1152 
(6) SECTION
908.—Section 908(f)(7) of the 
Electronic 
Fund 
Transfer 
Act 
(15 
U.S.C. 
1693f(f)(7)) is amended by striking ‘‘Board’’ and in-
serting ‘‘Agency’’. 
(7) SECTION 910.—Section 910(a)(1)(E) of the 
Electronic 
Fund 
Transfer 
Act 
(15 
U.S.C. 
1693h(a)(1)(E)) is amended by striking ‘‘Board’’ 
and inserting ‘‘Agency’’. 
(8) SECTION
911.—Section 911(b)(3) of the 
Electronic 
Fund 
Transfer 
Act 
(15 
U.S.C. 
1693i(b)(3) is amended by striking ‘‘Board’’ and in-
serting ‘‘Agency’’. 
(9) SECTION 915.—Section 915(d) of the Elec-
tronic Fund Transfer Act (15 U.S.C. 1693m(d)) is 
amended— 
(A) by striking ‘‘Board’’ each place such 
term appears and inserting ‘‘Agency’’; and 
(B) by striking ‘‘Federal Reserve System’’ 
and inserting ‘‘Consumer Financial Protection 
Agency’’. 
(10) SECTION 917.—Section 917 of the Elec-
tronic Fund Transfer Act (15 U.S.C. 1693o) is 
amended— 
(A) in subsection (a)—
1153 
(i) by striking ‘‘Compliance’’ and in-
serting ‘‘Subject to section 4202 of the 
Consumer Financial Protection Agency Act 
of 2009, compliance’’; 
(ii) in paragraph (1)(A), by striking 
‘‘Office of the Comptroller of the Cur-
rency’’ and inserting ‘‘head of the agency 
responsible for chartering and regulating 
national banks’’; 
(iii) in paragraph (l)(B), by inserting 
‘‘of Governors of the Federal Reserve Sys-
tem’’ after ‘‘Board’’; and 
(iv) by striking paragraph (2) and in-
serting: 
‘‘(2) subtitle E of the Consumer Financial Pro-
tection Agency Act of 2009, by the Agency;’’; and 
(B) by striking subsection (c) and insert-
ing the following new subsection: 
‘‘(c) OVERALL ENFORCEMENT AUTHORITY OF THE 
FEDERAL TRADE COMMISSION.—Except to the extent 
that enforcement of the requirements imposed under this 
title is specifically committed to some other Government 
agency (other than the Consumer Financial Protection 
Agency) under subsection (a) and subject to section 4202 
of the Consumer Financial Protection Agency Act of 2009,
1154 
the Federal Trade Commission shall enforce such require-
ments. For the purpose of the exercise by the Federal 
Trade Commission of its functions and powers under the 
Federal Trade Commission Act, a violation of any require-
ment imposed under this title shall be deemed a violation 
of a requirement imposed under that Act. All of the func-
tions and powers of the Federal Trade Commission under 
the Federal Trade Commission Act are available to the 
Commission to enforce compliance by any person subject 
to the jurisdiction of the Commission with the require-
ments imposed under this title, irrespective of whether 
that person is engaged in commerce or meets any other 
jurisdictional tests in the Federal Trade Commission 
Act.’’. 
(11) SECTION 918.—Section 918 of the Elec-
tronic Fund Transfer Act (15 U.S.C. 1693p) is 
amended by striking ‘‘Board’’ each place such term 
appears and inserting ‘‘Agency’’. 
(12) SECTION 919.—Section 919 of the Elec-
tronic Fund Transfer Act (15 U.S.C. 1693q) is 
amended by striking ‘‘Board’’ each place such term 
appears and inserting ‘‘Agency’’. 
(13) SECTION 920.—Section 920 of the Elec-
tronic Fund Transfer Act (15 U.S.C. 1693r) is
1155 
amended by striking ‘‘Board’’ each place such term 
appears and inserting ‘‘Agency’’. 
(f) AMENDMENTS TO HOEPA RELATING TO THE 
TRUTH IN LENDING ACT.—Section 158 of the Home 
Ownership and Equity Protection Act of 1994 (15 U.S.C. 
1601 note) (relating to hearings on home equity lending) 
is amended— 
(1) in subsection (a), by striking ‘‘Board of 
Governors of the Federal Reserve System, in con-
sultation with the Consumer Advisory Council of the 
Board,’’ and inserting ‘‘Consumer Financial Protec-
tion Agency, in consultation with the Advisory 
Board to the Agency’’; and 
(2) in subsection (b), by striking ‘‘Board of 
Governors of the Federal Reserve System’’ and in-
serting ‘‘Consumer Financial Protection Agency’’. 
(g) AMENDMENT
TO
THE FAIR
AND ACCURATE 
CREDIT TRANSACTIONS ACT OF 2003 RELATING TO THE 
FAIR CREDIT REPORTING ACT.—Section 214(b)(1) of the 
Fair and Accurate Credit Transactions Act of 2003 (15 
U.S.C. 1681s–3 note) is amended by striking ‘‘The Fed-
eral banking agencies, the National Credit Union Adminis-
tration, and the Commission, with respect to the entities 
that are subject to their respective enforcement authority 
under section 621 of the Fair Credit Reporting Act and’’
1156 
and inserting ‘‘The Consumer Financial Protection Agen-
cy, with respect to a person subject to the enforcement 
authority of the Agency, the Commodity Futures Trading 
Commission, and’’. 
SEC. 4805. AMENDMENTS TO THE EXPEDITED FUNDS 
AVAILABILITY ACT. 
(a) SECTION 605.—Section 605(f)(1) of the Expe-
dited Funds Availability Act (12 U.S.C. 4004(f)(1)) is 
amended by inserting ‘‘, in consultation with the Director 
of the Consumer Financial Protection Agency,’’ after 
‘‘Board’’. 
(b) SECTION 609.—Section 609(a) of the Expedited 
Funds Availability Act (12 U.S.C. 4008(a)) is amended 
by inserting ‘‘, in consultation with the Director of the 
Consumer Financial Protection Agency,’’ after ‘‘Board’’. 
SEC. 4806. AMENDMENTS TO THE FEDERAL DEPOSIT IN-
SURANCE ACT. 
(a) SECTION 8.—Section 8(t) the Federal Deposit In-
surance Act (12 U.S.C. 1818(t)), as amended by section 
1111(b)(2), is further amended by adding at the end the 
following new paragraph: 
‘‘(7) REFERRAL TO CONSUMER FINANCIAL PRO-
TECTION
COMMISSION.—Each appropriate Federal 
banking agency shall make a referral to the Con-
sumer Financial Protection Agency when the Fed-
1157 
eral banking agency has a reasonable belief that a 
violation of an enumerated consumer law, as defined 
in section 4202(e)(2) of the Consumer Financial 
Protection Agency Act of 2009, by any insured de-
pository institution or institution-affiliated party 
within the jurisdiction of that appropriate Federal 
banking agency.’’. 
(b) SECTION 43.—Section 43 of the Federal Deposit 
Insurance Act (12 U.S.C. 1831t) is amended— 
(1) in subsection (c), by striking ‘‘Federal 
Trade Commission’’ and inserting ‘‘Agency’’; 
(2) in subsection (d), by striking ‘‘Federal 
Trade Commission’’ and inserting ‘‘Agency’’; 
(3) in subsection (e)— 
(A) in paragraph (2)(B), by striking ‘‘Fed-
eral Trade Commission’’ and inserting ‘‘Agen-
cy’’; and 
(B) by adding at the end the following new 
paragraph: 
‘‘(5) AGENCY.—The term ‘Agency’ means the 
Consumer Financial Protection Agency.’’. 
(c) SECTION 43(f).—Section 43(f) of the Federal De-
posit Insurance Act (12 U.S.C. 1831t(f)) is amended— 
(1) by striking paragraph (1) and inserting the 
following new paragraph:
1158 
‘‘(1) LIMITED
ENFORCEMENT
AUTHORITY.— 
Compliance with the requirements of subsections (b), 
(c), and (e), and any regulation prescribed or order 
issued under such subsection, shall be enforced 
under the Consumer Financial Protection Agency 
Act of 2009 by the Agency with respect to any per-
son (and without regard to the provision of a con-
sumer financial product or service).’’; and 
(2) in paragraph (2), by striking subparagraph 
(C) and inserting the following new subparagraph: 
‘‘(C) 
LIMITATION
ON
STATE
ACTION 
WHILE
FEDERAL
ACTION
PENDING.—If the 
Agency has instituted an enforcement action for 
a violation of this section, no appropriate State 
supervisory may, during the pendency of such 
action, bring an action under this section 
against any defendant named in the complaint 
of the Agency for any violation of this section 
that is alleged in that complaint.’’. 
SEC. 4807. AMENDMENTS TO THE GRAMM-LEACH-BLILEY 
ACT. 
(a) SECTION 501.—Section 501(b) of the Gramm- 
Leach-Bliley Act (15 U.S.C. 6801(b)) is amended by in-
serting ‘‘(other than the Consumer Financial Protection 
Agency)’’ after ‘‘title’’.
1159 
(b) SECTION 502.—Section 502(e)(5) of the Gramm- 
Leach-Bliley Act (15 U.S.C. 6802(e)(5)) is amended by 
inserting ‘‘the Consumer Financial Protection Agency,’’ 
after ‘‘(including’’. 
(c) SECTION 503.—Section 503(e)(1) of the Gramm- 
Leach-Bliley Act (15 U.S.C. 6803(e)(1)) is amended— 
(1) by inserting ‘‘Consumer Financial Protec-
tion Agency in consultation with the other’’ before 
‘‘agencies’’; and 
(2) by striking ‘‘jointly’’. 
(d) SECTION 504.—Section 504(a)(1) of the Gramm- 
Leach-Bliley Act (15 U.S.C. 6804(a)(1)) is amended— 
(1) by striking ‘‘The Federal banking agencies, 
the National Credit Union Administration, the Sec-
retary of the Treasury,’’ and inserting ‘‘The Con-
sumer Financial Protection Agency and’’; 
(2) by striking ‘‘, and the Federal Trade Com-
mission’’; and 
(3) by inserting ‘‘the Federal banking agencies, 
the National Credit Union Administration, the Sec-
retary of the Treasury, the Federal Trade Commis-
sion, and’’ before ‘‘representatives of State insurance 
authorities’’. 
(e) SECTION 505.—
1160 
(1) Section 505(a) of the Gramm-Leach-Bliley 
Act (15 U.S.C. 6805(a)) is amended— 
(A) in the matter preceding paragraph (1), 
by striking ‘‘This subtitle and the regulations 
prescribed thereunder shall be enforced by’’ and 
inserting ‘‘Subject to section 4202 of the Con-
sumer Financial Protection Agency Act of 
2009, this subtitle and the regulations pre-
scribed under this title shall be enforced by the 
Consumer Financial Protection Agency,’’; and 
(B) by inserting after paragraph (7) the 
following new paragraph: 
‘‘(8) Under the Consumer Financial Protection 
Agency Act of 2009, by the Consumer Financial 
Protection Agency in the case of financial institu-
tions and other covered persons and service pro-
viders subject to the jurisdiction of the Agency 
under that Act, but not with respect to the stand-
ards under section 501.’’. 
(2) Section 505(b)(1) of the Gramm-Leach-Bli-
ley Act (15 U.S.C. 6805(b)(1)) is amended by in-
serting ‘‘, other than the Consumer Financial Pro-
tection Agency,’’ after ‘‘described in subsection (a)’’. 
(f) SECTION 507.—Subsection 507(b) of the Gramm- 
Leach-Bliley Act (15 U.S.C. 6807(b)) is amended by strik-
1161 
ing ‘‘Federal Trade Commission’’ and inserting ‘‘Con-
sumer Financial Protection Agency, or in the case of a 
rule under section 501(b), the Federal Trade Commission 
or the Securities and Exchange Commission’’. 
SEC. 4808. AMENDMENTS TO THE HOME MORTGAGE DIS-
CLOSURE ACT OF 1975. 
(a) SECTION 303.—Section 303 of the Home Mort-
gage Disclosure Act of 1975 (12 U.S.C. 2802) is amend-
ed— 
(1) by redesignating paragraphs (1), (2), (3), 
(4), (5), and (6) as paragraphs (2), (3), (4), (5), 
(6), and (7), respectively; and 
(2) by inserting before paragraph (2) (as so re-
designated) the following new paragraph: 
‘‘(1) The term ‘Agency’ means the Consumer 
Financial Protection Agency.’’. 
(b) UNIVERSAL AMENDMENT RELATING TO AGEN-
CY.—Except as provided in subsections (c), (d), (e), and 
(f), the Home Mortgage Disclosure Act of 1975 (12 
U.S.C. 2801–11) is amended by striking ‘‘Board’’ each 
place such term appears and inserting ‘‘Agency’’. 
(c) SECTION 304.—Section 304 of the Home Mort-
gage Disclosure Act of 1975 (12 U.S.C. 2803(h)) is 
amended— 
(1) in subsection (b)—
1162 
(A) by striking ‘‘and’’ after the semicolon 
at the end of paragraph (3); 
(B) by striking ‘‘and gender’’ in paragraph 
(4), and inserting ‘‘age, and gender’’; 
(C) by striking the period at the end of 
paragraph (4) and inserting a semicolon; and 
(D) by inserting after paragraph (4) the 
following new paragraphs: 
‘‘(5) the number and dollar amount of mort-
gage loans grouped according to the following meas-
urements: 
‘‘(A) the total points and fees payable at 
origination in connection with the mortgage as 
determined by the Agency, taking into account 
section 103(aa)(4) of the Truth in Lending Act 
(15 U.S.C. 1602(aa)(4)); 
‘‘(B) the difference between the annual 
percentage rate associated with the loan and a 
benchmark rate or rates for all loans; 
‘‘(C) the term in months of any prepay-
ment penalty or other fee or charge payable on 
repayment of some portion of principal or the 
entire principal in advance of scheduled pay-
ments; and
1163 
‘‘(D) such other information as the Agency 
may require; and 
‘‘(6) the number and dollar amount of mort-
gage loans and completed applications grouped ac-
cording to the following measurements: 
‘‘(A) the value of the real property pledged 
or proposed to be pledged as collateral; 
‘‘(B) the actual or proposed term in 
months of any introductory period after which 
the rate of interest may change; 
‘‘(C) the presence of contractual terms or 
proposed contractual terms that would allow the 
mortgagor or applicant to make payments other 
than fully-amortizing payments during any por-
tion of the loan term; 
‘‘(D) the actual or proposed term in 
months of the mortgage loan; 
‘‘(E) the channel through which applica-
tion was made, including retail, broker, and 
other relevant categories; 
‘‘(F) as the Agency may determine to be 
appropriate, a unique identifier that identifies 
the loan originator as set forth in section 1503 
of the Secure and Fair Enforcement for Mort-
gage Licensing Act of 2008;
1164 
‘‘(G) as the Agency may determine to be 
appropriate, a universal loan identifier; 
‘‘(H) as the Agency may determine to be 
appropriate, the parcel number that cor-
responds to the real property pledged or pro-
posed to be pledged as collateral; 
‘‘(I) the credit score of mortgage appli-
cants and mortgagors in such form as the 
Agency may prescribe, except that the Agency 
shall modify or require modification of credit 
score data that is or will be available to the 
public to protect the compelling privacy interest 
of the mortgage applicant or mortgagors; and 
‘‘(J) such other information as the Agency 
may require.’’; 
(2) by striking subsection (h) and inserting the 
following new subsection: 
‘‘(h) SUBMISSION TO AGENCIES.— 
‘‘(1) IN GENERAL.—The data required to be 
disclosed under subsection (b) shall be submitted to 
the Agency or to the appropriate agency for any in-
stitution reporting under this title, in accordance 
with regulations prescribed by the Agency. Institu-
tions will not be required to report new data re-
quired under section 4808(c) before the first Janu-
1165 
ary 1 that occurs after the end of the 9-month pe-
riod beginning on the date that regulations pre-
scribed by the Agency are prescribed in final form. 
‘‘(2) REGULATIONS.—Notwithstanding the re-
quirement of section 304(a)(2)(A) for disclosure by 
census tract, the Agency, in cooperation with other 
appropriate regulators, including— 
‘‘(A) the head of the agency responsible for 
chartering and regulating national banks for 
national banks and Federal branches, Federal 
agencies of foreign banks, and savings associa-
tions; 
‘‘(B) the Federal Deposit Insurance Cor-
poration for depository institutions insured by 
the Federal Deposit Insurance Corporation 
(other than members of the Federal Reserve 
System, Federal savings associations, and sav-
ings and loan holding companies) and insured 
State branches of foreign banks; 
‘‘(C) the Director of the Office of Thrift 
Supervision for Federal savings associations 
and savings and loan holding companies; 
‘‘(D) the National Credit Union Adminis-
tration Board for credit unions; and
1166 
‘‘(E) the Secretary of Housing and Urban 
Development for other lending institutions not 
regulated by an agency referred to in subpara-
graph (A), (B), (C), or (D), 
shall develop regulations prescribing the format for 
such disclosures, the method for submission of the 
data to the appropriate regulatory agency, and the 
procedures for disclosing the information to the pub-
lic. 
‘‘(3) REQUIRED
DISCLOSURES.—The regula-
tions prescribed under paragraph (2) shall require 
the collection of data required to be disclosed under 
subsection (b) with respect to loans sold by each in-
stitution reporting under this title, and, in addition, 
shall require disclosure of the class of the purchaser 
of such loans. 
‘‘(4) ADDITIONAL DATA OR EXPLANATIONS.— 
Any reporting institution may submit in writing to 
the Agency or to the appropriate agency such addi-
tional data or explanations as it deems relevant to 
the decision to originate or purchase mortgage 
loans.’’; 
(3) in subsection (i), by striking ‘‘subsection 
(b)(4)’’ and inserting ‘‘paragraphs (4), (5), and (6) 
of subsection (b)’’;
1167 
(4) in subsection (j)— 
(A) by striking ‘‘(as’’ where such term ap-
pears in paragraph (1) and inserting ‘‘(con-
taining loan-level and application-level informa-
tion relating to disclosures required under sub-
sections (a) and (b) and as otherwise’’; 
(B) by striking ‘‘in the format in which 
such information is maintained by the institu-
tion’’ where such term appears in paragraph 
(2)(A), and inserting ‘‘in such formats as the 
Agency may require’’; and 
(C) by striking paragraph (3) and insert-
ing the following new paragraph: 
‘‘(3) CHANGE OF FORM NOT REQUIRED.—A de-
pository institution meets the disclosure requirement 
of paragraph (1) if the institution provides the infor-
mation required under such paragraph in such for-
mats as the Agency may require.’’; and 
(5) by striking paragraph (2) of subsection (m) 
and inserting the following new paragraph: 
‘‘(2) FORM
OF
INFORMATION.—In complying 
with paragraph (1), a depository institution shall 
provide the person requesting the information with 
a copy of the information requested in such formats 
as the Agency may require.’’.
1168 
(d) SECTION 305.—Section 305 of the Home Mort-
gage Disclosure Act of 1975 (12 U.S.C. 2804) is amend-
ed— 
(1) by striking subsection (b) and inserting the 
following new subsection: 
‘‘(b) POWERS OF CERTAIN OTHER AGENCIES.—Com-
pliance with the requirements imposed under this title 
shall be enforced under— 
‘‘(1) section 8 of the Federal Deposit Insurance 
Act, in the case of— 
‘‘(A) national banks, and Federal branches 
and Federal agencies of foreign banks, by the 
head of the agency responsible for chartering 
and regulating national banks; 
‘‘(B) member banks of the Federal Reserve 
System (other than national banks), branches 
and agencies of foreign banks (other than Fed-
eral branches, Federal agencies, and insured 
State branches of foreign banks), commercial 
lending companies owned or controlled by for-
eign banks, and organizations operating under 
section 25 or 25A of the Federal Reserve Act, 
by the Board; 
‘‘(C) depository institutions insured by the 
Federal Deposit Insurance Corporation (other
1169 
than members of the Federal Reserve System, 
Federal savings associations, and savings and 
loan holding companies) and insured State 
branches of foreign banks, by the Board of Di-
rectors of the Federal Deposit Insurance Cor-
poration; and 
‘‘(D) Federal savings associations, and 
savings and loan holding companies, by the Di-
rector of the Office of Thrift Supervision; 
‘‘(2) subtitle E of the Consumer Financial Pro-
tection Agency Act of 2009, by the Agency; 
‘‘(3) the Federal Credit Union Act, by the Ad-
ministrator of the National Credit Union Adminis-
tration with respect to any credit union; and 
‘‘(4) other lending institutions, by the Secretary 
of Housing and Urban Development. The terms 
used in paragraph (1) that are not defined in this 
title or otherwise defined in section 3(s) of the Fed-
eral Deposit Insurance Act (12 U.S.C. 1813(s)) 
shall have the meaning given to them in section 1(b) 
of the International Banking Act of 1978 (12 U.S.C. 
3101). 
The terms used in paragraph (1) that are not defined in 
this title or otherwise defined in section 3(s) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the
1170 
meaning given to them in section 1(b) of the International 
Banking Act of 1978.’’; and 
(2) by inserting at the end of section 305 the 
following new subsection: 
‘‘(d) OVERALL ENFORCEMENT AUTHORITY OF THE 
CONSUMER FINANCIAL PROTECTION AGENCY.—Subject 
to section 4202 of the Consumer Financial Protection 
Agency Act of 2009, enforcement of the requirements im-
posed under this title is committed to each of the agencies 
under subsection (b). The Agency may exercise its authori-
ties under the Consumer Financial Protection Agency Act 
of 2009 to exercise principal authority to examine and en-
force compliance by any person with the requirements 
under this title.’’. 
(e) SECTION 306.—Subsection 306(b) of the Home 
Mortgage Disclosure Act of 1975 (12 U.S.C. 2805(b)) is 
amended to read as follows: 
‘‘(b) The Agency may, by regulation, exempt from the 
requirements of this title any State chartered depository 
institution within any State or subdivision of any state if 
the Agency determines that, under the law of such State 
or subdivision, that institution is subject to requirements 
substantially similar to those imposed under this title, and 
that such law contains adequate provisions for enforce-
ment. Notwithstanding any other provision of this sub-
1171 
section, compliance with the requirements imposed under 
this subsection shall be enforced by the head of the agency 
responsible for chartering and regulating national banks 
under section 8 of the Federal Deposit Insurance Act in 
the case of national banks and savings association the de-
posits of which are insured by the Federal Deposit Insur-
ance Corporation.’’. 
(f) SECTION 307.—Section 307 of the Home Mort-
gage Disclosure Act of 1975 (12 U.S.C. 2806) is amended 
to read as follows: 
‘‘SEC. 307. RESEARCH AND IMPROVED METHODS. 
‘‘(a) ENHANCED COMPLIANCE IN ECONOMICAL MAN-
NER.— 
‘‘(1) IN GENERAL.—The Director of the Con-
sumer Financial Protection Agency, with the assist-
ance of the Secretary, the Director of the Bureau of 
the Census, the Board of Governors of the Federal 
Reserve System, the Federal Deposit Insurance Cor-
poration, and such other persons as the Consumer 
Financial Protection Agency deems appropriate, 
shall develop or assist in the improvement of, meth-
ods of matching addresses and census tracts to fa-
cilitate compliance by depository institutions in as 
economical a manner as possible with the require-
ments of this title.
1172 
‘‘(2) AUTHORIZATION
OF
APPROPRIATION.— 
There is authorized to be appropriated such sums as 
may be necessary to carry out this subsection. 
‘‘(3) AUTHORITY OF AGENCY.—The Director of 
the Consumer Financial Protection Agency is au-
thorized to utilize, contract with, act through, or 
compensate any person or agency in order to carry 
out this subsection. 
‘‘(b) RECOMMENDATIONS TO THE CONGRESS.—The 
Director of the Consumer Financial Protection Agency 
shall recommend to the Committee on Financial Services 
of the House of Representatives and the Committee on 
Banking, Housing, and Urban Affairs of the Senate such 
additional legislation as the Director of the Consumer Fi-
nancial Protection Agency deems appropriate to carry out 
the purpose of this title.’’. 
SEC. 4809. AMENDMENTS TO DIVISION D OF THE OMNIBUS 
APPROPRIATIONS ACT, 2009. 
(a) Section 626(a) of title VI of division D of the 
Omnibus Appropriations Act, 2009 (15 U.S.C. 1638 note) 
(as amended by the Credit Card Accountability Responsi-
bility and Disclosure Act of 2009) is amended— 
(1) by striking by paragraph (1) and inserting 
the following new paragraph: ‘‘(1) The Director of 
the Consumer Financial Protection Agency shall
1173 
have authority to prescribe regulations with respect 
to mortgage loans in accordance with section 553 of 
title 5, United States Code. Such rulemaking shall 
relate to unfair or deceptive acts or practices regard-
ing mortgage loans, which may include unfair or de-
ceptive acts or practices involving loan modification 
and foreclosure rescue services. Any violation of a 
regulation prescribed under this subsection shall be 
treated as a violation of a regulation prohibiting un-
fair, deceptive, or abusive acts or practices under the 
Consumer Financial Protection Agency Act of 
2009.’’; 
(2) by striking paragraph (2); 
(3) by striking paragraph (3); and 
(4) by striking paragraph (4) and inserting the 
following new paragraph: 
‘‘(2) The Director of the Consumer Financial Protec-
tion Agency shall enforce the regulations issued under 
paragraph (1) in the same manner, by the same means, 
and with the same jurisdiction, powers, and duties as 
though all applicable terms and provisions of the Con-
sumer Financial Protection Agency Act of 2009 were in-
corporated into and made part of this section.’’. 
(b) Section 626(b) of title VI of division D of the 
Omnibus Appropriations Act, 2009 (15 U.S.C. 1638 note)
1174 
(as amended by the Credit Card Accountability Responsi-
bility and Disclosure Act of 2009) is amended by striking 
‘‘primary Federal regulator’’ each place it appears and in-
serting ‘‘Consumer Financial Protection Agency’’. 
SEC. 4810. AMENDMENTS TO THE HOMEOWNERS PROTEC-
TION ACT OF 1998. 
Section 10 of the Homeowners Protection Act of 
1998 (12 U.S.C. 4909) is amended— 
(1) in the matter preceding paragraph (1) of 
subsection (a), by striking ‘‘Compliance’’ and insert-
ing ‘‘Subject to section 4202 of the Consumer Fi-
nancial Protection Agency Act of 2009, compliance’’; 
(2) in subsection (a)(2), by striking ‘‘and’’ after 
the semicolon at the end; 
(3) in subsection (a)(3), by striking the period 
at the end and inserting ‘‘; and’’; 
(4) by inserting after subsection (a)(3), the fol-
lowing new paragraph: 
‘‘(4) subtitle E of the Consumer Financial Pro-
tection Agency Act of 2009, by the Consumer Fi-
nancial Protection Agency.’’; and 
(5) in subsection (b)(2), by inserting ‘‘, subject 
to section 4202 of the Consumer Financial Protec-
tion Agency Act of 2009’’ before the period at the 
end.
1175 
SEC. 4811. AMENDMENTS TO THE REAL ESTATE SETTLE-
MENT PROCEDURES ACT OF 1974. 
(a) SECTION 3.—Section 3 of the Real Estate Settle-
ment Procedures Act of 1974 (12 U.S.C. 2602) is amend-
ed— 
(1) in paragraph (7), by striking ‘‘and’’ after 
the semicolon at the end; 
(2) in paragraph (8), by striking the period at 
the end and inserting ‘‘; and’’; and 
(3) by adding at the end the following new 
paragraph: 
‘‘(9) the term ‘Agency’ means the Consumer Fi-
nancial Protection Agency.’’. 
(b) SECTION 4.—Section 4 of the Real Estate Settle-
ment Procedures Act of 1974 (12 U.S.C. 2603) is amend-
ed— 
(1) in subsection (a), by striking the first sen-
tence and inserting the following: ‘‘The Agency shall 
publish a single, integrated disclosure for mortgage 
loan transactions, including real estate settlement 
cost statements, which include the disclosure re-
quirements of this title, in conjunction with the dis-
closure requirements of the Truth in Lending Act 
(15 U.S.C. 1601 note et seq.) that, taken together, 
may apply to transactions subject to both or either 
law. The purpose of such model disclosure shall be
1177 
(d) SECTION 6.—Section 6(j)(3) of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2605(j)(3)) 
is amended— 
(1) by striking ‘‘Secretary’’ and inserting ‘‘Di-
rector of the Agency’’; and 
(2) by striking ‘‘by regulations that shall take 
effect not later than April 20, 1991,’’ and inserting 
‘‘by regulation,’’. 
(e) SECTION 7.—Section 7 of the Real Estate Settle-
ment Procedures Act of 1974 (12 U.S.C. 2606) is amend-
ed by striking ‘‘Secretary’’ and inserting ‘‘the Director of 
the Agency’’. 
(f) SECTION 8.—Section 8 of the Real Estate Settle-
ment Procedures Act of 1974 (12 U.S.C. 2607) is amend-
ed— 
(1) in subsection (c)(5), by striking ‘‘prescribed 
by the Secretary’’ and inserting ‘‘prescribed by the 
Director of the Agency’’; and 
(2) in subsection (d)(4)— 
(A) by striking ‘‘The Secretary,’’ and in-
serting ‘‘The Agency, the Secretary,’’; and 
(B) by adding at the end the following new 
sentence: ‘‘However, to the extent that a Fed-
eral law authorizes the Agency and other Fed-
eral and State agencies to enforce or administer
1178 
the law, the Agency shall have primary author-
ity to enforce or administer that Federal law in 
accordance with section 4202 of the Consumer 
Financial Protection Agency Act of 2009.’’. 
(g) SECTION 10.—Section 10(d) of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2609(d)) 
is amended by striking ‘‘Secretary’’ and inserting ‘‘Agen-
cy’’. 
(h) SECTION 16.—Section 16 of the Real Estate Set-
tlement Procedures Act of 1974 (12 U.S.C. 2614) is 
amended by inserting ‘‘the Agency,’’ before ‘‘the Sec-
retary’’. 
(i) SECTION 18.—Section 18 of the Real Estate Set-
tlement Procedures Act of 1974 (12 U.S.C. 2616) is 
amended by striking ‘‘Secretary’’ each place such term ap-
pears and inserting ‘‘Agency’’. 
(j) SECTION 19.—Section 19 of the Real Estate Set-
tlement Procedures Act of 1974 (12 U.S.C. 2617) is 
amended— 
(1) in the section heading, by striking ‘‘SEC-
RETARY’’ and inserting ‘‘AGENCY’’; and 
(2) by striking ‘‘Secretary’’ each place such 
term appears and inserting ‘‘Agency’’.
1179 
SEC. 4812. AMENDMENTS TO THE RIGHT TO FINANCIAL 
PRIVACY ACT OF 1978. 
(a) AMENDMENTS TO SECTION 1101.—Section 1101 
of the Right to Financial Privacy Act of 1978 (12 U.S.C. 
3401) is amended— 
(1) by striking paragraph (1) and inserting the 
following new paragraph: 
‘‘(1) ‘financial institution’ means any bank, sav-
ings association, card issuer as defined in section 
103(n) of the Truth in Lending Act, credit union, or 
consumer finance institution located in any State or 
territory of the United States, the District of Colum-
bia, Puerto Rico, Guam, American Samoa, or the 
Virgin Islands;’’; and 
(2) in paragraph (7), by inserting after sub-
paragraph (A) the following new subparagraph: 
‘‘(B) the Consumer Financial Protection 
Agency;’’. 
(b) AMENDMENTS
TO
SECTION
1112.—Section 
1112(e) of the Right to Financial Privacy Act of 1978 
(12 U.S.C. 3412) is amended by striking ‘‘and the Com-
modity Futures Trading Commission is permitted’’ and in-
serting ‘‘the Commodity Futures Trading Commission, 
and the Consumer Financial Protection Agency is per-
mitted’’.
1180 
(c) AMENDMENTS TO SECTION 1113.—Section 1113 
of the Right to Financial Privacy Act of 1978 (12 U.S.C. 
3413) is amended by adding at the end the following new 
subsection— 
‘‘(r) DISCLOSURE TO THE CONSUMER FINANCIAL 
PROTECTION AGENCY.—Nothing in this chapter shall 
apply to the examination by or disclosure to the Consumer 
Financial Protection Agency of financial records or infor-
mation in the exercise of its authority with respect to a 
financial institution.’’. 
SEC. 4813. AMENDMENTS TO THE SECURE AND FAIR EN-
FORCEMENT FOR MORTGAGE LICENSING ACT 
OF 2008. 
(a) SECTION 1503.—Section 1503 of the Secure and 
Fair Enforcement for Mortgage Licensing Act of 2008 (12 
U.S.C. 5102) is amended— 
(1) by striking paragraph (9); 
(2) by redesignating paragraph (1) as para-
graph (4), and transferring paragraph (4) (as so re-
designated) and inserting such paragraph after 
paragraph (3) (as added by paragraph (5)); 
(3) by redesignating paragraphs (3), (4), (5), 
(6), (7), (8), (10), (11), and (12) as paragraphs (5), 
(6), (7), (8), (9), (10), (11), (12), and (13), respec-
tively;
1181 
(4) by inserting before paragraph (2) the fol-
lowing new paragraph: 
‘‘(1) AGENCY.—The term ‘Agency’ means the 
Consumer Financial Protection Agency.’’; and 
(5) by inserting after paragraph (2) the fol-
lowing new paragraph: 
‘‘(3) DIRECTOR.—The term ‘Director’ means 
the Director of the Agency.’’. 
(b) UNIVERSAL AMENDMENTS RELATING TO AGEN-
CY.—The Secure and Fair Enforcement for Mortgage Li-
censing Act of 2008 (12 U.S.C. 5101 et seq.) is amend-
ed— 
(1) by striking ‘‘Federal banking agencies’’ 
each place such term appears (other than in sub-
section (a)(4) (as so redesignated by subsection (a), 
relating to the definition of Federal banking agen-
cies) or in connection with a reference that is specifi-
cally amended by another provision of this section) 
and inserting ‘‘Agency’’; and 
(2) by striking ‘‘Secretary’’ each place such 
term appears (other than in connection with a ref-
erence that is specifically amended by another provi-
sion of this section) and inserting ‘‘Director’’.
1183 
(d) SECTION 1508.— 
(1) IN GENERAL.—Section 1508 of the Secure 
and Fair Enforcement for Mortgage Licensing Act 
of 2008 (12 U.S.C. 5107) is amended by adding at 
the end the following new subsection: 
‘‘(f) REGULATIONS.— 
‘‘(1) IN GENERAL.—The Agency may prescribe 
regulations setting minimum net worth or surety 
bond requirements for residential mortgage loan 
originators and minimum requirements for recovery 
funds paid into by loan originators. 
‘‘(2) FACTORS
TAKEN
INTO
ACCOUNT.—Such 
regulations shall take into account the need to pro-
vide originators adequate incentives to originate af-
fordable and sustainable mortgage loans as well as 
the need to ensure a competitive origination market 
that maximizes consumers’ access to affordable and 
sustainable mortgage loans.’’. 
(2) CLERICAL AMENDMENT.—The heading for 
section 1508 of the Secure and Fair Enforcement 
for Mortgage Licensing Act of 2008 is amended by 
striking ‘‘SECRETARY OF HOUSING AND URBAN 
DEVELOPMENT’’ and inserting ‘‘CONSUMER FI-
NANCIAL PROTECTION AGENCY’’.
1184 
(e) SECTION 1510.—Section 1510 of the Secure and 
Fair Enforcement for Mortgage Licensing Act of 2008 (12 
U.S.C. 5109) is amended to read as follows: 
‘‘SEC. 1510. FEES. 
‘‘The Agency and the Nationwide Mortgage Licensing 
System and Registry may charge reasonable fees to cover 
the costs of maintaining and providing access to informa-
tion from the Nationwide Mortgage Licensing System and 
Registry, to the extent that such fees are not charged to 
consumers for access to such system and registry.’’. 
(f) SECTION 1513.—Section 1513 of the Secure and 
Fair Enforcement for Mortgage Licensing Act of 2008 (12 
U.S.C. 5112) is amended to read as follows: 
‘‘SEC. 1513. LIABILITY PROVISIONS. 
‘‘The Agency, any State official or agency, or any or-
ganization serving as the administrator of the Nationwide 
Mortgage Licensing System and Registry or a system es-
tablished by the Director under section 1509, or any offi-
cer or employee of any such entity, shall not by subject 
to any civil action or proceeding for monetary damages 
by reason of the good faith action or omission of any offi-
cer or employee of any such entity, while acting within 
the scope of office or employment, relating to the collec-
tion, furnishing, or dissemination of information con-
1185 
cerning persons who are loan originators or are applying 
for licensing or registration as loan originators.’’. 
(g) SECTION 1514.—The heading for section 1514 
of the Secure and Fair Enforcement for Mortgage Licens-
ing Act of 2008 (12 U.S.C. 5113) is amended by striking 
‘‘UNDER HUD BACKUP LICENSING SYSTEM’’ and in-
serting ‘‘BY THE AGENCY’’. 
SEC. 4814. AMENDMENTS TO THE TRUTH IN SAVINGS ACT. 
(a) SECTION 263.—Section 263 of the Truth in Sav-
ings Act (12 U.S.C. 4302) is amended in subsection (b) 
by striking ‘‘Board’’ each place such term appears and 
inserting ‘‘Agency’’. 
(b) SECTION 265.—Section 265 of the Truth in Sav-
ings Act (12 U.S.C. 4304) is amended by striking 
‘‘Board’’ each place such term appears and inserting 
‘‘Agency’’. 
(c) SECTION 266.—Section 266(e) of the Truth in 
Savings Act is amended (12 U.S.C. 4305) by striking 
‘‘Board’’ and inserting ‘‘Agency’’. 
(d) SECTION 269.—Section 269 of the Truth in Sav-
ings Act (12 U.S.C. 4308) is amended by striking 
‘‘Board’’ each place such term appears and inserting 
‘‘Agency’’. 
(e) SECTION 270.—Section 270 of the Truth in Sav-
ings Act (12 U.S.C. 4309) is amended—
1186 
(1) in subsection (a)— 
(A) by striking ‘‘Compliance’’ and insert-
ing ‘‘Subject to section 4202 of the Consumer 
Financial Protection Agency Act of 2009, com-
pliance’’; 
(B) by striking subparagraph (A) of para-
graph (1) and inserting the following new sub-
paragraph: 
‘‘(A) by the head of the agency responsible 
for chartering and regulating national banks for 
national banks, and Federal branches and Fed-
eral agencies of foreign banks;’’; and 
(C) by adding at the end, the following 
new paragraph: 
‘‘(3) subtitle E of the Consumer Financial Pro-
tection Agency Act of 2009, by the Agency.’’; and 
(2) in subsection (c)— 
(A) in the subsection heading, by striking 
‘‘BOARD’’ and insert ‘‘AGENCY’’; and 
(B) by striking ‘‘Board’’ and inserting 
‘‘Agency’’. 
(f) SECTION 272.—Section 272 of the Truth in Sav-
ings Act (12 U.S.C. 4311) is amended— 
(1) in subsection (a), by striking ‘‘Board’’ and 
inserting ‘‘Agency’’; and
1187 
(2) in subsection (b), by striking ‘‘regulation 
prescribed by the Board’’ each place such term ap-
pears and inserting ‘‘regulation prescribed by the 
Agency’’. 
(g) SECTION 273.—Section 273 of the Truth in Sav-
ings Act (12 U.S.C. 4312) is amended in the last sentence 
by striking ‘‘Board’’ and inserting ‘‘Agency’’. 
(h) SECTION 274.—Section 274 of the Truth in Sav-
ings Act (12 U.S.C. 4313) is amended— 
(1) in paragraph (2) by striking ‘‘Board’’ and 
inserting ‘‘Agency’’; and 
(2) by striking paragraph (4) and inserting the 
following new paragraph: 
‘‘(4) AGENCY.—The term ‘Agency’ means the 
Consumer Financial Protection Agency.’’. 
SEC. 4815. AMENDMENTS TO THE TELEMARKETING AND 
CONSUMER FRAUD ABUSE AND PREVENTION 
ACT. 
(a) Section 4 of the Telemarketing and Consumer 
Fraud Abuse and Prevention Act (15 U.S.C. 6102) is 
amended— 
(1) in subsection (b)— 
(A) by inserting ‘‘and the Consumer Fi-
nancial Protection Agency with respect to a 
person subject to the authority of that Agency
1188 
under the Consumer Financial Protection Agen-
cy Act’’ after ‘‘Commission’’ each of the first 2 
places it appears; and 
(B) by inserting ‘‘or the Consumer Finan-
cial Protection Agency’’ after ‘‘Commission’’ the 
last place it appears; and 
(2) in subsection (d), by inserting ‘‘or the Con-
sumer Financial Protection Agency’’ after ‘‘Commis-
sion’’ each place such term appears. 
(b) Section 5 of the Telemarketing and Consumer 
Fraud Abuse and Prevention Act (15 U.S.C. 6102) is 
amended— 
(1) in subsection (b)— 
(A) by inserting ‘‘and the Consumer Fi-
nancial Protection Agency with respect to a 
person subject to the authority of that Agency 
under the Consumer Financial Protection Agen-
cy Act’’ after ‘‘Commission’’ each of the first 2 
places it appears; and 
(B) by inserting ‘‘or the Consumer Finan-
cial Protection Agency’’ after ‘‘Commission’’ the 
last place it appears; and 
(2) in subsection (c), by inserting ‘‘or the Con-
sumer Financial Protection Agency’’ after ‘‘Commis-
sion’’ each place such term appears.
1189 
(c) Section 6 of the Telemarketing and Consumer 
Fraud Abuse and Prevention Act (15 U.S.C. 6102) is 
amended by redesignating subsection (c) as subsection (d) 
and inserting after subsection (b) the following: 
‘‘(c) ENFORCEMENT BY THE CONSUMER FINANCIAL 
PROTECTION AGENCY.—Subject to section 4202 of the 
Consumer Financial Protection Agency Act of 2009, this 
Act shall be enforced by the Consumer Financial Protec-
tion Agency, under subtitle E of that Act, with respect 
to a person subject to the authority of that Agency under 
that Act. For the purpose of the exercise by the Consumer 
Financial Protection Agency of its powers under subtitle 
E, a violation of any requirement imposed under this Act 
shall be deemed to be a violation of a requirement imposed 
under the Consumer Financial Protection Agency Act. In 
addition to its powers under subtitle E of that Act, the 
Agency may exercise, for the purpose of enforcing compli-
ance with any requirement imposed under this Act, any 
other authority conferred on it by law.’’. 
SEC. 4816. MEMBERSHIP IN FINANCIAL LITERACY AND 
EDUCATION COMMISSION. 
Section 513(c)(1) of the Financial Literacy and Edu-
cation Improvement Act (20 U.S.C. 9702(c)(1)) is amend-
ed—
1190 
(1) in subparagraph (B), by striking ‘‘and’’ at 
the end; 
(2) by redesignating subparagraph (C) as sub-
paragraph (D); and 
(3) by inserting after subparagraph (B) the fol-
lowing new subparagraph: 
‘‘(C) the Director of the Consumer Finan-
cial Protection Agency; and’’. 
SEC. 4817. EFFECTIVE DATE. 
The amendments made by sections 4803 through 
4815 shall take effect on the designated transfer date. 
SEC. 4818. AMENDMENTS TO TRUTH IN LENDING ACT. 
(a) IN GENERAL.—Section 128(e) of the Truth in 
Lending Act is amended— 
(1) by striking paragraph (3) and inserting the 
following new paragraph (3): 
‘‘(3) 
INSTITUTIONAL
CERTIFICATION
RE-
QUIRED.—(A) Except as provided in subparagraph 
(B), before a creditor may issue any funds with re-
spect to an extension of credit described in para-
graph (1), the creditor shall obtain from the relevant 
institution of higher education such institution’s cer-
tification— 
‘‘(i) of the enrollment status of the bor-
rower;
1191 
‘‘(ii) of the borrower’s cost of attendance 
at the institution as determined by the institu-
tion under part F of title IV of the Higher 
Education Act of 1965; 
‘‘(iii) of the difference between the bor-
rower’s cost of attendance and the borrower’s 
estimated financial assistance received under 
title IV of the Higher Education Act of 1965 
and other assistance known to the institution, 
as applicable; and 
‘‘(iv) that the institution has— 
‘‘(I) informed the borrower— 
‘‘(aa) about the availability of, 
and the borrower’s potential eligibility 
for, Federal financial assistance under 
this title, including disclosing the 
terms, conditions, and interest rates 
of Federal student loans; 
‘‘(bb) of the borrower’s ability to 
select a private educational lender of 
the borrower’s choice; 
‘‘(cc) about the impact of a pro-
posed private education loan on the 
borrowers’ 
potential 
eligibility 
for 
other financial assistance, including
1192 
Federal financial assistance under the 
Higher Education Act of 1965; and 
‘‘(dd) about a borrower’s right to 
accept or reject a private education 
loan within the 30-day period fol-
lowing a private educational lender’s 
approval of a borrower’s application 
and about a borrower’s 3-day right to 
cancel altogether; 
‘‘(II) determined whether the bor-
rower has applied for and exhausted the 
Federal financial assistance available to 
the borrower under the Higher Education 
Act of 1965 and informed the borrower ac-
cordingly; and 
‘‘(III) counseled the borrower on the 
borrower’s financial aid options. 
‘‘(B) A creditor may issue funds with respect to 
an extension of credit described in paragraph (1) 
without obtaining from the relevant institution of 
higher education such institution’s certification if 
such institution fails to provide such certification 
within 21 calendar days or 15 business days, which-
ever comes first, of the creditor’s request for such 
certification.’’;
1193 
(2) by redesignating paragraphs (9), (10), and 
(11) as paragraphs (10), (11), and (12), respec-
tively; and 
(3) by inserting after paragraph (8) the fol-
lowing new paragraph (9): 
‘‘(9) PROVISION OF INFORMATION.—On or be-
fore the date a creditor issues any funds with re-
spect to an extension of credit described in para-
graph (1), the creditor shall notify the relevant insti-
tution of higher education, in writing, of the amount 
of the extension of credit and the student on whose 
behalf credit is extended. The form of such written 
notification shall be subject to the regulations of the 
Agency.’’. 
(b) REGULATIONS.— 
(1) DEADLINE FOR REGULATIONS.—Not later 
than 365 days after the date of enactment of this 
Act, the Agency shall issue regulations in final form 
to implement paragraphs (3) and (9) of section 
128(e) of the Truth in Lending Act, as amended by 
subsection (a). Such regulations shall become effec-
tive not later than 6 months after their date of 
issuance. 
(2) EFFECTIVE DATE.—The regulations in ef-
fect pursuant to section 128(e) of the Truth in
1194 
Lending Act as of the date of the enactment of this 
Act shall remain in effect until the effective date of 
the regulations issued under paragraph (1). 
(c) STUDY AND REPORT ON PRIVATE EDUCATION 
LOANS AND PRIVATE EDUCATIONAL LENDERS.— 
(1) REPORT.—Not later than 2 years after the 
date of enactment of this Act, the Director and the 
Secretary of Education, in consultation with the 
Commissioners of the Federal Trade Commission, 
and the Attorney General, shall submit a report to 
the Committee on Financial Services and the Com-
mittee on Education and Labor of the House of 
Representatives and the Committee on Banking, 
Housing, and Urban Affairs and the Committee on 
Health Education, Labor, and Pensions of the Sen-
ate on private education loans (as that term is de-
fined in section 140 of the Truth in Lending Act (15 
U.S.C. 1650)) and private educational lenders (as 
that term is defined in such section). 
(2) CONTENT.—The report required by this 
subsection shall examine, at a minimum, the fol-
lowing: 
(A) the growth and changes of the private 
education loan market in the United States;
1195 
(B) factors influencing such growth and 
changes; 
(C) the extent to which students and par-
ents of students rely on private education loans 
to finance postsecondary education and the pri-
vate education loan indebtedness of borrowers; 
(D) the characteristics of private education 
loan borrowers, including the types of institu-
tions of higher education they attend, socio-
economic characteristics (including income and 
education levels, racial characteristics, geo-
graphical background, age, and gender), what 
other forms of financing borrowers use to pay 
for education, whether they exhaust their Fed-
eral loan options before taking out a private 
loan, whether such borrowers are dependent or 
independent students (as determined under part 
F of title IV of the Higher Education Act of 
1965) or parents of such students, whether 
such borrowers are students enrolled in a pro-
gram leading to a certificate, license or creden-
tial other than a degree, an associates degree, 
a baccalaureate degree, or a graduate or profes-
sional degree and, if practicable, employment 
and repayment behaviors;
1196 
(E) the characteristics of private edu-
cational lenders, including whether such credi-
tors are for-profit, non-profit, or institutions of 
higher education; 
(F) the underwriting criteria used by pri-
vate educational lenders, including the use of 
cohort default rate (as such term is defined in 
section 435(m) of the Higher Education Act of 
1965); 
(G) the terms, conditions, and pricing of 
private education loans; 
(H) the consumer protections available to 
private education loan borrowers, including the 
effectiveness of existing disclosures and require-
ments and borrowers’ awareness and under-
standing about terms and conditions of various 
financial products; 
(I) whether Federal regulators and the 
public have access to information sufficient to 
provide them with assurances that private edu-
cation loans are provided in accord with the 
Nation’s fair lending laws and that allows pub-
lic officials to determine lenders’ compliance 
with fair lending laws; and
1197 
(J) any statutory or legislative rec-
ommendations necessary to improve consumer 
protections for private education loan borrowers 
and to better enable Federal regulators and the 
public to ascertain private educational lender 
compliance with fair lending laws. 
(d) REPORT.— Not later than 18 months after the 
issuance of regulations under subsection (b)(1), the Con-
sumer Financial Protection Agency and the Secretary of 
Education shall jointly submit to Congress a report on the 
compliance of institutions and private educational lenders 
with the amendments made by this section. The report 
shall include the degree to which specific institutions uti-
lize certifications in effectively encouraging the exhaustion 
of Federal student loan eligibility and lowering student 
debt. 
Subtitle I—Improvements to the 
Federal Trade Commission Act 
SEC. 4901. AMENDMENTS TO THE FEDERAL TRADE COM-
MISSION ACT. 
(a) Section 5(m)(1)(A) of the Federal Trade Com-
mission Act (15 U.S.C. 45(m)(1)(A)) is amended— 
(1) by inserting ‘‘this Act or’’ after ‘‘violates’’ 
the first place such term appears;
1198 
(2) by inserting a comma after ‘‘under this 
Act’’; 
(3) by inserting a comma after ‘‘subsection 
(a)(1))’’; and 
(4) by inserting ‘‘a violation of this Act or is’’ 
before ‘‘prohibited’’. 
(b) Section 5 of the Federal Trade Commission Act 
(15 U.S.C. 45) is amended by adding at the end thereof 
the following new subsection: 
‘‘(o) UNLAWFUL ASSISTANCE.—It is unlawful for any 
person, partnership, or corporation, knowingly or reck-
lessly, to provide substantial assistance to another in vio-
lating any provision of this Act or of any other Act en-
forceable by the Commission that relates to unfair or de-
ceptive acts or practices. Any such violation shall con-
stitute an unfair or deceptive act or practice described in 
section 5(a)(1) of this Act. Nothing in this section shall 
be construed as limiting or superseding the protection pro-
vided to any provider or user qualifying for protection 
under section 230(c)(1) of the Communications Act of 
1934 (47 U.S.C. 230(c)(1)).’’. 
(c) Section 18 of the Federal Trade Commission Act 
(15 U.S.C. 57a) is amended— 
(1) in subsection (a)(1), by striking ‘‘(h)’’ and 
inserting ‘‘(f)’’;
1199 
(2) by amending subsection (b) to read as fol-
lows: 
‘‘(b) PROCEDURE APPLICABLE.—When prescribing a 
rule under subsection (a)(1)(B) of this section, the Com-
mission shall proceed in accordance with section 553 of 
title 5.’’; 
(3) by striking subsection (c); 
(4) in subsection (d), by striking ‘‘(d)(1) The 
Commission’s’’ and all that follows through the end 
of paragraph (2) and by redesignating paragraph (3) 
of such subsection as subsection (c); 
(5) In such subsection (c) (as so redesignated), 
by inserting ‘‘prescribed’’ after ‘‘any rule’’; 
(6) by striking subsections (f), (i), and (j) and 
redesignating subsections (e), (g), and (h) as sub-
sections (d), (e), and (f), respectively; 
(7) in subsection (c) (as redesignated), by in-
serting ‘‘prescribed’’ after ‘‘rule’’; and 
(8) in subsection (d) (as redesignated)— 
(A) in paragraph (1)(A) by striking ‘‘pro-
mulgated’’ and inserting ‘‘prescribed’’; 
(B) in paragraph (1)(B), by striking ‘‘the 
transcript required by subsection (c)(5),’’;
1200 
(C) in paragraph (3), by striking ‘‘The 
court shall hold unlawful’’ and all that follows 
through the end of the paragraph; and 
(D) by striking paragraphs (4) and (5) 
and inserting the following: 
‘‘(4) The procedure set forth in this subsection for 
judicial review of a rule prescribed under subsection 
(a)(1)(B) is the exclusive means for such review, other 
than in an enforcement proceeding.’’; and 
(9) in subsection (e)(2) (as so redesignated), by 
striking ‘‘class or persons’’ and inserting ‘‘class of 
persons’’. 
(d) Section 16(a)(2) of the Federal Trade Commis-
sion Act (15 U.S.C. 56(a)(2)) is amended— 
(1) in subparagraph (D), by striking ‘‘; or’’ and 
inserting a semicolon; and 
(2) by inserting after subparagraph (E) the fol-
lowing: 
‘‘(F) to obtain a civil penalty authorized 
under any provision of law enforced by the 
Commission.’’. 
(e) Section 5(l) of the Federal Trade Commission Act 
(15 U.S.C. 45(l)) is amended in the first sentence by in-
serting ‘‘the Commission or’’ after ‘‘brought by’’.
1201 
Subtitle J—Miscellaneous 
SEC. 4951. REQUIREMENTS FOR STATE-LICENSED LOAN 
ORIGINATORS. 
Paragraph (2) of section 1505 (b) of the S.A.F.E. 
Mortgage Licensing Act of 2008 (12 U.S.C. 5104(b)(2)) 
is amended by inserting after and below subparagraph 
(B), the following: 
‘‘Notwithstanding the preceding sentence, a State 
loan originator supervisory authority may provide 
for review of applicants and for granting exceptions, 
on a case-by-case basis, to the minimum standard 
under subparagraph (B), but only to the extent that 
any such exception otherwise complies with the pur-
poses of this title.’’. 
TITLE V—CAPITAL MARKETS 
Subtitle A—Private Fund Invest-
ment Advisers Registration Act 
SEC. 5001. SHORT TITLE. 
This subtitle may be cited as the ‘‘Private Fund In-
vestment Advisers Registration Act of 2009’’. 
SEC. 5002. DEFINITIONS. 
Section 202(a) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–2(a)) is amended by adding at the 
end the following new paragraphs:
1202 
‘‘(29) PRIVATE FUND.—The term ‘private fund’ 
means an issuer that would be an investment com-
pany under section 3(a) of the Investment Company 
Act of 1940 (15 U.S.C. 80a–3(a)) but for the excep-
tion provided from that definition by either section 
3(c)(1) or section 3(c)(7) of such Act. 
‘‘(30) FOREIGN PRIVATE FUND ADVISER.—The 
term ‘foreign private fund adviser’ means an invest-
ment adviser who— 
‘‘(A) has no place of business in the 
United States; 
‘‘(B) during the preceding 12 months has 
had— 
‘‘(i) in total, fewer than 15 clients and 
investors in the United States in private 
funds advised by the investment adviser; 
and 
‘‘(ii) aggregate assets under manage-
ment attributable to clients and investors 
in the United States in private funds ad-
vised by the investment adviser of less 
than $25,000,000, or such higher amount 
as the Commission may, by rule, deem ap-
propriate in the public interest or for the 
protection of investors; and
1203 
‘‘(C) neither holds itself out generally to 
the public in the United States as an invest-
ment adviser, nor acts as an investment adviser 
to any investment company registered under the 
Investment Company Act of 1940, or a com-
pany which has elected to be a business devel-
opment company pursuant to section 54 of the 
Investment Company Act of 1940 (15 U.S.C. 
80a–53) and has not withdrawn such election.’’. 
SEC. 5003. ELIMINATION OF PRIVATE ADVISER EXEMPTION; 
LIMITED EXEMPTION FOR FOREIGN PRIVATE 
FUND ADVISERS; LIMITED INTRASTATE EX-
EMPTION. 
(a) EXEMPTION.—Section 203(b) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b–3(b)) is amended— 
(1) in paragraph (1), by inserting ‘‘, except an 
investment adviser who acts as an investment ad-
viser to any private fund,’’ after ‘‘any investment ad-
viser’’; 
(2) by amending paragraph (3) to read as fol-
lows: 
‘‘(3) any investment adviser that is a foreign 
private fund adviser;’’; 
(3) in paragraph (5), by striking ‘‘or’’ at the 
end;
1204 
(4) in paragraph (6)— 
(A) in subparagraph (A), by striking ‘‘or’’; 
(B) in subparagraph (B), by striking the 
period at the end and adding ‘‘; or’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(C) a private fund; or’’; and 
(5) by adding at the end the following: 
‘‘(7) any investment adviser who solely ad-
vises— 
‘‘(A) small business investment companies 
licensed under the Small Business Investment 
Act of 1958; 
‘‘(B) entities that have received from the 
Small Business Administration notice to pro-
ceed to qualify for a license, which notice or li-
cense has not been revoked; or 
‘‘(C) applicants, related to one or more li-
censed small business investment companies 
covered in subparagraph (A), that have applied 
for another license, which application remains 
pending.’’. 
(b) CONSIDERATION OF RISK.—Section 203(c) of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b–3(c)) is 
amended by adding at the end the following:
1205 
‘‘(3) The Commission shall take into account 
the relative risk profile of different classes of private 
funds as it establishes, by rule or regulation, the 
registration requirements for private funds.’’. 
SEC. 5004. COLLECTION OF DATA. 
Section 204 of the Investment Advisers Act of 1940 
(15 U.S.C. 80b–4) is amended— 
(1) by redesignating subsections (b) and (c) as 
subsections (c) and (d), respectively; and 
(2) by inserting after subsection (a) the fol-
lowing new subsection: 
‘‘(b) RECORDS AND REPORTS OF PRIVATE FUNDS.— 
‘‘(1) IN GENERAL.—The Commission is author-
ized to require any investment adviser registered 
under this Act to maintain such records of and file 
with the Commission such reports regarding private 
funds advised by the investment adviser as are nec-
essary or appropriate in the public interest and for 
the protection of investors or for the assessment of 
systemic risk as the Commission determines in con-
sultation with the Board of Governors of the Federal 
Reserve System. The Commission is authorized to 
provide or make available to the Board of Governors 
of the Federal Reserve System and to the Financial 
Services Oversight Council, those reports or records
1206 
or the information contained therein. The records 
and reports of any private fund, to which any such 
investment adviser provides investment advice, main-
tained or filed by an investment adviser registered 
under this Act, shall be deemed to be the records 
and reports of the investment adviser. 
‘‘(2) REQUIRED
INFORMATION.—The records 
and reports required to be maintained or filed with 
the Commission under this subsection shall include, 
for each private fund advised by the investment ad-
viser— 
‘‘(A) the amount of assets under manage-
ment; 
‘‘(B) the use of leverage (including off-bal-
ance sheet leverage); 
‘‘(C) counterparty credit risk exposures; 
‘‘(D) trading and investment positions; 
‘‘(E) trading practices; and 
‘‘(F) such other information as the Com-
mission, in consultation with the Board of Gov-
ernors of the Federal Reserve System, deter-
mines necessary or appropriate in the public in-
terest and for the protection of investors or for 
the assessment of systemic risk.
1207 
‘‘(3) OPTIONAL INFORMATION.—The Commis-
sion may require the reporting of such additional in-
formation from private fund advisers as the Com-
mission determines necessary. In making such deter-
mination, the Commission, taking into account the 
public interest and potential to contribute to sys-
temic risk, may set different reporting requirements 
for different classes of private fund advisers, based 
on the particular types or sizes of private funds ad-
vised by such advisers. 
‘‘(4) MAINTENANCE OF RECORDS.—An invest-
ment adviser registered under this Act is required to 
maintain and keep such records of private funds ad-
vised by the investment adviser for such period or 
periods as the Commission, by rule or regulation, 
may prescribe as necessary or appropriate in the 
public interest and for the protection of investors or 
for the assessment of systemic risk. 
‘‘(5) EXAMINATION OF RECORDS.— 
‘‘(A) PERIODIC
AND
SPECIAL
EXAMINA-
TIONS.—All records of a private fund main-
tained by an investment adviser registered 
under this Act shall be subject at any time and 
from time to time to such periodic, special, and 
other examinations by the Commission, or any
1208 
member or representative thereof, as the Com-
mission may prescribe. 
‘‘(B) AVAILABILITY OF RECORDS.—An in-
vestment adviser registered under this Act shall 
make available to the Commission or its rep-
resentatives any copies or extracts from such 
records as may be prepared without undue ef-
fort, expense, or delay as the Commission or its 
representatives may reasonably request. 
‘‘(6) INFORMATION SHARING.—The Commission 
shall make available to the Board of Governors of 
the Federal Reserve System and to the Financial 
Services Oversight Council, copies of all reports, doc-
uments, records, and information filed with or pro-
vided to the Commission by an investment adviser 
under this subsection as the Board, or the Financial 
Services Oversight Council, may consider necessary 
for the purpose of assessing the systemic risk of a 
private fund. All such reports, documents, records, 
and information obtained by the Board, or such 
other entity, from the Commission under this sub-
section shall be kept confidential in a manner con-
sistent with confidentiality established by the Com-
mission pursuant to paragraph (8).
1209 
‘‘(7) DISCLOSURES OF CERTAIN PRIVATE FUND 
INFORMATION.—An investment adviser registered 
under this Act shall provide such reports, records, 
and other documents to investors, prospective inves-
tors, counterparties, and creditors, of any private 
fund advised by the investment adviser as the Com-
mission, by rule or regulation, may prescribe as nec-
essary or appropriate in the public interest and for 
the protection of investors or for the assessment of 
systemic risk. 
‘‘(8) APPLICABLE PRIVILEGES NOT WAIVED.— 
An investment advisor, and investment advisor to a 
private fund, a private fund, foreign private fund ad-
visor, a foreign private fund, an advisor to a venture 
capital fund, a venture capital fund, or other person 
shall not be compelled to waive and shall not be 
deemed to have waived any privilege otherwise appli-
cable to any data or information by transferring the 
data or information to, or permitting that data or 
information to be used by— 
‘‘(A) the Financial Services Oversight 
Council; 
‘‘(B) the Commission; 
‘‘(C) any Federal financial regulator or 
State financial regulator, in any capacity; or
1210 
‘‘(D) any other agency of the Federal Gov-
ernment (as defined in section 6 of title 18, 
United States Code). 
‘‘(9) NON-DISCLOSURE
OF
CERTAIN
PROPRI-
ETARY INFORMATION AND CONFIDENTIALITY OF RE-
PORTS.—Any proprietary information of an invest-
ment adviser ascertained by the Commission from 
any report required to be filed with the Commission 
pursuant to this section 204(b) shall be subject to 
the same limitations on public disclosure as any 
facts ascertained during an examination as provided 
by section 210(b) of this title. The Commission may 
not compel the private fund to disclose such propri-
etary information to counterparties and creditors. 
For purposes of this section, proprietary information 
shall include sensitive, non-public information re-
garding the investment adviser’s investment or trad-
ing strategies, analytical or research methodologies, 
trading data, computer hardware or software con-
taining intellectual property, and any additional in-
formation that the Commission determines to be 
proprietary. Notwithstanding any other provision of 
law, the Commission shall not be compelled to dis-
close any report or information contained therein re-
quired to be filed with the Commission under this
1211 
subsection. Nothing in this paragraph shall author-
ize the Commission to withhold information from the 
Congress or to prevent the Commission from com-
plying with a request for information from any other 
Federal department or agency or any self-regulatory 
organization requesting the report or information for 
purposes within the scope of its jurisdiction, or com-
plying with an order of a court of the United States 
in an action brought by the United States or the 
Commission. For purposes of section 552 of title 5, 
United States Code, this paragraph shall be consid-
ered a statute described in subsection (b)(3)(B) of 
such section.’’. 
SEC. 5005. ELIMINATION OF DISCLOSURE PROVISION. 
Section 210 of the Investment Advisers Act of 1940 
(15 U.S.C. 80b–10) is amended by striking subsection (c). 
SEC. 5006. EXEMPTION OF AND REPORTING BY VENTURE 
CAPITAL FUND ADVISERS. 
Section 203 of the Investment Advisers Act of 1940 
(15 U.S.C. 80b–3) is amended by adding at the end the 
following new subsection: 
‘‘(l) EXEMPTION OF AND REPORTING BY VENTURE 
CAPITAL FUND ADVISERS.—The Commission shall iden-
tify and define the term ‘venture capital fund’ and shall 
provide an adviser to such a fund an exemption from the
1212 
registration requirements under this section (excluding 
any such fund whose adviser is exempt from registration 
pursuant to paragraph (7) of subsection (b)). The Com-
mission shall require such advisers to maintain such 
records and provide to the Commission such annual or 
other reports as the Commission determines necessary or 
appropriate in the public interest or for the protection of 
investors.’’. 
SEC. 5007. EXEMPTION OF AND REPORTING BY CERTAIN 
PRIVATE FUND ADVISERS. 
Section 203 of the Investment Advisers Act of 1940 
(15 U.S.C. 80b–3), as amended by section 5006, is further 
amended by adding at the end the following new sub-
sections: 
‘‘(m) EXEMPTION OF AND REPORTING BY CERTAIN 
PRIVATE FUND ADVISERS.— 
‘‘(1) IN GENERAL.—The Commission shall pro-
vide an exemption from the registration require-
ments under this section to any investment adviser 
of private funds, if each of such investment adviser 
acts solely as an adviser to private funds and has as-
sets under management in the United States of less 
than $150,000,000. 
‘‘(2) REPORTING.—The Commission shall re-
quire investment advisers exempted by reason of this
1213 
subsection to maintain such records and provide to 
the Commission such annual or other reports as the 
Commission determines necessary or appropriate in 
the public interest or for the protection of investors. 
‘‘(n) REGISTRATION
AND EXAMINATION
OF MID- 
SIZED PRIVATE FUND ADVISERS.—In prescribing regula-
tions to carry out the requirements of this section with 
respect to investment advisers acting as investment advis-
ers to mid-sized private funds, the Commission shall take 
into account the size, governance, and investment strategy 
of such funds to determine whether they pose systemic 
risk, and shall provide for registration and examination 
procedures with respect to the investment advisers of such 
funds which reflect the level of systemic risk posed by such 
funds.’’. 
SEC. 5008. CLARIFICATION OF RULEMAKING AUTHORITY. 
Section 211 of the Investment Advisers Act of 1940 
(15 U.S.C. 80b–11) is amended— 
(1) by amending subsection (a) to read as fol-
lows: 
‘‘(a) The Commission shall have authority from time 
to time to make, issue, amend, and rescind such rules and 
regulations and such orders as are necessary or appro-
priate to the exercise of the functions and powers con-
ferred upon the Commission elsewhere in this title, includ-
1214 
ing rules and regulations defining technical, trade, and 
other terms used in this title. For the purposes of its rules 
and regulations, the Commission may— 
‘‘(1) classify persons and matters within its ju-
risdiction based upon, but not limited to— 
‘‘(A) size; 
‘‘(B) scope; 
‘‘(C) business model; 
‘‘(D) compensation scheme; or 
‘‘(E) potential to create or increase sys-
temic risk; 
‘‘(2) prescribe different requirements for dif-
ferent classes of persons or matters; and 
‘‘(3) ascribe different meanings to terms (in-
cluding the term ‘client’, except the Commission 
shall not ascribe a meaning to the term ‘client’ that 
would include an investor in a private fund managed 
by an investment adviser, where such private fund 
has entered into an advisory contract with such ad-
viser) used in different sections of this title as the 
Commission determines necessary to effect the pur-
poses of this title.’’; and 
(2) by adding at the end the following new sub-
section:
1215 
‘‘(e) The Commission and the Commodity Futures 
Trading Commission shall, after consultation with the 
Board of Governors of the Federal Reserve System, within 
12 months after the date of enactment of the Private 
Fund Investment Advisers Registration Act of 2009, joint-
ly promulgate rules to establish the form and content of 
the reports required to be filed with the Commission under 
sections 203(l), 203(m), and 204(b) and with the Com-
modity Futures Trading Commission by investment advis-
ers that are registered both under the Investment Advisers 
Act of 1940 (15 U.S.C. 80b–1 et seq.) and the Commodity 
Exchange Act (7 U.S.C. 1 et seq.).’’. 
SEC. 5009. GAO STUDY. 
(a) STUDY REQUIRED.—The Comptroller General of 
the United States shall carry out a study to assess the 
annual costs on industry members and their investors due 
to the registration requirements and ongoing reporting re-
quirements under this subtitle and the amendments made 
by this subtitle. 
(b) REPORT TO THE CONGRESS.—Not later than the 
end of the 2-year period beginning on the date of the en-
actment of this title, the Comptroller General of the 
United States shall submit a report to the Congress con-
taining the findings and determinations made by the
1216 
Comptroller General in carrying out the study required 
under subsection (a). 
SEC. 5010. EFFECTIVE DATE; TRANSITION PERIOD. 
(a) EFFECTIVE
DATE.—This subtitle, and the 
amendments made by this subtitle, shall take effect with 
respect to investment advisers after the end of the 1-year 
period beginning on the date of the enactment of this title. 
(b) TRANSITION PERIOD.—The Securities and Ex-
change Commission shall prescribe rules and regulations 
to the extent necessary to permit an investment adviser 
who will be required to register with the Securities and 
Exchange Commission by reason of this subtitle with the 
option of registering with the Securities and Exchange 
Commission before the date described under subsection 
(a). 
SEC. 5011. QUALIFIED CLIENT STANDARD. 
Section 205(e) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–5(e)) is amended by adding at the 
end the following: ‘‘With respect to any factor used in any 
rule or regulation by the Commission in making a deter-
mination under this subsection, if the Commission uses 
a dollar amount test in connection with such factor, such 
as a net asset threshold, the Commission shall, by order, 
not later than 1 year after the date of the enactment of 
the Private Fund Investment Advisers Registration Act of
1217 
2009, and every 5 years thereafter, adjust for the effects 
of inflation on such test. Any such adjustment that is not 
a multiple of $100,000 shall be rounded to the nearest 
multiple of $100,000.’’. 
Subtitle 
B—Accountability 
and 
Transparency in Rating Agen-
cies Act 
SEC. 6001. SHORT TITLE. 
This subtitle may be cited as the ‘‘Accountability and 
Transparency in Rating Agencies Act of 2009’’. 
SEC. 6002. ENHANCED REGULATION OF NATIONALLY REC-
OGNIZED STATISTICAL RATING ORGANIZA-
TIONS. 
(a) IN GENERAL.—Section 15E of the Securities Ex-
change Act of 1934 (15 U.S.C. 78o–7) is amended— 
(1) in subsection (a)— 
(A) by amending paragraph (1)(A) to read 
as follows: 
‘‘(A) IN
GENERAL.—Each credit rating 
agency shall register as a nationally recognized 
statistical rating organization for the purposes 
of this title (in this section referred to as the 
‘applicant’), and shall file with the Commission 
an application for registration, in such form as 
the Commission shall require, by rule or regula-
1218 
tion issued in accordance with subsection (n), 
and containing the information described in 
subparagraph (B).’’. 
(B) in paragraph (2)(A), by striking ‘‘fur-
nished to’’ and inserting ‘‘filed with’’; 
(C) in paragraph (2)(B)(i)(II), by striking 
‘‘furnished to’’ and inserting ‘‘filed with’’; and 
(D) by adding at the end of paragraph (1) 
the following: 
‘‘(F) EXEMPTIONS.—The registration re-
quirement in subparagraph (A) shall not apply 
to— 
‘‘(i) a credit rating agency if the cred-
it rating agency— 
‘‘(I) does not engage in the provi-
sion of credit ratings to issuers of se-
curities for a fee; and 
‘‘(II) issues credit ratings only in 
any bona fide newspaper, news maga-
zine, or business or financial publica-
tion of general and regular circula-
tion; or 
‘‘(ii) such other persons as the Com-
mission may designate by rules and regula-
1219 
tions or order when in the public interest 
and for the protection of investors.’’. 
(2) in subsection (b)— 
(A) in paragraph (1)(A), by striking ‘‘fur-
nished’’ and inserting ‘‘filed’’ and by striking 
‘‘furnishing’’ and inserting ‘‘filing’’; 
(B) in paragraph (1)(B), by striking ‘‘fur-
nishing’’ and inserting ‘‘filing’’; and 
(C) in the first sentence of paragraph (2), 
by striking ‘‘furnish to’’ and inserting ‘‘file 
with’’; 
(3) in subsection (c)— 
(A) paragraph (2)— 
(i) in the second sentence by inserting 
‘‘including the requirements of this sec-
tion,’’ after ‘‘Notwithstanding any other 
provision of law,’’; and 
(ii) by inserting before the period at 
the end of the last sentence ‘‘, provided 
that this paragraph does not afford a de-
fense against any action or proceeding 
brought by the Commission to enforce the 
antifraud provision of the securities laws’’; 
(B) by adding at the end the following new 
paragraph:
1220 
‘‘(3) REVIEW
OF
INTERNAL
PROCESSES
FOR 
DETERMINING CREDIT RATINGS.— 
‘‘(A) IN GENERAL.—The Commission shall 
examine credit ratings issued by, and the poli-
cies, procedures, and methodologies employed 
by, each nationally recognized statistical rating 
organization to review whether— 
‘‘(i) the nationally recognized statis-
tical rating organization has established 
and documented a system of internal con-
trols, due diligence and implementation of 
methodologies for determining credit rat-
ings, taking into consideration such factors 
as the Commission may prescribe by rule; 
‘‘(ii) the nationally recognized statis-
tical rating organization adheres to such 
system; and 
‘‘(iii) the public disclosures of the na-
tionally recognized statistical rating orga-
nization required under this section about 
its credit ratings, methodologies, and pro-
cedures are consistent with such system. 
‘‘(B) MANNER
AND
FREQUENCY.—The 
Commission shall conduct reviews required by 
this paragraph no less frequently than annually
1221 
in a manner to be determined by the Commis-
sion. 
‘‘(4) PROVISION OF INFORMATION TO THE COM-
MISSION.—Each nationally recognized statistical rat-
ing organization shall make available and maintain 
such records and information, for such a period of 
time, as the Commission may prescribe, by rule, as 
necessary for the Commission to conduct the reviews 
under paragraph (3). 
‘‘(5) DISCLOSURES WITH RESPECT TO STRUC-
TURED SECURITIES.— 
‘‘(A) REGULATIONS REQUIRED.—The rules 
and regulations prescribed by the Commission 
pursuant to this section with respect to nation-
ally recognized statistical rating organizations 
shall, with respect to disclosure of the proce-
dures and methodologies by which any nation-
ally recognized statistical rating organization 
determines credit ratings for structured securi-
ties— 
‘‘(i) specify the information required 
to be disclosed to such rating organizations 
by the sponsor, issuers, and underwriters 
of such structured securities on the collat-
1222 
eral underlying such structured securities; 
and 
‘‘(ii) establish and implement proce-
dures to collect and disclose information 
about the processes used by such sponsor, 
issuers, and underwriters to assess the ac-
curacy and integrity of their data and 
fraud detection. 
‘‘(B) DEFINITION.—For purposes of this 
paragraph, the Commission shall, by rule or 
regulation, define the term ‘structured securi-
ties’ as appropriate in the public interest and 
for the protection of investors. 
‘‘(6) HISTORICAL
DEFAULT
RATE
DISCLO-
SURES.—The rules and regulations prescribed by the 
Commission pursuant to this section with respect to 
nationally recognized statistical rating organizations 
shall require each nationally recognized statistical 
rating organization to establish and maintain, on a 
publicly accessible Internet site, a facility to disclose, 
in a central database, the historical default rates of 
all classes of financial products rated by such orga-
nization.’’; 
(4) in subsection (d)—
1223 
(A) in the heading, by inserting ‘‘FINE,’’ 
after ‘‘CENSURE,’’; 
(B) by striking ‘‘shall censure’’ and all 
that follows through ‘‘revocation’’ and inserting 
the following: ‘‘shall censure, fine in accordance 
with section 21B(a), place limitations on the ac-
tivities, functions, or operations of, suspend for 
a period not exceeding 12 months, or revoke the 
registration of any nationally recognized statis-
tical rating organization (or with respect to any 
person who is associated, who is seeking to be-
come associated, or, at the time of the alleged 
misconduct, who was associated or was seeking 
to become associated with a nationally recog-
nized statistical rating organization, the Com-
mission, by order, shall censure, fine in accord-
ance with section 21B(a), place limitations on 
the activities or functions of such person, sus-
pend for a period not exceeding 12 months, or 
bar such person from being associated with a 
nationally recognized statistical rating organiza-
tion), if the Commission finds, on the record 
after notice and opportunity for hearing, that 
such censure, fine, placing of limitations, bar, 
suspension, or revocation’’;
1224 
(C) in paragraph (2), by striking ‘‘fur-
nished to’’ and inserting ‘‘filed with’’; 
(D) in paragraph (4)— 
(i) by striking ‘‘furnish’’ and inserting 
‘‘file’’; and 
(ii) by striking ‘‘or’’ at the end; 
(E) in paragraph (5), by striking the pe-
riod at the end and inserting a semicolon; and 
(F) by adding at the end the following: 
‘‘(6) has failed reasonably to supervise another 
person who commits a violation of the securities 
laws, the rules or regulations thereunder, or any 
rules of the Municipal Securities Rulemaking Board 
if such other person is subject to his or her super-
vision, except that no person shall be deemed to have 
failed reasonably to supervise any other person 
under this paragraph, if— 
‘‘(A) there have been established proce-
dures, and a system for applying such proce-
dures, which would reasonably be expected to 
prevent and detect, insofar as practicable, any 
such violation by such other person; and 
‘‘(B) such person has reasonably dis-
charged the duties and obligations incumbent 
upon him or her by reason of such procedures
1225 
and system without reasonable cause to believe 
that such procedures and system were not being 
complied with; or 
‘‘(7) fails to conduct sufficient surveillance to 
ensure that credit ratings remain current, as appli-
cable.’’; 
(5) in subsection (e), by striking paragraph (1) 
and inserting the following new paragraph (1): 
‘‘(1) VOLUNTARY WITHDRAWAL.—A nationally 
recognized statistical rating organization may, upon 
such terms and conditions as the Commission may 
establish as necessary in the public interest or for 
the protection of investors, withdraw from registra-
tion by furnishing a written notice of withdrawal to 
the Commission, provided that such nationally recog-
nized statistical rating organization certifies that it 
received less than $250,000,000 during its last full 
fiscal year in net revenue for providing credit ratings 
on securities and money market instruments issued 
in the United States.’’; 
(6) by amending subsection (h) to read as fol-
lows: 
‘‘(h) CORPORATE GOVERNANCE, ORGANIZATION, AND 
MANAGEMENT OF CONFLICTS OF INTEREST.— 
‘‘(1) BOARD OF DIRECTORS.—
1226 
‘‘(A) IN GENERAL.—Each nationally recog-
nized statistical rating organization shall have a 
board of directors. 
‘‘(B) INDEPENDENT DIRECTORS.—At least 
1⁄3 of such board, but no less than 2 of the 
members of the board of directors, shall be 
independent directors. In order to be considered 
independent for purposes of this subsection, a 
director of a nationally recognized statistical 
rating organization may not, other than in his 
or her capacity as a member of the board of di-
rectors or any committee thereof— 
‘‘(i) accept any consulting, advisory, 
or other compensatory fee from the nation-
ally recognized statistical rating organiza-
tion; or 
‘‘(ii) be a person associated with the 
nationally recognized statistical rating or-
ganization or with any affiliated company 
thereof. 
‘‘(C) COMPENSATION
AND
TERM.—The 
compensation of the independent directors shall 
not be linked to the business performance of the 
nationally recognized statistical rating organiza-
tion and shall be arranged so as to ensure the
1227 
independence of their judgment. The term of 
office of the independent directors shall be for 
a pre-agreed fixed period not exceeding 5 years 
and shall not be renewable. 
‘‘(D) DUTIES.—In addition to the overall 
responsibility of the board of directors, the 
board shall oversee— 
‘‘(i) the establishment, maintenance, 
and enforcement of policies and procedures 
for determining credit ratings; 
‘‘(ii) the establishment, maintenance, 
and enforcement of policies and procedures 
to address, manage, and disclose any con-
flicts of interest; 
‘‘(iii) the effectiveness of the internal 
control system with respect to policies and 
procedures for determining credit ratings; 
and 
‘‘(iv) the compensation and promotion 
policies and practices of the nationally rec-
ognized statistical rating organization. 
‘‘(2) ORGANIZATION
POLICIES
AND
PROCE-
DURES.—Each nationally recognized statistical rat-
ing organization shall establish, maintain, and en-
force written policies and procedures reasonably de-
1228 
signed, taking into consideration the nature of the 
business of the nationally recognized statistical rat-
ing organization and affiliated persons and affiliated 
companies thereof, to address, manage, and disclose 
any conflicts of interest that can arise from such 
business. 
‘‘(3) COMMISSION
RULES.—The Commission 
shall issue rules to prohibit, or require the manage-
ment and disclosure of, any conflicts of interest re-
lating to the issuance of credit ratings by a nation-
ally recognized statistical rating organization, includ-
ing rules regarding— 
‘‘(A) conflicts of interest relating to the 
manner in which a nationally recognized statis-
tical rating organization is compensated by the 
obligor, or any affiliate of the obligor, for 
issuing credit ratings or providing related serv-
ices; 
‘‘(B) conflicts of interest relating to busi-
ness relationships, ownership interests, and af-
filiations of nationally recognized statistical rat-
ing organization board members with obligors, 
or any other financial or personal interests be-
tween a nationally recognized statistical rating 
organization, or any person associated with
1229 
such nationally recognized statistical rating or-
ganization, and the obligor, or any affiliate of 
the obligor; 
‘‘(C) conflicts of interest relating to any af-
filiation of a nationally recognized statistical 
rating organization, or any person associated 
with such nationally recognized statistical rat-
ing organization, with any person who under-
writes securities, money market instruments, or 
other instruments that are the subject of a 
credit rating; 
‘‘(D) a requirement that each nationally 
recognized statistical rating organization dis-
close on such organization’s website a consoli-
dated report at the end of each fiscal year that 
shows— 
‘‘(i) the percent of net revenue earned 
by the nationally recognized statistical rat-
ing organization or an affiliate of a nation-
ally recognized statistical rating organiza-
tion, or any person associated with a na-
tionally recognized statistical rating orga-
nization, to the extent determined appro-
priate by the Commission, for that fiscal 
year for providing services and products
1230 
other than credit rating services to each 
person who paid for a credit rating; and 
‘‘(ii) the relative standing of each per-
son who paid for a credit rating that was 
outstanding as of the end of the fiscal year 
in terms of the amount of net revenue 
earned by the nationally recognized statis-
tical rating organization attributable to 
each such person and classified by the 
highest 5, 10, 25, and 50 percentiles and 
lowest 50 and 25 percentiles; 
‘‘(E) the establishment of a system of pay-
ment for credit ratings issued by each nation-
ally recognized statistical rating organization 
that requires that payments are structured in a 
manner designed to ensure that the nationally 
recognized statistical rating organization con-
ducts accurate and reliable surveillance of credit 
ratings over time, as applicable, and that incen-
tives for reliable credit ratings are in place; 
‘‘(F) a requirement that a nationally rec-
ognized statistical rating organization disclose 
with the publication of a credit rating the type 
and number of credit ratings it has provided to 
the person being rated or affiliates of such per-
1231 
son, the fees it has billed for the credit rating, 
and the aggregate amount of net revenue 
earned by the nationally recognized statistical 
rating organization in the preceding 2 fiscal 
years attributable to the person being rated and 
its affiliates; and 
‘‘(G) any other potential conflict of inter-
est, as the Commission determines necessary or 
appropriate in the public interest or for the pro-
tection of investors. 
‘‘(4) LOOK-BACK REQUIREMENT.— 
‘‘(A) REVIEW BY THE NATIONALLY RECOG-
NIZED STATISTICAL RATING ORGANIZATION.— 
Each nationally recognized statistical rating or-
ganization shall establish, maintain, and enforce 
policies and procedures reasonably designed to 
ensure that, in any case in which an employee 
of a person subject to a credit rating of the na-
tionally recognized statistical rating organiza-
tion or the issuer, underwriter, or sponsor of a 
security or money market instrument subject to 
a credit rating of the nationally recognized sta-
tistical rating organization was employed by the 
nationally recognized statistical rating organiza-
tion and participated in any capacity in deter-
1232 
mining credit ratings for the person or the se-
curities or money market instruments during 
the 1-year period preceding the date an action 
was taken with respect to the credit rating, the 
nationally recognized statistical rating organiza-
tion shall— 
‘‘(i) conduct a review to determine 
whether any conflicts of interest of the em-
ployee influenced the credit rating; and 
‘‘(ii) take action to revise the rating if 
appropriate, in accordance with such rules 
as the Commission shall prescribe. 
‘‘(B) REVIEW BY COMMISSION.— 
‘‘(i) IN GENERAL.—The Commission 
shall conduct periodic reviews of the poli-
cies described in subparagraph (A) and the 
implementation of the policies at each na-
tionally recognized statistical rating orga-
nization to ensure they are reasonably de-
signed and implemented to most effectively 
eliminate conflicts of interest. 
‘‘(ii) TIMING OF REVIEWS.—The Com-
mission shall review the code of ethics and 
conflict of interest policy of each nationally 
recognized statistical rating organization—
1233 
‘‘(I) not less frequently than an-
nually; and 
‘‘(II) whenever such policies are 
materially modified or amended. 
‘‘(5) REPORT TO COMMISSION ON CERTAIN EM-
PLOYMENT TRANSITIONS.— 
‘‘(A) REPORT REQUIRED.—Each nationally 
recognized statistical rating organization shall 
report to the Commission any case such organi-
zation knows or can reasonably be expected to 
know where a person associated with such orga-
nization within the previous 5 years obtains em-
ployment with any obligor, issuer, underwriter, 
or sponsor of a security or money market in-
strument for which the organization issued a 
credit rating during the 12-month period prior 
to such employment, if such employee— 
‘‘(i) was a senior officer of such orga-
nization; 
‘‘(ii) participated in any capacity in 
determining credit ratings for such obligor, 
issuer, underwriter, or sponsor; or 
‘‘(iii) supervised an employee de-
scribed in clause (ii).
1234 
‘‘(B) PUBLIC DISCLOSURE.—Upon receiv-
ing such a report, the Commission shall make 
such information publicly available.’’; 
(7) by amending subsection (j) to read as fol-
lows: 
‘‘(j) DESIGNATION OF COMPLIANCE OFFICER.— 
‘‘(1) IN GENERAL.—Each nationally recognized 
statistical rating organization shall designate an in-
dividual to serve as a compliance officer. 
‘‘(2) DUTIES.—The compliance officer shall— 
‘‘(A) report directly to the board of the na-
tionally recognized statistical rating organiza-
tion; 
‘‘(B) review compliance with policies and 
procedures to manage conflicts of interest and 
assess the risk that the compliance (or lack of 
such compliance) may compromise the integrity 
of the credit rating process; 
‘‘(C) review compliance with the internal 
control system with respect to the procedures 
and methodologies for determining credit rat-
ings, including qualitative methodologies and 
quantitative inputs used in the rating process, 
and assess the risk that such internal control
1235 
system is reasonably designed to ensure the in-
tegrity and quality of the credit rating process; 
‘‘(D) in consultation with the board of the 
nationally recognized statistical rating organiza-
tion, resolve any conflicts of interest that may 
arise; 
‘‘(E) be responsible for administering the 
policies and procedures required to be estab-
lished pursuant to this section; 
‘‘(F) ensure compliance with securities 
laws and the rules and regulations issued there-
under, including rules prescribed by the Com-
mission pursuant to this section; and 
‘‘(G) establish procedures— 
‘‘(i) for the receipt, retention, and 
treatment of complaints regarding credit 
ratings, models, methodologies, and com-
pliance with the securities laws and the 
policies and procedures required under this 
section; 
‘‘(ii) for the receipt, retention, and 
treatment of confidential, anonymous com-
plaints by employees, obligors, issuers, and 
investors;
1236 
‘‘(iii) for the remediation of non-com-
pliance issues found during compliance of-
fice reviews, the reviews required under 
paragraph (7), internal or external audit 
findings, self-reported errors, or through 
validated complaints; and 
‘‘(iv) designed so that ratings that the 
nationally recognized statistical rating or-
ganization disseminates reflect consider-
ation of all information in a manner gen-
erally consistent with the nationally recog-
nized statistical rating organization’s pub-
lished rating methodology, including infor-
mation which is provided, received, or oth-
erwise obtained from obligor, issuer and 
non-issuer sources, such as investors, the 
media, and other interested or informed 
parties. 
‘‘(3) LIMITATIONS.—The compliance officer 
shall not, while serving in that capacity— 
‘‘(A) determine credit ratings; 
‘‘(B) participate in the establishment of 
the procedures and methodologies or the quali-
tative methodologies and quantitative inputs 
used to determine credit ratings;
1237 
‘‘(C) perform marketing or sales functions; 
or 
‘‘(D) participate in establishing compensa-
tion levels, other than for employees working 
for the compliance officer. 
‘‘(4) ANNUAL REPORTS REQUIRED.—The com-
pliance officer shall annually prepare and sign a re-
port on the compliance of the nationally recognized 
statistical rating organization with the securities 
laws and such organization’s internal policies and 
procedures, including its code of ethics and conflict 
of interest policies, in accordance with rules pre-
scribed by the Commission. Such compliance report 
shall accompany the financial reports of the nation-
ally recognized statistical rating organization that 
are required to be filed with the Commission pursu-
ant to this section and shall include a certification 
that, under penalty of law, the report is accurate 
and complete. 
‘‘(5) COMPENSATION.—The compensation of 
the compliance officer shall not be linked to the 
business performance of the nationally recognized 
statistical rating organization and shall be arranged 
so as to ensure the independence of the officer’s 
judgment.’’;
1238 
(8) in subsection (k)— 
(A) by striking ‘‘, on a confidential basis,’’; 
(B) by striking ‘‘furnish to’’ and inserting 
‘‘file with’’; 
(C) by striking ‘‘Each nationally’’ and in-
serting the following: 
‘‘(1) IN GENERAL.—Each nationally’’; and 
(D) by adding at the end the following new 
paragraph: 
‘‘(2) EXCEPTION.—The Commission may treat 
as confidential any information provided by a na-
tionally recognized statistical rating organization 
under this section consistent with applicable Federal 
laws or Commission rules.’’; 
(9) in subsection (l)(2)(A)(i), by striking ‘‘fur-
nished’’ and inserting ‘‘filed’’; 
(10) by amending subsection (p) to read as fol-
lows: 
‘‘(p) ESTABLISHMENT OF SEC OFFICE.— 
‘‘(1) IN GENERAL.—The Commission shall es-
tablish an office that administers the rules of the 
Commission with respect to the practices of nation-
ally recognized statistical rating organizations. 
‘‘(2) STAFFING.—The office of the Commission 
established under this subsection shall be staffed
1239 
sufficiently to carry out fully the requirements of 
this section. 
‘‘(3) RULEMAKING AUTHORITY.—The Commis-
sion shall— 
‘‘(A) establish, by rule, fines and other 
penalties for any nationally recognized statis-
tical rating organization that violates the appli-
cable requirements of this title; and 
‘‘(B) issue such rules as may be necessary 
to carry out this section with respect to nation-
ally recognized statistical rating organiza-
tions.’’; and 
(11) by adding after subsection (p) the fol-
lowing new subsections: 
‘‘(q) TRANSPARENCY OF RATINGS PERFORMANCE.— 
‘‘(1) RULEMAKING
REQUIRED.—The Commis-
sion shall, by rule, require each nationally recognized 
statistical rating organization to publicly disclose in-
formation on initial ratings and subsequent changes 
to such ratings for the purpose of providing a gauge 
of the performance of ratings and allowing investors 
to compare performance of ratings by different na-
tionally recognized statistical rating organizations.
1240 
‘‘(2) CONTENT.—The rules of the Commission 
under this subsection shall require, at a minimum, 
disclosures that— 
‘‘(A) are comparable among nationally rec-
ognized statistical rating organizations, so that 
investors can compare rating performance 
across rating organizations; 
‘‘(B) are clear and informative for a wide 
range of investor sophistication; 
‘‘(C) include performance information over 
a range of years and for a variety of classes of 
credit ratings, as determined by the Commis-
sion; 
‘‘(D) are published and made freely avail-
able by the nationally recognized statistical rat-
ing organization, on an easily accessible portion 
of its website and in written form when re-
quested by investors; and 
‘‘(E) each nationally recognized statistical 
rating organization include an attestation with 
any credit rating it issues affirming that no 
part of the rating was influenced by any other 
business activities, that the rating was based 
solely on the merits of the instruments being 
rated, and that such rating was an independent
1241 
evaluation of the risks and merits of the instru-
ment. 
‘‘(r) CREDIT RATINGS METHODOLOGIES.— 
‘‘(1) IN GENERAL.—The Commission shall pre-
scribe rules, in the public interest and for the pro-
tection of investors, that require each nationally rec-
ognized statistical rating organization to establish, 
maintain, and enforce written procedures and meth-
odologies and an internal control system with respect 
to such procedures and methodologies that are rea-
sonably designed to— 
‘‘(A) ensure that credit ratings are deter-
mined using procedures and methodologies, in-
cluding qualitative methodologies and quan-
titative inputs that are determined in accord-
ance with the policies and procedures of the na-
tionally recognized statistical rating organiza-
tion for developing and modifying credit rating 
procedures and methodologies; 
‘‘(B) ensure that when major changes to 
credit rating procedures and methodologies, in-
cluding to qualitative methodologies and quan-
titative inputs, are made, that the changes are 
applied consistently to all credit ratings to 
which the changed procedures and methodolo-
1242 
gies apply and, to the extent the changes are 
made to credit rating surveillance procedures 
and methodologies, they are applied to current 
credit ratings within a time period to be deter-
mined by the Commission by rule, and that the 
reason for the change is publicly disclosed; 
‘‘(C) notify persons who have access to the 
credit ratings of the nationally recognized sta-
tistical rating organization, regardless of wheth-
er they are made readily accessible for free or 
a reasonable fee, of the procedure or method-
ology, including qualitative methodologies and 
quantitative inputs, used with respect to a par-
ticular credit rating; and 
‘‘(D) notify persons who have access to the 
credit ratings of the nationally recognized sta-
tistical rating organization, regardless of wheth-
er they are made readily accessible for free or 
a reasonable fee, when a change is made to a 
procedure or methodology, including to quali-
tative methodologies and quantitative inputs, or 
an error is identified in a procedure or method-
ology that may result in credit rating actions, 
and the likelihood of the change resulting in
1243 
current credit ratings being subject to rating 
actions. 
‘‘(2) SYMBOLS.—The Commission may pre-
scribe rules that require nationally recognized statis-
tical rating organizations to establish credit rating 
symbols that distinguish credit ratings for struc-
tured products from credit ratings for other prod-
ucts that the Commission determines appropriate or 
necessary in the public interest and for the protec-
tion of investors, provided such rules do not prevent 
public pension funds or other State regulated enti-
ties from investing in rated products. 
‘‘(3) RATING CLARITY AND CONSISTENCY.— 
‘‘(A) COMMISSION
OBLIGATION.—Subject 
to subparagraphs (B) and (C), the Commission 
shall require, by rule, each nationally recognized 
statistical rating organization to establish, 
maintain, and enforce written policies and pro-
cedures reasonably designed— 
‘‘(i) with respect to credit ratings of 
securities and money market instruments, 
to assess the risk that investors in securi-
ties and money market instruments may 
not receive payment in accordance with the 
terms of such securities and instruments;
1244 
‘‘(ii) to define clearly any credit rating 
symbol used by that organization; and 
‘‘(iii) to apply such credit rating sym-
bol in a consistent manner for all types of 
securities and money market instruments. 
‘‘(B) ADDITIONAL
CREDIT
FACTORS.— 
Nothing in subparagraph (A)— 
‘‘(i) prohibits a nationally recognized 
statistical rating organization from using 
additional credit factors that are docu-
mented and disclosed by the organization 
and that have a demonstrated impact on 
the risk an investor in a security or money 
market instrument will not receive repay-
ment in accordance with the terms of 
issuance; 
‘‘(ii) prohibits a nationally recognized 
statistical rating organization from consid-
ering credit factors that are unique to mu-
nicipal securities; or 
‘‘(iii) prohibits a nationally recognized 
statistical rating organization from using 
an additional symbol with respect to the 
ratings described in subparagraph (A)(i) 
for the purpose of distinguishing the rat-
1245 
ings of a certain type of security or money 
market instrument from ratings of any 
other types of securities or money market 
instruments. 
‘‘(C) 
COMPLEMENTARY
RATINGS.—The 
Commission shall not impose any requirement 
under subparagraph (A) that prevents nation-
ally recognized statistical rating organizations 
from establishing ratings that are complemen-
tary to the ratings described in subparagraph 
(A)(i) and that are created to measure a dis-
crete aspect of the security’s or instrument’s 
risk. 
‘‘(s) TRANSPARENCY
OF CREDIT RATING METH-
ODOLOGIES AND INFORMATION REVIEWED.— 
‘‘(1) IN GENERAL.—The Commission shall re-
quire, by rule, a nationally recognized statistical rat-
ing organization to include with the publication of 
each credit rating regardless of whether the credit 
rating is made readily accessible for free or a rea-
sonable fee a form that discloses information about 
the assumptions underlying the procedures and 
methodologies used, and the data relied on, to deter-
mine the credit rating in the format prescribed in
1246 
paragraph (2) and containing the information de-
scribed in paragraph (3). 
‘‘(2) FORMAT.—The Commission shall prescribe 
a form for use under paragraph (1) that— 
‘‘(A) is designed in a user-friendly and 
helpful manner for investors to understand the 
information contained in the report; 
‘‘(B) requires the nationally recognized 
statistical rating organization to provide the 
content, as required by paragraph (3), in a 
manner that is directly comparable across secu-
rities; and 
‘‘(C) the nationally recognized statistical 
rating organization certifies the information on 
the form as true and accurate. 
‘‘(3) CONTENT.—The Commission shall pre-
scribe a form that requires a nationally recognized 
statistical rating organization to disclose— 
‘‘(A) the main assumptions included in 
constructing procedures and methodologies, in-
cluding qualitative methodologies and quan-
titative inputs and assumptions about the cor-
relation of defaults across underlying assets 
used in rating certain structured products;
1247 
‘‘(B) the potential shortcomings of the 
credit ratings, and the types of risks not meas-
ured in the credit ratings that the nationally 
recognized statistical rating organization is not 
commenting on, such as liquidity, market, and 
other risks; 
‘‘(C) information on the certainty of the 
rating, including information on the reliability, 
accuracy, and quality of the data relied on in 
determining the ultimate credit rating and a 
statement on the extent to which key data in-
puts for the credit rating were reliable or lim-
ited, including any limits on the reach of histor-
ical data, limits in accessibility to certain docu-
ments or other forms of information that would 
have better informed the credit rating, and the 
completeness of certain information considered; 
‘‘(D) whether and to what extent third 
party due diligence services have been utilized, 
and a description of the information that such 
third party reviewed in conducting due diligence 
services; 
‘‘(E) a description of relevant data about 
any obligor, issuer, security, or money market
1248 
instrument that was used and relied on for the 
purpose of determining the credit rating; 
‘‘(F) a statement containing an overall as-
sessment of the quality of information available 
and considered in producing a credit rating for 
a security in relation to the quality of informa-
tion available to the nationally recognized sta-
tistical rating organization in rating similar ob-
ligors, securities, or money market instruments; 
‘‘(G) an explanation or measure of the po-
tential volatility for the credit rating, including 
any factors that might lead to a change in the 
credit rating, and the extent of the change that 
might be anticipated under different conditions; 
‘‘(H) information on the content of the 
credit rating, including— 
‘‘(i) the expected default probability; 
and 
‘‘(ii) the loss given default; 
‘‘(I) information on the sensitivity of the 
rating to assumptions made by the nationally 
recognized statistical rating organization, in-
cluding— 
‘‘(i) 5 assumptions made in the rat-
ings process that, without accounting for
1249 
any other factor, would have the greatest 
impact on a rating if such assumptions 
were proven false or inaccurate; and 
‘‘(ii) an analysis, using concrete exam-
ples, on how each of the 5 assumptions 
identified under clause (i) impacts a rat-
ing; 
‘‘(J) where applicable, how the nationally 
recognized statistical rating organization used 
servicer or remittance reports, and with what 
frequency, to conduct surveillance of the credit 
rating; and 
‘‘(K) such additional information as may 
be required by the Commission. 
‘‘(4) DUE DILIGENCE SERVICES.— 
‘‘(A) CERTIFICATION REQUIRED.—In any 
case in which third-party due diligence services 
are employed by a nationally recognized statis-
tical rating organization or an issuer, under-
writer, or sponsor in connection with the 
issuance of a credit rating, the firm providing 
the due diligence services shall provide to the 
nationally recognized statistical rating organiza-
tion written certification of such due diligence, 
which shall be subject to review by the Commis-
1250 
sion, and the issuer, underwriter, or sponsor 
shall provide any reports issued by the provider 
of such due diligence services to the nationally 
recognized statistical rating organization. 
‘‘(B) FORMAT AND CONTENT.—The Com-
mission shall establish the appropriate format 
and content for written certifications required 
under subparagraph (A) to ensure that pro-
viders of due diligence services certify that they 
have conducted a thorough review of data, doc-
umentation, and other relevant information nec-
essary for the nationally recognized statistical 
rating organization to provide a reliable rating. 
‘‘(C) DISCLOSURE
OF
CERTIFICATION.— 
The Commission shall adopt rules requiring a 
nationally recognized statistical rating organiza-
tion to disclose to persons who have access to 
the credit ratings of the nationally recognized 
statistical rating organization regardless of 
whether they are made readily accessible for 
free or a reasonable fee the certification de-
scribed in subparagraph (A) with the publica-
tion of the applicable credit rating in a manner 
that may permit the persons to determine the
1251 
adequacy and level of due diligence services pro-
vided by the third party. 
‘‘(t) PROHIBITED ACTIVITIES.—Beginning 180 days 
from the date of enactment of the Accountability, Reli-
ability, and Transparency in Rating Agencies Act, it shall 
be unlawful for a nationally recognized statistical rating 
organization, or an affiliate of a nationally recognized sta-
tistical rating organization, or any person associated with 
a nationally recognized statistical rating organization, that 
provides a credit rating for an issuer, underwriter, or 
placement agent of a security to provide any non-rating 
service to that issuer, underwriter, or placement agent in 
determining a credit rating, including— 
‘‘(1) risk management advisory services; 
‘‘(2) advice or consultation relating to any 
merger, sales, or disposition of assets of the issuer; 
‘‘(3) ancillary assistance, advice, or consulting 
services unrelated to any specific credit rating 
issuance; and 
‘‘(4) such further activities or services as the 
Commission may determine as necessary or appro-
priate in the public interest or for the protection of 
investors.’’. 
(b) CONFORMING AMENDMENT.—Section 3(a)(62) of 
the Securities Exchange Act of 1934 is amended by strik-
1252 
ing subparagraph (A) and redesignating subparagraphs 
(B) and (C) as subparagraphs (A) and (B), respectively. 
SEC. 6003. STANDARDS FOR PRIVATE ACTIONS. 
(a) IN GENERAL.—Section 21D(b)(2) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78u–4(b)(2)) is 
amended by inserting before the period at the end of the 
following: ‘‘, and in the case of an action brought under 
this title for money damages against a nationally recog-
nized statistical rating organization, it shall be sufficient 
for purposes of pleading any required state of mind for 
purposes of such action that the complaint shall state with 
particularity facts giving rise to a strong inference that 
the nationally recognized statistical rating organization 
was grossly negligent in violating the securities laws’’. 
(b) PLEADING STANDARD.—Section 15E(m) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o–7(m)) 
amended to read as follows: 
‘‘(m) APPLICATION OF ENFORCEMENT PROVISIONS; 
PLEADING STANDARD IN PRIVATE RIGHTS OF ACTION.— 
Statements made by nationally recognized statistical rat-
ing organizations shall not be deemed forward looking 
statements for purposes of section 21E. In any private 
right of action commenced against a nationally recognized 
statistical rating organization under the securities laws, 
the same pleading standards with respect to gross neg-
1253 
ligence shall apply to the nationally recognized statistical 
rating organization as would apply to any other person 
in the same private right of action against such person.’’. 
(c) REQUIREMENTS FOR LIABILITY.—Section 21D of 
the Securities Exchange Act of 1934 (15 U.S.C. 78u–4) 
is amended— 
(1) by redesignating subsections (c) through (f) 
as subsections (d) through (g), respectively; and 
(2) by inserting after subsection (b) the fol-
lowing: 
‘‘(c) REQUIREMENTS FOR LIABILITY.—A purchaser 
of a security given a rating by a nationally recognized sta-
tistical rating organization shall have the right to recover 
for damages if the process of determining the credit rating 
was— 
‘‘(1) grossly negligent, based on the facts and 
circumstances at the time the rating was issued; and 
‘‘(2) a substantial factor in the economic loss 
suffered by the investor. 
No action shall be maintained to enforce any liability cre-
ated under this subsection unless brought within 2 years 
after the discovery of the facts constituting the violation 
and within 3 years after the initial issuance of the rat-
ing.’’.
1254 
SEC. 6004. ISSUER DISCLOSURE OF PRELIMINARY RATINGS. 
The Securities and Exchange Commission shall adopt 
rules under authority of the Securities Act of 1933 (15 
U.S.C. 77a et seq.) to require issuers to disclose prelimi-
nary credit ratings received from nationally recognized 
statistical rating agencies on structured products and all 
forms of corporate debt. 
SEC. 6005. CHANGE TO DESIGNATION. 
The Securities Act of 1933 and the Securities Ex-
change Act of 1934 are each amended by striking ‘‘nation-
ally recognized statistical rating’’ each place it appears 
and inserting ‘‘nationally registered statistical rating’’. 
SEC. 6006. TIMELINE FOR REGULATIONS. 
Unless otherwise specified in this subtitle, the Securi-
ties and Exchange Commission shall adopt rules and regu-
lations, as required by the amendments made by this sub-
title, not later than 365 days after the date of enactment. 
SEC. 6007. ELIMINATION OF EXEMPTION FROM FAIR DIS-
CLOSURE RULE. 
Not later than 90 days after the date of enactment 
of this subtitle, the Securities Exchange Commission shall 
revise Regulation FD (17 CFR 243.100) to remove from 
such regulation the exemption for entities whose primary 
business is the issuance of credit ratings (17 CFR 
243.100(b)(2)(iii)).
1255 
SEC. 6008. ADVISORY BOARD. 
(a) ESTABLISHMENT.—Not later than 90 days after 
the date of the enactment of this subtitle, the Securities 
and Exchange Commission shall establish an advisory 
board to be known as the Credit Ratings Agency Advisory 
Board (in this section referred to as ‘‘the Board’’). 
(b) APPOINTMENT AND TERMS OF SERVICE.—The 
Board shall consist of 7 members appointed by the Com-
mission, no more than 2 of whom may be former employ-
ees of a credit rating agency. Members of the Board shall 
be prominent individuals of integrity and reputation who 
have a demonstrated commitment to the interests of inves-
tors and the public, and an understanding of the role that 
credit ratings play to a broad range of investors. Terms 
of service shall be staggered as determined by the Com-
mission. 
(c) DUTIES.—The Board shall— 
(1) advise the Commission concerning the rules 
and regulations required by the amendments made 
by this subtitle; 
(2) ensure that the Commission properly and 
fully executes its oversight functions and responsibil-
ities with the respect to nationally recognized statis-
tical rating organizations and individual partici-
pants; and
1256 
(3) issue an annual report to Congress detailing 
its work and recommending any additional Congres-
sional actions necessary to aid the Commission and 
such additional reports from time to time as appro-
priate when it feels that the Commission is not prop-
erly executing its oversight functions. 
SEC. 6009. REMOVAL OF STATUTORY REFERENCES TO 
CREDIT RATINGS. 
(a) FEDERAL DEPOSIT INSURANCE ACT.—The Fed-
eral Deposit Insurance Act (12 U.S.C. 1811 et seq.) is 
amended— 
(1) in section 28(d)— 
(A) in the subsection heading, by striking 
‘‘NOT OF INVESTMENT GRADE’’; 
(B) in paragraph (1), by striking ‘‘not of 
investment grade’’ and inserting ‘‘that does not 
meet standards of credit-worthiness as estab-
lished by the Corporation’’; 
(C) in paragraph (2), by striking ‘‘not of 
investment grade’’; 
(D) by striking paragraph (3) and redesig-
nating paragraph (4) as paragraph (3); and 
(E) in paragraph (3) (as so redesig-
nated)—
1257 
(i) by striking subparagraph (A) and 
redesignating subparagraphs (B) and (C) 
as subparagraphs (A) and (B), respec-
tively; and 
(ii) in subparagraph (B) (as so redes-
ignated), by striking ‘‘not of investment 
grade’’ and inserting ‘‘that does not meet 
standards of credit-worthiness as estab-
lished by the Corporation’’; 
(2) in section 28(e)— 
(A) in the subsection heading, by striking 
‘‘NOT OF INVESTMENT GRADE’’; 
(B) in paragraph (1), by striking ‘‘not of 
investment grade’’ and inserting ‘‘that does not 
meet standards of credit-worthiness as estab-
lished by the Corporation’’; and 
(C) in paragraphs (2) and (3), by striking 
‘‘not of investment grade’’ each place that it ap-
pears and inserting ‘‘that does not meet stand-
ards of credit-worthiness established by the 
Corporation’’; and 
(3) in section 7(b)(1)(E)(i), by striking ‘‘credit 
rating entities, and other private economic’’ and in-
sert ‘‘private economic, credit,’’.
1258 
(b) FEDERAL HOUSING ENTERPRISES FINANCIAL 
SAFETY AND SOUNDNESS ACT OF 1992.—Section 1319 
of the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992 (12 U.S.C. 4519) is amended— 
(1) in the section heading, by striking ‘‘BY 
RATING ORGANIZATION’’; and 
(2) by striking ‘‘that is a nationally recognized 
statistical rating organization, as such term is de-
fined in section 3(a) of the Securities Exchange Act 
of 1934,’’. 
(c) INVESTMENT COMPANY ACT OF 1940.—Section 
6(a)(5)(A)(iv)(I) Investment Company Act of 1940 (15 
U.S.C. 80a–6(a)(5)(A)(iv)(I)) is amended by striking ‘‘is 
rated investment grade by not less than 1 nationally recog-
nized statistical rating organization’’ and inserting ‘‘meets 
such standards of credit-worthiness that the Commission 
shall adopt’’. 
(d) REVISED STATUTES.—Section 5136A of title 
LXII of the Revised Statutes of the United States (12 
U.S.C. 24a) is amended— 
(1) in subsection (a)(2)(E), by striking ‘‘any 
applicable rating’’ and inserting ‘‘standards of cred-
it-worthiness established by the Comptroller of the 
Currency’’;
1259 
(2) in the heading for subsection (a)(3) by 
striking ‘‘RATING OR COMPARABLE REQUIREMENT’’ 
and inserting ‘‘REQUIREMENT’’; 
(3) subsection (a)(3), by amending subpara-
graph (A) to read as follows: 
‘‘(A) IN GENERAL.—A national bank meets 
the requirements of this paragraph if the bank 
is one of the 100 largest insured banks and has 
not fewer than 1 issue of outstanding debt that 
meets standards of credit-worthiness or other 
criteria as the Secretary of the Treasury and 
the Board of Governors of the Federal Reserve 
System may jointly establish.’’. 
(4) in the heading for subsection (f), by striking 
‘‘MAINTAIN
PUBLIC
RATING
OR’’ and inserting 
‘‘MEET STANDARDS OF CREDIT-WORTHINESS’’; and 
(5) in subsection (f)(1), by striking ‘‘any appli-
cable rating’’ and inserting ‘‘standards of credit-wor-
thiness established by the Comptroller of the Cur-
rency’’. 
(e) SECURITIES EXCHANGE ACT OF 1934.—Section 
3(a) Securities Exchange Act of 1934 (15 U.S.C. 
78a(3)(a)) is amended— 
(1) in paragraph (41), by striking ‘‘is rated in 
one of the two highest rating categories by at least
1260 
one nationally recognized statistical rating organiza-
tion’’ and inserting ‘‘meets standards of credit-wor-
thiness as defined by the Commission’’; and 
(2) in paragraph (53)(A), by striking ‘‘is rated 
in 1 of the 4 highest rating categories by at least 1 
nationally recognized statistical rating organization’’ 
and inserting ‘‘meets standards of credit-worthiness 
as defined by the Commission’’. 
(f) WORLD BANK DISCUSSIONS.—Section 3(a)(6) of 
the amendment in the nature of a substitute to the text 
of H.R. 4645, as ordered reported from the Committee 
on Banking, Finance and Urban Affairs on September 22, 
1988, as enacted into law by section 555 of Public Law 
100–461, (22 U.S.C. 286hh(a)(6)), is amended by striking 
‘‘rating’’ and inserting ‘‘worthiness’’. 
(g) EFFECTIVE DATE.—The amendments made by 
this section shall take effect after the end of the 6-month 
period beginning on the date of the enactment of this sub-
title. 
SEC. 6010. REVIEW OF RELIANCE ON RATINGS. 
(a) AGENCY REVIEW.— 
(1) REVIEW.—Not later than 1 year after the 
date of the enactment of this subtitle, each Federal 
agency listed in paragraph (4) shall, to the extent 
applicable, review—
1261 
(A) any regulation issued by such agency 
that requires the use of an assessment of the 
credit-worthiness of a security or money market 
instrument; and 
(B) any references to or requirements in 
such regulations regarding credit ratings. 
(2) MODIFICATIONS
REQUIRED.—Each such 
agency shall modify any such regulations identified 
by the review conducted under paragraph (1) to re-
move any reference to or requirement of reliance on 
credit ratings and to substitute in such regulations 
such standard of credit-worthiness as each respective 
agency shall determine as appropriate for such regu-
lations. In making such determination, such agencies 
shall seek to establish, to the extent feasible, uni-
form standards of credit-worthiness for use by each 
such agency, taking into account the entities regu-
lated by each such agency and the purposes for 
which such entities would rely on such standards of 
credit-worthiness. 
(3) REPORT.—Upon conclusion of the review 
required under paragraph (1), each Federal agency 
listed in paragraph (4) shall transmit a report to 
Congress containing a description of any modifica-
1262 
tion of any regulation such agency made pursuant to 
paragraph (2). 
(4) APPLICABLE AGENCIES.—The agencies re-
quired to conduct the review and report required by 
this subsection are— 
(A) the Securities and Exchange Commis-
sion; 
(B) the Federal Deposit Insurance Cor-
poration; 
(C) the Office of Thrift Supervision; 
(D) the Office of the Comptroller of the 
Currency; 
(E) the Board of Governors of the Federal 
Reserve; 
(F) the National Credit Union Administra-
tion; and 
(G) the Federal Housing Finance Agency. 
(b) GAO REVIEW OF OTHER AGENCIES.— 
(1) REVIEW.—The Comptroller General shall 
conduct a comprehensive review of the use of credit 
ratings by Federal agencies other than those listed 
in subsection (a)(3), including an analysis of the 
provisions of law or regulation applicable to each 
such agency that refer to and require the use of 
credit ratings by the agency, and the policies and
1263 
practices of each agency with respect to credit rat-
ings. 
(2) REPORT.—Not later than 18 months after 
the date of the enactment of this subtitle, the Comp-
troller General shall transmit to Congress a report 
on the findings of the study conducted pursuant to 
paragraph (1), including recommendations for any 
legislation or rulemaking necessary or appropriate in 
order for such agencies to reduce their reliance on 
credit ratings. 
SEC. 6011. PUBLICATION OF RATING HISTORIES ON THE 
EDGAR SYSTEM. 
Not later than 180 days after the date of the enact-
ment of this subtitle, the Securities and Exchange Com-
mission shall revise its rules in section 240.17g–2(a) and 
(d) of title 17, Code of Federal Regulations, to require 
that the random sample of ratings histories of credit rat-
ings required under such rules to be disclosed on the 
website of a nationally recognized statistical rating organi-
zation also be provided to the Commission in a format con-
sistent with publication by the Commission on the 
EDGAR system.
1264 
SEC. 6012. EFFECT OF RULE 436(G). 
Rule 436(g), promulgated by the Securities and Ex-
change Commission under the Securities Act of 1933, 
shall have no force or effect. 
SEC. 6013. STUDIES. 
(a) GAO STUDY.— 
(1) IN
GENERAL.—The Comptroller General 
shall conduct a study of— 
(A) the implementation of this subtitle and 
the amendments made by this subtitle by the 
Securities and Exchange Commission; 
(B) the appropriateness of relying on rat-
ings for use in Federal, State, and local securi-
ties and banking regulations, including for de-
termining capital requirements; 
(C) the effect of liability in private actions 
arising under the Securities Exchange Act of 
1934; 
(D) alternative means for compensating 
credit rating agencies that would create incen-
tives for accurate credit ratings and what, if 
any, statutory changes would be required to 
permit or facilitate the use of such alternative 
means of compensation; and 
(E) alternative methodologies to assess 
credit risk, including market-based measures.
1265 
(2) REPORT.—Not later than 30 months after 
the date of enactment of this subtitle, the Comp-
troller General shall submit to Congress and the Se-
curities Exchange Commission, a report containing 
the findings under the study required by subsection 
(a). 
(3) ACCESS.— 
(A) IN GENERAL.—For purposes of con-
ducting the study described in paragraph (1), 
the Comptroller General shall have access, upon 
request and with the consent of the Securities 
and Exchange Commission, to any information, 
data, schedules, books, accounts, financial 
records, reports, files, electronic communica-
tions, or other papers, things, or property be-
longing to or in use by each nationally recog-
nized statistical rating organization, and to the 
officers, directors, employees, independent pub-
lic accountants, financial advisors, staff and 
agents and representatives of the organization 
(as related to the agent’s or representative’s ac-
tivities on behalf of the organization) at such 
reasonable times as the Comptroller General 
may request. The Comptroller General may 
make and retain copies of books, records, ac-
1266 
counts, and other records as the Comptroller 
General deems appropriate. 
(B) CONFIDENTIALITY.—The Comptroller 
General may not disclose reasonably designated 
proprietary, trade secret or business confiden-
tial information obtained from the organization 
except that such information shall be disclosed 
by the Comptroller General— 
(i) to other Federal Government de-
partments, agencies, and officials for offi-
cial use upon request; 
(ii) to committees of Congress upon 
request; and 
(iii) to a court in any judicial pro-
ceeding under court order. 
Nothing in this provision shall be construed to 
limit the requirements imposed by section 1905 
of title 18, United States Code. 
(b) SEC STUDY
ON ASSIGNING CREDIT RATING 
AGENCIES ON A ROTATING BASIS.—The Securities and 
Exchange Commission shall undertake a study on creating 
a system whereby nationally recognized statistical rating 
organizations are assigned on a rotating basis to issuers 
and obligors seeking a credit rating. Not later than 1 year 
after the date of enactment of this subtitle, the Securities
1267 
and Exchange Commission shall transmit to Congress a 
report containing the findings of the study. 
(c) SEC STUDY
ON EFFECT
OF NEW REQUIRE-
MENTS ON NRSRO REGISTRATION.—The Securities and 
Exchange Commission shall conduct a study on the effect 
of the amendments made by section 2 on credit rating 
agencies seeking to register as nationally recognized sta-
tistical rating organizations, including whether the new re-
quirements in such amendments deter credit rating agen-
cies from registering as nationally recognized statistical 
rating organizations. Not later than 1 year after the date 
of enactment of this subtitle, the Commission shall trans-
mit to the Committee on Financial Services of the House 
of Representatives and the Committee on Banking, Hous-
ing, and Urban Affairs of the Senate a report on the find-
ings of such study. 
(d) STUDY
OF CREDIT RATINGS
OF DIFFERENT 
CLASSES OF BONDS.— 
(1) STUDY.—The Securities and Exchange 
Commission shall conduct a study of the treatment 
of different classes of bonds (municipal versus cor-
porate) by the nationally recognized statistical rating 
organizations. Such study shall examine— 
(A) whether there are fundamental dif-
ferences in the treatment of different classes of
1268 
bonds by such rating organizations that cause 
some classes of bonds to suffer from undue dis-
crimination; 
(B) if there are such differences, what are 
the causes of such differences and how can they 
be alleviated; 
(C) whether there are factors other than 
risk of loss that are appropriate for the credit 
ratings agencies to consider when rating bonds, 
and do those factors vary across different sec-
tors; 
(D) the types of financing arrangement 
used by municipal issuers; 
(E) the differing legal and regulatory re-
gimes governing disclosures for corporate bonds 
and municipal bonds; 
(F) the extent to which retail investors 
could be disadvantaged by a single ratings 
scale; and 
(G) practices, policies, and methodologies 
by the nationally recognized statistical rating 
organizations with respect to rating municipal 
bonds. 
(2) REPORT.—Within 6 months after the date 
of enactment of this subtitle, the Securities and Ex-
1269 
change Commission shall submit a report on the re-
sults of the study required by paragraph (1) to the 
Committee on Financial Services of the House of 
Representatives and the Committee on Banking, 
Housing, and Urban Development of the Senate. 
Such report shall include as assessment of each of 
the issues and subjects described in subparagraphs 
(A) through (G) of paragraph (1). 
(e) SEC STUDY ON MEANINGFUL MULTI-DIGIT RAT-
ING SYMBOLS.— 
(1) STUDY.—The Securities and Exchange 
Commission shall conduct a study on the feasibility 
and desirability of implementing a standardized rat-
ing system whereby ratings symbols contain multiple 
characters, each representing a range of default 
probabilities and loss expectations under standard-
ized and increasingly severe levels of market stress. 
The study shall optimize the definitions of the sym-
bols to maximize their overall usefulness for users of 
credit ratings. 
(2) INITIAL EXAMPLE FOR GUIDANCE.—An ex-
ample to provide initial guidance for the study is a 
ratings symbol consisting of three digits, each of 
which corresponds to default probabilities under dif-
ferent levels of market stress as follows:
1270 
(A) The first digit represents the default 
probability under ‘‘normal’’ market stress, char-
acterized by normal economic fluctuations in 
addition to a 5 percent decline in asset value 
and 2 percent increase in unemployment. 
(B) The second digit represents the default 
probability under more severe market stress, 
characterized a 20 percent decline in asset 
value and 5 percent increase in unemployment. 
(C) The third digit represents the default 
probability under extreme market stress, char-
acterized by a 50 percent decline in asset value 
and 10 percent increase in unemployment. 
(3) REPORT.—Not later than 1 year after the 
date of the enactment of this subtitle, the Commis-
sion shall transmit to Congress a report of the study 
conducted pursuant to paragraph (1), including rec-
ommendations on whether the system similar to that 
described in paragraph (2) should be implemented 
and, if so, any necessary legislation required to im-
plement such a system. 
(f) SEC STUDY ON RATINGS STANDARDIZATION.— 
(1) IN
GENERAL.—The Securities and Ex-
change Commission shall undertake a study on the 
feasability and desirability of—
1271 
(A) standardizing credit ratings termi-
nology, so that all credit rating agencies issue 
credit ratings using identical terms; 
(B) standardizing the market stress condi-
tions under which ratings are evaluated; 
(C) requiring a quantitative correspond-
ence between credit ratings and a range of de-
fault probabilities and loss expectations under 
standardized conditions of economic stress; and 
(D) standardizing credit rating termi-
nology across asset classes, so that named rat-
ings shall correspond to a standard range of de-
fault probabilities and expected losses inde-
pendent of asset class and issuing entity. 
(2) REPORT.—Not later than 1 year after the 
date of enactment of this subtitle, the Securities and 
Exchange Commission shall transmit to Congress a 
report containing the findings of the study and the 
recommendations of the Commission. 
Subtitle C—Investor Protection Act 
SEC. 7001. SHORT TITLE. 
This subtitle may be cited as the ‘‘Investor Protection 
Act of 2009’’.
1272 
PART 1—DISCLOSURE 
SEC. 
7101. 
INVESTOR 
ADVISORY 
COMMITTEE 
ESTAB-
LISHED. 
The Securities Exchange Act of 1934 (15 U.S.C. 78a 
et seq.) is amended by adding after section 4C the fol-
lowing new section: 
‘‘SEC. 4D. INVESTOR ADVISORY COMMITTEE. 
‘‘(a) ESTABLISHMENT AND PURPOSE.—There is es-
tablished an Investor Advisory Committee (in this section 
referred to as the ‘Committee’) to advise and consult with 
the Commission on— 
‘‘(1) regulatory priorities and issues regarding 
new products, trading strategies, fee structures and 
the effectiveness of disclosures; 
‘‘(2) initiatives to protect investor interest; and 
‘‘(3) initiatives to promote investor confidence 
in the integrity of the marketplace. 
‘‘(b) MEMBERSHIP.— 
‘‘(1) APPOINTMENT.—The Chairman of the 
Commission shall appoint the members of the Com-
mittee, which members shall— 
‘‘(A) represent the interests of individual 
investors; 
‘‘(B) represent the interests of institutional 
investors; and
1273 
‘‘(C) use a wide range of investment ap-
proaches. 
‘‘(2) MEMBERS
NOT
COMMISSION
EMPLOY-
EES.—Members shall not be considered employees or 
agents of the Commission solely because of member-
ship on the Committee. 
‘‘(c) MEETINGS.—The Committee shall meet from 
time to time at the call of the Commission, but, at a min-
imum, shall meet at least twice each year. 
‘‘(d) COMPENSATION
AND TRAVEL EXPENSES.— 
Members of the Committee who are not full-time employ-
ees of the United States shall— 
‘‘(1) be entitled to receive compensation at a 
rate fixed by the Commission while attending meet-
ings of the Committee, including travel time; and 
‘‘(2) be allowed travel expenses, including trans-
portation and subsistence, while away from their 
homes or regular places of business. 
‘‘(e) COMMITTEE FINDINGS.—Nothing in this section 
requires the Commission to accept, agree, or act upon the 
findings or recommendations of the Committee. 
‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There 
is authorized to be appropriated to the Commission such 
sums as are necessary for the activities of the Com-
mittee.’’.
1274 
SEC. 7102. CLARIFICATION OF THE COMMISSION’S AUTHOR-
ITY TO ENGAGE IN CONSUMER TESTING. 
(a) AMENDMENT TO SECURITIES ACT OF 1933.— 
Section 19 of the Securities Act of 1933 (15 U.S.C. 77s) 
is amended by adding at the end the following new sub-
section: 
‘‘(e) For the purposes of evaluating its rules and pro-
grams and for considering, proposing, adopting, or engag-
ing in rules or programs, the Commission is authorized 
to gather information, communicate with investors or 
other members of the public, and engage in such tem-
porary or experimental programs as the Commission in its 
discretion determines is in the public interest or for the 
protection of investors. The Commission may delegate to 
its staff some or all of the authority conferred by this sub-
section.’’. 
(b) AMENDMENT TO SECURITIES EXCHANGE ACT OF 
1934.—Section 23 of the Securities Exchange Act of 1934 
(15 U.S.C. 78w) is amended by redesignating subsections 
(b), (c), and (d) as subsections (c), (d), and (e), respec-
tively, and inserting after subsection (a) the following: 
‘‘(b) For the purposes of evaluating its rules and pro-
grams and for considering proposing, adopting, or engag-
ing in rules or programs, the Commission is authorized 
to gather information, communicate with investors or 
other members of the public, and engage in such tem-
1275 
porary or experimental programs as the Commission in its 
discretion determines is in the public interest or for the 
protection of investors. The Commission may delegate to 
its staff some or all of the authority conferred by this sub-
section.’’. 
(c) AMENDMENT TO INVESTMENT COMPANY ACT OF 
1940.—Section 38 of the Investment Company Act of 
1940 (15 U.S.C. 80a–38) is amended by adding at the 
end the following new subsection: 
‘‘(d) GATHERING INFORMATION.—For the purposes 
of evaluating its rules and programs and for considering 
proposing, adopting, or engaging in rules or programs, the 
Commission is authorized to gather information, commu-
nicate with investors or other members of the public, and 
engage in such temporary or experimental programs as 
the Commission in its discretion determines is in the pub-
lic interest or for the protection of investors. The Commis-
sion may delegate to its staff some or all of the authority 
conferred by this subsection.’’. 
(d) AMENDMENT TO THE INVESTMENT ADVISERS 
ACT OF 1940.—Section 211 of the Investment Advisers 
Act of 1940 (15 U.S.C. 80b–11) (as amended by section 
5008(2)) is further amended by adding at the end the fol-
lowing new subsection:
1276 
‘‘(f) For the purposes of evaluating its rules and pro-
grams and for considering proposing, adopting, or engag-
ing in rules or programs, the Commission is authorized 
to gather information, communicate with investors or 
other members of the public, and engage in such tem-
porary or experimental programs as the Commission in its 
discretion determines is in the public interest or for the 
protection of investors. The Commission may delegate to 
its staff some or all of the authority conferred by this sub-
section.’’. 
SEC. 7103. ESTABLISHMENT OF A FIDUCIARY DUTY FOR 
BROKERS, DEALERS, AND INVESTMENT AD-
VISERS, AND HARMONIZATION OF REGULA-
TION. 
(a) IN GENERAL.— 
(1) SECURITIES EXCHANGE ACT OF 1934.—Sec-
tion 15 of the Securities Exchange Act of 1934 (15 
U.S.C. 78o) (as amended by section 1951(c)) is fur-
ther amended by adding at the end the following 
new subsections: 
‘‘(m) STANDARD OF CONDUCT.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of this Act or the Investment Advisers Act 
of 1940, the Commission shall promulgate rules to 
provide that, with respect to a broker or dealer,
1277 
when providing personalized investment advice about 
securities to a retail customer (and such other cus-
tomers as the Commission may by rule provide), the 
standard of conduct for such broker or dealer with 
respect to such customer shall be the same as the 
standard of conduct applicable to an investment ad-
viser under section 211 of the Investment Advisers 
Act of 1940. The receipt of compensation based on 
commission or other standard compensation for the 
sale of securities shall not, in and of itself, be con-
sidered a violation of such standard applied to a 
broker or dealer. Nothing in this section shall re-
quire a broker or dealer or registered representative 
to have a continuing duty of care or loyalty to the 
customer after providing personalized investment ad-
vice about securities. 
‘‘(2) DISCLOSURE OF RANGE OF PRODUCTS OF-
FERED.—Where a broker or dealer sells only propri-
etary or other limited range of products, as deter-
mined by the Commission, the Commission shall by 
rule require that such broker or dealer provide no-
tice to each retail customer and obtain the consent 
or acknowledgment of the customer. The sale of only 
proprietary or other limited range of products by a 
broker or dealer shall not, in and of itself, be consid-
1278 
ered a violation of the standard set forth in para-
graph (1). 
‘‘(3) RETAIL CUSTOMER DEFINED.—For pur-
poses of this subsection, the term ‘retail customer’ 
means a natural person, or the legal representative 
of such natural person, who— 
‘‘(A) receives personalized investment ad-
vice about securities from a broker or dealer; 
and 
‘‘(B) uses such advice primarily for per-
sonal, family, or household purposes. 
‘‘(n) OTHER MATTERS.—The Commission shall— 
‘‘(1) facilitate the provision of simple and clear 
disclosures to investors regarding the terms of their 
relationships with brokers, dealers, and investment 
advisers, including any material conflicts of interest; 
and 
‘‘(2) examine and, where appropriate, promul-
gate rules prohibiting or restricting certain sales 
practices, conflicts of interest, and compensation 
schemes for brokers, dealers, and investment advis-
ers that the Commission deems contrary to the pub-
lic interest and the protection of investors.’’. 
(2) INVESTMENT ADVISERS ACT OF 1940.—Sec-
tion 211 of the Investment Advisers Act of 1940, as
1279 
amended by section 7102(d), is further amended by 
adding at the end the following new subsections: 
‘‘(g) STANDARD OF CONDUCT.— 
‘‘(1) IN GENERAL.—The Commission shall pro-
mulgate rules to provide that the standard of con-
duct for all brokers, dealers, and investment advis-
ers, when providing personalized investment advice 
about securities to retail customers (and such other 
customers as the Commission may by rule provide), 
shall be to act in the best interest of the customer 
without regard to the financial or other interest of 
the broker, dealer, or investment adviser providing 
the advice. In accordance with such rules, any mate-
rial conflicts of interest shall be disclosed and may 
be consented to by the customer. Such rules shall 
provide that such standard of conduct shall be no 
less stringent than the standard applicable to invest-
ment advisers under section 206(1) and (2) of this 
Act when providing personalized investment advice 
about securities, except the Commission shall not as-
cribe a meaning to the term ‘customer’ that would 
include an investor in a private fund managed by an 
investment adviser, where such private fund has en-
tered into an advisory contract with such adviser. 
The receipt of compensation based on commission or
1280 
fees shall not, in and of itself, be considered a viola-
tion of such standard applied to a broker, dealer, or 
investment adviser. 
‘‘(2) RETAIL CUSTOMER DEFINED.—For pur-
poses of this subsection, the term ‘retail customer’ 
means a natural person, or the legal representative 
of such natural person, who— 
‘‘(A) receives personalized investment ad-
vice about securities from a broker, dealer, or 
investment adviser; and 
‘‘(B) uses such advice primarily for per-
sonal, family, or household purposes. 
‘‘(h) OTHER MATTERS.—The Commission shall— 
‘‘(1) facilitate the provision of simple and clear 
disclosures to investors regarding the terms of their 
relationships with brokers, dealers, and investment 
advisers, including any material conflicts of interest; 
and 
‘‘(2) examine and, where appropriate, promul-
gate rules prohibiting or restricting certain sales 
practices, conflicts of interest, and compensation 
schemes for brokers, dealers, and investment advis-
ers that the Commission deems contrary to the pub-
lic interest and the protection of investors.’’. 
(b) HARMONIZATION OF ENFORCEMENT.—
1281 
(1) SECURITIES EXCHANGE ACT OF 1934.—Sec-
tion 15 of the Securities Exchange Act of 1934, as 
amended by subsection (a)(1), is further amended by 
adding at the end the following new subsection: 
‘‘(o) HARMONIZATION OF ENFORCEMENT.—The en-
forcement authority of the Commission with respect to vio-
lations of the standard of conduct applicable to a broker 
or dealer providing personalized investment advice about 
securities to a retail customer shall include— 
‘‘(1) the enforcement authority of the Commis-
sion with respect to such violations provided under 
this Act; and 
‘‘(2) the enforcement authority of the Commis-
sion with respect to violations of the standard of 
conduct applicable to an investment advisor under 
the Investment Advisers Act of 1940, including the 
authority to impose sanctions for such violations, 
and 
the Commission shall seek to prosecute and sanction viola-
tors of the standard of conduct applicable to a broker or 
dealer providing personalized investment advice about se-
curities to a retail customer under this Act to same extent 
as the Commission prosecutes and sanctions violators of 
the standard of conduct applicable to an investment advi-
sor under the Investment Advisers Act of 1940.’’.
1282 
(2) INVESTMENT ADVISERS ACT OF 1940.—Sec-
tion 211 of the Investment Advisers Act of 1940, as 
amended by subsection (a)(2), is further amended by 
adding at the end the following new subsection: 
‘‘(i) HARMONIZATION OF ENFORCEMENT.—The en-
forcement authority of the Commission with respect to vio-
lations of the standard of conduct applicable to an invest-
ment adviser shall include— 
‘‘(1) the enforcement authority of the Commis-
sion with respect to such violations provided under 
this Act; and 
‘‘(2) the enforcement authority of the Commis-
sion with respect to violations of the standard of 
conduct applicable to a broker or dealer providing 
personalized investment advice about securities to a 
retail customer under the Securities Exchange Act 
of 1934, including the authority to impose sanctions 
for such violations, and 
the Commission shall seek to prosecute and sanction viola-
tors of the standard of conduct applicable to an invest-
ment advisor under this Act to same extent as the Com-
mission prosecutes and sanctions violators of the standard 
of conduct applicable to a broker or dealer providing per-
sonalized investment advice about securities to a retail 
customer under the Securities Exchange Act of 1934.’’.
1283 
SEC. 7104. COMMISSION STUDY AND RULEMAKING ON DIS-
CLOSURE TO RETAIL CUSTOMERS BEFORE 
PURCHASE OF PRODUCTS OR SERVICES. 
(a) STUDY REQUIRED.—Prior to proposing any rules 
or regulations pursuant to subsection (b)(1) regarding the 
provision of documents or information to retail customers 
prior to the purchase of investment products or services, 
and within 180 days after the date of the enactment of 
this subtitle, the Securities and Exchange Commission 
shall publish a study that examines— 
(1) the nature of a ‘‘retail customer’’, taking 
into consideration the definition in section 15(k) of 
the Securities Exchange Act of 1934 (15 U.S.C. 
78o), as amended by section 7103 of this subtitle; 
(2) the range of products and services sold or 
provided to retail customers, and the sellers or pro-
viders of such products and services, that are within 
the Commission’s jurisdiction; 
(3) how such products and services are sold or 
provided to retail customers, the fees charged for 
such products and services, and the conflicts of in-
terest that may arise during the sales process or 
provision of services; 
(4) information that retail customers should re-
ceive prior to purchasing each product or service,
1284 
and the appropriate person or entity to provide such 
information; and 
(5) ways to ensure that, where possible, reason-
ably similar products and services are subject to 
similar regulatory treatment, including with respect 
to information that must be provided to retail cus-
tomers prior to the purchase of such products or 
services and how such information is provided. 
(b) RULEMAKING.— 
(1) Notwithstanding any other provision of the 
Securities Act of 1933 (15 U.S.C. 77a et seq.) or 
the Investment Company Act of 1940 (15 U.S.C. 
80a–1 et seq.), following completion of the study re-
quired by subsection (a), the Commission is author-
ized to promulgate rules to require that the appro-
priate persons or entities provide designated docu-
ments or information to retail customers prior to the 
purchase of identified investment products or serv-
ices. Any such rules shall— 
(A) take into account the findings of the 
study conducted pursuant to subsection (a); 
(B) take into consideration, to the extent 
possible, the need for such documents and in-
formation to be consistent and comparable
1285 
across investment products or services sold or 
provided to retail customers; and 
(C) reduce, to the extent possible, disrup-
tions to the purchase process for investment 
products and services sold or provided to retail 
customers, by means such as permitting re-
quired disclosures to be made via the Internet. 
(2) Notwithstanding paragraph (1), the Com-
mission is authorized to promulgate rules in connec-
tion with— 
(A) the implementation of section 7103; 
and 
(B) disclosure to retail customers other 
than rules that require the provision of docu-
ments or information to retail customers prior 
to the purchase of investment products or serv-
ices. 
SEC. 7105. BENEFICIAL OWNERSHIP AND SHORT-SWING 
PROFIT REPORTING. 
(a) BENEFICIAL OWNERSHIP REPORTING.—Section 
13 of the Securities Exchange Act of 1934 (15 U.S.C. 
78m) is amended— 
(1) in subsection (d)(1)— 
(A) by inserting after ‘‘within ten days 
after such acquisition’’ the following: ‘‘or within
1286 
such shorter time as the Commission may es-
tablish by rule’’; and 
(B) by striking ‘‘send to the issuer of the 
security at its principal executive office, by reg-
istered or certified mail, send to each exchange 
where the security is traded, and’’; 
(2) in subsection (d)(2)— 
(A) by striking ‘‘in the statements to the 
issuer and the exchange, and’’; and 
(B) by striking ‘‘shall be transmitted to 
the issuer and the exchange and’’; 
(3) in subsection (g)(1), by striking ‘‘shall send 
to the issuer of the security and’’; and 
(4) in subsection (g)(2)— 
(A) by striking ‘‘sent to the issuer and’’; 
and 
(B) by striking ‘‘shall be transmitted to 
the issuer and’’. 
(b) SHORT-SWING
PROFIT
REPORTING.—Section 
16(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78p(a)) is amended— 
(1) in paragraph (1), by striking ‘‘(and, if such 
security is registered on a national securities ex-
change, also with the exchange)’’; and
1287 
(2) in paragraph (2)(B), by inserting after ‘‘of-
ficer’’ the following: ‘‘, or within such shorter time 
as the Commission may establish by rule’’. 
SEC. 7106. REVISION TO RECORDKEEPING RULES. 
(a) INVESTMENT COMPANY ACT OF 1940 AMEND-
MENTS.—Section 31 of the Investment Company Act of 
1940 (15 U.S.C. 80a–30) is amended— 
(1) in subsection (a)(1), by adding at the end 
the following: ‘‘Each person with custody or use of 
a registered investment company’s securities, depos-
its, or credits shall maintain and preserve all records 
that relate to the person’s custody or use of the reg-
istered investment company’s securities, deposits, or 
credits for such period or periods as the Commis-
sion, by rules and regulations, may prescribe as nec-
essary or appropriate in the public interest or for 
the protection of investors.’’; and 
(2) in subsection (b), by adding at the end the 
following new paragraph: 
‘‘(4) RECORDS OF PERSONS WITH CUSTODY OR 
USE.— 
‘‘(A) IN GENERAL.—Notwithstanding para-
graph (1), records of persons with custody or 
use of a registered investment company’s secu-
rities, deposits, or credits, that relate to such
1288 
custody or use, are subject at any time, or from 
time to time, to such reasonable periodic, spe-
cial, or other examinations and other informa-
tion and document requests by representatives 
of the Commission as the Commission deems 
necessary or appropriate in the public interest 
or for the protection of investors. 
‘‘(B) CERTAIN
PERSONS
SUBJECT
TO 
OTHER REGULATION.—Persons subject to regu-
lation and examination by a Federal financial 
institution regulatory agency (as such term is 
defined under section 212(c)(2) of title 18, 
United States Code) may satisfy any examina-
tion request, information request, or document 
request described under subparagraph (A), by 
providing the Commission with a detailed list-
ing, in writing, of the registered investment 
company’s securities, deposits, or credits within 
such person’s custody or use.’’. 
(b) INVESTMENT ADVISERS ACT OF 1940 AMEND-
MENT.—Section 204 of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–4) is amended by adding at the end 
the following new subsection: 
‘‘(d) RECORDS
OF PERSONS WITH CUSTODY
OR 
USE.—
1289 
‘‘(1) IN
GENERAL.—Records of persons with 
custody or use of a client’s securities, deposits, or 
credits, that relate to such custody or use, are sub-
ject at any time, or from time to time, to such rea-
sonable periodic, special, or other examinations and 
other information and document requests by rep-
resentatives of the Commission as the Commission 
deems necessary or appropriate in the public interest 
or for the protection of investors. 
‘‘(2) CERTAIN
PERSONS
SUBJECT
TO
OTHER 
REGULATION.—Persons subject to regulation and ex-
amination by a Federal financial institution regu-
latory agency (as such term is defined under section 
212(c)(2) of title 18, United States Code) may sat-
isfy any examination request, information request, 
or document request described under paragraph (1), 
by providing the Commission with a detailed listing, 
in writing, of the client’s securities, deposits, or 
credits within such person’s custody or use.’’. 
SEC. 7107. STUDY ON ENHANCING INVESTMENT ADVISER 
EXAMINATIONS. 
(a) STUDY REQUIRED.— 
(1) IN GENERAL.—The Commission shall review 
and analyze the need for enhanced examination and 
enforcement resources for investment advisers.
1290 
(2) AREAS OF CONSIDERATION.—The study re-
quired by this subsection shall examine— 
(A) the number and frequency of examina-
tions of investment advisers by the Commission 
over the 5 years preceding the date of the en-
actment of this subtitle; 
(B) the extent to which having Congress 
authorize the Commission to designate one or 
more self-regulatory organizations to augment 
the Commission’s efforts in overseeing invest-
ment advisers would improve the frequency of 
examinations of investment advisers; and 
(C) current and potential approaches to ex-
amining the investment advisory activities of 
dually registered broker-dealers and investment 
advisers or affiliated broker-dealers and invest-
ment advisers. 
(b) REPORT REQUIRED.—The Commission shall re-
port its findings to the Committee on Financial Services 
of the House of Representatives and the Committee on 
Banking, Housing, and Urban Affairs of the Senate, not 
later than 180 days after the date of enactment of this 
subtitle, and shall use such findings to revise its rules and 
regulations, as necessary. The report shall include a dis-
cussion of regulatory or legislative steps that are rec-
1291 
ommended or that may be necessary to address concerns 
identified in the study. 
SEC. 7108. GAO STUDY OF FINANCIAL PLANNING. 
(a) STUDY REQUIRED.—The Comptroller General of 
the United States shall conduct a study on the regulation 
and oversight of financial planning.
The study shall con-
sider— 
(1) the unique role of financial planners in pro-
viding comprehensive advice in investment planning, 
income tax planning, education planning, retirement 
planning, estate planning, risk management, and 
other areas with respect to the management of fi-
nancial resources; and 
(2) any gaps in the regulation of financial plan-
ners given existing State and Federal regulation of 
financial planning activities and the need to provide 
related consumer protections for such financial plan-
ning activities. 
(b) REPORT.—Not later than the end of the 180-day 
period beginning on the date of the enactment of this sub-
title, the Comptroller General of the United States shall 
submit to the Congress a report containing the findings 
and determinations made by the Comptroller General in 
carrying out the study required under subsection (a), in-
cluding recommendations for the appropriate regulation
1292 
of, or standards for, financial planners as a profession and 
how such regulations or standards should be established. 
PART 2—ENFORCEMENT AND REMEDIES 
SEC. 7201. AUTHORITY TO RESTRICT MANDATORY PRE-DIS-
PUTE ARBITRATION. 
(a) AMENDMENT TO SECURITIES EXCHANGE ACT OF 
1934.—Section 15 of the Securities Exchange Act of 1934 
(15 U.S.C. 78o), as amended by section 7103, is further 
amended by adding at the end the following new sub-
section: 
‘‘(p) AUTHORITY TO RESTRICT MANDATORY PRE- 
DISPUTE ARBITRATION.—The Commission, by rule, may 
prohibit, or impose conditions or limitations on the use 
of, agreements that require customers or clients of any 
broker, dealer, or municipal securities dealer to arbitrate 
any future dispute between them arising under the Fed-
eral securities laws, the rules and regulations thereunder, 
or the rules of a self-regulatory organization if it finds 
that such prohibition, imposition of conditions, or limita-
tions are in the public interest and for the protection of 
investors.’’. 
(b) AMENDMENT TO INVESTMENT ADVISERS ACT OF 
1940.—Section 205 of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–5) is amended by adding at the end 
the following new subsection:
1293 
‘‘(f) AUTHORITY TO RESTRICT MANDATORY PRE- 
DISPUTE ARBITRATION.—The Commission, by rule, may 
prohibit, or impose conditions or limitations on the use 
of, agreements that require customers or clients of any 
investment adviser to arbitrate any future dispute between 
them arising under the Federal securities laws, the rules 
and regulations thereunder, or the rules of a self-regu-
latory organization if it finds that such prohibition, impo-
sition of conditions, or limitations are in the public inter-
est and for the protection of investors.’’. 
SEC. 7202. COMPTROLLER GENERAL STUDY TO REVIEW SE-
CURITIES ARBITRATION SYSTEM. 
(a) STUDY.—The Comptroller General of the United 
States shall conduct a study to review— 
(1) the costs to parties of an arbitration pro-
ceeding using the arbitration system operated by the 
Financial Industry Regulatory Authority and over-
seen by the Securities and Exchange Commission as 
compared to litigation; 
(2) the percentage of recovery of the total 
amount of a claim in an arbitration proceeding using 
the arbitration system operated by the Financial In-
dustry Regulatory Authority and overseen by the Se-
curities and Exchange Commission; and
1294 
(3) other additional issues as may be raised 
during the course of the study conducted under this 
subsection. 
(b) REPORT.—Not later than 1 year after the date 
of enactment of this subtitle, the Comptroller General of 
the United States shall submit to the Committee on Fi-
nancial Services of the House of Representatives and the 
Committee on Banking, Housing, and Urban Affairs of 
the Senate a report on the results of the study required 
by subsection (a), including in such report recommenda-
tions for improvements to the arbitration system ref-
erenced in such subsection. 
SEC. 7203. WHISTLEBLOWER PROTECTION. 
(a) IN GENERAL.—The Securities Exchange Act of 
1934 (15 U.S.C. 78a et seq.) is amended by adding after 
section 21E the following new section: 
‘‘SEC. 21F. SECURITIES WHISTLEBLOWER INCENTIVES AND 
PROTECTION. 
‘‘(a) IN GENERAL.—In any judicial or administrative 
action brought by the Commission under the securities 
laws that results in monetary sanctions exceeding 
$1,000,000, the Commission, under regulations prescribed 
by the Commission and subject to subsection (b), may pay 
an award or awards not exceeding an amount equal to 30 
percent, in total, of the monetary sanctions imposed in the
1295 
action or related actions to one or more whistleblowers 
who voluntarily provided original information to the Com-
mission that led to the successful enforcement of the ac-
tion. Any amount payable under the preceding sentence 
shall be paid from the fund described in subsection (f). 
‘‘(b) DETERMINATION OF AMOUNT OF AWARD; DE-
NIAL OF AWARD.— 
‘‘(1) 
DETERMINATION
OF
AMOUNT
OF 
AWARD.—The determination of the amount of an 
award, within the limit specified in subsection (a), 
shall be in the sole discretion of the Commission. 
The Commission may take into account the signifi-
cance of the whistleblower’s information to the suc-
cess of the judicial or administrative action described 
in subsection (a), the degree of assistance provided 
by the whistleblower and any legal representative of 
the whistleblower in such action, the Commission’s 
programmatic interest in deterring violations of the 
securities laws by making awards to whistleblowers 
who provide information that leads to the successful 
enforcement of such laws, and such additional fac-
tors as the Commission may establish by rules or 
regulations. 
‘‘(2) DENIAL
OF
AWARD.—No award under 
subsection (a) shall be made—
1296 
‘‘(A) to any whistleblower who is, or was at 
the time he or she acquired the original infor-
mation submitted to the Commission, a mem-
ber, officer, or employee of any appropriate reg-
ulatory agency, the Department of Justice, the 
Public Company Accounting Oversight Board, 
law enforcement agency, or a self-regulatory or-
ganization; 
‘‘(B) to any whistleblower who is convicted 
of a criminal violation related to the judicial or 
administrative action for which the whistle-
blower otherwise could receive an award under 
this section; 
‘‘(C) to any whistleblower who gains the 
information through the performance of an 
audit of financial statements required under the 
securities laws; or 
‘‘(D) to any whistleblower who fails to sub-
mit information to the Commission in such 
form as the Commission may, by rule, require. 
‘‘(c) REPRESENTATION.— 
‘‘(1) 
PERMITTED
REPRESENTATION.—Any 
whistleblower who makes a claim for an award under 
subsection (a) may be represented by counsel.
1297 
‘‘(2) REQUIRED REPRESENTATION.—Any whis-
tleblower who makes a claim for an award under 
subsection (a) must be represented by counsel if the 
whistleblower submits the information upon which 
the claim is based anonymously. Prior to the pay-
ment of an award, the whistleblower must disclose 
his or her identity and provide such other informa-
tion as the Commission may require. 
‘‘(d) NO CONTRACT NECESSARY.—No contract with 
the Commission is necessary for any whistleblower to re-
ceive an award under subsection (a), unless the Commis-
sion, by rule or regulation, so requires. 
‘‘(e) APPEALS.—Any determinations under this sec-
tion, including whether, to whom, or in what amounts to 
make awards, shall be in the sole discretion of the Com-
mission, and any such determinations shall be final and 
not subject to judicial review. 
‘‘(f) INVESTOR PROTECTION FUND.— 
‘‘(1) FUND
ESTABLISHED.—There is estab-
lished in the Treasury of the United States a fund 
to be known as the ‘Securities and Exchange Com-
mission Investor Protection Fund’ (referred to in 
this section as the ‘Fund’). 
‘‘(2) USE OF FUND.—The Fund shall be avail-
able to the Commission, without further appropria-
1298 
tion or fiscal year limitation, for the following pur-
poses: 
‘‘(A) Paying awards to whistleblowers as 
provided in subsection (a). 
‘‘(B) Funding investor education initiatives 
designed to help investors protect themselves 
against securities fraud or other violations of 
the securities laws, or the rules and regulations 
thereunder. 
‘‘(3) DEPOSITS AND CREDITS.—There shall be 
deposited into or credited to the Fund— 
‘‘(A) any monetary sanction collected by 
the Commission in any judicial or administra-
tive action brought by the Commission under 
the securities laws that is not added to a 
disgorgement fund or other fund pursuant to 
section 308 of the Sarbanes-Oxley Act of 2002 
or otherwise distributed to victims of a violation 
of the securities laws, or the rules and regula-
tions thereunder, underlying such action, unless 
the balance of the Fund at the time the mone-
tary sanction is collected exceeds $100,000,000; 
‘‘(B) any monetary sanction added to a 
disgorgement fund or other fund pursuant to 
section 308 of the Sarbanes-Oxley Act of 2002
1299 
that is not distributed to the victims for whom 
the disgorgement fund or other fund was estab-
lished, unless the balance of the Fund at the 
time the determination is made not to dis-
tribute the monetary sanction to such victims 
exceeds $100,000,000; and 
‘‘(C) all income from investments made 
under paragraph (4). 
‘‘(4) INVESTMENTS.— 
‘‘(A) AMOUNTS
IN
FUND
MAY
BE
IN-
VESTED.—The Commission may request the 
Secretary of the Treasury to invest the portion 
of the Fund that is not, in the Commission’s 
judgment, required to meet the current needs of 
the Fund. 
‘‘(B) 
ELIGIBLE
INVESTMENTS.—Invest-
ments shall be made by the Secretary of the 
Treasury in obligations of the United States or 
obligations that are guaranteed as to principal 
and interest by the United States, with matu-
rities suitable to the needs of the Fund as de-
termined by the Commission. 
‘‘(C) INTEREST
AND
PROCEEDS
CRED-
ITED.—The interest on, and the proceeds from 
the sale or redemption of, any obligations held
1300 
in the Fund shall be credited to, and form a 
part of, the Fund. 
‘‘(5) REPORTS TO CONGRESS.—Not later than 
October 30 of each year, the Commission shall 
transmit to the Committee on Banking, Housing, 
and Urban Affairs of the Senate, and the Committee 
on Financial Services of the House of Representa-
tives a report on— 
‘‘(A) 
the 
Commission’s 
whistleblower 
award program under this section, including a 
description of the number of awards that were 
granted and the types of cases in which awards 
were granted during the preceding fiscal year; 
‘‘(B) investor education initiatives de-
scribed in paragraph (2)(B) that were funded 
by the Fund during the preceding fiscal year; 
‘‘(C) the balance of the Fund at the begin-
ning of the preceding fiscal year; 
‘‘(D) the amounts deposited into or cred-
ited to the Fund during the preceding fiscal 
year; 
‘‘(E) the amount of earnings on invest-
ments of amounts in the Fund during the pre-
ceding fiscal year;
1301 
‘‘(F) the amount paid from the Fund dur-
ing the preceding fiscal year to whistleblowers 
pursuant to subsection (a); 
‘‘(G) the amount paid from the Fund dur-
ing the preceding fiscal year for investor edu-
cation initiatives described in paragraph (1)(B); 
‘‘(H) the balance of the Fund at the end 
of the preceding fiscal year; and 
‘‘(I) a complete set of audited financial 
statements, including a balance sheet, income 
statement, and cash flow analysis. 
‘‘(g) PROTECTION OF WHISTLEBLOWERS.— 
‘‘(1) PROHIBITION AGAINST RETALIATION.— 
‘‘(A) IN GENERAL.—No employer may dis-
charge, demote, suspend, threaten, harass, or in 
any other manner discriminate against an em-
ployee, contractor, or agent in the terms and 
conditions of employment because of any lawful 
act done by the employee, contractor, or agent 
in providing information to the Commission in 
accordance with subsection (a), or in assisting 
in any investigation or judicial or administrative 
action of the Commission based upon or related 
to such information. 
‘‘(B) ENFORCEMENT.—
1302 
‘‘(i) CAUSE
OF
ACTION.—An indi-
vidual who alleges discharge or other dis-
crimination in violation of subparagraph 
(A) may bring an action under this sub-
section in the appropriate district court of 
the United States for the relief provided in 
subparagraph (C). 
‘‘(ii) SUBPOENAS.—A subpoena re-
quiring the attendance of a witness at a 
trial or hearing conducted under this sec-
tion may be served at any place in the 
United States. 
‘‘(iii) STATUTE OF LIMITATIONS.—An 
action under this subsection may not be 
brought more than 6 years after the date 
on which the violation of subparagraph (A) 
occurred, or more than 3 years after the 
date when facts material to the right of ac-
tion are known or reasonably should have 
been known by the employee alleging a vio-
lation of subparagraph (A), but in no event 
after 10 years after the date on which the 
violation occurs. 
‘‘(C) RELIEF.—An employee, contractor, 
or agent prevailing in any action brought under
1303 
subparagraph (B) shall be entitled to all relief 
necessary to make that employee, contractor, or 
agent whole, including reinstatement with the 
same seniority status that the employee, con-
tractor, or agent would have had, but for the 
discrimination, 2 times the amount of back pay, 
with interest, and compensation for any special 
damages sustained as a result of the discrimi-
nation, including litigation costs, expert witness 
fees, and reasonable attorneys’ fees. 
‘‘(2) CONFIDENTIALITY.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the Commission and any of-
ficer or employee of the Commission shall not 
disclose any information, including information 
provided by a whistleblower to the Commission, 
which could reasonably be expected to reveal 
the identity of a whistleblower, except in ac-
cordance with the provisions of section 552a of 
title 5, United States Code, unless and until re-
quired to be disclosed to a defendant or re-
spondent in connection with a public proceeding 
instituted by the Commission or any entity de-
scribed in subparagraph (B). For purposes of 
section 552 of title 5, United States Code, this
1304 
paragraph shall be considered a statute de-
scribed in subsection (b)(3)(B) of such section 
552. 
‘‘(B) 
AVAILABILITY
TO
GOVERNMENT 
AGENCIES.—Without the loss of its status as 
confidential and privileged in the hands of the 
Commission, all information referred to in sub-
paragraph (A) may, in the discretion of the 
Commission, when determined by the Commis-
sion to be necessary to accomplish the purposes 
of this Act and protect investors, be made avail-
able to— 
‘‘(i) the Attorney General of the 
United States, 
‘‘(ii) an appropriate regulatory au-
thority, 
‘‘(iii) a self-regulatory organization, 
‘‘(iv) State attorneys general in con-
nection with any criminal investigation, 
and 
‘‘(v) any appropriate State regulatory 
authority, 
each of which shall not disclose such informa-
tion in accordance with subparagraph (A).
1305 
‘‘(h) PROVISION
OF FALSE INFORMATION.—Any 
whistleblower who knowingly and willfully makes any 
false, fictitious, or fraudulent statement or representation, 
or makes or uses any false writing or document knowing 
the same to contain any false, fictitious, or fraudulent 
statement or entry, shall not be entitled to an award under 
this section. 
‘‘(i) RULEMAKING AUTHORITY.—The Commission 
shall have the authority to issue such rules and regulations 
as may be necessary or appropriate to implement the pro-
visions of this section. 
‘‘(j) DEFINITIONS.—For purposes of this section, the 
following terms have the following meanings: 
‘‘(1) 
ORIGINAL
INFORMATION.—The 
term 
‘original information’ means information that— 
‘‘(A) is based on the direct and inde-
pendent knowledge or analysis of a whistle-
blower; 
‘‘(B) is not known to the Commission from 
any other source, unless the whistleblower is the 
initial source of the information; and 
‘‘(C) is not based on allegations in a judi-
cial or administrative hearing, in a govern-
mental report, hearing, audit, or investigation, 
or from the news media, unless the whistle-
1306 
blower is the initial source of the information 
that resulted in the judicial or administrative 
hearing, governmental report, hearing, audit, or 
investigation, or the news media’s report on the 
allegations. 
‘‘(2) MONETARY SANCTIONS.—The term ‘mone-
tary sanctions’, when used with respect to any judi-
cial or administrative action, means any monies, in-
cluding but not limited to penalties, disgorgement, 
and interest, ordered to be paid, and any monies de-
posited into a disgorgement fund or other fund pur-
suant to section 308(b) of the Sarbanes-Oxley Act of 
2002 (15 U.S.C. 7246(b)), as a result of such action 
or any settlement of such action. 
‘‘(3) RELATED ACTION.—The term ‘related ac-
tion’, when used with respect to any judicial or ad-
ministrative action brought by the Commission 
under the securities laws, means any judicial or ad-
ministrative action brought by an entity described in 
subsection (g)(2)(B) that is based upon the same 
original information provided by a whistleblower 
pursuant to subsection (a) that led to the successful 
enforcement of the Commission action. 
‘‘(4) WHISTLEBLOWER.—The term ‘whistle-
blower’ means an individual, or two or more individ-
1307 
uals acting jointly, who submit information to the 
Commission as provided in this section.’’. 
(b) ADMINISTRATION AND ENFORCEMENT.—The Se-
curities and Exchange Commission shall establish a sepa-
rate office within the Commission to administer and en-
force the provisions of section 21F of the Securities Ex-
change Act of 1934, as added by subsection (a). Such of-
fice shall report annually to Congress on its activities, 
whistleblower complaints, and the response of the Com-
mission to such complaints. 
SEC. 7204. CONFORMING AMENDMENTS FOR WHISTLE-
BLOWER PROTECTION. 
(a) IN GENERAL.—Each of the following provisions 
is amended by inserting ‘‘and section 21F of the Securities 
Exchange Act of 1934’’ after ‘‘the Sarbanes-Oxley Act of 
2002’’: 
(1) Section 20(d)(3)(A) of the Securities Act of 
1933 (15 U.S.C. 77t(d)(3)(A)). 
(2) Section 42(e)(3)(A) of the Investment Com-
pany Act of 1940 (15 U.S.C. 80a–41(e)(3)(A)). 
(3) Section 209(e)(3)(A) of the Investment Ad-
visers Act of 1940 (15 U.S.C. 80b–9(e)(3)(A)). 
(b) SECURITIES EXCHANGE ACT.—The Securities 
Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amend-
ed—
1308 
(1) in section 21(d)(3)(C)(i) (15 U.S.C. 
78u(d)(3)(C)(i)), by inserting ‘‘and section 21F of 
this title’’ after ‘‘the Sarbanes-Oxley Act of 2002’’; 
(2) in section 21A(d)(1) (15 U.S.C. 78u– 
1(d)(1))— 
(A) by striking ‘‘(subject to subsection 
(e))’’; and 
(B) by inserting ‘‘and section 21F of this 
title’’ after ‘‘the Sarbanes-Oxley Act of 2002’’; 
and 
(3) in section 21A, by striking subsection (e) 
and redesignating subsections (f) and (g) as sub-
sections (e) and (f), respectively. 
SEC. 7205. IMPLEMENTATION AND TRANSITION PROVI-
SIONS FOR WHISTLEBLOWER PROTECTIONS. 
(a) IMPLEMENTING RULES.—The Securities and Ex-
change Commission shall issue final regulations imple-
menting the provisions of section 21F of the Securities 
Exchange Act of 1934, as added by this part, no later 
than 270 days after the date of enactment of this subtitle. 
(b) ORIGINAL
INFORMATION.—Information sub-
mitted to the Commission by a whistleblower in accord-
ance with regulations implementing the provisions of sec-
tion 21F of the Securities Exchange Act of 1934, as added 
by this part, shall not lose its status as original informa-
1309 
tion, as defined in subsection (i)(1) of such section, solely 
because the whistleblower submitted such information 
prior to the effective date of such regulations, provided 
such information was submitted after the date of enact-
ment of this subtitle, or related to insider trading viola-
tions for which a bounty could have been paid at the time 
such information was submitted. 
(c) AWARDS.—A whistleblower may receive an award 
pursuant to section 21F of the Securities Exchange Act 
of 1934, as added by this part, regardless of whether any 
violation of a provision of the securities laws, or a rule 
or regulation thereunder, underlying the judicial or admin-
istrative action upon which the award is based occurred 
prior to the date of enactment of this subtitle. 
SEC. 7206. COLLATERAL BARS. 
(a) SECTION 15 OF THE SECURITIES EXCHANGE ACT 
OF 1934.—Section 15(b)(6)(A) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78o(b)(6)(A)) is amended 
by striking ‘‘12 months, or bar such person from being 
associated with a broker or dealer,’’ and inserting ‘‘12 
months, or bar any such person from being associated with 
a broker, dealer, investment adviser, municipal securities 
dealer, transfer agent, municipal financial adviser, or na-
tionally recognized statistical rating organization,’’.
1310 
(b) SECTION 15B OF THE SECURITIES EXCHANGE 
ACT OF 1934.—Section 15B(c)(4) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78o–4(c)(4)) is amended 
by striking ‘‘twelve months or bar any such person from 
being associated with a municipal securities dealer,’’ and 
inserting ‘‘12 months or bar any such person from being 
associated with a broker, dealer, investment adviser, mu-
nicipal securities dealer, transfer agent, municipal finan-
cial adviser, or nationally recognized statistical rating or-
ganization,’’. 
(c) SECTION 17A OF THE SECURITIES EXCHANGE 
ACT OF 1934.—Section 17A(c)(4)(C) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78q–1(c)(4)(C)) is 
amended by striking ‘‘twelve months or bar any such per-
son from being associated with the transfer agent,’’ and 
inserting ‘‘12 months or bar any such person from being 
associated with any transfer agent, broker, dealer, invest-
ment adviser, municipal securities dealer, municipal finan-
cial adviser, or nationally recognized statistical rating or-
ganization,’’. 
(d) SECTION 203 OF THE INVESTMENT ADVISERS 
ACT OF 1940.—Section 203(f) of the Investment Advisers 
Act of 1940 (15 U.S.C. 80b–3(f)) is amended by striking 
‘‘twelve months or bar any such person from being associ-
ated with an investment adviser,’’ and inserting ‘‘12
1311 
months or bar any such person from being associated with 
an investment adviser, broker, dealer, municipal securities 
dealer, transfer agent, municipal financial adviser, or na-
tionally recognized statistical rating organization,’’. 
SEC. 7207. AIDING AND ABETTING AUTHORITY UNDER THE 
SECURITIES ACT AND THE INVESTMENT COM-
PANY ACT. 
(a) UNDER THE SECURITIES ACT OF 1933.—Section 
15 of the Securities Act of 1933 (15 U.S.C. 77o) is 
amended— 
(1) by striking ‘‘Every person who’’ and insert-
ing ‘‘(a) CONTROLLING PERSONS.—Every person 
who’’; and 
(2) by adding at the end the following: 
‘‘(b) PROSECUTION
OF PERSONS WHO AID
AND 
ABET VIOLATIONS.—For purposes of any action brought 
by the Commission under subparagraph (b) or (d) of sec-
tion 20, any person that knowingly or recklessly provides 
substantial assistance to another person in violation of a 
provision of this Act, or of any rule or regulation issued 
under this Act, shall be deemed to be in violation of such 
provision to the same extent as the person to whom such 
assistance is provided.’’. 
(b) UNDER
THE INVESTMENT COMPANY ACT
OF 
1940.—Section 48 of the Investment Company Act of
1312 
1940 (15 U.S.C. 80a–48) is amended by redesignating 
subsection (b) as subsection (c) and inserting after sub-
section (a) the following: 
‘‘(b) For purposes of any action brought by the Com-
mission under subsection (d) or (e) of section 42, any per-
son that knowingly or recklessly provides substantial as-
sistance to another person in violation of a provision of 
this Act, or of any rule or regulation issued under this 
Act, shall be deemed to be in violation of such provision 
to the same extent as the person to whom such assistance 
is provided.’’. 
SEC. 7208. AUTHORITY TO IMPOSE PENALTIES FOR AIDING 
AND ABETTING VIOLATIONS OF THE INVEST-
MENT ADVISERS ACT. 
Section 209 of the Investment Advisers Act of 1940 
(15 U.S.C. 80b–9) is amended by inserting at the end the 
following new subsection: 
‘‘(f) AIDING AND ABETTING.—For purposes of any 
action brought by the Commission under subsection (e), 
any person that knowingly or recklessly has aided, abetted, 
counseled, commanded, induced, or procured a violation 
of any provision of this Act, or of any rule, regulation, 
or order hereunder, shall be deemed to be in violation of 
such provision, rule, regulation, or order to the same ex-
tent as the person that committed such violation.’’.
1313 
SEC. 7209. DEADLINE FOR COMPLETING EXAMINATIONS, 
INSPECTIONS AND ENFORCEMENT ACTIONS. 
The Securities Exchange Act of 1934 (15 U.S.C. 78a 
et seq.) is amended by inserting after section 4D (as added 
by section 7101) the following new section: 
‘‘SEC. 4E. DEADLINE FOR COMPLETING ENFORCEMENT IN-
VESTIGATIONS AND COMPLIANCE EXAMINA-
TIONS AND INSPECTIONS. 
‘‘(a) ENFORCEMENT INVESTIGATIONS.— 
‘‘(1) IN GENERAL.—Not later than 180 days 
after the date on which Commission staff provide a 
written Wells notification to any person, the Com-
mission staff shall either file an action against such 
person or provide notice to the Director of the Divi-
sion of Enforcement of its intent to not file an ac-
tion. 
‘‘(2) EXCEPTIONS FOR CERTAIN COMPLEX AC-
TIONS.—Notwithstanding paragraph (1), if the Di-
rector of the Division of Enforcement of the Com-
mission or the Director’s designee determines that a 
particular enforcement investigation is sufficiently 
complex such that a determination regarding the fil-
ing of an action against a person cannot be com-
pleted within the deadline specified in paragraph (1), 
the Director of the Division of Enforcement of the 
Commission or the Director’s designee may, after
1314 
providing notice to the Chairman of the Commission, 
extend such deadline as needed for one additional 
180-day period. If after the additional 180-day pe-
riod the Director of the Division of Enforcement of 
the Commission or the Director’s designee deter-
mines that a particular enforcement investigation is 
sufficiently complex such that a determination re-
garding the filing of an action against a person can-
not be completed within the additional 180-day pe-
riod, the Director of the Division of Enforcement of 
the Commission or the Director’s designee may, 
after providing notice to and receiving approval of 
the Commission, extend such deadline as needed for 
one or more additional successive 180-day periods. 
‘‘(b) COMPLIANCE
EXAMINATIONS
AND
INSPEC-
TIONS.— 
‘‘(1) IN GENERAL.—Not later than 180 days 
after the date on which Commission staff completes 
the on-site portion of its compliance examination or 
inspection or receives all records requested from the 
entity being examined or inspected, whichever is 
later, Commission staff shall provide the entity being 
examined or inspected with written notification indi-
cating either that the examination or inspection has 
concluded, has concluded without findings, or that
1315 
the staff requests the entity undertake corrective ac-
tion. 
‘‘(2) EXCEPTION FOR CERTAIN COMPLEX AC-
TIONS.—Notwithstanding paragraph (1), if the head 
of any division or office within the Commission re-
sponsible for compliance examinations and inspec-
tions or his designee determines that a particular 
compliance examination or inspection is sufficiently 
complex such that a determination regarding con-
cluding the examination or inspection, or regarding 
the staff requests the entity undertake corrective ac-
tion, cannot be completed within the deadline speci-
fied in paragraph (1), the head of any division or of-
fice within the Commission responsible for compli-
ance examinations and inspections or his designee 
may, after providing notice to the Chairman of the 
Commission, extend such deadline as needed for one 
additional 180-day period.’’. 
SEC. 7210. NATIONWIDE SERVICE OF SUBPOENAS. 
(a) SECURITIES ACT OF 1933.—Section 22(a) of the 
Securities Act of 1933 (15 U.S.C. 77v(a)) is amended by 
inserting after the second sentence the following: ‘‘In any 
civil action instituted by the Commission under this title 
in a United States district court for any judicial district, 
subpoenas issued to compel the attendance of witnesses
1316 
or the production of documents or tangible things (or 
both) at any hearing or trial may be served at any place 
within the United States. Rule 45(c)(3)(A)(ii) of the Fed-
eral Rules of Civil Procedure does not apply to a subpoena 
so issued.’’. 
(b) SECURITIES EXCHANGE ACT OF 1934.—Section 
27 of the Securities Exchange Act of 1934 (15 U.S.C. 
78aa) is amended by inserting after the third sentence the 
following: ‘‘In any civil action instituted by the Commis-
sion under this title in a United States district court for 
any judicial district, subpoenas issued to compel the at-
tendance of witnesses or the production of documents or 
tangible things (or both) at any hearing or trial may be 
served at any place within the United States. Rule 
45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure 
does not apply to a subpoena so issued.’’. 
(c) INVESTMENT COMPANY ACT OF 1940.—Section 
44 of the Investment Company Act of 1940 (15 U.S.C. 
80a–43) is amended by inserting after the fourth sentence 
the following: ‘‘In any civil action instituted by the Com-
mission under this title in a United States district court 
for any judicial district, subpoenas issued to compel the 
attendance of witnesses or the production of documents 
or tangible things (or both) at any hearing or trial may 
be served at any place within the United States. Rule
1317 
45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure 
does not apply to a subpoena so issued.’’. 
(d) INVESTMENT ADVISERS ACT OF 1940.—Section 
214 of the Investment Advisers Act of 1940 (15 U.S.C. 
80b–14) is amended by inserting after the third sentence 
the following: ‘‘In any civil action instituted by the Com-
mission under this title in a United States district court 
for any judicial district, subpoenas issued to compel the 
attendance of witnesses or the production of documents 
or tangible things (or both) at any hearing or trial may 
be served at any place within the United States. Rule 
45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure 
does not apply to a subpoena so issued.’’. 
SEC. 7211. AUTHORITY TO IMPOSE CIVIL PENALTIES IN 
CEASE AND DESIST PROCEEDINGS. 
(a) UNDER THE SECURITIES ACT OF 1933.—Section 
8A of the Securities Act of 1933 (15 U.S.C. 77h–1) is 
amended by adding at the end the following new sub-
section: 
‘‘(g) AUTHORITY
TO
IMPOSE
MONETARY
PEN-
ALTIES.— 
‘‘(1) GROUNDS FOR IMPOSING.—In any cease- 
and-desist proceeding under subsection (a), the 
Commission may impose a civil penalty on a person
1318 
if it finds, on the record after notice and opportunity 
for hearing, that— 
‘‘(A) such person— 
‘‘(i) is violating or has violated any 
provision of this title, or any rule or regu-
lation thereunder; or 
‘‘(ii) is or was a cause of the violation 
of any provision of this title, or any rule or 
regulation thereunder; and 
‘‘(B) such penalty is in the public interest. 
‘‘(2) MAXIMUM AMOUNT OF PENALTY.— 
‘‘(A) FIRST TIER.—The maximum amount 
of penalty for each act or omission described in 
paragraph (1) shall be $7,500 for a natural 
person or $75,000 for any other person. 
‘‘(B) 
SECOND
TIER.—Notwithstanding 
paragraph (A), the maximum amount of pen-
alty for each such act or omission shall be 
$75,000 for a natural person or $375,000 for 
any other person if the act or omission de-
scribed in paragraph (1) involved fraud, deceit, 
manipulation, or deliberate or reckless dis-
regard of a regulatory requirement. 
‘‘(C) THIRD TIER.—Notwithstanding para-
graphs (A) and (B), the maximum amount of
1319 
penalty for each such act or omission shall be 
$150,000 for a natural person or $725,000 for 
any other person if— 
‘‘(i) the act or omission described in 
paragraph (1) involved fraud, deceit, ma-
nipulation, or deliberate or reckless dis-
regard of a regulatory requirement; and 
‘‘(ii) such act or omission directly or 
indirectly resulted in substantial losses or 
created a significant risk of substantial 
losses to other persons or resulted in sub-
stantial pecuniary gain to the person who 
committed the act or omission. 
‘‘(3) EVIDENCE
CONCERNING
ABILITY
TO 
PAY.—In any proceeding in which the Commission 
may impose a penalty under this section, a respond-
ent may present evidence of the respondent’s ability 
to pay such penalty. The Commission may, in its 
discretion, consider such evidence in determining 
whether such penalty is in the public interest. Such 
evidence may relate to the extent of such person’s 
ability to continue in business and the collectability 
of a penalty, taking into account any other claims of 
the United States or third parties upon such per-
1320 
son’s assets and the amount of such person’s as-
sets.’’. 
(b) UNDER THE SECURITIES EXCHANGE ACT OF 
1934.—Subsection (a) of section 21B of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u–2(a)) is amend-
ed— 
(1) by striking ‘‘(a) COMMISSION AUTHORITY 
TO
ASSESS
MONEY
PENALTIES.—In any pro-
ceeding’’ and inserting the following: 
‘‘(a) COMMISSION AUTHORITY
TO ASSESS MONE-
TARY PENALTIES.— 
‘‘(1) IN GENERAL.—In any proceeding’’; 
(2) by redesignating paragraphs (1) through 
(4) of such subsection as subparagraphs (A) through 
(D), respectively, and moving such redesignated sub-
paragraphs and the matter following such subpara-
graphs 2 ems to the right; and 
(3) by adding at the end of such subsection the 
following new paragraph: 
‘‘(2) 
CEASE-AND-DESIST
PROCEEDINGS.—In 
any proceeding instituted pursuant to section 21C of 
this title against any person, the Commission may 
impose a civil penalty if it finds, on the record after 
notice and opportunity for hearing, that such per-
son—
1321 
‘‘(A) is violating or has violated any provi-
sion of this title, or any rule or regulation 
thereunder; or 
‘‘(B) is or was a cause of the violation of 
any provision of this title, or any rule or regula-
tion thereunder.’’. 
(c) UNDER
THE INVESTMENT COMPANY ACT
OF 
1940.—Paragraph (1) of section 9(d) of the Investment 
Company Act of 1940 (15 U.S.C. 80a–9(d)(1)) is amend-
ed— 
(1) by striking ‘‘(1) AUTHORITY OF COMMIS-
SION.—In any proceeding’’ and inserting the fol-
lowing: 
‘‘(1) AUTHORITY OF COMMISSION.— 
‘‘(A) IN GENERAL.—In any proceeding’’; 
(2) by redesignating subparagraphs (A) through 
(C) of such paragraph as clauses (i) through (iii), 
respectively, and by moving such redesignated 
clauses and the matter following such subparagraphs 
2 ems to the right; and 
(3) by adding at the end of such paragraph the 
following new subparagraph: 
‘‘(B) CEASE-AND-DESIST PROCEEDINGS.— 
In any proceeding instituted pursuant to sub-
section (f) against any person, the Commission
1322 
may impose a civil penalty if it finds, on the 
record after notice and opportunity for hearing, 
that such person— 
‘‘(i) is violating or has violated any 
provision of this title, or any rule or regu-
lation thereunder; or 
‘‘(ii) is or was a cause of the violation 
of any provision of this title, or any rule or 
regulation thereunder.’’. 
(d) UNDER THE INVESTMENT ADVISERS ACT OF 
1940.—Paragraph (1) of section 203(i) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b–3(i)(1)) is amend-
ed— 
(1) by striking ‘‘(1) AUTHORITY OF COMMIS-
SION.—In any proceeding’’ and inserting the fol-
lowing: 
‘‘(1) AUTHORITY OF COMMISSION.— 
‘‘(A) IN GENERAL.—In any proceeding’’; 
(2) by redesignating subparagraphs (A) through 
(D) of such paragraph as clauses (i) through (iv), 
respectively, and moving such redesignated clauses 
and the matter following such subparagraphs 2 ems 
to the right; and 
(3) by adding at the end of such paragraph the 
following new subparagraph:
1323 
‘‘(B) CEASE-AND-DESIST PROCEEDINGS.— 
In any proceeding instituted pursuant to sub-
section (k) against any person, the Commission 
may impose a civil penalty if it finds, on the 
record after notice and opportunity for hearing, 
that such person— 
‘‘(i) is violating or has violated any 
provision of this title, or any rule or regu-
lation thereunder; or 
‘‘(ii) is or was a cause of the violation 
of any provision of this title, or any rule or 
regulation thereunder.’’. 
SEC. 7212. FORMERLY ASSOCIATED PERSONS. 
(a) MEMBER OR EMPLOYEE OF THE MUNICIPAL SE-
CURITIES RULEMAKING BOARD.—Section 15B(c)(8) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78o– 
4(c)(8)) is amended by striking ‘‘any member or em-
ployee’’ and inserting ‘‘any person who is, or at the time 
of the alleged misconduct was, a member or employee’’. 
(b) PERSON ASSOCIATED WITH A GOVERNMENT SE-
CURITIES BROKER OR DEALER.—Section 15C of the Se-
curities Exchange Act of 1934 (15 U.S.C. 78o–5) is 
amended— 
(1) in subsection (c)(1)(C), by striking ‘‘or 
seeking to become associated,’’ and inserting ‘‘seek-
1324 
ing to become associated, or, at the time of the al-
leged misconduct, associated or seeking to become 
associated’’; 
(2) in subsection (c)(2)(A), by inserting ‘‘, seek-
ing to become associated, or, at the time of the al-
leged misconduct, associated or seeking to become 
associated’’ after ‘‘any person associated’’; and 
(3) in subsection (c)(2)(B), by inserting ‘‘, 
seeking to become associated, or, at the time of the 
alleged misconduct, associated or seeking to become 
associated’’ after ‘‘any person associated’’. 
(c) PERSON ASSOCIATED WITH A MEMBER OF A NA-
TIONAL SECURITIES EXCHANGE OR REGISTERED SECURI-
TIES ASSOCIATION.—Section 21(a)(1) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u(a)(1)) is amended 
by inserting ‘‘, or, as to any act or practice, or omission 
to act, while associated with a member, formerly associ-
ated’’ after ‘‘member or a person associated’’. 
(d) PARTICIPANT
OF
A REGISTERED CLEARING 
AGENCY.—Section 21(a)(1) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78u(a)(1)) is amended by insert-
ing ‘‘or, as to any act or practice, or omission to act, while 
a participant, was a participant,’’ after ‘‘in which such 
person is a participant,’’.
1325 
(e) OFFICER OR DIRECTOR OF A SELF-REGULATORY 
ORGANIZATION.—Section 19(h)(4) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78s(h)(4)) is amended— 
(1) by striking ‘‘any officer or director’’ and in-
serting ‘‘any person who is, or at the time of the al-
leged misconduct was, an officer or director’’; and 
(2) by striking ‘‘such officer or director’’ and 
inserting ‘‘such person’’. 
(f) OFFICER OR DIRECTOR OF AN INVESTMENT COM-
PANY.—Section 36(a) of the Investment Company Act of 
1940 (15 U.S.C. 80a–35(a)) is amended— 
(1) by striking ‘‘a person serving or acting’’ and 
inserting ‘‘a person who is, or at the time of the al-
leged misconduct was, serving or acting’’; and 
(2) by striking ‘‘such person so serves or acts’’ 
and inserting ‘‘such person so serves or acts, or at 
the time of the alleged misconduct, so served or 
acted’’. 
(g) PERSON ASSOCIATED WITH A PUBLIC ACCOUNT-
ING FIRM.— 
(1) SARBANES-OXLEY
ACT
OF
2002
AMEND-
MENT.—Section 2(a)(9) of the Sarbanes-Oxley Act 
of 2002 (15 U.S.C. 7201(9)) is amended by adding 
at the end the following new subparagraph:
1326 
‘‘(C) INVESTIGATIVE AND ENFORCEMENT 
AUTHORITY.—For purposes of the provisions of 
sections 3(c), 101(c), 105, and 107(c) and 
Board or Commission rules thereunder, except 
to the extent specifically excepted by such rules, 
the terms defined in subparagraph (A) shall in-
clude any person associated, seeking to become 
associated, or formerly associated with a public 
accounting firm, except— 
‘‘(i) the authority to conduct an inves-
tigation of such person under section 
105(b) shall apply only with respect to any 
act or practice, or omission to act, while 
such person was associated or seeking to 
become associated with a registered public 
accounting firm; and 
‘‘(ii) the authority to commence a pro-
ceeding under section 105(c)(1), or impose 
disciplinary 
sanctions 
under 
section 
105(c)(4), against such person shall apply 
only on— 
‘‘(I) the basis of conduct occur-
ring while such person was associated 
or seeking to become associated with 
a registered public accounting firm; or
1327 
‘‘(II) 
non-cooperation 
as 
de-
scribed in section 105(b)(3) with re-
spect to a demand in a Board inves-
tigation for testimony, documents, or 
other information relating to a period 
when such person was associated or 
seeking to become associated with a 
registered public accounting firm.’’. 
(2) SECURITIES
EXCHANGE
ACT
OF
1934 
AMENDMENT.—Section 21(a)(1) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u(a)(1)) is 
amended by striking ‘‘or a person associated with 
such a firm’’ and inserting ‘‘, a person associated 
with such a firm, or, as to any act, practice, or omis-
sion to act while associated with such firm, a person 
formerly associated with such a firm’’. 
(h) SUPERVISORY
PERSONNEL
OF
AN
AUDIT 
FIRM.—Section 105(c)(6) of the Sarbanes-Oxley Act of 
2002 (15 U.S.C. 7215(c)(6)) is amended— 
(1) in subparagraph (A), by striking ‘‘the su-
pervisory personnel’’ and inserting ‘‘any person who 
is, or at the time of the alleged failure reasonably to 
supervise was, a supervisory person’’; and 
(2) in subparagraph (B)—
1328 
(A) by striking ‘‘No associated person’’ 
and inserting ‘‘No current or former super-
visory person’’; and 
(B) by striking ‘‘any other person’’ and in-
serting ‘‘any associated person’’. 
(i) MEMBER OF THE PUBLIC COMPANY ACCOUNTING 
OVERSIGHT BOARD.—Section 107(d)(3) of the Sarbanes- 
Oxley Act of 2002 (15 U.S.C. 7217(d)(3)) is amended by 
striking ‘‘any member’’ and inserting ‘‘any person who is, 
or at the time of the alleged misconduct was, a member’’. 
SEC. 7213. SHARING PRIVILEGED INFORMATION WITH 
OTHER AUTHORITIES. 
Section 24 of the Securities Exchange Act of 1934 
(15 U.S.C. 78x) is amended— 
(1) by redesignating subsections (d) and (e) as 
subsections (e) and (f), respectively; 
(2) in subsection (e), as redesignated, by strik-
ing ‘‘as provided in subsection (e)’’ and inserting ‘‘as 
provided in subsection (f)’’; and 
(3) by inserting after subsection (c) the fol-
lowing new subsection: 
‘‘(d) SHARING
PRIVILEGED
INFORMATION
WITH 
OTHER AUTHORITIES.— 
‘‘(1) PRIVILEGED INFORMATION PROVIDED BY 
THE
COMMISSION.—The Commission shall not be
1329 
deemed to have waived any privilege applicable to 
any information by transferring that information to 
or permitting that information to be used by— 
‘‘(A) any agency (as defined in section 6 of 
title 18, United States Code); 
‘‘(B) any foreign securities authority; 
‘‘(C) the Public Company Accounting 
Oversight Board; 
‘‘(D) any self-regulatory organization; 
‘‘(E) any foreign law enforcement author-
ity; or 
‘‘(F) any State securities or law enforce-
ment authority. 
‘‘(2) NON-DISCLOSURE OF PRIVILEGED INFOR-
MATION PROVIDED TO THE COMMISSION.—The Com-
mission shall not be compelled to disclose privileged 
information obtained from any foreign securities au-
thority, or foreign law enforcement authority, if the 
authority has in good faith determined and rep-
resented to the Commission that the information is 
privileged. 
‘‘(3) NON-WAIVER
OF
PRIVILEGED
INFORMA-
TION PROVIDED TO THE COMMISSION.— 
‘‘(A) 
IN
GENERAL.—Federal 
agencies, 
State securities and law enforcement authori-
1330 
ties, self-regulatory organizations, and the Pub-
lic Company Accounting Oversight Board shall 
not be deemed to have waived any privilege ap-
plicable to any information by transferring that 
information to or permitting that information 
to be used by the Commission. 
‘‘(B) EXCEPTION WITH RESPECT TO CER-
TAIN
ACTIONS.—The provisions of subpara-
graph (A) shall not apply to a self-regulatory 
organization or the Public Company Accounting 
Oversight Board with respect to information 
used by the Commission in an action against 
such organization. 
‘‘(4) DEFINITIONS.—For purposes of this sub-
section: 
‘‘(A) The term ‘privilege’ includes any 
work-product privilege, attorney-client privilege, 
governmental privilege, or other privilege recog-
nized under Federal, foreign, or State law. 
‘‘(B) The term ‘foreign law enforcement 
authority’ means any foreign authority that is 
empowered under foreign law to detect, inves-
tigate or prosecute potential violations of law. 
‘‘(C) The term ‘State securities or law en-
forcement authority’ means the authority of any
1331 
State or territory that is empowered under 
State or territory law to detect, investigate or 
prosecute potential violations of law.’’. 
SEC. 7214. EXPANDED ACCESS TO GRAND JURY INFORMA-
TION. 
Subsection (b) of section 3322 of title 18, United 
States Code, is amended— 
(1) in paragraph (1), by striking ‘‘matters oc-
curring before a grand jury’’ and inserting ‘‘grand 
jury information obtained’’; 
(2) by redesignating paragraph (2) as para-
graph (3); 
(3) in paragraph (3) (as so redesignated), by 
inserting ‘‘or (2)’’ after ‘‘(1)’’; and 
(4) by inserting after paragraph (1), the fol-
lowing new paragraph: 
‘‘(2) Upon motion of an attorney for the gov-
ernment, a court may direct disclosure of grand jury 
information obtained during an investigation of a se-
curities law violation to identified personnel of the 
Securities and Exchange Commission— 
‘‘(A) for use in relation to any matter 
within the jurisdiction of the Commission; or
1332 
‘‘(B) to assist an attorney for the govern-
ment to whom matters have been disclosed 
under subsection (a).’’. 
SEC. 7215. AIDING AND ABETTING STANDARD OF KNOWL-
EDGE SATISFIED BY RECKLESSNESS. 
Section 20(e) of the Securities Exchange Act of 1934 
(15 U.S.C. 78t(e)) is amended by inserting ‘‘or recklessly’’ 
after ‘‘knowingly’’. 
SEC. 7216. EXTRATERRITORIAL JURISDICTION OF THE 
ANTIFRAUD PROVISIONS OF THE FEDERAL 
SECURITIES LAWS. 
(a) UNDER THE SECURITIES ACT OF 1933.—Section 
22 of the Securities Act of 1933 (15 U.S.C. 77v(a)) is 
amended by adding at the end the following new sub-
section: 
‘‘(c) EXTRATERRITORIAL JURISDICTION.—With re-
spect to any actions or proceedings brought or instituted 
by the Commission or the United States, this jurisdiction 
includes violations of section 17(a) of this title, and all 
suits in equity and actions at law under that section, in-
volving— 
‘‘(1) conduct within the United States that con-
stitutes significant steps in furtherance of the viola-
tion, even if the securities transaction occurs outside
1333 
the United States and involves only foreign inves-
tors; or 
‘‘(2) conduct occurring outside the United 
States that has a foreseeable substantial effect with-
in the United States.’’. 
(b) UNDER THE SECURITIES EXCHANGE ACT OF 
1934.—Section 27 of the Securities Exchange Act of 1934 
(15 U.S.C. 78aa) is amended— 
(1) by striking ‘‘The district’’ and inserting the 
following: 
‘‘(a) IN GENERAL.—The district’’; and 
(2) by inserting at the end the following new 
subsection: 
‘‘(b) EXTRATERRITORIAL JURISDICTION.—With re-
spect to any actions or proceedings brought or instituted 
by the Commission or the United States, this jurisdiction 
includes violations of the antifraud provisions of this title, 
and all suits in equity and actions at law under those pro-
visions, involving— 
‘‘(1) conduct within the United States that con-
stitutes significant steps in furtherance of the viola-
tion, even if the securities transaction occurs outside 
the United States and involves only foreign inves-
tors; or
1334 
‘‘(2) conduct occurring outside the United 
States that has a foreseeable substantial effect with-
in the United States.’’. 
(c) UNDER
THE INVESTMENT ADVISERS ACT
OF 
1940.—Section 214 of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–14) is amended— 
(1) by striking ‘‘The district’’ and inserting the 
following: 
‘‘(a) IN GENERAL.—The district’’; and 
(2) by inserting at the end the following new 
subsection: 
‘‘(b) EXTRATERRITORIAL JURISDICTION.—With re-
spect to any actions or proceedings brought or instituted 
by the Commission or the United States, this jurisdiction 
includes violations of section 206, and all suits in equity 
and actions at law under that section, involving— 
‘‘(1) conduct within the United States that con-
stitutes significant steps in furtherance of the viola-
tion, even if the violation is committed by a foreign 
adviser and involves only foreign investors; or 
‘‘(2) conduct occurring outside the United 
States that has a foreseeable substantial effect with-
in the United States.’’.