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111th Congress                                            Rept. 111-687
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================



 
                    INVESTOR PROTECTION ACT OF 2009

                                _______
                                

               December 16, 2010.--Ordered to be printed

                                _______
                                

 Mr. Frank of Massachusetts, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3817]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Financial Services, to whom was referred the 
bill (H.R. 3817) to provide the Securities and Exchange 
Commission with additional authorities to protect investors 
from violations of the securities laws, and for other purposes, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.





                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................    46
Background and Need for Legislation..............................    47
Hearings.........................................................    55
Committee Consideration..........................................    57
Committee Votes..................................................    57
Committee Oversight Findings.....................................    66
Performance Goals and Objectives.................................    67
New Budget Authority, Entitlement Authority, and Tax Expenditures    67
Committee Cost Estimate..........................................    67
Congressional Budget Office Estimate.............................    67
Federal Mandates Statement.......................................    72
Advisory Committee Statement.....................................    72
Constitutional Authority Statement...............................    72
Applicability to Legislative Branch..............................    72
Earmark Identification...........................................    72
Section-by-Section Analysis of the Legislation...................    73
Changes in Existing Law Made by the Bill, as Reported............    92
Dissenting Views.................................................   183

99-006



                               Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Investor Protection Act of 2009''.

SEC. 2. TABLE OF CONTENTS.

  The table of contents for this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.

                          TITLE I--DISCLOSURE

Sec. 101. Investor Advisory Committee established.
Sec. 102. Clarification of the commission's authority to engage in 
consumer testing.
Sec. 103. Establishment of a fiduciary duty for brokers, dealers, and 
investment advisers, and harmonization of regulation.
Sec. 104. Commission study on disclosure to retail customers before 
purchase of products or services.
Sec. 105. Beneficial ownership and short-swing profit reporting.
Sec. 106. Revision to recordkeeping rules.
Sec. 107. Study on enhancing investment advisor examinations.
Sec. 108. GAO study of financial planning.

                   TITLE II--ENFORCEMENT AND REMEDIES

Sec. 201. Authority to restrict mandatory pre-dispute arbitration.
Sec. 202. Comptroller General study to review securities arbitration 
system.
Sec. 203. Whistleblower protection.
Sec. 204. Conforming amendments for whistleblower protection.
Sec. 205. Implementation and transition provisions for whistleblower 
protections.
Sec. 206. Collateral bars.
Sec. 207. Aiding and abetting authority under the Securities Act and 
the Investment Company Act.
Sec. 208. Authority to impose penalties for aiding and abetting 
violations of the Investment Advisers Act.
Sec. 209. Deadline for completing examinations, inspections and 
enforcement actions.
Sec. 210. Nationwide service of subpoenas.
Sec. 211. Authority to impose civil penalties in cease and desist 
proceedings.
Sec. 212. Formerly associated persons.
Sec. 213. Sharing privileged information with other authorities.
Sec. 214. Expanded access to grand jury material.
Sec. 215. Aiding and abetting standard of knowledge satisfied by 
recklessness.
Sec. 216. Extraterritorial jurisdiction of the antifraud provisions of 
the Federal securities laws.
Sec. 217. Fidelity bonding.
Sec. 218. Enhanced SEC authority to conduct surveillance and risk 
assessment.
Sec. 219. Investment company examinations.
Sec. 220. Control person liability under the Securities Exchange Act.
Sec. 221. Enhanced application of anti-fraud provisions.
Sec. 222. SEC Authority to Issue Rules on Proxy Access.

             TITLE III--COMMISSION FUNDING AND ORGANIZATION

Sec. 301. Authorization of appropriations.
Sec. 302. Investment adviser regulation funding.
Sec. 303. Amendments to section 31 of the Securities Exchange Act of 
1934.
Sec. 304. Commission organizational study and reform.
Sec. 305. Capital Markets Safety Board.
Sec. 306. Report on implementation of ``post-Madoff reforms''.
Sec. 307. Joint Advisory Committee.

                TITLE IV--ADDITIONAL COMMISSION REFORMS

Sec. 401. Regulation of securities lending.
Sec. 402. Lost and stolen securities.
Sec. 403. Fingerprinting.
Sec. 404. Equal treatment of self-regulatory organization rules.
Sec. 405. Clarification that section 205 of the Investment Advisers Act 
of 1940 does not apply to State-registered advisers.
Sec. 406. Conforming amendments for the repeal of the Public Utility 
Holding Company Act of 1935.
Sec. 407. Promoting transparency in financial reporting.
Sec. 408. Unlawful margin lending.
Sec. 409. Protecting confidentiality of materials submitted to the 
Commission.
Sec. 410. Technical corrections.
Sec. 411. Municipal securities.
Sec. 412. Interested person definition.
Sec. 413. Rulemaking authority to protect redeeming investors.
Sec. 414. Study on SEC revolving door.
Sec. 415. Study on internal control evaluation and reporting cost 
burdens on smaller issuers.
Sec. 416. Analysis of rule regarding smaller reporting companies.
Sec. 417. Financial Reporting Forum.
Sec. 418. Investment advisers subject to State authorities.
Sec. 419. Custodial requirements.
Sec. 420. Ombudsman.

         TITLE V--SECURITIES INVESTOR PROTECTION ACT AMENDMENTS

Sec. 501. Increasing the minimum assessment paid by SIPC members.
Sec. 502. Increasing the borrowing limit on treasury loans.
Sec. 503. Increasing the cash limit of protection.
Sec. 504. SIPC as trustee in SIPA liquidation proceedings.
Sec. 505. Insiders ineligible for SIPC advances.
Sec. 506. Eligibility for direct payment procedure.
Sec. 507. Increasing the fine for prohibited acts under SIPA.
Sec. 508. Penalty for misrepresentation of SIPC membership or 
protection.
Sec. 509. Futures held in a portfolio margin securities account 
protection.
Sec. 510. Study and report on the feasibility of risk-based assessments 
SIPC members.
Sec. 511. Budgetary treatment of Commission loans to SIPC.

                TITLE VI--SARBANES-OXLEY ACT AMENDMENTS

Sec. 601. Public Company Accounting Oversight Board oversight of 
auditors of brokers and dealers.
Sec. 602. Foreign regulatory information sharing.
Sec. 603. Expansion of audit information to be produced and exchanged 
with foreign counterparts.
Sec. 604. Conforming amendment related to registration.
Sec. 605. Fair fund amendments.
Sec. 606. Exemption for nonaccelerated filers.
Sec. 607. Whistleblower protection against retaliation by a subsidiary 
of an issuer.
Sec. 608. Congressional access to information.
Sec. 609. Creation of ombudsman for the PCAOB.
Sec. 610. Auditing Oversight Board.

                TITLE VII--SENIOR INVESTMENT PROTECTION

Sec. 701. Findings.
Sec. 702. Definitions.
Sec. 703. Grants to States for enhanced protection of seniors from 
being mislead by false designations.
Sec. 704. Applications.
Sec. 705. Length of participation.
Sec. 706. Authorization of appropriations.

        TITLE VIII--REGISTRATION OF MUNICIPAL FINANCIAL ADVISORS

Sec. 801. Municipal financial adviser registration requirement.
Sec. 802. Conforming amendments.
Sec. 803. Effective dates.

                          TITLE I--DISCLOSURE

SEC. 101. INVESTOR ADVISORY COMMITTEE ESTABLISHED.

  The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 
amended by adding after section 4C the following new section:

``SEC. 4D. INVESTOR ADVISORY COMMITTEE.

  ``(a) Establishment and Purpose.--There is established an Investor 
Advisory Committee (in this section referred to as the `Committee') to 
advise and consult with the Commission on--
          ``(1) regulatory priorities and issues regarding new 
        products, trading strategies, fee structures and the 
        effectiveness of disclosures;
          ``(2) initiatives to protect investor interest; and
          ``(3) initiatives to promote investor confidence in the 
        integrity of the marketplace.
  ``(b) Membership.--
          ``(1) Appointment.--The Chairman of the Commission shall 
        appoint the members of the Committee, which members shall--
                  ``(A) represent the interests of individual 
                investors;
                  ``(B) represent the interests of institutional 
                investors; and
                  ``(C) use a wide range of investment approaches.
          ``(2) Members not commission employees.--Members shall not be 
        considered employees or agents of the Commission solely because 
        of membership on the Committee.
  ``(c) Meetings.--The Committee shall meet from time to time at the 
call of the Commission, but, at a minimum, shall meet at least twice 
each year.
  ``(d) Compensation and Travel Expenses.--Members of the Committee who 
are not full-time employees of the United States shall--
          ``(1) be entitled to receive compensation at a rate fixed by 
        the Commission while attending meetings of the Committee, 
        including travel time; and
          ``(2) be allowed travel expenses, including transportation 
        and subsistence, while away from their homes or regular places 
        of business.
  ``(e) Committee Findings.--Nothing in this section requires the 
Commission to accept, agree, or act upon the findings or 
recommendations of the Committee.
  ``(f) Authorization of Appropriations.--There is authorized to be 
appropriated to the Commission such sums as are necessary for the 
activities of the Committee.''.

SEC. 102. CLARIFICATION OF THE COMMISSION'S AUTHORITY TO ENGAGE IN 
                    CONSUMER TESTING.

  (a) Amendment to Securities Act of 1933.--Section 19 of the 
Securities Act of 1933 (15 U.S.C. 77s) is amended by adding at the end 
the following new subsection:
  ``(e) For the purposes of evaluating its rules and programs and for 
considering, proposing, adopting, or engaging in rules or programs, the 
Commission is authorized to gather information, communicate with 
investors or other members of the public, and engage in such temporary 
or experimental programs as the Commission in its discretion determines 
is in the public interest or for the protection of investors. The 
Commission may delegate to its staff some or all of the authority 
conferred by this subsection.''.
  (b) Amendment to Securities Exchange Act of 1934.--Section 23 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78w) is amended by 
redesignating subsections (b), (c), and (d) as subsections (c), (d), 
and (e), respectively, and inserting after subsection (a) the 
following:
  ``(b) For the purposes of evaluating its rules and programs and for 
considering proposing, adopting, or engaging in rules or programs, the 
Commission is authorized to gather information, communicate with 
investors or other members of the public, and engage in such temporary 
or experimental programs as the Commission in its discretion determines 
is in the public interest or for the protection of investors. The 
Commission may delegate to its staff some or all of the authority 
conferred by this subsection.''.
  (c) Amendment to Investment Company Act of 1940.--Section 38 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-38) is amended by adding 
at the end the following new subsection:
  ``(d) Gathering Information.--For the purposes of evaluating its 
rules and programs and for considering proposing, adopting, or engaging 
in rules or programs, the Commission is authorized to gather 
information, communicate with investors or other members of the public, 
and engage in such temporary or experimental programs as the Commission 
in its discretion determines is in the public interest or for the 
protection of investors. The Commission may delegate to its staff some 
or all of the authority conferred by this subsection.''.
  (d) Amendment to the Investment Advisers Act of 1940.--Section 211 of 
the Investment Advisers Act of 1940 (15 U.S.C. 80b-11) is amended by 
adding at the end the following new subsections:
  ``(e) For the purposes of evaluating its rules and programs and for 
considering proposing, adopting, or engaging in rules or programs, the 
Commission is authorized to gather information, communicate with 
investors or other members of the public, and engage in such temporary 
or experimental programs as the Commission in its discretion determines 
is in the public interest or for the protection of investors. The 
Commission may delegate to its staff some or all of the authority 
conferred by this subsection.''.

SEC. 103. ESTABLISHMENT OF A FIDUCIARY DUTY FOR BROKERS, DEALERS, AND 
                    INVESTMENT ADVISERS, AND HARMONIZATION OF 
                    REGULATION.

  (a) In General.--
          (1) Securities exchange act of 1934.--Section 15 of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended--
                  (A) by redesignating the second subsection (i) as 
                subsection (j); and
                  (B) by adding at the end the following new 
                subsections:
  ``(k) Standard of Conduct.--
          ``(1) In general.--Notwithstanding any other provision of 
        this Act or the Investment Advisers Act of 1940, the Commission 
        shall promulgate rules to provide that, with respect to a 
        broker or dealer, when providing personalized investment advice 
        about securities to a retail customer (and such other customers 
        as the Commission may by rule provide), the standard of conduct 
        for such broker or dealer with respect to such customer shall 
        be the same as the standard of conduct applicable to an 
        investment adviser under the Investment Advisers Act of 1940. 
        The receipt of compensation based on commission or other 
        standard compensation for the sale of securities shall not, in 
        and of itself, be considered a violation of such standard 
        applied to a broker or dealer.
          ``(2) Disclosure of range of products offered.--Where a 
        broker or dealer sells only proprietary or other limited range 
        of products, as determined by the Commission, the Commission 
        shall by rule require that such broker or dealer provide notice 
        to each retail customer and obtain the consent or 
        acknowledgment of the customer. The sale of only proprietary or 
        other limited range of products by a broker or dealer shall 
        not, in and of itself, be considered a violation of the 
        standard set forth in paragraph (1).
          ``(3) Retail customer defined.--For purposes of this 
        subsection, the term `retail customer' means a natural person, 
        or the legal representative of such natural person, who--
                  ``(A) receives personalized investment advice about 
                securities from a broker or dealer; and
                  ``(B) uses such advice primarily for personal, 
                family, or household purposes.
  ``(l) Other Matters.--The Commission shall--
          ``(1) facilitate the provision of simple and clear 
        disclosures to investors regarding the terms of their 
        relationships with brokers, dealers, and investment advisers, 
        including any material conflicts of interest; and
          ``(2) examine and, where appropriate, promulgate rules 
        prohibiting or restricting certain sales practices, conflicts 
        of interest, and compensation schemes for brokers, dealers, and 
        investment advisers that the Commission deems contrary to the 
        public interest and the protection of investors.''.
          (2) Investment advisers act of 1940.--Section 211 of the 
        Investment Advisers Act of 1940, as amended by section 102(d), 
        is further amended by adding at the end the following new 
        subsections:
  ``(f) Standard of Conduct.--
          ``(1) In general.--The Commission shall promulgate rules to 
        provide that the standard of conduct for all brokers, dealers, 
        and investment advisers, when providing personalized investment 
        advice about securities to retail customers (and such other 
        customers as the Commission may by rule provide), shall be to 
        act in the best interest of the customer without regard to the 
        financial or other interest of the broker, dealer, or 
        investment adviser providing the advice. In accordance with 
        such rules, any material conflicts of interest shall be 
        disclosed and may be consented to by the customer. Such rules 
        shall provide that such standard of conduct shall be no less 
        stringent than the standard applicable to investment advisers 
        under section 206(1) and (2) of this Act when providing 
        personalized investment advice about securities, except the 
        Commission shall not ascribe a meaning to the term `customer' 
        that would include an investor in a private fund managed by an 
        investment adviser, where such private fund has entered into an 
        advisory contract with such adviser. The receipt of 
        compensation based on commission or fees shall not, in and of 
        itself, be considered a violation of such standard applied to a 
        broker, dealer, or investment adviser.
          ``(2) Retail customer defined.--For purposes of this 
        subsection, the term `retail customer' means a natural person, 
        or the legal representative of such natural person, who--
                  ``(A) receives personalized investment advice about 
                securities from a broker, dealer, or investment 
                adviser; and
                  ``(B) uses such advice primarily for personal, 
                family, or household purposes.
  ``(g) Other Matters.--The Commission shall--
          ``(1) facilitate the provision of simple and clear 
        disclosures to investors regarding the terms of their 
        relationships with brokers, dealers, and investment advisers, 
        including any material conflicts of interest; and
          ``(2) examine and, where appropriate, promulgate rules 
        prohibiting or restricting certain sales practices, conflicts 
        of interest, and compensation schemes for brokers, dealers, and 
        investment advisers that the Commission deems contrary to the 
        public interest and the protection of investors.''.
  (b) Harmonization of Enforcement.--
          (1) Securities exchange act of 1934.--Section 15 of the 
        Securities Exchange Act of 1934, as amended by subsection 
        (a)(1), is further amended by adding at the end the following 
        new subsection:
  ``(m) Harmonization of Enforcement.--The enforcement authority of the 
Commission with respect to violations of the standard of conduct 
applicable to a broker or dealer providing personalized investment 
advice about securities to a retail customer shall include--
          ``(1) the enforcement authority of the Commission with 
        respect to such violations provided under this Act, and
          ``(2) the enforcement authority of the Commission with 
        respect to violations of the standard of conduct applicable to 
        an investment advisor under the Investment Advisers Act of 
        1940, including the authority to impose sanctions for such 
        violations, and
the Commission shall seek to prosecute and sanction violators of the 
standard of conduct applicable to a broker or dealer providing 
personalized investment advice about securities to a retail customer 
under this Act to same extent as the Commission prosecutes and 
sanctions violators of the standard of conduct applicable to an 
investment advisor under the Investment Advisers Act of 1940.''.
          (2) Investment advisers act of 1940.--Section 211 of the 
        Investment Advisers Act of 1940, as amended by section (a)(2), 
        is further amended by adding at the end the following new 
        subsection:
  ``(h) Harmonization of Enforcement.--The enforcement authority of the 
Commission with respect to violations of the standard of conduct 
applicable to an investment adviser shall include--
          ``(1) the enforcement authority of the Commission with 
        respect to such violations provided under this Act, and
          ``(2) the enforcement authority of the Commission with 
        respect to violations of the standard of conduct applicable to 
        a broker or dealer providing personalized investment advice 
        about securities to a retail customer under the Securities 
        Exchange Act of 1934, including the authority to impose 
        sanctions for such violations, and
the Commission shall seek to prosecute and sanction violators of the 
standard of conduct applicable to an investment advisor under this Act 
to same extent as the Commission prosecutes and sanctions violators of 
the standard of conduct applicable to a broker or dealer providing 
personalized investment advice about securities to a retail customer 
under the Securities Exchange Act of 1934.''.

SEC. 104. COMMISSION STUDY ON DISCLOSURE TO RETAIL CUSTOMERS BEFORE 
                    PURCHASE OF PRODUCTS OR SERVICES.

  (a) Study Required.--Prior to proposing any rules or regulations 
pursuant to subsection (b)(1) regarding the manner in which investment 
products or services are sold or provided in the United States to 
retail customers or the information that must be provided to retail 
customers prior to the purchase of such products or services, and 
within 180 days after the date of the enactment of this Act, the 
Securities and Exchange Commission shall publish a study that 
examines--
          (1) the nature of a ``retail customer'', taking into 
        consideration the definition in section 15(k) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78o), as amended by section 103 
        of this Act;
          (2) the range of products and services sold or provided to 
        retail customers, and the sellers or providers of such products 
        and services, that are within the Commission's jurisdiction;
          (3) how such products and services are sold or provided to 
        retail customers, the fees charged for such products and 
        services, and the conflicts of interest that may arise during 
        the sales process or provision of services;
          (4) information that retail customers should receive prior to 
        purchasing each product or service, and the appropriate person 
        or entity to provide such information; and
          (5) ways to ensure that, where possible, reasonably similar 
        products and services are subject to similar regulatory 
        treatment, including with respect to information that must be 
        provided to retail customers prior to the purchase of such 
        products or services and how such information is provided.
  (b) Rulemaking.--
          (1) Notwithstanding any other provision of the Securities Act 
        of 1933 (15 U.S.C. 77a et seq.) or the Investment Company Act 
        of 1940 (15 U.S.C. 80a-1 et seq.), following completion of the 
        study required by subsection (a), the Commission is authorized 
        to promulgate rules to require that the appropriate persons or 
        entities provide designated documents or information to retail 
        customers prior to the purchase of identified investment 
        products or services. Any such rules shall--
                  (A) take into account the findings of the study 
                conducted pursuant to subsection (a);
                  (B) take into consideration, to the extent possible, 
                the need for such documents and information to be 
                consistent and comparable across investment products or 
                services sold or provided to retail customers; and
                  (C) reduce, to the extent possible, disruptions to 
                the purchase process for investment products and 
                services sold or provided to retail customers, by means 
                such as permitting required disclosures to be made via 
                the Internet.
          (2) Notwithstanding paragraph (1), the Commission is 
        authorized to promulgate rules in connection with--
                  (A) the implementation of section 103; and
                  (B) disclosure to retail customers other than in 
                connection with the purchase of investment products or 
                services.

SEC. 105. BENEFICIAL OWNERSHIP AND SHORT-SWING PROFIT REPORTING.

  (a) Beneficial Ownership Reporting.--Section 13 of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m) is amended--
          (1) in subsection (d)(1)--
                  (A) by inserting after ``within ten days after such 
                acquisition'' the following: ``or within such shorter 
                time as the Commission may establish by rule''; and
                  (B) by striking ``send to the issuer of the security 
                at its principal executive office, by registered or 
                certified mail, send to each exchange where the 
                security is traded, and'';
          (2) in subsection (d)(2)--
                  (A) by striking ``in the statements to the issuer and 
                the exchange, and''; and
                  (B) by striking ``shall be transmitted to the issuer 
                and the exchange and'';
          (3) in subsection (g)(1), by striking ``shall send to the 
        issuer of the security and''; and
          (4) in subsection (g)(2)--
                  (A) by striking ``sent to the issuer and''; and
                  (B) by striking ``shall be transmitted to the issuer 
                and''.
  (b) Short-swing Profit Reporting.--Section 16(a) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78p(a)) is amended--
          (1) in paragraph (1), by striking ``(and, if such security is 
        registered on a national securities exchange, also with the 
        exchange)''; and
          (2) in paragraph (2)(B), by inserting after ``officer'' the 
        following: ``, or within such shorter time as the Commission 
        may establish by rule''.

SEC. 106. REVISION TO RECORDKEEPING RULES.

  (a) Investment Company Act of 1940 Amendments.--Section 31 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-30) is amended--
          (1) in subsection (a)(1), by adding at the end the following: 
        ``Each person with custody or use of a registered investment 
        company's securities, deposits, or credits shall maintain and 
        preserve all records that relate to the person's custody or use 
        of the registered investment company's securities, deposits, or 
        credits for such period or periods as the Commission, by rules 
        and regulations, may prescribe as necessary or appropriate in 
        the public interest or for the protection of investors.''; and
          (2) in subsection (b), by adding at the end the following new 
        paragraph:
          ``(4) Records of persons with custody or use.--
                  ``(A) In general.--Notwithstanding paragraph (1), 
                records of persons with custody or use of a registered 
                investment company's securities, deposits, or credits, 
                that relate to such custody or use, are subject at any 
                time, or from time to time, to such reasonable 
                periodic, special, or other examinations and other 
                information and document requests by representatives of 
                the Commission as the Commission deems necessary or 
                appropriate in the public interest or for the 
                protection of investors.
                  ``(B) Certain persons subject to other regulation.--
                Persons subject to regulation and examination by a 
                Federal financial institution regulatory agency (as 
                such term is defined under section 212(c)(2) of title 
                18, United States Code) may satisfy any examination 
                request, information request, or document request 
                described under subparagraph (A), by providing the 
                Commission with a detailed listing, in writing, of the 
                registered investment company's securities, deposits, 
                or credits within such person's custody or use.''.
  (b) Investment Advisers Act of 1940 Amendment.--Section 204 of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-4) is amended by adding 
at the end the following new subsection:
  ``(d) Records of Persons With Custody or Use.--
          ``(1) In general.--Records of persons with custody or use of 
        a client's securities, deposits, or credits, that relate to 
        such custody or use, are subject at any time, or from time to 
        time, to such reasonable periodic, special, or other 
        examinations and other information and document requests by 
        representatives of the Commission as the Commission deems 
        necessary or appropriate in the public interest or for the 
        protection of investors.
          ``(2) Certain persons subject to other regulation.--Persons 
        subject to regulation and examination by a Federal financial 
        institution regulatory agency (as such term is defined under 
        section 212(c)(2) of title 18, United States Code) may satisfy 
        any examination request, information request, or document 
        request described under paragraph (1), by providing the 
        Commission with a detailed listing, in writing, of the client's 
        securities, deposits, or credits within such person's custody 
        or use.''.

SEC. 107. STUDY ON ENHANCING INVESTMENT ADVISOR EXAMINATIONS.

  (a) Study Required.--
          (1) In general.--The Commission shall review and analyze the 
        need for enhanced examination and enforcement resources for 
        investment advisers.
          (2) Areas of consideration.--The study required by this 
        subsection shall examine--
                  (A) the number and frequency of examinations of 
                investment advisers by the Commission over the 5 years 
                preceding the date of the enactment of this Act;
                  (B) the extent to which having Congress authorize the 
                Commission to designate one or more self-regulatory 
                organizations to augment the Commission's efforts in 
                overseeing investment advisers would improve the 
                frequency of examinations of investment advisers; and
                  (C) current and potential approaches to examining the 
                investment advisory activities of dually registered 
                broker-dealers and investment advisers or affiliated 
                broker-dealers and investment advisers.
  (b) Report Required.--The Commission shall report its findings to the 
Committee on Financial Services of the House of Representatives and the 
Committee on Banking, Housing, and Urban Affairs of the Senate, not 
later than 180 days after the date of enactment of this Act, and shall 
use such findings to revise its rules and regulations, as necessary. 
The report shall include a discussion of regulatory or legislative 
steps that are recommended or that may be necessary to address concerns 
identified in the study.

SEC. 108. GAO STUDY OF FINANCIAL PLANNING.

  (a) Study Required.--The Comptroller General of the United States 
shall conduct a study on the regulation and oversight of financial 
planning.   The study shall consider--
          (1) the unique role of financial planners in providing 
        comprehensive advice in investment planning, income tax 
        planning, education planning, retirement planning, estate 
        planning, risk management, and other areas with respect to the 
        management of financial resources; and
          (2) any gaps in the regulation of financial planners given 
        existing State and Federal regulation of financial planning 
        activities and the need to provide related consumer protections 
        for such financial planning activities.
  (b) Report.--Not later than the end of the 180-day period beginning 
on the date of the enactment of this Act, the Comptroller General of 
the United States shall submit to the Congress a report containing the 
findings and determinations made by the Comptroller General in carrying 
out the study required under subsection (a), including recommendations 
for the appropriate regulation of, or standards for, financial planners 
as a profession and how such regulations or standards should be 
established.

                   TITLE II--ENFORCEMENT AND REMEDIES

SEC. 201. AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.

  (a) Amendment to Securities Exchange Act of 1934.--Section 15 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o), as amended by section 
103, is further amended by adding at the end the following new 
subsection:
  ``(n) Authority to Restrict Mandatory Pre-dispute Arbitration.--The 
Commission, by rule, may prohibit, or impose conditions or limitations 
on the use of, agreements that require customers or clients of any 
broker, dealer, or municipal securities dealer to arbitrate any future 
dispute between them arising under the Federal securities laws, the 
rules and regulations thereunder, or the rules of a self-regulatory 
organization if it finds that such prohibition, imposition of 
conditions, or limitations are in the public interest and for the 
protection of investors.''.
  (b) Amendment to Investment Advisers Act of 1940.--Section 205 of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-5) is amended by adding 
at the end the following new subsection:
  ``(f) Authority to Restrict Mandatory Pre-dispute Arbitration.--The 
Commission, by rule, may prohibit, or impose conditions or limitations 
on the use of, agreements that require customers or clients of any 
investment adviser to arbitrate any future dispute between them arising 
under the Federal securities laws, the rules and regulations 
thereunder, or the rules of a self-regulatory organization if it finds 
that such prohibition, imposition of conditions, or limitations are in 
the public interest and for the protection of investors.''.

SEC. 202. COMPTROLLER GENERAL STUDY TO REVIEW SECURITIES ARBITRATION 
                    SYSTEM.

  (a) Study.--The Comptroller General of the United States shall 
conduct a study to review--
          (1) the costs to parties of an arbitration proceeding using 
        the arbitration system operated by the Financial Industry 
        Regulatory Authority and overseen by the Securities and 
        Exchange Commission as compared to litigation;
          (2) the percentage of recovery of the total amount of a claim 
        in an arbitration proceeding using the arbitration system 
        operated by the Financial Industry Regulatory Authority and 
        overseen by the Securities and Exchange Commission; and
          (3) 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 enactment of 
this Act, 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), 
including in such report recommendations for improvements to the 
arbitration system referenced in such subsection.

SEC. 203. WHISTLEBLOWER PROTECTION.

  (a) In General.--The Securities Exchange Act of 1934 (15 U.S.C. 78a 
et seq.) is amended by adding after section 21E the following new 
section:

``SEC. 21F. SECURITIES WHISTLEBLOWER INCENTIVES AND PROTECTION.

  ``(a) In General.--In any judicial or administrative action brought 
by the Commission under the securities laws that results in monetary 
sanctions exceeding $1,000,000, the Commission, under regulations 
prescribed by the Commission and subject to subsection (b), may pay an 
award or awards not exceeding an amount equal to 30 percent, in total, 
of the monetary sanctions imposed in the action or related actions to 
one or more whistleblowers who voluntarily provided original 
information to the Commission that led to the successful enforcement of 
the action. Any amount payable under the preceding sentence shall be 
paid from the fund described in subsection (f).
  ``(b) Determination of Amount of Award; Denial of Award.--
          ``(1) Determination of amount of award.--The determination of 
        the amount of an award, within the limit specified in 
        subsection (a), shall be in the sole discretion of the 
        Commission. The Commission may take into account the 
        significance of the whistleblower's information to the success 
        of the judicial or administrative action described in 
        subsection (a), the degree of assistance provided by the 
        whistleblower and any legal representative of the whistleblower 
        in such action, the Commission's programmatic interest in 
        deterring violations of the securities laws by making awards to 
        whistleblowers who provide information that leads to the 
        successful enforcement of such laws, and such additional 
        factors as the Commission may establish by rules or 
        regulations.
          ``(2) Denial of award.--No award under subsection (a) shall 
        be made--
                  ``(A) to any whistleblower who is, or was at the time 
                he or she acquired the original information submitted 
                to the Commission, a member, officer, or employee of 
                any appropriate regulatory agency, the Department of 
                Justice, the Public Company Accounting Oversight Board, 
                or a self-regulatory organization;
                  ``(B) to any whistleblower who is convicted of a 
                criminal violation related to the judicial or 
                administrative action for which the whistleblower 
                otherwise could receive an award under this section; or
                  ``(C) to any whistleblower who fails to submit 
                information to the Commission in such form as the 
                Commission may, by rule, require.
  ``(c) Representation.--
          ``(1) Permitted representation.--Any whistleblower who makes 
        a claim for an award under subsection (a) may be represented by 
        counsel.
          ``(2) Required representation.--Any whistleblower who makes a 
        claim for an award under subsection (a) must be represented by 
        counsel if the whistleblower submits the information upon which 
        the claim is based anonymously. Prior to the payment of an 
        award, the whistleblower must disclose his or her identity and 
        provide such other information as the Commission may require.
  ``(d) No Contract Necessary.--No contract with the Commission is 
necessary for any whistleblower to receive an award under subsection 
(a), unless the Commission, by rule or regulation, so requires.
  ``(e) Appeals.--Any determinations under this section, including 
whether, to whom, or in what amounts to make awards, shall be in the 
sole discretion of the Commission, and any such determinations shall be 
final and not subject to judicial review.
  ``(f) Investor Protection Fund.--
          ``(1) Fund established.--There is established in the Treasury 
        of the United States a fund to be known as the `Securities and 
        Exchange Commission Investor Protection Fund' (referred to in 
        this section as the `Fund').
          ``(2) Use of fund.--The Fund shall be available to the 
        Commission, without further appropriation or fiscal year 
        limitation, for the following purposes:
                  ``(A) Paying awards to whistleblowers as provided in 
                subsection (a).
                  ``(B) Funding investor education initiatives designed 
                to help investors protect themselves against securities 
                fraud or other violations of the securities laws, or 
                the rules and regulations thereunder.
          ``(3) Deposits and credits.--There shall be deposited into or 
        credited to the Fund--
                  ``(A) any monetary sanction collected by the 
                Commission in any judicial or administrative action 
                brought by the Commission under the securities laws 
                that is not added to a disgorgement fund or other fund 
                pursuant to section 308 of the Sarbanes-Oxley Act of 
                2002 or otherwise distributed to victims of a violation 
                of the securities laws, or the rules and regulations 
                thereunder, underlying such action, unless the balance 
                of the Fund at the time the monetary sanction is 
                collected exceeds $100,000,000;
                  ``(B) any monetary sanction added to a disgorgement 
                fund or other fund pursuant to section 308 of the 
                Sarbanes-Oxley Act of 2002 that is not distributed to 
                the victims for whom the disgorgement fund or other 
                fund was established, unless the balance of the Fund at 
                the time the determination is made not to distribute 
                the monetary sanction to such victims exceeds 
                $100,000,000; and
                  ``(C) all income from investments made under 
                paragraph (4).
          ``(4) Investments.--
                  ``(A) Amounts in fund may be invested.--The 
                Commission may request the Secretary of the Treasury to 
                invest the portion of the Fund that is not, in the 
                Commission's judgment, required to meet the current 
                needs of the Fund.
                  ``(B) Eligible investments.--Investments shall be 
                made by the Secretary of the Treasury in obligations of 
                the United States or obligations that are guaranteed as 
                to principal and interest by the United States, with 
                maturities suitable to the needs of the Fund as 
                determined by the Commission.
                  ``(C) Interest and proceeds credited.--The interest 
                on, and the proceeds from the sale or redemption of, 
                any obligations held in the Fund shall be credited to, 
                and form a part of, the Fund.
          ``(5) Reports to congress.--Not later than October 30 of each 
        year, the Commission shall transmit to the Committee on 
        Banking, Housing, and Urban Affairs of the Senate, and the 
        Committee on Financial Services of the House of Representatives 
        a report on--
                  ``(A) the Commission's whistleblower award program 
                under this section, including a description of the 
                number of awards that were granted and the types of 
                cases in which awards were granted during the preceding 
                fiscal year;
                  ``(B) investor education initiatives described in 
                paragraph (2)(B) that were funded by the Fund during 
                the preceding fiscal year;
                  ``(C) the balance of the Fund at the beginning of the 
                preceding fiscal year;
                  ``(D) the amounts deposited into or credited to the 
                Fund during the preceding fiscal year;
                  ``(E) the amount of earnings on investments of 
                amounts in the Fund during the preceding fiscal year;
                  ``(F) the amount paid from the Fund during the 
                preceding fiscal year to whistleblowers pursuant to 
                subsection (a);
                  ``(G) the amount paid from the Fund during the 
                preceding fiscal year for investor education 
                initiatives described in paragraph (1)(B);
                  ``(H) the balance of the Fund at the end of the 
                preceding fiscal year; and
                  ``(I) a complete set of audited financial statements, 
                including a balance sheet, income statement, and cash 
                flow analysis.
  ``(g) Protection of Whistleblowers.--
          ``(1) Prohibition against retaliation.--
                  ``(A) In general.--No employer may discharge, demote, 
                suspend, threaten, harass, or in any other manner 
                discriminate against an employee, contractor, or agent 
                in the terms and conditions of employment because of 
                any lawful act done by the employee, contractor, or 
                agent in providing information to the Commission in 
                accordance with subsection (a), or in assisting in any 
                investigation or judicial or administrative action of 
                the Commission based upon or related to such 
                information.
                  ``(B) Enforcement.--
                          ``(i) Cause of action.--An individual who 
                        alleges discharge or other discrimination in 
                        violation of subparagraph (A) may bring an 
                        action under this subsection in the appropriate 
                        district court of the United States for the 
                        relief provided in subparagraph (C).
                          ``(ii) Subpoenas.--A subpoena requiring the 
                        attendance of a witness at a trial or hearing 
                        conducted under this section may be served at 
                        any place in the United States.
                          ``(iii) Statute of limitations.--An action 
                        under this subsection may not be brought more 
                        than 6 years after the date on which the 
                        violation of subparagraph (A) occurred, or more 
                        than 3 years after the date when facts material 
                        to the right of action are known or reasonably 
                        should have been known by the employee alleging 
                        a violation of subparagraph (A), but in no 
                        event after 10 years after the date on which 
                        the violation occurs.
                  ``(C) Relief.--An employee, contractor, or agent 
                prevailing in any action brought under subparagraph (B) 
                shall be entitled to all relief necessary to make that 
                employee, contractor, or agent whole, including 
                reinstatement with the same seniority status that the 
                employee, contractor, or agent would have had, but for 
                the discrimination, 2 times the amount of back pay, 
                with interest, and compensation for any special damages 
                sustained as a result of the discrimination, including 
                litigation costs, expert witness fees, and reasonable 
                attorneys' fees.
          ``(2) Confidentiality.--
                  ``(A) In general.--Except as provided in subparagraph 
                (B), all information provided to the Commission by a 
                whistleblower shall be confidential and privileged as 
                an evidentiary matter (and shall not be subject to 
                civil discovery or other legal process) in any 
                proceeding in any Federal or State court or 
                administrative agency, and shall be exempt from 
                disclosure, in the hands of an agency or establishment 
                of the Federal Government, under the Freedom of 
                Information Act (5 U.S.C. 552), or otherwise, unless 
                and until required to be disclosed to a defendant or 
                respondent in connection with a proceeding instituted 
                by the Commission or any entity described in 
                subparagraph (B). For purposes of section 552 of title 
                5, United States Code, this paragraph shall be 
                considered a statute described in subsection (b)(3)(B) 
                of such section 552. Nothing herein is intended to 
                limit the Attorney General's ability to present such 
                evidence to a grand jury or to share such evidence with 
                potential witnesses or defendants in the course of an 
                ongoing criminal investigation.
                  ``(B) Availability to government agencies.--Without 
                the loss of its status as confidential and privileged 
                in the hands of the Commission, all information 
                referred to in subparagraph (A) may, in the discretion 
                of the Commission, when determined by the Commission to 
                be necessary to accomplish the purposes of this Act and 
                protect investors, be made available to--
                          ``(i) the Attorney General of the United 
                        States,
                          ``(ii) an appropriate regulatory authority,
                          ``(iii) a self-regulatory organization,
                          ``(iv) the Public Company Accounting 
                        Oversight Board,
                          ``(v) State attorneys general in connection 
                        with any criminal investigation, and
                          ``(vi) any appropriate State regulatory 
                        authority,
                each of which shall maintain such information as 
                confidential and privileged, in accordance with the 
                requirements in subparagraph (A).
          ``(3) Rights retained.--Nothing in this section shall be 
        deemed to diminish the rights, privileges, or remedies of any 
        whistleblower under any Federal or State law, or under any 
        collective bargaining agreement.
  ``(h) Provision of False Information.--Any whistleblower who 
knowingly and willfully makes any false, fictitious, or fraudulent 
statement or representation, or makes or uses any false writing or 
document knowing the same to contain any false, fictitious, or 
fraudulent statement or entry, shall not be entitled to an award under 
this section and shall be subject to prosecution under section 1001 of 
title 18, United States Code.
  ``(i) Rulemaking Authority.--The Commission shall have the authority 
to issue such rules and regulations as may be necessary or appropriate 
to implement the provisions of this section.
  ``(j) Definitions.--For purposes of this section, the following terms 
have the following meanings:
          ``(1) Original information.--The term `original information' 
        means information that--
                  ``(A) is based on the direct and independent 
                knowledge or analysis of a whistleblower;
                  ``(B) is not known to the Commission from any other 
                source, unless the whistleblower is the initial source 
                of the information; and
                  ``(C) is not based on allegations in a judicial or 
                administrative hearing, in a governmental report, 
                hearing, audit, or investigation, or from the news 
                media, unless the whistleblower is the initial source 
                of the information that resulted in the judicial or 
                administrative hearing, governmental report, hearing, 
                audit, or investigation, or the news media's report on 
                the allegations.
          ``(2) Monetary sanctions.--The term `monetary sanctions', 
        when used with respect to any judicial or administrative 
        action, means any monies, including but not limited to 
        penalties, disgorgement, and interest, ordered to be paid, and 
        any monies deposited into a disgorgement fund or other fund 
        pursuant to section 308(b) of the Sarbanes-Oxley Act of 2002 
        (15 U.S.C. 7246(b)), as a result of such action or any 
        settlement of such action.
          ``(3) Related action.--The term `related action', when used 
        with respect to any judicial or administrative action brought 
        by the Commission under the securities laws, means any judicial 
        or administrative action brought by an entity described in 
        subsection (g)(2)(B) that is based upon the same original 
        information provided by a whistleblower pursuant to subsection 
        (a) that led to the successful enforcement of the Commission 
        action.
          ``(4) Whistleblower.--The term `whistleblower' means an 
        individual, or two or more individuals acting jointly, who 
        submit information to the Commission as provided in this 
        section.''.
  (b) Administration and Enforcement.--The Securities and Exchange 
Commission shall establish a separate office within the Commission to 
administer and enforce the provisions of section 21F of the Securities 
Exchange Act of 1934, as added by subsection (a). Such office shall 
report annually to Congress on its activities, whistleblower 
complaints, and the response of the Commission to such complaints.

SEC. 204. CONFORMING AMENDMENTS FOR WHISTLEBLOWER PROTECTION.

  (a) In General.--Each of the following provisions is amended by 
inserting ``and section 21F of the Securities Exchange Act of 1934'' 
after ``the Sarbanes-Oxley Act of 2002'':
          (1) Section 20(d)(3)(A) of the Securities Act of 1933 (15 
        U.S.C. 77t(d)(3)(A)).
          (2) Section 42(e)(3)(A) of the Investment Company Act of 1940 
        (15 U.S.C. 80a-41(e)(3)(A)).
          (3) Section 209(e)(3)(A) of the Investment Advisers Act of 
        1940 (15 U.S.C. 80b-9(e)(3)(A)).
  (b) Securities Exchange Act.--The Securities Exchange Act of 1934 (15 
U.S.C. 78a et seq.) is amended--
          (1) in section 21(d)(3)(C)(i) (15 U.S.C. 78u(d)(3)(C)(i)), by 
        inserting ``and section 21F of this title'' after ``the 
        Sarbanes-Oxley Act of 2002'';
          (2) in section 21A(d)(1) (15 U.S.C. 78u-1(d)(1))--
                  (A) by striking ``(subject to subsection (e))''; and
                  (B) by inserting ``and section 21F of this title'' 
                after ``the Sarbanes-Oxley Act of 2002''; and
          (3) in section 21A, by striking subsection (e) and 
        redesignating subsections (f) and (g) as subsection (e) and 
        (f), respectively.

SEC. 205. IMPLEMENTATION AND TRANSITION PROVISIONS FOR WHISTLEBLOWER 
                    PROTECTIONS.

  (a) Implementing Rules.--The Securities and Exchange Commission shall 
issue final regulations implementing the provisions of section 21F of 
the Securities Exchange Act of 1934, as added by this title, no later 
than 270 days after the date of enactment of this Act.
  (b) Original Information.--Information submitted to the Commission by 
a whistleblower in accordance with regulations implementing the 
provisions of section 21F of the Securities Exchange Act of 1934, as 
added by this title, shall not lose its status as original information, 
as defined in subsection (i)(1) of such section, solely because the 
whistleblower submitted such information prior to the effective date of 
such regulations, provided such information was submitted after the 
date of enactment of this Act, or related to insider trading violations 
for which a bounty could have been paid at the time such information 
was submitted.
  (c) Awards.--A whistleblower may receive an award pursuant to section 
21F of the Securities Exchange Act of 1934, as added by this title, 
regardless of whether any violation of a provision of the securities 
laws, or a rule or regulation thereunder, underlying the judicial or 
administrative action upon which the award is based occurred prior to 
the date of enactment of this Act.

SEC. 206. COLLATERAL BARS.

  (a) Section 15 of the Securities Exchange Act of 1934.--Section 
15(b)(6)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o(b)(6)(A)) is amended by striking ``12 months, or bar such person 
from being associated with a broker or dealer,'' and inserting ``12 
months, or bar any such person from being associated with a broker, 
dealer, investment adviser, municipal securities dealer, transfer 
agent, or nationally recognized statistical rating organization,''.
  (b) Section 15B of the Securities Exchange Act of 1934.--Section 
15B(c)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
4(c)(4)) is amended by striking ``twelve months or bar any such person 
from being associated with a municipal securities dealer,'' and 
inserting ``12 months or bar any such person from being associated with 
a broker, dealer, investment adviser, municipal securities dealer, 
transfer agent, or nationally recognized statistical rating 
organization,''.
  (c) Section 17A of the Securities Exchange Act of 1934.--Section 
17A(c)(4)(C) of the Securities Exchange Act of 1934 (15 U.S.C. 78q-
1(c)(4)(C)) is amended by striking ``twelve months or bar any such 
person from being associated with the transfer agent,'' and inserting 
``12 months or bar any such person from being associated with any 
transfer agent, broker, dealer, investment adviser, municipal 
securities dealer, or nationally recognized statistical rating 
organization,''.
  (d) Section 203 of the Investment Advisers Act of 1940.--Section 
203(f) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(f)) is 
amended by striking ``twelve months or bar any such person from being 
associated with an investment adviser,'' and inserting ``12 months or 
bar any such person from being associated with an investment adviser, 
broker, dealer, municipal securities dealer, transfer agent, or 
nationally recognized statistical rating organization,''.

SEC. 207. AIDING AND ABETTING AUTHORITY UNDER THE SECURITIES ACT AND 
                    THE INVESTMENT COMPANY ACT.

  (a) Under the Securities Act of 1933.--Section 15 of the Securities 
Act of 1933 (15 U.S.C. 77o) is amended--
          (1) by striking ``Every person who'' and inserting ``(a) 
        Controlling Persons.--Every person who''; and
          (2) by adding at the end the following:
  ``(b) Prosecution of Persons Who Aid and Abet Violations.--For 
purposes of any action brought by the Commission under subparagraph (b) 
or (d) of section 20, any person that knowingly or recklessly provides 
substantial assistance to another person in violation of a provision of 
this Act, or of any rule or regulation issued under this Act, shall be 
deemed to be in violation of such provision to the same extent as the 
person to whom such assistance is provided.''.
  (c) Under the Investment Company Act of 1940.--Section 48 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-48) is amended by 
redesignating subsection (b) as subsection (c) and inserting after 
subsection (a) the following:
  ``(b) For purposes of any action brought by the Commission under 
subsection (d) or (e) of section 42, any person that knowingly or 
recklessly provides substantial assistance to another person in 
violation of a provision of this Act, or of any rule or regulation 
issued under this Act, shall be deemed to be in violation of such 
provision to the same extent as the person to whom such assistance is 
provided.''.

SEC. 208. AUTHORITY TO IMPOSE PENALTIES FOR AIDING AND ABETTING 
                    VIOLATIONS OF THE INVESTMENT ADVISERS ACT.

  Section 209 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-9) 
is amended by inserting at the end the following new subsections:
  ``(f) Aiding and Abetting.--For purposes of any action brought by the 
Commission under subsection (e), any person that knowingly or 
recklessly has aided, abetted, counseled, commanded, induced, or 
procured a violation of any provision of this Act, or of any rule, 
regulation, or order hereunder, shall be deemed to be in violation of 
such provision, rule, regulation, or order to the same extent as the 
person that committed such violation.
  ``(g) Enforcement by National Securities Associations.--The 
Commission may permit or require a national securities association 
registered under the Securities Exchange Act of 1934 to enforce 
compliance by its members and persons associated with its members with 
the provisions of this Act, the rules and regulations thereunder, and 
to adopt such rules (subject to any rule or order of the Commission 
pursuant to the Securities Exchange Act of 1934) as the association may 
deem necessary and in the public interest to further the purposes of 
this Act.''.

SEC. 209. DEADLINE FOR COMPLETING EXAMINATIONS, INSPECTIONS AND 
                    ENFORCEMENT ACTIONS.

  The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 
amended by inserting after section 4D (as added by section 101) the 
following new section:

``SEC. 4E. DEADLINE FOR COMPLETING ENFORCEMENT INVESTIGATIONS AND 
                    COMPLIANCE EXAMINATIONS AND INSPECTIONS.

  ``(a) Enforcement Investigations.--
          ``(1) In general.--Not later than 180 days after the date on 
        which Commission staff provide a written Wells notification to 
        any person, the Commission staff shall either file an action 
        against such person or provide notice to the Director of the 
        Division of Enforcement of its intent to not file an action.
          ``(2) Exceptions for certain complex actions.--
        Notwithstanding paragraph (1), if the head of any division or 
        office within the Commission or his designee determines that a 
        particular enforcement investigation is sufficiently complex 
        such that a determination regarding the filing of an action 
        against a person cannot be completed within the deadline 
        specified in paragraph (1), the head of any division or office 
        within the Commission or his designee may, after 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 period the head of any division or office 
        within the Commission or his designee determines that a 
        particular enforcement investigation is sufficiently complex 
        such that a determination regarding the filing of an action 
        against a person cannot be completed within the additional 180-
        day period, the head of any division or office within the 
        Commission or his 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 Inspections.--
          ``(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 
        indicating either that the examination or inspection has 
        concluded without findings or that the staff requests the 
        entity undertake corrective action.
          ``(2) Exception for certain complex actions.--Notwithstanding 
        paragraph (1), if the head of any division or office within the 
        Commission or his designee determines that a particular 
        compliance examination or inspection is sufficiently complex 
        such that a determination regarding concluding the examination 
        or inspection or regarding the staff requests the entity 
        undertake corrective action cannot be completed within the 
        deadline specified in paragraph (1), the head of any division 
        or office within the Commission 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. 210. 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 action or proceeding 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 or the production of documents or tangible things (or both) 
at a hearing or trial may be served at any place within the United 
States.''.
  (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 action or proceeding 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 or the production of documents or tangible things (or both) 
at a hearing or trial may be served at any place within the United 
States.''.
  (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 action or proceeding 
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 or the production of documents or tangible 
things (or both) at a hearing or trial may be served at any place 
within the United States.''.
  (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 action or proceeding 
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 or the production of documents or tangible 
things (or both) at a hearing or trial may be served at any place 
within the United States.''.

SEC. 211. 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 subsection:
  ``(g) Authority to Impose Money Penalties.--
          ``(1) Grounds for imposing.--In any cease-and-desist 
        proceeding under subsection (a), the Commission may impose a 
        civil penalty on a person 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 
                        regulation 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 penalty 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 
                described in paragraph (1) involved fraud, deceit, 
                manipulation, or deliberate or reckless disregard of a 
                regulatory requirement.
                  ``(C) Third tier.--Notwithstanding paragraphs (A) and 
                (B), the maximum amount of 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, 
                        manipulation, or deliberate or reckless 
                        disregard 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 
                        substantial 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 respondent 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 person's 
        assets and the amount of such person's assets.''.
  (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 amended--
          (1) by striking ``(a) Commission Authority To Assess Money 
        Penalties.--In any proceeding'' and inserting the following:
  ``(a) Commission Authority To Assess Money 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 subparagraphs and the matter following 
        such subparagraphs 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 person--
                  ``(A) is violating or has violated any provision 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 regulation 
                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 amended--
          (1) by striking ``(1) Authority of commission.--In any 
        proceeding'' and inserting the following:
          ``(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 subsection (f) 
                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 
                        regulation 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 amended--
          (1) by striking ``(1) Authority of commission.--In any 
        proceeding'' and inserting the following:
          ``(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:
                  ``(B) Cease-and-desist proceedings.--In any 
                proceeding instituted pursuant to subsection (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 
                        regulation thereunder; or
                          ``(ii) is or was a cause of the violation of 
                        any provision of this title, or any rule or 
                        regulation thereunder.''.

SEC. 212. FORMERLY ASSOCIATED PERSONS.

  (a) Member or Employee of the Municipal Securities 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 employee'' 
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 Securities Broker or 
Dealer.--Section 15C of the Securities 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 ``seeking to become 
        associated, or, at the time of the alleged misconduct, 
        associated or seeking to become associated'';
          (2) in subsection (c)(2)(A), by inserting ``, seeking to 
        become associated, or, at the time of the alleged 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 National Securities Exchange 
or Registered Securities 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 associated'' 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 
inserting ``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,''.
  (e) Officer or Director of a Self-regulatory Organization.--Section 
19(h)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(h)(4)) 
is amended--
          (1) by striking ``any officer or director'' and inserting 
        ``any person who is, or at the time of the alleged 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 Company.--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 alleged 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 Accounting Firm.--
          (1) Sarbanes-oxley act of 2002 amendment.--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:
                  ``(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 include any person associated, seeking to become 
                associated, or formerly associated with a public 
                accounting firm, except--
                          ``(i) the authority to conduct an 
                        investigation 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 proceeding 
                        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 occurring 
                                while such person was associated or 
                                seeking to become associated with a 
                                registered public accounting firm; or
                                  ``(II) non-cooperation as described 
                                in section 105(b)(3) with respect to a 
                                demand in a Board investigation 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 omission 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 supervisory 
        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)--
                  (A) by striking ``No associated person'' and 
                inserting ``No current or former supervisory person''; 
                and
                  (B) by striking ``any other person'' and inserting 
                ``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. 213. 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 striking ``as 
        provided in subsection (e)'' and inserting ``as provided in 
        subsection (f)''; and
          (3) by inserting after subsection (c) the following new 
        subsection:
  ``(d) Sharing Privileged Information With Other Authorities.--
          ``(1) Privileged information provided by the commission.--The 
        Commission shall not be 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 authority; or
                  ``(F) any State securities or law enforcement 
                authority.
          ``(2) Non-disclosure of privileged information provided to 
        the commission.--Except as provided in subsection (f), the 
        Commission shall not be compelled to disclose privileged 
        information obtained from any foreign securities authority, or 
        foreign law enforcement authority, if the authority has in good 
        faith determined and represented to the Commission that the 
        information is privileged.
          ``(3) Non-waiver of privileged information provided to the 
        commission.--
                  ``(A) In general.--Federal agencies, State securities 
                and law enforcement authorities, self-regulatory 
                organizations, and the Public Company Accounting 
                Oversight Board shall not be deemed to have waived any 
                privilege applicable to any information by transferring 
                that information to or permitting that information to 
                be used by the Commission.
                  ``(B) Exception with respect to certain actions.--The 
                provisions of subparagraph (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 subsection:
                  ``(A) The term `privilege' includes any work-product 
                privilege, attorney-client privilege, governmental 
                privilege, or other privilege recognized 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, investigate or prosecute 
                potential violations of law.
                  ``(C) The term `State securities or law enforcement 
                authority' means the authority of any State or 
                territory that is empowered under State or territory 
                law to detect, investigate or prosecute potential 
                violations of law.''.

SEC. 214. EXPANDED ACCESS TO GRAND JURY MATERIAL.

  (a) In General.--Title VI of the Sarbanes-Oxley Act of 2002 is 
amended by adding at the end the following new section:

``SEC. 605. ACCESS TO GRAND JURY INFORMATION.

  ``(a) Disclosure.--
          ``(1) In general.--Upon motion of an attorney for the 
        government, a court may direct disclosure of matters occurring 
        before a grand jury during an investigation of conduct that may 
        constitute a violation of any provision of the securities laws 
        to the Commission for use in relation to any matter within the 
        jurisdiction of the Commission.
          ``(2) Substantial need required.--A court may issue an order 
        under paragraph (1) only upon a finding of a substantial need 
        in the public interest.
  ``(b) Use of Matter.--A person to whom a matter has been disclosed 
under this section shall not use such matter other than for the purpose 
for which such disclosure was authorized.
  ``(c) Definitions.--As used in this section, the terms `attorney for 
the government' and `grand jury information' have the meanings given to 
those terms in section 3322 of title 18, United States Code.''.
  (b) Conforming Amendment.--The table of contents in section 1(b) of 
the Sarbanes-Oxley Act of 2002 is amended by inserting after the item 
relating to section 604 the following:

``Sec. 605. Access to grand jury information.''.

SEC. 215. AIDING AND ABETTING STANDARD OF KNOWLEDGE 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. 216. 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 subsection:
  ``(c) Extraterritorial Jurisdiction.--The jurisdiction of the 
district courts of the United States and the United States courts of 
any Territory described under subsection (a) includes violations of 
section 17(a), and all suits in equity and actions at law under that 
section, involving--
          ``(1) conduct within the United States that constitutes 
        significant steps in furtherance of the violation, even if the 
        securities transaction occurs outside the United States and 
        involves only foreign investors; or
          ``(2) conduct occurring outside the United States that has a 
        foreseeable substantial effect within 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.--The jurisdiction of the 
district courts of the United States and the United States courts of 
any Territory or other place subject to the jurisdiction of the United 
States described under subsection (a) includes violations of the 
antifraud provisions of this title, and all suits in equity and actions 
at law under those provisions, involving--
          ``(1) conduct within the United States that constitutes 
        significant steps in furtherance of the violation, even if the 
        securities transaction occurs outside the United States and 
        involves only foreign investors; or
          ``(2) conduct occurring outside the United States that has a 
        foreseeable substantial effect within 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.--The jurisdiction of the 
district courts of the United States and the United States courts of 
any Territory or other place subject to the jurisdiction of the United 
States described under subsection (a) 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 constitutes 
        significant steps in furtherance of the violation, 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 within the United States.''.

SEC. 217. FIDELITY BONDING.

  Section 17(g) of the Investment Company Act of 1940 (15 U.S.C. 80a-
17(g)) is amended to read as follows:
  ``(g) Fidelity Bonding.--
          ``(1) In general.--The Commission is authorized to require 
        that a registered management company 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 
        direct generally the disposition of such securities (unless 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 subsection:
                  ``(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--
                          ``(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 Commission 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. 218. ENHANCED SEC AUTHORITY TO CONDUCT SURVEILLANCE AND RISK 
                    ASSESSMENT.

  (a) Securities Exchange Act of 1934 Amendments.--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 section 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.''.
  (b) Investment Company Act of 1940 Amendments.--Section 31(b) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-30(b)), as amended by 
section 106(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 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.''.
  (c) Investment Advisers Act of 1940 Amendments.--Section 204 of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-4), as amended by 
section 106(b), is further amended by adding at the end the following 
new subsection:
  ``(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. 219. 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 registered investment 
        company, and each underwriter, broker, dealer, or investment 
        adviser that is a majority-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 Commission deems 
        necessary or appropriate in the public interest or for the 
        protection of investors.''.

SEC. 220. CONTROL PERSON LIABILITY UNDER THE SECURITIES EXCHANGE ACT.

  Section 20(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78t(a)) is amended by inserting after ``controlled person is liable,'' 
the following: ``including to the Commission in any action brought 
under paragraph (1) or (3) of section 21(d),''.

SEC. 221. ENHANCED APPLICATION OF ANTI-FRAUD PROVISIONS.

  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 exchange,''; and
                  (C) in subsection (c), by inserting after ``unlawful 
                for any'' the following: ``broker, dealer, 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 ``otherwise than on a 
        national securities exchange of which it is a member''.

SEC. 222. SEC AUTHORITY TO ISSUE RULES ON PROXY ACCESS.

  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 procedures 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.''.

             TITLE III--COMMISSION FUNDING AND ORGANIZATION

SEC. 301. 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 appropriated to the 
Commission, there are authorized to be appropriated to carry out the 
functions, powers, and duties 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;
          ``(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. 302. INVESTMENT ADVISER REGULATION FUNDING.

  Section 203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3) 
is amended by adding at the end the following new subsection:
  ``(l) 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 Commission a fair and reasonable fee determined by the 
        Commission. In determining such fee, the Commission shall 
        consider objective factors such as--
                  ``(A) the investment adviser's size;
                  ``(B) the number of clients of the investment 
                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 
                examinations 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 examinations 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.
          ``(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 required by this subsection.
          ``(6) Judicial review.--Increases or decreases in fees made 
        pursuant to this section shall not be subject to judicial 
        review.''.

SEC. 303. AMENDMENTS TO SECTION 31 OF THE SECURITIES 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 assessments estimated to be collected under 
                subsection (d))''.

SEC. 304. COMMISSION ORGANIZATIONAL STUDY AND REFORM.

  (a) Study Required.--
          (1) In general.--Not later than the end of the 90-day period 
        beginning on the date of the enactment of this Act, the 
        Securities and Exchange Commission (hereinafter in this section 
        referred to as the ``SEC'') shall hire an independent 
        consultant of high caliber and with expertise in organizational 
        restructuring and the operations of capital markets to examine 
        the internal operations, structure, funding, and the need for 
        comprehensive reform of the SEC, as well as the SEC's 
        relationship with the reliance on self-regulatory organizations 
        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;
                  (B) improving communications between SEC offices and 
                divisions;
                  (C) the need to put in place a clear chain-of-command 
                structure, particularly for enforcement 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 effect of such trading and 
                advances on the market;
                  (E) the SEC's hiring authorities, workplace policies, 
                and personal practices, including--
                          (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
                          (iv) the application of civil service laws by 
                        the SEC;
                  (F) whether the SEC's oversight and reliance on self-
                regulatory organizations promotes efficient and 
                effective governance for the securities 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 independent consultant hired pursuant to 
subsection (a)(1) shall issue a report to the SEC and the Congress 
containing--
          (1) a detailed description of any findings and conclusions 
        made while carrying out the study required under subsection 
        (a)(1);
          (2) recommendations for legislative, regulatory, or 
        administrative action that the consultant determines 
        appropriate to enable the SEC and other entities 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 the report under subsection 
(b), and every 6-months thereafter 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 administrative recommendations contained in the 
consultant's report.

SEC. 305. CAPITAL MARKETS SAFETY BOARD.

  There is established within the Securities and Exchange 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 determine 
what caused such institutions to fail. Upon the conclusion of an 
investigation, the Board shall make available on the Commission's 
website a report of its findings, including recommendations regarding 
how others can avoid similar mistakes. No information that may 
compromise an ongoing Federal investigation shall be made available in 
any such report.

SEC. 306. REPORT ON IMPLEMENTATION OF ``POST-MADOFF REFORMS''.

  (a) In General.--Not later than 6 months after the date of the 
enactment of this Act, the Securities and 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 recommended by the Inspector General 
        of the Commission.
  (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. 307. 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--
          (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 recommendations for solutions;
          (3) serving as a vehicle for discussion and communication 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.

                TITLE IV--ADDITIONAL COMMISSION REFORMS

SEC. 401. 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 following new subsection:
  ``(c)(1) To effect, accept, or facilitate a transaction involving the 
loan or borrowing of securities in contravention 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 agency (as defined in 
section 3 of the Federal Deposit Insurance 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 impose 
restrictions on transactions involving the loan or borrowing of 
securities in order to protect the safety and soundness of a financial 
institution or to protect the financial system from systemic risk.''.

SEC. 402. 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 stolen'' and 
        inserting ``stolen, cancelled, or reported in such other manner 
        as the Commission, by rule, may prescribe''.

SEC. 403. FINGERPRINTING.

  Section 17(f)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 
78q(f)(2)) is amended--
          (1) by striking ``and registered clearing agency,'' and 
        inserting ``registered clearing agency, registered securities 
        information processor, national securities exchange, and 
        national securities association''; and
          (2) by striking ``or clearing agency,'' and inserting 
        ``clearing agency, securities information processor, national 
        securities exchange, or national securities association,''.

SEC. 404. EQUAL TREATMENT OF SELF-REGULATORY ORGANIZATION 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 organization,''.

SEC. 405. CLARIFICATION THAT SECTION 205 OF THE INVESTMENT 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 registration pursuant 
        to section 203(b),'' and inserting ``registered or required to 
        be registered with the Commission'';
          (2) by striking ``make use of the mails or any means or 
        instrumentality of interstate commerce, directly or indirectly, 
        to''; and
          (3) by striking ``to'' after ``in any way''.

SEC. 406. CONFORMING AMENDMENTS FOR THE REPEAL OF THE PUBLIC UTILITY 
                    HOLDING COMPANY ACT OF 1935.

  (a) Securities Exchange Act of 1934.--The Securities 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 subsection, the term 
        `emergency' means--
                  ``(A) a major market disturbance characterized by or 
                constituting--
                          ``(i) sudden and excessive fluctuations of 
                        securities prices generally, or a substantial 
                        threat thereof, that threaten fair and orderly 
                        markets; or
                          ``(ii) a substantial disruption of the safe 
                        or efficient operation of the national system 
                        for clearance and settlement of transactions in 
                        securities, or a substantial threat thereof; or
                  ``(B) a major disturbance that substantially 
                disrupts, or threatens to substantially disrupt--
                          ``(i) the functioning of securities markets, 
                        investment companies, or any other significant 
                        portion or segment of the securities 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 Holding 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.'';
          (2) in section 308 (15 U.S.C. 77hhh), by striking 
        ``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 striking 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 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''.
  (c) Investment Company Act of 1940.--The Investment Company Act of 
1940 (15 U.S.C. 80a-1 et seq.) is amended--
          (1) in section 2(a)(44) (15 U.S.C. 80a-2(a)(44)), by striking 
        ```Public Utility Holding Company 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 striking ``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. 407. PROMOTING TRANSPARENCY IN FINANCIAL REPORTING.

  (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 accounting, auditing, 
        and reporting guidance pose a major challenge.
          (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 Complexity in Financial 
Reporting.--The Securities and Exchange Commission, the Public Company 
Accounting Oversight Board, and the standard setting body designated 
pursuant to section 19(b) of the Securities Act of 1933 shall annually 
provide oral testimony by their respective Chairpersons or a designee 
of the Chairperson, beginning in 2010, and for 5 years thereafter, to 
the Committee on Financial Services of the House of Representatives on 
their efforts to reduce the complexity in financial reporting to 
provide more accurate and clear financial information to investors, 
including--
          (1) reassessing complex and outdated accounting standards;
          (2) improving the understandability, consistency, 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''.

SEC. 408. 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. 409. PROTECTING CONFIDENTIALITY OF MATERIALS SUBMITTED TO THE 
                    COMMISSION.

  (a) Securities Exchange Act of 1934.--Section 17(j) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78q(j)) is amended to read as follows:
  ``(j) Authority To Limit Disclosure of Information.--
          ``(1) In general.--Notwithstanding any other provision of 
        law, the Commission shall not be compelled 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, including subsection 
        (i)(5)(A), or the financial or operational condition of such 
        persons, or any information supplied to the Commission by any 
        domestic or foreign regulatory agency or self-regulatory 
        organization 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 withhold information from the 
        Congress, prevent the Commission from complying with a request 
        for information from any other Federal department or agency, 
        the Public Company Accounting Oversight Board, or any self-
        regulatory organization requesting 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 described in this section to 
        produce information, documents, records, or reports relating 
        directly to the examination, 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 subsection shall be considered a statute described 
        in subsection (b)(3)(B) of that section.
          ``(4) Certain information to be confidential.--In prescribing 
        regulations to carry out the requirements of this subsection, 
        the Commission shall designate information described in or 
        obtained pursuant to subparagraphs (A), (B), and (C) of 
        subsection (i)(3) as confidential information for purposes 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 
106(a)(2) and 218(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, documents, records, or 
                reports that relate to an examination, 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, prevent the Commission from 
                complying with a request for information from any other 
                Federal department or agency, or the Public Company 
                Accounting Oversight Board requesting 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 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.
                  ``(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 described in subsection (b)(3)(B) of that 
                section.''.
  (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 106(b) 
and 218(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 compelled to disclose any 
        information, documents, records, or reports that relate to an 
        examination of a person subject to or described in this 
        section.
          ``(2) Certain exceptions.--Nothing in this subsection shall 
        authorize the Commission to withhold information from Congress, 
        prevent the Commission from complying with a request for 
        information from any other Federal department or agency, the 
        Public Company Accounting Oversight Board, or a self-regulatory 
        organization requesting 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 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 subsection shall be considered a statute described 
        in subsection (b)(3)(B) of that section.''.

SEC. 410. TECHNICAL CORRECTIONS.

  (a) Securities Act of 1933.--The Securities Act of 1933 (15 U.S.C. 
77a et seq.) is amended--
          (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 inserting ``a security'';
          (4) in section 18(c)(2)(B)(i) (15 U.S.C. 77r(c)(2)(B)(i)), by 
        striking ``State, or'' and inserting ``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 inserting 
        ``business entity,''.
  (b) Securities Exchange Act of 1934.--The Securities 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 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 striking 
        ``company, account person, or entity'' and inserting ``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 matter 
                following such subparagraph after ``are satisfied.'';
          (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 membership.'' in such 
                subparagraph (B), as redesignated; and
                  (C) by inserting such sentence in the matter 
                following such redesignated subparagraph after ``are 
                satisfied.'';
          (8) in section 16(a)(2)(C) (15 U.S.C. 78p(a)(2)(C)), by 
        striking ``section 206(b)'' and inserting ``section 206B'';
          (9) in section 17(b)(1)(B) (15 U.S.C. 78q(b)(1)(B)), by 
        striking ``15A(k) gives'' and inserting ``15A(k), give''; and
          (10) 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 ``section 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 Investment Company Act of 
1940 (15 U.S.C. 80a-1 et seq.) is amended--
          (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 subsection'' and inserting 
        ``any provision of this paragraph'';
          (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 inserting ``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 inserting ``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
                  (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 Investment 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. 411. 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 follows: (1) Not 
        later than October 1, 2010, the Municipal Securities Rulemaking 
        Board (hereinafter in this section referred to as the `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 
                representatives, at least one of whom shall be 
                representative of investors in municipal securities and 
                at least one of whom shall be representative of issuers 
                of municipal securities (which members are hereinafter 
                referred to as `public representatives');
                  ``(B) at least one individual who is representative 
                of municipal securities brokers and municipal 
                securities dealers which are not banks or subsidiaries 
                or departments or divisions of banks (which members are 
                hereinafter referred to as `broker-dealer 
                representatives'); and
                  ``(C) at least one individual who is representative 
                of municipal securities dealers which are banks or 
                subsidiaries or departments or divisions of banks 
                (which members are hereinafter referred to as `bank 
                representatives').''; and
          (2) by amending paragraph (2)(B) to read as follows:
          ``(B) Establish fair procedures for the nomination and 
        election of members of the Board and assure fair representation 
        in such nominations and elections of municipal securities 
        brokers and municipal securities dealers. Such rules--
                  ``(i) shall establish requirements regarding the 
                independence of public representatives;
                  ``(ii) shall provide that the number of public 
                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 representatives, which 
                may include, among other things, prior work experience 
                in the securities, municipal 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.''.

SEC. 412. 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, determines are unlikely to exercise 
                        an appropriate degree of independence as a 
                        result of--
                                  ``(I) a material business or 
                                professional relationship with such 
                                company or any affiliated person of 
                                such company; or
                                  ``(II) a close familial relationship 
                                with any natural person who is an 
                                affiliated 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''.

SEC. 413. RULEMAKING AUTHORITY TO PROTECT REDEEMING 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 illiquid 
securities or other illiquid property.''.

SEC. 414. 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 Commission;
          (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 regulated by such 
        Commission;
          (4) review existing internal controls and make 
        recommendations on strengthening such controls to ensure that 
        employees of the Securities and Exchange Commission who are 
        later employed by financial institutions did not assist such 
        institutions in violating any rules or regulations of the 
        Commission during the course of their employment with such 
        Commission;
          (5) determine if greater post-employment restrictions 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 inefficiencies in enforcement;
          (7) determine if employees of the Securities and Exchange 
        Commission who are later employed by financial institutions 
        have engaged in information sharing or assisted such 
        institutions in circumventing Federal rules and regulations 
        while employed by such Commission;
          (8) review any information that may address the volume of 
        employees of the Securities and Exchange Commission who are 
        later employed by financial institutions, and make 
        recommendations to Congress; and
          (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 Act, 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. 415. STUDY ON INTERNAL CONTROL EVALUATION AND REPORTING COST 
                    BURDENS ON SMALLER ISSUERS.

  (a) Study Required.--The Government Accountability Office and the 
Securities and Exchange Commission shall each conduct a study 
evaluating the costs and benefits of complying with section 404(b) of 
the Sarbanes-Oxley Act of 2002 (15 U.S.C. Sec.  7262(b)) on issuers who 
are not accelerated or large accelerated filers as defined by 
Commission Rule 12b-2. The study shall--
          (1) include recommendations, administrative reforms, and 
        legislative proposals on implementation steps that could be 
        taken to reduce compliance burdens on these issuers; and
          (2) determine the efficacy of the Securities and Exchange 
        Commission's measures to limit the cost of compliance on 
        smaller issuers.
  (b) Reports Required.--On or before June 1, 2010, the Government 
Accountability Office and the Securities and Exchange Commission shall 
submit separate reports to Congress containing the findings and 
conclusions of the studies required under subsection (a), together with 
such recommendations for regulatory, legislative, or administrative 
action as may be appropriate.
  (c) Effective Date Contingent on Reports.--Requirements under section 
404(b) of the Sarbanes-Oxley Act of 2002 on issuers described under 
subsection (a) shall not become effective until the results of the 
report are delivered, but in no case before June 1, 2011.

SECTION 416. ANALYSIS OF RULE REGARDING SMALLER REPORTING COMPANIES.

  (a) Findings.--Congress finds the following:
          (1) Many small businesses in cutting-edge technology sectors 
        require significant capital investment to develop new 
        technologies related to clean energy, drug treatments for 
        terminal diseases and food production in hunger-stricken areas 
        of the World.
          (2) Many technology companies conducting research do not meet 
        the definition of ``smaller reporting 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 Committee on Smaller 
        Public Companies to the Securities and Exchange Commission 
        recommended that a company with a market capitalization of less 
        than about $787,000,000 be considered a smallcap company 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.
  (b) Study of Using Revenue as Criteria to Define 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 Act, the Commission shall 
provide the Committee on Financial Services of the House of 
Representatives and the Committee on Banking, Housing and Urban Affairs 
of the Senate a report of the findings of the study.

SEC. 417. 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 Accounting Oversight 
        Board;
          (4) the head of each appropriate Federal banking agency, as 
        such term is defined under section 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 institution, 
        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 immediate and long-term 
issues critical to financial reporting.
  (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, including any legislative recommendations the 
Forum may have related to financial reporting matters.

SEC. 418. INVESTMENT ADVISERS SUBJECT TO STATE AUTHORITIES.

  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 paragraph (3); and
          (2) by inserting after paragraph (1) the following new 
        paragraph:
          ``(2) Treatment of certain mid-sized investment advisers.--
        Notwithstanding paragraph (1), an investment adviser that--
                  ``(A) is regulated and examined, or required to be 
                regulated and examined, by a State; and
                  ``(B) has assets under management between--
                          ``(i) the amount specified under subparagraph 
                        (A) of paragraph (1), as such amount may have 
                        been adjusted by the Commission pursuant to 
                        that subparagraph, and
                          ``(ii) $100,000,000, or such higher amount as 
                        the Commission may, by rule, deem appropriate 
                        in accordance with the purposes of this title,
                  shall register with, and be subject to examination 
                by, such State. The Commission shall publish a list of 
                the States that regulate and examine, or require 
                regulation and examination of, investment advisers to 
                which the requirements of this paragraph apply.''.

SEC. 419. CUSTODIAL REQUIREMENTS.

  Not later than 180 days after the date of the enactment of this Act, 
the Securities and Exchange Commission shall adopt a rule pursuant to 
its authority under section 211(a) of the Investment Advisers Act of 
1940 making it unlawful under section 206(4) of such Act for an 
investment adviser registered under the Act to have custody of funds or 
securities of a client the value of which exceeds $10,000,000, subject 
to such exception the Commission determines in such rule are in the 
public interest and consistent with the protection of investors, 
unless--
          (1) the funds and securities are maintained with a qualified 
        custodian either in a separate account for each client under 
        the client's name, or in accounts that contain only client 
        funds and securities 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.

SEC. 420. OMBUDSMAN.

  (a) Appointment.--Not later than 180 days after the date of the 
enactment of this Act, 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 subsection (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 Commission resulting from the regulatory 
        activities of the Commission;
          (2) review and make recommendations regarding Commission 
        policies and procedures to encourage persons to present 
        questions to the Commission regarding compliance with Federal 
        securities laws; and
          (3) maintain confidentiality of communications between such 
        persons 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 diminishing the activities of any ombudsman or similar 
office in any other agency.
  (d) Report.--Each year, the Ombudsman shall submit a report to the 
Commission for inclusion in the annual report that describes the 
activities and evaluates the effectiveness of the Ombudsman during the 
preceding year. In that report, the Ombudsman shall include solicited 
comments and evaluations from registrants in regards to the 
effectiveness of the Ombudsman.

         TITLE V--SECURITIES INVESTOR PROTECTION ACT AMENDMENTS

SEC. 501. INCREASING THE MINIMUM ASSESSMENT PAID BY SIPC MEMBERS.

  Section 4(d)(1)(C) of the Securities Investor Protection 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''.

SEC. 502. INCREASING THE BORROWING LIMIT ON TREASURY 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. 503. 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 customer, 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 `standard 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 determine whether an inflation adjustment to the 
        standard maximum cash advance amount is appropriate. If the 
        Board of Directors of SIPC determines such an adjustment is 
        appropriate, then the standard 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 thereto), published by the Department 
                of Commerce, for the calendar year preceding the year 
                in which such determination is made, to the published 
                annual value of such index for the calendar 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 Department 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.
          ``(3) Publication and report to the congress.--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 containing stating the standard 
                maximum cash advance amount.
          ``(4) Implementation period.--Any adjustment 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 considerations.--In making any 
        determination under paragraph (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 members of 
                SIPC; and
                  ``(C) such other factors as the Board of Directors of 
                SIPC may determine appropriate.''.

SEC. 504. SIPC AS TRUSTEE IN SIPA LIQUIDATION PROCEEDINGS.

   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 creditors and to subordinated 
        lenders appear to aggregate less than $750,000 and that''; and
          (2) by striking ``five hundred'' and inserting ``five 
        thousand''.

SEC. 505. 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 inserting ``an insider,'' after 
``or net profits of the debtor,''.

SEC. 506. ELIGIBILITY FOR DIRECT PAYMENT PROCEDURE.

  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''.

SEC. 507. 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. 508. 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 limitation, 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 protection under this 
        Act or by SIPC, shall be liable for any damages caused thereby 
        and shall be fined not more than $250,000 or imprisoned for not 
        more than five years.
          ``(2) Internet service providers.--Any Internet service 
        provider that, on or through a system or network controlled or 
        operated by the Internet service provider, transmits, routes, 
        provides connections for, or stores any material containing any 
        misrepresentation of the kind prohibited in paragraph (1) shall 
        be liable for any damages caused thereby, including damages 
        suffered by SIPC, if the Internet service provider--
                  ``(A) has actual knowledge that the material contains 
                a misrepresentation of the kind prohibited in paragraph 
                (1), or
                  ``(B) in the absence of actual knowledge, is aware of 
                facts or circumstances from which it is apparent that 
                the material contains a misrepresentation of the kind 
                prohibited in paragraph (1), and
        upon obtaining such knowledge or awareness, fails to act 
        expeditiously to remove, or disable access to, the material.
          ``(3) Injunctions.--Any court having jurisdiction 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) or (2). 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 enforceable, by 
        proceedings in contempt or otherwise, by any United States 
        court having jurisdiction over that person. The clerk of the 
        court granting the injunction shall, when requested by any 
        other court in which enforcement of the injunction is sought, 
        transmit promptly to the other court a certified copy of all 
        papers in the case on file in such clerk's office.''.

SEC. 509. FUTURES HELD IN A PORTFOLIO MARGIN SECURITIES ACCOUNT 
                    PROTECTION.

  (a) SIPC Advances.--Section 9(a)(1) of the Securities 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--
          (1) by amending paragraph (2) to read as follows:
          ``(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 securities 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 purchases, 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 securities.
                  ``(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 conversions 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 transactions with 
                        a foreign subsidiary of a member of SIPC;
                          ``(ii) any person to the extent that such 
                        person has a claim for cash or securities which 
                        by contract, agreement, or understanding, or by 
                        operation of law, is part of the capital of the 
                        debtor, or is subordinated 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 
                        voidable 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 repurchase or 
                        open reverse repurchase agreement.
                For purposes of this paragraph, the term `repurchase 
                agreement' means the sale of a security at a specified 
                price with a simultaneous agreement or obligation to 
                repurchase the security 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)--
                  (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 securities 
                        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 Commission; 
                        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 portfolio margining account 
                pursuant to a portfolio margining program approved by 
                the Commission, 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 to such 
                contract as of the filing date, and such claim shall be 
                treated as a claim for cash.''.

SEC. 510. STUDY AND REPORT ON THE FEASIBILITY OF RISK-BASED ASSESSMENTS 
                    FOR SIPC MEMBERS.

  (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.
  (b) Content.--The Comptroller General in conducting 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 enforcement and compliance 
        actions taken by regulatory bodies against the SIPC member, or 
        the number of years the SIPC member has been in operation, 
        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 assessments could have 
        on large and small brokers and dealers; and
          (5) examine the impact that risk-based assessments could have 
        on institutional and retail brokers and dealers.
  (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 
Regulatory Authority, and any other public or private sector 
organization that the Comptroller General considers appropriate.
  (d) Report Required.--Not later than one year after the date of 
enactment of this Act, the Comptroller 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 Committee on 
Financial Services of the House of Representatives.

SEC. 511. BUDGETARY TREATMENT OF COMMISSION LOANS TO SIPC.

  Section 4(g) of the Securities Investor Protection Act of 1970 (15 
U.S.C. 78ddd(g)) is amended by adding at the end the following: ``Any 
loan made by the Commission to SIPC under this subsection shall not be 
considered to result in a new direct loan obligation or a new loan 
guarantee commitment for purposes of section 504 of the Federal Credit 
Reform Act of 1990.''.

                TITLE VI--SARBANES-OXLEY ACT AMENDMENTS

SEC. 601. PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD OVERSIGHT OF 
                    AUDITORS OF BROKERS 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 examination of the 
        financial statements, reports, documents, 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 preceding 
        the adoption of applicable rules of the Board under section 
        103, in accordance with then-applicable generally accepted 
        auditing and related standards for such purposes), for the 
        purpose of expressing 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 performed 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 either--
                          ``(i) sets forth the opinion of that firm 
                        regarding a financial statement, report, 
                        notice, other document, procedures, or 
                        controls; 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 setting 
                        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 Exchange Act of 1934 
                        (15 U.S.C. 78a(m)); and
                          ``(ii) relevant to audit reports for 
                        particular issuers, brokers, or dealers, or 
                        dealt with in the quality control system of a 
                        particular registered public accounting firm; 
                        and
                  ``(B) auditing standards, standards for attestation 
                engagements, quality control policies and procedures, 
                ethical and competency standards, 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, brokers, or 
                        dealers; and
                          ``(ii) are established or adopted by the 
                        Board under section 103(a), or are promulgated 
                        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. 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 Exchange 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'';
          (2) in subsection (a), by striking ``public companies'' and 
        inserting ``companies''; and
          (3) in subsection (a), by striking ``for companies 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 dealers''.
  (d) Auditing and Independence.--Section 103(a) of such Act is 
amended--
          (1) in paragraph (1), by striking ``and such ethics 
        standards'' and inserting ``such ethics standards, and such 
        independence standards'';
          (2) in paragraph (2)(A)(iii), by striking ``describe in each 
        audit report'' and inserting ``in each audit report for an 
        issuer, describe''; and
          (3) in paragraph (2)(B)(i), by striking ``issuers'' and 
        inserting ``issuers, brokers, and dealers''.
  (e) Inspections of Registered Public Accounting Firms.--Section 104 
of such Act is amended--
          (1) in subsection (a), by striking ``issuers'' and inserting 
        ``issuers, brokers, and dealers'';
          (2) in subsection (b)(1)(A)--
                  (A) by striking ``audit reports'' and inserting 
                ``audit reports on annual financial statements''; and
                  (B) by striking ``and'';
          (3) in subsection (b)(1)(B)--
                  (A) by striking ``audit reports'' and inserting 
                ``audit reports on annual financial statements''; and
                  (B) by striking the period at the end and inserting 
                ``; and''; and
          (4) by adding at the end of subsection (b)(1) the following 
        new subparagraph:
                  ``(C) with respect to each registered public 
                accounting firm that regularly provides audit reports 
                and is not described under subparagraph (A) or (B), on 
                a basis to be determined by the Board, by rule, 
                consistent with the public interest and protection of 
                investors.''.
  (f) Investigations and Disciplinary Proceedings.--Section 
105(c)(7)(B) of such Act is amended--
          (1) in the subparagraph heading, by inserting ``, broker, or 
        dealer'' after ``issuer'';
          (2) by striking ``any issuer'' each place it appears and 
        inserting ``any issuer, broker, or dealer''; and
          (3) by striking ``an issuer under this subsection'' and 
        inserting ``a registered public accounting 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 amended--
          (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 appropriate'' and 
        inserting ``and among brokers and dealers in accordance with 
        subsection (h), and allowing 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 following new 
        subsection:
  ``(h) Allocation of Accounting Support Fees Among Brokers and 
Dealers.--
          ``(1) In general.--Any amount due from brokers and dealers 
        (or a particular class of such brokers 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 brokers 
        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 dealer, in accordance with the rules of the Board.
          ``(2) Obligation to pay.--Every broker or dealer shall pay 
        the share of a reasonable annual accounting support fee or fees 
        allocated to such broker or dealer under this section.''.
  (i) Referral of Investigations to a Self-regulatory 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 concerns an 
                        audit report for a broker or dealer that is 
                        subject to the jurisdiction of such self-
                        regulatory organization;''.
  (j) Use of Documents Related to an Inspection 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 following new 
        subclause:
                                  ``(V) a self-regulatory organization, 
                                with respect to an audit report for a 
                                broker or dealer that is subject to the 
                                jurisdiction of such self-regulatory 
                                organization,''.

SEC. 602. 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 authority.--The term 
        `foreign auditor oversight authority' means any governmental 
        body or other entity empowered by a foreign government to 
        conduct inspections of public accounting firms or otherwise to 
        administer or enforce laws related to the regulation of public 
        accounting firms.''.
  (b) Availability To Share Information.--Section 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 oversight 
                authorities.--When in the Board's discretion it is 
                necessary to accomplish the purposes 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 information referred to in subparagraph (A) 
                that relates to a public accounting firm within the 
                inspection 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 
``subparagraph (B)'' and inserting ``subparagraphs (B) and (C)''.

SEC. 603. EXPANSION OF AUDIT INFORMATION TO BE PRODUCED 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 follows:
  ``(b) Production of Documents.--
          ``(1) Production by foreign firms.--If a foreign public 
        accounting firm issues an audit report, performs audit work, 
        conducts interim reviews, or performs material services upon 
        which a registered public accounting firm relies in the conduct 
        of an audit or interim review, the foreign public accounting 
        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 request 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 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 documents 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 foreign public 
                accounting firm.'';
          (2) by redesignating subsection (d) as subsection (g); and
          (3) by inserting after subsection (c) the following new 
        subsections:
  ``(d) Service of Requests or Process.--Any foreign public accounting 
firm that performs work for a domestic registered public accounting 
firm shall furnish to the domestic 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 section. Any foreign public accounting 
firm that issues an audit report, performs audit work, performs interim 
reviews, or performs other material services upon which a registered 
public accounting firm relies in the conduct of an audit or interim 
review, shall designate to the Commission or the Board an agent in the 
United States upon whom may be served any process, pleading, or other 
papers in any action brought to enforce this section or any request by 
the Commission or the Board under this section.
  ``(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 section to meet production obligations under this section 
though alternate means, such as through foreign counterparts of the 
Commission or Board.''.

SEC. 604. CONFORMING AMENDMENT RELATED TO REGISTRATION.

  Section 102(b)(3)(A) of the Sarbanes-Oxley Act of 2002 (15 U.S. Code 
7212(b)(3)(A)) is amended by striking ``by the Board'' and inserting 
``by the Commission or the Board''.

SEC. 605. 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 follows:
  ``(a) Civil Penalties to Be Used for the Relief of Victims.--If in 
any judicial or administrative action brought by the Commission under 
the securities laws (as such term is defined in section 3(a)(47) of the 
Securities 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 thereunder, or such person agrees in 
settlement of any such action to such civil penalty, the amount of such 
civil penalty 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 benefit of the victims of such 
violation.'';
          (2) in subsection (b), by--
                  (A) striking ``for a disgorgement fund described 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).

SEC. 606. EXEMPTION FOR NONACCELERATED FILERS.

  (a) Exemption.--Section 404 of the Sarbanes-Oxley Act of 2002 is 
amended by adding at the end the following:
  ``(c) Exemption for Smaller Issuers.--Subsection (b) shall not apply 
with respect to any audit report prepared for an issuer that is not an 
accelerated filer within the meaning Rule 12b-2 of the Commission (17 
C.F.R. 240.12b-2).''.
  (b) Study.--The Securities and Exchange Commission and the 
Comptroller General shall jointly conduct a study to determine how the 
Commission 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 
reducing 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 180 days after the date of the enactment of 
this Act, the Commission and the Comptroller General shall transmit a 
report of such study to Congress.

SEC. 607. WHISTLEBLOWER PROTECTION AGAINST RETALIATION BY A SUBSIDIARY 
                    OF AN ISSUER.

  Section 1514A(a) of title 18, United States Code, is amended by 
inserting ``including any subsidiary or affiliate whose financial 
information is included in the consolidated financial statements of 
such company,'' after ``(15 U.S.C. 78o(d)),''.

SEC. 608. 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--
          ``(1) affect the Boards obligations, if any, to provide 
        access to records under the Right to Financial Privacy Act; or
          ``(2) authorize the Board to withhold information from 
        Congress or prevent the Board from complying with an order of a 
        court of the United States in an action commenced by the United 
        States or the Board.''.

SEC. 609. 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 601(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 Protection Act, the Board shall appoint an 
ombudsman for the Board. The Ombudsman shall report directly to the 
Chairman.
  ``(b) Duties of Ombudsman.--The ombudsman appointed 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 concerning the 
                preparation or issuance of any audit report with 
                respect to that issuer; and
                  ``(B) any affected registered public accounting firm 
                or issuer with respect to--
                          ``(i) any problem such firm or issuer may 
                        have in dealing with the Board resulting from 
                        the regulatory activities of the Board, 
                        particularly with regard to the implementation 
                        of section 404; and
                          ``(ii) issues caused by the relationships of 
                        registered public accounting firms and issuers 
                        generally; and
          ``(2) assure that safeguards exist to encourage complainants 
        to come forward and to preserve confidentiality; and
          ``(3) carry out such activities, and any other activities 
        assigned by the Board, in accordance with guidelines prescribed 
        by the Board.''.
  (b) Conforming Amendment.--The table of sections 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. 610. AUDITING OVERSIGHT BOARD.

  The Sarbanes-Oxley Act of 2002 is amended--
          (1) in section 2(a)(5), by striking ``Public Company 
        Accounting Oversight Board'' and inserting ``Auditing Oversight 
        Board'';
          (2) in section 101(a), by striking ``Public Company 
        Accounting Oversight Board'' and inserting ``Auditing Oversight 
        Board''; and
          (3) in the heading of title I, by striking ``PUBLIC COMPANY 
        ACCOUNTING OVERSIGHT BOARD'' and inserting ``AUDITING OVERSIGHT 
        BOARD''.

                TITLE VII--SENIOR INVESTMENT PROTECTION

SEC. 701. FINDINGS.

  Congress finds that--
          (1) many seniors are targeted by salespersons and advisers 
        using misleading certifications and professional designations;
          (2) many certifications and professional designations used by 
        salespersons and advisers represent limited training or 
        expertise, and may in fact be of no value with respect to 
        advising seniors on financial and estate planning matters, and 
        far too often, such designations are obtained simply by 
        attending a weekend seminar and passing an open book, multiple 
        choice test;
          (3) many seniors have lost their life savings because 
        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 understands the products 
        and is working in their best interest or a self-interested 
        salesperson or adviser advocating particular products; and
          (5) many existing State laws and enforcement measures 
        addressing the use of certifications, professional 
        designations, and suitability standards in selling financial 
        products to seniors are inadequate to protect senior investors 
        from salespersons and advisers using such designations.

SEC. 702. DEFINITIONS.

  For purposes of this title:
          (1) Misleading designation.--The term ``misleading 
        designation''--
                  (A) means the use of a purported certification, 
                professional designation, or other credential, that 
                indicates or implies that a salesperson or adviser has 
                special certification or training in advising or 
                servicing seniors; and
                  (B) does not include any legitimate certification, 
                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 
                        certifications, licenses, and professional 
                        designations outlined by the North American 
                        Securities Administrators Association (in this 
                        title referred to as the ``NASAA'') Model Rule 
                        on the Use of Senior-Specific Certifications 
                        and Professional Designations, as in effect on 
                        the date of the enactment of this Act, 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 (including insurance products 
        which pay a return, whether fixed or variable), and bank and 
        loan products.
          (3) Misleading or fraudulent marketing.--The term 
        ``misleading or fraudulent marketing'' 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 individual 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 unincorporated territories of 
        Puerto Rico and the U.S. Virgin Islands.

SEC. 703. GRANTS TO STATES FOR ENHANCED PROTECTION OF SENIORS FROM 
                    BEING MISLEAD BY FALSE DESIGNATIONS.

  (a) Grant Program.--The Securities and Exchange Commission (in this 
title referred to as the ``Commission'')--
          (1) shall establish a program in accordance with this title 
        to provide grants to States--
                  (A) to investigate and prosecute misleading and 
                fraudulent marketing practices; or
                  (B) to develop educational materials and training 
                aimed at reducing misleading and fraudulent marketing 
                of financial products toward seniors; and
          (2) may establish such performance objectives, reporting 
        requirements, and application procedures for States and State 
        agencies receiving grants under this title as the Commission 
        determines are necessary to carry out and assess the 
        effectiveness of the program under this title.
  (b) Use of Grant Amounts.--A grant under this title 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, investigate, and 
        prosecute (through civil, administrative, or criminal 
        enforcement actions) cases involving misleading or fraudulent 
        marketing of financial products to seniors;
          (2) to fund technology, equipment, and training for 
        regulators, prosecutors, and law enforcement in order to 
        identify salespersons and advisers who target seniors through 
        the use of misleading designations;
          (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 training to 
        regulators on the appropriateness of the use of designations by 
        salespersons and advisers of financial products;
          (5) to provide educational materials and training to seniors 
        to increase their awareness and understanding 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 title may not 
        exceed $500,000 per fiscal year per State, if all requirements 
        of paragraphs (2), (3), (4), and (5) are met. Such amount shall 
        be limited to $100,000 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).
          (2) Standard designation rules for securities.--A State shall 
        have adopted rules on the appropriate 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 Certifications and 
        Professional Designations, as in effect on the date of the 
        enactment of this Act, or any successor thereto.
          (3) Suitability rules for securities.--A State shall have 
        adopted standard rules on the suitability requirements in the 
        sale of securities, which shall, to the extent practicable, 
        conform to the minimum requirements on suitability imposed by 
        self-regulatory organization rules under the securities laws 
        (as defined in section 3 of the Securities Exchange Act of 
        1934).
          (4) Standard designation rules for insurance products.--A 
        State shall have adopted standard rules on the appropriate use 
        of designations in the sale of insurance products, which shall, 
        to the extent practicable, conform to the minimum requirements 
        of the National Association of Insurance Commissioners Model 
        Regulation on the Use of Senior-Specific Certifications and 
        Professional Designations in the Sale of Life Insurance and 
        Annuities, as in effect on the date of the enactment of this 
        Act, or any successor thereto.
          (5) Suitability and supervision rules for annuity products.--
                  (A) In general.--A State shall have adopted rules 
                governing insurer supervision of, suitability of, and 
                insurer and insurance producer conduct relating to, the 
                sale of annuity products, including fixed and index 
                annuities.
                  (B) Annuity products criteria.--The rules required by 
                subparagraph (A) shall, to the extent practicable, 
                provide--
                          (i) that insurers, and insurance producers 
                        are responsible for, and liable for penalties 
                        for, the suitability of each recommended 
                        annuity transaction;
                          (ii) that insurers and insurance producers 
                        are required to apply a standard for 
                        determining the suitability of each recommended 
                        annuity transaction, including fixed and index 
                        annuities, that is at least as protective of 
                        the interests of the consumer as rule 2821(b) 
                        of the Financial Industry Regulatory Authority 
                        (in this paragraph referred to as ``FINRA''), 
                        as in effect on the date of the enactment of 
                        this Act, or any successor to such rule;
                          (iii) that insurers and insurance producers 
                        are required to maintain a process for review 
                        of the suitability, and approval or 
                        disapproval, of each recommended annuity 
                        transaction that is at least as protective of 
                        the interests of the consumer as the principal 
                        review required under rule 2821(c) of FINRA, as 
                        in effect on the date of the enactment of this 
                        Act, or any successor to such rule;
                          (iv) that insurers and insurance producers 
                        are required to maintain processes for the 
                        supervision of direct annuity sales and 
                        insurance producer-recommended annuity sales 
                        (including procedures for the insurer to obtain 
                        and confirm consumer suitability information 
                        and for the insurer to confirm consumer 
                        understanding of the annuity transaction) that 
                        are at least as protective of the interests of 
                        the consumer as member broker and dealer 
                        supervision requirements of FINRA, as in effect 
                        on the date of the enactment of this Act, or 
                        any successor to such requirements;
                          (v) that insurers are required to verify that 
                        each insurance producer successfully completes, 
                        and each insurance producer is required to 
                        receive, training designed to ensure that the 
                        insurance producer is competent to recommend 
                        each class of annuity;
                          (vi) that insurers are required to verify 
                        that insurance producers receive, and insurance 
                        producers are required to receive, training 
                        regarding the features of each offered annuity 
                        product, to an extent that is at least as 
                        protective of the interests of the consumer as 
                        the FINRA firm element training requirements, 
                        as in effect on the date of the enactment of 
                        this Act, or any successor to such 
                        requirements;
                          (vii) for coordination of such rules with the 
                        rules of FINRA governing member brokers, 
                        dealers, and security representatives, to the 
                        extent appropriate, consistent with protecting 
                        the interests of consumers, for State insurance 
                        regulators to rely on, or to avoid duplication 
                        of FINRA rules; and
                          (viii) for exemption from such rules only if 
                        such exemption is consistent with the 
                        protection of consumers.

SEC. 704. APPLICATIONS.

  To be eligible for a grant under this title, the State or appropriate 
State agency shall submit to the Commission a proposal to use the grant 
money to protect seniors from misleading or fraudulent marketing 
techniques in the 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, including, at a minimum--
                  (A) by proactively identifying senior victims of 
                misleading and fraudulent marketing in the offer and 
                sale of financial products;
                  (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 misleading 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.

SEC. 705. LENGTH OF PARTICIPATION.

  A State receiving a grant under this title shall be provided 
assistance funds for a period of 3 years, after which the State may 
reapply for additional funding.

SEC. 706. AUTHORIZATION OF APPROPRIATIONS.

  There are authorized to be appropriated to carry out this title, 
$8,000,000 for each of the fiscal years 2011 through 2015.

        TITLE VIII--REGISTRATION OF MUNICIPAL FINANCIAL ADVISORS

SEC. 801. MUNICIPAL FINANCIAL ADVISER REGISTRATION REQUIREMENT.

  (a) In General.--The Securities Exchange Act of 1934 is amended by 
inserting after section 15E (15 U.S.C. 78o-7) the following new 
section:

``SEC. 15F. 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 adviser unless such person is registered as a 
municipal financial adviser in accordance with subsection (b).
  ``(B) Subparagraph (A) shall not apply to a natural person associated 
with a municipal financial adviser, as long as such adviser is 
registered in accordance with subsection (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 registered by filing 
with the Commission an application for registration in such form and 
containing such information and documents concerning such municipal 
financial adviser and any persons associated with such municipal 
financial 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 registration 
        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 registration. At the 
        conclusion of such proceedings, the Commission, 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 consents.
        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 
Commission, by rule, may prescribe, shall contain such information and 
documents concerning the applicant, the successor, 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 the protection of investors. The grant or denial of registration 
to such an applicant shall be in accordance with the procedures set 
forth in paragraph (1) of this subsection. If the Commission grants 
such registration, the registration shall terminate on the 45th day 
after the effective date thereof, unless prior thereto the successor 
shall, in accordance with such rules and regulations as the Commission 
may prescribe, adopt the application for registration as its own.
  ``(3) Any provision of this title (other than section 5 and 
subsection (a) of this section) which prohibits any act, practice, or 
course of business if the mails or any means or instrumentality of 
interstate commerce is used in connection therewith shall also prohibit 
any such act, practice, or course of business by any registered 
municipal financial adviser or any person acting on behalf of such a 
municipal financial adviser, irrespective of any use of the mails or 
any means or instrumentality of interstate commerce in connection 
therewith.
  ``(4) The Commission, by order, shall censure, place limitations on 
the activities, functions, or operations of, suspend for a period not 
exceeding 12 months, or revoke the registration of any municipal 
financial adviser if it finds, on the record after notice and 
opportunity for hearing, that such censure, placing of limitations, 
suspension, or revocation is in the public interest and that such 
municipal financial adviser, whether prior or subsequent to becoming 
such, or any person associated with such municipal financial adviser, 
whether prior or subsequent to becoming so associated--
          ``(A) has willfully made or caused to be made in any 
        application for registration or report required to be filed 
        with the Commission or with any other appropriate regulatory 
        agency under this title, or in any proceeding before the 
        Commission with respect to registration, any statement which 
        was at the time and in the light of the circumstances under 
        which it was made false or misleading with respect to any 
        material fact, or has omitted to state in any such application 
        or report any material fact which is required to be stated 
        therein;
          ``(B) has been convicted within 10 years preceding the filing 
        of any application for registration or at any time thereafter 
        of any felony or misdemeanor or of a substantially equivalent 
        crime by a foreign court of competent jurisdiction which the 
        Commission finds--
                  ``(i) involves the purchase or sale of any security, 
                the taking of a false oath, the making of a false 
                report, bribery, perjury, burglary, any substantially 
                equivalent activity however denominated by the laws of 
                the relevant foreign government, or conspiracy to 
                commit any such offense;
                  ``(ii) arises out of the conduct of the business of a 
                municipal financial adviser, broker, dealer, municipal 
                securities dealer, government securities broker, 
                government securities dealer, investment adviser, bank, 
                insurance company, fiduciary, transfer agent, 
                nationally recognized statistical rating organization, 
                foreign person performing a function substantially 
                equivalent to any of the above, or entity or person 
                required to be registered under the Commodity Exchange 
                Act (7 U.S.C. 1 et seq.) or any substantially 
                equivalent foreign statute or regulation;
                  ``(iii) involves the larceny, theft, robbery, 
                extortion, forgery, counterfeiting, fraudulent 
                concealment, embezzlement, fraudulent conversion, or 
                misappropriation of funds, or securities, or 
                substantially equivalent activity however denominated 
                by the laws of the relevant foreign government; or
                  ``(iv) involves the violation of section 152, 1341, 
                1342, or 1343 or chapter 25 or 47 of title 18, or a 
                violation of a substantially equivalent foreign 
                statute;
          ``(C) is permanently or temporarily enjoined by order, 
        judgment, or decree of any court of competent jurisdiction from 
        acting as a municipal financial adviser, investment adviser, 
        underwriter, broker, dealer, municipal securities dealer, 
        government securities broker, government securities dealer, 
        transfer agent, nationally recognized statistical rating 
        organization, foreign person performing a function 
        substantially equivalent to any of the above, or entity or 
        person required to be registered under the Commodity Exchange 
        Act or any substantially equivalent foreign statute or 
        regulation, or as an affiliated person or employee of any 
        investment company, bank, insurance company, foreign entity 
        substantially equivalent to any of the above, or entity or 
        person required to be registered under the Commodity Exchange 
        Act or any substantially equivalent foreign statute or 
        regulation or from engaging in or continuing any conduct or 
        practice in connection with any such activity, or in connection 
        with the purchase or sale of any security;
          ``(D) has willfully violated any provision of the Securities 
        Act of 1933, the Investment Advisers Act of 1940, the 
        Investment Company Act of 1940, the Commodity Exchange Act, 
        this title, the rules or regulations under any of such 
        statutes, or is unable to comply with any such provision;
          ``(E) has willfully aided, abetted, counseled, commanded, 
        induced, or procured the violation by any other person of any 
        provision of the Securities Act of 1933, the Investment 
        Advisers Act of 1940, the Investment Company Act of 1940, the 
        Commodity Exchange Act, this title, the rules or regulations 
        under any of such statutes, or has failed reasonably to 
        supervise, with a view to preventing violations of the 
        provisions of such statutes, rules, and regulations, another 
        person who commits such a violation, if such other person is 
        subject to his supervision. For the purposes of this 
        subparagraph, no person shall be deemed to have failed 
        reasonably to supervise any other person, if--
                  ``(i) there have been established procedures, and a 
                system for applying such procedures, which would 
                reasonably be expected to prevent and detect, insofar 
                as practicable, any such violation by such other 
                person, and
                  ``(ii) such person has reasonably discharged the 
                duties and obligations incumbent upon him by reason of 
                such procedures and system without reasonable cause to 
                believe that such procedures and system were not being 
                complied with;
          ``(F) is subject to any order of the Commission barring or 
        suspending the right of the person to be associated with a 
        municipal financial adviser;
          ``(G) has been found by a foreign financial regulatory 
        authority to have--
                  ``(i) made or caused to be made in any application 
                for registration or report required to be filed with a 
                foreign financial regulatory authority, or in any 
                proceeding before a foreign financial regulatory 
                authority with respect to registration, any statement 
                that was at the time and in the light of the 
                circumstances under which it was made false or 
                misleading with respect to any material fact, or has 
                omitted to state in any application or report to the 
                foreign financial regulatory authority any material 
                fact that is required to be stated therein;
                  ``(ii) violated any foreign statute or regulation 
                regarding transactions in securities, or contracts of 
                sale of a commodity for future delivery, traded on or 
                subject to the rules of a contract market or any board 
                of trade; or
                  ``(iii) aided, abetted, counseled, commanded, 
                induced, or procured the violation by any person of any 
                provision of any statutory provisions enacted by a 
                foreign government, or rules or regulations thereunder, 
                empowering a foreign financial regulatory authority 
                regarding transactions in securities, or contracts of 
                sale of a commodity for future delivery, traded on or 
                subject to the rules of a contract market or any board 
                of trade, or has been found, by a foreign financial 
                regulatory authority, to have failed reasonably to 
                supervise, with a view to preventing violations of such 
                statutory provisions, rules, and regulations, another 
                person who commits such a violation, if such other 
                person is subject to his supervision; or
          ``(H) is subject to any final order of a State securities 
        commission (or any agency or officer performing like 
        functions), State authority that supervises or examines banks, 
        savings associations, or credit unions, State insurance 
        commission (or any agency or office performing like functions), 
        an appropriate Federal banking agency (as defined in section 3 
        of the Federal Deposit Insurance Act (12 U.S.C. 1813(q))), or 
        the National Credit Union Administration, that--
                  ``(i) bars such person from association with an 
                entity regulated by such commission, authority, agency, 
                or officer, or from engaging in the business of 
                securities, insurance, banking, savings association 
                activities, or credit union activities; or
                  ``(ii) constitutes a final order based on violations 
                of any laws or regulations that prohibit fraudulent, 
                manipulative, or deceptive conduct.
  ``(5) Pending final determination whether any registration under this 
subsection shall be revoked, the Commission, by order, may suspend such 
registration, if such suspension appears to the Commission, after 
notice and opportunity for hearing, to be necessary or appropriate in 
the public interest or for the protection of investors. Any registered 
municipal financial adviser may, upon such terms and conditions as the 
Commission deems necessary or appropriate in the public interest or for 
the protection of investors, withdraw from registration by filing a 
written notice of withdrawal with the Commission. If the Commission 
finds that any registered municipal financial adviser is no longer in 
existence or has ceased to do business as a municipal financial 
adviser, the Commission, by order, shall cancel the registration of 
such municipal financial adviser.
  ``(6)(A) With respect to any person who is associated, who is seeking 
to become associated, or, at the time of the alleged misconduct, who 
was associated or was seeking to become associated with a municipal 
financial adviser, the Commission, by order, shall censure, place 
limitations on the activities or functions of such person, or suspend 
for a period not exceeding 12 months, or bar such person from being 
associated with a municipal financial adviser, if the Commission finds, 
on the record after notice and opportunity for a hearing, that such 
censure, placing of limitations, suspension, or bar is in the public 
interest and that such person--
          ``(i) has committed or omitted any act, or is subject to an 
        order or finding, enumerated in subparagraph (A), (D), or (E) 
        of paragraph (4) of this subsection;
          ``(ii) has been convicted of any offense specified in 
        subparagraph (B) of such paragraph (4) within 10 years of the 
        commencement of the proceedings under this paragraph; or
          ``(iii) is enjoined from any action, conduct, or practice 
        specified in subparagraph (C) of such paragraph (4).
  ``(B) It shall be unlawful--
          ``(i) for any person as to whom an order under subparagraph 
        (A) is in effect, without the consent of the Commission, 
        willfully to become, or to be, associated with a municipal 
        financial adviser in contravention of such order; or
          ``(ii) for any municipal financial adviser to permit such a 
        person, without the consent of the Commission, to become or 
        remain, a person associated with the municipal financial 
        adviser in contravention of such order, if such municipal 
        financial adviser knew, or in the exercise of reasonable care 
        should have known, of such order.
  ``(7) No registered municipal financial adviser shall act as such 
unless it meets such standards of operational capability and such 
municipal financial adviser and all natural persons associated with 
such municipal financial adviser meet such standards of training, 
experience, competence, and such other qualifications as the Commission 
finds necessary or appropriate in the public interest or for the 
protection of investors. The Commission shall establish such standards 
by rules and regulations, which may--
          ``(A) specify that all or any portion of such standards shall 
        be applicable to any class of municipal financial advisers and 
        persons associated with municipal financial advisers;
          ``(B) require persons in any such class to pass tests 
        prescribed in accordance with such rules and regulations, which 
        tests shall, with respect to any class of partners, officers, 
        or supervisory employees (which latter term may be defined by 
        the Commission's rules and regulations) engaged in the 
        management of the municipal financial adviser, include 
        questions relating to bookkeeping, accounting, supervision of 
        employees, maintenance of records, and other appropriate 
        matters; and
          ``(C) provide that persons in any such class other than 
        municipal financial advisers and partners, officers, and 
        supervisory employees of municipal financial advisers, may be 
        qualified solely on the basis of compliance with such standards 
        of training and such other qualifications as the Commission 
        finds appropriate.
The Commission, by rule, may prescribe reasonable fees and charges to 
defray its costs in carrying out this paragraph, including, but not 
limited to, fees for any test administered by it or under its 
direction.
  ``(c)(1)(A) No municipal financial adviser shall make use of the 
mails or any means or instrumentality of interstate commerce in 
connection with which such municipal financial adviser engages in any 
fraudulent, deceptive, or manipulative act or practice or violates such 
rules and regulations regarding conflicts of interest or fair 
practices, including but not limited to rules and regulations related 
to political contributions, as the Commission shall prescribe in the 
public interest or for the protection of investors or to maintain fair 
and orderly markets.
  ``(B) The Commission shall, for the purposes of this paragraph as the 
Commission finds necessary or appropriate in the public interest or for 
the protection of investors, by rules and regulations define, and 
prescribe means reasonably designed to prevent, such acts and practices 
as are fraudulent, deceptive, or manipulative.
  ``(2) If the Commission finds, after notice and opportunity for a 
hearing, that any person subject to the provisions of this section or 
any rule or regulation thereunder has failed to comply with any such 
provision, rule, or regulation in any material respect, the Commission 
may publish its findings and issue an order requiring such person, and 
any person who was a cause of the failure to comply due to an act or 
omission the person knew or should have known would contribute to the 
failure to comply, to comply, or to take steps to effect compliance, 
with such provision or such rule or regulation thereunder upon such 
terms and conditions and within such time as the Commission may specify 
in such order.
  ``(d) Every registered municipal financial adviser shall establish, 
maintain, and enforce written policies and procedures reasonably 
designed, taking into consideration the nature of such municipal 
financial adviser's business, to prevent the misuse in violation of 
this title, or the rules or regulations thereunder, of material, 
nonpublic information by such municipal financial adviser or any person 
associated with such municipal financial adviser. The Commission, as it 
deems necessary or appropriate in the public interest or for the 
protection of investors, shall adopt rules or regulations to require 
specific policies or procedures reasonably designed to prevent misuse 
in violation of this title (or the rules or regulations thereunder) of 
material, nonpublic information.
  ``(e) A municipal financial adviser and any person associated with 
such municipal financial adviser shall be deemed to have a fiduciary 
duty to any municipal securities issuer for whom such municipal 
financial adviser acts as a municipal financial adviser. A municipal 
financial adviser may not engage in any act, practice, or course of 
business which is not consistent with a municipal financial adviser's 
fiduciary duty. The Commission shall, for the purposes of this 
paragraph, by rules and regulations define, and prescribe means 
reasonably designed to prevent, such acts, practices, and courses of 
business as are not consistent with a municipal financial adviser's 
fiduciary duty to its clients.''.
  (b) Definition.--Section 3(a) of the Securities Exchange Act of 1934 
(15 U.S.C. 78c(a)) is amended by adding at the end the following new 
paragraphs:
          ``(65) Municipal financial adviser.--
                  ``(A) The term `municipal financial adviser' means a 
                person who, for compensation, engages in the business 
                of--
                          ``(i) providing advice to a municipal 
                        securities issuer with respect to--
                                  ``(I) the issuance or proposed 
                                issuance of securities, including any 
                                remarketing of municipal securities 
                                directly or indirectly by or on behalf 
                                of a municipal securities issuer;
                                  ``(II) the investment of proceeds 
                                from securities issued by such 
                                municipal securities issuer;
                                  ``(III) the hedging of any risks 
                                associated with subclauses (I) or (II), 
                                including advice as to swap agreements 
                                (as defined in section 206A of the 
                                Gramm-Leach-Bliley Act regardless of 
                                whether the counterparties constitute 
                                eligible contract participants); or
                                  ``(IV) preparation of disclosure 
                                documents in connection with the 
                                issuance, proposed issuance, or 
                                previous issuance of securities issued 
                                by a municipal securities issuer, 
                                including, without limitation, official 
                                statements and documents prepared in 
                                connection with a written agreement or 
                                contract for the benefit of holders of 
                                such securities described in section 
                                240.15c2-12 of title 17, Code of 
                                Federal Regulations;
                          ``(ii) assisting a municipal securities 
                        issuer in selecting or negotiating guaranteed 
                        investment contracts or other investment 
                        products; or
                          ``(iii) assisting any municipal securities 
                        issuer in the primary offering of securities 
                        not involving a public offering.
                  ``(B) Such term does not include--
                          ``(i) an attorney, if the attorney is 
                        offering advice or providing services that are 
                        of a traditional legal nature;
                          ``(ii) a nationally recognized statistical 
                        rating organization to the extent it is 
                        involved in the process of developing credit 
                        ratings;
                          ``(iii) a registered broker-dealer when 
                        acting as an underwriter, as such term is 
                        defined in section 2(a)(11) of the Securities 
                        Act of 1933 (15 U.S.C. section 77b(a)(11)); or
                          ``(iv) a State or any political subdivision 
                        thereof.
          ``(66) Municipal securities issuer.--The term `municipal 
        securities issuer' means--
                  ``(A) any entity that has the ability to issue a 
                security the interest on which is excludable from gross 
                income under section 103 of the Internal Revenue Code 
                of 1986 and the regulations thereunder; or
                  ``(B) any person who receives the proceeds generated 
                from the issuance of municipal securities.
          ``(67) Person associated with a municipal financial adviser; 
        associated person of a municipal financial adviser.--The term 
        `person associated with a municipal financial adviser' or 
        `associated person of a municipal financial adviser' means any 
        partner, officer, director, or branch manager of such municipal 
        financial adviser (or any person occupying a similar status or 
        performing similar functions), any person directly or 
        indirectly controlling, controlled by, or under common control 
        with such municipal financial adviser, or any employee of such 
        municipal financial adviser, except that any person associated 
        with a municipal financial adviser whose functions are solely 
        clerical or ministerial shall not be included in the meaning of 
        such term for purposes of section 15F(b) (other than paragraph 
        (6) thereof).''.

SEC. 802. CONFORMING AMENDMENTS.

  (a) Securities Exchange Act of 1934.--The Securities Exchange Act of 
1934 is amended--
          (1) in section 15(b)(4)(B)(ii) (15 U.S.C. 78o(b)(4)(B)(ii)), 
        by inserting ``municipal finance adviser,'' after ``nationally 
        recognized statistical rating organization,'';
          (2) in section 15(b)(4)(C) (15 U.S.C. 78o(b)(4)(C)), by 
        inserting ``municipal finance adviser,'' after ``nationally 
        recognized statistical rating organization,''; and
          (3) in section 17(a)(1) (15 U.S.C. 78q(a)(1)), by inserting 
        ``registered municipal financial adviser,'' after ``nationally 
        recognized statistical rating organization,''.
  (b) Investment Company Act of 1940.--The Investment Company Act of 
1940 is amended--
          (1) in section 2(a) (15 U.S.C. 80a-2(a)), by inserting at the 
        end the following new paragraph:
          ``(54) The term `municipal finance adviser' has the same 
        meaning as in section 3 of the Securities Exchange Act of 
        1934.'';
          (2) in section 9(a)(1) (15 U.S.C. 80a-9(a)(1)), by inserting 
        ``municipal finance adviser,'' after ``credit rating agency,''; 
        and
          (3) in section 9(a)(2) (15 U.S.C. 80a-9(a)(2)), by inserting 
        ``municipal finance adviser,'' after ``credit rating agency,''.
  (c) Investment Advisers Act of 1940.--The Investment Advisers Act of 
1940 is amended--
          (1) in section 202(a) (15 U.S.C. 80b-2(a)), by inserting at 
        the end the following new paragraph:
          ``(29) The term `municipal finance adviser' has the same 
        meaning as in section 3 of the Securities Exchange Act of 
        1934.'';
          (2) in section 203(e)(2)(B) (15 U.S.C. 80b-3(e)(2)(B)), by 
        inserting ``municipal finance adviser,'' after ``credit rating 
        agency,''; and
          (3) in section 203(e)(4) (15 U.S.C. 80b-3(e)(4)) is amended 
        by inserting ``municipal finance adviser,'' after ``credit 
        rating agency,''.

SEC. 803. EFFECTIVE DATES.

  (a) In General.--The amendments made by this title shall take effect 
30 days after the date of the enactment of this Act.
  (b) Effective Date and Requirements for Regulations.--Notwithstanding 
subsection (a), the Securities and Exchange Commission shall, within 
120 days after the date of the enactment of this Act, publish for 
notice and public comment such regulations as are initially required to 
implement this title, and shall take final action with respect to such 
regulations not later than 270 days after the date of enactment of this 
Act.
  (c) Registration Date.--No person may continue to act as a municipal 
financial adviser, as such term is defined in section 3(a)(65) of the 
Securities Exchange Act of 1934 (as added by this title), after 30 days 
after the date the regulations described in subsection (b) become 
effective unless such person has been registered as required by the 
amendment made by section 701 of this title.

                          Purpose and Summary

    H.R. 3817, the Investor Protection Act of 2009, generally 
aims to strengthen the oversight of U.S. securities markets, 
close regulatory loopholes, and better safeguard investors. 
Among its key reforms, the bill establishes a common fiduciary 
standard to apply to both broker-dealers and investment 
advisers in order to ensure that securities professionals place 
customers' interests first when offering investment advice. The 
legislation also provides the U.S. Securities and Exchange 
Commission (SEC) with the authority to restrict mandatory pre-
dispute arbitration clauses in securities contracts.
    Additionally, H.R. 3817 enhances the SEC's enforcement 
powers, remedies, and rulemaking authorities in a number of 
ways. Principally, the bill establishes a whistleblower bounty 
program to reward individuals whose tips about securities 
wrongdoing lead to successful enforcement actions by the SEC. 
The bill also facilitates the ability of the SEC to bring 
actions against those individuals who aid and abet securities 
fraud.
    H.R. 3817 further clarifies the ability of the SEC to issue 
rules regarding the nomination by shareholders of individuals 
to serve on the boards of public companies. These provisions 
regarding proxy access will enhance democratic participation in 
corporate governance.
    Moreover, H.R. 3817 modifies the SEC's funding and 
structure. In this regard, the legislation doubles the SEC's 
authorized budget over five years and provides a new funding 
stream to support the agency's operations via assessments on 
investor advisers. The bill also provides for an expeditious, 
independent, comprehensive study of the securities regulatory 
regime by a high caliber body with expertise in organizational 
restructuring to identify reforms and ensure that the SEC and 
other regulatory entities put in place further improvements 
designed to provide superior investor protection.
    H.R. 3817 additionally contains numerous reforms not only 
aimed at revising and bolstering the authorities of the 
Securities Investor Protection Corporation (SIPC), but also 
improving the effectiveness of the Public Company Accounting 
Oversight Board (PCAOB), especially its ability to take 
enforcement actions against the auditors of broker-dealers and 
its capacity to coordinate with foreign regulatory bodies. The 
bill further amends the Sarbanes-Oxley Act to improve 
whistleblower protections and to exempt public companies with 
less than $75 million in market capitalization from the law's 
external audit of internal control requirements, as well.
    Finally, H.R. 3817 creates a grant program to provide 
funding to the States for the enhanced protection of senior 
citizens from securities fraudsters. The legislation also 
requires the registration of municipal financial advisers to 
safeguard a sizable segment of the U.S. securities markets.

                  Background and Need for Legislation

    During the 110th Congress, the Financial Services Committee 
developed H.R. 6513, the Securities Act of 2008. The House 
ultimately passed the bipartisan investor protection package in 
September 2008, but the bill did not become law.
    The financial crisis that erupted in late 2008 further 
exposed vulnerabilities in the U.S. regulatory system and 
highlighted the lack of adequate safeguards for investors in 
the global capital markets. Without sufficient protections, 
investors lost confidence, and confidence among investors is 
the predicate for a healthy, functional securities marketplace.
    The massive Madoff and Stanford Financial investment fraud 
schemes that also came to light during the height of the crisis 
exhibited, in large part at least, the need to improve investor 
protection. They also demonstrated deficiencies in the existing 
securities regulatory structure. The freezing up of the 
auction-rate securities markets and ``breaking the buck'' by a 
prominent money-market fund provided two other, if less 
extreme, examples of problematic securities regulation.
    In response, the House Financial Services Committee worked 
in the 111th Congress to reconsider and augment the reforms 
contained in H.R. 6513 from the 110th Congress. This product 
became known as the Investor Protection Act, which Congressman 
Paul E. Kanjorski, the Chairman of the Financial Services 
Subcommittee on Capital Markets, Insurance, and Government 
Sponsored Enterprises, introduced as H.R. 3817 on October 15, 
2009.
    In general, H.R. 3817 addresses many recently identified 
investor protection problems by reforming the SEC to strengthen 
and update its powers, better safeguard investors, and 
efficiently and effectively regulate the capital markets. By 
doubling the SEC's authorized funding and providing dozens of 
new enforcement powers and regulatory authorities, the bill 
enhances the SEC's effectiveness and provides the agency with 
the tools needed to police today's complex securities markets.
    In addition to the specific statutory reforms included in 
H.R. 3817, the legislation provides for an expeditious, 
independent, comprehensive study of the securities regulatory 
regime by a high caliber body. This study will identify 
organizational reforms in order to ensure that the SEC and the 
other regulatory entities that monitor our securities markets 
put in place further improvements designed to ensure superior 
investor protection.
    H.R. 3817 also builds on the reforms previously passed by 
the House as part of H.R. 6513 in the 110th Congress. In 
addition to incorporating the vast majority of the provisions 
of H.R. 6513, H.R. 3817 includes reforms proposed by the Obama 
Administration as part of its comprehensive white paper 
entitled Financial Regulatory Reform: A New Foundation. H.R. 
3817 also contains numerous reforms first recommended by the 
SEC, the PCAOB, and SIPC, among others.
    Among its chief reforms, H.R. 3817 establishes that every 
financial intermediary who provides investment advice to 
customers will have a fiduciary duty to the investor. Through 
this harmonized standard of care, both broker-dealers and 
investment advisers will place customers' interests first.
    Regulators and practitioners have become increasingly 
concerned that investors are confused by the legal distinction 
between broker-dealers and investment advisers. The two groups 
owe investors different standards of care, even though their 
services and marketing have become increasingly 
indistinguishable to retail investors.
    In September 2006, the SEC commissioned a study by the RAND 
Corporation on the state of regulation for the investment 
advisory and brokerage industries. The RAND study found that 
this marketplace had become ``very heterogeneous'' in terms of 
the size, services and dual affiliations of many broker-dealers 
and investment advisers. The report also determined that a 
small number of extremely large firms, providing a full range 
of services, dominate the market.
    Moreover, the study concluded that investors do not fully 
understand the distinction between broker-dealers and 
investment advisers, including the duties they owe customers, 
the titles they use, the services they offer, and their 
compensation schemes. Even after the RAND study presented 
investors with plain language explanations of the distinct 
legal duties owed to customers by these two securities 
professional groups, focus-group participants could not 
understand the differences between the varying standards of 
care. Furthermore, even after investors learned that current 
laws held investment advisers to a higher standard of care, 
investors expressed doubt that any actual difference existed in 
practice.
    But under the law, the distinction is very real. On the one 
hand, investment advisers owe a fiduciary duty to their 
customers, the highest duty available under the law and one 
that requires them to completely subordinate their personal 
interests to those of their clients. On the other hand, broker-
dealers remain subject to a ``suitability'' requirement, a 
lower standard of care, when advising customers.
    A suitability standard allows broker-dealers to consider 
factors besides the client's best interests when offering 
investment advice. Unlike an investment adviser, who must 
recommend the best possible investment alternative, regardless 
of fees, the broker-dealer may recommend the security that 
generates the highest fee for the broker-dealer, if the 
security is ``suitable'' for the individual's investment goals, 
even if another security would better serve the needs of the 
customer. Moreover, the law does not subject a broker-dealer to 
an ongoing duty to disclose these conflicts of interest.
    Because of investor confusion and because the two 
professions have increasingly become interlinked, many investor 
advocates and securities regulators have contended that when 
brokerages give personalized advice to a customer they should 
face the same accountability that the fiduciary standard 
imposes on investment advisers. In October 2009, for example, 
the Financial Services Committee received testimony on this 
subject from Texas State Securities Commissioner Denise Voigt 
Crawford. Commissioner Crawford's statement echoes the RAND 
study's findings, noting that:

          The migration of stockbrokers into the advisory arena 
        through the marketing of brokers as ``trusted 
        advisers'' and ``financial advisors'' over the years 
        has fueled confusion among investors as to the services 
        provided by stockbrokers and investment advisers as 
        well as the level of protection.

    Additionally, Commissioner Crawford observed the importance 
of imposing on broker-dealers the traditional fiduciary duty 
emanating from the 1963 U.S. Supreme Court case known as SEC v. 
Capital Gains Research Bureau. A traditional fiduciary duty 
includes an affirmative duty of care, loyalty and honesty; an 
affirmative duty to act in good faith; and a duty to act in the 
best interests of the client.
    Commissioner Crawford also testified that several groups 
had proposed variations on this traditional duty, but she 
warned that these proposals ``would potentially supplant 
longstanding principles of fiduciary law embodied in decades of 
common law'' and might not require the up-front disclosures 
mandated by a traditional fiduciary standard. H.R. 3817 seeks 
to respect this existing body of case law in imposing a 
fiduciary duty standard on broker-dealers without altering the 
existing fiduciary standards of investment advisers.
    The RAND study further raised an important issue regarding 
field testing and outreach to investors. The RAND study 
obtained very precise results about investors' understanding of 
the brokerage and investment advisory businesses. It achieved 
these results by surveying more than 600 U.S households and 
conducting a number of focus groups.
    RAND also field tested plain language disclosures to assess 
whether they improved investor knowledge. Importantly, RAND 
learned that disclosures they deemed as ``plain language'' did 
not clarify investor understanding. Such field testing is an 
integral part of social science research, program design, and 
market assessment, but the SEC does not practice it. H.R. 3817 
works to address this situation by clarifying the SEC's 
authority to engage in consumer testing.
    For too long, securities industry practices have deprived 
investors of a choice when seeking dispute settlement, too. In 
particular, pre-dispute mandatory arbitration clauses inserted 
into contracts have limited the ability of defrauded investors 
to seek redress. Brokerage firms contend that arbitration is 
fair and efficient as a dispute resolution mechanism.
    Critics of mandatory arbitration clauses, however, maintain 
that the brokerage firms hold powerful advantages over 
investors. Brokerages often hide mandatory arbitration clauses 
in dense contract language. Moreover, arbitration settlements 
generally remain secret, preventing other investors from 
learning about the performance of a particular brokerage firm.
    If arbitration truly offers investors the opportunity to 
efficiently and fairly settle disputes, then investors will 
choose that option. But investors should also have the choice 
to pursue remedies in court, should they view that option as 
superior to arbitration. For these reasons, H.R. 3817 provides 
the SEC with the authority to limit, prohibit or place 
conditions on mandatory arbitration clauses in securities 
contracts.
    A myriad of problems presently confronts the SEC, perhaps 
none more urgent than the need for adequate resources. SEC 
Chairman Mary L. Schapiro and others have repeatedly stressed 
the need to increase the funding to ensure that the agency has 
the ability to keep pace with technological advances in the 
securities markets, hire staff with industry expertise, and 
fulfill one of its core missions: the protection of investors.
    To assist the agency in accomplishing these goals and 
achieving its other objectives, H.R. 3817 doubles the SEC's 
authorized funding from $1.115 billion in FY 2010 to $2.25 
billion in FY 2015. Together these authorized amounts will 
provide the SEC with nearly $10 billion in funding over six 
years.
    Many have documented the need for increased SEC funding. A 
report in March 2009 by the Government Accountability Office, 
for example, noted that SEC enforcement staff felt insufficient 
funding impeded their ability to effectively oversee the 
securities industry. In particular, the report notes that:

        . . . both management and staff said resource 
        challenges have delayed cases, reduced the number of 
        cases that can be brought, and potentially undermined 
        the quality of some cases. Specifically, investigative 
        attorneys cited the low level of administrative, 
        paralegal, and information technology support, and 
        unavailability of specialized services and expertise, 
        as challenges to bringing actions.

    In May 2009, Mr. Robert Khuzami, the Director of the SEC 
Division of Enforcement, also testified before the U.S. Senate 
Banking, Housing, and Urban Affairs Subcommittee on Securities, 
Insurance, and Investment. In his testimony, Mr. Khuzami 
offered the following assessment of the agency's resource 
needs:

          In today's markets, the SEC oversees more than 30,000 
        registrants, including more than 12,000 public 
        companies, 4,600 mutual fund families, 11,000 
        investment advisers, 600 transfer agents, and 5,500 
        broker dealers. In fiscal year 2008, the Enforcement 
        Division received more than 700,000 complaints, tips 
        and referrals regarding potential violations of the 
        federal securities laws. Yet, our entire Enforcement 
        staff nationwide--including lawyers, accountants, 
        information technology staff, and support staff--is 
        just above 1,100.

    If, as is contemplated by H.R. 3818, the Private Fund 
Investment Advisers Registration Act of 2009, advisers to 
private pools of capital also register with the SEC, the SEC 
could become responsible for the oversight of several thousand 
more registrants. H.R. 3817 ensures that the SEC will have the 
funding it needs to handle this increase in responsibilities.
    On October 6, 2009, the Financial Services Committee 
further received testimony from Mr. Richard Ketchum, the 
Chairman and Chief Executive Officer of the Financial Industry 
Regulatory Authority (FINRA), a self-regulatory organization. 
Mr. Ketchum noted that of more than 11,000 federally registered 
investment advisory firms, the SEC projected that it would 
examine only 9 percent in 2009 and 2010. By comparison, FINRA 
and the SEC, which share oversight duties for brokerages, will 
together examine 55 percent of nearly 5,000 registered broker-
dealer firms on average during the same timeframe.
    When combined, these statistics begin to explain, but not 
forgive, the failure of the SEC to aggressively investigate and 
uncover the massive fraud perpetrated by Mr. Bernard L. Madoff. 
They also raise concerns that the SEC, the government's chief 
securities regulator, has fewer resources than even FINRA, a 
front-line self-funded securities regulatory entity that the 
SEC oversees.
    Currently, broker-dealers pay a fee to FINRA to support 
their inspections and examinations, with the SEC providing 
backstop regulatory oversight and enforcement for this 
securities profession. The SEC, however, can assess no similar 
fee to support its direct examinations of investment advisers. 
To address this inequity and to increase the SEC's available 
resources, H.R. 3817 establishes a new funding stream for the 
agency through fees paid by investment advisers.
    In addition to increasing its funding, H.R. 3817 vests the 
SEC with increased enforcement authorities to address long-
standing concerns about the agency's powers. For example, many 
market analysts have noted that the SEC should have the 
authority to impose collateral bars on individuals in order to 
prevent wrongdoers in one sector of the securities industry 
from entering another sector.
    A 1999 appellate decision for the D.C. Circuit, Teicher v. 
SEC, rejected the SEC authority to impose collateral bars in 
certain circumstances. Since then, administrative law judges 
have become reluctant to issue them at all. Yet, especially in 
light of the extreme blurring of the brokerage and investment 
advisory industries, many contend that the SEC should have the 
power to bar actors who violate the law in one area of the 
industry from participating in other areas. H.R. 3817 provides 
the SEC with clear authority to do so.
    By addressing the SEC's extra-territorial jurisdiction, 
H.R. 3817 further acknowledges the global nature of securities 
frauds and Ponzi schemes. Without clear statutory guidance, the 
courts have developed and employed two separate tests to 
determine the question of jurisdiction in such cases: the 
conduct test and the effects test.
    H.R. 3817 seeks to settle conflicts and confusion about 
which tests courts should use when considering extra-
territorial jurisdiction in securities matters by providing the 
SEC with the broadest authority to prosecute actions truly 
international in scope. It achieves this goal by codifying both 
the conduct and the effects tests. Together, these tests will 
provide one national standard for protecting investors.
    The Investor Protection Act also recognizes the need for 
greater flexibility for regulators to obtain and share 
information in today's increasingly complex global securities 
markets. With H.R. 3817, the SEC will have broader authority to 
collect information from and coordinate with foreign regulatory 
bodies about securities law violations.
    While the entire financial crisis has brought to light 
weaknesses in the present system for securities regulation, 
perhaps no case has highlighted the problems of our existing 
investor protection framework as the massive Madoff fraud. 
Federal authorities arrested Mr. Madoff in December 2008 for 
perpetrating the largest investment fraud in history. Estimates 
of investor losses vary, but Mr. Madoff ultimately pleaded 
guilty in March 2009 to 11 charges of defrauding investors out 
of almost $65 billion over 20 years in a Ponzi scheme. For 
these transgressions, Mr. Madoff received a 150-year prison 
sentence.
    Mr. Madoff's victims included pension funds, charities, 
wealthy investors, and large investment and asset management 
firms. They also included dozens of foreign financial 
institutions, such as commercial banks, investment banks, 
private banks, brokerages, hedge funds, insurers, and other 
financial services providers.
    In perpetrating his landmark fraud, Mr. Madoff worked with 
others, as well. A top aide and his longtime independent 
auditor have both already pleaded guilty to charges related to 
the deception.
    Whereas the Big Four accounting firms audit most large 
investment firms, Mr. Madoff's firm used a relatively obscure, 
small auditor to review the company's financial statements. The 
three-person auditing practice had not registered with the 
PCAOB as a result of a series of exemptions granted by the SEC 
after the enactment of the Sarbanes-Oxley Act.
    Moreover, Mr. Harry Markopolos's regular communications 
with the SEC should have alerted the agency that Mr. Madoff's 
activities deserved closer scrutiny. The whistleblower first 
contacted the SEC in 2000 about his concerns. In late 2005, Mr. 
Markopolos sent the SEC a 19-page report entitled ``The World's 
Largest Hedge Fund is a Fraud.''
    As reported by the Wall Street Journal on December 18, 
2008, this document ``presented a series of 29 `red flags,' 
ranging from in-depth mathematical calculations that purported 
to show the Madoff investment strategy couldn't work, to little 
more than rumor or innuendo--such as claims that a group of 
Arab investors were barred from using a major accounting firm 
to examine Mr. Madoff's books.'' Mr. Markopolos concluded that 
Mr. Madoff could only be engaged in one of two illegal 
practices--front-running or a Ponzi scheme. The SEC, 
unfortunately, failed to carefully examine Mr. Markopolos's 
conclusions.
    On the heels of the Madoff revelations, in early 2009, 
allegations of another massive fraud arose. Stanford Financial 
Group and its owner, Mr. Allen Stanford, now stand accused of 
engaging in an $8 billion fraud to produce consistently above-
market returns. The case has not yet been adjudicated, and Mr. 
Stanford has pleaded not guilty to fraud, conspiracy, and 
obstruction of justice charges. Nevertheless, this financial 
scam negatively affected the fortunes of numerous investors.
    In addition to suffering sizable losses resulting from the 
Madoff and Stanford Financial frauds, investors experienced 
considerable setbacks as a result of purchasing securities 
backed by abusive and problematic mortgages. Together, these 
developments highlight shortcomings in the current system for 
investor protection regulation and the need for greater 
disclosures and accountability.
    To fix the problems exposed by the Madoff scandal, the 
Stanford Financial fraud, and the meltdown of the mortgage-
backed securities markets, H.R. 3817 takes a number of steps. 
For example, the bill closes a legal loophole in the Sarbanes-
Oxley Act by giving the PCAOB the explicit power to investigate 
or examine the auditors of all broker-dealers. In granting this 
new power, the bill provides flexibility to the PCAOB to 
differentiate among classes of broker-dealers.
    Because the SEC had failed to uncover the Madoff Ponzi 
scheme, despite having received a number of tips from several 
different sources as to the fraud's existence, H.R. 3817 
creates a bounty program to reward individuals whose tips lead 
to successful enforcement actions by the SEC. After conducting 
his review of the Madoff fraud, SEC Inspector General H. David 
Kotz agreed with both the whistleblower protections and the 
PCAOB broker-dealer auditor fix contained in H.R. 3817.
    Mr. Kotz further recommended changes to the law regarding 
the custody of records. Accordingly, H.R. 3817 improves 
statutory custody requirements. These changes will help to make 
it more difficult for fraudsters to misappropriate investors' 
securities.
    H.R. 3817 also refines and makes improvements to the 
Securities Investor Protection Act. The Bernard L. Madoff 
Investment Securities and Lehman Brothers liquidations have 
placed a severe burden on the available resources of SIPC. To 
address this potential shortfall and protect against other such 
episodes in the future, the bill increases from $1 billion to 
$2.5 billion the borrowing authority at the Treasury Department 
for SIPC and raises the minimum assessments paid by SIPC 
members.
    Among other things, H.R. 3817 also imposes both civil and 
criminal liability for false representation that an account has 
SIPC coverage. Moreover, H.R. 3817 enhances investor protection 
by providing SIPC coverage for futures held in portfolio margin 
accounts and increases SIPC's cash advance limits to bring them 
in line with the protection provided by the Federal Deposit 
Insurance Corporation.
    In addition, the bill aims to protect senior citizens from 
less than scrupulous financial advisors who prey on the elderly 
by touting misleading or fraudulent ``senior'' designations and 
specializations. Too often these deceptive titles can be 
obtained online and require little or no training to acquire.
    In response, the bill creates a new grant program 
administered by the SEC to assist the States in their efforts 
to protect seniors from misleading financial advisor 
designations and improve investor protections. The grants will 
provide the States with incentives to improve their own rules 
regulating the use of senior designations by encouraging them 
to adopt the North American Securities Administrators 
Association's and National Association of Insurance 
Commissioners' new model rules on the use of senior 
designations and suitability standards.
    The grants are designed to give the States the flexibility 
to use funds for a wide variety of senior investor protection 
efforts, including hiring additional staff to investigate and 
prosecute cases. The States may also use the grants to fund new 
technology, equipment and training for regulators, prosecutors 
and law enforcement, as well as to provide educational 
materials to increase awareness and understanding of 
designations.
    The financial crisis also laid bare problems in the $2.8 
trillion municipal bond market in the United States and showed 
that municipal financial advisors needed better oversight. SEC 
Office of Municipal Securities Chief Martha Mahan Haines made 
clear the need for Congress to act when she stated during a May 
2009 hearing of the Financial Services Committee: ``The impact 
on the functioning of this market . . . from poor advice . . . 
or misleading disclosure documents prepared by unqualified 
municipal financial advisers, participation by financial 
advisors with conflicts of interest or those engaged in pay-to-
play activities can indirectly affect the daily lives of 
Americans.''
    H.R. 3817 therefore extends regulation to the financial 
advisers of municipalities. In particular, the bill would bring 
professional standards to an area of public finance that 
currently lacks formal rules. Specifically, H.R. 3817 
establishes a requirement and sets out the terms under which 
municipal financial advisers will register with the SEC. The 
bill also prohibits municipal financial advisers from engaging 
in certain transactions and establishes a fiduciary duty for 
these securities professionals.
    In sum, H.R. 3817 responds to the financial crisis by 
putting in place more than six dozen reforms aimed overall at 
improving investor protection. These safeguards include 
establishing a fiduciary duty for broker-dealers, creating a 
whistleblower bounty program to reward tipsters, and 
restricting the use of mandatory arbitration clauses in 
securities contracts. The bill also enhances oversight of the 
auditors of broker-dealers and of municipal financial advisers.
    H.R. 3817 further ensures that SIPC will have the resources 
it needs to compensate defrauded investors and updates 
provisions that have remained unchanged for more than three 
decades. Finally, the bill enhances the SEC's resources and 
effectiveness by doubling the agency's authorized funding over 
five years, creating a new funding stream to support its 
activities, and forcing a top-to-bottom study of its 
operations. Together these reforms will better protect 
investors in the future.

                                Hearings

    The Financial Services Committee has reviewed the 
extraordinary investment fraud perpetrated by Mr. Madoff on two 
occasions. The Committee first met in a proceeding entitled 
Assessing the Madoff Ponzi Scheme and the Need for Regulatory 
Reform on January 5, 2009, and the following individuals 
participated:

Panel One

     Mr. H. David Kotz, Inspector General, SEC
     Mr. Stephen P. Harbeck, President, SIPC

Panel Two

     Mr. Allan Goldstein, a retiree and investor with 
Bernard L. Madoff Investment Securities
     Ms. Tamar Frankel, Professor of Law and Michaels 
Faculty Research Scholar, Boston University School of Law
     Mr. Leon Metzger, adjunct faculty member at 
Columbia University, Cornell University, New York University, 
and Yale University
    The Subcommittee on Capital Markets, Insurance, and 
Government Sponsored Enterprises subsequently held a hearing 
entitled Assessing the Madoff Ponzi Scheme and Regulatory 
Failures on February 4, 2009. The following witnesses 
testified:

Panel One

     Mr. Harry Markopolos, an independent financial 
fraud investigator for institutional investors and others 
seeking forensic accounting expertise, as well as a Chartered 
Financial Analyst and Certified Fraud Examiner

Panel Two

     Ms. Linda Thomsen, Director, Division of 
Enforcement, SEC
     Mr. Andrew J. Donohue, Director, Division of 
Investor Management, SEC
     Mr. Erik Sirri, Director, Division of Trading and 
Markets, SEC
     Mr. Andy Vollmer, Acting General Counsel, SEC
     Ms. Lori A. Richards, Director, Office of 
Compliance Inspections and Examinations, SEC
     Mr. Stephen Luparello, Interim Chief Executive 
Officer, FINRA
    Also, the Financial Services Committee held a hearing 
entitled Federal and State Enforcement of Financial Consumer 
and Investor Protection Laws on March 20, 2009. The following 
people participated:

Panel One

     The Honorable Elizabeth A. Duke, Governor, Board 
of Governors of the Federal Reserve System
     The Honorable John C. Dugan, Comptroller, Office 
of the Comptroller of the Currency
     The Honorable Elisse B. Walter, Commissioner, SEC
     The Honorable Martin J. Gruenberg, Vice Chairman, 
Federal Deposit Insurance Corporation
     Mr. Scott Polakoff, Acting Director, Office of 
Thrift Supervision
     Ms. Rita Glavin, Acting Assistant Attorney 
General, Criminal Division, U.S. Department of Justice
     Mr. John Pistole, Deputy Director, Federal Bureau 
of Investigations

Panel Two

     The Honorable William Francis Galvin, Secretary of 
the Commonwealth of Massachusetts
     The Honorable Lisa Madigan, Attorney General, 
State of Illinois
     Ms. Sarah Bloom Raskin, Commissioner, Maryland 
Office of Financial Regulation
     Mr. James B. Ropp, Securities Commissioner, 
Delaware Department of Justice
     Mr. Merle D. Sharick, Mortgage Asset Research 
Institute
    Subsequently, the Financial Services Committee held a 
hearing entitled Legislative Proposals to Improve the 
Efficiency and Oversight of Municipal Finance on May 21, 2009. 
Witnesses testifying included:

Panel One

     Ms. Martha Mahan Haines, Chief, Office of 
Municipal Securities, SEC
     Mr. Bill Apgar, Senior Advisor to the Secretary, 
U.S. Department of Housing and Urban Development
     Mr. David W. Wilcox, Deputy Director, Division of 
Research and Statistics, Board of Governors of the Federal 
Reserve System
     The Honorable Thomas C. Leppert, Mayor of Dallas, 
Texas on behalf of the U.S. Conference of Mayors
     Mr. Ben Watkins, Director of State of Florida 
Division of Bond Finance, State Board of Administration

Panel Two

     Mr. Michael J. Marz, Vice Chairman, First 
Southwest Company on behalf of the Regional Bond Dealers 
Association
     Ms. Laura Levenstein, Senior Managing Director, 
Moody's Investors Service
     Mr. Keith Curry, PFM Group, Managing Director
     Mr. Alan B. Ispass, PE, BCEE, Vice President and 
Global Director of Utility Management Solutions, CH2M Hill
     Mr. Sean W. McCarthy, President and Chief 
Operating Officer, Financial Security Assurance, Inc.
     Mr. Bernard Beal, Chief Executive Officer, MR Beal 
& Company on behalf of the Securities Industry and Financial 
Markets Association
     Ms. Mary Jo Ochson, CFA, Senior Vice President, 
Chief Investment Officer for the Tax-Exempt Money Market and 
Municipal Bond Investment Groups and Senior Portfolio Manager, 
The Federated Funds
     Mr. Mike Allen, Chief Financial Officer, Winona 
Health on behalf of Healthcare Financial Management Association
     Mr. Sean Egan, Managing Director, Egan-Jones 
Ratings Company
    The Capital Markets Subcommittee additionally convened a 
hearing entitled SEC Oversight: Current State and Agenda on 
July 14, 2009. The Honorable Mary L. Schapiro, Chairman of the 
SEC, testified during the proceedings.
    Finally, the Financial Services Committee held a hearing 
entitled Capital Markets Regulatory Reform: Strengthening 
Investor Protection, Enhancing Oversight of Private Pools of 
Capital, and Creating a National Insurance Office on October 6, 
2009. The first panel discussed investor protection issues, and 
the following witnesses testified on that panel:
     Ms. Denise Voigt Crawford, Texas Securities 
Commissioner, Securities Administrators Board, on behalf of the 
North American Securities Administrators Association
     Mr. Richard Ketchum, Chairman and CEO, FINRA
     Mr. Mercer E. Bullard, Founder and President, Fund 
Democracy, Inc.
     Mr. John Taft, Head of Wealth Management, RBC 
Wealth Management, on behalf of Securities Industry and 
Financial Markets Association
     Mr. David G. Tittsworth, Executive Director, 
Investment Adviser Association
     Mr. Bruce W. Maisel, Vice President and Managing 
Counsel, General Counsel's Office, Thrivent Financial for 
Lutherans, on behalf of the American Council of Life Insurers

                        Committee Consideration

    The Committee on Financial Services met in open session on 
October 28 and November 3, 2009, and on November 4, 2009, 
ordered H.R. 3817, Investor Protection Act of 2009, favorably 
reported to the House by a record vote of 41 yeas and 28 nays.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Mr. Frank to report the bill, as amended, to the 
House with a favorable recommendation was agreed to by a record 
vote of 41 yeas and 28 nays (Record vote no. FC-88). The names 
of Members voting for and against follow:

                                              RECORD VOTE NO. FC-88
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................        X   ........  .........  Mr. Bachus.......  ........        X   .........
Mr. Kanjorski..................        X   ........  .........  Mr. Castle.......  ........        X   .........
Ms. Waters.....................        X   ........  .........  Mr. King (NY)....  ........        X   .........
Mrs. Maloney...................        X   ........  .........  Mr. Royce........  ........        X   .........
Mr. Gutierrez..................        X   ........  .........  Mr. Lucas........  ........        X   .........
Ms. Velazquez..................        X   ........  .........  Mr. Paul.........  ........        X   .........
Mr. Watt.......................        X   ........  .........  Mr. Manzullo.....  ........        X   .........
Mr. Ackerman...................        X   ........  .........  Mr. Jones........  ........        X   .........
Mr. Sherman....................        X   ........  .........  Mrs. Biggert.....  ........        X   .........
Mr. Meeks......................        X   ........  .........  Mr. Miller (CA)..  ........        X   .........
Mr. Moore (KS).................        X   ........  .........  Mrs. Capito......  ........        X   .........
Mr. Capuano....................        X   ........  .........  Mr. Hensarling...  ........        X   .........
Mr. Hinojosa...................        X   ........  .........  Mr. Garrett (NJ).  ........        X   .........
Mr. Clay.......................        X   ........  .........  Mr. Barrett (SC).  ........        X   .........
Mrs. McCarthy..................        X   ........  .........  Mr. Gerlach......  ........  ........  .........
Mr. Baca.......................        X   ........  .........  Mr. Neugebauer...  ........        X   .........
Mr. Lynch......................        X   ........  .........  Mr. Price (GA)...  ........        X   .........
Mr. Miller (NC)................        X   ........  .........  Mr. McHenry......  ........        X   .........
Mr. Scott......................        X   ........  .........  Mr. Campbell.....  ........        X   .........
Mr. Green......................        X   ........  .........  Mr. Putnam.......  ........        X   .........
Mr. Cleaver....................        X   ........  .........  Mrs. Bachmann....  ........        X   .........
Ms. Bean.......................        X   ........  .........  Mr. Marchant.....  ........        X   .........
Ms. Moore (WI).................        X   ........  .........  Mr. McCotter.....  ........        X   .........
Mr. Hodes......................        X   ........  .........  Mr. McCarthy.....  ........        X   .........
Mr. Ellison....................        X   ........  .........  Mr. Posey........  ........        X   .........
Mr. Klein......................        X   ........  .........  Ms. Jenkins......  ........        X   .........
Mr. Wilson.....................        X   ........  .........  Mr. Lee..........  ........        X   .........
Mr. Perlmutter.................  ........  ........  .........  Mr. Paulsen......  ........        X   .........
Mr. Donnelly...................        X   ........  .........  Mr. Lance........  ........        X   .........
Mr. Foster.....................        X   ........  .........  .................  ........  ........  .........
Mr. Carson.....................        X   ........  .........  .................  ........  ........  .........
Ms. Speier.....................        X   ........  .........  .................  ........  ........  .........
Mr. Childers...................        X   ........  .........  .................  ........  ........  .........
Mr. Minnick....................        X   ........  .........  .................  ........  ........  .........
Mr. Adler......................        X   ........  .........  .................  ........  ........  .........
Ms. Kilroy.....................        X   ........  .........  .................  ........  ........  .........
Mr. Driehaus...................        X   ........  .........  .................  ........  ........  .........
Ms. Kosmas.....................        X   ........  .........  .................  ........  ........  .........
Mr. Grayson....................        X   ........  .........  .................  ........  ........  .........
Mr. Himes......................        X   ........  .........  .................  ........  ........  .........
Mr. Peters.....................        X   ........  .........  .................  ........  ........  .........
Mr. Maffei.....................        X   ........  .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    During consideration of the bill, the following amendments 
were disposed of by record votes. The names of Members voting 
for and against follow:
    An amendment by Mr. Price, no. 6, striking section 201 
(authority to restrict mandatory pre-dispute arbitration), was 
not agreed to by a record vote of 27 yeas and 38 nays (Record 
vote no. FC-80):

                                              RECORD VOTE NO. FC-80
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................  ........        X   .........  Mr. Bachus.......        X   ........  .........
Mr. Kanjorski..................  ........        X   .........  Mr. Castle.......        X   ........  .........
Ms. Waters.....................  ........        X   .........  Mr. King (NY)....        X   ........  .........
Mrs. Maloney...................  ........        X   .........  Mr. Royce........        X   ........  .........
Mr. Gutierrez..................  ........        X   .........  Mr. Lucas........        X   ........  .........
Ms. Velazquez..................  ........        X   .........  Mr. Paul.........        X   ........  .........
Mr. Watt.......................  ........  ........  .........  Mr. Manzullo.....        X   ........  .........
Mr. Ackerman...................  ........        X   .........  Mr. Jones........        X   ........  .........
Mr. Sherman....................  ........        X   .........  Mrs. Biggert.....        X   ........  .........
Mr. Meeks......................  ........        X   .........  Mr. Miller (CA)..  ........  ........  .........
Mr. Moore (KS).................  ........  ........  .........  Mrs. Capito......        X   ........  .........
Mr. Capuano....................  ........        X   .........  Mr. Hensarling...        X   ........  .........
Mr. Hinojosa...................  ........        X   .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Clay.......................  ........        X   .........  Mr. Barrett (SC).        X   ........  .........
Mrs. McCarthy..................  ........  ........  .........  Mr. Gerlach......  ........  ........  .........
Mr. Baca.......................  ........        X   .........  Mr. Neugebauer...        X   ........  .........
Mr. Lynch......................  ........        X   .........  Mr. Price (GA)...        X   ........  .........
Mr. Miller (NC)................  ........        X   .........  Mr. McHenry......        X   ........  .........
Mr. Scott......................  ........        X   .........  Mr. Campbell.....        X   ........  .........
Mr. Green......................  ........        X   .........  Mr. Putnam.......        X   ........  .........
Mr. Cleaver....................  ........        X   .........  Mrs. Bachmann....        X   ........  .........
Ms. Bean.......................  ........        X   .........  Mr. Marchant.....        X   ........  .........
Ms. Moore (WI).................  ........  ........  .........  Mr. McCotter.....        X   ........  .........
Mr. Hodes......................  ........        X   .........  Mr. McCarthy.....        X   ........  .........
Mr. Ellison....................  ........        X   .........  Mr. Posey........        X   ........  .........
Mr. Klein......................  ........        X   .........  Ms. Jenkins......        X   ........  .........
Mr. Wilson.....................  ........        X   .........  Mr. Lee..........        X   ........  .........
Mr. Perlmutter.................  ........        X   .........  Mr. Paulsen......        X   ........  .........
Mr. Donnelly...................  ........        X   .........  Mr. Lance........        X   ........  .........
Mr. Foster.....................  ........        X   .........  .................  ........  ........
Mr. Carson.....................  ........        X   .........  .................  ........  ........  .........
Ms. Speier.....................  ........        X   .........  .................  ........  ........  .........
Mr. Childers...................  ........        X   .........  .................  ........  ........  .........
Mr. Minnick....................  ........        X   .........  .................  ........  ........  .........
Mr. Adler......................  ........        X   .........  .................  ........  ........  .........
Ms. Kilroy.....................  ........        X   .........  .................  ........  ........  .........
Mr. Driehaus...................  ........        X   .........  .................  ........  ........  .........
Ms. Kosmas.....................  ........        X   .........  .................  ........  ........  .........
Mr. Grayson....................  ........        X   .........  .................  ........  ........  .........
Mr. Himes......................  ........        X   .........  .................  ........  ........  .........
Mr. Peters.....................  ........        X   .........  .................  ........  ........  .........
Mr. Maffei.....................  ........        X   .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mrs. Maloney (and Mr. Garrett), no. 9, 
regarding a study on internal control evaluation and reporting 
cost burdens on smaller issuers, was agreed to by a record vote 
of 57 yeas and 12 nays (Record vote no. FC-81):

                                              RECORD VOTE NO. FC-81
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................  ........        X   .........  Mr. Bachus.......        X   ........  .........
Mr. Kanjorski..................        X   ........  .........  Mr. Castle.......        X   ........  .........
Ms. Waters.....................        X   ........  .........  Mr. King (NY)....        X   ........  .........
Mrs. Maloney...................        X   ........  .........  Mr. Royce........        X   ........  .........
Mr. Gutierrez..................  ........        X   .........  Mr. Lucas........        X   ........  .........
Ms. Velazquez..................        X   ........  .........  Mr. Paul.........        X   ........  .........
Mr. Watt.......................  ........        X   .........  Mr. Manzullo.....        X   ........  .........
Mr. Ackerman...................  ........        X   .........  Mr. Jones........        X   ........  .........
Mr. Sherman....................        X   ........  .........  Mrs. Biggert.....        X   ........  .........
Mr. Meeks......................        X   ........  .........  Mr. Miller (CA)..        X   ........  .........
Mr. Moore (KS).................        X   ........  .........  Mrs. Capito......        X   ........  .........
Mr. Capuano....................        X   ........  .........  Mr. Hensarling...        X   ........  .........
Mr. Hinojosa...................        X   ........  .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Clay.......................  ........        X   .........  Mr. Barrett (SC).        X   ........  .........
Mrs. McCarthy..................  ........  ........  .........  Mr. Gerlach......  ........  ........  .........
Mr. Baca.......................        X   ........  .........  Mr. Neugebauer...        X   ........  .........
Mr. Lynch......................        X   ........  .........  Mr. Price (GA)...        X   ........  .........
Mr. Miller (NC)................        X   ........  .........  Mr. McHenry......        X   ........  .........
Mr. Scott......................        X   ........  .........  Mr. Campbell.....        X   ........  .........
Mr. Green......................        X   ........  .........  Mr. Putnam.......        X   ........  .........
Mr. Cleaver....................        X   ........  .........  Mrs. Bachmann....        X   ........  .........
Ms. Bean.......................        X   ........  .........  Mr. Marchant.....        X   ........  .........
Ms. Moore (WI).................        X   ........  .........  Mr. McCotter.....        X   ........  .........
Mr. Hodes......................        X   ........  .........  Mr. McCarthy.....        X   ........  .........
Mr. Ellison....................  ........        X   .........  Mr. Posey........        X   ........  .........
Mr. Klein......................  ........        X   .........  Ms. Jenkins......        X   ........  .........
Mr. Wilson.....................        X   ........  .........  Mr. Lee..........        X   ........  .........
Mr. Perlmutter.................  ........        X   .........  Mr. Paulsen......        X   ........  .........
Mr. Donnelly...................        X   ........  .........  Mr. Lance........        X   ........  .........
Mr. Foster.....................        X   ........  .........  .................  ........  ........  .........
Mr. Carson.....................  ........        X   .........  .................  ........  ........  .........
Ms. Speier.....................        X   ........  .........  .................  ........  ........  .........
Mr. Childers...................        X   ........  .........  .................  ........  ........  .........
Mr. Minnick....................        X   ........  .........  .................  ........  ........  .........
Mr. Adler......................        X   ........  .........  .................  ........  ........  .........
Ms. Kilroy.....................  ........        X   .........  .................  ........  ........  .........
Mr. Driehaus...................        X   ........  .........  .................  ........  ........  .........
Ms. Kosmas.....................        X   ........  .........  .................  ........  ........  .........
Mr. Grayson....................  ........        X   .........  .................  ........  ........  .........
Mr. Himes......................  ........        X   .........  .................  ........  ........  .........
Mr. Peters.....................        X   ........  .........  .................  ........  ........  .........
Mr. Maffei.....................        X   ........  .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Lee, no. 12, regarding grandfathering 
of existing agreements, was not agreed to by a record vote of 
29 yeas and 40 nays (Record vote no. FC-82):

                                              RECORD VOTE NO. FC-82
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................  ........        X   .........  Mr. Bachus.......        X   ........  .........
Mr. Kanjorski..................  ........        X   .........  Mr. Castle.......        X   ........  .........
Ms. Waters.....................  ........        X   .........  Mr. King (NY)....        X   ........  .........
Mrs. Maloney...................  ........        X   .........  Mr. Royce........        X   ........  .........
Mr. Gutierrez..................  ........        X   .........  Mr. Lucas........        X   ........  .........
Ms. Velazquez..................  ........        X   .........  Mr. Paul.........        X   ........  .........
Mr. Watt.......................  ........        X   .........  Mr. Manzullo.....        X   ........  .........
Mr. Ackerman...................  ........        X   .........  Mr. Jones........        X   ........  .........
Mr. Sherman....................  ........        X   .........  Mrs. Biggert.....        X   ........  .........
Mr. Meeks......................  ........        X   .........  Mr. Miller (CA)..        X   ........  .........
Mr. Moore (KS).................  ........        X   .........  Mrs. Capito......        X   ........  .........
Mr. Capuano....................  ........        X   .........  Mr. Hensarling...        X   ........  .........
Mr. Hinojosa...................  ........        X   .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Clay.......................  ........        X   .........  Mr. Barrett (SC).        X   ........  .........
Mrs. McCarthy..................  ........        X   .........  Mr. Gerlach......  ........  ........  .........
Mr. Baca.......................  ........        X   .........  Mr. Neugebauer...        X   ........  .........
Mr. Lynch......................  ........        X   .........  Mr. Price (GA)...        X   ........  .........
Mr. Miller (NC)................  ........        X   .........  Mr. McHenry......        X   ........  .........
Mr. Scott......................  ........        X   .........  Mr. Campbell.....        X   ........  .........
Mr. Green......................  ........        X   .........  Mr. Putnam.......        X   ........  .........
Mr. Cleaver....................  ........        X   .........  Mrs. Bachmann....        X   ........  .........
Ms. Bean.......................        X   ........  .........  Mr. Marchant.....        X   ........  .........
Ms. Moore (WI).................  ........        X   .........  Mr. McCotter.....        X   ........  .........
Mr. Hodes......................  ........        X   .........  Mr. McCarthy.....        X   ........  .........
Mr. Ellison....................  ........        X   .........  Mr. Posey........        X   ........  .........
Mr. Klein......................  ........        X   .........  Ms. Jenkins......        X   ........  .........
Mr. Wilson.....................  ........        X   .........  Mr. Lee..........        X   ........  .........
Mr. Perlmutter.................  ........  ........  .........  Mr. Paulsen......        X   ........  .........
Mr. Donnelly...................  ........        X   .........  Mr. Lance........        X   ........  .........
Mr. Foster.....................  ........        X   .........
Mr. Carson.....................  ........        X   .........
Ms. Speier.....................  ........        X   .........
Mr. Childers...................  ........        X   .........
Mr. Minnick....................  ........        X   .........
Mr. Adler......................  ........        X   .........
Ms. Kilroy.....................  ........        X   .........
Mr. Driehaus...................  ........        X   .........
Ms. Kosmas.....................  ........        X   .........
Mr. Grayson....................  ........        X   .........
Mr. Himes......................  ........        X   .........
Mr. Peters.....................  ........        X   .........
Mr. Maffei.....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Neugebauer (and Mr. Garrett), no. 27, 
revising the SEC budget, was not agreed to by a record vote of 
28 yeas and 41 nays (Record vote no. FC-83):

                                              RECORD VOTE NO. FC-83
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................  ........        X   .........  Mr. Bachus.......        X   ........  .........
Mr. Kanjorski..................  ........        X   .........  Mr. Castle.......        X   ........  .........
Ms. Waters.....................  ........        X   .........  Mr. King (NY)....        X   ........  .........
Mrs. Maloney...................  ........        X   .........  Mr. Royce........        X   ........  .........
Mr. Gutierrez..................  ........        X   .........  Mr. Lucas........        X   ........  .........
Ms. Velazquez..................  ........        X   .........  Mr. Paul.........        X   ........  .........
Mr. Watt.......................  ........        X   .........  Mr. Manzullo.....        X   ........  .........
Mr. Ackerman...................  ........        X   .........  Mr. Jones........        X   ........  .........
Mr. Sherman....................  ........        X   .........  Mrs. Biggert.....        X   ........  .........
Mr. Meeks......................  ........        X   .........  Mr. Miller (CA)..        X   ........  .........
Mr. Moore (KS).................  ........        X   .........  Mrs. Capito......        X   ........  .........
Mr. Capuano....................  ........        X   .........  Mr. Hensarling...        X   ........  .........
Mr. Hinojosa...................  ........        X   .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Clay.......................  ........        X   .........  Mr. Barrett (SC).        X   ........  .........
Mrs. McCarthy..................  ........        X   .........  Mr. Gerlach......  ........  ........  .........
Mr. Baca.......................  ........        X   .........  Mr. Neugebauer...        X   ........  .........
Mr. Lynch......................  ........        X   .........  Mr. Price (GA)...        X   ........  .........
Mr. Miller (NC)................  ........        X   .........  Mr. McHenry......        X   ........  .........
Mr. Scott......................  ........        X   .........   Mr. Campbell....        X   ........  .........
Mr. Green......................  ........        X   .........   Mr. Putnam......        X   ........  .........
Mr. Cleaver....................  ........        X   .........   Mrs. Bachmann...        X   ........  .........
Ms. Bean.......................  ........        X   .........   Mr. Marchant....        X   ........  .........
Ms. Moore (WI).................  ........        X   .........   Mr. McCotter....        X   ........  .........
Mr. Hodes......................  ........        X   .........   Mr. McCarthy....        X   ........  .........
Mr. Ellison....................  ........        X   .........   Mr. Posey.......        X   ........  .........
Mr. Klein......................  ........        X   .........   Ms. Jenkins.....        X   ........  .........
Mr. Wilson.....................  ........        X   .........   Mr. Lee.........        X   ........  .........
Mr. Perlmutter.................  ........  ........  .........   Mr. Paulsen.....        X   ........  .........
Mr. Donnelly...................  ........        X   .........   Mr. Lance.......        X   ........  .........
Mr. Foster.....................  ........        X   .........  .................  ........  ........  .........
Mr. Carson.....................  ........        X   .........  .................  ........  ........  .........
Ms. Speier.....................  ........        X   .........  .................  ........  ........  .........
Mr. Childers...................  ........        X   .........  .................  ........  ........  .........
Mr. Minnick....................  ........        X   .........  .................  ........  ........  .........
Mr. Adler......................  ........        X   .........  .................  ........  ........  .........
Ms. Kilroy.....................  ........        X   .........  .................  ........  ........  .........
Mr. Driehaus...................  ........        X   .........  .................  ........  ........  .........
Ms. Kosmas.....................  ........        X   .........  .................  ........  ........  .........
Mr. Grayson....................  ........        X   .........  .................  ........  ........  .........
Mr. Himes......................  ........        X   .........  .................  ........  ........  .........
Mr. Peters.....................  ........        X   .........  .................  ........  ........  .........
Mr. Maffei.....................  ........        X   .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Ms. Waters (and Mr. Peters), no. 34, 
regarding SEC authority to issue rules on proxy access, was 
agreed to by a record vote of 39 yeas and 30 nays (Record vote 
no. FC-84):

                                              RECORD VOTE NO. FC-84
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................        X   ........  .........  Mr. Bachus.......  ........        X   .........
Mr. Kanjorski..................        X   ........  .........  Mr. Castle.......  ........        X   .........
Ms. Waters.....................        X   ........  .........   Mr. King (NY)...  ........        X   .........
Mrs. Maloney...................        X   ........  .........   Mr. Royce.......  ........        X   .........
Mr. Gutierrez..................        X   ........  .........   Mr. Lucas.......  ........        X   .........
Ms. Velazquez..................        X   ........  .........   Mr. Paul........  ........        X   .........
Mr. Watt.......................        X   ........  .........   Mr. Manzullo....  ........        X   .........
Mr. Ackerman...................        X   ........  .........   Mr. Jones.......  ........        X   .........
Mr. Sherman....................        X   ........  .........   Mrs. Biggert....  ........        X   .........
Mr. Meeks......................        X   ........  .........   Mr. Miller (CA).  ........        X   .........
Mr. Moore (KS).................        X   ........  .........   Mrs. Capito.....  ........        X   .........
Mr. Capuano....................        X   ........  .........   Mr. Hensarling..  ........        X   .........
Mr. Hinojosa...................        X   ........  .........   Mr. Garrett (NJ)  ........        X   .........
Mr. Clay.......................        X   ........  .........   Mr. Barrett (SC)  ........        X   .........
Mrs. McCarthy..................        X   ........  .........   Mr. Gerlach.....  ........  ........  .........
Mr. Baca.......................        X   ........  .........   Mr. Neugebauer..  ........        X   .........
Mr. Lynch......................        X   ........  .........   Mr. Price (GA)..  ........        X   .........
Mr. Miller (NC)................        X   ........  .........   Mr. McHenry.....  ........        X   .........
Mr. Scott......................        X   ........  .........   Mr. Campbell....  ........        X   .........
Mr. Green......................        X   ........  .........   Mr. Putnam......  ........        X   .........
Mr. Cleaver....................        X   ........  .........   Mrs. Bachmann...  ........        X   .........
Ms. Bean.......................        X   ........  .........   Mr. Marchant....  ........        X   .........
Ms. Moore (WI).................        X   ........  .........   Mr. McCotter....  ........        X   .........
Mr. Hodes......................        X   ........  .........   Mr. McCarthy....  ........        X   .........
Mr. Ellison....................        X   ........  .........   Mr. Posey.......  ........        X   .........
Mr. Klein......................        X   ........  .........   Ms. Jenkins.....  ........        X   .........
Mr. Wilson.....................        X   ........  .........   Mr. Lee.........  ........        X   .........
Mr. Perlmutter.................  ........  ........  .........  Mr. Paulsen......  ........        X   .........
Mr. Donnelly...................        X   ........  .........   Mr. Lance.......  ........        X   .........
Mr. Foster.....................        X   ........  .........  Mr. Childers.....  ........        X   .........
Mr. Carson.....................        X   ........  .........  Mr. Minnick......  ........        X   .........
Ms. Speier.....................        X   ........  .........  .................  ........  ........  .........
Mr. Adler......................        X   ........  .........  .................  ........  ........  .........
Ms. Kilroy.....................        X   ........  .........  .................  ........  ........  .........
Mr. Driehaus...................        X   ........  .........  .................  ........  ........  .........
Ms. Kosmas.....................        X   ........  .........  .................  ........  ........  .........
Mr. Grayson....................        X   ........  .........  .................  ........  ........  .........
Mr. Himes......................        X   ........  .........  .................  ........  ........  .........
Mr. Peters.....................        X   ........  .........  .................  ........  ........  .........
Mr. Maffei.....................        X   ........  .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Garrett, no. 42, regarding clearing 
services, was not agreed to by a record vote of 26 yeas and 43 
nays (Record vote no. FC-85):

                                              RECORD VOTE NO. FC-85
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................  ........        X   .........  Mr. Bachus.......        X   ........  .........
Mr. Kanjorski..................  ........        X   .........  Mr. Castle.......        X   ........  .........
Ms. Waters.....................  ........        X   .........  Mr. King (NY)....  ........        X   .........
Mrs. Maloney...................  ........        X   .........  Mr. Royce........        X   ........  .........
Mr. Gutierrez..................  ........        X   .........  Mr. Lucas........        X   ........  .........
Ms. Velazquez..................  ........        X   .........  Mr. Paul.........        X   ........  .........
Mr. Watt.......................  ........        X   .........  Mr. Manzullo.....        X   ........  .........
Mr. Ackerman...................  ........        X   .........  Mr. Jones........        X   ........  .........
Mr. Sherman....................  ........        X   .........  Mrs. Biggert.....  ........        X   .........
Mr. Meeks......................  ........        X   .........  Mr. Miller (CA)..        X   ........  .........
Mr. Moore (KS).................  ........        X   .........  Mrs. Capito......        X   ........  .........
Mr. Capuano....................  ........        X   .........  Mr. Hensarling...        X   ........  .........
Mr. Hinojosa...................  ........        X   .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Clay.......................  ........        X   .........  Mr. Barrett (SC).        X   ........  .........
Mrs. McCarthy..................  ........        X   .........  Mr. Gerlach......  ........  ........  .........
Mr. Baca.......................  ........        X   .........  Mr. Neugebauer...        X   ........  .........
Mr. Lynch......................  ........        X   .........  Mr. Price (GA)...        X   ........  .........
Mr. Miller (NC)................  ........        X   .........  Mr. McHenry......        X   ........  .........
Mr. Scott......................  ........        X   .........  Mr. Campbell.....        X   ........  .........
Mr. Green......................  ........        X   .........  Mr. Putnam.......        X   ........  .........
Mr. Cleaver....................  ........        X   .........  Mrs. Bachmann....        X   ........  .........
Ms. Bean.......................  ........        X   .........  Mr. Marchant.....        X   ........  .........
Ms. Moore (WI).................  ........        X   .........  Mr. McCotter.....        X   ........  .........
Mr. Hodes......................  ........        X   .........  Mr. McCarthy.....        X   ........  .........
Mr. Ellison....................  ........        X   .........  Mr. Posey........        X   ........  .........
Mr. Klein......................  ........        X   .........  Ms. Jenkins......        X   ........  .........
Mr. Wilson.....................  ........        X   .........  Mr. Lee..........        X   ........  .........
Mr. Perlmutter.................  ........        X   .........  Mr. Paulsen......        X   ........  .........
Mr. Donnelly...................  ........        X   .........  Mr. Lance........        X   ........  .........
Mr. Foster.....................  ........        X   .........  .................  ........  ........  .........
Mr. Carson.....................  ........        X   .........  .................  ........  ........  .........
Ms. Speier.....................  ........        X   .........  .................  ........  ........  .........
Mr. Childers...................  ........        X   .........  .................  ........  ........  .........
Mr. Minnick....................  ........        X   .........  .................  ........  ........  .........
Mr. Adler......................  ........        X   .........  .................  ........  ........  .........
Ms. Kilroy.....................  ........        X   .........  .................  ........  ........  .........
Mr. Driehaus...................  ........        X   .........  .................  ........  ........  .........
Ms. Kosmas.....................  ........        X   .........  .................  ........  ........  .........
Mr. Grayson....................  ........        X   .........  .................  ........  ........  .........
Mr. Himes......................  ........        X   .........  .................  ........  ........  .........
Mr. Peters.....................  ........        X   .........  .................  ........  ........  .........
Mr. Maffei.....................  ........        X   .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Garrett (and Mr. Adler), no. 44, 
regarding exemption for non-accelerated filers, was agreed to 
by a record vote of 37 yeas and 32 nays (Record vote no. FC-
86):

                                              RECORD VOTE NO. FC-86
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................  ........        X   .........  Mr. Bachus.......        X   ........  .........
Mr. Kanjorski..................  ........        X   .........  Mr. Castle.......        X   ........  .........
Ms. Waters.....................  ........        X   .........  Mr. King (NY)....        X   ........  .........
Mrs. Maloney...................  ........        X   .........  Mr. Royce........        X   ........  .........
Mr. Gutierrez..................  ........        X   .........  Mr. Lucas........        X   ........  .........
Ms. Velazquez..................  ........        X   .........  Mr. Paul.........        X   ........  .........
Mr. Watt.......................  ........        X   .........  Mr. Manzullo.....        X   ........  .........
Mr. Ackerman...................  ........        X   .........  Mr. Jones........        X   ........  .........
Mr. Sherman....................  ........        X   .........  Mrs. Biggert.....        X   ........  .........
Mr. Meeks......................  ........        X   .........  Mr. Miller (CA)..        X   ........  .........
Mr. Moore (KS).................  ........        X   .........  Mrs. Capito......        X   ........  .........
Mr. Capuano....................  ........        X   .........  Mr. Hensarling...        X   ........  .........
Mr. Hinojosa...................  ........        X   .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Clay.......................  ........        X   .........  Mr. Barrett (SC).        X   ........  .........
Mrs. McCarthy..................  ........        X   .........  Mr. Gerlach......  ........  ........  .........
Mr. Baca.......................  ........        X   .........  Mr. Neugebauer...        X   ........  .........
Mr. Lynch......................  ........        X   .........  Mr. Price (GA)...        X   ........  .........
Mr. Miller (NC)................  ........        X   .........  Mr. McHenry......        X   ........  .........
Mr. Scott......................  ........        X   .........  Mr. Campbell.....        X   ........  .........
Mr. Green......................  ........        X   .........  Mr. Putnam.......        X   ........  .........
Mr. Cleaver....................  ........        X   .........  Mrs. Bachmann....        X   ........  .........
Ms. Bean.......................        X   ........  .........  Mr. Marchant.....        X   ........  .........
Ms. Moore (WI).................  ........        X   .........  Mr. McCotter.....        X   ........  .........
Mr. Hodes......................  ........        X   .........  Mr. McCarthy.....        X   ........  .........
Mr. Ellison....................  ........        X   .........  Mr. Posey........        X   ........  .........
Mr. Klein......................  ........        X   .........  Ms. Jenkins......        X   ........  .........
Mr. Wilson.....................  ........        X   .........  Mr. Lee..........        X   ........  .........
Mr. Perlmutter.................  ........  ........  .........  Mr. Paulsen......        X   ........  .........
Mr. Donnelly...................  ........        X   .........  Mr. Lance........        X   ........  .........
Mr. Foster.....................        X   ........  .........  .................  ........  ........  .........
Mr. Carson.....................  ........        X   .........  .................  ........  ........  .........
Ms. Speier.....................  ........        X   .........  .................  ........  ........  .........
Mr. Childers...................        X   ........  .........  .................  ........  ........  .........
Mr. Minnick....................        X   ........  .........  .................  ........  ........  .........
Mr. Adler......................        X   ........  .........  .................  ........  ........  .........
Ms. Kilroy.....................  ........        X   .........  .................  ........  ........  .........
Mr. Driehaus...................        X   ........  .........  .................  ........  ........  .........
Ms. Kosmas.....................        X   ........  .........  .................  ........  ........  .........
Mr. Grayson....................  ........        X   .........  .................  ........  ........  .........
Mr. Himes......................  ........        X   .........  .................  ........  ........  .........
Mr. Peters.....................        X   ........  .........  .................  ........  ........  .........
Mr. Maffei.....................        X   ........  .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Lee, no. 45, regarding prohibition of 
certain contingency-based attorney fee agreements relating to 
pre-existing agreements, was not agreed to by a record vote of 
27 yeas, 41 nays, and 1 present (Record vote no. FC-87):

                                              RECORD VOTE NO. FC-87
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................  ........        X   .........  Mr. Bachus.......        X   ........  .........
Mr. Kanjorski..................  ........        X   .........  Mr. Castle.......        X   ........  .........
Ms. Waters.....................  ........        X   .........  Mr. King (NY)....        X   ........  .........
Mrs. Maloney...................  ........        X   .........  Mr. Royce........        X   ........  .........
Mr. Gutierrez..................  ........        X   .........  Mr. Lucas........        X   ........  .........
Ms. Velazquez..................  ........        X   .........  Mr. Paul.........        X   ........  .........
Mr. Watt.......................  ........        X   .........  Mr. Manzullo.....        X   ........  .........
Mr. Ackerman...................  ........        X   .........  Mr. Jones........        X   ........  .........
Mr. Sherman....................  ........        X   .........  Mrs. Biggert.....  ........  ........         X
Mr. Meeks......................  ........        X   .........  Mr. Miller (CA)..        X   ........  .........
Mr. Moore (KS).................  ........        X   .........  Mrs. Capito......        X   ........  .........
Mr. Capuano....................  ........        X   .........  Mr. Hensarling...        X   ........  .........
Mr. Hinojosa...................  ........        X   .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Clay.......................  ........        X   .........  Mr. Barrett (SC).        X   ........  .........
Mrs. McCarthy..................  ........        X   .........  Mr. Gerlach......  ........  ........  .........
Mr. Baca.......................  ........        X   .........  Mr. Neugebauer...        X   ........  .........
Mr. Lynch......................  ........        X   .........  Mr. Price (GA)...        X   ........  .........
Mr. Miller (NC)................  ........        X   .........  Mr. McHenry......        X   ........  .........
Mr. Scott......................  ........        X   .........  Mr. Campbell.....        X   ........  .........
Mr. Green......................  ........        X   .........  Mr. Putnam.......        X   ........  .........
Mr. Cleaver....................  ........        X   .........  Mrs. Bachmann....        X   ........  .........
Ms. Bean.......................  ........        X   .........  Mr. Marchant.....        X   ........  .........
Ms. Moore (WI).................  ........        X   .........  Mr. McCotter.....        X   ........  .........
Mr. Hodes......................  ........        X   .........  Mr. McCarthy.....        X   ........  .........
Mr. Ellison....................  ........        X   .........  Mr. Posey........        X   ........  .........
Mr. Klein......................  ........        X   .........  Ms. Jenkins......        X   ........  .........
Mr. Wilson.....................  ........        X   .........  Mr. Lee..........        X   ........  .........
Mr. Perlmutter.................  ........  ........  .........  Mr. Paulsen......        X   ........  .........
Mr. Donnelly...................  ........        X   .........  Mr. Lance........        X   ........  .........
Mr. Foster.....................  ........        X   .........  .................  ........  ........  .........
Mr. Carson.....................  ........        X   .........  .................  ........  ........  .........
Ms. Speier.....................  ........        X   .........  .................  ........  ........  .........
Mr. Childers...................  ........        X   .........  .................  ........  ........  .........
Mr. Minnick....................  ........        X   .........  .................  ........  ........  .........
Mr. Adler......................  ........        X   .........  .................  ........  ........  .........
Ms. Kilroy.....................  ........        X   .........  .................  ........  ........  .........
Mr. Driehaus...................  ........        X   .........  .................  ........  ........  .........
Ms. Kosmas.....................  ........        X   .........  .................  ........  ........  .........
Mr. Grayson....................  ........        X   .........  .................  ........  ........  .........
Mr. Himes......................  ........        X   .........  .................  ........  ........  .........
Mr. Peters.....................  ........        X   .........  .................  ........  ........  .........
Mr. Maffei.....................  ........        X   .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    The following other amendments were also considered by the 
Committee:
    An amendment by Mr. Frank (and Mr. Kanjorski), no. 1, a 
managers amendment, was agreed to by voice vote, as amended. An 
amendment by Mr. Maffei, no. 1a, to the amendment, was agreed 
to by voice vote. An amendment by Mr. Hensarling, no. 1b, to 
the amendment, was offered and withdrawn.
    An amendment by Mr. Castle (and Ms. Speier), no. 2, a study 
on SEC revolving door, was agreed to by voice vote.
    An amendment by Mr. Hodes, no. 3, regarding senior 
investment protection, was agreed to, as modified, by voice 
vote.
    An amendment by Mr. Campbell, no. 4, regarding nationwide 
service of subpenas, was agreed to by voice vote.
    An amendment by Mr. Driehaus, no. 5, regarding registration 
of municipal financial advisors, was agreed to by voice vote.
    An amendment by Mr. Perlmutter, no. 7, regarding a study of 
high-frequency trading, was agreed to by voice vote.
    An amendment by Mr. Adler, no. 8, regarding exemption for 
smaller companies from attestation requirements, was offered, a 
record vote was ordered, and the amendment was withdrawn by 
unanimous consent.
    An amendment by Mr. Neugebauer, no. 10, regarding a 
Comptroller General study to review the securities arbitration 
system, was agreed to, as modified, by voice vote.
    An amendment by Ms. Kilroy, no. 11, regarding additional 
responsibilities to secure delivery of dividends, interest, and 
other valuable property rights, was offered and withdrawn.
    An amendment by Mr. Miller (CA), no. 13, regarding a 
financial reporting forum, was agreed to by voice vote.
    An amendment by Mrs. McCarthy (NY), no. 14, regarding a 
study on enhancing investment advisor examinations, was agreed 
to by voice vote.
    An amendment by Mr. Posey, no. 15, regarding authority to 
contract for collection of delinquent judgments and orders, was 
not agreed to by voice vote.
    An amendment by Mr. Perlmutter, no. 16, regarding a study 
on disclosure to retail customers before purchase of products 
or services, was agreed to by voice vote.
    An amendment by Mr. Campbell, no. 17, regarding biannual 
rather than quarterly reporting, was offered and withdrawn.
    An amendment by Mr. Klein, no. 18, regarding a 
clarification of liquidation proceedings, was offered and 
withdrawn.
    An amendment by Mr. Royce, no. 19, regarding an SEC 
administration and enforcement office, was agreed to by voice 
vote.
    An amendment by Mr. Royce, no. 20, establishing a Capital 
Markets Safety Board, was agreed to by voice vote.
    An amendment by Mr. Ellison, no. 21, a securities 
clarification, was agreed to by voice vote.
    An amendment by Mr. Ellison, no. 22, a fiduciary duty 
clarification, was offered and withdrawn.
    An amendment by Mr. McCarthy (CA), no. 23, a report on 
implementation of reforms, was agreed to by voice vote.
    An amendment by Mr. McCarthy (CA), no. 24, regarding the 
organization and conduct of the divisions and offices of the 
SEC, was offered and withdrawn.
    An amendment by Mr. Frank, no. 25, regarding investment 
advisers subject to state authorities, was agreed to by voice 
vote.
    An amendment by Mr. Maffei (and Mr. Ellison), no. 26, 
regarding higher SIPC payouts with respect to pension plans, 
was offered and withdrawn.
    An amendment by Mr. Foster, no. 28, regarding custodial 
requirements, was agreed to by voice vote.
    An amendment by Mr. Putnam, no. 29, regarding congressional 
access to information, was agreed to, as modified, by voice 
vote.
    An amendment by Mr. Capuano, no. 30, regarding a GAO study 
of financial planning, was agreed to by voice vote.
    An amendment by Mr. Bachus, no. 31, regarding national 
securities association enforcement, was agreed to by voice 
vote.
    An amendment by Mr. Capuano (and Mr. Garrett), no. 32, 
regarding an analysis of rule regarding smaller reporting 
companies, was agreed to by voice vote.
    An amendment by Mrs. Jenkins (and Mr. Garrett), no. 33, 
creating an ombudsman for the PCAOB, was agreed to by voice 
vote.
    An amendment by Mr. McCarthy (CA), no. 35, creating an 
ombudsman for the SEC, was agreed to by voice vote.
    An amendment by Mr. Meeks (and Mr. Posey), no. 36, 
streamlining SEC filing procedures, was offered and withdrawn.
    An amendment by Mr. Bachus, no. 37, regarding the 
definition of ``customer'', was agreed to by voice vote.
    An amendment by Mr. Campbell (and Mr. Peters), no. 38, a 
clarification of the standard of conduct with respect to 
Commission and fee-base compensation, was agreed to by voice 
vote.
    An amendment by Mrs. Bachmann, no. 39, regarding the 
effective date, was offered and withdrawn.
    An amendment by Mrs. Bachmann, no. 40, regarding 
Presidential appointment of PCAOB members, was offered and 
withdrawn.
    An amendment by Mr. Miller (CA), no. 41, regarding a joint 
SEC-CFTC advisory committee, was agreed to by voice vote.
    An amendment by Mr. Garrett, no. 43, regarding the Auditing 
Oversight Board, was agreed to by voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 3817 aims to improve investor protection by enhancing 
the powers, increasing the funding, and augmenting the 
operations of the U.S. Securities and Exchange Commission. H.R. 
3817 also makes refinements to the laws governing the Public 
Company Accounting Oversight Board and the Securities Investor 
Protection Corporation with the goal of improving those 
entities' abilities to better protect the interests of 
investors.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office for H.R. 4173 as 
introduced on December 2, 2009, title V of which incorporated 
H.R. 3817 as reported, pursuant to section 402 of the 
Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, December 4, 2009.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office (CBO) 
and the Joint Committee on Taxation (JCT) have reviewed H.R. 
4173, the Wall Street Reform and Consumer Protection Act of 
2009, as introduced on December 2, 2009. As summarized in the 
enclosed table, CBO and JCT estimate that enacting H.R. 4173 
would increase revenues by $4.9 billion over the 2010-2019 
period and would increase direct spending by $9.4 billion over 
that 10-year period. In total, CBO estimates that enacting the 
legislation would increase budget deficits by $10.7 billion 
over the 2010-2014 period and by $4.5 billion over the 2010-
2019 period. CBO has not completed an estimate of the bill's 
impact on spending subject to appropriation.
    The direct spending and revenue impacts of H.R. 4173 stem 
from provisions in titles I, IV, and V. Those budgetary impacts 
are briefly described below.

              TITLE I--FINANCIAL STABILITY IMPROVEMENT ACT

    CBO and JCT estimate that the provisions in title I would 
increase revenues by $4.4 billion over the 2010-2019 period and 
increase direct spending by $7.4 billion over the same period. 
The net effect of enacting this title would be an increase in 
budget deficits of $3.0 billion over the 2010-2019 period. Much 
of that net cost would occur because income from the fees 
collected under this title would be partially offset by a loss 
of revenue from income and payroll taxes. Title I includes four 
subtitles that would affect direct spending and revenues; each 
is described below.
    Subtitle B would establish new standards, procedures, and 
programs for identifying and addressing potential risks to the 
financial or economic stability of the United States. CBO 
estimates that implementing this subtitle would increase direct 
spending by $1.1 billion and increase revenues by $0.6 billion 
over the 2010-2019 period. Most of the estimated costs of this 
subtitle would result from provisions that would expand the 
scope and modify the terms of the Federal Deposit Insurance 
Corporation's (FDIC's) authority to guarantee obligations of 
solvent depository institutions and financial companies during 
a financial crises. While the probability of such events is 
small, potential losses from such guarantees could be 
significant. For this estimate, CBO assumes that the FDIC would 
eventually recover any costs through fees on participants and, 
as necessary, compulsory assessments (which are classified as 
revenues) on very large financial institutions. The FDIC's 
authority to provide guarantees would expire on December 31, 
2013.
    Subtitle C would revise the regulatory regime for thrift 
associations, transferring functions now performed by the 
Office of Thrift Supervision (OTS) to other regulatory 
agencies. CBO estimates that enacting those provisions would 
increase direct spending by $0.5 billion and reduce revenues by 
$0.3 billion over the 2010-2019 period. Most of the estimated 
costs of this subtitle would result from provisions that would 
authorize the Office of the Comptroller of Currency to enter 
into agreements without regard to existing laws governing the 
disposition of real or personal property; allow for the 
expenditure of unobligated funds held by the OTS; and transfer 
oversight of thrift holding companies to the Federal Reserve, 
which unlike the OTS does not charge fees to cover its 
supervision costs.
    Subtitle D would direct the Federal Reserve to assess fees 
on bank holding companies with total assets of $10 billion or 
more to defray the cost of examining those firms. CBO estimates 
that the Federal Reserve would collect about $0.4 billion over 
the 2010-2019 period to offset those costs. That collection 
would increase revenues remitted to the Treasury by the Federal 
Reserve. (This provision would not apply to thrift holding 
companies, which would come under the Federal Reserve's 
supervision in subtitle C.)
    Subtitle G would create new government mechanisms for 
dissolving systemically important firms that are in default or 
in danger of default. CBO estimates that implementing these 
provisions would increase direct spending by $5.7 billion and 
increase revenues by $3.7 billion over the next 10 years. Under 
conditions outlined in the bill, the FDIC would be appointed as 
receiver and would be authorized to enter into various 
arrangements necessary to liquidate such firms, including 
organizing bridge banks that would be exempt from federal and 
state taxation. Under this bill, the FDIC's obligations for 
this purpose would be capped at $150 billion. Those funds could 
be derived from assessments on certain large financial firms 
(which are classified in the budget as revenues) or amounts 
borrowed from the Treasury. Under the bill, any amounts 
borrowed through the Treasury would be repaid from proceeds 
from asset sales, warrants, or future assessments on private 
firms. The FDIC's authority to obligate or borrow funds for 
such activities would expire on December 31, 2013. CBO expects 
that the probability of such receivership activities would be 
small and that spending for losses and working capital would 
eventually be offset by recoveries and assessments.

              TITLE IV--CONSUMER FINANCIAL PROTECTION ACT

    Title IV of H.R. 4173 is identical to H.R. 3126, the 
Consumer Financial Protection Agency Act of 2009, as ordered 
reported by the House Committee on Financial Services on 
October 22, 2009. On December 3, 2009, CBO transmitted a cost 
estimate for H.R. 3126 to the Congress. As detailed in that 
cost estimate, the provisions of title IV of H.R. 4173 would 
increase direct spending by $0.6 billion over the 2010-2019 
period and decrease revenues by $0.5 billion over the same 
period. In total, those changes would increase budget deficits 
by about $1.1 billion over the 2010-2019 period. This net 
deficit impact would result for a number of reasons:
     The Department of the Treasury would incur costs 
that would not be subject to appropriation and would not be 
offset by fees;
     The Federal Reserve would incur additional costs 
that would decrease the revenues they would remit to the 
Treasury;
     While the Consumer Financial Protection Agency 
would be authorized to spend all of the fees they collect under 
the bill, those fees would be partially offset by a loss of 
receipts from income and payroll taxes; and
     Federal banking regulators would not be able to 
offset all of the costs they would incur under title IV because 
the bill would impose a cap on the fees they are otherwise 
authorized to collect under current law.

                        TITLE V--CAPITAL MARKETS

    CBO estimates that title V would increase direct spending 
by $1.4 billion over the 2010-2019 period and increase revenues 
by about $1.0 billion over the same 10-year period. The net 
effect of this title would be an increase in the federal 
deficit of about $0.4 billion over the 10-year period.
    The bill would increase fees to support examination 
activities by both the Securities and Exchange Commission (SEC) 
and the Public Companies Accounting Oversight Board (PCAOB), 
which would be recorded in the budget as revenues. This title 
also would raise the amount that the Securities Investor 
Protection Corporation (SIPC) would be authorized to borrow 
from the SEC; under current law, SIPC may borrow up to $1 
billion from the SEC--the bill would raise that to about $2.5 
billion. From fees collected from brokers and dealers of 
securities under current law, SIPC may make payments to 
investors that are harmed when a brokerage firm fails and 
customer assets are missing. CBO estimates that there is a 
small probability (about 10 percent) that SIPC would exercise 
the new borrowing authority over the next 10 years. CBO 
estimates that the net effect of the new borrowing authority 
would increase direct spending by about $0.7 billion over the 
2010-2019 period. Other provisions of the bill, including 
spending for awards to individuals who report violations of 
securities laws to the SEC and additional costs of the PCAOB, 
would increase direct spending by about $0.7 billion over the 
2010-2019 period.
    Intergovernmental and private-sector impact: H.R. 4173 
includes a number of intergovernmental and private-sector 
mandates, as defined in the Unfunded Mandates Reform Act (UMRA) 
that CBO previously identified in its cost estimates for H.R. 
3269, the Corporate and Financial Institution Compensation 
Fairness Act of 2009; H.R. 3795, the Over-the-Counter 
Derivatives Markets Act of 2009; and H.R. 3818, the Private 
Fund Investment Advisers Registration Act of 2009. In addition, 
H.R. 4173 would preempt state laws and would impose 
intergovernmental and private-sector mandates on entities that 
conduct financial activities and credit rating agencies.
    Because the costs of complying with some of the mandates 
would depend on the regulations to be established under the 
bill, CBO cannot determine whether the aggregate costs of the 
intergovernmental mandates would exceed the annual threshold 
established in UMRA ($69 million in 2009, adjusted annually for 
inflation). CBO estimates that the total costs of the private-
sector mandates in the bill would well exceed the annual 
threshold established in UMRA ($139 million in 2009, adjusted 
annually for inflation).
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Susan 
Willie and Kathleen Gramp (for federal spending), Barbara 
Edwards (for federal revenues), Elizabeth Cove Delisle (for 
intergovernmental mandates), and Sam Wice, Paige Piper/Bach, 
and Brian Prest (for private-sector mandates).
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.
    Enclosure.

ESTIMATED CHANGES IN REVENUES AND DIRECT SPENDING RESULTING FROM H.R. 4173, THE WALL STREET REFORM AND CONSUMER PROTECTION ACT OF 2009, AS INTRODUCED ON
                                                                     DECEMBER 2, 2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  By fiscal year, in billions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2010    2011    2012    2013    2014    2015    2016    2017    2018    2019   2010-2014  2010-2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   CHANGES IN REVENUES

Title I--Financial Stability Improvement Act
    Subtitle B--Prudential Regulation.............       0       0       0       *     0.1     0.1     0.1     0.1     0.1     0.1       0.1        0.6
    Subtitle C--Improvements to Supervision of           *       *       *       *       *       *       *       *       *    -0.1      -0.1       -0.3
     Federal Depository Institutions..............
    Subtitle D--Improvements to Regulation of Bank       0       *       *       *       *       *       *     0.1     0.1     0.1       0.1        0.4
     Holding Companies............................
    Subtitle G--Enhanced Dissolution Authority....       0       0     0.2     0.4     0.5     0.5     0.5     0.5     0.6     0.5       1.1        3.7
        Total Title I--Financial Stability               0       0     0.2     0.4     0.6     0.6     0.6     0.7     0.7     0.6       1.2        4.4
         Improvement Act..........................
Title IV--Consumer Financial Protection Agency Act       0       0    -0.3    -0.2    -0.1       *       *       *       *       *      -0.6       -0.5
Title V--Capital Markets..........................       0     0.1     0.1     0.1     0.1     0.1     0.1     0.1     0.1     0.1       0.4        1.0
                                                   -----------------------------------------------------------------------------------------------------
        Total Changes in Revenues\2\..............       0     0.1       *     0.3     0.6     0.7     0.7     0.8     0.8     0.7       1.0        4.9

                                                               CHANGES IN DIRECT SPENDING

Title I--Financial Stability Improvement Act
    Subtitle B--Prudential Regulation
        Estimated Budget Authority................       0     0.6     0.9     0.6       0    -0.4    -0.3    -0.2    -0.1       0       2.1        1.1
        Estimated Outlays.........................       0     0.6     0.9     0.6       0    -0.4    -0.3    -0.2    -0.1       0       2.1        1.1
    Subtitle C--Improvements to Supervision of
     Federal Depository Institutions
        Estimated Budget Authority................       0       *       *       *     0.1     0.1     0.1     0.1     0.1     0.1       0.3        0.6
        Estimated Outlays.........................       0       *       *       *     0.1     0.1     0.1     0.1       *       *       0.1        0.5
    Subtitle G--Enhanced Dissolution Authority
        Estimated Budget Authority................     0.2     2.2     3.7     2.6     0.5    -1.5    -1.3    -0.5    -0.2    -0.1       9.2        5.7
        Estimated Outlays.........................     0.2     2.2     3.7     2.6     0.5    -1.5    -1.3    -0.5    -0.2    -0.1       9.2        5.7
Total Title I--Financial Stability Improvement Act
    Estimated Budget Authority....................     0.2     2.9     4.7     3.2     0.5    -1.8    -1.5    -0.6    -0.2       0      11.5        7.4
    Estimated Outlays.............................     0.2     2.9     4.7     3.2     0.5    -1.8    -1.5    -0.6    -0.2       *      11.5        7.4
Title IV--Consumer Financial Protection Agency Act
    Estimated Budget Authority....................       *       *    -0.2    -0.1       *     0.1     0.2     0.2     0.2     0.2      -0.3        0.6
    Estimated Outlays.............................       *       *    -0.2    -0.1       *     0.1     0.2     0.2     0.2     0.2      -0.3        0.6
Title V--Capital Markets
    Estimated Budget Authority....................       *     0.1     0.1     0.1     0.3     0.2     0.2     0.2     0.1     0.1       0.5        1.4
    Estimated Outlays.............................       *     0.1     0.1     0.1     0.3     0.2     0.2     0.2     0.1     0.1       0.5        1.4
    Total Changes in Direct Spending..............
        Estimated Budget Authority................     0.2     3.0     4.6     3.2     0.9    -1.5    -1.1    -0.2     0.1     0.3      11.9        9.5
        Estimated Outlays.........................     0.2     3.0     4.6     3.2     0.8    -1.5    -1.1    -0.2     0.1     0.3      11.7        9.4

                                            IMPACT OF CHANGES IN REVENUES AND DIRECT SPENDING ON THE DEFICIT

Net Effect on the Deficitb........................     0.2     2.9     4.6     2.9     0.2    -2.2    -1.8    -1.0    -0.9    -0.4      10.7        4.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\H.R. 4173 could affect federal tax receipts under the Internal Revenue Code. However, there are a number of uncertainties regarding potential effects
  of the use of a bridge financial company by the Federal Deposit Insurance Corporation on the tax attributes of a failed financial institution. It is
  not possible to determine whether the use of a bridge financial company would provide a tax result that is more or less favorable than bankruptcy,
  which is the current-law alternative. For this reason at this point, the staff of the Joint Committee on Taxation is not able to estimate the changes
  in tax revenue that would result from the bill.
\b\Positive numbers indicate increases in deficits; negative numbers indicate the opposite.
Notes: * = between -$50 million and $50 million. Components may not sum to totals because of rounding.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    Section 101 of this legislation establishes an Investor 
Advisory Committee to advise and consult with the SEC and 
section 307 establishes a joint advisory committee to assist 
the SEC and CFTC, both being advisory committees as defined by 
section 3 of the Federal Advisory Committee Act. The Committee 
finds pursuant to section 5 of the Federal Advisory Committee 
Act that none of the functions of the proposed advisory 
committees are being or could be performed by one or more 
agencies or by an advisory committee already in existence, or 
by enlarging the mandate of an existing advisory committee. The 
Committee also determines that these committees have a clearly 
defined purpose, fairly balanced membership, and meets all of 
the other requirements of section 5(b) of the Federal Advisory 
Committee Act.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 3817 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    The section designates the short title of the legislation 
as the ``Investor Protection Act of 2009''.

Section 2. Table of contents

    The section provides a table of contents for the bill.

                          TITLE I--DISCLOSURE


Section 101. Investor Advisory Committee established

    The U.S. Securities and Exchange Commission (SEC) has 
recently administratively established an Investor Advisory 
Committee to advise on the SEC's regulatory priorities, 
including issues concerning new products, trading strategies, 
fee structures, and the effectiveness of disclosure; 
initiatives to protect investor interest; and initiatives to 
promote investor confidence in the integrity of the 
marketplace. The section codifies the Investor Advisory 
Committee.
    The membership on the Investor Advisory Committee consists 
of individuals representing the interests of individual and 
institutional investors who use a wide range of investment 
approaches. The advisory panel must meet at least twice 
annually, and its members will receive compensation for 
participation in meetings and travel expenses. The section 
authorizes funding, as is necessary, to support the work of the 
Investor Advisory Committee, as well.

Section 102. Clarification of the Commission's authority to engage in 
        consumer testing

    This section clarifies the SEC's authority to gather 
information (e.g., through focus groups), communicate with 
investors or other members of the public (e.g., through 
telephonic or written surveys), and engage in temporary 
experimental programs (e.g., pilot programs to ``field test'' 
disclosures) in order to inform the agency's rulemaking and 
other policy functions. The section confers this power under 
the four principal securities laws administered by the SEC: the 
Securities Act of 1933, the Securities Exchange Act of 1934, 
the Investment Company Act of 1940, and the Investment Advisers 
Act of 1940. The section represents an endorsement of the 
benefits that can accrue from field testing, consumer outreach 
and testing of disclosures to individual investors.

Section 103. Establishment of a fiduciary duty for brokers, dealers and 
        investment advisers, and harmonization of regulation

    Section 103 requires the SEC to write rules to establish a 
fiduciary duty for brokers and dealers harmonizing the standard 
of conduct for brokers and dealers with that of investment 
advisers when giving personalized investment advice about 
securities to retail customers (and such other customers as the 
SEC provides). The section amends the Securities Exchange Act 
of 1934 (Exchange Act) and the Investment Advisers Act of 1940 
(Advisers Act).
    In this section, the Exchange Act is amended with a new 
subsection within section 15. The new section authorizes the 
SEC to write rules for brokers and dealers to establish a 
fiduciary duty that is the same standard applicable to 
investment advisers under the Advisers Act. The section also 
states that compensation, by commission or other standard forms 
of compensation, is not to be considered a violation of the 
standard applied to the broker or dealer.
    This section directs the SEC to establish rules under the 
Exchange Act for the disclosure and consent by a retail 
customer when a broker or dealer sells only proprietary 
products or a limited range of products. The practice of 
selling proprietary or a limited basket of products will not be 
considered a violation of the established fiduciary duty. The 
SEC shall take into consideration in rulemaking the 
preservation of proprietary product channels and limited 
offerings by brokers and dealers when providing personalized 
investment advice. This is consistent with standards and 
practices for investment advisers, which also may advise on and 
sell a limited range of products.
    Under this section, it is intended for the SEC when writing 
rules to remain mindful of the range of activities conducted by 
brokers and dealers and the varying methods of compensation. 
The SEC shall prescribe rules that are inclusive of, address 
and preserve the different activities and compensation models 
of brokers and dealers. This range of activities should not 
prohibit brokers and dealers from acting in the best interests 
of customers when they give personalized investment advice 
about securities.
    Additionally, while rules under this section will require 
that a broker or dealer act in the best interest of a customer 
in providing investment advice, the section does not indicate 
that a broker or dealer that provides advice in one setting or 
on a limited basis, such as a telephonic advice line or 
responding to a client request for limited advice, has 
established a relationship of duty and trust and a fiduciary 
obligation for all purposes and all accounts if the 
professional does not otherwise provide ongoing advice to the 
customer, as with a discount broker.
    Section 103 also amends the Advisers Act by adding a new 
subsection to Section 211. The subsection directs the SEC to 
write rules on the standard of care such that ``the standard of 
conduct for all brokers, dealers and investment advisers, when 
providing personalized investment advice about securities shall 
be to act in the best interest of a customer without regard to 
the financial or other interest of the broker, dealer, of 
investment adviser providing the advice.''
    This section enables the SEC through rulemaking proceedings 
to enhance this fiduciary duty, as necessary. As industry and 
markets evolve, the SEC should be able to evolve application 
and interpretation of the rules. As stated in the language of 
the provision, ``such rules shall provide that such standard of 
conduct shall be no less stringent than the standard applicable 
to investment advisers under Section 206(1) and (2) of this 
Act.'' The section purposefully neither defines nor employs the 
terminology ``fiduciary duty'' in statute to avoid confusion as 
to what is the standard of conduct under the Advisers Act. 
Additionally, while the rulemaking required by this section 
requires the SEC to address only retail customers, it does not 
change the existing standard of care by investment advisers to 
non-retail customers.
    The section references the Advisers Act, Sections 206(1) 
and 206(2), to direct the SEC to the source of the standard of 
conduct applicable currently to investment advisers. The 
relevant case law emanating from these sections of the Advisers 
Act is chiefly outlined in the Supreme Court case, SEC v. 
Capital Gains Research Bureau, 375 U.S. 180 (1963), and forms 
the basis, in addition to SEC administrative rulings, for 
accepted industry practice for investment advisers. The 
Committee aims to apply the current state of law to brokers and 
dealers and does not intend to undermine or dilute this 
fiduciary standard and market practice for investment advisers.
    This section further defines ``retail customer'' and gives 
the SEC rulemaking authority to extend rules to other types of 
customers in both the Exchange Act and the Advisers Act. 
Investment advisers have a fiduciary duty to all customers, 
including but not limited to retail customers. Direction to the 
SEC under this section is not intended to alter the duty to the 
range of customers that investment advisers' currently serve.
    This section also stipulates that the SEC cannot define an 
investor in a private fund where the investment adviser is 
contracted to the private fund as a ``retail customer'' for the 
purpose of such rules. This language ensures that the fiduciary 
duty of an investment adviser to a private fund is owed to the 
fund, not to each individual investor in the private fund. 
Further, this section prevents the mere receipt of 
compensation--whether in the form of fees for investment 
advisers or commissions for broker-dealers--from being 
considered a violation of the required standard of care.
    This section further codifies in both the Exchange Act and 
the Advisers Act that the SEC shall facilitate the disclosure 
of conflicts of interest, including material conflicts of 
interest, to customers for a broker, dealer, and investment 
adviser. These disclosures should be enhanced, clear, simple 
and easy to understand for a wide range of investors. Such 
disclosures should include the roles and duties of the 
intermediaries such that investors can make informed decisions 
and preserve the choice of the customer.
    This section additionally directs the SEC in both the 
Exchange Act and the Advisers Act to conduct an examination of 
sales practices, conflicts of interest and compensation schemes 
of brokers, dealers and investment advisers. The SEC shall 
write rules prohibiting or restricting these provisions should 
they be deemed contrary to the public interest or investor 
protection.
    In addition to harmonizing the fiduciary duty of brokers, 
dealers, and investment advisers under the Exchange Act and the 
Advisers Act, this section harmonizes the enforcement authority 
of the SEC with respect to violations by brokers, dealers, and 
investment advisers. This section is intended to bring equal 
sanctions and prosecution to brokers, dealers, and investment 
advisers who violate their standard of conduct set forth in 
this title.

Section 104. Commission study on disclosure to retail customers before 
        purchase of products or services

    Within 180 days of enactment, this section requires the SEC 
to perform a study of the nature and range of products sold to 
retail customers. The study must also examine how products are 
sold to customers and what information retail customers should 
receive prior to purchasing such products and services. The 
study will additionally examine ways to ensure that, where 
possible, reasonably similar products and services are subject 
to similar regulatory treatment. After completing the study, 
the SEC may propose rules or regulations relating to the 
subject matter contained in the study.

Section 105. Beneficial ownership and short swing profit reporting

    This section provides the SEC with the authority to adopt 
rules to shorten reporting timeframes and help the markets 
receive more timely information concerning substantial 
ownership interests in issuers. This change is important for 
purposes of obtaining more accurate pricing of listed 
securities.

Section 106. Revision to recordkeeping rules

    The Madoff scandal highlighted the need for better 
recordkeeping and third-party custody. This section would 
expand the scope of records to be maintained and subject to 
examination by the SEC under both the Investment Company Act of 
1940 and the Investment Advisers Act of 1940 to custodians or 
others who have custody or use of the investment company's or 
the investment adviser's clients' securities, deposits, or 
credits.

Section 107. Study on enhancing investment adviser examinations

    This section calls for the SEC, within 180 days of 
enactment, to examine the need to enhance and improve the 
oversight of investment advisers. The study must include a 
discussion of needed or recommended regulatory or legislative 
steps necessary to implement changes identified by the SEC. The 
SEC shall also examine the potential need for designating one 
or more self-regulatory organizations to augment its oversight 
of investment advisers. The SEC must report its findings to the 
House and Senate and use such findings to revise its rules and 
regulations as necessary.

Section 108. GAO study of financial planning

    Within 180 days of enactment, this section requires the 
Comptroller General to conduct a study on the unique role of 
financial planners in offering investment planning and other 
services to individuals. The study by the Government 
Accountability Office (GAO) must also examine potential 
regulatory gaps in this field. The GAO must report to Congress, 
including recommendations for registration or standards for 
financial planners.

                   TITLE II--ENFORCEMENT AND REMEDIES


Section 201. Authority to restrict mandatory pre-dispute arbitration

    This section allows the SEC to issue rules under the 
Securities Exchange Act of 1934 and the Investment Advisers Act 
of 1940 to prohibit, or impose conditions or limitations on the 
use of pre-dispute agreements requiring arbitration between a 
broker, dealer, or municipal securities dealer and its 
customers. In developing such rules, it is intended that the 
SEC will review arbitration practices and establish that the 
reforms are in the public interest and for the protection of 
investors.

Section 202. Comptroller General study to review securities arbitration 
        system

    This section requires the GAO to conduct a study on 
securities arbitration issues, including costs and benefits. 
The Comptroller General has one year after enactment to submit 
a report to Congress.

Section 203. Whistleblower protection

    The section provides the SEC with the authority to 
establish an Investor Protection Fund, using funds collected in 
enforcement actions not otherwise distributed to investors, to 
pay whistleblowers for information that leads to enforcement 
actions resulting in significant financial awards. The SEC 
currently has such authority to compensate sources in insider 
trading cases, and this provision would extend the SEC's power 
to compensate other tipsters who bring substantial evidence of 
other securities law violations. The SEC may also use the 
Investor Protection Fund to pay for investor education 
initiatives designed to help investors protect themselves 
against securities fraud or other violations of the securities 
laws. Any whistleblower who knowingly and willfully makes any 
false, fictitious, or fraudulent statement or representation, 
or makes or uses any false writing or document knowing the same 
to contain any false, fictitious, or fraudulent statement or 
entry, shall not be entitled to an award under this section and 
shall be subject to criminal prosecution.

Section 204. Conforming amendments for whistleblower protection

    This section makes conforming changes to existing 
securities laws to account for the whistleblower bounty program 
established in section 203 of the bill.

Section 205. Implementation and transition provisions for whistleblower 
        protections

    The SEC must issue final rules and regulations to implement 
the new whistleblower bounty program within 270 days of 
enactment. The provisions also allow sources who submit tips 
before the date of enactment to receive rewards under the new 
program.

Section 206. Collateral bars

    Generally, this section authorizes the SEC to impose 
collateral bars against regulated persons. As a result, the SEC 
would have the power to bar a regulated person who violates the 
securities laws in one part of the industry (e.g., a broker-
dealer who misappropriates customer funds) from access to 
customer funds in another part of the securities industry 
(e.g., an investment adviser). By expressly empowering the SEC 
under the Securities Exchange Act of 1934 and the Investment 
Advisers Act of 1940 to impose broad prophylactic relief in one 
action in the first instance, this section will enable the SEC 
to more effectively protect investors and the markets while 
more efficiently using SEC resources.

Section 207. Aiding and abetting authority under the Securities Act and 
        the Investment Company Act

    The Securities Exchange Act of 1934 and the Investment 
Advisers Act of 1940 presently permit the SEC to bring actions 
for aiding and abetting violations of those statutes in civil 
enforcement actions. This section provides the SEC with the 
power to bring similar actions for aiding and abetting 
violations of the Securities Act of 1933 and the Investment 
Company Act of 1940. In addition, the section clarifies that 
the knowledge requirement to bring an aiding and abetting claim 
can be satisfied by recklessness.

Section 208. Authority to impose penalties for aiding and abetting 
        violations of the Investment Advisers Act

    This section would clarify that the Investment Advisers Act 
of 1940 expressly permits the imposition of penalties on those 
individuals who aid and abet securities fraud.

Section 209. Deadline for completing examinations, inspections and 
        enforcement actions

    This section generally requires the SEC to complete 
enforcement investigations within 180 days after staff provides 
a written Wells notice to any person. The section contains 
exceptions for complex actions to permit 180-day extensions 
after notice to the Chairman for the initial extension and 
after notice to and approval by the Commission for subsequent 
extensions.
    For compliance examinations and inspections, the SEC has 
180 days after the 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, to request the entity to undertake 
corrective action or conclude the examination or inspection 
without findings. For complex cases, the SEC may extend the 
examination or inspection for one additional 180-day period 
after providing notice to the Chairman.

Section 210. Nationwide service of subpoenas

    The SEC currently has nationwide service of process in 
administrative proceedings. This section enhances the SEC's 
enforcement program by providing the SEC with the ability to 
make nationwide service of process available in civil actions 
filed in Federal courts. Nationwide service of process would 
produce a number of substantial advantages, including a 
significant savings in terms of travel costs and staff time. 
The changes apply to the Securities Act of 1933, the Securities 
Exchange Act of 1934, the Investment Company Act of 1940, and 
the Investment Advisers Act of 1940.

Section 211. Authority to impose civil penalties in cease and desist 
        proceedings

    This section streamlines the SEC's existing enforcement 
authorities by permitting the SEC to seek civil money penalties 
in cease-and-desist proceedings under Federal securities laws. 
The section provides appropriate due process protections by 
making the SEC's authority in administrative penalty 
proceedings coextensive with its authority to seek penalties in 
Federal court. As is the case when a Federal district court 
imposes a civil penalty in a SEC action, administrative civil 
money penalties would be subject to review by a Federal appeals 
court.

Section 212. Formerly associated persons

    Many provisions of the Federal securities laws that 
authorize the sanctioning of a person who engages in misconduct 
while associated with a regulated or supervised entity 
explicitly provide that such power exists even if the person is 
no longer associated with that entity. Several provisions, 
however, do not explicitly address this issue. As such, this 
section amends those provisions of the Federal securities laws 
that do not explicitly address this issue to make it clear that 
the SEC, or in applicable cases the Public Company Accounting 
Oversight Board, may sanction or discipline persons who engage 
in misconduct while associated with a regulated or supervised 
entity even if they are no longer associated with that entity.

Section 213. Sharing privileged information with other authorities

    This section allows the SEC to share information with 
domestic and foreign regulators and law enforcement agencies 
engaged in the investigation and prosecution of violations of 
applicable securities laws without waiving any privileges the 
SEC may have with respect to such information. The language is 
modeled on a provision in the Federal Deposit Insurance Act 
that enables the Federal bank regulatory agencies to share 
information with other regulators without waiving their 
privileges with respect to such information.

Section 214. Expanded access to grand jury material

    Modeled on Section 964 of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 providing banking 
and thrift regulators with access to grand jury information, 
the section authorizes government attorneys to seek court 
authorization to release certain limited grand jury information 
to SEC personnel for use in matters within the SEC's 
jurisdiction.
    Under existing law, the SEC may access grand jury 
information only in the rare case in which the agency can 
demonstrate that it has a ``particularized need'' for the 
information and that the information is sought ``preliminarily 
to or in connection with a judicial proceeding''. As a 
practical matter, the ``particularized need'' standard and the 
required nexus with an ongoing or imminent judicial proceeding 
severely limit the situations in which the U.S. Department of 
Justice can share with the SEC even the most critical 
information relevant to parallel investigations.
    In most cases, the SEC must therefore conduct a separate, 
duplicative investigation to obtain the same information. This 
both entails an inefficient use of government resources and 
frequently burdens private parties and financial institutions 
with the need to provide essentially the same documents and 
testimony in multiple investigations. The need for the SEC to 
conduct a separate investigation also can result in substantial 
delays. A narrow modification of the ``grand jury secrecy 
rule'', consistent with provisions already in place for Federal 
banking regulators, would aid the SEC in its investigations and 
would greatly enhance the efficient use of the law enforcement 
resources devoted to those investigations.
    The section also permits sharing of information only with 
regard to conduct that may constitute violations of the Federal 
securities laws. With regard to that information, however, the 
section lessens the burden in obtaining court approval. With 
this legislation, the court could approve the sharing of the 
information upon a showing of a ``substantial need in the 
public interest'' rather than the higher ``particularized 
need'' standard. In addition, under the section the judicial 
proceeding requirement does not apply to the SEC, permitting 
information to be shared at an earlier stage in an 
investigation and in connection with an administrative 
proceeding.

Section 215. Aiding and abetting standards of knowledge satisfied by 
        recklessness

    The current law for determining aiding and abetting 
violations and the scope of primary liability remains 
unsettled, resulting in challenges for the SEC in charging 
people who play substantial roles in fraud cases. Specifically, 
the Securities Exchange Act of 1934 provides that the SEC can 
prosecute people for ``knowingly'' aiding and abetting 
violations of that law. A growing number of courts, however, 
have held that knowingly means actual knowledge, rather than 
recklessness, resulting in a standard that is higher for aiding 
and abetting violations than for the primary violation (which, 
for a fraud violation, would include recklessness).
    The section corrects this discrepancy by clarifying that 
recklessness is sufficient for bringing an aiding and abetting 
action. As a result, the standard for aiding and abetting and 
the primary violation would become the same, and the SEC would 
no longer find itself at a disadvantage in charging someone as 
an aider and abettor rather than a primary violator.

Section 216. Extraterritorial jurisdiction of the anti-fraud provisions 
        of the Federal securities laws

    This section addresses the authority of the SEC and the 
United States to bring civil and criminal law enforcement 
proceedings involving transnational securities frauds--i.e., 
securities frauds in which not all of the fraudulent conduct 
occurs within the United States and not all of the wrongdoers 
are located domestically. Courts have previously ruled that 
Federal securities laws are silent as to their transnational 
reach, so two court tests--the conduct test and the effects 
test--have emerged for making such determinations and different 
courts apply different tests. This section would codify the 
SEC's authority to bring proceedings under both the conduct and 
the effects tests developed by the courts regardless of the 
jurisdiction of the proceedings. As a result, the bill creates 
a single national standard for protecting investors affected by 
transnational frauds.

Section 217. Fidelity bonding

    The section provides the SEC with the power to require that 
registered management companies provide and maintain a bond 
against loss as to any officer or employee who has access to 
securities or funds of the company either directly or through 
the authority to draw upon such funds or to direct generally 
the disposition of such securities.

Section 218. Enhanced SEC authority to conduct surveillance and risk 
        assessment

    This section amends the Securities Exchange Act of 1934, 
the Investment Company Act of 1940, and the Investment Advisers 
Act of 1940 to subject registered individuals and firms at any 
time, or from time to time, to such reasonable periodic, 
special, or other information and document requests as the SEC 
by rule or order deems necessary or appropriate to conduct 
surveillance or risk assessments of the securities markets.

Section 219. Investment company examinations

    Since 1975 the SEC has had the authority to examine ``all'' 
records of broker-dealers and other persons registered under 
the Securities Exchange Act of 1934, as well as ``all'' records 
of advisers registered under the Investment Advisers Act of 
1940. The SEC's authority to examine registered investment 
companies, however, has remained limited to ``required'' 
records. This section changes the authority under the 
Investment Companies Act of 1940 to apply to ``all'' records. 
By fixing this statutory anomaly, the SEC would gain a better 
understanding of the operations of investment companies.

Section 220. Control person liability under the Securities Exchange Act

    The SEC had for many years relied on Section 20(a) of the 
Securities Exchange Act of 1934, which imposes joint-and-
several liability on control persons unless they can establish 
an affirmative defense. Two recent court decisions, however, 
have concluded that the provision is available only to private 
parties. This section makes it clear that the SEC may once 
again impose joint-and-several liability on control persons 
unless they can establish an affirmative defense.

Section 221. Enhanced application of anti-fraud provisions

    Several of the anti-fraud provisions in the Securities 
Exchange Act of 1934 apply only to those transactions that 
involve securities registered on an exchange. In today's 
trading environment, however, the same standards should apply 
to all transactions whether they involve securities registered 
on an exchange.
    This section therefore broadens the SEC's authority to 
apply the law's anti-fraud provisions to transactions not 
conducted on exchanges. Significantly, the amendments extend 
the SEC's existing rulemaking authority to cover short sales in 
the over-the-counter markets and of non-equity securities. 
Additionally, the section extends the SEC's anti-fraud 
rulemaking power to cover all options on securities.

Section 222. SEC authority to issue rules on proxy access

    This section provides the SEC with the clear authority to 
issue regulations regarding the nomination of directors by 
shareholders to serve on a company's board of directors, 
thereby further democratizing corporate governance.

             TITLE III--COMMISSION FUNDING AND ORGANIZATION


Section 301. Authorization of appropriations

    Under this section, the SEC's authorized funding level 
doubles over a 5-year period, going from $1.115 billion in FY 
2010 to $2.25 billion in FY 2015. This enhanced funding 
authorization will allow the SEC to improve its enforcement 
programs and obtain the tools needed to better protect 
investors, hire staff with industry experience, and police 
today's complex markets.

Section 302. Investment adviser regulation funding

    This section grants the SEC rulemaking authority to create 
a new user fee paid by investment advisers to support the SEC's 
work related to the inspection and examination of investment 
advisers. Broker-dealers presently pay fees to the Financial 
Industry Regulatory Authority (FINRA), a self-regulatory 
organization, to cover the costs of their primary regulator, 
but investment advisers do not pay such fees to the SEC, which 
serves as their front-line regulator.

Section 303. Amendments to section 31 of the Securities Exchange Act of 
        1934

    This section makes several technical changes to section 31 
of the Securities Exchange Act of 1934 to improve the 
collection of the fees assessed on securities transactions that 
presently help to offset the costs of the SEC's operations.

Section 304. Commission organizational study and reform

    The failures to detect the Madoff and Stanford Financial 
frauds demonstrated deep deficiencies and flaws in our existing 
securities regulatory structure. The section therefore requires 
an expeditious, independent, comprehensive study of the present 
structure of securities regulation by a high-caliber entity 
with expertise in organizational change. The study will 
identify structural and operational reforms, and offer 
administrative and regulatory recommendations designed to 
identify further modifications aimed at enhancing investor 
protection at the SEC, FINRA, and other self-regulatory 
organizations. The SEC must hire the independent consultant 
within 90 days of enactment, and the consultant must complete 
its work within 150 days after being retained.
    Not later than the end of the 6-month period beginning on 
the date the consultant releases the organizational reform 
study, the SEC shall issue a report to the House Financial 
Services Committee and the Senate Banking Committee about what 
steps the agency is taking to implement the report's 
recommendations and reorganize securities regulation. The SEC 
shall continue via reports to update the two congressional 
panels on its progress every 6 months for 2 years after the 
issuance of the initial organizational reform study.

Section 305. Capital Markets Safety Board

    This section creates within the SEC a Capital Markets 
Safety Board to investigate how institutions in the securities 
industry failed. After completing its investigations, the Board 
must publish on the SEC's website its findings and 
recommendations on how other firms can avoid similar mistakes.

Section 306. Report on implementation of ``post-Madoff reforms''

    Under this section, the SEC must publish within 6 months of 
enactment a report outlining how the agency has implemented its 
post-Madoff reforms and whether an overlap exists between those 
reforms and the post-Madoff recommendations made by the SEC 
Inspector General.

Section 307. Joint Advisory Committee

    This section permits the SEC and the Commodity Futures 
Trading Commission (CFTC) to establish a joint advisory 
committee--on which members of each Commission and industry 
experts can sit--to examine areas of common interest, identify 
emerging regulatory risks and provide solutions, and regularly 
report its findings to the SEC, the CFTC, and Congress.

                TITLE IV--ADDITIONAL COMMISSION REFORMS


Section 401. Regulation of securities lending

    The securities lending program of American International 
Group contributed greatly to the company's need to seek aid 
from the Federal government. Securities lending and borrowing 
therefore have the potential to harm investors. In response, 
this section clarifies the SEC's authority to regulate stock 
loans and borrowing. Such rules will enhance market 
transparency, limit collateral risk exposures, and limit 
conflicts of interest in the securities lending process.
    The section further ensures that nothing in the new power 
shall be construed to limit the ability of other Federal 
financial regulators to issue rules to impose restrictions on 
the lending or borrowing of securities in order to protect the 
solvency of a financial institution under their jurisdiction or 
against systemic risk.

Section 402. Lost and stolen securities

    The section expands the scope of securities that must be 
reported to the SEC or its designee under the Lost and Stolen 
Securities Program, to include cancelled, missing or 
counterfeit securities certificates.

Section 403. Fingerprinting

    This section requires fingerprinting for the personnel of 
registered securities information processors, national 
securities exchanges, and national securities associations. 
This change would bring these new entities in line with the 
organizations already listed in the Securities Exchange Act of 
1934. This reform also ensures that these entities are aware of 
whether their personnel have criminal backgrounds and 
facilitates governmental efforts to combat terrorism financing.

Section 404. Equal treatment of self-regulatory organization rules

    Section 29(a) of the Securities Exchange Act of 1934 voids 
any condition, stipulation, or provision binding any person to 
waive compliance with any provision of the law, any rule or 
regulation thereunder, or any rule of an exchange. This section 
extends this safeguard to the rules of other self-regulatory 
organizations--specifically registered securities associations 
(e.g., FINRA) and registered clearing agencies.
    This change is consistent with provisions of the law that 
encourage allocation of self-regulatory responsibilities among 
self-regulatory organizations to avoid overlapping and 
duplicative regulation. The change is particularly important 
now that FINRA has taken over the regulation of New York Stock 
Exchange's members' conduct in relation to customers.

Section 405. Clarification that section 205 of the Investment Advisers 
        Act of 1940 does not apply to State-registered advisers

    As part of the National Securities Markets Improvements Act 
of 1996, Congress determined that the SEC should regulate 
larger investment advisers while States should oversee smaller 
investment advisers. This section eliminates any remaining 
application of Federal law to investment adviser firms that the 
States now exclusively regulate.

Section 406. Conforming amendments for the repeal of the Public Utility 
        Holding Company Act of 1935

    In 2005, Congress repealed the Public Utility Holding 
Company Act of 1935 but failed to remove all associated 
references in Federal securities laws. This section amends the 
following statutes to make conforming amendments resulting from 
the 2005 repeal of the Public Utility Holding Company Act: the 
Securities Exchange Act of 1934, the Trust Indenture Act of 
1939, the Investment Company Act of 1940, and the Investment 
Advisers Act of 1940.

Section 407. Promoting transparency in financial reporting

    This section requires the SEC, the Financial Accounting 
Standards Board, and the Public Company Accounting Oversight 
Board to provide oral testimony by their respective 
chairpersons (or a designee), beginning in 2010, and annually 
for 5 years, to the House Committee on Financial Services. 
Testimony at these hearings will address efforts to reduce the 
complexity in financial reporting in order to provide more 
accurate and clearer financial information to investors.

Section 408. Unlawful margin lending

    The Capital Markets Efficiency Act of 1996 amended Section 
7(c) of the Exchange Act, in part, by replacing the period that 
concluded the predecessor provision of Subsection 7(c)(1)(A) 
with a semicolon and an ``and''. This section changes the 
``and'' to an ``or'' in order to clarify that a violation of 
either prong remains sufficient to establish a cause of action 
for improper margin lending. This technical fix would match the 
statutory language to existing SEC policy interpretations that 
provide that the two clauses operate independently.

Section 409. Protecting confidentiality of materials submitted to the 
        Commission

    This section amends the Securities Exchange Act of 1934, 
the Investment Company Act of 1940, and the Investment Advisers 
Act of 1940 to protect the confidentiality of other sensitive 
business records and information obtained by SEC staff during 
the supervisory process. The section also protects the 
confidentiality of sensitive business records and information 
that the staff obtains during examinations of investment 
companies and investment advisers.

Section 410. Technical corrections

    This section makes numerous technical corrections to the 
Securities Act of 1933, the Securities Exchange Act of 1934, 
the Trust Indenture Act of 1939, the Investment Company Act of 
1940, and the Investment Advisers Act of 1940.

Section 411. Municipal securities

    In recent years, the composition of the governing bodies of 
most self-regulatory organizations has become more independent. 
Consistent with these changes, this section gives the SEC 
greater flexibility in determining the make-up of the Municipal 
Securities Rulemaking Board (a statutorily mandated self-
regulatory organization), director independence, and how the 
board functions.

Section 412. Interested person definition

    This section amends the Investment Company Act of 1940 to 
include in the definition of an interested person of an 
investment company any person whom the SEC finds would be 
unlikely to exercise an appropriate degree of independence 
because of (1) a material business or professional relationship 
with the company or any affiliated person of the company or (2) 
a close familial relationship with any affiliated person of the 
company. As a result of these changes, the SEC will have the 
authority the agency needs to ensure that these individuals and 
other conflicted persons cannot claim to act as independent 
watchdogs for mutual fund shareholders.

Section 413. Rulemaking authority to protect redeeming investors

    This section provides the SEC with express authority to 
limit mutual funds' investments in illiquid securities. During 
the height of the financial crisis, the illiquidity of short-
term debt threatened to cause the per share net asset values of 
many money market funds to drop below a dollar when they were 
unable to sell previously liquid securities at their carrying 
value. As a result of these market conditions, Reserve Primary 
Fund ``broke the buck,'' and only government intervention 
averted similar situations at other money market funds. While 
the SEC's longstanding illiquid investment limits have worked 
reasonably well, the section will remove any doubt about the 
SEC's authority to impose such restrictions.

Section 414. Study on SEC revolving door

    This section requires the GAO to perform a study within one 
year of enactment about concerns related to SEC employees going 
on to work for entities they once regulated.

Section 415. Study on internal control evaluation and reporting cost 
        burdens on smaller issuers

    This section requires the SEC and the GAO to each conduct a 
study evaluating the costs and benefits of complying with 
section 404(b) of the Sarbanes-Oxley Act for non-accelerated 
issuers. Non-accelerated issuers are publicly traded companies 
that have a market capitalization of $75 million or less. The 
report will provide reform recommendations on reducing 
compliance burdens.

Section 416. Analysis of rule regarding smaller reporting companies

    In light of the fact that certain companies' revenues and 
market capitalizations do not precisely reflect the nature of 
those companies, especially in the biotechnology industry, this 
section requires the SEC to conduct a study on the inclusion of 
revenue as a criteria used in defining smaller reporting 
companies under Rule 12b-2, established pursuant to the 
Sarbanes-Oxley Act.

Section 417. Financial Reporting Forum

    This section establishes a Financial Reporting Forum 
comprised of the SEC Chairman, the head of the Financial 
Accounting Standards Board, the Chairman of the Public Company 
Accounting Oversight Board, the heads of other Federal 
financial regulators, and appointed representatives with an 
interest in accounting issues to meet quarterly to discuss 
issues critical to immediate and long-term financial reporting. 
The Financial Reporting Forum shall annually report its 
findings to Congress.

Section 418. Investment advisers subject to State authorities

    This section clarifies the regulatory treatment of certain 
investment advisers. Generally, the provision requires 
investment advisers with $100 million or less in assets under 
management, or such higher figure as the SEC may by rule deem 
appropriate, to register with State securities regulators.

Section 419. Custodial requirements

    This section prohibits registered investment advisers from 
maintaining custody of client assets in excess of $10 million 
dollars, unless the assets are kept by a qualified custodian, 
maintained in separate accounts under the client's names, or 
retained in an account of which the investment adviser is the 
trustee. The qualified custodian cannot, directly or 
indirectly, provide investment advice to the funds it holds in 
custody. The change comes in response to the Madoff scandal.

Section 420. Ombudsman

    The section creates the position of an ombudsman at the 
SEC. Within 180 days after enactment, the SEC Chairman will 
appoint the ombudsman who will report directly to the Chairman. 
The ombudsman will serve as a liaison between the SEC and any 
affected person with respect to any problem such person may 
have in dealing with the SEC resulting from the regulatory 
activities of the SEC. The ombudsman will have a number of 
duties, including issuing reports to the SEC annually.

         TITLE V--SECURITIES INVESTOR PROTECTION ACT AMENDMENTS


Section 501. Increasing the minimum assessment paid by SIPC members

    This section updates the Securities Investor Protection Act 
(SIPA) to increase the minimum assessments paid by members of 
the Securities Investor Protection Corporation (SIPC) to the 
SIPC Fund. Currently, SIPA provides that the minimum assessment 
of a SIPC member shall not exceed $150 per year, regardless of 
the size of the SIPC member. This limit was imposed when SIPA 
was first enacted in 1970 and has never been adjusted to 
reflect either inflation or the substantial growth of the 
securities industry. The section strikes this current minimum 
assessment level and sets a new minimum assessment at 2 basis 
points of a SIPC member's gross revenues.

Section 502. Increasing the borrowing limit on Treasury loans

    The liquidations of Bernard L. Madoff Investment Securities 
and Lehman Brothers have significantly decreased and may 
eventually deplete the SIPC Fund's available reserves. This 
section therefore provides that, in the event that the SIPC 
Fund is or may reasonably appear to be insufficient to satisfy 
its statutory requirements, the SEC is authorized to make loans 
to the SIPC Fund by issuing notes or other obligations to the 
Secretary of the Treasury. Congress imposed the current 
borrowing limit of $1 billion at the time of SIPA's enactment 
in 1970 and has never adjusted the figure to reflect either 
inflation or the substantial growth of the securities industry. 
This section increases the SEC's authority to issue notes or 
other obligations to $2.5 billion.

Section 503. Increasing the cash limit of protection

    This section raises the maximum cash advance amount to 
$250,000 and authorizes SIPC, subject to the approval of the 
SEC, to make inflationary adjustments every 5 years to that 
amount starting in 2010. Since the establishment of SIPC in 
1970, Congress has generally increased the SIPC cash advance 
amount each time it has increased the amount of Federal Deposit 
Insurance Corporation (FDIC) coverage. Consistent with changes 
to FDIC coverage levels made in 2005, this section brings SIPC 
and FDIC coverage back in line and provides a commensurate 
level of protection for the clients of securities brokerage 
firms as the customers of depository institutions.

Section 504. SIPC as trustee in SIPA liquidation proceedings

    Under current law, SIPC must designate an outside trustee 
for the liquidation of a failed SIPC member when the failed 
firm's liabilities to unsecured general creditors and to 
subordinated lenders exceed $750,000 and where the failed firm 
appears to have more than 500 customers. Experience has shown 
that administration expenses are substantially reduced when 
SIPC personnel perform the liquidation functions, with equal 
benefit to customers as when an outside trustee is appointed. 
Accordingly, this section permits SIPC to designate itself as 
trustee for the liquidation of a failed SIPC member regardless 
of the size of the firm's liabilities to unsecured general 
creditors and where the failed firm appears to have less than 
5,000 customers.

Section 505. Insiders ineligible for SIPC advances

    The section adds ``insiders'' (as defined under the 
Bankruptcy Code) to the class of customers ineligible for SIPC 
advances. This statutory change would thus conform the 
treatment of an insider's claims filed in a stockbroker 
liquidation under the Bankruptcy Code and in a SIPA liquidation 
proceeding.

Section 506. Eligibility for direct payment procedure

    This section allows SIPC to use the direct payment 
procedure to resolve the failure of small firms with total 
claims of all customers up to an aggregate of $850,000. The 
direct payment procedure enables SIPC to quickly, and 
inexpensively, resolve the failure of small brokerage firms 
without the need to use the more time-consuming and expensive 
procedures applicable in a judicial liquidation proceeding. 
Current law limits the use of the direct payment procedure to 
cases in which all customer claims of an affected SIPC member 
aggregate to less than $250,000. Congress imposed this limit 
when adding the direct payment procedure to SIPA in 1978, and 
the figure has remained unadjusted since then.

Section 507. Increasing the fine for prohibited acts under SIPA

    SIPA currently identifies and prescribes criminal penalties 
up to $50,000 for several prohibited acts and for fraudulent 
conversion. The maximum penalty amount has remained constant 
since the enactment of the provisions concerning prohibited 
acts and fraudulent conversions, more than three decades ago. 
This section quintuples the maximum fine under SIPA to 
$250,000.

Section 508. Penalty for misrepresentation of SIPC membership or 
        protection

    This section adds false advertising and misrepresentation 
regarding SIPC membership or protection to the list of 
prohibited acts under SIPA. This section also prescribes civil 
liability for damages caused by such misrepresentations and 
criminal liability in the form of a fine up to $250,000 or 
imprisonment up to 5 years. Finally, this section extends civil 
liability to Internet service providers who knowingly transmit 
such misrepresentations and provides for court jurisdiction to 
issue injunctions.

Section 509. Futures held in a portfolio margin securities account 
        protection

    Under SIPA, claims of securities customers take priority 
over claims of general creditors. SIPC insurance, however, does 
not extend to futures positions, other than securities futures.
    This section extends SIPC insurance to futures positions 
held in a customer's portfolio margining account under a 
program approved by the SEC. This amendment addresses the 
possibility that current law would treat a portfolio margining 
customer as a general creditor with respect to the proceeds 
from such customer's futures positions, while the same 
portfolio margining customer would have priority for their 
securities holdings in the case of insolvency of their broker-
dealer. This uneven treatment, along with the Commodity 
Exchange Act (CEA) requirement that futures be held in a 
segregated account, prevents customers from including related 
futures products in their portfolio margining securities 
accounts. These obstacles preclude those customers from taking 
full advantage of the efficiencies created from hedging related 
positions in a single account.
    This section would become fully operative when the CFTC 
provides exemptive relief from the CEA's requirements regarding 
segregation of customer funds. This section neither amends the 
CEA nor limits the CFTC's discretion in granting exemptive 
relief.

Section 510. Study and report on the feasibility of risk-based 
        assessments for SIPC members

    This section directs the Comptroller General to conduct and 
complete a study within one year of enactment to determine 
whether SIPC could levy risk-based premiums on SIPC members. 
The GAO must consult with the SEC, FINRA, SIPC, FDIC, and any 
other entity it deems relevant in carrying out this study.

Section 511. Budgetary treatment of Commission loans to SIPC

    This section clarifies that SIPC is a budgetary entity as 
defined by the Federal Credit Reform Act, codifying a recent 
Office of Management and Budget determination to this effect. 
This provision would neither affect the status of SIPC staff as 
non-government employees nor subject SIPC to Federal 
procurement law. It would, however, require an accounting of 
SIPC expenses and revenues in monthly statements issued by the 
U.S. Treasury. This clarification is needed because, for the 
first time, SIPC may need to borrow money from the SEC as a 
result of the Madoff fraud and other insolvencies.

                TITLE VI--SARBANES-OXLEY ACT AMENDMENTS


Section 601. Public Company Accounting Oversight Board oversight of 
        auditors of brokers and dealers

    The $65 billion Madoff Ponzi scheme revealed a loophole in 
Federal securities laws with respect to the oversight of the 
auditors of broker-dealers. This section closes this loophole 
by providing the Public Company Accounting Oversight Board 
(PCAOB) with oversight authorities over the auditors of 
brokers-dealers, not just the requirement that such auditors 
register with the PCAOB.
    Like public companies, brokers-dealers would pay an 
accounting support fee in proportion to the broker-dealer's net 
capital compared to the total net capital of all brokers and 
dealers. The section also authorizes the PCAOB to refer 
investigations to FINRA or other defined self-regulatory 
organizations and share relevant information with them. The 
section further allows the PCAOB to differentiate amongst 
different types of broker-dealers to allow for the scaling and 
scoping of registered auditor reviews commensurate with the 
activities and size of the broker-dealer.

Section 602. Foreign regulatory information sharing

    This section allows the PCAOB to share information with 
foreign regulatory and law enforcement agencies engaged in the 
investigation and prosecution of violations of applicable 
accounting and auditing laws without waiving any privileges 
with respect to such information. This statutory change will 
resolve international conflicts that have impaired the PCAOB's 
ability to fulfill its statutory obligation to inspect non-U.S. 
registered accounting firms.

Section 603. Expansion of audit information to be produced and 
        exchanged with foreign counterparts

    This section enhances the ability of the SEC and the PCAOB 
to access the audit work of foreign public accounting firms 
when the foreign public accounting firm performs audit work, 
conducts interim reviews, or performs other material services 
upon which a registered public accounting firm relies in the 
conduct of an audit or interim review.

Section 604. Conforming amendment related to registration

    This section changes the Sarbanes-Oxley Act so that the SEC 
has authority--in addition to the PCAOB--regarding applications 
for registration.

Section 605. Fair Fund amendments

    This section increases the money available to compensate 
defrauded investors by revising the Fair Fund provisions to 
permit the SEC to use penalties obtained from a securities 
fraudster to recompense victims of the fraud even if the SEC 
does not obtain an order requiring the fraudster to disgorge 
ill-gotten gains. In some cases, a defendant may engage in a 
securities law violation that harms investors, but the SEC 
cannot obtain disgorgement from the defendant because the 
defendant did not personally benefit from the violation.

Section 606. Exemption for non-accelerated filers

    This section exempts non-accelerated filers, which are 
those public companies with less than $75 million in market 
capitalization, from the external audit of internal controls 
requirements contained in section 404 of the Sarbanes-Oxley 
Act. The provision also calls for a joint study by the SEC and 
the GAO to determine ways the section 404 compliance burdens 
for companies whose public float falls between $75 and $250 
million can be further reduced.

Section 607. Whistleblower protection against retaliation by a 
        subsidiary of an issuer

    This section creates additional protections for 
whistleblowers who report securities fraud and other 
wrongdoing. Currently, the statute could be read as providing a 
remedy only for retaliation by the issuer, and not by the 
subsidiaries or affiliates of an issuer. This section would 
eliminate a defense now raised in a substantial number of 
actions brought by whistleblowers and apply the whistleblower 
protections under the Sarbanes-Oxley Act to both issuers and 
their subsidiaries and affiliates.

Section 608. Congressional access to information

    This section clarifies that the PCAOB may not withhold 
information from Congress.

Section 609. Creation of ombudsman for the PCAOB

    This section creates an ombudsman for the PCAOB, who will 
be appointed by the Board within 180 days of enactment and who 
will report directly to the PCAOB Chairman. The ombudsman will 
serve as a liaison between the Board and registered accounting 
firms and issuers. The ombudsman will also assure that 
safeguards exist to encourage complaints to come forward and 
carry out other duties assigned by the Board.

Section 610. Auditing Oversight Board

    This section changes the name of the Public Company 
Accounting Oversight Board to the Auditing Oversight Board to 
reflect the entity's actual responsibilities, especially in 
light of the changes made by section 601 of the bill.

                TITLE VII--SENIOR INVESTMENT PROTECTION


Section 701. Findings

    This section provides congressional findings that seniors 
are targeted by unscrupulous salespersons using misleading 
designations and that seniors have a right to know whether they 
are working with qualified advisers who understand the products 
they are offering.

Section 702. Definitions

    This section defines the terms ``misleading designation'', 
``financial product'', and ``misleading or fraudulent 
marketing'', among others.

Section 703. Grants to States for enhanced protection of seniors from 
        being mislead by false designations

    This section requires the SEC to establish a program 
providing grants to the States to investigate and prosecute 
misleading and fraudulent marketing practices and to educate 
seniors to reduce the occurrence of those practices. The 
section also lays out how the States can use the grants and the 
minimum amounts of the grants. The section additionally 
explains in detail how State designation rules for securities, 
and State suitability rules for securities and annuities, will 
function within the grant program.

Section 704. Applications

    This section establishes how States will apply to the SEC 
for grants. The application must identify the scope of the 
problem, and describe how the proposal protects seniors from 
misleading or fraudulent marketing in the sale of financial 
products.

Section 705. Length of participation

    States obtaining grants under this title can receive 
assistance for three years, after which they may reapply for 
funding.

Section 706. Authorization of appropriations

    To carry out the program created under this title, this 
section authorizes $8 million for each of the fiscal years 2011 
through 2015.

        TITLE VIII--REGISTRATION OF MUNICIPAL FINANCIAL ADVISERS


Section 801. Municipal financial adviser registration requirements

    This section requires municipal financial advisers not 
currently regulated under existing securities laws to register 
with the SEC. The section sets forth professional standards for 
this area of public finance. It further spells out the terms 
under which municipal financial advisers must register with the 
SEC and defines a municipal financial adviser. The section also 
defines prohibited transactions for municipal financial 
advisers and creates a fiduciary duty toward their clients.

Section 802. Conforming amendments

    This section amends relevant securities laws to reflect the 
changes made in this title.

Section 803. Effective dates

    This section makes these amendments effective 30 days after 
enactment. The SEC, however, has until 120 days after the 
enactment to publish for notice and public comment regulations 
necessary to effectuate the title. The SEC must take final 
action on the rules within 270 days after enactment.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                    SECURITIES EXCHANGE ACT OF 1934


TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *



           NECESSITY FOR REGULATION AS PROVIDED IN THIS TITLE

  Sec. 2. For the reasons hereinafter enumerated, transactions 
in securities as commonly conducted upon securities exchanges 
and over-the-counter markets are affected with a national 
public interest which makes it necessary to provide for 
regulation and control of such transactions and of practices 
and matters related thereto, including transactions by 
officers, directors, and principal security holders, to require 
appropriate reports, to remove impediments to and perfect the 
mechanisms of a national market system for securities and a 
national system for the clearance and settlement of securities 
transactions and the safeguarding of securities and funds 
related thereto, and to impose requirements necessary to make 
such regulation and control reasonably complete and effective, 
in order to protect interstate commerce, the national credit, 
the Federal taxing power, to protect and make more effective 
the national banking system and Federal Reserve System, and to 
insure the maintenance of fair and honest markets in such 
transactions:
  (1) Such transactions (a) are carried on in large volume by 
the public generally and in large part originate outside the 
States in which the exchanges and over-the-counter markets are 
located and/or are [affected] effected by means of the mails 
and instrumentalities of interstate commerce; (b) constitute an 
important part of the current of interstate commerce; (c) 
involve in large part the securities of issuers engaged in 
interstate commerce; (d) involve the use of credit, directly 
affect the financing of trade, industry, and transportation in 
interstate commerce, and directly affect and influence the 
volume of interstate commerce; and affect the national credit.

           *       *       *       *       *       *       *


                  DEFINITIONS AND APPLICATION OF TITLE

  Sec. 3. (a) When used in this title, unless the context 
otherwise requires--
          (1) * * *

           *       *       *       *       *       *       *

          (47) The term ``securities laws'' means the 
        Securities Act of 1933 (15 U.S.C. 78a et seq.), the 
        Securities Exchange Act of 1934 (15 U.S.C. 78a et 
        seq.), the Sarbanes-Oxley Act of 2002, [the Public 
        Utility Holding Company Act of 1935 (15 U.S.C. 79a et 
        seq.),] the Trust Indenture Act of 1939 (15 U.S.C. 
        77aaa 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 et seq.), and the Securities 
        Investor Protection Act of 1970 (15 U.S.C. 78aaa et 
        seq.).

           *       *       *       *       *       *       *

          (55)(A) The term ``security future'' means a contract 
        of sale for future delivery of a single security or of 
        a narrow-based security index, including any interest 
        therein or based on the value thereof, except an 
        exempted security under [section 3(a)(12) of the 
        Securities Exchange Act of 1934] section 3(a)(12) of 
        this Act as in effect on the date of the enactment of 
        the Futures Trading Act of 1982 (other than any 
        municipal security as defined in section 3(a)(29) as in 
        effect on the date of the enactment of the Futures 
        Trading Act of 1982). The term ``security future'' does 
        not include any agreement, contract, or transaction 
        excluded from the Commodity Exchange Act under section 
        2(c), 2(d), 2(f), or 2(g) of the Commodity Exchange Act 
        (as in effect on the date of the enactment of the 
        Commodity Futures Modernization Act of 2000) or title 
        IV of the Commodity Futures Modernization Act of 2000.

           *       *       *       *       *       *       *

          (65) Municipal financial adviser.--
                  (A) The term ``municipal financial adviser'' 
                means a person who, for compensation, engages 
                in the business of--
                          (i) providing advice to a municipal 
                        securities issuer with respect to--
                                  (I) the issuance or proposed 
                                issuance of securities, 
                                including any remarketing of 
                                municipal securities directly 
                                or indirectly by or on behalf 
                                of a municipal securities 
                                issuer;
                                  (II) the investment of 
                                proceeds from securities issued 
                                by such municipal securities 
                                issuer;
                                  (III) the hedging of any 
                                risks associated with 
                                subclauses (I) or (II), 
                                including advice as to swap 
                                agreements (as defined in 
                                section 206A of the Gramm-
                                Leach-Bliley Act regardless of 
                                whether the counterparties 
                                constitute eligible contract 
                                participants); or
                                  (IV) preparation of 
                                disclosure documents in 
                                connection with the issuance, 
                                proposed issuance, or previous 
                                issuance of securities issued 
                                by a municipal securities 
                                issuer, including, without 
                                limitation, official statements 
                                and documents prepared in 
                                connection with a written 
                                agreement or contract for the 
                                benefit of holders of such 
                                securities described in section 
                                240.15c2-12 of title 17, Code 
                                of Federal Regulations;
                          (ii) assisting a municipal securities 
                        issuer in selecting or negotiating 
                        guaranteed investment contracts or 
                        other investment products; or
                          (iii) assisting any municipal 
                        securities issuer in the primary 
                        offering of securities not involving a 
                        public offering.
                  (B) Such term does not include--
                          (i) an attorney, if the attorney is 
                        offering advice or providing services 
                        that are of a traditional legal nature;
                          (ii) a nationally recognized 
                        statistical rating organization to the 
                        extent it is involved in the process of 
                        developing credit ratings;
                          (iii) a registered broker-dealer when 
                        acting as an underwriter, as such term 
                        is defined in section 2(a)(11) of the 
                        Securities Act of 1933 (15 U.S.C. 
                        section 77b(a)(11)); or
                          (iv) a State or any political 
                        subdivision thereof.
          (66) Municipal securities issuer.--The term 
        ``municipal securities issuer'' means--
                  (A) any entity that has the ability to issue 
                a security the interest on which is excludable 
                from gross income under section 103 of the 
                Internal Revenue Code of 1986 and the 
                regulations thereunder; or
                  (B) any person who receives the proceeds 
                generated from the issuance of municipal 
                securities.
          (67) Person associated with a municipal financial 
        adviser; associated person of a municipal financial 
        adviser.--The term ``person associated with a municipal 
        financial adviser'' or ``associated person of a 
        municipal financial adviser'' means any partner, 
        officer, director, or branch manager of such municipal 
        financial adviser (or any person occupying a similar 
        status or performing similar functions), any person 
        directly or indirectly controlling, controlled by, or 
        under common control with such municipal financial 
        adviser, or any employee of such municipal financial 
        adviser, except that any person associated with a 
        municipal financial adviser whose functions are solely 
        clerical or ministerial shall not be included in the 
        meaning of such term for purposes of section 15F(b) 
        (other than paragraph (6) thereof).

           *       *       *       *       *       *       *

  (g) Church Plans.--No church plan described in section 414(e) 
of the Internal Revenue Code of 1986, no person or entity 
eligible to establish and maintain such a plan under the 
Internal Revenue Code of 1986, no company or account that is 
excluded from the definition of an investment company under 
section 3(c)(14) of the Investment Company Act of 1940, and no 
trustee, director, officer or employee of or volunteer for such 
plan, [company, account person, or entity] company, account, 
person, or entity, acting within the scope of that person's 
employment or activities with respect to such plan, shall be 
deemed to be a ``broker'', ``dealer'', ``municipal securities 
broker'', ``municipal securities dealer'', ``government 
securities broker'', ``government securities dealer'', 
``clearing agency'', or ``transfer agent'' for purposes of this 
title--
          (1) * * *

           *       *       *       *       *       *       *


SEC. 4D. INVESTOR ADVISORY COMMITTEE.

  (a) Establishment and Purpose.--There is established an 
Investor Advisory Committee (in this section referred to as the 
``Committee'') to advise and consult with the Commission on--
          (1) regulatory priorities and issues regarding new 
        products, trading strategies, fee structures and the 
        effectiveness of disclosures;
          (2) initiatives to protect investor interest; and
          (3) initiatives to promote investor confidence in the 
        integrity of the marketplace.
  (b) Membership.--
          (1) Appointment.--The Chairman of the Commission 
        shall appoint the members of the Committee, which 
        members shall--
                  (A) represent the interests of individual 
                investors;
                  (B) represent the interests of institutional 
                investors; and
                  (C) use a wide range of investment 
                approaches.
          (2) Members not commission employees.--Members shall 
        not be considered employees or agents of the Commission 
        solely because of membership on the Committee.
  (c) Meetings.--The Committee shall meet from time to time at 
the call of the Commission, but, at a minimum, shall meet at 
least twice each year.
  (d) Compensation and Travel Expenses.--Members of the 
Committee who are not full-time employees of the United States 
shall--
          (1) be entitled to receive compensation at a rate 
        fixed by the Commission while attending meetings of the 
        Committee, including travel time; and
          (2) be allowed travel expenses, including 
        transportation and subsistence, while away from their 
        homes or regular places of business.
  (e) Committee Findings.--Nothing in this section requires the 
Commission to accept, agree, or act upon the findings or 
recommendations of the Committee.
  (f) Authorization of Appropriations.--There is authorized to 
be appropriated to the Commission such sums as are necessary 
for the activities of the Committee.

SEC. 4E. DEADLINE FOR COMPLETING ENFORCEMENT INVESTIGATIONS AND 
                    COMPLIANCE EXAMINATIONS AND INSPECTIONS.

  (a) Enforcement Investigations.--
          (1) In general.--Not later than 180 days after the 
        date on which Commission staff provide a written Wells 
        notification to any person, the Commission staff shall 
        either file an action against such person or provide 
        notice to the Director of the Division of Enforcement 
        of its intent to not file an action.
          (2) Exceptions for certain complex actions.--
        Notwithstanding paragraph (1), if the head of any 
        division or office within the Commission or his 
        designee determines that a particular enforcement 
        investigation is sufficiently complex such that a 
        determination regarding the filing of an action against 
        a person cannot be completed within the deadline 
        specified in paragraph (1), the head of any division or 
        office within the Commission or his designee may, after 
        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 period the 
        head of any division or office within the Commission or 
        his designee determines that a particular enforcement 
        investigation is sufficiently complex such that a 
        determination regarding the filing of an action against 
        a person cannot be completed within the additional 180-
        day period, the head of any division or office within 
        the Commission or his 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 Inspections.--
          (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 indicating either 
        that the examination or inspection has concluded 
        without findings or that the staff requests the entity 
        undertake corrective action.
          (2) Exception for certain complex actions.--
        Notwithstanding paragraph (1), if the head of any 
        division or office within the Commission or his 
        designee determines that a particular compliance 
        examination or inspection is sufficiently complex such 
        that a determination regarding concluding the 
        examination or inspection or regarding the staff 
        requests the entity undertake corrective action cannot 
        be completed within the deadline specified in paragraph 
        (1), the head of any division or office within the 
        Commission or his designee may, after providing notice 
        to the Chairman of the Commission, extend such deadline 
        as needed for one additional 180-day period.

           *       *       *       *       *       *       *


                          MARGIN REQUIREMENTS

  Sec. 7. (a) * * *

           *       *       *       *       *       *       *

  (c) Unlawful Credit Extension to Customers.--
          (1) Prohibition.--It shall be unlawful for any member 
        of a national securities exchange or any broker or 
        dealer, directly or indirectly, to extend or maintain 
        credit or arrange for the extension or maintenance of 
        credit to or for any customer--
                  (A) on any security (other than an exempted 
                security), except as provided in paragraph (2), 
                in contravention of the rules and regulations 
                which the Board of Governors of the Federal 
                Reserve System (hereafter in this section 
                referred to as the ``Board'') shall prescribe 
                under subsections (a) and (b); [and] or

           *       *       *       *       *       *       *


          PROHIBITION AGAINST MANIPULATION OF SECURITY PRICES

  Sec. 9. (a) It shall be unlawful for any person, directly or 
indirectly, by the use of the mails or any means or 
instrumentality of interstate commerce, or of any facility of 
any national securities exchange, or for any member of a 
national securities exchange--
  (1) For the purpose of creating a false or misleading 
appearance of active trading in any security [registered on a 
national securities exchange] other than a government security, 
or a false or misleading appearance with respect to the market 
for any such security, (A) to effect any transaction in such 
security which involves no change in the beneficial ownership 
thereof, or (B) to enter an order or orders for the purchase of 
such security with the knowledge that an order or orders of 
substantially the same size, at substantially the same time, 
and at substantially the same price, for the sale of any such 
security, has been or will be entered by or for the same or 
different parties, or (C) to enter any order or orders for the 
sale of any such security with the knowledge that an order or 
orders of substantially the same size, at substantially the 
same time, and at substantially the same price, for the 
purchase of such security, has been or will be entered by or 
for the same or different parties.
  (2) To effect, alone or with one or more other persons, a 
series of transactions in any security [registered on a 
national securities exchange] other than a government security 
or in connection with any security-based swap agreement (as 
defined in section 206B of the Gramm-Leach-Bliley Act) with 
respect to such security creating actual or apparent active 
trading in such security, or raising or depressing the price of 
such security, for the purpose of inducing the purchase or sale 
of such security by others.
  (3) If a dealer or broker, or other person selling or 
offering for sale or purchasing or offering to purchase the 
security or a security-based swap agreement (as defined in 
section 206B of the Gramm-Leach-Bliley Act) with respect to 
such security, to induce the purchase or sale of any security 
[registered on a national securities exchange] other than a 
government security or any security-based swap agreement (as 
defined in section 206B of the Gramm-Leach-Bliley Act) with 
respect to such security by the circulation or dissemination in 
the ordinary course of business of information to the effect 
that the price of any such security will or is likely to rise 
or fall because of market operations of any one or more persons 
conducted for the purpose of raising or depressing the price of 
such security.
  (4) If a dealer or broker, or the person selling or offering 
for sale or purchasing or offering to purchase the security or 
a security-based swap agreement (as defined in section 206B of 
the Gramm-Leach-Bliley Act) with respect to such security, to 
make, regarding any security [registered on a national 
securities exchange] other than a government security or any 
security-based swap agreement (as defined in section 206B of 
the Gramm-Leach-Bliley Act) with respect to such security, for 
the purpose of inducing the purchase or sale of such security 
or such security-based swap agreement, any statement which was 
at the time and in the light of the circumstances under which 
it was made, false or misleading with respect to any material 
fact, and which he knew or had reasonable ground to believe was 
so false or misleading.
  (5) For a consideration, received directly or indirectly from 
a dealer or broker, or other person selling or offering for 
sale or purchasing or offering to purchase the security or a 
security-based swap agreement (as defined in section 206B of 
the Gramm-Leach-Bliley Act) with respect to such security, to 
induce the purchase of any security [registered on a national 
securities exchange] other than a government security or any 
security-based swap agreement (as defined in section 206B of 
the Gramm-Leach-Bliley Act) with respect to such security by 
the circulation or dissemination of information to the effect 
that the price of any such security will or is likely to rise 
or fall because of the market operations of any one or more 
persons conducted for the purpose of raising or depressing the 
price of such security.
  (6) To effect either alone or with one or more other persons 
any series of transactions for the purchase and/or sale of any 
security [registered on a national securities exchange] other 
than a government security for the purpose of pegging, fixing, 
or stabilizing the price of such security in contravention of 
such rules and regulations as the Commission may prescribe as 
necessary or appropriate in the public interest or for the 
protection of investors.
  (b) It shall be unlawful for any person to effect, [by use of 
any facility of a national securities exchange,] in 
contravention of such rules and regulations as the Commission 
may prescribe as necessary or appropriate in the public 
interest or for the protection of investors--
          (1) * * *

           *       *       *       *       *       *       *

  (c) It shall be unlawful for any broker, dealer, or member of 
a national securities exchange directly or indirectly to 
endorse or guarantee the performance of any put, call, 
straddle, option, or privilege in relation to any security 
[registered on a national securities exchange] other than a 
government security, in contravention of such rules and 
regulations as the Commission may prescribe as necessary or 
appropriate in the public interest or for the protection of 
investors.

           *       *       *       *       *       *       *


      REGULATION OF THE USE OF MANIPULATIVE AND DECEPTIVE DEVICES

  Sec. 10. It shall be unlawful for any person, directly or 
indirectly, by the use of any means or instrumentality of 
interstate commerce or of the mails, or of any facility of any 
national securities exchange--
          (a)(1) To effect a short sale, or to use or employ 
        any stop-loss order in connection with the purchase or 
        sale, of any security [registered on a national 
        securities exchange] other than a government security, 
        in contravention of such rules and regulations as the 
        Commission may prescribe as necessary or appropriate in 
        the public interest or for the protection of investors.

           *       *       *       *       *       *       *

  (c)(1) To effect, accept, or facilitate a transaction 
involving the loan or borrowing of securities in contravention 
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 agency (as defined 
in section 3 of the Federal Deposit Insurance 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 impose restrictions on transactions involving 
the loan or borrowing of securities in order to protect the 
safety and soundness of a financial institution or to protect 
the financial system from systemic risk.

SEC. 10A. AUDIT REQUIREMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  (i) Preapproval Requirements.--
          (1) In general.--
                  (A) * * *
                  (B) De minimus exception.--The preapproval 
                requirement under subparagraph (A) is waived 
                with respect to the provision of non-audit 
                services for an issuer, if--
                          (i) the aggregate amount of all such 
                        non-audit services provided to the 
                        issuer constitutes not more than 5 
                        percent of the total amount of revenues 
                        paid by the issuer to its auditor 
                        during the fiscal year in which the 
                        [nonaudit] non-audit services are 
                        provided;

           *       *       *       *       *       *       *


                REGISTRATION REQUIREMENTS FOR SECURITIES

  Sec. 12. (a) * * *

           *       *       *       *       *       *       *

  (k) Trading Suspensions; Emergency Authority.--
          (1) * * *

           *       *       *       *       *       *       *

          [(7) Definitions.--For purposes of this subsection--
                  [(A) the term ``emergency'' means--
                          [(i) a major market disturbance 
                        characterized by or constituting--
                                  [(I) sudden and excessive 
                                fluctuations of securities 
                                prices generally, or a 
                                substantial threat thereof, 
                                that threaten fair and orderly 
                                markets; or
                                  [(II) a substantial 
                                disruption of the safe or 
                                efficient operation of the 
                                national system for clearance 
                                and settlement of transactions 
                                in securities, or a substantial 
                                threat thereof; or
                          [(ii) a major disturbance that 
                        substantially disrupts, or threatens to 
                        substantially disrupt--
                                  [(I) the functioning of 
                                securities markets, investment 
                                companies, or any other 
                                significant portion or segment 
                                of the securities markets; or
                                  [(II) the transmission or 
                                processing of securities 
                                transactions; and
                  [(B) notwithstanding section 3(a)(47), the 
                term ``securities laws'' does not include the 
                Public Utility Holding Company Act of 1935.]
          (7) Definition.--For purposes of this subsection, the 
        term ``emergency'' means--
                  (A) a major market disturbance characterized 
                by or constituting--
                          (i) sudden and excessive fluctuations 
                        of securities prices generally, or a 
                        substantial threat thereof, that 
                        threaten fair and orderly markets; or
                          (ii) a substantial disruption of the 
                        safe or efficient operation of the 
                        national system for clearance and 
                        settlement of transactions in 
                        securities, or a substantial threat 
                        thereof; or
                  (B) a major disturbance that substantially 
                disrupts, or threatens to substantially 
                disrupt--
                          (i) the functioning of securities 
                        markets, investment companies, or any 
                        other significant portion or segment of 
                        the securities markets; or
                          (ii) the transmission or processing 
                        of securities transactions.

           *       *       *       *       *       *       *


                      PERIODICAL AND OTHER REPORTS

  Sec. 13. (a) * * *
  (b)(1) The Commission may prescribe, in regard to reports 
made pursuant to this title, the form or forms in which the 
required information shall be set forth, the items or details 
to be shown in the balance sheet and the [earning statement] 
earnings statement, and the methods to be followed in the 
preparation of reports, in the appraisal or valuation of assets 
and liabilities, in the determination of depreciation and 
depletion, in the differentiation of recurring and nonrecurring 
income, in the differentiation of investment and operating 
income, and in the preparation, where the Commission deems it 
necessary or desirable, of separate and/or consolidated balance 
sheets or income accounts of any person directly or indirectly 
controlling or controlled by the issuer, or any person under 
direct or indirect common control with the issuer; but in the 
case of the reports of any person whose methods of accounting 
are prescribed under the provisions of any law of the United 
States, or any rule or regulation thereunder, the rules and 
regulations of the Commission with respect to reports shall not 
be inconsistent with the requirements imposed by such law or 
rule or regulation in respect of the same subject matter 
(except that such rules and regulations of the Commission may 
be inconsistent with such requirements to the extent that the 
Commission determines that the public interest or the 
protection of investors so requires).

           *       *       *       *       *       *       *

  (d)(1) Any person who, after acquiring directly or indirectly 
the beneficial ownership of any equity security of a class 
which is registered pursuant to section 12 of this title, or 
any equity security of an insurance company which would have 
been required to be so registered except for the exemption 
contained in section 12(g)(2)(G) of this title, or any equity 
security issued by a closed-end investment company registered 
under the Investment Company Act of 1940 or any equity security 
issued by a Native Corporation pursuant to section 37(d)(6) of 
the Alaska Native Claims Settlement Act, is directly or 
indirectly the beneficial owner of more than 5 per centum of 
such class shall, within ten days after such acquisition or 
within such shorter time as the Commission may establish by 
rule, [send to the issuer of the security at its principal 
executive office, by registered or certified mail, send to each 
exchange where the security is traded, and] file with the 
Commission, a statement containing such of the following 
information, and such additional information, as the Commission 
may by rules and regulations, prescribe as necessary or 
appropriate in the public interest or for the protection of 
investors--
          (A) * * *

           *       *       *       *       *       *       *

  (2) If any material change occurs in the facts set forth [in 
the statements to the issuer and the exchange, and] in the 
statement filed with the Commission, an amendment [shall be 
transmitted to the issuer and the exchange and] shall be filed 
with the Commission, in accordance with such rules and 
regulations as the Commission may prescribe as necessary or 
appropriate in the public interest or for the protection of 
investors.

           *       *       *       *       *       *       *

  (g)(1) Any person who is directly or indirectly the 
beneficial owner of more than 5 per centum of any security of a 
class described in subsection (d)(1) of this section [shall 
send to the issuer of the security and] shall file with the 
Commission a statement setting forth, in such form and at such 
time as the Commission may, by rule, prescribe--
          (A) * * *

           *       *       *       *       *       *       *

  (2) If any material change occurs in the facts set forth in 
the statement [sent to the issuer and] filed with the 
Commission, an amendment [shall be transmitted to the issuer 
and] shall be filed with the Commission, in accordance with 
such rules and regulations as the Commission may prescribe as 
necessary or appropriate in the public interest or for the 
protection of investors.

           *       *       *       *       *       *       *


                                PROXIES

  Sec. 14. (a)(1) It shall be unlawful for any person, by the 
use of the mails or by any means or instrumentality of 
interstate commerce or of any facility of a national securities 
exchange or otherwise, in contravention of such rules and 
regulations as the Commission may prescribe as necessary or 
appropriate in the public interest or for the protection of 
investors, to solicit or to permit the use of his name to 
solicit any proxy or consent or authorization in respect of any 
security (other than an exempted security) registered pursuant 
to section 12 of this title.
  (2) The authority of the Commission to prescribe rules and 
regulations under paragraph (1) includes rules and regulations 
that require the inclusion and set procedures 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.

           *       *       *       *       *       *       *


           REGISTRATION AND REGULATION OF BROKERS AND DEALERS

  Sec. 15. (a) * * *
  (b)(1) A broker or dealer may be registered by filing with 
the Commission an application for registration in such form and 
containing such information and documents concerning such 
broker or dealer and any persons associated with such broker or 
dealer as the Commission, by rule, may prescribe as necessary 
or appropriate in the public interest or for the protection of 
investors. Within forty-five 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) * * *
          (B) institute proceedings to determine whether 
        registration should be denied. Such proceedings shall 
        include notice of the grounds for denial under 
        consideration and opportunity for hearing and shall be 
        concluded within one hundred twenty days of the date of 
        the filing of the application for registration. At the 
        conclusion of such proceedings, the Commission, by 
        order, shall grant or deny such registration. [The 
        order granting registration shall not be effective 
        until such broker or dealer has become a member of a 
        registered securities association, or until such broker 
        or dealer has become a member of a national securities 
        exchange if such broker or dealer effects transactions 
        solely on that exchange, unless the Commission has 
        exempted such broker or dealer, by rule or order, from 
        such membership.] The Commission may extend the time 
        for conclusion of such proceedings for up to ninety 
        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 consents.
The Commission shall grant such registration if the Commission 
finds that the requirements of this section are satisfied. The 
order granting registration shall not be effective until such 
broker or dealer has become a member of a registered securities 
association, or until such broker or dealer has become a member 
of a national securities exchange if such broker or dealer 
effects transactions solely on that exchange, unless the 
Commission has exempted such broker or dealer, by rule or 
order, from such membership. 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) of this subsection.

           *       *       *       *       *       *       *

  (4) The Commission, by order, shall censure, place 
limitations on the activities, functions, or operations of, 
suspend for a period not exceeding twelve months, or revoke the 
registration of any broker or dealer if it finds, on the record 
after notice and opportunity for hearing, that such censure, 
placing of limitations, suspension, or revocation is in the 
public interest and that such broker or dealer, whether prior 
or subsequent to becoming such, or any person associated with 
such broker or dealer, whether prior or subsequent to becoming 
so associated--
          (A) * * *
          (B) has been convicted within ten years preceding the 
        filing of any application for registration or at any 
        time thereafter of any felony or misdemeanor or of a 
        substantially equivalent crime by a foreign court of 
        competent jurisdiction which the Commission finds--
                  (i) * * *
                  (ii) arises out of the conduct of the 
                business of a broker, dealer, municipal 
                securities dealer, government securities 
                broker, government securities dealer, 
                investment adviser, bank, insurance company, 
                fiduciary, transfer agent, nationally 
                recognized statistical rating organization, 
                municipal finance adviser, foreign person 
                performing a function substantially equivalent 
                to any of the above, or entity or person 
                required to be registered under the Commodity 
                Exchange Act (7 U.S.C. 1 et seq.) or any 
                substantially equivalent foreign statute or 
                regulation;

           *       *       *       *       *       *       *

          (C) is permanently or temporarily enjoined by order, 
        judgment, or decree of any court of competent 
        jurisdiction from acting as an investment adviser, 
        underwriter, broker, dealer, municipal securities 
        dealer, government securities broker, government 
        securities dealer, transfer agent, nationally 
        recognized statistical rating organization, municipal 
        finance adviser, foreign person performing a function 
        substantially equivalent to any of the above, or entity 
        or person required to be registered under the Commodity 
        Exchange Act or any substantially equivalent foreign 
        statute or regulation, or as an affiliated person or 
        employee of any investment company, bank, insurance 
        company, foreign entity substantially equivalent to any 
        of the above, or entity or person required to be 
        registered under the Commodity Exchange Act or any 
        substantially equivalent foreign statute or regulation, 
        or from engaging in or continuing any conduct or 
        practice in connection with any such activity, or in 
        connection with the purchase or sale of any security.

           *       *       *       *       *       *       *

  (6)(A) With respect to any person who is associated, who is 
seeking to become associated, or, at the time of the alleged 
misconduct, who was associated or was seeking to become 
associated with a broker or dealer, or any person 
participating, or, at the time of the alleged misconduct, who 
was participating, in an offering of any penny stock, the 
Commission, by order, shall censure, place limitations on the 
activities or functions of such person, or suspend for a period 
not exceeding [12 months, or bar such person from being 
associated with a broker or dealer,] 12 months, or bar any such 
person from being associated with a broker, dealer, investment 
adviser, municipal securities dealer, transfer agent, or 
nationally recognized statistical rating organization, or from 
participating in an offering of penny stock, if the Commission 
finds, on the record after notice and opportunity for a 
hearing, that such censure, placing of limitations, suspension, 
or bar is in the public interest and that such person--
          (i) * * *

           *       *       *       *       *       *       *

  (c)(1)(A) No broker or dealer shall make use of the mails or 
any means or instrumentality of interstate commerce to effect 
any transaction in, or to induce or attempt to induce the 
purchase or sale of, any security (other than commercial paper, 
bankers' acceptances, or commercial bills) [otherwise than on a 
national securities exchange of which it is a member], or any 
security-based swap agreement (as defined in section 206B of 
the Gramm-Leach-Bliley Act), by means of any manipulative, 
deceptive, or other fraudulent device or contrivance.

           *       *       *       *       *       *       *

  [(i)] (j) The authority of the Commission under this section 
with respect to security-based swap agreements (as defined in 
section 206B of the Gramm-Leach-Bliley Act) shall be subject to 
the restrictions and limitations of section 3A(b) of this 
title.
  (k) Standard of Conduct.--
          (1) In general.--Notwithstanding any other provision 
        of this Act or the Investment Advisers Act of 1940, the 
        Commission shall promulgate rules to provide that, with 
        respect to a broker or dealer, when providing 
        personalized investment advice about securities to a 
        retail customer (and such other customers as the 
        Commission may by rule provide), the standard of 
        conduct for such broker or dealer with respect to such 
        customer shall be the same as the standard of conduct 
        applicable to an investment adviser under the 
        Investment Advisers Act of 1940. The receipt of 
        compensation based on commission or other standard 
        compensation for the sale of securities shall not, in 
        and of itself, be considered a violation of such 
        standard applied to a broker or dealer.
          (2) Disclosure of range of products offered.--Where a 
        broker or dealer sells only proprietary or other 
        limited range of products, as determined by the 
        Commission, the Commission shall by rule require that 
        such broker or dealer provide notice to each retail 
        customer and obtain the consent or acknowledgment of 
        the customer. The sale of only proprietary or other 
        limited range of products by a broker or dealer shall 
        not, in and of itself, be considered a violation of the 
        standard set forth in paragraph (1).
          (3) Retail customer defined.--For purposes of this 
        subsection, the term ``retail customer'' means a 
        natural person, or the legal representative of such 
        natural person, who--
                  (A) receives personalized investment advice 
                about securities from a broker or dealer; and
                  (B) uses such advice primarily for personal, 
                family, or household purposes.
  (l) Other Matters.--The Commission shall--
          (1) facilitate the provision of simple and clear 
        disclosures to investors regarding the terms of their 
        relationships with brokers, dealers, and investment 
        advisers, including any material conflicts of interest; 
        and
          (2) examine and, where appropriate, promulgate rules 
        prohibiting or restricting certain sales practices, 
        conflicts of interest, and compensation schemes for 
        brokers, dealers, and investment advisers that the 
        Commission deems contrary to the public interest and 
        the protection of investors.
  (m) Harmonization of Enforcement.--The enforcement authority 
of the Commission with respect to violations of the standard of 
conduct applicable to a broker or dealer providing personalized 
investment advice about securities to a retail customer shall 
include--
          (1) the enforcement authority of the Commission with 
        respect to such violations provided under this Act, and
          (2) the enforcement authority of the Commission with 
        respect to violations of the standard of conduct 
        applicable to an investment advisor under the 
        Investment Advisers Act of 1940, including the 
        authority to impose sanctions for such violations, and
the Commission shall seek to prosecute and sanction violators 
of the standard of conduct applicable to a broker or dealer 
providing personalized investment advice about securities to a 
retail customer under this Act to same extent as the Commission 
prosecutes and sanctions violators of the standard of conduct 
applicable to an investment advisor under the Investment 
Advisers Act of 1940.
  (n) Authority to Restrict Mandatory Pre-Dispute 
Arbitration.--The Commission, by rule, may prohibit, or impose 
conditions or limitations on the use of, agreements that 
require customers or clients of any broker, dealer, or 
municipal securities dealer to arbitrate any future dispute 
between them arising under the Federal securities laws, the 
rules and regulations thereunder, or the rules of a self-
regulatory organization if it finds that such prohibition, 
imposition of conditions, or limitations are in the public 
interest and for the protection of investors.

           *       *       *       *       *       *       *


                          MUNICIPAL SECURITIES

  Sec. 15B. (a) * * *
  (b)[(1) Not later than one hundred twenty days after the date 
of enactment of the Securities Acts Amendments of 1975, the 
Commission shall establish a Municipal Securities Rulemaking 
Board (hereinafter in this section referred to as the 
``Board''), to be composed initially of fifteen members 
appointed by the Commission, which shall perform the duties set 
forth in this section. The initial members of the Board shall 
serve as members for a term of two years, and shall consist of 
(A) five individuals who are not associated with any broker, 
dealer, or municipal securities dealer (other than by reason of 
being under common control with, or indirectly controlling, any 
broker or dealer which is not a municipal securities broker or 
municipal securities dealer), at least one of whom shall be 
representative of investors in municipal securities, and at 
least one of whom shall be representative of issuers of 
municipal securities (which members are hereinafter referred to 
as ``public representatives''); (B) five individuals who are 
associated with and representative of municipal securities 
brokers and municipal securities dealers which are not banks or 
subsidiaries or departments or divisions of banks (which 
members are hereinafter referred to as ``broker-dealer 
representatives''); and (C) five individuals who are associated 
with and representative of municipal securities dealers which 
are banks or subsidiaries or departments or divisions of banks 
(which members are hereinafter referred to as ``bank 
representatives''). Prior to the expiration of the terms of 
office of the initial members of the Board, an election shall 
be held under rules adopted by the Board (pursuant to 
subsection (b)(2)(B) of this section) of the members to succeed 
such initial members.] (1) Not later than October 1, 2010, the 
Municipal Securities Rulemaking Board (hereinafter in this 
section referred to as the ``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 representatives, at 
least one of whom shall be representative of investors in 
municipal securities and at least one of whom shall be 
representative of issuers of municipal securities (which 
members are hereinafter referred to as ``public 
representatives'');
  (B) at least one individual who is representative of 
municipal securities brokers and municipal securities dealers 
which are not banks or subsidiaries or departments or divisions 
of banks (which members are hereinafter referred to as 
``broker-dealer representatives''); and
  (C) at least one individual who is representative of 
municipal securities dealers which are banks or subsidiaries or 
departments or divisions of banks (which members are 
hereinafter referred to as ``bank representatives'').
  (2) The Board shall propose and adopt rules to effect the 
purposes of this title with respect to transactions in 
municipal securities effected by brokers, dealers, and 
municipal securities dealers. (Such rules are hereinafter 
collectively referred to in this title as ``rules of the 
Board''.) The rules of the Board, as a minimum, shall:
          (A) * * *
          [(B) establish fair procedures for the nomination and 
        election of members of the Board and assure fair 
        representation in such nominations and elections of 
        municipal securities brokers and municipal securities 
        dealers. Such rules shall provide that the membership 
        of the Board shall at all times be equally divided 
        among public representatives, broker-dealer 
        representatives, and bank representatives, and that the 
        public representatives shall be subject to approval by 
        the Commission to assure that no one of them is 
        associated with any broker, dealer, or municipal 
        securities dealer (other than by reason of being under 
        common control with, or indirectly controlling, any 
        broker or dealer which is not a municipal securities 
        broker or municipal securities dealer) and that at 
        least one is representative of investors in municipal 
        securities and at least one is representative of 
        issuers of municipal securities. Such rules shall also 
        specify the term members shall serve and may increase 
        the number of members which shall constitute the whole 
        Board provided that such number is an odd number.]
  (B) Establish fair procedures for the nomination and election 
of members of the Board and assure fair representation in such 
nominations and elections of municipal securities brokers and 
municipal securities dealers. Such rules--
  (i) shall establish requirements regarding the independence 
of public representatives;
  (ii) shall provide that the number of public 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 representatives, which may include, among other things, 
prior work experience in the securities, municipal 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.

           *       *       *       *       *       *       *

  (c)(1) * * *

           *       *       *       *       *       *       *

  (4) The Commission, by order, shall censure or place 
limitations on the activities or functions of any person 
associated, seeking to become associated, or, at the time of 
the alleged misconduct, associated or seeking to become 
associated with a municipal securities dealer, or suspend for a 
period not exceeding [twelve months or bar any such person from 
being associated with a municipal securities dealer,] 12 months 
or bar any such person from being associated with a broker, 
dealer, investment adviser, municipal securities dealer, 
transfer agent, or nationally recognized statistical rating 
organization, if the Commission finds, on the record after 
notice and opportunity for hearing, that such censure, placing 
of limitations, suspension, or bar is in the public interest 
and that such person has committed any act, or is subject to an 
order or finding, enumerated in subparagraph (A), (D), (E), 
(H), or (G) of paragraph (4) of section 15(b) of this title, 
has been convicted of any offense specified in subparagraph (B) 
of such paragraph (4) within 10 years of the commencement of 
the proceedings under this paragraph, or is enjoined from any 
action, conduct, or practice specified in subparagraph (C) of 
such paragraph (4). It shall be unlawful for any person as to 
whom an order entered pursuant to this paragraph or paragraph 
(5) of this subsection suspending or barring him from being 
associated with a municipal securities dealer is in effect 
willfully to become, or to be, associated with a municipal 
securities dealer without the consent of the Commission, and it 
shall be unlawful for any municipal securities dealer to permit 
such a person to become, or remain, a person associated with 
him without the consent of the Commission, if such municipal 
securities dealer knew, or, in the exercise of reasonable care 
should have known, of such order.

           *       *       *       *       *       *       *

  (8) The Commission is authorized, by order, if in its opinion 
such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise, in furtherance 
of the purposes of this title, to remove from office or censure 
[any member or employee] any person who is, or at the time of 
the alleged misconduct was, a member or employee of the Board, 
who, the Commission finds, on the record after notice and 
opportunity for hearing, has willfully (A) violated any 
provision of this title, the rules and regulations thereunder, 
or the rules of the Board or (B) abused his authority.

           *       *       *       *       *       *       *


               GOVERNMENT SECURITIES BROKERS AND DEALERS

  Sec. 15C. (a)(1) * * *
  (2) A government securities broker or a government securities 
dealer subject to the registration requirement of paragraph 
(1)(A) of this subsection may be registered by filing with the 
Commission an application for registration in such form and 
containing such information and documents concerning such 
government securities broker or government securities dealer 
and any persons associated with such government securities 
broker or government securities dealer 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 filing of such application (or within such longer 
period as to which the applicant consents), the Commission 
shall--
          [(i)] (A) by order grant registration, or
          [(ii)] (B) institute proceedings to determine whether 
        registration 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 registration. At the conclusion of 
        such proceedings, the Commission, by order, shall grant 
        or deny such registration. [The order granting 
        registration shall not be effective until such 
        government securities broker or government securities 
        dealer has become a member of a national securities 
        exchange registered under section 6 of this title, or a 
        securities association registered under section 15A of 
        this title, unless the Commission has exempted such 
        government securities broker or government securities 
        dealer, by rule or order, from such membership.] The 
        Commission may extend the time for the 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 consents.
The Commission shall grant the registration of a government 
securities broker or a government securities dealer if the 
Commission finds that the requirements of this section are 
satisfied. The order granting registration shall not be 
effective until such government securities broker or government 
securities dealer has become a member of a national securities 
exchange registered under section 6 of this title, or a 
securities association registered under section 15A of this 
title, unless the Commission has exempted such government 
securities broker or government securities dealer, by rule or 
order, from such membership.  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 subsection 
(c) of this section.

           *       *       *       *       *       *       *

  (c)(1) With respect to any government securities broker or 
government securities dealer registered or required to register 
under subsection (a)(1)(A) of this section--
          (A) * * *

           *       *       *       *       *       *       *

          (C) The Commission, by order, shall censure or place 
        limitations on the activities or functions of any 
        person associated, [or seeking to become associated,] 
        seeking to become associated, or, at the time of the 
        alleged misconduct, associated or seeking to become 
        associated with a government securities broker or 
        government securities dealer registered or required to 
        register under subsection (a)(1)(A) of this section or 
        suspend for a period not exceeding 12 months or bar any 
        such person from being associated with such a 
        government securities broker or government securities 
        dealer, if the Commission finds, on the record after 
        notice and opportunity for hearing, that such censure, 
        placing of limitations, suspension, or bar is in the 
        public interest and that such person has committed or 
        omitted any act, or is subject to an order or finding, 
        enumerated in subparagraph (A), (D), (E), (H), or (G) 
        of paragraph (4) of section 15(b) of this title, has 
        been convicted of any offense specified in subparagraph 
        (B) of such paragraph (4) within 10 years of the 
        commencement of the proceedings under this paragraph, 
        or is enjoined from any action, conduct, or practice 
        specified in subparagraph (C) of such paragraph (4).
  (2)(A) With respect to any government securities broker or 
government securities dealer which is not registered or 
required to register under subsection (a)(1)(A) of this 
section, the appropriate regulatory agency for such government 
securities broker or government securities dealer may, in the 
manner and for the reasons specified in paragraph (1)(A) of 
this subsection, censure, place limitations on the activities, 
functions, or operations of, suspend for a period not exceeding 
12 months, or bar from acting as a government securities broker 
or government securities dealer any such government securities 
broker or government securities dealer, and may sanction any 
person associated, seeking to become associated, or, at the 
time of the alleged misconduct, associated or seeking to become 
associated with such government securities broker or government 
securities dealer in the manner and for the reasons specified 
in paragraph (1)(C) of this subsection.
  (B) In addition, where applicable, such appropriate 
regulatory agency may, in accordance with section 8 of the 
Federal Deposit Insurance Act (12 U.S.C. 1818), section 5 of 
the Home Owners' Loan Act of 1933 (12 U.S.C. 1464), or section 
407 of the National Housing Act (12 U.S.C. 1730), enforce 
compliance by such government securities broker or government 
securities dealer or any person associated, seeking to become 
associated, or, at the time of the alleged misconduct, 
associated or seeking to become associated with such government 
securities broker or government securities dealer with the 
provisions of this section and the rules thereunder.

           *       *       *       *       *       *       *


SEC. 15F. 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 adviser unless such 
person is registered as a municipal financial adviser in 
accordance with subsection (b).
  (B) Subparagraph (A) shall not apply to a natural person 
associated with a municipal financial adviser, as long as such 
adviser is registered in accordance with subsection (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 registered by 
filing with the Commission an application for registration in 
such form and containing such information and documents 
concerning such municipal financial adviser and any persons 
associated with such municipal financial 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 
        registration 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 registration. At the conclusion of 
        such proceedings, the Commission, 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 consents.
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 Commission, by rule, may 
prescribe, shall contain such information and documents 
concerning the applicant, the successor, 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 the protection of investors. The 
grant or denial of registration to such an applicant shall be 
in accordance with the procedures set forth in paragraph (1) of 
this subsection. If the Commission grants such registration, 
the registration shall terminate on the 45th day after the 
effective date thereof, unless prior thereto the successor 
shall, in accordance with such rules and regulations as the 
Commission may prescribe, adopt the application for 
registration as its own.
  (3) Any provision of this title (other than section 5 and 
subsection (a) of this section) which prohibits any act, 
practice, or course of business if the mails or any means or 
instrumentality of interstate commerce is used in connection 
therewith shall also prohibit any such act, practice, or course 
of business by any registered municipal financial adviser or 
any person acting on behalf of such a municipal financial 
adviser, irrespective of any use of the mails or any means or 
instrumentality of interstate commerce in connection therewith.
  (4) The Commission, by order, shall censure, place 
limitations on the activities, functions, or operations of, 
suspend for a period not exceeding 12 months, or revoke the 
registration of any municipal financial adviser if it finds, on 
the record after notice and opportunity for hearing, that such 
censure, placing of limitations, suspension, or revocation is 
in the public interest and that such municipal financial 
adviser, whether prior or subsequent to becoming such, or any 
person associated with such municipal financial adviser, 
whether prior or subsequent to becoming so associated--
          (A) has willfully made or caused to be made in any 
        application for registration or report required to be 
        filed with the Commission or with any other appropriate 
        regulatory agency under this title, or in any 
        proceeding before the Commission with respect to 
        registration, any statement which was at the time and 
        in the light of the circumstances under which it was 
        made false or misleading with respect to any material 
        fact, or has omitted to state in any such application 
        or report any material fact which is required to be 
        stated therein;
          (B) has been convicted within 10 years preceding the 
        filing of any application for registration or at any 
        time thereafter of any felony or misdemeanor or of a 
        substantially equivalent crime by a foreign court of 
        competent jurisdiction which the Commission finds--
                  (i) involves the purchase or sale of any 
                security, the taking of a false oath, the 
                making of a false report, bribery, perjury, 
                burglary, any substantially equivalent activity 
                however denominated by the laws of the relevant 
                foreign government, or conspiracy to commit any 
                such offense;
                  (ii) arises out of the conduct of the 
                business of a municipal financial adviser, 
                broker, dealer, municipal securities dealer, 
                government securities broker, government 
                securities dealer, investment adviser, bank, 
                insurance company, fiduciary, transfer agent, 
                nationally recognized statistical rating 
                organization, foreign person performing a 
                function substantially equivalent to any of the 
                above, or entity or person required to be 
                registered under the Commodity Exchange Act (7 
                U.S.C. 1 et seq.) or any substantially 
                equivalent foreign statute or regulation;
                  (iii) involves the larceny, theft, robbery, 
                extortion, forgery, counterfeiting, fraudulent 
                concealment, embezzlement, fraudulent 
                conversion, or misappropriation of funds, or 
                securities, or substantially equivalent 
                activity however denominated by the laws of the 
                relevant foreign government; or
                  (iv) involves the violation of section 152, 
                1341, 1342, or 1343 or chapter 25 or 47 of 
                title 18, or a violation of a substantially 
                equivalent foreign statute;
          (C) is permanently or temporarily enjoined by order, 
        judgment, or decree of any court of competent 
        jurisdiction from acting as a municipal financial 
        adviser, investment adviser, underwriter, broker, 
        dealer, municipal securities dealer, government 
        securities broker, government securities dealer, 
        transfer agent, nationally recognized statistical 
        rating organization, foreign person performing a 
        function substantially equivalent to any of the above, 
        or entity or person required to be registered under the 
        Commodity Exchange Act or any substantially equivalent 
        foreign statute or regulation, or as an affiliated 
        person or employee of any investment company, bank, 
        insurance company, foreign entity substantially 
        equivalent to any of the above, or entity or person 
        required to be registered under the Commodity Exchange 
        Act or any substantially equivalent foreign statute or 
        regulation or from engaging in or continuing any 
        conduct or practice in connection with any such 
        activity, or in connection with the purchase or sale of 
        any security;
          (D) has willfully violated any provision of the 
        Securities Act of 1933, the Investment Advisers Act of 
        1940, the Investment Company Act of 1940, the Commodity 
        Exchange Act, this title, the rules or regulations 
        under any of such statutes, or is unable to comply with 
        any such provision;
          (E) has willfully aided, abetted, counseled, 
        commanded, induced, or procured the violation by any 
        other person of any provision of the Securities Act of 
        1933, the Investment Advisers Act of 1940, the 
        Investment Company Act of 1940, the Commodity Exchange 
        Act, this title, the rules or regulations under any of 
        such statutes, or has failed reasonably to supervise, 
        with a view to preventing violations of the provisions 
        of such statutes, rules, and regulations, another 
        person who commits such a violation, if such other 
        person is subject to his supervision. For the purposes 
        of this subparagraph, no person shall be deemed to have 
        failed reasonably to supervise any other person, if--
                  (i) there have been established procedures, 
                and a system for applying such procedures, 
                which would reasonably be expected to prevent 
                and detect, insofar as practicable, any such 
                violation by such other person, and
                  (ii) such person has reasonably discharged 
                the duties and obligations incumbent upon him 
                by reason of such procedures and system without 
                reasonable cause to believe that such 
                procedures and system were not being complied 
                with;
          (F) is subject to any order of the Commission barring 
        or suspending the right of the person to be associated 
        with a municipal financial adviser;
          (G) has been found by a foreign financial regulatory 
        authority to have--
                  (i) made or caused to be made in any 
                application for registration or report required 
                to be filed with a foreign financial regulatory 
                authority, or in any proceeding before a 
                foreign financial regulatory authority with 
                respect to registration, any statement that was 
                at the time and in the light of the 
                circumstances under which it was made false or 
                misleading with respect to any material fact, 
                or has omitted to state in any application or 
                report to the foreign financial regulatory 
                authority any material fact that is required to 
                be stated therein;
                  (ii) violated any foreign statute or 
                regulation regarding transactions in 
                securities, or contracts of sale of a commodity 
                for future delivery, traded on or subject to 
                the rules of a contract market or any board of 
                trade; or
                  (iii) aided, abetted, counseled, commanded, 
                induced, or procured the violation by any 
                person of any provision of any statutory 
                provisions enacted by a foreign government, or 
                rules or regulations thereunder, empowering a 
                foreign financial regulatory authority 
                regarding transactions in securities, or 
                contracts of sale of a commodity for future 
                delivery, traded on or subject to the rules of 
                a contract market or any board of trade, or has 
                been found, by a foreign financial regulatory 
                authority, to have failed reasonably to 
                supervise, with a view to preventing violations 
                of such statutory provisions, rules, and 
                regulations, another person who commits such a 
                violation, if such other person is subject to 
                his supervision; or
          (H) is subject to any final order of a State 
        securities commission (or any agency or officer 
        performing like functions), State authority that 
        supervises or examines banks, savings associations, or 
        credit unions, State insurance commission (or any 
        agency or office performing like functions), an 
        appropriate Federal banking agency (as defined in 
        section 3 of the Federal Deposit Insurance Act (12 
        U.S.C. 1813(q))), or the National Credit Union 
        Administration, that--
                  (i) bars such person from association with an 
                entity regulated by such commission, authority, 
                agency, or officer, or from engaging in the 
                business of securities, insurance, banking, 
                savings association activities, or credit union 
                activities; or
                  (ii) constitutes a final order based on 
                violations of any laws or regulations that 
                prohibit fraudulent, manipulative, or deceptive 
                conduct.
  (5) Pending final determination whether any registration 
under this subsection shall be revoked, the Commission, by 
order, may suspend such registration, if such suspension 
appears to the Commission, after notice and opportunity for 
hearing, to be necessary or appropriate in the public interest 
or for the protection of investors. Any registered municipal 
financial adviser may, upon such terms and conditions as the 
Commission deems necessary or appropriate in the public 
interest or for the protection of investors, withdraw from 
registration by filing a written notice of withdrawal with the 
Commission. If the Commission finds that any registered 
municipal financial adviser is no longer in existence or has 
ceased to do business as a municipal financial adviser, the 
Commission, by order, shall cancel the registration of such 
municipal financial adviser.
  (6)(A) With respect to any person who is associated, who is 
seeking to become associated, or, at the time of the alleged 
misconduct, who was associated or was seeking to become 
associated with a municipal financial adviser, the Commission, 
by order, shall censure, place limitations on the activities or 
functions of such person, or suspend for a period not exceeding 
12 months, or bar such person from being associated with a 
municipal financial adviser, if the Commission finds, on the 
record after notice and opportunity for a hearing, that such 
censure, placing of limitations, suspension, or bar is in the 
public interest and that such person--
          (i) has committed or omitted any act, or is subject 
        to an order or finding, enumerated in subparagraph (A), 
        (D), or (E) of paragraph (4) of this subsection;
          (ii) has been convicted of any offense specified in 
        subparagraph (B) of such paragraph (4) within 10 years 
        of the commencement of the proceedings under this 
        paragraph; or
          (iii) is enjoined from any action, conduct, or 
        practice specified in subparagraph (C) of such 
        paragraph (4).
  (B) It shall be unlawful--
          (i) for any person as to whom an order under 
        subparagraph (A) is in effect, without the consent of 
        the Commission, willfully to become, or to be, 
        associated with a municipal financial adviser in 
        contravention of such order; or
          (ii) for any municipal financial adviser to permit 
        such a person, without the consent of the Commission, 
        to become or remain, a person associated with the 
        municipal financial adviser in contravention of such 
        order, if such municipal financial adviser knew, or in 
        the exercise of reasonable care should have known, of 
        such order.
  (7) No registered municipal financial adviser shall act as 
such unless it meets such standards of operational capability 
and such municipal financial adviser and all natural persons 
associated with such municipal financial adviser meet such 
standards of training, experience, competence, and such other 
qualifications as the Commission finds necessary or appropriate 
in the public interest or for the protection of investors. The 
Commission shall establish such standards by rules and 
regulations, which may--
          (A) specify that all or any portion of such standards 
        shall be applicable to any class of municipal financial 
        advisers and persons associated with municipal 
        financial advisers;
          (B) require persons in any such class to pass tests 
        prescribed in accordance with such rules and 
        regulations, which tests shall, with respect to any 
        class of partners, officers, or supervisory employees 
        (which latter term may be defined by the Commission's 
        rules and regulations) engaged in the management of the 
        municipal financial adviser, include questions relating 
        to bookkeeping, accounting, supervision of employees, 
        maintenance of records, and other appropriate matters; 
        and
          (C) provide that persons in any such class other than 
        municipal financial advisers and partners, officers, 
        and supervisory employees of municipal financial 
        advisers, may be qualified solely on the basis of 
        compliance with such standards of training and such 
        other qualifications as the Commission finds 
        appropriate.
The Commission, by rule, may prescribe reasonable fees and 
charges to defray its costs in carrying out this paragraph, 
including, but not limited to, fees for any test administered 
by it or under its direction.
  (c)(1)(A) No municipal financial adviser shall make use of 
the mails or any means or instrumentality of interstate 
commerce in connection with which such municipal financial 
adviser engages in any fraudulent, deceptive, or manipulative 
act or practice or violates such rules and regulations 
regarding conflicts of interest or fair practices, including 
but not limited to rules and regulations related to political 
contributions, as the Commission shall prescribe in the public 
interest or for the protection of investors or to maintain fair 
and orderly markets.
  (B) The Commission shall, for the purposes of this paragraph 
as the Commission finds necessary or appropriate in the public 
interest or for the protection of investors, by rules and 
regulations define, and prescribe means reasonably designed to 
prevent, such acts and practices as are fraudulent, deceptive, 
or manipulative.
  (2) If the Commission finds, after notice and opportunity for 
a hearing, that any person subject to the provisions of this 
section or any rule or regulation thereunder has failed to 
comply with any such provision, rule, or regulation in any 
material respect, the Commission may publish its findings and 
issue an order requiring such person, and any person who was a 
cause of the failure to comply due to an act or omission the 
person knew or should have known would contribute to the 
failure to comply, to comply, or to take steps to effect 
compliance, with such provision or such rule or regulation 
thereunder upon such terms and conditions and within such time 
as the Commission may specify in such order.
  (d) Every registered municipal financial adviser shall 
establish, maintain, and enforce written policies and 
procedures reasonably designed, taking into consideration the 
nature of such municipal financial adviser's business, to 
prevent the misuse in violation of this title, or the rules or 
regulations thereunder, of material, nonpublic information by 
such municipal financial adviser or any person associated with 
such municipal financial adviser. The Commission, as it deems 
necessary or appropriate in the public interest or for the 
protection of investors, shall adopt rules or regulations to 
require specific policies or procedures reasonably designed to 
prevent misuse in violation of this title (or the rules or 
regulations thereunder) of material, nonpublic information.
  (e) A municipal financial adviser and any person associated 
with such municipal financial adviser shall be deemed to have a 
fiduciary duty to any municipal securities issuer for whom such 
municipal financial adviser acts as a municipal financial 
adviser. A municipal financial adviser may not engage in any 
act, practice, or course of business which is not consistent 
with a municipal financial adviser's fiduciary duty. The 
Commission shall, for the purposes of this paragraph, by rules 
and regulations define, and prescribe means reasonably designed 
to prevent, such acts, practices, and courses of business as 
are not consistent with a municipal financial adviser's 
fiduciary duty to its clients.

SEC. 16. DIRECTORS, OFFICERS, AND PRINCIPAL STOCKHOLDERS.

  (a) Disclosures Required.--
          (1) Directors, officers, and principal stockholders 
        required to file.--Every person who is directly or 
        indirectly the beneficial owner of more than 10 percent 
        of any class of any equity security (other than an 
        exempted security) which is registered pursuant to 
        section 12, or who is a director or an officer of the 
        issuer of such security, shall file the statements 
        required by this subsection with the Commission [(and, 
        if such security is registered on a national securities 
        exchange, also with the exchange)].
          (2) Time of filing.--The statements required by this 
        subsection shall be filed--
                  (A) * * *
                  (B) within 10 days after he or she becomes 
                such beneficial owner, director, or officer, or 
                within such shorter time as the Commission may 
                establish by rule;
                  (C) if there has been a change in such 
                ownership, or if such person shall have 
                purchased or sold a security-based swap 
                agreement (as defined in [section 206(b)] 
                section 206B of the Gramm-Leach-Bliley Act (15 
                U.S.C. 78c note)) involving such equity 
                security, before the end of the second business 
                day following the day on which the subject 
                transaction has been executed, or at such other 
                time as the Commission shall establish, by 
                rule, in any case in which the Commission 
                determines that such 2-day period is not 
                feasible.

           *       *       *       *       *       *       *


  ACCOUNTS AND RECORDS, EXAMINATIONS OF EXCHANGES, MEMBERS, AND OTHERS

  Sec. 17. (a)(1) Every national securities exchange, member 
thereof, broker or dealer who transacts a business in 
securities through the medium of any such member, registered 
securities association, registered broker or dealer, registered 
municipal securities dealer, registered securities information 
processor, registered transfer agent, nationally recognized 
statistical rating organization, registered municipal financial 
adviser, and registered clearing agency and the Municipal 
Securities Rulemaking Board shall make and keep for prescribed 
periods such records, furnish such copies thereof, and make and 
disseminate such reports as the Commission, by rule, prescribes 
as necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the 
purposes of this title. Any report that a nationally recognized 
statistical rating organization is required by Commission rules 
under this paragraph to make and disseminate to the Commission 
shall be deemed furnished to the Commission.

           *       *       *       *       *       *       *

  (b) Records Subject to Examination.--
          (1) Procedures for cooperation with other agencies.--
        All records of persons described in subsection (a) of 
        this section are subject at any time, or from time to 
        time, to such reasonable periodic, special, or other 
        examinations by representatives of the Commission and 
        the appropriate regulatory agency for such persons as 
        the Commission or the appropriate regulatory agency for 
        such persons deems necessary or appropriate in the 
        public interest, for the protection of investors, or 
        otherwise in furtherance of the purposes of this title: 
        Provided, however, That the Commission shall, prior to 
        conducting any such examination of a--
                  (A) * * *
                  (B) broker or dealer registered pursuant to 
                section 15(b)(11), exchange registered pursuant 
                to section 6(g), or national securities 
                association registered pursuant to section 
                [15A(k) gives] 15A(k), give notice to the 
                Commodity Futures Trading Commission of such 
                proposed examination and consults with the 
                Commodity Futures Trading Commission concerning 
                the feasibility and desirability of 
                coordinating such examination with examinations 
                conducted by the Commodity Futures Trading 
                Commission in order to avoid unnecessary 
                regulatory duplication or undue regulatory 
                burdens for such broker or dealer or exchange.

           *       *       *       *       *       *       *

          (5) Surveillance and risk assessment.--All persons 
        described in subsection (a) of this section 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.

           *       *       *       *       *       *       *

  (f)(1) Every national securities exchange, member thereof, 
registered securities association, broker, dealer, municipal 
securities dealer, government securities broker, government 
securities dealer, registered transfer agent, registered 
clearing agency, participant therein, member of the Federal 
Reserve System, and bank whose deposits are insured by the 
Federal Deposit Insurance Corporation shall--
          (A) report to the Commission or other person 
        designated by the Commission and, in the case of 
        securities issued pursuant to chapter 31 of title 31, 
        United States Code, to the Secretary of the Treasury 
        such information about [missing, lost, counterfeit, or 
        stolen securities] securities that are missing, lost, 
        counterfeit, stolen, cancelled, or any other category 
        of securities as the Commission, by rule, may 
        prescribe, in such form and within such time as the 
        Commission, by rule, determines is necessary or 
        appropriate in the public interest or for the 
        protection of investors; such information shall be 
        available on request for a reasonable fee, to any such 
        exchange, member, association, broker, dealer, 
        municipal securities dealer, transfer agent, clearing 
        agency, participant, member of the Federal Reserve 
        System, or insured bank, and such other persons as the 
        Commission, by rule, designates; and
          (B) make such inquiry with respect to information 
        reported pursuant to this subsection as the Commission, 
        by rule, prescribes as necessary or appropriate in the 
        public interest or for the protection of investors, to 
        determine whether securities in their custody or 
        control, for which they are responsible, or in which 
        they are effecting, clearing, or settling a transaction 
        have been reported as missing, lost, counterfeit, [or 
        stolen] stolen, cancelled, or reported in such other 
        manner as the Commission, by rule, may prescribe.
  (2) Every member of a national securities exchange, broker, 
dealer, registered transfer agent, [and registered clearing 
agency,] registered clearing agency, registered securities 
information processor, national securities exchange, and 
national securities association shall require that each of its 
partners, directors, officers, and employees be fingerprinted 
and shall submit such fingerprints, or cause the same to be 
submitted, to the Attorney General of the United States for 
identification and appropriate processing. The Commission, by 
rule, may exempt from the provisions of this paragraph upon 
specified terms, conditions, and periods, any class of 
partners, directors, officers, or employees of any such member, 
broker, dealer, transfer agent, [or clearing agency,] clearing 
agency, securities information processor, national securities 
exchange, or national securities association, if the Commission 
finds that such action is not inconsistent with the public 
interest or the protection of investors. Notwithstanding any 
other provision of law, in providing identification and 
processing functions, the Attorney General shall provide the 
Commission and self-regulatory organizations designated by the 
Commission with access to all criminal history record 
information.

           *       *       *       *       *       *       *

  [(j) Authority To Limit Disclosure of Information.--
Notwithstanding any other provision of law, the Commission 
shall not be compelled to disclose any information required to 
be reported under subsection (h) or (i) or any information 
supplied to the Commission by any domestic or foreign 
regulatory agency that relates to the financial or operational 
condition of any associated person of a broker or dealer, 
investment bank holding company, or any affiliate of an 
investment bank holding company. Nothing in this subsection 
shall authorize the Commission to withhold information from 
Congress, or prevent the Commission from complying with a 
request for information from any other Federal department or 
agency or any self-regulatory organization requesting the 
information for purposes within the scope of its jurisdiction, 
or complying with an order of a court of the United States in 
an action brought by the United States or the Commission. For 
purposes of section 552 of title 5, United States Code, this 
subsection shall be considered a statute described in 
subsection (b)(3)(B) of such section 552. In prescribing 
regulations to carry out the requirements of this subsection, 
the Commission shall designate information described in or 
obtained pursuant to subparagraphs (A), (B), and (C) of 
subsection (i)(5) as confidential information for purposes of 
section 24(b)(2) of this title.]
  (j) Authority To Limit Disclosure of Information.--
          (1) In general.--Notwithstanding any other provision 
        of law, the Commission shall not be compelled 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, including subsection (i)(5)(A), or the 
        financial or operational condition of such persons, or 
        any information supplied to the Commission by any 
        domestic or foreign regulatory agency or self-
        regulatory organization 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 withhold information 
        from the Congress, prevent the Commission from 
        complying with a request for information from any other 
        Federal department or agency, the Public Company 
        Accounting Oversight Board, or any self-regulatory 
        organization requesting 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 
        described in this section to produce information, 
        documents, records, or reports relating directly to the 
        examination, 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 subsection shall be considered 
        a statute described in subsection (b)(3)(B) of that 
        section.
          (4) Certain information to be confidential.--In 
        prescribing regulations to carry out the requirements 
        of this subsection, the Commission shall designate 
        information described in or obtained pursuant to 
        subparagraphs (A), (B), and (C) of subsection (i)(3) as 
        confidential information for purposes of section 
        24(b)(2) of this title.

           *       *       *       *       *       *       *


NATIONAL SYSTEM FOR CLEARANCE AND SETTLEMENT OF SECURITIES TRANSACTIONS

  Sec. 17A. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) * * *

           *       *       *       *       *       *       *

  (4)(A) * * *

           *       *       *       *       *       *       *

  (C) The appropriate regulatory agency for a transfer agent, 
by order, shall censure or place limitations on the activities 
or functions of any person associated, seeking to become 
associated, or, at the time of the alleged misconduct, 
associated or seeking to become associated with the transfer 
agent, or suspend for a period not exceeding [twelve months or 
bar any such person from being associated with the transfer 
agent,] 12 months or bar any such person from being associated 
with any transfer agent, broker, dealer, investment adviser, 
municipal securities dealer, or nationally recognized 
statistical rating organization, if the appropriate regulatory 
agency finds, on the record after notice and opportunity for 
hearing, that such censure, placing of limitations, suspension, 
or bar is in the public interest and that such person has 
committed or omitted any act, or is subject to an order or 
finding, enumerated in subparagraph (A), (D), (E), (H), or (G) 
or paragraph (4) of section 15(b) of this title, has been 
convicted of any offense specified in subparagraph (B) of such 
paragraph (4) within ten years of the commencement of the 
proceedings under this paragraph, or is enjoined from any 
action, conduct, or practice specified in subparagraph (C) of 
such paragraph (4). It shall be unlawful for any person as to 
whom such an order suspending or barring him from being 
associated with a transfer agent is in effect willfully to 
become, or to be, associated with a transfer agent without the 
consent of the appropriate regulatory agency that entered the 
order and the appropriate regulatory agency for that transfer 
agent. It shall be unlawful for any transfer agent to permit 
such a person to become, or remain, a person associated with it 
without the consent of such appropriate regulatory agencies, if 
the transfer agent knew, or in the exercise of reasonable care 
should have known, of such order. The Commission may establish, 
by rule, procedures by which a transfer agent reasonably can 
determine whether a person associated or seeking to become 
associated with it is subject to any such order, and may 
require, by rule, that any transfer agent comply with such 
procedures.

           *       *       *       *       *       *       *


   REGISTRATION, RESPONSIBILITIES, AND OVERSIGHT OF SELF-REGULATORY 
                             ORGANIZATIONS

  Sec. 19. (a) * * *

           *       *       *       *       *       *       *

  (h)(1) * * *

           *       *       *       *       *       *       *

  (4) The appropriate regulatory agency for a self-regulatory 
organization is authorized, by order, if in its opinion such 
action is necessary or appropriate in the public interest, for 
the protection of investors, or otherwise in furtherance of the 
purposes of this title, to remove from office or censure [any 
officer or director] any person who is, or at the time of the 
alleged misconduct was, an officer or director of such self-
regulatory organization, if such appropriate regulatory agency 
finds, on the record after notice and opportunity for hearing, 
that [such officer or director] such person has willfully 
violated any provision of this title, the rules or regulations 
thereunder, or the rules of such self-regulatory organization, 
willfully abused his authority, or without reasonable 
justification or excuse has failed to enforce compliance--
          (A) * * *

           *       *       *       *       *       *       *


     LIABILITY OF CONTROLLING PERSONS AND PERSONS WHO AID AND ABET 
                               VIOLATIONS

  Sec. 20. (a) Every person who, directly or indirectly, 
controls any person liable under any provision of this title or 
of any rule or regulation thereunder shall also be liable 
jointly and severally with and to the same extent as such 
controlled person to any person to whom such controlled person 
is liable, including to the Commission in any action brought 
under paragraph (1) or (3) of section 21(d), unless the 
controlling person acted in good faith and did not directly or 
indirectly induce the act or acts constituting the violation or 
cause of action.

           *       *       *       *       *       *       *

  (e) Prosecution of Persons Who Aid and Abet Violations.--For 
purposes of any action brought by the Commission under 
paragraph (1) or (3) of section 21(d), any person that 
knowingly or recklessly provides substantial assistance to 
another person in violation of a provision of this title, or of 
any rule or regulation issued under this title, shall be deemed 
to be in violation of such provision to the same extent as the 
person to whom such assistance is provided.

           *       *       *       *       *       *       *


        INVESTIGATIONS; INJUNCTIONS AND PROSECUTION OF OFFENSES

  Sec. 21. (a)(1) The Commission may, in its discretion, make 
such investigations as it deems necessary to determine whether 
any person has violated, is violating, or is about to violate 
any provision of this title, the rules or regulations 
thereunder, the rules of a national securities exchange or 
registered securities association of which such person is a 
member or a person associated, or, as to any act or practice, 
or omission to act, while associated with a member, formerly 
associated with a member, the rules of a registered clearing 
agency in which such person is a participant, or, as to any act 
or practice, or omission to act, while a participant, was a 
participant, the rules of the Public Company Accounting 
Oversight Board, of which such person is a registered public 
accounting firm [or a person associated with such a firm], a 
person associated with such a firm, or, as to any act, 
practice, or omission to act while associated with such firm, a 
person formerly associated with such a firm, or the rules of 
the Municipal Securities Rulemaking Board, and may require or 
permit any person to file with it a statement in writing, under 
oath or otherwise as the Commission shall determine, as to all 
the facts and circumstances concerning the matter to be 
investigated. The Commission is authorized in its discretion, 
to publish information concerning any such violations, and to 
investigate any facts, conditions, practices, or matters which 
it may deem necessary or proper to aid in the enforcement of 
such provisions, in the prescribing of rules and regulations 
under this title, or in securing information to serve as a 
basis for recommending further legislation concerning the 
matters to which this title relates.

           *       *       *       *       *       *       *

  (d)(1) * * *

           *       *       *       *       *       *       *

  (3) Money penalties in civil actions.--
          (A) * * *

           *       *       *       *       *       *       *

          (C) Procedures for collection.--
                  (i) Payment of penalty to treasury.--A 
                penalty imposed under this section shall be 
                payable into the Treasury of the United States, 
                except as otherwise provided in section 308 of 
                the Sarbanes-Oxley Act of 2002 and section 21F 
                of this title.

           *       *       *       *       *       *       *

  (h)(1) * * *
  (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 subpoena 
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) * * *

           *       *       *       *       *       *       *


                  CIVIL PENALTIES FOR INSIDER TRADING

  Sec. 21A. (a) * * *

           *       *       *       *       *       *       *

  (d) Procedures for Collection.--
          (1) Payment of penalty to treasury.--A penalty 
        imposed under this section shall [(subject to 
        subsection (e))] be payable into the Treasury of the 
        United States, except as otherwise provided in section 
        308 of the Sarbanes-Oxley Act of 2002 and section 21F 
        of this title.

           *       *       *       *       *       *       *

  [(e) Authority To Award Bounties to Informants.--
Notwithstanding the provisions of subsection (d)(1), there 
shall be paid from amounts imposed as a penalty under this 
section and recovered by the Commission or the Attorney 
General, such sums, not to exceed 10 percent of such amounts, 
as the Commission deems appropriate, to the person or persons 
who provide information leading to the imposition of such 
penalty. Any determinations under this subsection, including 
whether, to whom, or in what amount to make payments, shall be 
in the sole discretion of the Commission, except that no such 
payment shall be made to any member, officer, or employee of 
any appropriate regulatory agency, the Department of Justice, 
or a self-regulatory organization. Any such determination shall 
be final and not subject to judicial review.]
  [(f)] (e) Definition.--For purposes of this section, ``profit 
gained'' or ``loss avoided'' is the difference between the 
purchase or sale price of the security and the value of that 
security as measured by the trading price of the security a 
reasonable period after public dissemination of the nonpublic 
information.
  [(g)] (f) The authority of the Commission under this section 
with respect to security-based swap agreements (as defined in 
section 206B of the Gramm-Leach-Bliley Act) shall be subject to 
the restrictions and limitations of section 3A(b) of this 
title.

              CIVIL REMEDIES IN ADMINISTRATIVE PROCEEDINGS

  Sec. 21B. [(a) Commission Authority To Assess Money 
Penalties.--In any proceeding]
  (a) Commission Authority To Assess Money Penalties.--
          (1) In general.--In any proceeding instituted 
        pursuant to sections 15(b)(4), 15(b)(6), 15D, 15B, 15C, 
        15E, or 17A of this title against any person, the 
        Commission or the appropriate regulatory agency may 
        impose a civil penalty if it finds, on the record after 
        notice and opportunity for hearing, that such person--
                  [(1)] (A) has willfully violated any 
                provision of the Securities Act of 1933, the 
                Investment Company Act of 1940, the Investment 
                Advisers Act of 1940, or this title, or the 
                rules or regulations thereunder, or the rules 
                of the Municipal Securities Rulemaking Board;
                  [(2)] (B) has willfully aided, abetted, 
                counseled, commanded, induced, or procured such 
                a violation by any other person;
                  [(3)] (C) has willfully made or caused to be 
                made in any application for registration or 
                report required to be filed with the Commission 
                or with any other appropriate regulatory agency 
                under this title, or in any proceeding before 
                the Commission with respect to registration, 
                any statement which was, at the time and in the 
                light of the circumstances under which it was 
                made, false or misleading with respect to any 
                material fact, or has omitted to state in any 
                such application or report any material fact 
                which is required to be stated therein; or
                  [(4)] (D) has failed reasonably to supervise, 
                within the meaning of section 15(b)(4)(E) of 
                this title, with a view to preventing 
                violations of the provisions of such statutes, 
                rules and regulations, another person who 
                commits such a violation, if such other person 
                is subject to his supervision;
        and that such penalty is in the public interest.
  (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 person--
          (A) is violating or has violated any provision 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 regulation 
        thereunder.

                      CEASE-AND-DESIST PROCEEDINGS

  Sec. 21C. (a) * * *

           *       *       *       *       *       *       *

  (c) Temporary Order.--
          (1) * * *
          (2) Applicability.--[paragraph (1) 
        subsection]Paragraph (1) shall apply only to a 
        respondent that acts, or, at the time of the alleged 
        misconduct acted, as a broker, dealer, investment 
        adviser, investment company, municipal securities 
        dealer, government securities broker, government 
        securities dealer, registered public accounting firm 
        (as defined in section 2 of the Sarbanes-Oxley Act of 
        2002), or transfer agent, or is, or was at the time of 
        the alleged misconduct, an associated person of, or a 
        person seeking to become associated with, any of the 
        foregoing.

           *       *       *       *       *       *       *


SEC. 21F. SECURITIES WHISTLEBLOWER INCENTIVES AND PROTECTION.

  (a) In General.--In any judicial or administrative action 
brought by the Commission under the securities laws that 
results in monetary sanctions exceeding $1,000,000, the 
Commission, under regulations prescribed by the Commission and 
subject to subsection (b), may pay an award or awards not 
exceeding an amount equal to 30 percent, in total, of the 
monetary sanctions imposed in the action or related actions to 
one or more whistleblowers who voluntarily provided original 
information to the Commission that led to the successful 
enforcement of the action. Any amount payable under the 
preceding sentence shall be paid from the fund described in 
subsection (f).
  (b) Determination of Amount of Award; Denial of Award.--
          (1) Determination of amount of award.--The 
        determination of the amount of an award, within the 
        limit specified in subsection (a), shall be in the sole 
        discretion of the Commission. The Commission may take 
        into account the significance of the whistleblower's 
        information to the success of the judicial or 
        administrative action described in subsection (a), the 
        degree of assistance provided by the whistleblower and 
        any legal representative of the whistleblower in such 
        action, the Commission's programmatic interest in 
        deterring violations of the securities laws by making 
        awards to whistleblowers who provide information that 
        leads to the successful enforcement of such laws, and 
        such additional factors as the Commission may establish 
        by rules or regulations.
          (2) Denial of award.--No award under subsection (a) 
        shall be made--
                  (A) to any whistleblower who is, or was at 
                the time he or she acquired the original 
                information submitted to the Commission, a 
                member, officer, or employee of any appropriate 
                regulatory agency, the Department of Justice, 
                the Public Company Accounting Oversight Board, 
                or a self-regulatory organization;
                  (B) to any whistleblower who is convicted of 
                a criminal violation related to the judicial or 
                administrative action for which the 
                whistleblower otherwise could receive an award 
                under this section; or
                  (C) to any whistleblower who fails to submit 
                information to the Commission in such form as 
                the Commission may, by rule, require.
  (c) Representation.--
          (1) Permitted representation.--Any whistleblower who 
        makes a claim for an award under subsection (a) may be 
        represented by counsel.
          (2) Required representation.--Any whistleblower who 
        makes a claim for an award under subsection (a) must be 
        represented by counsel if the whistleblower submits the 
        information upon which the claim is based anonymously. 
        Prior to the payment of an award, the whistleblower 
        must disclose his or her identity and provide such 
        other information as the Commission may require.
  (d) No Contract Necessary.--No contract with the Commission 
is necessary for any whistleblower to receive an award under 
subsection (a), unless the Commission, by rule or regulation, 
so requires.
  (e) Appeals.--Any determinations under this section, 
including whether, to whom, or in what amounts to make awards, 
shall be in the sole discretion of the Commission, and any such 
determinations shall be final and not subject to judicial 
review.
  (f) Investor Protection Fund.--
          (1) Fund established.--There is established in the 
        Treasury of the United States a fund to be known as the 
        ``Securities and Exchange Commission Investor 
        Protection Fund'' (referred to in this section as the 
        ``Fund'').
          (2) Use of fund.--The Fund shall be available to the 
        Commission, without further appropriation or fiscal 
        year limitation, for the following purposes:
                  (A) Paying awards to whistleblowers as 
                provided in subsection (a).
                  (B) Funding investor education initiatives 
                designed to help investors protect themselves 
                against securities fraud or other violations of 
                the securities laws, or the rules and 
                regulations thereunder.
          (3) Deposits and credits.--There shall be deposited 
        into or credited to the Fund--
                  (A) any monetary sanction collected by the 
                Commission in any judicial or administrative 
                action brought by the Commission under the 
                securities laws that is not added to a 
                disgorgement fund or other fund pursuant to 
                section 308 of the Sarbanes-Oxley Act of 2002 
                or otherwise distributed to victims of a 
                violation of the securities laws, or the rules 
                and regulations thereunder, underlying such 
                action, unless the balance of the Fund at the 
                time the monetary sanction is collected exceeds 
                $100,000,000;
                  (B) any monetary sanction added to a 
                disgorgement fund or other fund pursuant to 
                section 308 of the Sarbanes-Oxley Act of 2002 
                that is not distributed to the victims for whom 
                the disgorgement fund or other fund was 
                established, unless the balance of the Fund at 
                the time the determination is made not to 
                distribute the monetary sanction to such 
                victims exceeds $100,000,000; and
                  (C) all income from investments made under 
                paragraph (4).
          (4) Investments.--
                  (A) Amounts in fund may be invested.--The 
                Commission may request the Secretary of the 
                Treasury to invest the portion of the Fund that 
                is not, in the Commission's judgment, required 
                to meet the current needs of the Fund.
                  (B) Eligible investments.--Investments shall 
                be made by the Secretary of the Treasury in 
                obligations of the United States or obligations 
                that are guaranteed as to principal and 
                interest by the United States, with maturities 
                suitable to the needs of the Fund as determined 
                by the Commission.
                  (C) Interest and proceeds credited.--The 
                interest on, and the proceeds from the sale or 
                redemption of, any obligations held in the Fund 
                shall be credited to, and form a part of, the 
                Fund.
          (5) Reports to congress.--Not later than October 30 
        of each year, the Commission shall transmit to the 
        Committee on Banking, Housing, and Urban Affairs of the 
        Senate, and the Committee on Financial Services of the 
        House of Representatives a report on--
                  (A) the Commission's whistleblower award 
                program under this section, including a 
                description of the number of awards that were 
                granted and the types of cases in which awards 
                were granted during the preceding fiscal year;
                  (B) investor education initiatives described 
                in paragraph (2)(B) that were funded by the 
                Fund during the preceding fiscal year;
                  (C) the balance of the Fund at the beginning 
                of the preceding fiscal year;
                  (D) the amounts deposited into or credited to 
                the Fund during the preceding fiscal year;
                  (E) the amount of earnings on investments of 
                amounts in the Fund during the preceding fiscal 
                year;
                  (F) the amount paid from the Fund during the 
                preceding fiscal year to whistleblowers 
                pursuant to subsection (a);
                  (G) the amount paid from the Fund during the 
                preceding fiscal year for investor education 
                initiatives described in paragraph (1)(B);
                  (H) the balance of the Fund at the end of the 
                preceding fiscal year; and
                  (I) a complete set of audited financial 
                statements, including a balance sheet, income 
                statement, and cash flow analysis.
  (g) Protection of Whistleblowers.--
          (1) Prohibition against retaliation.--
                  (A) In general.--No employer may discharge, 
                demote, suspend, threaten, harass, or in any 
                other manner discriminate against an employee, 
                contractor, or agent in the terms and 
                conditions of employment because of any lawful 
                act done by the employee, contractor, or agent 
                in providing information to the Commission in 
                accordance with subsection (a), or in assisting 
                in any investigation or judicial or 
                administrative action of the Commission based 
                upon or related to such information.
                  (B) Enforcement.--
                          (i) Cause of action.--An individual 
                        who alleges discharge or other 
                        discrimination in violation of 
                        subparagraph (A) may bring an action 
                        under this subsection in the 
                        appropriate district court of the 
                        United States for the relief provided 
                        in subparagraph (C).
                          (ii) Subpoenas.--A subpoena requiring 
                        the attendance of a witness at a trial 
                        or hearing conducted under this section 
                        may be served at any place in the 
                        United States.
                          (iii) Statute of limitations.--An 
                        action under this subsection may not be 
                        brought more than 6 years after the 
                        date on which the violation of 
                        subparagraph (A) occurred, or more than 
                        3 years after the date when facts 
                        material to the right of action are 
                        known or reasonably should have been 
                        known by the employee alleging a 
                        violation of subparagraph (A), but in 
                        no event after 10 years after the date 
                        on which the violation occurs.
                  (C) Relief.--An employee, contractor, or 
                agent prevailing in any action brought under 
                subparagraph (B) shall be entitled to all 
                relief necessary to make that employee, 
                contractor, or agent whole, including 
                reinstatement with the same seniority status 
                that the employee, contractor, or agent would 
                have had, but for the discrimination, 2 times 
                the amount of back pay, with interest, and 
                compensation for any special damages sustained 
                as a result of the discrimination, including 
                litigation costs, expert witness fees, and 
                reasonable attorneys' fees.
          (2) Confidentiality.--
                  (A) In general.--Except as provided in 
                subparagraph (B), all information provided to 
                the Commission by a whistleblower shall be 
                confidential and privileged as an evidentiary 
                matter (and shall not be subject to civil 
                discovery or other legal process) in any 
                proceeding in any Federal or State court or 
                administrative agency, and shall be exempt from 
                disclosure, in the hands of an agency or 
                establishment of the Federal Government, under 
                the Freedom of Information Act (5 U.S.C. 552), 
                or otherwise, unless and until required to be 
                disclosed to a defendant or respondent in 
                connection with a proceeding instituted by the 
                Commission or any entity described in 
                subparagraph (B). For purposes of section 552 
                of title 5, United States Code, this paragraph 
                shall be considered a statute described in 
                subsection (b)(3)(B) of such section 552. 
                Nothing herein is intended to limit the 
                Attorney General's ability to present such 
                evidence to a grand jury or to share such 
                evidence with potential witnesses or defendants 
                in the course of an ongoing criminal 
                investigation.
                  (B) Availability to government agencies.--
                Without the loss of its status as confidential 
                and privileged in the hands of the Commission, 
                all information referred to in subparagraph (A) 
                may, in the discretion of the Commission, when 
                determined by the Commission to be necessary to 
                accomplish the purposes of this Act and protect 
                investors, be made available to--
                          (i) the Attorney General of the 
                        United States,
                          (ii) an appropriate regulatory 
                        authority,
                          (iii) a self-regulatory organization,
                          (iv) the Public Company Accounting 
                        Oversight Board,
                          (v) State attorneys general in 
                        connection with any criminal 
                        investigation, and
                          (vi) any appropriate State regulatory 
                        authority,
                each of which shall maintain such information 
                as confidential and privileged, in accordance 
                with the requirements in subparagraph (A).
          (3) Rights retained.--Nothing in this section shall 
        be deemed to diminish the rights, privileges, or 
        remedies of any whistleblower under any Federal or 
        State law, or under any collective bargaining 
        agreement.
  (h) Provision of False Information.--Any whistleblower who 
knowingly and willfully makes any false, fictitious, or 
fraudulent statement or representation, or makes or uses any 
false writing or document knowing the same to contain any 
false, fictitious, or fraudulent statement or entry, shall not 
be entitled to an award under this section and shall be subject 
to prosecution under section 1001 of title 18, United States 
Code.
  (i) Rulemaking Authority.--The Commission shall have the 
authority to issue such rules and regulations as may be 
necessary or appropriate to implement the provisions of this 
section.
  (j) Definitions.--For purposes of this section, the following 
terms have the following meanings:
          (1) Original information.--The term ``original 
        information'' means information that--
                  (A) is based on the direct and independent 
                knowledge or analysis of a whistleblower;
                  (B) is not known to the Commission from any 
                other source, unless the whistleblower is the 
                initial source of the information; and
                  (C) is not based on allegations in a judicial 
                or administrative hearing, in a governmental 
                report, hearing, audit, or investigation, or 
                from the news media, unless the whistleblower 
                is the initial source of the information that 
                resulted in the judicial or administrative 
                hearing, governmental report, hearing, audit, 
                or investigation, or the news media's report on 
                the allegations.
          (2) Monetary sanctions.--The term ``monetary 
        sanctions'', when used with respect to any judicial or 
        administrative action, means any monies, including but 
        not limited to penalties, disgorgement, and interest, 
        ordered to be paid, and any monies deposited into a 
        disgorgement fund or other fund pursuant to section 
        308(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
        7246(b)), as a result of such action or any settlement 
        of such action.
          (3) Related action.--The term ``related action'', 
        when used with respect to any judicial or 
        administrative action brought by the Commission under 
        the securities laws, means any judicial or 
        administrative action brought by an entity described in 
        subsection (g)(2)(B) that is based upon the same 
        original information provided by a whistleblower 
        pursuant to subsection (a) that led to the successful 
        enforcement of the Commission action.
          (4) Whistleblower.--The term ``whistleblower'' means 
        an individual, or two or more individuals acting 
        jointly, who submit information to the Commission as 
        provided in this section.

           *       *       *       *       *       *       *


             RULES, REGULATIONS, AND ORDERS; ANNUAL REPORTS

  Sec. 23. (a) * * *
  (b) For the purposes of evaluating its rules and programs and 
for considering proposing, adopting, or engaging in rules or 
programs, the Commission is authorized to gather information, 
communicate with investors or other members of the public, and 
engage in such temporary or experimental programs as the 
Commission in its discretion determines is in the public 
interest or for the protection of investors. The Commission may 
delegate to its staff some or all of the authority conferred by 
this subsection.
  [(b)] (c)(1) * * *

           *       *       *       *       *       *       *

  [(c)] (d) The Commission, by rule, shall prescribe the 
procedure applicable to every case pursuant to this title of 
adjudication (as defined in section 551 of title 5, United 
States Code) not required to be determined on the record after 
notice and opportunity for hearing. Such rules shall, as a 
minimum, provide that prompt notice shall be given of any 
adverse action or final disposition and that such notice and 
the entry of any order shall be accompanied by a statement of 
written reasons.
  [(d)] (e) Cease-and-Desist Procedures.--Within 1 year after 
the date of enactment of this subsection, the Commission shall 
establish regulations providing for the expeditious conduct of 
hearings and rendering of decisions under section 21C of this 
title, section 8A of the Securities Act of 1933, section 9(f) 
of the Investment Company Act of 1940, and section 203(k) of 
the Investment Advisers Act of 1940.

                   PUBLIC AVAILABILITY OF INFORMATION

  Sec. 24. (a) * * *

           *       *       *       *       *       *       *

  (d) Sharing Privileged Information With Other Authorities.--
          (1) Privileged information provided by the 
        commission.--The Commission shall not be 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 authority; or
                  (F) any State securities or law enforcement 
                authority.
          (2) Non-disclosure of privileged information provided 
        to the commission.--Except as provided in subsection 
        (f), the Commission shall not be compelled to disclose 
        privileged information obtained from any foreign 
        securities authority, or foreign law enforcement 
        authority, if the authority has in good faith 
        determined and represented to the Commission that the 
        information is privileged.
          (3) Non-waiver of privileged information provided to 
        the commission.--
                  (A) In general.--Federal agencies, State 
                securities and law enforcement authorities, 
                self-regulatory organizations, and the Public 
                Company Accounting Oversight Board shall not be 
                deemed to have waived any privilege applicable 
                to any information by transferring that 
                information to or permitting that information 
                to be used by the Commission.
                  (B) Exception with respect to certain 
                actions.--The provisions of subparagraph (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 subsection:
                  (A) The term ``privilege'' includes any work-
                product privilege, attorney-client privilege, 
                governmental privilege, or other privilege 
                recognized 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, 
                investigate or prosecute potential violations 
                of law.
                  (C) The term ``State securities or law 
                enforcement authority'' means the authority of 
                any State or territory that is empowered under 
                State or territory law to detect, investigate 
                or prosecute potential violations of law.
  [(d)] (e) Records Obtained From Foreign Securities 
Authorities.--Except [as provided in subsection (e)] as 
provided in subsection (f), the Commission shall not be 
compelled to disclose records obtained from a foreign 
securities authority if (1) the foreign securities authority 
has in good faith determined and represented to the Commission 
that public disclosure of such records would violate the laws 
applicable to that foreign securities authority, and (2) the 
Commission obtains such records pursuant to (A) such procedure 
as the Commission may authorize for use in connection with the 
administration or enforcement of the securities laws, or (B) a 
memorandum of understanding. For purposes of section 552 of 
title 5, United States Code, this subsection shall be 
considered a statute described in subsection (b)(3)(B) of such 
section 552.
  [(e)] (f) Savings Provisions.--Nothing in this section 
shall--
          (1) * * *

           *       *       *       *       *       *       *


                   JURISDICTION OF OFFENSES AND SUITS

  Sec. 27. [The district]
  (a) In General.--The district courts of the United States and 
the United States courts of any Territory or other place 
subject to the jurisdiction of the United States shall have 
exclusive jurisdiction of violations of this title or the rules 
and regulations thereunder, and of all suits in equity and 
actions at law brought to enforce any liability or duty created 
by this title or the rules and regulations thereunder. Any 
criminal proceeding may be brought in the district wherein any 
act or transaction constituting the violation occurred. Any 
suit or action to enforce any liability or duty created by this 
title or rules and regulations thereunder, or to enjoin any 
violation of such title or rules and regulations, may be 
brought in any such district or in the district wherein the 
defendant is found or is an inhabitant or transacts business, 
and process in such cases may be served in any other district 
of which the defendant is an inhabitant or wherever the 
defendant may be found. In any action or proceeding 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 or the production of documents or 
tangible things (or both) at a hearing or trial may be served 
at any place within the United States. Judgments and decrees so 
rendered shall be subject to review as provided in sections 
1254, 1291, 1292, and 1294 of title 28, United States Code. No 
costs shall be assessed for or against the Commission in any 
proceeding under this title brought by or against it in the 
Supreme Court or such other courts.
  (b) Extraterritorial Jurisdiction.--The jurisdiction of the 
district courts of the United States and the United States 
courts of any Territory or other place subject to the 
jurisdiction of the United States described under subsection 
(a) includes violations of the antifraud provisions of this 
title, and all suits in equity and actions at law under those 
provisions, involving--
          (1) conduct within the United States that constitutes 
        significant steps in furtherance of the violation, even 
        if the securities transaction occurs outside the United 
        States and involves only foreign investors; or
          (2) conduct occurring outside the United States that 
        has a foreseeable substantial effect within the United 
        States.

           *       *       *       *       *       *       *


                         VALIDITY OF CONTRACTS

  Sec. 29. (a) Any condition, stipulation, or provision binding 
any person to waive compliance with any provision of this title 
or of any rule or regulation thereunder, or of any rule of [an 
exchange required thereby] a self-regulatory organization, 
shall be void.

           *       *       *       *       *       *       *


SEC. 31. TRANSACTION FEES.

  (a) * * *

           *       *       *       *       *       *       *

  (e) Dates for Payments.--The fees and assessments required by 
subsections (b), (c), and (d) of this section shall be paid--
          (1) * * *
          (2) on or before [September 30] September 25, with 
        respect to transactions and sales occurring during the 
        period beginning on the preceding January 1 and ending 
        at the close of the preceding August 31.

           *       *       *       *       *       *       *

  (g) Publication.--The Commission shall publish in the Federal 
Register notices of the fee or assessment rates applicable 
under this section for each fiscal year not later than [April 
30] August 31 of the fiscal year preceding the fiscal year to 
which such rate applies, together with any estimates or 
projections on which such fees are based.

           *       *       *       *       *       *       *

  (j) Recapture of Projection Windfalls for Further Rate 
Reductions.--
          (1) * * *
          (2) Mid-year adjustment.--For each of the fiscal 
        years 2002 through 2011, the Commission shall 
        determine, by March 1 of such fiscal year, whether, 
        based on the actual aggregate dollar volume of sales 
        during the first [5 months] 4 months of such fiscal 
        year, the baseline estimate of the aggregate dollar 
        volume of sales used under paragraph (1) for such 
        fiscal year (or $48,800,000,000,000 in the case of 
        fiscal year 2002) is reasonably likely to be 10 percent 
        (or more) greater or less than the actual aggregate 
        dollar volume of sales for such fiscal year. If the 
        Commission so determines, the Commission shall by 
        order, no later than such March 1, adjust each of the 
        rates applicable under subsections (b) and (c) for such 
        fiscal year to a uniform adjusted rate that, when 
        applied to the revised estimate of the aggregate dollar 
        amount of sales for the remainder of such fiscal year, 
        is reasonably likely to produce aggregate fee 
        collections under this section [(including fees 
        collected during such 5-month period and assessments 
        collected under subsection (d))] (including fees 
        estimated to be collected under subsections (b) and (c) 
        prior to the effective date of the uniform adjusted 
        rate and assessments estimated to be collected under 
        subsection (d)) that are equal to the target offsetting 
        collection amount for such fiscal year. In making such 
        revised estimate, the Commission shall, after 
        consultation with the Congressional Budget Office and 
        the Office of Management and Budget, use the same 
        methodology required by subsection (l)(2).

           *       *       *       *       *       *       *


[SEC. 35. AUTHORIZATION OF APPROPRIATIONS.

  [In addition to any other funds authorized to be appropriated 
to the Commission, there are authorized to be appropriated to 
carry out the functions, powers, and duties of the Commission, 
$776,000,000 for fiscal year 2003, of which--
          [(1) $102,700,000 shall be available to fund 
        additional compensation, including salaries and 
        benefits, as authorized in the Investor and Capital 
        Markets Fee Relief Act (Public Law 107-123; 115 Stat. 
        2390 et seq.);
          [(2) $108,400,000 shall be available for information 
        technology, security enhancements, and recovery and 
        mitigation activities in light of the terrorist attacks 
        of September 11, 2001; and
          [(3) $98,000,000 shall be available to add not fewer 
        than an additional 200 qualified professionals to 
        provide enhanced oversight of auditors and audit 
        services required by the Federal securities laws, and 
        to improve Commission investigative and disciplinary 
        efforts with respect to such auditors and services, as 
        well as for additional professional support staff 
        necessary to strengthen the programs of the Commission 
        involving Full Disclosure and Prevention and 
        Suppression of Fraud, risk management, industry 
        technology review, compliance, inspections, 
        examinations, market regulation, and investment 
        management.]

SEC. 35. AUTHORIZATION OF APPROPRIATIONS.

  In addition to any other funds authorized to be appropriated 
to the Commission, there are authorized to be appropriated to 
carry out the functions, powers, and duties 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;
          (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.

           *       *       *       *       *       *       *

                              ----------                              


                         SECURITIES ACT OF 1933

                          TITLE I--SHORT TITLE

  Section 1. This title may be cited as the ``Securities Act of 
1933''.

           *       *       *       *       *       *       *


                          EXEMPTED SECURITIES

  Sec. 3. (a) Except as hereinafter expressly provided, the 
provisions of this title shall not apply to any of the 
following classes of securities:
          (1) * * *

           *       *       *       *       *       *       *

          (4) Any security issued by a person organized and 
        operated exclusively for religious, educational, 
        benevolent, fraternal, charitable, or reformatory 
        purposes and not for pecuniary profit, and no part of 
        the net earnings of which inures to the benefit of any 
        person, private stockholder, or [individual;] 
        individual, or any security of a fund that is excluded 
        from the definition of an investment company under 
        section 3(c)(10)(B) of the Investment Company Act of 
        1940;

           *       *       *       *       *       *       *


                      CEASE-AND-DESIST PROCEEDINGS

  Sec. 8A. (a) * * *

           *       *       *       *       *       *       *

  (g) Authority to Impose Money Penalties.--
          (1) Grounds for imposing.--In any cease-and-desist 
        proceeding under subsection (a), the Commission may 
        impose a civil penalty on a person 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 
                        regulation 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 penalty 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 described in paragraph 
                (1) involved fraud, deceit, manipulation, or 
                deliberate or reckless disregard of a 
                regulatory requirement.
                  (C) Third tier.--Notwithstanding paragraphs 
                (A) and (B), the maximum amount of 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, 
                        manipulation, or deliberate or reckless 
                        disregard 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 substantial 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 respondent 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 person's assets and the amount of such 
        person's assets.

      CIVIL LIABILITIES ON ACCOUNT OF FALSE REGISTRATION STATEMENT

  Sec. 11. (a) In case any part of the registration statement, 
when such part became effective, contained an untrue statement 
of a material fact or omitted to state a material fact required 
to be stated therein or necessary to make the statements 
therein not misleading, any person acquiring such security 
(unless it is proved that at the time of such acquisition he 
knew of such untruth or omission) may, either at law or in 
equity, in any court of competent jurisdiction, sue--
          (1) * * *

           *       *       *       *       *       *       *

If such person acquired the security after the issuer has made 
generally available to its security holders an [earning 
statement] earnings statement covering a period of at least 
twelve months beginning after the effective date of the 
registration statement, then the right of recovery under this 
subsection shall be conditioned on proof that such person 
acquired the security relying upon such untrue statement in the 
registration statement or relying upon the registration 
statement and not knowing of such omission, but such reliance 
may be established without proof of the reading of the 
registration statement by such person.

           *       *       *       *       *       *       *


                    LIABILITY OF CONTROLLING PERSONS

  Sec. 15. [Every person who] (a) Controlling persons.--Every 
person who, by or through stock ownership, agency, or 
otherwise, or who, pursuant to or in connection with an 
agreement or understanding with one or more other persons by or 
through stock ownership, agency, or otherwise, controls any 
person liable under section 11 or 12, shall also be liable 
jointly and severally with and to the same extent as such 
controlled person to any person to whom such controlled person 
is liable, unless the controlling person had no knowledge of or 
reasonable ground to believe in the existence of the facts by 
reason of which the liability of the controlled person is 
alleged to exist.
  (b) Prosecution of Persons Who Aid and Abet Violations.--For 
purposes of any action brought by the Commission under 
subparagraph (b) or (d) of section 20, any person that 
knowingly or recklessly provides substantial assistance to 
another person in violation of a provision of this Act, or of 
any rule or regulation issued under this Act, shall be deemed 
to be in violation of such provision to the same extent as the 
person to whom such assistance is provided.

           *       *       *       *       *       *       *


SEC. 18. EXEMPTION FROM STATE REGULATION OF SECURITIES OFFERINGS.

  (a) * * *
  (b) Covered Securities.--For purposes of this section, the 
following are covered securities:
          (1) Exclusive federal registration of nationally 
        traded securities.--A security is a covered security if 
        such security is--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) [is a security] a security of the same 
                issuer that is equal in seniority or that is a 
                senior security to a security described in 
                subparagraph (A) or (B).

           *       *       *       *       *       *       *

  (c) Preservation of Authority.--
          (1) * * *
          (2) Preservation of filing requirements.--
                  (A) * * *
                  (B) Preservation of fees.--
                          (i) In general.--Until otherwise 
                        provided by law, rule, regulation, or 
                        order, or other administrative action 
                        of any [State, or] State or any 
                        political subdivision thereof, adopted 
                        after the date of enactment of the 
                        National Securities Markets Improvement 
                        Act of 1996, filing or registration 
                        fees with respect to securities or 
                        securities transactions shall continue 
                        to be collected in amounts determined 
                        pursuant to State law as in effect on 
                        the day before such date.

           *       *       *       *       *       *       *


                      SPECIAL POWERS OF COMMISSION

  Sec. 19. (a) * * *

           *       *       *       *       *       *       *

  (d)(1) * * *

           *       *       *       *       *       *       *

  (6) Notwithstanding any other provision of law, neither the 
Commission nor any other person shall be required to establish 
any procedures not specifically required by the securities 
laws, as that term is defined in section 3(a)(47) of the 
Securities Exchange Act of 1934, or by chapter 5 of title 5, 
United States Code, in connection with cooperation, 
coordination, or consultation with--
          (A) any association referred to [in paragraph (1) of 
        (3)] in paragraph (1) or (3) or any conference or 
        meeting referred to in paragraph (4), while such 
        association, conference, or meeting is carrying out 
        activities in furtherance of the provisions of this 
        subsection; or

           *       *       *       *       *       *       *

  (e) For the purposes of evaluating its rules and programs and 
for considering, proposing, adopting, or engaging in rules or 
programs, the Commission is authorized to gather information, 
communicate with investors or other members of the public, and 
engage in such temporary or experimental programs as the 
Commission in its discretion determines is in the public 
interest or for the protection of investors. The Commission may 
delegate to its staff some or all of the authority conferred by 
this subsection.

                INJUNCTIONS AND PROSECUTION OF OFFENSES

  Sec. 20. (a) * * *

           *       *       *       *       *       *       *

  (d) Money Penalties in Civil Actions.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Procedures for collection.--
                  (A) Payment of penalty to treasury.--A 
                penalty imposed under this section shall be 
                payable into the Treasury of the United States, 
                except as otherwise provided in section 308 of 
                the Sarbanes-Oxley Act of 2002 and section 21F 
                of the Securities Exchange Act of 1934.

           *       *       *       *       *       *       *


                   JURISDICTION OF OFFENSES AND SUITS

  Sec. 22. (a) The district courts of the United States and 
United States courts of any Territory shall have jurisdiction 
of offenses and violations under this title and under the rules 
and regulations promulgated by the Commission in respect 
thereto, and, concurrent with State and Territorial courts, 
except as provided in section 16 with respect to covered class 
actions, of all suits in equity and actions at law brought to 
enforce any liability or duty created by this title. Any such 
suit or action may be brought in the district wherein the 
defendant is found or is an inhabitant or transacts business, 
or in the district where the offer or sale took place, if the 
defendant participated therein, and process in such cases may 
be served in any other district of which the defendant is an 
inhabitant or wherever the defendant may be found. In any 
action or proceeding 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 or the production of documents or tangible things (or 
both) at a hearing or trial may be served at any place within 
the United States. Judgments and decrees so rendered shall be 
subject to review as provided in sections 1254, 1291, 1292, and 
1294 of title 28, United States Code. Except as provided in 
section 16(c), no case arising under this title and brought in 
any State court of competent jurisdiction shall be removed to 
any court of the United States. No costs shall be assessed for 
or against the Commission in any proceeding under this title 
brought by or against it in the Supreme Court or such other 
courts.

           *       *       *       *       *       *       *

  (c) Extraterritorial Jurisdiction.--The jurisdiction of the 
district courts of the United States and the United States 
courts of any Territory described under subsection (a) includes 
violations of section 17(a), and all suits in equity and 
actions at law under that section, involving--
          (1) conduct within the United States that constitutes 
        significant steps in furtherance of the violation, even 
        if the securities transaction occurs outside the United 
        States and involves only foreign investors; or
          (2) conduct occurring outside the United States that 
        has a foreseeable substantial effect within the United 
        States.

           *       *       *       *       *       *       *


SEC. 27A. APPLICATION OF SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Safe Harbor.--
          (1) In general.--Except as provided in subsection 
        (b), in any private action arising under this title 
        that is based on an untrue statement of a material fact 
        or omission of a material fact necessary to make the 
        statement not misleading, a person referred to in 
        subsection (a) shall not be liable with respect to any 
        forward-looking statement, whether written or oral, if 
        and to the extent that--
                  (A) * * *
                  (B) the plaintiff fails to prove that the 
                forward-looking statement--
                          (i) * * *
                          (ii) if made by a [business entity;] 
                        business entity, was--
                                  (I) * * *

           *       *       *       *       *       *       *

                              ----------                              


                     INVESTMENT COMPANY ACT OF 1940

TITLE I--INVESTMENT COMPANIES

           *       *       *       *       *       *       *


                          GENERAL DEFINITIONS

  Sec. 2. (a) When used in this title, unless the context 
otherwise requires--
          (1) * * *

           *       *       *       *       *       *       *

          (19) ``Interested person'' of another person means--
  (A) when used with respect to an investment company--
          (i) * * *

           *       *       *       *       *       *       *

          [(v) any person or any affiliated person of a person 
        (other than a registered investment company) that, at 
        any time during the 6-month period preceding the date 
        of the determination of whether that person or 
        affiliated person is an interested person, has executed 
        any portfolio transactions for, engaged in any 
        principal transactions with, or distributed shares 
        for--
                  [(I) the investment company;
                  [(II) any other investment company having the 
                same investment adviser as such investment 
                company or holding itself out to investors as a 
                related company for purposes of investment or 
                investor services; or
                  [(III) any account over which the investment 
                company's investment adviser has brokerage 
                placement discretion,
          [(vi) any person or any affiliated person of a person 
        (other than a registered investment company) that, at 
        any time during the 6-month period preceding the date 
        of the determination of whether that person or 
        affiliated person is an interested person, has loaned 
        money or other property to--
                  [(I) the investment company;
                  [(II) any other investment company having the 
                same investment adviser as such investment 
                company or holding itself out to investors as a 
                related company for purposes of investment or 
                investor services; or
                  [(III) any account for which the investment 
                company's investment adviser has borrowing 
                authority,]
          (v) any natural person who is a member of a class of 
        persons who the Commission, by rule or regulation, 
        determines are unlikely to exercise an appropriate 
        degree of independence as a result of--
                  (I) a material business or professional 
                relationship with such company or any 
                affiliated person of such company; or
                  (II) a close familial relationship with any 
                natural person who is an affiliated person of 
                such company;
          [(vii)] (vi) any natural person whom the Commission 
        by order shall have determined to be an interested 
        person by reason of having had, at any time since the 
        beginning of the last [two] five completed fiscal years 
        of such company, a material business or professional 
        relationship with such company or with the principal 
        executive officer of such company or with any other 
        investment company having the same investment adviser 
        or principal underwriter or with the principal 
        executive officer of such other investment company:
Provided, That no person shall be deemed to be an interested 
person of an investment company solely by reason of (aa) his 
being a member of its board of directors or advisory board or 
an owner of its securities, or (bb) his membership in the 
immediate family of any person specified in clause (aa) of this 
proviso; and
                  (B) when used with respect to an investment 
                adviser of or principal underwriter for any 
                investment company--
                          (i) * * *

           *       *       *       *       *       *       *

                For the purposes of this paragraph (19), 
                ``member of the immediate family'' means any 
                parent, spouse of a parent, child, spouse of a 
                child, spouse, brother, or sister, and includes 
                step and adoptive relationships. The Commission 
                may modify or revoke any order issued under 
                clause [(vi)] (vii) of subparagaph (A) or (B) 
                of this paragraph whenever it finds that such 
                order is no longer consistent with the facts. 
                No order issued pursuant to clause [(vi)] (vii) 
                of subparagraph (A) or (B) of this paragraph 
                shall become effective until at least sixty 
                days after the entry thereof, and no such order 
                shall affect the status of any person for the 
                purposes of this title or for any other purpose 
                for any period prior to the effective date of 
                such order.

           *       *       *       *       *       *       *

          (44) ``Securities Act of 1933'', ``Securities 
        Exchange Act of 1934'', [``Public Utility Holding 
        Company Act of 1935'',] and ``Trust Indenture Act of 
        1939'' means those Acts, respectively, as heretofore or 
        hereafter amended.

           *       *       *       *       *       *       *

          (54) The term ``municipal finance adviser'' has the 
        same meaning as in section 3 of the Securities Exchange 
        Act of 1934.

           *       *       *       *       *       *       *


                    DEFINITION OF INVESTMENT COMPANY

  Sec. 3. (a) * * *

           *       *       *       *       *       *       *

  (c) Notwithstanding subsection (a), none of the following 
persons is an investment company within the meaning of this 
title:
          (1) * * *

           *       *       *       *       *       *       *

          [(8) Any company subject to regulation under the 
        Public Utility Holding Company Act of 1935.]
          (8) [Repealed]

           *       *       *       *       *       *       *


      INELIGIBILITY OF CERTAIN AFFILIATED PERSONS AND UNDERWRITERS

  Sec. 9. (a) It shall be unlawful for any of the following 
persons to serve or act in the capacity of employee, officer, 
director, member of an advisory board, investment adviser, or 
depositor of any registered investment company, or principal 
underwriter for any registered open-end company, registered 
unit investment trust, or registered face-amount certificate 
company:
          (1) any person who within 10 years has been convicted 
        of any felony or misdemeanor involving the purchase or 
        sale of any security or arising out of such person's 
        conduct as an underwriter, broker, dealer, investment 
        adviser, municipal securities dealer, government 
        securities broker, government securities dealer, bank, 
        transfer agent, credit rating agency, municipal finance 
        adviser, or entity or person required to be registered 
        under the Commodity Exchange Act, or as an affiliated 
        person, salesman, or employee of any investment 
        company, bank, insurance company, or entity or person 
        required to be registered under the Commodity Exchange 
        Act;
          (2) any person who, by reason of any misconduct, is 
        permanently or temporarily enjoined by order, judgment, 
        or decree of any court of competent jurisdiction from 
        acting as an underwriter, broker, dealer, investment 
        adviser, municipal securities dealer, government 
        securities broker, government securities dealer, bank, 
        transfer agent, credit rating agency, municipal finance 
        adviser, or entity or person required to be registered 
        under the Commodity Exchange Act, or as an affiliated 
        person, salesman, or employee of any investment 
        company, bank, insurance company, or entity or person 
        required to be registered under the Commodity Exchange 
        Act, or from engaging in or continuing any conduct or 
        practice in connection with any such activity or in 
        connection with the purchase or sale of any security; 
        or

           *       *       *       *       *       *       *

  (b) The Commission may, after notice and opportunity for 
hearing, by order prohibit, conditionally or unconditionally, 
either permanently or for such period of time as it in its 
discretion shall deem appropriate in the public interest, any 
person from serving or acting as an employee, officer, 
director, member of an advisory board, investment adviser or 
depositor of, or principal underwriter for, a registered 
investment company or affiliated person of such investment 
adviser, depositor, or principal underwriter, if such person--
          (1) * * *

           *       *       *       *       *       *       *

          (4) has been found by a foreign financial regulatory 
        authority to have--
                  (A) * * *
                  (B) violated any foreign statute or 
                regulation regarding transactions in securities 
                or contracts of sale of a commodity for future 
                delivery traded on or subject to the rules of a 
                contract market or any board of trade; or

           *       *       *       *       *       *       *

  (d) Money Penalties in Administrative Proceedings.--
          [(1) Authority of commission.--In any proceeding]
          (1) Authority of commission.--
                  (A) In general.--In any proceeding instituted 
                pursuant to subsection (b) 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--
                          [(A)] (i) has willfully violated any 
                        provision of the Securities Act of 
                        1933, the Securities Exchange Act of 
                        1934, the Investment Advisers Act of 
                        1940, or this title, or the rules or 
                        regulations thereunder;
                          [(B)] (ii) has willfully aided, 
                        abetted, counseled, commanded, induced, 
                        or procured such a violation by any 
                        other person; or
                          [(C)] (iii) has willfully made or 
                        caused to be made in any registration 
                        statement, application, or report 
                        required to be filed with the 
                        Commission under this title, any 
                        statement which was, at the time and in 
                        the light of the circumstances under 
                        which it was made, false or misleading 
                        with respect to any material fact, or 
                        has omitted to state in any such 
                        registration statement, application, or 
                        report any material fact which was 
                        required to be stated therein;
                and that such penalty is in the public 
                interest.
                  (B) Cease-and-desist proceedings.--In any 
                proceeding instituted pursuant to subsection 
                (f) 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 
                        regulation thereunder; or
                          (ii) is or was a cause of the 
                        violation of any provision of this 
                        title, or any rule or regulation 
                        thereunder.

           *       *       *       *       *       *       *


            FUNCTIONS AND ACTIVITIES OF INVESTMENT COMPANIES

  Sec. 12. (a) * * *

           *       *       *       *       *       *       *

  (d)(1)(A) * * *

           *       *       *       *       *       *       *

  (J) The Commission, by rule or regulation, upon its own 
motion or by order upon application, may conditionally or 
unconditionally exempt any person, security, or transaction, or 
any class or classes of persons, securities, or transactions 
from [any provision of this subsection] any provision of this 
paragraph, if and to the extent that such exemption is 
consistent with the public interest and the protection of 
investors.

           *       *       *       *       *       *       *


                      CHANGES IN INVESTMENT POLICY

  Sec. 13. (a) No registered investment company shall, unless 
authorized by the vote of a majority of its outstanding voting 
securities--
          (1) * * *

           *       *       *       *       *       *       *

          (3) deviate from its policy in respect of 
        concentration of investments in any particular industry 
        or group of industries as recited in its registration 
        statement, deviate from any investment policy which is 
        changeable only if authorized by shareholder vote, or 
        deviate from any policy recited in its registration 
        statement pursuant to section 8(b)(3); or

           *       *       *       *       *       *       *


      TRANSACTIONS OF CERTAIN AFFILIATED PERSONS AND UNDERWRITERS

  Sec. 17. (a) * * *

           *       *       *       *       *       *       *

  (f) Custody of Securities.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) [No such member] No member of a national 
        securities exchange which trades in securities for its 
        own account may act as custodian except in accordance 
        with rules and regulations prescribed by the Commission 
        for the protection of investors.

           *       *       *       *       *       *       *

          (6) The Commission may, after consultation with and 
        taking into consideration the views of the Federal 
        banking agencies (as defined in section 3 of the 
        Federal Deposit Insurance Act), adopt rules and 
        regulations, and issue orders, consistent with the 
        protection of investors, prescribing the conditions 
        under which a bank, or an affiliated person of a bank, 
        either of which is an affiliated person, promoter, 
        organizer, or sponsor of, or principal underwriter for, 
        a registered management [company may serve] company, 
        may serve as custodian of that registered management 
        company.
  [(g) The Commission is authorized to require by rules and 
regulations or orders for the protection of investors that any 
officer or employee of a registered management investment 
company who may singly, or jointly with others, have access to 
securities or funds of any registered company, either directly 
or through authority to draw upon such funds or to direct 
generally the disposition of such securities (unless the 
officer or employee has such access solely through his position 
as an officer or employee of a bank) be bonded by a reputable 
fidelity insurance company against larceny and embezzlement in 
such reasonable minimum amounts as the Commission may 
prescribe.]
  (g) Fidelity Bonding.--
          (1) In general.--The Commission is authorized to 
        require that a registered management company 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 direct 
        generally the disposition of such securities (unless 
        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 subsection:
                  (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--
                          (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 
                        Commission 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.

           *       *       *       *       *       *       *


   DISTRIBUTION, REDEMPTION, AND REPURCHASE OF REDEEMABLE SECURITIES

  Sec. 22. (a) * * *

           *       *       *       *       *       *       *

  (e) No registered investment company shall suspend the right 
of redemption, or postpone the date of payment or satisfaction 
upon redemption of any redeemable security in accordance with 
its terms for more than seven days after the tender of such 
security to the company or its agent designated for that 
purpose for redemption, except--
          (1) * * *

           *       *       *       *       *       *       *

The Commission shall by rules and regulations determine the 
conditions under which (i) trading shall be deemed to be 
restricted and (ii) an emergency shall be deemed to exist 
within the meaning of this subsection. The Commission may, by 
rules and regulations, limit the extent to which a registered 
open-end investment company may own, hold, or invest in 
illiquid securities or other illiquid property.

           *       *       *       *       *       *       *


                          ACCOUNTS AND RECORDS

  Sec. 31. (a) Maintenance of Records.--
          (1) In general.--Each registered investment company, 
        and each underwriter, broker, dealer, or investment 
        adviser that is a majority-owned subsidiary of such a 
        company, shall maintain and preserve such records (as 
        defined in section 3(a)(37) of the Securities Exchange 
        Act of 1934) for such period or periods as the 
        Commission, by rules and regulations, may prescribe as 
        necessary or appropriate in the public interest or for 
        the protection of investors. Each investment adviser 
        that is not a majority-owned subsidiary of, and each 
        depositor of any registered investment company, and 
        each principal underwriter for any registered 
        investment company other than a closed-end company, 
        shall maintain and preserve for such period or periods 
        as the Commission shall prescribe by rules and 
        regulations, such records as are necessary or 
        appropriate to record such person's transactions with 
        such registered company. Each person with custody or 
        use of a registered investment company's securities, 
        deposits, or credits shall maintain and preserve all 
        records that relate to the person's custody or use of 
        the registered investment company's securities, 
        deposits, or credits for such period or periods as the 
        Commission, by rules and regulations, may prescribe as 
        necessary or appropriate in the public interest or for 
        the protection of investors.

           *       *       *       *       *       *       *

  (b) Examinations of Records.--
          [(1) In general.--All records required to be 
        maintained and preserved in accordance with subsection 
        (a) shall be subject at any time and from time to time 
        to such reasonable periodic, special, and other 
        examinations by the Commission, or any member or 
        representative thereof, as the Commission may 
        prescribe.]
          (1) In general.--All records of each registered 
        investment company, and each underwriter, broker, 
        dealer, or investment adviser that is a majority-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 Commission 
        deems necessary or appropriate in the public interest 
        or for the protection of investors.

           *       *       *       *       *       *       *

          (4) Records of persons with custody or use.--
                  (A) In general.--Notwithstanding paragraph 
                (1), records of persons with custody or use of 
                a registered investment company's securities, 
                deposits, or credits, that relate to such 
                custody or use, are subject at any time, or 
                from time to time, to such reasonable periodic, 
                special, or other examinations and other 
                information and document requests by 
                representatives of the Commission as the 
                Commission deems necessary or appropriate in 
                the public interest or for the protection of 
                investors.
                  (B) Certain persons subject to other 
                regulation.--Persons subject to regulation and 
                examination by a Federal financial institution 
                regulatory agency (as such term is defined 
                under section 212(c)(2) of title 18, United 
                States Code) may satisfy any examination 
                request, information request, or document 
                request described under subparagraph (A), by 
                providing the Commission with a detailed 
                listing, in writing, of the registered 
                investment company's securities, deposits, or 
                credits within such person's custody or use.
          (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 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.
          (6) Confidentiality.--
                  (A) In general.--Notwithstanding any other 
                provision of law, the Commission shall not be 
                compelled 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.
                  (B) Certain exceptions.--Nothing in this 
                subsection shall authorize the Commission to 
                withhold information from the Congress, prevent 
                the Commission from complying with a request 
                for information from any other Federal 
                department or agency, or the Public Company 
                Accounting Oversight Board requesting 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 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.
                  (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 
                described in subsection (b)(3)(B) of that 
                section.

           *       *       *       *       *       *       *


                        BREACH OF FIDUCIARY DUTY

  Sec. 36. (a) The Commission is authorized to bring an action 
in the proper district court of the United States, or in the 
United States court of any territory or other place subject to 
the jurisdiction of the United States, alleging that [a person 
serving or acting] a person who is, or at the time of the 
alleged misconduct was, serving or acting in one or more of the 
following capacities has engaged within five years of the 
commencement of the action or is about to engage in any act or 
practice constituting a breach of fiduciary duty involving 
personal misconduct in respect of any registered investment 
company for which [such person so serves or acts] such person 
so serves or acts, or at the time of the alleged misconduct, so 
served or acted--
          (1) * * *

           *       *       *       *       *       *       *


      RULES, REGULATIONS, AND ORDERS; GENERAL POWERS OF COMMISSION

  Sec. 38. (a) * * *
  (b) The Commission, by such rules and regulations or order as 
it deems necessary or appropriate in the public interest or for 
the protection of investors, may authorize the filing of any 
information or documents required to be filed with the 
Commission under this title, title II of this Act, the 
Securities Act of 1933, the Securities Exchange Act of 1934, 
[the Public Utility Holding Company Act of 1935,] or the Trust 
Indenture Act of 1939, by incorporating by reference any 
information or documents theretofore or concurrently filed with 
the Commission under this title or any of such Acts.

           *       *       *       *       *       *       *

  (d) Gathering Information.--For the purposes of evaluating 
its rules and programs and for considering proposing, adopting, 
or engaging in rules or programs, the Commission is authorized 
to gather information, communicate with investors or other 
members of the public, and engage in such temporary or 
experimental programs as the Commission in its discretion 
determines is in the public interest or for the protection of 
investors. The Commission may delegate to its staff some or all 
of the authority conferred by this subsection.

           *       *       *       *       *       *       *


                          ENFORCEMENT OF TITLE

  Sec. 42. (a) * * *

           *       *       *       *       *       *       *

  (e) Money Penalties in Civil Actions.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Procedures for collection.--
                  (A) Payment of penalty to treasury.--A 
                penalty imposed under this section shall be 
                payable into the Treasury of the United States, 
                except as otherwise provided in section 308 of 
                the Sarbanes-Oxley Act of 2002 and section 21F 
                of the Securities Exchange Act of 1934.

           *       *       *       *       *       *       *


                   JURISDICTION OF OFFENSES AND SUITS

  Sec. 44. The district courts of the United States and the 
United States courts of any Territory or other place subject to 
the jurisdiction of the United States shall have jurisdiction 
of violations of this title or the rules, regulations, or 
orders thereunder, and, concurrently with State and Territorial 
courts, of all suits in equity and actions at law brought to 
enforce any liability or duty created by, or to enjoin any 
violation of, this title or the rules, regulations, or orders 
thereunder. Any criminal proceeding may be brought in the 
district wherein any act or transaction constituting the 
violation occurred. A criminal proceeding based upon a 
violation of section 34, or upon a failure to file a report or 
other document required to be filed under this title, may be 
brought in the district wherein the defendant is an inhabitant 
or maintains his principal office or place of business. Any 
suit or action to enforce any liability or duty created by, or 
to enjoin any violation of, this title or rules, regulations, 
or orders thereunder, may be brought in any such district or in 
the district wherein the defendant is an inhabitant or 
transacts business, and process in such cases may be served in 
any district of which the defendant is an inhabitant or 
transacts business or wherever the defendant may be found. In 
any action or proceeding 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 or the production of documents or tangible things (or 
both) at a hearing or trial may be served at any place within 
the United States. Judgments and decrees so rendered shall be 
subject to review as provided in sections 1254, 1291, 1292, and 
1294 of title 28, United States Code. No costs shall be 
assesssed for or against the Commission in any proceeding under 
this title brought by or against the Commission in any court. 
The Commission may intervene as a party in any action or suit 
to enforce any liability or duty created by, or to enjoin any 
noncompliance with, section 36(b) of this title at any stage of 
such action or suit prior to final judgment therein.

           *       *       *       *       *       *       *


   LIABILITY OF CONTROLLING PERSONS; PREVENTING COMPLIANCE WITH TITLE

  Sec. 48. (a) * * *
  (b) For purposes of any action brought by the Commission 
under subsection (d) or (e) of section 42, any person that 
knowingly or recklessly provides substantial assistance to 
another person in violation of a provision of this Act, or of 
any rule or regulation issued under this Act, shall be deemed 
to be in violation of such provision to the same extent as the 
person to whom such assistance is provided.
  [(b)] (c) It shall be unlawful for any person without just 
cause to hinder, delay, or obstruct the making, filing, or 
keeping of any information, document, report, record, or 
account required to be made, filed, or kept under any provision 
of this title or any rule, regulation, or order thereunder.

           *       *       *       *       *       *       *


                         EFFECT ON EXISTING LAW

  Sec. 50. Except where specific provision is made to the 
contrary, nothing in this title shall affect (1) the 
jurisdiction of the Commission under the Securities Act of 
1933, the Securities Exchange Act of 1934, [the Public Utility 
Holding Company Act of 1935,] the Trust Indenture Act of 1939, 
or title II of this Act, over any person, security, or 
transaction, or (2) the rights, obligations, duties, or 
liabilities of any person under such Acts; nor shall anything 
in this title affect the jurisdiction of any other commission, 
board, agency, or officer of the United States or of any State 
or political subdivision of any State, over any person, 
security, or transaction, insofar as such jurisdiction does not 
conflict with any provision of this title or of any rule, 
regulation, or order hereunder.

           *       *       *       *       *       *       *


                           CAPITAL STRUCTURE

  Sec. 61. (a) Notwithstanding the exemption set forth in 
section 6(f), section 18 shall apply to a business development 
company to the same extent as if it were a registered closed-
end investment company, except as follows:
          (1) * * *

           *       *       *       *       *       *       *

          (3) Notwithstanding section 18(d)--
                  (A) * * *
                  (B) a business development company may issue, 
                to its directors, officers, employees, and 
                general partners, warrants, options, and rights 
                to purchase voting securities of such company 
                pursuant to an executive compensation plan, 
                if--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) no investment adviser of such 
                        business development company receives 
                        any compensation described in 
                        [paragraph (1) of section 205] section 
                        205(a)(1) of title II of this Act, 
                        except to the extent permitted by 
                        [clause (A) or (B) of that section] 
                        section 205(b)(1) or (2); and

           *       *       *       *       *       *       *

                              ----------                              


                    INVESTMENT ADVISERS ACT OF 1940

TITLE II--INVESTMENT ADVISERS

           *       *       *       *       *       *       *


                              DEFINITIONS

  Sec. 202. (a) When used in this title, unless the context 
otherwise requires, the following definitions shall apply:
          (1) * * *

           *       *       *       *       *       *       *

          (21) ``Securities Act of 1933'', ``Securities 
        Exchange Act of 1934'', [``Public Utility Holding 
        Company Act of 1935'',] and ``Trust Indenture Act of 
        1939'', mean those Acts, respectively, as heretofore or 
        hereafter amended.

           *       *       *       *       *       *       *

          (29) The term ``municipal finance adviser'' has the 
        same meaning as in section 3 of the Securities Exchange 
        Act of 1934.

           *       *       *       *       *       *       *


                  REGISTRATION OF INVESTMENT ADVISERS

  Sec. 203. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) An investment adviser, or any person who presently 
contemplates becoming an investment adviser, may be registered 
by filing with the Commission an application for registration 
in such form and containing such of the following information 
and documents as the Commission, by rule, may prescribe as 
necessary or appropriate in the public interest or for the 
protection of investors:
          (A) the name and form of organization under which the 
        investment adviser engages or intends to engage in 
        business; the name of the State or other sovereign 
        power under which such investment adviser is organized; 
        the location of his or its [principal business office] 
        principal office and place of business  and branch 
        offices, if any; the names and addresses of his or its 
        partners, officers, directors, and persons performing 
        similar functions or, if such an investment adviser be 
        an individual, of such individual; and the number of 
        his or its employees;

           *       *       *       *       *       *       *

  (e) The Commission, by order, shall censure, place 
limitations on the activities, functions, or operations of, 
suspend for a period not exceeding twelve months, or revoke the 
registration of any investment adviser if it finds, on the 
record after notice and opportunity for hearing, that such 
censure, placing of limitations, suspension, or revocation is 
in the public interest and that such investment adviser, or any 
person associated with such investment adviser, whether prior 
to or subsequent to becoming so associated--
          (1) * * *
          (2) has been convicted within ten years preceding the 
        filing of any application for registration or at any 
        time thereafter of any felony or misdemeanor or of a 
        substantially equivalent crime by a foreign court of 
        competent jurisdiction which the Commission finds--
                  (A) * * *
                  (B) arises out of the conduct of the business 
                of a broker, dealer, municipal securities 
                dealer, investment adviser, bank, insurance 
                company, government securities broker, 
                government securities dealer, fiduciary, 
                transfer agent, credit rating agency, municipal 
                finance adviser, foreign person performing a 
                function substantially equivalent to any of the 
                above, or entity or person required to be 
                registered under the Commodity Exchange Act or 
                any substantially equivalent statute or 
                regulation;

           *       *       *       *       *       *       *

          (4) is permanently or temporarily enjoined by order, 
        judgment, or decree of any court of competent 
        jurisdiction, including any foreign court of competent 
        jurisdiction, from acting as an investment adviser, 
        underwriter, broker, dealer, municipal securities 
        dealer, government securities broker, government 
        securities dealer, transfer agent, credit rating 
        agency, municipal finance adviser, foreign person 
        performing a function substantially equivalent to any 
        of the above, or entity or person required to be 
        registered under the Commodity Exchange Act or any 
        substantially equivalent statute or regulation, or as 
        an affiliated person or employee of any investment 
        company, bank, insurance company, foreign entity 
        substantially equivalent to any of the above, or entity 
        or person required to be registered under the Commodity 
        Exchange Act or any substantially equivalent statute or 
        regulation, or from engaging in or continuing any 
        conduct or practice in connection with any such 
        activity, or in connection with the purchase or sale of 
        any security.

           *       *       *       *       *       *       *

  (f) The Commission, by order, shall censure or place 
limitations on the activities of any person associated, seeking 
to become associated, or, at the time of the alleged 
misconduct, associated or seeking to become associated with an 
investment adviser, or suspend for a period not exceeding 
[twelve months or bar any such person from being associated 
with an investment adviser,] 12 months or bar any such person 
from being associated with an investment adviser, broker, 
dealer, municipal securities dealer, transfer agent, or 
nationally recognized statistical rating organization, if the 
Commission finds, on the record after notice and opportunity 
for hearing, that such censure, placing of limitations, 
suspension, or bar is in the public interest and that such 
person has committed or omitted any act or omission enumerated 
in paragraph (1), (5), (6), (8), or (9) of subsection (e) or 
has been convicted of any offense specified in paragraph (2) or 
(3) of subsection (e) within ten years of the commencement of 
the proceedings under this subsection, or is enjoined from any 
action, conduct, or practice specified in paragraph (4) of 
subsection (e). It shall be unlawful for any person as to whom 
such an order suspending or barring him from being associated 
with an investment adviser is in effect willfully to become, or 
to be, associated with an investment adviser without the 
consent of the Commission, and it shall be unlawful for any 
investment adviser to permit such a person to become, or 
remain, a person associated with him without the consent of the 
Commission, if such investment adviser knew, or in the exercise 
of reasonable care, should have known, of such order.

           *       *       *       *       *       *       *

  (i) Money Penalties in Administrative Proceedings.--
          [(1) Authority of commission.--In any proceeding]
          (1) Authority of commission.--
                  (A) In general.--In any proceeding instituted 
                pursuant to subsection (e) or (f) 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--
                          [(A)] (i) has willfully violated any 
                        provision of the Securities Act of 
                        1933, the Securities Exchange Act of 
                        1934, the Investment Company Act of 
                        1940, or this title, or the rules or 
                        regulations thereunder;
                          [(B)] (ii) has willfully aided, 
                        abetted, counseled, commanded, induced, 
                        or procured such a violation by any 
                        other person;
                          [(C)] (iii) has willfully made or 
                        caused to be made in any application 
                        for registration or report required to 
                        be filed with the Commission under this 
                        title, or in any proceeding before the 
                        Commission with respect to 
                        registration, any statement which was, 
                        at the time and in the light of the 
                        circumstances under which it was made, 
                        false or misleading with respect to any 
                        material fact, or has omitted to state 
                        in any such application or report any 
                        material fact which was required to be 
                        stated therein; or
                          [(D)] (iv) has failed reasonably to 
                        supervise, within the meaning of 
                        subsection (e)(6), with a view to 
                        preventing violations of the provisions 
                        of this title and the rules and 
                        regulations thereunder, another person 
                        who commits such a violation, if such 
                        other person is subject to his 
                        supervision;
                and that such penalty is in the public 
                interest.
                  (B) Cease-and-desist proceedings.--In any 
                proceeding instituted pursuant to subsection 
                (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 
                        regulation thereunder; or
                          (ii) is or was a cause of the 
                        violation of any provision of this 
                        title, or any rule or regulation 
                        thereunder.

           *       *       *       *       *       *       *

  (k) Cease-and-Desist Proceedings.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Review of temporary orders.--
                  (A) * * *
                  (B) Judicial review.--Within--
                          (i) 10 days after the date the 
                        respondent was served with a temporary 
                        cease-and-desist order entered with a 
                        prior Commission hearing, or
                          (ii) 10 days after the Commission 
                        renders a decision on an application 
                        and hearing under subparagraph (A), 
                        with respect to any temporary cease-
                        and-desist order entered without a 
                        prior Commission hearing,
                the respondent may apply to the United States 
                district court for the district in which the 
                respondent resides or has its [principal place 
                of business] principal office and place of 
                business, or for the District of Columbia, for 
                an order setting aside, limiting, or suspending 
                the effectiveness or enforcement of the order, 
                and the court shall have jurisdiction to enter 
                such an order. A respondent served with a 
                temporary cease-and-desist order entered 
                without a prior Commission hearing may not 
                apply to the court except after hearing and 
                decision by the Commission on the respondent's 
                application under subparagraph (A) of this 
                paragraph.

           *       *       *       *       *       *       *

  (l) 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 Commission a fair 
        and reasonable fee determined by the Commission. In 
        determining such fee, the Commission shall consider 
        objective factors such as--
                  (A) the investment adviser's size;
                  (B) the number of clients of the investment 
                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 examinations 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 examinations 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.
          (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 required by this 
        subsection.
          (6) Judicial review.--Increases or decreases in fees 
        made pursuant to this section shall not be subject to 
        judicial review.

SEC. 203A. STATE AND FEDERAL RESPONSIBILITIES.

  (a) Advisers Subject to State Authorities.--
          (1) * * *
          (2) Treatment of certain mid-sized investment 
        advisers.--Notwithstanding paragraph (1), an investment 
        adviser that--
                  (A) is regulated and examined, or required to 
                be regulated and examined, by a State; and
                  (B) has assets under management between--
                          (i) the amount specified under 
                        subparagraph (A) of paragraph (1), as 
                        such amount may have been adjusted by 
                        the Commission pursuant to that 
                        subparagraph, and
                          (ii) $100,000,000, or such higher 
                        amount as the Commission may, by rule, 
                        deem appropriate in accordance with the 
                        purposes of this title,
                shall register with, and be subject to 
                examination by, such State. The Commission 
                shall publish a list of the States that 
                regulate and examine, or require regulation and 
                examination of, investment advisers to which 
                the requirements of this paragraph apply.
          [(2)] (3) Definition.--For purposes of this 
        subsection, the term ``assets under management'' means 
        the securities portfolios with respect to which an 
        investment adviser provides continuous and regular 
        supervisory or management services.

           *       *       *       *       *       *       *


                        ANNUAL AND OTHER REPORTS

  Sec. 204. (a) * * *

           *       *       *       *       *       *       *

  (d) Records of Persons With Custody or Use.--
          (1) In general.--Records of persons with custody or 
        use of a client's securities, deposits, or credits, 
        that relate to such custody or use, are subject at any 
        time, or from time to time, to such reasonable 
        periodic, special, or other examinations and other 
        information and document requests by representatives of 
        the Commission as the Commission deems necessary or 
        appropriate in the public interest or for the 
        protection of investors.
          (2) Certain persons subject to other regulation.--
        Persons subject to regulation and examination by a 
        Federal financial institution regulatory agency (as 
        such term is defined under section 212(c)(2) of title 
        18, United States Code) may satisfy any examination 
        request, information request, or document request 
        described under paragraph (1), by providing the 
        Commission with a detailed listing, in writing, of the 
        client's securities, deposits, or credits within such 
        person's custody or use.
  (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.
  (f) Confidentiality.--
          (1) In general.--Notwithstanding any other provision 
        of law, the Commission shall not be compelled to 
        disclose any information, documents, records, or 
        reports that relate to an examination of a person 
        subject to or described in this section.
          (2) Certain exceptions.--Nothing in this subsection 
        shall authorize the Commission to withhold information 
        from Congress, prevent the Commission from complying 
        with a request for information from any other Federal 
        department or agency, the Public Company Accounting 
        Oversight Board, or a self-regulatory organization 
        requesting 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 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 subsection shall be considered 
        a statute described in subsection (b)(3)(B) of that 
        section.

           *       *       *       *       *       *       *


                     INVESTMENT ADVISORY CONTRACTS

  Sec. 205. (a) No investment adviser[, unless exempt from 
registration pursuant to section 203(b),] registered or 
required to be registered with the Commission shall [make use 
of the mails or any means or instrumentality of interstate 
commerce, directly or indirectly, to] enter into, extend, or 
renew any investment advisory contract, or in any way [to] 
perform any investment advisory contract entered into, 
extended, or renewed on or after the effective date of this 
title, if such contract--
          (1) * * *

           *       *       *       *       *       *       *

  (f) Authority to Restrict Mandatory Pre-Dispute 
Arbitration.--The Commission, by rule, may prohibit, or impose 
conditions or limitations on the use of, agreements that 
require customers or clients of any investment adviser to 
arbitrate any future dispute between them arising under the 
Federal securities laws, the rules and regulations thereunder, 
or the rules of a self-regulatory organization if it finds that 
such prohibition, imposition of conditions, or limitations are 
in the public interest and for the protection of investors.

       PROHIBITED TRANSACTIONS BY REGISTERED INVESTMENT ADVISERS

  Sec. 206. It shall be unlawful for any investment adviser, by 
use of the mails or any means or instrumentality of interstate 
commerce, directly or indirectly--
          (1) * * *

           *       *       *       *       *       *       *

          (3) acting as principal for his own account, 
        knowingly to sell any security to or purchase any 
        security from a client, or acting as broker for a 
        person other than such client, knowingly to effect any 
        sale or purchase of any security for the account of 
        such client, without disclosing to such client in 
        writing before the completion of such transaction the 
        capacity in which he is acting and obtaining the 
        consent of the client to such transaction. The 
        prohibitions of this paragraph (3) shall not apply to 
        any transaction with a customer of a broker or dealer 
        if such broker or dealer is not acting as an investment 
        adviser in relation to such transaction; or

           *       *       *       *       *       *       *


                          ENFORCEMENT OF TITLE

  Sec. 209. (a) * * *

           *       *       *       *       *       *       *

  (e) Money Penalties in Civil Actions.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Procedures for collection.--
                  (A) Payment of penalty to treasury.--A 
                penalty imposed under this section shall be 
                payable into the Treasury of the United States, 
                except as otherwise provided in section 308 of 
                the Sarbanes-Oxley Act of 2002 and section 21F 
                of the Securities Exchange Act of 1934.

           *       *       *       *       *       *       *

  (f) Aiding and Abetting.--For purposes of any action brought 
by the Commission under subsection (e), any person that 
knowingly or recklessly has aided, abetted, counseled, 
commanded, induced, or procured a violation of any provision of 
this Act, or of any rule, regulation, or order hereunder, shall 
be deemed to be in violation of such provision, rule, 
regulation, or order to the same extent as the person that 
committed such violation.
  (g) Enforcement by National Securities Associations.--The 
Commission may permit or require a national securities 
association registered under the Securities Exchange Act of 
1934 to enforce compliance by its members and persons 
associated with its members with the provisions of this Act, 
the rules and regulations thereunder, and to adopt such rules 
(subject to any rule or order of the Commission pursuant to the 
Securities Exchange Act of 1934) as the association may deem 
necessary and in the public interest to further the purposes of 
this Act.

           *       *       *       *       *       *       *


                     RULES, REGULATIONS, AND ORDERS

  Sec. 211. (a) * * *

           *       *       *       *       *       *       *

  (e) For the purposes of evaluating its rules and programs and 
for considering proposing, adopting, or engaging in rules or 
programs, the Commission is authorized to gather information, 
communicate with investors or other members of the public, and 
engage in such temporary or experimental programs as the 
Commission in its discretion determines is in the public 
interest or for the protection of investors. The Commission may 
delegate to its staff some or all of the authority conferred by 
this subsection.
  (f) Standard of Conduct.--
          (1) In general.--The Commission shall promulgate 
        rules to provide that the standard of conduct for all 
        brokers, dealers, and investment advisers, when 
        providing personalized investment advice about 
        securities to retail customers (and such other 
        customers as the Commission may by rule provide), shall 
        be to act in the best interest of the customer without 
        regard to the financial or other interest of the 
        broker, dealer, or investment adviser providing the 
        advice. In accordance with such rules, any material 
        conflicts of interest shall be disclosed and may be 
        consented to by the customer. Such rules shall provide 
        that such standard of conduct shall be no less 
        stringent than the standard applicable to investment 
        advisers under section 206(1) and (2) of this Act when 
        providing personalized investment advice about 
        securities, except the Commission shall not ascribe a 
        meaning to the term ``customer'' that would include an 
        investor in a private fund managed by an investment 
        adviser, where such private fund has entered into an 
        advisory contract with such adviser. The receipt of 
        compensation based on commission or fees shall not, in 
        and of itself, be considered a violation of such 
        standard applied to a broker, dealer, or investment 
        adviser.
          (2) Retail customer defined.--For purposes of this 
        subsection, the term ``retail customer'' means a 
        natural person, or the legal representative of such 
        natural person, who--
                  (A) receives personalized investment advice 
                about securities from a broker, dealer, or 
                investment adviser; and
                  (B) uses such advice primarily for personal, 
                family, or household purposes.
  (g) Other Matters.--The Commission shall--
          (1) facilitate the provision of simple and clear 
        disclosures to investors regarding the terms of their 
        relationships with brokers, dealers, and investment 
        advisers, including any material conflicts of interest; 
        and
          (2) examine and, where appropriate, promulgate rules 
        prohibiting or restricting certain sales practices, 
        conflicts of interest, and compensation schemes for 
        brokers, dealers, and investment advisers that the 
        Commission deems contrary to the public interest and 
        the protection of investors.
  (h) Harmonization of Enforcement.--The enforcement authority 
of the Commission with respect to violations of the standard of 
conduct applicable to an investment adviser shall include--
          (1) the enforcement authority of the Commission with 
        respect to such violations provided under this Act, and
          (2) the enforcement authority of the Commission with 
        respect to violations of the standard of conduct 
        applicable to a broker or dealer providing personalized 
        investment advice about securities to a retail customer 
        under the Securities Exchange Act of 1934, including 
        the authority to impose sanctions for such violations, 
        and
the Commission shall seek to prosecute and sanction violators 
of the standard of conduct applicable to an investment advisor 
under this Act to same extent as the Commission prosecutes and 
sanctions violators of the standard of conduct applicable to a 
broker or dealer providing personalized investment advice about 
securities to a retail customer under the Securities Exchange 
Act of 1934.

           *       *       *       *       *       *       *


                         COURT REVIEW OF ORDERS

  Sec. 213. (a) Any person or party aggrieved by an order 
issued by the Commission under this title may obtain a review 
of such order in the court of appeals of the United States 
within any circuit wherein such person resides or has his 
[principal place of business] principal office and place of 
business, or in the United States Court of Appeals for the 
District of Columbia, by filing in such court, within sixty 
days after the entry of such order, a written petition praying 
that the order of the Commission be modified or set aside in 
whole or in part. A copy of such petition shall be forthwith 
transmitted by the clerk of the court to any member of the 
Commission, or any officer thereof designated by the Commission 
for that purpose, and thereupon the Commission shall file in 
the court the record upon which the order complained of was 
entered, as provided in section 2112 of title 28, United States 
Code. Upon the filing of such petition such court shall have 
jurisdiction, which upon the filing of the record shall be 
exclusive, to affirm, modify, or set aside such order, in whole 
or in part. No objection to the order of the Commission shall 
be considered by the court unless such objection shall have 
been urged before the Commission or unless there were 
reasonable grounds for failure so to do. The findings of the 
Commission as to the facts, if supported by substantial 
evidence, shall be conclusive. If application is made to the 
court for leave to adduce additional evidence, and it is shown 
to the satisfaction of the court that such additional evidence 
is material and that there were reasonable grounds for failure 
to adduce such evidence in the proceeding before the 
Commission, the court may order such additional evidence to be 
taken before the Commission and to be adduced upon the hearing 
in such manner and upon such terms and conditions as to the 
court may seem proper. The Commission may modify its findings 
as to the facts by reason of the additional evidence so taken, 
and it shall file with the court such modified or new findings, 
which, if supported by substantial evidence, shall be 
conclusive, and its recommendation, if any, for the 
modification or setting aside of the original order. The 
judgment and decree of the court affirming, modifying, or 
setting aside, in whole or in part, any such order of the 
Commission shall be final, subject to review by the Supreme 
Court of the United States upon certiorari or certification as 
provided in section 1254 of title 28, United States Code.

           *       *       *       *       *       *       *


                   JURISDICTION OF OFFENSES AND SUITS

  Sec. 214. [The district]
  (a) In General.--The district courts of the United States and 
the United States courts of any Territory or other place 
subject to the jurisdiction of the United States shall have 
jurisdiction of violations of this title or the rules, 
regulations, or orders thereunder, and, concurrently with State 
and Territorial courts, of all suits in equity and actions at 
law brought to enforce any liability or duty created by, or to 
enjoin any violation of this title or the rules, regulations, 
or orders thereunder. Any criminal proceeding may be brought in 
the district wherein any act or transaction constituting the 
violation occurred. Any suit or action to enforce any liability 
or duty created by, or to enjoin any violation of this title or 
rules, regulations, or orders thereunder, may be brought in any 
such district or in the district wherein the defendant is an 
inhabitant or transacts business, and process in such cases may 
be served in any district of which the defendant is an 
inhabitant or transacts business or wherever the defendant may 
be found. In any action or proceeding 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 or the production of documents or 
tangible things (or both) at a hearing or trial may be served 
at any place within the United States. Judgments and decrees so 
rendered shall be subject to review as provided in sections 
1254, 1291, 1292, and 1294 of title 28, United States Code. No 
costs shall be assessed for or against the Commission in any 
proceeding under this title brought by or against the 
Commission in any court.
  (b) Extraterritorial Jurisdiction.--The jurisdiction of the 
district courts of the United States and the United States 
courts of any Territory or other place subject to the 
jurisdiction of the United States described under subsection 
(a) 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 constitutes 
        significant steps in furtherance of the violation, 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 within the United 
        States.

           *       *       *       *       *       *       *


SEC. 222. STATE REGULATION OF INVESTMENT ADVISERS.

  (a) * * *
  (b) Dual Compliance Purposes.--No State may enforce any law 
or regulation that would require an investment adviser to 
maintain any books or records in addition to those required 
under the laws of the State in which it maintains its 
[principal place of business] principal office and place of 
business, if the investment adviser--
          (1) is registered or licensed as such in the State in 
        which it maintains its [principal place of business] 
        principal office and place of business; and
          (2) is in compliance with the applicable books and 
        records requirements of the State in which it maintains 
        its [principal place of business] principal office and 
        place of business.
  (c) Limitation on Capital and Bond Requirements.--No State 
may enforce any law or regulation that would require an 
investment adviser to maintain a higher minimum net capital or 
to post any bond in addition to any that is required under the 
laws of the State in which it maintains its [principal place of 
business] principal office and place of business, if the 
investment adviser--
          (1) is registered or licensed as such in the State in 
        which it maintains its [principal place of business] 
        principal office and place of business; and
          (2) is in compliance with the applicable net capital 
        or bonding requirements of the State in which it 
        maintains its [principal place of business] principal 
        office and place of business.

           *       *       *       *       *       *       *

                              ----------                              


                       SARBANES-OXLEY ACT OF 2002

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) * * *
  (b) Table of Contents.--The table of contents for this Act is 
as follows:
     * * * * * * *

           TITLE I--PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

     * * * * * * *
Sec. 110. Definitions.
Sec. 111. Ombudsman.
     * * * * * * *

              TITLE VI--COMMISSION RESOURCES AND AUTHORITY

     * * * * * * *
Sec. 605. Access to grand jury information.

SEC. 2. DEFINITIONS.

  (a) In General.--In this Act, the following definitions shall 
apply:
          (1) * * *

           *       *       *       *       *       *       *

          (5) Board.--The term ``Board'' means the [Public 
        Company Accounting Oversight Board] Auditing Oversight 
        Board established under section 101.

           *       *       *       *       *       *       *

          (9) Person associated with a public accounting 
        firm.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (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 
                include any person associated, seeking to 
                become associated, or formerly associated with 
                a public accounting firm, except--
                          (i) the authority to conduct an 
                        investigation 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 
                        proceeding 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 
                                occurring while such person was 
                                associated or seeking to become 
                                associated with a registered 
                                public accounting firm; or
                                  (II) non-cooperation as 
                                described in section 105(b)(3) 
                                with respect to a demand in a 
                                Board investigation 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.

           *       *       *       *       *       *       *

          (17) Foreign auditor oversight authority.--The term 
        ``foreign auditor oversight authority'' means any 
        governmental body or other entity empowered by a 
        foreign government to conduct inspections of public 
        accounting firms or otherwise to administer or enforce 
        laws related to the regulation of public accounting 
        firms.

           *       *       *       *       *       *       *


TITLE I--[PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD] AUDITING OVERSIGHT 
                                 BOARD

SEC. 101. ESTABLISHMENT; ADMINISTRATIVE PROVISIONS.

  (a) Establishment of Board.--There is established the [Public 
Company Accounting Oversight Board] Auditing Oversight Board, 
to oversee the audit of [public companies] companies that are 
subject to the securities laws, and related matters, in order 
to protect the interests of investors and further the public 
interest in the preparation of informative, accurate, and 
independent audit reports [for companies the securities of 
which are sold to, and held by and for, public investors]. The 
Board shall be a body corporate, operate as a nonprofit 
corporation, and have succession until dissolved by an Act of 
Congress.

           *       *       *       *       *       *       *

  (c) Duties of the Board.--The Board shall, subject to action 
by the Commission under section 107, and once a determination 
is made by the Commission under subsection (d) of this 
section--
          (1) register public accounting firms that prepare 
        audit reports for [issuers] issuers, brokers, and 
        dealers, in accordance with section 102;
          (2) establish or adopt, or both, by rule, auditing, 
        quality control, ethics, independence, and other 
        standards relating to the preparation of audit reports 
        for [issuers] issuers, brokers, and dealers, in 
        accordance with section 103;

           *       *       *       *       *       *       *

  (e) Board Membership.--
          (1) Composition.--The Board shall have 5 members, 
        appointed from among prominent individuals of integrity 
        and reputation who have a demonstrated commitment to 
        the interests of investors and the public, and an 
        understanding of the responsibilities for and nature of 
        the financial disclosures required of [issuers] 
        issuers, brokers, and dealers under the securities laws 
        and the obligations of accountants with respect to the 
        preparation and issuance of audit reports with respect 
        to such disclosures.

           *       *       *       *       *       *       *

  (i) Congressional Access to Information.--Nothing in this 
section shall--
          (1) affect the Board's obligations, if any, to 
        provide access to records under the Right to Financial 
        Privacy Act; or
          (2) authorize the Board to withhold information from 
        Congress or prevent the Board from complying with an 
        order of a court of the United States in an action 
        commenced by the United States or the Board.

SEC. 102. REGISTRATION WITH THE BOARD.

  (a) Mandatory Registration.--[Beginning 180 days after the 
date of the determination of the Commission under section 
101(d), it] It shall be unlawful for any person that is not a 
registered public accounting firm to prepare or issue, or to 
participate in the preparation or issuance of, any audit report 
with respect to any [issuer] issuer, broker, or dealer.
  (b) Applications for Registration.--
          (1) * * *
          (2) Contents of applications.--Each public accounting 
        firm shall submit, as part of its application for 
        registration, in such detail as the Board shall 
        specify--
                  (A) the names of all [issuers] issuers, 
                brokers, and dealers for which the firm 
                prepared or issued audit reports during the 
                immediately preceding calendar year, and for 
                which the firm expects to prepare or issue 
                audit reports during the current calendar year;

           *       *       *       *       *       *       *

                  (G) copies of any periodic or annual 
                disclosure filed by an [issuer] issuer, broker, 
                or dealer with the Commission during the 
                immediately preceding calendar year which 
                discloses accounting disagreements between such 
                [issuer] issuer, broker, or dealer and the firm 
                in connection with an audit report furnished or 
                prepared by the firm for such [issuer] issuer, 
                broker, or dealer; and

           *       *       *       *       *       *       *

          (3) Consents.--Each application for registration 
        under this subsection shall include--
                  (A) a consent executed by the public 
                accounting firm to cooperation in and 
                compliance with any request for testimony or 
                the production of documents made [by the Board] 
                by the Commission or the Board in the 
                furtherance of its authority and 
                responsibilities under this title (and an 
                agreement to secure and enforce similar 
                consents from each of the associated persons of 
                the public accounting firm as a condition of 
                their continued employment by or other 
                association with such firm); and

           *       *       *       *       *       *       *


SEC. 103. AUDITING, QUALITY CONTROL, AND INDEPENDENCE STANDARDS AND 
                    RULES.

  (a) Auditing, Quality Control, and Ethics Standards.--
          (1) In general.--The Board shall, by rule, establish, 
        including, to the extent it determines appropriate, 
        through adoption of standards proposed by 1 or more 
        professional groups of accountants designated pursuant 
        to paragraph (3)(A) or advisory groups convened 
        pursuant to paragraph (4), and amend or otherwise 
        modify or alter, such auditing and related attestation 
        standards, such quality control standards, [and such 
        ethics standards] such ethics standards, and such 
        independence standards to be used by registered public 
        accounting firms in the preparation and issuance of 
        audit reports, as required by this Act or the rules of 
        the Commission, or as may be necessary or appropriate 
        in the public interest or for the protection of 
        investors.
          (2) Rule requirements.--In carrying out paragraph 
        (1), the Board--
                  (A) shall include in the auditing standards 
                that it adopts, requirements that each 
                registered public accounting firm shall--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) [describe in each audit report] 
                        in each audit report for an issuer, 
                        describe the scope of the auditor's 
                        testing of the internal control 
                        structure and procedures of the issuer, 
                        required by section 404(b), and present 
                        (in such report or in a separate 
                        report)--
                                  (I) * * *

           *       *       *       *       *       *       *

                  (B) shall include, in the quality control 
                standards that it adopts with respect to the 
                issuance of audit reports, requirements for 
                every registered public accounting firm 
                relating to--
                          (i) monitoring of professional ethics 
                        and independence from [issuers] 
                        issuers, brokers, and dealers on behalf 
                        of which the firm issues audit reports;

           *       *       *       *       *       *       *


SEC. 104. INSPECTIONS OF REGISTERED PUBLIC ACCOUNTING FIRMS.

  (a) In General.--The Board shall conduct a continuing program 
of inspections to assess the degree of compliance of each 
registered public accounting firm and associated persons of 
that firm with this Act, the rules of the Board, the rules of 
the Commission, or professional standards, in connection with 
its performance of audits, issuance of audit reports, and 
related matters involving [issuers] issuers, brokers, and 
dealers.
  (b) Inspection Frequency.--
          (1) In general.--Subject to paragraph (2), 
        inspections required by this section shall be 
        conducted--
                  (A) annually with respect to each registered 
                public accounting firm that regularly provides 
                [audit reports] audit reports on annual 
                financial statements for more than 100 issuers; 
                [and]
                  (B) not less frequently than once every 3 
                years with respect to each registered public 
                accounting firm that regularly provides [audit 
                reports] audit reports on annual financial 
                statements for 100 or fewer issuers[.]; and
                  (C) with respect to each registered public 
                accounting firm that regularly provides audit 
                reports and is not described under subparagraph 
                (A) or (B), on a basis to be determined by the 
                Board, by rule, consistent with the public 
                interest and protection of investors.

           *       *       *       *       *       *       *


SEC. 105. INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS.

  (a) * * *
  (b) Investigations.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Coordination and referral of investigations.--
                  (A) * * *
                  (B) Referral.--The Board may refer an 
                investigation under this section--
                          (i) * * *
                          (ii) to a self-regulatory 
                        organization, in the case of an 
                        investigation that concerns an audit 
                        report for a broker or dealer that is 
                        subject to the jurisdiction of such 
                        self-regulatory organization;
                          [(ii)] (iii) to any other Federal 
                        functional regulator (as defined in 
                        section 509 of the Gramm-Leach-Bliley 
                        Act (15 U.S.C. 6809)), in the case of 
                        an investigation that concerns an audit 
                        report for an institution that is 
                        subject to the jurisdiction of such 
                        regulator; and
                          [(iii)] (iv) at the direction of the 
                        Commission, to--
                                  (I) * * *

           *       *       *       *       *       *       *

          (5) Use of documents.--
                  (A) Confidentiality.--Except as provided in 
                [subparagraph (B)] subparagraphs (B) and (C), 
                all documents and information prepared or 
                received by or specifically for the Board, and 
                deliberations of the Board and its employees 
                and agents, in connection with an inspection 
                under section 104 or with an investigation 
                under this section, shall be confidential and 
                privileged as an evidentiary matter (and shall 
                not be subject to civil discovery or other 
                legal process) in any proceeding in any Federal 
                or State court or administrative agency, and 
                shall be exempt from disclosure, in the hands 
                of an agency or establishment of the Federal 
                Government, under the Freedom of Information 
                Act (5 U.S.C. 552a), or otherwise, unless and 
                until presented in connection with a public 
                proceeding or released in accordance with 
                subsection (c).
                  (B) Availability to government agencies.--
                Without the loss of its status as confidential 
                and privileged in the hands of the Board, all 
                information referred to in subparagraph (A) 
                may--
                          (i) * * *
                          (ii) in the discretion of the Board, 
                        when determined by the Board to be 
                        necessary to accomplish the purposes of 
                        this Act or to protect investors, be 
                        made available to--
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (III) State attorneys general 
                                in connection with any criminal 
                                investigation; [and]
                                  (IV) any appropriate State 
                                regulatory authority[,]; and
                                  (V) a self-regulatory 
                                organization, with respect to 
                                an audit report for a broker or 
                                dealer that is subject to the 
                                jurisdiction of such self-
                                regulatory organization,
                each of which shall maintain such information 
                as confidential and privileged.
                  (C) Availability to foreign oversight 
                authorities.--When in the Board's discretion it 
                is necessary to accomplish the purposes 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 
                information referred to in subparagraph (A) 
                that relates to a public accounting firm within 
                the inspection 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) Disciplinary Procedures.--
          (1) * * *

           *       *       *       *       *       *       *

          (6) Failure to supervise.--
                  (A) In general.--The Board may impose 
                sanctions under this section on a registered 
                accounting firm or upon [the supervisory 
                personnel] any person who is, or at the time of 
                the alleged failure reasonably to supervise 
                was, a supervisory person of such firm, if the 
                Board finds that--
                          (i) * * *

           *       *       *       *       *       *       *

                  (B) Rule of construction.--[No associated 
                person] No current or former supervisory person 
                of a registered public accounting firm shall be 
                deemed to have failed reasonably to supervise 
                [any other person] any associated person for 
                purposes of subparagraph (A), if--
                          (i) * * *

           *       *       *       *       *       *       *

          (7) Effect of suspension.--
                  (A) * * *
                  (B) Association with an issuer, broker, or 
                dealer.--It shall be unlawful for any person 
                that is suspended or barred from being 
                associated with [an issuer under this 
                subsection] a registered public accounting firm 
                under this subsection willfully to become or 
                remain associated with [any issuer] any issuer, 
                broker, or dealer in an accountancy or a 
                financial management capacity, and for [any 
                issuer] any issuer, broker, or dealer that 
                knew, or in the exercise of reasonable care 
                should have known, of such suspension or bar, 
                to permit such an association, without the 
                consent of the Board or the Commission.

           *       *       *       *       *       *       *


SEC. 106. FOREIGN PUBLIC ACCOUNTING FIRMS.

  (a) Applicability to Certain Foreign Firms.--
          (1) In general.--Any foreign public accounting firm 
        that prepares or furnishes an audit report with respect 
        to any [issuer] issuer, broker, or dealer, shall be 
        subject to this Act and the rules of the Board and the 
        Commission issued under this Act, in the same manner 
        and to the same extent as a public accounting firm that 
        is organized and operates under the laws of the United 
        States or any State, except that registration pursuant 
        to section 102 shall not by itself provide a basis for 
        subjecting such a foreign public accounting firm to the 
        jurisdiction of the Federal or State courts, other than 
        with respect to controversies between such firms and 
        the Board.
          (2) Board authority.--The Board may, by rule, 
        determine that a foreign public accounting firm (or a 
        class of such firms) that does not issue audit reports 
        nonetheless plays such a substantial role in the 
        preparation and furnishing of such reports for 
        particular [issuers] issuers, brokers, or dealers, that 
        it is necessary or appropriate, in light of the 
        purposes of this Act and in the public interest or for 
        the protection of investors, that such firm (or class 
        of firms) should be treated as a public accounting firm 
        (or firms) for purposes of registration under, and 
        oversight by the Board in accordance with, this title.
  [(b) Production of Audit Workpapers.--
          [(1) Consent by foreign firms.--If a foreign public 
        accounting firm issues an opinion or otherwise performs 
        material services upon which a registered public 
        accounting firm relies in issuing all or part of any 
        audit report or any opinion contained in an audit 
        report, that foreign public accounting firm shall be 
        deemed to have consented--
                  [(A) to produce its audit workpapers for the 
                Board or the Commission in connection with any 
                investigation by either body with respect to 
                that audit report; and
                  [(B) to be subject to the jurisdiction of the 
                courts of the United States for purposes of 
                enforcement of any request for production of 
                such workpapers.
          [(2) Consent by domestic firms.--A registered public 
        accounting firm that relies upon the opinion of a 
        foreign public accounting firm, as described in 
        paragraph (1), shall be deemed--
                  [(A) to have consented to supplying the audit 
                workpapers of that foreign public accounting 
                firm in response to a request for production by 
                the Board or the Commission; and
                  [(B) to have secured the agreement of that 
                foreign public accounting firm to such 
                production, as a condition of its reliance on 
                the opinion of that foreign public accounting 
                firm.]
  (b) Production of Documents.--
          (1) Production by foreign firms.--If a foreign public 
        accounting firm issues an audit report, performs audit 
        work, conducts interim reviews, or performs material 
        services upon which a registered public accounting firm 
        relies in the conduct of an audit or interim review, 
        the foreign public accounting 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 request 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 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 
                documents 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 
                foreign public accounting firm.

           *       *       *       *       *       *       *

  (d) Service of Requests or Process.--Any foreign public 
accounting firm that performs work for a domestic registered 
public accounting firm shall furnish to the domestic 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 section. Any foreign public accounting 
firm that issues an audit report, performs audit work, performs 
interim reviews, or performs other material services upon which 
a registered public accounting firm relies in the conduct of an 
audit or interim review, shall designate to the Commission or 
the Board an agent in the United States upon whom may be served 
any process, pleading, or other papers in any action brought to 
enforce this section or any request by the Commission or the 
Board under this section.
  (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 section to meet production obligations 
under this section though alternate means, such as through 
foreign counterparts of the Commission or Board.
  [(d)] (g) Definition.--In this section, the term ``foreign 
public accounting firm'' means a public accounting firm that is 
organized and operates under the laws of a foreign government 
or political subdivision thereof.

SEC. 107. COMMISSION OVERSIGHT OF THE BOARD.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Censure of the Board; Other Sanctions.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Censure of board members; removal from office.--
        The Commission may, as necessary or appropriate in the 
        public interest, for the protection of investors, or 
        otherwise in furtherance of the purposes of this Act or 
        the securities laws, remove from office or censure [any 
        member] any person who is, or at the time of the 
        alleged misconduct was, a member of the Board, if the 
        Commission finds, on the record, after notice and 
        opportunity for a hearing, that such member--
                  (A) * * *

           *       *       *       *       *       *       *


SEC. 109. FUNDING.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Sources and Uses of Funds.--
          (1) * * *
          (2) Funds generated from the collection of monetary 
        penalties.--Subject to the availability in advance in 
        an appropriations Act, and notwithstanding [subsection 
        (i)] subsection (j), all funds collected by the Board 
        as a result of the assessment of monetary penalties 
        shall be used to fund a merit scholarship program for 
        undergraduate and graduate students enrolled in 
        accredited accounting degree programs, which program is 
        to be administered by the Board or by an entity or 
        agent identified by the Board.
  (d) Annual Accounting Support Fee for the Board.--
          (1) * * *
          (2) Assessments.--The rules of the Board under 
        paragraph (1) shall provide for the equitable 
        allocation, assessment, and collection by the Board (or 
        an agent appointed by the Board) of the fee established 
        under paragraph (1), among issuers, in accordance with 
        subsection (g), [allowing for differentiation among 
        classes of issuers, as appropriate] and among brokers 
        and dealers in accordance with subsection (h), and 
        allowing for differentiation among classes of issuers 
        and brokers and dealers, as appropriate.
          (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.

           *       *       *       *       *       *       *

  (h) Allocation of Accounting Support Fees Among Brokers and 
Dealers.--
          (1) In general.--Any amount due from brokers and 
        dealers (or a particular class of such brokers 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 brokers 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 dealer, in accordance with the rules 
        of the Board.
          (2) Obligation to pay.--Every broker or dealer shall 
        pay the share of a reasonable annual accounting support 
        fee or fees allocated to such broker or dealer under 
        this section.
  [(h)] (i) Conforming Amendments.--Section 13(b)(2) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78m(b)(2)) is 
amended--
          (1) * * *

           *       *       *       *       *       *       *

  [(i)] (j) Rule of Construction.--Nothing in this section 
shall be construed to render either the Board, the standard 
setting body referred to in subsection (a), or both, subject to 
procedures in Congress to authorize or appropriate public 
funds, or to prevent such organization from utilizing 
additional sources of revenue for its activities, such as 
earnings from publication sales, provided that each additional 
source of revenue shall not jeopardize, in the judgment of the 
Commission, the actual and perceived independence of such 
organization.
  [(j)] (k) Start-Up Expenses of the Board.--From the 
unexpended balances of the appropriations to the Commission for 
fiscal year 2003, the Secretary of the Treasury is authorized 
to advance to the Board not to exceed the amount necessary to 
cover the expenses of the Board during its first fiscal year 
(which may be a short fiscal year).

SEC. 110. DEFINITIONS.

  For the purposes of this title, and notwithstanding section 
2:
          (1) Audit.--The term ``audit'' means an examination 
        of the financial statements, reports, documents, 
        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 preceding the adoption 
        of applicable rules of the Board under section 103, in 
        accordance with then-applicable generally accepted 
        auditing and related standards for such purposes), for 
        the purpose of expressing 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 performed 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 either--
                          (i) sets forth the opinion of that 
                        firm regarding a financial statement, 
                        report, notice, other document, 
                        procedures, or controls; 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 
                        setting 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 Exchange Act of 
                        1934 (15 U.S.C. 78a(m)); and
                          (ii) relevant to audit reports for 
                        particular issuers, brokers, or 
                        dealers, or dealt with in the quality 
                        control system of a particular 
                        registered public accounting firm; and
                  (B) auditing standards, standards for 
                attestation engagements, quality control 
                policies and procedures, ethical and competency 
                standards, 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, 
                        brokers, or dealers; and
                          (ii) are established or adopted by 
                        the Board under section 103(a), or are 
                        promulgated 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. 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 Exchange Act of 1934 
        (15 U.S.C. 78c(a)(26)).

SEC. 111. OMBUDSMAN.

  (a) Establishment Required.--Not later than 180 days after 
the date of enactment of the Investor Protection Act, the Board 
shall appoint an ombudsman for the Board. The Ombudsman shall 
report directly to the Chairman.
  (b) Duties of Ombudsman.--The ombudsman appointed 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 
                concerning the preparation or issuance of any 
                audit report with respect to that issuer; and
                  (B) any affected registered public accounting 
                firm or issuer with respect to--
                          (i) any problem such firm or issuer 
                        may have in dealing with the Board 
                        resulting from the regulatory 
                        activities of the Board, particularly 
                        with regard to the implementation of 
                        section 404; and
                          (ii) issues caused by the 
                        relationships of registered public 
                        accounting firms and issuers generally; 
                        and
          (2) assure that safeguards exist to encourage 
        complainants to come forward and to preserve 
        confidentiality; and
          (3) carry out such activities, and any other 
        activities assigned by the Board, in accordance with 
        guidelines prescribed by the Board.

           *       *       *       *       *       *       *


TITLE III--CORPORATE RESPONSIBILITY

           *       *       *       *       *       *       *


SEC. 308. FAIR FUNDS FOR INVESTORS.

  [(a) Civil Penalties Added to Disgorgement Funds for the 
Relief of Victims.--If in any judicial or administrative action 
brought by the Commission under the securities laws (as such 
term is defined in section 3(a)(47) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c(a)(47)) the Commission obtains an 
order requiring disgorgement against any person for a violation 
of such laws or the rules or regulations thereunder, or such 
person agrees in settlement of any such action to such 
disgorgement, and the Commission also obtains pursuant to such 
laws a civil penalty against such person, the amount of such 
civil penalty shall, on the motion or at the direction of the 
Commission, be added to and become part of the disgorgement 
fund for the benefit of the victims of such violation.]
  (a) Civil Penalties to be Used for the Relief of Victims.--If 
in any judicial or administrative action brought by the 
Commission under the securities laws (as such term is defined 
in section 3(a)(47) of the Securities 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 thereunder, or such person agrees in settlement 
of any such action to such civil penalty, the amount of such 
civil penalty 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 benefit of 
the victims of such violation.
  (b) Acceptance of Additional Donations.--The Commission is 
authorized to accept, hold, administer, and utilize gifts, 
bequests and devises of property, both real and personal, to 
the United States [for a disgorgement fund described in 
subsection (a)] for a disgorgement fund or other fund described 
in subsection (a). Such gifts, bequests, and devises of money 
and proceeds from sales of other property received as gifts, 
bequests, or devises shall be deposited [in the disgorgement 
fund] in such fund and shall be available for allocation in 
accordance with subsection (a).
  [(e) Definition.--As used in this section, the term 
``disgorgement fund'' means a fund established in any 
administrative or judicial proceeding described in subsection 
(a).]

           *       *       *       *       *       *       *


SEC. 404. MANAGEMENT ASSESSMENT OF INTERNAL CONTROLS.

  (A)  * * *.--

           *       *       *       *       *       *       *

  (c) Exemption for Smaller Issuers.--Subsection (b) shall not 
apply with respect to any audit report prepared for an issuer 
that is not an accelerated filer within the meaning Rule 12b-2 
of the Commission (17 C.F.R. 240.12b-2).

TITLE VI--COMMISSION RESOURCES AND AUTHORITY

           *       *       *       *       *       *       *


SEC. 605. ACCESS TO GRAND JURY INFORMATION.

  (a) Disclosure.--
          (1) In general.--Upon motion of an attorney for the 
        government, a court may direct disclosure of matters 
        occurring before a grand jury during an investigation 
        of conduct that may constitute a violation of any 
        provision of the securities laws to the Commission for 
        use in relation to any matter within the jurisdiction 
        of the Commission.
          (2) Substantial need required.--A court may issue an 
        order under paragraph (1) only upon a finding of a 
        substantial need in the public interest.
  (b) Use of Matter.--A person to whom a matter has been 
disclosed under this section shall not use such matter other 
than for the purpose for which such disclosure was authorized.
  (c) Definitions.--As used in this section, the terms 
``attorney for the government'' and ``grand jury information'' 
have the meanings given to those terms in section 3322 of title 
18, United States Code.

           *       *       *       *       *       *       *

                              ----------                              


                      TRUST INDENTURE ACT OF 1939



           *       *       *       *       *       *       *
TITLE III--SHORT TITLE

           *       *       *       *       *       *       *


                              DEFINITIONS

  Sec. 303. When used in this title, unless the context 
otherwise requires--
          (1) * * *

           *       *       *       *       *       *       *

          [(17) The terms ``Securities Act of 1933'', 
        ``Securities Exchange Act of 1934'', and ``Public 
        Utility Holding Company Act of 1935'' shall be deemed 
        to refer, respectively, to such Acts, as amended, 
        whether amended prior to or after the enactment of this 
        title.]
          (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.

           *       *       *       *       *       *       *


                  EXEMPTED SECURITIES AND TRANSACTIONS

  Sec. 304. (a) * * *
  (b) The provisions of sections 305 and 306 shall not apply 
(1) to any of the transactions exempted from the provisions of 
section 5 of the Securities Act of 1933 by section 4 thereof, 
or (2) to any transaction which would be so exempted but for 
the last sentence of paragraph (11) of [section 2 of such Act] 
section 2(a) of such Act.

           *       *       *       *       *       *       *


      INTEGRATION OF PROCEDURE WITH SECURITIES ACT AND OTHER ACTS

  Sec. 308. (a) The Commission, by such rules and regulations 
or orders as it deems necessary or appropriate in the public 
interest or for the protection of investors, shall authorize 
the filing of any information or documents required to be filed 
with the Commission under this title, or under the [Securities 
Act of 1933, the Securities Exchange Act of 1934, or the Public 
Utility Holding Company Act of 1935] Securities Act of 1933 or 
the Securities Exchange Act of 1934, by incorporating by 
reference any information or documents on file with the 
Commission under this title or under any such Act.
  (b) The Commission, by such rules and regulations or orders 
as it deems necessary or appropriate in the public interest or 
for the protection of investors, shall provide for the 
consolidation of applications, reports, and proceedings under 
this title with registration statements, applications, reports, 
and proceedings under the [Securities Act of 1933, the 
Securities Exchange Act of 1934, or the Public Utility Holding 
Company Act of 1935] Securities Act of 1933 or the Securities 
Exchange Act of 1934.

           *       *       *       *       *       *       *


              ELIGIBILITY AND DISQUALIFICATION OF TRUSTEE

  Sec. 310. (a) * * *

           *       *       *       *       *       *       *

  [(c) Applicability of Section.--The Public Utility Holding 
Company Act of 1935 shall not be held to establish or authorize 
the establishment of any standards regarding the eligibility 
and qualifications of any trustee or prospective trustee under 
an indenture to be qualified under this title, or regarding the 
provisions to be included in any such indenture with respect to 
the eligibility and qualifications of the trustee thereunder, 
other than those established by the provisions of this 
section.]

           PREFERENTIAL COLLECTION OF CLAIMS AGAINST OBLIGOR

  Sec. 311. (a) * * *

           *       *       *       *       *       *       *

  [(c) In the exercise by the Commission of any jurisdiction 
under the Public Utility Holding Company Act of 1935 regarding 
the issue or sale, by any registered holding company or a 
subsidiary company thereof, of any security of such issuer or 
seller or of any other company to a person which is trustee 
under an indenture or indentures of such issuer or seller or 
other company, or of a subsidiary or associate company or 
affiliate of such issuer or seller or other company (whether or 
not such indenture or indentures are qualified or to be 
qualified under this title), the fact that such trustee will 
thereby become a creditor, directly or indirectly, of any of 
the foregoing shall not constitute a ground for the Commission 
taking adverse action with respect to any application or 
declaration, or limiting the scope of any rule or regulation 
which would otherwise permit such transaction to take effect; 
but in any case in which such trustee is trustee under an 
indenture of the company of which it will thereby become a 
creditor, or of any subsidiary company thereof, this subsection 
shall not prevent the Commission from requiring (if such 
requirement would be authorized under the provisions of the 
Public Utility Holding Company Act of 1935) that such trustee, 
as such, shall effectively and irrevocably agree in writing, 
for the benefit of the holders from time to time of the 
securities from time to time outstanding under such indenture, 
to be bound by the provisions of this section, subsection (c) 
of section 315, and, in case of default (as such term is 
defined in such indenture), subsection (d) of section 315, as 
fully as though such provisions were included in such 
indenture. For the purposes of this subsection the terms 
``registered holding company'', ``subsidiary company'', 
``associate company'', and ``affiliate'' shall have the 
respective meanings assigned to such terms in section 2(a) of 
the Public Utility Holding Company Act of 1935.]

           *       *       *       *       *       *       *


                      REPORTS BY INDENTURE TRUSTEE

  Sec. 313. (a) The indenture trustee shall transmit to the 
indenture security holders as hereinafter provided, at stated 
intervals of not more than 12 months, a brief report with 
respect to any of the following events which may have occurred 
within the previous 12 months (but if no such event has 
occurred within such period no report need be transmitted):--
          (1) * * *

           *       *       *       *       *       *       *

          (4) any change to the amount, interest rate, and 
        maturity date of all other indebtedness owing to it in 
        its individual capacity, on the date of such report, by 
        the obligor upon the indenture securities, with a brief 
        description of any property held as collateral security 
        therefor, except an indebtedness based upon a creditor 
        relationship arising in any manner described in 
        paragraphs (2), (3), (4), or (6) of [subsection (b) of 
        section 311] section 311(b);

           *       *       *       *       *       *       *


           SPECIAL POWERS OF TRUSTEE; DUTIES OF PAYING AGENTS

  Sec. 317. (a) The indenture trustee shall be authorized--
          (1) [,] in the case of a default in payment of the 
        principal of any indenture security, when and as the 
        same shall become due and payable, or in the case of a 
        default in payment of the interest on any such 
        security, when and as the same shall become due and 
        payable and the continuance of such default for such 
        period as may be prescribed in such indenture, to 
        recover judgment, in its own name and as trustee of an 
        express trust, against the obligor upon the indenture 
        securities for the whole amount of such principal and 
        interest remaining unpaid; and

           *       *       *       *       *       *       *


                  LIABILITY FOR MISLEADING STATEMENTS

  Sec. 323. (a) * * *
  (b) The rights and remedies provided by this title shall be 
in addition to any and all other rights and remedies that may 
exist under the [Securities Act of 1933, or the Securities 
Exchange Act of 1934, or the Public Utility Holding Company Act 
of 1935] Securities Act of 1933 or the Securities Exchange Act 
of 1934, or otherwise at law or in equity; but no person 
permitted to maintain a suit for damages under the provisions 
of this title shall recover, through satisfaction of judgment 
in one or more actions, a total amount in excess of his actual 
damages on account of the act complained of.

           *       *       *       *       *       *       *


                         EFFECT ON EXISTING LAW

  Sec. 326. Except as otherwise expressly provided, nothing in 
this title shall affect (1) the jurisdiction of the Commission 
under the [Securities Act of 1933, or the Securities Exchange 
Act of 1934, or the Public Utility Holding Company Act of 
1935,] Securities Act of 1933 or the Securities Exchange Act of 
1934 over any person, security, or contract, or (2) the rights, 
obligations, duties, or liabilities of any person under such 
Acts; nor shall anything in this title affect the jurisdiction 
of any other commission, board, agency, or officer of the 
United States or of any State or political subdivision of any 
State, over any person or security, insofar as such 
jurisdiction does not conflict with any provision of this title 
or any rule, regulation, or order thereunder.

           *       *       *       *       *       *       *

                              ----------                              


               SECURITIES INVESTOR PROTECTION ACT OF 1970



           *       *       *       *       *       *       *
SEC. 4. SIPC FUND.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Requirements Respecting Assessments and Lines of 
Credit.--
          (1) Assessments.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Minimum assessment.--The minimum 
                assessment imposed upon each member of SIPC 
                shall be $25 per annum through the year ending 
                December 31, 1979, and thereafter shall be the 
                amount from time to time set by SIPC bylaw, but 
                in no event shall the minimum assessment be 
                greater than [$150 per annum] 0.02 percent of 
                the gross revenues from the securities business 
                of such member of SIPC.

           *       *       *       *       *       *       *

  (g) SEC Loans to SIPC.--In the event that the fund is or may 
reasonably appear to be insufficient for the purposes of this 
Act, the Commission is authorized to make loans to SIPC. At the 
time of application for, and as a condition to, any such loan, 
SIPC shall file with the Commission a statement with respect to 
the anticipated use of the proceeds of the loan. If the 
Commission determines that such loan is necessary for the 
protection of customers of brokers or dealers and the 
maintenance of confidence in the United States securities 
markets and that SIPC has submitted a plan which provides as 
reasonable an assurance of prompt repayment as may be feasible 
under the circumstances, then the Commission shall so certify 
to the Secretary of the Treasury, and issue notes or other 
obligations to the Secretary of the Treasury pursuant to 
subsection (h). If the Commission determines that the amount or 
time for payment of the assessments pursuant to such plan would 
not satisfactorily provide for the repayment of such loan, it 
may, by rules and regulations, impose upon the purchasers of 
equity securities in transactions on national securities 
exchanges and in the over-the-counter markets a transaction fee 
in such amount as at any time or from time to time it may 
determine to be appropriate, but not exceeding one-fiftieth of 
1 per centum of the purchase price of the securities. No such 
fee shall be imposed on a transaction (as defined by rules or 
regulations of the Commission) of less than $5,000. For the 
purposes of the next preceding sentence, (1) the fee shall be 
based upon the total dollar amount of each purchase; (2) the 
fee shall not apply to any purchase on a national securities 
exchange or in an over-the-counter market by or for the account 
of a broker or dealer registered under section 15(b) of the 
1934 Act unless such purchase is for an investment account of 
such broker or dealer (and for this purpose any transfer from a 
trading account to an investment account shall be deemed a 
purchase at fair market value); and (3) the Commission may, by 
rule, exempt any transaction in the over-the-counter markets or 
on any national securities exchange where necessary to provide 
for the assessment of fees on purchasers in transactions in 
such markets and exchanges on a comparable basis. Such fee 
shall be collected by the broker or dealer effecting the 
transaction for or with the purchaser, or by such other person 
as provided by the Commission by rule, and shall be paid to 
SIPC in the same manner as assessments imposed pursuant to 
subsection (c) but without regard to the limits on such 
assessments, or in such other manner as the Commission may by 
rule provide. Any loan made by the Commission to SIPC under 
this subsection shall not be considered to result in a new 
direct loan obligation or a new loan guarantee commitment for 
purposes of section 504 of the Federal Credit Reform Act of 
1990.
  (h) SEC Notes Issued to Treasury.--To enable the Commission 
to make loans under subsection (g), the Commission is 
authorized to issue to the Secretary of the Treasury notes or 
other obligations in an aggregate amount [of not to exceed 
$1,000,000,000] the lesser of $2,500,000,000 or the target 
amount of the SIPC Fund specified in the bylaws of SIPC, in 
such forms and denominations, bearing such maturities, and 
subject to such terms and conditions, as may be prescribed by 
the Secretary of the Treasury. Such notes or other obligations 
shall bear interest at a rate determined by the Secretary of 
the Treasury, taking into consideration the current average 
market yield on outstanding marketable obligations of the 
United States of comparable maturities during the month 
preceding the issuance of the notes or other obligations. The 
Secretary of the Treasury may reduce the interest rate if he 
determines such reduction to be in the national interest. The 
Secretary of the Treasury is authorized and directed to 
purchase any notes and other obligations issued hereunder and 
for that purpose he is authorized to use as a public debt 
transaction the proceeds from the sale of any securities issued 
under the Second Liberty Bond Act, as amended, and the purposes 
for which securities may be issued under that Act, as amended, 
are extended to include any purchase of such notes and 
obligations. The Secretary of the Treasury may at any time sell 
any of the notes or other obligations acquired by him under 
this subsection. All redemptions, purchases, and sales by the 
Secretary of the Treasury of such notes or other obligations 
shall be treated as public debt transactions of the United 
States.

           *       *       *       *       *       *       *


SEC. 5. PROTECTION OF CUSTOMERS.

  (a) * * *
  (b) Court Action.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Appointment of trustee and attorney.--If the 
        court issues a protective decree under paragraph (1), 
        such court shall forthwith appoint, as trustee for the 
        liquidation of the business of the debtor and as 
        attorney for the trustee, such persons as SIPC, in its 
        sole discretion, specifies. The persons appointed as 
        trustee and as attorney for the trustee may be 
        associated with the same firm. SIPC may, in its sole 
        discretion, specify itself or one of its employees as 
        trustee in any case in which [SIPC has determined that 
        the liabilities of the debtor to unsecured general 
        creditors and to subordinated lenders appear to 
        aggregate less than $750,000 and that] there appear to 
        be fewer than [five hundred] five thousand customers of 
        such debtor. No person may be appointed to serve as 
        trustee or attorney for the trustee if such person is 
        not disinterested within the meaning of paragraph (6), 
        except that for any specified purpose other than to 
        represent a trustee in conducting a liquidation 
        proceeding, the trustee may, with the approval of SIPC 
        and the court, employ an attorney who is not 
        disinterested. A trustee appointed under this paragraph 
        shall qualify by filing a bond in the manner prescribed 
        by section 322 of title 11 of the United States Code, 
        except that neither SIPC nor any employee of SIPC shall 
        be required to file a bond when appointed as trustee.

           *       *       *       *       *       *       *


SEC. 9. SIPC ADVANCES.

  (a) Advances for Customers' Claims.--In order to provide for 
prompt payment and satisfaction of net equity claims of 
customers of the debtor, SIPC shall advance to the trustee such 
moneys, not to exceed $500,000 for each customer, as may be 
required to pay or otherwise satisfy claims for the amount by 
which the net equity of each customer exceeds his ratable share 
of customer property, except that--
          (1) if all or any portion of the net equity claim of 
        a customer in excess of his ratable share of customer 
        property is a claim for cash, as distinct from a claim 
        for securities or options on futures contracts, the 
        amount advanced to satisfy such claim for cash shall 
        not exceed [$100,000 for each such customer] the 
        standard maximum cash advance amount for each such 
        customer, as determined in accordance with subsection 
        (d);

           *       *       *       *       *       *       *

          (4) no advance shall be made by SIPC to the trustee 
        to pay or otherwise satisfy, directly or indirectly, 
        any net equity claim of a customer who is a general 
        partner, officer, or director of the debtor, a 
        beneficial owner of five per centum or more of any 
        class of equity security of the debtor (other than a 
        nonconvertible stock having fixed preferential dividend 
        and liquidation rights), a limited partner with a 
        participation of five per centum or more in the net 
        assets or net profits of the debtor, an insider, or a 
        person who, directly or indirectly and through 
        agreement or otherwise, exercised or had the power to 
        exercise a controlling influence over the management or 
        policies of the debtor; and

           *       *       *       *       *       *       *

  (d) Standard Maximum Cash Advance Amount Defined.--For 
purposes of this section, the term ``standard 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 determine whether 
        an inflation adjustment to the standard maximum cash 
        advance amount is appropriate. If the Board of 
        Directors of SIPC determines such an adjustment is 
        appropriate, then the standard 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 thereto), 
                published by the Department of Commerce, for 
                the calendar year preceding the year in which 
                such determination is made, to the published 
                annual value of such index for the calendar 
                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 Department 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.
          (3) Publication and report to the congress.--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 containing 
                stating the standard maximum cash advance 
                amount.
          (4) Implementation period.--Any adjustment 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 considerations.--In making 
        any determination under paragraph (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 members 
                of SIPC; and
                  (C) such other factors as the Board of 
                Directors of SIPC may determine appropriate.

SEC. 10. DIRECT PAYMENT PROCEDURE.

  (a) Determination Regarding Direct Payments.--If SIPC 
determines that--
          (1) * * *

           *       *       *       *       *       *       *

          (4) the claims of all customers of the member 
        aggregate less than [$250,000] $850,000;

           *       *       *       *       *       *       *

SIPC may, in its discretion, use the direct payment procedure 
set forth in this section in lieu of instituting a liquidation 
proceeding with respect to such member.

           *       *       *       *       *       *       *


SEC. 14. PROHIBITED ACTS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Concealment of Assets; False Statements or Claims.--
          (1) Specific prohibited acts.--Any person who, 
        directly or indirectly, in connection with or in 
        contemplation of any liquidation proceeding or direct 
        payment procedure--
                  (A) * * *

           *       *       *       *       *       *       *

        shall be fined not more than [$50,000] $250,000 or 
        imprisoned for not more than five years, or both.
          (2) Fraudulent conversion.--Any person who, directly 
        or indirectly steals, embezzles, or fraudulently, or 
        with intent to defeat this Act, abstracts or converts 
        to his own use or to the use of another any of the 
        moneys, securities, or other assets of SIPC, or 
        otherwise defrauds or attempts to defraud SIPC or a 
        trustee by any means, shall be fined not more than 
        [$50,000] $250,000 or imprisoned not more than five 
        years, or both.
  (d) Misrepresentation of SIPC Membership or Protection.--
          (1) In general.--Any person who falsely represents by 
        any means (including, without limitation, 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 protection under this Act 
        or by SIPC, shall be liable for any damages caused 
        thereby and shall be fined not more than $250,000 or 
        imprisoned for not more than five years.
          (2) Internet service providers.--Any Internet service 
        provider that, on or through a system or network 
        controlled or operated by the Internet service 
        provider, transmits, routes, provides connections for, 
        or stores any material containing any misrepresentation 
        of the kind prohibited in paragraph (1) shall be liable 
        for any damages caused thereby, including damages 
        suffered by SIPC, if the Internet service provider--
                  (A) has actual knowledge that the material 
                contains a misrepresentation of the kind 
                prohibited in paragraph (1), or
                  (B) in the absence of actual knowledge, is 
                aware of facts or circumstances from which it 
                is apparent that the material contains a 
                misrepresentation of the kind prohibited in 
                paragraph (1), and
        upon obtaining such knowledge or awareness, fails to 
        act expeditiously to remove, or disable access to, the 
        material.
          (3) Injunctions.--Any court having jurisdiction 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) or (2). 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 enforceable, by proceedings 
        in contempt or otherwise, by any United States court 
        having jurisdiction over that person. The clerk of the 
        court granting the injunction shall, when requested by 
        any other court in which enforcement of the injunction 
        is sought, transmit promptly to the other court a 
        certified copy of all papers in the case on file in 
        such clerk's office.

           *       *       *       *       *       *       *


SEC. 16. DEFINITIONS.

  For purposes of this Act, including the application of the 
Bankruptcy Act to a liquidation proceeding:
          (1) * * *
          [(2) Customer.--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 securities 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 purchases, 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 securities, and any person who has 
        deposited cash with the debtor for the purpose of 
        purchasing securities, but does not include--
                  [(A) any person to the extent that the claim 
                of such person arises out of transactions with 
                a foreign subsidiary of a member of SIPC; or
                  [(B) any person to the extent that such 
                person has a claim for cash or securities which 
                by contract, agreement, or understanding, or by 
                operation of law, is part of the capital of the 
                debtor, or is subordinated 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 
                voidable in a suit between the claimant and the 
                debtor.]
          (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 securities 
                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 
                purchases, 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 securities.
                  (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 conversions 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 
                        transactions with a foreign subsidiary 
                        of a member of SIPC;
                          (ii) any person to the extent that 
                        such person has a claim for cash or 
                        securities which by contract, 
                        agreement, or understanding, or by 
                        operation of law, is part of the 
                        capital of the debtor, or is 
                        subordinated 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 voidable 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 
                        repurchase or open reverse repurchase 
                        agreement.
                For purposes of this paragraph, the term 
                ``repurchase agreement'' means the sale of a 
                security at a specified price with a 
                simultaneous agreement or obligation to 
                repurchase the security at a specified price on 
                a specified future date.

           *       *       *       *       *       *       *

          (4) Customer property.--The term ``customer 
        property'' means cash and securities (except customer 
        name securities delivered to the customer) at any time 
        received, acquired, or held by or for the account of a 
        debtor from or for the securities accounts of a 
        customer, and the proceeds of any such property 
        transferred by the debtor, including property 
        unlawfully converted. 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. The term ``customer property'' 
        includes--
                  (A) * * *

           *       *       *       *       *       *       *

          (9) Gross revenues from the securities business.--The 
        term ``gross revenues from the securities business'' 
        means the sum of (but without duplication)--
                  (A) * * *

           *       *       *       *       *       *       *

        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. Such term does not include revenues 
        received by a broker or dealer in connection with the 
        distribution of shares of a registered open end 
        investment company or unit investment trust or revenues 
        derived by a broker or dealer from the sale of variable 
        annuities or from the conduct of the business of 
        insurance.

           *       *       *       *       *       *       *

          (11) Net equity.--The term ``net equity'' means the 
        dollar amount of the account or accounts of a customer, 
        to be determined by--
                  [(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, all securities positions of 
                such customer (other than customer name 
                securities reclaimed by such customer); minus]
                  (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 
                        securities 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 Commission; 
                        minus

           *       *       *       *       *       *       *

        A claim for a commodity futures contract received, 
        acquired, or held in a portfolio margining account 
        pursuant to a portfolio margining program approved by 
        the Commission, 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 to such 
        contract as of the filing date, and such claim shall be 
        treated as a claim for cash. In determining net equity 
        under this paragraph, accounts held by a customer in 
        separate capacities shall be deemed to be accounts of 
        separate customers.

           *       *       *       *       *       *       *

                              ----------                              


                      TITLE 18, UNITED STATES CODE

PART I--CRIMES

           *       *       *       *       *       *       *


CHAPTER 73--OBSTRUCTION OF JUSTICE

           *       *       *       *       *       *       *


Sec. 1514A. Civil action to protect against retaliation in fraud cases

  (a) Whistleblower Protection for Employees of Publicly Traded 
Companies.--No company with a class of securities registered 
under section 12 of the Securities Exchange Act of 1934 (15 
U.S.C. 78l), or that is required to file reports under section 
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o(d)), including any subsidiary or affiliate whose financial 
information is included in the consolidated financial 
statements of such company, or any officer, employee, 
contractor, subcontractor, or agent of such company, may 
discharge, demote, suspend, threaten, harass, or in any other 
manner discriminate against an employee in the terms and 
conditions of employment because of any lawful act done by the 
employee--
          (1) * * *

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    The catastrophic failures of several large, complex 
financial institutions and the massive financial frauds carried 
out by Bernard Madoff and others on Wall Street provide clear 
evidence that our current capital markets regulatory and 
enforcement structure is in need of repair. H.R. 3817, the 
Investor Protection Act of 2009, incorporates several key 
provisions from the Republican Financial Regulatory Reform plan 
(H.R. 3310), giving the Securities and Exchange Commission 
(SEC) enhanced enforcement powers and providing victims of 
financial fraud additional relief. These provisions will 
enhance investor protection, modernize our capital markets and 
begin to restore investor confidence in the SEC. Additionally, 
the legislation contains provisions sponsored by 
Representatives Kevin McCarthy, Chris Lee, and Lynn Jenkins 
that have already passed the House this year. These provisions 
would close regulatory loopholes that prevent the SEC from 
filing enforcement actions against formerly associated persons, 
make needed technical corrections to securities laws, and 
promote transparency in financial reporting. The bill also 
includes the provisions of H.R. 2873, introduced by 
Representative John Campbell and passed by the House on 
December 2, 2009, to provide the SEC with increased enforcement 
powers.
    However, Committee Republicans have serious concerns 
regarding other provisions of H.R. 3817 that will have 
potentially harmful consequences for U.S. capital markets. 
Republicans also object to the Committee's hurried 
consideration of this far-reaching legislation.
    The Committee held only a single legislative hearing on 
H.R. 3817, which addressed only three of the Investor 
Protection Act's more than sixty sections in any detail. 
Additionally, the Committee did not receive any testimony 
regarding Title VI of the bill, which would amend the Sarbanes-
Oxley Act (SOX) for the first time since the law's enactment 
seven years ago. The former Chairman of the Public Company 
Accounting Oversight Board (PCAOB), Mark Olson, wrote to the 
Majority requesting the changes contained in Title VI, however, 
the Committee never elicited testimony from the PCAOB on the 
need for these SOX amendments. While Titles V and VI raise 
important policy considerations that are worthy of attention, 
the Committee has failed to conduct any oversight of the 
Securities Investor Protection Corporation (outside of the 
Madoff Ponzi scheme), the PCAOB--whose existing authorities are 
expanded in Title VI--or the Sarbanes-Oxley Act since 2006, 
when Republicans were in the majority. Furthermore, the U.S. 
Supreme Court has scheduled oral arguments in the case of Free 
Enterprise Fund v. Public Company Accounting Oversight Board 
for December 7, 2009. This important case is expected to 
determine the constitutionality of both the PCAOB and Sarbanes-
Oxley. It seems premature to significantly amend the statute 
until the Supreme Court decides its constitutionality. Again, 
no testimony was ever received by the Committee regarding this 
important Constitutional concern.
    The useful reforms contained in H.R. 3817 are overshadowed 
by the bill's failure to fundamentally reform the SEC, whose 
shortcomings were exposed by the Madoff scandal and by the 
spectacular collapse of Bear Stearns and Lehman Brothers, both 
of which operated under the SEC's regulatory purview. The bill 
dramatically increases the SEC's taxing authority but does 
little to reform the agency's outdated, ineffective, and siloed 
structure. The recent SEC Inspector General's report detailing 
the massive failure by the SEC staff to detect the Madoff Ponzi 
scheme is the best evidence for SEC reform. The Office of 
Compliance, Inspections and Examinations (OCIE) needs to be 
eliminated and its functions returned to the divisions from 
which it was created. Instead of eliminating OCIE, which 
completely missed the Madoff Ponzi scheme, the SEC created a 
new division that will further entrench the SEC's stovepipe 
operational structure. H.R. 3817 does nothing to address this 
continuing problem with the agency.
    Unfortunately, H.R. 3817 would restrict the ability of 
investors to effectively resolve their disputes by granting the 
SEC the authority to ban pre-dispute arbitration agreements. 
Arbitration, an alternative to expensive and protracted 
litigation, uses neutral third parties to settle differences 
between parties to a controversy. Arbitration produces much 
faster results for parties seeking damages, as awards must be 
paid within 30 days of the date of the arbitration ruling, 
unless a party seeks judicial review. The SEC oversees the 
arbitration programs administered by securities industry self-
regulatory organizations (SROs). H.R. 3817 would give the SEC 
the power to prohibit or restrict the use of contractual 
agreements that contain mandatory arbitration clauses to settle 
any disputes. If enacted, this mandate will result in extended 
and costly litigation and additional costs for all investors. 
Its primary beneficiaries will be members of the trial bar, not 
individual investors. An amendment offered by Representative 
Lee of New York that would preserve existing contracts with 
arbitration clauses received unanimous Republican support, but 
was rejected by the Majority by a vote of 40-29.
    In addition, the Majority's legislation fails to recognize 
the complexities of the broker-dealer business model and seeks 
to impose a ``one-size-fits-all'' standard on the brokerage 
industry in an effort to harmonize the duty of care between 
broker-dealers and investment advisers. Once again, the 
Committee received no evidence that the existing broker-dealer 
suitability standard was a cause of the financial crisis, 
however, the Majority decided to eliminate a standard that has 
served investors well for 75 years. Requiring broker-dealers 
and investment advisers to be held to the same fiduciary 
standard could place providers of commission-based investment 
products at a competitive disadvantage versus fee-based 
products and subject them to increased litigation. The result 
could be fewer investment options for investors who cannot 
afford to pay upfront fees for financial advice.
    The Committee also adopted an ill-considered amendment 
offered by Representative Waters which will inject the SEC into 
regulating and overseeing corporate board elections for all 
public companies. There have been significant changes in 
corporate governance since the adoption of the Sarbanes-Oxley 
Act, including the adoption of majority voting in uncontested 
director elections, which has resulted in greater board 
accountability. The Waters amendment takes the SEC away from 
its core mission of protecting investors. States are already 
enhancing shareholder rights. For example, Delaware has enacted 
legislation clarifying the authority of companies and their 
shareholders to adopt proxy access and proxy reimbursement 
bylaws and North Dakota has created a state proxy access right. 
These state actions allow shareholders to choose whether proxy 
access is appropriate and, if it is, to delineate specific 
details such as ownership thresholds and holding periods. The 
amendment would undermine 150 years of corporate governance 
that has served our capital markets well.
    The Committee on Financial Services ordered H.R. 3817 
reported on a party-line vote. Republicans believe that the 
House should reject this ill-considered legislation and send it 
back to the Committee on Financial Services for a more thorough 
review of its potentially harmful impact on investors of the 
U.S. capital markets.

                                   Spencer Bachus.
                                   Kenny Marchant.
                                   Scott Garrett.
                                   Randy Neugebauer.
                                   Adam H. Putnam.
                                   Erik Paulsen.
                                   Christopher John Lee.