SEC. 2. ORGANIZATION AND CONDUCT OF THE DIVISIONS 
AND OFFICES OF THE SECURITIES AND EX-
CHANGE COMMISSION. 
Section 4 of the Securities Exchange Act of 1934 (15 
U.S.C. 78d) is amended by adding at the end the following 
new subsections: 
‘‘(g) DIVISIONS
AND OFFICES
OF
THE COMMIS-
SION.— 
‘‘(1) COMPLIANCE, INSPECTIONS, AND EXAMI-
NATIONS.—The authority that the Commission has 
to conduct inspections and examinations of reg-
istered brokers or dealers (15 U.S.C. 78q(b)), reg-
istered investment companies (15 U.S.C. 80a– 
30(b)), and registered investment advisers (15 
U.S.C. 80b–4) shall be vested in the administrative 
divisions or offices to which the Commission has del-
egated pursuant to section 4A of this Act the au-
thority to administer its responsibilities under this 
Act, the Investment Company Act of 1940 (15 
U.S.C. 80a), and the Investment Advisers Act of 
1940 (15 U.S.C. 80b). The Commission shall report 
to Congress pursuant to section 21(a) of this Act no 
less frequently than every 5 years from the enact-
ment of this subsection, and shall in that report 
state its views on the continuing efficacy, effective-
ness, and efficiency of requiring the administrative 
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divisions or offices to conduct inspections and exami-
nations of registered brokers or dealers, registered 
investment companies, and registered investment ad-
visers. 
‘‘(2) CLOSURE OF OPEN MATTERS.—Not less 
frequently than every 120 days during a period in 
which an enforcement division or office of the Com-
mission with respect to a formal or informal inquiry, 
or an administrative division or office of the Com-
mission with respect to an inspection or examina-
tion, is conducting an inquiry or inspection, that di-
vision or office shall notify in writing the person who 
is the subject of that inquiry or inspection to inform 
such person of the status of the inquiry or inspec-
tion. When that division or office has completed its 
inquiry or inspection, that division or office shall, 
within 10 days of completing that inquiry or inspec-
tion, notify in writing the person who was the sub-
ject of that inquiry or inspection that the inquiry or 
inspection has been completed. 
‘‘(3) SWEEP EXAMINATIONS OR INSPECTIONS.— 
‘‘(A) NOTICE AND APPROVAL.—Before an 
administrative division or office of the Commis-
sion may conduct an inspection of registered 
brokers or dealers, registered investment com-
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panies, or registered investment advisers, it 
shall provide written notification in such form 
determined by the Chairman. Before an admin-
istrative division or office of the Commission 
may conduct a sweep examination of registered 
brokers or dealers, registered investment com-
panies, or registered investment advisers, it 
shall seek authority from the Commission to 
conduct such a sweep examination or inspection 
in the same manner and subject to the same 
procedures that the enforcement divisions or of-
fices of the Commission must follow in seeking 
the authority to conduct a formal investigation 
or inquiry regarding a registered broker or 
dealer, a registered investment company, or a 
registered investment adviser. 
‘‘(B) CONTENT.—An administrative divi-
sion or office of the Commission shall confine 
the content of a sweep examination or inspec-
tion to those existing books and records that 
the registered broker or dealer, registered in-
vestment company, or registered investment ad-
viser is required to keep and maintain under 
applicable rules and regulations, and may not 
require the creation of a new document or the 
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calculation or presentation of data that is not 
required to be kept or maintained under appli-
cable rules and regulations. 
‘‘(4) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply: 
‘‘(A) CONFIDENTIAL
COMMUNICATION.— 
The term ‘confidential communication’ shall 
mean any transfer of information, regardless of 
the form or format in which the information is 
communicated to an officer or employee of a 
compliance and inspections office, about a reg-
istered broker or dealer, registered investment 
company, or registered investment adviser by 
an officer or employee of a registered broker or 
dealer, registered investment company, or reg-
istered investment adviser regarding whether 
the broker or dealer, investment company, or 
investment adviser is in compliance with appli-
cable provisions of this Act, the Securities Act 
of 1933, the Investment Company Act of 1940, 
or the Investment Advisers Act of 1940, where-
in the officer or employee transferring such in-
formation reasonably believes in good faith that 
the information being communicated to an offi-
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cer or employee of a compliance and inspections 
office of the Commission— 
‘‘(i) is not information required to be 
made publicly available by any applicable 
Federal law or regulation; or 
‘‘(ii) is information regarding any 
book, record, or other information in the 
possession of, or maintained on behalf of, 
the registered broker or dealer, registered 
investment company, or registered invest-
ment adviser that is subject to the exam-
ination and inspection authority of the 
Commission. 
‘‘(B) SWEEP
EXAMINATION.—Not later 
than 60 days after the date of enactment of 
this subsection, the Commission shall define the 
term ‘sweep examination’ for purposes of this 
subsection. 
‘‘(C) ENFORCEMENT DIVISION.—The term 
‘enforcement division’ means the divisions or of-
fices to which the Commission has delegated 
pursuant to section 4A of this Act the authority 
to investigate and to enforce the provisions of 
this Act, the Investment Company Act of 1940 
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sroberts on PROD1PC70 with BILLS
(15 U.S.C. 80a–41), and the Investment Advis-
ers Act of 1940 (15 U.S.C. 80b–9). 
‘‘(h) OMBUDSMAN.— 
‘‘(1) APPOINTMENT.—Not later than 180 days 
after the date of enactment of this section, the 
Chairman of the Securities and Exchange Commis-
sion shall appoint an Ombudsman who shall report 
directly to the Chairman. 
‘‘(2) DUTIES OF OMBUDSMAN.—The Ombuds-
man appointed under subsection (a) shall— 
‘‘(A) ensure safeguards exist to encourage 
persons who are issuers, registered brokers or 
dealers, registered investment companies, or 
registered investment advisers to present ques-
tions to the Commission regarding compliance 
with the securities laws; 
‘‘(B) maintain privilege of confidential 
communications between such persons and the 
Ombudsman; 
‘‘(C) advise and guide such persons 
through the process of self-reporting, ensuring 
appropriate and due credit is given to the reg-
istrant upon self-reporting; and 
‘‘(D) act as a liaison between the agency 
and such persons with respect to any problem 
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such registrant may have in dealing with the 
agency resulting from the regulatory activities 
of the agency. 
‘‘(3) LIMITATION.—In carrying out the duties 
under paragraph (1), the Ombudsman shall utilize 
personnel of the Commission to the extent prac-
ticable. Nothing in this section is intended to re-
place, alter, or diminish the activities of any om-
budsman or similar office in any other agency. 
‘‘(4) DISCLOSURE OF CONFIDENTIAL COMMU-
NICATIONS.—Notwithstanding any other provision of 
this subsection, in those circumstances where the 
most senior officer of the enforcement division or of-
fice of the Commission has made a formal rec-
ommendation in writing to the Commission that it 
exercise its authority in section 21(d)(1) to seek an 
injunction against a registered broker or dealer, its 
authority in section 42(d) of the Investment Com-
pany Act of 1940 to seek an injunction against a 
registered investment company, or its authority in 
section 209(d) of the Investment Advisers Act of 
1940 to seek an injunction against a registered in-
vestment adviser, the Ombudsman or an employee of 
the Ombudsman shall disclose to the officers and 
employees of any other division or office any con-
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fidential communications received from an officer or 
employee of a registered broker or dealer, a reg-
istered investment company, or a registered invest-
ment adviser pursuant to the provisions of section 
24(b). 
‘‘(5) REPORT.—Each year, the Ombudsman 
shall submit a report to the Commission for inclu-
sion in the annual report that describes the activi-
ties, and evaluates the effectiveness of the Ombuds-
man during the preceding year. In that report, the 
Ombudsman shall include solicited comments and 
evaluations from registrants in regards to the effec-
tiveness of the Ombudsman.’’. 
SEC. 3. SENSE OF CONGRESS. 
It is the sense of Congress that the Securities and 
Exchange Commission should develop and publish guide-
lines setting forth explicitly the benefit that an issuer the 
securities of which are registered under section 12 of the 
Securities Exchange Act of 1934, a registered broker-deal-
er, a registered investment company, or a registered in-
vestment adviser shall receive if it self-reports to an ad-
ministrative division or office of the Commission or to an 
enforcement division or office of the Commission an ap-
parent violation of law, rules, or regulations applicable to 
it and is subsequently the respondent in a civil injunctive 
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action or administrative proceeding brought by the Com-
mission with respect to the matter that was self-reported. 
Æ 
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