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  115th Congress    }                                 {  Rept. 115-153
                         HOUSE OF REPRESENTATIVES    
  1st  Session      }                                 { Part 1
_______________________________________________________________________

                                     


                      FINANCIAL CHOICE ACT OF 2010

                               ----------                              

                              R E P O R T

                                 of the

                    COMMITTEE ON FINANCIAL SERVICES

                             together with

                             MINORITY VIEWS

                         [to accompany H.R. 10]

                              BOOK 2 OF 2
                              

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




  May 25, 2017.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed
              
              
              
              
              



                      FINANCIAL CHOICE ACT OF 2010

                             (Book 2 of 2)
                             
                             
                             
                             
                             
                             
 115th Congress    }                                       {  Rept. 115-153
                           HOUSE OF REPRESENTATIVES          
 1st Session       }                                       {   Part 1
_______________________________________________________________________

                                     

 
                      FINANCIAL CHOICE ACT OF 2010

                               __________

                              R E P O R T

                                 of the

                    COMMITTEE ON FINANCIAL SERVICES

                             together with

                             MINORITY VIEWS

                         [to accompany H.R. 10]

                              BOOK 2 OF 2

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


  May 25, 2017.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed
              
              
              
              
 
                                    _________ 
                          
                        U.S. GOVERNMENT PUBLISHING OFFICE
                        
26-562                          WASHINGTON : 2017                    
              
              
              
              
              
              
SEC. 10D. RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION POLICY.

  (a) Listing Standards.--The Commission shall, by rule, direct 
the national securities exchanges and national securities 
associations to prohibit the listing of any security of an 
issuer that does not comply with the requirements of this 
section.
  (b) Recovery of Funds.--The rules of the Commission under 
subsection (a) shall require each issuer to develop and 
implement a policy providing--
          (1) for disclosure of the policy of the issuer on 
        incentive-based compensation that is based on financial 
        information required to be reported under the 
        securities laws; and
          (2) that, in the event that the issuer is required to 
        prepare an accounting restatement due to the material 
        noncompliance of the issuer with any financial 
        reporting requirement under the securities laws, the 
        issuer will recover from any current or former 
        executive officer of the issuer who received incentive-
        based compensation (including stock options awarded as 
        compensation) during the 3-year period preceding the 
        date on which the issuer is required to prepare an 
        accounting restatement, based on the erroneous data, in 
        excess of what would have been paid to the executive 
        officer under the accounting restatement, where such 
        executive officer had control or authority over the 
        financial reporting that resulted in the accounting 
        restatement.

           *       *       *       *       *       *       *


                registration requirements for securities

  Sec. 12. (a) It shall be unlawful for any member, broker, or 
dealer to effect any transaction in any security (other than an 
exempted security) on a national securities exchange unless a 
registration is effective as to such security for such exchange 
in accordance with the provisions of this title and the rules 
and regulations thereunder. The provisions of this subsection 
shall not apply in respect of a security futures product traded 
on a national securities exchange.
  (b) A security may be registered on a national securities 
exchange by the issuer filing an application with the exchange 
(and filing with the Commission such duplicate originals 
thereof as the Commission may require), which application shall 
contain--
          (1) Such information, in such detail, as to the 
        issuer and any person directly or indirectly 
        controlling or controlled by, or under direct or 
        indirect common control with, the issuer, and any 
        guarantor of the security as to principal or interest 
        or both, as the Commission may by rules and regulations 
        require, as necessary or appropriate in the public 
        interest or for the protection of investors, in respect 
        of the following:
                  (A) the organization, financial structures, 
                and nature of the business;
                  (B) the terms, position, rights, and 
                privileges of the different classes of 
                securities outstanding;
                  (C) the terms on which their securities are 
                to be, and during the preceding three years 
                have been, offered to the public or otherwise;
                  (D) the directors, officers, and 
                underwriters, and each security holder of 
                record holding more than 10 per centum of any 
                class of any equity security of the issuer 
                (other than an exempted security), their 
                remuneration and their interests in the 
                securities of, and their material contracts 
                with, the issuer and any person directly or 
                indirectly controlling or controlled by, or 
                under direct or indirect common control with, 
                the issuer;
                  (E) remuneration to others than directors and 
                officers exceeding $20,000 per annum;
                  (F) bonus and profit-sharing arrangements;
                  (G) management and service contracts;
                  (H) options existing or to be created in 
                respect of their securities;
                  (I) material contracts, not made in the 
                ordinary course of business, which are to be 
                executed in whole or in part at or after the 
                filing of the application or which were made 
                not more than two years before such filing, and 
                every material patent or contract for a 
                material patent right shall be deemed a 
                material contract;
                  (J) balance sheets for not more than the 
                three preceding fiscal years, certified if 
                required by the rules and regulations of the 
                Commission by a registered public accounting 
                firm;
                  (K) profit and loss statements for not more 
                than the three preceding fiscal years, 
                certified if required by the rules and 
                regulations of the Commission by a registered 
                public accounting firm; and
                  (L) any further financial statements which 
                the Commission may deem necessary or 
                appropriate for the protection of investors.
          (2) Such copies of articles of incorporation, bylaws, 
        trust indentures, or corresponding documents by 
        whatever name known, underwriting arrangements, and 
        other similar documents of, and voting trust agreements 
        with respect to, the issuer and any person directly or 
        indirectly controlling or controlled by, or under 
        direct or indirect common control with, the issuer as 
        the Commission may require as necessary or appropriate 
        for the proper protection of investors and to insure 
        fair dealing in the security.
          (3) Such copies of material contracts, referred to in 
        paragraph (1)(I) above, as the Commission may require 
        as necessary or appropriate for the proper protection 
        of investors and to insure fair dealing in the 
        security.
  (c) If in the judgment of the Commission any information 
required under subsection (b) of this section is inapplicable 
to any specified class or classes of issuers, the Commission 
shall require in lieu thereof the submission of such other 
information of comparable character as it may deem applicable 
to such class of issuers.
  (d) If the exchange authorities certify to the Commission 
that the security has been approved by the exchange for listing 
and registration, the registration shall become effective 
thirty days after the receipt of such certification by the 
Commission or within such shorter period of time as the 
Commission may determine. A security registered with a national 
securities exchange may be withdrawn or stricken from listing 
and registration in accordance with the rules of the exchange 
and, upon such terms as the Commission may deem necessary to 
impose for the protection of investors, upon application by the 
issuer or the exchange to the Commission; whereupon the issuer 
shall be relieved from further compliance with the provisions 
of this section and section 13 of this title and any rules or 
regulations under such sections as to the securities so 
withdrawn or stricken. An unissued security may be registered 
only 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.
  (e) Notwithstanding the foregoing provisions of this section, 
the Commission may by such rules and regulations as it deems 
necessary or appropriate in the public interest or for the 
protection of investors permit securities listed on any 
exchange at the time the registration of such exchange as a 
national securities exchange becomes effective, to be 
registered for a period ending not later than July 1, 1935, 
without complying with the provisions of this section.
  (f)(1)(A) Notwithstanding the preceding subsections of this 
section, any national securities exchange, in accordance with 
the requirements of this subsection and the rules hereunder, 
may extend unlisted trading privileges to--
          (i) any security that is listed and registered on a 
        national securities exchange, subject to subparagraph 
        (B); and
          (ii) any security that is otherwise registered 
        pursuant to this section, or that would be required to 
        be so registered except for the exemption from 
        registration provided in subparagraph (B) or (G) of 
        subsection (g)(2), subject to subparagraph (E) of this 
        paragraph.
  (B) A national securities exchange may not extend unlisted 
trading privileges to a security described in subparagraph 
(A)(i) during such interval, if any, after the commencement of 
an initial public offering of such security, as is or may be 
required pursuant to subparagraph (C).
  (C) Not later than 180 days after the date of enactment of 
the Unlisted Trading Privileges Act of 1994, the Commission 
shall prescribe, by rule or regulation, the duration of the 
interval referred to in subparagraph (B), if any, as the 
Commission determines to be necessary or appropriate for the 
maintenance of fair and orderly markets, the protection of 
investors and the public interest, or otherwise in furtherance 
of the purposes of this title. Until the earlier of the 
effective date of such rule or regulation or 240 days after 
such date of enactment, such interval shall begin at the 
opening of trading on the day on which such security commences 
trading on the national securities exchange with which such 
security is registered and end at the conclusion of the next 
day of trading.
  (D) The Commission may prescribe, by rule or regulation such 
additional procedures or requirements for extending unlisted 
trading privileges to any security as the Commission deems 
necessary or appropriate for the maintenance of fair and 
orderly markets, the protection of investors and the public 
interest, or otherwise in furtherance of the purposes of this 
title.
  (E) No extension of unlisted trading privileges to securities 
described in subparagraph (A)(ii) may occur except pursuant to 
a rule, regulation, or order of the Commission approving such 
extension or extensions. In promulgating such rule or 
regulation or in issuing such order, the Commission--
          (i) shall find that such extension or extensions of 
        unlisted trading privileges is consistent with the 
        maintenance of fair and orderly markets, the protection 
        of investors and the public interest, and otherwise in 
        furtherance of the purposes of this title;
          (ii) shall take account of the public trading 
        activity in such securities, the character of such 
        trading, the impact of such extension on the existing 
        markets for such securities, and the desirability of 
        removing impediments to and the progress that has been 
        made toward the development of a national market 
        system; and
          (iii) shall not permit a national securities exchange 
        to extend unlisted trading privileges to such 
        securities if any rule of such national securities 
        exchange would unreasonably impair the ability of a 
        dealer to solicit or effect transactions in such 
        securities for its own account, or would unreasonably 
        restrict competition among dealers in such securities 
        or between such dealers acting in the capacity of 
        market makers who are specialists and such dealers who 
        are not specialists.
  (F) An exchange may continue to extend unlisted trading 
privileges in accordance with this paragraph only if the 
exchange and the subject security continue to satisfy the 
requirements for eligibility under this paragraph, including 
any rules and regulations issued by the Commission pursuant to 
this paragraph, except that unlisted trading privileges may 
continue with regard to securities which had been admitted on 
such exchange prior to July 1, 1964, notwithstanding the 
failure to satisfy such requirements. If unlisted trading 
privileges in a security are discontinued pursuant to this 
subparagraph, the exchange shall cease trading in that 
security, unless the exchange and the subject security 
thereafter satisfy the requirements of this paragraph and the 
rules issued hereunder.
  (G) For purposes of this paragraph--
          (i) a security is the subject of an initial public 
        offering if--
                  (I) the offering of the subject security is 
                registered under the Securities Act of 1933; 
                and
                  (II) the issuer of the security, immediately 
                prior to filing the registration statement with 
                respect to the offering, was not subject to the 
                reporting requirements of section 13 or 15(d) 
                of this title; and
          (ii) an initial public offering of such security 
        commences at the opening of trading on the day on which 
        such security commences trading on the national 
        securities exchange with which such security is 
        registered.
  (2)(A) At any time within 60 days of commencement of trading 
on an exchange of a security pursuant to unlisted trading 
privileges, the Commission may summarily suspend such unlisted 
trading privileges on the exchange. Such suspension shall not 
be reviewable under section 25 of this title and shall not be 
deemed to be a final agency action for purposes of section 704 
of title 5, United States Code. Upon such suspension--
          (i) the exchange shall cease trading in the security 
        by the close of business on the date of such 
        suspension, or at such time as the Commission may 
        prescribe by rule or order for the maintenance of fair 
        and orderly markets, the protection of investors and 
        the public interest, or otherwise in furtherance of the 
        purposes of this title; and
          (ii) if the exchange seeks to extend unlisted trading 
        privileges to the security, the exchange shall file an 
        application to reinstate its ability to do so with the 
        Commission pursuant to such procedures as the 
        Commission may prescribe by rule or order for the 
        maintenance of fair and orderly markets, the protection 
        of investors and the public interest, or otherwise in 
        furtherance of the purposes of this title.
  (B) A suspension under subparagraph (A) shall remain in 
effect until the Commission, by order, grants approval of an 
application to reinstate, as described in subparagraph (A)(ii).
  (C) A suspension under subparagraph (A) shall not affect the 
validity or force of an extension of unlisted trading 
privileges in effect prior to such suspension.
  (D) The Commission shall not approve an application by a 
national securities exchange to reinstate its ability to extend 
unlisted trading privileges to a security unless the Commission 
finds, after notice and opportunity for hearing, that the 
extension of unlisted trading privileges pursuant to such 
application is consistent with the maintenance of fair and 
orderly markets, the protection of investors and the public 
interest, and otherwise in furtherance of the purposes of this 
title. If the application is made to reinstate unlisted trading 
privileges to a security described in paragraph (1)(A)(ii), the 
Commission--
          (i) shall take account of the public trading activity 
        in such security, the character of such trading, the 
        impact of such extension on the existing markets for 
        such a security, and the desirability of removing 
        impediments to and the progress that has been made 
        toward the development of a national market system; and
          (ii) shall not grant any such application if any rule 
        of the national securities exchange making application 
        under this subsection would unreasonably impair the 
        ability of a dealer to solicit or effect transactions 
        in such security for its own account, or would 
        unreasonably restrict competition among dealers in such 
        security or between such dealers acting in the capacity 
        of marketmakers who are specialists and such dealers 
        who are not specialists.
  (3) Notwithstanding paragraph (2), the Commission shall by 
rules and regulations suspend unlisted trading privileges in 
whole or in part for any or all classes of securities for a 
period not exceeding twelve months, if it deems such suspension 
necessary or appropriate in the public interest or for the 
protection of investors or to prevent evasion of the purposes 
of this title.
  (4) On the application of the issuer of any security for 
which unlisted trading privileges on any exchange have been 
continued or extended pursuant to this subsection, or of any 
broker or dealer who makes or creates a market for such 
security, or of any other person having a bona fide interest in 
the question of termination or suspension of such unlisted 
trading privileges, or on its own motion, the Commission shall 
by order terminate, or suspend for a period not exceeding 
twelve months, such unlisted trading privileges for such 
security if the Commission finds, after appropriate notice and 
opportunity for hearing, that such termination or suspension is 
necessary or appropriate in the public interest or for the 
protection of investors.
  (5) In any proceeding under this subsection in which 
appropriate notice and opportunity for hearing are required, 
notice of not less than ten days to the applicant in such 
proceeding, to the issuer of the security involved, to the 
exchange which is seeking to continue or extend or has 
continued or extended unlisted trading privileges for such 
security, and to the exchange, if any, on which such security 
is listed and registered, shall be deemed adequate notice, and 
any broker or dealer who makes or creates a market for such 
security, and any other person having a bona fide interest in 
such proceeding, shall upon application be entitled to be 
heard.
  (6) Any security for which unlisted trading privileges are 
continued or extended pursuant to this subsection shall be 
deemed to be registered on a national securities exchange 
within the meaning of this title. The powers and duties of the 
Commission under this title shall be applicable to the rules of 
an exchange in respect to any such security. The Commission 
may, by such rules and regulations as it deems necessary or 
appropriate in the public interest or for the protection of 
investors, either unconditionally or upon specified terms and 
conditions, or for stated periods, exempt such securities from 
the operation of any provision of section 13, 14, or 16 of this 
title.
  (g)(1) Every issuer which is engaged in interstate commerce, 
or in a business affecting interstate commerce, or whose 
securities are traded by use of the mails or any means or 
instrumentality of interstate commerce [shall--]
          [(A) within 120 days after the last day of its first 
        fiscal year ended on which the issuer has total assets 
        exceeding $10,000,000 and a class of equity security 
        (other than an exempted security) held of record by 
        either--
          [(i) 2,000 persons, or
          [(ii) 500 persons who are not accredited investors 
        (as such term is defined by the Commission), and
          [(B) in the case of an issuer that is a bank, a 
        savings and loan holding company (as defined in section 
        10 of the Home Owners' Loan Act), or a bank holding 
        company, as such term is defined in section 2 of the 
        Bank Holding Company Act of 1956 (12 U.S.C. 1841), not 
        later than 120 days after the last day of its first 
        fiscal year ended after the effective date of this 
        subsection, on which the issuer has total assets 
        exceeding $10,000,000 and a class of equity security 
        (other than an exempted security) held of record by 
        2,000 or more persons,
 register such security] shall, not later than 120 days after 
the last day of its first fiscal year ended after the effective 
date of this subsection on which the issuer has total assets 
exceeding $10,000,000 (or such greater amount of assets as the 
Commission may establish by rule) and a class of equity 
security (other than an exempted security) held of record by 
2,000 or more persons (or such greater number of persons as the 
Commission may establish by rule), register such security  by 
filing with the Commission a registration statement (and such 
copies thereof as the Commission may require) with respect to 
such security containing such information and documents as the 
Commission may specify comparable to that which is required in 
an application to register a security pursuant to subsection 
(b) of this section. Each such registration statement shall 
become effective sixty days after filing with the Commission or 
within such shorter period as the Commission may direct. Until 
such registration statement becomes effective it shall not be 
deemed filed for the purposes of section 18 of this title. Any 
issuer may register any class of equity security not required 
to be registered by filing a registration statement pursuant to 
the provisions of this paragraph. The Commission is authorized 
to extend the date upon which any issuer or class of issuers is 
required to register a security pursuant to the provisions of 
this paragraph. The dollar figure in this paragraph shall be 
indexed for inflation every 5 years by the Commission to 
reflect the change in the Consumer Price Index for All Urban 
Consumers published by the Bureau of Labor Statistics, rounded 
to the nearest $100,000.
  (2) The provisions of this subsection shall not apply in 
respect of--
          (A) any security listed and registered on a national 
        securities exchange.
          (B) any security issued by an investment company 
        registered pursuant to section 8 of the Investment 
        Company Act of 1940.
          (C) any security, other than permanent stock, 
        guaranty stock, permanent reserve stock, or any similar 
        certificate evidencing nonwithdrawable capital, issued 
        by a savings and loan association, building and loan 
        association, cooperative bank, homestead association, 
        or similar institution, which is supervised and 
        examined by State or Federal authority having 
        supervision over any such institution.
          (D) any security of an issuer 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 private 
        shareholder or 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.
          (E) any security of an issuer which is a 
        ``cooperative association'' as defined in the 
        Agricultural Marketing Act, approved June 15, 1929, as 
        amended, or a federation of such cooperative 
        associations, if such federation possesses no greater 
        powers or purposes than cooperative associations so 
        defined.
          (F) any security issued by a mutual or cooperative 
        organization which supplies a commodity or service 
        primarily for the benefit of its members and operates 
        not for pecuniary profit, but only if the security is 
        part of a class issuable only to persons who purchase 
        commodities or services from the issuer, the security 
        is transferable only to a successor in interest or 
        occupancy of premises serviced or to be served by the 
        issuer, and no dividends are payable to the holder of 
        the security.
          (G) any security issued by an insurance company if 
        all of the following conditions are met:
                  (i) Such insurance company is required to and 
                does file an annual statement with the 
                Commissioner of Insurance (or other officer or 
                agency performing a similar function) of its 
                domiciliary State, and such annual statement 
                conforms to that prescribed by the National 
                Association of Insurance Commissioners or in 
                the determination of such State commissioner, 
                officer or agency substantially conforms to 
                that so prescribed.
                  (ii) Such insurance company is subject to 
                regulation by its domiciliary State of proxies, 
                consents, or authorizations in respect of 
                securities issued by such company and such 
                regulation conforms to that prescribed by the 
                National Association of Insurance 
                Commissioners.
                  (iii) After July 1, 1966, the purchase and 
                sales of securities issued by such insurance 
                company by beneficial owners, directors, or 
                officers of such company are subject to 
                regulation (including reporting) by its 
                domiciliary State substantially in the manner 
                provided in section 16 of this title.
          (H) any interest or participation in any collective 
        trust funds maintained by a bank or in a separate 
        account maintained by an insurance company which 
        interest or participation is issued in connection with 
        (i) a stock-bonus, pension, or profit-sharing plan 
        which meets the requirements for qualification under 
        section 401 of the Internal Revenue Code of 1954, (ii) 
        an annuity plan which meets the requirements for 
        deduction of the employer's contribution under section 
        404(a)(2) of such Code, or (iii) a church plan, 
        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.
  (3) The Commission may by rules or regulations or, on its own 
motion, after notice and opportunity for hearing, by order, 
exempt from this subsection any security of a foreign issuer, 
including any certificate of deposit for such a security, if 
the Commission finds that such exemption is in the public 
interest and is consistent with the protection of investors.
  (4) Registration of any class of security pursuant to this 
subsection shall be terminated ninety days, or such shorter 
period as the Commission may determine, after the issuer files 
a certification with the Commission that the number of holders 
of record of such class of security is reduced to less than 
[300 persons, or, in the case of a bank, a savings and loan 
holding company (as defined in section 10 of the Home Owners' 
Loan Act), or a bank holding company, as such term is defined 
in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 
1841), 1,200 persons persons] 1,200 persons. The Commission 
shall after notice and opportunity for hearing deny termination 
of registration if it finds that the certification is untrue. 
Termination of registration shall be deferred pending final 
determination on the question of denial.
  [(5)] [For the purposes]
  (5) Definitions._
          (A) In general._For the purposes of this subsection 
        the term ``class'' shall include all securities of an 
        issuer which are of substantially similar character and 
        the holders of which enjoy substantially similar rights 
        and privileges. The Commission may for the purpose of 
        this subsection define by rules and regulations the 
        terms ``total assets'' and ``held of record'' as it 
        deems necessary or appropriate in the public interest 
        or for the protection of investors in order to prevent 
        circumvention of the provisions of this subsection. For 
        purposes of this subsection, a security futures product 
        shall not be considered a class of equity security of 
        the issuer of the securities underlying the security 
        futures product. For purposes of determining whether an 
        issuer is required to register a security with the 
        Commission pursuant to paragraph (1), the definition of 
        ``held of record'' shall not include securities held by 
        persons who received the securities pursuant to an 
        employee compensation plan in transactions exempted 
        from the registration requirements of section 5 of the 
        Securities Act of 1933.
          (B) Exclusion for persons holding certain 
        securities.--For purposes of this subsection, 
        securities held by persons who purchase such securities 
        in transactions described under section 4(a)(6) of the 
        Securities Act of 1933 shall not be deemed to be ``held 
        of record''.
          (6) Exclusion for persons holding certain 
        securities.--The Commission shall, by rule, exempt, 
        conditionally or unconditionally, securities acquired 
        pursuant to an offering made under section 4(6) of the 
        Securities Act of 1933 from the provisions of this 
        subsection.
  (h) The Commission may by rules and regulations, or upon 
application of an interested person, by order, after notice and 
opportunity for hearing, exempt in whole or in part any issuer 
or class of issuers from the provisions of subsection (g) of 
this section or from section 13, 14, or 15(d) or may exempt 
from section 16 any officer, director, or beneficial owner of 
securities of any issuer, any security of which is required to 
be registered pursuant to subsection (g) hereof, upon such 
terms and conditions and for such period as it deems necessary 
or appropriate, if the Commission finds, by reason of the 
number of public investors, amount of trading interest in the 
securities, the nature and extent of the activities of the 
issuer, income or assets of the issuer, or otherwise, that such 
action is not inconsistent with the public interest or the 
protection of investors. The Commission may, for the purposes 
of any of the above-mentioned sections or subsections of this 
title, classify issuers and prescribe requirements appropriate 
for each such class.
  (i) In respect of any securities issued by banks and savings 
associations the deposits of which are insured in accordance 
with the Federal Deposit Insurance Act, the powers, functions, 
and duties vested in the Commission to administer and enforce 
sections 10A(m), 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of 
this Act, and sections 302, 303, 304, 306, 401(b), 404, 406, 
and 407 of the Sarbanes-Oxley Act of 2002, (1) with respect to 
national banks and Federal savings associations, the accounts 
of which are insured by the Federal Deposit Insurance 
Corporation are vested in the Comptroller of the Currency, (2) 
with respect to all other member banks of the Federal Reserve 
System are vested in the Board of Governors of the Federal 
Reserve System, and (3) with respect to all other insured banks 
and State savings associations, the accounts of which are 
insured by the Federal Deposit Insurance Corporation, are 
vested in the Federal Deposit Insurance Corporation. The 
Comptroller of the Currency, the Board of Governors of the 
Federal Reserve System, and the Federal Deposit Insurance 
Corporation shall have the power to make such rules and 
regulations as may be necessary for the execution of the 
functions vested in them as provided in this subsection. In 
carrying out their responsibilities under this subsection, the 
agencies named in the first sentence of this subsection shall 
issue substantially similar regulations to regulations and 
rules issued by the Commission under sections 10A(m), 12, 13, 
14(a), 14(c), 14(d), 14(f) and 16 of this Act, and sections 
302, 303, 304, 306, 401(b), 404, 406, and 407 of the Sarbanes-
Oxley Act of 2002, unless they find that implementation of 
substantially similar regulations with respect to insured banks 
and insured institutions are not necessary or appropriate in 
the public interest or for protection of investors, and publish 
such findings, and the detailed reasons therefor, in the 
Federal Register. Such regulations of the above-named agencies, 
or the reasons for failure to publish such substantially 
similar regulations to those of the Commission, shall be 
published in the Federal Register within 120 days of the date 
of enactment of this subsection, and, thereafter, within 60 
days of any changes made by the Commission in its relevant 
regulations and rules.
  (j) The Commission is authorized, by order, as it deems 
necessary or appropriate for the protection of investors to 
deny, to suspend the effective date of, to suspend for a period 
not exceeding twelve months, or to revoke the registration of a 
security, if the Commission finds, on the record after notice 
and opportunity for hearing, that the issuer of such security 
has failed to comply with any provision of this title or the 
rules and regulations thereunder. No member of a national 
securities exchange, 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 the purchase or sale 
of, any security the registration of which has been and is 
suspended or revoked pursuant to the preceding sentence.
  (k) Trading Suspensions; Emergency Authority.--
          (1) Trading suspensions.--If in its opinion the 
        public interest and the protection of investors so 
        require, the Commission is authorized by order--
                  (A) summarily to suspend trading in any 
                security (other than an exempted security) for 
                a period not exceeding 10 business days, and
                  (B) summarily to suspend all trading on any 
                national securities exchange or otherwise, in 
                securities other than exempted securities, for 
                a period not exceeding 90 calendar days.
        The action described in subparagraph (B) shall not take 
        effect unless the Commission notifies the President of 
        its decision and the President notifies the Commission 
        that the President does not disapprove of such 
        decision. If the actions described in subparagraph (A) 
        or (B) involve a security futures product, the 
        Commission shall consult with and consider the views of 
        the Commodity Futures Trading Commission.
          (2) Emergency orders.--
                  (A) In general.--The Commission, in an 
                emergency, may by order summarily take such 
                action to alter, supplement, suspend, or impose 
                requirements or restrictions with respect to 
                any matter or action subject to regulation by 
                the Commission or a self-regulatory 
                organization under the securities laws, as the 
                Commission determines is necessary in the 
                public interest and for the protection of 
                investors--
                          (i) to maintain or restore fair and 
                        orderly securities markets (other than 
                        markets in exempted securities);
                          (ii) to ensure prompt, accurate, and 
                        safe clearance and settlement of 
                        transactions in securities (other than 
                        exempted securities); or
                          (iii) to reduce, eliminate, or 
                        prevent the substantial disruption by 
                        the emergency of--
                                  (I) securities markets (other 
                                than markets in exempted 
                                securities), investment 
                                companies, or any other 
                                significant portion or segment 
                                of such markets; or
                                  (II) the transmission or 
                                processing of securities 
                                transactions (other than 
                                transactions in exempted 
                                securities).
                  (B) Effective period.--An order of the 
                Commission under this paragraph shall continue 
                in effect for the period specified by the 
                Commission, and may be extended. Except as 
                provided in subparagraph (C), an order of the 
                Commission under this paragraph may not 
                continue in effect for more than 10 business 
                days, including extensions.
                  (C) Extension.--An order of the Commission 
                under this paragraph may be extended to 
                continue in effect for more than 10 business 
                days if, at the time of the extension, the 
                Commission finds that the emergency still 
                exists and determines that the continuation of 
                the order beyond 10 business days is necessary 
                in the public interest and for the protection 
                of investors to attain an objective described 
                in clause (i), (ii), or (iii) of subparagraph 
                (A). In no event shall an order of the 
                Commission under this paragraph continue in 
                effect for more than 30 calendar days.
                  (D) Security futures.--If the actions 
                described in subparagraph (A) involve a 
                security futures product, the Commission shall 
                consult with and consider the views of the 
                Commodity Futures Trading Commission.
                  (E) Exemption.--In exercising its authority 
                under this paragraph, the Commission shall not 
                be required to comply with the provisions of--
                          (i) section 19(c); or
                          (ii) section 553 of title 5, United 
                        States Code.
          (3) Termination of emergency actions by president.--
        The President may direct that action taken by the 
        Commission under paragraph (1)(B) or paragraph (2) of 
        this subsection shall not continue in effect.
          (4) Compliance with orders.--No member of a national 
        securities exchange, 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 the purchase or sale of, any security in 
        contravention of an order of the Commission under this 
        subsection unless such order has been stayed, modified, 
        or set aside as provided in paragraph (5) of this 
        subsection or has ceased to be effective upon direction 
        of the President as provided in paragraph (3).
          (5) Limitations on review of orders.--An order of the 
        Commission pursuant to this subsection shall be subject 
        to review only as provided in section 25(a) of this 
        title. Review shall be based on an examination of all 
        the information before the Commission at the time such 
        order was issued. The reviewing court shall not enter a 
        stay, writ of mandamus, or similar relief unless the 
        court finds, after notice and hearing before a panel of 
        the court, that the Commission's action is arbitrary, 
        capricious, an abuse of discretion, or otherwise not in 
        accordance with law.
          (6) Consultation.--Prior to taking any action 
        described in paragraph (1)(B), the Commission shall 
        consult with and consider the views of the Secretary of 
        the Treasury, the Board of Governors of the Federal 
        Reserve System, and the Commodity Futures Trading 
        Commission, unless such consultation is impracticable 
        in light of the emergency.
          (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.
  (l) It shall be unlawful for an issuer, any class of whose 
securities is registered pursuant to this section or would be 
required to be so registered except for the exemption from 
registration provided by subsection (g)(2)(B) or (g)(2)(G) of 
this section, by the use of any means or instrumentality of 
interstate commerce, or of the mails, to issue, either 
originally or upon transfer, any of such securities in a form 
or with a format which contravenes such rules and regulations 
as the Commission may prescribe as necessary or appropriate for 
the prompt and accurate clearance and settlement of 
transactions in securities. The provisions of this subsection 
shall not apply to variable annuity contracts or variable life 
policies issued by an insurance company or its separate 
accounts.

                      periodical and other reports

  Sec. 13. (a) Every issuer of a security registered pursuant 
to section 12 of this title shall file with the Commission, in 
accordance with such rules and regulations as the Commission 
may prescribe as necessary or appropriate for the proper 
protection of investors and to insure fair dealing in the 
security--
          (1) such information and documents (and such copies 
        thereof) as the Commission shall require to keep 
        reasonably current the information and documents 
        required to be included in or filed with an application 
        or registration statement filed pursuant to section 12, 
        except that the Commission may not require the filing 
        of any material contract wholly executed before July 1, 
        1962.
          (2) such annual reports (and such copies thereof), 
        certified if required by the rules and regulations of 
        the Commission by independent public accountants, and 
        such quarterly reports (and such copies thereof), as 
        the Commission may prescribe.
Every issuer of a security registered on a national securities 
exchange shall also file a duplicate original of such 
information, documents, and reports with the exchange. In any 
registration statement, periodic report, or other reports to be 
filed with the Commission, an emerging growth company need not 
present selected financial data in accordance with section 
229.301 of title 17, Code of Federal Regulations, for any 
period prior to the earliest audited period presented in 
connection with its first registration statement that became 
effective under this Act or the Securities Act of 1933 and, 
with respect to any such statement or reports, an emerging 
growth company may not be required to comply with any new or 
revised financial accounting standard until such date that a 
company that is not an issuer (as defined under section 2(a) of 
the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a))) is required 
to comply with such new or revised accounting standard, if such 
standard applies to companies that are not issuers.
  (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 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).
  (2) Every issuer which has a class of securities registered 
pursuant to section 12 of this title and every issuer which is 
required to file reports pursuant to section 15(d) of this 
title shall--
          (A) make and keep books, records, and accounts, 
        which, in reasonable detail, accurately and fairly 
        reflect the transactions and dispositions of the assets 
        of the issuer;
          (B) devise and maintain a system of internal 
        accounting controls sufficient to provide reasonable 
        assurances that--
                  (i) transactions are executed in accordance 
                with management's general or specific 
                authorization;
                  (ii) transactions are recorded as necessary 
                (I) to permit preparation of financial 
                statements in conformity with generally 
                accepted accounting principles or any other 
                criteria applicable to such statements, and 
                (II) to maintain accountability for assets;
                  (iii) access to assets is permitted only in 
                accordance with management's general or 
                specific authorization; and
                  (iv) the recorded accountability for assets 
                is compared with the existing assets at 
                reasonable intervals and appropriate action is 
                taken with respect to any differences; and
          (C) notwithstanding any other provision of law, pay 
        the allocable share of such issuer of a reasonable 
        annual accounting support fee or fees, determined in 
        accordance with section 109 of the Sarbanes-Oxley Act 
        of 2002.
  (3)(A) With respect to matters concerning the national 
security of the United States, no duty or liability under 
paragraph (2) of this subsection shall be imposed upon any 
person acting in cooperation with the head of any Federal 
department or agency responsible for such matters if such act 
in cooperation with such head of a department or agency was 
done upon the specific, written directive of the head of such 
department or agency pursuant to Presidential authority to 
issue such directives. Each directive issued under this 
paragraph shall set forth the specific facts and circumstances 
with respect to which the provisions of this paragraph are to 
be invoked. Each such directive shall, unless renewed in 
writing, expire one year after the date of issuance.
  (B) Each head of a Federal department or agency of the United 
States who issues a directive pursuant to this paragraph shall 
maintain a complete file of all such directives and shall, on 
October 1 of each year, transmit a summary of matters covered 
by such directives in force at any time during the previous 
year to the Permanent Select Committee on Intelligence of the 
House of Representatives and the Select Committee on 
Intelligence of the Senate.
  (4) No criminal liability shall be imposed for failing to 
comply with the requirements of paragraph (2) of this 
subsection except as provided in paragraph (5) of this 
subsection.
  (5) No person shall knowingly circumvent or knowingly fail to 
implement a system of internal accounting controls or knowingly 
falsify any book, record, or account described in paragraph 
(2).
  (6) Where an issuer which has a class of securities 
registered pursuant to section 12 of this title or an issuer 
which is required to file reports pursuant to section 15(d) of 
this title holds 50 per centum or less of the voting power with 
respect to a domestic or foreign firm, the provisions of 
paragraph (2) require only that the issuer proceed in good 
faith to use its influence, to the extent reasonable under the 
issuer's circumstances, to cause such domestic or foreign firm 
to devise and maintain a system of internal accounting controls 
consistent with paragraph (2). Such circumstances include the 
relative degree of the issuer's ownership of the domestic or 
foreign firm and the laws and practices governing the business 
operations of the country in which such firm is located. An 
issuer which demonstrates good faith efforts to use such 
influence shall be conclusively presumed to have complied with 
the requirements of paragraph (2).
  (7) For the purpose of paragraph (2) of this subsection, the 
terms ``reasonable assurances'' and ``reasonable detail'' mean 
such level of detail and degree of assurance as would satisfy 
prudent officials in the conduct of their own affairs.
  (c) If in the judgment of the Commission any report required 
under subsection (a) is inapplicable to any specified class or 
classes of issuers, the Commission shall require in lieu 
thereof the submission of such reports of comparable character 
as it may deem applicable to such class or classes of issuers.
  (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, or otherwise becomes 
or is deemed to become a beneficial owner of any of the 
foregoing upon the purchase or sale of a security-based swap 
that the Commission may define by rule, and 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, 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) the background, and identity, residence, and 
        citizenship of, and the nature of such beneficial 
        ownership by, such person and all other persons by whom 
        or on whose behalf the purchases have been or are to be 
        effected;
          (B) the source and amount of the funds or other 
        consideration used or to be used in making the 
        purchases, and if any part of the purchase price is 
        represented or is to be represented by funds or other 
        consideration borrowed or otherwise obtained for the 
        purpose of acquiring, holding, or trading such 
        security, a description of the transaction and the 
        names of the parties thereto, except that where a 
        source of funds is a loan made in the ordinary course 
        of business by a bank, as defined in section 3(a)(6) of 
        this title, if the person filing such statement so 
        requests, the name of the bank shall not be made 
        available to the public;
          (C) if the purpose of the purchases or prospective 
        purchases is to acquire control of the business of the 
        issuer of the securities any plans or proposals which 
        such persons may have to liquidate such issuer, to sell 
        its assets to or merge it with any other persons, or to 
        make any other major change in its business or 
        corporate structure;
          (D) the number of shares of such security which are 
        beneficially owned, and the number of shares concerning 
        which there is a right to acquire, directly or 
        indirectly, by (i) such person, and (ii) by each 
        associate of such person, giving the background, 
        identity, residence, and citizenship of each such 
        associate; and
          (E) information as to any contracts, arrangements, or 
        understandings with any person with respect to any 
        securities of the issuer, including but not limited to 
        transfer of any of the securities, joint ventures, loan 
        or option arrangements, puts or calls, guaranties of 
        loans, guaranties against loss or guaranties of 
        profits, division of losses or profits, or the giving 
        or withholding of proxies, naming the persons with whom 
        such contracts, arrangements, or understandings have 
        been entered into, and giving the details thereof.
  (2) If any material change occurs in the facts set forth in 
the statement filed with the Commission, an amendment 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.
  (3) When two or more persons act as a partnership, limited 
partnership, syndicate, or other group for the purpose of 
acquiring, holding, or disposing of securities of an issuer, 
such syndicate or group shall be deemed a ``person'' for the 
purposes of this subsection.
  (4) In determining, for purposes of this subsection, any 
percentage of a class of any security, such class shall be 
deemed to consist of the amount of the outstanding securities 
of such class, exclusive of any securities of such class held 
by or for the account of the issuer or a subsidiary of the 
issuer.
  (5) The Commission, by rule or regulation or by order, may 
permit any person to file in lieu of the statement required by 
paragraph (1) of this subsection or the rules and regulations 
thereunder, a notice stating the name of such person, the 
number of shares of any equity securities subject to paragraph 
(1) which are owned by him, the date of their acquisition and 
such other information as the Commission may specify, if it 
appears to the Commission that such securities were acquired by 
such person in the ordinary course of his business and were not 
acquired for the purpose of and do not have the effect of 
changing or influencing the control of the issuer nor in 
connection with or as a participant in any transaction having 
such purpose or effect.
  (6) The provisions of this subsection shall not apply to--
          (A) any acquisition or offer to acquire securities 
        made or proposed to be made by means of a registration 
        statement under the Securities Act of 1933;
          (B) any acquisition of the beneficial ownership of a 
        security which, together with all other acquisitions by 
        the same person of securities of the same class during 
        the preceding twelve months, does not exceed 2 per 
        centum of that class;
          (C) any acquisition of an equity security by the 
        issuer of such security;
          (D) any acquisition or proposed acquisition of a 
        security which the Commission, by rules or regulations 
        or by order, shall exempt from the provisions of this 
        subsection as not entered into for the purpose of, and 
        not having the effect of, changing or influencing the 
        control of the issuer or otherwise as not comprehended 
        within the purposes of this subsection.
  (e)(1) It shall be unlawful for an issuer which has a class 
of equity securities registered pursuant to section 12 of this 
title, or which is a closed-end investment company registered 
under the Investment Company Act of 1940, to purchase any 
equity security issued by it if such purchase is in 
contravention of such rules and regulations as the Commission, 
in the public interest or for the protection of investors, may 
adopt (A) to define acts and practices which are fraudulent, 
deceptive, or manipulative, and (B) to prescribe means 
reasonably designed to prevent such acts and practices. Such 
rules and regulations may require such issuer to provide 
holders of equity securities of such class with such 
information relating to the reasons for such purchase, the 
source of funds, the number of shares to be purchased, the 
price to be paid for such securities, the method of purchase, 
and such additional information, as the Commission deems 
necessary or appropriate in the public interest or for the 
protection of investors, or which the Commission deems to be 
material to a determination whether such security should be 
sold.
  (2) For the purpose of this subsection, a purchase by or for 
the issuer or any person controlling, controlled by, or under 
common control with the issuer, or a purchase subject to 
control of the issuer or any such person, shall be deemed to be 
a purchase by the issuer. The Commission shall have power to 
make rules and regulations implementing this paragraph in the 
public interest and for the protection of investors, including 
exemptive rules and regulations covering situations in which 
the Commission deems it unnecessary or inappropriate that a 
purchase of the type described in this paragraph shall be 
deemed to be a purchase by the issuer for purposes of some or 
all of the provisions of paragraph (1) of this subsection.
  (3) At the time of filing such statement as the Commission 
may require by rule pursuant to paragraph (1) of this 
subsection, the person making the filing shall pay to the 
Commission a fee at a rate that, subject to paragraph (4), is 
equal to $92 per $1,000,000 of the value of securities proposed 
to be purchased. The fee shall be reduced with respect to 
securities in an amount equal to any fee paid with respect to 
any securities issued in connection with the proposed 
transaction under section 6(b) of the Securities Act of 1933, 
or the fee paid under that section shall be reduced in an 
amount equal to the fee paid to the Commission in connection 
with such transaction under this paragraph.
          (4) Annual adjustment.--For each fiscal year, the 
        Commission shall by order adjust the rate required by 
        paragraph (3) for such fiscal year to a rate that is 
        equal to the rate (expressed in dollars per million) 
        that is applicable under section 6(b) of the Securities 
        Act of 1933 for such fiscal year.
          [(5) Fee collections.--Fees collected pursuant to 
        this subsection for fiscal year 2012 and each fiscal 
        year thereafter shall be deposited and credited as 
        general revenue of the Treasury and shall not be 
        available for obligation.]
          (5) Offsetting collections.--Fees collected pursuant 
        to this subsection for any fiscal year--
                  (A) except as provided in section 31(i)(2), 
                shall be deposited and credited as offsetting 
                collections to the account providing 
                appropriations to the Commission; and
                  (B) except as provided in paragraph (8), 
                shall not be collected for any fiscal year 
                except to the extent provided in advance in 
                appropriations Acts.
          (6) Effective date; publication.--In exercising its 
        authority under this subsection, the Commission shall 
        not be required to comply with the provisions of 
        section 553 of title 5, United States Code. An adjusted 
        rate prescribed under paragraph (4) shall be published 
        and take effect in accordance with section 6(b) of the 
        Securities Act of 1933 (15 U.S.C. 77f(b)).
          (7) Pro rata application.--The rates per $1,000,000 
        required by this subsection shall be applied pro rata 
        to amounts and balances of less than $1,000,000.
          (8) Lapse of appropriation.--If on the first day of a 
        fiscal year a regular appropriation to the Commission 
        has not been enacted, the Commission shall continue to 
        collect fees (as offsetting collections) under this 
        subsection at the rate in effect during the preceding 
        fiscal year, until 5 days after the date such a regular 
        appropriation is enacted.
  (f)(1) Every institutional investment manager which uses the 
mails, or any means or instrumentality of interstate commerce 
in the course of its business as an institutional investment 
manager and which exercises investment discretion with respect 
to accounts holding equity securities of a class described in 
section 13(d)(1) of this title having an aggregate fair market 
value on the last trading day in any of the preceding twelve 
months of at least $100,000,000 or such lesser amount (but in 
no case less than $10,000,000) as the Commission, by rule, may 
determine, shall file reports with the Commission in such form, 
for such periods, and at such times after the end of such 
periods as the Commission, by rule, may prescribe, but in no 
event shall such reports be filed for periods longer than one 
year or shorter than one quarter. Such reports shall include 
for each such equity security held on the last day of the 
reporting period by accounts (in aggregate or by type as the 
Commission, by rule, may prescribe) with respect to which the 
institutional investment manager exercises investment 
discretion (other than securities held in amounts which the 
Commission, by rule, determines to be insignificant for 
purposes of this subsection), the name of the issuer and the 
title, class, CUSIP number, number of shares or principal 
amount, and aggregate fair market value of each such security. 
Such reports may also include for accounts (in aggregate or by 
type) with respect to which the institutional investment 
manager exercises investment discretion such of the following 
information as the Commission, by rule, prescribes--
          (A) the name of the issuer and the title, class, 
        CUSIP number, number of shares or principal amount, and 
        aggregate fair market value or cost or amortized cost 
        of each other security (other than an exempted 
        security) held on the last day of the reporting period 
        by such accounts;
          (B) the aggregate fair market value or cost or 
        amortized cost of exempted securities (in aggregate or 
        by class) held on the last day of the reporting period 
        by such accounts;
          (C) the number of shares of each equity security of a 
        class described in section 13(d)(1) of this title held 
        on the last day of the reporting period by such 
        accounts with respect to which the institutional 
        investment manager possesses sole or shared authority 
        to exercise the voting rights evidenced by such 
        securities;
          (D) the aggregate purchases and aggregate sales 
        during the reporting period of each security (other 
        than an exempted security) effected by or for such 
        accounts; and
          (E) with respect to any transaction or series of 
        transactions having a market value of at least $500,000 
        or such other amount as the Commission, by rule, may 
        determine, effected during the reporting period by or 
        for such accounts in any equity security of a class 
        described in section 13(d)(1) of this title--
                  (i) the name of the issuer and the title, 
                class, and CUSIP number of the security;
                  (ii) the number of shares or principal amount 
                of the security involved in the transaction;
                  (iii) whether the transaction was a purchase 
                or sale;
                  (iv) the per share price or prices at which 
                the transaction was effected;
                  (v) the date or dates of the transaction;
                  (vi) the date or dates of the settlement of 
                the transaction;
                  (vii) the broker or dealer through whom the 
                transaction was effected;
                  (viii) the market or markets in which the 
                transaction was effected; and
                  (ix) such other related information as the 
                Commission, by rule, may prescribe.
          (2) The Commission shall prescribe rules providing 
        for the public disclosure of the name of the issuer and 
        the title, class, CUSIP number, aggregate amount of the 
        number of short sales of each security, and any 
        additional information determined by the Commission 
        following the end of the reporting period. At a 
        minimum, such public disclosure shall occur every 
        month.
  (3) The Commission, by rule or order, may exempt, 
conditionally or unconditionally, any institutional investment 
manager or security or any class of institutional investment 
managers or securities from any or all of the provisions of 
this subsection or the rules thereunder.
  (4) The Commission shall make available to the public for a 
reasonable fee a list of all equity securities of a class 
described in section 13(d)(1) of this title, updated no less 
frequently than reports are required to be filed pursuant to 
paragraph (1) of this subsection. The Commission shall tabulate 
the information contained in any report filed pursuant to this 
subsection in a manner which will, in the view of the 
Commission, maximize the usefulness of the information to other 
Federal and State authorities and the public. Promptly after 
the filing of any such report, the Commission shall make the 
information contained therein conveniently available to the 
public for a reasonable fee in such form as the Commission, by 
rule, may prescribe, except that the Commission, as it 
determines to be necessary or appropriate in the public 
interest or for the protection of investors, may delay or 
prevent public disclosure of any such information in accordance 
with section 552 of title 5, United States Code. 
Notwithstanding the preceding sentence, any such information 
identifying the securities held by the account of a natural 
person or an estate or trust (other than a business trust or 
investment company) shall not be disclosed to the public.
  (5) In exercising its authority under this subsection, the 
Commission shall determine (and so state) that its action is 
necessary or appropriate in the public interest and for the 
protection of investors or to maintain fair and orderly markets 
or, in granting an exemption, that its action is consistent 
with the protection of investors and the purposes of this 
subsection. In exercising such authority the Commission shall 
take such steps as are within its power, including consulting 
with the Comptroller General of the United States, the Director 
of the Office of Management and Budget, the appropriate 
regulatory agencies, Federal and State authorities which, 
directly or indirectly, require reports from institutional 
investment managers of information substantially similar to 
that called for by this subsection, national securities 
exchanges, and registered securities associations, (A) to 
achieve uniform, centralized reporting of information 
concerning the securities holdings of and transactions by or 
for accounts with respect to which institutional investment 
managers exercise investment discretion, and (B) consistently 
with the objective set forth in the preceding subparagraph, to 
avoid unnecessarily duplicative reporting by, and minimize the 
compliance burden on, institutional investment managers. 
Federal authorities which, directly or indirectly, require 
reports from institutional investment managers of information 
substantially similar to that called for by this subsection 
shall cooperate with the Commission in the performance of its 
responsibilities under the preceding sentence. An institutional 
investment manager which is a bank, the deposits of which are 
insured in accordance with the Federal Deposit Insurance Act, 
shall file with the appropriate regulatory agency a copy of 
every report filed with the Commission pursuant to this 
subsection.
  (6)(A) For purposes of this subsection the term 
``institutional investment manager'' includes any person, other 
than a natural person, investing in or buying and selling 
securities for its own account, and any person exercising 
investment discretion with respect to the account of any other 
person.
  (B) The Commission shall adopt such rules as it deems 
necessary or appropriate to prevent duplicative reporting 
pursuant to this subsection by two or more institutional 
investment managers exercising investment discretion with 
respect to the same amount.
  (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 or 
otherwise becomes or is deemed to become a beneficial owner of 
any security of a class described in subsection (d)(1) upon the 
purchase or sale of a security-based swap that the Commission 
may define by ruleshall file with the Commission a statement 
setting forth, in such form and at such time as the Commission 
may, by rule, prescribe--
          (A) such person's identity, residence, and 
        citizenship; and
          (B) the number and description of the shares in which 
        such person has an interest and the nature of such 
        interest.
  (2) If any material change occurs in the facts set forth in 
the statement filed with the Commission, an amendment 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.
  (3) When two or more persons act as a partnership, limited 
partnership, syndicate, or other group for the purpose of 
acquiring, holding, or disposing of securities of an issuer, 
such syndicate or group shall be deemed a ``person'' for the 
purposes of this subsection.
  (4) In determining, for purposes of this subsection, any 
percentage of a class of any security, such class shall be 
deemed to consist of the amount of the outstanding securities 
of such class, exclusive of any securities of such class held 
by or for the account of the issuer or a subsidiary of the 
issuer.
  (5) In exercising its authority under this subsection, the 
Commission shall take such steps as it deems necessary or 
appropriate in the public interest or for the protection of 
investors (A) to achieve centralized reporting of information 
regarding ownership, (B) to avoid unnecessarily duplicative 
reporting by and minimize the compliance burden on persons 
required to report, and (C) to tabulate and promptly make 
available the information contained in any report filed 
pursuant to this subsection in a manner which will, in the view 
of the Commission, maximize the usefulness of the information 
to other Federal and State agencies and the public.
  (6) The Commission may, by rule or order, exempt, in whole or 
in part, any person or class of persons from any or all of the 
reporting requirements of this subsection as it deems necessary 
or appropriate in the public interest or for the protection of 
investors.
  (h) Large Trader Reporting.--
          (1) Identification requirements for large traders.--
        For the purpose of monitoring the impact on the 
        securities markets of securities transactions involving 
        a substantial volume or a large fair market value or 
        exercise value and for the purpose of otherwise 
        assisting the Commission in the enforcement of this 
        title, each large trader shall--
                  (A) provide such information to the 
                Commission as the Commission may by rule or 
                regulation prescribe as necessary or 
                appropriate, identifying such large trader and 
                all accounts in or through which such large 
                trader effects such transactions; and
                  (B) identify, in accordance with such rules 
                or regulations as the Commission may prescribe 
                as necessary or appropriate, to any registered 
                broker or dealer by or through whom such large 
                trader directly or indirectly effects 
                securities transactions, such large trader and 
                all accounts directly or indirectly maintained 
                with such broker or dealer by such large trader 
                in or through which such transactions are 
                effected.
          (2) Recordkeeping and reporting requirements for 
        brokers and dealers.--Every registered broker or dealer 
        shall make and keep for prescribed periods such records 
        as the Commission by rule or regulation prescribes as 
        necessary or appropriate in the public interest, for 
        the protection of investors, or otherwise in 
        furtherance of the purposes of this title, with respect 
        to securities transactions that equal or exceed the 
        reporting activity level effected directly or 
        indirectly by or through such registered broker or 
        dealer of or for any person that such broker or dealer 
        knows is a large trader, or any person that such broker 
        or dealer has reason to know is a large trader on the 
        basis of transactions in securities effected by or 
        through such broker or dealer. Such records shall be 
        available for reporting to the Commission, or any self-
        regulatory organization that the Commission shall 
        designate to receive such reports, on the morning of 
        the day following the day the transactions were 
        effected, and shall be reported to the Commission or a 
        self-regulatory organization designated by the 
        Commission immediately upon request by the Commission 
        or such a self-regulatory organization. Such records 
        and reports shall be in a format and transmitted in a 
        manner prescribed by the Commission (including, but not 
        limited to, machine readable form).
          (3) Aggregation rules.--The Commission may prescribe 
        rules or regulations governing the manner in which 
        transactions and accounts shall be aggregated for the 
        purpose of this subsection, including aggregation on 
        the basis of common ownership or control.
          (4) Examination of broker and dealer records.--All 
        records required to be made and kept by registered 
        brokers and dealers pursuant to this subsection with 
        respect to transactions effected by large traders are 
        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, 
        for the protection of investors, or otherwise in 
        furtherance of the purposes of this title.
          (5) Factors to be considered in commission actions.--
        In exercising its authority under this subsection, the 
        Commission shall take into account--
                  (A) existing reporting systems;
                  (B) the costs associated with maintaining 
                information with respect to transactions 
                effected by large traders and reporting such 
                information to the Commission or self-
                regulatory organizations; and
                  (C) the relationship between the United 
                States and international securities markets.
          (6) Exemptions.--The Commission, by rule, regulation, 
        or order, consistent with the purposes of this title, 
        may exempt any person or class of persons or any 
        transaction or class of transactions, either 
        conditionally or upon specified terms and conditions or 
        for stated periods, from the operation of this 
        subsection, and the rules and regulations thereunder.
          (7) Authority of commission to limit disclosure of 
        information.--Notwithstanding any other provision of 
        law, the Commission shall not be compelled to disclose 
        any information required to be kept or reported under 
        this subsection. 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 requesting 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.
          (8) Definitions.--For purposes of this subsection--
                  (A) the term ``large trader'' means every 
                person who, for his own account or an account 
                for which he exercises investment discretion, 
                effects transactions for the purchase or sale 
                of any publicly traded security or securities 
                by use of any means or instrumentality of 
                interstate commerce or of the mails, or of any 
                facility of a national securities exchange, 
                directly or indirectly by or through a 
                registered broker or dealer in an aggregate 
                amount equal to or in excess of the identifying 
                activity level;
                  (B) the term ``publicly traded security'' 
                means any equity security (including an option 
                on individual equity securities, and an option 
                on a group or index of such securities) listed, 
                or admitted to unlisted trading privileges, on 
                a national securities exchange, or quoted in an 
                automated interdealer quotation system;
                  (C) the term ``identifying activity level'' 
                means transactions in publicly traded 
                securities at or above a level of volume, fair 
                market value, or exercise value as shall be 
                fixed from time to time by the Commission by 
                rule or regulation, specifying the time 
                interval during which such transactions shall 
                be aggregated;
                  (D) the term ``reporting activity level'' 
                means transactions in publicly traded 
                securities at or above a level of volume, fair 
                market value, or exercise value as shall be 
                fixed from time to time by the Commission by 
                rule, regulation, or order, specifying the time 
                interval during which such transactions shall 
                be aggregated; and
                  (E) the term ``person'' has the meaning given 
                in section 3(a)(9) of this title and also 
                includes two or more persons acting as a 
                partnership, limited partnership, syndicate, or 
                other group, but does not include a foreign 
                central bank.
  (i) Accuracy of Financial Reports.--Each financial report 
that contains financial statements, and that is required to be 
prepared in accordance with (or reconciled to) generally 
accepted accounting principles under this title and filed with 
the Commission shall reflect all material correcting 
adjustments that have been identified by a registered public 
accounting firm in accordance with generally accepted 
accounting principles and the rules and regulations of the 
Commission.
  (j) Off-Balance Sheet Transactions.--Not later than 180 days 
after the date of enactment of the Sarbanes-Oxley Act of 2002, 
the Commission shall issue final rules providing that each 
annual and quarterly financial report required to be filed with 
the Commission shall disclose all material off-balance sheet 
transactions, arrangements, obligations (including contingent 
obligations), and other relationships of the issuer with 
unconsolidated entities or other persons, that may have a 
material current or future effect on financial condition, 
changes in financial condition, results of operations, 
liquidity, capital expenditures, capital resources, or 
significant components of revenues or expenses.
  (k) Prohibition on Personal Loans to Executives.--
          (1) In general.--It shall be unlawful for any issuer 
        (as defined in section 2 of the Sarbanes-Oxley Act of 
        2002), directly or indirectly, including through any 
        subsidiary, to extend or maintain credit, to arrange 
        for the extension of credit, or to renew an extension 
        of credit, in the form of a personal loan to or for any 
        director or executive officer (or equivalent thereof) 
        of that issuer. An extension of credit maintained by 
        the issuer on the date of enactment of this subsection 
        shall not be subject to the provisions of this 
        subsection, provided that there is no material 
        modification to any term of any such extension of 
        credit or any renewal of any such extension of credit 
        on or after that date of enactment.
          (2) Limitation.--Paragraph (1) does not preclude any 
        home improvement and manufactured home loans (as that 
        term is defined in section 5 of the Home Owners' Loan 
        Act (12 U.S.C. 1464)), consumer credit (as defined in 
        section 103 of the Truth in Lending Act (15 U.S.C. 
        1602)), or any extension of credit under an open end 
        credit plan (as defined in section 103 of the Truth in 
        Lending Act (15 U.S.C. 1602)), or a charge card (as 
        defined in section 127(c)(4)(e) of the Truth in Lending 
        Act (15 U.S.C. 1637(c)(4)(e)), or any extension of 
        credit by a broker or dealer registered under section 
        15 of this title to an employee of that broker or 
        dealer to buy, trade, or carry securities, that is 
        permitted under rules or regulations of the Board of 
        Governors of the Federal Reserve System pursuant to 
        section 7 of this title (other than an extension of 
        credit that would be used to purchase the stock of that 
        issuer), that is--
                  (A) made or provided in the ordinary course 
                of the consumer credit business of such issuer;
                  (B) of a type that is generally made 
                available by such issuer to the public; and
                  (C) made by such issuer on market terms, or 
                terms that are no more favorable than those 
                offered by the issuer to the general public for 
                such extensions of credit.
          (3) Rule of construction for certain loans.--
        Paragraph (1) does not apply to any loan made or 
        maintained by an insured depository institution (as 
        defined in section 3 of the Federal Deposit Insurance 
        Act (12 U.S.C. 1813)), if the loan is subject to the 
        insider lending restrictions of section 22(h) of the 
        Federal Reserve Act (12 U.S.C. 375b).
  (l) Real Time Issuer Disclosures.--Each issuer reporting 
under section 13(a) or 15(d) shall disclose to the public on a 
rapid and current basis such additional information concerning 
material changes in the financial condition or operations of 
the issuer, in plain English, which may include trend and 
qualitative information and graphic presentations, as the 
Commission determines, by rule, is necessary or useful for the 
protection of investors and in the public interest.
  (m) Public Availability of Security-based Swap Transaction 
Data.--
          (1) In general.--
                  (A) Definition of real-time public 
                reporting.--In this paragraph, the term ``real-
                time public reporting'' means to report data 
                relating to a security-based swap transaction, 
                including price and volume, as soon as 
                technologically practicable after the time at 
                which the security-based swap transaction has 
                been executed.
                  (B) Purpose.--The purpose of this subsection 
                is to authorize the Commission to make 
                security-based swap transaction and pricing 
                data available to the public in such form and 
                at such times as the Commission determines 
                appropriate to enhance price discovery.
                  (C) General rule.--The Commission is 
                authorized to provide by rule for the public 
                availability of security-based swap 
                transaction, volume, and pricing data as 
                follows:
                          (i) With respect to those security-
                        based swaps that are subject to the 
                        mandatory clearing requirement 
                        described in section 3C(a)(1) 
                        (including those security-based swaps 
                        that are excepted from the requirement 
                        pursuant to section 3C(g)), the 
                        Commission shall require real-time 
                        public reporting for such transactions.
                          (ii) With respect to those security-
                        based swaps that are not subject to the 
                        mandatory clearing requirement 
                        described in section 3C(a)(1), but are 
                        cleared at a registered clearing 
                        agency, the Commission shall require 
                        real-time public reporting for such 
                        transactions.
                          (iii) With respect to security-based 
                        swaps that are not cleared at a 
                        registered clearing agency and which 
                        are reported to a security-based swap 
                        data repository or the Commission under 
                        section 3C(a)(6), the Commission shall 
                        require real-time public reporting for 
                        such transactions, in a manner that 
                        does not disclose the business 
                        transactions and market positions of 
                        any person.
                          (iv) With respect to security-based 
                        swaps that are determined to be 
                        required to be cleared under section 
                        3C(b) but are not cleared, the 
                        Commission shall require real-time 
                        public reporting for such transactions.
                  (D) Registered entities and public 
                reporting.--The Commission may require 
                registered entities to publicly disseminate the 
                security-based swap transaction and pricing 
                data required to be reported under this 
                paragraph.
                  (E) Rulemaking required.--With respect to the 
                rule providing for the public availability of 
                transaction and pricing data for security-based 
                swaps described in clauses (i) and (ii) of 
                subparagraph (C), the rule promulgated by the 
                Commission shall contain provisions--
                          (i) to ensure such information does 
                        not identify the participants;
                          (ii) to specify the criteria for 
                        determining what constitutes a large 
                        notional security-based swap 
                        transaction (block trade) for 
                        particular markets and contracts;
                          (iii) to specify the appropriate time 
                        delay for reporting large notional 
                        security-based swap transactions (block 
                        trades) to the public; and
                          (iv) that take into account whether 
                        the public disclosure will materially 
                        reduce market liquidity.
                  (F) Timeliness of reporting.--Parties to a 
                security-based swap (including agents of the 
                parties to a security-based swap) shall be 
                responsible for reporting security-based swap 
                transaction information to the appropriate 
                registered entity in a timely manner as may be 
                prescribed by the Commission.
                  (G) Reporting of swaps to registered 
                security-based swap data repositories.--Each 
                security-based swap (whether cleared or 
                uncleared) shall be reported to a registered 
                security-based swap data repository.
                  (H) Registration of clearing agencies.--A 
                clearing agency may register as a security-
                based swap data repository.
          (2) Semiannual and annual public reporting of 
        aggregate security-based swap data.--
                  (A) In general.--In accordance with 
                subparagraph (B), the Commission shall issue a 
                written report on a semiannual and annual basis 
                to make available to the public information 
                relating to--
                          (i) the trading and clearing in the 
                        major security-based swap categories; 
                        and
                          (ii) the market participants and 
                        developments in new products.
                  (B) Use; consultation.--In preparing a report 
                under subparagraph (A), the Commission shall--
                          (i) use information from security-
                        based swap data repositories and 
                        clearing agencies; and
                          (ii) consult with the Office of the 
                        Comptroller of the Currency, the Bank 
                        for International Settlements, and such 
                        other regulatory bodies as may be 
                        necessary.
                  (C) Authority of commission.--The Commission 
                may, by rule, regulation, or order, delegate 
                the public reporting responsibilities of the 
                Commission under this paragraph in accordance 
                with such terms and conditions as the 
                Commission determines to be appropriate and in 
                the public interest.
  (n) Security-based Swap Data Repositories.--
          (1) Registration requirement.--It shall be unlawful 
        for any person, unless registered with the Commission, 
        directly or indirectly, to make use of the mails or any 
        means or instrumentality of interstate commerce to 
        perform the functions of a security-based swap data 
        repository.
          (2) Inspection and examination.--Each registered 
        security-based swap data repository shall be subject to 
        inspection and examination by any representative of the 
        Commission.
          (3) Compliance with core principles.--
                  (A) In general.--To be registered, and 
                maintain registration, as a security-based swap 
                data repository, the security-based swap data 
                repository shall comply with--
                          (i) the requirements and core 
                        principles described in this 
                        subsection; and
                          (ii) any requirement that the 
                        Commission may impose by rule or 
                        regulation.
                  (B) Reasonable discretion of security-based 
                swap data repository.--Unless otherwise 
                determined by the Commission, by rule or 
                regulation, a security-based swap data 
                repository described in subparagraph (A) shall 
                have reasonable discretion in establishing the 
                manner in which the security-based swap data 
                repository complies with the core principles 
                described in this subsection.
          (4) Standard setting.--
                  (A) Data identification.--
                          (i) In general.--In accordance with 
                        clause (ii), the Commission shall 
                        prescribe standards that specify the 
                        data elements for each security-based 
                        swap that shall be collected and 
                        maintained by each registered security-
                        based swap data repository.
                          (ii) Requirement.--In carrying out 
                        clause (i), the Commission shall 
                        prescribe consistent data element 
                        standards applicable to registered 
                        entities and reporting counterparties.
                  (B) Data collection and maintenance.--The 
                Commission shall prescribe data collection and 
                data maintenance standards for security-based 
                swap data repositories.
                  (C) Comparability.--The standards prescribed 
                by the Commission under this subsection shall 
                be comparable to the data standards imposed by 
                the Commission on clearing agencies in 
                connection with their clearing of security-
                based swaps.
          (5) Duties.--A security-based swap data repository 
        shall--
                  (A) accept data prescribed by the Commission 
                for each security-based swap under subsection 
                (b);
                  (B) confirm with both counterparties to the 
                security-based swap the accuracy of the data 
                that was submitted;
                  (C) maintain the data described in 
                subparagraph (A) in such form, in such manner, 
                and for such period as may be required by the 
                Commission;
                  (D)(i) provide direct electronic access to 
                the Commission (or any designee of the 
                Commission, including another registered 
                entity); and
                  (ii) provide the information described in 
                subparagraph (A) in such form and at such 
                frequency as the Commission may require to 
                comply with the public reporting requirements 
                set forth in subsection (m);
                  (E) at the direction of the Commission, 
                establish automated systems for monitoring, 
                screening, and analyzing security-based swap 
                data;
                  (F) maintain the privacy of any and all 
                security-based swap transaction information 
                that the security-based swap data repository 
                receives from a security-based swap dealer, 
                counterparty, or any other registered entity; 
                and
                  (G) on a confidential basis pursuant to 
                section 24, upon request, and after notifying 
                the Commission of the request, make available 
                security-based swap data obtained by the 
                security-based swap data repository, including 
                individual counterparty trade and position 
                data, to--
                          (i) each appropriate prudential 
                        regulator;
                          (ii) the Financial Stability 
                        Oversight Council;
                          (iii) the Commodity Futures Trading 
                        Commission;
                          (iv) the Department of Justice; and
                          (v) any other person that the 
                        Commission determines to be 
                        appropriate, including--
                                  (I) foreign financial 
                                supervisors (including foreign 
                                futures authorities);
                                  (II) foreign central banks;
                                  (III) foreign ministries; and
                                  (IV) other foreign 
                                authorities.
                  (H) Confidentiality agreement.--Before the 
                security-based swap data repository may share 
                information with any entity described in 
                subparagraph (G), the security-based swap data 
                repository shall receive a written agreement 
                from each entity stating that the entity shall 
                abide by the confidentiality requirements 
                described in section 24 relating to the 
                information on security-based swap transactions 
                that is provided.
          (6) Designation of chief compliance officer.--
                  (A) In general.--Each security-based swap 
                data repository shall designate an individual 
                to serve as a chief compliance officer.
                  (B) Duties.--The chief compliance officer 
                shall--
                          (i) report directly to the board or 
                        to the senior officer of the security-
                        based swap data repository;
                          (ii) review the compliance of the 
                        security-based swap data repository 
                        with respect to the requirements and 
                        core principles described in this 
                        subsection;
                          (iii) in consultation with the board 
                        of the security-based swap data 
                        repository, a body performing a 
                        function similar to the board of the 
                        security-based swap data repository, or 
                        the senior officer of the security-
                        based swap data repository, resolve any 
                        conflicts of interest that may arise;
                          (iv) be responsible for administering 
                        each policy and procedure that is 
                        required to be established pursuant to 
                        this section;
                          (v) ensure compliance with this title 
                        (including regulations) relating to 
                        agreements, contracts, or transactions, 
                        including each rule prescribed by the 
                        Commission under this section;
                          (vi) establish procedures for the 
                        remediation of noncompliance issues 
                        identified by the chief compliance 
                        officer through any--
                                  (I) compliance office review;
                                  (II) look-back;
                                  (III) internal or external 
                                audit finding;
                                  (IV) self-reported error; or
                                  (V) validated complaint; and
                          (vii) establish and follow 
                        appropriate procedures for the 
                        handling, management response, 
                        remediation, retesting, and closing of 
                        noncompliance issues.
                  (C) Annual reports.--
                          (i) In general.--In accordance with 
                        rules prescribed by the Commission, the 
                        chief compliance officer shall annually 
                        prepare and sign a report that contains 
                        a description of--
                                  (I) the compliance of the 
                                security-based swap data 
                                repository of the chief 
                                compliance officer with respect 
                                to this title (including 
                                regulations); and
                                  (II) each policy and 
                                procedure of the security-based 
                                swap data repository of the 
                                chief compliance officer 
                                (including the code of ethics 
                                and conflict of interest 
                                policies of the security-based 
                                swap data repository).
                          (ii) Requirements.--A compliance 
                        report under clause (i) shall--
                                  (I) accompany each 
                                appropriate financial report of 
                                the security-based swap data 
                                repository that is required to 
                                be furnished to the Commission 
                                pursuant to this section; and
                                  (II) include a certification 
                                that, under penalty of law, the 
                                compliance report is accurate 
                                and complete.
          (7) Core principles applicable to security-based swap 
        data repositories.--
                  (A) Antitrust considerations.--Unless 
                necessary or appropriate to achieve the 
                purposes of this title, the swap data 
                repository shall not--
                          (i) adopt any rule or take any action 
                        that results in any unreasonable 
                        restraint of trade; or
                          (ii) impose any material 
                        anticompetitive burden on the trading, 
                        clearing, or reporting of transactions.
                  (B) Governance arrangements.--Each security-
                based swap data repository shall establish 
                governance arrangements that are transparent--
                          (i) to fulfill public interest 
                        requirements; and
                          (ii) to support the objectives of the 
                        Federal Government, owners, and 
                        participants.
                  (C) Conflicts of interest.--Each security-
                based swap data repository shall--
                          (i) establish and enforce rules to 
                        minimize conflicts of interest in the 
                        decision-making process of the 
                        security-based swap data repository; 
                        and
                          (ii) establish a process for 
                        resolving any conflicts of interest 
                        described in clause (i).
                  (D) Additional duties developed by 
                commission.--
                          (i) In general.--The Commission may 
                        develop 1 or more additional duties 
                        applicable to security-based swap data 
                        repositories.
                          (ii) Consideration of evolving 
                        standards.--In developing additional 
                        duties under subparagraph (A), the 
                        Commission may take into consideration 
                        any evolving standard of the United 
                        States or the international community.
                          (iii) Additional duties for 
                        commission designees.--The Commission 
                        shall establish additional duties for 
                        any registrant described in section 
                        13(m)(2)(C) in order to minimize 
                        conflicts of interest, protect data, 
                        ensure compliance, and guarantee the 
                        safety and security of the security-
                        based swap data repository.
          (8) Required registration for security-based swap 
        data repositories.--Any person that is required to be 
        registered as a security-based swap data repository 
        under this subsection shall register with the 
        Commission, regardless of whether that person is also 
        licensed under the Commodity Exchange Act as a swap 
        data repository.
          (9) Rules.--The Commission shall adopt rules 
        governing persons that are registered under this 
        subsection.
  (o) Beneficial ownership.--For purposes ofthis section and 
section 16, a person shall be deemed to acquire 
beneficialownership of an equity security based on the purchase 
or sale of asecurity-based swap, only to the extent that the 
Commission, by rule,determines after consultation with the 
prudential regulators and the Secretaryof the Treasury, that 
the purchase or sale of the security-based swap, or classof 
security-based swap, provides incidents of ownership comparable 
to directownership of the equity security, and that it is 
necessary to achieve thepurposes of this section that the 
purchase or sale of the security-based swaps,or class of 
security-based swap, be deemed the acquisition of 
beneficialownership of the equitysecurity.
  (p) Disclosures Relating to Conflict Minerals Originating in 
the Democratic Republic of the Congo.--
          (1) Regulations.--
                  (A) In general.--Not later than 270 days 
                after the date of the enactment of this 
                subsection, the Commission shall promulgate 
                regulations requiring any person described in 
                paragraph (2) to disclose annually, beginning 
                with the person's first full fiscal year that 
                begins after the date of promulgation of such 
                regulations, whether conflict minerals that are 
                necessary as described in paragraph (2)(B), in 
                the year for which such reporting is required, 
                did originate in the Democratic Republic of the 
                Congo or an adjoining country and, in cases in 
                which such conflict minerals did originate in 
                any such country, submit to the Commission a 
                report that includes, with respect to the 
                period covered by the report--
                          (i) a description of the measures 
                        taken by the person to exercise due 
                        diligence on the source and chain of 
                        custody of such minerals, which 
                        measures shall include an independent 
                        private sector audit of such report 
                        submitted through the Commission that 
                        is conducted in accordance with 
                        standards established by the 
                        Comptroller General of the United 
                        States, in accordance with rules 
                        promulgated by the Commission, in 
                        consultation with the Secretary of 
                        State; and
                          (ii) a description of the products 
                        manufactured or contracted to be 
                        manufactured that are not DRC conflict 
                        free (``DRC conflict free'' is defined 
                        to mean the products that do not 
                        contain minerals that directly or 
                        indirectly finance or benefit armed 
                        groups in the Democratic Republic of 
                        the Congo or an adjoining country), the 
                        entity that conducted the independent 
                        private sector audit in accordance with 
                        clause (i), the facilities used to 
                        process the conflict minerals, the 
                        country of origin of the conflict 
                        minerals, and the efforts to determine 
                        the mine or location of origin with the 
                        greatest possible specificity.
                  (B) Certification.--The person submitting a 
                report under subparagraph (A) shall certify the 
                audit described in clause (i) of such 
                subparagraph that is included in such report. 
                Such a certified audit shall constitute a 
                critical component of due diligence in 
                establishing the source and chain of custody of 
                such minerals.
                  (C) Unreliable determination.--If a report 
                required to be submitted by a person under 
                subparagraph (A) relies on a determination of 
                an independent private sector audit, as 
                described under subparagraph (A)(i), or other 
                due diligence processes previously determined 
                by the Commission to be unreliable, the report 
                shall not satisfy the requirements of the 
                regulations promulgated under subparagraph 
                (A)(i).
                  (D) DRC conflict free.--For purposes of this 
                paragraph, a product may be labeled as ``DRC 
                conflict free'' if the product does not contain 
                conflict minerals that directly or indirectly 
                finance or benefit armed groups in the 
                Democratic Republic of the Congo or an 
                adjoining country.
                  (E) Information available to the public.--
                Each person described under paragraph (2) shall 
                make available to the public on the Internet 
                website of such person the information 
                disclosed by such person under subparagraph 
                (A).
          (2) Person described.--A person is described in this 
        paragraph if--
                  (A) the person is required to file reports 
                with the Commission pursuant to paragraph 
                (1)(A); and
                  (B) conflict minerals are necessary to the 
                functionality or production of a product 
                manufactured by such person.
          (3) Revisions and waivers.--The Commission shall 
        revise or temporarily waive the requirements described 
        in paragraph (1) if the President transmits to the 
        Commission a determination that--
                  (A) such revision or waiver is in the 
                national security interest of the United States 
                and the President includes the reasons 
                therefor; and
                  (B) establishes a date, not later than 2 
                years after the initial publication of such 
                exemption, on which such exemption shall 
                expire.
          (4) Termination of disclosure requirements.--The 
        requirements of paragraph (1) shall terminate on the 
        date on which the President determines and certifies to 
        the appropriate congressional committees, but in no 
        case earlier than the date that is one day after the 
        end of the 5-year period beginning on the date of the 
        enactment of this subsection, that no armed groups 
        continue to be directly involved and benefitting from 
        commercial activity involving conflict minerals.
          (5) Definitions.--For purposes of this subsection, 
        the terms ``adjoining country'', ``appropriate 
        congressional committees'', ``armed group'', and 
        ``conflict mineral'' have the meaning given those terms 
        under section 1502 of the Dodd-Frank Wall Street Reform 
        and Consumer Protection Act.
  (q) Disclosure of Payments by Resource Extraction Issuers.--
          (1) Definitions.--In this subsection--
                  (A) the term ``commercial development of oil, 
                natural gas, or minerals'' includes 
                exploration, extraction, processing, export, 
                and other significant actions relating to oil, 
                natural gas, or minerals, or the acquisition of 
                a license for any such activity, as determined 
                by the Commission;
                  (B) the term ``foreign government'' means a 
                foreign government, a department, agency, or 
                instrumentality of a foreign government, or a 
                company owned by a foreign government, as 
                determined by the Commission;
                  (C) the term ``payment''--
                          (i) means a payment that is--
                                  (I) made to further the 
                                commercial development of oil, 
                                natural gas, or minerals; and
                                  (II) not de minimis; and
                          (ii) includes taxes, royalties, fees 
                        (including license fees), production 
                        entitlements, bonuses, and other 
                        material benefits, that the Commission, 
                        consistent with the guidelines of the 
                        Extractive Industries Transparency 
                        Initiative (to the extent practicable), 
                        determines are part of the commonly 
                        recognized revenue stream for the 
                        commercial development of oil, natural 
                        gas, or minerals;
                  (D) the term ``resource extraction issuer'' 
                means an issuer that--
                          (i) is required to file an annual 
                        report with the Commission; and
                          (ii) engages in the commercial 
                        development of oil, natural gas, or 
                        minerals;
                  (E) the term ``interactive data format'' 
                means an electronic data format in which pieces 
                of information are identified using an 
                interactive data standard; and
                  (F) the term ``interactive data standard'' 
                means standardized list of electronic tags that 
                mark information included in the annual report 
                of a resource extraction issuer.
          (2) Disclosure.--
                  (A) Information required.--Not later than 270 
                days after the date of enactment of the Dodd-
                Frank Wall Street Reform and Consumer 
                Protection Act, the Commission shall issue 
                final rules that require each resource 
                extraction issuer to include in an annual 
                report of the resource extraction issuer 
                information relating to any payment made by the 
                resource extraction issuer, a subsidiary of the 
                resource extraction issuer, or an entity under 
                the control of the resource extraction issuer 
                to a foreign government or the Federal 
                Government for the purpose of the commercial 
                development of oil, natural gas, or minerals, 
                including--
                          (i) the type and total amount of such 
                        payments made for each project of the 
                        resource extraction issuer relating to 
                        the commercial development of oil, 
                        natural gas, or minerals; and
                          (ii) the type and total amount of 
                        such payments made to each government.
                  (B) Consultation in rulemaking.--In issuing 
                rules under subparagraph (A), the Commission 
                may consult with any agency or entity that the 
                Commission determines is relevant.
                  (C) Interactive data format.--The rules 
                issued under subparagraph (A) shall require 
                that the information included in the annual 
                report of a resource extraction issuer be 
                submitted in an interactive data format.
                  (D) Interactive data standard.--
                          (i) In general.--The rules issued 
                        under subparagraph (A) shall establish 
                        an interactive data standard for the 
                        information included in the annual 
                        report of a resource extraction issuer.
                          (ii) Electronic tags.--The 
                        interactive data standard shall include 
                        electronic tags that identify, for any 
                        payments made by a resource extraction 
                        issuer to a foreign government or the 
                        Federal Government--
                                  (I) the total amounts of the 
                                payments, by category;
                                  (II) the currency used to 
                                make the payments;
                                  (III) the financial period in 
                                which the payments were made;
                                  (IV) the business segment of 
                                the resource extraction issuer 
                                that made the payments;
                                  (V) the government that 
                                received the payments, and the 
                                country in which the government 
                                is located;
                                  (VI) the project of the 
                                resource extraction issuer to 
                                which the payments relate; and
                                  (VII) such other information 
                                as the Commission may determine 
                                is necessary or appropriate in 
                                the public interest or for the 
                                protection of investors.
                  (E) International transparency efforts.--To 
                the extent practicable, the rules issued under 
                subparagraph (A) shall support the commitment 
                of the Federal Government to international 
                transparency promotion efforts relating to the 
                commercial development of oil, natural gas, or 
                minerals.
                  (F) Effective date.--With respect to each 
                resource extraction issuer, the final rules 
                issued under subparagraph (A) shall take effect 
                on the date on which the resource extraction 
                issuer is required to submit an annual report 
                relating to the fiscal year of the resource 
                extraction issuer that ends not earlier than 1 
                year after the date on which the Commission 
                issues final rules under subparagraph (A).
          (3) Public availability of information.--
                  (A) In general.--To the extent practicable, 
                the Commission shall make available online, to 
                the public, a compilation of the information 
                required to be submitted under the rules issued 
                under paragraph (2)(A).
                  (B) Other information.--Nothing in this 
                paragraph shall require the Commission to make 
                available online information other than the 
                information required to be submitted under the 
                rules issued under paragraph (2)(A).
          (4) Authorization of appropriations.--There are 
        authorized to be appropriated to the Commission such 
        sums as may be necessary to carry out this subsection.
  (r) Disclosure of Certain Activities Relating to Iran.--
          (1) In general.--Each issuer required to file an 
        annual or quarterly report under subsection (a) shall 
        disclose in that report the information required by 
        paragraph (2) if, during the period covered by the 
        report, the issuer or any affiliate of the issuer--
                  (A) knowingly engaged in an activity 
                described in subsection (a) or (b) of section 5 
                of the Iran Sanctions Act of 1996 (Public Law 
                104-172; 50 U.S.C. 1701 note);
                  (B) knowingly engaged in an activity 
                described in subsection (c)(2) of section 104 
                of the Comprehensive Iran Sanctions, 
                Accountability, and Divestment Act of 2010 (22 
                U.S.C. 8513) or a transaction described in 
                subsection (d)(1) of that section;
                  (C) knowingly engaged in an activity 
                described in section 105A(b)(2) of that Act; or
                  (D) knowingly conducted any transaction or 
                dealing with--
                          (i) any person the property and 
                        interests in property of which are 
                        blocked pursuant to Executive Order No. 
                        13224 (66 Fed. Reg. 49079; relating to 
                        blocking property and prohibiting 
                        transactions with persons who commit, 
                        threaten to commit, or support 
                        terrorism);
                          (ii) any person the property and 
                        interests in property of which are 
                        blocked pursuant to Executive Order No. 
                        13382 (70 Fed. Reg. 38567; relating to 
                        blocking of property of weapons of mass 
                        destruction proliferators and their 
                        supporters); or
                          (iii) any person or entity identified 
                        under section 560.304 of title 31, Code 
                        of Federal Regulations (relating to the 
                        definition of the Government of Iran) 
                        without the specific authorization of a 
                        Federal department or agency.
          (2) Information required.--If an issuer or an 
        affiliate of the issuer has engaged in any activity 
        described in paragraph (1), the issuer shall disclose a 
        detailed description of each such activity, including--
                  (A) the nature and extent of the activity;
                  (B) the gross revenues and net profits, if 
                any, attributable to the activity; and
                  (C) whether the issuer or the affiliate of 
                the issuer (as the case may be) intends to 
                continue the activity.
          (3) Notice of disclosures.--If an issuer reports 
        under paragraph (1) that the issuer or an affiliate of 
        the issuer has knowingly engaged in any activity 
        described in that paragraph, the issuer shall 
        separately file with the Commission, concurrently with 
        the annual or quarterly report under subsection (a), a 
        notice that the disclosure of that activity has been 
        included in that annual or quarterly report that 
        identifies the issuer and contains the information 
        required by paragraph (2).
          (4) Public disclosure of information.--Upon receiving 
        a notice under paragraph (3) that an annual or 
        quarterly report includes a disclosure of an activity 
        described in paragraph (1), the Commission shall 
        promptly--
                  (A) transmit the report to--
                          (i) the President;
                          (ii) the Committee on Foreign Affairs 
                        and the Committee on Financial Services 
                        of the House of Representatives; and
                          (iii) the Committee on Foreign 
                        Relations and the Committee on Banking, 
                        Housing, and Urban Affairs of the 
                        Senate; and
                  (B) make the information provided in the 
                disclosure and the notice available to the 
                public by posting the information on the 
                Internet website of the Commission.
          (5) Investigations.--Upon receiving a report under 
        paragraph (4) that includes a disclosure of an activity 
        described in paragraph (1) (other than an activity 
        described in subparagraph (D)(iii) of that paragraph), 
        the President shall--
                  (A) initiate an investigation into the 
                possible imposition of sanctions under the Iran 
                Sanctions Act of 1996 (Public Law 104-172; 50 
                U.S.C. 1701 note), section 104 or 105A of the 
                Comprehensive Iran Sanctions, Accountability, 
                and Divestment Act of 2010, an Executive order 
                specified in clause (i) or (ii) of paragraph 
                (1)(D), or any other provision of law relating 
                to the imposition of sanctions with respect to 
                Iran, as applicable; and
                  (B) not later than 180 days after initiating 
                such an investigation, make a determination 
                with respect to whether sanctions should be 
                imposed with respect to the issuer or the 
                affiliate of the issuer (as the case may be).
          (6) Sunset.--The provisions of this subsection shall 
        terminate on the date that is 30 days after the date on 
        which the President makes the certification described 
        in section 401(a) of the Comprehensive Iran Sanctions, 
        Accountability, and Divestment Act of 2010 (22 U.S.C. 
        8551(a)).

           *       *       *       *       *       *       *


                                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 rules and regulations prescribed by the Commission 
under paragraph (1) may include--
          (A) a requirement that a solicitation of proxy, 
        consent, or authorization by (or on behalf of) an 
        issuer include a nominee submitted by a shareholder to 
        serve on the board of directors of the issuer; and
          (B) a requirement that an issuer follow a certain 
        procedure in relation to a solicitation described in 
        subparagraph (A).
  (b)(1) It shall be unlawful for any member of a national 
securities exchange, or any broker or dealer registered under 
this title, or any bank, association, or other entity that 
exercises fiduciary powers, 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 give, or to refrain from giving a proxy, consent, 
authorization, or information statement in respect of any 
security registered pursuant to section 12 of this title, or 
any security issued by an investment company registered under 
the Investment Company Act of 1940, and carried for the account 
of a customer.
  (2) With respect to banks, the rules and regulations 
prescribed by the Commission under paragraph (1) shall not 
require the disclosure of the names of beneficial owners of 
securities in an account held by the bank on the date of 
enactment of this paragraph unless the beneficial owner 
consents to the disclosure. The provisions of this paragraph 
shall not apply in the case of a bank which the Commission 
finds has not made a good faith effort to obtain such consent 
from such beneficial owners.
  (c) Unless proxies, consents, or authorizations in respect of 
a security registered pursuant to section 12 of this title, or 
a security issued by an investment company registered under the 
Investment Company Act of 1940, are solicited by or on behalf 
of the management of the issuer from the holders of record of 
such security in accordance with the rules and regulations 
prescribed under subsection (a) of this section, prior to any 
annual or other meeting of the holders of such security, such 
issuer shall, in accordance with rules and regulations 
prescribed by the Commission, file with the Commission and 
transmit to all holders of record of such security information 
substantially equivalent to the information which would be 
required to be transmitted if a solicitation were made, but no 
information shall be required to be filed or transmitted 
pursuant to this subsection before July 1, 1964.
  (d)(1) It shall be unlawful for any person, directly or 
indirectly, by use of the mails or by any means or 
instrumentality of interstate commerce or of any facility of a 
national securities exchange or otherwise, to make a tender 
offer for, or a request or invitation for tenders of, any class 
of any equity security 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, if, after consummation thereof, such person would, 
directly or indirectly, be the beneficial owner of more than 5 
per centum of such class, unless at the time copies of the 
offer or request or invitation are first published or sent or 
given to security holders such person has filed with the 
Commission a statement containing such of the information 
specified in section 13(d) of this title, 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. All requests or invitations 
for tenders or advertisements making a tender offer or 
requesting or inviting tenders, of such a security shall be 
filed as a part of such statement and shall contain such of the 
information contained in such statement as the Commission may 
by rules and regulations prescribe. Copies of any additional 
material soliciting or requesting such tender offers subsequent 
to the initial solicitation or request shall contain such 
information as the Commission may by rules and regulations 
prescribe as necessary or appropriate in the public interest or 
for the protection of investors, and shall be filed with the 
Commission not later than the time copies of such material are 
first published or sent or given to security holders. Copies of 
all statements, in the form in which such material is furnished 
to security holders and the Commission, shall be sent to the 
issuer not later than the date such material is first published 
or sent or given to any security holders.
  (2) When two or more persons act as a partnership, limited 
partnership, syndicate, or other group for the purpose of 
acquiring, holding, or disposing of securities of an issuer, 
such syndicate or group shall be deemed a ``person'' for 
purposes of this subsection.
  (3) In determining, for purposes of this subsection, any 
percentage of a class of any security, such class shall be 
deemed to consist of the amount of the outstanding securities 
of such class, exclusive of any securities of such class held 
by or for the account of the issuer or a subsidiary of the 
issuer.
  (4) Any solicitation or recommendation to the holders of such 
a security to accept or reject a tender offer or request or 
invitation for tenders shall be made 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.
  (5) Securities deposited pursuant to a tender offer or 
request or invitation for tenders may be withdrawn by or on 
behalf of the depositor at any time until the expiration of 
seven days after the time definitive copies of the offer or 
request or invitation are first published or sent or given to 
security holders, and at any time after sixty days from the 
date of the original tender offer or request or invitation, 
except as the Commission may otherwise prescribe by rules, 
regulations, or order as necessary or appropriate in the public 
interest or for the protection of investors.
  (6) Where any person makes a tender offer, or request or 
invitation for tenders, for less than all the outstanding 
equity securities of a class, and where a greater number of 
securities is deposited pursuant thereto within ten days after 
copies of the offer or request or invitation are first 
published or sent or given to security holders than such person 
is bound or willing to take up and pay for, the securities 
taken up shall be taken up as nearly as may be pro rata, 
disregarding fractions, according to the number of securities 
deposited by each depositor. The provisions of this subsection 
shall also apply to securities deposited within ten days after 
notice of an increase in the consideration offered to security 
holders, as described in paragraph (7), is first published or 
sent or given to security holders.
  (7) Where any person varies the terms of a tender offer or 
request or invitation for tenders before the expiration thereof 
by increasing the consideration offered to holders of such 
securities, such person shall pay the increased consideration 
to each security holder whose securities are taken up and paid 
for pursuant to the tender offer or request or invitation for 
tenders whether or not such securities have been taken up by 
such person before the variation of the tender offer or request 
or invitation.
  (8) The provisions of this subsection shall not apply to any 
offer for, or request or invitation for tenders of, any 
security--
          (A) if the acquisition of such security, together 
        with all other acquisitions by the same person of 
        securities of the same class during the preceding 
        twelve months, would not exceed 2 per centum of that 
        class;
          (B) by the issuer of such security; or
          (C) which the Commission, by rules or regulations or 
        by order, shall exempt from the provisions of this 
        subsection as not entered into for the purpose of, and 
        not having the effect of, changing or influencing the 
        control of the issuer or otherwise as not comprehended 
        within the purposes of this subsection.
  (e) It shall be unlawful for any person to make any untrue 
statement of a material fact or omit to state any material fact 
necessary in order to make the statements made, in the light of 
the circumstances under which they are made, not misleading, or 
to engage in any fraudulent, deceptive, or manipulative acts or 
practices, in connection with any tender offer or request or 
invitation for tenders, or any solicitation of security holders 
in opposition to or in favor of any such offer, request, or 
invitation. The Commission shall, for the purposes of this 
subsection, by rules and regulations define, and prescribe 
means reasonably designed to prevent, such acts and practices 
as are fraudulent, deceptive, or manipulative.
  (f) If, pursuant to any arrangement or understanding with the 
person or persons acquiring securities in a transaction subject 
to subsection (d) of this section or subsection (d) of section 
13 of this title, any persons are to be elected or designated 
as directors of the issuer, otherwise than at a meeting of 
security holders, and the persons so elected or designated will 
constitute a majority of the directors of the issuer, then, 
prior to the time any such person takes office as a director, 
and in accordance with rules and regulations prescribed by the 
Commission, the issuer shall file with the Commission, and 
transmit to all holders of record of securities of the issuer 
who would be entitled to vote at a meeting for election of 
directors, information substantially equivalent to the 
information which would be required by subsection (a) or (c) of 
this section to be transmitted if such person or persons were 
nominees for election as directors at a meeting of such 
security holders.
  (g)(1)(A) At the time of filing such preliminary proxy 
solicitation material as the Commission may require by rule 
pursuant to subsection (a) of this section that concerns an 
acquisition, merger, consolidation, or proposed sale or other 
disposition of substantially all the assets of a company, the 
person making such filing, other than a company registered 
under the Investment Company Act of 1940, shall pay to the 
Commission the following fees:
          (i) for preliminary proxy solicitation material 
        involving an acquisition, merger, or consolidation, if 
        there is a proposed payment of cash or transfer of 
        securities or property to shareholders, a fee at a rate 
        that, subject to paragraph (4), is equal to $92 per 
        $1,000,000 of such proposed payment, or of the value of 
        such securities or other property proposed to be 
        transferred; and
          (ii) for preliminary proxy solicitation material 
        involving a proposed sale or other disposition of 
        substantially all of the assets of a company, a fee at 
        a rate that, subject to paragraph (4), is equal to $92 
        per $1,000,000 of the cash or of the value of any 
        securities or other property proposed to be received 
        upon such sale or disposition.
  (B) The fee imposed under subparagraph (A) shall be reduced 
with respect to securities in an amount equal to any fee paid 
to the Commission with respect to such securities in connection 
with the proposed transaction under section 6(b) of the 
Securities Act of 1933 (15 U.S.C. 77f(b)), or the fee paid 
under that section shall be reduced in an amount equal to the 
fee paid to the Commission in connection with such transaction 
under this subsection. Where two or more companies involved in 
an acquisition, merger, consolidation, sale, or other 
disposition of substantially all the assets of a company must 
file such proxy material with the Commission, each shall pay a 
proportionate share of such fee.
  (2) At the time of filing such preliminary information 
statement as the Commission may require by rule pursuant to 
subsection (c) of this section, the issuer shall pay to the 
Commission the same fee as required for preliminary proxy 
solicitation material under paragraph (1) of this subsection.
  (3) At the time of filing such statement as the Commission 
may require by rule pursuant to subsection (d)(1) of this 
section, the person making the filing shall pay to the 
Commission a fee at a rate that, subject to paragraph (4), is 
equal to $92 per $1,000,000 of the aggregate amount of cash or 
of the value of securities or other property proposed to be 
offered. The fee shall be reduced with respect to securities in 
an amount equal to any fee paid with respect to such securities 
in connection with the proposed transaction under section 6(b) 
of the Securities Act of 1933 (15 U.S.C. 77f(b)), or the fee 
paid under that section shall be reduced in an amount equal to 
the fee paid to the Commission in connection with such 
transaction under this subsection.
          (4) Annual adjustment.--For each fiscal year, the 
        Commission shall by order adjust the rate required by 
        paragraphs (1) and (3) for such fiscal year to a rate 
        that is equal to the rate (expressed in dollars per 
        million) that is applicable under section 6(b) of the 
        Securities Act of 1933 (15 U.S.C. 77f(b)) for such 
        fiscal year.
          [(5) Fee collection.--Fees collected pursuant to this 
        subsection for fiscal year 2012 and each fiscal year 
        thereafter shall be deposited and credited as general 
        revenue of the Treasury and shall not be available for 
        obligation.]
          (5) Offsetting collections.--Fees collected pursuant 
        to this subsection for any fiscal year--
                  (A) except as provided in section 31(i)(2), 
                shall be deposited and credited as offsetting 
                collections to the account providing 
                appropriations to the Commission; and
                  (B) except as provided in paragraph (8), 
                shall not be collected for any fiscal year 
                except to the extent provided in advance in 
                appropriations Acts.
          (6) Review; effective date; publication.--In 
        exercising its authority under this subsection, the 
        Commission shall not be required to comply with the 
        provisions of section 553 of title 5, United States 
        Code. An adjusted rate prescribed under paragraph (4) 
        shall be published and take effect in accordance with 
        section 6(b) of the Securities Act of 1933 (15 U.S.C. 
        77f(b)).
          (7) Pro rata application.--The rates per $1,000,000 
        required by this subsection shall be applied pro rata 
        to amounts and balances of less than $1,000,000.
          (8) Lapse of appropriation.--If on the first day of a 
        fiscal year a regular appropriation to the Commission 
        has not been enacted, the Commission shall continue to 
        collect fees (as offsetting collections) under this 
        subsection at the rate in effect during the preceding 
        fiscal year, until 5 days after the date such a regular 
        appropriation is enacted.
  [(8)] (9) Notwithstanding any other provision of law, the 
Commission may impose fees, charges, or prices for matters not 
involving any acquisition, merger, consolidation, sale, or 
other disposition of assets described in this subsection, as 
authorized by section 9701 of title 31, United States Code, or 
otherwise.
  (h) Proxy Solicitations and Tender Offers in Connection With 
Limited Partnership Rollup Transactions.--
          (1) Proxy rules to contain special provisions.--It 
        shall be unlawful for any person to solicit any proxy, 
        consent, or authorization concerning a limited 
        partnership rollup transaction, or to make any tender 
        offer in furtherance of a limited partnership rollup 
        transaction, unless such transaction is conducted in 
        accordance with rules prescribed by the Commission 
        under subsections (a) and (d) as required by this 
        subsection. Such rules shall--
                  (A) permit any holder of a security that is 
                the subject of the proposed limited partnership 
                rollup transaction to engage in preliminary 
                communications for the purpose of determining 
                whether to solicit proxies, consents, or 
                authorizations in opposition to the proposed 
                limited partnership rollup transaction, without 
                regard to whether any such communication would 
                otherwise be considered a solicitation of 
                proxies, and without being required to file 
                soliciting material with the Commission prior 
                to making that determination, except that--
                          (i) nothing in this subparagraph 
                        shall be construed to limit the 
                        application of any provision of this 
                        title prohibiting, or reasonably 
                        designed to prevent, fraudulent, 
                        deceptive, or manipulative acts or 
                        practices under this title; and
                          (ii) any holder of not less than 5 
                        percent of the outstanding securities 
                        that are the subject of the proposed 
                        limited partnership rollup transaction 
                        who engages in the business of buying 
                        and selling limited partnership 
                        interests in the secondary market shall 
                        be required to disclose such ownership 
                        interests and any potential conflicts 
                        of interests in such preliminary 
                        communications;
                  (B) require the issuer to provide to holders 
                of the securities that are the subject of the 
                limited partnership rollup transaction such 
                list of the holders of the issuer's securities 
                as the Commission may determine in such form 
                and subject to such terms and conditions as the 
                Commission may specify;
                  (C) prohibit compensating any person 
                soliciting proxies, consents, or authorizations 
                directly from security holders concerning such 
                a limited partnership rollup transaction--
                          (i) on the basis of whether the 
                        solicited proxy, consent, or 
                        authorization either approves or 
                        disapproves the proposed limited 
                        partnership rollup transaction; or
                          (ii) contingent on the approval, 
                        disapproval, or completion of the 
                        limited partnership rollup transaction;
                  (D) set forth disclosure requirements for 
                soliciting material distributed in connection 
                with a limited partnership rollup transaction, 
                including requirements for clear, concise, and 
                comprehensible disclosure with respect to--
                          (i) any changes in the business plan, 
                        voting rights, form of ownership 
                        interest, or the compensation of the 
                        general partner in the proposed limited 
                        partnership rollup transaction from 
                        each of the original limited 
                        partnerships;
                          (ii) the conflicts of interest, if 
                        any, of the general partner;
                          (iii) whether it is expected that 
                        there will be a significant difference 
                        between the exchange values of the 
                        limited partnerships and the trading 
                        price of the securities to be issued in 
                        the limited partnership rollup 
                        transaction;
                          (iv) the valuation of the limited 
                        partnerships and the method used to 
                        determine the value of the interests of 
                        the limited partners to be exchanged 
                        for the securities in the limited 
                        partnership rollup transaction;
                          (v) the differing risks and effects 
                        of the limited partnership rollup 
                        transaction for investors in different 
                        limited partnerships proposed to be 
                        included, and the risks and effects of 
                        completing the limited partnership 
                        rollup transaction with less than all 
                        limited partnerships;
                          (vi) the statement by the general 
                        partner required under subparagraph 
                        (E);
                          (vii) such other matters deemed 
                        necessary or appropriate by the 
                        Commission;
                  (E) require a statement by the general 
                partner as to whether the proposed limited 
                partnership rollup transaction is fair or 
                unfair to investors in each limited 
                partnership, a discussion of the basis for that 
                conclusion, and an evaluation and a description 
                by the general partner of alternatives to the 
                limited partnership rollup transaction, such as 
                liquidation;
                  (F) provide that, if the general partner or 
                sponsor has obtained any opinion (other than an 
                opinion of counsel), appraisal, or report that 
                is prepared by an outside party and that is 
                materially related to the limited partnership 
                rollup transaction, such soliciting materials 
                shall contain or be accompanied by clear, 
                concise, and comprehensible disclosure with 
                respect to--
                          (i) the analysis of the transaction, 
                        scope of review, preparation of the 
                        opinion, and basis for and methods of 
                        arriving at conclusions, and any 
                        representations and undertakings with 
                        respect thereto;
                          (ii) the identity and qualifications 
                        of the person who prepared the opinion, 
                        the method of selection of such person, 
                        and any material past, existing, or 
                        contemplated relationships between the 
                        person or any of its affiliates and the 
                        general partner, sponsor, successor, or 
                        any other affiliate;
                          (iii) any compensation of the 
                        preparer of such opinion, appraisal, or 
                        report that is contingent on the 
                        transaction's approval or completion; 
                        and
                          (iv) any limitations imposed by the 
                        issuer on the access afforded to such 
                        preparer to the issuer's personnel, 
                        premises, and relevant books and 
                        records;
                  (G) provide that, if the general partner or 
                sponsor has obtained any opinion, appraisal, or 
                report as described in subparagraph (F) from 
                any person whose compensation is contingent on 
                the transaction's approval or completion or who 
                has not been given access by the issuer to its 
                personnel and premises and relevant books and 
                records, the general partner or sponsor shall 
                state the reasons therefor;
                  (H) provide that, if the general partner or 
                sponsor has not obtained any opinion on the 
                fairness of the proposed limited partnership 
                rollup transaction to investors in each of the 
                affected partnerships, such soliciting 
                materials shall contain or be accompanied by a 
                statement of such partner's or sponsor's 
                reasons for concluding that such an opinion is 
                not necessary in order to permit the limited 
                partners to make an informed decision on the 
                proposed transaction;
                  (I) require that the soliciting material 
                include a clear, concise, and comprehensible 
                summary of the limited partnership rollup 
                transaction (including a summary of the matters 
                referred to in clauses (i) through (vii) of 
                subparagraph (D) and a summary of the matter 
                referred to in subparagraphs (F), (G), and 
                (H)), with the risks of the limited partnership 
                rollup transaction set forth prominently in the 
                fore part thereof;
                  (J) provide that any solicitation or offering 
                period with respect to any proxy solicitation, 
                tender offer, or information statement in a 
                limited partnership rollup transaction shall be 
                for not less than the lesser of 60 calendar 
                days or the maximum number of days permitted 
                under applicable State law; and
                  (K) contain such other provisions as the 
                Commission determines to be necessary or 
                appropriate for the protection of investors in 
                limited partnership rollup transactions.
          (2) Exemptions.--The Commission may, consistent with 
        the public interest, the protection of investors, and 
        the purposes of this title, exempt by rule or order any 
        security or class of securities, any transaction or 
        class of transactions, or any person or class of 
        persons, in whole or in part, conditionally or 
        unconditionally, from the requirements imposed pursuant 
        to paragraph (1) or from the definition contained in 
        paragraph (4).
          (3) Effect on commission authority.--Nothing in this 
        subsection limits the authority of the Commission under 
        subsection (a) or (d) or any other provision of this 
        title or precludes the Commission from imposing, under 
        subsection (a) or (d) or any other provision of this 
        title, a remedy or procedure required to be imposed 
        under this subsection.
          (4) Definition of limited partnership rollup 
        transaction.--Except as provided in paragraph (5), as 
        used in this subsection, the term ``limited partnership 
        rollup transaction'' means a transaction involving the 
        combination or reorganization of one or more limited 
        partnerships, directly or indirectly, in which--
                  (A) some or all of the investors in any of 
                such limited partnerships will receive new 
                securities, or securities in another entity, 
                that will be reported under a transaction 
                reporting plan declared effective before the 
                date of enactment of this subsection by the 
                Commission under section 11A;
                  (B) any of the investors' limited partnership 
                securities are not, as of the date of filing, 
                reported under a transaction reporting plan 
                declared effective before the date of enactment 
                of this subsection by the Commission under 
                section 11A;
                  (C) investors in any of the limited 
                partnerships involved in the transaction are 
                subject to a significant adverse change with 
                respect to voting rights, the term of existence 
                of the entity, management compensation, or 
                investment objectives; and
                  (D) any of such investors are not provided an 
                option to receive or retain a security under 
                substantially the same terms and conditions as 
                the original issue.
          (5) Exclusions from definition.--Notwithstanding 
        paragraph (4), the term ``limited partnership rollup 
        transaction'' does not include--
                  (A) a transaction that involves only a 
                limited partnership or partnerships having an 
                operating policy or practice of retaining cash 
                available for distribution and reinvesting 
                proceeds from the sale, financing, or 
                refinancing of assets in accordance with such 
                criteria as the Commission determines 
                appropriate;
                  (B) a transaction involving only limited 
                partnerships wherein the interests of the 
                limited partners are repurchased, recalled, or 
                exchanged in accordance with the terms of the 
                preexisting limited partnership agreements for 
                securities in an operating company specifically 
                identified at the time of the formation of the 
                original limited partnership;
                  (C) a transaction in which the securities to 
                be issued or exchanged are not required to be 
                and are not registered under the Securities Act 
                of 1933;
                  (D) a transaction that involves only issuers 
                that are not required to register or report 
                under section 12, both before and after the 
                transaction;
                  (E) a transaction, except as the Commission 
                may otherwise provide by rule for the 
                protection of investors, involving the 
                combination or reorganization of one or more 
                limited partnerships in which a non-affiliated 
                party succeeds to the interests of a general 
                partner or sponsor, if--
                          (i) such action is approved by not 
                        less than 66\2/3\ percent of the 
                        outstanding units of each of the 
                        participating limited partnerships; and
                          (ii) as a result of the transaction, 
                        the existing general partners will 
                        receive only compensation to which they 
                        are entitled as expressly provided for 
                        in the preexisting limited partnership 
                        agreements; or
                  (F) a transaction, except as the Commission 
                may otherwise provide by rule for the 
                protection of investors, in which the 
                securities offered to investors are securities 
                of another entity that are reported under a 
                transaction reporting plan declared effective 
                before the date of enactment of this subsection 
                by the Commission under section 11A, if--
                          (i) such other entity was formed, and 
                        such class of securities was reported 
                        and regularly traded, not less than 12 
                        months before the date on which 
                        soliciting material is mailed to 
                        investors; and
                          (ii) the securities of that entity 
                        issued to investors in the transaction 
                        do not exceed 20 percent of the total 
                        outstanding securities of the entity, 
                        exclusive of any securities of such 
                        class held by or for the account of the 
                        entity or a subsidiary of the entity.
  (i) Disclosure of Pay Versus Performance.--The Commission 
shall, by rule, require each issuer to disclose in any proxy or 
consent solicitation material for an annual meeting of the 
shareholders of the issuer a clear description of any 
compensation required to be disclosed by the issuer under 
section 229.402 of title 17, Code of Federal Regulations (or 
any successor thereto), including, for any issuer other than an 
emerging growth company, information that shows the 
relationship between executive compensation actually paid and 
the financial performance of the issuer, taking into account 
any change in the value of the shares of stock and dividends of 
the issuer and any distributions. The disclosure under this 
subsection may include a graphic representation of the 
information required to be disclosed.
  (j) Disclosure of Hedging by Employees and Directors.--The 
Commission shall, by rule, require each issuer to disclose in 
any proxy or consent solicitation material for an annual 
meeting of the shareholders of the issuer whether any employee 
or member of the board of directors of the issuer, or any 
designee of such employee or member, is permitted to purchase 
financial instruments (including prepaid variable forward 
contracts, equity swaps, collars, and exchange funds) that are 
designed to hedge or offset any decrease in the market value of 
equity securities--
          (1) granted to the employee or member of the board of 
        directors by the issuer as part of the compensation of 
        the employee or member of the board of directors; or
          (2) held, directly or indirectly, by the employee or 
        member of the board of directors.
  (j) Shareholder Proposals by Proxies Not Permitted.--An 
issuer may not include in its proxy materials a shareholder 
proposal submitted by a person in such person's capacity as a 
proxy, representative, agent, or person otherwise acting on 
behalf of a shareholder.
  (k) Prohibition on Requiring a Single Ballot.--The Commission 
may not require that a solicitation of a proxy, consent, or 
authorization to vote a security of an issuer in an election of 
members of the board of directors of the issuer be made using a 
single ballot or card that lists both individuals nominated by 
(or on behalf of) the issuer and individuals nominated by (or 
on behalf of) other proponents and permits the person granting 
the proxy, consent, or authorization to select from among 
individuals in both groups.

SEC. 14A. SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION.

  (a) Separate Resolution Required.--
          (1) In general.--[Not less frequently than once every 
        3 years] Each year in which there has been a material 
        change to the compensation of executives of an issuer 
        from the previous year, a proxy or consent or 
        authorization for an annual or other meeting of the 
        shareholders for which the proxy solicitation rules of 
        the Commission require compensation disclosure shall 
        include a separate resolution subject to shareholder 
        vote to approve the compensation of executives, as 
        disclosed pursuant to section 229.402 of title 17, Code 
        of Federal Regulations, or any successor thereto.
          [(2) Frequency of vote.--Not less frequently than 
        once every 6 years, a proxy or consent or authorization 
        for an annual or other meeting of the shareholders for 
        which the proxy solicitation rules of the Commission 
        require compensation disclosure shall include a 
        separate resolution subject to shareholder vote to 
        determine whether votes on the resolutions required 
        under paragraph (1) will occur every 1, 2, or 3 years.]
          [(3)] (2) Effective date.--The proxy or consent or 
        authorization for the first annual or other meeting of 
        the shareholders occurring after the end of the 6-month 
        period beginning on the date of enactment of this 
        section shall include--
                  (A) the resolution described in paragraph 
                (1); and
                  (B) a separate resolution subject to 
                shareholder vote to determine whether votes on 
                the resolutions required under paragraph (1) 
                will occur every 1, 2, or 3 years.
  (b) Shareholder Approval of Golden Parachute Compensation.--
          (1) Disclosure.--In any proxy or consent solicitation 
        material (the solicitation of which is subject to the 
        rules of the Commission pursuant to subsection (a)) for 
        a meeting of the shareholders occurring after the end 
        of the 6-month period beginning on the date of 
        enactment of this section, at which shareholders are 
        asked to approve an acquisition, merger, consolidation, 
        or proposed sale or other disposition of all or 
        substantially all the assets of an issuer, the person 
        making such solicitation shall disclose in the proxy or 
        consent solicitation material, in a clear and simple 
        form in accordance with regulations to be promulgated 
        by the Commission, any agreements or understandings 
        that such person has with any named executive officers 
        of such issuer (or of the acquiring issuer, if such 
        issuer is not the acquiring issuer) concerning any type 
        of compensation (whether present, deferred, or 
        contingent) that is based on or otherwise relates to 
        the acquisition, merger, consolidation, sale, or other 
        disposition of all or substantially all of the assets 
        of the issuer and the aggregate total of all such 
        compensation that may (and the conditions upon which it 
        may) be paid or become payable to or on behalf of such 
        executive officer.
          (2) Shareholder approval.--Any proxy or consent or 
        authorization relating to the proxy or consent 
        solicitation material containing the disclosure 
        required by paragraph (1) shall include a separate 
        resolution subject to shareholder vote to approve such 
        agreements or understandings and compensation as 
        disclosed, unless such agreements or understandings 
        have been subject to a shareholder vote under 
        subsection (a).
  (c) Rule of Construction.--The shareholder vote referred to 
in subsections (a) and (b) shall not be binding on the issuer 
or the board of directors of an issuer, and may not be 
construed--
          (1) as overruling a decision by such issuer or board 
        of directors;
          (2) to create or imply any change to the fiduciary 
        duties of such issuer or board of directors;
          (3) to create or imply any additional fiduciary 
        duties for such issuer or board of directors; or
          (4) to restrict or limit the ability of shareholders 
        to make proposals for inclusion in proxy materials 
        related to executive compensation.
  (d) Disclosure of Votes.--Every institutional investment 
manager subject to section 13(f) shall report at least annually 
how it voted on any shareholder vote pursuant to subsections 
(a) and (b), unless such vote is otherwise required to be 
reported publicly by rule or regulation of the Commission.
  (e) Exemption.--
           (1)  In general.--.--The Commission may, by rule or 
        order, exempt any other issuer or class of issuers from 
        the requirement under subsection (a) or (b). In 
        determining whether to make an exemption under this 
        subsection, the Commission shall take into account, 
        among other considerations, whether the requirements 
        under subsections (a) and (b) disproportionately 
        burdens small issuers.
          (2) Treatment of emerging growth companies.--
                  (A) In general.--An emerging growth company 
                shall be exempt from the requirements of 
                subsections (a) and (b).
                  (B) Compliance after termination of emerging 
                growth company treatment.--An issuer that was 
                an emerging growth company but is no longer an 
                emerging growth company shall include the first 
                separate resolution described under subsection 
                (a)(1) not later than the end of--
                          (i) in the case of an issuer that was 
                        an emerging growth company for less 
                        than 2 years after the date of first 
                        sale of common equity securities of the 
                        issuer pursuant to an effective 
                        registration statement under the 
                        Securities Act of 1933, the 3-year 
                        period beginning on such date; and
                          (ii) in the case of any other issuer, 
                        the 1-year period beginning on the date 
                        the issuer is no longer an emerging 
                        growth company.

           *       *       *       *       *       *       *


           registration and regulation of brokers and dealers

  Sec. 15. (a)(1) It shall be unlawful for any broker or dealer 
which is either a person other than a natural person or a 
natural person not associated with a broker or dealer which is 
a person other than a natural person (other than such a broker 
or dealer whose business is exclusively intrastate and who does 
not make use of any facility of a national securities exchange) 
to make use of the mails or any means or instrumentality of 
interstate commerce to effect any transactions in, or to induce 
or attempt to induce the purchase or sale of, any security 
(other than an exempted security or commercial paper, bankers' 
acceptances, or commercial bills) unless such broker or dealer 
is registered in accordance with subsection (b) of this 
section.
  (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 subsection any broker or dealer or class of brokers or 
dealers specified in such rule or order.
  (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) 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 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 
        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.
  (2)(A) An application for registration of a broker or dealer 
to be formed or organized may be made by a broker or dealer to 
which the broker or dealer 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 forty-fifth 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.
  (B) Any person who is a broker or dealer solely by reason of 
acting as a municipal securities dealer or municipal securities 
broker, who so acts through a separately identifiable 
department or division, and who so acted in such a manner on 
the date of enactment of the Securities Acts Amendments of 
1975, may, in accordance with such terms and conditions as the 
Commission, by rule, prescribes as necessary and appropriate in 
the public interest and for the protection of investors, 
register such separately identifiable department or division in 
accordance with this subsection. If any such department or 
division is so registered, the department or division and not 
such person himself shall be the broker or dealer for purposes 
of this title.
  (C) Within six months of the date of the granting of 
registration to a broker or dealer, the Commission, or upon the 
authorization and direction of the Commission, a registered 
securities association or national securities exchange of which 
such broker or dealer is a member, shall conduct an inspection 
of the broker or dealer to determine whether it is operating in 
conformity with the provisions of this title and the rules and 
regulations thereunder: Provided, however, That the Commission 
may delay such inspection of any class of brokers or dealers 
for a period not to exceed six months.
  (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 broker or dealer or any person 
acting on behalf of such a broker or dealer, 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 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) 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 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) 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 broker, dealer, municipal 
                securities [dealer municipal advisor,,] dealer, 
                municipal advisor, 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, United States Code, 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 an investment adviser, 
        underwriter, broker, dealer, municipal securities 
        [dealer municipal advisor,,] dealer, municipal advisor, 
        government securities broker, government securities 
        dealer, security-based swap dealer, major security-
        based swap participant, 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 the rules of the 
        Municipal Securities Rulemaking Board, 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 the rules of the Municipal Securities 
        Rulemaking Board, 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 (E) 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 broker, dealer, security-based swap dealer, or a 
        major security-based swap participant;
          (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;
                  (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 broker or 
dealer 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 broker or dealer is no 
longer in existence or has ceased to do business as a broker or 
dealer, the Commission, by order, shall cancel the registration 
of such broker or dealer.
  (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 any such person from being 
associated with a broker, dealer, investment adviser, municipal 
securities dealer, municipal advisor, 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) 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 this 
        subsection;] enumerated in subparagraph (A), (D), (E), 
        (G), or (H) 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 broker or dealer in contravention of 
        such order, or to participate in an offering of penny 
        stock in contravention of such order;
          (ii) for any broker or dealer to permit such a 
        person, without the consent of the Commission, to 
        become or remain, a person associated with the broker 
        or dealer in contravention of such order, if such 
        broker or dealer knew, or in the exercise of reasonable 
        care should have known, of such order; or
          (iii) for any broker or dealer to permit such a 
        person, without the consent of the Commission, to 
        participate in an offering of penny stock in 
        contravention of such order, if such broker or dealer 
        knew, or in the exercise of reasonable care should have 
        known, of such order and of such participation.
  (C) For purposes of this paragraph, the term ``person 
participating in an offering of penny stock'' includes any 
person acting as any promoter, finder, consultant, agent, or 
other person who engages in activities with a broker, dealer, 
or issuer for purposes of the issuance or trading in any penny 
stock, or inducing or attempting to induce the purchase or sale 
of any penny stock. The Commission may, by rule or regulation, 
define such term to include other activities, and may, by rule, 
regulation, or order, exempt any person or class of persons, in 
whole or in part, conditionally or unconditionally, from such 
term.
  (7) No registered broker or dealer or government securities 
broker or government securities dealer registered (or required 
to register) under section 15C(a)(1)(A) shall effect any 
transaction in, or induce the purchase or sale of, any security 
unless such broker or dealer meets such standards of 
operational capability and such broker or dealer and all 
natural persons associated with such broker or dealer 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 brokers and dealers 
        and persons associated with brokers and dealers;
          (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 and as so defined shall include 
        branch managers of brokers or dealers) engaged in the 
        management of the broker or dealer, include questions 
        relating to bookkeeping, accounting, internal control 
        over cash and securities, supervision of employees, 
        maintenance of records, and other appropriate matters; 
        and
          (C) provide that persons in any such class other than 
        brokers and dealers and partners, officers, and 
        supervisory employees of brokers or dealers, 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. The Commission may cooperate with 
registered securities associations and national securities 
exchanges in devising and administering tests and may require 
registered brokers and dealers and persons associated with such 
brokers and dealers to pass tests administered by or on behalf 
of any such association or exchange and to pay such association 
or exchange reasonable fees or charges to defray the costs 
incurred by such association or exchange in administering such 
tests.
  (8) It shall be unlawful for any registered broker or dealer 
to effect any transaction in, or induce or attempt to induce 
the purchase or sale of, any security (other than or commercial 
paper, bankers' acceptances, or commercial bills), unless such 
broker or dealer is a member of a securities association 
registered pursuant to section 15A of this title or effects 
transactions in securities solely on a national securities 
exchange of which it is a member.
  (9) 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 (8) of 
this subsection any broker or dealer or class of brokers or 
dealers specified in such rule or order.
  (10) For the purposes of determining whether a person is 
subject to a statutory disqualification under section 6(c)(2), 
15A(g)(2), or 17A(b)(4)(A) of this title, the term 
``Commission'' in paragraph (4)(B) of this subsection shall 
mean ``exchange'', ``association'', or ``clearing agency'', 
respectively.
          (11) Broker/dealer registration with respect to 
        transactions in security futures products.--
                  (A) Notice registration.--
                          (i) Contents of notice.--
                        Notwithstanding paragraphs (1) and (2), 
                        a broker or dealer required to register 
                        only because it effects transactions in 
                        security futures products on an 
                        exchange registered pursuant to section 
                        6(g) may register for purposes of this 
                        section by filing with the Commission a 
                        written notice in such form and 
                        containing such information 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. A broker or 
                        dealer may not register under this 
                        paragraph unless that broker or dealer 
                        is a member of a national securities 
                        association registered under section 
                        15A(k).
                          (ii) Immediate effectiveness.--Such 
                        registration shall be effective 
                        contemporaneously with the submission 
                        of notice, in written or electronic 
                        form, to the Commission, except that 
                        such registration shall not be 
                        effective if the registration would be 
                        subject to suspension or revocation 
                        under paragraph (4).
                          (iii) Suspension.--Such registration 
                        shall be suspended immediately if a 
                        national securities association 
                        registered pursuant to section 15A(k) 
                        of this title suspends the membership 
                        of that broker or dealer.
                          (iv) Termination.--Such registration 
                        shall be terminated immediately if any 
                        of the above stated conditions for 
                        registration set forth in this 
                        paragraph are no longer satisfied.
                  (B) Exemptions for registered brokers and 
                dealers.--A broker or dealer registered 
                pursuant to the requirements of subparagraph 
                (A) shall be exempt from the following 
                provisions of this title and the rules 
                thereunder with respect to transactions in 
                security futures products:
                          (i) Section 8.
                          (ii) Section 11.
                          (iii) Subsections (c)(3) and (c)(5) 
                        of this section.
                          (iv) Section 15B.
                          (v) Section 15C.
                          (vi) Subsections (d), (e), (f), (g), 
                        (h), and (i) of section 17.
          (12) Exemption for security futures product exchange 
        members.--
                  (A) Registration exemption.--A natural person 
                shall be exempt from the registration 
                requirements of this section if such person--
                          (i) is a member of a designated 
                        contract market registered with the 
                        Commission as an exchange pursuant to 
                        section 6(g);
                          (ii) effects transactions only in 
                        securities on the exchange of which 
                        such person is a member; and
                          (iii) does not directly accept or 
                        solicit orders from public customers or 
                        provide advice to public customers in 
                        connection with the trading of security 
                        futures products.
                  (B) Other exemptions.--A natural person 
                exempt from registration pursuant to 
                subparagraph (A) shall also be exempt from the 
                following provisions of this title and the 
                rules thereunder:
                          (i) Section 8.
                          (ii) Section 11.
                          (iii) Subsections (c)(3), (c)(5), and 
                        (e) of this section.
                          (iv) Section 15B.
                          (v) Section 15C.
                          (vi) Subsections (d), (e), (f), (g), 
                        (h), and (i) of section 17.
          (13) Registration exemption for merger and 
        acquisition brokers.--
                  (A) In general.--Except as provided in 
                subparagraph (B), an M&A; broker shall be exempt 
                from registration under this section.
                  (B) Excluded activities.--An M&A; broker is 
                not exempt from registration under this 
                paragraph if such broker does any of the 
                following:
                          (i) Directly or indirectly, in 
                        connection with the transfer of 
                        ownership of an eligible privately held 
                        company, receives, holds, transmits, or 
                        has custody of the funds or securities 
                        to be exchanged by the parties to the 
                        transaction.
                          (ii) Engages on behalf of an issuer 
                        in a public offering of any class of 
                        securities that is registered, or is 
                        required to be registered, with the 
                        Commission under section 12 or with 
                        respect to which the issuer files, or 
                        is required to file, periodic 
                        information, documents, and reports 
                        under subsection (d).
                          (iii) Engages on behalf of any party 
                        in a transaction involving a public 
                        shell company.
                  (C) Disqualifications.--An M&A; broker is not 
                exempt from registration under this paragraph 
                if such broker is subject to--
                          (i) suspension or revocation of 
                        registration under paragraph (4);
                          (ii) a statutory disqualification 
                        described in section 3(a)(39);
                          (iii) a disqualification under the 
                        rules adopted by the Commission under 
                        section 926 of the Investor Protection 
                        and Securities Reform Act of 2010 (15 
                        U.S.C. 77d note); or
                          (iv) a final order described in 
                        paragraph (4)(H).
                  (D) Rule of construction.--Nothing in this 
                paragraph shall be construed to limit any other 
                authority of the Commission to exempt any 
                person, or any class of persons, from any 
                provision of this title, or from any provision 
                of any rule or regulation thereunder.
                  (E) Definitions.--In this paragraph:
                          (i) Control.--The term ``control'' 
                        means the power, directly or 
                        indirectly, to direct the management or 
                        policies of a company, whether through 
                        ownership of securities, by contract, 
                        or otherwise. There is a presumption of 
                        control for any person who--
                                  (I) is a director, general 
                                partner, member or manager of a 
                                limited liability company, or 
                                officer exercising executive 
                                responsibility (or has similar 
                                status or functions);
                                  (II) has the right to vote 20 
                                percent or more of a class of 
                                voting securities or the power 
                                to sell or direct the sale of 
                                20 percent or more of a class 
                                of voting securities; or
                                  (III) in the case of a 
                                partnership or limited 
                                liability company, has the 
                                right to receive upon 
                                dissolution, or has 
                                contributed, 20 percent or more 
                                of the capital.
                          (ii) Eligible privately held 
                        company.--The term ``eligible privately 
                        held company'' means a privately held 
                        company that meets both of the 
                        following conditions:
                                  (I) The company does not have 
                                any class of securities 
                                registered, or required to be 
                                registered, with the Commission 
                                under section 12 or with 
                                respect to which the company 
                                files, or is required to file, 
                                periodic information, 
                                documents, and reports under 
                                subsection (d).
                                  (II) In the fiscal year 
                                ending immediately before the 
                                fiscal year in which the 
                                services of the M&A; broker are 
                                initially engaged with respect 
                                to the securities transaction, 
                                the company meets either or 
                                both of the following 
                                conditions (determined in 
                                accordance with the historical 
                                financial accounting records of 
                                the company):
                                          (aa) The earnings of 
                                        the company before 
                                        interest, taxes, 
                                        depreciation, and 
                                        amortization are less 
                                        than $25,000,000.
                                          (bb) The gross 
                                        revenues of the company 
                                        are less than 
                                        $250,000,000.
                          (iii) M&A; broker.--The term ``M&A; 
                        broker'' means a broker, and any person 
                        associated with a broker, engaged in 
                        the business of effecting securities 
                        transactions solely in connection with 
                        the transfer of ownership of an 
                        eligible privately held company, 
                        regardless of whether the broker acts 
                        on behalf of a seller or buyer, through 
                        the purchase, sale, exchange, issuance, 
                        repurchase, or redemption of, or a 
                        business combination involving, 
                        securities or assets of the eligible 
                        privately held company, if the broker 
                        reasonably believes that--
                                  (I) upon consummation of the 
                                transaction, any person 
                                acquiring securities or assets 
                                of the eligible privately held 
                                company, acting alone or in 
                                concert, will control and, 
                                directly or indirectly, will be 
                                active in the management of the 
                                eligible privately held company 
                                or the business conducted with 
                                the assets of the eligible 
                                privately held company; and
                                  (II) if any person is offered 
                                securities in exchange for 
                                securities or assets of the 
                                eligible privately held 
                                company, such person will, 
                                prior to becoming legally bound 
                                to consummate the transaction, 
                                receive or have reasonable 
                                access to the most recent 
                                fiscal year-end financial 
                                statements of the issuer of the 
                                securities as customarily 
                                prepared by the management of 
                                the issuer in the normal course 
                                of operations and, if the 
                                financial statements of the 
                                issuer are audited, reviewed, 
                                or compiled, any related 
                                statement by the independent 
                                accountant, a balance sheet 
                                dated not more than 120 days 
                                before the date of the offer, 
                                and information pertaining to 
                                the management, business, 
                                results of operations for the 
                                period covered by the foregoing 
                                financial statements, and 
                                material loss contingencies of 
                                the issuer.
                          (iv) Public shell company.--The term 
                        ``public shell company'' is a company 
                        that at the time of a transaction with 
                        an eligible privately held company--
                                  (I) has any class of 
                                securities registered, or 
                                required to be registered, with 
                                the Commission under section 12 
                                or that is required to file 
                                reports pursuant to subsection 
                                (d);
                                  (II) has no or nominal 
                                operations; and
                                  (III) has--
                                          (aa) no or nominal 
                                        assets;
                                          (bb) assets 
                                        consisting solely of 
                                        cash and cash 
                                        equivalents; or
                                          (cc) assets 
                                        consisting of any 
                                        amount of cash and cash 
                                        equivalents and nominal 
                                        other assets.
                  (F) Inflation adjustment.--
                          (i) In general.--On the date that is 
                        5 years after the date of the enactment 
                        of this paragraph, and every 5 years 
                        thereafter, each dollar amount in 
                        subparagraph (E)(ii)(II) shall be 
                        adjusted by--
                                  (I) dividing the annual value 
                                of the Employment Cost Index 
                                For Wages and Salaries, Private 
                                Industry Workers (or any 
                                successor index), as published 
                                by the Bureau of Labor 
                                Statistics, for the calendar 
                                year preceding the calendar 
                                year in which the adjustment is 
                                being made by the annual value 
                                of such index (or successor) 
                                for the calendar year ending 
                                December 31, 2012; and
                                  (II) multiplying such dollar 
                                amount by the quotient obtained 
                                under subclause (I).
                          (ii) Rounding.--Each dollar amount 
                        determined under clause (i) shall be 
                        rounded to the nearest multiple of 
                        $100,000.
  (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), or any security-
based swap agreement by means of any manipulative, deceptive, 
or other fraudulent device or contrivance.
  (B) No broker, dealer, or municipal securities 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 municipal 
security or any security-based swap agreement involving a 
municipal security by means of any manipulative, deceptive, or 
other fraudulent device or contrivance.
  (C) No government securities broker or government securities 
dealer shall make use of the mails or any means or 
instrumentality of interstate commerce to effect any 
transaction in, or to induce or to attempt to induce the 
purchase or sale of, any government security or any security-
based swap agreement involving a government security by means 
of any manipulative, deceptive, or other fraudulent device or 
contrivance.
  (2)(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 an exempted security or 
commercial paper, bankers' acceptances, or commercial bills) 
otherwise than on a national securities exchange of which it is 
a member, in connection with which such broker or dealer 
engages in any fraudulent, deceptive, or manipulative act or 
practice, or makes any fictitious quotation.
  (B) No broker, dealer, or municipal securities 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 municipal 
security in connection with which such broker, dealer, or 
municipal securities dealer engages in any fraudulent, 
deceptive, or manipulative act or practice, or makes any 
fictitious quotation.
  (C) No government securities broker or government securities 
dealer shall make use of the mails or any means or 
instrumentality of interstate commerce to effect any 
transaction in, or induce or attempt to induce the purchase or 
sale of, any government security in connection with which such 
government securities broker or government securities dealer 
engages in any fraudulent, deceptive, or manipulative act or 
practice, or makes any fictitious quotation.
  (D) The Commission shall, for the purposes of this paragraph, 
by rules and regulations define, and prescribe means reasonably 
designed to prevent, such acts and practices as are fraudulent, 
deceptive, or manipulative and such quotations as are 
fictitious.
  (E) The Commission shall, prior to adopting any rule or 
regulation under subparagraph (C), consult with and consider 
the views of the Secretary of the Treasury and each appropriate 
regulatory agency. If the Secretary of the Treasury or any 
appropriate regulatory agency comments in writing on a proposed 
rule or regulation of the Commission under such subparagraph 
(C) that has been published for comment, the Commission shall 
respond in writing to such written comment before adopting the 
proposed rule. If the Secretary of the Treasury determines, and 
notifies the Commission, that such rule or regulation, if 
implemented, would, or as applied does (i) adversely affect the 
liquidity or efficiency of the market for government 
securities; or (ii) impose any burden on competition not 
necessary or appropriate in furtherance of the purposes of this 
section, the Commission shall, prior to adopting the proposed 
rule or regulation, find that such rule or regulation is 
necessary and appropriate in furtherance of the purposes of 
this section notwithstanding the Secretary's determination.
  (3)(A) No broker or dealer (other than a government 
securities broker or government securities dealer, except a 
registered 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 an exempted security 
(except a government security) or commercial paper, bankers' 
acceptances, or commercial bills) in contravention of such 
rules and regulations as the Commission shall prescribe as 
necessary or appropriate in the public interest or for the 
protection of investors to provide safeguards with respect to 
the financial responsibility and related practices of brokers 
and dealers including, but not limited to, the acceptance of 
custody and use of customers' securities and the carrying and 
use of customers' deposits or credit balances. Such rules and 
regulations shall (A) require the maintenance of reserves with 
respect to customers' deposits or credit balances, and (B) no 
later than September 1, 1975, establish minimum financial 
responsibility requirements for all brokers and dealers.
  (B) Consistent with this title, the Commission, in 
consultation with the Commodity Futures Trading Commission, 
shall issue such rules, regulations, or orders as are necessary 
to avoid duplicative or conflicting regulations applicable to 
any broker or dealer registered with the Commission pursuant to 
section 15(b) (except paragraph (11) thereof), that is also 
registered with the Commodity Futures Trading Commission 
pursuant to section 4f(a) of the Commodity Exchange Act (except 
paragraph (2) thereof), with respect to the application of: (i) 
the provisions of section 8, section 15(c)(3), and section 17 
of this title and the rules and regulations thereunder related 
to the treatment of customer funds, securities, or property, 
maintenance of books and records, financial reporting, or other 
financial responsibility rules, involving security futures 
products; and (ii) similar provisions of the Commodity Exchange 
Act and rules and regulations thereunder involving security 
futures products.
          (C) Notwithstanding any provision of sections 
        2(a)(1)(C)(i) or 4d(a)(2) of the Commodity Exchange Act 
        and the rules and regulations thereunder, and pursuant 
        to an exemption granted by the Commission under section 
        36 of this title or pursuant to a rule or regulation, 
        cash and securities may be held by a broker or dealer 
        registered pursuant to subsection (b)(1) and also 
        registered as a futures commission merchant pursuant to 
        section 4f(a)(1) of the Commodity Exchange Act, in a 
        portfolio margining account carried as a futures 
        account subject to section 4d of the Commodity Exchange 
        Act and the rules and regulations thereunder, pursuant 
        to a portfolio margining program approved by the 
        Commodity Futures Trading Commission, and subject to 
        subchapter IV of chapter 7 of title 11 of the United 
        States Code and the rules and regulations thereunder. 
        The Commission shall consult with the Commodity Futures 
        Trading Commission to adopt rules to ensure that such 
        transactions and accounts are subject to comparable 
        requirements to the extent practicable for similar 
        products.
  (4) If the Commission finds, after notice and opportunity for 
a hearing, that any person subject to the provisions of section 
12, 13, 14, or subsection (d) of section 15 of this title 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.
  (5) No dealer (other than a specialist registered on a 
national securities exchange) acting in the capacity of market 
maker or otherwise 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 an exempted security or a 
municipal security) in contravention of such specified and 
appropriate standards with respect to dealing as the 
Commission, by rule, shall prescribe as necessary or 
appropriate in the public interest and for the protection of 
investors, to maintain fair and orderly markets, or to remove 
impediments to and perfect the mechanism of a national market 
system. Under the rules of the Commission a dealer in a 
security may be prohibited from acting as broker in that 
security.
  (6) 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 an exempted security, 
municipal security, commercial paper, bankers' acceptances, or 
commercial bills) in contravention of such rules and 
regulations as the Commission shall prescribe as necessary or 
appropriate in the public interest and for the protection of 
investors or to perfect or remove impediments to a national 
system for the prompt and accurate clearance and settlement of 
securities transactions, with respect to the time and method 
of, and the form and format of documents used in connection 
with, making settlements of and payments for transactions in 
securities, making transfers and deliveries of securities, and 
closing accounts. Nothing in this paragraph shall be construed 
(A) to affect the authority of the Board of Governors of the 
Federal Reserve System, pursuant to section 7 of this title, to 
prescribe rules and regulations for the purpose of preventing 
the excessive use of credit for the purchase or carrying of 
securities, or (B) to authorize the Commission to prescribe 
rules or regulations for such purpose.
  (7) In connection with any bid for or purchase of a 
government security related to an offering of government 
securities by or on behalf of an issuer, no government 
securities broker, government securities dealer, or bidder for 
or purchaser of securities in such offering shall knowingly or 
willfully make any false or misleading written statement or 
omit any fact necessary to make any written statement made not 
misleading.
  (8) Prohibition of referral fees.--No broker or dealer, or 
person associated with a broker or dealer, may solicit or 
accept, directly or indirectly, remuneration for assisting an 
attorney in obtaining the representation of any person in any 
private action arising under this title or under the Securities 
Act of 1933.
  (d) Supplementary and Periodic Information.--
          (1) In general.--Each issuer which has filed a 
        registration statement containing an undertaking which 
        is or becomes operative under this subsection as in 
        effect prior to the date of enactment of the Securities 
        Acts Amendments of 1964, and each issuer which shall 
        after such date file a registration statement which has 
        become effective pursuant to the Securities Act of 
        1933, as amended, shall file 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, 
        such supplementary and periodic information, documents, 
        and reports as may be required pursuant to section 13 
        of this title in respect of a security registered 
        pursuant to section 12 of this title. The duty to file 
        under this subsection shall be automatically suspended 
        if and so long as any issue of securities of such 
        issuer is registered pursuant to section 12 of this 
        title. The duty to file under this subsection shall 
        also be automatically suspended as to any fiscal year, 
        other than the fiscal year within which such 
        registration statement became effective, if, at the 
        beginning of such fiscal year, the securities of each 
        class, other than any class of asset-backed securities, 
        to which the registration statement relates are held of 
        record by less than [300 persons, or, in the case of a 
        bank, a savings and loan holding company (as defined in 
        section 10 of the Home Owners' Loan Act), or a bank 
        holding company, as such term is defined in section 2 
        of the Bank Holding Company Act of 1956 (12 U.S.C. 
        1841), 1,200 persons persons] 1,200 persons. For the 
        purposes of this subsection, the term ``class'' shall 
        be construed to include all securities of an issuer 
        which are of substantially similar character and the 
        holders of which enjoy substantially similar rights and 
        privileges. The Commission may, for the purpose of this 
        subsection, define by rules and regulations the term 
        ``held of record'' as it deems necessary or appropriate 
        in the public interest or for the protection of 
        investors in order to prevent circumvention of the 
        provisions of this subsection. Nothing in this 
        subsection shall apply to securities issued by a 
        foreign government or political subdivision thereof.
          (2) Asset-backed securities.--
                  (A) Suspension of duty to file.--The 
                Commission may, by rule or regulation, provide 
                for the suspension or termination of the duty 
                to file under this subsection for any class of 
                asset-backed security, on such terms and 
                conditions and for such period or periods as 
                the Commission deems necessary or appropriate 
                in the public interest or for the protection of 
                investors.
                  (B) Classification of issuers.--The 
                Commission may, for purposes of this 
                subsection, classify issuers and prescribe 
                requirements appropriate for each class of 
                issuers of asset-backed securities.
  (e) Notices to Customers Regarding Securities Lending.--Every 
registered broker or dealer shall provide notice to its 
customers that they may elect not to allow their fully paid 
securities to be used in connection with short sales. If a 
broker or dealer uses a customer's securities in connection 
with short sales, the broker or dealer shall provide notice to 
its customer that the broker or dealer may receive compensation 
in connection with lending the customer's securities. The 
Commission, by rule, as it deems necessary or appropriate in 
the public interest and for the protection of investors, may 
prescribe the form, content, time, and manner of delivery of 
any notice required under this paragraph.
  (f) The Commission, by rule, as it deems necessary or 
appropriate in the public interest and for the protection of 
investors or to assure equal regulation, may require any member 
of a national securities exchange not required to register 
under section 15 of this title and any person associated with 
any such member to comply with any provision of this title 
(other than section 15(a)) or the rules or regulations 
thereunder which by its terms regulates or prohibits any act, 
practice, or course of business by a ``broker or dealer'' or 
``registered broker or dealer'' or a ``person associated with a 
broker or dealer,'' respectively.
  (g) Every registered broker or dealer shall establish, 
maintain, and enforce written policies and procedures 
reasonably designed, taking into consideration the nature of 
such broker's or dealer's business, to prevent the misuse in 
violation of this title, or the rules or regulations 
thereunder, of material, nonpublic information by such broker 
or dealer or any person associated with such broker or dealer. 
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.
  (h) Requirements for Transactions in Penny Stocks.--
          (1) In general.--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 penny stock by any customer except in accordance 
        with the requirements of this subsection and the rules 
        and regulations prescribed under this subsection.
          (2) Risk disclosure with respect to penny stocks.--
        Prior to effecting any transaction in any penny stock, 
        a broker or dealer shall give the customer a risk 
        disclosure document that--
                  (A) contains a description of the nature and 
                level of risk in the market for penny stocks in 
                both public offerings and secondary trading;
                  (B) contains a description of the broker's or 
                dealer's duties to the customer and of the 
                rights and remedies available to the customer 
                with respect to violations of such duties or 
                other requirements of Federal securities laws;
                  (C) contains a brief, clear, narrative 
                description of a dealer market, including 
                ``bid'' and ``ask'' prices for penny stocks and 
                the significance of the spread between the bid 
                and ask prices;
                  (D) contains the toll free telephone number 
                for inquiries on disciplinary actions 
                established pursuant to section 15A(i) of this 
                title;
                  (E) defines significant terms used in the 
                disclosure document or in the conduct of 
                trading in penny stocks; and
                  (F) contains such other information, and is 
                in such form (including language, type size, 
                and format), as the Commission shall require by 
                rule or regulation.
          (3) Commission rules relating to disclosure.--The 
        Commission shall adopt rules setting forth additional 
        standards for the disclosure by brokers and dealers to 
        customers of information concerning transactions in 
        penny stocks. Such rules--
                  (A) shall require brokers and dealers to 
                disclose to each customer, prior to effecting 
                any transaction in, and at the time of 
                confirming any transaction with respect to any 
                penny stock, in accordance with such procedures 
                and methods as the Commission may require 
                consistent with the public interest and the 
                protection of investors--
                          (i) the bid and ask prices for penny 
                        stock, or such other information as the 
                        Commission may, by rule, require to 
                        provide customers with more useful and 
                        reliable information relating to the 
                        price of such stock;
                          (ii) the number of shares to which 
                        such bid and ask prices apply, or other 
                        comparable information relating to the 
                        depth and liquidity of the market for 
                        such stock; and
                          (iii) the amount and a description of 
                        any compensation that the broker or 
                        dealer and the associated person 
                        thereof will receive or has received in 
                        connection with such transaction;
                  (B) shall require brokers and dealers to 
                provide, to each customer whose account with 
                the broker or dealer contains penny stocks, a 
                monthly statement indicating the market value 
                of the penny stocks in that account or 
                indicating that the market value of such stock 
                cannot be determined because of the 
                unavailability of firm quotes; and
                  (C) may, as the Commission finds necessary or 
                appropriate in the public interest or for the 
                protection of investors, require brokers and 
                dealers to disclose to customers additional 
                information concerning transactions in penny 
                stocks.
          (4) Exemptions.--The Commission, as it determines 
        consistent with the public interest and the protection 
        of investors, may by rule, regulation, or order exempt 
        in whole or in part, conditionally or unconditionally, 
        any person or class of persons, or any transaction or 
        class of transactions, from the requirements of this 
        subsection. Such exemptions shall include an exemption 
        for brokers and dealers based on the minimal percentage 
        of the broker's or dealer's commissions, commission-
        equivalents, and markups received from transactions in 
        penny stocks.
          (5) Regulations.--It shall be unlawful for any person 
        to violate such rules and regulations as the Commission 
        shall prescribe in the public interest or for the 
        protection of investors or to maintain fair and orderly 
        markets--
                  (A) as necessary or appropriate to carry out 
                this subsection; or
                  (B) as reasonably designed to prevent 
                fraudulent, deceptive, or manipulative acts and 
                practices with respect to penny stocks.
  (i) Limitations on State Law.--
          (1) Capital, margin, books and records, bonding, and 
        reports.--No law, rule, regulation, or order, or other 
        administrative action of any State or political 
        subdivision thereof shall establish capital, custody, 
        margin, financial responsibility, making and keeping 
        records, bonding, or financial or operational reporting 
        requirements for brokers, dealers, municipal securities 
        dealers, government securities brokers, or government 
        securities dealers that differ from, or are in addition 
        to, the requirements in those areas established under 
        this title. The Commission shall consult periodically 
        the securities commissions (or any agency or office 
        performing like functions) of the States concerning the 
        adequacy of such requirements as established under this 
        title.
          (2) Funding portals.--
                  (A) Limitation on state laws.--Except as 
                provided in subparagraph (B), no State or 
                political subdivision thereof may enforce any 
                law, rule, regulation, or other administrative 
                action against a registered funding portal with 
                respect to its business as such.
                  (B) Examination and enforcement authority.--
                Subparagraph (A) does not apply with respect to 
                the examination and enforcement of any law, 
                rule, regulation, or administrative action of a 
                State or political subdivision thereof in which 
                the principal place of business of a registered 
                funding portal is located, provided that such 
                law, rule, regulation, or administrative action 
                is not in addition to or different from the 
                requirements for registered funding portals 
                established by the Commission.
                  (C) Definition.--For purposes of this 
                paragraph, the term ``State'' includes the 
                District of Columbia and the territories of the 
                United States.
          (3) De minimis transactions by associated persons.--
        No law, rule, regulation, or order, or other 
        administrative action of any State or political 
        subdivision thereof may prohibit an associated person 
        of a broker or dealer from effecting a transaction 
        described in paragraph (3) for a customer in such State 
        if--
                  (A) such associated person is not ineligible 
                to register with such State for any reason 
                other than such a transaction;
                  (B) such associated person is registered with 
                a registered securities association and at 
                least one State; and
                  (C) the broker or dealer with which such 
                person is associated is registered with such 
                State.
          (4) Described transactions.--
                  (A) In general.--A transaction is described 
                in this paragraph if--
                          (i) such transaction is effected--
                                  (I) on behalf of a customer 
                                that, for 30 days prior to the 
                                day of the transaction, 
                                maintained an account with the 
                                broker or dealer; and
                                  (II) by an associated person 
                                of the broker or dealer--
                                          (aa) to which the 
                                        customer was assigned 
                                        for 14 days prior to 
                                        the day of the 
                                        transaction; and
                                          (bb) who is 
                                        registered with a State 
                                        in which the customer 
                                        was a resident or was 
                                        present for at least 30 
                                        consecutive days during 
                                        the 1-year period prior 
                                        to the day of the 
                                        transaction; or
                          (ii) the transaction is effected--
                                  (I) on behalf of a customer 
                                that, for 30 days prior to the 
                                day of the transaction, 
                                maintained an account with the 
                                broker or dealer; and
                                  (II) during the period 
                                beginning on the date on which 
                                such associated person files an 
                                application for registration 
                                with the State in which the 
                                transaction is effected and 
                                ending on the earlier of--
                                          (aa) 60 days after 
                                        the date on which the 
                                        application is filed; 
                                        or
                                          (bb) the date on 
                                        which such State 
                                        notifies the associated 
                                        person that it has 
                                        denied the application 
                                        for registration or has 
                                        stayed the pendency of 
                                        the application for 
                                        cause.
                  (B) Rules of construction.--For purposes of 
                subparagraph (A)(i)(II)--
                          (i) each of up to 3 associated 
                        persons of a broker or dealer who are 
                        designated to effect transactions 
                        during the absence or unavailability of 
                        the principal associated person for a 
                        customer may be treated as an 
                        associated person to which such 
                        customer is assigned; and
                          (ii) if the customer is present in 
                        another State for 30 or more 
                        consecutive days or has permanently 
                        changed his or her residence to another 
                        State, a transaction is not described 
                        in this paragraph, unless the 
                        associated person of the broker or 
                        dealer files an application for 
                        registration with such State not later 
                        than 10 business days after the later 
                        of the date of the transaction, or the 
                        date of the discovery of the presence 
                        of the customer in the other State for 
                        30 or more consecutive days or the 
                        change in the customer's residence.
  (j) Rulemaking To Extend Requirements to New Hybrid 
Products.--
          (1) Consultation.--Prior to commencing a rulemaking 
        under this subsection, the Commission shall consult 
        with and seek the concurrence of the Board concerning 
        the imposition of broker or dealer registration 
        requirements with respect to any new hybrid product. In 
        developing and promulgating rules under this 
        subsection, the Commission shall consider the views of 
        the Board, including views with respect to the nature 
        of the new hybrid product; the history, purpose, 
        extent, and appropriateness of the regulation of the 
        new product under the Federal banking laws; and the 
        impact of the proposed rule on the banking industry.
          (2) Limitation.--The Commission shall not--
                  (A) require a bank to register as a broker or 
                dealer under this section because the bank 
                engages in any transaction in, or buys or 
                sells, a new hybrid product; or
                  (B) bring an action against a bank for a 
                failure to comply with a requirement described 
                in subparagraph (A),
        unless the Commission has imposed such requirement by 
        rule or regulation issued in accordance with this 
        section.
          (3) Criteria for rulemaking.--The Commission shall 
        not impose a requirement under paragraph (2) of this 
        subsection with respect to any new hybrid product 
        unless the Commission determines that--
                  (A) the new hybrid product is a security; and
                  (B) imposing such requirement is necessary 
                and appropriate in the public interest and for 
                the protection of investors.
          (4) Considerations.--In making a determination under 
        paragraph (3), the Commission shall consider--
                  (A) the nature of the new hybrid product; and
                  (B) the history, purpose, extent, and 
                appropriateness of the regulation of the new 
                hybrid product under the Federal securities 
                laws and under the Federal banking laws.
          (5) Objection to commission regulation.--
                  (A) Filing of petition for review.--The Board 
                may obtain review of any final regulation 
                described in paragraph (2) in the United States 
                Court of Appeals for the District of Columbia 
                Circuit by filing in such court, not later than 
                60 days after the date of publication of the 
                final regulation, a written petition requesting 
                that the regulation be set aside. Any 
                proceeding to challenge any such rule shall be 
                expedited by the Court of Appeals.
                  (B) Transmittal of petition and record.--A 
                copy of a petition described in subparagraph 
                (A) shall be transmitted as soon as possible by 
                the Clerk of the Court to an officer or 
                employee of the Commission designated for that 
                purpose. Upon receipt of the petition, the 
                Commission shall file with the court the 
                regulation under review and any documents 
                referred to therein, and any other relevant 
                materials prescribed by the court.
                  (C) Exclusive jurisdiction.--On the date of 
                the filing of the petition under subparagraph 
                (A), the court has jurisdiction, which becomes 
                exclusive on the filing of the materials set 
                forth in subparagraph (B), to affirm and 
                enforce or to set aside the regulation at 
                issue.
                  (D) Standard of review.--The court shall 
                determine to affirm and enforce or set aside a 
                regulation of the Commission under this 
                subsection, based on the determination of the 
                court as to whether--
                          (i) the subject product is a new 
                        hybrid product, as defined in this 
                        subsection;
                          (ii) the subject product is a 
                        security; and
                          (iii) imposing a requirement to 
                        register as a broker or dealer for 
                        banks engaging in transactions in such 
                        product is appropriate in light of the 
                        history, purpose, and extent of 
                        regulation under the Federal securities 
                        laws and under the Federal banking 
                        laws, giving deference neither to the 
                        views of the Commission nor the Board.
                  (E) Judicial stay.--The filing of a petition 
                by the Board pursuant to subparagraph (A) shall 
                operate as a judicial stay, until the date on 
                which the determination of the court is final 
                (including any appeal of such determination).
                  (F) Other authority to challenge.--Any 
                aggrieved party may seek judicial review of the 
                Commission's rulemaking under this subsection 
                pursuant to section 25 of this title.
          (6) Definitions.--For purposes of this subsection:
                  (A) New hybrid product.--The term ``new 
                hybrid product'' means a product that--
                          (i) was not subjected to regulation 
                        by the Commission as a security prior 
                        to the date of the enactment of the 
                        Gramm-Leach-Bliley Act;
                          (ii) is not an identified banking 
                        product as such term is defined in 
                        section 206 of such Act; and
                          (iii) is not an equity swap within 
                        the meaning of section 206(a)(6) of 
                        such Act.
                  (B) Board.--The term ``Board'' means the 
                Board of Governors of the Federal Reserve 
                System.
  (k) Registration or Succession to a United States Broker or 
Dealer.--In determining whether to permit a foreign person or 
an affiliate of a foreign person to register as a United States 
broker or dealer, or succeed to the registration of a United 
States broker or dealer, the Commission may consider whether, 
for a foreign person, or an affiliate of a foreign person that 
presents a risk to the stability of the United States financial 
system, the home country of the foreign person has adopted, or 
made demonstrable progress toward adopting, an appropriate 
system of financial regulation to mitigate such risk.
  (l) Termination of a United States Broker or Dealer.--For a 
foreign person or an affiliate of a foreign person that 
presents such a risk to the stability of the United States 
financial system, the Commission may determine to terminate the 
registration of such foreign person or an affiliate of such 
foreign person as a broker or dealer in the United States, if 
the Commission determines that the home country of the foreign 
person has not adopted, or made demonstrable progress toward 
adopting, an appropriate system of financial regulation to 
mitigate such risk.
  (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 adviser 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 the 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) Disclosures to Retail Investors.--
          (1) In general.--Notwithstanding any other provision 
        of the securities laws, the Commission may issue rules 
        designating documents or information that shall be 
        provided by a broker or dealer to a retail investor 
        before the purchase of an investment product or service 
        by the retail investor.
          (2) Considerations.--In developing any rules under 
        paragraph (1), the Commission shall consider whether 
        the rules will promote investor protection, efficiency, 
        competition, and capital formation.
          (3) Form and contents of documents and information.--
        Any documents or information designated under a rule 
        promulgated under paragraph (1) shall--
                  (A) be in a summary format; and
                  (B) contain clear and concise information 
                about--
                          (i) investment objectives, 
                        strategies, costs, and risks; and
                          (ii) any compensation or other 
                        financial incentive received by a 
                        broker, dealer, or other intermediary 
                        in connection with the purchase of 
                        retail investment products.
  (o) 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.
  [(k)] (q) Standard of Conduct.--
          (1) In general.--Notwithstanding any other provision 
        of this Act or the Investment Advisers Act of 1940, the 
        Commission may 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 section 211 
        of 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. Nothing in this 
        section shall require a broker or dealer or registered 
        representative to have a continuing duty of care or 
        loyalty to the customer after providing personalized 
        investment advice about securities.
          (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 may 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) Requirements prior to rulemaking.--The Commission 
        shall not promulgate a rule pursuant to paragraph (1) 
        before providing 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 whether--
                  (A) retail investors (and such other 
                customers as the Commission may provide) are 
                being harmed due to brokers or dealers 
                operating under different standards of conduct 
                than those that apply to investment advisors 
                under section 211 of the Investment Advisers 
                Act of 1940 (15 U.S.C. 80b-11);
                  (B) alternative remedies will reduce any 
                confusion or harm to retail investors due to 
                brokers or dealers operating under different 
                standards of conduct than those standards that 
                apply to investment advisors under section 211 
                of the Investment Advisers Act of 1940 (15 
                U.S.C. 80b-11), including--
                          (i) simplifying the titles used by 
                        brokers, dealers, and investment 
                        advisers; and
                          (ii) enhancing disclosure surrounding 
                        the different standards of conduct 
                        currently applicable to brokers, 
                        dealers, and investment advisers;
                  (C) the adoption of a uniform fiduciary 
                standard of conduct for brokers, dealers, and 
                investment advisors would adversely impact the 
                commissions of brokers and dealers, the 
                availability of proprietary products offered by 
                brokers and dealers, and the ability of brokers 
                and dealers to engage in principal transactions 
                with customers; and
                  (D) the adoption of a uniform fiduciary 
                standard of conduct for brokers or dealers and 
                investment advisors would adversely impact 
                retail investor access to personalized and 
                cost-effective investment advice, 
                recommendations about securities, or the 
                availability of such advice and 
                recommendations.
          (4) Economic analysis.--The Commission's conclusions 
        contained in the report described in paragraph (3) 
        shall be supported by economic analysis.
          (5) Requirements for promulgating a rule.--The 
        Commission shall publish in the Federal Register 
        alongside the rule promulgated pursuant to paragraph 
        (1) formal findings that such rule would reduce 
        confusion or harm to retail customers (and such other 
        customers as the Commission may by rule provide) due to 
        different standards of conduct applicable to brokers, 
        dealers, and investment advisors.
          (6) Requirements under investment advisers act of 
        1940.--In proposing rules under paragraph (1) for 
        brokers or dealers, the Commission shall consider the 
        differences in the registration, supervision, and 
        examination requirements applicable to brokers, 
        dealers, and investment advisors.
  [(l)] (r) 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.
  [(j)] (p) The authority of the Commission under this section 
with respect to security-based swap agreements shall be subject 
to the restrictions and limitations of section 3A(b) of this 
title.

           *       *       *       *       *       *       *


                          municipal securities

  Sec. 15B. (a)(1)(A) It shall be unlawful for any municipal 
securities dealer (other than one registered as a broker or 
dealer under section 15 of this title) to 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 municipal security unless such 
municipal securities dealer is registered in accordance with 
this subsection.
                  (B) It shall be unlawful for a municipal 
                advisor to provide advice to or on behalf of a 
                municipal entity or obligated person with 
                respect to municipal financial products or the 
                issuance of municipal securities, or to 
                undertake a solicitation of a municipal entity 
                or obligated person, unless the municipal 
                advisor is registered in accordance with this 
                subsection.
  (2) A municipal securities dealer or municipal advisor may be 
registered by filing with the Commission an application for 
registration in such form and containing such information and 
documents concerning such municipal securities dealer or 
municipal advisor and any person associated with such municipal 
securities dealer or municipal advisor 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) 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 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 
        Commission may extend the time for the 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 the registration of a municipal 
securities dealer or municipal advisor 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 subsection (c) of this section.
  (3) Any provision of this title (other than section 5 or 
paragraph (1) of this subsection) 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 securities dealer or 
municipal advisor or any person acting on behalf of such 
municipal securities dealer or municipal advisor, irrespective 
of any use of the mails or any means or instrumentality of 
interstate commerce in connection therewith.
  (4) The Commission, by rule or order, upon its own motion or 
upon application, may conditionally or unconditionally exempt 
any broker, dealer, municipal securities dealer, or municipal 
advisor, or class of brokers, dealers, municipal securities 
dealers, or municipal advisors from any provision of this 
section or the rules or regulations thereunder, if the 
Commission finds that such exemption is consistent with the 
public interest, the protection of investors, and the purposes 
of this section.
          (5) No municipal advisor shall make use of the mails 
        or any means or instrumentality of interstate commerce 
        to provide advice to or on behalf of a municipal entity 
        or obligated person with respect to municipal financial 
        products, the issuance of municipal securities, or to 
        undertake a solicitation of a municipal entity or 
        obligated person, in connection with which such 
        municipal advisor engages in any fraudulent, deceptive, 
        or manipulative act or practice.
  (b)(1) The Municipal Securities Rulemaking Board shall be 
composed of 15 members, or such other number of members as 
specified by rules of the Board pursuant to paragraph (2)(B),, 
which shall perform the duties set forth in this section. The 
members of the Board shall serve as members for a term of 3 
years or for such other terms as specified by rules of the 
Board pursuant to paragraph (2)(B), and shall consist of (A) 8 
individuals who are independent of any municipal securities 
broker, municipal securities dealer, or municipal advisor, at 
least 1 of whom shall be representative of institutional or 
retail investors in municipal securities, at least 1 of whom 
shall be representative of municipal entities, and at least 1 
of whom shall be a member of the public with knowledge of or 
experience in the municipal industry (which members are 
hereinafter referred to as ``public representatives''); and (B) 
7 individuals who are associated with a broker, dealer, 
municipal securities dealer, or municipal advisor, including at 
least 1 individual who is associated with and representative of 
brokers, dealers, or municipal securities dealers that are not 
banks or subsidiaries or departments or divisions of banks 
(which members are hereinafter referred to as ``broker-dealer 
representatives''), at least 1 individual who is 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''), and at least 1 individual who is associated 
with a municipal advisor (which members are hereinafter 
referred to as ``advisor representatives'' and, together with 
the broker-dealer representatives and the bank representatives, 
are referred to as ``regulated representatives''). Each member 
of the board shall be knowledgeable of matters related to the 
municipal securities markets. 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.
  (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 and advice provided to or on 
behalf of municipal entities or obligated persons by brokers, 
dealers, municipal securities dealers, and municipal advisors 
with respect to municipal financial products, the issuance of 
municipal securities, and solicitations of municipal entities 
or obligated persons undertaken by brokers, dealers, municipal 
securities dealers, and municipal advisors. The rules of the 
Board, as a minimum, shall:
          (A) provide that no municipal securities broker or 
        municipal securities dealer shall effect any 
        transaction in, or induce or attempt to induce the 
        purchase or sale of, any municipal security, and no 
        broker, dealer, municipal securities dealer, or 
        municipal advisor shall provide advice to or on behalf 
        of a municipal entity or obligated person with respect 
        to municipal financial products or the issuance of 
        municipal securities, unless such municipal securities 
        broker or municipal securities dealer meets such 
        standards of operational capability and such municipal 
        securities broker or municipal securities dealer and 
        every natural person associated with such municipal 
        securities broker or municipal securities dealer meets 
        such standards of training, experience, competence, and 
        such other qualifications as the Board finds necessary 
        or appropriate in the public interest or for the 
        protection of investors and municipal entities or 
        obligated persons. In connection with the definition 
        and application of such standards the Board may--
                  (i) appropriately classify municipal 
                securities brokers, municipal securities 
                dealers, and municipal advisors (taking into 
                account relevant matters, including types of 
                business done, nature of securities other than 
                municipal securities sold, and character of 
                business organization), and persons associated 
                with municipal securities brokers, municipal 
                securities dealers, and municipal advisors;
                  (ii) specify that all or any portion of such 
                standards shall be applicable to any such 
                class; and
                  (iii) require persons in any such class to 
                pass tests administered in accordance with 
                subsection (c)(7) of this section.
          (B) establish fair procedures for the nomination and 
        election of members of the Board and assure fair 
        representation in such nominations and elections of 
        public representatives, broker dealer representatives, 
        bank representatives, and advisor representatives. Such 
        rules--
                  (i) shall provide that the number of public 
                representatives of the Board shall at all times 
                exceed the total number of regulated 
                representatives and that the membership shall 
                at all times be as evenly divided in number as 
                possible between public representatives and 
                regulated representatives;
                  (ii) shall specify the length or lengths of 
                terms members shall serve;
                  (iii) may increase the number of members 
                which shall constitute the whole Board, 
                provided that such number is an odd number; and
                  (iv) shall establish requirements regarding 
                the independence of public representatives.
          (C) be designed to prevent fraudulent and 
        manipulative acts and practices, to promote just and 
        equitable principles of trade, to foster cooperation 
        and coordination with persons engaged in regulating, 
        clearing, settling, processing information with respect 
        to, and facilitating transactions in municipal 
        securities and municipal financial products, to remove 
        impediments to and perfect the mechanism of a free and 
        open market in municipal securities and municipal 
        financial products, and, in general, to protect 
        investors, municipal entities, obligated persons, and 
        the public interest; and not be designed to permit 
        unfair discrimination among customers, municipal 
        entities, obligated persons, municipal securities 
        brokers, municipal securities dealers, or municipal 
        advisors, to fix minimum profits, to impose any 
        schedule or fix rates of commissions, allowances, 
        discounts, or other fees to be charged by municipal 
        securities brokers, municipal securities dealers, or 
        municipal advisors, to regulate by virtue of any 
        authority conferred by this title matters not related 
        to the purpose of this title or the administration of 
        the Board, or to impose any burden on competition not 
        necessary or appropriate in furtherance of the purposes 
        of this title.
          (D) if the Board deems appropriate, provide for the 
        arbitration of claims, disputes, and controversies 
        relating to transactions in municipal securities and 
        advice concerning municipal financial products: 
        Provided, however, that no person other than a 
        municipal securities broker, municipal securities 
        dealer, municipal advisor, or person associated with 
        such a municipal securities broker, municipal 
        securities dealer, or municipal advisor may be 
        compelled to submit to such arbitration except at his 
        instance and in accordance with section 29 of this 
        title.
          (E) provide for the periodic examination in 
        accordance with subsection (c)(7) of this section of 
        municipal securities brokers, municipal securities 
        dealers, and municipal advisors to determine compliance 
        with applicable provisions of this title, the rules and 
        regulations thereunder, and the rules of the Board. 
        Such rules shall specify the minimum scope and 
        frequency of such examinations and shall be designed to 
        avoid unnecessary regulatory duplication or undue 
        regulatory burdens for any such municipal securities 
        broker, municipal securities dealer, or municipal 
        advisor.
          (F) include provisions governing the form and content 
        of quotations relating to municipal securities which 
        may be distributed or published by any municipal 
        securities broker, municipal securities dealer, or 
        person associated with such a municipal securities 
        broker or municipal securities dealer, and the persons 
        to whom such quotations may be supplied. Such rules 
        relating to quotations shall be designed to produce 
        fair and informative quotations, to prevent fictitious 
        or misleading quotations, and to promote orderly 
        procedures for collecting, distributing, and publishing 
        quotations.
          (G) prescribe records to be made and kept by 
        municipal securities brokers, municipal securities 
        dealers, and municipal advisors and the periods for 
        which such records shall be preserved.
          (H) define the term ``separately identifiable 
        department or division'', as that term is used in 
        section 3(a)(30) of this title, in accordance with 
        specified and appropriate standards to assure that a 
        bank is not deemed to be engaged in the business of 
        buying and selling municipal securities through a 
        separately identifiable department or division unless 
        such department or division is organized and 
        administered so as to permit independent examination 
        and enforcement of applicable provisions of this title, 
        the rules and regulations thereunder, and the rules of 
        the Board. A separately identifiable department or 
        division of a bank may be engaged in activities other 
        than those relating to municipal securities.
          (I) provide for the operation and administration of 
        the Board, including the selection of a Chairman from 
        among the members of the Board, the compensation of the 
        members of the Board, and the appointment and 
        compensation of such employees, attorneys, and 
        consultants as may be necessary or appropriate to carry 
        out the Board's functions under this section.
          (J) provide that each municipal securities broker, 
        municipal securities dealer, and municipal advisor 
        shall pay to the Board such reasonable fees and charges 
        as may be necessary or appropriate to defray the costs 
        and expenses of operating and administering the Board. 
        Such rules shall specify the amount of such fees and 
        charges, which may include charges for failure to 
        submit to the Board, or to any information system 
        operated by the Board, within the prescribed 
        timeframes, any items of information or documents 
        required to be submitted under any rule issued by the 
        Board.
          (K) establish the terms and conditions under which 
        any broker, dealer, or municipal securities dealer may 
        sell, or prohibit any broker, dealer, or municipal 
        securities dealer from selling, any part of a new issue 
        of municipal securities to a related account of a 
        broker, dealer, or municipal securities dealer during 
        the underwriting period.
          (L) with respect to municipal advisors--
                  (i) prescribe means reasonably designed to 
                prevent acts, practices, and courses of 
                business as are not consistent with a municipal 
                advisor's fiduciary duty to its clients;
                  (ii) provide continuing education 
                requirements for municipal advisors;
                  (iii) provide professional standards; and
                  (iv) not impose a regulatory burden on small 
                municipal advisors that is not necessary or 
                appropriate in the public interest and for the 
                protection of investors, municipal entities, 
                and obligated persons, provided that there is 
                robust protection of investors against fraud.
          (3) The Board, in conjunction with or on behalf of 
        any Federal financial regulator or self-regulatory 
        organization, may--
                  (A) establish information systems; and
                  (B) assess such reasonable fees and charges 
                for the submission of information to, or the 
                receipt of information from, such systems from 
                any persons which systems may be developed for 
                the purposes of serving as a repository of 
                information from municipal market participants 
                or otherwise in furtherance of the purposes of 
                the Board, a Federal financial regulator, or a 
                self-regulatory organization, except that the 
                Board--
                          (i) may not charge a fee to municipal 
                        entities or obligated persons to submit 
                        documents or other information to the 
                        Board or charge a fee to any person to 
                        obtain, directly from the Internet site 
                        of the Board, documents or information 
                        submitted by municipal entities, 
                        obligated persons, brokers, dealers, 
                        municipal securities dealers, or 
                        municipal advisors, including documents 
                        submitted under the rules of the Board 
                        or the Commission; and
                          (ii) shall not be prohibited from 
                        charging commercially reasonable fees 
                        for automated subscription-based feeds 
                        or similar services, or for charging 
                        for other data or document-based 
                        services customized upon request of any 
                        person, made available to commercial 
                        enterprises, municipal securities 
                        market professionals, or the general 
                        public, whether delivered through the 
                        Internet or any other means, that 
                        contain all or part of the documents or 
                        information, subject to approval of the 
                        fees by the Commission under section 
                        19(b).
          (4) The Board may provide guidance and assistance in 
        the enforcement of, and examination for, compliance 
        with the rules of the Board to the Commission, a 
        registered securities association under section 15A, or 
        any other appropriate regulatory agency, as applicable.
          (5) The Board, the Commission, and a registered 
        securities association under section 15A, or the 
        designees of the Board, the Commission, or such 
        association, shall meet not less frequently than 2 
        times a year--
                  (A) to describe the work of the Board, the 
                Commission, and the registered securities 
                association involving the regulation of 
                municipal securities; and
                  (B) to share information about--
                          (i) the interpretation of the Board, 
                        the Commission, and the registered 
                        securities association of Board rules; 
                        and
                          (ii) examination and enforcement of 
                        compliance with Board rules.
  (7) Nothing in this section shall be construed to impair or 
limit the power of the Commission under this title.
  (c)(1) No broker, dealer, or municipal securities 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 municipal 
security, and no broker, dealer, municipal securities dealer, 
or municipal advisor shall make use of the mails or any means 
or instrumentality of interstate commerce to provide advice to 
or on behalf of a municipal entity or obligated person with 
respect to municipal financial products, the issuance of 
municipal securities, or to undertake a solicitation of a 
municipal entity or obligated person, in contravention of any 
rule of the Board. A municipal advisor and any person 
associated with such municipal advisor shall be deemed to have 
a fiduciary duty to any municipal entity for whom such 
municipal advisor acts as a municipal advisor, and no municipal 
advisor may engage in any act, practice, or course of business 
which is not consistent with a municipal advisor's fiduciary 
duty or that is in contravention of any rule of the Board.
  (2) The Commission, by order, shall censure, place 
limitations on the activities, functions, or operations, 
suspend for a period not exceeding twelve months, or revoke the 
registration of any municipal securities dealer or municipal 
advisor, if it finds, on the record after notice and 
opportunity for hearing, that such censure, placing of 
limitations, denial, suspension, or revocation, is in the 
public interest and that such municipal securities dealer or 
municipal advisor 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 ten years of the 
commencement of the proceedings under this paragraph, or is 
enjoined from any action, conduct, or practice specified in 
subparagraph (C) or such paragraph (4).
  (3) Pending final determination whether any registration 
under this section 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 or municipal entities or obligated 
person. Any registered municipal securities dealer or municipal 
advisor may, upon such terms and conditions as the Commission 
may deem necessary in the public interest or for the protection 
of investors or municipal entities or obligated person, 
withdraw from registration by filing a written notice of 
withdrawal with the Commission. If the Commission finds that 
any registered municipal securities dealer or municipal advisor 
is no longer in existence or has ceased to do business as a 
municipal securities dealer or municipal advisor, the 
Commission, by order, shall cancel the registration of such 
municipal securities dealer or municipal advisor.
  (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 12 months or bar any such person from 
being associated with a broker, dealer, investment adviser, 
municipal securities dealer, municipal advisor, 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.
  (5) With respect to any municipal securities dealer for which 
the Commission is not the appropriate regulatory agency, the 
appropriate regulatory agency for such municipal securities 
dealer may sanction any such municipal securities dealer in the 
manner and for the reasons specified in paragraph (2) of this 
subsection and any person associated with such municipal 
securities dealer in the manner and for the reasons specified 
in paragraph (4) of this subsection. In addition, such 
appropriate regulatory agency may, in accordance with section 8 
of the Federal Deposit Insurance Act (12 U.S.C. 1818), enforce 
compliance by such municipal securities dealer or any person 
associated with such municipal securities dealer with the 
provisions of this section, section 17 of this title, the rules 
of the Board, and the rules of the Commission pertaining to 
municipal securities dealers, persons associated with municipal 
securities dealers, and transactions in municipal securities. 
For purposes of the preceding sentence, any violation of any 
such provision shall constitute adequate basis for the issuance 
of any order under section 8(b) or 8(c) of the Federal Deposit 
Insurance Act, and the customers of any such municipal 
securities dealer shall be deemed to be ``depositors'' as that 
term is used in section 8(c) of that Act. Nothing in this 
paragraph shall be construed to affect in any way the powers of 
such appropriate regulatory agency to proceed against such 
municipal securities dealer under any other provision of law.
  (6)(A) The Commission, prior to the entry of an order of 
investigation, or commencement of any proceedings, against any 
municipal securities dealer, or person associated with any 
municipal securities dealer, for which the Commission is not 
the appropriate regulatory agency, for violation of any 
provision of this section, section 15(c)(1) or 15(c)(2) of this 
title, any rule or regulation under any such section or any 
rule of the Board, shall (i) give notice to the appropriate 
regulatory agency for such municipal securities dealer of the 
identity of such municipal securities dealer or person 
associated with such municipal securities dealer, the nature of 
and basis for such proposed action, and whether the Commission 
is seeking a monetary penalty against such municipal securities 
dealer or such associated person pursuant to section 21B of 
this title; and (ii) consult with such appropriate regulatory 
agency concerning the effect of such proposed action on sound 
banking practices and the feasibility and desirability of 
coordinating such action with any proceeding or proposed 
proceeding by such appropriate regulatory agency against such 
municipal securities dealer or associated person.
  (B) The appropriate regulatory agency for a municipal 
securities dealer (if other than the Commission), prior to the 
entry of an order of investigation, or commencement of any 
proceedings, against such municipal securities dealer or person 
associated with such municipal securities dealer, for violation 
of any provision of this section, the rules of the Board, or 
the rules or regulations of the Commission pertaining to 
municipal securities dealers, persons associated with municipal 
securities dealers, or transactions in municipal securities 
shall (i) give notice to the Commission of the identity of such 
municipal securities dealer or person associated with such 
municipal securities dealer and the nature of and basis for 
such proposed action and (ii) consult with the Commission 
concerning the effect of such proposed action on the protection 
of investors or municipal entities or obligated person and the 
feasibility and desirability of coordinating such action with 
any proceeding or proposed proceeding by the Commission against 
such municipal securities dealer or associated person.
  (C) Nothing in this paragraph shall be construed to impair or 
limit (other than by the requirement of prior consultation) the 
power of the Commission or the appropriate regulatory agency 
for a municipal securities dealer to initiate any action of a 
class described in this paragraph or to affect in any way the 
power of the Commission or such appropriate regulatory agency 
to initiate any other action pursuant to this title or any 
other provision of law.
  (7)(A) Tests required pursuant to subsection (b)(2)(A)(iii) 
of this section shall be administered by or on behalf of and 
periodic examinations pursuant to subsection (b)(2)(E) of this 
section shall be conducted by--
          (i) a registered securities association, in the case 
        of municipal securities brokers and municipal 
        securities dealers who are members of such association;
          (ii) the appropriate regulatory agency for any 
        municipal securities broker or municipal securities 
        dealer, in the case of all other municipal securities 
        brokers and municipal securities dealers; and
                  (iii) the Commission, or its designee, in the 
                case of municipal advisors.
  (B) A registered securities association shall make a report 
of any examination conducted pursuant to subsection (b)(2)(E) 
of this section and promptly furnish the Commission a copy 
thereof and any data supplied to it in connection with such 
examination. Subject to such limitations as the Commission, by 
rule, determines to be necessary or appropriate in the public 
interest or for the protection of investors or municipal 
entities or obligated person, the Commission shall, on request, 
make available to the Board a copy of any report of an 
examination of a municipal securities broker or municipal 
securities dealer made by or furnished to the Commission 
pursuant to this paragraph or section 17(c)(3) of this title.
  (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 person who is, or at the time of the alleged violation or 
abuse 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.
          [(9)(A) Fines collected by the Commission for 
        violations of the rules of the Board shall be equally 
        divided between the Commission and the Board.
          [(B) Fines collected by a registered securities 
        association under section 15A(7) with respect to 
        violations of the rules of the Board shall be accounted 
        for by such registered securities association 
        separately from other fines collected under section 
        15A(7) and shall be allocated between such registered 
        securities association and the Board, and such 
        allocation shall require the registered securities 
        association to pay to the Board \1/3\ of all fines 
        collected by the registered securities association 
        reasonably allocable to violations of the rules of the 
        Board, or such other portion of such fines as may be 
        directed by the Commission upon agreement between the 
        registered securities association and the Board.]
  (9) Fines collected for violations of the rules of the Board 
shall be deposited and credited as general revenue of the 
Treasury, except as otherwise provided in section 308 of the 
Sarbanes-Oxley Act of 2002 or section 21F of this title.
  (d)(1) Neither the Commission nor the Board is authorized 
under this title, by rule or regulation, to require any issuer 
of municipal securities, directly or indirectly through a 
purchaser or prospective purchaser of securities from the 
issuer, to file with the Commission or the Board prior to the 
sale of such securities by the issuer any application, report, 
or document in connection with the issuance, sale, or 
distribution of such securities.
  (2) The Board is not authorized under this title to require 
any issuer of municipal securities, directly or indirectly 
through a municipal securities broker, municipal securities 
dealer, municipal advisor, or otherwise, or municipal advisors 
to furnish to the Board or to a purchaser or a prospective 
purchaser of such securities any application, report, document, 
or information with respect to such issuer: Provided, however, 
That the Board may require municipal securities brokers and 
municipal securities dealers to furnish to the Board or 
purchasers or prospective purchasers of municipal securities 
applications, reports, documents, and information with respect 
to the issuer thereof which is generally available from a 
source other than such issuer. Nothing in this paragraph shall 
be construed to impair or limit the power of the Commission 
under any provision of this title.
  (3) An issuer of municipal securities shall not be required 
to retain a municipal advisor prior to issuing any such 
securities.
  (e) Definitions.--For purposes of this section--
          (1) the term ``Board'' means the Municipal Securities 
        Rulemaking Board established under subsection (b)(1);
          (2) the term ``guaranteed investment contract'' 
        includes any investment that has specified withdrawal 
        or reinvestment provisions and a specifically 
        negotiated or bid interest rate, and also includes any 
        agreement to supply investments on 2 or more future 
        dates, such as a forward supply contract;
          (3) the term ``investment strategies'' includes plans 
        or programs for the investment of the proceeds of 
        municipal securities that are not municipal 
        derivatives, guaranteed investment contracts, and the 
        recommendation of and brokerage of municipal escrow 
        investments;
          (4) the term ``municipal advisor''--
                  (A) means a person (who is not a municipal 
                entity or an employee of a municipal entity) 
                that--
                          (i) provides advice to or on behalf 
                        of a municipal entity or obligated 
                        person with respect to municipal 
                        financial products or the issuance of 
                        municipal securities, including advice 
                        with respect to the structure, timing, 
                        terms, and other similar matters 
                        concerning such financial products or 
                        issues; or
                          (ii) undertakes a solicitation of a 
                        municipal entity;
                  (B) includes financial advisors, guaranteed 
                investment contract brokers, third-party 
                marketers, placement agents, solicitors, 
                finders, and swap advisors, if such persons are 
                described in any of clauses (i) through (iii) 
                of subparagraph (A); and
                  (C) does not include a broker, dealer, or 
                municipal securities dealer serving as an 
                underwriter (as defined in section 2(a)(11) of 
                the Securities Act of 1933) (15 U.S.C. 
                77b(a)(11)), any investment adviser registered 
                under the Investment Advisers Act of 1940, or 
                persons associated with such investment 
                advisers who are providing investment advice, 
                any commodity trading advisor registered under 
                the Commodity Exchange Act or persons 
                associated with a commodity trading advisor who 
                are providing advice related to swaps, 
                attorneys offering legal advice or providing 
                services that are of a traditional legal 
                nature, or engineers providing engineering 
                advice;
          (5) the term ``municipal financial product'' means 
        municipal derivatives, guaranteed investment contracts, 
        and investment strategies;
          (6) the term ``rules of the Board'' means the rules 
        proposed and adopted by the Board under subsection 
        (b)(2);
          (7) the term ``person associated with a municipal 
        advisor'' or ``associated person of an advisor'' 
        means--
                  (A) any partner, officer, director, or branch 
                manager of such municipal advisor (or any 
                person occupying a similar status or performing 
                similar functions);
                  (B) any other employee of such municipal 
                advisor who is engaged in the management, 
                direction, supervision, or performance of any 
                activities relating to the provision of advice 
                to or on behalf of a municipal entity or 
                obligated person with respect to municipal 
                financial products or the issuance of municipal 
                securities; and
                  (C) any person directly or indirectly 
                controlling, controlled by, or under common 
                control with such municipal advisor;
          (8) the term ``municipal entity'' means any State, 
        political subdivision of a State, or municipal 
        corporate instrumentality of a State, including--
                  (A) any agency, authority, or instrumentality 
                of the State, political subdivision, or 
                municipal corporate instrumentality;
                  (B) any plan, program, or pool of assets 
                sponsored or established by the State, 
                political subdivision, or municipal corporate 
                instrumentality or any agency, authority, or 
                instrumentality thereof; and
                  (C) any other issuer of municipal securities;
          (9) the term ``solicitation of a municipal entity or 
        obligated person'' means a direct or indirect 
        communication with a municipal entity or obligated 
        person made by a person, for direct or indirect 
        compensation, on behalf of a broker, dealer, municipal 
        securities dealer, municipal advisor, or investment 
        adviser (as defined in section 202 of the Investment 
        Advisers Act of 1940) that does not control, is not 
        controlled by, or is not under common control with the 
        person undertaking such solicitation for the purpose of 
        obtaining or retaining an engagement by a municipal 
        entity or obligated person of a broker, dealer, 
        municipal securities dealer, or municipal advisor for 
        or in connection with municipal financial products, the 
        issuance of municipal securities, or of an investment 
        adviser to provide investment advisory services to or 
        on behalf of a municipal entity; and
          (10) the term ``obligated person'' means any person, 
        including an issuer of municipal securities, who is 
        either generally or through an enterprise, fund, or 
        account of such person, committed by contract or other 
        arrangement to support the payment of all or part of 
        the obligations on the municipal securities to be sold 
        in an offering of municipal securities.

           *       *       *       *       *       *       *


SEC. 15E. REGISTRATION OF NATIONALLY RECOGNIZED STATISTICAL RATING 
                    ORGANIZATIONS.

  (a) Registration Procedures.--
          (1) Application for registration.--
                  (A) In general.--A credit rating agency that 
                elects to be treated as a nationally recognized 
                statistical rating organization for purposes of 
                this title (in this section referred to as the 
                ``applicant''), shall furnish to the Commission 
                an application for registration, in such form 
                as the Commission shall require, by rule or 
                regulation issued in accordance with subsection 
                (n), and containing the information described 
                in subparagraph (B).
                  (B) Required information.--An application for 
                registration under this section shall contain 
                information regarding--
                          (i) credit ratings performance 
                        measurement statistics over short-term, 
                        mid-term, and long-term periods (as 
                        applicable) of the applicant;
                          (ii) the procedures and methodologies 
                        that the applicant uses in determining 
                        credit ratings;
                          (iii) policies or procedures adopted 
                        and implemented by the applicant to 
                        prevent the misuse, in violation of 
                        this title (or the rules and 
                        regulations hereunder), of material, 
                        nonpublic information;
                          (iv) the organizational structure of 
                        the applicant;
                          (v) whether or not the applicant has 
                        in effect a code of ethics, and if not, 
                        the reasons therefor;
                          (vi) any conflict of interest 
                        relating to the issuance of credit 
                        ratings by the applicant;
                          (vii) the categories described in any 
                        of clauses (i) through (v) of section 
                        3(a)(62)(B) with respect to which the 
                        applicant intends to apply for 
                        registration under this section;
                          (viii) on a confidential basis, a 
                        list of the 20 largest issuers and 
                        subscribers that use the credit rating 
                        services of the applicant, by amount of 
                        net revenues received therefrom in the 
                        fiscal year immediately preceding the 
                        date of submission of the application;
                          (ix) on a confidential basis, as to 
                        each applicable category of obligor 
                        described in any of clauses (i) through 
                        (v) of section 3(a)(62)(B), written 
                        certifications described in 
                        subparagraph (C), except as provided in 
                        subparagraph (D); and
                          (x) any other information and 
                        documents concerning the applicant and 
                        any person associated with such 
                        applicant as the Commission, by rule, 
                        may prescribe as necessary or 
                        appropriate in the public interest or 
                        for the protection of investors.
                  (C) Written certifications.--Written 
                certifications required by subparagraph 
                (B)(ix)--
                          (i) shall be provided from not fewer 
                        than 10 qualified institutional buyers, 
                        none of which is affiliated with the 
                        applicant;
                          (ii) may address more than one 
                        category of obligors described in any 
                        of clauses (i) through (v) of section 
                        3(a)(62)(B);
                          (iii) shall include not fewer than 2 
                        certifications for each such category 
                        of obligor; and
                          (iv) shall state that the qualified 
                        institutional buyer--
                                  (I) meets the definition of a 
                                qualified institutional buyer 
                                under section 3(a)(64); and
                                  (II) has used the credit 
                                ratings of the applicant for at 
                                least the 3 years immediately 
                                preceding the date of the 
                                certification in the subject 
                                category or categories of 
                                obligors.
                  (D) Exemption from certification 
                requirement.--A written certification under 
                subparagraph (B)(ix) is not required with 
                respect to any credit rating agency which has 
                received, or been the subject of, a no-action 
                letter from the staff of the Commission prior 
                to August 2, 2006, stating that such staff 
                would not recommend enforcement action against 
                any broker or dealer that considers credit 
                ratings issued by such credit rating agency to 
                be ratings from a nationally recognized 
                statistical rating organization.
                  (E) Limitation on liability of qualified 
                institutional buyers.--No qualified 
                institutional buyer shall be liable in any 
                private right of action for any opinion or 
                statement expressed in a certification made 
                pursuant to subparagraph (B)(ix).
          (2) Review of application.--
                  (A) Initial determination.--Not later than 90 
                days after the date on which the application 
                for registration is furnished to the Commission 
                under paragraph (1) (or within such longer 
                period as to which the applicant consents) the 
                Commission shall--
                          (i) by order, grant such registration 
                        for ratings in the subject category or 
                        categories of obligors, as described in 
                        clauses (i) through (v) of section 
                        3(a)(62)(B); or
                          (ii) institute proceedings to 
                        determine whether registration should 
                        be denied.
                  (B) Conduct of proceedings.--
                          (i) Content.--Proceedings referred to 
                        in subparagraph (A)(ii) shall--
                                  (I) include notice of the 
                                grounds for denial under 
                                consideration and an 
                                opportunity for hearing; and
                                  (II) be concluded not later 
                                than 120 days after the date on 
                                which the application for 
                                registration is furnished to 
                                the Commission under paragraph 
                                (1).
                          (ii) Determination.--At the 
                        conclusion of such proceedings, the 
                        Commission, by order, shall grant or 
                        deny such application for registration.
                          (iii) Extension authorized.--The 
                        Commission may extend the time for 
                        conclusion of such proceedings for not 
                        longer than 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.
                  (C) Grounds for decision.--The Commission 
                shall grant registration under this 
                subsection--
                          (i) if the Commission finds that the 
                        requirements of this section are 
                        satisfied; and
                          (ii) unless the Commission finds (in 
                        which case the Commission shall deny 
                        such registration) that--
                                  (I) the applicant does not 
                                have adequate financial and 
                                managerial resources to 
                                consistently produce credit 
                                ratings with integrity and to 
                                materially comply with the 
                                procedures and methodologies 
                                disclosed under paragraph 
                                (1)(B) and with subsections 
                                (g), (h), (i), and (j); or
                                  (II) if the applicant were so 
                                registered, its registration 
                                would be subject to suspension 
                                or revocation under subsection 
                                (d).
          (3) Public availability of information.--Subject to 
        section 24, the Commission shall, by rule, require a 
        nationally recognized statistical rating organization, 
        upon the granting of registration under this section, 
        to make the information and documents submitted to the 
        Commission in its completed application for 
        registration, or in any amendment submitted under 
        paragraph (1) or (2) of subsection (b), publicly 
        available on its website, or through another 
        comparable, readily accessible means, except as 
        provided in clauses (viii) and (ix) of paragraph 
        (1)(B).
  (b) Update of Registration.--
          (1) Update.--Each nationally recognized statistical 
        rating organization shall promptly amend its 
        application for registration under this section if any 
        information or document provided therein becomes 
        materially inaccurate, except that a nationally 
        recognized statistical rating organization is not 
        required to amend--
                  (A) the information required to be filed 
                under subsection (a)(1)(B)(i) by filing 
                information under this paragraph, but shall 
                amend such information in the annual submission 
                of the organization under paragraph (2) of this 
                subsection; or
                  (B) the certifications required to be 
                provided under subsection (a)(1)(B)(ix) by 
                filing information under this paragraph.
          (2) Certification.--Not later than 90 days after the 
        end of each calendar year, each nationally recognized 
        statistical rating organization shall file with the 
        Commission an amendment to its registration, in such 
        form as the Commission, by rule, may prescribe as 
        necessary or appropriate in the public interest or for 
        the protection of investors--
                  (A) certifying that the information and 
                documents in the application for registration 
                of such nationally recognized statistical 
                rating organization (other than the 
                certifications required under subsection 
                (a)(1)(B)(ix)) continue to be accurate; and
                  (B) listing any material change that occurred 
                to such information or documents during the 
                previous calendar year.
  (c) Accountability for Ratings Procedures.--
          (1) Authority.--The Commission shall have exclusive 
        authority to enforce the provisions of this section in 
        accordance with this title with respect to any 
        nationally recognized statistical rating organization, 
        if such nationally recognized statistical rating 
        organization issues credit ratings in material 
        contravention of those procedures relating to such 
        nationally recognized statistical rating organization, 
        including procedures relating to the prevention of 
        misuse of nonpublic information and conflicts of 
        interest, that such nationally recognized statistical 
        rating organization--
                  (A) includes in its application for 
                registration under subsection (a)(1)(B)(ii); or
                  (B) makes and disseminates in reports 
                pursuant to section 17(a) or the rules and 
                regulations thereunder.
          (2) Limitation.--The rules and regulations that the 
        Commission may prescribe pursuant to this title, as 
        they apply to nationally recognized statistical rating 
        organizations, shall be narrowly tailored to meet the 
        requirements of this title applicable to nationally 
        recognized statistical rating organizations. 
        Notwithstanding any other provision of this section, or 
        any other provision of law, neither the Commission nor 
        any State (or political subdivision thereof) may 
        regulate the substance of credit ratings or the 
        procedures and methodologies by which any nationally 
        recognized statistical rating organization determines 
        credit ratings. Nothing in this paragraph may be 
        construed to afford a defense against any action or 
        proceeding brought by the Commission to enforce the 
        antifraud provisions of the securities laws.
          (3) Internal controls over processes for determining 
        credit ratings.--
                  (A) In general.--Each nationally recognized 
                statistical rating organization shall 
                establish, maintain, enforce, and document an 
                effective internal control structure governing 
                the implementation of and adherence to 
                policies, procedures, and methodologies for 
                determining credit ratings, taking into 
                consideration such factors as the Commission 
                may prescribe, by rule.
                  (B) Attestation requirement.--The Commission 
                shall prescribe rules requiring each nationally 
                recognized statistical rating organization to 
                submit to the Commission an annual internal 
                controls report, which shall contain--
                          (i) a description of the 
                        responsibility of the management of the 
                        nationally recognized statistical 
                        rating organization in establishing and 
                        maintaining an effective internal 
                        control structure under subparagraph 
                        (A); and
                          (ii) an assessment of the 
                        effectiveness of the internal control 
                        structure of the nationally recognized 
                        statistical rating organization[; and].
                          [(iii) the attestation of the chief 
                        executive officer, or equivalent 
                        individual, of the nationally 
                        recognized statistical rating 
                        organization.]
  (d) Censure, Denial, or Suspension of Registration; Notice 
and Hearing.--
          (1) In general.--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 
        nationally recognized statistical rating organization, 
        or with respect to any person who is associated with, 
        who is seeking to become associated with, or, at the 
        time of the alleged misconduct, who was associated or 
        was seeking to become associated with a nationally 
        recognized statistical rating organization, the 
        Commission, by order, shall censure, place limitations 
        on the activities or functions of such person, suspend 
        for a period not exceeding 1 year, or bar such person 
        from being associated with a 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, bar or revocation is necessary for the 
        protection of investors and in the public interest and 
        that such nationally recognized statistical rating 
        organization, or any person associated with such an 
        organization, whether prior to or subsequent to 
        becoming so associated--
                  (A) has committed or omitted any act, or is 
                subject to an order or finding, enumerated in 
                subparagraph (A), (D), (E), (H), or (G) of 
                section 15(b)(4), has been convicted of any 
                offense specified in section 15(b)(4)(B), or is 
                enjoined from any action, conduct, or practice 
                specified in subparagraph (C) of section 
                15(b)(4), during the 10-year period preceding 
                the date of commencement of the proceedings 
                under this subsection, or at any time 
                thereafter;
                  (B) has been convicted during the 10-year 
                period preceding the date on which an 
                application for registration is filed with the 
                Commission under this section, or at any time 
                thereafter, of--
                          (i) any crime that is punishable by 
                        imprisonment for 1 or more years, and 
                        that is not described in section 
                        15(b)(4)(B); or
                          (ii) a substantially equivalent crime 
                        by a foreign court of competent 
                        jurisdiction;
                  (C) is subject to any order of the Commission 
                barring or suspending the right of the person 
                to be associated with a nationally recognized 
                statistical rating organization;
                  (D) fails to file the certifications required 
                under subsection (b)(2);
                  (E) fails to maintain adequate financial and 
                managerial resources to consistently produce 
                credit ratings with integrity;
                  (F) has failed reasonably to supervise, with 
                a view to preventing a violation of the 
                securities laws, an individual who commits such 
                a violation, if the individual is subject to 
                the supervision of that person.
          (2) Suspension or revocation for particular class of 
        securities.--
                  (A) In general.--The Commission may 
                temporarily suspend or permanently revoke the 
                registration of a nationally recognized 
                statistical rating organization with respect to 
                a particular class or subclass of securities, 
                if the Commission finds, on the record after 
                notice and opportunity for hearing, that the 
                nationally recognized statistical rating 
                organization does not have adequate financial 
                and managerial resources to consistently 
                produce credit ratings with integrity.
                  (B) Considerations.--In making any 
                determination under subparagraph (A), the 
                Commission shall consider--
                          (i) whether the nationally recognized 
                        statistical rating organization has 
                        failed over a sustained period of time, 
                        as determined by the Commission, to 
                        produce ratings that are accurate for 
                        that class or subclass of securities; 
                        and
                          (ii) such other factors as the 
                        Commission may determine.
  (e) Termination of Registration.--
          (1) Voluntary withdrawal.--A nationally recognized 
        statistical rating organization may, upon such terms 
        and conditions as the Commission may establish as 
        necessary in the public interest or for the protection 
        of investors, withdraw from registration by furnishing 
        a written notice of withdrawal to the Commission.
          (2) Commission authority.--In addition to any other 
        authority of the Commission under this title, if the 
        Commission finds that a nationally recognized 
        statistical rating organization is no longer in 
        existence or has ceased to do business as a credit 
        rating agency, the Commission, by order, shall cancel 
        the registration under this section of such nationally 
        recognized statistical rating organization.
  (f) Representations.--
          (1) Ban on representations of sponsorship by united 
        states or agency thereof.--It shall be unlawful for any 
        nationally recognized statistical rating organization 
        to represent or imply in any manner whatsoever that 
        such nationally recognized statistical rating 
        organization has been designated, sponsored, 
        recommended, or approved, or that the abilities or 
        qualifications thereof have in any respect been passed 
        upon, by the United States or any agency, officer, or 
        employee thereof.
          (2) Ban on representation as nrsro of unregistered 
        credit rating agencies.--It shall be unlawful for any 
        credit rating agency that is not registered under this 
        section as a nationally recognized statistical rating 
        organization to state that such credit rating agency is 
        a nationally recognized statistical rating organization 
        registered under this title.
          (3) Statement of registration under securities 
        exchange act of 1934 provisions.--No provision of 
        paragraph (1) shall be construed to prohibit a 
        statement that a nationally recognized statistical 
        rating organization is a nationally recognized 
        statistical rating organization under this title, if 
        such statement is true in fact and if the effect of 
        such registration is not misrepresented.
  (g) Prevention of Misuse of Nonpublic Information.--
          (1) Organization policies and procedures.--Each 
        nationally recognized statistical rating organization 
        shall establish, maintain, and enforce written policies 
        and procedures reasonably designed, taking into 
        consideration the nature of the business of such 
        nationally recognized statistical rating organization, 
        to prevent the misuse in violation of this title, or 
        the rules or regulations hereunder, of material, 
        nonpublic information by such nationally recognized 
        statistical rating organization or any person 
        associated with such nationally recognized statistical 
        rating organization.
          (2) Commission authority.--The Commission shall issue 
        final rules in accordance with subsection (n) to 
        require specific policies or procedures that are 
        reasonably designed to prevent misuse in violation of 
        this title (or the rules or regulations hereunder) of 
        material, nonpublic information.
  (h) Management of Conflicts of Interest.--
          (1) Organization policies and procedures.--Each 
        nationally recognized statistical rating organization 
        shall establish, maintain, and enforce written policies 
        and procedures reasonably designed, taking into 
        consideration the nature of the business of such 
        nationally recognized statistical rating organization 
        and affiliated persons and affiliated companies 
        thereof, to address and manage any conflicts of 
        interest that can arise from such business.
          (2) Commission authority.--The Commission shall issue 
        final rules in accordance with subsection (n) to 
        prohibit, or require the management and disclosure of, 
        any conflicts of interest relating to the issuance of 
        credit ratings by a nationally recognized statistical 
        rating organization, including, without limitation, 
        conflicts of interest relating to--
                  (A) the manner in which a nationally 
                recognized statistical rating organization is 
                compensated by the obligor, or any affiliate of 
                the obligor, for issuing credit ratings or 
                providing related services;
                  (B) the provision of consulting, advisory, or 
                other services by a nationally recognized 
                statistical rating organization, or any person 
                associated with such nationally recognized 
                statistical rating organization, to the 
                obligor, or any affiliate of the obligor;
                  (C) business relationships, ownership 
                interests, or any other financial or personal 
                interests between a nationally recognized 
                statistical rating organization, or any person 
                associated with such nationally recognized 
                statistical rating organization, and the 
                obligor, or any affiliate of the obligor;
                  (D) any affiliation of a nationally 
                recognized statistical rating organization, or 
                any person associated with such nationally 
                recognized statistical rating organization, 
                with any person that underwrites the securities 
                or money market instruments that are the 
                subject of a credit rating; and
                  (E) any other potential conflict of interest, 
                as the Commission deems necessary or 
                appropriate in the public interest or for the 
                protection of investors.
          (3) Separation of ratings from sales and marketing.--
                  (A) Rules required.--The Commission shall 
                issue rules to prevent the sales and marketing 
                considerations of a nationally recognized 
                statistical rating organization from 
                influencing the production of ratings by the 
                nationally recognized statistical rating 
                organization.
                  (B) Contents of rules.--The rules issued 
                under subparagraph (A) shall provide for--
                          (i) exceptions for small nationally 
                        recognized statistical rating 
                        organizations with respect to which the 
                        Commission determines that the 
                        separation of the production of ratings 
                        and sales and marketing activities is 
                        not appropriate; and
                          (ii) suspension or revocation of the 
                        registration of a nationally recognized 
                        statistical rating organization, if the 
                        Commission finds, on the record, after 
                        notice and opportunity for a hearing, 
                        that--
                                  (I) the nationally recognized 
                                statistical rating organization 
                                has committed a violation of a 
                                rule issued under this 
                                subsection; and
                                  (II) the violation of a rule 
                                issued under this subsection 
                                affected a rating.
                  (C) Exception for providing certain material 
                information.--Rules issued under this paragraph 
                may not prohibit a person who participates in 
                sales or marketing of a product or service of a 
                nationally recognized statistical rating 
                organization from providing material 
                information, or information believed in good 
                faith to be material, to the issuance or 
                maintenance of a credit rating to a person who 
                participates in determining or monitoring the 
                credit rating, or developing or approving 
                procedures or methodologies used for 
                determining the credit rating, so long as the 
                information provided is not intended to 
                influence the determination of a credit rating, 
                or the procedures or methodologies used to 
                determine credit ratings.
          (4) Look-back requirement.--
                  (A) Review by the nationally recognized 
                statistical rating organization.--[Each 
                nationally]
                          (i) In general._Each nationally 
                        recognized statistical rating 
                        organization shall establish, maintain, 
                        and enforce policies and procedures 
                        reasonably designed to ensure that, in 
                        any case in which an employee of a 
                        person subject to a credit rating of 
                        the nationally recognized statistical 
                        rating organization or the issuer, 
                        [underwriter] lead underwriter, or 
                        sponsor of a security or money market 
                        instrument subject to a credit rating 
                        of the nationally recognized 
                        statistical rating organization was 
                        employed by the nationally recognized 
                        statistical rating organization and 
                        participated [in any capacity] in 
                        determining credit ratings for the 
                        person or the securities or money 
                        market instruments [during the 1-year 
                        period preceding the date an action was 
                        taken with respect to the credit 
                        rating], the nationally recognized 
                        statistical rating organization shall--
                                  [(i)] (I) conduct a review to 
                                determine whether any conflicts 
                                of interest of the employee 
                                influenced the credit rating 
                                during the 1-year period 
                                preceding the departure of the 
                                employee from the nationally 
                                recognized statistical rating 
                                organization; and
                                  [(ii)] (II) take action to 
                                revise the rating if 
                                appropriate, in accordance with 
                                such rules as the Commission 
                                shall prescribe.
                          (ii) Maintenance of ratings 
                        actions.--In the case of maintenance of 
                        ratings actions, the requirement under 
                        clause (i) shall only apply to 
                        employees of a person subject to a 
                        credit rating of the nationally 
                        recognized statistical rating 
                        organization or an issuer of a security 
                        or money market instrument subject to a 
                        credit rating of the nationally 
                        recognized statistical rating 
                        organization.
                  (B) Review by commission.--
                          (i) In general.--The Commission shall 
                        conduct periodic reviews of the 
                        policies described in subparagraph (A) 
                        and the implementation of the policies 
                        at each nationally recognized 
                        statistical rating organization to 
                        ensure they are reasonably designed and 
                        implemented to most effectively 
                        eliminate conflicts of interest.
                          (ii) Timing of reviews.--The 
                        Commission shall review the code of 
                        ethics and conflict of interest policy 
                        of each nationally recognized 
                        statistical rating organization--
                                  (I) not less frequently than 
                                annually; and
                                  (II) whenever such policies 
                                are materially modified or 
                                amended.
          (5) Report to commission on certain employment 
        transitions.--
                  (A) Report required.--Each nationally 
                recognized statistical rating organization 
                shall report to the Commission any case such 
                organization knows or can reasonably be 
                expected to know where a person associated with 
                such organization within the previous 5 years 
                obtains employment with any obligor, issuer, 
                underwriter, or sponsor of a security or money 
                market instrument for which the organization 
                issued a credit rating during the 12-month 
                period prior to such employment, if such 
                employee--
                          (i) was a senior officer of such 
                        organization;
                          (ii) participated in any capacity in 
                        determining credit ratings for such 
                        obligor, issuer, underwriter, or 
                        sponsor; or
                          (iii) supervised an employee 
                        described in clause (ii).
                  (B) Public disclosure.--Upon receiving such a 
                report, the Commission shall make such 
                information publicly available.
  (i) Prohibited Conduct.--
          (1) Prohibited acts and practices.--The Commission 
        shall issue final rules in accordance with subsection 
        (n) to prohibit any act or practice relating to the 
        issuance of credit ratings by a nationally recognized 
        statistical rating organization that the Commission 
        determines to be unfair, coercive, or abusive, 
        including any act or practice relating to--
                  (A) conditioning or threatening to condition 
                the issuance of a credit rating on the purchase 
                by the obligor or an affiliate thereof of other 
                services or products, including pre-credit 
                rating assessment products, of the nationally 
                recognized statistical rating organization or 
                any person associated with such nationally 
                recognized statistical rating organization;
                  (B) lowering or threatening to lower a credit 
                rating on, or refusing to rate, securities or 
                money market instruments issued by an asset 
                pool or as part of any asset-backed or 
                mortgage-backed securities transaction, unless 
                a portion of the assets within such pool or 
                part of such transaction, as applicable, also 
                is rated by the nationally recognized 
                statistical rating organization; or
                  (C) modifying or threatening to modify a 
                credit rating or otherwise departing from its 
                adopted systematic procedures and methodologies 
                in determining credit ratings, based on whether 
                the obligor, or an affiliate of the obligor, 
                purchases or will purchase the credit rating or 
                any other service or product of the nationally 
                recognized statistical rating organization or 
                any person associated with such organization.
          (2) Rule of construction.--Nothing in paragraph (1), 
        or in any rules or regulations adopted thereunder, may 
        be construed to modify, impair, or supersede the 
        operation of any of the antitrust laws (as defined in 
        the first section of the Clayton Act, except that such 
        term includes section 5 of the Federal Trade Commission 
        Act, to the extent that such section 5 applies to 
        unfair methods of competition).
  (j) Designation of Compliance Officer.--
          (1) In general.--Each nationally recognized 
        statistical rating organization shall designate an 
        individual responsible for administering the policies 
        and procedures that are required to be established 
        pursuant to subsections (g) and (h), and for ensuring 
        compliance with the securities laws and the rules and 
        regulations thereunder, including those promulgated by 
        the Commission pursuant to this section.
          (2) Limitations.--
                  (A) In general.--Except as provided in 
                subparagraph (B), an individual designated 
                under paragraph (1) may not, while serving in 
                the designated capacity--
                          (i) perform credit ratings;
                          (ii) participate in the development 
                        of ratings methodologies or models;
                          (iii) perform marketing or sales 
                        functions; or
                          (iv) participate in establishing 
                        compensation levels, other than for 
                        employees working for that individual.
                  (B) Exception.--The Commission may exempt a 
                small nationally recognized statistical rating 
                organization from the limitations under this 
                paragraph, if the Commission finds that 
                compliance with such limitations would impose 
                an unreasonable burden on the nationally 
                recognized statistical rating organization.
          (3) Other duties.--Each individual designated under 
        paragraph (1) shall establish procedures for the 
        receipt, retention, and treatment of--
                  (A) complaints regarding credit ratings, 
                models, methodologies, and compliance with the 
                securities laws and the policies and procedures 
                developed under this section; and
                  (B) confidential, anonymous complaints by 
                employees or users of credit ratings.
          (4) Compensation.--The compensation of each 
        compliance officer appointed under paragraph (1) shall 
        not be linked to the financial performance of the 
        nationally recognized statistical rating organization 
        and shall be arranged so as to ensure the independence 
        of the officer's judgment.
          (5) Annual reports required.--
                  (A) Annual reports required.--Each individual 
                designated under paragraph (1) shall submit to 
                the nationally recognized statistical rating 
                organization an annual report on the compliance 
                of the nationally recognized statistical rating 
                organization with the securities laws and the 
                policies and procedures of the nationally 
                recognized statistical rating organization that 
                includes--
                          (i) a description of any material 
                        changes to the code of ethics and 
                        conflict of interest policies of the 
                        nationally recognized statistical 
                        rating organization; and
                          (ii) a certification that the report 
                        is accurate and complete.
                  (B) Submission of reports to the 
                commission.--Each nationally recognized 
                statistical rating organization shall file the 
                reports required under subparagraph (A) 
                together with the financial report that is 
                required to be submitted to the Commission 
                under this section.
  (k) Statements of Financial Condition.--Each nationally 
recognized statistical rating organization shall, on a 
confidential basis, file with the Commission, at intervals 
determined by the Commission, such financial statements, 
certified (if required by the rules or regulations of the 
Commission) by an independent public accountant, and 
information concerning its financial condition, as the 
Commission, by rule, may prescribe as necessary or appropriate 
in the public interest or for the protection of investors.
  (l) Sole Method of Registration.--
          (1) In general.--On and after the effective date of 
        this section, a credit rating agency may only be 
        registered as a nationally recognized statistical 
        rating organization for any purpose in accordance with 
        this section.
          (2) Prohibition on reliance on no-action relief.--On 
        and after the effective date of this section--
                  (A) an entity that, before that date, 
                received advice, approval, or a no-action 
                letter from the Commission or staff thereof to 
                be treated as a nationally recognized 
                statistical rating organization pursuant to the 
                Commission rule at section 240.15c3-1 of title 
                17, Code of Federal Regulations, may represent 
                itself or act as a nationally recognized 
                statistical rating organization only--
                          (i) during Commission consideration 
                        of the application, if such entity has 
                        filed an application for registration 
                        under this section; and
                          (ii) on and after the date of 
                        approval of its application for 
                        registration under this section; and
                  (B) the advice, approval, or no-action letter 
                described in subparagraph (A) shall be void.
          (3) Notice to other agencies.--Not later than 30 days 
        after the date of enactment of this section, the 
        Commission shall give notice of the actions undertaken 
        pursuant to this section to each Federal agency which 
        employs in its rules and regulations the term 
        ``nationally recognized statistical rating 
        organization'' (as that term is used under Commission 
        rule 15c3-1 (17 C.F.R. 240.15c3-1), as in effect on the 
        date of enactment of this section).
  (m) Accountability.--
          (1) In general.--The enforcement and penalty 
        provisions of this title shall apply to statements made 
        by a credit rating agency in the same manner and to the 
        same extent as such provisions apply to statements made 
        by a registered public accounting firm or a securities 
        analyst under the securities laws, and such statements 
        shall not be deemed forward-looking statements for the 
        purposes of section 21E.
          (2) Rulemaking.--The Commission shall issue such 
        rules as may be necessary to carry out this subsection.
  (n) Regulations.--
          (1) New provisions.--Such rules and regulations as 
        are required by this section or are otherwise necessary 
        to carry out this section, including the application 
        form required under subsection (a)--
                  (A) shall be issued by the Commission in 
                final form, not later than 270 days after the 
                date of enactment of this section; and
                  (B) shall become effective not later than 270 
                days after the date of enactment of this 
                section.
          (2) Review of existing regulations.--Not later than 
        270 days after the date of enactment of this section, 
        the Commission shall--
                  (A) review its existing rules and regulations 
                which employ the term ``nationally recognized 
                statistical rating organization'' or ``NRSRO''; 
                and
                  (B) amend or revise such rules and 
                regulations in accordance with the purposes of 
                this section, as the Commission may prescribe 
                as necessary or appropriate in the public 
                interest or for the protection of investors.
  (o) NRSROs Subject to Commission Authority.--
          (1) In general.--No provision of the laws of any 
        State or political subdivision thereof requiring the 
        registration, licensing, or qualification as a credit 
        rating agency or a nationally recognized statistical 
        rating organization shall apply to any nationally 
        recognized statistical rating organization or person 
        employed by or working under the control of a 
        nationally recognized statistical rating organization.
          (2) Limitation.--Nothing in this subsection prohibits 
        the securities commission (or any agency or office 
        performing like functions) of any State from 
        investigating and bringing an enforcement action with 
        respect to fraud or deceit against any nationally 
        recognized statistical rating organization or person 
        associated with a nationally recognized statistical 
        rating organization.
  (p) Regulation of Nationally Recognized Statistical Rating 
Organizations.--
          (1) Establishment of office of credit ratings.--
                  (A) Office established.--The Commission shall 
                establish [within the Commission] within the 
                Division of Trading and Markets an Office of 
                Credit Ratings (referred to in this subsection 
                as the ``Office'') to administer the rules of 
                the Commission--
                          (i) with respect to the practices of 
                        nationally recognized statistical 
                        rating organizations in determining 
                        ratings, for the protection of users of 
                        credit ratings and in the public 
                        interest;
                          (ii) to promote accuracy in credit 
                        ratings issued by nationally recognized 
                        statistical rating organizations; and
                          (iii) to ensure that such ratings are 
                        not unduly influenced by conflicts of 
                        interest.
                  (B) Director of the office.--The head of the 
                Office shall be the Director, who shall [report 
                to the Chairman] report to the head of the 
                Division of Trading and Markets.
          (2) Staffing.--The Office established under this 
        subsection shall be staffed sufficiently to carry out 
        fully the requirements of this section. The staff shall 
        include persons with knowledge of and expertise in 
        corporate, municipal, and structured debt finance.
          (3) Commission examinations.--
                  (A)  [Annual] Risk-based examinations 
                required.--The Office shall conduct [an 
                examination] examinations of each nationally 
                recognized statistical rating organization [at 
                least annually].
                  (B) Conduct of examinations.--Each 
                examination under subparagraph (A) shall 
                include, as appropriate, a review of--
                          (i) whether the nationally recognized 
                        statistical rating organization 
                        conducts business in accordance with 
                        the policies, procedures, and rating 
                        methodologies of the nationally 
                        recognized statistical rating 
                        organization;
                          (ii) the management of conflicts of 
                        interest by the nationally recognized 
                        statistical rating organization;
                          (iii) implementation of ethics 
                        policies by the nationally recognized 
                        statistical rating organization;
                          (iv) the internal supervisory 
                        controls of the nationally recognized 
                        statistical rating organization;
                          (v) the governance of the nationally 
                        recognized statistical rating 
                        organization;
                          (vi) the activities of the individual 
                        designated by the nationally recognized 
                        statistical rating organization under 
                        subsection (j)(1);
                          (vii) the processing of complaints by 
                        the nationally recognized statistical 
                        rating organization; and
                          (viii) the policies of the nationally 
                        recognized statistical rating 
                        organization governing the post-
                        employment activities of former staff 
                        of the nationally recognized 
                        statistical rating organization.
                  (C) Inspection reports.--The Commission shall 
                make available to the public, in an easily 
                understandable format, an annual report 
                summarizing--
                          (i) the essential findings of all 
                        examinations conducted under 
                        subparagraph (A), as deemed appropriate 
                        by the Commission;
                          (ii) the responses by the nationally 
                        recognized statistical rating 
                        organizations to any material 
                        regulatory deficiencies identified by 
                        the Commission under clause (i); and
                          (iii) whether the nationally 
                        recognized statistical rating 
                        organizations have appropriately 
                        addressed the recommendations of the 
                        Commission contained in previous 
                        reports under this subparagraph.
          (4) Rulemaking authority.--The Commission shall--
                  (A) establish, by rule, fines, and other 
                penalties applicable to any nationally 
                recognized statistical rating organization that 
                violates the requirements of this section and 
                the rules thereunder; and
                  (B) issue such rules as may be necessary to 
                carry out this section.
  (q) Transparency of Ratings Performance.--
          (1) Rulemaking required.--The Commission shall, by 
        rule, require that each nationally recognized 
        statistical rating organization publicly disclose 
        information on the initial credit ratings determined by 
        the nationally recognized statistical rating 
        organization for each type of obligor, security, and 
        money market instrument, and any subsequent changes to 
        such credit ratings, for the purpose of allowing users 
        of credit ratings to evaluate the accuracy of ratings 
        and compare the performance of ratings by different 
        nationally recognized statistical rating organizations.
          (2) Content.--The rules of the Commission under this 
        subsection shall require, at a minimum, disclosures 
        that--
                  (A) are comparable among nationally 
                recognized statistical rating organizations, to 
                allow users of credit ratings to compare the 
                performance of credit ratings across nationally 
                recognized statistical rating organizations;
                  (B) are clear and informative for investors 
                having a wide range of sophistication who use 
                or might use credit ratings;
                  (C) include performance information over a 
                range of years and for a variety of types of 
                credit ratings, including for credit ratings 
                withdrawn by the nationally recognized 
                statistical rating organization;
                  (D) are published and made freely available 
                by the nationally recognized statistical rating 
                organization, on an easily accessible portion 
                of its website, and in writing, when requested; 
                and
                  (E) are appropriate to the business model of 
                a nationally recognized statistical rating 
                organization[; and].
                  [(F) each nationally recognized statistical 
                rating organization include an attestation with 
                any credit rating it issues affirming that no 
                part of the rating was influenced by any other 
                business activities, that the rating was based 
                solely on the merits of the instruments being 
                rated, and that such rating was an independent 
                evaluation of the risks and merits of the 
                instrument.]
  (r) Credit Ratings Methodologies.--The Commission shall 
prescribe rules, for the protection of investors and in the 
public interest, with respect to the procedures and 
methodologies, including qualitative and quantitative data and 
models, used by nationally recognized statistical rating 
organizations that require each nationally recognized 
statistical rating organization--
          (1) to ensure that credit ratings are determined 
        using procedures and methodologies, including 
        qualitative and quantitative data and models, that 
        are--
                  (A) approved by the board of the nationally 
                recognized statistical rating organization, a 
                body performing a function similar to that of a 
                board, or the Chief Credit Officer; and
                  (B) in accordance with the policies and 
                procedures of the nationally recognized 
                statistical rating organization for the 
                development and modification of credit rating 
                procedures and methodologies;
          (2) to ensure that when material changes to credit 
        rating procedures and methodologies (including changes 
        to qualitative and quantitative data and models) are 
        made, that--
                  (A) the changes are applied consistently to 
                all credit ratings to which the changed 
                procedures and methodologies apply;
                  (B) to the extent that changes are made to 
                credit rating surveillance procedures and 
                methodologies, the changes are applied to then-
                current credit ratings by the nationally 
                recognized statistical rating organization 
                within a reasonable time period determined by 
                the Commission, by rule; and
                  (C) the nationally recognized statistical 
                rating organization publicly discloses the 
                reason for the change; and
          (3) to notify users of credit ratings--
                  (A) of the version of a procedure or 
                methodology, including the qualitative 
                methodology or quantitative inputs, used with 
                respect to a particular credit rating;
                  (B) when a material change is made to a 
                procedure or methodology, including to a 
                qualitative model or quantitative inputs;
                  (C) when a significant error is identified in 
                a procedure or methodology, including a 
                qualitative or quantitative model, that may 
                result in credit rating actions; and
                  (D) of the likelihood of a material change 
                described in subparagraph (B) resulting in a 
                change in current credit ratings.
  (s) Transparency of Credit Rating Methodologies and 
Information Reviewed.--
          (1) Form for disclosures.--The Commission shall 
        require, by rule, each nationally recognized 
        statistical rating organization to prescribe a form to 
        accompany the publication of each credit rating that 
        discloses--
                  (A) information relating to--
                          (i) the assumptions underlying the 
                        credit rating procedures and 
                        methodologies;
                          (ii) the data that was relied on to 
                        determine the credit rating; and
                          (iii) if applicable, how the 
                        nationally recognized statistical 
                        rating organization used servicer or 
                        remittance reports, and with what 
                        frequency, to conduct surveillance of 
                        the credit rating; and
                  (B) information that can be used by investors 
                and other users of credit ratings to better 
                understand credit ratings in each class of 
                credit rating issued by the nationally 
                recognized statistical rating organization.
          (2) Format.--The form developed under paragraph (1) 
        shall--
                  (A) be easy to use and helpful for users of 
                credit ratings to understand the information 
                contained in the report;
                  (B) require the nationally recognized 
                statistical rating organization to provide the 
                content described in paragraph (3)(B) in a 
                manner that is directly comparable across types 
                of securities rated by the nationally 
                recognized statistical rating agency; and
                  (C) be made readily available to users of 
                credit ratings, in electronic or paper form, as 
                the Commission may, by rule, determine.
          (3) Content of form.--
                  (A) Qualitative content.--Each nationally 
                recognized statistical rating organization 
                shall disclose on the form developed under 
                paragraph (1)--
                          (i) the credit ratings produced by 
                        the nationally recognized statistical 
                        rating organization;
                          (ii) the main assumptions and 
                        principles used in constructing 
                        procedures and methodologies, including 
                        qualitative methodologies and 
                        quantitative inputs and assumptions 
                        about the correlation of defaults 
                        across underlying assets used in rating 
                        structured products;
                          (iii) the potential limitations of 
                        the credit ratings, and the types of 
                        risks excluded from the credit ratings 
                        that the nationally recognized 
                        statistical rating organization does 
                        not comment on, including liquidity, 
                        market, and other risks;
                          (iv) information on the uncertainty 
                        of the credit rating, including--
                                  (I) information on the 
                                reliability, accuracy, and 
                                quality of the data relied on 
                                in determining the credit 
                                rating; and
                                  (II) a statement relating to 
                                the extent to which data 
                                essential to the determination 
                                of the credit rating were 
                                reliable or limited, 
                                including--
                                          (aa) any limits on 
                                        the scope of historical 
                                        data; and
                                          (bb) any limits in 
                                        accessibility to 
                                        certain documents or 
                                        other types of 
                                        information that would 
                                        have better informed 
                                        the credit rating;
                          (v) whether and to what extent third 
                        party due diligence services have been 
                        used by the nationally recognized 
                        statistical rating organization, a 
                        description of the information that 
                        such third party reviewed in conducting 
                        due diligence services, and a 
                        description of the findings or 
                        conclusions of such third party;
                          (vi) a description of the data about 
                        any obligor, issuer, security, or money 
                        market instrument that were relied upon 
                        for the purpose of determining the 
                        credit rating;
                          (vii) a statement containing an 
                        overall assessment of the quality of 
                        information available and considered in 
                        producing a rating for an obligor, 
                        security, or money market instrument, 
                        in relation to the quality of 
                        information available to the nationally 
                        recognized statistical rating 
                        organization in rating similar 
                        issuances;
                          (viii) information relating to 
                        conflicts of interest of the nationally 
                        recognized statistical rating 
                        organization; and
                          (ix) such additional information as 
                        the Commission may require, except that 
                        the Commission may not require the 
                        inclusion of references to statutory or 
                        regulatory requirements or statutory 
                        provision headings or enumerators for 
                        any specific disclosure.
                  (B) Quantitative content.--Each nationally 
                recognized statistical rating organization 
                shall disclose on the form developed under this 
                subsection--
                          (i) an explanation or measure of the 
                        potential volatility of the credit 
                        rating, including--
                                  (I) any factors that might 
                                lead to a change in the credit 
                                ratings; and
                                  (II) the magnitude of the 
                                change that a user can expect 
                                under different market 
                                conditions;
                          (ii) information on the content of 
                        the rating, including--
                                  (I) the historical 
                                performance of the rating; and
                                  (II) the expected probability 
                                of default and the expected 
                                loss in the event of default;
                          (iii) information on the sensitivity 
                        of the rating to assumptions made by 
                        the nationally recognized statistical 
                        rating organization, including--
                                  (I) 5 assumptions made in the 
                                ratings process that, without 
                                accounting for any other 
                                factor, would have the greatest 
                                impact on a rating if the 
                                assumptions were proven false 
                                or inaccurate; and
                                  (II) an analysis, using 
                                specific examples, of how each 
                                of the 5 assumptions identified 
                                under subclause (I) impacts a 
                                rating;
                          (iv) such additional information as 
                        may be required by the Commission, 
                        except that the Commission may not 
                        require the inclusion of references to 
                        statutory or regulatory requirements or 
                        statutory provision headings or 
                        enumerators for any specific 
                        disclosure.
                  (C) No mandate on the organization of 
                disclosures.--The Commission may not mandate 
                the specific organization of the disclosures 
                required under this paragraph.
          (4) Due diligence services for asset-backed 
        securities.--
                  (A) Findings.--The issuer or underwriter of 
                any asset-backed security shall make publicly 
                available the findings and conclusions of any 
                third-party due diligence report obtained by 
                the issuer or underwriter.
                  (B) Certification required.--In any case in 
                which third-party due diligence services are 
                employed by a nationally recognized statistical 
                rating organization, an issuer, or an 
                underwriter, the person providing the due 
                diligence services shall provide to any 
                nationally recognized statistical rating 
                organization that produces a rating to which 
                such services relate, written certification, as 
                provided in subparagraph (C).
                  (C) Format and content.--The Commission shall 
                establish the appropriate format and content 
                for the written certifications required under 
                subparagraph (B), to ensure that providers of 
                due diligence services have conducted a 
                thorough review of data, documentation, and 
                other relevant information necessary for a 
                nationally recognized statistical rating 
                organization to provide an accurate rating.
                  (D) Disclosure of certification.--The 
                Commission shall adopt rules requiring a 
                nationally recognized statistical rating 
                organization, at the time at which the 
                nationally recognized statistical rating 
                organization produces a rating, to disclose the 
                certification described in subparagraph (B) to 
                the public in a manner that allows the public 
                to determine the adequacy and level of due 
                diligence services provided by a third party.
  (t) Corporate Governance, Organization, and Management of 
Conflicts of Interest.--
          (1) Board of directors.--Each nationally recognized 
        statistical rating organization shall have a board of 
        directors.
          (2) Independent directors.--
                  (A) In general.--At least \1/2\ of the board 
                of directors, but not fewer than 2 of the 
                members thereof, shall be independent of the 
                nationally recognized statistical rating 
                agency. A portion of the independent directors 
                shall include users of ratings from a 
                nationally recognized statistical rating 
                organization.
                  (B) Independence determination.--In order to 
                be considered independent for purposes of this 
                subsection, a member of the board of directors 
                of a nationally recognized statistical rating 
                organization--
                          (i) may not, other than in his or her 
                        capacity as a member of the board of 
                        directors or any committee thereof--
                                  (I) accept any consulting, 
                                advisory, or other compensatory 
                                fee from the nationally 
                                recognized statistical rating 
                                organization; or
                                  (II) be a person associated 
                                with the nationally recognized 
                                statistical rating organization 
                                or with any affiliated company 
                                thereof; and
                          (ii) shall be disqualified from any 
                        deliberation involving a specific 
                        rating in which the independent board 
                        member has a financial interest in the 
                        outcome of the rating.
                  (C) Compensation and term.--The compensation 
                of the independent members of the board of 
                directors of a nationally recognized 
                statistical rating organization shall not be 
                linked to the business performance of the 
                nationally recognized statistical rating 
                organization, and shall be arranged so as to 
                ensure the independence of their judgment. The 
                term of office of the independent directors 
                shall be for a pre-agreed fixed period, not to 
                exceed 5 years, and shall not be renewable.
          (3) Duties of board of directors.--In addition to the 
        overall responsibilities of the board of directors, the 
        board shall oversee--
                  (A) the establishment, maintenance, and 
                enforcement of policies and procedures for 
                determining credit ratings;
                  (B) the establishment, maintenance, and 
                enforcement of policies and procedures to 
                address, manage, and disclose any conflicts of 
                interest;
                  (C) the effectiveness of the internal control 
                system with respect to policies and procedures 
                for determining credit ratings; and
                  (D) the compensation and promotion policies 
                and practices of the nationally recognized 
                statistical rating organization.
          (4) Treatment of nrsro subsidiaries.--If a nationally 
        recognized statistical rating organization is a 
        subsidiary of a parent entity, the board of the 
        directors of the parent entity may satisfy the 
        requirements of this subsection by assigning to a 
        committee of such board of directors the duties under 
        paragraph (3), if--
                  (A) at least \1/2\ of the members of the 
                committee (including the chairperson of the 
                committee) are independent, as defined in this 
                section; and
                  (B) at least 1 member of the committee is a 
                user of ratings from a nationally recognized 
                statistical rating organization.
          (5) Exception authority.--If the Commission finds 
        that compliance with the provisions of this subsection 
        present an unreasonable burden on a small nationally 
        recognized statistical rating organization, the 
        Commission may permit the nationally recognized 
        statistical rating organization to delegate such 
        responsibilities to a committee that includes at least 
        one individual who is a user of ratings of a nationally 
        recognized statistical rating organization.
  (u) Duty To Report Tips Alleging Material Violations of 
Law.--
          (1) Duty to report.--Each nationally recognized 
        statistical rating organization shall refer to the 
        appropriate law enforcement or regulatory authorities 
        any information that the nationally recognized 
        statistical rating organization receives from a third 
        party and finds credible that alleges that an issuer of 
        securities rated by the nationally recognized 
        statistical rating organization has committed or is 
        committing a material violation of law that has not 
        been adjudicated by a Federal or State court.
          (2) Rule of construction.--Nothing in paragraph (1) 
        may be construed to require a nationally recognized 
        statistical rating organization to verify the accuracy 
        of the information described in paragraph (1).
  (v) Information From Sources Other Than the Issuer.--In 
producing a credit rating, a nationally recognized statistical 
rating organization shall consider information about an issuer 
that the nationally recognized statistical rating organization 
has, or receives from a source other than the issuer or 
underwriter, that the nationally recognized statistical rating 
organization finds credible and potentially significant to a 
rating decision.
  (w) Commission Exemptive Authority.--The Commission, by rules 
and regulations upon its own motion, or by order upon 
application, may conditionally or unconditionally exempt any 
person from any provision or provisions of this title or of any 
rule or regulation thereunder, if and to the extent it 
determines that such rule, regulation, or requirement is 
creating a barrier to entry into the market for nationally 
recognized statistical rating organizations or impeding 
competition among such organizations, or that such an exemption 
is necessary or appropriate in the public interest and is 
consistent with the protection of investors.

SEC. 15F. REGISTRATION AND REGULATION OF SECURITY-BASED SWAP DEALERS 
                    AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.

  (a) Registration.--
          (1) Security-based swap dealers.--It shall be 
        unlawful for any person to act as a security-based swap 
        dealer unless the person is registered as a security-
        based swap dealer with the Commission.
          (2) Major security-based swap participants.--It shall 
        be unlawful for any person to act as a major security-
        based swap participant unless the person is registered 
        as a major security-based swap participant with the 
        Commission.
  (b) Requirements.--
          (1) In general.--A person shall register as a 
        security-based swap dealer or major security-based swap 
        participant by filing a registration application with 
        the Commission.
          (2) Contents.--
                  (A) In general.--The application shall be 
                made in such form and manner as prescribed by 
                the Commission, and shall contain such 
                information, as the Commission considers 
                necessary concerning the business in which the 
                applicant is or will be engaged.
                  (B) Continual reporting.--A person that is 
                registered as a security-based swap dealer or 
                major security-based swap participant shall 
                continue to submit to the Commission reports 
                that contain such information pertaining to the 
                business of the person as the Commission may 
                require.
          (3) Expiration.--Each registration under this section 
        shall expire at such time as the Commission may 
        prescribe by rule or regulation.
          (4) Rules.--Except as provided in subsections (d) and 
        (e), the Commission may prescribe rules applicable to 
        security-based swap dealers and major security-based 
        swap participants, including rules that limit the 
        activities of non-bank security-based swap dealers and 
        major security-based swap participants.
          (5) Transition.--Not later than 1 year after the date 
        of enactment of the Wall Street Transparency and 
        Accountability Act of 2010, the Commission shall issue 
        rules under this section to provide for the 
        registration of security-based swap dealers and major 
        security-based swap participants.
          (6) Statutory disqualification.--Except to the extent 
        otherwise specifically provided by rule, regulation, or 
        order of the Commission, it shall be unlawful for a 
        security-based swap dealer or a major security-based 
        swap participant to permit any person associated with a 
        security-based swap dealer or a major security-based 
        swap participant who is subject to a statutory 
        disqualification to effect or be involved in effecting 
        security-based swaps on behalf of the security-based 
        swap dealer or major security-based swap participant, 
        if the security-based swap dealer or major security-
        based swap participant knew, or in the exercise of 
        reasonable care should have known, of the statutory 
        disqualification.
  (c) Dual Registration.--
          (1) Security-based swap dealer.--Any person that is 
        required to be registered as a security-based swap 
        dealer under this section shall register with the 
        Commission, regardless of whether the person also is 
        registered with the Commodity Futures Trading 
        Commission as a swap dealer.
          (2) Major security-based swap participant.--Any 
        person that is required to be registered as a major 
        security-based swap participant under this section 
        shall register with the Commission, regardless of 
        whether the person also is registered with the 
        Commodity Futures Trading Commission as a major swap 
        participant.
  (d) Rulemaking.--
          (1) In general.--The Commission shall adopt rules for 
        persons that are registered as security-based swap 
        dealers or major security-based swap participants under 
        this section.
          (2) Exception for prudential requirements.--
                  (A) In general.--The Commission may not 
                prescribe rules imposing prudential 
                requirements on security-based swap dealers or 
                major security-based swap participants for 
                which there is a prudential regulator.
                  (B) Applicability.--Subparagraph (A) does not 
                limit the authority of the Commission to 
                prescribe rules as directed under this section.
  (e) Capital and Margin Requirements.--
          (1) In general.--
                  (A) Security-based swap dealers and major 
                security-based swap participants that are 
                banks.--Each registered security-based swap 
                dealer and major security-based swap 
                participant for which there is not a prudential 
                regulator shall meet such minimum capital 
                requirements and minimum initial and variation 
                margin requirements as the prudential regulator 
                shall by rule or regulation prescribe under 
                paragraph (2)(A).
                  (B) Security-based swap dealers and major 
                security-based swap participants that are not 
                banks.--Each registered security-based swap 
                dealer and major security-based swap 
                participant for which there is not a prudential 
                regulator shall meet such minimum capital 
                requirements and minimum initial and variation 
                margin requirements as the Commission shall by 
                rule or regulation prescribe under paragraph 
                (2)(B).
          (2) Rules.--
                  (A) Security-based swap dealers and major 
                security-based swap participants that are 
                banks.--The prudential regulators, in 
                consultation with the Commission and the 
                Commodity Futures Trading Commission, shall 
                adopt rules for security-based swap dealers and 
                major security-based swap participants, with 
                respect to their activities as a swap dealer or 
                major swap participant, for which there is a 
                prudential regulator imposing--
                          (i) capital requirements; and
                          (ii) both initial and variation 
                        margin requirements on all security-
                        based swaps that are not cleared by a 
                        registered clearing agency.
                  (B) Security-based swap dealers and major 
                security-based swap participants that are not 
                banks.--The Commission shall adopt rules for 
                security-based swap dealers and major security-
                based swap participants, with respect to their 
                activities as a swap dealer or major swap 
                participant, for which there is not a 
                prudential regulator imposing--
                          (i) capital requirements; and
                          (ii) both initial and variation 
                        margin requirements on all swaps that 
                        are not cleared by a registered 
                        clearing agency.
                  (C) Capital.--In setting capital requirements 
                for a person that is designated as a security-
                based swap dealer or a major security-based 
                swap participant for a single type or single 
                class or category of security-based swap or 
                activities, the prudential regulator and the 
                Commission shall take into account the risks 
                associated with other types of security-based 
                swaps or classes of security-based swaps or 
                categories of security-based swaps engaged in 
                and the other activities conducted by that 
                person that are not otherwise subject to 
                regulation applicable to that person by virtue 
                of the status of the person.
          (3) Standards for capital and margin.--
                  (A) In general.--To offset the greater risk 
                to the security-based swap dealer or major 
                security-based swap participant and the 
                financial system arising from the use of 
                security-based swaps that are not cleared, the 
                requirements imposed under paragraph (2) shall 
                --
                          (i) help ensure the safety and 
                        soundness of the security-based swap 
                        dealer or major security-based swap 
                        participant; and
                          (ii) be appropriate for the risk 
                        associated with the non-cleared 
                        security-based swaps held as a 
                        security-based swap dealer or major 
                        security-based swap participant.
                  (B) Rule of construction.--
                          (i) In general.--Nothing in this 
                        section shall limit, or be construed to 
                        limit, the authority--
                                  (I) of the Commission to set 
                                financial responsibility rules 
                                for a broker or dealer 
                                registered pursuant to section 
                                15(b) (except for section 
                                15(b)(11) thereof) in 
                                accordance with section 
                                15(c)(3); or
                                  (II) of the Commodity Futures 
                                Trading Commission to set 
                                financial responsibility rules 
                                for a futures commission 
                                merchant or introducing broker 
                                registered pursuant to section 
                                4f(a) of the Commodity Exchange 
                                Act (except for section 
                                4f(a)(3) thereof) in accordance 
                                with section 4f(b) of the 
                                Commodity Exchange Act.
                          (ii) Futures commission merchants and 
                        other dealers.--A futures commission 
                        merchant, introducing broker, broker, 
                        or dealer shall maintain sufficient 
                        capital to comply with the stricter of 
                        any applicable capital requirements to 
                        which such futures commission merchant, 
                        introducing broker, broker, or dealer 
                        is subject to under this title or the 
                        Commodity Exchange Act.
                  (C) Margin requirements.--In prescribing 
                margin requirements under this subsection, the 
                prudential regulator with respect to security-
                based swap dealers and major security-based 
                swap participants that are depository 
                institutions, and the Commission with respect 
                to security-based swap dealers and major 
                security-based swap participants that are not 
                depository institutions shall permit the use of 
                noncash collateral, as the regulator or the 
                Commission determines to be consistent with--
                          (i) preserving the financial 
                        integrity of markets trading security-
                        based swaps; and
                          (ii) preserving the stability of the 
                        United States financial system.
                  (D) Comparability of capital and margin 
                requirements.--
                          (i) In general.--The prudential 
                        regulators, the Commission, and the 
                        Securities and Exchange Commission 
                        shall periodically (but not less 
                        frequently than annually) consult on 
                        minimum capital requirements and 
                        minimum initial and variation margin 
                        requirements.
                          (ii) Comparability.--The entities 
                        described in clause (i) shall, to the 
                        maximum extent practicable, establish 
                        and maintain comparable minimum capital 
                        requirements and minimum initial and 
                        variation margin requirements, 
                        including the use of noncash 
                        collateral, for--
                                  (I) security-based swap 
                                dealers; and
                                  (II) major security-based 
                                swap participants.
          (4) Applicability with respect to counterparties.--
        The requirements of paragraphs (2)(A)(ii) and 
        (2)(B)(ii) shall not apply to a security-based swap in 
        which a counterparty qualifies for an exception under 
        section 3C(g)(1) or satisfies the criteria in section 
        3C(g)(4).
  (f) Reporting and Recordkeeping.--
          (1) In general.--Each registered security-based swap 
        dealer and major security-based swap participant--
                  (A) shall make such reports as are required 
                by the Commission, by rule or regulation, 
                regarding the transactions and positions and 
                financial condition of the registered security-
                based swap dealer or major security-based swap 
                participant;
                  (B)(i) for which there is a prudential 
                regulator, shall keep books and records of all 
                activities related to the business as a 
                security-based swap dealer or major security-
                based swap participant in such form and manner 
                and for such period as may be prescribed by the 
                Commission by rule or regulation; and
                  (ii) for which there is no prudential 
                regulator, shall keep books and records in such 
                form and manner and for such period as may be 
                prescribed by the Commission by rule or 
                regulation; and
                  (C) shall keep books and records described in 
                subparagraph (B) open to inspection and 
                examination by any representative of the 
                Commission.
          (2) Rules.--The Commission shall adopt rules 
        governing reporting and recordkeeping for security-
        based swap dealers and major security-based swap 
        participants.
  (g) Daily Trading Records.--
          (1) In general.--Each registered security-based swap 
        dealer and major security-based swap participant shall 
        maintain daily trading records of the security-based 
        swaps of the registered security-based swap dealer and 
        major security-based swap participant and all related 
        records (including related cash or forward 
        transactions) and recorded communications, including 
        electronic mail, instant messages, and recordings of 
        telephone calls, for such period as may be required by 
        the Commission by rule or regulation.
          (2) Information requirements.--The daily trading 
        records shall include such information as the 
        Commission shall require by rule or regulation.
          (3) Counterparty records.--Each registered security-
        based swap dealer and major security-based swap 
        participant shall maintain daily trading records for 
        each counterparty in a manner and form that is 
        identifiable with each security-based swap transaction.
          (4) Audit trail.--Each registered security-based swap 
        dealer and major security-based swap participant shall 
        maintain a complete audit trail for conducting 
        comprehensive and accurate trade reconstructions.
          (5) Rules.--The Commission shall adopt rules 
        governing daily trading records for security-based swap 
        dealers and major security-based swap participants.
  (h) Business Conduct Standards.--
          (1) In general.--Each registered security-based swap 
        dealer and major security-based swap participant shall 
        conform with such business conduct standards as 
        prescribed in paragraph (3) and as may be prescribed by 
        the Commission by rule or regulation that relate to--
                  (A) fraud, manipulation, and other abusive 
                practices involving security-based swaps 
                (including security-based swaps that are 
                offered but not entered into);
                  (B) diligent supervision of the business of 
                the registered security-based swap dealer and 
                major security-based swap participant;
                  (C) adherence to all applicable position 
                limits; and
                  (D) such other matters as the Commission 
                determines to be appropriate.
          (2) Responsibilities with respect to special 
        entities.--
                  (A) Advising special entities.--A security-
                based swap dealer or major security-based swap 
                participant that acts as an advisor to a 
                special entity regarding a security-based swap 
                shall comply with the requirements of paragraph 
                (4) with respect to such special entity.
                  (B) Entering of security-based swaps with 
                respect to special entities.--A security-based 
                swap dealer that enters into or offers to enter 
                into a security-based swap with a special 
                entity shall comply with the requirements of 
                paragraph (5) with respect to such special 
                entity.
                  (C) Special entity defined.--For purposes of 
                this subsection, the term ``special entity'' 
                means--
                          (i) a Federal agency;
                          (ii) a State, State agency, city, 
                        county, municipality, or other 
                        political subdivision of a State or;
                          (iii) any employee benefit plan, as 
                        defined in section 3 of the Employee 
                        Retirement Income Security Act of 1974 
                        (29 U.S.C. 1002);
                          (iv) any governmental plan, as 
                        defined in section 3 of the Employee 
                        Retirement Income Security Act of 1974 
                        (29 U.S.C. 1002); or
                          (v) any endowment, including an 
                        endowment that is an organization 
                        described in section 501(c)(3) of the 
                        Internal Revenue Code of 1986.
          (3) Business conduct requirements.--Business conduct 
        requirements adopted by the Commission shall--
                  (A) establish a duty for a security-based 
                swap dealer or major security-based swap 
                participant to verify that any counterparty 
                meets the eligibility standards for an eligible 
                contract participant;
                  (B) require disclosure by the security-based 
                swap dealer or major security-based swap 
                participant to any counterparty to the 
                transaction (other than a security-based swap 
                dealer, major security-based swap participant, 
                security-based swap dealer, or major security-
                based swap participant) of--
                          (i) information about the material 
                        risks and characteristics of the 
                        security-based swap;
                          (ii) any material incentives or 
                        conflicts of interest that the 
                        security-based swap dealer or major 
                        security-based swap participant may 
                        have in connection with the security-
                        based swap; and
                          (iii)(I) for cleared security-based 
                        swaps, upon the request of the 
                        counterparty, receipt of the daily mark 
                        of the transaction from the appropriate 
                        derivatives clearing organization; and
                          (II) for uncleared security-based 
                        swaps, receipt of the daily mark of the 
                        transaction from the security-based 
                        swap dealer or the major security-based 
                        swap participant;
                  (C) establish a duty for a security-based 
                swap dealer or major security-based swap 
                participant to communicate in a fair and 
                balanced manner based on principles of fair 
                dealing and good faith; and
                  (D) establish such other standards and 
                requirements as the Commission may determine 
                are appropriate in the public interest, for the 
                protection of investors, or otherwise in 
                furtherance of the purposes of this Act.
          (4) Special requirements for security-based swap 
        dealers acting as advisors.--
                  (A) In general.--It shall be unlawful for a 
                security-based swap dealer or major security-
                based swap participant--
                          (i) to employ any device, scheme, or 
                        artifice to defraud any special entity 
                        or prospective customer who is a 
                        special entity;
                          (ii) to engage in any transaction, 
                        practice, or course of business that 
                        operates as a fraud or deceit on any 
                        special entity or prospective customer 
                        who is a special entity; or
                          (iii) to engage in any act, practice, 
                        or course of business that is 
                        fraudulent, deceptive, or manipulative.
                  (B) Duty.--Any security-based swap dealer 
                that acts as an advisor to a special entity 
                shall have a duty to act in the best interests 
                of the special entity.
                  (C) Reasonable efforts.--Any security-based 
                swap dealer that acts as an advisor to a 
                special entity shall make reasonable efforts to 
                obtain such information as is necessary to make 
                a reasonable determination that any security-
                based swap recommended by the security-based 
                swap dealer is in the best interests of the 
                special entity, including information relating 
                to--
                          (i) the financial status of the 
                        special entity;
                          (ii) the tax status of the special 
                        entity;
                          (iii) the investment or financing 
                        objectives of the special entity; and
                          (iv) any other information that the 
                        Commission may prescribe by rule or 
                        regulation.
          (5) Special requirements for security-based swap 
        dealers as counterparties to special entities.--
                  (A) In general.--Any security-based swap 
                dealer or major security-based swap participant 
                that offers to or enters into a security-based 
                swap with a special entity shall--
                          (i) comply with any duty established 
                        by the Commission for a security-based 
                        swap dealer or major security-based 
                        swap participant, with respect to a 
                        counterparty that is an eligible 
                        contract participant within the meaning 
                        of subclause (I) or (II) of clause 
                        (vii) of section 1a(18)(A) of the 
                        Commodity Exchange Act, that requires 
                        the security-based swap dealer or major 
                        security-based swap participant to have 
                        a reasonable basis to believe that the 
                        counterparty that is a special entity 
                        has an independent representative 
                        that--
                                  (I) has sufficient knowledge 
                                to evaluate the transaction and 
                                risks;
                                  (II) is not subject to a 
                                statutory disqualification;
                                  (III) is independent of the 
                                security-based swap dealer or 
                                major security-based swap 
                                participant;
                                  (IV) undertakes a duty to act 
                                in the best interests of the 
                                counterparty it represents;
                                  (V) makes appropriate 
                                disclosures;
                                  (VI) will provide written 
                                representations to the special 
                                entity regarding fair pricing 
                                and the appropriateness of the 
                                transaction; and
                                  (VII) in the case of employee 
                                benefit plans subject to the 
                                Employee Retirement Income 
                                Security [act of] Act of 1974, 
                                is a fiduciary as defined in 
                                section 3 of that Act (29 
                                U.S.C. 1002); and
                          (ii) before the initiation of the 
                        transaction, disclose to the special 
                        entity in writing the capacity in which 
                        the security-based swap dealer is 
                        acting.
                  (B) Commission authority.--The Commission may 
                establish such other standards and requirements 
                under this paragraph as the Commission may 
                determine are appropriate in the public 
                interest, for the protection of investors, or 
                otherwise in furtherance of the purposes of 
                this Act.
          (6) Rules.--The Commission shall prescribe rules 
        under this subsection governing business conduct 
        standards for security-based swap dealers and major 
        security-based swap participants.
          (7) Applicability.--This subsection shall not apply 
        with respect to a transaction that is--
                  (A) initiated by a special entity on an 
                exchange or security-based swaps execution 
                facility; and
                  (B) the security-based swap dealer or major 
                security-based swap participant does not know 
                the identity of the counterparty to the 
                transaction.''
  (i) Documentation Standards.--
          (1) In general.--Each registered security-based swap 
        dealer and major security-based swap participant shall 
        conform with such standards as may be prescribed by the 
        Commission, by rule or regulation, that relate to 
        timely and accurate confirmation, processing, netting, 
        documentation, and valuation of all security-based 
        swaps.
          (2) Rules.--The Commission shall adopt rules 
        governing documentation standards for security-based 
        swap dealers and major security-based swap 
        participants.
  (j) Duties.--Each registered security-based swap dealer and 
major security-based swap participant shall, at all times, 
comply with the following requirements:
          (1) Monitoring of trading.--The security-based swap 
        dealer or major security-based swap participant shall 
        monitor its trading in security-based swaps to prevent 
        violations of applicable position limits.
          (2) Risk management procedures.--The security-based 
        swap dealer or major security-based swap participant 
        shall establish robust and professional risk management 
        systems adequate for managing the day-to-day business 
        of the security-based swap dealer or major security-
        based swap participant.
          (3) Disclosure of general information.--The security-
        based swap dealer or major security-based swap 
        participant shall disclose to the Commission and to the 
        prudential regulator for the security-based swap dealer 
        or major security-based swap participant, as 
        applicable, information concerning--
                  (A) terms and conditions of its security-
                based swaps;
                  (B) security-based swap trading operations, 
                mechanisms, and practices;
                  (C) financial integrity protections relating 
                to security-based swaps; and
                  (D) other information relevant to its trading 
                in security-based swaps.
          (4) Ability to obtain information.--The security-
        based swap dealer or major security-based swap 
        participant shall--
                  (A) establish and enforce internal systems 
                and procedures to obtain any necessary 
                information to perform any of the functions 
                described in this section; and
                  (B) provide the information to the Commission 
                and to the prudential regulator for the 
                security-based swap dealer or major security-
                based swap participant, as applicable, on 
                request.
          (5) Conflicts of interest.--The security-based swap 
        dealer and major security-based swap participant shall 
        implement conflict-of-interest systems and procedures 
        that--
                  (A) establish structural and institutional 
                safeguards to ensure that the activities of any 
                person within the firm relating to research or 
                analysis of the price or market for any 
                security-based swap or acting in a role of 
                providing clearing activities or making 
                determinations as to accepting clearing 
                customers are separated by appropriate 
                informational partitions within the firm from 
                the review, pressure, or oversight of persons 
                whose involvement in pricing, trading, or 
                clearing activities might potentially bias 
                their judgment or supervision and contravene 
                the core principles of open access and the 
                business conduct standards described in this 
                title; and
                  (B) address such other issues as the 
                Commission determines to be appropriate.
          (6) Antitrust considerations.--Unless necessary or 
        appropriate to achieve the purposes of this title, the 
        security-based swap dealer or major security-based swap 
        participant shall not--
                  (A) adopt any process or take any action that 
                results in any unreasonable restraint of trade; 
                or
                  (B) impose any material anticompetitive 
                burden on trading or clearing.
          (7) Rules.--The Commission shall prescribe rules 
        under this subsection governing duties of security-
        based swap dealers and major security-based swap 
        participants.
  (k) Designation of Chief Compliance Officer.--
          (1) In general.--Each security-based swap dealer and 
        major security-based swap participant shall designate 
        an individual to serve as a chief compliance officer.
          (2) Duties.--The chief compliance officer shall--
                  (A) report directly to the board or to the 
                senior officer of the security-based swap 
                dealer or major security-based swap 
                participant;
                  (B) review the compliance of the security-
                based swap dealer or major security-based swap 
                participant with respect to the security-based 
                swap dealer and major security-based swap 
                participant requirements described in this 
                section;
                  (C) in consultation with the board of 
                directors, a body performing a function similar 
                to the board, or the senior officer of the 
                organization, resolve any conflicts of interest 
                that may arise;
                  (D) be responsible for administering each 
                policy and procedure that is required to be 
                established pursuant to this section;
                  (E) ensure compliance with this title 
                (including regulations) relating to security-
                based swaps, including each rule prescribed by 
                the Commission under this section;
                  (F) establish procedures for the remediation 
                of noncompliance issues identified by the chief 
                compliance officer through any--
                          (i) compliance office review;
                          (ii) look-back;
                          (iii) internal or external audit 
                        finding;
                          (iv) self-reported error; or
                          (v) validated complaint; and
                  (G) establish and follow appropriate 
                procedures for the handling, management 
                response, remediation, retesting, and closing 
                of noncompliance issues.
          (3) Annual reports.--
                  (A) In general.--In accordance with rules 
                prescribed by the Commission, the chief 
                compliance officer shall annually prepare and 
                sign a report that contains a description of--
                          (i) the compliance of the security-
                        based swap dealer or major swap 
                        participant with respect to this title 
                        (including regulations); and
                          (ii) each policy and procedure of the 
                        security-based swap dealer or major 
                        security-based swap participant of the 
                        chief compliance officer (including the 
                        code of ethics and conflict of interest 
                        policies).
                  (B) Requirements.--A compliance report under 
                subparagraph (A) shall--
                          (i) accompany each appropriate 
                        financial report of the security-based 
                        swap dealer or major security-based 
                        swap participant that is required to be 
                        furnished to the Commission pursuant to 
                        this section; and
                          (ii) include a certification that, 
                        under penalty of law, the compliance 
                        report is accurate and complete.
  (l) Enforcement and Administrative Proceeding Authority.--
          (1) Primary enforcement authority.--
                  (A) Securities and exchange commission.--
                Except as provided in subparagraph (B), (C), or 
                (D), the Commission shall have primary 
                authority to enforce subtitle B, and the 
                amendments made by subtitle B of the Wall 
                Street Transparency and Accountability Act of 
                2010, with respect to any person.
                  (B) Prudential regulators.--The prudential 
                regulators shall have exclusive authority to 
                enforce the provisions of subsection (e) and 
                other prudential requirements of this title 
                (including risk management standards), with 
                respect to security-based swap dealers or major 
                security-based swap participants for which they 
                are the prudential regulator.
                  (C) Referral.--
                          (i) Violations of nonprudential 
                        requirements.--If the appropriate 
                        Federal banking agency for security-
                        based swap dealers or major security-
                        based swap participants that are 
                        depository institutions has cause to 
                        believe that such security-based swap 
                        dealer or major security-based swap 
                        participant may have engaged in conduct 
                        that constitutes a violation of the 
                        nonprudential requirements of this 
                        section or rules adopted by the 
                        Commission thereunder, the agency may 
                        recommend in writing to the Commission 
                        that the Commission initiate an 
                        enforcement proceeding as authorized 
                        under this title. The recommendation 
                        shall be accompanied by a written 
                        explanation of the concerns giving rise 
                        to the recommendation.
                          (ii) Violations of prudential 
                        requirements.--If the Commission has 
                        cause to believe that a securities-
                        based swap dealer or major securities-
                        based swap participant that has a 
                        prudential regulator may have engaged 
                        in conduct that constitute a violation 
                        of the prudential requirements of 
                        subsection (e) or rules adopted 
                        thereunder, the Commission may 
                        recommend in writing to the prudential 
                        regulator that the prudential regulator 
                        initiate an enforcement proceeding as 
                        authorized under this title. The 
                        recommendation shall be accompanied by 
                        a written explanation of the concerns 
                        giving rise to the recommendation.
                  (D) Backstop enforcement authority.--
                          (i) Initiation of enforcement 
                        proceeding by prudential regulator.--If 
                        the Commission does not initiate an 
                        enforcement proceeding before the end 
                        of the 90-day period beginning on the 
                        date on which the Commission receives a 
                        written report under subsection (C)(i), 
                        the prudential regulator may initiate 
                        an enforcement proceeding.
                          (ii) Initiation of enforcement 
                        proceeding by commission.--If the 
                        prudential regulator does not initiate 
                        an enforcement proceeding before the 
                        end of the 90-day period beginning on 
                        the date on which the prudential 
                        regulator receives a written report 
                        under subsection (C)(ii), the 
                        Commission may initiate an enforcement 
                        proceeding.
          (2) Censure, denial, suspension; notice and 
        hearing.--The Commission, by order, shall censure, 
        place limitations on the activities, functions, or 
        operations of, or revoke the registration of any 
        security-based swap dealer or major security-based swap 
        participant that has registered with the Commission 
        pursuant to subsection (b) if the Commission finds, on 
        the record after notice and opportunity for hearing, 
        that such censure, placing of limitations, or 
        revocation is in the public interest and that such 
        security-based swap dealer or major security-based swap 
        participant, or any person associated with such 
        security-based swap dealer or major security-based swap 
        participant effecting or involved in effecting 
        transactions in security-based swaps on behalf of such 
        security-based swap dealer or major security-based swap 
        participant, whether prior or subsequent to becoming so 
        associated--
                  (A) has committed or omitted any act, or is 
                subject to an order or finding, enumerated in 
                subparagraph (A), (D), or (E) of paragraph (4) 
                of section 15(b);
                  (B) has been convicted of any offense 
                specified in subparagraph (B) of such paragraph 
                (4) within 10 years of the commencement of the 
                proceedings under this subsection;
                  (C) is enjoined from any action, conduct, or 
                practice specified in subparagraph (C) of such 
                paragraph (4);
                  (D) is subject to an order or a final order 
                specified in subparagraph (F) or (H), 
                respectively, of such paragraph (4); or
                  (E) has been found by a foreign financial 
                regulatory authority to have committed or 
                omitted any act, or violated any foreign 
                statute or regulation, enumerated in 
                subparagraph (G) of such paragraph (4).
          (3) Associated persons.--With respect to any person 
        who is associated, who is seeking to become associated, 
        or, at the time of the alleged misconduct, who was 
        associated or was seeking to become associated with a 
        security-based swap dealer or major security-based swap 
        participant for the purpose of effecting or being 
        involved in effecting security-based swaps on behalf of 
        such security-based swap dealer or major security-based 
        swap participant, 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 security-based swap dealer or major 
        security-based swap participant, if the Commission 
        finds, on the record after notice and opportunity for a 
        hearing, that such censure, placing of limitations, 
        suspension, or bar is in the public interest and that 
        such person--
                  (A) has committed or omitted any act, or is 
                subject to an order or finding, enumerated in 
                subparagraph (A), (D), or (E) of paragraph (4) 
                of section 15(b);
                  (B) has been convicted of any offense 
                specified in subparagraph (B) of such paragraph 
                (4) within 10 years of the commencement of the 
                proceedings under this subsection;
                  (C) is enjoined from any action, conduct, or 
                practice specified in subparagraph (C) of such 
                paragraph (4);
                  (D) is subject to an order or a final order 
                specified in subparagraph (F) or (H), 
                respectively, of such paragraph (4); or
                  (E) has been found by a foreign financial 
                regulatory authority to have committed or 
                omitted any act, or violated any foreign 
                statute or regulation, enumerated in 
                subparagraph (G) of such paragraph (4).
          (4) Unlawful conduct.--It shall be unlawful--
                  (A) for any person as to whom an order under 
                paragraph (3) is in effect, without the consent 
                of the Commission, willfully to become, or to 
                be, associated with a security-based swap 
                dealer or major security-based swap participant 
                in contravention of such order; or
                  (B) for any security-based swap dealer or 
                major security-based swap participant to permit 
                such a person, without the consent of the 
                Commission, to become or remain a person 
                associated with the security-based swap dealer 
                or major security-based swap participant in 
                contravention of such order, if such security-
                based swap dealer or major security-based swap 
                participant knew, or in the exercise of 
                reasonable care should have known, of such 
                order.

SEC. 15G. CREDIT RISK RETENTION.

  (a) Definitions.--In this section--
          (1) the term ``Federal banking agencies'' means the 
        Office of the Comptroller of the Currency, the Board of 
        Governors of the Federal Reserve System, and the 
        Federal Deposit Insurance Corporation;
          (2) the term ``insured depository institution'' has 
        the same meaning as in section 3(c) of the Federal 
        Deposit Insurance Act (12 U.S.C. 1813(c));
          (3) the term ``securitizer'' means--
                  (A) an issuer of an asset-backed security; or
                  (B) a person who organizes and initiates an 
                asset-backed securities transaction by selling 
                or transferring assets, either directly or 
                indirectly, including through an affiliate, to 
                the issuer; [and]
          (4) the term ``originator'' means a person who--
                  (A) through the extension of credit or 
                otherwise, creates a financial asset that 
                collateralizes an asset-backed security; and
                  (B) sells an asset directly or indirectly to 
                a securitizer[.]; and
          (5) the term ``asset-backed security'' refers only to 
        an asset-backed security that is comprised wholly of 
        residential mortgages.
  (b) Regulations Required.--
          [(1) In general.--Not later than 270 days after the 
        date of enactment of this section, the Federal banking 
        agencies and the Commission shall jointly prescribe 
        regulations to require any securitizer to retain an 
        economic interest in a portion of the credit risk for 
        any asset that the securitizer, through the issuance of 
        an asset-backed security, transfers, sells, or conveys 
        to a third party.
          [(2) Residential mortgages.--] Not later than 270 
        days after the date of the enactment of this section, 
        the Federal banking agencies, the Commission, the 
        Secretary of Housing and Urban Development, and the 
        Board of Directors of the Federal Housing Finance 
        Agency, shall jointly prescribe regulations to require 
        any securitizer to retain an economic interest in a 
        portion of the credit risk for any residential mortgage 
        asset that the securitizer, through the issuance of an 
        asset-backed security, transfers, sells, or conveys to 
        a third party.
  (c) Standards for Regulations.--
          (1) Standards.--The regulations prescribed under 
        subsection (b) shall--
                  (A) prohibit a securitizer from directly or 
                indirectly hedging or otherwise transferring 
                the credit risk that the securitizer is 
                required to retain with respect to an asset;
                  (B) require a securitizer to retain--
                          (i) not less than 5 percent of the 
                        credit risk for any asset--
                                  (I) that is not a qualified 
                                residential mortgage that is 
                                transferred, sold, or conveyed 
                                through the issuance of an 
                                asset-backed security by the 
                                securitizer; or
                                  (II) that is a qualified 
                                residential mortgage that is 
                                transferred, sold, or conveyed 
                                through the issuance of an 
                                asset-backed security by the 
                                securitizer, if 1 or more of 
                                the assets that collateralize 
                                the asset-backed security are 
                                not qualified residential 
                                mortgages; or
                          (ii) less than 5 percent of the 
                        credit risk for an asset that is not a 
                        qualified residential mortgage that is 
                        transferred, sold, or conveyed through 
                        the issuance of an asset-backed 
                        security by the securitizer, if the 
                        originator of the asset meets the 
                        underwriting standards prescribed under 
                        paragraph (2)(B);
                  (C) specify--
                          (i) the permissible forms of risk 
                        retention for purposes of this section;
                          (ii) the minimum duration of the risk 
                        retention required under this section; 
                        and
                          (iii) that a securitizer is not 
                        required to retain any part of the 
                        credit risk for an asset that is 
                        transferred, sold or conveyed through 
                        the issuance of an asset-backed 
                        security by the securitizer, if all of 
                        the assets that collateralize the 
                        asset-backed security are qualified 
                        residential mortgages;
                  (D) apply, regardless of whether the 
                securitizer is an insured depository 
                institution;
                  (E) with respect to a commercial mortgage, 
                specify the permissible types, forms, and 
                amounts of risk retention that would meet the 
                requirements of subparagraph (B), which in the 
                determination of the Federal banking agencies 
                and the Commission may include--
                          (i) retention of a specified amount 
                        or percentage of the total credit risk 
                        of the asset;
                          (ii) retention of the first-loss 
                        position by a third-party purchaser 
                        that specifically negotiates for the 
                        purchase of such first loss position, 
                        holds adequate financial resources to 
                        back losses, provides due diligence on 
                        all individual assets in the pool 
                        before the issuance of the asset-backed 
                        securities, and meets the same 
                        standards for risk retention as the 
                        Federal banking agencies and the 
                        Commission require of the securitizer;
                          (iii) a determination by the Federal 
                        banking agencies and the Commission 
                        that the underwriting standards and 
                        controls for the asset are adequate; 
                        and
                          (iv) provision of adequate 
                        representations and warranties and 
                        related enforcement mechanisms; and
                  (F) establish appropriate standards for 
                retention of an economic interest with respect 
                to collateralized debt obligations, securities 
                collateralized by collateralized debt 
                obligations, and similar instruments 
                collateralized by other asset-backed 
                securities; and
                  (G) provide for--
                          (i) a total or partial exemption of 
                        any securitization, as may be 
                        appropriate in the public interest and 
                        for the protection of investors;
                          (ii) a total or partial exemption for 
                        the securitization of an asset issued 
                        or guaranteed by the United States, or 
                        an agency of the United States, as the 
                        Federal banking agencies and the 
                        Commission jointly determine 
                        appropriate in the public interest and 
                        for the protection of investors, except 
                        that, for purposes of this clause, the 
                        Federal National Mortgage Association 
                        and the Federal Home Loan Mortgage 
                        Corporation are not agencies of the 
                        United States;
                          (iii) a total or partial exemption 
                        for any asset-backed security that is a 
                        security issued or guaranteed by any 
                        State of the United States, or by any 
                        political subdivision of a State or 
                        territory, or by any public 
                        instrumentality of a State or territory 
                        that is exempt from the registration 
                        requirements of the Securities Act of 
                        1933 by reason of section 3(a)(2) of 
                        that Act (15 U.S.C. 77c(a)(2)), or a 
                        security defined as a qualified 
                        scholarship funding bond in section 
                        150(d)(2) of the Internal Revenue Code 
                        of 1986, as may be appropriate in the 
                        public interest and for the protection 
                        of investors; and
                          (iv) the allocation of risk retention 
                        obligations between a securitizer and 
                        an originator in the case of a 
                        securitizer that purchases assets from 
                        an originator, as the Federal banking 
                        agencies and the Commission jointly 
                        determine appropriate.
          (2) Asset classes.--
                  (A) Asset classes.--The regulations 
                prescribed under subsection (b) shall establish 
                asset classes with separate rules for 
                securitizers of different classes of assets, 
                including residential mortgages, commercial 
                mortgages, commercial loans, auto loans, and 
                any other class of assets that the Federal 
                banking agencies and the Commission deem 
                appropriate.
                  (B) Contents.--For each asset class 
                established under subparagraph (A), the 
                regulations prescribed under subsection (b) 
                shall include underwriting standards 
                established by the Federal banking agencies 
                that specify the terms, conditions, and 
                characteristics of a loan within the asset 
                class that indicate a low credit risk with 
                respect to the loan.
  (d) Originators.--In determining how to allocate risk 
retention obligations between a securitizer and an originator 
under subsection (c)(1)(E)(iv), the Federal banking agencies 
and the Commission shall--
          (1) reduce the percentage of risk retention 
        obligations required of the securitizer by the 
        percentage of risk retention obligations required of 
        the originator; and
          (2) consider--
                  (A) whether the assets sold to the 
                securitizer have terms, conditions, and 
                characteristics that reflect low credit risk;
                  (B) whether the form or volume of 
                transactions in securitization markets creates 
                incentives for imprudent origination of the 
                type of loan or asset to be sold to the 
                securitizer; and
                  (C) the potential impact of the risk 
                retention obligations on the access of 
                consumers and businesses to credit on 
                reasonable terms, which may not include the 
                transfer of credit risk to a third party.
  (e) Exemptions, Exceptions, and Adjustments.--
          (1) In general.--The Federal banking agencies and the 
        Commission may jointly adopt or issue exemptions, 
        exceptions, or adjustments to the rules issued under 
        this section, including exemptions, exceptions, or 
        adjustments for classes of institutions or assets 
        relating to the risk retention requirement and the 
        prohibition on hedging under subsection (c)(1).
          (2) Applicable standards.--Any exemption, exception, 
        or adjustment adopted or issued by the Federal banking 
        agencies and the Commission under this paragraph 
        shall--
                  (A) help ensure high quality underwriting 
                standards for the securitizers and originators 
                of assets that are securitized or available for 
                securitization; and
                  (B) encourage appropriate risk management 
                practices by the securitizers and originators 
                of assets, improve the access of consumers and 
                businesses to credit on reasonable terms, or 
                otherwise be in the public interest and for the 
                protection of investors.
          (3) Certain institutions and programs exempt.--
                  (A) Farm credit system institutions.--
                Notwithstanding any other provision of this 
                section, the requirements of this section shall 
                not apply to any loan or other financial asset 
                made, insured, guaranteed, or purchased by any 
                institution that is subject to the supervision 
                of the Farm Credit Administration, including 
                the Federal Agricultural Mortgage Corporation.
                  (B) Other federal programs.--This section 
                shall not apply to any residential, 
                multifamily, or health care facility mortgage 
                loan asset, or securitization based directly or 
                indirectly on such an asset, which is insured 
                or guaranteed by the United States or an agency 
                of the United States. For purposes of this 
                subsection, the Federal National Mortgage 
                Association, the Federal Home Loan Mortgage 
                Corporation, and the Federal home loan banks 
                shall not be considered an agency of the United 
                States.
          (4) Exemption for qualified residential mortgages.--
                  (A) In general.--The Federal banking 
                agencies, the Commission, the Secretary of 
                Housing and Urban Development, and the Director 
                of the Federal Housing Finance Agency shall 
                jointly issue regulations to exempt qualified 
                residential mortgages from the risk retention 
                requirements of this [subsection] section.
                  (B) Qualified residential mortgage.--The 
                Federal banking agencies, the Commission, the 
                Secretary of Housing and Urban Development, and 
                the Director of the Federal Housing Finance 
                Agency shall jointly define the term 
                ``qualified residential mortgage'' for purposes 
                of this subsection, taking into consideration 
                underwriting and product features that 
                historical loan performance data indicate 
                result in a lower risk of default, such as--
                          (i) documentation and verification of 
                        the financial resources relied upon to 
                        qualify the mortgagor;
                          (ii) standards with respect to--
                                  (I) the residual income of 
                                the mortgagor after all monthly 
                                obligations;
                                  (II) the ratio of the housing 
                                payments of the mortgagor to 
                                the monthly income of the 
                                mortgagor;
                                  (III) the ratio of total 
                                monthly installment payments of 
                                the mortgagor to the income of 
                                the mortgagor;
                          (iii) mitigating the potential for 
                        payment shock on adjustable rate 
                        mortgages through product features and 
                        underwriting standards;
                          (iv) mortgage guarantee insurance or 
                        other types of insurance or credit 
                        enhancement obtained at the time of 
                        origination, to the extent such 
                        insurance or credit enhancement reduces 
                        the risk of default; and
                          (v) prohibiting or restricting the 
                        use of balloon payments, negative 
                        amortization, prepayment penalties, 
                        interest-only payments, and other 
                        features that have been demonstrated to 
                        exhibit a higher risk of borrower 
                        default.
                  (C) Limitation on definition.--The Federal 
                banking agencies, the Commission, the Secretary 
                of Housing and Urban Development, and the 
                Director of the Federal Housing Finance Agency 
                in defining the term ``qualified residential 
                mortgage'', as required by subparagraph (B), 
                shall define that term to be no broader than 
                the definition ``qualified mortgage'' as the 
                term is defined under section [129C(c)(2)] 
                129C(b)(2)(A) of the Truth in Lending Act (15 
                U.S.C. 1639c(b)(2)(A)), as amended by the 
                Consumer Financial Protection Act of 2010, and 
                regulations adopted thereunder.
          (5) Condition for qualified residential mortgage 
        exemption.--The regulations issued under paragraph (4) 
        shall provide that an asset-backed security that is 
        collateralized by tranches of other asset-backed 
        securities shall not be exempt from the risk retention 
        requirements of this [subsection] section.
          (6) Certification.--The Commission shall require an 
        issuer to certify, for each issuance of an asset-backed 
        security collateralized exclusively by qualified 
        residential mortgages, that the issuer has evaluated 
        the effectiveness of the internal supervisory controls 
        of the issuer with respect to the process for ensuring 
        that all assets that collateralize the asset-backed 
        security are qualified residential mortgages.
  (f) Enforcement.--The regulations issued under this section 
shall be enforced by--
          (1) the appropriate Federal banking agency, with 
        respect to any securitizer that is an insured 
        depository institution; and
          (2) the Commission, with respect to any securitizer 
        that is not an insured depository institution.
  (g) Authority of Commission.--The authority of the Commission 
under this section shall be in addition to the authority of the 
Commission to otherwise enforce the securities laws.
  [(h) Authority to Coordinate on Rulemaking.--The Chairperson 
of the Financial Stability Oversight Council shall coordinate 
all joint rulemaking required under this section.]
  [(i)] (h) Effective Date of Regulations.--The regulations 
issued under this section shall become [effective--]
          [(1)] [with respect to] effective with respect to 
        securitizers and originators of asset-backed securities 
        backed by residential mortgages, 1 year after the date 
        on which final rules under this section are published 
        in the Federal Register[; and].
          [(2) with respect to securitizers and originators of 
        all other classes of asset-backed securities, 2 years 
        after the date on which final rules under this section 
        are published in the Federal Register.]

SEC. 15H. REGISTRATION OF PROXY ADVISORY FIRMS.

  (a) Conduct Prohibited.--It shall be unlawful for a proxy 
advisory firm to make use of the mails or any means or 
instrumentality of interstate commerce to provide proxy voting 
research, analysis, or recommendations to any client, unless 
such proxy advisory firm is registered under this section.
  (b) Registration Procedures.--
          (1) Application for registration.--
                  (A) In general.--A proxy advisory firm must 
                file with the Commission an application for 
                registration, in such form as the Commission 
                shall require, by rule or regulation, and 
                containing the information described in 
                subparagraph (B).
                  (B) Required information.--An application for 
                registration under this section shall contain 
                information regarding--
                          (i) a certification that the 
                        applicant has adequate financial and 
                        managerial resources to consistently 
                        provide proxy advice based on accurate 
                        information;
                          (ii) the procedures and methodologies 
                        that the applicant uses in developing 
                        proxy voting recommendations, including 
                        whether and how the applicant considers 
                        the size of a company when making proxy 
                        voting recommendations;
                          (iii) the organizational structure of 
                        the applicant;
                          (iv) whether or not the applicant has 
                        in effect a code of ethics, and if not, 
                        the reasons therefor;
                          (v) any potential or actual conflict 
                        of interest relating to the ownership 
                        structure of the applicant or the 
                        provision of proxy advisory services by 
                        the applicant, including whether the 
                        proxy advisory firm engages in services 
                        ancillary to the provision of proxy 
                        advisory services such as consulting 
                        services for corporate issuers, and if 
                        so the revenues derived therefrom;
                          (vi) the policies and procedures in 
                        place to manage conflicts of interest 
                        under subsection (f); and
                          (vii) any other information and 
                        documents concerning the applicant and 
                        any person associated with such 
                        applicant as the Commission, by rule, 
                        may prescribe as necessary or 
                        appropriate in the public interest or 
                        for the protection of investors.
          (2) Review of application.--
                  (A) Initial determination.--Not later than 90 
                days after the date on which the application 
                for registration is filed with the Commission 
                under paragraph (1) (or within such longer 
                period as to which the applicant consents) the 
                Commission shall--
                          (i) by order, grant registration; or
                          (ii) institute proceedings to 
                        determine whether registration should 
                        be denied.
                  (B) Conduct of proceedings.--
                          (i) Content.--Proceedings referred to 
                        in subparagraph (A)(ii) shall--
                                  (I) include notice of the 
                                grounds for denial under 
                                consideration and an 
                                opportunity for hearing; and
                                  (II) be concluded not later 
                                than 120 days after the date on 
                                which the application for 
                                registration is filed with the 
                                Commission under paragraph (1).
                          (ii) Determination.--At the 
                        conclusion of such proceedings, the 
                        Commission, by order, shall grant or 
                        deny such application for registration.
                          (iii) Extension authorized.--The 
                        Commission may extend the time for 
                        conclusion of such proceedings for not 
                        longer than 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.
                  (C) Grounds for decision.--The Commission 
                shall grant registration under this 
                subsection--
                          (i) if the Commission finds that the 
                        requirements of this section are 
                        satisfied; and
                          (ii) unless the Commission finds (in 
                        which case the Commission shall deny 
                        such registration) that--
                                  (I) the applicant has failed 
                                to certify to the Commission's 
                                satisfaction that it has 
                                adequate financial and 
                                managerial resources to 
                                consistently provide proxy 
                                advice based on accurate 
                                information and to materially 
                                comply with the procedures and 
                                methodologies disclosed under 
                                paragraph (1)(B) and with 
                                subsections (f) and (g); or
                                  (II) if the applicant were so 
                                registered, its registration 
                                would be subject to suspension 
                                or revocation under subsection 
                                (e).
          (3) Public availability of information.--Subject to 
        section 24, the Commission shall make the information 
        and documents submitted to the Commission by a proxy 
        advisory firm in its completed application for 
        registration, or in any amendment submitted under 
        paragraph (1) or (2) of subsection (c), publicly 
        available on the Commission's website, or through 
        another comparable, readily accessible means.
  (c) Update of Registration.--
          (1) Update.--Each registered proxy advisory firm 
        shall promptly amend and update its application for 
        registration under this section if any information or 
        document provided therein becomes materially 
        inaccurate, except that a registered proxy advisory 
        firm is not required to amend the information required 
        to be filed under subsection (b)(1)(B)(i) by filing 
        information under this paragraph, but shall amend such 
        information in the annual submission of the 
        organization under paragraph (2) of this subsection.
          (2) Certification.--Not later than 90 calendar days 
        after the end of each calendar year, each registered 
        proxy advisory firm shall file with the Commission an 
        amendment to its registration, in such form as the 
        Commission, by rule, may prescribe as necessary or 
        appropriate in the public interest or for the 
        protection of investors--
                  (A) certifying that the information and 
                documents in the application for registration 
                of such registered proxy advisory firm continue 
                to be accurate in all material respects; and
                  (B) listing any material change that occurred 
                to such information or documents during the 
                previous calendar year.
  (d) Censure, Denial, or Suspension of Registration; Notice 
and Hearing.--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 registered proxy advisory firm if the 
Commission finds, on the record after notice and opportunity 
for hearing, that such censure, placing of limitations, 
suspension, or revocation is necessary for the protection of 
investors and in the public interest and that such registered 
proxy advisory firm, or any person associated with such an 
organization, whether prior to or subsequent to becoming so 
associated--
          (1) has committed or omitted any act, or is subject 
        to an order or finding, enumerated in subparagraph (A), 
        (D), (E), (H), or (G) of section 15(b)(4), has been 
        convicted of any offense specified in section 
        15(b)(4)(B), or is enjoined from any action, conduct, 
        or practice specified in subparagraph (C) of section 
        15(b)(4), during the 10-year period preceding the date 
        of commencement of the proceedings under this 
        subsection, or at any time thereafter;
          (2) has been convicted during the 10-year period 
        preceding the date on which an application for 
        registration is filed with the Commission under this 
        section, or at any time thereafter, of--
                  (A) any crime that is punishable by 
                imprisonment for one or more years, and that is 
                not described in section 15(b)(4)(B); or
                  (B) a substantially equivalent crime by a 
                foreign court of competent jurisdiction;
          (3) is subject to any order of the Commission barring 
        or suspending the right of the person to be associated 
        with a registered proxy advisory firm;
          (4) fails to furnish the certifications required 
        under subsections (b)(2)(C)(ii)(I) and (c)(2);
          (5) has engaged in one or more prohibited acts 
        enumerated in paragraph (1); or
          (6) fails to maintain adequate financial and 
        managerial resources to consistently offer advisory 
        services with integrity, including by failing to comply 
        with subsections (f) or (g).
  (e) Termination of Registration.--
          (1) Voluntary withdrawal.--A registered proxy 
        advisory firm may, upon such terms and conditions as 
        the Commission may establish as necessary in the public 
        interest or for the protection of investors, which 
        terms and conditions shall include at a minimum that 
        the registered proxy advisory firm will no longer 
        conduct such activities as to bring it within the 
        definition of proxy advisory firm in section 3(a)(83) 
        of the Securities Exchange Act of 1934, withdraw from 
        registration by filing a written notice of withdrawal 
        to the Commission.
          (2) Commission authority.--In addition to any other 
        authority of the Commission under this title, if the 
        Commission finds that a registered proxy advisory firm 
        is no longer in existence or has ceased to do business 
        as a proxy advisory firm, the Commission, by order, 
        shall cancel the registration under this section of 
        such registered proxy advisory firm.
  (f) Management of Conflicts of Interest.--
          (1) Organization policies and procedures.--Each 
        registered proxy advisory firm shall establish, 
        maintain, and enforce written policies and procedures 
        reasonably designed, taking into consideration the 
        nature of the business of such registered proxy 
        advisory firm and associated persons, to address and 
        manage any conflicts of interest that can arise from 
        such business.
          (2) Commission authority.--The Commission shall issue 
        final rules to prohibit, or require the management and 
        disclosure of, any conflicts of interest relating to 
        the offering of proxy advisory services by a registered 
        proxy advisory firm, including, without limitation, 
        conflicts of interest relating to--
                  (A) the manner in which a registered proxy 
                advisory firm is compensated by the client, or 
                any affiliate of the client, for providing 
                proxy advisory services;
                  (B) the provision of consulting, advisory, or 
                other services by a registered proxy advisory 
                firm, or any person associated with such 
                registered proxy advisory firm, to the client;
                  (C) business relationships, ownership 
                interests, or any other financial or personal 
                interests between a registered proxy advisory 
                firm, or any person associated with such 
                registered proxy advisory firm, and any client, 
                or any affiliate of such client;
                  (D) transparency around the formulation of 
                proxy voting policies;
                  (E) the execution of proxy votes if such 
                votes are based upon recommendations made by 
                the proxy advisory firm in which someone other 
                than the issuer is a proponent;
                  (F) issuing recommendations where proxy 
                advisory firms provide advisory services to a 
                company; and
                  (G) any other potential conflict of interest, 
                as the Commission deems necessary or 
                appropriate in the public interest or for the 
                protection of investors.
  (g) Reliability of Proxy Advisory Firm Services.--
          (1) In general.--Each registered proxy advisory firm 
        shall have staff sufficient to produce proxy voting 
        recommendations that are based on accurate and current 
        information. Each registered proxy advisory firm shall 
        detail procedures sufficient to permit companies 
        receiving proxy advisory firm recommendations access in 
        a reasonable time to the draft recommendations, with an 
        opportunity to provide meaningful comment thereon, 
        including the opportunity to present details to the 
        person responsible for developing the recommendation in 
        person or telephonically. Each registered proxy 
        advisory firm shall employ an ombudsman to receive 
        complaints about the accuracy of voting information 
        used in making recommendations from the subjects of the 
        proxy advisory firm's voting recommendations, and shall 
        resolve those complaints in a timely fashion and in any 
        event prior to voting on the matter to which the 
        recommendation relates.
          (2) Draft recommendations defined.--For purposes of 
        this subsection, the term ``draft recommendations''--
                  (A) means the overall conclusions of proxy 
                voting recommendations prepared for the clients 
                of a proxy advisory firm, including any public 
                data cited therein, any company information or 
                substantive analysis impacting the 
                recommendation, and the specific voting 
                recommendations on individual proxy ballot 
                issues; and
                  (B) does not include the entirety of the 
                proxy advisory firm's final report to its 
                clients.
  (h) Designation of Compliance Officer.--Each registered proxy 
advisory firm shall designate an individual responsible for 
administering the policies and procedures that are required to 
be established pursuant to subsections (f) and (g), and for 
ensuring compliance with the securities laws and the rules and 
regulations thereunder, including those promulgated by the 
Commission pursuant to this section.
  (i) Prohibited Conduct.--
          (1) Prohibited acts and practices.--The Commission 
        shall issue final rules to prohibit any act or practice 
        relating to the offering of proxy advisory services by 
        a registered proxy advisory firm that the Commission 
        determines to be unfair or coercive, including any act 
        or practice relating to--
                  (A) conditioning a voting recommendation or 
                other proxy advisory firm recommendation on the 
                purchase by an issuer or an affiliate thereof 
                of other services or products, of the 
                registered proxy advisory firm or any person 
                associated with such registered proxy advisory 
                firm; and
                  (B) modifying a voting recommendation or 
                otherwise departing from its adopted systematic 
                procedures and methodologies in the provision 
                of proxy advisory services, based on whether an 
                issuer, or affiliate thereof, subscribes or 
                will subscribe to other services or product of 
                the registered proxy advisory firm or any 
                person associated with such organization.
          (2) Rule of construction.--Nothing in paragraph (1), 
        or in any rules or regulations adopted thereunder, may 
        be construed to modify, impair, or supersede the 
        operation of any of the antitrust laws (as defined in 
        the first section of the Clayton Act, except that such 
        term includes section 5 of the Federal Trade Commission 
        Act, to the extent that such section 5 applies to 
        unfair methods of competition).
  (j) Statements of Financial Condition.--Each registered proxy 
advisory firm shall, on a confidential basis, file with the 
Commission, at intervals determined by the Commission, such 
financial statements, certified (if required by the rules or 
regulations of the Commission) by an independent public 
auditor, and information concerning its financial condition, as 
the Commission, by rule, may prescribe as necessary or 
appropriate in the public interest or for the protection of 
investors.
  (k) Annual Report.--Each registered proxy advisory firm 
shall, at the beginning of each fiscal year of such firm, 
report to the Commission on the number of shareholder proposals 
its staff reviewed in the prior fiscal year, the number of 
recommendations made in the prior fiscal year, the number of 
staff who reviewed and made recommendations on such proposals 
in the prior fiscal year, and the number of recommendations 
made in the prior fiscal year where the proponent of such 
recommendation was a client of or received services from the 
proxy advisory firm.
  (l) Transparent Policies.--Each registered proxy advisory 
firm shall file with the Commission and make publicly available 
its methodology for the formulation of proxy voting policies 
and voting recommendations.
  (m) Rules of Construction.--
          (1) No waiver of rights, privileges, or defenses.--
        Registration under and compliance with this section 
        does not constitute a waiver of, or otherwise diminish, 
        any right, privilege, or defense that a registered 
        proxy advisory firm may otherwise have under any 
        provision of State or Federal law, including any rule, 
        regulation, or order thereunder.
          (2) No private right of action.--Nothing in this 
        section may be construed as creating any private right 
        of action, and no report filed by a registered proxy 
        advisory firm in accordance with this section or 
        section 17 shall create a private right of action under 
        section 18 or any other provision of law.
  (n) Regulations.--
          (1) New provisions.--Such rules and regulations as 
        are required by this section or are otherwise necessary 
        to carry out this section, including the application 
        form required under subsection (a)--
                  (A) shall be issued by the Commission, not 
                later than 180 days after the date of enactment 
                of this section; and
                  (B) shall become effective not later than 1 
                year after the date of enactment of this 
                section.
          (2) Review of existing regulations.--Not later than 
        270 days after the date of enactment of this section, 
        the Commission shall--
                  (A) review its existing rules and regulations 
                which affect the operations of proxy advisory 
                firms;
                  (B) amend or revise such rules and 
                regulations in accordance with the purposes of 
                this section, and issue such guidance, as the 
                Commission may prescribe as necessary or 
                appropriate in the public interest or for the 
                protection of investors; and
                  (C) direct Commission staff to withdraw the 
                Egan Jones Proxy Services (May 27, 2004) and 
                Institutional Shareholder Services, Inc. 
                (September 15, 2004) no-action letters.
  (o) Applicability.--This section, other than subsection (n), 
which shall apply on the date of enactment of this section, 
shall apply on the earlier of--
          (1) the date on which regulations are issued in final 
        form under subsection (n)(1); or
          (2) 270 days after the date of enactment of this 
        section.

  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 municipal advisor,, registered 
securities information processor, registered transfer agent, 
nationally recognized statistical rating organization, proxy 
advisory firm, 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.
  (2) Every registered clearing agency shall also make and keep 
for prescribed periods such records, furnish such copies 
thereof, and make and disseminate such reports, as the 
appropriate regulatory agency for such clearing agency, by 
rule, prescribes as necessary or appropriate for the 
safeguarding of securities and funds in the custody or control 
of such clearing agency or for which it is responsible.
  (3) Every registered transfer agent shall also make and keep 
for prescribed periods such records, furnish such copies 
thereof, and make such reports as the appropriate regulatory 
agency for such transfer agent, by rule, prescribes as 
necessary or appropriate in furtherance of the purposes of 
section 17A of this title.
  (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) registered clearing agency, registered 
                transfer agent, or registered municipal 
                securities dealer for which it is not the 
                appropriate regulatory agency, give notice to 
                the appropriate regulatory agency for such 
                clearing agency, transfer agent, or municipal 
                securities dealer of such proposed examination 
                and consult with such appropriate regulatory 
                agency concerning the feasibility and 
                desirability of coordinating such examination 
                with examinations conducted by such appropriate 
                regulatory agency with a view to avoiding 
                unnecessary regulatory duplication or undue 
                regulatory burdens for such clearing agency, 
                transfer agent, or municipal securities dealer; 
                or
                  (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), 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.
          (2) Furnishing data and reports to cftc.--The 
        Commission shall notify the Commodity Futures Trading 
        Commission of any examination conducted of any 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) and, upon request, furnish to the 
        Commodity Futures Trading Commission any examination 
        report and data supplied to, or prepared by, the 
        Commission in connection with such examination.
          (3) Use of cftc reports.--Prior to conducting an 
        examination under paragraph (1), the Commission shall 
        use the reports of examinations, if the information 
        available therein is sufficient for the purposes of the 
        examination, of--
                  (A) any broker or dealer registered pursuant 
                to section 15(b)(11);
                  (B) exchange registered pursuant to section 
                6(g); or
                  (C) national securities association 
                registered pursuant to section 15A(k);
        that is made by the Commodity Futures Trading 
        Commission, a national securities association 
        registered pursuant to section 15A(k), or an exchange 
        registered pursuant to section 6(g).
          (4) Rules of construction.--
                  (A) Notwithstanding any other provision of 
                this subsection, the records of a broker or 
                dealer registered pursuant to section 
                15(b)(11), an exchange registered pursuant to 
                section 6(g), or a national securities 
                association registered pursuant to section 
                15A(k) described in this subparagraph shall not 
                be subject to routine periodic examinations by 
                the Commission.
                  (B) Any recordkeeping rules adopted under 
                this subsection for a broker or dealer 
                registered pursuant to section 15(b)(11), an 
                exchange registered pursuant to section 6(g), 
                or a national securities association registered 
                pursuant to section 15A(k) shall be limited to 
                records with respect to persons, accounts, 
                agreements, contracts, and transactions 
                involving security futures products.
                  (C) Nothing in the proviso in paragraph (1) 
                shall be construed to impair or limit (other 
                than by the requirement of prior consultation) 
                the power of the Commission under this 
                subsection to examine any clearing agency, 
                transfer agent, or municipal securities dealer 
                or to affect in any way the power of the 
                Commission under any other provision of this 
                title or otherwise to inspect, examine, or 
                investigate any such clearing agency, transfer 
                agent, or municipal securities dealer.
  (c)(1) Every clearing agency, transfer agent, and municipal 
securities dealer for which the Commission is not the 
appropriate regulatory agency shall (A) file with the 
appropriate regulatory agency for such clearing agency, 
transfer agent, or municipal securities dealer a copy of any 
application, notice, proposal, report, or document filed with 
the Commission by reason of its being a clearing agency, 
transfer agent, or municipal securities dealer and (B) file 
with the Commission a copy of any application, notice, 
proposal, report, or document filed with such appropriate 
regulatory agency by reason of its being a clearing agency, 
transfer agent, or municipal securities dealer. The Municipal 
Securities Rulemaking Board shall file with each agency 
enumerated in section 3(a)(34)(A) of this title copies of every 
proposed rule change filed with the Commission pursuant to 
section 19(b) of this title.
  (2) The appropriate regulatory agency for a clearing agency, 
transfer agent, or municipal securities dealer for which the 
Commission is not the appropriate regulatory agency shall file 
with the Commission notice of the commencement of any 
proceeding and a copy of any order entered by such appropriate 
regulatory agency against any clearing agency, transfer agent, 
municipal securities dealer, or person associated with a 
transfer agent or municipal securities dealer, and the 
Commission shall file with such appropriate regulatory agency, 
if any, notice of the commencement of any proceeding and a copy 
of any order entered by the Commission against the clearing 
agency, transfer agent, or municipal securities dealer, or 
against any person associated with a transfer agent or 
municipal securities dealer for which the agency is the 
appropriate regulatory agency.
  (3) The Commission and the appropriate regulatory agency for 
a clearing agency, transfer agent, or municipal securities 
dealer for which the Commission is not the appropriate 
regulatory agency shall each notify the other and make a report 
of any examination conducted by it of such clearing agency, 
transfer agent, or municipal securities dealer, and, upon 
request, furnish to the other a copy of such report and any 
data supplied to it in connection with such examination.
  (4) The Commission or the appropriate regulatory agency may 
specify that documents required to be filed pursuant to this 
subsection with the Commission or such agency, respectively, 
may be retained by the originating clearing agency, transfer 
agent, or municipal securities dealer, or filed with another 
appropriate regulatory agency. The Commission or the 
appropriate regulatory agency (as the case may be) making such 
a specification shall continue to have access to the document 
on request.
  (d)(1) The Commission, by rule or order, as it deems 
necessary or appropriate in the public interest and for the 
protection of investors, to foster cooperation and coordination 
among self-regulatory organizations, or to remove impediments 
to and foster the development of a national market system and 
national system for the clearance and settlement of securities 
transactions, may--
          (A) with respect to any person who is a member of or 
        participant in more than one self-regulatory 
        organization, relieve any such self-regulatory 
        organization of any responsibility under this title (i) 
        to receive regulatory reports from such person, (ii) to 
        examine such person for compliance, or to enforce 
        compliance by such person, with specified provisions of 
        this title, the rules and regulations thereunder, and 
        its own rules, or (iii) to carry out other specified 
        regulatory functions with respect to such person, and
          (B) allocate among self-regulatory organizations the 
        authority to adopt rules with respect to matters as to 
        which, in the absence of such allocation, such self-
        regulatory organizations share authority under this 
        title.
In making any such rule or entering any such order, the 
Commission shall take into consideration the regulatory 
capabilities and procedures of the self-regulatory 
organizations, availability of staff, convenience of location, 
unnecessary regulatory duplication, and such other factors as 
the Commission may consider germane to the protection of 
investors, cooperation and coordination among self-regulatory 
organizations, and the development of a national market system 
and a national system for the clearance and settlement of 
securities transactions. The Commission, by rule or order, as 
it deems necessary or appropriate in the public interest and 
for the protection of investors, may require any self-
regulatory organization relieved of any responsibility pursuant 
to this paragraph, and any person with respect to whom such 
responsibility relates, to take such steps as are specified in 
any such rule or order to notify customers of, and persons 
doing business with, such person of the limited nature of such 
self-regulatory organization's responsibility for such person's 
acts, practices, and course of business.
  (2) A self-regulatory organization shall furnish copies of 
any report of examination of any person who is a member of or a 
participant in such self-regulatory organization to any other 
self-regulatory organization of which such person is a member 
or in which such person is a participant upon the request of 
such person, such other self-regulatory organization, or the 
Commission.
  (e)(1)(A) Every registered broker or dealer shall annually 
file with the Commission a balance sheet and income statement 
certified by a independent public accounting firm, or by a 
registered public accounting firm if the firm is required to be 
registered under the Sarbanes-Oxley Act of 2002,, prepared on a 
calendar or fiscal year basis, and such other financial 
statements (which shall, as the Commission specifies, be 
certified) and information concerning its financial condition 
as the Commission, by rule may prescribe as necessary or 
appropriate in the public interest or for the protection of 
investors.
  (B) Every registered broker and dealer shall annually send to 
its customers its certified balance sheet and such other 
financial statements and information concerning its financial 
condition as the Commission, by rule, may prescribe pursuant to 
subsection (a) of this section.
  (C) The Commission, by rule or order, may conditionally or 
unconditionally exempt any registered broker or dealer, or 
class of such brokers or dealers, from any provision of this 
paragraph if the Commission determines that such exemption is 
consistent with the public interest and the protection of 
investors.
  (2) The Commission, by rule, as it deems necessary or 
appropriate in the public interest or for the protection of 
investors, may prescribe the form and content of financial 
statements filed pursuant to this title and the accounting 
principles and accounting standards used in their preparation.
  (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 securities that are missing, 
        lost, counterfeit, stolen, or cancelled, 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, 
        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, 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, 
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.
  (3)(A) In order to carry out the authority under paragraph 
(1) above, the Commission or its designee may enter into 
agreement with the Attorney General to use the facilities of 
the National Crime Information Center (``NCIC'') to receive, 
store, and disseminate information in regard to missing, lost, 
counterfeit, or stolen securities and to permit direct inquiry 
access to NCIC's file on such securities for the financial 
community.
  (B) In order to carry out the authority under paragraph (1) 
of this subsection, the Commission or its designee and the 
Secretary of the Treasury shall enter into an agreement whereby 
the Commission or its designee will receive, store, and 
disseminate information in the possession, and which comes into 
the possession, of the Department of the Treasury in regard to 
missing, lost, counterfeit, or stolen securities.
  (4) In regard to paragraphs (1), (2), and (3), above insofar 
as such paragraphs apply to any bank or member of the Federal 
Reserve System, the Commission may delegate its authority to:
          (A) the Comptroller of the Currency as to national 
        banks;
          (B) the Federal Reserve Board in regard to any member 
        of the Federal Reserve System which is not a national 
        bank; and
          (C) the Federal Deposit Insurance Corporation for any 
        State bank which is insured by the Federal Deposit 
        Insurance Corporation but which is not a member of the 
        Federal Reserve System.
  (5) The Commission shall encourage the insurance industry to 
require their insured to report expeditiously instances of 
missing, lost, counterfeit, or stolen securities to the 
Commission or to such other person as the Commission may, by 
rule, designate to receive such information.
  (g) Any broker, dealer, or other person extending credit who 
is subject to the rules and regulations prescribed by the Board 
of Governors of the Federal Reserve System pursuant to this 
title shall make such reports to the Board as it may require as 
necessary or appropriate to enable it to perform the functions 
conferred upon it by this title. If any such broker, dealer, or 
other person shall fail to make any such report or fail to 
furnish full information therein, or, if in the judgment of the 
Board it is otherwise necessary, such broker, dealer, or other 
person shall permit such inspections to be made by the Board 
with respect to the business operations of such broker, dealer, 
or other person as the Board may deem necessary to enable it to 
obtain the required information.
  (h) Risk Assessment for Holding Company Systems.--
          (1) Obligations to obtain, maintain, and report 
        information.--Every person who is (A) a registered 
        broker or dealer, or (B) a registered municipal 
        securities dealer for which the Commission is the 
        appropriate regulatory agency, shall obtain such 
        information and make and keep such records as the 
        Commission by rule prescribes concerning the registered 
        person's policies, procedures, or systems for 
        monitoring and controlling financial and operational 
        risks to it resulting from the activities of any of its 
        associated persons, other than a natural person. Such 
        records shall describe, in the aggregate, each of the 
        financial and securities activities conducted by, and 
        the customary sources of capital and funding of, those 
        of its associated persons whose business activities are 
        reasonably likely to have a material impact on the 
        financial or operational condition of such registered 
        person, including its net capital, its liquidity, or 
        its ability to conduct or finance its operations. The 
        Commission, by rule, may require summary reports of 
        such information to be filed with the Commission no 
        more frequently than quarterly.
          (2) Authority to require additional information.--If, 
        as a result of adverse market conditions or based on 
        reports provided to the Commission pursuant to 
        paragraph (1) of this subsection or other available 
        information, the Commission reasonably concludes that 
        it has concerns regarding the financial or operational 
        condition of (A) any registered broker or dealer, or 
        (B) any registered municipal securities dealer, 
        government securities broker, or government securities 
        dealer for which the Commission is the appropriate 
        regulatory agency, the Commission may require the 
        registered person to make reports concerning the 
        financial and securities activities of any of such 
        person's associated persons, other than a natural 
        person, whose business activities are reasonably likely 
        to have a material impact on the financial or 
        operational condition of such registered person. The 
        Commission, in requiring reports pursuant to this 
        paragraph, shall specify the information required, the 
        period for which it is required, the time and date on 
        which the information must be furnished, and whether 
        the information is to be furnished directly to the 
        Commission or to a self-regulatory organization with 
        primary responsibility for examining the registered 
        person's financial and operational condition.
          (3) Special provisions with respect to associated 
        persons subject to federal banking agency regulation.--
                  (A) Cooperation in implementation.--In 
                developing and implementing reporting 
                requirements pursuant to paragraph (1) of this 
                subsection with respect to associated persons 
                subject to examination by or reporting 
                requirements of a Federal banking agency, the 
                Commission shall consult with and consider the 
                views of each such Federal banking agency. If a 
                Federal banking agency comments in writing on a 
                proposed rule of the Commission under this 
                subsection that has been published for comment, 
                the Commission shall respond in writing to such 
                written comment before adopting the proposed 
                rule. The Commission shall, at the request of 
                the Federal banking agency, publish such 
                comment and response in the Federal Register at 
                the time of publishing the adopted rule.
                  (B) Use of banking agency reports.--A 
                registered broker, dealer, or municipal 
                securities dealer shall be in compliance with 
                any recordkeeping or reporting requirement 
                adopted pursuant to paragraph (1) of this 
                subsection concerning an associated person that 
                is subject to examination by or reporting 
                requirements of a Federal banking agency if 
                such broker, dealer, or municipal securities 
                dealer utilizes for such recordkeeping or 
                reporting requirement copies of reports filed 
                by the associated person with the Federal 
                banking agency pursuant to section 5211 of the 
                Revised Statutes, section 9 of the Federal 
                Reserve Act, section 7(a) of the Federal 
                Deposit Insurance Act, section 10(b) of the 
                Home Owners' Loan Act, or section 8 of the Bank 
                Holding Company Act of 1956. The Commission 
                may, however, by rule adopted pursuant to 
                paragraph (1), require any broker, dealer, or 
                municipal securities dealer filing such reports 
                with the Commission to obtain, maintain, or 
                report supplemental information if the 
                Commission makes an explicit finding that such 
                supplemental information is necessary to inform 
                the Commission regarding potential risks to 
                such broker, dealer, or municipal securities 
                dealer. Prior to requiring any such 
                supplemental information, the Commission shall 
                first request the Federal banking agency to 
                expand its reporting requirements to include 
                such information.
                  (C) Procedure for requiring additional 
                information.--Prior to making a request 
                pursuant to paragraph (2) of this subsection 
                for information with respect to an associated 
                person that is subject to examination by or 
                reporting requirements of a Federal banking 
                agency, the Commission shall--
                          (i) notify such agency of the 
                        information required with respect to 
                        such associated person; and
                          (ii) consult with such agency to 
                        determine whether the information 
                        required is available from such agency 
                        and for other purposes, unless the 
                        Commission determines that any delay 
                        resulting from such consultation would 
                        be inconsistent with ensuring the 
                        financial and operational condition of 
                        the broker, dealer, municipal 
                        securities dealer, government 
                        securities broker, or government 
                        securities dealer or the stability or 
                        integrity of the securities markets.
                  (D) Exclusion for examination reports.--
                Nothing in this subsection shall be construed 
                to permit the Commission to require any 
                registered broker or dealer, or any registered 
                municipal securities dealer, government 
                securities broker, or government securities 
                dealer for which the Commission is the 
                appropriate regulatory agency, to obtain, 
                maintain, or furnish any examination report of 
                any Federal banking agency or any supervisory 
                recommendations or analysis contained therein.
                  (E) Confidentiality of information 
                provided.--No information provided to or 
                obtained by the Commission from any Federal 
                banking agency pursuant to a request by the 
                Commission under subparagraph (C) of this 
                paragraph regarding any associated person which 
                is subject to examination by or reporting 
                requirements of a Federal banking agency may be 
                disclosed to any other person (other than a 
                self-regulatory organization), without the 
                prior written approval of the Federal banking 
                agency. 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 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.
                  (F) Notice to banking agencies concerning 
                financial and operational condition concerns.--
                The Commission shall notify the Federal banking 
                agency of any concerns of the Commission 
                regarding significant financial or operational 
                risks resulting from the activities of any 
                registered broker or dealer, or any registered 
                municipal securities dealer, government 
                securities broker, or government securities 
                dealer for which the Commission is the 
                appropriate regulatory agency, to any 
                associated person thereof which is subject to 
                examination by or reporting requirements of the 
                Federal banking agency.
                  (G) Definition.--For purposes of this 
                paragraph, the term ``Federal banking agency'' 
                shall have the same meaning as the term 
                ``appropriate Federal bank agency'' in section 
                3(q) of the Federal Deposit Insurance Act (12 
                U.S.C. 1813(q)).
          (4) Exemptions.--The Commission by rule or order may 
        exempt any person or class of persons, under such terms 
        and conditions and for such periods as the Commission 
        shall provide in such rule or order, from the 
        provisions of this subsection, and the rules 
        thereunder. In granting such exemptions, the Commission 
        shall consider, among other factors--
                  (A) whether information of the type required 
                under this subsection is available from a 
                supervisory agency (as defined in section 
                1101(6) of the Right to Financial Privacy Act 
                of 1978 (12 U.S.C. 3401(6))), a State insurance 
                commission or similar State agency, the 
                Commodity Futures Trading Commission, or a 
                similar foreign regulator;
                  (B) the primary business of any associated 
                person;
                  (C) the nature and extent of domestic or 
                foreign regulation of the associated person's 
                activities;
                  (D) the nature and extent of the registered 
                person's securities activities; and
                  (E) with respect to the registered person and 
                its associated persons, on a consolidated 
                basis, the amount and proportion of assets 
                devoted to, and revenues derived from, 
                activities in the United States securities 
                markets.
          (5) 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 this 
        subsection, 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 registered broker, 
        dealer, government securities broker, government 
        securities dealer, or municipal securities dealer. 
        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 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 
        subparagraph (B) or (C) of paragraph (3) of this 
        subsection as confidential information for purposes of 
        section 24(b)(2) of this title.
  (i) 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) Coordination of Examining Authorities.--
          (1) Elimination of duplication.--The Commission and 
        the examining authorities, through cooperation and 
        coordination of examination and oversight activities, 
        shall eliminate any unnecessary and burdensome 
        duplication in the examination process.
          (2) Coordination of examinations.--The Commission and 
        the examining authorities shall share such information, 
        including reports of examinations, customer complaint 
        information, and other nonpublic regulatory 
        information, as appropriate to foster a coordinated 
        approach to regulatory oversight of brokers and dealers 
        that are subject to examination by more than one 
        examining authority.
          (3) Examinations for cause.--At any time, any 
        examining authority may conduct an examination for 
        cause of any broker or dealer subject to its 
        jurisdiction.
          (4) Confidentiality.--
                  (A) In general.--Section 24 shall apply to 
                the sharing of information in accordance with 
                this subsection. The Commission shall take 
                appropriate action under section 24(c) to 
                ensure that such information is not 
                inappropriately disclosed.
                  (B) Appropriate disclosure not prohibited.--
                Nothing in this paragraph authorizes the 
                Commission or any examining authority to 
                withhold information from the Congress, or 
                prevent the Commission or any examining 
                authority from complying with a request for 
                information from any other Federal department 
                or agency 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.
          (5) Definition.--For purposes of this subsection, the 
        term ``examining authority'' means a self-regulatory 
        organization registered with the Commission under this 
        title (other than a registered clearing agency) with 
        the authority to examine, inspect, and otherwise 
        oversee the activities of a registered broker or 
        dealer.

national system for clearance and settlement of securities transactions

  Sec. 17A. (a)(1) The Congress finds that--
          (A) The prompt and accurate clearance and settlement 
        of securities transactions, including the transfer of 
        record ownership and the safeguarding of securities and 
        funds related thereto, are necessary for the protection 
        of investors and persons facilitating transactions by 
        and acting on behalf of investors.
          (B) Inefficient procedures for clearance and 
        settlement impose unnecessary costs on investors and 
        persons facilitating transactions by and acting on 
        behalf of investors.
          (C) New data processing and communications techniques 
        create the opportunity for more efficient, effective, 
        and safe procedures for clearance and settlement.
          (D) The linking of all clearance and settlement 
        facilities and the development of uniform standards and 
        procedures for clearance and settlement will reduce 
        unnecessary costs and increase the protection of 
        investors and persons facilitating transactions by and 
        acting on behalf of investors.
  (2)(A) The Commission is directed, therefore, having due 
regard for the public interest, the protection of investors, 
the safeguarding of securities and funds, and maintenance of 
fair competition among brokers and dealers, clearing agencies, 
and transfer agents, to use its authority under this title--
          (i) to facilitate the establishment of a national 
        system for the prompt and accurate clearance and 
        settlement of transactions in securities (other than 
        exempt securities); and
          (ii) to facilitate the establishment of linked or 
        coordinated facilities for clearance and settlement of 
        transactions in securities, securities options, 
        contracts of sale for future delivery and options 
        thereon, and commodity options;
in accordance with the findings and to carry out the objectives 
set forth in paragraph (1) of this subsection.
  (B) The Commission shall use its authority under this title 
to assure equal regulation under this title of registered 
clearing agencies and registered transfer agents. In carrying 
out its responsibilities set forth in subparagraph (A)(ii) of 
this paragraph, the Commission shall coordinate with the 
Commodity Futures Trading Commission and consult with the Board 
of Governors of the Federal Reserve System.
  (b)(1) Except as otherwise provided in this section, it shall 
be unlawful for any clearing agency, unless registered in 
accordance with this subsection, directly or indirectly, to 
make use of the mails or any means or instrumentality of 
interstate commerce to perform the functions of a clearing 
agency with respect to any security (other than an exempted 
security). The Commission, by rule or order, upon its own 
motion or upon application, may conditionally or 
unconditionally exempt any clearing agency or security or any 
class of clearing agencies or securities from any provisions of 
this section or the rules or regulations thereunder, if the 
Commission finds that such exemption is consistent with the 
public interest, the protection of investors, and the purposes 
of this section, including the prompt and accurate clearance 
and settlement of securities transactions and the safeguarding 
of securities and funds. A clearing agency or transfer agent 
shall not perform the functions of both a clearing agency and a 
transfer agent unless such clearing agency or transfer agent is 
registered in accordance with this subsection and subsection 
(c) of this section.
  (2) A clearing agency may be registered under the terms and 
conditions hereinafter provided in this subsection and in 
accordance with the provisions of section 19(a) of this title, 
by filing with the Commission an application for registration 
in such form as the Commission, by rule, may prescribe 
containing the rules of the clearing agency and such other 
information and documents as the Commission, by rule, may 
prescribe as necessary or appropriate in the public interest or 
for the prompt and accurate clearance and settlement of 
securities transactions.
  (3) A clearing agency shall not be registered unless the 
Commission determines that--
          (A) Such clearing agency is so organized and has the 
        capacity to be able to facilitate the prompt and 
        accurate clearance and settlement of securities 
        transactions and derivative agreements, contracts, and 
        transactions for which it is responsible, to safeguard 
        securities and funds in its custody or control or for 
        which it is responsible, to comply with the provisions 
        of this title and the rules and regulations thereunder, 
        to enforce (subject to any rule or order of the 
        Commission pursuant to section 17(d) or 19(g)(2) of 
        this title) compliance by its participants with the 
        rules of the clearing agency, and to carry out the 
        purposes of this section.
          (B) Subject to the provisions of paragraph (4) of 
        this subsection, the rules of the clearing agency 
        provide that any (i) registered broker or dealer, (ii) 
        other registered clearing agency, (iii) registered 
        investment company, (iv) bank, (v) insurance company, 
        or (vi) other person or class of persons as the 
        Commission, by rule, may from time to time designate as 
        appropriate to the development of a national system or 
        the prompt and accurate clearance and settlement of 
        securities transactions may become a participant in 
        such clearing agency.
          (C) The rules of the clearing agency assure a fair 
        representation of its shareholders (or members) and 
        participants in the selection of its directors and 
        administration of its affairs. (The Commission may 
        determine that the representation of participants is 
        fair if they are afforded a reasonable opportunity to 
        acquire voting stock of the clearing agency, directly 
        or indirectly, in reasonable proportion to their use of 
        such clearing agency.)
          (D) The rules of the clearing agency provide for the 
        equitable allocation of reasonable dues, fees, and 
        other charges among its participants.
          (E) The rules of the clearing agency do not impose 
        any schedule of prices, or fix rates or other fees, for 
        services rendered by its participants.
          (F) The rules of the clearing agency are designed to 
        promote the prompt and accurate clearance and 
        settlement of securities transactions and, to the 
        extent applicable, derivative agreements, contracts, 
        and transactions, to assure the safeguarding of 
        securities and funds which are in the custody or 
        control of the clearing agency or for which it is 
        responsible, to foster cooperation and coordination 
        with persons engaged in the clearance and settlement of 
        securities transactions, to remove impediments to and 
        perfect the mechanism of a national system for the 
        prompt and accurate clearance and settlement of 
        securities transactions, and, in general, to protect 
        investors and the public interest; and are not designed 
        to permit unfair discrimination in the admission of 
        participants or among participants in the use of the 
        clearing agency, or to regulate by virtue of any 
        authority conferred by this title matters not related 
        to the purposes of this section or the administration 
        of the clearing agency.
          (G) The rules of the clearing agency provide that 
        (subject to any rule or order of the Commission 
        pursuant to section 17(d) or 19(g)(2) of this title) 
        its participants shall be appropriately disciplined for 
        violation of any provision of the rules of the clearing 
        agency by expulsion, suspension, limitation of 
        activities, functions, and operations, fine, censure, 
        or any other fitting sanction.
          (H) The rules of the clearing agency are in 
        accordance with the provisions of paragraph (5) of this 
        subsection, and, in general, provide a fair procedure 
        with respect to the disciplining of participants, the 
        denial of participation to any persons seeking 
        participation therein, and the prohibition or 
        limitation by the clearing agency of any person with 
        respect to access to services offered by the clearing 
        agency.
          (I) The rules of the clearing agency do not impose 
        any burden on competition not necessary or appropriate 
        in furtherance of the purposes of this title.
  (4)(A) A registered clearing agency may, and in cases in 
which the Commission, by order, directs as appropriate in the 
public interest shall, deny participation to any person subject 
to a statutory disqualification. A registered clearing agency 
shall file notice with the Commission not less than thirty days 
prior to admitting any person to participation, if the clearing 
agency knew, or in the exercise of reasonable care should have 
known, that such person was subject to a statutory 
disqualification. The notice shall be in such form and contain 
such information as the Commission, by rule, may prescribe as 
necessary or appropriate in the public interest or for the 
protection of investors.
  (B) A registered clearing agency may deny participation to, 
or condition the participation of, any person if such person 
does not meet such standards of financial responsibility, 
operational capability, experience, and competence as are 
prescribed by the rules of the clearing agency. A registered 
clearing agency may examine and verify the qualifications of an 
applicant to be a participant in accordance with procedures 
established by the rules of the clearing agency.
  (5)(A) In any proceeding by a registered clearing agency to 
determine whether a participant should be disciplined (other 
than a summary proceeding pursuant to subparagraph (C) of this 
paragraph), the clearing agency shall bring specific charges, 
notify such participant of, and give him an opportunity to 
defend against such charges, and keep a record. A determination 
by the clearing agency to impose a disciplinary sanction shall 
be supported by a statement setting forth--
          (i) any act or practice in which such participant has 
        been found to have engaged, or which such participant 
        has been found to have omitted;
          (ii) the specific provisions of the rules of the 
        clearing agency which any such act or practice, or 
        omission to act, is deemed to violate; and
          (iii) the sanction imposed and the reasons therefor.
  (B) In any proceeding by a registered clearing agency to 
determine whether a person shall be denied participation or 
prohibited or limited with respect to access to services 
offered by the clearing agency, the clearing agency shall 
notify such person of, and give him an opportunity to be heard 
upon, the specific grounds for denial or prohibition or 
limitation under consideration and keep a record. A 
determination by the clearing agency to deny participation or 
prohibit or limit a person with respect to access to services 
offered by the clearing agency shall be supported by a 
statement setting forth the specific grounds on which the 
denial or prohibition or limitation is based.
  (C) A registered clearing agency may summarily suspend and 
close the accounts of a participant who (i) has been and is 
expelled or suspended from any self-regulatory organization, 
(ii) is in default of any delivery of funds or securities to 
the clearing agency, or (iii) is in such financial or operating 
difficulty that the clearing agency determines and so notifies 
the appropriate regulatory agency for such participant that 
such suspension and closing of accounts are necessary for the 
protection of the clearing agency, its participants, creditors, 
or investors. A participant so summarily suspended shall be 
promptly afforded an opportunity for a hearing by the clearing 
agency in accordance with the provisions of subparagraph (A) of 
this paragraph. The appropriate regulatory agency for such 
participant, by order, may stay any such summary suspension on 
its own motion or upon application by any person aggrieved 
thereby, if such appropriate regulatory agency determines 
summarily or after notice and opportunity for hearing (which 
hearing may consist solely of the submission of affidavits or 
presentation of oral arguments) that such stay is consistent 
with the public interest and protection of investors.
  (6) No registered clearing agency shall prohibit or limit 
access by any person to services offered by any participant 
therein.
  (7)(A) A clearing agency that is regulated directly or 
indirectly by the Commodity Futures Trading Commission through 
its association with a designated contract market for security 
futures products that is a national securities exchange 
registered pursuant to section 6(g), and that would be required 
to register pursuant to paragraph (1) of this subsection only 
because it performs the functions of a clearing agency with 
respect to security futures products effected pursuant to the 
rules of the designated contract market with which such agency 
is associated, is exempted from the provisions of this section 
and the rules and regulations thereunder, except that if such a 
clearing agency performs the functions of a clearing agency 
with respect to a security futures product that is not cash 
settled, it must have arrangements in place with a registered 
clearing agency to effect the payment and delivery of the 
securities underlying the security futures product.
  (B) Any clearing agency that performs the functions of a 
clearing agency with respect to security futures products must 
coordinate with and develop fair and reasonable links with any 
and all other clearing agencies that perform the functions of a 
clearing agency with respect to security futures products, in 
order to permit, as of the compliance date (as defined in 
section 6(h)(6)(C)), security futures products to be purchased 
on one market and offset on another market that trades such 
products.
  (8) A registered clearing agency shall be permitted to 
provide facilities for the clearance and settlement of any 
derivative agreements, contracts, or transactions that are 
excluded from the Commodity Exchange Act, subject to the 
requirements of this section and to such rules and regulations 
as the Commission may prescribe as necessary or appropriate in 
the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of this title.
  (c)(1) Except as otherwise provided in this section, it shall 
be unlawful for any transfer agent, unless registered in 
accordance with this section, directly or indirectly, to make 
use of the mails or any means or instrumentality of interstate 
commerce to perform the function of a transfer agent with 
respect to any security registered under section 12 of this 
title or which would be required to be registered except for 
the exemption from registration provided by subsection 
(g)(2)(B) or (g)(2)(G) of that section. The appropriate 
regulatory agency, by rule or order, upon its own motion or 
upon application, may conditionally or unconditionally exempt 
any person or security or class of persons or securities from 
any provision of this section or any rule or regulation 
prescribed under this section, if the appropriate regulatory 
agency finds (A) that such exemption is in the public interest 
and consistent with the protection of investors and the 
purposes of this section, including the prompt and accurate 
clearance and settlement of securities transactions and the 
safeguarding of securities and funds, and (B) the Commission 
does not object to such exemption.
  (2) A transfer agent may be registered by filing with the 
appropriate regulatory agency for such transfer agent an 
application for registration in such form and containing such 
information and documents concerning such transfer agent and 
any persons associated with the transfer agent as such 
appropriate regulatory agency may prescribe as necessary or 
appropriate in furtherance of the purposes of this section. 
Except as hereinafter provided, such registration shall become 
effective 45 days after receipt of such application by such 
appropriate regulatory agency or within such shorter period of 
time as such appropriate regulatory agency may determine.
  (3) The appropriate regulatory agency for a transfer agent, 
by order, shall deny registration to, censure, place 
limitations on the activities, functions, or operations of, 
suspend for a period not exceeding 12 months, or revoke the 
registration of such transfer agent, if such appropriate 
regulatory agency finds, on the record after notice and 
opportunity for hearing, that such denial, censure, placing of 
limitations, suspension, or revocation is in the public 
interest and that such transfer agent, whether prior or 
subsequent to becoming such, or any person associated with such 
transfer agent, whether prior or subsequent to becoming so 
associated--
          (A) has committed or omitted any act, or is subject 
        to an order or finding, enumerated in subparagraph (A), 
        (D), (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 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); or
          (B) is subject to an order entered pursuant to 
        subparagraph (C) of paragraph (4) of this subsection 
        barring or suspending the right of such person to be 
        associated with a transfer agent.
  (4)(A) Pending final determination whether any registration 
by a transfer agent under this subsection shall be denied, the 
appropriate regulatory agency for such transfer agent, by 
order, may postpone the effective date of such registration for 
a period not to exceed fifteen days, but if, after notice and 
opportunity for hearing (which may consist solely of affidavits 
and oral arguments), it shall appear to such appropriate 
regulatory agency to be necessary or appropriate in the public 
interest or for the protection of investors to postpone the 
effective date of such registration until final determination, 
such appropriate regulatory agency shall so order. Pending 
final determination whether any registration under this 
subsection shall be revoked, such appropriate regulatory 
agency, by order, may suspend such registration, if such 
suspension appears to such appropriate regulatory agency, after 
notice and opportunity for hearing, to be necessary or 
appropriate in the public interest or for the protection of 
investors.
  (B) A registered transfer agent may, upon such terms and 
conditions as the appropriate regulatory agency for such 
transfer agent deems necessary or appropriate in the public 
interest, for the protection of investors, or in furtherance of 
the purposes of this section, withdraw from registration by 
filing a written notice of withdrawal with such appropriate 
regulatory agency. If such appropriate regulatory agency finds 
that any transfer agent for which it is the appropriate 
regulatory agency, is no longer in existence or has ceased to 
do business as a transfer agent, such appropriate regulatory 
agency, by order, shall cancel or deny the registration.
  (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 12 months or bar 
any such person from being associated with any transfer agent, 
broker, dealer, investment adviser, municipal securities 
dealer, municipal advisor, or nationally recognized statistical 
rating organization, 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.
  (d)(1) No registered clearing agency or registered transfer 
agent shall, directly or indirectly, engage in any activity as 
clearing agency or transfer agent in contravention of such 
rules and regulations (A) as the Commission may prescribe as 
necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the 
purposes of this title, or (B) as the appropriate regulatory 
agency for such clearing agency or transfer agent may prescribe 
as necessary or appropriate for the safeguarding of securities 
and funds.
  (2) With respect to any clearing agency or transfer agent for 
which the Commission is not the appropriate regulatory agency, 
the appropriate regulatory agency for such clearing agency or 
transfer agent may, in accordance with section 8 of the Federal 
Deposit Insurance Act (12 U.S.C. 1818), enforce compliance by 
such clearing agency or transfer agent with the provisions of 
this section, sections 17 and 19 of this title, and the rules 
and regulations thereunder. For purposes of the preceding 
sentence, any violation of any such provision shall constitute 
adequate basis for the issuance of an order under section 8(b) 
or 8(c) of the Federal Deposit Insurance Act, and the 
participants in any such clearing agency and the persons doing 
business with any such transfer agent shall be deemed to be 
``depositors'' as that term is used in section 8(c) of that 
Act.
  (3)(A) With respect to any clearing agency or transfer agent 
for which the Commission is not the appropriate regulatory 
agency, the Commission and the appropriate regulatory agency 
for such clearing agency or transfer agent shall consult and 
cooperate with each other, and, as may be appropriate, with 
State banking authorities having supervision over such clearing 
agency or transfer agent toward the end that, to the maximum 
extent practicable, their respective regulatory 
responsibilities may be fulfilled and the rules and regulations 
applicable to such clearing agency or transfer agent may be in 
accord with both sound banking practices and a national system 
for the prompt and accurate clearance and settlement of 
securities transactions. In accordance with this objective--
          (i) the Commission and such appropriate regulatory 
        agency shall, at least fifteen days prior to the 
        issuance for public comment of any proposed rule or 
        regulation or adoption of any rule or regulation 
        concerning such clearing agency or transfer agent, 
        consult and request the views of the other; and
          (ii) such appropriate regulatory agency shall assume 
        primary responsibility to examine and enforce 
        compliance by such clearing agency or transfer agent 
        with the provisions of this section and sections 17 and 
        19 of this title.
  (B) Nothing in the preceding subparagraph or elsewhere in 
this title shall be construed to impair or limit (other than by 
the requirement of notification) the Commission's authority to 
make rules under any provision of this title or to enforce 
compliance pursuant to any provision of this title by any 
clearing agency, transfer agent, or person associated with a 
transfer agent with the provisions of this title and the rules 
and regulations thereunder.
  (4) Nothing in this section shall be construed to impair the 
authority of any State banking authority or other State or 
Federal regulatory authority having jurisdiction over a person 
registered as a clearing agency, transfer agent, or person 
associated with a transfer agent, to make and enforce rules 
governing such person which are not inconsistent with this 
title and the rules and regulations thereunder.
  (5) A registered transfer agent may not, directly or 
indirectly, engage in any activity in connection with the 
guarantee of a signature of an endorser of a security, 
including the acceptance or rejection of such guarantee, in 
contravention of such rules and regulations as the Commission 
may prescribe as necessary or appropriate in the public 
interest, for the protection of investors, to facilitate the 
equitable treatment of financial institutions which issue such 
guarantees, or otherwise in furtherance of the purposes of this 
title.
  (e) The Commission shall use its authority under this title 
to end the physical movement of securities certificates in 
connection with the settlement among brokers and dealers of 
transactions in securities consummated by means of the mails or 
any means or instrumentalities of interstate commerce.
  (f)(1) Notwithstanding any provision of State law, except as 
provided in paragraph (3), if the Commission makes each of the 
findings described in paragraph (2)(A), the Commission may 
adopt rules concerning--
          (A) the transfer of certificated or uncertificated 
        securities (other than government securities issued 
        pursuant to chapter 31 of title 31, United States Code, 
        or securities otherwise processed within a book-entry 
        system operated by the Federal Reserve banks pursuant 
        to a Federal book-entry regulation) or limited 
        interests (including security interests) therein; and
          (B) rights and obligations of purchasers, sellers, 
        owners, lenders, borrowers, and financial 
        intermediaries (including brokers, dealers, banks, and 
        clearing agencies) involved in or affected by such 
        transfers, and the rights of third parties whose 
        interests in such securities devolve from such 
        transfers.
  (2)(A) The findings described in this paragraph are findings 
by the Commission that--
          (i) such rule is necessary or appropriate for the 
        protection of investors or in the public interest and 
        is reasonably designed to promote the prompt, accurate, 
        and safe clearance and settlement of securities 
        transactions;
          (ii) in the absence of a uniform rule, the safe and 
        efficient operation of the national system for 
        clearance and settlement of securities transactions 
        will be, or is, substantially impeded; and
          (iii) to the extent such rule will impair or 
        diminish, directly or indirectly, rights of persons 
        specified in paragraph (1)(B) under State law 
        concerning transfers of securities (or limited 
        interests therein), the benefits of such rule outweigh 
        such impairment or diminution of rights.
  (B) In making the findings described in subparagraph (A), the 
Commission shall give consideration to the recommendations of 
the Advisory Committee established under paragraph (4), and it 
shall consult with and consider the views of the Secretary of 
the Treasury and the Board of Governors of the Federal Reserve 
System. If the Secretary of the Treasury objects, in writing, 
to any proposed rule of the Commission on the basis of the 
Secretary's view on the issues described in clauses (i), (ii), 
and (iii) of subparagraph (A), the Commission shall consider 
all feasible alternatives to the proposed rule, and it shall 
not adopt any such rule unless the Commission makes an explicit 
finding that the rule is the most practicable method for 
achieving safe and efficient operation of the national 
clearance and settlement system.
  (3) Any State may, prior to the expiration of 2 years after 
the Commission adopts a rule under this subsection, enact a 
statute that specifically refers to this subsection and the 
specific rule thereunder and establishes, prospectively from 
the date of enactment of the State statute, a provision that 
differs from that applicable under the Commission's rule.
  (4)(A) Within 90 days after the date of enactment of this 
subsection, the Commission shall (and at such times thereafter 
as the Commission may determine, the Commission may), after 
consultation with the Secretary of the Treasury and the Board 
of Governors of the Federal Reserve System, establish an 
advisory committee under the Federal Advisory Committee Act (5 
U.S.C. App.). The Advisory Committee shall be directed to 
consider and report to the Commission on such matters as the 
Commission, after consultation with the Secretary of the 
Treasury and the Board of Governors of the Federal Reserve 
System, determines, including the areas, if any, in which State 
commercial laws and related Federal laws concerning the 
transfer of certificated or uncertificated securities, limited 
interests (including security interests) in such securities, or 
the creation or perfection of security interests in such 
securities do not provide the necessary certainty, uniformity, 
and clarity for purchasers, sellers, owners, lenders, 
borrowers, and financial intermediaries concerning their 
respective rights and obligations.
  (B) The Advisory Committee shall consist of 15 members, of 
which--
          (i) 11 shall be designated by the Commission in 
        accordance with the Federal Advisory Committee Act; and
          (ii) 2 each shall be designated by the Board of 
        Governors of the Federal Reserve System and the 
        Secretary of the Treasury.
  (C) The Advisory Committee shall conduct its activities in 
accordance with the Federal Advisory Committee Act. Within 6 
months of its designation, or such longer time as the 
Commission may designate, the Advisory Committee shall issue a 
report to the Commission, and shall cause copies of that report 
to be delivered to the Secretary of the Treasury and the 
Chairman of the Board of Governors of the Federal Reserve 
System.
  (g) Registration Requirement.--It shall be unlawful for a 
clearing agency, unless registered with the Commission, 
directly or indirectly to make use of the mails or any means or 
instrumentality of interstate commerce to perform the functions 
of a clearing agency with respect to a security-based swap.
  (h) Voluntary Registration.--A person that clears agreements, 
contracts, or transactions that are not required to be cleared 
under this title may register with the Commission as a clearing 
agency.
  (i) Standards for Clearing Agencies Clearing Security-based 
Swap Transactions.--To be registered and to maintain 
registration as a clearing agency that clears security-based 
swap transactions, a clearing agency shall comply with such 
standards as the Commission may establish by rule. In 
establishing any such standards, and in the exercise of its 
oversight of such a clearing agency pursuant to this title, the 
Commission may conform such standards or oversight to reflect 
evolving United States and international standards. Except 
where the Commission determines otherwise by rule or 
regulation, a clearing agency shall have reasonable discretion 
in establishing the manner in which it complies with any such 
standards.
  (j) Rules.--The Commission shall adopt rules governing 
persons that are registered as clearing agencies for security-
based swaps under this title.
  (k) Exemptions.--The Commission may exempt, conditionally or 
unconditionally, a clearing agency from registration under this 
section for the clearing of security-based swaps if the 
Commission determines that the clearing agency is subject to 
comparable, comprehensive supervision and regulation by the 
Commodity Futures Trading Commission or the appropriate 
government authorities in the home country of the agency. Such 
conditions may include, but are not limited to, requiring that 
the clearing agency be available for inspection by the 
Commission and make available all information requested by the 
Commission.
  (l) Existing Depository Institutions and Derivative Clearing 
Organizations.--
          (1) In general.--A depository institution or 
        derivative clearing organization registered with the 
        Commodity Futures Trading Commission under the 
        Commodity Exchange Act that is required to be 
        registered as a clearing agency under this section is 
        deemed to be registered under this section solely for 
        the purpose of clearing security-based swaps to the 
        extent that, before the date of enactment of this 
        subsection--
                  (A) the depository institution cleared swaps 
                as a multilateral clearing organization; or
                  (B) the derivative clearing organization 
                cleared swaps pursuant to an exemption from 
                registration as a clearing agency.
          (2) Conversion of depository institutions.--A 
        depository institution to which this subsection applies 
        may, by the vote of the shareholders owning not less 
        than 51 percent of the voting interests of the 
        depository institution, be converted into a State 
        corporation, partnership, limited liability company, or 
        similar legal form pursuant to a plan of conversion, if 
        the conversion is not in contravention of applicable 
        State law.
          (3) Sharing of information.--The Commodity Futures 
        Trading Commission shall make available to the 
        Commission, upon request, all information determined to 
        be relevant by the Commodity Futures Trading Commission 
        regarding a derivatives clearing organization deemed to 
        be registered with the Commission under paragraph (1).
  (m) Modification of Core Principles.--The Commission may 
conform the core principles established in this section to 
reflect evolving United States and international standards.
  [(g)] (n) Due Diligence for the Delivery of Dividends, 
Interest, and Other Valuable Property Rights.--
          (1) Revision of rules required.--The Commission shall 
        revise its regulations in section 240.17Ad-17 of title 
        17, Code of Federal Regulations, as in effect on 
        December 8, 1997, to extend the application of such 
        section to brokers and dealers and to provide for the 
        following:
                  (A) A requirement that the paying agent 
                provide a single written notification to each 
                missing security holder that the missing 
                security holder has been sent a check that has 
                not yet been negotiated. The written 
                notification may be sent along with a check or 
                other mailing subsequently sent to the missing 
                security holder but must be provided no later 
                than 7 months after the sending of the not yet 
                negotiated check.
                  (B) An exclusion for paying agents from the 
                notification requirements when the value of the 
                not yet negotiated check is less than $25.
                  (C) A provision clarifying that the 
                requirements described in subparagraph (A) 
                shall have no effect on State escheatment laws.
                  (D) For purposes of such revised 
                regulations--
                          (i) a security holder shall be 
                        considered a ``missing security 
                        holder'' if a check is sent to the 
                        security holder and the check is not 
                        negotiated before the earlier of the 
                        paying agent sending the next regularly 
                        scheduled check or the elapsing of 6 
                        months after the sending of the not yet 
                        negotiated check; and
                          (ii) the term ``paying agent'' 
                        includes any issuer, transfer agent, 
                        broker, dealer, investment adviser, 
                        indenture trustee, custodian, or any 
                        other person that accepts payments from 
                        the issuer of a security and 
                        distributes the payments to the holders 
                        of the security.
          (2) Rulemaking.--The Commission shall adopt such 
        rules, regulations, and orders necessary to implement 
        this subsection no later than 1 year after the date of 
        enactment of this subsection. In proposing such rules, 
        the Commission shall seek to minimize disruptions to 
        current systems used by or on behalf of paying agents 
        to process payment to account holders and avoid 
        requiring multiple paying agents to send written 
        notification to a missing security holder regarding the 
        same not yet negotiated check.

           *       *       *       *       *       *       *


        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, 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.
  (2) On request from a foreign securities authority, the 
Commission may provide assistance in accordance with this 
paragraph if the requesting authority states that the 
requesting authority is conducting an investigation which it 
deems necessary to determine whether any person has violated, 
is violating, or is about to violate any laws or rules relating 
to securities matters that the requesting authority administers 
or enforces. The Commission may, in its discretion, conduct 
such investigation as the Commission deems necessary to collect 
information and evidence pertinent to the request for 
assistance. Such assistance may be provided without regard to 
whether the facts stated in the request would also constitute a 
violation of the laws of the United States. In deciding whether 
to provide such assistance, the Commission shall consider 
whether (A) the requesting authority has agreed to provide 
reciprocal assistance in securities matters to the Commission; 
and (B) compliance with the request would prejudice the public 
interest of the United States.
  (b) Supoena.--[For the purpose of]
          (1) In general._For the purpose of  any such 
        investigation, or any other proceeding under this 
        title, any member of the Commission or any officer 
        designated by it is empowered to administer oaths and 
        affirmations, subpoena witnesses, compel their 
        attendance, take evidence, and require the production 
        of any books, papers, correspondence, memoranda, or 
        other records which the Commission deems relevant or 
        material to the inquiry. Such attendance of witnesses 
        and the production of any such records may be required 
        from any place in the United States or any State at any 
        designated place of hearing.
          (2) Omnibus orders of investigation.--
                  (A) Duration and renewal.--An omnibus order 
                of investigation shall not be for an indefinite 
                duration and may be renewed only by Commission 
                action.
                  (B) Definition.--In paragraph (A), the term 
                ``omnibus order of investigation'' means an 
                order of the Commission authorizing 1 of more 
                members of the Commission or its staff to issue 
                subpoenas under paragraph (1) to multiple 
                persons in relation to a particular subject 
                matter area.
  (c) In case of contumacy by, or refusal to obey a subpoena 
issued to, any person, the Commission may invoke the aid of any 
court of the United States within the jurisdiction of which 
such investigation or proceeding is carried on, or where such 
person resides or carries on business, in requiring the 
attendance and testimony of witnesses and the production of 
books, papers, correspondence, memoranda, and other records. 
And such court may issue an order requiring such person to 
appear before the Commission or member or officer designated by 
the Commission, there to produce records, if so ordered, or to 
give testimony touching the matter under investigation or in 
question; and any failure to obey such order of the court may 
be punished by such court as a contempt thereof. All process in 
any such case may be served in the judicial district whereof 
such person is an inhabitant or wherever he may be found. Any 
person who shall, without just cause, fail or refuse to attend 
and testify or to answer any lawful inquiry or to produce 
books, papers, correspondence, memoranda, and other records, if 
in his power so to do, in obedience to the subpoena of the 
Commission, shall be guilty of a misdemeanor and, upon 
conviction, shall be subject to a fine of not more than $1,000 
or to imprisonment for a term of not more than one year, or 
both.
  (d)(1) Whenever it shall appear to the Commission that any 
person is engaged or is about to engage in acts or practices 
constituting a violation of 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 with a 
member, the rules of a registered clearing agency in which such 
person is 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, or the rules of the Municipal Securities 
Rulemaking Board, it may in its discretion bring an action in 
the proper district court of the United States, the United 
States District Court for the District of Columbia, or the 
United States courts of any territory or other place subject to 
the jurisdiction of the United States, to enjoin such acts or 
practices, and upon a proper showing a permanent or temporary 
injunction or restraining order shall be granted without bond. 
The Commission may transmit such evidence as may be available 
concerning such acts or practices as may constitute a violation 
of any provision of this title or the rules or regulations 
thereunder to the Attorney General, who may, in his discretion, 
institute the necessary criminal proceedings under this title.
  (2) Authority of a Court To Prohibit Persons From Serving as 
Officers and Directors.--In any proceeding under paragraph (1) 
of this subsection, the court may prohibit, conditionally or 
unconditionally, and permanently or for such period of time as 
it shall determine, any person who violated section 10(b) of 
this title or the rules or regulations thereunder from acting 
as an officer or director of any issuer that has a class of 
securities registered pursuant to section 12 of this title or 
that is required to file reports pursuant to section 15(d) of 
this title if the person's conduct demonstrates unfitness to 
serve as an officer or director of any such issuer.
  (3) Money Penalties in Civil Actions.--
          (A) Authority of commission.--Whenever it shall 
        appear to the Commission that any person has violated 
        any provision of this title, the rules or regulations 
        thereunder, a Federal court injunction or a bar 
        obtained or entered by the Commission under this title, 
        or a cease-and-desist order entered by the Commission 
        pursuant to section 21C of this title, other than by 
        committing a violation subject to a penalty pursuant to 
        section 21A, the Commission may bring an action in a 
        United States district court to seek, and the court 
        shall have jurisdiction to impose, upon a proper 
        showing, a civil penalty to be paid by the person who 
        committed such violation.
          (B) Amount of penalty.--
                  (i) First tier.--The amount of the penalty 
                shall be determined by the court in light of 
                the facts and circumstances. For each 
                violation, the amount of the penalty shall not 
                exceed the greater of (I) [$5,000] $10,000 for 
                a natural person or [$50,000] $100,000 for any 
                other person, or (II) the gross amount of 
                pecuniary gain to such defendant as a result of 
                the violation.
                  (ii) Second tier.--Notwithstanding clause 
                (i), the amount of penalty for each such 
                violation shall not exceed the greater of (I) 
                [$50,000] $100,000 for a natural person or 
                [$250,000] $500,000 for any other person, or 
                (II) the gross amount of pecuniary gain to such 
                defendant as a result of the violation, if the 
                violation described in subparagraph (A) 
                involved fraud, deceit, manipulation, or 
                deliberate or reckless disregard of a 
                regulatory requirement.
                  [(iii) Third tier.--Notwithstanding clauses 
                (i) and (ii), the amount of penalty for each 
                such violation shall not exceed the greater of 
                (I) $100,000 for a natural person or $500,000 
                for any other person, or (II) the gross amount 
                of pecuniary gain to such defendant as a result 
                of the violation, if--
                          [(aa) the violation described in 
                        subparagraph (A) involved fraud, 
                        deceit, manipulation, or deliberate or 
                        reckless disregard of a regulatory 
                        requirement; and
                          [(bb) such violation directly or 
                        indirectly resulted in substantial 
                        losses or created a significant risk of 
                        substantial losses to other persons.]
                  (iii) Third tier.--
                          (I) In general.--Notwithstanding 
                        clauses (i) and (ii), the amount of 
                        penalty for each such violation shall 
                        not exceed the amount specified in 
                        subclause (II) if--
                                  (aa) the violation described 
                                in subparagraph (A) involved 
                                fraud, deceit, manipulation, or 
                                deliberate or reckless 
                                disregard of a regulatory 
                                requirement; and
                                  (bb) such violation directly 
                                or indirectly resulted in 
                                substantial losses or created a 
                                significant risk of substantial 
                                losses to other persons.
                          (II) Maximum amount of penalty.--The 
                        amount referred to in subclause (I) is 
                        the greatest of--
                                  (aa) $300,000 for a natural 
                                person or $1,450,000 for any 
                                other person;
                                  (bb) 3 times the gross amount 
                                of pecuniary gain to such 
                                defendant as a result of the 
                                violation; or
                                  (cc) the amount of losses 
                                incurred by victims as a result 
                                of the violation.
                  (iv) Fourth tier.--Notwithstanding clauses 
                (i), (ii), and (iii), the maximum amount of 
                penalty for each such violation shall be 3 
                times the otherwise applicable amount in such 
                clauses if, within the 5-year period preceding 
                such violation, the defendant was criminally 
                convicted for securities fraud or became 
                subject to a judgment or order imposing 
                monetary, equitable, or administrative relief 
                in any Commission action alleging fraud by that 
                defendant.
          (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.
                  (ii) Collection of penalties.--If a person 
                upon whom such a penalty is imposed shall fail 
                to pay such penalty within the time prescribed 
                in the court's order, the Commission may refer 
                the matter to the Attorney General who shall 
                recover such penalty by action in the 
                appropriate United States district court.
                  (iii) Remedy not exclusive.--The actions 
                authorized by this paragraph may be brought in 
                addition to any other action that the 
                Commission or the Attorney General is entitled 
                to bring.
                  (iv) Jurisdiction and venue.--For purposes of 
                section 27 of this title, actions under this 
                paragraph shall be actions to enforce a 
                liability or a duty created by this title.
          [(D) Special provisions relating to a violation of a 
        cease-and-desist order.--In an action to enforce a 
        cease-and-desist order entered by the Commission 
        pursuant to section 21C, each separate violation of 
        such order shall be a separate offense, except that in 
        the case of a violation through a continuing failure to 
        comply with the order, each day of the failure to 
        comply shall be deemed a separate offense.]
          (D) Special provisions relating to a violation of an 
        injunction or certain orders.--
                  (i) In general.--Each separate violation of 
                an injunction or order described in clause (ii) 
                shall be a separate offense, except that in the 
                case of a violation through a continuing 
                failure to comply with such injunction or 
                order, each day of the failure to comply with 
                the injunction or order shall be deemed a 
                separate offense.
                  (ii) Injunctions and orders.--Clause (i) 
                shall apply with respect to an action to 
                enforce--
                          (I) a Federal court injunction 
                        obtained pursuant to this title;
                          (II) an order entered or obtained by 
                        the Commission pursuant to this title 
                        that bars, suspends, places limitations 
                        on the activities or functions of, or 
                        prohibits the activities of, a person; 
                        or
                          (III) a cease-and-desist order 
                        entered by the Commission pursuant to 
                        section 21C.
          (4) Prohibition of attorneys' fees paid from 
        commission disgorgement funds.--Except as otherwise 
        ordered by the court upon motion by the Commission, or, 
        in the case of an administrative action, as otherwise 
        ordered by the Commission, funds disgorged as the 
        result of an action brought by the Commission in 
        Federal court, or as a result of any Commission 
        administrative action, shall not be distributed as 
        payment for attorneys' fees or expenses incurred by 
        private parties seeking distribution of the disgorged 
        funds.
  (5) Equitable Relief.--In any action or proceeding brought or 
instituted by the Commission under any provision of the 
securities laws, the Commission may seek, and any Federal court 
may grant, any equitable relief that may be appropriate or 
necessary for the benefit of investors.
  (6) Authority of a court to prohibit persons from 
participating in an offering of penny stock.--
          (A) In general.--In any proceeding under paragraph 
        (1) against any person participating in, or, at the 
        time of the alleged misconduct who was participating 
        in, an offering of penny stock, the court may prohibit 
        that person from participating in an offering of penny 
        stock, conditionally or unconditionally, and 
        permanently or for such period of time as the court 
        shall determine.
          (B) Definition.--For purposes of this paragraph, the 
        term ``person participating in an offering of penny 
        stock'' includes any person engaging in activities with 
        a broker, dealer, or issuer for purposes of issuing, 
        trading, or inducing or attempting to induce the 
        purchase or sale of, any penny stock. The Commission 
        may, by rule or regulation, define such term to include 
        other activities, and may, by rule, regulation, or 
        order, exempt any person or class of persons, in whole 
        or in part, conditionally or unconditionally, from 
        inclusion in such term.
  (e) Upon application of the Commission 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 to issue writs of mandamus, 
injunctions, and orders commanding (1) any person to comply 
with the provisions of this title, the rules, regulations, and 
orders thereunder, the rules of a national securities exchange 
or registered securities association of which such person is a 
member or person associated with a member, the rules of a 
registered clearing agency in which such person is 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, the 
rules of the Municipal Securities Rulemaking Board, or any 
undertaking contained in a registration statement as provided 
in subsection (d) of section 15 of this title, (2) any national 
securities exchange or registered securities association to 
enforce compliance by its members and persons associated with 
its members with the provisions of this title, the rules, 
regulations, and orders thereunder, and the rules of such 
exchange or association, or (3) any registered clearing agency 
to enforce compliance by its participants with the provisions 
of the rules of such clearing agency.
  (f) Notwithstanding any other provision of this title, the 
Commission shall not bring any action pursuant to subsection 
(d) or (e) of this section against any person for violation of, 
or to command compliance with, the rules of a self-regulatory 
organization or the Public Company Accounting Oversight Board 
unless it appears to the Commission that (1) such self-
regulatory organization or the Public Company Accounting 
Oversight Board is unable or unwilling to take appropriate 
action against such person in the public interest and for the 
protection of investors, or (2) such action is otherwise 
necessary or appropriate in the public interest or for the 
protection of investors.
  (g) Notwithstanding the provisions of section 1407(a) of 
title 28, United States Code, or any other provision of law, no 
action for equitable relief instituted by the Commission 
pursuant to the securities laws shall be consolidated or 
coordinated with other actions not brought by the Commission, 
even though such other actions may involve common questions of 
fact, unless such consolidation is consented to by the 
Commission.
  (h)(1) The Right to Financial Privacy Act of 1978 shall apply 
with respect to the Commission, except as otherwise provided in 
this subsection.
  (2) Notwithstanding section 1105 or 1107 of the Right to 
Financial Privacy Act of 1978, the Commission may have access 
to and obtain copies of, or the information contained in 
financial records of a customer from a financial institution 
without prior notice to the customer upon an ex parte showing 
to an appropriate United States district court that the 
Commission seeks such financial records pursuant to a 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 42(b) of the Investment Company 
Act of 1940, or section 209(b) of the Investment Advisers Act 
of 1940, and that the Commission has reason to believe that--
          (A) delay in obtaining access to such financial 
        records, or the required notice, will result in--
                  (i) flight from prosecution;
                  (ii) destruction of or tampering with 
                evidence;
                  (iii) transfer of assets or records outside 
                the territorial limits of the United States;
                  (iv) improper conversion of investor assets; 
                or
                  (v) impeding the ability of the Commission to 
                identify or trace the source or disposition of 
                funds involved in any securities transaction;
          (B) such financial records are necessary to identify 
        or trace the record or beneficial ownership interest in 
        any security;
          (C) the acts, practices or course of conduct under 
        investigation involve--
                  (i) the dissemination of materially false or 
                misleading information concerning any security, 
                issuer, or market, or the failure to make 
                disclosures required under the securities laws, 
                which remain uncorrected; or
                  (ii) a financial loss to investors or other 
                persons protected under the securities laws 
                which remains substantially uncompensated; or
          (D) the acts, practices or course of conduct under 
        investigation--
                  (i) involve significant financial speculation 
                in securities; or
                  (ii) endanger the stability of any financial 
                or investment intermediary.
  (3) Any application under paragraph (2) for a delay in notice 
shall be made with reasonable specificity.
  (4)(A) Upon a showing described in paragraph (2), the 
presiding judge or magistrate shall enter an ex parte order 
granting the requested delay for a period not to exceed ninety 
days and an order prohibiting the financial institution 
involved from disclosing that records have been obtained or 
that a request for records has been made.
  (B) Extensions of the period of delay of notice provided in 
subparagraph (A) of up to ninety days each may be granted by 
the court upon application, but only in accordance with this 
subsection or section 1109(a), (b)(1), or (b)(2) of the Right 
to Financial Privacy Act of 1978.
  (C) Upon expiration of the period of delay of notification 
ordered under subparagraph (A) or (B), the customer shall be 
served with or mailed a copy of the subpena insofar as it 
applies to the customer together with the following notice 
which shall describe with reasonable specificity the nature of 
the investigation for which the Commission sought the financial 
records:``Records or information concerning your transactions 
which are held by the financial institution named in the 
attached subpena were supplied to the Securities and Exchange 
Commission on (date). Notification was withheld pursuant to a 
determination by the (title of court so ordering) under section 
21(h) of the Securities Exchange Act of 1934 that (state 
reason). The purpose of the investigation or official 
proceeding was (state purpose).''
  (5) Upon application by the Commission, all proceedings 
pursuant to paragraphs (2) and (4) shall be held in camera and 
the records thereof sealed until expiration of the period of 
delay or such other date as the presiding judge or magistrate 
may permit.
  (7)(A) Following the expiration of the period of delay of 
notification ordered by the court pursuant to paragraph (4) of 
this subsection, the customer may, upon motion, reopen the 
proceeding in the district court which issued the order. If the 
presiding judge or magistrate finds that the movant is the 
customer to whom the records obtained by the Commission 
pertain, and that the Commission has obtained financial records 
or information contained therein in violation of this 
subsection, other than paragraph (1), it may order that the 
customer be granted civil penalties against the Commission in 
an amount equal to the sum of--
          (i) $100 without regard to the volume of records 
        involved;
          (ii) any out-of-pocket damages sustained by the 
        customer as a direct result of the disclosure; and
          (iii) if the violation is found to have been willful, 
        intentional, and without good faith, such punitive 
        damages as the court may allow, together with the costs 
        of the action and reasonable attorney's fees as 
        determined by the court.
  (B) Upon a finding that the Commission has obtained financial 
records or information contained therein in violation of this 
subsection, other than paragraph (1), the court, in its 
discretion, may also or in the alternative issue injunctive 
relief to require the Commission to comply with this subsection 
with respect to any subpena which the Commission issues in the 
future for financial records of such customer for purposes of 
the same investigation.
  (C) Whenever the court determines that the Commission has 
failed to comply with this subsection, other than paragraph 
(1), and the court finds that the circumstances raise questions 
of whether an officer or employee of the Commission acted in a 
willful and intentional manner and without good faith with 
respect to the violation, the Office of Personnel Management 
shall promptly initiate a proceeding to determine whether 
disciplinary action is warranted against the agent or employee 
who was primarily responsible for the violation. After 
investigating and considering the evidence submitted, the 
Office of Personnel Management shall submit its findings and 
recommendations to the Commission and shall send copies of the 
findings and recommendations to the officer or employee or his 
representative. The Commission shall take the corrective action 
that the Office of Personnel Management recommends.
  (8) The relief described in paragraphs (7) and (10) shall be 
the only remedies or sanctions available to a customer for a 
violation of this subsection, other than paragraph (1), and 
nothing herein or in the Right to Financial Privacy Act of 1978 
shall be deemed to prohibit the use in any investigation or 
proceeding of financial records, or the information contained 
therein, obtained by a subpena issued by the Commission. In the 
case of an unsuccessful action under paragraph (7), the court 
shall award the costs of the action and attorney's fees to the 
Commission if the presiding judge or magistrate finds that the 
customer's claims were made in bad faith.
  (9)(A) The Commission may transfer financial records or the 
information contained therein to any government authority if 
the Commission proceeds as a transferring agency in accordance 
with section 1112 of the Right to Financial Privacy Act of 
1978, except that the customer notice required under section 
1112(b) or (c) of such Act may be delayed upon a showing by the 
Commission, in accordance with the procedure set forth in 
paragraphs (4) and (5), that one or more of subparagraphs (A) 
through (D) of paragraph (2) apply.
  (B) The Commission may, without notice to the customer 
pursuant to section 1112 of the Right to Financial Privacy Act 
of 1978, transfer financial records or the information 
contained therein to a State securities agency or to the 
Department of Justice. Financial records or information 
transferred by the Commission to the Department of Justice or 
to a State securities agency pursuant to the provisions of this 
subparagraph may be disclosed or used only in an 
administrative, civil, or criminal action or investigation by 
the Department of Justice or the State securities agency which 
arises out of or relates to the acts, practices, or courses of 
conduct investigated by the Commission, except that if the 
Department of Justice or the State securities agency determines 
that the information should be disclosed or used for any other 
purpose, it may do so if it notifies the customer, except as 
otherwise provided in the Right to Financial Privacy Act of 
1978, within 30 days of its determination, or complies with the 
requirements of section 1109 of such Act regarding delay of 
notice.
  (10) Any government authority violating paragraph (9) shall 
be subject to the procedures and penalties applicable to the 
Commission under paragraph (7)(A) with respect to a violation 
by the Commission in obtaining financial records.
  (11) Notwithstanding the provisions of this subsection, the 
Commission may obtain financial records from a financial 
institution or transfer such records in accordance with 
provisions of the Right to Financial Privacy Act of 1978.
  (12) Nothing in this subsection shall enlarge or restrict any 
rights of a financial institution to challenge requests for 
records made by the Commission under existing law. Nothing in 
this subsection shall entitle a customer to assert any rights 
of a financial institution.
  (13) Unless the context otherwise requires, all terms defined 
in the Right to Financial Privacy Act of 1978 which are common 
to this subsection shall have the same meaning as in such Act.
  (i) Information to CFTC.--The Commission shall provide the 
Commodity Futures Trading Commission with notice of the 
commencement of any proceeding and a copy of any order entered 
by the Commission against any broker or dealer registered 
pursuant to section 15(b)(11), any exchange registered pursuant 
to section 6(g), or any national securities association 
registered pursuant to section 15A(k).
  (k) Adequate Notice Required Before Bringing an Enforcement 
Action.--
          (1) In general.--No person shall be subject to an 
        enforcement action by the Commission for an alleged 
        violation of the securities laws or the rules and 
        regulations issued thereunder if such person did not 
        have adequate notice of such law, rule, or regulation.
          (2) Publishing of interpretation deemed adequate 
        notice.--With respect to an enforcement action, 
        adequate notice of a securities law or a rule or 
        regulation issued thereunder shall be deemed to have 
        been provided to a person if the Commission approved a 
        statement or guidance, in accordance with Section 4I, 
        with respect to the conduct that is the subject of the 
        enforcement action, prior to the time that the person 
        engaged in the conduct that is the subject of the 
        enforcement action.

                  civil penalties for insider trading

  Sec. 21A. (a) Authority To Impose Civil Penalties.--
          (1) Judicial actions by commission authorized.--
        Whenever it shall appear to the Commission that any 
        person has violated any provision of this title or the 
        rules or regulations thereunder by purchasing or 
        selling a security or security-based swap agreement 
        while in possession of material, nonpublic information 
        in, or has violated any such provision by communicating 
        such information in connection with, a transaction on 
        or through the facilities of a national securities 
        exchange or from or through a broker or dealer, and 
        which is not part of a public offering by an issuer of 
        securities other than standardized options or security 
        futures products, the Commission--
                  (A) may bring an action in a United States 
                district court to seek, and the court shall 
                have jurisdiction to impose, a civil penalty to 
                be paid by the person who committed such 
                violation; and
                  (B) may, subject to subsection (b)(1), bring 
                an action in a United States district court to 
                seek, and the court shall have jurisdiction to 
                impose, a civil penalty to be paid by a person 
                who, at the time of the violation, directly or 
                indirectly controlled the person who committed 
                such violation.
          (2) Amount of penalty for person who committed 
        violation.--The amount of the penalty which may be 
        imposed on the person who committed such violation 
        shall be determined by the court in light of the facts 
        and circumstances, but shall not exceed three times the 
        profit gained or loss avoided as a result of such 
        unlawful purchase, sale, or communication.
          (3) Amount of penalty for controlling person.--The 
        amount of the penalty which may be imposed on any 
        person who, at the time of the violation, directly or 
        indirectly controlled the person who committed such 
        violation, shall be determined by the court in light of 
        the facts and circumstances, but shall not exceed the 
        greater of [$1,000,000] $2,500,000, or three times the 
        amount of the profit gained or loss avoided as a result 
        of such controlled person's violation. If such 
        controlled person's violation was a violation by 
        communication, the profit gained or loss avoided as a 
        result of the violation shall, for purposes of this 
        paragraph only, be deemed to be limited to the profit 
        gained or loss avoided by the person or persons to whom 
        the controlled person directed such communication.
  (b) Limitations on Liability.--
          (1) Liability of controlling persons.--No controlling 
        person shall be subject to a penalty under subsection 
        (a)(1)(B) unless the Commission establishes that--
                  (A) such controlling person knew or 
                recklessly disregarded the fact that such 
                controlled person was likely to engage in the 
                act or acts constituting the violation and 
                failed to take appropriate steps to prevent 
                such act or acts before they occurred; or
                  (B) such controlling person knowingly or 
                recklessly failed to establish, maintain, or 
                enforce any policy or procedure required under 
                section 15(f) of this title or section 204A of 
                the Investment Advisers Act of 1940 and such 
                failure substantially contributed to or 
                permitted the occurrence of the act or acts 
                constituting the violation.
          (2) Additional restrictions on liability.--No person 
        shall be subject to a penalty under subsection (a) 
        solely by reason of employing another person who is 
        subject to a penalty under such subsection, unless such 
        employing person is liable as a controlling person 
        under paragraph (1) of this subsection. Section 20(a) 
        of this title shall not apply to actions under 
        subsection (a) of this section.
  (c) Authority of Commission.--the Commission, by such rules, 
regulations, and orders as it considers necessary or 
appropriate in the public interest or for the protection of 
investors, may exempt, in whole or in part, either 
unconditionally or upon specific terms and conditions, any 
person or transaction or class of persons or transactions from 
this section.
  (d) Procedures for Collection.--
          (1) 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.
          (2) Collection of penalties.--If a person upon whom 
        such a penalty is imposed shall fail to pay such 
        penalty within the time prescribed in the court's 
        order, the Commission may refer the matter to the 
        Attorney General who shall recover such penalty by 
        action in the appropriate United States district court.
          (3) Remedy not exclusive.--The actions authorized by 
        this section may be brought in addition to any other 
        actions that the Commission or the Attorney General are 
        entitled to bring.
          (4) Jurisdiction and venue.--For purposes of section 
        27 of this title, actions under this section shall be 
        actions to enforce a liability or a duty created by 
        this title.
          (5) Statute of limitations.--No action may be brought 
        under this section more than 5 years after the date of 
        the purchase or sale. This section shall not be 
        construed to bar or limit in any manner any action by 
        the Commission or the Attorney General under any other 
        provision of this title, nor shall it bar or limit in 
        any manner any action to recover penalties, or to seek 
        any other order regarding penalties, imposed in an 
        action commenced within 5 years of such transaction.
  (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.
  (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.
  (g) Duty of Members and Employees of Congress.--
          (1) In general.--Subject to the rule of construction 
        under section 10 of the STOCK Act and solely for 
        purposes of the insider trading prohibitions arising 
        under this Act, including section 10(b) and Rule 10b-5 
        thereunder, each Member of Congress or employee of 
        Congress owes a duty arising from a relationship of 
        trust and confidence to the Congress, the United States 
        Government, and the citizens of the United States with 
        respect to material, nonpublic information derived from 
        such person's position as a Member of Congress or 
        employee of Congress or gained from the performance of 
        such person's official responsibilities.
          (2) Definitions.--In this subsection--
                  (A) the term ``Member of Congress'' means a 
                member of the Senate or House of 
                Representatives, a Delegate to the House of 
                Representatives, and the Resident Commissioner 
                from Puerto Rico; and
                  (B) the term ``employee of Congress'' means--
                          (i) any individual (other than a 
                        Member of Congress), whose compensation 
                        is disbursed by the Secretary of the 
                        Senate or the Chief Administrative 
                        Officer of the House of 
                        Representatives; and
                          (ii) any other officer or employee of 
                        the legislative branch (as defined in 
                        section 109(11) of the Ethics in 
                        Government Act of 1978 (5 U.S.C. App. 
                        109(11))).
          (3) Rule of construction.--Nothing in this subsection 
        shall be construed to impair or limit the construction 
        of the existing antifraud provisions of the securities 
        laws or the authority of the Commission under those 
        provisions.
  (h) Duty of Other Federal Officials.--
          (1) In general.--Subject to the rule of construction 
        under section 10 of the STOCK Act and solely for 
        purposes of the insider trading prohibitions arising 
        under this Act, including section 10(b), and Rule 10b-5 
        thereunder, each executive branch employee, each 
        judicial officer, and each judicial employee owes a 
        duty arising from a relationship of trust and 
        confidence to the United States Government and the 
        citizens of the United States with respect to material, 
        nonpublic information derived from such person's 
        position as an executive branch employee, judicial 
        officer, or judicial employee or gained from the 
        performance of such person's official responsibilities.
          (2) Definitions.--In this subsection--
                  (A) the term ``executive branch employee''--
                          (i) has the meaning given the term 
                        ``employee'' under section 2105 of 
                        title 5, United States Code;
                          (ii) includes--
                                  (I) the President;
                                  (II) the Vice President; and
                                  (III) an employee of the 
                                United States Postal Service or 
                                the Postal Regulatory 
                                Commission;
                  (B) the term ``judicial employee'' has the 
                meaning given that term in section 109(8) of 
                the Ethics in Government Act of 1978 (5 U.S.C. 
                App. 109(8)); and
                  (C) the term ``judicial officer'' has the 
                meaning given that term under section 109(10) 
                of the Ethics in Government Act of 1978 (5 
                U.S.C. App. 109(10)).
          (3) Rule of construction.--Nothing in this subsection 
        shall be construed to impair or limit the construction 
        of the existing antifraud provisions of the securities 
        laws or the authority of the Commission under those 
        provisions.
  (i) Participation in Initial Public Offerings.--An individual 
described in section 101(f) of the Ethics in Government Act of 
1978 may not purchase securities that are the subject of an 
initial public offering (within the meaning given such term in 
section 12(f)(1)(G)(i)) in any manner other than is available 
to members of the public generally.

              CIVIL REMEDIES IN ADMINISTRATIVE PROCEEDINGS

  Sec. 21B. (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 penalty 
        is in the public interest and that such person--
                  (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;
                  (B) has willfully aided, abetted, counseled, 
                commanded, induced, or procured such a 
                violation by any other person;
                  (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
                  (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;
          (2) Cease-and-desist proceedings.--In any proceeding 
        instituted under section 21C against any person, the 
        Commission may impose a civil penalty, if the 
        Commission 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 issued under this title; or
                  (B) is or was a cause of the violation of any 
                provision of this title, or any rule or 
                regulation issued under this title.
  (b) Maximum Amount of Penalty.--
          (1) First tier.--The maximum amount of penalty for 
        each act or omission described in subsection (a) shall 
        be [$5,000] $10,000 for a natural person or [$50,000] 
        $100,000 for any other person.
          (2) Second tier.--Notwithstanding paragraph (1), the 
        maximum amount of penalty for each such act or omission 
        shall be [$50,000] $100,000 for a natural person or 
        [$250,000] $500,000 for any other person if the act or 
        omission described in subsection (a) involved fraud, 
        deceit, manipulation, or deliberate or reckless 
        disregard of a regulatory requirement.
          [(3) Third tier.--Notwithstanding paragraphs (1) and 
        (2), the maximum amount of penalty for each such act or 
        omission shall be $100,000 for a natural person or 
        $500,000 for any other person if--
                  [(A) the act or omission described in 
                subsection (a) involved fraud, deceit, 
                manipulation, or deliberate or reckless 
                disregard of a regulatory requirement; and
                  [(B) 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) Third tier.--
                  (A) In general.--Notwithstanding paragraphs 
                (1) and (2), the amount of penalty for each 
                such act or omission shall not exceed the 
                amount specified in subparagraph (B) if--
                          (i) the act or omission described in 
                        subsection (a) 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.
                  (B) Maximum amount of penalty.--The amount 
                referred to in subparagraph (A) is the greatest 
                of--
                          (i) $300,000 for a natural person or 
                        $1,450,000 for any other person;
                          (ii) 3 times the gross amount of 
                        pecuniary gain to the person who 
                        committed the act or omission; or
                          (iii) the amount of losses incurred 
                        by victims as a result of the act or 
                        omission.
          (4) Fourth tier.--Notwithstanding paragraphs (1), 
        (2), and (3), the maximum amount of penalty for each 
        such act or omission shall be 3 times the otherwise 
        applicable amount in such paragraphs if, within the 5-
        year period preceding such act or omission, the person 
        who committed the act or omission was criminally 
        convicted for securities fraud or became subject to a 
        judgment or order imposing monetary, equitable, or 
        administrative relief in any Commission action alleging 
        fraud by that person.
  (c) Determination of Public Interest.--In considering under 
this section whether a penalty is in the public interest, the 
Commission or the appropriate regulatory agency may consider--
          (1) whether the act or omission for which such 
        penalty is assessed involved fraud, deceit, 
        manipulation, or deliberate or reckless disregard of a 
        regulatory requirement;
          (2) the harm to other persons resulting either 
        directly or indirectly from such act or omission;
          (3) the extent to which any person was unjustly 
        enriched, taking into account any restitution made to 
        persons injured by such behavior;
          (4) whether such person previously has been found by 
        the Commission, another appropriate regulatory agency, 
        or a self-regulatory organization to have violated the 
        Federal securities laws, State securities laws, or the 
        rules of a self-regulatory organization, has been 
        enjoined by a court of competent jurisdiction from 
        violations of such laws or rules, or has been convicted 
        by a court of competent jurisdiction of violations of 
        such laws or of any felony or misdemeanor described in 
        section 15(b)(4)(B) of this title;
          (5) the need to deter such person and other persons 
        from committing such acts or omissions; and
          (6) such other matters as justice may require.
  (d) Evidence Concerning Ability To Pay.--In any proceeding in 
which the Commission or the appropriate regulatory agency may 
impose a penalty under this section, a respondent may present 
evidence of the respondent's ability to pay such penalty. The 
Commission or the appropriate regulatory agency 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.
  (e) Authority To Enter an Order Requiring an Accounting and 
Disgorgement.--In any proceeding in which the Commission or the 
appropriate regulatory agency may impose a penalty under this 
section, the Commission or the appropriate regulatory agency 
may enter an order requiring accounting and disgorgement, 
including reasonable interest. The Commission is authorized to 
adopt rules, regulations, and orders concerning payments to 
investors, rates of interest, periods of accrual, and such 
other matters as it deems appropriate to implement this 
subsection.
  (f) Security-based Swaps.--
          (1) Clearing agency.--Any clearing agency that 
        knowingly or recklessly evades or participates in or 
        facilitates an evasion of the requirements of section 
        3C shall be liable for a civil money penalty in twice 
        the amount otherwise available for a violation of 
        section 3C.
          (2) Security-based swap dealer or major security-
        based swap participant.--Any security-based swap dealer 
        or major security-based swap participant that knowingly 
        or recklessly evades or participates in or facilitates 
        an evasion of the requirements of section 3C shall be 
        liable for a civil money penalty in twice the amount 
        otherwise available for a violation of section 3C.

                      CEASE-AND-DESIST PROCEEDINGS

  Sec. 21C. (a) Authority of the Commission.--If the Commission 
finds, after notice and opportunity for hearing, that any 
person is violating, has violated, or is about to violate any 
provision of this title, or any rule or regulation thereunder, 
the Commission may publish its findings and enter an order 
requiring such person, and any other person that is, was, or 
would be a cause of the violation, due to an act or omission 
the person knew or should have known would contribute to such 
violation, to cease and desist from committing or causing such 
violation and any future violation of the same provision, rule, 
or regulation. Such order may, in addition to requiring a 
person to cease and desist from committing or causing a 
violation, require such person to comply, or to take steps to 
effect compliance, with such provision, rule, or regulation, 
upon such terms and conditions and within such time as the 
Commission may specify in such order. Any such order may, as 
the Commission deems appropriate, require future compliance or 
steps to effect future compliance, either permanently or for 
such period of time as the Commission may specify, with such 
provision, rule, or regulation with respect to any security, 
any issuer, or any other person.
  (b) Hearing.--The notice instituting proceedings pursuant to 
subsection (a) shall fix a hearing date not earlier than 30 
days nor later than 60 days after service of the notice unless 
an earlier or a later date is set by the Commission with the 
consent of any respondent so served.
  (c) Temporary Order.--
          (1) In general.--Whenever the Commission determines 
        that the alleged violation or threatened violation 
        specified in the notice instituting proceedings 
        pursuant to subsection (a), or the continuation 
        thereof, is likely to result in significant dissipation 
        or conversion of assets, significant harm to investors, 
        or substantial harm to the public interest, including, 
        but not limited to, losses to the Securities Investor 
        Protection Corporation, prior to the completion of the 
        proceedings, the Commission may enter a temporary order 
        requiring the respondent to cease and desist from the 
        violation or threatened violation and to take such 
        action to prevent the violation or threatened violation 
        and to prevent dissipation or conversion of assets, 
        significant harm to investors, or substantial harm to 
        the public interest as the Commission deems appropriate 
        pending completion of such proceedings. Such an order 
        shall be entered only after notice and opportunity for 
        a hearing, unless the Commission determines that notice 
        and hearing prior to entry would be impracticable or 
        contrary to the public interest. A temporary order 
        shall become effective upon service upon the respondent 
        and, unless set aside, limited, or suspended by the 
        Commission or a court of competent jurisdiction, shall 
        remain effective and enforceable pending the completion 
        of the proceedings.
          (2) Applicability.--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.
          (3) Temporary freeze.--
                  (A) In general.--
                          (i) Issuance of temporary order.--
                        Whenever, during the course of a lawful 
                        investigation involving possible 
                        violations of the Federal securities 
                        laws by an issuer of publicly traded 
                        securities or any of its directors, 
                        officers, partners, controlling 
                        persons, agents, or employees, it shall 
                        appear to the Commission that it is 
                        likely that the issuer will make 
                        extraordinary payments (whether 
                        compensation or otherwise) to any of 
                        the foregoing persons, the Commission 
                        may petition a Federal district court 
                        for a temporary order requiring the 
                        issuer to escrow, subject to court 
                        supervision, those payments in an 
                        interest-bearing account for 45 days.
                          (ii) Standard.--A temporary order 
                        shall be entered under clause (i), only 
                        after notice and opportunity for a 
                        hearing, unless the court determines 
                        that notice and hearing prior to entry 
                        of the order would be impracticable or 
                        contrary to the public interest.
                          (iii) Effective period.--A temporary 
                        order issued under clause (i) shall--
                                  (I) become effective 
                                immediately;
                                  (II) be served upon the 
                                parties subject to it; and
                                  (III) unless set aside, 
                                limited or suspended by a court 
                                of competent jurisdiction, 
                                shall remain effective and 
                                enforceable for 45 days.
                          (iv) Extensions authorized.--The 
                        effective period of an order under this 
                        subparagraph may be extended by the 
                        court upon good cause shown for not 
                        longer than 45 additional days, 
                        provided that the combined period of 
                        the order shall not exceed 90 days.
                  (B) Process on Determination of violations.--
                          (i) Violations charged.--If the 
                        issuer or other person described in 
                        subparagraph (A) is charged with any 
                        violation of the Federal securities 
                        laws before the expiration of the 
                        effective period of a temporary order 
                        under subparagraph (A) (including any 
                        applicable extension period), the order 
                        shall remain in effect, subject to 
                        court approval, until the conclusion of 
                        any legal proceedings related thereto, 
                        and the affected issuer or other 
                        person, shall have the right to 
                        petition the court for review of the 
                        order.
                          (ii) Violations not charged.--If the 
                        issuer or other person described in 
                        subparagraph (A) is not charged with 
                        any violation of the Federal securities 
                        laws before the expiration of the 
                        effective period of a temporary order 
                        under subparagraph (A) (including any 
                        applicable extension period), the 
                        escrow shall terminate at the 
                        expiration of the 45-day effective 
                        period (or the expiration of any 
                        extension period, as applicable), and 
                        the disputed payments (with accrued 
                        interest) shall be returned to the 
                        issuer or other affected person.
  (d) Review of Temporary Orders.--
          (1) Commission review.--At any time after the 
        respondent has been served with a temporary cease-and-
        desist order pursuant to subsection (c), the respondent 
        may apply to the Commission to have the order set 
        aside, limited, or suspended. If the respondent has 
        been served with a temporary cease-and-desist order 
        entered without a prior Commission hearing, the 
        respondent may, within 10 days after the date on which 
        the order was served, request a hearing on such 
        application and the Commission shall hold a hearing and 
        render a decision on such application at the earliest 
        possible time.
          (2) Judicial review.--Within--
                  (A) 10 days after the date the respondent was 
                served with a temporary cease-and-desist order 
                entered with a prior Commission hearing, or
                  (B) 10 days after the Commission renders a 
                decision on an application and hearing under 
                paragraph (1), 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, 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 
        paragraph (1) of this subsection.
          (3) No automatic stay of temporary order.--The 
        commencement of proceedings under paragraph (2) of this 
        subsection shall not, unless specifically ordered by 
        the court, operate as a stay of the Commission's order.
          (4) Exclusive review.--Section 25 of this title shall 
        not apply to a temporary order entered pursuant to this 
        section.
  (e) Authority To Enter an Order Requiring an Accounting and 
Disgorgement.--In any cease-and-desist proceeding under 
subsection (a), the Commission may enter an order requiring 
accounting and disgorgement, including reasonable interest. The 
Commission is authorized to adopt rules, regulations, and 
orders concerning payments to investors, rates of interest, 
periods of accrual, and such other matters as it deems 
appropriate to implement this subsection.
  [(f) Authority of the Commission to Prohibit Persons From 
Serving as Officers or Directors.--In any cease-and-desist 
proceeding under subsection (a), the Commission may issue an 
order to prohibit, conditionally or unconditionally, and 
permanently or for such period of time as it shall determine, 
any person who has violated section 10(b) or the rules or 
regulations thereunder, from acting as an officer or director 
of any issuer that has a class of securities registered 
pursuant to section 12, or that is required to file reports 
pursuant to section 15(d), if the conduct of that person 
demonstrates unfitness to serve as an officer or director of 
any such issuer.]

           *       *       *       *       *       *       *


SEC. 21F. SECURITIES WHISTLEBLOWER INCENTIVES AND PROTECTION.

  (a) Definitions.--In this section the following definitions 
shall apply:
          (1) Covered judicial or administrative action.--The 
        term ``covered judicial or administrative action'' 
        means any judicial or administrative action brought by 
        the Commission under the securities laws that results 
        in monetary sanctions exceeding $1,000,000.
          (2) Fund.--The term ``Fund'' means the Securities and 
        Exchange Commission Investor Protection Fund.
          (3) Original information.--The term ``original 
        information'' means information that--
                  (A) is derived from the independent knowledge 
                or analysis of a whistleblower;
                  (B) is not known to the Commission from any 
                other source, unless the whistleblower is the 
                original source of the information; and
                  (C) is not exclusively derived from an 
                allegation made in a judicial or administrative 
                hearing, in a governmental report, hearing, 
                audit, or investigation, or from the news 
                media, unless the whistleblower is a source of 
                the information.
          (4) Monetary sanctions.--The term ``monetary 
        sanctions'', when used with respect to any judicial or 
        administrative action, means--
                  (A) any monies, including penalties, 
                disgorgement, and interest, [ordered] required 
                to be paid; and
                  (B) 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.
          (5) 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 
        subclauses (I) through (IV) of subsection (h)(2)(D)(i) 
        that is based upon the original information provided by 
        a whistleblower pursuant to subsection (a) that led to 
        the successful enforcement of the Commission action.
          (6) Whistleblower.--The term ``whistleblower'' means 
        any individual who provides, or 2 or more individuals 
        acting jointly who provide, information relating to a 
        violation of the securities laws to the Commission, in 
        a manner established, by rule or regulation, by the 
        Commission.
  (b) Awards.--
          (1) In general.--In any covered judicial or 
        administrative action, or related action, the 
        Commission, under regulations prescribed by the 
        Commission and subject to subsection (c), shall pay an 
        award or awards to 1 or more whistleblowers who 
        voluntarily provided original information to the 
        Commission that led to the successful enforcement of 
        the covered judicial or administrative action, or 
        related action, in an aggregate amount equal to--
                  (A) not less than 10 percent, in total, of 
                what has been collected of the monetary 
                sanctions imposed in the action or related 
                actions; and
                  (B) not more than 30 percent, in total, of 
                what has been collected of the monetary 
                sanctions imposed in the action or related 
                actions.
          (2) Payment of awards.--Any amount paid under 
        paragraph (1) shall be paid from the Fund.
  (c) Determination of Amount of Award; Denial of Award.--
          (1) Determination of amount of award.--
                  (A) Discretion.--The determination of the 
                amount of an award made under subsection (b) 
                shall be in the discretion of the Commission.
                  (B) Criteria.--In determining the amount of 
                an award made under subsection (b), the 
                Commission--
                          (i) shall take into consideration--
                                  (I) the significance of the 
                                information provided by the 
                                whistleblower to the success of 
                                the covered judicial or 
                                administrative action;
                                  (II) the degree of assistance 
                                provided by the whistleblower 
                                and any legal representative of 
                                the whistleblower in a covered 
                                judicial or administrative 
                                action;
                                  (III) the programmatic 
                                interest of the Commission in 
                                deterring violations of the 
                                securities laws by making 
                                awards to whistleblowers who 
                                provide information that lead 
                                to the successful enforcement 
                                of such laws; and
                                  (IV) such additional relevant 
                                factors as the Commission may 
                                establish by rule or 
                                regulation; and
                          (ii) shall not take into 
                        consideration the balance of the Fund.
          (2) Denial of award.--No award under subsection (b) 
        shall be made--
                  (A) to any whistleblower who is, or was at 
                the time the whistleblower acquired the 
                original information submitted to the 
                Commission, a member, officer, or employee of--
                          (i) an appropriate regulatory agency;
                          (ii) the Department of Justice;
                          (iii) a self-regulatory organization;
                          (iv) the Public Company Accounting 
                        Oversight Board; or
                          (v) a law enforcement organization;
                  (B) to any whistleblower who is convicted of 
                a criminal violation related to the judicial or 
                administrative action for which the 
                whistleblower otherwise could receive an award 
                under this section;
                  (C) to any whistleblower who gains the 
                information through the performance of an audit 
                of financial statements required under the 
                securities laws and for whom such submission 
                would be contrary to the requirements of 
                section 10A of the Securities Exchange Act of 
                1934 (15 U.S.C. 78j-1); [or]
                  (D) to any whistleblower who fails to submit 
                information to the Commission in such form as 
                the Commission may, by rule, require[.]; or
                  (E) to any whistleblower who is responsible 
                for, or complicit in, the violation of the 
                securities laws for which the whistleblower 
                provided information to the Commission.
          (3) Definition.--For purposes of paragraph (2)(E), a 
        person is responsible for, or complicit in, a violation 
        of the securities laws if, with the intent to promote 
        or assist the violation, the person--
                  (A) procures, induces, or causes another 
                person to commit the offense;
                  (B) aids or abets another person in 
                committing the offense; or
                  (C) having a duty to prevent the violation, 
                fails to make an effort the person is required 
                to make.
  (d) Representation.--
          (1) Permitted representation.--Any whistleblower who 
        makes a claim for an award under subsection (b) may be 
        represented by counsel.
          (2) Required representation.--
                  (A) In general.--Any whistleblower who 
                anonymously makes a claim for an award under 
                subsection (b) shall be represented by counsel 
                if the whistleblower anonymously submits the 
                information upon which the claim is based.
                  (B) Disclosure of identity.--Prior to the 
                payment of an award, a whistleblower shall 
                disclose the identity of the whistleblower and 
                provide such other information as the 
                Commission may require, directly or through 
                counsel for the whistleblower.
  (e) No Contract Necessary.--No contract with the Commission 
is necessary for any whistleblower to receive an award under 
subsection (b), unless otherwise required by the Commission by 
rule or regulation.
  (f) Appeals.--Any determination made under this section, 
including whether, to whom, or in what amount to make awards, 
shall be in the discretion of the Commission. Any such 
determination, except the determination of the amount of an 
award if the award was made in accordance with subsection (b), 
may be appealed to the appropriate court of appeals of the 
United States not more than 30 days after the determination is 
issued by the Commission. The court shall review the 
determination made by the Commission in accordance with section 
706 of title 5, United States Code.
  (g) Investor Protection Fund.--
          (1) Fund established.--There is established in the 
        Treasury of the United States a fund to be known as the 
        ``Securities and Exchange Commission Investor 
        Protection Fund''.
          (2) Use of fund.--The Fund shall be available to the 
        Commission, without further appropriation or fiscal 
        year limitation, for--
                  (A) paying awards to whistleblowers as 
                provided in subsection (b); and
                  (B) funding the activities of the Inspector 
                General of the Commission under section 4(i).
          (3) Deposits and credits.--
                  (A) In general.--There shall be deposited 
                into or credited to the Fund an amount equal 
                to--
                          (i) 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 under section 308 of 
                        the Sarbanes-Oxley Act of 2002 (15 
                        U.S.C. 7246) 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 $300,000,000;
                          (ii) any monetary sanction added to a 
                        disgorgement fund or other fund under 
                        section 308 of the Sarbanes-Oxley Act 
                        of 2002 (15 U.S.C. 7246) that is not 
                        distributed to the victims for whom the 
                        Fund was established, unless the 
                        balance of the disgorgement fund at the 
                        time the determination is made not to 
                        distribute the monetary sanction to 
                        such victims exceeds $200,000,000; and
                          (iii) all income from investments 
                        made under paragraph (4).
                  (B) Additional amounts.--If the amounts 
                deposited into or credited to the Fund under 
                subparagraph (A) are not sufficient to satisfy 
                an award made under subsection (b), there shall 
                be deposited into or credited to the Fund an 
                amount equal to the unsatisfied portion of the 
                award from any monetary sanction collected by 
                the Commission in the covered judicial or 
                administrative action on which the award is 
                based.
          (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 discretion of the Commission, 
                required to meet the current needs of the Fund.
                  (B) Eligible investments.--Investments shall 
                be made by the Secretary of the Treasury in 
                obligations of the United States or obligations 
                that are guaranteed as to principal and 
                interest by the United States, with maturities 
                suitable to the needs of the Fund as determined 
                by the Commission on the record.
                  (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 the Fund.
          (5) Reports to congress.--Not later than October 30 
        of each fiscal year beginning after the date of 
        enactment of this subsection, the Commission shall 
        submit to the Committee on Banking, Housing, and Urban 
        Affairs of the Senate, and the Committee on Financial 
        Services of the House of Representatives a report on--
                  (A) the whistleblower award program, 
                established under this section, including--
                          (i) a description of the number of 
                        awards granted; and
                          (ii) the types of cases in which 
                        awards were granted during the 
                        preceding fiscal year;
                  (B) the balance of the Fund at the beginning 
                of the preceding fiscal year;
                  (C) the amounts deposited into or credited to 
                the Fund during the preceding fiscal year;
                  (D) the amount of earnings on investments 
                made under paragraph (4) during the preceding 
                fiscal year;
                  (E) the amount paid from the Fund during the 
                preceding fiscal year to whistleblowers 
                pursuant to subsection (b);
                  (F) the balance of the Fund at the end of the 
                preceding fiscal year; and
                  (G) a complete set of audited financial 
                statements, including--
                          (i) a balance sheet;
                          (ii) income statement; and
                          (iii) cash flow analysis.
  (h) Protection of Whistleblowers.--
          (1) Prohibition against retaliation.--
                  (A) In general.--No employer may discharge, 
                demote, suspend, threaten, harass, directly or 
                indirectly, or in any other manner discriminate 
                against, a whistleblower in the terms and 
                conditions of employment because of any lawful 
                act done by the whistleblower--
                          (i) in providing information to the 
                        Commission in accordance with this 
                        section;
                          (ii) in initiating, testifying in, or 
                        assisting in any investigation or 
                        judicial or administrative action of 
                        the Commission based upon or related to 
                        such information; or
                          (iii) in making disclosures that are 
                        required or protected under the 
                        Sarbanes-Oxley Act of 2002 (15 U.S.C. 
                        7201 et seq.), the Securities Exchange 
                        Act of 1934 (15 U.S.C. 78a et seq.), 
                        including section 10A(m) of such Act 
                        (15 U.S.C. 78f(m)), section 1513(e) of 
                        title 18, United States Code, and any 
                        other law, rule, or regulation subject 
                        to the jurisdiction of the Commission.
                  (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.--
                                  (I) In general.--An action 
                                under this subsection may not 
                                be brought--
                                          (aa) more than 6 
                                        years after the date on 
                                        which the violation of 
                                        subparagraph (A) 
                                        occurred; or
                                          (bb) more than 3 
                                        years after the date 
                                        when facts material to 
                                        the right of action are 
                                        known or reasonably 
                                        should have been known 
                                        by the employee 
                                        alleging a violation of 
                                        subparagraph (A).
                                  (II) Required action within 
                                10 years.--Notwithstanding 
                                subclause (I), an action under 
                                this subsection may not in any 
                                circumstance be brought more 
                                than 10 years after the date on 
                                which the violation occurs.
                  (C) Relief.--Relief for an individual 
                prevailing in an action brought under 
                subparagraph (B) shall include--
                          (i) reinstatement with the same 
                        seniority status that the individual 
                        would have had, but for the 
                        discrimination;
                          (ii) 2 times the amount of back pay 
                        otherwise owed to the individual, with 
                        interest; and
                          (iii) compensation for litigation 
                        costs, expert witness fees, and 
                        reasonable attorneys' fees.
          (2) Confidentiality.--
                  (A) In general.--Except as provided in 
                subparagraphs (B) and (C), the Commission and 
                any officer or employee of the Commission shall 
                not disclose any information, including 
                information provided by a whistleblower to the 
                Commission, which could reasonably be expected 
                to reveal the identity of a whistleblower, 
                except in accordance with the provisions of 
                section 552a of title 5, United States Code, 
                unless and until required to be disclosed to a 
                defendant or respondent in connection with a 
                public proceeding instituted by the Commission 
                or any entity described in subparagraph (C). 
                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.
                  (B) Exempted statute.--For purposes of 
                section 552 of title 5, United States Code, 
                this paragraph shall be considered a statute 
                described in subsection (b)(3)(B) of such 
                section 552.
                  (C) Rule of construction.--Nothing in this 
                section is intended to limit, or shall be 
                construed to limit, the ability of the Attorney 
                General to present such evidence to a grand 
                jury or to share such evidence with potential 
                witnesses or defendants in the course of an 
                ongoing criminal investigation.
                  (D) Availability to government agencies.--
                          (i) In general.--Without the loss of 
                        its status as confidential 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 to 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) a State attorney general 
                                in connection with any criminal 
                                investigation;
                                  (V) any appropriate State 
                                regulatory authority;
                                  (VI) the Public Company 
                                Accounting Oversight Board;
                                  (VII) a foreign securities 
                                authority; and
                                  (VIII) a foreign law 
                                enforcement authority.
                          (ii) Confidentiality.--
                                  (I) In general.--Each of the 
                                entities described in 
                                subclauses (I) through (VI) of 
                                clause (i) shall maintain such 
                                information as confidential in 
                                accordance with the 
                                requirements established under 
                                subparagraph (A).
                                  (II) Foreign authorities.--
                                Each of the entities described 
                                in subclauses (VII) and (VIII) 
                                of clause (i) shall maintain 
                                such information in accordance 
                                with such assurances of 
                                confidentiality as the 
                                Commission determines 
                                appropriate.
          (3) Rights retained.--Nothing in this section shall 
        be deemed to diminish the rights, privileges, or 
        remedies of any whistleblower under any Federal or 
        State law, or under any collective bargaining 
        agreement.
  (i) Provision of False Information.--A whistleblower shall 
not be entitled to an award under this section if the 
whistleblower--
          (1) knowingly and willfully makes any false, 
        fictitious, or fraudulent statement or representation; 
        or
          (2) uses any false writing or document knowing the 
        writing or document contains any false, fictitious, or 
        fraudulent statement or entry.
  (j) Rulemaking Authority.--The Commission shall have the 
authority to issue such rules and regulations as may be 
necessary or appropriate to implement the provisions of this 
section consistent with the purposes of this section.

           *       *       *       *       *       *       *


             rules, regulations, and orders; annual reports

  Sec. 23. (a)(1) The Commission, the Board of Governors of the 
Federal Reserve System, and the other agencies enumerated in 
section 3(a)(34) of this title shall each have power to make 
such rules and regulations as may be necessary or appropriate 
to implement the provisions of this title for which they are 
responsible or for the execution of the functions vested in 
them by this title, and may for such purposes classify persons, 
securities, transactions, statements, applications, reports, 
and other matters within their respective jurisdictions, and 
prescribe greater, lesser, or different requirements for 
different classes thereof. No provision of this title imposing 
any liability shall apply to any act done or omitted in good 
faith in conformity with a rule, regulation, or order of the 
Commission, the Board of Governors of the Federal Reserve 
System, other agency enumerated in section 3(a)(34) of this 
title, or any self-regulatory organization, notwithstanding 
that such rule, regulation, or order may thereafter be amended 
or rescinded or determined by judicial or other authority to be 
invalid for any reason.
  (2) The Commission and the Secretary of the Treasury, in 
making rules and regulations pursuant to any provisions of this 
title, shall consider among other matters the impact any such 
rule or regulation would have on competition. The Commission 
and the Secretary of the Treasury shall not adopt any such rule 
or regulation which would impose a burden on competition not 
necessary or appropriate in furtherance of the purposes of this 
title. The Commission and the Secretary of the Treasury shall 
include in the statement of basis and purpose incorporated in 
any rule or regulation adopted under this title, the reasons 
for the Commission's or the Secretary's determination that any 
burden on competition imposed by such rule or regulation is 
necessary or appropriate in furtherance of the purposes of this 
title.
  (3) The Commission and the Secretary, in making rules and 
regulations pursuant to any provision of this title, 
considering any application for registration in accordance with 
section 19(a) of this title, or reviewing any proposed rule 
change of a self-regulatory organization in accordance with 
section 19(b) of this title, shall keep in a public file and 
make available for copying all written statements filed with 
the Commission and the Secretary and all written communications 
between the Commission or the Secretary and any person relating 
to the proposed rule, regulation, application, or proposed rule 
change: Provided, however, That the Commission and the 
Secretary shall not be required to keep in a public file or 
make available for copying any such statement or communication 
which it may withhold from the public in accordance with the 
provisions of section 552 of title 5, United States Code.
  (b)(1) The Commission, the Board of Governors of the Federal 
Reserve System, and the other agencies enumerated in section 
3(a)(34) of this title shall each make an annual report to the 
Congress on its work for the preceding year, and shall include 
in each such report whatever information, data, and 
recommendations for further legislation it considers advisable 
with regard to matters within its respective jurisdiction under 
this title.
  (2) The appropriate regulatory agency for a self-regulatory 
organization shall include in its annual report to the Congress 
for each fiscal year, a summary of its oversight activities 
under this title with respect to such self-regulatory 
organization, including a description of any examination 
conducted as part of such activities of any organization, any 
material recommendation presented as part of such activities to 
such organization for changes in its organization or rules, and 
any such action by such organization in response to any such 
recommendation.
  (3) The appropriate regulatory agency for any class of 
municipal securities dealers shall include in its annual report 
to the Congress for each fiscal year a summary of its 
regulatory activities pursuant to this title with respect to 
such municipal securities dealers, including the nature of and 
reason for any sanction imposed pursuant to this title against 
any such municipal securities dealer.
  (4) The Commission shall also include in its annual report to 
the Congress for each fiscal year--
          (A) a summary of the Commission's oversight 
        activities with respect to self-regulatory 
        organizations for which it is not the appropriate 
        regulatory agency, including a description of any 
        examination of any such organization, any material 
        recommendation presented to any such organization for 
        changes in its organization or rules, and any action by 
        any such organization in response to any such 
        recommendations;
          (B) a statement and analysis of the expenses and 
        operations of each self-regulatory organization in 
        connection with the performance of its responsibilities 
        under this title, for which purpose data pertaining to 
        such expenses and operations shall be made available by 
        such organization to the Commission at its request;
          (C) the steps the Commission has taken and the 
        progress it has made toward ending the physical 
        movement of the securities certificate in connection 
        with the settlement of securities transactions, and its 
        recommendations, if any, for legislation to eliminate 
        the securities certificate;
          (D) the number of requests for exemptions from 
        provisions of this title received, the number granted, 
        and the basis upon which any such exemption was 
        granted;
          (E) a summary of the Commission's regulatory 
        activities with respect to municipal securities dealers 
        for which it is not the appropriate regulatory agency, 
        including the nature of, and reason for, any sanction 
        imposed in proceedings against such municipal 
        securities dealers;
          (F) a statement of the time elapsed between the 
        filing of reports pursuant to section 13(f) of this 
        title and the public availability of the information 
        contained therein, the costs involved in the 
        Commission's processing of such reports and tabulating 
        such information, the manner in which the Commission 
        uses such information, and the steps the Commission has 
        taken and the progress it has made toward requiring 
        such reports to be filed and such information to be 
        made available to the public in machine language;
          (G) information concerning (i) the effects its rules 
        and regulations are having on the viability of small 
        brokers and dealers; (ii) its attempts to reduce any 
        unnecessary reporting burden on such brokers and 
        dealers; and (iii) its efforts to help to assure the 
        continued participation of small brokers and dealers in 
        the United States securities markets;
          (H) a statement detailing its administration of the 
        Freedom of Information Act, section 552 of title 5, 
        United States Code, including a copy of the report 
        filed pursuant to subsection (d) of such section; and
          (I) the steps that have been taken and the progress 
        that has been made in promoting the timely public 
        dissemination and availability for analytical purposes 
        (on a fair, reasonable, and nondiscriminatory basis) of 
        information concerning government securities 
        transactions and quotations, and its recommendations, 
        if any, for legislation to assure timely dissemination 
        of (i) information on transactions in regularly traded 
        government securities sufficient to permit the 
        determination of the prevailing market price for such 
        securities, and (ii) reports of the highest published 
        bids and lowest published offers for government 
        securities (including the size at which persons are 
        willing to trade with respect to such bids and offers).
  (c) 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) 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.
  (e) Report on Unobligated Appropriations.--If, at the end of 
any fiscal year, there remain unobligated any funds that were 
appropriated to the Commission for such fiscal year, the 
Commission shall, not later than 30 days after the last day of 
such fiscal year, submit to the Committee on Financial Services 
and the Committee on Appropriations of the House of 
Representatives and the Committee on Banking, Housing, and 
Urban Affairs and the Committee on Appropriations of the Senate 
a report stating the amount of such unobligated funds. If there 
is any material change in the amount stated in the report, the 
Commission shall, not later than 7 days after determining the 
amount of the change, submit to such committees a supplementary 
report stating the amount of and reason for the change.
  (e) Procedure for Obtaining Certain Intellectual Property.--
The Commission is not authorized to compel under this title a 
person to produce or furnish source code, including algorithmic 
trading source code or similar intellectual property, to the 
Commission unless the Commission first issues a subpoena.

                   public availability of information

  Sec. 24. (a) For purposes of section 552 of title 5, United 
States Code, the term ``records'' includes all applications, 
statements, reports, contracts, correspondence, notices, and 
other documents filed with or otherwise obtained by the 
Commission pursuant to this title or otherwise.
  (b) It shall be unlawful for any member, officer, or employee 
of the Commission to disclose to any person other than a 
member, officer, or employee of the Commission, or to use for 
personal benefit, any information contained in any application, 
statement, report, contract, correspondence, notice, or other 
document filed with or otherwise obtained by the Commission (1) 
in contravention of the rules and regulations of the Commission 
under section 552 of Title 5, United States Code, or (2) in 
circumstances where the Commission has determined pursuant to 
such rules to accord confidential treatment to such 
information.
  (c) Confidential Disclosures.--The Commission may, in its 
discretion and upon a showing that such information is needed, 
provide all ``records'' (as defined in subsection (a)) and 
other information in its possession to such persons, both 
domestic and foreign, as the Commission by rule deems 
appropriate if the person receiving such records or information 
provides such assurances of confidentiality as the Commission 
deems appropriate.
  [(d) Records Obtained from Foreign Securities Authorities.--
Except as provided in subsection (g), 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.]
  (d) Records Obtained From Foreign Securities and Law 
Enforcement Authorities.--Except as provided in subsection (g), 
the Commission shall not be compelled to disclose records 
obtained from a foreign securities authority, or from a foreign 
law enforcement authority as defined in subsection (f)(4), if--
          (1) the foreign securities authority or foreign law 
        enforcement authority has in good faith determined and 
        represented to the Commission that the records are 
        confidential under the laws of the country of such 
        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) Freedom of Information Act.--For purposes of section 
552(b)(8) of title 5, United States Code, (commonly referred to 
as the Freedom of Information Act)--
          (1) the Commission is an agency responsible for the 
        regulation or supervision of financial institutions; 
        and
          (2) any entity for which the Commission is 
        responsible for regulating, supervising, or examining 
        under this title is a financial institution.
  (f) 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) the Public Company Accounting Oversight 
                Board;
                  (C) any self-regulatory organization;
                  (D) any foreign securities authority;
                  (E) any foreign law enforcement authority; or
                  (F) any State securities or law enforcement 
                authority.
          (2) Nondisclosure of privileged information provided 
        to the commission.--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) Nonwaiver 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.--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, State, or foreign 
                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; and
                  (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.
  (g) Savings Provisions.--Nothing in this section shall--
          (1) alter the Commission's responsibilities under the 
        Right to Financial Privacy Act (12 U.S.C. 3401 et 
        seq.), as limited by section 21(h) of this Act, with 
        respect to transfers of records covered by such 
        statutes, or
          (2) authorize the Commission to withhold information 
        from the Congress or prevent the Commission from 
        complying with an order of a court of the United States 
        in an action commenced by the United States or the 
        Commission.

           *       *       *       *       *       *       *


SEC. 31. TRANSACTION FEES.

  [(a) Recovery of Costs of Annual Appropriation.--The 
Commission shall, in accordance with this section, collect 
transaction fees and assessments that are designed to recover 
the costs to the Government of the annual appropriation to the 
Commission by Congress.
  (a) Collection.--The Commission shall, in accordance with 
this section, collect transaction fees and assessments.
  (b) Exchange-Traded Securities.--Subject to subsection (j), 
each national securities exchange shall pay to the Commission a 
fee at a rate equal to $15 per $1,000,000 of the aggregate 
dollar amount of sales of securities (other than bonds, 
debentures, other evidences of indebtedness, security futures 
products, and options on securities indexes (excluding a 
narrow-based security index)) transacted on such national 
securities exchange.
  (c) Off-Exchange Trades of Exchange Registered and Last-Sale-
Reported Securities.--Subject to subsection (j), each national 
securities association shall pay to the Commission a fee at a 
rate equal to $15 per $1,000,000 of the aggregate dollar amount 
of sales transacted by or through any member of such 
association otherwise than on a national securities exchange of 
securities (other than bonds, debentures, other evidences of 
indebtedness, security futures products, and options on 
securities indexes (excluding a narrow-based security index)) 
registered on a national securities exchange or subject to 
prompt last sale reporting pursuant to the rules of the 
Commission or a registered national securities association.
  (d) Assessments on Security Futures Transactions.--Each 
national securities exchange and national securities 
association shall pay to the Commission an assessment equal to 
$0.009 for each round turn transaction (treated as including 
one purchase and one sale of a contract of sale for future 
delivery) on a security future traded on such national 
securities exchange or by or through any member of such 
association otherwise than on a national securities exchange, 
except that for fiscal year 2007 and each succeeding fiscal 
year such assessment shall be equal to $0.0042 for each such 
transaction.
  (e) Dates for Payments.--The fees and assessments required by 
subsections (b), (c), and (d) of this section shall be paid--
          (1) on or before March 15, with respect to 
        transactions and sales occurring during the period 
        beginning on the preceding September 1 and ending at 
        the close of the preceding December 31; and
          (2) on or before 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.
  (f) Exemptions.--The Commission, by rule, may exempt any sale 
of securities or any class of sales of securities from any fee 
or assessment imposed by this section, if the Commission finds 
that such exemption is consistent with the public interest, the 
equal regulation of markets and brokers and dealers, and the 
development of a national market system.
  (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 30 days 
after the date on which an Act making a regular appropriation 
to the Commission for such fiscal year is enacted, together 
with any estimates or projections on which such fees are based.
  (h) Pro Rata Application.--The rates per $1,000,000 required 
by this section shall be applied pro rata to amounts and 
balances of less than $1,000,000.
  (i) Deposit of Fees.--
          (1) Offsetting collections.--Fees collected pursuant 
        to subsections (b), (c), and (d) for any fiscal year--
                  (A) except as provided in paragraph (2), 
                shall be deposited and credited as offsetting 
                collections to the account providing 
                appropriations to the Commission; and
                  (B) except as provided in subsection (k), 
                shall not be collected for any fiscal year 
                except to the extent provided in advance in 
                appropriation Acts.
          [(2) General revenues prohibited.--No fees collected 
        pursuant to subsections (b), (c), and (d) for fiscal 
        year 2002 or any succeeding fiscal year shall be 
        deposited and credited as general revenue of the 
        Treasury.]
          (2) General revenue.--Any fees collected for a fiscal 
        year pursuant to this section, sections 13(e) and 14(g) 
        of this title, and section 6(b) of the Securities Act 
        of 1933 in excess of the amount provided in 
        appropriation Acts for collection for such fiscal year 
        pursuant to such sections shall be deposited and 
        credited as general revenue of the Treasury.
  (j) Adjustments to Fee Rates.--
          (1) Annual adjustment.--Subject to subsections 
        (i)(1)(B) and (k), for each fiscal year, the Commission 
        shall by order 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 
        baseline estimate of the aggregate dollar amount of 
        sales for such fiscal year, is reasonably likely to 
        produce aggregate fee collections under this section 
        (including assessments collected under subsection (d) 
        of this section) that are equal to [the regular 
        appropriation to the Commission by Congress for such 
        fiscal year] the target offsetting collection amount 
        for such fiscal year.
          (2) Mid-year adjustment.--Subject to subsections 
        (i)(1)(B) and (k), for each fiscal year, 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 of such fiscal year, 
        the baseline estimate of the aggregate dollar volume of 
        sales used under paragraph (1) for such fiscal year 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 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 five-month period and 
        assessments collected under subsection (d) of this 
        section) that are equal to [the regular appropriation 
        to the Commission by Congress for such fiscal year] 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)] 
        subsection (l)(2).
          (3) Review.--In exercising its authority under this 
        subsection, the Commission shall not be required to 
        comply with the provisions of section 553 of title 5, 
        United States Code. An adjusted rate prescribed under 
        paragraph (1) or (2) and published under subsection (g) 
        shall not be subject to judicial review.
          (4) Effective date.--
                  (A) Annual adjustment.--Subject to 
                subsections (i)(1)(B) and (k), an adjusted rate 
                prescribed under paragraph (1) shall take 
                effect on the later of--
                          (i) the first day of the fiscal year 
                        to which such rate applies; or
                          (ii) 60 days after the date on which 
                        an Act making a regular appropriation 
                        to the Commission for such fiscal year 
                        is enacted.
                  (B) Mid-year adjustment.--An adjusted rate 
                prescribed under paragraph (2) shall take 
                effect on April 1 of the fiscal year to which 
                such rate applies.
  (k) Lapse of Appropriation.--If on the first day of a fiscal 
year a regular appropriation to the Commission has not been 
enacted, the Commission shall continue to collect (as 
offsetting collections) the fees and assessments under 
subsections (b), (c), and (d) at the rate in effect during the 
preceding fiscal year, until 60 days after the date such a 
regular appropriation is enacted.
  [(l) Baseline Estimate of the Aggregate Dollar Amount of 
Sales.--The baseline estimate of the aggregate dollar amount of 
sales for any fiscal year is the baseline estimate of the 
aggregate dollar amount of sales of securities (other than 
bonds, debentures, other evidences of indebtedness, security 
futures products, and options on securities indexes (excluding 
a narrow-based security index)) to be transacted on each 
national securities exchange and by or through any member of 
each national securities association (otherwise than on a 
national securities exchange) during such fiscal year as 
determined by the Commission, after consultation with the 
Congressional Budget Office and the Office of Management and 
Budget, using the methodology required for making projections 
pursuant to section 257 of the Balanced Budget and Emergency 
Deficit Control Act of 1985.
  (l) Definitions.--For purposes of this section:
          (1) Target offsetting collection amount.--The target 
        offsetting collection amount for a fiscal year is--
                  (A) for fiscal year 2017, $1,400,000,000; and
                  (B) for each succeeding fiscal year, the 
                target offsetting collection amount for the 
                prior fiscal year, adjusted by the rate of 
                inflation.
          (2) Baseline estimate of the aggregate dollar amount 
        of sales.--The baseline estimate of the aggregate 
        dollar amount of sales for any fiscal year is the 
        baseline estimate of the aggregate dollar amount of 
        sales of securities (other than bonds, debentures, 
        other evidences of indebtedness, security futures 
        products, and options on securities indexes (excluding 
        a narrow-based security index)) to be transacted on 
        each national securities exchange and by or through any 
        member of each national securities association 
        (otherwise than on a national securities exchange) 
        during such fiscal year as determined by the 
        Commission, after consultation with the Congressional 
        Budget Office and the Office of Management and Budget, 
        using the methodology required for making projections 
        pursuant to section 257 of the Balanced Budget and 
        Emergency Deficit Control Act of 1985.
  (m) Transmittal of Commission Budget Requests.--
          (1) Budget required.--For fiscal year 2012, and each 
        fiscal year thereafter, the Commission shall prepare 
        and submit a budget to the President. Whenever the 
        Commission submits a budget estimate or request to the 
        President or the Office of Management and Budget, the 
        Commission shall concurrently transmit copies of the 
        estimate or request to the Committee on Appropriations 
        of the Senate, the Committee on Appropriations of the 
        House of Representatives, the Committee on Banking, 
        Housing, and Urban Affairs of the Senate, and the 
        Committee on Financial Services of the House of 
        Representatives.
          (2) Submission to congress.--The President shall 
        submit each budget submitted under paragraph (1) to 
        Congress, in unaltered form, together with the annual 
        budget for the Administration submitted by the 
        President.
          (3) Contents.--The Commission shall include in each 
        budget submitted under paragraph (1)--
                  (A) an itemization of the amount of funds 
                necessary to carry out the functions of the 
                Commission.
                  (B) an amount to be designated as contingency 
                funding to be used by the Commission to address 
                unanticipated needs; and
                  (C) a designation of any activities of the 
                Commission for which multi-year budget 
                authority would be suitable.
  (n) Overpayment.--If a national securities exchange or 
national securities association pays to the Commission an 
amount in excess of fees and assessments due under this section 
and informs the Commission of such amount paid in excess within 
10 years of the date of the payment, the Commission shall 
offset future fees and assessments due by such exchange or 
association in an amount equal to such excess amount.
  Sec. 32. (a) Any person who willfully violates any provision 
of this title (other than section 30A), or any rule or 
regulation thereunder the violation of which is made unlawful 
or the observance of which is required under the terms of this 
title, or any person who willfully and knowingly makes, or 
causes to be made, any statement in any application, report, or 
document required to be filed under this title or any rule or 
regulation thereunder or undertaking contained in a 
registration statement as provided in subsection (d) of section 
15 of this title, or by any self-regulatory organization in 
connection with an application for membership or participation 
therein or to become associated with a member thereof, which 
statement was false or misleading with respect to any material 
fact, shall upon conviction be fined not more than [$5,000,000] 
$7,000,000, or imprisoned not more than 20 years, or both, 
except that when such person is a person other than a natural 
person, a fine not exceeding $25,000,000 may be imposed; but no 
person shall be subject to imprisonment under this section for 
the violation of any rule or regulation if he proves that he 
had no knowledge of such rule or regulation.
  (b) Any issuer which fails to file information, documents, or 
reports required to be filed under subsection (d) of section 15 
of this title or any rule or regulation thereunder shall 
forfeit to the United States the sum of $100 for each and every 
day such failure to file shall continue. Such forfeiture, which 
shall be in lieu of any criminal penalty for such failure to 
file which might be deemed to arise under subsection (a) of 
this section, shall be payable into the Treasury of the United 
States and shall be recoverable in a civil suit in the name of 
the United States.
  (c)(1)(A) Any issuer that violates subsection (a) or (g) of 
section 30A shall be fined not more than [$2,000,000] 
$4,000,000.
  (B) Any issuer that violates subsection (a) or (g) of section 
30A shall be subject to a civil penalty of not more than 
[$10,000] $50,000 imposed in an action brought by the 
Commission.
  (2)(A) Any officer, director, employee, or agent of an 
issuer, or stockholder acting on behalf of such issuer, who 
willfully violates subsection (a) or (g) of section 30A of this 
title shall be fined not more than [$100,000] $250,000, or 
imprisoned not more than 5 years, or both.
  (B) Any officer, director, employee, or agent of an issuer, 
or stockholder acting on behalf of such issuer, who violates 
subsection (a) or (g) of section 30A of this title shall be 
subject to a civil penalty of not more than [$10,000] $50,000 
imposed in an action brought by the Commission.
  (3) Whenever a fine is imposed under paragraph (2) upon any 
officer, director, employee, agent, or stockholder of an 
issuer, such fine may not be paid, directly or indirectly, by 
such issuer.

           *       *       *       *       *       *       *


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 2011, $1,300,000,000;
          [(2) for fiscal year 2012, $1,500,000,000;
          [(3) for fiscal year 2013, $1,750,000,000;
          [(4) for fiscal year 2014, $2,000,000,000; and
          [(5) for fiscal year 2015, $2,250,000,000.]
          (1) for fiscal year 2017, $1,555,000,000;
          (2) for fiscal year 2018, $1,605,000,000;
          (3) for fiscal year 2019, $1,655,000,000;
          (4) for fiscal year 2020, $1,705,000,000;
          (5) for fiscal year 2021, $1,755,000,000; and
          (6) for fiscal year 2022, $1,805,000,000.

           *       *       *       *       *       *       *


SEC. 39. INVESTOR ADVISORY COMMITTEE.

  (a) Establishment and Purpose.--
          (1) Establishment.--There is established within the 
        Commission the Investor Advisory Committee (referred to 
        in this section as the ``Committee'').
          (2) Purpose.--The Committee shall--
                  (A) advise and consult with the Commission 
                on--
                          (i) regulatory priorities of the 
                        Commission;
                          (ii) issues relating to the 
                        regulation of securities products, 
                        trading strategies, and fee structures, 
                        and the effectiveness of disclosure;
                          (iii) initiatives to protect investor 
                        interest; and
                          (iv) initiatives to promote investor 
                        confidence and the integrity of the 
                        securities marketplace; and
                  (B) [submit] in consultation with the Small 
                Business Capital Formation Advisory Committee 
                established under section 40, submit to the 
                Commission such findings and recommendations as 
                the Committee determines are appropriate, 
                including recommendations for proposed 
                legislative changes.
  (b) Membership.--
          (1) In general.--The members of the Committee shall 
        be--
                  (A) the Investor Advocate;
                  (B) a representative of State securities 
                commissions;
                  (C) a representative of the interests of 
                senior citizens; [and]
                  (D) not fewer than 10, and not more than 20, 
                members appointed by the Commission, from among 
                individuals who--
                          (i) represent the interests of 
                        individual equity and debt investors, 
                        including investors in mutual funds;
                          (ii) represent the interests of 
                        institutional investors, including the 
                        interests of pension funds and 
                        registered investment companies;
                          (iii) are knowledgeable about 
                        investment issues and decisions; and
                          (iv) have reputations of 
                        integrity[.]; and
                  (E) a member of the Small Business Capital 
                Formation Advisory Committee who shall be a 
                nonvoting member.
          [(2) Term.--Each member of the Committee appointed 
        under paragraph (1)(B) shall serve for a term of 4 
        years.]
          (2) Term.--
                  (A) Length of term for members of the 
                committee.--Each member of the Committee 
                appointed under paragraph (1), other than the 
                Investor Advocate, shall serve for a term of 4 
                years.
                  (B) Limitation on multiple terms.--A member 
                of the Committee may not serve for more than 
                one term, except for the Investor Advocate, a 
                representative of State securities commissions, 
                and the member of the Small Business Capital 
                Formation Advisory Committee.
          (3) Members not commission employees.--Members 
        appointed under [paragraph (1)(B)] paragraph (1) shall 
        not be deemed to be employees or agents of the 
        Commission solely because of membership on the 
        Committee.
  (c) Chairman; Vice Chairman; Secretary; Assistant 
Secretary.--
          (1) In general.--The members of the Committee shall 
        elect, from among the members of the Committee--
                  (A) a chairman, who may not be employed by an 
                issuer;
                  (B) a vice chairman, who may not be employed 
                by an issuer;
                  (C) a secretary; and
                  (D) an assistant secretary.
          [(2) Term.--Each member elected under paragraph (1) 
        shall serve for a term of 3 years in the capacity for 
        which the member was elected under paragraph (1).]
          (2) Term.--
                  (A) Length of term.--Each member elected 
                under paragraph (1) shall serve for a term of 3 
                years in the capacity for which the member was 
                elected under paragraph (1).
                  (B) Limitation on multiple terms.--A member 
                elected under paragraph (1) may not serve for 
                more than one term in the capacity for which 
                the member was elected under paragraph (1).
  (d) Meetings.--
          (1) Frequency of meetings.--The Committee shall 
        meet--
                  (A) not less frequently than twice annually, 
                at the call of the chairman of the Committee; 
                and
                  (B) from time to time, at the call of the 
                Commission.
          (2) Notice.--The chairman of the Committee shall give 
        the members of the Committee written notice of each 
        meeting, not later than 2 weeks before the date of the 
        meeting.
  (e) Compensation and Travel Expenses.--Each member of the 
Committee who is not a full-time employee of the United States 
shall--
          (1) be entitled to receive compensation at a rate not 
        to exceed the daily equivalent of the annual rate of 
        basic pay in effect for a position at level V of the 
        Executive Schedule under section 5316 of title 5, 
        United States Code, for each day during which the 
        member is engaged in the actual performance of the 
        duties of the Committee; and
          (2) while away from the home or regular place of 
        business of the member in the performance of services 
        for the Committee, be allowed travel expenses, 
        including per diem in lieu of subsistence, in the same 
        manner as persons employed intermittently in the 
        Government service are allowed expenses under section 
        5703(b) of title 5, United States Code.
  (f) Staff.--The Commission shall make available to the 
Committee such staff as the chairman of the Committee 
determines are necessary to carry out this section.
  (g) Review by Commission.--The Commission shall--
          (1) review the findings and recommendations of the 
        Committee; and
          (2) each time the Committee submits a finding or 
        recommendation to the Commission, promptly issue a 
        public statement--
                  (A) assessing the finding or recommendation 
                of the Committee; and
                  (B) disclosing the action, if any, the 
                Commission intends to take with respect to the 
                finding or recommendation.
  (h) Committee Findings.--Nothing in this section shall 
require the Commission to agree to or act upon any finding or 
recommendation of the Committee.
  [(i) Federal Advisory Committee Act.--The Federal Advisory 
Committee Act (5 U.S.C. App.) shall not apply with respect to 
the Committee and its activities.
  [(j) Authorization of Appropriations.--There is authorized to 
be appropriated to the Commission such sums as are necessary to 
carry out this section.]

SEC. 40. SMALL BUSINESS CAPITAL FORMATION ADVISORY COMMITTEE.

  (a) Establishment and Purpose.--
          (1) Establishment.--There is established within the 
        Commission the Small Business Capital Formation 
        Advisory Committee (hereafter in this section referred 
        to as the ``Committee'').
          (2) Functions.--
                  (A) In general.--The Committee shall provide 
                the Commission with advice on the Commission's 
                rules, regulations, and policies with regard to 
                the Commission's mission of protecting 
                investors, maintaining fair, orderly, and 
                efficient markets, and facilitating capital 
                formation, as such rules, regulations, and 
                policies relate to--
                          (i) capital raising by emerging, 
                        privately held small businesses 
                        (``emerging companies'') and publicly 
                        traded companies with less than 
                        $250,000,000 in public market 
                        capitalization (``smaller public 
                        companies'') through securities 
                        offerings, including private and 
                        limited offerings and initial and other 
                        public offerings;
                          (ii) trading in the securities of 
                        emerging companies and smaller public 
                        companies; and
                          (iii) public reporting and corporate 
                        governance requirements of emerging 
                        companies and smaller public companies.
                  (B) Limitation.--The Committee shall not 
                provide any advice with respect to any 
                policies, practices, actions, or decisions 
                concerning the Commission's enforcement 
                program.
  (b) Membership.--
          (1) In general.--The members of the Committee shall 
        be--
                  (A) the Advocate for Small Business Capital 
                Formation;
                  (B) not fewer than 10, and not more than 20, 
                members appointed by the Commission, from among 
                individuals--
                          (i) who represent--
                                  (I) emerging companies 
                                engaging in private and limited 
                                securities offerings or 
                                considering initial public 
                                offerings (``IPO'') (including 
                                the companies' officers and 
                                directors);
                                  (II) the professional 
                                advisors of such companies 
                                (including attorneys, 
                                accountants, investment 
                                bankers, and financial 
                                advisors); and
                                  (III) the investors in such 
                                companies (including angel 
                                investors, venture capital 
                                funds, and family offices);
                          (ii) who are officers or directors of 
                        minority-owned small businesses or 
                        women-owned small businesses;
                          (iii) who represent--
                                  (I) smaller public companies 
                                (including the companies' 
                                officers and directors);
                                  (II) the professional 
                                advisors of such companies 
                                (including attorneys, auditors, 
                                underwriters, and financial 
                                advisors); and
                                  (III) the pre-IPO and post-
                                IPO investors in such companies 
                                (both institutional, such as 
                                venture capital funds, and 
                                individual, such as angel 
                                investors); and
                          (iv) who represent participants in 
                        the marketplace for the securities of 
                        emerging companies and smaller public 
                        companies, such as securities 
                        exchanges, alternative trading systems, 
                        analysts, information processors, and 
                        transfer agents; and
                  (C) three non-voting members--
                          (i) one of whom shall be appointed by 
                        the Investor Advocate;
                          (ii) one of whom shall be appointed 
                        by the North American Securities 
                        Administrators Association; and
                          (iii) one of whom shall be appointed 
                        by the Administrator of the Small 
                        Business Administration.
          (2) Term.--Each member of the Committee appointed 
        under subparagraph (B), (C)(ii), or (C)(iii) of 
        paragraph (1) shall serve for a term of 4 years.
          (3) Members not commission employees.--Members 
        appointed under subparagraph (B), (C)(ii), or (C)(iii) 
        of paragraph (1) shall not be treated as employees or 
        agents of the Commission solely because of membership 
        on the Committee.
  (c) Chairman; Vice Chairman; Secretary; Assistant 
Secretary.--
          (1) In general.--The members of the Committee shall 
        elect, from among the members of the Committee--
                  (A) a chairman;
                  (B) a vice chairman;
                  (C) a secretary; and
                  (D) an assistant secretary.
          (2) Term.--Each member elected under paragraph (1) 
        shall serve for a term of 3 years in the capacity for 
        which the member was elected under paragraph (1).
  (d) Meetings.--
          (1) Frequency of meetings.--The Committee shall 
        meet--
                  (A) not less frequently than four times 
                annually, at the call of the chairman of the 
                Committee; and
                  (B) from time to time, at the call of the 
                Commission.
          (2) Notice.--The chairman of the Committee shall give 
        the members of the Committee written notice of each 
        meeting, not later than 2 weeks before the date of the 
        meeting.
  (e) Compensation and Travel Expenses.--Each member of the 
Committee who is not a full-time employee of the United States 
shall--
          (1) be entitled to receive compensation at a rate not 
        to exceed the daily equivalent of the annual rate of 
        basic pay in effect for a position at level V of the 
        Executive Schedule under section 5316 of title 5, 
        United States Code, for each day during which the 
        member is engaged in the actual performance of the 
        duties of the Committee; and
          (2) while away from the home or regular place of 
        business of the member in the performance of services 
        for the Committee, be allowed travel expenses, 
        including per diem in lieu of subsistence, in the same 
        manner as persons employed intermittently in the 
        Government service are allowed expenses under section 
        5703 of title 5, United States Code.
  (f) Staff.--The Commission shall make available to the 
Committee such staff as the chairman of the Committee 
determines are necessary to carry out this section.
  (g) Review by Commission.--The Commission shall--
          (1) review the findings and recommendations of the 
        Committee; and
          (2) each time the Committee submits a finding or 
        recommendation to the Commission, promptly issue a 
        public statement--
                  (A) assessing the finding or recommendation 
                of the Committee; and
                  (B) disclosing the action, if any, the 
                Commission intends to take with respect to the 
                finding or recommendation.
  [(h) Federal Advisory Committee Act.--The Federal Advisory 
Committee Act (5 U.S.C. App.) shall not apply with respect to 
the Committee and its activities.]

SEC. 41. PRIVATE PARTIES AUTHORIZED TO COMPEL THE COMMISSION TO SEEK 
                    SANCTIONS BY FILING CIVIL ACTIONS.

  (a) Termination of Administrative Proceeding.--In the case of 
any person who is a party to a proceeding brought by the 
Commission under a securities law, to which section 554 of 
title 5, United States Code, applies, and against whom an order 
imposing a cease and desist order and a penalty may be issued 
at the conclusion of the proceeding, that person may, not later 
than 20 days after receiving notice of such proceeding, and at 
that person's discretion, require the Commission to terminate 
the proceeding.
  (b) Civil Action Authorized.--If a person requires the 
Commission to terminate a proceeding pursuant to subsection 
(a), the Commission may bring a civil action against that 
person for the same remedy that might be imposed.
  (c) Standard of Proof in Administrative Proceeding.--
Notwithstanding any other provision of law, in the case of a 
proceeding brought by the Commission under a securities law, to 
which section 554 of title 5, United States Code, applies, a 
legal or equitable remedy may be imposed on the person against 
whom the proceeding was brought only on a showing by the 
Commission of clear and convincing evidence that the person has 
violated the relevant provision of law.
                              ----------                              


                     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) ``Advisory board'' means a board, whether elected 
        or appointed, which is distinct from the board of 
        directors or board of trustees, of an investment 
        company, and which is composed solely of persons who do 
        not serve such company in any other capacity, whether 
        or not the functions of such board are such as to 
        render its members ``directors'' within the definition 
        of that term, which board has advisory functions as to 
        investments but has no power to determine that any 
        security or other investment shall be purchased or sold 
        by such company.
          (2) ``Affiliated company'' means a company which is 
        an affiliated person.
          (3) ``Affiliated person'' of another person means (A) 
        any person directly or indirectly owning, controlling, 
        or holding with power to vote, 5 per centum or more of 
        the outstanding voting securities of such other person; 
        (B) any person 5 per centum or more of whose 
        outstanding voting securities are directly or 
        indirectly owned, controlled, or held with power to 
        vote, by such other person; (C) any person directly or 
        indirectly controlling, controlled by, or under common 
        control with, such other person; (D) any officer, 
        director, partner, copartner, or employee of such other 
        person; (E) if such other person is an investment 
        company, any investment adviser thereof or any member 
        of an advisory board thereof; and (F) if such other 
        person is an unincorporated investment company not 
        having a board of directors, the depositor thereof.
          (4) ``Assignment'' includes any direct or indirect 
        transfer or hypothecation of a contract or chose in 
        action by the assignor, or of a controlling block of 
        the assignor's outstanding voting securities by a 
        security holder of the assignor; but does not include 
        an assignment of partnership interests incidental to 
        the death or withdrawal of a minority of the members of 
        the partnership having only a minority interest in the 
        partnership business or to the admission to the 
        partnership of one or more members who, after such 
        admission, shall be only a minority of the members and 
        shall have only a minority interest in the business.
          (5) ``Bank'' means (A) a depository institution (as 
        defined in section 3 of the Federal Deposit Insurance 
        Act) or a branch or agency of a foreign bank (as such 
        terms are defined in section 1(b) of the International 
        Banking Act of 1978), (B) a member bank of the Federal 
        Reserve System, (C) any other banking institution or 
        trust company, whether incorporated or not, doing 
        business under the laws of any State or of the United 
        States, a substantial portion of the business of which 
        consists of receiving deposits or exercising fiduciary 
        powers similar to those permitted to national banks 
        under the authority of the Comptroller of the Currency, 
        and which is supervised and examined by State or 
        Federal authority having supervision over banks, and 
        which is not operated for the purpose of evading the 
        provisions of this title, and (D) a receiver, 
        conservator, or other liquidating agent of any 
        institution or firm included in clause (A), (B), or (C) 
        of this paragraph.
          (6) The term ``broker'' has the same meaning as given 
        in section 3 of the Securities Exchange Act of 1934, 
        except that such term does not include any person 
        solely by reason of the fact that such person is an 
        underwriter for one or more investment companies.
          (7) ``Commission'' means the Securities and Exchange 
        Commission.
          (8) ``Company'' means a corporation, a partnership, 
        an association, a joint-stock company, a trust, a fund, 
        or any organized group of persons whether incorporated 
        or not; or any receiver, trustee in a case under title 
        11 of the United States Code or similar official or any 
        liquidating agent for any of the foregoing, in his 
        capacity as such.
          (9) ``Control'' means the power to exercise a 
        controlling influence over the management or policies 
        of a company, unless such power is solely the result of 
        an official position with such company.
          Any person who owns beneficially, either directly or 
        through one or more controlled companies, more than 25 
        per centum of the voting securities of a company shall 
        be presumed to control such company. Any person who 
        does not so own more than 25 per centum of the voting 
        securities of any company shall be presumed not to 
        control such company. A natural person shall be 
        presumed not to be a controlled person within the 
        meaning of this title. Any such presumption may be 
        rebutted by evidence, but except as hereinafter 
        provided, shall continue until a determination to the 
        contrary made by the Commission by order either on its 
        own motion or on application by an interested person. 
        If an application filed hereunder is not granted or 
        denied by the Commission within sixty days after filing 
        thereof, the determination sought by the application 
        shall be deemed to have been temporarily granted 
        pending final determination of the Commission thereon. 
        The Commission, upon its own motion or upon 
        application, may by order revoke or modify any order 
        issued under this paragraph whenever it shall find that 
        the determination embraced in such original order is no 
        longer consistent with the facts.
          (10) ``Convicted'' includes a verdict, judgment, or 
        plea of guilty, or a finding of guilt on a plea of nolo 
        contendere, if such verdict, judgment, plea, or finding 
        has not been reversed, set aside, or withdrawn, whether 
        or not sentence has been imposed.
          (11) The term ``dealer'' has the same meaning as 
        given in the Securities Exchange Act of 1934, but does 
        not include an insurance company or investment company.
          (12) ``Director'' means any director of a corporation 
        or any person performing similar functions with respect 
        to any organization, whether incorporated or 
        unincorporated, including any natural person who is a 
        member of a board of trustees of a management company 
        created as a common-law trust.
          (13) ``Employees' securities company'' means any 
        investment company or similar issuer all of the 
        outstanding securities of which (other than short-term 
        paper) are beneficially owned (A) by the employees or 
        persons on retainer of a single employer or of two or 
        more employers each of which is an affiliated company 
        of the other, (B) by former employees of such employer 
        or employers, (C) by members of the immediate family of 
        such employees, persons on retainer, or former 
        employees, (D) by any two or more of the foregoing 
        classes of persons, or (E) by such employer or 
        employers together with any one or more of the 
        foregoing classes of persons.
          (14) ``Exchange'' means any organization, 
        association, or group of persons, whether incorporated 
        or unincorporated, which constitutes, maintains, or 
        provides a market place or facilities for bringing 
        together purchasers and sellers of securities or for 
        otherwise performing with respect to securities the 
        functions commonly performed by a stock exchange as 
        that term is generally understood, and includes the 
        market place and the market facilities maintained by 
        such exchange.
          (15) ``Face-amount certificate'' means any 
        certificate, investment contract, or other security 
        which represents an obligation on the part of its 
        issuer to pay a stated or determinable sum or sums at a 
        fixed or determinable date or dates more than twenty-
        four months after the date of issuance, in 
        consideration of the payment of periodic installments 
        of a stated or determinable amount (which security 
        shall be known as a face-amount certificate of the 
        ``installment type''); or any security which represents 
        a similar obligation on the part of a face-amount 
        certificate company, the consideration for which is the 
        payment of a single lump sum (which security shall be 
        known as a ``fully paid'' face-amount certificate).
          (16) ``Government security'' means any security 
        issued or guaranteed as to principal or interest by the 
        United States, or by a person controlled or supervised 
        by and acting as an instrumentality of the Government 
        of the United States pursuant to authority granted by 
        the Congress of the United States; or any certificate 
        of deposit for any of the foregoing.
          (17) ``Insurance company'' means a company which is 
        organized as an insurance company, whose primary and 
        predominant business activity is the writing of 
        insurance or the reinsuring of risks underwritten by 
        insurance companies, and which is subject to 
        supervision by the insurance commissioner or a similar 
        official or agency of a State; or any receiver or 
        similar official or any liquidating agent for such a 
        company, in his capacity as such.
          (18) ``Interstate commerce'' means trade, commerce, 
        transportation, or communication among the several 
        States, or between any foreign country and any State, 
        or between any State and any place or ship outside 
        thereof.
          (19) ``Interested person'' of another person means--
                  (A) when used with respect to an investment 
                company--
                          (i) any affiliated person of such 
                        company,
                          (ii) any member of the immediate 
                        family of any natural person who is an 
                        affiliated person of such company,
                          (iii) any interested person of any 
                        investment adviser of or principal 
                        underwriter for such company,
                          (iv) any person or partner or 
                        employee of any person who at any time 
                        since the beginning of the last two 
                        completed fiscal years of such company 
                        has acted as legal counsel for such 
                        company,
                          (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, and
                          (vii) 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 
                        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) any affiliated person of such 
                        investment adviser or principal 
                        underwriter,
                          (ii) any member of the immediate 
                        family of any natural person who is an 
                        affiliated person of such investment 
                        advisor or principal underwiter,
                          (iii) any person who knowingly has 
                        any direct or indirect beneficial 
                        interest in, or who is designated as 
                        trustee, executor, or guardian of any 
                        legal interest in, any security issued 
                        either by such investment adviser or 
                        principal underwriter or by a 
                        controlling person of such investment 
                        adviser or principal underwriter,
                          (iv) any person or partner or 
                        employee of any person who at any time 
                        since the beginning of the last two 
                        completed fiscal years of such 
                        investment company has acted as legal 
                        counsel for such investment adviser or 
                        principal underwriter,
                          (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) any investment company 
                                for which the investment 
                                adviser or principal 
                                underwriter serves as such;
                                  (II) any investment company 
                                holding itself out to 
                                investors, for purposes of 
                                investment or investor 
                                services, as a company related 
                                to any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as 
                                such; or
                                  (III) any account over which 
                                the 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) any investment company 
                                for which the investment 
                                adviser or principal 
                                underwriter serves as such;
                                  (II) any investment company 
                                holding itself out to 
                                investors, for purposes of 
                                investment or investor 
                                services, as a company related 
                                to any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as 
                                such; or
                                  (III) any account for which 
                                the investment adviser has 
                                borrowing authority, and
                          (vii) 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 
                        completed fiscal years of such 
                        investment company a material business 
                        or professional relationship with such 
                        investment adviser or principal 
                        underwriter or with the principal 
                        executive officer or any controlling 
                        person of such investment adviser or 
                        principal underwriter.
                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 (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 (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.
          (20) ``Investment adviser'' of an investment company 
        means (A) any person (other than a bona fide officer, 
        director, trustee, member of an advisory board, or 
        employee of such company, as such) who pursuant to 
        contract with such company regularly furnishes advice 
        to such company with respect to the desirability of 
        investing in, purchasing or selling securities or other 
        property, or is empowered to determine what securities 
        or other property shall be purchased or sold by such 
        company, and (B) any other person who pursuant to 
        contract with a person described in clause (A) 
        regularly performs substantially all of the duties 
        undertaken by such person described in clause (A); but 
        does not include (i) a person whose advice is furnished 
        solely through uniform publications distributed to 
        subscribers thereto, (ii) a person who furnishes only 
        statistical and other factual information, advice 
        regarding economic factors and trends, or advice as to 
        occasional transactions in specific securities, but 
        without generally furnishing advice or making 
        recommendations regarding the purchase or sale of 
        securities, (iii) a company furnishing such services at 
        cost to one or more investment companies, insurance 
        companies, or other financial institutions, (iv) any 
        person the character and amount of whose compensation 
        for such services must be approved by a court, or (v) 
        such other persons as the Commission may by rules and 
        regulations or order determine not to be within the 
        intent of this definition.
          (21) ``Investment banker'' means any person engaged 
        in the business of underwriting securities issued by 
        other persons, but does not include an investment 
        company, any person who acts as an underwriter in 
        isolated transactions but not as a part of a regular 
        business, or any person solely by reason of the fact 
        that such person is an underwriter for one or more 
        investment companies.
          (22) ``Issuer'' means every person who issues or 
        proposes to issue any security, or has outstanding any 
        security which it has issued.
          (23) ``Lend'' includes a purchase coupled with an 
        agreement by the vendor to repurchase; ``borrow'' 
        includes a sale coupled with a similar agreement.
          (24) ``Majority-owned subsidiary'' of a person means 
        a company 50 per centum or more of the outstanding 
        voting securities of which are owned by such person, or 
        by a company which, within the meaning of this 
        paragraph, is a majority-owned subsidiary of such 
        person.
          (25) ``Means or instrumentality of interstate 
        commerce'' includes any facility of a national 
        securities exchange.
          (26) ``National securities exchange'' means an 
        exchange registered under section 6 of the Securities 
        Exchange Act of 1934.
          (27) ``Periodic payment plan certificate'' means (A) 
        any certificate, investment contract, or other security 
        providing for a series of periodic payments by the 
        holder, and representing an undivided interest in 
        certain specified securities or in a unit or fund of 
        securities purchased wholly or partly with the proceeds 
        of such payments, and (B) any security the issuer of 
        which is also issuing securities of the character 
        described in clause (A) and the holder of which has 
        substantially the same rights and privileges as those 
        which holders of securities of the character described 
        in clause (A) have upon completing the periodic 
        payments for which such securities provide.
          (28) ``Person'' means a natural person or a company.
          (29) ``Principal underwriter'' of or for any 
        investment company other than a closed-end company, or 
        of any security issued by such a company, means any 
        underwriter who as principal purchases from such 
        company, or pursuant to contract has the right (whether 
        absolute or conditional) from time to time to purchase 
        from such company, any such security for distribution, 
        or who as agent for such company sells or has the right 
        to sell any such security to a dealer or to the public 
        or both, but does not include a dealer who purchases 
        from such company through a principal underwriter 
        acting as agent for such company. ``Principal 
        underwriter'' of or for a closed-end company or any 
        issuer which is not an investment company, or of any 
        security issued by such a company or issuer, means any 
        underwriter who, in connection with a primary 
        distribution of securities, (A) is in privity of 
        contract with the issuer or an affiliated person of the 
        issuer; (B) acting alone or in concert with one or more 
        other persons, initiates or directs the formation of an 
        underwriting syndicate; or (C) is allowed a rate of 
        gross commission, spread, or other profit greater than 
        the rate allowed another underwriter participating in 
        the distribution.
          (30) ``Promoter'' of a company or a proposed company 
        means a person who, acting alone or in concert with 
        other persons, is initiating or directing, or has 
        within one year initiated or directed, the organization 
        of such company.
          (31) ``Prospectus'', as used in section 22, means a 
        written prospectus intended to meet the requirements of 
        section 10(a) of the Securities Act of 1933 and 
        currently in use. As used elsewhere, ``prospectus'' 
        means a prospectus as defined in the Securities Act of 
        1933.
          (32) ``Redeemable security'' means any security, 
        other than short-term paper, under the terms of which 
        the holder, upon its presentation to the issuer or to a 
        person designated by the issuer, is entitled (whether 
        absolutely or only out of surplus) to receive 
        approximately his proportionate share of the issuer's 
        current net assets, or the cash equivalent thereof.
          (33) ``Reorganization'' means (A) a reorganization 
        under the supervision of a court of competent 
        jurisdiction; (B) a merger or consolidation; (C) a sale 
        of 75 per centum or more in value of the assets of a 
        company; (D) a restatement of the capital of a company, 
        or an exchange of securities issued by a company for 
        any of its own outstanding securities; (E) a voluntary 
        dissolution or liquidation of a company; (F) a 
        recapitalization or other procedure or transaction 
        which has for its purpose the alteration, modification, 
        or elimination of any of the rights, preferences, or 
        privileges of any class of securities issued by a 
        company, as provided in its charter or other instrument 
        creating or defining such rights, preferences, and 
        privileges; (G) an exchange of securities issued by a 
        company for outstanding securities issued by another 
        company or companies, preliminary to and for the 
        purpose of effecting or consummating any of the 
        foregoing; or (H) any exchange of securities by a 
        company which is not an investment company for 
        securities issued by a registered investment company.
          (34) ``Sale'', ``sell'', ``offer to sell'', or 
        ``offer for sale'' includes every contract of sale or 
        disposition of, attempt or offer to dispose of, or 
        solicitation of an offer to buy, a security or interest 
        in a security, for value. Any security given or 
        delivered with, or as a bonus on account of, any 
        purchase of securities or any other thing, shall be 
        conclusively presumed to constitute a part of the 
        subject of such purchase and to have been sold for 
        value.
          (35) ``Sales load'' means the difference between the 
        price of a security to the public and that portion of 
        the proceeds from its sale which is received and 
        invested or held for investment by the issuer (or in 
        the case of a unit investment trust, by the depositor 
        or trustee), less any portion of such difference 
        deducted for trustee's or custodian's fee, insurance 
        premiums, issue taxes, or administrative expenses or 
        fees which are not properly chargeable to sales or 
        promotional activities. In the case of a periodic 
        payment plan certificate, ``sales load'' includes the 
        sales load on any investment company securities in 
        which the payments made on such certificate are 
        invested, as well as the sales load on the certificate 
        itself.
          (36) ``Security'' means any note, stock, treasury 
        stock, security future, bond, debenture, evidence of 
        indebtedness, certificate of interest or participation 
        in any profit-sharing agreement, collateral-trust 
        certificate, preorganization certificate or 
        subsciption, transferable share, investment contract, 
        voting-trust certificate, certificate of deposit for a 
        security, fractional undivided interest in oil, gas, or 
        other mineral rights, any put, call, straddle, option, 
        or privilege on any security (including a certificate 
        of deposit) or on any group or index of securities 
        (including any interest therein or based on the value 
        thereof), or any put, call, straddle, option, or 
        privilege entered into on a national securities 
        exchange relating to foreign currency, or, in general, 
        any interest or instrument commonly known as a 
        ``security'', or any certificate of interest or 
        participation in, temporary or interim certificate for, 
        receipt for, guarantee of, or warrant or right to 
        subscribe to or purchase, any of the foregoing.
          (37) ``Separate account'' means an account 
        established and maintained by an insurance company 
        pursuant to the laws of any State or territory of the 
        United States, or of Canada or any province thereof, 
        under which income, gains and losses, whether or not 
        realized, from assets allocated to such account, are, 
        in accordance with the applicable contract, credited to 
        or charged against such account without regard to other 
        income, gains, or losses of the insurance company.
          (38) ``Short-term paper'' means any note, draft, bill 
        of exchange, or banker's acceptance payable on demand 
        or having a maturity at the time of issuance of not 
        exceeding nine months, exclusive of days of grace, or 
        any renewal thereof payable on demand or having a 
        maturity likewise limited; and such other classes of 
        securities, of a commercial rather than an investment 
        character, as the Commission may designate by rules and 
        regulations.
          (39) ``State'' means any State of the United States, 
        the District of Columbia, Puerto Rico, the Virgin 
        Islands, or any other possession of the United States.
          (40) ``Underwriter'' means any person who has 
        purchased from an issuer with a view to, or sells for 
        an issuer in connection with, the distribution of any 
        security, or participates or has a direct or indirect 
        participation in any such undertaking, or participates 
        or has a participation in the direct or indirect 
        underwriting of any such undertaking; but such term 
        shall not include a person whose interest is limited to 
        a commission from an underwriter or dealer not in 
        excess of the usual and customary distributor's or 
        seller's commission. As used in this paragraph the term 
        ``issuer'' shall include, in addition to an issuer, any 
        person directly or indirectly controlling or controlled 
        by the issuer, or any person under direct or indirect 
        common control with the issuer. When the distribution 
        of the securities in respect of which any person is an 
        underwriter is completed such person shall cease to be 
        an underwriter in respect of such securities or the 
        issuer thereof.
          (41) ``Value'', with respect to assets of registered 
        investment companies, except as provided in subsection 
        (b) of section 28 of this title, means--
                  (A) as used in sections 3, 5, and 12 of this 
                title, (i) with respect to securities owned at 
                the end of the last preceding fiscal quarter 
                for which market quotations are readily 
                available, the market value at the end of such 
                quarter; (ii) with respect to other securities 
                and assets owned at the end of the last 
                preceding fiscal quarter, fair value at the end 
                of such quarter, as determined in good faith by 
                the board of directors; and (iii) with respect 
                to securities and other assets acquired after 
                the end of the last preceding fiscal quarter, 
                the cost thereof; and
                  (B) as used elsewhere in this title, (i) with 
                respect to securities for which market 
                quotations are readily available, the market 
                value of such securities; and (ii) with respect 
                to other securities and assets, fair value as 
                determined in good faith by the board of 
                directors;
        in each case as of such time or times as determined 
        pursuant to this title, and the rules and regulations 
        issued by the Commission hereunder. Notwithstanding the 
        fact that market quotations for securities issued by 
        controlled companies are available, the board of 
        directors may in good faith determine the value of such 
        securities: Provided, That the value so determined is 
        not in excess of the higher of market value or asset 
        value of such securities in the case of majority-owned 
        subsidiaries, and is not in excess of market value in 
        the case of other controlled companies.
                  
  For purposes of the valuation of those assets of a registered 
diversified company which are not subject to the limitations 
provided for in section 5(b)(1), the Commission may, by rules 
and regulations or orders, permit any security to be carried at 
cost, if it shall determine that such procedure is consistent 
with the general intent and purposes of this title. For 
purposes of sections 5 and 12, in lieu of values determined as 
provided in clause (A) above, the Commission shall by rules and 
regulations permit valuation of securities at cost or other 
basis in cases where it may be more convenient for such company 
to make its computations on such basis by reason of the 
necessity or desirability of complying with the provisions of 
any United States revenue laws or rules and regulations issued 
thereunder, or the laws or the rules and regulations issued 
thereunder of any State in which the securities of such company 
may be qualified for sale.
  The foregoing definition shall not derogate from the 
authority of the Commission with respect to the reports, 
information, and documents to be filed with the Commission by 
any registered company, or with respect to the accounting 
policies and principles to be following by any such company, as 
provided in sections 8, 30, and 31.
          (42) ``Voting security'' means any security presently 
        entitling the owner or holder thereof to vote for the 
        election of directors of a company. A specified 
        percentage of the outstanding voting securities of a 
        company means such amount of its outstanding voting 
        securities as entitles the holder or holders thereof to 
        cast said specified percentage of the aggregate votes 
        which the holders of all the outstanding voting 
        securities of such company are entitled to cast. The 
        vote of a majority of the outstanding voting securities 
        of a company means the vote, at the annual or a special 
        meeting of the security holders of such company duly 
        called, (A) of 67 per centum or more of the voting 
        securities present at such meeting, if the holders of 
        more than 50 per centum of the outstanding voting 
        securities of such company are present or represented 
        by proxy; or (B) of more than 50 per centum of the 
        outstanding voting securities of such company, 
        whichever is the less.
          (43) ``Wholly-owned subsidiary'' of a person means a 
        company 95 per centum or more of the outstanding voting 
        securities of which are owned by such person, or by a 
        company which, within the meaning of this paragraph, is 
        a wholly-owned subsidiary of such person.
          (44) ``Securities Act of 1933'', ``Securities 
        Exchange Act of 1934'', and ``Trust Indenture Act of 
        1939'' means those Acts, respectively, as heretofore or 
        hereafter amended.
          (45) ``Savings and loan association'' means a savings 
        and loan association, building and loan association, 
        cooperative bank, homestead association, or similar 
        institution, which is supervised and examined by State 
        or Federal authority having supervision over any such 
        institution, and a receiver, conservator, or other 
        liquidating agent of any such institution.
          (46) ``Eligible portfolio company'' means any issuer 
        which--
                  (A) is organized under the laws of, and has 
                its principal place of business in, any State 
                or States;
                  (B) is neither an investment company as 
                defined in section 3 (other than a small 
                business investment company which is licensed 
                by the Small Business Administration to operate 
                under the Small Business Investment Act of 1958 
                and which is a wholly-owned subsidiary of the 
                business development company) nor a company 
                which would be an investment company except for 
                the exclusion from the definition of investment 
                company in section 3(c) (unless it is described 
                in paragraph (2), (3), (4), (5), (6), or (9) of 
                such section); and
                  (C) satisfies one of the following:
                          (i) it does not have any class of 
                        securities with respect to which a 
                        member of a national securities 
                        exchange, broker, or dealer may extend 
                        or maintain credit to or for a customer 
                        pursuant to rules or regulations 
                        adopted by the Board of Governors of 
                        the Federal Reserve System under 
                        section 7 of the Securities Exchange 
                        Act of 1934;
                          (ii) it is controlled by a business 
                        development company, either alone or as 
                        part of a group acting together, and 
                        such business development company in 
                        fact exercises a controlling influence 
                        over the management or policies of such 
                        eligible portfolio company and, as a 
                        result of such control, has an 
                        affiliated person who is a director of 
                        such eligible portfolio company;
                          (iii) it has total assets of not more 
                        than $4,000,000, and capital and 
                        surplus (shareholders' equity less 
                        retained earnings) of not less than 
                        $2,000,000, except that the Commission 
                        may adjust such amounts by rule, 
                        regulation, or order to reflect changes 
                        in 1 or more generally accepted indices 
                        or other indicators for small 
                        businesses; or
                          (iv) it meets such other criteria as 
                        the Commission may, by rule, establish 
                        as consistent with the public interest, 
                        the protection of investors, and the 
                        purposes fairly intended by the policy 
                        and provisions of this title.
          (47) ``Making available significant managerial 
        assistance'' by a business development company means--
                  (A) any arrangement whereby a business 
                development company, through its directors, 
                officers, employees, or general partners, 
                offers to provide, and, if accepted, does so 
                provide, significant guidance and counsel 
                concerning the management, operations, or 
                business objectives and policies of a portfolio 
                company;
                  (B) the exercise by a business development 
                company of a controlling influence over the 
                management or policies of a portfolio company 
                by the business development company acting 
                individually or as part of a group acting 
                together which controls such portfolio company; 
                or
                  (C) with respect to a small business 
                investment company licensed by the Small 
                Business Administration to operate under the 
                Small Business Investment Act of 1958, the 
                making of loans to a portfolio company.
        For purposes of subparagraph (A), the requirement that 
        a business development company make available 
        significant managerial assistance shall be deemed to be 
        satisfied with respect to any particular portfolio 
        company where the business development company 
        purchases securities of such portfolio company in 
        conjunction with one or more other persons acting 
        together, and at least one of the persons in the group 
        makes available significant managerial assistance to 
        such portfolio company, except that such requirement 
        will not be deemed to be satisfied if the business 
        development company, in all cases, makes available 
        significant managerial assistance solely in the manner 
        described in this sentence.
          (48) ``Business development company'' means any 
        closed-end company which--
                  (A) is organized under the laws of, and has 
                its principal place of business in, any State 
                or States;
                  (B) is operated for the purpose of making 
                investments in securities described in 
                paragraphs (1) through (3) of section 55(a), 
                and makes available significant managerial 
                assistance with respect to the issuers of such 
                securities, provided that a business 
                development company must make available 
                significant managerial assistance only with 
                respect to the companies which are treated by 
                such business development company as satisfying 
                the 70 per centum of the value of its total 
                assets condition of section 55; and provided 
                further that a business development company 
                need not make available significant managerial 
                assistance with respect to any company 
                described in paragraph (46)(C)(iii), or with 
                respect to any other company that meets such 
                criteria as the Commission may by rule, 
                regulation, or order permit, as consistent with 
                the public interest, the protection of 
                investors, and the purposes of this title; and
                  (C) has elected pursuant to section 54(a) to 
                be subject to the provisions of sections 55 
                through 65.
          (49) ``Foreign securities authority'' means any 
        foreign government or any governmental body or 
        regulatory organization empowered by a foreign 
        government to administer or enforce its laws as they 
        relate to securities matters.
          (50) ``Foreign financial regulatory authority'' means 
        any (A) foreign securities authority, (B) other 
        governmental body or foreign equivalent of a self-
        regulatory organization empowered by a foreign 
        government to administer or enforce its laws relating 
        to the regulation of fiduciaries, trusts, commercial 
        lending, insurance, trading in contracts of sale of a 
        commodity for future delivery, or other instruments 
        traded on or subject to the rules of a contract market, 
        board of trade or foreign equivalent, or other 
        financial activities, or (C) membership organization a 
        function of which is to regulate the participation of 
        its members in activities listed above.
          (51)(A) ``Qualified purchaser'' means--
                  (i) any natural person (including any person 
                who holds a joint, community property, or other 
                similar shared ownership interest in an issuer 
                that is excepted under section 3(c)(7) with 
                that person's qualified purchaser spouse) who 
                owns not less than $5,000,000 in investments, 
                as defined by the Commission;
                  (ii) any company that owns not less than 
                $5,000,000 in investments and that is owned 
                directly or indirectly by or for 2 or more 
                natural persons who are related as siblings or 
                spouse (including former spouses), or direct 
                lineal descendants by birth or adoption, 
                spouses of such persons, the estates of such 
                persons, or foundations, charitable 
                organizations, or trusts established by or for 
                the benefit of such persons;
                  (iii) any trust that is not covered by clause 
                (ii) and that was not formed for the specific 
                purpose of acquiring the securities offered, as 
                to which the trustee or other person authorized 
                to make decisions with respect to the trust, 
                and each settlor or other person who has 
                contributed assets to the trust, is a person 
                described in clause (i), (ii), or (iv); or
                  (iv) any person, acting for its own account 
                or the accounts of other qualified purchasers, 
                who in the aggregate owns and invests on a 
                discretionary basis, not less than $25,000,000 
                in investments.
          (B) The Commission may adopt such rules and 
        regulations applicable to the persons and trusts 
        specified in clauses (i) through (iv) of subparagraph 
        (A) as it determines are necessary or appropriate in 
        the public interest or for the protection of investors.
          (C) The term ``qualified purchaser'' does not include 
        a company that, but for the exceptions provided for in 
        paragraph (1) or (7) of section 3(c), would be an 
        investment company (hereafter in this paragraph 
        referred to as an ``excepted investment company''), 
        unless all beneficial owners of its outstanding 
        securities (other than short-term paper), determined in 
        accordance with section 3(c)(1)(A), that acquired such 
        securities on or before April 30, 1996 (hereafter in 
        this paragraph referred to as ``pre-amendment 
        beneficial owners''), and all pre-amendment beneficial 
        owners of the outstanding securities (other than short-
        term paper) of any excepted investment company that, 
        directly or indirectly, owns any outstanding securities 
        of such excepted investment company, have consented to 
        its treatment as a qualified purchaser. Unanimous 
        consent of all trustees, directors, or general partners 
        of a company or trust referred to in clause (ii) or 
        (iii) of subparagraph (A) shall constitute consent for 
        purposes of this subparagraph.
          (52) The terms ``security future'' and ``narrow-based 
        security index'' have the same meanings as provided in 
        section 3(a)(55) of the Securities Exchange Act of 
        1934.
          (53) The term ``credit rating agency'' has the same 
        meaning as in section 3 of the Securities Exchange Act 
        of 1934.
          (54) The terms ``commodity pool'', ``commodity pool 
        operator'', ``commodity trading advisor'', ``major swap 
        participant'', ``swap'', ``swap dealer'', and ``swap 
        execution facility'' have the same meanings as in 
        section 1a of the Commodity Exchange Act (7 U.S.C. 
        1a).''.
  (b) No provision in this title shall apply to, or be deemed 
to include, the United States, a State, or any political 
subdivision of a State, or any agency, authority, or 
instrumentality of any one or more of the foregoing, or any 
corporation which is wholly owned directly or indirectly by any 
one or more of the foregoing, or any officer, agent, or 
employee of any of the foregoing acting as such in the course 
of his official duty, unless such provision makes specific 
reference thereto.
  (c) Consideration of Promotion of Efficiency, Competition, 
and Capital Formation.--Whenever pursuant to this title the 
Commission is engaged in rulemaking and is required to consider 
or determine whether an action is consistent with the public 
interest, the Commission shall also consider, in addition to 
the protection of investors, whether the action will promote 
efficiency, competition, and capital formation.

                    definition of investment company

  Sec. 3. (a)(1) When used in this title, ``investment 
company'' means any issuer which--
          (A) is or holds itself out as being engaged 
        primarily, or proposes to engage primarily, in the 
        business of investing, reinvesting, or trading in 
        securities;
          (B) is engaged or proposes to engage in the business 
        of issuing face-amount certificates of the installment 
        type, or has been engaged in such business and has any 
        such certificate outstanding; or
          (C) is engaged or proposes to engage in the business 
        of investing, reinvesting, owning, holding, or trading 
        in securities, and owns or proposes to acquire 
        investment securities having a value exceeding 40 per 
        centum of the value of such issuer's total assets 
        (exclusive of Government securities and cash items) on 
        an unconsolidated basis.
  (2) As used in this section, ``investment securities'' 
includes all securities except (A) Government securities, (B) 
securities issued by employees' securities companies, and (C) 
securities issued by majority-owned subsidiaries of the owner 
which (i) are not investment companies, and (ii) are not 
relying on the exception from the definition of investment 
company in paragraph (1) or (7) of subsection (c).
  (b) Notwithstanding paragraph (1)(C) of subsection (a), none 
of the following persons is an investment company within the 
meaning of this title:
          (1) Any issuer primarily engaged, directly or through 
        a wholly-owned subsidiary or subsidiaries, in a 
        business or businesses other than that of investing, 
        reinvesting, owning, holding, or trading in securities.
          (2) Any issuer which the Commission, upon application 
        by such issuer, finds and by order declares to be 
        primarily engaged in a business or businesses other 
        than that of investing, reinvesting, owning, holding, 
        or trading in securities either directly or (A) through 
        majority-owned subsidiaries or (B) through controlled 
        companies conducting similar types of businesses. The 
        filing of an application under this paragraph in good 
        faith by an issuer other than a registered investment 
        company shall exempt the applicant for a period of 
        sixty days from all provisions of this title applicable 
        to investment companies as such. For cause shown, the 
        Commission by order may extend such period of exemption 
        for an additional period or periods. Whenever the 
        Commission, upon its own motion or upon application, 
        finds that the circumstances which gave rise to the 
        issuance of an order granting an application under this 
        paragraph no longer exist, the Commission shall by 
        order revoke such order.
          (3) Any issuer all the outstanding securities of 
        which (other than short-term paper and directors' 
        qualifying shares) are directly or indirectly owned by 
        a company excepted from the definition of investment 
        company by paragraph (1) or (2) of this subsection.
  (c) Notwithstanding subsection (a), none of the following 
persons is an investment company within the meaning of this 
title:
          (1) Any issuer whose outstanding securities (other 
        than short-term paper) are beneficially owned by not 
        more than one hundred persons (or, with respect to a 
        qualifying venture capital fund, 500 persons) and which 
        is not making and does not presently propose to make a 
        public offering of its securities. Such issuer shall be 
        deemed to be an investment company for purposes of the 
        limitations set forth in subparagraphs (A)(i) and 
        (B)(i) of section 12(d)(1) governing the purchase or 
        other acquisition by such issuer of any security issued 
        by any registered investment company and the sale of 
        any security issued by any registered open-end 
        investment company to any such issuer. For purposes of 
        this paragraph:
                  (A) Beneficial ownership by a company shall 
                be deemed to be beneficial ownership by one 
                person, except that, if the company owns 10 per 
                centum or more of the outstanding voting 
                securities of the issuer, and is or, but for 
                the exception provided for in this paragraph or 
                paragraph (7), would be an investment company, 
                the beneficial ownership shall be deemed to be 
                that of the holders of such company's 
                outstanding securities (other than short-term 
                paper).
                  (B) Beneficial ownership by any person who 
                acquires securities or interests in securities 
                of an issuer described in the first sentence of 
                this paragraph shall be deemed to be beneficial 
                ownership by the person from whom such transfer 
                was made, pursuant to such rules and 
                regulations as the Commission shall prescribe 
                as necessary or appropriate in the public 
                interest and consistent with the protection of 
                investors and the purposes fairly intended by 
                the policy and provisions of this title, where 
                the transfer was caused by legal separation, 
                divorce, death, or other involuntary event.
                  (C) The term ``qualifying venture capital 
                fund'' means any venture capital fund (as 
                defined pursuant to section 203(l)(1) of the 
                Investment Advisers Act of 1940 (15 U.S.C. 80b-
                3(l)(1)) with no more than $50,000,000 in 
                aggregate capital contributions and uncalled 
                committed capital, as such dollar amount is 
                annually adjusted by the Commission to reflect 
                the change in the Consumer Price Index for All 
                Urban Consumers published by the Bureau of 
                Labor Statistics of the Department of Labor.
          (2)(A) Any person primarily engaged in the business 
        of underwriting and distributing securities issued by 
        other persons, selling securities to customers, acting 
        as broker, and acting as market intermediary, or any 
        one or more of such activities, whose gross income 
        normally is derived principally from such business and 
        related activities.
          (B) For purposes of this paragraph--
                  (i) the term ``market intermediary'' means 
                any person that regularly holds itself out as 
                being willing contemporaneously to engage in, 
                and that is regularly engaged in, the business 
                of entering into transactions on both sides of 
                the market for a financial contract or one or 
                more such financial contracts; and
                  (ii) the term ``financial contract'' means 
                any arrangement that--
                          (I) takes the form of an individually 
                        negotiated contract, agreement, or 
                        option to buy, sell, lend, swap, or 
                        repurchase, or other similar 
                        individually negotiated transaction 
                        commonly entered into by participants 
                        in the financial markets;
                          (II) is in respect of securities, 
                        commodities, currencies, interest or 
                        other rates, other measures of value, 
                        or any other financial or economic 
                        interest similar in purpose or function 
                        to any of the foregoing; and
                          (III) is entered into in response to 
                        a request from a counter party for a 
                        quotation, or is otherwise entered into 
                        and structured to accommodate the 
                        objectives of the counter party to such 
                        arrangement.
          (3) Any bank or insurance company; any savings and 
        loan association, building and loan association, 
        cooperative bank, homestead association, or similar 
        institution, or any receiver, conservator, liquidator, 
        liquidating agent, or similar official or person 
        thereof or therefor; or any common trust fund or 
        similar fund maintained by a bank exclusively for the 
        collective investment and reinvestment of moneys 
        contributed thereto by the bank in its capacity as a 
        trustee, executor, administrator, or guardian, if--
                  (A) such fund is employed by the bank solely 
                as an aid to the administration of trusts, 
                estates, or other accounts created and 
                maintained for a fiduciary purpose;
                  (B) except in connection with the ordinary 
                advertising of the bank's fiduciary services, 
                interests in such fund are not--
                          (i) advertised; or
                          (ii) offered for sale to the general 
                        public; and
                  (C) fees and expenses charged by such fund 
                are not in contravention of fiduciary 
                principles established under applicable Federal 
                or State law.
          (4) Any person substantially all of whose business is 
        confined to making small loans, industrial banking, or 
        similar businesses.
          (5) Any person who is not engaged in the business of 
        issuing redeemable securities, face-amount certificates 
        of the installment type or periodic payment plan 
        certificates, and who is primarily engaged in one or 
        more of the following businesses: (A) Purchasing or 
        otherwise acquiring notes, drafts, acceptances, open 
        accounts receivable, and other obligations representing 
        part or all of the sales price of merchandise, 
        insurance, and services; (B) making loans to 
        manufacturers, wholesalers, and retailers of, and to 
        prospective purchasers of, specified merchandise, 
        insurance, and services; and (C) purchasing or 
        otherwise acquiring mortgages and other liens on and 
        interests in real estate.
          (6) Any company primarily engaged, directly or 
        through majority-owned subsidiaries, in one or more of 
        the businesses described in paragraphs (3), (4), and 
        (5), or in one or more of such businesses (from which 
        not less than 25 centum of such company's gross income 
        during its last fiscal year was derived) together with 
        an additional business or businesses other than 
        investing, reinvesting, owning, holding, or trading in 
        securities.
          (7)(A) Any issuer, the outstanding securities of 
        which are owned exclusively by persons who, at the time 
        of acquisition of such securities, are qualified 
        purchasers, and which is not making and does not at 
        that time propose to make a public offering of such 
        securities. Securities that are owned by persons who 
        received the securities from a qualified purchaser as a 
        gift or bequest, or in a case in which the transfer was 
        caused by legal separation, divorce, death, or other 
        involuntary event, shall be deemed to be owned by a 
        qualified purchaser, subject to such rules, 
        regulations, and orders as the Commission may prescribe 
        as necessary or appropriate in the public interest or 
        for the protection of investors.
          (B) Notwithstanding subparagraph (A), an issuer is 
        within the exception provided by this paragraph if--
                  (i) in addition to qualified purchasers, 
                outstanding securities of that issuer are 
                beneficially owned by not more than 100 persons 
                who are not qualified purchasers, if--
                          (I) such persons acquired any portion 
                        of the securities of such issuer on or 
                        before September 1, 1996; and
                          (II) at the time at which such 
                        persons initially acquired the 
                        securities of such issuer, the issuer 
                        was excepted by paragraph (1); and
                  (ii) prior to availing itself of the 
                exception provided by this paragraph--
                          (I) such issuer has disclosed to each 
                        beneficial owner, as determined under 
                        paragraph (1), that future investors 
                        will be limited to qualified 
                        purchasers, and that ownership in such 
                        issuer is no longer limited to not more 
                        than 100 persons; and
                          (II) concurrently with or after such 
                        disclosure, such issuer has provided 
                        each beneficial owner, as determined 
                        under paragraph (1), with a reasonable 
                        opportunity to redeem any part or all 
                        of their interests in the issuer, 
                        notwithstanding any agreement to the 
                        contrary between the issuer and such 
                        persons, for that person's 
                        proportionate share of the issuer's net 
                        assets.
          (C) Each person that elects to redeem under 
        subparagraph (B)(ii)(II) shall receive an amount in 
        cash equal to that person's proportionate share of the 
        issuer's net assets, unless the issuer elects to 
        provide such person with the option of receiving, and 
        such person agrees to receive, all or a portion of such 
        person's share in assets of the issuer. If the issuer 
        elects to provide such persons with such an 
        opportunity, disclosure concerning such opportunity 
        shall be made in the disclosure required by 
        subparagraph (B)(ii)(I).
          (D) An issuer that is excepted under this paragraph 
        shall nonetheless be deemed to be an investment company 
        for purposes of the limitations set forth in 
        subparagraphs (A)(i) and (B)(i) of section 12(d)(1) 
        relating to the purchase or other acquisition by such 
        issuer of any security issued by any registered 
        investment company and the sale of any security issued 
        by any registered open-end investment company to any 
        such issuer.
          (E) For purposes of determining compliance with this 
        paragraph and paragraph (1), an issuer that is 
        otherwise excepted under this paragraph and an issuer 
        that is otherwise excepted under paragraph (1) shall 
        not be treated by the Commission as being a single 
        issuer for purposes of determining whether the 
        outstanding securities of the issuer excepted under 
        paragraph (1) are beneficially owned by not more than 
        100 persons or whether the outstanding securities of 
        the issuer excepted under this paragraph are owned by 
        persons that are not qualified purchasers. Nothing in 
        this subparagraph shall be construed to establish that 
        a person is a bona fide qualified purchaser for 
        purposes of this paragraph or a bona fide beneficial 
        owner for purposes of paragraph (1).
          (9) Any person substantially all of whose business 
        consists of owning or holding oil, gas, or other 
        mineral royalties or leases, or fractional interests 
        therein, or certificates of interest or participation 
        in or investment contracts relative to such royalties, 
        leases, or fractional interests.
          (10)(A) Any company organized and operated 
        exclusively for religious, educational, benevolent, 
        fraternal, charitable, or reformatory purposes--
                  (i) no part of the net earnings of which 
                inures to the benefit of any private 
                shareholder or individual; or
                  (ii) which is or maintains a fund described 
                in subparagraph (B).
          (B) For the purposes of subparagraph (A)(ii), a fund 
        is described in this subparagraph if such fund is a 
        pooled income fund, collective trust fund, collective 
        investment fund, or similar fund maintained by a 
        charitable organization exclusively for the collective 
        investment and reinvestment of one or more of the 
        following:
                  (i) assets of the general endowment fund or 
                other funds of one or more charitable 
                organizations;
                  (ii) assets of a pooled income fund;
                  (iii) assets contributed to a charitable 
                organization in exchange for the issuance of 
                charitable gift annuities;
                  (iv) assets of a charitable remainder trust 
                or of any other trust, the remainder interests 
                of which are irrevocably dedicated to any 
                charitable organization;
                  (v) assets of a charitable lead trust;
                  (vi) assets of a trust, the remainder 
                interests of which are revocably dedicated to 
                or for the benefit of 1 or more charitable 
                organizations, if the ability to revoke the 
                dedication is limited to circumstances 
                involving--
                          (I) an adverse change in the 
                        financial circumstances of a settlor or 
                        an income beneficiary of the trust;
                          (II) a change in the identity of the 
                        charitable organization or 
                        organizations having the remainder 
                        interest, provided that the new 
                        beneficiary is also a charitable 
                        organization; or
                          (III) both the changes described in 
                        subclauses (I) and (II);
                  (vii) assets of a trust not described in 
                clauses (i) through (v), the remainder 
                interests of which are revocably dedicated to a 
                charitable organization, subject to 
                subparagraph (C); or
                  (viii) such assets as the Commission may 
                prescribe by rule, regulation, or order in 
                accordance with section 6(c).
          (C) A fund that contains assets described in clause 
        (vii) of subparagraph (B) shall be excluded from the 
        definition of an investment company for a period of 3 
        years after the date of enactment of this subparagraph, 
        but only if--
                  (i) such assets were contributed before the 
                date which is 60 days after the date of 
                enactment of this subparagraph; and
                  (ii) such assets are commingled in the fund 
                with assets described in one or more of clauses 
                (i) through (vi) and (viii) of subparagraph 
                (B).
          (D) For purposes of this paragraph--
                  (i) a trust or fund is ``maintained'' by a 
                charitable organization if the organization 
                serves as a trustee or administrator of the 
                trust or fund or has the power to remove the 
                trustees or administrators of the trust or fund 
                and to designate new trustees or 
                administrators;
                  (ii) the term ``pooled income fund'' has the 
                same meaning as in section 642(c)(5) of the 
                Internal Revenue Code of 1986;
                  (iii) the term ``charitable organization'' 
                means an organization described in paragraphs 
                (1) through (5) of section 170(c) or section 
                501(c)(3) of the Internal Revenue Code of 1986;
                  (iv) the term ``charitable lead trust'' means 
                a trust described in section 170(f)(2)(B), 
                2055(e)(2)(B), or 2522(c)(2)(B) of the Internal 
                Revenue Code of 1986;
                  (v) the term ``charitable remainder trust'' 
                means a charitable remainder annuity trust or a 
                charitable remainder unitrust, as those terms 
                are defined in section 664(d) of the Internal 
                Revenue Code of 1986; and
                  (vi) the term ``charitable gift annuity'' 
                means an annuity issued by a charitable 
                organization that is described in section 
                501(m)(5) of the Internal Revenue Code of 1986.
          (11) Any employee's stock bonus, pension, or profit-
        sharing trust which meets the requirements for 
        qualification under section 401 of the Internal Revenue 
        Code of 1986; or any governmental plan described in 
        section 3(a)(2)(C) of the Securities Act of 1933; or 
        any collective trust fund maintained by a bank 
        consisting solely of assets of one or more of such 
        trusts, government plans, or church plans, companies or 
        accounts that are excluded from the definition of an 
        investment company under paragraph (14) of this 
        subsection; or any separate account the assets of which 
        are derived solely from (A) contributions under pension 
        or profit-sharing plans which meet the requirements of 
        section 401 of the Internal Revenue Code of 1986 or the 
        requirements for deduction of the employer's 
        contribution under section 404(a)(2) of such Code, (B) 
        contributions under governmental plans in connection 
        with which interests, participations, or securities are 
        exempted from the registration provisions of section 5 
        of the Securities Act of 1933 by section 3(a)(2)(C) of 
        such Act, and (C) advances made by an insurance company 
        in connection with the operation of such separate 
        account.
          (12) Any voting trust the assets of which consist 
        exclusively of securities of a single issuer which is 
        not an investment company.
          (13) Any security holders' protective committee or 
        similar issuer having outstanding and issuing no 
        securities other than certificates of deposit and 
        short-term paper.
          (14) Any church plan described in section 414(e) of 
        the Internal Revenue Code of 1986, if, under any such 
        plan, no part of the assets may be used for, or 
        diverted to, purposes other than the exclusive benefit 
        of plan participants or beneficiaries, or any company 
        or account that is--
                  (A) established by a person that is eligible 
                to establish and maintain such a plan under 
                section 414(e) of the Internal Revenue Code of 
                1986; and
                  (B) substantially all of the activities of 
                which consist of--
                          (i) managing or holding assets 
                        contributed to such church plans or 
                        other assets which are permitted to be 
                        commingled with the assets of church 
                        plans under the Internal Revenue Code 
                        of 1986; or
                          (ii) administering or providing 
                        benefits pursuant to church plans.

           *       *       *       *       *       *       *


                               exemptions

  Sec. 6. (a) The following investment companies are exempt 
from the provisions of this title:
          (1) Any company organized or otherwise created under 
        the laws of and having its principal office and place 
        of business in Puerto Rico, the Virgin Islands, or any 
        other possession of the United States; but such 
        exemption shall terminate if any security of which such 
        company is the issuer is offered for sale or sold after 
        the effective date of this title, by such company or an 
        underwriter therefor, to a resident of any State other 
        than the State in which such company is organized.
          (2) Any company which since the effective date of 
        this title or within five years prior to such date has 
        been reorganized under the supervision of a court of 
        competent jurisdiction, if (A) such company was not an 
        investment company at the commencement of such 
        reorganization proceedings, (B) at the conclusion of 
        such proceedings all outstanding securities of such 
        company were owned by creditors of such company or by 
        persons to whom such securities were issued on account 
        of creditors' claims, and (C) more than 50 per centum 
        of the voting securities of such company, and 
        securities representing more than 50 per centum of the 
        net asset value of such company, are currently owned 
        beneficially by not more than twenty-five persons; but 
        such exemption shall terminate if any security of which 
        such company is the issuer is offered for sale or sold 
        to the public after the conclusion of such proceedings 
        by the issuer or by or through any underwriter. For the 
        purposes of this paragraph, any new company organized 
        as part of the reorganization shall be deemed the same 
        company as its predecessor; and beneficial ownership 
        shall be determined in the manner provided in section 
        3(c)(1).
          (3) Any issuer as to which there is outstanding a 
        writing filed with the Commission by the Federal 
        Savings and Loan Insurance Corporation stating that 
        exemption of such issuer from the provisions of this 
        title is consistent with the public interest and the 
        protection of investors and is necessary or appropriate 
        by reason of the fact that such issuer holds or 
        proposes to acquire any assets or any product of any 
        assets which have been segregated (A) from assets of 
        any company which at the filing of such writing is an 
        insured institution within the meaning of section 
        401(a) of the National Housing Act, as heretofore or 
        hereafter amended, or (B) as a part of or in connection 
        with any plan for or condition to the insurance of 
        accounts of any company by said corporation or the 
        conversion of any company into a Federal savings and 
        loan association. Any such writing shall expire when 
        canceled by a writing similarly filed or at the 
        expiration of two years after the date of its filing, 
        whichever first occurs; but said corporation may, 
        nevertheless, before, at, or after the expiration of 
        any such writing file another writing or writings with 
        respect to such issuer.
          (4) Any company which prior to March 15, 1940, was 
        and now is a wholly-owned subsidiary of a registered 
        face-amount certificate company and was prior to said 
        date and now is organized and operating under the 
        insurance laws of any State and subject to supervision 
        and examination by the insurance commissioner thereof, 
        and which prior to March 15, 1940, was and now is 
        engaged, subject to such laws, in business 
        substantially all of which consists of issuing and 
        selling only to residents of such State and investing 
        the proceeds from, securities providing for or 
        representing participations or interests in intangible 
        assets consisting of mortgages or other liens on real 
        estate or notes or bonds secured thereby or in a fund 
        or deposit of mortgages or other liens on real estate 
        or notes or bonds secured thereby or having outstanding 
        such securities so issued and sold.
          (5)(A) Any company that is not engaged in the 
        business of issuing redeemable securities, the 
        operations of which are subject to regulation by the 
        State in which the company is organized under a statute 
        governing entities that provide financial or managerial 
        assistance to enterprises doing business, or proposing 
        to do business, in that State if--
                  (i) the organizational documents of the 
                company state that the activities of the 
                company are limited to the promotion of 
                economic, business, or industrial development 
                in the State through the provision of financial 
                or managerial assistance to enterprises doing 
                business, or proposing to do business, in that 
                State, and such other activities that are 
                incidental or necessary to carry out that 
                purpose;
                  (ii) immediately following each sale of the 
                securities of the company by the company or any 
                underwriter for the company, not less than 80 
                percent of the securities of the company being 
                offered in such sale, on a class-by-class 
                basis, are held by persons who reside or who 
                have a substantial business presence in that 
                State;
                  (iii) the securities of the company are sold, 
                or proposed to be sold, by the company or by 
                any underwriter for the company, solely to 
                accredited investors, as that term is defined 
                in section 2(a)(15) of the Securities Act of 
                1933, or to such other persons that the 
                Commission, as necessary or appropriate in the 
                public interest and consistent with the 
                protection of investors, may permit by rule, 
                regulation, or order; and
                  (iv) the company does not purchase any 
                security issued by an investment company or by 
                any company that would be an investment company 
                except for the exclusions from the definition 
                of the term ``investment company'' under 
                paragraph (1) or (7) of section 3(c), other 
                than--
                          (I) any debt security that meets such 
                        standards of credit-worthiness as the 
                        Commission shall adopt; or
                          (II) any security issued by a 
                        registered open-end investment company 
                        that is required by its investment 
                        policies to invest not less than 65 
                        percent of its total assets in 
                        securities described in subclause (I) 
                        or securities that are determined by 
                        such registered open-end investment 
                        company to be comparable in quality to 
                        securities described in subclause (I).
          (B) Notwithstanding the exemption provided by this 
        paragraph, section 9 (and, to the extent necessary to 
        enforce section 9, sections 38 through 51) shall apply 
        to a company described in this paragraph as if the 
        company were an investment company registered under 
        this title.
          (C) Any company proposing to rely on the exemption 
        provided by this paragraph shall file with the 
        Commission a notification stating that the company 
        intends to do so, in such form and manner as the 
        Commission may prescribe by rule.
          (D) Any company meeting the requirements of this 
        paragraph may rely on the exemption provided by this 
        paragraph upon filing with the Commission the 
        notification required by subparagraph (C), until such 
        time as the Commission determines by order that such 
        reliance is not in the public interest or is not 
        consistent with the protection of investors.
          (E) The exemption provided by this paragraph may be 
        subject to such additional terms and conditions as the 
        Commission may by rule, regulation, or order determine 
        are necessary or appropriate in the public interest or 
        for the protection of investors.
  (b) Upon application by any employees' security company, the 
Commission shall by order exempt such company from the 
provisions of this title and of the rules and regulations 
hereunder, if and to the extent that such exemption is 
consistent with the protection of investors. In determining the 
provisions to which such an order of exemption shall apply, the 
Commission shall give due weight, among other things, to the 
form of organization and the capital structure of such company, 
the persons by whom its voting securities, evidences of 
indebtedness, and other securities are owned and controlled, 
the prices at which securities issued by such company are sold 
and the sales load thereon, the disposition of the proceeds of 
such sales, the character of the securities in which such 
proceeds are invested, and any relationship between such 
company and the issuer of any such security.
  [(c)] [The Commission] (c)  General Exemptive Authority._
          (1) In general._The Commission, by rules and 
        regulations 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 or provisions of this 
        title or of any rule or regulation thereunder, if and 
        to the extent that such exemption is necessary or 
        appropriate in the public interest and consistent with 
        the protection of investors and the purposes fairly 
        intended by the policy and provisions of this title.
          (2) Application process.--
                  (A) In general.--A person who wishes to 
                receive an exemption from the Commission 
                pursuant to paragraph (1) shall file an 
                application with the Commission in such form 
                and manner and containing such information as 
                the Commission may require.
                  (B) Publication; rejection of invalid 
                applications.--
                          (i) In general.--Not later than the 
                        end of the 5-day period beginning on 
                        the date that the Commission receives 
                        an application under subparagraph (A), 
                        the Commission shall either--
                                  (I) publish the application, 
                                including by publication on the 
                                website of the Commission; or
                                  (II) if the Commission 
                                determines that the application 
                                does not comply with the proper 
                                form, manner, or information 
                                requirements described under 
                                subparagraph (A), reject such 
                                application and notify the 
                                applicant of the specific 
                                reasons the application was 
                                rejected.
                          (ii) Failure to publish 
                        application.--If the Commission does 
                        not reject an application under clause 
                        (i)(II), but fails to publish the 
                        application by the end of the time 
                        period specified under clause (i), such 
                        application shall be deemed to have 
                        been published on the date that is the 
                        end of such time period.
          (3) Determination by commission.--
                  (A) In general.--Not later than 45 days after 
                the date that the Commission publishes an 
                application pursuant to paragraph (2)(B), the 
                Commission shall, by order--
                          (i) approve the application;
                          (ii) if the Commission determines 
                        that the application would have been 
                        approved had the applicant provided 
                        additional supporting documentation or 
                        made certain amendments to the 
                        application--
                                  (I) provide the applicant 
                                with the specific additional 
                                supporting documentation or 
                                amendments that the Commission 
                                believes are necessary for the 
                                applicant to provide in order 
                                for the application to be 
                                approved; and
                                  (II) request that the 
                                applicant withdraw the 
                                application and re-submit the 
                                application with such 
                                additional supporting 
                                documentation and amendments; 
                                or
                          (iii) deny the application.
                  (B) Extension of time period.--The Commission 
                may extend the time period described under 
                subparagraph (A) by not more than an additional 
                45 days, if--
                          (i) the Commission determines that a 
                        longer period is appropriate and 
                        publishes the reasons for such 
                        determination; or
                          (ii) the applicant consents to the 
                        longer period.
                  (C) Time period for withdrawal.--If the 
                Commission makes a request under subparagraph 
                (A)(ii) for an applicant to withdraw an 
                application, such application shall be deemed 
                to be denied if the applicant informs the 
                Commission that the applicant will not withdraw 
                the application or if the applicant does not 
                withdraw the application before the end of the 
                30-day period beginning on the date the 
                Commission makes such request.
          (4) Proceedings; notice and hearing.--If an 
        application is denied pursuant to paragraph (3), the 
        Commission shall provide the applicant with--
                  (A) a written explanation for why the 
                application was not approved; and
                  (B) an opportunity for hearing, if requested 
                by the applicant not later than 20 days after 
                the date of such denial, with such hearing to 
                be commenced not later than 30 days after the 
                date of such denial.
          (5) Result of failure to institute or commence 
        proceedings.--An application shall be deemed to have 
        been approved by the Commission, if--
                  (A) the Commission fails to either approve, 
                request the withdrawal of, or deny the 
                application, as required under paragraph 
                (3)(A), within the time period required under 
                paragraph (3)(A), as such time period may have 
                been extended pursuant to paragraph (3)(B); or
                  (B) the applicant requests an opportunity for 
                hearing, pursuant to paragraph (4)(B), but the 
                Commission does not commence such hearing 
                within the time period required under paragraph 
                (4)(B).
          (6) Rulemaking.--Not later than 180 days after the 
        date of enactment of this paragraph, the Commission 
        shall issue rules to carry out this subsection.
  (d) The Commission, by rules and regulations or order, shall 
exempt a closed-end investment company from any or all 
provisions of this title, but subject to such terms and 
conditions as may be necessary or appropriate in the public 
interest or for the protection of investors, if--
          (1) the aggregate sums received by such company from 
        the sale of all its outstanding securities, plus the 
        aggregate offering price of all securities of which 
        such company is the issuer and which it proposes to 
        offer for sale, do not exceed $10,000,000, or such 
        other amount as the Commission may set by rule, 
        regulation, or order;
          (2) no security of which such company is the issuer 
        has been or is proposed to be sold by such company or 
        any underwriter therefor, in connection with a public 
        offering, to any person who is not a resident of the 
        State under the laws of which such company is organized 
        or otherwise created; and
          (3) such exemption is not contrary to the public 
        interest or inconsistent with the protection of 
        investors.
  (e) If, in connection with any rule, regulation, or order 
under this section exempting any investment company from any 
provision of section 7, the Commission deems it necessary or 
appropriate in the public interest or for the protection of 
investors that certain specified provisions of this title 
pertaining to registered investment companies shall be 
applicable in respect of such company, the provisions so 
specified shall apply to such company, and to other persons in 
their transactions and relations with such company, as though 
such company were a registered investment company.
  (f) Any closed-end company which--
          (1) elects to be treated as a business development 
        company pursuant to section 54; or
          (2) would be excluded from the definition of an 
        investment company by section 3(c)(1), except that it 
        presently proposes to make a public offering of its 
        securities as a business development company, and has 
        notified the Commission, in a form and manner which the 
        Commission may, by rule, prescribe, that it intends in 
        good faith to file, within 90 days, a notification of 
        election to become subject to the provisions of 
        sections 55 through 65,
shall be exempt from sections 1 through 53, except to the 
extent provided in sections 59 through 65.

           *       *       *       *       *       *       *


      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, 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, 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
          (3) a company any affiliated person of which is 
        ineligible, by reason of paragraph (1) or (2), to serve 
        or act in the foregoing capacities.
For the purposes of paragraphs (1), (2), and (3) of this 
subsection, the term ``investment adviser'' shall include an 
investment adviser as defined in title II of this Act.
  (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) has willfully made or caused to be made in any 
        registration statement, application or report 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;
          (2) has willfully violated any provision of the 
        Securities Act of 1933, or of the Securities Exchange 
        Act of 1934, or of title II of this Act, or of this 
        title, or of the Commodity Exchange Act, or of any rule 
        or regulation under any of such statutes;
          (3) has willfully aided, abetted, counseled, 
        commanded, induced, or procured the violation by any 
        other person of the Securities Act of 1933, or of the 
        Securities Exchange Act of 1934, or of title II of this 
        Act, or of this title, or of the Commodity Exchange 
        Act, or of any rule or regulation under any of such 
        statutes;
          (4) has been found by a foreign financial regulatory 
        authority to have--
                  (A) made or caused to be made in any 
                application for registration or report required 
                to be filed with a foreign securities 
                authority, or in any proceeding before a 
                foreign securities authority with respect to 
                registration, any statement that was at the 
                time and in 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 a foreign 
                securities authority any material fact that is 
                required to be stated therein;
                  (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
                  (C) aided, abetted, counseled, commanded, 
                induced, or procured the violation by any other 
                person of 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;
          (5) within 10 years has been convicted by a foreign 
        court of competent jurisdiction of a crime, however 
        denominated by the laws of the relevant foreign 
        government, that is substantially equivalent to an 
        offense set forth in paragraph (1) of subsection (a); 
        or
          (6) by reason of any misconduct, is temporarily or 
        permanently enjoined by any foreign court of competent 
        jurisdiction from acting in any of the capacities, set 
        forth in paragraph (2) of subsection (a), or a 
        substantially equivalent foreign capacity, 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.
  (c) Any person who is ineligible, by reason of subsection 
(a), to serve or act in the capacities enumerated in that 
subsection, may file with the Commission an application for an 
exemption from the provisions of that subsection. The 
Commission shall by order grant such application, either 
unconditionally or on an appropriate temporary or other 
conditional basis, if it is established that the prohibitions 
of subsection (a), as applied to such person, are unduly or 
disproportionately severe or that the conduct of such person 
has been such as not to make it against the public interest or 
protection of investors to grant such application.
  (d) Money Penalties in Administrative Proceedings.--
          (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 penalty is 
                in the public interest, and that such person--
                          (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;
                          (ii) has willfully aided, abetted, 
                        counseled, commanded, induced, or 
                        procured such a violation by any other 
                        person; or
                          (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;
                  (B) Cease-and-desist proceedings.--In any 
                proceeding instituted pursuant to subsection 
                (f) against any person, the Commission may 
                impose a civil penalty if the Commission 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 issued under this title; or
                          (ii) is or was a cause of the 
                        violation of any provision of this 
                        title, or any rule or regulation issued 
                        under this title.
          (2) Maximum amount of penalty.--
                  (A) First tier.--The maximum amount of 
                penalty for each act or omission described in 
                paragraph (1) shall be [$5,000] $10,000 for a 
                natural person or [$50,000] $100,000 for any 
                other person.
                  (B) Second tier.--Notwithstanding 
                subparagraph (A), the maximum amount of penalty 
                for each such act or omission shall be 
                [$50,000] $100,000 for a natural person or 
                [$250,000] $500,000 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 
                subparagraphs (A) and (B), the maximum amount 
                of penalty for each such act or omission shall 
                be $100,000 for a natural person or $500,000 
                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.]
                  (C) Third tier.--
                          (i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), the amount 
                        of penalty for each such act or 
                        omission shall not exceed the amount 
                        specified in clause (ii) 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.
                          (ii) Maximum amount of penalty.--The 
                        amount referred to in clause (i) is the 
                        greatest of--
                                  (I) $300,000 for a natural 
                                person or $1,450,000 for any 
                                other person;
                                  (II) 3 times the gross amount 
                                of pecuniary gain to the person 
                                who committed the act or 
                                omission; or
                                  (III) the amount of losses 
                                incurred by victims as a result 
                                of the act or omission.
                  (D) Fourth tier.--Notwithstanding 
                subparagraphs (A), (B), and (C), the maximum 
                amount of penalty for each such act or omission 
                shall be 3 times the otherwise applicable 
                amount in such subparagraphs if, within the 5-
                year period preceding such act or omission, the 
                person who committed the act or omission was 
                criminally convicted for securities fraud or 
                became subject to a judgment or order imposing 
                monetary, equitable, or administrative relief 
                in any Commission action alleging fraud by that 
                person.
          (3) Determination of public interest.--In considering 
        under this section whether a penalty is in the public 
        interest, the Commission may consider--
                  (A) whether the act or omission for which 
                such penalty is assessed involved fraud, 
                deceit, manipulation, or deliberate or reckless 
                disregard of a regulatory requirement;
                  (B) the harm to other persons resulting 
                either directly or indirectly from such act or 
                omission;
                  (C) the extent to which any person was 
                unjustly enriched, taking into account any 
                restitution made to persons injured by such 
                behavior;
                  (D) whether such person previously has been 
                found by the Commission, another appropriate 
                regulatory agency, or a self-regulatory 
                organization to have violated the Federal 
                securities laws, State securities laws, or the 
                rules of a self-regulatory organization, has 
                been enjoined by a court of competent 
                jurisdiction from violations of such laws or 
                rules, or has been convicted by a court of 
                competent jurisdiction of violations of such 
                laws or of any felony or misdemeanor described 
                in section 203(e)(2) of the Investment Advisers 
                Act of 1940;
                  (E) the need to deter such person and other 
                persons from committing such acts or omissions; 
                and
                  (F) such other matters as justice may 
                require.
          (4) 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.
  (e) Authority To Enter an Order Requiring an Accounting and 
Disgorgement.--In any proceeding in which the Commission may 
impose a penalty under this section, the Commission may enter 
an order requiring accounting and disgorgement, including 
reasonable interest. The Commission is authorized to adopt 
rules, regulations, and orders concerning payments to 
investors, rates of interest, periods of accrual, and such 
other matters as it deems appropriate to implement this 
subsection.
  (f) Cease-and-Desist Proceedings.--
          (1) Authority of the commission.--If the Commission 
        finds, after notice and opportunity for hearing, that 
        any person is violating, has violated, or is about to 
        violate any provision of this title, or any rule or 
        regulation thereunder, the Commission may publish its 
        findings and enter an order requiring such person, and 
        any other person that is, was, or would be a cause of 
        the violation, due to an act or omission the person 
        knew or should have known would contribute to such 
        violation, to cease and desist from committing or 
        causing such violation and any future violation of the 
        same provision, rule, or regulation. Such order may, in 
        addition to requiring a person to cease and desist from 
        committing or causing a violation, require such person 
        to comply, or to take steps to effect compliance, with 
        such provision, rule, or regulation, upon such terms 
        and conditions and within such time as the Commission 
        may specify in such order. Any such order may, as the 
        Commission deems appropriate, require future compliance 
        or steps to effect future compliance, either 
        permanently or for such period of time as the 
        Commission may specify, with such provision, rule, or 
        regulation with respect to any security, any issuer, or 
        any other person.
          (2) Hearing.--The notice instituting proceedings 
        pursuant to paragraph (1) shall fix a hearing date not 
        earlier than 30 days nor later than 60 days after 
        service of the notice unless an earlier or a later date 
        is set by the Commission with the consent of any 
        respondent so served.
          (3) Temporary order.--
                  (A) In general.--Whenever the Commission 
                determines that the alleged violation or 
                threatened violation specified in the notice 
                instituting proceedings pursuant to paragraph 
                (1), or the continuation thereof, is likely to 
                result in significant dissipation or conversion 
                of assets, significant harm to investors, or 
                substantial harm to the public interest, 
                including, but not limited to, losses to the 
                Securities Investor Protection Corporation, 
                prior to the completion of the proceeding, the 
                Commission may enter a temporary order 
                requiring the respondent to cease and desist 
                from the violation or threatened violation and 
                to take such action to prevent the violation or 
                threatened violation and to prevent dissipation 
                or conversion of assets, significant harm to 
                investors, or substantial harm to the public 
                interest as the Commission deems appropriate 
                pending completion of such proceedings. Such an 
                order shall be entered only after notice and 
                opportunity for a hearing, unless the 
                Commission, notwithstanding section 40(a) of 
                this title, determines that notice and hearing 
                prior to entry would be impracticable or 
                contrary to the public interest. A temporary 
                order shall become effective upon service upon 
                the respondent and, unless set aside, limited, 
                or suspended by the Commission or a court of 
                competent jurisdiction, shall remain effective 
                and enforceable pending the completion of the 
                proceedings.
                  (B) Applicability.--This paragraph 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, 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.
          (4) Review of temporary orders.--
                  (A) Commission review.--At any time after the 
                respondent has been served with a temporary 
                cease-and-desist order pursuant to paragraph 
                (3), the respondent may apply to the Commission 
                to have the order set aside, limited, or 
                suspended. If the respondent has been served 
                with a temporary cease-and-desist order entered 
                without a prior Commission hearing, the 
                respondent may, within 10 days after the date 
                on which the order was served, request a 
                hearing on such application and the Commission 
                shall hold a hearing and render a decision on 
                such application at the earliest possible time.
                  (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, 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.
                  (C) No automatic stay of temporary order.--
                The commencement of proceedings under 
                subparagraph (B) of this paragraph shall not, 
                unless specifically ordered by the court, 
                operate as a stay of the Commission's order.
                  (D) Exclusive review.--Section 43 of this 
                title shall not apply to a temporary order 
                entered pursuant to this section.
          (5) Authority to enter an order requiring an 
        accounting and disgorgement.--In any cease-and-desist 
        proceeding under subsection (f)(1), the Commission may 
        enter an order requiring accounting and disgorgement, 
        including reasonable interest. The Commission is 
        authorized to adopt rules, regulations, and orders 
        concerning payments to investors, rates of interest, 
        periods of accrual, and such other matters as it deems 
        appropriate to implement this subsection.
  (g) For the purposes of this section, the term ``investment 
adviser'' includes a corporate or other trustee performing the 
functions of an investment adviser.

           *       *       *       *       *       *       *


                          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 having custody or 
        use of the securities, deposits, or credits of a 
        registered investment company shall maintain and 
        preserve all records that relate to the custody or use 
        by such person of the securities, deposits, or credits 
        of the registered investment company for such period or 
        periods as the Commission, by rule or regulation, may 
        prescribe, as necessary or appropriate in the public 
        interest or for the protection of investors.
          (2) Minimizing compliance burden.--In exercising its 
        authority under this subsection, the Commission shall 
        take such steps as it deems necessary or appropriate, 
        consistent with the public interest and for the 
        protection of investors, to avoid unnecessary 
        recordkeeping by, and minimize the compliance burden 
        on, persons required to maintain records under this 
        subsection (hereafter in this section referred to as 
        ``subject persons''). Such steps shall include 
        considering, and requesting public comment on--
                  (A) feasible alternatives that minimize the 
                recordkeeping burdens on subject persons;
                  (B) the necessity of such records in view of 
                the public benefits derived from the 
                independent scrutiny of such records through 
                Commission examination;
                  (C) the costs associated with maintaining the 
                information that would be required to be 
                reflected in such records; and
                  (D) the effects that a proposed recordkeeping 
                requirement would have on internal compliance 
                policies and procedures.
  (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.
          (2) Availability.--For purposes of examinations 
        referred to in paragraph (1), any subject person shall 
        make available to the Commission or its representatives 
        any copies or extracts from such records as may be 
        prepared without undue effort, expense, or delay as the 
        Commission or its representatives may reasonably 
        request.
          (3) Commission action.--The Commission shall exercise 
        its authority under this subsection with due regard for 
        the benefits of internal compliance policies and 
        procedures and the effective implementation and 
        operation thereof.
          (4) Records of persons with custody or use.--
                  (A) In general.--Records of persons having 
                custody or use of the securities, deposits, or 
                credits of a registered investment company 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.--Any person that is 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 to the Commission a detailed 
                listing, in writing, of the securities, 
                deposits, or credits of the registered 
                investment company within the custody or use of 
                such person.
  (c) Regulatory Authority.--The Commission may, in the public 
interest or for the protection of investors, issue rules and 
regulations providing for a reasonable degree of uniformity in 
the accounting policies and principles to be followed by 
registered investment companies in maintaining their accounting 
records and in preparing financial statements required pursuant 
to this title.
  (d) Exemption Authority.--The Commission, upon application 
made by any registered investment company, may by order exempt 
a specific transaction or transactions from the provisions of 
any rule or regulation made pursuant to subsection (e), if the 
Commission finds that such rule or regulation should not 
reasonably be applied to such transaction.
  (e) Procedure for Obtaining Certain Intellectual Property.--
The Commission is not authorized to compel under this title an 
investment company to produce or furnish source code, including 
algorithmic trading source code or similar intellectual 
property, to the Commission unless the Commission first issues 
a subpoena.

           *       *       *       *       *       *       *


                        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 
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, or at the time of the alleged misconduct, so 
served or acted--
          (1) as officer, director, member of any advisory 
        board, investment adviser, or depositor; or
          (2) as principal underwriter, if such registered 
        company is an open-end company, unit investment trust, 
        or face-amount certificate company.
If such allegations are established, the court may enjoin such 
persons from acting in any or all such capacities either 
permanently or temporarily and award such injunctive or other 
relief against such person as may be reasonable and appropriate 
in the circumstances, having due regard to the protection of 
investors and to the effectuation of the policies declared in 
section 1(b) of this title.
  (b) For the purposes of this subsection, the investment 
adviser of a registered investment company shall be deemed to 
have a fiduciary duty with respect to the receipt of 
compensation for services, or of payments of a material nature, 
paid by such registered investment company, or by the security 
holders thereof, to such investment adviser or any affiliated 
person of such investment adviser. An action may be brought 
under this subsection by the Commission, or by a security 
holder of such registered investment company on behalf of such 
company, against such investment adviser, or any affiliated 
person of such investment adviser, or any other person 
enumerated in subsection (a) of this section who has a 
fiduciary duty concerning such compensation or payments, for 
breach of fiduciary duty in respect of such compensation or 
payments paid by such registered investment company or by the 
security holders thereof to such investment adviser or person. 
With respect to any such action the following provisions shall 
apply:
          (1) It shall not be necessary to allege or prove that 
        any defendant engaged in personal misconduct, and the 
        plaintiff shall have the burden of proving a breach of 
        fiduciary duty.
          (2) In any such action approval by the board of 
        directors of such investment company of such 
        compensation or payments, or of contracts or other 
        arrangements providing for such compensation or 
        payments, and ratification or approval of such 
        compensation or payments, or of contracts or other 
        arrangements providing for such compensation or 
        payments, by the shareholders of such investment 
        company, shall be given such consideration by the court 
        as is deemed appropriate under all the circumstances.
          (3) No such action shall be brought or maintained 
        against any person other than the recipient of such 
        compensation or payments, and no damages or other 
        relief shall be granted against any person other than 
        the recipient of such compensation or payments. No 
        award of damages shall be recoverable for any period 
        prior to one year before the action was instituted. Any 
        award of damages against such recipient shall be 
        limited to the actual damages resulting from the breach 
        of fiduciary duty and shall in no event exceed the 
        amount of compensation or payments received from such 
        investment company, or the security holders thereof, by 
        such recipient.
          (4) This subsection shall not apply to compensation 
        or payments made in connection with transactions 
        subject to section 17 of this title, or rules, 
        regulations, or orders thereunder, or to sales loads 
        for the acquisition of any security issued by a 
        registered investment company.
          (5) Any action pursuant to this subsection may be 
        brought only in an appropriate district court of the 
        United States.
          (6) No finding by a court with respect to a breach of 
        fiduciary duty under this subsection shall be made a 
        basis (A) for a finding of a violation of this title 
        for the purposes of sections 9 and 49 of this title, 
        section 15 of the Securities Exchange Act of 1934, or 
        section 203 of title II of this Act, or (B) for an 
        injunction to prohibit any person from serving in any 
        of the capacities enumerated in subsection (a) of this 
        section.
          (7) In any such action brought by a security holder 
        of a registered investment company on behalf of such 
        company--
                  (A) the complaint shall state with 
                particularity all facts establishing a breach 
                of fiduciary duty, and, if an allegation of any 
                such facts is based on information and belief, 
                the complaint shall state with particularity 
                all facts on which that belief is formed; and
                  (B) such security holder shall have the 
                burden of proving a breach of fiduciary duty by 
                clear and convincing evidence.
  (c) For the purposes of subsections (a) and (b) of this 
section, the term ``investment adviser'' includes a corporate 
or other trustee performing the functions of an investment 
adviser.

           *       *       *       *       *       *       *


                          enforcement of title

  Sec. 42. (a) The Commission may make such investigations as 
it deems necessary to determine whether any person has violated 
or is about to violate any provision of this title or of any 
rule, regulation, or order hereunder, or to determine whether 
any action in any court or any proceeding before the Commission 
shall be instituted under this title against a particular 
person or persons, or with respect to a particular transaction 
or transactions. The Commission shall 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.
  (b) For the purpose of any investigation or any other 
proceeding under this title, any member of the Commission, or 
any officer thereof designated by it, is empowered to 
administer oaths and affirmations, subpena witnesses, compel 
their attendance, take evidence, and require the production of 
any books, papers, correspondence, memoranda, contracts, 
agreements, or other records which are relevant or material to 
the inquiry. Such attendance of witnesses and the production of 
any such records may be required from any place in any State or 
in any Territory or other place subject to the jurisdiction of 
the United States at any designated place of hearing.
  (c) In case of contumacy by, or refusal to obey a subpena 
issued to, any person, the Commission may invoke the aid of any 
court of the United States within the jurisdiction of which 
such investigation or proceeding is carried on, or where such 
person resides or carries on business, in requiring the 
attendance and testimony of witnesses and the production of 
books, papers, correspondence, memoranda, contracts, 
agreements, and other records. And such court may issue an 
order requiring such person to appear before the Commission or 
member or officer designated by the Commission, there to 
produce records, if so ordered, or to give testimony touching 
the matter under investigation or in question; any failure to 
obey such order of the court may be punished by such court as a 
contempt thereof. All process in any such case may be served in 
the judicial district whereof such person is an inhabitant or 
wherever he may be found. Any person who without just cause 
shall fail or refuse to attend and testify or to answer any 
lawful inquiry or to produce books, papers, correspondence, 
memoranda, contracts, agreements, or other records, if in his 
or its power so to do, in obedience to the subpena of the 
Commission, shall be guilty of a misdemeanor, and upon 
conviction shall be subject to a fine of not more than $1,000 
or to imprisonment for a term of not more than one year, or 
both.
  (d) Whenever it shall appear to the Commission that any 
person has engaged or is about to engage in any act or practice 
constituting a violation of any provision of this title, or of 
any rule, regulation, or order hereunder, it may in its 
discretion bring an action in the proper district court of the 
United States, or the proper United States court of any 
Territory or other place subject to the jurisdiction of the 
United States, to enjoin such acts or practices and to enforce 
compliance with this title or any rule, regulation, or order 
hereunder. Upon a showing that such person has engaged or is 
about to engage in any such act or practice, a permanent or 
temporary injunction or decree or restraining order shall be 
granted without bond. In any proceeding under this subsection 
to enforce compliance with section 7, the court as a court of 
equity may, to the extent it deems necessary or appropriate, 
take exclusive jurisdiction and possession of the investment 
company or companies involved and the books, records, and 
assets thereof, wherever located; and the court shall have 
jurisdiction to appoint a trustee, who with the approval of the 
court shall have power to dispose of any or all of such assets, 
subject to such terms and conditions as the court may 
prescribe. The Commission may transmit such evidence as may be 
available concerning any violation of the provisions of this 
title, or of any rule, regulation, or order thereunder, to the 
Attorney General, who, in his discretion, may institute the 
appropriate criminal proceedings under this title.
  (e) Money Penalties in Civil Actions.--
          (1) Authority of commission.--Whenever it shall 
        appear to the Commission that any person has violated 
        any provision of this title, the rules or regulations 
        thereunder, a Federal court injunction or a bar 
        obtained or entered by the Commission under this title, 
        or a cease-and-desist order entered by the Commission 
        pursuant to section 9(f) of this title, the Commission 
        may bring an action in a United States district court 
        to seek, and the court shall have jurisdiction to 
        impose, upon a proper showing, a civil penalty to be 
        paid by the person who committed such violation.
          (2) Amount of penalty.--
                  (A) First tier.--The amount of the penalty 
                shall be determined by the court in light of 
                the facts and circumstances. For each 
                violation, the amount of the penalty shall not 
                exceed the greater of (i) [$5,000] $10,000 for 
                a natural person or [$50,000] $100,000 for any 
                other person, or (ii) the gross amount of 
                pecuniary gain to such defendant as a result of 
                the violation.
                  (B) Second tier.--Notwithstanding 
                subparagraph (A), the amount of penalty for 
                each such violation shall not exceed the 
                greater of (i) [$50,000] $100,000 for a natural 
                person or [$250,000] $500,000 for any other 
                person, or (ii) the gross amount of pecuniary 
                gain to such defendant as a result of the 
                violation, if the violation described in 
                paragraph (1) involved fraud, deceit, 
                manipulation, or deliberate or reckless 
                disregard of a regulatory requirement.
                  [(C) Third tier.--Notwithstanding 
                subparagraphs (A) and (B), the amount of 
                penalty for each such violation shall not 
                exceed the greater of (i) $100,000 for a 
                natural person or $500,000 for any other 
                person, or (ii) the gross amount of pecuniary 
                gain to such defendant as a result of the 
                violation, if--
                          [(I) the violation described in 
                        paragraph (1) involved fraud, deceit, 
                        manipulation, or deliberate or reckless 
                        disregard of a regulatory requirement; 
                        and
                          [(II) such violation directly or 
                        indirectly resulted in substantial 
                        losses or created a significant risk of 
                        substantial losses to other persons.]
                  (C) Third tier.--
                          (i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), the amount 
                        of penalty for each such violation 
                        shall not exceed the amount specified 
                        in clause (ii) if--
                                  (I) the violation described 
                                in paragraph (1) involved 
                                fraud, deceit, manipulation, or 
                                deliberate or reckless 
                                disregard of a regulatory 
                                requirement; and
                                  (II) such violation directly 
                                or indirectly resulted in 
                                substantial losses or created a 
                                significant risk of substantial 
                                losses to other persons.
                          (ii) Maximum amount of penalty.--The 
                        amount referred to in clause (i) is the 
                        greatest of--
                                  (I) $300,000 for a natural 
                                person or $1,450,000 for any 
                                other person;
                                  (II) 3 times the gross amount 
                                of pecuniary gain to such 
                                defendant as a result of the 
                                violation; or
                                  (III) the amount of losses 
                                incurred by victims as a result 
                                of the violation.
                  (D) Fourth tier.--Notwithstanding 
                subparagraphs (A), (B), and (C), the maximum 
                amount of penalty for each such violation shall 
                be 3 times the otherwise applicable amount in 
                such subparagraphs if, within the 5-year period 
                preceding such violation, the defendant was 
                criminally convicted for securities fraud or 
                became subject to a judgment or order imposing 
                monetary, equitable, or administrative relief 
                in any Commission action alleging fraud by that 
                defendant.
          (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.
                  (B) Collection of penalties.--If a person 
                upon whom such a penalty is imposed shall fail 
                to pay such penalty within the time prescribed 
                in the court's order, the Commission may refer 
                the matter to the Attorney General who shall 
                recover such penalty by action in the 
                appropriate United States district court.
                  (C) Remedy not exclusive.--The actions 
                authorized by this subsection may be brought in 
                addition to any other action that the 
                Commission or the Attorney General is entitled 
                to bring.
                  (D) Jurisdiction and venue.--For purposes of 
                section 44 of this title, actions under this 
                paragraph shall be actions to enforce a 
                liability or a duty created by this title.
          [(4) Special provisions relating to a violation of a 
        cease-and-desist order.--In an action to enforce a 
        cease-and-desist order entered by the Commission 
        pursuant to section 9(f), each separate violation of 
        such order shall be a separate offense, except that in 
        the case of a violation through a continuing failure to 
        comply with the order, each day of the failure to 
        comply shall be deemed a separate offense.]
          (4) Special provisions relating to a violation of an 
        injunction or certain orders.--
                  (A) In general.--Each separate violation of 
                an injunction or order described in 
                subparagraph (B) shall be a separate offense, 
                except that in the case of a violation through 
                a continuing failure to comply with such 
                injunction or order, each day of the failure to 
                comply with the injunction or order shall be 
                deemed a separate offense.
                  (B) Injunctions and orders.--Subparagraph (A) 
                shall apply with respect to any action to 
                enforce--
                          (i) a Federal court injunction 
                        obtained pursuant to this title;
                          (ii) an order entered or obtained by 
                        the Commission pursuant to this title 
                        that bars, suspends, places limitations 
                        on the activities or functions of, or 
                        prohibits the activities of, a person; 
                        or
                          (iii) a cease-and-desist order 
                        entered by the Commission pursuant to 
                        section 9(f).

           *       *       *       *       *       *       *


       functions and activities of business development companies

  Sec. 55. (a) It shall be unlawful for a business development 
company to acquire any assets (other than those described in 
paragraphs (1) through (7) of this subsection) unless, at the 
time the acquisition is made, assets described in paragraphs 
(1) through (6) below represent at least 70 per centum of the 
value of its total assets (other than assets described in 
paragraph (7) below), provided that no more 15 than 50 percent 
of its total assets are assets described in section 3(c):
          (1) securities purchased, in transactions not 
        involving any public offering or in such other 
        transactions as the Commission may, by rule, prescribe 
        if it finds that enforcement of this title and of the 
        Securities Act of 1933 with respect to such 
        transactions is not necessary in the public interest or 
        for the protection of investors by reason of the small 
        amount, or the limited nature of the public offering, 
        involved in such transactions--
                  (A) from the issuer of such securities, which 
                issuer is an eligible portfolio company, from 
                any person who is, or who within the preceding 
                thirteen months has been, an affiliated person 
                of such eligible portfolio company, or from any 
                other person, subject to such rules and 
                regulations as the Commission may prescribe as 
                necessary or appropriate in the public interest 
                or for the protection of investors; or
                  (B) from the issuer of such securities, which 
                issuer is described in section 2(a)(46) (A) and 
                (B) but is not an eligible portfolio company 
                because it has issued a class of securities 
                with respect to which a member of a national 
                securities exchange, broker, or dealer may 
                extend or maintain credit to or for a customer 
                pursuant to rules or regulations adopted by the 
                Board of Governors of the Federal Reserve 
                System under section 7 of the Securities 
                Exchange Act of 1934, or from any person who is 
                an officer or employee of such issuer, if--
                          (i) at the time of the purchase, the 
                        business development company owns at 
                        least 50 per centum of--
                                  (I) the greatest number of 
                                equity securities of such 
                                issuer and securities 
                                convertible into or 
                                exchangeable for such 
                                securities; and
                                  (II) the greatest amount of 
                                debt securities of such issuer,
                        held by such business development 
                        company at any point in time during the 
                        period when such issuer was an eligible 
                        portfolio company, except that options, 
                        warrants, and similar securities which 
                        have by their terms expired and debt 
                        securities which have been converted, 
                        or repaid or prepaid in the ordinary 
                        course of business or incident to a 
                        public offering of securities of such 
                        issuer, shall not be considered to have 
                        been held by such business development 
                        company for purposes of this 
                        requirement; and
                          (ii) the business development company 
                        is one of the 20 largest holders of 
                        record of such issuer's outstanding 
                        voting securities;
          (2) securities of any eligible portfolio company with 
        respect to which the business development company 
        satisfies the requirements of section 2(a)(46)(C)(ii);
          (3) securities purchased in transactions not 
        involving any public offering from an issuer described 
        in sections 2(a)(46) (A) and (B) or from a person who 
        is, or who within the preceding thirteen months has 
        been, an affiliated person of such issuer, or from any 
        person in transactions incident thereto, if such 
        securities were--
                  (A) issued by an issuer that is, or was 
                immediately prior to the purchase of its 
                securities by the business development company, 
                in bankruptcy proceedings, subject to 
                reorganization under the supervision of a court 
                of competent jurisdiction, or subject to a plan 
                or arrangement resulting from such bankruptcy 
                proceedings or reorganization;
                  (B) issued by an issuer pursuant to or in 
                consummation of such a plan or arrangement; or
                  (C) issued by an issuer that, immediately 
                prior to the purchase of such issuer's 
                securities by the business development company, 
                was not in bankruptcy proceedings but was 
                unable to meet its obligations as they came due 
                without material assistance other than 
                conventional lending or financing arrangements;
          (4) securities of eligible portfolio companies 
        purchased from any person in transactions not involving 
        any public offering, if there is no ready market for 
        such securities and if immediately prior to such 
        purchase the business development company owns at least 
        60 per centum of the outstanding equity securities of 
        such issuer (giving effect to all securities presently 
        convertible into or exchangeable for equity securities 
        of such issuer as if such securities were so converted 
        or exchanged);
          (5) securities received in exchange for or 
        distributed on or with respect to securities described 
        in paragraphs (1) through (4) of this subsection, or 
        pursuant to the exercise of options, warrants, or 
        rights relating to securities described in such 
        paragraphs;
          (6) cash, cash items, Government securities, or high 
        quality debt securities maturing in one year or less 
        from the time of investment in such high quality debt 
        securities; and
          (7) office furniture and equipment, interests in real 
        estate and leasehold improvements and facilities 
        maintained to conduct the business operations of the 
        business development company, deferred organization and 
        operating expenses, and other noninvestment assets 
        necessary and appropriate to its operations as a 
        business development company, including notes of 
        indebtedness of directors, officers, employees, and 
        general partners held by a business development company 
        as payment for securities of such company issued in 
        connection with an executive compensation plan 
        described in section 57(j).
  (b) For purposes of this section, the value of a business 
development company's assets shall be determined as of the date 
of the most recent financial statements filed by such company 
with the Commission pursuant to section 13 of the Securities 
Exchange Act of 1934, and shall be determined no less 
frequently than annually.

           *       *       *       *       *       *       *


                  transactions with certain affiliates

  Sec. 57. (a) It shall be unlawful for any person who is 
related to a business development company in a manner described 
in subsection (b) of this section, acting as principal--
          (1) knowingly to sell any security or other property 
        to such business development company or to any company 
        controlled by such business development company, unless 
        such sale involves solely (A) securities of which the 
        buyer is the issuer, or (B) securities of which the 
        seller is the issuer and which are part of a general 
        offering to the holders of a class of its securities;
          (2) knowingly to purchase from such business 
        development company or from any company controlled by 
        such business development company, any security or 
        other property (except securities of which the seller 
        is the issuer);
          (3) knowingly to borrow money or other property from 
        such business development company or from any company 
        controlled by such business development company (unless 
        the borrower is controlled by the lender), except as 
        permitted in section 21(b) or section 62; or
          (4) knowingly to effect any transaction in which such 
        business development company or a company controlled by 
        such business development company is a joint or a joint 
        and several participant with such person in 
        contravention of such rules and regulations as the 
        Commission may prescribe for the purpose of limiting or 
        preventing participation by such business development 
        company or controlled company on a basis less 
        advantageous than that of such person, except that 
        nothing contained in this paragraph shall be deemed to 
        preclude any person from acting as manager of any 
        underwriting syndicate or other group in which such 
        business development company or controlled company is a 
        participant and receiving compensation therefor.
  (b) The provisions of subsection (a) of this section shall 
apply to the following persons:
          (1) Any director, officer, employee, or member of an 
        advisory board of a business development company or any 
        person (other than the business development company 
        itself) who is, within the meaning of section 
        2(a)(3)(C) of this title, an affiliated person of any 
        such person specified in this paragraph.
          (2) Any investment adviser or promoter of, general 
        partner in, principal underwriter for, or person 
        directly or indirectly either controlling, controlled 
        by, or under common control with, a business 
        development company (except the business development 
        company itself and any person who, if it were not 
        directly or indirectly controlled by the business 
        development company, would not be directly or 
        indirectly under the control of a person who controls 
        the business development company), or any person who 
        is, within the meaning of section 2(a)(3) (C) or (D), 
        an affiliated person of any such person specified in 
        this paragraph.
  (c) Notwithstanding paragraphs (1), (2), and (3) of 
subsection (a), any person may file with the Commission an 
application for an order exempting a proposed transaction of 
the applicant from one or more provisions of such paragraphs. 
The Commission shall grant such application and issue such 
order of exemption if evidence establishes that--
          (1) the terms of the proposed transaction, including 
        the consideration to be paid or received, are 
        reasonable and fair and do not involve overreaching of 
        the business development company or its shareholders or 
        partners on the part of any person concerned;
          (2) the proposed transaction is consistent with the 
        policy of the business development company as recited 
        in the filings made by such company with the Commission 
        under the Securities Act of 1933, its registration 
        statement and reports filed under the Securities 
        Exchange Act of 1934, and its reports to shareholders 
        or partners; and
          (3) the proposed transaction is consistent with the 
        general purposes of this title.
  (d) It shall be unlawful for any person who is related to a 
business development company in the manner described in 
subsection (e) of this section and who is not subject to the 
prohibitions of subsection (a) of this section, acting as 
principal--
          (1) knowingly to sell any security or other property 
        to such business development company or to any company 
        controlled by such business development company, unless 
        such sale involves solely (A) securities of which the 
        buyer is the issuer, or (B) securities of which the 
        seller is the issuer and which are part of a general 
        offering to the holders of a class of its securities;
          (2) knowingly to purchase from such business 
        development company or from any company controlled by 
        such business development company, any security or 
        other property (except securities of which the seller 
        is the issuer);
          (3) knowingly to borrow money or other property from 
        such business development company or from any company 
        controlled by such business development company (unless 
        the borrower is controlled by the lender), except as 
        permitted in section 21(b); or
          (4) knowingly to effect any transaction in which such 
        business development company or a company controlled by 
        such business development company is a joint or a joint 
        and several participant with such affiliated person in 
        contravention of such rules and regulations as the 
        Commission may prescribe for the purpose of limiting or 
        preventing participation by such business development 
        company or controlled company on a basis less 
        advantageous than that of such affiliated person, 
        except that nothing contained in this paragraph shall 
        be deemed to preclude any person from acting as manager 
        of any underwriting syndicate or other group in which 
        such business development company or controlled company 
        is a participant and receiving compensation therefor.
  (e) The provisions of subsection (d) of this section shall 
apply to the following persons:
          (1) Any person (A) who is, within the meaning of 
        section 2(a)(3)(A), an affiliated person of a business 
        development company, (B) who is an executive officer or 
        a director of, or general partner in, any such 
        affiliated person, or (C) who directly or indirectly 
        either controls, is controlled by, or is under common 
        control with, such affiliated person.
          (2) Any person who is an affiliated person of a 
        director, officer, employee, investment adviser, member 
        of an advisory board or promoter of, principal 
        underwriter for, general partner in, or an affiliated 
        person of any person directly or indirectly either 
        controlling or under common control with a business 
        development company (except the business development 
        company itself and any person who, if it were not 
        directly or indirectly controlled by the business 
        development company, would not be directly or 
        indirectly under the control of a person who controls 
        the business development company).
For purposes of this subsection, the term ``executive officer'' 
means the president, secretary, treasurer, any vice president 
in charge of a principal business function, and any other 
person who performs similar policymaking functions.
  (f) Notwithstanding subsection (d) of this section, a person 
described in subsection (e) may engage in a proposed 
transaction described in subsection (d) if such proposed 
transaction is approved by the required majority (as defined in 
subsection (o)) of the directors of or general partners in the 
business development company on the basis that--
          (1) the terms thereof, including the consideration to 
        be paid or received, are reasonable and fair to the 
        shareholders or partners of the business development 
        company and do not involve overreaching of such company 
        or its shareholders or partners on the part of any 
        person concerned;
          (2) the proposed transaction is consistent with the 
        interests of the shareholders or partners of the 
        business development company and is consistent with the 
        policy of such company as recited in filings made by 
        such company with the Commission under the Securities 
        Act of 1933, its registration statement and reports 
        filed under the Securities Exchange Act of 1934, and 
        its reports to shareholders or partners; and
          (3) the directors or general partners record in their 
        minutes and preserve in their records, for such periods 
        as if such records were required to be maintained 
        pursuant to section 31(a), a description of such 
        transaction, their findings, the information or 
        materials upon which their findings were based, and the 
        basis therefor.
  (g) Notwithstanding subsection (a) or (d), a person may, in 
the ordinary course of business, sell to or purchase from any 
company merchandise or may enter into a lessor-lessee 
relationship with any person and furnish the services incident 
thereto.
  (h) The directors of or general partners in any business 
development company shall adopt, and periodically review and 
update as appropriate, procedures reasonably designed to ensure 
that reasonable inquiry is made, prior to the consummation of 
any transaction in which such business development company or a 
company controlled by such business development company 
proposes to participate, with respect to the possible 
involvement in the transaction of persons described in 
subsections (b) and (e) of this section.
  (i) Until the adoption by the Commission of rules or 
regulations under subsections (a) and (d) of this section, the 
rules and regulations of the Commission under subsections (a) 
and (d) of section 17 applicable to registered closed-end 
investment companies shall be deemed to apply to transactions 
subject to subsections (a) and (d) of this section. Any rules 
or regulations adopted by the Commission to implement this 
section shall be no more restrictive than the rules or 
regulations adopted by the Commission under subsections (a) and 
(d) of section 17 that are applicable to all registered closed-
end investment companies.
  (j) Notwithstanding subsections (a) and (d) of this section, 
any director, officer, or employee of, or general partner in, a 
business development company may--
          (1) acquire warrants, options, and rights to purchase 
        voting securities of such business development company, 
        and securities issued upon the exercise or conversion 
        thereof, pursuant to an executive compensation plan 
        offered by such company which meets the requirements of 
        [section 61(a)(3)(B)] section 61(a)(4)(B); and
          (2) borrow money from such business development 
        company for the purpose of purchasing securities issued 
        by such company pursuant to an executive compensation 
        plan, if each such loan--
                  (A) has a term of not more than ten years;
                  (B) becomes due within a reasonable time, not 
                to exceed sixty days, after the termination of 
                such person's employment or service;
                  (C) bears interest at no less than the 
                prevailing rate applicable to 90-day United 
                States Treasury bills at the time the loan is 
                made;
                  (D) at all times is fully collateralized 
                (such collateral may include any securities 
                issued by such business development company); 
                and
                  (E)(i) in the case of a loan to any officer 
                or employee of such business development 
                company (including any officer or employee who 
                is also a director of such company), is 
                approved by the required majority (as defined 
                in subsection (o)) of the directors of or 
                general partners in such company on the basis 
                that the loan is in the best interests of such 
                company and its shareholders or partners; or
                  (ii) in the case of a loan to any director of 
                such business development company who is not 
                also an officer or employee of such company, or 
                to any general partner in such company, is 
                approved by order of the Commission, upon 
                application, on the basis that the terms of the 
                loan are fair and reasonable and do not involve 
                overreaching of such company or its 
                shareholders or partners.
  (k) It shall be unlawful for any person described in 
subsection (l)--
          (1) acting as agent, to accept from any source any 
        compensation (other than a regular salary or wages from 
        the business development company) for the purchase or 
        sale of any property to or for such business 
        development company or any controlled company thereof, 
        except in the course of such person's business as an 
        underwriter or broker; or
          (2) acting as broker, in connection with the sale of 
        securities to or by the business development company or 
        any controlled company thereof, to receive from any 
        source a commission, fee, or other remuneration for 
        effecting such transaction which exceeds--
                  (A) the usual and customary broker's 
                commission if the sale is effected on a 
                securities exchange;
                  (B) 2 per centum of the sales price if the 
                sale is effected in connection with a secondary 
                distribution of such securities; or
                  (C) 1 per centum of the purchase or sale 
                price of such securities if the sale is 
                otherwise effected,
unless the Commission, by rules and regulations or order in the 
public interest and consistent with the protection of 
investors, permits a larger commission.
  (l) The provisions of subsection (k) of this section shall 
apply to the following persons:
          (1) Any affiliated person of a business development 
        company.
          (2)(A) Any person who is, within the meaning of 
        section 2(a)(3) (B), (C), or (D), an affiliated person 
        of any director, officer, employee, or member of an 
        advisory board of the business development company.
          (B) Any person who is, within the meaning of section 
        2(a)(3) (A), (B), (C), or (D), an affiliated person of 
        any investment adviser of, general partner in, or 
        person directly or indirectly either controlling, 
        controlled by, or under common control with, the 
        business development company.
          (C) Any