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providing notice to the Chairman of the Commission, 
extend such deadline as needed for one additional 
180-day period. If after the additional 180-day pe-
riod the Director of the Division of Enforcement of 
the Commission or the Director’s designee deter-
mines that a particular enforcement investigation is 
sufficiently complex such that a determination re-
garding the filing of an action against a person can-
not be completed within the additional 180-day pe-
riod, the Director of the Division of Enforcement of 
the Commission or the Director’s designee may, 
after providing notice to and receiving approval of 
the Commission, extend such deadline as needed for 
one or more additional successive 180-day periods. 
‘‘(b) COMPLIANCE
EXAMINATIONS
AND
INSPEC-
TIONS.— 
‘‘(1) IN GENERAL.—Not later than 180 days 
after the date on which Commission staff completes 
the on-site portion of its compliance examination or 
inspection or receives all records requested from the 
entity being examined or inspected, whichever is 
later, Commission staff shall provide the entity being 
examined or inspected with written notification indi-
cating either that the examination or inspection has 
concluded, has concluded without findings, or that 
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the staff requests the entity undertake corrective ac-
tion. 
‘‘(2) EXCEPTION FOR CERTAIN COMPLEX AC-
TIONS.—Notwithstanding paragraph (1), if the head 
of any division or office within the Commission re-
sponsible for compliance examinations and inspec-
tions or his designee determines that a particular 
compliance examination or inspection is sufficiently 
complex such that a determination regarding con-
cluding the examination or inspection, or regarding 
the staff requests the entity undertake corrective ac-
tion, cannot be completed within the deadline speci-
fied in paragraph (1), the head of any division or of-
fice within the Commission responsible for compli-
ance examinations and inspections or his designee 
may, after providing notice to the Chairman of the 
Commission, extend such deadline as needed for one 
additional 180-day period.’’. 
SEC. 7210. NATIONWIDE SERVICE OF SUBPOENAS. 
(a) SECURITIES ACT OF 1933.—Section 22(a) of the 
Securities Act of 1933 (15 U.S.C. 77v(a)) is amended by 
inserting after the second sentence the following: ‘‘In any 
civil action instituted by the Commission under this title 
in a United States district court for any judicial district, 
subpoenas issued to compel the attendance of witnesses 
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or the production of documents or tangible things (or 
both) at any hearing or trial may be served at any place 
within the United States. Rule 45(c)(3)(A)(ii) of the Fed-
eral Rules of Civil Procedure does not apply to a subpoena 
so issued.’’. 
(b) SECURITIES EXCHANGE ACT OF 1934.—Section 
27 of the Securities Exchange Act of 1934 (15 U.S.C. 
78aa) is amended by inserting after the third sentence the 
following: ‘‘In any civil action instituted by the Commis-
sion under this title in a United States district court for 
any judicial district, subpoenas issued to compel the at-
tendance of witnesses or the production of documents or 
tangible things (or both) at any hearing or trial may be 
served at any place within the United States. Rule 
45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure 
does not apply to a subpoena so issued.’’. 
(c) INVESTMENT COMPANY ACT OF 1940.—Section 
44 of the Investment Company Act of 1940 (15 U.S.C. 
80a–43) is amended by inserting after the fourth sentence 
the following: ‘‘In any civil action instituted by the Com-
mission under this title in a United States district court 
for any judicial district, subpoenas issued to compel the 
attendance of witnesses or the production of documents 
or tangible things (or both) at any hearing or trial may 
be served at any place within the United States. Rule 
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45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure 
does not apply to a subpoena so issued.’’. 
(d) INVESTMENT ADVISERS ACT OF 1940.—Section 
214 of the Investment Advisers Act of 1940 (15 U.S.C. 
80b–14) is amended by inserting after the third sentence 
the following: ‘‘In any civil action instituted by the Com-
mission under this title in a United States district court 
for any judicial district, subpoenas issued to compel the 
attendance of witnesses or the production of documents 
or tangible things (or both) at any hearing or trial may 
be served at any place within the United States. Rule 
45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure 
does not apply to a subpoena so issued.’’. 
SEC. 7211. AUTHORITY TO IMPOSE CIVIL PENALTIES IN 
CEASE AND DESIST PROCEEDINGS. 
(a) UNDER THE SECURITIES ACT OF 1933.—Section 
8A of the Securities Act of 1933 (15 U.S.C. 77h–1) is 
amended by adding at the end the following new sub-
section: 
‘‘(g) AUTHORITY
TO
IMPOSE
MONETARY
PEN-
ALTIES.— 
‘‘(1) GROUNDS FOR IMPOSING.—In any cease- 
and-desist proceeding under subsection (a), the 
Commission may impose a civil penalty on a person 
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if it finds, on the record after notice and opportunity 
for hearing, that— 
‘‘(A) such person— 
‘‘(i) is violating or has violated any 
provision of this title, or any rule or regu-
lation thereunder; or 
‘‘(ii) is or was a cause of the violation 
of any provision of this title, or any rule or 
regulation thereunder; and 
‘‘(B) such penalty is in the public interest. 
‘‘(2) MAXIMUM AMOUNT OF PENALTY.— 
‘‘(A) FIRST TIER.—The maximum amount 
of penalty for each act or omission described in 
paragraph (1) shall be $7,500 for a natural 
person or $75,000 for any other person. 
‘‘(B) 
SECOND
TIER.—Notwithstanding 
paragraph (A), the maximum amount of pen-
alty for each such act or omission shall be 
$75,000 for a natural person or $375,000 for 
any other person if the act or omission de-
scribed in paragraph (1) involved fraud, deceit, 
manipulation, or deliberate or reckless dis-
regard of a regulatory requirement. 
‘‘(C) THIRD TIER.—Notwithstanding para-
graphs (A) and (B), the maximum amount of 
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penalty for each such act or omission shall be 
$150,000 for a natural person or $725,000 for 
any other person if— 
‘‘(i) the act or omission described in 
paragraph (1) involved fraud, deceit, ma-
nipulation, or deliberate or reckless dis-
regard of a regulatory requirement; and 
‘‘(ii) such act or omission directly or 
indirectly resulted in substantial losses or 
created a significant risk of substantial 
losses to other persons or resulted in sub-
stantial pecuniary gain to the person who 
committed the act or omission. 
‘‘(3) EVIDENCE
CONCERNING
ABILITY
TO 
PAY.—In any proceeding in which the Commission 
may impose a penalty under this section, a respond-
ent may present evidence of the respondent’s ability 
to pay such penalty. The Commission may, in its 
discretion, consider such evidence in determining 
whether such penalty is in the public interest. Such 
evidence may relate to the extent of such person’s 
ability to continue in business and the collectability 
of a penalty, taking into account any other claims of 
the United States or third parties upon such per-
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son’s assets and the amount of such person’s as-
sets.’’. 
(b) UNDER THE SECURITIES EXCHANGE ACT OF 
1934.—Subsection (a) of section 21B of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u–2(a)) is amend-
ed— 
(1) by striking ‘‘(a) COMMISSION AUTHORITY 
TO
ASSESS
MONEY
PENALTIES.—In any pro-
ceeding’’ and inserting the following: 
‘‘(a) COMMISSION AUTHORITY
TO ASSESS MONE-
TARY PENALTIES.— 
‘‘(1) IN GENERAL.—In any proceeding’’; 
(2) by redesignating paragraphs (1) through 
(4) of such subsection as subparagraphs (A) through 
(D), respectively, and moving such redesignated sub-
paragraphs and the matter following such subpara-
graphs 2 ems to the right; and 
(3) by adding at the end of such subsection the 
following new paragraph: 
‘‘(2) 
CEASE-AND-DESIST
PROCEEDINGS.—In 
any proceeding instituted pursuant to section 21C of 
this title against any person, the Commission may 
impose a civil penalty if it finds, on the record after 
notice and opportunity for hearing, that such per-
son— 
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‘‘(A) is violating or has violated any provi-
sion of this title, or any rule or regulation 
thereunder; or 
‘‘(B) is or was a cause of the violation of 
any provision of this title, or any rule or regula-
tion thereunder.’’. 
(c) UNDER
THE INVESTMENT COMPANY ACT
OF 
1940.—Paragraph (1) of section 9(d) of the Investment 
Company Act of 1940 (15 U.S.C. 80a–9(d)(1)) is amend-
ed— 
(1) by striking ‘‘(1) AUTHORITY OF COMMIS-
SION.—In any proceeding’’ and inserting the fol-
lowing: 
‘‘(1) AUTHORITY OF COMMISSION.— 
‘‘(A) IN GENERAL.—In any proceeding’’; 
(2) by redesignating subparagraphs (A) through 
(C) of such paragraph as clauses (i) through (iii), 
respectively, and by moving such redesignated 
clauses and the matter following such subparagraphs 
2 ems to the right; and 
(3) by adding at the end of such paragraph the 
following new subparagraph: 
‘‘(B) CEASE-AND-DESIST PROCEEDINGS.— 
In any proceeding instituted pursuant to sub-
section (f) against any person, the Commission 
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may impose a civil penalty if it finds, on the 
record after notice and opportunity for hearing, 
that such person— 
‘‘(i) is violating or has violated any 
provision of this title, or any rule or regu-
lation thereunder; or 
‘‘(ii) is or was a cause of the violation 
of any provision of this title, or any rule or 
regulation thereunder.’’. 
(d) UNDER THE INVESTMENT ADVISERS ACT OF 
1940.—Paragraph (1) of section 203(i) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b–3(i)(1)) is amend-
ed— 
(1) by striking ‘‘(1) AUTHORITY OF COMMIS-
SION.—In any proceeding’’ and inserting the fol-
lowing: 
‘‘(1) AUTHORITY OF COMMISSION.— 
‘‘(A) IN GENERAL.—In any proceeding’’; 
(2) by redesignating subparagraphs (A) through 
(D) of such paragraph as clauses (i) through (iv), 
respectively, and moving such redesignated clauses 
and the matter following such subparagraphs 2 ems 
to the right; and 
(3) by adding at the end of such paragraph the 
following new subparagraph: 
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‘‘(B) CEASE-AND-DESIST PROCEEDINGS.— 
In any proceeding instituted pursuant to sub-
section (k) against any person, the Commission 
may impose a civil penalty if it finds, on the 
record after notice and opportunity for hearing, 
that such person— 
‘‘(i) is violating or has violated any 
provision of this title, or any rule or regu-
lation thereunder; or 
‘‘(ii) is or was a cause of the violation 
of any provision of this title, or any rule or 
regulation thereunder.’’. 
SEC. 7212. FORMERLY ASSOCIATED PERSONS. 
(a) MEMBER OR EMPLOYEE OF THE MUNICIPAL SE-
CURITIES RULEMAKING BOARD.—Section 15B(c)(8) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78o– 
4(c)(8)) is amended by striking ‘‘any member or em-
ployee’’ and inserting ‘‘any person who is, or at the time 
of the alleged misconduct was, a member or employee’’. 
(b) PERSON ASSOCIATED WITH A GOVERNMENT SE-
CURITIES BROKER OR DEALER.—Section 15C of the Se-
curities Exchange Act of 1934 (15 U.S.C. 78o–5) is 
amended— 
(1) in subsection (c)(1)(C), by striking ‘‘or 
seeking to become associated,’’ and inserting ‘‘seek-
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ing to become associated, or, at the time of the al-
leged misconduct, associated or seeking to become 
associated’’; 
(2) in subsection (c)(2)(A), by inserting ‘‘, seek-
ing to become associated, or, at the time of the al-
leged misconduct, associated or seeking to become 
associated’’ after ‘‘any person associated’’; and 
(3) in subsection (c)(2)(B), by inserting ‘‘, 
seeking to become associated, or, at the time of the 
alleged misconduct, associated or seeking to become 
associated’’ after ‘‘any person associated’’. 
(c) PERSON ASSOCIATED WITH A MEMBER OF A NA-
TIONAL SECURITIES EXCHANGE OR REGISTERED SECURI-
TIES ASSOCIATION.—Section 21(a)(1) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u(a)(1)) is amended 
by inserting ‘‘, or, as to any act or practice, or omission 
to act, while associated with a member, formerly associ-
ated’’ after ‘‘member or a person associated’’. 
(d) PARTICIPANT
OF
A REGISTERED CLEARING 
AGENCY.—Section 21(a)(1) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78u(a)(1)) is amended by insert-
ing ‘‘or, as to any act or practice, or omission to act, while 
a participant, was a participant,’’ after ‘‘in which such 
person is a participant,’’. 
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(e) OFFICER OR DIRECTOR OF A SELF-REGULATORY 
ORGANIZATION.—Section 19(h)(4) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78s(h)(4)) is amended— 
(1) by striking ‘‘any officer or director’’ and in-
serting ‘‘any person who is, or at the time of the al-
leged misconduct was, an officer or director’’; and 
(2) by striking ‘‘such officer or director’’ and 
inserting ‘‘such person’’. 
(f) OFFICER OR DIRECTOR OF AN INVESTMENT COM-
PANY.—Section 36(a) of the Investment Company Act of 
1940 (15 U.S.C. 80a–35(a)) is amended— 
(1) by striking ‘‘a person serving or acting’’ and 
inserting ‘‘a person who is, or at the time of the al-
leged misconduct was, serving or acting’’; and 
(2) by striking ‘‘such person so serves or acts’’ 
and inserting ‘‘such person so serves or acts, or at 
the time of the alleged misconduct, so served or 
acted’’. 
(g) PERSON ASSOCIATED WITH A PUBLIC ACCOUNT-
ING FIRM.— 
(1) SARBANES-OXLEY
ACT
OF
2002
AMEND-
MENT.—Section 2(a)(9) of the Sarbanes-Oxley Act 
of 2002 (15 U.S.C. 7201(9)) is amended by adding 
at the end the following new subparagraph: 
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‘‘(C) INVESTIGATIVE AND ENFORCEMENT 
AUTHORITY.—For purposes of the provisions of 
sections 3(c), 101(c), 105, and 107(c) and 
Board or Commission rules thereunder, except 
to the extent specifically excepted by such rules, 
the terms defined in subparagraph (A) shall in-
clude any person associated, seeking to become 
associated, or formerly associated with a public 
accounting firm, except— 
‘‘(i) the authority to conduct an inves-
tigation of such person under section 
105(b) shall apply only with respect to any 
act or practice, or omission to act, while 
such person was associated or seeking to 
become associated with a registered public 
accounting firm; and 
‘‘(ii) the authority to commence a pro-
ceeding under section 105(c)(1), or impose 
disciplinary 
sanctions 
under 
section 
105(c)(4), against such person shall apply 
only on— 
‘‘(I) the basis of conduct occur-
ring while such person was associated 
or seeking to become associated with 
a registered public accounting firm; or 
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‘‘(II) 
non-cooperation 
as 
de-
scribed in section 105(b)(3) with re-
spect to a demand in a Board inves-
tigation for testimony, documents, or 
other information relating to a period 
when such person was associated or 
seeking to become associated with a 
registered public accounting firm.’’. 
(2) SECURITIES
EXCHANGE
ACT
OF
1934 
AMENDMENT.—Section 21(a)(1) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u(a)(1)) is 
amended by striking ‘‘or a person associated with 
such a firm’’ and inserting ‘‘, a person associated 
with such a firm, or, as to any act, practice, or omis-
sion to act while associated with such firm, a person 
formerly associated with such a firm’’. 
(h) SUPERVISORY
PERSONNEL
OF
AN
AUDIT 
FIRM.—Section 105(c)(6) of the Sarbanes-Oxley Act of 
2002 (15 U.S.C. 7215(c)(6)) is amended— 
(1) in subparagraph (A), by striking ‘‘the su-
pervisory personnel’’ and inserting ‘‘any person who 
is, or at the time of the alleged failure reasonably to 
supervise was, a supervisory person’’; and 
(2) in subparagraph (B)— 
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(A) by striking ‘‘No associated person’’ 
and inserting ‘‘No current or former super-
visory person’’; and 
(B) by striking ‘‘any other person’’ and in-
serting ‘‘any associated person’’. 
(i) MEMBER OF THE PUBLIC COMPANY ACCOUNTING 
OVERSIGHT BOARD.—Section 107(d)(3) of the Sarbanes- 
Oxley Act of 2002 (15 U.S.C. 7217(d)(3)) is amended by 
striking ‘‘any member’’ and inserting ‘‘any person who is, 
or at the time of the alleged misconduct was, a member’’. 
SEC. 7213. SHARING PRIVILEGED INFORMATION WITH 
OTHER AUTHORITIES. 
Section 24 of the Securities Exchange Act of 1934 
(15 U.S.C. 78x) is amended— 
(1) by redesignating subsections (d) and (e) as 
subsections (e) and (f), respectively; 
(2) in subsection (e), as redesignated, by strik-
ing ‘‘as provided in subsection (e)’’ and inserting ‘‘as 
provided in subsection (f)’’; and 
(3) by inserting after subsection (c) the fol-
lowing new subsection: 
‘‘(d) SHARING
PRIVILEGED
INFORMATION
WITH 
OTHER AUTHORITIES.— 
‘‘(1) PRIVILEGED INFORMATION PROVIDED BY 
THE
COMMISSION.—The Commission shall not be 
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deemed to have waived any privilege applicable to 
any information by transferring that information to 
or permitting that information to be used by— 
‘‘(A) any agency (as defined in section 6 of 
title 18, United States Code); 
‘‘(B) any foreign securities authority; 
‘‘(C) the Public Company Accounting 
Oversight Board; 
‘‘(D) any self-regulatory organization; 
‘‘(E) any foreign law enforcement author-
ity; or 
‘‘(F) any State securities or law enforce-
ment authority. 
‘‘(2) NON-DISCLOSURE OF PRIVILEGED INFOR-
MATION PROVIDED TO THE COMMISSION.—The Com-
mission shall not be compelled to disclose privileged 
information obtained from any foreign securities au-
thority, or foreign law enforcement authority, if the 
authority has in good faith determined and rep-
resented to the Commission that the information is 
privileged. 
‘‘(3) NON-WAIVER
OF
PRIVILEGED
INFORMA-
TION PROVIDED TO THE COMMISSION.— 
‘‘(A) 
IN
GENERAL.—Federal 
agencies, 
State securities and law enforcement authori-
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ties, self-regulatory organizations, and the Pub-
lic Company Accounting Oversight Board shall 
not be deemed to have waived any privilege ap-
plicable to any information by transferring that 
information to or permitting that information 
to be used by the Commission. 
‘‘(B) EXCEPTION WITH RESPECT TO CER-
TAIN
ACTIONS.—The provisions of subpara-
graph (A) shall not apply to a self-regulatory 
organization or the Public Company Accounting 
Oversight Board with respect to information 
used by the Commission in an action against 
such organization. 
‘‘(4) DEFINITIONS.—For purposes of this sub-
section: 
‘‘(A) The term ‘privilege’ includes any 
work-product privilege, attorney-client privilege, 
governmental privilege, or other privilege recog-
nized under Federal, foreign, or State law. 
‘‘(B) The term ‘foreign law enforcement 
authority’ means any foreign authority that is 
empowered under foreign law to detect, inves-
tigate or prosecute potential violations of law. 
‘‘(C) The term ‘State securities or law en-
forcement authority’ means the authority of any 
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State or territory that is empowered under 
State or territory law to detect, investigate or 
prosecute potential violations of law.’’. 
SEC. 7214. EXPANDED ACCESS TO GRAND JURY INFORMA-
TION. 
Subsection (b) of section 3322 of title 18, United 
States Code, is amended— 
(1) in paragraph (1), by striking ‘‘matters oc-
curring before a grand jury’’ and inserting ‘‘grand 
jury information obtained’’; 
(2) by redesignating paragraph (2) as para-
graph (3); 
(3) in paragraph (3) (as so redesignated), by 
inserting ‘‘or (2)’’ after ‘‘(1)’’; and 
(4) by inserting after paragraph (1), the fol-
lowing new paragraph: 
‘‘(2) Upon motion of an attorney for the gov-
ernment, a court may direct disclosure of grand jury 
information obtained during an investigation of a se-
curities law violation to identified personnel of the 
Securities and Exchange Commission— 
‘‘(A) for use in relation to any matter 
within the jurisdiction of the Commission; or 
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‘‘(B) to assist an attorney for the govern-
ment to whom matters have been disclosed 
under subsection (a).’’. 
SEC. 7215. AIDING AND ABETTING STANDARD OF KNOWL-
EDGE SATISFIED BY RECKLESSNESS. 
Section 20(e) of the Securities Exchange Act of 1934 
(15 U.S.C. 78t(e)) is amended by inserting ‘‘or recklessly’’ 
after ‘‘knowingly’’. 
SEC. 7216. EXTRATERRITORIAL JURISDICTION OF THE 
ANTIFRAUD PROVISIONS OF THE FEDERAL 
SECURITIES LAWS. 
(a) UNDER THE SECURITIES ACT OF 1933.—Section 
22 of the Securities Act of 1933 (15 U.S.C. 77v(a)) is 
amended by adding at the end the following new sub-
section: 
‘‘(c) EXTRATERRITORIAL JURISDICTION.—With re-
spect to any actions or proceedings brought or instituted 
by the Commission or the United States, this jurisdiction 
includes violations of section 17(a) of this title, and all 
suits in equity and actions at law under that section, in-
volving— 
‘‘(1) conduct within the United States that con-
stitutes significant steps in furtherance of the viola-
tion, even if the securities transaction occurs outside 
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the United States and involves only foreign inves-
tors; or 
‘‘(2) conduct occurring outside the United 
States that has a foreseeable substantial effect with-
in the United States.’’. 
(b) UNDER THE SECURITIES EXCHANGE ACT OF 
1934.—Section 27 of the Securities Exchange Act of 1934 
(15 U.S.C. 78aa) is amended— 
(1) by striking ‘‘The district’’ and inserting the 
following: 
‘‘(a) IN GENERAL.—The district’’; and 
(2) by inserting at the end the following new 
subsection: 
‘‘(b) EXTRATERRITORIAL JURISDICTION.—With re-
spect to any actions or proceedings brought or instituted 
by the Commission or the United States, this jurisdiction 
includes violations of the antifraud provisions of this title, 
and all suits in equity and actions at law under those pro-
visions, involving— 
‘‘(1) conduct within the United States that con-
stitutes significant steps in furtherance of the viola-
tion, even if the securities transaction occurs outside 
the United States and involves only foreign inves-
tors; or 
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‘‘(2) conduct occurring outside the United 
States that has a foreseeable substantial effect with-
in the United States.’’. 
(c) UNDER
THE INVESTMENT ADVISERS ACT
OF 
1940.—Section 214 of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–14) is amended— 
(1) by striking ‘‘The district’’ and inserting the 
following: 
‘‘(a) IN GENERAL.—The district’’; and 
(2) by inserting at the end the following new 
subsection: 
‘‘(b) EXTRATERRITORIAL JURISDICTION.—With re-
spect to any actions or proceedings brought or instituted 
by the Commission or the United States, this jurisdiction 
includes violations of section 206, and all suits in equity 
and actions at law under that section, involving— 
‘‘(1) conduct within the United States that con-
stitutes significant steps in furtherance of the viola-
tion, even if the violation is committed by a foreign 
adviser and involves only foreign investors; or 
‘‘(2) conduct occurring outside the United 
States that has a foreseeable substantial effect with-
in the United States.’’. 
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SEC. 7217. FIDELITY BONDING. 
Section 17(g) of the Investment Company Act of 
1940 (15 U.S.C. 80a–17(g)) is amended to read as fol-
lows: 
‘‘(g) FIDELITY BONDING.— 
‘‘(1) IN GENERAL.—The Commission is author-
ized to require that a registered management com-
pany provide and maintain a fidelity bond against 
loss as to any officer or employee who has access to 
securities or funds of the company, either directly or 
through authority to draw upon such funds or to di-
rect generally the disposition of such securities (un-
less the officer or employee has such access solely 
through his position as an officer or employee of a 
bank), in such form and amount as the Commission 
may prescribe by rule, regulation, or order for the 
protection of investors. 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section: 
‘‘(A) MANAGEMENT COMPANY.—The term 
‘management company’ has the meaning given 
such term under section 4 of the Investment 
Company Act of 1940. 
‘‘(B) OFFICER OR EMPLOYEE.—The term 
‘officer or employee’ means— 
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‘‘(i) any officer or employee of the 
management company; and 
‘‘(ii) any officer or employee of any 
investment adviser to the management 
company, or of any affiliated company of 
any such investment adviser, as the Com-
mission may prescribe by rule, regulation, 
or order for the protection of investors. 
‘‘(C) OTHER
DEFINITIONS.—The terms 
‘affiliated company’ and ‘investment adviser’ 
shall have the meaning given such terms under 
section 2 of the Investment Company Act of 
1940.’’. 
SEC. 7218. ENHANCED SEC AUTHORITY TO CONDUCT SUR-
VEILLANCE AND RISK ASSESSMENT. 
(a) SECURITIES EXCHANGE ACT OF 1934 AMEND-
MENTS.—Section 17(b) of the Securities Exchange Act of 
1934 (15 U.S.C. 78q(b)) is amended by adding at the end 
the following new paragraph: 
‘‘(5) SURVEILLANCE AND RISK ASSESSMENT.— 
All persons described in subsection (a) of this sec-
tion are subject at any time, or from time to time, 
to such reasonable periodic, special, or other infor-
mation and document requests by representatives of 
the Commission as the Commission by rule or order 
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deems necessary or appropriate to conduct surveil-
lance or risk assessments of the securities markets, 
persons registered with the Commission under this 
title, or otherwise in furtherance of the purposes of 
this title.’’. 
(b) INVESTMENT COMPANY ACT OF 1940 AMEND-
MENTS.—Section 31(b) of the Investment Company Act 
of 1940 (15 U.S.C. 80a–30(b)), as amended by section 
7106(a)(2), is further amended by adding at the end the 
following new paragraph: 
‘‘(5) SURVEILLANCE AND RISK ASSESSMENT.— 
All persons described in paragraph (1) are subject at 
any time, or from time to time, to such reasonable 
periodic, special, or other information and document 
requests by representatives of the Commission as the 
Commission by rule or order deems necessary or ap-
propriate to conduct surveillance or risk assessments 
of the securities markets, persons registered with the 
Commission under this title, or otherwise in further-
ance of the purposes of this title.’’. 
(c) INVESTMENT ADVISERS ACT OF 1940 AMEND-
MENTS.—Section 204 of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–4), as amended by section 7106(b), 
is further amended by adding at the end the following new 
subsection: 
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‘‘(e) SURVEILLANCE AND RISK ASSESSMENT.—All 
persons described in subsection (a) are subject at any 
time, or from time to time, to such reasonable periodic, 
special, or other information and document requests by 
representatives of the Commission as the Commission by 
rule or order deems necessary or appropriate to conduct 
surveillance or risk assessments of the securities markets, 
persons registered with the Commission under this title, 
or otherwise in furtherance of the purposes of this title.’’. 
SEC. 7219. INVESTMENT COMPANY EXAMINATIONS. 
Section 31(b)(1) of the Investment Company Act of 
1940 (15 U.S.C. 80a–30) is amended to read as follows: 
‘‘(1) IN
GENERAL.—All records of each reg-
istered investment company, and each underwriter, 
broker, dealer, or investment adviser that is a major-
ity-owned subsidiary of such a company, shall be 
subject at any time, or from time to time, to such 
reasonable periodic, special, or other examinations 
by representatives of the Commission as the Com-
mission deems necessary or appropriate in the public 
interest or for the protection of investors.’’. 
SEC. 7220. CONTROL PERSON LIABILITY UNDER THE SECU-
RITIES EXCHANGE ACT. 
Section 20(a) of the Securities Exchange Act of 1934 
(15 U.S.C. 78t(a)) is amended by inserting after ‘‘con-
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trolled person is liable,’’ the following: ‘‘including to the 
Commission in any action brought under paragraph (1) 
or (3) of section 21(d),’’. 
SEC. 7221. ENHANCED APPLICATION OF ANTI-FRAUD PRO-
VISIONS. 
The Securities Exchange Act of 1934 (15 U.S.C. 78a 
et seq.) is amended— 
(1) in section 9— 
(A) by striking ‘‘registered on a national 
securities exchange’’ each place it appears and 
inserting ‘‘other than a government security’’; 
(B) in subsection (b), by striking ‘‘by use 
of any facility of a national securities ex-
change,’’; and 
(C) in subsection (c), by inserting after 
‘‘unlawful for any’’ the following: ‘‘broker, deal-
er, or’’; 
(2) in section 10(a)(1), by striking ‘‘registered 
on a national securities exchange’’ and inserting 
‘‘other than a government security’’; and 
(3) in section 15(c)(1)(A), by striking ‘‘other-
wise than on a national securities exchange of which 
it is a member’’. 
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SEC. 7222. SEC AUTHORITY TO ISSUE RULES ON PROXY AC-
CESS. 
Section 14(a) of the Securities Exchange Act of 1934 
(15 U.S.C. 78n(a)) is amended— 
(1) by inserting ‘‘(1)’’ after ‘‘(a)’’; and 
(2) by adding at the end the following: 
‘‘(2) The authority of the Commission to prescribe 
rules and regulations under paragraph (1) includes rules 
and regulations that require the inclusion and set proce-
dures relating to the inclusion, in a solicitation of a proxy 
or consent or authorization by or on behalf of an issuer, 
of a nominee or nominees submitted by shareholders to 
serve on the issuer’s board of directors.’’. 
PART 3—COMMISSION FUNDING AND 
ORGANIZATION 
SEC. 7301. AUTHORIZATION OF APPROPRIATIONS. 
Section 35 of the Securities Exchange Act of 1934 
(15 U.S.C. 78kk) is amended to read as follows: 
‘‘SEC. 35. AUTHORIZATION OF APPROPRIATIONS. 
‘‘In addition to any other funds authorized to be ap-
propriated to the Commission, there are authorized to be 
appropriated to carry out the functions, powers, and du-
ties of the Commission— 
‘‘(1) for fiscal year 2010, $1,115,000,000; 
‘‘(2) for fiscal year 2011, $1,300,000,000; 
‘‘(3) for fiscal year 2012, $1,500,000,000; 
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‘‘(4) for fiscal year 2013, $1,750,000,000; 
‘‘(5) for fiscal year 2014, $2,000,000,000; and 
‘‘(6) for fiscal year 2015, $2,250,000,000.’’. 
SEC. 7302. INVESTMENT ADVISER REGULATION FUNDING. 
Section 203 of the Investment Advisers Act of 1940 
(15 U.S.C. 80b–3) (as amended by sections 5006 and 
5007) is further amended by adding at the end the fol-
lowing new subsection: 
‘‘(o) ANNUAL ASSESSMENT.— 
‘‘(1) IN GENERAL.—The Commission shall, in 
accordance with this subsection, promulgate rules 
pursuant to which it may collect from investment 
advisers required to register with the Commission 
under this title, fees designed to help recover the 
cost of inspections and examinations of registered 
investment advisers conducted by the Commission 
pursuant to this title. 
‘‘(2) FEE PAYMENT REQUIRED.—An investment 
adviser shall, at the time of registration with the 
Commission, and each fiscal year thereafter during 
which such adviser is so registered, pay to the Com-
mission a fair and reasonable fee determined by the 
Commission. In determining such fee, the Commis-
sion shall consider objective factors such as— 
‘‘(A) the investment adviser’s size; 
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‘‘(B) the number of clients of the invest-
ment adviser; 
‘‘(C) the types of clients of the investment 
adviser; and 
‘‘(D) such other relevant factors as the 
Commission determines to be appropriate. 
‘‘(3) AMOUNT AND USE OF FEES.— 
‘‘(A) MINIMUM
AGGREGATE
AMOUNT.— 
The aggregate amount of fees determined by 
the Commission under this subsection for any 
fiscal year shall be greater than the amount the 
Commission spent on inspections and examina-
tions of registered investment advisers during 
the 2009 fiscal year. 
‘‘(B) EXCESS
FEES.—The Commission 
may retain any excess fees collected under this 
subsection during a fiscal year for application 
towards the costs of inspections and examina-
tions of investment advisers in future fiscal 
years. 
‘‘(4) REVIEW
AND
ADJUSTMENT
OF
FEES.— 
The Commission may review fee rates established 
pursuant to this section before the end of any fiscal 
year and make any appropriate adjustments prior to 
collecting any such fee in the following fiscal year. 
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‘‘(5) PENALTY
FEE.—The Commission shall 
prescribe by rule or regulation an additional fee to 
be assessed as a penalty for late payment of fees re-
quired by this subsection. 
‘‘(6) JUDICIAL REVIEW.—Increases or decreases 
in fees made pursuant to this section shall not be 
subject to judicial review.’’. 
SEC. 7303. AMENDMENTS TO SECTION 31 OF THE SECURI-
TIES EXCHANGE ACT OF 1934. 
Section 31 of the Securities Exchange Act of 1934 
(15 U.S.C. 78ee) is amended— 
(1) in subsection (e)(2), by striking ‘‘September 
30’’ and inserting ‘‘September 25’’; 
(2) in subsection (g), by striking ‘‘April 30’’ 
and inserting ‘‘August 31’’; and 
(3) in subsection (j)(2)— 
(A) by striking ‘‘5 months’’ and inserting 
‘‘4 months’’; and 
(B) by striking ‘‘(including fees collected 
during such 5-month period and assessments 
collected under subsection (d))’’ and inserting 
‘‘(including fees estimated to be collected under 
subsections (b) and (c) prior to the effective 
date of the uniform adjusted rate and assess-
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ments estimated to be collected under sub-
section (d))’’. 
SEC. 7304. COMMISSION ORGANIZATIONAL STUDY AND RE-
FORM. 
(a) STUDY REQUIRED.— 
(1) IN GENERAL.—Not later than the end of 
the 90-day period beginning on the date of the en-
actment of this subtitle, the Securities and Ex-
change Commission (hereinafter in this section re-
ferred to as the ‘‘SEC’’) shall hire an independent 
consultant of high caliber and with expertise in orga-
nizational restructuring and the operations of capital 
markets to examine the internal operations, struc-
ture, funding, and the need for comprehensive re-
form of the SEC, as well as the SEC’s relationship 
with and the reliance on self-regulatory organiza-
tions and other entities relevant to the regulation of 
securities and the protection of securities investors 
that are under the SEC’s oversight. 
(2) SPECIFIC AREAS FOR STUDY.—The study 
required under paragraph (1) shall, at a minimum, 
include the study of— 
(A) the possible elimination of unnecessary 
or redundant units at the SEC; 
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(B) improving communications between 
SEC offices and divisions; 
(C) the need to put in place a clear chain- 
of-command structure, particularly for enforce-
ment examinations and compliance inspections; 
(D) the effect of high-frequency trading 
and other technological advances on the market 
and what the SEC requires to monitor the ef-
fect of such trading and advances on the mar-
ket; 
(E) the SEC’s hiring authorities, work-
place policies, and personal practices, includ-
ing— 
(i) whether there is a need to further 
streamline hiring authorities for those who 
are not lawyers, accountants, compliance 
examiners, or economists; 
(ii) whether there is a need for further 
pay reforms; 
(iii) the diversity of skill sets of SEC 
employees and whether the present skill set 
diversity efficiently and effectively fosters 
the SEC’s mission of investor protection; 
and 
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(iv) the application of civil service 
laws by the SEC; 
(F) whether the SEC’s oversight and reli-
ance on self-regulatory organizations promotes 
efficient and effective governance for the securi-
ties markets; and 
(G) whether adjusting the SEC’s reliance 
on self-regulatory organizations is necessary to 
promote more efficient and effective governance 
for the securities markets. 
(b) CONSULTANT REPORT.—Not later than the end 
of the 150-day period after being retained, the inde-
pendent consultant hired pursuant to subsection (a)(1) 
shall issue a report to the SEC and the Congress con-
taining— 
(1) a detailed description of any findings and 
conclusions made while carrying out the study re-
quired under subsection (a)(1); and 
(2) recommendations for legislative, regulatory, 
or administrative action that the consultant deter-
mines appropriate to enable the SEC and other enti-
ties on which it reports to perform their statutorily 
or otherwise mandated missions. 
(c) SEC REPORT.—Not later than the end of the 6- 
month period beginning on the date the consultant issues 
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the report under subsection (b), and every 6-months there-
after during the 2-year period following the date on which 
the consultant issues such report, the SEC shall issue a 
report to the Committee on Financial Services of the 
House of Representatives and the Committee on Banking, 
Housing, and Urban Affairs of the Senate describing the 
SEC’s implementation of the regulatory and administra-
tive recommendations contained in the consultant’s report. 
SEC. 7305. CAPITAL MARKETS SAFETY BOARD. 
There is established within the Securities and Ex-
change Commission an office to be known as the Capital 
Markets Safety Board whose purpose shall be to conduct 
investigations, at the direction of the Commission, of 
failed institutions registered with the Commission, to de-
termine what caused such institutions to fail. Upon the 
conclusion of an investigation, the Board shall make avail-
able on the Commission’s website a report of its findings, 
including recommendations regarding how others can 
avoid similar mistakes. No information that may com-
promise an ongoing Federal investigation shall be made 
available in any such report. 
SEC. 7306. REPORT ON IMPLEMENTATION OF ‘‘POST- 
MADOFF REFORMS’’. 
(a) IN GENERAL.—Not later than 6 months after the 
date of the enactment of this subtitle, the Securities and 
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Exchange Commission shall provide to the Committee on 
Financial Services of the House of Representatives and 
the Committee on Banking, Housing, and Urban Affairs 
of the Senate a report describing the implementation of 
reforms outlined by the Commission in the wake of the 
discovery of fraud by Bernie Madoff. 
(b) CONTENTS OF REPORT.—The report required by 
subsection (a) shall include an analysis of— 
(1) how many of the post-Madoff reforms have 
been implemented and to what extent; and 
(2) whether there is overlap between any of the 
Commission’s reform proposals and those rec-
ommended by the Inspector General of the Commis-
sion. 
(c) PUBLICATION OF REPORT.—The Commission and 
the Committees referred to in subsection (a) shall publish 
the report required by such subsection on their Web sites. 
SEC. 7307. JOINT ADVISORY COMMITTEE. 
The Securities and Exchange Commission and the 
Commodities Futures Trading Commission may jointly 
form and operate a joint advisory committee composed of 
members of each Commission and industry experts and 
participants. The purposes of such an advisory committee 
include— 
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(1) considering and developing solutions to 
emerging and ongoing issues of common interest in 
the futures and securities markets; 
(2) identifying emerging regulatory risks and 
assess and quantify their implications for investors 
and other market participants, and provide rec-
ommendations for solutions; 
(3) serving as a vehicle for discussion and com-
munication on regulatory issues of mutual concerns 
affecting each Commission, the regulated markets, 
and the industry generally; and 
(4) reporting regularly to each Commission and 
to Congress on its activities. 
PART 4—ADDITIONAL COMMISSION REFORMS 
SEC. 7401. REGULATION OF SECURITIES LENDING. 
Section 10 of the Securities Exchange Act of 1934 
(15 U.S.C. 78j) is amended by adding at the end the fol-
lowing new subsection: 
‘‘(c)(1) To effect, accept, or facilitate a transaction 
involving the loan or borrowing of securities in contraven-
tion of such rules and regulations as the Commission may 
prescribe as necessary or appropriate in the public interest 
or for the protection of investors. 
‘‘(2) Nothing in paragraph (1) shall be construed to 
limit the authority of an appropriate Federal banking 
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agency (as defined in section 3 of the Federal Deposit In-
surance Act (12 U.S.C. 1813(q))), the National Credit 
Union Administration, or any other Federal department 
or agency identified under law as having a systemic risk 
responsibility from prescribing rules or regulations to im-
pose restrictions on transactions involving the loan or bor-
rowing of securities in order to protect the safety and 
soundness of a financial institution or to protect the finan-
cial system from systemic risk.’’. 
SEC. 7402. LOST AND STOLEN SECURITIES. 
Section 17(f)(1) of the Securities Exchange Act of 
1934 (15 U.S.C. 78q(f)(1)) is amended— 
(1) in subparagraph (A), by striking ‘‘missing, 
lost, counterfeit, or stolen securities’’ and inserting 
‘‘securities that are missing, lost, counterfeit, stolen, 
cancelled, or any other category of securities as the 
Commission, by rule, may prescribe’’; and 
(2) in subparagraph (B), by striking ‘‘or sto-
len’’ and inserting ‘‘stolen, cancelled, or reported in 
such other manner as the Commission, by rule, may 
prescribe’’. 
SEC. 7403. FINGERPRINTING. 
Section 17(f)(2) of the Securities Exchange Act of 
1934 (15 U.S.C. 78q(f)(2)) is amended— 
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(1) by striking ‘‘and registered clearing agen-
cy,’’ and inserting ‘‘registered clearing agency, reg-
istered securities information processor, national se-
curities exchange, and national securities associa-
tion’’; and 
(2) by striking ‘‘or clearing agency,’’ and insert-
ing ‘‘clearing agency, securities information proc-
essor, national securities exchange, or national secu-
rities association,’’. 
SEC. 7404. EQUAL TREATMENT OF SELF-REGULATORY OR-
GANIZATION 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 organi-
zation,’’. 
SEC. 7405. 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— 
(1) by striking ‘‘, unless exempt from registra-
tion pursuant to section 203(b),’’ and inserting 
‘‘registered or required to be registered with the 
Commission’’; 
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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. 7406. CONFORMING AMENDMENTS FOR THE REPEAL 
OF THE PUBLIC UTILITY HOLDING COMPANY 
ACT OF 1935. 
(a) SECURITIES EXCHANGE ACT OF 1934.—The Se-
curities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is 
amended— 
(1) in section 3(a)(47) (15 U.S.C. 78c(a)(47)), 
by striking ‘‘the Public Utility Holding Company 
Act of 1935 (15 U.S.C. 79a et seq.),’’; and 
(2) in section 12(k) (15 U.S.C. 78l(k)), by 
amending paragraph (7) to read as follows:
‘‘(7) DEFINITION.—For purposes of this sub-
section, the term ‘emergency’ means— 
‘‘(A) a major market disturbance charac-
terized by or constituting— 
‘‘(i) sudden and excessive fluctuations 
of securities prices generally, or a substan-
tial threat thereof, that threaten fair and 
orderly markets; or 
‘‘(ii) a substantial disruption of the 
safe or efficient operation of the national 
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system for clearance and settlement of 
transactions in securities, or a substantial 
threat thereof; or 
‘‘(B) a major disturbance that substan-
tially disrupts, or threatens to substantially dis-
rupt— 
‘‘(i) the functioning of securities mar-
kets, investment companies, or any other 
significant portion or segment of the secu-
rities markets; or 
‘‘(ii) the transmission or processing of 
securities transactions.’’. 
(3) in section 21(h)(2) (15 U.S.C. 78u(h)(2)), 
by striking ‘‘section 18(c) of the Public Utility Hold-
ing Company Act of 1935,’’. 
(b) TRUST INDENTURE ACT OF 1939.—The Trust 
Indenture Act of 1939 (15 U.S.C. 77aaa et seq.) is 
amended— 
(1) in section 303 (15 U.S.C. 77ccc), by 
amending paragraph (17) to read as follows: 
‘‘(17) The terms ‘Securities Act of 1933’ and 
‘Securities Exchange Act of 1934’ shall be deemed 
to refer, respectively, to such Acts, as amended, 
whether amended prior to or after the enactment of 
this title.’’; 
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(2) in section 308 (15 U.S.C. 77hhh), by strik-
ing ‘‘Securities Act of 1933, the Securities Exchange 
Act of 1934, or the Public Utility Holding Company 
Act of 1935’’ each place it appears and inserting 
‘‘Securities Act of 1933 or the Securities Exchange 
Act of 1934’’; 
(3) in section 310 (15 U.S.C. 77jjj), by striking 
subsection (c); 
(4) in section 311 (15 U.S.C. 77kkk) by strik-
ing subsection (c); 
(5) in section 323(b) (15 U.S.C. 77www(b)), by 
striking ‘‘Securities Act of 1933, or the Securities 
Exchange Act of 1934, or the Public Utility Holding 
Company Act of 1935’’ and inserting ‘‘Securities Act 
of 1933 or the Securities Exchange Act of 1934’’; 
and 
(6) in section 326 (15 U.S.C. 77zzz), by strik-
ing ‘‘Securities Act of 1933, or the Securities Ex-
change Act of 1934, or the Public Utility Holding 
Company Act of 1935,’’ and inserting ‘‘Securities 
Act of 1933 or the Securities Exchange Act of 
1934’’. 
(c) INVESTMENT COMPANY ACT OF 1940.—The In-
vestment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) 
is amended— 
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(1) in section 2(a)(44) (15 U.S.C. 80a– 
2(a)(44)), by striking ‘‘ ‘Public Utility Holding Com-
pany Act of 1935’,’’; 
(2) in section 3(c) (15 U.S.C. 80a–3(c)), by 
amending paragraph (8) to read as follows: 
‘‘(8) [Repealed]’’; 
(3) in section 38(b) (15 U.S.C. 80a–37(b)), by 
striking ‘‘the Public Utility Holding Company Act of 
1935,’’; and 
(4) in section 50 (15 U.S.C. 80a–49), by strik-
ing ‘‘the Public Utility Holding Company Act of 
1935,’’. 
(d) INVESTMENT ADVISERS ACT OF 1940.—Section 
202(a)(21) of the Investment Advisers Act of 1940 (15 
U.S.C. 80b–2(a)(21)) is amended by striking ‘‘ ‘Public 
Utility Holding Company Act of 1935’,’’. 
SEC. 7407. PROMOTING TRANSPARENCY IN FINANCIAL RE-
PORTING. 
(a) FINDINGS.—Congress finds the following: 
(1) Transparent and clear financial reporting is 
integral to the continued growth and strength of our 
capital markets and the confidence of investors. 
(2) The increasing detail and volume of ac-
counting, auditing, and reporting guidance pose a 
major challenge. 
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(3) The complexity of accounting and auditing 
standards in the United States has added to the 
costs and effort involved in financial reporting. 
(b) TESTIMONY REQUIRED
ON REDUCING COM-
PLEXITY IN FINANCIAL REPORTING.—The Securities and 
Exchange Commission, the Public Company Accounting 
Oversight Board, and the standard setting body des-
ignated pursuant to section 19(b) of the Securities Act 
of 1933 shall annually provide oral testimony by their re-
spective Chairpersons or a designee of the Chairperson, 
beginning in 2010, and for 5 years thereafter, to the Com-
mittee on Financial Services of the House of Representa-
tives on their efforts to reduce the complexity in financial 
reporting to provide more accurate and clear financial in-
formation to investors, including— 
(1) reassessing complex and outdated account-
ing standards; 
(2) improving the understandability, consist-
ency, and overall usability of the existing accounting 
and auditing literature; 
(3) 
developing 
principles-based 
accounting 
standards; 
(4) encouraging the use and acceptance of 
interactive data; and 
(5) promoting disclosures in ‘‘plain English’’. 
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SEC. 7408. 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. 7409. PROTECTING CONFIDENTIALITY OF MATERIALS 
SUBMITTED TO THE COMMISSION. 
(a) SECURITIES EXCHANGE ACT OF 1934.—Section 
17(i) of the Securities Exchange Act of 1934 (as amended 
by section 1314(2)) is amended to read as follows: 
‘‘(i) AUTHORITY TO LIMIT DISCLOSURE OF INFOR-
MATION.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of law, the Commission shall not be com-
pelled to disclose any information, documents, 
records, or reports that relate to an examination, 
surveillance, or risk assessment of a person subject 
to or described in this section, or the financial or 
operational condition of such persons, or any infor-
mation supplied to the Commission by any domestic 
or foreign regulatory agency or self-regulatory orga-
nization that relates to the financial or operational 
condition of such persons, of any associated person 
of such persons, or any affiliate of an investment 
bank holding company. 
‘‘(2) CERTAIN EXCEPTIONS.—Nothing in this 
subsection shall authorize the Commission to with-
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hold information from the Congress, prevent the 
Commission from complying with a request for infor-
mation from any other Federal department or agen-
cy, the Public Company Accounting Oversight 
Board, or any self-regulatory organization request-
ing the information for purposes within the scope of 
its jurisdiction, or prevent the Commission from 
complying with an order of a court of the United 
States in an action brought by the United States or 
the Commission against a person subject to or de-
scribed in this section to produce information, docu-
ments, records, or reports relating directly to the ex-
amination, surveillance, or risk assessment of that 
person or the financial or operational condition of 
that person or an associated or affiliated person of 
that person. 
‘‘(3) TREATMENT
UNDER
SECTION
552
OF 
TITLE 5, UNITED STATES CODE.—For purposes of 
section 552 of title 5, United States Code, this sub-
section shall be considered a statute described in 
subsection (b)(3)(B) of that section. 
‘‘(4) CERTAIN INFORMATION TO BE CONFIDEN-
TIAL.—In prescribing regulations to carry out the 
requirements of this subsection, the Commission 
shall designate information described in or obtained 
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pursuant to subparagraphs (A), (B), and (C) of sub-
section (i)(3) as confidential information for pur-
poses of section 24(b)(2) of this title.’’. 
(b) INVESTMENT COMPANY ACT OF 1940.—Section 
31(b) of the Investment Company Act of 1940 (15 U.S.C. 
80a–30(b)), as amended by sections 7106(a)(2) and 
7218(b)(4), is further amended by adding at the end the 
following new paragraph: 
‘‘(6) CONFIDENTIALITY.— 
‘‘(A) IN GENERAL.—Notwithstanding any 
other provision of law, the Commission shall not 
be compelled to disclose any information, docu-
ments, records, or reports that relate to an ex-
amination, surveillance, or risk assessment of a 
person subject to or described in this section. 
‘‘(B) CERTAIN EXCEPTIONS.—Nothing in 
this subsection shall authorize the Commission 
to withhold information from the Congress, pre-
vent the Commission from complying with a re-
quest for information from any other Federal 
department or agency, or the Public Company 
Accounting Oversight Board requesting the in-
formation for purposes within the scope of its 
jurisdiction, or prevent the Commission from 
complying with an order of a court of the 
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United States in an action brought by the 
United States or the Commission against a per-
son subject to or described in this section to 
produce information, documents, records, or re-
ports relating directly to the examination of 
that person or the financial or operational con-
dition of that person or an associated or affili-
ated person of that person. 
‘‘(C) TREATMENT UNDER SECTION 552 OF 
TITLE 5, UNITED STATES CODE.—For purposes 
of section 552 of title 5, United States Code, 
this subsection shall be considered a statute de-
scribed in subsection (b)(3)(B) of that sec-
tion.’’. 
(c) INVESTMENT ADVISERS ACT OF 1940.—Section 
204 of the Investment Advisers Act of 1940 (15 U.S.C. 
80b–4), as amended by sections 7106(b) and 7218(c), is 
further amended by adding at the end the following new 
subsection: 
‘‘(f) CONFIDENTIALITY.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of law, the Commission shall not be com-
pelled to disclose any information, documents, 
records, or reports that relate to an examination of 
a person subject to or described in this section. 
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‘‘(2) CERTAIN EXCEPTIONS.—Nothing in this 
subsection shall authorize the Commission to with-
hold information from Congress, prevent the Com-
mission from complying with a request for informa-
tion from any other Federal department or agency, 
the Public Company Accounting Oversight Board, or 
a self-regulatory organization requesting the infor-
mation for purposes within the scope of its jurisdic-
tion, or prevent the Commission from complying 
with an order of a court of the United States in an 
action brought by the United States or the Commis-
sion against a person subject to or described in this 
section to produce information, documents, records, 
or reports relating directly to the examination of 
that person or the financial or operational condition 
of that person or an associated or affiliated person 
of that person. 
‘‘(3) TREATMENT
UNDER
SECTION
552
OF 
TITLE 5, UNITED STATES CODE.—For purposes of 
section 552 of title 5, United States Code, this sub-
section shall be considered a statute described in 
subsection (b)(3)(B) of that section.’’. 
SEC. 7410. TECHNICAL CORRECTIONS. 
(a) SECURITIES ACT OF 1933.—The Securities Act 
of 1933 (15 U.S.C. 77a et seq.) is amended— 
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(1) in section 3(a)(4) (15 U.S.C. 77c(a)(4)), by 
striking ‘‘individual;’’ and inserting ‘‘individual,’’; 
(2) in the matter following paragraph (5) of 
section 11(a), by striking ‘‘earning statement’’ and 
inserting ‘‘earnings statement’’; 
(3) 
in 
section 
18(b)(1)(C) 
(15 
U.S.C. 
77r(b)(1)(C)), by striking ‘‘is a security’’ and insert-
ing ‘‘a security’’; 
(4) in section 18(c)(2)(B)(i) (15 U.S.C. 
77r(c)(2)(B)(i)), by striking ‘‘State, or’’ and insert-
ing ‘‘State or’’; 
(5) 
in 
section 
19(d)(6)(A) 
(15 
U.S.C. 
77s(d)(6)(A)), by striking ‘‘in paragraph (1) of (3)’’ 
and inserting ‘‘in paragraph (1) or (3)’’; and 
(6) in section 27A(c)(1)(B)(ii) (15 U.S.C. 77z– 
2(c)(1)(B)(ii)), by striking ‘‘business entity;’’ and in-
serting ‘‘business entity,’’. 
(b) SECURITIES EXCHANGE ACT OF 1934.—The Se-
curities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is 
amended— 
(1) in section 2(1)(a) (15 U.S.C. 78b(1)(a)), by 
striking ‘‘affected’’ and inserting ‘‘effected’’; 
(2) 
in 
section 
3(a)(55)(A) 
(15 
U.S.C. 
78c(a)(55)(A)), by striking ‘‘section 3(a)(12) of the 
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Securities Exchange Act of 1934’’ and inserting 
‘‘section 3(a)(12) of this Act’’; 
(3) in section 3(g) (15 U.S.C. 78c(g)), by strik-
ing ‘‘company, account person, or entity’’ and insert-
ing ‘‘company, account, person, or entity’’; 
(4) in section 10A(i)(1)(B)(i) (15 U.S.C. 78j– 
1(i)(1)(B)(i)), by striking ‘‘nonaudit’’ and inserting 
‘‘non-audit’’; 
(5) in section 13(b)(1) (15 U.S.C. 78m(b)(1)), 
by striking ‘‘earning statement’’ and inserting 
‘‘earnings statement’’; 
(6) in section 15(b)(1) (15 U.S.C. 78o(b)(1))— 
(A) by striking the sentence beginning 
‘‘The order granting’’ and ending ‘‘from such 
membership.’’ in subparagraph (B); and 
(B) by inserting such sentence in the mat-
ter following such subparagraph after ‘‘are sat-
isfied.’’; 
(7) in section 15C(a)(2) (15 U.S.C. 78o– 
5(a)(2))— 
(A) by redesignating clauses (i) and (ii) as 
subparagraphs (A) and (B), respectively; 
(B) by striking the sentence beginning 
‘‘The order granting’’ and ending ‘‘from such 
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membership.’’ in such subparagraph (B), as re-
designated; and 
(C) by inserting such sentence in the mat-
ter following such redesignated subparagraph 
after ‘‘are satisfied.’’; 
(8) 
in 
section 
17(b)(1)(B) 
(15 
U.S.C. 
78q(b)(1)(B)), by striking ‘‘15A(k) gives’’ and in-
serting ‘‘15A(k), give’’; and 
(9) in section 21C(c)(2) (15 U.S.C. 78u– 
3(c)(2)), by striking ‘‘paragraph (1) subsection’’ and 
inserting ‘‘Paragraph (1)’’. 
(c) TRUST INDENTURE ACT OF 1939.—The Trust 
Indenture Act of 1939 (15 U.S.C. 77aaa et seq.) is 
amended— 
(1) in section 304(b) (15 U.S.C. 77ddd(b)), by 
striking ‘‘section 2 of such Act’’ and inserting ‘‘sec-
tion 2(a) of such Act’’; 
(2) 
in 
section 
313(a)(4) 
(15 
U.S.C. 
77mmm(a)(4)) by striking ‘‘subsection (b) of section 
311’’ and inserting ‘‘section 311(b)’’; and 
(3) 
in 
section 
317(a)(1) 
(15 
U.S.C. 
77qqq(a)(1)), by striking ‘‘(1),’’ and inserting ‘‘(1)’’. 
(d) INVESTMENT COMPANY ACT OF 1940.—The In-
vestment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) 
is amended— 
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(1) in section 2(a)(19)(B) (15 U.S.C. 80a– 
2(a)(19)(B)) by striking ‘‘clause (vi)’’ both places it 
appears in the last two sentences and inserting 
‘‘clause (vii)’’; 
(2) in section 9(b)(4)(B) (15 U.S.C. 80a– 
9(b)(4)(B)), by inserting ‘‘or’’ after the semicolon at 
the end; 
(3) in section 12(d)(1)(J) (15 U.S.C. 80a– 
12(d)(1)(J)), by striking ‘‘any provision of this sub-
section’’ and inserting ‘‘any provision of this para-
graph’’; 
(4) in section 13(a)(3) (15 U.S.C. 80a– 
13(a)(3)), by inserting ‘‘or’’ after the semicolon at 
the end; 
(5) in section 17(f)(4) (15 U.S.C. 80a– 
17(f)(4)), by striking ‘‘No such member’’ and insert-
ing ‘‘No member of a national securities exchange’’; 
(6) in section 17(f)(6) (15 U.S.C. 80a– 
17(f)(6)), by striking ‘‘company may serve’’ and in-
serting ‘‘company, may serve’’; and 
(7) in section 61(a)(3)(B)(iii) (15 U.S.C. 80a– 
60(a)(3)(B)(iii))— 
(A) by striking ‘‘paragraph (1) of section 
205’’ and inserting ‘‘section 205(a)(1)’’; and 
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(B) by striking ‘‘clause (A) or (B) of that 
section’’ and inserting ‘‘section 205(b)(1) or 
(2)’’. 
(e) INVESTMENT ADVISERS ACT OF 1940.—The In-
vestment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.) 
is amended— 
(1) in each of the following sections, by striking 
‘‘principal business office’’ or ‘‘principal place of 
business’’ (whichever and wherever it appears) and 
inserting ‘‘principal office and place of business’’: 
sections 203(c)(1)(A), 203(k)(4)(B), 213(a), 222(b), 
and 222(c) (15 U.S.C. 80b–3(c)(1)(A), 80b– 
3(k)(4)(B), 
80b–13(a), 
80b–18a(b), 
and 
80b– 
18a(c)); and 
(2) in section 206(3) (15 U.S.C. 80b–6(3)), by 
inserting ‘‘or’’ after the semicolon at the end. 
SEC. 7411. MUNICIPAL SECURITIES. 
Section 15B(b) of the Securities Exchange Act of 
1934 (15 U.S.C. 78o–4(b)) is amended— 
(1) by amending paragraph (1) to read as fol-
lows: 
‘‘(1) COMPOSITION OF THE MUNICIPAL SECURI-
TIES RULEMAKING BOARD.—Not later than October 
1, 2010, the Municipal Securities Rulemaking Board 
(hereinafter in this section referred to as the 
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‘Board’), shall be composed of members which shall 
perform the duties set forth in this section and shall 
consist of— 
‘‘(A) a majority of independent public rep-
resentatives, at least one of whom shall be rep-
resentative of investors in municipal securities 
and at least one of whom shall be representative 
of issuers of municipal securities (which mem-
bers are hereinafter referred to as ‘public rep-
resentatives’); 
‘‘(B) at least one individual who is rep-
resentative of municipal securities brokers and 
municipal securities dealers which are not 
banks or subsidiaries or departments or divi-
sions of banks (which members are hereinafter 
referred to as ‘broker-dealer representatives’); 
and 
‘‘(C) at least one individual who is rep-
resentative of municipal securities dealers which 
are banks or subsidiaries or departments or di-
visions of banks (which members are herein-
after referred to as ‘bank representatives’).’’; 
and 
(2) by amending paragraph (2)(B) to read as 
follows: 
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‘‘(B) Establish fair procedures for the nomina-
tion and election of members of the Board and as-
sure fair representation in such nominations and 
elections of municipal securities brokers and munic-
ipal securities dealers. Such rules— 
‘‘(i) shall establish requirements regarding 
the independence of public representatives; 
‘‘(ii) shall provide that the number of pub-
lic representatives of the Board shall at all 
times exceed the total number of broker-dealer 
representatives and bank representatives; 
‘‘(iii) shall establish minimum knowledge, 
experience, and other appropriate qualifications 
for individuals to serve as public representa-
tives, which may include, among other things, 
prior work experience in the securities, munic-
ipal finance, or municipal securities industries; 
‘‘(iv) shall specify the term members shall 
serve; and 
‘‘(v) may increase or decrease the number 
of members which shall constitute the whole 
Board, but in no case may such number be an 
even number.’’. 
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SEC. 7412. INTERESTED PERSON DEFINITION. 
Section 2(a)(19)(A) of the Investment Company Act 
of 1940 (15 U.S.C. 80a–2(a)(19)(A)) is amended— 
(1) by striking clauses (v) and (vi); 
(2) by inserting after clause (iv) the following 
new clause: 
‘‘(v) any natural person who is a 
member of a class of persons who the 
Commission, by rule or regulation, deter-
mines are unlikely to exercise an appro-
priate degree of independence as a result 
of— 
‘‘(I) a material business or pro-
fessional relationship with such com-
pany or any affiliated person of such 
company; or 
‘‘(II) a close familial relationship 
with any natural person who is an af-
filiated person of such company;’’; 
(3) by redesignating clause (vii) as clause (vi); 
and 
(4) in clause (vi), as redesignated, by striking 
‘‘two completed fiscal years’’ and inserting ‘‘five 
completed fiscal years’’. 
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SEC. 7413. RULEMAKING AUTHORITY TO PROTECT RE-
DEEMING INVESTORS. 
Section 22(e) of the Investment Company Act of 
1940 (15 U.S.C. 80a–22(e)) is amended by adding at the 
end the following: ‘‘The Commission may, by rules and 
regulations, limit the extent to which a registered open- 
end investment company may own, hold, or invest in il-
liquid securities or other illiquid property.’’. 
SEC. 7414. STUDY ON SEC REVOLVING DOOR. 
(a) 
GOVERNMENT
ACCOUNTABILITY
OFFICE 
STUDY.—The Comptroller General of the United States 
shall conduct a study that will— 
(1) review the number of employees who leave 
the Securities and Exchange Commission to work 
for financial institutions regulated by such Commis-
sion; 
(2) determine how many employees who leave 
the Securities and Exchange Commission worked on 
cases that involved financial institutions regulated by 
such Commission; 
(3) review the length of time employees work 
for the Securities and Exchange Commission before 
leaving to be employed by financial institutions regu-
lated by such Commission; 
(4) review existing internal controls and make 
recommendations on strengthening such controls to 
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ensure that employees of the Securities and Ex-
change Commission who are later employed by fi-
nancial institutions did not assist such institutions 
in violating any rules or regulations of the Commis-
sion during the course of their employment with 
such Commission; 
(5) determine if greater post-employment re-
strictions are necessary to prevent employees of the 
Securities and Exchange Commission from being 
employed by financial institutions after employment 
with such Commission; 
(6) determine if the volume of employees of the 
Securities and Exchange Commission who are later 
employed by financial institutions has led to ineffi-
ciencies in enforcement; 
(7) determine if employees of the Securities and 
Exchange Commission who are later employed by fi-
nancial institutions assisted such institutions in cir-
cumventing Federal rules and regulations while em-
ployed by such Commission; 
(8) review any information that may address 
the volume of employees of the Securities and Ex-
change Commission who are later employed by fi-
nancial institutions, and make recommendations to 
Congress; and 
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(9) review other additional issues as may be 
raised during the course of the study conducted 
under this subsection. 
(b) REPORT.—Not later than 1 year after the date 
of the enactment of this subtitle, the Comptroller General 
of the United States shall submit to the Committee on 
Financial Services of the House of Representatives and 
the Committee on Banking, Housing, and Urban Affairs 
of the Senate a report on the results of the study required 
by subsection (a). 
SEC. 7415. STUDY ON INTERNAL CONTROL EVALUATION 
AND REPORTING COST BURDENS ON SMALL-
ER ISSUERS. 
(a) STUDY REQUIRED.—The Government Account-
ability Office shall conduct a study evaluating the costs 
and benefits of complying with section 404(b) of the Sar-
banes-Oxley Act of 2002 (15 U.S.C. 7262(b)) on issuers 
who are not accelerated or large accelerated filers as de-
fined by Commission Rule 12b–2. The study shall— 
(1) include recommendations, administrative re-
forms, and legislative proposals on implementation 
steps that could be taken to reduce compliance bur-
dens on these issuers; 
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(2) determine the efficacy of the Securities and 
Exchange Commission’s measures to limit the cost 
of compliance on smaller issuers; 
(3) determine how to reduce the burden of com-
plying with section 404(b) of the Sarbanes-Oxley Act 
of 2002 for companies whose market capitalization 
is less than $250,000,000 for the relevant reporting 
period while maintaining investor protections for 
such companies; and 
(4) determine whether various methods of re-
ducing the compliance burden or a complete exemp-
tion for such companies (whose market capitalization 
is less than $250,000,000 for the relevant reporting 
period) from such compliance would encourage com-
panies to list on exchanges in the United States in 
their initial public offerings. 
(b) REPORTS REQUIRED.—Not later than 9 months 
after the date of the enactment of this subtitle, the Gov-
ernment Accountability Office shall submit a report to 
Congress containing the findings and conclusions of the 
studies required under subsection (a), together with such 
recommendations for regulatory, legislative, or administra-
tive action as may be appropriate. 
(c) EFFECTIVE DATE CONTINGENT ON REPORTS.— 
Requirements under section 404(b) of the Sarbanes-Oxley 
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Act of 2002 on issuers described under subsection (a) shall 
not become effective until the results of the report are de-
livered, but in no case before June 1, 2011. 
SEC. 7416. ANALYSIS OF RULE REGARDING SMALLER RE-
PORTING COMPANIES. 
(a) FINDINGS.—Congress finds the following: 
(1) Many small businesses in cutting-edge tech-
nology sectors require significant capital investment 
to develop new technologies related to clean energy, 
drug treatments for terminal diseases and food pro-
duction in hunger-stricken areas of the World. 
(2) Many technology companies conducting re-
search do not meet the definition of ‘‘smaller report-
ing company’’ under the Securities and Exchange 
Commission’s Rule 12b–2 due to unusually high 
public floats despite low or zero revenue. 
(3) The Final Report of the Advisory Com-
mittee on Smaller Public Companies to the Securi-
ties and Exchange Commission recommended that a 
company with a market capitalization of less than 
about $787,000,000 be considered a smallcap com-
pany and that the Commission provide exemptions 
from section 404(b) of the Sarbanes-Oxley Act to 
companies with less than $250,000,000 in annual 
revenues. 
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(b) STUDY OF USING REVENUE AS CRITERIA TO DE-
FINE SMALLER REPORTING COMPANY.—The Securities 
and Exchange Commission shall conduct a study of the 
inclusion of revenue as a criteria used in defining smaller 
reporting company as defined under the Commission’s 
Rule 12b–2 to account for smaller public companies with 
public floats less than $700,000,000 and revenues less 
than $250,000,000. Not later than 180 days after the date 
of enactment of this subtitle, the Commission shall provide 
the Committee on Financial Services of the House of Rep-
resentatives and the Committee on Banking, Housing and 
Urban Affairs of the Senate a report of the findings of 
the study. 
SEC. 7417. FINANCIAL REPORTING FORUM. 
(a) ESTABLISHMENT.—There is hereby established a 
Financial Reporting Forum (hereinafter referred to as the 
‘‘Forum’’), which shall consist of— 
(1) the Chairman of the Securities Exchange 
Commission (hereinafter referred to as the ‘‘SEC’’); 
(2) the head of the Financial Accounting 
Standards Board; 
(3) the Chairman of the Public Company Ac-
counting Oversight Board; 
(4) the head of each appropriate Federal bank-
ing agency, as such term is defined under section 
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3(q) of the Federal Deposit Insurance Act (12 
U.S.C. 1813(q)); 
(5) the Administrator of the National Credit 
Union Administration; 
(6) the Secretary of the Treasury; 
(7) a representative of a non-financial institu-
tion, appointed by the SEC; 
(8) a representative of a financial institution, 
appointed by the SEC; 
(9) a representative of auditors, appointed by 
the SEC; and 
(10) a representative of investors, appointed by 
the SEC. 
(b) MEETINGS.—The Forum shall meet no less often 
than quarterly. 
(c) DUTIES.—The Forum shall meet to discuss im-
mediate and long-term issues critical to financial report-
ing. 
(d) REPORTING.—The Forum shall issue an annual 
report to the Congress detailing any determinations or 
findings made by the Forum during the previous year, in-
cluding any legislative recommendations the Forum may 
have related to financial reporting matters. 
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SEC. 7418. INVESTMENT ADVISERS SUBJECT TO STATE AU-
THORITIES. 
Section 203A(a) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–3a(a)) is amended— 
(1) by redesignating paragraph (2) as para-
graph (3); and 
(2) by inserting after paragraph (1) the fol-
lowing new paragraph: 
‘‘(2) TREATMENT OF CERTAIN MID-SIZED IN-
VESTMENT
ADVISERS.—Notwithstanding paragraph 
(1), an investment adviser that is not exempt from 
registration under section 203 and— 
‘‘(A) is regulated and examined, or re-
quired to be regulated and examined, in the 
State where it maintains its principal office and 
place of business; and 
‘‘(B) has assets under management be-
tween— 
‘‘(i) the amount specified under sub-
paragraph (A) of paragraph (1), as such 
amount may have been adjusted by the 
Commission pursuant to that subpara-
graph; and 
‘‘(ii) $100,000,000, or such higher 
amount as the Commission may, by rule, 
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deem appropriate in accordance with the 
purposes of this title, 
shall register with, and be subject to examina-
tion by, such State. The Commission shall pub-
lish a list of the States that regulate and exam-
ine, or require regulation and examination of, 
investment advisers to which the requirements 
of this paragraph apply. If no State in which an 
investment adviser described in subparagraph 
(B) is registered conducts such an examination, 
the investment adviser must register with the 
Commission. If, pursuant to this paragraph, an 
investment adviser would be required to register 
with 5 or more States, then the adviser may 
maintain its registration with the Commis-
sion.’’. 
SEC. 7419. CUSTODIAL REQUIREMENTS. 
(a) IN GENERAL.—Not later than 180 days after the 
date of the enactment of this title, the Securities and Ex-
change Commission shall adopt a rule pursuant to its au-
thority under section 211(a) of the Investment Advisers 
Act of 1940 making it unlawful under section 206(4) of 
that Act for an investment adviser registered under such 
Act to have custody of funds or securities of a client the 
value of which exceeds $10,000,000, unless— 
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(1) the funds and securities are maintained 
with a qualified custodian either in a separate ac-
count for each client under the client’s name, or in 
accounts that contain only client funds and securi-
ties under the name of the investment adviser as 
agent or trustee for the client; and 
(2) the qualified custodian does not directly or 
indirectly provide investment advice with respect to 
such funds or securities. 
(b) EXCEPTIONS.—The rule adopted under sub-
section (a) shall include such exceptions as the Commis-
sion determines in the public interest and consistent with 
the protection of investors. Any exemption granted under 
this subsection shall ensure that at least once per year, 
a client described in subsection (a) shall receive a report 
from an independent entity with a fiduciary responsibility 
to the client to verify that the assets in the client’s account 
are in accord with those stated on the client’s account 
statement. 
(c) NO LIMITS ON OTHER ACTIONS.—Nothing in this 
section shall be construed to limit other actions the Securi-
ties and Exchange Commission may take under this Act 
to require the protection of client assets. 
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SEC. 7420. OMBUDSMAN. 
(a) APPOINTMENT.—Not later than 180 days after 
the date of the enactment of this subtitle, the Chairman 
of the Securities and Exchange Commission shall appoint 
an Ombudsman who shall report directly to the Chairman. 
(b) DUTIES.—The Ombudsman appointed under sub-
section (a) shall— 
(1) act as a liaison between the Commission 
and any affected person with respect to any problem 
such person may have in dealing with the Commis-
sion resulting from the regulatory activities of the 
Commission; 
(2) review and make recommendations regard-
ing Commission policies and procedures to encour-
age persons to present questions to the Commission 
regarding compliance with Federal securities laws; 
and 
(3) assure that safeguards exist to maintain 
confidentiality of communications between such per-
sons and the Ombudsman. 
(c) LIMITATION.—In carrying out the duties under 
subsection (b), the Ombudsman shall utilize personnel of 
the Commission to the extent practicable. Nothing in this 
section shall be construed as replacing, altering, or dimin-
ishing the activities of any ombudsman or similar office 
in any other agency. 
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(d) REPORT.—Each year, the Ombudsman shall sub-
mit a report to the Commission for inclusion in the annual 
report that describes the activities and evaluates the effec-
tiveness of the Ombudsman during the preceding year. In 
that report, the Ombudsman shall include solicited com-
ments and evaluations from registrants in regard to the 
effectiveness of the Ombudsman. 
SEC. 7421. NOTICE TO MISSING SECURITY HOLDERS. 
Section 17A of the Securities Exchange Act of 1934 
(15 U.S.C. 78q–1) is amended by adding at the end the 
following new subsection: 
‘‘(g) DUE DILIGENCE FOR THE DELIVERY OF DIVI-
DENDS, INTEREST, AND OTHER VALUABLE PROPERTY 
RIGHTS.— 
‘‘(1) REVISION
OF
RULES
REQUIRED.—The 
Commission shall revise its regulations in section 
240.17Ad–17 of title 17, Code of Federal Regula-
tions, as in effect on December 8, 1997, to extend 
the application of such section to brokers and deal-
ers and to provide for the following: 
‘‘(A) A requirement that the paying agent 
provide a single written notification to each 
missing security holder that the missing secu-
rity holder has been sent a check that has not 
yet been negotiated. The written notification 
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may be sent along with a check or other mailing 
subsequently sent to the missing security holder 
but must be provided no later than 7 months 
after the sending of the not yet negotiated 
check. 
‘‘(B) An exclusion for paying agents from 
the notification requirements when the value of 
the not yet negotiated check is less than $25. 
‘‘(C) A provision clarifying that the re-
quirements described in subparagraph (A) shall 
have no effect on State escheatment laws. 
‘‘(D) For purposes of such revised regula-
tions— 
‘‘(i) a security holder shall be consid-
ered a ‘missing security holder’ if a check 
is sent to the security holder and the check 
is not negotiated before the earlier of the 
paying agent sending the next regularly 
scheduled check or the elapsing of 6 
months after the sending of the not yet ne-
gotiated check; and 
‘‘(ii) the term ‘paying agent’ includes 
any issuer, transfer agent, broker, dealer, 
investment adviser, indenture trustee, cus-
todian, or any other person that accepts 
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payments from the issuer of a security and 
distributes the payments to the holders of 
the security. 
‘‘(2) RULEMAKING.—The Commission shall 
adopt such rules, regulations, and orders necessary 
to implement this subsection no later than 1 year 
after the date of enactment of this subsection. In 
proposing such rules, the Commission shall seek to 
minimize disruptions to current systems used by or 
on behalf of paying agents to process payment to ac-
count holders and avoid requiring multiple paying 
agents to send written notification to a missing secu-
rity holder regarding the same not yet negotiated 
check.’’. 
SEC. 7422. SHORT SALE REFORMS. 
(a) SHORT SALE DISCLOSURE.—Section 13(f) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78m(f)) is 
amended by redesignating paragraphs (2), (3), (4), and 
(5) as paragraphs (3), (4), (5), and (6), respectively, and 
inserting after paragraph (1) the following: 
‘‘(2)(A) Every institutional investment manager 
that effects a short sale of an equity security shall 
also file a report on a daily basis with the Commis-
sion in such form as the Commission, by rule, may 
prescribe. Such report shall include, as applicable, 
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the name of the institution, the name of the institu-
tional investment manager and the title, class, 
CUSIP number, number of shares or principal 
amount, aggregate fair market value of each secu-
rity, and any additional information requested by 
the Commission. For purposes of section 552 of title 
5, United States Code, this subparagraph shall be 
considered 
a 
statute 
described 
in 
subsection 
(b)(3)(B) of such section. The information contained 
in reports of an institutional investment manager 
filed with the Commission pursuant to this section, 
shall be subject to the same non-disclosure and con-
fidentiality 
protection 
provided 
under 
section 
204(b)(8) of the Investment Advisers Act of 1940. 
‘‘(B) The Commission shall prescribe rules pro-
viding for the public disclosure of the name of the 
issuer and the title, class, CUSIP number, aggregate 
amount of the number of short sales of each secu-
rity, and any additional information determined by 
the Commission following the end of the reporting 
period. At a minimum, such public disclosure shall 
occur every month.’’. 
(b) SHORT SELLING ENFORCEMENT.—Section 9 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78i) is 
amended— 
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(1) by redesignating subsections (d), (e), (f), 
(g), (h), and (i) as subsections (e), (f), (g), (h), (i), 
and (j), respectively; and 
(2) inserting after subsection (c), the following 
new subsection: 
‘‘(d) TRANSACTIONS RELATING TO SHORT SALES OF 
SECURITIES.—It shall be unlawful for any person, directly 
or indirectly, by the use of the mails or any means or in-
strumentality of interstate commerce, or of any facility of 
any national securities exchange, or for any member of 
a national securities exchange to effect, alone or with one 
or more other persons, a manipulative short sale of any 
security. The Commission shall issue such other rules as 
are necessary or appropriate to ensure that the appro-
priate enforcement options and remedies are available for 
violations of this subsection in the public interest or for 
the protection of investors.’’. 
(c) INVESTOR NOTIFICATION.—Section 15 of the Se-
curities Exchange Act of 1934 (15 U.S.C. 78o) is amend-
ed— 
(1) by redesignating subsections (e), (f), (g), 
(h), and (i) as subsections (f), (g), (h), (i), and (j), 
respectively; and 
(2) inserting after subsection (d) the following 
new subsection: 
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‘‘(e) NOTICES TO CUSTOMERS REGARDING SECURI-
TIES LENDING.—Every registered broker or dealer shall 
provide notice to its customers that they may elect not 
to allow their fully paid securities to be used in connection 
with short sales. If a broker or dealer uses a customer’s 
securities in connection with short sales, the broker or 
dealer shall provide notice to its customer that the broker 
or dealer may receive compensation in connection with 
lending the customer’s securities. The Commission, by 
rule, as it deems necessary or appropriate in the public 
interest and for the protection of investors, may prescribe 
the form, content, time, and manner of delivery of any 
notice required under this paragraph.’’. 
SEC. 7423. STREAMLINING OF SEC FILING PROCEDURES. 
(a) APPROVAL PROCESS.—Section 19(b)(2) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78s(b)(2)) 
is amended to read as follows: 
‘‘(2) FILING PROCEDURES.— 
‘‘(A) IN
GENERAL.—Within thirty-five 
days of the date of publication of notice of the 
filing of a proposed rule change in accordance 
with paragraph (1) of this subsection, or within 
such longer period as the Commission may des-
ignate up to ninety days of such date if it finds 
such longer period to be appropriate and pub-
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lishes its reasons for so finding or as to which 
the self-regulatory organization consents, the 
Commission shall— 
‘‘(i) by order approve such proposed 
rule change; or 
‘‘(ii) institute proceedings under sub-
paragraph (B) to determine whether the 
proposed rule change should be dis-
approved. 
‘‘(B) PROCEEDINGS.—Proceedings to de-
termine whether the proposed rule change 
should be disapproved shall include notice of 
the grounds for disapproval under consideration 
and opportunity for hearing and be concluded 
within 200 days from the date of receipt of a 
proper filing. At the conclusion of such pro-
ceedings the Commission, by order, shall ap-
prove or disapprove such proposed rule change. 
The Commission may extend the time for con-
clusion of such proceedings for up to 60 days 
if it finds good cause for such extension and 
publishes its reasons for so finding or for such 
longer period as to which the self-regulatory or-
ganization consents. The Commission shall ap-
prove a proposed rule change of a self-regu-
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latory organization if it finds that such pro-
posed rule change is consistent with the re-
quirements of this title and the rules and regu-
lations thereunder applicable to such organiza-
tion. The Commission shall disapprove a pro-
posed rule change of a self-regulatory organiza-
tion if it does not make such finding. The Com-
mission shall not approve any proposed rule 
change prior to the thirtieth day after the date 
of publication of notice of the filing thereof, un-
less the Commission finds good cause for so 
doing and publishes its reasons for so finding.’’. 
(b) RULES.—Not later than 12 months after the date 
of enactment of this Act, the Commission shall issue rules 
implementing a disapproval process for filings submitted 
on or after the effective date of such rules. 
PART 5—SECURITIES INVESTOR PROTECTION 
ACT AMENDMENTS 
SEC. 7501. INCREASING THE MINIMUM ASSESSMENT PAID 
BY SIPC MEMBERS. 
Section 4(d)(1)(C) of the Securities Investor Protec-
tion Act of 1970 (15 U.S.C. 78ddd(d)(1)(C)) is amended 
by striking ‘‘$150 per annum’’ and inserting the following: 
‘‘0.02 percent of the gross revenues from the securities 
business of such member of SIPC’’. 
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SEC. 7502. 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 by striking ‘‘of 
not to exceed $1,000,000,000’’ and inserting ‘‘the lesser 
of $2,500,000,000 or the target amount of the SIPC Fund 
specified in the bylaws of SIPC’’. 
SEC. 7503. INCREASING THE CASH LIMIT OF PROTECTION. 
Section 9 of the Securities Investor Protection Act 
of 1970 (15 U.S.C. 78fff–3) is amended— 
(1) in subsection (a)(1), by striking ‘‘$100,000 
for each such customer’’ and inserting ‘‘the standard 
maximum cash advance amount for each such cus-
tomer, as determined in accordance with subsection 
(d)’’; and 
(2) by adding the following new subsections: 
‘‘(d) STANDARD MAXIMUM CASH ADVANCE AMOUNT 
DEFINED.—For purposes of this section, the term ‘stand-
ard maximum cash advance amount’ means $250,000, as 
such amount may be adjusted after March 31, 2010, as 
provided under subsection (e). 
‘‘(e) INFLATION ADJUSTMENT.— 
‘‘(1) IN
GENERAL.—No later than April 1, 
2010, and every 5 years thereafter, and subject to 
the approval of the Commission as provided under 
section 3(e)(2), the Board of Directors of SIPC shall 
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determine whether an inflation adjustment to the 
standard maximum cash advance amount is appro-
priate. If the Board of Directors of SIPC determines 
such an adjustment is appropriate, then the stand-
ard maximum cash advance amount shall be an 
amount equal to— 
‘‘(A) $250,000 multiplied by 
‘‘(B) the ratio of the annual value of the 
Personal Consumption Expenditures Chain- 
Type Price Index (or any successor index there-
to), published by the Department of Commerce, 
for the calendar year preceding the year in 
which such determination is made, to the pub-
lished annual value of such index for the cal-
endar year preceding the year in which this 
subsection was enacted. 
The index values used in calculations under this 
paragraph shall be, as of the date of the calculation, 
the values most recently published by the Depart-
ment of Commerce. 
‘‘(2) ROUNDING.—If the standard maximum 
cash advance amount determined under paragraph 
(1) for any period is not a multiple of $10,000, the 
amount so determined shall be rounded down to the 
nearest $10,000. 
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‘‘(3) PUBLICATION AND REPORT TO THE CON-
GRESS.—Not later than April 5 of any calendar year 
in which a determination is required to be made 
under paragraph (1)— 
‘‘(A) the Commission shall publish in the 
Federal Register the standard maximum cash 
advance amount; and 
‘‘(B) the Board of Directors of SIPC shall 
submit a report to the Congress stating the 
standard maximum cash advance amount. 
‘‘(4) IMPLEMENTATION
PERIOD.—Any adjust-
ment to the standard maximum cash advance 
amount shall take effect on January 1 of the year 
immediately succeeding the calendar year in which 
such adjustment is made. 
‘‘(5) 
INFLATION
ADJUSTMENT
CONSIDER-
ATIONS.—In making any determination under para-
graph (1) to increase the standard maximum cash 
advance amount, the Board of Directors of SIPC 
shall consider— 
‘‘(A) the overall state of the fund and the 
economic conditions affecting members of 
SIPC; 
‘‘(B) the potential problems affecting mem-
bers of SIPC; and 
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‘‘(C) such other factors as the Board of 
Directors of SIPC may determine appro-
priate.’’. 
SEC. 7504. SIPC AS TRUSTEE IN SIPA LIQUIDATION PRO-
CEEDINGS. 
Section 5(b)(3) of the Securities Investor Protection 
Act of 1970 (15 U.S.C. 78eee(b)(3)) is amended— 
(1) by striking ‘‘SIPC has determined that the 
liabilities of the debtor to unsecured general credi-
tors and to subordinated lenders appear to aggre-
gate less than $750,000 and that’’; and 
(2) by striking ‘‘five hundred’’ and inserting 
‘‘five thousand’’. 
SEC. 7505. INSIDERS INELIGIBLE FOR SIPC ADVANCES. 
Section 9(a)(4) of the Securities Investor Protection 
Act of 1970 (15 U.S.C. 78fff–3(a)(4)) is amended by in-
serting ‘‘an insider,’’ after ‘‘or net profits of the debtor,’’. 
SEC. 7506. ELIGIBILITY FOR DIRECT PAYMENT PROCE-
DURE. 
Section 10(a)(4) of the Securities Investor Protection 
Act of 1970 (15 U.S.C. 78fff–4(a)(4)) is amended by 
striking ‘‘$250,000’’ and inserting ‘‘$850,000’’. 
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SEC. 7507. INCREASING THE FINE FOR PROHIBITED ACTS 
UNDER SIPA. 
Section 14(c) of the Securities Investor Protection 
Act of 1970 (15 U.S.C. 78jjj(c)) is amended— 
(1) in paragraph (1), by striking ‘‘$50,000’’ 
and inserting ‘‘$250,000’’; and 
(2) in paragraph (2), by striking ‘‘$50,000’’ 
and inserting ‘‘$250,000’’. 
SEC. 7508. PENALTY FOR MISREPRESENTATION OF SIPC 
MEMBERSHIP OR PROTECTION. 
Section 14 of the Securities Investor Protection Act 
of 1970 (15 U.S.C. 78jjj) is amended by adding at the 
end the following new subsection: 
‘‘(d) MISREPRESENTATION OF SIPC MEMBERSHIP 
OR PROTECTION.— 
‘‘(1) IN
GENERAL.—Any person who falsely 
represents by any means (including, without limita-
tion, through the Internet or any other medium of 
mass communication), with actual knowledge of the 
falsity of the representation and with an intent to 
deceive or cause injury to another, that such person, 
or another person, is a member of SIPC or that any 
person or account is protected or is eligible for pro-
tection under this Act or by SIPC, shall be liable for 
any damages caused thereby and shall be fined not 
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more than $250,000 or imprisoned for not more 
than 5 years. 
‘‘(2) INJUNCTIONS.—Any court having jurisdic-
tion of a civil action arising under this Act may 
grant temporary injunctions and final injunctions on 
such terms as the court deems reasonable to prevent 
or restrain any violation of paragraph (1). Any such 
injunction may be served anywhere in the United 
States on the person enjoined, shall be operative 
throughout the United States, and shall be enforce-
able, by proceedings in contempt or otherwise, by 
any United States court having jurisdiction over that 
person. The clerk of the court granting the injunc-
tion shall, when requested by any other court in 
which enforcement of the injunction is sought, trans-
mit promptly to the other court a certified copy of 
all papers in the case on file in such clerk’s office.’’. 
SEC. 7509. FUTURES HELD IN A PORTFOLIO MARGIN SECU-
RITIES ACCOUNT PROTECTION. 
(a) SIPC ADVANCES.—Section 9(a)(1) of the Securi-
ties Investor Protection Act of 1970 (15 U.S.C. 78fff– 
3(a)(1)) is amended by inserting ‘‘or options on futures 
contracts’’ after ‘‘claim for securities’’. 
(b) DEFINITIONS.—Section 16 of such Act (15 
U.S.C. 78lll) is amended— 
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(1) by amending paragraph (2) to read as fol-
lows: 
‘‘(2) CUSTOMER.— 
‘‘(A) IN GENERAL.—The term ‘customer’ 
of a debtor means any person (including any 
person with whom the debtor deals as principal 
or agent) who has a claim on account of securi-
ties received, acquired, or held by the debtor in 
the ordinary course of its business as a broker 
or dealer from or for the securities accounts of 
such person for safekeeping, with a view to sale, 
to cover consummated sales, pursuant to pur-
chases, as collateral, security, or for purposes of 
effecting transfer. The term ‘customer’ includes 
any person who has a claim against the debtor 
arising out of sales or conversions of such secu-
rities. 
‘‘(B) 
INCLUDED
PERSONS.—The 
term 
‘customer’ includes— 
‘‘(i) any person who has deposited 
cash with the debtor for the purpose of 
purchasing securities; and 
‘‘(ii) any person who has a claim 
against the debtor for, or a claim against 
the debtor arising out of sales or conver-
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sions of, cash, securities, futures contracts, 
or options on futures contracts received, 
acquired, or held in a portfolio margining 
account carried as a securities account 
pursuant to a portfolio margining program 
approved by the Commission. 
‘‘(C) EXCLUDED
PERSONS.—The term 
‘customer’ does not include— 
‘‘(i) any person to the extent that the 
claim of such person arises out of trans-
actions with a foreign subsidiary of a mem-
ber of SIPC; 
‘‘(ii) any person to the extent that 
such person has a claim for cash or securi-
ties which by contract, agreement, or un-
derstanding, or by operation of law, is part 
of the capital of the debtor, or is subordi-
nated to the claims of any or all creditors 
of the debtor, notwithstanding that some 
ground exists for declaring such contract, 
agreement, or understanding void or void-
able in a suit between the claimant and the 
debtor; or 
‘‘(iii) any person to the extent such 
person has a claim relating to any open re-
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purchase or open reverse repurchase agree-
ment. 
For purposes of this paragraph, the term ‘re-
purchase agreement’ means the sale of a secu-
rity at a specified price with a simultaneous 
agreement or obligation to repurchase the secu-
rity at a specified price on a specified future 
date.’’; 
(2) in paragraph (4), by inserting after the first 
sentence the following new sentence: ‘‘In the case of 
portfolio margining accounts of customers that are 
carried as securities accounts pursuant to a portfolio 
margining program approved by the Commission, 
such term shall also include futures contracts and 
options on futures contracts received, acquired, or 
held by or for the account of a debtor from or for 
such accounts, and the proceeds thereof.’’; 
(3) in paragraph (9), by inserting before ‘‘Such 
term’’ in the matter following subparagraph (L) the 
following: ‘‘The term includes revenues earned by a 
broker or dealer in connection with transactions in 
customers’ portfolio margining accounts carried as 
securities accounts pursuant to a portfolio margining 
program approved by the Commission.’’; and 
(4) in paragraph (11)— 
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(A) by amending subparagraph (A) to read 
as follows: 
‘‘(A) calculating the sum which would have 
been owed by the debtor to such customer if the 
debtor had liquidated, by sale or purchase on 
the filing date— 
‘‘(i) all securities positions of such 
customer (other than customer name secu-
rities reclaimed by such customer); and 
‘‘(ii) all positions in futures contracts 
and options on futures contracts held in a 
portfolio margining account carried as a 
securities account pursuant to a portfolio 
margining program approved by the Com-
mission; minus’’; and 
(B) by inserting before ‘‘In determining’’ 
in the matter following subparagraph (C) the 
following: ‘‘A claim for a commodity futures 
contract received, acquired, or held in a port-
folio margining account pursuant to a portfolio 
margining program approved by the Commis-
sion, or a claim for a security futures contract, 
shall be deemed to be a claim for the mark-to- 
market (variation) payments due with respect 
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to such contract as of the filing date, and such 
claim shall be treated as a claim for cash.’’. 
SEC. 7510. STUDY AND REPORT ON THE FEASIBILITY OF 
RISK-BASED ASSESSMENTS FOR SIPC MEM-
BERS. 
(a) STUDY REQUIRED.—The Comptroller General of 
the United States shall conduct a study on whether the 
Securities Investor Protection Corporation (hereafter in 
this section referred to as ‘‘SIPC’’) should be required to 
impose assessments, on its member brokers and dealers, 
based on risk for the purpose of adequately maintaining 
the SIPC Fund and to provide additional levels of cov-
erage on an optional basis. 
(b) CONTENT.—The Comptroller General in con-
ducting this study shall— 
(1) identify and examine available approaches, 
including modeling, to measure broker and dealer 
operational risk; 
(2) analyze whether the available approaches to 
measure broker and dealer operational risk can be 
used in managing the aggregate risk to the SIPC 
Fund; 
(3) explore whether objective measures like the 
volume of assets of the SIPC member, previous en-
forcement and compliance actions taken by regu-
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latory bodies against the SIPC member, or the num-
ber of years the SIPC member has been in oper-
ation, among other factors, can be used to assess the 
probability the fund will incur a loss with respect to 
the SIPC member; 
(4) examine the impact that risk-based assess-
ments could have on large and small brokers and 
dealers; 
(5) examine the impact that risk-based assess-
ments could have on institutional and retail brokers 
and dealers; and 
(6) examine the feasibility of SIPC providing 
additional levels of coverage on an optional basis, 
what those additional levels of coverage should be, 
and the appropriate risked-based premium for pro-
viding additional coverage. 
(c) CONSULTATION.—The Comptroller General in 
planning and conducting this study shall consult with the 
Securities and Exchange Commission, the Federal Deposit 
Insurance Corporation, SIPC, the Financial Industry Reg-
ulatory Authority, and any other public or private sector 
organization that the Comptroller General considers ap-
propriate. 
(d) REPORT REQUIRED.—Not later than 1 year after 
the date of enactment of this subtitle, the Comptroller 
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general shall submit a report of the results of the study 
required by this section to the Committee on Banking, 
Housing, and Urban Affairs of the Senate and the Com-
mittee on Financial Services of the House of Representa-
tives. 
PART 6—SARBANES-OXLEY ACT AMENDMENTS 
SEC. 7601. PUBLIC COMPANY ACCOUNTING OVERSIGHT 
BOARD OVERSIGHT OF AUDITORS OF BRO-
KERS AND DEALERS. 
(a) DEFINITIONS.—(1) Title I of the Sarbanes-Oxley 
Act of 2002 is amended by adding at the end the following 
new section: 
‘‘SEC. 110. DEFINITIONS. 
‘‘For the purposes of this title, and notwithstanding 
section 2: 
‘‘(1) AUDIT.—The term ‘audit’ means an exam-
ination of the financial statements, reports, docu-
ments, procedures or controls, or notices, of any 
issuer, broker, or dealer by an independent public 
accounting firm in accordance with the rules of the 
Board or the Commission (or, for the period pre-
ceding the adoption of applicable rules of the Board 
under section 103, in accordance with then-applica-
ble generally accepted auditing and related stand-
ards for such purposes), for the purpose of express-
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ing an opinion on such financial statements, reports, 
documents, procedures or controls, or notices. 
‘‘(2) AUDIT REPORT.—The term ‘audit report’ 
means a document, report, notice, or other record— 
‘‘(A) prepared following an audit per-
formed for purposes of compliance by an issuer, 
broker, or dealer with the requirements of the 
securities laws; and 
‘‘(B) in which a public accounting firm ei-
ther— 
‘‘(i) sets forth the opinion of that firm 
regarding a financial statement, report, no-
tice, other document, procedures, or con-
trols; or 
‘‘(ii) asserts that no such opinion can 
be expressed. 
‘‘(3) PROFESSIONAL
STANDARDS.—The term 
‘professional standards’ means— 
‘‘(A) accounting principles that are— 
‘‘(i) established by the standard set-
ting body described in section 19(b) of the 
Securities Act of 1933, as amended by this 
Act, or prescribed by the Commission 
under section 19(a) of that Act (15 U.S.C. 
17a(s)) or section 13(b) of the Securities 
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Exchange Act of 1934 (15 U.S.C. 78a(m)); 
and 
‘‘(ii) relevant to audit reports for par-
ticular issuers, brokers, or dealers, or dealt 
with in the quality control system of a par-
ticular registered public accounting firm; 
and 
‘‘(B) auditing standards, standards for at-
testation engagements, quality control policies 
and procedures, ethical and competency stand-
ards, and independence standards (including 
rules implementing title II) that the Board or 
the Commission determines— 
‘‘(i) relate to the preparation or 
issuance of audit reports for issuers, bro-
kers, or dealers; and 
‘‘(ii) are established or adopted by the 
Board under section 103(a), or are pro-
mulgated as rules of the Commission. 
‘‘(4) BROKER.—The term ‘broker’ means a 
broker (as such term is defined in section 3(a)(4) of 
the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(4))) that is required to file a balance sheet, 
income statement, or other financial statement 
under section 17(e)(1)(A) of such Act (15 U.S.C. 
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78q(e)(1)(A)), where such balance sheet, income 
statement, or financial statement is required to be 
certified by a registered public accounting firm. 
‘‘(5) DEALER.—The term ‘dealer’ means a 
dealer (as such term is defined in section 3(a)(5) of 
the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(5))) that is required to file a balance sheet, 
income statement, or other financial statement 
under section 17(e)(1)(A) of such Act (15 U.S.C. 
78q(e)(1)(A)), where such balance sheet, income 
statement, or financial statement is required to be 
certified by a registered public accounting firm. 
‘‘(6) SELF-REGULATORY
ORGANIZATION.—The 
term ‘self-regulatory organization’ has the same 
meaning as in section 3(a)(26) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78c(a)(26)).’’. 
(2) The table of sections in section 1(b) of such Act 
is amended, by inserting after the item relating to section 
109 the following new item: 
‘‘Sec. 110. Definitions.’’. 
(b) ESTABLISHMENT AND ADMINISTRATION OF THE 
PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD.— 
Section 101 of such Act is amended— 
(1) by striking ‘‘issuers’’ each place it appears 
and inserting ‘‘issuers, brokers, and dealers’’; 
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(2) in subsection (a), by striking ‘‘public com-
panies’’ and inserting ‘‘companies’’; and 
(3) in subsection (a), by striking ‘‘for compa-
nies the securities of which are sold to, and held by 
and for, public investors’’. 
(c) REGISTRATION WITH THE BOARD.—Section 102 
of such Act is amended— 
(1) in subsection (a), by striking ‘‘Beginning 
180 days after the date of the determination of the 
Commission under section 101(d), it’’ and inserting 
‘‘It’’; 
(2) in subsections (a) and (b)(2)(G), by striking 
‘‘issuer’’ each place it appears and inserting ‘‘issuer, 
broker, or dealer’’; and 
(3) 
in 
subsection 
(b)(2)(A), 
by 
striking 
‘‘issuers’’ and inserting ‘‘issuers, brokers, and deal-
ers’’. 
(d) AUDITING AND INDEPENDENCE.—Section 103(a) 
of such Act is amended— 
(1) in paragraph (1), by striking ‘‘and such eth-
ics standards’’ and inserting ‘‘such ethics standards, 
and such independence standards’’; 
(2) in paragraph (2)(A)(iii), by striking ‘‘de-
scribe in each audit report’’ and inserting ‘‘in each 
audit report for an issuer, describe’’; and 
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(3) 
in 
paragraph 
(2)(B)(i), 
by 
striking 
‘‘issuers’’ and inserting ‘‘issuers, brokers, and deal-
ers’’. 
(e) INSPECTIONS
BY
REGISTERED
ACCOUNTING 
FIRMS.—Subsection (a) of Section 104 of such Act is 
amended— 
(1) by striking ‘‘(a) IN GENERAL.—The Board 
shall’’ and inserting the following: 
‘‘(a) IN GENERAL.— 
‘‘(1) The Board shall’’; and 
(2) by adding at the end of such subsection the 
following: 
‘‘(2) INSPECTIONS OF AUDIT REPORT FOR BRO-
KERS AND DEALERS.— 
‘‘(A) The Board may, by rule, conduct and 
require a program of inspection in accordance 
with paragraph (a)(1), on a basis to be deter-
mined by the Board, of registered public ac-
counting firms that provide one or more audit 
reports for a broker or dealer. The Board, in 
establishing such a program, may allow for dif-
ferentiation among classes of brokers and deal-
ers, as appropriate. 
‘‘(B) If the Board determines to establish 
a program of inspection pursuant to subpara-
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graph (A), the Board shall consider in estab-
lishing any inspection schedules whether dif-
fering schedules would be appropriate with re-
spect to registered public accounting firms that 
issue audit reports only for one or more brokers 
or dealers that do not receive, handle, or hold 
customer securities or cash or are not a mem-
ber of the Securities Investor Protection Cor-
poration. 
‘‘(C) Any rules of the Board pursuant to 
this paragraph shall be subject to prior ap-
proval by the Commission pursuant to section 
107(b) before the rules become effective, includ-
ing an opportunity for public notice and com-
ment. 
‘‘(D) Notwithstanding anything to the con-
trary in section 102 of this Act, a public ac-
counting firm shall not be required to register 
with the Board if the public accounting firm is 
exempt from the inspection program which may 
be established by the Board under subpara-
graph (a)(2)(A) of this section. 
‘‘(3) CONFORMING
AMENDMENT.—Section 17 
(e)(1)(A) of the Securities Exchange Act of 1934 
(15 U.S.C. 78q(e)(1)(A)) is amended by striking 
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‘registered public accounting firm’ and inserting 
‘independent public accounting firm or by a reg-
istered public accounting firm if registration is re-
quired under the Sarbanes-Oxley Act of 2002 as 
amended.’.’’. 
(f) 
INVESTIGATIONS
AND
DISCIPLINARY
PRO-
CEEDINGS.—Section 105(c)(7)(B) of such Act is amend-
ed— 
(1) in the subparagraph heading, by inserting 
‘‘, BROKER, OR DEALER’’ after ‘‘ISSUER’’; 
(2) by striking ‘‘any issuer’’ each place it ap-
pears and inserting ‘‘any issuer, broker, or dealer’’; 
and 
(3) by striking ‘‘an issuer under this sub-
section’’ and inserting ‘‘a registered public account-
ing firm under this subsection’’. 
(g) FOREIGN PUBLIC ACCOUNTING FIRMS.—Section 
106 of such Act is amended— 
(1) in subsection (a)(1), by striking ‘‘issuer’’ 
and inserting ‘‘issuer, broker, or dealer’’; and 
(2) in subsection (a)(2), by striking ‘‘issuers’’ 
and inserting ‘‘issuers, brokers, or dealers’’. 
(h) FUNDING.—Section 109 of such Act is amend-
ed— 
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(1) in subsection (c)(2), by striking ‘‘subsection 
(i)’’ and inserting ‘‘subsection (j)’’; 
(2) in subsection (d)(2), by striking ‘‘allowing 
for differentiation among classes of issuers, as ap-
propriate’’ and inserting ‘‘and among brokers and 
dealers in accordance with subsection (h), and allow-
ing for differentiation among classes of issuers and 
brokers and dealers, as appropriate’’; 
(3) in subsection (d), by inserting at the end 
the following new paragraph: 
‘‘(3) BROKERS
AND
DEALERS.—The rules of 
the Board under paragraph (1) shall provide that 
the allocation, assessment, and collection by the 
Board (or an agent appointed by the Board) of the 
fee established under paragraph (1) with respect to 
brokers and dealers shall not begin until the first 
day of the first full fiscal year beginning after the 
date of the enactment of this paragraph.’’; 
(4) by redesignating subsections (h), (i), and (j) 
as subsections (i), (j), and (k), respectively; and 
(5) by inserting after subsection (g) the fol-
lowing new subsection: 
‘‘(h) ALLOCATION OF ACCOUNTING SUPPORT FEES 
AMONG BROKERS AND DEALERS.— 
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‘‘(1) IN GENERAL.—Any amount due from bro-
kers and dealers (or a particular class of such bro-
kers and dealers) under this section to fund the 
budget of the Board shall be allocated among and 
payable by such brokers and dealers (or such bro-
kers and dealers in a particular class, as applicable). 
A broker or dealer’s allocation shall be in proportion 
to the broker or dealer’s net capital compared to the 
total net capital of all brokers and dealers, in ac-
cordance with the rules of the Board. 
‘‘(2) OBLIGATION
TO
PAY.—Every broker or 
dealer shall pay the share of a reasonable annual ac-
counting support fee or fees allocated to such broker 
or dealer under this section.’’. 
(i) REFERRAL OF INVESTIGATIONS TO A SELF-REGU-
LATORY ORGANIZATION.—Section 105(b)(4)(B) of the 
Sarbanes-Oxley Act of 2002 is amended— 
(1) by redesignating clauses (ii) and (iii) as 
clauses (iii) and (iv), respectively; and 
(2) by inserting after clause (i) the following 
new clause: 
‘‘(ii) to a self-regulatory organization, 
in the case of an investigation that con-
cerns an audit report for a broker or deal-
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er that is subject to the jurisdiction of 
such self-regulatory organization;’’. 
(j) USE OF DOCUMENTS RELATED TO AN INSPEC-
TION
OR INVESTIGATION.—Section 105(b)(5)(B)(ii) of 
such Act is amended— 
(1) in subclause (III), by striking ‘‘and’’; 
(2) in subclause (IV), by striking the comma 
and inserting ‘‘; and’’; and 
(3) by inserting after subclause (IV) the fol-
lowing new subclause: 
‘‘(V) a self-regulatory organiza-
tion, with respect to an audit report 
for a broker or dealer that is subject 
to the jurisdiction of such self-regu-
latory organization,’’. 
SEC. 7602. FOREIGN REGULATORY INFORMATION SHARING. 
(a) DEFINITION.—Section 2(a) of the Sarbanes- 
Oxley Act of 2002 (15 U.S.C. 7201(a)) is amended by 
inserting after paragraph (16) the following: 
‘‘(17) FOREIGN AUDITOR OVERSIGHT AUTHOR-
ITY.—The term ‘foreign auditor oversight authority’ 
means any governmental body or other entity em-
powered by a foreign government to conduct inspec-
tions of public accounting firms or otherwise to ad-
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minister or enforce laws related to the regulation of 
public accounting firms.’’. 
(b) AVAILABILITY TO SHARE INFORMATION.—Sec-
tion 105(b)(5) of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7215(b)(5)) is amended by adding at the end the 
following: 
‘‘(C) AVAILABILITY
TO
FOREIGN
OVER-
SIGHT
AUTHORITIES.—When in the Board’s 
discretion it is necessary to accomplish the pur-
poses of this Act or to protect investors, and 
without the loss of its status as confidential and 
privileged in the hands of the Board, all infor-
mation referred to in subparagraph (A) that re-
lates to a public accounting firm within the in-
spection authority, or other regulatory or law 
enforcement jurisdiction, of a foreign auditor 
oversight authority may be made available to 
the foreign auditor oversight authority if the 
foreign auditor oversight authority provides 
such assurances of confidentiality as the Board 
determines appropriate.’’. 
(c) 
CONFORMING
AMENDMENT.—Section 
105(b)(5)(A) of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7215(b)(5)(A)) is amended by striking ‘‘subpara-
graph (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’. 
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SEC. 7603. EXPANSION OF AUDIT INFORMATION TO BE PRO-
DUCED AND EXCHANGED WITH FOREIGN 
COUNTERPARTS. 
Section 106 of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7216) is amended— 
(1) by amending subsection (b) to read as fol-
lows: 
‘‘(b) PRODUCTION OF DOCUMENTS.— 
‘‘(1) PRODUCTION BY FOREIGN FIRMS.—If a 
foreign public accounting firm issues an audit re-
port, performs audit work, conducts interim reviews, 
or performs material services upon which a reg-
istered public accounting firm relies in the conduct 
of an audit or interim review, the foreign public ac-
counting firm shall produce its audit work papers 
and all other documents related to any such audit 
work or interim review to the Commission or the 
Board when requested by the Commission or the 
Board and the foreign public accounting firm shall 
be subject to the jurisdiction of the courts of the 
United States for purposes of enforcement of any re-
quest of such documents. 
‘‘(2) OTHER
PRODUCTION.—Any registered 
public accounting firm that relies, in whole or in 
part, on the work of a foreign public accounting firm 
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in issuing an audit report, performing audit work, or 
conducting an interim review, shall— 
‘‘(A) produce the foreign public accounting 
firm’s audit work papers and all other docu-
ments related to any such work in response to 
a request for production by the Commission or 
the Board; and 
‘‘(B) secure the agreement of any foreign 
public accounting firm to such production, as a 
condition of its reliance on the work of that for-
eign public accounting firm.’’; 
(2) by redesignating subsection (d) as sub-
section (g); and 
(3) by inserting after subsection (c) the fol-
lowing new subsections: 
‘‘(d) SERVICE OF REQUESTS OR PROCESS.—Any for-
eign public accounting firm that performs work for a do-
mestically registered public accounting firm shall furnish 
to the domestically firm a written irrevocable consent and 
power of attorney that designates the domestic firm as an 
agent upon whom may be served any process, pleadings, 
or other papers in any action brought to enforce this sec-
tion. Any foreign public accounting firm that issues an 
audit report, performs audit work, performs interim re-
views, or performs other material services upon which a 
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registered public accounting firm relies in the conduct of 
an audit or interim review, shall designate to the Commis-
sion or the Board an agent in the United States upon 
whom may be served any process, pleading, or other pa-
pers in any action brought to enforce this section or any 
request by the Commission or the Board under this sec-
tion. 
‘‘(e) SANCTIONS.—A willful refusal to comply, in 
whole in or in part, with any request by the Commission 
or the Board under this section, shall be a violation of 
this Act. 
‘‘(f) OTHER MEANS OF SATISFYING PRODUCTION 
OBLIGATIONS.—Notwithstanding any other provision of 
this section, the staff of the Commission or Board may 
allow foreign public accounting firms subject to this sec-
tion to meet production obligations under this section 
though alternate means, such as through foreign counter-
parts of the Commission or Board.’’. 
SEC. 7604. CONFORMING AMENDMENT RELATED TO REG-
ISTRATION. 
Section 102(b)(3)(A) of the Sarbanes-Oxley Act of 
2002 (15 U.S.C. 7212(b)(3)(A)) is amended by striking 
‘‘by the Board’’ and inserting ‘‘by the Commission or the 
Board’’. 
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SEC. 7605. FAIR FUND AMENDMENTS. 
Section 308 of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7246(a)) is amended— 
(1) by amending subsection (a) to read as fol-
lows: 
‘‘(a) CIVIL PENALTIES TO BE USED FOR THE RE-
LIEF OF VICTIMS.—If in any judicial or administrative ac-
tion brought by the Commission under the securities laws 
(as such term is defined in section 3(a)(47) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), the 
Commission obtains a civil penalty against any person for 
a violation of such laws or the rules and regulations there-
under, or such person agrees in settlement of any such 
action to such civil penalty, the amount of such civil pen-
alty or settlement 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 ben-
efit of the victims of such violation.’’; 
(2) in subsection (b), by— 
(A) striking ‘‘for a disgorgement fund de-
scribed in subsection (a)’’ and inserting ‘‘for a 
disgorgement fund or other fund described in 
subsection (a)’’; and 
(B) striking ‘‘in the disgorgement fund’’ 
and inserting ‘‘in such fund’’; and 
(3) by striking subsection (e). 
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SEC. 7606. EXEMPTION FOR NONACCELERATED FILERS. 
(a) EXEMPTION.—Section 404 of the Sarbanes-Oxley 
Act of 2002 is amended by adding at the end the fol-
lowing: 
‘‘(c) EXEMPTION
FOR SMALLER ISSUERS.—Sub-
section (b) shall not apply with respect to any audit report 
prepared for an issuer that is not an accelerated filer with-
in the meaning Rule 12b–2 of the Commission (17 CFR 
240.12b–2).’’. 
(b) STUDY.—The Securities and Exchange Commis-
sion shall conduct a study to determine how the Commis-
sion could reduce the burden of complying with section 
404(b) of the Sarbanes-Oxley Act of 2002 for companies 
whose market capitalization is between $75,000,000 and 
$250,000,000 for the relevant reporting period while 
maintaining investor protections for such companies. The 
study shall also consider whether any such methods of re-
ducing the compliance burden or a complete exemption for 
such companies from compliance with such section would 
encourage companies to list on exchanges in the United 
States in their initial public offerings. Not later than 9 
months after the date of the enactment of this subtitle, 
the Commission shall transmit a report of such study to 
Congress. 
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SEC. 7607. WHISTLEBLOWER PROTECTION AGAINST RETAL-
IATION BY A SUBSIDIARY OF AN ISSUER. 
Section 1514A(a) of title 18, United States Code, is 
amended by inserting ‘‘including any subsidiary or affil-
iate whose financial information is included in the consoli-
dated financial statements of such company,’’ after ‘‘(15 
U.S.C. 78o(d)),’’. 
SEC. 7608. CONGRESSIONAL ACCESS TO INFORMATION. 
Section 101 of the Sarbanes-Oxley Act of 2002 is 
amended by adding at the end the following: 
‘‘(i) CONGRESSIONAL ACCESS TO INFORMATION.— 
Nothing in this section shall prevent the Board from re-
sponding to requests for reports from the Committee’s 
specified under subsection (h) about the activities or pro-
grams of the Board, provided that any confidential infor-
mation contained therein shall be subject to the provisions 
of section 105(b)(5).’’. 
SEC. 7609. CREATION OF OMBUDSMAN FOR THE PCAOB. 
(a) OMBUDSMAN.—Title I of the Sarbanes-Oxley Act 
of 2002 (15 U.S.C. 7211 et seq.), as amended by section 
7601(a)(1), is further amended by adding at the end the 
following new section: 
‘‘SEC. 111. OMBUDSMAN. 
‘‘(a) ESTABLISHMENT REQUIRED.—Not later than 
180 days after the date of enactment of the Investor Pro-
tection Act, the Board shall appoint an ombudsman for 
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the Board. The Ombudsman shall report directly to the 
Chairman. 
‘‘(b) DUTIES OF OMBUDSMAN.—The ombudsman ap-
pointed in accordance with subsection (a) for the Board 
shall— 
‘‘(1) act as a liaison between the Board and— 
‘‘(A) any registered public accounting firm 
or issuer with respect to issues or disputes con-
cerning the preparation or issuance of any audit 
report with respect to that issuer; and 
‘‘(B) any affected registered public ac-
counting firm or issuer with respect to— 
‘‘(i) any problem such firm or issuer 
may have in dealing with the Board result-
ing from the regulatory activities of the 
Board, particularly with regard to the im-
plementation of section 404; and 
‘‘(ii) issues caused by the relationships 
of registered public accounting firms and 
issuers generally; 
‘‘(2) assure that safeguards exist to encourage 
complainants to come forward and to preserve con-
fidentiality; and 
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‘‘(3) carry out such activities, and any other ac-
tivities assigned by the Board, in accordance with 
guidelines prescribed by the Board.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions in section 1(b) of such Act is amended, by inserting 
after the item relating to section 110 (as added by section 
601(a)(2)) the following new item: 
‘‘Sec. 111. Ombudsman.’’. 
SEC. 7610. AUDITING OVERSIGHT BOARD. 
The Sarbanes-Oxley Act of 2002 is amended— 
(1) in section 2(a)(5), by striking ‘‘Public Com-
pany Accounting Oversight Board’’ and inserting 
‘‘Auditing Oversight Board’’; 
(2) in section 101(a), by striking ‘‘Public Com-
pany Accounting Oversight Board’’ and inserting 
‘‘Auditing Oversight Board’’; and 
(3) in the heading of title I, by striking ‘‘PUB-
LIC COMPANY ACCOUNTING OVER-
SIGHT BOARD’’ and inserting ‘‘AUDITING 
OVERSIGHT BOARD’’. 
PART 7—SENIOR INVESTMENT PROTECTION 
SEC. 7701. FINDINGS. 
Congress finds that— 
(1) many seniors are targeted by salespersons 
and advisers using misleading certifications and pro-
fessional designations; 
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(2) many certifications and professional des-
ignations used by salespersons and advisers rep-
resent limited training or expertise, and may in fact 
be of no value with respect to advising seniors on fi-
nancial and estate planning matters, and far too 
often, such designations are obtained simply by at-
tending a weekend seminar and passing an open 
book, multiple choice test; 
(3) many seniors have lost their life savings be-
cause salespersons and advisers holding a misleading 
designation have steered them toward products that 
were unsuitable for them, given their retirement 
needs and life expectancies; 
(4) seniors have a right to clearly know whether 
they are working with a qualified adviser who under-
stands the products and is working in their best in-
terest or a self-interested salesperson or adviser ad-
vocating particular products; and 
(5) many existing State laws and enforcement 
measures addressing the use of certifications, profes-
sional designations, and suitability standards in sell-
ing financial products to seniors are inadequate to 
protect senior investors from salespersons and advis-
ers using such designations. 
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SEC. 7702. DEFINITIONS. 
For purposes of this part: 
(1) MISLEADING
DESIGNATION.—The term 
‘‘misleading designation’’— 
(A) means the use of a purported certifi-
cation, professional designation, or other cre-
dential, that indicates or implies that a sales-
person or adviser has special certification or 
training in advising or servicing seniors; and 
(B) does not include any legitimate certifi-
cation, professional designation, license, or 
other credential, if— 
(i) it has been offered by an academic 
institution having regional accreditation; or 
(ii) it meets the standards for certifi-
cations, licenses, and professional designa-
tions outlined by the North American Se-
curities Administrators Association (in this 
part referred to as the ‘‘NASAA’’) Model 
Rule on the Use of Senior-Specific Certifi-
cations and Professional Designations, as 
in effect on the date of the enactment of 
this subtitle, or any successor thereto, or it 
was issued by or obtained from any State. 
(2) FINANCIAL PRODUCT.—The term ‘‘financial 
product’’ means securities, insurance products (in-
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cluding insurance products which pay a return, 
whether fixed or variable), and bank and loan prod-
ucts. 
(3) 
MISLEADING
OR
FRAUDULENT
MAR-
KETING.—The term ‘‘misleading or fraudulent mar-
keting’’ means the use of a misleading designation 
when selling to or advising a senior about the sale 
of a financial product. 
(4) SENIOR.—The term ‘‘senior’’ means any in-
dividual who has attained the age of 62 years or 
more. 
(5) STATE.—The term ‘‘State’’ means each of 
the 50 States, the District of Columbia, and the un-
incorporated territories of Puerto Rico and the U.S. 
Virgin Islands. 
SEC. 7703. GRANTS TO STATES FOR ENHANCED PROTEC-
TION OF SENIORS FROM BEING MISLED BY 
FALSE DESIGNATIONS. 
(a) GRANT PROGRAM.—The Securities and Exchange 
Commission (in this part referred to as the ‘‘Commis-
sion’’)— 
(1) shall establish a program in accordance with 
this part to provide grants to States— 
(A) to investigate and prosecute misleading 
and fraudulent marketing practices; or 
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(B) to develop educational materials and 
training aimed at reducing misleading and 
fraudulent marketing of financial products to-
ward seniors; and 
(2) may establish such performance objectives, 
reporting requirements, and application procedures 
for States and State agencies receiving grants under 
this part as the Commission determines are nec-
essary to carry out and assess the effectiveness of 
the program under this part. 
(b) USE OF GRANT AMOUNTS.—A grant under this 
part may be used (including through subgrants) by the 
State or the appropriate State agency designated by the 
State— 
(1) to fund additional staff to identify, inves-
tigate, and prosecute (through civil, administrative, 
or criminal enforcement actions) cases involving mis-
leading or fraudulent marketing of financial prod-
ucts to seniors; 
(2) to fund technology, equipment, and training 
for regulators, prosecutors, and law enforcement in 
order to identify salespersons and advisers who tar-
get seniors through the use of misleading designa-
tions; 
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(3) to fund technology, equipment, and training 
for prosecutors to increase the successful prosecution 
of those targeting seniors with the use of misleading 
designations; 
(4) to provide educational materials and train-
ing to regulators on the appropriateness of the use 
of designations by salespersons and advisers of fi-
nancial products; 
(5) to provide educational materials and train-
ing to seniors to increase their awareness and under-
standing of designations; and 
(6) to develop comprehensive plans to combat 
misleading or fraudulent marketing of financial 
products to seniors. 
(c) GRANT REQUIREMENTS.— 
(1) MAXIMUM.—The amount of a grant under 
this part may not exceed $1,000,000 per fiscal year 
per State, if all requirements of paragraphs (2), (3), 
(4), and (5) are met. Such amount shall be limited 
to $250,000 per fiscal year per State in any case in 
which the State meets the requirements of— 
(A) paragraphs (2) and (3), but not each 
of paragraphs (4) and (5); or 
(B) paragraphs (4) and (5), but not each 
of paragraphs (2) and (3). 
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(2) STANDARD DESIGNATION RULES FOR SECU-
RITIES.—A State shall have adopted rules on the ap-
propriate use of designations in the offer or sale of 
securities or investment advice, which shall meet or 
exceed the minimum requirements of the NASAA 
Model Rule on the Use of Senior-Specific Certifi-
cations and Professional Designations, as in effect 
on the date of the enactment of this subtitle, or any 
successor thereto. 
(3) SUITABILITY RULES FOR SECURITIES.—A 
State shall have adopted standard rules on the suit-
ability requirements in the sale of securities, which 
shall, to the extent practicable, conform to the min-
imum requirements on suitability imposed by self- 
regulatory organization rules under the securities 
laws (as defined in section 3 of the Securities Ex-
change Act of 1934). 
(4) APPLICATION
OF
FIDUCIARY
DUTY
FOR 
PERSONALIZED INVESTMENT ADVICE ABOUT SECURI-
TIES.—Nothing in this section shall diminish in any 
manner nor supersede the standard of conduct appli-
cable to all brokers, dealers and investment advisers 
providing personalized investment advice about secu-
rities as set forth in section 7103 of this Act. 
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(5) STANDARD DESIGNATION RULES FOR IN-
SURANCE PRODUCTS.—A State shall have adopted 
standard rules on the appropriate use of designa-
tions in the sale of insurance products, which shall 
meet or exceed minimum requirements of the Na-
tional Association of Insurance Commissioners 
Model Regulation on the Use of Senior-Specific Cer-
tifications and Professional Designations in the Sale 
of Life Insurance and Annuities, as in effect on the 
date of the enactment of this subtitle, or any suc-
cessor thereto. 
(6) SUITABILITY AND SUPERVISION RULES FOR 
ANNUITY PRODUCTS.—A State shall have adopted 
rules that govern suitability requirements in the sale 
of annuities which shall meet or exceed the min-
imum requirements established by the National As-
sociation of Insurance Commissioners Suitability in 
Annuity Transactions Model Regulation in effect on 
the date of the enactment of this Act, or any suc-
cessor thereto. 
SEC. 7704. APPLICATIONS. 
To be eligible for a grant under this part, the State 
or appropriate State agency shall submit to the Commis-
sion a proposal to use the grant money to protect seniors 
from misleading or fraudulent marketing techniques in the 
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offer and sale of financial products, which application 
shall— 
(1) identify the scope of the problem; 
(2) describe how the proposed program will help 
to protect seniors from misleading or fraudulent 
marketing in the sale of financial products, includ-
ing, at a minimum— 
(A) by proactively identifying seniors who 
are victims of misleading and fraudulent mar-
keting in the offer and sale of financial prod-
ucts; 
(B) how the proposed program can assist 
in the investigation and prosecution of those 
using misleading or fraudulent marketing in the 
offer and sale of financial products to seniors; 
and 
(C) how the proposed program can help 
discourage and reduce future cases of mis-
leading or fraudulent marketing in the offer 
and sale of financial products to seniors; and 
(3) describe how the proposed program is to be 
integrated with other existing State efforts. 
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SEC. 7705. LENGTH OF PARTICIPATION. 
A State receiving a grant under this part shall be 
provided assistance funds for a period of 3 years, after 
which the State may reapply for additional funding. 
SEC. 7706. AUTHORIZATION OF APPROPRIATIONS. 
There are authorized to be appropriated to carry out 
this part, $16,000,000 for each of the fiscal years 2011 
through 2015. 
PART 8—REGISTRATION OF MUNICIPAL 
FINANCIAL ADVISORS 
SEC. 7801. MUNICIPAL FINANCIAL ADVISER REGISTRATION 
REQUIREMENT. 
(a) IN GENERAL.—The Securities Exchange Act of 
1934 (as amended by section 3204) is amended by insert-
ing after section 15F (15 U.S.C. 78o–7) the following new 
section: 
‘‘SEC. 15G. MUNICIPAL FINANCIAL ADVISER REGISTRATION 
REQUIREMENT. 
‘‘(a)(1)(A) It shall be unlawful for any person to 
make use of the mails or any means or instrumentality 
of interstate commerce to act as a municipal financial ad-
viser unless such person is registered as a municipal finan-
cial adviser in accordance with subsection (b). 
‘‘(B) Subparagraph (A) shall not apply to a natural 
person associated with a municipal financial adviser, as 
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long as such adviser is registered in accordance with sub-
section (b) and is not a natural person. 
‘‘(2) The Commission, by rule or order, as it deems 
consistent with the public interest and the protection of 
investors, may conditionally or unconditionally exempt 
from paragraph (1) of this section any municipal financial 
adviser or class of municipal financial advisers specified 
in such rule or order. 
‘‘(b)(1) A municipal financial adviser may be reg-
istered by filing with the Commission an application for 
registration in such form and containing such information 
and documents concerning such municipal financial ad-
viser and any persons associated with such municipal fi-
nancial adviser as the Commission, by rule, may prescribe 
as necessary or appropriate in the public interest or for 
the protection of investors. Within 45 days of the date of 
the filing of such application (or within such longer period 
as to which the applicant consents), the Commission 
shall— 
‘‘(A) by order grant registration; or 
‘‘(B) institute proceedings to determine whether reg-
istration should be denied. Such proceedings shall include 
notice of the grounds for denial under consideration and 
opportunity for hearing and shall be concluded within 120 
days of the date of the filing of the application for reg-
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istration. At the conclusion of such proceedings, the Com-
mission, by order, shall grant or deny such registration. 
The Commission may extend the time for conclusion of 
such proceedings for up to 90 days if it finds good cause 
for such extension and publishes its reasons for so finding, 
or for such longer period as to which the applicant con-
sents. 
The Commission shall grant such registration if 
the Commission finds that the requirements of 
this section are satisfied. The Commission shall 
deny such registration if it does not make such 
a finding or if it finds that if the applicant were 
so registered, its registration would be subject 
to suspension or revocation under paragraph 
(4). 
‘‘(2) An application for registration of a municipal 
financial adviser to be formed or organized may be made 
by a municipal financial adviser to which the municipal 
financial adviser to be formed or organized is to be the 
successor. Such application, in such form as the Commis-
sion, by rule, may prescribe, shall contain such informa-
tion and documents concerning the applicant, the suc-
cessor, and any persons associated with the applicant or 
the successor, as the Commission, by rule, may prescribe 
as necessary or appropriate in the public interest or for 
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‘‘(C) NOTICE OF DETERMINATION OF IN-
CONSISTENCY.—Upon making any determina-
tion of inconsistency, the Director shall— 
‘‘(i) notify the appropriate State of 
the determination and the extent of the in-
consistency; 
‘‘(ii) establish a reasonable period of 
time, which shall not be shorter than 90 
days, before the determination shall be-
come effective; and 
‘‘(iii) notify the Committee on Finan-
cial Services of the House of Representa-
tives and the Committee on Banking, 
Housing, and Urban Affairs of the Senate 
of the inconsistency. 
‘‘(3) NOTICE OF EFFECTIVENESS.—Upon the 
conclusion of the period referred to in paragraph 
(2)(C)(ii), if the basis for the determination of in-
consistency still exists, the determination shall be-
come effective and the Director shall— 
‘‘(A) cause to be published notice in the 
Federal Register that the preemption has be-
come effective, as well as the effective date; and 
‘‘(B) notify the appropriate State. 
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