[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 1357 Introduced in Senate (IS)]
<DOC>
118th CONGRESS
1st Session
S. 1357
To address advertising by digital asset intermediaries, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 27, 2023
Ms. Sinema (for herself and Ms. Lummis) introduced the following bill;
which was read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
_______________________________________________________________________
A BILL
To address advertising by digital asset intermediaries, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Responsible Digital Asset
Advertising Act of 2023''.
SEC. 2. DEFINITIONS.
In this Act:
(1) Commissions.--The term ``Commissions'' means the
Securities and Exchange Commission and the Commodity Futures
Trading Commission, acting jointly.
(2) Covered advertisement.--The term ``covered
advertisement''--
(A) means a communication that--
(i) relates to--
(I) the desirability of purchasing
or entering into a transaction for a
digital asset; or
(II) the availability of digital
asset-related services; and
(ii) is widely available to the general
public, as specified by rule of the
Commissions; and
(B) includes any script, slide, handout, or other
written (including electronic) material used in
connection with a public appearance with respect to a
digital asset or the availability of digital asset-
related services.
(3) Digital asset.--The term ``digital asset'' means a
natively electronic asset that--
(A) confers economic, proprietary, or access rights
or authorities; and
(B) is recorded using cryptographically-secured
distributed ledger technology, or any similar analogue.
(4) Digital asset intermediary.--The term ``digital asset
intermediary'' means a person that--
(A) holds a license, registration, or other similar
authorization pursuant to the Commodity Exchange Act (7
U.S.C. 1 et seq.), the Securities Act of 1933 (15
U.S.C. 77a et seq.), the Corporation of Foreign
Bondholders Act, 1933 (15 U.S.C. 77bb et seq.), the
Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.),
the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.), the Securities Investor Protection Act of 1970
(15 U.S.C. 78aaa et seq.), the Investment Company Act
of 1940 (15 U.S.C. 80a-1 et seq.), the Investment
Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.), or the
Omnibus Small Business Capital Formation Act of 1980
(title V of Public Law 96-2); and
(B) engages in market activities relating to
digital assets.
SEC. 3. ADVERTISING BY DIGITAL ASSET INTERMEDIARIES.
(a) Approval by Officer.--Before a digital asset intermediary may
make a covered advertisement available to the public, an officer of the
digital asset intermediary shall be required to approve that covered
advertisement and certify compliance with the requirements of this
section.
(b) Procedures.--
(1) In general.--Each digital asset intermediary shall
establish written procedures, which are appropriate and
reasonable to the business, size, structure, and customers of
the digital asset intermediary, for the review of covered
advertisements, as required under subsection (a), which shall
include--
(A) provisions for the education and training of
applicable employees of the digital asset intermediary
regarding the procedures of the digital asset
intermediary governing covered advertisements;
(B) documentation of the education and training
required under subparagraph (A); and
(C) surveillance and follow-up measures to ensure
that the digital asset intermediary implements and
adheres to those procedures.
(2) Recordkeeping.--
(A) Period of maintenance.--Each digital asset
intermediary shall maintain the records required under
this subsection for not less than 5 years.
(B) Types of records.--The types of records that a
digital asset intermediary is required to maintain
under subparagraph (A) include, with respect to each
covered advertisement made by the digital asset
intermediary--
(i) a copy of the covered advertisement;
(ii) the dates of the first and, if
applicable, last use of the covered
advertisement;
(iii) the name of the officer of the
digital asset intermediary who approved the
covered advertisement, as required under
subsection (a), including the date on which the
officer gave that approval;
(iv) information concerning the source of
all data, statistical tables, charts, graphs,
or other illustrations or outside sources used
in the covered advertisement; and
(v) for a covered advertisement that
includes or incorporates a performance ranking
or comparison with another digital asset
intermediary, a copy of the ranking or
performance used.
(c) Requirements for Covered Advertisements.--Each covered
advertisement shall adhere to the following standards:
(1) The covered advertisement shall--
(A) be based on principles of fair dealing and good
faith; and
(B) provide a sound basis for evaluating the facts
with respect to any particular digital asset or type of
digital asset, industry, or service that is the subject
of the covered advertisement.
(2) The covered advertisement may not omit any material
fact or qualification if that omission, in light of the context
of the material presented, would cause the covered
advertisement to be misleading.
(3) The covered advertisement may not make any false,
exaggerated, unwarranted, promissory, or misleading statement
or claim.
(4) Information may be placed in a legend or footnote
within the covered advertisement only if that placement would
not inhibit understanding of the covered advertisement.
(5) The covered advertisement shall be consistent with
risks that are present with respect to the subject matter of
the covered advertisement, including volatility with respect to
the value of digital assets, the amount of potential returns,
and operational risks for digital asset intermediaries.
(6) The covered advertisement shall--
(A) consider the nature of the audience to which
the covered advertisement will be directed; and
(B) provide details and explanations that are
appropriate for the audience described in subparagraph
(A).
(7)(A) The covered advertisement may not predict or project
performance, imply that past performance will recur, or make
any exaggerated or unwarranted claim, opinion, or forecast.
(B) Nothing in subparagraph (A) may be construed to
prohibit the use of--
(i) a hypothetical illustration of mathematical
principles, if that illustration does not predict or
project the performance of a particular strategy;
(ii) an analysis tool, or a written report produced
by an analysis tool; or
(iii) a price target contained in a research
report, if the target has a reasonable basis, the
report discloses the valuation methods used to
determine the price target, and the price target is
accompanied by a disclosure concerning the risks that
may impede achievement of the price target.
(8) Any comparison in the covered advertisement between
digital assets, digital asset intermediaries, or digital asset-
related services shall disclose key material differences
between the applicable items, including, as applicable,
differences with respect to return objectives, costs and
expenses, liquidity, safety, guarantees or insurance,
volatility, and tax features.
(9) The covered advertisement shall prominently disclose
the following:
(A) The fact that the covered advertisement is
governed by this section and is subject to Federal law.
(B) The name of the applicable digital asset
intermediary.
(C) The name of the officer who made the
certification with respect to the covered
advertisement, as required under subsection (a).
(D) Any relationship between the applicable digital
asset intermediary and any person that appears in the
covered advertisement or any compensation offered by
that digital asset intermediary to such a person.
(E) Registrations, licenses, or other
authorizations in good standing that are held by the
applicable digital asset intermediary.
(10)(A) In the covered advertisement, any reference to tax-
free or tax-exempt income shall indicate which taxes apply, or
which do not, unless income is free from all applicable taxes.
(B) For the purposes of subparagraph (A), the covered
advertisement may not characterize income or returns as tax-
free or exempt from income tax if tax liability is merely
postponed or deferred, such as when taxes are payable upon
redemption.
(C) The Commissions may, by rule, adopt further standards
regarding tax considerations that appear in covered
advertisements.
(11) The covered advertisement shall disclose the amounts
of the following fees with respect to the digital asset or
digital asset-related services that are the subject of the
covered advertisement, which shall be set forth prominently
and, in any print advertisement, in a prominent text box that
contains only such information:
(A) Custody fees.
(B) Account fees.
(C) Applicable bank fees.
(12) If any testimonial in the covered advertisement
concerns a technical aspect of purchasing or otherwise entering
into a transaction for digital assets--
(A) the person making the testimonial shall have
the knowledge and experience to form a valid opinion
regarding the issue; and
(B) the testimonial, if the testimonial concerns
the advisability of purchasing digital assets or the
performance of a digital asset, shall prominently
disclose--
(i) the fact that the testimonial may not
be representative of the experience of other
customers;
(ii) the fact that the testimonial is no
guarantee of future performance or success; and
(iii) if more than $1,000 in value is paid
for the testimonial--
(I) the fact that the testimonial
is a paid testimonial; and
(II) the amount and type of
compensation paid, which shall include,
if compensation was paid in digital
assets, an identification of each
specific digital asset.
(13) If the covered advertisement includes a recommendation
to purchase, or otherwise transact in, a digital asset, the
covered advertisement shall--
(A) have a reasonable basis for the recommendation;
and
(B) if applicable, disclose--
(i) that, at the time the covered
advertisement was published or distributed, the
applicable digital asset intermediary was
conducting trading activities in the digital
asset;
(ii) that the applicable digital asset
intermediary--
(I) is directly and materially
involved in the preparation of the
content of the covered advertisement;
and
(II) has a financial interest the
digital assets being recommended; and
(iii) the nature of any financial interest
disclosed under clause (ii), including whether
that financial interest consists of any option,
right, warrant, future, or long or short
position, unless the extent of that financial
interest is nominal.
(14)(A) Except as otherwise provided by subparagraph (B),
the covered advertisement may not refer, directly or
indirectly, to past specific recommendations made by the
applicable digital asset intermediary that were or would have
been profitable to any person.
(B) The covered advertisement may set out or offer to
furnish a list of all recommendations as to the same type of
digital assets made by the applicable digital asset
intermediary during the 1-year period preceding the date on
which the covered advertisement is released, if the
communication or list--
(i) states the name of each digital asset
recommended, the date and nature of each such
recommendation (such as whether to buy, sell, or hold
the digital asset), the market price (as of the date of
the recommendation), the price at which a person was
meant to act upon the recommendation, and the market
price of each such digital asset, as of the most recent
practicable date; and
(ii) contains the following warning, which shall
appear prominently within the communication or list:
``it should not be assumed that recommendations made in
the future will be profitable or will equal the
performance of the digital assets in this list.''.
(d) Sources Supporting a Recommendation.--
(1) In general.--A digital asset intermediary shall
provide, or offer to provide upon request, available
information or sources supporting any recommendation described
in subsection (c)(13).
(2) Price disclosure.--When a digital asset intermediary
recommends a digital asset in a covered advertisement, as
described in subsection (c)(13), the digital asset intermediary
shall provide the price of the digital asset, as of the date on
which the recommendation is made.
(e) Information Provided in Public Appearances.--
(1) In general.--When an officer or employee of a digital
asset intermediary is sponsoring or participating in a seminar,
forum, or radio or television interview, or when such an
individual is otherwise engaged in a public appearance or
speaking activity, paragraphs (1), (2), and (3) of subsection
(c) shall apply to that appearance to the same extent as those
provisions apply to a covered advertisement.
(2) Recommendations.--If an officer or employee of a
digital asset intermediary recommends a digital asset in a
public appearance, that individual shall--
(A) have a reasonable basis for the recommendation;
and
(B) disclose, as applicable--
(i) whether the individual has a financial
interest in the digital asset recommended;
(ii) the nature of the financial interest
disclosed under clause (i), including whether
that financial interest consists of any option,
right, warrant, future, or long or short
position, unless the extent of that financial
interest is nominal; and
(iii) any other actual, material conflict
of interest of which the individual knows or
has reason to know at the time of the public
appearance.
(f) Procedures for Public Appearances.--Each digital asset
intermediary shall establish written procedures that are appropriate
and reasonable to the business, size, structure, and customers of the
digital asset intermediary in order to supervise the public appearances
of the officers and employees of the digital asset intermediary, which
shall include--
(1) provisions for the education and training of employees
of the digital asset intermediary regarding those procedures;
(2) documentation of the education and training required
under paragraph (1); and
(3) surveillance and follow-up measures to ensure that the
digital asset intermediary implements and adheres to those
procedures.
(g) Enforcement by Commissions.--
(1) In general.--The Securities and Exchange Commission,
the Commodity Futures Trading Commission, or any applicable
self-regulatory organization operating under delegated
authority by the appropriate commission, as applicable to a
digital asset intermediary, shall regularly ascertain the
compliance with this section by the digital asset intermediary
(and applicable individuals) at the time of each regular
examination of the intermediary by the applicable entity.
(2) Investigations.--The appropriate commission or self-
regulatory organization, as applicable, may conduct an
investigation into a suspected violation of this section and
take enforcement action outside of a regular examination of a
digital asset intermediary, which shall be comprised of the
following:
(A) With respect to such a violation by that
digital asset intermediary, the following:
(i) For an initial violation of this
section, the imposition of a civil monetary
penalty in an amount that is not more than
$100,000.
(ii) For any subsequent violation of this
section, the imposition of a civil monetary
penalty in an amount that is not more than
$1,000,000.
(iii) The enjoinment of future violations
of this section by the digital asset
intermediary and the requirement that the
digital asset intermediary submit to the
enforcing entity appropriate remediation plans.
(B) For repeated, knowing violations of this
section by an individual, the imposition of a temporary
or permanent bar from the digital asset industry with
respect to that individual.
(h) Applicability to Disclosures.--A document filed with the
Securities and Exchange Commission, as otherwise required by law or
regulation, is not subject to the requirements of this section.
(i) Rules.--The Commissions, after not less than a 120-day comment
period, shall adopt rules to implement this section.
(j) Authorization of Appropriations.--For the purposes of
appointing employees to enforce the requirements of this section, and
for other costs relating to the enforcement of this section, there is
authorized to be appropriated, for fiscal year 2023, to remain
available until September 30, 2024--
(1) $25,000,000 to the Securities and Exchange Commission;
and
(2) $25,000,000 to the Commodity Futures Trading
Commission.
SEC. 4. OFFSETTING THE COSTS OF DIGITAL ASSET ADVERTISING SUPERVISION.
(a) Recovery of Certain Costs of Annual Appropriations.--
(1) In general.--Beginning October 1, 2024, the Securities
and Exchange Commission and the Commodity Futures Trading
Commission may, jointly, by rule, collect fees--
(A) to fund expenses relating to the supervision of
advertising by digital asset intermediaries; and
(B) that are designed to recover the costs to the
Federal Government of the annual appropriation to each
commission by Congress for the cost of the supervision
of advertising by digital asset intermediaries.
(2) Registered entities.--A fee shall be imposed under
paragraph (1) only--
(A) on an entity that--
(i) is licensed, registered, or similarly
authorized pursuant to a provision of law
described in section 2(4)(A); and
(ii) is engaged in activities relating to
digital assets, including a digital asset
intermediary that is registered with either
commission as otherwise may be provided by
Federal law; and
(B) in relation to the regulation of those
activities under a provision of law described in
section 2(4)(A).
(3) Fee rates.--A fee imposed under paragraph (1) shall--
(A) be strictly related to the cost to the
Commissions relating to the supervision of advertising
by digital asset intermediaries;
(B) minimize negative impacts on market liquidity;
and
(C) maintain the efficiency, competitiveness, and
financial integrity of digital asset markets.
(4) Collection of fees.--The Commissions shall collect fees
under this subsection in such manner and within such time as
may be specified by the Commissions, by rule.
(b) Fee Rate Orders.--
(1) In general.--Each fiscal year, the Commissions shall
jointly adopt an order setting rates for fees that are
collected under subsection (a) during that fiscal year.
(2) Publication.--The Commissions shall publish in the
Federal Register each order adopted under paragraph (1), which
shall include--
(A) projections on which the fees are based; and
(B) an explanation of the method used for
calculating applicable fee rates.
(c) Deposit of Fees.--
(1) Offsetting collections.--Fees collected under
subsection (a) for any fiscal year shall--
(A) be split evenly between the Commissions;
(B) be deposited and credited as offsetting
collections to the accounts providing appropriations to
each respective commission; and
(C) not be collected or available for obligation
for any fiscal year except to the extent provided in
advance in appropriation Acts.
(2) General revenues prohibited.--No fee collected under
subsection (a) may be deposited and credited as general revenue
of the Treasury.
(d) Lapse of Appropriations.--If a regular appropriation to a
commission has not been enacted on the first day of a fiscal year, the
commission shall continue to collect fees under this section at the
rates in effect on September 30 of the preceding fiscal year until the
regular appropriation for the fiscal year has been enacted and the
commission has published fees based on the appropriation under
subsection (b)(2).
(e) Limitations.--
(1) Leveraged, margined, or financed transactions.--Nothing
in this section may be construed to authorize the imposition of
fees on a registered entity relating to leveraged, margined, or
financed transactions under this Act, including those
activities relating to digital assets.
(2) Other appropriations.--Notwithstanding any other
provision of law, a commission may use appropriations otherwise
made available by law to fund expenses relating to the
supervision of digital asset advertising under section 2.
(f) Ceiling on Fees.--Unless otherwise provided by law, the total
amount of fees collected under this section shall not exceed
$50,000,000.
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