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imum extent practicable, establish and maintain 
comparable minimum capital requirements and 
minimum initial and variation margin require-
ments, including the use of noncash collateral, 
for— 
‘‘(i) security-based swap dealers; and 
‘‘(ii) major security-based swap par-
ticipants. 
‘‘(7) REQUESTED MARGIN.—If any party to a se-
curity-based swap that is exempt from the margin re-
quirements of paragraph (4)(A) or paragraph (4)(B) 
requests that such security-based swap be margined, 
then— 
‘‘(A) the exemption shall not apply; and 
‘‘(B) the counterparty to such security-based 
swap shall provide the requested margin. 
‘‘(8) 
APPLICABILITY
WITH
RESPECT
TO 
COUNTERPARTIES.—Paragraphs (4) and (5) shall not 
apply to initial and variation margin for security- 
based swaps in which 1 of the counterparties is not— 
‘‘(A) a security-based swap dealer; 
‘‘(B) a major security-based swap partici-
pant; or 
‘‘(C) a financial entity as described in sec-
tion 3C(a)(10)(A)(ii), and such counterparty is
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eligible for and utilizing the commercial end user 
clearing exemption under section 3C(a)(10). 
‘‘(f) REPORTING AND RECORDKEEPING.— 
‘‘(1) IN
GENERAL.—Each registered security- 
based swap dealer and major security-based swap 
participant— 
‘‘(A) shall make such reports as are re-
quired by the Commission, by rule or regulation, 
regarding the transactions and positions and fi-
nancial condition of the registered security-based 
swap dealer or major security-based swap partic-
ipant; 
‘‘(B)(i) for which there is a prudential regu-
lator, shall keep books and records of all activi-
ties related to the business as a security-based 
swap dealer or major security-based swap partic-
ipant in such form and manner and for such pe-
riod as may be prescribed by the Commission by 
rule or regulation; and 
‘‘(ii) for which there is no prudential regu-
lator, shall keep books and records in such form 
and manner and for such period as may be pre-
scribed by the Commission by rule or regulation; 
and
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‘‘(C) shall keep books and records described 
in subparagraph (B) open to inspection and ex-
amination by any representative of the Commis-
sion. 
‘‘(2) RULES.—The Commission shall adopt rules 
governing reporting and recordkeeping for security- 
based swap dealers and major security-based swap 
participants. 
‘‘(g) DAILY TRADING RECORDS.— 
‘‘(1) IN
GENERAL.—Each registered security- 
based swap dealer and major security-based swap 
participant shall maintain daily trading records of 
the security-based swaps of the registered security- 
based swap dealer and major security-based swap 
participant and all related records (including related 
cash or forward transactions) and recorded commu-
nications, including electronic mail, instant messages, 
and recordings of telephone calls, for such period as 
may be required by the Commission by rule or regula-
tion. 
‘‘(2) INFORMATION REQUIREMENTS.—The daily 
trading records shall include such information as the 
Commission shall require by rule or regulation. 
‘‘(3) CUSTOMER RECORDS.—Each registered se-
curity-based swap dealer and major security-based
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swap participant shall maintain daily trading 
records for each customer or counterparty in a man-
ner and form that is identifiable with each security- 
based swap transaction. 
‘‘(4) AUDIT
TRAIL.—Each registered security- 
based swap dealer and major security-based swap 
participant shall maintain a complete audit trail for 
conducting comprehensive and accurate trade recon-
structions. 
‘‘(5) RULES.—The Commission shall adopt rules 
governing daily trading records for security-based 
swap dealers and major security-based swap partici-
pants. 
‘‘(h) BUSINESS CONDUCT STANDARDS.— 
‘‘(1) IN
GENERAL.—Each registered security- 
based swap dealer and major security-based swap 
participant shall conform with such business conduct 
standards as may be prescribed by the Commission, 
by rule or regulation, that relate to— 
‘‘(A) fraud, manipulation, and other abu-
sive practices involving security-based swaps (in-
cluding security-based swaps that are offered but 
not entered into);
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‘‘(B) diligent supervision of the business of 
the registered security-based swap dealer and 
major security-based swap participant; 
‘‘(C) adherence to all applicable position 
limits; and 
‘‘(D) such other matters as the Commission 
determines to be appropriate. 
‘‘(2) SPECIAL RULE; FIDUCIARY DUTIES TO CER-
TAIN ENTITIES.— 
‘‘(A) GOVERNMENTAL
ENTITIES.—A secu-
rity-based swap dealer that provides advice re-
garding, or offers to enter into, or enters into a 
security-based swap with a State, State agency, 
city, county, municipality, or other political sub-
division of a State, or a Federal agency shall 
have a fiduciary duty to the State, State agency, 
city, county, municipality, or other political sub-
division of the State, or the Federal agency, as 
appropriate. 
‘‘(B) PENSION
PLANS; ENDOWMENTS; RE-
TIREMENT PLANS.—A security-based swap dealer 
that provides advice regarding, or offers to enter 
into, or enters into a security-based swap with 
a pension plan, endowment, or retirement plan
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shall have a fiduciary duty to the pension plan, 
endowment, or retirement plan, as appropriate. 
‘‘(3) BUSINESS
CONDUCT
REQUIREMENTS.— 
Business conduct requirements adopted by the Com-
mission under this subsection shall— 
‘‘(A) establish the standard of care for a se-
curity-based swap dealer or major security-based 
swap 
participant 
to 
verify 
that 
any 
counterparty meets the eligibility standards for 
an eligible contract participant; 
‘‘(B) require disclosure by the security-based 
swap dealer or major security-based swap partic-
ipant to any counterparty to the transaction 
(other than a security-based swap dealer or a 
major security-based swap participant) of— 
‘‘(i) information about the material 
risks and characteristics of the security- 
based swap; 
‘‘(ii) the source and amount of any fees 
or other material remuneration that the se-
curity-based swap dealer or major security- 
based swap participant would directly or 
indirectly expect to receive in connection 
with the security-based swap;
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‘‘(iii) any other material incentives or 
conflicts of interest that the security-based 
swap dealer or major security-based swap 
participant may have in connection with 
the security-based swap; and 
‘‘(iv)(I) 
for 
cleared 
security-based 
swaps, upon the request of the counterparty, 
the daily mark from the appropriate clear-
ing agency; and 
‘‘(II) 
for 
uncleared 
security-based 
swaps, the daily mark of the security-based 
swap dealer or the major security-based 
swap participant; 
‘‘(C) establish a standard of conduct for a 
security-based swap dealer or major security- 
based swap participant to communicate in a 
fair and balanced manner based on principles of 
fair dealing and good faith; 
‘‘(D) establish a standard of conduct for a 
security-based swap dealer or major security- 
based swap participant, with respect to a 
counterparty that is an eligible contract partici-
pant within the meaning of subclause (I) or (II) 
of clause (vii) of section 1a(18) of the Com-
modity Exchange Act, to have a reasonable basis
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to believe that the counterparty has an inde-
pendent representative that— 
‘‘(i) has sufficient knowledge to evalu-
ate the transaction and risks; 
‘‘(ii) is not subject to a statutory dis-
qualification; 
‘‘(iii) is independent of the security- 
based swap dealer or major security-based 
swap participant; 
‘‘(iv) undertakes a duty to act in the 
best interests of the counterparty it rep-
resents; 
‘‘(v) makes appropriate disclosures; 
and 
‘‘(vi) will provide written representa-
tions to the eligible contract participant re-
garding fair pricing and the appropriate-
ness of the transaction; and 
‘‘(E) establish such other standards and re-
quirements as the Commission may determine 
are appropriate in the public interest, for the 
protection of investors, or otherwise in further-
ance of the purposes of this title. 
‘‘(4) RULES.—The Commission shall prescribe 
rules under this subsection governing business conduct
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standards for security-based swap dealers and major 
security-based swap participants. 
‘‘(i) DOCUMENTATION
AND BACK OFFICE STAND-
ARDS.— 
‘‘(1) IN
GENERAL.—Each registered security- 
based swap dealer and major security-based swap 
participant shall conform with such standards as 
may be prescribed by the Commission, by rule or reg-
ulation, that relate to timely and accurate confirma-
tion, processing, netting, documentation, and valu-
ation of all security-based swaps. 
‘‘(2) RULES.—The Commission shall adopt rules 
governing documentation and back office standards 
for security-based swap dealers and major security- 
based swap participants. 
‘‘(j) DUTIES.—Each registered security-based swap 
dealer and major security-based swap participant shall, at 
all times, comply with the following requirements: 
‘‘(1) MONITORING OF TRADING.—The security- 
based swap dealer or major security-based swap par-
ticipant shall monitor its trading in security-based 
swaps to prevent violations of applicable position 
limits. 
‘‘(2) RISK MANAGEMENT PROCEDURES.—The se-
curity-based swap dealer or major security-based
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tion to perform any of the functions described in 
this section; and 
‘‘(B) provide the information to the Com-
mission and to the prudential regulator for the 
security-based swap dealer or major security- 
based swap participant, as applicable, on re-
quest. 
‘‘(5) CONFLICTS
OF
INTEREST.—The security- 
based swap dealer and major security-based swap 
participant shall implement conflict-of-interest sys-
tems and procedures that— 
‘‘(A) establish structural and institutional 
safeguards to ensure that the activities of any 
person within the firm relating to research or 
analysis of the price or market for any security- 
based swap or acting in a role of providing 
clearing activities or making determinations as 
to accepting clearing customers are separated by 
appropriate informational partitions within the 
firm from the review, pressure, or oversight of 
persons whose involvement in pricing, trading, 
or clearing activities might potentially bias their 
judgment or supervision and contravene the core 
principles of open access and the business con-
duct standards described in this title; and
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swap dealer and major security-based swap par-
ticipant requirements described in this section; 
‘‘(C) in consultation with the board of di-
rectors, a body performing a function similar to 
the board, or the senior officer of the organiza-
tion, resolve any conflicts of interest that may 
arise; 
‘‘(D) be responsible for administering each 
policy and procedure that is required to be estab-
lished pursuant to this section; 
‘‘(E) ensure compliance with this title (in-
cluding regulations) relating to security-based 
swaps, including each rule prescribed by the 
Commission under this section; 
‘‘(F) establish procedures for the remedi-
ation of noncompliance issues identified by the 
chief compliance officer through any— 
‘‘(i) compliance office review; 
‘‘(ii) look-back; 
‘‘(iii) internal or external audit find-
ing; 
‘‘(iv) self-reported error; or 
‘‘(v) validated complaint; and 
‘‘(G) establish and follow appropriate proce-
dures for the handling, management response, re-
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mediation, retesting, and closing of noncompli-
ance issues. 
‘‘(3) ANNUAL REPORTS.— 
‘‘(A) IN
GENERAL.—In accordance with 
rules prescribed by the Commission, the chief 
compliance officer shall annually prepare and 
sign a report that contains a description of— 
‘‘(i) the compliance of the security- 
based swap dealer or major swap partici-
pant with respect to this title (including 
regulations); and 
‘‘(ii) each policy and procedure of the 
security-based swap dealer or major secu-
rity-based swap participant of the chief 
compliance officer (including the code of 
ethics and conflict of interest policies). 
‘‘(B) REQUIREMENTS.—A compliance re-
port under subparagraph (A) shall— 
‘‘(i) accompany each appropriate fi-
nancial report of the security-based swap 
dealer or major security-based swap partici-
pant that is required to be furnished to the 
Commission pursuant to this section; and
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‘‘(ii) include a certification that, under 
penalty of law, the compliance report is ac-
curate and complete. 
‘‘(l) ENFORCEMENT
AND
ADMINISTRATIVE
PRO-
CEEDING AUTHORITY.— 
‘‘(1) PRIMARY ENFORCEMENT AUTHORITY.— 
‘‘(A) SECURITIES AND EXCHANGE COMMIS-
SION.—Except as provided in subparagraph (B), 
the Commission shall have primary authority to 
enforce subtitle B, and the amendments made by 
subtitle B of the Wall Street Transparency and 
Accountability Act of 2010, with respect to any 
person. 
‘‘(B) 
APPROPRIATE
FEDERAL
BANKING 
AGENCIES.—The appropriate Federal banking 
agency for security-based swap dealers or major 
security-based swap participants that are deposi-
tory institutions, as that term is defined under 
section 3 of the Federal Deposit Insurance Act 
(12 U.S.C. 1813), shall have exclusive authority 
to enforce the provisions of subsection (e) and 
other prudential requirements of this title, with 
respect to depository institutions that are secu-
rity-based swap dealers or major security-based 
swap participants.
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‘‘(C) REFERRAL.— 
‘‘(i) VIOLATIONS
OF
NONPRUDENTIAL 
REQUIREMENTS.—If the appropriate Fed-
eral banking agency for security-based swap 
dealers or major security-based swap par-
ticipants that are depository institutions 
has cause to believe that such security-based 
swap dealer or major security-based swap 
participant may have engaged in conduct 
that constitutes a violation of the non-
prudential requirements of this section or 
rules adopted by the Commission there-
under, the agency may recommend in writ-
ing to the Commission that the Commission 
initiate an enforcement proceeding as au-
thorized under this title. The recommenda-
tion shall be accompanied by a written ex-
planation of the concerns giving rise to the 
recommendation. 
‘‘(ii) VIOLATIONS OF PRUDENTIAL RE-
QUIREMENTS.—If the Commission has cause 
to believe that a securities-based swap deal-
er or major securities-based swap partici-
pant that has a prudential regulator may 
have engaged in conduct that constitute a
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violation of the prudential requirements of 
subsection (e) or rules adopted thereunder, 
the Commission may recommend in writing 
to the prudential regulator that the pruden-
tial regulator initiate an enforcement pro-
ceeding as authorized under this title. The 
recommendation shall be accompanied by a 
written explanation of the concerns giving 
rise to the recommendation. 
‘‘(2) CENSURE, DENIAL, SUSPENSION; NOTICE 
AND HEARING.—The Commission, by order, shall cen-
sure, place limitations on the activities, functions, or 
operations of, or revoke the registration of any secu-
rity-based swap dealer or major security-based swap 
participant that has registered with the Commission 
pursuant to subsection (b) if the Commission finds, 
on the record after notice and opportunity for hear-
ing, that such censure, placing of limitations, or rev-
ocation is in the public interest and that such secu-
rity-based swap dealer or major security-based swap 
participant, or any person associated with such secu-
rity-based swap dealer or major security-based swap 
participant effecting or involved in effecting trans-
actions in security-based swaps on behalf of such secu-
rity-based swap dealer or major security-based swap
875 
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participant, whether prior or subsequent to becoming 
so associated— 
‘‘(A) has committed or omitted any act, or 
is subject to an order or finding, enumerated in 
subparagraph (A), (D), or (E) of paragraph (4) 
of section 15(b); 
‘‘(B) has been convicted of any offense speci-
fied in subparagraph (B) of such paragraph (4) 
within 10 years of the commencement of the pro-
ceedings under this subsection; 
‘‘(C) is enjoined from any action, conduct, 
or practice specified in subparagraph (C) of such 
paragraph (4); 
‘‘(D) is subject to an order or a final order 
specified in subparagraph (F) or (H), respec-
tively, of such paragraph (4); or 
‘‘(E) has been found by a foreign financial 
regulatory authority to have committed or omit-
ted any act, or violated any foreign statute or 
regulation, enumerated in subparagraph (G) of 
such paragraph (4). 
‘‘(3) ASSOCIATED
PERSONS.—With respect to 
any person who is associated, who is seeking to be-
come associated, or, at the time of the alleged mis-
conduct, who was associated or was seeking to become
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associated with a security-based swap dealer or major 
security-based swap participant for the purpose of ef-
fecting or being involved in effecting security-based 
swaps on behalf of such security-based swap dealer or 
major security-based swap participant, the Commis-
sion, by order, shall censure, place limitations on the 
activities or functions of such person, or suspend for 
a period not exceeding 12 months, or bar such person 
from being associated with a security-based swap 
dealer or major security-based swap participant, if 
the Commission finds, on the record after notice and 
opportunity for a hearing, that such censure, placing 
of limitations, suspension, or bar is in the public in-
terest and that such person— 
‘‘(A) has committed or omitted any act, or 
is subject to an order or finding, enumerated in 
subparagraph (A), (D), or (E) of paragraph (4) 
of section 15(b); 
‘‘(B) has been convicted of any offense speci-
fied in subparagraph (B) of such paragraph (4) 
within 10 years of the commencement of the pro-
ceedings under this subsection; 
‘‘(C) is enjoined from any action, conduct, 
or practice specified in subparagraph (C) of such 
paragraph (4);
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‘‘(D) is subject to an order or a final order 
specified in subparagraph (F) or (H), respec-
tively, of such paragraph (4); or 
‘‘(E) has been found by a foreign financial 
regulatory authority to have committed or omit-
ted any act, or violated any foreign statute or 
regulation, enumerated in subparagraph (G) of 
such paragraph (4). 
‘‘(4) UNLAWFUL CONDUCT.—It shall be unlaw-
ful— 
‘‘(A) for any person as to whom an order 
under paragraph (3) is in effect, without the 
consent of the Commission, willfully to become, 
or to be, associated with a security-based swap 
dealer or major security-based swap participant 
in contravention of such order; or 
‘‘(B) for any security-based swap dealer or 
major security-based swap participant to permit 
such a person, without the consent of the Com-
mission, to become or remain a person associated 
with the security-based swap dealer or major se-
curity-based swap participant in contravention 
of such order, if such security-based swap dealer 
or major security-based swap participant knew,
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or in the exercise of reasonable care should have 
known, of such order.’’. 
SEC. 765. RULEMAKING ON CONFLICT OF INTEREST. 
(a) IN GENERAL.—Not later than 180 days after the 
date of enactment of the Wall Street Transparency and Ac-
countability Act of 2010, the Securities and Exchange Com-
mission shall determine whether to adopt rules to establish 
limits on the control of any clearing agency that clears secu-
rity-based swaps, or on the control of any security-based 
swap execution facility or national securities exchange that 
posts or makes available for trading security-based swaps, 
by a bank holding company (as defined in section 2 of the 
Bank Holding Company Act of 1956 (12 U.S.C. 1841)) 
with total consolidated assets of $50,000,000,000 or more, 
a nonbank financial company (as defined in section 102) 
supervised by the Board of Governors of the Federal Reserve 
System, affiliate of such a bank holding company or 
nonbank financial company, a security-based swap dealer, 
major security-based swap participant, or person associated 
with a security-based swap dealer or major security-based 
swap participant. 
(b) PURPOSES.—The Commission shall adopt rules if 
the Commission determines, after the review described in 
subsection (a), that such rules are necessary or appropriate 
to improve the governance of, or to mitigate systemic risk,
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promote competition, or mitigate conflicts of interest in 
connection with a security-based swap dealer or major secu-
rity-based swap participant’s conduct of business with, a 
clearing agency, national securities exchange, or security- 
based swap execution facility that clears, posts, or makes 
available for trading security-based swaps and in which 
such security-based swap dealer or major security-based 
swap participant has a material debt or equity investment. 
SEC. 766. REPORTING AND RECORDKEEPING. 
(a) IN GENERAL.—The Securities Exchange Act of 
1934 (15 U.S.C. 78a et seq.) is amended by inserting after 
section 13 the following: 
‘‘SEC. 13A. REPORTING AND RECORDKEEPING FOR CERTAIN 
SECURITY-BASED SWAPS. 
‘‘(a) REQUIRED
REPORTING
OF
SECURITY-BASED 
SWAPS NOT ACCEPTED BY ANY CLEARING AGENCY OR DE-
RIVATIVES CLEARING ORGANIZATION.— 
‘‘(1) IN
GENERAL.—Each security-based swap 
that is not accepted for clearing by any clearing 
agency or derivatives clearing organization shall be 
reported to— 
‘‘(A) a security-based swap data repository 
described in section 10B(n); or 
‘‘(B) in the case in which there is no secu-
rity-based swap data repository that would ac-
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cept the security-based swap, to the Commission 
pursuant to this section within such time period 
as the Commission may by rule or regulation 
prescribe. 
‘‘(2) TRANSITION RULE FOR PREENACTMENT SE-
CURITY-BASED SWAPS.— 
‘‘(A) SECURITY-BASED
SWAPS
ENTERED 
INTO BEFORE THE DATE OF ENACTMENT OF THE 
WALL
STREET
TRANSPARENCY
AND
ACCOUNT-
ABILITY ACT OF 2010.—Each security-based swap 
entered into before the date of enactment of the 
Wall Street Transparency and Accountability 
Act of 2010, the terms of which have not expired 
as of the date of enactment of that Act, shall be 
reported to a registered security-based swap data 
repository or the Commission by a date that is 
not later than— 
‘‘(i) 30 days after issuance of the in-
terim final rule; or 
‘‘(ii) such other period as the Commis-
sion determines to be appropriate. 
‘‘(B) COMMISSION RULEMAKING.—The Com-
mission shall promulgate an interim final rule 
within 90 days of the date of enactment of this 
section providing for the reporting of each secu-
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rity-based swap entered into before the date of 
enactment as referenced in subparagraph (A). 
‘‘(C) EFFECTIVE DATE.—The reporting pro-
visions described in this section shall be effective 
upon the date of the enactment of this section. 
‘‘(3) REPORTING OBLIGATIONS.— 
‘‘(A) SECURITY-BASED
SWAPS
IN
WHICH 
ONLY
COUNTERPARTY
IS
A
SECURITY-BASED 
SWAP DEALER OR MAJOR SECURITY-BASED SWAP 
PARTICIPANT.—With respect to a security-based 
swap in which only 1 counterparty is a security- 
based swap dealer or major security-based swap 
participant, the security-based swap dealer or 
major security-based swap participant shall re-
port the security-based swap as required under 
paragraphs (1) and (2). 
‘‘(B) SECURITY-BASED SWAPS IN WHICH 1 
COUNTERPARTY
IS
A
SECURITY-BASED
SWAP 
DEALER AND THE OTHER A MAJOR SECURITY- 
BASED SWAP PARTICIPANT.—With respect to a 
security-based swap in which 1 counterparty is 
a security-based swap dealer and the other a 
major security-based swap participant, the secu-
rity-based swap dealer shall report the security-
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based swap as required under paragraphs (1) 
and (2). 
‘‘(C) OTHER
SECURITY-BASED
SWAPS.— 
With respect to any other security-based swap 
not described in subparagraph (A) or (B), the 
counterparties to the security-based swap shall 
select a counterparty to report the security-based 
swap as required under paragraphs (1) and (2). 
‘‘(b) DUTIES OF CERTAIN INDIVIDUALS.—Any indi-
vidual or entity that enters into a security-based swap shall 
meet each requirement described in subsection (c) if the in-
dividual or entity did not— 
‘‘(1) clear the security-based swap in accordance 
with section 3C(a)(1); or 
‘‘(2) have the data regarding the security-based 
swap accepted by a security-based swap data reposi-
tory in accordance with rules (including timeframes) 
adopted by the Commission under this title. 
‘‘(c) REQUIREMENTS.—An individual or entity de-
scribed in subsection (b) shall— 
‘‘(1) upon written request from the Commission, 
provide reports regarding the security-based swaps 
held by the individual or entity to the Commission in 
such form and in such manner as the Commission 
may request; and
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‘‘(2) maintain books and records pertaining to 
the security-based swaps held by the individual or en-
tity in such form, in such manner, and for such pe-
riod as the Commission may require, which shall be 
open to inspection by— 
‘‘(A) any representative of the Commission; 
‘‘(B) an appropriate prudential regulator; 
‘‘(C) the Commodity Futures Trading Com-
mission; 
‘‘(D) the Financial Stability Oversight 
Council; and 
‘‘(E) the Department of Justice. 
‘‘(d) IDENTICAL DATA.—In prescribing rules under 
this section, the Commission shall require individuals and 
entities described in subsection (b) to submit to the Commis-
sion a report that contains data that is not less comprehen-
sive than the data required to be collected by security-based 
swap data repositories under this title.’’. 
(b) BENEFICIAL OWNERSHIP REPORTING.—Section 13 
of the Securities Exchange Act of 1934 (15 U.S.C. 78m) 
is amended— 
(1) in subsection (d)(1), by inserting ‘‘or other-
wise becomes or is deemed to become a beneficial 
owner of any of the foregoing upon the purchase or 
sale of a security-based swap that the Commission
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† HR 4173 PP
may define by rule, and’’ after ‘‘Alaska Native Claims 
Settlement Act,’’; and 
(2) in subsection (g)(1), by inserting ‘‘or other-
wise becomes or is deemed to become a beneficial 
owner of any security of a class described in sub-
section (d)(1) upon the purchase or sale of a security- 
based swap that the Commission may define by rule’’ 
after ‘‘subsection (d)(1) of this section’’. 
(c) REPORTS BY INSTITUTIONAL INVESTMENT MAN-
AGERS.—Section 13(f)(1) of the Securities Exchange Act of 
1934 (15 U.S.C. 78m(f)(1)) is amended by inserting ‘‘or 
otherwise becomes or is deemed to become a beneficial owner 
of any security of a class described in subsection (d)(1) 
upon the purchase or sale of a security-based swap that the 
Commission may define by rule,’’ after ‘‘subsection (d)(1) 
of this section’’. 
(d) ADMINISTRATIVE PROCEEDING AUTHORITY.—Sec-
tion 15(b)(4) of the Securities Exchange Act of 1934 (15 
U.S.C. 78o(b)(4)) is amended— 
(1) in subparagraph (C), by inserting ‘‘security- 
based swap dealer, major security-based swap partici-
pant,’’ after ‘‘government securities dealer,’’; and 
(2) in subparagraph (F), by striking ‘‘broker or 
dealer’’ and inserting ‘‘broker, dealer, security-based
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swap dealer, or a major security-based swap partici-
pant’’. 
(e) SECURITY-BASED
SWAP
BENEFICIAL
OWNER-
SHIP.—Section 13 of the Securities Exchange Act of 1934 
(15 U.S.C. 78m) is amended by adding at the end the fol-
lowing: 
‘‘(o) BENEFICIAL OWNERSHIP.—For purposes of this 
section and section 16, a person shall be deemed to acquire 
beneficial ownership of an equity security based on the pur-
chase or sale of a security-based swap, only to the extent 
that the Commission, by rule, determines after consultation 
with the prudential regulators and the Secretary of the 
Treasury, that the purchase or sale of the security-based 
swap, or class of security-based swap, provides incidents of 
ownership comparable to direct ownership of the equity se-
curity, and that it is necessary to achieve the purposes of 
this section that the purchase or sale of the security-based 
swaps, or class of security-based swap, be deemed the acqui-
sition of beneficial ownership of the equity security.’’. 
SEC. 767. STATE GAMING AND BUCKET SHOP LAWS. 
Section 28(a) of the Securities Exchange Act of 1934 
(15 U.S.C. 78bb(a)) is amended to read as follows: 
‘‘(a) LIMITATION ON JUDGMENTS.— 
‘‘(1) IN
GENERAL.—No person permitted to 
maintain a suit for damages under the provisions of
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this title shall recover, through satisfaction of judg-
ment in 1 or more actions, a total amount in excess 
of the actual damages to that person on account of the 
act complained of. Except as otherwise specifically 
provided in this title, nothing in this title shall affect 
the jurisdiction of the securities commission (or any 
agency or officer performing like functions) of any 
State over any security or any person insofar as it 
does not conflict with the provisions of this title or the 
rules and regulations under this title. 
‘‘(2) RULE OF CONSTRUCTION.—Except as pro-
vided in subsection (f), the rights and remedies pro-
vided by this title shall be in addition to any and all 
other rights and remedies that may exist at law or in 
equity. 
‘‘(3) STATE BUCKET SHOP LAWS.—No State law 
which prohibits or regulates the making or promoting 
of wagering or gaming contracts, or the operation of 
‘bucket shops’ or other similar or related activities, 
shall invalidate— 
‘‘(A) any put, call, straddle, option, privi-
lege, or other security subject to this title (except 
any security that has a pari-mutuel payout or 
otherwise is determined by the Commission, act-
ing by rule, regulation, or order, to be appro-
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priately subject to such laws), or apply to any 
activity which is incidental or related to the 
offer, purchase, sale, exercise, settlement, or close-
out of any such security; 
‘‘(B) any security-based swap between eligi-
ble contract participants; or 
‘‘(C) any security-based swap effected on a 
national securities exchange registered pursuant 
to section 6(b). 
‘‘(4) OTHER STATE PROVISIONS.—No provision 
of State law regarding the offer, sale, or distribution 
of securities shall apply to any transaction in a secu-
rity-based swap or a security futures product, except 
that this paragraph may not be construed as limiting 
any State antifraud law of general applicability. A 
security-based swap may not be regulated as an in-
surance contract under any provision of State law.’’. 
SEC. 768. AMENDMENTS TO THE SECURITIES ACT OF 1933; 
TREATMENT OF SECURITY-BASED SWAPS. 
(a) DEFINITIONS.—Section 2(a) of the Securities Act 
of 1933 (15 U.S.C. 77b(a)) is amended— 
(1) in paragraph (1), by inserting ‘‘security- 
based swap,’’ after ‘‘security future,’’; 
(2) in paragraph (3), by adding at the end the 
following: ‘‘Any offer or sale of a security-based swap
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by or on behalf of the issuer of the securities upon 
which such security-based swap is based or is ref-
erenced, an affiliate of the issuer, or an underwriter, 
shall constitute a contract for sale of, sale of, offer for 
sale, or offer to sell such securities.’’; and 
(3) by adding at the end the following: 
‘‘(17) The terms ‘swap’ and ‘security-based swap’ 
have the same meanings as in section 1a of the Com-
modity Exchange Act (7 U.S.C. 1a). 
‘‘(18) The terms ‘purchase’ or ‘sale’ of a security- 
based swap shall be deemed to mean the execution, 
termination (prior to its scheduled maturity date), 
assignment, exchange, or similar transfer or convey-
ance of, or extinguishing of rights or obligations 
under, a security-based swap, as the context may re-
quire.’’. 
(b) REGISTRATION OF SECURITY-BASED SWAPS.—Sec-
tion 5 of the Securities Act of 1933 (15 U.S.C. 77e) is 
amended by adding at the end the following: 
‘‘(d) Notwithstanding the provisions of section 3 or 4, 
unless a registration statement meeting the requirements of 
section 10(a) is in effect as to a security-based swap, it shall 
be unlawful for any person, directly or indirectly, to make 
use of any means or instruments of transportation or com-
munication in interstate commerce or of the mails to offer
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to sell, offer to buy or purchase or sell a security-based swap 
to any person who is not an eligible contract participant 
as defined in section 1a(18) of the Commodity Exchange 
Act (7 U.S.C. 1a(18)).’’. 
SEC. 769. DEFINITIONS UNDER THE INVESTMENT COMPANY 
ACT OF 1940. 
Section 2(a) of the Investment Company Act of 1940 
(15 U.S.C. 80a–2) is amended by adding at the end the 
following: 
‘‘(54) The terms ‘commodity pool’, ‘commodity 
pool operator’, ‘commodity trading advisor’, ‘major 
swap participant’, ‘swap’, ‘swap dealer’, and ‘swap 
execution facility’ have the same meanings as in sec-
tion 1a of the Commodity Exchange Act (7 U.S.C. 
1a).’’. 
SEC. 770. DEFINITIONS UNDER THE INVESTMENT ADVI-
SORS ACT OF 1940. 
Section 202(a) of the Investment Advisers Act of 1940 
(15 U.S.C. 80b–2) is amended by adding at the end the 
following: 
‘‘(29) The terms ‘commodity pool’, ‘commodity 
pool operator’, ‘commodity trading advisor’, ‘major 
swap participant’, ‘swap’, ‘swap dealer’, and ‘swap 
execution facility’ have the same meanings as in sec-
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tion 1a of the Commodity Exchange Act (7 U.S.C. 
1a).’’. 
SEC. 771. OTHER AUTHORITY. 
Unless otherwise provided by its terms, this subtitle 
does not divest any appropriate Federal banking agency, 
the Securities and Exchange Commission, the Commodity 
Futures Trading Commission, or any other Federal or State 
agency, of any authority derived from any other provision 
of applicable law. 
SEC. 772. JURISDICTION. 
(a) IN GENERAL.—Section 36 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78mm) is amended by add-
ing at the end the following: 
‘‘(c) DERIVATIVES.—The Commission shall not grant 
exemptions from the security-based swap provisions of the 
Wall Street Transparency and Accountability Act of 2010 
or the amendments made by that Act, except as expressly 
authorized under the provisions of that Act.’’. 
(b) RULE OF CONSTRUCTION.—Section 30 of the Secu-
rities Exchange Act of 1934 (15 U.S.C. 78dd) is amended 
by adding at the end the following: 
‘‘(c) RULE OF CONSTRUCTION.—No provision of this 
title that was added by the Wall Street Transparency and 
Accountability Act of 2010, or any rule or regulation there-
under, shall apply to any person insofar as such person
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transacts a business in security-based swaps without the ju-
risdiction of the United States, unless such person transacts 
such business in contravention of such rules and regulations 
as the Commission may prescribe as necessary or appro-
priate to prevent the evasion of any provision of this title 
that was added by the Wall Street Transparency and Ac-
countability Act of 2010. This subsection shall not be con-
strued to limit the jurisdiction of the Commission under 
any provision of this title, as in effect prior to the date 
of enactment of the Wall Street Transparency and Account-
ability Act of 2010.’’. 
SEC. 773. EFFECTIVE DATE. 
Unless otherwise specifically provided in this subtitle, 
this subtitle, the provisions of this subtitle, and the amend-
ments made by this subtitle shall become effective 180 days 
after the date of enactment of this Act. 
TITLE 
VIII—PAYMENT, 
CLEAR-
ING, AND SETTLEMENT SU-
PERVISION 
SEC. 801. SHORT TITLE. 
This title may be cited as the ‘‘Payment, Clearing, and 
Settlement Supervision Act of 2010’’. 
SEC. 802. FINDINGS AND PURPOSES. 
(a) FINDINGS.—Congress finds the following:
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(1) The proper functioning of the financial mar-
kets is dependent upon safe and efficient arrange-
ments for the clearing and settlement of payment, se-
curities, and other financial transactions. 
(2) Financial market utilities that conduct or 
support multilateral payment, clearing, or settlement 
activities may reduce risks for their participants and 
the broader financial system, but such utilities may 
also concentrate and create new risks and thus must 
be well designed and operated in a safe and sound 
manner. 
(3) Payment, clearing, and settlement activities 
conducted by financial institutions also present im-
portant risks to the participating financial institu-
tions and to the financial system. 
(4) Enhancements to the regulation and super-
vision of systemically important financial market 
utilities and the conduct of systemically important 
payment, clearing, and settlement activities by finan-
cial institutions are necessary— 
(A) to provide consistency; 
(B) to promote robust risk management and 
safety and soundness; 
(C) to reduce systemic risks; and
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(D) to support the stability of the broader 
financial system. 
(b) PURPOSE.—The purpose of this title is to mitigate 
systemic risk in the financial system and promote financial 
stability by— 
(1) authorizing the Board of Governors to pre-
scribe uniform standards for the— 
(A) management of risks by systemically 
important financial market utilities; and 
(B) conduct of systemically important pay-
ment, clearing, and settlement activities by fi-
nancial institutions; 
(2) providing the Board of Governors an en-
hanced role in the supervision of risk management 
standards for systemically important financial mar-
ket utilities; 
(3) strengthening the liquidity of systemically 
important financial market utilities; and 
(4) providing the Board of Governors an en-
hanced role in the supervision of risk management 
standards for systemically important payment, clear-
ing, and settlement activities by financial institu-
tions. 
SEC. 803. DEFINITIONS. 
In this title, the following definitions shall apply:
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(1) APPROPRIATE FINANCIAL REGULATOR.—The 
term ‘‘appropriate financial regulator’’ means— 
(A) the primary financial regulatory agen-
cy, as defined in section 2 of this Act; 
(B) the National Credit Union Administra-
tion, with respect to any insured credit union 
under the Federal Credit Union Act (12 U.S.C. 
1751 et seq.); and 
(C) the Board of Governors, with respect to 
organizations operating under section 25A of the 
Federal Reserve Act (12 U.S.C. 611), and any 
other financial institution engaged in a des-
ignated activity. 
(2) DESIGNATED
ACTIVITY.—The term ‘‘des-
ignated activity’’ means a payment, clearing, or set-
tlement activity that the Council has designated as 
systemically important under section 804. 
(3) DESIGNATED FINANCIAL MARKET UTILITY.— 
The term ‘‘designated financial market utility’’ means 
a financial market utility that the Council has des-
ignated as systemically important under section 804. 
(4) FINANCIAL INSTITUTION.—The term ‘‘finan-
cial institution’’ means—
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(A) a depository institution, as defined in 
section 3 of the Federal Deposit Insurance Act 
(12 U.S.C. 1813); 
(B) a branch or agency of a foreign bank, 
as defined in section 1(b) of the International 
Banking Act of 1978 (12 U.S.C. 3101); 
(C) an organization operating under section 
25 or 25A of the Federal Reserve Act (12 U.S.C. 
601–604a and 611 through 631); 
(D) a credit union, as defined in section 
101 of the Federal Credit Union Act (12 U.S.C. 
1752); 
(E) a broker or dealer, as defined in section 
3 of the Securities Exchange Act of 1934 (15 
U.S.C. 78c); 
(F) an investment company, as defined in 
section 3 of the Investment Company Act of 1940 
(15 U.S.C. 80a–3); 
(G) an insurance company, as defined in 
section 2 of the Investment Company Act of 1940 
(15 U.S.C. 80a–2); 
(H) an investment adviser, as defined in 
section 202 of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–2);
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(I) a futures commission merchant, com-
modity trading advisor, or commodity pool oper-
ator, as defined in section 1a of the Commodity 
Exchange Act (7 U.S.C. 1a); and 
(J) any company engaged in activities that 
are financial in nature or incidental to a finan-
cial activity, as described in section 4 of the 
Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)). 
(5) FINANCIAL MARKET UTILITY.—The term ‘‘fi-
nancial market utility’’ means any person that man-
ages or operates a multilateral system for the purpose 
of transferring, clearing, or settling payments, securi-
ties, or other financial transactions among financial 
institutions or between financial institutions and the 
person. 
(6) PAYMENT, CLEARING, OR SETTLEMENT ACTIV-
ITY.— 
(A) IN
GENERAL.—The term ‘‘payment, 
clearing, or settlement activity’’ means an activ-
ity carried out by 1 or more financial institu-
tions to facilitate the completion of financial 
transactions.
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(B) FINANCIAL
TRANSACTION.—For the 
purposes of subparagraph (A), the term ‘‘finan-
cial transaction’’ includes— 
(i) funds transfers; 
(ii) securities contracts; 
(iii) contracts of sale of a commodity 
for future delivery; 
(iv) forward contracts; 
(v) repurchase agreements; 
(vi) swaps; 
(vii) security-based swaps; 
(viii) swap agreements; 
(ix) security-based swap agreements; 
(x) foreign exchange contracts; 
(xi) financial derivatives contracts; 
and 
(xii) any similar transaction that the 
Council determines to be a financial trans-
action for purposes of this title. 
(C) INCLUDED
ACTIVITIES.—When con-
ducted with respect to a financial transaction, 
payment, clearing, and settlement activities may 
include—
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(i) the calculation and communication 
of unsettled financial transactions between 
counterparties; 
(ii) the netting of transactions; 
(iii) provision and maintenance of 
trade, contract, or instrument information; 
(iv) the management of risks and ac-
tivities associated with continuing financial 
transactions; 
(v) transmittal and storage of payment 
instructions; 
(vi) the movement of funds; 
(vii) the final settlement of financial 
transactions; and 
(viii) other similar functions that the 
Council may determine. 
(7) SUPERVISORY AGENCY.— 
(A) IN GENERAL.—The term ‘‘Supervisory 
Agency’’ means the Federal agency that has pri-
mary jurisdiction over a designated financial 
market utility under Federal banking, securities, 
or commodity futures laws, as follows: 
(i) The Securities and Exchange Com-
mission, with respect to a designated finan-
cial market utility that is a clearing agency
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registered with the Securities and Exchange 
Commission. 
(ii) The Commodity Futures Trading 
Commission, with respect to a designated fi-
nancial market utility that is a derivatives 
clearing organization registered with the 
Commodity Futures Trading Commission. 
(iii) The appropriate Federal banking 
agency, with respect to a designated finan-
cial market utility that is an institution de-
scribed in section 3(q) of the Federal De-
posit Insurance Act. 
(iv) The Board of Governors, with re-
spect to a designated financial market util-
ity that is otherwise not subject to the juris-
diction of any agency listed in clauses (i), 
(ii), and (iii). 
(B) MULTIPLE AGENCY JURISDICTION.—If a 
designated financial market utility is subject to 
the jurisdictional supervision of more than 1 
agency listed in subparagraph (A), then such 
agencies should agree on 1 agency to act as the 
Supervisory Agency, and if such agencies cannot 
agree on which agency has primary jurisdiction,
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the Council shall decide which agency is the Su-
pervisory Agency for purposes of this title. 
(8) SYSTEMICALLY
IMPORTANT
AND
SYSTEMIC 
IMPORTANCE.—The terms ‘‘systemically important’’ 
and ‘‘systemic importance’’ mean a situation where 
the failure of or a disruption to the functioning of a 
financial market utility or the conduct of a payment, 
clearing, or settlement activity could create, or in-
crease, the risk of significant liquidity or credit prob-
lems spreading among financial institutions or mar-
kets and thereby threaten the stability of the financial 
system. 
SEC. 804. DESIGNATION OF SYSTEMIC IMPORTANCE. 
(a) DESIGNATION.— 
(1) FINANCIAL
STABILITY
OVERSIGHT
COUN-
CIL.—The Council, on a nondelegable basis and by a 
vote of not fewer than 2⁄3 of members then serving, in-
cluding an affirmative vote by the Chairperson of the 
Council, shall designate those financial market utili-
ties or payment, clearing, or settlement activities that 
the Council determines are, or are likely to become, 
systemically important. 
(2) CONSIDERATIONS.—In determining whether 
a financial market utility or payment, clearing, or 
settlement activity is, or is likely to become, system-
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ically important, the Council shall take into consider-
ation the following: 
(A) The aggregate monetary value of trans-
actions processed by the financial market utility 
or carried out through the payment, clearing, or 
settlement activity. 
(B) The aggregate exposure of the financial 
market utility or a financial institution engaged 
in payment, clearing, or settlement activities to 
its counterparties. 
(C) The relationship, interdependencies, or 
other interactions of the financial market utility 
or payment, clearing, or settlement activity with 
other financial market utilities or payment, 
clearing, or settlement activities. 
(D) The effect that the failure of or a dis-
ruption to the financial market utility or pay-
ment, clearing, or settlement activity would have 
on critical markets, financial institutions, or the 
broader financial system. 
(E) Any other factors that the Council 
deems appropriate. 
(b) RESCISSION OF DESIGNATION.— 
(1) IN GENERAL.—The Council, on a nondele-
gable basis and by a vote of not fewer than 2⁄3 of
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members then serving, including an affirmative vote 
by the Chairperson of the Council, shall rescind a des-
ignation of systemic importance for a designated fi-
nancial market utility or designated activity if the 
Council determines that the utility or activity no 
longer meets the standards for systemic importance. 
(2) EFFECT OF RESCISSION.—Upon rescission, 
the financial market utility or financial institutions 
conducting the activity will no longer be subject to the 
provisions of this title or any rules or orders pre-
scribed by the Council under this title. 
(c) CONSULTATION AND NOTICE AND OPPORTUNITY 
FOR HEARING.— 
(1) CONSULTATION.—Before making any deter-
mination under subsection (a) or (b), the Council 
shall consult with the relevant Supervisory Agency 
and the Board of Governors. 
(2) ADVANCE
NOTICE
AND
OPPORTUNITY
FOR 
HEARING.— 
(A) IN GENERAL.—Before making any de-
termination under subsection (a) or (b), the 
Council shall provide the financial market util-
ity or, in the case of a payment, clearing, or set-
tlement activity, financial institutions with ad-
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vance notice of the proposed determination of the 
Council. 
(B) NOTICE IN FEDERAL REGISTER.—The 
Council shall provide such advance notice to fi-
nancial institutions by publishing a notice in 
the Federal Register. 
(C) REQUESTS FOR HEARING.—Within 30 
days from the date of any notice of the proposed 
determination of the Council, the financial mar-
ket utility or, in the case of a payment, clearing, 
or settlement activity, a financial institution en-
gaged in the designated activity may request, in 
writing, an opportunity for a written or oral 
hearing before the Council to demonstrate that 
the proposed designation or rescission of designa-
tion is not supported by substantial evidence. 
(D) WRITTEN SUBMISSIONS.—Upon receipt 
of a timely request, the Council shall fix a time, 
not more than 30 days after receipt of the re-
quest, unless extended at the request of the finan-
cial market utility or financial institution, and 
place at which the financial market utility or fi-
nancial institution may appear, personally or 
through counsel, to submit written materials, or,
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at the sole discretion of the Council, oral testi-
mony or oral argument. 
(3) EMERGENCY EXCEPTION.— 
(A) WAIVER OR MODIFICATION BY VOTE OF 
THE COUNCIL.—The Council may waive or mod-
ify the requirements of paragraph (2) if the 
Council determines, by an affirmative vote of not 
less than 2⁄3 of all members then serving, includ-
ing an affirmative vote by the Chairperson of the 
Council, that the waiver or modification is nec-
essary to prevent or mitigate an immediate 
threat to the financial system posed by the finan-
cial market utility or the payment, clearing, or 
settlement activity. 
(B) NOTICE
OF
WAIVER
OR
MODIFICA-
TION.—The Council shall provide notice of the 
waiver or modification to the financial market 
utility concerned or, in the case of a payment, 
clearing, or settlement activity, to financial in-
stitutions, as soon as practicable, which shall be 
no later than 24 hours after the waiver or modi-
fication in the case of a financial market utility 
and 3 business days in the case of financial in-
stitutions. The Council shall provide the notice to 
financial institutions by posting a notice on the
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website of the Council and by publishing a notice 
in the Federal Register. 
(d) NOTIFICATION OF FINAL DETERMINATION.— 
(1) AFTER HEARING.—Within 60 days of any 
hearing under subsection (c)(3), the Council shall no-
tify the financial market utility or financial institu-
tions of the final determination of the Council in 
writing, which shall include findings of fact upon 
which the determination of the Council is based. 
(2) WHEN
NO
HEARING
REQUESTED.—If the 
Council does not receive a timely request for a hear-
ing under subsection (c)(3), the Council shall notify 
the financial market utility or financial institutions 
of the final determination of the Council in writing 
not later than 30 days after the expiration of the date 
by which a financial market utility or a financial in-
stitution could have requested a hearing. All notices 
to financial institutions under this subsection shall be 
published in the Federal Register. 
(e) EXTENSION OF TIME PERIODS.—The Council may 
extend the time periods established in subsections (c) and 
(d) as the Council determines to be necessary or appro-
priate.
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SEC. 805. STANDARDS FOR SYSTEMICALLY IMPORTANT FI-
NANCIAL MARKET UTILITIES AND PAYMENT, 
CLEARING, OR SETTLEMENT ACTIVITIES. 
(a) AUTHORITY TO PRESCRIBE STANDARDS.—The 
Board, by rule or order, and in consultation with the Coun-
cil and the Supervisory Agencies, shall prescribe risk man-
agement standards, taking into consideration relevant 
international standards and existing prudential require-
ments, governing— 
(1) the operations related to the payment, clear-
ing, and settlement activities of designated financial 
market utilities; and 
(2) the conduct of designated activities by finan-
cial institutions. 
(b) OBJECTIVES AND PRINCIPLES.—The objectives and 
principles for the risk management standards prescribed 
under subsection (a) shall be to— 
(1) promote robust risk management; 
(2) promote safety and soundness; 
(3) reduce systemic risks; and 
(4) support the stability of the broader financial 
system. 
(c) SCOPE.—The standards prescribed under sub-
section (a) may address areas such as— 
(1) risk management policies and procedures; 
(2) margin and collateral requirements;
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(3) participant or counterparty default policies 
and procedures; 
(4) the ability to complete timely clearing and 
settlement of financial transactions; 
(5) capital and financial resource requirements 
for designated financial market utilities; and 
(6) other areas that the Board determines are 
necessary to achieve the objectives and principles in 
subsection (b). 
(d) THRESHOLD LEVEL.—The standards prescribed 
under subsection (a) governing the conduct of designated 
activities by financial institutions shall, where appropriate, 
establish a threshold as to the level or significance of engage-
ment in the activity at which a financial institution will 
become subject to the standards with respect to that activity. 
(e) COMPLIANCE REQUIRED.—Designated financial 
market utilities and financial institutions subject to the 
standards prescribed by the Board of Governors for a des-
ignated activity shall conduct their operations in compli-
ance with the applicable risk management standards pre-
scribed by the Board of Governors. 
SEC. 806. OPERATIONS OF DESIGNATED FINANCIAL MAR-
KET UTILITIES. 
(a) FEDERAL RESERVE ACCOUNT AND SERVICES.— 
The Board of Governors may authorize a Federal Reserve
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Bank to establish and maintain an account for a designated 
financial market utility and provide services to the des-
ignated financial market utility that the Federal Reserve 
Bank is authorized under the Federal Reserve Act to pro-
vide to a depository institution, subject to any applicable 
rules, orders, standards, or guidelines prescribed by the 
Board of Governors. 
(b) ADVANCES.—The Board of Governors may author-
ize a Federal Reserve Bank to provide to a designated fi-
nancial market utility the same discount and borrowing 
privileges as the Federal Reserve Bank may provide to a 
depository institution under the Federal Reserve Act, sub-
ject to any applicable rules, orders, standards, or guidelines 
prescribed by the Board of Governors. 
(c) EARNINGS ON FEDERAL RESERVE BALANCES.—A 
Federal Reserve Bank may pay earnings on balances main-
tained by or on behalf of a designated financial market util-
ity in the same manner and to the same extent as the Fed-
eral Reserve Bank may pay earnings to a depository insti-
tution under the Federal Reserve Act, subject to any appli-
cable rules, orders, standards, or guidelines prescribed by 
the Board of Governors. 
(d) RESERVE REQUIREMENTS.—The Board of Gov-
ernors may exempt a designated financial market utility 
from, or modify any, reserve requirements under section 19
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of the Federal Reserve Act (12 U.S.C. 461) applicable to 
a designated financial market utility. 
(e) CHANGES TO RULES, PROCEDURES, OR OPER-
ATIONS.— 
(1) ADVANCE NOTICE.— 
(A) 
ADVANCE
NOTICE
OF
PROPOSED 
CHANGES
REQUIRED.—A designated financial 
market utility shall provide notice 60 days in 
advance advance notice to its Supervisory Agen-
cy and the Board of Governors of any proposed 
change to its rules, procedures, or operations that 
could, as defined in rules of the Board of Gov-
ernors, materially affect, the nature or level of 
risks presented by the designated financial mar-
ket utility. 
(B) TERMS AND STANDARDS PRESCRIBED 
BY THE BOARD OF GOVERNORS.—The Board of 
Governors shall prescribe regulations that define 
and describe the standards for determining when 
notice is required to be provided under subpara-
graph (A). 
(C) CONTENTS OF NOTICE.—The notice of a 
proposed change shall describe— 
(i) the nature of the change and ex-
pected effects on risks to the designated fi-
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nancial market utility, its participants, or 
the market; and 
(ii) how the designated financial mar-
ket utility plans to manage any identified 
risks. 
(D) ADDITIONAL
INFORMATION.—The Su-
pervisory Agency or the Board of Governors may 
require a designated financial market utility to 
provide any information necessary to assess the 
effect the proposed change would have on the na-
ture or level of risks associated with the des-
ignated financial market utility’s payment, 
clearing, or settlement activities and the suffi-
ciency of any proposed risk management tech-
niques. 
(E) NOTICE
OF
OBJECTION.—The Super-
visory Agency or the Board of Governors shall 
notify the designated financial market utility of 
any objection regarding the proposed change 
within 60 days from the later of— 
(i) the date that the notice of the pro-
posed change is received; or 
(ii) the date any further information 
requested for consideration of the notice is 
received.
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(F) CHANGE
NOT
ALLOWED
IF
OBJEC-
TION.—A designated financial market utility 
shall not implement a change to which the Board 
of Governors or the Supervisory Agency has an 
objection. 
(G) CHANGE
ALLOWED
IF
NO
OBJECTION 
WITHIN 60 DAYS.—A designated financial market 
utility may implement a change if it has not re-
ceived an objection to the proposed change within 
60 days of the later of— 
(i) the date that the Supervisory Agen-
cy or the Board of Governors receives the 
notice of proposed change; or 
(ii) the date the Supervisory Agency or 
the Board of Governors receives any further 
information it requests for consideration of 
the notice. 
(H) REVIEW
EXTENSION
FOR
NOVEL
OR 
COMPLEX ISSUES.—The Supervisory Agency or 
the Board of Governors may, during the 60-day 
review period, extend the review period for an 
additional 60 days for proposed changes that 
raise novel or complex issues, subject to the Su-
pervisory Agency or the Board of Governors pro-
viding the designated financial market utility
912 
† HR 4173 PP
with prompt written notice of the extension. Any 
extension under this subparagraph will extend 
the time periods under subparagraphs (D) and 
(F). 
(I) CHANGE
ALLOWED
EARLIER
IF
NOTI-
FIED OF NO OBJECTION.—A designated financial 
market utility may implement a change in less 
than 60 days from the date of receipt of the no-
tice of proposed change by the Supervisory Agen-
cy or the Board of Governors, or the date the Su-
pervisory Agency or the Board of Governors re-
ceives any further information it requested, if the 
Supervisory Agency or the Board of Governors 
notifies the designated financial market utility 
in writing that it does not object to the proposed 
change and authorizes the designated financial 
market utility to implement the change on an 
earlier date, subject to any conditions imposed 
by the Supervisory Agency or the Board of Gov-
ernors. 
(2) EMERGENCY CHANGES.— 
(A) IN GENERAL.—A designated financial 
market utility may implement a change that 
would otherwise require advance notice under 
this subsection if it determines that—
913 
† HR 4173 PP
(i) an emergency exists; and 
(ii) immediate implementation of the 
change is necessary for the designated fi-
nancial market utility to continue to pro-
vide its services in a safe and sound man-
ner. 
(B) NOTICE REQUIRED WITHIN 24 HOURS.— 
The designated financial market utility shall 
provide notice of any such emergency change to 
its Supervisory Agency and the Board of Gov-
ernors, as soon as practicable, which shall be no 
later than 24 hours after implementation of the 
change. 
(C) CONTENTS OF EMERGENCY NOTICE.—In 
addition to the information required for changes 
requiring advance notice, the notice of an emer-
gency change shall describe— 
(i) the nature of the emergency; and 
(ii) the reason the change was nec-
essary for the designated financial market 
utility to continue to provide its services in 
a safe and sound manner. 
(D) MODIFICATION
OR
RESCISSION
OF 
CHANGE MAY BE REQUIRED.—The Supervisory 
Agency or the Board of Governors may require
914 
† HR 4173 PP
modification or rescission of the change if it 
finds that the change is not consistent with the 
purposes of this Act or any rules, orders, or 
standards prescribed by the Board of Governors 
hereunder. 
(3) COPYING THE BOARD OF GOVERNORS.—The 
Supervisory Agency shall provide the Board of Gov-
ernors concurrently with a complete copy of any no-
tice, request, or other information it issues, submits, 
or receives under this subsection. 
(4) CONSULTATION
WITH
BOARD
OF
GOV-
ERNORS.—Before taking any action on, or completing 
its review of, a change proposed by a designated fi-
nancial market utility, the Supervisory Agency shall 
consult with the Board of Governors. 
SEC. 807. EXAMINATION OF AND ENFORCEMENT ACTIONS 
AGAINST DESIGNATED FINANCIAL MARKET 
UTILITIES. 
(a) EXAMINATION.—Notwithstanding any other provi-
sion of law and subject to subsection (d), the Supervisory 
Agency shall conduct examinations of a designated finan-
cial market utility at least once annually in order to deter-
mine the following: 
(1) The nature of the operations of, and the risks 
borne by, the designated financial market utility.
915 
† HR 4173 PP
(2) The financial and operational risks presented 
by the designated financial market utility to finan-
cial institutions, critical markets, or the broader fi-
nancial system. 
(3) The resources and capabilities of the des-
ignated financial market utility to monitor and con-
trol such risks. 
(4) The safety and soundness of the designated 
financial market utility. 
(5) The designated financial market utility’s 
compliance with— 
(A) this title; and 
(B) the rules and orders prescribed by the 
Board of Governors under this title. 
(b) SERVICE PROVIDERS.—Whenever a service integral 
to the operation of a designated financial market utility 
is performed for the designated financial market utility by 
another entity, whether an affiliate or non-affiliate and 
whether on or off the premises of the designated financial 
market utility, the Supervisory Agency may examine 
whether the provision of that service is in compliance with 
applicable law, rules, orders, and standards to the same ex-
tent as if the designated financial market utility were per-
forming the service on its own premises.
916 
† HR 4173 PP
(c) ENFORCEMENT.—For purposes of enforcing the 
provisions of this section, a designated financial market 
utility shall be subject to, and the appropriate Supervisory 
Agency shall have authority under the provisions of sub-
sections (b) through (n) of section 8 of the Federal Deposit 
Insurance Act (12 U.S.C. 1818) in the same manner and 
to the same extent as if the designated financial market util-
ity was an insured depository institution and the Super-
visory Agency was the appropriate Federal banking agency 
for such insured depository institution. 
(d) BOARD OF GOVERNORS INVOLVEMENT IN EXAMI-
NATIONS.— 
(1) BOARD
OF
GOVERNORS
CONSULTATION
ON 
EXAMINATION
PLANNING.—The Supervisory Agency 
shall consult with the Board of Governors regarding 
the scope and methodology of any examination con-
ducted under subsections (a) and (b). 
(2) BOARD OF GOVERNORS PARTICIPATION IN EX-
AMINATION.—The Board of Governors may, in its dis-
cretion, participate in any examination led by a Su-
pervisory Agency and conducted under subsections (a) 
and (b). 
(e) BOARD
OF
GOVERNORS
ENFORCEMENT
REC-
OMMENDATIONS.—
917 
† HR 4173 PP
(1) RECOMMENDATION.—The Board of Governors 
may at any time recommend to the Supervisory 
Agency that such agency take enforcement action 
against a designated financial market utility. Any 
such recommendation for enforcement action shall 
provide a detailed analysis supporting the rec-
ommendation of the Board of Governors. 
(2) CONSIDERATION.—The Supervisory Agency 
shall consider the recommendation of the Board of 
Governors and submit a response to the Board of Gov-
ernors within 60 days. 
(3) MEDIATION.—If the Supervisory Agency re-
jects, in whole or in part, the recommendation of the 
Board of Governors, the Board of Governors may dis-
pute the matter by referring the recommendation to 
the Council, which shall attempt to resolve the dis-
pute. 
(4) ENFORCEMENT ACTION.—If the Council is 
unable to resolve the dispute under paragraph (3) 
within 30 days from the date of referral, the Board 
of Governors may, upon a vote of its members— 
(A) exercise the enforcement authority ref-
erenced in subsection (c) as if it were the Super-
visory Agency; and
918 
† HR 4173 PP
(B) take enforcement action against the des-
ignated financial market utility. 
(f) EMERGENCY ENFORCEMENT ACTIONS
BY
THE 
BOARD OF GOVERNORS.— 
(1) IMMINENT RISK OF SUBSTANTIAL HARM.— 
The Board of Governors may, after consulting with 
the Council and the Supervisory Agency, take enforce-
ment action against a designated financial market 
utility if the Board of Governors has reasonable cause 
to believe that— 
(A) either— 
(i) an action engaged in, or con-
templated by, a designated financial market 
utility (including any change proposed by 
the designated financial market utility to 
its rules, procedures, or operations that 
would otherwise be subject to section 806(e)) 
poses an imminent risk of substantial harm 
to financial institutions, critical markets, 
or the broader financial system; or 
(ii) the condition of a designated fi-
nancial market utility poses an imminent 
risk of substantial harm to financial insti-
tutions, critical markets, or the broader fi-
nancial system; and
919 
† HR 4173 PP
(B) the imminent risk of substantial harm 
precludes the Board of Governors’ use of the pro-
cedures in subsection (e). 
(2) ENFORCEMENT AUTHORITY.—For purposes of 
taking enforcement action under paragraph (1), a 
designated financial market utility shall be subject to, 
and the Board of Governors shall have authority 
under the provisions of subsections (b) through (n) of 
section 8 of the Federal Deposit Insurance Act (12 
U.S.C. 1818) in the same manner and to the same ex-
tent as if the designated financial market utility was 
an insured depository institution and the Board of 
Governors was the appropriate Federal banking agen-
cy for such insured depository institution. 
(3) PROMPT NOTICE TO SUPERVISORY AGENCY OF 
ENFORCEMENT ACTION.—Within 24 hours of taking 
an enforcement action under this subsection, the 
Board of Governors shall provide written notice to the 
designated financial market utility’s Supervisory 
Agency containing a detailed analysis of the action of 
the Board of Governors, with supporting documenta-
tion included.
920 
† HR 4173 PP
SEC. 808. EXAMINATION OF AND ENFORCEMENT ACTIONS 
AGAINST FINANCIAL INSTITUTIONS SUBJECT 
TO STANDARDS FOR DESIGNATED ACTIVI-
TIES. 
(a) EXAMINATION.—The appropriate financial regu-
lator is authorized to examine a financial institution sub-
ject to the standards prescribed by the Board of Governors 
for a designated activity in order to determine the fol-
lowing: 
(1) The nature and scope of the designated ac-
tivities engaged in by the financial institution. 
(2) The financial and operational risks the des-
ignated activities engaged in by the financial institu-
tion may pose to the safety and soundness of the fi-
nancial institution. 
(3) The financial and operational risks the des-
ignated activities engaged in by the financial institu-
tion may pose to other financial institutions, critical 
markets, or the broader financial system. 
(4) The resources available to and the capabili-
ties of the financial institution to monitor and con-
trol the risks described in paragraphs (2) and (3). 
(5) The financial institution’s compliance with 
this title and the rules and orders prescribed by the 
Board of Governors under this title.
921 
† HR 4173 PP
(b) ENFORCEMENT.—For purposes of enforcing the 
provisions of this section, and the rules and orders pre-
scribed by the Board of Governors under this section, a fi-
nancial institution subject to the standards prescribed by 
the Board of Governors for a designated activity shall be 
subject to, and the appropriate financial regulator shall 
have authority under the provisions of subsections (b) 
through (n) of section 8 of the Federal Deposit Insurance 
Act (12 U.S.C. 1818) in the same manner and to the same 
extent as if the financial institution was an insured deposi-
tory institution and the appropriate financial regulator 
was the appropriate Federal banking agency for such in-
sured depository institution. 
(c) TECHNICAL ASSISTANCE.—The Board of Governors 
shall consult with and provide such technical assistance as 
may be required by the appropriate financial regulators to 
ensure that the rules and orders prescribed by the Board 
of Governors under this title are interpreted and applied 
in as consistent and uniform a manner as practicable. 
(d) DELEGATION.— 
(1) EXAMINATION.— 
(A) REQUEST TO BOARD OF GOVERNORS.— 
The appropriate financial regulator may request 
the Board of Governors to conduct or participate 
in an examination of a financial institution
922 
† HR 4173 PP
subject to the standards prescribed by the Board 
of Governors for a designated activity in order 
to assess the compliance of such financial insti-
tution with— 
(i) this title; or 
(ii) the rules or orders prescribed by 
the Board of Governors under this title. 
(B) EXAMINATION
BY
BOARD
OF
GOV-
ERNORS.—Upon receipt of an appropriate writ-
ten request, the Board of Governors will conduct 
the examination under such terms and condi-
tions to which the Board of Governors and the 
appropriate financial regulator mutually agree. 
(2) ENFORCEMENT.— 
(A) REQUEST TO BOARD OF GOVERNORS.— 
The appropriate financial regulator may request 
the Board of Governors to enforce this title or the 
rules or orders prescribed by the Board of Gov-
ernors under this title against a financial insti-
tution that is subject to the standards prescribed 
by the Board of Governors for a designated activ-
ity. 
(B) ENFORCEMENT
BY
BOARD
OF
GOV-
ERNORS.—Upon receipt of an appropriate writ-
ten request, the Board of Governors shall deter-
923 
† HR 4173 PP
mine whether an enforcement action is war-
ranted, and, if so, it shall enforce compliance 
with this title or the rules or orders prescribed 
by the Board of Governors under this title and, 
if so, the financial institution shall be subject to, 
and the Board of Governors shall have authority 
under the provisions of subsections (b) through 
(n) of section 8 of the Federal Deposit Insurance 
Act (12 U.S.C. 1818) in the same manner and 
to the same extent as if the financial institution 
was an insured depository institution and the 
Board of Governors was the appropriate Federal 
banking agency for such insured depository in-
stitution. 
(e) BACK-UP AUTHORITY OF THE BOARD OF GOV-
ERNORS.— 
(1) EXAMINATION AND ENFORCEMENT.—Notwith-
standing any other provision of law, the Board of 
Governors may— 
(A) conduct an examination of the type de-
scribed in subsection (a) of any financial insti-
tution that is subject to the standards prescribed 
by the Board of Governors for a designated activ-
ity; and
924 
† HR 4173 PP
(B) enforce the provisions of this title or 
any rules or orders prescribed by the Board of 
Governors under this title against any financial 
institution that is subject to the standards pre-
scribed by the Board of Governors for a des-
ignated activity. 
(2) LIMITATIONS.— 
(A) EXAMINATION.—The Board of Gov-
ernors may exercise the authority described in 
paragraph (1)(A) only if the Board of Governors 
has— 
(i) reasonable cause to believe that a fi-
nancial institution is not in compliance 
with this title or the rules or orders pre-
scribed by the Board of Governors under 
this title with respect to a designated activ-
ity; 
(ii) notified, in writing, the appro-
priate financial regulator and the Council 
of its belief under clause (i) with supporting 
documentation included; 
(iii) requested the appropriate finan-
cial regulator to conduct a prompt exam-
ination of the financial institution; and 
(iv) either—
925 
† HR 4173 PP
(I) not been afforded a reasonable 
opportunity to participate in an exam-
ination of the financial institution by 
the appropriate financial regulator 
within 30 days after the date of the 
Board’s notification under clause (ii); 
or 
(II) reasonable cause to believe 
that the financial institution’s non-
compliance with this title or the rules 
or orders prescribed by the Board of 
Governors under this title poses a sub-
stantial risk to other financial institu-
tions, critical markets, or the broader 
financial system, subject to the Board 
of Governors affording the appropriate 
financial regulator a reasonable oppor-
tunity to participate in the examina-
tion. 
(B) ENFORCEMENT.—The Board of Gov-
ernors may exercise the authority described in 
paragraph (1)(B) only if the Board of Governors 
has— 
(i) reasonable cause to believe that a fi-
nancial institution is not in compliance
926 
† HR 4173 PP
with this title or the rules or orders pre-
scribed by the Board of Governors under 
this title with respect to a designated activ-
ity; 
(ii) notified, in writing, the appro-
priate financial regulator and the Council 
of its belief under clause (i) with supporting 
documentation included and with a rec-
ommendation that the appropriate financial 
regulator take 1 or more specific enforce-
ment actions against the financial institu-
tion; and 
(iii) either— 
(I) not been notified, in writing, 
by the appropriate financial regulator 
of the commencement of an enforcement 
action recommended by the Board of 
Governors against the financial insti-
tution within 60 days from the date of 
the notification under clause (ii); or 
(II) reasonable cause to believe 
that the financial institution’s non-
compliance with this title or the rules 
or orders prescribed by the Board of 
Governors under this title poses a sub-
927 
† HR 4173 PP
stantial risk to other financial institu-
tions, critical markets, or the broader 
financial system, subject to the Board 
of Governors notifying the appropriate 
financial regulator of the Board’s en-
forcement action. 
(3) ENFORCEMENT
PROVISIONS.—For purposes 
of taking enforcement action under paragraph (1), the 
financial institution shall be subject to, and the 
Board of Governors shall have authority under the 
provisions of subsections (b) through (n) of section 8 
of the Federal Deposit Insurance Act (12 U.S.C. 
1818) in the same manner and to the same extent as 
if the financial institution was an insured depository 
institution and the Board of Governors was the ap-
propriate Federal banking agency for such insured 
depository institution. 
SEC. 809. REQUESTS FOR INFORMATION, REPORTS, OR 
RECORDS. 
(a) INFORMATION
TO
ASSESS
SYSTEMIC
IMPOR-
TANCE.— 
(1) FINANCIAL MARKET UTILITIES.—The Council 
is authorized to require any financial market utility 
to submit such information as the Council may re-
quire for the sole purpose of assessing whether that fi-
928 
† HR 4173 PP
nancial market utility is systemically important, but 
only if the Council has reasonable cause to believe 
that the financial market utility meets the standards 
for systemic importance set forth in section 804. 
(2) FINANCIAL INSTITUTIONS ENGAGED IN PAY-
MENT, CLEARING, OR SETTLEMENT ACTIVITIES.—The 
Council is authorized to require any financial insti-
tution to submit such information as the Council may 
require for the sole purpose of assessing whether any 
payment, clearing, or settlement activity engaged in 
or supported by a financial institution is system-
ically important, but only if the Council has reason-
able cause to believe that the activity meets the stand-
ards for systemic importance set forth in section 804. 
(b) REPORTING AFTER DESIGNATION.— 
(1) DESIGNATED
FINANCIAL
MARKET
UTILI-
TIES.—The Board of Governors and the Council may 
require a designated financial market utility to sub-
mit reports or data to the Board of Governors and the 
Council in such frequency and form as deemed nec-
essary by the Board of Governors and the Council in 
order to assess the safety and soundness of the utility 
and the systemic risk that the utility’s operations pose 
to the financial system.
929 
† HR 4173 PP
(2) 
FINANCIAL
INSTITUTIONS
SUBJECT
TO 
STANDARDS
FOR
DESIGNATED
ACTIVITIES.—The 
Board of Governors and the Council may require 1 or 
more financial institutions subject to the standards 
prescribed by the Board of Governors for a designated 
activity to submit, in such frequency and form as 
deemed necessary by the Board of Governors and the 
Council, reports and data to the Board of Governors 
and the Council solely with respect to the conduct of 
the designated activity and solely to assess whether— 
(A) the rules, orders, or standards pre-
scribed by the Board of Governors with respect 
to the designated activity appropriately address 
the risks to the financial system presented by 
such activity; and 
(B) the financial institutions are in compli-
ance with this title and the rules and orders pre-
scribed by the Board of Governors under this 
title with respect to the designated activity. 
(c) COORDINATION WITH APPROPRIATE FEDERAL SU-
PERVISORY AGENCY.— 
(1) ADVANCE
COORDINATION.—Before directly 
requesting any material information from, or impos-
ing reporting or recordkeeping requirements on, any 
financial market utility or any financial institution
930 
† HR 4173 PP
engaged in a payment, clearing, or settlement activ-
ity, the Board of Governors and the Council shall co-
ordinate with the Supervisory Agency for a financial 
market utility or the appropriate financial regulator 
for a financial institution to determine if the infor-
mation is available from or may be obtained by the 
agency in the form, format, or detail required by the 
Board of Governors and the Council. 
(2) SUPERVISORY
REPORTS.—Notwithstanding 
any other provision of law, the Supervisory Agency, 
the appropriate financial regulator, and the Board of 
Governors are authorized to disclose to each other and 
the Council copies of its examination reports or simi-
lar reports regarding any financial market utility or 
any financial institution engaged in payment, clear-
ing, or settlement activities. 
(d) TIMING OF RESPONSE FROM APPROPRIATE FED-
ERAL SUPERVISORY AGENCY.—If the information, report, 
records, or data requested by the Board of Governors or the 
Council under subsection (c)(1) are not provided in full by 
the Supervisory Agency or the appropriate financial regu-
lator in less than 15 days after the date on which the mate-
rial is requested, the Board of Governors or the Council may 
request the information or impose recordkeeping or report-
931 
† HR 4173 PP
ing requirements directly on such persons as provided in 
subsections (a) and (b) with notice to the agency. 
(e) SHARING OF INFORMATION.— 
(1) MATERIAL CONCERNS.—Notwithstanding any 
other provision of law, the Board of Governors, the 
Council, the appropriate financial regulator, and any 
Supervisory Agency are authorized to— 
(A) promptly notify each other of material 
concerns about a designated financial market 
utility or any financial institution engaged in 
designated activities; and 
(B) share appropriate reports, information, 
or data relating to such concerns. 
(2) OTHER INFORMATION.—Notwithstanding any 
other provision of law, the Board of Governors, the 
Council, the appropriate financial regulator, or any 
Supervisory Agency may, under such terms and con-
ditions as it deems appropriate, provide confidential 
supervisory information and other information ob-
tained under this title to other persons it deems ap-
propriate, including the Secretary, State financial in-
stitution supervisory agencies, foreign financial su-
pervisors, foreign central banks, and foreign finance 
ministries, subject to reasonable assurances of con-
fidentiality.
932 
† HR 4173 PP
(f) PRIVILEGE MAINTAINED.—The Board of Governors, 
the Council, the appropriate financial regulator, and any 
Supervisory Agency providing reports or data under this 
section shall not be deemed to have waived any privilege 
applicable to those reports or data, or any portion thereof, 
by providing the reports or data to the other party or by 
permitting the reports or data, or any copies thereof, to be 
used by the other party. 
(g) DISCLOSURE EXEMPTION.—Information obtained 
by the Board of Governors or the Council under this section 
and any materials prepared by the Board of Governors or 
the Council regarding its assessment of the systemic impor-
tance of financial market utilities or any payment, clear-
ing, or settlement activities engaged in by financial institu-
tions, and in connection with its supervision of designated 
financial market utilities and designated activities, shall be 
confidential supervisory information exempt from disclo-
sure under section 552 of title 5, United States Code. For 
purposes of such section 552, this subsection shall be consid-
ered a statute described in subsection (b)(3) of such section 
552. 
SEC. 810. RULEMAKING. 
The Board of Governors and the Council are author-
ized to prescribe such rules and issue such orders as may 
be necessary to administer and carry out the authorities
933 
† HR 4173 PP
and duties granted to the Board of Governors or the Coun-
cil, respectively, and prevent evasions thereof. 
SEC. 811. OTHER AUTHORITY. 
Unless otherwise provided by its terms, this title does 
not divest any appropriate financial regulator, any Super-
visory Agency, or any other Federal or State agency, of any 
authority derived from any other applicable law, except 
that any standards prescribed by the Board of Governors 
under section 805 shall supersede any less stringent require-
ments established under other authority to the extent of any 
conflict. 
SEC. 812. EFFECTIVE DATE. 
This title is effective as of the date of enactment of this 
Act. 
TITLE 
IX—INVESTOR 
PROTEC-
TIONS AND IMPROVEMENTS 
TO THE REGULATION OF SE-
CURITIES 
Subtitle A—Increasing Investor 
Protection 
SEC. 911. INVESTOR ADVISORY COMMITTEE ESTABLISHED. 
Title I of the Securities Exchange Act of 1934 (15 
U.S.C. 78a et seq.) is amended by adding at the end the 
following:
934 
† HR 4173 PP
‘‘SEC. 39. INVESTOR ADVISORY COMMITTEE. 
‘‘(a) ESTABLISHMENT AND PURPOSE.— 
‘‘(1) 
ESTABLISHMENT.—There 
is 
established 
within the Commission the Investor Advisory Com-
mittee (referred to in this section as the ‘Committee’). 
‘‘(2) PURPOSE.—The Committee shall— 
‘‘(A) advise and consult with the Commis-
sion on— 
‘‘(i) regulatory priorities of the Com-
mission; 
‘‘(ii) issues relating to the regulation of 
securities products, trading strategies, and 
fee structures, and the effectiveness of disclo-
sure; 
‘‘(iii) initiatives to protect investor in-
terest; and 
‘‘(iv) initiatives to promote investor 
confidence and the integrity of the securities 
marketplace; and 
‘‘(B) submit to the Commission such find-
ings and recommendations as the Committee de-
termines 
are 
appropriate, 
including 
rec-
ommendations for proposed legislative changes. 
‘‘(b) MEMBERSHIP.— 
‘‘(1) IN GENERAL.—The members of the Com-
mittee shall be—
935 
† HR 4173 PP
‘‘(A) the Investor Advocate; 
‘‘(B) a representative of State securities 
commissions; 
‘‘(C) a representative of the interests of sen-
ior citizens; and 
‘‘(D) not fewer than 10, and not more than 
20, members appointed by the Commission, from 
among individuals who— 
‘‘(i) represent the interests of indi-
vidual equity and debt investors, including 
investors in mutual funds; 
‘‘(ii) represent the interests of institu-
tional investors, including the interests of 
pension funds and registered investment 
companies; 
‘‘(iii) are knowledgeable about invest-
ment issues and decisions; and 
‘‘(iv) have reputations of integrity. 
‘‘(2) TERM.—Each member of the Committee ap-
pointed under paragraph (1)(B) shall serve for a term 
of 4 years. 
‘‘(3) MEMBERS NOT COMMISSION EMPLOYEES.— 
Members appointed under paragraph (1)(B) shall not 
be deemed to be employees or agents of the Commis-
sion solely because of membership on the Committee.
936 
† HR 4173 PP
‘‘(c) CHAIRMAN; VICE CHAIRMAN; SECRETARY; AS-
SISTANT SECRETARY.— 
‘‘(1) IN GENERAL.—The members of the Com-
mittee shall elect, from among the members of the 
Committee— 
‘‘(A) a chairman, who may not be employed 
by an issuer; 
‘‘(B) a vice chairman, who may not be em-
ployed by an issuer; 
‘‘(C) a secretary; and 
‘‘(D) an assistant secretary. 
‘‘(2) TERM.—Each member elected under para-
graph (1) shall serve for a term of 3 years in the ca-
pacity for which the member was elected under para-
graph (1). 
‘‘(d) MEETINGS.— 
‘‘(1) FREQUENCY OF MEETINGS.—The Committee 
shall meet— 
‘‘(A) not less frequently than twice annu-
ally, at the call of the chairman of the Com-
mittee; and 
‘‘(B) from time to time, at the call of the 
Commission. 
‘‘(2) NOTICE.—The chairman of the Committee 
shall give the members of the Committee written no-
937 
† HR 4173 PP
tice of each meeting, not later than 2 weeks before the 
date of the meeting. 
‘‘(e) COMPENSATION AND TRAVEL EXPENSES.—Each 
member of the Committee who is not a full-time employee 
of the United States shall— 
‘‘(1) be compensated at a rate not to exceed the 
daily equivalent of the annual rate of basic pay in 
effect for a position at level V of the Executive Sched-
ule under section 5316 of title 5, United States Code, 
for each day during which the member is engaged in 
the actual performance of the duties of the Committee; 
and 
‘‘(2) while away from the home or regular place 
of business of the member in the performance of serv-
ices for the Committee, be allowed travel expenses, in-
cluding per diem in lieu of subsistence, in the same 
manner as persons employed intermittently in the 
Government service are allowed expenses under sec-
tion 5703(b) of title 5, United States Code. 
‘‘(f) STAFF.—The Commission shall make available to 
the Committee such staff as the chairman of the Committee 
determines are necessary to carry out this section. 
‘‘(g) REVIEW
BY
COMMISSION.—The Commission 
shall—
938 
† HR 4173 PP
‘‘(1) review the findings and recommendations of 
the Committee; and 
‘‘(2) each time the Committee submits a finding 
or recommendation to the Commission, issue a public 
statement— 
‘‘(A) assessing the finding or recommenda-
tion of the Committee; and 
‘‘(B) disclosing the action, if any, the Com-
mission intends to take with respect to the find-
ing or recommendation. 
‘‘(h) COMMITTEE FINDINGS.—Nothing in this section 
shall require the Commission to agree to or act upon any 
finding or recommendation of the Committee. 
‘‘(i) FEDERAL ADVISORY COMMITTEE ACT.—The Fed-
eral Advisory Committee Act (5 U.S.C. App.) shall not 
apply with respect to the Committee and its activities. 
‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—There is 
authorized to be appropriated to the Commission such sums 
as are necessary to carry out this section.’’. 
SEC. 912. CLARIFICATION OF AUTHORITY OF THE COMMIS-
SION TO ENGAGE IN INVESTOR TESTING. 
Section 19 of the Securities Act of 1933 (15 U.S.C. 
77s) is amended by adding at the end the following: 
‘‘(e) EVALUATION OF RULES OR PROGRAMS.—For the 
purpose of evaluating any rule or program of the Commis-
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† HR 4173 PP
sion issued or carried out under any provision of the securi-
ties laws, as defined in section 3 of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c), and the purposes of consid-
ering, proposing, adopting, or engaging in any such rule 
or program or developing new rules or programs, the Com-
mission may— 
‘‘(1) gather information from and communicate 
with investors or other members of the public; 
‘‘(2) engage in such temporary investor testing 
programs as the Commission determines are in the 
public interest or would protect investors; and 
‘‘(3) consult with academics and consultants, as 
necessary to carry out this subsection. 
‘‘(f) RULE OF CONSTRUCTION.—For purposes of the 
Paperwork Reduction Act (44 U.S.C. 3501 et seq.), any ac-
tion taken under subsection (e) shall not be construed to 
be a collection of information.’’. 
SEC. 913. STUDY AND RULEMAKING REGARDING OBLIGA-
TIONS OF BROKERS, DEALERS, AND INVEST-
MENT ADVISERS. 
(a) DEFINITIONS.—In this section— 
(1) the term ‘‘FINRA’’ means the Financial In-
dustry Regulatory Authority; and 
(2) the term ‘‘retail customer’’ means an indi-
vidual customer of a broker, dealer, investment ad-
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† HR 4173 PP
viser, person associated with a broker or dealer, or a 
person associated with an investment adviser. 
(b) IN GENERAL.—The Commission shall conduct a 
study to evaluate— 
(1) the effectiveness of existing legal or regulatory 
standards of care for brokers, dealers, investment ad-
visers, persons associated with brokers or dealers, and 
persons associated with investment advisers for pro-
viding personalized investment advice and rec-
ommendations about securities to retail customers im-
posed by the Commission and FINRA, and other Fed-
eral and State legal or regulatory standards; and 
(2) whether there are legal or regulatory gaps or 
overlap in legal or regulatory standards in the protec-
tion of retail customers relating to the standards of 
care for brokers, dealers, investment advisers, persons 
associated with brokers or dealers, and persons associ-
ated with investment advisers for providing personal-
ized investment advice about securities to retail cus-
tomers that should be addressed by rule or statute. 
(c) CONSIDERATIONS.—In conducting the study re-
quired under subsection (b), the Commission shall con-
sider— 
(1) the regulatory, examination, and enforcement 
resources devoted to, and activities of, the Commission
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and FINRA to enforce the standards of care for bro-
kers, dealers, investment advisers, persons associated 
with brokers or dealers, and persons associated with 
investment advisers when providing personalized in-
vestment advice and recommendations about securi-
ties to retail customers, including— 
(A) the frequency of examinations of bro-
kers, dealers, and investment advisers; and 
(B) the length of time of the examinations; 
(2) the substantive differences, compared and 
contrasted in detail, in the regulation of brokers, deal-
ers, and investment advisers, when providing person-
alized investment advice and recommendations about 
securities to retail customers, including the differences 
in the amount of resources devoted to the regulation 
and examination of brokers, dealers, and investment 
advisers, by the Commission and FINRA; 
(3) the specific instances in which— 
(A) the regulation and oversight of invest-
ment advisers provide greater protection to retail 
customers than the regulation and oversight of 
brokers and dealers; and 
(B) the regulation and oversight of brokers 
and dealers provide greater protection to retail
942 
† HR 4173 PP
customers than the regulation and oversight of 
investment advisers; 
(4) the existing legal or regulatory standards of 
State securities regulators and other regulators in-
tended to protect retail customers; 
(5) the potential impact on retail customers, in-
cluding the potential impact on access of retail cus-
tomers to the range of products and services offered by 
brokers and dealers, of imposing upon brokers, deal-
ers, and persons associated with brokers or dealers— 
(A) the standard of care applied under the 
Investment Advisers Act of 1940 (15 U.S.C. 80b– 
1 et seq.) for providing personalized investment 
advice about securities to retail customers of in-
vestment advisers; and 
(B) other requirements of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.); 
(6) the potential impact of— 
(A) imposing on investment advisers the 
standard of care applied by the Commission and 
FINRA under the Securities Exchange Act of 
1934 (15 U.S.C. 78a et seq.) for providing rec-
ommendations about securities to retail cus-
tomers of brokers and dealers and other Commis-
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† HR 4173 PP
sion and FINRA requirements applicable to bro-
kers and dealers; and 
(B) authorizing the Commission to des-
ignate 1 or more self-regulatory organizations to 
augment the efforts of the Commission to oversee 
investment advisers; 
(7) the potential impact of eliminating the 
broker and dealer exclusion from the definition of ‘‘in-
vestment adviser’’ under section 202(a)(11)(C) of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b– 
2(a)(11)(C)), in terms of— 
(A) the potential benefits or harm to retail 
customers that could result from such a change, 
including any potential impact on access to per-
sonalized investment advice and recommenda-
tions about securities to retail customers or the 
availability of such advice and recommenda-
tions; 
(B) the number of additional entities and 
individuals that would be required to register 
under, or become subject to, the Investment Ad-
visers Act of 1940 (15 U.S.C. 80b–1 et seq.), and 
the additional requirements to which brokers, 
dealers, and persons associated with brokers and 
dealers would become subject, including—
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(i) any potential additional associated 
person licensing, registration, and examina-
tion requirements; and 
(ii) the additional costs, if any, to the 
additional entities and individuals; and 
(C) the impact on Commission resources 
to— 
(i) conduct examinations of registered 
investment advisers and the representatives 
of registered investment advisers, including 
the impact on the examination cycle; and 
(ii) enforce the standard of care and 
other 
applicable 
requirements 
imposed 
under the Investment Advisers Act of 1940 
(15 U.S.C. 80b–1 et seq.); 
(8) the ability of investors to understand the dif-
ferences in terms of regulatory oversight and exami-
nations between brokers, dealers, and investment ad-
visers; 
(9) the varying level of services provided by bro-
kers, dealers, investment advisers, persons associated 
with brokers or dealers, and persons associated with 
investment advisers to retail customers and the vary-
ing scope and terms of retail customer relationships 
of brokers, dealers, investment advisers, persons asso-
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† HR 4173 PP
ciated with brokers or dealers, and persons associated 
with investment advisers with such retail customers; 
(10) any potential benefits or harm to retail cus-
tomers that could result from any potential changes 
in the regulatory requirements or legal standards af-
fecting brokers, dealers, investment advisers, persons 
associated with brokers or dealers, and persons associ-
ated with investment advisers relating to their obliga-
tions to retail customers, including any potential im-
pact on— 
(A) protection from fraud; 
(B) access to personalized investment ad-
vice, and recommendations about securities to re-
tail customers; or 
(C) the availability of such advice and rec-
ommendations; 
(11) the additional costs and expenses to retail 
customers and to brokers, dealers, and investment ad-
visers resulting from potential changes in the regu-
latory requirements or legal standards affecting bro-
kers, dealers, investment advisers, persons associated 
with brokers or dealers, and persons associated with 
investment advisers relating to their obligations to re-
tail customers; and
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(12) any other consideration that the Commis-
sion deems necessary and appropriate to effectively 
execute the study required under subsection (b). 
(d) REPORT.— 
(1) IN GENERAL.—Not later than 1 year after 
the date of enactment of this Act, the Commission 
shall submit a report on the study required under 
subsection (b) to— 
(A) the Committee on Banking, Housing, 
and Urban Affairs of the Senate; and 
(B) the Committee on Financial Services of 
the House of Representatives. 
(2) CONTENT
REQUIREMENTS.—The report re-
quired under paragraph (1) shall describe the find-
ings, conclusions, and recommendations of the Com-
mission from the study required under subsection (b), 
including— 
(A) a description of the considerations, 
analysis, and public and industry input that the 
Commission considered, as required under sub-
section (e), to make such findings, conclusions, 
and policy recommendations; and 
(B) an analysis of— 
(i) whether any identified legal or reg-
ulatory gaps or overlap in legal or regu-
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latory standards in the protection of retail 
customers relating to the standards of care 
for brokers, dealers, investment advisers, 
persons associated with brokers or dealers, 
and persons associated with investment ad-
visers for providing personalized investment 
advice about securities to retail customers 
can be addressed by rule; and 
(ii) whether, and the extent to which, 
the Commission would require additional 
statutory authority to address such gaps or 
overlap. 
(e) PUBLIC COMMENT.—The Commission shall seek 
and consider public input, comments, and data in order 
to prepare the report required under subsection (d). 
(f) RULEMAKING.— 
(1) IN GENERAL.—If the study required under 
subsection (b) identifies any gaps or overlap in the 
legal or regulatory standards in the protection of re-
tail customers relating to the standards of care for 
brokers, dealers, investment advisers, persons associ-
ated with brokers or dealers, and persons associated 
with investment advisers for providing personalized 
investment advice about securities to such retail cus-
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tomers, the Commission, not later than 2 years after 
the date of enactment of this Act, shall— 
(A) commence a rulemaking, as necessary 
or appropriate in the public interest and for the 
protection of retail customers, to address such 
regulatory gaps and overlap that can be ad-
dressed by rule, using its authority under the Se-
curities Exchange Act of 1934 (15 U.S.C. 78a et 
seq.) and the Investment Advisers Act of 1940 
(15 U.S.C. 80b–1 et seq.); and 
(B) consider and take into account the find-
ings, conclusions, and recommendations of the 
study required under this section. 
(2) RULE OF CONSTRUCTION.—Nothing in this 
section shall be construed to limit the rulemaking au-
thority of the Commission under any other provision 
of Federal law. 
SEC. 914. OFFICE OF THE INVESTOR ADVOCATE. 
Section 4 of the Securities Exchange Act of 1934 (15 
U.S.C. 78d) is amended by adding at the end the following: 
‘‘(g) OFFICE OF THE INVESTOR ADVOCATE.— 
‘‘(1) OFFICE ESTABLISHED.—There is established 
within the Commission the Office of the Investor Ad-
vocate (in this subsection referred to as the ‘Office’). 
‘‘(2) INVESTOR ADVOCATE.—
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‘‘(A) IN GENERAL.—The head of the Office 
shall be the Investor Advocate, who shall— 
‘‘(i) report directly to the Chairman; 
and 
‘‘(ii) be appointed by the Chairman, in 
consultation with the Commission, from 
among individuals having experience in ad-
vocating for the interests of investors in se-
curities and investor protection issues, from 
the perspective of investors. 
‘‘(B) COMPENSATION.—The annual rate of 
pay for the Investor Advocate shall be equal to 
the highest rate of annual pay for a Senior Exec-
utive Service position within the Commission. 
‘‘(C) LIMITATION
ON
SERVICE.—An indi-
vidual who serves as the Investor Advocate may 
not be employed by the Commission— 
‘‘(i) during the 2-year period ending 
on the date of appointment as Investor Ad-
vocate; or 
‘‘(ii) during the 5-year period begin-
ning on the date on which the person ceases 
to serve as the Investor Advocate. 
‘‘(3) STAFF OF OFFICE.—The Investor Advocate 
may retain or employ independent counsel, research
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staff, and service staff, as the Investor Advocate deems 
necessary to carry out the functions, powers, and du-
ties of the Office. 
‘‘(4) FUNCTIONS OF THE INVESTOR ADVOCATE.— 
The Investor Advocate shall— 
‘‘(A) assist retail investors in resolving sig-
nificant problems such investors may have with 
the Commission or with self-regulatory organiza-
tions; 
‘‘(B) identify areas in which investors 
would benefit from changes in the regulations of 
the Commission or the rules of self-regulatory or-
ganizations; 
‘‘(C) identify problems that investors have 
with financial service providers and investment 
products; 
‘‘(D) analyze the potential impact on inves-
tors of— 
‘‘(i) proposed regulations of the Com-
mission; and 
‘‘(ii) proposed rules of self-regulatory 
organizations registered under this title; 
and 
‘‘(E) to the extent practicable, propose to the 
Commission changes in the regulations or orders
951 
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of the Commission and to Congress any legisla-
tive, administrative, or personnel changes that 
may be appropriate to mitigate problems identi-
fied under this paragraph and to promote the in-
terests of investors. 
‘‘(5) ACCESS TO DOCUMENTS.—The Commission 
shall ensure that the Investor Advocate has full access 
to the documents of the Commission and any self-reg-
ulatory organization, as necessary to carry out the 
functions of the Office. 
‘‘(6) ANNUAL REPORTS.— 
‘‘(A) REPORT ON OBJECTIVES.— 
‘‘(i) IN
GENERAL.—Not later than 
June 30 of each year after 2010, the Inves-
tor Advocate shall submit to the Committee 
on Banking, Housing, and Urban Affairs of 
the Senate and the Committee on Financial 
Services of the House of Representatives a 
report on the objectives of the Investor Advo-
cate for the following fiscal year. 
‘‘(ii) 
CONTENTS.—Each 
report 
re-
quired under clause (i) shall contain full 
and substantive analysis and explanation. 
‘‘(B) REPORT ON ACTIVITIES.—
952 
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‘‘(i) IN GENERAL.—Not later than De-
cember 31 of each year after 2010, the In-
vestor Advocate shall submit to the Com-
mittee on Banking, Housing, and Urban 
Affairs of the Senate and the Committee on 
Financial Services of the House of Rep-
resentatives a report on the activities of the 
Investor Advocate during the immediately 
preceding fiscal year. 
‘‘(ii) 
CONTENTS.—Each 
report 
re-
quired under clause (i) shall include— 
‘‘(I) appropriate statistical infor-
mation and full and substantive anal-
ysis; 
‘‘(II) information on steps that 
the Investor Advocate has taken during 
the reporting period to improve inves-
tor services and the responsiveness of 
the Commission and self-regulatory or-
ganizations to investor concerns; 
‘‘(III) a summary of the most se-
rious problems encountered by inves-
tors during the reporting period;
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‘‘(IV) an inventory of the items 
described in subclauses (III) that in-
cludes— 
‘‘(aa) identification of any 
action taken by the Commission 
or the self-regulatory organization 
and the result of such action; 
‘‘(bb) the length of time that 
each item has remained on such 
inventory; and 
‘‘(cc) for items on which no 
action has been taken, the reasons 
for inaction, and an identifica-
tion of any official who is respon-
sible for such action; 
‘‘(V) recommendations for such 
administrative and legislative actions 
as may be appropriate to resolve prob-
lems encountered by investors; and 
‘‘(VI) any other information, as 
determined appropriate by the Investor 
Advocate. 
‘‘(iii) INDEPENDENCE.—Each report 
required under this paragraph shall be pro-
vided directly to the Committees listed in
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clause (i) without any prior review or com-
ment from the Commission, any commis-
sioner, any other officer or employee of the 
Commission, or the Office of Management 
and Budget. 
‘‘(iv) CONFIDENTIALITY.—No report re-
quired under clause (i) may contain con-
fidential information. 
‘‘(7) REGULATIONS.—The Commission shall, by 
regulation, establish procedures requiring a formal re-
sponse to all recommendations submitted to the Com-
mission by the Investor Advocate, not later than 3 
months after the date of such submission.’’. 
SEC. 915. STREAMLINING OF FILING PROCEDURES FOR 
SELF-REGULATORY ORGANIZATIONS. 
(a) FILING PROCEDURES.—Section 19(b) of the Secu-
rities Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended 
by striking paragraph (2) (including the undesignated mat-
ter immediately following subparagraph (B)) and inserting 
the following: 
‘‘(2) APPROVAL PROCESS.— 
‘‘(A) APPROVAL PROCESS ESTABLISHED.— 
‘‘(i) IN GENERAL.—Except as provided 
in clause (ii), not later than 45 days after 
the date of publication of a proposed rule
955 
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change under paragraph (1), the Commis-
sion shall— 
‘‘(I) by order, approve the pro-
posed rule change; or 
‘‘(II) institute proceedings under 
subparagraph (B) to determine wheth-
er the proposed rule change should be 
disapproved. 
‘‘(ii) EXTENSION OF TIME PERIOD.— 
The Commission may extend the period es-
tablished under clause (i) by not more than 
an additional 45 days, if— 
‘‘(I) the Commission determines 
that a longer period is appropriate 
and publishes the reasons for such de-
termination; or 
‘‘(II) the self-regulatory organiza-
tion that filed the proposed rule change 
consents to the longer period. 
‘‘(B) PROCEEDINGS.— 
‘‘(i) NOTICE
AND
HEARING.—If the 
Commission does not approve a proposed 
rule change under subparagraph (A), the 
Commission shall provide to the self-regu-
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† HR 4173 PP
latory organization that filed the proposed 
rule change— 
‘‘(I) notice of the grounds for dis-
approval under consideration; and 
‘‘(II) opportunity for hearing, to 
be concluded not later than 180 days 
after the date of publication of notice 
of the filing of the proposed rule 
change. 
‘‘(ii) ORDER
OF
APPROVAL
OR
DIS-
APPROVAL.— 
‘‘(I) IN GENERAL.—Except as pro-
vided in subclause (II), not later than 
180 days after the date of publication 
under paragraph (1), the Commission 
shall issue an order approving or dis-
approving the proposed rule change. 
‘‘(II) EXTENSION
OF
TIME
PE-
RIOD.—The Commission may extend 
the period for issuance under clause (I) 
by not more than 60 days, if— 
‘‘(aa) the Commission deter-
mines that a longer period is ap-
propriate and publishes the rea-
sons for such determination; or
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‘‘(bb) the self-regulatory orga-
nization that filed the proposed 
rule change consents to the longer 
period. 
‘‘(C) STANDARDS FOR APPROVAL AND DIS-
APPROVAL.— 
‘‘(i) 
APPROVAL.—The 
Commission 
shall approve a proposed rule change of a 
self-regulatory organization if it finds that 
such proposed rule change is consistent with 
the requirements of this title and the rules 
and regulations issued under this title that 
are applicable to such organization. 
‘‘(ii) DISAPPROVAL.—The Commission 
shall disapprove a proposed rule change of 
a self-regulatory organization if it does not 
make a finding described in clause (i). 
‘‘(iii) 
TIME
FOR
APPROVAL.—The 
Commission may not approve a proposed 
rule change earlier than 30 days after the 
date of publication under paragraph (1), 
unless the Commission finds good cause for 
so doing and publishes the reason for the 
finding.
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† HR 4173 PP
‘‘(D) RESULT OF FAILURE TO INSTITUTE OR 
CONCLUDE
PROCEEDINGS.—A 
proposed 
rule 
change shall be deemed to have been approved by 
the Commission, if— 
‘‘(i) the Commission does not approve 
the proposed rule change or begin pro-
ceedings under subparagraph (B) within the 
period described in subparagraph (A); or 
‘‘(ii) the Commission does not issue an 
order approving or disapproving the pro-
posed rule change under subparagraph (B) 
within the period described in subpara-
graph (B)(ii). 
‘‘(E) PUBLICATION DATE BASED ON FED-
ERAL REGISTER PUBLISHING.—For purposes of 
this paragraph, if, after filing a proposed rule 
change with the Commission pursuant to para-
graph (1), a self-regulatory organization pub-
lishes a notice of the filing of such proposed rule 
change, together with the substantive terms of 
such proposed rule change, on a publicly acces-
sible website, the Commission shall thereafter 
send the notice to the Federal Register for publi-
cation thereof under paragraph (1) within 15 
days of the date on which such website publica-
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† HR 4173 PP
tion is made. If the Commission fails to send the 
notice for publication thereof within such 15 day 
period, then the date of publication shall be 
deemed to be the date on which such website pub-
lication was made.’’. 
(b) CLARIFICATION OF FILING DATE.— 
(1) RULE OF CONSTRUCTION.—Section 19(b) of 
the Securities Exchange Act of 1934 (15 U.S.C. 
78s(b)) is amended by adding at the end the fol-
lowing: 
‘‘(10) RULE
OF
CONSTRUCTION
RELATING
TO 
FILING DATE OF PROPOSED RULE CHANGES.— 
‘‘(A) IN
GENERAL.—For purposes of this 
subsection, the date of filing of a proposed rule 
change shall be deemed to be the date on which 
the Commission receives the proposed rule 
change. 
‘‘(B) EXCEPTION.—A proposed rule change 
has not been received by the Commission for pur-
poses of subparagraph (A) if, not later than 7 
days after the date of receipt by the Commission, 
the Commission notifies the self-regulatory orga-
nization that such proposed rule change does not 
comply with the rules of the Commission relating 
to the required form of a proposed rule change.’’.
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† HR 4173 PP
(2) PUBLICATION.—Section 19(b)(1) of the Secu-
rities Exchange Act of 1934 (15 U.S.C. 78s(b)(1)) is 
amended by striking ‘‘upon’’ and inserting ‘‘as soon 
as practicable after the date of’’. 
(c) EFFECTIVE DATE OF PROPOSED RULES.—Section 
19(b)(3) of the Securities Exchange Act of 1934 (15 U.S.C. 
78s(b)(3)) is amended— 
(1) in subparagraph (A)— 
(A) by striking ‘‘may take effect’’ and in-
serting ‘‘shall take effect’’; and 
(B) by inserting ‘‘on any person, whether or 
not the person is a member of the self-regulatory 
organization’’ after ‘‘charge imposed by the self- 
regulatory organization’’; and 
(2) in subparagraph (C)— 
(A) by amending the second sentence to read 
as follows: ‘‘At any time within the 60-day pe-
riod beginning on the date of filing of such a 
proposed rule change in accordance with the pro-
visions of paragraph (1), the Commission sum-
marily may temporarily suspend the change in 
the rules of the self-regulatory organization made 
thereby, if it appears to the Commission that 
such action is necessary or appropriate in the 
public interest, for the protection of investors, or
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† HR 4173 PP
otherwise in furtherance of the purposes of this 
title.’’; 
(B) by inserting after the second sentence 
the following: ‘‘If the Commission takes such ac-
tion, the Commission shall institute proceedings 
under paragraph (2)(B) to determine whether 
the proposed rule should be approved or dis-
approved.’’; and 
(C) in the third sentence, by striking ‘‘the 
preceding sentence’’ and inserting ‘‘this subpara-
graph’’. 
(d) CONFORMING CHANGE.—Section 19(b)(4)(D) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78s(b)(4)(D)) 
is amended to read as follows: 
‘‘(D)(i) The Commission shall order the 
temporary suspension of any change in the rules 
of a clearing agency made by a proposed rule 
change that has taken effect under paragraph 
(3), if the appropriate regulatory agency for the 
clearing agency notifies the Commission not 
later than 30 days after the date on which the 
proposed rule change was filed of— 
‘‘(I) the determination by the appro-
priate regulatory agency that the rules of 
such clearing agency, as so changed, may be
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† HR 4173 PP
inconsistent with the safeguarding of securi-
ties or funds in the custody or control of 
such clearing agency or for which it is re-
sponsible; and 
‘‘(II) the reasons for the determination 
described in subclause (I). 
‘‘(ii) If the Commission takes action under 
clause (i), the Commission shall institute pro-
ceedings under paragraph (2)(B) to determine if 
the proposed rule change should be approved or 
disapproved.’’. 
SEC. 916. STUDY REGARDING FINANCIAL LITERACY AMONG 
INVESTORS. 
(a) IN GENERAL.—The Commission shall conduct a 
study to identify— 
(1) the existing level of financial literacy among 
retail investors, including subgroups of investors iden-
tified by the Commission; 
(2) methods to improve the timing, content, and 
format of disclosures to investors with respect to fi-
nancial intermediaries, investment products, and in-
vestment services; 
(3) the most useful and understandable relevant 
information that retail investors need to make in-
formed financial decisions before engaging a financial
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† HR 4173 PP
intermediary or purchasing an investment product or 
service that is typically sold to retail investors, in-
cluding shares of open-end companies, as that term is 
defined in section 5 of the Investment Company Act 
of 1940 (15 U.S.C. 80a–5) that are registered under 
section 8 of that Act; 
(4) methods to increase the transparency of ex-
penses and conflicts of interests in transactions in-
volving investment services and products, including 
shares of open-end companies described in paragraph 
(3); 
(5) the most effective existing private and public 
efforts to educate investors; and 
(6) in consultation with the Financial Literacy 
and Education Commission, a strategy (including, to 
the extent practicable, measurable goals and objec-
tives) to increase the financial literacy of investors in 
order to bring about a positive change in investor be-
havior. 
(b) REPORT.—Not later than 2 years after the date 
of enactment of this Act, the Commission shall submit a 
report on the study required under subsection (a) to— 
(1) the Committee on Banking, Housing, and 
Urban Affairs of the Senate; and
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† HR 4173 PP
(2) the Committee on Financial Services of the 
House of Representatives. 
SEC. 917. STUDY REGARDING MUTUAL FUND ADVERTISING. 
(a) IN GENERAL.—The Comptroller General of the 
United States shall conduct a study on mutual fund adver-
tising to identify— 
(1) existing and proposed regulatory require-
ments for open-end investment company advertise-
ments; 
(2) current marketing practices for the sale of 
open-end investment company shares, including the 
use of past performance data, funds that have merged, 
and incubator funds; 
(3) the impact of such advertising on consumers; 
and 
(4) recommendations to improve investor protec-
tions in mutual fund advertising and additional in-
formation necessary to ensure that investors can make 
informed financial decisions when purchasing shares. 
(b) REPORT.—Not later than 1 year after the date of 
enactment of this Act, the Comptroller General of the United 
States shall submit a report on the results of the study con-
ducted under subsection (a) to— 
(1) the Committee on Banking, Housing, and 
Urban Affairs of the United States Senate; and
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(2) the Committee on Financial Services of the 
House of Representatives. 
SEC. 918. CLARIFICATION OF COMMISSION AUTHORITY TO 
REQUIRE INVESTOR DISCLOSURES BEFORE 
PURCHASE OF INVESTMENT PRODUCTS AND 
SERVICES. 
Section 15 of the Securities Exchange Act of 1934 (15 
U.S.C. 78o) is amended by adding at the end the following: 
‘‘(k) DISCLOSURES TO RETAIL INVESTORS.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of the securities laws, the Commission may 
issue rules designating documents or information that 
shall be provided by a broker or dealer to a retail in-
vestor before the purchase of an investment product or 
service by the retail investor. 
‘‘(2) CONSIDERATIONS.—In developing any rules 
under paragraph (1), the Commission shall consider 
whether the rules will promote investor protection, ef-
ficiency, competition, and capital formation. 
‘‘(3) FORM AND CONTENTS OF DOCUMENTS AND 
INFORMATION.—Any documents or information des-
ignated under a rule promulgated under paragraph 
(1) shall— 
‘‘(A) be in a summary format; and
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‘‘(B) contain clear and concise information 
about— 
‘‘(i) investment objectives, strategies, 
costs, and risks; and 
‘‘(ii) any compensation or other finan-
cial incentive received by a broker, dealer, 
or other intermediary in connection with 
the purchase of retail investment products.’’. 
SEC. 919. STUDY ON CONFLICTS OF INTEREST. 
(a) IN GENERAL.—The Comptroller General of the 
United States shall conduct a study— 
(1) to identify and examine potential conflicts of 
interest that exist between the staffs of the investment 
banking and equity and fixed income securities ana-
lyst functions within the same firm; and 
(2) to make recommendations to Congress de-
signed to protect investors in light of such conflicts. 
(b) CONSIDERATIONS.—In conducting the study under 
subsection (a), the Comptroller General shall— 
(1) consider— 
(A) the potential for investor harm resulting 
from conflicts, including consideration of the 
forms of misconduct engaged in by the several se-
curities firms and individuals that entered into
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the Global Analyst Research Settlements in 2003 
(also known as the ‘‘Global Settlement’’); 
(B) the nature and benefits of the under-
takings to which those firms agreed in enforce-
ment proceedings, including firewalls between re-
search and investment banking, separate report-
ing lines, dedicated legal and compliance staffs, 
allocation of budget, physical separation, com-
pensation, employee performance evaluations, 
coverage decisions, limitations on soliciting in-
vestment banking business, disclosures, trans-
parency, and other measures; 
(C) whether any such undertakings should 
be codified and applied permanently to securities 
firms, or whether the Commission should adopt 
rules applying any such undertakings to securi-
ties firms; and 
(D) whether to recommend regulatory or 
legislative measures designed to mitigate possible 
adverse consequences to investors arising from 
the conflicts of interest or to enhance investor 
protection or confidence in the integrity of the 
securities markets; and 
(2) consult with State attorneys general, State 
securities officials, the Commission, the Financial In-
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dustry Regulatory Authority (‘‘FINRA’’), NYSE Reg-
ulation, investor advocates, brokers, dealers, retail in-
vestors, institutional investors, and academics. 
(c) REPORT.—The Comptroller General shall submit 
a report on the results of the study required by this section 
to the Committee on Banking, Housing, and Urban Affairs 
of the Senate and the Committee on Financial Services of 
the House of Representatives, not later than 18 months after 
the date of enactment of this Act. 
SEC. 919A. STUDY ON IMPROVED INVESTOR ACCESS TO IN-
FORMATION ON INVESTMENT ADVISERS AND 
BROKER-DEALERS. 
(a) STUDY.— 
(1) IN GENERAL.—Not later than 6 months after 
the date of enactment of this Act, the Commission 
shall complete a study, including recommendations, of 
ways to improve the access of investors to registration 
information (including disciplinary actions, regu-
latory, judicial, and arbitration proceedings, and 
other information) about registered and previously 
registered investment advisers, associated persons of 
investment advisers, brokers and dealers and their as-
sociated persons on the existing Central Registration 
Depository and Investment Adviser Registration De-
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pository systems, as well as identify additional infor-
mation that should be made publicly available. 
(2) CONTENTS.—The study required by sub-
section (a) shall include an analysis of the advantages 
and disadvantages of further centralizing access to the 
information contained in the 2 systems, including— 
(A) identification of those data pertinent to 
investors; and 
(B) the identification of the method and for-
mat for displaying and publishing such data to 
enhance accessibility by and utility to investors. 
(b) IMPLEMENTATION.—Not later than 18 months after 
the date of completion of the study required by subsection 
(a), the Commission shall implement any recommendations 
of the study. 
SEC. 919B. STUDY ON FINANCIAL PLANNERS AND THE USE 
OF FINANCIAL DESIGNATIONS. 
(a) IN GENERAL.—The Comptroller General of the 
United States shall conduct a study to evaluate— 
(1) the effectiveness of State and Federal regula-
tions to protect consumers from individuals who hold 
themselves out as financial planners through the use 
of misleading designations; 
(2) current State and Federal oversight structure 
and regulations for financial planners; and
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(3) legal or regulatory gaps in the regulation of 
financial planners and other individuals who provide 
or offer to provide financial planning services to con-
sumers. 
(b) CONSIDERATIONS.—In conducting the study re-
quired under subsection (a), the Comptroller General shall 
consider— 
(1) the role of financial planners in providing 
advice regarding the management of financial re-
sources, including investment planning, income tax 
planning, education planning, retirement planning, 
estate planning, and risk management; 
(2) whether current regulations at the State and 
Federal level provide adequate ethical and profes-
sional standards for financial planners; 
(3) the use of the title ‘‘financial planner’’ and 
misleading designations in connection with sale of fi-
nancial products, including insurance and securities; 
(4) the possible risk posed to consumers by indi-
viduals who hold themselves out as financial planners 
through the use of misleading designations, including 
‘‘financial advisor’’ and ‘‘financial consultant’’; 
(5) the ability of consumers to understand licens-
ing requirements and standards of care that apply to 
individuals who provide financial advice;
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(6) the possible benefits to consumers of regula-
tion and professional oversight of financial planners; 
and 
(7) any other consideration that the Comptroller 
General deems necessary or appropriate to effectively 
execute the study required under subsection (a). 
(c) RECOMMENDATIONS.—In providing recommenda-
tions for the appropriate regulation of financial planners 
and other individuals who provide or offer to provide finan-
cial planning services, in order to protect consumers of fi-
nancial planning services, the Comptroller General shall 
consider— 
(1) the appropriate structure for regulation of fi-
nancial planners and individuals providing financial 
planning services; and 
(2) the appropriate scope of the regulations need-
ed to protect consumers, including but not limited to 
the need to establish competency standards, practice 
standards, ethical guidelines, disciplinary authority, 
and transparency to consumers. 
(d) REPORT.— 
(1) IN GENERAL.—Not later than 180 days after 
the date of enactment of this Act, the Comptroller 
General shall submit a report on the study required 
under subsection (a) to—
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(A) the Committee on Banking, Housing, 
and Urban Affairs of the Senate; 
(B) the Special Committee on Aging of the 
Senate; and 
(C) the Committee on Financial Services of 
the House of Representatives. 
(2) CONTENT
REQUIREMENTS.—The report re-
quired under paragraph (1) shall describe the find-
ings and determinations made by the Comptroller 
General in carrying out the study required under sub-
section (a), including a description of the consider-
ations, analysis, and government, public, industry, 
nonprofit and consumer input that the Comptroller 
General considered to make such findings, conclu-
sions, and legislative, regulatory, or other rec-
ommendations. 
Subtitle B—Increasing Regulatory 
Enforcement and Remedies 
SEC. 921. AUTHORITY TO ISSUE RULES RELATED TO MAN-
DATORY PREDISPUTE 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 918, is amended 
by adding at the end the following:
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‘‘(l) 
AUTHORITY
TO
RESTRICT
MANDATORY 
PREDISPUTE ARBITRATION.—The Commission may con-
duct a rulemaking to reaffirm or prohibit, or impose or not 
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 dispute between 
them and such broker, dealer, or municipal securities dealer 
that arises under the securities laws or the rules of a self- 
regulatory organization, if the Commission finds that such 
reaffirmation, prohibition, imposition of conditions or limi-
tations, or other action is 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: 
‘‘(f) AUTHORITY TO ISSUE RULES RELATED TO MAN-
DATORY
PREDISPUTE
ARBITRATION.—The Commission 
may conduct rulemaking to reaffirm or prohibit, or impose 
or not impose conditions or limitations on the use of, agree-
ments that require customers or clients of any investment 
adviser to arbitrate any dispute between them and such in-
vestment adviser that arises under the securities laws, as 
defined in section 3 of the Securities Exchange Act of 1934 
(15 U.S.C. 78c), or the rules of a self-regulatory organiza-
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tion, if the Commission finds that such reaffirmation, pro-
hibition, imposition of conditions or limitations, or other 
action is in the public interest and for the protection of 
investors.’’. 
SEC. 922. WHISTLEBLOWER PROTECTION. 
(a) IN GENERAL.—The Securities Exchange Act of 
1934 (15 U.S.C. 78a et seq.) is amended by inserting after 
section 21E the following: 
‘‘SEC. 21F. SECURITIES WHISTLEBLOWER INCENTIVES AND 
PROTECTION. 
‘‘(a) DEFINITIONS.—In this section the following defi-
nitions shall apply: 
‘‘(1) COVERED JUDICIAL OR ADMINISTRATIVE AC-
TION.—The term ‘covered judicial or administrative 
action’ means any judicial or administrative action 
brought by the Commission under the securities laws 
that 
results 
in 
monetary 
sanctions 
exceeding 
$1,000,000. 
‘‘(2) FUND.—The term ‘Fund’ means the Securi-
ties and Exchange Commission Investor Protection 
Fund. 
‘‘(3) ORIGINAL INFORMATION.—The term ‘origi-
nal information’ means information that— 
‘‘(A) is derived from the independent knowl-
edge or analysis of a whistleblower;
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‘‘(B) is not known to the Commission from 
any other source, unless the whistleblower is the 
original source of the information; and 
‘‘(C) is not exclusively derived from an alle-
gation made in a judicial or administrative 
hearing, in a governmental report, hearing, 
audit, or investigation, or from the news media, 
unless the whistleblower is a source of the infor-
mation. 
‘‘(4) MONETARY SANCTIONS.—The term ‘mone-
tary sanctions’, when used with respect to any judi-
cial or administrative action, means— 
‘‘(A) any monies, including penalties, 
disgorgement, and interest, ordered to be paid; 
and 
‘‘(B) 
any 
monies 
deposited 
into 
a 
disgorgement fund or other fund pursuant to sec-
tion 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. 
‘‘(5) 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 administra-
tive action brought by an entity described in sub-
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clauses (I) through (IV) of subsection (h)(2)(D)(i) that 
is based upon the original information provided by a 
whistleblower pursuant to subsection (a) that led to 
the successful enforcement of the Commission action. 
‘‘(6) 
WHISTLEBLOWER.—The 
term 
‘whistle-
blower’ means any individual, or 2 or more individ-
uals acting jointly, who provides information relating 
to a violation of the securities laws to the Commis-
sion, in a manner established, by rule or regulation, 
by the Commission. 
‘‘(b) AWARDS.— 
‘‘(1) IN GENERAL.—In any covered judicial or 
administrative action, or related action, the Commis-
sion, under regulations prescribed by the Commission 
and subject to subsection (c), shall pay an award or 
awards to 1 or more whistleblowers who voluntarily 
provided original information to the Commission that 
led to the successful enforcement of the covered judi-
cial or administrative action, or related action, in an 
aggregate amount equal to— 
‘‘(A) not less than 10 percent, in total, of 
what has been collected of the monetary sanctions 
imposed in the action or related actions; and
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‘‘(B) not more than 30 percent, in total, of 
what has been collected of the monetary sanctions 
imposed in the action or related actions. 
‘‘(2) PAYMENT OF AWARDS.—Any amount paid 
under paragraph (1) shall be paid from the Fund. 
‘‘(c) DETERMINATION OF AMOUNT OF AWARD; DENIAL 
OF AWARD.— 
‘‘(1) DETERMINATION OF AMOUNT OF AWARD.— 
‘‘(A) DISCRETION.—The determination of 
the amount of an award made under subsection 
(b) shall be in the discretion of the Commission. 
‘‘(B) 
CRITERIA.—In 
determining 
the 
amount of an award made under subsection (b), 
the Commission shall take into account— 
‘‘(i) the significance of the information 
provided by the whistleblower to the success 
of the covered judicial or administrative ac-
tion; 
‘‘(ii) the degree of assistance provided 
by the whistleblower and any legal rep-
resentative of the whistleblower in a covered 
judicial or administrative action; 
‘‘(iii) the programmatic interest of the 
Commission in deterring violations of the 
securities laws by making awards to whis-
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tleblowers who provide information that 
lead to the successful enforcement of such 
laws; and 
‘‘(iv) such additional relevant factors 
as the Commission may establish by rule or 
regulation. 
‘‘(2) DENIAL OF AWARD.—No award under sub-
section (b) shall be made— 
‘‘(A) to any whistleblower who is, or was at 
the time the whistleblower acquired the original 
information submitted to the Commission, a 
member, officer, or employee of— 
‘‘(i) an appropriate regulatory agency; 
‘‘(ii) the Department of Justice; 
‘‘(iii) a self-regulatory organization; 
‘‘(iv) the Public Company Accounting 
Oversight Board; or 
‘‘(v) a law enforcement organization; 
‘‘(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 in-
formation through the performance of an audit
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of financial statements required under the securi-
ties laws and for whom such submission would 
be contrary to the requirements of section 101A 
of the Securities Exchange Act of 1934 (15 
U.S.C. 78j–1); or 
‘‘(D) to any whistleblower who fails to sub-
mit information to the Commission in such form 
as the Commission may, by rule, require. 
‘‘(d) REPRESENTATION.— 
‘‘(1) PERMITTED REPRESENTATION.—Any whis-
tleblower who makes a claim for an award under sub-
section (b) may be represented by counsel. 
‘‘(2) REQUIRED REPRESENTATION.— 
‘‘(A) IN GENERAL.—Any whistleblower who 
anonymously makes a claim for an award under 
subsection (b) shall be represented by counsel if 
the whistleblower anonymously submits the in-
formation upon which the claim is based. 
‘‘(B) DISCLOSURE OF IDENTITY.—Prior to 
the payment of an award, a whistleblower shall 
disclose the identity of the whistleblower and 
provide such other information as the Commis-
sion may require, directly or through counsel for 
the whistleblower.
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‘‘(e) NO CONTRACT NECESSARY.—No contract with the 
Commission is necessary for any whistleblower to receive 
an award under subsection (b), unless otherwise required 
by the Commission by rule or regulation. 
‘‘(f) APPEALS.—Any determination made under this 
section, including whether, to whom, or in what amount 
to make awards, shall be in the discretion of the Commis-
sion. Any such determination may be appealed to the ap-
propriate court of appeals of the United States not more 
than 30 days after the determination is issued by the Com-
mission. The court shall review the determination made by 
the Commission in accordance with section 706 of title 5, 
United States Code. 
‘‘(g) INVESTOR PROTECTION FUND.— 
‘‘(1) FUND ESTABLISHED.—There is established 
in the Treasury of the United States a fund to be 
known as the ‘Securities and Exchange Commission 
Investor Protection Fund’. 
‘‘(2) USE OF FUND.—The Fund shall be avail-
able to the Commission, without further appropria-
tion or fiscal year limitation, for— 
‘‘(A) paying awards to whistleblowers as 
provided in subsection (b); and 
‘‘(B) funding the activities of the Inspector 
General of the Commission under section 4(i).
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‘‘(3) DEPOSITS AND CREDITS.—There shall be 
deposited into or credited to the Fund an amount 
equal to— 
‘‘(A) the amount awarded under subsection 
(b) from any monetary sanction collected by the 
Commission in any judicial or administrative 
action brought by the Commission that is based 
on information provided by a whistleblower 
under the securities laws, unless, the balance of 
the Fund at the time the monetary sanction is 
collected exceeds $200,000,000; 
‘‘(B) any monetary sanction added to a 
disgorgement fund or other fund pursuant to sec-
tion 308 of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7246) that is not distributed to the vic-
tims for whom the disgorgement fund was estab-
lished, unless the balance of the disgorgement 
fund at the time the determination is made not 
to distribute the monetary sanction to such vic-
tims 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 Sec-
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retary of the Treasury to invest the portion of 
the Fund that is not, in the discretion of the 
Commission, required to meet the current needs 
of the Fund. 
‘‘(B) ELIGIBLE INVESTMENTS.—Investments 
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 maturities suitable to 
the needs of the Fund as determined by the Com-
mission on the record. 
‘‘(C) INTEREST
AND
PROCEEDS
CRED-
ITED.—The interest on, and the proceeds from 
the sale or redemption of, any obligations held in 
the Fund shall be credited to the Fund. 
‘‘(5) REPORTS TO CONGRESS.—Not later than 
October 30 of each fiscal year beginning after the date 
of enactment of this subsection, the Commission shall 
submit to the Committee on Banking, Housing, and 
Urban Affairs of the Senate, and the Committee on 
Financial Services of the House of Representatives a 
report on— 
‘‘(A) the whistleblower award program, es-
tablished under this section, including—
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‘‘(i) a description of the number of 
awards granted; and 
‘‘(ii) the types of cases in which 
awards were granted during the preceding 
fiscal year; 
‘‘(B) the balance of the Fund at the begin-
ning of the preceding fiscal year; 
‘‘(C) the amounts deposited into or credited 
to the Fund during the preceding fiscal year; 
‘‘(D) the amount of earnings on investments 
made under paragraph (4) during the preceding 
fiscal year; 
‘‘(E) the amount paid from the Fund dur-
ing the preceding fiscal year to whistleblowers 
pursuant to subsection (b); 
‘‘(F) the balance of the Fund at the end of 
the preceding fiscal year; and 
‘‘(G) a complete set of audited financial 
statements, including— 
‘‘(i) a balance sheet; 
‘‘(ii) income statement; and 
‘‘(iii) cash flow analysis. 
‘‘(h) PROTECTION OF WHISTLEBLOWERS.— 
‘‘(1) PROHIBITION AGAINST RETALIATION.—
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‘‘(A) IN GENERAL.—No employer may dis-
charge, demote, suspend, threaten, harass, di-
rectly or indirectly, or in any other manner dis-
criminate against, a whistleblower in the terms 
and conditions of employment because of any 
lawful act done by the whistleblower— 
‘‘(i) in providing information to the 
Commission in accordance with subsection 
(a); or 
‘‘(ii) in assisting in any investigation 
or judicial or administrative action of the 
Commission based upon or related to such 
information. 
‘‘(B) ENFORCEMENT.— 
‘‘(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 requir-
ing the attendance of a witness at a trial or 
hearing conducted under this section may 
be served at any place in the United States.
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‘‘(iii) STATUTE OF LIMITATIONS.— 
‘‘(I) IN
GENERAL.—An action 
under this subsection may not be 
brought— 
‘‘(aa) more than 6 years 
after the date on which the viola-
tion of subparagraph (A) oc-
curred; or 
‘‘(bb) more than 3 years after 
the date when facts material to 
the right of action are known or 
reasonably 
should 
have 
been 
known by the employee alleging a 
violation of subparagraph (A). 
‘‘(II) REQUIRED
ACTION
WITHIN 
10 YEARS.—Notwithstanding subclause 
(I), an action under this subsection 
may not in any circumstance be 
brought more than 10 years after the 
date on which the violation occurs. 
‘‘(C) RELIEF.—Relief for an individual 
prevailing in an action brought under subpara-
graph (B) shall include—
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‘‘(i) reinstatement with the same se-
niority status that the individual would 
have had, but for the discrimination; 
‘‘(ii) 2 times the amount of back pay 
otherwise owed to the individual, with in-
terest; and 
‘‘(iii) compensation for litigation costs, 
expert witness fees, and reasonable attor-
neys’ fees. 
‘‘(2) CONFIDENTIALITY.— 
‘‘(A) IN GENERAL.—Unless and until re-
quired to be disclosed to a defendant or respond-
ent in connection with a proceeding instituted by 
the Commission or any entity described in sub-
paragraph (D), all information provided to the 
Commission by a whistleblower— 
‘‘(i) in any proceeding in any Federal 
or State court or administrative agency— 
‘‘(I) shall be confidential and 
privileged as an evidentiary matter; 
and 
‘‘(II) shall not be subject to civil 
discovery or other legal process; and 
‘‘(ii) shall not be subject to disclosure 
under section 552 of title 5, United States
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Code (commonly referred to as the Freedom 
of Information Act) or under any pro-
ceeding under that section. 
‘‘(B) EXEMPTED
STATUTE.—For purposes 
of section 552 of title 5, United States Code, this 
paragraph shall be considered a statute described 
in subsection (b)(3)(B) of such section 552. 
‘‘(C) RULE OF CONSTRUCTION.—Nothing in 
this section is intended to limit, or shall be con-
strued to limit, the ability of the Attorney Gen-
eral to present such evidence to a grand jury or 
to share such evidence with potential witnesses or 
defendants in the course of an ongoing criminal 
investigation. 
‘‘(D) AVAILABILITY TO GOVERNMENT AGEN-
CIES.— 
‘‘(i) IN GENERAL.—Without the loss of 
its status as confidential and privileged in 
the hands of the Commission, all informa-
tion referred to in subparagraph (A) may, 
in the discretion of the Commission, when 
determined by the Commission to be nec-
essary to accomplish the purposes of this 
Act and to protect investors, be made avail-
able to—
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‘‘(I) the Attorney General of the 
United States; 
‘‘(II) an appropriate regulatory 
authority; 
‘‘(III) a self-regulatory organiza-
tion; 
‘‘(IV) a State attorney general in 
connection with any criminal inves-
tigation; 
‘‘(V) any appropriate State regu-
latory authority; 
‘‘(VI) the Public Company Ac-
counting Oversight Board; 
‘‘(VII) a foreign securities author-
ity; and 
‘‘(VIII) a foreign law enforcement 
authority. 
‘‘(ii) CONFIDENTIALITY.— 
‘‘(I) IN
GENERAL.—Each of the 
entities described in subclauses (I) 
through (VI) of clause (i) shall main-
tain such information as confidential 
and privileged, in accordance with the 
requirements established under sub-
paragraph (A).
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‘‘(II) FOREIGN
AUTHORITIES.— 
Each of the entities described in sub-
clauses (VII) and (VIII) of clause (i) 
shall maintain such information in ac-
cordance with such assurances of con-
fidentiality as the Commission deter-
mines appropriate. 
‘‘(3) RIGHTS RETAINED.—Nothing in this section 
shall be deemed to diminish the rights, privileges, or 
remedies of any whistleblower under any Federal or 
State law, or under any collective bargaining agree-
ment. 
‘‘(i) PROVISION OF FALSE INFORMATION.—A whistle-
blower shall not be entitled to an award under this section 
if the whistleblower— 
‘‘(1) knowingly and willfully makes any false, 
fictitious, or fraudulent statement or representation; 
or 
‘‘(2) uses any false writing or document knowing 
the writing or document contains any false, fictitious, 
or fraudulent statement or entry. 
‘‘(j) RULEMAKING
AUTHORITY.—The Commission 
shall have the authority to issue such rules and regulations 
as may be necessary or appropriate to implement the provi-
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† HR 4173 PP
sions of this section consistent with the purposes of this sec-
tion.’’. 
(b) PROTECTION
FOR EMPLOYEES
OF NATIONALLY 
RECOGNIZED STATISTICAL RATING ORGANIZATIONS.—Sec-
tion 1514A(a) of title 18, United States Code, is amended— 
(1) by inserting ‘‘or nationally recognized statis-
tical rating organization (as defined in section 3(a) 
of the Securities Exchange Act of 1934 (15 U.S.C. 
78c),’’ after ‘‘78o(d)),’’; and 
(2) by inserting ‘‘or nationally recognized statis-
tical rating organization’’ after ‘‘such company’’. 
SEC. 
923. 
CONFORMING 
AMENDMENTS 
FOR 
WHISTLE-
BLOWER PROTECTION. 
(a) IN GENERAL.— 
(1) 
SECURITIES
ACT
OF
1933.—Section 
20(d)(3)(A) of the Securities Act of 1933 (15 U.S.C. 
77t(d)(3)(A)) is amended by inserting ‘‘and section 
21F of the Securities Exchange Act of 1934’’ after 
‘‘the Sarbanes-Oxley Act of 2002’’. 
(2) INVESTMENT COMPANY ACT OF 1940.—Section 
42(e)(3)(A) of the Investment Company Act of 1940 
(15 U.S.C. 80a–41(e)(3)(A)) is amended by inserting 
‘‘and section 21F of the Securities Exchange Act of 
1934’’ after ‘‘the Sarbanes-Oxley Act of 2002’’.
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† HR 4173 PP
(3) INVESTMENT ADVISERS ACT OF 1940.—Sec-
tion 209(e)(3)(A) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–9(e)(3)(A)) is amended by in-
serting ‘‘and section 21F of the Securities Exchange 
Act of 1934’’ after ‘‘the Sarbanes-Oxley Act of 2002’’. 
(b) SECURITIES EXCHANGE ACT.— 
(1) SECTION 21.—Section 21(d)(3)(C)(i) of the 
Securities 
Exchange 
Act 
of 
1934 
(15 
U.S.C. 
78u(d)(3)(C)(i)) is amended by inserting ‘‘and section 
21F of this title’’ after ‘‘the Sarbanes-Oxley Act of 
2002’’. 
(2) SECTION 21A.—Section 21A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u–1) is amend-
ed— 
(A) in subsection (d)(1) by— 
(i) striking ‘‘(subject to subsection 
(e))’’; and 
(ii) inserting ‘‘and section 21F of this 
title’’ after ‘‘the Sarbanes-Oxley Act of 
2002’’; 
(B) by striking subsection (e); and 
(C) by redesignating subsections (f) and (g) 
as subsections (e) and (f), respectively.
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† HR 4173 PP
SEC. 924. IMPLEMENTATION AND TRANSITION PROVISIONS 
FOR WHISTLEBLOWER PROTECTION. 
(a) IMPLEMENTING RULES.—The Commission shall 
issue final regulations implementing the provisions of sec-
tion 21F of the Securities Exchange Act of 1934, as added 
by this subtitle, not later than 270 days after the date of 
enactment of this Act. 
(b) ORIGINAL INFORMATION.—Information provided 
to the Commission by a whistleblower in accordance with 
the regulations referenced in subsection (a) shall not lose 
the status of original information (as defined in section 
21F(i)(1) of the Securities Exchange Act of 1934, as added 
by this subtitle) solely because the whistleblower provided 
the information prior to the effective date of the regulations, 
provided that the information is— 
(1) provided by the whistleblower after the date 
of enactment of this subtitle, or monetary sanctions 
are collected after the date of enactment of this sub-
title; or 
(2) related to a violation for which an award 
under section 21F of the Securities Exchange Act of 
1934, as added by this subtitle, could have been paid 
at the time the information was provided by the whis-
tleblower. 
(c) AWARDS.—A whistleblower may receive an award 
pursuant to section 21F of the Securities Exchange Act of
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1934, as added by this subtitle, regardless of whether any 
violation of a provision of the securities laws, or a rule or 
regulation thereunder, underlying the judicial or adminis-
trative action upon which the award is based, occurred 
prior to the date of enactment of this subtitle. 
SEC. 925. COLLATERAL BARS. 
(a) SECURITIES EXCHANGE ACT OF 1934.— 
(1) SECTION 15.—Section 15(b)(6)(A) of the Se-
curities 
Exchange 
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, deal-
er, investment adviser, municipal securities dealer, 
municipal advisor, transfer agent, or nationally rec-
ognized statistical rating organization,’’. 
(2) SECTION 15B.—Section 15B(c)(4) of the Se-
curities Exchange 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 munic-
ipal securities dealer,’’ and inserting ‘‘12 months or 
bar any such person from being associated with a 
broker, dealer, investment adviser, municipal securi-
ties dealer, municipal advisor, transfer agent, or na-
tionally recognized statistical rating organization,’’.
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(3) SECTION 17A.—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 person 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, investment adviser, municipal 
securities dealer, municipal advisor, or nationally 
recognized statistical rating organization,’’. 
(b) 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 associated with an investment ad-
viser,’’ and inserting ‘‘12 months or bar any such person 
from being associated with an investment adviser, broker, 
dealer, municipal securities dealer, municipal advisor, 
transfer agent, or nationally recognized statistical rating 
organization,’’. 
SEC. 926. DISQUALIFYING FELONS AND OTHER ‘‘BAD AC-
TORS’’ FROM REGULATION D OFFERINGS. 
Not later than 1 year after the date of enactment of 
this Act, the Commission shall issue rules for the disquali-
fication of offerings and sales of securities made under sec-
tion 230.506 of title 17, Code of Federal Regulations, that—
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(1) are substantially similar to the provisions of 
section 230.262 of title 17, Code of Federal Regula-
tions, or any successor thereto; and 
(2) disqualify any offering or sale of securities 
by a person that— 
(A) is subject to a final order of a State se-
curities commission (or an agency or officer of a 
State performing like functions), a State author-
ity that supervises or examines banks, savings 
associations, or credit unions, a State insurance 
commission (or an agency or officer of a State 
performing like functions), an appropriate Fed-
eral banking agency, or the National Credit 
Union Administration, that— 
(i) bars the person from— 
(I) association with an entity reg-
ulated by such commission, authority, 
agency, or officer; 
(II) engaging in the business of 
securities, insurance, or banking; or 
(III) engaging in savings associa-
tion or credit union activities; or 
(ii) constitutes a final order based on 
a violation of any law or regulation that 
prohibits fraudulent, manipulative, or de-
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ceptive conduct within the 10-year period 
ending on the date of the filing of the offer 
or sale; or 
(B) has been convicted of any felony or mis-
demeanor in connection with the purchase or 
sale of any security or involving the making of 
any false filing with the Commission. 
SEC. 927. EQUAL TREATMENT OF SELF-REGULATORY ORGA-
NIZATION RULES. 
Section 29(a) of the Securities Exchange Act of 1934 
(15 U.S.C. 78cc(a)) is amended by striking ‘‘an exchange 
required thereby’’ and inserting ‘‘a self-regulatory organiza-
tion,’’. 
SEC. 928. CLARIFICATION THAT SECTION 205 OF THE IN-
VESTMENT ADVISERS ACT OF 1940 DOES NOT 
APPLY TO STATE-REGISTERED ADVISERS. 
Section 205(a) of the Investment Advisers Act of 1940 
(15 U.S.C. 80b–5(a)) is amended, in the matter preceding 
paragraph (1)— 
(1) by striking ‘‘, unless exempt from registra-
tion pursuant to section 203(b),’’ and inserting ‘‘reg-
istered or required to be registered with the Commis-
sion’’;
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(2) by striking ‘‘make use of the mails or any 
means or instrumentality of interstate commerce, di-
rectly or indirectly, to’’; and 
(3) by striking ‘‘to’’ after ‘‘in any way’’. 
SEC. 929. UNLAWFUL MARGIN LENDING. 
Section 7(c)(1)(A) of the Securities Exchange Act of 
1934 (15 U.S.C. 78g(c)(1)(A)) is amended by striking ‘‘; 
and’’ and inserting ‘‘; or’’. 
SEC. 929A. PROTECTION FOR EMPLOYEES OF SUBSIDIARIES 
AND AFFILIATES OF PUBLICLY TRADED COM-
PANIES. 
Section 1514A of title 18, United States Code, is 
amended by inserting ‘‘including any subsidiary or affiliate 
whose financial information is included in the consolidated 
financial statements of such company’’ after ‘‘the Securities 
Exchange Act of 1934 (15 U.S.C. 78o(d))’’. 
SEC. 929B. FAIR FUND AMENDMENTS. 
Section 308 of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7246(a)) is amended— 
(1) by striking subsection (a) and inserting the 
following: 
‘‘(a) CIVIL PENALTIES TO BE USED FOR THE RELIEF 
OF VICTIMS.—If, in any judicial or administrative action 
brought by the Commission under the securities laws, the 
Commission obtains a civil penalty against any person for
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a violation of such laws, or such person agrees, in settlement 
of any such action, to such civil penalty, the amount of 
such civil penalty shall, on the motion or at the direction 
of the Commission, be added to and become part of a 
disgorgement fund or other fund established for the benefit 
of the victims of such violation.’’; 
(2) in subsection (b)— 
(A) by striking ‘‘for a disgorgement fund 
described in subsection (a)’’ and inserting ‘‘for a 
disgorgement fund or other fund described in 
subsection (a)’’; and 
(B) by striking ‘‘in the disgorgement fund’’ 
and inserting ‘‘in such fund’’; and 
(3) by striking subsection (e). 
SEC. 929C. INCREASING THE BORROWING LIMIT ON TREAS-
URY LOANS. 
Section 4(h) of the Securities Investor Protection Act 
of 1970 (15 U.S.C. 78ddd(h)) is amended in the first sen-
tence, 
by 
striking 
‘‘$1,000,000,000’’ 
and 
inserting 
‘‘$2,500,000,000’’. 
Subtitle C—Improvements to the 
Regulation 
of 
Credit 
Rating 
Agencies 
SEC. 931. FINDINGS. 
Congress finds the following:
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(1) Because of the systemic importance of credit 
ratings and the reliance placed on credit ratings by 
individual and institutional investors and financial 
regulators, the activities and performances of credit 
rating agencies, including nationally recognized sta-
tistical rating organizations, are matters of national 
public interest, as credit rating agencies are central 
to capital formation, investor confidence, and the effi-
cient performance of the United States economy. 
(2) Credit rating agencies, including nationally 
recognized statistical rating organizations, play a 
critical ‘‘gatekeeper’’ role in the debt market that is 
functionally similar to that of securities analysts, who 
evaluate the quality of securities in the equity market, 
and auditors, who review the financial statements of 
firms. Such role justifies a similar level of public 
oversight and accountability. 
(3) Because credit rating agencies perform eval-
uative and analytical services on behalf of clients, 
much as other financial ‘‘gatekeepers’’ do, the activi-
ties of credit rating agencies are fundamentally com-
mercial in character and should be subject to the same 
standards of liability and oversight as apply to audi-
tors, securities analysts, and investment bankers.
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(4) In certain activities, particularly in advising 
arrangers of structured financial products on poten-
tial ratings of such products, credit rating agencies 
face conflicts of interest that need to be carefully mon-
itored and that therefore should be addressed explic-
itly in legislation in order to give clearer authority 
to the Securities and Exchange Commission. 
(5) In the recent financial crisis, the ratings on 
structured financial products have proven to be inac-
curate. This inaccuracy contributed significantly to 
the mismanagement of risks by financial institutions 
and investors, which in turn adversely impacted the 
health of the economy in the United States and 
around the world. Such inaccuracy necessitates in-
creased accountability on the part of credit rating 
agencies. 
SEC. 932. ENHANCED REGULATION, ACCOUNTABILITY, AND 
TRANSPARENCY 
OF 
NATIONALLY 
RECOG-
NIZED 
STATISTICAL 
RATING 
ORGANIZA-
TIONS. 
Section 15E of the Securities Exchange Act of 1934 
(15 U.S.C. 78o–7) is amended— 
(1) in subsection (c)— 
(A) in paragraph (2)—
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(i) in the second sentence, by inserting 
‘‘any other provision of this section, or’’ 
after ‘‘Notwithstanding’’; and 
(ii) by inserting after the period at the 
end the following: ‘‘Nothing in this para-
graph may be construed to afford a defense 
against any action or proceeding brought by 
the Commission to enforce the antifraud 
provisions of the securities laws.’’; and 
(B) by adding at the end the following: 
‘‘(3) INTERNAL CONTROLS OVER PROCESSES FOR 
DETERMINING CREDIT RATINGS.— 
‘‘(A) IN GENERAL.—Each nationally recog-
nized statistical rating organization shall estab-
lish, maintain, enforce, and document an effec-
tive internal control structure governing the im-
plementation of and adherence to policies, proce-
dures, and methodologies for determining credit 
ratings, taking into consideration such factors as 
the Commission may prescribe, by rule. 
‘‘(B) 
ATTESTATION
REQUIREMENT.—The 
Commission shall prescribe rules requiring each 
nationally recognized statistical rating organiza-
tion to submit to the Commission an annual in-
ternal controls report, which shall contain—
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‘‘(i) a description of the responsibility 
of the management of the nationally recog-
nized statistical rating organization in es-
tablishing and maintaining an effective in-
ternal control structure under subparagraph 
(A); 
‘‘(ii) an assessment of the effectiveness 
of the internal control structure of the na-
tionally recognized statistical rating organi-
zation; and 
‘‘(iii) the attestation of the chief execu-
tive officer, or equivalent individual, of the 
nationally recognized statistical rating or-
ganization.’’; 
(2) in subsection (d)— 
(A) in the subsection heading, by inserting 
‘‘FINE,’’ after ‘‘CENSURE,’’; 
(B) by inserting ‘‘fine,’’ after ‘‘censure,’’ 
each place that term appears; 
(C) in paragraph (2), by redesignating sub-
paragraphs (A) and (B) as clauses (i) and (ii), 
respectively, and adjusting the clause margins 
accordingly; 
(D) 
by 
redesignating 
paragraphs 
(1) 
through (5) as subparagraphs (A) through (E),
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respectively, and adjusting the subparagraph 
margins accordingly; 
(E) in the matter preceding subparagraph 
(A), as so redesignated, by striking ‘‘The Com-
mission’’ and inserting the following: 
‘‘(1) IN GENERAL.—The Commission’’; 
(F) in subparagraph (D), as so redesig-
nated, by striking ‘‘or’’ at the end; 
(G) in subparagraph (E), as so redesig-
nated, by striking the period at the end and in-
serting a semicolon; and 
(H) by adding at the end the following: 
‘‘(F) has failed reasonably to supervise, 
with a view to preventing a violation of the secu-
rities laws, an individual who commits such a 
violation, if the individual is subject to the su-
pervision of that person. 
‘‘(2) SUSPENSION
OR
REVOCATION
FOR
PAR-
TICULAR CLASS OF SECURITIES.— 
‘‘(A) IN GENERAL.—The Commission may 
temporarily suspend or permanently revoke the 
registration of a nationally recognized statistical 
rating organization with respect to a particular 
class or subclass of securities, if the Commission 
finds, on the record after notice and opportunity
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‘‘(B) CONTENTS
OF
RULES.—The rules 
issued under subparagraph (A) shall provide 
for— 
‘‘(i) exceptions for small nationally 
recognized statistical rating organizations 
with respect to which the Commission deter-
mines that the separation of the production 
of ratings and sales and marketing activi-
ties is not appropriate; and 
‘‘(ii) suspension or revocation of the 
registration of a nationally recognized sta-
tistical rating organization, if the Commis-
sion finds, on the record, after notice and 
opportunity for a hearing, that— 
‘‘(I) the nationally recognized sta-
tistical rating organization has com-
mitted a violation of a rule issued 
under this subsection; and 
‘‘(II) the violation of a rule issued 
under this subsection affected a rat-
ing.’’; 
(4) in subsection (j)— 
(A) by striking ‘‘Each’’ and inserting the 
following: 
‘‘(1) IN GENERAL.—Each’’; and
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(B) by adding at the end the following: 
‘‘(2) LIMITATIONS.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), an individual designated 
under paragraph (1) may not, while serving in 
the designated capacity— 
‘‘(i) perform credit ratings; 
‘‘(ii) participate in the development of 
ratings methodologies or models; 
‘‘(iii) perform marketing or sales func-
tions; or 
‘‘(iv) participate in establishing com-
pensation levels, other than for employees 
working for that individual. 
‘‘(B) EXCEPTION.—The Commission may 
exempt a small nationally recognized statistical 
rating organization from the limitations under 
this paragraph, if the Commission finds that 
compliance with such limitations would impose 
an unreasonable burden on the nationally recog-
nized statistical rating organization. 
‘‘(3) OTHER
DUTIES.—Each individual des-
ignated under paragraph (1) shall establish proce-
dures for the receipt, retention, and treatment of—
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‘‘(A) complaints regarding credit ratings, 
models, methodologies, and compliance with the 
securities laws and the policies and procedures 
developed under this section; and 
‘‘(B) confidential, anonymous complaints 
by employees or users of credit ratings. 
‘‘(4) ANNUAL REPORTS REQUIRED.— 
‘‘(A) ANNUAL REPORTS REQUIRED.—Each 
individual designated under paragraph (1) shall 
submit to the nationally recognized statistical 
rating organization an annual report on the 
compliance of the nationally recognized statis-
tical rating organization with the securities laws 
and the policies and procedures of the nationally 
recognized statistical rating organization that 
includes— 
‘‘(i) a description of any material 
changes to the code of ethics and conflict of 
interest policies of the nationally recognized 
statistical rating organization; and 
‘‘(ii) a certification that the report is 
accurate and complete. 
‘‘(B) SUBMISSION
OF
REPORTS
TO
THE 
COMMISSION.—Each nationally recognized statis-
tical rating organization shall file the reports re-
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† HR 4173 PP
quired under subparagraph (A) together with the 
financial report that is required to be submitted 
to the Commission under this section.’’; and 
(5) by striking subsection (p) and inserting the 
following: 
‘‘(p) REGULATION OF NATIONALLY RECOGNIZED STA-
TISTICAL RATING ORGANIZATIONS.— 
‘‘(1) ESTABLISHMENT
OF
OFFICE
OF
CREDIT 
RATINGS.— 
‘‘(A) OFFICE ESTABLISHED.—The Commis-
sion shall establish within the Commission an 
Office of Credit Ratings (referred to in this sub-
section as the ‘Office’) to administer the rules of 
the Commission— 
‘‘(i) with respect to the practices of na-
tionally recognized statistical rating organi-
zations in determining ratings, for the pro-
tection of users of credit ratings and in the 
public interest; 
‘‘(ii) to promote accuracy in credit rat-
ings issued by nationally recognized statis-
tical rating organizations; and 
‘‘(iii) to ensure that such ratings are 
not unduly influenced by conflicts of inter-
est.
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‘‘(B) DIRECTOR OF THE OFFICE.—The head 
of the Office shall be the Director, who shall re-
port to the Chairman. 
‘‘(2) STAFFING.—The Office established under 
this subsection shall be staffed sufficiently to carry 
out fully the requirements of this section. The staff 
shall include persons with knowledge of and expertise 
in corporate, municipal, and structured debt finance. 
‘‘(3) COMMISSION EXAMINATIONS.— 
‘‘(A) ANNUAL EXAMINATIONS REQUIRED.— 
The Office shall conduct an examination of each 
nationally recognized statistical rating organiza-
tion at least annually. 
‘‘(B) CONDUCT
OF
EXAMINATIONS.—Each 
examination under subparagraph (A) shall in-
clude a review of— 
‘‘(i) whether the nationally recognized 
statistical rating organization conducts 
business in accordance with the policies, 
procedures, and rating methodologies of the 
nationally recognized statistical rating or-
ganization; 
‘‘(ii) the management of conflicts of in-
terest by the nationally recognized statis-
tical rating organization;
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‘‘(iii) implementation of ethics policies 
by the nationally recognized statistical rat-
ing organization; 
‘‘(iv) the internal supervisory controls 
of the nationally recognized statistical rat-
ing organization; 
‘‘(v) the governance of the nationally 
recognized statistical rating organization; 
‘‘(vi) the activities of the individual 
designated by the nationally recognized sta-
tistical rating organization under sub-
section (j)(1); 
‘‘(vii) the processing of complaints by 
the nationally recognized statistical rating 
organization; and 
‘‘(viii) the policies of the nationally 
recognized statistical rating organization 
governing the post-employment activities of 
former staff of the nationally recognized sta-
tistical rating organization. 
‘‘(C) INSPECTION REPORTS.—The Commis-
sion shall make available to the public, in an 
easily understandable format, an annual report 
summarizing—
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‘‘(i) the essential findings of all exami-
nations conducted under subparagraph (A), 
as deemed appropriate by the Commission; 
‘‘(ii) the responses by the nationally 
recognized statistical rating organizations 
to any material regulatory deficiencies 
identified by the Commission under clause 
(i); and 
‘‘(iii) whether the nationally recognized 
statistical rating organizations have appro-
priately addressed the recommendations of 
the Commission contained in previous re-
ports under this subparagraph. 
‘‘(4) RULEMAKING
AUTHORITY.—The Commis-
sion shall— 
‘‘(A) establish, by rule, fines, and other pen-
alties applicable to any nationally recognized 
statistical rating organization that violates the 
requirements of this subsection and the rules 
thereunder; and 
‘‘(B) issue such rules as may be necessary 
to carry out this subsection. 
‘‘(q) TRANSPARENCY OF RATINGS PERFORMANCE.— 
‘‘(1) RULEMAKING REQUIRED.—The Commission 
shall, by rule, require that each nationally recognized
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statistical rating organization publicly disclose infor-
mation on the initial credit ratings determined by the 
nationally recognized statistical rating organization 
for each type of obligor, security, and money market 
instrument, and any subsequent changes to such cred-
it ratings, for the purpose of allowing users of credit 
ratings to evaluate the accuracy of ratings and com-
pare the performance of ratings by different nation-
ally recognized statistical rating organizations. 
‘‘(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, to allow 
users of credit ratings to compare the perform-
ance of credit ratings across nationally recog-
nized statistical rating organizations; 
‘‘(B) are clear and informative for investors 
who use or might use credit ratings; 
‘‘(C) include performance information over 
a range of years and for a variety of types of 
credit ratings, including for credit ratings with-
drawn by the nationally recognized statistical 
rating organization;
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‘‘(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 writing, when requested; 
and 
‘‘(E) are appropriate to the business model 
of a nationally recognized statistical rating orga-
nization. 
‘‘(r) CREDIT RATINGS METHODOLOGIES.—The Com-
mission shall prescribe rules, for the protection of investors 
and in the public interest, with respect to the procedures 
and methodologies, including qualitative and quantitative 
data and models, used by nationally recognized statistical 
rating organizations that require each nationally recog-
nized statistical rating organization— 
‘‘(1) to ensure that credit ratings are determined 
using procedures and methodologies, including quali-
tative and quantitative data and models, that are— 
‘‘(A) approved by the board of the nation-
ally recognized statistical rating organization, a 
body performing a function similar to that of a 
board, or the senior credit officer of the nation-
ally recognized statistical rating organization; 
and
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‘‘(B) in accordance with the policies and 
procedures of the nationally recognized statistical 
rating organization for the development and 
modification of credit rating procedures and 
methodologies; 
‘‘(2) to ensure that when material changes to 
credit rating procedures and methodologies (including 
changes to qualitative and quantitative data and 
models) are made, that— 
‘‘(A) the changes are applied consistently to 
all credit ratings to which the changed proce-
dures and methodologies apply; 
‘‘(B) to the extent that changes are made to 
credit rating surveillance procedures and meth-
odologies, the changes are applied to then-current 
credit ratings by the nationally recognized statis-
tical rating organization within a reasonable 
time period determined by the Commission, by 
rule; and 
‘‘(C) the nationally recognized statistical 
rating organization publicly discloses the reason 
for the change; and 
‘‘(3) to notify users of credit ratings— 
‘‘(A) of the version of a procedure or meth-
odology, including the qualitative methodology or
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quantitative inputs, used with respect to a par-
ticular credit rating; 
‘‘(B) when a material change is made to a 
procedure or methodology, including to a quali-
tative model or quantitative inputs; 
‘‘(C) when a significant error is identified 
in a procedure or methodology, including a qual-
itative or quantitative model, that may result in 
credit rating actions; and 
‘‘(D) of the likelihood of a material change 
described in subparagraph (B) resulting in a 
change in current credit ratings. 
‘‘(s) TRANSPARENCY OF CREDIT RATING METHODOLO-
GIES AND INFORMATION REVIEWED.— 
‘‘(1) FORM FOR DISCLOSURES.—The Commission 
shall require, by rule, each nationally recognized sta-
tistical rating organization to prescribe a form to ac-
company the publication of each credit rating that 
discloses— 
‘‘(A) information relating to— 
‘‘(i) the assumptions underlying the 
credit rating procedures and methodologies; 
‘‘(ii) the data that was relied on to de-
termine the credit rating; and
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‘‘(iii) if 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 
‘‘(B) information that can be used by inves-
tors and other users of credit ratings to better 
understand credit ratings in each class of credit 
rating issued by the nationally recognized statis-
tical rating organization. 
‘‘(2) FORMAT.—The form developed under para-
graph (1) shall— 
‘‘(A) be easy to use and helpful for users of 
credit ratings to understand the information 
contained in the report; 
‘‘(B) require the nationally recognized sta-
tistical rating organization to provide the con-
tent described in paragraph (3)(B) in a manner 
that is directly comparable across types of secu-
rities; and 
‘‘(C) be made readily available to users of 
credit ratings, in electronic or paper form, as the 
Commission may, by rule, determine. 
‘‘(3) CONTENT OF FORM.—
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‘‘(A) QUALITATIVE
CONTENT.—Each na-
tionally recognized statistical rating organiza-
tion shall disclose on the form developed under 
paragraph (1)— 
‘‘(i) the credit ratings produced by the 
nationally recognized statistical rating or-
ganization; 
‘‘(ii) the main assumptions and prin-
ciples used in constructing procedures and 
methodologies, including qualitative meth-
odologies and quantitative inputs and as-
sumptions about the correlation of defaults 
across obligors used in rating structured 
products; 
‘‘(iii) the potential limitations of the 
credit ratings, and the types of risks ex-
cluded from the credit ratings that the na-
tionally recognized statistical rating organi-
zation does not comment on, including li-
quidity, market, and other risks; 
‘‘(iv) information on the uncertainty of 
the credit rating, including— 
‘‘(I) information on the reli-
ability, accuracy, and quality of the
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† HR 4173 PP
data relied on in determining the cred-
it rating; and 
‘‘(II) a statement relating to the 
extent to which data essential to the 
determination of the credit rating were 
reliable or limited, including— 
‘‘(aa) any limits on the scope 
of historical data; and 
‘‘(bb) any limits in accessi-
bility to certain documents or 
other types of information that 
would have better informed the 
credit rating; 
‘‘(v) whether and to what extent third 
party due diligence services have been used 
by the nationally recognized statistical rat-
ing organization, a description of the infor-
mation that such third party reviewed in 
conducting due diligence services, and a de-
scription of the findings or conclusions of 
such third party; 
‘‘(vi) a description of the data about 
any obligor, issuer, security, or money mar-
ket instrument that were relied upon for the 
purpose of determining the credit rating;
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‘‘(vii) a statement containing an over-
all assessment of the quality of information 
available and considered in producing a 
rating for an obligor, security, or money 
market instrument, in relation to the qual-
ity of information available to the nation-
ally recognized statistical rating organiza-
tion in rating similar issuances; 
‘‘(viii) information relating to conflicts 
of interest of the nationally recognized sta-
tistical rating organization; and 
‘‘(ix) such additional information as 
the Commission may require. 
‘‘(B) QUANTITATIVE
CONTENT.—Each na-
tionally recognized statistical rating organiza-
tion shall disclose on the form developed under 
this subsection— 
‘‘(i) an explanation or measure of the 
potential volatility of the credit rating, in-
cluding— 
‘‘(I) any factors that might lead 
to a change in the credit ratings; and 
‘‘(II) the magnitude of the change 
that a user can expect under different 
market conditions;
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‘‘(ii) information on the content of the 
rating, including— 
‘‘(I) the historical performance of 
the rating; and 
‘‘(II) the expected probability of 
default and the expected loss in the 
event of default; 
‘‘(iii) information on the sensitivity of 
the rating to assumptions made by the na-
tionally recognized statistical rating organi-
zation; and 
‘‘(iv) such additional information as 
may be required by the Commission. 
‘‘(4) DUE
DILIGENCE
SERVICES
FOR
ASSET- 
BACKED SECURITIES.— 
‘‘(A) FINDINGS.—The issuer or underwriter 
of any asset-backed security shall make publicly 
available the findings and conclusions of any 
third-party due diligence report obtained by the 
issuer or underwriter. 
‘‘(B) CERTIFICATION
REQUIRED.—In any 
case in which third-party due diligence services 
are employed by a nationally recognized statis-
tical rating organization, an issuer, or an un-
derwriter, the person providing the due diligence
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‘‘(t) CORPORATE GOVERNANCE, ORGANIZATION, AND 
MANAGEMENT OF CONFLICTS OF INTEREST.— 
‘‘(1) BOARD
OF
DIRECTORS.—Each nationally 
recognized statistical rating organization shall have a 
board of directors. 
‘‘(2) INDEPENDENT DIRECTORS.— 
‘‘(A) IN GENERAL.—At least 1⁄2 of the board 
of directors, but not fewer than 2 of the members 
thereof, shall be independent of the nationally 
recognized statistical rating agency. A portion of 
the independent directors shall include users of 
ratings from a nationally recognized statistical 
rating organization. 
‘‘(B) INDEPENDENCE DETERMINATION.—In 
order to be considered independent for purposes 
of this subsection, a member of the board of di-
rectors of a nationally recognized statistical rat-
ing organization— 
‘‘(i) may not, other than in his or her 
capacity as a member of the board of direc-
tors or any committee thereof— 
‘‘(I) accept any consulting, advi-
sory, or other compensatory fee from 
the nationally recognized statistical 
rating organization; or
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‘‘(II) be a person associated with 
the nationally recognized statistical 
rating organization or with any affili-
ated company thereof; and 
‘‘(ii) shall be disqualified from any de-
liberation involving a specific rating in 
which the independent board member has a 
financial interest in the outcome of the rat-
ing. 
‘‘(C) COMPENSATION AND TERM.—The com-
pensation of the independent members of the 
board of directors of a nationally recognized sta-
tistical rating organization shall not be linked to 
the business performance of the nationally recog-
nized statistical rating organization, and shall 
be arranged so as to ensure the independence of 
their judgment. The term of office of the inde-
pendent directors shall be for a pre-agreed fixed 
period, not to exceed 5 years, and shall not be re-
newable. 
‘‘(3) DUTIES OF BOARD OF DIRECTORS.—In ad-
dition to the overall responsibilities of the board of di-
rectors, the board shall oversee—
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‘‘(A) the establishment, maintenance, and 
enforcement of policies and procedures for deter-
mining credit ratings; 
‘‘(B) the establishment, maintenance, and 
enforcement of policies and procedures to ad-
dress, manage, and disclose any conflicts of in-
terest; 
‘‘(C) the effectiveness of the internal control 
system with respect to policies and procedures 
for determining credit ratings; and 
‘‘(D) the compensation and promotion poli-
cies and practices of the nationally recognized 
statistical rating organization. 
‘‘(4) TREATMENT OF NRSRO SUBSIDIARIES.—If a 
nationally recognized statistical rating organization 
is a subsidiary of a parent entity, the board of the 
directors of the parent entity may satisfy the require-
ments of this subsection by assigning to a committee 
of such board of directors the duties under paragraph 
(3), if— 
‘‘(A) at least 1⁄2 of the members of the com-
mittee (including the chairperson of the com-
mittee) are independent, as defined in this sec-
tion; and
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† HR 4173 PP
‘‘(B) at least 1 member of the committee is 
a user of ratings from a nationally recognized 
statistical rating organization. 
‘‘(5) EXCEPTION
AUTHORITY.—If the Commis-
sion finds that compliance with the provisions of this 
subsection present an unreasonable burden on a small 
nationally recognized statistical rating organization, 
the Commission may permit the nationally recognized 
statistical rating organization to delegate such re-
sponsibilities to a committee that includes at least one 
individual who is a user of ratings of a nationally 
recognized statistical rating organization.’’. 
SEC. 933. STATE OF MIND IN PRIVATE ACTIONS. 
(a) ACCOUNTABILITY.—Section 15E(m) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78o–7(m)) is amended 
to read as follows: 
‘‘(m) ACCOUNTABILITY.— 
‘‘(1) IN GENERAL.—The enforcement and penalty 
provisions of this title shall apply to statements made 
by a credit rating agency in the same manner and 
to the same extent as such provisions apply to state-
ments made by a registered public accounting firm or 
a securities analyst under the securities laws, and 
such statements shall not be deemed forward-looking 
statements for the purposes of section 21E.
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† HR 4173 PP
‘‘(2) RULEMAKING.—The Commission shall issue 
such rules as may be necessary to carry out this sub-
section.’’. 
(b) STATE OF MIND.—Section 21D(b)(2) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78u–4(b)(2)) is 
amended— 
(1) by striking ‘‘In any’’ and inserting the fol-
lowing: 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), in any’’; and 
(2) by adding at the end the following: 
‘‘(B) EXCEPTION.—In the case of an action 
for money damages brought against a credit rat-
ing agency or a controlling person under this 
title, it shall be sufficient, for purposes of plead-
ing any required state of mind in relation to 
such action, that the complaint state with par-
ticularity facts giving rise to a strong inference 
that the credit rating agency knowingly or reck-
lessly failed— 
‘‘(i) to conduct a reasonable investiga-
tion of the rated security with respect to the 
factual elements relied upon by its own 
methodology for evaluating credit risk; or
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† HR 4173 PP
‘‘(ii) to obtain reasonable verification 
of such factual elements (which verification 
may be based on a sampling technique that 
does not amount to an audit) from other 
sources that the credit rating agency consid-
ered to be competent and that were inde-
pendent of the issuer and underwriter.’’. 
SEC. 934. REFERRING TIPS TO LAW ENFORCEMENT OR REG-
ULATORY AUTHORITIES. 
Section 15E of the Securities Exchange Act of 1934 
(15 U.S.C. 78o–7), as amended by this subtitle, is amended 
by adding at the end the following: 
‘‘(u) DUTY TO REPORT TIPS ALLEGING MATERIAL 
VIOLATIONS OF LAW.— 
‘‘(1) DUTY TO REPORT.—Each nationally recog-
nized statistical rating organization shall refer to the 
appropriate law enforcement or regulatory authorities 
any information that the nationally recognized statis-
tical rating organization receives from a third party 
and finds credible that alleges that an issuer of secu-
rities rated by the nationally recognized statistical 
rating organization has committed or is committing 
a material violation of law that has not been adju-
dicated by a Federal or State court.
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† HR 4173 PP
‘‘(2) RULE
OF
CONSTRUCTION.—Nothing in 
paragraph (1) may be construed to require a nation-
ally recognized statistical rating organization to 
verify the accuracy of the information described in 
paragraph (1).’’. 
SEC. 
935. 
CONSIDERATION 
OF 
INFORMATION 
FROM 
SOURCES OTHER THAN THE ISSUER IN RAT-
ING DECISIONS. 
Section 15E of the Securities Exchange Act of 1934 
(15 U.S.C. 78o–7), as amended by this subtitle, is amended 
by adding at the end the following: 
‘‘(v) INFORMATION FROM SOURCES OTHER THAN THE 
ISSUER.—In producing a credit rating, a nationally recog-
nized statistical rating organization shall consider informa-
tion about an issuer that the nationally recognized statis-
tical rating organization has, or receives from a source 
other than the issuer, that the nationally recognized statis-
tical rating organization finds credible and potentially sig-
nificant to a rating decision.’’. 
SEC. 936. QUALIFICATION STANDARDS FOR CREDIT RATING 
ANALYSTS. 
Not later than 1 year after the date of enactment of 
this Act, the Commission shall issue rules that are reason-
ably designed to ensure that any person employed by a na-
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† HR 4173 PP
tionally recognized statistical rating organization to per-
form credit ratings— 
(1) meets standards of training, experience, and 
competence necessary to produce accurate ratings for 
the categories of issuers whose securities the person 
rates; and 
(2) is tested for knowledge of the credit rating 
process. 
SEC. 937. TIMING OF REGULATIONS. 
Unless otherwise specifically provided in this subtitle, 
the Commission shall issue final regulations, as required 
by this subtitle and the amendments made by this subtitle, 
not later than 1 year after the date of enactment of this 
Act. 
SEC. 938. UNIVERSAL RATINGS SYMBOLS. 
(a) RULEMAKING.—The Commission shall require, by 
rule, each nationally recognized statistical rating organiza-
tion to establish, maintain, and enforce written policies and 
procedures that— 
(1) assess the probability that an issuer of a se-
curity or money market instrument will default, fail 
to make timely payments, or otherwise not make pay-
ments to investors in accordance with the terms of the 
security or money market instrument;
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† HR 4173 PP
(2) clearly define and disclose the meaning of 
any symbol used by the nationally recognized statis-
tical rating organization to denote a credit rating; 
and 
(3) apply any symbol described in paragraph (2) 
in a manner that is consistent for all types of securi-
ties and money market instruments for which the 
symbol is used. 
(b) RULE OF CONSTRUCTION.—Nothing in this section 
shall prohibit a nationally recognized statistical rating or-
ganization from using distinct sets of symbols to denote 
credit ratings for different types of securities or money mar-
ket instruments. 
SEC. 939. REMOVAL OF STATUTORY REFERENCES TO CRED-
IT RATINGS. 
(a) FEDERAL DEPOSIT INSURANCE ACT.—The Federal 
Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amend-
ed— 
(1) in section 7(b)(1)(E)(i), by striking ‘‘credit 
rating entities, and other private economic’’ and in-
sert ‘‘private economic, credit,’’; 
(2) in section 28(d)— 
(A) in the subsection heading, by striking 
‘‘NOT OF INVESTMENT GRADE’’;
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† HR 4173 PP
(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); 
(E) by redesignating paragraph (4) as 
paragraph (3); and 
(F) in paragraph (3), as so redesignated— 
(i) by striking subparagraph (A); 
(ii) by redesignating subparagraphs 
(B) and (C) as subparagraphs (A) and (B), 
respectively; and 
(iii) in subparagraph (B), as so redes-
ignated, by striking ‘‘not of investment 
grade’’ and inserting ‘‘that does not meet 
standards of credit-worthiness as established 
by the Corporation’’; and 
(3) 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
1032 
† HR 4173 PP
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 Cor-
poration’’. 
(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 by 
striking ‘‘that is a nationally registered statistical rating 
organization, as such term is defined 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 reg-
istered statistical rating organization’’ and inserting 
‘‘meets such standards of credit-worthiness as the Commis-
sion 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—
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† HR 4173 PP
(1) in subsection (a)(2)(E), by striking ‘‘any ap-
plicable rating’’ and inserting ‘‘standards of credit- 
worthiness established by the Comptroller of the Cur-
rency’’; 
(2) in the heading for subsection (a)(3) by strik-
ing ‘‘RATING OR COMPARABLE REQUIREMENT’’ and 
inserting ‘‘REQUIREMENT’’; 
(3) subsection (a)(3), by amending subparagraph 
(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’’.
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† HR 4173 PP
(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 one 
nationally registered statistical rating organization’’ 
and inserting ‘‘meets standards of credit-worthiness 
as established 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 registered statistical rating organization’’ 
and inserting ‘‘meets standards of credit-worthiness 
as established 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 
‘‘credit rating’’ and inserting ‘‘credit-worthiness’’. 
(g) EFFECTIVE DATE.—The amendments made by this 
section shall take effect 2 years after the date of enactment 
of this Act. 
(1) IN GENERAL.—Commission shall undertake a 
study on the feasability and desirability of—
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† HR 4173 PP
(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 correspondence 
between credit ratings and a range of default 
probabilities and loss expectations under stand-
ardized conditions of economic stress; and 
(D) standardizing credit rating terminology 
across asset classes, so that named ratings cor-
respond to a standard range of default prob-
abilities and expected losses independent of asset 
class and issuing entity. 
(2) REPORT.—Not later than 1 year after the 
date of enactment of this Act, the Commission shall 
submit to Congress a report containing the findings 
of the study under paragraph (1) and the rec-
ommendations, if any, of the Commission with respect 
to the study. 
SEC. 939A. SECURITIES AND EXCHANGE COMMISSION 
STUDY ON STRENGTHENING CREDIT RATING 
AGENCY INDEPENDENCE. 
(a) STUDY.—The Commission shall conduct a study 
of—
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† HR 4173 PP
(1) the independence of nationally recognized 
statistical rating organizations; and 
(2) how the independence of nationally recog-
nized statistical rating organizations affects the rat-
ings issued by the nationally recognized statistical 
rating organizations. 
(b) SUBJECTS FOR EVALUATION.—In conducting the 
study under subsection (a), the Commission shall evalu-
ate— 
(1) the management of conflicts of interest raised 
by a nationally recognized statistical rating organiza-
tion providing other services, including risk manage-
ment advisory services, ancillary assistance, or con-
sulting services; 
(2) the potential impact of rules prohibiting a 
nationally recognized statistical rating organization 
that provides a rating to an issuer from providing 
other services to the issuer; and 
(3) any other issue relating to nationally recog-
nized statistical rating organizations, as the Chair-
man of the Commission determines is appropriate. 
(c) REPORT.—Not later than 3 years after the date of 
enactment of this Act, the Chairman of the Commission 
shall submit to the Committee on Banking, Housing, and 
Urban Affairs of the Senate and the Committee on Finan-
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† HR 4173 PP
cial Services of the House of Representatives a report on 
the results of the study conducted under subsection (a), in-
cluding recommendations, if any, for improving the integ-
rity of ratings issued by nationally recognized statistical 
rating organizations. 
SEC. 939B. GOVERNMENT ACCOUNTABILITY OFFICE STUDY 
ON ALTERNATIVE BUSINESS MODELS. 
(a) STUDY.—The Comptroller General of the United 
States shall conduct a study on alternative means for com-
pensating nationally recognized statistical rating organiza-
tions in order to create incentives for nationally recognized 
statistical rating organizations to provide more accurate 
credit ratings, including any statutory changes that would 
be required to facilitate the use of an alternative means of 
compensation. 
(b) REPORT.—Not later than 1 year after the date of 
enactment of this Act, the Comptroller General shall submit 
to the Committee on Banking, Housing, and Urban Affairs 
of the Senate and the Committee on Financial Services of 
the House of Representatives a report on the results of the 
study conducted under subsection (a), including rec-
ommendations, if any, for providing incentives to credit 
rating agencies to improve the credit rating process.
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† HR 4173 PP
SEC. 939C. GOVERNMENT ACCOUNTABILITY OFFICE STUDY 
ON THE CREATION OF AN INDEPENDENT 
PROFESSIONAL ANALYST ORGANIZATION. 
(a) STUDY.—The Comptroller General of the United 
States shall conduct a study on the feasibility and merits 
of creating an independent professional organization for 
rating analysts employed by nationally recognized statis-
tical rating organizations that would be responsible for— 
(1) establishing independent standards for gov-
erning the profession of rating analysts; 
(2) establishing a code of ethical conduct; and 
(3) overseeing the profession of rating analysts. 
(b) REPORT.—Not later than 1 year after the date of 
enactment of this Act, the Comptroller General shall submit 
to the Committee on Banking, Housing, and Urban Affairs 
of the Senate and the Committee on Financial Services of 
the House of Representatives a report on the results of the 
study conducted under subsection (a). 
SEC. 939D. INITIAL CREDIT RATING ASSIGNMENTS. 
Section 15E of the Securities Exchange Act of 1934 
(15 U.S.C. 78o–7), as amended by this Act, is amended by 
adding at the end the following: 
‘‘(w) INITIAL CREDIT RATING ASSIGNMENTS.— 
‘‘(1) DEFINITIONS.—In this subsection the fol-
lowing definitions shall apply:
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† HR 4173 PP
‘‘(A) BOARD.—The term ‘Board’ means the 
Credit Rating Agency Board established under 
paragraph (2). 
‘‘(B) QUALIFIED NATIONALLY RECOGNIZED 
STATISTICAL RATING ORGANIZATION.—The term 
‘qualified nationally recognized statistical rating 
organization’, with respect to a category of struc-
tured finance products, means a nationally rec-
ognized statistical rating organization that the 
Board determines, under paragraph (3)(B), to be 
qualified to issue initial credit ratings with re-
spect to such category. 
‘‘(C) REGULATIONS.— 
‘‘(i) CATEGORY
OF
STRUCTURED
FI-
NANCE PRODUCTS.— 
‘‘(I) IN GENERAL.—The term ‘cat-
egory of structured finance products’— 
‘‘(aa) shall include any asset 
backed security and any struc-
tured product based on an asset- 
backed security; and 
‘‘(bb) shall be further defined 
and expanded by the Commission, 
by rule, as necessary.
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† HR 4173 PP
‘‘(II) 
CONSIDERATIONS.—In 
issuing the regulations required under 
subclause (I), the Commission shall 
consider— 
‘‘(aa) the types of issuers 
that issue structured finance prod-
ucts; 
‘‘(bb) the types of investors 
who purchase structured finance 
products; 
‘‘(cc) the different categories 
of structured finance products ac-
cording to— 
‘‘(AA) the types of cap-
ital flow and legal structure 
used; 
‘‘(BB) the types of un-
derlying products used; and 
‘‘(CC) the types of terms 
used in debt securities; 
‘‘(dd) the different values of 
debt securities; and 
‘‘(ee) the different numbers of 
units of debt securities that are 
issued together.
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† HR 4173 PP
‘‘(ii) REASONABLE
FEE.—The Board 
shall issue regulations to define the term 
‘reasonable fee’. 
‘‘(2) CREDIT RATING AGENCY BOARD.— 
‘‘(A) IN
GENERAL.—Not later than 180 
days after the date of enactment of the Restoring 
American Financial Stability Act of 2010, the 
Commission shall— 
‘‘(i) establish the Credit Rating Agency 
Board, which shall be a self-regulatory orga-
nization; 
‘‘(ii) subject to subparagraph (C), se-
lect the initial members of the Board; and 
‘‘(iii) establish a schedule to ensure 
that the Board begins assigning qualified 
nationally recognized statistical rating or-
ganizations to provide initial ratings not 
later than 1 year after the selection of the 
members of the Board. 
‘‘(B) SCHEDULE.—The schedule established 
under subparagraph (A)(iii) shall prescribe 
when— 
‘‘(i) the Board will conduct a study of 
the securitization and ratings process and
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† HR 4173 PP
provide recommendations to the Commis-
sion; 
‘‘(ii) the Commission will issue rules 
and regulations under this section; 
‘‘(iii) the Board may issue rules under 
this subsection; and 
‘‘(iv) the Board will— 
‘‘(I) begin accepting applications 
to select qualified national recognized 
statistical rating organizations; and 
‘‘(II) begin assigning qualified 
national recognized statistical rating 
organizations to provide initial rat-
ings. 
‘‘(C) MEMBERSHIP.— 
‘‘(i) IN
GENERAL.—The Board shall 
initially be composed of an odd number of 
members selected from the industry, with 
the total numerical membership of the 
Board to be determined by the Commission. 
‘‘(ii) SPECIFICATIONS.—Of the mem-
bers initially selected to serve on the 
Board— 
‘‘(I) not less than a majority of 
the members shall be representatives of
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† HR 4173 PP
the investor industry who do not rep-
resent issuers; 
‘‘(II) not less than 1 member 
should be a representative of the issuer 
industry; 
‘‘(III) not less than 1 member 
should be a representative of the credit 
rating agency industry; and 
‘‘(IV) not less than 1 member 
should be an independent member. 
‘‘(iii) TERMS.—Initial members shall 
be appointed by the Commission for a term 
of 4 years. 
‘‘(iv) NOMINATION AND ELECTION OF 
MEMBERS.— 
‘‘(I) IN GENERAL.—Prior to the 
expiration of the terms of office of the 
initial members, the Commission shall 
establish fair procedures for the nomi-
nation and election of future members 
of the Board. 
‘‘(II) MODIFICATIONS
OF
THE 
BOARD.—Prior to the expiration of the 
terms of office of the initial members, 
the Commission—
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† HR 4173 PP
‘‘(aa) may increase the size 
of the board to a larger odd num-
ber and adjust the length of future 
terms; and 
‘‘(bb) shall retain the com-
position of members described in 
clause (ii). 
‘‘(v) 
RESPONSIBILITIES
OF
MEM-
BERS.—Members shall perform, at a min-
imum, the duties described in this sub-
section. 
‘‘(vi) RULEMAKING
AUTHORITY.—The 
Commission shall, if it determines necessary 
and appropriate, issue further rules and 
regulations on the composition of the mem-
bership of the Board and the responsibilities 
of the members. 
‘‘(D) 
OTHER
AUTHORITIES
OF
THE 
BOARD.—The Board shall have the authority to 
levy fees from qualified nationally recognized 
statistical rating organization applicants, and 
periodically from qualified nationally recognized 
statistical rating organizations as necessary to 
fund expenses of the Board.
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† HR 4173 PP
‘‘(E) REGULATION.—The Commission has 
the authority to regulate the activities of the 
Board, and issue any further regulations of the 
Board it deems necessary, not in contravention 
with the intent of this section. 
‘‘(3) BOARD SELECTION OF QUALIFIED NATION-
ALLY
RECOGNIZED
STATISTICAL
RATING
ORGANIZA-
TION.— 
‘‘(A) APPLICATION.— 
‘‘(i) IN GENERAL.—A nationally recog-
nized statistical rating organization may 
submit an application to the Board, in such 
form and manner as the Board may re-
quire, to become a qualified nationally rec-
ognized statistical rating organization with 
respect to a category of structured finance 
products. 
‘‘(ii) CONTENTS.—An application sub-
mitted under clause (i) shall contain— 
‘‘(I) information regarding the in-
stitutional and technical capacity of 
the nationally recognized statistical 
rating organization to issue credit rat-
ings;
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† HR 4173 PP
‘‘(II) information on whether the 
nationally recognized statistical rating 
organization has been exempted by the 
Commission from any requirements 
under any other provision of this sec-
tion; and 
‘‘(III) any additional information 
the Board may require. 
‘‘(iii) REJECTION OF APPLICATIONS.— 
The Board may reject an application sub-
mitted under this paragraph if the nation-
ally recognized statistical rating organiza-
tion has been exempted by the Commission 
from any requirements under any other 
provision of this section. 
‘‘(B) SELECTION.—The Board shall select 
qualified national recognized statistical rating 
organizations with respect to each category of 
structured finance products from among nation-
ally recognized statistical rating organizations 
that submit applications under subparagraph 
(A). 
‘‘(C) RETENTION OF STATUS AND OBLIGA-
TIONS AFTER SELECTION.—An entity selected as 
a qualified nationally recognized statistical rat-
1047 
† HR 4173 PP
ing organization shall retain its status and obli-
gations under the law as a nationally recognized 
statistical rating organization, and nothing in 
this subsection grants authority to the Commis-
sion or the Board to exempt qualified nationally 
recognized statistical rating organizations from 
obligations or requirements otherwise imposed by 
Federal law on nationally recognized statistical 
rating organizations. 
‘‘(4) REQUESTING AN INITIAL CREDIT RATING.— 
An issuer that seeks an initial credit rating for a 
structured finance product— 
‘‘(A) may not request an initial credit rat-
ing from a nationally recognized statistical rat-
ing organization; and 
‘‘(B) shall submit a request for an initial 
credit rating to the Board, in such form and 
manner as the Board may prescribe. 
‘‘(5) ASSIGNMENT OF RATING DUTIES.— 
‘‘(A) IN
GENERAL.—For each request re-
ceived by the Board under paragraph (4)(B), the 
Board shall select a qualified nationally recog-
nized statistical rating organization to provide 
the initial credit rating to the issuer. 
‘‘(B) METHOD OF SELECTION.—
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† HR 4173 PP
‘‘(i) IN GENERAL.—The Board shall— 
‘‘(I) evaluate a number of selec-
tion methods, including a lottery or ro-
tating 
assignment 
system, 
incor-
porating the factors described in clause 
(ii), to reduce the conflicts of interest 
that exist under the issuer-pays model; 
and 
‘‘(II) prescribe and publish the se-
lection method to be used under sub-
paragraph (A). 
‘‘(ii) CONSIDERATION.—In evaluating 
a selection method described in clause (i)(I), 
the Board shall consider— 
‘‘(I) the information submitted by 
the qualified nationally recognized sta-
tistical 
rating 
organization 
under 
paragraph (3)(A)(ii) regarding the in-
stitutional and technical capacity of 
the qualified nationally recognized sta-
tistical rating organization to issue 
credit ratings; 
‘‘(II) evaluations conducted under 
paragraph (7);