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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3145 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 3145

 To amend the securities laws to prohibit credit default swaps and to 
 provide the Securities and Exchange Commission with the authority to 
                       regulate swap agreements.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              July 9, 2009

  Ms. Waters introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL

 
 To amend the securities laws to prohibit credit default swaps and to 
 provide the Securities and Exchange Commission with the authority to 
                       regulate swap agreements.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Credit Default Swap Prohibition Act 
of 2009''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds the following:
            (1) Credit default swaps were conceived as insurance 
        instruments, used to diffuse risk and increase liquidity 
        throughout our lending system.
            (2) The credit default swap market has grown over the past 
        decade to include contracts that are entered into by persons 
        with no economic interest in the contract's underlying 
        reference event, also known as naked credit default swaps.
            (3) Certain parties wrote credit default swap contracts 
        without posting collateral, leaving them overexposed to certain 
        asset classes and creating a systemic risk.
            (4) Unconnected and uncollateralized speculation creates an 
        unnecessary risk for our financial system.
            (5) Credit default swaps have proved to be harmful 
        financial instruments and have caused significant wealth 
        destruction during our economic crisis.
    (b) Purpose.--The purposes of this Act are--
            (1) to allow the Securities and Exchange Commission to have 
        oversight over all security-based swap agreements; and
            (2) to prevent further damage to our economy by prohibiting 
        credit default swaps.

SEC. 3. ESTABLISHING SECURITIES AND EXCHANGE COMMISSION OVERSIGHT OF 
              CREDIT DEFAULT SWAPS.

    (a) Definition of Credit Default Swap.--
            (1) Section 2(a) of the Securities Act of 1933 (15 U.S.C. 
        77b(a)) is amended by adding at the end the following:
            ``(17) Credit default swap.--The term `credit default swap' 
        means--
                    ``(A) a swap agreement (as such term is defined in 
                section 206A of the Gramm-Leach-Bliley Act) that 
                protects a party to such agreement against the risk of 
                a loss of value because of the occurrence or non-
                occurrence of an event or contingency specified in such 
                agreement relating to a security, loan, or other 
                reference asset; and
                    ``(B) such other forms of credit risk protection as 
                the Commission may, by rule, prescribe as necessary or 
                appropriate in the public interest or for the 
                protection of investors.''.
            (2) Section 3(a) of the Securities Exchange Act of 1934 (15 
        U.S.C. 78c(a)) is amended by adding at the end the following:
            ``(65) Credit default swap.--The term `credit default swap' 
        means--
                    ``(A) a swap agreement (as such term is defined in 
                section 206A of the Gramm-Leach-Bliley Act) that 
                protects a party to such agreement against the risk of 
                a loss of value because of the occurrence or non-
                occurrence of an event or contingency specified in such 
                agreement relating to a security, loan, or other 
                reference asset; and
                    ``(B) such other forms of credit risk protection as 
                the Commission may, by rule, prescribe as necessary or 
                appropriate in the public interest or for the 
                protection of investors.''.
    (b) Securities Act Jurisdiction Over Swaps.--Section 2A(b) of the 
Securities Act of 1933 (15 U.S.C. 77b-1(b)) is amended--
            (1) in paragraph (1), by striking ``does not'' and 
        inserting ``shall'';
            (2) by amending paragraph (2) to read as follows:
            ``(2) The Commission may require the registration of any 
        security-based swap agreement under this title.''; and
            (3) by amending paragraph (3) to read as follows:
            ``(3) The Commission may promulgate rules, interpret rules, 
        enforce rules, and issue orders of general applicability under 
        this title in a manner that imposes or specifies reporting or 
        recordkeeping requirements, procedures, or standards as 
        prophylactic measures against fraud, manipulation, or insider 
        trading with respect to any security-based swap agreement.''.
    (c) Securities Exchange Act Jurisdiction Over Swaps.--Section 3A(b) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78c-1(b)) is 
amended--
            (1) in paragraph (1), by striking ``does not'' and 
        inserting ``shall'';
            (2) by amending paragraph (2) to read as follows:
            ``(2) The Commission may require registration of any 
        security-based swap agreement under this title.''; and
            (3) by amending paragraph (3) to read as follows:
            ``(3) The Commission may promulgate rules, interpret rules, 
        enforce rules, and issue orders of general applicability under 
        this title in a manner that imposes or specifies reporting or 
        recordkeeping requirements, procedures, or standards as 
        prophylactic measures against fraud, manipulation, or insider 
        trading with respect to any security-based swap agreement.''.
    (d) Technical and Conforming Amendment.--
            (1) Section 17 of the Securities Act of 1933 (15 U.S.C. 
        77q) is amended by striking subsection (d).
            (2) Section 9 of the Securities Exchange Act of 1934 (15 
        U.S.C. 78i) is amended by striking subsection (i).
            (3) Section 15 of the Securities Exchange Act of 1934 (15 
        U.S.C. 78o) is amended by striking subsection (i) (as added by 
        section 303(f) of the Commodity Futures Modernization Act of 
        2000).
            (4) Section 16 of the Securities Exchange Act of 1934 (15 
        U.S.C. 78p) is amended by striking subsection (g).
            (5) Section 20 of the Securities Exchange Act of 1934 (15 
        U.S.C. 78t) is amended by striking subsection (f).
            (6) Section 21A of the Securities Exchange Act of 1934 (15 
        U.S.C. 78u-1) is amended by striking subsection (g).

SEC. 4. PROHIBITION ON CREDIT DEFAULT SWAPS.

    The Securities Exchange Act of 1934 is amended by inserting after 
section 7 (15 U.S.C. 78g) the following new section:

``SEC. 7A. PROHIBITION ON CREDIT DEFAULT SWAPS.

    ``It shall be unlawful for any person to enter into a credit 
default swap agreement or contract.''.

SEC. 5. EFFECTIVE DATE.

    This Act and the amendments made by this Act shall take effect with 
respect to swap agreements (as such term is defined in section 206A of 
the Gramm-Leach-Bliley Act) and credit default swaps (as such term is 
defined in section 3(a)(65) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)(65))) entered into after the end of the 180-day period 
beginning on the date of the enactment of this Act.
                                 <all>
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