I
107TH CONGRESS
1ST SESSION
H. R. 1408
To safeguard the public from fraud in the financial services industry, to
streamline and facilitate the antifraud information-sharing efforts of Fed-
eral and State regulators, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
APRIL 4, 2001
Mr. ROGERS of Michigan (for himself, Mr. OXLEY, Mrs. KELLY, Mr. BACHUS,
and Mr. TIBERI) introduced the following bill; which was referred to the
Committee on Financial Services, and in addition to the Committees on
the Judiciary, and Agriculture, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To safeguard the public from fraud in the financial services
industry, to streamline and facilitate the antifraud infor-
mation-sharing efforts of Federal and State regulators,
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; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Financial Services Antifraud Network Act of 2001’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Purposes.
TITLE I—ANTIFRAUD SUBCOMMITTEE
Sec. 101. Establishment.
Sec. 102. Duties of the Subcommittee.
Sec. 103. Chairperson; term of chairperson; meetings; officers and staff.
Sec. 104. Purposes of the Subcommittee.
Sec. 105. Powers of the Subcommittee.
Sec. 106. Agreement on cost structure.
Sec. 107. Agency supervisory privilege.
Sec. 108. Confidentiality of information.
Sec. 109. Liability provisions.
Sec. 110. Authorization for identification and criminal background check.
Sec. 111. Definitions.
Sec. 112. Technical and conforming amendments to other Acts.
TITLE II—SECURITIES INDUSTRY COORDINATION
Subtitle A—Disciplinary Information
Sec. 201. Investment Advisers Act of 1940.
Sec. 202. Securities Exchange Act of 1934.
Subtitle B—Preventing Migration of Rogue Financial Professionals to the
Securities Industry
Sec. 211. Securities Exchange Act of 1934.
Sec. 212. Investment Advisers Act of 1940.
SEC. 2. PURPOSES.
The purposes of this Act are—
(1) to safeguard the public from fraud in the fi-
nancial services industry;
(2) to streamline the antifraud coordination ef-
forts of Federal and State regulators and prevent
failure to communicate essential information;
(3) to reduce duplicative information requests
by, and other inefficiencies of, financial services reg-
ulation;
(4) to assist financial regulators in detecting
patterns of fraud, particularly patterns that only be-
come apparent when viewed across the full spectrum
of the financial services industry; and
(5) to take advantage of Internet technology
and other advanced data-sharing technology to mod-
ernize the fight against fraud in all of its evolving
manifestations and permutations.
TITLE I—ANTIFRAUD
SUBCOMMITTEE
SEC. 101. ESTABLISHMENT.
(a) IN GENERAL.—There shall be within the Presi-
dent’s Working Group on Financial Markets (as estab-
lished by Executive Order Numbered 12631) a sub-
committee to be known as the ‘Antifraud Subcommittee’
(hereafter in this title referred to as the ‘Subcommittee’)
which shall consist of the following members:
‘‘(1) The Secretary of the Treasury, or a des-
ignee of the Secretary.
‘‘(2) The Chairman of the Securities and Ex-
change Commission or a designee of the Chairman.
‘‘(3) A State insurance commissioner des-
ignated by the National Association of Insurance
Commissioners, or a designee of such commissioner.
(b) FINANCIAL LIAISONS.—The following shall serve
as liaisons between the Subcommittee and the agencies
represented by each such liaison:
(1) A representative of each Federal banking
agency appointed by the head of each such agency.
(2) A representative of the Commodity Futures
Trading Commission appointed by the Commodity
Futures Trading Commission.
(3) A representative of the National Credit
Union Administration appointed by the National
Credit Union Administration Board.
(4) A representative of the Farm Credit Admin-
istration, appointed by the Farm Credit Administra-
tion Board.
(5) A representative of the Federal Housing Fi-
nance Board, appointed by such Board.
(6) A representative of the Office of Federal
Housing Enterprise Oversight of the Department of
Housing and Urban Development appointed by the
Director of such Office.
(7) A representative of State bank supervisors
designated by the Conference of State Bank Super-
visors.
(1) A representative of the Department of Jus-
tice appointed by the Attorney General.
(2) A representative of the Federal Bureau of
Investigation appointed by the Director of such Bu-
reau.
(3) A representative of the United States Secret
Service appointed by the Director of such Service.
(4) Any other liaison as the Subcommittee may
provide to represent any other regulator, including
self-regulatory agencies or organizations that main-
tain significant databases on persons engaged in the
business of conducting financial activities, des-
ignated in the manner provided by the Sub-
committee.
(d) VACANCY.—If, for any reason, the position of any
member of or liaison to the Subcommittee is not filled
within a reasonable period of time after being created or
becoming vacant, the President shall appoint a person to
fill the position after consulting the agency or entity to
be represented by such member or liaison, and to the ex-
tent possible, shall appoint such person from a list of pos-
sible representatives submitted by such agency or entity.
(e) REORGANIZATION AUTHORITY.—If the President
disbands the Working Group referred to in subsection (a),
the President shall provide for the reorganization of the
Subcommittee in such manner as the President determines
to be appropriate.
SEC. 102. DUTIES OF THE SUBCOMMITTEE.
(a) IN GENERAL.—The duties of the Subcommittee
are as follows:
(1) To coordinate access by the participants to
antifraud databases of various regulators, by facili-
tating the establishment, maintenance, and use of a
computer network of existing antifraud information
maintained by such regulators with respect to per-
sons engaged in the business of conducting financial
activities.
(2) Coordinate access by each participating reg-
ulator to such computer network in a manner that
allows the regulator to review, at a minimal cost, ex-
isting information in the databases of other regu-
lators, as a part of licensure, change of control, or
investigation, of any person engaged in the business
of conducting financial activities.
(3) Coordinate information-sharing, where ap-
propriate, among State, Federal, and international
financial regulators and law enforcement agencies
where sufficient privacy and confidentiality safe-
guards exist.
(4) Coordinate development by participants of a
name-relationship index for persons engaged in the
business of conducting financial activities using ex-
isting information from the databases of regulators.
(5) Advise regulators in updating their anti-
fraud databases to better coordinate with the com-
puter network.
(6) Consider establishing a tracking and record-
keeping procedure that allows a record of the inquir-
ies made through the network and the information
transferred through the network by one regulator to
another to be maintained, in such manner as the
Subcommittee considers to be appropriate.
(7) After the end of each year, transmit to the
Congress a summary of the coordination efforts un-
dertaken by the Subcommittee during the preceding
year and a description of any impediments to or rec-
ommended legislation for facilitating such efforts.
(b) CRITERIA FOR NETWORK WITH RESPECT TO
ANY PERSON ENGAGED
IN
THE BUSINESS
OF CON-
DUCTING FINANCIAL ACTIVITIES.—
(1) FINAL
DISCIPLINARY
AND
FORMAL
EN-
FORCEMENT ACTIONS.—Each regulator that is rep-
resented by a member of the Subcommittee under
section 101(a) or by a financial liaison to the Sub-
committee under section 101(b) shall allow any par-
ticipant access, through the network, to any public
final disciplinary or formal enforcement action by
the member or financial liaison which is accessible
electronically relating to fraudulent, wrongful, or
dishonest conduct of persons engaged in the business
of conducting financial activities.
(2) OTHER
INFORMATION.—Subject to such
limitations and criteria that may be established by
any participant in accordance with subsection (c) re-
garding the access to information maintained by
such participant and the requirements of subsection
(d), each participant may permit access through the
network to the following information as it relates to
persons engaged in the business of conducting finan-
cial activities:
(A) To the extent the regulator determines
the disclosure to be appropriate and cost-effec-
tive, information concerning—
(i) the registrations, licenses, ap-
proved applications, or notices that have
been granted or approved by, or are other-
wise within the regulatory jurisdiction of,
the participant and are in effect with re-
spect to any person engaged in the busi-
ness of conducting financial activities; and
(ii) any significant affiliations or
name-relationships of such person on
which the participant maintains records.
(B) To the extent the regulator determines
the disclosure to be appropriate, information
concerning investigations conducted by the par-
ticipant, such as the issuance of a notice of
charges or on-going investigations after notice
has been provided to the subject of the inves-
tigation, public notice has been given, or some
public action has been taken in connection with
the investigation.
(C) To the extent the participant deter-
mines the disclosure to be appropriate, con-
sumer complaints relating to fraudulent activi-
ties or matters within the jurisdiction of the re-
questing member or liaison.
(D) To the extent the appropriate Federal
banking agency and the Secretary of the Treas-
ury may determine the disclosure to be appro-
priate, suspicious activity reports filed in ac-
cordance with section 5318(g) of title 31,
United States Code, and regulations prescribed
by the Secretary under such section, or pursu-
ant to regulations prescribed by the appropriate
Federal banking agency, particularly where
such reports reference persons engaged in the
business of conducting financial activities other
than a depository institution or an institution-
affiliated party (as defined in section 3 of the
Federal Deposit Insurance Act).
(E) To the extent the appropriate State in-
surance commissioner determines the disclosure
to be appropriate, special activity reports from
any State insurance commissioner, including
the National Association of Insurance Commis-
sioners only to the extent such association is
acting as the agent of, and is subject to the
oversight of, such insurance commissioner.
(F) Any other regulatory or supervisory in-
formation that any participant may determine
to be appropriate to provide access to through
the network, including financial records or ex-
amination reports.
(3) USE OF CENTRALIZED DATABASES.—
(A) IN GENERAL.—A member or financial
liaison shall be deemed to have met the require-
ments of paragraph (1) if the Subcommittee de-