103D CONGRESS
1ST SESSION
H. R. 578
AN ACT
To provide for recovery of costs of supervision and
regulation of investment advisers and their activi-
ties, and for other purposes.
103D CONGRESS
1ST SESSION
H. R. 578
AN ACT
To provide for recovery of costs of supervision and regulation
of investment advisers and their activities, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Investment Adviser
Regulatory Enhancement and Disclosure Act of 1993’’.
SEC. 2. ADDITIONAL RESOURCES FOR INVESTMENT AD-
VISER SUPERVISION.
(a) AMENDMENT.—The Investment Advisers Act of
1940 (15 U.S.C. 80b–1 et seq.) is amended by inserting
after section 203 the following new section:
‘‘FEES FOR REGISTRANTS AND APPLICANTS
‘‘SEC. 203A. (a) IN GENERAL.—The Commission is
authorized, in accordance with this section, to collect fees
to recover the costs of registration, supervision, and regu-
lation of investment advisers and their activities. Such fees
shall be collected, and shall be available, only to the extent
provided in advance in appropriations Acts. No appropria-
tion Act may authorize fees to be collected under this sec-
tion during any fiscal year unless the amount appropriated
by such Act for such costs for such fiscal year equals or
exceeds the aggregate amount that may reasonably be ex-
pected to be collected by such fees. Such fees shall be de-
posited as an offsetting collection to the Commission’s ap-
propriation and may remain available for such purposes
for the succeeding fiscal year. The costs covered by such
fees shall be limited to the costs of Commission expenses
for registration, examinations, and surveys of persons reg-
istered or required to register under this Act.
‘‘(b) TIME FOR PAYMENT.—
‘‘(1) NEW REGISTRANTS.—At the time of filing
an application for registration under this title, the
applicant shall pay to the Commission the fee speci-
fied in subsection (c). No part of such fee shall be
refunded to the applicant. The filing of an applica-
tion for registration under this title shall not be
‘‘(3) PROMINENT
DISCLOSURES.—Such docu-
ment shall also prominently disclose—
‘‘(A) that—
‘‘(i) the registered person receives or
may receive, directly or indirectly, sales
commissions or other fees in connection
with a purchase or sale effected on behalf
of a client; or
‘‘(ii) the registered person will not re-
ceive, directly or indirectly, any sales com-
mission or other fees in connection with
such purchase or sale, but the client may
be charged a sales commission or other fee
by another person in connection with such
purchase or sale; and
‘‘(B) that remedies may be available to the
client with respect to disputes arising out of the
advisory relationship.
‘‘(4) DEFINITION.—The Commission shall de-
fine ‘associated person providing significant invest-
ment advisory services to the client’ by rule for pur-
poses of this subsection.
‘‘(c) TRANSACTION REPORTS.—
‘‘(1) INITIAL DISCLOSURE.—Before a purchase
or sale is effected on behalf of any client, each reg-
istered investment adviser shall, in accordance with
rules prescribed by the Commission, disclose to the
client the total amount of commissions, fees, or
other charges that may reasonably be expected to be
charged in connection with the transaction (or, in
the case of payments from third parties, that a pay-
ment will be received) and that the adviser or a re-
lated person will receive a portion of the commission,
fee, charge, or payment. Such initial disclosure shall
be in writing if the purchase or sale was rec-
ommended in writing.
‘‘(2) CONFIRMATION.—After a purchase or sale
is effected, each registered investment adviser shall
transmit to each client a written statement that dis-
closes the amount of commissions, fees, or other
charges charged in connection with the transaction
(or, in the case of payments from third parties, that
a payment has been or will be received). Such writ-
ten statement shall be in such form and contain
such information, and be provided in accordance
with such rules, as the Commission shall prescribe.
Such rules shall, to the extent consistent with the
protection of investors, permit delivery of a con-
firmation statement of a broker or a dealer that in-
cludes information that meets the requirements of
this subsection (and the rules adopted thereunder)
in order to satisfy such requirements.
‘‘(3) WAIVER.—The Commission may, by rule,
permit an investment adviser to omit disclosure re-
quired by this subsection with the knowing written
consent of the client.
‘‘(4) EXCEPTIONS.—This subsection shall not
apply—
‘‘(A) with respect to any purchase or sale
for which the investment adviser, and any per-
son associated or under common control with
the investment adviser, will not receive any por-
tion of the amount charged or deducted in con-
nection with the purchase or sale, and will not
receive any payment from a third party re-
quired to be disclosed under paragraph (1);
‘‘(B) with respect to accounts for which
the person is authorized to exercise investment
discretion; or
‘‘(C) with respect to any account for which
the person is not acting as an investment ad-
viser.
‘‘(5) SPECIAL
RULE.—The provisions of this
subsection shall also apply to any person associated
with an investment adviser effecting transactions for
advisory clients through a broker or dealer with
which the person is associated.
‘‘(d) PERIODIC REPORTS.—
‘‘(1) IN GENERAL.—Each registered investment
adviser shall provide to each client a periodic written
statement in such form and containing such infor-
mation as the Commission shall prescribe by rule
consistent with the public interest, the protection of
investors, and the purposes of this title. Such rule
shall require the disclosure of—
‘‘(A) commissions, fees, or other charges
paid by the client during the period for services
provided by the investment adviser and any per-
son associated or under common control with
the investment adviser;
‘‘(B) compensation directly or indirectly re-
ceived during the period by the investment ad-
viser, or any person associated or under com-
mon control with the investment adviser, from
any third party with respect to any rec-
ommended transaction;
‘‘(C) in the case of a client account for
which the investment adviser provides invest-
ment supervisory services, securities positions
held in the account at the beginning and at the
end of the period; and
‘‘(D) such other matters as the Commis-
sion shall prescribe.
‘‘(2) COMMISSION RULES.—The rule prescribed
by the Commission pursuant to paragraph (1) shall
require that the format and timing of delivery be de-
signed to present the required information in a man-
ner that readily permits clients to compare the costs
charged by the investment adviser with the costs
charged by other advisers. In adopting such rule, the
Commission shall require an investment adviser
whose clients purchase or sell investment products
through persons other than such adviser, or persons
associated or under common control with such ad-
viser, to disclose to its clients that such information
concerning costs charged does not include commis-
sions or other fees paid in connection with such pur-
chases or sales. Such rule shall, to the extent con-
sistent with the protection of investors, permit deliv-
ery of a report of a broker or dealer that includes
information that meets the requirements of this sub-
section (and the rules adopted thereunder) in order
to satisfy such requirements.
‘‘(3) WAIVER.—The Commission may, by rule,
permit an investment adviser to provide the state-
ment required by paragraph (1) no more frequently
than annually if the client knowingly waives, in writ-
ing, the right to obtain such statement more fre-
quently than annually.
‘‘(4) EXCEPTION.—This subsection shall not
apply with respect to any account for which the per-
son is not acting as an investment adviser.
‘‘(e) FACILITIES
FOR FILING RECORDS
AND RE-
PORTS; ACCESS TO DISCIPLINARY AND OTHER INFORMA-
TION.—
‘‘(1) FILING DEPOSITORIES.—The Commission,
by rule, may require any investment adviser—
‘‘(A) to file with the Commission any fee,
application, report, or notice required by this
title or by the rules issued under this title
through any entity designated by the Commis-
sion for that purpose; and
‘‘(B) to pay the reasonable costs associated
with (i) such filing, and (ii) the maintenance of
the toll-free telephone listing required by para-
graph (2).
‘‘(2) LISTING FOR TOLL-FREE INQUIRIES.—The
Commission shall require the entity designated by