the broker or dealer and that has filed notice or is
required to file notice under section 15D(a)(1)(B) of
this title’’.
SEC. 204. REGISTERED SECURITIES ASSOCIATION.
Section 15A of the Securities Exchange Act of 1934
(15 U.S.C. 78o–3) is hereby amended by adding at the
end the following new subsection:
‘‘(j) AUTHORITY TO ADOPT RULES RELATING TO
TRANSACTIONS IN DERIVATIVES.—A registered securities
association may adopt and implement rules applicable to
members of such association, and material associated per-
sons that have filed notice or are required to file notice
under section 15D(a)(1)(B) of this title and that are asso-
ciated with members for which the association is the des-
ignated examining authority, who engage in transactions
in derivatives—
‘‘(1) to enforce compliance with applicable pro-
visions of this title and the rules and regulations
thereunder;
‘‘(2) to provide that any such person shall be
appropriately disciplined, in accordance with sub-
sections (b)(7), (b)(8), and (h) of this section, for
violations of applicable provisions of this title and
the rules and regulations thereunder;
‘‘(3) to provide for reasonable inspection and
examination of the books and records of any such
person;
‘‘(4) to prevent fraudulent and manipulative
acts and practices;
‘‘(5) to promote just and equitable principles of
trade; and
‘‘(6) to require the establishment of, and adher-
ence to, appropriate internal controls structures.’’.
SEC. 205. RISK ASSESSMENT FOR GOVERNMENT SECURI-
TIES BROKERS AND DEALERS.
Section 15C(b)(2) of the Securities Exchange Act of
1934 (15 U.S.C. 78o–5(b)(2)) is amended
(1) in subparagraph (A)—
(A) by striking ‘‘Such records shall de-
scribe, in the aggregate,’’ in the second sen-
tence and inserting ‘‘Such records may be re-
quired to describe’’;
(B) by striking ‘‘summary’’ in the third
sentence;
(2) by redesignating subparagraphs (C) through
(F) as subparagraphs (G) through (J), respectively;
(3) by inserting after subparagraph (B) the fol-
lowing new subparagraphs:
‘‘(C) REPORTING BY HOLDING COMPANIES
AND
OTHER
MATERIAL
ASSOCIATED
PER-
SONS.—Every person, other than a natural per-
son, who is associated with a government secu-
rities broker or government securities dealer for
which the Commission is the appropriate regu-
latory agency, and whose business activities are
reasonably likely to have a material impact on
the financial or operational condition of such
registered person, including its net capital, its
liquidity, or its ability to conduct or finance its
operations, shall make such reports concerning
the associated person’s policies, procedures, or
systems for monitoring and controlling the fi-
nancial and operational risks to the registered
person and its associated persons as the Sec-
retary, by rule, prescribes. Such reports may be
required to describe, without limitation, each of
the associated person’s financial and securities
activities, and customary sources of capital and
funding. The Secretary, by rule, may require
such reports to be filed with the Commission no
more frequently than quarterly.
‘‘(D) RECORDKEEPING BY HOLDING COM-
PANIES
AND
OTHER
MATERIAL
ASSOCIATED
PERSONS.—All persons subject to the reporting
requirements under subparagraph (C) of this
subsection shall keep and maintain such records
as are necessary to permit the Commission to
verify the information contained in reports filed
with the Commission pursuant to subparagraph
(C).
‘‘(E) EXAMINATION OF HOLDING COMPA-
NIES AND OTHER MATERIAL ASSOCIATED PER-
SONS.—All records of persons subject to the re-
porting requirements contained in subpara-
graph (C) of this subsection are subject at any
time, or from time to time, to such reasonable
periodic, special, or other examinations by rep-
resentatives of the Commission as the Commis-
sion deems necessary or appropriate to verify
the information contained in reports filed with
the Commission pursuant to subparagraph (C).
‘‘(F) USE OF ALTERNATIVE REPORTS BY
REGISTERED
PERSONS
AND
THEIR
HOLDING
COMPANIES AND OTHER MATERIAL ASSOCIATED
PERSONS.—(i) The Secretary, insofar as the
Secretary determines is consistent with the pur-
poses of this title, shall permit persons subject
to the reporting requirements of subparagraphs
(A) and (C) of this paragraph, to use reports
otherwise created and maintained to meet the
reporting requirements of those subparagraphs.
‘‘(ii) The appropriate regulatory agency,
insofar as such agency determines is consistent
with the purposes of this title, shall permit per-
sons, subject to the reporting requirements of
subparagraph (B) of this paragraph, to use re-
ports otherwise created and maintained to meet
the reporting requirement of that subpara-
graph.’’; and
(4) in subparagraphs (G) and (I) (as redesig-
nated by paragraph (2)), by striking ‘‘subparagraph
(A)’’ each place it appears and inserting ‘‘subpara-
graphs (A) and (C)’’.
SEC. 206. RISK ASSESSMENT FOR BROKERS AND DEALERS.
Section 17(h) of the Securities Exchange Act of 1934
(15 U.S.C. 78q(h)) is amended—
(1) in paragraph (1)—
(A) by striking ‘‘Such records shall de-
scribe, in the aggregate,’’ in the second sen-
tence and inserting ‘‘Such records may be re-
quired to describe’’;
(B) by striking ‘‘summary’’ in the third
sentence;
(2) by redesignating paragraphs (3) through
(5) as paragraphs (7) through (9), respectively;
(3) by inserting after paragraph (2) the fol-
lowing new paragraphs:
‘‘(3) REPORTING BY HOLDING COMPANIES AND
OTHER
MATERIAL
ASSOCIATED
PERSONS.—Every
person, other than a natural person, who is associ-
ated with (A) a registered broker or dealer, or (B)
a registered municipal securities dealer for which the
Commission is the appropriate regulatory agency,
and whose business activities are reasonably likely to
have a material impact on the financial or oper-
ational condition of such registered person, including
its net capital, its liquidity, or its ability to conduct
or finance its operations, shall make such reports
concerning the associated person’s policies, proce-
dures, or systems for monitoring and controlling the
financial and operation risks to the registered person
and its associated persons as the Commission, by
rule, prescribes. Such reports may be required to de-
scribe, without limitation, each of the associated per-
son’s financial and securities activities, and cus-
tomary sources of capital and funding. The Commis-
sion, by rule, may require such reports to be filed
with the Commission no more frequently than quar-
terly.
‘‘(4) RECORDKEEPING BY HOLDING COMPANIES
AND OTHER MATERIAL ASSOCIATED PERSONS.—All
persons subject to the reporting requirements under
paragraph (3) of this subsection shall keep and
maintain such records as are necessary to permit the
Commission to verify the information contained in
reports filed with the Commission pursuant to para-
graph (3).
‘‘(5) EXAMINATION
OF
HOLDING
COMPANIES
AND OTHER MATERIAL ASSOCIATED PERSONS.—All
records of persons subject to the reporting require-
ments contained in paragraph (3) of this subsection
are subject at any time, or from time to time, to
such reasonable periodic, special, or other examina-
tions by representatives of the Commission as the
Commission deems necessary or appropriate to
verify the information contained in reports filed with
the Commission pursuant to paragraph (3).
‘‘(6) USE OF ALTERNATIVE REPORTS BY REG-
ISTERED PERSONS AND THEIR HOLDING COMPANIES
AND OTHER MATERIAL ASSOCIATED PERSONS.—The
Commission, insofar as it determines is consistent
with the purposes of this title, shall permit persons
subject to the reporting requirements of paragraphs
(1), (2), and (3) of this subsection, to use reports
otherwise created and maintained to meet the re-
porting requirements of those paragraphs.’’; and
(4) in paragraphs (7) and (9) (as redesignated
by paragraph (2)), by striking ‘‘paragraph (1)’’ each
place it appears and inserting ‘‘paragraphs (1) and
(3)’’.
SEC. 207. LARGE TRADER REPORTING: RULEMAKING DEAD-
LINE.
Within one year after the date of enactment of this
Act, the Securities and Exchange Commission shall take
all actions necessary to establish regulations pursuant to
section 13(h) of the Securities Exchange Act of 1934 (15
U.S.C. 78m(h)).
SEC. 208. RULES, REGULATIONS, AND ORDERS; ANNUAL RE-
PORTS.
(a) RULES, REGULATIONS, AND ORDERS.—Section
23(a)(1) of the Securities Exchange Act of 1934 (15
U.S.C. 78w(a)(1)) is amended by inserting ‘‘derivatives,’’
after ‘‘and may for such purposes classify persons, securi-
ties,’’.
(b) REPORTS.—Section 8(a) of the Market Reform
Act of 1990 is amended by striking ‘‘May 31, 1991, and
annually thereafter until May 31, 1995,’’ and inserting
‘‘May 31, 2000, and annually thereafter’’.
SEC. 209. CONFORMING AMENDMENTS.
Section 3(a)(48) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(48)) is amended to read as fol-
lows:
‘‘(48) The term ‘registered broker or dealer’
means a broker or dealer registered or required to
register pursuant to section 15 or 15B of this title,
except that—
‘‘(A) in paragraph (3)(A) of this sub-
section and in section 6, the term means such
a broker or dealer or a government securities
broker or government securities dealer reg-
istered or required to register pursuant to sec-
tion 15C(a)(1)(A) of this title; and
‘‘(B) in paragraph (3)(B) of this sub-
section and in section 15A, the term means
such a broker or dealer, a government securities
broker or government securities dealer reg-
istered or required to register pursuant to sec-
tion 15C(a)(1)(A) of this title, or a derivatives
dealer registered or required to register pursu-
ant to section 15D(a)(1)(A) of this title.’’.
TITLE III—HEDGE FUND
REPORTING
SEC. 301. PUBLIC REPORTING BY UNREGISTERED HEDGE
FUNDS.
Section 30 of the Investment Company Act of 1940
(15 U.S.C. 80a–29) is amended by adding at the end the
following new subsection:
‘‘(k) REPORTS OF UNREGISTERED HEDGE FUNDS.—
‘‘(1) FILING OF REPORTS.—No later than 15
days after the end of each calendar or fiscal quarter,
every unregistered hedge fund shall submit to the
Commission a report prepared in accordance with
United States generally accepted accounting prin-
ciples that includes the following information for
each pooled investment vehicle that is part of the
unregistered hedge fund:
‘‘(A) A statement of financial condition as
of the end of the quarter.
‘‘(B) A statement of income (loss) for the
quarter ended.
‘‘(C) A statement of cash flows.
‘‘(D) A statement of changes in equity.
‘‘(E) A description of the models and
methodologies that the pooled investment vehi-
cle uses to calculate, assess, and evaluate mar-
ket risk.
‘‘(F) Such other information and within
such time period as the Commission, in con-
sultation with the Secretary of the Treasury,
the Chairman of the Federal Reserve Board,
the Commodity Futures Trading Commission,
and other appropriate regulatory agencies, may
require by rule or regulation, as may be nec-
essary or appropriate in the public interest or
for the protection of investors, including infor-
mation about sudden changes in net asset value
of a pooled investment vehicle within the quar-
ter, the leverage ratio of the pooled investment
vehicle, and the total notional amount of the
pooled investment vehicle’s exchange-traded and
over-the-counter derivatives positions.
‘‘(2) RULEMAKING.—The Commission shall
have the authority to promulgate rules and regula-
tions, as may be necessary or appropriate in the
public interest or for the protection of investors, that
prescribe the form of the reports required by para-
graph (1) and define the terms used in this sub-
section.