I 

111TH CONGRESS 

1ST SESSION H. R. 2622 

To amend the Securities Exchange Act of 1934 to establish rules and procedures for the delegation of compliance and inspections authority to the 

operating divisions of the Securities and Exchange Commission, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 21, 2009 

Mr. MCCARTHY of California introduced the following bill; which was referred 

to the Committee on Financial Services 

A BILL 

To amend the Securities Exchange Act of 1934 to establish 

rules and procedures for the delegation of compliance 

and inspections authority to the operating divisions of 

the Securities and Exchange Commission, 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 ‘‘Compliance, Examina5 tions, and Inspections Restructuring Act of 2009’’. 


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1 SEC. 2. ORGANIZATION AND CONDUCT OF THE DIVISIONS 

2 AND OFFICES OF THE SECURITIES AND EX3 CHANGE COMMISSION. 

4 Section 4 of the Securities Exchange Act of 1934 (15 

5 U.S.C. 78d) is amended by adding at the end the following 

6 new subsections: 

7 ‘‘(g) DIVISIONS AND OFFICES OF THE COMMIS8 SION.— 

9 ‘‘(1) COMPLIANCE, INSPECTIONS, AND EXAMI10 NATIONS.—The authority that the Commission has 

11 to conduct inspections and examinations of reg12 istered brokers or dealers (15 U.S.C. 78q(b)), reg13 istered investment companies (15 U.S.C. 80a– 

14 30(b)), and registered investment advisers (15 

15 U.S.C. 80b–4) shall be vested in the administrative 

16 divisions or offices to which the Commission has del17 egated pursuant to section 4A of this Act the au18 thority to administer its responsibilities under this 

19 Act, the Investment Company Act of 1940 (15 

20 U.S.C. 80a), and the Investment Advisers Act of 

21 1940 (15 U.S.C. 80b). The Commission shall report 

22 to Congress pursuant to section 21(a) of this Act no 

23 less frequently than every 5 years from the enact24 ment of this subsection, and shall in that report 

25 state its views on the continuing efficacy, effective26 ness, and efficiency of requiring the administrative 


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1 divisions or offices to conduct inspections and exami2 nations of registered brokers or dealers, registered 

3 investment companies, and registered investment ad4 visers. 

5 ‘‘(2) CLOSURE OF OPEN MATTERS.—Not less 

6 frequently than every 120 days during a period in 

7 which an enforcement division or office of the Com8 mission with respect to a formal or informal inquiry, 

9 or an administrative division or office of the Com10 mission with respect to an inspection or examina11 tion, is conducting an inquiry or inspection, that di12 vision or office shall notify in writing the person who 

13 is the subject of that inquiry or inspection to inform 

14 such person of the status of the inquiry or inspec15 tion. When that division or office has completed its 

16 inquiry or inspection, that division or office shall, 

17 within 10 days of completing that inquiry or inspec18 tion, notify in writing the person who was the sub19 ject of that inquiry or inspection that the inquiry or 

20 inspection has been completed. 

21 ‘‘(3) SWEEP EXAMINATIONS OR INSPECTIONS.— 

22 ‘‘(A) NOTICE AND APPROVAL.—Before an 

23 administrative division or office of the Commis24 sion may conduct an inspection of registered 

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1 panies, or registered investment advisers, it 

2 shall provide written notification in such form 

3 determined by the Chairman. Before an admin4 istrative division or office of the Commission 

5 may conduct a sweep examination of registered 

6 brokers or dealers, registered investment com7 panies, or registered investment advisers, it 

8 shall seek authority from the Commission to 

9 conduct such a sweep examination or inspection 

10 in the same manner and subject to the same 

11 procedures that the enforcement divisions or of12 fices of the Commission must follow in seeking 

13 the authority to conduct a formal investigation 

14 or inquiry regarding a registered broker or 

15 dealer, a registered investment company, or a 

16 registered investment adviser. 

17 ‘‘(B) CONTENT.—An administrative divi18 sion or office of the Commission shall confine 

19 the content of a sweep examination or inspec20 tion to those existing books and records that 

21 the registered broker or dealer, registered in22 vestment company, or registered investment ad23 viser is required to keep and maintain under 

24 applicable rules and regulations, and may not 

25 require the creation of a new document or the 


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1 calculation or presentation of data that is not 

2 required to be kept or maintained under appli3 cable rules and regulations. 

4 ‘‘(4) DEFINITIONS.—For purposes of this sub5 section, the following definitions shall apply: 

6 ‘‘(A) CONFIDENTIAL COMMUNICATION.— 

7 The term ‘confidential communication’ shall 

8 mean any transfer of information, regardless of 

9 the form or format in which the information is 

10 communicated to an officer or employee of a 

11 compliance and inspections office, about a reg12 istered broker or dealer, registered investment 

13 company, or registered investment adviser by 

14 an officer or employee of a registered broker or 

15 dealer, registered investment company, or reg16 istered investment adviser regarding whether 

17 the broker or dealer, investment company, or 

18 investment adviser is in compliance with appli19 cable provisions of this Act, the Securities Act 

20 of 1933, the Investment Company Act of 1940, 

21 or the Investment Advisers Act of 1940, where22 in the officer or employee transferring such in23 formation reasonably believes in good faith that 

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1 cer or employee of a compliance and inspections 

2 office of the Commission— 

3 ‘‘(i) is not information required to be 

4 made publicly available by any applicable 

5 Federal law or regulation; or 

6 ‘‘(ii) is information regarding any 

7 book, record, or other information in the 

8 possession of, or maintained on behalf of, 

9 the registered broker or dealer, registered 

10 investment company, or registered invest11 ment adviser that is subject to the exam12 ination and inspection authority of the 

13 Commission. 

14 ‘‘(B) SWEEP EXAMINATION.—Not later 

15 than 60 days after the date of enactment of 

16 this subsection, the Commission shall define the 

17 term ‘sweep examination’ for purposes of this 

18 subsection. 

19 ‘‘(C) ENFORCEMENT DIVISION.—The term 

20 ‘enforcement division’ means the divisions or of21 fices to which the Commission has delegated 

22 pursuant to section 4A of this Act the authority 

23 to investigate and to enforce the provisions of 

24 this Act, the Investment Company Act of 1940 


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1 (15 U.S.C. 80a–41), and the Investment Advis2 ers Act of 1940 (15 U.S.C. 80b–9). 

3 ‘‘(h) OMBUDSMAN.— 

4 ‘‘(1) APPOINTMENT.—Not later than 180 days 

5 after the date of enactment of this section, the 

6 Chairman of the Securities and Exchange Commis7 sion shall appoint an Ombudsman who shall report 

8 directly to the Chairman. 

9 ‘‘(2) DUTIES OF OMBUDSMAN.—The Ombuds10 man appointed under subsection (a) shall— 

11 ‘‘(A) ensure safeguards exist to encourage 

12 persons who are issuers, registered brokers or 

13 dealers, registered investment companies, or 

14 registered investment advisers to present ques15 tions to the Commission regarding compliance 

16 with the securities laws; 

17 ‘‘(B) maintain privilege of confidential 

18 communications between such persons and the 

19 Ombudsman; 

20 ‘‘(C) advise and guide such persons 

21 through the process of self-reporting, ensuring 

22 appropriate and due credit is given to the reg23 istrant upon self-reporting; and 

24 ‘‘(D) act as a liaison between the agency 

25 and such persons with respect to any problem 


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1 such registrant may have in dealing with the 

2 agency resulting from the regulatory activities 

3 of the agency. 

4 ‘‘(3) LIMITATION.—In carrying out the duties 

5 under paragraph (1), the Ombudsman shall utilize 

6 personnel of the Commission to the extent prac7 ticable. Nothing in this section is intended to re8 place, alter, or diminish the activities of any om9 budsman or similar office in any other agency. 

10 ‘‘(4) DISCLOSURE OF CONFIDENTIAL COMMU11 NICATIONS.—Notwithstanding any other provision of 

12 this subsection, in those circumstances where the 

13 most senior officer of the enforcement division or of14 fice of the Commission has made a formal rec15 ommendation in writing to the Commission that it 

16 exercise its authority in section 21(d)(1) to seek an 

17 injunction against a registered broker or dealer, its 

18 authority in section 42(d) of the Investment Com19 pany Act of 1940 to seek an injunction against a 

20 registered investment company, or its authority in 

21 section 209(d) of the Investment Advisers Act of 

22 1940 to seek an injunction against a registered in23 vestment adviser, the Ombudsman or an employee of 

24 the Ombudsman shall disclose to the officers and 

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1 fidential communications received from an officer or 

2 employee of a registered broker or dealer, a reg3 istered investment company, or a registered invest4 ment adviser pursuant to the provisions of section 

5 24(b). 

6 ‘‘(5) REPORT.—Each year, the Ombudsman 

7 shall submit a report to the Commission for inclu8 sion in the annual report that describes the activi9 ties, and evaluates the effectiveness of the Ombuds10 man during the preceding year. In that report, the 

11 Ombudsman shall include solicited comments and 

12 evaluations from registrants in regards to the effec13 tiveness of the Ombudsman.’’. 

14 SEC. 3. SENSE OF CONGRESS. 

15 It is the sense of Congress that the Securities and 

16 Exchange Commission should develop and publish guide17 lines setting forth explicitly the benefit that an issuer the 

18 securities of which are registered under section 12 of the 

19 Securities Exchange Act of 1934, a registered broker-deal20 er, a registered investment company, or a registered in21 vestment adviser shall receive if it self-reports to an ad22 ministrative division or office of the Commission or to an 

23 enforcement division or office of the Commission an ap24 parent violation of law, rules, or regulations applicable to 

25 it and is subsequently the respondent in a civil injunctive 


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1 action or administrative proceeding brought by the Com2 mission with respect to the matter that was self-reported. 

Æ 


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