IB

Union Calendar No. 144

107TH CONGRESS

1ST SESSION H. R. 1408

[Report No. 107–192, Parts I and II]

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.

IN THE HOUSE OF REPRESENTATIVES

APRIL 4, 2001

Mr. ROGERS of Michigan (for himself, Mr. OXLEY, Mrs. KELLY, Mr. BACHUS,

and Mr. TIBERI) introduced the following bill; which was referred to the

Committee on Financial Services, and in addition to the Committees on

the Judiciary, and Agriculture, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions

as fall within the jurisdiction of the committee concerned

AUGUST 2, 2001

Reported from the Committee on Financial Services with an amendment

[Strike out all after the enacting clause and insert the part printed in italic]

AUGUST 2, 2001

Referral to the Committee on Agriculture extended for a period ending not

later than August 2, 2001

AUGUST 2, 2001

The Committee on Agriculture discharged

AUGUST 2, 2001

Referral to the Committee on the Judiciary extended for a period ending not

later than September 14, 2001

SEPTEMBER 14, 2001

Referral to the Committee on the Judiciary extended for a period ending not

later than October 5, 2001
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OCTOBER 5, 2001

Referral to the Committee on the Judiciary extended for a period ending not

later than October 12, 2001

OCTOBER 12, 2001

Referral to the Committee on the Judiciary extended for a period ending not

later than October 16, 2001

OCTOBER 16, 2001

Additional sponsors: Mr. SHOWS, Mr. SHERMAN, Mr. CANTOR, Mr. HOBSON,

Mr. GILLMOR, Mr. NEY, Mrs. ROUKEMA, Ms. KILPATRICK, Mr. WELDON

of Florida, Mrs. BIGGERT, Mr. NORWOOD, Mr. KING, Mr. CHAMBLISS,

Mrs. NORTHUP, Ms. PRYCE of Ohio, and Mr. CRAMER

OCTOBER 16, 2001

Reported from the Committee on the Judiciary with an amendment; committed to the Committee of the Whole House on the State of the Union,

and ordered to be printed

[Omit the part struck through in italic and insert the part printed in boldface roman]

[For text of introduced bill, see copy of bill as introduced on April 4, 2001]

A BILL

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,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the ‘‘Fi5 nancial Services Antifraud Network Act of 2001’’.

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

7 Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Purposes.
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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.

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.

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 fail7 ure to communicate essential information;
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1 (3) to reduce duplicative information requests

2 by, and other inefficiencies of, financial services regu3 lation;

4 (4) to assist financial regulators in detecting

5 patterns of fraud, particularly patterns that only be6 come apparent when viewed across the full spectrum

7 of the financial services industry; and

8 (5) to take advantage of Internet technology and

9 other advanced data-sharing technology to modernize

10 the fight against fraud in all of its evolving mani11 festations and permutations.

12 TITLE I—ANTIFRAUD NETWORK

13 Subtitle A—Direction to Financial

14 Regulators

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

16 (a) SHARING OF PUBLIC INFORMATION.—The finan17 cial regulators shall, to the extent practicable and appro18 priate and in consultation with other relevant and appro19 priate agencies and parties—

20 (1) develop procedures to provide for a network

21 for the sharing of antifraud information; and

22 (2) coordinate to further improve upon the anti23 fraud efforts of the participants in the network as

24 such participants deem appropriate over time.
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1 (b) MINIMUM REQUIREMENTS.—The procedures de2 scribed in subsection (a) shall—

3 (1) provide for the sharing of public final dis4 ciplinary and formal enforcement actions taken by

5 the financial regulators that are accessible electroni6 cally relating to the conduct of persons engaged in the

7 business of conducting financial activities that is

8 fraudulent, dishonest, or involves a breach of trust or

9 relates to the failure to register with the appropriate

10 financial regulator as required by law;

11 (2) include a plan for considering the sharing

12 among the participants of other relevant and useful

13 antifraud information relating to companies and

14 other persons engaged in conducting financial activi15 ties, to the extent practicable and appropriate when

16 adequate privacy, confidentiality, and security safe17 guards governing access to, and the use of, such infor18 mation have been developed that—

19 (A) is accessible by the public; or

20 (B) pertains to information, that does not

21 include personally identifiable information on

22 consumers, on—

23 (i) licenses and applications, financial

24 affiliations and name-relationships, aggre-
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1 gate trend data, appraisals, or reports filed

2 by a regulated entity with a participant; or

3 (ii) similar information generated by

4 or for a participant if—

5 (I) such information is being

6 shared for the purpose of verifying an

7 application or other report filed by a

8 regulated entity; and

9 (II) the participant determines

10 such information is factual and sub11 stantiated; and

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

13 an adverse action against a person engaged in the

14 business of conducting financial activities on the basis

15 of information described in paragraph (1) or (2) that

16 was received from another participant through the

17 network, the regulator shall—

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

19 participant from whom such information was re20 ceived;

21 (B) provide the person with a specific and

22 detailed description of the information that was

23 received from the other participant through the

24 network and would be relied on in taking the ad25 verse action; and
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1 (C) notify the person of the right to a rea2 sonable opportunity to respond to such informa3 tion.

4 (c) PROVISIONS RELATING TO REQUIREMENTS.—

5 (1) TIME OF NOTICE.—The notice to any person,

6 and the opportunity to respond, under subsection

7 (b)(3) shall be provided to the person a reasonable pe8 riod of time before any final action against the person

9 which is based on information referred to in such

10 paragraph is completed, unless the financial regulator

11 determines that such advance notice and opportunity

12 to respond is impracticable or inappropriate, in

13 which case the notice and opportunity to respond

14 shall be provided at the time of such final action.

15 (2) VERIFICATION OR SUBSTANTIATION OF IN16 FORMATION.—With respect to subsection (b)(3), a

17 delay in the consideration of a license, application,

18 report, or other request for the purpose of verifying or

19 substantiating information relating to such license,

20 application, report, or other request shall not be treat21 ed as an adverse action if the verification or substan22 tiation of such information is completed within a rea23 sonable time.

24 (d) IMPLEMENTATION.—
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1 (1) SUBMISSION OF PLAN.—Before the end of the

2 6-month period beginning on the date of the enact3 ment of this Act, the Federal financial regulators

4 shall submit to Congress a plan detailing how the fi5 nancial regulators (and any association representing

6 financial regulators) will meet the requirements of

7 subsections (a) and (b).

8 (2) DEADLINE FOR IMPLEMENTATION.—Before

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

10 the enactment of this Act, the financial regulators

11 shall establish the network described in subsections (a)

12 and (b).

13 (e) FINANCIAL REGULATORS DEFINED.—For the pur14 poses of this section, the term ‘‘financial regulators’’ means

15 the financial regulators described in subparagraphs (A)

16 through (Q) of section 115(3).

17 (f) DETERMINATION OF IMPLEMENTATION OF SUB18 TITLE B.—

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

20 shall take effect only if the Secretary of the Treasury,

21 or a designee of the Secretary, before the end of the

22 30-day period beginning at the end of the period re23 ferred to in—

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

25 that the Federal financial regulators have sub-
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1 mitted a plan which substantially meets the re2 quirements of such subsection; or

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

4 that the financial regulators have established a

5 network that substantially complies with the re6 quirements of subsections (a) and (b).

7 (2) SCOPE OF APPLICATION.—This subtitle shall

8 cease to apply as of the date subtitle B takes effect.

9 (g) USE OF CENTRALIZED DATABASES.—

10 (1) IN GENERAL.—A financial regulator shall be

11 deemed to have met the requirements of subsection

12 (b)(1) if—

13 (A) the participants have access to a cen14 tralized database that contains information on

15 public final disciplinary or formal enforcement

16 actions similar to that described in such sub17 section; or

18 (B) the financial regulator makes the infor19 mation described in such subsection available to

20 the public over the Internet.

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

22 Congress that the National Association of Insurance

23 Commissioners, the Conference of State Bank Super24 visors, the American Council of State Savings Super25 visors, the National Association of State Credit Union
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1 Supervisors, and the North American Securities Ad2 ministrators Association should develop model guide3 lines for regulators in their respective regulated finan4 cial industries, where appropriate, to promote uni5 form standards for sharing information with the net6 work under this section.

7 (h) FINANCIAL REGULATOR CONTROL OF ACCESS.—

8 (1) IN GENERAL.—Except as provided in para9 graph (4), each participant that allows access to its

10 databases or information by other participants

11 through the network may establish parameters for

12 controlling or limiting such access, including the reg13 ulation of—

14 (A) the type or category of information that

15 may be accessed by other participants and the

16 extent to which any such type or category of in17 formation may be accessed;

18 (B) the participants that may have access

19 to the database or any specific type or category

20 of information in the database (whether for rea21 sons of cost reimbursement, data security, effi22 ciency, or otherwise); and

23 (C) the disclosure by any other participant

24 of any type or category of information that may

25 be accessed by the participant.
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1 (2) PROCEDURES.—A participant may establish

2 the parameters described in paragraph (1) by regula3 tion, order, or guideline or on a case-by-case basis.

4 (3) DISCLAIMER.—

5 (A) IN GENERAL.—Each participant shall

6 ensure that any transfer of information through

7 the network under this section, other than infor8 mation described in paragraphs (1) and (2) of

9 subsection (b), from such participant to another

10 participant is subject to a disclaimer that the in11 formation accessed may be unsubstantiated and

12 may not be relied on as the basis for denying

13 any application or license.

14 (B) REGULATORY FLEXIBILITY.—Each fi15 nancial regulator may develop guidelines, as the

16 regulator determines to be appropriate, gov17 erning the location, wording, and frequency of

18 disclaimers under this paragraph and the man19 ner in which any such disclaimer shall be made.

20 (4) FINAL DISCIPLINARY AND FORMAL ENFORCE21 MENT ACTIONS NOT SUBJECT TO LIMITATION.—This

22 subsection, and standards or procedures adopted by

23 any participant under this subsection, shall not apply

24 with respect to information described in paragraphs

25 (1) and (2) of subsection (b).
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1 (5) NO EFFECT ON PUBLIC OR COMPANY AC2 CESS.—No provision of this section shall replace, su3 persede, or otherwise affect access to any databases

4 maintained by any Federal or State regulator, or any

5 entity representing any such regulator, which are ac6 cessible by the public or persons engaged in the busi7 ness of conducting financial activities.

8 (i) ELIGIBILITY REQUIREMENTS FOR STATE SECURI9 TIES ADMINISTRATORS.—

10 (1) IN GENERAL.—No State securities adminis11 trator shall be eligible to be a participant and access

12 the network unless—

13 (A) such State securities administrator par14 ticipates in a centralized database for broker15 dealers, broker-dealer agents, investment advis16 ers, and investment advisor representatives, reg17 istered or required to be registered, as designated

18 by the North American Securities Administra19 tors Association; and

20 (B) such State securities administrator re21 quires the broker-dealer, broker-dealer agent, in22 vestment adviser, or investment adviser rep23 resentative, currently registered or required to be

24 registered, to file any application, amendment to
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1 an application, or a renewal of an application

2 through the centralized registration database.

3 (2) TIME DELAY FOR PARTICIPATION IN DATA4 BASES.—The provisions of paragraph (1) shall not

5 become effective until 3 years after the date of enact6 ment of this Act.

7 (j) ELIGIBILITY REQUIREMENTS FOR STATE INSUR8 ANCE COMMISSIONERS.—

9 (1) PARTICIPATION IN DATABASES.—No State

10 insurance commissioner shall be eligible to access the

11 network unless such commissioner participates with

12 other State insurance commissioners—

13 (A) in a centralized database addressing

14 disciplinary or enforcement actions taken

15 against persons engaged in the business of insur16 ance, such as the Regulatory Information Re17 trieval System maintained by the National Asso18 ciation of Insurance Commissioners or any net19 work or database designated by such Association

20 as a successor to such System; and

21 (B) in centralized databases addressing,

22 with respect to persons engaged in the business

23 of insurance—

24 (i) corporate and other business affili25 ations or relationships, such as the Pro-
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1 ducer Database maintained by the National

2 Association of Insurance Commissioners or

3 any network or database designated by such

4 Association as a successor to such Database;

5 and

6 (ii) consumer complaints, such as the

7 Complaints Database maintained by the

8 National Association of Insurance Commis9 sioners or any network or database des10 ignated by such Association as a successor

11 to such Database.

12 (2) TIME DELAY FOR PARTICIPATION IN DATA13 BASES.—The provisions of subparagraph (1)(B) of

14 this section shall not become effective until 3 years

15 after the date of enactment of this Act.

16 (3) ACCREDITATION.—No State insurance com17 missioner shall be eligible to access the network unless

18 the State insurance department which such commis19 sioner represents meets 1 of the following accredita20 tion requirements at the time of access to the network:

21 (A) Is accredited by the National Associa22 tion of Insurance Commissioners.

23 (B) Has an application for accredited sta24 tus pending with the National Association of In25 surance Commissioners.
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1 (C) Has a determination by the Sub2 committee in effect that such State insurance de3 partment meets or exceeds the standards estab4 lished by the National Association of Insurance

5 Commissioners for accreditation.

6 (k) STANDARDS.—Each financial regulator shall con7 sider developing guidelines for participants on—

8 (1) how to denote which types of information are

9 to receive different levels of confidentiality protection;

10 and

11 (2) how entities or associations that act as

12 agents for financial regulators should denote such

13 agency status when acting in that capacity.

14 (l) OTHER SHARING ARRANGEMENTS NOT AF15 FECTED.—No provision of this section shall be construed

16 as limiting or otherwise affecting the authority of a finan17 cial regulator to provide any person, including another par18 ticipant, access to any information in accordance with any

19 provision of law other than this Act.

20 Subtitle B—Potential Establish21 ment of Antifraud Subcommittee

22 SEC. 101. ESTABLISHMENT.

23 (a) IN GENERAL.—Unless the determinations described

24 in section 100(f) are made, after the applicable date de25 scribed in such section there shall be established within the
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1 President’s Working Group on Financial Markets (as estab2 lished by Executive Order No. 12631) a subcommittee to

3 be known as the ‘‘Antifraud Subcommittee’’ (hereafter in

4 this title referred to as the ‘‘Subcommittee’’) which shall

5 consist of the following members:

6 (1) The Secretary of the Treasury, or a designee

7 of the Secretary.

8 (2) The Chairman of the Securities and Ex9 change Commission or a designee of the Chairman.

10 (3) A State insurance commissioner designated

11 by the National Association of Insurance Commis12 sioners, or a designee of such commissioner.

13 (4) The Chairman of the Commodity Futures

14 Trading Commission or a designee of such Chairman.

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

16 Financial Institutions Examination Council.

17 (b) FINANCIAL LIAISONS.—The following shall serve as

18 liaisons between the Subcommittee and the agencies rep19 resented by each such liaison:

20 (1) A representative of each Federal banking

21 agency appointed by the head of each such agency.

22 (2) A representative of the National Credit

23 Union Administration appointed by the National

24 Credit Union Administration Board.
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1 (3) A representative of the Farm Credit Admin2 istration, appointed by the Farm Credit Administra3 tion Board.

4 (4) A representative of the Federal Housing Fi5 nance Board, appointed by such Board.

6 (5) A representative of the Office of Federal

7 Housing Enterprise Oversight of the Department of

8 Housing and Urban Development appointed by the

9 Director of such Office.

10 (6) A representative of the Appraisal Sub11 committee of the Financial Institutions Examination

12 Council.

13 (7) A representative of State bank supervisors

14 designated by the Conference of State Bank Super15 visors.

16 (8) A representative of State savings association

17 supervisors designated by the American Council of

18 State Savings Supervisors.

19 (9) A representative of State credit union super20 visors designated by the National Association of State

21 Credit Union Supervisors.

22 (10) A representative of State securities adminis23 trators designated by the North American Securities

24 Administrators Association.
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1 (11) A representative of the National Association

2 of Securities Dealers appointed by the National Asso3 ciation of Securities Dealers.

4 (12) A representative of the National Futures As5 sociation appointed by the National Futures Associa6 tion.

7 (13) Any other financial liaison as the Sub8 committee may provide to represent any other finan9 cial regulator or foreign financial regulator, includ10 ing self-regulatory agencies or organizations that

11 maintain significant databases on persons engaged in

12 the business of conducting financial activities, des13 ignated in the manner provided by the Subcommittee.

14 (c) OTHER LIAISONS.—

15 (1) LAW ENFORCEMENT LIAISONS.—The fol16 lowing shall serve as liaisons between the Sub17 committee and the agencies represented by each such

18 liaison:

19 (A) A representative of the Department of

20 Justice appointed by the Attorney General.

21 (B) A representative of the Federal Bureau

22 of Investigation appointed by the Director of

23 such Bureau.
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1 (C) A representative of the United States

2 Secret Service appointed by the Director of such

3 Service.

4 (D) A representative of the Financial

5 Crimes Enforcement Network (as established by

6 the Secretary of the Treasury) appointed by the

7 Secretary of the Treasury.

8 (2) SUBCOMMITTEE APPOINTED LIAISONS.—The

9 Subcommittee may provide for any other liaison to

10 represent any other regulator, including self-regu11 latory agencies or organizations that maintain data12 bases on persons engaged in the business of con13 ducting financial activities, designated in the manner

14 provided by the Subcommittee.

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

16 member of or liaison to the Subcommittee is not filled with17 in a reasonable period of time after being created or becom18 ing vacant, the President shall appoint an individual to

19 fill the position after consulting the agency or entity to be

20 represented by such member or liaison, and to the extent

21 possible, shall appoint such individual from a list of pos22 sible representatives submitted by such agency or entity.

23 (e) REORGANIZATION AUTHORITY.—

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

25 otherwise significantly modifies the Working Group
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1 referred to in subsection (a), the President shall pro2 vide for the continuation of the Subcommittee’s co3 ordination functions.

4 (2) MEMBER AND LIAISON WITHDRAWAL.—If the

5 President materially alters the structure or duties of

6 the Subcommittee, any member of or liaison to the

7 Subcommittee may withdraw from the Subcommittee.

8 SEC. 102. PURPOSES OF THE SUBCOMMITTEE.

9 (a) IN GENERAL.—The purposes of the Subcommittee

10 are as follows:

11 (1) Coordinate access by the participants to

12 antifraud databases of various regulators, by facili13 tating the establishment, maintenance, and use of a

14 network of existing antifraud information maintained

15 by such regulators with respect to persons engaged in

16 the business of conducting financial activities.

17 (2) Coordinate access by each participant to such

18 network in a manner that allows the participant to

19 review, at a minimal cost, existing information in the

20 databases of other regulators, as a part of licensure,

21 change of control, or investigation, concerning any

22 person engaged in the business of conducting finan23 cial activities.

24 (3) Coordinate information sharing, where ap25 propriate, among State, Federal, and foreign finan-
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1 cial regulators, and law enforcement agencies, where

2 sufficient privacy and confidentiality safeguards

3 exist.

4 (4) Consider coordinating development by par5 ticipants of a networked name-relationship index for

6 persons engaged in the business of conducting finan7 cial activities using information from the databases of

8 regulators, to the extent such information is available.

9 (5) Advise participants on coordinating their

10 antifraud databases with the network.

11 (6) Coordinate development of guidelines by par12 ticipants for ensuring appropriate privacy, confiden13 tiality, and security of shared information, including

14 tracking systems or testing audits, as appropriate.

15 (b) CRITERIA FOR NETWORK WITH RESPECT TO ANY

16 PERSON ENGAGED IN THE BUSINESS OF CONDUCTING FI17 NANCIAL ACTIVITIES.—

18 (1) FINAL DISCIPLINARY AND FORMAL ENFORCE19 MENT ACTIONS.—Each financial regulator that is rep20 resented by a member of the Subcommittee under sec21 tion 101(a) or by a financial liaison to the Sub22 committee under section 101(b) shall allow any par23 ticipant access, through the network, to any public

24 final disciplinary or formal enforcement action by

25 such regulator which is accessible electronically relat-
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1 ing to the conduct of persons engaged in the business

2 of conducting financial activities that is fraudulent or

3 dishonest, involves a breach of trust, or relates to the

4 failure to register with the appropriate financial reg5 ulator as required by law.

6 (2) SENSE OF THE CONGRESS ON OTHER INFOR7 MATION.—It is the sense of the Congress that the fi8 nancial regulators should consider sharing through

9 the network other relevant and useful antifraud infor10 mation relating to companies and other persons en11 gaged in conducting financial activities, to the extent

12 practicable and appropriate when adequate privacy,

13 confidentiality, and security safeguards governing ac14 cess to and the use of such information have been de15 veloped that—

16 (A) is accessible by the public; or

17 (B) consists of information, that does not

18 include personally identifiable information on

19 consumers, on—

20 (i) licenses and applications, financial

21 affiliations and name-relationships, aggre22 gate trend data, or reports filed by a regu23 lated entity with the participant; or

24 (ii) similar information generated by

25 or for a participant if—
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1 (I) such information is being

2 shared for the purpose of verifying an

3 application or other report filed by a

4 regulated entity; and

5 (II) the participant determines

6 such information is factual and sub7 stantiated; and

8 (3) NOTICE AND RESPONSE.—If a financial reg9 ulator takes an adverse action against a person en10 gaged in the business of conducting financial activi11 ties on the basis of information described in para12 graph (1) or (2) that was received from another par13 ticipant through the network, the regulator shall—

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

15 participant from whom such information was re16 ceived;

17 (B) provide the person with a specific and

18 detailed description of the information that was

19 received from the other participant through the

20 network and would be relied on in taking the ad21 verse action; and

22 (C) notify the person of the right to a rea23 sonable opportunity to respond to such informa24 tion.

25 (4) PROVISIONS RELATING TO REQUIREMENTS.—
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1 (A) TIME OF NOTICE.—Any notice to any

2 person, and an opportunity to respond, under

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

4 reasonable period of time before any final action

5 against the person which is based on information

6 referred to in such paragraph is completed, un7 less the financial regulator determines that such

8 advance notice and opportunity to respond is

9 impracticable or inappropriate, in which case

10 the notice and opportunity to respond shall be

11 provided at the time of such final action.

12 (B) VERIFICATION OR SUBSTANTIATION OF

13 INFORMATION.—With respect to information re14 ferred to in paragraph (3), a delay in the con15 sideration of a license, application, report, or

16 other request for the purpose of verifying or sub17 stantiating information relating to such license,

18 application, report, or other request shall not be

19 treated as an adverse action if the verification or

20 substantiation of such information is completed

21 within a reasonable time.

22 (5) USE OF CENTRALIZED DATABASES.—

23 (A) IN GENERAL.—A financial regulator

24 shall be deemed to have met the requirements of

25 paragraph (1) if the Subcommittee determines
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1 that the participants have access to a centralized

2 database that contains information on public

3 final disciplinary or formal enforcement actions

4 similar to that described in paragraph (1) or if

5 the financial regulator makes the information

6 described in paragraph (1) available to the pub7 lic over the Internet.

8 (B) FACTORS FOR DETERMINATION.—The

9 Subcommittee shall make the determination

10 under subparagraph (A) on an ongoing basis,

11 considering both short-term costs and techno12 logical limitations, as well as the need for long13 term comprehensive coverage, and other appro14 priate factors.

15 (C) STATE SUPERVISORS.—It is the sense of

16 the Congress that the National Association of In17 surance Commissioners, the Conference of State

18 Bank Supervisors, the American Council of State

19 Savings Supervisors, the National Association of

20 State Credit Union Supervisors, and the North

21 American Securities Administrators Association

22 should develop model guidelines for regulators in

23 their respective regulated financial industries,

24 where appropriate, to promote uniform stand-
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1 ards for sharing information with the network

2 under this section.

3 (c) FINANCIAL REGULATOR CONTROL OF ACCESS.—

4 (1) IN GENERAL.—Except as provided in para5 graph (4), each participant that allows access to its

6 databases or information by other participants

7 through the network may establish parameters for

8 controlling or limiting such access, including the reg9 ulation of—

10 (A) the type or category of information that

11 may be accessed by other participants and the

12 extent to which any such type or category of in13 formation may be accessed;

14 (B) the participants that may have access

15 to the database or any specific type or category

16 of information in the database (whether for rea17 sons of cost reimbursement, data security, effi18 ciency, or otherwise); and

19 (C) the disclosure by any other participant

20 of any type or category of information that may

21 be accessed by the participant.

22 (2) PROCEDURES.—A participant may establish

23 the parameters described in paragraph (1) by regula24 tion, order, or guideline or on a case-by-case basis.

25 (3) DISCLAIMER.—
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1 (A) IN GENERAL.—Each participant shall

2 ensure that any transfer of information through

3 the network under this section, other than infor4 mation described in paragraphs (1) and (2) of

5 subsection (b), from such participant to another

6 participant is subject to a disclaimer that the in7 formation accessed may be unsubstantiated and

8 may not be relied on as the basis for denying

9 any application or license.

10 (B) SUBCOMMITTEE FLEXIBILITY.—The

11 Subcommittee may prescribe such guidelines as

12 the Subcommittee determines to be appropriate

13 governing the location, wording, and frequency

14 of disclaimers under this paragraph and the

15 manner in which any such disclaimer shall be

16 made.

17 (4) FINAL DISCIPLINARY AND FORMAL ENFORCE18 MENT ACTIONS NOT SUBJECT TO LIMITATION.—This

19 subsection, and standards or procedures adopted by

20 any participant under this subsection, shall not apply

21 with respect to information described in paragraphs

22 (1) and (2) of subsection (b).

23 (5) NO EFFECT ON PUBLIC OR COMPANY AC24 CESS.—No provision of this section shall replace, su25 persede, or otherwise affect access to any databases
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1 maintained by any Federal or State regulator, or any

2 entity representing any such regulator, which are ac3 cessible by the public or persons engaged in the busi4 ness of conducting financial activities.

5 (d) ELIGIBILITY REQUIREMENTS FOR STATE SECURI6 TIES ADMINISTRATORS.—

7 (1) IN GENERAL.—No State securities adminis8 trator shall be eligible to be a participant and access

9 the network unless—

10 (A) such State securities administrator par11 ticipates in a centralized database for broker12 dealers, broker-dealer agents, investment advis13 ers, and investment advisor representatives, reg14 istered or required to be registered, as designated

15 by the North American Securities Administra16 tors Association; and

17 (B) such State securities administrator re18 quires the broker-dealer, broker-dealer agent, in19 vestment adviser, or investment adviser rep20 resentative, currently registered or required to be

21 registered, to file any application, amendment to

22 an application, or a renewal of an application

23 through the centralized registration database.

24 (2) TIME DELAY FOR PARTICIPATION IN DATA25 BASES.—The provisions of paragraph (1) shall not
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1 become effective until 3 years after the date of enact2 ment of this Act.

3 (e) ELIGIBILITY REQUIREMENTS FOR STATE INSUR4 ANCE COMMISSIONERS.—

5 (1) PARTICIPATION IN DATABASES.—No State

6 insurance commissioner shall be eligible to access the

7 network unless such commissioner participates with

8 other State insurance commissioners—

9 (A) in a centralized database addressing

10 disciplinary or enforcement actions taken

11 against persons engaged in the business of insur12 ance, such as the Regulatory Information Re13 trieval System maintained by the National Asso14 ciation of Insurance Commissioners or any net15 work or database designated by such Association

16 as a successor to such System; and

17 (B) in centralized databases addressing,

18 with respect to persons engaged in the business

19 of insurance—

20 (i) corporate and other business affili21 ations or relationships, such as the Pro22 ducer Database maintained by the National

23 Association of Insurance Commissioners or

24 any network or database designated by such
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1 Association as a successor to such Database;

2 and

3 (ii) consumer complaints, such as the

4 Complaints Database maintained by the

5 National Association of Insurance Commis6 sioners or any network or database des7 ignated by such Association as a successor

8 to such Database.

9 (2) TIME DELAY FOR PARTICIPATION IN DATA10 BASES.—The provisions of subparagraph (1)(B) of

11 this section shall not become effective until 3 years

12 after the date of enactment of this Act.

13 (3) ACCREDITATION.—No State insurance com14 missioner shall be eligible to access the network unless

15 the State insurance department which such commis16 sioner represents meets 1 of the following accredita17 tion requirements at the time of access to the network:

18 (A) Is accredited by the National Associa19 tion of Insurance Commissioners.

20 (B) Has an application for accredited sta21 tus pending with the National Association of In22 surance Commissioners.

23 (C) Has a determination by the Sub24 committee in effect that such State insurance de25 partment meets or exceeds the standards estab-
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1 lished by the National Association of Insurance

2 Commissioners for accreditation.

3 (f) SUBCOMMITTEE STANDARDS.—The Subcommittee

4 shall consider developing guidelines for participants on—

5 (1) how to denote which types of information are

6 to receive different levels of confidentiality protection;

7 and

8 (2) how entities or associations that act as

9 agents for financial regulators should denote such

10 agency status when acting in that capacity.

11 (g) REPORTING AND FEASIBILITY REQUIREMENTS AND

12 REVIEW OF OPTIMAL NETWORKING METHODS.—

13 (1) REPORT.—Before the end of the 180-day pe14 riod beginning on the date this subtitle takes effect in

15 accordance with section 101(a), and again before the

16 end of the 2-year period beginning on such date, the

17 Subcommittee shall submit a report to the Congress

18 regarding the methods the regulators plan to use to

19 network information, and a description of any im20 pediments to (or recommended additional legislation

21 for) facilitating the appropriate sharing of such infor22 mation.

23 (2) TIMEFRAME FOR NETWORKING.—

24 (A) IN GENERAL.—The networking of infor25 mation required under subsection (b)(1) shall be
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1 established before the end of the 2-year period be2 ginning on the date this subtitle takes effect, un3 less the Subcommittee determines, in conjunction

4 with the liaisons, that such a network cannot be

5 established within such time period in a prac6 ticable and cost-effective manner.

7 (B) REPORTS ON EFFORTS IF TIMEFRAME

8 IS NOT MET.—If the Subcommittee makes such a

9 determination, the Subcommittee shall report an10 nually to the Congress on its efforts to coordinate

11 the sharing of appropriate information among

12 the regulators until the networking requirements

13 are fulfilled.

14 (h) OTHER SHARING ARRANGEMENTS NOT AF15 FECTED.—No provision of this section shall be construed

16 as limiting or otherwise affecting the authority of a finan17 cial regulator or other member or liaison of the Sub18 committee to provide any person, including another partici19 pant, access to any information in accordance with any

20 provision of law other than this Act.

21 (i) NO NEW DATABASES OR EXPENDITURES MAN22 DATED.—In implementing this Act, the Subcommittee shall

23 not have any authority to require a member or liaison to

24 create a new database or otherwise incur significant costs
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1 in modifying existing databases for the networking of infor2 mation.

3 SEC. 103. CHAIRPERSON; TERM OF CHAIRPERSON; MEET4 INGS; OFFICERS AND STAFF.

5 (a) CHAIRPERSON.—

6 (1) SELECTION.—The members of the Sub7 committee shall select the Chairperson from among

8 the members of the Subcommittee.

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

10 2 years.

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

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

13 there is business to be conducted.

14 (c) QUORUM.—A majority of members of the Sub15 committee shall constitute a quorum.

16 (d) MAJORITY VOTE.—Decisions of the Subcommittee

17 shall be made by the vote of a majority of the members of

18 the Subcommittee.

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

20 Subcommittee may appoint such officers and staff as may

21 be necessary to carry out the purposes of the Subcommittee.

22 SEC. 104. NONAGENCY STATUS.

23 The Subcommittee shall not be considered an advisory

24 committee for purposes of the Federal Advisory Committee
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1 Act or as an agency for purposes of subchapter II of chapter

2 5 of title 5, United States Code.

3 SEC. 105. POWERS OF THE SUBCOMMITTEE.

4 (a) IN GENERAL.—The Subcommittee shall have such

5 powers as are necessary to carry out the purposes of the

6 Subcommittee under this title.

7 (b) INFORMATION TO FACILITATE COORDINATION.—

8 Each agency and entity represented by a member or liaison

9 shall, to the extent permitted by law, provide the Sub10 committee with a description of the types of databases

11 maintained by the agency or entity to assist the Sub12 committee in carrying out the purposes described in section

13 102(a).

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

15 of and liaisons to the Subcommittee shall serve without ad16 ditional compensation for their work on the Subcommittee.

17 (d) ADMINISTRATIVE AND TECHNICAL SUPPORT.—The

18 Subcommittee may request that any agency or entity rep19 resented by a member or liaison provide the Subcommittee

20 with any administrative, technical, or other support service

21 that the Subcommittee determines is necessary or appro22 priate for it to carry out the purposes described in section

23 102(a).
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1 SEC. 106. AGREEMENT ON COST STRUCTURE.

2 (a) IN GENERAL.—The Subcommittee shall determine,

3 after consultation with the affected participants or their

4 representatives, the means for providing for any costs the

5 Subcommittee may incur in carrying out the purposes of

6 this subtitle.

7 (b) CONSULTATION AND AGREEMENT ON FEES AND

8 CONTRIBUTIONS.—Notwithstanding any other provision of

9 this subtitle, the Subcommittee may not impose any fee or

10 assessment on, or apportion any contribution against, any

11 member or liaison under this section unless—

12 (1) the Subcommittee consults with such member

13 or liaison; and

14 (2) the member or liaison consents to the

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

16 or contributions.

17 (c) REIMBURSEMENT OF PARTICIPANT COSTS.—Before

18 allowing access by the Subcommittee or a participant to

19 any information described in section 102, other than access

20 described in subsection (b)(1) of such section, a member or

21 liaison may request the reimbursement of reasonable costs

22 for providing such access.

23 Subtitle C—Regulatory Provisions

24 SEC. 111. AGENCY SUPERVISORY PRIVILEGE.

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

26 following definitions shall apply:
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1 (1) SUPERVISORY PROCESS.—The term ‘‘super2 visory process’’ means any activity engaged in by a

3 financial regulator to carry out the official respon4 sibilities of the financial regulator with regard to the

5 regulation or supervision of persons engaged in the

6 business of conducting financial activities, including

7 examinations, inspections, visitations, investigations,

8 consumer complaints, or any other regulatory or su9 pervisory activities.

10 (2) CONFIDENTIAL SUPERVISORY INFORMA11 TION.—Subject to paragraph (3), the term ‘‘confiden12 tial supervisory information’’ means any of the fol13 lowing information which is treated as, or considered

14 to be, confidential information by a financial regu15 lator, regardless of the form or format in which the

16 information is created, conveyed, or maintained:

17 (A) Any report of examination, inspection,

18 visitation, or investigation, and information pre19 pared or collected by the financial regulator in

20 connection with the supervisory process,

21 including—

22 (i) any file, work paper, or similar in23 formation;

24 (ii) any correspondence, communica25 tion, or information exchanged, in connec-
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1 tion with the supervisory process, between a

2 financial regulator and a person engaged in

3 the business of conducting financial activi4 ties; and

5 (iii) any information, including any

6 report, created by or on behalf of a person

7 engaged in the business of conducting finan8 cial activities that is required by, or is pre9 pared at the request of, a financial regu10 lator in connection with the supervisory

11 process.

12 (B) Any record to the extent it contains in13 formation derived from any report, correspond14 ence, communication or other information de15 scribed in subparagraph (A).

16 (C) Any consumer complaints filed with the

17 financial regulator by a consumer with respect

18 to a person engaged in the business of conducting

19 financial activities that have been identified by

20 the financial regulator as requiring confidential

21 treatment to protect the integrity of an inves22 tigation or the safety of an individual.

23 (3) EXCLUSIONS.—The term ‘‘confidential super24 visory information’’ shall not include—
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1 (A) any book, record, or other information,

2 in the possession of, or maintained on behalf of,

3 the person engaged in the business of conducting

4 financial activities that—

5 (i) is not a report required by, or pre6 pared at the request of, a financial regu7 lator; and

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

9 confidential supervisory information that

10 was created or prepared by a financial reg11 ulator; or

12 (B) any information required to be made

13 publicly available by—

14 (i) any applicable Federal law or regu15 lation; or

16 (ii) in the case of confidential super17 visory information created by a State fi18 nancial regulator or requested from a per19 son engaged in the business of conducting

20 financial activities by a State financial reg21 ulator, any applicable State law or regula22 tion that specifically refers to such type of

23 information.

24 (b) FINANCIAL REGULATOR SUPERVISORY PRIVI25 LEGE.—
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1 (1) PRIVILEGE ESTABLISHED.—

2 (A) IN GENERAL.—All confidential super3 visory information shall be privileged from dis4 closure to any person except as provided in this

5 section.

6 (B) PROHIBITION ON UNAUTHORIZED DIS7 CLOSURES.—No person in possession of confiden8 tial supervisory information may disclose such

9 information, in whole or in part, without the

10 prior authorization of the financial regulator

11 that created the information, or requested the in12 formation from a person engaged in the business

13 of conducting financial activities, except for a

14 disclosure made in published statistical material

15 that does not disclose, either directly or when

16 used in conjunction with publicly available in17 formation, the affairs of any person or other per18 sonally identifiable information.

19 (C) AGENCY WAIVER.—The financial regu20 lator that created the confidential supervisory

21 information, or requested the confidential super22 visory information from a person engaged in the

23 business of conducting financial activities, may

24 waive, in whole or in part, in the discretion of
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1 the regulator, any privilege established under

2 this paragraph with respect to such information.

3 (2) EXCEPTIONS.—

4 (A) ACCESS BY GOVERNMENTAL BODIES.—

5 (i) CONGRESS AND GENERAL ACCOUNT6 ING OFFICE.—No provision of paragraph

7 (1) shall be construed as preventing access

8 to confidential supervisory information by

9 duly authorized committees of the Congress

10 or the Comptroller General of the United

11 States.

12 (ii) FINANCIAL REGULATOR OVER13 SIGHT.—No financial regulator which is de14 scribed in subparagraph (P), (Q), or (R) of

15 section 115(3) and is subject to the oversight

16 of a Federal financial regulator may assert

17 the privilege described in paragraph (1) to

18 prevent access to confidential supervisory

19 information by such Federal financial regu20 lator.

21 (B) PRIVILEGE NOT WAIVED.—If a finan22 cial regulator provides access to confidential su23 pervisory information to the Congress, the Comp24 troller General, or another financial regulator,

25 such action shall not affect the ability of the fi-
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1 nancial regulator to assert any privilege associ2 ated with such information against any other

3 person.

4 (c) TREATMENT OF FOREIGN SUPERVISORY INFORMA5 TION.—In any proceeding before a Federal or State court

6 of the United States, in which a person seeks to compel pro7 duction or disclosure by a financial regulator of informa8 tion or documents prepared or collected by a foreign finan9 cial regulator that would, had the information or document

10 been prepared or collected by a financial regulator, be con11 fidential supervisory information for purposes of this sec12 tion, the information or document shall be privileged to the

13 same extent that the information and documents of finan14 cial regulators are privileged under this title.

15 (d) OTHER PRIVILEGES NOT WAIVED BY DISCLOSURE

16 TO FINANCIAL REGULATOR.—The submission by a person

17 engaged in the business of conducting financial activities

18 of any information to a financial regulator or a foreign

19 financial regulator in connection with the supervisory proc20 ess of such financial regulator or foreign financial regulator

21 shall not waive, destroy, or otherwise affect any privilege

22 such person may claim with respect to such information

23 under Federal or State law as to a party other than such

24 financial regulator or foreign financial regulator.

25 (e) DISCOVERY AND DISCLOSURE OF INFORMATION.—
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1 (1) INFORMATION AVAILABLE ONLY FROM FINAN2 CIAL REGULATOR.—

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

4 the financial regulator that created the informa5 tion or requested the information from a person

6 engaged in the business of conducting financial

7 activities) may disclose, in whole or in part, any

8 confidential supervisory information to any per9 son who seeks such information through sub10 poena, discovery procedures, or otherwise.

11 (B) PROCEDURE FOR REQUESTS SUB12 MITTED TO FINANCIAL REGULATOR.—

13 (i) IN GENERAL.—Any request for dis14 covery or disclosure of confidential super15 visory information shall be made to the fi16 nancial regulator that created the informa17 tion, or requested the information from a

18 person engaged in the business of con19 ducting financial activities.

20 (ii) PROCEDURE.—Upon receiving a

21 request for confidential supervisory infor22 mation, the financial regulator shall deter23 mine within a reasonable time period

24 whether to disclose such information pursu-
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1 ant to procedures and criteria established

2 by the financial regulator.

3 (C) NOTIFICATION.—

4 (i) IN GENERAL.—Before any financial

5 regulator releases information that was re6 quested from a person engaged in the busi7 ness of conducting financial activities to a

8 person under subparagraph (B), notice and

9 a reasonable time for comment shall be pro10 vided to the person from whom such infor11 mation was requested unless such

12 information—

13 (I) is being provided to another fi14 nancial regulator, an agency or entity

15 represented by a liaison to the Sub16 committee, or a Federal, State, or for17 eign government (or any agency or in18 strumentality of any such government

19 acting in any capacity);

20 (II) is being sought for use in a

21 criminal proceeding or investigation,

22 or a regulatory, supervisory, enforce23 ment, or disciplinary administrative

24 proceeding, civil action, or investiga25 tion; or
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1 (III) was originally created, or

2 included in information created, by the

3 financial regulator.

4 (ii) PROCEDURES AND REQUIRE5 MENTS.—A financial regulator may pre6 scribe regulations, or issue orders, guide7 lines, or procedures, governing the notice

8 and time period required by clause (i).

9 (2) FEDERAL COURT JURISDICTION OVER DIS10 PUTES.—

11 (A) REMOVAL AUTHORITY.—In any action

12 or proceeding in which a party seeks to compel

13 disclosure of confidential supervisory informa14 tion, a financial regulator may, in its sole dis15 cretion, elect to remove the matter relating to the

16 disclosure issue to Federal court, and, if the ac17 tion is so removed, the appropriate Federal court

18 shall have exclusive jurisdiction over such mat19 ter.

20 (A) DECLARATORY JUDGMENT.—If a

21 party seeks in any action or pro22 ceeding to compel disclosure of con23 fidential supervisory information, a

24 financial regulator may in a civil ac-
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1 tion for a declaratory judgment seek

2 to prevent such disclosure.

3 (B) JUDICIAL REVIEW.—Judicial review of

4 the final action of a financial regulator with re5 gard to the disposition of a request for confiden6 tial supervisory information shall be before a

7 district court of the United States of competent

8 jurisdiction, subject to chapter 7 of part I of title

9 5, United States Code.

10 (f) AUTHORITY TO INTERVENE.—In the case of any

11 action or proceeding to compel compliance with a subpoena,

12 order, discovery request, or other judicial or administrative

13 process with respect to any confidential supervisory infor14 mation of a financial regulator concerning any person en15 gaged in the business of conducting financial activities, the

16 financial regulator may intervene in such action or pro17 ceeding, and such person may intervene with such regu18 lator, for the purpose of—

19 (1) enforcing the limitations established in para20 graph (1) of subsections (b) and (e);

21 (2) seeking the withdrawal of any compulsory

22 process with respect to such information; and

23 (3) registering appropriate objections with re24 spect to the action or proceeding to the extent the ac-
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1 tion or proceeding relates to or involves such informa2 tion.

3 (g) RIGHT TO APPEAL.—Any court order that compels

4 production of confidential supervisory information may be

5 immediately appealed by the financial regulator and the

6 order compelling production shall be automatically stayed,

7 pending the outcome of such appeal.

8 (h) REGULATIONS.—

9 (1) AUTHORITY TO PRESCRIBE.—Each financial

10 regulator may prescribe such regulations as the regu11 lator considers to be appropriate, after consultation

12 with the other financial regulators (to the extent the

13 prescribing financial regulator considers appropriate

14 and feasible), to carry out the purposes of this section.

15 (2) AUTHORITY TO REQUIRE NOTICE.—Any reg16 ulations prescribed by a financial regulator under

17 paragraph (1) may require any person in possession

18 of confidential supervisory information to notify the

19 financial regulator whenever the person is served with

20 a subpoena, order, discovery request, or other judicial

21 or administrative process requiring the personal at22 tendance of such person as a witness or requiring the

23 production of such information in any proceeding.

24 (i) ABILITY TO PARTIALLY WAIVE PRIVILEGE WHERE

25 NO OTHER PRIVILEGE APPLIES.—A financial regulator
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1 may, to the extent permitted by applicable law governing

2 the disclosure of information by the regulator, authorize a

3 waiver of the privilege established by this section to allow

4 access by a person to confidential supervisory information

5 created by such regulator (or requested by such regulator

6 from any person engaged in the business of conducting fi7 nancial activities), except that—

8 (1) the regulator may place appropriate limits

9 on the use and disclosure of the information shared,

10 and may continue to assert the privilege with respect

11 to any other person that seeks access to the informa12 tion; and

13 (2) such waiver shall not affect any other privi14 lege or confidentiality protection that any party may

15 assert against any person other than such financial

16 regulator.

17 (j) SHARING OF REPORTS.—

18 (1) IN GENERAL.—Subject to subsection (k), no

19 provision of this section shall be construed as pre20 venting a person engaged in the business of con21 ducting financial activities from providing a report

22 that is required by, or prepared at the request of, a

23 financial regulator (the originating financial regu24 lator) to another financial regulator that has the au-
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1 thority to obtain the information from the person

2 under any other provision of law.

3 (2) PRIVILEGE PRESERVED.—If a person pro4 vides a report referred to in paragraph (1) to a fi5 nancial regulator other than the originating financial

6 regulator, such action shall not affect the ability of

7 the originating financial regulator to assert any

8 privilege that such financial regulator may claim

9 with respect to the report against any person that is

10 not a financial regulator.

11 (k) REQUESTS FOR INFORMATION INVOLVING AN12 OTHER FINANCIAL REGULATOR.—

13 (1) IN GENERAL.—Before any financial regu14 lator requests information from a person engaged in

15 the business of conducting financial activities that is

16 confidential supervisory information contained in a

17 report that was created by another financial regu18 lator, or that was derived from confidential super19 visory information that was created by another finan20 cial regulator, (hereafter in this subsection referred to

21 as the ‘‘originating financial regulator’’), the finan22 cial regulator seeking such information (hereafter in

23 this subsection referred to as the ‘‘requesting financial

24 regulator’’) shall first request such information di25 rectly from the originating financial regulator.
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1 (2) NOTICE OF INTENT TO REQUEST INFORMA2 TION FROM FINANCIAL INSTITUTION.—If, pursuant to

3 a request from a requesting financial regulator under

4 paragraph (1), an originating financial regulator re5 fuses to provide the information described in such

6 paragraph, the requesting financial regulator may

7 not request or compel the production of such informa8 tion from a person engaged in the business of con9 ducting financial activities unless the requesting fi10 nancial regulator first provides notice of such regu11 lator’s intention (to make such request or compel such

12 production) to the originating financial institution

13 and provides the originating financial regulator with

14 reasonable opportunity to respond.

15 (3) DECLARATORY JUDGMENT.—The opportunity

16 to respond described in paragraph (2) shall include

17 the right of the originating financial regulator to

18 bring an action in the United States District Court

19 for the District of Columbia for a declaratory judg20 ment of the rights and privileges of the requesting and

21 originating financial regulators with respect to the

22 information described in paragraph (1), and such re23 lief as may be appropriate.

24 (4) STANDARDS.—In any action brought under

25 paragraph (3), the United States District Court for
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1 the District of Columbia shall decide the matter de

2 novo based on applicable law, other than this title, in3 cluding any protections or privileges that would be

4 available to the originating financial regulator if such

5 regulator were to intervene in an action brought by

6 the requesting financial regulator to compel the pro7 duction of such information from the person engaged

8 in the business of conducting financial activity re9 ferred to in paragraph (1).

10 (5) PROHIBITION ON REQUESTING INFORMATION

11 WHILE ACTION IS PENDING.—While any action under

12 paragraph (3) is pending with respect to any infor13 mation described in paragraph (1), the requesting fi14 nancial regulator may not make any request for such

15 information from any person engaged in the business

16 of conducting financial activity.

17 (6) RULE OF CONSTRUCTION.—No provision of

18 this subsection may be construed as creating any new

19 authority for any financial regulator to request or

20 compel the production of any information from any

21 person engaged in the business of conducting finan22 cial activities.

23 (l) NO WAIVER OF ANY PRIVILEGE OF ANY OTHER

24 PARTY.—No provision of this Act shall provide a financial

25 regulator with any new authority to disclose information
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1 in contravention of applicable law governing disclosure of

2 information.

3 SEC. 112. CONFIDENTIALITY OF INFORMATION.

4 (a) IN GENERAL.—

5 (1) FINANCIAL REGULATORS.—Except as other6 wise provided in this section or section 111, any re7 quirement under Federal or State law regarding the

8 privacy or confidentiality of any information or ma9 terial in the possession of any participant, and any

10 privilege arising under Federal or State law (includ11 ing the rules of any Federal or State court) with re12 spect to such information or material, shall continue

13 to apply to such information or material after the

14 information or material has been disclosed through

15 the network to another participant or, if subtitle B

16 has taken effect, the Subcommittee.

17 (2) CERTAIN INSURANCE INFORMATION.—Except

18 as otherwise provided in this section or section 111,

19 any requirement under Federal or State law regard20 ing the privacy or confidentiality of any information

21 or material in the possession of the National Associa22 tion of Insurance Commissioners, or any member or

23 affiliate of the Association, and any privilege arising

24 under Federal or State law (including the rules of

25 any Federal or State court) with respect to such in-
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1 formation or material, shall continue to apply to such

2 information or material after the information has

3 been disclosed to the Association, or any other member

4 or affiliate of the Association, through the computer

5 databases maintained by the Association.

6 (3) NONAPPLICABILITY OF CERTAIN REQUIRE7 MENTS.—Information or material that is subject to a

8 privilege or confidentiality under any other para9 graph of this subsection shall not be subject to—

10 (A) disclosure under any Federal or State

11 law governing the disclosure to the public of in12 formation held by an officer or an agency of the

13 Federal Government or the respective State; or

14 (B) subpoena or discovery, or admission

15 into evidence, in any private civil action or ad16 ministrative process,

17 unless with respect to any privilege held by a partici18 pant with respect to such information or material, the

19 participant waives, in whole or in part, in the discre20 tion of the participant, such privilege.

21 (b) PREEMPTION OF STATE LAW.—Any State law, in22 cluding any State open record law, relating to the disclosure

23 of confidential supervisory information or any information

24 or material to which subsection (a) applies that is incon25 sistent with any provision of section 111 or subsection (a)
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1 of this section shall be superseded by the requirements of

2 such provision to the extent State law provides less con3 fidentiality or a weaker privilege.

4 (c) DUTY OF FINANCIAL REGULATOR TO MAINTAIN

5 CONFIDENTIALITY.—A participant may not receive,

6 download, copy, or otherwise maintain any information or

7 material from any other member of or liaison to the Sub8 committee through the network unless—

9 (1) the participant maintains a system that en10 ables the participant to maintain full compliance

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

12 and this section, with respect to such information and

13 material; and

14 (2) if and to the extent required by the guidelines

15 established under sections 100 and 102, a record is

16 maintained of each attempt to access such informa17 tion and material, and the identity of the person

18 making the attempt, in order to prevent evasions of

19 such requirements.

20 SEC. 113. LIABILITY PROVISIONS.

21 (a) NO LIABILITY FOR GOOD FAITH DISCLOSURES.—

22 Any financial regulator, and any officer or employee of any

23 financial regulator, shall not be subject to any civil action

24 or proceeding for monetary damages by reason of the good

25 faith action or omission of any officer or employee, while
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1 acting within the scope of office or employment, relating

2 to collecting, furnishing, or disseminating regulatory or su3 pervisory information concerning persons engaged in the

4 business of conducting financial activities, to or from an5 other financial regulator, whether directly or through the

6 network.

7 (b) CRIMINAL LIABILITY FOR INTENTIONAL UNLAWFUL

8 DISCLOSURES.—

9 (1) IN GENERAL.—It shall be unlawful to will10 fully disclose to any person any information con11 cerning any person engaged in the business of con12 ducting financial activities knowing the disclosure to

13 be in violation of any provision of this title—

14 (A) requiring the confidentiality of such in15 formation; or

16 (B) establishing a privilege from disclosure

17 for such information that has not been waived by

18 the relevant financial regulator.

19 (2) PENALTY.—Notwithstanding section 3571 of

20 title 18, United States Code, any person who violates

21 paragraph (1) shall be fined an amount not to exceed

22 the greater of $100,000 or the amount of the actual

23 damages sustained by any person as a result of such

24 violation, or imprisoned not more than 5 years, or

25 both.
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1 (c) FULL, CONTINUED PROTECTION UNDER THE SO2 CALLED ‘‘FEDERAL TORT CLAIMS ACT’’.—No provision of

3 this Act shall be construed as reducing or limiting any pro4 tection provided for any Federal agency, or any officer or

5 employee of any Federal agency, under section 2679 of title

6 28, United States Code.

7 (d) PROTECTION APPLIED TO THE SUBCOMMITTEE.—

8 For the purposes of this section, the term ‘‘financial regu9 lator’’ includes the Subcommittee after subtitle B has taken

10 effect.

11 SEC. 114. AUTHORIZATION FOR IDENTIFICATION AND

12 CRIMINAL BACKGROUND CHECK.

13 (a) SHARING OF CRIMINAL RECORDS.—

14 (1) ATTORNEY GENERAL AUTHORIZATION.—

15 Upon receiving a request from a financial regulator,

16 the Attorney General shall—

17 (A) search the records of the Criminal Jus18 tice Information Services Division of the Federal

19 Bureau of Investigation, and any other similar

20 database over which the Attorney General has

21 authority and deems appropriate, for any crimi22 nal background records (including wanted per23 sons information) corresponding to the identi24 fication information provided under subsection

25 (b); and
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1 (B) either—

2 (i) shall provide any such records to

3 any authorized agent of the financial regu4 lator, which shall provide the relevant infor5 mation to such regulator; or

6 (ii) may provide such records directly

7 to the financial regulator if the Attorney

8 General limits such provision of records to

9 relevant information.

10 (2) AUTHORIZED AGENT DEFINED.—For pur11 poses of this section, the term ‘‘authorized agent’’

12 means—

13 (A) any agent which has been recognized by

14 the Attorney General for such purpose and au15 thorized by at least 3 other financial regulators

16 to receive such records and perform the informa17 tion sharing requirements of paragraph (3);

18 (B) the State attorney general for the State

19 in which the regulator is primarily located; and

20 (C) any law enforcement designee of the At21 torney General or such State attorney general.

22 (3) INFORMATION SHARED.—

23 (A) IN GENERAL.—The authorized agent

24 shall provide to the requesting financial regu-
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1 lator only any records that are relevant informa2 tion.

3 (B) RELEVANT INFORMATION DEFINED.—

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

5 information’’ means any of the following records:

6 (i) All felony convictions.

7 (ii) All misdemeanor convictions

8 involving—

9 (I) violation of a law involving fi10 nancial activities;

11 (II) dishonesty or breach of trust,

12 within the meaning of section 1033 of

13 title 18, United States Code, including

14 taking, withholding, misappropriating,

15 or converting money or property;

16 (III) failure to comply with child

17 support obligations;

18 (IV) failure to pay taxes; and

19 (V) domestic violence, child abuse,

20 or a crime of violence.

21 (C) CRIME OF VIOLENCE DEFINED.—For

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

23 ‘‘crime of violence’’ means a burglary of a dwell24 ing and a criminal offense that has as an ele25 ment, the use or attempted use of physical force,
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1 or threat of great bodily harm, or the use, at2 tempted use, or threatened use of a deadly weap3 on, against an individual, including committing

4 or attempting to commit murder, manslaughter,

5 kidnapping, aggravated assault, forcible sex of6 fenses, robbery, arson, extortion, and extortionate

7 extension of credit.

8 (4) STATE UNIFORM OR RECIPROCITY LAWS RE9 QUIREMENT.—

10 (A) IN GENERAL.—The Attorney General

11 may not provide any records under this sub12 section to an insurance regulator of a State, or

13 agent of such regulator, if such State does not

14 have in effect uniform or reciprocity laws and

15 regulations governing the licensure of individuals

16 and entities authorized to sell and solicit the

17 purchase of insurance within the State as set

18 forth in section 321 of Public Law 106–102.

19 (B) DETERMINATION OF RECIPROCITY.—

20 The determination of whether or not a State has

21 uniform or reciprocity laws or regulations in ef22 fect for purposes of subparagraph (A) shall be

23 made by the Attorney General, with the advice

24 and counsel of the National Association of Insur25 ance Commissioners.
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1 (C) EXCEPTION UNDER CERTAIN CIR2 CUMSTANCES.—Notwithstanding subparagraph

3 (B), the Attorney General may provide records

4 under this section to an insurance regulator of a

5 State, or agent of such regulator, on the basis of

6 a specific determination by the National Associa7 tion of Insurance Commissioners that such State

8 has in effect uniform or reciprocity laws and

9 regulations referred to in subparagraph (A) if—

10 (i) a determination by the Attorney

11 General under subparagraph (B) is pend12 ing; or

13 (ii) the Attorney General considers

14 whether such State has in effect such uni15 form or reciprocity laws or regulations and

16 fails to make a determination, unless the

17 Attorney General subsequently determines

18 that such State does not have in effect uni19 form or reciprocity laws or regulations.

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

21 (a) shall include a copy of any necessary identification in22 formation required by the Attorney General, such as the

23 name and fingerprints of the person about whom the record

24 is requested and a statement signed by the person acknowl-
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1 edging that the regulator (or such regulator’s designated

2 agent under subsection (g)(1)) may request the search.

3 (c) LIMITATION ON PERMISSIBLE USES OF INFORMA4 TION.—Information obtained under this section may—

5 (1) be used only for regulatory or law enforce6 ment purposes; and

7 (2) be disclosed—

8 (A) only to other financial regulators or

9 Federal or State law enforcement agencies; and

10 (B) only if the recipient agrees to—

11 (i) maintain the confidentiality of such

12 information; and

13 (ii) limit the use of such information

14 to appropriate regulatory and law enforce15 ment purposes.

16 (d) PENALTY FOR IMPROPER USE.—

17 (1) IN GENERAL.—Whoever uses any information

18 obtained under this section knowingly and willfully

19 for an unauthorized purpose shall be fined under title

20 18, United States Code, imprisoned for not more than

21 2 years, or both.

22 (2) ADDITIONAL PENALTIES AND WAIVERS.—

23 (A) IN GENERAL.—Any authorized agent

24 who violates paragraph (1), or any individual

25 who directs such agent to violate such para-
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1 graph, shall be barred from engaging in or regu2 lating any activities related to the business of in3 surance.

4 (B) WAIVER AUTHORIZED.—The Attorney

5 General, in the discretion of the Attorney Gen6 eral, may waive the bar in subparagraph (A), as

7 appropriate.

8 (e) RELIANCE ON INFORMATION.—A financial regu9 lator (or such regulator’s designated agent under subsection

10 (g)(1)) who reasonably relies on information provided

11 under this section shall not be liable in any action for using

12 information as permitted under this section in good faith.

13 (f) CLARIFICATION OF SECTION 1033.—With respect to

14 any action brought under section 1033(e)(1)(B) of title 18,

15 United States Code, no person engaged in the business of

16 conducting financial activities shall be subject to any pen17 alty resulting from such section if the individual who the

18 person permitted to engage in the business of insurance is

19 licensed, or approved (as part of an application or other20 wise), by a State insurance regulator that performs crimi21 nal background checks under this section, unless such person

22 knows that the individual is in violation of section

23 1033(e)(1)(A) of such title.

24 (g) DESIGNATION OF AGENT.—
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1 (1) IN GENERAL.—A financial regulator may

2 designate an agent for facilitating requests and ex3 changes of information under this section between or

4 among the financial regulator, the Attorney General,

5 and any other authorized agent.

6 (2) SENSE OF CONGRESS REGARDING AGENTS OF

7 INSURANCE REGULATORS.—It is the sense of the Con8 gress that—

9 (A) each State insurance commissioner

10 should designate the National Association of In11 surance Commissioners as an agent under para12 graph (1);

13 (B) persons engaged in the business of in14 surance should be able to use the National Asso15 ciation of Insurance Commissioners to facilitate

16 obtaining fingerprints and supplying identifica17 tion information for use in background checks

18 under this section on a multijurisdictional basis;

19 (C) the National Association of Insurance

20 Commissioners should maintain a database to

21 obtain records under this section for use by State

22 insurance commissioners to reduce multiple or

23 duplicative fingerprinting requirements and

24 criminal background checks, except that any such

25 record shall not be maintained for more than 1
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1 year without performing a new background check

2 to determine if the criminal background record

3 has changed;

4 (D) other financial regulators that require

5 fingerprints and criminal background checks

6 should similarly coordinate efforts to reduce du7 plication for persons engaged in the business of

8 conducting multiple types of financial activities;

9 and

10 (E) the National Association of Insurance

11 Commissioners, and other financial regulators

12 that use this section, should consult with the At13 torney General to consider the feasibility of de14 veloping an on-going notification system that

15 would allow the Attorney General to notify such

16 Association when a licensed or approved insur17 ance professional is convicted of a relevant

18 crime.

19 (h) FEES.—The Attorney General may charge a rea20 sonable fee for the provision of information under this sec21 tion.

22 (i) RULE OF CONSTRUCTION.—This section shall not—

23 (1) provide independent authorization for a fi24 nancial regulator to require fingerprinting as a part

25 of a licensure or other application;
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1 (2) require a financial regulator to perform

2 criminal background checks under this section; or

3 (3) supersede or otherwise limit any other au4 thority that allows access to criminal background

5 records.

6 (j) REGULATIONS.—The Attorney General may pre7 scribe regulations to carry out this section.

8 SEC. 115. DEFINITIONS.

9 For purposes of this title, the following definitions

10 shall apply:

11 (1) FEDERAL BANKING AGENCY.—The term

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

13 given in section 3(z) of the Federal Deposit Insurance

14 Act.

15 (2) FINANCIAL ACTIVITIES.—

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

17 activities’’—

18 (i) means banking activities (including

19 the ownership of a bank), securities activi20 ties, insurance activities, or commodities

21 activities; and

22 (ii) includes all activities that are fi23 nancial in nature or are incidental to a fi24 nancial activity (as defined under section
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1 4(k) of the Bank Holding Company Act of

2 1956).

3 (B) RULE OF CONSTRUCTION.—Subpara4 graph (A) shall not be construed as creating any

5 inference, including any negative inference, con6 cerning the types or extent of activities that are

7 appropriately recognized as activities that are fi8 nancial in nature, or are incidental to a finan9 cial activity, for purposes of section 4 of the

10 Bank Holding Company Act of 1956.

11 (3) FINANCIAL REGULATOR.—The term ‘‘finan12 cial regulator’’ means—

13 (A) each Federal banking agency;

14 (B) the Securities and Exchange Commis15 sion;

16 (C) the Commodity Futures Trading Com17 mission;

18 (D) the National Credit Union Administra19 tion;

20 (E) the Farm Credit Administration;

21 (F) the Federal Housing Finance Board;

22 (G) the Federal Trade Commission, to the

23 extent the Commission has jurisdiction over fi24 nancial activities being conducted by a person
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1 engaged in the business of conducting financial

2 activities;

3 (H) the Secretary of the Treasury, to the ex4 tent the Secretary has jurisdiction over financial

5 activities being conducted by a person engaged

6 in the business of conducting financial activities;

7 (I) the Office of Federal Housing Enterprise

8 Oversight of the Department of Housing and

9 Urban Development;

10 (J) the Appraisal Subcommittee of the Fi11 nancial Institutions Examination Council;

12 (K) any State bank supervisor (as defined

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

14 Act), including the Conference of State Bank Su15 pervisors only to the extent such conference is

16 acting as an agent of, and is subject to the over17 sight of, any such State bank supervisor;

18 (L) any State savings association super19 visor, including the American Council of State

20 Savings Supervisors only to the extent such con21 ference is acting as an agent of, and is subject

22 to the oversight of, any such State savings asso23 ciation supervisor;

24 (M) any State insurance commissioner, in25 cluding the National Association of Insurance
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1 Commissioners only to the extent such associa2 tion is acting as the agent of, and is subject to

3 the oversight of, any such insurance commis4 sioner;

5 (N) any State securities administrator, in6 cluding the North American Securities Adminis7 trators Association only to the extent such asso8 ciation is acting as the agent of, and is subject

9 to the oversight of, any such securities adminis10 trator;

11 (O) any State credit union supervisor, in12 cluding the National Association of State Credit

13 Union Supervisors only to the extent such asso14 ciation is acting as the agent of, and is subject

15 to the oversight of, any such credit union super16 visor;

17 (P) the National Association of Securities

18 Dealers, only to the extent that—

19 (i) such association is acting in con20 nection with the financial services industry;

21 and

22 (ii) the association and the relevant ac23 tions are subject to the oversight of the Secu24 rities and Exchange Commission;
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1 (Q) the National Futures Association, only

2 to the extent that—

3 (i) such association is acting in con4 nection with the financial services industry;

5 and

6 (ii) the association and the relevant ac7 tions are subject to the oversight of the Com8 modity Futures Trading Commission or the

9 Securities and Exchange Commission; and

10 (R) any other self-regulatory organization

11 that engages in or coordinates regulatory and su12 pervisory activities, with respect to any person

13 engaged in the business of conducting financial

14 activities, and is subject to the oversight of the

15 Securities and Exchange Commission or the

16 Commodity Futures Trading Commission, but

17 only to the extent that the organization engages

18 in such activities and is subject to such oversight.

19 (4) FOREIGN FINANCIAL REGULATOR.—The term

20 ‘‘foreign financial regulator’’ means any agency, enti21 ty, or body (including a self-regulatory organization)

22 that is empowered by the laws of a foreign country

23 to supervise and regulate persons engaged in the busi24 ness of conducting financial activities, but only to the

25 extent of such supervisory and regulatory activities.
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1 (5) PARTICIPANT.—The term ‘‘participant’’

2 means any entity described in section 101 as being

3 represented by a member of, or a liaison to, the Sub4 committee (regardless of whether subtitle B has taken

5 effect) but only to the extent the regulator provides or

6 obtains access to information through the network.

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

8 financial regulator.

9 (7) PERSON ENGAGED IN THE BUSINESS OF CON10 DUCTING FINANCIAL ACTIVITIES.—The term ‘‘person

11 engaged in the business of conducting financial ac12 tivities’’ includes, to the extent appropriate under the

13 laws applicable to the jurisdiction of a financial regu14 lator over such person—

15 (A) any director, officer, employee, or con16 trolling stockholder of, or agent for, any such

17 person;

18 (B) any other person who has filed or is re19 quired to file a change-in-control notice with the

20 appropriate financial regulator before acquiring

21 control of such person; and

22 (C) any person who has sought approval

23 from a financial regulator to engage in the busi24 ness of conducting financial activities, or that
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1 was engaged in such business and subject to the

2 jurisdiction of a financial regulator; and

3 (D) any shareholder, consultant, joint ven4 ture partner, and any other person, including an

5 independent contractor, as determined by the ap6 propriate financial regulator (by regulation or

7 case-by-case) who participates in the conduct of

8 the affairs of such person.

9 (8) STATE INSURANCE COMMISSIONER.—The

10 term ‘‘State insurance commissioner’’ means any offi11 cer, agency, or other entity of any State which has

12 primary regulatory authority over the business of in13 surance and over any person engaged in the business

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

15 State.

16 (9) STATE SECURITIES ADMINISTRATOR.—The

17 term ‘‘State securities administrator’’ means the secu18 rities commission (or any agency or office performing

19 like functions) of any State.

20 SEC. 116. TECHNICAL AND CONFORMING AMENDMENTS TO

21 OTHER ACTS.

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

23 States Code, is amended—

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

25 (11);
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1 (2) by striking the period at the end of para2 graph (12) and inserting ‘‘; or’’; and

3 (3) by inserting after paragraph (12) the fol4 lowing new paragraph:

5 ‘‘(13) for recordkeeping, licensing, and other reg6 ulatory and law enforcement purposes in accordance

7 with title I of the Financial Services Antifraud Net8 work Act of 2001—

9 ‘‘(A) through a network or name-relation10 ship index maintained under such title; or

11 ‘‘(B) to a multistate database maintained

12 by the National Association of Insurance Com13 missioners and any subsidiary or affiliate of

14 such association, subject to the requirements of

15 such title.’’.

16 (b) Section 1113 of the Financial Institutions Regu17 latory and Interest Rate Control Act of 1978 (12 U.S.C.

18 3413) is amended by adding at the end the following new

19 subsection:

20 ‘‘(r) This title shall not apply to disclosure by a finan21 cial regulator of information pursuant to subtitle A or B

22 of the Financial Services Antifraud Network Act of 2001

23 to the extent the disclosure is made in accordance with the

24 requirements of such Act.’’.
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1 (c) Section 602 of the Consumer Credit Protection Act

2 (15 U.S.C. 1681) is amended by adding at the end the fol3 lowing new subsection:

4 ‘‘(c) This title shall not apply to a communication be5 tween participants, as defined in the Financial Services

6 Antifraud Network Act of 2001, to the extent the commu7 nication is made in accordance with such Act.’’.

8 SEC. 117. AUDIT OF STATE INSURANCE REGULATORS.

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

10 Comptroller General shall audit a State insurance regulator

11 or any person who maintains information on behalf of such

12 regulator.

13 (b) LIMITATIONS ON DISCLOSURE OF INFORMATION.—

14 Except as provided in this subsection, an officer or employee

15 of the General Accounting Office may not disclose informa16 tion identifying an open insurance company or a customer

17 of an open or closed insurance company. The Comptroller

18 General may disclose information related to the affairs of

19 a closed insurance company only if the Comptroller General

20 believes the customer had a controlling influence in the

21 management of the closed insurance company or was re22 lated to or affiliated with a person or group having a con23 trolling influence.

24 (c) COORDINATION WITH STATE REGULATOR.—An of25 ficer or employee of the Office may discuss a customer or
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1 insurance company with an official of a State insurance

2 regulator and may report an apparent criminal violation

3 to an appropriate law enforcement authority of the United

4 States Government or a State.

5 (d) CONGRESSIONAL OVERSIGHT.—This subsection

6 shall not be construed as authorizing an officer or employee

7 of a State insurance regulator to withhold information from

8 a committee of the Congress authorized to have the informa9 tion.

10 (e) ADMINISTRATIVE ASPECTS OF AUDIT.—

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

12 records and property of or used by a State insurance

13 regulator, including samples of reports of examina14 tions of an insurance company the Comptroller Gen15 eral considers statistically meaningful and

16 workpapers and correspondence related to the reports

17 shall be made available to the Comptroller General.

18 The Comptroller General shall give a State insurance

19 regulator a current list of officers and employees to

20 whom, with proper identification, records and prop21 erty may be made available, and who may make

22 notes or copies necessary to carry out an audit.

23 (2) PREVENTION OF UNAUTHORIZED ACCESS.—

24 The Comptroller General shall prevent unauthorized

25 access to records or property of or used by a State in-
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1 surance regulator that the Comptroller General ob2 tains during an audit.

3 (f) CONFIDENTIALITY.—

4 (1) IN GENERAL.—The Comptroller General shall

5 maintain the same level of confidentiality for a record

6 made available under this section as is required of the

7 head of the State insurance regulator from which it

8 is obtained.

9 (2) PREVENTION OF INVASION OF PERSONAL PRI10 VACY.—The Comptroller General shall keep informa11 tion described in section 552(b)(6) of title 5, United

12 States Code, that the Comptroller General obtains in

13 a way that prevents unwarranted invasions of per14 sonal privacy.

15 (3) AVAILABILITY OF INFORMATION.—Except as

16 provided in subsection (b), no provision of this section

17 shall be construed as authorizing any information to

18 be withheld from the Congress.

19 (g) AVAILABILITY OF INFORMATION AND INSPECTION

20 OF RECORDS.—The right of access of the Comptroller Gen21 eral to information under this section shall be enforceable

22 under section 716 of title 31, United States Code.

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

24 following definitions shall apply:
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1 (1) STATE INSURANCE REGULATOR DEFINED.—

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

3 principal insurance regulatory authority of a State,

4 the District of Columbia, any territory of the United

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

6 Trust Territory of the Pacific Islands, the Virgin Is7 lands, and the Northern Mariana Islands.

8 (2) INSURANCE COMPANY.—The term ‘‘insurance

9 company’’ includes any person engaged in the busi10 ness of insurance to the extent of such activities.

11 TITLE II—SECURITIES INDUSTRY

12 COORDINATION

13 Subtitle A—Disciplinary

14 Information

15 SEC. 201. INVESTMENT ADVISERS ACT OF 1940.

16 Section 204 of the Investment Advisers Act of 1940 (15

17 U.S.C. 80b–4) is amended—

18 (1) by striking ‘‘Every investment’’ and insert19 ing the following:

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

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

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

23 rule, may require an investment adviser—

24 ‘‘(1) to file with the Commission any fee, appli25 cation, report, or notice required to be filed by this
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1 title or the rules issued under this title through any

2 entity designated by the Commission for that purpose;

3 and

4 ‘‘(2) to pay the reasonable costs associated with

5 such filing and the establishment and maintenance of

6 the systems required by subsection (c).

7 ‘‘(c) ACCESS TO DISCIPLINARY AND OTHER INFORMA8 TION.—

9 ‘‘(1) MAINTENANCE OF SYSTEM TO RESPOND TO

10 INQUIRIES.—The Commission shall require the entity

11 designated by the Commission under subsection

12 (b)(1)—

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

14 telephone listing or other readily accessible elec15 tronic process to receive inquiries regarding dis16 ciplinary actions and proceedings and other in17 formation involving investment advisers and

18 persons associated with investment advisers; and

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

20 ‘‘(2) RECOVERY OF COSTS.—An entity des21 ignated by the Commission under subsection (b)(1)

22 may charge persons, other than individual investors,

23 reasonable fees for responses to inquiries made under

24 paragraph (1).
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1 ‘‘(3) LIMITATION ON LIABILITY.—An entity des2 ignated by the Commission under subsection (b)(1)

3 shall not have any liability to any person for any ac4 tions taken or omitted in good faith under this sub5 section.’’.

6 SEC. 202. SECURITIES EXCHANGE ACT OF 1934.

7 Subsection (i) of section 15A of the Securities Ex8 change Act of 1934 (15 U.S.C. 78o–3) is amended to read

9 as follows:

10 ‘‘(i) OBLIGATION TO MAINTAIN DISCIPLINARY AND

11 OTHER DATA.—

12 ‘‘(1) MAINTENANCE OF SYSTEM TO RESPOND TO

13 INQUIRIES.—A registered securities association

14 shall—

15 ‘‘(A) establish and maintain a toll-free tele16 phone listing or other readily accessible elec17 tronic process to receive inquiries regarding dis18 ciplinary actions and proceedings and other in19 formation involving its members and their asso20 ciated persons and regarding disciplinary ac21 tions and proceedings and other information

22 that has been reported to the Central Registra23 tion Depository by any registered national secu24 rities exchange involving its members and their

25 associated persons; and
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1 ‘‘(B) promptly respond to such inquiries.

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

3 may charge persons, other than individual investors,

4 reasonable fees for responses to such inquiries.

5 ‘‘(3) LIMITATION ON LIABILITY.—Such an asso6 ciation or exchange shall not have any liability to

7 any person for any actions taken or omitted in good

8 faith under this subsection.’’.

9 Subtitle B—Preventing Migration of

10 Rogue Financial Professionals

11 to the Securities Industry

12 SEC. 211. SECURITIES EXCHANGE ACT OF 1934.

13 (a) BROKERS AND DEALERS.—Section 15(b) of the Se14 curities Exchange Act of 1934 (15 U.S.C. 78o(b)) is

15 amended—

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

17 (F) and (G) and inserting the following:

18 ‘‘(F) is subject to any order of the Commission

19 barring or suspending the right of the person to be as20 sociated with a broker or dealer.

21 ‘‘(G) has been found by a foreign financial regu22 latory authority to have—

23 ‘‘(i) made or caused to be made in any ap24 plication for registration or report required to be

25 filed with a foreign financial regulatory author-
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1 ity, or in any proceeding before a foreign finan2 cial regulatory authority with respect to reg3 istration, any statement that was at the time

4 and in the light of the circumstances under

5 which it was made false or misleading with re6 spect to any material fact, or omitted to state in

7 any such application, report, or proceeding any

8 material fact that is required to be stated there9 in;

10 ‘‘(ii) violated any foreign statute or regula11 tion regarding securities, banking, thrift activi12 ties, credit union activities, insurance, or con13 tracts of sale of a commodity for future delivery,

14 traded on or subject to the rules of a contract

15 market or any board of trade; or

16 ‘‘(iii) aided, abetted, counseled, commanded,

17 induced, or procured the violation by any other

18 person of any provision of any statutory provi19 sions enacted by a foreign government, or rules

20 or regulations thereunder, regarding securities,

21 banking, thrift activities, credit union activities,

22 insurance, or contracts of sale of a commodity

23 for future delivery traded on or subject to the

24 rules of a contract market or any board of trade,

25 or to have failed reasonably to supervise, with a
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1 view to preventing violations of such statutory

2 provisions, rules, and regulations, another person

3 who commits such a violation, if such other per4 son is subject to his supervision.

5 ‘‘(H) is subject to any final order of a State se6 curities commission (or any agency or officer per7 forming like functions), State authority that super8 vises or examines banks, thrifts, or credit unions,

9 State insurance commission (or any agency or office

10 performing like functions), an appropriate Federal

11 banking agency (as defined in section 3 of the Federal

12 Deposit Insurance Act (12 U.S.C. 1813(q)), or the

13 National Credit Union Administration, that—

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

15 an entity regulated by such commission, author16 ity, agency, or officer, or from engaging in the

17 business of securities, insurance, banking, thrift

18 activities, or credit union activities; or

19 ‘‘(ii) constitutes a final order based on vio20 lations of any laws or regulations that prohibit

21 fraudulent, manipulative, or deceptive conduct.’’;

22 and

23 (2) in paragraph (6)(A)(i), by striking ‘‘or omis24 sion enumerated in subparagraph (A), (D), (E), or

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

2 (G), or (H)’’.

3 (b) MUNICIPAL SECURITIES BROKERS AND DEAL4 ERS.—Section 15B(c) of the Securities Exchange Act of

5 1934 (15 U.S.C. 78o–4(c)) is amended—

6 (1) in paragraph (2)—

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

8 subparagraph (A), (D), (E), or (G)’’ and insert9 ing ‘‘, or is subject to an order or finding, enu10 merated in subparagraph (A), (D), (E), (G), or

11 (H)’’; and

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

13 and

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

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

16 and inserting ‘‘, or is subject to an order or finding,

17 enumerated in subparagraph (A), (D), (E), (G), or

18 (H)’’.

19 (c) GOVERNMENT SECURITIES BROKERS AND DEAL20 ERS.—Section 15C(c)(1) of the Securities Exchange Act of

21 1934 (15 U.S.C. 78o–5(c)(1)) is amended—

22 (1) in subparagraph (A), by striking ‘‘or omis23 sion enumerated in subparagraph (A), (D), (E), or

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

2 (G), or (H)’’; and

3 (2) in subparagraph (C), by striking ‘‘or omis4 sion enumerated in subparagraph (A), (D), (E), or

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

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

7 (G), or (H)’’.

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

9 the Securities Exchange Act of 1934 (15 U.S.C. 78q–1(c))

10 is amended—

11 (1) in paragraph (3)(A), by striking ‘‘enumer12 ated in subparagraph (A), (D), (E), or (G)’’ and in13 serting ‘‘, or is subject to an order or finding, enu14 merated in subparagraph (A), (D), (E), (G), or (H)’’;

15 and

16 (2) in paragraph (4)(C)—

17 (A) by striking ‘‘enumerated in subpara18 graph (A), (D), (E), or (G)’’ and inserting ‘‘, or

19 is subject to an order or finding, enumerated in

20 subparagraph (A), (D), (E), (G), or (H)’’; and

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

22 ‘‘10 years’’.

23 (e) DEFINITION OF STATUTORY DISQUALIFICATION.—

24 Section 3(a)(39)(F) of the Securities Exchange Act of 1934

25 (15 U.S.C. 78c(a)(39)(F)) is amended by striking ‘‘has com-
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1 mitted or omitted any act enumerated in subparagraph

2 (D), (E), or (G)’’ and inserting ‘‘has committed or omitted

3 any act, or is subject to an order or finding, enumerated

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

5 SEC. 212. INVESTMENT ADVISERS ACT OF 1940.

6 (a) AUTHORITY TO DENY OR REVOKE REGISTRATION

7 BASED ON STATE (AND OTHER GOVERNMENTAL) ADMINIS8 TRATIVE ACTIONS.—Section 203(e) of the Investment Advis9 ers Act of 1940 (15 U.S.C. 80b–3(e)) is amended by striking

10 paragraphs (7) and (8) and inserting the following:

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

12 barring or suspending the right of the person to be as13 sociated with an investment adviser.

14 ‘‘(8) has been found by a foreign financial regu15 latory authority to have—

16 ‘‘(A) made or caused to be made in any ap17 plication for registration or report required to be

18 filed with a foreign securities authority, or in

19 any proceeding before a foreign securities author20 ity with respect to registration, any statement

21 that was at the time and in light of the cir22 cumstances under which it was made false or

23 misleading with respect to any material fact, or

24 has omitted to state in any such application, re-
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1 port, or proceeding any material fact that is re2 quired to be stated therein;

3 ‘‘(B) violated any foreign statute or regula4 tion regarding securities, banking, thrift activi5 ties, credit union activities, insurance, or con6 tracts of sale of a commodity for future delivery

7 traded on or subject to the rules of a contract

8 market or any board of trade;

9 ‘‘(C) aided, abetted, counseled, commanded,

10 induced, or procured the violation by any other

11 person of any foreign statute or regulation re12 garding securities, banking, thrift activities,

13 credit union activities, insurance, or contracts of

14 sale of a commodity for future delivery traded on

15 or subject to the rules of a contract market or

16 any board of trade, or to have failed reasonably

17 to supervise, with a view to preventing violations

18 of statutory provisions, and rules and regula19 tions promulgated thereunder, another person

20 who commits such a violation, if such other per21 son is subject to his supervision.

22 ‘‘(9) is subject to any final order of a State secu23 rities commission (or any agency or officer per24 forming like functions), State authority that super25 vises or examines banks, thrifts, or credit unions,
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1 State insurance commission (or any agency or office

2 performing like functions), an appropriate Federal

3 banking agency (as defined in section 3 of the Federal

4 Deposit Insurance Act (12 U.S.C. 1813(q)), or the

5 National Credit Union Administration, that—

6 ‘‘(A) bars such person from association with

7 an entity regulated by such commission, author8 ity, agency, or officer, or from engaging in the

9 business of securities, insurance, banking, thrift

10 activities, or credit union activities; or

11 ‘‘(B) constitutes a final order based on vio12 lations of any laws or regulations that prohibit

13 fraudulent, manipulative, or deceptive conduct.’’.

14 (b) BARS ON FELONS ASSOCIATED WITH INVESTMENT

15 ADVISERS.—Section 203(f) of the Investment Advisers Act

16 of 1940 (15 U.S.C. 80b–3(f)) is amended—

17 (A) by striking ‘‘or (8)’’ and inserting ‘‘(8),

18 or (9)’’; and

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

20 (2)’’.
Union Calendar No. 144

107TH CONGRESS

1ST SESSION H.R. 1408

[Report No. 107–192, Parts I and II]

A BILL

To safeguard the public from fraud in the financial

services industry, to streamline and facilitate theantifraud information-sharing efforts of Federaland State regulators, and for other purposes.

OCTOBER 16, 2001

Reported from the Committee on the Judiciary with an

amendment; committed to the Committee of the WholeHouse on the State of the Union, and ordered to beprinted