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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 3005 Introduced in Senate (IS)]

111th CONGRESS
  2d Session
                                S. 3005

    To create an independent research institute, to be known as the 
``National Institute of Finance'', that will oversee the collection and 
   standardization of data on financial entities and activities, and 
  conduct monitoring and other research and analytical activities to 
 support the work of the Federal financial regulatory agencies and the 
                               Congress.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                            February 4, 2010

   Mr. Reed introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL

 
    To create an independent research institute, to be known as the 
``National Institute of Finance'', that will oversee the collection and 
   standardization of data on financial entities and activities, and 
  conduct monitoring and other research and analytical activities to 
 support the work of the Federal financial regulatory agencies and the 
                               Congress.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``National Institute 
of Finance Act of 2010''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--Congress finds the following:
            (1) The United States is experiencing the worst economic 
        and financial crisis since the Great Depression. The nature of 
        the current crisis is systemic. It was set in motion not by the 
        actions of any single entity, but by a loss of confidence 
        throughout the financial system as a whole.
            (2) Such catastrophic events revealed significant 
        shortcomings in the legal tools available to financial 
        policymakers. The scale and systemic nature of the crisis calls 
        for a thorough review of the United States' system of financial 
        regulation, to assess its capacity to understand, monitor, and 
        respond to systemic threats. It is critical that financial 
        regulators have the legal tools they need to act quickly, 
        decisively, effectively, and when appropriate, preemptively, to 
        prevent systemic financial crises in the future and to mitigate 
        their negative impact, should they recur.
            (3) The recent catastrophic events in financial markets 
        also revealed significant gaps in the information and analytic 
        tools available to regulators and policymakers charged with 
        ensuring the health of the financial system.
            (4) Systemic risk involves interactions among financial 
        entities in addition to features of individual firms. 
        Therefore, to understand and monitor the buildup of systemic 
        risk in the financial system requires information about such 
        interactions among institutions.
            (5) Operational methods do not exist by which to measure 
        systemic risks in the United States financial system. Nor do 
        proven operational techniques exist by which regulators can 
        identify the buildup of systemic risks in the United States 
        financial system.
            (6) Regulators do not have effective methodologies for 
        assessing the effects of particular regulatory actions or 
        approaches on the overall health of the financial system.
            (7) Financial regulators do not have the data needed to map 
        the networks of counterparty relationships through which 
        systemic contagion could spread. Nor do they have the analytic 
        tools required to translate such data into useful, actionable 
        information.
            (8) Notwithstanding noteworthy efforts from the research 
        community, sustained, large-scale programs of applied research 
        and development necessary to create operational systems for 
        understanding, measuring, and monitoring systemic risk in 
        financial systems have not emerged.
            (9) There is a substantial amount of high-quality research 
        in academia in relevant disciplines, including financial 
        economics, statistics, and operations research, but such 
        research tends to focus on theoretical or conceptual 
        innovations that are not immediately reducible to operational 
        practice.
            (10) The incentives confronting academic researchers work 
        against the production of research that does not yield novel 
        theoretical insights or computational techniques.
            (11) The challenges of gaining access to data and obtaining 
        funding from government and industry for academic research 
        severely restrict the number of academics working on 
        understanding and monitoring systemic risk in the financial 
        markets.
            (12) Some of the largest commercial firms make substantial 
        investments in research and development in the area of 
        quantitative finance, but such commercial research programs are 
        targeted almost exclusively at applications that create 
        commercial value for the firms undertaking the substantial 
        investments necessary to support the programs, and focus 
        primarily on techniques for pricing particular financial 
        instruments and managing firm-specific risks.
            (13) Financial institutions that sponsor research programs 
        usually protect the results of investigations as commercial 
        trade secrets. Even those results that might be useful in 
        application to the analysis of systemic risk are generally not 
        available to the public.
            (14) No organization anywhere has access to the 
        comprehensive transaction-level data that are necessary to map 
        the network of counterparty relationships in the financial 
        system. Absent such data, it is not possible to evaluate the 
        primary counterparty risks, the extent to which any given firm 
        is vulnerable to the failure of one of its counterparties, or 
        broader counterparty network risks.
            (15) It is not possible to understand, assess, or predict 
        how the collapse of one or more institutions might set off a 
        cascade of failure that destabilizes the entire financial 
        system.
            (16) Without intelligence about the network of counterparty 
        relationships and the liquidity provided by the members of the 
        counterparty network, it is difficult even to identify reliably 
        the set of institutions that regulators should deem to be 
        systemically important.
            (17) Notwithstanding statutory mandates that call for 
        sharing of information among regulatory agencies, United States 
        financial regulators do not require that firms report data in a 
        uniform standard format. The lack of compatibility in the data 
        formats used by different agencies implies in practice that 
        agencies find it difficult and expensive to integrate data from 
        multiple sources.
            (18) In periods of financial crisis such as that 
        experienced in the 2 years preceding the date of enactment of 
        this Act, absence of data comparability becomes a critical 
        handicap, in that dispersed information cannot quickly be 
        integrated into a comprehensive framework that could help 
        reveal the condition of the financial system as a whole. 
        Without a capacity quickly to compare and integrate financial 
        data of diverse types from multiple sources, regulators are 
        unable to analyze the state of the financial system accurately 
        and comprehensively. Nor are they able to foresee, and 
        potentially head off, the onset of a financial crisis.
            (19) The events of September 2008 offer a sobering example 
        of the consequences that can flow from an inability quickly to 
        integrate financial data from diverse sources. During several 
        critical days in that month, senior Government officials 
        contemplated the possible consequences of allowing the failure 
        of Lehman Brothers Holdings, Inc. Insofar as the content of 
        their deliberations is accessible in the public record, there 
        is little evidence that such officials had at their disposal an 
        intelligence system that could illuminate the potential 
        consequences of alternative choices. Notwithstanding that the 
        United States Government, through its several agencies, 
        collects a broad range of information from financial firms, the 
        events of September 2008 revealed that, at this most critical 
        juncture, these data and accompanying analytics could not 
        provide financial officials with the information they needed.
            (20) The creation of a system for collecting and organizing 
        a comprehensive financial transaction database that employs 
        standardized formats is feasible.
            (21) The Enterprise Data Management Council, an industry 
        consortium, is on record as advocating both the feasibility and 
        desirability of bringing uniform standards to the collection, 
        reporting, and management of financial transaction data.
            (22) A leading financial firm has developed for its 
        internal use a system that incorporates comprehensive reference 
        databases of all legal entities in its counterparty network and 
        of all of the many types of financial instruments in which it 
        transacts. Using the system, the firm can compute its exposure 
        to many of their counterparties within an hour.
            (23) A leading information technology firm has developed a 
        prototype of an operational system that would support a 
        comprehensive database of financial instruments and 
        transactions across the entire economy, and in collaboration 
        with other private sector firms and public sector entities, is 
        in the process of developing a prototype system for maintaining 
        the needed system-wide reference databases.
            (24) The community of financial regulators can realize 
        substantial benefits by consolidating into one entity the 
        highly technical tasks of establishing and maintaining uniform 
        standards for reporting financial data, organizing and managing 
        high-volume flows of financial data, providing analytic and 
        high performance computational services, performing applied 
        research and development activities, and conducting, 
        coordinating, and sponsoring essential long term, fundamental 
        research in the field of financial analysis and regulatory 
        intelligence.
            (25) Such technical tasks benefit from increasing economies 
        of scale, the total cost of providing such services to the 
        regulatory community promises to be lower if one agency is 
        tasked to provide all of such data, instead of creating 
        redundant and less effective units in each of the several 
        financial regulatory agencies.
            (26) An entity that provides access to data and analytic 
        tools to all regulatory agencies on a common basis would help 
        to ensure that all agencies are receiving accurate, consistent, 
        comparable data and analytic tools that can be modified for 
        agency-specific needs.
            (27) The creation of an entity that creates shared data and 
        analytic services will provide a natural and regular vehicle 
        for the exchange of research and collaboration between 
        regulatory agencies.
            (28) The emergence of uniform standards for referencing and 
        reporting financial transactions would generate substantial 
        benefits for the financial services industry. There is, at 
        present, no consistent, comprehensive, and universal system for 
        coding, transmitting, and storing financial transaction data. 
        Data reside typically in unconnected databases and 
        spreadsheets, using multiple formats and inconsistent 
        definitions. The routine conduct of business obliges firms to 
        incur substantial costs to translate and transfer data among 
        otherwise incompatible systems. In addition, this data 
        incomparability impedes the ability of companies to assess 
        their risks accurately. The adoption of a common language for 
        data coding and handling would dramatically reduce costs for 
        processing transactions and carrying out other administrative 
        tasks. Standardized reporting would also enable firms to map 
        their counterparty relationships more clearly and more easily 
        understand their credit exposures to other firms, a development 
        that promises improvements in risk management practices across 
        the industry.
            (29) In August 2008, the Counterparty Risk Management 
        Policy Group called for the financial industry to move rapidly 
        toward real-time reconciliation and confirmation of financial 
        transactions. Industry experts believe that this change would 
        yield substantial benefits to firms individually, to the 
        financial services industry, and to the economy as a whole. 
        Achieving this goal would not be possible, however, without 
        industry-wide adoption of common standards for coding and 
        handling financial transaction data. Despite the clear benefits 
        of data standardization and despite years of effort by the 
        industry, through consortia such as the Enterprise Data 
        Management Council, the financial services industry has not 
        been able to make meaningful progress towards the goal of 
        universal adoption of uniform, consistent standards for data 
        handling.
            (30) Efforts to see a common set of standards for financial 
        data adopted universally are impeded by so-called ``network 
        effects''. The benefits of adoption for any one firm depend on 
        the extent to which other firms adopt the same common language. 
        For any one institution, the full benefits are distinctly 
        limited until a critical number of participants in the industry 
        adopt the same standards. In light of these network effects, 
        the adoption of a single data handling standard by all industry 
        participants presents a daunting coordination challenge. Each 
        individual firm is discouraged from making the substantial 
        investments required to upgrade its own systems, unless and 
        until they receive assurance that others in the industry will 
        follow suit. Many firms are deferring significant upgrades to 
        their systems until well-defined industry-wide standards are 
        accepted.
            (31) The financial services industry's historical 
        experience strongly suggests that the industry is unlikely to 
        achieve universal adoption of a single data-handling standard 
        on its own initiative, through either the decentralized actions 
        of industry participants or through voluntary coordination at 
        the urging of industry consortia or trade associations. 
        Standardization of financial data will require an external 
        mandate.
            (32) The new data standards promulgated for reporting by 
        firms will emerge as the de facto standard for data management 
        in the finance industry, a standard on which firms could 
        converge. Firms could then be confident of realizing a 
        significant return on the investment needed to update their 
        internal systems, knowing that other industry participants were 
        doing likewise.
            (33) The establishment of Federal requirements for the 
        maintenance and provision of reference databases and reporting 
        of transactions and position data to a central repository would 
        assure individual institutions of a significant return on the 
        investment needed to update their internal systems. Firms would 
        benefit from not having to maintain their own unique reference 
        databases, standardized reporting would greatly reduce the cost 
        of reconciling trades and other back office activities, and it 
        would give firms a clear map of their counterparty 
        relationships, which would facilitate better risk management 
        across the industry.
            (34) Once achieved, the universal adoption of standard 
        protocols for handling financial transaction data promises to 
        generate significant and sustained improvements in the 
        efficiency and productivity of the financial services industry 
        in the United States. Such improvements will help to secure and 
        maintain the international leadership position of United States 
        capital markets.
            (35) United States regulators must never again find 
        themselves confronting a financial crisis without the full set 
        of legal, data, and analytic tools they need to understand, 
        measure, monitor, and respond intelligently to systemic risks 
        that threaten the stability of the United States financial 
        system.
    (b) Purposes.--The purposes of this Act are--
            (1) to ensure that the financial regulatory community is 
        equipped fully with the data and analytic tools it needs to 
        fulfill its responsibility to safeguard the United States 
        financial system;
            (2) to reduce the likelihood of another systemic financial 
        crisis occurring;
            (3) to restore integrity and confidence to the financial 
        markets of the United States;
            (4) to provide for the security of the United States 
        economy from potential external threats to the United States 
        financial system;
            (5) to improve the efficiency of the financial markets in 
        the United States;
            (6) to reduce the cost and increase the effectiveness of 
        coordinated financial regulation in the United States;
            (7) to help maintain the leadership position of the United 
        States as home to the most efficient, competitive, and 
        productive capital markets in the world; and
            (8) to help restore and maintain conditions in the United 
        States financial system that will support the creation of 
        wealth and prosperity in the United States.

SEC. 3. DEFINITIONS.

    In this Act, the following definitions shall apply:
            (1) Financial regulatory agency.--The term ``financial 
        regulatory agency'' means any Federal regulatory agency or body 
        charged with regulating, examining, or supervising a financial 
        entity or activity, including any financial systemic risk 
        council or agency established by Congress.
            (2) Institute; director; board of directors.--The terms 
        ``Institute'', ``Director'', and ``Board of Directors'' mean 
        the National Institute of Finance, the Director thereof, and 
        the Board of Directors thereof, respectively.
            (3) Financial entity.--
                    (A) In general.--The term ``financial entity'' 
                means any corporation, partnership, individual, or 
                other organizational form, whether public or private, 
                used to engage in any type of financial activity that 
                may contribute to systemic risk, including any bank, 
                savings association, credit union, industrial loan 
                company, trust, pension fund, holding company, lender, 
                finance company, mortgage broker, broker-dealer, mutual 
                fund or other investment company, investment adviser, 
                hedge fund, insurance company, clearinghouse or other 
                central counterparty, exchange, and any other entity or 
                institution that the Director determines, at the 
                formation of the Institute, are necessary for the 
                Institute to complete its duties under this Act.
                    (B) Director authority.--The Director may, by rule, 
                add new types of entities or institutions to be treated 
                as financial entities for purposes of this Act.
            (4) Systemic risk.--The term ``systemic risk'' means the 
        risk that a failure or default by a financial entity or 
        entities, or exposures to a financial product or products or 
        activity will produce--
                    (A) significant disruptions to the operations of 
                financial markets;
                    (B) the spreading of financial losses and failures 
                through the financial system; or
                    (C) significant disruption to the broader economy.
            (5) Financial contract.--The term ``financial contract'' 
        mean a legally binding agreement between 2 or more 
        counterparties, describing rights, and obligations relating to 
        the future delivery of items of intrinsic or extrinsic value 
        among the counterparties.
            (6) Financial instrument.--The term ``financial 
        instrument'' means a financial contract in which the terms and 
        conditions are publicly available, and the roles of 1 or more 
        of the counterparties are assignable without the consent of any 
        of the other counterparties, including common stock of a 
        publicly traded company, government bonds, and exchange traded 
        futures and options contracts.
            (7) Financial entity reference database.--The term 
        ``financial entity reference database'' means a comprehensive 
        list of financial entities that may be counterparties to 
        financial transactions or referenced in the contractual 
        structure of a financial instrument. For each financial entity, 
        the database shall include, but not be limited to a unique 
        identifier, and sufficient information to differentiate the 
        entity from every other entity, including an exact legal name 
        and an address for each company, and an exact legal name and a 
        social security number for each American citizen. For financial 
        entities that are legally owned by or otherwise contained 
        within other financial entities, the database shall include 
        such information.
            (8) Financial instrument reference database.--The term 
        ``financial instrument reference database'' means a 
        comprehensive list of unique financial instruments. For each 
        financial instrument, the database shall include a unique 
        identifier and a comprehensive description of the contractual 
        structure of the instrument as well as all express terms 
        governing the interpretation and implementation of the 
        contract, including jurisdiction, force majeure, and dispute 
        resolution. The contractual structure shall include the 
        financial and economic obligations and rights, both express and 
        implied, and including through legal agreements such as netting 
        agreements, established among all of the counterparties having 
        identified roles in the contract, including advisors, 
        principals, trustees, custodians, guarantors, prime brokers, 
        executing brokers, clearing brokers, and issuers of securities. 
        An electronic copy of the prospectus for each financial 
        instrument for which a prospectus was created or distributed 
        shall also be contained in the database.
            (9) Financial transaction data.--The term ``financial 
        transaction'' means the explicit or implicit creation of a 
        financial contract where at least one of the counterparties is 
        required to report to the Institute. The data describing the 
        transaction shall include the structure of the contract created 
        in the transaction, as well as all express terms governing the 
        interpretation and implementation of the contract, including 
        jurisdiction, force majeure, and dispute resolution. The 
        contractual structure shall include clearly identified 
        counterparties, clearly identified financial instruments (when 
        used as part of the structure of the contract), and the 
        financial and economic obligations and rights, both express and 
        implied, established among all of the counterparties with 
        identified roles in the contract.
            (10) Position data.--The term ``position'' means a 
        financial asset or liability held on the balance sheet of a 
        financial entity. A new position is created, or the quantity of 
        an existing position is changed, by the execution of a 
        financial transaction involving the financial entity as a 
        counterparty. Position data include--
                    (A) the counterparty identifier;
                    (B) a contract identifier;
                    (C) the role of the counterparty on the 
                transaction;
                    (D) a quantity, if applicable;
                    (E) a location, if applicable; and
                    (F) the valuation of the position for the purposes 
                of the books and records of the financial entity.

SEC. 4. ESTABLISHMENT OF NATIONAL INSTITUTE OF FINANCE; ADMINISTRATIVE 
              MATTERS.

    (a) In General.--
            (1) Establishment.--There is established the National 
        Institute of Finance, which shall be an independent 
        establishment, as that term is defined in section 104 of title 
        5, United States Code.
            (2) Mission.--The mission of the Institute is to support 
        the Federal financial regulatory agencies, including any 
        systemic risk council or agency established by Congress, by--
                    (A) collecting and providing data;
                    (B) standardizing the types and formats of data 
                reported and collected;
                    (C) performing applied research and essential long-
                term research;
                    (D) developing tools for risk measurement and 
                monitoring;
                    (E) performing other related services; and
                    (F) making the results of its activities available 
                to financial regulatory agencies.
    (b) Director.--
            (1) Appointment.--The Institute shall be headed by a 
        Director, who shall be appointed by the President, by and with 
        the advice and consent of the Senate.
            (2) Term of service.--The Director shall serve for a term 
        of 15 years.
            (3) Executive level and pension.--The position of the 
        Director shall be at level II of the Executive Schedule, and a 
        Director who serves a full term, or becomes disabled and unable 
        to fulfill the responsibilities of the Director after serving 
        at least 10 years, shall receive a pension at retirement equal 
        to the salary of that person in the last year of the term, and 
        that pension shall increase in subsequent years with the 
        increase in the cost of living.
            (4) Vacancy.--In the event that a successor is not 
        nominated and confirmed by the end of the term of service of a 
        Director, the Director may continue to serve until such time as 
        the new Director is appointed and confirmed.
            (5) Prohibition on dual service.--The individual serving in 
        the position of Director may not, during such service, also 
        serve as the head of any financial regulatory agency.
            (6) Responsibilities, duties and authority.--The Director 
        shall have sole discretion to fulfill the responsibilities and 
        duties and exercise the authorities described in this Act, 
        except in cases where specific authorities have been given to 
        the Board of Directors.
    (c) Board of Directors.--The Board of Directors of the Institute 
shall be comprised of the Director, the Secretary of the Treasury, and 
the head of each financial regulatory agency.
    (d) Membership of the Director on the Board of Directors.--The 
Director shall serve as a voting member of the Board of Directors and 
as a member of any financial systemic risk regulatory council or agency 
established by Congress.
    (e) Funding.--
            (1) Annual budget.--The Director, in consultation with the 
        Board of Directors shall establish the initial annual budget. 
        For all other annual budgets, the Director shall submit an 
        annual budget for the Institute to the Board of Directors not 
        later than April 30 of each year. The Board of Directors may, 
        without amendment, reject the budget with a two-thirds majority 
        vote. Each time a budget is rejected, the Director shall submit 
        a revised budget to the Board of Directors within 60 days, and 
        the Board of Directors may, without amendment, reject the 
        budget with a two-thirds majority vote. If the Board of 
        Directors fails to reject the budget within 60 days of 
        submission by the Director, the budget shall be automatically 
        approved. If a new budget is not approved before the existing 
        budget expires, the most recent approved budget shall continue 
        on a pro rata basis. Each submitted budget and all votes by the 
        Board of Directors on each budget shall be part of the public 
        record of the Board of Directors.
            (2) Assessments.--The Institute shall be funded through 
        assessments on the financial entities required to report data 
        to the Institute. The formula by which the budgetary costs are 
        allocated among the reporting entities shall be determined by 
        the Board of Directors. If the Board of Directors fails to 
        establish the formula within 60 days of submission of a budget 
        by the Director, the Director shall determine the formula by 
        which the budgetary costs are allocated among the reporting 
        entities for that year.
            (3) Initial funding and start up.--During the first 4 years 
        of the operation of the Institute, the Institute shall have 
        authority to borrow against future assessment revenue from the 
        Federal Financing Bank. Such borrowed funds shall be paid back 
        to the Federal Financing Bank over a term not to exceed 20 
        years. The Secretary of the Treasury, and any financial 
        regulatory agency, may second personnel to the Institute to 
        assist the operations of the Institute.
    (f) Excepted Service Agency.--The Institute shall be an excepted 
service agency.
    (g) Personnel.--The Board of Directors may fix the compensation of 
Institute personnel, without regard to the provisions of chapter 51 and 
subchapter III of chapter 53 of title 5, United States Code, relating 
to classification of positions and General Schedule pay rates. The 
rates of pay and benefits shall be competitive with and comparable to 
the rates of pay and benefits at Federal financial regulatory agencies 
that are not covered by title 5, United States Code.
    (h) Non-Compete.--The Director and staff of the Institute, who have 
had access to the transaction or position data maintained by the Data 
Center or other business confidential information about financial 
entities required to report to the Institute, may not, for a period of 
1 year after last having access to such transaction or position data or 
business confidential information, be employed by or provide advice or 
consulting services to a financial entity, regardless of whether it is 
required to report to the Institute. Individual staff members who 
notify the Director of their intention to terminate their employment 
with the Institute and to seek employment with a prohibited employer or 
in a prohibited activity, shall be transferred for a period of 12 
months to a position that does not provide access to transaction or 
position data or other business confidential information. For staff 
whose access to business confidential information was limited, the 
Board of Directors may provide, on a case-by-case basis, for a shorter 
period of post-employment prohibition, provided that the shorter period 
does not compromise business confidential information.
    (i) Advisory Boards.--The Institute shall maintain any advisory 
boards that the Director determines are needed to complete the mission 
of the Institute.
    (j) Fellowship Program.--The Institute may establish and maintain 
an academic and professional fellowship program, under which qualified 
academics and professionals shall be invited to spend not longer than 2 
years at the Institute, to perform research and to provide advanced 
training for Institute personnel.
    (k) Executive Schedule Matters.--Section 5312 of title 5, United 
States Code, is amended by adding at the end the following new item:

``Director of the National Institute of Finance.''.

SEC. 5. ORGANIZATIONAL STRUCTURE; RESPONSIBILITIES OF PRIMARY 
              PROGRAMMATIC UNITS.

    (a) In General.--The Institute shall carry out its programmatic 
responsibilities through--
            (1) the Federal Financial Data Center (in this Act referred 
        to as the ``Data Center''); and
            (2) the Federal Financial Research and Analysis Center (in 
        this Act referred to as the ``Research Center'').
    (b) Federal Financial Data Center.--
            (1) General duties.--The Data Center shall collect, 
        validate, and maintain all data necessary to carry out its 
        duties, as described in this Act.
            (2) Responsibilities.--The Data Center shall prepare and 
        publish, in a manner that is easily accessible to the public--
                    (A) a financial entity reference database;
                    (B) a financial instrument reference database; and
                    (C) formats and standards for reporting financial 
                transaction and position data to the Institute.
            (3) Data to be collected.--Data referred to in paragraph 
        (1)--
                    (A) shall include for each financial entity--
                            (i) comprehensive financial transaction 
                        data on a schedule determined by the Director;
                            (ii) comprehensive position data on a 
                        schedule determined by the Director;
                            (iii) for each financial instrument in the 
                        financial instrument reference database or for 
                        any other obligation of a financial entity that 
                        is contingent on the value of an observable 
                        event, where the observable event is not widely 
                        available to the public, the level and changes 
                        in the level of these observable events, on a 
                        schedule determined by the Director; and
                            (iv) any other data that are considered by 
                        the Director to be important for measuring and 
                        monitoring systemic risk, or for determining 
                        the soundness of individual financial entities; 
                        and
                    (B) may include data regarding policies and 
                procedures, governance, incentives, compensation 
                practices, contractual relationships, and any other 
                information deemed by the Director to be necessary in 
                order for the Institute to carry out its 
                responsibilities under this Act; and
                    (C) the Board of Directors may, by a two-thirds 
                vote, exclude financial entities, which, as a group, 
                will not contribute to systemic risk for reasons such 
                as size, nature of their assets and liabilities, volume 
                of transactions, or other reasonable purposes, from 
                reporting data. Notwithstanding such exclusions, 
                financial entities shall comply with all reporting 
                requirements or ensure that reporting requirements are 
                met for any assets or part of their balance sheets that 
                are sold to create a financial instrument or 
                obligation, as described in subparagraph (A)(iii).
            (4) Information security.--The Director and the Board of 
        Directors shall ensure that data collected and maintained by 
        the Data Center are kept secure and protected against 
        unauthorized disclosure.
            (5) Catalogue of financial entities and instruments.--The 
        Data Center shall maintain a catalogue of the financial 
        entities and instruments reported to the Institute.
            (6) Availability to the financial regulatory agencies.--The 
        Data Center shall make data collected and maintained by the 
        Data Center available to any financial regulatory agency 
        represented on the Board of Directors, as needed to support the 
        regulatory responsibilities of such agency.
            (7) Other responsibilities.--The Data Center shall oversee 
        the management of the data supply chain, from the point of 
        issuance, in order to ensure the quality of all data required 
        to be submitted to the Institute.
            (8) Other authority.--The Institute shall, after 
        consultation with the Board of Directors provide certain data 
        to financial industry participants and the general public to 
        increase market transparency and facilitate research on the 
        financial system, so long as intellectual property rights are 
        not violated, business confidential information is properly 
        protected, and the sharing of such information poses no 
        significant threats to the financial system.
    (c) Federal Financial Research and Analysis Center.--
            (1) General duties.--The Research Center shall develop and 
        maintain the independent analytical capabilities and computing 
        resources--
                    (A) to measure and monitor systemic risk;
                    (B) to perform independent risk assessments of 
                individual financial entities and markets;
                    (C) to analyze and investigate relationships 
                between the soundness of individual financial entities 
                and markets and the soundness of the financial system 
                together as a whole; and
                    (D) to provide advice on the financial system.
            (2) Responsibilities.--The Research Center shall--
                    (A) develop and maintain metrics and risk reporting 
                systems for system-wide risk;
                    (B) develop and maintain metrics and risk reporting 
                systems for determining the soundness of financial 
                entities;
                    (C) monitor, investigate, and report changes in 
                system-wide risk levels and patterns to the Board of 
                Directors and Congress, including through the 
                collection of additional information that the Director 
                deems necessary to understand such changes;
                    (D) conduct, coordinate, and sponsor research to 
                support and improve regulation of financial entities 
                and markets;
                    (E) benchmark financial risk management practices 
                and promote best practices for financial risk 
                management;
                    (F) at the direction of the Board of Directors, or 
                any member of the Board of Directors, for firms under 
                that member's purview, develop, oversee, and report on 
                stress tests or other tests of the valuation and risk 
                management systems of any of the financial entities 
                required to report to the Institute;
                    (G) maintain expertise in such areas as may be 
                necessary to support specific requests for advice and 
                assistance from financial regulators;
                    (H) at the direction of the Board of Directors or 
                at the request of Congress, conduct studies and provide 
                advice on financial markets and products, including 
                advice regarding risks to consumers posed by financial 
                products and practices;
                    (I) at the direction of the Director, at the 
                discretion of the Board of Directors, or at the request 
                of Congress, investigate disruptions and failures in 
                the financial markets, report findings, and make 
                recommendations to the Board of Directors and Congress; 
                and
                    (J) at the direction of the Board of Directors or 
                at the request of Congress, conduct studies and provide 
                advice on the impact of policies related to systemic 
                risk.
    (d) Reporting Responsibilities.--
            (1) Required report.--Commencing 2 years after the date of 
        the establishment of the Institute, the Institute shall prepare 
        and submit an annual report to Congress, not later than 120 
        days after the end of each fiscal year.
            (2) Content.--The report required by this subsection shall 
        assess the state of the financial system, including an analysis 
        of any threats to the financial system, the status of the 
        Institute's efforts in meeting its mission, and key findings 
        from its research and analysis of the financial system.
            (3) Additional reports.--At the sole discretion of the 
        Director, the Director may initiate and provide additional 
        reports to Congress regarding the state of the financial 
        system. The Director shall notify the Board of Directors of any 
        additional reports provided to Congress.

SEC. 6. ADMINISTRATIVE AUTHORITIES OF THE INSTITUTE.

    The Institute may--
            (1) require financial entities to report all data and 
        information in conformance with reporting standards, as 
        determined by the Institute, that are necessary to fulfill the 
        responsibilities of the Institute under this Act;
            (2) require reporting on a worldwide basis from the 
        financial entities and affiliates thereof that are organized in 
        the United States;
            (3) require reporting of United States-based activities by 
        financial entities that are not organized in the United States;
            (4) enforce and apply sanctions on all financial entities 
        required to report to the Institute that fail to report data 
        requested by and in standards, frequency, and time frames, as 
        determined by rule or regulation by the Institute;
            (5) share data and information, as well as software 
        developed by the Institute, with other financial regulatory 
        agencies, as determined appropriate by the Board of Directors, 
        where the shared data and software shall be maintained with at 
        least the same level of security as is used by the Institute, 
        and may not be shared with any individuals or entities without 
        the permission of the Board of Directors;
            (6) purchase and lease software;
            (7) sponsor and conduct research projects; and
            (8) assist, on a reimbursable basis, with financial 
        analyses undertaken at the request of governmental agencies, 
        other than financial regulatory agencies.

SEC. 7. CIVIL PENALTIES.

    Any person or entity that violates this Act or fails to comply with 
a rule, regulation, or order of the Institute issued under this Act 
shall be subject to a civil penalty in an amount established by the 
Institute and published in the Code of Federal Regulations. Each such 
violation or failure shall constitute a separate civil offense.
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