A bill to amend the Securities Investor Protection Act to increase the amount of protection available under such Act to customers of brokers and dealers, and to provide for the applicability of the Right to Financial Privacy Act of 1978 to the Securities and Exchange Commission.
PL 96-433 (H.R.7939), enacted 10/10/1980

PUBLIC LAW 96-433—OCT. 10, 1980 
94 STAT. 1855 
Public Law 96-
96th Congress 
433 
An Act 
Oct. 10, 1980 
[H.R. 7939] 
Brokers and 
dealers' 
customers, 
increased 
protection; 
financial 
privacy, 
applicability to 
SEC. 
To amend the Securities Investor Protection Act to increase the amount of protec-
tion available under such Act to customers of brokers and dealers, and to provide 
for the applicability of the Right to Financial Privacy Act of 1978 to the Securi-
ties and Exchange Commission. 
Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, 
AMENDMENTS TO THE SECURITIES INVESTOR PROTECTION ACT 
SECTION 1. Section 9(a) of the Securities Investor Protection Act (15 
U.S.C. 78fff-3(a)) is amended— 
(1) by striking out "$100,000" and inserting in Ueu thereof 
"$500,000"; and 
(2) in paragraph (1), by striking out "$40,000" and inserting in 
lieu thereof'^$100,000". 
A M E N D M E N T TO THE RIGHT TO F I N A N C I A L PRIVACY ACT OF 
1978 
SEC. 2. Section 1122 of the Right to Financial Privacy Act of 1978 (12 
U.S.C. 3422) is amended to read as follows: 
"SECURITIES AND EXCHANGE COMMISSION 
"SEC. 1122. Except as provided in the Securities Exchange Act of 
1934, this Act shall apply with respect to the Securities and Exchange 15 USC 78a. 
Commission.". 
AMENDMENT TO THE SECURITIES EXCHANGE ACT OF 1934 
SEC. 3. Section 21 of the Securities Exchange Act of 1934 (15 U.S.C. 
78u) is amended by adding at the end thereof the following: 
"(h)(1) The Right to Financial Privacy Act of 1978 shall apply with 
respect to the Commission, except as otherwise provided in this 
subsection. 
"(2) Notwithstanding section 1105 or 1107 of the Right to Financial 
Privacy Act of 1978, the Commission may have access to and obtain 
copies of, or the information contained in financial records of a 
customer from a financial institution without prior notice to the 
customer upon an ex parte showing to an appropriate United States 
district court that the Commission seeks such financial records 
pursuant to a subpena issued in conformity with the requirements of 
section 19(b) of the Securities Act of 1933, section 21(b) of the 
Securities Exchange Act of 1934, section 18(c) of the Public Utility 
Holding Company Act of 1935, section 42(b) of the Investment 
Company Act of 1940, or section 209(b) of the Investment Advisers 
Act of 1940, and that the Commission has reason to believe that— 
"(A) delay in obtaining access to such financial records, or the 
required notice, will result in— 
"(i) flight from prosecution; 
12 USC 3401 
note. 
Records, access. 
12 USC 3405, 
3407. 
15 USC 77s. 
15 USC 78u. 
15 USC 79r. 
15 USC 80a-41. 
15 USC 80b-9. 
79-194 
O—81—pt. 2 
37 : QL3 
94 STAT. 1856 
PUBLIC LAW 96-433—OCT. 10, 1980 
Ex parte order 
granting delay. 
Delay, extension. 
12 u s e 3409. 
Subpena. 
Notice. 
Ante, p. 1855. 
Proceedings and 
records. 
Annual 
tabulation; 
report to 
Congress. 
12 u s e 3401 
note. 
"(ii) destruction of or tampering with evidence; 
"(iii) transfer of assets or records outside the territorial 
limits of the United States; 
"(iv) improper conversion of investor assets; or 
"(v) impeding the ability of the Commission to identify or 
trace the source or disposition of funds involved in any 
securities transaction; 
"(B) such financial records are necessary to identify or trace 
the record or beneficial ownership interest in any security; 
"(C) the acts, practices or course of conduct under investigation 
involve— 
"(i) the dissemination of materially false or misleading 
information concerning any security, issuer, or market, or 
the failure to make disclosures required under the securities 
laws, which remain uncorrected; or 
"(ii) a financial loss to investors or other persons protected 
under the securities laws which remains substantially un-
compensated; or 
"(D) the acts, practices or course of conduct under investiga-
tion— 
"(i) involve significant financial speculation in securities; 
or 
"(ii) endanger the stability of any financial or investment 
intermediary. 
"(3) Any application under paragraph (2) for a delay in notice shall 
be made with reasonable specificity. 
"(4)(A) Upon a showing described in paragraph (2), the presiding 
judge or magistrate shall enter an ex parte order granting the 
requested delay for a period not to exceed ninety days and an order 
prohibiting the financial institution involved from disclosing that 
records have been obtained or that a request for records has been 
made. 
"(B) Extensions of the period of delay of notice provided in subpara-
graph (A) of up to ninety days each may be granted by the court upon 
application, but only in accordance with this subsection or section 
1109(a), (b)(1), or (b)(2) of the Right to Financial Privacy Act of 1978. 
"(C) Upon expiration of the period of delay of notification ordered 
under subparagraph (A) or (B), the customer shall be served with or 
mailed a copy of the subpena insofar as it applies to the customer 
together with the following notice which shall describe with reason-
able specificity the nature of the investigation for which the Commis-
sion sought the financial records: 
" 'Records or information concerning your transactions which are 
held by the financial institution named in the attached subpena were 
supplied to the Securities and Exchange Commission on (date). 
Notification was withheld pursuant to a determination by the (title of 
court so ordering) under section 21(h) of the Securities Exchange Act 
of 1934 that (state reason). The purpose of the investigation or official 
proceeding was (state purpose).'. 
"(5) Upon application by the Commission, all proceedings pursuant 
to paragraphs (2) and (4) shall be held in camera and the records 
thereof sealed until expiration of the period of delay or such other 
date as the presiding judge or magistrate may permit. 
"(6) The Commission shall compile an annual tabulation of the 
occasions on which the Commission used each separate subparagraph 
or clause of paragraph (2) of this subsection or the provisions of the 
Right to Financial Privacy Act of 1978 to obtain access to financial 
records of a customer and include it in its annual report to the 
PUBLIC LAW 96-433—OCT. 10, 1980 
94 STAT. 1857 
Congress. Section 1121(b) of the Right to Financial Privacy Act of 
1978 shall not apply with respect to the Commission. 
"(7XA) Following the expiration of the period of delay of notifica-
tion ordered by the court pursuant to paragraph (4) of this subsection, 
the customer may, upon motion, reopen the proceeding in the district 
court which issued the order. If the presiding judge or magistrate 
finds that the movant is the customer to whom the records obtained 
by the Commission pertain, and that the Commission has obtained 
financial records or information contained therein in violation of this 
subsection, other than paragraph (1), it may order that the customer 
be granted civil penalties against the Commission in an amount equal 
to the sum o
f
— 
"(i) $100 without regard to the volume of records involved; 
"(ii) any out-of-pocket damages sustained by the customer as a 
direct result of the disclosure; and 
"(iii) if the violation is found to have been willful, intentional, 
and without good faith, such punitive damages as the court may 
allow, together with the costs of the action and reasonable 
attorney's fees as determined by the court. 
"(B) Upon a finding that the Commission h£is obtained financial 
records or information contained therein in violation of this subsec-
tion, other than paragraph (1), the court, in its discretion, may also or 
in the alternative issue injunctive relief to require the Commission 
to comply with this subsection with respect to any subpena which 
the Commission issues in the future for financial records of such 
customer for purposes of the same investigation. 
"(C) Whenever the court determines that the Commission has 
failed to comply with this subsection, other than paragraph (1), and 
the court finds that the circumstances raise questions of whether an 
officer or employee of the Commission acted in a willful and inten-
tional manner and without good faith with respect to the violation, 
the Office of Personnel Management shall promptly initiate a pro-
ceeding to determine whether disciplinary action is warranted 
against the agent or employee who was primarily responsible for the 
violation. After investigating and considering the evidence sub-
mitted, the Office of Personnel Management shall submit its findings 
and recommendations to the Commission and shall send copies of the 
findings and recommendations to the officer or employee or his 
representative. The Commission shall take the corrective action that 
the Office of Personnel Management recommends. 
"(8) The relief described in paragraphs (7) and (10) shall be the only 
remedies or sanctions available to a customer for a violation of this 
subsection, other than paragraph (1), and nothing herein or in the 
Right to Financial Privacy Act of 1978 shall be deemed to prohibit the 
use in any investigation or proceeding of financial records, or the 
information contained therein, obtained by a subpena issued by the 
Commission. In the C£ise of an unsuccessful action under paragraph 
(7), the court shall award the costs of the action and attorney's fees to 
the Commission if the presiding judge or magistrate finds that the 
customer's claims were made in bad faith. 
"(9XA) The (Dommission may transfer financial records or the 
information contained therein to any government authority if the 
Commission proceeds as a transferring agency in accordance with 
section 1112 of the Right to Financial Privacy Act of 1978, except that 
the customer notice required under section 1112 (b) or (c) of such Act 
may be delayed upon a showing by the Commission, in accordance 
with the procedure set forth in paragraphs (4) and (5), that one or 
more of subparagraphs (A) through (D) of paragraph (2) apply. 
12 u s e 3421. 
Reopening of 
proceeding. 
Civil penalties. 
Injunctive relief. 
0PM 
investigation. 
Findings and 
recommenda-
tions, submittal 
to SEC. 
12 u s e 3401 
note. 
Costs and fees. 
Records, 
transfer. 
12 u s e 3412. 
94 STAT. 1858 
PUBLIC LAW 96-433—OCT. 10, 1980 
Records, transfer. 
12 u s e 3412. 
Disclosure 
restrictions, 
customer 
notification. 
12 u s e 3401 
note. 
Procedures and 
penalties. 
Financial 
institution's 
records. 
Records 
requests, 
challenges. 
Defined terms. 
"(B) The Commission may, without notice to the customer pursuant 
to section 1112 of 
the Right to Financial Privacy Act of 1978, transfer 
financial records or the information contained therein to a State 
securities agency or to the Department of Justice. Financial records 
or information transferred by the Commission to the Department of 
Justice or to a State securities agency pursuant to the provisions of 
this subparagraph may be disclosed or used only in an admioistra-
tive, civil, or crimuaal action or inv^tigation by the Department of 
Justice or the State securities agency which arises out of or relates to 
the acts, practices, or courses of conduct investigated by the Commis-
sion, except that if the Department of Justice or the State securities 
agency determines that the information should be disclosed or used 
for any other purpose, it may do so if it notifies the customer, except 
as otherwise provided in the Right to Financial Privacy Act of 1978, 
within 30 days of its determination, or complies with the require-
ments of 
section 1109 of 
such Act r^arding delay of 
notice. 
"(10) Any government authority violating paragraph (9) shall be 
subject to the procedures and penalties apphcable to the Commission 
under paragraph (7KA) with respect to a violation by the Commission 
in obtaining 
financial 
records. 
"(11) Notwithstanding the provisions of this subsection, the Com-
mission may obtain financial records fi^m a financial institution or 
transfer such records in accordance with provisions of the Right to 
Financial Privacy Act of 1978. 
"(12) Nothing m this subsection shall enlarge or restrict any rights 
of a financial institution to challenge requests for records made bv 
the Commission imder existing law. Nothmg in this subsection shall 
entitle a customer to assert an;^ rights of a financial institution. 
"(13) Unless the context otherwise requires, all terms defined in the 
Right to Financial Privacy Act of 1978 which are common to this 
subsection shall have the same meaning as in such Act.". 
CONFORMING AMENDMENT 
SEC. 4. The second sentence of section 21(g) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u^)) is amended by inserting "and 
in subsection (h)" after "as used herein". 
EFFECTIVE DATES 
1
5 use 78u note. 
SEC. 5. (a) The amendments made by section 1 of 
this Act shall take 
effect on the date of 
enactment of 
this Act. 
(b) The amendments made by sections 2,3, and 4 of this Act shall 
take effect on November 10,19s0. Nothing in this Act or in the Right 
to Financial Privacy Act of 1978 shall apply to any Securities and 
Exchange Commission subpena issued prior to such date. 
Approved October 10, 1980. 
LEGISLATIVE HISTORY: 
HOUSE REPORT No. 96-1321, Pt. I (eomm. on Intersta«fe and Foreign eommerce). 
CONGRESSIONAL RECORD, Vol. 126 (1980): 
Sept. 22, 23, considered and passed House. 
Sept. 25, considered and passed Senate.