II 

111TH CONGRESS 

1ST SESSION S. 2813 

To increase corporate responsibility, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 20, 2009 

Mr. MENENDEZ introduced the following bill; which was read twice and 

referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To increase corporate responsibility, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Investors Rights and 

5 Corporate Accountability Act of 2009’’. 

6 SEC. 2. FIDUCIARY STANDARD FOR BROKER-DEALERS. 

7 Section 15 of the Securities Exchange Act of 1934 

8 (15 U.S.C. 78o) is amended— 

9 (1) by redesignating subsection (i), as added by 

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1 acted into law by section 1(a)(5) of Public Law 106– 

2 554, as subsection (j); and 

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

4 ‘‘(k) STANDARD OF CARE.—Notwithstanding any 

5 other provision of this title or the Investment Advisers Act 

6 of 1940 (15 U.S.C. 80b–1 et seq.), the Commission shall 

7 promulgate rules, not later than 1 year after the date of 

8 enactment of this subsection, to provide that the standard 

9 of care for all brokers and dealers in providing investment 

10 advice to retail customers or clients (and any other cus11 tomers or clients as the Commission may by rule provide) 

12 shall be the fiduciary duty established under the Invest13 ment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.), in14 cluding the duty to act solely in the best interest of the 

15 customer or client, without regard to the financial or other 

16 interest of the broker or dealer providing the advice.’’. 

17 SEC. 3. CLAWBACK OF INCENTIVE COMPENSATION AND BO18 NUSES. 

19 (a) SECURITIES EXCHANGE ACT OF 1934.—Section 

20 21D(f)(2)(A) of the Securities Exchange Act of 1934 (15 

21 U.S.C. 78u–4(f)(2)(A)) is amended— 

22 (1) by striking ‘‘JOINT AND SEVERAL LIABIL23 ITY.—Any’’ and inserting the following: ‘‘KNOWING

24 VIOLATIONS.— 


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1 ‘‘(i) JOINT AND SEVERAL LIABIL2 ITY.—Any’’; and 

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

4 ‘‘(ii) INCENTIVE COMPENSATION AND

5 BONUSES.—If the trier of fact specifically 

6 determines that a covered person know7 ingly committed a violation of the securi8 ties laws, the covered person shall be or9 dered to reimburse an issuer for— 

10 ‘‘(I) any bonus or other incen11 tive-based or equity-based compensa12 tion received by the covered person 

13 from the issuer during the period of 

14 the violation of the securities laws; 

15 and 

16 ‘‘(II) any profits realized by the 

17 covered person from the sale of securi18 ties of the issuer during the period of 

19 the violation of the securities laws.’’. 

20 (b) SARBANES-OXLEY ACT OF 2002.—Section 304 of 

21 the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7243) is 

22 amended— 

23 (1) in subsection (a)— 

24 (A) in the matter preceding paragraph (1), 

25 by striking ‘‘, as a result of misconduct,’’; 


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1 (B) in paragraph (1), by striking ‘‘or filing 

2 with the Commission (whichever first occurs)’’; 

3 and 

4 (C) in paragraph (2), by striking ‘‘during 

5 that 12-month period’’; and 

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

7 ‘‘(c) COMMENCEMENT OF ACTION.—A shareholder of 

8 an issuer may commence an action on behalf of the issuer 

9 under this section if the chief executive officer or the chief 

10 financial officer of the issuer has not made a reimburse11 ment required under this section before the expiration of 

12 the 90-day period beginning on the date on which the ac13 counting restatement occurs.’’. 

14 SEC. 4. PROTECTING THE CONFIDENTIALITY OF WHISTLE15 BLOWERS. 

16 Section 21D(b)(2) of the Securities Exchange Act of 

17 1934 (15 U.S.C. 78u–4(b)(2)) is amended— 

18 (1) by striking ‘‘In any private action’’ and in19 serting the following: 

20 ‘‘(A) IN GENERAL.—In any private ac21 tion’’; and 

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

23 ‘‘(B) CONFIDENTIAL SOURCES.— 

24 ‘‘(i) IN GENERAL.—Allegations by a 

25 confidential source shall be considered to 


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1 give rise to a strong inference that the de2 fendant acted with the required state of 

3 mind, if the source is described in the com4 plaint with sufficient particularity to sup5 port the probability that a person in the 

6 situation of the source would possess the 

7 information alleged. 

8 ‘‘(ii) CONSIDERATIONS.—The weight 

9 accorded allegations by a confidential 

10 source shall depend on the level of detail 

11 provided by the source, the corroborative 

12 nature of the other facts alleged (including 

13 from other sources), the coherence and 

14 plausibility of the allegations, the number 

15 of sources, the reliability of the sources, 

16 and similar indicia. 

17 ‘‘(iii) PROTECTION.—A confidential 

18 source described in a complaint shall be ac19 corded the same protection received by a 

20 confidential source who provides com21 parable information to the Commission. 

22 ‘‘(iv) NONDISCLOSURE REQUIRE23 MENTS.—Upon motion, a court shall enter 

24 an order reasonably limiting the scope of 

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1 ment agreement. An order under this 

2 clause may not impair a legitimate interest 

3 of a former employer in the confidentiality 

4 of documents and information subject to 

5 the order.’’. 

6 SEC. 5. PROHIBITION ON CERTAIN VOTING BY BROKERS. 

7 Section 6(b) of the Securities Exchange Act of 1934 

8 (15 U.S.C. 78f(b)) is amended by adding at the end the 

9 following: 

10 ‘‘(10) The rules of the exchange prohibit any 

11 member from granting any proxy to vote any secu12 rity in connection with an election for membership 

13 to the board of directors or analogous governing 

14 body of any issuer of a listed security, in the absence 

15 of instructions from the beneficial owner of the secu16 rity regarding the specific election.’’. 

17 SEC. 6. INDEPENDENCE OF COMPENSATION ADVISERS. 

18 Section 16 of the Securities Exchange Act of 1934 

19 (15 U.S.C. 78p) is amended by adding at the end the fol20 lowing: 

21 ‘‘(h) INDEPENDENT COMPENSATION ADVISERS.— 

22 Not later than 1 year after the date of enactment of this 

23 subsection, the Commission shall, by rule— 

24 ‘‘(1) require any adviser retained by the board 

25 of directors or a committee of the board of directors 


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1 of an issuer in conjunction with the negotiation of 

2 an employment contract or a compensation agree3 ment with an executive of the issuer— 

4 ‘‘(A) to be independent of the issuer and 

5 the executives and directors of the issuer; and 

6 ‘‘(B) to report solely to the board of direc7 tors or the committee of the board of directors 

8 responsible for executive compensation; and 

9 ‘‘(2) prohibit an issuer from agreeing to indem10 nify or limit the liability of an adviser described in 

11 paragraph (1).’’. 

12 SEC. 7. AIDING AND ABETTING LIABILITY. 

13 (a) SECURITIES EXCHANGE ACT OF 1934.—Section 

14 21D of the Securities Exchange Act of 1934 (15 U.S.C. 

15 78u–4) is amended by adding at the end the following: 

16 ‘‘(g) PERSONS THAT AID OR ABET VIOLATIONS.— 

17 Any person that provides substantial assistance to another 

18 person, with reckless disregard for whether the substantial 

19 assistance is in violation of this title, or of any rule or 

20 regulation issued under this title, shall be liable in a pri21 vate action brought under this title, to the same extent 

22 as the person to whom the substantial assistance is pro23 vided.’’. 


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1 (b) INVESTMENT ADVISERS ACT.—Section 209 of the 

2 Investment Advisers Act of 1940 (15 U.S.C. 80b–9) is 

3 amended by adding at the end the following: 

4 ‘‘(f) AIDING AND ABETTING.—For purposes of any 

5 action brought by the Commission under subsection (e), 

6 any person that provides substantial assistance to another 

7 person, with reckless disregard for whether the substantial 

8 assistance is in violation of this Act, or of any rule, regula9 tion, or order issued under this Act, shall be liable, to the 

10 same extent as the person to whom the substantial assist11 ance is provided.’’. 

12 SEC. 8. SHAREHOLDER APPROVAL OF GOLDEN PARACHUTE 

13 COMPENSATION. 

14 Section 16 of the Securities Exchange Act of 1934 

15 (15 U.S.C. 78p), as amended by this Act, is amended by 

16 adding at the end the following: 

17 ‘‘(i) SEVERANCE AGREEMENTS TIED TO PERFORM18 ANCE.— 

19 ‘‘(1) COMMISSION RULES.— 

20 ‘‘(A) IN GENERAL.—Not later than 270 

21 days after the date of enactment of this sub22 section, the Commission shall, by rule, direct 

23 the national securities exchanges and national 

24 securities associations to prohibit the listing of 

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1 ance with the requirements of any portion of 

2 paragraph (2). 

3 ‘‘(B) OPPORTUNITY TO CURE.—The rules 

4 issued under subparagraph (A) shall provide for 

5 appropriate procedures for an issuer to have an 

6 opportunity to cure any defects that would be 

7 the basis for such a prohibition before the im8 position of such prohibition. 

9 ‘‘(C) CONSIDERATIONS.—The rules issued 

10 under subparagraph (A) shall be implemented 

11 with due regard for contracts in existence on 

12 the date of enactment of this subsection. 

13 ‘‘(2) SEVERANCE AGREEMENTS TIED TO PER14 FORMANCE.—The board of directors of an issuer, or 

15 a committee of such board of directors, may not 

16 enter into an agreement providing for severance pay17 ments to a senior executive officer who is terminated 

18 because of poor performance as an executive, as de19 termined by the board of directors. To the extent 

20 that an issuer is able to terminate a senior executive 

21 officer for cause, poor performance by the executive, 

22 as determined by the board of directors, shall be 

23 considered as one such cause.’’. 

Æ 


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