

24 report, or other request for the purpose of verifying

25 or substantiating information relating to such li-
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1 cense, application, report, or other request shall not

2 be treated as an adverse action if the verification or

3 substantiation of such information is completed

4 within a reasonable time.

5 (d) IMPLEMENTATION.—

6 (1) SUBMISSION OF PLAN.—Before the end of

7 the 6-month period beginning on the date of the en8 actment of this Act, the Federal financial regulators

9 shall submit to Congress a plan detailing how the fi10 nancial regulators (and any association representing

11 financial regulators) expect to meet the requirements

12 of subsections (a) and (b).

13 (2) DEADLINE FOR IMPLEMENTATION.—Before

14 the end of the 2-year period beginning on the date

15 of the enactment of this Act, the financial regulators

16 shall establish the network described in subsections

17 (a) and (b).

18 (e) FINANCIAL REGULATORS DEFINED.—For the

19 purposes of this section, the term ‘‘financial regulators’’

20 means the financial regulators described in subparagraphs

21 (A) through (Q) of section 115(3).

22 (f) DETERMINATION OF IMPLEMENTATION OF SUB23 TITLE B.—

24 (1) IN GENERAL.—The provisions of subtitle B

25 shall take effect only if the Secretary of the Treas-
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1 ury, or a designee of the Secretary, before the end

2 of the 30-day period beginning at the end of the pe3 riod referred to in—

4 (A) subsection (d)(1), does not determine

5 that the Federal financial regulators have sub6 mitted a plan which substantially meets the re7 quirements of such subsection; or

8 (B) subsection (d)(2), does not determine

9 that the financial regulators have established a

10 network that substantially complies with the re11 quirements of subsections (a) and (b).

12 (2) SCOPE OF APPLICATION.—This subtitle

13 shall cease to apply as of the date subtitle B takes

14 effect.

15 (g) USE OF CENTRALIZED DATABASES.—

16 (1) IN GENERAL.—A financial regulator shall

17 be deemed to have met the requirements of sub18 section (b)(1) if—

19 (A) the participants have access to a cen20 tralized database that contains information on

21 public final disciplinary or formal enforcement

22 actions similar to that described in such sub23 section; or
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1 (B) the financial regulator makes the in2 formation described in such subsection available

3 to the public over the Internet.

4 (2) STATE SUPERVISORS.—It is the sense of the

5 Congress that the National Association of Insurance

6 Commissioners, the Conference of State Bank Su7 pervisors, the American Council of State Savings

8 Supervisors, the National Association of State Credit

9 Union Supervisors, and the North American Securi10 ties Administrators Association should develop model

11 guidelines for regulators in their respective regulated

12 financial industries, where appropriate, to promote

13 uniform standards for sharing information with the

14 network under this section.

15 (h) FINANCIAL REGULATOR CONTROL OF ACCESS.—

16 (1) IN GENERAL.—Except as provided in para17 graph (4), each participant that allows access to its

18 databases or information by other participants

19 through the network may establish parameters for

20 controlling or limiting such access, including the reg21 ulation of—

22 (A) the type or category of information

23 that may be accessed by other participants and

24 the extent to which any such type or category

25 of information may be accessed;
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1 (B) the participants that may have access

2 to the database or any specific type or category

3 of information in the database (whether for rea4 sons of cost reimbursement, data security, effi5 ciency, or otherwise); and

6 (C) the disclosure by any other participant

7 of any type or category of information that may

8 be accessed by the participant.

9 (2) PROCEDURES.—A participant may establish

10 the parameters described in paragraph (1) by regu11 lation, order, or guideline or on a case-by-case basis.

12 (3) DISCLAIMER.—

13 (A) IN GENERAL.—Each participant shall

14 ensure that any transfer of information through

15 the network under this section, other than in16 formation described in subsection (b)(1), from

17 such participant to another participant is sub18 ject to a disclaimer that the information

19 accessed may be unsubstantiated and may not

20 be relied on as the basis for denying any appli21 cation or license.

22 (B) REGULATORY FLEXIBILITY.—Each fi23 nancial regulator may develop guidelines, as the

24 regulator determines to be appropriate, gov25 erning the location, wording, and frequency of
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1 disclaimers under this paragraph and the man2 ner in which any such disclaimer shall be made.

3 (4) FINAL DISCIPLINARY AND FORMAL EN4 FORCEMENT ACTIONS NOT SUBJECT TO LIMITA5 TION.—This subsection, and standards or proce6 dures adopted by any participant under this sub7 section, shall not apply with respect to information

8 described in subsection (b)(1).

9 (5) NO EFFECT ON PUBLIC OR COMPANY AC10 CESS.—No provision of this section shall replace, su11 persede, or otherwise affect access to any databases

12 maintained by any Federal or State regulator, or

13 any entity representing any such regulator, which

14 are accessible by the public or persons engaged in

15 the business of conducting financial activities.

16 (i) ELIGIBILITY REQUIREMENTS FOR STATE SECURI17 TIES ADMINISTRATORS.—

18 (1) IN GENERAL.—No State securities adminis19 trator shall be eligible to be a participant and access

20 the network unless—

21 (A) such State securities administrator

22 participates in a centralized database for

23 broker-dealers, broker-dealer agents, investment

24 advisers, and investment advisor representa25 tives, registered or required to be registered, as
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1 designated by the North American Securities

2 Administrators Association; and

3 (B) such State securities administrator re4 quires the broker-dealer, broker-dealer agent,

5 investment adviser, or investment adviser rep6 resentative, currently registered or required to

7 be registered, to file any application, amend8 ment to an application, or a renewal of an ap9 plication through the centralized registration

10 database.

11 (2) TIME DELAY FOR PARTICIPATION IN DATA12 BASES.—The provisions of paragraph (1) shall not

13 become effective until 3 years after the date of en14 actment of this Act.

15 (j) ELIGIBILITY REQUIREMENTS FOR STATE INSUR16 ANCE COMMISSIONERS.—

17 (1) PARTICIPATION IN DATABASES.—No State

18 insurance commissioner shall be eligible to access

19 the network unless such commissioner participates

20 with other State insurance commissioners—

21 (A) in a centralized database addressing

22 disciplinary or enforcement actions taken

23 against persons engaged in the business of in24 surance, such as the Regulatory Information

25 Retrieval System maintained by the National
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1 Association of Insurance Commissioners or any

2 network or database designated by such Asso3 ciation as a successor to such System; and

4 (B) in centralized databases addressing,

5 with respect to persons engaged in the business

6 of insurance—

7 (i) corporate and other business affili8 ations or relationships, such as the Pro9 ducer Database maintained by the Na10 tional Association of Insurance Commis11 sioners or any network or database des12 ignated by such Association as a successor

13 to such Database; and

14 (ii) consumer complaints, such as the

15 Complaints Database maintained by the

16 National Association of Insurance Commis17 sioners or any network or database des18 ignated by such Association as a successor

19 to such Database.

20 (2) TIME DELAY FOR PARTICIPATION IN DATA21 BASES.—The provisions of subparagraph (1)(B) of

22 this section shall not become effective until 3 years

23 after the date of enactment of this Act.

24 (3) ACCREDITATION.—No State insurance com25 missioner shall be eligible to access the network un-
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1 less the State insurance department which such

2 commissioner represents meets 1 of the following ac3 creditation requirements at the time of access to the

4 network:

5 (A) Is accredited by the National Associa6 tion of Insurance Commissioners.

7 (B) Has an application for accredited sta8 tus pending with the National Association of

9 Insurance Commissioners.

10 (k) STANDARDS.—Each financial regulator shall con11 sider developing guidelines on—

12 (1) how to denote which types of information

13 are to receive different levels of confidentiality pro14 tection; and

15 (2) how entities or associations that act as

16 agents for financial regulators should denote such

17 agency status when acting in that capacity.

18 (l) OTHER SHARING ARRANGEMENTS NOT AF19 FECTED.—No provision of this section shall be construed

20 as limiting or otherwise affecting the authority of a finan21 cial regulator to provide any person, including another

22 participant, access to any information in accordance with

23 any provision of law other than this Act.
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1 Subtitle B—Potential Establish2 ment of Antifraud Sub3 committee

4 SEC. 101. ESTABLISHMENT.

5 (a) IN GENERAL.—Unless the determinations de6 scribed in section 100(f) are made, after the applicable

7 date described in such section there shall be established

8 within the President’s Working Group on Financial Mar9 kets (as established by Executive Order No. 12631) a sub10 committee to be known as the ‘‘Antifraud Subcommittee’’

11 (hereafter in this title referred to as the ‘‘Subcommittee’’)

12 which shall consist of the following members:

13 (1) The Secretary of the Treasury, or a des14 ignee of the Secretary.

15 (2) The Chairman of the Securities and Ex16 change Commission or a designee of the Chairman.

17 (3) A State insurance commissioner designated

18 by the National Association of Insurance Commis19 sioners, or a designee of such commissioner.

20 (4) The Chairman of the Commodity Futures

21 Trading Commission or a designee of such Chair22 man.

23 (5) A designee of the Chairman of the Federal

24 Financial Institutions Examination Council.
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1 (b) FINANCIAL LIAISONS.—The following shall serve

2 as liaisons between the Subcommittee and the agencies

3 represented by each such liaison:

4 (1) A representative of each Federal banking

5 agency appointed by the head of each such agency.

6 (2) A representative of the National Credit

7 Union Administration appointed by the National

8 Credit Union Administration Board.

9 (3) A representative of the Farm Credit Admin10 istration, appointed by the Farm Credit Administra11 tion Board.

12 (4) A representative of the Federal Housing Fi13 nance Board, appointed by such Board.

14 (5) A representative of the Office of Federal

15 Housing Enterprise Oversight of the Department of

16 Housing and Urban Development appointed by the

17 Director of such Office.

18 (6) A representative of the Appraisal Sub19 committee of the Financial Institutions Examination

20 Council designated by the Chairperson of the Ap21 praisal Subcommittee.

22 (7) A representative of State bank supervisors

23 designated by the Conference of State Bank Super24 visors.
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1 (8) A representative of State savings associa2 tion supervisors designated by the American Council

3 of State Savings Supervisors.

4 (9) A representative of State credit union su5 pervisors designated by the National Association of

6 State Credit Union Supervisors.

7 (10) A representative of State securities admin8 istrators designated by the North American Securi9 ties Administrators Association.

10 (11) A representative of the National Associa11 tion of Securities Dealers appointed by the National

12 Association of Securities Dealers.

13 (12) A representative of the National Futures

14 Association appointed by the National Futures Asso15 ciation.

16 (13) Any other financial liaison as the Sub17 committee may provide to represent any other finan18 cial regulator or foreign financial regulator, includ19 ing self-regulatory agencies or organizations that

20 maintain databases on persons engaged in the busi21 ness of conducting financial activities, designated in

22 the manner provided by the Subcommittee.

23 (c) OTHER LIAISONS.—

24 (1) LAW ENFORCEMENT LIAISONS.—The fol25 lowing shall serve as liaisons between the Sub-
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1 committee and the agencies represented by each

2 such liaison:

3 (A) A representative of the Department of

4 Justice appointed by the Attorney General.

5 (B) A representative of the Federal Bu6 reau of Investigation appointed by the Director

7 of such Bureau.

8 (C) A representative of the United States

9 Secret Service appointed by the Director of

10 such Service.

11 (D) A representative of the Financial

12 Crimes Enforcement Network (as established by

13 the Secretary of the Treasury) appointed by the

14 Secretary of the Treasury.

15 (2) SUBCOMMITTEE APPOINTED LIAISONS.—

16 The Subcommittee may provide for any other liaison

17 to represent any other regulator, including self-regu18 latory agencies or organizations that maintain data19 bases on persons engaged in the business of con20 ducting financial activities, designated in the manner

21 provided by the Subcommittee.

22 (d) VACANCY.—If, for any reason, the position of any

23 member of or liaison to the Subcommittee is not filled

24 within a reasonable period of time after being created or

25 becoming vacant, the President shall appoint an individual
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1 to fill the position after consulting the agency or entity

2 to be represented by such member or liaison, and to the

3 extent possible, shall appoint such individual from a list

4 of possible representatives submitted by such agency or

5 entity.

6 (e) REORGANIZATION AUTHORITY.—

7 (1) IN GENERAL.—If the President disbands or

8 otherwise significantly modifies the Working Group

9 referred to in subsection (a), the President shall pro10 vide for the continuation of the Subcommittee’s co11 ordination functions.

12 (2) MEMBER AND LIAISON WITHDRAWAL.—If

13 the President materially alters the structure or du14 ties of the Subcommittee, any member of or liaison

15 to the Subcommittee may withdraw from the Sub16 committee.

17 SEC. 102. PURPOSES OF THE SUBCOMMITTEE.

18 (a) IN GENERAL.—The purposes of the Sub19 committee are as follows:

20 (1) Coordinate access by the participants to

21 antifraud databases of various regulators, by facili22 tating the establishment, maintenance, and use of a

23 network of existing antifraud information main24 tained by such regulators with respect to persons en-
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1 gaged in the business of conducting financial activi2 ties.

3 (2) Coordinate access by each participant to

4 such network in a manner that allows the partici5 pant to review, at a minimal cost, existing informa6 tion in the databases of other regulators, as a part

7 of licensure, change of control, or investigation, con8 cerning any person engaged in the business of con9 ducting financial activities.

10 (3) Coordinate information sharing, where ap11 propriate, among State, Federal, and foreign finan12 cial regulators, and law enforcement agencies, where

13 sufficient privacy and confidentiality safeguards

14 exist.

15 (4) Consider coordinating development by par16 ticipants of a networked name-relationship index for

17 persons engaged in the business of conducting finan18 cial activities using information from the databases

19 of regulators, to the extent such information is avail20 able.

21 (5) Advise participants on coordinating their

22 antifraud databases with the network.

23 (6) Coordinate development of guidelines by

24 participants for ensuring appropriate privacy, con25 fidentiality, and security of shared information, in-
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1 cluding tracking systems or testing audits, as appro2 priate.

3 (b) CRITERIA FOR NETWORK WITH RESPECT TO

4 ANY PERSON ENGAGED IN THE BUSINESS OF CON5 DUCTING FINANCIAL ACTIVITIES.—

6 (1) FINAL DISCIPLINARY AND FORMAL EN7 FORCEMENT ACTIONS.—Each financial regulator

8 that is represented by a member of the Sub9 committee under section 101(a) or by a financial li10 aison to the Subcommittee under section 101(b)

11 shall allow any participant access, through the net12 work, to any public final disciplinary or formal en13 forcement action by such regulator which is acces14 sible electronically relating to the conduct of persons

15 engaged in the business of conducting financial ac16 tivities that is fraudulent or dishonest, involves a

17 breach of trust, or relates to the failure to register

18 with the appropriate financial regulator as required

19 by law.

20 (2) SENSE OF THE CONGRESS ON OTHER IN21 FORMATION.—It is the sense of the Congress that

22 the financial regulators should consider sharing

23 through the network other relevant and useful anti24 fraud information relating to companies and other

25 persons engaged in conducting financial activities, to
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1 the extent practicable and appropriate when ade2 quate privacy, confidentiality, and security safe3 guards governing access to and the use of such in4 formation have been developed that—

5 (A) is accessible by the public; or

6 (B) consists of information, that does not

7 include personally identifiable information on

8 consumers, on—

9 (i) licenses and applications, financial

10 affiliations and name-relationships, aggre11 gate trend data, or reports filed by a regu12 lated entity with the participant; or

13 (ii) similar information generated by

14 or for a participant if—

15 (I) such information is being

16 shared for the purpose of verifying an

17 application or other report filed by a

18 regulated entity; and

19 (II) the participant determines

20 such information is factual and sub21 stantiated.

22 (3) NOTICE AND RESPONSE.—If a financial reg23 ulator takes an adverse action against a person en24 gaged in the business of conducting financial activi25 ties on the basis of information described in para-
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1 graph (1) or (2) that was received from another par2 ticipant through the network, the regulator shall—

3 (A) notify the person of the identity of the

4 participant from whom such information was

5 received;

6 (B) provide the person with a specific and

7 detailed description of the information that was

8 received from the other participant through the

9 network and would be relied on in taking the

10 adverse action; and

11 (C) notify the person of the right to a rea12 sonable opportunity to respond to such informa13 tion.

14 (4) PROVISIONS RELATING TO REQUIRE15 MENTS.—

16 (A) TIME OF NOTICE.—Any notice to any

17 person, and an opportunity to respond, under

18 paragraph (3) shall be provided to the person a

19 reasonable period of time before any final ac20 tion against the person which is based on infor21 mation referred to in such paragraph is com22 pleted, unless the financial regulator determines

23 that such advance notice and opportunity to re24 spond is impracticable or inappropriate, in

25 which case the notice and opportunity to re-
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1 spond shall be provided at the time of such

2 final action.

3 (B) VERIFICATION OR SUBSTANTIATION OF

4 INFORMATION.—With respect to paragraph (3),

5 a delay in the consideration of a license, appli6 cation, report, or other request for the purpose

7 of verifying or substantiating information relat8 ing to such license, application, report, or other

9 request shall not be treated as an adverse ac10 tion if the verification or substantiation of such

11 information is completed within a reasonable

12 time.

13 (5) USE OF CENTRALIZED DATABASES.—

14 (A) IN GENERAL.—A financial regulator

15 shall be deemed to have met the requirements

16 of paragraph (1) if the Subcommittee deter17 mines that the participants have access to a

18 centralized database that contains information

19 on public final disciplinary or formal enforce20 ment actions similar to that described in para21 graph (1) or if the financial regulator makes

22 the information described in paragraph (1)

23 available to the public over the Internet.

24 (B) FACTORS FOR DETERMINATION.—The

25 Subcommittee shall make the determination
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1 under subparagraph (A) on an ongoing basis,

2 considering both short-term costs and techno3 logical limitations, as well as the need for long4 term comprehensive coverage, and other appro5 priate factors.

6 (C) STATE SUPERVISORS.—It is the sense

7 of the Congress that the National Association

8 of Insurance Commissioners, the Conference of

9 State Bank Supervisors, the American Council

10 of State Savings Supervisors, the National As11 sociation of State Credit Union Supervisors,

12 and the North American Securities Administra13 tors Association should develop model guidelines

14 for regulators in their respective regulated fi15 nancial industries, where appropriate, to pro16 mote uniform standards for sharing information

17 with the network under this section.

18 (c) FINANCIAL REGULATOR CONTROL OF ACCESS.—

19 (1) IN GENERAL.—Except as provided in para20 graph (4), each participant that allows access to its

21 databases or information by other participants

22 through the network may establish parameters for

23 controlling or limiting such access, including the reg24 ulation of—
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1 (A) the type or category of information

2 that may be accessed by other participants and

3 the extent to which any such type or category

4 of information may be accessed;

5 (B) the participants that may have access

6 to the database or any specific type or category

7 of information in the database (whether for rea8 sons of cost reimbursement, data security, effi9 ciency, or otherwise); and

10 (C) the disclosure by any other participant

11 of any type or category of information that may

12 be accessed by the participant.

13 (2) PROCEDURES.—A participant may establish

14 the parameters described in paragraph (1) by regu15 lation, order, or guideline or on a case-by-case basis.

16 (3) DISCLAIMER.—

17 (A) IN GENERAL.—Each participant shall

18 ensure that any transfer of information through

19 the network under this section, other than in20 formation described in paragraph (1) of sub21 section (b), from such participant to another

22 participant is subject to a disclaimer that the

23 information accessed may be unsubstantiated

24 and may not be relied on as the basis for deny25 ing any application or license.
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1 (B) SUBCOMMITTEE FLEXIBILITY.—The

2 Subcommittee may prescribe such guidelines as

3 the Subcommittee determines to be appropriate

4 governing the location, wording, and frequency

5 of disclaimers under this paragraph and the

6 manner in which any such disclaimer shall be

7 made.

8 (4) FINAL DISCIPLINARY AND FORMAL EN9 FORCEMENT ACTIONS NOT SUBJECT TO LIMITA10 TION.—This subsection, and standards or proce11 dures adopted by any participant under this sub12 section, shall not apply with respect to information

13 described in paragraph (1) of subsection (b).

14 (5) NO EFFECT ON PUBLIC OR COMPANY AC15 CESS.—No provision of this section shall replace, su16 persede, or otherwise affect access to any databases

17 maintained by any Federal or State regulator, or

18 any entity representing any such regulator, which

19 are accessible by the public or persons engaged in

20 the business of conducting financial activities.

21 (d) ELIGIBILITY REQUIREMENTS FOR STATE SECU22 RITIES ADMINISTRATORS.—

23 (1) IN GENERAL.—No State securities adminis24 trator shall be eligible to be a participant and access

25 the network unless—
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1 (A) such State securities administrator

2 participates in a centralized database for

3 broker-dealers, broker-dealer agents, investment

4 advisers, and investment advisor representa5 tives, registered or required to be registered, as

6 designated by the North American Securities

7 Administrators Association; and

8 (B) such State securities administrator re9 quires the broker-dealer, broker-dealer agent,

10 investment adviser, or investment adviser rep11 resentative, currently registered or required to

12 be registered, to file any application, amend13 ment to an application, or a renewal of an ap14 plication through the centralized registration

15 database.

16 (2) TIME DELAY FOR PARTICIPATION IN DATA17 BASES.—The provisions of paragraph (1) shall not

18 become effective until 3 years after the date of en19 actment of this Act.

20 (e) ELIGIBILITY REQUIREMENTS FOR STATE INSUR21 ANCE COMMISSIONERS.—

22 (1) PARTICIPATION IN DATABASES.—No State

23 insurance commissioner shall be eligible to access

24 the network unless such commissioner participates

25 with other State insurance commissioners—
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1 (A) in a centralized database addressing

2 disciplinary or enforcement actions taken

3 against persons engaged in the business of in4 surance, such as the Regulatory Information

5 Retrieval System maintained by the National

6 Association of Insurance Commissioners or any

7 network or database designated by such Asso8 ciation as a successor to such System; and

9 (B) in centralized databases addressing,

10 with respect to persons engaged in the business

11 of insurance—

12 (i) corporate and other business affili13 ations or relationships, such as the Pro14 ducer Database maintained by the Na15 tional Association of Insurance Commis16 sioners or any network or database des17 ignated by such Association as a successor

18 to such Database; and

19 (ii) consumer complaints, such as the

20 Complaints Database maintained by the

21 National Association of Insurance Commis22 sioners or any network or database des23 ignated by such Association as a successor

24 to such Database.
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1 (2) TIME DELAY FOR PARTICIPATION IN DATA2 BASES.—The provisions of subparagraph (1)(B) of

3 this section shall not become effective until 3 years

4 after the date of enactment of this Act.

5 (3) ACCREDITATION.—No State insurance com6 missioner shall be eligible to access the network un7 less the State insurance department which such

8 commissioner represents meets 1 of the following ac9 creditation requirements at the time of access to the

10 network:

11 (A) Is accredited by the National Associa12 tion of Insurance Commissioners.

13 (B) Has an application for accredited sta14 tus pending with the National Association of

15 Insurance Commissioners.

16 (C) Has a determination by the Sub17 committee in effect that such State insurance

18 department meets or exceeds the standards es19 tablished by the National Association of Insur20 ance Commissioners for accreditation.

21 (f) SUBCOMMITTEE STANDARDS.—The Sub22 committee shall consider developing guidelines for partici23 pants on—
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1 (1) how to denote which types of information

2 are to receive different levels of confidentiality pro3 tection; and

4 (2) how entities or associations that act as

5 agents for financial regulators should denote such

6 agency status when acting in that capacity.

7 (g) REPORTING AND FEASIBILITY REQUIREMENTS

8 AND REVIEW OF OPTIMAL NETWORKING METHODS.—

9 (1) REPORT.—Before the end of the 180-day

10 period beginning on the date this subtitle takes ef11 fect in accordance with section 101(a), and again be12 fore the end of the 2-year period beginning on such

13 date, the Subcommittee shall submit a report to the

14 Congress regarding the methods the regulators plan

15 to use to network information, and a description of

16 any impediments to (or recommended additional leg17 islation for) facilitating the appropriate sharing of

18 such information.

19 (2) TIMEFRAME FOR NETWORKING.—

20 (A) IN GENERAL.—The networking of in21 formation required under subsection (b)(1)

22 shall be established before the end of the 2-year

23 period beginning on the date this subtitle takes

24 effect, unless the Subcommittee determines, in

25 conjunction with the liaisons, that such a net-
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1 work cannot be established within such time pe2 riod in a practicable and cost-effective manner.

3 (B) REPORTS ON EFFORTS IF TIMEFRAME

4 IS NOT MET.—If the Subcommittee makes such

5 a determination, the Subcommittee shall report

6 annually to the Congress on its efforts to co7 ordinate the sharing of appropriate information

8 among the regulators until the networking re9 quirements are fulfilled.

10 (h) OTHER SHARING ARRANGEMENTS NOT AF11 FECTED.—No provision of this section shall be construed

12 as limiting or otherwise affecting the authority of a finan13 cial regulator or other member or liaison of the Sub14 committee to provide any person, including another partic15 ipant, access to any information in accordance with any

16 provision of law other than this Act.

17 (i) NO NEW DATABASES OR EXPENDITURES MAN18 DATED.—In implementing this Act, the Subcommittee

19 shall not have any authority to require a member or liaison

20 to create a new database or otherwise incur significant

21 costs in modifying existing databases for the networking

22 of information.

23 SEC. 103. CHAIRPERSON; TERM OF CHAIRPERSON; MEET24 INGS; OFFICERS AND STAFF.

25 (a) CHAIRPERSON.—
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1 (1) SELECTION.—The members of the Sub2 committee shall select the Chairperson from among

3 the members of the Subcommittee.

4 (2) TERM.—The term of the Chairperson shall

5 be 2 years.

6 (b) MEETINGS.—The Subcommittee shall meet at the

7 call of the Chairperson or a majority of the members when

8 there is business to be conducted.

9 (c) QUORUM.—A majority of members of the Sub10 committee shall constitute a quorum.

11 (d) MAJORITY VOTE.—Decisions of the Sub12 committee shall be made by the vote of a majority of the

13 members of the Subcommittee.

14 (e) OFFICERS AND STAFF.—The Chairperson of the

15 Subcommittee may appoint such officers and staff as may

16 be necessary to carry out the purposes of the Sub17 committee.

18 SEC. 104. NONAGENCY STATUS.

19 The Subcommittee shall not be considered an advi20 sory committee for purposes of the Federal Advisory Com21 mittee Act or as an agency for purposes of subchapter II

22 of chapter 5 of title 5, United States Code.
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1 SEC. 105. POWERS OF THE SUBCOMMITTEE.

2 (a) IN GENERAL.—The Subcommittee shall have

3 such powers as are necessary to carry out the purposes

4 of the Subcommittee under this title.

5 (b) INFORMATION TO FACILITATE COORDINATION.—

6 Each agency and entity represented by a member or liai7 son shall, to the extent permitted by law, provide the Sub8 committee with a description of the types of databases

9 maintained by the agency or entity to assist the Sub10 committee in carrying out the purposes described in sec11 tion 102(a).

12 (c) SERVICE OF MEMBERS AND LIAISONS.—Members

13 of and liaisons to the Subcommittee shall serve without

14 additional compensation for their work on the Sub15 committee.

16 (d) ADMINISTRATIVE AND TECHNICAL SUPPORT.—

17 The Subcommittee may request that any agency or entity

18 represented by a member or liaison provide the Sub19 committee with any administrative, technical, or other

20 support service that the Subcommittee determines is nec21 essary or appropriate for it to carry out the purposes de22 scribed in section 102(a).

23 SEC. 106. AGREEMENT ON COST STRUCTURE.

24 (a) IN GENERAL.—The Subcommittee shall deter25 mine, after consultation with the affected participants or

26 their representatives, the means for providing for any
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1 costs the Subcommittee may incur in carrying out the pur2 poses of this subtitle.

3 (b) CONSULTATION AND AGREEMENT ON FEES AND

4 CONTRIBUTIONS.—Notwithstanding any other provision

5 of this subtitle, the Subcommittee may not impose any fee

6 or assessment on, or apportion any contribution against,

7 any member or liaison under this section unless—

8 (1) the Subcommittee consults with such mem9 ber or liaison; and

10 (2) the member or liaison consents to the

11 amounts, or to a schedule, of such fees, assessments,

12 or contributions.

13 (c) REIMBURSEMENT OF PARTICIPANT COSTS.—Be14 fore allowing access by the Subcommittee or a participant

15 to any information described in section 102, other than

16 access described in subsection (b)(1) of such section, a

17 member or liaison may request the reimbursement of rea18 sonable costs for providing such access.

19 Subtitle C—Regulatory Provisions

20 SEC. 111. AGENCY SUPERVISORY PRIVILEGE.

21 (a) DEFINITIONS.—For purposes of this section, the

22 following definitions shall apply:

23 (1) SUPERVISORY PROCESS.—The term ‘‘super24 visory process’’ means any activity engaged in by a

25 financial regulator to carry out the official respon-
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1 sibilities of the financial regulator with regard to the

2 regulation or supervision of persons engaged in the

3 business of conducting financial activities, including

4 examinations, inspections, visitations, investigations,

5 consumer complaints, or any other regulatory or su6 pervisory activities.

7 (2) CONFIDENTIAL SUPERVISORY INFORMA8 TION.—Subject to paragraph (3), the term ‘‘con9 fidential supervisory information’’ means any of the

10 following information which is treated as, or consid11 ered to be, confidential information by a financial

12 regulator, regardless of the form or format in which

13 the information is created, conveyed, or maintained:

14 (A) Any report of examination, inspection,

15 visitation, or investigation, and information pre16 pared or collected by the financial regulator in

17 connection with the supervisory process,

18 including—

19 (i) any file, work paper, or similar in20 formation;

21 (ii) any correspondence, communica22 tion, or information exchanged, in connec23 tion with the supervisory process, between

24 a financial regulator and a person engaged
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1 in the business of conducting financial ac2 tivities; and

3 (iii) any information, including any

4 report, created by or on behalf of a person

5 engaged in the business of conducting fi6 nancial activities that is required by, or is

7 prepared at the request of, a financial reg8 ulator in connection with the supervisory

9 process.

10 (B) Any record to the extent it contains in11 formation derived from any report, correspond12 ence, communication or other information de13 scribed in subparagraph (A).

14 (C) Any consumer complaints filed with

15 the financial regulator by a consumer with re16 spect to a person engaged in the business of

17 conducting financial activities that have been

18 identified by the financial regulator as requiring

19 confidential treatment to protect the integrity

20 of an investigation or the safety of an indi21 vidual.

22 (3) EXCLUSIONS.—The term ‘‘confidential su23 pervisory information’’ shall not include—

24 (A) any book, record, or other information,

25 in the possession of, or maintained on behalf of,
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1 the person engaged in the business of con2 ducting financial activities that—

3 (i) is not a report required by, or pre4 pared at the request of, a financial regu5 lator; and

6 (ii) is not, and is not derived from,

7 confidential supervisory information that

8 was created or prepared by a financial reg9 ulator; or

10 (B) any information required to be made

11 publicly available by—

12 (i) any applicable Federal law or regu13 lation; or

14 (ii) in the case of confidential super15 visory information created by a State fi16 nancial regulator or requested from a per17 son engaged in the business of conducting

18 financial activities by a State financial reg19 ulator, any applicable State law or regula20 tion that specifically refers to such type of

21 information.

22 (b) SHARING OF REPORTS.—

23 (1) IN GENERAL.—No provision of this section

24 shall be construed as preventing—
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1 (A) a person engaged in the business of

2 conducting financial activities from providing a

3 report that is required by, or prepared at the

4 request of, a financial regulator (the originating

5 financial regulator) to another financial regu6 lator that has the authority to obtain the infor7 mation from the person under any other provi8 sion of law;

9 (B) a financial regulator that obtains a re10 port described in subparagraph (A) from a per11 son engaged in the business of conducting fi12 nancial activities from using or disclosing such

13 report to the extent otherwise permitted by law;

14 or

15 (C) a person engaged in the business of

16 conducting financial activities from sharing con17 fidential supervisory information with the per18 son’s attorneys, accountants, and auditors, sole19 ly for the purpose of providing legal, account20 ing, or auditing services, respectively, for such

21 person, except that—

22 (i) such sharing shall not be consid23 ered a disclosure for any other purpose;
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1 (ii) the attorneys, accountants, or

2 auditors may not further disclose such in3 formation; and

4 (iii) such sharing shall be conducted

5 in accordance with any other applicable

6 governing laws and regulations.

7 (2) PRIVILEGE PRESERVED.—If a person pro8 vides a report referred to in paragraph (1) to a fi9 nancial regulator other than the originating financial

10 regulator, such action shall not affect the ability of

11 the originating financial regulator to assert any

12 privilege that such financial regulator may claim

13 with respect to the report against any person that

14 is not a financial regulator.

15 (c) FINANCIAL REGULATOR SUPERVISORY PRIVI16 LEGE.—

17 (1) PRIVILEGE ESTABLISHED.—

18 (A) IN GENERAL.—All confidential super19 visory information shall be privileged from dis20 closure to any person except as provided in this

21 section.

22 (B) PROHIBITION ON UNAUTHORIZED DIS23 CLOSURES.—No person in possession of con24 fidential supervisory information may disclose

25 such information, in whole or in part, without
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1 the prior authorization of the financial regu2 lator that created the information, or requested

3 the information from a person engaged in the

4 business of conducting financial activities, ex5 cept for a disclosure made in published statis6 tical material that does not disclose, either di7 rectly or when used in conjunction with publicly

8 available information, the affairs of any person

9 or other personally identifiable information.

10 (C) AGENCY WAIVER.—The financial regu11 lator that created the confidential supervisory

12 information, or requested the confidential su13 pervisory information from a person engaged in

14 the business of conducting financial activities,

15 may waive, in whole or in part, in the discretion

16 of the regulator, any privilege established under

17 this paragraph with respect to such informa18 tion.

19 (2) EXCEPTIONS.—

20 (A) ACCESS BY GOVERNMENTAL BODIES.—

21 (i) CONGRESS AND GENERAL AC22 COUNTING OFFICE.—No provision of para23 graph (1) shall be construed as preventing

24 access to confidential supervisory informa25 tion by duly authorized committees of the
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1 Congress or the Comptroller General of the

2 United States.

3 (ii) FINANCIAL REGULATOR OVER4 SIGHT.—No financial regulator which is

5 described in subparagraph (P), (Q), or (R)

6 of section 115(3) and is subject to the

7 oversight of a Federal financial regulator

8 may assert the privilege described in para9 graph (1) to prevent access to confidential

10 supervisory information by such Federal fi11 nancial regulator.

12 (B) PRIVILEGE NOT WAIVED.—If a finan13 cial regulator provides access to confidential su14 pervisory information to the Congress, the

15 Comptroller General, or another financial regu16 lator, such action shall not affect the ability of

17 the financial regulator to assert any privilege

18 associated with such information against any

19 other person.

20 (d) TREATMENT OF FOREIGN SUPERVISORY INFOR21 MATION.—In any proceeding before a Federal or State

22 court of the United States, in which a person seeks to

23 compel production or disclosure by a financial regulator

24 of information or documents prepared or collected by a

25 foreign financial regulator that would, had the information
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1 or document been prepared or collected by a financial reg2 ulator, be confidential supervisory information for pur3 poses of this section, the information or document shall

4 be privileged to the same extent that the information and

5 documents of financial regulators are privileged under this

6 title.

7 (e) OTHER PRIVILEGES NOT WAIVED BY DISCLO8 SURE TO FINANCIAL REGULATOR.—The submission by a

9 person engaged in the business of conducting financial ac10 tivities of any information to a financial regulator or a

11 foreign financial regulator in connection with the super12 visory process of such financial regulator or foreign finan13 cial regulator shall not waive, destroy, or otherwise affect

14 any privilege such person may claim with respect to such

15 information under Federal or State law as to a party other

16 than such financial regulator or foreign financial regu17 lator.

18 (f) DISCOVERY AND DISCLOSURE OF INFORMA19 TION.—

20 (1) INFORMATION AVAILABLE ONLY FROM FI21 NANCIAL REGULATOR.—

22 (A) IN GENERAL.—No person (other than

23 the financial regulator that created the informa24 tion or requested the information from a person

25 engaged in the business of conducting financial
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1 activities) may disclose, in whole or in part, any

2 confidential supervisory information to any per3 son who seeks such information through sub4 poena, discovery procedures, or otherwise.

5 (B) PROCEDURE FOR REQUESTS SUB6 MITTED TO FINANCIAL REGULATOR.—

7 (i) IN GENERAL.—Any request for

8 discovery or disclosure of confidential su9 pervisory information shall be made to the

10 financial regulator that created the infor11 mation, or requested the information from

12 a person engaged in the business of con13 ducting financial activities.

14 (ii) PROCEDURE.—Upon receiving a

15 request for confidential supervisory infor16 mation, the financial regulator shall deter17 mine within a reasonable time period

18 whether to disclose such information pur19 suant to procedures and criteria estab20 lished by the financial regulator.

21 (C) NOTIFICATION.—

22 (i) IN GENERAL.—Before any finan23 cial regulator releases confidential super24 visory information that was requested from

25 a person engaged in the business of con-
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1 ducting financial activities to a person

2 under subparagraph (B), notice and a rea3 sonable time for comment shall be provided

4 to the person from whom such information

5 was requested unless such information—

6 (I) is being provided to another

7 financial regulator, an agency or enti8 ty represented by a liaison to the Sub9 committee, or a Federal, State, or for10 eign government (or any agency or in11 strumentality of any such government

12 acting in any capacity);

13 (II) is being sought for use in a

14 criminal proceeding or investigation,

15 or a regulatory, supervisory, enforce16 ment, or disciplinary administrative

17 proceeding, civil action, or investiga18 tion; or

19 (III) was originally created, or

20 included in information created, by

21 the financial regulator.

22 (ii) PROCEDURES AND REQUIRE23 MENTS.—A financial regulator may pre24 scribe regulations, or issue orders, guide-
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1 lines, or procedures, governing the notice

2 and time period required by clause (i).

3 (2) FEDERAL COURT JURISDICTION OVER DIS4 PUTES.—

5 (A) DECLARATORY JUDGMENT.—If a party

6 seeks in any action or proceeding to compel dis7 closure of confidential supervisory information,

8 a financial regulator may in a civil action for a

9 declaratory judgment seek to prevent such dis10 closure.

11 (B) JUDICIAL REVIEW.—Judicial review of

12 the final action of a financial regulator with re13 gard to the disposition of a request for con14 fidential supervisory information shall be before

15 a district court of the United States of com16 petent jurisdiction, subject to chapter 7 of part

17 I of title 5, United States Code.

18 (g) AUTHORITY TO INTERVENE.—In the case of any

19 action or proceeding to compel compliance with a sub20 poena, order, discovery request, or other judicial or admin21 istrative process with respect to any confidential super22 visory information of a financial regulator concerning any

23 person engaged in the business of conducting financial ac24 tivities, the financial regulator may intervene in such ac-
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1 tion or proceeding, and such person may intervene with

2 such regulator, for the purpose of—

3 (1) enforcing the limitations established in

4 paragraph (1) of subsections (c) and (f);

5 (2) seeking the withdrawal of any compulsory

6 process with respect to such information; and

7 (3) registering appropriate objections with re8 spect to the action or proceeding to the extent the

9 action or proceeding relates to or involves such infor10 mation.

11 (h) RIGHT TO APPEAL.—Any court order that com12 pels production of confidential supervisory information

13 may be immediately appealed by the financial regulator

14 and the order compelling production shall be automatically

15 stayed, pending the outcome of such appeal.

16 (i) REGULATIONS.—

17 (1) AUTHORITY TO PRESCRIBE.—Each financial

18 regulator may prescribe such regulations as the reg19 ulator considers to be appropriate, after consultation

20 with the other financial regulators (to the extent the

21 prescribing financial regulator considers appropriate

22 and feasible), to carry out the purposes of this sec23 tion.

24 (2) AUTHORITY TO REQUIRE NOTICE.—Any

25 regulations prescribed by a financial regulator under
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1 paragraph (1) may require any person in possession

2 of confidential supervisory information to notify the

3 financial regulator whenever the person is served

4 with a subpoena, order, discovery request, or other

5 judicial or administrative process requiring the per6 sonal attendance of such person as a witness or re7 quiring the production of such information in any

8 proceeding.

9 (j) ABILITY TO PARTIALLY WAIVE PRIVILEGE

10 WHERE NO OTHER PRIVILEGE APPLIES.—A financial

11 regulator may, to the extent permitted by applicable law

12 governing the disclosure of information by the regulator,

13 authorize a waiver of the privilege established by this sec14 tion to allow access by a person to confidential supervisory

15 information created by such regulator (or requested by

16 such regulator from any person engaged in the business

17 of conducting financial activities), except that—

18 (1) the regulator may place appropriate limits

19 on the use and disclosure of the information shared,

20 and may continue to assert the privilege with respect

21 to any other person that seeks access to the infor22 mation; and

23 (2) such waiver shall not affect any other privi24 lege or confidentiality protection that any party may
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1 assert against any person other than such financial

2 regulator.

3 (k) SHARING OF CONFIDENTIAL SUPERVISORY IN4 FORMATION AMONG FEDERAL FUNCTIONAL REGU5 LATORS.—A Federal functional regulator (as defined in

6 section 509 of the Gramm-Leach-Bliley Act) shall freely

7 share, upon request, any confidential supervisory informa8 tion created by it with another Federal functional regu9 lator subject only to any existing legal restrictions on the

10 regulator’s authority to share or disclose information and

11 to the following paragraphs:

12 (1) REQUESTS DIRECTED TO REGULATOR.—A

13 Federal functional regulator may seek information

14 described in this subsection solely from the Federal

15 functional regulator that created the information

16 (hereafter in this subsection referred to as the ‘‘orig17 inating regulator’’), and not from any other person

18 (unless authorized by the originating regulator).

19 (2) REVIEW OF REQUESTS.—Notwithstanding

20 any other provision of law, in response to a request

21 for such information, the originating regulator may

22 decline to provide any portion of the information if

23 the originating regulator, in consultation with the

24 requesting regulator and after giving due consider-
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1 ation to the request, determines that withholding the

2 information is appropriate in the public interest.

3 (3) USE WITHIN AGENCY PERMITTED.—Any

4 confidential supervisory information received by a re5 questing regulator under this subsection may be

6 shared freely among personnel within the requesting

7 regulator.

8 (4) APPROVAL REQUIRED FOR OTHER USES.—

9 The requesting regulator shall obtain the approval of

10 the originating regulator before any information de11 scribed in this subsection is—

12 (A) made public;

13 (B) provided to any third person or agen14 cy; or

15 (C) cited or made a part of the record in

16 the course of any enforcement action.

17 (l) ACCESS TO INFORMATION OF REGULATED ENTI18 TY PRESERVED.—No provision of this section shall be

19 construed as preventing a Federal functional regulator (as

20 defined in section 509 of the Gramm-Leach-Bliley Act)

21 from obtaining from any person, other than a Federal

22 functional regulator, any book, record or information

23 (other than confidential supervisory information created

24 by a Federal functional regulator), including any book,

25 record or other information referred to in, or constituting
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1 the underlying data for, any confidential supervisory infor2 mation created by another Federal functional regulator.

3 (m) NO GRANT OF AUTHORITY.—No provision of

4 this section shall be construed as providing any financial

5 regulator any new authority to request or obtain informa6 tion.

7 (n) NO WAIVER OF ANY PRIVILEGE OF ANY OTHER

8 PARTY.—No provision of this Act shall be construed as

9 providing a financial regulator with any new authority to

10 disclose information in contravention of applicable law

11 governing disclosure of information.

12 SEC. 112. CONFIDENTIALITY OF INFORMATION.

13 (a) IN GENERAL.—

14 (1) FINANCIAL REGULATORS.—Except as other15 wise provided in this section or section 111, any re16 quirement under Federal or State law regarding the

17 privacy or confidentiality of any information or ma18 terial in the possession of any participant, and any

19 privilege arising under Federal or State law (includ20 ing the rules of any Federal or State court) with re21 spect to such information or material, shall continue

22 to apply to such information or material after the in23 formation or material has been disclosed through the

24 network to another participant or, if subtitle B has

25 taken effect, the Subcommittee.
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1 (2) CERTAIN INSURANCE INFORMATION.—Ex2 cept as otherwise provided in this section or section

3 111, any requirement under Federal or State law re4 garding the privacy or confidentiality of any infor5 mation or material in the possession of the National

6 Association of Insurance Commissioners, or any

7 member or affiliate of the Association, and any

8 privilege arising under Federal or State law (includ9 ing the rules of any Federal or State court) with re10 spect to such information or material, shall continue

11 to apply to such information or material after the in12 formation has been disclosed to the Association, or

13 any other member or affiliate of the Association,

14 through the computer databases maintained by the

15 Association.

16 (3) NONAPPLICABILITY OF CERTAIN REQUIRE17 MENTS.—Information or material that is subject to

18 a privilege or confidentiality under any other para19 graph of this subsection shall not be subject to—

20 (A) disclosure under any Federal or State

21 law governing the disclosure to the public of in22 formation held by an officer or an agency of the

23 Federal Government or the respective State; or
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1 (B) subpoena or discovery, or admission

2 into evidence, in any private civil action or ad3 ministrative process,

4 unless with respect to any privilege held by a partici5 pant with respect to such information or material,

6 the participant waives, in whole or in part, in the

7 discretion of the participant, such privilege.

8 (b) PREEMPTION OF STATE LAW.—Any State law,

9 including any State open record law, relating to the disclo10 sure of confidential supervisory information or any infor11 mation or material described in subsection (a) that is in12 consistent with any provision of section 111 or subsection

13 (a) of this section shall be superseded by the requirements

14 of such provision to the extent State law provides less con15 fidentiality or a weaker privilege.

16 (c) DUTY OF FINANCIAL REGULATOR TO MAINTAIN

17 CONFIDENTIALITY.—A participant may not receive,

18 download, copy, or otherwise maintain any information or

19 material from any other member of or liaison to the Sub20 committee through the network unless—

21 (1) the participant maintains a system that en22 ables the participant to maintain full compliance

23 with the requirements of sections 100, 102, and 111

24 and this section, with respect to such information

25 and material; and
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1 (2) if and to the extent required by the guide2 lines established under sections 100 and 102, a

3 record is maintained of each attempt to access such

4 information and material, and the identity of the

5 person making the attempt, in order to prevent eva6 sions of such requirements.

7 SEC. 113. LIABILITY PROVISIONS.

8 (a) NO LIABILITY FOR GOOD FAITH DISCLO9 SURES.—Any financial regulator, and any officer or em10 ployee of any financial regulator, shall not be subject to

11 any civil action or proceeding for monetary damages by

12 reason of the good faith action or omission of any officer

13 or employee, while acting within the scope of office or em14 ployment, relating to collecting, furnishing, or dissemi15 nating regulatory or supervisory information concerning

16 persons engaged in the business of conducting financial

17 activities, to or from another financial regulator, whether

18 directly or through the network.

19 (b) CRIMINAL LIABILITY FOR INTENTIONAL UNLAW20 FUL DISCLOSURES.—

21 (1) IN GENERAL.—It shall be unlawful to will22 fully disclose to any person any information con23 cerning any person engaged in the business of con24 ducting financial activities knowing the disclosure to

25 be in violation of any provision of this title—
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1 (A) requiring the confidentiality of such in2 formation; or

3 (B) establishing a privilege from disclosure

4 for such information that has not been waived

5 by the relevant financial regulator.

6 (2) PENALTY.—Notwithstanding section 3571

7 of title 18, United States Code, any person who vio8 lates paragraph (1) shall be fined an amount not to

9 exceed the greater of $100,000 or the amount of the

10 actual damages sustained by any person as a result

11 of such violation, or imprisoned not more than 5

12 years, or both.

13 (c) FULL, CONTINUED PROTECTION UNDER THE SO14 CALLED ‘‘FEDERAL TORT CLAIMS ACT’’.—No provision

15 of this Act shall be construed as reducing or limiting any

16 protection provided for any Federal agency, or any officer

17 or employee of any Federal agency, under section 2679

18 of title 28, United States Code.

19 (d) PROTECTION APPLIED TO THE SUB20 COMMITTEE.—For the purposes of this section, the term

21 ‘‘financial regulator’’ includes the Subcommittee after

22 subtitle B has taken effect.

23 SEC. 114. AUTHORIZATION FOR IDENTIFICATION AND

24 CRIMINAL BACKGROUND CHECK.

25 (a) SHARING OF CRIMINAL RECORDS.—
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1 (1) ATTORNEY GENERAL AUTHORIZATION.—

2 Upon receiving a request from a financial regulator,

3 the Attorney General shall—

4 (A) search the records of the Criminal Jus5 tice Information Services Division of the Fed6 eral Bureau of Investigation, and any other

7 similar database over which the Attorney Gen8 eral has authority and deems appropriate, for

9 any criminal background records (including

10 wanted persons information) corresponding to

11 the identification information provided under

12 subsection (b); and

13 (B) either—

14 (i) shall provide any such records to

15 any authorized agent of the financial regu16 lator, which shall provide the relevant in17 formation to such regulator; or

18 (ii) may provide such records directly

19 to the financial regulator if the Attorney

20 General limits such provision of records to

21 relevant information.

22 (2) AUTHORIZED AGENT DEFINED.—For pur23 poses of this section, the term ‘‘authorized agent’’

24 means—
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1 (A) any agent which has been recognized

2 by the Attorney General for such purpose and

3 authorized by at least 3 other financial regu4 lators to receive such records and perform the

5 information sharing requirements of paragraph

6 (3);

7 (B) the State attorney general for the

8 State in which the regulator is primarily lo9 cated; and

10 (C) any law enforcement designee of the

11 Attorney General or such State attorney gen12 eral.

13 (3) INFORMATION SHARED.—

14 (A) IN GENERAL.—The authorized agent

15 shall provide to the requesting financial regu16 lator only any records that are relevant infor17 mation.

18 (B) RELEVANT INFORMATION DEFINED.—

19 For purposes of this section, the term ‘‘relevant

20 information’’ means any of the following

21 records:

22 (i) All felony convictions.

23 (ii) All misdemeanor convictions

24 involving—
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1 (I) violation of a law involving fi2 nancial activities;

3 (II) dishonesty or breach of

4 trust, within the meaning of section

5 1033 of title 18, United States Code,

6 including taking, withholding, mis7 appropriating, or converting money or

8 property;

9 (III) failure to comply with child

10 support obligations;

11 (IV) failure to pay taxes; and

12 (V) domestic violence, child

13 abuse, or a crime of violence.

14 (C) CRIME OF VIOLENCE DEFINED.—For

15 purposes of subparagraph (B)(ii)(V), the term

16 ‘‘crime of violence’’ means a burglary of a

17 dwelling and a criminal offense that has as an

18 element the use or attempted use of physical

19 force, or threat of great bodily harm, or the

20 use, attempted use, or threatened use of a

21 deadly weapon, against an individual, including

22 committing or attempting to commit murder,

23 manslaughter, kidnapping, aggravated assault,

24 forcible sex offenses, robbery, arson, extortion,

25 and extortionate extension of credit.
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1 (4) STATE UNIFORM OR RECIPROCITY LAWS RE2 QUIREMENT.—

3 (A) IN GENERAL.—The Attorney General

4 may not provide any records under this sub5 section to an insurance regulator of a State, or

6 agent of such regulator, if such State does not

7 have in effect uniform or reciprocity laws and

8 regulations governing the licensure of individ9 uals and entities authorized to sell and solicit

10 the purchase of insurance within the State as

11 set forth in section 321 of P.L. 106-102.

12 (B) DETERMINATION OF RECIPROCITY.—

13 The determination of whether or not a State

14 has uniform or reciprocity laws or regulations

15 in effect for purposes of subparagraph (A) shall

16 be made by the Attorney General, with the ad17 vice and counsel of the National Association of

18 Insurance Commissioners.

19 (C) EXCEPTION UNDER CERTAIN CIR20 CUMSTANCES.—Notwithstanding subparagraph

21 (B), the Attorney General may provide records

22 under this section to an insurance regulator of

23 a State, or agent of such regulator, on the basis

24 of a specific determination by the National As25 sociation of Insurance Commissioners that such
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1 State has in effect uniform or reciprocity laws

2 and regulations referred to in subparagraph (A)

3 if—

4 (i) a determination by the Attorney

5 General under subparagraph (B) is pend6 ing; or

7 (ii) the Attorney General considers

8 whether such State has in effect such uni9 form or reciprocity laws or regulations and

10 fails to make a determination, unless the

11 Attorney General subsequently determines

12 that such State does not have in effect uni13 form or reciprocity laws or regulations.

14 (b) FORM OF REQUEST.—A request under subsection

15 (a) shall include a copy of any necessary identification in16 formation required by the Attorney General, such as the

17 name and fingerprints of the person about whom the

18 record is requested and a statement signed by the person

19 acknowledging that the regulator (or such regulator’s des20 ignated agent under subsection (g)(1)) may request the

21 search.

22 (c) LIMITATION ON PERMISSIBLE USES OF INFORMA23 TION.—Information obtained under this section may—

24 (1) be used only for regulatory or law enforce25 ment purposes; and
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1 (2) be disclosed—

2 (A) only to other financial regulators or

3 Federal or State law enforcement agencies; and

4 (B) only if the recipient agrees to—

5 (i) maintain the confidentiality of

6 such information; and

7 (ii) limit the use of such information

8 to appropriate regulatory and law enforce9 ment purposes.

10 (d) PENALTY FOR IMPROPER USE.—

11 (1) IN GENERAL.—Whoever uses any informa12 tion obtained under this section knowingly and will13 fully for an unauthorized purpose shall be fined

14 under title 18, United States Code, imprisoned for

15 not more than 2 years, or both.

16 (2) ADDITIONAL PENALTIES AND WAIVERS.—

17 (A) IN GENERAL.—Any authorized agent

18 who violates paragraph (1), or any individual

19 who directs such agent to violate such para20 graph, shall be barred from engaging in or reg21 ulating any activities related to the business of

22 insurance.

23 (B) WAIVER AUTHORIZED.—The Attorney

24 General, in the discretion of the Attorney Gen-
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1 eral, may waive the bar in subparagraph (A), as

2 appropriate.

3 (e) RELIANCE ON INFORMATION.—A financial regu4 lator (or such regulator’s designated agent under sub5 section (g)(1)) who reasonably relies on information pro6 vided under this section shall not be liable in any action

7 for using information as permitted under this section in

8 good faith.

9 (f) CLARIFICATION OF SECTION 1033.—With respect

10 to any action brought under section 1033(e)(1)(B) of title

11 18, United States Code, no person engaged in the business

12 of conducting financial activities shall be subject to any

13 penalty resulting from such section if the individual who

14 the person permitted to engage in the business of insur15 ance is licensed, or approved (as part of an application

16 or otherwise), by a State insurance regulator that per17 forms criminal background checks under this section, un18 less such person knows that the individual is in violation

19 of section 1033(e)(1)(A) of such title.

20 (g) DESIGNATION OF AGENT.—

21 (1) IN GENERAL.—A financial regulator may

22 designate an agent for facilitating requests and ex23 changes of information under this section between or

24 among the financial regulator, the Attorney General,

25 and any other authorized agent.
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1 (2) SENSE OF CONGRESS REGARDING AGENTS

2 OF INSURANCE REGULATORS.—It is the sense of the

3 Congress that—

4 (A) each State insurance commissioner

5 should designate the National Association of In6 surance Commissioners as an agent under para7 graph (1);

8 (B) persons engaged in the business of in9 surance should be able to use the National As10 sociation of Insurance Commissioners to facili11 tate obtaining fingerprints and supplying identi12 fication information for use in background

13 checks under this section on a multijuris14 dictional basis;

15 (C) the National Association of Insurance

16 Commissioners should maintain a database to

17 obtain records under this section for use by

18 State insurance commissioners to reduce mul19 tiple or duplicative fingerprinting requirements

20 and criminal background checks, except that

21 any such record shall not be maintained for

22 more than 1 year without performing a new

23 background check to determine if the criminal

24 background record has changed;
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1 (D) other financial regulators that require

2 fingerprints and criminal background checks

3 should similarly coordinate efforts to reduce du4 plication for persons engaged in the business of

5 conducting multiple types of financial activities;

6 and

7 (E) the National Association of Insurance

8 Commissioners, and other financial regulators

9 that use this section, should consult with the

10 Attorney General to consider the feasibility of

11 developing an on-going notification system that

12 would allow the Attorney General to notify such

13 Association when a licensed or approved insur14 ance professional is convicted of a relevant

15 crime.

16 (h) FEES.—The Attorney General may charge a rea17 sonable fee for the provision of information under this sec18 tion.

19 (i) RULE OF CONSTRUCTION.—This section shall

20 not—

21 (1) provide independent authorization for a fi22 nancial regulator to require fingerprinting as a part

23 of a licensure or other application;

24 (2) require a financial regulator to perform

25 criminal background checks under this section; or
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1 (3) supersede or otherwise limit any other au2 thority that allows access to criminal background

3 records.

4 (j) REGULATIONS.—The Attorney General may pre5 scribe regulations to carry out this section.

6 SEC. 115. DEFINITIONS.

7 For purposes of this title, the following definitions

8 shall apply:

9 (1) FEDERAL BANKING AGENCY.—The term

10 ‘‘Federal banking agency’’ has the same meaning as

11 given in section 3(z) of the Federal Deposit Insur12 ance Act.

13 (2) FINANCIAL ACTIVITIES.—

14 (A) IN GENERAL.—The term ‘‘financial

15 activities’’—

16 (i) means banking activities (including

17 the ownership of a bank), securities activi18 ties, insurance activities, or commodities

19 activities; and

20 (ii) includes all activities that are fi21 nancial in nature or are incidental to a fi22 nancial activity (as defined under section

23 4(k) of the Bank Holding Company Act of

24 1956).
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1 (B) RULE OF CONSTRUCTION.—Subpara2 graph (A) shall not be construed as creating

3 any inference, including any negative inference,

4 concerning the types or extent of activities that

5 are appropriately recognized as activities that

6 are financial in nature, or are incidental to a fi7 nancial activity, for purposes of section 4 of the

8 Bank Holding Company Act of 1956.

9 (3) FINANCIAL REGULATOR.—The term ‘‘finan10 cial regulator’’ means—

11 (A) each Federal banking agency;

12 (B) the Securities and Exchange Commis13 sion;

14 (C) the Commodity Futures Trading Com15 mission;

16 (D) the National Credit Union Administra17 tion;

18 (E) the Farm Credit Administration;

19 (F) the Federal Housing Finance Board;

20 (G) the Federal Trade Commission, to the

21 extent the Commission has jurisdiction over fi22 nancial activities being conducted by a person

23 engaged in the business of conducting financial

24 activities;
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1 (H) the Secretary of the Treasury, to the

2 extent the Secretary has jurisdiction over finan3 cial activities being conducted by a person en4 gaged in the business of conducting financial

5 activities;

6 (I) the Office of Federal Housing Enter7 prise Oversight of the Department of Housing

8 and Urban Development;

9 (J) the Appraisal Subcommittee of the Fi10 nancial Institutions Examination Council;

11 (K) any State bank supervisor (as defined

12 in section 3(r) of the Federal Deposit Insurance

13 Act), including the Conference of State Bank

14 Supervisors only to the extent such conference

15 is acting as an agent of, and is subject to the

16 oversight of, any such State bank supervisor;

17 (L) any State savings association super18 visor, including the American Council of State

19 Savings Supervisors only to the extent such

20 conference is acting as an agent of, and is sub21 ject to the oversight of, any such State savings

22 association supervisor;

23 (M) any State insurance commissioner, in24 cluding the National Association of Insurance

25 Commissioners only to the extent such associa-
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1 tion is acting as the agent of, and is subject to

2 the oversight of, any such insurance commis3 sioner;

4 (N) any State securities administrator, in5 cluding the North American Securities Adminis6 trators Association only to the extent such asso7 ciation is acting as the agent of, and is subject

8 to the oversight of, any such securities adminis9 trator;

10 (O) any State credit union supervisor, in11 cluding the National Association of State Credit

12 Union Supervisors only to the extent such asso13 ciation is acting as the agent of, and is subject

14 to the oversight of, any such credit union super15 visor;

16 (P) the National Association of Securities

17 Dealers, only to the extent that—

18 (i) such association is acting in con19 nection with the financial services industry;

20 and

21 (ii) the association and the relevant

22 actions are subject to the oversight of the

23 Securities and Exchange Commission;

24 (Q) the National Futures Association, only

25 to the extent that—
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1 (i) such association is acting in con2 nection with the financial services industry;

3 and

4 (ii) the association and the relevant

5 actions are subject to the oversight of the

6 Commodity Futures Trading Commission

7 or the Securities and Exchange Commis8 sion; and

9 (R) any other self-regulatory organization

10 that engages in or coordinates regulatory and

11 supervisory activities, with respect to any per12 son engaged in the business of conducting fi13 nancial activities, and is subject to the oversight

14 of the Securities and Exchange Commission or

15 the Commodity Futures Trading Commission,

16 but only to the extent that the organization en17 gages in such activities and is subject to such

18 oversight.

19 (4) FOREIGN FINANCIAL REGULATOR.—The

20 term ‘‘foreign financial regulator’’ means any agen21 cy, entity, or body (including a self-regulatory orga22 nization) that is empowered by the laws of a foreign

23 country to supervise and regulate persons engaged

24 in the business of conducting financial activities, but
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1 only to the extent of such supervisory and regulatory

2 activities.

3 (5) PARTICIPANT.—The term ‘‘participant’’

4 means any entity described in section 101 as being

5 represented by a member of, or a liaison to, the Sub6 committee (regardless of whether subtitle B has

7 taken effect) but only to the extent the regulator

8 provides or obtains access to information through

9 the network.

10 (6) PERSON.—The term ‘‘person’’ includes any

11 financial regulator.

12 (7) PERSON ENGAGED IN THE BUSINESS OF

13 CONDUCTING FINANCIAL ACTIVITIES.—The term

14 ‘‘person engaged in the business of conducting finan15 cial activities’’ includes, to the extent appropriate

16 under the laws applicable to the jurisdiction of a fi17 nancial regulator over such person—

18 (A) any director, officer, employee, or con19 trolling stockholder of, or agent for, any such

20 person;

21 (B) any other person who has filed or is

22 required to file a change-in-control notice with

23 the appropriate financial regulator before ac24 quiring control of such person; and
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1 (C) any person who has sought approval

2 from a financial regulator to engage in the

3 business of conducting financial activities, or

4 that was engaged in such business and subject

5 to the jurisdiction of a financial regulator; and

6 (D) any shareholder, consultant, joint ven7 ture partner, and any other person, including

8 an independent contractor, as determined by

9 the appropriate financial regulator (by regula10 tion or case-by-case) who participates in the

11 conduct of the affairs of such person.

12 (8) STATE INSURANCE COMMISSIONER.—The

13 term ‘‘State insurance commissioner’’ means any of14 ficer, agency, or other entity of any State which has

15 primary regulatory authority over the business of in16 surance and over any person engaged in the business

17 of insurance to the extent of such activities, in such

18 State.

19 (9) STATE SECURITIES ADMINISTRATOR.—The

20 term ‘‘State securities administrator’’ means the se21 curities commission (or any agency or office per22 forming like functions) of any State.
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1 SEC. 116. TECHNICAL AND CONFORMING AMENDMENTS TO

2 OTHER ACTS.

3 (a) Subsection (b) of section 552a of title 5, United

4 States Code, is amended—

5 (1) by striking ‘‘and’’ at the end of paragraph

6 (11);

7 (2) by striking the period at the end of para8 graph (12) and inserting ‘‘; or’’; and

9 (3) by inserting after paragraph (12) the fol10 lowing new paragraph:

11 ‘‘(13) for recordkeeping, licensing, and other

12 regulatory and law enforcement purposes in accord13 ance with title I of the Financial Services Antifraud

14 Network Act of 2001—

15 ‘‘(A) through a network or name-relation16 ship index maintained under such title; or

17 ‘‘(B) to a multistate database maintained

18 by the National Association of Insurance Com19 missioners and any subsidiary or affiliate of

20 such association, subject to the requirements of

21 such title.’’.

22 (b) Section 1113 of the Financial Institutions Regu23 latory and Interest Rate Control Act of 1978 (12 U.S.C.

24 3413) is amended by adding at the end the following new

25 subsection:
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1 ‘‘(r) This title shall not apply to disclosure by a finan2 cial regulator of information pursuant to subtitle A or B

3 of title I of the Financial Services Antifraud Network Act

4 of 2001 to the extent the disclosure is made in accordance

5 with the requirements of such Act.’’.

6 (c) Section 602 of the Consumer Credit Protection

7 Act (15 U.S.C. 1681) is amended by adding at the end

8 the following new subsection:

9 ‘‘(c) This title shall not apply to a communication be10 tween participants, as defined in the Financial Services

11 Antifraud Network Act of 2001, to the extent the commu12 nication is made in accordance with such Act.’’.

13 SEC. 117. AUDIT OF STATE INSURANCE REGULATORS.

14 (a) IN GENERAL.—At the request of the Congress,

15 the Comptroller General shall audit a State insurance reg16 ulator or any person who maintains information on behalf

17 of such regulator.

18 (b) LIMITATIONS ON DISCLOSURE OF INFORMA19 TION.—Except as provided in this subsection, an officer

20 or employee of the General Accounting Office may not dis21 close information identifying an open insurance company

22 or a customer of an open or closed insurance company.

23 The Comptroller General may disclose information related

24 to the affairs of a closed insurance company only if the

25 Comptroller General believes the customer had a control-
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1 ling influence in the management of the closed insurance

2 company or was related to or affiliated with a person or

3 group having a controlling influence.

4 (c) COORDINATION WITH STATE REGULATOR.—An

5 officer or employee of the General Accounting Office may

6 discuss a customer or insurance company with an official

7 of a State insurance regulator and may report an apparent

8 criminal violation to an appropriate law enforcement au9 thority of the United States Government or a State.

10 (d) CONGRESSIONAL OVERSIGHT.—This subsection

11 shall not be construed as authorizing an officer or em12 ployee of a State insurance regulator to withhold informa13 tion from a committee of the Congress authorized to have

14 the information.

15 (e) ADMINISTRATIVE ASPECTS OF AUDIT.—

16 (1) IN GENERAL.—To carry out this section, all

17 records and property of or used by a State insurance

18 regulator, including samples of reports of examina19 tions of an insurance company the Comptroller Gen20 eral considers statistically meaningful and

21 workpapers and correspondence related to the re22 ports shall be made available to the Comptroller

23 General. The Comptroller General shall give a State

24 insurance regulator a current list of officers and em25 ployees to whom, with proper identification, records
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1 and property may be made available, and who may

2 make notes or copies necessary to carry out an

3 audit.

4 (2) PREVENTION OF UNAUTHORIZED ACCESS.—

5 The Comptroller General shall prevent unauthorized

6 access to records or property of or used by a State

7 insurance regulator that the Comptroller General ob8 tains during an audit.

9 (f) CONFIDENTIALITY.—

10 (1) IN GENERAL.—The Comptroller General

11 shall maintain the same level of confidentiality for a

12 record made available under this section as is re13 quired of the head of the State insurance regulator

14 from which it is obtained.

15 (2) PREVENTION OF INVASION OF PERSONAL

16 PRIVACY.—The Comptroller General shall keep in17 formation described in section 552(b)(6) of title 5,

18 United States Code, that the Comptroller General

19 obtains in a way that prevents unwarranted inva20 sions of personal privacy.

21 (3) AVAILABILITY OF INFORMATION.—Except

22 as provided in subsection (b), no provision of this

23 section shall be construed as authorizing any infor24 mation to be withheld from the Congress.
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1 (g) AVAILABILITY OF INFORMATION AND INSPEC2 TION OF RECORDS.—The right of access of the Comp3 troller General to information under this section shall be

4 enforceable under section 716 of title 31, United States

5 Code.

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

7 following definitions shall apply:

8 (1) STATE INSURANCE REGULATOR DEFINED.—

9 The term ‘‘State insurance regulator’’ means the

10 principal insurance regulatory authority of a State,

11 the District of Columbia, any territory of the United

12 States, Puerto Rico, Guam, American Samoa, the

13 Trust Territory of the Pacific Islands, the Virgin Is14 lands, and the Northern Mariana Islands.

15 (2) INSURANCE COMPANY.—The term ‘‘insur16 ance company’’ includes any person engaged in the

17 business of insurance to the extent of such activities.

18 Subtitle D—Anti-Terrorism

19 SEC. 121. PREVENTING INTERNATIONAL TERRORISM.

20 (a) IN GENERAL.—The financial regulators shall co21 ordinate the network established under sections 100 and

22 101 with their foreign counterparts, to the extent the reg23 ulators deem possible, practicable, and appropriate, to

24 help uncover, hinder, and prosecute the financial activities

25 of terrorists.
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1 (b) REPORT REQUIRED.—The entities described in

2 section 101(a) shall report to the Congress by the end of

3 the 6-month period beginning on the date of the enact4 ment of this Act their further recommendations to the

5 Congress for achieving the goals of subsection (a).

6 TITLE II—SECURITIES

7 INDUSTRY COORDINATION

8 Subtitle A—Disciplinary

9 Information

10 SEC. 201. INVESTMENT ADVISERS ACT OF 1940.

11 (a) AMENDMENT.—Section 204 of the Investment

12 Advisers Act of 1940 (15 U.S.C. 80b–4) is amended—

13 (1) by striking ‘‘Every investment’’ and insert14 ing the following:

15 ‘‘(a) IN GENERAL.—Every investment’’; and

16 (2) by adding at the end the following:

17 ‘‘(b) FILING DEPOSITORIES.—The Commission, by

18 rule, may require an investment adviser—

19 ‘‘(1) to file with the Commission any fee, appli20 cation, report, or notice required to be filed by this

21 title or the rules issued under this title through any

22 entity designated by the Commission for that pur23 pose; and
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1 ‘‘(2) to pay the reasonable costs associated with

2 such filing and the establishment and maintenance

3 of the systems required by subsection (c).

4 ‘‘(c) ACCESS TO DISCIPLINARY AND OTHER INFOR5 MATION.—

6 ‘‘(1) MAINTENANCE OF SYSTEM TO RESPOND

7 TO INQUIRIES.—The Commission shall require the

8 entity designated by the Commission under sub9 section (b)(1)—

10 ‘‘(A) to establish and maintain a toll-free

11 telephone listing or other readily accessible elec12 tronic process to receive inquiries regarding dis13 ciplinary actions and proceedings and other in14 formation involving investment advisers and

15 persons associated with investment advisers;

16 and

17 ‘‘(B) to respond promptly to such inquir18 ies.

19 ‘‘(2) RECOVERY OF COSTS.—An entity des20 ignated by the Commission under subsection (b)(1)

21 may charge persons, other than individual investors,

22 reasonable fees for responses to inquiries made

23 under paragraph (1).

24 ‘‘(3) LIMITATION ON LIABILITY.—An entity

25 designated by the Commission under subsection
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1 (b)(1) shall not have any liability to any person for

2 any actions taken or omitted in good faith under

3 this subsection.’’.

4 (b) CONFORMING AMENDMENTS.—

5 (1) Section 203A of the Investment Advisers

6 Act of 1940 (15 U.S.C. 80b-3a) is amended—

7 (A) by striking subsection (d); and

8 (B) by redesignating subsection (e) as sub9 section (d).

10 (2) Section 306 of the National Securities Mar11 kets Improvement Act of 1996 (15 U.S.C. 80b-10,

12 note; P.L. 104-290; 110 Stat. 3439) is repealed.

13 SEC. 202. SECURITIES EXCHANGE ACT OF 1934.

14 Subsection (i) of section 15A of the Securities Ex15 change Act of 1934 (15 U.S.C. 78o–3) is amended to read

16 as follows:

17 ‘‘(i) OBLIGATION TO MAINTAIN DISCIPLINARY AND

18 OTHER DATA.—

19 ‘‘(1) MAINTENANCE OF SYSTEM TO RESPOND

20 TO INQUIRIES.—A registered securities association

21 shall—

22 ‘‘(A) establish and maintain a toll-free tele23 phone listing or other readily accessible elec24 tronic process to receive inquiries regarding dis25 ciplinary actions and proceedings and other in-
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1 formation involving its members and their asso2 ciated persons and regarding disciplinary ac3 tions and proceedings and other information

4 that has been reported to the Central Registra5 tion Depository by any registered national secu6 rities exchange involving its members and their

7 associated persons; and

8 ‘‘(B) promptly respond to such inquiries.

9 ‘‘(2) RECOVERY OF COSTS.—Such association

10 may charge persons, other than individual investors,

11 reasonable fees for responses to such inquiries.

12 ‘‘(3) LIMITATION ON LIABILITY.—Such an asso13 ciation or exchange shall not have any liability to

14 any person for any actions taken or omitted in good

15 faith under this subsection.’’.

16 Subtitle B—Preventing Migration

17 of Rogue Financial Profes18 sionals to the Securities Indus19 try

20 SEC. 211. SECURITIES EXCHANGE ACT OF 1934.

21 (a) BROKERS AND DEALERS.—Section 15(b) of the

22 Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) is

23 amended—

24 (1) in paragraph (4), by striking subparagraphs

25 (F) and (G) and inserting the following:
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1 ‘‘(F) is subject to any order of the Commission

2 barring or suspending the right of the person to be

3 associated with a broker or dealer.

4 ‘‘(G) has been found by a foreign financial reg5 ulatory authority to have—

6 ‘‘(i) made or caused to be made in any ap7 plication for registration or report required to

8 be filed with a foreign financial regulatory au9 thority, or in any proceeding before a foreign fi10 nancial regulatory authority with respect to reg11 istration, any statement that was at the time

12 and in the light of the circumstances under

13 which it was made false or misleading with re14 spect to any material fact, or omitted to state

15 in any such application, report, or proceeding

16 any material fact that is required to be stated

17 therein;

18 ‘‘(ii) violated any foreign statute or regula19 tion regarding securities, banking, thrift activi20 ties, credit union activities, insurance, or con21 tracts of sale of a commodity for future deliv22 ery, traded on or subject to the rules of a con23 tract market or any board of trade; or

24 ‘‘(iii) aided, abetted, counseled, com25 manded, induced, or procured the violation by
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1 any other person of any provision of any statu2 tory provisions enacted by a foreign govern3 ment, or rules or regulations thereunder, re4 garding securities, banking, thrift activities,

5 credit union activities, insurance, or contracts

6 of sale of a commodity for future delivery trad7 ed on or subject to the rules of a contract mar8 ket or any board of trade, or to have failed rea9 sonably to supervise, with a view to preventing

10 violations of such statutory provisions, rules,

11 and regulations, another person who commits

12 such a violation, if such other person is subject

13 to his supervision.

14 ‘‘(H) is subject to any final order of a State se15 curities commission (or any agency or officer per16 forming like functions), State authority that super17 vises or examines banks, thrifts, or credit unions,

18 State insurance commission (or any agency or office

19 performing like functions), an appropriate Federal

20 banking agency (as defined in section 3 of the Fed21 eral Deposit Insurance Act (12 U.S.C. 1813(q)), or

22 the National Credit Union Administration, that—

23 ‘‘(i) bars such person from association with

24 an entity regulated by such commission, author25 ity, agency, or officer, or from engaging in the
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1 business of securities, insurance, banking, thrift

2 activities, or credit union activities; or

3 ‘‘(ii) constitutes a final order based on vio4 lations of any laws or regulations that prohibit

5 fraudulent, manipulative, or deceptive con6 duct.’’; and

7 (2) in paragraph (6)(A)(i), by striking ‘‘or

8 omission enumerated in subparagraph (A), (D), (E),

9 or (G)’’ and inserting ‘‘, or is subject to an order or

10 finding, enumerated in subparagraph (A), (D), (E),

11 (G), or (H)’’.

12 (b) MUNICIPAL SECURITIES BROKERS AND DEAL13 ERS.—Section 15B(c) of the Securities Exchange Act of

14 1934 (15 U.S.C. 78o–4(c)) is amended—

15 (1) in paragraph (2)—

16 (A) by striking ‘‘or omission enumerated in

17 subparagraph (A), (D), (E), or (G)’’ and insert18 ing ‘‘, or is subject to an order or finding, enu19 merated in subparagraph (A), (D), (E), (G), or

20 (H)’’; and

21 (B) by striking ‘‘ten’’ and inserting ‘‘10’’;

22 and

23 (2) in paragraph (4) by striking ‘‘or omission

24 enumerated in subparagraph (A), (D), (E), or (G)’’

25 and inserting ‘‘, or is subject to an order or finding,
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1 enumerated in subparagraph (A), (D), (E), (G), or

2 (H)’’.

3 (c) GOVERNMENT SECURITIES BROKERS AND DEAL4 ERS.—Section 15C(c)(1) of the Securities Exchange Act

5 of 1934 (15 U.S.C. 78o–5(c)(1)) is amended—

6 (1) in subparagraph (A), by striking ‘‘or omis7 sion enumerated in subparagraph (A), (D), (E), or

8 (G)’’ and inserting ‘‘, or is subject to an order or

9 finding, enumerated in subparagraph (A), (D), (E),

10 (G), or (H)’’; and

11 (2) in subparagraph (C), by striking ‘‘or omis12 sion enumerated in subparagraph (A), (D), (E), or

13 (G)’’ and inserting ‘‘, or is subject to an order or

14 finding, enumerated in subparagraph (A), (D), (E),

15 (G), or (H)’’.

16 (d) CLEARANCE AND SETTLEMENT.—Section 17A(c)

17 of the Securities Exchange Act of 1934 (15 U.S.C. 78q–

18 1(c)) is amended—

19 (1) in paragraph (3)(A), by striking ‘‘enumer20 ated in subparagraph (A), (D), (E), or (G)’’ and in21 serting ‘‘, or is subject to an order or finding, enu22 merated in subparagraph (A), (D), (E), (G), or

23 (H)’’; and

24 (2) in paragraph (4)(C)—
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1 (A) by striking ‘‘enumerated in subpara2 graph (A), (D), (E), or (G)’’ and inserting ‘‘,

3 or is subject to an order or finding, enumerated

4 in subparagraph (A), (D), (E), (G), or (H)’’;

5 and

6 (B) by striking ‘‘ten years’’ and inserting

7 ‘‘10 years’’.

8 (e) DEFINITION OF STATUTORY DISQUALIFICA9 TION.—Section 3(a)(39)(F) of the Securities Exchange

10 Act of 1934 (15 U.S.C. 78c(a)(39)(F)) is amended by

11 striking ‘‘has committed or omitted any act enumerated

12 in subparagraph (D), (E), or (G)’’ and inserting ‘‘has

13 committed or omitted any act, or is subject to an order

14 or finding, enumerated in subparagraph (D), (E), (G), or

15 (H)’’.

16 SEC. 212. INVESTMENT ADVISERS ACT OF 1940.

17 (a) AUTHORITY TO DENY OR REVOKE REGISTRA18 TION BASED ON STATE (AND OTHER GOVERNMENTAL)

19 ADMINISTRATIVE ACTIONS.—Section 203(e) of the Invest20 ment Advisers Act of 1940 (15 U.S.C. 80b–3(e)) is

21 amended by striking paragraphs (7) and (8) and inserting

22 the following:

23 ‘‘(7) is subject to any order of the Commission

24 barring or suspending the right of the person to be

25 associated with an investment adviser.
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1 ‘‘(8) has been found by a foreign financial regu2 latory authority to have—

3 ‘‘(A) made or caused to be made in any

4 application for registration or report required to

5 be filed with a foreign securities authority, or in

6 any proceeding before a foreign securities au7 thority with respect to registration, any state8 ment that was at the time and in light of the

9 circumstances under which it was made false or

10 misleading with respect to any material fact, or

11 has omitted to state in any such application, re12 port, or proceeding any material fact that is re13 quired to be stated therein;

14 ‘‘(B) violated any foreign statute or regula15 tion regarding securities, banking, thrift activi16 ties, credit union activities, insurance, or con17 tracts of sale of a commodity for future delivery

18 traded on or subject to the rules of a contract

19 market or any board of trade;

20 ‘‘(C) aided, abetted, counseled, com21 manded, induced, or procured the violation by

22 any other person of any foreign statute or regu23 lation regarding securities, banking, thrift ac24 tivities, credit union activities, insurance, or

25 contracts of sale of a commodity for future de-
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1 livery traded on or subject to the rules of a con2 tract market or any board of trade, or to have

3 failed reasonably to supervise, with a view to

4 preventing violations of statutory provisions,

5 and rules and regulations promulgated there6 under, another person who commits such a vio7 lation, if such other person is subject to his su8 pervision.

9 ‘‘(9) is subject to any final order of a State se10 curities commission (or any agency or officer per11 forming like functions), State authority that super12 vises or examines banks, thrifts, or credit unions,

13 State insurance commission (or any agency or office

14 performing like functions), an appropriate Federal

15 banking agency (as defined in section 3 of the Fed16 eral Deposit Insurance Act (12 U.S.C. 1813(q)), or

17 the National Credit Union Administration, that—

18 ‘‘(A) bars such person from association

19 with an entity regulated by such commission,

20 authority, agency, or officer, or from engaging

21 in the business of securities, insurance, bank22 ing, thrift activities, or credit union activities;

23 or

24 ‘‘(B) constitutes a final order based on vio25 lations of any laws or regulations that prohibit
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1 fraudulent, manipulative, or deceptive con2 duct.’’.

3 (b) BARS ON FELONS ASSOCIATED WITH INVEST4 MENT ADVISERS.—Section 203(f) of the Investment Ad5 visers Act of 1940 (15 U.S.C. 80b–3(f)) is amended—

6 (A) by striking ‘‘or (8)’’ and inserting

7 ‘‘(8), or (9)’’; and

8 (B) by inserting ‘‘or (3)’’ after ‘‘paragraph

9 (2)’’.

Passed the House of Representatives November 6,

2001.

Attest: JEFF TRANDAHL,

Clerk.