IB
Union Calendar No. 33
103D CONGRESS
1ST SESSION
H. R. 578
[Report No. 103–75]
To provide for recovery of costs of supervision and regulation of investment
advisers and their activities, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 26, 1993
Mr. BOUCHER (for himself, Mr. MARKEY, Mr. DINGELL, Mr. FIELDS of
Texas, Mr. COOPER, Mr. WYDEN, Mr. LEHMAN, and Mr. SYNAR) intro-
duced the following bill; which was referred to the Committee on Energy
and Commerce
APRIL 29, 1993
Additional sponsors: Mr. MOORHEAD, Mr. MARTINEZ, Mrs. JOHNSON of Con-
necticut, Mr. BARRETT of Wisconsin, Mr. HUGHES, Mr. GLICKMAN, Mrs.
MEEK, and Mr. STUDDS
APRIL 29, 1993
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on January 26, 1993]
A BILL
To provide for recovery of costs of supervision and regulation
of investment advisers and their activities, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Investment Adviser Reg-
ulatory Enhancement and Disclosure Act of 1993’’.
SEC. 2. ADDITIONAL RESOURCES FOR INVESTMENT AD-
VISER SUPERVISION.
(a) AMENDMENT.—The Investment Advisers Act of
1940 (15 U.S.C. 80b–1 et seq.) is amended by inserting
after section 203 the following new section:
‘‘FEES FOR REGISTRANTS AND APPLICANTS
‘‘SEC. 203A. (a) IN GENERAL.—The Commission is
authorized, in accordance with this section, to collect fees
to recover the costs of registration, supervision, and regula-
tion of investment advisers and their activities. Such fees
shall be collected, and shall be available, only to the extent
provided in advance in appropriations Acts. No appropria-
tion Act may authorize fees to be collected under this section
during any fiscal year unless the amount appropriated by
such Act for such costs for such fiscal year equals or exceeds
the aggregate amount that may reasonably be expected to
be collected by such fees. Such fees shall be deposited as an
offsetting collection to the Commission’s appropriation and
may remain available for such purposes for the succeeding
fiscal year. The costs covered by such fees shall be limited
to the costs of Commission expenses for registration, exami-
nations, and surveys of persons registered or required to
register under this Act.
‘‘(b) TIME FOR PAYMENT.—
‘‘(1) NEW REGISTRANTS.—At the time of filing
an application for registration under this title, the
applicant shall pay to the Commission the fee speci-
fied in subsection (c). No part of such fee shall be re-
funded to the applicant. The filing of an application
for registration under this title shall not be deemed to
have occurred unless the application is accompanied
by the fee required under this section.
‘‘(2) ONGOING REGISTRANTS.—Each investment
adviser whose registration is effective on the last day
of its fiscal year shall pay to the Commission the fee
specified in subsection (c). Such payment shall be
made not later than 90 days after the end of its fiscal
year, or at such other time as the Commission, by
rule, shall determine, unless its registration has been
withdrawn, canceled, or revoked prior to that date. No
part of such fee shall be refunded to the investment
adviser.
‘‘(c) COST-BASED SCHEDULE OF FEES.—For any fis-
cal year for which fees are authorized to be collected by an
appropriation Act, the amount of fees due from investment
advisers in accordance with paragraphs (1) and (2) of sub-
section (b) shall be determined according to the following
schedule:
‘‘Assets under management
Fee due:
Less than $10,000,000 ...................................................................
$300
$10,000,000 or more, but less than $25,000,000 .........................
$500
$25,000,000 or more, but less than $50,000,000 .........................
$1,000
$50,000,000 or more, but less than $100,000,000 .......................
$2,500
$100,000,000 or more, but less than $250,000,000 .....................
$4,000
$250,000,000 or more, but less than $500,000,000 .....................
$5,000
$500,000,000 or more ....................................................................
$7,000.
‘‘(d) SUSPENSION FOR FAILURE TO PAY.—The Com-
mission, by order, may suspend the registration of any in-
vestment adviser if it finds, after notice, that such invest-
ment adviser has failed to pay when due any fee required
by this section. The Commission shall reinstate such reg-
istration upon payment of the fee (and any penalty due),
if such suspension was based solely on the failure to pay
the fee.
‘‘(e) RULEMAKING.—The Commission may adopt such
rules as are necessary to carry out this section.
‘‘(f) DEFINITION OF ASSETS UNDER MANAGEMENT.—
As used in this section, the term ‘assets under management’
means the client assets with respect to which an investment
adviser provides continuous and regular supervisory or
management services.’’.
(b) EFFECTIVE DATE.—This section shall become effec-
tive upon the adoption by the Commission of implementing
rules, under section 203A(f) of the Investment Advisers Act
of 1940, as added by subsection (a).
SEC. 3. EXAMINATIONS AND SURVEYS.
The Investment Advisers Act of 1940 is amended by
inserting after section 222 (15 U.S.C. 80b–22) the following
new section:
‘‘EXAMINATIONS AND SURVEYS
‘‘SEC. 223. (a) PERIODIC EXAMINATIONS.—The Com-
mission shall establish and periodically revise a schedule
for the regular examination of investment advisers. Such
schedule shall provide for more frequent examinations of
certain investment advisers based on factors that the Com-
mission determines increase the need for examination of
those investment advisers, which shall include (at a mini-
mum) each of the following:
‘‘(1) the frequency of customer complaints;
‘‘(2) the risks associated with newly registered
investment advisers;
‘‘(3) custody of funds and the authority to exer-
cise investment discretion;
‘‘(4) the existence of deficiencies detected during
an examination under this title that may continue to
present high risks to clients; and
‘‘(5) the receipt of commissions for the sale of in-
vestments recommended to clients.
‘‘(b) SURVEYS
OF UNREGISTERED PERSONS.—The
Commission shall, within 3 years after the date of enact-
ment of this section and periodically thereafter, provide for
the conduct of a survey to determine the extent of, and rea-
sons for, the failure of persons to register as required by
this Act. The Commission shall, on the basis of such survey
results, establish objectives for the reduction or elimination
of such failures and shall include in annual reports to Con-
gress (under section 23(b) of the Securities Exchange Act
of 1934) submitted after completion of the first survey, a
statement of such objectives, an evaluation of the success in
attaining those objectives during the preceding year, and
such recommendations as the Commission considers appro-
priate to assist in the attainment of those objectives. If the
survey identifies any pattern of noncompliance with the
registration requirements of the title and the rules there-
under, the Commission’s objectives shall include such rule-
making proceedings as may be required to correct such non-
compliance.
‘‘(c) PROVISIONS NOT LIMITATION.—The provisions of
this section shall not be construed to limit the authority
of the Commission to prescribe rules under this Act or to
conduct an examination or investigation at any time or
to institute proceedings under this title or any other title.’’.
SEC. 4. DESIGNATION OF SELF-REGULATORY ORGANIZA-
TIONS.
The Investment Advisers Act of 1940 (15 U.S.C. 80b–
1 et seq.) is amended by inserting after section 223 (as
added by section 3 of this Act) the following new section:
‘‘DESIGNATION OF SELF-REGULATORY ORGANIZATIONS
‘‘SEC. 224. (a) DESIGNATION TO CONDUCT EXAMINA-
TIONS.—The Commission, by rule, consistent with the pub-
lic interest, the protection of investors, and the purposes of
this title, may designate one or more self-regulatory organi-
zations registered with the Commission under section 6 or
15A of the Securities Exchange Act of 1934, to conduct peri-
odic examinations of its members, and affiliates of mem-
bers, that are registered or required to register under this
title, to determine compliance with applicable provisions of
this title and the rules and regulations thereunder. Such
rule shall specify the minimum scope and frequency for
such examinations and shall, to the extent consistent with
the protection of investors, be designed to avoid unnecessary
regulatory duplication or undue regulatory burdens. Such
self-regulatory organization may discipline such members
and affiliates of members for violations of the applicable
provisions of this title and the rules and regulations there-
under pursuant to the standards and procedures set forth
in sections 6, 15A, and 19 of the Securities Exchange Act
of 1934. The money penalties imposed by a self-regulatory
organization for violations of this title shall not exceed those
contained in section 203(i).
‘‘(b) LIMITATIONS.—
‘‘(1) PRIMARY BUSINESS LIMITATION.—The Com-
mission shall not exercise the designation authority
contained in subsection (a) for members or affiliates
of members if the primary business of the member
and its affiliates is investment advisory activities.
‘‘(2) LIMITATION WITH RESPECT TO AFFILIATES
OF MEMBERS.—The Commission shall not exercise the
authority contained in subsection (a) for an affiliate
of a member if—
‘‘(A) the primary business of the affiliate is
investment advisory activities;
‘‘(B) the affiliate is an affiliate of the mem-
ber solely as a result of the adviser’s (or an asso-
ciated person of the adviser’s) registration with
the member as a registered representative; and
‘‘(C) the affiliate is a registered representa-
tive of the member solely to enable the adviser to
execute transactions that are incidental to the
investment adviser’s primary business;
unless the Commission determines, in accordance with
such other criteria as the Commission establishes by
rule, that such exercise of designation authority is
consistent with the public interest, the protection of
investors, the purposes of this title, and the objectives
of the Commission’s investment adviser examination
program.
‘‘(3) LIMITATION WITH RESPECT TO SAVINGS AS-
SOCIATION AFFILIATES OF MEMBERS.—The Commis-
sion shall not exercise the authority contained in sub-
section (a) for an affiliate of a member if the affiliate
is a savings association, as such term is defined in
section 3(b)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1813(b)(1)).
‘‘(4) DEFINITIONAL
RULES.—For purposes of
this subsection, the Commission may, by rule, estab-
lish criteria for defining the terms ‘primary business’
and ‘incidental to the investment adviser’s primary
business’.
‘‘(c) AUTHORITY TO IMPOSE FEES.—
‘‘(1) IN GENERAL.—Any self-regulatory organi-
zation designated by the Commission to perform the
examinations specified in subsection (a) shall have
the authority to collect fees in accordance with this
subsection.
‘‘(2) LIMITATION.—The total fee paid by a reg-
istered investment adviser under this subsection shall
not exceed an amount determined in accordance with
rules prescribed by the Commission. Such rules shall
require that the fees collected by a self-regulatory or-
ganization under this subsection—
‘‘(A) cover only the costs of the self-regu-
latory organization’s expenses for examinations
conducted pursuant to subsection (a);
‘‘(B) as to any investment adviser, bear a
reasonable relationship to the costs of conducting
an examination of that adviser pursuant to sub-
section (a); and
‘‘(C) not exceed such portion of the fee au-
thorized under section 203A as the Commission
determines is allocable to the Commission’s ex-
penses for conducting such an examination.
‘‘(3) REDUCTION OF SECTION 203A FEES.—The
amount of any fee that a registered investment ad-
viser is required to pay under section 203A with re-
spect to any fiscal year shall be reduced by the
amount paid to a self-regulatory organization in ac-
cordance with this subsection with respect to such fis-
cal year.
‘‘(d) EFFECTIVE DATE OF RULE.—A rule prescribed
by the Commission under this section shall not be effective
until 90 days after the date on which the Commission sub-
mits to each House of Congress a report—
‘‘(1) containing the text of the proposed rule and
the reasons therefor;
‘‘(2) describing the procedures to be used to co-
ordinate the collection of fees by the Commission
under section 203A and by a self-regulatory organiza-
tion under the rule; and
‘‘(3) containing such other information as may
be necessary to describe the implementation and en-
forcement of the rule.
‘‘(e) DEFINITION.—For purposes of this section, the
term ‘affiliate’ shall mean any person directly or indirectly
controlling, controlled by, or under common control with
a member.’’.
SEC. 5. SUITABILITY AND OTHER ADVISER OBLIGATIONS.
(a) AMENDMENT.—Section 206 of the Investment Ad-
visers Act of 1940 (15 U.S.C. 80b–6) is amended to read
as follows:
‘‘PROHIBITED TRANSACTIONS BY INVESTMENT ADVISERS
‘‘SEC. 206. (a) PROHIBITED CONDUCT.—It shall be
unlawful for any investment adviser or any person associ-
ated with an investment adviser, by use of the mails or any
means or instrumentality of interstate commerce, directly
or indirectly—
‘‘(1) to employ any device, scheme, or artifice to
defraud any client or prospective client;
‘‘(2) to engage in any transaction, practice, or
course of business which operates as a fraud or deceit
upon any client or prospective client;
‘‘(3) acting as principal for his own account,
knowingly to sell any security to or purchase any se-
curity from a client, or acting as broker for a person
other than such client, knowingly to effect any sale or
purchase of any security for the account of such cli-
ent, without disclosing to such client in writing before
the completion of such transaction the capacity in
which he is acting and obtaining the consent of the
client to such transaction;
‘‘(4) to engage in any act, practice, or course of
business which is fraudulent, deceptive, or manipula-
tive;
‘‘(5) to provide investment advice to any client,
other than in connection with impersonal advisory
services, unless the adviser—
‘‘(A) prior to providing any investment ad-
vice, and as appropriate thereafter, makes a rea-
sonable inquiry into the client’s financial situa-
tion, investment experience, and investment ob-
jectives;
‘‘(B) reasonably determines that the invest-
ment advice is suitable for the client; and
‘‘(C) maintains reasonable records, in ac-
cordance with such rules as the Commission shall
prescribe, of the information obtained from the
inquiries the adviser made in complying with
this paragraph; or
‘‘(6) to guarantee a client that a specific result
will be achieved as a result of the advisory services
provided by the investment adviser.
‘‘(b) EXEMPTIONS AND SPECIAL RULES.—
‘‘(1) EXEMPTION.—The prohibitions of sub-
section (a)(3) shall not apply to any transaction with
a customer of a broker or dealer if such broker or
dealer is not acting as an investment adviser in rela-
tion to such transaction.
‘‘(2) AUTHORITY TO DEFINE AND PRESCRIBE.—
The Commission shall, for the purposes of subsection
(a)(4), by rules define, and prescribe means reason-
ably designed to prevent, such acts, practices, and
courses of business as are fraudulent, deceptive, or
manipulative.
‘‘(3) DEFINITION
OF
IMPERSONAL
ADVISORY
SERVICES.—As used in subsection (a)(5), the term
‘impersonal advisory services’ means any investment
advisory services provided—
‘‘(A) by means of written material or oral
statements which do not purport to meet the ob-
jectives or needs of specific individuals or ac-
counts;
‘‘(B) through the issuance of statistical in-
formation containing no expression of opinion as
to the investment merits of a particular security;
or
‘‘(C) by any combination of the foregoing
services.’’.
(b) RULEMAKING REQUIRED.—The Commission shall
prescribe rules for purposes of paragraph (5)(C) of section
206(a) of the Investment Advisers Act of 1940 (as added
by subsection (a) of this section) within one year after the
date of enactment of this Act.
SEC. 6. ADDITIONAL DISCLOSURE OBLIGATIONS OF IN-
VESTMENT ADVISERS.
(a) ADDITIONAL OBLIGATIONS.—Section 204 of the In-
vestment Advisers Act of 1940 (15 U.S.C. 80b–4) is amend-
ed—
(1) by striking the heading of such section and
inserting the following:
‘‘PERIODIC REPORTS AND OTHER DISCLOSURE
REQUIREMENTS’’;
(2) by inserting ‘‘(a) PERIODIC AND OTHER RE-
PORTS.—’’ after ‘‘SEC. 204.’’; and
(3) by adding at the end the following new sub-
sections:
‘‘(b) BROCHURE REQUIRED.—
‘‘(1) IN GENERAL.—Each person registered under
section 203 of this title shall disseminate to each cli-
ent or prospective client a document disclosing mate-
rial facts concerning matters listed in paragraphs (2)
and (3) and such other matters as the Commission
shall prescribe. In order to provide for timely and ef-
fective disclosure of such facts and matters to clients,
the Commission shall by rule prescribe the format of
the document and the timing of its dissemination.
‘‘(2) CONTENTS OF BROCHURE.—The document
required by paragraph (1) shall include information
concerning—
‘‘(A) the education and business background
of such person and of any associated person pro-
viding significant investment advisory services
to the client,
‘‘(B) compensation arrangements between
the client and the investment adviser,
‘‘(C) the nature of services offered,
‘‘(D) business practices,
‘‘(E) methods for obtaining information on
the disciplinary history and registration of the
investment adviser and persons associated with
the investment adviser, and
‘‘(F) conflicts of interest which could rea-
sonably be expected to impair the rendering of
disinterested advice.
‘‘(3) PROMINENT DISCLOSURES.—Such document
shall also prominently disclose—
‘‘(A) that—
‘‘(i) the registered person receives or
may receive, directly or indirectly, sales
commissions or other fees in connection
with a purchase or sale effected on behalf of
a client; or
‘‘(ii) the registered person will not re-
ceive, directly or indirectly, any sales com-
mission or other fees in connection with
such purchase or sale, but the client may be
charged a sales commission or other fee by
another person in connection with such pur-
chase or sale; and
‘‘(B) that remedies may be available to the
client with respect to disputes arising out of the
advisory relationship.
‘‘(4) DEFINITION.—The Commission shall define
‘associated person providing significant investment
advisory services to the client’ by rule for purposes of
this subsection.
‘‘(c) TRANSACTION REPORTS.—
‘‘(1) INITIAL DISCLOSURE.—Before a purchase or
sale is effected on behalf of any client, each registered
investment adviser shall, in accordance with rules
prescribed by the Commission, disclose to the client
the total amount of commissions, fees, or other charges
that may reasonably be expected to be charged in con-
nection with the transaction (or, in the case of pay-
ments from third parties, that a payment will be re-
ceived) and that the adviser or a related person will
receive a portion of the commission, fee, charge, or
payment. Such initial disclosure shall be in writing
if the purchase or sale was recommended in writing.
‘‘(2) CONFIRMATION.—After a purchase or sale is
effected, each registered investment adviser shall
transmit to each client a written statement that dis-
closes the amount of commissions, fees, or other
charges charged in connection with the transaction
(or, in the case of payments from third parties, that
a payment has been or will be received). Such written
statement shall be in such form and contain such in-
formation, and be provided in accordance with such
rules, as the Commission shall prescribe. Such rules
shall, to the extent consistent with the protection of
investors, permit delivery of a confirmation statement
of a broker or a dealer that includes information that
meets the requirements of this subsection (and the
rules adopted thereunder) in order to satisfy such re-
quirements.
‘‘(3) WAIVER.—The Commission may, by rule,
permit an investment adviser to omit disclosure re-
quired by this subsection with the knowing written
consent of the client.
‘‘(4) EXCEPTIONS.—This subsection shall not
apply—
‘‘(A) with respect to any purchase or sale
for which the investment adviser, and any per-
son associated or under common control with the
investment adviser, will not receive any portion
of the amount charged or deducted in connection
with the purchase or sale, and will not receive
any payment from a third party required to be
disclosed under paragraph (1);
‘‘(B) with respect to accounts for which the
person is authorized to exercise investment dis-
cretion; or
‘‘(C) with respect to any account for which
the person is not acting as an investment ad-
viser.
‘‘(5) SPECIAL RULE.—The provisions of this sub-
section shall also apply to any person associated with
an investment adviser effecting transactions for advi-
sory clients through a broker or dealer with which the
person is associated.
‘‘(d) PERIODIC REPORTS.—
‘‘(1) IN GENERAL.—Each registered investment
adviser shall provide to each client a periodic written
statement in such form and containing such informa-
tion as the Commission shall prescribe by rule con-
sistent with the public interest, the protection of in-
vestors, and the purposes of this title. Such rule shall
require the disclosure of—
‘‘(A) commissions, fees, or other charges
paid by the client during the period for services
provided by the investment adviser and any per-
son associated or under common control with the
investment adviser;
‘‘(B) compensation directly or indirectly re-
ceived during the period by the investment ad-
viser, or any person associated or under common
control with the investment adviser, from any
a report of a broker or dealer that includes informa-
tion that meets the requirements of this subsection
(and the rules adopted thereunder) in order to satisfy
such requirements.
‘‘(3) WAIVER.—The Commission may, by rule,
permit an investment adviser to provide the statement
required by paragraph (1) no more frequently than
annually if the client knowingly waives, in writing,
the right to obtain such statement more frequently
than annually.
‘‘(4) EXCEPTION.—This subsection shall not
apply with respect to any account for which the per-
son is not acting as an investment adviser.
‘‘(e) FACILITIES FOR FILING RECORDS AND REPORTS;
ACCESS TO DISCIPLINARY AND OTHER INFORMATION.—
‘‘(1) FILING DEPOSITORIES.—The Commission,
by rule, may require any investment adviser—
‘‘(A) to file with the Commission any fee,
application, report, or notice required by this
title or by the rules issued under this title
through any entity designated by the Commis-
sion for that purpose; and
‘‘(B) to pay the reasonable costs associated
with (i) such filing, and (ii) the maintenance of
the toll-free telephone listing required by para-
graph (2).
‘‘(2) LISTING FOR TOLL-FREE INQUIRIES.—The
Commission shall require the entity designated by the
Commission to receive fees, applications, reports, or
notices pursuant to paragraph (1) to—
‘‘(A) establish and maintain a toll-free tele-
phone listing to receive inquiries regarding the
disciplinary and other information involving in-
vestment advisers and persons associated with
investment advisers; and
‘‘(B) respond promptly to such inquiries in
writing.
Such designated entity may charge persons, other
than individual investors, reasonable fees for the cost
of providing written responses to inquiries. Such des-
ignated entity shall not have any liability to any per-
son for any actions taken or omitted in good faith
under this paragraph.’’.
(b) RULEMAKING REQUIRED.—The Commission shall
prescribe rules for purposes of subsections (b), (c), and (d)
of section 204 of the Investment Advisers Act of 1940 (as
added by subsection (a) of this section) within one year
after the date of enactment of this Act.
SEC. 7. BOND REQUIREMENT.
Section 208 of the Investment Advisers Act of 1940 (15
U.S.C. 80b–8) is amended by adding at the end the follow-
ing:
‘‘(e) BOND REQUIREMENT.—
‘‘(1) IN GENERAL.—The Commission, by rules
for the protection of investors, shall require any in-
vestment adviser registered under section 203 who—
‘‘(A) is authorized to exercise investment
discretion, as defined in section 3(a)(35) of the
Securities Exchange Act of 1934, with respect to
an account,
‘‘(B) has access to the securities or funds of
a client, or
‘‘(C) is an investment adviser of an invest-
ment company, as defined in section 2(a)(20) of
the Investment Company Act of 1940,
to obtain a bond from a reputable fidelity insurance
company against larceny and embezzlement in such
reasonable amounts and covering such officers, part-
ners, directors, and employees of the investment ad-
viser as the Commission may prescribe.
‘‘(2) CONSIDERATIONS IN RULEMAKING.—In im-
plementing paragraph (1), the Commission shall con-
sider—
‘‘(A) the degree of risk to client assets that
is involved;
‘‘(B) the cost and availability of fidelity
bonds;
‘‘(C) existing fidelity bonding requirements;
and
‘‘(D) any alternative means to protect client
assets.
‘‘(3) EXEMPTION AUTHORITY.—The Commission
by rule may exempt any person or class of persons,
under such terms and conditions and for such periods
as the Commission shall provide in such rule, from
the requirements of this subsection and the rules
thereunder.’’.
SEC. 8. DISQUALIFYING CONDUCT.
(a) AMENDMENT.—Section 203(e) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b–3(e)) is amended—
(1) by redesignating paragraphs (3) through (7)
as paragraphs (4) through (8), respectively; and
(2) by inserting after paragraph (2) the follow-
ing new paragraph:
‘‘(3) has been convicted within ten years preced-
ing the filing of any application for registration or
at any time thereafter of any crime that is punishable
by imprisonment for one or more years and that is
not described in paragraph (2) of this subsection or
of a substantially equivalent crime by a foreign court
of competent jurisdiction.’’.
(b) CONFORMING AMENDMENTS.—Section 203 of such
Act is further amended—
(1) in subsection (e)(6) (as redesignated by sub-
section (a) of this section), by striking ‘‘this para-
graph (5)’’ and inserting ‘‘this paragraph (6)’’;
(2) in subsection (f)—
(A) by striking ‘‘paragraph (1), (4), (5), or
(7)’’ and inserting ‘‘paragraph (1), (5), (6), or
(8)’’; and
(B) by striking ‘‘paragraph (3)’’ and insert-
ing ‘‘paragraph (4)’’; and
(3) in subsection (i)(1)(D), by striking ‘‘section
203(e)(5) of this title’’ and inserting ‘‘subsection
(e)(6) of this section’’.
SEC. 9. CONFIDENTIALITY.
Section 208 of the Investment Advisers Act of 1940 (15
U.S.C. 80b–8), as amended by section 7, is further amended
by adding at the end the following new subsection:
‘‘(f) DISCLOSURE OF CLIENT INFORMATION PROHIB-
ITED.—
‘‘(1) ADVISER DISCLOSURE.—It shall be unlaw-
ful for any investment adviser to disclose any person-