H.R.4173
One Hundred Eleventh Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Tuesday,
the fifth day of January, two thousand and ten
An Act
To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail’, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title- This Act may be cited as the ‘Dodd-Frank Wall Street Reform and Consumer Protection Act’.
(b) Table of Contents- The table of contents for this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Severability.
Sec. 4. Effective date.
Sec. 5. Budgetary effects.
Sec. 6. Antitrust savings clause.
Sec. 101. Short title.
Sec. 102. Definitions.
Sec. 111. Financial Stability Oversight Council established.
Sec. 112. Council authority.
Sec. 113. Authority to require supervision and regulation of certain nonbank financial companies.
Sec. 114. Registration of nonbank financial companies supervised by the Board of Governors.
Sec. 115. Enhanced supervision and prudential standards for nonbank financial companies supervised by the Board of Governors and certain bank holding companies.
Sec. 116. Reports.
Sec. 117. Treatment of certain companies that cease to be bank holding companies.
Sec. 118. Council funding.
Sec. 119. Resolution of supervisory jurisdictional disputes among member agencies.
Sec. 120. Additional standards applicable to activities or practices for financial stability purposes.
Sec. 121. Mitigation of risks to financial stability.
Sec. 122. GAO Audit of Council.
Sec. 123. Study of the effects of size and complexity of financial institutions on capital market efficiency and economic growth.
Sec. 151. Definitions.
Sec. 152. Office of Financial Research established.
Sec. 153. Purpose and duties of the Office.
Sec. 154. Organizational structure; responsibilities of primary programmatic units.
Sec. 155. Funding.
Sec. 156. Transition oversight.
Sec. 161. Reports by and examinations of nonbank financial companies by the Board of Governors.
Sec. 162. Enforcement.
Sec. 163. Acquisitions.
Sec. 164. Prohibition against management interlocks between certain financial companies.
Sec. 165. Enhanced supervision and prudential standards for nonbank financial companies supervised by the Board of Governors and certain bank holding companies.
Sec. 166. Early remediation requirements.
Sec. 167. Affiliations.
Sec. 168. Regulations.
Sec. 169. Avoiding duplication.
Sec. 170. Safe harbor.
Sec. 171. Leverage and risk-based capital requirements.
Sec. 172. Examination and enforcement actions for insurance and orderly liquidation purposes.
Sec. 173. Access to United States financial market by foreign institutions.
Sec. 174. Studies and reports on holding company capital requirements.
Sec. 175. International policy coordination.
Sec. 176. Rule of construction.
Sec. 201. Definitions.
Sec. 202. Judicial review.
Sec. 203. Systemic risk determination.
Sec. 204. Orderly liquidation of covered financial companies.
Sec. 205. Orderly liquidation of covered brokers and dealers.
Sec. 206. Mandatory terms and conditions for all orderly liquidation actions.
Sec. 207. Directors not liable for acquiescing in appointment of receiver.
Sec. 208. Dismissal and exclusion of other actions.
Sec. 209. Rulemaking; non-conflicting law.
Sec. 210. Powers and duties of the Corporation.
Sec. 211. Miscellaneous provisions.
Sec. 212. Prohibition of circumvention and prevention of conflicts of interest.
Sec. 213. Ban on certain activities by senior executives and directors.
Sec. 214. Prohibition on taxpayer funding.
Sec. 215. Study on secured creditor haircuts.
Sec. 216. Study on bankruptcy process for financial and nonbank financial institutions
Sec. 217. Study on international coordination relating to bankruptcy process for nonbank financial institutions
Sec. 300. Short title.
Sec. 301. Purposes.
Sec. 302. Definition.
Sec. 311. Transfer date.
Sec. 312. Powers and duties transferred.
Sec. 313. Abolishment.
Sec. 314. Amendments to the Revised Statutes.
Sec. 315. Federal information policy.
Sec. 316. Savings provisions.
Sec. 317. References in Federal law to Federal banking agencies.
Sec. 318. Funding.
Sec. 319. Contracting and leasing authority.
Sec. 321. Interim use of funds, personnel, and property of the Office of Thrift Supervision.
Sec. 322. Transfer of employees.
Sec. 323. Property transferred.
Sec. 324. Funds transferred.
Sec. 325. Disposition of affairs.
Sec. 326. Continuation of services.
Sec. 327. Implementation plan and reports.
Sec. 331. Deposit insurance reforms.
Sec. 332. Elimination of procyclical assessments.
Sec. 333. Enhanced access to information for deposit insurance purposes.
Sec. 334. Transition reserve ratio requirements to reflect new assessment base.
Sec. 335. Permanent increase in deposit and share insurance.
Sec. 336. Management of the Federal Deposit Insurance Corporation.
Sec. 341. Branching.
Sec. 342. Office of Minority and Women Inclusion.
Sec. 343. Insurance of transaction accounts.
Sec. 351. Effective date.
Sec. 352. Balanced Budget and Emergency Deficit Control Act of 1985.
Sec. 353. Bank Enterprise Act of 1991.
Sec. 354. Bank Holding Company Act of 1956.
Sec. 355. Bank Holding Company Act Amendments of 1970.
Sec. 356. Bank Protection Act of 1968.
Sec. 357. Bank Service Company Act.
Sec. 358. Community Reinvestment Act of 1977.
Sec. 359. Crime Control Act of 1990.
Sec. 360. Depository Institution Management Interlocks Act.
Sec. 361. Emergency Homeowners’ Relief Act.
Sec. 362. Federal Credit Union Act.
Sec. 363. Federal Deposit Insurance Act.
Sec. 364. Federal Home Loan Bank Act.
Sec. 365. Federal Housing Enterprises Financial Safety and Soundness Act of 1992.
Sec. 366. Federal Reserve Act.
Sec. 367. Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
Sec. 368. Flood Disaster Protection Act of 1973.
Sec. 369. Home Owners’ Loan Act.
Sec. 370. Housing Act of 1948.
Sec. 371. Housing and Community Development Act of 1992.
Sec. 372. Housing and Urban-Rural Recovery Act of 1983.
Sec. 373. National Housing Act.
Sec. 374. Neighborhood Reinvestment Corporation Act.
Sec. 375. Public Law 93-100.
Sec. 376. Securities Exchange Act of 1934.
Sec. 377. Title 18, United States Code.
Sec. 378. Title 31, United States Code.
Sec. 401. Short title.
Sec. 402. Definitions.
Sec. 403. Elimination of private adviser exemption; limited exemption for foreign private advisers; limited intrastate exemption.
Sec. 404. Collection of systemic risk data; reports; examinations; disclosures.
Sec. 405. Disclosure provision amendment.
Sec. 406. Clarification of rulemaking authority.
Sec. 407. Exemption of venture capital fund advisers.
Sec. 408. Exemption of and record keeping by private equity fund advisers.
Sec. 409. Family offices.
Sec. 410. State and Federal responsibilities; asset threshold for Federal registration of investment advisers.
Sec. 411. Custody of client assets.
Sec. 412. Adjusting the accredited investor standard.
Sec. 413. GAO study and report on accredited investors.
Sec. 414. GAO study on self-regulatory organization for private funds.
Sec. 415. Commission study and report on short selling.
Sec. 416. Transition period.
Sec. 501. Short title.
Sec. 502. Federal Insurance Office.
Sec. 511. Short title.
Sec. 512. Effective date.
Sec. 521. Reporting, payment, and allocation of premium taxes.
Sec. 522. Regulation of nonadmitted insurance by insured’s home State.
Sec. 523. Participation in national producer database.
Sec. 524. Uniform standards for surplus lines eligibility.
Sec. 525. Streamlined application for commercial purchasers.
Sec. 526. GAO study of nonadmitted insurance market.
Sec. 527. Definitions.
Sec. 531. Regulation of credit for reinsurance and reinsurance agreements.
Sec. 532. Regulation of reinsurer solvency.
Sec. 533. Definitions.
Sec. 541. Rule of construction.
Sec. 542. Severability.
Sec. 601. Short title.
Sec. 602. Definition.
Sec. 603. Moratorium and study on treatment of credit card banks, industrial loan companies, and certain other companies under the Bank Holding Company Act of 1956.
Sec. 604. Reports and examinations of holding companies; regulation of functionally regulated subsidiaries.
Sec. 605. Assuring consistent oversight of permissible activities of depository institution subsidiaries of holding companies.
Sec. 606. Requirements for financial holding companies to remain well capitalized and well managed.
Sec. 607. Standards for interstate acquisitions.
Sec. 608. Enhancing existing restrictions on bank transactions with affiliates.
Sec. 609. Eliminating exceptions for transactions with financial subsidiaries.
Sec. 610. Lending limits applicable to credit exposure on derivative transactions, repurchase agreements, reverse repurchase agreements, and securities lending and borrowing transactions.
Sec. 611. Consistent treatment of derivative transactions in lending limits.
Sec. 612. Restriction on conversions of troubled banks.
Sec. 613. De novo branching into States.
Sec. 614. Lending limits to insiders.
Sec. 615. Limitations on purchases of assets from insiders.
Sec. 616. Regulations regarding capital levels.
Sec. 617. Elimination of elective investment bank holding company framework.
Sec. 618. Securities holding companies.
Sec. 619. Prohibitions on proprietary trading and certain relationships with hedge funds and private equity funds.
Sec. 620. Study of bank investment activities.
Sec. 621. Conflicts of interest.
Sec. 622. Concentration limits on large financial firms.
Sec. 623. Interstate merger transactions.
Sec. 624. Qualified thrift lenders.
Sec. 625. Treatment of dividends by certain mutual holding companies.
Sec. 626. Intermediate holding companies.
Sec. 627. Interest-bearing transaction accounts authorized.
Sec. 628. Credit card bank small business lending.
Sec. 701. Short title.
Sec. 711. Definitions.
Sec. 712. Review of regulatory authority.
Sec. 713. Portfolio margining conforming changes.
Sec. 714. Abusive swaps.
Sec. 715. Authority to prohibit participation in swap activities.
Sec. 716. Prohibition against Federal Government bailouts of swaps entities.
Sec. 717. New product approval CFTC--SEC process.
Sec. 718. Determining status of novel derivative products.
Sec. 719. Studies.
Sec. 720. Memorandum.
Sec. 721. Definitions.
Sec. 722. Jurisdiction.
Sec. 723. Clearing.
Sec. 724. Swaps; segregation and bankruptcy treatment.
Sec. 725. Derivatives clearing organizations.
Sec. 726. Rulemaking on conflict of interest.
Sec. 727. Public reporting of swap transaction data.
Sec. 728. Swap data repositories.
Sec. 729. Reporting and recordkeeping.
Sec. 730. Large swap trader reporting.
Sec. 731. Registration and regulation of swap dealers and major swap participants.
Sec. 732. Conflicts of interest.
Sec. 733. Swap execution facilities.
Sec. 734. Derivatives transaction execution facilities and exempt boards of trade.
Sec. 735. Designated contract markets.
Sec. 736. Margin.
Sec. 737. Position limits.
Sec. 738. Foreign boards of trade.
Sec. 739. Legal certainty for swaps.
Sec. 740. Multilateral clearing organizations.
Sec. 741. Enforcement.
Sec. 742. Retail commodity transactions.
Sec. 743. Other authority.
Sec. 744. Restitution remedies.
Sec. 745. Enhanced compliance by registered entities.
Sec. 746. Insider trading.
Sec. 747. Antidisruptive practices authority.
Sec. 748. Commodity whistleblower incentives and protection.
Sec. 749. Conforming amendments.
Sec. 750. Study on oversight of carbon markets.
Sec. 751. Energy and environmental markets advisory committee.
Sec. 752. International harmonization.
Sec. 753. Anti-manipulation authority.
Sec. 754. Effective date.
Sec. 761. Definitions under the Securities Exchange Act of 1934.
Sec. 762. Repeal of prohibition on regulation of security-based swap agreements.
Sec. 763. Amendments to the Securities Exchange Act of 1934.
Sec. 764. Registration and regulation of security-based swap dealers and major security-based swap participants.
Sec. 765. Rulemaking on conflict of interest.
Sec. 766. Reporting and recordkeeping.
Sec. 767. State gaming and bucket shop laws.
Sec. 768. Amendments to the Securities Act of 1933; treatment of security-based swaps.
Sec. 769. Definitions under the Investment Company Act of 1940.
Sec. 770. Definitions under the Investment Advisers Act of 1940.
Sec. 771. Other authority.
Sec. 772. Jurisdiction.
Sec. 773. Civil penalties.
Sec. 774. Effective date.
Sec. 801. Short title.
Sec. 802. Findings and purposes.
Sec. 803. Definitions.
Sec. 804. Designation of systemic importance.
Sec. 805. Standards for systemically important financial market utilities and payment, clearing, or settlement activities.
Sec. 806. Operations of designated financial market utilities.
Sec. 807. Examination of and enforcement actions against designated financial market utilities.
Sec. 808. Examination of and enforcement actions against financial institutions subject to standards for designated activities.
Sec. 809. Requests for information, reports, or records.
Sec. 810. Rulemaking.
Sec. 811. Other authority.
Sec. 812. Consultation.
Sec. 813. Common framework for designated clearing entity risk management.
Sec. 814. Effective date.
Sec. 901. Short title.
Sec. 911. Investor Advisory Committee established.
Sec. 912. Clarification of authority of the Commission to engage in investor testing.
Sec. 913. Study and rulemaking regarding obligations of brokers, dealers, and investment advisers.
Sec. 914. Study on enhancing investment adviser examinations.
Sec. 915. Office of the Investor Advocate.
Sec. 916. Streamlining of filing procedures for self-regulatory organizations.
Sec. 917. Study regarding financial literacy among investors.
Sec. 918. Study regarding mutual fund advertising.
Sec. 919. Clarification of Commission authority to require investor disclosures before purchase of investment products and services.
Sec. 919A. Study on conflicts of interest.
Sec. 919B. Study on improved investor access to information on investment advisers and broker-dealers.
Sec. 919C. Study on financial planners and the use of financial designations.
Sec. 919D. Ombudsman.
Sec. 921. Authority to restrict mandatory pre-dispute arbitration.
Sec. 922. Whistleblower protection.
Sec. 923. Conforming amendments for whistleblower protection.
Sec. 924. Implementation and transition provisions for whistleblower protection.
Sec. 925. Collateral bars.
Sec. 926. Disqualifying felons and other ‘bad actors’ from Regulation D offerings.
Sec. 927. Equal treatment of self-regulatory organization rules.
Sec. 928. Clarification that section 205 of the Investment Advisers Act of 1940 does not apply to State-registered advisers.
Sec. 929. Unlawful margin lending.
Sec. 929A. Protection for employees of subsidiaries and affiliates of publicly traded companies.
Sec. 929B. Fair Fund amendments.
Sec. 929C. Increasing the borrowing limit on Treasury loans.
Sec. 929D. Lost and stolen securities.
Sec. 929E. Nationwide service of subpoenas.
Sec. 929F. Formerly associated persons.
Sec. 929G. Streamlined hiring authority for market specialists.
Sec. 929H. SIPC Reforms.
Sec. 929I. Protecting confidentiality of materials submitted to the Commission.
Sec. 929J. Expansion of audit information to be produced and exchanged.
Sec. 929K. Sharing privileged information with other authorities.
Sec. 929L. Enhanced application of antifraud provisions.
Sec. 929M. Aiding and abetting authority under the Securities Act and the Investment Company Act.
Sec. 929N. Authority to impose penalties for aiding and abetting violations of the Investment Advisers Act.
Sec. 929O. Aiding and abetting standard of knowledge satisfied by recklessness.
Sec. 929P. Strengthening enforcement by the Commission.
Sec. 929Q. Revision to recordkeeping rule.
Sec. 929R. Beneficial ownership and short-swing profit reporting.
Sec. 929S. Fingerprinting.
Sec. 929T. Equal treatment of self-regulatory organization rules.
Sec. 929U. Deadline for completing examinations, inspections and enforcement actions.
Sec. 929V. Security Investor Protection Act amendments.
Sec. 929W. Notice to missing security holders.
Sec. 929X. Short sale reforms.
Sec. 929Y. Study on extraterritorial private rights of action.
Sec. 929Z. GAO study on securities litigation.
Sec. 931. Findings.
Sec. 932. Enhanced regulation, accountability, and transparency of nationally recognized statistical rating organizations.
Sec. 933. State of mind in private actions.
Sec. 934. Referring tips to law enforcement or regulatory authorities.
Sec. 935. Consideration of information from sources other than the issuer in rating decisions.
Sec. 936. Qualification standards for credit rating analysts.
Sec. 937. Timing of regulations.
Sec. 938. Universal ratings symbols.
Sec. 939. Removal of statutory references to credit ratings.
Sec. 939A. Review of reliance on ratings.
Sec. 939B. Elimination of exemption from fair disclosure rule.
Sec. 939C. Securities and Exchange Commission study on strengthening credit rating agency independence.
Sec. 939D. Government Accountability Office study on alternative business models.
Sec. 939E. Government Accountability Office study on the creation of an independent professional analyst organization.
Sec. 939F. Study and rulemaking on assigned credit ratings.
Sec. 939G. Effect of Rule 436(g).
Sec. 939H. Sense of Congress.
Sec. 941. Regulation of credit risk retention.
Sec. 942. Disclosures and reporting for asset-backed securities.
Sec. 943. Representations and warranties in asset-backed offerings.
Sec. 944. Exempted transactions under the Securities Act of 1933.
Sec. 945. Due diligence analysis and disclosure in asset-backed securities issues.
Sec. 946. Study on the macroeconomic effects of risk retention requirements.
Sec. 951. Shareholder vote on executive compensation disclosures.
Sec. 952. Compensation committee independence.
Sec. 953. Executive compensation disclosures.
Sec. 954. Recovery of erroneously awarded compensation.
Sec. 955. Disclosure regarding employee and director hedging.
Sec. 956. Enhanced compensation structure reporting.
Sec. 957. Voting by brokers.
Sec. 961. Report and certification of internal supervisory controls.
Sec. 962. Triennial report on personnel management.
Sec. 963. Annual financial controls audit.
Sec. 964. Report on oversight of national securities associations.
Sec. 965. Compliance examiners.
Sec. 966. Suggestion program for employees of the Commission.
Sec. 967. Commission organizational study and reform.
Sec. 968. Study on SEC revolving door.
Sec. 971. Proxy access.
Sec. 972. Disclosures regarding chairman and CEO structures.
Sec. 975. Regulation of municipal securities and changes to the board of the MSRB.
Sec. 976. Government Accountability Office study of increased disclosure to investors.
Sec. 977. Government Accountability Office study on the municipal securities markets.
Sec. 978. Funding for Governmental Accounting Standards Board.
Sec. 979. Commission Office of Municipal Securities.
Sec. 981. Authority to share certain information with foreign authorities.
Sec. 982. Oversight of brokers and dealers.
Sec. 983. Portfolio margining.
Sec. 984. Loan or borrowing of securities.
Sec. 985. Technical corrections to Federal securities laws.
Sec. 986. Conforming amendments relating to repeal of the Public Utility Holding Company Act of 1935.
Sec. 987. Amendment to definition of material loss and nonmaterial losses to the Deposit Insurance Fund for purposes of Inspector General reviews.
Sec. 988. Amendment to definition of material loss and nonmaterial losses to the National Credit Union Share Insurance Fund for purposes of Inspector General reviews.
Sec. 989. Government Accountability Office study on proprietary trading.
Sec. 989A. Senior investor protections.
Sec. 989B. Designated Federal entity inspectors general independence.
Sec. 989C. Strengthening Inspector General accountability.
Sec. 989D. Removal of Inspectors General of designated Federal entities.
Sec. 989E. Additional oversight of financial regulatory system.
Sec. 989F. GAO study of person to person lending.
Sec. 989G. Exemption for nonaccelerated filers.
Sec. 989H. Corrective responses by heads of certain establishments to deficiencies identified by Inspectors General.
Sec. 989I. GAO study regarding exemption for smaller issuers.
Sec. 989J. Further promoting the adoption of the NAIC Model Regulations that enhance protection of seniors and other consumers.
Sec. 991. Securities and Exchange Commission match funding.
Sec. 1001. Short title.
Sec. 1002. Definitions.
Sec. 1011. Establishment of the Bureau of Consumer Financial Protection.
Sec. 1012. Executive and administrative powers.
Sec. 1013. Administration.
Sec. 1014. Consumer Advisory Board.
Sec. 1015. Coordination.
Sec. 1016. Appearances before and reports to Congress.
Sec. 1017. Funding; penalties and fines.
Sec. 1018. Effective date.
Sec. 1021. Purpose, objectives, and functions.
Sec. 1022. Rulemaking authority.
Sec. 1023. Review of Bureau regulations.
Sec. 1024. Supervision of nondepository covered persons.
Sec. 1025. Supervision of very large banks, savings associations, and credit unions.
Sec. 1026. Other banks, savings associations, and credit unions.
Sec. 1027. Limitations on authorities of the Bureau; preservation of authorities.
Sec. 1028. Authority to restrict mandatory pre-dispute arbitration.
Sec. 1029. Exclusion for auto dealers.
Sec. 1029A. Effective date.
Sec. 1031. Prohibiting unfair, deceptive, or abusive acts or practices.
Sec. 1032. Disclosures.
Sec. 1033. Consumer rights to access information.
Sec. 1034. Response to consumer complaints and inquiries.
Sec. 1035. Private education loan ombudsman.
Sec. 1036. Prohibited acts.
Sec. 1037. Effective date.
Sec. 1041. Relation to State law.
Sec. 1042. Preservation of enforcement powers of States.
Sec. 1043. Preservation of existing contracts.
Sec. 1044. State law preemption standards for national banks and subsidiaries clarified.
Sec. 1045. Clarification of law applicable to nondepository institution subsidiaries.
Sec. 1046. State law preemption standards for Federal savings associations and subsidiaries clarified.
Sec. 1047. Visitorial standards for national banks and savings associations.
Sec. 1048. Effective date.
Sec. 1051. Definitions.
Sec. 1052. Investigations and administrative discovery.
Sec. 1053. Hearings and adjudication proceedings.
Sec. 1054. Litigation authority.
Sec. 1055. Relief available.
Sec. 1056. Referrals for criminal proceedings.
Sec. 1057. Employee protection.
Sec. 1058. Effective date.
Sec. 1061. Transfer of consumer financial protection functions.
Sec. 1062. Designated transfer date.
Sec. 1063. Savings provisions.
Sec. 1064. Transfer of certain personnel.
Sec. 1065. Incidental transfers.
Sec. 1066. Interim authority of the Secretary.
Sec. 1067. Transition oversight.
Sec. 1071. Small business data collection.
Sec. 1072. Assistance for economically vulnerable individuals and families.
Sec. 1073. Remittance transfers.
Sec. 1074. Department of the Treasury study on ending the conservatorship of Fannie Mae, Freddie Mac, and reforming the housing finance system.
Sec. 1075. Reasonable fees and rules for payment card transactions.
Sec. 1076. Reverse mortgage study and regulations.
Sec. 1077. Report on private education loans and private educational lenders.
Sec. 1078. Study and report on credit scores.
Sec. 1079. Review, report, and program with respect to exchange facilitators.
Sec. 1079A. Financial fraud provisions.
Sec. 1081. Amendments to the Inspector General Act.
Sec. 1082. Amendments to the Privacy Act of 1974.
Sec. 1083. Amendments to the Alternative Mortgage Transaction Parity Act of 1982.
Sec. 1084. Amendments to the Electronic Fund Transfer Act.
Sec. 1085. Amendments to the Equal Credit Opportunity Act.
Sec. 1086. Amendments to the Expedited Funds Availability Act.
Sec. 1087. Amendments to the Fair Credit Billing Act.
Sec. 1088. Amendments to the Fair Credit Reporting Act and the Fair and Accurate Credit Transactions Act of 2003.
Sec. 1089. Amendments to the Fair Debt Collection Practices Act.
Sec. 1090. Amendments to the Federal Deposit Insurance Act.
Sec. 1091. Amendment to Federal Financial Institutions Examination Council Act of 1978.
Sec. 1092. Amendments to the Federal Trade Commission Act.
Sec. 1093. Amendments to the Gramm-Leach-Bliley Act.
Sec. 1094. Amendments to the Home Mortgage Disclosure Act of 1975.
Sec. 1095. Amendments to the Homeowners Protection Act of 1998.
Sec. 1096. Amendments to the Home Ownership and Equity Protection Act of 1994.
Sec. 1097. Amendments to the Omnibus Appropriations Act, 2009.
Sec. 1098. Amendments to the Real Estate Settlement Procedures Act of 1974.
Sec. 1098A. Amendments to the Interstate Land Sales Full Disclosure Act.
Sec. 1099. Amendments to the Right to Financial Privacy Act of 1978.
Sec. 1100. Amendments to the Secure and Fair Enforcement for Mortgage Licensing Act of 2008.
Sec. 1100A. Amendments to the Truth in Lending Act.
Sec. 1100B. Amendments to the Truth in Savings Act.
Sec. 1100C. Amendments to the Telemarketing and Consumer Fraud and Abuse Prevention Act.
Sec. 1100D. Amendments to the Paperwork Reduction Act.
Sec. 1100E. Adjustments for inflation in the Truth in Lending Act.
Sec. 1100F. Use of consumer reports.
Sec. 1100G. Small business fairness and regulatory transparency.
Sec. 1100H. Effective date.
Sec. 1101. Federal Reserve Act amendments on emergency lending authority.
Sec. 1102. Reviews of special Federal reserve credit facilities.
Sec. 1103. Public access to information.
Sec. 1104. Liquidity event determination.
Sec. 1105. Emergency financial stabilization.
Sec. 1106. Additional related amendments.
Sec. 1107. Federal Reserve Act amendments on Federal reserve bank governance.
Sec. 1108. Federal Reserve Act amendments on supervision and regulation policy.
Sec. 1109. GAO audit of the Federal Reserve facilities; publication of Board actions.
Sec. 1201. Short title.
Sec. 1202. Purpose.
Sec. 1203. Definitions.
Sec. 1204. Expanded access to mainstream financial institutions.
Sec. 1205. Low-cost alternatives to payday loans.
Sec. 1206. Grants to establish loan-loss reserve funds.
Sec. 1207. Procedural provisions.
Sec. 1208. Authorization of appropriations.
Sec. 1209. Regulations.
Sec. 1210. Evaluation and reports to Congress.
Sec. 1301. Short title.
Sec. 1302. Amendment to reduce TARP authorization.
Sec. 1303. Report.
Sec. 1304. Amendments to Housing and Economic Recovery Act of 2008.
Sec. 1305. Federal Housing Finance Agency report.
Sec. 1306. Repayment of unobligated ARRA funds.
Sec. 1400. Short title; designation as enumerated consumer law.
Sec. 1401. Definitions.
Sec. 1402. Residential mortgage loan origination.
Sec. 1403. Prohibition on steering incentives.
Sec. 1404. Liability.
Sec. 1405. Regulations.
Sec. 1406. Study of shared appreciation mortgages.
Sec. 1411. Ability to repay.
Sec. 1412. Safe harbor and rebuttable presumption.
Sec. 1413. Defense to foreclosure.
Sec. 1414. Additional standards and requirements.
Sec. 1415. Rule of construction.
Sec. 1416. Amendments to civil liability provisions.
Sec. 1417. Lender rights in the context of borrower deception.
Sec. 1418. Six-month notice required before reset of hybrid adjustable rate mortgages.
Sec. 1419. Required disclosures.
Sec. 1420. Disclosures required in monthly statements for residential mortgage loans.
Sec. 1421. Report by the GAO.
Sec. 1422. State attorney general enforcement authority.
Sec. 1431. Definitions relating to high-cost mortgages.
Sec. 1432. Amendments to existing requirements for certain mortgages.
Sec. 1433. Additional requirements for certain mortgages.
Sec. 1441. Short title.
Sec. 1442. Establishment of Office of Housing Counseling.
Sec. 1443. Counseling procedures.
Sec. 1444. Grants for housing counseling assistance.
Sec. 1445. Requirements to use HUD-certified counselors under HUD programs.
Sec. 1446. Study of defaults and foreclosures.
Sec. 1447. Default and foreclosure database.
Sec. 1448. Definitions for counseling-related programs.
Sec. 1449. Accountability and transparency for grant recipients.
Sec. 1450. Updating and simplification of mortgage information booklet.
Sec. 1451. Home inspection counseling.
Sec. 1452. Warnings to homeowners of foreclosure rescue scams.
Sec. 1461. Escrow and impound accounts relating to certain consumer credit transactions.
Sec. 1462. Disclosure notice required for consumers who waive escrow services.
Sec. 1463. Real Estate Settlement Procedures Act of 1974 amendments.
Sec. 1464. Truth in Lending Act amendments.
Sec. 1465. Escrows included in repayment analysis.
Sec. 1471. Property appraisal requirements.
Sec. 1472. Appraisal independence requirements.
Sec. 1473. Amendments relating to Appraisal Subcommittee of FFIEC, Appraiser Independence Monitoring, Approved Appraiser Education, Appraisal Management Companies, Appraiser Complaint Hotline, Automated Valuation Models, and Broker Price Opinions.
Sec. 1474. Equal Credit Opportunity Act amendment.
Sec. 1475. Real Estate Settlement Procedures Act of 1974 amendment relating to certain appraisal fees.
Sec. 1476. GAO study on the effectiveness and impact of various appraisal methods, valuation models and distributions channels, and on the Home Valuation Code of conduct and the Appraisal Subcommittee.
Sec. 1481. Multifamily mortgage resolution program.
Sec. 1482. Home Affordable Modification Program guidelines.
Sec. 1483. Public availability of information of Making Home Affordable Program.
Sec. 1484. Protecting tenants at foreclosure extension and clarification.
Sec. 1491. Sense of Congress regarding the importance of government-sponsored enterprises reform to enhance the protection, limitation, and regulation of the terms of residential mortgage credit.
Sec. 1492. GAO study report on government efforts to combat mortgage foreclosure rescue scams and loan modification fraud.
Sec. 1493. Reporting of mortgage data by State.
Sec. 1494. Study of effect of drywall presence on foreclosures.
Sec. 1495. Definition.
Sec. 1496. Emergency mortgage relief.
Sec. 1497. Additional assistance for Neighborhood Stabilization Program.
Sec. 1498. Legal assistance for foreclosure-related issues.
Sec. 1501. Restrictions on use of United States funds for foreign governments; protection of American taxpayers.
Sec. 1502. Conflict minerals.
Sec. 1503. Reporting requirements regarding coal or other mine safety.
Sec. 1504. Disclosure of payments by resource extraction issuers.
Sec. 1505. Study by the Comptroller General.
Sec. 1506. Study on core deposits and brokered deposits.
Sec. 1601. Certain swaps, etc., not treated as section 1256 contracts.
SEC. 2. DEFINITIONS.
As used in this Act, the following definitions shall apply, except as the context otherwise requires or as otherwise specifically provided in this Act:
(1) AFFILIATE- The term ‘affiliate’ has the same meaning as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).
(2) APPROPRIATE FEDERAL BANKING AGENCY- On and after the transfer date, the term ‘appropriate Federal banking agency’ has the same meaning as in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), as amended by title III.
(3) BOARD OF GOVERNORS- The term ‘Board of Governors’ means the Board of Governors of the Federal Reserve System.
(4) BUREAU- The term ‘Bureau’ means the Bureau of Consumer Financial Protection established under title X.
(5) COMMISSION- The term ‘Commission’ means the Securities and Exchange Commission, except in the context of the Commodity Futures Trading Commission.
(6) COMMODITY FUTURES TERMS- The terms ‘futures commission merchant’, ‘swap’, ‘swap dealer’, ‘swap execution facility’, ‘derivatives clearing organization’, ‘board of trade’, ‘commodity trading advisor’, ‘commodity pool’, and ‘commodity pool operator’ have the same meanings as given the terms in section 1a of the Commodity Exchange Act (7 U.S.C. 1 et seq.).
(7) CORPORATION- The term ‘Corporation’ means the Federal Deposit Insurance Corporation.
(8) COUNCIL- The term ‘Council’ means the Financial Stability Oversight Council established under title I.
(9) CREDIT UNION- The term ‘credit union’ means a Federal credit union, State credit union, or State-chartered credit union, as those terms are defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752).
(10) FEDERAL BANKING AGENCY- The term--
(A) ‘Federal banking agency’ means, individually, the Board of Governors, the Office of the Comptroller of the Currency, and the Corporation; and
(B) ‘Federal banking agencies’ means all of the agencies referred to in subparagraph (A), collectively.
(11) FUNCTIONALLY REGULATED SUBSIDIARY- The term ‘functionally regulated subsidiary’ has the same meaning as in section 5(c)(5) of the Bank Holding Company Act of 1956 (12 U.S.C. 1844(c)(5)).
(12) PRIMARY FINANCIAL REGULATORY AGENCY- The term ‘primary financial regulatory agency’ means--
(A) the appropriate Federal banking agency, with respect to institutions described in section 3(q) of the Federal Deposit Insurance Act, except to the extent that an institution is or the activities of an institution are otherwise described in subparagraph (B), (C), (D), or (E);
(B) the Securities and Exchange Commission, with respect to--
(i) any broker or dealer that is registered with the Commission under the Securities Exchange Act of 1934, with respect to the activities of the broker or dealer that require the broker or dealer to be registered under that Act;
(ii) any investment company that is registered with the Commission under the Investment Company Act of 1940, with respect to the activities of the investment company that require the investment company to be registered under that Act;
(iii) any investment adviser that is registered with the Commission under the Investment Advisers Act of 1940, with respect to the investment advisory activities of such company and activities that are incidental to such advisory activities;
(iv) any clearing agency registered with the Commission under the Securities Exchange Act of 1934, with respect to the activities of the clearing agency that require the agency to be registered under such Act;
(v) any nationally recognized statistical rating organization registered with the Commission under the Securities Exchange Act of 1934;
(vi) any transfer agent registered with the Commission under the Securities Exchange Act of 1934;
(vii) any exchange registered as a national securities exchange with the Commission under the Securities Exchange Act of 1934;
(viii) any national securities association registered with the Commission under the Securities Exchange Act of 1934;
(ix) any securities information processor registered with the Commission under the Securities Exchange Act of 1934;
(x) the Municipal Securities Rulemaking Board established under the Securities Exchange Act of 1934;
(xi) the Public Company Accounting Oversight Board established under the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7211 et seq.);
(xii) the Securities Investor Protection Corporation established under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.); and
(xiii) any security-based swap execution facility, security-based swap data repository, security-based swap dealer or major security-based swap participant registered with the Commission under the Securities Exchange Act of 1934, with respect to the security-based swap activities of the person that require such person to be registered under such Act;
(C) the Commodity Futures Trading Commission, with respect to--
(i) any futures commission merchant registered with the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.), with respect to the activities of the futures commission merchant that require the futures commission merchant to be registered under that Act;
(ii) any commodity pool operator registered with the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.), with respect to the activities of the commodity pool operator that require the commodity pool operator to be registered under that Act, or a commodity pool, as defined in that Act;
(iii) any commodity trading advisor or introducing broker registered with the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.), with respect to the activities of the commodity trading advisor or introducing broker that require the commodity trading adviser or introducing broker to be registered under that Act;
(iv) any derivatives clearing organization registered with the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.), with respect to the activities of the derivatives clearing organization that require the derivatives clearing organization to be registered under that Act;
(v) any board of trade designated as a contract market by the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.);
(vi) any futures association registered with the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.);
(vii) any retail foreign exchange dealer registered with the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.), with respect to the activities of the retail foreign exchange dealer that require the retail foreign exchange dealer to be registered under that Act;
(viii) any swap execution facility, swap data repository, swap dealer, or major swap participant registered with the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.) with respect to the swap activities of the person that require such person to be registered under that Act; and
(ix) any registered entity under the Commodity Exchange Act (7 U.S.C. 1 et seq.), with respect to the activities of the registered entity that require the registered entity to be registered under that Act;
(D) the State insurance authority of the State in which an insurance company is domiciled, with respect to the insurance activities and activities that are incidental to such insurance activities of an insurance company that is subject to supervision by the State insurance authority under State insurance law; and
(E) the Federal Housing Finance Agency, with respect to Federal Home Loan Banks or the Federal Home Loan Bank System, and with respect to the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.
(13) PRUDENTIAL STANDARDS- The term ‘prudential standards’ means enhanced supervision and regulatory standards developed by the Board of Governors under section 165.
(14) SECRETARY- The term ‘Secretary’ means the Secretary of the Treasury.
(15) SECURITIES TERMS- The--
(A) terms ‘broker’, ‘dealer’, ‘issuer’, ‘nationally recognized statistical rating organization’, ‘security’, and ‘securities laws’ have the same meanings as in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c);
(B) term ‘investment adviser’ has the same meaning as in section 202 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2); and
(C) term ‘investment company’ has the same meaning as in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3).
(16) STATE- The term ‘State’ means any State, commonwealth, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, or the United States Virgin Islands.
(17) TRANSFER DATE- The term ‘transfer date’ means the date established under section 311.
(18) OTHER INCORPORATED DEFINITIONS-
(A) FEDERAL DEPOSIT INSURANCE ACT- The terms ‘bank’, ‘bank holding company’, ‘control’, ‘deposit’, ‘depository institution’, ‘Federal depository institution’, ‘Federal savings association’, ‘foreign bank’, ‘including’, ‘insured branch’, ‘insured depository institution’, ‘national member bank’, ‘national nonmember bank’, ‘savings association’, ‘State bank’, ‘State depository institution’, ‘State member bank’, ‘State nonmember bank’, ‘State savings association’, and ‘subsidiary’ have the same meanings as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).
(B) HOLDING COMPANIES- The term--
(i) ‘bank holding company’ has the same meaning as in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841);
(ii) ‘financial holding company’ has the same meaning as in section 2(p) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(p)); and
(iii) ‘savings and loan holding company’ has the same meaning as in section 10 of the Home Owners’ Loan Act (12 U.S.C. 1467a(a)).
SEC. 3. SEVERABILITY.
If any provision of this Act, an amendment made by this Act, or the application of such provision or amendment to any person or circumstance is held to be unconstitutional, the remainder of this Act, the amendments made by this Act, and the application of the provisions of such to any person or circumstance shall not be affected thereby.
SEC. 4. EFFECTIVE DATE.
Except as otherwise specifically provided in this Act or the amendments made by this Act, this Act and such amendments shall take effect 1 day after the date of enactment of this Act.
SEC. 5. BUDGETARY EFFECTS.
The budgetary effects of this Act, for the purpose of complying with the Statutory Pay-As-You-Go-Act of 2010, shall be determined by reference to the latest statement titled ‘Budgetary Effects of PAYGO Legislation’ for this Act, jointly submitted for printing in the Congressional Record by the Chairmen of the House and Senate Budget Committees, provided that such statement has been submitted prior to the vote on passage in the House acting first on this conference report or amendment between the Houses.
SEC. 6. ANTITRUST SAVINGS CLAUSE.
Nothing in this Act, or any amendment made by this Act, shall be construed to modify, impair, or supersede the operation of any of the antitrust laws, unless otherwise specified. For purposes of this section, the term ‘antitrust laws’ has the same meaning as in subsection (a) of 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.
TITLE I--FINANCIAL STABILITY
SEC. 101. SHORT TITLE.
This title may be cited as the ‘Financial Stability Act of 2010’.
SEC. 102. DEFINITIONS.
(a) In General- For purposes of this title, unless the context otherwise requires, the following definitions shall apply:
(1) BANK HOLDING COMPANY- The term ‘bank holding company’ has the same meaning as in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841). A foreign bank or company that is treated as a bank holding company for purposes of the Bank Holding Company Act of 1956, pursuant to section 8(a) of the International Banking Act of 1978 (12 U.S.C. 3106(a)), shall be treated as a bank holding company for purposes of this title.
(2) CHAIRPERSON- The term ‘Chairperson’ means the Chairperson of the Council.
(3) MEMBER AGENCY- The term ‘member agency’ means an agency represented by a voting member of the Council.
(4) NONBANK FINANCIAL COMPANY DEFINITIONS-
(A) FOREIGN NONBANK FINANCIAL COMPANY- The term ‘foreign nonbank financial company’ means a company (other than a company that is, or is treated in the United States as, a bank holding company) that is--
(i) incorporated or organized in a country other than the United States; and
(ii) predominantly engaged in, including through a branch in the United States, financial activities, as defined in paragraph (6).
(B) U.S. NONBANK FINANCIAL COMPANY- The term ‘U.S. nonbank financial company’ means a company (other than a bank holding company, a Farm Credit System institution chartered and subject to the provisions of the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), or a national securities exchange (or parent thereof), clearing agency (or parent thereof, unless the parent is a bank holding company), security-based swap execution facility, or security-based swap data repository registered with the Commission, or a board of trade designated as a contract market (or parent thereof), or a derivatives clearing organization (or parent thereof, unless the parent is a bank holding company), swap execution facility or a swap data repository registered with the Commodity Futures Trading Commission), that is--
(i) incorporated or organized under the laws of the United States or any State; and
(ii) predominantly engaged in financial activities, as defined in paragraph (6).
(C) NONBANK FINANCIAL COMPANY- The term ‘nonbank financial company’ means a U.S. nonbank financial company and a foreign nonbank financial company.
(D) NONBANK FINANCIAL COMPANY SUPERVISED BY THE BOARD OF GOVERNORS- The term ‘nonbank financial company supervised by the Board of Governors’ means a nonbank financial company that the Council has determined under section 113 shall be supervised by the Board of Governors.
(5) OFFICE OF FINANCIAL RESEARCH- The term ‘Office of Financial Research’ means the office established under section 152.
(6) PREDOMINANTLY ENGAGED- A company is ‘predominantly engaged in financial activities’ if--
(A) the annual gross revenues derived by the company and all of its subsidiaries from activities that are financial in nature (as defined in section 4(k) of the Bank Holding Company Act of 1956) and, if applicable, from the ownership or control of one or more insured depository institutions, represents 85 percent or more of the consolidated annual gross revenues of the company; or
(B) the consolidated assets of the company and all of its subsidiaries related to activities that are financial in nature (as defined in section 4(k) of the Bank Holding Company Act of 1956) and, if applicable, related to the ownership or control of one or more insured depository institutions, represents 85 percent or more of the consolidated assets of the company.
(7) SIGNIFICANT INSTITUTIONS- The terms ‘significant nonbank financial company’ and ‘significant bank holding company’ have the meanings given those terms by rule of the Board of Governors, but in no instance shall the term ‘significant nonbank financial company’ include those entities that are excluded under paragraph (4)(B).
(b) Definitional Criteria- The Board of Governors shall establish, by regulation, the requirements for determining if a company is predominantly engaged in financial activities, as defined in subsection (a)(6).
(c) Foreign Nonbank Financial Companies- For purposes of the application of subtitles A and C (other than section 113(b)) with respect to a foreign nonbank financial company, references in this title to ‘company’ or ‘subsidiary’ include only the United States activities and subsidiaries of such foreign company, except as otherwise provided.
Subtitle A--Financial Stability Oversight Council
SEC. 111. FINANCIAL STABILITY OVERSIGHT COUNCIL ESTABLISHED.
(a) Establishment- Effective on the date of enactment of this Act, there is established the Financial Stability Oversight Council.
(b) Membership- The Council shall consist of the following members:
(1) VOTING MEMBERS- The voting members, who shall each have 1 vote on the Council shall be--
(A) the Secretary of the Treasury, who shall serve as Chairperson of the Council;
(B) the Chairman of the Board of Governors;
(C) the Comptroller of the Currency;
(D) the Director of the Bureau;
(E) the Chairman of the Commission;
(F) the Chairperson of the Corporation;
(G) the Chairperson of the Commodity Futures Trading Commission;
(H) the Director of the Federal Housing Finance Agency;
(I) the Chairman of the National Credit Union Administration Board; and
(J) an independent member appointed by the President, by and with the advice and consent of the Senate, having insurance expertise.
(2) NONVOTING MEMBERS- The nonvoting members, who shall serve in an advisory capacity as a nonvoting member of the Council, shall be--
(A) the Director of the Office of Financial Research;
(B) the Director of the Federal Insurance Office;
(C) a State insurance commissioner, to be designated by a selection process determined by the State insurance commissioners;
(D) a State banking supervisor, to be designated by a selection process determined by the State banking supervisors; and
(E) a State securities commissioner (or an officer performing like functions), to be designated by a selection process determined by such State securities commissioners.
(3) NONVOTING MEMBER PARTICIPATION- The nonvoting members of the Council shall not be excluded from any of the proceedings, meetings, discussions, or deliberations of the Council, except that the Chairperson may, upon an affirmative vote of the member agencies, exclude the nonvoting members from any of the proceedings, meetings, discussions, or deliberations of the Council when necessary to safeguard and promote the free exchange of confidential supervisory information.
(c) Terms; Vacancy-
(1) TERMS- The independent member of the Council shall serve for a term of 6 years, and each nonvoting member described in subparagraphs (C), (D), and (E) of subsection (b)(2) shall serve for a term of 2 years.
(2) VACANCY- Any vacancy on the Council shall be filled in the manner in which the original appointment was made.
(3) ACTING OFFICIALS MAY SERVE- In the event of a vacancy in the office of the head of a member agency or department, and pending the appointment of a successor, or during the absence or disability of the head of a member agency or department, the acting head of the member agency or department shall serve as a member of the Council in the place of that agency or department head.
(d) Technical and Professional Advisory Committees- The Council may appoint such special advisory, technical, or professional committees as may be useful in carrying out the functions of the Council, including an advisory committee consisting of State regulators, and the members of such committees may be members of the Council, or other persons, or both.
(e) Meetings-
(1) TIMING- The Council shall meet at the call of the Chairperson or a majority of the members then serving, but not less frequently than quarterly.
(2) RULES FOR CONDUCTING BUSINESS- The Council shall adopt such rules as may be necessary for the conduct of the business of the Council. Such rules shall be rules of agency organization, procedure, or practice for purposes of section 553 of title 5, United States Code.
(f) Voting- Unless otherwise specified, the Council shall make all decisions that it is authorized or required to make by a majority vote of the voting members then serving.
(g) Nonapplicability of FACA- The Federal Advisory Committee Act (5 U.S.C. App.) shall not apply to the Council, or to any special advisory, technical, or professional committee appointed by the Council, except that, if an advisory, technical, or professional committee has one or more members who are not employees of or affiliated with the United States Government, the Council shall publish a list of the names of the members of such committee.
(h) Assistance From Federal Agencies- Any department or agency of the United States may provide to the Council and any special advisory, technical, or professional committee appointed by the Council, such services, funds, facilities, staff, and other support services as the Council may determine advisable.
(i) Compensation of Members-
(1) FEDERAL EMPLOYEE MEMBERS- All members of the Council who are officers or employees of the United States shall serve without compensation in addition to that received for their services as officers or employees of the United States.
(2) COMPENSATION FOR NON-FEDERAL MEMBER- Section 5314 of title 5, United States Code, is amended by adding at the end the following:
‘Independent Member of the Financial Stability Oversight Council (1).’.
(j) Detail of Government Employees- Any employee of the Federal Government may be detailed to the Council without reimbursement, and such detail shall be without interruption or loss of civil service status or privilege. An employee of the Federal Government detailed to the Council shall report to and be subject to oversight by the Council during the assignment to the Council, and shall be compensated by the department or agency from which the employee was detailed.
SEC. 112. COUNCIL AUTHORITY.
(a) Purposes and Duties of the Council-
(1) IN GENERAL- The purposes of the Council are--
(A) to identify risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected bank holding companies or nonbank financial companies, or that could arise outside the financial services marketplace;
(B) to promote market discipline, by eliminating expectations on the part of shareholders, creditors, and counterparties of such companies that the Government will shield them from losses in the event of failure; and
(C) to respond to emerging threats to the stability of the United States financial system.
(2) DUTIES- The Council shall, in accordance with this title--
(A) collect information from member agencies, other Federal and State financial regulatory agencies, the Federal Insurance Office and, if necessary to assess risks to the United States financial system, direct the Office of Financial Research to collect information from bank holding companies and nonbank financial companies;
(B) provide direction to, and request data and analyses from, the Office of Financial Research to support the work of the Council;
(C) monitor the financial services marketplace in order to identify potential threats to the financial stability of the United States;
(D) to monitor domestic and international financial regulatory proposals and developments, including insurance and accounting issues, and to advise Congress and make recommendations in such areas that will enhance the integrity, efficiency, competitiveness, and stability of the U.S. financial markets;
(E) facilitate information sharing and coordination among the member agencies and other Federal and State agencies regarding domestic financial services policy development, rulemaking, examinations, reporting requirements, and enforcement actions;
(F) recommend to the member agencies general supervisory priorities and principles reflecting the outcome of discussions among the member agencies;
(G) identify gaps in regulation that could pose risks to the financial stability of the United States;
(H) require supervision by the Board of Governors for nonbank financial companies that may pose risks to the financial stability of the United States in the event of their material financial distress or failure, or because of their activities pursuant to section 113;
(I) make recommendations to the Board of Governors concerning the establishment of heightened prudential standards for risk-based capital, leverage, liquidity, contingent capital, resolution plans and credit exposure reports, concentration limits, enhanced public disclosures, and overall risk management for nonbank financial companies and large, interconnected bank holding companies supervised by the Board of Governors;
(J) identify systemically important financial market utilities and payment, clearing, and settlement activities (as that term is defined in title VIII);
(K) make recommendations to primary financial regulatory agencies to apply new or heightened standards and safeguards for financial activities or practices that could create or increase risks of significant liquidity, credit, or other problems spreading among bank holding companies, nonbank financial companies, and United States financial markets;
(L) review and, as appropriate, may submit comments to the Commission and any standard-setting body with respect to an existing or proposed accounting principle, standard, or procedure;
(M) provide a forum for--
(i) discussion and analysis of emerging market developments and financial regulatory issues; and
(ii) resolution of jurisdictional disputes among the members of the Council; and
(N) annually report to and testify before Congress on--
(i) the activities of the Council;
(ii) significant financial market and regulatory developments, including insurance and accounting regulations and standards, along with an assessment of those developments on the stability of the financial system;
(iii) potential emerging threats to the financial stability of the United States;
(iv) all determinations made under section 113 or title VIII, and the basis for such determinations;
(v) all recommendations made under section 119 and the result of such recommendations; and
(vi) recommendations--
(I) to enhance the integrity, efficiency, competitiveness, and stability of United States financial markets;
(II) to promote market discipline; and
(III) to maintain investor confidence.
(b) Statements by Voting Members of the Council- At the time at which each report is submitted under subsection (a), each voting member of the Council shall--
(1) if such member believes that the Council, the Government, and the private sector are taking all reasonable steps to ensure financial stability and to mitigate systemic risk that would negatively affect the economy, submit a signed statement to Congress stating such belief; or
(2) if such member does not believe that all reasonable steps described under paragraph (1) are being taken, submit a signed statement to Congress stating what actions such member believes need to be taken in order to ensure that all reasonable steps described under paragraph (1) are taken.
(c) Testimony by the Chairperson- The Chairperson shall appear before the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate at an annual hearing, after the report is submitted under subsection (a)--
(1) to discuss the efforts, activities, objectives, and plans of the Council; and
(2) to discuss and answer questions concerning such report.
(d) Authority To Obtain Information-
(1) IN GENERAL- The Council may receive, and may request the submission of, any data or information from the Office of Financial Research, member agencies, and the Federal Insurance Office, as necessary--
(A) to monitor the financial services marketplace to identify potential risks to the financial stability of the United States; or
(B) to otherwise carry out any of the provisions of this title.
(2) SUBMISSIONS BY THE OFFICE AND MEMBER AGENCIES- Notwithstanding any other provision of law, the Office of Financial Research, any member agency, and the Federal Insurance Office, are authorized to submit information to the Council.
(3) FINANCIAL DATA COLLECTION-
(A) IN GENERAL- The Council, acting through the Office of Financial Research, may require the submission of periodic and other reports from any nonbank financial company or bank holding company for the purpose of assessing the extent to which a financial activity or financial market in which the nonbank financial company or bank holding company participates, or the nonbank financial company or bank holding company itself, poses a threat to the financial stability of the United States.
(B) MITIGATION OF REPORT BURDEN- Before requiring the submission of reports from any nonbank financial company or bank holding company that is regulated by a member agency or any primary financial regulatory agency, the Council, acting through the Office of Financial Research, shall coordinate with such agencies and shall, whenever possible, rely on information available from the Office of Financial Research or such agencies.
(C) MITIGATION IN CASE OF FOREIGN FINANCIAL COMPANIES- Before requiring the submission of reports from a company that is a foreign nonbank financial company or foreign-based bank holding company, the Council shall, acting through the Office of Financial Research, to the extent appropriate, consult with the appropriate foreign regulator of such company and, whenever possible, rely on information already being collected by such foreign regulator, with English translation.
(4) BACK-UP EXAMINATION BY THE BOARD OF GOVERNORS- If the Council is unable to determine whether the financial activities of a U.S. nonbank financial company pose a threat to the financial stability of the United States, based on information or reports obtained under paragraphs (1) and (3), discussions with management, and publicly available information, the Council may request the Board of Governors, and the Board of Governors is authorized, to conduct an examination of the U.S. nonbank financial company for the sole purpose of determining whether the nonbank financial company should be supervised by the Board of Governors for purposes of this title.
(5) CONFIDENTIALITY-
(A) IN GENERAL- The Council, the Office of Financial Research, and the other member agencies shall maintain the confidentiality of any data, information, and reports submitted under this title.
(B) RETENTION OF PRIVILEGE- The submission of any nonpublicly available data or information under this subsection and subtitle B shall not constitute a waiver of, or otherwise affect, any privilege arising under Federal or State law (including the rules of any Federal or State court) to which the data or information is otherwise subject.
(C) FREEDOM OF INFORMATION ACT- Section 552 of title 5, United States Code, including the exceptions thereunder, shall apply to any data or information submitted under this subsection and subtitle B.
SEC. 113. AUTHORITY TO REQUIRE SUPERVISION AND REGULATION OF CERTAIN NONBANK FINANCIAL COMPANIES.
(a) U.S. Nonbank Financial Companies Supervised by the Board of Governors-
(1) DETERMINATION- The Council, on a nondelegable basis and by a vote of not fewer than 2/3 of the voting members then serving, including an affirmative vote by the Chairperson, may determine that a U.S. nonbank financial company shall be supervised by the Board of Governors and shall be subject to prudential standards, in accordance with this title, if the Council determines that material financial distress at the U.S. nonbank financial company, or the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the U.S. nonbank financial company, could pose a threat to the financial stability of the United States.
(2) CONSIDERATIONS- In making a determination under paragraph (1), the Council shall consider--
(A) the extent of the leverage of the company;
(B) the extent and nature of the off-balance-sheet exposures of the company;
(C) the extent and nature of the transactions and relationships of the company with other significant nonbank financial companies and significant bank holding companies;
(D) the importance of the company as a source of credit for households, businesses, and State and local governments and as a source of liquidity for the United States financial system;
(E) the importance of the company as a source of credit for low-income, minority, or underserved communities, and the impact that the failure of such company would have on the availability of credit in such communities;
(F) the extent to which assets are managed rather than owned by the company, and the extent to which ownership of assets under management is diffuse;
(G) the nature, scope, size, scale, concentration, interconnectedness, and mix of the activities of the company;
(H) the degree to which the company is already regulated by 1 or more primary financial regulatory agencies;
(I) the amount and nature of the financial assets of the company;
(J) the amount and types of the liabilities of the company, including the degree of reliance on short-term funding; and
(K) any other risk-related factors that the Council deems appropriate.
(b) Foreign Nonbank Financial Companies Supervised by the Board of Governors-
(1) DETERMINATION- The Council, on a nondelegable basis and by a vote of not fewer than 2/3 of the voting members then serving, including an affirmative vote by the Chairperson, may determine that a foreign nonbank financial company shall be supervised by the Board of Governors and shall be subject to prudential standards, in accordance with this title, if the Council determines that material financial distress at the foreign nonbank financial company, or the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the foreign nonbank financial company, could pose a threat to the financial stability of the United States.
(2) CONSIDERATIONS- In making a determination under paragraph (1), the Council shall consider--
(A) the extent of the leverage of the company;
(B) the extent and nature of the United States related off-balance-sheet exposures of the company;
(C) the extent and nature of the transactions and relationships of the company with other significant nonbank financial companies and significant bank holding companies;
(D) the importance of the company as a source of credit for United States households, businesses, and State and local governments and as a source of liquidity for the United States financial system;
(E) the importance of the company as a source of credit for low-income, minority, or underserved communities in the United States, and the impact that the failure of such company would have on the availability of credit in such communities;
(F) the extent to which assets are managed rather than owned by the company and the extent to which ownership of assets under management is diffuse;
(G) the nature, scope, size, scale, concentration, interconnectedness, and mix of the activities of the company;
(H) the extent to which the company is subject to prudential standards on a consolidated basis in its home country that are administered and enforced by a comparable foreign supervisory authority;
(I) the amount and nature of the United States financial assets of the company;
(J) the amount and nature of the liabilities of the company used to fund activities and operations in the United States, including the degree of reliance on short-term funding; and
(K) any other risk-related factors that the Council deems appropriate.
(c) Antievasion-
(1) DETERMINATIONS- In order to avoid evasion of this title, the Council, on its own initiative or at the request of the Board of Governors, may determine, on a nondelegable basis and by a vote of not fewer than 2/3 of the voting members then serving, including an affirmative vote by the Chairperson, that--
(A) material financial distress related to, or the nature, scope, size, scale, concentration, interconnectedness, or mix of, the financial activities conducted directly or indirectly by a company incorporated or organized under the laws of the United States or any State or the financial activities in the United States of a company incorporated or organized in a country other than the United States would pose a threat to the financial stability of the United States, based on consideration of the factors in subsection (a)(2) or (b)(2), as applicable;
(B) the company is organized or operates in such a manner as to evade the application of this title; and
(C) such financial activities of the company shall be supervised by the Board of Governors and subject to prudential standards in accordance with this title, consistent with paragraph (3).
(2) REPORT- Upon making a determination under paragraph (1), the Council shall submit a report to the appropriate committees of Congress detailing the reasons for making such determination.
(3) CONSOLIDATED SUPERVISION OF ONLY FINANCIAL ACTIVITIES; ESTABLISHMENT OF AN INTERMEDIATE HOLDING COMPANY-
(A) ESTABLISHMENT OF AN INTERMEDIATE HOLDING COMPANY- Upon a determination under paragraph (1), the company that is the subject of the determination may establish an intermediate holding company in which the financial activities of such company and its subsidiaries shall be conducted (other than the activities described in section 167(b)(2)) in compliance with any regulations or guidance provided by the Board of Governors. Such intermediate holding company shall be subject to the supervision of the Board of Governors and to prudential standards under this title as if the intermediate holding company were a nonbank financial company supervised by the Board of Governors.
(B) ACTION OF THE BOARD OF GOVERNORS- To facilitate the supervision of the financial activities subject to the determination in paragraph (1), the Board of Governors may require a company to establish an intermediate holding company, as provided for in section 167, which would be subject to the supervision of the Board of Governors and to prudential standards under this title, as if the intermediate holding company were a nonbank financial company supervised by the Board of Governors.
(4) NOTICE AND OPPORTUNITY FOR HEARING AND FINAL DETERMINATION; JUDICIAL REVIEW- Subsections (d) through (h) shall apply to determinations made by the Council pursuant to paragraph (1) in the same manner as such subsections apply to nonbank financial companies.
(5) COVERED FINANCIAL ACTIVITIES- For purposes of this subsection, the term ‘financial activities’--
(A) means activities that are financial in nature (as defined in section 4(k) of the Bank Holding Company Act of 1956);
(B) includes the ownership or control of one or more insured depository institutions; and
(C) does not include internal financial activities conducted for the company or any affiliate thereof, including internal treasury, investment, and employee benefit functions.
(6) ONLY FINANCIAL ACTIVITIES SUBJECT TO PRUDENTIAL SUPERVISION- Nonfinancial activities of the company shall not be subject to supervision by the Board of Governors and prudential standards of the Board. For purposes of this Act, the financial activities that are the subject of the determination in paragraph (1) shall be subject to the same requirements as a nonbank financial company supervised by the Board of Governors. Nothing in this paragraph shall prohibit or limit the authority of the Board of Governors to apply prudential standards under this title to the financial activities that are subject to the determination in paragraph (1).
(d) Reevaluation and Rescission- The Council shall--
(1) not less frequently than annually, reevaluate each determination made under subsections (a) and (b) with respect to such nonbank financial company supervised by the Board of Governors; and
(2) rescind any such determination, if the Council, by a vote of not fewer than 2/3 of the voting members then serving, including an affirmative vote by the Chairperson, determines that the nonbank financial company no longer meets the standards under subsection (a) or (b), as applicable.
(e) Notice and Opportunity for Hearing and Final Determination-
(1) IN GENERAL- The Council shall provide to a nonbank financial company written notice of a proposed determination of the Council, including an explanation of the basis of the proposed determination of the Council, that a nonbank financial company shall be supervised by the Board of Governors and shall be subject to prudential standards in accordance with this title.
(2) HEARING- Not later than 30 days after the date of receipt of any notice of a proposed determination under paragraph (1), the nonbank financial company may request, in writing, an opportunity for a written or oral hearing before the Council to contest the proposed determination. Upon receipt of a timely request, the Council shall fix a time (not later than 30 days after the date of receipt of the request) and place at which such company may appear, personally or through counsel, to submit written materials (or, at the sole discretion of the Council, oral testimony and oral argument).
(3) FINAL DETERMINATION- Not later than 60 days after the date of a hearing under paragraph (2), the Council shall notify the nonbank financial company of the final determination of the Council, which shall contain a statement of the basis for the decision of the Council.
(4) NO HEARING REQUESTED- If a nonbank financial company does not make a timely request for a hearing, the Council shall notify the nonbank financial company, in writing, of the final determination of the Council under subsection (a) or (b), as applicable, not later than 10 days after the date by which the company may request a hearing under paragraph (2).
(f) Emergency Exception-
(1) IN GENERAL- The Council may waive or modify the requirements of subsection (e) with respect to a nonbank financial company, if the Council determines, by a vote of not fewer than 2/3 of the voting members then serving, including an affirmative vote by the Chairperson, that such waiver or modification is necessary or appropriate to prevent or mitigate threats posed by the nonbank financial company to the financial stability of the United States.
(2) NOTICE- The Council shall provide notice of a waiver or modification under this subsection to the nonbank financial company concerned as soon as practicable, but not later than 24 hours after the waiver or modification is granted.
(3) INTERNATIONAL COORDINATION- In making a determination under paragraph (1), the Council shall consult with the appropriate home country supervisor, if any, of the foreign nonbank financial company that is being considered for such a determination.
(4) OPPORTUNITY FOR HEARING- The Council shall allow a nonbank financial company to request, in writing, an opportunity for a written or oral hearing before the Council to contest a waiver or modification under this subsection, not later than 10 days after the date of receipt of notice of the waiver or modification by the company. Upon receipt of a timely request, the Council shall fix a time (not later than 15 days after the date of receipt of the request) and place at which the nonbank financial company may appear, personally or through counsel, to submit written materials (or, at the sole discretion of the Council, oral testimony and oral argument).
(5) NOTICE OF FINAL DETERMINATION- Not later than 30 days after the date of any hearing under paragraph (4), the Council shall notify the subject nonbank financial company of the final determination of the Council under this subsection, which shall contain a statement of the basis for the decision of the Council.
(g) Consultation- The Council shall consult with the primary financial regulatory agency, if any, for each nonbank financial company or subsidiary of a nonbank financial company that is being considered for supervision by the Board of Governors under this section before the Council makes any final determination with respect to such nonbank financial company under subsection (a), (b), or (c).
(h) Judicial Review- If the Council makes a final determination under this section with respect to a nonbank financial company, such nonbank financial company may, not later than 30 days after the date of receipt of the notice of final determination under subsection (d)(2), (e)(3), or (f)(5), bring an action in the United States district court for the judicial district in which the home office of such nonbank financial company is located, or in the United States District Court for the District of Columbia, for an order requiring that the final determination be rescinded, and the court shall, upon review, dismiss such action or direct the final determination to be rescinded. Review of such an action shall be limited to whether the final determination made under this section was arbitrary and capricious.
(i) International Coordination- In exercising its duties under this title with respect to foreign nonbank financial companies, foreign-based bank holding companies, and cross-border activities and markets, the Council shall consult with appropriate foreign regulatory authorities, to the extent appropriate.
SEC. 114. REGISTRATION OF NONBANK FINANCIAL COMPANIES SUPERVISED BY THE BOARD OF GOVERNORS.
Not later than 180 days after the date of a final Council determination under section 113 that a nonbank financial company is to be supervised by the Board of Governors, such company shall register with the Board of Governors, on forms prescribed by the Board of Governors, which shall include such information as the Board of Governors, in consultation with the Council, may deem necessary or appropriate to carry out this title.
SEC. 115. ENHANCED SUPERVISION AND PRUDENTIAL STANDARDS FOR NONBANK FINANCIAL COMPANIES SUPERVISED BY THE BOARD OF GOVERNORS AND CERTAIN BANK HOLDING COMPANIES.
(a) In General-
(1) PURPOSE- In order to prevent or mitigate risks to the financial stability of the United States that could arise from the material financial distress, failure, or ongoing activities of large, interconnected financial institutions, the Council may make recommendations to the Board of Governors concerning the establishment and refinement of prudential standards and reporting and disclosure requirements applicable to nonbank financial companies supervised by the Board of Governors and large, interconnected bank holding companies, that--
(A) are more stringent than those applicable to other nonbank financial companies and bank holding companies that do not present similar risks to the financial stability of the United States; and
(B) increase in stringency, based on the considerations identified in subsection (b)(3).
(2) RECOMMENDED APPLICATION OF REQUIRED STANDARDS- In making recommendations under this section, the Council may--
(A) differentiate among companies that are subject to heightened standards on an individual basis or by category, taking into consideration their capital structure, riskiness, complexity, financial activities (including the financial activities of their subsidiaries), size, and any other risk-related factors that the Council deems appropriate; or
(B) recommend an asset threshold that is higher than $50,000,000,000 for the application of any standard described in subsections (c) through (g).
(b) Development of Prudential Standards-
(1) IN GENERAL- The recommendations of the Council under subsection (a) may include--
(A) risk-based capital requirements;
(B) leverage limits;
(C) liquidity requirements;
(D) resolution plan and credit exposure report requirements;
(E) concentration limits;
(F) a contingent capital requirement;
(G) enhanced public disclosures;
(H) short-term debt limits; and
(I) overall risk management requirements.
(2) PRUDENTIAL STANDARDS FOR FOREIGN FINANCIAL COMPANIES- In making recommendations concerning the standards set forth in paragraph (1) that would apply to foreign nonbank financial companies supervised by the Board of Governors or foreign-based bank holding companies, the Council shall--
(A) give due regard to the principle of national treatment and equality of competitive opportunity; and
(B) take into account the extent to which the foreign nonbank financial company or foreign-based bank holding company is subject on a consolidated basis to home country standards that are comparable to those applied to financial companies in the United States.
(3) CONSIDERATIONS- In making recommendations concerning prudential standards under paragraph (1), the Council shall--
(A) take into account differences among nonbank financial companies supervised by the Board of Governors and bank holding companies described in subsection (a), based on--
(i) the factors described in subsections (a) and (b) of section 113;
(ii) whether the company owns an insured depository institution;
(iii) nonfinancial activities and affiliations of the company; and
(iv) any other factors that the Council determines appropriate;
(B) to the extent possible, ensure that small changes in the factors listed in subsections (a) and (b) of section 113 would not result in sharp, discontinuous changes in the prudential standards established under section 165; and
(C) adapt its recommendations as appropriate in light of any predominant line of business of such company, including assets under management or other activities for which particular standards may not be appropriate.
(c) Contingent Capital-
(1) STUDY REQUIRED- The Council shall conduct a study of the feasibility, benefits, costs, and structure of a contingent capital requirement for nonbank financial companies supervised by the Board of Governors and bank holding companies described in subsection (a), which study shall include--
(A) an evaluation of the degree to which such requirement would enhance the safety and soundness of companies subject to the requirement, promote the financial stability of the United States, and reduce risks to United States taxpayers;
(B) an evaluation of the characteristics and amounts of contingent capital that should be required;
(C) an analysis of potential prudential standards that should be used to determine whether the contingent capital of a company would be converted to equity in times of financial stress;
(D) an evaluation of the costs to companies, the effects on the structure and operation of credit and other financial markets, and other economic effects of requiring contingent capital;
(E) an evaluation of the effects of such requirement on the international competitiveness of companies subject to the requirement and the prospects for international coordination in establishing such requirement; and
(F) recommendations for implementing regulations.
(2) REPORT- The Council shall submit a report to Congress regarding the study required by paragraph (1) not later than 2 years after the date of enactment of this Act.
(3) RECOMMENDATIONS-
(A) IN GENERAL- Subsequent to submitting a report to Congress under paragraph (2), the Council may make recommendations to the Board of Governors to require any nonbank financial company supervised by the Board of Governors and any bank holding company described in subsection (a) to maintain a minimum amount of contingent capital that is convertible to equity in times of financial stress.
(B) FACTORS TO CONSIDER- In making recommendations under this subsection, the Council shall consider--
(i) an appropriate transition period for implementation of a conversion under this subsection;
(ii) the factors described in subsection (b)(3);
(iii) capital requirements applicable to a nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a), and subsidiaries thereof;
(iv) results of the study required by paragraph (1); and
(v) any other factor that the Council deems appropriate.
(d) Resolution Plan and Credit Exposure Reports-
(1) RESOLUTION PLAN- The Council may make recommendations to the Board of Governors concerning the requirement that each nonbank financial company supervised by the Board of Governors and each bank holding company described in subsection (a) report periodically to the Council, the Board of Governors, and the Corporation, the plan of such company for rapid and orderly resolution in the event of material financial distress or failure.
(2) CREDIT EXPOSURE REPORT- The Council may make recommendations to the Board of Governors concerning the advisability of requiring each nonbank financial company supervised by the Board of Governors and bank holding company described in subsection (a) to report periodically to the Council, the Board of Governors, and the Corporation on--
(A) the nature and extent to which the company has credit exposure to other significant nonbank financial companies and significant bank holding companies; and
(B) the nature and extent to which other such significant nonbank financial companies and significant bank holding companies have credit exposure to that company.
(e) Concentration Limits- In order to limit the risks that the failure of any individual company could pose to nonbank financial companies supervised by the Board of Governors or bank holding companies described in subsection (a), the Council may make recommendations to the Board of Governors to prescribe standards to limit such risks, as set forth in section 165.
(f) Enhanced Public Disclosures- The Council may make recommendations to the Board of Governors to require periodic public disclosures by bank holding companies described in subsection (a) and by nonbank financial companies supervised by the Board of Governors, in order to support market evaluation of the risk profile, capital adequacy, and risk management capabilities thereof.
(g) Short-term Debt Limits- The Council may make recommendations to the Board of Governors to require short-term debt limits to mitigate the risks that an over-accumulation of such debt could pose to bank holding companies described in subsection (a), nonbank financial companies supervised by the Board of Governors, or the financial system.
SEC. 116. REPORTS.
(a) In General- Subject to subsection (b), the Council, acting through the Office of Financial Research, may require a bank holding company with total consolidated assets of $50,000,000,000 or greater or a nonbank financial company supervised by the Board of Governors, and any subsidiary thereof, to submit certified reports to keep the Council informed as to--
(1) the financial condition of the company;
(2) systems for monitoring and controlling financial, operating, and other risks;
(3) transactions with any subsidiary that is a depository institution; and
(4) the extent to which the activities and operations of the company and any subsidiary thereof, could, under adverse circumstances, have the potential to disrupt financial markets or affect the overall financial stability of the United States.
(b) Use of Existing Reports-
(1) IN GENERAL- For purposes of compliance with subsection (a), the Council, acting through the Office of Financial Research, shall, to the fullest extent possible, use--
(A) reports that a bank holding company, nonbank financial company supervised by the Board of Governors, or any functionally regulated subsidiary of such company has been required to provide to other Federal or State regulatory agencies or to a relevant foreign supervisory authority;
(B) information that is otherwise required to be reported publicly; and
(C) externally audited financial statements.
(2) AVAILABILITY- Each bank holding company described in subsection (a) and nonbank financial company supervised by the Board of Governors, and any subsidiary thereof, shall provide to the Council, at the request of the Council, copies of all reports referred to in paragraph (1).
(3) CONFIDENTIALITY- The Council shall maintain the confidentiality of the reports obtained under subsection (a) and paragraph (1)(A) of this subsection.
SEC. 117. TREATMENT OF CERTAIN COMPANIES THAT CEASE TO BE BANK HOLDING COMPANIES.
(a) Applicability- This section shall apply to--
(1) any entity that--
(A) was a bank holding company having total consolidated assets equal to or greater than $50,000,000,000 as of January 1, 2010; and
(B) received financial assistance under or participated in the Capital Purchase Program established under the Troubled Asset Relief Program authorized by the Emergency Economic Stabilization Act of 2008; and
(2) any successor entity (as defined by the Board of Governors, in consultation with the Council) to an entity described in paragraph (1).
(b) Treatment- If an entity described in subsection (a) ceases to be a bank holding company at any time after January 1, 2010, then such entity shall be treated as a nonbank financial company supervised by the Board of Governors, as if the Council had made a determination under section 113 with respect to that entity.
(c) Appeal-
(1) REQUEST FOR HEARING- An entity may request, in writing, an opportunity for a written or oral hearing before the Council to appeal its treatment as a nonbank financial company supervised by the Board of Governors in accordance with this section. Upon receipt of the request, the Council shall fix a time (not later than 30 days after the date of receipt of the request) and place at which such entity may appear, personally or through counsel, to submit written materials (or, at the sole discretion of the Council, oral testimony and oral argument).
(2) DECISION-
(A) PROPOSED DECISION- A Council decision to grant an appeal under this subsection shall be made by a vote of not fewer than 2/3 of the voting members then serving, including an affirmative vote by the Chairperson. Not later than 60 days after the date of a hearing under paragraph (1), the Council shall submit a report to, and may testify before, the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the proposed decision of the Council regarding an appeal under paragraph (1), which report shall include a statement of the basis for the proposed decision of the Council.
(B) NOTICE OF FINAL DECISION- The Council shall notify the subject entity of the final decision of the Council regarding an appeal under paragraph (1), which notice shall contain a statement of the basis for the final decision of the Council, not later than 60 days after the later of--
(i) the date of the submission of the report under subparagraph (A); or
(ii) if, not later than 1 year after the date of submission of the report under subparagraph (A), the Committee on Banking, Housing, and Urban Affairs of the Senate or the Committee on Financial Services of the House of Representatives holds one or more hearings regarding such report, the date of the last such hearing.
(C) CONSIDERATIONS- In making a decision regarding an appeal under paragraph (1), the Council shall consider whether the company meets the standards under section 113(a) or 113(b), as applicable, and the definition of the term ‘nonbank financial company’ under section 102. The decision of the Council shall be final, subject to the review under paragraph (3).
(3) REVIEW- If the Council denies an appeal under this subsection, the Council shall, not less frequently than annually, review and reevaluate the decision.
SEC. 118. COUNCIL FUNDING.
Any expenses of the Council shall be treated as expenses of, and paid by, the Office of Financial Research.
SEC. 119. RESOLUTION OF SUPERVISORY JURISDICTIONAL DISPUTES AMONG MEMBER AGENCIES.
(a) Request for Council Recommendation- The Council shall seek to resolve a dispute among 2 or more member agencies, if--
(1) a member agency has a dispute with another member agency about the respective jurisdiction over a particular bank holding company, nonbank financial company, or financial activity or product (excluding matters for which another dispute mechanism specifically has been provided under title X);
(2) the Council determines that the disputing agencies cannot, after a demonstrated good faith effort, resolve the dispute without the intervention of the Council; and
(3) any of the member agencies involved in the dispute--
(A) provides all other disputants prior notice of the intent to request dispute resolution by the Council; and
(B) requests in writing, not earlier than 14 days after providing the notice described in subparagraph (A), that the Council seek to resolve the dispute.
(b) Council Recommendation- The Council shall seek to resolve each dispute described in subsection (a)--
(1) within a reasonable time after receiving the dispute resolution request;
(2) after consideration of relevant information provided by each agency party to the dispute; and
(3) by agreeing with 1 of the disputants regarding the entirety of the matter, or by determining a compromise position.
(c) Form of Recommendation- Any Council recommendation under this section shall--
(1) be in writing;
(2) include an explanation of the reasons therefor; and
(3) be approved by the affirmative vote of 2/3 of the voting members of the Council then serving.
(d) Nonbinding Effect- Any recommendation made by the Council under subsection (c) shall not be binding on the Federal agencies that are parties to the dispute.
SEC. 120. ADDITIONAL STANDARDS APPLICABLE TO ACTIVITIES OR PRACTICES FOR FINANCIAL STABILITY PURPOSES.
(a) In General- The Council may provide for more stringent regulation of a financial activity by issuing recommendations to the primary financial regulatory agencies to apply new or heightened standards and safeguards, including standards enumerated in section 115, for a financial activity or practice conducted by bank holding companies or nonbank financial companies under their respective jurisdictions, if the Council determines that the conduct, scope, nature, size, scale, concentration, or interconnectedness of such activity or practice could create or increase the risk of significant liquidity, credit, or other problems spreading among bank holding companies and nonbank financial companies, financial markets of the United States, or low-income, minority, or underserved communities.
(b) Procedure for Recommendations to Regulators-
(1) NOTICE AND OPPORTUNITY FOR COMMENT- The Council shall consult with the primary financial regulatory agencies and provide notice to the public and opportunity for comment for any proposed recommendation that the primary financial regulatory agencies apply new or heightened standards and safeguards for a financial activity or practice.
(2) CRITERIA- The new or heightened standards and safeguards for a financial activity or practice recommended under paragraph (1)--
(A) shall take costs to long-term economic growth into account; and
(B) may include prescribing the conduct of the activity or practice in specific ways (such as by limiting its scope, or applying particular capital or risk management requirements to the conduct of the activity) or prohibiting the activity or practice.
(c) Implementation of Recommended Standards-
(1) ROLE OF PRIMARY FINANCIAL REGULATORY AGENCY-
(A) IN GENERAL- Each primary financial regulatory agency may impose, require reports regarding, examine for compliance with, and enforce standards in accordance with this section with respect to those entities for which it is the primary financial regulatory agency.
(B) RULE OF CONSTRUCTION- The authority under this paragraph is in addition to, and does not limit, any other authority of a primary financial regulatory agency. Compliance by an entity with actions taken by a primary financial regulatory agency under this section shall be enforceable in accordance with the statutes governing the respective jurisdiction of the primary financial regulatory agency over the entity, as if the agency action were taken under those statutes.
(2) IMPOSITION OF STANDARDS- The primary financial regulatory agency shall impose the standards recommended by the Council in accordance with subsection (a), or similar standards that the Council deems acceptable, or shall explain in writing to the Council, not later than 90 days after the date on which the Council issues the recommendation, why the agency has determined not to follow the recommendation of the Council.
(d) Report to Congress- The Council shall report to Congress on--
(1) any recommendations issued by the Council under this section;
(2) the implementation of, or failure to implement, such recommendation on the part of a primary financial regulatory agency; and
(3) in any case in which no primary financial regulatory agency exists for the nonbank financial company conducting financial activities or practices referred to in subsection (a), recommendations for legislation that would prevent such activities or practices from threatening the stability of the financial system of the United States.
(e) Effect of Rescission of Identification-
(1) NOTICE- The Council may recommend to the relevant primary financial regulatory agency that a financial activity or practice no longer requires any standards or safeguards implemented under this section.
(2) DETERMINATION OF PRIMARY FINANCIAL REGULATORY AGENCY TO CONTINUE-
(A) IN GENERAL- Upon receipt of a recommendation under paragraph (1), a primary financial regulatory agency that has imposed standards under this section shall determine whether such standards should remain in effect.
(B) APPEAL PROCESS- Each primary financial regulatory agency that has imposed standards under this section shall promulgate regulations to establish a procedure under which entities under its jurisdiction may appeal a determination by such agency under this paragraph that standards imposed under this section should remain in effect.
SEC. 121. MITIGATION OF RISKS TO FINANCIAL STABILITY.
(a) Mitigatory Actions- If the Board of Governors determines that a bank holding company with total consolidated assets of $50,000,000,000 or more, or a nonbank financial company supervised by the Board of Governors, poses a grave threat to the financial stability of the United States, the Board of Governors, upon an affirmative vote of not fewer than 2/3 of the voting members of the Council then serving, shall--
(1) limit the ability of the company to merge with, acquire, consolidate with, or otherwise become affiliated with another company;
(2) restrict the ability of the company to offer a financial product or products;
(3) require the company to terminate one or more activities;
(4) impose conditions on the manner in which the company conducts 1 or more activities; or
(5) if the Board of Governors determines that the actions described in paragraphs (1) through (4) are inadequate to mitigate a threat to the financial stability of the United States in its recommendation, require the company to sell or otherwise transfer assets or off-balance-sheet items to unaffiliated entities.
(b) Notice and Hearing-
(1) IN GENERAL- The Board of Governors, in consultation with the Council, shall provide to a company described in subsection (a) written notice that such company is being considered for mitigatory action pursuant to this section, including an explanation of the basis for, and description of, the proposed mitigatory action.
(2) HEARING- Not later than 30 days after the date of receipt of notice under paragraph (1), the company may request, in writing, an opportunity for a written or oral hearing before the Board of Governors to contest the proposed mitigatory action. Upon receipt of a timely request, the Board of Governors shall fix a time (not later than 30 days after the date of receipt of the request) and place at which such company may appear, personally or through counsel, to submit written materials (or, at the discretion of the Board of Governors, in consultation with the Council, oral testimony and oral argument).
(3) DECISION- Not later than 60 days after the date of a hearing under paragraph (2), or not later than 60 days after the provision of a notice under paragraph (1) if no hearing was held, the Board of Governors shall notify the company of the final decision of the Board of Governors, including the results of the vote of the Council, as described in subsection (a).
(c) Factors for Consideration- The Board of Governors and the Council shall take into consideration the factors set forth in subsection (a) or (b) of section 113, as applicable, in making any determination under subsection (a).
(d) Application to Foreign Financial Companies- The Board of Governors may prescribe regulations regarding the application of this section to foreign nonbank financial companies supervised by the Board of Governors and foreign-based bank holding companies--
(1) giving due regard to the principle of national treatment and equality of competitive opportunity; and
(2) taking into account the extent to which the foreign nonbank financial company or foreign-based bank holding company is subject on a consolidated basis to home country standards that are comparable to those applied to financial companies in the United States.
SEC. 122. GAO AUDIT OF COUNCIL.
(a) Authority To Audit- The Comptroller General of the United States may audit the activities of--
(1) the Council; and
(2) any person or entity acting on behalf of or under the authority of the Council, to the extent that such activities relate to work for the Council by such person or entity.
(b) Access to Information-
(1) IN GENERAL- Notwithstanding any other provision of law, the Comptroller General shall, upon request and at such reasonable time and in such reasonable form as the Comptroller General may request, have access to--
(A) any records or other information under the control of or used by the Council;
(B) any records or other information under the control of a person or entity acting on behalf of or under the authority of the Council, to the extent that such records or other information is relevant to an audit under subsection (a); and
(C) the officers, directors, employees, financial advisors, staff, working groups, and agents and representatives of the Council (as related to the activities on behalf of the Council of such agent or representative), at such reasonable times as the Comptroller General may request.
(2) COPIES- The Comptroller General may make and retain copies of such books, accounts, and other records, access to which is granted under this section, as the Comptroller General considers appropriate.
SEC. 123. STUDY OF THE EFFECTS OF SIZE AND COMPLEXITY OF FINANCIAL INSTITUTIONS ON CAPITAL MARKET EFFICIENCY AND ECONOMIC GROWTH.
(a) Study Required-
(1) IN GENERAL- The Chairperson of the Council shall carry out a study of the economic impact of possible financial services regulatory limitations intended to reduce systemic risk. Such study shall estimate the benefits and costs on the efficiency of capital markets, on the financial sector, and on national economic growth, of--
(A) explicit or implicit limits on the maximum size of banks, bank holding companies, and other large financial institutions;
(B) limits on the organizational complexity and diversification of large financial institutions;
(C) requirements for operational separation between business units of large financial institutions in order to expedite resolution in case of failure;
(D) limits on risk transfer between business units of large financial institutions;
(E) requirements to carry contingent capital or similar mechanisms;
(F) limits on commingling of commercial and financial activities by large financial institutions;
(G) segregation requirements between traditional financial activities and trading or other high-risk operations in large financial institutions; and
(H) other limitations on the activities or structure of large financial institutions that may be useful to limit systemic risk.
(2) RECOMMENDATIONS- The study required by this section shall include recommendations for the optimal structure of any limits considered in subparagraphs (A) through (E), in order to maximize their effectiveness and minimize their economic impact.
(b) Report- Not later than the end of the 180-day period beginning on the date of enactment of this title, and not later than every 5 years thereafter, the Chairperson shall issue a report to the Congress containing any findings and determinations made in carrying out the study required under subsection (a).
Subtitle B--Office of Financial Research
SEC. 151. DEFINITIONS.
For purposes of this subtitle--
(1) the terms ‘Office’ and ‘Director’ mean the Office of Financial Research established under this subtitle and the Director thereof, respectively;
(2) the term ‘financial company’ has the same meaning as in title II, and includes an insured depository institution and an insurance company;
(3) the term ‘Data Center’ means the data center established under section 154;
(4) the term ‘Research and Analysis Center’ means the research and analysis center established under section 154;
(5) the term ‘financial transaction data’ means the structure and legal description of a financial contract, with sufficient detail to describe the rights and obligations between counterparties and make possible an independent valuation;
(6) the term ‘position data’--
(A) means data on financial assets or liabilities held on the balance sheet of a financial company, where positions are created or changed by the execution of a financial transaction; and
(B) includes information that identifies counterparties, the valuation by the financial company of the position, and information that makes possible an independent valuation of the position;
(7) the term ‘financial contract’ means a legally binding agreement between 2 or more counterparties, describing rights and obligations relating to the future delivery of items of intrinsic or extrinsic value among the counterparties; and
(8) the term ‘financial instrument’ means a financial contract in which the terms and conditions are publicly available, and the roles of one or more of the counterparties are assignable without the consent of any of the other counterparties (including common stock of a publicly traded company, government bonds, or exchange traded futures and options contracts).
SEC. 152. OFFICE OF FINANCIAL RESEARCH ESTABLISHED.
(a) Establishment- There is established within the Department of the Treasury the Office of Financial Research.
(b) Director-
(1) IN GENERAL- The Office shall be headed by a Director, who shall be appointed by the President, by and with the advice and consent of the Senate.
(2) TERM OF SERVICE- The Director shall serve for a term of 6 years, except that, in the event that a successor is not nominated and confirmed by the end of the term of service of a Director, the Director may continue to serve until such time as the next Director is appointed and confirmed.
(3) EXECUTIVE LEVEL- The Director shall be compensated at Level III of the Executive Schedule.
(4) PROHIBITION ON DUAL SERVICE- The individual serving in the position of Director may not, during such service, also serve as the head of any financial regulatory agency.
(5) RESPONSIBILITIES, DUTIES, AND AUTHORITY- The Director shall have sole discretion in the manner in which the Director fulfills the responsibilities and duties and exercises the authorities described in this subtitle.
(c) Budget- The Director, in consultation with the Chairperson, shall establish the annual budget of the Office.
(d) Office Personnel-
(1) IN GENERAL- The Director, in consultation with the Chairperson, may fix the number of, and appoint and direct, all employees of the Office.
(2) COMPENSATION- The Director, in consultation with the Chairperson, shall fix, adjust, and administer the pay for all employees of the Office, without regard to chapter 51 or subchapter III of chapter 53 of title 5, United States Code, relating to classification of positions and General Schedule pay rates.
(3) COMPARABILITY- Section 1206(a) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1833b(a)) is amended--
(A) by striking ‘Finance Board,’ and inserting ‘Finance Board, the Office of Financial Research, and the Bureau of Consumer Financial Protection’; and
(B) by striking ‘and the Office of Thrift Supervision,’.
(4) SENIOR EXECUTIVES- Section 3132(a)(1)(D) of title 5, United States Code, is amended by striking ‘and the National Credit Union Administration;’ and inserting ‘the National Credit Union Administration, the Bureau of Consumer Financial Protection, and the Office of Financial Research;’.
(e) Assistance From Federal Agencies- Any department or agency of the United States may provide to the Office and any special advisory, technical, or professional committees appointed by the Office, such services, funds, facilities, staff, and other support services as the Office may determine advisable. Any Federal Government employee may be detailed to the Office without reimbursement, and such detail shall be without interruption or loss of civil service status or privilege.
(f) Procurement of Temporary and Intermittent Services- The Director may procure temporary and intermittent services under section 3109(b) of title 5, United States Code, at rates for individuals which do not exceed the daily equivalent of the annual rate of basic pay prescribed for Level V of the Executive Schedule under section 5316 of such title.
(g) Post-employment Prohibitions- The Secretary, with the concurrence of the Director of the Office of Government Ethics, shall issue regulations prohibiting the Director and any employee of the Office who has had access to the transaction or position data maintained by the Data Center or other business confidential information about financial entities required to report to the Office from being employed by or providing advice or consulting services to a financial company, for a period of 1 year after last having had access in the course of official duties to such transaction or position data or business confidential information, regardless of whether that entity is required to report to the Office. For employees whose access to business confidential information was limited, the regulations may provide, on a case-by-case basis, for a shorter period of post-employment prohibition, provided that the shorter period does not compromise business confidential information.
(h) Technical and Professional Advisory Committees- The Office, in consultation with the Chairperson, may appoint such special advisory, technical, or professional committees as may be useful in carrying out the functions of the Office, and the members of such committees may be staff of the Office, or other persons, or both.
(i) Fellowship Program- The Office, in consultation with the Chairperson, may establish and maintain an academic and professional fellowship program, under which qualified academics and professionals shall be invited to spend not longer than 2 years at the Office, to perform research and to provide advanced training for Office personnel.
(j) Executive Schedule Compensation- Section 5314 of title 5, United States Code, is amended by adding at the end the following new item:
‘Director of the Office of Financial Research.’.
SEC. 153. PURPOSE AND DUTIES OF THE OFFICE.
(a) Purpose and Duties- The purpose of the Office is to support the Council in fulfilling the purposes and duties of the Council, as set forth in subtitle A, and to support member agencies, by--
(1) collecting data on behalf of the Council, and providing such data to the Council and member agencies;
(2) standardizing the types and formats of data reported and collected;
(3) performing applied research and essential long-term research;
(4) developing tools for risk measurement and monitoring;
(5) performing other related services;
(6) making the results of the activities of the Office available to financial regulatory agencies; and
(7) assisting such member agencies in determining the types and formats of data authorized by this Act to be collected by such member agencies.
(b) Administrative Authority- The Office may--
(1) share data and information, including software developed by the Office, with the Council, member agencies, and the Bureau of Economic Analysis, which shared data, information, and software--
(A) shall be maintained with at least the same level of security as is used by the Office; and
(B) may not be shared with any individual or entity without the permission of the Council;
(2) sponsor and conduct research projects; and
(3) assist, on a reimbursable basis, with financial analyses undertaken at the request of other Federal agencies that are not member agencies.
(c) Rulemaking Authority-
(1) SCOPE- The Office, in consultation with the Chairperson, shall issue rules, regulations, and orders only to the extent necessary to carry out the purposes and duties described in paragraphs (1), (2), and (7) of subsection (a).
(2) STANDARDIZATION- Member agencies, in consultation with the Office, shall implement regulations promulgated by the Office under paragraph (1) to standardize the types and formats of data reported and collected on behalf of the Council, as described in subsection (a)(2). If a member agency fails to implement such regulations prior to the expiration of the 3-year period following the date of publication of final regulations, the Office, in consultation with the Chairperson, may implement such regulations with respect to the financial entities under the jurisdiction of the member agency. This paragraph shall not supersede or interfere with the independent authority of a member agency under other law to collect data, in such format and manner as the member agency requires.
(d) Testimony-
(1) IN GENERAL- The Director of the Office shall report to and testify before the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives annually on the activities of the Office, including the work of the Data Center and the Research and Analysis Center, and the assessment of the Office of significant financial market developments and potential emerging threats to the financial stability of the United States.
(2) NO PRIOR REVIEW- No officer or agency of the United States shall have any authority to require the Director to submit the testimony required under paragraph (1) or other congressional testimony to any officer or agency of the United States for approval, comment, or review prior to the submission of such testimony. Any such testimony to Congress shall include a statement that the views expressed therein are those of the Director and do not necessarily represent the views of the President.
(e) Additional Reports- The Director may provide additional reports to Congress concerning the financial stability of the United States. The Director shall notify the Council of any such additional reports provided to Congress.
(f) Subpoena-
(1) IN GENERAL- The Director may require from a financial company, by subpoena, the production of the data requested under subsection (a)(1) and section 154(b)(1), but only upon a written finding by the Director that--
(A) such data is required to carry out the functions described under this subtitle; and
(B) the Office has coordinated with the relevant primary financial regulatory agency, as required under section 154(b)(1)(B)(ii).
(2) FORMAT- Subpoenas under paragraph (1) shall bear the signature of the Director, and shall be served by any person or class of persons designated by the Director for that purpose.
(3) ENFORCEMENT- In the case of contumacy or failure to obey a subpoena, the subpoena shall be enforceable by order of any appropriate district court of the United States. Any failure to obey the order of the court may be punished by the court as a contempt of court.
SEC. 154. ORGANIZATIONAL STRUCTURE; RESPONSIBILITIES OF PRIMARY PROGRAMMATIC UNITS.
(a) In General- There are established within the Office, to carry out the programmatic responsibilities of the Office--
(1) the Data Center; and
(2) the Research and Analysis Center.
(b) Data Center-
(1) GENERAL DUTIES-
(A) DATA COLLECTION- The Data Center, on behalf of the Council, shall collect, validate, and maintain all data necessary to carry out the duties of the Data Center, as described in this subtitle. The data assembled shall be obtained from member agencies, commercial data providers, publicly available data sources, and financial entities under subparagraph (B).
(B) AUTHORITY-
(i) IN GENERAL- The Office may, as determined by the Council or by the Director in consultation with the Council, require the submission of periodic and other reports from any financial company for the purpose of assessing the extent to which a financial activity or financial market in which the financial company participates, or the financial company itself, poses a threat to the financial stability of the United States.
(ii) MITIGATION OF REPORT BURDEN- Before requiring the submission of a report from any financial company that is regulated by a member agency, any primary financial regulatory agency, a foreign supervisory authority, or the Office shall coordinate with such agencies or authority, and shall, whenever possible, rely on information available from such agencies or authority.
(iii) COLLECTION OF FINANCIAL TRANSACTION AND POSITION DATA- The Office shall collect, on a schedule determined by the Director, in consultation with the Council, financial transaction data and position data from financial companies.
(C) RULEMAKING- The Office shall promulgate regulations pursuant to subsections (a)(1), (a)(2), (a)(7), and (c)(1) of section 153 regarding the type and scope of the data to be collected by the Data Center under this paragraph.
(2) RESPONSIBILITIES-
(A) PUBLICATION- The Data Center shall prepare and publish, in a manner that is easily accessible to the public--
(i) a financial company reference database;
(ii) a financial instrument reference database; and
(iii) formats and standards for Office data, including standards for reporting financial transaction and position data to the Office.
(B) CONFIDENTIALITY- The Data Center shall not publish any confidential data under subparagraph (A).
(3) INFORMATION SECURITY- The Director shall ensure that data collected and maintained by the Data Center are kept secure and protected against unauthorized disclosure.
(4) CATALOG OF FINANCIAL ENTITIES AND INSTRUMENTS- The Data Center shall maintain a catalog of the financial entities and instruments reported to the Office.
(5) AVAILABILITY TO THE COUNCIL AND MEMBER AGENCIES- The Data Center shall make data collected and maintained by the Data Center available to the Council and member agencies, as necessary to support their regulatory responsibilities.
(6) OTHER AUTHORITY- The Office shall, after consultation with the member agencies, provide certain data to financial industry participants and to the general public to increase market transparency and facilitate research on the financial system, to the extent that intellectual property rights are not violated, business confidential information is properly protected, and the sharing of such information poses no significant threats to the financial system of the United States.
(c) Research and Analysis Center-
(1) GENERAL DUTIES- The Research and Analysis Center, on behalf of the Council, shall develop and maintain independent analytical capabilities and computing resources--
(A) to develop and maintain metrics and reporting systems for risks to the financial stability of the United States;
(B) to monitor, investigate, and report on changes in systemwide risk levels and patterns to the Council and Congress;
(C) to conduct, coordinate, and sponsor research to support and improve regulation of financial entities and markets;
(D) to evaluate and report on stress tests or other stability-related evaluations of financial entities overseen by the member agencies;
(E) to maintain expertise in such areas as may be necessary to support specific requests for advice and assistance from financial regulators;
(F) to investigate disruptions and failures in the financial markets, report findings, and make recommendations to the Council based on those findings;
(G) to conduct studies and provide advice on the impact of policies related to systemic risk; and
(H) to promote best practices for financial risk management.
(d) Reporting Responsibilities-
(1) REQUIRED REPORTS- Not later than 2 years after the date of enactment of this Act, and not later than 120 days after the end of each fiscal year thereafter, the Office shall prepare and submit a report to Congress.
(2) CONTENT- Each report required by this subsection shall assess the state of the United States financial system, including--
(A) an analysis of any threats to the financial stability of the United States;
(B) the status of the efforts of the Office in meeting the mission of the Office; and
(C) key findings from the research and analysis of the financial system by the Office.
SEC. 155. FUNDING.
(a) Financial Research Fund-
(1) FUND ESTABLISHED- There is established in the Treasury of the United States a separate fund to be known as the ‘Financial Research Fund’.
(2) FUND RECEIPTS- All amounts provided to the Office under subsection (c), and all assessments that the Office receives under subsection (d) shall be deposited into the Financial Research Fund.
(3) INVESTMENTS AUTHORIZED-
(A) AMOUNTS IN FUND MAY BE INVESTED- The Director may request the Secretary to invest the portion of the Financial Research Fund that is not, in the judgment of the Director, required to meet the needs of the Office.
(B) ELIGIBLE INVESTMENTS- Investments shall be made by the Secretary 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 Financial Research Fund, as determined by the Director.
(4) INTEREST AND PROCEEDS CREDITED- The interest on, and the proceeds from the sale or redemption of, any obligations held in the Financial Research Fund shall be credited to and form a part of the Financial Research Fund.
(b) Use of Funds-
(1) IN GENERAL- Funds obtained by, transferred to, or credited to the Financial Research Fund shall be immediately available to the Office, and shall remain available until expended, to pay the expenses of the Office in carrying out the duties and responsibilities of the Office.
(2) FEES, ASSESSMENTS, AND OTHER FUNDS NOT GOVERNMENT FUNDS- Funds obtained by, transferred to, or credited to the Financial Research Fund shall not be construed to be Government funds or appropriated moneys.
(3) AMOUNTS NOT SUBJECT TO APPORTIONMENT- Notwithstanding any other provision of law, amounts in the Financial Research Fund shall not be subject to apportionment for purposes of chapter 15 of title 31, United States Code, or under any other authority, or for any other purpose.
(c) Interim Funding- During the 2-year period following the date of enactment of this Act, the Board of Governors shall provide to the Office an amount sufficient to cover the expenses of the Office.
(d) Permanent Self-funding- Beginning 2 years after the date of enactment of this Act, the Secretary shall establish, by regulation, and with the approval of the Council, an assessment schedule, including the assessment base and rates, applicable to bank holding companies with total consolidated assets of $50,000,000,000 or greater and nonbank financial companies supervised by the Board of Governors, that takes into account differences among such companies, based on the considerations for establishing the prudential standards under section 115, to collect assessments equal to the total expenses of the Office.
SEC. 156. TRANSITION OVERSIGHT.
(a) Purpose- The purpose of this section is to ensure that the Office--
(1) has an orderly and organized startup;
(2) attracts and retains a qualified workforce; and
(3) establishes comprehensive employee training and benefits programs.
(b) Reporting Requirement-
(1) IN GENERAL- The Office shall submit an annual report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives that includes the plans described in paragraph (2).
(2) PLANS- The plans described in this paragraph are as follows:
(A) TRAINING AND WORKFORCE DEVELOPMENT PLAN- The Office shall submit a training and workforce development plan that includes, to the extent practicable--
(i) identification of skill and technical expertise needs and actions taken to meet those requirements;
(ii) steps taken to foster innovation and creativity;
(iii) leadership development and succession planning; and
(iv) effective use of technology by employees.
(B) WORKPLACE FLEXIBILITY PLAN- The Office shall submit a workforce flexibility plan that includes, to the extent practicable--
(i) telework;
(ii) flexible work schedules;
(iii) phased retirement;
(iv) reemployed annuitants;
(v) part-time work;
(vi) job sharing;
(vii) parental leave benefits and childcare assistance;
(viii) domestic partner benefits;
(ix) other workplace flexibilities; or
(x) any combination of the items described in clauses (i) through (ix).
(C) RECRUITMENT AND RETENTION PLAN- The Office shall submit a recruitment and retention plan that includes, to the extent practicable, provisions relating to--
(i) the steps necessary to target highly qualified applicant pools with diverse backgrounds;
(ii) streamlined employment application processes;
(iii) the provision of timely notification of the status of employment applications to applicants; and
(iv) the collection of information to measure indicators of hiring effectiveness.
(c) Expiration- The reporting requirement under subsection (b) shall terminate 5 years after the date of enactment of this Act.
(d) Rule of Construction- Nothing in this section may be construed to affect--
(1) a collective bargaining agreement, as that term is defined in section 7103(a)(8) of title 5, United States Code, that is in effect on the date of enactment of this Act; or
(2) the rights of employees under chapter 71 of title 5, United States Code.
Subtitle C--Additional Board of Governors Authority for Certain Nonbank Financial Companies and Bank Holding Companies
SEC. 161. REPORTS BY AND EXAMINATIONS OF NONBANK FINANCIAL COMPANIES BY THE BOARD OF GOVERNORS.
(a) Reports-
(1) IN GENERAL- The Board of Governors may require each nonbank financial company supervised by the Board of Governors, and any subsidiary thereof, to submit reports under oath, to keep the Board of Governors informed as to--
(A) the financial condition of the company or subsidiary, systems of the company or subsidiary for monitoring and controlling financial, operating, and other risks, and the extent to which the activities and operations of the company or subsidiary pose a threat to the financial stability of the United States; and
(B) compliance by the company or subsidiary with the requirements of this title.
(2) USE OF EXISTING REPORTS AND INFORMATION- In carrying out subsection (a), the Board of Governors shall, to the fullest extent possible, use--
(A) reports and supervisory information that a nonbank financial company or subsidiary thereof has been required to provide to other Federal or State regulatory agencies;
(B) information otherwise obtainable from Federal or State regulatory agencies;
(C) information that is otherwise required to be reported publicly; and
(D) externally audited financial statements of such company or subsidiary.
(3) AVAILABILITY- Upon the request of the Board of Governors, a nonbank financial company supervised by the Board of Governors, or a subsidiary thereof, shall promptly provide to the Board of Governors any information described in paragraph (2).
(b) Examinations-
(1) IN GENERAL- Subject to paragraph (2), the Board of Governors may examine any nonbank financial company supervised by the Board of Governors and any subsidiary of such company, to inform the Board of Governors of--
(A) the nature of the operations and financial condition of the company and such subsidiary;
(B) the financial, operational, and other risks of the company or such subsidiary that may pose a threat to the safety and soundness of such company or subsidiary or to the financial stability of the United States;
(C) the systems for monitoring and controlling such risks; and
(D) compliance by the company or such subsidiary with the requirements of this title.
(2) USE OF EXAMINATION REPORTS AND INFORMATION- For purposes of this subsection, the Board of Governors shall, to the fullest extent possible, rely on reports of examination of any subsidiary depository institution or functionally regulated subsidiary made by the primary financial regulatory agency for that subsidiary, and on information described in subsection (a)(2).
(c) Coordination With Primary Financial Regulatory Agency- The Board of Governors shall--
(1) provide reasonable notice to, and consult with, the primary financial regulatory agency for any subsidiary before requiring a report or commencing an examination of such subsidiary under this section; and
(2) avoid duplication of examination activities, reporting requirements, and requests for information, to the fullest extent possible.
SEC. 162. ENFORCEMENT.
(a) In General- Except as provided in subsection (b), a nonbank financial company supervised by the Board of Governors and any subsidiaries of such company (other than any depository institution subsidiary) shall be subject to the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818), in the same manner and to the same extent as if the company were a bank holding company, as provided in section 8(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1818(b)(3)).
(b) Enforcement Authority for Functionally Regulated Subsidiaries-
(1) REFERRAL- If the Board of Governors determines that a condition, practice, or activity of a depository institution subsidiary or functionally regulated subsidiary of a nonbank financial company supervised by the Board of Governors does not comply with the regulations or orders prescribed by the Board of Governors under this Act, or otherwise poses a threat to the financial stability of the United States, the Board of Governors may recommend, in writing, to the primary financial regulatory agency for the subsidiary that such agency initiate a supervisory action or enforcement proceeding. The recommendation shall be accompanied by a written explanation of the concerns giving rise to the recommendation.
(2) BACK-UP AUTHORITY OF THE BOARD OF GOVERNORS- If, during the 60-day period beginning on the date on which the primary financial regulatory agency receives a recommendation under paragraph (1), the primary financial regulatory agency does not take supervisory or enforcement action against a subsidiary that is acceptable to the Board of Governors, the Board of Governors (upon a vote of its members) may take the recommended supervisory or enforcement action, as if the subsidiary were a bank holding company subject to supervision by the Board of Governors.
SEC. 163. ACQUISITIONS.
(a) Acquisitions of Banks; Treatment as a Bank Holding Company- For purposes of section 3 of the Bank Holding Company Act of 1956 (12 U.S.C. 1842), a nonbank financial company supervised by the Board of Governors shall be deemed to be, and shall be treated as, a bank holding company.
(b) Acquisition of Nonbank Companies-
(1) PRIOR NOTICE FOR LARGE ACQUISITIONS- Notwithstanding section 4(k)(6)(B) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)(6)(B)), a bank holding company with total consolidated assets equal to or greater than $50,000,000,000 or a nonbank financial company supervised by the Board of Governors shall not acquire direct or indirect ownership or control of any voting shares of any company (other than an insured depository institution) that is engaged in activities described in section 4(k) of the Bank Holding Company Act of 1956 having total consolidated assets of $10,000,000,000 or more, without providing written notice to the Board of Governors in advance of the transaction.
(2) EXEMPTIONS- The prior notice requirement in paragraph (1) shall not apply with regard to the acquisition of shares that would qualify for the exemptions in section 4(c) or section 4(k)(4)(E) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(c) and (k)(4)(E)).
(3) NOTICE PROCEDURES- The notice procedures set forth in section 4(j)(1) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(j)(1)), without regard to section 4(j)(3) of that Act, shall apply to an acquisition of any company (other than an insured depository institution) by a bank holding company with total consolidated assets equal to or greater than $50,000,000,000 or a nonbank financial company supervised by the Board of Governors, as described in paragraph (1), including any such company engaged in activities described in section 4(k) of that Act.
(4) STANDARDS FOR REVIEW- In addition to the standards provided in section 4(j)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(j)(2)), the Board of Governors shall consider the extent to which the proposed acquisition would result in greater or more concentrated risks to global or United States financial stability or the United States economy.
(5) HART-SCOTT-RODINO FILING REQUIREMENT- Solely for purposes of section 7A(c)(8) of the Clayton Act (15 U.S.C. 18a(c)(8)), the transactions subject to the requirements of paragraph (1) shall be treated as if Board of Governors approval is not required.
SEC. 164. PROHIBITION AGAINST MANAGEMENT INTERLOCKS BETWEEN CERTAIN FINANCIAL COMPANIES.
A nonbank financial company supervised by the Board of Governors shall be treated as a bank holding company for purposes of the Depository Institutions Management Interlocks Act (12 U.S.C. 3201 et seq.), except that the Board of Governors shall not exercise the authority provided in section 7 of that Act (12 U.S.C. 3207) to permit service by a management official of a nonbank financial company supervised by the Board of Governors as a management official of any bank holding company with total consolidated assets equal to or greater than $50,000,000,000, or other nonaffiliated nonbank financial company supervised by the Board of Governors (other than to provide a temporary exemption for interlocks resulting from a merger, acquisition, or consolidation).
SEC. 165. ENHANCED SUPERVISION AND PRUDENTIAL STANDARDS FOR NONBANK FINANCIAL COMPANIES SUPERVISED BY THE BOARD OF GOVERNORS AND CERTAIN BANK HOLDING COMPANIES.
(a) In General-
(1) PURPOSE- In order to prevent or mitigate risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected financial institutions, the Board of Governors shall, on its own or pursuant to recommendations by the Council under section 115, establish prudential standards for nonbank financial companies supervised by the Board of Governors and bank holding companies with total consolidated assets equal to or greater than $50,000,000,000 that--
(A) are more stringent than the standards and requirements applicable to nonbank financial companies and bank holding companies that do not present similar risks to the financial stability of the United States; and
(B) increase in stringency, based on the considerations identified in subsection (b)(3).
(2) TAILORED APPLICATION-
(A) IN GENERAL- In prescribing more stringent prudential standards under this section, the Board of Governors may, on its own or pursuant to a recommendation by the Council in accordance with section 115, differentiate among companies on an individual basis or by category, taking into consideration their capital structure, riskiness, complexity, financial activities (including the financial activities of their subsidiaries), size, and any other risk-related factors that the Board of Governors deems appropriate.
(B) ADJUSTMENT OF THRESHOLD FOR APPLICATION OF CERTAIN STANDARDS- The Board of Governors may, pursuant to a recommendation by the Council in accordance with section 115, establish an asset threshold above $50,000,000,000 for the application of any standard established under subsections (c) through (g).
(b) Development of Prudential Standards-
(1) IN GENERAL-
(A) REQUIRED STANDARDS- The Board of Governors shall establish prudential standards for nonbank financial companies supervised by the Board of Governors and bank holding companies described in subsection (a), that shall include--
(i) risk-based capital requirements and leverage limits, unless the Board of Governors, in consultation with the Council, determines that such requirements are not appropriate for a company subject to more stringent prudential standards because of the activities of such company (such as investment company activities or assets under management) or structure, in which case, the Board of Governors shall apply other standards that result in similarly stringent risk controls;
(ii) liquidity requirements;
(iii) overall risk management requirements;
(iv) resolution plan and credit exposure report requirements; and
(v) concentration limits.
(B) ADDITIONAL STANDARDS AUTHORIZED- The Board of Governors may establish additional prudential standards for nonbank financial companies supervised by the Board of Governors and bank holding companies described in subsection (a), that include--
(i) a contingent capital requirement;
(ii) enhanced public disclosures;
(iii) short-term debt limits; and
(iv) such other prudential standards as the Board or Governors, on its own or pursuant to a recommendation made by the Council in accordance with section 115, determines are appropriate.
(2) STANDARDS FOR FOREIGN FINANCIAL COMPANIES- In applying the standards set forth in paragraph (1) to any foreign nonbank financial company supervised by the Board of Governors or foreign-based bank holding company, the Board of Governors shall--
(A) give due regard to the principle of national treatment and equality of competitive opportunity; and
(B) take into account the extent to which the foreign financial company is subject on a consolidated basis to home country standards that are comparable to those applied to financial companies in the United States.
(3) CONSIDERATIONS- In prescribing prudential standards under paragraph (1), the Board of Governors shall--
(A) take into account differences among nonbank financial companies supervised by the Board of Governors and bank holding companies described in subsection (a), based on--
(i) the factors described in subsections (a) and (b) of section 113;
(ii) whether the company owns an insured depository institution;
(iii) nonfinancial activities and affiliations of the company; and
(iv) any other risk-related factors that the Board of Governors determines appropriate;
(B) to the extent possible, ensure that small changes in the factors listed in subsections (a) and (b) of section 113 would not result in sharp, discontinuous changes in the prudential standards established under paragraph (1) of this subsection;
(C) take into account any recommendations of the Council under section 115; and
(D) adapt the required standards as appropriate in light of any predominant line of business of such company, including assets under management or other activities for which particular standards may not be appropriate.
(4) CONSULTATION- Before imposing prudential standards or any other requirements pursuant to this section, including notices of deficiencies in resolution plans and more stringent requirements or divestiture orders resulting from such notices, that are likely to have a significant impact on a functionally regulated subsidiary or depository institution subsidiary of a nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a), the Board of Governors shall consult with each Council member that primarily supervises any such subsidiary with respect to any such standard or requirement.
(5) REPORT- The Board of Governors shall submit an annual report to Congress regarding the implementation of the prudential standards required pursuant to paragraph (1), including the use of such standards to mitigate risks to the financial stability of the United States.
(c) Contingent Capital-
(1) IN GENERAL- Subsequent to submission by the Council of a report to Congress under section 115(c), the Board of Governors may issue regulations that require each nonbank financial company supervised by the Board of Governors and bank holding companies described in subsection (a) to maintain a minimum amount of contingent capital that is convertible to equity in times of financial stress.
(2) FACTORS TO CONSIDER- In issuing regulations under this subsection, the Board of Governors shall consider--
(A) the results of the study undertaken by the Council, and any recommendations of the Council, under section 115(c);
(B) an appropriate transition period for implementation of contingent capital under this subsection;
(C) the factors described in subsection (b)(3)(A);
(D) capital requirements applicable to the nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a), and subsidiaries thereof; and
(E) any other factor that the Board of Governors deems appropriate.
(d) Resolution Plan and Credit Exposure Reports-
(1) RESOLUTION PLAN- The Board of Governors shall require each nonbank financial company supervised by the Board of Governors and bank holding companies described in subsection (a) to report periodically to the Board of Governors, the Council, and the Corporation the plan of such company for rapid and orderly resolution in the event of material financial distress or failure, which shall include--
(A) information regarding the manner and extent to which any insured depository institution affiliated with the company is adequately protected from risks arising from the activities of any nonbank subsidiaries of the company;
(B) full descriptions of the ownership structure, assets, liabilities, and contractual obligations of the company;
(C) identification of the cross-guarantees tied to different securities, identification of major counterparties, and a process for determining to whom the collateral of the company is pledged; and
(D) any other information that the Board of Governors and the Corporation jointly require by rule or order.
(2) CREDIT EXPOSURE REPORT- The Board of Governors shall require each nonbank financial company supervised by the Board of Governors and bank holding companies described in subsection (a) to report periodically to the Board of Governors, the Council, and the Corporation on--
(A) the nature and extent to which the company has credit exposure to other significant nonbank financial companies and significant bank holding companies; and
(B) the nature and extent to which other significant nonbank financial companies and significant bank holding companies have credit exposure to that company.
(3) REVIEW- The Board of Governors and the Corporation shall review the information provided in accordance with this subsection by each nonbank financial company supervised by the Board of Governors and bank holding company described in subsection (a).
(4) NOTICE OF DEFICIENCIES- If the Board of Governors and the Corporation jointly determine, based on their review under paragraph (3), that the resolution plan of a nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a) is not credible or would not facilitate an orderly resolution of the company under title 11, United States Code--
(A) the Board of Governors and the Corporation shall notify the company of the deficiencies in the resolution plan; and
(B) the company shall resubmit the resolution plan within a timeframe determined by the Board of Governors and the Corporation, with revisions demonstrating that the plan is credible and would result in an orderly resolution under title 11, United States Code, including any proposed changes in business operations and corporate structure to facilitate implementation of the plan.
(5) FAILURE TO RESUBMIT CREDIBLE PLAN-
(A) IN GENERAL- If a nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a) fails to timely resubmit the resolution plan as required under paragraph (4), with such revisions as are required under subparagraph (B), the Board of Governors and the Corporation may jointly impose more stringent capital, leverage, or liquidity requirements, or restrictions on the growth, activities, or operations of the company, or any subsidiary thereof, until such time as the company resubmits a plan that remedies the deficiencies.
(B) DIVESTITURE- The Board of Governors and the Corporation, in consultation with the Council, may jointly direct a nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a), by order, to divest certain assets or operations identified by the Board of Governors and the Corporation, to facilitate an orderly resolution of such company under title 11, United States Code, in the event of the failure of such company, in any case in which--
(i) the Board of Governors and the Corporation have jointly imposed more stringent requirements on the company pursuant to subparagraph (A); and
(ii) the company has failed, within the 2-year period beginning on the date of the imposition of such requirements under subparagraph (A), to resubmit the resolution plan with such revisions as were required under paragraph (4)(B).
(6) NO LIMITING EFFECT- A resolution plan submitted in accordance with this subsection shall not be binding on a bankruptcy court, a receiver appointed under title II, or any other authority that is authorized or required to resolve the nonbank financial company supervised by the Board, any bank holding company, or any subsidiary or affiliate of the foregoing.
(7) NO PRIVATE RIGHT OF ACTION- No private right of action may be based on any resolution plan submitted in accordance with this subsection.
(8) RULES- Not later than 18 months after the date of enactment of this Act, the Board of Governors and the Corporation shall jointly issue final rules implementing this subsection.
(e) Concentration Limits-
(1) STANDARDS- In order to limit the risks that the failure of any individual company could pose to a nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a), the Board of Governors, by regulation, shall prescribe standards that limit such risks.
(2) LIMITATION ON CREDIT EXPOSURE- The regulations prescribed by the Board of Governors under paragraph (1) shall prohibit each nonbank financial company supervised by the Board of Governors and bank holding company described in subsection (a) from having credit exposure to any unaffiliated company that exceeds 25 percent of the capital stock and surplus (or such lower amount as the Board of Governors may determine by regulation to be necessary to mitigate risks to the financial stability of the United States) of the company.
(3) CREDIT EXPOSURE- For purposes of paragraph (2), ‘credit exposure’ to a company means--
(A) all extensions of credit to the company, including loans, deposits, and lines of credit;
(B) all repurchase agreements and reverse repurchase agreements with the company, and all securities borrowing and lending transactions with the company, to the extent that such transactions create credit exposure for the nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a);
(C) all guarantees, acceptances, or letters of credit (including endorsement or standby letters of credit) issued on behalf of the company;
(D) all purchases of or investment in securities issued by the company;
(E) counterparty credit exposure to the company in connection with a derivative transaction between the nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a) and the company; and
(F) any other similar transactions that the Board of Governors, by regulation, determines to be a credit exposure for purposes of this section.
(4) ATTRIBUTION RULE- For purposes of this subsection, any transaction by a nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a) with any person is a transaction with a company, to the extent that the proceeds of the transaction are used for the benefit of, or transferred to, that company.
(5) RULEMAKING- The Board of Governors may issue such regulations and orders, including definitions consistent with this section, as may be necessary to administer and carry out this subsection.
(6) EXEMPTIONS- This subsection shall not apply to any Federal home loan bank. The Board of Governors may, by regulation or order, exempt transactions, in whole or in part, from the definition of the term ‘credit exposure’ for purposes of this subsection, if the Board of Governors finds that the exemption is in the public interest and is consistent with the purpose of this subsection.
(7) TRANSITION PERIOD-
(A) IN GENERAL- This subsection and any regulations and orders of the Board of Governors under this subsection shall not be effective until 3 years after the date of enactment of this Act.
(B) EXTENSION AUTHORIZED- The Board of Governors may extend the period specified in subparagraph (A) for not longer than an additional 2 years.
(f) Enhanced Public Disclosures- The Board of Governors may prescribe, by regulation, periodic public disclosures by nonbank financial companies supervised by the Board of Governors and bank holding companies described in subsection (a) in order to support market evaluation of the risk profile, capital adequacy, and risk management capabilities thereof.
(g) Short-term Debt Limits-
(1) IN GENERAL- In order to mitigate the risks that an over-accumulation of short-term debt could pose to financial companies and to the stability of the United States financial system, the Board of Governors may, by regulation, prescribe a limit on the amount of short-term debt, including off-balance sheet exposures, that may be accumulated by any bank holding company described in subsection (a) and any nonbank financial company supervised by the Board of Governors.
(2) BASIS OF LIMIT- Any limit prescribed under paragraph (1) shall be based on the short-term debt of the company described in paragraph (1) as a percentage of capital stock and surplus of the company or on such other measure as the Board of Governors considers appropriate.
(3) SHORT-TERM DEBT DEFINED- For purposes of this subsection, the term ‘short-term debt’ means such liabilities with short-dated maturity that the Board of Governors identifies, by regulation, except that such term does not include insured deposits.
(4) RULEMAKING AUTHORITY- In addition to prescribing regulations under paragraphs (1) and (3), the Board of Governors may prescribe such regulations, including definitions consistent with this subsection, and issue such orders, as may be necessary to carry out this subsection.
(5) AUTHORITY TO ISSUE EXEMPTIONS AND ADJUSTMENTS- Notwithstanding the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), the Board of Governors may, if it determines such action is necessary to ensure appropriate heightened prudential supervision, with respect to a company described in paragraph (1) that does not control an insured depository institution, issue to such company an exemption from or adjustment to the limit prescribed under paragraph (1).
(h) Risk Committee-
(1) NONBANK FINANCIAL COMPANIES SUPERVISED BY THE BOARD OF GOVERNORS- The Board of Governors shall require each nonbank financial company supervised by the Board of Governors that is a publicly traded company to establish a risk committee, as set forth in paragraph (3), not later than 1 year after the date of receipt of a notice of final determination under section 113(e)(3) with respect to such nonbank financial company supervised by the Board of Governors.
(2) CERTAIN BANK HOLDING COMPANIES-
(A) MANDATORY REGULATIONS- The Board of Governors shall issue regulations requiring each bank holding company that is a publicly traded company and that has total consolidated assets of not less than $10,000,000,000 to establish a risk committee, as set forth in paragraph (3).
(B) PERMISSIVE REGULATIONS- The Board of Governors may require each bank holding company that is a publicly traded company and that has total consolidated assets of less than $10,000,000,000 to establish a risk committee, as set forth in paragraph (3), as determined necessary or appropriate by the Board of Governors to promote sound risk management practices.
(3) RISK COMMITTEE- A risk committee required by this subsection shall--
(A) be responsible for the oversight of the enterprise-wide risk management practices of the nonbank financial company supervised by the Board of Governors or bank holding company described in subsection (a), as applicable;
(B) include such number of independent directors as the Board of Governors may determine appropriate, based on the nature of operations, size of assets, and other appropriate criteria related to the nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a), as applicable; and
(C) include at least 1 risk management expert having experience in identifying, assessing, and managing risk exposures of large, complex firms.
(4) RULEMAKING- The Board of Governors shall issue final rules to carry out this subsection, not later than 1 year after the transfer date, to take effect not later than 15 months after the transfer date.
(i) Stress Tests-
(1) BY THE BOARD OF GOVERNORS-
(A) ANNUAL TESTS REQUIRED- The Board of Governors, in coordination with the appropriate primary financial regulatory agencies and the Federal Insurance Office, shall conduct annual analyses in which nonbank financial companies supervised by the Board of Governors and bank holding companies described in subsection (a) are subject to evaluation of whether such companies have the capital, on a total consolidated basis, necessary to absorb losses as a result of adverse economic conditions.
(B) TEST PARAMETERS AND CONSEQUENCES- The Board of Governors--
(i) shall provide for at least 3 different sets of conditions under which the evaluation required by this subsection shall be conducted, including baseline, adverse, and severely adverse;
(ii) may require the tests described in subparagraph (A) at bank holding companies and nonbank financial companies, in addition to those for which annual tests are required under subparagraph (A);
(iii) may develop and apply such other analytic techniques as are necessary to identify, measure, and monitor risks to the financial stability of the United States;
(iv) shall require the companies described in subparagraph (A) to update their resolution plans required under subsection (d)(1), as the Board of Governors determines appropriate, based on the results of the analyses; and
(v) shall publish a summary of the results of the tests required under subparagraph (A) or clause (ii) of this subparagraph.
(2) BY THE COMPANY-
(A) REQUIREMENT- A nonbank financial company supervised by the Board of Governors and a bank holding company described in subsection (a) shall conduct semiannual stress tests. All other financial companies that have total consolidated assets of more than $10,000,000,000 and are regulated by a primary Federal financial regulatory agency shall conduct annual stress tests. The tests required under this subparagraph shall be conducted in accordance with the regulations prescribed under subparagraph (C).
(B) REPORT- A company required to conduct stress tests under subparagraph (A) shall submit a report to the Board of Governors and to its primary financial regulatory agency at such time, in such form, and containing such information as the primary financial regulatory agency shall require.
(C) REGULATIONS- Each Federal primary financial regulatory agency, in coordination with the Board of Governors and the Federal Insurance Office, shall issue consistent and comparable regulations to implement this paragraph that shall--
(i) define the term ‘stress test’ for purposes of this paragraph;
(ii) establish methodologies for the conduct of stress tests required by this paragraph that shall provide for at least 3 different sets of conditions, including baseline, adverse, and severely adverse;
(iii) establish the form and content of the report required by subparagraph (B); and
(iv) require companies subject to this paragraph to publish a summary of the results of the required stress tests.
(j) Leverage Limitation-
(1) REQUIREMENT- The Board of Governors shall require a bank holding company with total consolidated assets equal to or greater than $50,000,000,000 or a nonbank financial company supervised by the Board of Governors to maintain a debt to equity ratio of no more than 15 to 1, upon a determination by the Council that such company poses a grave threat to the financial stability of the United States and that the imposition of such requirement is necessary to mitigate the risk that such company poses to the financial stability of the United States. Nothing in this paragraph shall apply to a Federal home loan bank.
(2) CONSIDERATIONS- In making a determination under this subsection, the Council shall consider the factors described in subsections (a) and (b) of section 113 and any other risk-related factors that the Council deems appropriate.
(3) REGULATIONS- The Board of Governors shall promulgate regulations to establish procedures and timelines for complying with the requirements of this subsection.
(k) Inclusion of Off-balance-sheet Activities in Computing Capital Requirements-
(1) IN GENERAL- In the case of any bank holding company described in subsection (a) or nonbank financial company supervised by the Board of Governors, the computation of capital for purposes of meeting capital requirements shall take into account any off-balance-sheet activities of the company.
(2) EXEMPTIONS- If the Board of Governors determines that an exemption from the requirement under paragraph (1) is appropriate, the Board of Governors may exempt a company, or any transaction or transactions engaged in by such company, from the requirements of paragraph (1).
(3) OFF-BALANCE-SHEET ACTIVITIES DEFINED- For purposes of this subsection, the term ‘off-balance-sheet activities’ means an existing liability of a company that is not currently a balance sheet liability, but may become one upon the happening of some future event, including the following transactions, to the extent that they may create a liability:
(A) Direct credit substitutes in which a bank substitutes its own credit for a third party, including standby letters of credit.
(B) Irrevocable letters of credit that guarantee repayment of commercial paper or tax-exempt securities.
(C) Risk participations in bankers’ acceptances.
(D) Sale and repurchase agreements.
(E) Asset sales with recourse against the seller.
(F) Interest rate swaps.
(G) Credit swaps.
(H) Commodities contracts.
(I) Forward contracts.
(J) Securities contracts.
(K) Such other activities or transactions as the Board of Governors may, by rule, define.
SEC. 166. EARLY REMEDIATION REQUIREMENTS.
(a) In General- The Board of Governors, in consultation with the Council and the Corporation, shall prescribe regulations establishing requirements to provide for the early remediation of financial distress of a nonbank financial company supervised by the Board of Governors or a bank holding company described in section 165(a), except that nothing in this subsection authorizes the provision of financial assistance from the Federal Government.
(b) Purpose of the Early Remediation Requirements- The purpose of the early remediation requirements under subsection (a) shall be to establish a series of specific remedial actions to be taken by a nonbank financial company supervised by the Board of Governors or a bank holding company described in section 165(a) that is experiencing increasing financial distress, in order to minimize the probability that the company will become insolvent and the potential harm of such insolvency to the financial stability of the United States.
(c) Remediation Requirements- The regulations prescribed by the Board of Governors under subsection (a) shall--
(1) define measures of the financial condition of the company, including regulatory capital, liquidity measures, and other forward-looking indicators; and
(2) establish requirements that increase in stringency as the financial condition of the company declines, including--
(A) requirements in the initial stages of financial decline, including limits on capital distributions, acquisitions, and asset growth; and
(B) requirements at later stages of financial decline, including a capital restoration plan and capital-raising requirements, limits on transactions with affiliates, management changes, and asset sales.
SEC. 167. AFFILIATIONS.
(a) Affiliations- Nothing in this subtitle shall be construed to require a nonbank financial company supervised by the Board of Governors, or a company that controls a nonbank financial company supervised by the Board of Governors, to conform the activities thereof to the requirements of section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843).
(b) Requirement-
(1) IN GENERAL-
(A) BOARD AUTHORITY- If a nonbank financial company supervised by the Board of Governors conducts activities other than those that are determined to be financial in nature or incidental thereto under section 4(k) of the Bank Holding Company Act of 1956, the Board of Governors may require such company to establish and conduct all or a portion of such activities that are determined to be financial in nature or incidental thereto in or through an intermediate holding company established pursuant to regulation of the Board of Governors, not later than 90 days (or such longer period as the Board of Governors may deem appropriate) after the date on which the nonbank financial company supervised by the Board of Governors is notified of the determination of the Board of Governors under this section.
(B) NECESSARY ACTIONS- Notwithstanding subparagraph (A), the Board of Governors shall require a nonbank financial company supervised by the Board of Governors to establish an intermediate holding company if the Board of Governors makes a determination that the establishment of such intermediate holding company is necessary to--
(i) appropriately supervise activities that are determined to be financial in nature or incidental thereto; or
(ii) to ensure that supervision by the Board of Governors does not extend to the commercial activities of such nonbank financial company.
(2) INTERNAL FINANCIAL ACTIVITIES- For purposes of this subsection, activities that are determined to be financial in nature or incidental thereto under section 4(k) of the Bank Holding Company Act of 1956, as described in paragraph (1), shall not include internal financial activities, including internal treasury, investment, and employee benefit functions. With respect to any internal financial activity engaged in for the company or an affiliate and a non-affiliate of such company during the year prior to the date of enactment of this Act, such company (or an affiliate that is not an intermediate holding company or subsidiary of an intermediate holding company) may continue to engage in such activity, as long as not less than 2/3 of the assets or 2/3 of the revenues generated from the activity are from or attributable to such company or an affiliate, subject to review by the Board of Governors, to determine whether engaging in such activity presents undue risk to such company or to the financial stability of the United States.
(3) SOURCE OF STRENGTH- A company that directly or indirectly controls an intermediate holding company established under this section shall serve as a source of strength to its subsidiary intermediate holding company.
(4) PARENT COMPANY REPORTS- The Board of Governors may, from time to time, require reports under oath from a company that controls an intermediate holding company, and from the appropriate officers or directors of such company, solely for purposes of ensuring compliance with the provisions of this section, including assessing the ability of the company to serve as a source of strength to its subsidiary intermediate holding company pursuant to paragraph (3) and enforcing such compliance.
(5) LIMITED PARENT COMPANY ENFORCEMENT-
(A) IN GENERAL- In addition to any other authority of the Board of Governors, the Board of Governors may enforce compliance with the provisions of this subsection that are applicable to any company described in paragraph (1) that controls an intermediate holding company under section 8 of the Federal Deposit Insurance Act, and such company shall be subject to such section (solely for such purposes) in the same manner and to the same extent as if such company were a bank holding company.
(B) APPLICATION OF OTHER ACT- Any violation of this subsection by any company that controls an intermediate holding company may also be treated as a violation of the Federal Deposit Insurance Act for purposes of subparagraph (A).
(C) NO EFFECT ON OTHER AUTHORITY- No provision of this paragraph shall be construed as limiting any authority of the Board of Governors or any other Federal agency under any other provision of law.
(c) Regulations- The Board of Governors--
(1) shall promulgate regulations to establish the criteria for determining whether to require a nonbank financial company supervised by the Board of Governors to establish an intermediate holding company under subsection (b); and
(2) may promulgate regulations to establish any restrictions or limitations on transactions between an intermediate holding company or a nonbank financial company supervised by the Board of Governors and its affiliates, as necessary to prevent unsafe and unsound practices in connection with transactions between such company, or any subsidiary thereof, and its parent company or affiliates that are not subsidiaries of such company, except that such regulations shall not restrict or limit any transaction in connection with the bona fide acquisition or lease by an unaffiliated person of assets, goods, or services.
SEC. 168. REGULATIONS.
The Board of Governors shall have authority to issue regulations to implement subtitles A and C and the amendments made thereunder. Except as otherwise specified in subtitle A or C, not later than 18 months after the effective date of this Act, the Board of Governors shall issue final regulations to implement subtitles A and C, and the amendments made thereunder.
SEC. 169. AVOIDING DUPLICATION.
The Board of Governors shall take any action that the Board of Governors deems appropriate to avoid imposing requirements under this subtitle that are duplicative of requirements applicable to bank holding companies and nonbank financial companies under other provisions of law.
SEC. 170. SAFE HARBOR.
(a) Regulations- The Board of Governors shall promulgate regulations on behalf of, and in consultation with, the Council setting forth the criteria for exempting certain types or classes of U.S. nonbank financial companies or foreign nonbank financial companies from supervision by the Board of Governors.
(b) Considerations- In developing the criteria under subsection (a), the Board of Governors shall take into account the factors for consideration described in subsections (a) and (b) of section 113 in determining whether a U.S. nonbank financial company or foreign nonbank financial company shall be supervised by the Board of Governors.
(c) Rule of Construction- Nothing in this section shall be construed to require supervision by the Board of Governors of a U.S. nonbank financial company or foreign nonbank financial company, if such company does not meet the criteria for exemption established under subsection (a).
(d) Revisions-
(1) IN GENERAL- The Board of Governors shall, in consultation with the Council, review the regulations promulgated under subsection (a), not less frequently than every 5 years, and based upon the review, the Board of Governors may revise such regulations on behalf of, and in consultation with, the Council to update as necessary the criteria set forth in such regulations.
(2) TRANSITION PERIOD- No revisions under paragraph (1) shall take effect before the end of the 2-year period after the date of publication of such revisions in final form.
(e) Report- The Chairman of the Board of Governors and the Chairperson of the Council shall submit a joint report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives not later than 30 days after the date of the issuance in final form of regulations under subsection (a), or any subsequent revision to such regulations under subsection (d), as applicable. Such report shall include, at a minimum, the rationale for exemption and empirical evidence to support the criteria for exemption.
SEC. 171. LEVERAGE AND RISK-BASED CAPITAL REQUIREMENTS.
(a) Definitions- For purposes of this section, the following definitions shall apply:
(1) GENERALLY APPLICABLE LEVERAGE CAPITAL REQUIREMENTS- The term ‘generally applicable leverage capital requirements’ means--
(A) the minimum ratios of tier 1 capital to average total assets, as established by the appropriate Federal banking agencies to apply to insured depository institutions under the prompt corrective action regulations implementing section 38 of the Federal Deposit Insurance Act, regardless of total consolidated asset size or foreign financial exposure; and
(B) includes the regulatory capital components in the numerator of that capital requirement, average total assets in the denominator of that capital requirement, and the required ratio of the numerator to the denominator.
(2) GENERALLY APPLICABLE RISK-BASED CAPITAL REQUIREMENTS- The term ‘generally applicable risk-based capital requirements’ means--
(A) the risk-based capital requirements, as established by the appropriate Federal banking agencies to apply to insured depository institutions under the prompt corrective action regulations implementing section 38 of the Federal Deposit Insurance Act, regardless of total consolidated asset size or foreign financial exposure; and
(B) includes the regulatory capital components in the numerator of those capital requirements, the risk-weighted assets in the denominator of those capital requirements, and the required ratio of the numerator to the denominator.
(3) DEFINITION OF DEPOSITORY INSTITUTION HOLDING COMPANY- The term ‘depository institution holding company’ means a bank holding company or a savings and loan holding company (as those terms are defined in section 3 of the Federal Deposit Insurance Act) that is organized in the United States, including any bank or savings and loan holding company that is owned or controlled by a foreign organization, but does not include the foreign organization.
(b) Minimum Capital Requirements-
(1) MINIMUM LEVERAGE CAPITAL REQUIREMENTS- The appropriate Federal banking agencies shall establish minimum leverage capital requirements on a consolidated basis for insured depository institutions, depository institution holding companies, and nonbank financial companies supervised by the Board of Governors. The minimum leverage capital requirements established under this paragraph shall not be less than the generally applicable leverage capital requirements, which shall serve as a floor for any capital requirements that the agency may require, nor quantitatively lower than the generally applicable leverage capital requirements that were in effect for insured depository institutions as of the date of enactment of this Act.
(2) MINIMUM RISK-BASED CAPITAL REQUIREMENTS- The appropriate Federal banking agencies shall establish minimum risk-based capital requirements on a consolidated basis for insured depository institutions, depository institution holding companies, and nonbank financial companies supervised by the Board of Governors. The minimum risk-based capital requirements established under this paragraph shall not be less than the generally applicable risk-based capital requirements, which shall serve as a floor for any capital requirements that the agency may require, nor quantitatively lower than the generally applicable risk-based capital requirements that were in effect for insured depository institutions as of the date of enactment of this Act.
(3) INVESTMENTS IN FINANCIAL SUBSIDIARIES- For purposes of this section, investments in financial subsidiaries that insured depository institutions are required to deduct from regulatory capital under section 5136A of the Revised Statutes of the United States or section 46(a)(2) of the Federal Deposit Insurance Act need not be deducted from regulatory capital by depository institution holding companies or nonbank financial companies supervised by the Board of Governors, unless such capital deduction is required by the Board of Governors or the primary financial regulatory agency in the case of nonbank financial companies supervised by the Board of Governors.
(4) EFFECTIVE DATES AND PHASE-IN PERIODS-
(A) DEBT OR EQUITY INSTRUMENTS ON OR AFTER MAY 19, 2010- For debt or equity instruments issued on or after May 19, 2010, by depository institution holding companies or by nonbank financial companies supervised by the Board of Governors, this section shall be deemed to have become effective as of May 19, 2010.
(B) DEBT OR EQUITY INSTRUMENTS ISSUED BEFORE MAY 19, 2010- For debt or equity instruments issued before May 19, 2010, by depository institution holding companies or by nonbank financial companies supervised by the Board of Governors, any regulatory capital deductions required under this section shall be phased in incrementally over a period of 3 years, with the phase-in period to begin on January 1, 2013, except as set forth in subparagraph (C).
(C) DEBT OR EQUITY INSTRUMENTS OF SMALLER INSTITUTIONS- For debt or equity instruments issued before May 19, 2010, by depository institution holding companies with total consolidated assets of less than $15,000,000,000 as of December 31, 2009, and by organizations that were mutual holding companies on May 19, 2010, the capital deductions that would be required for other institutions under this section are not required as a result of this section.
(D) DEPOSITORY INSTITUTION HOLDING COMPANIES NOT PREVIOUSLY SUPERVISED BY THE BOARD OF GOVERNORS- For any depository institution holding company that was not supervised by the Board of Governors as of May 19, 2010, the requirements of this section, except as set forth in subparagraphs (A) and (B), shall be effective 5 years after the date of enactment of this Act
(E) CERTAIN BANK HOLDING COMPANY SUBSIDIARIES OF FOREIGN BANKING ORGANIZATIONS- For bank holding company subsidiaries of foreign banking organizations that have relied on Supervision and Regulation Letter SR-01-1 issued by the Board of Governors (as in effect on May 19, 2010), the requirements of this section, except as set forth in subparagraph (A), shall be effective 5 years after the date of enactment of this Act.
(5) EXCEPTIONS- This section shall not apply to--
(A) debt or equity instruments issued to the United States or any agency or instrumentality thereof pursuant to the Emergency Economic Stabilization Act of 2008, and prior to October 4, 2010;
(B) any Federal home loan bank; or
(C) any small bank holding company that is subject to the Small Bank Holding Company Policy Statement of the Board of Governors, as in effect on May 19, 2010.
(6) STUDY AND REPORT ON SMALL INSTITUTION ACCESS TO CAPITAL-
(A) STUDY REQUIRED- The Comptroller General of the United States, after consultation with the Federal banking agencies, shall conduct a study of access to capital by smaller insured depository institutions.
(B) SCOPE- For purposes of this study required by subparagraph (A), the term ‘smaller insured depository institution’ means an insured depository institution with total consolidated assets of $5,000,000,000 or less.
(C) REPORT TO CONGRESS- Not later than 18 months after the date of enactment of this Act, the Comptroller General of the United States 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 summarizing the results of the study conducted under subparagraph (A), together with any recommendations for legislative or regulatory action that would enhance the access to capital of smaller insured depository institutions, in a manner that is consistent with safe and sound banking operations.
(7) CAPITAL REQUIREMENTS TO ADDRESS ACTIVITIES THAT POSE RISKS TO THE FINANCIAL SYSTEM-
(A) IN GENERAL- Subject to the recommendations of the Council, in accordance with section 120, the Federal banking agencies shall develop capital requirements applicable to insured depository institutions, depository institution holding companies, and nonbank financial companies supervised by the Board of Governors that address the risks that the activities of such institutions pose, not only to the institution engaging in the activity, but to other public and private stakeholders in the event of adverse performance, disruption, or failure of the institution or the activity.
(B) CONTENT- Such rules shall address, at a minimum, the risks arising from--
(i) significant volumes of activity in derivatives, securitized products purchased and sold, financial guarantees purchased and sold, securities borrowing and lending, and repurchase agreements and reverse repurchase agreements;
(ii) concentrations in assets for which the values presented in financial reports are based on models rather than historical cost or prices deriving from deep and liquid 2-way markets; and
(iii) concentrations in market share for any activity that would substantially disrupt financial markets if the institution is forced to unexpectedly cease the activity.
SEC. 172. EXAMINATION AND ENFORCEMENT ACTIONS FOR INSURANCE AND ORDERLY LIQUIDATION PURPOSES.
(a) Examinations for Insurance and Resolution Purposes- Section 10(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1820(b)(3)) is amended--
(1) by striking ‘In addition’ and inserting the following:
‘(A) IN GENERAL- In addition’; and
(2) by striking ‘whenever the board of directors determines’ and all that follows through the period and inserting the following: ‘or nonbank financial company supervised by the Board of Governors or a bank holding company described in section 165(a) of the Financial Stability Act of 2010, whenever the Board of Directors determines that a special examination of any such depository institution is necessary to determine the condition of such depository institution for insurance purposes, or of such nonbank financial company supervised by the Board of Governors or bank holding company described in section 165(a) of the Financial Stability Act of 2010, for the purpose of implementing its authority to provide for orderly liquidation of any such company under title II of that Act, provided that such authority may not be used with respect to any such company that is in a generally sound condition.
‘(B) LIMITATION- Before conducting a special examination of a nonbank financial company supervised by the Board of Governors or a bank holding company described in section 165(a) of the Financial Stability Act of 2010, the Corporation shall review any available and acceptable resolution plan that the company has submitted in accordance with section 165(d) of that Act, consistent with the nonbinding effect of such plan, and available reports of examination, and shall coordinate to the maximum extent practicable with the Board of Governors, in order to minimize duplicative or conflicting examinations.’.
(b) Enforcement Authority- Section 8(t) of the Federal Deposit Insurance Act (12 U.S.C. 1818(t)) is amended--
(1) in paragraph (1), by inserting ‘, any depository institution holding company,’ before ‘or any institution-affiliated party’;
(2) in paragraph (2)--
(A) by striking ‘or’ at the end of subparagraph (B);
(B) at the end of subparagraph (C), by striking the period and inserting ‘or’; and
(C) by inserting at the end the following new subparagraph:
‘(D) the conduct or threatened conduct (including any acts or omissions) of the depository institution holding company poses a risk to the Deposit Insurance Fund, provided that such authority may not be used with respect to a depository institution holding company that is in generally sound condition and whose conduct does not pose a foreseeable and material risk of loss to the Deposit Insurance Fund;’; and
(3) by adding at the end the following:
‘(6) POWERS AND DUTIES WITH RESPECT TO DEPOSITORY INSTITUTION HOLDING COMPANIES- For purposes of exercising the backup authority provided in this subsection--
‘(A) the Corporation shall have the same powers with respect to a depository institution holding company and its affiliates as the appropriate Federal banking agency has with respect to the holding company and its affiliates; and
‘(B) the holding company and its affiliates shall have the same duties and obligations with respect to the Corporation as the holding company and its affiliates have with respect to the appropriate Federal banking agency.’.
(c) Rule of Construction- Nothing in this Act shall be construed to limit or curtail the Corporation’s current authority to examine or bring enforcement actions with respect to any insured depository institution or institution-affiliated party.
SEC. 173. ACCESS TO UNITED STATES FINANCIAL MARKET BY FOREIGN INSTITUTIONS.
(a) Establishment of Foreign Bank Offices in the United States- Section 7(d)(3) of the International Banking Act of 1978 (12 U.S.C. 3105(d)(3)) is amended--
(1) in subparagraph (C), by striking ‘and’ at the end;
(2) in subparagraph (D), by striking the period at the end of and inserting ‘; and’; and
(3) by adding at the end the following new subparagraph:
‘(E) for a foreign bank that presents a risk to the stability of United States financial system, whether the home country of the foreign bank has adopted, or is making demonstrable progress toward adopting, an appropriate system of financial regulation for the financial system of such home country to mitigate such risk.’.
(b) Termination of Foreign Bank Offices in the United States- Section 7(e)(1) of the International Banking Act of 1978 (12 U.S.C. 3105(e)(1)) is amended--
(1) in subparagraph (A), by striking ‘or’ at the end;
(2) in subparagraph (B), by striking the period at the end of and inserting ‘; or’; and
(3) by inserting after subparagraph (B), the following new subparagraph:
‘(C) for a foreign bank that presents a risk to the stability of the United States financial system, the home country of the foreign bank has not adopted, or made demonstrable progress toward adopting, an appropriate system of financial regulation to mitigate such risk.’.
(c) Registration or Succession to a United States Broker or Dealer and Termination of Such Registration- Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended by adding at the end the following new subsections:
‘(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.’.
SEC. 174. STUDIES AND REPORTS ON HOLDING COMPANY CAPITAL REQUIREMENTS.
(a) Study of Hybrid Capital Instruments- The Comptroller General of the United States, in consultation with the Board of Governors, the Comptroller of the Currency, and the Corporation, shall conduct a study of the use of hybrid capital instruments as a component of Tier 1 capital for banking institutions and bank holding companies. The study shall consider--
(1) the current use of hybrid capital instruments, such as trust preferred shares, as a component of Tier 1 capital;
(2) the differences between the components of capital permitted for insured depository institutions and those permitted for companies that control insured depository institutions;
(3) the benefits and risks of allowing such instruments to be used to comply with Tier 1 capital requirements;
(4) the economic impact of prohibiting the use of such capital instruments for Tier 1;
(5) a review of the consequences of disqualifying trust preferred instruments, and whether it could lead to the failure or undercapitalization of existing banking organizations;
(6) the international competitive implications prohibiting hybrid capital instruments for Tier 1;
(7) the impact on the cost and availability of credit in the United States from such a prohibition;
(8) the availability of capital for financial institutions with less than $10,000,000,000 in total assets; and
(9) any other relevant factors relating to the safety and soundness of our financial system and potential economic impact of such a prohibition.
(b) Study of Foreign Bank Intermediate Holding Company Capital Requirements- The Comptroller General of the United States, in consultation with the Secretary, the Board of Governors, the Comptroller of the Currency, and the Corporation, shall conduct a study of capital requirements applicable to United States intermediate holding companies of foreign banks that are bank holding companies or savings and loan holding companies. The study shall consider--
(1) current Board of Governors policy regarding the treatment of intermediate holding companies;
(2) the principle of national treatment and equality of competitive opportunity for foreign banks operating in the United States;
(3) the extent to which foreign banks are subject on a consolidated basis to home country capital standards comparable to United States capital standards;
(4) potential effects on United States banking organizations operating abroad of changes to United States policy regarding intermediate holding companies;
(5) the impact on the cost and availability of credit in the United States from a change in United States policy regarding intermediate holding companies; and
(6) any other relevant factors relating to the safety and soundness of our financial system and potential economic impact of such a prohibition.
(c) Report- Not later than 18 months after the date of enactment of this Act, the Comptroller General of the United States shall submit reports to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives summarizing the results of the studies required under subsection (a). The reports shall include specific recommendations for legislative or regulatory action regarding the treatment of hybrid capital instruments, including trust preferred shares, and shall explain the basis for such recommendations.
SEC. 175. INTERNATIONAL POLICY COORDINATION.
(a) By the President- The President, or a designee of the President, may coordinate through all available international policy channels, similar policies as those found in United States law relating to limiting the scope, nature, size, scale, concentration, and interconnectedness of financial companies, in order to protect financial stability and the global economy.
(b) By the Council- The Chairperson of the Council, in consultation with the other members of the Council, shall regularly consult with the financial regulatory entities and other appropriate organizations of foreign governments or international organizations on matters relating to systemic risk to the international financial system.
(c) By the Board of Governors and the Secretary- The Board of Governors and the Secretary shall consult with their foreign counterparts and through appropriate multilateral organizations to encourage comprehensive and robust prudential supervision and regulation for all highly leveraged and interconnected financial companies.
SEC. 176. RULE OF CONSTRUCTION.
No regulation or standard imposed under this title may be construed in a manner that would lessen the stringency of the requirements of any applicable primary financial regulatory agency or any other Federal or State agency that are otherwise applicable. This title, and the rules and regulations or orders prescribed pursuant to this title, do not divest any such agency of any authority derived from any other applicable law.
TITLE II--ORDERLY LIQUIDATION AUTHORITY
SEC. 201. DEFINITIONS.
(a) In General- In this title, the following definitions shall apply:
(1) ADMINISTRATIVE EXPENSES OF THE RECEIVER- The term ‘administrative expenses of the receiver’ includes--
(A) the actual, necessary costs and expenses incurred by the Corporation as receiver for a covered financial company in liquidating a covered financial company; and
(B) any obligations that the Corporation as receiver for a covered financial company determines are necessary and appropriate to facilitate the smooth and orderly liquidation of the covered financial company.
(2) BANKRUPTCY CODE- The term ‘Bankruptcy Code’ means title 11, United States Code.
(3) BRIDGE FINANCIAL COMPANY- The term ‘bridge financial company’ means a new financial company organized by the Corporation in accordance with section 210(h) for the purpose of resolving a covered financial company.
(4) CLAIM- The term ‘claim’ means any right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.
(5) COMPANY- The term ‘company’ has the same meaning as in section 2(b) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(b)), except that such term includes any company described in paragraph (11), the majority of the securities of which are owned by the United States or any State.
(6) COURT- The term ‘Court’ means the United States District Court for the District of Columbia, unless the context otherwise requires.
(7) COVERED BROKER OR DEALER- The term ‘covered broker or dealer’ means a covered financial company that is a broker or dealer that--
(A) is registered with the Commission under section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)); and
(B) is a member of SIPC.
(8) COVERED FINANCIAL COMPANY- The term ‘covered financial company’--
(A) means a financial company for which a determination has been made under section 203(b); and
(B) does not include an insured depository institution.
(9) COVERED SUBSIDIARY- The term ‘covered subsidiary’ means a subsidiary of a covered financial company, other than--
(A) an insured depository institution;
(B) an insurance company; or
(C) a covered broker or dealer.
(10) DEFINITIONS RELATING TO COVERED BROKERS AND DEALERS- The terms ‘customer’, ‘customer name securities’, ‘customer property’, and ‘net equity’ in the context of a covered broker or dealer, have the same meanings as in section 16 of the Securities Investor Protection Act of 1970 (15 U.S.C. 78lll).
(11) FINANCIAL COMPANY- The term ‘financial company’ means any company that--
(A) is incorporated or organized under any provision of Federal law or the laws of any State;
(B) is--
(i) a bank holding company, as defined in section 2(a) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a));
(ii) a nonbank financial company supervised by the Board of Governors;
(iii) any company that is predominantly engaged in activities that the Board of Governors has determined are financial in nature or incidental thereto for purposes of section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)) other than a company described in clause (i) or (ii); or
(iv) any subsidiary of any company described in any of clauses (i) through (iii) that is predominantly engaged in activities that the Board of Governors has determined are financial in nature or incidental thereto for purposes of section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)) (other than a subsidiary that is an insured depository institution or an insurance company); and
(C) is not a Farm Credit System institution chartered under and subject to the provisions of the Farm Credit Act of 1971, as amended (12 U.S.C. 2001 et seq.), a governmental entity, or a regulated entity, as defined under section 1303(20) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4502(20)).
(12) FUND- The term ‘Fund’ means the Orderly Liquidation Fund established under section 210(n).
(13) INSURANCE COMPANY- The term ‘insurance company’ means any entity that is--
(A) engaged in the business of insurance;
(B) subject to regulation by a State insurance regulator; and
(C) covered by a State law that is designed to specifically deal with the rehabilitation, liquidation, or insolvency of an insurance company.
(14) NONBANK FINANCIAL COMPANY- The term ‘nonbank financial company’ has the same meaning as in section 102(a)(4)(C).
(15) NONBANK FINANCIAL COMPANY SUPERVISED BY THE BOARD OF GOVERNORS- The term ‘nonbank financial company supervised by the Board of Governors’ has the same meaning as in section 102(a)(4)(D).
(16) SIPC- The term ‘SIPC’ means the Securities Investor Protection Corporation.
(b) Definitional Criteria- For purpose of the definition of the term ‘financial company’ under subsection (a)(11), no company shall be deemed to be predominantly engaged in activities that the Board of Governors has determined are financial in nature or incidental thereto for purposes of section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)), if the consolidated revenues of such company from such activities constitute less than 85 percent of the total consolidated revenues of such company, as the Corporation, in consultation with the Secretary, shall establish by regulation. In determining whether a company is a financial company under this title, the consolidated revenues derived from the ownership or control of a depository institution shall be included.
SEC. 202. JUDICIAL REVIEW.
(a) Commencement of Orderly Liquidation-
(1) PETITION TO DISTRICT COURT-
(A) DISTRICT COURT REVIEW-
(i) PETITION TO DISTRICT COURT- Subsequent to a determination by the Secretary under section 203 that a financial company satisfies the criteria in section 203(b), the Secretary shall notify the Corporation and the covered financial company. If the board of directors (or body performing similar functions) of the covered financial company acquiesces or consents to the appointment of the Corporation as receiver, the Secretary shall appoint the Corporation as receiver. If the board of directors (or body performing similar functions) of the covered financial company does not acquiesce or consent to the appointment of the Corporation as receiver, the Secretary shall petition the United States District Court for the District of Columbia for an order authorizing the Secretary to appoint the Corporation as receiver.
(ii) FORM AND CONTENT OF ORDER- The Secretary shall present all relevant findings and the recommendation made pursuant to section 203(a) to the Court. The petition shall be filed under seal.
(iii) DETERMINATION- On a strictly confidential basis, and without any prior public disclosure, the Court, after notice to the covered financial company and a hearing in which the covered financial company may oppose the petition, shall determine whether the determination of the Secretary that the covered financial company is in default or in danger of default and satisfies the definition of a financial company under section 201(a)(11) is arbitrary and capricious.
(iv) ISSUANCE OF ORDER- If the Court determines that the determination of the Secretary that the covered financial company is in default or in danger of default and satisfies the definition of a financial company under section 201(a)(11)--
(I) is not arbitrary and capricious, the Court shall issue an order immediately authorizing the Secretary to appoint the Corporation as receiver of the covered financial company; or
(II) is arbitrary and capricious, the Court shall immediately provide to the Secretary a written statement of each reason supporting its determination, and afford the Secretary an immediate opportunity to amend and refile the petition under clause (i).
(v) PETITION GRANTED BY OPERATION OF LAW- If the Court does not make a determination within 24 hours of receipt of the petition--
(I) the petition shall be granted by operation of law;
(II) the Secretary shall appoint the Corporation as receiver; and
(III) liquidation under this title shall automatically and without further notice or action be commenced and the Corporation may immediately take all actions authorized under this title.
(B) EFFECT OF DETERMINATION- The determination of the Court under subparagraph (A) shall be final, and shall be subject to appeal only in accordance with paragraph (2). The decision shall not be subject to any stay or injunction pending appeal. Upon conclusion of its proceedings under subparagraph (A), the Court shall provide immediately for the record a written statement of each reason supporting the decision of the Court, and shall provide copies thereof to the Secretary and the covered financial company.
(C) CRIMINAL PENALTIES- A person who recklessly discloses a determination of the Secretary under section 203(b) or a petition of the Secretary under subparagraph (A), or the pendency of court proceedings as provided for under subparagraph (A), shall be fined not more than $250,000, or imprisoned for not more than 5 years, or both.
(2) APPEAL OF DECISIONS OF THE DISTRICT COURT-
(A) APPEAL TO COURT OF APPEALS-
(i) IN GENERAL- Subject to clause (ii), the United States Court of Appeals for the District of Columbia Circuit shall have jurisdiction of an appeal of a final decision of the Court filed by the Secretary or a covered financial company, through its board of directors, notwithstanding section 210(a)(1)(A)(i), not later than 30 days after the date on which the decision of the Court is rendered or deemed rendered under this subsection.
(ii) CONDITION OF JURISDICTION- The Court of Appeals shall have jurisdiction of an appeal by a covered financial company only if the covered financial company did not acquiesce or consent to the appointment of a receiver by the Secretary under paragraph (1)(A).
(iii) EXPEDITION- The Court of Appeals shall consider any appeal under this subparagraph on an expedited basis.
(iv) SCOPE OF REVIEW- For an appeal taken under this subparagraph, review shall be limited to whether the determination of the Secretary that a covered financial company is in default or in danger of default and satisfies the definition of a financial company under section 201(a)(11) is arbitrary and capricious.
(B) APPEAL TO THE SUPREME COURT-
(i) IN GENERAL- A petition for a writ of certiorari to review a decision of the Court of Appeals under subparagraph (A) may be filed by the Secretary or the covered financial company, through its board of directors, notwithstanding section 210(a)(1)(A)(i), with the Supreme Court of the United States, not later than 30 days after the date of the final decision of the Court of Appeals, and the Supreme Court shall have discretionary jurisdiction to review such decision.
(ii) WRITTEN STATEMENT- In the event of a petition under clause (i), the Court of Appeals shall immediately provide for the record a written statement of each reason for its decision.
(iii) EXPEDITION- The Supreme Court shall consider any petition under this subparagraph on an expedited basis.
(iv) SCOPE OF REVIEW- Review by the Supreme Court under this subparagraph shall be limited to whether the determination of the Secretary that the covered financial company is in default or in danger of default and satisfies the definition of a financial company under section 201(a)(11) is arbitrary and capricious.
(b) Establishment and Transmittal of Rules and Procedures-
(1) IN GENERAL- Not later than 6 months after the date of enactment of this Act, the Court shall establish such rules and procedures as may be necessary to ensure the orderly conduct of proceedings, including rules and procedures to ensure that the 24-hour deadline is met and that the Secretary shall have an ongoing opportunity to amend and refile petitions under subsection (a)(1).
(2) PUBLICATION OF RULES- The rules and procedures established under paragraph (1), and any modifications of such rules and procedures, shall be recorded and shall be transmitted to--
(A) the Committee on the Judiciary of the Senate;
(B) the Committee on Banking, Housing, and Urban Affairs of the Senate;
(C) the Committee on the Judiciary of the House of Representatives; and
(D) the Committee on Financial Services of the House of Representatives.
(c) Provisions Applicable to Financial Companies-
(1) BANKRUPTCY CODE- Except as provided in this subsection, the provisions of the Bankruptcy Code and rules issued thereunder or otherwise applicable insolvency law, and not the provisions of this title, shall apply to financial companies that are not covered financial companies for which the Corporation has been appointed as receiver.
(2) THIS TITLE- The provisions of this title shall exclusively apply to and govern all matters relating to covered financial companies for which the Corporation is appointed as receiver, and no provisions of the Bankruptcy Code or the rules issued thereunder shall apply in such cases, except as expressly provided in this title.
(d) Time Limit on Receivership Authority-
(1) BASELINE PERIOD- Any appointment of the Corporation as receiver under this section shall terminate at the end of the 3-year period beginning on the date on which such appointment is made.
(2) EXTENSION OF TIME LIMIT- The time limit established in paragraph (1) may be extended by the Corporation for up to 1 additional year, if the Chairperson of the Corporation determines and certifies in writing to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives that continuation of the receivership is necessary--
(A) to--
(i) maximize the net present value return from the sale or other disposition of the assets of the covered financial company; or
(ii) minimize the amount of loss realized upon the sale or other disposition of the assets of the covered financial company; and
(B) to protect the stability of the financial system of the United States.
(3) SECOND EXTENSION OF TIME LIMIT-
(A) IN GENERAL- The time limit under this subsection, as extended under paragraph (2), may be extended for up to 1 additional year, if the Chairperson of the Corporation, with the concurrence of the Secretary, submits the certifications described in paragraph (2).
(B) ADDITIONAL REPORT REQUIRED- Not later than 30 days after the date of commencement of the extension under subparagraph (A), the Corporation shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives describing the need for the extension and the specific plan of the Corporation to conclude the receivership before the end of the second extension.
(4) ONGOING LITIGATION- The time limit under this subsection, as extended under paragraph (3), may be further extended solely for the purpose of completing ongoing litigation in which the Corporation as receiver is a party, provided that the appointment of the Corporation as receiver shall terminate not later than 90 days after the date of completion of such litigation, if--
(A) the Council determines that the Corporation used its best efforts to conclude the receivership in accordance with its plan before the end of the time limit described in paragraph (3);
(B) the Council determines that the completion of longer-term responsibilities in the form of ongoing litigation justifies the need for an extension; and
(C) the Corporation submits a report approved by the Council not later than 30 days after the date of the determinations by the Council under subparagraphs (A) and (B) to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives, describing--
(i) the ongoing litigation justifying the need for an extension; and
(ii) the specific plan of the Corporation to complete the litigation and conclude the receivership.
(5) REGULATIONS- The Corporation may issue regulations governing the termination of receiverships under this title.
(6) NO LIABILITY- The Corporation and the Deposit Insurance Fund shall not be liable for unresolved claims arising from the receivership after the termination of the receivership.
(e) Study of Bankruptcy and Orderly Liquidation Process for Financial Companies-
(1) STUDY-
(A) IN GENERAL- The Administrative Office of the United States Courts and the Comptroller General of the United States shall each monitor the activities of the Court, and each such Office shall conduct separate studies regarding the bankruptcy and orderly liquidation process for financial companies under the Bankruptcy Code.
(B) ISSUES TO BE STUDIED- In conducting the study under subparagraph (A), the Administrative Office of the United States Courts and the Comptroller General of the United States each shall evaluate--
(i) the effectiveness of chapter 7 or chapter 11 of the Bankruptcy Code in facilitating the orderly liquidation or reorganization of financial companies;
(ii) ways to maximize the efficiency and effectiveness of the Court; and
(iii) ways to make the orderly liquidation process under the Bankruptcy Code for financial companies more effective.
(2) REPORTS- Not later than 1 year after the date of enactment of this Act, in each successive year until the third year, and every fifth year after that date of enactment, the Administrative Office of the United States Courts and the Comptroller General of the United States shall submit to the Committee on Banking, Housing, and Urban Affairs and the Committee on the Judiciary of the Senate and the Committee on Financial Services and the Committee on the Judiciary of the House of Representatives separate reports summarizing the results of the studies conducted under paragraph (1).
(f) Study of International Coordination Relating to Bankruptcy Process for Financial Companies-
(1) STUDY-
(A) IN GENERAL- The Comptroller General of the United States shall conduct a study regarding international coordination relating to the orderly liquidation of financial companies under the Bankruptcy Code.
(B) ISSUES TO BE STUDIED- In conducting the study under subparagraph (A), the Comptroller General of the United States shall evaluate, with respect to the bankruptcy process for financial companies--
(i) the extent to which international coordination currently exists;
(ii) current mechanisms and structures for facilitating international cooperation;
(iii) barriers to effective international coordination; and
(iv) ways to increase and make more effective international coordination.
(2) REPORT- Not later than 1 year after the date of enactment of this Act, the Comptroller General of the United States shall submit to the Committee on Banking, Housing, and Urban Affairs and the Committee on the Judiciary of the Senate and the Committee on Financial Services and the Committee on the Judiciary of the House of Representatives and the Secretary a report summarizing the results of the study conducted under paragraph (1).
(g) Study of Prompt Corrective Action Implementation by the Appropriate Federal Agencies-
(1) STUDY- The Comptroller General of the United States shall conduct a study regarding the implementation of prompt corrective action by the appropriate Federal banking agencies.
(2) ISSUES TO BE STUDIED- In conducting the study under paragraph (1), the Comptroller General shall evaluate--
(A) the effectiveness of implementation of prompt corrective action by the appropriate Federal banking agencies and the resolution of insured depository institutions by the Corporation; and
(B) ways to make prompt corrective action a more effective tool to resolve the insured depository institutions at the least possible long-term cost to the Deposit Insurance Fund.
(3) REPORT TO COUNCIL- Not later than 1 year after the date of enactment of this Act, the Comptroller General shall submit a report to the Council on the results of the study conducted under this subsection.
(4) COUNCIL REPORT OF ACTION- Not later than 6 months after the date of receipt of the report from the Comptroller General under paragraph (3), the Council shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on actions taken in response to the report, including any recommendations made to the Federal primary financial regulatory agencies under section 120.
SEC. 203. SYSTEMIC RISK DETERMINATION.
(a) Written Recommendation and Determination-
(1) VOTE REQUIRED-
(A) IN GENERAL- On their own initiative, or at the request of the Secretary, the Corporation and the Board of Governors shall consider whether to make a written recommendation described in paragraph (2) with respect to whether the Secretary should appoint the Corporation as receiver for a financial company. Such recommendation shall be made upon a vote of not fewer than 2/3 of the members of the Board of Governors then serving and 2/3 of the members of the board of directors of the Corporation then serving.
(B) CASES INVOLVING BROKERS OR DEALERS- In the case of a broker or dealer, or in which the largest United States subsidiary (as measured by total assets as of the end of the previous calendar quarter) of a financial company is a broker or dealer, the Commission and the Board of Governors, at the request of the Secretary, or on their own initiative, shall consider whether to make the written recommendation described in paragraph (2) with respect to the financial company. Subject to the requirements in paragraph (2), such recommendation shall be made upon a vote of not fewer than 2/3 of the members of the Board of Governors then serving and 2/3 of the members of the Commission then serving, and in consultation with the Corporation.
(C) CASES INVOLVING INSURANCE COMPANIES- In the case of an insurance company, or in which the largest United States subsidiary (as measured by total assets as of the end of the previous calendar quarter) of a financial company is an insurance company, the Director of the Federal Insurance Office and the Board of Governors, at the request of the Secretary or on their own initiative, shall consider whether to make the written recommendation described in paragraph (2) with respect to the financial company. Subject to the requirements in paragraph (2), such recommendation shall be made upon a vote of not fewer than 2/3 of the Board of Governors then serving and the affirmative approval of the Director of the Federal Insurance Office, and in consultation with the Corporation.
(2) RECOMMENDATION REQUIRED- Any written recommendation pursuant to paragraph (1) shall contain--
(A) an evaluation of whether the financial company is in default or in danger of default;
(B) a description of the effect that the default of the financial company would have on financial stability in the United States;
(C) a description of the effect that the default of the financial company would have on economic conditions or financial stability for low income, minority, or underserved communities;
(D) a recommendation regarding the nature and the extent of actions to be taken under this title regarding the financial company;
(E) an evaluation of the likelihood of a private sector alternative to prevent the default of the financial company;
(F) an evaluation of why a case under the Bankruptcy Code is not appropriate for the financial company;
(G) an evaluation of the effects on creditors, counterparties, and shareholders of the financial company and other market participants; and
(H) an evaluation of whether the company satisfies the definition of a financial company under section 201.
(b) Determination by the Secretary- Notwithstanding any other provision of Federal or State law, the Secretary shall take action in accordance with section 202(a)(1)(A), if, upon the written recommendation under subsection (a), the Secretary (in consultation with the President) determines that--
(1) the financial company is in default or in danger of default;
(2) the failure of the financial company and its resolution under otherwise applicable Federal or State law would have serious adverse effects on financial stability in the United States;
(3) no viable private sector alternative is available to prevent the default of the financial company;
(4) any effect on the claims or interests of creditors, counterparties, and shareholders of the financial company and other market participants as a result of actions to be taken under this title is appropriate, given the impact that any action taken under this title would have on financial stability in the United States;
(5) any action under section 204 would avoid or mitigate such adverse effects, taking into consideration the effectiveness of the action in mitigating potential adverse effects on the financial system, the cost to the general fund of the Treasury, and the potential to increase excessive risk taking on the part of creditors, counterparties, and shareholders in the financial company;
(6) a Federal regulatory agency has ordered the financial company to convert all of its convertible debt instruments that are subject to the regulatory order; and
(7) the company satisfies the definition of a financial company under section 201.
(c) Documentation and Review-
(1) IN GENERAL- The Secretary shall--
(A) document any determination under subsection (b);
(B) retain the documentation for review under paragraph (2); and
(C) notify the covered financial company and the Corporation of such determination.
(2) REPORT TO CONGRESS- Not later than 24 hours after the date of appointment of the Corporation as receiver for a covered financial company, the Secretary shall provide written notice of the recommendations and determinations reached in accordance with subsections (a) and (b) to the Majority Leader and the Minority Leader of the Senate and the Speaker and the Minority Leader 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, which shall consist of a summary of the basis for the determination, including, to the extent available at the time of the determination--
(A) the size and financial condition of the covered financial company;
(B) the sources of capital and credit support that were available to the covered financial company;
(C) the operations of the covered financial company that could have had a significant impact on financial stability, markets, or both;
(D) identification of the banks and financial companies which may be able to provide the services offered by the covered financial company;
(E) any potential international ramifications of resolution of the covered financial company under other applicable insolvency law;
(F) an estimate of the potential effect of the resolution of the covered financial company under other applicable insolvency law on the financial stability of the United States;
(G) the potential effect of the appointment of a receiver by the Secretary on consumers;
(H) the potential effect of the appointment of a receiver by the Secretary on the financial system, financial markets, and banks and other financial companies; and
(I) whether resolution of the covered financial company under other applicable insolvency law would cause banks or other financial companies to experience severe liquidity distress.
(3) REPORTS TO CONGRESS AND THE PUBLIC-
(A) IN GENERAL- Not later than 60 days after the date of appointment of the Corporation as receiver for a covered financial company, the Corporation shall file a report with the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives--
(i) setting forth information on the financial condition of the covered financial company as of the date of the appointment, including a description of its assets and liabilities;
(ii) describing the plan of, and actions taken by, the Corporation to wind down the covered financial company;
(iii) explaining each instance in which the Corporation waived any applicable requirements of part 366 of title 12, Code of Federal Regulations (or any successor thereto) with respect to conflicts of interest by any person in the private sector who was retained to provide services to the Corporation in connection with such receivership;
(iv) describing the reasons for the provision of any funding to the receivership out of the Fund;
(v) setting forth the expected costs of the orderly liquidation of the covered financial company;
(vi) setting forth the identity of any claimant that is treated in a manner different from other similarly situated claimants under subsection (b)(4), (d)(4), or (h)(5)(E), the amount of any additional payment to such claimant under subsection (d)(4), and the reason for any such action; and
(vii) which report the Corporation shall publish on an online website maintained by the Corporation, subject to maintaining appropriate confidentiality.
(B) AMENDMENTS- The Corporation shall, on a timely basis, not less frequently than quarterly, amend or revise and resubmit the reports prepared under this paragraph, as necessary.
(C) CONGRESSIONAL TESTIMONY- The Corporation and the primary financial regulatory agency, if any, of the financial company for which the Corporation was appointed receiver under this title shall appear before Congress, if requested, not later than 30 days after the date on which the Corporation first files the reports required under subparagraph (A).
(4) DEFAULT OR IN DANGER OF DEFAULT- For purposes of this title, a financial company shall be considered to be in default or in danger of default if, as determined in accordance with subsection (b)--
(A) a case has been, or likely will promptly be, commenced with respect to the financial company under the Bankruptcy Code;
(B) the financial company has incurred, or is likely to incur, losses that will deplete all or substantially all of its capital, and there is no reasonable prospect for the company to avoid such depletion;
(C) the assets of the financial company are, or are likely to be, less than its obligations to creditors and others; or
(D) the financial company is, or is likely to be, unable to pay its obligations (other than those subject to a bona fide dispute) in the normal course of business.
(5) GAO REVIEW- The Comptroller General of the United States shall review and report to Congress on any determination under subsection (b), that results in the appointment of the Corporation as receiver, including--
(A) the basis for the determination;
(B) the purpose for which any action was taken pursuant thereto;
(C) the likely effect of the determination and such action on the incentives and conduct of financial companies and their creditors, counterparties, and shareholders; and
(D) the likely disruptive effect of the determination and such action on the reasonable expectations of creditors, counterparties, and shareholders, taking into account the impact any action under this title would have on financial stability in the United States, including whether the rights of such parties will be disrupted.
(d) Corporation Policies and Procedures- As soon as is practicable after the date of enactment of this Act, the Corporation shall establish policies and procedures that are acceptable to the Secretary governing the use of funds available to the Corporation to carry out this title, including the terms and conditions for the provision and use of funds under sections 204(d), 210(h)(2)(G)(iv), and 210(h)(9).
(e) Treatment of Insurance Companies and Insurance Company Subsidiaries-
(1) IN GENERAL- Notwithstanding subsection (b), if an insurance company is a covered financial company or a subsidiary or affiliate of a covered financial company, the liquidation or rehabilitation of such insurance company, and any subsidiary or affiliate of such company that is not excepted under paragraph (2), shall be conducted as provided under applicable State law.
(2) EXCEPTION FOR SUBSIDIARIES AND AFFILIATES- The requirement of paragraph (1) shall not apply with respect to any subsidiary or affiliate of an insurance company that is not itself an insurance company.
(3) BACKUP AUTHORITY- Notwithstanding paragraph (1), with respect to a covered financial company described in paragraph (1), if, after the end of the 60-day period beginning on the date on which a determination is made under section 202(a) with respect to such company, the appropriate regulatory agency has not filed the appropriate judicial action in the appropriate State court to place such company into orderly liquidation under the laws and requirements of the State, the Corporation shall have the authority to stand in the place of the appropriate regulatory agency and file the appropriate judicial action in the appropriate State court to place such company into orderly liquidation under the laws and requirements of the State.
SEC. 204. ORDERLY LIQUIDATION OF COVERED FINANCIAL COMPANIES.
(a) Purpose of Orderly Liquidation Authority- It is the purpose of this title to provide the necessary authority to liquidate failing financial companies that pose a significant risk to the financial stability of the United States in a manner that mitigates such risk and minimizes moral hazard. The authority provided in this title shall be exercised in the manner that best fulfills such purpose, so that--
(1) creditors and shareholders will bear the losses of the financial company;
(2) management responsible for the condition of the financial company will not be retained; and
(3) the Corporation and other appropriate agencies will take all steps necessary and appropriate to assure that all parties, including management, directors, and third parties, having responsibility for the condition of the financial company bear losses consistent with their responsibility, including actions for damages, restitution, and recoupment of compensation and other gains not compatible with such responsibility.
(b) Corporation as Receiver- Upon the appointment of the Corporation under section 202, the Corporation shall act as the receiver for the covered financial company, with all of the rights and obligations set forth in this title.
(c) Consultation- The Corporation, as receiver--
(1) shall consult with the primary financial regulatory agency or agencies of the covered financial company and its covered subsidiaries for purposes of ensuring an orderly liquidation of the covered financial company;
(2) may consult with, or under subsection (a)(1)(B)(v) or (a)(1)(L) of section 210, acquire the services of, any outside experts, as appropriate to inform and aid the Corporation in the orderly liquidation process;
(3) shall consult with the primary financial regulatory agency or agencies of any subsidiaries of the covered financial company that are not covered subsidiaries, and coordinate with such regulators regarding the treatment of such solvent subsidiaries and the separate resolution of any such insolvent subsidiaries under other governmental authority, as appropriate; and
(4) shall consult with the Commission and the Securities Investor Protection Corporation in the case of any covered financial company for which the Corporation has been appointed as receiver that is a broker or dealer registered with the Commission under section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) and is a member of the Securities Investor Protection Corporation, for the purpose of determining whether to transfer to a bridge financial company organized by the Corporation as receiver, without consent of any customer, customer accounts of the covered financial company.
(d) Funding for Orderly Liquidation- Upon its appointment as receiver for a covered financial company, and thereafter as the Corporation may, in its discretion, determine to be necessary or appropriate, the Corporation may make available to the receivership, subject to the conditions set forth in section 206 and subject to the plan described in section 210(n)(9), funds for the orderly liquidation of the covered financial company. All funds provided by the Corporation under this subsection shall have a priority of claims under subparagraph (A) or (B) of section 210(b)(1), as applicable, including funds used for--
(1) making loans to, or purchasing any debt obligation of, the covered financial company or any covered subsidiary;
(2) purchasing or guaranteeing against loss the assets of the covered financial company or any covered subsidiary, directly or through an entity established by the Corporation for such purpose;
(3) assuming or guaranteeing the obligations of the covered financial company or any covered subsidiary to 1 or more third parties;
(4) taking a lien on any or all assets of the covered financial company or any covered subsidiary, including a first priority lien on all unencumbered assets of the covered financial company or any covered subsidiary to secure repayment of any transactions conducted under this subsection;
(5) selling or transferring all, or any part, of such acquired assets, liabilities, or obligations of the covered financial company or any covered subsidiary; and
(6) making payments pursuant to subsections (b)(4), (d)(4), and (h)(5)(E) of section 210.
SEC. 205. ORDERLY LIQUIDATION OF COVERED BROKERS AND DEALERS.
(a) Appointment of SIPC as Trustee-
(1) APPOINTMENT- Upon the appointment of the Corporation as receiver for any covered broker or dealer, the Corporation shall appoint, without any need for court approval, the Securities Investor Protection Corporation to act as trustee for the liquidation under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) of the covered broker or dealer.
(2) ACTIONS BY SIPC-
(A) FILING- Upon appointment of SIPC under paragraph (1), SIPC shall promptly file with any Federal district court of competent jurisdiction specified in section 21 or 27 of the Securities Exchange Act of 1934 (15 U.S.C. 78u, 78aa), an application for a protective decree under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) as to the covered broker or dealer. The Federal district court shall accept and approve the filing, including outside of normal business hours, and shall immediately issue the protective decree as to the covered broker or dealer.
(B) ADMINISTRATION BY SIPC- Following entry of the protective decree, and except as otherwise provided in this section, the determination of claims and the liquidation of assets retained in the receivership of the covered broker or dealer and not transferred to the bridge financial company shall be administered under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) by SIPC, as trustee for the covered broker or dealer.
(C) DEFINITION OF FILING DATE- For purposes of the liquidation proceeding, the term ‘filing date’ means the date on which the Corporation is appointed as receiver of the covered broker or dealer.
(D) DETERMINATION OF CLAIMS- As trustee for the covered broker or dealer, SIPC shall determine and satisfy, consistent with this title and with the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), all claims against the covered broker or dealer arising on or before the filing date.
(b) Powers and Duties of SIPC-
(1) IN GENERAL- Except as provided in this section, upon its appointment as trustee for the liquidation of a covered broker or dealer, SIPC shall have all of the powers and duties provided by the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), including, without limitation, all rights of action against third parties, and shall conduct such liquidation in accordance with the terms of the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), except that SIPC shall have no powers or duties with respect to assets and liabilities transferred by the Corporation from the covered broker or dealer to any bridge financial company established in accordance with this title.
(2) LIMITATION OF POWERS- The exercise by SIPC of powers and functions as trustee under subsection (a) shall not impair or impede the exercise of the powers and duties of the Corporation with regard to--
(A) any action, except as otherwise provided in this title--
(i) to make funds available under section 204(d);
(ii) to organize, establish, operate, or terminate any bridge financial company;
(iii) to transfer assets and liabilities;
(iv) to enforce or repudiate contracts; or
(v) to take any other action relating to such bridge financial company under section 210; or
(B) determining claims under subsection (e).
(3) PROTECTIVE DECREE- SIPC and the Corporation, in consultation with the Commission, shall jointly determine the terms of the protective decree to be filed by SIPC with any court of competent jurisdiction under section 21 or 27 of the Securities Exchange Act of 1934 (15 U.S.C. 78u, 78aa), as required by subsection (a).
(4) QUALIFIED FINANCIAL CONTRACTS- Notwithstanding any provision of the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) to the contrary (including section 5(b)(2)(C) of that Act (15 U.S.C. 78eee(b)(2)(C))), the rights and obligations of any party to a qualified financial contract (as that term is defined in section 210(c)(8)) to which a covered broker or dealer for which the Corporation has been appointed receiver is a party shall be governed exclusively by section 210, including the limitations and restrictions contained in section 210(c)(10)(B).
(c) Limitation on Court Action- Except as otherwise provided in this title, no court may take any action, including any action pursuant to the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) or the Bankruptcy Code, to restrain or affect the exercise of powers or functions of the Corporation as receiver for a covered broker or dealer and any claims against the Corporation as such receiver shall be determined in accordance with subsection (e) and such claims shall be limited to money damages.
(d) Actions by Corporation as Receiver-
(1) IN GENERAL- Notwithstanding any other provision of this title, no action taken by the Corporation as receiver with respect to a covered broker or dealer shall--
(A) adversely affect the rights of a customer to customer property or customer name securities;
(B) diminish the amount or timely payment of net equity claims of customers; or
(C) otherwise impair the recoveries provided to a customer under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.).
(2) NET PROCEEDS- The net proceeds from any transfer, sale, or disposition of assets of the covered broker or dealer, or proceeds thereof by the Corporation as receiver for the covered broker or dealer shall be for the benefit of the estate of the covered broker or dealer, as provided in this title.
(e) Claims Against the Corporation as Receiver- Any claim against the Corporation as receiver for a covered broker or dealer for assets transferred to a bridge financial company established with respect to such covered broker or dealer--
(1) shall be determined in accordance with section 210(a)(2); and
(2) may be reviewed by the appropriate district or territorial court of the United States in accordance with section 210(a)(5).
(f) Satisfaction of Customer Claims-
(1) OBLIGATIONS TO CUSTOMERS- Notwithstanding any other provision of this title, all obligations of a covered broker or dealer or of any bridge financial company established with respect to such covered broker or dealer to a customer relating to, or net equity claims based upon, customer property or customer name securities shall be promptly discharged by SIPC, the Corporation, or the bridge financial company, as applicable, by the delivery of securities or the making of payments to or for the account of such customer, in a manner and in an amount at least as beneficial to the customer as would have been the case had the actual proceeds realized from the liquidation of the covered broker or dealer under this title been distributed in a proceeding under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) without the appointment of the Corporation as receiver and without any transfer of assets or liabilities to a bridge financial company, and with a filing date as of the date on which the Corporation is appointed as receiver.
(2) SATISFACTION OF CLAIMS BY SIPC- SIPC, as trustee for a covered broker or dealer, shall satisfy customer claims in the manner and amount provided under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), as if the appointment of the Corporation as receiver had not occurred, and with a filing date as of the date on which the Corporation is appointed as receiver. The Corporation shall satisfy customer claims, to the extent that a customer would have received more securities or cash with respect to the allocation of customer property had the covered financial company been subject to a proceeding under the Securities Investor Protection Act (15 U.S.C. 78aaa et seq.) without the appointment of the Corporation as receiver, and with a filing date as of the date on which the Corporation is appointed as receiver.
(g) Priorities-
(1) CUSTOMER PROPERTY- As trustee for a covered broker or dealer, SIPC shall allocate customer property and deliver customer name securities in accordance with section 8(c) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78fff-2(c)).
(2) OTHER CLAIMS- All claims other than those described in paragraph (1) (including any unpaid claim by a customer for the allowed net equity claim of such customer from customer property) shall be paid in accordance with the priorities in section 210(b).
(h) Rulemaking- The Commission and the Corporation, after consultation with SIPC, shall jointly issue rules to implement this section.
SEC. 206. MANDATORY TERMS AND CONDITIONS FOR ALL ORDERLY LIQUIDATION ACTIONS.
In taking action under this title, the Corporation shall--
(1) determine that such action is necessary for purposes of the financial stability of the United States, and not for the purpose of preserving the covered financial company;
(2) ensure that the shareholders of a covered financial company do not receive payment until after all other claims and the Fund are fully paid;
(3) ensure that unsecured creditors bear losses in accordance with the priority of claim provisions in section 210;
(4) ensure that management responsible for the failed condition of the covered financial company is removed (if such management has not already been removed at the time at which the Corporation is appointed receiver);
(5) ensure that the members of the board of directors (or body performing similar functions) responsible for the failed condition of the covered financial company are removed, if such members have not already been removed at the time the Corporation is appointed as receiver; and
(6) not take an equity interest in or become a shareholder of any covered financial company or any covered subsidiary.
SEC. 207. DIRECTORS NOT LIABLE FOR ACQUIESCING IN APPOINTMENT OF RECEIVER.
The members of the board of directors (or body performing similar functions) of a covered financial company shall not be liable to the shareholders or creditors thereof for acquiescing in or consenting in good faith to the appointment of the Corporation as receiver for the covered financial company under section 203.
SEC. 208. DISMISSAL AND EXCLUSION OF OTHER ACTIONS.
(a) In General- Effective as of the date of the appointment of the Corporation as receiver for the covered financial company under section 202 or the appointment of SIPC as trustee for a covered broker or dealer under section 205, as applicable, any case or proceeding commenced with respect to the covered financial company under the Bankruptcy Code or the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) shall be dismissed, upon notice to the bankruptcy court (with respect to a case commenced under the Bankruptcy Code), and upon notice to SIPC (with respect to a covered broker or dealer) and no such case or proceeding may be commenced with respect to a covered financial company at any time while the orderly liquidation is pending.
(b) Revesting of Assets- Effective as of the date of appointment of the Corporation as receiver, the assets of a covered financial company shall, to the extent they have vested in any entity other than the covered financial company as a result of any case or proceeding commenced with respect to the covered financial company under the Bankruptcy Code, the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), or any similar provision of State liquidation or insolvency law applicable to the covered financial company, revest in the covered financial company.
(c) Limitation- Notwithstanding subsections (a) and (b), any order entered or other relief granted by a bankruptcy court prior to the date of appointment of the Corporation as receiver shall continue with the same validity as if an orderly liquidation had not been commenced.
SEC. 209. RULEMAKING; NON-CONFLICTING LAW.
The Corporation shall, in consultation with the Council, prescribe such rules or regulations as the Corporation considers necessary or appropriate to implement this title, including rules and regulations with respect to the rights, interests, and priorities of creditors, counterparties, security entitlement holders, or other persons with respect to any covered financial company or any assets or other property of or held by such covered financial company, and address the potential for conflicts of interest between or among individual receiverships established under this title or under the Federal Deposit Insurance Act. To the extent possible, the Corporation shall seek to harmonize applicable rules and regulations promulgated under this section with the insolvency laws that would otherwise apply to a covered financial company.
SEC. 210. POWERS AND DUTIES OF THE CORPORATION.
(a) Powers and Authorities-
(1) GENERAL POWERS-
(A) SUCCESSOR TO COVERED FINANCIAL COMPANY- The Corporation shall, upon appointment as receiver for a covered financial company under this title, succeed to--
(i) all rights, titles, powers, and privileges of the covered financial company and its assets, and of any stockholder, member, officer, or director of such company; and
(ii) title to the books, records, and assets of any previous receiver or other legal custodian of such covered financial company.
(B) OPERATION OF THE COVERED FINANCIAL COMPANY DURING THE PERIOD OF ORDERLY LIQUIDATION- The Corporation, as receiver for a covered financial company, may--
(i) take over the assets of and operate the covered financial company with all of the powers of the members or shareholders, the directors, and the officers of the covered financial company, and conduct all business of the covered financial company;
(ii) collect all obligations and money owed to the covered financial company;
(iii) perform all functions of the covered financial company, in the name of the covered financial company;
(iv) manage the assets and property of the covered financial company, consistent with maximization of the value of the assets in the context of the orderly liquidation; and
(v) provide by contract for assistance in fulfilling any function, activity, action, or duty of the Corporation as receiver.
(C) FUNCTIONS OF COVERED FINANCIAL COMPANY OFFICERS, DIRECTORS, AND SHAREHOLDERS- The Corporation may provide for the exercise of any function by any member or stockholder, director, or officer of any covered financial company for which the Corporation has been appointed as receiver under this title.
(D) ADDITIONAL POWERS AS RECEIVER- The Corporation shall, as receiver for a covered financial company, and subject to all legally enforceable and perfected security interests and all legally enforceable security entitlements in respect of assets held by the covered financial company, liquidate, and wind-up the affairs of a covered financial company, including taking steps to realize upon the assets of the covered financial company, in such manner as the Corporation deems appropriate, including through the sale of assets, the transfer of assets to a bridge financial company established under subsection (h), or the exercise of any other rights or privileges granted to the receiver under this section.
(E) ADDITIONAL POWERS WITH RESPECT TO FAILING SUBSIDIARIES OF A COVERED FINANCIAL COMPANY-
(i) IN GENERAL- In any case in which a receiver is appointed for a covered financial company under section 202, the Corporation may appoint itself as receiver of any covered subsidiary of the covered financial company that is organized under Federal law or the laws of any State, if the Corporation and the Secretary jointly determine that--
(I) the covered subsidiary is in default or in danger of default;
(II) such action would avoid or mitigate serious adverse effects on the financial stability or economic conditions of the United States; and
(III) such action would facilitate the orderly liquidation of the covered financial company.
(ii) TREATMENT AS COVERED FINANCIAL COMPANY- If the Corporation is appointed as receiver of a covered subsidiary of a covered financial company under clause (i), the covered subsidiary shall thereafter be considered a covered financial company under this title, and the Corporation shall thereafter have all the powers and rights with respect to that covered subsidiary as it has with respect to a covered financial company under this title.
(F) ORGANIZATION OF BRIDGE COMPANIES- The Corporation, as receiver for a covered financial company, may organize a bridge financial company under subsection (h).
(G) MERGER; TRANSFER OF ASSETS AND LIABILITIES-
(i) IN GENERAL- Subject to clauses (ii) and (iii), the Corporation, as receiver for a covered financial company, may--
(I) merge the covered financial company with another company; or
(II) transfer any asset or liability of the covered financial company (including any assets and liabilities held by the covered financial company for security entitlement holders, any customer property, or any assets and liabilities associated with any trust or custody business) without obtaining any approval, assignment, or consent with respect to such transfer.
(ii) FEDERAL AGENCY APPROVAL; ANTITRUST REVIEW- With respect to a transaction described in clause (i)(I) that requires approval by a Federal agency--
(I) the transaction may not be consummated before the 5th calendar day after the date of approval by the Federal agency responsible for such approval;
(II) if, in connection with any such approval, a report on competitive factors is required, the Federal agency responsible for such approval shall promptly notify the Attorney General of the United States of the proposed transaction, and the Attorney General shall provide the required report not later than 10 days after the date of the request; and
(III) if notification under section 7A of the Clayton Act is required with respect to such transaction, then the required waiting period shall end on the 15th day after the date on which the Attorney General and the Federal Trade Commission receive such notification, unless the waiting period is terminated earlier under subsection (b)(2) of such section 7A, or is extended pursuant to subsection (e)(2) of such section 7A.
(iii) SETOFF- Subject to the other provisions of this title, any transferee of assets from a receiver, including a bridge financial company, shall be subject to such claims or rights as would prevail over the rights of such transferee in such assets under applicable noninsolvency law.
(H) PAYMENT OF VALID OBLIGATIONS- The Corporation, as receiver for a covered financial company, shall, to the extent that funds are available, pay all valid obligations of the covered financial company that are due and payable at the time of the appointment of the Corporation as receiver, in accordance with the prescriptions and limitations of this title.
(I) APPLICABLE NONINSOLVENCY LAW- Except as may otherwise be provided in this title, the applicable noninsolvency law shall be determined by the noninsolvency choice of law rules otherwise applicable to the claims, rights, titles, persons, or entities at issue.
(J) SUBPOENA AUTHORITY-
(i) IN GENERAL- The Corporation, as receiver for a covered financial company, may, for purposes of carrying out any power, authority, or duty with respect to the covered financial company (including determining any claim against the covered financial company and determining and realizing upon any asset of any person in the course of collecting money due the covered financial company), exercise any power established under section 8(n) of the Federal Deposit Insurance Act, as if the Corporation were the appropriate Federal banking agency for the covered financial company, and the covered financial company were an insured depository institution.
(ii) RULE OF CONSTRUCTION- This subparagraph may not be construed as limiting any rights that the Corporation, in any capacity, might otherwise have to exercise any powers described in clause (i) or under any other provision of law.
(K) INCIDENTAL POWERS- The Corporation, as receiver for a covered financial company, may exercise all powers and authorities specifically granted to receivers under this title, and such incidental powers as shall be necessary to carry out such powers under this title.
(L) UTILIZATION OF PRIVATE SECTOR- In carrying out its responsibilities in the management and disposition of assets from the covered financial company, the Corporation, as receiver for a covered financial company, may utilize the services of private persons, including real estate and loan portfolio asset management, property management, auction marketing, legal, and brokerage services, if such services are available in the private sector, and the Corporation determines that utilization of such services is practicable, efficient, and cost effective.
(M) SHAREHOLDERS AND CREDITORS OF COVERED FINANCIAL COMPANY- Notwithstanding any other provision of law, the Corporation, as receiver for a covered financial company, shall succeed by operation of law to the rights, titles, powers, and privileges described in subparagraph (A), and shall terminate all rights and claims that the stockholders and creditors of the covered financial company may have against the assets of the covered financial company or the Corporation arising out of their status as stockholders or creditors, except for their right to payment, resolution, or other satisfaction of their claims, as permitted under this section. The Corporation shall ensure that shareholders and unsecured creditors bear losses, consistent with the priority of claims provisions under this section.
(N) COORDINATION WITH FOREIGN FINANCIAL AUTHORITIES- The Corporation, as receiver for a covered financial company, shall coordinate, to the maximum extent possible, with the appropriate foreign financial authorities regarding the orderly liquidation of any covered financial company that has assets or operations in a country other than the United States.
(O) RESTRICTION ON TRANSFERS-
(i) SELECTION OF ACCOUNTS FOR TRANSFER- If the Corporation establishes one or more bridge financial companies with respect to a covered broker or dealer, the Corporation shall transfer to one of such bridge financial companies, all customer accounts of the covered broker or dealer, and all associated customer name securities and customer property, unless the Corporation, after consulting with the Commission and SIPC, determines that--
(I) the customer accounts, customer name securities, and customer property are likely to be promptly transferred to another broker or dealer that is registered with the Commission under section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 73o(b)) and is a member of SIPC; or
(II) the transfer of the accounts to a bridge financial company would materially interfere with the ability of the Corporation to avoid or mitigate serious adverse effects on financial stability or economic conditions in the United States.
(ii) TRANSFER OF PROPERTY- SIPC, as trustee for the liquidation of the covered broker or dealer, and the Commission shall provide any and all reasonable assistance necessary to complete such transfers by the Corporation.
(iii) CUSTOMER CONSENT AND COURT APPROVAL NOT REQUIRED- Neither customer consent nor court approval shall be required to transfer any customer accounts or associated customer name securities or customer property to a bridge financial company in accordance with this section.
(iv) NOTIFICATION OF SIPC AND SHARING OF INFORMATION- The Corporation shall identify to SIPC the customer accounts and associated customer name securities and customer property transferred to the bridge financial company. The Corporation and SIPC shall cooperate in the sharing of any information necessary for each entity to discharge its obligations under this title and under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) including by providing access to the books and records of the covered financial company and any bridge financial company established in accordance with this title.
(2) DETERMINATION OF CLAIMS-
(A) IN GENERAL- The Corporation, as receiver for a covered financial company, shall report on claims, as set forth in section 203(c)(3). Subject to paragraph (4) of this subsection, the Corporation, as receiver for a covered financial company, shall determine claims in accordance with the requirements of this subsection and regulations prescribed under section 209.
(B) NOTICE REQUIREMENTS- The Corporation, as receiver for a covered financial company, in any case involving the liquidation or winding up of the affairs of a covered financial company, shall--
(i) promptly publish a notice to the creditors of the covered financial company to present their claims, together with proof, to the receiver by a date specified in the notice, which shall be not earlier than 90 days after the date of publication of such notice; and
(ii) republish such notice 1 month and 2 months, respectively, after the date of publication under clause (i).
(C) MAILING REQUIRED- The Corporation as receiver shall mail a notice similar to the notice published under clause (i) or (ii) of subparagraph (B), at the time of such publication, to any creditor shown on the books and records of the covered financial company--
(i) at the last address of the creditor appearing in such books;
(ii) in any claim filed by the claimant; or
(iii) upon discovery of the name and address of a claimant not appearing on the books and records of the covered financial company, not later than 30 days after the date of the discovery of such name and address.
(3) PROCEDURES FOR RESOLUTION OF CLAIMS-
(A) DECISION PERIOD-
(i) IN GENERAL- Prior to the 180th day after the date on which a claim against a covered financial company is filed with the Corporation as receiver, or such later date as may be agreed as provided in clause (ii), the Corporation shall notify the claimant whether it allows or disallows the claim, in accordance with subparagraphs (B), (C), and (D).
(ii) EXTENSION OF TIME- By written agreement executed not later than 180 days after the date on which a claim against a covered financial company is filed with the Corporation, the period described in clause (i) may be extended by written agreement between the claimant and the Corporation. Failure to notify the claimant of any disallowance within the time period set forth in clause (i), as it may be extended by agreement under this clause, shall be deemed to be a disallowance of such claim, and the claimant may file or continue an action in court, as provided in paragraph (4).
(iii) MAILING OF NOTICE SUFFICIENT- The requirements of clause (i) shall be deemed to be satisfied if the notice of any decision with respect to any claim is mailed to the last address of the claimant which appears--
(I) on the books, records, or both of the covered financial company;
(II) in the claim filed by the claimant; or
(III) in documents submitted in proof of the claim.
(iv) CONTENTS OF NOTICE OF DISALLOWANCE- If the Corporation as receiver disallows any claim filed under clause (i), the notice to the claimant shall contain--
(I) a statement of each reason for the disallowance; and
(II) the procedures required to file or continue an action in court, as provided in paragraph (4).
(B) ALLOWANCE OF PROVEN CLAIM- The receiver shall allow any claim received by the receiver on or before the date specified in the notice under paragraph (2)(B)(i), which is proved to the satisfaction of the receiver.
(C) DISALLOWANCE OF CLAIMS FILED AFTER END OF FILING PERIOD-
(i) IN GENERAL- Except as provided in clause (ii), claims filed after the date specified in the notice published under paragraph (2)(B)(i) shall be disallowed, and such disallowance shall be final.
(ii) CERTAIN EXCEPTIONS- Clause (i) shall not apply with respect to any claim filed by a claimant after the date specified in the notice published under paragraph (2)(B)(i), and such claim may be considered by the receiver under subparagraph (B), if--
(I) the claimant did not receive notice of the appointment of the receiver in time to file such claim before such date; and
(II) such claim is filed in time to permit payment of such claim.
(D) AUTHORITY TO DISALLOW CLAIMS-
(i) IN GENERAL- The Corporation may disallow any portion of any claim by a creditor or claim of a security, preference, setoff, or priority which is not proved to the satisfaction of the Corporation.
(ii) PAYMENTS TO UNDERSECURED CREDITORS- In the case of a claim against a covered financial company that is secured by any property or other asset of such covered financial company, the receiver--
(I) may treat the portion of such claim which exceeds an amount equal to the fair market value of such property or other asset as an unsecured claim; and
(II) may not make any payment with respect to such unsecured portion of the claim, other than in connection with the disposition of all claims of unsecured creditors of the covered financial company.
(iii) EXCEPTIONS- No provision of this paragraph shall apply with respect to--
(I) any extension of credit from any Federal reserve bank, or the Corporation, to any covered financial company; or
(II) subject to clause (ii), any legally enforceable and perfected security interest in the assets of the covered financial company securing any such extension of credit.
(E) LEGAL EFFECT OF FILING-
(i) STATUTE OF LIMITATIONS TOLLED- For purposes of any applicable statute of limitations, the filing of a claim with the receiver shall constitute a commencement of an action.
(ii) NO PREJUDICE TO OTHER ACTIONS- Subject to paragraph (8), the filing of a claim with the receiver shall not prejudice any right of the claimant to continue any action which was filed before the date of appointment of the receiver for the covered financial company.
(4) JUDICIAL DETERMINATION OF CLAIMS-
(A) IN GENERAL- Subject to subparagraph (B), a claimant may file suit on a claim (or continue an action commenced before the date of appointment of the Corporation as receiver) in the district or territorial court of the United States for the district within which the principal place of business of the covered financial company is located (and such court shall have jurisdiction to hear such claim).
(B) TIMING- A claim under subparagraph (A) may be filed before the end of the 60-day period beginning on the earlier of--
(i) the end of the period described in paragraph (3)(A)(i) (or, if extended by agreement of the Corporation and the claimant, the period described in paragraph (3)(A)(ii)) with respect to any claim against a covered financial company for which the Corporation is receiver; or
(ii) the date of any notice of disallowance of such claim pursuant to paragraph (3)(A)(i).
(C) STATUTE OF LIMITATIONS- If any claimant fails to file suit on such claim (or to continue an action on such claim commenced before the date of appointment of the Corporation as receiver) prior to the end of the 60-day period described in subparagraph (B), the claim shall be deemed to be disallowed (other than any portion of such claim which was allowed by the receiver) as of the end of such period, such disallowance shall be final, and the claimant shall have no further rights or remedies with respect to such claim.
(5) EXPEDITED DETERMINATION OF CLAIMS-
(A) PROCEDURE REQUIRED- The Corporation shall establish a procedure for expedited relief outside of the claims process established under paragraph (3), for any claimant that alleges--
(i) having a legally valid and enforceable or perfected security interest in property of a covered financial company or control of any legally valid and enforceable security entitlement in respect of any asset held by the covered financial company for which the Corporation has been appointed receiver; and
(ii) that irreparable injury will occur if the claims procedure established under paragraph (3) is followed.
(B) DETERMINATION PERIOD- Prior to the end of the 90-day period beginning on the date on which a claim is filed in accordance with the procedures established pursuant to subparagraph (A), the Corporation shall--
(i) determine--
(I) whether to allow or disallow such claim, or any portion thereof; or
(II) whether such claim should be determined pursuant to the procedures established pursuant to paragraph (3);
(ii) notify the claimant of the determination; and
(iii) if the claim is disallowed, provide a statement of each reason for the disallowance and the procedure for obtaining a judicial determination.
(C) PERIOD FOR FILING OR RENEWING SUIT- Any claimant who files a request for expedited relief shall be permitted to file suit (or continue a suit filed before the date of appointment of the Corporation as receiver seeking a determination of the rights of the claimant with respect to such security interest (or such security entitlement) after the earlier of--
(i) the end of the 90-day period beginning on the date of the filing of a request for expedited relief; or
(ii) the date on which the Corporation denies the claim or a portion thereof.
(D) STATUTE OF LIMITATIONS- If an action described in subparagraph (C) is not filed, or the motion to renew a previously filed suit is not made, before the end of the 30-day period beginning on the date on which such action or motion may be filed in accordance with subparagraph (C), the claim shall be deemed to be disallowed as of the end of such period (other than any portion of such claim which was allowed by the receiver), such disallowance shall be final, and the claimant shall have no further rights or remedies with respect to such claim.
(E) LEGAL EFFECT OF FILING-
(i) STATUTE OF LIMITATIONS TOLLED- For purposes of any applicable statute of limitations, the filing of a claim with the receiver shall constitute a commencement of an action.
(ii) NO PREJUDICE TO OTHER ACTIONS- Subject to paragraph (8), the filing of a claim with the receiver shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the Corporation as receiver for the covered financial company.
(6) AGREEMENTS AGAINST INTEREST OF THE RECEIVER- No agreement that tends to diminish or defeat the interest of the Corporation as receiver in any asset acquired by the receiver under this section shall be valid against the receiver, unless such agreement--
(A) is in writing;
(B) was executed by an authorized officer or representative of the covered financial company, or confirmed in the ordinary course of business by the covered financial company; and
(C) has been, since the time of its execution, an official record of the company or the party claiming under the agreement provides documentation, acceptable to the receiver, of such agreement and its authorized execution or confirmation by the covered financial company.
(7) PAYMENT OF CLAIMS-
(A) IN GENERAL- Subject to subparagraph (B), the Corporation as receiver may, in its discretion and to the extent that funds are available, pay creditor claims, in such manner and amounts as are authorized under this section, which are--
(i) allowed by the receiver;
(ii) approved by the receiver pursuant to a final determination pursuant to paragraph (3) or (5), as applicable; or
(iii) determined by the final judgment of a court of competent jurisdiction.
(B) LIMITATION- A creditor shall, in no event, receive less than the amount that the creditor is entitled to receive under paragraphs (2) and (3) of subsection (d), as applicable.
(C) PAYMENT OF DIVIDENDS ON CLAIMS- The Corporation as receiver may, in its sole discretion, and to the extent otherwise permitted by this section, pay dividends on proven claims at any time, and no liability shall attach to the Corporation as receiver, by reason of any such payment or for failure to pay dividends to a claimant whose claim is not proved at the time of any such payment.
(D) RULEMAKING BY THE CORPORATION- The Corporation may prescribe such rules, including definitions of terms, as the Corporation deems appropriate to establish an interest rate for or to make payments of post-insolvency interest to creditors holding proven claims against the receivership estate of a covered financial company, except that no such interest shall be paid until the Corporation as receiver has satisfied the principal amount of all creditor claims.
(8) SUSPENSION OF LEGAL ACTIONS-
(A) IN GENERAL- After the appointment of the Corporation as receiver for a covered financial company, the Corporation may request a stay in any judicial action or proceeding in which such covered financial company is or becomes a party, for a period of not to exceed 90 days.
(B) GRANT OF STAY BY ALL COURTS REQUIRED- Upon receipt of a request by the Corporation pursuant to subparagraph (A), the court shall grant such stay as to all parties.
(9) ADDITIONAL RIGHTS AND DUTIES-
(A) PRIOR FINAL ADJUDICATION- The Corporation shall abide by any final, non-appealable judgment of any court of competent jurisdiction that was rendered before the appointment of the Corporation as receiver.
(B) RIGHTS AND REMEDIES OF RECEIVER- In the event of any appealable judgment, the Corporation as receiver shall--
(i) have all the rights and remedies available to the covered financial company (before the date of appointment of the Corporation as receiver under section 202) and the Corporation, including removal to Federal court and all appellate rights; and
(ii) not be required to post any bond in order to pursue such remedies.
(C) NO ATTACHMENT OR EXECUTION- No attachment or execution may be issued by any court upon assets in the possession of the Corporation as receiver for a covered financial company.
(D) LIMITATION ON JUDICIAL REVIEW- Except as otherwise provided in this title, no court shall have jurisdiction over--
(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any covered financial company for which the Corporation has been appointed receiver, including any assets which the Corporation may acquire from itself as such receiver; or
(ii) any claim relating to any act or omission of such covered financial company or the Corporation as receiver.
(E) DISPOSITION OF ASSETS- In exercising any right, power, privilege, or authority as receiver in connection with any covered financial company for which the Corporation is acting as receiver under this section, the Corporation shall, to the greatest extent practicable, conduct its operations in a manner that--
(i) maximizes the net present value return from the sale or disposition of such assets;
(ii) minimizes the amount of any loss realized in the resolution of cases;
(iii) mitigates the potential for serious adverse effects to the financial system;
(iv) ensures timely and adequate competition and fair and consistent treatment of offerors; and
(v) prohibits discrimination on the basis of race, sex, or ethnic group in the solicitation and consideration of offers.
(10) STATUTE OF LIMITATIONS FOR ACTIONS BROUGHT BY RECEIVER-
(A) IN GENERAL- Notwithstanding any provision of any contract, the applicable statute of limitations with regard to any action brought by the Corporation as receiver for a covered financial company shall be--
(i) in the case of any contract claim, the longer of--
(I) the 6-year period beginning on the date on which the claim accrues; or
(II) the period applicable under State law; and
(ii) in the case of any tort claim, the longer of--
(I) the 3-year period beginning on the date on which the claim accrues; or
(II) the period applicable under State law.
(B) DATE ON WHICH A CLAIM ACCRUES- For purposes of subparagraph (A), the date on which the statute of limitations begins to run on any claim described in subparagraph (A) shall be the later of--
(i) the date of the appointment of the Corporation as receiver under this title; or
(ii) the date on which the cause of action accrues.
(C) REVIVAL OF EXPIRED STATE CAUSES OF ACTION-
(i) IN GENERAL- In the case of any tort claim described in clause (ii) for which the applicable statute of limitations under State law has expired not more than 5 years before the date of appointment of the Corporation as receiver for a covered financial company, the Corporation may bring an action as receiver on such claim without regard to the expiration of the statute of limitations.
(ii) CLAIMS DESCRIBED- A tort claim referred to in clause (i) is a claim arising from fraud, intentional misconduct resulting in unjust enrichment, or intentional misconduct resulting in substantial loss to the covered financial company.
(11) AVOIDABLE TRANSFERS-
(A) FRAUDULENT TRANSFERS- The Corporation, as receiver for any covered financial company, may avoid a transfer of any interest of the covered financial company in property, or any obligation incurred by the covered financial company, that was made or incurred at or within 2 years before the date on which the Corporation was appointed receiver, if--
(i) the covered financial company voluntarily or involuntarily--
(I) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the covered financial company was or became, on or after the date on which such transfer was made or such obligation was incurred, indebted; or
(II) received less than a reasonably equivalent value in exchange for such transferor obligation; and
(ii) the covered financial company voluntarily or involuntarily--
(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;
(II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the covered financial company was an unreasonably small capital;
(III) intended to incur, or believed that the covered financial company would incur, debts that would be beyond the ability of the covered financial company to pay as such debts matured; or
(IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.
(B) PREFERENTIAL TRANSFERS- The Corporation as receiver for any covered financial company may avoid a transfer of an interest of the covered financial company in property--
(i) to or for the benefit of a creditor;
(ii) for or on account of an antecedent debt that was owed by the covered financial company before the transfer was made;
(iii) that was made while the covered financial company was insolvent;
(iv) that was made--
(I) 90 days or less before the date on which the Corporation was appointed receiver; or
(II) more than 90 days, but less than 1 year before the date on which the Corporation was appointed receiver, if such creditor at the time of the transfer was an insider; and
(v) that enables the creditor to receive more than the creditor would receive if--
(I) the covered financial company had been liquidated under chapter 7 of the Bankruptcy Code;
(II) the transfer had not been made; and
(III) the creditor received payment of such debt to the extent provided by the provisions of chapter 7 of the Bankruptcy Code.
(C) POST-RECEIVERSHIP TRANSACTIONS- The Corporation as receiver for any covered financial company may avoid a transfer of property of the receivership that occurred after the Corporation was appointed receiver that was not authorized under this title by the Corporation as receiver.
(D) RIGHT OF RECOVERY- To the extent that a transfer is avoided under subparagraph (A), (B), or (C), the Corporation may recover, for the benefit of the covered financial company, the property transferred or, if a court so orders, the value of such property (at the time of such transfer) from--
(i) the initial transferee of such transfer or the person for whose benefit such transfer was made; or
(ii) any immediate or mediate transferee of any such initial transferee.
(E) RIGHTS OF TRANSFEREE OR OBLIGEE- The Corporation may not recover under subparagraph (D)(ii) from--
(i) any transferee that takes for value, including in satisfaction of or to secure a present or antecedent debt, in good faith, and without knowledge of the voidability of the transfer avoided; or
(ii) any immediate or mediate good faith transferee of such transferee.
(F) DEFENSES- Subject to the other provisions of this title--
(i) a transferee or obligee from which the Corporation seeks to recover a transfer or to avoid an obligation under subparagraph (A), (B), (C), or (D) shall have the same defenses available to a transferee or obligee from which a trustee seeks to recover a transfer or avoid an obligation under sections 547, 548, and 549 of the Bankruptcy Code; and
(ii) the authority of the Corporation to recover a transfer or avoid an obligation shall be subject to subsections (b) and (c) of section 546, section 547(c), and section 548(c) of the Bankruptcy Code.
(G) RIGHTS UNDER THIS SECTION- The rights of the Corporation as receiver under this section shall be superior to any rights of a trustee or any other party (other than a Federal agency) under the Bankruptcy Code.
(H) RULES OF CONSTRUCTION; DEFINITIONS- For purposes of--
(i) subparagraphs (A) and (B)--
(I) the term ‘insider’ has the same meaning as in section 101(31) of the Bankruptcy Code;
(II) a transfer is made when such transfer is so perfected that a bona fide purchaser from the covered financial company against whom applicable law permits such transfer to be perfected cannot acquire an interest in the property transferred that is superior to the interest in such property of the transferee, but if such transfer is not so perfected before the date on which the Corporation is appointed as receiver for the covered financial company, such transfer is made immediately before the date of such appointment; and
(III) the term ‘value’ means property, or satisfaction or securing of a present or antecedent debt of the covered financial company, but does not include an unperformed promise to furnish support to the covered financial company; and
(ii) subparagraph (B)--
(I) the covered financial company is presumed to have been insolvent on and during the 90-day period immediately preceding the date of appointment of the Corporation as receiver; and
(II) the term ‘insolvent’ has the same meaning as in section 101(32) of the Bankruptcy Code.
(12) SETOFF-
(A) GENERALLY- Except as otherwise provided in this title, any right of a creditor to offset a mutual debt owed by the creditor to any covered financial company that arose before the Corporation was appointed as receiver for the covered financial company against a claim of such creditor may be asserted if enforceable under applicable noninsolvency law, except to the extent that--
(i) the claim of the creditor against the covered financial company is disallowed;
(ii) the claim was transferred, by an entity other than the covered financial company, to the creditor--
(I) after the Corporation was appointed as receiver of the covered financial company; or
(II)(aa) after the 90-day period preceding the date on which the Corporation was appointed as receiver for the covered financial company; and
(bb) while the covered financial company was insolvent (except for a setoff in connection with a qualified financial contract); or
(iii) the debt owed to the covered financial company was incurred by the covered financial company--
(I) after the 90-day period preceding the date on which the Corporation was appointed as receiver for the covered financial company;
(II) while the covered financial company was insolvent; and
(III) for the purpose of obtaining a right of setoff against the covered financial company (except for a setoff in connection with a qualified financial contract).
(B) INSUFFICIENCY-
(i) IN GENERAL- Except with respect to a setoff in connection with a qualified financial contract, if a creditor offsets a mutual debt owed to the covered financial company against a claim of the covered financial company on or within the 90-day period preceding the date on which the Corporation is appointed as receiver for the covered financial company, the Corporation may recover from the creditor the amount so offset, to the extent that any insufficiency on the date of such setoff is less than the insufficiency on the later of--
(I) the date that is 90 days before the date on which the Corporation is appointed as receiver for the covered financial company; or
(II) the first day on which there is an insufficiency during the 90-day period preceding the date on which the Corporation is appointed as receiver for the covered financial company.
(ii) DEFINITION OF INSUFFICIENCY- In this subparagraph, the term ‘insufficiency’ means the amount, if any, by which a claim against the covered financial company exceeds a mutual debt owed to the covered financial company by the holder of such claim.
(C) INSOLVENCY- The term ‘insolvent’ has the same meaning as in section 101(32) of the Bankruptcy Code.
(D) PRESUMPTION OF INSOLVENCY- For purposes of this paragraph, the covered financial company is presumed to have been insolvent on and during the 90-day period preceding the date of appointment of the Corporation as receiver.
(E) LIMITATION- Nothing in this paragraph (12) shall be the basis for any right of setoff where no such right exists under applicable noninsolvency law.
(F) PRIORITY CLAIM- Except as otherwise provided in this title, the Corporation as receiver for the covered financial company may sell or transfer any assets free and clear of the setoff rights of any party, except that such party shall be entitled to a claim, subordinate to the claims payable under subparagraphs (A), (B), (C), and (D) of subsection (b)(1), but senior to all other unsecured liabilities defined in subsection (b)(1)(E), in an amount equal to the value of such setoff rights.
(13) ATTACHMENT OF ASSETS AND OTHER INJUNCTIVE RELIEF- Subject to paragraph (14), any court of competent jurisdiction may, at the request of the Corporation as receiver for a covered financial company, issue an order in accordance with Rule 65 of the Federal Rules of Civil Procedure, including an order placing the assets of any person designated by the Corporation under the control of the court and appointing a trustee to hold such assets.
(14) STANDARDS-
(A) SHOWING- Rule 65 of the Federal Rules of Civil Procedure shall apply with respect to any proceeding under paragraph (13), without regard to the requirement that the applicant show that the injury, loss, or damage is irreparable and immediate.
(B) STATE PROCEEDING- If, in the case of any proceeding in a State court, the court determines that rules of civil procedure available under the laws of the State provide substantially similar protections of the right of the parties to due process as provided under Rule 65 (as modified with respect to such proceeding by subparagraph (A)), the relief sought by the Corporation pursuant to paragraph (14) may be requested under the laws of such State.
(15) TREATMENT OF CLAIMS ARISING FROM BREACH OF CONTRACTS EXECUTED BY THE CORPORATION AS RECEIVER- Notwithstanding any other provision of this title, any final and non-appealable judgment for monetary damages entered against the Corporation as receiver for a covered financial company for the breach of an agreement executed or approved by the Corporation after the date of its appointment shall be paid as an administrative expense of the receiver. Nothing in this paragraph shall be construed to limit the power of a receiver to exercise any rights under contract or law, including to terminate, breach, cancel, or otherwise discontinue such agreement.
(16) ACCOUNTING AND RECORDKEEPING REQUIREMENTS-
(A) IN GENERAL- The Corporation as receiver for a covered financial company shall, consistent with the accounting and reporting practices and procedures established by the Corporation, maintain a full accounting of each receivership or other disposition of any covered financial company.
(B) ANNUAL ACCOUNTING OR REPORT- With respect to each receivership to which the Corporation is appointed, the Corporation shall make an annual accounting or report, as appropriate, available to the Secretary and the Comptroller General of the United States.
(C) AVAILABILITY OF REPORTS- Any report prepared pursuant to subparagraph (B) and section 203(c)(3) shall be made available to the public by the Corporation.
(D) RECORDKEEPING REQUIREMENT-
(i) IN GENERAL- The Corporation shall prescribe such regulations and establish such retention schedules as are necessary to maintain the documents and records of the Corporation generated in exercising the authorities of this title and the records of a covered financial company for which the Corporation is appointed receiver, with due regard for--
(I) the avoidance of duplicative record retention; and
(II) the expected evidentiary needs of the Corporation as receiver for a covered financial company and the public regarding the records of covered financial companies.
(ii) RETENTION OF RECORDS- Unless otherwise required by applicable Federal law or court order, the Corporation may not, at any time, destroy any records that are subject to clause (i).
(iii) RECORDS DEFINED- As used in this subparagraph, the terms ‘records’ and ‘records of a covered financial company’ mean any document, book, paper, map, photograph, microfiche, microfilm, computer or electronically-created record generated or maintained by the covered financial company in the course of and necessary to its transaction of business.
(b) Priority of Expenses and Unsecured Claims-
(1) IN GENERAL- Unsecured claims against a covered financial company, or the Corporation as receiver for such covered financial company under this section, that are proven to the satisfaction of the receiver shall have priority in the following order:
(A) Administrative expenses of the receiver.
(B) Any amounts owed to the United States, unless the United States agrees or consents otherwise.
(C) Wages, salaries, or commissions, including vacation, severance, and sick leave pay earned by an individual (other than an individual described in subparagraph (G)), but only to the extent of $11,725 for each individual (as indexed for inflation, by regulation of the Corporation) earned not later than 180 days before the date of appointment of the Corporation as receiver.
(D) Contributions owed to employee benefit plans arising from services rendered not later than 180 days before the date of appointment of the Corporation as receiver, to the extent of the number of employees covered by each such plan, multiplied by $11,725 (as indexed for inflation, by regulation of the Corporation), less the aggregate amount paid to such employees under subparagraph (C), plus the aggregate amount paid by the receivership on behalf of such employees to any other employee benefit plan.
(E) Any other general or senior liability of the covered financial company (which is not a liability described under subparagraph (F), (G), or (H)).
(F) Any obligation subordinated to general creditors (which is not an obligation described under subparagraph (G) or (H)).
(G) Any wages, salaries, or commissions, including vacation, severance, and sick leave pay earned, owed to senior executives and directors of the covered financial company.
(H) Any obligation to shareholders, members, general partners, limited partners, or other persons, with interests in the equity of the covered financial company arising as a result of their status as shareholders, members, general partners, limited partners, or other persons with interests in the equity of the covered financial company.
(2) POST-RECEIVERSHIP FINANCING PRIORITY- In the event that the Corporation, as receiver for a covered financial company, is unable to obtain unsecured credit for the covered financial company from commercial sources, the Corporation as receiver may obtain credit or incur debt on the part of the covered financial company, which shall have priority over any or all administrative expenses of the receiver under paragraph (1)(A).
(3) CLAIMS OF THE UNITED STATES- Unsecured claims of the United States shall, at a minimum, have a higher priority than liabilities of the covered financial company that count as regulatory capital.
(4) CREDITORS SIMILARLY SITUATED- All claimants of a covered financial company that are similarly situated under paragraph (1) shall be treated in a similar manner, except that the Corporation may take any action (including making payments, subject to subsection (o)(1)(D)(i)) that does not comply with this subsection, if--
(A) the Corporation determines that such action is necessary--
(i) to maximize the value of the assets of the covered financial company;
(ii) to initiate and continue operations essential to implementation of the receivership or any bridge financial company;
(iii) to maximize the present value return from the sale or other disposition of the assets of the covered financial company; or
(iv) to minimize the amount of any loss realized upon the sale or other disposition of the assets of the covered financial company; and
(B) all claimants that are similarly situated under paragraph (1) receive not less than the amount provided in paragraphs (2) and (3) of subsection (d).
(5) SECURED CLAIMS UNAFFECTED- This section shall not affect secured claims or security entitlements in respect of assets or property held by the covered financial company, except to the extent that the security is insufficient to satisfy the claim, and then only with regard to the difference between the claim and the amount realized from the security.
(6) PRIORITY OF EXPENSES AND UNSECURED CLAIMS IN THE ORDERLY LIQUIDATION OF SIPC MEMBER- Where the Corporation is appointed as receiver for a covered broker or dealer, unsecured claims against such covered broker or dealer, or the Corporation as receiver for such covered broker or dealer under this section, that are proven to the satisfaction of the receiver under section 205(e), shall have the priority prescribed in paragraph (1), except that--
(A) SIPC shall be entitled to recover administrative expenses incurred in performing its responsibilities under section 205 on an equal basis with the Corporation, in accordance with paragraph (1)(A);
(B) the Corporation shall be entitled to recover any amounts paid to customers or to SIPC pursuant to section 205(f), in accordance with paragraph (1)(B);
(C) SIPC shall be entitled to recover any amounts paid out of the SIPC Fund to meet its obligations under section 205 and under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), which claim shall be subordinate to the claims payable under subparagraphs (A) and (B) of paragraph (1), but senior to all other claims; and
(D) the Corporation may, after paying any proven claims to customers under section 205 and the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), and as provided above, pay dividends on other proven claims, in its discretion, and to the extent that funds are available, in accordance with the priorities set forth in paragraph (1).
(c) Provisions Relating to Contracts Entered Into Before Appointment of Receiver-
(1) AUTHORITY TO REPUDIATE CONTRACTS- In addition to any other rights that a receiver may have, the Corporation as receiver for any covered financial company may disaffirm or repudiate any contract or lease--
(A) to which the covered financial company is a party;
(B) the performance of which the Corporation as receiver, in the discretion of the Corporation, determines to be burdensome; and
(C) the disaffirmance or repudiation of which the Corporation as receiver determines, in the discretion of the Corporation, will promote the orderly administration of the affairs of the covered financial company.
(2) TIMING OF REPUDIATION- The Corporation, as receiver for any covered financial company, shall determine whether or not to exercise the rights of repudiation under this section within a reasonable period of time.
(3) CLAIMS FOR DAMAGES FOR REPUDIATION-
(A) IN GENERAL- Except as provided in paragraphs (4), (5), and (6) and in subparagraphs (C), (D), and (E) of this paragraph, the liability of the Corporation as receiver for a covered financial company for the disaffirmance or repudiation of any contract pursuant to paragraph (1) shall be--
(i) limited to actual direct compensatory damages; and
(ii) determined as of--
(I) the date of the appointment of the Corporation as receiver; or
(II) in the case of any contract or agreement referred to in paragraph (8), the date of the disaffirmance or repudiation of such contract or agreement.
(B) NO LIABILITY FOR OTHER DAMAGES- For purposes of subparagraph (A), the term ‘actual direct compensatory damages’ does not include--
(i) punitive or exemplary damages;
(ii) damages for lost profits or opportunity; or
(iii) damages for pain and suffering.
(C) MEASURE OF DAMAGES FOR REPUDIATION OF QUALIFIED FINANCIAL CONTRACTS- In the case of any qualified financial contract or agreement to which paragraph (8) applies, compensatory damages shall be--
(i) deemed to include normal and reasonable costs of cover or other reasonable measures of damages utilized in the industries for such contract and agreement claims; and
(ii) paid in accordance with this paragraph and subsection (d), except as otherwise specifically provided in this subsection.
(D) MEASURE OF DAMAGES FOR REPUDIATION OR DISAFFIRMANCE OF DEBT OBLIGATION- In the case of any debt for borrowed money or evidenced by a security, actual direct compensatory damages shall be no less than the amount lent plus accrued interest plus any accreted original issue discount as of the date the Corporation was appointed receiver of the covered financial company and, to the extent that an allowed secured claim is secured by property the value of which is greater than the amount of such claim and any accrued interest through the date of repudiation or disaffirmance, such accrued interest pursuant to paragraph (1).
(E) MEASURE OF DAMAGES FOR REPUDIATION OR DISAFFIRMANCE OF CONTINGENT OBLIGATION- In the case of any contingent obligation of a covered financial company consisting of any obligation under a guarantee, letter of credit, loan commitment, or similar credit obligation, the Corporation may, by rule or regulation, prescribe that actual direct compensatory damages shall be no less than the estimated value of the claim as of the date the Corporation was appointed receiver of the covered financial company, as such value is measured based on the likelihood that such contingent claim would become fixed and the probable magnitude thereof.
(4) LEASES UNDER WHICH THE COVERED FINANCIAL COMPANY IS THE LESSEE-
(A) IN GENERAL- If the Corporation as receiver disaffirms or repudiates a lease under which the covered financial company is the lessee, the receiver shall not be liable for any damages (other than damages determined pursuant to subparagraph (B)) for the disaffirmance or repudiation of such lease.
(B) PAYMENTS OF RENT- Notwithstanding subparagraph (A), the lessor under a lease to which subparagraph (A) would otherwise apply shall--
(i) be entitled to the contractual rent accruing before the later of the date on which--
(I) the notice of disaffirmance or repudiation is mailed; or
(II) the disaffirmance or repudiation becomes effective, unless the lessor is in default or breach of the terms of the lease;
(ii) have no claim for damages under any acceleration clause or other penalty provision in the lease; and
(iii) have a claim for any unpaid rent, subject to all appropriate offsets and defenses, due as of the date of the appointment which shall be paid in accordance with this paragraph and subsection (d).
(5) LEASES UNDER WHICH THE COVERED FINANCIAL COMPANY IS THE LESSOR-
(A) IN GENERAL- If the Corporation as receiver for a covered financial company repudiates an unexpired written lease of real property of the covered financial company under which the covered financial company is the lessor and the lessee is not, as of the date of such repudiation, in default, the lessee under such lease may either--
(i) treat the lease as terminated by such repudiation; or
(ii) remain in possession of the leasehold interest for the balance of the term of the lease, unless the lessee defaults under the terms of the lease after the date of such repudiation.
(B) PROVISIONS APPLICABLE TO LESSEE REMAINING IN POSSESSION- If any lessee under a lease described in subparagraph (A) remains in possession of a leasehold interest pursuant to clause (ii) of subparagraph (A)--
(i) the lessee--
(I) shall continue to pay the contractual rent pursuant to the terms of the lease after the date of the repudiation of such lease; and
(II) may offset against any rent payment which accrues after the date of the repudiation of the lease, any damages which accrue after such date due to the nonperformance of any obligation of the covered financial company under the lease after such date; and
(ii) the Corporation as receiver shall not be liable to the lessee for any damages arising after such date as a result of the repudiation, other than the amount of any offset allowed under clause (i)(II).
(6) CONTRACTS FOR THE SALE OF REAL PROPERTY-
(A) IN GENERAL- If the receiver repudiates any contract (which meets the requirements of subsection (a)(6)) for the sale of real property, and the purchaser of such real property under such contract is in possession and is not, as of the date of such repudiation, in default, such purchaser may either--
(i) treat the contract as terminated by such repudiation; or
(ii) remain in possession of such real property.
(B) PROVISIONS APPLICABLE TO PURCHASER REMAINING IN POSSESSION- If any purchaser of real property under any contract described in subparagraph (A) remains in possession of such property pursuant to clause (ii) of subparagraph (A)--
(i) the purchaser--
(I) shall continue to make all payments due under the contract after the date of the repudiation of the contract; and
(II) may offset against any such payments any damages which accrue after such date due to the nonperformance (after such date) of any obligation of the covered financial company under the contract; and
(ii) the Corporation as receiver shall--
(I) not be liable to the purchaser for any damages arising after such date as a result of the repudiation, other than the amount of any offset allowed under clause (i)(II);
(II) deliver title to the purchaser in accordance with the provisions of the contract; and
(III) have no obligation under the contract other than the performance required under subclause (II).
(C) ASSIGNMENT AND SALE ALLOWED-
(i) IN GENERAL- No provision of this paragraph shall be construed as limiting the right of the Corporation as receiver to assign the contract described in subparagraph (A) and sell the property, subject to the contract and the provisions of this paragraph.
(ii) NO LIABILITY AFTER ASSIGNMENT AND SALE- If an assignment and sale described in clause (i) is consummated, the Corporation as receiver shall have no further liability under the contract described in subparagraph (A) or with respect to the real property which was the subject of such contract.
(7) PROVISIONS APPLICABLE TO SERVICE CONTRACTS-
(A) SERVICES PERFORMED BEFORE APPOINTMENT- In the case of any contract for services between any person and any covered financial company for which the Corporation has been appointed receiver, any claim of such person for services performed before the date of appointment shall be--
(i) a claim to be paid in accordance with subsections (a), (b), and (d); and
(ii) deemed to have arisen as of the date on which the receiver was appointed.
(B) SERVICES PERFORMED AFTER APPOINTMENT AND PRIOR TO REPUDIATION- If, in the case of any contract for services described in subparagraph (A), the Corporation as receiver accepts performance by the other person before making any determination to exercise the right of repudiation of such contract under this section--
(i) the other party shall be paid under the terms of the contract for the services performed; and
(ii) the amount of such payment shall be treated as an administrative expense of the receivership.
(C) ACCEPTANCE OF PERFORMANCE NO BAR TO SUBSEQUENT REPUDIATION- The acceptance by the Corporation as receiver for services referred to in subparagraph (B) in connection with a contract described in subparagraph (B) shall not affect the right of the Corporation as receiver to repudiate such contract under this section at any time after such performance.
(8) CERTAIN QUALIFIED FINANCIAL CONTRACTS-
(A) RIGHTS OF PARTIES TO CONTRACTS- Subject to subsection (a)(8) and paragraphs (9) and (10) of this subsection, and notwithstanding any other provision of this section, any other provision of Federal law, or the law of any State, no person shall be stayed or prohibited from exercising--
(i) any right that such person has to cause the termination, liquidation, or acceleration of any qualified financial contract with a covered financial company which arises upon the date of appointment of the Corporation as receiver for such covered financial company or at any time after such appointment;
(ii) any right under any security agreement or arrangement or other credit enhancement related to one or more qualified financial contracts described in clause (i); or
(iii) any right to offset or net out any termination value, payment amount, or other transfer obligation arising under or in connection with 1 or more contracts or agreements described in clause (i), including any master agreement for such contracts or agreements.
(B) APPLICABILITY OF OTHER PROVISIONS- Subsection (a)(8) shall apply in the case of any judicial action or proceeding brought against the Corporation as receiver referred to in subparagraph (A), or the subject covered financial company, by any party to a contract or agreement described in subparagraph (A)(i) with such covered financial company.
(C) CERTAIN TRANSFERS NOT AVOIDABLE-
(i) IN GENERAL- Notwithstanding subsection (a)(11), (a)(12), or (c)(12), section 5242 of the Revised Statutes of the United States, or any other provision of Federal or State law relating to the avoidance of preferential or fraudulent transfers, the Corporation, whether acting as the Corporation or as receiver for a covered financial company, may not avoid any transfer of money or other property in connection with any qualified financial contract with a covered financial company.
(ii) EXCEPTION FOR CERTAIN TRANSFERS- Clause (i) shall not apply to any transfer of money or other property in connection with any qualified financial contract with a covered financial company if the transferee had actual intent to hinder, delay, or defraud such company, the creditors of such company, or the Corporation as receiver appointed for such company.
(D) CERTAIN CONTRACTS AND AGREEMENTS DEFINED- For purposes of this subsection, the following definitions shall apply:
(i) QUALIFIED FINANCIAL CONTRACT- The term ‘qualified financial contract’ means any securities contract, commodity contract, forward contract, repurchase agreement, swap agreement, and any similar agreement that the Corporation determines by regulation, resolution, or order to be a qualified financial contract for purposes of this paragraph.
(ii) SECURITIES CONTRACT- The term ‘securities contract’--
(I) means a contract for the purchase, sale, or loan of a security, a certificate of deposit, a mortgage loan, any interest in a mortgage loan, a group or index of securities, certificates of deposit, or mortgage loans or interests therein (including any interest therein or based on the value thereof), or any option on any of the foregoing, including any option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option, and including any repurchase or reverse repurchase transaction on any such security, certificate of deposit, mortgage loan, interest, group or index, or option (whether or not such repurchase or reverse repurchase transaction is a ‘repurchase agreement’, as defined in clause (v));
(II) does not include any purchase, sale, or repurchase obligation under a participation in a commercial mortgage loan unless the Corporation determines by regulation, resolution, or order to include any such agreement within the meaning of such term;
(III) means any option entered into on a national securities exchange relating to foreign currencies;
(IV) means the guarantee (including by novation) by or to any securities clearing agency of any settlement of cash, securities, certificates of deposit, mortgage loans or interests therein, group or index of securities, certificates of deposit or mortgage loans or interests therein (including any interest therein or based on the value thereof) or an option on any of the foregoing, including any option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option (whether or not such settlement is in connection with any agreement or transaction referred to in subclauses (I) through (XII) (other than subclause (II)));
(V) means any margin loan;
(VI) means any extension of credit for the clearance or settlement of securities transactions;
(VII) means any loan transaction coupled with a securities collar transaction, any prepaid securities forward transaction, or any total return swap transaction coupled with a securities sale transaction;
(VIII) means any other agreement or transaction that is similar to any agreement or transaction referred to in this clause;
(IX) means any combination of the agreements or transactions referred to in this clause;
(X) means any option to enter into any agreement or transaction referred to in this clause;
(XI) means a master agreement that provides for an agreement or transaction referred to in any of subclauses (I) through (X), other than subclause (II), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a securities contract under this clause, except that the master agreement shall be considered to be a securities contract under this clause only with respect to each agreement or transaction under the master agreement that is referred to in any of subclauses (I) through (X), other than subclause (II); and
(XII) means any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this clause, including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in this clause.
(iii) COMMODITY CONTRACT- The term ‘commodity contract’ means--
(I) with respect to a futures commission merchant, a contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a contract market or board of trade;
(II) with respect to a foreign futures commission merchant, a foreign future;
(III) with respect to a leverage transaction merchant, a leverage transaction;
(IV) with respect to a clearing organization, a contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a contract market or board of trade that is cleared by such clearing organization, or commodity option traded on, or subject to the rules of, a contract market or board of trade that is cleared by such clearing organization;
(V) with respect to a commodity options dealer, a commodity option;
(VI) any other agreement or transaction that is similar to any agreement or transaction referred to in this clause;
(VII) any combination of the agreements or transactions referred to in this clause;
(VIII) any option to enter into any agreement or transaction referred to in this clause;
(IX) a master agreement that provides for an agreement or transaction referred to in any of subclauses (I) through (VIII), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a commodity contract under this clause, except that the master agreement shall be considered to be a commodity contract under this clause only with respect to each agreement or transaction under the master agreement that is referred to in any of subclauses (I) through (VIII); or
(X) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this clause, including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in this clause.
(iv) FORWARD CONTRACT- The term ‘forward contract’ means--
(I) a contract (other than a commodity contract) for the purchase, sale, or transfer of a commodity or any similar good, article, service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract trade, or product or byproduct thereof, with a maturity date that is more than 2 days after the date on which the contract is entered into, including a repurchase or reverse repurchase transaction (whether or not such repurchase or reverse repurchase transaction is a ‘repurchase agreement’, as defined in clause (v)), consignment, lease, swap, hedge transaction, deposit, loan, option, allocated transaction, unallocated transaction, or any other similar agreement;
(II) any combination of agreements or transactions referred to in subclauses (I) and (III);
(III) any option to enter into any agreement or transaction referred to in subclause (I) or (II);
(IV) a master agreement that provides for an agreement or transaction referred to in subclause (I), (II), or (III), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a forward contract under this clause, except that the master agreement shall be considered to be a forward contract under this clause only with respect to each agreement or transaction under the master agreement that is referred to in subclause (I), (II), or (III); or
(V) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in subclause (I), (II), (III), or (IV), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such subclause.
(v) REPURCHASE AGREEMENT- The term ‘repurchase agreement’ (which definition also applies to a reverse repurchase agreement)--
(I) means an agreement, including related terms, which provides for the transfer of one or more certificates of deposit, mortgage related securities (as such term is defined in section 3 of the Securities Exchange Act of 1934), mortgage loans, interests in mortgage-related securities or mortgage loans, eligible bankers’ acceptances, qualified foreign government securities (which, for purposes of this clause, means a security that is a direct obligation of, or that is fully guaranteed by, the central government of a member of the Organization for Economic Cooperation and Development, as determined by regulation or order adopted by the Board of Governors), or securities that are direct obligations of, or that are fully guaranteed by, the United States or any agency of the United States against the transfer of funds by the transferee of such certificates of deposit, eligible bankers’ acceptances, securities, mortgage loans, or interests with a simultaneous agreement by such transferee to transfer to the transferor thereof certificates of deposit, eligible bankers’ acceptances, securities, mortgage loans, or interests as described above, at a date certain not later than 1 year after such transfers or on demand, against the transfer of funds, or any other similar agreement;
(II) does not include any repurchase obligation under a participation in a commercial mortgage loan, unless the Corporation determines, by regulation, resolution, or order to include any such participation within the meaning of such term;
(III) means any combination of agreements or transactions referred to in subclauses (I) and (IV);
(IV) means any option to enter into any agreement or transaction referred to in subclause (I) or (III);
(V) means a master agreement that provides for an agreement or transaction referred to in subclause (I), (III), or (IV), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a repurchase agreement under this clause, except that the master agreement shall be considered to be a repurchase agreement under this subclause only with respect to each agreement or transaction under the master agreement that is referred to in subclause (I), (III), or (IV); and
(VI) means any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in subclause (I), (III), (IV), or (V), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such subclause.
(vi) SWAP AGREEMENT- The term ‘swap agreement’ means--
(I) any agreement, including the terms and conditions incorporated by reference in any such agreement, which is an interest rate swap, option, future, or forward agreement, including a rate floor, rate cap, rate collar, cross-currency rate swap, and basis swap; a spot, same day-tomorrow, tomorrow-next, forward, or other foreign exchange, precious metals, or other commodity agreement; a currency swap, option, future, or forward agreement; an equity index or equity swap, option, future, or forward agreement; a debt index or debt swap, option, future, or forward agreement; a total return, credit spread or credit swap, option, future, or forward agreement; a commodity index or commodity swap, option, future, or forward agreement; weather swap, option, future, or forward agreement; an emissions swap, option, future, or forward agreement; or an inflation swap, option, future, or forward agreement;
(II) any agreement or transaction that is similar to any other agreement or transaction referred to in this clause and that is of a type that has been, is presently, or in the future becomes, the subject of recurrent dealings in the swap or other derivatives markets (including terms and conditions incorporated by reference in such agreement) and that is a forward, swap, future, option, or spot transaction on one or more rates, currencies, commodities, equity securities or other equity instruments, debt securities or other debt instruments, quantitative measures associated with an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or economic consequence, or economic or financial indices or measures of economic or financial risk or value;
(III) any combination of agreements or transactions referred to in this clause;
(IV) any option to enter into any agreement or transaction referred to in this clause;
(V) a master agreement that provides for an agreement or transaction referred to in subclause (I), (II), (III), or (IV), together with all supplements to any such master agreement, without regard to whether the master agreement contains an agreement or transaction that is not a swap agreement under this clause, except that the master agreement shall be considered to be a swap agreement under this clause only with respect to each agreement or transaction under the master agreement that is referred to in subclause (I), (II), (III), or (IV); and
(VI) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in any of subclauses (I) through (V), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such clause.
(vii) DEFINITIONS RELATING TO DEFAULT- When used in this paragraph and paragraphs (9) and (10)--
(I) the term ‘default’ means, with respect to a covered financial company, any adjudication or other official decision by any court of competent jurisdiction, or other public authority pursuant to which the Corporation has been appointed receiver; and
(II) the term ‘in danger of default’ means a covered financial company with respect to which the Corporation or appropriate State authority has determined that--
(aa) in the opinion of the Corporation or such authority--
(AA) the covered financial company is not likely to be able to pay its obligations in the normal course of business; and
(BB) there is no reasonable prospect that the covered financial company will be able to pay such obligations without Federal assistance; or
(bb) in the opinion of the Corporation or such authority--
(AA) the covered financial company has incurred or is likely to incur losses that will deplete all or substantially all of its capital; and
(BB) there is no reasonable prospect that the capital will be replenished without Federal assistance.
(viii) TREATMENT OF MASTER AGREEMENT AS ONE AGREEMENT- Any master agreement for any contract or agreement described in any of clauses (i) through (vi) (or any master agreement for such master agreement or agreements), together with all supplements to such master agreement, shall be treated as a single agreement and a single qualified financial contact. If a master agreement contains provisions relating to agreements or transactions that are not themselves qualified financial contracts, the master agreement shall be deemed to be a qualified financial contract only with respect to those transactions that are themselves qualified financial contracts.
(ix) TRANSFER- The term ‘transfer’ means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest in property, including retention of title as a security interest and foreclosure of the equity of redemption of the covered financial company.
(x) PERSON- The term ‘person’ includes any governmental entity in addition to any entity included in the definition of such term in section 1, title 1, United States Code.
(E) CLARIFICATION- No provision of law shall be construed as limiting the right or power of the Corporation, or authorizing any court or agency to limit or delay, in any manner, the right or power of the Corporation to transfer any qualified financial contract or to disaffirm or repudiate any such contract in accordance with this subsection.
(F) WALKAWAY CLAUSES NOT EFFECTIVE-
(i) IN GENERAL- Notwithstanding the provisions of subparagraph (A) of this paragraph and sections 403 and 404 of the Federal Deposit Insurance Corporation Improvement Act of 1991, no walkaway clause shall be enforceable in a qualified financial contract of a covered financial company in default.
(ii) LIMITED SUSPENSION OF CERTAIN OBLIGATIONS- In the case of a qualified financial contract referred to in clause (i), any payment or delivery obligations otherwise due from a party pursuant to the qualified financial contract shall be suspended from the time at which the Corporation is appointed as receiver until the earlier of--
(I) the time at which such party receives notice that such contract has been transferred pursuant to paragraph (10)(A); or
(II) 5:00 p.m. (eastern time) on the business day following the date of the appointment of the Corporation as receiver.
(iii) WALKAWAY CLAUSE DEFINED- For purposes of this subparagraph, the term ‘walkaway clause’ means any provision in a qualified financial contract that suspends, conditions, or extinguishes a payment obligation of a party, in whole or in part, or does not create a payment obligation of a party that would otherwise exist, solely because of the status of such party as a nondefaulting party in connection with the insolvency of a covered financial company that is a party to the contract or the appointment of or the exercise of rights or powers by the Corporation as receiver for such covered financial company, and not as a result of the exercise by a party of any right to offset, setoff, or net obligations that exist under the contract, any other contract between those parties, or applicable law.
(G) CERTAIN OBLIGATIONS TO CLEARING ORGANIZATIONS- In the event that the Corporation has been appointed as receiver for a covered financial company which is a party to any qualified financial contract cleared by or subject to the rules of a clearing organization (as defined in paragraph (9)(D)), the receiver shall use its best efforts to meet all margin, collateral, and settlement obligations of the covered financial company that arise under qualified financial contracts (other than any margin, collateral, or settlement obligation that is not enforceable against the receiver under paragraph (8)(F)(i) or paragraph (10)(B)), as required by the rules of the clearing organization when due. Notwithstanding any other provision of this title, if the receiver fails to satisfy any such margin, collateral, or settlement obligations under the rules of the clearing organization, the clearing organization shall have the immediate right to exercise, and shall not be stayed from exercising, all of its rights and remedies under its rules and applicable law with respect to any qualified financial contract of the covered financial company, including, without limitation, the right to liquidate all positions and collateral of such covered financial company under the company’s qualified financial contracts, and suspend or cease to act for such covered financial company, all in accordance with the rules of the clearing organization.
(H) RECORDKEEPING-
(i) JOINT RULEMAKING- The Federal primary financial regulatory agencies shall jointly prescribe regulations requiring that financial companies maintain such records with respect to qualified financial contracts (including market valuations) that the Federal primary financial regulatory agencies determine to be necessary or appropriate in order to assist the Corporation as receiver for a covered financial company in being able to exercise its rights and fulfill its obligations under this paragraph or paragraph (9) or (10).
(ii) TIME FRAME- The Federal primary financial regulatory agencies shall prescribe joint final or interim final regulations not later than 24 months after the date of enactment of this Act.
(iii) BACK-UP RULEMAKING AUTHORITY- If the Federal primary financial regulatory agencies do not prescribe joint final or interim final regulations within the time frame in clause (ii), the Chairperson of the Council shall prescribe, in consultation with the Corporation, the regulations required by clause (i).
(iv) CATEGORIZATION AND TIERING- The joint regulations prescribed under clause (i) shall, as appropriate, differentiate among financial companies by taking into consideration their size, risk, complexity, leverage, frequency and dollar amount of qualified financial contracts, interconnectedness to the financial system, and any other factors deemed appropriate.
(9) TRANSFER OF QUALIFIED FINANCIAL CONTRACTS-
(A) IN GENERAL- In making any transfer of assets or liabilities of a covered financial company in default, which includes any qualified financial contract, the Corporation as receiver for such covered financial company shall either--
(i) transfer to one financial institution, other than a financial institution for which a conservator, receiver, trustee in bankruptcy, or other legal custodian has been appointed or which is otherwise the subject of a bankruptcy or insolvency proceeding--
(I) all qualified financial contracts between any person or any affiliate of such person and the covered financial company in default;
(II) all claims of such person or any affiliate of such person against such covered financial company under any such contract (other than any claim which, under the terms of any such contract, is subordinated to the claims of general unsecured creditors of such company);
(III) all claims of such covered financial company against such person or any affiliate of such person under any such contract; and
(IV) all property securing or any other credit enhancement for any contract described in subclause (I) or any claim described in subclause (II) or (III) under any such contract; or
(ii) transfer none of the qualified financial contracts, claims, property or other credit enhancement referred to in clause (i) (with respect to such person and any affiliate of such person).
(B) TRANSFER TO FOREIGN BANK, FINANCIAL INSTITUTION, OR BRANCH OR AGENCY THEREOF- In transferring any qualified financial contracts and related claims and property under subparagraph (A)(i), the Corporation as receiver for the covered financial company shall not make such transfer to a foreign bank, financial institution organized under the laws of a foreign country, or a branch or agency of a foreign bank or financial institution unless, under the law applicable to such bank, financial institution, branch or agency, to the qualified financial contracts, and to any netting contract, any security agreement or arrangement or other credit enhancement related to one or more qualified financial contracts, the contractual rights of the parties to such qualified financial contracts, netting contracts, security agreements or arrangements, or other credit enhancements are enforceable substantially to the same extent as permitted under this section.
(C) TRANSFER OF CONTRACTS SUBJECT TO THE RULES OF A CLEARING ORGANIZATION- In the event that the Corporation as receiver for a financial institution transfers any qualified financial contract and related claims, property, or credit enhancement pursuant to subparagraph (A)(i) and such contract is cleared by or subject to the rules of a clearing organization, the clearing organization shall not be required to accept the transferee as a member by virtue of the transfer.
(D) DEFINITIONS- For purposes of this paragraph--
(i) the term ‘financial institution’ means a broker or dealer, a depository institution, a futures commission merchant, a bridge financial company, or any other institution determined by the Corporation, by regulation, to be a financial institution; and
(ii) the term ‘clearing organization’ has the same meaning as in section 402 of the Federal Deposit Insurance Corporation Improvement Act of 1991.
(10) NOTIFICATION OF TRANSFER-
(A) IN GENERAL-
(i) NOTICE- The Corporation shall provide notice in accordance with clause (ii), if--
(I) the Corporation as receiver for a covered financial company in default or in danger of default transfers any assets or liabilities of the covered financial company; and
(II) the transfer includes any qualified financial contract.
(ii) TIMING- The Corporation as receiver for a covered financial company shall notify any person who is a party to any contract described in clause (i) of such transfer not later than 5:00 p.m. (eastern time) on the business day following the date of the appointment of the Corporation as receiver.
(B) CERTAIN RIGHTS NOT ENFORCEABLE-
(i) RECEIVERSHIP- A person who is a party to a qualified financial contract with a covered financial company may not exercise any right that such person has to terminate, liquidate, or net such contract under paragraph (8)(A) solely by reason of or incidental to the appointment under this section of the Corporation as receiver for the covered financial company (or the insolvency or financial condition of the covered financial company for which the Corporation has been appointed as receiver)--
(I) until 5:00 p.m. (eastern time) on the business day following the date of the appointment; or
(II) after the person has received notice that the contract has been transferred pursuant to paragraph (9)(A).
(ii) NOTICE- For purposes of this paragraph, the Corporation as receiver for a covered financial company shall be deemed to have notified a person who is a party to a qualified financial contract with such covered financial company, if the Corporation has taken steps reasonably calculated to provide notice to such person by the time specified in subparagraph (A).
(C) TREATMENT OF BRIDGE FINANCIAL COMPANY- For purposes of paragraph (9), a bridge financial company shall not be considered to be a financial institution for which a conservator, receiver, trustee in bankruptcy, or other legal custodian has been appointed, or which is otherwise the subject of a bankruptcy or insolvency proceeding.
(D) BUSINESS DAY DEFINED- For purposes of this paragraph, the term ‘business day’ means any day other than any Saturday, Sunday, or any day on which either the New York Stock Exchange or the Federal Reserve Bank of New York is closed.
(11) DISAFFIRMANCE OR REPUDIATION OF QUALIFIED FINANCIAL CONTRACTS- In exercising the rights of disaffirmance or repudiation of the Corporation as receiver with respect to any qualified financial contract to which a covered financial company is a party, the Corporation shall either--
(A) disaffirm or repudiate all qualified financial contracts between--
(i) any person or any affiliate of such person; and
(ii) the covered financial company in default; or
(B) disaffirm or repudiate none of the qualified financial contracts referred to in subparagraph (A) (with respect to such person or any affiliate of such person).
(12) CERTAIN SECURITY AND CUSTOMER INTERESTS NOT AVOIDABLE- No provision of this subsection shall be construed as permitting the avoidance of any--
(A) legally enforceable or perfected security interest in any of the assets of any covered financial company, except in accordance with subsection (a)(11); or
(B) legally enforceable interest in customer property, security entitlements in respect of assets or property held by the covered financial company for any security entitlement holder.
(13) AUTHORITY TO ENFORCE CONTRACTS-
(A) IN GENERAL- The Corporation, as receiver for a covered financial company, may enforce any contract, other than a liability insurance contract of a director or officer, a financial institution bond entered into by the covered financial company, notwithstanding any provision of the contract providing for termination, default, acceleration, or exercise of rights upon, or solely by reason of, insolvency, the appointment of or the exercise of rights or powers by the Corporation as receiver, the filing of the petition pursuant to section 202(a)(1), or the issuance of the recommendations or determination, or any actions or events occurring in connection therewith or as a result thereof, pursuant to section 203.
(B) CERTAIN RIGHTS NOT AFFECTED- No provision of this paragraph may be construed as impairing or affecting any right of the Corporation as receiver to enforce or recover under a liability insurance contract of a director or officer or financial institution bond under other applicable law.
(C) CONSENT REQUIREMENT AND IPSO FACTO CLAUSES-
(i) IN GENERAL- Except as otherwise provided by this section, no person may exercise any right or power to terminate, accelerate, or declare a default under any contract to which the covered financial company is a party (and no provision in any such contract providing for such default, termination, or acceleration shall be enforceable), or to obtain possession of or exercise control over any property of the covered financial company or affect any contractual rights of the covered financial company, without the consent of the Corporation as receiver for the covered financial company during the 90 day period beginning from the appointment of the Corporation as receiver.
(ii) EXCEPTIONS- No provision of this subparagraph shall apply to a director or officer liability insurance contract or a financial institution bond, to the rights of parties to certain qualified financial contracts pursuant to paragraph (8), or to the rights of parties to netting contracts pursuant to subtitle A of title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4401 et seq.), or shall be construed as permitting the Corporation as receiver to fail to comply with otherwise enforceable provisions of such contract.
(D) CONTRACTS TO EXTEND CREDIT- Notwithstanding any other provision in this title, if the Corporation as receiver enforces any contract to extend credit to the covered financial company or bridge financial company, any valid and enforceable obligation to repay such debt shall be paid by the Corporation as receiver, as an administrative expense of the receivership.
(14) EXCEPTION FOR FEDERAL RESERVE BANKS AND CORPORATION SECURITY INTEREST- No provision of this subsection shall apply with respect to--
(A) any extension of credit from any Federal reserve bank or the Corporation to any covered financial company; or
(B) any security interest in the assets of the covered financial company securing any such extension of credit.
(15) SAVINGS CLAUSE- The meanings of terms used in this subsection are applicable for purposes of this subsection only, and shall not be construed or applied so as to challenge or affect the characterization, definition, or treatment of any similar terms under any other statute, regulation, or rule, including the Gramm-Leach-Bliley Act, the Legal Certainty for Bank Products Act of 2000, the securities laws (as that term is defined in section 3(a)(47) of the Securities Exchange Act of 1934), and the Commodity Exchange Act.
(16) ENFORCEMENT OF CONTRACTS GUARANTEED BY THE COVERED FINANCIAL COMPANY-
(A) IN GENERAL- The Corporation, as receiver for a covered financial company or as receiver for a subsidiary of a covered financial company (including an insured depository institution) shall have the power to enforce contracts of subsidiaries or affiliates of the covered financial company, the obligations under which are guaranteed or otherwise supported by or linked to the covered financial company, notwithstanding any contractual right to cause the termination, liquidation, or acceleration of such contracts based solely on the insolvency, financial condition, or receivership of the covered financial company, if--
(i) such guaranty or other support and all related assets and liabilities are transferred to and assumed by a bridge financial company or a third party (other than a third party for which a conservator, receiver, trustee in bankruptcy, or other legal custodian has been appointed, or which is otherwise the subject of a bankruptcy or insolvency proceeding) within the same period of time as the Corporation is entitled to transfer the qualified financial contracts of such covered financial company; or
(ii) the Corporation, as receiver, otherwise provides adequate protection with respect to such obligations.
(B) RULE OF CONSTRUCTION- For purposes of this paragraph, a bridge financial company shall not be considered to be a third party for which a conservator, receiver, trustee in bankruptcy, or other legal custodian has been appointed, or which is otherwise the subject of a bankruptcy or insolvency proceeding.
(d) Valuation of Claims in Default-
(1) IN GENERAL- Notwithstanding any other provision of Federal law or the law of any State, and regardless of the method utilized by the Corporation for a covered financial company, including transactions authorized under subsection (h), this subsection shall govern the rights of the creditors of any such covered financial company.
(2) MAXIMUM LIABILITY- The maximum liability of the Corporation, acting as receiver for a covered financial company or in any other capacity, to any person having a claim against the Corporation as receiver or the covered financial company for which the Corporation is appointed shall equal the amount that such claimant would have received if--
(A) the Corporation had not been appointed receiver with respect to the covered financial company; and
(B) the covered financial company had been liquidated under chapter 7 of the Bankruptcy Code, or any similar provision of State insolvency law applicable to the covered financial company.
(3) SPECIAL PROVISION FOR ORDERLY LIQUIDATION BY SIPC- The maximum liability of the Corporation, acting as receiver or in its corporate capacity for any covered broker or dealer to any customer of such covered broker or dealer, with respect to customer property of such customer, shall be--
(A) equal to the amount that such customer would have received with respect to such customer property in a case initiated by SIPC under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.); and
(B) determined as of the close of business on the date on which the Corporation is appointed as receiver.
(4) ADDITIONAL PAYMENTS AUTHORIZED-
(A) IN GENERAL- Subject to subsection (o)(1)(D)(i), the Corporation, with the approval of the Secretary, may make additional payments or credit additional amounts to or with respect to or for the account of any claimant or category of claimants of the covered financial company, if the Corporation determines that such payments or credits are necessary or appropriate to minimize losses to the Corporation as receiver from the orderly liquidation of the covered financial company under this section.
(B) LIMITATIONS-
(i) PROHIBITION- The Corporation shall not make any payments or credit amounts to any claimant or category of claimants that would result in any claimant receiving more than the face value amount of any claim that is proven to the satisfaction of the Corporation.
(ii) NO OBLIGATION- Notwithstanding any other provision of Federal or State law, or the Constitution of any State, the Corporation shall not be obligated, as a result of having made any payment under subparagraph (A) or credited any amount described in subparagraph (A) to or with respect to, or for the account, of any claimant or category of claimants, to make payments to any other claimant or category of claimants.
(C) MANNER OF PAYMENT- The Corporation may make payments or credit amounts under subparagraph (A) directly to the claimants or may make such payments or credit such amounts to a company other than a covered financial company or a bridge financial company established with respect thereto in order to induce such other company to accept liability for such claims.
(e) Limitation on Court Action- Except as provided in this title, no court may take any action to restrain or affect the exercise of powers or functions of the receiver hereunder, and any remedy against the Corporation or receiver shall be limited to money damages determined in accordance with this title.
(f) Liability of Directors and Officers-
(1) IN GENERAL- A director or officer of a covered financial company may be held personally liable for monetary damages in any civil action described in paragraph (2) by, on behalf of, or at the request or direction of the Corporation, which action is prosecuted wholly or partially for the benefit of the Corporation--
(A) acting as receiver for such covered financial company;
(B) acting based upon a suit, claim, or cause of action purchased from, assigned by, or otherwise conveyed by the Corporation as receiver; or
(C) acting based upon a suit, claim, or cause of action purchased from, assigned by, or otherwise conveyed in whole or in part by a covered financial company or its affiliate in connection with assistance provided under this title.
(2) ACTIONS COVERED- Paragraph (1) shall apply with respect to actions for gross negligence, including any similar conduct or conduct that demonstrates a greater disregard of a duty of care (than gross negligence) including intentional tortious conduct, as such terms are defined and determined under applicable State law.
(3) SAVINGS CLAUSE- Nothing in this subsection shall impair or affect any right of the Corporation under other applicable law.
(g) Damages- In any proceeding related to any claim against a director, officer, employee, agent, attorney, accountant, or appraiser of a covered financial company, or any other party employed by or providing services to a covered financial company, recoverable damages determined to result from the improvident or otherwise improper use or investment of any assets of the covered financial company shall include principal losses and appropriate interest.
(h) Bridge Financial Companies-
(1) ORGANIZATION-
(A) PURPOSE- The Corporation, as receiver for one or more covered financial companies or in anticipation of being appointed receiver for one or more covered financial companies, may organize one or more bridge financial companies in accordance with this subsection.
(B) AUTHORITIES- Upon the creation of a bridge financial company under subparagraph (A) with respect to a covered financial company, such bridge financial company may--
(i) assume such liabilities (including liabilities associated with any trust or custody business, but excluding any liabilities that count as regulatory capital) of such covered financial company as the Corporation may, in its discretion, determine to be appropriate;
(ii) purchase such assets (including assets associated with any trust or custody business) of such covered financial company as the Corporation may, in its discretion, determine to be appropriate; and
(iii) perform any other temporary function which the Corporation may, in its discretion, prescribe in accordance with this section.
(2) CHARTER AND ESTABLISHMENT-
(A) ESTABLISHMENT- Except as provided in subparagraph (H), where the covered financial company is a covered broker or dealer, the Corporation, as receiver for a covered financial company, may grant a Federal charter to and approve articles of association for one or more bridge financial company or companies, with respect to such covered financial company which shall, by operation of law and immediately upon issuance of its charter and approval of its articles of association, be established and operate in accordance with, and subject to, such charter, articles, and this section.
(B) MANAGEMENT- Upon its establishment, a bridge financial company shall be under the management of a board of directors appointed by the Corporation.
(C) ARTICLES OF ASSOCIATION- The articles of association and organization certificate of a bridge financial company shall have such terms as the Corporation may provide, and shall be executed by such representatives as the Corporation may designate.
(D) TERMS OF CHARTER; RIGHTS AND PRIVILEGES- Subject to and in accordance with the provisions of this subsection, the Corporation shall--
(i) establish the terms of the charter of a bridge financial company and the rights, powers, authorities, and privileges of a bridge financial company granted by the charter or as an incident thereto; and
(ii) provide for, and establish the terms and conditions governing, the management (including the bylaws and the number of directors of the board of directors) and operations of the bridge financial company.
(E) TRANSFER OF RIGHTS AND PRIVILEGES OF COVERED FINANCIAL COMPANY-
(i) IN GENERAL- Notwithstanding any other provision of Federal or State law, the Corporation may provide for a bridge financial company to succeed to and assume any rights, powers, authorities, or privileges of the covered financial company with respect to which the bridge financial company was established and, upon such determination by the Corporation, the bridge financial company shall immediately and by operation of law succeed to and assume such rights, powers, authorities, and privileges.
(ii) EFFECTIVE WITHOUT APPROVAL- Any succession to or assumption by a bridge financial company of rights, powers, authorities, or privileges of a covered financial company under clause (i) or otherwise shall be effective without any further approval under Federal or State law, assignment, or consent with respect thereto.
(F) CORPORATE GOVERNANCE AND ELECTION AND DESIGNATION OF BODY OF LAW- To the extent permitted by the Corporation and consistent with this section and any rules, regulations, or directives issued by the Corporation under this section, a bridge financial company may elect to follow the corporate governance practices and procedures that are applicable to a corporation incorporated under the general corporation law of the State of Delaware, or the State of incorporation or organization of the covered financial company with respect to which the bridge financial company was established, as such law may be amended from time to time.
(G) CAPITAL-
(i) CAPITAL NOT REQUIRED- Notwithstanding any other provision of Federal or State law, a bridge financial company may, if permitted by the Corporation, operate without any capital or surplus, or with such capital or surplus as the Corporation may in its discretion determine to be appropriate.
(ii) NO CONTRIBUTION BY THE CORPORATION REQUIRED- The Corporation is not required to pay capital into a bridge financial company or to issue any capital stock on behalf of a bridge financial company established under this subsection.
(iii) AUTHORITY- If the Corporation determines that such action is advisable, the Corporation may cause capital stock or other securities of a bridge financial company established with respect to a covered financial company to be issued and offered for sale in such amounts and on such terms and conditions as the Corporation may, in its discretion, determine.
(iv) OPERATING FUNDS IN LIEU OF CAPITAL AND IMPLEMENTATION PLAN- Upon the organization of a bridge financial company, and thereafter as the Corporation may, in its discretion, determine to be necessary or advisable, the Corporation may make available to the bridge financial company, subject to the plan described in subsection (n)(9), funds for the operation of the bridge financial company in lieu of capital.
(H) BRIDGE BROKERS OR DEALERS-
(i) IN GENERAL- The Corporation, as receiver for a covered broker or dealer, may approve articles of association for one or more bridge financial companies with respect to such covered broker or dealer, which bridge financial company or companies shall, by operation of law and immediately upon approval of its articles of association--
(I) be established and deemed registered with the Commission under the Securities Exchange Act of 1934 and a member of SIPC;
(II) operate in accordance with such articles and this section; and
(III) succeed to any and all registrations and memberships of the covered financial company with or in any self-regulatory organizations.
(ii) OTHER REQUIREMENTS- Except as provided in clause (i), and notwithstanding any other provision of this section, the bridge financial company shall be subject to the Federal securities laws and all requirements with respect to being a member of a self-regulatory organization, unless exempted from any such requirements by the Commission, as is necessary or appropriate in the public interest or for the protection of investors.
(iii) TREATMENT OF CUSTOMERS- Except as otherwise provided by this title, any customer of the covered broker or dealer whose account is transferred to a bridge financial company shall have all the rights, privileges, and protections under section 205(f) and under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), that such customer would have had if the account were not transferred from the covered financial company under this subparagraph.
(iv) OPERATION OF BRIDGE BROKERS OR DEALERS- Notwithstanding any other provision of this title, the Corporation shall not operate any bridge financial company created by the Corporation under this title with respect to a covered broker or dealer in such a manner as to adversely affect the ability of customers to promptly access their customer property in accordance with applicable law.
(3) INTERESTS IN AND ASSETS AND OBLIGATIONS OF COVERED FINANCIAL COMPANY- Notwithstanding paragraph (1) or (2) or any other provision of law--
(A) a bridge financial company shall assume, acquire, or succeed to the assets or liabilities of a covered financial company (including the assets or liabilities associated with any trust or custody business) only to the extent that such assets or liabilities are transferred by the Corporation to the bridge financial company in accordance with, and subject to the restrictions set forth in, paragraph (1)(B); and
(B) a bridge financial company shall not assume, acquire, or succeed to any obligation that a covered financial company for which the Corporation has been appointed receiver may have to any shareholder, member, general partner, limited partner, or other person with an interest in the equity of the covered financial company that arises as a result of the status of that person having an equity claim in the covered financial company.
(4) BRIDGE FINANCIAL COMPANY TREATED AS BEING IN DEFAULT FOR CERTAIN PURPOSES- A bridge financial company shall be treated as a covered financial company in default at such times and for such purposes as the Corporation may, in its discretion, determine.
(5) TRANSFER OF ASSETS AND LIABILITIES-
(A) AUTHORITY OF CORPORATION- The Corporation, as receiver for a covered financial company, may transfer any assets and liabilities of a covered financial company (including any assets or liabilities associated with any trust or custody business) to one or more bridge financial companies, in accordance with and subject to the restrictions of paragraph (1).
(B) SUBSEQUENT TRANSFERS- At any time after the establishment of a bridge financial company with respect to a covered financial company, the Corporation, as receiver, may transfer any assets and liabilities of such covered financial company as the Corporation may, in its discretion, determine to be appropriate in accordance with and subject to the restrictions of paragraph (1).
(C) TREATMENT OF TRUST OR CUSTODY BUSINESS- For purposes of this paragraph, the trust or custody business, including fiduciary appointments, held by any covered financial company is included among its assets and liabilities.
(D) EFFECTIVE WITHOUT APPROVAL- The transfer of any assets or liabilities, including those associated with any trust or custody business of a covered financial company, to a bridge financial company shall be effective without any further approval under Federal or State law, assignment, or consent with respect thereto.
(E) EQUITABLE TREATMENT OF SIMILARLY SITUATED CREDITORS- The Corporation shall treat all creditors of a covered financial company that are similarly situated under subsection (b)(1), in a similar manner in exercising the authority of the Corporation under this subsection to transfer any assets or liabilities of the covered financial company to one or more bridge financial companies established with respect to such covered financial company, except that the Corporation may take any action (including making payments, subject to subsection (o)(1)(D)(i)) that does not comply with this subparagraph, if--
(i) the Corporation determines that such action is necessary--
(I) to maximize the value of the assets of the covered financial company;
(II) to maximize the present value return from the sale or other disposition of the assets of the covered financial company; or
(III) to minimize the amount of any loss realized upon the sale or other disposition of the assets of the covered financial company; and
(ii) all creditors that are similarly situated under subsection (b)(1) receive not less than the amount provided under paragraphs (2) and (3) of subsection (d).
(F) LIMITATION ON TRANSFER OF LIABILITIES- Notwithstanding any other provision of law, the aggregate amount of liabilities of a covered financial company that are transferred to, or assumed by, a bridge financial company from a covered financial company may not exceed the aggregate amount of the assets of the covered financial company that are transferred to, or purchased by, the bridge financial company from the covered financial company.
(6) STAY OF JUDICIAL ACTION- Any judicial action to which a bridge financial company becomes a party by virtue of its acquisition of any assets or assumption of any liabilities of a covered financial company shall be stayed from further proceedings for a period of not longer than 45 days (or such longer period as may be agreed to upon the consent of all parties) at the request of the bridge financial company.
(7) AGREEMENTS AGAINST INTEREST OF THE BRIDGE FINANCIAL COMPANY- No agreement that tends to diminish or defeat the interest of the bridge financial company in any asset of a covered financial company acquired by the bridge financial company shall be valid against the bridge financial company, unless such agreement--
(A) is in writing;
(B) was executed by an authorized officer or representative of the covered financial company or confirmed in the ordinary course of business by the covered financial company; and
(C) has been on the official record of the company, since the time of its execution, or with which, the party claiming under the agreement provides documentation of such agreement and its authorized execution or confirmation by the covered financial company that is acceptable to the receiver.
(8) NO FEDERAL STATUS-
(A) AGENCY STATUS- A bridge financial company is not an agency, establishment, or instrumentality of the United States.
(B) EMPLOYEE STATUS- Representatives for purposes of paragraph (1)(B), directors, officers, employees, or agents of a bridge financial company are not, solely by virtue of service in any such capacity, officers or employees of the United States. Any employee of the Corporation or of any Federal instrumentality who serves at the request of the Corporation as a representative for purposes of paragraph (1)(B), director, officer, employee, or agent of a bridge financial company shall not--
(i) solely by virtue of service in any such capacity lose any existing status as an officer or employee of the United States for purposes of title 5, United States Code, or any other provision of law; or
(ii) receive any salary or benefits for service in any such capacity with respect to a bridge financial company in addition to such salary or benefits as are obtained through employment with the Corporation or such Federal instrumentality.
(9) FUNDING AUTHORIZED- The Corporation may, subject to the plan described in subsection (n)(9), provide funding to facilitate any transaction described in subparagraph (A), (B), (C), or (D) of paragraph (13) with respect to any bridge financial company, or facilitate the acquisition by a bridge financial company of any assets, or the assumption of any liabilities, of a covered financial company for which the Corporation has been appointed receiver.
(10) EXEMPT TAX STATUS- Notwithstanding any other provision of Federal or State law, a bridge financial company, its franchise, property, and income shall be exempt from all taxation now or hereafter imposed by the United States, by any territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority.
(11) FEDERAL AGENCY APPROVAL; ANTITRUST REVIEW- If a transaction involving the merger or sale of a bridge financial company requires approval by a Federal agency, the transaction may not be consummated before the 5th calendar day after the date of approval by the Federal agency responsible for such approval with respect thereto. If, in connection with any such approval a report on competitive factors from the Attorney General is required, the Federal agency responsible for such approval shall promptly notify the Attorney General of the proposed transaction and the Attorney General shall provide the required report within 10 days of the request. If a notification is required under section 7A of the Clayton Act with respect to such transaction, the required waiting period shall end on the 15th day after the date on which the Attorney General and the Federal Trade Commission receive such notification, unless the waiting period is terminated earlier under section 7A(b)(2) of the Clayton Act, or extended under section 7A(e)(2) of that Act.
(12) DURATION OF BRIDGE FINANCIAL COMPANY- Subject to paragraphs (13) and (14), the status of a bridge financial company as such shall terminate at the end of the 2-year period following the date on which it was granted a charter. The Corporation may, in its discretion, extend the status of the bridge financial company as such for no more than 3 additional 1-year periods.
(13) TERMINATION OF BRIDGE FINANCIAL COMPANY STATUS- The status of any bridge financial company as such shall terminate upon the earliest of--
(A) the date of the merger or consolidation of the bridge financial company with a company that is not a bridge financial company;
(B) at the election of the Corporation, the sale of a majority of the capital stock of the bridge financial company to a company other than the Corporation and other than another bridge financial company;
(C) the sale of 80 percent, or more, of the capital stock of the bridge financial company to a person other than the Corporation and other than another bridge financial company;
(D) at the election of the Corporation, either the assumption of all or substantially all of the liabilities of the bridge financial company by a company that is not a bridge financial company, or the acquisition of all or substantially all of the assets of the bridge financial company by a company that is not a bridge financial company, or other entity as permitted under applicable law; and
(E) the expiration of the period provided in paragraph (12), or the earlier dissolution of the bridge financial company, as provided in paragraph (15).
(14) EFFECT OF TERMINATION EVENTS-
(A) MERGER OR CONSOLIDATION- A merger or consolidation, described in paragraph (13)(A) shall be conducted in accordance with, and shall have the effect provided in, the provisions of applicable law. For the purpose of effecting such a merger or consolidation, the bridge financial company shall be treated as a corporation organized under the laws of the State of Delaware (unless the law of another State has been selected by the bridge financial company in accordance with paragraph (2)(F)), and the Corporation shall be treated as the sole shareholder thereof, notwithstanding any other provision of State or Federal law.
(B) CHARTER CONVERSION- Following the sale of a majority of the capital stock of the bridge financial company, as provided in paragraph (13)(B), the Corporation may amend the charter of the bridge financial company to reflect the termination of the status of the bridge financial company as such, whereupon the company shall have all of the rights, powers, and privileges under its constituent documents and applicable Federal or State law. In connection therewith, the Corporation may take such steps as may be necessary or convenient to reincorporate the bridge financial company under the laws of a State and, notwithstanding any provisions of Federal or State law, such State-chartered corporation shall be deemed to succeed by operation of law to such rights, titles, powers, and interests of the bridge financial company as the Corporation may provide, with the same effect as if the bridge financial company had merged with the State-chartered corporation under provisions of the corporate laws of such State.
(C) SALE OF STOCK- Following the sale of 80 percent or more of the capital stock of a bridge financial company, as provided in paragraph (13)(C), the company shall have all of the rights, powers, and privileges under its constituent documents and applicable Federal or State law. In connection therewith, the Corporation may take such steps as may be necessary or convenient to reincorporate the bridge financial company under the laws of a State and, notwithstanding any provisions of Federal or State law, the State-chartered corporation shall be deemed to succeed by operation of law to such rights, titles, powers and interests of the bridge financial company as the Corporation may provide, with the same effect as if the bridge financial company had merged with the State-chartered corporation under provisions of the corporate laws of such State.
(D) ASSUMPTION OF LIABILITIES AND SALE OF ASSETS- Following the assumption of all or substantially all of the liabilities of the bridge financial company, or the sale of all or substantially all of the assets of the bridge financial company, as provided in paragraph (13)(D), at the election of the Corporation, the bridge financial company may retain its status as such for the period provided in paragraph (12) or may be dissolved at the election of the Corporation.
(E) AMENDMENTS TO CHARTER- Following the consummation of a transaction described in subparagraph (A), (B), (C), or (D) of paragraph (13), the charter of the resulting company shall be amended to reflect the termination of bridge financial company status, if appropriate.
(15) DISSOLUTION OF BRIDGE FINANCIAL COMPANY-
(A) IN GENERAL- Notwithstanding any other provision of Federal or State law, if the status of a bridge financial company as such has not previously been terminated by the occurrence of an event specified in subparagraph (A), (B), (C), or (D) of paragraph (13)--
(i) the Corporation may, in its discretion, dissolve the bridge financial company in accordance with this paragraph at any time; and
(ii) the Corporation shall promptly commence dissolution proceedings in accordance with this paragraph upon the expiration of the 2-year period following the date on which the bridge financial company was chartered, or any extension thereof, as provided in paragraph (12).
(B) PROCEDURES- The Corporation shall remain the receiver for a bridge financial company for the purpose of dissolving the bridge financial company. The Corporation as receiver for a bridge financial company shall wind up the affairs of the bridge financial company in conformity with the provisions of law relating to the liquidation of covered financial companies under this title. With respect to any such bridge financial company, the Corporation as receiver shall have all the rights, powers, and privileges and shall perform the duties related to the exercise of such rights, powers, or privileges granted by law to the Corporation as receiver for a covered financial company under this title and, notwithstanding any other provision of law, in the exercise of such rights, powers, and privileges, the Corporation shall not be subject to the direction or supervision of any State agency or other Federal agency.
(16) AUTHORITY TO OBTAIN CREDIT-
(A) IN GENERAL- A bridge financial company may obtain unsecured credit and issue unsecured debt.
(B) INABILITY TO OBTAIN CREDIT- If a bridge financial company is unable to obtain unsecured credit or issue unsecured debt, the Corporation may authorize the obtaining of credit or the issuance of debt by the bridge financial company--
(i) with priority over any or all of the obligations of the bridge financial company;
(ii) secured by a lien on property of the bridge financial company that is not otherwise subject to a lien; or
(iii) secured by a junior lien on property of the bridge financial company that is subject to a lien.
(C) LIMITATIONS-
(i) IN GENERAL- The Corporation, after notice and a hearing, may authorize the obtaining of credit or the issuance of debt by a bridge financial company that is secured by a senior or equal lien on property of the bridge financial company that is subject to a lien, only if--
(I) the bridge financial company is unable to otherwise obtain such credit or issue such debt; and
(II) there is adequate protection of the interest of the holder of the lien on the property with respect to which such senior or equal lien is proposed to be granted.
(ii) HEARING- The hearing required pursuant to this subparagraph shall be before a court of the United States, which shall have jurisdiction to conduct such hearing and to authorize a bridge financial company to obtain secured credit under clause (i).
(D) BURDEN OF PROOF- In any hearing under this paragraph, the Corporation has the burden of proof on the issue of adequate protection.
(E) QUALIFIED FINANCIAL CONTRACTS- No credit or debt obtained or issued by a bridge financial company may contain terms that impair the rights of a counterparty to a qualified financial contract upon a default by the bridge financial company, other than the priority of such counterparty’s unsecured claim (after the exercise of rights) relative to the priority of the bridge financial company’s obligations in respect of such credit or debt, unless such counterparty consents in writing to any such impairment.
(17) EFFECT ON DEBTS AND LIENS- The reversal or modification on appeal of an authorization under this subsection to obtain credit or issue debt, or of a grant under this section of a priority or a lien, does not affect the validity of any debt so issued, or any priority or lien so granted, to an entity that extended such credit in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and the issuance of such debt, or the granting of such priority or lien, were stayed pending appeal.
(i) Sharing Records- If the Corporation has been appointed as receiver for a covered financial company, other Federal regulators shall make all records relating to the covered financial company available to the Corporation, which may be used by the Corporation in any manner that the Corporation determines to be appropriate.
(j) Expedited Procedures for Certain Claims-
(1) TIME FOR FILING NOTICE OF APPEAL- The notice of appeal of any order, whether interlocutory or final, entered in any case brought by the Corporation against a director, officer, employee, agent, attorney, accountant, or appraiser of the covered financial company, or any other person employed by or providing services to a covered financial company, shall be filed not later than 30 days after the date of entry of the order. The hearing of the appeal shall be held not later than 120 days after the date of the notice of appeal. The appeal shall be decided not later than 180 days after the date of the notice of appeal.
(2) SCHEDULING- The court shall expedite the consideration of any case brought by the Corporation against a director, officer, employee, agent, attorney, accountant, or appraiser of a covered financial company or any other person employed by or providing services to a covered financial company. As far as practicable, the court shall give such case priority on its docket.
(3) JUDICIAL DISCRETION- The court may modify the schedule and limitations stated in paragraphs (1) and (2) in a particular case, based on a specific finding that the ends of justice that would be served by making such a modification would outweigh the best interest of the public in having the case resolved expeditiously.
(k) Foreign Investigations- The Corporation, as receiver for any covered financial company, and for purposes of carrying out any power, authority, or duty with respect to a covered financial company--
(1) may request the assistance of any foreign financial authority and provide assistance to any foreign financial authority in accordance with section 8(v) of the Federal Deposit Insurance Act, as if the covered financial company were an insured depository institution, the Corporation were the appropriate Federal banking agency for the company, and any foreign financial authority were the foreign banking authority; and
(2) may maintain an office to coordinate foreign investigations or investigations on behalf of foreign financial authorities.
(l) Prohibition on Entering Secrecy Agreements and Protective Orders- The Corporation may not enter into any agreement or approve any protective order which prohibits the Corporation from disclosing the terms of any settlement of an administrative or other action for damages or restitution brought by the Corporation in its capacity as receiver for a covered financial company.
(m) Liquidation of Certain Covered Financial Companies or Bridge Financial Companies-
(1) IN GENERAL- Except as specifically provided in this section, and notwithstanding any other provision of law, the Corporation, in connection with the liquidation of any covered financial company or bridge financial company with respect to which the Corporation has been appointed as receiver, shall--
(A) in the case of any covered financial company or bridge financial company that is a stockbroker, but is not a member of the Securities Investor Protection Corporation, apply the provisions of subchapter III of chapter 7 of the Bankruptcy Code, in respect of the distribution to any customer of all customer name security and customer property and member property, as if such covered financial company or bridge financial company were a debtor for purposes of such subchapter; or
(B) in the case of any covered financial company or bridge financial company that is a commodity broker, apply the provisions of subchapter IV of chapter 7 the Bankruptcy Code, in respect of the distribution to any customer of all customer property and member property, as if such covered financial company or bridge financial company were a debtor for purposes of such subchapter.
(2) DEFINITIONS- For purposes of this subsection--
(A) the terms ‘customer’, ‘customer name security’, and ‘customer property and member property’ have the same meanings as in sections 741 and 761 of title 11, United States Code; and
(B) the terms ‘commodity broker’ and ‘stockbroker’ have the same meanings as in section 101 of the Bankruptcy Code.
(n) Orderly Liquidation Fund-
(1) ESTABLISHMENT- There is established in the Treasury of the United States a separate fund to be known as the ‘Orderly Liquidation Fund’, which shall be available to the Corporation to carry out the authorities contained in this title, for the cost of actions authorized by this title, including the orderly liquidation of covered financial companies, payment of administrative expenses, the payment of principal and interest by the Corporation on obligations issued under paragraph (5), and the exercise of the authorities of the Corporation under this title.
(2) PROCEEDS- Amounts received by the Corporation, including assessments received under subsection (o), proceeds of obligations issued under paragraph (5), interest and other earnings from investments, and repayments to the Corporation by covered financial companies, shall be deposited into the Fund.
(3) MANAGEMENT- The Corporation shall manage the Fund in accordance with this subsection and the policies and procedures established under section 203(d).
(4) INVESTMENTS- At the request of the Corporation, the Secretary may invest such portion of amounts held in the Fund that are not, in the judgment of the Corporation, required to meet the current needs of the Corporation, in obligations of the United States having suitable maturities, as determined by the Corporation. The interest on and the proceeds from the sale or redemption of such obligations shall be credited to the Fund.
(5) AUTHORITY TO ISSUE OBLIGATIONS-
(A) CORPORATION AUTHORIZED TO ISSUE OBLIGATIONS- Upon appointment by the Secretary of the Corporation as receiver for a covered financial company, the Corporation is authorized to issue obligations to the Secretary.
(B) SECRETARY AUTHORIZED TO PURCHASE OBLIGATIONS- The Secretary may, under such terms and conditions as the Secretary may require, purchase or agree to purchase any obligations issued under subparagraph (A), and for such purpose, the Secretary is authorized to use as a public debt transaction the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include such purchases.
(C) INTEREST RATE- Each purchase of obligations by the Secretary under this paragraph shall be upon such terms and conditions as to yield a return at a rate determined by the Secretary, taking into consideration the current average yield on outstanding marketable obligations of the United States of comparable maturity, plus an interest rate surcharge to be determined by the Secretary, which shall be greater than the difference between--
(i) the current average rate on an index of corporate obligations of comparable maturity; and
(ii) the current average rate on outstanding marketable obligations of the United States of comparable maturity.
(D) SECRETARY AUTHORIZED TO SELL OBLIGATIONS- The Secretary may sell, upon such terms and conditions as the Secretary shall determine, any of the obligations acquired under this paragraph.
(E) PUBLIC DEBT TRANSACTIONS- All purchases and sales by the Secretary of such obligations under this paragraph shall be treated as public debt transactions of the United States, and the proceeds from the sale of any obligations acquired by the Secretary under this paragraph shall be deposited into the Treasury of the United States as miscellaneous receipts.
(6) MAXIMUM OBLIGATION LIMITATION- The Corporation may not, in connection with the orderly liquidation of a covered financial company, issue or incur any obligation, if, after issuing or incurring the obligation, the aggregate amount of such obligations outstanding under this subsection for each covered financial company would exceed--
(A) an amount that is equal to 10 percent of the total consolidated assets of the covered financial company, based on the most recent financial statement available, during the 30-day period immediately following the date of appointment of the Corporation as receiver (or a shorter time period if the Corporation has calculated the amount described under subparagraph (B)); and
(B) the amount that is equal to 90 percent of the fair value of the total consolidated assets of each covered financial company that are available for repayment, after the time period described in subparagraph (A).
(7) RULEMAKING- The Corporation and the Secretary shall jointly, in consultation with the Council, prescribe regulations governing the calculation of the maximum obligation limitation defined in this paragraph.
(8) RULE OF CONSTRUCTION-
(A) IN GENERAL- Nothing in this section shall be construed to affect the authority of the Corporation under subsection (a) or (b) of section 14 or section 15(c)(5) of the Federal Deposit Insurance Act (12 U.S.C. 1824, 1825(c)(5)), the management of the Deposit Insurance Fund by the Corporation, or the resolution of insured depository institutions, provided that--
(i) the authorities of the Corporation contained in this title shall not be used to assist the Deposit Insurance Fund or to assist any financial company under applicable law other than this Act;
(ii) the authorities of the Corporation relating to the Deposit Insurance Fund, or any other responsibilities of the Corporation under applicable law other than this title, shall not be used to assist a covered financial company pursuant to this title; and
(iii) the Deposit Insurance Fund may not be used in any manner to otherwise circumvent the purposes of this title.
(B) VALUATION- For purposes of determining the amount of obligations under this subsection--
(i) the Corporation shall include as an obligation any contingent liability of the Corporation pursuant to this title; and
(ii) the Corporation shall value any contingent liability at its expected cost to the Corporation.
(9) ORDERLY LIQUIDATION AND REPAYMENT PLANS-
(A) ORDERLY LIQUIDATION PLAN- Amounts in the Fund shall be available to the Corporation with regard to a covered financial company for which the Corporation is appointed receiver after the Corporation has developed an orderly liquidation plan that is acceptable to the Secretary with regard to such covered financial company, including the provision and use of funds, including taking any actions specified under section 204(d) and subsection (h)(2)(G)(iv) and (h)(9) of this section, and payments to third parties. The orderly liquidation plan shall take into account actions to avoid or mitigate potential adverse effects on low income, minority, or underserved communities affected by the failure of the covered financial company, and shall provide for coordination with the primary financial regulatory agencies, as appropriate, to ensure that such actions are taken. The Corporation may, at any time, amend any orderly liquidation plan approved by the Secretary with the concurrence of the Secretary.
(B) MANDATORY REPAYMENT PLAN-
(i) IN GENERAL- No amount authorized under paragraph (6)(B) may be provided by the Secretary to the Corporation under paragraph (5), unless an agreement is in effect between the Secretary and the Corporation that--
(I) provides a specific plan and schedule to achieve the repayment of the outstanding amount of any borrowing under paragraph (5); and
(II) demonstrates that income to the Corporation from the liquidated assets of the covered financial company and assessments under subsection (o) will be sufficient to amortize the outstanding balance within the period established in the repayment schedule and pay the interest accruing on such balance within the time provided in subsection (o)(1)(B).
(ii) CONSULTATION WITH AND REPORT TO CONGRESS- The Secretary and the Corporation shall--
(I) consult with the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the terms of any repayment schedule agreement; and
(II) submit a copy of the repayment schedule agreement to the Committees described in subclause (I) before the end of the 30-day period beginning on the date on which any amount is provided by the Secretary to the Corporation under paragraph (5).
(10) IMPLEMENTATION EXPENSES-
(A) IN GENERAL- Reasonable implementation expenses of the Corporation incurred after the date of enactment of this Act shall be treated as expenses of the Council.
(B) REQUESTS FOR REIMBURSEMENT- The Corporation shall periodically submit a request for reimbursement for implementation expenses to the Chairperson of the Council, who shall arrange for prompt reimbursement to the Corporation of reasonable implementation expenses.
(C) DEFINITION- As used in this paragraph, the term ‘implementation expenses’--
(i) means costs incurred by the Corporation beginning on the date of enactment of this Act, as part of its efforts to implement this title that do not relate to a particular covered financial company; and
(ii) includes the costs incurred in connection with the development of policies, procedures, rules, and regulations and other planning activities of the Corporation consistent with carrying out this title.
(o) Assessments-
(1) RISK-BASED ASSESSMENTS-
(A) ELIGIBLE FINANCIAL COMPANIES DEFINED- For purposes of this subsection, the term ‘eligible financial company’ means any bank holding company with total consolidated assets equal to or greater than $50,000,000,000 and any nonbank financial company supervised by the Board of Governors.
(B) ASSESSMENTS- The Corporation shall charge one or more risk-based assessments in accordance with the provisions of subparagraph (D), if such assessments are necessary to pay in full the obligations issued by the Corporation to the Secretary under this title within 60 months of the date of issuance of such obligations.
(C) EXTENSIONS AUTHORIZED- The Corporation may, with the approval of the Secretary, extend the time period under subparagraph (B), if the Corporation determines that an extension is necessary to avoid a serious adverse effect on the financial system of the United States.
(D) APPLICATION OF ASSESSMENTS- To meet the requirements of subparagraph (B), the Corporation shall--
(i) impose assessments, as soon as practicable, on any claimant that received additional payments or amounts from the Corporation pursuant to subsection (b)(4), (d)(4), or (h)(5)(E), except for payments or amounts necessary to initiate and continue operations essential to implementation of the receivership or any bridge financial company, to recover on a cumulative basis, the entire difference between--
(I) the aggregate value the claimant received from the Corporation on a claim pursuant to this title (including pursuant to subsection (b)(4), (d)(4), and (h)(5)(E)), as of the date on which such value was received; and
(II) the value the claimant was entitled to receive from the Corporation on such claim solely from the proceeds of the liquidation of the covered financial company under this title; and
(ii) if the amounts to be recovered on a cumulative basis under clause (i) are insufficient to meet the requirements of subparagraph (B), after taking into account the considerations set forth in paragraph (4), impose assessments on--
(I) eligible financial companies; and
(II) financial companies with total consolidated assets equal to or greater than $50,000,000,000 that are not eligible financial companies.
(E) PROVISION OF FINANCING- Payments or amounts necessary to initiate and continue operations essential to implementation of the receivership or any bridge financial company described in subparagraph (D)(i) shall not include the provision of financing, as defined by rule of the Corporation, to third parties.
(2) GRADUATED ASSESSMENT RATE- The Corporation shall impose assessments on a graduated basis, with financial companies having greater assets and risk being assessed at a higher rate.
(3) NOTIFICATION AND PAYMENT- The Corporation shall notify each financial company of that company’s assessment under this subsection. Any financial company subject to assessment under this subsection shall pay such assessment in accordance with the regulations prescribed pursuant to paragraph (6).
(4) RISK-BASED ASSESSMENT CONSIDERATIONS- In imposing assessments under paragraph (1)(D)(ii), the Corporation shall use a risk matrix. The Council shall make a recommendation to the Corporation on the risk matrix to be used in imposing such assessments, and the Corporation shall take into account any such recommendation in the establishment of the risk matrix to be used to impose such assessments. In recommending or establishing such risk matrix, the Council and the Corporation, respectively, shall take into account--
(A) economic conditions generally affecting financial companies so as to allow assessments to increase during more favorable economic conditions and to decrease during less favorable economic conditions;
(B) any assessments imposed on a financial company or an affiliate of a financial company that--
(i) is an insured depository institution, assessed pursuant to section 7 or 13(c)(4)(G) of the Federal Deposit Insurance Act;
(ii) is a member of the Securities Investor Protection Corporation, assessed pursuant to section 4 of the Securities Investor Protection Act of 1970 (15 U.S.C. 78ddd);
(iii) is an insured credit union, assessed pursuant to section 202(c)(1)(A)(i) of the Federal Credit Union Act (12 U.S.C. 1782(c)(1)(A)(i)); or
(iv) is an insurance company, assessed pursuant to applicable State law to cover (or reimburse payments made to cover) the costs of the rehabilitation, liquidation, or other State insolvency proceeding with respect to 1 or more insurance companies;
(C) the risks presented by the financial company to the financial system and the extent to which the financial company has benefitted, or likely would benefit, from the orderly liquidation of a financial company under this title, including--
(i) the amount, different categories, and concentrations of assets of the financial company and its affiliates, including both on-balance sheet and off-balance sheet assets;
(ii) the activities of the financial company and its affiliates;
(iii) the relevant market share of the financial company and its affiliates;
(iv) the extent to which the financial company is leveraged;
(v) the potential exposure to sudden calls on liquidity precipitated by economic distress;
(vi) the amount, maturity, volatility, and stability of the company’s financial obligations to, and relationship with, other financial companies;
(vii) the amount, maturity, volatility, and stability of the liabilities of the company, including the degree of reliance on short-term funding, taking into consideration existing systems for measuring a company’s risk-based capital;
(viii) the stability and variety of the company’s sources of funding;
(ix) the company’s importance as a source of credit for households, businesses, and State and local governments and as a source of liquidity for the financial system;
(x) the extent to which assets are simply managed and not owned by the financial company and the extent to which ownership of assets under management is diffuse; and
(xi) the amount, different categories, and concentrations of liabilities, both insured and uninsured, contingent and noncontingent, including both on-balance sheet and off-balance sheet liabilities, of the financial company and its affiliates;
(D) any risks presented by the financial company during the 10-year period immediately prior to the appointment of the Corporation as receiver for the covered financial company that contributed to the failure of the covered financial company; and
(E) such other risk-related factors as the Corporation, or the Council, as applicable, may determine to be appropriate.
(5) COLLECTION OF INFORMATION- The Corporation may impose on covered financial companies such collection of information requirements as the Corporation deems necessary to carry out this subsection after the appointment of the Corporation as receiver under this title.
(6) RULEMAKING-
(A) IN GENERAL- The Corporation shall prescribe regulations to carry out this subsection. The Corporation shall consult with the Secretary in the development and finalization of such regulations.
(B) EQUITABLE TREATMENT- The regulations prescribed under subparagraph (A) shall take into account the differences in risks posed to the financial stability of the United States by financial companies, the differences in the liability structures of financial companies, and the different bases for other assessments that such financial companies may be required to pay, to ensure that assessed financial companies are treated equitably and that assessments under this subsection reflect such differences.
(p) Unenforceability of Certain Agreements-
(1) IN GENERAL- No provision described in paragraph (2) shall be enforceable against or impose any liability on any person, as such enforcement or liability shall be contrary to public policy.
(2) PROHIBITED PROVISIONS- A provision described in this paragraph is any term contained in any existing or future standstill, confidentiality, or other agreement that, directly or indirectly--
(A) affects, restricts, or limits the ability of any person to offer to acquire or acquire;
(B) prohibits any person from offering to acquire or acquiring; or
(C) prohibits any person from using any previously disclosed information in connection with any such offer to acquire or acquisition of,
all or part of any covered financial company, including any liabilities, assets, or interest therein, in connection with any transaction in which the Corporation exercises its authority under this title.
(q) Other Exemptions-
(1) IN GENERAL- When acting as a receiver under this title--
(A) the Corporation, including its franchise, its capital, reserves and surplus, and its income, shall be exempt from all taxation imposed by any State, county, municipality, or local taxing authority, except that any real property of the Corporation shall be subject to State, territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed, except that, notwithstanding the failure of any person to challenge an assessment under State law of the value of such property, such value, and the tax thereon, shall be determined as of the period for which such tax is imposed;
(B) no property of the Corporation shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Corporation, nor shall any involuntary lien attach to the property of the Corporation; and
(C) the Corporation shall not be liable for any amounts in the nature of penalties or fines, including those arising from the failure of any person to pay any real property, personal property, probate, or recording tax or any recording or filing fees when due; and
(D) the Corporation shall be exempt from all prosecution by the United States or any State, county, municipality, or local authority for any criminal offense arising under Federal, State, county, municipal, or local law, which was allegedly committed by the covered financial company, or persons acting on behalf of the covered financial company, prior to the appointment of the Corporation as receiver.
(2) LIMITATION- Paragraph (1) shall not apply with respect to any tax imposed (or other amount arising) under the Internal Revenue Code of 1986.
(r) Certain Sales of Assets Prohibited-
(1) PERSONS WHO ENGAGED IN IMPROPER CONDUCT WITH, OR CAUSED LOSSES TO, COVERED FINANCIAL COMPANIES- The Corporation shall prescribe regulations which, at a minimum, shall prohibit the sale of assets of a covered financial company by the Corporation to--
(A) any person who--
(i) has defaulted, or was a member of a partnership or an officer or director of a corporation that has defaulted, on 1 or more obligations, the aggregate amount of which exceeds $1,000,000, to such covered financial company;
(ii) has been found to have engaged in fraudulent activity in connection with any obligation referred to in clause (i); and
(iii) proposes to purchase any such asset in whole or in part through the use of the proceeds of a loan or advance of credit from the Corporation or from any covered financial company;
(B) any person who participated, as an officer or director of such covered financial company or of any affiliate of such company, in a material way in any transaction that resulted in a substantial loss to such covered financial company; or
(C) any person who has demonstrated a pattern or practice of defalcation regarding obligations to such covered financial company.
(2) CONVICTED DEBTORS- Except as provided in paragraph (3), a person may not purchase any asset of such institution from the receiver, if that person--
(A) has been convicted of an offense under section 215, 656, 657, 1005, 1006, 1007, 1008, 1014, 1032, 1341, 1343, or 1344 of title 18, United States Code, or of conspiring to commit such an offense, affecting any covered financial company; and
(B) is in default on any loan or other extension of credit from such covered financial company which, if not paid, will cause substantial loss to the Fund or the Corporation.
(3) SETTLEMENT OF CLAIMS- Paragraphs (1) and (2) shall not apply to the sale or transfer by the Corporation of any asset of any covered financial company to any person, if the sale or transfer of the asset resolves or settles, or is part of the resolution or settlement, of 1 or more claims that have been, or could have been, asserted by the Corporation against the person.
(4) DEFINITION OF DEFAULT- For purposes of this subsection, the term ‘default’ means a failure to comply with the terms of a loan or other obligation to such an extent that the property securing the obligation is foreclosed upon.
(s) Recoupment of Compensation From Senior Executives and Directors-
(1) IN GENERAL- The Corporation, as receiver of a covered financial company, may recover from any current or former senior executive or director substantially responsible for the failed condition of the covered financial company any compensation received during the 2-year period preceding the date on which the Corporation was appointed as the receiver of the covered financial company, except that, in the case of fraud, no time limit shall apply.
(2) COST CONSIDERATIONS- In seeking to recover any such compensation, the Corporation shall weigh the financial and deterrent benefits of such recovery against the cost of executing the recovery.
(3) RULEMAKING- The Corporation shall promulgate regulations to implement the requirements of this subsection, including defining the term ‘compensation’ to mean any financial remuneration, including salary, bonuses, incentives, benefits, severance, deferred compensation, or golden parachute benefits, and any profits realized from the sale of the securities of the covered financial company.
SEC. 211. MISCELLANEOUS PROVISIONS.
(a) Clarification of Prohibition Regarding Concealment of Assets From Receiver or Liquidating Agent- Section 1032(1) of title 18, United States Code, is amended by inserting ‘the Federal Deposit Insurance Corporation acting as receiver for a covered financial company, in accordance with title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act,’ before ‘or the National Credit’.
(b) Conforming Amendment- Section 1032 of title 18, United States Code, is amended in the section heading, by striking ‘of financial institution’.
(c) Federal Deposit Insurance Corporation Improvement Act of 1991- Section 403(a) of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4403(a)) is amended by inserting ‘section 210(c) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4617(d)),’ after ‘section 11(e) of the Federal Deposit Insurance Act,’.
(d) FDIC Inspector General Reviews-
(1) SCOPE- The Inspector General of the Corporation shall conduct, supervise, and coordinate audits and investigations of the liquidation of any covered financial company by the Corporation as receiver under this title, including collecting and summarizing--
(A) a description of actions taken by the Corporation as receiver;
(B) a description of any material sales, transfers, mergers, obligations, purchases, and other material transactions entered into by the Corporation;
(C) an evaluation of the adequacy of the policies and procedures of the Corporation under section 203(d) and orderly liquidation plan under section 210(n)(14);
(D) an evaluation of the utilization by the Corporation of the private sector in carrying out its functions, including the adequacy of any conflict-of-interest reviews; and
(E) an evaluation of the overall performance of the Corporation in liquidating the covered financial company, including administrative costs, timeliness of liquidation process, and impact on the financial system.
(2) FREQUENCY- Not later than 6 months after the date of appointment of the Corporation as receiver under this title and every 6 months thereafter, the Inspector General of the Corporation shall conduct the audit and investigation described in paragraph (1).
(3) REPORTS AND TESTIMONY- The Inspector General of the Corporation shall include in the semiannual reports required by section 5(a) of the Inspector General Act of 1978 (5 U.S.C. App.), a summary of the findings and evaluations under paragraph (1), and shall appear before the appropriate committees of Congress, if requested, to present each such report.
(4) FUNDING-
(A) INITIAL FUNDING- The expenses of the Inspector General of the Corporation in carrying out this subsection shall be considered administrative expenses of the receivership.
(B) ADDITIONAL FUNDING- If the maximum amount available to the Corporation as receiver under this title is insufficient to enable the Inspector General of the Corporation to carry out the duties under this subsection, the Corporation shall pay such additional amounts from assessments imposed under section 210.
(5) TERMINATION OF RESPONSIBILITIES- The duties and responsibilities of the Inspector General of the Corporation under this subsection shall terminate 1 year after the date of termination of the receivership under this title.
(e) Treasury Inspector General Reviews-
(1) SCOPE- The Inspector General of the Department of the Treasury shall conduct, supervise, and coordinate audits and investigations of actions taken by the Secretary related to the liquidation of any covered financial company under this title, including collecting and summarizing--
(A) a description of actions taken by the Secretary under this title;
(B) an analysis of the approval by the Secretary of the policies and procedures of the Corporation under section 203 and acceptance of the orderly liquidation plan of the Corporation under section 210; and
(C) an assessment of the terms and conditions underlying the purchase by the Secretary of obligations of the Corporation under section 210.
(2) FREQUENCY- Not later than 6 months after the date of appointment of the Corporation as receiver under this title and every 6 months thereafter, the Inspector General of the Department of the Treasury shall conduct the audit and investigation described in paragraph (1).
(3) REPORTS AND TESTIMONY- The Inspector General of the Department of the Treasury shall include in the semiannual reports required by section 5(a) of the Inspector General Act of 1978 (5 U.S.C. App.), a summary of the findings and assessments under paragraph (1), and shall appear before the appropriate committees of Congress, if requested, to present each such report.
(4) TERMINATION OF RESPONSIBILITIES- The duties and responsibilities of the Inspector General of the Department of the Treasury under this subsection shall terminate 1 year after the date on which the obligations purchased by the Secretary from the Corporation under section 210 are fully redeemed.
(f) Primary Financial Regulatory Agency Inspector General Reviews-
(1) SCOPE- Upon the appointment of the Corporation as receiver for a covered financial company supervised by a Federal primary financial regulatory agency or the Board of Governors under section 165, the Inspector General of the agency or the Board of Governors shall make a written report reviewing the supervision by the agency or the Board of Governors of the covered financial company, which shall--
(A) evaluate the effectiveness of the agency or the Board of Governors in carrying out its supervisory responsibilities with respect to the covered financial company;
(B) identify any acts or omissions on the part of agency or Board of Governors officials that contributed to the covered financial company being in default or in danger of default;
(C) identify any actions that could have been taken by the agency or the Board of Governors that would have prevented the company from being in default or in danger of default; and
(D) recommend appropriate administrative or legislative action.
(2) REPORTS AND TESTIMONY- Not later than 1 year after the date of appointment of the Corporation as receiver under this title, the Inspector General of the Federal primary financial regulatory agency or the Board of Governors shall provide the report required by paragraph (1) to such agency or the Board of Governors, and along with such agency or the Board of Governors, as applicable, shall appear before the appropriate committees of Congress, if requested, to present the report required by paragraph (1). Not later than 90 days after the date of receipt of the report required by paragraph (1), such agency or the Board of Governors, as applicable, shall provide a written report to Congress describing any actions taken in response to the recommendations in the report, and if no such actions were taken, describing the reasons why no actions were taken.
SEC. 212. PROHIBITION OF CIRCUMVENTION AND PREVENTION OF CONFLICTS OF INTEREST.
(a) No Other Funding- Funds for the orderly liquidation of any covered financial company under this title shall only be provided as specified under this title.
(b) Limit on Governmental Actions- No governmental entity may take any action to circumvent the purposes of this title.
(c) Conflict of Interest- In the event that the Corporation is appointed receiver for more than 1 covered financial company or is appointed receiver for a covered financial company and receiver for any insured depository institution that is an affiliate of such covered financial company, the Corporation shall take appropriate action, as necessary to avoid any conflicts of interest that may arise in connection with multiple receiverships.
SEC. 213. BAN ON CERTAIN ACTIVITIES BY SENIOR EXECUTIVES AND DIRECTORS.
(a) Prohibition Authority- The Board of Governors or, if the covered financial company was not supervised by the Board of Governors, the Corporation, may exercise the authority provided by this section.
(b) Authority To Issue Order- The appropriate agency described in subsection (a) may take any action authorized by subsection (c), if the agency determines that--
(1) a senior executive or a director of the covered financial company, prior to the appointment of the Corporation as receiver, has, directly or indirectly--
(A) violated--
(i) any law or regulation;
(ii) any cease-and-desist order which has become final;
(iii) any condition imposed in writing by a Federal agency in connection with any action on any application, notice, or request by such company or senior executive; or
(iv) any written agreement between such company and such agency;
(B) engaged or participated in any unsafe or unsound practice in connection with any financial company; or
(C) committed or engaged in any act, omission, or practice which constitutes a breach of the fiduciary duty of such senior executive or director;
(2) by reason of the violation, practice, or breach described in any subparagraph of paragraph (1), such senior executive or director has received financial gain or other benefit by reason of such violation, practice, or breach and such violation, practice, or breach contributed to the failure of the company; and
(3) such violation, practice, or breach--
(A) involves personal dishonesty on the part of such senior executive or director; or
(B) demonstrates willful or continuing disregard by such senior executive or director for the safety or soundness of such company.
(c) Authorized Actions-
(1) IN GENERAL- The appropriate agency for a financial company, as described in subsection (a), may serve upon a senior executive or director described in subsection (b) a written notice of the intention of the agency to prohibit any further participation by such person, in any manner, in the conduct of the affairs of any financial company for a period of time determined by the appropriate agency to be commensurate with such violation, practice, or breach, provided such period shall be not less than 2 years.
(2) PROCEDURES- The due process requirements and other procedures under section 8(e) of the Federal Deposit Insurance Act (12 U.S.C. 1818(e)) shall apply to actions under this section as if the covered financial company were an insured depository institution and the senior executive or director were an institution-affiliated party, as those terms are defined in that Act.
(d) Regulations- The Corporation and the Board of Governors, in consultation with the Council, shall jointly prescribe rules or regulations to administer and carry out this section, including rules, regulations, or guidelines to further define the term senior executive for the purposes of this section.
SEC. 214. PROHIBITION ON TAXPAYER FUNDING.
(a) Liquidation Required- All financial companies put into receivership under this title shall be liquidated. No taxpayer funds shall be used to prevent the liquidation of any financial company under this title.
(b) Recovery of Funds- All funds expended in the liquidation of a financial company under this title shall be recovered from the disposition of assets of such financial company, or shall be the responsibility of the financial sector, through assessments.
(c) No Losses to Taxpayers- Taxpayers shall bear no losses from the exercise of any authority under this title.
SEC. 215. STUDY ON SECURED CREDITOR HAIRCUTS.
(a) Study Required- The Council shall conduct a study evaluating the importance of maximizing United States taxpayer protections and promoting market discipline with respect to the treatment of fully secured creditors in the utilization of the orderly liquidation authority authorized by this Act. In carrying out such study, the Council shall--
(1) not be prejudicial to current or past laws or regulations with respect to secured creditor treatment in a resolution process;
(2) study the similarities and differences between the resolution mechanisms authorized by the Bankruptcy Code, the Federal Deposit Insurance Corporation Improvement Act of 1991, and the orderly liquidation authority authorized by this Act;
(3) determine how various secured creditors are treated in such resolution mechanisms and examine how a haircut (of various degrees) on secured creditors could improve market discipline and protect taxpayers;
(4) compare the benefits and dynamics of prudent lending practices by depository institutions in secured loans for consumers and small businesses to the lending practices of secured creditors to large, interconnected financial firms;
(5) consider whether credit differs according to different types of collateral and different terms and timing of the extension of credit; amd
(6) include an examination of stakeholders who were unsecured or under-collateralized and seek collateral when a firm is failing, and the impact that such behavior has on financial stability and an orderly resolution that protects taxpayers if the firm fails.
(b) Report- Not later than the end of the 1-year period beginning on the date of enactment of this Act, the Council shall issue a report to the Congress containing all findings and conclusions made by the Council in carrying out the study required under subsection (a).
SEC. 216. STUDY ON BANKRUPTCY PROCESS FOR FINANCIAL AND NONBANK FINANCIAL INSTITUTIONS.
(a) Study-
(1) IN GENERAL- Upon enactment of this Act, the Board of Governors, in consultation with the Administrative Office of the United States Courts, shall conduct a study regarding the resolution of financial companies under the Bankruptcy Code, under chapter 7 or 11 thereof .
(2) ISSUES TO BE STUDIED- Issues to be studied under this section include--
(A) the effectiveness of chapter 7 and chapter 11 of the Bankruptcy Code in facilitating the orderly resolution or reorganization of systemic financial companies;
(B) whether a special financial resolution court or panel of special masters or judges should be established to oversee cases involving financial companies to provide for the resolution of such companies under the Bankruptcy Code, in a manner that minimizes adverse impacts on financial markets without creating moral hazard;
(C) whether amendments to the Bankruptcy Code should be adopted to enhance the ability of the Code to resolve financial companies in a manner that minimizes adverse impacts on financial markets without creating moral hazard;
(D) whether amendments should be made to the Bankruptcy Code, the Federal Deposit Insurance Act, and other insolvency laws to address the manner in which qualified financial contracts of financial companies are treated; and
(E) the implications, challenges, and benefits to creating a new chapter or subchapter of the Bankruptcy Code to deal with financial companies.
(b) Reports to Congress- Not later than 1 year after the date of enactment of this Act, and in each successive year until the fifth year after the date of enactment of this Act, the Administrative Office of the United States courts shall submit to the Committees on Banking, Housing, and Urban Affairs and the Judiciary of the Senate and the Committees on Financial Services and the Judiciary of the House of Representatives a report summarizing the results of the study conducted under subsection (a).
SEC. 217. STUDY ON INTERNATIONAL COORDINATION RELATING TO BANKRUPTCY PROCESS FOR NONBANK FINANCIAL INSTITUTIONS.
(a) Study-
(1) IN GENERAL- The Board of Governors, in consultation with the Administrative Office of the United States Courts, shall conduct a study regarding international coordination relating to the resolution of systemic financial companies under the United States Bankruptcy Code and applicable foreign law.
(2) ISSUES TO BE STUDIED- With respect to the bankruptcy process for financial companies, issues to be studied under this section include--
(A) the extent to which international coordination currently exists;
(B) current mechanisms and structures for facilitating international cooperation;
(C) barriers to effective international coordination; and
(D) ways to increase and make more effective international coordination of the resolution of financial companies, so as to minimize the impact on the financial system without creating moral hazard.
(b) Report to Congress- Not later than 1 year after the date of enactment of this Act, the Administrative office of the United States Courts shall submit to the Committees on Banking, Housing, and Urban Affairs and the Judiciary of the Senate and the Committees on Financial Services and the Judiciary of the House of Representatives a report summarizing the results of the study conducted under subsection (a).
TITLE III--TRANSFER OF POWERS TO THE COMPTROLLER OF THE CURRENCY, THE CORPORATION, AND THE BOARD OF GOVERNORS
SEC. 300. SHORT TITLE.
This title may be cited as the ‘Enhancing Financial Institution Safety and Soundness Act of 2010’.
SEC. 301. PURPOSES.
The purposes of this title are--
(1) to provide for the safe and sound operation of the banking system of the United States;
(2) to preserve and protect the dual system of Federal and State-chartered depository institutions;
(3) to ensure the fair and appropriate supervision of each depository institution, regardless of the size or type of charter of the depository institution; and
(4) to streamline and rationalize the supervision of depository institutions and the holding companies of depository institutions.
SEC. 302. DEFINITION.
In this title, the term ‘transferred employee’ means, as the context requires, an employee transferred to the Office of the Comptroller of the Currency or the Corporation under section 322.
Subtitle A--Transfer of Powers and Duties
SEC. 311. TRANSFER DATE.
(a) Transfer Date- Except as provided in subsection (b), the term ‘transfer date’ means the date that is 1 year after the date of enactment of this Act.
(b) Extension Permitted-
(1) NOTICE REQUIRED- The Secretary, in consultation with the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Chairman of the Board of Governors, and the Chairperson of the Corporation, may extend the period under subsection (a) and designate a transfer date that is not later than 18 months after the date of enactment of this Act, if the Secretary transmits to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives--
(A) a written determination that commencement of the orderly process to implement this title is not feasible by the date that is 1 year after the date of enactment of this Act;
(B) an explanation of why an extension is necessary to commence the process of orderly implementation of this title;
(C) the transfer date designated under this subsection; and
(D) a description of the steps that will be taken to initiate the process of an orderly and timely implementation of this title within the extended time period.
(2) PUBLICATION OF NOTICE- Not later than 270 days after the date of enactment of this Act, the Secretary shall publish in the Federal Register notice of any transfer date designated under paragraph (1).
SEC. 312. POWERS AND DUTIES TRANSFERRED.
(a) Effective Date- This section, and the amendments made by this section, shall take effect on the transfer date.
(b) Functions of the Office of Thrift Supervision-
(1) SAVINGS AND LOAN HOLDING COMPANY FUNCTIONS TRANSFERRED-
(A) TRANSFER OF FUNCTIONS- There are transferred to the Board of Governors all functions of the Office of Thrift Supervision and the Director of the Office of Thrift Supervision (including the authority to issue orders) relating to--
(i) the supervision of--
(I) any savings and loan holding company; and
(II) any subsidiary (other than a depository institution) of a savings and loan holding company; and
(ii) all rulemaking authority of the Office of Thrift Supervision and the Director of the Office of Thrift Supervision relating to savings and loan holding companies.
(B) POWERS, AUTHORITIES, RIGHTS, AND DUTIES- The Board of Governors shall succeed to all powers, authorities, rights, and duties that were vested in the Office of Thrift Supervision and the Director of the Office of Thrift Supervision on the day before the transfer date relating to the functions and authority transferred under subparagraph (A).
(2) ALL OTHER FUNCTIONS TRANSFERRED-
(A) BOARD OF GOVERNORS- All rulemaking authority of the Office of Thrift Supervision and the Director of the Office of Thrift Supervision under section 11 of the Home Owners’ Loan Act (12 U.S.C. 1468) relating to transactions with affiliates and extensions of credit to executive officers, directors, and principal shareholders and under section 5(q) of such Act relating to tying arrangements is transferred to the Board of Governors.
(B) COMPTROLLER OF THE CURRENCY- Except as provided in paragraph (1) and subparagraph (A)--
(i) there are transferred to the Office of the Comptroller of the Currency and the Comptroller of the Currency--
(I) all functions of the Office of Thrift Supervision and the Director of the Office of Thrift Supervision, respectively, relating to Federal savings associations; and
(II) all rulemaking authority of the Office of Thrift Supervision and the Director of the Office of Thrift Supervision, respectively, relating to savings associations; and
(ii) the Office of the Comptroller of the Currency and the Comptroller of the Currency shall succeed to all powers, authorities, rights, and duties that were vested in the Office of Thrift Supervision and the Director of the Office of Thrift Supervision, respectively, on the day before the transfer date relating to the functions and authority transferred under clause (i).
(C) CORPORATION- Except as provided in paragraph (1) and subparagraphs (A) and (B)--
(i) all functions of the Office of Thrift Supervision and the Director of the Office of Thrift Supervision relating to State savings associations are transferred to the Corporation; and
(ii) the Corporation shall succeed to all powers, authorities, rights, and duties that were vested in the Office of Thrift Supervision and the Director of the Office of Thrift Supervision on the day before the transfer date relating to the functions transferred under clause (i).
(c) Conforming Amendments- Section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) is amended--
(1) in subsection (q), by striking paragraphs (1) through (4) and inserting the following:
‘(1) the Office of the Comptroller of the Currency, in the case of--
‘(A) any national banking association;
‘(B) any Federal branch or agency of a foreign bank; and
‘(C) any Federal savings association;
‘(2) the Federal Deposit Insurance Corporation, in the case of--
‘(A) any State nonmember insured bank;
‘(B) any foreign bank having an insured branch; and
‘(C) any State savings association;
‘(3) the Board of Governors of the Federal Reserve System, in the case of--
‘(A) any State member bank;
‘(B) any branch or agency of a foreign bank with respect to any provision of the Federal Reserve Act which is made applicable under the International Banking Act of 1978;
‘(C) any foreign bank which does not operate an insured branch;
‘(D) any agency or commercial lending company other than a Federal agency;
‘(E) supervisory or regulatory proceedings arising from the authority given to the Board of Governors under section 7(c)(1) of the International Banking Act of 1978, including such proceedings under the Financial Institutions Supervisory Act of 1966;
‘(F) any bank holding company and any subsidiary (other than a depository institution) of a bank holding company; and
‘(G) any savings and loan holding company and any subsidiary (other than a depository institution) of a savings and loan holding company.’; and
(2) in paragraphs (1) and (3) of subsection (u), by striking ‘(other than a bank holding company’ and inserting ‘(other than a bank holding company or savings and loan holding company’.
(d) Consumer Protection- Nothing in this section may be construed to limit or otherwise affect the transfer of powers under title X.
SEC. 313. ABOLISHMENT.
Effective 90 days after the transfer date, the Office of Thrift Supervision and the position of Director of the Office of Thrift Supervision are abolished.
SEC. 314. AMENDMENTS TO THE REVISED STATUTES.
(a) Amendment to Section 324- Section 324 of the Revised Statutes of the United States (12 U.S.C. 1) is amended to read as follows:
‘SEC. 324. COMPTROLLER OF THE CURRENCY.
‘(a) Office of the Comptroller of the Currency Established- There is established in the Department of the Treasury a bureau to be known as the ‘Office of the Comptroller of the Currency’ which is charged with assuring the safety and soundness of, and compliance with laws and regulations, fair access to financial services, and fair treatment of customers by, the institutions and other persons subject to its jurisdiction.
‘(b) Comptroller of the Currency-
‘(1) IN GENERAL- The chief officer of the Office of the Comptroller of the Currency shall be known as the Comptroller of the Currency. The Comptroller of the Currency shall perform the duties of the Comptroller of the Currency under the general direction of the Secretary of the Treasury. The Secretary of the Treasury may not delay or prevent the issuance of any rule or the promulgation of any regulation by the Comptroller of the Currency, and may not intervene in any matter or proceeding before the Comptroller of the Currency (including agency enforcement actions), unless otherwise specifically provided by law.
‘(2) ADDITIONAL AUTHORITY- The Comptroller of the Currency shall have the same authority with respect to functions transferred to the Comptroller of the Currency under the Enhancing Financial Institution Safety and Soundness Act of 2010 as was vested in the Director of the Office of Thrift Supervision on the transfer date, as defined in section 311 of that Act.’.
(b) Supervision of Federal Savings Associations- Chapter 9 of title VII of the Revised Statutes of the United States (12 U.S.C. 1 et seq.) is amended by inserting after section 327A (12 U.S.C. 4a) the following:
‘SEC. 327B. DEPUTY COMPTROLLER FOR THE SUPERVISION AND EXAMINATION OF FEDERAL SAVINGS ASSOCIATIONS.
‘The Comptroller of the Currency shall designate a Deputy Comptroller, who shall be responsible for the supervision and examination of Federal savings associations.’.
(c) Amendment to Section 329- Section 329 of the Revised Statutes of the United States (12 U.S.C. 11) is amended by inserting before the period at the end the following: ‘or any Federal savings association’.
(d) Effective Date- This section, and the amendments made by this section, shall take effect on the transfer date.
SEC. 315. FEDERAL INFORMATION POLICY.
Section 3502(5) of title 44, United States Code, is amended by inserting ‘Office of the Comptroller of the Currency,’ after ‘the Securities and Exchange Commission,’.
SEC. 316. SAVINGS PROVISIONS.
(a) Office of Thrift Supervision-
(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED- Sections 312(b) and 313 shall not affect the validity of any right, duty, or obligation of the United States, the Director of the Office of Thrift Supervision, the Office of Thrift Supervision, or any other person, that existed on the day before the transfer date.
(2) CONTINUATION OF SUITS- This title shall not abate any action or proceeding commenced by or against the Director of the Office of Thrift Supervision or the Office of Thrift Supervision before the transfer date, except that--
(A) for any action or proceeding arising out of a function of the Office of Thrift Supervision or the Director of the Office of Thrift Supervision transferred to the Board of Governors by this title, the Board of Governors shall be substituted for the Office of Thrift Supervision or the Director of the Office of Thrift Supervision as a party to the action or proceeding on and after the transfer date;
(B) for any action or proceeding arising out of a function of the Office of Thrift Supervision or the Director of the Office of Thrift Supervision transferred to the Office of the Comptroller of the Currency or the Comptroller of the Currency by this title, the Office of the Comptroller of the Currency or the Comptroller of the Currency shall be substituted for the Office of Thrift Supervision or the Director of the Office of Thrift Supervision, as the case may be, as a party to the action or proceeding on and after the transfer date; and
(C) for any action or proceeding arising out of a function of the Office of Thrift Supervision or the Director of the Office of Thrift Supervision transferred to the Corporation by this title, the Corporation shall be substituted for the Office of Thrift Supervision or the Director of the Office of Thrift Supervision as a party to the action or proceeding on and after the transfer date.
(b) Continuation of Existing OTS Orders, Resolutions, Determinations, Agreements, Regulations, etc- All orders, resolutions, determinations, agreements, and regulations, interpretative rules, other interpretations, guidelines, procedures, and other advisory materials, that have been issued, made, prescribed, or allowed to become effective by the Office of Thrift Supervision or the Director of the Office of Thrift Supervision, or by a court of competent jurisdiction, in the performance of functions that are transferred by this title and that are in effect on the day before the transfer date, shall continue in effect according to the terms of such orders, resolutions, determinations, agreements, and regulations, interpretative rules, other interpretations, guidelines, procedures, and other advisory materials, and shall be enforceable by or against--
(1) the Board of Governors, in the case of a function of the Office of Thrift Supervision or the Director of the Office of Thrift Supervision transferred to the Board of Governors, until modified, terminated, set aside, or superseded in accordance with applicable law by the Board of Governors, by any court of competent jurisdiction, or by operation of law;
(2) the Office of the Comptroller of the Currency or the Comptroller of the Currency, in the case of a function of the Office of Thrift Supervision or the Director of the Office of Thrift Supervision transferred to the Office of the Comptroller of the Currency or the Comptroller of the Currency, respectively, until modified, terminated, set aside, or superseded in accordance with applicable law by the Office of the Comptroller of the Currency or the Comptroller of the Currency, by any court of competent jurisdiction, or by operation of law; and
(3) the Corporation, in the case of a function of the Office of Thrift Supervision or the Director of the Office of Thrift Supervision transferred to the Corporation, until modified, terminated, set aside, or superseded in accordance with applicable law by the Corporation, by any court of competent jurisdiction, or by operation of law.
(c) Identification of Regulations Continued-
(1) BY THE BOARD OF GOVERNORS- Not later than the transfer date, the Board of Governors shall--
(A) identify the regulations continued under subsection (b) that will be enforced by the Board of Governors; and
(B) publish a list of the regulations identified under subparagraph (A) in the Federal Register.
(2) BY OFFICE OF THE COMPTROLLER OF THE CURRENCY- Not later than the transfer date, the Office of the Comptroller of the Currency shall--
(A) after consultation with the Corporation, identify the regulations continued under subsection (b) that will be enforced by the Office of the Comptroller of the Currency; and
(B) publish a list of the regulations identified under subparagraph (A) in the Federal Register.
(3) BY THE CORPORATION- Not later than the transfer date, the Corporation shall--
(A) after consultation with the Office of the Comptroller of the Currency, identify the regulations continued under subsection (b) that will be enforced by the Corporation; and
(B) publish a list of the regulations identified under subparagraph (A) in the Federal Register.
(d) Status of Regulations Proposed or Not Yet Effective-
(1) PROPOSED REGULATIONS- Any proposed regulation of the Office of Thrift Supervision, which the Office of Thrift Supervision in performing functions transferred by this title, has proposed before the transfer date but has not published as a final regulation before such date, shall be deemed to be a proposed regulation of the Office of the Comptroller of the Currency or the Board of Governors, as appropriate, according to the terms of the proposed regulation.
(2) REGULATIONS NOT YET EFFECTIVE- Any interim or final regulation of the Office of Thrift Supervision, which the Office of Thrift Supervision, in performing functions transferred by this title, has published before the transfer date but which has not become effective before that date, shall become effective as a regulation of the Office of the Comptroller of the Currency or the Board of Governors, as appropriate, according to the terms of the interim or final regulation, unless modified, terminated, set aside, or superseded in accordance with applicable law by the Office of the Comptroller of the Currency or the Board of Governors, as appropriate, by any court of competent jurisdiction, or by operation of law.
SEC. 317. REFERENCES IN FEDERAL LAW TO FEDERAL BANKING AGENCIES.
On and after the transfer date, any reference in Federal law to the Director of the Office of Thrift Supervision or the Office of Thrift Supervision, in connection with any function of the Director of the Office of Thrift Supervision or the Office of Thrift Supervision transferred under section 312(b) or any other provision of this subtitle, shall be deemed to be a reference to the Comptroller of the Currency, the Office of the Comptroller of the Currency, the Chairperson of the Corporation, the Corporation, the Chairman of the Board of Governors, or the Board of Governors, as appropriate and consistent with the amendments made in subtitle E.
SEC. 318. FUNDING.
(a) Compensation of Examiners- Section 5240 of the Revised Statutes of the United States (12 U.S.C. 481 et seq.) is amended--
(1) in the second undesignated paragraph (12 U.S.C. 481), in the fourth sentence, by striking ‘without regard to the provisions of other laws applicable to officers or employees of the United States’ and inserting the following: ‘set and adjusted subject to chapter 71 of title 5, United States Code, and without regard to the provisions of other laws applicable to officers or employees of the United States’; and
(2) in the third undesignated paragraph (12 U.S.C. 482), in the first sentence, by striking ‘shall fix’ and inserting ‘shall, subject to chapter 71 of title 5, United States Code, fix’.
(b) Funding of Office of the Comptroller of the Currency- Chapter 4 of title LXII of the Revised Statutes is amended by inserting after section 5240 (12 U.S.C. 481, 482) the following:
‘Sec. 5240A. The Comptroller of the Currency may collect an assessment, fee, or other charge from any entity described in section 3(q)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)(1)), as the Comptroller determines is necessary or appropriate to carry out the responsibilities of the Office of the Comptroller of the Currency. In establishing the amount of an assessment, fee, or charge collected from an entity under this section, the Comptroller of the Currency may take into account the nature and scope of the activities of the entity, the amount and type of assets that the entity holds, the financial and managerial condition of the entity, and any other factor, as the Comptroller of the Currency determines is appropriate. Funds derived from any assessment, fee, or charge collected or payment made pursuant to this section may be deposited by the Comptroller of the Currency in accordance with the provisions of section 5234. Such funds shall not be construed to be Government funds or appropriated monies, and shall not be subject to apportionment for purposes of chapter 15 of title 31, United States Code, or any other provision of law. The authority of the Comptroller of the Currency under this section shall be in addition to the authority under section 5240.
‘The Comptroller of the Currency shall have sole authority to determine the manner in which the obligations of the Office of the Comptroller of the Currency shall be incurred and its disbursements and expenses allowed and paid, in accordance with this section, except as provided in chapter 71 of title 5, United States Code (with respect to compensation).’.
(c) Funding of Board of Governors- Section 11 of the Federal Reserve Act (12 U.S.C. 248) is amended by adding at the end the following:
‘(s) Assessments, Fees, and Other Charges for Certain Companies-
‘(1) IN GENERAL- The Board shall collect a total amount of assessments, fees, or other charges from the companies described in paragraph (2) that is equal to the total expenses the Board estimates are necessary or appropriate to carry out the supervisory and regulatory responsibilities of the Board with respect to such companies.
‘(2) COMPANIES- The companies described in this paragraph are--
‘(A) all bank holding companies having total consolidated assets of $50,000,000,000 or more;
‘(B) all savings and loan holding companies having total consolidated assets of $50,000,000,000 or more; and
‘(C) all nonbank financial companies supervised by the Board under section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.’.
(d) Corporation Examination Fees- Section 10(e) of the Federal Deposit Insurance Act (12 U.S.C. 1820(e)) is amended by striking paragraph (1) and inserting the following:
‘(1) REGULAR AND SPECIAL EXAMINATIONS OF DEPOSITORY INSTITUTIONS- The cost of conducting any regular examination or special examination of any depository institution under subsection (b)(2), (b)(3), or (d) or of any entity described in section 3(q)(2) may be assessed by the Corporation against the institution or entity to meet the expenses of the Corporation in carrying out such examinations.’.
(e) Effective Date- This section, and the amendments made by this section, shall take effect on the transfer date.
SEC. 319. CONTRACTING AND LEASING AUTHORITY.
Notwithstanding the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 251 et seq.) or any other provision of law (except the full and open competition requirements of the Competition in Contracting Act), the Office of the Comptroller of the Currency may--
(1) enter into and perform contracts, execute instruments, and acquire real property (or property interest) as the Comptroller deems necessary to carry out the duties and responsibilities of the Office of the Comptroller of the Currency; and
(2) hold, maintain, sell, lease, or otherwise dispose of the property (or property interest) acquired under paragraph (1).
Subtitle B--Transitional Provisions
SEC. 321. INTERIM USE OF FUNDS, PERSONNEL, AND PROPERTY OF THE OFFICE OF THRIFT SUPERVISION.
(a) In General- Before the transfer date, the Office of the Comptroller of the Currency, the Corporation, and the Board of Governors shall--
(1) consult and cooperate with the Office of Thrift Supervision to facilitate the orderly transfer of functions to the Office of the Comptroller of the Currency, the Corporation, and the Board of Governors in accordance with this title;
(2) determine jointly, from time to time--
(A) the amount of funds necessary to pay any expenses associated with the transfer of functions (including expenses for personnel, property, and administrative services) during the period beginning on the date of enactment of this Act and ending on the transfer date;
(B) which personnel are appropriate to facilitate the orderly transfer of functions by this title; and
(C) what property and administrative services are necessary to support the Office of the Comptroller of the Currency, the Corporation, and the Board of Governors during the period beginning on the date of enactment of this Act and ending on the transfer date; and
(3) take such actions as may be necessary to provide for the orderly implementation of this title.
(b) Agency Consultation- When requested jointly by the Office of the Comptroller of the Currency, the Corporation, and the Board of Governors to do so before the transfer date, the Office of Thrift Supervision shall--
(1) pay to the Office of the Comptroller of the Currency, the Corporation, or the Board of Governors, as applicable, from funds obtained by the Office of Thrift Supervision through assessments, fees, or other charges that the Office of Thrift Supervision is authorized by law to impose, such amounts as the Office of the Comptroller of the Currency, the Corporation, and the Board of Governors jointly determine to be necessary under subsection (a);
(2) detail to the Office of the Comptroller of the Currency, the Corporation, or the Board of Governors, as applicable, such personnel as the Office of the Comptroller of the Currency, the Corporation, and the Board of Governors jointly determine to be appropriate under subsection (a); and
(3) make available to the Office of the Comptroller of the Currency, the Corporation, or the Board of Governors, as applicable, such property and provide to the Office of the Comptroller of the Currency, the Corporation, or the Board of Governors, as applicable, such administrative services as the Office of the Comptroller of the Currency, the Corporation, and the Board of Governors jointly determine to be necessary under subsection (a).
(c) Notice Required- The Office of the Comptroller of the Currency, the Corporation, and the Board of Governors shall jointly give the Office of Thrift Supervision reasonable prior notice of any request that the Office of the Comptroller of the Currency, the Corporation, and the Board of Governors jointly intend to make under subsection (b).
SEC. 322. TRANSFER OF EMPLOYEES.
(a) In General-
(1) OFFICE OF THRIFT SUPERVISION EMPLOYEES-
(A) IN GENERAL- Except as provided in section 1064, all employees of the Office of Thrift Supervision shall be transferred to the Office of the Comptroller of the Currency or the Corporation for employment in accordance with this section.
(B) ALLOCATING EMPLOYEES FOR TRANSFER TO RECEIVING AGENCIES- The Director of the Office of Thrift Supervision, the Comptroller of the Currency, and the Chairperson of the Corporation shall--
(i) jointly determine the number of employees of the Office of Thrift Supervision necessary to perform or support the functions that are transferred to the Office of the Comptroller of the Currency or the Corporation by this title; and
(ii) consistent with the determination under clause (i), jointly identify employees of the Office of Thrift Supervision for transfer to the Office of the Comptroller of the Currency or the Corporation.
(2) EMPLOYEES TRANSFERRED; SERVICE PERIODS CREDITED- For purposes of this section, periods of service with a Federal home loan bank, a joint office of Federal home loan banks, or a Federal reserve bank shall be credited as periods of service with a Federal agency.
(3) APPOINTMENT AUTHORITY FOR EXCEPTED SERVICE TRANSFERRED-
(A) IN GENERAL- Except as provided in subparagraph (B), any appointment authority of the Office of Thrift Supervision under Federal law that relates to the functions transferred under section 312, including the regulations of the Office of Personnel Management, for filling the positions of employees in the excepted service shall be transferred to the Comptroller of the Currency or the Chairperson of the Corporation, as appropriate.
(B) DECLINING TRANSFERS ALLOWED- The Comptroller of the Currency or the Chairperson of the Corporation may decline to accept a transfer of authority under subparagraph (A) (and the employees appointed under that authority) to the extent that such authority relates to positions excepted from the competitive service because of their confidential, policy-making, policy-determining, or policy-advocating character.
(4) ADDITIONAL APPOINTMENT AUTHORITY- Notwithstanding any other provision of law, the Office of the Comptroller of the Currency and the Corporation may appoint transferred employees to positions in the Office of the Comptroller of the Currency or the Corporation, respectively.
(b) Timing of Transfers and Position Assignments- Each employee to be transferred under subsection (a)(1) shall--
(1) be transferred not later than 90 days after the transfer date; and
(2) receive notice of the position assignment of the employee not later than 120 days after the effective date of the transfer of the employee.
(c) Transfer of Functions-
(1) IN GENERAL- Notwithstanding any other provision of law, the transfer of employees under this subtitle shall be deemed a transfer of functions for the purpose of section 3503 of title 5, United States Code.
(2) PRIORITY- If any provision of this subtitle conflicts with any protection provided to a transferred employee under section 3503 of title 5, United States Code, the provisions of this subtitle shall control.
(d) Employee Status and Eligibility- The transfer of functions and employees under this subtitle, and the abolishment of the Office of Thrift Supervision under section 313, shall not affect the status of the transferred employees as employees of an agency of the United States under any provision of law.
(e) Equal Status and Tenure Positions-
(1) STATUS AND TENURE- Each transferred employee from the Office of Thrift Supervision shall be placed in a position at the Office of the Comptroller of the Currency or the Corporation with the same status and tenure as the transferred employee held on the day before the date on which the employee was transferred.
(2) FUNCTIONS- To the extent practicable, each transferred employee shall be placed in a position at the Office of the Comptroller of the Currency or the Corporation, as applicable, responsible for the same functions and duties as the transferred employee had on the day before the date on which the employee was transferred, in accordance with the expertise and preferences of the transferred employee.
(f) No Additional Certification Requirements- An examiner who is a transferred employee shall not be subject to any additional certification requirements before being placed in a comparable position at the Office of the Comptroller of the Currency or the Corporation, if the examiner carries out examinations of the same type of institutions as an employee of the Office of the Comptroller of the Currency or the Corporation as the employee was responsible for carrying out before the date on which the employee was transferred.
(g) Personnel Actions Limited-
(1) PROTECTION-
(A) IN GENERAL- Except as provided in paragraph (2), each affected employee shall not, during the 30-month period beginning on the transfer date, be involuntarily separated, or involuntarily reassigned outside his or her locality pay area.
(B) AFFECTED EMPLOYEES- For purposes of this paragraph, the term ‘affected employee’ means--
(i) an employee transferred from the Office of Thrift Supervision holding a permanent position on the day before the transfer date; and
(ii) an employee of the Office of the Comptroller of the Currency or the Corporation holding a permanent position on the day before the transfer date.
(2) EXCEPTIONS- Paragraph (1) does not limit the right of the Office of the Comptroller of the Currency or the Corporation to--
(A) separate an employee for cause or for unacceptable performance;
(B) terminate an appointment to a position excepted from the competitive service because of its confidential policy-making, policy-determining, or policy-advocating character; or
(C) reassign an employee outside such employee’s locality pay area when the Office of the Comptroller of the Currency or the Corporation determines that the reassignment is necessary for the efficient operation of the agency.
(h) Pay-
(1) 30-month PROTECTION- Except as provided in paragraph (2), during the 30-month period beginning on the date on which the employee was transferred under this subtitle, a transferred employee shall be paid at a rate that is not less than the basic rate of pay, including any geographic differential, that the transferred employee received during the pay period immediately preceding the date on which the employee was transferred. Notwithstanding the preceding sentence, if the employee was receiving a higher rate of basic pay on a temporary basis (because of a temporary assignment, temporary promotion, or other temporary action) immediately before the transfer, the Agency may reduce the rate of basic pay on the date the rate would have been reduced but for the transfer, and the protected rate for the remainder of the 30-month period will be the reduced rate that would have applied but for the transfer.
(2) EXCEPTIONS- The Comptroller of the Currency or the Corporation may reduce the rate of basic pay of a transferred employee--
(A) for cause, including for unacceptable performance; or
(B) with the consent of the transferred employee.
(3) PROTECTION ONLY WHILE EMPLOYED- This subsection shall apply to a transferred employee only during the period that the transferred employee remains employed by Office of the Comptroller of the Currency or the Corporation.
(4) PAY INCREASES PERMITTED- Nothing in this subsection shall limit the authority of the Comptroller of the Currency or the Chairperson of the Corporation to increase the pay of a transferred employee.
(i) Benefits-
(1) RETIREMENT BENEFITS FOR TRANSFERRED EMPLOYEES-
(A) IN GENERAL-
(i) CONTINUATION OF EXISTING RETIREMENT PLAN- Each transferred employee shall remain enrolled in the retirement plan of the transferred employee, for as long as the transferred employee is employed by the Office of the Comptroller of the Currency or the Corporation.
(ii) Employer’s CONTRIBUTION- The Comptroller of the Currency or the Chairperson of the Corporation, as appropriate, shall pay any employer contributions to the existing retirement plan of each transferred employee, as required under each such existing retirement plan.
(B) DEFINITION- In this paragraph, the term ‘existing retirement plan’ means, with respect to a transferred employee, the retirement plan (including the Financial Institutions Retirement Fund), and any associated thrift savings plan, of the agency from which the employee was transferred in which the employee was enrolled on the day before the date on which the employee was transferred.
(2) BENEFITS OTHER THAN RETIREMENT BENEFITS-
(A) DURING FIRST YEAR-
(i) EXISTING PLANS CONTINUE- During the 1-year period following the transfer date, each transferred employee may retain membership in any employee benefit program (other than a retirement benefit program) of the agency from which the employee was transferred under this title, including any dental, vision, long term care, or life insurance program to which the employee belonged on the day before the transfer date.
(ii) Employer’s CONTRIBUTION- The Office of the Comptroller of the Currency or the Corporation, as appropriate, shall pay any employer cost required to extend coverage in the benefit program to the transferred employee as required under that program or negotiated agreements.
(B) DENTAL, VISION, OR LIFE INSURANCE AFTER FIRST YEAR- If, after the 1-year period beginning on the transfer date, the Office of the Comptroller of the Currency or the Corporation determines that the Office of the Comptroller of the Currency or the Corporation, as the case may be, will not continue to participate in any dental, vision, or life insurance program of an agency from which an employee was transferred, a transferred employee who is a member of the program may, before the decision takes effect and without regard to any regularly scheduled open season, elect to enroll in--
(i) the enhanced dental benefits program established under chapter 89A of title 5, United States Code;
(ii) the enhanced vision benefits established under chapter 89B of title 5, United States Code; and
(iii) the Federal Employees’ Group Life Insurance Program established under chapter 87 of title 5, United States Code, without regard to any requirement of insurability.
(C) LONG TERM CARE INSURANCE AFTER 1ST YEAR- If, after the 1-year period beginning on the transfer date, the Office of the Comptroller of the Currency or the Corporation determines that the Office of the Comptroller of the Currency or the Corporation, as appropriate, will not continue to participate in any long term care insurance program of an agency from which an employee transferred, a transferred employee who is a member of such a program may, before the decision takes effect, elect to apply for coverage under the Federal Long Term Care Insurance Program established under chapter 90 of title 5, United States Code, under the underwriting requirements applicable to a new active workforce member, as described in part 875 of title 5, Code of Federal Regulations (or any successor thereto).
(D) CONTRIBUTION OF TRANSFERRED EMPLOYEE-
(i) IN GENERAL- Subject to clause (ii), a transferred employee who is enrolled in a plan under the Federal Employees Health Benefits Program shall pay any employee contribution required under the plan.
(ii) COST DIFFERENTIAL- The Office of the Comptroller of the Currency or the Corporation, as applicable, shall pay any difference in cost between the employee contribution required under the plan provided to transferred employees by the agency from which the employee transferred on the date of enactment of this Act and the plan provided by the Office of the Comptroller of the Currency or the Corporation, as the case may be, under this section.
(iii) FUNDS TRANSFER- The Office of the Comptroller of the Currency or the Corporation, as the case may be, shall transfer to the Employees Health Benefits Fund established under section 8909 of title 5, United States Code, an amount determined by the Director of the Office of Personnel Management, after consultation with the Comptroller of the Currency or the Chairperson of the Corporation, as the case may be, and the Office of Management and Budget, to be necessary to reimburse the Fund for the cost to the Fund of providing any benefits under this subparagraph that are not otherwise paid for by a transferred employee under clause (i).
(E) SPECIAL PROVISIONS TO ENSURE CONTINUATION OF LIFE INSURANCE BENEFITS-
(i) IN GENERAL- An annuitant, as defined in section 8901 of title 5, United States Code, who is enrolled in a life insurance plan administered by an agency from which employees are transferred under this title on the day before the transfer date shall be eligible for coverage by a life insurance plan under sections 8706(b), 8714a, 8714b, or 8714c of title 5, United States Code, or by a life insurance plan established by the Office of the Comptroller of the Currency or the Corporation, as applicable, without regard to any regularly scheduled open season or any requirement of insurability.
(ii) CONTRIBUTION OF TRANSFERRED EMPLOYEE-
(I) IN GENERAL- Subject to subclause (II), a transferred employee enrolled in a life insurance plan under this subparagraph shall pay any employee contribution required by the plan.
(II) COST DIFFERENTIAL- The Office of the Comptroller of the Currency or the Corporation, as the case may be, shall pay any difference in cost between the benefits provided by the agency from which the employee transferred on the date of enactment of this Act and the benefits provided under this section.
(III) FUNDS TRANSFER- The Office of the Comptroller of the Currency or the Corporation, as the case may be, shall transfer to the Federal Employees’ Group Life Insurance Fund established under section 8714 of title 5, United States Code, an amount determined by the Director of the Office of Personnel Management, after consultation with the Comptroller of the Currency or the Chairperson of the Corporation, as the case may be, and the Office of Management and Budget, to be necessary to reimburse the Federal Employees’ Group Life Insurance Fund for the cost to the Federal Employees’ Group Life Insurance Fund of providing benefits under this subparagraph not otherwise paid for by a transferred employee under subclause (I).
(IV) CREDIT FOR TIME ENROLLED IN OTHER PLANS- For any transferred employee, enrollment in a life insurance plan administered by the agency from which the employee transferred, immediately before enrollment in a life insurance plan under chapter 87 of title 5, United States Code, shall be considered as enrollment in a life insurance plan under that chapter for purposes of section 8706(b)(1)(A) of title 5, United States Code.
(j) Incorporation Into Agency Pay System- Not later than 30 months after the transfer date, the Comptroller of the Currency and the Chairperson of the Corporation shall place each transferred employee into the established pay system and structure of the appropriate employing agency.
(k) Equitable Treatment- In administering the provisions of this section, the Comptroller of the Currency and the Chairperson of the Corporation--
(1) may not take any action that would unfairly disadvantage a transferred employee relative to any other employee of the Office of the Comptroller of the Currency or the Corporation on the basis of prior employment by the Office of Thrift Supervision;
(2) may take such action as is appropriate in an individual case to ensure that a transferred employee receives equitable treatment, with respect to the status, tenure, pay, benefits (other than benefits under programs administered by the Office of Personnel Management), and accrued leave or vacation time for prior periods of service with any Federal agency of the transferred employee;
(3) shall, jointly with the Director of the Office of Thrift Supervision, develop and adopt procedures and safeguards designed to ensure that the requirements of this subsection are met; and
(4) shall conduct a study detailing the position assignments of all employees transferred pursuant to subsection (a), describing the procedures and safeguards adopted pursuant to paragraph (3), and demonstrating that the requirements of this subsection have been met; and shall, not later than 365 days after the transfer date, submit a copy of such study to Congress.
(l) Reorganization-
(1) IN GENERAL- If the Comptroller of the Currency or the Chairperson of the Corporation determines, during the 2-year period beginning 1 year after the transfer date, that a reorganization of the staff of the Office of the Comptroller of the Currency or the Corporation, respectively, is required, the reorganization shall be deemed a ‘major reorganization’ for purposes of affording affected employees retirement under section 8336(d)(2) or 8414(b)(1)(B) of title 5, United States Code.
(2) SERVICE CREDIT- For purposes of this subsection, periods of service with a Federal home loan bank or a joint office of Federal home loan banks shall be credited as periods of service with a Federal agency.
SEC. 323. PROPERTY TRANSFERRED.
(a) Property Defined- For purposes of this section, the term ‘property’ includes all real property (including leaseholds) and all personal property, including computers, furniture, fixtures, equipment, books, accounts, records, reports, files, memoranda, paper, reports of examination, work papers, and correspondence related to such reports, and any other information or materials.
(b) Property of the Office of Thrift Supervision-
(1) IN GENERAL- No later than 90 days after the transfer date, all property of the Office of Thrift Supervision (other than property described under paragraph (b)(2)) that the Comptroller of the Currency and the Chairperson of the Corporation jointly determine is used, on the day before the transfer date, to perform or support the functions of the Office of Thrift Supervision transferred to the Office of the Comptroller of the Currency or the Corporation under this title, shall be transferred to the Office of the Comptroller of the Currency or the Corporation in a manner consistent with the transfer of employees under this subtitle.
(2) PERSONAL PROPERTY- All books, accounts, records, reports, files, memoranda, papers, documents, reports of examination, work papers, and correspondence of the Office of Thrift Supervision that the Comptroller of the Currency, the Chairperson of the Corporation, and the Chairman of the Board of Governors jointly determine is used, on the day before the transfer date, to perform or support the functions of the Office of Thrift Supervision transferred to the Board of Governors under this title shall be transferred to the Board of Governors in a manner consistent with the purposes of this title.
(c) Contracts Related to Property Transferred- Each contract, agreement, lease, license, permit, and similar arrangement relating to property transferred to the Office of the Comptroller of the Currency or the Corporation by this section shall be transferred to the Office of the Comptroller of the Currency or the Corporation, as appropriate, together with the property to which it relates.
(d) Preservation of Property- Property identified for transfer under this section shall not be altered, destroyed, or deleted before transfer under this section.
SEC. 324. FUNDS TRANSFERRED.
The funds that, on the day before the transfer date, the Director of the Office of Thrift Supervision (in consultation with the Comptroller of the Currency, the Chairperson of the Corporation, and the Chairman of the Board of Governors) determines are not necessary to dispose of the affairs of the Office of Thrift Supervision under section 325 and are available to the Office of Thrift Supervision to pay the expenses of the Office of Thrift Supervision--
(1) relating to the functions of the Office of Thrift Supervision transferred under section 312(b)(2)(B), shall be transferred to the Office of the Comptroller of the Currency on the transfer date;
(2) relating to the functions of the Office of Thrift Supervision transferred under section 312(b)(2)(C), shall be transferred to the Corporation on the transfer date; and
(3) relating to the functions of the Office of Thrift Supervision transferred under section 312(b)(1)(A), shall be transferred to the Board of Governors on the transfer date.
SEC. 325. DISPOSITION OF AFFAIRS.
(a) Authority of Director- During the 90-day period beginning on the transfer date, the Director of the Office of Thrift Supervision--
(1) shall, solely for the purpose of winding up the affairs of the Office of Thrift Supervision relating to any function transferred to the Office of the Comptroller of the Currency, the Corporation, or the Board of Governors under this title--
(A) manage the employees of the Office of Thrift Supervision who have not yet been transferred and provide for the payment of the compensation and benefits of the employees that accrue before the date on which the employees are transferred under this title; and
(B) manage any property of the Office of Thrift Supervision, until the date on which the property is transferred under section 323; and
(2) may take any other action necessary to wind up the affairs of the Office of Thrift Supervision.
(b) Status of Director-
(1) IN GENERAL- Notwithstanding the transfer of functions under this subtitle, during the 90-day period beginning on the transfer date, the Director of the Office of Thrift Supervision shall retain and may exercise any authority vested in the Director of the Office of Thrift Supervision on the day before the transfer date, only to the extent necessary--
(A) to wind up the Office of Thrift Supervision; and
(B) to carry out the transfer under this subtitle during such 90-day period.
(2) OTHER PROVISIONS- For purposes of paragraph (1), the Director of the Office of Thrift Supervision shall, during the 90-day period beginning on the transfer date, continue to be--
(A) treated as an officer of the United States; and
(B) entitled to receive compensation at the same annual rate of basic pay that the Director of the Office of Thrift Supervision received on the day before the transfer date.
SEC. 326. CONTINUATION OF SERVICES.
Any agency, department, or other instrumentality of the United States, and any successor to any such agency, department, or instrumentality, that was, before the transfer date, providing support services to the Office of Thrift Supervision in connection with functions transferred to the Office of the Comptroller of the Currency, the Corporation or the Board of Governors under this title, shall--
(1) continue to provide such services, subject to reimbursement by the Office of the Comptroller of the Currency, the Corporation, or the Board of Governors, until the transfer of functions under this title is complete; and
(2) consult with the Comptroller of the Currency, the Chairperson of the Corporation, or the Chairman of the Board of Governors, as appropriate, to coordinate and facilitate a prompt and orderly transition.
SEC. 327. IMPLEMENTATION PLAN AND REPORTS.
(a) Plan Submission- Within 180 days of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Board of Governors, the Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision, shall jointly submit a plan to the Committee on Banking, Housing, and Urban Affairs of the Senate, the Committee on Financial Services of the House of Representatives, and the Inspectors General of the Department of the Treasury, the Corporation, and the Board of Governors detailing the steps the Board of Governors, the Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision will take to implement the provisions of sections 301 through 326, and the provisions of the amendments made by such sections.
(b) Inspectors General Review of the Plan- Within 60 days of receiving the plan required under subsection (a), the Inspectors General of the Department of the Treasury, the Corporation, and the Board of Governors shall jointly provide a written report to the Board of Governors, the Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision and shall submit a copy to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives detailing whether the plan conforms with the provisions of sections 301 through 326, and the provisions of the amendments made by such sections, including--
(1) whether the plan sufficiently takes into consideration the orderly transfer of personnel;
(2) whether the plan describes procedures and safeguards to ensure that the Office of Thrift Supervision employees are not unfairly disadvantaged relative to employees of the Office of the Comptroller of the Currency and the Corporation;
(3) whether the plan sufficiently takes into consideration the orderly transfer of authority and responsibilities;
(4) whether the plan sufficiently takes into consideration the effective transfer of funds;
(5) whether the plan sufficiently takes in consideration the orderly transfer of property; and
(6) any additional recommendations for an orderly and effective process.
(c) Implementation Reports- Not later than 6 months after the date on which the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives receives the report required under subsection (b), and every 6 months thereafter until all aspects of the plan have been implemented, the Inspectors General of the Department of the Treasury, the Corporation, and the Board of Governors shall jointly provide a written report on the status of the implementation of the plan to the Board of Governors, the Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision and shall submit a copy to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives.
Subtitle C--Federal Deposit Insurance Corporation
SEC. 331. DEPOSIT INSURANCE REFORMS.
(a) Size Distinctions- Section 7(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)) is amended--
(1) by striking subparagraph (D); and
(2) by redesignating subparagraph (C) as subparagraph (D).
(b) Assessment Base- The Corporation shall amend the regulations issued by the Corporation under section 7(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)) to define the term ‘assessment base’ with respect to an insured depository institution for purposes of that section 7(b)(2), as an amount equal to--
(1) the average consolidated total assets of the insured depository institution during the assessment period; minus
(2) the sum of--
(A) the average tangible equity of the insured depository institution during the assessment period; and
(B) in the case of an insured depository institution that is a custodial bank (as defined by the Corporation, based on factors including the percentage of total revenues generated by custodial businesses and the level of assets under custody) or a banker’s bank (as that term is used in section 5136 of the Revised Statutes (12 U.S.C. 24)), an amount that the Corporation determines is necessary to establish assessments consistent with the definition under section 7(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(1)) for a custodial bank or a banker’s bank.
SEC. 332. ELIMINATION OF PROCYCLICAL ASSESSMENTS.
Section 7(e) of the Federal Deposit Insurance Act is amended--
(1) in paragraph (2)--
(A) by amending subparagraph (B) to read as follows:
‘(B) LIMITATION- The Board of Directors may, in its sole discretion, suspend or limit the declaration of payment of dividends under subparagraph (A).’;
(B) by amending subparagraph (C) to read as follows:
‘(C) NOTICE AND OPPORTUNITY FOR COMMENT- The Corporation shall prescribe, by regulation, after notice and opportunity for comment, the method for the declaration, calculation, distribution, and payment of dividends under this paragraph’; and
(C) by striking subparagraphs (D) through (G); and
(2) in paragraph (4)(A) by striking ‘paragraphs (2)(D) and’ and inserting ‘paragraphs (2) and’.
SEC. 333. ENHANCED ACCESS TO INFORMATION FOR DEPOSIT INSURANCE PURPOSES.
(a) Section 7(a)(2)(B) of the Federal Deposit Insurance Act is amended by striking ‘agreement’ and inserting ‘consultation’.
(b) Section 7(b)(1)(E) of the Federal Deposit Insurance Act is amended--
(1) in clause (i), by striking ‘such as’ and inserting ‘including’; and
(2) in clause (iii), by striking ‘Corporation’ and inserting ‘Corporation, except as provided in section 7(a)(2)(B)’.
SEC. 334. TRANSITION RESERVE RATIO REQUIREMENTS TO REFLECT NEW ASSESSMENT BASE.
(a) Section 7(b)(3)(B) of the Federal Deposit Insurance Act is amended to read as follows:
‘(B) MINIMUM RESERVE RATIO- The reserve ratio designated by the Board of Directors for any year may not be less than 1.35 percent of estimated insured deposits, or the comparable percentage of the assessment base set forth in paragraph (2)(C).’.
(b) Section 3(y)(3) of the Federal Deposit Insurance Act is amended by inserting ‘, or such comparable percentage of the assessment base set forth in section 7(b)(2)(C)’ before the period.
(c) For a period of not less than 5 years after the date of the enactment of this title, the Federal Deposit Insurance Corporation shall make available to the public the reserve ratio and the designated reserve ratio using both estimated insured deposits and the assessment base under section 7(b)(2)(C) of the Federal Deposit Insurance Act.
(d) Reserve Ratio- Notwithstanding the timing requirements of section 7(b)(3)(E)(ii) of the Federal Deposit Insurance Act, the Corporation shall take such steps as may be necessary for the reserve ratio of the Deposit Insurance Fund to reach 1.35 percent of estimated insured deposits by September 30, 2020.
(e) Offset- In setting the assessments necessary to meet the requirements of subsection (d), the Corporation shall offset the effect of subsection (d) on insured depository institutions with total consolidated assets of less than $10,000,000,000.
SEC. 335. PERMANENT INCREASE IN DEPOSIT AND SHARE INSURANCE.
(a) Permanent Increase in Deposit Insurance- Section 11(a)(1)(E) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)(E)) is amended--
(1) by striking ‘$100,000’ and inserting ‘$250,000’; and
(2) by adding at the end the following new sentences: ‘Notwithstanding any other provision of law, the increase in the standard maximum deposit insurance amount to $250,000 shall apply to depositors in any institution for which the Corporation was appointed as receiver or conservator on or after January 1, 2008, and before October 3, 2008. The Corporation shall take such actions as are necessary to carry out the requirements of this section with respect to such depositors, without regard to any time limitations under this Act. In implementing this and the preceding 2 sentences, any payment on a deposit claim made by the Corporation as receiver or conservator to a depositor above the standard maximum deposit insurance amount in effect at the time of the appointment of the Corporation as receiver or conservator shall be deemed to be part of the net amount due to the depositor under subparagraph (B).’
(b) Permanent Increase in Share Insurance- Section 207(k)(5) of the Federal Credit Union Act (12 U.S.C. 1787(k)(5)) is amended by striking ‘$100,000’ and inserting ‘$250,000’.
SEC. 336. MANAGEMENT OF THE FEDERAL DEPOSIT INSURANCE CORPORATION.
(a) In General- Section 2 of the Federal Deposit Insurance Act (12 U.S.C. 1812) is amended--
(1) in subsection (a)(1)(B), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Director of the Consumer Financial Protection Bureau’;
(2) by amending subsection (d)(2) to read as follows:
‘(2) ACTING OFFICIALS MAY SERVE- In the event of a vacancy in the office of the Comptroller of the Currency or the office of Director of the Consumer Financial Protection Bureau and pending the appointment of a successor, or during the absence or disability of the Comptroller of the Currency or the Director of the Consumer Financial Protection Bureau, the acting Comptroller of the Currency or the acting Director of the Consumer Financial Protection Bureau, as the case may be, shall be a member of the Board of Directors in the place of the Comptroller or Director.’; and
(3) in subsection (f)(2), by striking ‘Office of Thrift Supervision’ and inserting ‘Consumer Financial Protection Bureau’.
(b) Effective Date- This section, and the amendments made by this section, shall take effect on the transfer date.
Subtitle D--Other Matters
SEC. 341. BRANCHING.
Notwithstanding the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.), the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), or any other provision of Federal or State law, a savings association that becomes a bank may--
(1) continue to operate any branch or agency that the savings association operated immediately before the savings association became a bank; and
(2) establish, acquire, and operate additional branches and agencies at any location within any State in which the savings association operated a branch immediately before the savings association became a bank, if the law of the State in which the branch is located, or is to be located, would permit establishment of the branch if the bank were a State bank chartered by such State.
SEC. 342. OFFICE OF MINORITY AND WOMEN INCLUSION.
(a) Office of Minority and Women Inclusion-
(1) ESTABLISHMENT-
(A) IN GENERAL- Except as provided in subparagraph (B), not later than 6 months after the date of enactment of this Act, each agency shall establish an Office of Minority and Women Inclusion that shall be responsible for all matters of the agency relating to diversity in management, employment, and business activities.
(B) BUREAU- The Bureau shall establish an Office of Minority and Women Inclusion not later than 6 months after the designated transfer date established under section 1062.
(2) TRANSFER OF RESPONSIBILITIES- Each agency that, on the day before the date of enactment of this Act, assigned the responsibilities described in paragraph (1) (or comparable responsibilities) to another office of the agency shall ensure that such responsibilities are transferred to the Office.
(3) DUTIES WITH RESPECT TO CIVIL RIGHTS LAWS- The responsibilities described in paragraph (1) do not include enforcement of statutes, regulations, or executive orders pertaining to civil rights, except each Director shall coordinate with the agency administrator, or the designee of the agency administrator, regarding the design and implementation of any remedies resulting from violations of such statutes, regulations, or executive orders.
(b) Director-
(1) IN GENERAL- The Director of each Office shall be appointed by, and shall report to, the agency administrator. The position of Director shall be a career reserved position in the Senior Executive Service, as that position is defined in section 3132 of title 5, United States Code, or an equivalent designation.
(2) DUTIES- Each Director shall develop standards for--
(A) equal employment opportunity and the racial, ethnic, and gender diversity of the workforce and senior management of the agency;
(B) increased participation of minority-owned and women-owned businesses in the programs and contracts of the agency, including standards for coordinating technical assistance to such businesses; and
(C) assessing the diversity policies and practices of entities regulated by the agency.
(3) OTHER DUTIES- Each Director shall advise the agency administrator on the impact of the policies and regulations of the agency on minority-owned and women-owned businesses.
(4) RULE OF CONSTRUCTION- Nothing in paragraph (2)(C) may be construed to mandate any requirement on or otherwise affect the lending policies and practices of any regulated entity, or to require any specific action based on the findings of the assessment.
(c) Inclusion in All Levels of Business Activities-
(1) IN GENERAL- The Director of each Office shall develop and implement standards and procedures to ensure, to the maximum extent possible, the fair inclusion and utilization of minorities, women, and minority-owned and women-owned businesses in all business and activities of the agency at all levels, including in procurement, insurance, and all types of contracts.
(2) CONTRACTS- The procedures established by each agency for review and evaluation of contract proposals and for hiring service providers shall include, to the extent consistent with applicable law, a component that gives consideration to the diversity of the applicant. Such procedure shall include a written statement, in a form and with such content as the Director shall prescribe, that a contractor shall ensure, to the maximum extent possible, the fair inclusion of women and minorities in the workforce of the contractor and, as applicable, subcontractors.
(3) TERMINATION-
(A) DETERMINATION- The standards and procedures developed and implemented under this subsection shall include a procedure for the Director to make a determination whether an agency contractor, and, as applicable, a subcontractor has failed to make a good faith effort to include minorities and women in their workforce.
(B) EFFECT OF DETERMINATION-
(i) RECOMMENDATION TO AGENCY ADMINISTRATOR- Upon a determination described in subparagraph (A), the Director shall make a recommendation to the agency administrator that the contract be terminated.
(ii) ACTION BY AGENCY ADMINISTRATOR- Upon receipt of a recommendation under clause (i), the agency administrator may--
(I) terminate the contract;
(II) make a referral to the Office of Federal Contract Compliance Programs of the Department of Labor; or
(III) take other appropriate action.
(d) Applicability- This section shall apply to all contracts of an agency for services of any kind, including the services of financial institutions, investment banking firms, mortgage banking firms, asset management firms, brokers, dealers, financial services entities, underwriters, accountants, investment consultants, and providers of legal services. The contracts referred to in this subsection include all contracts for all business and activities of an agency, at all levels, including contracts for the issuance or guarantee of any debt, equity, or security, the sale of assets, the management of the assets of the agency, the making of equity investments by the agency, and the implementation by the agency of programs to address economic recovery.
(e) Reports- Each Office shall submit to Congress an annual report regarding the actions taken by the agency and the Office pursuant to this section, which shall include--
(1) a statement of the total amounts paid by the agency to contractors since the previous report;
(2) the percentage of the amounts described in paragraph (1) that were paid to contractors described in subsection (c)(1);
(3) the successes achieved and challenges faced by the agency in operating minority and women outreach programs;
(4) the challenges the agency may face in hiring qualified minority and women employees and contracting with qualified minority-owned and women-owned businesses; and
(5) any other information, findings, conclusions, and recommendations for legislative or agency action, as the Director determines appropriate.
(f) Diversity in Agency Workforce- Each agency shall take affirmative steps to seek diversity in the workforce of the agency at all levels of the agency in a manner consistent with applicable law. Such steps shall include--
(1) recruiting at historically black colleges and universities, Hispanic-serving institutions, women’s colleges, and colleges that typically serve majority minority populations;
(2) sponsoring and recruiting at job fairs in urban communities;
(3) placing employment advertisements in newspapers and magazines oriented toward minorities and women;
(4) partnering with organizations that are focused on developing opportunities for minorities and women to place talented young minorities and women in industry internships, summer employment, and full-time positions;
(5) where feasible, partnering with inner-city high schools, girls’ high schools, and high schools with majority minority populations to establish or enhance financial literacy programs and provide mentoring; and
(6) any other mass media communications that the Office determines necessary.
(g) Definitions- For purposes of this section, the following definitions shall apply:
(1) AGENCY- The term ‘agency’ means--
(A) the Departmental Offices of the Department of the Treasury;
(B) the Corporation;
(C) the Federal Housing Finance Agency;
(D) each of the Federal reserve banks;
(E) the Board;
(F) the National Credit Union Administration;
(G) the Office of the Comptroller of the Currency;
(H) the Commission; and
(I) the Bureau.
(2) AGENCY ADMINISTRATOR- The term ‘agency administrator’ means the head of an agency.
(3) MINORITY- The term ‘minority’ has the same meaning as in section 1204(c) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1811 note).
(4) MINORITY-OWNED BUSINESS- The term ‘minority-owned business’ has the same meaning as in section 21A(r)(4)(A) of the Federal Home Loan Bank Act (12 U.S.C. 1441a(r)(4)(A)), as in effect on the day before the transfer date.
(5) OFFICE- The term ‘Office’ means the Office of Minority and Women Inclusion established by an agency under subsection (a).
(6) WOMEN-OWNED BUSINESS- The term ‘women-owned business’ has the meaning given the term ‘women’s business’ in section 21A(r)(4)(B) of the Federal Home Loan Bank Act (12 U.S.C. 1441a(r)(4)(B)), as in effect on the day before the transfer date.
SEC. 343. INSURANCE OF TRANSACTION ACCOUNTS.
(a) Banks and Savings Associations-
(1) AMENDMENTS- Section 11(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)) is amended--
(A) in subparagraph (B)--
(i) by striking ‘The net amount’ and inserting the following:
‘(i) IN GENERAL- Subject to clause (ii), the net amount’; and
(ii) by adding at the end the following new clauses:
‘(ii) INSURANCE FOR NONINTEREST-BEARING TRANSACTION ACCOUNTS- Notwithstanding clause (i), the Corporation shall fully insure the net amount that any depositor at an insured depository institution maintains in a noninterest-bearing transaction account. Such amount shall not be taken into account when computing the net amount due to such depositor under clause (i).
‘(iii) NONINTEREST-BEARING TRANSACTION ACCOUNT DEFINED- For purposes of this subparagraph, the term ‘noninterest-bearing transaction account’ means a deposit or account maintained at an insured depository institution--
‘(I) with respect to which interest is neither accrued nor paid;
‘(II) on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable instrument, payment orders of withdrawal, telephone or other electronic media transfers, or other similar items for the purpose of making payments or transfers to third parties or others; and
‘(III) on which the insured depository institution does not reserve the right to require advance notice of an intended withdrawal.’; and
(B) in subparagraph (C), by striking ‘subparagraph (B)’ and inserting ‘subparagraph (B)(i)’.
(2) EFFECTIVE DATE- The amendments made by paragraph (1) shall take effect on December 31, 2010.
(3) PROSPECTIVE REPEAL- Effective January 1, 2013, section 11(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)), as amended by paragraph (1), is amended--
(A) in subparagraph (B)--
(i) by striking ‘DEPOSIT- ’ and all that follows through ‘clause (ii), the net amount’ and insert ‘DEPOSIT- The net amount’; and
(ii) by striking clauses (ii) and (iii); and
(B) in subparagraph (C), by striking ‘subparagraph (B)(i)’ and inserting ‘subparagraph (B)’.
(b) Credit Unions-
(1) AMENDMENTS- Section 207(k)(1) of the Federal Credit Union Act (12 U.S.C. 1787(k)(1)) is amended--
(A) in subparagraph (A)--
(i) by striking ‘Subject to the provisions of paragraph (2), the net amount’ and inserting the following:
‘(i) NET AMOUNT OF INSURANCE PAYABLE- Subject to clause (ii) and the provisions of paragraph (2), the net amount’; and
(ii) by adding at the end the following new clauses:
‘(ii) INSURANCE FOR NONINTEREST-BEARING TRANSACTION ACCOUNTS- Notwithstanding clause (i), the Board shall fully insure the net amount that any member or depositor at an insured credit union maintains in a noninterest-bearing transaction account. Such amount shall not be taken into account when computing the net amount due to such member or depositor under clause (i).
‘(iii) NONINTEREST-BEARING TRANSACTION ACCOUNT DEFINED- For purposes of this subparagraph, the term ‘noninterest-bearing transaction account’ means an account or deposit maintained at an insured credit union--
‘(I) with respect to which interest is neither accrued nor paid;
‘(II) on which the account holder or depositor is permitted to make withdrawals by negotiable or transferable instrument, payment orders of withdrawal, telephone or other electronic media transfers, or other similar items for the purpose of making payments or transfers to third parties or others; and
‘(III) on which the insured credit union does not reserve the right to require advance notice of an intended withdrawal.’; and
(B) in subparagraph (B), by striking ‘subparagraph (A)’ and inserting ‘subparagraph (A)(i)’.
(2) EFFECTIVE DATE- The amendments made by paragraph (1) shall take effect upon the date of the enactment of this Act
(3) PROSPECTIVE REPEAL- Effective January 1, 2013, section 207(k)(1) of the Federal Credit Union Act (12 U.S.C. 1787(k)(1)), as amended by paragraph (1), is amended--
(A) in subparagraph (A)--
(i) by striking ‘(i) NET AMOUNT OF INSURANCE PAYABLE- ’ and all that follows through ‘paragraph (2), the net amount’ and inserting ‘Subject to the provisions of paragraph (2), the net amount’; and
(ii) by striking clauses (ii) and (iii); and
(B) in subparagraph (B), by striking ‘subparagraph (A)(i)’ and inserting ‘subparagraph (A)’.
Subtitle E--Technical and Conforming Amendments
SEC. 351. EFFECTIVE DATE.
Except as provided in section 364(a), the amendments made by this subtitle shall take effect on the transfer date.
SEC. 352. BALANCED BUDGET AND EMERGENCY DEFICIT CONTROL ACT OF 1985.
Section 256(h) of the Balanced Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 906(h)) is amended--
(1) in paragraph (4), by striking subparagraphs (C) and (G); and
(2) by redesignating subparagraphs (D), (E), (F), and (H) as subparagraphs (C), (D), (E), and (F), respectively.
SEC. 353. BANK ENTERPRISE ACT OF 1991.
Section 232(a) of the Bank Enterprise Act of 1991 (12 U.S.C. 1834(a)) is amended--
(1) in the subsection heading, by striking ‘by Federal Reserve Board’;
(2) in paragraph (1)--
(A) by striking ‘The Board of Governors of the Federal Reserve System,’ and inserting ‘The Comptroller of the Currency’; and
(B) by striking ‘section 7(b)(2)(H)’ and inserting ‘section 7(b)(2)(E)’;
(3) in paragraph (2)(A), by striking ‘Board’ and inserting ‘Comptroller’; and
(4) in paragraph (3)--
(A) by redesignating subparagraphs (A) through (C) as subparagraphs (B) through (D), respectively; and
(B) by inserting before subparagraph (B) the following:
‘(A) COMPTROLLER- The term ‘Comptroller’ means the Comptroller of the Currency.’.
SEC. 354. BANK HOLDING COMPANY ACT OF 1956.
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended--
(1) in section 2(j)(3) (12 U.S.C. 1841(j)(3)), strike ‘Director of the Office of Thrift Supervision’ and inserting ‘appropriate Federal banking agency’;
(2) in section 4 (12 U.S.C. 1843)--
(A) in subsection (i)--
(i) in paragraph (4)--
(I) in subparagraph (A)--
(aa) in the subparagraph heading, by striking ‘TO DIRECTOR’; and
(bb) by striking ‘Board’ and all that follows through the end of the subparagraph and inserting ‘Board shall solicit comments and recommendations from--
‘(i) the Comptroller of the Currency, with respect to the acquisition of a Federal savings association; and
‘(ii) the Federal Deposit Insurance Corporation, with respect to the acquisition of a State savings association.’.
(II) in subparagraph (B), by striking ‘Director’ each place that term appears and inserting ‘Comptroller of the Currency or the Federal Deposit Insurance Corporation, as applicable,’;
(ii) in paragraph (5)--
(I) in subparagraph (B), by striking ‘Director with’ and inserting ‘Comptroller of the Currency or the Federal Deposit Insurance Corporation, as applicable, with’; and
(II) by striking ‘Director’ each place that term appears and inserting ‘Comptroller of the Currency or the Federal Deposit Insurance Corporation’;
(iii) in paragraph (6), by striking ‘Director’ and inserting ‘Comptroller of the Currency or the Federal Deposit Insurance Corporation, as applicable,’; and
(iv) by striking paragraph (7); and
(3) in section 5(f) (12 U.S.C. 1844(f))--
(A) by striking ‘subpena’ each place that term appears and inserting ‘subpoena’;
(B) by striking ‘subpenas’ each place that term appears and inserting ‘subpoenas’; and
(C) by striking ‘subpenaed’ and inserting ‘subpoenaed’.
SEC. 355. BANK HOLDING COMPANY ACT AMENDMENTS OF 1970.
Section 106(b)(1) of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1972(1)) is amended in the undesignated matter following subparagraph (E) by inserting ‘issue such regulations as are necessary to carry out this section, and, in consultation with the Comptroller of the Currency and the Federal Deposit Insurance Company, may’ after ‘The Board may’.
SEC. 356. BANK PROTECTION ACT OF 1968.
The Bank Protection Act of 1968 (12 U.S.C. 1881 et seq.) is amended--
(1) in section 2 (12 U.S.C. 1881), by striking ‘the term’ and all that follows through the end of the section and inserting ‘the term ‘Federal supervisory agency’ means the appropriate Federal banking agency, as defined in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).’;
(2) in section 3 (12 U.S.C. 1882), by striking ‘and loan’ each place that term appears; and
(3) in section 5 (12 U.S.C. 1884), by striking ‘and loan’.
SEC. 357. BANK SERVICE COMPANY ACT.
The Bank Service Company Act (12 U.S.C. 1861 et seq.) is amended--
(1) in section 1(b)(4) (12 U.S.C. 1861(b)(4))--
(A) by inserting after ‘an insured bank,’ the following: ‘a savings association,’;
(B) by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘appropriate Federal banking agency’; and
(C) by striking ‘, the Federal Savings and Loan Insurance Corporation,’;
(2) in section 1(b)(5), by striking ‘term ‘insured depository institution’ has the same meaning as in section 3(c)’ and inserting ‘terms ‘depository institution’ and ‘savings association’ have the same meanings as in section 3’; and
(3) in section 7(c)(2) (12 U.S.C. 1867(c)(2)), by inserting ‘each’ after ‘notify’.
SEC. 358. COMMUNITY REINVESTMENT ACT OF 1977.
The Community Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.) is amended--
(1) in section 803 (12 U.S.C. 2902)--
(A) in paragraph (1)--
(i) in subparagraph (A), by inserting ‘and Federal savings associations (the deposits of which are insured by the Federal Deposit Insurance Corporation)’ after ‘banks’;
(ii) in subparagraph (B), by striking ‘and bank holding companies’ and inserting ‘, bank holding companies, and savings and loan holding companies’; and
(iii) in subparagraph (C), by striking ‘; and’ and inserting ‘, and State savings associations (the deposits of which are insured by the Federal Deposit Insurance Corporation).’; and
(B) by striking paragraph (2) (relating to the Office of Thrift Supervision), as added by section 744(q) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Public Law 101-73; 103 Stat. 440); and
(2) in section 806 (12 U.S.C. 2905), by inserting ‘, except that the Comptroller of the Currency shall prescribe regulations applicable to savings associations and the Board of Governors shall prescribe regulations applicable to insured State member banks, bank holding companies and savings and loan holding companies,’ after ‘supervisory agency’.
SEC. 359. CRIME CONTROL ACT OF 1990.
The Crime Control Act of 1990 is amended--
(1) in section 2539(c)(2) (28 U.S.C. 509 note)--
(A) by striking subparagraphs (C) and (D); and
(B) by redesignating subparagraphs (E) through (H) as subparagraphs (C) through (G), respectively; and
(2) in section 2554(b)(2) (Public Law 101-647; 104 Stat. 4890)--
(A) in subparagraph (A), by striking ‘, the Director of the Office of Thrift Supervision,’ and inserting ‘the Comptroller of the Currency’; and
(B) in subparagraph (B), by striking ‘, the Director’ and all that follows through ‘Trust Corporation’ and inserting ‘or the Federal Deposit Insurance Corporation’.
SEC. 360. DEPOSITORY INSTITUTION MANAGEMENT INTERLOCKS ACT.
The Depository Institution Management Interlocks Act (12 U.S.C. 3201 et seq.) is amended--
(1) in section 207 (12 U.S.C. 3206)--
(A) in paragraph (1), by inserting before the comma at the end the following: ‘and Federal savings associations (the deposits of which are insured by the Federal Deposit Insurance Corporation)’;
(B) in paragraph (2), by striking ‘, and bank holding companies’ and inserting ‘, bank holding companies, and savings and loan holding companies’;
(C) in paragraph (3), by striking ‘Corporation,’ and inserting ‘Corporation and State savings associations (the deposits of which are insured by the Federal Deposit Insurance Corporation),’;
(D) by striking paragraph (4);
(E) by redesignating paragraphs (5) and (6) as paragraphs (4) and (5), respectively; and
(F) in paragraph (5), as so redesignated, by striking ‘through (5)’ and inserting ‘through (4)’;
(2) in section 209 (12 U.S.C. 3207)--
(A) in paragraph (1), by inserting before the comma at the end the following: ‘and Federal savings associations (the deposits of which are insured by the Federal Deposit Insurance Corporation)’;
(B) in paragraph (2), by striking ‘, and bank holding companies’ and inserting ‘, bank holding companies, and savings and loan holding companies’;
(C) in paragraph (3), by striking ‘Corporation,’ and inserting ‘Corporation and State savings associations (the deposits of which are insured by the Federal Deposit Insurance Corporation),’;
(D) by striking paragraph (4); and
(E) by redesignating paragraph (5) as paragraph (4); and
(3) in section 210(a) (12 U.S.C. 3208(a))--
(A) by striking ‘his’ and inserting ‘the’; and
(B) by inserting ‘of the Attorney General’ after ‘enforcement functions’.
SEC. 361. EMERGENCY HOMEOWNERS’ RELIEF ACT.
Section 110 of the Emergency Homeowners’ Relief Act (12 U.S.C. 2709) is amended in the second sentence, by striking ‘Home Loan Bank Board, the Federal Savings and Loan Insurance Corporation’ and inserting ‘Housing Finance Agency’.
SEC. 362. FEDERAL CREDIT UNION ACT.
The Federal Credit Union Act (12 U.S.C. 1751 et seq.) is amended--
(1) in section 107(8) (12 U.S.C. 1757(8)), by striking ‘or the Federal Savings and Loan Insurance Corporation’;
(2) in section 205 (12 U.S.C. 1785)--
(A) in subsection (b)(2)(G)(i), by striking ‘the Office of Thrift Supervision and’; and
(B) in subsection (i)(1), by striking ‘or the Federal Savings and Loan Insurance Corporation’; and
(3) in section 206(g)(7) (12 U.S.C. 1786(g)(7))--
(A) in subparagraph (A)--
(i) in clause (ii), by striking ‘(b)(8)’ and inserting ‘(b)(9)’;
(ii) in clause (v)--
(I) by striking ‘depository’ and inserting ‘financial’; and
(II) by adding ‘and’ at the end;
(iii) in clause (vi)--
(I) by striking ‘Board’ and inserting ‘Agency’; and
(II) by striking ‘; and’ and inserting a period; and
(iv) by striking clause (vii); and
(B) in subparagraph (D)--
(i) in clause (iii), by adding ‘and’ at the end;
(ii) in clause (iv)--
(I) by striking ‘Board’ and inserting ‘Agency’; and
(II) by striking ‘and’ at the end; and
(iii) by striking clause (v).
SEC. 363. FEDERAL DEPOSIT INSURANCE ACT.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended--
(1) in section 3 (12 U.S.C. 1813)--
(A) in subsection (b)(1)(C), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’;
(B) in subsection (l)(5), in the matter preceding subparagraph (A), by striking ‘Director of the Office of Thrift Supervision,’; and
(C) in subsection (z), by striking ‘the Director of the Office of Thrift Supervision,’;
(2) in section 7 (12 U.S.C. 1817)--
(A) in subsection (a)--
(i) in paragraph (2)--
(I) in subparagraph (A)--
(aa) in the first sentence, by striking ‘the Director of the Office of Thrift Supervision,’;
(bb) in the second sentence--
(AA) by striking ‘the Director of the Office of Thrift Supervision,’ and inserting ‘to’; and
(BB) by inserting ‘to’ before ‘any Federal home’; and
(cc) by striking ‘Finance Board’ each place that term appears and inserting ‘Finance Agency’; and
(II) in subparagraph (B), by striking ‘the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Director of the Office of Thrift Supervision,’ and inserting ‘the Comptroller of the Currency and the Board of Governors of the Federal Reserve System,’;
(ii) in paragraph (3), in the first sentence, by striking ‘Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Director of the Office of Thrift Supervision.’ and inserting ‘Comptroller of the Currency, and the Chairman of the Board of Governors of the Federal Reserve System.’;
(iii) in paragraph (6), by striking ‘section 232(a)(3)(C)’ and inserting ‘section 232(a)(3)(D)’; and
(iv) in paragraph (7), by striking ‘, the Director of the Office of Thrift Supervision,’; and
(B) in subsection (n)--
(i) in the heading, by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’;
(ii) in the first sentence--
(I) by striking ‘the Director of the Office of Thrift Supervision’ and inserting ‘the Comptroller of the Currency’; and
(II) by inserting ‘Federal’ before ‘savings associations’;
(iii) in the third sentence, by striking ‘, the Financing Corporation, and the Resolution Funding Corporation’; and
(iv) by striking ‘the Director’ each place that term appears and inserting ‘the Comptroller’;
(3) in section 8 (12 U.S.C. 1818)--
(A) in subsection (a)(8)(B)(ii), in the last sentence, by striking ‘Director of the Office of Thrift Supervision’ each place that term appears and inserting ‘Comptroller of the Currency’;
(B) in subsection (b)(3)--
(i) by inserting ‘any savings and loan holding company and any subsidiary (other than a depository institution) of a savings and loan holding company (as such terms are defined in section 10 of Home Owners’ Loan Act)), any noninsured State member bank’ after ‘Bank Holding Company Act of 1956,’; and
(ii) by inserting ‘or against a savings and loan holding company or any subsidiary thereof (other than a depository institution or a subsidiary of such depository institution)’ before the period at the end;
(C) by striking paragraph (9) of subsection (b) and inserting the following new paragraph:
‘(9) [Repealed]’.
(D) in subsection (e)(7)--
(i) in subparagraph (A)--
(I) in clause (v), by inserting ‘and’ after the semicolon;
(II) in clause (vi)--
(aa) by striking ‘Board’ and inserting ‘Agency’; and
(bb) by striking ‘; and’ and inserting a period; and
(III) by striking clause (vii); and
(ii) in subparagraph (D)--
(I) in clause (iii), by inserting ‘and’ after the semicolon;
(II) in clause (iv)--
(aa) by striking ‘Board’ and inserting ‘Agency’; and
(bb) by striking ‘; and’ and inserting a period; and
(III) by striking clause (v);
(E) in subsection (j)--
(i) in paragraph (2), by striking ‘, or as a savings association under subsection (b)(9) of this section’;
(ii) in paragraph (3), by inserting ‘or’ after the semicolon;
(iii) in paragraph (4), by striking ‘; or’ and inserting a comma; and
(iv) by striking paragraph (5);
(F) in subsection (o), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’; and
(G) in subsection (w)(3)(A), by striking ‘and the Office of Thrift Supervision’;
(4) in section 10 (12 U.S.C. 1820)--
(A) in subsection (d)(5), by striking ‘or the Resolution Trust Corporation’ each place that term appears; and
(B) in subsection (k)(5)(B)--
(i) in clause (ii), by inserting ‘and’ after the semicolon;
(ii) in clause (iii), by striking ‘; and’ and inserting a period; and
(iii) by striking clause (iv);
(5) in section 11 (12 U.S.C. 1821)--
(A) in subsection (c)--
(i) in paragraph (2)(A)(ii), by striking ‘(other than section 21A of the Federal Home Loan Bank Act)’;
(ii) in paragraph (4), by striking ‘Except as otherwise provided in section 21A of the Federal Home Loan Bank Act and notwithstanding’ and inserting ‘Notwithstanding’;
(iii) in paragraph (6)--
(I) in the heading, by striking ‘DIRECTOR OF THE OFFICE OF THRIFT SUPERVISION’ and inserting ‘COMPTROLLER OF THE CURRENCY’;
(II) in subparagraph (A)--
(aa) by striking ‘or the Resolution Trust Corporation’; and
(bb) by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’; and
(III) by amending subparagraph (B) to read as follows:
‘(B) RECEIVER- The Corporation may, at the discretion of the Comptroller of the Currency, be appointed receiver and the Corporation may accept any such appointment.’;
(iv) in paragraph (12)(A), by striking ‘or the Resolution Trust Corporation’;
(B) in subsection (d)--
(i) in paragraph (17)(A), by striking ‘or the Director of the Office of Thrift Supervision’; and
(ii) in paragraph (18)(B), by striking ‘or the Director of the Office of Thrift Supervision’;
(C) in subsection (m)--
(i) in paragraph (9), by striking ‘or the Director of the Office of Thrift Supervision, as appropriate’;
(ii) in paragraph (16), by striking ‘or the Director of the Office of Thrift Supervision, as appropriate’ each place that term appears; and
(iii) in paragraph (18), by striking ‘or the Director of the Office of Thrift Supervision, as appropriate’ each place that term appears;
(D) in subsection (n)--
(i) in paragraph (1)(A)--
(I) by striking ‘, or the Director of the Office of Thrift Supervision, with respect to’ and inserting ‘or’; and
(II) by striking ‘applicable,,’ and inserting ‘applicable,’;
(ii) in paragraph (2)(A), by striking ‘or the Director of the Office of Thrift Supervision’;
(iii) in paragraph (4)(D), by striking ‘and the Director of the Office of Thrift Supervision, as appropriate,’;
(iv) in paragraph (4)(G), by striking ‘and the Director of the Office of Thrift Supervision, as appropriate,’; and
(v) in paragraph (12)(B)--
(I) by inserting ‘as’ after ‘shall appoint the Corporation’;
(II) by striking ‘or the Director of the Office of Thrift Supervision, as appropriate,’ each place such term appears;
(E) in subsection (p)--
(i) in paragraph (2)(B), by striking ‘the Corporation, the FSLIC Resolution Fund, or the Resolution Trust Corporation,’ and inserting ‘or the Corporation,’; and
(ii) in paragraph (3)(B), by striking ‘, the FSLIC Resolution Fund, the Resolution Trust Corporation,’; and
(F) in subsection (r), by striking ‘and the Resolution Trust Corporation’;
(6) in section 13(k)(1)(A)(iv) (12 U.S.C. 1823(k)(1)(A)(iv)), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’;
(7) in section 18 (12 U.S.C. 1828)--
(A) in subsection (c)(2)--
(i) in subparagraph (A), by inserting ‘or a Federal savings association’ before the semicolon;
(ii) in subparagraph (B), by adding ‘and’ at the end;
(iii) in subparagraph (C), by striking ‘(except’ and all that follows through ‘; and’ and inserting ‘or a State savings association.’; and
(iv) by striking subparagraph (D);
(B) in subsection (g)(1), by striking ‘the Director of the Office of Thrift Supervision’and inserting ‘the Comptroller of the Currency’;
(C) in subsection (i)(2)(C), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Corporation’; and
(D) in subsection (m)--
(i) in paragraph (1)--
(I) in subparagraph (A), by striking ‘and the Director of the Office of Thrift Supervision’ and inserting ‘or the Comptroller of the Currency, as appropriate,’; and
(II) in subparagraph (B), by striking ‘and orders of the Director of the Office of Thrift Supervision’ and inserting ‘of the Comptroller of the Currency and orders of the Corporation and the Comptroller of the Currency’;
(ii) in paragraph (2)--
(I) in subparagraph (A), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency, as appropriate,’; and
(II) in subparagraph (B)--
(aa) in the matter before clause (i), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Corporation or the Comptroller of the Currency, as appropriate,’; and
(bb) in the matter following clause (ii)--
(AA) in the first sentence, by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Office of the Comptroller of the Currency, as appropriate,’; and
(BB) by striking the second sentence and inserting the following: ‘The Corporation or the Comptroller of the Currency, as appropriate, may take any other corrective measures with respect to the subsidiary, including the authority to require the subsidiary to terminate the activities or operations posing such risks, as the Corporation or the Comptroller of the Currency, respectively, may deem appropriate.’; and
(iii) in paragraph (3)--
(I) in subparagraph (A), in the second sentence--
(aa) by inserting ‘, in the case of a Federal savings association,’ before ‘consult with’; and
(bb) by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’; and
(II) in subparagraph (B)--
(aa) in the subparagraph heading, by striking ‘DIRECTOR’ and inserting ‘COMPTROLLER OF THE CURRENCY’;
(bb) by striking ‘Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’;
(cc) by inserting a comma after ‘soundness’; and
(dd) by inserting ‘as to Federal savings associations’ after ‘compliance’;
(8) in section 19(e) (12 U.S.C. 1829(e))--
(A) in paragraph (1), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Board of Governors of the Federal Reserve System’; and
(B) in paragraph (2), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Board of Governors of the Federal Reserve System’;
(9) in section 28 (12 U.S.C. 1831e)--
(A) in subsection (e)--
(i) in paragraph (2)--
(I) in subparagraph (A)(ii), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency or the Corporation, as appropriate’;
(II) in subparagraph (C), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency or the Corporation, as appropriate,’; and
(III) in subparagraph (F), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency or the Corporation, as appropriate’; and
(ii) in paragraph (3)--
(I) in subparagraph (A), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency or the Corporation, as appropriate’; and
(II) in subparagraph (B), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency or the Corporation, as appropriate,’; and
(B) in subsection (h)(2), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency, of the Corporation,’; and
(10) in section 33(e) (12 U.S.C. 1831j(e)), by striking ‘Federal Housing Finance Board, the Comptroller of the Currency, and the Director of the Office of Thrift Supervision’ and inserting ‘Federal Housing Finance Agency and the Comptroller of the Currency’.
SEC. 364. FEDERAL HOME LOAN BANK ACT.
(a) Repeal of Section 18(c)- Effective 90 days after the transfer date, section 18(c) of the Federal Home Loan Bank Act (12 U.S.C. 1438(c)) is repealed.
(b) Repeal of Section 21A- Section 21A of the Federal Home Loan Bank Act (12 U.S.C. 1441a) is repealed.
SEC. 365. FEDERAL HOUSING ENTERPRISES FINANCIAL SAFETY AND SOUNDNESS ACT OF 1992.
The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.) is amended--
(1) in section 1315(b) (12 U.S.C. 4515(b)), by striking ‘the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision.’ and inserting ‘and the Federal Deposit Insurance Corporation.’; and
(2) in section 1317(c) (12 U.S.C. 4517(c)), by striking ‘the Federal Deposit Insurance Corporation, or the Director of the Office of Thrift Supervision’ and inserting ‘or the Federal Deposit Insurance Corporation’.
SEC. 366. FEDERAL RESERVE ACT.
The Federal Reserve Act (12 U.S.C. 221 et seq.) is amended--
(1) in section 11(a)(2) (12 U.S.C. 248(a)(2))--
(A) by inserting ‘State savings associations that are insured depository institutions (as defined in section 3 of the Federal Deposit Insurance Act),’ after ‘case of insured’;
(B) by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’;
(C) by inserting ‘Federal’ before ‘savings association which’; and
(D) by striking ‘savings and loan association’ and inserting ‘savings association’; and
(2) in section 19(b) (12 U.S.C. 461(b))--
(A) in paragraph (1)(F), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’; and
(B) in paragraph (4)(B), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’.
SEC. 367. FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT OF 1989.
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 is amended--
(1) in section 203 (12 U.S.C. 1812 note), by striking subsection (b);
(2) in section 302(1) (12 U.S.C. 1467a note), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’;
(3) in section 305(12 U.S.C. 1464 note), by striking subsection (b);
(4) in section 308 (12 U.S.C. 1463 note)--
(A) in subsection (a), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Chairman of the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Chairman of the National Credit Union Administration,’; and
(B) by adding at the end the following new subsection:
‘(c) Reports- The Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Chairman of the National Credit Union Administration, and the Chairperson of Board of Directors of the Federal Deposit Insurance Corporation shall each submit an annual report to the Congress containing a description of actions taken to carry out this section.’;
(5) in section 402 (12 U.S.C. 1437 note)--
(A) in subsection (a), by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’;
(B) by striking subsection (b);
(C) in subsection (e)--
(i) in paragraph (1), by striking ‘Office of Thrift Supervision’ and inserting ‘Comptroller of the Currency’; and
(ii) in each of paragraphs (2), (3), and (4), by striking ‘Director of the Office of Thrift Supervision’ each place that term appears and inserting ‘Comptroller of the Currency’; and
(D) by striking ‘Federal Housing Finance Board’ each place that term appears and inserting ‘Federal Housing Finance Agency’;
(6) in section 1103(a) (12 U.S.C. 3332(a)), by striking ‘and the Resolution Trust Corporation’;
(7) in section 1205(b) (12 U.S.C. 1818 note)--
(A) in paragraph (1)--
(i) by striking subparagraph (B); and
(ii) by redesignating subparagraphs (C) through (F) as subparagraphs (B) through (E), respectively; and
(B) in paragraph (2), by striking ‘paragraph (1)(F)’ and inserting ‘paragraph (1)(E)’;
(8) in section 1206 (12 U.S.C. 1833b)--
(A) by striking ‘Board, the Oversight Board of the Resolution Trust Corporation’ and inserting ‘Agency, and’; and
(B) by striking ‘, and the Office of Thrift Supervision’;
(9) in section 1216 (12 U.S.C. 1833e)--
(A) in subsection (a)--
(i) in paragraph (3), by adding ‘and’ at the end;
(ii) in paragraph (4), by striking the semicolon at the end and inserting a period;
(iii) by striking paragraphs (2), (5), and (6); and
(iv) by redesignating paragraphs (3) and (4), as paragraphs (2) and (3), respectively;
(B) in subsection (c)--
(i) by striking ‘the Director of the Office of Thrift Supervision,’ and inserting ‘and’; and
(ii) by striking ‘the Thrift Depositor Protection Oversight Board of the Resolution Trust Corporation, and the Resolution Trust Corporation’; and
(C) in subsection (d)--
(i) by striking paragraphs (3), (5), and (6); and
(ii) by redesignating paragraphs (4), (7), and (8) as paragraphs (3), (4), and (5), respectively.
SEC. 368. FLOOD DISASTER PROTECTION ACT OF 1973.
Section 3(a)(5) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4003(a)(5)) is amended by striking ‘, the Office of Thrift Supervision’.
SEC. 369. HOME OWNERS’ LOAN ACT.
The Home Owners’ Loan Act (12 U.S.C. 1461 et seq.) is amended--
(1) in section 1 (12 U.S.C. 1461), by striking the table of contents;
(2) in section 2 (12 U.S.C. 1462), as amended by this Act--
(A) by striking paragraphs (1) and (3);
(B) by redesignating paragraph (2) as paragraph (1);
(C) by redesignating paragraphs (4) through (9) as paragraphs (2) through (7), respectively; and
(D) by adding at the end the following:
‘(8) BOARD- The term ‘Board’, other than in the context of the Board of Directors of the Corporation, means the Board of Governors of the Federal Reserve System.
‘(9) COMPTROLLER- The term ‘Comptroller’ means the Comptroller of the Currency.’;
(3) in section 3 (12 U.S.C. 1462a)--
(A) by striking the section heading and inserting the following:
‘SEC. 3. ADMINISTRATIVE PROVISIONS.’;
(B) by striking subsections (a), (b), (c), (d), (g), (h), (i), and (j);
(C) by redesignating subsections (e) and (f) as subsections (a) and (b), respectively;
(D) in subsection (a), as so redesignated--
(i) in the heading by striking ‘of the Director’; and
(ii) in the matter preceding paragraph (1), by striking ‘The Director’ and inserting ‘In accordance with subtitle A of title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the appropriate Federal banking agency’; and
(E) in subsection (b), as so redesignated, by striking ‘Director’ and inserting ‘appropriate Federal banking agency’;
(4) in section 4 (12 U.S.C. 1463)--
(A) in subsection (a)--
(i) in the subsection heading, by striking ‘Federal’;
(ii) by striking paragraphs (1) and (2) and inserting the following:
‘(1) EXAMINATION AND SAFE AND SOUND OPERATION-
‘(A) FEDERAL SAVINGS ASSOCIATIONS- The Comptroller shall provide for the examination and safe and sound operation of Federal savings associations.
‘(B) STATE SAVINGS ASSOCIATIONS- The Corporation shall provide for the examination and safe and sound operation of State savings associations.
‘(2) REGULATIONS FOR SAVINGS ASSOCIATIONS- The Comptroller may prescribe regulations with respect to savings associations, as the Comptroller determines to be appropriate to carry out the purposes of this Act.’; and
(iii) in paragraph (3), by striking ‘Director’ each place that term appears and inserting ‘Comptroller and the Corporation’;
(B) in subsection (b)--
(i) in paragraph (2)--
(I) in subparagraph (A), by adding ‘and’ at the end;
(II) in subparagraph (B), by striking ‘; and’ and inserting a period; and
(III) by striking subparagraph (C); and
(ii) by striking ‘Director’ each place that term appears and inserting ‘Comptroller’;
(C) in subsection (c)--
(i) by striking ‘All regulations and policies of the Director’ and inserting ‘The regulations of the Comptroller and the policies of the Comptroller and the Corporation’; and
(ii) by striking ‘of the Currency’;
(D) in subsection (e)(5), by striking ‘Director’ and inserting ‘Comptroller’;
(E) in subsection (f), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’; and
(F) in subsection (h), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(5) in section 5 (12 U.S.C. 1464)--
(A) in subsection (a), by striking ‘Director’, each place such term appears and inserting ‘Comptroller of the Currency’;
(B) in subsection (b), by striking ‘Director’, each place such term appears and inserting ‘Comptroller of the Currency’;
(C) in subsection (c)--
(i) in paragraph (5)--
(I) in subparagraph (A), by striking ‘Director’ and inserting ‘appropriate Federal banking agency’; and
(II) in subparagraph (B)--
(aa) by striking ‘The Director’ and inserting ‘The appropriate Federal banking agency’; and
(bb) by striking ‘the Director’ and inserting ‘the appropriate Federal banking agency’;
(D) in subsection (d)--
(i) in paragraph (1)--
(I) in subparagraph (A)--
(aa) in the first sentence, by striking ‘Director’ and inserting ‘appropriate Federal banking agency’;
(bb) in the second sentence--
(AA) by striking ‘Director’s own name and through the Director’s own attorneys’ and inserting ‘name of the appropriate Federal banking agency and through the attorneys of the appropriate Federal banking agency’; and
(BB) by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’; and
(cc) in the third sentence, by striking ‘Director’ each place that term appears and inserting ‘Comptroller’;
(II) in subparagraph (B)--
(aa) in clauses (i) through (iv), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(III) in clause (v)--
(aa) in the matter preceding subclause (I), by striking ‘Director’ and inserting ‘appropriate Federal banking agency’;
(bb) in subclause (II), by striking ‘subpenas’ and inserting ‘subpoenas’; and
(cc) in the matter following subclause (II), by striking ‘subpena’ and inserting ‘subpoena’;
(IV) in clause (vi)--
(aa) in the first sentence, by striking ‘Director’ and inserting ‘appropriate Federal banking agency’; and
(bb) in the second sentence, by striking ‘Director’ and inserting ‘Comptroller’;
(V) in clause (vii)--
(aa) in the first sentence, by striking ‘subpena’ and inserting ‘subpoena’;
(bb) in the second sentence, by striking ‘subpenaed’ and inserting ‘subpoenaed’; and
(cc) in the third sentence, by striking ‘Director’ and inserting ‘appropriate Federal banking agency’;
(ii) in paragraph (2)--
(I) in subparagraph (A)--
(aa) by striking ‘Director of the Office of Thrift Supervision’ and inserting ‘appropriate Federal banking agency’;
(bb) by striking ‘any insured savings association’ and inserting ‘an insured savings association’; and
(cc) by striking ‘Director determines, in the Director’s discretion’ and inserting ‘appropriate Federal banking agency determines, in the discretion of the appropriate Federal banking agency’;
(II) in subparagraph (B), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(III) in subparagraphs (C) and (D), by striking ‘Director’ and inserting ‘appropriate Federal banking agency’;
(IV) in subparagraph (E)--
(aa) in clause (ii)--
(AA) in the clause heading, by striking ‘OR RTC’; and
(BB) by striking ‘or the Resolution Trust Corporation, as appropriate,’ each place that term appears; and
(bb) by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’; and
(iii) in paragraph (3)--
(I) in subparagraph (A), by striking ‘Director’ each place that term appears and inserting ‘Comptroller’; and
(II) in subparagraph (B)--
(aa) in the subparagraph heading, by striking ‘OR RTC’;
(bb) by striking ‘Corporation or the Resolution Trust’; and
(cc) by striking ‘Director’ and inserting ‘Comptroller’;
(iv) in paragraph (4), by striking ‘Director’ and inserting ‘appropriate Federal banking agency’;
(v) in paragraph (6)--
(I) in subparagraph (A), by striking ‘Director’ and inserting ‘Comptroller’; and
(II) in subparagraphs (B) and (C), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(vi) in paragraph (7)--
(I) in subparagraphs (A), (B), and (D), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(II) in subparagraph (C), by striking ‘Director’ and inserting ‘Federal Deposit Insurance Corporation or the Comptroller, as appropriate,’; and
(III) by striking subparagraph (E) and inserting the following:
‘(E) ADMINISTRATION BY THE COMPTROLLER AND THE CORPORATION- The Comptroller may issue such regulations, and the appropriate Federal banking agency may issue such orders, including those issued pursuant to section 8 of the Federal Deposit Insurance Act, as may be necessary to administer and carry out this paragraph and to prevent evasion of this paragraph.’;
(E) in subsection (e)(2), strike ‘Director’ and insert ‘Comptroller’;
(F) in subsection (i)--
(i) by striking ‘Director’, each place such term appears, and inserting ‘Comptroller’;
(ii) in paragraph (2), in the heading, by striking ‘DIRECTOR’ and inserting ‘COMPTROLLER’;
(iii) in paragraph (5)(A), by striking ‘of the Currency’; and
(iv) except as provided in clauses (i) through (iii), by striking ‘Director’ each place such term appears and inserting ‘Comptroller’;
(G) in subsection (o)--
(i) in paragraph (1), by striking ‘Director’ and inserting ‘Comptroller’; and
(ii) in paragraph (2)(B), by striking ‘Director’s determination’ and inserting ‘determination of the Comptroller’;
(H) in subsections (m), (n), (o), and (p), by striking ‘Director’, each place such term appears, and inserting ‘Comptroller’;
(I) in subsection (q)--
(i) in paragraph (6), by striking ‘of Governors of the Federal Reserve System’;
(ii) by striking ‘Director’ each place that term appears and inserting ‘Board’; and
(iii) by inserting ‘in consultation with the Comptroller and the Corporation,’ before ‘considers’;
(J) in subsection (r)(3), by striking ‘Director’ and inserting ‘Comptroller of the Currency’;
(K) in subsection (s)--
(i) in paragraph (1), strike ‘Director’ and insert ‘Comptroller of the Currency’;
(ii) in paragraph (2), strike ‘Director’ and insert ‘Comptroller of the Currency’;
(iii) in paragraph (3), by striking ‘Director’s discretion, the Director’ and inserting ‘discretion of the appropriate Federal banking agency, the appropriate Federal banking agency,’;
(iv) in paragraph (4), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’; and
(v) in paragraph (5)--
(I) by striking ‘Director’, each place such term appears, and inserting ‘appropriate Federal banking agency’; and
(II) by striking ‘Director’s approval’ and inserting ‘approval of the appropriate Federal banking agency’;
(L) in subsection (t)--
(i) in paragraph (1), by striking subparagraph (D);
(ii) by striking paragraph (3) and inserting the following:
‘(3) [Repealed].’;
(iii) in paragraph (5)--
(I) in subparagraph (B), by striking ‘Corporation, in its sole discretion’ and inserting ‘appropriate Federal banking agency, in the sole discretion of the appropriate Federal banking agency’; and
(II) by striking subparagraph (D);
(iv) in paragraph (6)--
(I) by striking subparagraph (A) and inserting the following:
‘(A) [Reserved].’;
(II) in subparagraph (B), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(III) in subparagraph (C)--
(aa) in clause (i), by striking ‘Director’s prior approval’ and inserting ‘prior approval of the appropriate Federal banking agency’;
(bb) in clause (ii), by striking ‘Director’s discretion’ and inserting ‘discretion of the appropriate Federal banking agency’; and
(cc) by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(IV) in subparagraph (E), by striking ‘Director shall’ and inserting ‘appropriate Federal banking agency may’; and
(V) in subparagraph (F), by striking ‘Director’ and all that follows through the end of the subparagraph and inserting ‘appropriate Federal banking agency under this Act or any other provision of law.’;
(v) in paragraph (7), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(vi) by striking paragraph (8) and inserting the following:
‘(8) [Repealed].’;
(vii) in paragraph (9)--
(I) in subparagraph (A), by striking ‘Director’ and inserting ‘Comptroller’;
(II) in subparagraph (C), by striking ‘of the Currency’; and
(III) by striking subparagraph (B) and redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively; and
(viii) except as provided in clauses (i) through (vii), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(M) in subsection (u), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(N) in subsection (v)--
(i) in paragraph (2), by striking ‘Director’s determinations’ and inserting ‘determinations of the appropriate Federal banking agency’; and
(ii) by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(O) in subsection (w)(1)--
(i) in subparagraph (A)(II), by striking ‘Director’s intention’ and inserting ‘intention of the Comptroller’; and
(ii) in subparagraph (B), by striking ‘Director’s intention’ and inserting ‘intention of the Comptroller’; and
(P) except as provided in subparagraphs (A) through (J), by striking ‘Director’ each place that term appears and inserting ‘Comptroller’;
(6) in section 8 (12 U.S.C. 1466a), by striking ‘Director’ each place that term appears and inserting ‘Comptroller’;
(7) in section 9 (12 U.S.C. 1467)--
(A) in subsection (a), by striking ‘assessed by the Director’ and all that follows through the end of the subsection and inserting the following: ‘assessed by--
‘(1) the Comptroller, against each such Federal savings association, as the Comptroller deems necessary or appropriate; and
‘(2) the Corporation, against each such State savings association, as the Corporation deems necessary or appropriate.’;
(B) in subsection (b), by striking ‘Director’, each place such term appears, and inserting ‘Comptroller or Corporation, as appropriate’;
(C) in subsection (e)--
(i) by striking ‘Only the Director’ and inserting ‘The Comptroller’; and
(ii) by striking ‘Director’s designee’ and inserting ‘designee of the Comptroller’;
(D) by striking subsection (f) and inserting the following:
‘(f) [Reserved].’;
(E) in subsection (g)--
(i) in paragraph (1), by striking ‘Director’ and inserting ‘appropriate Federal banking agency’; and
(ii) in paragraph (2), by striking ‘Director, or the Corporation, as the case may be,’ and inserting ‘appropriate Federal banking agency for the savings association’;
(F) in subsection (i), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(G) in subsection (j), by striking ‘Director’s sole discretion’ and inserting ‘sole discretion of the appropriate Federal banking agency’;
(H) in subsection (k), by striking ‘Director may assess against institutions for which the Director is the appropriate Federal banking agency, as defined in section 3 of the Federal Deposit Insurance Act,’ and inserting ‘appropriate Federal banking agency may assess against an institution’; and
(I) except as provided in subparagraphs (A) through (G), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(8) in section 10 (12 U.S.C. 1467a)--
(A) in subsection (a)(1), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(B) in subsection (b)--
(i) in paragraph (2), by striking ‘and the regional office of the Director of the district in which its principal office is located,’; and
(ii) in paragraph (6), by striking ‘Director’s own motion or application’ and inserting ‘motion or application of the Board’;
(C) in subsection (c)--
(i) in paragraph (2)(F), by striking ‘of Governors of the Federal Reserve System’;
(ii) in paragraph (4)(B), in the subparagraph heading, by striking ‘BY DIRECTOR’;
(iii) in paragraph (6)(D), in the subparagraph heading, by striking ‘BY DIRECTOR’; and
(iv) in paragraph (9)(E), by inserting ‘(in consultation with the appropriate Federal banking agency)’ after ‘including a determination’;
(D) in subsection (g)(5)(B), by striking ‘the Director’s discretion’ and inserting ‘the discretion of the Board’;
(E) in subsection (l), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(F) in subsection (m), by striking ‘Director’ and inserting ‘appropriate Federal banking agency’;
(G) in subsection (p)--
(i) in paragraph (1)--
(I) by striking ‘Director determines’ the 1st place such term appears and inserting ‘Board or the appropriate Federal banking agency for the savings association determines’;
(II) by striking ‘Director may’ and inserting ‘Board may’; and
(III) by striking ‘Director determines’ the 2nd place such term appears and inserting ‘Board, in consultation with the appropriate Federal banking agency for the savings association determines’; and
(ii) in paragraph (2), by striking ‘Director’, each place such term appears, and inserting ‘Board’;
(H) in subsection (q), by striking ‘Director’, each place such term appears, and inserting ‘Board’;
(I) in subsection (r), by striking ‘Director’, each place such term appears, and inserting ‘Board or appropriate Federal banking agency’;
(J) in subsection (s)--
(i) in paragraph (2)--
(I) in subparagraph (B)(ii), by striking ‘Director’s judgment’ and inserting ‘judgment of the appropriate Federal banking agency for the savings association’; and
(II) by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency for the savings association’; and
(ii) in paragraph (4), by striking ‘Director’ and inserting ‘Comptroller’; and
(K) except as provided in subparagraphs (A) through (J), by striking ‘Director’ each place that term appears and inserting ‘Board’;
(9) in section 11 (12 U.S.C. 1468), by striking ‘Director’ each place that term appears and inserting ‘appropriate Federal banking agency’;
(10) in section 12 (12 U.S.C. 1468a), by striking ‘the Director’ and inserting ‘a Federal banking agency’; and
(11) in section 13 (12 U.S.C. 1468a) is amended by striking ‘Director’ and inserting ‘a Federal banking agency’.
SEC. 370. HOUSING ACT OF 1948.
Section 502(c) of the Housing Act of 1948 (12 U.S.C. 1701c(c)) is amended--
(1) in the matter preceding paragraph (1), by striking ‘and the Director of the Office of Thrift Supervision’ and inserting ‘, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation’; and
(2) in paragraph (3), by striking ‘Board’ and inserting ‘Agency’.
SEC. 371. HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1992.
Section 543 of the Housing and Community Development Act of 1992 (Public Law 102-550; 106 Stat. 3798) is amended--
(1) in subsection (c)(1)--
(A) by striking subparagraphs (D) through (F); and
(B) by redesignating subparagraphs (G) and (H) as subparagraphs (D) and (E), respectively; and
(2) in subsection (f)--
(A) in paragraph (2), by striking ‘the Office of Thrift Supervision,’ each place that term appears; and
(B) in paragraph (3)--
(i) in the matter preceding subparagraph (A), by striking ‘the Office of Thrift Supervision,’; and
(ii) in subparagraph (D), by striking ‘Office of Thrift Supervision,’.
SEC. 372. HOUSING AND URBAN-RURAL RECOVERY ACT OF 1983.
Section 469 of the Housing and Urban-Rural Recovery Act of 1983 (12 U.S.C. 1701p-1) is amended in the first sentence, by striking ‘Federal Home Loan Bank Board’ and inserting ‘Federal Housing Finance Agency’.
SEC. 373. NATIONAL HOUSING ACT.
Section 202(f) of the National Housing Act (12 U.S.C. 1708(f)) is amended--
(1) by striking paragraph (5) and inserting the following:
‘(5) if the mortgagee is a national bank, a subsidiary or affiliate of such bank, a Federal savings association or a subsidiary or affiliate of a savings association, the Comptroller of the Currency;’;
(2) in paragraph (6), by adding ‘and’ at the end;
(3) in paragraph (7)--
(A) by inserting ‘or State savings association’ after ‘State bank’; and
(B) by striking ‘; and’ and inserting a period; and
(4) by striking paragraph (8).
SEC. 374. NEIGHBORHOOD REINVESTMENT CORPORATION ACT.
Section 606(c)(3) of the Neighborhood Reinvestment Corporation Act (42 U.S.C. 8105(c)(3)) is amended by striking ‘Federal Home Loan Bank Board’ and inserting ‘Federal Housing Finance Agency’.
SEC. 375. PUBLIC LAW 93-100.
Section 5(d) of Public Law 93-100 (12 U.S.C. 1470(a)) is amended--
(1) in paragraph (1), by striking ‘Federal Savings and Loan Insurance Corporation with respect to insured institutions, the Board of Governors of the Federal Reserve System with respect to State member insured banks, and the Federal Deposit Insurance Corporation with respect to State nonmember insured banks’ and inserting ‘appropriate Federal banking agency, with respect to the institutions subject to the jurisdiction of each such agency,’; and
(2) in paragraph (2), by striking ‘supervisory’ and inserting ‘banking’.
SEC. 376. SECURITIES EXCHANGE ACT OF 1934.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended--
(1) in section 3(a)(34) (15 U.S.C. 78c(a)(34))--
(A) in subparagraph (A)--
(i) in clause (i), by striking ‘or a subsidiary or a department or division of any such bank’ and inserting ‘a subsidiary or a department or division of any such bank, a Federal savings association (as defined in section 3(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2))), the deposits of which are insured by the Federal Deposit Insurance Corporation, or a subsidiary or department or division of any such Federal savings association’;
(ii) in clause (ii), by striking ‘or a subsidiary or a department or division of such subsidiary’ and inserting ‘a subsidiary or a department or division of such subsidiary, or a savings and loan holding company’;
(iii) in clause (iii), by striking ‘or a subsidiary or department or division thereof;’ and inserting ‘a subsidiary or department or division of any such bank, a State savings association (as defined in section 3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3))), the deposits of which are insured by the Federal Deposit Insurance Corporation, or a subsidiary or a department or division of any such State savings association; and’;
(iv) by striking clause (iv); and
(v) by redesignating clause (v) as clause (iv);
(B) in subparagraph (B)--
(i) in clause (i), by striking ‘or a subsidiary of any such bank’ and inserting ‘a subsidiary of any such bank, a Federal savings association (as defined in section 3(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2))), the deposits of which are insured by the Federal Deposit Insurance Corporation, or a subsidiary of any such Federal savings association’;
(ii) in clause (ii), by striking ‘or a subsidiary of a bank holding company which is a bank other than a bank specified in clause (i), (iii), or (iv) of this subparagraph’ and inserting ‘a subsidiary of a bank holding company that is a bank other than a bank specified in clause (i) or (iii) of this subparagraph, or a savings and loan holding company’;
(iii) in clause (iii), by striking ‘or a subsidiary thereof;’ and inserting ‘a subsidiary of any such bank, a State savings association (as defined in section 3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3))), the deposits of which are insured by the Federal Deposit Insurance Corporation, or a subsidiary of any such State savings association; and’;
(iv) by striking clause (iv); and
(v) by redesignating clause (v) as clause (iv);
(C) in subparagraph (C)--
(i) in clause (i), by striking ‘bank’ and inserting ‘bank or a Federal savings association (as defined in section 3(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2))), the deposits of which are insured by the Federal Deposit Insurance Corporation’;
(ii) in clause (ii), by striking ‘or a subsidiary of a bank holding company which is a bank other than a bank specified in clause (i), (iii), or (iv) of this subparagraph’ and inserting ‘a subsidiary of a bank holding company that is a bank other than a bank specified in clause (i) or (iii) of this subparagraph, or a savings and loan holding company’;
(iii) in clause (iii), by striking ‘System)’ and inserting, ‘System) or a State savings association (as defined in section 3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3))), the deposits of which are insured by the Federal Deposit Insurance Corporation; and’;
(iv) by striking clause (iv); and
(v) by redesignating clause (v) as clause (iv);
(D) in subparagraph (D)--
(i) in clause (i), by inserting after ‘bank’ the following: ‘or a Federal savings association (as defined in section 3(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2))), the deposits of which are insured by the Federal Deposit Insurance Corporation’;
(ii) in clause (ii), by adding ‘and’ at the end;
(iii) by striking clause (iii);
(iv) by redesignating clause (iv) as clause (iii); and
(v) in clause (iii), as so redesignated, by inserting after ‘bank’ the following: ‘or a State savings association (as defined in section 3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3))), the deposits of which are insured by the Federal Deposit Insurance Corporation’;
(E) in subparagraph (F)--
(i) in clause (i), by inserting after ‘bank’ the following: ‘or a Federal savings association (as defined in section 3(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2))), the deposits of which are insured by the Federal Deposit Insurance Corporation’;
(ii) by striking clause (ii);
(iii) by redesignating clauses (iii), (iv), and (v) as clauses (ii), (iii), and (iv), respectively; and
(iv) in clause (iii), as so redesignated, by inserting before the semicolon the following: ‘or a State savings association (as defined in section 3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3))), the deposits of which are insured by the Federal Deposit Insurance Corporation’;
(F) in subparagraph (G)--
(i) in clause (i), by inserting after ‘national bank’ the following: ‘, a Federal savings association (as defined in section 3(b)(2) of the Federal Deposit Insurance Act), the deposits of which are insured by the Federal Deposit Insurance Corporation,’;
(ii) in clause (iii)--
(I) by inserting after ‘bank)’ the following: ‘, a State savings association (as defined in section 3(b)(3) of the Federal Deposit Insurance Act), the deposits of which are insured by the Federal Deposit Insurance Corporation,’; and
(II) by adding ‘and’ at the end;
(iii) by striking clause (iv); and
(iv) by redesignating clause (v) as clause (iv); and
(G) in the undesignated matter following subparagraph (H), by striking ‘, and the term ‘District of Columbia savings and loan association’ means any association subject to examination and supervision by the Office of Thrift Supervision under section 8 of the Home Owners’ Loan Act of 1933’;
(2) in section 12(i) (15 U.S.C. 78l(i))--
(A) in paragraph (1), by inserting after ‘national banks’ the following: ‘and Federal savings associations, the accounts of which are insured by the Federal Deposit Insurance Corporation’;
(B) by striking ‘(3)’ and all that follows through ‘vested in the Office of Thrift Supervision’ and inserting ‘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’; and
(C) in the second sentence, by striking ‘the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision’ and inserting ‘and the Federal Deposit Insurance Corporation’;
(3) in section 15C(g)(1) (15 U.S.C. 78o-5(g)(1)), by striking ‘the Director of the Office of Thrift Supervision, the Federal Savings and Loan Insurance Corporation,’; and
(4) in section 23(b)(1) (15 U.S.C. 78w(b)(1)), by striking ‘, other than the Office of Thrift Supervision,’.
SEC. 377. TITLE 18, UNITED STATES CODE.
Title 18, United States Code, is amended--
(1) in section 212(c)(2)--
(A) by striking subparagraph (C); and
(B) by redesignating subparagraphs (D) through (H) as subparagraphs (C) through (G), respectively;
(2) in section 657, by striking ‘Office of Thrift Supervision, the Resolution Trust Corporation,’;
(3) in section 981(a)(1)(D)--
(A) by striking ‘Resolution Trust Corporation,’; and
(B) by striking ‘or the Office of Thrift Supervision’;
(4) in section 982(a)(3)--
(A) by striking ‘Resolution Trust Corporation,’; and
(B) by striking ‘or the Office of Thrift Supervision’;
(5) in section 1006--
(A) by striking ‘Office of Thrift Supervision,’; and
(B) by striking ‘the Resolution Trust Corporation,’;
(6) in section 1014--
(A) by striking ‘the Office of Thrift Supervision’; and
(B) by striking ‘the Resolution Trust Corporation,’; and
(7) in section 1032(1)--
(A) by striking ‘the Resolution Trust Corporation,’; and
(B) by striking ‘or the Director of the Office of Thrift Supervision’.
SEC. 378. TITLE 31, UNITED STATES CODE.
Title 31, United States Code, is amended--
(1) in section 321--
(A) in subsection (c)--
(i) in paragraph (1), by adding ‘and’ at the end;
(ii) in paragraph (2), by striking ‘; and’ and inserting a period; and
(iii) by striking paragraph (3); and
(B) by striking subsection (e); and
(2) in section 714(a), by striking ‘the Office of the Comptroller of the Currency, and the Office of Thrift Supervision.’ and inserting ‘and the Office of the Comptroller of the Currency.’.
TITLE IV--REGULATION OF ADVISERS TO HEDGE FUNDS AND OTHERS
SEC. 401. SHORT TITLE.
This title may be cited as the ‘Private Fund Investment Advisers Registration Act of 2010’.
SEC. 402. DEFINITIONS.
(a) Investment Advisers Act of 1940 Definitions- Section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)) is amended by adding at the end the following:
‘(29) The term ‘private fund’ means an issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3), but for section 3(c)(1) or 3(c)(7) of that Act.
‘(30) The term ‘foreign private adviser’ means any investment adviser who--
‘(A) has no place of business in the United States;
‘(B) has, in total, fewer than 15 clients and investors in the United States in private funds advised by the investment adviser;
‘(C) has aggregate assets under management attributable to clients in the United States and investors in the United States in private funds advised by the investment adviser of less than $25,000,000, or such higher amount as the Commission may, by rule, deem appropriate in accordance with the purposes of this title; and
‘(D) neither--
‘(i) holds itself out generally to the public in the United States as an investment adviser; nor
‘(ii) acts as--
‘(I) an investment adviser to any investment company registered under the Investment Company Act of 1940; or
‘(II) a company that has elected to be a business development company pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a-53), and has not withdrawn its election.’.
(b) Other Definitions- As used in this title, the terms ‘investment adviser’ and ‘private fund’ have the same meanings as in section 202 of the Investment Advisers Act of 1940, as amended by this title.
SEC. 403. ELIMINATION OF PRIVATE ADVISER EXEMPTION; LIMITED EXEMPTION FOR FOREIGN PRIVATE ADVISERS; LIMITED INTRASTATE EXEMPTION.
Section 203(b) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(b)) is amended--
(1) in paragraph (1), by inserting ‘, other than an investment adviser who acts as an investment adviser to any private fund,’ before ‘all of whose’;
(2) by striking paragraph (3) and inserting the following:
‘(3) any investment adviser that is a foreign private adviser;’; and
(3) in paragraph (5), by striking ‘or’ at the end;
(4) in paragraph (6)--
(A) by striking ‘any investment adviser’ and inserting ‘(A) any investment adviser’;
(B) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii), respectively; and
(C) in clause (ii) (as so redesignated), by striking the period at the end and inserting ‘; or’; and
(D) by adding at the end the following:
‘(B) any investment adviser that is registered with the Commodity Futures Trading Commission as a commodity trading advisor and advises a private fund, provided that, if after the date of enactment of the Private Fund Investment Advisers Registration Act of 2010, the business of the advisor should become predominately the provision of securities-related advice, then such adviser shall register with the Commission.’.
(5) by adding at the end the following:
‘(7) any investment adviser, other than any entity that has elected to be regulated or is regulated as a business development company pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a-54), who solely advises--
‘(A) small business investment companies that are licensees under the Small Business Investment Act of 1958;
‘(B) entities that have received from the Small Business Administration notice to proceed to qualify for a license as a small business investment company under the Small Business Investment Act of 1958, which notice or license has not been revoked; or
‘(C) applicants that are affiliated with 1 or more licensed small business investment companies described in subparagraph (A) and that have applied for another license under the Small Business Investment Act of 1958, which application remains pending.’.
SEC. 404. COLLECTION OF SYSTEMIC RISK DATA; REPORTS; EXAMINATIONS; DISCLOSURES.
Section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-4) is amended--
(1) by redesignating subsections (b) and (c) as subsections (c) and (d), respectively; and
(2) by inserting after subsection (a) the following:
‘(b) Records and Reports of Private Funds-
‘(1) IN GENERAL- The Commission may require any investment adviser registered under this title--
‘(A) to maintain such records of, and file with the Commission such reports regarding, private funds advised by the investment adviser, as necessary and appropriate in the public interest and for the protection of investors, or for the assessment of systemic risk by the Financial Stability Oversight Council (in this subsection referred to as the ‘Council’); and
‘(B) to provide or make available to the Council those reports or records or the information contained therein.
‘(2) TREATMENT OF RECORDS- The records and reports of any private fund to which an investment adviser registered under this title provides investment advice shall be deemed to be the records and reports of the investment adviser.
‘(3) REQUIRED INFORMATION- The records and reports required to be maintained by an investment adviser and subject to inspection by the Commission under this subsection shall include, for each private fund advised by the investment adviser, a description of--
‘(A) the amount of assets under management and use of leverage, including off-balance-sheet leverage;
‘(B) counterparty credit risk exposure;
‘(C) trading and investment positions;
‘(D) valuation policies and practices of the fund;
‘(E) types of assets held;
‘(F) side arrangements or side letters, whereby certain investors in a fund obtain more favorable rights or entitlements than other investors;
‘(G) trading practices; and
‘(H) such other information as the Commission, in consultation with the Council, determines is necessary and appropriate in the public interest and for the protection of investors or for the assessment of systemic risk, which may include the establishment of different reporting requirements for different classes of fund advisers, based on the type or size of private fund being advised.
‘(4) MAINTENANCE OF RECORDS- An investment adviser registered under this title shall maintain such records of private funds advised by the investment adviser for such period or periods as the Commission, by rule, may prescribe as necessary and appropriate in the public interest and for the protection of investors, or for the assessment of systemic risk.
‘(5) FILING OF RECORDS- The Commission shall issue rules requiring each investment adviser to a private fund to file reports containing such information as the Commission deems necessary and appropriate in the public interest and for the protection of investors or for the assessment of systemic risk.
‘(6) EXAMINATION OF RECORDS-
‘(A) PERIODIC AND SPECIAL EXAMINATIONS- The Commission--
‘(i) shall conduct periodic inspections of the records of private funds maintained by an investment adviser registered under this title in accordance with a schedule established by the Commission; and
‘(ii) may conduct at any time and from time to time such additional, special, and other examinations as the Commission may prescribe as necessary and appropriate in the public interest and for the protection of investors, or for the assessment of systemic risk.
‘(B) AVAILABILITY OF RECORDS- An investment adviser registered under this title shall make available to the Commission 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.
‘(7) INFORMATION SHARING-
‘(A) IN GENERAL- The Commission shall make available to the Council copies of all reports, documents, records, and information filed with or provided to the Commission by an investment adviser under this subsection as the Council may consider necessary for the purpose of assessing the systemic risk posed by a private fund.
‘(B) CONFIDENTIALITY- The Council shall maintain the confidentiality of information received under this paragraph in all such reports, documents, records, and information, in a manner consistent with the level of confidentiality established for the Commission pursuant to paragraph (8). The Council shall be exempt from section 552 of title 5, United States Code, with respect to any information in any report, document, record, or information made available, to the Council under this subsection.’.
‘(8) COMMISSION CONFIDENTIALITY OF REPORTS- Notwithstanding any other provision of law, the Commission may not be compelled to disclose any report or information contained therein required to be filed with the Commission under this subsection, except that nothing in this subsection authorizes the Commission--
‘(A) to withhold information from Congress, upon an agreement of confidentiality; or
‘(B) prevent the Commission from complying with--
‘(i) a request for information from any other Federal department or agency or any self-regulatory organization requesting the report or information for purposes within the scope of its jurisdiction; or
‘(ii) an order of a court of the United States in an action brought by the United States or the Commission.
‘(9) OTHER RECIPIENTS CONFIDENTIALITY- Any department, agency, or self-regulatory organization that receives reports or information from the Commission under this subsection shall maintain the confidentiality of such reports, documents, records, and information in a manner consistent with the level of confidentiality established for the Commission under paragraph (8).
‘(10) PUBLIC INFORMATION EXCEPTION-
‘(A) IN GENERAL- The Commission, the Council, and any other department, agency, or self-regulatory organization that receives information, reports, documents, records, or information from the Commission under this subsection, shall be exempt from the provisions of section 552 of title 5, United States Code, with respect to any such report, document, record, or information. Any proprietary information of an investment adviser ascertained by the Commission from any report required to be filed with the Commission pursuant to this subsection shall be subject to the same limitations on public disclosure as any facts ascertained during an examination, as provided by section 210(b) of this title.
‘(B) PROPRIETARY INFORMATION- For purposes of this paragraph, proprietary information includes sensitive, non-public information regarding--
‘(i) the investment or trading strategies of the investment adviser;
‘(ii) analytical or research methodologies;
‘(iii) trading data;
‘(iv) computer hardware or software containing intellectual property; and
‘(v) any additional information that the Commission determines to be proprietary.
‘(11) ANNUAL REPORT TO CONGRESS- The Commission shall report annually to Congress on how the Commission has used the data collected pursuant to this subsection to monitor the markets for the protection of investors and the integrity of the markets.’.
SEC. 405. DISCLOSURE PROVISION AMENDMENT.
Section 210(c) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-10(c)) is amended by inserting before the period at the end the following: ‘or for purposes of assessment of potential systemic risk’.
SEC. 406. CLARIFICATION OF RULEMAKING AUTHORITY.
Section 211 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-11) is amended--
(1) in subsection (a), by inserting before the period at the end of the first sentence the following: ‘, including rules and regulations defining technical, trade, and other terms used in this title, except that the Commission may not define the term ‘client’ for purposes of paragraphs (1) and (2) of section 206 to include an investor in a private fund managed by an investment adviser, if such private fund has entered into an advisory contract with such adviser’; and
(2) by adding at the end the following:
‘(e) Disclosure Rules on Private Funds- The Commission and the Commodity Futures Trading Commission shall, after consultation with the Council but not later than 12 months after the date of enactment of the Private Fund Investment Advisers Registration Act of 2010, jointly promulgate rules to establish the form and content of the reports required to be filed with the Commission under subsection 204(b) and with the Commodity Futures Trading Commission by investment advisers that are registered both under this title and the Commodity Exchange Act (7 U.S.C. 1a et seq.).’.
SEC. 407. EXEMPTION OF AND REPORTING BY VENTURE CAPITAL FUND ADVISERS.
Section 203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3) is amended by adding at the end the following:
‘(l) Exemption of Venture Capital Fund Advisers- No investment adviser that acts as an investment adviser solely to 1 or more venture capital funds shall be subject to the registration requirements of this title with respect to the provision of investment advice relating to a venture capital fund. Not later than 1 year after the date of enactment of this subsection, the Commission shall issue final rules to define the term ‘venture capital fund’ for purposes of this subsection. The Commission shall require such advisers to maintain such records and provide to the Commission such annual or other reports as the Commission determines necessary or appropriate in the public interest or for the protection of investors.’.
SEC. 408. EXEMPTION OF AND REPORTING BY CERTAIN PRIVATE FUND ADVISERS.
Section 203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3) is amended by adding at the end the following:
‘(m) Exemption of and Reporting by Certain Private Fund Advisers-
‘(1) IN GENERAL- The Commission shall provide an exemption from the registration requirements under this section to any investment adviser of private funds, if each of such investment adviser acts solely as an adviser to private funds and has assets under management in the United States of less than $150,000,000.
‘(2) REPORTING- The Commission shall require investment advisers exempted by reason of this subsection to maintain such records and provide to the Commission such annual or other reports as the Commission determines necessary or appropriate in the public interest or for the protection of investors.
‘(n) Registration and Examination of Mid-sized Private Fund Advisers- In prescribing regulations to carry out the requirements of this section with respect to investment advisers acting as investment advisers to mid-sized private funds, the Commission shall take into account the size, governance, and investment strategy of such funds to determine whether they pose systemic risk, and shall provide for registration and examination procedures with respect to the investment advisers of such funds which reflect the level of systemic risk posed by such funds.’.
SEC. 409. FAMILY OFFICES.
(a) In General- Section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)) is amended by striking ‘or (G)’ and inserting the following: ‘; (G) any family office, as defined by rule, regulation, or order of the Commission, in accordance with the purposes of this title; or (H)’.
(b) Rulemaking- The rules, regulations, or orders issued by the Commission pursuant to section 202(a)(11)(G) of the Investment Advisers Act of 1940, as added by this section, regarding the definition of the term ‘family office’ shall provide for an exemption that--
(1) is consistent with the previous exemptive policy of the Commission, as reflected in exemptive orders for family offices in effect on the date of enactment of this Act, and the grandfathering provisions in paragraph (3);
(2) recognizes the range of organizational, management, and employment structures and arrangements employed by family offices; and
(3) does not exclude any person who was not registered or required to be registered under the Investment Advisers Act of 1940 on January 1, 2010 from the definition of the term ‘family office’, solely because such person provides investment advice to, and was engaged before January 1, 2010 in providing investment advice to--
(A) natural persons who, at the time of their applicable investment, are officers, directors, or employees of the family office who--
(i) have invested with the family office before January 1, 2010; and
(ii) are accredited investors, as defined in Regulation D of the Commission (or any successor thereto) under the Securities Act of 1933, or, as the Commission may prescribe by rule, the successors-in-interest thereto;
(B) any company owned exclusively and controlled by members of the family of the family office, or as the Commission may prescribe by rule;
(C) any investment adviser registered under the Investment Adviser Act of 1940 that provides investment advice to the family office and who identifies investment opportunities to the family office, and invests in such transactions on substantially the same terms as the family office invests, but does not invest in other funds advised by the family office, and whose assets as to which the family office directly or indirectly provides investment advice represent, in the aggregate, not more than 5 percent of the value of the total assets as to which the family office provides investment advice.
(c) Antifraud Authority- A family office that would not be a family office, but for subsection (b)(3), shall be deemed to be an investment adviser for the purposes of paragraphs (1), (2) and (4) of section 206 of the Investment Advisers Act of 1940.
SEC. 410. STATE AND FEDERAL RESPONSIBILITIES; ASSET THRESHOLD FOR FEDERAL REGISTRATION OF INVESTMENT ADVISERS.
Section 203A(a) of the of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3a(a)) is amended--
(1) by redesignating paragraph (2) as paragraph (3); and
(2) by inserting after paragraph (1) the following:
‘(2) TREATMENT OF MID-SIZED INVESTMENT ADVISERS-
‘(A) IN GENERAL- No investment adviser described in subparagraph (B) shall register under section 203, unless the investment adviser is an adviser to an investment company registered under the Investment Company Act of 1940, or a company which has elected to be a business development company pursuant to section 54 of the Investment Company Act of 1940, and has not withdrawn the election, except that, if by effect of this paragraph an investment adviser would be required to register with 15 or more States, then the adviser may register under section 203.
‘(B) COVERED PERSONS- An investment adviser described in this subparagraph is an investment adviser that--
‘(i) is required to be registered as an investment adviser with the securities commissioner (or any agency or office performing like functions) of the State in which it maintains its principal office and place of business and, if registered, would be subject to examination as an investment adviser by any such commissioner, agency, or office; and
‘(ii) has assets under management between--
‘(I) the amount specified under subparagraph (A) of paragraph (1), as such amount may have been adjusted by the Commission pursuant to that subparagraph; and
‘(II) $100,000,000, or such higher amount as the Commission may, by rule, deem appropriate in accordance with the purposes of this title.’.
SEC. 411. CUSTODY OF CLIENT ASSETS.
The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) is amended by adding at the end the following new section:
‘SEC. 223. CUSTODY OF CLIENT ACCOUNTS.
‘An investment adviser registered under this title shall take such steps to safeguard client assets over which such adviser has custody, including, without limitation, verification of such assets by an independent public accountant, as the Commission may, by rule, prescribe.’.
SEC. 412. COMPTROLLER GENERAL STUDY ON CUSTODY RULE COSTS.
The Comptroller General of the United States shall--
(1) conduct a study of--
(A) the compliance costs associated with the current Securities and Exchange Commission rules 204-2 (17 C.F.R. Parts 275.204-2) and rule 206(4)-2 (17 C.F.R. 275.206(4)-2) under the Investment Advisers Act of 1940 regarding custody of funds or securities of clients by investment advisers; and
(B) the additional costs if subsection (b)(6) of rule 206(4)-2 (17 C.F.R. 275.206(4)-2(b)(6)) relating to operational independence were eliminated; and
(2) submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the results of such study, not later than 3 years after the date of enactment of this Act.
SEC. 413. ADJUSTING THE ACCREDITED INVESTOR STANDARD.
(a) In General- The Commission shall adjust any net worth standard for an accredited investor, as set forth in the rules of the Commission under the Securities Act of 1933, so that the individual net worth of any natural person, or joint net worth with the spouse of that person, at the time of purchase, is more than $1,000,000 (as such amount is adjusted periodically by rule of the Commission), excluding the value of the primary residence of such natural person, except that during the 4-year period that begins on the date of enactment of this Act, any net worth standard shall be $1,000,000, excluding the value of the primary residence of such natural person.
(b) Review and Adjustment-
(1) INITIAL REVIEW AND ADJUSTMENT-
(A) INITIAL REVIEW- The Commission may undertake a review of the definition of the term ‘accredited investor’, as such term applies to natural persons, to determine whether the requirements of the definition, excluding the requirement relating to the net worth standard described in subsection (a), should be adjusted or modified for the protection of investors, in the public interest, and in light of the economy.
(B) ADJUSTMENT OR MODIFICATION- Upon completion of a review under subparagraph (A), the Commission may, by notice and comment rulemaking, make such adjustments to the definition of the term ‘accredited investor’, excluding adjusting or modifying the requirement relating to the net worth standard described in subsection (a), as such term applies to natural persons, as the Commission may deem appropriate for the protection of investors, in the public interest, and in light of the economy.
(2) SUBSEQUENT REVIEWS AND ADJUSTMENT-
(A) SUBSEQUENT REVIEWS- Not earlier than 4 years after the date of enactment of this Act, and not less frequently than once every 4 years thereafter, the Commission shall undertake a review of the definition, in its entirety, of the term ‘accredited investor’, as defined in section 230.215 of title 17, Code of Federal Regulations, or any successor thereto, as such term applies to natural persons, to determine whether the requirements of the definition should be adjusted or modified for the protection of investors, in the public interest, and in light of the economy.
(B) ADJUSTMENT OR MODIFICATION- Upon completion of a review under subparagraph (A), the Commission may, by notice and comment rulemaking, make such adjustments to the definition of the term ‘accredited investor’, as defined in section 230.215 of title 17, Code of Federal Regulations, or any successor thereto, as such term applies to natural persons, as the Commission may deem appropriate for the protection of investors, in the public interest, and in light of the economy.
SEC. 414. RULE OF CONSTRUCTION RELATING TO THE COMMODITIES EXCHANGE ACT.
The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) is further amended by adding at the end the following new section:
‘SEC. 224. RULE OF CONSTRUCTION RELATING TO THE COMMODITIES EXCHANGE ACT.
‘Nothing in this title shall relieve any person of any obligation or duty, or affect the availability of any right or remedy available to the Commodity Futures Trading Commission or any private party, arising under the Commodity Exchange Act (7 U.S.C. 1 et seq.) governing commodity pools, commodity pool operators, or commodity trading advisors.’.
SEC. 415. GAO STUDY AND REPORT ON ACCREDITED INVESTORS.
The Comptroller General of the United States shall conduct a study on the appropriate criteria for determining the financial thresholds or other criteria needed to qualify for accredited investor status and eligibility to invest in private funds, and shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the results of such study not later than 3 years after the date of enactment of this Act.
SEC. 416. GAO STUDY ON SELF-REGULATORY ORGANIZATION FOR PRIVATE FUNDS.
The Comptroller General of the United States shall--
(1) conduct a study of the feasibility of forming a self-regulatory organization to oversee private funds; and
(2) submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the results of such study, not later than 1 year after the date of enactment of this Act.
SEC. 417. COMMISSION STUDY AND REPORT ON SHORT SELLING.
(a) Studies- The Division of Risk, Strategy, and Financial Innovation of the Commission shall conduct--
(1) a study, taking into account current scholarship, on the state of short selling on national securities exchanges and in the over-the-counter markets, with particular attention to the impact of recent rule changes and the incidence of--
(A) the failure to deliver shares sold short; or
(B) delivery of shares on the fourth day following the short sale transaction; and
(2) a study of--
(A) the feasibility, benefits, and costs of requiring reporting publicly, in real time short sale positions of publicly listed securities, or, in the alternative, reporting such short positions in real time only to the Commission and the Financial Industry Regulatory Authority; and
(B) the feasibility, benefits, and costs of conducting a voluntary pilot program in which public companies will agree to have all trades of their shares marked ‘short’, ‘market maker short’, ‘buy’, ‘buy-to-cover’, or ‘long’, and reported in real time through the Consolidated Tape.
(b) Reports- The Commission shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives--
(1) on the results of the study required under subsection (a)(1), including recommendations for market improvements, not later than 2 years after the date of enactment of this Act; and
(2) on the results of the study required under subsection (a)(2), not later than 1 year after the date of enactment of this Act.
SEC. 418. QUALIFIED CLIENT STANDARD.
Section 205(e) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-5(e)) is amended by adding at the end the following: ‘With respect to any factor used in any rule or regulation by the Commission in making a determination under this subsection, if the Commission uses a dollar amount test in connection with such factor, such as a net asset threshold, the Commission shall, by order, not later than 1 year after the date of enactment of the Private Fund Investment Advisers Registration Act of 2010, and every 5 years thereafter, adjust for the effects of inflation on such test. Any such adjustment that is not a multiple of $100,000 shall be rounded to the nearest multiple of $100,000.’.
SEC. 419. TRANSITION PERIOD.
Except as otherwise provided in this title, this title and the amendments made by this title shall become effective 1 year after the date of enactment of this Act, except that any investment adviser may, at the discretion of the investment adviser, register with the Commission under the Investment Advisers Act of 1940 during that 1-year period, subject to the rules of the Commission.
TITLE V--INSURANCE
Subtitle A--Federal Insurance Office
SEC. 501. SHORT TITLE.
This subtitle may be cited as the ‘Federal Insurance Office Act of 2010’.
SEC. 502. FEDERAL INSURANCE OFFICE.
(a) Establishment of Office- Subchapter I of chapter 3 of subtitle I of title 31, United States Code, is amended--
(1) by redesignating section 312 as section 315;
(2) by redesignating section 313 as section 312; and
(3) by inserting after section 312 (as so redesignated) the following new sections:
‘SEC. 313. FEDERAL INSURANCE OFFICE.
‘(a) Establishment- There is established within the Department of the Treasury the Federal Insurance Office.
‘(b) Leadership- The Office shall be headed by a Director, who shall be appointed by the Secretary of the Treasury. The position of Director shall be a career reserved position in the Senior Executive Service, as that position is defined under section 3132 of title 5, United States Code.
‘(c) Functions-
‘(1) AUTHORITY PURSUANT TO DIRECTION OF SECRETARY- The Office, pursuant to the direction of the Secretary, shall have the authority--
‘(A) to monitor all aspects of the insurance industry, including identifying issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance industry or the United States financial system;
‘(B) to monitor the extent to which traditionally underserved communities and consumers, minorities (as such term is defined in section 1204(c) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1811 note)), and low- and moderate-income persons have access to affordable insurance products regarding all lines of insurance, except health insurance;
‘(C) to recommend to the Financial Stability Oversight Council that it designate an insurer, including the affiliates of such insurer, as an entity subject to regulation as a nonbank financial company supervised by the Board of Governors pursuant to title I of the Dodd-Frank Wall Street Reform and Consumer Protection Act;
‘(D) to assist the Secretary in administering the Terrorism Insurance Program established in the Department of the Treasury under the Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701 note);
‘(E) to coordinate Federal efforts and develop Federal policy on prudential aspects of international insurance matters, including representing the United States, as appropriate, in the International Association of Insurance Supervisors (or a successor entity) and assisting the Secretary in negotiating covered agreements (as such term is defined in subsection (r));
‘(F) to determine, in accordance with subsection (f), whether State insurance measures are preempted by covered agreements;
‘(G) to consult with the States (including State insurance regulators) regarding insurance matters of national importance and prudential insurance matters of international importance; and
‘(H) to perform such other related duties and authorities as may be assigned to the Office by the Secretary.
‘(2) ADVISORY FUNCTIONS- The Office shall advise the Secretary on major domestic and prudential international insurance policy issues.
‘(3) ADVISORY CAPACITY ON COUNCIL- The Director shall serve in an advisory capacity on the Financial Stability Oversight Council established under the Financial Stability Act of 2010.
‘(d) Scope- The authority of the Office shall extend to all lines of insurance except--
‘(1) health insurance, as determined by the Secretary in coordination with the Secretary of Health and Human Services based on section 2791 of the Public Health Service Act (42 U.S.C. 300gg-91);
‘(2) long-term care insurance, except long-term care insurance that is included with life or annuity insurance components, as determined by the Secretary in coordination with the Secretary of Health and Human Services, and in the case of long-term care insurance that is included with such components, the Secretary shall coordinate with the Secretary of Health and Human Services in performing the functions of the Office; and
‘(3) crop insurance, as established by the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.).
‘(e) Gathering of Information-
‘(1) IN GENERAL- In carrying out the functions required under subsection (c), the Office may--
‘(A) receive and collect data and information on and from the insurance industry and insurers;
‘(B) enter into information-sharing agreements;
‘(C) analyze and disseminate data and information; and
‘(D) issue reports regarding all lines of insurance except health insurance.
‘(2) COLLECTION OF INFORMATION FROM INSURERS AND AFFILIATES-
‘(A) IN GENERAL- Except as provided in paragraph (3), the Office may require an insurer, or any affiliate of an insurer, to submit such data or information as the Office may reasonably require in carrying out the functions described under subsection (c).
‘(B) RULE OF CONSTRUCTION- Notwithstanding any other provision of this section, for purposes of subparagraph (A), the term ‘insurer’ means any entity that writes insurance or reinsures risks and issues contracts or policies in 1 or more States.
‘(3) EXCEPTION FOR SMALL INSURERS- Paragraph (2) shall not apply with respect to any insurer or affiliate thereof that meets a minimum size threshold that the Office may establish, whether by order or rule.
‘(4) ADVANCE COORDINATION- Before collecting any data or information under paragraph (2) from an insurer, or affiliate of an insurer, the Office shall coordinate with each relevant Federal agency and State insurance regulator (or other relevant Federal or State regulatory agency, if any, in the case of an affiliate of an insurer) and any publicly available sources to determine if the information to be collected is available from, and may be obtained in a timely manner by, such Federal agency or State insurance regulator, individually or collectively, other regulatory agency, or publicly available sources. If the Director determines that such data or information is available, and may be obtained in a timely manner, from such an agency, regulator, regulatory agency, or source, the Director shall obtain the data or information from such agency, regulator, regulatory agency, or source. If the Director determines that such data or information is not so available, the Director may collect such data or information from an insurer (or affiliate) only if the Director complies with the requirements of subchapter I of chapter 35 of title 44, United States Code (relating to Federal information policy; commonly known as the Paperwork Reduction Act), in collecting such data or information. Notwithstanding any other provision of law, each such relevant Federal agency and State insurance regulator or other Federal or State regulatory agency is authorized to provide to the Office such data or information.
‘(5) CONFIDENTIALITY-
‘(A) RETENTION OF PRIVILEGE- The submission of any nonpublicly available data and information to the Office under this subsection shall not constitute a waiver of, or otherwise affect, any privilege arising under Federal or State law (including the rules of any Federal or State court) to which the data or information is otherwise subject.
‘(B) CONTINUED APPLICATION OF PRIOR CONFIDENTIALITY AGREEMENTS- Any requirement under Federal or State law to the extent otherwise applicable, or any requirement pursuant to a written agreement in effect between the original source of any nonpublicly available data or information and the source of such data or information to the Office, regarding the privacy or confidentiality of any data or information in the possession of the source to the Office, shall continue to apply to such data or information after the data or information has been provided pursuant to this subsection to the Office.
‘(C) INFORMATION-SHARING AGREEMENT- Any data or information obtained by the Office may be made available to State insurance regulators, individually or collectively, through an information-sharing agreement that--
‘(i) shall comply with applicable Federal law; and
‘(ii) shall not constitute a waiver of, or otherwise affect, any privilege under Federal or State law (including the rules of any Federal or State court) to which the data or information is otherwise subject.
‘(D) AGENCY DISCLOSURE REQUIREMENTS- Section 552 of title 5, United States Code, shall apply to any data or information submitted to the Office by an insurer or an affiliate of an insurer.
‘(6) SUBPOENAS AND ENFORCEMENT- The Director shall have the power to require by subpoena the production of the data or information requested under paragraph (2), but only upon a written finding by the Director that such data or information is required to carry out the functions described under subsection (c) and that the Office has coordinated with such regulator or agency as required under paragraph (4). Subpoenas shall bear the signature of the Director and shall be served by any person or class of persons designated by the Director for that purpose. In the case of contumacy or failure to obey a subpoena, the subpoena shall be enforceable by order of any appropriate district court of the United States. Any failure to obey the order of the court may be punished by the court as a contempt of court.
‘(f) Preemption of State Insurance Measures-
‘(1) STANDARD- A State insurance measure shall be preempted pursuant to this section or section 314 if, and only to the extent that the Director determines, in accordance with this subsection, that the measure--
‘(A) results in less favorable treatment of a non-United States insurer domiciled in a foreign jurisdiction that is subject to a covered agreement than a United States insurer domiciled, licensed, or otherwise admitted in that State; and
‘(B) is inconsistent with a covered agreement.
‘(2) DETERMINATION-
‘(A) NOTICE OF POTENTIAL INCONSISTENCY- Before making any determination under paragraph (1), the Director shall--
‘(i) notify and consult with the appropriate State regarding any potential inconsistency or preemption;
‘(ii) notify and consult with the United States Trade Representative regarding any potential inconsistency or preemption;
‘(iii) cause to be published in the Federal Register notice of the issue regarding the potential inconsistency or preemption, including a description of each State insurance measure at issue and any applicable covered agreement;
‘(iv) provide interested parties a reasonable opportunity to submit written comments to the Office; and
‘(v) consider any comments received.
‘(B) SCOPE OF REVIEW- For purposes of this subsection, any determination of the Director regarding State insurance measures, and any preemption under paragraph (1) as a result of such determination, shall be limited to the subject matter contained within the covered agreement involved and shall achieve a level of protection for insurance or reinsurance consumers that is substantially equivalent to the level of protection achieved under State insurance or reinsurance regulation.
‘(C) NOTICE OF DETERMINATION OF INCONSISTENCY- Upon making any determination under paragraph (1), the Director shall--
‘(i) notify the appropriate State of the determination and the extent of the inconsistency;
‘(ii) establish a reasonable period of time, which shall not be less than 30 days, before the determination shall become effective; and
‘(iii) notify the Committees on Financial Services and Ways and Means of the House of Representatives and the Committees on Banking, Housing, and Urban Affairs and Finance of the Senate.
‘(3) NOTICE OF EFFECTIVENESS- Upon the conclusion of the period referred to in paragraph (2)(C)(ii), if the basis for such determination still exists, the determination shall become effective and the Director shall--
‘(A) cause to be published a notice in the Federal Register that the preemption has become effective, as well as the effective date; and
‘(B) notify the appropriate State.
‘(4) LIMITATION- No State may enforce a State insurance measure to the extent that such measure has been preempted under this subsection.
‘(g) Applicability of Administrative Procedures Act- Determinations of inconsistency made pursuant to subsection (f)(2) shall be subject to the applicable provisions of subchapter II of chapter 5 of title 5, United States Code (relating to administrative procedure), and chapter 7 of such title (relating to judicial review), except that in any action for judicial review of a determination of inconsistency, the court shall determine the matter de novo.
‘(h) Regulations, Policies, and Procedures- The Secretary may issue orders, regulations, policies, and procedures to implement this section.
‘(i) Consultation- The Director shall consult with State insurance regulators, individually or collectively, to the extent the Director determines appropriate, in carrying out the functions of the Office.
‘(j) Savings Provisions- Nothing in this section shall--
‘(1) preempt--
‘(A) any State insurance measure that governs any insurer’s rates, premiums, underwriting, or sales practices;
‘(B) any State coverage requirements for insurance;
‘(C) the application of the antitrust laws of any State to the business of insurance; or
‘(D) any State insurance measure governing the capital or solvency of an insurer, except to the extent that such State insurance measure results in less favorable treatment of a non-United State insurer than a United States insurer;
‘(2) be construed to alter, amend, or limit any provision of the Consumer Financial Protection Agency Act of 2010; or
‘(3) affect the preemption of any State insurance measure otherwise inconsistent with and preempted by Federal law.
‘(k) Retention of Existing State Regulatory Authority- Nothing in this section or section 314 shall be construed to establish or provide the Office or the Department of the Treasury with general supervisory or regulatory authority over the business of insurance.
‘(l) Retention of Authority of Federal Financial Regulatory Agencies- Nothing in this section or section 314 shall be construed to limit the authority of any Federal financial regulatory agency, including the authority to develop and coordinate policy, negotiate, and enter into agreements with foreign governments, authorities, regulators, and multinational regulatory committees and to preempt State measures to affect uniformity with international regulatory agreements.
‘(m) Retention of Authority of United States Trade Representative- Nothing in this section or section 314 shall be construed to affect the authority of the Office of the United States Trade Representative pursuant to section 141 of the Trade Act of 1974 (19 U.S.C. 2171) or any other provision of law, including authority over the development and coordination of United States international trade policy and the administration of the United States trade agreements program.
‘(n) Annual Reports to Congress-
‘(1) SECTION 313(f) REPORTS- Beginning September 30, 2011, the Director shall submit a report on or before September 30 of each calendar year to the President and to the Committees on Financial Services and Ways and Means of the House of Representatives and the Committees on Banking, Housing, and Urban Affairs and Finance of the Senate on any actions taken by the Office pursuant to subsection (f) (regarding preemption of inconsistent State insurance measures).
‘(2) INSURANCE INDUSTRY- Beginning September 30, 2011, the Director shall submit a report on or before September 30 of each calendar year to the President and to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate on the insurance industry and any other information as deemed relevant by the Director or requested by such Committees.
‘(o) Reports on U.S. and Global Reinsurance Market- The Director shall submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate--
‘(1) a report received not later than September 30, 2012, describing the breadth and scope of the global reinsurance market and the critical role such market plays in supporting insurance in the United States; and
‘(2) a report received not later than January 1, 2013, and updated not later than January 1, 2015, describing the impact of part II of the Nonadmitted and Reinsurance Reform Act of 2010 on the ability of State regulators to access reinsurance information for regulated companies in their jurisdictions.
‘(p) Study and Report on Regulation of Insurance-
‘(1) IN GENERAL- Not later than 18 months after the date of enactment of this section, the Director shall conduct a study and submit a report to Congress on how to modernize and improve the system of insurance regulation in the United States.
‘(2) CONSIDERATIONS- The study and report required under paragraph (1) shall be based on and guided by the following considerations:
‘(A) Systemic risk regulation with respect to insurance.
‘(B) Capital standards and the relationship between capital allocation and liabilities, including standards relating to liquidity and duration risk.
‘(C) Consumer protection for insurance products and practices, including gaps in State regulation.
‘(D) The degree of national uniformity of State insurance regulation.
‘(E) The regulation of insurance companies and affiliates on a consolidated basis.
‘(F) International coordination of insurance regulation.
‘(3) ADDITIONAL FACTORS- The study and report required under paragraph (1) shall also examine the following factors:
‘(A) The costs and benefits of potential Federal regulation of insurance across various lines of insurance (except health insurance).
‘(B) The feasibility of regulating only certain lines of insurance at the Federal level, while leaving other lines of insurance to be regulated at the State level.
‘(C) The ability of any potential Federal regulation or Federal regulators to eliminate or minimize regulatory arbitrage.
‘(D) The impact that developments in the regulation of insurance in foreign jurisdictions might have on the potential Federal regulation of insurance.
‘(E) The ability of any potential Federal regulation or Federal regulator to provide robust consumer protection for policyholders.
‘(F) The potential consequences of subjecting insurance companies to a Federal resolution authority, including the effects of any Federal resolution authority--
‘(i) on the operation of State insurance guaranty fund systems, including the loss of guaranty fund coverage if an insurance company is subject to a Federal resolution authority;
‘(ii) on policyholder protection, including the loss of the priority status of policyholder claims over other unsecured general creditor claims;
‘(iii) in the case of life insurance companies, on the loss of the special status of separate account assets and separate account liabilities; and
‘(iv) on the international competitiveness of insurance companies.
‘(G) Such other factors as the Director determines necessary or appropriate, consistent with the principles set forth in paragraph (2).
‘(4) REQUIRED RECOMMENDATIONS- The study and report required under paragraph (1) shall also contain any legislative, administrative, or regulatory recommendations, as the Director determines appropriate, to carry out or effectuate the findings set forth in such report.
‘(5) CONSULTATION- With respect to the study and report required under paragraph (1), the Director shall consult with the State insurance regulators, consumer organizations, representatives of the insurance industry and policyholders, and other organizations and experts, as appropriate.
‘(q) Use of Existing Resources- To carry out this section, the Office may employ personnel, facilities, and any other resource of the Department of the Treasury available to the Secretary and the Secretary shall dedicate specific personnel to the Office.
‘(r) Definitions- In this section and section 314, the following definitions shall apply:
‘(1) AFFILIATE- The term ‘affiliate’ means, with respect to an insurer, any person who controls, is controlled by, or is under common control with the insurer.
‘(2) COVERED AGREEMENT- The term ‘covered agreement’ means a written bilateral or multilateral agreement regarding prudential measures with respect to the business of insurance or reinsurance that--
‘(A) is entered into between the United States and one or more foreign governments, authorities, or regulatory entities; and
‘(B) relates to the recognition of prudential measures with respect to the business of insurance or reinsurance that achieves a level of protection for insurance or reinsurance consumers that is substantially equivalent to the level of protection achieved under State insurance or reinsurance regulation.
‘(3) INSURER- The term ‘insurer’ means any person engaged in the business of insurance, including reinsurance.
‘(4) FEDERAL FINANCIAL REGULATORY AGENCY- The term ‘Federal financial regulatory agency’ means the Department of the Treasury, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, or the National Credit Union Administration.
‘(5) NON-UNITED STATES INSURER- The term ‘non-United States insurer’ means an insurer that is organized under the laws of a jurisdiction other than a State, but does not include any United States branch of such an insurer.
‘(6) OFFICE- The term ‘Office’ means the Federal Insurance Office established by this section.
‘(7) STATE INSURANCE MEASURE- The term ‘State insurance measure’ means any State law, regulation, administrative ruling, bulletin, guideline, or practice relating to or affecting prudential measures applicable to insurance or reinsurance.
‘(8) STATE INSURANCE REGULATOR- The term ‘State insurance regulator’ means any State regulatory authority responsible for the supervision of insurers.
‘(9) SUBSTANTIALLY EQUIVALENT TO THE LEVEL OF PROTECTION ACHIEVED- The term ‘substantially equivalent to the level of protection achieved’ means the prudential measures of a foreign government, authority, or regulatory entity achieve a similar outcome in consumer protection as the outcome achieved under State insurance or reinsurance regulation.
‘(10) UNITED STATES INSURER- The term ‘United States insurer’ means--
‘(A) an insurer that is organized under the laws of a State; or
‘(B) a United States branch of a non-United States insurer.
‘(s) Authorization of Appropriations- There are authorized to be appropriated for the Office for each fiscal year such sums as may be necessary.
‘SEC. 314. COVERED AGREEMENTS.
‘(a) Authority- The Secretary and the United States Trade Representative are authorized, jointly, to negotiate and enter into covered agreements on behalf of the United States.
‘(b) Requirements for Consultation With Congress-
‘(1) IN GENERAL- Before initiating negotiations to enter into a covered agreement under subsection (a), during such negotiations, and before entering into any such agreement, the Secretary and the United States Trade Representative shall jointly consult with the Committee on Financial Services and the Committee on Ways and Means of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs and the Committee on Finance of the Senate.
‘(2) SCOPE- The consultation described in paragraph (1) shall include consultation with respect to--
‘(A) the nature of the agreement;
‘(B) how and to what extent the agreement will achieve the applicable purposes, policies, priorities, and objectives of section 313 and this section; and
‘(C) the implementation of the agreement, including the general effect of the agreement on existing State laws.
‘(c) Submission and Layover Provisions- A covered agreement under subsection (a) may enter into force with respect to the United States only if--
‘(1) the Secretary and the United States Trade Representative jointly submit to the congressional committees specified in subsection (b)(1), on a day on which both Houses of Congress are in session, a copy of the final legal text of the agreement; and
‘(2) a period of 90 calendar days beginning on the date on which the copy of the final legal text of the agreement is submitted to the congressional committees under paragraph (1) has expired.’.
(b) Duties of Secretary- Section 321(a) of title 31, United States Code, is amended--
(1) in paragraph (7), by striking ‘; and’ and inserting a semicolon;
(2) in paragraph (8)(C), by striking the period at the end and inserting ‘; and’; and
(3) by adding at the end the following new paragraph:
‘(9) advise the President on major domestic and international prudential policy issues in connection with all lines of insurance except health insurance.’.
(c) Clerical Amendment- The table of sections for subchapter I of chapter 3 of title 31, United States Code, is amended by striking the item relating to section 312 and inserting the following new items:
‘Sec. 312. Terrorism and financial intelligence.
‘Sec. 313. Federal Insurance Office.
‘Sec. 314. Covered agreements.
‘Sec. 315. Continuing in office.’.
Subtitle B--State-Based Insurance Reform
SEC. 511. SHORT TITLE.
This subtitle may be cited as the ‘Nonadmitted and Reinsurance Reform Act of 2010’.
SEC. 512. EFFECTIVE DATE.
Except as otherwise specifically provided in this subtitle, this subtitle shall take effect upon the expiration of the 12-month period beginning on the date of the enactment of this subtitle.
SEC. 521. REPORTING, PAYMENT, AND ALLOCATION OF PREMIUM TAXES.
(a) Home State’s Exclusive Authority- No State other than the home State of an insured may require any premium tax payment for nonadmitted insurance.
(b) Allocation of Nonadmitted Premium Taxes-
(1) IN GENERAL- The States may enter into a compact or otherwise establish procedures to allocate among the States the premium taxes paid to an insured’s home State described in subsection (a).
(2) EFFECTIVE DATE- Except as expressly otherwise provided in such compact or other procedures, any such compact or other procedures--
(A) if adopted on or before the expiration of the 330-day period that begins on the date of the enactment of this subtitle, shall apply to any premium taxes that, on or after such date of enactment, are required to be paid to any State that is subject to such compact or procedures; and
(B) if adopted after the expiration of such 330-day period, shall apply to any premium taxes that, on or after January 1 of the first calendar year that begins after the expiration of such 330-day period, are required to be paid to any State that is subject to such compact or procedures.
(3) REPORT- Upon the expiration of the 330-day period referred to in paragraph (2), the NAIC may submit a report to the Committee on Financial Services and the Committee on the Judiciary of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate identifying and describing any compact or other procedures for allocation among the States of premium taxes that have been adopted during such period by any States.
(4) NATIONWIDE SYSTEM- The Congress intends that each State adopt nationwide uniform requirements, forms, and procedures, such as an interstate compact, that provide for the reporting, payment, collection, and allocation of premium taxes for nonadmitted insurance consistent with this section.
(c) Allocation Based on Tax Allocation Report- To facilitate the payment of premium taxes among the States, an insured’s home State may require surplus lines brokers and insureds who have independently procured insurance to annually file tax allocation reports with the insured’s home State detailing the portion of the nonadmitted insurance policy premium or premiums attributable to properties, risks, or exposures located in each State. The filing of a nonadmitted insurance tax allocation report and the payment of tax may be made by a person authorized by the insured to act as its agent.
SEC. 522. REGULATION OF NONADMITTED INSURANCE BY INSURED’S HOME STATE.
(a) Home State Authority- Except as otherwise provided in this section, the placement of nonadmitted insurance shall be subject to the statutory and regulatory requirements solely of the insured’s home State.
(b) Broker Licensing- No State other than an insured’s home State may require a surplus lines broker to be licensed in order to sell, solicit, or negotiate nonadmitted insurance with respect to such insured.
(c) Enforcement Provision- With respect to section 521 and subsections (a) and (b) of this section, any law, regulation, provision, or action of any State that applies or purports to apply to nonadmitted insurance sold to, solicited by, or negotiated with an insured whose home State is another State shall be preempted with respect to such application.
(d) Workers’ Compensation Exception- This section may not be construed to preempt any State law, rule, or regulation that restricts the placement of workers’ compensation insurance or excess insurance for self-funded workers’ compensation plans with a nonadmitted insurer.
SEC. 523. PARTICIPATION IN NATIONAL PRODUCER DATABASE.
After the expiration of the 2-year period beginning on the date of the enactment of this subtitle, a State may not collect any fees relating to licensing of an individual or entity as a surplus lines broker in the State unless the State has in effect at such time laws or regulations that provide for participation by the State in the national insurance producer database of the NAIC, or any other equivalent uniform national database, for the licensure of surplus lines brokers and the renewal of such licenses.
SEC. 524. UNIFORM STANDARDS FOR SURPLUS LINES ELIGIBILITY.
A State may not--
(1) impose eligibility requirements on, or otherwise establish eligibility criteria for, nonadmitted insurers domiciled in a United States jurisdiction, except in conformance with such requirements and criteria in sections 5A(2) and 5C(2)(a) of the Non-Admitted Insurance Model Act, unless the State has adopted nationwide uniform requirements, forms, and procedures developed in accordance with section 521(b) of this subtitle that include alternative nationwide uniform eligibility requirements; or
(2) prohibit a surplus lines broker from placing nonadmitted insurance with, or procuring nonadmitted insurance from, a nonadmitted insurer domiciled outside the United States that is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC.
SEC. 525. STREAMLINED APPLICATION FOR COMMERCIAL PURCHASERS.
A surplus lines broker seeking to procure or place nonadmitted insurance in a State for an exempt commercial purchaser shall not be required to satisfy any State requirement to make a due diligence search to determine whether the full amount or type of insurance sought by such exempt commercial purchaser can be obtained from admitted insurers if--
(1) the broker procuring or placing the surplus lines insurance has disclosed to the exempt commercial purchaser that such insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight; and
(2) the exempt commercial purchaser has subsequently requested in writing the broker to procure or place such insurance from a nonadmitted insurer.
SEC. 526. GAO STUDY OF NONADMITTED INSURANCE MARKET.
(a) In General- The Comptroller General of the United States shall conduct a study of the nonadmitted insurance market to determine the effect of the enactment of this part on the size and market share of the nonadmitted insurance market for providing coverage typically provided by the admitted insurance market.
(b) Contents- The study shall determine and analyze--
(1) the change in the size and market share of the nonadmitted insurance market and in the number of insurance companies and insurance holding companies providing such business in the 18-month period that begins upon the effective date of this subtitle;
(2) the extent to which insurance coverage typically provided by the admitted insurance market has shifted to the nonadmitted insurance market;
(3) the consequences of any change in the size and market share of the nonadmitted insurance market, including differences in the price and availability of coverage available in both the admitted and nonadmitted insurance markets;
(4) the extent to which insurance companies and insurance holding companies that provide both admitted and nonadmitted insurance have experienced shifts in the volume of business between admitted and nonadmitted insurance; and
(5) the extent to which there has been a change in the number of individuals who have nonadmitted insurance policies, the type of coverage provided under such policies, and whether such coverage is available in the admitted insurance market.
(c) Consultation With NAIC- In conducting the study under this section, the Comptroller General shall consult with the NAIC.
(d) Report- The Comptroller General shall complete the study under this section and submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives regarding the findings of the study not later than 30 months after the effective date of this subtitle.
SEC. 527. DEFINITIONS.
For purposes of this part, the following definitions shall apply:
(1) ADMITTED INSURER- The term ‘admitted insurer’ means, with respect to a State, an insurer licensed to engage in the business of insurance in such State.
(2) AFFILIATE- The term ‘affiliate’ means, with respect to an insured, any entity that controls, is controlled by, or is under common control with the insured.
(3) AFFILIATED GROUP- The term ‘affiliated group’ means any group of entities that are all affiliated.
(4) CONTROL- An entity has ‘control’ over another entity if--
(A) the entity directly or indirectly or acting through 1 or more other persons owns, controls, or has the power to vote 25 percent or more of any class of voting securities of the other entity; or
(B) the entity controls in any manner the election of a majority of the directors or trustees of the other entity.
(5) EXEMPT COMMERCIAL PURCHASER- The term ‘exempt commercial purchaser’ means any person purchasing commercial insurance that, at the time of placement, meets the following requirements:
(A) The person employs or retains a qualified risk manager to negotiate insurance coverage.
(B) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of $100,000 in the immediately preceding 12 months.
(C)(i) The person meets at least 1 of the following criteria:
(I) The person possesses a net worth in excess of $20,000,000, as such amount is adjusted pursuant to clause (ii).
(II) The person generates annual revenues in excess of $50,000,000, as such amount is adjusted pursuant to clause (ii).
(III) The person employs more than 500 full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than 1,000 employees in the aggregate.
(IV) The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000, as such amount is adjusted pursuant to clause (ii).
(V) The person is a municipality with a population in excess of 50,000 persons.
(ii) Effective on the fifth January 1 occurring after the date of the enactment of this subtitle and each fifth January 1 occurring thereafter, the amounts in subclauses (I), (II), and (IV) of clause (i) shall be adjusted to reflect the percentage change for such 5-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor.
(6) HOME STATE-
(A) IN GENERAL- Except as provided in subparagraph (B), the term ‘home State’ means, with respect to an insured--
(i) the State in which an insured maintains its principal place of business or, in the case of an individual, the individual’s principal residence; or
(ii) if 100 percent of the insured risk is located out of the State referred to in clause (i), the State to which the greatest percentage of the insured’s taxable premium for that insurance contract is allocated.
(B) AFFILIATED GROUPS- If more than 1 insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term ‘home State’ means the home State, as determined pursuant to subparagraph (A), of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract.
(7) INDEPENDENTLY PROCURED INSURANCE- The term ‘independently procured insurance’ means insurance procured directly by an insured from a nonadmitted insurer.
(8) NAIC- The term ‘NAIC’ means the National Association of Insurance Commissioners or any successor entity.
(9) NONADMITTED INSURANCE- The term ‘nonadmitted insurance’ means any property and casualty insurance permitted to be placed directly or through a surplus lines broker with a nonadmitted insurer eligible to accept such insurance.
(10) NON-ADMITTED INSURANCE MODEL ACT- The term ‘Non-Admitted Insurance Model Act’ means the provisions of the Non-Admitted Insurance Model Act, as adopted by the NAIC on August 3, 1994, and amended on September 30, 1996, December 6, 1997, October 2, 1999, and June 8, 2002.
(11) NONADMITTED INSURER- The term ‘nonadmitted insurer’--
(A) means, with respect to a State, an insurer not licensed to engage in the business of insurance in such State; but
(B) does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4)).
(12) PREMIUM TAX- The term ‘premium tax’ means, with respect to surplus lines or independently procured insurance coverage, any tax, fee, assessment, or other charge imposed by a government entity directly or indirectly based on any payment made as consideration for an insurance contract for such insurance, including premium deposits, assessments, registration fees, and any other compensation given in consideration for a contract of insurance.
(13) QUALIFIED RISK MANAGER- The term ‘qualified risk manager’ means, with respect to a policyholder of commercial insurance, a person who meets all of the following requirements:
(A) The person is an employee of, or third-party consultant retained by, the commercial policyholder.
(B) The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance.
(C) The person--
(i)(I) has a bachelor’s degree or higher from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management; and
(II)(aa) has 3 years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance; or
(bb) has--
(AA) a designation as a Chartered Property and Casualty Underwriter (in this subparagraph referred to as ‘CPCU’) issued by the American Institute for CPCU/Insurance Institute of America;
(BB) a designation as an Associate in Risk Management (ARM) issued by the American Institute for CPCU/Insurance Institute of America;
(CC) a designation as Certified Risk Manager (CRM) issued by the National Alliance for Insurance Education & Research;
(DD) a designation as a RIMS Fellow (RF) issued by the Global Risk Management Institute; or
(EE) any other designation, certification, or license determined by a State insurance commissioner or other State insurance regulatory official or entity to demonstrate minimum competency in risk management;
(ii)(I) has at least 7 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; and
(II) has any 1 of the designations specified in subitems (AA) through (EE) of clause (i)(II)(bb);
(iii) has at least 10 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; or
(iv) has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management.
(14) REINSURANCE- The term ‘reinsurance’ means the assumption by an insurer of all or part of a risk undertaken originally by another insurer.
(15) SURPLUS LINES BROKER- The term ‘surplus lines broker’ means an individual, firm, or corporation which is licensed in a State to sell, solicit, or negotiate insurance on properties, risks, or exposures located or to be performed in a State with nonadmitted insurers.
(16) STATE- The term ‘State’ includes any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands, and American Samoa.
SEC. 531. REGULATION OF CREDIT FOR REINSURANCE AND REINSURANCE AGREEMENTS.
(a) Credit for Reinsurance- If the State of domicile of a ceding insurer is an NAIC-accredited State, or has financial solvency requirements substantially similar to the requirements necessary for NAIC accreditation, and recognizes credit for reinsurance for the insurer’s ceded risk, then no other State may deny such credit for reinsurance.
(b) Additional Preemption of Extraterritorial Application of State Law- In addition to the application of subsection (a), all laws, regulations, provisions, or other actions of a State that is not the domiciliary State of the ceding insurer, except those with respect to taxes and assessments on insurance companies or insurance income, are preempted to the extent that they--
(1) restrict or eliminate the rights of the ceding insurer or the assuming insurer to resolve disputes pursuant to contractual arbitration to the extent such contractual provision is not inconsistent with the provisions of title 9, United States Code;
(2) require that a certain State’s law shall govern the reinsurance contract, disputes arising from the reinsurance contract, or requirements of the reinsurance contract;
(3) attempt to enforce a reinsurance contract on terms different than those set forth in the reinsurance contract, to the extent that the terms are not inconsistent with this part; or
(4) otherwise apply the laws of the State to reinsurance agreements of ceding insurers not domiciled in that State.
SEC. 532. REGULATION OF REINSURER SOLVENCY.
(a) Domiciliary State Regulation- If the State of domicile of a reinsurer is an NAIC-accredited State or has financial solvency requirements substantially similar to the requirements necessary for NAIC accreditation, such State shall be solely responsible for regulating the financial solvency of the reinsurer.
(b) Nondomiciliary States-
(1) LIMITATION ON FINANCIAL INFORMATION REQUIREMENTS- If the State of domicile of a reinsurer is an NAIC-accredited State or has financial solvency requirements substantially similar to the requirements necessary for NAIC accreditation, no other State may require the reinsurer to provide any additional financial information other than the information the reinsurer is required to file with its domiciliary State.
(2) RECEIPT OF INFORMATION- No provision of this section shall be construed as preventing or prohibiting a State that is not the State of domicile of a reinsurer from receiving a copy of any financial statement filed with its domiciliary State.
SEC. 533. DEFINITIONS.
For purposes of this part, the following definitions shall apply:
(1) CEDING INSURER- The term ‘ceding insurer’ means an insurer that purchases reinsurance.
(2) DOMICILIARY STATE- The terms ‘State of domicile’ and ‘domiciliary State’ mean, with respect to an insurer or reinsurer, the State in which the insurer or reinsurer is incorporated or entered through, and licensed.
(3) NAIC- The term ‘NAIC’ means the National Association of Insurance Commissioners or any successor entity.
(4) REINSURANCE- The term ‘reinsurance’ means the assumption by an insurer of all or part of a risk undertaken originally by another insurer.
(5) REINSURER-
(A) IN GENERAL- The term ‘reinsurer’ means an insurer to the extent that the insurer--
(i) is principally engaged in the business of reinsurance;
(ii) does not conduct significant amounts of direct insurance as a percentage of its net premiums; and
(iii) is not engaged in an ongoing basis in the business of soliciting direct insurance.
(B) DETERMINATION- A determination of whether an insurer is a reinsurer shall be made under the laws of the State of domicile in accordance with this paragraph.
(6) STATE- The term ‘State’ includes any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands, and American Samoa.
SEC. 541. RULE OF CONSTRUCTION.
Nothing in this subtitle or the amendments made by this subtitle shall be construed to modify, impair, or supersede the application of the antitrust laws. Any implied or actual conflict between this subtitle and any amendments to this subtitle and the antitrust laws shall be resolved in favor of the operation of the antitrust laws.
SEC. 542. SEVERABILITY.
If any section or subsection of this subtitle, or any application of such provision to any person or circumstance, is held to be unconstitutional, the remainder of this subtitle, and the application of the provision to any other person or circumstance, shall not be affected.
TITLE VI--IMPROVEMENTS TO REGULATION OF BANK AND SAVINGS ASSOCIATION HOLDING COMPANIES AND DEPOSITORY INSTITUTIONS
SEC. 601. SHORT TITLE.
This title may be cited as the ‘Bank and Savings Association Holding Company and Depository Institution Regulatory Improvements Act of 2010’.
SEC. 602. DEFINITION.
For purposes of this title, a company is a ‘commercial firm’ if the annual gross revenues derived by the company and all of its affiliates from activities that are financial in nature (as defined in section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k))) and, if applicable, from the ownership or control of one or more insured depository institutions, represent less than 15 percent of the consolidated annual gross revenues of the company.
SEC. 603. MORATORIUM AND STUDY ON TREATMENT OF CREDIT CARD BANKS, INDUSTRIAL LOAN COMPANIES, AND CERTAIN OTHER COMPANIES UNDER THE BANK HOLDING COMPANY ACT OF 1956.
(a) Moratorium-
(1) DEFINITIONS- In this subsection--
(A) the term ‘credit card bank’ means an institution described in section 2(c)(2)(F) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(F));
(B) the term ‘industrial bank’ means an institution described in section 2(c)(2)(H) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(H)); and
(C) the term ‘trust bank’ means an institution described in section 2(c)(2)(D) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(D)).
(2) MORATORIUM ON PROVISION OF DEPOSIT INSURANCE- The Corporation may not approve an application for deposit insurance under section 5 of the Federal Deposit Insurance Act (12 U.S.C. 1815) that is received after November 23, 2009, for an industrial bank, a credit card bank, or a trust bank that is directly or indirectly owned or controlled by a commercial firm.
(3) CHANGE IN CONTROL-
(A) IN GENERAL- Except as provided in subparagraph (B), the appropriate Federal banking agency shall disapprove a change in control, as provided in section 7(j) of the Federal Deposit Insurance Act (12 U.S.C. 1817(j)), of an industrial bank, a credit card bank, or a trust bank if the change in control would result in direct or indirect control of the industrial bank, credit card bank, or trust bank by a commercial firm.
(B) EXCEPTIONS- Subparagraph (A) shall not apply to a change in control of an industrial bank, credit card bank, or trust bank--
(i) that--
(I) is in danger of default, as determined by the appropriate Federal banking agency;
(II) results from the merger or whole acquisition of a commercial firm that directly or indirectly controls the industrial bank, credit card bank, or trust bank in a bona fide merger with or acquisition by another commercial firm, as determined by the appropriate Federal banking agency; or
(III) results from an acquisition of voting shares of a publicly traded company that controls an industrial bank, credit card bank, or trust bank, if, after the acquisition, the acquiring shareholder (or group of shareholders acting in concert) holds less than 25 percent of any class of the voting shares of the company; and
(ii) that has obtained all regulatory approvals otherwise required for such change of control under any applicable Federal or State law, including section 7(j) of the Federal Deposit Insurance Act (12 U.S.C. 1817(j)).
(4) SUNSET- This subsection shall cease to have effect 3 years after the date of enactment of this Act.
(b) Government Accountability Office Study of Exceptions Under the Bank Holding Company Act of 1956-
(1) STUDY REQUIRED- The Comptroller General of the United States shall carry out a study to determine whether it is necessary, in order to strengthen the safety and soundness of institutions or the stability of the financial system, to eliminate the exceptions under section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841) for institutions described in--
(A) section 2(a)(5)(E) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(5)(E));
(B) section 2(a)(5)(F) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(5)(F));
(C) section 2(c)(2)(D) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(D));
(D) section 2(c)(2)(F) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(F));
(E) section 2(c)(2)(H) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(H)); and
(F) section 2(c)(2)(B) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(B)).
(2) CONTENT OF STUDY-
(A) IN GENERAL- The study required under paragraph (1), with respect to the institutions referenced in each of subparagraphs (A) through (E) of paragraph (1), shall, to the extent feasible be based on information provided to the Comptroller General by the appropriate Federal or State regulator, and shall--
(i) identify the types and number of institutions excepted from section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841) under each of the subparagraphs described in subparagraphs (A) through (E) of paragraph (1);
(ii) generally describe the size and geographic locations of the institutions described in clause (i);
(iii) determine the extent to which the institutions described in clause (i) are held by holding companies that are commercial firms;
(iv) determine whether the institutions described in clause (i) have any affiliates that are commercial firms;
(v) identify the Federal banking agency responsible for the supervision of the institutions described in clause (i) on and after the transfer date;
(vi) determine the adequacy of the Federal bank regulatory framework applicable to each category of institution described in clause (i), including any restrictions (including limitations on affiliate transactions or cross-marketing) that apply to transactions between an institution, the holding company of the institution, and any other affiliate of the institution; and
(vii) evaluate the potential consequences of subjecting the institutions described in clause (i) to the requirements of the Bank Holding Company Act of 1956, including with respect to the availability and allocation of credit, the stability of the financial system and the economy, the safe and sound operation of each category of institution, and the impact on the types of activities in which such institutions, and the holding companies of such institutions, may engage.
(B) SAVINGS ASSOCIATIONS- With respect to institutions described in paragraph (1)(F), the study required under paragraph (1) shall--
(i) determine the adequacy of the Federal bank regulatory framework applicable to such institutions, including any restrictions (including limitations on affiliate transactions or cross-marketing) that apply to transactions between an institution, the holding company of the institution, and any other affiliate of the institution; and
(ii) evaluate the potential consequences of subjecting the institutions described in paragraph (1)(F) to the requirements of the Bank Holding Company Act of 1956, including with respect to the availability and allocation of credit, the stability of the financial system and the economy, the safe and sound operation of such institutions, and the impact on the types of activities in which such institutions, and the holding companies of such institutions, may engage.
(3) REPORT- Not later than 18 months after the date of enactment of this Act, the Comptroller General 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 the study required under paragraph (1).
SEC. 604. REPORTS AND EXAMINATIONS OF HOLDING COMPANIES; REGULATION OF FUNCTIONALLY REGULATED SUBSIDIARIES.
(a) Reports by Bank Holding Companies- Sections 5(c)(1) of the Bank Holding Company Act of 1956 (12 U.S.C. 1844(c)(1)) is amended--
(1) by striking subclause (A)(ii) and inserting the following:
‘(ii) compliance by the bank holding company or subsidiary with--
‘(I) this Act;
‘(II) Federal laws that the Board has specific jurisdiction to enforce against the company or subsidiary; and
‘(III) other than in the case of an insured depository institution or functionally regulated subsidiary, any other applicable provision of Federal law.’;
(2) by striking subparagraph (B) and inserting the following:
‘(B) USE OF EXISTING REPORTS AND OTHER SUPERVISORY INFORMATION- The Board shall, to the fullest extent possible, use--
‘(i) reports and other supervisory information that the bank holding company or any subsidiary thereof has been required to provide to other Federal or State regulatory agencies;
‘(ii) externally audited financial statements of the bank holding company or subsidiary;
‘(iii) information otherwise available from Federal or State regulatory agencies; and
‘(iv) information that is otherwise required to be reported publicly.’; and
(3) by adding at the end the following:
‘(C) AVAILABILITY- Upon the request of the Board, the bank holding company or a subsidiary of the bank holding company shall promptly provide to the Board any information described in clauses (i) through (iii) of subparagraph (B).’.
(b) Examinations of Bank Holding Companies- Section 5(c)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1844(c)(2)) is amended to read as follows:
‘(2) EXAMINATIONS-
‘(A) IN GENERAL- Subject to subtitle B of the Consumer Financial Protection Act of 2010, the Board may make examinations of a bank holding company and each subsidiary of a bank holding company in order to--
‘(i) inform the Board of--
‘(I) the nature of the operations and financial condition of the bank holding company and the subsidiary;
‘(II) the financial, operational, and other risks within the bank holding company system that may pose a threat to--
‘(aa) the safety and soundness of the bank holding company or of any depository institution subsidiary of the bank holding company; or
‘(bb) the stability of the financial system of the United States; and
‘(III) the systems of the bank holding company for monitoring and controlling the risks described in subclause (II); and
‘(ii) monitor the compliance of the bank holding company and the subsidiary with--
‘(I) this Act;
‘(II) Federal laws that the Board has specific jurisdiction to enforce against the company or subsidiary; and
‘(III) other than in the case of an insured depository institution or functionally regulated subsidiary, any other applicable provisions of Federal law.
‘(B) USE OF REPORTS TO REDUCE EXAMINATIONS- For purposes of this paragraph, the Board shall, to the fullest extent possible, rely on--
‘(i) examination reports made by other Federal or State regulatory agencies relating to a bank holding company and any subsidiary of a bank holding company; and
‘(ii) the reports and other information required under paragraph (1).
‘(C) COORDINATION WITH OTHER REGULATORS- The Board shall--
‘(i) provide reasonable notice to, and consult with, the appropriate Federal banking agency, the Securities and Exchange Commission, the Commodity Futures Trading Commission, or State regulatory agency, as appropriate, for a subsidiary that is a depository institution or a functionally regulated subsidiary of a bank holding company before commencing an examination of the subsidiary under this section; and
‘(ii) to the fullest extent possible, avoid duplication of examination activities, reporting requirements, and requests for information.’.
(c) Authority To Regulate Functionally Regulated Subsidiaries of Bank Holding Companies- The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended--
(1) in section 5(c)(5)(B) (12 U.S.C. 1844(c)(5)(B)), by striking clause (v) and inserting the following:
‘(v) an entity that is subject to regulation by, or registration with, the Commodity Futures Trading Commission, with respect to activities conducted as a futures commission merchant, commodity trading adviser, commodity pool, commodity pool operator, swap execution facility, swap data repository, swap dealer, major swap participant, and activities that are incidental to such commodities and swaps activities.’; and
(2) by striking section 10A (12 U.S.C. 1848a).
(d) Acquisitions of Banks- Section 3(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 1842(c)) is amended by adding at the end the following:
‘(7) FINANCIAL STABILITY- In every case, the Board shall take into consideration the extent to which a proposed acquisition, merger, or consolidation would result in greater or more concentrated risks to the stability of the United States banking or financial system.’.
(e) Acquisitions of Nonbanks-
(1) NOTICE PROCEDURES- Section 4(j)(2)(A) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(j)(2)(A)) is amended by striking ‘or unsound banking practices’ and inserting ‘unsound banking practices, or risk to the stability of the United States banking or financial system’.
(2) ACTIVITIES THAT ARE FINANCIAL IN NATURE- Section 4(k)(6)(B) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)(6)(B)) is amended to read as follows:
‘(B) APPROVAL NOT REQUIRED FOR CERTAIN FINANCIAL ACTIVITIES-
‘(i) IN GENERAL- Except as provided in subsection (j) with regard to the acquisition of a savings association and clause (ii), a financial holding company may commence any activity, or acquire any company, pursuant to paragraph (4) or any regulation prescribed or order issued under paragraph (5), without prior approval of the Board.
‘(ii) EXCEPTION- A financial holding company may not acquire a company, without the prior approval of the Board, in a transaction in which the total consolidated assets to be acquired by the financial holding company exceed $10,000,000,000.
‘(iii) HART-SCOTT-RODINO FILING REQUIREMENT- Solely for purposes of section 7A(c)(8) of the Clayton Act (15 U.S.C. 18a(c)(8)), the transactions subject to the requirements of this paragraph shall be treated as if the approval of the Board is not required.’.
(f) Bank Merger Act Transactions- Section 18(c)(5) of the Federal Deposit Insurance Act (12 U.S.C. 1828(c)(5)) is amended, in the matter immediately following subparagraph (B), by striking ‘and the convenience and needs of the community to be served’ and inserting ‘the convenience and needs of the community to be served, and the risk to the stability of the United States banking or financial system’.
(g) Reports by Savings and Loan Holding Companies- Section 10(b)(2) of the Home Owners’ Loan Act (12 U.S.C. 1467a(b)(2) is amended--
(1) by striking ‘Each savings’ and inserting the following:
‘(A) IN GENERAL- Each savings’; and
(2) by adding at the end the following:
‘(B) USE OF EXISTING REPORTS AND OTHER SUPERVISORY INFORMATION- The Board shall, to the fullest extent possible, use--
‘(i) reports and other supervisory information that the savings and loan holding company or any subsidiary thereof has been required to provide to other Federal or State regulatory agencies;
‘(ii) externally audited financial statements of the savings and loan holding company or subsidiary;
‘(iii) information that is otherwise available from Federal or State regulatory agencies; and
‘(iv) information that is otherwise required to be reported publicly.
‘(C) AVAILABILITY- Upon the request of the Board, a savings and loan holding company or a subsidiary of a savings and loan holding company shall promptly provide to the Board any information described in clauses (i) through (iii) of subparagraph (B).’.
(h) Examination of Savings and Loan Holding Companies-
(1) DEFINITIONS- Section 2 of the Home Owners’ Loan Act (12 U.S.C. 1462) is amended by adding at the end the following:
‘(10) APPROPRIATE FEDERAL BANKING AGENCY- The term ‘appropriate Federal banking agency’ has the same meaning as in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).
‘(11) FUNCTIONALLY REGULATED SUBSIDIARY- The term ‘functionally regulated subsidiary’ has the same meaning as in section 5(c)(5) of the Bank Holding Company Act of 1956 (12 U.S.C. 1844(c)(5)).’.
(2) EXAMINATION- Section 10(b) of the Home Owners’ Loan Act (12 U.S.C. 1467a(b)) is amended by striking paragraph (4) and inserting the following:
‘(4) EXAMINATIONS-
‘(A) IN GENERAL- Subject to subtitle B of the Consumer Financial Protection Act of 2010, the Board may make examinations of a savings and loan holding company and each subsidiary of a savings and loan holding company system, in order to--
‘(i) inform the Board of--
‘(I) the nature of the operations and financial condition of the savings and loan holding company and the subsidiary;
‘(II) the financial, operational, and other risks within the savings and loan holding company system that may pose a threat to--
‘(aa) the safety and soundness of the savings and loan holding company or of any depository institution subsidiary of the savings and loan holding company; or
‘(bb) the stability of the financial system of the United States; and
‘(III) the systems of the savings and loan holding company for monitoring and controlling the risks described in subclause (II); and
‘(ii) monitor the compliance of the savings and loan holding company and the subsidiary with--
‘(I) this Act;
‘(II) Federal laws that the Board has specific jurisdiction to enforce against the company or subsidiary; and
‘(III) other than in the case of an insured depository institution or functionally regulated subsidiary, any other applicable provisions of Federal law.
‘(B) USE OF REPORTS TO REDUCE EXAMINATIONS- For purposes of this subsection, the Board shall, to the fullest extent possible, rely on--
‘(i) the examination reports made by other Federal or State regulatory agencies relating to a savings and loan holding company and any subsidiary; and
‘(ii) the reports and other information required under paragraph (2).
‘(C) COORDINATION WITH OTHER REGULATORS- The Board shall--
‘(i) provide reasonable notice to, and consult with, the appropriate Federal banking agency, the Securities and Exchange Commission, the Commodity Futures Trading Commission, or State regulatory agency, as appropriate, for a subsidiary that is a depository institution or a functionally regulated subsidiary of a savings and loan holding company before commencing an examination of the subsidiary under this section; and
‘(ii) to the fullest extent possible, avoid duplication of examination activities, reporting requirements, and requests for information.’.
(i) Definition of the Term ‘Savings and Loan Holding Company’- Section 10(a)(1)(D)(ii) of the Home Owners’ Loan Act (12 U.S.C. 1467a(a)(1)(D)(ii)) is amended to read as follows:
‘(ii) EXCLUSION- The term ‘savings and loan holding company’ does not include--
‘(I) a bank holding company that is registered under, and subject to, the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), or to any company directly or indirectly controlled by such company (other than a savings association);
‘(II) a company that controls a savings association that functions solely in a trust or fiduciary capacity as described in section 2(c)(2)(D) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(D)); or
‘(III) a company described in subsection (c)(9)(C) solely by virtue of such company’s control of an intermediate holding company established pursuant to section 10A.’.
(j) Effective Date- The amendments made by this section shall take effect on the transfer date.
SEC. 605. ASSURING CONSISTENT OVERSIGHT OF PERMISSIBLE ACTIVITIES OF DEPOSITORY INSTITUTION SUBSIDIARIES OF HOLDING COMPANIES.
(a) In General- The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by inserting after section 25 the following new section:
‘SEC. 26. ASSURING CONSISTENT OVERSIGHT OF SUBSIDIARIES OF HOLDING COMPANIES.
‘(a) Definitions- For purposes of this section:
‘(1) BOARD- The term ‘Board’ means the Board of Governors of the Federal Reserve System.
‘(2) FUNCTIONALLY REGULATED SUBSIDIARY- The term ‘functionally regulated subsidiary’ has the same meaning as in section 5(c)(5) of the Bank Holding Company Act.
‘(3) LEAD INSURED DEPOSITORY INSTITUTION- The term ‘lead insured depository institution’ has the same meaning as in section 2(o)(8) of the Bank Holding Company Act.
‘(b) Examination Requirements- Subject to subtitle B of the Consumer Financial Protection Act of 2010, the Board shall examine the activities of a nondepository institution subsidiary (other than a functionally regulated subsidiary or a subsidiary of a depository institution) of a depository institution holding company that are permissible for the insured depository institution subsidiaries of the depository institution holding company in the same manner, subject to the same standards, and with the same frequency as would be required if such activities were conducted in the lead insured depository institution of the depository institution holding company.
‘(c) State Coordination-
‘(1) CONSULTATION AND COORDINATION- If a nondepository institution subsidiary is supervised by a State bank supervisor or other State regulatory authority, the Board, in conducting the examinations required in subsection (b), shall consult and coordinate with such State regulator.
‘(2) ALTERNATING EXAMINATIONS PERMITTED- The examinations required under subsection (b) may be conducted in joint or alternating manner with a State regulator, if the Board determines that an examination of a nondepository institution subsidiary conducted by the State carries out the purposes of this section.
‘(d) Appropriate Federal Banking Agency Backup Examination Authority-
‘(1) IN GENERAL- In the event that the Board does not conduct examinations required under subsection (b) in the same manner, subject to the same standards, and with the same frequency as would be required if such activities were conducted by the lead insured depository institution subsidiary of the depository institution holding company, the appropriate Federal banking agency for the lead insured depository institution may recommend in writing (which shall include a written explanation of the concerns giving rise to the recommendation) that the Board perform the examination required under subsection (b).
‘(2) EXAMINATION BY AN APPROPRIATE FEDERAL BANKING AGENCY- If the Board does not, before the end of the 60-day period beginning on the date on which the Board receives a recommendation under paragraph (1), begin an examination as required under subsection (b) or provide a written explanation or plan to the appropriate Federal banking agency making such recommendation responding to the concerns raised by the appropriate Federal banking agency for the lead insured depository institution, the appropriate Federal banking agency for the lead insured depository institution may, subject to the Consumer Financial Protection Act of 2010, examine the activities that are permissible for a depository institution subsidiary conducted by such nondepository institution subsidiary (other than a functionally regulated subsidiary or a subsidiary of a depository institution) of the depository institution holding company as if the nondepository institution subsidiary were an insured depository institution for which the appropriate Federal banking agency of the lead insured depository institution was the appropriate Federal banking agency, to determine whether the activities--
‘(A) pose a material threat to the safety and soundness of any insured depository institution subsidiary of the depository institution holding company;
‘(B) are conducted in accordance with applicable Federal law; and
‘(C) are subject to appropriate systems for monitoring and controlling the financial, operating, and other material risks of the activities that may pose a material threat to the safety and soundness of the insured depository institution subsidiaries of the holding company.
‘(3) AGENCY COORDINATION WITH THE BOARD- An appropriate Federal banking agency that conducts an examination pursuant to paragraph (2) shall coordinate examination of the activities of nondepository institution subsidiaries described in subsection (b) with the Board in a manner that--
‘(A) avoids duplication;
‘(B) shares information relevant to the supervision of the depository institution holding company;
‘(C) achieves the objectives of subsection (b); and
‘(D) ensures that the depository institution holding company and the subsidiaries of the depository institution holding company are not subject to conflicting supervisory demands by such agency and the Board.
‘(4) FEE PERMITTED FOR EXAMINATION COSTS- An appropriate Federal banking agency that conducts an examination or enforcement action pursuant to this section may collect an assessment, fee, or such other charge from the subsidiary as the appropriate Federal banking agency determines necessary or appropriate to carry out the responsibilities of the appropriate Federal banking agency in connection with such examination.
‘(e) Referrals for Enforcement by Appropriate Federal Banking Agency-
‘(1) RECOMMENDATION OF ENFORCEMENT ACTION- The appropriate Federal banking agency for the lead insured depository institution, based upon its examination of a nondepository institution subsidiary conducted pursuant to subsection (d), or other relevant information, may submit to the Board, in writing, a recommendation that the Board take enforcement action against such nondepository institution subsidiary, together with an explanation of the concerns giving rise to the recommendation, if the appropriate Federal banking agency determines (by a vote of its members, if applicable) that the activities of the nondepository institution subsidiary pose a material threat to the safety and soundness of any insured depository institution subsidiary of the depository institution holding company.
‘(2) BACK-UP AUTHORITY OF THE APPROPRIATE FEDERAL BANKING AGENCY- If, within the 60-day period beginning on the date on which the Board receives a recommendation under paragraph (1), the Board does not take enforcement action against the nondepository institution subsidiary or provide a plan for supervisory or enforcement action that is acceptable to the appropriate Federal banking agency that made the recommendation pursuant to paragraph (1), such agency may take the recommended enforcement action against the nondepository institution subsidiary, in the same manner as if the nondepository institution subsidiary were an insured depository institution for which the agency was the appropriate Federal banking agency.
‘(f) Coordination Among Appropriate Federal Banking Agencies- Each Federal banking agency, prior to or when exercising authority under subsection (d) or (e) shall--
‘(1) provide reasonable notice to, and consult with, the appropriate Federal banking agency or State bank supervisor (or other State regulatory agency) of the nondepository institution subsidiary of a depository institution holding company that is described in subsection (d) before commencing any examination of the subsidiary;
‘(2) to the fullest extent possible--
‘(A) rely on the examinations, inspections, and reports of the appropriate Federal banking agency or the State bank supervisor (or other State regulatory agency) of the subsidiary;
‘(B) avoid duplication of examination activities, reporting requirements, and requests for information; and
‘(C) ensure that the depository institution holding company and the subsidiaries of the depository institution holding company are not subject to conflicting supervisory demands by the appropriate Federal banking agencies.
‘(g) Rule of Construction- No provision of this section shall be construed as limiting any authority of the Board, the Corporation, or the Comptroller of the Currency under any other provision of law.’.
(b) Effective Date- The amendment made by subsection (a) shall take effect on the transfer date.
SEC. 606. REQUIREMENTS FOR FINANCIAL HOLDING COMPANIES TO REMAIN WELL CAPITALIZED AND WELL MANAGED.
(a) Amendment- Section 4(l)(1) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(l)(1)) is amended--
(1) in subparagraph (B), by striking ‘and’ at the end;
(2) by redesignating subparagraph (C) as subparagraph (D);
(3) by inserting after subparagraph (B) the following:
‘(C) the bank holding company is well capitalized and well managed; and’; and
(4) in subparagraph (D)(ii), as so redesignated, by striking ‘subparagraphs (A) and (B)’ and inserting ‘subparagraphs (A), (B), and (C)’.
(b) Home Owners’ Loan Act Amendment- Section 10(c)(2) of the Home Owners’ Loan Act (12 U.S.C. 1467a(c)(2)) is amended by adding at the end the following new subparagraph:
‘(H) Any activity that is permissible for a financial holding company (as such term is defined under section 2(p) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(p)) to conduct under section 4(k) of the Bank Holding Company Act of 1956 if--
‘(i) the savings and loan holding company meets all of the criteria to qualify as a financial holding company, and complies with all of the requirements applicable to a financial holding company, under sections 4(l) and 4(m) of the Bank Holding Company Act and section 804(c) of the Community Reinvestment Act of 1977 (12 U.S.C. 2903(c)) as if the savings and loan holding company was a bank holding company; and
‘(ii) the savings and loan holding company conducts the activity in accordance with the same terms, conditions, and requirements that apply to the conduct of such activity by a bank holding company under the Bank Holding Company Act of 1956 and the Board’s regulations and interpretations under such Act.’.
(c) Effective Date- The amendments made by this section shall take effect on the transfer date.
SEC. 607. STANDARDS FOR INTERSTATE ACQUISITIONS.
(a) Acquisition of Banks- Section 3(d)(1)(A) of the Bank Holding Company Act of 1956 (12 U.S.C. 1842(d)(1)(A)) is amended by striking ‘adequately capitalized and adequately managed’ and inserting ‘well capitalized and well managed’.
(b) Interstate Bank Mergers- Section 44(b)(4)(B) of the Federal Deposit Insurance Act (12 U.S.C. 1831u(b)(4)(B)) is amended by striking ‘will continue to be adequately capitalized and adequately managed’ and inserting ‘will be well capitalized and well managed’.
(c) Effective Date- The amendments made by this section shall take effect on the transfer date.
SEC. 608. ENHANCING EXISTING RESTRICTIONS ON BANK TRANSACTIONS WITH AFFILIATES.
(a) Affiliate Transactions- Section 23A of the Federal Reserve Act (12 U.S.C. 371c) is amended--
(1) in subsection (b)--
(A) in paragraph (1), by striking subparagraph (D) and inserting the following:
‘(D) any investment fund with respect to which a member bank or affiliate thereof is an investment adviser; and’; and
(B) in paragraph (7)--
(i) in subparagraph (A), by inserting before the semicolon at the end the following: ‘, including a purchase of assets subject to an agreement to repurchase’;
(ii) in subparagraph (C), by striking ‘, including assets subject to an agreement to repurchase,’;
(iii) in subparagraph (D)--
(I) by inserting ‘or other debt obligations’ after ‘acceptance of securities’; and
(II) by striking ‘or’ at the end; and
(iv) by adding at the end the following:
‘(F) a transaction with an affiliate that involves the borrowing or lending of securities, to the extent that the transaction causes a member bank or a subsidiary to have credit exposure to the affiliate; or
‘(G) a derivative transaction, as defined in paragraph (3) of section 5200(b) of the Revised Statutes of the United States (12 U.S.C. 84(b)), with an affiliate, to the extent that the transaction causes a member bank or a subsidiary to have credit exposure to the affiliate;’;
(2) in subsection (c)--
(A) in paragraph (1)--
(i) in the matter preceding subparagraph (A), by striking ‘subsidiary’ and all that follows through ‘time of the transaction’ and inserting ‘subsidiary, and any credit exposure of a member bank or a subsidiary to an affiliate resulting from a securities borrowing or lending transaction, or a derivative transaction, shall be secured at all times’; and
(ii) in each of subparagraphs (A) through (D), by striking ‘or letter of credit’ and inserting ‘letter of credit, or credit exposure’;
(B) by striking paragraph (2);
(C) by redesignating paragraphs (3) through (5) as paragraphs (2) through (4), respectively;
(D) in paragraph (2), as so redesignated, by inserting before the period at the end ‘, or credit exposure to an affiliate resulting from a securities borrowing or lending transaction, or derivative transaction’; and
(E) in paragraph (3), as so redesignated--
(i) by inserting ‘or other debt obligations’ after ‘securities’; and
(ii) by striking ‘or guarantee’ and all that follows through ‘behalf of,’ and inserting ‘guarantee, acceptance, or letter of credit issued on behalf of, or credit exposure from a securities borrowing or lending transaction, or derivative transaction to,’;
(3) in subsection (d)(4), in the matter preceding subparagraph (A), by striking ‘or issuing’ and all that follows through ‘behalf of,’ and inserting ‘issuing a guarantee, acceptance, or letter of credit on behalf of, or having credit exposure resulting from a securities borrowing or lending transaction, or derivative transaction to,’; and
(4) in subsection (f)--
(A) in paragraph (2)--
(i) by striking ‘or order’;
(ii) by striking ‘if it finds’ and all that follows through the end of the paragraph and inserting the following: ‘if--
‘(i) the Board finds the exemption to be in the public interest and consistent with the purposes of this section, and notifies the Federal Deposit Insurance Corporation of such finding; and
‘(ii) before the end of the 60-day period beginning on the date on which the Federal Deposit Insurance Corporation receives notice of the finding under clause (i), the Federal Deposit Insurance Corporation does not object, in writing, to the finding, based on a determination that the exemption presents an unacceptable risk to the Deposit Insurance Fund.’;
(iii) by striking the Board and inserting the following:
‘(A) IN GENERAL- The Board’; and
(iv) by adding at the end the following:
‘(B) ADDITIONAL EXEMPTIONS-
‘(i) NATIONAL BANKS- The Comptroller of the Currency may, by order, exempt a transaction of a national bank from the requirements of this section if--
‘(I) the Board and the Office of the Comptroller of the Currency jointly find the exemption to be in the public interest and consistent with the purposes of this section and notify the Federal Deposit Insurance Corporation of such finding; and
‘(II) before the end of the 60-day period beginning on the date on which the Federal Deposit Insurance Corporation receives notice of the finding under subclause (I), the Federal Deposit Insurance Corporation does not object, in writing, to the finding, based on a determination that the exemption presents an unacceptable risk to the Deposit Insurance Fund.
‘(ii) STATE BANKS- The Federal Deposit Insurance Corporation may, by order, exempt a transaction of a State nonmember bank, and the Board may, by order, exempt a transaction of a State member bank, from the requirements of this section if--
‘(I) the Board and the Federal Deposit Insurance Corporation jointly find that the exemption is in the public interest and consistent with the purposes of this section; and
‘(II) the Federal Deposit Insurance Corporation finds that the exemption does not present an unacceptable risk to the Deposit Insurance Fund.’; and
(B) by adding at the end the following:
‘(4) AMOUNTS OF COVERED TRANSACTIONS- The Board may issue such regulations or interpretations as the Board determines are necessary or appropriate with respect to the manner in which a netting agreement may be taken into account in determining the amount of a covered transaction between a member bank or a subsidiary and an affiliate, including the extent to which netting agreements between a member bank or a subsidiary and an affiliate may be taken into account in determining whether a covered transaction is fully secured for purposes of subsection (d)(4). An interpretation under this paragraph with respect to a specific member bank, subsidiary, or affiliate shall be issued jointly with the appropriate Federal banking agency for such member bank, subsidiary, or affiliate.’.
(b) Transactions With Affiliates- Section 23B(e) of the Federal Reserve Act (12 U.S.C. 371c-1(e)) is amended--
(1) by striking the undesignated matter following subparagraph (B);
(2) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii), respectively, and adjusting the clause margins accordingly;
(3) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively, and adjusting the subparagraph margins accordingly;
(4) by striking ‘The Board’ and inserting the following:
‘(1) IN GENERAL- The Board’;
(5) in paragraph (1)(B), as so redesignated--
(A) in the matter preceding clause (i), by inserting before ‘regulations’ the following: ‘subject to paragraph (2), if the Board finds that an exemption or exclusion is in the public interest and is consistent with the purposes of this section, and notifies the Federal Deposit Insurance Corporation of such finding,’; and
(B) in clause (ii), by striking the comma at the end and inserting a period; and
(6) by adding at the end the following:
‘(2) EXCEPTION- The Board may grant an exemption or exclusion under this subsection only if, during the 60-day period beginning on the date of receipt of notice of the finding from the Board under paragraph (1)(B), the Federal Deposit Insurance Corporation does not object, in writing, to such exemption or exclusion, based on a determination that the exemption presents an unacceptable risk to the Deposit Insurance Fund.’.
(c) Home Owners’ Loan Act- Section 11 of the Home Owners’ Loan Act (12 U.S.C. 1468) is amended by adding at the end the following:
‘(d) Exemptions-
‘(1) FEDERAL SAVINGS ASSOCIATIONS- The Comptroller of the Currency may, by order, exempt a transaction of a Federal savings association from the requirements of this section if--
‘(A) the Board and the Office of the Comptroller of the Currency jointly find the exemption to be in the public interest and consistent with the purposes of this section and notify the Federal Deposit Insurance Corporation of such finding; and
‘(B) before the end of the 60-day period beginning on the date on which the Federal Deposit Insurance Corporation receives notice of the finding under subparagraph (A), the Federal Deposit Insurance Corporation does not object, in writing, to the finding, based on a determination that the exemption presents an unacceptable risk to the Deposit Insurance Fund.
‘(2) STATE SAVINGS ASSOCIATION- The Federal Deposit Insurance Corporation may, by order, exempt a transaction of a State savings association from the requirements of this section if the Board and the Federal Deposit Insurance Corporation jointly find that--
‘(A) the exemption is in the public interest and consistent with the purposes of this section; and
‘(B) the exemption does not present an unacceptable risk to the Deposit Insurance Fund.’.
(d) Effective Date- The amendments made by this section shall take effect 1 year after the transfer date.
SEC. 609. ELIMINATING EXCEPTIONS FOR TRANSACTIONS WITH FINANCIAL SUBSIDIARIES.
(a) Amendment- Section 23A(e) of the Federal Reserve Act (12 U.S.C. 371c(e)) is amended--
(1) by striking paragraph (3); and
(2) by redesignating paragraph (4) as paragraph (3).
(b) Prospective Application of Amendment- The amendments made by this section shall apply with respect to any covered transaction between a bank and a subsidiary of the bank, as those terms are defined in section 23A of the Federal Reserve Act (12 U.S.C. 371c), that is entered into on or after the date of enactment of this Act.
(c) Effective Date- The amendments made by this section shall take effect 1 year after the transfer date.
SEC. 610. LENDING LIMITS APPLICABLE TO CREDIT EXPOSURE ON DERIVATIVE TRANSACTIONS, REPURCHASE AGREEMENTS, REVERSE REPURCHASE AGREEMENTS, AND SECURITIES LENDING AND BORROWING TRANSACTIONS.
(a) National Banks- Section 5200(b) of the Revised Statutes of the United States (12 U.S.C. 84(b)) is amended--
(1) in paragraph (1), by striking ‘shall include’ and all that follows through the end of the paragraph and inserting the following: ‘shall include--
‘(A) all direct or indirect advances of funds to a person made on the basis of any obligation of that person to repay the funds or repayable from specific property pledged by or on behalf of the person;
‘(B) to the extent specified by the Comptroller of the Currency, any liability of a national banking association to advance funds to or on behalf of a person pursuant to a contractual commitment; and
‘(C) any credit exposure to a person arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction between the national banking association and the person;’;
(2) in paragraph (2), by striking the period at the end and inserting ‘; and’; and
(3) by adding at the end the following:
‘(3) the term ‘derivative transaction’ includes any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.’.
(b) Savings Associations- Section 5(u)(3) of the Home Owners’ Loan Act (12 U.S.C. 1464(u)(3)) is amended by striking ‘Director’ each place that term appears and inserting ‘Comptroller of the Currency’.
(c) Effective Date- The amendments made by this section shall take effect 1 year after the transfer date.
SEC. 611. CONSISTENT TREATMENT OF DERIVATIVE TRANSACTIONS IN LENDING LIMITS.
(a) Amendment- Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is amended by adding at the end the following:
‘(y) State Lending Limit Treatment of Derivatives Transactions- An insured State bank may engage in a derivative transaction, as defined in section 5200(b)(3) of the Revised Statutes of the United States (12 U.S.C. 84(b)(3)), only if the law with respect to lending limits of the State in which the insured State bank is chartered takes into consideration credit exposure to derivative transactions.’.
(b) Effective Date- The amendment made by this section shall take effect 18 months after the transfer date.
SEC. 612. RESTRICTION ON CONVERSIONS OF TROUBLED BANKS.
(a) Conversion of a National Banking Association- The Act entitled ‘An Act to provide for the conversion of national banking associations into and their merger or consolidation with State banks, and for other purposes.’ (12 U.S.C. 214 et seq.) is amended by adding at the end the following:
‘SEC. 10. PROHIBITION ON CONVERSION.
‘A national banking association may not convert to a State bank or State savings association during any period in which the national banking association is subject to a cease and desist order (or other formal enforcement order) issued by, or a memorandum of understanding entered into with, the Comptroller of the Currency with respect to a significant supervisory matter.’.
(b) Conversion of a State Bank or Savings Association- Section 5154 of the Revised Statutes of the United States (12 U.S.C. 35) is amended by adding at the end the following: ‘The Comptroller of the Currency may not approve the conversion of a State bank or State savings association to a national banking association or Federal savings association during any period in which the State bank or State savings association is subject to a cease and desist order (or other formal enforcement order) issued by, or a memorandum of understanding entered into with, a State bank supervisor or the appropriate Federal banking agency with respect to a significant supervisory matter or a final enforcement action by a State Attorney General.’.
(c) Conversion of a Federal Savings Association- Section 5(i) of the Home Owners’ Loan Act (12 U.S.C. 1464(i)) is amended by adding at the end the following:
‘(6) LIMITATION ON CERTAIN CONVERSIONS BY FEDERAL SAVINGS ASSOCIATIONS- A Federal savings association may not convert to a State bank or State savings association during any period in which the Federal savings association is subject to a cease and desist order (or other formal enforcement order) issued by, or a memorandum of understanding entered into with, the Office of Thrift Supervision or the Comptroller of the Currency with respect to a significant supervisory matter.’.
(d) Exception- The prohibition on the approval of conversions under the amendments made by subsections (a), (b), and (c) shall not apply, if--
(1) the Federal banking agency that would be the appropriate Federal banking agency after the proposed conversion gives the appropriate Federal banking agency or State bank supervisor that issued the cease and desist order (or other formal enforcement order) or memorandum of understanding, as appropriate, written notice of the proposed conversion including a plan to address the significant supervisory matter in a manner that is consistent with the safe and sound operation of the institution;
(2) within 30 days of receipt of the written notice required under paragraph (1), the appropriate Federal banking agency or State bank supervisor that issued the cease and desist order (or other formal enforcement order) or memorandum of understanding, as appropriate, does not object to the conversion or the plan to address the significant supervisory matter;
(3) after conversion of the insured depository institution, the appropriate Federal banking agency after the conversion implements such plan; and
(4) in the case of a final enforcement action by a State Attorney General, approval of the conversion is conditioned on compliance by the insured depository institution with the terms of such final enforcement action.
(e) Notification of Pending Enforcement Actions-
(1) COPY OF CONVERSION APPLICATION- At the time an insured depository institution files a conversion application, the insured depository institution shall transmit a copy of the conversion application to--
(A) the appropriate Federal banking agency for the insured depository institution; and
(B) the Federal banking agency that would be the appropriate Federal banking agency of the insured depository institution after the proposed conversion.
(2) NOTIFICATION AND ACCESS TO INFORMATION- Upon receipt of a copy of the application described in paragraph (1), the appropriate Federal banking agency for the insured depository institution proposing the conversion shall--
(A) notify the Federal banking agency that would be the appropriate Federal banking agency for the institution after the proposed conversion in writing of any ongoing supervisory or investigative proceedings that the appropriate Federal banking agency for the institution proposing to convert believes is likely to result, in the near term and absent the proposed conversion, in a cease and desist order (or other formal enforcement order) or memorandum of understanding with respect to a significant supervisory matter; and
(B) provide the Federal banking agency that would be the appropriate Federal banking agency for the institution after the proposed conversion access to all investigative and supervisory information relating to the proceedings described in subparagraph (A).
SEC. 613. DE NOVO BRANCHING INTO STATES.
(a) National Banks- Section 5155(g)(1)(A) of the Revised Statutes of the United States (12 U.S.C. 36(g)(1)(A)) is amended to read as follows:
‘(A) the law of the State in which the branch is located, or is to be located, would permit establishment of the branch, if the national bank were a State bank chartered by such State; and’.
(b) State Insured Banks- Section 18(d)(4)(A)(i) of the Federal Deposit Insurance Act (12 U.S.C. 1828(d)(4)(A)(i)) is amended to read as follows:
‘(i) the law of the State in which the branch is located, or is to be located, would permit establishment of the branch, if the bank were a State bank chartered by such State; and’.
SEC. 614. LENDING LIMITS TO INSIDERS.
(a) Extensions of Credit- Section 22(h)(9)(D)(i) of the Federal Reserve Act (12 U.S.C. 375b(9)(D)(i)) is amended--
(1) by striking the period at the end and inserting ‘; or’;
(2) by striking ‘a person’ and inserting ‘the person’;
(3) by striking ‘extends credit by making’ and inserting the following: ‘extends credit to a person by--
‘(I) making’; and
(4) by adding at the end the following:
‘(II) having credit exposure to the person arising from a derivative transaction (as defined in section 5200(b) of the Revised Statutes of the United States (12 U.S.C. 84(b))), repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction between the member bank and the person.’.
(b) Effective Date- The amendments made by this section shall take effect 1 year after the transfer date.
SEC. 615. LIMITATIONS ON PURCHASES OF ASSETS FROM INSIDERS.
(a) Amendment to the Federal Deposit Insurance Act- Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is amended by adding at the end the following:
‘(z) General Prohibition on Sale of Assets-
‘(1) IN GENERAL- An insured depository institution may not purchase an asset from, or sell an asset to, an executive officer, director, or principal shareholder of the insured depository institution, or any related interest of such person (as such terms are defined in section 22(h) of Federal Reserve Act), unless--
‘(A) the transaction is on market terms; and
‘(B) if the transaction represents more than 10 percent of the capital stock and surplus of the insured depository institution, the transaction has been approved in advance by a majority of the members of the board of directors of the insured depository institution who do not have an interest in the transaction.
‘(2) RULEMAKING- The Board of Governors of the Federal Reserve System may issue such rules as may be necessary to define terms and to carry out the purposes this subsection. Before proposing or adopting a rule under this paragraph, the Board of Governors of the Federal Reserve System shall consult with the Comptroller of the Currency and the Corporation as to the terms of the rule.’.
(b) Amendments to the Federal Reserve Act- Section 22(d) of the Federal Reserve Act (12 U.S.C. 375) is amended to read as follows:
‘(d) [Reserved]’.
(c) Effective Date- The amendments made by this section shall take effect on the transfer date.
SEC. 616. REGULATIONS REGARDING CAPITAL LEVELS.
(a) Capital Levels of Bank Holding Companies- Section 5(b) of the Bank Holding Company Act of 1956 (12 U.S.C. 1844(b)) is amended--
(1) by inserting after ‘orders’ the following: ‘, including regulations and orders relating to the capital requirements for bank holding companies,’; and
(2) by adding at the end the following: ‘In establishing capital regulations pursuant to this subsection, the Board shall seek to make such requirements countercyclical, so that the amount of capital required to be maintained by a company increases in times of economic expansion and decreases in times of economic contraction, consistent with the safety and soundness of the company.’.
(b) Capital Levels of Savings and Loan Holding Companies- Section 10(g)(1) of the Home Owners’ Loan Act (12 U.S.C. 1467a(g)(1)) is amended--
(1) by inserting after ‘orders’ the following: ‘, including regulations and orders relating to capital requirements for savings and loan holding companies,’; and
(2) by inserting at the end the following: ‘In establishing capital regulations pursuant to this subsection, the appropriate Federal banking agency shall seek to make such requirements countercyclical so that the amount of capital required to be maintained by a company increases in times of economic expansion and decreases in times of economic contraction, consistent with the safety and soundness of the company.’.
(c) Capital Levels of Insured Depository Institutions- Section 908(a)(1) of the International Lending Supervision Act of 1983 (12 U.S.C. 3907(a)(1)) is amended by adding at the end the following: ‘Each appropriate Federal banking agency shall seek to make the capital standards required under this section or other provisions of Federal law for insured depository institutions countercyclical so that the amount of capital required to be maintained by an insured depository institution increases in times of economic expansion and decreases in times of economic contraction, consistent with the safety and soundness of the insured depository institution.’
(d) Source of Strength- The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by inserting after section 38 (12 U.S.C. 1831o) the following:
‘SEC. 38A. SOURCE OF STRENGTH.
‘(a) Holding Companies- The appropriate Federal banking agency for a bank holding company or savings and loan holding company shall require the bank holding company or savings and loan holding company to serve as a source of financial strength for any subsidiary of the bank holding company or savings and loan holding company that is a depository institution.
‘(b) Other Companies- If an insured depository institution is not the subsidiary of a bank holding company or savings and loan holding company, the appropriate Federal banking agency for the insured depository institution shall require any company that directly or indirectly controls the insured depository institution to serve as a source of financial strength for such institution.
‘(c) Reports- The appropriate Federal banking agency for an insured depository institution described in subsection (b) may, from time to time, require the company, or a company that directly or indirectly controls the insured depository institution, to submit a report, under oath, for the purposes of--
‘(1) assessing the ability of such company to comply with the requirement under subsection (b); and
‘(2) enforcing the compliance of such company with the requirement under subsection (b).
‘(d) Rules- Not later than 1 year after the transfer date, as defined in section 311 of the Enhancing Financial Institution Safety and Soundness Act of 2010, the appropriate Federal banking agencies shall jointly issue final rules to carry out this section.
‘(e) Definition- In this section, the term ‘source of financial strength’ means the ability of a company that directly or indirectly owns or controls an insured depository institution to provide financial assistance to such insured depository institution in the event of the financial distress of the insured depository institution.’.
(e) Effective Date- The amendments made by this section shall take effect on the transfer date.
SEC. 617. ELIMINATION OF ELECTIVE INVESTMENT BANK HOLDING COMPANY FRAMEWORK.
(a) Amendment- Section 17 of the Securities Exchange Act of 1934 (15 U.S.C. 78q) is amended--
(1) by striking subsection (i); and
(2) by redesignating subsections (j) and (k) as subsections (i) and (j), respectively.
(b) Effective Date- The amendments made by this section shall take effect on the transfer date.
SEC. 618. SECURITIES HOLDING COMPANIES.
(a) Definitions- In this section--
(1) the term ‘associated person of a securities holding company’ means a person directly or indirectly controlling, controlled by, or under common control with, a securities holding company;
(2) the term ‘foreign bank’ has the same meaning as in section 1(b)(7) of the International Banking Act of 1978 (12 U.S.C. 3101(7));
(3) the term ‘insured bank’ has the same meaning as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);
(4) the term ‘securities holding company’--
(A) means--
(i) a person (other than a natural person) that owns or controls 1 or more brokers or dealers registered with the Commission; and
(ii) the associated persons of a person described in clause (i); and
(B) does not include a person that is--
(i) a nonbank financial company supervised by the Board under title I;
(ii) an insured bank (other than an institution described in subparagraphs (D), (F), or (H) of section 2(c)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)) or a savings association;
(iii) an affiliate of an insured bank (other than an institution described in subparagraphs (D), (F), or (H) of section 2(c)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)) or an affiliate of a savings association;
(iv) a foreign bank, foreign company, or company that is described in section 8(a) of the International Banking Act of 1978 (12 U.S.C. 3106(a));
(v) a foreign bank that controls, directly or indirectly, a corporation chartered under section 25A of the Federal Reserve Act (12 U.S.C. 611 et seq.); or
(vi) subject to comprehensive consolidated supervision by a foreign regulator;
(5) the term ‘supervised securities holding company’ means a securities holding company that is supervised by the Board of Governors under this section; and
(6) the terms ‘affiliate’, ‘bank’, ‘bank holding company’, ‘company’, ‘control’, ‘savings association’, and ‘subsidiary’ have the same meanings as in section 2 of the Bank Holding Company Act of 1956.
(b) Supervision of a Securities Holding Company Not Having a Bank or Savings Association Affiliate-
(1) IN GENERAL- A securities holding company that is required by a foreign regulator or provision of foreign law to be subject to comprehensive consolidated supervision may register with the Board of Governors under paragraph (2) to become a supervised securities holding company. Any securities holding company filing such a registration shall be supervised in accordance with this section, and shall comply with the rules and orders prescribed by the Board of Governors applicable to supervised securities holding companies.
(2) REGISTRATION AS A SUPERVISED SECURITIES HOLDING COMPANY-
(A) REGISTRATION- A securities holding company that elects to be subject to comprehensive consolidated supervision shall register by filing with the Board of Governors such information and documents as the Board of Governors, by regulation, may prescribe as necessary or appropriate in furtherance of the purposes of this section.
(B) EFFECTIVE DATE- A securities holding company that registers under subparagraph (A) shall be deemed to be a supervised securities holding company, effective on the date that is 45 days after the date of receipt of the registration information and documents under subparagraph (A) by the Board of Governors, or within such shorter period as the Board of Governors, by rule or order, may determine.
(c) Supervision of Securities Holding Companies-
(1) RECORDKEEPING AND REPORTING-
(A) RECORDKEEPING AND REPORTING REQUIRED- Each supervised securities holding company and each affiliate of a supervised securities holding company shall make and keep for periods determined by the Board of Governors such records, furnish copies of such records, and make such reports, as the Board of Governors determines to be necessary or appropriate to carry out this section, to prevent evasions thereof, and to monitor compliance by the supervised securities holding company or affiliate with applicable provisions of law.
(B) FORM AND CONTENTS-
(i) IN GENERAL- Any record or report required to be made, furnished, or kept under this paragraph shall--
(I) be prepared in such form and according to such specifications (including certification by a registered public accounting firm), as the Board of Governors may require; and
(II) be provided promptly to the Board of Governors at any time, upon request by the Board of Governors.
(ii) CONTENTS- Records and reports required to be made, furnished, or kept under this paragraph may include--
(I) a balance sheet or income statement of the supervised securities holding company or an affiliate of a supervised securities holding company;
(II) an assessment of the consolidated capital and liquidity of the supervised securities holding company;
(III) a report by an independent auditor attesting to the compliance of the supervised securities holding company with the internal risk management and internal control objectives of the supervised securities holding company; and
(IV) a report concerning the extent to which the supervised securities holding company or affiliate has complied with the provisions of this section and any regulations prescribed and orders issued under this section.
(2) USE OF EXISTING REPORTS-
(A) IN GENERAL- The Board of Governors shall, to the fullest extent possible, accept reports in fulfillment of the requirements of this paragraph that a supervised securities holding company or an affiliate of a supervised securities holding company has been required to provide to another regulatory agency or a self-regulatory organization.
(B) AVAILABILITY- A supervised securities holding company or an affiliate of a supervised securities holding company shall promptly provide to the Board of Governors, at the request of the Board of Governors, any report described in subparagraph (A), as permitted by law.
(3) EXAMINATION AUTHORITY-
(A) FOCUS OF EXAMINATION AUTHORITY- The Board of Governors may make examinations of any supervised securities holding company and any affiliate of a supervised securities holding company to carry out this subsection, to prevent evasions thereof, and to monitor compliance by the supervised securities holding company or affiliate with applicable provisions of law.
(B) DEFERENCE TO OTHER EXAMINATIONS- For purposes of this subparagraph, the Board of Governors shall, to the fullest extent possible, use the reports of examination made by other appropriate Federal or State regulatory authorities with respect to any functionally regulated subsidiary or any institution described in subparagraph (D), (F), or (H) of section 2(c)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)).
(d) Capital and Risk Management-
(1) IN GENERAL- The Board of Governors shall, by regulation or order, prescribe capital adequacy and other risk management standards for supervised securities holding companies that are appropriate to protect the safety and soundness of the supervised securities holding companies and address the risks posed to financial stability by supervised securities holding companies.
(2) DIFFERENTIATION- In imposing standards under this subsection, the Board of Governors may differentiate among supervised securities holding companies on an individual basis, or by category, taking into consideration the requirements under paragraph (3).
(3) CONTENT- Any standards imposed on a supervised securities holding company under this subsection shall take into account--
(A) the differences among types of business activities carried out by the supervised securities holding company;
(B) the amount and nature of the financial assets of the supervised securities holding company;
(C) the amount and nature of the liabilities of the supervised securities holding company, including the degree of reliance on short-term funding;
(D) the extent and nature of the off-balance sheet exposures of the supervised securities holding company;
(E) the extent and nature of the transactions and relationships of the supervised securities holding company with other financial companies;
(F) the importance of the supervised securities holding company as a source of credit for households, businesses, and State and local governments, and as a source of liquidity for the financial system; and
(G) the nature, scope, and mix of the activities of the supervised securities holding company.
(4) NOTICE- A capital requirement imposed under this subsection may not take effect earlier than 180 days after the date on which a supervised securities holding company is provided notice of the capital requirement.
(e) Other Provisions of Law Applicable to Supervised Securities Holding Companies-
(1) FEDERAL DEPOSIT INSURANCE ACT- Subsections (b), (c) through (s), and (u) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) shall apply to any supervised securities holding company, and to any subsidiary (other than a bank or an institution described in subparagraph (D), (F), or (H) of section 2(c)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2))) of a supervised securities holding company, in the same manner as such subsections apply to a bank holding company for which the Board of Governors is the appropriate Federal banking agency. For purposes of applying such subsections to a supervised securities holding company or a subsidiary (other than a bank or an institution described in subparagraph (D), (F), or (H) of section 2(c)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2))) of a supervised securities holding company, the Board of Governors shall be deemed the appropriate Federal banking agency for the supervised securities holding company or subsidiary.
(2) BANK HOLDING COMPANY ACT OF 1956- Except as the Board of Governors may otherwise provide by regulation or order, a supervised securities holding company shall be subject to the provisions of the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) in the same manner and to the same extent a bank holding company is subject to such provisions, except that a supervised securities holding company may not, by reason of this paragraph, be deemed to be a bank holding company for purposes of section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843).
SEC. 619. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE EQUITY FUNDS.
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended by adding at the end the following:
‘SEC. 13. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE EQUITY FUNDS.
‘(a) In General-
‘(1) PROHIBITION- Unless otherwise provided in this section, a banking entity shall not--
‘(A) engage in proprietary trading; or
‘(B) acquire or retain any equity, partnership, or other ownership interest in or sponsor a hedge fund or a private equity fund.
‘(2) NONBANK FINANCIAL COMPANIES SUPERVISED BY THE BOARD- Any nonbank financial company supervised by the Board that engages in proprietary trading or takes or retains any equity, partnership, or other ownership interest in or sponsors a hedge fund or a private equity fund shall be subject, by rule, as provided in subsection (b)(2), to additional capital requirements for and additional quantitative limits with regards to such proprietary trading and taking or retaining any equity, partnership, or other ownership interest in or sponsorship of a hedge fund or a private equity fund, except that permitted activities as described in subsection (d) shall not be subject to the additional capital and additional quantitative limits except as provided in subsection (d)(3), as if the nonbank financial company supervised by the Board were a banking entity.
‘(b) Study and Rulemaking-
‘(1) STUDY- Not later than 6 months after the date of enactment of this section, the Financial Stability Oversight Council shall study and make recommendations on implementing the provisions of this section so as to--
‘(A) promote and enhance the safety and soundness of banking entities;
‘(B) protect taxpayers and consumers and enhance financial stability by minimizing the risk that insured depository institutions and the affiliates of insured depository institutions will engage in unsafe and unsound activities;
‘(C) limit the inappropriate transfer of Federal subsidies from institutions that benefit from deposit insurance and liquidity facilities of the Federal Government to unregulated entities;
‘(D) reduce conflicts of interest between the self-interest of banking entities and nonbank financial companies supervised by the Board, and the interests of the customers of such entities and companies;
‘(E) limit activities that have caused undue risk or loss in banking entities and nonbank financial companies supervised by the Board, or that might reasonably be expected to create undue risk or loss in such banking entities and nonbank financial companies supervised by the Board;
‘(F) appropriately accommodate the business of insurance within an insurance company, subject to regulation in accordance with the relevant insurance company investment laws, while protecting the safety and soundness of any banking entity with which such insurance company is affiliated and of the United States financial system; and
‘(G) appropriately time the divestiture of illiquid assets that are affected by the implementation of the prohibitions under subsection (a).
‘(2) RULEMAKING-
‘(A) IN GENERAL- Unless otherwise provided in this section, not later than 9 months after the completion of the study under paragraph (1), the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, shall consider the findings of the study under paragraph (1) and adopt rules to carry out this section, as provided in subparagraph (B).
‘(B) COORDINATED RULEMAKING-
‘(i) REGULATORY AUTHORITY- The regulations issued under this paragraph shall be issued by--
‘(I) the appropriate Federal banking agencies, jointly, with respect to insured depository institutions;
‘(II) the Board, with respect to any company that controls an insured depository institution, or that is treated as a bank holding company for purposes of section 8 of the International Banking Act, any nonbank financial company supervised by the Board, and any subsidiary of any of the foregoing (other than a subsidiary for which an agency described in subclause (I), (III), or (IV) is the primary financial regulatory agency);
‘(III) the Commodity Futures Trading Commission, with respect to any entity for which the Commodity Futures Trading Commission is the primary financial regulatory agency, as defined in section 2 of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and
‘(IV) the Securities and Exchange Commission, with respect to any entity for which the Securities and Exchange Commission is the primary financial regulatory agency, as defined in section 2 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
‘(ii) COORDINATION, CONSISTENCY, AND COMPARABILITY- In developing and issuing regulations pursuant to this section, the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission shall consult and coordinate with each other, as appropriate, for the purposes of assuring, to the extent possible, that such regulations are comparable and provide for consistent application and implementation of the applicable provisions of this section to avoid providing advantages or imposing disadvantages to the companies affected by this subsection and to protect the safety and soundness of banking entities and nonbank financial companies supervised by the Board.
‘(iii) COUNCIL ROLE- The Chairperson of the Financial Stability Oversight Council shall be responsible for coordination of the regulations issued under this section.
‘(c) Effective Date-
‘(1) IN GENERAL- Except as provided in paragraphs (2) and (3), this section shall take effect on the earlier of--
‘(A) 12 months after the date of the issuance of final rules under subsection (b); or
‘(B) 2 years after the date of enactment of this section.
‘(2) CONFORMANCE PERIOD FOR DIVESTITURE- A banking entity or nonbank financial company supervised by the Board shall bring its activities and investments into compliance with the requirements of this section not later than 2 years after the date on which the requirements become effective pursuant to this section or 2 years after the date on which the entity or company becomes a nonbank financial company supervised by the Board. The Board may, by rule or order, extend this two-year period for not more than one year at a time, if, in the judgment of the Board, such an extension is consistent with the purposes of this section and would not be detrimental to the public interest. The extensions made by the Board under the preceding sentence may not exceed an aggregate of 3 years.
‘(3) EXTENDED TRANSITION FOR ILLIQUID FUNDS-
‘(A) APPLICATION- The Board may, upon the application of a banking entity, extend the period during which the banking entity, to the extent necessary to fulfill a contractual obligation that was in effect on May 1, 2010, may take or retain its equity, partnership, or other ownership interest in, or otherwise provide additional capital to, an illiquid fund.
‘(B) TIME LIMIT ON APPROVAL- The Board may grant 1 extension under subparagraph (A), which may not exceed 5 years.
‘(4) DIVESTITURE REQUIRED- Except as otherwise provided in subsection (d)(1)(G), a banking entity may not engage in any activity prohibited under subsection (a)(1)(B) after the earlier of--
‘(A) the date on which the contractual obligation to invest in the illiquid fund terminates; and
‘(B) the date on which any extensions granted by the Board under paragraph (3) expire.
‘(5) ADDITIONAL CAPITAL DURING TRANSITION PERIOD- Notwithstanding paragraph (2), on the date on which the rules are issued under subsection (b)(2), the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission shall issue rules, as provided in subsection (b)(2), to impose additional capital requirements, and any other restrictions, as appropriate, on any equity, partnership, or ownership interest in or sponsorship of a hedge fund or private equity fund by a banking entity.
‘(6) SPECIAL RULEMAKING- Not later than 6 months after the date of enactment of this section, the Board shall issues rules to implement paragraphs (2) and (3).
‘(d) Permitted Activities-
‘(1) IN GENERAL- Notwithstanding the restrictions under subsection (a), to the extent permitted by any other provision of Federal or State law, and subject to the limitations under paragraph (2) and any restrictions or limitations that the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, may determine, the following activities (in this section referred to as ‘permitted activities’) are permitted:
‘(A) The purchase, sale, acquisition, or disposition of obligations of the United States or any agency thereof, obligations, participations, or other instruments of or issued by the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, a Federal Home Loan Bank, the Federal Agricultural Mortgage Corporation, or a Farm Credit System institution chartered under and subject to the provisions of the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), and obligations of any State or of any political subdivision thereof.
‘(B) The purchase, sale, acquisition, or disposition of securities and other instruments described in subsection (h)(4) in connection with underwriting or market-making-related activities, to the extent that any such activities permitted by this subparagraph are designed not to exceed the reasonably expected near term demands of clients, customers, or counterparties.
‘(C) Risk-mitigating hedging activities in connection with and related to individual or aggregated positions, contracts, or other holdings of a banking entity that are designed to reduce the specific risks to the banking entity in connection with and related to such positions, contracts, or other holdings.
‘(D) The purchase, sale, acquisition, or disposition of securities and other instruments described in subsection (h)(4) on behalf of customers.
‘(E) Investments in one or more small business investment companies, as defined in section 102 of the Small Business Investment Act of 1958 (15 U.S.C. 662), investments designed primarily to promote the public welfare, of the type permitted under paragraph (11) of section 5136 of the Revised Statutes of the United States (12 U.S.C. 24), or investments that are qualified rehabilitation expenditures with respect to a qualified rehabilitated building or certified historic structure, as such terms are defined in section 47 of the Internal Revenue Code of 1986 or a similar State historic tax credit program.
‘(F) The purchase, sale, acquisition, or disposition of securities and other instruments described in subsection (h)(4) by a regulated insurance company directly engaged in the business of insurance for the general account of the company and by any affiliate of such regulated insurance company, provided that such activities by any affiliate are solely for the general account of the regulated insurance company, if--
‘(i) the purchase, sale, acquisition, or disposition is conducted in compliance with, and subject to, the insurance company investment laws, regulations, and written guidance of the State or jurisdiction in which each such insurance company is domiciled; and
‘(ii) the appropriate Federal banking agencies, after consultation with the Financial Stability Oversight Council and the relevant insurance commissioners of the States and territories of the United States, have not jointly determined, after notice and comment, that a particular law, regulation, or written guidance described in clause (i) is insufficient to protect the safety and soundness of the banking entity, or of the financial stability of the United States.
‘(G) Organizing and offering a private equity or hedge fund, including serving as a general partner, managing member, or trustee of the fund and in any manner selecting or controlling (or having employees, officers, directors, or agents who constitute) a majority of the directors, trustees, or management of the fund, including any necessary expenses for the foregoing, only if--
‘(i) the banking entity provides bona fide trust, fiduciary, or investment advisory services;
‘(ii) the fund is organized and offered only in connection with the provision of bona fide trust, fiduciary, or investment advisory services and only to persons that are customers of such services of the banking entity;
‘(iii) the banking entity does not acquire or retain an equity interest, partnership interest, or other ownership interest in the funds except for a de minimis investment subject to and in compliance with paragraph (4);
‘(iv) the banking entity complies with the restrictions under paragraphs (1) and (2) of subparagraph (f);
‘(v) the banking entity does not, directly or indirectly, guarantee, assume, or otherwise insure the obligations or performance of the hedge fund or private equity fund or of any hedge fund or private equity fund in which such hedge fund or private equity fund invests;
‘(vi) the banking entity does not share with the hedge fund or private equity fund, for corporate, marketing, promotional, or other purposes, the same name or a variation of the same name;
‘(vii) no director or employee of the banking entity takes or retains an equity interest, partnership interest, or other ownership interest in the hedge fund or private equity fund, except for any director or employee of the banking entity who is directly engaged in providing investment advisory or other services to the hedge fund or private equity fund; and
‘(viii) the banking entity discloses to prospective and actual investors in the fund, in writing, that any losses in such hedge fund or private equity fund are borne solely by investors in the fund and not by the banking entity, and otherwise complies with any additional rules of the appropriate Federal banking agencies, the Securities and Exchange Commission, or the Commodity Futures Trading Commission, as provided in subsection (b)(2), designed to ensure that losses in such hedge fund or private equity fund are borne solely by investors in the fund and not by the banking entity.
‘(H) Proprietary trading conducted by a banking entity pursuant to paragraph (9) or (13) of section 4(c), provided that the trading occurs solely outside of the United States and that the banking entity is not directly or indirectly controlled by a banking entity that is organized under the laws of the United States or of one or more States.
‘(I) The acquisition or retention of any equity, partnership, or other ownership interest in, or the sponsorship of, a hedge fund or a private equity fund by a banking entity pursuant to paragraph (9) or (13) of section 4(c) solely outside of the United States, provided that no ownership interest in such hedge fund or private equity fund is offered for sale or sold to a resident of the United States and that the banking entity is not directly or indirectly controlled by a banking entity that is organized under the laws of the United States or of one or more States.
‘(J) Such other activity as the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission determine, by rule, as provided in subsection (b)(2), would promote and protect the safety and soundness of the banking entity and the financial stability of the United States.
‘(2) LIMITATION ON PERMITTED ACTIVITIES-
‘(A) IN GENERAL- No transaction, class of transactions, or activity may be deemed a permitted activity under paragraph (1) if the transaction, class of transactions, or activity--
‘(i) would involve or result in a material conflict of interest (as such term shall be defined by rule as provided in subsection (b)(2)) between the banking entity and its clients, customers, or counterparties;
‘(ii) would result, directly or indirectly, in a material exposure by the banking entity to high-risk assets or high-risk trading strategies (as such terms shall be defined by rule as provided in subsection (b)(2));
‘(iii) would pose a threat to the safety and soundness of such banking entity; or
‘(iv) would pose a threat to the financial stability of the United States.
‘(B) RULEMAKING- The appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission shall issue regulations to implement subparagraph (A), as part of the regulations issued under subsection (b)(2).
‘(3) CAPITAL AND QUANTITATIVE LIMITATIONS- The appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission shall, as provided in subsection (b)(2), adopt rules imposing additional capital requirements and quantitative limitations, including diversification requirements, regarding the activities permitted under this section if the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission determine that additional capital and quantitative limitations are appropriate to protect the safety and soundness of banking entities engaged in such activities.
‘(4) DE MINIMIS INVESTMENT-
‘(A) IN GENERAL- A banking entity may make and retain an investment in a hedge fund or private equity fund that the banking entity organizes and offers, subject to the limitations and restrictions in subparagraph (B) for the purposes of--
‘(i) establishing the fund and providing the fund with sufficient initial equity for investment to permit the fund to attract unaffiliated investors; or
‘(ii) making a de minimis investment.
‘(B) LIMITATIONS AND RESTRICTIONS ON INVESTMENTS-
‘(i) REQUIREMENT TO SEEK OTHER INVESTORS- A banking entity shall actively seek unaffiliated investors to reduce or dilute the investment of the banking entity to the amount permitted under clause (ii).
‘(ii) LIMITATIONS ON SIZE OF INVESTMENTS- Notwithstanding any other provision of law, investments by a banking entity in a hedge fund or private equity fund shall--
‘(I) not later than 1 year after the date of establishment of the fund, be reduced through redemption, sale, or dilution to an amount that is not more than 3 percent of the total ownership interests of the fund;
‘(II) be immaterial to the banking entity, as defined, by rule, pursuant to subsection (b)(2), but in no case may the aggregate of all of the interests of the banking entity in all such funds exceed 3 percent of the Tier 1 capital of the banking entity.
‘(iii) CAPITAL- For purposes of determining compliance with applicable capital standards under paragraph (3), the aggregate amount of the outstanding investments by a banking entity under this paragraph, including retained earnings, shall be deducted from the assets and tangible equity of the banking entity, and the amount of the deduction shall increase commensurate with the leverage of the hedge fund or private equity fund.
‘(C) EXTENSION- Upon an application by a banking entity, the Board may extend the period of time to meet the requirements under subparagraph (B)(ii)(I) for 2 additional years, if the Board finds that an extension would be consistent with safety and soundness and in the public interest.
‘(e) Anti-evasion-
‘(1) RULEMAKING- The appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission shall issue regulations, as part of the rulemaking provided for in subsection (b)(2), regarding internal controls and recordkeeping, in order to insure compliance with this section.
‘(2) TERMINATION OF ACTIVITIES OR INVESTMENT- Notwithstanding any other provision of law, whenever an appropriate Federal banking agency, the Securities and Exchange Commission, or the Commodity Futures Trading Commission, as appropriate, has reasonable cause to believe that a banking entity or nonbank financial company supervised by the Board under the respective agency’s jurisdiction has made an investment or engaged in an activity in a manner that functions as an evasion of the requirements of this section (including through an abuse of any permitted activity) or otherwise violates the restrictions under this section, the appropriate Federal banking agency, the Securities and Exchange Commission, or the Commodity Futures Trading Commission, as appropriate, shall order, after due notice and opportunity for hearing, the banking entity or nonbank financial company supervised by the Board to terminate the activity and, as relevant, dispose of the investment. Nothing in this paragraph shall be construed to limit the inherent authority of any Federal agency or State regulatory authority to further restrict any investments or activities under otherwise applicable provisions of law.
‘(f) Limitations on Relationships With Hedge Funds and Private Equity Funds-
‘(1) IN GENERAL- No banking entity that serves, directly or indirectly, as the investment manager, investment adviser, or sponsor to a hedge fund or private equity fund, or that organizes and offers a hedge fund or private equity fund pursuant to paragraph (d)(1)(G), and no affiliate of such entity, may enter into a transaction with the fund, or with any other hedge fund or private equity fund that is controlled by such fund, that would be a covered transaction, as defined in section 23A of the Federal Reserve Act (12 U.S.C. 371c), with the hedge fund or private equity fund, as if such banking entity and the affiliate thereof were a member bank and the hedge fund or private equity fund were an affiliate thereof.
‘(2) TREATMENT AS MEMBER BANK- A banking entity that serves, directly or indirectly, as the investment manager, investment adviser, or sponsor to a hedge fund or private equity fund, or that organizes and offers a hedge fund or private equity fund pursuant to paragraph (d)(1)(G), shall be subject to section 23B of the Federal Reserve Act (12 U.S.C. 371c-1), as if such banking entity were a member bank and such hedge fund or private equity fund were an affiliate thereof.
‘(3) PERMITTED SERVICES-
‘(A) IN GENERAL- Notwithstanding paragraph (1), the Board may permit a banking entity to enter into any prime brokerage transaction with any hedge fund or private equity fund in which a hedge fund or private equity fund managed, sponsored, or advised by such banking entity has taken an equity, partnership, or other ownership interest, if--
‘(i) the banking entity is in compliance with each of the limitations set forth in subsection (d)(1)(G) with regard to a hedge fund or private equity fund organized and offered by such banking entity;
‘(ii) the chief executive officer (or equivalent officer) of the banking entity certifies in writing annually (with a duty to update the certification if the information in the certification materially changes) that the conditions specified in subsection (d)(1)(g)(v) are satisfied; and
‘(iii) the Board has determined that such transaction is consistent with the safe and sound operation and condition of the banking entity.
‘(B) TREATMENT OF PRIME BROKERAGE TRANSACTIONS- For purposes of subparagraph (A), a prime brokerage transaction described in subparagraph (A) shall be subject to section 23B of the Federal Reserve Act (12 U.S.C. 371c-1) as if the counterparty were an affiliate of the banking entity.
‘(4) APPLICATION TO NONBANK FINANCIAL COMPANIES SUPERVISED BY THE BOARD- The appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission shall adopt rules, as provided in subsection (b)(2), imposing additional capital charges or other restrictions for nonbank financial companies supervised by the Board to address the risks to and conflicts of interest of banking entities described in paragraphs (1), (2), and (3) of this subsection.
‘(g) Rules of Construction-
‘(1) LIMITATION ON CONTRARY AUTHORITY- Except as provided in this section, notwithstanding any other provision of law, the prohibitions and restrictions under this section shall apply to activities of a banking entity or nonbank financial company supervised by the Board, even if such activities are authorized for a banking entity or nonbank financial company supervised by the Board.
‘(2) SALE OR SECURITIZATION OF LOANS- Nothing in this section shall be construed to limit or restrict the ability of a banking entity or nonbank financial company supervised by the Board to sell or securitize loans in a manner otherwise permitted by law.
‘(3) AUTHORITY OF FEDERAL AGENCIES AND STATE REGULATORY AUTHORITIES- Nothing in this section shall be construed to limit the inherent authority of any Federal agency or State regulatory authority under otherwise applicable provisions of law.
‘(h) Definitions- In this section, the following definitions shall apply:
‘(1) BANKING ENTITY- The term ‘banking entity’ means any insured depository institution (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)), any company that controls an insured depository institution, or that is treated as a bank holding company for purposes of section 8 of the International Banking Act of 1978, and any affiliate or subsidiary of any such entity. For purposes of this paragraph, the term ‘insured depository institution’ does not include an institution that functions solely in a trust or fiduciary capacity, if--
‘(A) all or substantially all of the deposits of such institution are in trust funds and are received in a bona fide fiduciary capacity;
‘(B) no deposits of such institution which are insured by the Federal Deposit Insurance Corporation are offered or marketed by or through an affiliate of such institution;
‘(C) such institution does not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others or make commercial loans; and
‘(D) such institution does not--
‘(i) obtain payment or payment related services from any Federal Reserve bank, including any service referred to in section 11A of the Federal Reserve Act (12 U.S.C. 248a); or
‘(ii) exercise discount or borrowing privileges pursuant to section 19(b)(7) of the Federal Reserve Act (12 U.S.C. 461(b)(7)).
‘(2) HEDGE FUND; PRIVATE EQUITY FUND- The terms ‘hedge fund’ and ‘private equity fund’ mean an issuer that would be an investment company, as defined in the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), but for section 3(c)(1) or 3(c)(7) of that Act, or such similar funds as the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission may, by rule, as provided in subsection (b)(2), determine.
‘(3) NONBANK FINANCIAL COMPANY SUPERVISED BY THE BOARD- The term ‘nonbank financial company supervised by the Board’ means a nonbank financial company supervised by the Board of Governors, as defined in section 102 of the Financial Stability Act of 2010.
‘(4) PROPRIETARY TRADING- The term ‘proprietary trading’, when used with respect to a banking entity or nonbank financial company supervised by the Board, means engaging as a principal for the trading account of the banking entity or nonbank financial company supervised by the Board in any transaction to purchase or sell, or otherwise acquire or dispose of, any security, any derivative, any contract of sale of a commodity for future delivery, any option on any such security, derivative, or contract, or any other security or financial instrument that the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission may, by rule as provided in subsection (b)(2), determine.
‘(5) SPONSOR- The term to ‘sponsor’ a fund means--
‘(A) to serve as a general partner, managing member, or trustee of a fund;
‘(B) in any manner to select or to control (or to have employees, officers, or directors, or agents who constitute) a majority of the directors, trustees, or management of a fund; or
‘(C) to share with a fund, for corporate, marketing, promotional, or other purposes, the same name or a variation of the same name.
‘(6) TRADING ACCOUNT- The term ‘trading account’ means any account used for acquiring or taking positions in the securities and instruments described in paragraph (4) principally for the purpose of selling in the near term (or otherwise with the intent to resell in order to profit from short-term price movements), and any such other accounts as the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission may, by rule as provided in subsection (b)(2), determine.
‘(7) ILLIQUID FUND-
‘(A) IN GENERAL- The term ‘illiquid fund’ means a hedge fund or private equity fund that--
‘(i) as of May 1, 2010, was principally invested in, or was invested and contractually committed to principally invest in, illiquid assets, such as portfolio companies, real estate investments, and venture capital investments; and
‘(ii) makes all investments pursuant to, and consistent with, an investment strategy to principally invest in illiquid assets. In issuing rules regarding this subparagraph, the Board shall take into consideration the terms of investment for the hedge fund or private equity fund, including contractual obligations, the ability of the fund to divest of assets held by the fund, and any other factors that the Board determines are appropriate.
‘(B) HEDGE FUND- For the purposes of this paragraph, the term ‘hedge fund’ means any fund identified under subsection (h)(2), and does not include a private equity fund, as such term is used in section 203(m) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(m)).’.
SEC. 620. STUDY OF BANK INVESTMENT ACTIVITIES.
(a) Study-
(1) IN GENERAL- Not later than 18 months after the date of enactment of this Act, the appropriate Federal banking agencies shall jointly review and prepare a report on the activities that a banking entity, as such term is defined in the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et. seq.), may engage in under Federal and State law, including activities authorized by statute and by order, interpretation and guidance.
(2) CONTENT- In carrying out the study under paragraph (1), the appropriate Federal banking agencies shall review and consider--
(A) the type of activities or investments;
(B) any financial, operational, managerial, or reputation risks associated with or presented as a result of the banking entity engaged in the activity or making the investment; and
(C) risk mitigation activities undertaken by the banking entity with regard to the risks.
(b) Report and Recommendations to the Council and to Congress- The appropriate Federal banking agencies shall submit to the Council, the Committee on Financial Services of the House of Representatives, and the Committee on Banking, Housing, and Urban Affairs of the Senate the study conducted pursuant to subsection (a) no later than 2 months after its completion. In addition to the information described in subsection (a), the report shall include recommendations regarding--
(1) whether each activity or investment has or could have a negative effect on the safety and soundness of the banking entity or the United States financial system;
(2) the appropriateness of the conduct of each activity or type of investment by banking entities; and
(3) additional restrictions as may be necessary to address risks to safety and soundness arising from the activities or types of investments described in subsection (a).
SEC. 621. CONFLICTS OF INTEREST.
(a) In General- The Securities Act of 1933 (15 U.S.C. 77a et seq.) is amended by inserting after section 27A the following:
‘SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN SECURITIZATIONS.
‘(a) In General- An underwriter, placement agent, initial purchaser, or sponsor, or any affiliate or subsidiary of any such entity, of an asset-backed security (as such term is defined in section 3 of the Securities and Exchange Act of 1934 (15 U.S.C. 78c), which for the purposes of this section shall include a synthetic asset-backed security), shall not, at any time for a period ending on the date that is one year after the date of the first closing of the sale of the asset-backed security, engage in any transaction that would involve or result in any material conflict of interest with respect to any investor in a transaction arising out of such activity.
‘(b) Rulemaking- Not later than 270 days after the date of enactment of this section, the Commission shall issue rules for the purpose of implementing subsection (a).
‘(c) Exception- The prohibitions of subsection (a) shall not apply to--
‘(1) risk-mitigating hedging activities in connection with positions or holdings arising out of the underwriting, placement, initial purchase, or sponsorship of an asset-backed security, provided that such activities are designed to reduce the specific risks to the underwriter, placement agent, initial purchaser, or sponsor associated with positions or holdings arising out of such underwriting, placement, initial purchase, or sponsorship; or
‘(2) purchases or sales of asset-backed securities made pursuant to and consistent with--
‘(A) commitments of the underwriter, placement agent, initial purchaser, or sponsor, or any affiliate or subsidiary of any such entity, to provide liquidity for the asset-backed security, or
‘(B) bona fide market-making in the asset backed security.
‘(d) Rule of Construction- This subsection shall not otherwise limit the application of section 15G of the Securities Exchange Act of 1934.’.
(b) Effective Date- Section 27B of the Securities Act of 1933, as added by this section, shall take effect on the effective date of final rules issued by the Commission under subsection (b) of such section 27B, except that subsections (b) and (d) of such section 27B shall take effect on the date of enactment of this Act.
SEC. 622. CONCENTRATION LIMITS ON LARGE FINANCIAL FIRMS.
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended by adding at the end the following:
‘SEC. 14. CONCENTRATION LIMITS ON LARGE FINANCIAL FIRMS.
‘(a) Definitions- In this section--
‘(1) the term ‘Council’ means the Financial Stability Oversight Council;
‘(2) the term ‘financial company’ means--
‘(A) an insured depository institution;
‘(B) a bank holding company;
‘(C) a savings and loan holding company;
‘(D) a company that controls an insured depository institution;
‘(E) a nonbank financial company supervised by the Board under title I of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and
‘(F) a foreign bank or company that is treated as a bank holding company for purposes of this Act; and
‘(3) the term ‘liabilities’ means--
‘(A) with respect to a United States financial company--
‘(i) the total risk-weighted assets of the financial company, as determined under the risk-based capital rules applicable to bank holding companies, as adjusted to reflect exposures that are deducted from regulatory capital; less
‘(ii) the total regulatory capital of the financial company under the risk-based capital rules applicable to bank holding companies;
‘(B) with respect to a foreign-based financial company--
‘(i) the total risk-weighted assets of the United States operations of the financial company, as determined under the applicable risk-based capital rules, as adjusted to reflect exposures that are deducted from regulatory capital; less
‘(ii) the total regulatory capital of the United States operations of the financial company, as determined under the applicable risk-based capital rules; and
‘(C) with respect to an insurance company or other nonbank financial company supervised by the Board, such assets of the company as the Board shall specify by rule, in order to provide for consistent and equitable treatment of such companies.
‘(b) Concentration Limit- Subject to the recommendations by the Council under subsection (e), a financial company may not merge or consolidate with, acquire all or substantially all of the assets of, or otherwise acquire control of, another company, if the total consolidated liabilities of the acquiring financial company upon consummation of the transaction would exceed 10 percent of the aggregate consolidated liabilities of all financial companies at the end of the calendar year preceding the transaction.
‘(c) Exception to Concentration Limit- With the prior written consent of the Board, the concentration limit under subsection (b) shall not apply to an acquisition--
‘(1) of a bank in default or in danger of default;
‘(2) with respect to which assistance is provided by the Federal Deposit Insurance Corporation under section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. 1823(c)); or
‘(3) that would result only in a de minimis increase in the liabilities of the financial company.
‘(d) Rulemaking and Guidance- The Board shall issue regulations implementing this section in accordance with the recommendations of the Council under subsection (e), including the definition of terms, as necessary. The Board may issue interpretations or guidance regarding the application of this section to an individual financial company or to financial companies in general.
‘(e) Council Study and Rulemaking-
‘(1) STUDY AND RECOMMENDATIONS- Not later than 6 months after the date of enactment of this section, the Council shall--
‘(A) complete a study of the extent to which the concentration limit under this section would affect financial stability, moral hazard in the financial system, the efficiency and competitiveness of United States financial firms and financial markets, and the cost and availability of credit and other financial services to households and businesses in the United States; and
‘(B) make recommendations regarding any modifications to the concentration limit that the Council determines would more effectively implement this section.
‘(2) RULEMAKING- Not later than 9 months after the date of completion of the study under paragraph (1), and notwithstanding subsections (b) and (d), the Board shall issue final regulations implementing this section, which shall reflect any recommendations by the Council under paragraph (1)(B).’.
SEC. 623. INTERSTATE MERGER TRANSACTIONS.
(a) Interstate Merger Transactions- Section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 1828(c)) is amended by adding at the end the following:
‘(13)(A) Except as provided in subparagraph (B), the responsible agency may not approve an application for an interstate merger transaction if the resulting insured depository institution (including all insured depository institutions which are affiliates of the resulting insured depository institution), upon consummation of the transaction, would control more than 10 percent of the total amount of deposits of insured depository institutions in the United States.
‘(B) Subparagraph (A) shall not apply to an interstate merger transaction that involves 1 or more insured depository institutions in default or in danger of default, or with respect to which the Corporation provides assistance under section 13.
‘(C) In this paragraph--
‘(i) the term ‘interstate merger transaction’ means a merger transaction involving 2 or more insured depository institutions that have different home States and that are not affiliates; and
‘(ii) the term ‘home State’ means--
‘(I) with respect to a national bank, the State in which the main office of the bank is located;
‘(II) with respect to a State bank or State savings association, the State by which the State bank or State savings association is chartered; and
‘(III) with respect to a Federal savings association, the State in which the home office (as defined by the regulations of the Director of the Office of Thrift Supervision, or, on and after the transfer date, the Comptroller of the Currency) of the Federal savings association is located.’.
(b) Acquisitions by Bank Holding Companies-
(1) IN GENERAL- Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843) is amended--
(A) in subsection (i), by adding at the end the following:
‘(8) INTERSTATE ACQUISITIONS-
‘(A) IN GENERAL- The Board may not approve an application by a bank holding company to acquire an insured depository institution under subsection (c)(8) or any other provision of this Act if--
‘(i) the home State of such insured depository institution is a State other than the home State of the bank holding company; and
‘(ii) the applicant (including all insured depository institutions which are affiliates of the applicant) controls, or upon consummation of the transaction would control, more than 10 percent of the total amount of deposits of insured depository institutions in the United States.
‘(B) EXCEPTION- Subparagraph (A) shall not apply to an acquisition that involves an insured depository institution in default or in danger of default, or with respect to which the Federal Deposit Insurance Corporation provides assistance under section 13 of the Federal Deposit Insurance Act (12 U.S.C. 1823).’; and
(B) in subsection (k)(6)(B), by striking ‘savings association’ and inserting ‘insured depository institution’.
(2) DEFINITIONS- Section 2(o)(4) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(o)(4)) is amended--
(A) in subparagraph (B), by striking ‘and’ at the end;
(B) in subparagraph (C)(ii), by striking the period at the end and inserting a semicolon; and
(C) by adding at the end the following:
‘(D) with respect to a State savings association, the State by which the savings association is chartered; and
‘(E) with respect to a Federal savings association, the State in which the home office (as defined by the regulations of the Director of the Office of Thrift Supervision, or, on and after the transfer date, the Comptroller of the Currency) of the Federal savings association is located.’.
(c) Acquisitions by Savings and Loan Holding Companies- Section 10(e)(2) of the Home Owners’ Loan Act (12 U.S.C. 1467a(e)(2)) is amended--
(1) in paragraph (2)--
(A) in subparagraph (C), by striking ‘or’ at the end;
(B) in subparagraph (D), by striking the period at the end and inserting ‘, or’; and
(C) by adding at the end the following:
‘(E) in the case of an application by a savings and loan holding company to acquire an insured depository institution, if--
‘(i) the home State of the insured depository institution is a State other than the home State of the savings and loan holding company;
‘(ii) the applicant (including all insured depository institutions which are affiliates of the applicant) controls, or upon consummation of the transaction would control, more than 10 percent of the total amount of deposits of insured depository institutions in the United States; and
‘(iii) the acquisition does not involve an insured depository institution in default or in danger of default, or with respect to which the Federal Deposit Insurance Corporation provides assistance under section 13 of the Federal Deposit Insurance Act (12 U.S.C. 1823).’; and
(2) by adding at the end the following:
‘(7) DEFINITIONS- For purposes of paragraph (2)(E)--
‘(A) the terms ‘default’, ‘in danger of default’, and ‘insured depository institution’ have the same meanings as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813); and
‘(B) the term ‘home State’ means--
‘(i) with respect to a national bank, the State in which the main office of the bank is located;
‘(ii) with respect to a State bank or State savings association, the State by which the savings association is chartered;
‘(iii) with respect to a Federal savings association, the State in which the home office (as defined by the regulations of the Director of the Office of Thrift Supervision, or, on and after the transfer date, the Comptroller of the Currency) of the Federal savings association is located; and
‘(iv) with respect to a savings and loan holding company, the State in which the amount of total deposits of all insured depository institution subsidiaries of such company was the greatest on the date on which the company became a savings and loan holding company.’.
SEC. 624. QUALIFIED THRIFT LENDERS.
Section 10(m)(3) of the Home Owners’ Loan Act (12 U.S.C. 1467a(m)(3)) is amended--
(1) by striking subparagraph (A) and inserting the following:
‘(A) IN GENERAL- A savings association that fails to become or remain a qualified thrift lender shall immediately be subject to the restrictions under subparagraph (B).’; and
(2) in subparagraph (B)(i), by striking subclause (III) and inserting the following:
‘(III) DIVIDENDS- The savings association may not pay dividends, except for dividends that--
‘(aa) would be permissible for a national bank;
‘(bb) are necessary to meet obligations of a company that controls such savings association; and
‘(cc) are specifically approved by the Comptroller of the Currency and the Board after a written request submitted to the Comptroller of the Currency and the Board by the savings association not later than 30 days before the date of the proposed payment.
‘(IV) REGULATORY AUTHORITY- A savings association that fails to become or remain a qualified thrift lender shall be deemed to have violated section 5 of the Home Owners’ Loan Act (12 U.S.C. 1464) and subject to actions authorized by section 5(d) of the Home Owners’ Loan Act (12 U.S.C. 1464(d)).’.
SEC. 625. TREATMENT OF DIVIDENDS BY CERTAIN MUTUAL HOLDING COMPANIES.
(a) In General- Section 10(o) of the Home Owners’ Loan Act (12 U.S.C. 1467a(o) is amended by adding at the end the following:
‘(11) DIVIDENDS-
‘(A) DECLARATION OF DIVIDENDS-
‘(i) ADVANCE NOTICE REQUIRED- Each subsidiary of a mutual holding company that is a savings association shall give the appropriate Federal banking agency and the Board notice not later than 30 days before the date of a proposed declaration by the board of directors of the savings association of any dividend on the guaranty, permanent, or other nonwithdrawable stock of the savings association.
‘(ii) INVALID DIVIDENDS- Any dividend described in clause (i) that is declared without giving notice to the appropriate Federal banking agency and the Board under clause (i), or that is declared during the 30-day period preceding the date of a proposed declaration for which notice is given to the appropriate Federal banking agency and the Board under clause (i), shall be invalid and shall confer no rights or benefits upon the holder of any such stock.
‘(B) WAIVER OF DIVIDENDS- A mutual holding company may waive the right to receive any dividend declared by a subsidiary of the mutual holding company, if--
‘(i) no insider of the mutual holding company, associate of an insider, or tax-qualified or non-tax-qualified employee stock benefit plan of the mutual holding company holds any share of the stock in the class of stock to which the waiver would apply; or
‘(ii) the mutual holding company gives written notice to the Board of the intent of the mutual holding company to waive the right to receive dividends, not later than 30 days before the date of the proposed date of payment of the dividend, and the Board does not object to the waiver.
‘(C) RESOLUTION INCLUDED IN WAIVER NOTICE- A notice of a waiver under subparagraph (B) shall include a copy of the resolution of the board of directors of the mutual holding company, in such form and substance as the Board may determine, together with any supporting materials relied upon by the board of directors of the mutual holding company, concluding that the proposed dividend waiver is consistent with the fiduciary duties of the board of directors to the mutual members of the mutual holding company.
‘(D) STANDARDS FOR WAIVER OF DIVIDEND- The Board may not object to a waiver of dividends under subparagraph (B) if--
‘(i) the waiver would not be detrimental to the safe and sound operation of the savings association;
‘(ii) the board of directors of the mutual holding company expressly determines that a waiver of the dividend by the mutual holding company is consistent with the fiduciary duties of the board of directors to the mutual members of the mutual holding company; and
‘(iii) the mutual holding company has, prior to December 1, 2009--
‘(I) reorganized into a mutual holding company under subsection (o);
‘(II) issued minority stock either from its mid-tier stock holding company or its subsidiary stock savings association; and
‘(III) waived dividends it had a right to receive from the subsidiary stock savings association.
‘(E) VALUATION-
‘(i) IN GENERAL- The appropriate Federal banking agency shall consider waived dividends in determining an appropriate exchange ratio in the event of a full conversion to stock form.
‘(ii) EXCEPTION- In the case of a savings association that has reorganized into a mutual holding company, has issued minority stock from a mid-tier stock holding company or a subsidiary stock savings association of the mutual holding company, and has waived dividends it had a right to receive from a subsidiary savings association before December 1, 2009, the appropriate Federal banking agency shall not consider waived dividends in determining an appropriate exchange ratio in the event of a full conversion to stock form.’.
(b) Effective Date- The amendment made by subsection (a) shall take effect on the transfer date.
SEC. 626. INTERMEDIATE HOLDING COMPANIES.
The Home Owners’ Loan Act (12 U.S.C. 1461 et seq.) is amended by inserting after section 10 (12 U.S.C. 1467a) the following new section:
‘SEC. 10A. INTERMEDIATE HOLDING COMPANIES.
‘(a) Definition- For purposes of this section:
‘(1) FINANCIAL ACTIVITIES- The term ‘financial activities’ means activities described in clauses (i) and (ii) of section 10(c)(9)(A).
‘(2) GRANDFATHERED UNITARY SAVINGS AND LOAN HOLDING COMPANY- The term ‘grandfathered unitary savings and loan holding company’ means a company described in section 10(c)(9)(C).
‘(3) INTERNAL FINANCIAL ACTIVITIES- The term ‘internal financial activities’ includes--
‘(A) internal financial activities conducted by a grandfathered savings and loan holding company or any affiliate; and
‘(B) internal treasury, investment, and employee benefit functions.
‘(b) Requirement-
‘(1) IN GENERAL-
‘(A) ACTIVITIES OTHER THAN FINANCIAL ACTIVITIES- If a grandfathered unitary savings and loan holding company conducts activities other than financial activities, the Board may require such company to establish and conduct all or a portion of such financial activities in or through an intermediate holding company, which shall be a savings and loan holding company, established pursuant to regulations of the Board, not later than 90 days (or such longer period as the Board may deem appropriate) after the transfer date.
‘(B) OTHER ACTIVITIES- Notwithstanding subparagraph (A), the Board shall require a grandfathered unitary savings and loan holding company to establish an intermediate holding company if the Board makes a determination that the establishment of such intermediate holding company is necessary--
‘(i) to appropriately supervise activities that are determined to be financial activities; or
‘(ii) to ensure that supervision by the Board does not extend to the activities of such company that are not financial activities.
‘(2) INTERNAL FINANCIAL ACTIVITIES-
‘(A) TREATMENT OF INTERNAL FINANCIAL ACTIVITIES- For purposes of this subsection, the internal financial activities of a grandfathered unitary savings and loan holding company shall not be required to be placed in an intermediate holding company.
‘(B) GRANDFATHERED ACTIVITIES- A grandfathered unitary savings and loan holding company may continue to engage in an internal financial activity, subject to review by the Board to determine whether engaging in such activity presents undue risk to the grandfathered unitary savings and loan holding company or to the financial stability of the United States, if--
‘(i) the grandfathered unitary savings and loan holding company engaged in the activity during the year before the date of enactment of this section; and
‘(ii) at least 2/3 of the assets or 2/3 of the revenues generated from the activity are from or attributable to the grandfathered unitary savings and loan holding company.
‘(3) SOURCE OF STRENGTH- A grandfathered unitary savings and loan holding company that directly or indirectly controls an intermediate holding company established under this section shall serve as a source of strength to its subsidiary intermediate holding company.
‘(4) PARENT COMPANY REPORTS- The Board, may from time to time, examine and require reports under oath from a grandfathered unitary savings and loan holding company that controls an intermediate holding company, and from the appropriate officers or directors of such company, solely for purposes of ensuring compliance with the provisions of this section, including assessing the ability of the company to serve as a source of strength to its subsidiary intermediate holding company as required under paragraph (3) and enforcing compliance with such requirement.
‘(5) LIMITED PARENT COMPANY ENFORCEMENT-
‘(A) IN GENERAL- In addition to any other authority of the Board, the Board may enforce compliance with the provisions of this subsection that are applicable to any company described in paragraph (1)(A) that controls an intermediate holding company under section 8 of the Federal Deposit Insurance Act, and a company described in paragraph (1)(A) shall be subject to such section (solely for purposes of this subparagraph) in the same manner and to the same extent as if the company described in paragraph (1)(A) were a savings and loan holding company.
‘(B) APPLICATION OF OTHER ACT- Any violation of this subsection by a grandfathered unitary savings and loan holding company that controls an intermediate holding company may also be treated as a violation of the Federal Deposit Insurance Act for purposes of subparagraph (A).
‘(C) NO EFFECT ON OTHER AUTHORITY- No provision of this paragraph shall be construed as limiting any authority of the Board or any other Federal agency under any other provision of law.
‘(c) Regulations- The Board--
‘(1) shall promulgate regulations to establish the criteria for determining whether to require a grandfathered unitary savings and loan holding company to establish an intermediate holding company under subsection (b); and
‘(2) may promulgate regulations to establish any restrictions or limitations on transactions between an intermediate holding company or a parent of such company and its affiliates, as necessary to prevent unsafe and unsound practices in connection with transactions between the intermediate holding company, or any subsidiary thereof, and its parent company or affiliates that are not subsidiaries of the intermediate holding company, except that such regulations shall not restrict or limit any transaction in connection with the bona fide acquisition or lease by an unaffiliated person of assets, goods, or services.
‘(d) Rules of Construction-
‘(1) ACTIVITIES- Nothing in this section shall be construed to require a grandfathered unitary savings and loan holding company to conform its activities to permissible activities.
‘(2) PERMISSIBLE CORPORATE REORGANIZATION- The formation of an intermediate holding company as required in subsection (b) shall be presumed to be a permissible corporate reorganization as described in section 10(c)(9)(D).’.
SEC. 627. INTEREST-BEARING TRANSACTION ACCOUNTS AUTHORIZED.
(a) Repeal of Prohibition on Payment of Interest on Demand Deposits-
(1) FEDERAL RESERVE ACT- Section 19(i) of the Federal Reserve Act (12 U.S.C. 371a) is amended to read as follows:
‘(i) [Repealed]’.
(2) HOME OWNERS’ LOAN ACT- The first sentence of section 5(b)(1)(B) of the Home Owners’ Loan Act (12 U.S.C. 1464(b)(1)(B)) is amended by striking ‘savings association may not--’ and all that follows through ‘(ii) permit any’ and inserting ‘savings association may not permit any’.
(3) FEDERAL DEPOSIT INSURANCE ACT- Section 18(g) of the Federal Deposit Insurance Act (12 U.S.C. 1828(g)) is amended to read as follows:
‘(g) [Repealed]’.
(b) Effective Date- The amendments made by subsection (a) shall take effect 1 year after the date of the enactment of this Act.
SEC. 628. CREDIT CARD BANK SMALL BUSINESS LENDING.
Section 2(c)(2)(F)(v) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(F)(v)) is amended by inserting before the period the following: ‘, other than credit card loans that are made to businesses that meet the criteria for a small business concern to be eligible for business loans under regulations established by the Small Business Administration under part 121 of title 13, Code of Federal Regulations’.
TITLE VII--WALL STREET TRANSPARENCY AND ACCOUNTABILITY
SEC. 701. SHORT TITLE.
This title may be cited as the ‘Wall Street Transparency and Accountability Act of 2010’.
Subtitle A--Regulation of Over-the-Counter Swaps Markets
SEC. 711. DEFINITIONS.
In this subtitle, the terms ‘prudential regulator’, ‘swap’, ‘swap dealer’, ‘major swap participant’, ‘swap data repository’, ‘associated person of a swap dealer or major swap participant’, ‘eligible contract participant’, ‘swap execution facility’, ‘security-based swap’, ‘security-based swap dealer’, ‘major security-based swap participant’, and ‘associated person of a security-based swap dealer or major security-based swap participant’ have the meanings given the terms in section 1a of the Commodity Exchange Act (7 U.S.C. 1a), including any modification of the meanings under section 721(b) of this Act.
SEC. 712. REVIEW OF REGULATORY AUTHORITY.
(a) Consultation-
(1) COMMODITY FUTURES TRADING COMMISSION- Before commencing any rulemaking or issuing an order regarding swaps, swap dealers, major swap participants, swap data repositories, derivative clearing organizations with regard to swaps, persons associated with a swap dealer or major swap participant, eligible contract participants, or swap execution facilities pursuant to this subtitle, the Commodity Futures Trading Commission shall consult and coordinate to the extent possible with the Securities and Exchange Commission and the prudential regulators for the purposes of assuring regulatory consistency and comparability, to the extent possible.
(2) SECURITIES AND EXCHANGE COMMISSION- Before commencing any rulemaking or issuing an order regarding security-based swaps, security-based swap dealers, major security-based swap participants, security-based swap data repositories, clearing agencies with regard to security-based swaps, persons associated with a security-based swap dealer or major security-based swap participant, eligible contract participants with regard to security-based swaps, or security-based swap execution facilities pursuant to subtitle B, the Securities and Exchange Commission shall consult and coordinate to the extent possible with the Commodity Futures Trading Commission and the prudential regulators for the purposes of assuring regulatory consistency and comparability, to the extent possible.
(3) PROCEDURES AND DEADLINE- Such regulations shall be prescribed in accordance with applicable requirements of title 5, United States Code, and shall be issued in final form not later than 360 days after the date of enactment of this Act.
(4) APPLICABILITY- The requirements of paragraphs (1) and (2) shall not apply to an order issued--
(A) in connection with or arising from a violation or potential violation of any provision of the Commodity Exchange Act (7 U.S.C. 1 et seq.);
(B) in connection with or arising from a violation or potential violation of any provision of the securities laws; or
(C) in any proceeding that is conducted on the record in accordance with sections 556 and 557 of title 5, United States Code.
(5) EFFECT- Nothing in this subsection authorizes any consultation or procedure for consultation that is not consistent with the requirements of subchapter II of chapter 5, and chapter 7, of title 5, United States Code (commonly known as the ‘Administrative Procedure Act’).
(6) RULES; ORDERS- In developing and promulgating rules or orders pursuant to this subsection, each Commission shall consider the views of the prudential regulators.
(7) TREATMENT OF SIMILAR PRODUCTS AND ENTITIES-
(A) IN GENERAL- In adopting rules and orders under this subsection, the Commodity Futures Trading Commission and the Securities and Exchange Commission shall treat functionally or economically similar products or entities described in paragraphs (1) and (2) in a similar manner.
(B) EFFECT- Nothing in this subtitle requires the Commodity Futures Trading Commission or the Securities and Exchange Commission to adopt joint rules or orders that treat functionally or economically similar products or entities described in paragraphs (1) and (2) in an identical manner.
(8) MIXED SWAPS- The Commodity Futures Trading Commission and the Securities and Exchange Commission, after consultation with the Board of Governors, shall jointly prescribe such regulations regarding mixed swaps, as described in section 1a(47)(D) of the Commodity Exchange Act (7 U.S.C. 1a(47)(D)) and in section 3(a)(68)(D) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(68)(D)), as may be necessary to carry out the purposes of this title.
(b) Limitation-
(1) COMMODITY FUTURES TRADING COMMISSION- Nothing in this title, unless specifically provided, confers jurisdiction on the Commodity Futures Trading Commission to issue a rule, regulation, or order providing for oversight or regulation of--
(A) security-based swaps; or
(B) with regard to its activities or functions concerning security-based swaps--
(i) security-based swap dealers;
(ii) major security-based swap participants;
(iii) security-based swap data repositories;
(iv) associated persons of a security-based swap dealer or major security-based swap participant;
(v) eligible contract participants with respect to security-based swaps; or
(vi) swap execution facilities with respect to security-based swaps.
(2) SECURITIES AND EXCHANGE COMMISSION- Nothing in this title, unless specifically provided, confers jurisdiction on the Securities and Exchange Commission or State securities regulators to issue a rule, regulation, or order providing for oversight or regulation of--
(A) swaps; or
(B) with regard to its activities or functions concerning swaps--
(i) swap dealers;
(ii) major swap participants;
(iii) swap data repositories;
(iv) persons associated with a swap dealer or major swap participant;
(v) eligible contract participants with respect to swaps; or
(vi) swap execution facilities with respect to swaps.
(3) PROHIBITION ON CERTAIN FUTURES ASSOCIATIONS AND NATIONAL SECURITIES ASSOCIATIONS-
(A) FUTURES ASSOCIATIONS- Notwithstanding any other provision of law (including regulations), unless otherwise authorized by this title, no futures association registered under section 17 of the Commodity Exchange Act (7 U.S.C. 21) may issue a rule, regulation, or order for the oversight or regulation of, or otherwise assert jurisdiction over, for any purpose, any security-based swap, except that this subparagraph shall not limit the authority of a registered futures association to examine for compliance with, and enforce, its rules on capital adequacy.
(B) NATIONAL SECURITIES ASSOCIATIONS- Notwithstanding any other provision of law (including regulations), unless otherwise authorized by this title, no national securities association registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3) may issue a rule, regulation, or order for the oversight or regulation of, or otherwise assert jurisdiction over, for any purpose, any swap, except that this subparagraph shall not limit the authority of a national securities association to examine for compliance with, and enforce, its rules on capital adequacy.
(c) Objection to Commission Regulation-
(1) FILING OF PETITION FOR REVIEW-
(A) IN GENERAL- If either Commission referred to in this section determines that a final rule, regulation, or order of the other Commission conflicts with subsection (a)(7) or (b), then the complaining Commission may obtain review of the final rule, regulation, or order in the United States Court of Appeals for the District of Columbia Circuit by filing in the court, not later than 60 days after the date of publication of the final rule, regulation, or order, a written petition requesting that the rule, regulation, or order be set aside.
(B) EXPEDITED PROCEEDING- A proceeding described in subparagraph (A) shall be expedited by the United States Court of Appeals for the District of Columbia Circuit.
(2) TRANSMITTAL OF PETITION AND RECORD-
(A) IN GENERAL- A copy of a petition described in paragraph (1) shall be transmitted not later than 1 business day after the date of filing by the complaining Commission to the Secretary of the responding Commission.
(B) DUTY OF RESPONDING COMMISSION- On receipt of the copy of a petition described in paragraph (1), the responding Commission shall file with the United States Court of Appeals for the District of Columbia Circuit--
(i) a copy of the rule, regulation, or order under review (including any documents referred to therein); and
(ii) any other materials prescribed by the United States Court of Appeals for the District of Columbia Circuit.
(3) STANDARD OF REVIEW- The United States Court of Appeals for the District of Columbia Circuit shall--
(A) give deference to the views of neither Commission; and
(B) determine to affirm or set aside a rule, regulation, or order of the responding Commission under this subsection, based on the determination of the court as to whether the rule, regulation, or order is in conflict with subsection (a)(7) or (b), as applicable.
(4) JUDICIAL STAY- The filing of a petition by the complaining Commission pursuant to paragraph (1) shall operate as a stay of the rule, regulation, or order until the date on which the determination of the United States Court of Appeals for the District of Columbia Circuit is final (including any appeal of the determination).
(d) Joint Rulemaking-
(1) IN GENERAL- Notwithstanding any other provision of this title and subsections (b) and (c), the Commodity Futures Trading Commission and the Securities and Exchange Commission, in consultation with the Board of Governors, shall further define the terms ‘swap’, ‘security-based swap’, ‘swap dealer’, ‘security-based swap dealer’, ‘major swap participant’, ‘major security-based swap participant’, ‘eligible contract participant’, and ‘security-based swap agreement’ in section 1a(47)(A)(v) of the Commodity Exchange Act (7 U.S.C. 1a(47)(A)(v)) and section 3(a)(78) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(78)).
(2) AUTHORITY OF THE COMMISSIONS-
(A) IN GENERAL- Notwithstanding any other provision of this title, the Commodity Futures Trading Commission and the Securities and Exchange Commission, in consultation with the Board of Governors, shall jointly adopt such other rules regarding such definitions as the Commodity Futures Trading Commission and the Securities and Exchange Commission determine are necessary and appropriate, in the public interest, and for the protection of investors.
(B) TRADE REPOSITORY RECORDKEEPING- Notwithstanding any other provision of this title, the Commodity Futures Trading Commission and the Securities and Exchange Commission, in consultation with the Board of Governors, shall engage in joint rulemaking to jointly adopt a rule or rules governing the books and records that are required to be kept and maintained regarding security-based swap agreements by persons that are registered as swap data repositories under the Commodity Exchange Act, including uniform rules that specify the data elements that shall be collected and maintained by each repository.
(C) BOOKS AND RECORDS- Notwithstanding any other provision of this title, the Commodity Futures Trading Commission and the Securities and Exchange Commission, in consultation with the Board of Governors, shall engage in joint rulemaking to jointly adopt a rule or rules governing books and records regarding security-based swap agreements, including daily trading records, for swap dealers, major swap participants, security-based swap dealers, and security-based swap participants.
(D) COMPARABLE RULES- Rules and regulations prescribed jointly under this title by the Commodity Futures Trading Commission and the Securities and Exchange Commission shall be comparable to the maximum extent possible, taking into consideration differences in instruments and in the applicable statutory requirements.
(E) TRACKING UNCLEARED TRANSACTIONS- Any rules prescribed under subparagraph (A) shall require the maintenance of records of all activities relating to security-based swap agreement transactions defined under subparagraph (A) that are not cleared.
(F) SHARING OF INFORMATION- The Commodity Futures Trading Commission shall make available to the Securities and Exchange Commission information relating to security-based swap agreement transactions defined in subparagraph (A) that are not cleared.
(3) FINANCIAL STABILITY OVERSIGHT COUNCIL- In the event that the Commodity Futures Trading Commission and the Securities and Exchange Commission fail to jointly prescribe rules pursuant to paragraph (1) or (2) in a timely manner, at the request of either Commission, the Financial Stability Oversight Council shall resolve the dispute--
(A) within a reasonable time after receiving the request;
(B) after consideration of relevant information provided by each Commission; and
(C) by agreeing with 1 of the Commissions regarding the entirety of the matter or by determining a compromise position.
(4) JOINT INTERPRETATION- Any interpretation of, or guidance by either Commission regarding, a provision of this title, shall be effective only if issued jointly by the Commodity Futures Trading Commission and the Securities and Exchange Commission, after consultation with the Board of Governors, if this title requires the Commodity Futures Trading Commission and the Securities and Exchange Commission to issue joint regulations to implement the provision.
(e) Global Rulemaking Timeframe- Unless otherwise provided in this title, or an amendment made by this title, the Commodity Futures Trading Commission or the Securities and Exchange Commission, or both, shall individually, and not jointly, promulgate rules and regulations required of each Commission under this title or an amendment made by this title not later than 360 days after the date of enactment of this Act.
(f) Rules and Registration Before Final Effective Dates- Beginning on the date of enactment of this Act and notwithstanding the effective date of any provision of this Act, the Commodity Futures Trading Commission and the Securities and Exchange Commission may, in order to prepare for the effective dates of the provisions of this Act--
(1) promulgate rules, regulations, or orders permitted or required by this Act;
(2) conduct studies and prepare reports and recommendations required by this Act;
(3) register persons under the provisions of this Act; and
(4) exempt persons, agreements, contracts, or transactions from provisions of this Act, under the terms contained in this Act,
provided, however, that no action by the Commodity Futures Trading Commission or the Securities and Exchange Commission described in paragraphs (1) through (4) shall become effective prior to the effective date applicable to such action under the provisions of this Act.
SEC. 713. PORTFOLIO MARGINING CONFORMING CHANGES.
(a) Securities Exchange Act of 1934- Section 15(c)(3) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c)(3)) is amended by adding at the end the following:
‘(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.’.
(b) Commodity Exchange Act- Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) is amended by adding at the end the following:
‘(h) Notwithstanding subsection (a)(2) or the rules and regulations thereunder, and pursuant to an exemption granted by the Commission under section 4(c) of this Act or pursuant to a rule or regulation, a futures commission merchant that is registered pursuant to section 4f(a)(1) of this Act and also registered as a broker or dealer pursuant to section 15(b)(1) of the Securities Exchange Act of 1934 may, pursuant to a portfolio margining program approved by the Securities and Exchange Commission pursuant to section 19(b) of the Securities Exchange Act of 1934, hold in a portfolio margining account carried as a securities account subject to section 15(c)(3) of the Securities Exchange Act of 1934 and the rules and regulations thereunder, a contract for the purchase or sale of a commodity for future delivery or an option on such a contract, and any money, securities or other property received from a customer to margin, guarantee or secure such a contract, or accruing to a customer as the result of such a contract. The Commission shall consult with the Securities and Exchange Commission to adopt rules to ensure that such transactions and accounts are subject to comparable requirements to the extent practical for similar products.’.
(c) Duty of Commodity Futures Trading Commission- Section 20 of the Commodity Exchange Act (7 U.S.C. 24) is amended by adding at the end the following:
‘(c) The Commission shall exercise its authority to ensure that securities held in a portfolio margining account carried as a futures account are customer property and the owners of those accounts are customers for the purposes of subchapter IV of chapter 7 of title 11 of the United States Code.’.
SEC. 714. ABUSIVE SWAPS.
The Commodity Futures Trading Commission or the Securities and Exchange Commission, or both, individually may, by rule or order--
(1) collect information as may be necessary concerning the markets for any types of--
(A) swap (as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a)); or
(B) security-based swap (as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a)); and
(2) issue a report with respect to any types of swaps or security-based swaps that the Commodity Futures Trading Commission or the Securities and Exchange Commission determines to be detrimental to--
(A) the stability of a financial market; or
(B) participants in a financial market.
SEC. 715. AUTHORITY TO PROHIBIT PARTICIPATION IN SWAP ACTIVITIES.
Except as provided in section 4 of the Commodity Exchange Act (7 U.S.C. 6), if the Commodity Futures Trading Commission or the Securities and Exchange Commission determines that the regulation of swaps or security-based swaps markets in a foreign country undermines the stability of the United States financial system, either Commission, in consultation with the Secretary of the Treasury, may prohibit an entity domiciled in the foreign country from participating in the United States in any swap or security-based swap activities.
SEC. 716. PROHIBITION AGAINST FEDERAL GOVERNMENT BAILOUTS OF SWAPS ENTITIES.
(a) Prohibition on Federal Assistance- Notwithstanding any other provision of law (including regulations), no Federal assistance may be provided to any swaps entity with respect to any swap, security-based swap, or other activity of the swaps entity.
(b) Definitions- In this section:
(1) FEDERAL ASSISTANCE- The term ‘Federal assistance’ means the use of any advances from any Federal Reserve credit facility or discount window that is not part of a program or facility with broad-based eligibility under section 13(3)(A) of the Federal Reserve Act, Federal Deposit Insurance Corporation insurance or guarantees for the purpose of--
(A) making any loan to, or purchasing any stock, equity interest, or debt obligation of, any swaps entity;
(B) purchasing the assets of any swaps entity;
(C) guaranteeing any loan or debt issuance of any swaps entity; or
(D) entering into any assistance arrangement (including tax breaks), loss sharing, or profit sharing with any swaps entity.
(2) SWAPS ENTITY-
(A) IN GENERAL- The term ‘swaps entity’ means any swap dealer, security-based swap dealer, major swap participant, major security-based swap participant, that is registered under--
(i) the Commodity Exchange Act (7 U.S.C. 1 et seq.); or
(ii) the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).
(B) EXCLUSION- The term ‘swaps entity’ does not include any major swap participant or major security-based swap participant that is an insured depository institution.
(c) Affiliates of Insured Depository Institutions- The prohibition on Federal assistance contained in subsection (a) does not apply to and shall not prevent an insured depository institution from having or establishing an affiliate which is a swaps entity, as long as such insured depository institution is part of a bank holding company, or savings and loan holding company, that is supervised by the Federal Reserve and such swaps entity affiliate complies with sections 23A and 23B of the Federal Reserve Act and such other requirements as the Commodity Futures Trading Commission or the Securities Exchange Commission, as appropriate, and the Board of Governors of the Federal Reserve System, may determine to be necessary and appropriate.
(d) Only Bona Fide Hedging and Traditional Bank Activities Permitted- The prohibition in subsection (a) shall apply to any insured depository institution unless the insured depository institution limits its swap or security-based swap activities to:
(1) Hedging and other similar risk mitigating activities directly related to the insured depository institution’s activities.
(2) Acting as a swaps entity for swaps or security-based swaps involving rates or reference assets that are permissible for investment by a national bank under the paragraph designated as ‘Seventh.’ of section 5136 of the Revised Statutes of the United States ( 12 U.S.C. 24), other than as described in paragraph (3).
(3) LIMITATION ON CREDIT DEFAULT SWAPS- Acting as a swaps entity for credit default swaps, including swaps or security-based swaps referencing the credit risk of asset-backed securities as defined in section 3(a)(77) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(77)) (as amended by this Act) shall not be considered a bank permissible activity for purposes of subsection (d)(2) unless such swaps or security-based swaps are cleared by a derivatives clearing organization (as such term is defined in section la of the Commodity Exchange Act (7 U.S.C. la)) or a clearing agency (as such term is defined in section 3 of the Securities Exchange Act (15 U.S.C. 78c)) that is registered, or exempt from registration, as a derivatives clearing organization under the Commodity Exchange Act or as a clearing agency under the Securities Exchange Act, respectively.
(e) Existing Swaps and Security-based Swaps- The prohibition in subsection (a) shall only apply to swaps or security-based swaps entered into by an insured depository institution after the end of the transition period described in subsection (f).
(f) Transition Period- To the extent an insured depository institution qualifies as a ‘swaps entity’ and would be subject to the Federal assistance prohibition in subsection (a), the appropriate Federal banking agency, after consulting with and considering the views of the Commodity Futures Trading Commission or the Securities Exchange Commission, as appropriate, shall permit the insured depository institution up to 24 months to divest the swaps entity or cease the activities that require registration as a swaps entity. In establishing the appropriate transition period to effect such divestiture or cessation of activities, which may include making the swaps entity an affiliate of the insured depository institution, the appropriate Federal banking agency shall take into account and make written findings regarding the potential impact of such divestiture or cessation of activities on the insured depository institution’s (1) mortgage lending, (2) small business lending, (3) job creation, and (4) capital formation versus the potential negative impact on insured depositors and the Deposit Insurance Fund of the Federal Deposit Insurance Corporation. The appropriate Federal banking agency may consider such other factors as may be appropriate. The appropriate Federal banking agency may place such conditions on the insured depository institution’s divestiture or ceasing of activities of the swaps entity as it deems necessary and appropriate. The transition period under this subsection may be extended by the appropriate Federal banking agency, after consultation with the Commodity Futures Trading Commission and the Securities and Exchange Commission, for a period of up to 1 additional year.
(g) Excluded Entities- For purposes of this section, the term ‘swaps entity’ shall not include any insured depository institution under the Federal Deposit Insurance Act or a covered financial company under title II which is in a conservatorship, receivership, or a bridge bank operated by the Federal Deposit Insurance Corporation.
(h) Effective Date- The prohibition in subsection (a) shall be effective 2 years following the date on which this Act is effective.
(i) Liquidation Required-
(1) IN GENERAL-
(A) FDIC INSURED INSTITUTIONS- All swaps entities that are FDIC insured institutions that are put into receivership or declared insolvent as a result of swap or security-based swap activity of the swaps entities shall be subject to the termination or transfer of that swap or security-based swap activity in accordance with applicable law prescribing the treatment of those contracts. No taxpayer funds shall be used to prevent the receivership of any swap entity resulting from swap or security-based swap activity of the swaps entity.
(B) INSTITUTIONS THAT POSE A SYSTEMIC RISK AND ARE SUBJECT TO HEIGHTENED PRUDENTIAL SUPERVISION AS REGULATED UNDER SECTION 113- All swaps entities that are institutions that pose a systemic risk and are subject to heightened prudential supervision as regulated under section 113, that are put into receivership or declared insolvent as a result of swap or security-based swap activity of the swaps entities shall be subject to the termination or transfer of that swap or security-based swap activity in accordance with applicable law prescribing the treatment of those contracts. No taxpayer funds shall be used to prevent the receivership of any swap entity resulting from swap or security-based swap activity of the swaps entity.
(C) NON-FDIC INSURED, NON-SYSTEMICALLY SIGNIFICANT INSTITUTIONS NOT SUBJECT TO HEIGHTENED PRUDENTIAL SUPERVISION AS REGULATED UNDER SECTION 113- No taxpayer resources shall be used for the orderly liquidation of any swaps entities that are non-FDIC insured, non-systemically significant institutions not subject to heightened prudential supervision as regulated under section 113.
(2) RECOVERY OF FUNDS- All funds expended on the termination or transfer of the swap or security-based swap activity of the swaps entity shall be recovered in accordance with applicable law from the disposition of assets of such swap entity or through assessments, including on the financial sector as provided under applicable law.
(3) NO LOSSES TO TAXPAYERS- Taxpayers shall bear no losses from the exercise of any authority under this title.
(j) Prohibition on Unregulated Combination of Swaps Entities and Banking- At no time following adoption of the rules in subsection (k) may a bank or bank holding company be permitted to be or become a swap entity unless it conducts its swap or security-based swap activity in compliance with such minimum standards set by its prudential regulator as are reasonably calculated to permit the swaps entity to conduct its swap or security-based swap activities in a safe and sound manner and mitigate systemic risk.
(k) Rules- In prescribing rules, the prudential regulator for a swaps entity shall consider the following factors:
(1) The expertise and managerial strength of the swaps entity, including systems for effective oversight.
(2) The financial strength of the swaps entity.
(3) Systems for identifying, measuring and controlling risks arising from the swaps entity’s operations.
(4) Systems for identifying, measuring and controlling the swaps entity’s participation in existing markets.
(5) Systems for controlling the swaps entity’s participation or entry into in new markets and products.
(l) Authority of the Financial Stability Oversight Council- The Financial Stability Oversight Council may determine that, when other provisions established by this Act are insufficient to effectively mitigate systemic risk and protect taxpayers, that swaps entities may no longer access Federal assistance with respect to any swap, security-based swap, or other activity of the swaps entity. Any such determination by the Financial Stability Oversight Council of a prohibition of federal assistance shall be made on an institution-by-institution basis, and shall require the vote of not fewer than two-thirds of the members of the Financial Stability Oversight Council, which must include the vote by the Chairman of the Council, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairperson of the Federal Deposit Insurance Corporation. Notice and hearing requirements for such determinations shall be consistent with the standards provided in title I.
(m) Ban on Proprietary Trading in Derivatives- An insured depository institution shall comply with the prohibition on proprietary trading in derivatives as required by section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
SEC. 717. NEW PRODUCT APPROVAL CFTC--SEC PROCESS.
(a) Amendments to the Commodity Exchange Act- Section 2(a)(1)(C) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)(C)) is amended--
(1) in clause (i) by striking ‘This’ and inserting ‘(I) Except as provided in subclause (II), this’; and
(2) by adding at the end of clause (i) the following:
‘(II) This Act shall apply to and the Commission shall have jurisdiction with respect to accounts, agreements, and transactions involving, and may permit the listing for trading pursuant to section 5c(c) of, a put, call, or other option on 1 or more securities (as defined in section 2(a)(1) of the Securities Act of 1933 or section 3(a)(10) of the Securities Exchange Act of 1934 on the date of enactment of the Futures Trading Act of 1982), including any group or index of such securities, or any interest therein or based on the value thereof, that is exempted by the Securities and Exchange Commission pursuant to section 36(a)(1) of the Securities Exchange Act of 1934 with the condition that the Commission exercise concurrent jurisdiction over such put, call, or other option; provided, however, that nothing in this paragraph shall be construed to affect the jurisdiction and authority of the Securities and Exchange Commission over such put, call, or other option.’.
(b) Amendments to the Securities Exchange Act of 1934- The Securities Exchange Act of 1934 is amended by adding the following section after section 3A (15 U.S.C. 78c-1):
‘SEC. 3B. SECURITIES-RELATED DERIVATIVES.
‘(a) Any agreement, contract, or transaction (or class thereof) that is exempted by the Commodity Futures Trading Commission pursuant to section 4(c)(1) of the Commodity Exchange Act (7 U.S.C. 6(c)(1)) with the condition that the Commission exercise concurrent jurisdiction over such agreement, contract, or transaction (or class thereof) shall be deemed a security for purposes of the securities laws.
‘(b) With respect to any agreement, contract, or transaction (or class thereof) that is exempted by the Commodity Futures Trading Commission pursuant to section 4(c)(1) of the Commodity Exchange Act (7 U.S.C. 6(c)(1)) with the condition that the Commission exercise concurrent jurisdiction over such agreement, contract, or transaction (or class thereof), references in the securities laws to the ‘purchase’ or ‘sale’ of a security shall be deemed to include the execution, termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of rights or obligations under such agreement, contract, or transaction, as the context may require.’.
(c) Amendment to Securities Exchange Act of 1934- Section 19(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended by adding at the end the following:
‘(10) Notwithstanding paragraph (2), the time period within which the Commission is required by order to approve a proposed rule change or institute proceedings to determine whether the proposed rule change should be disapproved is stayed pending a determination by the Commission upon the request of the Commodity Futures Trading Commission or its Chairman that the Commission issue a determination as to whether a product that is the subject of such proposed rule change is a security pursuant to section 718 of the Wall Street Transparency and Accountability Act of 2010.’.
(d) Amendment to Commodity Exchange Act- Section 5c(c)(1) of the Commodity Exchange Act (7 U.S.C. 7a-2(c)(1)) is amended--
(1) by striking ‘Subject to paragraph (2)’ and inserting the following:
‘(A) ELECTION- Subject to paragraph (2)’; and
(2) by adding at the end the following:
‘(B) CERTIFICATION- The certification of a product pursuant to this paragraph shall be stayed pending a determination by the Commission upon the request of the Securities and Exchange Commission or its Chairman that the Commission issue a determination as to whether the product that is the subject of such certification is a contract of sale of a commodity for future delivery, an option on such a contract, or an option on a commodity pursuant to section 718 of the Wall Street Transparency and Accountability Act of 2010.’.
SEC. 718. DETERMINING STATUS OF NOVEL DERIVATIVE PRODUCTS.
(a) Process for Determining the Status of a Novel Derivative Product-
(1) NOTICE-
(A) IN GENERAL- Any person filing a proposal to list or trade a novel derivative product that may have elements of both securities and contracts of sale of a commodity for future delivery (or options on such contracts or options on commodities) may concurrently provide notice and furnish a copy of such filing with the Securities and Exchange Commission and the Commodity Futures Trading Commission. Any such notice shall state that notice has been made with both Commissions.
(B) NOTIFICATION- If no concurrent notice is made pursuant to subparagraph (A), within 5 business days after determining that a proposal that seeks to list or trade a novel derivative product may have elements of both securities and contracts of sale of a commodity for future delivery (or options on such contracts or options on commodities), the Securities and Exchange Commission or the Commodity Futures Trading Commission, as applicable, shall notify the other Commission and provide a copy of such filing to the other Commission.
(2) REQUEST FOR DETERMINATION-
(A) IN GENERAL- No later than 21 days after receipt of a notice under paragraph (1), or upon its own initiative if no such notice is received, the Commodity Futures Trading Commission may request that the Securities and Exchange Commission issue a determination as to whether a product is a security, as defined in section 3(a)(10) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(10)).
(B) REQUEST- No later than 21 days after receipt of a notice under paragraph (1), or upon its own initiative if no such notice is received, the Securities and Exchange Commission may request that the Commodity Futures Trading Commission issue a determination as to whether a product is a contract of sale of a commodity for future delivery, an option on such a contract, or an option on a commodity subject to the Commodity Futures Trading Commission’s exclusive jurisdiction under section 2(a)(1)(A) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)(A)).
(C) REQUIREMENT RELATING TO REQUEST- A request under subparagraph (A) or (B) shall be made by submitting such request, in writing, to the Securities and Exchange Commission or the Commodity Futures Trading Commission, as applicable.
(D) EFFECT- Nothing in this paragraph shall be construed to prevent--
(i) the Commodity Futures Trading Commission from requesting that the Securities and Exchange Commission grant an exemption pursuant to section 36(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78mm(a)(1)) with respect to a product that is the subject of a filing under paragraph (1); or
(ii) the Securities and Exchange Commission from requesting that the Commodity Futures Trading Commission grant an exemption pursuant to section 4(c)(1) of the Commodity Exchange Act (7 U.S.C. 6(c)(1)) with respect to a product that is the subject of a filing under paragraph (1),
Provided, however, that nothing in this subparagraph shall be construed to require the Commodity Futures Trading Commission or the Securities and Exchange Commission to issue an exemption requested pursuant to this subparagraph; provided further, That an order granting or denying an exemption described in this subparagraph and issued under paragraph (3)(B) shall not be subject to judicial review pursuant to subsection (b).
(E) WITHDRAWAL OF REQUEST- A request under subparagraph (A) or (B) may be withdrawn by the Commission making the request at any time prior to a determination being made pursuant to paragraph (3) for any reason by providing written notice to the head of the other Commission.
(3) DETERMINATION- Notwithstanding any other provision of law, no later than 120 days after the date of receipt of a request--
(A) under subparagraph (A) or (B) of paragraph (2), unless such request has been withdrawn pursuant to paragraph (2)(E), the Securities and Exchange Commission or the Commodity Futures Trading Commission, as applicable, shall, by order, issue the determination requested in subparagraph (A) or (B) of paragraph (2), as applicable, and the reasons therefor; or
(B) under paragraph (2)(D), unless such request has been withdrawn, the Securities and Exchange Commission or the Commodity Futures Trading Commission, as applicable, shall grant an exemption or provide reasons for not granting such exemption, provided that any decision by the Securities and Exchange Commission not to grant such exemption shall not be reviewable under section 25 of the Securities Exchange Act of 1934 (15 U.S.C. 78y).
(b) Judicial Resolution-
(1) IN GENERAL- The Commodity Futures Trading Commission or the Securities and Exchange Commission may petition the United States Court of Appeals for the District of Columbia Circuit for review of a final order of the other Commission issued pursuant to subsection (a)(3)(A), with respect to a novel derivative product that may have elements of both securities and contracts of sale of a commodity for future delivery (or options on such contracts or options on commodities) that it believes affects its statutory jurisdiction within 60 days after the date of entry of such order, a written petition requesting a review of the order. Any such proceeding shall be expedited by the Court of Appeals.
(2) TRANSMITTAL OF PETITION AND RECORD- A copy of a petition described in paragraph (1) shall be transmitted not later than 1 business day after filing by the complaining Commission to the responding Commission. On receipt of the petition, the responding Commission shall file with the court a copy of the order under review and any documents referred to therein, and any other materials prescribed by the court.
(3) STANDARD OF REVIEW- The court, in considering a petition filed pursuant to paragraph (1), shall give no deference to, or presumption in favor of, the views of either Commission.
(4) JUDICIAL STAY- The filing of a petition by the complaining Commission pursuant to paragraph (1) shall operate as a stay of the order, until the date on which the determination of the court is final (including any appeal of the determination).
SEC. 719. STUDIES.
(a) Study on Effects of Position Limits on Trading on Exchanges in the United States-
(1) STUDY- The Commodity Futures Trading Commission, in consultation with each entity that is a designated contract market under the Commodity Exchange Act, shall conduct a study of the effects (if any) of the position limits imposed pursuant to the other provisions of this title on excessive speculation and on the movement of transactions from exchanges in the United States to trading venues outside the United States.
(2) REPORT TO THE CONGRESS- Within 12 months after the imposition of position limits pursuant to the other provisions of this title, the Commodity Futures Trading Commission, in consultation with each entity that is a designated contract market under the Commodity Exchange Act, shall submit to the Congress a report on the matters described in paragraph (1).
(3) REQUIRED HEARING- Within 30 legislative days after the submission to the Congress of the report described in paragraph (2), the Committee on Agriculture of the House of Representatives shall hold a hearing examining the findings of the report.
(4) BIENNIAL REPORTING- In addition to the study required in paragraph (1), the Chairman of the Commodity Futures Trading Commission shall prepare and submit to the Congress biennial reports on the growth or decline of the derivatives markets in the United States and abroad, which shall include assessments of the causes of any such growth or decline, the effectiveness of regulatory regimes in managing systemic risk, a comparison of the costs of compliance at the time of the report for market participants subject to regulation by the United States with the costs of compliance in December 2008 for the market participants, and the quality of the available data. In preparing the report, the Chairman shall solicit the views of, consult with, and address the concerns raised by, market participants, regulators, legislators, and other interested parties.
(b) Study on Feasibility of Requiring Use of Standardized Algorithmic Descriptions for Financial Derivatives-
(1) IN GENERAL- The Securities and Exchange Commission and the Commodity Futures Trading Commission shall conduct a joint study of the feasibility of requiring the derivatives industry to adopt standardized computer-readable algorithmic descriptions which may be used to describe complex and standardized financial derivatives.
(2) GOALS- The algorithmic descriptions defined in the study shall be designed to facilitate computerized analysis of individual derivative contracts and to calculate net exposures to complex derivatives. The algorithmic descriptions shall be optimized for simultaneous use by--
(A) commercial users and traders of derivatives;
(B) derivative clearing houses, exchanges and electronic trading platforms;
(C) trade repositories and regulator investigations of market activities; and
(D) systemic risk regulators.
The study will also examine the extent to which the algorithmic description, together with standardized and extensible legal definitions, may serve as the binding legal definition of derivative contracts. The study will examine the logistics of possible implementations of standardized algorithmic descriptions for derivatives contracts. The study shall be limited to electronic formats for exchange of derivative contract descriptions and will not contemplate disclosure of proprietary valuation models.
(3) INTERNATIONAL COORDINATION- In conducting the study, the Securities and Exchange Commission and the Commodity Futures Trading Commission shall coordinate the study with international financial institutions and regulators as appropriate and practical.
(4) REPORT- Within 8 months after the date of the enactment of this Act, the Securities and Exchange Commission and the Commodity Futures Trading Commission shall jointly submit to the Committees on Agriculture and on Financial Services of the House of Representatives and the Committees on Agriculture, Nutrition, and Forestry and on Banking, Housing, and Urban Affairs of the Senate a written report which contains the results of the study required by paragraphs (1) through (3).
(c) International Swap Regulation-
(1) IN GENERAL- The Commodity Futures Trading Commission and the Securities and Exchange Commission shall jointly conduct a study--
(A) relating to--
(i) swap regulation in the United States, Asia, and Europe; and
(ii) clearing house and clearing agency regulation in the United States, Asia, and Europe; and
(B) that identifies areas of regulation that are similar in the United States, Asia and Europe and other areas of regulation that could be harmonized
(2) REPORT- Not later than 18 months after the date of enactment of this Act, the Commodity Futures Trading Commission and the Securities and Exchange Commission shall submit to the Committee on Agriculture, Nutrition, and Forestry and the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Agriculture and the Committee on Financial Services of the House of Representatives a report that includes a description of the results of the study under subsection (a), including--
(A) identification of the major exchanges and their regulator in each geographic area for the trading of swaps and security-based swaps including a listing of the major contracts and their trading volumes and notional values as well as identification of the major swap dealers participating in such markets;
(B) identification of the major clearing houses and clearing agencies and their regulator in each geographic area for the clearing of swaps and security-based swaps, including a listing of the major contracts and the clearing volumes and notional values as well as identification of the major clearing members of such clearing houses and clearing agencies in such markets;
(C) a description of the comparative methods of clearing swaps in the United States, Asia, and Europe; and
(D) a description of the various systems used for establishing margin on individual swaps, security-based swaps, and swap portfolios.
(d) Stable Value Contracts-
(1) DETERMINATION-
(A) STATUS- Not later than 15 months after the date of the enactment of this Act, the Securities and Exchange Commission and the Commodity Futures Trading Commission shall, jointly, conduct a study to determine whether stable value contracts fall within the definition of a swap. In making the determination required under this subparagraph, the Commissions jointly shall consult with the Department of Labor, the Department of the Treasury, and the State entities that regulate the issuers of stable value contracts.
(B) REGULATIONS- If the Commissions determine that stable value contracts fall within the definition of a swap, the Commissions jointly shall determine if an exemption for stable value contracts from the definition of swap is appropriate and in the public interest. The Commissions shall issue regulations implementing the determinations required under this paragraph. Until the effective date of such regulations, and notwithstanding any other provision of this title, the requirements of this title shall not apply to stable value contracts.
(C) LEGAL CERTAINTY- Stable value contracts in effect prior to the effective date of the regulations described in subparagraph (B) shall not be considered swaps.
(2) DEFINITION- For purposes of this subsection, the term ‘stable value contract’ means any contract, agreement, or transaction that provides a crediting interest rate and guaranty or financial assurance of liquidity at contract or book value prior to maturity offered by a bank, insurance company, or other State or federally regulated financial institution for the benefit of any individual or commingled fund available as an investment in an employee benefit plan (as defined in section 3(3) of the Employee Retirement Income Security Act of 1974, including plans described in section 3(32) of such Act) subject to participant direction, an eligible deferred compensation plan (as defined in section 457(b) of the Internal Revenue Code of 1986) that is maintained by an eligible employer described in section 457(e)(1)(A) of such Code, an arrangement described in section 403(b) of such Code, or a qualified tuition program (as defined in section 529 of such Code).
SEC. 720. MEMORANDUM.
(a)(1) The Commodity Futures Trading Commission and the Federal Energy Regulatory Commission shall, not later than 180 days after the date of the enactment of this Act, negotiate a memorandum of understanding to establish procedures for--
(A) applying their respective authorities in a manner so as to ensure effective and efficient regulation in the public interest;
(B) resolving conflicts concerning overlapping jurisdiction between the 2 agencies; and
(C) avoiding, to the extent possible, conflicting or duplicative regulation.
(2) Such memorandum and any subsequent amendments to the memorandum shall be promptly submitted to the appropriate committees of Congress.
(b) The Commodity Futures Trading Commission and the Federal Energy Regulatory Commission shall, not later than 180 days after the date of the enactment of this section, negotiate a memorandum of understanding to share information that may be requested where either Commission is conducting an investigation into potential manipulation, fraud, or market power abuse in markets subject to such Commission’s regulation or oversight. Shared information shall remain subject to the same restrictions on disclosure applicable to the Commission initially holding the information.
SEC. 721. DEFINITIONS.
(a) In General- Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
(1) by redesignating paragraphs (2), (3) and (4), (5) through (17), (18) through (23), (24) through (28), (29), (30), (31) through (33), and (34) as paragraphs (6), (8) and (9), (11) through (23), (26) through (31), (34) through (38), (40), (41), (44) through (46), and (51), respectively;
(2) by inserting after paragraph (1) the following:
‘(2) APPROPRIATE FEDERAL BANKING AGENCY- The term ‘appropriate Federal banking agency’--
‘(A) has the meaning given the term in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);
‘(B) means the Board in the case of a noninsured State bank; and
‘(C) is the Farm Credit Administration for farm credit system institutions.
‘(3) ASSOCIATED PERSON OF A SECURITY-BASED SWAP DEALER OR MAJOR SECURITY-BASED SWAP PARTICIPANT- The term ‘associated person of a security-based swap dealer or major security-based swap participant’ has the meaning given the term in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).
‘(4) ASSOCIATED PERSON OF A SWAP DEALER OR MAJOR SWAP PARTICIPANT-
‘(A) IN GENERAL- The term ‘associated person of a swap dealer or major swap participant’ means a person who is associated with a swap dealer or major swap participant as a partner, officer, employee, or agent (or any person occupying a similar status or performing similar functions), in any capacity that involves--
‘(i) the solicitation or acceptance of swaps; or
‘(ii) the supervision of any person or persons so engaged.
‘(B) EXCLUSION- Other than for purposes of section 4s(b)(6), the term ‘associated person of a swap dealer or major swap participant’ does not include any person associated with a swap dealer or major swap participant the functions of which are solely clerical or ministerial.
‘(5) BOARD- The term ‘Board’ means the Board of Governors of the Federal Reserve System.’;
(3) by inserting after paragraph (6) (as redesignated by paragraph (1)) the following:
‘(7) CLEARED SWAP- The term ‘cleared swap’ means any swap that is, directly or indirectly, submitted to and cleared by a derivatives clearing organization registered with the Commission.’;
(4) in paragraph (9) (as redesignated by paragraph (1)), by striking ‘except onions’ and all that follows through the period at the end and inserting the following: ‘except onions (as provided by the first section of Public Law 85-839 (7 U.S.C. 13-1)) and motion picture box office receipts (or any index, measure, value, or data related to such receipts), and all services, rights, and interests (except motion picture box office receipts, or any index, measure, value or data related to such receipts) in which contracts for future delivery are presently or in the future dealt in.’;
(5) by inserting after paragraph (9) (as redesignated by paragraph (1)) the following:
‘(10) COMMODITY POOL-
‘(A) IN GENERAL- The term ‘commodity pool’ means any investment trust, syndicate, or similar form of enterprise operated for the purpose of trading in commodity interests, including any--
‘(i) commodity for future delivery, security futures product, or swap;
‘(ii) agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i);
‘(iii) commodity option authorized under section 4c; or
‘(iv) leverage transaction authorized under section 19.
‘(B) FURTHER DEFINITION- The Commission, by rule or regulation, may include within, or exclude from, the term ‘commodity pool’ any investment trust, syndicate, or similar form of enterprise if the Commission determines that the rule or regulation will effectuate the purposes of this Act.’;
(6) by striking paragraph (11) (as redesignated by paragraph (1)) and inserting the following:
‘(11) COMMODITY POOL OPERATOR-
‘(A) IN GENERAL- The term ‘commodity pool operator’ means any person--
‘(i) engaged in a business that is of the nature of a commodity pool, investment trust, syndicate, or similar form of enterprise, and who, in connection therewith, solicits, accepts, or receives from others, funds, securities, or property, either directly or through capital contributions, the sale of stock or other forms of securities, or otherwise, for the purpose of trading in commodity interests, including any--
‘(I) commodity for future delivery, security futures product, or swap;
‘(II) agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i);
‘(III) commodity option authorized under section 4c; or
‘(IV) leverage transaction authorized under section 19; or
‘(ii) who is registered with the Commission as a commodity pool operator.
‘(B) FURTHER DEFINITION- The Commission, by rule or regulation, may include within, or exclude from, the term ‘commodity pool operator’ any person engaged in a business that is of the nature of a commodity pool, investment trust, syndicate, or similar form of enterprise if the Commission determines that the rule or regulation will effectuate the purposes of this Act.’;
(7) in paragraph (12) (as redesignated by paragraph (1)), in subparagraph (A)--
(A) in clause (i)--
(i) in subclause (I), by striking ‘made or to be made on or subject to the rules of a contract market or derivatives transaction execution facility’ and inserting ‘, security futures product, or swap’;
(ii) by redesignating subclauses (II) and (III) as subclauses (III) and (IV);
(iii) by inserting after subclause (I) the following:
‘(II) any agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i)’; and
(iv) in subclause (IV) (as so redesignated), by striking ‘or’;
(B) in clause (ii), by striking the period at the end and inserting a semicolon; and
(C) by adding at the end the following:
‘(iii) is registered with the Commission as a commodity trading advisor; or
‘(iv) the Commission, by rule or regulation, may include if the Commission determines that the rule or regulation will effectuate the purposes of this Act.’;
(8) in paragraph (17) (as redesignated by paragraph (1)), in subparagraph (A), in the matter preceding clause (i), by striking ‘paragraph (12)(A)’ and inserting ‘paragraph (18)(A)’;
(9) in paragraph (18) (as redesignated by paragraph (1))--
(A) in subparagraph (A)--
(i) in the matter following clause (vii)(III)--
(I) by striking ‘section 1a (11)(A)’ and inserting ‘paragraph (17)(A)’; and
(II) by striking ‘$25,000,000’ and inserting ‘$50,000,000’; and
(ii) in clause (xi), in the matter preceding subclause (I), by striking ‘total assets in an amount’ and inserting ‘amounts invested on a discretionary basis, the aggregate of which is’;
(10) by striking paragraph (22) (as redesignated by paragraph (1)) and inserting the following:
‘(22) FLOOR BROKER-
‘(A) IN GENERAL- The term ‘floor broker’ means any person--
‘(i) who, in or surrounding any pit, ring, post, or other place provided by a contract market for the meeting of persons similarly engaged, shall purchase or sell for any other person--
‘(I) any commodity for future delivery, security futures product, or swap; or
‘(II) any commodity option authorized under section 4c; or
‘(ii) who is registered with the Commission as a floor broker.
‘(B) FURTHER DEFINITION- The Commission, by rule or regulation, may include within, or exclude from, the term ‘floor broker’ any person in or surrounding any pit, ring, post, or other place provided by a contract market for the meeting of persons similarly engaged who trades for any other person if the Commission determines that the rule or regulation will effectuate the purposes of this Act.’;
(11) by striking paragraph (23) (as redesignated by paragraph (1)) and inserting the following:
‘(23) FLOOR TRADER-
‘(A) IN GENERAL- The term ‘floor trader’ means any person--
‘(i) who, in or surrounding any pit, ring, post, or other place provided by a contract market for the meeting of persons similarly engaged, purchases, or sells solely for such person’s own account--
‘(I) any commodity for future delivery, security futures product, or swap; or
‘(II) any commodity option authorized under section 4c; or
‘(ii) who is registered with the Commission as a floor trader.
‘(B) FURTHER DEFINITION- The Commission, by rule or regulation, may include within, or exclude from, the term ‘floor trader’ any person in or surrounding any pit, ring, post, or other place provided by a contract market for the meeting of persons similarly engaged who trades solely for such person’s own account if the Commission determines that the rule or regulation will effectuate the purposes of this Act.’;
(12) by inserting after paragraph (23) (as redesignated by paragraph (1)) the following:
‘(24) FOREIGN EXCHANGE FORWARD- The term ‘foreign exchange forward’ means a transaction that solely involves the exchange of 2 different currencies on a specific future date at a fixed rate agreed upon on the inception of the contract covering the exchange.
‘(25) FOREIGN EXCHANGE SWAP- The term ‘foreign exchange swap’ means a transaction that solely involves--
‘(A) an exchange of 2 different currencies on a specific date at a fixed rate that is agreed upon on the inception of the contract covering the exchange; and
‘(B) a reverse exchange of the 2 currencies described in subparagraph (A) at a later date and at a fixed rate that is agreed upon on the inception of the contract covering the exchange.’;
(13) by striking paragraph (28) (as redesignated by paragraph (1)) and inserting the following:
‘(28) FUTURES COMMISSION MERCHANT-
‘(A) IN GENERAL- The term ‘futures commission merchant’ means an individual, association, partnership, corporation, or trust--
‘(i) that--
‘(I) is--
‘(aa) engaged in soliciting or in accepting orders for--
‘(AA) the purchase or sale of a commodity for future delivery;
‘(BB) a security futures product;
‘(CC) a swap;
‘(DD) any agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i);
‘(EE) any commodity option authorized under section 4c; or
‘(FF) any leverage transaction authorized under section 19; or
‘(bb) acting as a counterparty in any agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i); and
‘(II) in or in connection with the activities described in items (aa) or (bb) of subclause (I), accepts any money, securities, or property (or extends credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom; or
‘(ii) that is registered with the Commission as a futures commission merchant.
‘(B) FURTHER DEFINITION- The Commission, by rule or regulation, may include within, or exclude from, the term ‘futures commission merchant’ any person who engages in soliciting or accepting orders for, or acting as a counterparty in, any agreement, contract, or transaction subject to this Act, and who accepts any money, securities, or property (or extends credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom, if the Commission determines that the rule or regulation will effectuate the purposes of this Act.’;
(14) in paragraph (30) (as redesignated by paragraph (1)), in subparagraph (B), by striking ‘state’ and inserting ‘State’;
(15) by striking paragraph (31) (as redesignated by paragraph (1)) and inserting the following:
‘(31) INTRODUCING BROKER-
‘(A) IN GENERAL- The term ‘introducing broker’ means any person (except an individual who elects to be and is registered as an associated person of a futures commission merchant)--
‘(i) who--
‘(I) is engaged in soliciting or in accepting orders for--
‘(aa) the purchase or sale of any commodity for future delivery, security futures product, or swap;
‘(bb) any agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i);
‘(cc) any commodity option authorized under section 4c; or
‘(dd) any leverage transaction authorized under section 19; and
‘(II) does not accept any money, securities, or property (or extend credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom; or
‘(ii) who is registered with the Commission as an introducing broker.
‘(B) FURTHER DEFINITION- The Commission, by rule or regulation, may include within, or exclude from, the term ‘introducing broker’ any person who engages in soliciting or accepting orders for any agreement, contract, or transaction subject to this Act, and who does not accept any money, securities, or property (or extend credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom, if the Commission determines that the rule or regulation will effectuate the purposes of this Act.’;
(16) by inserting after paragraph (31) (as redesignated by paragraph (1)) the following:
‘(32) MAJOR SECURITY-BASED SWAP PARTICIPANT- The term ‘major security-based swap participant’ has the meaning given the term in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).
‘(33) MAJOR SWAP PARTICIPANT-
‘(A) IN GENERAL- The term ‘major swap participant’ means any person who is not a swap dealer, and--
‘(i) maintains a substantial position in swaps for any of the major swap categories as determined by the Commission, excluding--
‘(I) positions held for hedging or mitigating commercial risk; and
‘(II) positions maintained by any employee benefit plan (or any contract held by such a plan) as defined in paragraphs (3) and (32) of section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002) for the primary purpose of hedging or mitigating any risk directly associated with the operation of the plan;
‘(ii) whose outstanding swaps create substantial counterparty exposure that could have serious adverse effects on the financial stability of the United States banking system or financial markets; or
‘(iii)(I) is a financial entity that is highly leveraged relative to the amount of capital it holds and that is not subject to capital requirements established by an appropriate Federal banking agency; and
‘(II) maintains a substantial position in outstanding swaps in any major swap category as determined by the Commission.
‘(B) DEFINITION OF SUBSTANTIAL POSITION- For purposes of subparagraph (A), the Commission shall define by rule or regulation the term ‘substantial position’ at the threshold that the Commission determines to be prudent for the effective monitoring, management, and oversight of entities that are systemically important or can significantly impact the financial system of the United States. In setting the definition under this subparagraph, the Commission shall consider the person’s relative position in uncleared as opposed to cleared swaps and may take into consideration the value and quality of collateral held against counterparty exposures.
‘(C) SCOPE OF DESIGNATION- For purposes of subparagraph (A), a person may be designated as a major swap participant for 1 or more categories of swaps without being classified as a major swap participant for all classes of swaps.
‘(D) EXCLUSIONS- The definition under this paragraph shall not include an entity whose primary business is providing financing, and uses derivatives for the purpose of hedging underlying commercial risks related to interest rate and foreign currency exposures, 90 percent or more of which arise from financing that facilitates the purchase or lease of products, 90 percent or more of which are manufactured by the parent company or another subsidiary of the parent company.’;
(17) by inserting after paragraph (38) (as redesignated by paragraph (1)) the following:
‘(39) PRUDENTIAL REGULATOR- The term ‘prudential regulator’ means--
‘(A) the Board in the case of a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant that is--
‘(i) a State-chartered bank that is a member of the Federal Reserve System;
‘(ii) a State-chartered branch or agency of a foreign bank;
‘(iii) any foreign bank which does not operate an insured branch;
‘(iv) any organization operating under section 25A of the Federal Reserve Act or having an agreement with the Board under section 225 of the Federal Reserve Act;
‘(v) any bank holding company (as defined in section 2 of the Bank Holding Company Act of 1965 (12 U.S.C. 1841)), any foreign bank (as defined in section 1(b)(7) of the International Banking Act of 1978 (12 U.S.C. 3101(b)(7)) that is treated as a bank holding company under section 8(a) of the International Banking Act of 1978 (12 U.S.C. 3106(a)), and any subsidiary of such a company or foreign bank (other than a subsidiary that is described in subparagraph (A) or (B) or that is required to be registered with the Commission as a swap dealer or major swap participant under this Act or with the Securities and Exchange Commission as a security-based swap dealer or major security-based swap participant);
‘(vi) after the transfer date (as defined in section 311 of the Dodd-Frank Wall Street Reform and Consumer Protection Act), any savings and loan holding company (as defined in section 10 of the Home Owners’ Loan Act (12 U.S.C. 1467a)) and any subsidiary of such company (other than a subsidiary that is described in subparagraph (A) or (B) or that is required to be registered as a swap dealer or major swap participant with the Commission under this Act or with the Securities and Exchange Commission as a security-based swap dealer or major security-based swap participant); or
‘(vii) any organization operating under section 25A of the Federal Reserve Act (12U.S.C. 611 et seq.) or having an agreement with the Board under section 25 of the Federal Reserve Act (12 U.S.C. 601 et seq.);
‘(B) the Office of the Comptroller of the Currency in the case of a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant that is--
‘(i) a national bank;
‘(ii) a federally chartered branch or agency of a foreign bank; or
‘(iii) any Federal savings association;
‘(C) the Federal Deposit Insurance Corporation in the case of a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant that is--
‘(i) a State-chartered bank that is not a member of the Federal Reserve System; or
‘(ii) any State savings association;
‘(D) the Farm Credit Administration, in the case of a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant that is an institution chartered under the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.); and
‘(E) the Federal Housing Finance Agency in the case of a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant that is a regulated entity (as such term is defined in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992).’;
(18) in paragraph (40) (as redesignated by paragraph (1))--
(A) by striking subparagraph (B);
(B) by redesignating subparagraphs (C), (D), and (E) as subparagraphs (B), (C), and (F), respectively;
(C) in subparagraph (C) (as so redesignated), by striking ‘and’; and
(D) by inserting after subparagraph (C) (as so redesignated) the following:
‘(D) a swap execution facility registered under section 5h;
‘(E) a swap data repository registered under section 21; and’;
(19) by inserting after paragraph (41) (as redesignated by paragraph (1)) the following:
‘(42) SECURITY-BASED SWAP- The term ‘security-based swap’ has the meaning given the term in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).
‘(43) SECURITY-BASED SWAP DEALER- The term ‘security-based swap dealer’ has the meaning given the term in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).’;
(20) in paragraph (46) (as redesignated by paragraph (1)), by striking ‘subject to section 2(h)(7)’ and inserting ‘subject to section 2(h)(5)’;
(21) by inserting after paragraph (46) (as redesignated by paragraph (1)) the following:
‘(47) SWAP-
‘(A) IN GENERAL- Except as provided in subparagraph (B), the term ‘swap’ means any agreement, contract, or transaction--
‘(i) that is a put, call, cap, floor, collar, or similar option of any kind that is for the purchase or sale, or based on the value, of 1 or more interest or other rates, currencies, commodities, securities, instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind;
‘(ii) that provides for any purchase, sale, payment, or delivery (other than a dividend on an equity security) that is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence;
‘(iii) that provides on an executory basis for the exchange, on a fixed or contingent basis, of 1 or more payments based on the value or level of 1 or more interest or other rates, currencies, commodities, securities, instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind, or any interest therein or based on the value thereof, and that transfers, as between the parties to the transaction, in whole or in part, the financial risk associated with a future change in any such value or level without also conveying a current or future direct or indirect ownership interest in an asset (including any enterprise or investment pool) or liability that incorporates the financial risk so transferred, including any agreement, contract, or transaction commonly known as--
‘(I) an interest rate swap;
‘(II) a rate floor;
‘(III) a rate cap;
‘(IV) a rate collar;
‘(V) a cross-currency rate swap;
‘(VI) a basis swap;
‘(VII) a currency swap;
‘(VIII) a foreign exchange swap;
‘(IX) a total return swap;
‘(X) an equity index swap;
‘(XI) an equity swap;
‘(XII) a debt index swap;
‘(XIII) a debt swap;
‘(XIV) a credit spread;
‘(XV) a credit default swap;
‘(XVI) a credit swap;
‘(XVII) a weather swap;
‘(XVIII) an energy swap;
‘(XIX) a metal swap;
‘(XX) an agricultural swap;
‘(XXI) an emissions swap; and
‘(XXII) a commodity swap;
‘(iv) that is an agreement, contract, or transaction that is, or in the future becomes, commonly known to the trade as a swap;
‘(v) including any security-based swap agreement which meets the definition of ‘swap agreement’ as defined in section 206A of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note) of which a material term is based on the price, yield, value, or volatility of any security or any group or index of securities, or any interest therein; or
‘(vi) that is any combination or permutation of, or option on, any agreement, contract, or transaction described in any of clauses (i) through (v).
‘(B) EXCLUSIONS- The term ‘swap’ does not include--
‘(i) any contract of sale of a commodity for future delivery (or option on such a contract), leverage contract authorized under section 19, security futures product, or agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i);
‘(ii) any sale of a nonfinancial commodity or security for deferred shipment or delivery, so long as the transaction is intended to be physically settled;
‘(iii) any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities, including any interest therein or based on the value thereof, that is subject to--
‘(I) the Securities Act of 1933 (15 U.S.C. 77a et seq.); and
‘(II) the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);
‘(iv) any put, call, straddle, option, or privilege relating to a foreign currency entered into on a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a));
‘(v) any agreement, contract, or transaction providing for the purchase or sale of 1 or more securities on a fixed basis that is subject to--
‘(I) the Securities Act of 1933 (15 U.S.C. 77a et seq.); and
‘(II) the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);
‘(vi) any agreement, contract, or transaction providing for the purchase or sale of 1 or more securities on a contingent basis that is subject to the Securities Act of 1933 (15 U.S.C. 77a et seq.) and the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), unless the agreement, contract, or transaction predicates the purchase or sale on the occurrence of a bona fide contingency that might reasonably be expected to affect or be affected by the creditworthiness of a party other than a party to the agreement, contract, or transaction;
‘(vii) any note, bond, or evidence of indebtedness that is a security, as defined in section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1));
‘(viii) any agreement, contract, or transaction that is--
‘(I) based on a security; and
‘(II) entered into directly or through an underwriter (as defined in section 2(a)(11) of the Securities Act of 1933 (15 U.S.C. 77b(a)(11)) by the issuer of such security for the purposes of raising capital, unless the agreement, contract, or transaction is entered into to manage a risk associated with capital raising;
‘(ix) any agreement, contract, or transaction a counterparty of which is a Federal Reserve bank, the Federal Government, or a Federal agency that is expressly backed by the full faith and credit of the United States; and
‘(x) any security-based swap, other than a security-based swap as described in subparagraph (D).
‘(C) RULE OF CONSTRUCTION REGARDING MASTER AGREEMENTS-
‘(i) IN GENERAL- Except as provided in clause (ii), the term ‘swap’ includes a master agreement that provides for an agreement, contract, or transaction that is a swap under subparagraph (A), together with each supplement to any master agreement, without regard to whether the master agreement contains an agreement, contract, or transaction that is not a swap pursuant to subparagraph (A).
‘(ii) EXCEPTION- For purposes of clause (i), the master agreement shall be considered to be a swap only with respect to each agreement, contract, or transaction covered by the master agreement that is a swap pursuant to subparagraph (A).
‘(D) MIXED SWAP- The term ‘security-based swap’ includes any agreement, contract, or transaction that is as described in section 3(a)(68)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(68)(A)) and also is based on the value of 1 or more interest or other rates, currencies, commodities, instruments of indebtedness, indices, quantitative measures, other financial or economic interest or property of any kind (other than a single security or a narrow-based security index), or the occurrence, non-occurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence (other than an event described in subparagraph (A)(iii)).
‘(E) TREATMENT OF FOREIGN EXCHANGE SWAPS AND FORWARDS-
‘(i) IN GENERAL- Foreign exchange swaps and foreign exchange forwards shall be considered swaps under this paragraph unless the Secretary makes a written determination under section 1b that either foreign exchange swaps or foreign exchange forwards or both--
‘(I) should be not be regulated as swaps under this Act; and
‘(II) are not structured to evade the Dodd-Frank Wall Street Reform and Consumer Protection Act in violation of any rule promulgated by the Commission pursuant to section 721(c) of that Act.
‘(ii) CONGRESSIONAL NOTICE; EFFECTIVENESS- The Secretary shall submit any written determination under clause (i) to the appropriate committees of Congress, including the Committee on Agriculture, Nutrition, and Forestry of the Senate and the Committee on Agriculture of the House of Representatives. Any such written determination by the Secretary shall not be effective until it is submitted to the appropriate committees of Congress.
‘(iii) REPORTING- Notwithstanding a written determination by the Secretary under clause (i), all foreign exchange swaps and foreign exchange forwards shall be reported to either a swap data repository, or, if there is no swap data repository that would accept such swaps or forwards, to the Commission pursuant to section 4r within such time period as the Commission may by rule or regulation prescribe.
‘(iv) BUSINESS STANDARDS- Notwithstanding a written determination by the Secretary pursuant to clause (i), any party to a foreign exchange swap or forward that is a swap dealer or major swap participant shall conform to the business conduct standards contained in section 4s(h).
‘(v) SECRETARY- For purposes of this subparagraph, the term ‘Secretary’ means the Secretary of the Treasury.
‘(F) EXCEPTION FOR CERTAIN FOREIGN EXCHANGE SWAPS AND FORWARDS-
‘(i) REGISTERED ENTITIES- Any foreign exchange swap and any foreign exchange forward that is listed and traded on or subject to the rules of a designated contract market or a swap execution facility, or that is cleared by a derivatives clearing organization, shall not be exempt from any provision of this Act or amendments made by the Wall Street Transparency and Accountability Act of 2010 prohibiting fraud or manipulation.
‘(ii) RETAIL TRANSACTIONS- Nothing in subparagraph (E) shall affect, or be construed to affect, the applicability of this Act or the jurisdiction of the Commission with respect to agreements, contracts, or transactions in foreign currency pursuant to section 2(c)(2).
‘(48) SWAP DATA REPOSITORY- The term ‘swap data repository’ means any person that collects and maintains information or records with respect to transactions or positions in, or the terms and conditions of, swaps entered into by third parties for the purpose of providing a centralized recordkeeping facility for swaps.
‘(49) SWAP DEALER-
‘(A) IN GENERAL- The term ‘swap dealer’ means any person who--
‘(i) holds itself out as a dealer in swaps;
‘(ii) makes a market in swaps;
‘(iii) regularly enters into swaps with counterparties as an ordinary course of business for its own account; or
‘(iv) engages in any activity causing the person to be commonly known in the trade as a dealer or market maker in swaps,
provided however, in no event shall an insured depository institution be considered to be a swap dealer to the extent it offers to enter into a swap with a customer in connection with originating a loan with that customer.
‘(B) INCLUSION- A person may be designated as a swap dealer for a single type or single class or category of swap or activities and considered not to be a swap dealer for other types, classes, or categories of swaps or activities.
‘(C) EXCEPTION- The term ‘swap dealer’ does not include a person that enters into swaps for such person’s own account, either individually or in a fiduciary capacity, but not as a part of a regular business.
‘(D) DE MINIMIS EXCEPTION- The Commission shall exempt from designation as a swap dealer an entity that engages in a de minimis quantity of swap dealing in connection with transactions with or on behalf of its customers. The Commission shall promulgate regulations to establish factors with respect to the making of this determination to exempt.
‘(50) SWAP EXECUTION FACILITY- The term ‘swap execution facility’ means a trading system or platform in which multiple participants have the ability to execute or trade swaps by accepting bids and offers made by multiple participants in the facility or system, through any means of interstate commerce, including any trading facility, that--
‘(A) facilitates the execution of swaps between persons; and
‘(B) is not a designated contract market.’.
(22) in paragraph (51) (as redesignated by paragraph (1)), in subparagraph (A)(i), by striking ‘partipants’ and inserting ‘participants’.
(b) Authority To Define Terms- The Commodity Futures Trading Commission may adopt a rule to define--
(1) the term ‘commercial risk’; and
(2) any other term included in an amendment to the Commodity Exchange Act (7 U.S.C. 1 et seq.) made by this subtitle.
(c) Modification of Definitions- To include transactions and entities that have been structured to evade this subtitle (or an amendment made by this subtitle), the Commodity Futures Trading Commission shall adopt a rule to further define the terms ‘swap’, ‘swap dealer’, ‘major swap participant’, and ‘eligible contract participant’.
(d) Exemptions- Section 4(c)(1) of the Commodity Exchange Act (7 U.S.C. 6(c)(1)) is amended by striking ‘except that’ and all that follows through the period at the end and inserting the following: ‘except that--
‘(A) unless the Commission is expressly authorized by any provision described in this subparagraph to grant exemptions, with respect to amendments made by subtitle A of the Wall Street Transparency and Accountability Act of 2010--
‘(i) with respect to--
‘(I) paragraphs (2), (3), (4), (5), and (7), paragraph (18)(A)(vii)(III), paragraphs (23), (24), (31), (32), (38), (39), (41), (42), (46), (47), (48), and (49) of section 1a, and sections 2(a)(13), 2(c)(1)(D), 4a(a), 4a(b), 4d(c), 4d(d), 4r, 4s, 5b(a), 5b(b), 5(d), 5(g), 5(h), 5b(c), 5b(i), 8e, and 21; and
‘(II) section 206(e) of the Gramm-Leach-Bliley Act (Public Law 106-102; 15 U.S.C. 78c note); and
‘(ii) in sections 721(c) and 742 of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and
‘(B) the Commission and the Securities and Exchange Commission may by rule, regulation, or order jointly exclude any agreement, contract, or transaction from section 2(a)(1)(D)) if the Commissions determine that the exemption would be consistent with the public interest.’.
(e) Conforming Amendments-
(1) Section 2(c)(2)(B)(i)(II) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(B)(i)(II)) is amended--
(A) in item (cc)--
(i) in subitem (AA), by striking ‘section 1a(20)’ and inserting ‘section 1a’; and
(ii) in subitem (BB), by striking ‘section 1a(20)’ and inserting ‘section 1a’; and
(B) in item (dd), by striking ‘section 1a(12)(A)(ii)’ and inserting ‘section 1a(18)(A)(ii)’.
(2) Section 4m(3) of the Commodity Exchange Act (7 U.S.C. 6m(3)) is amended by striking ‘section 1a(6)’ and inserting ‘section 1a’.
(3) Section 4q(a)(1) of the Commodity Exchange Act (7 U.S.C. 6o-1(a)(1)) is amended by striking ‘section 1a(4)’ and inserting ‘section 1a(9)’.
(4) Section 5(e)(1) of the Commodity Exchange Act (7 U.S.C. 7(e)(1)) is amended by striking ‘section 1a(4)’ and inserting ‘section 1a(9)’.
(5) Section 5a(b)(2)(F) of the Commodity Exchange Act (7 U.S.C. 7a(b)(2)(F)) is amended by striking ‘section 1a(4)’ and inserting ‘section 1a(9)’.
(6) Section 5b(a) of the Commodity Exchange Act (7 U.S.C. 7a-1(a)) is amended, in the matter preceding paragraph (1), by striking ‘section 1a(9)’ and inserting ‘section 1a’.
(7) Section 5c(c)(2)(B) of the Commodity Exchange Act (7 U.S.C. 7a-2(c)(2)(B)) is amended by striking ‘section 1a(4)’ and inserting ‘section 1a(9)’.
(8) Section 6(g)(5)(B)(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(g)(5)(B)(i)) is amended--
(A) in subclause (I), by striking ‘section 1a(12)(B)(ii)’ and inserting ‘section 1a(18)(B)(ii)’; and
(B) in subclause (II), by striking ‘section 1a(12)’ and inserting ‘section 1a(18)’.
(9) Section 402 of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27 et seq.) is amended--
(A) in subsection (a)(7), by striking ‘section 1a(20)’ and inserting ‘section 1a’;
(B) in subsection (b)(2), by striking ‘section 1a(12)’ and inserting ‘section 1a’; and
(C) in subsection (c), by striking ‘section 1a(4)’ and inserting ‘section 1a’.
(10) The first section of Public Law 85-839 (7 U.S.C. 13-1) is amended in subsection (a), in the first sentence, by inserting ‘motion picture box office receipts (or any index, measure, value, or data related to such receipts) or’ after ‘sale of’.
(f) Effective Date- Notwithstanding any other provision of this Act, the amendments made by subsection (a)(4) shall take effect on June 1, 2010.
SEC. 722. JURISDICTION.
(a) Exclusive Jurisdiction- Section 2(a)(1) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)) is amended--
(1) in subparagraph (A), in the first sentence--
(A) by inserting ‘the Wall Street Transparency and Accountability Act of 2010 (including an amendment made by that Act) and’ after ‘otherwise provided in’;
(B) by striking ‘(C) and (D)’ and inserting ‘(C), (D), and (I)’;
(C) by striking ‘(c) through (i) of this section’ and inserting ‘(c) and (f)’;
(D) by striking ‘contracts of sale’ and inserting ‘swaps or contracts of sale’; and
(E) by striking ‘or derivatives transaction execution facility registered pursuant to section 5 or 5a’ and inserting ‘pursuant to section 5 or a swap execution facility pursuant to section 5h’; and
(2) by adding at the end the following:
‘(G)(i) Nothing in this paragraph shall limit the jurisdiction conferred on the Securities and Exchange Commission by the Wall Street Transparency and Accountability Act of 2010 with regard to security-based swap agreements as defined pursuant to section 3(a)(78) of the Securities Exchange Act of 1934, and security-based swaps.
‘(ii) In addition to the authority of the Securities and Exchange Commission described in clause (i), nothing in this subparagraph shall limit or affect any statutory authority of the Commission with respect to an agreement, contract, or transaction described in clause (i).
‘(H) Notwithstanding any other provision of law, the Wall Street Transparency and Accountability Act of 2010 shall not apply to, and the Commodity Futures Trading Commission shall have no jurisdiction under such Act (or any amendments to the Commodity Exchange Act made by such Act) with respect to, any security other than a security-based swap.’.
(b) Regulation of Swaps Under Federal and State Law- Section 12 of the Commodity Exchange Act (7 U.S.C. 16) is amended by adding at the end the following:
‘(h) Regulation of Swaps as Insurance Under State Law- A swap--
‘(1) shall not be considered to be insurance; and
‘(2) may not be regulated as an insurance contract under the law of any State.’.
(c) Agreements, Contracts, and Transactions Traded on an Organized Exchange- Section 2(c)(2)(A) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(A)) is amended--
(1) in clause (i), by striking ‘or’ at the end;
(2) by redesignating clause (ii) as clause (iii); and
(3) by inserting after clause (i) the following:
‘(ii) a swap; or’.
(d) Applicability- Section 2 of the Commodity Exchange Act (7 U.S.C. 2) (as amended by section 723(a)(3)) is amended by adding at the end the following:
‘(i) Applicability- The provisions of this Act relating to swaps that were enacted by the Wall Street Transparency and Accountability Act of 2010 (including any rule prescribed or regulation promulgated under that Act), shall not apply to activities outside the United States unless those activities--
‘(1) have a direct and significant connection with activities in, or effect on, commerce of the United States; or
‘(2) contravene such rules or regulations as the Commission may prescribe or promulgate as are necessary or appropriate to prevent the evasion of any provision of this Act that was enacted by the Wall Street Transparency and Accountability Act of 2010.’.
(e) Federal Energy Regulatory Commission- Section 2(a)(1) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)) is amended by adding at the end the following:
‘(I)(i) Nothing in this Act shall limit or affect any statutory authority of the Federal Energy Regulatory Commission or a State regulatory authority (as defined in section 3(21) of the Federal Power Act (16 U.S.C. 796(21)) with respect to an agreement, contract, or transaction that is entered into pursuant to a tariff or rate schedule approved by the Federal Energy Regulatory Commission or a State regulatory authority and is--
‘(I) not executed, traded, or cleared on a registered entity or trading facility; or
‘(II) executed, traded, or cleared on a registered entity or trading facility owned or operated by a regional transmission organization or independent system operator.
‘(ii) In addition to the authority of the Federal Energy Regulatory Commission or a State regulatory authority described in clause (i), nothing in this subparagraph shall limit or affect--
‘(I) any statutory authority of the Commission with respect to an agreement, contract, or transaction described in clause (i); or
‘(II) the jurisdiction of the Commission under subparagraph (A) with respect to an agreement, contract, or transaction that is executed, traded, or cleared on a registered entity or trading facility that is not owned or operated by a regional transmission organization or independent system operator (as defined by sections 3(27) and (28) of the Federal Power Act (16 U.S.C. 796(27), 796(28)).’.
(f) Public Interest Waiver- Section 4(c) of the Commodity Exchange Act (7 U.S.C. 6(c)) (as amended by section 721(d)) is amended by adding at the end the following:
‘(6) If the Commission determines that the exemption would be consistent with the public interest and the purposes of this Act, the Commission shall, in accordance with paragraphs (1) and (2), exempt from the requirements of this Act an agreement, contract, or transaction that is entered into--
‘(A) pursuant to a tariff or rate schedule approved or permitted to take effect by the Federal Energy Regulatory Commission;
‘(B) pursuant to a tariff or rate schedule establishing rates or charges for, or protocols governing, the sale of electric energy approved or permitted to take effect by the regulatory authority of the State or municipality having jurisdiction to regulate rates and charges for the sale of electric energy within the State or municipality; or
‘(C) between entities described in section 201(f) of the Federal Power Act (16 U.S.C. 824(f)).’.
(g) Authority of FERC- Nothing in the Wall Street Transparency and Accountability Act of 2010 or the amendments to the Commodity Exchange Act made by such Act shall limit or affect any statutory enforcement authority of the Federal Energy Regulatory Commission pursuant to section 222 of the Federal Power Act and section 4A of the Natural Gas Act that existed prior to the date of enactment of the Wall Street Transparency and Accountability Act of 2010.
(h) Determination- The Commodity Exchange Act is amended by inserting after section 1a (7 U.S.C. 1a) the following:
‘SEC. 1b. REQUIREMENTS OF SECRETARY OF THE TREASURY REGARDING EXEMPTION OF FOREIGN EXCHANGE SWAPS AND FOREIGN EXCHANGE FORWARDS FROM DEFINITION OF THE TERM ‘SWAP’.
‘(a) Required Considerations- In determining whether to exempt foreign exchange swaps and foreign exchange forwards from the definition of the term ‘swap’, the Secretary of the Treasury (referred to in this section as the ‘Secretary’) shall consider--
‘(1) whether the required trading and clearing of foreign exchange swaps and foreign exchange forwards would create systemic risk, lower transparency, or threaten the financial stability of the United States;
‘(2) whether foreign exchange swaps and foreign exchange forwards are already subject to a regulatory scheme that is materially comparable to that established by this Act for other classes of swaps;
‘(3) the extent to which bank regulators of participants in the foreign exchange market provide adequate supervision, including capital and margin requirements;
‘(4) the extent of adequate payment and settlement systems; and
‘(5) the use of a potential exemption of foreign exchange swaps and foreign exchange forwards to evade otherwise applicable regulatory requirements.
‘(b) Determination- If the Secretary makes a determination to exempt foreign exchange swaps and foreign exchange forwards from the definition of the term ‘swap’, the Secretary shall submit to the appropriate committees of Congress a determination that contains--
‘(1) an explanation regarding why foreign exchange swaps and foreign exchange forwards are qualitatively different from other classes of swaps in a way that would make the foreign exchange swaps and foreign exchange forwards ill-suited for regulation as swaps; and
‘(2) an identification of the objective differences of foreign exchange swaps and foreign exchange forwards with respect to standard swaps that warrant an exempted status.
‘(c) Effect of Determination- A determination by the Secretary under subsection (b) shall not exempt any foreign exchange swaps and foreign exchange forwards traded on a designated contract market or swap execution facility from any applicable antifraud and antimanipulation provision under this title.’.
SEC. 723. CLEARING.
(a) Clearing Requirement-
(1) IN GENERAL- Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is amended--
(A) by striking subsections (d), (e), (g), and (h); and
(B) by redesignating subsection (i) as subsection (g).
(2) SWAPS; LIMITATION ON PARTICIPATION- Section 2 of the Commodity Exchange Act (7 U.S.C. 2) (as amended by paragraph (1)) is amended by inserting after subsection (c) the following:
‘(d) Swaps- Nothing in this Act (other than subparagraphs (A), (B), (C), (D), (G), and (H) of subsection (a)(1), subsections (f) and (g), sections 1a, 2(a)(13), 2(c)(2)(A)(ii), 2(e), 2(h), 4(c), 4a, 4b, and 4b-1, subsections (a), (b), and (g) of section 4c, sections 4d, 4e, 4f, 4g, 4h, 4i, 4j, 4k, 4l, 4m, 4n, 4o, 4p, 4r, 4s, 4t, 5, 5b, 5c, 5e, and 5h, subsections (c) and (d) of section 6, sections 6c, 6d, 8, 8a, and 9, subsections (e)(2), (f), and (h) of section 12, subsections (a) and (b) of section 13, sections 17, 20, 21, and 22(a)(4), and any other provision of this Act that is applicable to registered entities or Commission registrants) governs or applies to a swap.
‘(e) Limitation on Participation- It shall be unlawful for any person, other than an eligible contract participant, to enter into a swap unless the swap is entered into on, or subject to the rules of, a board of trade designated as a contract market under section 5.’.
(3) MANDATORY CLEARING OF SWAPS- Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is amended by inserting after subsection (g) (as redesignated by paragraph (1)(B)) the following:
‘(h) Clearing Requirement-
‘(1) IN GENERAL-
‘(A) STANDARD FOR CLEARING- It shall be unlawful for any person to engage in a swap unless that person submits such swap for clearing to a derivatives clearing organization that is registered under this Act or a derivatives clearing organization that is exempt from registration under this Act if the swap is required to be cleared.
‘(B) OPEN ACCESS- The rules of a derivatives clearing organization described in subparagraph (A) shall--
‘(i) prescribe that all swaps (but not contracts of sale of a commodity for future delivery or options on such contracts) submitted to the derivatives clearing organization with the same terms and conditions are economically equivalent within the derivatives clearing organization and may be offset with each other within the derivatives clearing organization; and
‘(ii) provide for non-discriminatory clearing of a swap (but not a contract of sale of a commodity for future delivery or option on such contract) executed bilaterally or on or through the rules of an unaffiliated designated contract market or swap execution facility.
‘(2) COMMISSION REVIEW-
‘(A) COMMISSION-INITIATED REVIEW-
‘(i) The Commission on an ongoing basis shall review each swap, or any group, category, type, or class of swaps to make a determination as to whether the swap or group, category, type, or class of swaps should be required to be cleared.
‘(ii) The Commission shall provide at least a 30-day public comment period regarding any determination made under clause (i).
‘(B) SWAP SUBMISSIONS-
‘(i) A derivatives clearing organization shall submit to the Commission each swap, or any group, category, type, or class of swaps that it plans to accept for clearing, and provide notice to its members (in a manner to be determined by the Commission) of the submission.
‘(ii) Any swap or group, category, type, or class of swaps listed for clearing by a derivative clearing organization as of the date of enactment of this subsection shall be considered submitted to the Commission.
‘(iii) The Commission shall--
‘(I) make available to the public submissions received under clauses (i) and (ii);
‘(II) review each submission made under clauses (i) and (ii), and determine whether the swap, or group, category, type, or class of swaps described in the submission is required to be cleared; and
‘(III) provide at least a 30-day public comment period regarding its determination as to whether the clearing requirement under paragraph (1)(A) shall apply to the submission.
‘(C) DEADLINE- The Commission shall make its determination under subparagraph (B)(iii) not later than 90 days after receiving a submission made under subparagraphs (B)(i) and (B)(ii), unless the submitting derivatives clearing organization agrees to an extension for the time limitation established under this subparagraph.
‘(D) DETERMINATION-
‘(i) In reviewing a submission made under subparagraph (B), the Commission shall review whether the submission is consistent with section 5b(c)(2).
‘(ii) In reviewing a swap, group of swaps, or class of swaps pursuant to subparagraph (A) or a submission made under subparagraph (B), the Commission shall take into account the following factors:
‘(I) The existence of significant outstanding notional exposures, trading liquidity, and adequate pricing data.
‘(II) The availability of rule framework, capacity, operational expertise and resources, and credit support infrastructure to clear the contract on terms that are consistent with the material terms and trading conventions on which the contract is then traded.
‘(III) The effect on the mitigation of systemic risk, taking into account the size of the market for such contract and the resources of the derivatives clearing organization available to clear the contract.
‘(IV) The effect on competition, including appropriate fees and charges applied to clearing.
‘(V) The existence of reasonable legal certainty in the event of the insolvency of the relevant derivatives clearing organization or 1 or more of its clearing members with regard to the treatment of customer and swap counterparty positions, funds, and property.
‘(iii) In making a determination under subparagraph (A) or (B)(iii) that the clearing requirement shall apply, the Commission may require such terms and conditions to the requirement as the Commission determines to be appropriate.
‘(E) RULES- Not later than 1 year after the date of the enactment of this subsection, the Commission shall adopt rules for a derivatives clearing organization’s submission for review, pursuant to this paragraph, of a swap, or a group, category, type, or class of swaps, that it seeks to accept for clearing. Nothing in this subparagraph limits the Commission from making a determination under subparagraph (B)(iii) for swaps described in subparagraph (B)(ii).
‘(3) STAY OF CLEARING REQUIREMENT-
‘(A) IN GENERAL- After making a determination pursuant to paragraph (2)(B), the Commission, on application of a counterparty to a swap or on its own initiative, may stay the clearing requirement of paragraph (1) until the Commission completes a review of the terms of the swap (or the group, category, type, or class of swaps) and the clearing arrangement.
‘(B) DEADLINE- The Commission shall complete a review undertaken pursuant to subparagraph (A) not later than 90 days after issuance of the stay, unless the derivatives clearing organization that clears the swap, or group, category, type, or class of swaps agrees to an extension of the time limitation established under this subparagraph.
‘(C) DETERMINATION- Upon completion of the review undertaken pursuant to subparagraph (A), the Commission may--
‘(i) determine, unconditionally or subject to such terms and conditions as the Commission determines to be appropriate, that the swap, or group, category, type, or class of swaps must be cleared pursuant to this subsection if it finds that such clearing is consistent with paragraph (2)(D); or
‘(ii) determine that the clearing requirement of paragraph (1) shall not apply to the swap, or group, category, type, or class of swaps.
‘(D) RULES- Not later than 1 year after the date of the enactment of the Wall Street Transparency and Accountability Act of 2010, the Commission shall adopt rules for reviewing, pursuant to this paragraph, a derivatives clearing organization’s clearing of a swap, or a group, category, type, or class of swaps, that it has accepted for clearing.
‘(4) PREVENTION OF EVASION-
‘(A) IN GENERAL- The Commission shall prescribe rules under this subsection (and issue interpretations of rules prescribed under this subsection) as determined by the Commission to be necessary to prevent evasions of the mandatory clearing requirements under this Act.
‘(B) DUTY OF COMMISSION TO INVESTIGATE AND TAKE CERTAIN ACTIONS- To the extent the Commission finds that a particular swap, group, category, type, or class of swaps would otherwise be subject to mandatory clearing but no derivatives clearing organization has listed the swap, group, category, type, or class of swaps for clearing, the Commission shall--
‘(i) investigate the relevant facts and circumstances;
‘(ii) within 30 days issue a public report containing the results of the investigation; and
‘(iii) take such actions as the Commission determines to be necessary and in the public interest, which may include requiring the retaining of adequate margin or capital by parties to the swap, group, category, type, or class of swaps.
‘(C) EFFECT ON AUTHORITY- Nothing in this paragraph--
‘(i) authorizes the Commission to adopt rules requiring a derivatives clearing organization to list for clearing a swap, group, category, type, or class of swaps if the clearing of the swap, group, category, type, or class of swaps would threaten the financial integrity of the derivatives clearing organization; and
‘(ii) affects the authority of the Commission to enforce the open access provisions of paragraph (1)(B) with respect to a swap, group, category, type, or class of swaps that is listed for clearing by a derivatives clearing organization.
‘(5) REPORTING TRANSITION RULES- Rules adopted by the Commission under this section shall provide for the reporting of data, as follows:
‘(A) Swaps entered into before the date of the enactment of this subsection shall be reported to a registered swap data repository or the Commission no later than 180 days after the effective date of this subsection.
‘(B) Swaps entered into on or after such date of enactment shall be reported to a registered swap data repository or the Commission no later than the later of--
‘(i) 90 days after such effective date; or
‘(ii) such other time after entering into the swap as the Commission may prescribe by rule or regulation.
‘(6) CLEARING TRANSITION RULES-
‘(A) Swaps entered into before the date of the enactment of this subsection are exempt from the clearing requirements of this subsection if reported pursuant to paragraph (5)(A).
‘(B) Swaps entered into before application of the clearing requirement pursuant to this subsection are exempt from the clearing requirements of this subsection if reported pursuant to paragraph (5)(B).
‘(7) EXCEPTIONS-
‘(A) IN GENERAL- The requirements of paragraph (1)(A) shall not apply to a swap if 1 of the counterparties to the swap--
‘(i) is not a financial entity;
‘(ii) is using swaps to hedge or mitigate commercial risk; and
‘(iii) notifies the Commission, in a manner set forth by the Commission, how it generally meets its financial obligations associated with entering into non-cleared swaps.
‘(B) OPTION TO CLEAR- The application of the clearing exception in subparagraph (A) is solely at the discretion of the counterparty to the swap that meets the conditions of clauses (i) through (iii) of subparagraph (A).
‘(C) FINANCIAL ENTITY DEFINITION-
‘(i) IN GENERAL- For the purposes of this paragraph, the term ‘financial entity’ means--
‘(I) a swap dealer;
‘(II) a security-based swap dealer;
‘(III) a major swap participant;
‘(IV) a major security-based swap participant;
‘(V) a commodity pool;
‘(VI) a private fund as defined in section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80-b-2(a));
‘(VII) an employee benefit plan as defined in paragraphs (3) and (32) of section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002);
‘(VIII) a person predominantly engaged in activities that are in the business of banking, or in activities that are financial in nature, as defined in section 4(k) of the Bank Holding Company Act of 1956.
‘(ii) EXCLUSION- The Commission shall consider whether to exempt small banks, savings associations, farm credit system institutions, and credit unions, including--
‘(I) depository institutions with total assets of $10,000,000,000 or less;
‘(II) farm credit system institutions with total assets of $10,000,000,000 or less; or
‘(III) credit unions with total assets of $10,000,000,000 or less.
‘(iii) LIMITATION- Such definition shall not include an entity whose primary business is providing financing, and uses derivatives for the purpose of hedging underlying commercial risks related to interest rate and foreign currency exposures, 90 percent or more of which arise from financing that facilitates the purchase or lease of products, 90 percent or more of which are manufactured by the parent company or another subsidiary of the parent company.
‘(D) TREATMENT OF AFFILIATES-
‘(i) IN GENERAL- An affiliate of a person that qualifies for an exception under subparagraph (A) (including affiliate entities predominantly engaged in providing financing for the purchase of the merchandise or manufactured goods of the person) may qualify for the exception only if the affiliate, acting on behalf of the person and as an agent, uses the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity.
‘(ii) PROHIBITION RELATING TO CERTAIN AFFILIATES- The exception in clause (i) shall not apply if the affiliate is--
‘(I) a swap dealer;
‘(II) a security-based swap dealer;
‘(III) a major swap participant;
‘(IV) a major security-based swap participant;
‘(V) an issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3), but for paragraph (1) or (7) of subsection (c) of that Act (15 U.S.C. 80a-3(c));
‘(VI) a commodity pool; or
‘(VII) a bank holding company with over $50,000,000,000 in consolidated assets.
‘(iii) TRANSITION RULE FOR AFFILIATES- An affiliate, subsidiary, or a wholly owned entity of a person that qualifies for an exception under subparagraph (A) and is predominantly engaged in providing financing for the purchase or lease of merchandise or manufactured goods of the person shall be exempt from the margin requirement described in section 4s(e) and the clearing requirement described in paragraph (1) with regard to swaps entered into to mitigate the risk of the financing activities for not less than a 2-year period beginning on the date of enactment of this clause.
‘(E) ELECTION OF COUNTERPARTY-
‘(i) SWAPS REQUIRED TO BE CLEARED- With respect to any swap that is subject to the mandatory clearing requirement under this subsection and entered into by a swap dealer or a major swap participant with a counterparty that is not a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant, the counterparty shall have the sole right to select the derivatives clearing organization at which the swap will be cleared.
‘(ii) SWAPS NOT REQUIRED TO BE CLEARED- With respect to any swap that is not subject to the mandatory clearing requirement under this subsection and entered into by a swap dealer or a major swap participant with a counterparty that is not a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant, the counterparty--
‘(I) may elect to require clearing of the swap; and
‘(II) shall have the sole right to select the derivatives clearing organization at which the swap will be cleared.
‘(F) ABUSE OF EXCEPTION- The Commission may prescribe such rules or issue interpretations of the rules as the Commission determines to be necessary to prevent abuse of the exceptions described in this paragraph. The Commission may also request information from those persons claiming the clearing exception as necessary to prevent abuse of the exceptions described in this paragraph.
‘(8) TRADE EXECUTION-
‘(A) IN GENERAL- With respect to transactions involving swaps subject to the clearing requirement of paragraph (1), counterparties shall--
‘(i) execute the transaction on a board of trade designated as a contract market under section 5; or
‘(ii) execute the transaction on a swap execution facility registered under 5h or a swap execution facility that is exempt from registration under section 5h(f) of this Act.
‘(B) EXCEPTION- The requirements of clauses (i) and (ii) of subparagraph (A) shall not apply if no board of trade or swap execution facility makes the swap available to trade or for swap transactions subject to the clearing exception under paragraph (7).’.
(b) Commodity Exchange Act- Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is amended by adding at the end the following:
‘(j) Committee Approval by Board- Exemptions from the requirements of subsection (h)(1) to clear a swap and subsection (h)(8) to execute a swap through a board of trade or swap execution facility shall be available to a counterparty that is an issuer of securities that are registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or that is required to file reports pursuant to section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o) only if an appropriate committee of the issuer’s board or governing body has reviewed and approved its decision to enter into swaps that are subject to such exemptions.’.
(c) Grandfather Provisions-
(1) LEGAL CERTAINTY FOR CERTAIN TRANSACTIONS IN EXEMPT COMMODITIES- Not later than 60 days after the date of enactment of this Act, a person may submit to the Commodity Futures Trading Commission a petition to remain subject to section 2(h) of the Commodity Exchange Act (7 U.S.C. 2(h)) (as in effect on the day before the date of enactment of this Act).
(2) CONSIDERATION; AUTHORITY OF COMMODITY FUTURES TRADING COMMISSION- The Commodity Futures Trading Commission--
(A) shall consider any petition submitted under subparagraph (A) in a prompt manner; and
(B) may allow a person to continue operating subject to section 2(h) of the Commodity Exchange Act (7 U.S.C. 2(h)) (as in effect on the day before the date of enactment of this Act) for not longer than a 1-year period.
(3) AGRICULTURAL SWAPS-
(A) IN GENERAL- Except as provided in subparagraph (B), no person shall offer to enter into, enter into, or confirm the execution of, any swap in an agricultural commodity (as defined by the Commodity Futures Trading Commission).
(B) EXCEPTION- Notwithstanding subparagraph (A), a person may offer to enter into, enter into, or confirm the execution of, any swap in an agricultural commodity pursuant to section 4(c) of the Commodity Exchange Act (7 U.S.C. 6(c)) or any rule, regulation, or order issued thereunder (including any rule, regulation, or order in effect as of the date of enactment of this Act) by the Commodity Futures Trading Commission to allow swaps under such terms and conditions as the Commission shall prescribe.
(4) REQUIRED REPORTING- If the exception described in section 2(h)(8)(B) of the Commodity Exchange Act applies, the counterparties shall comply with any recordkeeping and transaction reporting requirements that may be prescribed by the Commission with respect to swaps subject to section 2(h)(8)(B) of the Commodity Exchange Act.
SEC. 724. SWAPS; SEGREGATION AND BANKRUPTCY TREATMENT.
(a) Segregation Requirements for Cleared Swaps- Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) (as amended by section 732) is amended by adding at the end the following:
‘(f) Swaps-
‘(1) REGISTRATION REQUIREMENT- It shall be unlawful for any person to accept any money, securities, or property (or to extend any credit in lieu of money, securities, or property) from, for, or on behalf of a swaps customer to margin, guarantee, or secure a swap cleared by or through a derivatives clearing organization (including money, securities, or property accruing to the customer as the result of such a swap), unless the person shall have registered under this Act with the Commission as a futures commission merchant, and the registration shall not have expired nor been suspended nor revoked.
‘(2) CLEARED SWAPS-
‘(A) SEGREGATION REQUIRED- A futures commission merchant shall treat and deal with all money, securities, and property of any swaps customer received to margin, guarantee, or secure a swap cleared by or though a derivatives clearing organization (including money, securities, or property accruing to the swaps customer as the result of such a swap) as belonging to the swaps customer.
‘(B) COMMINGLING PROHIBITED- Money, securities, and property of a swaps customer described in subparagraph (A) shall be separately accounted for and shall not be commingled with the funds of the futures commission merchant or be used to margin, secure, or guarantee any trades or contracts of any swaps customer or person other than the person for whom the same are held.
‘(3) EXCEPTIONS-
‘(A) USE OF FUNDS-
‘(i) IN GENERAL- Notwithstanding paragraph (2), money, securities, and property of swap customers of a futures commission merchant described in paragraph (2) may, for convenience, be commingled and deposited in the same account or accounts with any bank or trust company or with a derivatives clearing organization.
‘(ii) WITHDRAWAL- Notwithstanding paragraph (2), such share of the money, securities, and property described in clause (i) as in the normal course of business shall be necessary to margin, guarantee, secure, transfer, adjust, or settle a cleared swap with a derivatives clearing organization, or with any member of the derivatives clearing organization, may be withdrawn and applied to such purposes, including the payment of commissions, brokerage, interest, taxes, storage, and other charges, lawfully accruing in connection with the cleared swap.
‘(B) COMMISSION ACTION- Notwithstanding paragraph (2), in accordance with such terms and conditions as the Commission may prescribe by rule, regulation, or order, any money, securities, or property of the swaps customers of a futures commission merchant described in paragraph (2) may be commingled and deposited in customer accounts with any other money, securities, or property received by the futures commission merchant and required by the Commission to be separately accounted for and treated and dealt with as belonging to the swaps customer of the futures commission merchant.
‘(4) PERMITTED INVESTMENTS- Money described in paragraph (2) may be invested in obligations of the United States, in general obligations of any State or of any political subdivision of a State, and in obligations fully guaranteed as to principal and interest by the United States, or in any other investment that the Commission may by rule or regulation prescribe, and such investments shall be made in accordance with such rules and regulations and subject to such conditions as the Commission may prescribe.
‘(5) COMMODITY CONTRACT- A swap cleared by or through a derivatives clearing organization shall be considered to be a commodity contract as such term is defined in section 761 of title 11, United States Code, with regard to all money, securities, and property of any swaps customer received by a futures commission merchant or a derivatives clearing organization to margin, guarantee, or secure the swap (including money, securities, or property accruing to the customer as the result of the swap).
‘(6) PROHIBITION- It shall be unlawful for any person, including any derivatives clearing organization and any depository institution, that has received any money, securities, or property for deposit in a separate account or accounts as provided in paragraph (2) to hold, dispose of, or use any such money, securities, or property as belonging to the depositing futures commission merchant or any person other than the swaps customer of the futures commission merchant.’.
(b) Bankruptcy Treatment of Cleared Swaps- Section 761 of title 11, United States Code, is amended--
(1) in paragraph (4), by striking subparagraph (F) and inserting the following:
‘(F)(i) any other contract, option, agreement, or transaction that is similar to a contract, option, agreement, or transaction referred to in this paragraph; and
‘(ii) with respect to a futures commission merchant or a clearing organization, any other contract, option, agreement, or transaction, in each case, that is cleared by a clearing organization;’; and
(2) in paragraph (9)(A)(i), by striking ‘the commodity futures account’ and inserting ‘a commodity contract account’.
(c) Segregation Requirements for Uncleared Swaps- Section 4s of the Commodity Exchange Act (as added by section 731) is amended by adding at the end the following:
‘(l) Segregation Requirements-
‘(1) SEGREGATION OF ASSETS HELD AS COLLATERAL IN UNCLEARED SWAP TRANSACTIONS-
‘(A) NOTIFICATION- A swap dealer or major swap participant shall be required to notify the counterparty of the swap dealer or major swap participant at the beginning of a swap transaction that the counterparty has the right to require segregation of the funds or other property supplied to margin, guarantee, or secure the obligations of the counterparty.
‘(B) SEGREGATION AND MAINTENANCE OF FUNDS- At the request of a counterparty to a swap that provides funds or other property to a swap dealer or major swap participant to margin, guarantee, or secure the obligations of the counterparty, the swap dealer or major swap participant shall--
‘(i) segregate the funds or other property for the benefit of the counterparty; and
‘(ii) in accordance with such rules and regulations as the Commission may promulgate, maintain the funds or other property in a segregated account separate from the assets and other interests of the swap dealer or major swap participant.
‘(2) APPLICABILITY- The requirements described in paragraph (1) shall--
‘(A) apply only to a swap between a counterparty and a swap dealer or major swap participant that is not submitted for clearing to a derivatives clearing organization; and
‘(B)(i) not apply to variation margin payments; or
‘(ii) not preclude any commercial arrangement regarding--
‘(I) the investment of segregated funds or other property that may only be invested in such investments as the Commission may permit by rule or regulation; and
‘(II) the related allocation of gains and losses resulting from any investment of the segregated funds or other property.
‘(3) USE OF INDEPENDENT THIRD-PARTY CUSTODIANS- The segregated account described in paragraph (1) shall be--
‘(A) carried by an independent third-party custodian; and
‘(B) designated as a segregated account for and on behalf of the counterparty.
‘(4) REPORTING REQUIREMENT- If the counterparty does not choose to require segregation of the funds or other property supplied to margin, guarantee, or secure the obligations of the counterparty, the swap dealer or major swap participant shall report to the counterparty of the swap dealer or major swap participant on a quarterly basis that the back office procedures of the swap dealer or major swap participant relating to margin and collateral requirements are in compliance with the agreement of the counterparties.’.
SEC. 725. DERIVATIVES CLEARING ORGANIZATIONS.
(a) Registration Requirement- Section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) is amended by striking subsections (a) and (b) and inserting the following:
‘(a) Registration Requirement-
‘(1) IN GENERAL- Except as provided in paragraph (2), it shall be unlawful for a derivatives clearing organization, directly or indirectly, to make use of the mails or any means or instrumentality of interstate commerce to perform the functions of a derivatives clearing organization with respect to--
‘(A) a contract of sale of a commodity for future delivery (or an option on the contract of sale) or option on a commodity, in each case, unless the contract or option is--
‘(i) excluded from this Act by subsection (a)(1)(C)(i), (c), or (f) of section 2; or
‘(ii) a security futures product cleared by a clearing agency registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.); or
‘(B) a swap.
‘(2) EXCEPTION- Paragraph (1) shall not apply to a derivatives clearing organization that is registered with the Commission.
‘(b) Voluntary Registration- A person that clears 1 or more agreements, contracts, or transactions that are not required to be cleared under this Act may register with the Commission as a derivatives clearing organization.’.
(b) Registration for Depository Institutions and Clearing Agencies; Exemptions; Compliance Officer; Annual Reports- Section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) is amended by adding at the end the following:
‘(g) Existing Depository Institutions and Clearing Agencies-
‘(1) IN GENERAL- A depository institution or clearing agency registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) that is required to be registered as a derivatives clearing organization under this section is deemed to be registered under this section 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 clearing agency cleared swaps.
‘(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 Securities and Exchange Commission shall make available to the Commission, upon request, all information determined to be relevant by the Securities and Exchange Commission regarding a clearing agency deemed to be registered with the Commission under paragraph (1).
‘(h) Exemptions- The Commission may exempt, conditionally or unconditionally, a derivatives clearing organization from registration under this section for the clearing of swaps if the Commission determines that the derivatives clearing organization is subject to comparable, comprehensive supervision and regulation by the Securities and Exchange Commission or the appropriate government authorities in the home country of the organization. Such conditions may include, but are not limited to, requiring that the derivatives clearing organization be available for inspection by the Commission and make available all information requested by the Commission.
‘(i) Designation of Chief Compliance Officer-
‘(1) IN GENERAL- Each derivatives clearing organization 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 derivatives clearing organization;
‘(B) review the compliance of the derivatives clearing organization with respect to the core principles described in subsection (c)(2);
‘(C) in consultation with the board of the derivatives clearing organization, a body performing a function similar to the board of the derivatives clearing organization, or the senior officer of the derivatives clearing 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 Act (including regulations) relating to agreements, contracts, or transactions, including each rule prescribed by the Commission under this section;
‘(F) establish procedures for the remediation of noncompliance issues identified by the 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 derivatives clearing organization of the compliance officer with respect to this Act (including regulations); and
‘(ii) each policy and procedure of the derivatives clearing organization of the compliance officer (including the code of ethics and conflict of interest policies of the derivatives clearing organization).
‘(B) REQUIREMENTS- A compliance report under subparagraph (A) shall--
‘(i) accompany each appropriate financial report of the derivatives clearing organization 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.’.
(c) Core Principles for Derivatives Clearing Organizations- Section 5b(c) of the Commodity Exchange Act (7 U.S.C. 7a-1(c)) is amended by striking paragraph (2) and inserting the following:
‘(2) CORE PRINCIPLES FOR DERIVATIVES CLEARING ORGANIZATIONS-
‘(A) COMPLIANCE-
‘(i) IN GENERAL- To be registered and to maintain registration as a derivatives clearing organization, a derivatives clearing organization shall comply with each core principle described in this paragraph and any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5).
‘(ii) DISCRETION OF DERIVATIVES CLEARING ORGANIZATION- Subject to any rule or regulation prescribed by the Commission, a derivatives clearing organization shall have reasonable discretion in establishing the manner by which the derivatives clearing organization complies with each core principle described in this paragraph.
‘(B) FINANCIAL RESOURCES-
‘(i) IN GENERAL- Each derivatives clearing organization shall have adequate financial, operational, and managerial resources, as determined by the Commission, to discharge each responsibility of the derivatives clearing organization.
‘(ii) MINIMUM AMOUNT OF FINANCIAL RESOURCES- Each derivatives clearing organization shall possess financial resources that, at a minimum, exceed the total amount that would--
‘(I) enable the organization to meet its financial obligations to its members and participants notwithstanding a default by the member or participant creating the largest financial exposure for that organization in extreme but plausible market conditions; and
‘(II) enable the derivatives clearing organization to cover the operating costs of the derivatives clearing organization for a period of 1 year (as calculated on a rolling basis).
‘(C) PARTICIPANT AND PRODUCT ELIGIBILITY-
‘(i) IN GENERAL- Each derivatives clearing organization shall establish--
‘(I) appropriate admission and continuing eligibility standards (including sufficient financial resources and operational capacity to meet obligations arising from participation in the derivatives clearing organization) for members of, and participants in, the derivatives clearing organization; and
‘(II) appropriate standards for determining the eligibility of agreements, contracts, or transactions submitted to the derivatives clearing organization for clearing.
‘(ii) REQUIRED PROCEDURES- Each derivatives clearing organization shall establish and implement procedures to verify, on an ongoing basis, the compliance of each participation and membership requirement of the derivatives clearing organization.
‘(iii) REQUIREMENTS- The participation and membership requirements of each derivatives clearing organization shall--
‘(I) be objective;
‘(II) be publicly disclosed; and
‘(III) permit fair and open access.
‘(D) RISK MANAGEMENT-
‘(i) IN GENERAL- Each derivatives clearing organization shall ensure that the derivatives clearing organization possesses the ability to manage the risks associated with discharging the responsibilities of the derivatives clearing organization through the use of appropriate tools and procedures.
‘(ii) MEASUREMENT OF CREDIT EXPOSURE- Each derivatives clearing organization shall--
‘(I) not less than once during each business day of the derivatives clearing organization, measure the credit exposures of the derivatives clearing organization to each member and participant of the derivatives clearing organization; and
‘(II) monitor each exposure described in subclause (I) periodically during the business day of the derivatives clearing organization.
‘(iii) LIMITATION OF EXPOSURE TO POTENTIAL LOSSES FROM DEFAULTS- Each derivatives clearing organization, through margin requirements and other risk control mechanisms, shall limit the exposure of the derivatives clearing organization to potential losses from defaults by members and participants of the derivatives clearing organization to ensure that--
‘(I) the operations of the derivatives clearing organization would not be disrupted; and
‘(II) nondefaulting members or participants would not be exposed to losses that nondefaulting members or participants cannot anticipate or control.
‘(iv) MARGIN REQUIREMENTS- The margin required from each member and participant of a derivatives clearing organization shall be sufficient to cover potential exposures in normal market conditions.
‘(v) REQUIREMENTS REGARDING MODELS AND PARAMETERS- Each model and parameter used in setting margin requirements under clause (iv) shall be--
‘(I) risk-based; and
‘(II) reviewed on a regular basis.
‘(E) SETTLEMENT PROCEDURES- Each derivatives clearing organization shall--
‘(i) complete money settlements on a timely basis (but not less frequently than once each business day);
‘(ii) employ money settlement arrangements to eliminate or strictly limit the exposure of the derivatives clearing organization to settlement bank risks (including credit and liquidity risks from the use of banks to effect money settlements);
‘(iii) ensure that money settlements are final when effected;
‘(iv) maintain an accurate record of the flow of funds associated with each money settlement;
‘(v) possess the ability to comply with each term and condition of any permitted netting or offset arrangement with any other clearing organization;
‘(vi) regarding physical settlements, establish rules that clearly state each obligation of the derivatives clearing organization with respect to physical deliveries; and
‘(vii) ensure that each risk arising from an obligation described in clause (vi) is identified and managed.
‘(F) TREATMENT OF FUNDS-
‘(i) REQUIRED STANDARDS AND PROCEDURES- Each derivatives clearing organization shall establish standards and procedures that are designed to protect and ensure the safety of member and participant funds and assets.
‘(ii) HOLDING OF FUNDS AND ASSETS- Each derivatives clearing organization shall hold member and participant funds and assets in a manner by which to minimize the risk of loss or of delay in the access by the derivatives clearing organization to the assets and funds.
‘(iii) PERMISSIBLE INVESTMENTS- Funds and assets invested by a derivatives clearing organization shall be held in instruments with minimal credit, market, and liquidity risks.
‘(G) DEFAULT RULES AND PROCEDURES-
‘(i) IN GENERAL- Each derivatives clearing organization shall have rules and procedures designed to allow for the efficient, fair, and safe management of events during which members or participants--
‘(I) become insolvent; or
‘(II) otherwise default on the obligations of the members or participants to the derivatives clearing organization.
‘(ii) DEFAULT PROCEDURES- Each derivatives clearing organization shall--
‘(I) clearly state the default procedures of the derivatives clearing organization;
‘(II) make publicly available the default rules of the derivatives clearing organization; and
‘(III) ensure that the derivatives clearing organization may take timely action--
‘(aa) to contain losses and liquidity pressures; and
‘(bb) to continue meeting each obligation of the derivatives clearing organization.
‘(H) RULE ENFORCEMENT- Each derivatives clearing organization shall--
‘(i) maintain adequate arrangements and resources for--
‘(I) the effective monitoring and enforcement of compliance with the rules of the derivatives clearing organization; and
‘(II) the resolution of disputes;
‘(ii) have the authority and ability to discipline, limit, suspend, or terminate the activities of a member or participant due to a violation by the member or participant of any rule of the derivatives clearing organization; and
‘(iii) report to the Commission regarding rule enforcement activities and sanctions imposed against members and participants as provided in clause (ii).
‘(I) SYSTEM SAFEGUARDS- Each derivatives clearing organization shall--
‘(i) establish and maintain a program of risk analysis and oversight to identify and minimize sources of operational risk through the development of appropriate controls and procedures, and automated systems, that are reliable, secure, and have adequate scalable capacity;
‘(ii) establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allows for--
‘(I) the timely recovery and resumption of operations of the derivatives clearing organization; and
‘(II) the fulfillment of each obligation and responsibility of the derivatives clearing organization; and
‘(iii) periodically conduct tests to verify that the backup resources of the derivatives clearing organization are sufficient to ensure daily processing, clearing, and settlement.
‘(J) REPORTING- Each derivatives clearing organization shall provide to the Commission all information that the Commission determines to be necessary to conduct oversight of the derivatives clearing organization.
‘(K) RECORDKEEPING- Each derivatives clearing organization shall maintain records of all activities related to the business of the derivatives clearing organization as a derivatives clearing organization--
‘(i) in a form and manner that is acceptable to the Commission; and
‘(ii) for a period of not less than 5 years.
‘(L) PUBLIC INFORMATION-
‘(i) IN GENERAL- Each derivatives clearing organization shall provide to market participants sufficient information to enable the market participants to identify and evaluate accurately the risks and costs associated with using the services of the derivatives clearing organization.
‘(ii) AVAILABILITY OF INFORMATION- Each derivatives clearing organization shall make information concerning the rules and operating and default procedures governing the clearing and settlement systems of the derivatives clearing organization available to market participants.
‘(iii) PUBLIC DISCLOSURE- Each derivatives clearing organization shall disclose publicly and to the Commission information concerning--
‘(I) the terms and conditions of each contract, agreement, and transaction cleared and settled by the derivatives clearing organization;
‘(II) each clearing and other fee that the derivatives clearing organization charges the members and participants of the derivatives clearing organization;
‘(III) the margin-setting methodology, and the size and composition, of the financial resource package of the derivatives clearing organization;
‘(IV) daily settlement prices, volume, and open interest for each contract settled or cleared by the derivatives clearing organization; and
‘(V) any other matter relevant to participation in the settlement and clearing activities of the derivatives clearing organization.
‘(M) INFORMATION-SHARING- Each derivatives clearing organization shall--
‘(i) enter into, and abide by the terms of, each appropriate and applicable domestic and international information-sharing agreement; and
‘(ii) use relevant information obtained from each agreement described in clause (i) in carrying out the risk management program of the derivatives clearing organization.
‘(N) ANTITRUST CONSIDERATIONS- Unless necessary or appropriate to achieve the purposes of this Act, a derivatives clearing organization 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.
‘(O) GOVERNANCE FITNESS STANDARDS-
‘(i) GOVERNANCE ARRANGEMENTS- Each derivatives clearing organization shall establish governance arrangements that are transparent--
‘(I) to fulfill public interest requirements; and
‘(II) to permit the consideration of the views of owners and participants.
‘(ii) FITNESS STANDARDS- Each derivatives clearing organization shall establish and enforce appropriate fitness standards for--
‘(I) directors;
‘(II) members of any disciplinary committee;
‘(III) members of the derivatives clearing organization;
‘(IV) any other individual or entity with direct access to the settlement or clearing activities of the derivatives clearing organization; and
‘(V) any party affiliated with any individual or entity described in this clause.
‘(P) CONFLICTS OF INTEREST- Each derivatives clearing organization shall--
‘(i) establish and enforce rules to minimize conflicts of interest in the decision-making process of the derivatives clearing organization; and
‘(ii) establish a process for resolving conflicts of interest described in clause (i).
‘(Q) COMPOSITION OF GOVERNING BOARDS- Each derivatives clearing organization shall ensure that the composition of the governing board or committee of the derivatives clearing organization includes market participants.
‘(R) LEGAL RISK- Each derivatives clearing organization shall have a well-founded, transparent, and enforceable legal framework for each aspect of the activities of the derivatives clearing organization.’.
(d) Conflicts of Interest- The Commodity Futures Trading Commission shall adopt rules mitigating conflicts of interest in connection with the conduct of business by a swap dealer or a major swap participant with a derivatives clearing organization, board of trade, or a swap execution facility that clears or trades swaps in which the swap dealer or major swap participant has a material debt or material equity investment.
(e) Reporting Requirements- Section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) (as amended by subsection (b)) is amended by adding at the end the following:
‘(k) Reporting Requirements-
‘(1) DUTY OF DERIVATIVES CLEARING ORGANIZATIONS- Each derivatives clearing organization that clears swaps shall provide to the Commission all information that is determined by the Commission to be necessary to perform each responsibility of the Commission under this Act.
‘(2) DATA COLLECTION AND MAINTENANCE REQUIREMENTS- The Commission shall adopt data collection and maintenance requirements for swaps cleared by derivatives clearing organizations that are comparable to the corresponding requirements for--
‘(A) swaps data reported to swap data repositories; and
‘(B) swaps traded on swap execution facilities.
‘(3) REPORTS ON SECURITY-BASED SWAP AGREEMENTS TO BE SHARED WITH THE SECURITIES AND EXCHANGE COMMISSION-
‘(A) IN GENERAL- A derivatives clearing organization that clears security-based swap agreements (as defined in section 1a(47)(A)(v)) shall, upon request, open to inspection and examination to the Securities and Exchange Commission all books and records relating to such security-based swap agreements, consistent with the confidentiality and disclosure requirements of section 8.
‘(B) JURISDICTION- Nothing in this paragraph shall affect the exclusive jurisdiction of the Commission to prescribe recordkeeping and reporting requirements for a derivatives clearing organization that is registered with the Commission.
‘(4) INFORMATION SHARING- Subject to section 8, and upon request, the Commission shall share information collected under paragraph (2) with--
‘(A) the Board;
‘(B) the Securities and Exchange Commission;
‘(C) each appropriate prudential regulator;
‘(D) the Financial Stability Oversight Council;
‘(E) the Department of Justice; and
‘(F) any other person that the Commission determines to be appropriate, including--
‘(i) foreign financial supervisors (including foreign futures authorities);
‘(ii) foreign central banks; and
‘(iii) foreign ministries.
‘(5) CONFIDENTIALITY AND INDEMNIFICATION AGREEMENT- Before the Commission may share information with any entity described in paragraph (4)--
‘(A) the Commission shall receive a written agreement from each entity stating that the entity shall abide by the confidentiality requirements described in section 8 relating to the information on swap transactions that is provided; and
‘(B) each entity shall agree to indemnify the Commission for any expenses arising from litigation relating to the information provided under section 8.
‘(6) PUBLIC INFORMATION- Each derivatives clearing organization that clears swaps shall provide to the Commission (including any designee of the Commission) information under paragraph (2) in such form and at such frequency as is required by the Commission to comply with the public reporting requirements contained in section 2(a)(13).’.
(f) Public Disclosure- Section 8(e) of the Commodity Exchange Act (7 U.S.C. 12(e)) is amended in the last sentence--
(1) by inserting ‘, central bank and ministries,’ after ‘department’ each place it appears; and
(2) by striking ‘. is a party.’ and inserting ‘, is a party.’.
(g) Legal Certainty for Identified Banking Products-
(1) REPEALS- The Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27 et seq.) is amended--
(A) by striking sections 404 and 407 (7 U.S.C. 27b, 27e);
(B) in section 402 (7 U.S.C. 27), by striking subsection (d); and
(C) in section 408 (7 U.S.C. 27f)--
(i) in subsection (c)--
(I) by striking ‘in the case’ and all that follows through ‘a hybrid’ and inserting ‘in the case of a hybrid’;
(II) by striking ‘; or’ and inserting a period; and
(III) by striking paragraph (2);
(ii) by striking subsection (b); and
(iii) by redesignating subsection (c) as subsection (b).
(2) LEGAL CERTAINTY FOR BANK PRODUCTS ACT OF 2000- Section 403 of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27a) is amended to read as follows:
‘SEC. 403. EXCLUSION OF IDENTIFIED BANKING PRODUCT.
‘(a) Exclusion- Except as provided in subsection (b) or (c)--
‘(1) the Commodity Exchange Act (7 U.S.C. 1 et seq.) shall not apply to, and the Commodity Futures Trading Commission shall not exercise regulatory authority under the Commodity Exchange Act (7 U.S.C. 1 et seq.) with respect to, an identified banking product; and
‘(2) the definitions of ‘security-based swap’ in section 3(a)(68) of the Securities Exchange Act of 1934 and ‘security-based swap agreement’ in section 1a(47)(A)(v) of the Commodity Exchange Act and section 3(a)(78) of the Securities Exchange Act of 1934 do not include any identified bank product.
‘(b) Exception- An appropriate Federal banking agency may except an identified banking product of a bank under its regulatory jurisdiction from the exclusion in subsection (a) if the agency determines, in consultation with the Commodity Futures Trading Commission and the Securities and Exchange Commission, that the product--
‘(1) would meet the definition of a ‘swap’ under section 1a(47) of the Commodity Exchange Act (7 U.S.C. 1a) or a ‘security-based swap’ under that section 3(a)(68) of the Securities Exchange Act of 1934; and
‘(2) has become known to the trade as a swap or security-based swap, or otherwise has been structured as an identified banking product for the purpose of evading the provisions of the Commodity Exchange Act (7 U.S.C. 1 et seq.), the Securities Act of 1933 (15 U.S.C. 77a et seq.), or the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).
‘(c) Exception- The exclusions in subsection (a) shall not apply to an identified bank product that--
‘(1) is a product of a bank that is not under the regulatory jurisdiction of an appropriate Federal banking agency;
‘(2) meets the definition of swap in section 1a(47) of the Commodity Exchange Act or security-based swap in section 3(a)(68) of the Securities Exchange Act of 1934; and
‘(3) has become known to the trade as a swap or security-based swap, or otherwise has been structured as an identified banking product for the purpose of evading the provisions of the Commodity Exchange Act (7 U.S.C. 1 et seq.), the Securities Act of 1933 (15 U.S.C. 77a et seq.), or the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).’.
(h) Reducing Clearing Systemic Risk- Section 5b(f)(1) of the Commodity Exchange Act (7 U.S.C. 7a-1(F)(i)) is amended by adding at the end the following: ‘In order to minimize systemic risk, under no circumstances shall a derivatives clearing organization be compelled to accept the counterparty credit risk of another clearing organization.’.
SEC. 726. RULEMAKING ON CONFLICT OF INTEREST.
(a) In General- In order to mitigate conflicts of interest, not later than 180 days after the date of enactment of the Wall Street Transparency and Accountability Act of 2010, the Commodity Futures Trading Commission shall adopt rules which may include numerical limits on the control of, or the voting rights with respect to, any derivatives clearing organization that clears swaps, or swap execution facility or board of trade designated as a contract market that posts swaps or makes swaps available for trading, by a bank holding company (as defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841)) with total consolidated assets of $50,000,000,000 or more, a nonbank financial company (as defined in section 102) supervised by the Board, an affiliate of such a bank holding company or nonbank financial company, a swap dealer, major swap participant, or associated person of a swap dealer or major swap participant.
(b) Purposes- The Commission shall adopt rules if it determines, after the review described in subsection (a), that such rules are necessary or appropriate to improve the governance of, or to mitigate systemic risk, promote competition, or mitigate conflicts of interest in connection with a swap dealer or major swap participant’s conduct of business with, a derivatives clearing organization, contract market, or swap execution facility that clears or posts swaps or makes swaps available for trading and in which such swap dealer or major swap participant has a material debt or equity investment.
(c) Considerations- In adopting rules pursuant to this section, the Commodity Futures Trading Commission shall consider any conflicts of interest arising from the amount of equity owned by a single investor, the ability to vote, cause the vote of, or withhold votes entitled to be cast on any matters by the holders of the ownership interest, and the governance arrangements of any derivatives clearing organization that clears swaps, or swap execution facility or board of trade designated as a contract market that posts swaps or makes swaps available for trading.
SEC. 727. PUBLIC REPORTING OF SWAP TRANSACTION DATA.
Section 2(a) of the Commodity Exchange Act (7 U.S.C. 2(a)) is amended by adding at the end the following:
‘(13) PUBLIC AVAILABILITY OF SWAP TRANSACTION DATA-
‘(A) DEFINITION OF REAL-TIME PUBLIC REPORTING- In this paragraph, the term ‘real-time public reporting’ means to report data relating to a swap transaction, including price and volume, as soon as technologically practicable after the time at which the swap transaction has been executed.
‘(B) PURPOSE- The purpose of this section is to authorize the Commission to make 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 and required to provide by rule for the public availability of swap transaction and pricing data as follows:
‘(i) With respect to those swaps that are subject to the mandatory clearing requirement described in subsection (h)(1) (including those swaps that are excepted from the requirement pursuant to subsection (h)(7)), the Commission shall require real-time public reporting for such transactions.
‘(ii) With respect to those swaps that are not subject to the mandatory clearing requirement described in subsection (h)(1), but are cleared at a registered derivatives clearing organization, the Commission shall require real-time public reporting for such transactions.
‘(iii) With respect to swaps that are not cleared at a registered derivatives clearing organization and which are reported to a swap data repository or the Commission under subsection (h)(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 swaps that are determined to be required to be cleared under subsection (h)(2) 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 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 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 swap transaction (block trade) for particular markets and contracts;
‘(iii) to specify the appropriate time delay for reporting large notional 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 swap (including agents of the parties to a swap) shall be responsible for reporting 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 SWAP DATA REPOSITORIES- Each swap (whether cleared or uncleared) shall be reported to a registered swap data repository.
‘(14) SEMIANNUAL AND ANNUAL PUBLIC REPORTING OF AGGREGATE 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 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 swap data repositories and derivatives clearing organizations; 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 THE 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.’.
SEC. 728. SWAP DATA REPOSITORIES.
The Commodity Exchange Act is amended by inserting after section 20 (7 U.S.C. 24) the following:
‘SEC. 21. SWAP DATA REPOSITORIES.
‘(a) Registration Requirement-
‘(1) REQUIREMENT; AUTHORITY OF DERIVATIVES CLEARING ORGANIZATION-
‘(A) IN GENERAL- 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 swap data repository.
‘(B) REGISTRATION OF DERIVATIVES CLEARING ORGANIZATIONS- A derivatives clearing organization may register as a swap data repository.
‘(2) INSPECTION AND EXAMINATION- Each registered 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 swap data repository, the swap data repository shall comply with--
‘(i) the requirements and core principles described in this section; and
‘(ii) any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5).
‘(B) REASONABLE DISCRETION OF SWAP DATA REPOSITORY- Unless otherwise determined by the Commission by rule or regulation, a swap data repository described in subparagraph (A) shall have reasonable discretion in establishing the manner in which the swap data repository complies with the core principles described in this section.
‘(b) Standard Setting-
‘(1) DATA IDENTIFICATION-
‘(A) IN GENERAL- In accordance with subparagraph (B), the Commission shall prescribe standards that specify the data elements for each swap that shall be collected and maintained by each registered swap data repository.
‘(B) REQUIREMENT- In carrying out subparagraph (A), the Commission shall prescribe consistent data element standards applicable to registered entities and reporting counterparties.
‘(2) DATA COLLECTION AND MAINTENANCE- The Commission shall prescribe data collection and data maintenance standards for swap data repositories.
‘(3) COMPARABILITY- The standards prescribed by the Commission under this subsection shall be comparable to the data standards imposed by the Commission on derivatives clearing organizations in connection with their clearing of swaps.
‘(c) Duties- A swap data repository shall--
‘(1) accept data prescribed by the Commission for each swap under subsection (b);
‘(2) confirm with both counterparties to the swap the accuracy of the data that was submitted;
‘(3) maintain the data described in paragraph (1) in such form, in such manner, and for such period as may be required by the Commission;
‘(4)(A) provide direct electronic access to the Commission (or any designee of the Commission, including another registered entity); and
‘(B) provide the information described in paragraph (1) in such form and at such frequency as the Commission may require to comply with the public reporting requirements contained in section 2(a)(13);
‘(5) at the direction of the Commission, establish automated systems for monitoring, screening, and analyzing swap data, including compliance and frequency of end user clearing exemption claims by individual and affiliated entities;
‘(6) maintain the privacy of any and all swap transaction information that the swap data repository receives from a swap dealer, counterparty, or any other registered entity; and
‘(7) on a confidential basis pursuant to section 8, upon request, and after notifying the Commission of the request, make available all data obtained by the swap data repository, including individual counterparty trade and position data, to--
‘(A) each appropriate prudential regulator;
‘(B) the Financial Stability Oversight Council;
‘(C) the Securities and Exchange Commission;
‘(D) the Department of Justice; and
‘(E) any other person that the Commission determines to be appropriate, including--
‘(i) foreign financial supervisors (including foreign futures authorities);
‘(ii) foreign central banks; and
‘(iii) foreign ministries; and
‘(8) establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allows for the timely recovery and resumption of operations and the fulfillment of the responsibilities and obligations of the organization.
‘(d) Confidentiality and Indemnification Agreement- Before the swap data repository may share information with any entity described in subsection (c)(7)--
‘(1) the swap data repository shall receive a written agreement from each entity stating that the entity shall abide by the confidentiality requirements described in section 8 relating to the information on swap transactions that is provided; and
‘(2) each entity shall agree to indemnify the swap data repository and the Commission for any expenses arising from litigation relating to the information provided under section 8.
‘(e) Designation of Chief Compliance Officer-
‘(1) IN GENERAL- Each swap data repository 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 swap data repository;
‘(B) review the compliance of the swap data repository with respect to the requirements and core principles described in this section;
‘(C) in consultation with the board of the swap data repository, a body performing a function similar to the board of the swap data repository, or the senior officer of the swap data repository, 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 Act (including regulations) relating to agreements, contracts, or transactions, 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 swap data repository of the chief compliance officer with respect to this Act (including regulations); and
‘(ii) each policy and procedure of the swap data repository of the chief compliance officer (including the code of ethics and conflict of interest policies of the swap data repository).
‘(B) REQUIREMENTS- A compliance report under subparagraph (A) shall--
‘(i) accompany each appropriate financial report of the 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.
‘(f) Core Principles Applicable To Swap Data Repositories-
‘(1) ANTITRUST CONSIDERATIONS- Unless necessary or appropriate to achieve the purposes of this Act, a swap data repository shall not--
‘(A) adopt any rule or take any action that results in any unreasonable restraint of trade; or
‘(B) impose any material anticompetitive burden on the trading, clearing, or reporting of transactions.
‘(2) GOVERNANCE ARRANGEMENTS- Each swap data repository shall establish governance arrangements that are transparent--
‘(A) to fulfill public interest requirements; and
‘(B) to support the objectives of the Federal Government, owners, and participants.
‘(3) CONFLICTS OF INTEREST- Each swap data repository shall--
‘(A) establish and enforce rules to minimize conflicts of interest in the decision-making process of the swap data repository; and
‘(B) establish a process for resolving conflicts of interest described in subparagraph (A).
‘(4) ADDITIONAL DUTIES DEVELOPED BY COMMISSION-
‘(A) IN GENERAL- The Commission may develop 1 or more additional duties applicable to swap data repositories.
‘(B) 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.
‘(C) ADDITIONAL DUTIES FOR COMMISSION DESIGNEES- The Commission shall establish additional duties for any registrant described in section 1a(48) in order to minimize conflicts of interest, protect data, ensure compliance, and guarantee the safety and security of the swap data repository.
‘(g) Required Registration for Swap Data Repositories- Any person that is required to be registered as a swap data repository under this section shall register with the Commission regardless of whether that person is also licensed as a bank or registered with the Securities and Exchange Commission as a swap data repository.
‘(h) Rules- The Commission shall adopt rules governing persons that are registered under this section.’.
SEC. 729. REPORTING AND RECORDKEEPING.
The Commodity Exchange Act is amended by inserting after section 4q (7 U.S.C. 6o-1) the following:
‘SEC. 4r. REPORTING AND RECORDKEEPING FOR UNCLEARED SWAPS.
‘(a) Required Reporting of Swaps Not Accepted by Any Derivatives Clearing Organization-
‘(1) IN GENERAL- Each swap that is not accepted for clearing by any derivatives clearing organization shall be reported to--
‘(A) a swap data repository described in section 21; or
‘(B) in the case in which there is no swap data repository that would accept the swap, to the Commission pursuant to this section within such time period as the Commission may by rule or regulation prescribe.
‘(2) TRANSITION RULE FOR PREENACTMENT SWAPS-
‘(A) SWAPS ENTERED INTO BEFORE THE DATE OF ENACTMENT OF THE WALL STREET TRANSPARENCY AND ACCOUNTABILITY ACT OF 2010- Each swap entered into before the date of enactment of the Wall Street Transparency and Accountability Act of 2010, the terms of which have not expired as of the date of enactment of that Act, shall be reported to a registered swap data repository or the Commission by a date that is not later than--
‘(i) 30 days after issuance of the interim final rule; or
‘(ii) such other period as the Commission determines to be appropriate.
‘(B) COMMISSION RULEMAKING- The Commission shall promulgate an interim final rule within 90 days of the date of enactment of this section providing for the reporting of each swap entered into before the date of enactment as referenced in subparagraph (A).
‘(C) EFFECTIVE DATE- The reporting provisions described in this section shall be effective upon the enactment of this section.
‘(3) REPORTING OBLIGATIONS-
‘(A) SWAPS IN WHICH ONLY 1 COUNTERPARTY IS A SWAP DEALER OR MAJOR SWAP PARTICIPANT- With respect to a swap in which only 1 counterparty is a swap dealer or major swap participant, the swap dealer or major swap participant shall report the swap as required under paragraphs (1) and (2).
‘(B) SWAPS IN WHICH 1 COUNTERPARTY IS A SWAP DEALER AND THE OTHER A MAJOR SWAP PARTICIPANT- With respect to a swap in which 1 counterparty is a swap dealer and the other a major swap participant, the swap dealer shall report the swap as required under paragraphs (1) and (2).
‘(C) OTHER SWAPS- With respect to any other swap not described in subparagraph (A) or (B), the counterparties to the swap shall select a counterparty to report the swap as required under paragraphs (1) and (2).
‘(b) Duties of Certain Individuals- Any individual or entity that enters into a swap shall meet each requirement described in subsection (c) if the individual or entity did not--
‘(1) clear the swap in accordance with section 2(h)(1); or
‘(2) have the data regarding the swap accepted by a swap data repository in accordance with rules (including timeframes) adopted by the Commission under section 21.
‘(c) Requirements- An individual or entity described in subsection (b) shall--
‘(1) upon written request from the Commission, provide reports regarding the swaps held by the individual or entity to the Commission in such form and in such manner as the Commission may request; and
‘(2) maintain books and records pertaining to the swaps held by the individual or entity in such form, in such manner, and for such period as the Commission may require, which shall be open to inspection by--
‘(A) any representative of the Commission;
‘(B) an appropriate prudential regulator;
‘(C) the Securities and Exchange Commission;
‘(D) the Financial Stability Oversight Council; and
‘(E) the Department of Justice.
‘(d) Identical Data- In prescribing rules under this section, the Commission shall require individuals and entities described in subsection (b) to submit to the Commission a report that contains data that is not less comprehensive than the data required to be collected by swap data repositories under section 21.’.
SEC. 730. LARGE SWAP TRADER REPORTING.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by adding after section 4s (as added by section 731) the following:
‘SEC. 4t. LARGE SWAP TRADER REPORTING.
‘(a) Prohibition-
‘(1) IN GENERAL- Except as provided in paragraph (2), it shall be unlawful for any person to enter into any swap that the Commission determines to perform a significant price discovery function with respect to registered entities if--
‘(A) the person directly or indirectly enters into the swap during any 1 day in an amount equal to or in excess of such amount as shall be established periodically by the Commission; and
‘(B) the person directly or indirectly has or obtains a position in the swap equal to or in excess of such amount as shall be established periodically by the Commission.
‘(2) EXCEPTION- Paragraph (1) shall not apply if--
‘(A) the person files or causes to be filed with the properly designated officer of the Commission such reports regarding any transactions or positions described in subparagraphs (A) and (B) of paragraph (1) as the Commission may require by rule or regulation; and
‘(B) in accordance with the rules and regulations of the Commission, the person keeps books and records of all such swaps and any transactions and positions in any related commodity traded on or subject to the rules of any designated contract market or swap execution facility, and of cash or spot transactions in, inventories of, and purchase and sale commitments of, such a commodity.
‘(b) Requirements-
‘(1) IN GENERAL- Books and records described in subsection (a)(2)(B) shall--
‘(A) show such complete details concerning all transactions and positions as the Commission may prescribe by rule or regulation;
‘(B) be open at all times to inspection and examination by any representative of the Commission; and
‘(C) be open at all times to inspection and examination by the Securities and Exchange Commission, to the extent such books and records relate to transactions in swaps (as that term is defined in section 1a(47)(A)(v)), and consistent with the confidentiality and disclosure requirements of section 8.
‘(2) JURISDICTION- Nothing in paragraph (1) shall affect the exclusive jurisdiction of the Commission to prescribe recordkeeping and reporting requirements for large swap traders under this section.
‘(c) Applicability- For purposes of this section, the swaps, futures, and cash or spot transactions and positions of any person shall include the swaps, futures, and cash or spot transactions and positions of any persons directly or indirectly controlled by the person.
‘(d) Significant Price Discovery Function- In making a determination as to whether a swap performs or affects a significant price discovery function with respect to registered entities, the Commission shall consider the factors described in section 4a(a)(3).’.
SEC. 731. REGISTRATION AND REGULATION OF SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 4r (as added by section 729) the following:
‘SEC. 4s. REGISTRATION AND REGULATION OF SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.
‘(a) Registration-
‘(1) SWAP DEALERS- It shall be unlawful for any person to act as a swap dealer unless the person is registered as a swap dealer with the Commission.
‘(2) MAJOR SWAP PARTICIPANTS- It shall be unlawful for any person to act as a major swap participant unless the person is registered as a major swap participant with the Commission.
‘(b) Requirements-
‘(1) IN GENERAL- A person shall register as a swap dealer or major 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 swap dealer or major 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 swap dealers and major swap participants, including rules that limit the activities of swap dealers and major swap participants.
‘(5) TRANSITION- Rules under this section shall provide for the registration of swap dealers and major swap participants not later than 1 year after the date of enactment of the Wall Street Transparency and Accountability Act of 2010.
‘(6) STATUTORY DISQUALIFICATION- Except to the extent otherwise specifically provided by rule, regulation, or order, it shall be unlawful for a swap dealer or a major swap participant to permit any person associated with a swap dealer or a major swap participant who is subject to a statutory disqualification to effect or be involved in effecting swaps on behalf of the swap dealer or major swap participant, if the swap dealer or major swap participant knew, or in the exercise of reasonable care should have known, of the statutory disqualification.
‘(c) Dual Registration-
‘(1) SWAP DEALER- Any person that is required to be registered as a swap dealer under this section shall register with the Commission regardless of whether the person also is a depository institution or is registered with the Securities and Exchange Commission as a security-based swap dealer.
‘(2) MAJOR SWAP PARTICIPANT- Any person that is required to be registered as a major swap participant under this section shall register with the Commission regardless of whether the person also is a depository institution or is registered with the Securities and Exchange Commission as a major security-based swap participant.
‘(d) Rulemakings-
‘(1) IN GENERAL- The Commission shall adopt rules for persons that are registered as swap dealers or major swap participants under this section.
‘(2) EXCEPTION FOR PRUDENTIAL REQUIREMENTS-
‘(A) IN GENERAL- The Commission may not prescribe rules imposing prudential requirements on swap dealers or major 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) SWAP DEALERS AND MAJOR SWAP PARTICIPANTS THAT ARE BANKS- Each registered swap dealer and major swap participant for which there is 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) SWAP DEALERS AND MAJOR SWAP PARTICIPANTS THAT ARE NOT BANKS- Each registered swap dealer and major 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) SWAP DEALERS AND MAJOR SWAP PARTICIPANTS THAT ARE BANKS- The prudential regulators, in consultation with the Commission and the Securities and Exchange Commission, shall jointly adopt rules for swap dealers and major 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 swaps that are not cleared by a registered derivatives clearing organization.
‘(B) SWAP DEALERS AND MAJOR SWAP PARTICIPANTS THAT ARE NOT BANKS- The Commission shall adopt rules for swap dealers and major 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 derivatives clearing organization.
‘(C) CAPITAL- In setting capital requirements for a person that is designated as a swap dealer or a major swap participant for a single type or single class or category of swap or activities, the prudential regulator and the Commission shall take into account the risks associated with other types of swaps or classes of swaps or categories of 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 as a swap dealer or a major swap participant.
‘(3) STANDARDS FOR CAPITAL AND MARGIN-
‘(A) IN GENERAL- To offset the greater risk to the swap dealer or major swap participant and the financial system arising from the use of swaps that are not cleared, the requirements imposed under paragraph (2) shall--
‘(i) help ensure the safety and soundness of the swap dealer or major swap participant; and
‘(ii) be appropriate for the risk associated with the non-cleared swaps held as a swap dealer or major 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 futures commission merchant or introducing broker registered pursuant to section 4f(a) (except for section 4f(a)(3)) in accordance with section 4f(b); or
‘(II) of the Securities and Exchange Commission to set financial responsibility rules for a broker or dealer registered pursuant to section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) (except for section 15(b)(11) of that Act (15 U.S.C. 78o(b)(11)) in accordance with section 15(c)(3) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c)(3)).
‘(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 Act or the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).
‘(C) MARGIN REQUIREMENTS- In prescribing margin requirements under this subsection, the prudential regulator with respect to swap dealers and major swap participants for which it is the prudential regulator and the Commission with respect to swap dealers and major swap participants for which there is no prudential regulator 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 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 non cash collateral, for--
‘(I) swap dealers; and
‘(II) major swap participants.
‘(f) Reporting and Recordkeeping-
‘(1) IN GENERAL- Each registered swap dealer and major 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 swap dealer or major 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 swap dealer or major 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;
‘(C) shall keep books and records described in subparagraph (B) open to inspection and examination by any representative of the Commission; and
‘(D) shall keep any such books and records relating to swaps defined in section 1a(47)(A)(v) open to inspection and examination by the Securities and Exchange Commission.
‘(2) RULES- The Commission shall adopt rules governing reporting and recordkeeping for swap dealers and major swap participants.
‘(g) Daily Trading Records-
‘(1) IN GENERAL- Each registered swap dealer and major swap participant shall maintain daily trading records of the swaps of the registered swap dealer and major 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 swap dealer and major swap participant shall maintain daily trading records for each counterparty in a manner and form that is identifiable with each swap transaction.
‘(4) AUDIT TRAIL- Each registered swap dealer and major 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 swap dealers and major swap participants.
‘(h) Business Conduct Standards-
‘(1) IN GENERAL- Each registered swap dealer and major 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 swaps (including swaps that are offered but not entered into);
‘(B) diligent supervision of the business of the registered swap dealer and major 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 swap dealer or major swap participant that acts as an advisor to a special entity regarding a swap shall comply with the requirements of subparagraph (4) with respect to such Special Entity.
‘(B) ENTERING OF SWAPS WITH RESPECT TO SPECIAL ENTITIES- A swap dealer that enters into or offers to enter into swap with a Special Entity shall comply with the requirements of subparagraph (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;
‘(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 swap dealer or major swap participant to verify that any counterparty meets the eligibility standards for an eligible contract participant;
‘(B) require disclosure by the swap dealer or major swap participant to any counterparty to the transaction (other than a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant) of--
‘(i) information about the material risks and characteristics of the swap;
‘(ii) any material incentives or conflicts of interest that the swap dealer or major swap participant may have in connection with the swap; and
‘(iii)(I) for cleared 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 swaps, receipt of the daily mark of the transaction from the swap dealer or the major swap participant;
‘(C) establish a duty for a swap dealer or major 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 SWAP DEALERS ACTING AS ADVISORS-
‘(A) IN GENERAL- It shall be unlawful for a swap dealer or major 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 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 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 swap recommended by the 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 SWAP DEALERS AS COUNTERPARTIES TO SPECIAL ENTITIES-
‘(A) Any swap dealer or major swap participant that offers to enter or enters into a swap with a Special Entity shall--
‘(i) comply with any duty established by the Commission for a swap dealer or major 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) of this Act, that requires the swap dealer or major 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 swap dealer or major 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 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 swap dealer is acting; and
‘(B) the Commission may 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.
‘(6) RULES- The Commission shall prescribe rules under this subsection governing business conduct standards for swap dealers and major swap participants.
‘(7) APPLICABILITY- This section shall not apply with respect to a transaction that is--
‘(A) initiated by a Special Entity on an exchange or swap execution facility; and
‘(B) one in which the swap dealer or major swap participant does not know the identity of the counterparty to the transaction.
‘(i) Documentation Standards-
‘(1) IN GENERAL- Each registered swap dealer and major 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 swaps.
‘(2) RULES- The Commission shall adopt rules governing documentation standards for swap dealers and major swap participants.
‘(j) Duties- Each registered swap dealer and major swap participant at all times shall comply with the following requirements:
‘(1) MONITORING OF TRADING- The swap dealer or major swap participant shall monitor its trading in swaps to prevent violations of applicable position limits.
‘(2) RISK MANAGEMENT PROCEDURES- The swap dealer or major swap participant shall establish robust and professional risk management systems adequate for managing the day-to-day business of the swap dealer or major swap participant.
‘(3) DISCLOSURE OF GENERAL INFORMATION- The swap dealer or major swap participant shall disclose to the Commission and to the prudential regulator for the swap dealer or major swap participant, as applicable, information concerning--
‘(A) terms and conditions of its swaps;
‘(B) swap trading operations, mechanisms, and practices;
‘(C) financial integrity protections relating to swaps; and
‘(D) other information relevant to its trading in swaps.
‘(4) ABILITY TO OBTAIN INFORMATION- The swap dealer or major 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 swap dealer or major swap participant, as applicable, on request.
‘(5) CONFLICTS OF INTEREST- The swap dealer and major 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 commodity or 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 Act; 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 Act, a swap dealer or major 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 swap dealers and major swap participants.
‘(k) Designation of Chief Compliance Officer-
‘(1) IN GENERAL- Each swap dealer and major 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 swap dealer or major swap participant;
‘(B) review the compliance of the swap dealer or major swap participant with respect to the swap dealer and major 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 Act (including regulations) relating to 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 swap dealer or major swap participant with respect to this Act (including regulations); and
‘(ii) each policy and procedure of the swap dealer or major 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 swap dealer or major 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.’.
SEC. 732. CONFLICTS OF INTEREST.
Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) is amended--
(1) by redesignating subsection (c) as subsection (e); and
(2) by inserting after subsection (b) the following:
‘(c) Conflicts of Interest- The Commission shall require that futures commission merchants and introducing brokers implement conflict-of-interest systems and procedures that--
‘(1) 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 commodity are separated by appropriate informational partitions within the firm from the review, pressure, or oversight of persons whose involvement in trading or clearing activities might potentially bias the judgment or supervision of the persons; and
‘(2) address such other issues as the Commission determines to be appropriate.
‘(d) Designation of Chief Compliance Officer- Each futures commission merchant shall designate an individual to serve as its Chief Compliance Officer and perform such duties and responsibilities as shall be set forth in regulations to be adopted by the Commission or rules to be adopted by a futures association registered under section 17.’.
SEC. 733. SWAP EXECUTION FACILITIES.
The Commodity Exchange Act is amended by inserting after section 5g (7 U.S.C. 7b-2) the following:
‘SEC. 5h. SWAP EXECUTION FACILITIES.
‘(a) Registration-
‘(1) IN GENERAL- No person may operate a facility for the trading or processing of swaps unless the facility is registered as a swap execution facility or as a designated contract market under this section.
‘(2) DUAL REGISTRATION- Any person that is registered as a swap execution facility under this section shall register with the Commission regardless of whether the person also is registered with the Securities and Exchange Commission as a swap execution facility.
‘(b) Trading and Trade Processing-
‘(1) IN GENERAL- Except as specified in paragraph (2), a swap execution facility that is registered under subsection (a) may--
‘(A) make available for trading any swap; and
‘(B) facilitate trade processing of any swap.
‘(2) AGRICULTURAL SWAPS- A swap execution facility may not list for trading or confirm the execution of any swap in an agricultural commodity (as defined by the Commission) except pursuant to a rule or regulation of the Commission allowing the swap under such terms and conditions as the Commission shall prescribe.
‘(c) Identification of Facility Used To Trade Swaps by Contract Markets- A board of trade that operates a contract market shall, to the extent that the board of trade also operates a swap execution facility and uses the same electronic trade execution system for listing and executing trades of swaps on or through the contract market and the swap execution facility, identify whether the electronic trading of such swaps is taking place on or through the contract market or the swap execution facility.
‘(d) Rule-writing-
‘(1) The Securities and Exchange Commission and Commodity Futures Trading Commission may promulgate rules defining the universe of swaps that can be executed on a swap execution facility. These rules shall take into account the price and nonprice requirements of the counterparties to a swap and the goal of this section as set forth in subsection (e).
‘(2) For all swaps that are not required to be executed through a swap execution facility as defined in paragraph (1), such trades may be executed through any other available means of interstate commerce.
‘(3) The Securities and Exchange Commission and Commodity Futures Trading Commission shall update these rules as necessary to account for technological and other innovation.
‘(e) Rule of Construction- The goal of this section is to promote the trading of swaps on swap execution facilities and to promote pre-trade price transparency in the swaps market.
‘(f) Core Principles for Swap Execution Facilities-
‘(1) COMPLIANCE WITH CORE PRINCIPLES-
‘(A) IN GENERAL- To be registered, and maintain registration, as a swap execution facility, the swap execution facility shall comply with--
‘(i) the core principles described in this subsection; and
‘(ii) any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5).
‘(B) REASONABLE DISCRETION OF SWAP EXECUTION FACILITY- Unless otherwise determined by the Commission by rule or regulation, a swap execution facility described in subparagraph (A) shall have reasonable discretion in establishing the manner in which the swap execution facility complies with the core principles described in this subsection.
‘(2) COMPLIANCE WITH RULES- A swap execution facility shall--
‘(A) establish and enforce compliance with any rule of the swap execution facility, including--
‘(i) the terms and conditions of the swaps traded or processed on or through the swap execution facility; and
‘(ii) any limitation on access to the swap execution facility;
‘(B) establish and enforce trading, trade processing, and participation rules that will deter abuses and have the capacity to detect, investigate, and enforce those rules, including means--
‘(i) to provide market participants with impartial access to the market; and
‘(ii) to capture information that may be used in establishing whether rule violations have occurred;
‘(C) establish rules governing the operation of the facility, including rules specifying trading procedures to be used in entering and executing orders traded or posted on the facility, including block trades; and
‘(D) provide by its rules that when a swap dealer or major swap participant enters into or facilitates a swap that is subject to the mandatory clearing requirement of section 2(h), the swap dealer or major swap participant shall be responsible for compliance with the mandatory trading requirement under section 2(h)(8).
‘(3) SWAPS NOT READILY SUSCEPTIBLE TO MANIPULATION- The swap execution facility shall permit trading only in swaps that are not readily susceptible to manipulation.
‘(4) MONITORING OF TRADING AND TRADE PROCESSING- The swap execution facility shall--
‘(A) establish and enforce rules or terms and conditions defining, or specifications detailing--
‘(i) trading procedures to be used in entering and executing orders traded on or through the facilities of the swap execution facility; and
‘(ii) procedures for trade processing of swaps on or through the facilities of the swap execution facility; and
‘(B) monitor trading in swaps to prevent manipulation, price distortion, and disruptions of the delivery or cash settlement process through surveillance, compliance, and disciplinary practices and procedures, including methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions.
‘(5) ABILITY TO OBTAIN INFORMATION- The swap execution facility shall--
‘(A) establish and enforce rules that will allow the facility to obtain any necessary information to perform any of the functions described in this section;
‘(B) provide the information to the Commission on request; and
‘(C) have the capacity to carry out such international information-sharing agreements as the Commission may require.
‘(6) POSITION LIMITS OR ACCOUNTABILITY-
‘(A) IN GENERAL- To reduce the potential threat of market manipulation or congestion, especially during trading in the delivery month, a swap execution facility that is a trading facility shall adopt for each of the contracts of the facility, as is necessary and appropriate, position limitations or position accountability for speculators.
‘(B) POSITION LIMITS- For any contract that is subject to a position limitation established by the Commission pursuant to section 4a(a), the swap execution facility shall--
‘(i) set its position limitation at a level no higher than the Commission limitation; and
‘(ii) monitor positions established on or through the swap execution facility for compliance with the limit set by the Commission and the limit, if any, set by the swap execution facility.
‘(7) FINANCIAL INTEGRITY OF TRANSACTIONS- The swap execution facility shall establish and enforce rules and procedures for ensuring the financial integrity of swaps entered on or through the facilities of the swap execution facility, including the clearance and settlement of the swaps pursuant to section 2(h)(1).
‘(8) EMERGENCY AUTHORITY- The swap execution facility shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission, as is necessary and appropriate, including the authority to liquidate or transfer open positions in any swap or to suspend or curtail trading in a swap.
‘(9) TIMELY PUBLICATION OF TRADING INFORMATION-
‘(A) IN GENERAL- The swap execution facility shall make public timely information on price, trading volume, and other trading data on swaps to the extent prescribed by the Commission.
‘(B) CAPACITY OF SWAP EXECUTION FACILITY- The swap execution facility shall be required to have the capacity to electronically capture and transmit trade information with respect to transactions executed on the facility.
‘(10) RECORDKEEPING AND REPORTING-
‘(A) IN GENERAL- A swap execution facility shall--
‘(i) maintain records of all activities relating to the business of the facility, including a complete audit trail, in a form and manner acceptable to the Commission for a period of 5 years;
‘(ii) report to the Commission, in a form and manner acceptable to the Commission, such information as the Commission determines to be necessary or appropriate for the Commission to perform the duties of the Commission under this Act; and
‘(iii) shall keep any such records relating to swaps defined in section 1a(47)(A)(v) open to inspection and examination by the Securities and Exchange Commission.’
‘(B) REQUIREMENTS- The Commission shall adopt data collection and reporting requirements for swap execution facilities that are comparable to corresponding requirements for derivatives clearing organizations and swap data repositories.
‘(11) ANTITRUST CONSIDERATIONS- Unless necessary or appropriate to achieve the purposes of this Act, the swap execution facility shall not--
‘(A) adopt any rules or taking any actions that result in any unreasonable restraint of trade; or
‘(B) impose any material anticompetitive burden on trading or clearing.
‘(12) CONFLICTS OF INTEREST- The swap execution facility shall--
‘(A) establish and enforce rules to minimize conflicts of interest in its decision-making process; and
‘(B) establish a process for resolving the conflicts of interest.
‘(13) FINANCIAL RESOURCES-
‘(A) IN GENERAL- The swap execution facility shall have adequate financial, operational, and managerial resources to discharge each responsibility of the swap execution facility.
‘(B) DETERMINATION OF RESOURCE ADEQUACY- The financial resources of a swap execution facility shall be considered to be adequate if the value of the financial resources exceeds the total amount that would enable the swap execution facility to cover the operating costs of the swap execution facility for a 1-year period, as calculated on a rolling basis.
‘(14) SYSTEM SAFEGUARDS- The swap execution facility shall--
‘(A) establish and maintain a program of risk analysis and oversight to identify and minimize sources of operational risk, through the development of appropriate controls and procedures, and automated systems, that--
‘(i) are reliable and secure; and
‘(ii) have adequate scalable capacity;
‘(B) establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allow for--
‘(i) the timely recovery and resumption of operations; and
‘(ii) the fulfillment of the responsibilities and obligations of the swap execution facility; and
‘(C) periodically conduct tests to verify that the backup resources of the swap execution facility are sufficient to ensure continued--
‘(i) order processing and trade matching;
‘(ii) price reporting;
‘(iii) market surveillance and
‘(iv) maintenance of a comprehensive and accurate audit trail.
‘(15) DESIGNATION OF CHIEF COMPLIANCE OFFICER-
‘(A) IN GENERAL- Each swap execution facility 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 facility;
‘(ii) review compliance with the core principles in this subsection;
‘(iii) in consultation with the board of the facility, a body performing a function similar to that of a board, or the senior officer of the facility, resolve any conflicts of interest that may arise;
‘(iv) be responsible for establishing and administering the policies and procedures required to be established pursuant to this section;
‘(v) ensure compliance with this Act and the rules and regulations issued under this Act, including rules prescribed by the Commission pursuant to this section; and
‘(vi) establish procedures for the remediation of noncompliance issues found during compliance office reviews, look backs, internal or external audit findings, self-reported errors, or through validated complaints.
‘(C) REQUIREMENTS FOR PROCEDURES- In establishing procedures under subparagraph (B)(vi), the chief compliance officer shall design the procedures to establish the handling, management response, remediation, retesting, and closing of noncompliance issues.
‘(D) 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 swap execution facility with this Act; and
‘(II) the policies and procedures, including the code of ethics and conflict of interest policies, of the swap execution facility.
‘(ii) REQUIREMENTS- The chief compliance officer shall--
‘(I) submit each report described in clause (i) with the appropriate financial report of the swap execution facility that is required to be submitted to the Commission pursuant to this section; and
‘(II) include in the report a certification that, under penalty of law, the report is accurate and complete.
‘(g) Exemptions- The Commission may exempt, conditionally or unconditionally, a swap execution facility from registration under this section if the Commission finds that the facility is subject to comparable, comprehensive supervision and regulation on a consolidated basis by the Securities and Exchange Commission, a prudential regulator, or the appropriate governmental authorities in the home country of the facility.
‘(h) Rules- The Commission shall prescribe rules governing the regulation of alternative swap execution facilities under this section.’.
SEC. 734. DERIVATIVES TRANSACTION EXECUTION FACILITIES AND EXEMPT BOARDS OF TRADE.
(a) In General- Sections 5a and 5d of the Commodity Exchange Act (7 U.S.C. 7a, 7a-3) are repealed.
(b) Conforming Amendments-
(1) Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is amended--
(A) in subsection (a)(1)(A), in the first sentence, by striking ‘or 5a’; and
(B) in paragraph (2) of subsection (g) (as redesignated by section 723(a)(1)(B)), by striking ‘section 5a of this Act’ and all that follows through ‘5d of this Act’ and inserting ‘section 5b of this Act’.
(2) Section 6(g)(1)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(g)(1)(A)) is amended--
(A) by striking ‘that--’ and all that follows through ‘(i) has been designated’ and inserting ‘that has been designated’;
(B) by striking ‘; or’ and inserting ‘; and’ and
(C) by striking clause (ii).
(c) Ability to Petition Commission-
(1) IN GENERAL- Prior to the final effective dates in this title, a person may petition the Commodity Futures Trading Commission to remain subject to the provisions of section 5d of the Commodity Exchange Act, as such provisions existed prior to the effective date of this subtitle.
(2) CONSIDERATION OF PETITION- The Commodity Futures Trading Commission shall consider any petition submitted under paragraph (1) in a prompt manner and may allow a person to continue operating subject to the provisions of section 5d of the Commodity Exchange Act for up to 1 year after the effective date of this subtitle.
SEC. 735. DESIGNATED CONTRACT MARKETS.
(a) Criteria for Designation- Section 5 of the Commodity Exchange Act (7 U.S.C. 7) is amended by striking subsection (b).
(b) Core Principles for Contract Markets- Section 5 of the Commodity Exchange Act (7 U.S.C. 7) is amended by striking subsection (d) and inserting the following:
‘(d) Core Principles for Contract Markets-
‘(1) DESIGNATION AS CONTRACT MARKET-
‘(A) IN GENERAL- To be designated, and maintain a designation, as a contract market, a board of trade shall comply with--
‘(i) any core principle described in this subsection; and
‘(ii) any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5).
‘(B) REASONABLE DISCRETION OF CONTRACT MARKET- Unless otherwise determined by the Commission by rule or regulation, a board of trade described in subparagraph (A) shall have reasonable discretion in establishing the manner in which the board of trade complies with the core principles described in this subsection.
‘(2) COMPLIANCE WITH RULES-
‘(A) IN GENERAL- The board of trade shall establish, monitor, and enforce compliance with the rules of the contract market, including--
‘(i) access requirements;
‘(ii) the terms and conditions of any contracts to be traded on the contract market; and
‘(iii) rules prohibiting abusive trade practices on the contract market.
‘(B) CAPACITY OF CONTRACT MARKET- The board of trade shall have the capacity to detect, investigate, and apply appropriate sanctions to any person that violates any rule of the contract market.
‘(C) REQUIREMENT OF RULES- The rules of the contract market shall provide the board of trade with the ability and authority to obtain any necessary information to perform any function described in this subsection, including the capacity to carry out such international information-sharing agreements as the Commission may require.
‘(3) CONTRACTS NOT READILY SUBJECT TO MANIPULATION- The board of trade shall list on the contract market only contracts that are not readily susceptible to manipulation.
‘(4) PREVENTION OF MARKET DISRUPTION- The board of trade shall have the capacity and responsibility to prevent manipulation, price distortion, and disruptions of the delivery or cash-settlement process through market surveillance, compliance, and enforcement practices and procedures, including--
‘(A) methods for conducting real-time monitoring of trading; and
‘(B) comprehensive and accurate trade reconstructions.
‘(5) POSITION LIMITATIONS OR ACCOUNTABILITY-
‘(A) IN GENERAL- To reduce the potential threat of market manipulation or congestion (especially during trading in the delivery month), the board of trade shall adopt for each contract of the board of trade, as is necessary and appropriate, position limitations or position accountability for speculators.
‘(B) MAXIMUM ALLOWABLE POSITION LIMITATION- For any contract that is subject to a position limitation established by the Commission pursuant to section 4a(a), the board of trade shall set the position limitation of the board of trade at a level not higher than the position limitation established by the Commission.
‘(6) EMERGENCY AUTHORITY- The board of trade, in consultation or cooperation with the Commission, shall adopt rules to provide for the exercise of emergency authority, as is necessary and appropriate, including the authority--
‘(A) to liquidate or transfer open positions in any contract;
‘(B) to suspend or curtail trading in any contract; and
‘(C) to require market participants in any contract to meet special margin requirements.
‘(7) AVAILABILITY OF GENERAL INFORMATION- The board of trade shall make available to market authorities, market participants, and the public accurate information concerning--
‘(A) the terms and conditions of the contracts of the contract market; and
‘(B)(i) the rules, regulations, and mechanisms for executing transactions on or through the facilities of the contract market; and
‘(ii) the rules and specifications describing the operation of the contract market’s--
‘(I) electronic matching platform; or
‘(II) trade execution facility.
‘(8) DAILY PUBLICATION OF TRADING INFORMATION- The board of trade shall make public daily information on settlement prices, volume, open interest, and opening and closing ranges for actively traded contracts on the contract market.
‘(9) EXECUTION OF TRANSACTIONS-
‘(A) IN GENERAL- The board of trade shall provide a competitive, open, and efficient market and mechanism for executing transactions that protects the price discovery process of trading in the centralized market of the board of trade.
‘(B) RULES- The rules of the board of trade may authorize, for bona fide business purposes--
‘(i) transfer trades or office trades;
‘(ii) an exchange of--
‘(I) futures in connection with a cash commodity transaction;
‘(II) futures for cash commodities; or
‘(III) futures for swaps; or
‘(iii) a futures commission merchant, acting as principal or agent, to enter into or confirm the execution of a contract for the purchase or sale of a commodity for future delivery if the contract is reported, recorded, or cleared in accordance with the rules of the contract market or a derivatives clearing organization.
‘(10) TRADE INFORMATION- The board of trade shall maintain rules and procedures to provide for the recording and safe storage of all identifying trade information in a manner that enables the contract market to use the information--
‘(A) to assist in the prevention of customer and market abuses; and
‘(B) to provide evidence of any violations of the rules of the contract market.
‘(11) FINANCIAL INTEGRITY OF TRANSACTIONS- The board of trade shall establish and enforce--
‘(A) rules and procedures for ensuring the financial integrity of transactions entered into on or through the facilities of the contract market (including the clearance and settlement of the transactions with a derivatives clearing organization); and
‘(B) rules to ensure--
‘(i) the financial integrity of any--
‘(I) futures commission merchant; and
‘(II) introducing broker; and
‘(ii) the protection of customer funds.
‘(12) PROTECTION OF MARKETS AND MARKET PARTICIPANTS- The board of trade shall establish and enforce rules--
‘(A) to protect markets and market participants from abusive practices committed by any party, including abusive practices committed by a party acting as an agent for a participant; and
‘(B) to promote fair and equitable trading on the contract market.
‘(13) DISCIPLINARY PROCEDURES- The board of trade shall establish and enforce disciplinary procedures that authorize the board of trade to discipline, suspend, or expel members or market participants that violate the rules of the board of trade, or similar methods for performing the same functions, including delegation of the functions to third parties.
‘(14) DISPUTE RESOLUTION- The board of trade shall establish and enforce rules regarding, and provide facilities for alternative dispute resolution as appropriate for, market participants and any market intermediaries.
‘(15) GOVERNANCE FITNESS STANDARDS- The board of trade shall establish and enforce appropriate fitness standards for directors, members of any disciplinary committee, members of the contract market, and any other person with direct access to the facility (including any party affiliated with any person described in this paragraph).
‘(16) CONFLICTS OF INTEREST- The board of trade shall establish and enforce rules--
‘(A) to minimize conflicts of interest in the decision-making process of the contract market; and
‘(B) to establish a process for resolving conflicts of interest described in subparagraph (A).
‘(17) COMPOSITION OF GOVERNING BOARDS OF CONTRACT MARKETS- The governance arrangements of the board of trade shall be designed to permit consideration of the views of market participants.
‘(18) RECORDKEEPING- The board of trade shall maintain records of all activities relating to the business of the contract market--
‘(A) in a form and manner that is acceptable to the Commission; and
‘(B) for a period of at least 5 years.
‘(19) ANTITRUST CONSIDERATIONS- Unless necessary or appropriate to achieve the purposes of this Act, the board of trade shall not--
‘(A) adopt any rule or taking any action that results in any unreasonable restraint of trade; or
‘(B) impose any material anticompetitive burden on trading on the contract market.
‘(20) SYSTEM SAFEGUARDS- The board of trade shall--
‘(A) establish and maintain a program of risk analysis and oversight to identify and minimize sources of operational risk, through the development of appropriate controls and procedures, and the development of automated systems, that are reliable, secure, and have adequate scalable capacity;
‘(B) establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allow for the timely recovery and resumption of operations and the fulfillment of the responsibilities and obligations of the board of trade; and
‘(C) periodically conduct tests to verify that backup resources are sufficient to ensure continued order processing and trade matching, price reporting, market surveillance, and maintenance of a comprehensive and accurate audit trail.
‘(21) FINANCIAL RESOURCES-
‘(A) IN GENERAL- The board of trade shall have adequate financial, operational, and managerial resources to discharge each responsibility of the board of trade.
‘(B) DETERMINATION OF ADEQUACY- The financial resources of the board of trade shall be considered to be adequate if the value of the financial resources exceeds the total amount that would enable the contract market to cover the operating costs of the contract market for a 1-year period, as calculated on a rolling basis.
‘(22) DIVERSITY OF BOARD OF DIRECTORS- The board of trade, if a publicly traded company, shall endeavor to recruit individuals to serve on the board of directors and the other decision-making bodies (as determined by the Commission) of the board of trade from among, and to have the composition of the bodies reflect, a broad and culturally diverse pool of qualified candidates.
‘(23) SECURITIES AND EXCHANGE COMMISSION- The board of trade shall keep any such records relating to swaps defined in section 1a(47)(A)(v) open to inspection and examination by the Securities and Exchange Commission.’.
SEC. 736. MARGIN.
Section 8a(7) of the Commodity Exchange Act (7 U.S.C. 12a(7)) is amended--
(1) in subparagraph (C), by striking ‘, excepting the setting of levels of margin’;
(2) by redesignating subparagraphs (D) through (F) as subparagraphs (E) through (G), respectively; and
(3) by inserting after subparagraph (C) the following:
‘(D) margin requirements, provided that the rules, regulations, or orders shall--
‘(i) be limited to protecting the financial integrity of the derivatives clearing organization;
‘(ii) be designed for risk management purposes to protect the financial integrity of transactions; and
‘(iii) not set specific margin amounts;’.
SEC. 737. POSITION LIMITS.
(a) Aggregate Position Limits- Section 4a(a) of the Commodity Exchange Act (7 U.S.C. 6a(a)) is amended--
(1) by inserting after ‘(a)’ the following:
‘(1) IN GENERAL- ’;
(2) in the first sentence, by striking ‘on electronic trading facilities with respect to a significant price discovery contract’ and inserting ‘swaps that perform or affect a significant price discovery function with respect to registered entities’;
(3) in the second sentence--
(A) by inserting ‘, including any group or class of traders,’ after ‘held by any person’; and
(B) by striking ‘on an electronic trading facility with respect to a significant price discovery contract,’ and inserting ‘swaps traded on or subject to the rules of a designated contract market or a swap execution facility, or swaps not traded on or subject to the rules of a designated contract market or a swap execution facility that performs a significant price discovery function with respect to a registered entity,’; and
(4) by adding at the end the following:
‘(2) ESTABLISHMENT OF LIMITATIONS-
‘(A) IN GENERAL- In accordance with the standards set forth in paragraph (1) of this subsection and consistent with the good faith exception cited in subsection (b)(2), with respect to physical commodities other than excluded commodities as defined by the Commission, the Commission shall by rule, regulation, or order establish limits on the amount of positions, as appropriate, other than bona fide hedge positions, that may be held by any person with respect to contracts of sale for future delivery or with respect to options on the contracts or commodities traded on or subject to the rules of a designated contract market.
‘(B) TIMING-
‘(i) EXEMPT COMMODITIES- For exempt commodities, the limits required under subparagraph (A) shall be established within 180 days after the date of the enactment of this paragraph.
‘(ii) AGRICULTURAL COMMODITIES- For agricultural commodities, the limits required under subparagraph (A) shall be established within 270 days after the date of the enactment of this paragraph.
‘(C) GOAL- In establishing the limits required under subparagraph (A), the Commission shall strive to ensure that trading on foreign boards of trade in the same commodity will be subject to comparable limits and that any limits to be imposed by the Commission will not cause price discovery in the commodity to shift to trading on the foreign boards of trade.
‘(3) SPECIFIC LIMITATIONS- In establishing the limits required in paragraph (2), the Commission, as appropriate, shall set limits--
‘(A) on the number of positions that may be held by any person for the spot month, each other month, and the aggregate number of positions that may be held by any person for all months; and
‘(B) to the maximum extent practicable, in its discretion--
‘(i) to diminish, eliminate, or prevent excessive speculation as described under this section;
‘(ii) to deter and prevent market manipulation, squeezes, and corners;
‘(iii) to ensure sufficient market liquidity for bona fide hedgers; and
‘(iv) to ensure that the price discovery function of the underlying market is not disrupted.
‘(4) SIGNIFICANT PRICE DISCOVERY FUNCTION- In making a determination whether a swap performs or affects a significant price discovery function with respect to regulated markets, the Commission shall consider, as appropriate:
‘(A) PRICE LINKAGE- The extent to which the swap uses or otherwise relies on a daily or final settlement price, or other major price parameter, of another contract traded on a regulated market based upon the same underlying commodity, to value a position, transfer or convert a position, financially settle a position, or close out a position.
‘(B) ARBITRAGE- The extent to which the price for the swap is sufficiently related to the price of another contract traded on a regulated market based upon the same underlying commodity so as to permit market participants to effectively arbitrage between the markets by simultaneously maintaining positions or executing trades in the swaps on a frequent and recurring basis.
‘(C) MATERIAL PRICE REFERENCE- The extent to which, on a frequent and recurring basis, bids, offers, or transactions in a contract traded on a regulated market are directly based on, or are determined by referencing, the price generated by the swap.
‘(D) MATERIAL LIQUIDITY- The extent to which the volume of swaps being traded in the commodity is sufficient to have a material effect on another contract traded on a regulated market.
‘(E) OTHER MATERIAL FACTORS- Such other material factors as the Commission specifies by rule or regulation as relevant to determine whether a swap serves a significant price discovery function with respect to a regulated market.
‘(5) ECONOMICALLY EQUIVALENT CONTRACTS-
‘(A) Notwithstanding any other provision of this section, the Commission shall establish limits on the amount of positions, including aggregate position limits, as appropriate, other than bona fide hedge positions, that may be held by any person with respect to swaps that are economically equivalent to contracts of sale for future delivery or to options on the contracts or commodities traded on or subject to the rules of a designated contract market subject to paragraph (2).
‘(B) In establishing limits pursuant to subparagraph (A), the Commission shall--
‘(i) develop the limits concurrently with limits established under paragraph (2), and the limits shall have similar requirements as under paragraph (3)(B); and
‘(ii) establish the limits simultaneously with limits established under paragraph (2).
‘(6) AGGREGATE POSITION LIMITS- The Commission shall, by rule or regulation, establish limits (including related hedge exemption provisions) on the aggregate number or amount of positions in contracts based upon the same underlying commodity (as defined by the Commission) that may be held by any person, including any group or class of traders, for each month across--
‘(A) contracts listed by designated contract markets;
‘(B) with respect to an agreement contract, or transaction that settles against any price (including the daily or final settlement price) of 1 or more contracts listed for trading on a registered entity, contracts traded on a foreign board of trade that provides members or other participants located in the United States with direct access to its electronic trading and order matching system; and
‘(C) swap contracts that perform or affect a significant price discovery function with respect to regulated entities.
‘(7) EXEMPTIONS- The Commission, by rule, regulation, or order, may exempt, conditionally or unconditionally, any person or class of persons, any swap or class of swaps, any contract of sale of a commodity for future delivery or class of such contracts, any option or class of options, or any transaction or class of transactions from any requirement it may establish under this section with respect to position limits.’.
(b) Conforming Amendments- Section 4a(b) of the Commodity Exchange Act (7 U.S.C. 6a(b)) is amended--
(1) in paragraph (1), by striking ‘or derivatives transaction execution facility or facilities or electronic trading facility’ and inserting ‘or swap execution facility or facilities’; and
(2) in paragraph (2), by striking ‘or derivatives transaction execution facility or facilities or electronic trading facility’ and inserting ‘or swap execution facility’.
(c) Bona Fide Hedging Transaction- Section 4a(c) of the Commodity Exchange Act is amended--
(1) by inserting ‘(1)’ after ‘(c)’; and
(2) by adding at the end the following:
‘(2) For the purposes of implementation of subsection (a)(2) for contracts of sale for future delivery or options on the contracts or commodities, the Commission shall define what constitutes a bona fide hedging transaction or position as a transaction or position that--
‘(A)(i) represents a substitute for transactions made or to be made or positions taken or to be taken at a later time in a physical marketing channel;
‘(ii) is economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise; and
‘(iii) arises from the potential change in the value of--
‘(I) assets that a person owns, produces, manufactures, processes, or merchandises or anticipates owning, producing, manufacturing, processing, or merchandising;
‘(II) liabilities that a person owns or anticipates incurring; or
‘(III) services that a person provides, purchases, or anticipates providing or purchasing; or
‘(B) reduces risks attendant to a position resulting from a swap that--
‘(i) was executed opposite a counterparty for which the transaction would qualify as a bona fide hedging transaction pursuant to subparagraph (A); or
‘(ii) meets the requirements of subparagraph (A).’.
(d) Effective Date- This section and the amendments made by this section shall become effective on the date of the enactment of this section.
SEC. 738. FOREIGN BOARDS OF TRADE.
(a) In General- Section 4(b) of the Commodity Exchange Act (7 U.S.C. 6(b)) is amended--
(1) in the first sentence, by striking ‘The Commission’ and inserting the following:
‘(2) PERSONS LOCATED IN THE UNITED STATES-
‘(A) IN GENERAL- The Commission’;
(2) in the second sentence, by striking ‘Such rules and regulations’ and inserting the following:
‘(B) DIFFERENT REQUIREMENTS- Rules and regulations described in subparagraph (A)’;
(3) in the third sentence--
(A) by striking ‘No rule or regulation’ and inserting the following:
‘(C) PROHIBITION- Except as provided in paragraphs (1) and (2), no rule or regulation’;
(B) by striking ‘that (1) requires’ and inserting the following: ‘that--
‘(i) requires’; and
(C) by striking ‘market, or (2) governs’ and inserting the following: ‘market; or
‘(ii) governs’; and
(4) by inserting before paragraph (2) (as designated by paragraph (1)) the following:
‘(1) FOREIGN BOARDS OF TRADE-
‘(A) REGISTRATION- The Commission may adopt rules and regulations requiring registration with the Commission for a foreign board of trade that provides the members of the foreign board of trade or other participants located in the United States with direct access to the electronic trading and order matching system of the foreign board of trade, including rules and regulations prescribing procedures and requirements applicable to the registration of such foreign boards of trade. For purposes of this paragraph, ‘direct access’ refers to an explicit grant of authority by a foreign board of trade to an identified member or other participant located in the United States to enter trades directly into the trade matching system of the foreign board of trade. In adopting such rules and regulations, the commission shall consider--
‘(i) whether any such foreign board of trade is subject to comparable, comprehensive supervision and regulation by the appropriate governmental authorities in the foreign board of trade’s home country; and
‘(ii) any previous commission findings that the foreign board of trade is subject to comparable comprehensive supervision and regulation by the appropriate government authorities in the foreign board of trade’s home country.
‘(B) LINKED CONTRACTS- The Commission may not permit a foreign board of trade to provide to the members of the foreign board of trade or other participants located in the United States direct access to the electronic trading and order-matching system of the foreign board of trade with respect to an agreement, contract, or transaction that settles against any price (including the daily or final settlement price) of 1 or more contracts listed for trading on a registered entity, unless the Commission determines that--
‘(i) the foreign board of trade makes public daily trading information regarding the agreement, contract, or transaction that is comparable to the daily trading information published by the registered entity for the 1 or more contracts against which the agreement, contract, or transaction traded on the foreign board of trade settles; and
‘(ii) the foreign board of trade (or the foreign futures authority that oversees the foreign board of trade)--
‘(I) adopts position limits (including related hedge exemption provisions) for the agreement, contract, or transaction that are comparable to the position limits (including related hedge exemption provisions) adopted by the registered entity for the 1 or more contracts against which the agreement, contract, or transaction traded on the foreign board of trade settles;
‘(II) has the authority to require or direct market participants to limit, reduce, or liquidate any position the foreign board of trade (or the foreign futures authority that oversees the foreign board of trade) determines to be necessary to prevent or reduce the threat of price manipulation, excessive speculation as described in section 4a, price distortion, or disruption of delivery or the cash settlement process;
‘(III) agrees to promptly notify the Commission, with regard to the agreement, contract, or transaction that settles against any price (including the daily or final settlement price) of 1 or more contracts listed for trading on a registered entity, of any change regarding--
‘(aa) the information that the foreign board of trade will make publicly available;
‘(bb) the position limits that the foreign board of trade or foreign futures authority will adopt and enforce;
‘(cc) the position reductions required to prevent manipulation, excessive speculation as described in section 4a, price distortion, or disruption of delivery or the cash settlement process; and
‘(dd) any other area of interest expressed by the Commission to the foreign board of trade or foreign futures authority;
‘(IV) provides information to the Commission regarding large trader positions in the agreement, contract, or transaction that is comparable to the large trader position information collected by the Commission for the 1 or more contracts against which the agreement, contract, or transaction traded on the foreign board of trade settles; and
‘(V) provides the Commission such information as is necessary to publish reports on aggregate trader positions for the agreement, contract, or transaction traded on the foreign board of trade that are comparable to such reports on aggregate trader positions for the 1 or more contracts against which the agreement, contract, or transaction traded on the foreign board of trade settles.
‘(C) EXISTING FOREIGN BOARDS OF TRADE- Subparagraphs (A) and (B) shall not be effective with respect to any foreign board of trade to which, prior to the date of enactment of this paragraph, the Commission granted direct access permission until the date that is 180 days after that date of enactment.’.
(b) Liability of Registered Persons Trading on a Foreign Board of Trade- Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is amended--
(1) in subsection (a), in the matter preceding paragraph (1), by inserting ‘or by subsection (e)’ after ‘Unless exempted by the Commission pursuant to subsection (c)’; and
(2) by adding at the end the following:
‘(e) Liability of Registered Persons Trading on a Foreign Board of Trade-
‘(1) IN GENERAL- A person registered with the Commission, or exempt from registration by the Commission, under this Act may not be found to have violated subsection (a) with respect to a transaction in, or in connection with, a contract of sale of a commodity for future delivery if the person--
‘(A) has reason to believe that the transaction and the contract is made on or subject to the rules of a foreign board of trade that is--
‘(i) legally organized under the laws of a foreign country;
‘(ii) authorized to act as a board of trade by a foreign futures authority; and
‘(iii) subject to regulation by the foreign futures authority; and
‘(B) has not been determined by the Commission to be operating in violation of subsection (a).
‘(2) RULE OF CONSTRUCTION- Nothing in this subsection shall be construed as implying or creating any presumption that a board of trade, exchange, or market is located outside the United States, or its territories or possessions, for purposes of subsection (a).’.
(c) Contract Enforcement for Foreign Futures Contracts- Section 22(a) of the Commodity Exchange Act (7 U.S.C. 25(a)) (as amended by section 739) is amended by adding at the end the following:
‘(6) Contract Enforcement for Foreign Futures Contracts- A contract of sale of a commodity for future delivery traded or executed on or through the facilities of a board of trade, exchange, or market located outside the United States for purposes of section 4(a) shall not be void, voidable, or unenforceable, and a party to such a contract shall not be entitled to rescind or recover any payment made with respect to the contract, based on the failure of the foreign board of trade to comply with any provision of this Act.’.
SEC. 739. LEGAL CERTAINTY FOR SWAPS.
Section 22(a) of the Commodity Exchange Act (7 U.S.C. 25(a)) is amended by striking paragraph (4) and inserting the following:
‘(4) Contract Enforcement Between Eligible Counterparties-
‘(A) IN GENERAL- No hybrid instrument sold to any investor shall be void, voidable, or unenforceable, and no party to a hybrid instrument shall be entitled to rescind, or recover any payment made with respect to, the hybrid instrument under this section or any other provision of Federal or State law, based solely on the failure of the hybrid instrument to comply with the terms or conditions of section 2(f) or regulations of the Commission.
‘(B) SWAPS- No agreement, contract, or transaction between eligible contract participants or persons reasonably believed to be eligible contract participants shall be void, voidable, or unenforceable, and no party to such agreement, contract, or transaction shall be entitled to rescind, or recover any payment made with respect to, the agreement, contract, or transaction under this section or any other provision of Federal or State law, based solely on the failure of the agreement, contract, or transaction--
‘(i) to meet the definition of a swap under section 1a; or
‘(ii) to be cleared in accordance with section 2(h)(1).
‘(5) Legal Certainty for Long-term Swaps Entered Into Before the Date of Enactment of the Wall Street Transparency and Accountability Act of 2010-
‘(A) EFFECT ON SWAPS- Unless specifically reserved in the applicable swap, neither the enactment of the Wall Street Transparency and Accountability Act of 2010, nor any requirement under that Act or an amendment made by that Act, shall constitute a termination event, force majeure, illegality, increased costs, regulatory change, or similar event under a swap (including any related credit support arrangement) that would permit a party to terminate, renegotiate, modify, amend, or supplement 1 or more transactions under the swap.
‘(B) POSITION LIMITS- Any position limit established under the Wall Street Transparency and Accountability Act of 2010 shall not apply to a position acquired in good faith prior to the effective date of any rule, regulation, or order under the Act that establishes the position limit; provided, however, that such positions shall be attributed to the trader if the trader’s position is increased after the effective date of such position limit rule, regulation, or order.’.
SEC. 740. MULTILATERAL CLEARING ORGANIZATIONS.
Sections 408 and 409 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4421, 4422) are repealed.
SEC. 741. ENFORCEMENT.
(a) Enforcement Authority- The Commodity Exchange Act is amended by inserting after section 4b (7 U.S.C. 6b) the following:
‘SEC. 4b-1. ENFORCEMENT AUTHORITY.
‘(a) Commodity Futures Trading Commission- Except as provided in subsections (b), (c), and (d), the Commission shall have exclusive authority to enforce the provisions of subtitle A 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 section 4s(e) with respect to swap dealers or major swap participants for which they are the prudential regulator.
‘(c) Referrals-
‘(1) PRUDENTIAL REGULATORS- If the prudential regulator for a swap dealer or major swap participant has cause to believe that the swap dealer or major swap participant, or any affiliate or division of the swap dealer or major swap participant, may have engaged in conduct that constitutes a violation of the nonprudential requirements of this Act (including section 4s or rules adopted by the Commission under that section), the prudential regulator may promptly notify the Commission in a written report that includes--
‘(A) a request that the Commission initiate an enforcement proceeding under this Act; and
‘(B) an explanation of the facts and circumstances that led to the preparation of the written report.
‘(2) COMMISSION- If the Commission has cause to believe that a swap dealer or major swap participant that has a prudential regulator may have engaged in conduct that constitutes a violation of any prudential requirement of section 4s or rules adopted by the Commission under that section, the Commission may notify the prudential regulator of the conduct in a written report that includes--
‘(A) a request that the prudential regulator initiate an enforcement proceeding under this Act or any other Federal law (including regulations); and
‘(B) an explanation of the concerns of the Commission, and a description of the facts and circumstances, that led to the preparation of the written report.
‘(d) Backstop Enforcement Authority-
‘(1) 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)(1), the prudential regulator may initiate an enforcement proceeding.
‘(2) 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)(2), the Commission may initiate an enforcement proceeding.’.
(b) Conforming Amendments-
(1) Section 4b of the Commodity Exchange Act (7 U.S.C. 6b) is amended--
(A) in subsection (a)(2), by striking ‘or other agreement, contract, or transaction subject to paragraphs (1) and (2) of section 5a(g),’ and inserting ‘or swap,’;
(B) in subsection (b), by striking ‘or other agreement, contract or transaction subject to paragraphs (1) and (2) of section 5a(g),’ and inserting ‘or swap,’; and
(C) by adding at the end the following:
‘(e) It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any registered entity, in or in connection with any order to make, or the making of, any contract of sale of any commodity for future delivery (or option on such a contract), or any swap, on a group or index of securities (or any interest therein or based on the value thereof)--
‘(1) to employ any device, scheme, or artifice to defraud;
‘(2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
‘(3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.’.
(2) Section 4c(a)(1) of the Commodity Exchange Act (7 U.S.C. 6c(a)(1)) is amended by inserting ‘or swap’ before ‘if the transaction is used or may be used’.
(3) Section 6(c) of the Commodity Exchange Act (7 U.S.C. 9) is amended in the first sentence by inserting ‘or of any swap,’ before ‘or has willfully made’.
(4) Section 6(d) of the Commodity Exchange Act (7 U.S.C. 13b) is amended in the first sentence, in the matter preceding the proviso, by inserting ‘or of any swap,’ before ‘or otherwise is violating’.
(5) Section 6c(a) of the Commodity Exchange Act (7 U.S.C. 13a-1(a)) is amended in the matter preceding the proviso by inserting ‘or any swap’ after ‘commodity for future delivery’.
(6) Section 9 of the Commodity Exchange Act (7 U.S.C. 13) is amended--
(A) in subsection (a)--
(i) in paragraph (2), by inserting ‘or of any swap,’ before ‘or to corner’; and
(ii) in paragraph (4), by inserting ‘swap data repository,’ before ‘or futures association’ and
(B) in subsection (e)(1)--
(i) by inserting ‘swap data repository,’ before ‘or registered futures association’; and
(ii) by inserting ‘, or swaps,’ before ‘on the basis’.
(7) Section 9(a) of the Commodity Exchange Act (7 U.S.C. 13(a)) is amended by adding at the end the following:
‘(6) Any person to abuse the end user clearing exemption under section 2(h)(4), as determined by the Commission.’.
(8) Section 2(c)(2)(B) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(B)) is amended--
(A) by striking ‘(dd),’ each place it appears;
(B) in clause (iii), by inserting ‘, and accounts or pooled investment vehicles described in clause (vi),’ before ‘shall be subject to’; and
(C) by adding at the end the following:
‘(vi) This Act applies to, and the Commission shall have jurisdiction over, an account or pooled investment vehicle that is offered for the purpose of trading, or that trades, any agreement, contract, or transaction in foreign currency described in clause (i).’.
(9) Section 2(c)(2)(C) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(C)) is amended--
(A) by striking ‘(dd),’ each place it appears;
(B) in clause (ii)(I), by inserting ‘, and accounts or pooled investment vehicles described in clause (vii),’ before ‘shall be subject to’; and
(C) by adding at the end the following:
‘(vii) This Act applies to, and the Commission shall have jurisdiction over, an account or pooled investment vehicle that is offered for the purpose of trading, or that trades, any agreement, contract, or transaction in foreign currency described in clause (i).’.
(10) Section 1a(19)(A)(iv)(II) of the Commodity Exchange Act (7 U.S.C. 1a(19)(A)(iv)(II)) (as redesignated by section 721(a)(1)) is amended by inserting before the semicolon at the end the following: ‘provided, however, that for purposes of section 2(c)(2)(B)(vi) and section 2(c)(2)(C)(vii), the term ‘eligible contract participant’ shall not include a commodity pool in which any participant is not otherwise an eligible contract participant’.
(11) Section 6(e) of the Commodity Exchange Act (7 U.S.C. 9a) is amended by adding at the end the following:
‘(4) Any designated clearing organization that knowingly or recklessly evades or participates in or facilitates an evasion of the requirements of section 2(h) shall be liable for a civil money penalty in twice the amount otherwise available for a violation of section 2(h).
‘(5) Any swap dealer or major swap participant that knowingly or recklessly evades or participates in or facilitates an evasion of the requirements of section 2(h) shall be liable for a civil money penalty in twice the amount otherwise available for a violation of section 2(h).’.
(c) Savings Clause- Notwithstanding any other provision of this title, nothing in this subtitle shall be construed as divesting any appropriate Federal banking agency of any authority it may have to establish or enforce, with respect to a person for which such agency is the appropriate Federal banking agency, prudential or other standards pursuant to authority granted by Federal law other than this title.
SEC. 742. RETAIL COMMODITY TRANSACTIONS.
(a) In General- Section 2(c) of the Commodity Exchange Act (7 U.S.C. 2(c)) is amended--
(1) in paragraph (1), by striking ‘5a (to the extent provided in section 5a(g)), 5b, 5d, or 12(e)(2)(B))’ and inserting ‘, 5b, or 12(e)(2)(B))’; and
(2) in paragraph (2), by adding at the end the following:
‘(D) RETAIL COMMODITY TRANSACTIONS-
‘(i) APPLICABILITY- Except as provided in clause (ii), this subparagraph shall apply to any agreement, contract, or transaction in any commodity that is--
‘(I) entered into with, or offered to (even if not entered into with), a person that is not an eligible contract participant or eligible commercial entity; and
‘(II) entered into, or offered (even if not entered into), on a leveraged or margined basis, or financed by the offeror, the counterparty, or a person acting in concert with the offeror or counterparty on a similar basis.
‘(ii) EXCEPTIONS- This subparagraph shall not apply to--
‘(I) an agreement, contract, or transaction described in paragraph (1) or subparagraphs (A), (B), or (C), including any agreement, contract, or transaction specifically excluded from subparagraph (A), (B), or (C);
‘(II) any security;
‘(III) a contract of sale that--
‘(aa) results in actual delivery within 28 days or such other longer period as the Commission may determine by rule or regulation based upon the typical commercial practice in cash or spot markets for the commodity involved; or
‘(bb) creates an enforceable obligation to deliver between a seller and a buyer that have the ability to deliver and accept delivery, respectively, in connection with the line of business of the seller and buyer; or
‘(IV) an agreement, contract, or transaction that is listed on a national securities exchange registered under section 6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)); or
‘(V) an identified banking product, as defined in section 402(b) of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C.27(b)).
‘(iii) ENFORCEMENT- Sections 4(a), 4(b), and 4b apply to any agreement, contract, or transaction described in clause (i), as if the agreement, contract, or transaction was a contract of sale of a commodity for future delivery.
‘(iv) ELIGIBLE COMMERCIAL ENTITY- For purposes of this subparagraph, an agricultural producer, packer, or handler shall be considered to be an eligible commercial entity for any agreement, contract, or transaction for a commodity in connection with the line of business of the agricultural producer, packer, or handler.’.
(b) Gramm-Leach-Bliley Act- Section 206(a) of the Gramm-Leach-Bliley Act (Public Law 106-102; 15 U.S.C. 78c note) is amended, in the matter preceding paragraph (1), by striking ‘For purposes of’ and inserting ‘Except as provided in subsection (e), for purposes of’.
(c) Conforming Amendments Relating to Retail Foreign Exchange Transactions-
(1) Section 2(c)(2)(B)(i)(II) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(B)(i)(II)) is amended--
(A) in item (aa), by inserting ‘United States’ before ‘financial institution’;
(B) by striking items (dd) and (ff);
(C) by redesignating items (ee) and (gg) as items (dd) and (ff), respectively; and
(D) in item (dd) (as so redesignated), by striking the semicolon and inserting ‘; or’.
(2) Section 2(c)(2) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)) (as amended by subsection (a)(2)) is amended by adding at the end the following:
‘(E) PROHIBITION-
‘(i) DEFINITION OF FEDERAL REGULATORY AGENCY- In this subparagraph, the term ‘Federal regulatory agency’ means--
‘(I) the Commission;
‘(II) the Securities and Exchange Commission;
‘(III) an appropriate Federal banking agency;
‘(IV) the National Credit Union Association; and
‘(V) the Farm Credit Administration.
‘(ii) PROHIBITION-
‘(I) IN GENERAL- Except as provided in subclause (II), a person described in subparagraph (B)(i)(II) for which there is a Federal regulatory agency shall not offer to, or enter into with, a person that is not an eligible contract participant, any agreement, contract, or transaction in foreign currency described in subparagraph (B)(i)(I) except pursuant to a rule or regulation of a Federal regulatory agency allowing the agreement, contract, or transaction under such terms and conditions as the Federal regulatory agency shall prescribe.
‘(II) EFFECTIVE DATE- With regard to persons described in subparagraph (B)(i)(II) for which a Federal regulatory agency has issued a proposed rule concerning agreements, contracts, or transactions in foreign currency described in subparagraph (B)(i)(I) prior to the date of enactment of this subclause, subclause (I) shall take effect 90 days after the date of enactment of this subclause.
‘(iii) REQUIREMENTS OF RULES AND REGULATIONS-
‘(I) IN GENERAL- The rules and regulations described in clause (ii) shall prescribe appropriate requirements with respect to--
‘(aa) disclosure;
‘(bb) recordkeeping;
‘(cc) capital and margin;
‘(dd) reporting;
‘(ee) business conduct;
‘(ff) documentation; and
‘(gg) such other standards or requirements as the Federal regulatory agency shall determine to be necessary.
‘(II) TREATMENT- The rules or regulations described in clause (ii) shall treat all agreements, contracts, and transactions in foreign currency described in subparagraph (B)(i)(I), and all agreements, contracts, and transactions in foreign currency that are functionally or economically similar to agreements, contracts, or transactions described in subparagraph (B)(i)(I), similarly.’.
SEC. 743. OTHER AUTHORITY.
Unless otherwise provided by the amendments made by this subtitle, the amendments made by this subtitle do not divest any appropriate Federal banking agency, the Commodity Futures Trading Commission, the Securities and Exchange Commission, or other Federal or State agency of any authority derived from any other applicable law.
SEC. 744. RESTITUTION REMEDIES.
Section 6c(d) of the Commodity Exchange Act (7 U.S.C. 13a-1(d)) is amended by adding at the end the following:
‘(3) EQUITABLE REMEDIES- In any action brought under this section, the Commission may seek, and the court may impose, on a proper showing, on any person found in the action to have committed any violation, equitable remedies including--
‘(A) restitution to persons who have sustained losses proximately caused by such violation (in the amount of such losses); and
‘(B) disgorgement of gains received in connection with such violation.’.
SEC. 745. ENHANCED COMPLIANCE BY REGISTERED ENTITIES.
(a) Effect of Interpretation- Section 5c(a) of the Commodity Exchange Act (7 U.S.C. 7a-2(a)) is amended by striking paragraph (2) and inserting the following:
‘(2) EFFECT OF INTERPRETATION- An interpretation issued under paragraph (1) may provide the exclusive means for complying with each section described in paragraph (1).’.
(b) New Contracts, New Rules, and Rule Amendments- Section 5c of the Commodity Exchange Act (7 U.S.C. 7a-2) is amended by striking subsection (c) and inserting the following:
‘(c) New Contracts, New Rules, and Rule Amendments-
‘(1) IN GENERAL- A registered entity may elect to list for trading or accept for clearing any new contract, or other instrument, or may elect to approve and implement any new rule or rule amendment, by providing to the Commission (and the Secretary of the Treasury, in the case of a contract of sale of a government security for future delivery (or option on such a contract) or a rule or rule amendment specifically related to such a contract) a written certification that the new contract or instrument or clearing of the new contract or instrument, new rule, or rule amendment complies with this Act (including regulations under this Act).
‘(2) RULE REVIEW- The new rule or rule amendment described in paragraph (1) shall become effective, pursuant to the certification of the registered entity and notice of such certification to its members (in a manner to be determined by the Commission), on the date that is 10 business days after the date on which the Commission receives the certification (or such shorter period as determined by the Commission by rule or regulation) unless the Commission notifies the registered entity within such time that it is staying the certification because there exist novel or complex issues that require additional time to analyze, an inadequate explanation by the submitting registered entity, or a potential inconsistency with this Act (including regulations under this Act).
‘(3) STAY OF CERTIFICATION FOR RULES-
‘(A) A notification by the Commission pursuant to paragraph (2) shall stay the certification of the new rule or rule amendment for up to an additional 90 days from the date of the notification.
‘(B) A rule or rule amendment subject to a stay pursuant to subparagraph (A) shall become effective, pursuant to the certification of the registered entity, at the expiration of the period described in subparagraph (A) unless the Commission--
‘(i) withdraws the stay prior to that time; or
‘(ii) notifies the registered entity during such period that it objects to the proposed certification on the grounds that it is inconsistent with this Act (including regulations under this Act).
‘(C) The Commission shall provide a not less than 30-day public comment period, within the 90-day period in which the stay is in effect as described in subparagraph (A), whenever the Commission reviews a rule or rule amendment pursuant to a notification by the Commission under this paragraph.
‘(4) PRIOR APPROVAL-
‘(A) IN GENERAL- A registered entity may request that the Commission grant prior approval to any new contract or other instrument, new rule, or rule amendment.
‘(B) PRIOR APPROVAL REQUIRED- Notwithstanding any other provision of this section, a designated contract market shall submit to the Commission for prior approval each rule amendment that materially changes the terms and conditions, as determined by the Commission, in any contract of sale for future delivery of a commodity specifically enumerated in section 1a(10) (or any option thereon) traded through its facilities if the rule amendment applies to contracts and delivery months which have already been listed for trading and have open interest.
‘(C) DEADLINE- If prior approval is requested under subparagraph (A), the Commission shall take final action on the request not later than 90 days after submission of the request, unless the person submitting the request agrees to an extension of the time limitation established under this subparagraph.
‘(5) APPROVAL-
‘(A) RULES- The Commission shall approve a new rule, or rule amendment, of a registered entity unless the Commission finds that the new rule, or rule amendment, is inconsistent with this subtitle (including regulations).
‘(B) CONTRACTS AND INSTRUMENTS- The Commission shall approve a new contract or other instrument unless the Commission finds that the new contract or other instrument would violate this Act (including regulations).
‘(C) SPECIAL RULE FOR REVIEW AND APPROVAL OF EVENT CONTRACTS AND SWAPS CONTRACTS-
‘(i) EVENT CONTRACTS- In connection with the listing of agreements, contracts, transactions, or swaps in excluded commodities that are based upon the occurrence, extent of an occurrence, or contingency (other than a change in the price, rate, value, or levels of a commodity described in section 1a(2)(i)), by a designated contract market or swap execution facility, the Commission may determine that such agreements, contracts, or transactions are contrary to the public interest if the agreements, contracts, or transactions involve--
‘(I) activity that is unlawful under any Federal or State law;
‘(II) terrorism;
‘(III) assassination;
‘(IV) war;
‘(V) gaming; or
‘(VI) other similar activity determined by the Commission, by rule or regulation, to be contrary to the public interest.
‘(ii) PROHIBITION- No agreement, contract, or transaction determined by the Commission to be contrary to the public interest under clause (i) may be listed or made available for clearing or trading on or through a registered entity.
‘(iii) SWAPS CONTRACTS-
‘(I) IN GENERAL- In connection with the listing of a swap for clearing by a derivatives clearing organization, the Commission shall determine, upon request or on its own motion, the initial eligibility, or the continuing qualification, of a derivatives clearing organization to clear such a swap under those criteria, conditions, or rules that the Commission, in its discretion, determines.
‘(II) REQUIREMENTS- Any such criteria, conditions, or rules shall consider--
‘(aa) the financial integrity of the derivatives clearing organization; and
‘(bb) any other factors which the Commission determines may be appropriate.
‘(iv) DEADLINE- The Commission shall take final action under clauses (i) and (ii) in not later than 90 days from the commencement of its review unless the party seeking to offer the contract or swap agrees to an extension of this time limitation.’.
(c) Violation of Core Principles- Section 5c of the Commodity Exchange Act (7 U.S.C. 7a-2) is amended by striking subsection (d).
SEC. 746. INSIDER TRADING.
Section 4c(a) of the Commodity Exchange Act (7 U.S.C. 6c(a)) is amended by adding at the end the following:
‘(3) CONTRACT OF SALE- It shall be unlawful for any employee or agent of any department or agency of the Federal Government who, by virtue of the employment or position of the employee or agent, acquires information that may affect or tend to affect the price of any commodity in interstate commerce, or for future delivery, or any swap, and which information has not been disseminated by the department or agency of the Federal Government holding or creating the information in a manner which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, to use the information in his personal capacity and for personal gain to enter into, or offer to enter into--
‘(A) a contract of sale of a commodity for future delivery (or option on such a contract);
‘(B) an option (other than an option executed or traded on a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)); or
‘(C) a swap.
‘(4) NONPUBLIC INFORMATION-
‘(A) IMPARTING OF NONPUBLIC INFORMATION- It shall be unlawful for any employee or agent of any department or agency of the Federal Government who, by virtue of the employment or position of the employee or agent, acquires information that may affect or tend to affect the price of any commodity in interstate commerce, or for future delivery, or any swap, and which information has not been disseminated by the department or agency of the Federal Government holding or creating the information in a manner which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, to impart the information in his personal capacity and for personal gain with intent to assist another person, directly or indirectly, to use the information to enter into, or offer to enter into--
‘(i) a contract of sale of a commodity for future delivery (or option on such a contract);
‘(ii) an option (other than an option executed or traded on a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)); or
‘(iii) a swap.
‘(B) KNOWING USE- It shall be unlawful for any person who receives information imparted by any employee or agent of any department or agency of the Federal Government as described in subparagraph (A) to knowingly use such information to enter into, or offer to enter into--
‘(i) a contract of sale of a commodity for future delivery (or option on such a contract);
‘(ii) an option (other than an option executed or traded on a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)); or
‘(iii) a swap.
‘(C) THEFT OF NONPUBLIC INFORMATION- It shall be unlawful for any person to steal, convert, or misappropriate, by any means whatsoever, information held or created by any department or agency of the Federal Government that may affect or tend to affect the price of any commodity in interstate commerce, or for future delivery, or any swap, where such person knows, or acts in reckless disregard of the fact, that such information has not been disseminated by the department or agency of the Federal Government holding or creating the information in a manner which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, and to use such information, or to impart such information with the intent to assist another person, directly or indirectly, to use such information to enter into, or offer to enter into--
‘(i) a contract of sale of a commodity for future delivery (or option on such a contract);
‘(ii) an option (other than an option executed or traded on a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)); or
‘(iii) a swap, provided, however, that nothing in this subparagraph shall preclude a person that has provided information concerning, or generated by, the person, its operations or activities, to any employee or agent of any department or agency of the Federal Government, voluntarily or as required by law, from using such information to enter into, or offer to enter into, a contract of sale, option, or swap described in clauses (i), (ii), or (iii).’.
SEC. 747. ANTIDISRUPTIVE PRACTICES AUTHORITY.
Section 4c(a) of the Commodity Exchange Act (7 U.S.C. 6c(a)) (as amended by section 746) is amended by adding at the end the following:
‘(5) DISRUPTIVE PRACTICES- It shall be unlawful for any person to engage in any trading, practice, or conduct on or subject to the rules of a registered entity that--
‘(A) violates bids or offers;
‘(B) demonstrates intentional or reckless disregard for the orderly execution of transactions during the closing period; or
‘(C) is, is of the character of, or is commonly known to the trade as, ‘spoofing’ (bidding or offering with the intent to cancel the bid or offer before execution).
‘(6) RULEMAKING AUTHORITY- The Commission may make and promulgate such rules and regulations as, in the judgment of the Commission, are reasonably necessary to prohibit the trading practices described in paragraph (5) and any other trading practice that is disruptive of fair and equitable trading.
‘(7) USE OF SWAPS TO DEFRAUD- It shall be unlawful for any person to enter into a swap knowing, or acting in reckless disregard of the fact, that its counterparty will use the swap as part of a device, scheme, or artifice to defraud any third party.’.
SEC. 748. COMMODITY WHISTLEBLOWER INCENTIVES AND PROTECTION.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by adding at the end the following:
‘SEC. 23. COMMODITY WHISTLEBLOWER INCENTIVES AND PROTECTION.
‘(a) Definitions- In this section:
‘(1) COVERED JUDICIAL OR ADMINISTRATIVE ACTION- The term ‘covered judicial or administrative action’ means any judicial or administrative action brought by the Commission under this Act that results in monetary sanctions exceeding $1,000,000.
‘(2) FUND- The term ‘Fund’ means the Commodity Futures Trading Commission Customer Protection Fund established under subsection (g).
‘(3) MONETARY SANCTIONS- The term ‘monetary sanctions’, when used with respect to any judicial or administrative action means--
‘(A) any monies, including penalties, disgorgement, restitution, and interest ordered 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.
‘(4) 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.
‘(5) RELATED ACTION- The term ‘related action’, when used with respect to any judicial or administrative action brought by the Commission under this Act, means any judicial or administrative action brought by an entity described in subclauses (I) through (VI) of subsection (h)(2)(C) 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) SUCCESSFUL RESOLUTION- The term ‘successful resolution’, when used with respect to any judicial or administrative action brought by the Commission under this Act, includes any settlement of such action.
‘(7) WHISTLEBLOWER- The term ‘whistleblower’ means any individual, or 2 or more individuals acting jointly, who provides information relating to a violation of this Act 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 Act (including regulations under the Act) by making awards to whistleblowers who provide information that leads 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) a appropriate regulatory agency;
‘(ii) the Department of Justice;
‘(iii) a registered entity;
‘(iv) a registered futures association;
‘(v) a self-regulatory organization as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)); or
‘(vi) 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 submits information to the Commission that is based on the facts underlying the covered action submitted previously by another whistleblower;
‘(D) to any whistleblower who fails to submit information to the Commission in such form as the Commission may, by rule or regulation, require.
‘(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 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-
‘(1) IN GENERAL- 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.
‘(2) APPEALS- Any determination described in paragraph (1) 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.
‘(3) REVIEW- The court shall review the determination made by the Commission in accordance with section 7064 of title 5, United States Code.
‘(g) Commodity Futures Trading Commission Customer Protection Fund-
‘(1) ESTABLISHMENT- There is established in the Treasury of the United States a revolving fund to be known as the ‘Commodity Futures Trading Commission Customer Protection Fund’.
‘(2) USE OF FUND- The Fund shall be available to the Commission, without further appropriation or fiscal year limitation, for--
‘(A) the payment of awards to whistleblowers as provided in subsection (a); and
‘(B) the funding of customer education initiatives designed to help customers protect themselves against fraud or other violations of this Act, or the rules and regulations thereunder.
‘(3) DEPOSITS AND CREDITS- There shall be deposited into or credited to the Fund:
‘(A) MONETARY SANCTIONS- Any monetary sanctions collected by the Commission in any covered judicial or administrative action that is not otherwise distributed to victims of a violation of this Act or the rules and regulations thereunder underlying such action, unless the balance of the Fund at the time the monetary judgment is collected exceeds $100,000,000.
‘(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 any judicial or administrative action brought by the Commission under this Act that is based on information provided by a whistleblower.
‘(C) INVESTMENT INCOME- All income from investments made under paragraph (4).
‘(4) INVESTMENTS-
‘(A) AMOUNTS IN FUND MAY BE INVESTED- The Commission may request the Secretary of the Treasury to invest the portion of the Fund that is not, in the Commission’s judgment, required to meet the current needs of the Fund.
‘(B) ELIGIBLE INVESTMENTS- Investments shall be made by the Secretary of the Treasury in obligations of the United States or obligations that are guaranteed as to principal and interest by the United States, with maturities suitable to the needs of the Fund as determined by the Commission.
‘(C) INTEREST AND PROCEEDS CREDITED- The interest on, and the proceeds from the sale or redemption of, any obligations held in the Fund shall be credited to, and form a part of, the Fund.
‘(5) REPORTS TO CONGRESS- Not later than October 30 of each year, the Commission shall transmit to the Committee on Agriculture, Nutrition, and Forestry of the Senate, and the Committee on Agriculture of the House of Representatives a report on--
‘(A) the Commission’s whistleblower award program under this section, including a description of the number of awards granted and the types of cases in which awards were granted during the preceding fiscal year;
‘(B) customer education initiatives described in paragraph (2)(B) that were funded by the Fund during the preceding fiscal year;
‘(C) the balance of the Fund at the beginning of the preceding fiscal year;
‘(D) the amounts deposited into or credited to the Fund during the preceding fiscal year;
‘(E) the amount of earnings on investments of amounts in the Fund during the preceding fiscal year;
‘(F) the amount paid from the Fund during the preceding fiscal year to whistleblowers pursuant to subsection (b);
‘(G) the amount paid from the Fund during the preceding fiscal year for customer education initiatives described in paragraph (2)(B);
‘(H) the balance of the Fund at the end of the preceding fiscal year; and
‘(I) a complete set of audited financial statements, including a balance sheet, income statement, and cash flow analysis.
‘(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 subsection (b); or
‘(ii) in assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information.
‘(B) ENFORCEMENT-
‘(i) CAUSE OF ACTION- An individual who alleges discharge or other discrimination in violation of subparagraph (A) may bring an action under this subsection in the appropriate district court of the United States for the relief provided in subparagraph (C), unless the individual who is alleging discharge or other discrimination in violation of subparagraph (A) is an employee of the Federal Government, in which case the individual shall only bring an action under section 1221 of title 5, United States Code.
‘(ii) SUBPOENAS- A subpoena requiring the attendance of a witness at a trial or hearing conducted under this subsection may be served at any place in the United States.
‘(iii) STATUTE OF LIMITATIONS- An action under this subsection may not be brought more than 2 years after the date on which the violation reported in subparagraph (A) is committed.
‘(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) the amount of back pay otherwise owed to the individual, with interest; and
‘(iii) compensation for any special damages sustained as a result of the discharge or discrimination, including litigation costs, expert witness fees, and reasonable attorney’s 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 552.
‘(B) EFFECT- Nothing in this paragraph is intended 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.
‘(C) 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 or appropriate to accomplish the purposes of this Act and protect customers and in accordance with clause (ii), be made available to--
‘(I) the Department of Justice;
‘(II) an appropriate department or agency of the Federal Government, acting within the scope of its jurisdiction;
‘(III) a registered entity, registered futures association, or self-regulatory organization as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a));
‘(IV) a State attorney general in connection with any criminal investigation;
‘(V) an appropriate department or agency of any State, acting within the scope of its jurisdiction; and
‘(VI) a foreign futures authority.
‘(ii) MAINTENANCE OF INFORMATION- Each of the entities, agencies, or persons described in clause (i) shall maintain information described in that clause as confidential, in accordance with the requirements in subparagraph (A).
‘(iii) STUDY ON IMPACT OF FOIA EXEMPTION ON COMMODITY FUTURES TRADING COMMISSION-
‘(I) STUDY- The Inspector General of the Commission shall conduct a study--
‘(aa) on whether the exemption under section 552(b)(3) of title 5, United States Code (known as the Freedom of Information Act) established in paragraph (2)(A) aids whistleblowers in disclosing information to the Commission;
‘(bb) on what impact the exemption has had on the public’s ability to access information about the Commission’s regulation of commodity futures and option markets; and
‘(cc) to make any recommendations on whether the Commission should continue to use the exemption.
‘(II) REPORT- Not later than 30 months after the date of enactment of this clause, the Inspector General shall--
‘(aa) submit a report on the findings of the study required under this clause to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives; and
‘(bb) make the report available to the public through publication of a report on the website of the Commission.
‘(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) 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.
‘(j) Implementing Rules- The Commission shall issue final rules or regulations implementing the provisions of this section not later than 270 days after the date of enactment of the Wall Street Transparency and Accountability Act of 2010.
‘(k) Original Information- Information submitted to the Commission by a whistleblower in accordance with rules or regulations implementing this section shall not lose its status as original information solely because the whistleblower submitted such information prior to the effective date of such rules or regulations, provided such information was submitted after the date of enactment of the Wall Street Transparency and Accountability Act of 2010.
‘(l) Awards- A whistleblower may receive an award pursuant to this section regardless of whether any violation of a provision of this Act, or a rule or regulation thereunder, underlying the judicial or administrative action upon which the award is based occurred prior to the date of enactment of the Wall Street Transparency and Accountability Act of 2010.
‘(m) Provision of False Information- A whistleblower who knowingly and willfully makes any false, fictitious, or fraudulent statement or representation, or who makes or uses any false writing or document knowing the same to contain any false, fictitious, or fraudulent statement or entry, shall not be entitled to an award under this section and shall be subject to prosecution under section 1001 of title 18, United States Code.
‘(n) Nonenforceability of Certain Provisions Waiving Rights and Remedies or Requiring Arbitration of Disputes-
‘(1) WAIVER OF RIGHTS AND REMEDIES- The rights and remedies provided for in this section may not be waived by any agreement, policy form, or condition of employment including by a predispute arbitration agreement.
‘(2) PREDISPUTE ARBITRATION AGREEMENTS- No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.’.
SEC. 749. CONFORMING AMENDMENTS.
(a) Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) (as amended by section 724) is amended--
(1) in subsection (a)--
(A) in the matter preceding paragraph (1)--
(i) by striking ‘engage as’ and inserting ‘be a’; and
(ii) by striking ‘or introducing broker’ and all that follows through ‘or derivatives transaction execution facility’;
(B) in paragraph (1), by striking ‘or introducing broker’; and
(C) in paragraph (2), by striking ‘if a futures commission merchant,’; and
(2) by adding at the end the following:
‘(g) It shall be unlawful for any person to be an introducing broker unless such person shall have registered under this Act with the Commission as an introducing broker and such registration shall not have expired nor been suspended nor revoked.’.
(b) Section 4m(3) of the Commodity Exchange Act (7 U.S.C. 6m(3)) is amended--
(1) by striking ‘(3) Subsection (1) of this section’ and inserting the following:
‘(3) Exception-
‘(A) IN GENERAL- Paragraph (1)’; and
(2) by striking ‘to any investment trust’ and all that follows through the period at the end and inserting the following: ‘to any commodity pool that is engaged primarily in trading commodity interests.
‘(B) ENGAGED PRIMARILY- For purposes of subparagraph (A), a commodity trading advisor or a commodity pool shall be considered to be ‘engaged primarily’ in the business of being a commodity trading advisor or commodity pool if it is or holds itself out to the public as being engaged primarily, or proposes to engage primarily, in the business of advising on commodity interests or investing, reinvesting, owning, holding, or trading in commodity interests, respectively.
‘(C) COMMODITY INTERESTS- For purposes of this paragraph, commodity interests shall include contracts of sale of a commodity for future delivery, options on such contracts, security futures, swaps, leverage contracts, foreign exchange, spot and forward contracts on physical commodities, and any monies held in an account used for trading commodity interests.’.
(c) Section 5c of the Commodity Exchange Act (7 U.S.C. 7a-2) is amended--
(1) in subsection (a)(1)--
(A) by striking ‘, 5a(d),’; and
(B) by striking ‘and section (2)(h)(7) with respect to significant price discovery contracts,’; and
(2) in subsection (f)(1), by striking ‘section 4d(c) of this Act’ and inserting ‘section 4d(e)’.
(d) Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) is amended by striking ‘or revocation of the right of an electronic trading facility to rely on the exemption set forth in section 2(h)(3) with respect to a significant price discovery contract,’.
(e) Section 6(b) of the Commodity Exchange Act (7 U.S.C. 8(b)) is amended in the first sentence by striking ‘, or to revoke the right of an electronic trading facility to rely on the exemption set forth in section 2(h)(3) with respect to a significant price discovery contract,’.
(f) Section 12(e)(2)(B) of the Commodity Exchange Act (7 U.S.C. 16(e)(2)(B)) is amended--
(1) by striking ‘section 2(c), 2(d), 2(f), or 2(g) of this Act’ and inserting ‘section 2(c) or 2(f) of this Act’; and
(2) by striking ‘2(h) or’.
(g) Section 17(r)(1) of the Commodity Exchange Act (7 U.S.C. 21(r)(1)) is amended by striking ‘section 4d(c) of this Act’ and inserting ‘section 4d(e)’.
(h) Section 22 of the Commodity Exchange Act is amended--
(1) in subsection (a)(1)(B), by--
(A) inserting ‘or any swap’ after ‘commodity)’; and
(B) inserting ‘or any swap’ after ‘such contract’;
(2) in subsection (a)(1)(C), by adding at the end the following:
‘(iv) a swap; or’; and
(3) in subsection (b)(1)(A), by striking ‘section 2(h)(7) or sections 5 through 5c’ and inserting ‘section 5, 5b, 5c, 5h, or 21’.
(i) Section 408(2)(C) of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4421(2)(C)) is amended--
(1) by striking ‘section 2(c), 2(d), 2(f), or (2)(g) of such Act’ and inserting ‘section 2(c), 2(f), or 2(i) of that Act’; and
(2) by striking ‘2(h) or’.
SEC. 750. STUDY ON OVERSIGHT OF CARBON MARKETS.
(a) Interagency Working Group- There is established to carry out this section an interagency working group (referred to in this section as the ‘interagency group’) composed of the following members or designees:
(1) The Chairman of the Commodity Futures Trading Commission (referred to in this section as the ‘Commission’), who shall serve as Chairman of the interagency group.
(2) The Secretary of Agriculture.
(3) The Secretary of the Treasury.
(4) The Chairman of the Securities and Exchange Commission.
(5) The Administrator of the Environmental Protection Agency.
(6) The Chairman of the Federal Energy Regulatory Commission.
(7) The Commissioner of the Federal Trade Commission.
(8) The Administrator of the Energy Information Administration.
(b) Administrative Support- The Commission shall provide the interagency group such administrative support services as are necessary to enable the interagency group to carry out the functions of the interagency group under this section.
(c) Consultation- In carrying out this section, the interagency group shall consult with representatives of exchanges, clearinghouses, self-regulatory bodies, major carbon market participants, consumers, and the general public, as the interagency group determines to be appropriate.
(d) Study- The interagency group shall conduct a study on the oversight of existing and prospective carbon markets to ensure an efficient, secure, and transparent carbon market, including oversight of spot markets and derivative markets.
(e) Report- Not later than 180 days after the date of enactment of this Act, the interagency group shall submit to Congress a report on the results of the study conducted under subsection (b), including recommendations for the oversight of existing and prospective carbon markets to ensure an efficient, secure, and transparent carbon market, including oversight of spot markets and derivative markets.
SEC. 751. ENERGY AND ENVIRONMENTAL MARKETS ADVISORY COMMITTEE.
Section 2(a) of the Commodity Exchange Act (7 U.S.C. 2(a)) (as amended by section 727) is amended by adding at the end the following:
‘(15) ENERGY AND ENVIRONMENTAL MARKETS ADVISORY COMMITTEE-
‘(A) ESTABLISHMENT-
‘(i) IN GENERAL- An Energy and Environmental Markets Advisory Committee is hereby established.
‘(ii) MEMBERSHIP- The Committee shall have 9 members.
‘(iii) ACTIVITIES- The Committee’s objectives and scope of activities shall be--
‘(I) to conduct public meetings;
‘(II) to submit reports and recommendations to the Commission (including dissenting or minority views, if any); and
‘(III) otherwise to serve as a vehicle for discussion and communication on matters of concern to exchanges, firms, end users, and regulators regarding energy and environmental markets and their regulation by the Commission.
‘(B) REQUIREMENTS-
‘(i) IN GENERAL- The Committee shall hold public meetings at such intervals as are necessary to carry out the functions of the Committee, but not less frequently than 2 times per year.
‘(ii) MEMBERS- Members shall be appointed to 3-year terms, but may be removed for cause by vote of the Commission.
‘(C) APPOINTMENT- The Commission shall appoint members with a wide diversity of opinion and who represent a broad spectrum of interests, including hedgers and consumers.
‘(D) REIMBURSEMENT- Members shall be entitled to per diem and travel expense reimbursement by the Commission.
‘(E) FACA- The Committee shall not be subject to the Federal Advisory Committee Act (5 U.S.C. App.).’.
SEC. 752. INTERNATIONAL HARMONIZATION.
(a) In order to promote effective and consistent global regulation of swaps and security-based swaps, the Commodity Futures Trading Commission, the Securities and Exchange Commission, and the prudential regulators (as that term is defined in section 1a(39) of the Commodity Exchange Act), as appropriate, shall consult and coordinate with foreign regulatory authorities on the establishment of consistent international standards with respect to the regulation (including fees) of swaps, security-based swaps, swap entities, and security-based swap entities and may agree to such information-sharing arrangements as may be deemed to be necessary or appropriate in the public interest or for the protection of investors, swap counterparties, and security-based swap counterparties.
(b) In order to promote effective and consistent global regulation of contracts of sale of a commodity for future delivery and options on such contracts, the Commodity Futures Trading Commission shall consult and coordinate with foreign regulatory authorities on the establishment of consistent international standards with respect to the regulation of contracts of sale of a commodity for future delivery and options on such contracts, and may agree to such information-sharing arrangements as may be deemed necessary or appropriate in the public interest for the protection of users of contracts of sale of a commodity for future delivery.
SEC. 753. ANTI-MANIPULATION AUTHORITY.
(a) Prohibition Regarding Manipulation and False Information- Subsection (c) of section 6 of the Commodity Exchange Act (7 U.S.C. 9, 15) is amended to read as follows:
‘(c) Prohibition Regarding Manipulation and False Information-
‘(1) PROHIBITION AGAINST MANIPULATION- It shall be unlawful for any person, directly or indirectly, to use or employ, or attempt to use or employ, in connection with any swap, or a contract of sale of any commodity in interstate commerce, or for future delivery on or subject to the rules of any registered entity, any manipulative or deceptive device or contrivance, in contravention of such rules and regulations as the Commission shall promulgate by not later than 1 year after the date of enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, provided no rule or regulation promulgated by the Commission shall require any person to disclose to another person nonpublic information that may be material to the market price, rate, or level of the commodity transaction, except as necessary to make any statement made to the other person in or in connection with the transaction not misleading in any material respect.
‘(A) SPECIAL PROVISION FOR MANIPULATION BY FALSE REPORTING- Unlawful manipulation for purposes of this paragraph shall include, but not be limited to, delivering, or causing to be delivered for transmission through the mails or interstate commerce, by any means of communication whatsoever, a false or misleading or inaccurate report concerning crop or market information or conditions that affect or tend to affect the price of any commodity in interstate commerce, knowing, or acting in reckless disregard of the fact that such report is false, misleading or inaccurate.
‘(B) EFFECT ON OTHER LAW- Nothing in this paragraph shall affect, or be construed to affect, the applicability of section 9(a)(2).
‘(C) GOOD FAITH MISTAKES- Mistakenly transmitting, in good faith, false or misleading or inaccurate information to a price reporting service would not be sufficient to violate subsection (c)(1)(A).
‘(2) PROHIBITION REGARDING FALSE INFORMATION- It shall be unlawful for any person to make any false or misleading statement of a material fact to the Commission, including in any registration application or any report filed with the Commission under this Act, or any other information relating to a swap, or a contract of sale of a commodity, in interstate commerce, or for future delivery on or subject to the rules of any registered entity, or to omit to state in any such statement any material fact that is necessary to make any statement of a material fact made not misleading in any material respect, if the person knew, or reasonably should have known, the statement to be false or misleading.
‘(3) OTHER MANIPULATION- In addition to the prohibition in paragraph (1), it shall be unlawful for any person, directly or indirectly, to manipulate or attempt to manipulate the price of any swap, or of any commodity in interstate commerce, or for future delivery on or subject to the rules of any registered entity.
‘(4) ENFORCEMENT-
‘(A) AUTHORITY OF COMMISSION- If the Commission has reason to believe that any person (other than a registered entity) is violating or has violated this subsection, or any other provision of this Act (including any rule, regulation, or order of the Commission promulgated in accordance with this subsection or any other provision of this Act), the Commission may serve upon the person a complaint.
‘(B) CONTENTS OF COMPLAINT- A complaint under subparagraph (A) shall--
‘(i) contain a description of the charges against the person that is the subject of the complaint; and
‘(ii) have attached or contain a notice of hearing that specifies the date and location of the hearing regarding the complaint.
‘(C) HEARING- A hearing described in subparagraph (B)(ii)--
‘(i) shall be held not later than 3 days after service of the complaint described in subparagraph (A);
‘(ii) shall require the person to show cause regarding why--
‘(I) an order should not be made--
‘(aa) to prohibit the person from trading on, or subject to the rules of, any registered entity; and
‘(bb) to direct all registered entities to refuse all privileges to the person until further notice of the Commission; and
‘(II) the registration of the person, if registered with the Commission in any capacity, should not be suspended or revoked; and
‘(iii) may be held before--
‘(I) the Commission; or
‘(II) an administrative law judge designated by the Commission, under which the administrative law judge shall ensure that all evidence is recorded in written form and submitted to the Commission.
‘(5) SUBPOENA- For the purpose of securing effective enforcement of the provisions of this Act, for the purpose of any investigation or proceeding under this Act, and for the purpose of any action taken under section 12(f), any member of the Commission or any Administrative Law Judge or other officer designated by the Commission (except as provided in paragraph (7)) may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, or other records that the Commission deems relevant or material to the inquiry.
‘(6) WITNESSES- The attendance of witnesses and the production of any such records may be required from any place in the United States, any State, or any foreign country or jurisdiction at any designated place of hearing.
‘(7) SERVICE- A subpoena issued under this section may be served upon any person who is not to be found within the territorial jurisdiction of any court of the United States in such manner as the Federal Rules of Civil Procedure prescribe for service of process in a foreign country, except that a subpoena to be served on a person who is not to be found within the territorial jurisdiction of any court of the United States may be issued only on the prior approval of the Commission.
‘(8) REFUSAL TO OBEY- 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 in which the investigation or proceeding is conducted, or where such person resides or transacts business, in requiring the attendance and testimony of witnesses and the production of books, papers, correspondence, memoranda, and other records. Such court may issue an order requiring such person to appear before the Commission or member or Administrative Law Judge or other officer designated by the Commission, there to produce records, if so ordered, or to give testimony touching the matter under investigation or in question.
‘(9) FAILURE TO OBEY- Any failure to obey such order of the court may be punished by the court as a contempt thereof. All process in any such case may be served in the judicial district wherein such person is an inhabitant or transacts business or wherever such person may be found.
‘(10) EVIDENCE- On the receipt of evidence under paragraph (4)(C)(iii), the Commission may--
‘(A) prohibit the person that is the subject of the hearing from trading on, or subject to the rules of, any registered entity and require all registered entities to refuse the person all privileges on the registered entities for such period as the Commission may require in the order;
‘(B) if the person is registered with the Commission in any capacity, suspend, for a period not to exceed 180 days, or revoke, the registration of the person;
‘(C) assess such person--
‘(i) a civil penalty of not more than an amount equal to the greater of--
‘(I) $140,000; or
‘(II) triple the monetary gain to such person for each such violation; or
‘(ii) in any case of manipulation or attempted manipulation in violation of this subsection or section 9(a)(2), a civil penalty of not more than an amount equal to the greater of--
‘(I) $1,000,000; or
‘(II) triple the monetary gain to the person for each such violation; and
‘(D) require restitution to customers of damages proximately caused by violations of the person.
‘(11) ORDERS-
‘(A) NOTICE- The Commission shall provide to a person described in paragraph (10) and the appropriate governing board of the registered entity notice of the order described in paragraph (10) by--
‘(i) registered mail;
‘(ii) certified mail; or
‘(iii) personal delivery.
‘(B) REVIEW-
‘(i) IN GENERAL- A person described in paragraph (10) may obtain a review of the order or such other equitable relief as determined to be appropriate by a court described in clause (ii).
‘(ii) PETITION- To obtain a review or other relief under clause (i), a person may, not later than 15 days after notice is given to the person under clause (i), file a written petition to set aside the order with the United States Court of Appeals--
‘(I) for the circuit in which the petitioner carries out the business of the petitioner; or
‘(II) in the case of an order denying registration, the circuit in which the principal place of business of the petitioner is located, as listed on the application for registration of the petitioner.
‘(C) PROCEDURE-
‘(i) DUTY OF CLERK OF APPROPRIATE COURT- The clerk of the appropriate court under subparagraph (B)(ii) shall transmit to the Commission a copy of a petition filed under subparagraph (B)(ii).
‘(ii) DUTY OF COMMISSION- In accordance with section 2112 of title 28, United States Code, the Commission shall file in the appropriate court described in subparagraph (B)(ii) the record theretofore made.
‘(iii) JURISDICTION OF APPROPRIATE COURT- Upon the filing of a petition under subparagraph (B)(ii), the appropriate court described in subparagraph (B)(ii) may affirm, set aside, or modify the order of the Commission.’.
(b) Cease and Desist Orders, Fines- Section 6(d) of the Commodity Exchange Act (7 U.S.C. 13b) is amended to read as follows:
‘(d) If any person (other than a registered entity), is violating or has violated subsection (c) or any other provisions of this Act or of the rules, regulations, or orders of the Commission thereunder, the Commission may, upon notice and hearing, and subject to appeal as in other cases provided for in subsection (c), make and enter an order directing that such person shall cease and desist therefrom and, if such person thereafter and after the lapse of the period allowed for appeal of such order or after the affirmance of such order, shall knowingly fail or refuse to obey or comply with such order, such person, upon conviction thereof, shall be fined not more than the higher of $140,000 or triple the monetary gain to such person, or imprisoned for not more than 1 year, or both, except that if such knowing failure or refusal to obey or comply with such order involves any offense within subsection (a) or (b) of section 9, such person, upon conviction thereof, shall be subject to the penalties of said subsection (a) or (b): Provided, That any such cease and desist order under this subsection against any respondent in any case of manipulation shall be issued only in conjunction with an order issued against such respondent under subsection (c).’.
(c) Manipulations; Private Rights of Action- Section 22(a)(1) of the Commodity Exchange Act (7 U.S.C. 25(a)(1)) is amended by striking subparagraph (D) and inserting the following:
‘(D) who purchased or sold a contract referred to in subparagraph (B) hereof or swap if the violation constitutes--
‘(i) the use or employment of, or an attempt to use or employ, in connection with a swap, or a contract of sale of a commodity, in interstate commerce, or for future delivery on or subject to the rules of any registered entity, any manipulative device or contrivance in contravention of such rules and regulations as the Commission shall promulgate by not later than 1 year after the date of enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act; or
‘(ii) a manipulation of the price of any such contract or swap or the price of the commodity underlying such contract or swap.’.
(d) Effective Date-
(1) The amendments made by this section shall take effect on the date on which the final rule promulgated by the Commodity Futures Trading Commission pursuant to this Act takes effect.
(2) Paragraph (1) shall not preclude the Commission from undertaking prior to the effective date any rulemaking necessary to implement the amendments contained in this section.
SEC. 754. EFFECTIVE DATE.
Unless otherwise provided in this title, the provisions of this subtitle shall take effect on the later of 360 days after the date of the enactment of this subtitle or, to the extent a provision of this subtitle requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of this subtitle.
Subtitle B--Regulation of Security-Based Swap Markets
SEC. 761. DEFINITIONS UNDER THE SECURITIES EXCHANGE ACT OF 1934.
(a) Definitions- Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended--
(1) in subparagraphs (A) and (B) of paragraph (5), by inserting ‘(not including security-based swaps, other than security-based swaps with or for persons that are not eligible contract participants)’ after ‘securities’ each place that term appears;
(2) in paragraph (10), by inserting ‘security-based swap,’ after ‘security future,’;
(3) in paragraph (13), by adding at the end the following: ‘For security-based swaps, such terms include the execution, termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of rights or obligations under, a security-based swap, as the context may require.’;
(4) in paragraph (14), by adding at the end the following: ‘For security-based swaps, such terms include the execution, termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of rights or obligations under, a security-based swap, as the context may require.’;
(5) in paragraph (39)--
(A) in subparagraph (B)(i)--
(i) in subclause (I), by striking ‘or government securities dealer’ and inserting ‘government securities dealer, security-based swap dealer, or major security-based swap participant’; and
(ii) in subclause (II), by inserting ‘security-based swap dealer, major security-based swap participant,’ after ‘government securities dealer,’;
(B) in subparagraph (C), by striking ‘or government securities dealer’ and inserting ‘government securities dealer, security-based swap dealer, or major security-based swap participant’; and
(C) in subparagraph (D), by inserting ‘security-based swap dealer, major security-based swap participant,’ after ‘government securities dealer,’; and
(6) by adding at the end the following:
‘(65) ELIGIBLE CONTRACT PARTICIPANT- The term ‘eligible contract participant’ has the same meaning as in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).
‘(66) MAJOR SWAP PARTICIPANT- The term ‘major swap participant’ has the same meaning as in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).
‘(67) MAJOR SECURITY-BASED SWAP PARTICIPANT-
‘(A) IN GENERAL- The term ‘major security-based swap participant’ means any person--
‘(i) who is not a security-based swap dealer; and
‘(ii)(I) who maintains a substantial position in security-based swaps for any of the major security-based swap categories, as such categories are determined by the Commission, excluding both positions held for hedging or mitigating commercial risk and positions maintained by any employee benefit plan (or any contract held by such a plan) as defined in paragraphs (3) and (32) of section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002) for the primary purpose of hedging or mitigating any risk directly associated with the operation of the plan;
‘(II) whose outstanding security-based swaps create substantial counterparty exposure that could have serious adverse effects on the financial stability of the United States banking system or financial markets; or
‘(III) that is a financial entity that--
‘(aa) is highly leveraged relative to the amount of capital such entity holds and that is not subject to capital requirements established by an appropriate Federal banking agency; and
‘(bb) maintains a substantial position in outstanding security-based swaps in any major security-based swap category, as such categories are determined by the Commission.
‘(B) DEFINITION OF SUBSTANTIAL POSITION- For purposes of subparagraph (A), the Commission shall define, by rule or regulation, the term ‘substantial position’ at the threshold that the Commission determines to be prudent for the effective monitoring, management, and oversight of entities that are systemically important or can significantly impact the financial system of the United States. In setting the definition under this subparagraph, the Commission shall consider the person’s relative position in uncleared as opposed to cleared security-based swaps and may take into consideration the value and quality of collateral held against counterparty exposures.
‘(C) SCOPE OF DESIGNATION- For purposes of subparagraph (A), a person may be designated as a major security-based swap participant for 1 or more categories of security-based swaps without being classified as a major security-based swap participant for all classes of security-based swaps.
‘(68) SECURITY-BASED SWAP-
‘(A) IN GENERAL- Except as provided in subparagraph (B), the term ‘security-based swap’ means any agreement, contract, or transaction that--
‘(i) is a swap, as that term is defined under section 1a of the Commodity Exchange Act (without regard to paragraph (47)(B)(x) of such section); and
‘(ii) is based on--
‘(I) an index that is a narrow-based security index, including any interest therein or on the value thereof;
‘(II) a single security or loan, including any interest therein or on the value thereof; or
‘(III) the occurrence, nonoccurrence, or extent of the occurrence of an event relating to a single issuer of a security or the issuers of securities in a narrow-based security index, provided that such event directly affects the financial statements, financial condition, or financial obligations of the issuer.
‘(B) RULE OF CONSTRUCTION REGARDING MASTER AGREEMENTS- The term ‘security-based swap’ shall be construed to include a master agreement that provides for an agreement, contract, or transaction that is a security-based swap pursuant to subparagraph (A), together with all supplements to any such master agreement, without regard to whether the master agreement contains an agreement, contract, or transaction that is not a security-based swap pursuant to subparagraph (A), except that the master agreement shall be considered to be a security-based swap only with respect to each agreement, contract, or transaction under the master agreement that is a security-based swap pursuant to subparagraph (A).
‘(C) EXCLUSIONS- The term ‘security-based swap’ does not include any agreement, contract, or transaction that meets the definition of a security-based swap only because such agreement, contract, or transaction references, is based upon, or settles through the transfer, delivery, or receipt of an exempted security under paragraph (12), as in effect on the date of enactment of the Futures Trading Act of 1982 (other than any municipal security as defined in paragraph (29) as in effect on the date of enactment of the Futures Trading Act of 1982), unless such agreement, contract, or transaction is of the character of, or is commonly known in the trade as, a put, call, or other option.
‘(D) MIXED SWAP- The term ‘security-based swap’ includes any agreement, contract, or transaction that is as described in subparagraph (A) and also is based on the value of 1 or more interest or other rates, currencies, commodities, instruments of indebtedness, indices, quantitative measures, other financial or economic interest or property of any kind (other than a single security or a narrow-based security index), or the occurrence, non-occurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence (other than an event described in subparagraph (A)(ii)(III)).
‘(E) RULE OF CONSTRUCTION REGARDING USE OF THE TERM INDEX- The term ‘index’ means an index or group of securities, including any interest therein or based on the value thereof.
‘(69) SWAP- The term ‘swap’ has the same meaning as in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).
‘(70) PERSON ASSOCIATED WITH A SECURITY-BASED SWAP DEALER OR MAJOR SECURITY-BASED SWAP PARTICIPANT-
‘(A) IN GENERAL- The term ‘person associated with a security-based swap dealer or major security-based swap participant’ or ‘associated person of a security-based swap dealer or major security-based swap participant’ means--
‘(i) any partner, officer, director, or branch manager of such security-based swap dealer or major security-based swap participant (or any person occupying a similar status or performing similar functions);
‘(ii) any person directly or indirectly controlling, controlled by, or under common control with such security-based swap dealer or major security-based swap participant; or
‘(iii) any employee of such security-based swap dealer or major security-based swap participant.
‘(B) EXCLUSION- Other than for purposes of section 15F(l)(2), the term ‘person associated with a security-based swap dealer or major security-based swap participant’ or ‘associated person of a security-based swap dealer or major security-based swap participant’ does not include any person associated with a security-based swap dealer or major security-based swap participant whose functions are solely clerical or ministerial.
‘(71) SECURITY-BASED SWAP DEALER-
‘(A) IN GENERAL- The term ‘security-based swap dealer’ means any person who--
‘(i) holds themself out as a dealer in security-based swaps;
‘(ii) makes a market in security-based swaps;
‘(iii) regularly enters into security-based swaps with counterparties as an ordinary course of business for its own account; or
‘(iv) engages in any activity causing it to be commonly known in the trade as a dealer or market maker in security-based swaps.
‘(B) DESIGNATION BY TYPE OR CLASS- A person may be designated as a security-based swap dealer for a single type or single class or category of security-based swap or activities and considered not to be a security-based swap dealer for other types, classes, or categories of security-based swaps or activities.
‘(C) EXCEPTION- The term ‘security-based swap dealer’ does not include a person that enters into security-based swaps for such person’s own account, either individually or in a fiduciary capacity, but not as a part of regular business.
‘(D) DE MINIMIS EXCEPTION- The Commission shall exempt from designation as a security-based swap dealer an entity that engages in a de minimis quantity of security-based swap dealing in connection with transactions with or on behalf of its customers. The Commission shall promulgate regulations to establish factors with respect to the making of any determination to exempt.
‘(72) APPROPRIATE FEDERAL BANKING AGENCY- The term ‘appropriate Federal banking agency’ has the same meaning as in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).
‘(73) BOARD- The term ‘Board’ means the Board of Governors of the Federal Reserve System.
‘(74) PRUDENTIAL REGULATOR- The term ‘prudential regulator’ has the same meaning as in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).
‘(75) SECURITY-BASED SWAP DATA REPOSITORY- The term ‘security-based swap data repository’ means any person that collects and maintains information or records with respect to transactions or positions in, or the terms and conditions of, security-based swaps entered into by third parties for the purpose of providing a centralized recordkeeping facility for security-based swaps.
‘(76) SWAP DEALER- The term ‘swap dealer’ has the same meaning as in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).
‘(77) SECURITY-BASED SWAP EXECUTION FACILITY- The term ‘security-based swap execution facility’ means a trading system or platform in which multiple participants have the ability to execute or trade security-based swaps by accepting bids and offers made by multiple participants in the facility or system, through any means of interstate commerce, including any trading facility, that--
‘(A) facilitates the execution of security-based swaps between persons; and
‘(B) is not a national securities exchange.
‘(78) SECURITY-BASED SWAP AGREEMENT-
‘(A) IN GENERAL- For purposes of sections 9, 10, 16, 20, and 21A of this Act, and section 17 of the Securities Act of 1933 (15 U.S.C. 77q), the term ‘security-based swap agreement’ means a swap agreement as defined in section 206A of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note) of which a material term is based on the price, yield, value, or volatility of any security or any group or index of securities, or any interest therein.
‘(B) EXCLUSIONS- The term ‘security-based swap agreement’ does not include any security-based swap.’.
(b) Authority To Further Define Terms- The Securities and Exchange Commission may, by rule, further define--
(1) the term ‘commercial risk’;
(2) any other term included in an amendment to the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) made by this subtitle; and
(3) the terms ‘security-based swap’, ‘security-based swap dealer’, ‘major security-based swap participant’, and ‘eligible contract participant’, with regard to security-based swaps (as such terms are defined in the amendments made by subsection (a)) for the purpose of including transactions and entities that have been structured to evade this subtitle or the amendments made by this subtitle.
SEC. 762. REPEAL OF PROHIBITION ON REGULATION OF SECURITY-BASED SWAP AGREEMENTS.
(a) Repeal- Sections 206B and 206C of the Gramm-Leach-Bliley Act (Public Law 106-102; 15 U.S.C. 78c note) are repealed.
(b) Conforming Amendments to Gramm-Leach-Bliley- Section 206A(a) of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note) is amended in the material preceding paragraph (1), by striking ‘Except as’ and all that follows through ‘that--’ and inserting the following: ‘Except as provided in subsection (b), as used in this section, the term ‘swap agreement’ means any agreement, contract, or transaction that--’.
(c) Conforming Amendments to the Securities Act of 1933-
(1) Section 2A of the Securities Act of 1933 (15 U.S.C. 77b-1) is amended--
(A) by striking subsection (a) and reserving that subsection; and
(B) by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’ each place that such term appears and inserting ‘(as defined in section 3(a)(78) of the Securities Exchange Act of 1934)’.
(2) Section 17 of the Securities Act of 1933 (15 U.S.C. 77q) is amended--
(A) in subsection (a)--
(i) by inserting ‘(including security-based swaps)’ after ‘securities’; and
(ii) by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’ and inserting ‘(as defined in section 3(a)(78) of the Securities Exchange Act)’; and
(B) in subsection (d), by striking ‘206B of the Gramm-Leach-Bliley Act’ and inserting ‘3(a)(78) of the Securities Exchange Act of 1934’.
(d) Conforming Amendments to the Securities Exchange Act of 1934- The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended--
(1) in section 3A (15 U.S.C. 78c-1)--
(A) by striking subsection (a) and reserving that subsection; and
(B) by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’ each place that the term appears;
(2) in section 9 (15 U.S.C. 78i)--
(A) in subsection (a), by striking paragraphs (2) through (5) and inserting the following:
‘(2) To effect, alone or with 1 or more other persons, a series of transactions in any security registered on a national securities exchange, any security not so registered, or in connection with any security-based swap or security-based swap agreement with respect to such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.
‘(3) If a dealer, broker, security-based swap dealer, major security-based swap participant, or other person selling or offering for sale or purchasing or offering to purchase the security, a security-based swap, or a security-based swap agreement with respect to such security, to induce the purchase or sale of any security registered on a national securities exchange, any security not so registered, any security-based swap, or any security-based swap agreement with respect to such security by the circulation or dissemination in the ordinary course of business of information to the effect that the price of any such security will or is likely to rise or fall because of market operations of any 1 or more persons conducted for the purpose of raising or depressing the price of such security.
‘(4) If a dealer, broker, security-based swap dealer, major security-based swap participant, or other person selling or offering for sale or purchasing or offering to purchase the security, a security-based swap, or security-based swap agreement with respect to such security, to make, regarding any security registered on a national securities exchange, any security not so registered, any security-based swap, or any security-based swap agreement with respect to such security, for the purpose of inducing the purchase or sale of such security, such security-based swap, or such security-based swap agreement any statement which was at the time and in the light of the circumstances under which it was made, false or misleading with respect to any material fact, and which that person knew or had reasonable ground to believe was so false or misleading.
‘(5) For a consideration, received directly or indirectly from a broker, dealer, security-based swap dealer, major security-based swap participant, or other person selling or offering for sale or purchasing or offering to purchase the security, a security-based swap, or security-based swap agreement with respect to such security, to induce the purchase of any security registered on a national securities exchange, any security not so registered, any security-based swap, or any security-based swap agreement with respect to such security by the circulation or dissemination of information to the effect that the price of any such security will or is likely to rise or fall because of the market operations of any 1 or more persons conducted for the purpose of raising or depressing the price of such security.’; and
(B) in subsection (i), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’;
(3) in section 10 (15 U.S.C. 78j)--
(A) in subsection (b), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act),’ each place that term appears; and
(B) in the matter following subsection (b), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act), in each place that such terms appear’;
(4) in section 15 (15 U.S.C. 78o)--
(A) in subsection (c)(1)(A), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act),’;
(B) in subparagraphs (B) and (C) of subsection (c)(1), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’ each place that term appears;
(C) by redesignating subsection (i), as added by section 303(f) of the Commodity Futures Modernization Act of 2000 (Public Law 106-554; 114 Stat. 2763A-455)), as subsection (j); and
(D) in subsection (j), as redesignated by subparagraph (C), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’;
(5) in section 16 (15 U.S.C. 78p)--
(A) in subsection (a)(2)(C), by striking ‘(as defined in section 206(b) of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note))’;
(B) in subsection (a)(3)(B), by inserting ‘or security-based swaps’ after ‘security-based swap agreement’;
(C) in the first sentence of subsection (b), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’;
(D) in the third sentence of subsection (b), by striking ‘(as defined in section 206B of the Gramm-Leach Bliley Act)’ and inserting ‘or a security-based swap’; and
(E) in subsection (g), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’;
(6) in section 20 (15 U.S.C. 78t),
(A) in subsection (d), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’; and
(B) in subsection (f), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’; and
(7) in section 21A (15 U.S.C. 78u-1)--
(A) in subsection (a)(1), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’; and
(B) in subsection (g), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’.
SEC. 763. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.
(a) Clearing for Security-based Swaps- The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 3B (as added by section 717 of this Act):
‘SEC. 3C. CLEARING FOR SECURITY-BASED SWAPS.
‘(a) In General-
‘(1) STANDARD FOR CLEARING- It shall be unlawful for any person to engage in a security-based swap unless that person submits such security-based swap for clearing to a clearing agency that is registered under this Act or a clearing agency that is exempt from registration under this Act if the security-based swap is required to be cleared.
‘(2) OPEN ACCESS- The rules of a clearing agency described in paragraph (1) shall--
‘(A) prescribe that all security-based swaps submitted to the clearing agency with the same terms and conditions are economically equivalent within the clearing agency and may be offset with each other within the clearing agency; and
‘(B) provide for non-discriminatory clearing of a security-based swap executed bilaterally or on or through the rules of an unaffiliated national securities exchange or security-based swap execution facility.
‘(b) Commission Review-
‘(1) COMMISSION-INITIATED REVIEW-
‘(A) The Commission on an ongoing basis shall review each security-based swap, or any group, category, type, or class of security-based swaps to make a determination that such security-based swap, or group, category, type, or class of security-based swaps should be required to be cleared.
‘(B) The Commission shall provide at least a 30-day public comment period regarding any determination under subparagraph (A).
‘(2) SWAP SUBMISSIONS-
‘(A) A clearing agency shall submit to the Commission each security-based swap, or any group, category, type, or class of security-based swaps that it plans to accept for clearing and provide notice to its members (in a manner to be determined by the Commission) of such submission.
‘(B) Any security-based swap or group, category, type, or class of security-based swaps listed for clearing by a clearing agency as of the date of enactment of this subsection shall be considered submitted to the Commission.
‘(C) The Commission shall--
‘(i) make available to the public any submission received under subparagraphs (A) and (B);
‘(ii) review each submission made under subparagraphs (A) and (B), and determine whether the security-based swap, or group, category, type, or class of security-based swaps, described in the submission is required to be cleared; and
‘(iii) provide at least a 30-day public comment period regarding its determination whether the clearing requirement under subsection (a)(1) shall apply to the submission.
‘(3) DEADLINE- The Commission shall make its determination under paragraph (2)(C) not later than 90 days after receiving a submission made under paragraphs (2)(A) and (2)(B), unless the submitting clearing agency agrees to an extension for the time limitation established under this paragraph.
‘(4) DETERMINATION-
‘(A) In reviewing a submission made under paragraph (2), the Commission shall review whether the submission is consistent with section 17A.
‘(B) In reviewing a security-based swap, group of security-based swaps or class of security-based swaps pursuant to paragraph (1) or a submission made under paragraph (2), the Commission shall take into account the following factors:
‘(i) The existence of significant outstanding notional exposures, trading liquidity and adequate pricing data.
‘(ii) The availability of rule framework, capacity, operational expertise and resources, and credit support infrastructure to clear the contract on terms that are consistent with the material terms and trading conventions on which the contract is then traded.
‘(iii) The effect on the mitigation of systemic risk, taking into account the size of the market for such contract and the resources of the clearing agency available to clear the contract.
‘(iv) The effect on competition, including appropriate fees and charges applied to clearing.
‘(v) The existence of reasonable legal certainty in the event of the insolvency of the relevant clearing agency or 1 or more of its clearing members with regard to the treatment of customer and security-based swap counterparty positions, funds, and property.
‘(C) In making a determination under subsection (b)(1) or paragraph (2)(C) that the clearing requirement shall apply, the Commission may require such terms and conditions to the requirement as the Commission determines to be appropriate.
‘(5) RULES- Not later than 1 year after the date of the enactment of this section, the Commission shall adopt rules for a clearing agency’s submission for review, pursuant to this subsection, of a security-based swap, or a group, category, type, or class of security-based swaps, that it seeks to accept for clearing. Nothing in this paragraph limits the Commission from making a determination under paragraph (2)(C) for security-based swaps described in paragraph (2)(B).
‘(c) Stay of Clearing Requirement-
‘(1) IN GENERAL- After making a determination pursuant to subsection (b)(2), the Commission, on application of a counterparty to a security-based swap or on its own initiative, may stay the clearing requirement of subsection (a)(1) until the Commission completes a review of the terms of the security-based swap (or the group, category, type, or class of security-based swaps) and the clearing arrangement.
‘(2) DEADLINE- The Commission shall complete a review undertaken pursuant to paragraph (1) not later than 90 days after issuance of the stay, unless the clearing agency that clears the security-based swap, or group, category, type, or class of security-based swaps, agrees to an extension of the time limitation established under this paragraph.
‘(3) DETERMINATION- Upon completion of the review undertaken pursuant to paragraph (1), the Commission may--
‘(A) determine, unconditionally or subject to such terms and conditions as the Commission determines to be appropriate, that the security-based swap, or group, category, type, or class of security-based swaps, must be cleared pursuant to this subsection if it finds that such clearing is consistent with subsection (b)(4); or
‘(B) determine that the clearing requirement of subsection (a)(1) shall not apply to the security-based swap, or group, category, type, or class of security-based swaps.
‘(4) RULES- Not later than 1 year after the date of the enactment of this section, the Commission shall adopt rules for reviewing, pursuant to this subsection, a clearing agency’s clearing of a security-based swap, or a group, category, type, or class of security-based swaps, that it has accepted for clearing.
‘(d) Prevention of Evasion-
‘(1) IN GENERAL- The Commission shall prescribe rules under this section (and issue interpretations of rules prescribed under this section), as determined by the Commission to be necessary to prevent evasions of the mandatory clearing requirements under this Act.
‘(2) DUTY OF COMMISSION TO INVESTIGATE AND TAKE CERTAIN ACTIONS- To the extent the Commission finds that a particular security-based swap or any group, category, type, or class of security-based swaps that would otherwise be subject to mandatory clearing but no clearing agency has listed the security-based swap or the group, category, type, or class of security-based swaps for clearing, the Commission shall--
‘(A) investigate the relevant facts and circumstances;
‘(B) within 30 days issue a public report containing the results of the investigation; and
‘(C) take such actions as the Commission determines to be necessary and in the public interest, which may include requiring the retaining of adequate margin or capital by parties to the security-based swap or the group, category, type, or class of security-based swaps.
‘(3) EFFECT ON AUTHORITY- Nothing in this subsection--
‘(A) authorizes the Commission to adopt rules requiring a clearing agency to list for clearing a security-based swap or any group, category, type, or class of security-based swaps if the clearing of the security-based swap or the group, category, type, or class of security-based swaps would threaten the financial integrity of the clearing agency; and
‘(B) affects the authority of the Commission to enforce the open access provisions of subsection (a)(2) with respect to a security-based swap or the group, category, type, or class of security-based swaps that is listed for clearing by a clearing agency.
‘(e) Reporting Transition Rules- Rules adopted by the Commission under this section shall provide for the reporting of data, as follows:
‘(1) Security-based swaps entered into before the date of the enactment of this section shall be reported to a registered security-based swap data repository or the Commission no later than 180 days after the effective date of this section.
‘(2) Security-based swaps entered into on or after such date of enactment shall be reported to a registered security-based swap data repository or the Commission no later than the later of--
‘(A) 90 days after such effective date; or
‘(B) such other time after entering into the security-based swap as the Commission may prescribe by rule or regulation.
‘(f) Clearing Transition Rules-
‘(1) Security-based swaps entered into before the date of the enactment of this section are exempt from the clearing requirements of this subsection if reported pursuant to subsection (e)(1).
‘(2) Security-based swaps entered into before application of the clearing requirement pursuant to this section are exempt from the clearing requirements of this section if reported pursuant to subsection (e)(2).
‘(g) Exceptions-
‘(1) IN GENERAL- The requirements of subsection (a)(1) shall not apply to a security-based swap if 1 of the counterparties to the security-based swap--
‘(A) is not a financial entity;
‘(B) is using security-based swaps to hedge or mitigate commercial risk; and
‘(C) notifies the Commission, in a manner set forth by the Commission, how it generally meets its financial obligations associated with entering into non-cleared security-based swaps.
‘(2) OPTION TO CLEAR- The application of the clearing exception in paragraph (1) is solely at the discretion of the counterparty to the security-based swap that meets the conditions of subparagraphs (A) through (C) of paragraph (1).
‘(3) FINANCIAL ENTITY DEFINITION-
‘(A) IN GENERAL- For the purposes of this subsection, the term ‘financial entity’ means--
‘(i) a swap dealer;
‘(ii) a security-based swap dealer;
‘(iii) a major swap participant;
‘(iv) a major security-based swap participant;
‘(v) a commodity pool as defined in section 1a(10) of the Commodity Exchange Act;
‘(vi) a private fund as defined in section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80-b-2(a));
‘(vii) an employee benefit plan as defined in paragraphs (3) and (32) of section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002);
‘(viii) a person predominantly engaged in activities that are in the business of banking or financial in nature, as defined in section 4(k) of the Bank Holding Company Act of 1956.
‘(B) EXCLUSION- The Commission shall consider whether to exempt small banks, savings associations, farm credit system institutions, and credit unions, including--
‘(i) depository institutions with total assets of $10,000,000,000 or less;
‘(ii) farm credit system institutions with total assets of $10,000,000,000 or less; or
‘(iii) credit unions with total assets of $10,000,000,000 or less.
‘(4) TREATMENT OF AFFILIATES-
‘(A) IN GENERAL- An affiliate of a person that qualifies for an exception under this subsection (including affiliate entities predominantly engaged in providing financing for the purchase of the merchandise or manufactured goods of the person) may qualify for the exception only if the affiliate, acting on behalf of the person and as an agent, uses the security-based swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity.
‘(B) PROHIBITION RELATING TO CERTAIN AFFILIATES- The exception in subparagraph (A) shall not apply if the affiliate is--
‘(i) a swap dealer;
‘(ii) a security-based swap dealer;
‘(iii) a major swap participant;
‘(iv) a major security-based swap participant;
‘(v) an issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3), but for paragraph (1) or (7) of subsection (c) of that Act (15 U.S.C. 80a-3(c));
‘(vi) a commodity pool; or
‘(vii) a bank holding company with over $50,000,000,000 in consolidated assets.
‘(C) TRANSITION RULE FOR AFFILIATES- An affiliate, subsidiary, or a wholly owned entity of a person that qualifies for an exception under subparagraph (A) and is predominantly engaged in providing financing for the purchase or lease of merchandise or manufactured goods of the person shall be exempt from the margin requirement described in section 15F(e) and the clearing requirement described in subsection (a) with regard to security-based swaps entered into to mitigate the risk of the financing activities for not less than a 2-year period beginning on the date of enactment of this subparagraph.
‘(5) ELECTION OF COUNTERPARTY-
‘(A) SECURITY-BASED SWAPS REQUIRED TO BE CLEARED- With respect to any security-based swap that is subject to the mandatory clearing requirement under subsection (a) and entered into by a security-based swap dealer or a major security-based swap participant with a counterparty that is not a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant, the counterparty shall have the sole right to select the clearing agency at which the security-based swap will be cleared.
‘(B) SECURITY-BASED SWAPS NOT REQUIRED TO BE CLEARED- With respect to any security-based swap that is not subject to the mandatory clearing requirement under subsection (a) and entered into by a security-based swap dealer or a major security-based swap participant with a counterparty that is not a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant, the counterparty--
‘(i) may elect to require clearing of the security-based swap; and
‘(ii) shall have the sole right to select the clearing agency at which the security-based swap will be cleared.
‘(6) ABUSE OF EXCEPTION- The Commission may prescribe such rules or issue interpretations of the rules as the Commission determines to be necessary to prevent abuse of the exceptions described in this subsection. The Commission may also request information from those persons claiming the clearing exception as necessary to prevent abuse of the exceptions described in this subsection.
‘(h) Trade Execution-
‘(1) IN GENERAL- With respect to transactions involving security-based swaps subject to the clearing requirement of subsection (a)(1), counterparties shall--
‘(A) execute the transaction on an exchange; or
‘(B) execute the transaction on a security-based swap execution facility registered under section 3D or a security-based swap execution facility that is exempt from registration under section 3D(e).
‘(2) EXCEPTION- The requirements of subparagraphs (A) and (B) of paragraph (1) shall not apply if no exchange or security-based swap execution facility makes the security-based swap available to trade or for security-based swap transactions subject to the clearing exception under subsection (g).
‘(i) Board Approval- Exemptions from the requirements of this section to clear a security-based swap or execute a security-based swap through a national securities exchange or security-based swap execution facility shall be available to a counterparty that is an issuer of securities that are registered under section 12 or that is required to file reports pursuant to section 15(d), only if an appropriate committee of the issuer’s board or governing body has reviewed and approved the issuer’s decision to enter into security-based swaps that are subject to such exemptions.
‘(j) Designation of Chief Compliance Officer-
‘(1) IN GENERAL- Each registered clearing agency 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 clearing agency;
‘(B) in consultation with its board, a body performing a function similar thereto, or the senior officer of the registered clearing agency, resolve any conflicts of interest that may arise;
‘(C) be responsible for administering each policy and procedure that is required to be established pursuant to this section;
‘(D) ensure compliance with this title (including regulations issued under this title) relating to agreements, contracts, or transactions, including each rule prescribed by the Commission under this section;
‘(E) establish procedures for the remediation of noncompliance issues identified by the 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
‘(F) 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 registered clearing agency or security-based swap execution facility of the compliance officer with respect to this title (including regulations under this title); and
‘(ii) each policy and procedure of the registered clearing agency of the compliance officer (including the code of ethics and conflict of interest policies of the registered clearing agency).
‘(B) REQUIREMENTS- A compliance report under subparagraph (A) shall--
‘(i) accompany each appropriate financial report of the registered clearing agency 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.’.
(b) Clearing Agency Requirements- Section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q-1) is amended by adding at the end the following:
‘(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.’.
(c) Security-based Swap Execution Facilities- The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 3C (as added by subsection (a) of this section) the following:
‘SEC. 3D. SECURITY-BASED SWAP EXECUTION FACILITIES.
‘(a) Registration-
‘(1) IN GENERAL- No person may operate a facility for the trading or processing of security-based swaps, unless the facility is registered as a security-based swap execution facility or as a national securities exchange under this section.
‘(2) DUAL REGISTRATION- Any person that is registered as a security-based swap execution facility 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 execution facility.
‘(b) Trading and Trade Processing- A security-based swap execution facility that is registered under subsection (a) may--
‘(1) make available for trading any security-based swap; and
‘(2) facilitate trade processing of any security-based swap.
‘(c) Identification of Facility Used To Trade Security-based Swaps by National Securities Exchanges- A national securities exchange shall, to the extent that the exchange also operates a security-based swap execution facility and uses the same electronic trade execution system for listing and executing trades of security-based swaps on or through the exchange and the facility, identify whether electronic trading of such security-based swaps is taking place on or through the national securities exchange or the security-based swap execution facility.
‘(d) Core Principles for Security-based Swap Execution Facilities-
‘(1) COMPLIANCE WITH CORE PRINCIPLES-
‘(A) IN GENERAL- To be registered, and maintain registration, as a security-based swap execution facility, the security-based swap execution facility shall comply with--
‘(i) the 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 EXECUTION FACILITY- Unless otherwise determined by the Commission, by rule or regulation, a security-based swap execution facility described in subparagraph (A) shall have reasonable discretion in establishing the manner in which it complies with the core principles described in this subsection.
‘(2) COMPLIANCE WITH RULES- A security-based swap execution facility shall--
‘(A) establish and enforce compliance with any rule established by such security-based swap execution facility, including--
‘(i) the terms and conditions of the security-based swaps traded or processed on or through the facility; and
‘(ii) any limitation on access to the facility;
‘(B) establish and enforce trading, trade processing, and participation rules that will deter abuses and have the capacity to detect, investigate, and enforce those rules, including means--
‘(i) to provide market participants with impartial access to the market; and
‘(ii) to capture information that may be used in establishing whether rule violations have occurred; and
‘(C) establish rules governing the operation of the facility, including rules specifying trading procedures to be used in entering and executing orders traded or posted on the facility, including block trades.
‘(3) SECURITY-BASED SWAPS NOT READILY SUSCEPTIBLE TO MANIPULATION- The security-based swap execution facility shall permit trading only in security-based swaps that are not readily susceptible to manipulation.
‘(4) MONITORING OF TRADING AND TRADE PROCESSING- The security-based swap execution facility shall--
‘(A) establish and enforce rules or terms and conditions defining, or specifications detailing--
‘(i) trading procedures to be used in entering and executing orders traded on or through the facilities of the security-based swap execution facility; and
‘(ii) procedures for trade processing of security-based swaps on or through the facilities of the security-based swap execution facility; and
‘(B) monitor trading in security-based swaps to prevent manipulation, price distortion, and disruptions of the delivery or cash settlement process through surveillance, compliance, and disciplinary practices and procedures, including methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions.
‘(5) ABILITY TO OBTAIN INFORMATION- The security-based swap execution facility shall--
‘(A) establish and enforce rules that will allow the facility to obtain any necessary information to perform any of the functions described in this subsection;
‘(B) provide the information to the Commission on request; and
‘(C) have the capacity to carry out such international information-sharing agreements as the Commission may require.
‘(6) FINANCIAL INTEGRITY OF TRANSACTIONS- The security-based swap execution facility shall establish and enforce rules and procedures for ensuring the financial integrity of security-based swaps entered on or through the facilities of the security-based swap execution facility, including the clearance and settlement of security-based swaps pursuant to section 3C(a)(1).
‘(7) EMERGENCY AUTHORITY- The security-based swap execution facility shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission, as is necessary and appropriate, including the authority to liquidate or transfer open positions in any security-based swap or to suspend or curtail trading in a security-based swap.
‘(8) TIMELY PUBLICATION OF TRADING INFORMATION-
‘(A) IN GENERAL- The security-based swap execution facility shall make public timely information on price, trading volume, and other trading data on security-based swaps to the extent prescribed by the Commission.
‘(B) CAPACITY OF SECURITY-BASED SWAP EXECUTION FACILITY- The security-based swap execution facility shall be required to have the capacity to electronically capture and transmit and disseminate trade information with respect to transactions executed on or through the facility.
‘(9) RECORDKEEPING AND REPORTING-
‘(A) IN GENERAL- A security-based swap execution facility shall--
‘(i) maintain records of all activities relating to the business of the facility, including a complete audit trail, in a form and manner acceptable to the Commission for a period of 5 years; and
‘(ii) report to the Commission, in a form and manner acceptable to the Commission, such information as the Commission determines to be necessary or appropriate for the Commission to perform the duties of the Commission under this title.
‘(B) REQUIREMENTS- The Commission shall adopt data collection and reporting requirements for security-based swap execution facilities that are comparable to corresponding requirements for clearing agencies and security-based swap data repositories.
‘(10) ANTITRUST CONSIDERATIONS- Unless necessary or appropriate to achieve the purposes of this title, the security-based swap execution facility shall not--
‘(A) adopt any rules or taking any actions that result in any unreasonable restraint of trade; or
‘(B) impose any material anticompetitive burden on trading or clearing.
‘(11) CONFLICTS OF INTEREST- The security-based swap execution facility shall--
‘(A) establish and enforce rules to minimize conflicts of interest in its decision-making process; and
‘(B) establish a process for resolving the conflicts of interest.
‘(12) FINANCIAL RESOURCES-
‘(A) IN GENERAL- The security-based swap execution facility shall have adequate financial, operational, and managerial resources to discharge each responsibility of the security-based swap execution facility, as determined by the Commission.
‘(B) DETERMINATION OF RESOURCE ADEQUACY- The financial resources of a security-based swap execution facility shall be considered to be adequate if the value of the financial resources--
‘(i) enables the organization to meet its financial obligations to its members and participants notwithstanding a default by the member or participant creating the largest financial exposure for that organization in extreme but plausible market conditions; and
‘(ii) exceeds the total amount that would enable the security-based swap execution facility to cover the operating costs of the security-based swap execution facility for a 1-year period, as calculated on a rolling basis.
‘(13) SYSTEM SAFEGUARDS- The security-based swap execution facility shall--
‘(A) establish and maintain a program of risk analysis and oversight to identify and minimize sources of operational risk, through the development of appropriate controls and procedures, and automated systems, that--
‘(i) are reliable and secure; and
‘(ii) have adequate scalable capacity;
‘(B) establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allow for--
‘(i) the timely recovery and resumption of operations; and
‘(ii) the fulfillment of the responsibilities and obligations of the security-based swap execution facility; and
‘(C) periodically conduct tests to verify that the backup resources of the security-based swap execution facility are sufficient to ensure continued--
‘(i) order processing and trade matching;
‘(ii) price reporting;
‘(iii) market surveillance; and
‘(iv) maintenance of a comprehensive and accurate audit trail.
‘(14) DESIGNATION OF CHIEF COMPLIANCE OFFICER-
‘(A) IN GENERAL- Each security-based swap execution facility 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 facility;
‘(ii) review compliance with the core principles in this subsection;
‘(iii) in consultation with the board of the facility, a body performing a function similar to that of a board, or the senior officer of the facility, resolve any conflicts of interest that may arise;
‘(iv) be responsible for establishing and administering the policies and procedures required to be established pursuant to this section;
‘(v) ensure compliance with this title and the rules and regulations issued under this title, including rules prescribed by the Commission pursuant to this section;
‘(vi) establish procedures for the remediation of noncompliance issues found during--
‘(I) compliance office reviews;
‘(II) look backs;
‘(III) internal or external audit findings;
‘(IV) self-reported errors; or
‘(V) through validated complaints; 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 execution facility with this title; and
‘(II) the policies and procedures, including the code of ethics and conflict of interest policies, of the security-based security-based swap execution facility.
‘(ii) REQUIREMENTS- The chief compliance officer shall--
‘(I) submit each report described in clause (i) with the appropriate financial report of the security-based swap execution facility that is required to be submitted to the Commission pursuant to this section; and
‘(II) include in the report a certification that, under penalty of law, the report is accurate and complete.
‘(e) Exemptions- The Commission may exempt, conditionally or unconditionally, a security-based swap execution facility from registration under this section if the Commission finds that the facility is subject to comparable, comprehensive supervision and regulation on a consolidated basis by the Commodity Futures Trading Commission.
‘(f) Rules- The Commission shall prescribe rules governing the regulation of security-based swap execution facilities under this section.’.
(d) Segregation of Assets Held as Collateral in Security-based Swap Transactions- The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 3D (as added by subsection (b)) the following:
‘SEC. 3E. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SECURITY-BASED SWAP TRANSACTIONS.
‘(a) Registration Requirement- It shall be unlawful for any person to accept any money, securities, or property (or to extend any credit in lieu of money, securities, or property) from, for, or on behalf of a security-based swaps customer to margin, guarantee, or secure a security-based swap cleared by or through a clearing agency (including money, securities, or property accruing to the customer as the result of such a security-based swap), unless the person shall have registered under this title with the Commission as a broker, dealer, or security-based swap dealer, and the registration shall not have expired nor been suspended nor revoked.
‘(b) Cleared Security-based Swaps-
‘(1) SEGREGATION REQUIRED- A broker, dealer, or security-based swap dealer shall treat and deal with all money, securities, and property of any security-based swaps customer received to margin, guarantee, or secure a security-based swap cleared by or though a clearing agency (including money, securities, or property accruing to the security-based swaps customer as the result of such a security-based swap) as belonging to the security-based swaps customer.
‘(2) COMMINGLING PROHIBITED- Money, securities, and property of a security-based swaps customer described in paragraph (1) shall be separately accounted for and shall not be commingled with the funds of the broker, dealer, or security-based swap dealer or be used to margin, secure, or guarantee any trades or contracts of any security-based swaps customer or person other than the person for whom the same are held.
‘(c) Exceptions-
‘(1) USE OF FUNDS-
‘(A) IN GENERAL- Notwithstanding subsection (b), money, securities, and property of a security-based swaps customer of a broker, dealer, or security-based swap dealer described in subsection (b) may, for convenience, be commingled and deposited in the same 1 or more accounts with any bank or trust company or with a clearing agency.
‘(B) WITHDRAWAL- Notwithstanding subsection (b), such share of the money, securities, and property described in subparagraph (A) as in the normal course of business shall be necessary to margin, guarantee, secure, transfer, adjust, or settle a cleared security-based swap with a clearing agency, or with any member of the clearing agency, may be withdrawn and applied to such purposes, including the payment of commissions, brokerage, interest, taxes, storage, and other charges, lawfully accruing in connection with the cleared security-based swap.
‘(2) COMMISSION ACTION- Notwithstanding subsection (b), in accordance with such terms and conditions as the Commission may prescribe by rule, regulation, or order, any money, securities, or property of the security-based swaps customer of a broker, dealer, or security-based swap dealer described in subsection (b) may be commingled and deposited as provided in this section with any other money, securities, or property received by the broker, dealer, or security-based swap dealer and required by the Commission to be separately accounted for and treated and dealt with as belonging to the security-based swaps customer of the broker, dealer, or security-based swap dealer.
‘(d) Permitted Investments- Money described in subsection (b) may be invested in obligations of the United States, in general obligations of any State or of any political subdivision of a State, and in obligations fully guaranteed as to principal and interest by the United States, or in any other investment that the Commission may by rule or regulation prescribe, and such investments shall be made in accordance with such rules and regulations and subject to such conditions as the Commission may prescribe.
‘(e) Prohibition- It shall be unlawful for any person, including any clearing agency and any depository institution, that has received any money, securities, or property for deposit in a separate account or accounts as provided in subsection (b) to hold, dispose of, or use any such money, securities, or property as belonging to the depositing broker, dealer, or security-based swap dealer or any person other than the swaps customer of the broker, dealer, or security-based swap dealer.
‘(f) Segregation Requirements for Uncleared Security-based Swaps-
‘(1) SEGREGATION OF ASSETS HELD AS COLLATERAL IN UNCLEARED SECURITY-BASED SWAP TRANSACTIONS-
‘(A) NOTIFICATION- A security-based swap dealer or major security-based swap participant shall be required to notify the counterparty of the security-based swap dealer or major security-based swap participant at the beginning of a security-based swap transaction that the counterparty has the right to require segregation of the funds of other property supplied to margin, guarantee, or secure the obligations of the counterparty.
‘(B) SEGREGATION AND MAINTENANCE OF FUNDS- At the request of a counterparty to a security-based swap that provides funds or other property to a security-based swap dealer or major security-based swap participant to margin, guarantee, or secure the obligations of the counterparty, the security-based swap dealer or major security-based swap participant shall--
‘(i) segregate the funds or other property for the benefit of the counterparty; and
‘(ii) in accordance with such rules and regulations as the Commission may promulgate, maintain the funds or other property in a segregated account separate from the assets and other interests of the security-based swap dealer or major security-based swap participant.
‘(2) APPLICABILITY- The requirements described in paragraph (1) shall--
‘(A) apply only to a security-based swap between a counterparty and a security-based swap dealer or major security-based swap participant that is not submitted for clearing to a clearing agency; and
‘(B)(i) not apply to variation margin payments; or
‘(ii) not preclude any commercial arrangement regarding--
‘(I) the investment of segregated funds or other property that may only be invested in such investments as the Commission may permit by rule or regulation; and
‘(II) the related allocation of gains and losses resulting from any investment of the segregated funds or other property.
‘(3) USE OF INDEPENDENT THIRD-PARTY CUSTODIANS- The segregated account described in paragraph (1) shall be--
‘(A) carried by an independent third-party custodian; and
‘(B) designated as a segregated account for and on behalf of the counterparty.
‘(4) REPORTING REQUIREMENT- If the counterparty does not choose to require segregation of the funds or other property supplied to margin, guarantee, or secure the obligations of the counterparty, the security-based swap dealer or major security-based swap participant shall report to the counterparty of the security-based swap dealer or major security-based swap participant on a quarterly basis that the back office procedures of the security-based swap dealer or major security-based swap participant relating to margin and collateral requirements are in compliance with the agreement of the counterparties.
‘(g) Bankruptcy- A security-based swap, as defined in section 3(a)(68) shall be considered to be a security as such term is used in section 101(53A)(B) and subchapter III of title 11, United States Code. An account that holds a security-based swap, other than a portfolio margining account referred to in section 15(c)(3)(C) shall be considered to be a securities account, as that term is defined in section 741 of title 11, United States Code. The definitions of the terms ‘purchase’ and ‘sale’ in section 3(a)(13) and (14) shall be applied to the terms ‘purchase’ and ‘sale’, as used in section 741 of title 11, United States Code. The term ‘customer’, as defined in section 741 of title 11, United States Code, excludes any person, to the extent that such person has a claim based on any open repurchase agreement, open reverse repurchase agreement, stock borrowed agreement, non-cleared option, or non-cleared security-based swap except to the extent of any margin delivered to or by the customer with respect to which there is a customer protection requirement under section 15(c)(3) or a segregation requirement.’.
(e) Trading in Security-based Swaps- Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding at the end the following:
‘(l) Security-based Swaps- It shall be unlawful for any person to effect a transaction in a security-based swap with or for a person that is not an eligible contract participant, unless such transaction is effected on a national securities exchange registered pursuant to subsection (b).’.
(f) Additions of Security-based Swaps to Certain Enforcement Provisions- Section 9(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78i(b)) is amended by striking paragraphs (1) through (3) and inserting the following:
‘(1) any transaction in connection with any security whereby any party to such transaction acquires--
‘(A) any put, call, straddle, or other option or privilege of buying the security from or selling the security to another without being bound to do so;
‘(B) any security futures product on the security; or
‘(C) any security-based swap involving the security or the issuer of the security;
‘(2) any transaction in connection with any security with relation to which such person has, directly or indirectly, any interest in any--
‘(A) such put, call, straddle, option, or privilege;
‘(B) such security futures product; or
‘(C) such security-based swap; or
‘(3) any transaction in any security for the account of any person who such person has reason to believe has, and who actually has, directly or indirectly, any interest in any--
‘(A) such put, call, straddle, option, or privilege;
‘(B) such security futures product with relation to such security; or
‘(C) any security-based swap involving such security or the issuer of such security.’.
(g) Rulemaking Authority To Prevent Fraud, Manipulation and Deceptive Conduct in Security-based Swaps- Section 9 of the Securities Exchange Act of 1934 (15 U.S.C. 78i) is amended by adding at the end the following:
‘(j) It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange, to effect any transaction in, or to induce or attempt to induce the purchase or sale of, any security-based swap, in connection with which such person engages in any fraudulent, deceptive, or manipulative act or practice, makes any fictitious quotation, or engages in any transaction, practice, or course of business which operates as a fraud or deceit upon any person. The Commission shall, for the purposes of this subsection, by rules and regulations define, and prescribe means reasonably designed to prevent, such transactions, acts, practices, and courses of business as are fraudulent, deceptive, or manipulative, and such quotations as are fictitious.’.
(h) Position Limits and Position Accountability for Security-based Swaps- The Securities Exchange Act of 1934 is amended by inserting after section 10A (15 U.S.C. 78j-1) the following:
‘SEC. 10B. POSITION LIMITS AND POSITION ACCOUNTABILITY FOR SECURITY-BASED SWAPS AND LARGE TRADER REPORTING.
‘(a) Position Limits- As a means reasonably designed to prevent fraud and manipulation, the Commission shall, by rule or regulation, as necessary or appropriate in the public interest or for the protection of investors, establish limits (including related hedge exemption provisions) on the size of positions in any security-based swap that may be held by any person. In establishing such limits, the Commission may require any person to aggregate positions in--
‘(1) any security-based swap and any security or loan or group of securities or loans on which such security-based swap is based, which such security-based swap references, or to which such security-based swap is related as described in paragraph (68) of section 3(a), and any other instrument relating to such security or loan or group or index of securities or loans; or
‘(2) any security-based swap and--
‘(A) any security or group or index of securities, the price, yield, value, or volatility of which, or of which any interest therein, is the basis for a material term of such security-based swap as described in paragraph (68) of section 3(a); and
‘(B) any other instrument relating to the same security or group or index of securities described under subparagraph (A).
‘(b) Exemptions- The Commission, by rule, regulation, or order, may conditionally or unconditionally exempt any person or class of persons, any security-based swap or class of security-based swaps, or any transaction or class of transactions from any requirement the Commission may establish under this section with respect to position limits.
‘(c) SRO Rules-
‘(1) IN GENERAL- As a means reasonably designed to prevent fraud or manipulation, the Commission, by rule, regulation, or order, as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title, may direct a self-regulatory organization--
‘(A) to adopt rules regarding the size of positions in any security-based swap that may be held by--
‘(i) any member of such self-regulatory organization; or
‘(ii) any person for whom a member of such self-regulatory organization effects transactions in such security-based swap; and
‘(B) to adopt rules reasonably designed to ensure compliance with requirements prescribed by the Commission under this subsection.
‘(2) REQUIREMENT TO AGGREGATE POSITIONS- In establishing the limits under paragraph (1), the self-regulatory organization may require such member or person to aggregate positions in--
‘(A) any security-based swap and any security or loan or group or narrow-based security index of securities or loans on which such security-based swap is based, which such security-based swap references, or to which such security-based swap is related as described in section 3(a)(68), and any other instrument relating to such security or loan or group or narrow-based security index of securities or loans; or
‘(B)(i) any security-based swap; and
‘(ii) any security-based swap and any other instrument relating to the same security or group or narrow-based security index of securities.
‘(d) Large Trader Reporting- The Commission, by rule or regulation, may require any person that effects transactions for such person’s own account or the account of others in any securities-based swap or uncleared security-based swap and any security or loan or group or narrow-based security index of securities or loans as set forth in paragraphs (1) and (2) of subsection (a) under this section to report such information as the Commission may prescribe regarding any position or positions in any security-based swap or uncleared security-based swap and any security or loan or group or narrow-based security index of securities or loans and any other instrument relating to such security or loan or group or narrow-based security index of securities or loans as set forth in paragraphs (1) and (2) of subsection (a) under this section.’.
(i) Public Reporting and Repositories for Security-based Swaps- Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended by adding at the end the following:
‘(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 all 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; and
‘(III) foreign ministries.
‘(H) CONFIDENTIALITY AND INDEMNIFICATION AGREEMENT- Before the security-based swap data repository may share information with any entity described in subparagraph (G)--
‘(i) 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; and
‘(ii) each entity shall agree to indemnify the security-based swap data repository and the Commission for any expenses arising from litigation relating to the information provided under section 24.
‘(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.’.
SEC. 764. REGISTRATION AND REGULATION OF SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.
(a) In General- The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 15E (15 U.S.C. 78o-7) the following:
‘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.
‘(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 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 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) 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 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.’.
(b) Savings Clause- Notwithstanding any other provision of this title, nothing in this subtitle shall be construed as divesting any appropriate Federal banking agency of any authority it may have to establish or enforce, with respect to a person for which such agency is the appropriate Federal banking agency, prudential or other standards pursuant to authority by Federal law other than this title.
SEC. 765. RULEMAKING ON CONFLICT OF INTEREST.
(a) In General- In order to mitigate conflicts of interest, not later than 180 days after the date of enactment of the Wall Street Transparency and Accountability Act of 2010, the Securities and Exchange Commission shall adopt rules which may include numerical limits on the control of, or the voting rights with respect to, any clearing agency that clears security-based swaps, or on the control of any security-based swap execution facility or national securities exchange that posts or makes available for trading security-based swaps, by a bank holding company (as defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841)) with total consolidated assets of $50,000,000,000 or more, a nonbank financial company (as defined in section 102) supervised by the Board of Governors of the Federal Reserve System, affiliate of such a bank holding company or nonbank financial company, a security-based swap dealer, major security-based swap participant, or person associated with a security-based swap dealer or major security-based swap participant.
(b) Purposes- The Securities and Exchange Commission shall adopt rules if the Commission determines, after the review described in subsection (a), that such rules are necessary or appropriate to improve the governance of, or to mitigate systemic risk, promote competition, or mitigate conflicts of interest in connection with a security-based swap dealer or major security-based swap participant’s conduct of business with, a clearing agency, national securities exchange, or security-based swap execution facility that clears, posts, or makes available for trading security-based swaps and in which such security-based swap dealer or major security-based swap participant has a material debt or equity investment.
(c) Considerations- In adopting rules pursuant to this section, the Securities and Exchange Commission shall consider any conflicts of interest arising from the amount of equity owned by a single investor, the ability to vote, cause the vote of, or withhold votes entitled to be cast on any matters by the holders of the ownership interest, and the governance arrangements of any derivatives clearing organization that clears swaps, or swap execution facility or board of trade designated as a contract market that posts swaps or makes swaps available for trading.
SEC. 766. REPORTING AND RECORDKEEPING.
(a) In General- The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 13 the following:
‘SEC. 13A. REPORTING AND RECORDKEEPING FOR CERTAIN SECURITY-BASED SWAPS.
‘(a) Required Reporting of Security-based Swaps Not Accepted by Any Clearing Agency or Derivatives Clearing Organization-
‘(1) IN GENERAL- Each security-based swap that is not accepted for clearing by any clearing agency or derivatives clearing organization shall be reported to--
‘(A) a security-based swap data repository described in section 13(n); or
‘(B) in the case in which there is no security-based swap data repository that would accept the security-based swap, to the Commission pursuant to this section within such time period as the Commission may by rule or regulation prescribe.
‘(2) TRANSITION RULE FOR PREENACTMENT SECURITY-BASED SWAPS-
‘(A) SECURITY-BASED SWAPS ENTERED INTO BEFORE THE DATE OF ENACTMENT OF THE WALL STREET TRANSPARENCY AND ACCOUNTABILITY ACT OF 2010- Each security-based swap entered into before the date of enactment of the Wall Street Transparency and Accountability Act of 2010, the terms of which have not expired as of the date of enactment of that Act, shall be reported to a registered security-based swap data repository or the Commission by a date that is not later than--
‘(i) 30 days after issuance of the interim final rule; or
‘(ii) such other period as the Commission determines to be appropriate.
‘(B) COMMISSION RULEMAKING- The Commission shall promulgate an interim final rule within 90 days of the date of enactment of this section providing for the reporting of each security-based swap entered into before the date of enactment as referenced in subparagraph (A).
‘(C) EFFECTIVE DATE- The reporting provisions described in this section shall be effective upon the date of the enactment of this section.
‘(3) REPORTING OBLIGATIONS-
‘(A) SECURITY-BASED SWAPS IN WHICH ONLY 1 COUNTERPARTY IS A SECURITY-BASED SWAP DEALER OR MAJOR SECURITY-BASED SWAP PARTICIPANT- With respect to a security-based swap in which only 1 counterparty is a security-based swap dealer or major security-based swap participant, the security-based swap dealer or major security-based swap participant shall report the security-based swap as required under paragraphs (1) and (2).
‘(B) SECURITY-BASED SWAPS IN WHICH 1 COUNTERPARTY IS A SECURITY-BASED SWAP DEALER AND THE OTHER A MAJOR SECURITY-BASED SWAP PARTICIPANT- With respect to a security-based swap in which 1 counterparty is a security-based swap dealer and the other a major security-based swap participant, the security-based swap dealer shall report the security-based swap as required under paragraphs (1) and (2).
‘(C) OTHER SECURITY-BASED SWAPS- With respect to any other security-based swap not described in subparagraph (A) or (B), the counterparties to the security-based swap shall select a counterparty to report the security-based swap as required under paragraphs (1) and (2).
‘(b) Duties of Certain Individuals- Any individual or entity that enters into a security-based swap shall meet each requirement described in subsection (c) if the individual or entity did not--
‘(1) clear the security-based swap in accordance with section 3C(a)(1); or
‘(2) have the data regarding the security-based swap accepted by a security-based swap data repository in accordance with rules (including timeframes) adopted by the Commission under this title.
‘(c) Requirements- An individual or entity described in subsection (b) shall--
‘(1) upon written request from the Commission, provide reports regarding the security-based swaps held by the individual or entity to the Commission in such form and in such manner as the Commission may request; and
‘(2) maintain books and records pertaining to the security-based swaps held by the individual or entity in such form, in such manner, and for such period as the Commission may require, which shall be open to inspection by--
‘(A) any representative of the Commission;
‘(B) an appropriate prudential regulator;
‘(C) the Commodity Futures Trading Commission;
‘(D) the Financial Stability Oversight Council; and
‘(E) the Department of Justice.
‘(d) Identical Data- In prescribing rules under this section, the Commission shall require individuals and entities described in subsection (b) to submit to the Commission a report that contains data that is not less comprehensive than the data required to be collected by security-based swap data repositories under this title.’.
(b) Beneficial Ownership Reporting- Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended--
(1) in subsection (d)(1), by inserting ‘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’ after ‘Alaska Native Claims Settlement Act,’; and
(2) in subsection (g)(1), by inserting ‘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 rule’ after ‘subsection (d)(1) of this section’.
(c) Reports by Institutional Investment Managers- Section 13(f)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(f)(1)) is amended by inserting ‘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 rule,’ after ‘subsection (d)(1) of this section’.
(d) Administrative Proceeding Authority- Section 15(b)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)(4)) is amended--
(1) in subparagraph (C), by inserting ‘security-based swap dealer, major security-based swap participant,’ after ‘government securities dealer,’; and
(2) in subparagraph (F), by striking ‘broker or dealer’ and inserting ‘broker, dealer, security-based swap dealer, or a major security-based swap participant’.
(e) Security-based Swap Beneficial Ownership- Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended by adding at the end the following:
‘(o) Beneficial Ownership- For purposes of this section and section 16, a person shall be deemed to acquire beneficial ownership of an equity security based on the purchase or sale of a security-based swap, only to the extent that the Commission, by rule, determines after consultation with the prudential regulators and the Secretary of the Treasury, that the purchase or sale of the security-based swap, or class of security-based swap, provides incidents of ownership comparable to direct ownership of the equity security, and that it is necessary to achieve the purposes of this section that the purchase or sale of the security-based swaps, or class of security-based swap, be deemed the acquisition of beneficial ownership of the equity security.’.
SEC. 767. STATE GAMING AND BUCKET SHOP LAWS.
Section 28(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78bb(a)) is amended to read as follows:
‘(a) Limitation on Judgments-
‘(1) IN GENERAL- No person permitted to maintain a suit for damages under the provisions of this title shall recover, through satisfaction of judgment in 1 or more actions, a total amount in excess of the actual damages to that person on account of the act complained of. Except as otherwise specifically provided in this title, nothing in this title shall affect the jurisdiction of the securities commission (or any agency or officer performing like functions) of any State over any security or any person insofar as it does not conflict with the provisions of this title or the rules and regulations under this title.
‘(2) RULE OF CONSTRUCTION- Except as provided in subsection (f), the rights and remedies provided by this title shall be in addition to any and all other rights and remedies that may exist at law or in equity.
‘(3) STATE BUCKET SHOP LAWS- No State law which prohibits or regulates the making or promoting of wagering or gaming contracts, or the operation of ‘bucket shops’ or other similar or related activities, shall invalidate--
‘(A) any put, call, straddle, option, privilege, or other security subject to this title (except any security that has a pari-mutuel payout or otherwise is determined by the Commission, acting by rule, regulation, or order, to be appropriately subject to such laws), or apply to any activity which is incidental or related to the offer, purchase, sale, exercise, settlement, or closeout of any such security;
‘(B) any security-based swap between eligible contract participants; or
‘(C) any security-based swap effected on a national securities exchange registered pursuant to section 6(b).
‘(4) OTHER STATE PROVISIONS- No provision of State law regarding the offer, sale, or distribution of securities shall apply to any transaction in a security-based swap or a security futures product, except that this paragraph may not be construed as limiting any State antifraud law of general applicability. A security-based swap may not be regulated as an insurance contract under any provision of State law.’.
SEC. 768. AMENDMENTS TO THE SECURITIES ACT OF 1933; TREATMENT OF SECURITY-BASED SWAPS.
(a) Definitions- Section 2(a) of the Securities Act of 1933 (15 U.S.C. 77b(a)) is amended--
(1) in paragraph (1), by inserting ‘security-based swap,’ after ‘security future,’;
(2) in paragraph (3), by adding at the end the following: ‘Any offer or sale of a security-based swap by or on behalf of the issuer of the securities upon which such security-based swap is based or is referenced, an affiliate of the issuer, or an underwriter, shall constitute a contract for sale of, sale of, offer for sale, or offer to sell such securities.’; and
(3) by adding at the end the following:
‘(17) The terms ‘swap’ and ‘security-based swap’ have the same meanings as in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).
‘(18) The terms ‘purchase’ or ‘sale’ of a security-based swap shall be deemed to mean the execution, termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of rights or obligations under, a security-based swap, as the context may require.’.
(b) Registration of Security-based Swaps- Section 5 of the Securities Act of 1933 (15 U.S.C. 77e) is amended by adding at the end the following:
‘(d) Notwithstanding the provisions of section 3 or 4, unless a registration statement meeting the requirements of section 10(a) is in effect as to a security-based swap, it shall be unlawful for any person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell, offer to buy or purchase or sell a security-based swap to any person who is not an eligible contract participant as defined in section 1a(18) of the Commodity Exchange Act (7 U.S.C. 1a(18)).’.
SEC. 769. DEFINITIONS UNDER THE INVESTMENT COMPANY ACT OF 1940.
Section 2(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-2) is amended by adding at the end the following:
‘(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).’.
SEC. 770. DEFINITIONS UNDER THE INVESTMENT ADVISERS ACT OF 1940.
Section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2) is amended by adding at the end the following:
‘(29) 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).’.
SEC. 771. OTHER AUTHORITY.
Unless otherwise provided by its terms, this subtitle does not divest any appropriate Federal banking agency, the Securities and Exchange Commission, the Commodity Futures Trading Commission, or any other Federal or State agency, of any authority derived from any other provision of applicable law.
SEC. 772. JURISDICTION.
(a) In General- Section 36 of the Securities Exchange Act of 1934 (15 U.S.C. 78mm) is amended by adding at the end the following:
‘(c) Derivatives- Unless the Commission is expressly authorized by any provision described in this subsection to grant exemptions, the Commission shall not grant exemptions, with respect to amendments made by subtitle B of the Wall Street Transparency and Accountability Act of 2010, with respect to paragraphs (65), (66), (68), (69), (70), (71), (72), (73), (74), (75), (76), and (79) of section 3(a), and sections 10B(a), 10B(b), 10B(c), 13A, 15F, 17A(g), 17A(h), 17A(i), 17A(j), 17A(k), and 17A(l); provided that the Commission shall have exemptive authority under this title with respect to security-based swaps as to the same matters that the Commodity Futures Trading Commission has under the Wall Street Transparency and Accountability Act of 2010 with respect to swaps, including under section 4(c) of the Commodity Exchange Act.’.
(b) Rule of Construction- Section 30 of the Securities Exchange Act of 1934 (15 U.S.C. 78dd) is amended by adding at the end the following:
‘(c) Rule of Construction- No provision of this title that was added by the Wall Street Transparency and Accountability Act of 2010, or any rule or regulation thereunder, shall apply to any person insofar as such person transacts a business in security-based swaps without the jurisdiction of the United States, unless such person transacts such business in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate to prevent the evasion of any provision of this title that was added by the Wall Street Transparency and Accountability Act of 2010. This subsection shall not be construed to limit the jurisdiction of the Commission under any provision of this title, as in effect prior to the date of enactment of the Wall Street Transparency and Accountability Act of 2010.’.
SEC. 773. CIVIL PENALTIES.
Section 21B of the Securities Exchange Act of 1934 (15 U.S.C. 78p-2) is amended by adding at the end the following:
‘(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.’.
SEC. 774. EFFECTIVE DATE.
Unless otherwise provided, the provisions of this subtitle shall take effect on the later of 360 days after the date of the enactment of this subtitle or, to the extent a provision of this subtitle requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of this subtitle.
TITLE VIII--PAYMENT, CLEARING, AND SETTLEMENT SUPERVISION
SEC. 801. SHORT TITLE.
This title may be cited as the ‘Payment, Clearing, and Settlement Supervision Act of 2010’.
SEC. 802. FINDINGS AND PURPOSES.
(a) Findings- Congress finds the following:
(1) The proper functioning of the financial markets is dependent upon safe and efficient arrangements for the clearing and settlement of payment, securities, and other financial transactions.
(2) Financial market utilities that conduct or support multilateral payment, clearing, or settlement activities may reduce risks for their participants and the broader financial system, but such utilities may also concentrate and create new risks and thus must be well designed and operated in a safe and sound manner.
(3) Payment, clearing, and settlement activities conducted by financial institutions also present important risks to the participating financial institutions and to the financial system.
(4) Enhancements to the regulation and supervision of systemically important financial market utilities and the conduct of systemically important payment, clearing, and settlement activities by financial institutions are necessary--
(A) to provide consistency;
(B) to promote robust risk management and safety and soundness;
(C) to reduce systemic risks; and
(D) to support the stability of the broader financial system.
(b) Purpose- The purpose of this title is to mitigate systemic risk in the financial system and promote financial stability by--
(1) authorizing the Board of Governors to promote uniform standards for the--
(A) management of risks by systemically important financial market utilities; and
(B) conduct of systemically important payment, clearing, and settlement activities by financial institutions;
(2) providing the Board of Governors an enhanced role in the supervision of risk management standards for systemically important financial market utilities;
(3) strengthening the liquidity of systemically important financial market utilities; and
(4) providing the Board of Governors an enhanced role in the supervision of risk management standards for systemically important payment, clearing, and settlement activities by financial institutions.
SEC. 803. DEFINITIONS.
In this title, the following definitions shall apply:
(1) APPROPRIATE FINANCIAL REGULATOR- The term ‘appropriate financial regulator’ means--
(A) the primary financial regulatory agency, as defined in section 2 of this Act;
(B) the National Credit Union Administration, with respect to any insured credit union under the Federal Credit Union Act (12 U.S.C. 1751 et seq.); and
(C) the Board of Governors, with respect to organizations operating under section 25A of the Federal Reserve Act (12 U.S.C. 611), and any other financial institution engaged in a designated activity.
(2) DESIGNATED ACTIVITY- The term ‘designated activity’ means a payment, clearing, or settlement activity that the Council has designated as systemically important under section 804.
(3) DESIGNATED CLEARING ENTITY- The term ‘designated clearing entity’ means a designated financial market utility that is a derivatives clearing organization registered under section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) or a clearing agency registered with the Securities and Exchange Commission under section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q-1).
(4) DESIGNATED FINANCIAL MARKET UTILITY- The term ‘designated financial market utility’ means a financial market utility that the Council has designated as systemically important under section 804.
(5) FINANCIAL INSTITUTION-
(A) IN GENERAL- The term ‘financial institution’ means--
(i) a depository institution, as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);
(ii) a branch or agency of a foreign bank, as defined in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 3101);
(iii) an organization operating under section 25 or 25A of the Federal Reserve Act (12 U.S.C. 601-604a and 611 through 631);
(iv) a credit union, as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752);
(v) a broker or dealer, as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c);
(vi) an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3);
(vii) an insurance company, as defined in section 2 of the Investment Company Act of 1940 (15 U.S.C. 80a-2);
(viii) an investment adviser, as defined in section 202 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2);
(ix) a futures commission merchant, commodity trading advisor, or commodity pool operator, as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a); and
(x) any company engaged in activities that are financial in nature or incidental to a financial activity, as described in section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
(B) EXCLUSIONS- The term ‘financial institution’ does not include designated contract markets, registered futures associations, swap data repositories, and swap execution facilities registered under the Commodity Exchange Act (7 U.S.C. 1 et seq.), or national securities exchanges, national securities associations, alternative trading systems, securities information processors solely with respect to the activities of the entity as a securities information processor, security-based swap data repositories, and swap execution facilities registered under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), or designated clearing entities, provided that the exclusions in this subparagraph apply only with respect to the activities that require the entity to be so registered.
(6) FINANCIAL MARKET UTILITY-
(A) INCLUSION- The term ‘financial market utility’ means any person that manages or operates a multilateral system for the purpose of transferring, clearing, or settling payments, securities, or other financial transactions among financial institutions or between financial institutions and the person.
(B) EXCLUSIONS- The term ‘financial market utility’ does not include--
(i) designated contract markets, registered futures associations, swap data repositories, and swap execution facilities registered under the Commodity Exchange Act (7 U.S.C. 1 et seq.), or national securities exchanges, national securities associations, alternative trading systems, security-based swap data repositories, and swap execution facilities registered under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), solely by reason of their providing facilities for comparison of data respecting the terms of settlement of securities or futures transactions effected on such exchange or by means of any electronic system operated or controlled by such entities, provided that the exclusions in this clause apply only with respect to the activities that require the entity to be so registered; and
(ii) any broker, dealer, transfer agent, or investment company, or any futures commission merchant, introducing broker, commodity trading advisor, or commodity pool operator, solely by reason of functions performed by such institution as part of brokerage, dealing, transfer agency, or investment company activities, or solely by reason of acting on behalf of a financial market utility or a participant therein in connection with the furnishing by the financial market utility of services to its participants or the use of services of the financial market utility by its participants, provided that services performed by such institution do not constitute critical risk management or processing functions of the financial market utility.
(7) PAYMENT, CLEARING, OR SETTLEMENT ACTIVITY-
(A) IN GENERAL- The term ‘payment, clearing, or settlement activity’ means an activity carried out by 1 or more financial institutions to facilitate the completion of financial transactions, but shall not include any offer or sale of a security under the Securities Act of 1933 (15 U.S.C. 77a et seq.), or any quotation, order entry, negotiation, or other pre-trade activity or execution activity.
(B) FINANCIAL TRANSACTION- For the purposes of subparagraph (A), the term ‘financial transaction’ includes--
(i) funds transfers;
(ii) securities contracts;
(iii) contracts of sale of a commodity for future delivery;
(iv) forward contracts;
(v) repurchase agreements;
(vi) swaps;
(vii) security-based swaps;
(viii) swap agreements;
(ix) security-based swap agreements;
(x) foreign exchange contracts;
(xi) financial derivatives contracts; and
(xii) any similar transaction that the Council determines to be a financial transaction for purposes of this title.
(C) INCLUDED ACTIVITIES- When conducted with respect to a financial transaction, payment, clearing, and settlement activities may include--
(i) the calculation and communication of unsettled financial transactions between counterparties;
(ii) the netting of transactions;
(iii) provision and maintenance of trade, contract, or instrument information;
(iv) the management of risks and activities associated with continuing financial transactions;
(v) transmittal and storage of payment instructions;
(vi) the movement of funds;
(vii) the final settlement of financial transactions; and
(viii) other similar functions that the Council may determine.
(D) EXCLUSION- Payment, clearing, and settlement activities shall not include public reporting of swap transaction data under section 727 or 763(i) of the Wall Street Transparency and Accountability Act of 2010.
(8) SUPERVISORY AGENCY-
(A) IN GENERAL- The term ‘Supervisory Agency’ means the Federal agency that has primary jurisdiction over a designated financial market utility under Federal banking, securities, or commodity futures laws, as follows:
(i) The Securities and Exchange Commission, with respect to a designated financial market utility that is a clearing agency registered with the Securities and Exchange Commission.
(ii) The Commodity Futures Trading Commission, with respect to a designated financial market utility that is a derivatives clearing organization registered with the Commodity Futures Trading Commission.
(iii) The appropriate Federal banking agency, with respect to a designated financial market utility that is an institution described in section 3(q) of the Federal Deposit Insurance Act.
(iv) The Board of Governors, with respect to a designated financial market utility that is otherwise not subject to the jurisdiction of any agency listed in clauses (i), (ii), and (iii).
(B) MULTIPLE AGENCY JURISDICTION- If a designated financial market utility is subject to the jurisdictional supervision of more than 1 agency listed in subparagraph (A), then such agencies should agree on 1 agency to act as the Supervisory Agency, and if such agencies cannot agree on which agency has primary jurisdiction, the Council shall decide which agency is the Supervisory Agency for purposes of this title.
(9) SYSTEMICALLY IMPORTANT AND SYSTEMIC IMPORTANCE- The terms ‘systemically important’ and ‘systemic importance’ mean a situation where the failure of or a disruption to the functioning of a financial market utility or the conduct of a payment, clearing, or settlement activity could create, or increase, the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the financial system of the United States.
SEC. 804. DESIGNATION OF SYSTEMIC IMPORTANCE.
(a) Designation-
(1) FINANCIAL STABILITY OVERSIGHT COUNCIL- The Council, on a nondelegable basis and by a vote of not fewer than 2/3 of members then serving, including an affirmative vote by the Chairperson of the Council, shall designate those financial market utilities or payment, clearing, or settlement activities that the Council determines are, or are likely to become, systemically important.
(2) CONSIDERATIONS- In determining whether a financial market utility or payment, clearing, or settlement activity is, or is likely to become, systemically important, the Council shall take into consideration the following:
(A) The aggregate monetary value of transactions processed by the financial market utility or carried out through the payment, clearing, or settlement activity.
(B) The aggregate exposure of the financial market utility or a financial institution engaged in payment, clearing, or settlement activities to its counterparties.
(C) The relationship, interdependencies, or other interactions of the financial market utility or payment, clearing, or settlement activity with other financial market utilities or payment, clearing, or settlement activities.
(D) The effect that the failure of or a disruption to the financial market utility or payment, clearing, or settlement activity would have on critical markets, financial institutions, or the broader financial system.
(E) Any other factors that the Council deems appropriate.
(b) Rescission of Designation-
(1) IN GENERAL- The Council, on a nondelegable basis and by a vote of not fewer than 2/3 of members then serving, including an affirmative vote by the Chairperson of the Council, shall rescind a designation of systemic importance for a designated financial market utility or designated activity if the Council determines that the utility or activity no longer meets the standards for systemic importance.
(2) EFFECT OF RESCISSION- Upon rescission, the financial market utility or financial institutions conducting the activity will no longer be subject to the provisions of this title or any rules or orders prescribed under this title.
(c) Consultation and Notice and Opportunity for Hearing-
(1) CONSULTATION- Before making any determination under subsection (a) or (b), the Council shall consult with the relevant Supervisory Agency and the Board of Governors.
(2) ADVANCE NOTICE AND OPPORTUNITY FOR HEARING-
(A) IN GENERAL- Before making any determination under subsection (a) or (b), the Council shall provide the financial market utility or, in the case of a payment, clearing, or settlement activity, financial institutions with advance notice of the proposed determination of the Council.
(B) NOTICE IN FEDERAL REGISTER- The Council shall provide such advance notice to financial institutions by publishing a notice in the Federal Register.
(C) REQUESTS FOR HEARING- Within 30 days from the date of any notice of the proposed determination of the Council, the financial market utility or, in the case of a payment, clearing, or settlement activity, a financial institution engaged in the designated activity may request, in writing, an opportunity for a written or oral hearing before the Council to demonstrate that the proposed designation or rescission of designation is not supported by substantial evidence.
(D) WRITTEN SUBMISSIONS- Upon receipt of a timely request, the Council shall fix a time, not more than 30 days after receipt of the request, unless extended at the request of the financial market utility or financial institution, and place at which the financial market utility or financial institution may appear, personally or through counsel, to submit written materials, or, at the sole discretion of the Council, oral testimony or oral argument.
(3) EMERGENCY EXCEPTION-
(A) WAIVER OR MODIFICATION BY VOTE OF THE COUNCIL- The Council may waive or modify the requirements of paragraph (2) if the Council determines, by an affirmative vote of not fewer than 2/3 of members then serving, including an affirmative vote by the Chairperson of the Council, that the waiver or modification is necessary to prevent or mitigate an immediate threat to the financial system posed by the financial market utility or the payment, clearing, or settlement activity.
(B) NOTICE OF WAIVER OR MODIFICATION- The Council shall provide notice of the waiver or modification to the financial market utility concerned or, in the case of a payment, clearing, or settlement activity, to financial institutions, as soon as practicable, which shall be no later than 24 hours after the waiver or modification in the case of a financial market utility and 3 business days in the case of financial institutions. The Council shall provide the notice to financial institutions by posting a notice on the website of the Council and by publishing a notice in the Federal Register.
(d) Notification of Final Determination-
(1) AFTER HEARING- Within 60 days of any hearing under subsection (c)(2), the Council shall notify the financial market utility or financial institutions of the final determination of the Council in writing, which shall include findings of fact upon which the determination of the Council is based.
(2) WHEN NO HEARING REQUESTED- If the Council does not receive a timely request for a hearing under subsection (c)(2), the Council shall notify the financial market utility or financial institutions of the final determination of the Council in writing not later than 30 days after the expiration of the date by which a financial market utility or a financial institution could have requested a hearing. All notices to financial institutions under this subsection shall be published in the Federal Register.
(e) Extension of Time Periods- The Council may extend the time periods established in subsections (c) and (d) as the Council determines to be necessary or appropriate.
SEC. 805. STANDARDS FOR SYSTEMICALLY IMPORTANT FINANCIAL MARKET UTILITIES AND PAYMENT, CLEARING, OR SETTLEMENT ACTIVITIES.
(a) Authority to Prescribe Standards-
(1) BOARD OF GOVERNORS- Except as provided in paragraph (2), the Board of Governors, by rule or order, and in consultation with the Council and the Supervisory Agencies, shall prescribe risk management standards, taking into consideration relevant international standards and existing prudential requirements, governing--
(A) the operations related to the payment, clearing, and settlement activities of designated financial market utilities; and
(B) the conduct of designated activities by financial institutions.
(2) SPECIAL PROCEDURES FOR DESIGNATED CLEARING ENTITIES AND DESIGNATED ACTIVITIES OF CERTAIN FINANCIAL INSTITUTIONS-
(A) CFTC AND COMMISSION- The Commodity Futures Trading Commission and the Commission may each prescribe regulations, in consultation with the Council and the Board of Governors, containing risk management standards, taking into consideration relevant international standards and existing prudential requirements, for those designated clearing entities and financial institutions engaged in designated activities for which each is the Supervisory Agency or the appropriate financial regulator, governing--
(i) the operations related to payment, clearing, and settlement activities of such designated clearing entities; and
(ii) the conduct of designated activities by such financial institutions.
(B) REVIEW AND DETERMINATION- The Board of Governors may determine that existing prudential requirements of the Commodity Futures Trading Commission, the Commission, or both (including requirements prescribed pursuant to subparagraph (A)) with respect to designated clearing entities and financial institutions engaged in designated activities for which the Commission or the Commodity Futures Trading Commission is the Supervisory Agency or the appropriate financial regulator are insufficient to prevent or mitigate significant liquidity, credit, operational, or other risks to the financial markets or to the financial stability of the United States.
(C) WRITTEN DETERMINATION- Any determination by the Board of Governors under subparagraph (B) shall be provided in writing to the Commodity Futures Trading Commission or the Commission, as applicable, and the Council, and shall explain why existing prudential requirements, considered as a whole, are insufficient to ensure that the operations and activities of the designated clearing entities or the activities of financial institutions described in subparagraph (B) will not pose significant liquidity, credit, operational, or other risks to the financial markets or to the financial stability of the United States. The Board of Governors’ determination shall contain a detailed analysis supporting its findings and identify the specific prudential requirements that are insufficient.
(D) CFTC AND COMMISSION RESPONSE- The Commodity Futures Trading Commission or the Commission, as applicable, shall within 60 days either object to the Board of Governors’ determination with a detailed analysis as to why existing prudential requirements are sufficient, or submit an explanation to the Council and the Board of Governors describing the actions to be taken in response to the Board of Governors’ determination.
(E) AUTHORIZATION- Upon an affirmative vote by not fewer than 2/3 of members then serving on the Council, the Council shall either find that the response submitted under subparagraph (D) is sufficient, or require the Commodity Futures Trading Commission, or the Commission, as applicable, to prescribe such risk management standards as the Council determines is necessary to address the specific prudential requirements that are determined to be insufficient.’
(b) Objectives and Principles- The objectives and principles for the risk management standards prescribed under subsection (a) shall be to--
(1) promote robust risk management;
(2) promote safety and soundness;
(3) reduce systemic risks; and
(4) support the stability of the broader financial system.
(c) Scope- The standards prescribed under subsection (a) may address areas such as--
(1) risk management policies and procedures;
(2) margin and collateral requirements;
(3) participant or counterparty default policies and procedures;
(4) the ability to complete timely clearing and settlement of financial transactions;
(5) capital and financial resource requirements for designated financial market utilities; and
(6) other areas that are necessary to achieve the objectives and principles in subsection (b).
(d) Limitation on Scope- Except as provided in subsections (e) and (f) of section 807, nothing in this title shall be construed to permit the Council or the Board of Governors to take any action or exercise any authority granted to the Commodity Futures Trading Commission under section 2(h) of the Commodity Exchange Act or the Securities and Exchange Commission under section 3C(a) of the Securities Exchange Act of 1934, including--
(1) the approval of, disapproval of, or stay of the clearing requirement for any group, category, type, or class of swaps that a designated clearing entity may accept for clearing;
(2) the determination that any group, category, type, or class of swaps shall be subject to the mandatory clearing requirement of section 2(h)(1) of the Commodity Exchange Act or section 3C(a)(1) of the Securities Exchange Act of 1934;
(3) the determination that any person is exempt from the mandatory clearing requirement of section 2(h)(1) of the Commodity Exchange Act or section 3C(a)(1) of the Securities Exchange Act of 1934; or
(4) any authority granted to the Commodity Futures Trading Commission or the Securities and Exchange Commission with respect to transaction reporting or trade execution.
(e) Threshold Level- The standards prescribed under subsection (a) governing the conduct of designated activities by financial institutions shall, where appropriate, establish a threshold as to the level or significance of engagement in the activity at which a financial institution will become subject to the standards with respect to that activity.
(f) Compliance Required- Designated financial market utilities and financial institutions subject to the standards prescribed under subsection (a) for a designated activity shall conduct their operations in compliance with the applicable risk management standards.
SEC. 806. OPERATIONS OF DESIGNATED FINANCIAL MARKET UTILITIES.
(a) Federal Reserve Account and Services- The Board of Governors may authorize a Federal Reserve Bank to establish and maintain an account for a designated financial market utility and provide the services listed in section 11A(b) of the Federal Reserve Act (12 U.S.C. 248a(b)) and deposit accounts under the first undesignated paragraph of section 13 of the Federal Reserve Act (12 U.S.C. 342) to the designated financial market utility that the Federal Reserve Bank is authorized under the Federal Reserve Act to provide to a depository institution, subject to any applicable rules, orders, standards, or guidelines prescribed by the Board of Governors.
(b) Advances- The Board of Governors may authorize a Federal Reserve bank under section 10B of the Federal Reserve Act (12 U.S.C. 347b) to provide to a designated financial market utility discount and borrowing privileges only in unusual or exigent circumstances, upon the affirmative vote of a majority of the Board of Governors then serving (or such other number in accordance with the provisions of section 11(r)(2) of the Federal Reserve Act (12 U.S.C. 248(r)(2)) after consultation with the Secretary, and upon a showing by the designated financial market utility that it is unable to secure adequate credit accommodations from other banking institutions. All such discounts and borrowing privileges shall be subject to such other limitations, restrictions, and regulations as the Board of Governors may prescribe. Access to discount and borrowing privileges under section 10B of the Federal Reserve Act as authorized in this section does not require a designated financial market utility to be or become a bank or bank holding company.
(c) Earnings on Federal Reserve Balances- A Federal Reserve Bank may pay earnings on balances maintained by or on behalf of a designated financial market utility in the same manner and to the same extent as the Federal Reserve Bank may pay earnings to a depository institution under the Federal Reserve Act, subject to any applicable rules, orders, standards, or guidelines prescribed by the Board of Governors.
(d) Reserve Requirements- The Board of Governors may exempt a designated financial market utility from, or modify any, reserve requirements under section 19 of the Federal Reserve Act (12 U.S.C. 461) applicable to a designated financial market utility.
(e) Changes to Rules, Procedures, or Operations-
(1) ADVANCE NOTICE-
(A) ADVANCE NOTICE OF PROPOSED CHANGES REQUIRED- A designated financial market utility shall provide notice 60 days in advance notice to its Supervisory Agency of any proposed change to its rules, procedures, or operations that could, as defined in rules of each Supervisory Agency, materially affect, the nature or level of risks presented by the designated financial market utility.
(B) TERMS AND STANDARDS PRESCRIBED BY THE SUPERVISORY AGENCIES- Each Supervisory Agency, in consultation with the Board of Governors, shall prescribe regulations that define and describe the standards for determining when notice is required to be provided under subparagraph (A).
(C) CONTENTS OF NOTICE- The notice of a proposed change shall describe--
(i) the nature of the change and expected effects on risks to the designated financial market utility, its participants, or the market; and
(ii) how the designated financial market utility plans to manage any identified risks.
(D) ADDITIONAL INFORMATION- The Supervisory Agency may require a designated financial market utility to provide any information necessary to assess the effect the proposed change would have on the nature or level of risks associated with the designated financial market utility’s payment, clearing, or settlement activities and the sufficiency of any proposed risk management techniques.
(E) NOTICE OF OBJECTION- The Supervisory Agency shall notify the designated financial market utility of any objection regarding the proposed change within 60 days from the later of--
(i) the date that the notice of the proposed change is received; or
(ii) the date any further information requested for consideration of the notice is received.
(F) CHANGE NOT ALLOWED IF OBJECTION- A designated financial market utility shall not implement a change to which the Supervisory Agency has an objection.
(G) CHANGE ALLOWED IF NO OBJECTION WITHIN 60 DAYS- A designated financial market utility may implement a change if it has not received an objection to the proposed change within 60 days of the later of--
(i) the date that the Supervisory Agency receives the notice of proposed change; or
(ii) the date the Supervisory Agency receives any further information it requests for consideration of the notice.
(H) REVIEW EXTENSION FOR NOVEL OR COMPLEX ISSUES- The Supervisory Agency may, during the 60-day review period, extend the review period for an additional 60 days for proposed changes that raise novel or complex issues, subject to the Supervisory Agency providing the designated financial market utility with prompt written notice of the extension. Any extension under this subparagraph will extend the time periods under subparagraphs (E) and (G).
(I) CHANGE ALLOWED EARLIER IF NOTIFIED OF NO OBJECTION- A designated financial market utility may implement a change in less than 60 days from the date of receipt of the notice of proposed change by the Supervisory Agency, or the date the Supervisory Agency receives any further information it requested, if the Supervisory Agency notifies the designated financial market utility in writing that it does not object to the proposed change and authorizes the designated financial market utility to implement the change on an earlier date, subject to any conditions imposed by the Supervisory Agency.
(2) EMERGENCY CHANGES-
(A) IN GENERAL- A designated financial market utility may implement a change that would otherwise require advance notice under this subsection if it determines that--
(i) an emergency exists; and
(ii) immediate implementation of the change is necessary for the designated financial market utility to continue to provide its services in a safe and sound manner.
(B) NOTICE REQUIRED WITHIN 24 HOURS- The designated financial market utility shall provide notice of any such emergency change to its Supervisory Agency, as soon as practicable, which shall be no later than 24 hours after implementation of the change.
(C) CONTENTS OF EMERGENCY NOTICE- In addition to the information required for changes requiring advance notice, the notice of an emergency change shall describe--
(i) the nature of the emergency; and
(ii) the reason the change was necessary for the designated financial market utility to continue to provide its services in a safe and sound manner.
(D) MODIFICATION OR RESCISSION OF CHANGE MAY BE REQUIRED- The Supervisory Agency may require modification or rescission of the change if it finds that the change is not consistent with the purposes of this Act or any applicable rules, orders, or standards prescribed under section 805(a).
(3) COPYING THE BOARD OF GOVERNORS- The Supervisory Agency shall provide the Board of Governors concurrently with a complete copy of any notice, request, or other information it issues, submits, or receives under this subsection.
(4) CONSULTATION WITH BOARD OF GOVERNORS- Before taking any action on, or completing its review of, a change proposed by a designated financial market utility, the Supervisory Agency shall consult with the Board of Governors.
SEC. 807. EXAMINATION OF AND ENFORCEMENT ACTIONS AGAINST DESIGNATED FINANCIAL MARKET UTILITIES.
(a) Examination- Notwithstanding any other provision of law and subject to subsection (d), the Supervisory Agency shall conduct examinations of a designated financial market utility at least once annually in order to determine the following:
(1) The nature of the operations of, and the risks borne by, the designated financial market utility.
(2) The financial and operational risks presented by the designated financial market utility to financial institutions, critical markets, or the broader financial system.
(3) The resources and capabilities of the designated financial market utility to monitor and control such risks.
(4) The safety and soundness of the designated financial market utility.
(5) The designated financial market utility’s compliance with--
(A) this title; and
(B) the rules and orders prescribed under this title.
(b) Service Providers- Whenever a service integral to the operation of a designated financial market utility is performed for the designated financial market utility by another entity, whether an affiliate or non-affiliate and whether on or off the premises of the designated financial market utility, the Supervisory Agency may examine whether the provision of that service is in compliance with applicable law, rules, orders, and standards to the same extent as if the designated financial market utility were performing the service on its own premises.
(c) Enforcement- For purposes of enforcing the provisions of this title, a designated financial market utility shall be subject to, and the appropriate Supervisory Agency shall have authority under the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same manner and to the same extent as if the designated financial market utility was an insured depository institution and the Supervisory Agency was the appropriate Federal banking agency for such insured depository institution.
(d) Board of Governors Involvement in Examinations-
(1) BOARD OF GOVERNORS CONSULTATION ON EXAMINATION PLANNING- The Supervisory Agency shall consult annually with the Board of Governors regarding the scope and methodology of any examination conducted under subsections (a) and (b). The Supervisory Agency shall lead all examinations conducted under subsections (a) and (b)
(2) BOARD OF GOVERNORS PARTICIPATION IN EXAMINATION- The Board of Governors may, in its discretion, participate in any examination led by a Supervisory Agency and conducted under subsections (a) and (b).
(e) Board of Governors Enforcement Recommendations-
(1) RECOMMENDATION- The Board of Governors may, after consulting with the Council and the Supervisory Agency, at any time recommend to the Supervisory Agency that such agency take enforcement action against a designated financial market utility in order to prevent or mitigate significant liquidity, credit, operational, or other risks to the financial markets or to the financial stability of the United States. Any such recommendation for enforcement action shall provide a detailed analysis supporting the recommendation of the Board of Governors.
(2) CONSIDERATION- The Supervisory Agency shall consider the recommendation of the Board of Governors and submit a response to the Board of Governors within 60 days.
(3) BINDING ARBITRATION- If the Supervisory Agency rejects, in whole or in part, the recommendation of the Board of Governors, the Board of Governors may refer the recommendation to the Council for a binding decision on whether an enforcement action is warranted.
(4) ENFORCEMENT ACTION- Upon an affirmative vote by a majority of the Council in favor of the Board of Governors’ recommendation under paragraph (3), the Council may require the Supervisory Agency to--
(A) exercise the enforcement authority referenced in subsection (c); and
(B) take enforcement action against the designated financial market utility.
(f) Emergency Enforcement Actions by the Board of Governors-
(1) IMMINENT RISK OF SUBSTANTIAL HARM- The Board of Governors may, after consulting with the Supervisory Agency and upon an affirmative vote by a majority the Council, take enforcement action against a designated financial market utility if the Board of Governors has reasonable cause to conclude that--
(A) either--
(i) an action engaged in, or contemplated by, a designated financial market utility (including any change proposed by the designated financial market utility to its rules, procedures, or operations that would otherwise be subject to section 806(e)) poses an imminent risk of substantial harm to financial institutions, critical markets, or the broader financial system of the United States; or
(ii) the condition of a designated financial market utility poses an imminent risk of substantial harm to financial institutions, critical markets, or the broader financial system; and
(B) the imminent risk of substantial harm precludes the Board of Governors’ use of the procedures in subsection (e).
(2) ENFORCEMENT AUTHORITY- For purposes of taking enforcement action under paragraph (1), a designated financial market utility shall be subject to, and the Board of Governors shall have authority under the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same manner and to the same extent as if the designated financial market utility was an insured depository institution and the Board of Governors was the appropriate Federal banking agency for such insured depository institution.
SEC. 808. EXAMINATION OF AND ENFORCEMENT ACTIONS AGAINST FINANCIAL INSTITUTIONS SUBJECT TO STANDARDS FOR DESIGNATED ACTIVITIES.
(a) Examination- The appropriate financial regulator is authorized to examine a financial institution subject to the standards prescribed under section 805(a) for a designated activity in order to determine the following:
(1) The nature and scope of the designated activities engaged in by the financial institution.
(2) The financial and operational risks the designated activities engaged in by the financial institution may pose to the safety and soundness of the financial institution.
(3) The financial and operational risks the designated activities engaged in by the financial institution may pose to other financial institutions, critical markets, or the broader financial system.
(4) The resources available to and the capabilities of the financial institution to monitor and control the risks described in paragraphs (2) and (3).
(5) The financial institution’s compliance with this title and the rules and orders prescribed under section 805(a).
(b) Enforcement- For purposes of enforcing the provisions of this title, and the rules and orders prescribed under this section, a financial institution subject to the standards prescribed under section 805(a) for a designated activity shall be subject to, and the appropriate financial regulator shall have authority under the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same manner and to the same extent as if the financial institution was an insured depository institution and the appropriate financial regulator was the appropriate Federal banking agency for such insured depository institution.
(c) Technical Assistance- The Board of Governors shall consult with and provide such technical assistance as may be required by the appropriate financial regulators to ensure that the rules and orders prescribed under this title are interpreted and applied in as consistent and uniform a manner as practicable.
(d) Delegation-
(1) EXAMINATION-
(A) REQUEST TO BOARD OF GOVERNORS- The appropriate financial regulator may request the Board of Governors to conduct or participate in an examination of a financial institution subject to the standards prescribed under section 805(a) for a designated activity in order to assess the compliance of such financial institution with--
(i) this title; or
(ii) the rules or orders prescribed under this title.
(B) EXAMINATION BY BOARD OF GOVERNORS- Upon receipt of an appropriate written request, the Board of Governors will conduct the examination under such terms and conditions to which the Board of Governors and the appropriate financial regulator mutually agree.
(2) ENFORCEMENT-
(A) REQUEST TO BOARD OF GOVERNORS- The appropriate financial regulator may request the Board of Governors to enforce this title or the rules or orders prescribed under this title against a financial institution that is subject to the standards prescribed under section 805(a) for a designated activity.
(B) ENFORCEMENT BY BOARD OF GOVERNORS- Upon receipt of an appropriate written request, the Board of Governors shall determine whether an enforcement action is warranted, and, if so, it shall enforce compliance with this title or the rules or orders prescribed under this title and, if so, the financial institution shall be subject to, and the Board of Governors shall have authority under the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same manner and to the same extent as if the financial institution was an insured depository institution and the Board of Governors was the appropriate Federal banking agency for such insured depository institution.
(e) Back-up Authority of the Board of Governors-
(1) EXAMINATION AND ENFORCEMENT- Notwithstanding any other provision of law, the Board of Governors may--
(A) conduct an examination of the type described in subsection (a) of any financial institution that is subject to the standards prescribed under section 805(a) for a designated activity; and
(B) enforce the provisions of this title or any rules or orders prescribed under this title against any financial institution that is subject to the standards prescribed under section 805(a) for a designated activity.
(2) LIMITATIONS-
(A) EXAMINATION- The Board of Governors may exercise the authority described in paragraph (1)(A) only if the Board of Governors has--
(i) reasonable cause to believe that a financial institution is not in compliance with this title or the rules or orders prescribed under this title with respect to a designated activity;
(ii) notified, in writing, the appropriate financial regulator and the Council of its belief under clause (i) with supporting documentation included;
(iii) requested the appropriate financial regulator to conduct a prompt examination of the financial institution;
(iv) either--
(I) not been afforded a reasonable opportunity to participate in an examination of the financial institution by the appropriate financial regulator within 30 days after the date of the Board’s notification under clause (ii); or
(II) reasonable cause to believe that the financial institution’s noncompliance with this title or the rules or orders prescribed under this title poses a substantial risk to other financial institutions, critical markets, or the broader financial system, subject to the Board of Governors affording the appropriate financial regulator a reasonable opportunity to participate in the examination; and
(v) obtained the approval of the Council upon an affirmative vote by a majority of the Council.
(B) ENFORCEMENT- The Board of Governors may exercise the authority described in paragraph (1)(B) only if the Board of Governors has--
(i) reasonable cause to believe that a financial institution is not in compliance with this title or the rules or orders prescribed under this title with respect to a designated activity;
(ii) notified, in writing, the appropriate financial regulator and the Council of its belief under clause (i) with supporting documentation included and with a recommendation that the appropriate financial regulator take 1 or more specific enforcement actions against the financial institution;
(iii) either--
(I) not been notified, in writing, by the appropriate financial regulator of the commencement of an enforcement action recommended by the Board of Governors against the financial institution within 60 days from the date of the notification under clause (ii); or
(II) reasonable cause to believe that the financial institution’s noncompliance with this title or the rules or orders prescribed under this title poses significant liquidity, credit, operational, or other risks to the financial markets or to the financial stability of the United States, subject to the Board of Governors notifying the appropriate financial regulator of the Board’s enforcement action; and
(iv) obtained the approval of the Council upon an affirmative vote by a majority of the Council.
(3) ENFORCEMENT PROVISIONS- For purposes of taking enforcement action under paragraph (1), the financial institution shall be subject to, and the Board of Governors shall have authority under the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same manner and to the same extent as if the financial institution was an insured depository institution and the Board of Governors was the appropriate Federal banking agency for such insured depository institution.
SEC. 809. REQUESTS FOR INFORMATION, REPORTS, OR RECORDS.
(a) Information To Assess Systemic Importance-
(1) FINANCIAL MARKET UTILITIES- The Council is authorized to require any financial market utility to submit such information as the Council may require for the sole purpose of assessing whether that financial market utility is systemically important, but only if the Council has reasonable cause to believe that the financial market utility meets the standards for systemic importance set forth in section 804.
(2) FINANCIAL INSTITUTIONS ENGAGED IN PAYMENT, CLEARING, OR SETTLEMENT ACTIVITIES- The Council is authorized to require any financial institution to submit such information as the Council may require for the sole purpose of assessing whether any payment, clearing, or settlement activity engaged in or supported by a financial institution is systemically important, but only if the Council has reasonable cause to believe that the activity meets the standards for systemic importance set forth in section 804.
(b) Reporting After Designation-
(1) DESIGNATED FINANCIAL MARKET UTILITIES- The Board of Governors and the Council may each require a designated financial market utility to submit reports or data to the Board of Governors and the Council in such frequency and form as deemed necessary by the Board of Governors or the Council in order to assess the safety and soundness of the utility and the systemic risk that the utility’s operations pose to the financial system.
(2) FINANCIAL INSTITUTIONS SUBJECT TO STANDARDS FOR DESIGNATED ACTIVITIES- The Board of Governors and the Council may each require 1 or more financial institutions subject to the standards prescribed under section 805(a) for a designated activity to submit, in such frequency and form as deemed necessary by the Board of Governors or the Council, reports and data to the Board of Governors and the Council solely with respect to the conduct of the designated activity and solely to assess whether--
(A) the rules, orders, or standards prescribed under section 805(a) with respect to the designated activity appropriately address the risks to the financial system presented by such activity; and
(B) the financial institutions are in compliance with this title and the rules and orders prescribed under section 805(a) with respect to the designated activity.
(3) LIMITATION- The Board of Governors may, upon an affirmative vote by a majority of the Council, prescribe regulations under this section that impose a recordkeeping or reporting requirement on designated clearing entities or financial institutions engaged in designated activities that are subject to standards that have been prescribed under section 805(a)(2).
(c) Coordination With Appropriate Federal Supervisory Agency-
(1) ADVANCE COORDINATION- Before requesting any material information from, or imposing reporting or recordkeeping requirements on, any financial market utility or any financial institution engaged in a payment, clearing, or settlement activity, the Board of Governors or the Council shall coordinate with the Supervisory Agency for a financial market utility or the appropriate financial regulator for a financial institution to determine if the information is available from or may be obtained by the agency in the form, format, or detail required by the Board of Governors or the Council.
(2) SUPERVISORY REPORTS- Notwithstanding any other provision of law, the Supervisory Agency, the appropriate financial regulator, and the Board of Governors are authorized to disclose to each other and the Council copies of its examination reports or similar reports regarding any financial market utility or any financial institution engaged in payment, clearing, or settlement activities.
(d) Timing of Response From Appropriate Federal Supervisory Agency- If the information, report, records, or data requested by the Board of Governors or the Council under subsection (c)(1) are not provided in full by the Supervisory Agency or the appropriate financial regulator in less than 15 days after the date on which the material is requested, the Board of Governors or the Council may request the information or impose recordkeeping or reporting requirements directly on such persons as provided in subsections (a) and (b) with notice to the agency.
(e) Sharing of Information-
(1) MATERIAL CONCERNS- Notwithstanding any other provision of law, the Board of Governors, the Council, the appropriate financial regulator, and any Supervisory Agency are authorized to--
(A) promptly notify each other of material concerns about a designated financial market utility or any financial institution engaged in designated activities; and
(B) share appropriate reports, information, or data relating to such concerns.
(2) OTHER INFORMATION- Notwithstanding any other provision of law, the Board of Governors, the Council, the appropriate financial regulator, or any Supervisory Agency may, under such terms and conditions as it deems appropriate, provide confidential supervisory information and other information obtained under this title to each other, and to the Secretary, Federal Reserve Banks, State financial institution supervisory agencies, foreign financial supervisors, foreign central banks, and foreign finance ministries, subject to reasonable assurances of confidentiality, provided, however, that no person or entity receiving information pursuant to this section may disseminate such information to entities or persons other than those listed in this paragraph without complying with applicable law, including section 8 of the Commodity Exchange Act (7 U.S.C. 12).
(f) Privilege Maintained- The Board of Governors, the Council, the appropriate financial regulator, and any Supervisory Agency providing reports or data under this section shall not be deemed to have waived any privilege applicable to those reports or data, or any portion thereof, by providing the reports or data to the other party or by permitting the reports or data, or any copies thereof, to be used by the other party.
(g) Disclosure Exemption- Information obtained by the Board of Governors, the Supervisory Agencies, or the Council under this section and any materials prepared by the Board of Governors, the Supervisory Agencies, or the Council regarding their assessment of the systemic importance of financial market utilities or any payment, clearing, or settlement activities engaged in by financial institutions, and in connection with their supervision of designated financial market utilities and designated activities, shall be confidential supervisory information exempt from disclosure under section 552 of title 5, United States Code. For purposes of such section 552, this subsection shall be considered a statute described in subsection (b)(3) of such section 552.
SEC. 810. RULEMAKING.
The Board of Governors, the Supervisory Agencies, and the Council are authorized to prescribe such rules and issue such orders as may be necessary to administer and carry out their respective authorities and duties granted under this title and prevent evasions thereof.
SEC. 811. OTHER AUTHORITY.
Unless otherwise provided by its terms, this title does not divest any appropriate financial regulator, any Supervisory Agency, or any other Federal or State agency, of any authority derived from any other applicable law, except that any standards prescribed by the Board of Governors under section 805 shall supersede any less stringent requirements established under other authority to the extent of any conflict.
SEC. 812. CONSULTATION.
(a) CFTC- The Commodity Futures Trading Commission shall consult with the Board of Governors--
(1) prior to exercising its authorities under sections 2(h)(2)(C), 2(h)(3)(A), 2(h)(3)(C), 2(h)(4)(A), and 2(h)(4)(B) of the Commodity Exchange Act, as amended by the Wall Street Transparency and Accountability Act of 2010;
(2) with respect to any rule or rule amendment of a derivatives clearing organization for which a stay of certification has been issued under section 745(b)(3) of the Wall Street Transparency and Accountability Act of 2010; and
(3) prior to exercising its rulemaking authorities under section 728 of the Wall Street Transparency and Accountability Act of 2010.
(b) SEC- The Commission shall consult with the Board of Governors--
(1) prior to exercising its authorities under sections 3C(a)(2)(C), 3C(a)(3)(A), 3C(a)(3)(C), 3C(a)(4)(A), and 3C(a)(4)(B) of the Securities Exchange Act of 1934, as amended by the Wall Street Transparency and Accountability Act of 2010;
(2) with respect to any proposed rule change of a clearing agency for which an extension of the time for review has been designated under section 19(b)(2) of the Securities Exchange Act of 1934; and
(3) prior to exercising its rulemaking authorities under section 13(n) of the Securities Exchange Act of 1934, as added by section 763(i) of the Wall Street Transparency and Accountability Act of 2010.
SEC. 813. COMMON FRAMEWORK FOR DESIGNATED CLEARING ENTITY RISK MANAGEMENT.
The Commodity Futures Trading Commission and the Commission shall coordinate with the Board of Governors to jointly develop risk management supervision programs for designated clearing entities. Not later than 1 year after the date of enactment of this Act, the Commodity Futures Trading Commission, the Commission, and the Board of Governors shall submit a joint report to the Committee on Banking, Housing, and Urban Affairs and the Committee on Agriculture, Nutrition, and Forestry of the Senate, and the Committee on Financial Services and the Committee on Agriculture of the House of Representatives recommendations for--
(1) improving consistency in the designated clearing entity oversight programs of the Commission and the Commodity Futures Trading Commission;
(2) promoting robust risk management by designated clearing entities;
(3) promoting robust risk management oversight by regulators of designated clearing entities; and
(4) improving regulators’ ability to monitor the potential effects of designated clearing entity risk management on the stability of the financial system of the United States.
SEC. 814. EFFECTIVE DATE.
This title is effective as of the date of enactment of this Act.
TITLE IX--INVESTOR PROTECTIONS AND IMPROVEMENTS TO THE REGULATION OF SECURITIES
SEC. 901. SHORT TITLE.
This title may be cited as the ‘Investor Protection and Securities Reform Act of 2010’.
Subtitle A--Increasing Investor Protection
SEC. 911. INVESTOR ADVISORY COMMITTEE ESTABLISHED.
Title I of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by adding at the end the following:
‘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 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.
‘(2) TERM- Each member of the Committee appointed under paragraph (1)(B) shall serve for a term of 4 years.
‘(3) MEMBERS NOT COMMISSION EMPLOYEES- Members appointed under paragraph (1)(B) 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).
‘(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. 912. CLARIFICATION OF AUTHORITY OF THE COMMISSION TO ENGAGE IN INVESTOR TESTING.
Section 19 of the Securities Act of 1933 (15 U.S.C. 77s) is amended by adding at the end the following:
‘(e) Evaluation of Rules or Programs- For the purpose of evaluating any rule or program of the Commission issued or carried out under any provision of the securities laws, as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c), and the purposes of considering, proposing, adopting, or engaging in any such rule or program or developing new rules or programs, the Commission may--
‘(1) gather information from and communicate with investors or other members of the public;
‘(2) engage in such temporary investor testing programs as the Commission determines are in the public interest or would protect investors; and
‘(3) consult with academics and consultants, as necessary to carry out this subsection.
‘(f) Rule of Construction- For purposes of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.), any action taken under subsection (e) shall not be construed to be a collection of information.’.
SEC. 913. STUDY AND RULEMAKING REGARDING OBLIGATIONS OF BROKERS, DEALERS, AND INVESTMENT ADVISERS.
(a) Definition- For purposes of this section, the term ‘retail customer’ means a natural person, or the legal representative of such natural person, who--
(1) receives personalized investment advice about securities from a broker or dealer or investment adviser; and
(2) uses such advice primarily for personal, family, or household purposes.
(b) Study- The Commission shall conduct a study to evaluate--
(1) the effectiveness of existing legal or regulatory standards of care for brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers for providing personalized investment advice and recommendations about securities to retail customers imposed by the Commission and a national securities association, and other Federal and State legal or regulatory standards; and
(2) whether there are legal or regulatory gaps, shortcomings, or overlaps in legal or regulatory standards in the protection of retail customers relating to the standards of care for brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers for providing personalized investment advice about securities to retail customers that should be addressed by rule or statute.
(c) Considerations- In conducting the study required under subsection (b), the Commission shall consider--
(1) the effectiveness of existing legal or regulatory standards of care for brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers for providing personalized investment advice and recommendations about securities to retail customers imposed by the Commission and a national securities association, and other Federal and State legal or regulatory standards;
(2) whether there are legal or regulatory gaps, shortcomings, or overlaps in legal or regulatory standards in the protection of retail customers relating to the standards of care for brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers for providing personalized investment advice about securities to retail customers that should be addressed by rule or statute;
(3) whether retail customers understand that there are different standards of care applicable to brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers in the provision of personalized investment advice about securities to retail customers;
(4) whether the existence of different standards of care applicable to brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers is a source of confusion for retail customers regarding the quality of personalized investment advice that retail customers receive;
(5) the regulatory, examination, and enforcement resources devoted to, and activities of, the Commission, the States, and a national securities association to enforce the standards of care for brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers when providing personalized investment advice and recommendations about securities to retail customers, including--
(A) the effectiveness of the examinations of brokers, dealers, and investment advisers in determining compliance with regulations;
(B) the frequency of the examinations; and
(C) the length of time of the examinations;
(6) the substantive differences in the regulation of brokers, dealers, and investment advisers, when providing personalized investment advice and recommendations about securities to retail customers;
(7) the specific instances related to the provision of personalized investment advice about securities in which--
(A) the regulation and oversight of investment advisers provide greater protection to retail customers than the regulation and oversight of brokers and dealers; and
(B) the regulation and oversight of brokers and dealers provide greater protection to retail customers than the regulation and oversight of investment advisers;
(8) the existing legal or regulatory standards of State securities regulators and other regulators intended to protect retail customers;
(9) the potential impact on retail customers, including the potential impact on access of retail customers to the range of products and services offered by brokers and dealers, of imposing upon brokers, dealers, and persons associated with brokers or dealers--
(A) the standard of care applied under the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) for providing personalized investment advice about securities to retail customers of investment advisers, as interpreted by the Commission and the courts; and
(B) other requirements of the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.);
(10) the potential impact of eliminating the broker and dealer exclusion from the definition of ‘investment adviser’ under section 202(a)(11)(C) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)(C)), in terms of--
(A) the impact and potential benefits and harm to retail customers that could result from such a change, including any potential impact on access to personalized investment advice and recommendations about securities to retail customers or the availability of such advice and recommendations;
(B) the number of additional entities and individuals that would be required to register under, or become subject to, the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.), and the additional requirements to which brokers, dealers, and persons associated with brokers and dealers would become subject, including--
(i) any potential additional associated person licensing, registration, and examination requirements; and
(ii) the additional costs, if any, to the additional entities and individuals; and
(C) the impact on Commission and State resources to--
(i) conduct examinations of registered investment advisers and the representatives of registered investment advisers, including the impact on the examination cycle; and
(ii) enforce the standard of care and other applicable requirements imposed under the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.);
(11) the varying level of services provided by brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers to retail customers and the varying scope and terms of retail customer relationships of brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers with such retail customers;
(12) the potential impact upon retail customers that could result from potential changes in the regulatory requirements or legal standards of care affecting brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers relating to their obligations to retail customers regarding the provision of investment advice, including any potential impact on--
(A) protection from fraud;
(B) access to personalized investment advice, and recommendations about securities to retail customers; or
(C) the availability of such advice and recommendations;
(13) the potential additional costs and expenses to--
(A) retail customers regarding and the potential impact on the profitability of their investment decisions; and
(B) brokers, dealers, and investment advisers resulting from potential changes in the regulatory requirements or legal standards affecting brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers relating to their obligations, including duty of care, to retail customers; and
(14) any other consideration that the Commission considers necessary and appropriate in determining whether to conduct a rulemaking under subsection (f).
(d) Report-
(1) IN GENERAL- Not later than 6 months after the date of enactment of this Act, the Commission shall submit a report on the study required under subsection (b) to--
(A) the Committee on Banking, Housing, and Urban Affairs of the Senate; and
(B) the Committee on Financial Services of the House of Representatives.
(2) CONTENT REQUIREMENTS- The report required under paragraph (1) shall describe the findings, conclusions, and recommendations of the Commission from the study required under subsection (b), including--
(A) a description of the considerations, analysis, and public and industry input that the Commission considered, as required under subsection (b), to make such findings, conclusions, and policy recommendations; and
(B) an analysis of whether any identified legal or regulatory gaps, shortcomings, or overlap in legal or regulatory standards in the protection of retail customers relating to the standards of care for brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers for providing personalized investment advice about securities to retail customers.
(e) Public Comment- The Commission shall seek and consider public input, comments, and data in order to prepare the report required under subsection (d).
(f) Rulemaking- The Commission may commence a rulemaking, as necessary or appropriate in the public interest and for the protection of retail customers (and such other customers as the Commission may by rule provide), to address the legal or regulatory standards of care for brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers for providing personalized investment advice about securities to such retail customers. The Commission shall consider the findings conclusions, and recommendations of the study required under subsection (b).
(g) Authority to Establish a Fiduciary Duty for Brokers and Dealers-
(1) SECURITIES EXCHANGE ACT OF 1934- Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended by adding at the end the following:
‘(k) 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).
‘(l) Other Matters- The Commission shall--
‘(1) facilitate the provision of simple and clear disclosures to investors regarding the terms of their relationships with brokers, dealers, and investment advisers, including any material conflicts of interest; and
‘(2) examine and, where appropriate, promulgate rules prohibiting or restricting certain sales practices, conflicts of interest, and compensation schemes for brokers, dealers, and investment advisers that the Commission deems contrary to the public interest and the protection of investors.’.
(2) INVESTMENT ADVISERS ACT OF 1940- Section 211 of the Investment Advisers Act of 1940, is further amended by adding at the end the following new subsections:
‘(g) Standard of Conduct-
‘(1) IN GENERAL- The Commission may promulgate rules to provide that the standard of conduct for all brokers, dealers, and investment advisers, when providing personalized investment advice about securities to retail customers (and such other customers as the Commission may by rule provide), shall be to act in the best interest of the customer without regard to the financial or other interest of the broker, dealer, or investment adviser providing the advice. In accordance with such rules, any material conflicts of interest shall be disclosed and may be consented to by the customer. Such rules shall provide that such standard of conduct shall be no less stringent than the standard applicable to investment advisers under section 206(1) and (2) of this Act when providing personalized investment advice about securities, except the Commission shall not ascribe a meaning to the term ‘customer’ that would include an investor in a private fund managed by an investment adviser, where such private fund has entered into an advisory contract with such adviser. The receipt of compensation based on commission or fees shall not, in and of itself, be considered a violation of such standard applied to a broker, dealer, or investment adviser.
‘(2) RETAIL CUSTOMER DEFINED- For purposes of this subsection, the term ‘retail customer’ means a natural person, or the legal representative of such natural person, who--
‘(A) receives personalized investment advice about securities from a broker, dealer, or investment adviser; and
‘(B) uses such advice primarily for personal, family, or household purposes.
‘(h) Other Matters- The Commission shall--
‘(1) facilitate the provision of simple and clear disclosures to investors regarding the terms of their relationships with brokers, dealers, and investment advisers, including any material conflicts of interest; and
‘(2) examine and, where appropriate, promulgate rules prohibiting or restricting certain sales practices, conflicts of interest, and compensation schemes for brokers, dealers, and investment advisers that the Commission deems contrary to the public interest and the protection of investors.’.
(h) Harmonization of Enforcement-
(1) SECURITIES EXCHANGE ACT OF 1934- Section 15 of the Securities Exchange Act of 1934, as amended by subsection (g)(1), is further amended by adding at the end the following new subsection:
‘(m) Harmonization of Enforcement- The enforcement authority of the Commission with respect to violations of the standard of conduct applicable to a broker or dealer providing personalized investment advice about securities to a retail customer shall include--
‘(1) the enforcement authority of the Commission with respect to such violations provided under this Act; and
‘(2) the enforcement authority of the Commission with respect to violations of the standard of conduct applicable to an investment 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 same extent as the Commission prosecutes and sanctions violators of the standard of conduct applicable to an investment advisor under the Investment Advisers Act of 1940.’.
(2) INVESTMENT ADVISERS ACT OF 1940- Section 211 of the Investment Advisers Act of 1940, as amended by subsection (g)(2), is further amended by adding at the end the following new subsection:
‘(i) Harmonization of Enforcement- The enforcement authority of the Commission with respect to violations of the standard of conduct applicable to an investment adviser shall include--
‘(1) the enforcement authority of the Commission with respect to such violations provided under this Act; and
‘(2) the enforcement authority of the Commission with respect to violations of the standard of conduct applicable to a broker or dealer providing personalized investment advice about securities to a retail customer under the Securities Exchange Act of 1934, including the authority to impose sanctions for such violations, and
the Commission shall seek to prosecute and sanction violators of the standard of conduct applicable to an investment adviser under this Act to same extent as the Commission prosecutes and sanctions violators of the standard of conduct applicable to a broker or dealer providing personalized investment advice about securities to a retail customer under the Securities Exchange Act of 1934.’.
SEC. 914. STUDY ON ENHANCING INVESTMENT ADVISER EXAMINATIONS.
(a) Study Required-
(1) IN GENERAL- The Commission shall review and analyze the need for enhanced examination and enforcement resources for investment advisers.
(2) AREAS OF CONSIDERATION- The study required by this subsection shall examine--
(A) the number and frequency of examinations of investment advisers by the Commission over the 5 years preceding the date of the enactment of this subtitle;
(B) the extent to which having Congress authorize the Commission to designate one or more self-regulatory organizations to augment the Commission’s efforts in overseeing investment advisers would improve the frequency of examinations of investment advisers; and
(C) current and potential approaches to examining the investment advisory activities of dually registered broker-dealers and investment advisers or affiliated broker-dealers and investment advisers.
(b) Report Required- The Commission shall report its findings to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate, not later than 180 days after the date of enactment of this subtitle, and shall use such findings to revise its rules and regulations, as necessary. The report shall include a discussion of regulatory or legislative steps that are recommended or that may be necessary to address concerns identified in the study.
SEC. 915. OFFICE OF THE INVESTOR ADVOCATE.
Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d) is amended by adding at the end the following:
‘(g) Office of the Investor Advocate-
‘(1) OFFICE ESTABLISHED- There is established within the Commission the Office of the Investor Advocate (in this subsection referred to as the ‘Office’).
‘(2) INVESTOR ADVOCATE-
‘(A) IN GENERAL- The head of the Office shall be the Investor Advocate, who shall--
‘(i) report directly to the Chairman; and
‘(ii) be appointed by the Chairman, in consultation with the Commission, from among individuals having experience in advocating for the interests of investors in securities and investor protection issues, from the perspective of investors.
‘(B) COMPENSATION- The annual rate of pay for the Investor Advocate shall be equal to the highest rate of annual pay for other senior executives who report to the Chairman of the Commission.
‘(C) LIMITATION ON SERVICE- An individual who serves as the Investor Advocate may not be employed by the Commission--
‘(i) during the 2-year period ending on the date of appointment as Investor Advocate; or
‘(ii) during the 5-year period beginning on the date on which the person ceases to serve as the Investor Advocate.
‘(3) STAFF OF OFFICE- The Investor Advocate, after consultation with the Chairman of the Commission, may retain or employ independent counsel, research staff, and service staff, as the Investor Advocate deems necessary to carry out the functions, powers, and duties of the Office.
‘(4) FUNCTIONS OF THE INVESTOR ADVOCATE- The Investor Advocate shall--
‘(A) assist retail investors in resolving significant problems such investors may have with the Commission or with self-regulatory organizations;
‘(B) identify areas in which investors would benefit from changes in the regulations of the Commission or the rules of self-regulatory organizations;
‘(C) identify problems that investors have with financial service providers and investment products;
‘(D) analyze the potential impact on investors of--
‘(i) proposed regulations of the Commission; and
‘(ii) proposed rules of self-regulatory organizations registered under this title; and
‘(E) to the extent practicable, propose to the Commission changes in the regulations or orders of the Commission and to Congress any legislative, administrative, or personnel changes that may be appropriate to mitigate problems identified under this paragraph and to promote the interests of investors.
‘(5) ACCESS TO DOCUMENTS- The Commission shall ensure that the Investor Advocate has full access to the documents of the Commission and any self-regulatory organization, as necessary to carry out the functions of the Office.
‘(6) ANNUAL REPORTS-
‘(A) REPORT ON OBJECTIVES-
‘(i) IN GENERAL- Not later than June 30 of each year after 2010, the Investor Advocate 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 the objectives of the Investor Advocate for the following fiscal year.
‘(ii) CONTENTS- Each report required under clause (i) shall contain full and substantive analysis and explanation.
‘(B) REPORT ON ACTIVITIES-
‘(i) IN GENERAL- Not later than December 31 of each year after 2010, the Investor Advocate 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 the activities of the Investor Advocate during the immediately preceding fiscal year.
‘(ii) CONTENTS- Each report required under clause (i) shall include--
‘(I) appropriate statistical information and full and substantive analysis;
‘(II) information on steps that the Investor Advocate has taken during the reporting period to improve investor services and the responsiveness of the Commission and self-regulatory organizations to investor concerns;
‘(III) a summary of the most serious problems encountered by investors during the reporting period;
‘(IV) an inventory of the items described in subclause (III) that includes--
‘(aa) identification of any action taken by the Commission or the self-regulatory organization and the result of such action;
‘(bb) the length of time that each item has remained on such inventory; and
‘(cc) for items on which no action has been taken, the reasons for inaction, and an identification of any official who is responsible for such action;
‘(V) recommendations for such administrative and legislative actions as may be appropriate to resolve problems encountered by investors; and
‘(VI) any other information, as determined appropriate by the Investor Advocate.
‘(iii) INDEPENDENCE- Each report required under this paragraph shall be provided directly to the Committees listed in clause (i) without any prior review or comment from the Commission, any commissioner, any other officer or employee of the Commission, or the Office of Management and Budget.
‘(iv) CONFIDENTIALITY- No report required under clause (i) may contain confidential information.
‘(7) REGULATIONS- The Commission shall, by regulation, establish procedures requiring a formal response to all recommendations submitted to the Commission by the Investor Advocate, not later than 3 months after the date of such submission.’.
SEC. 916. STREAMLINING OF FILING PROCEDURES FOR SELF-REGULATORY ORGANIZATIONS.
(a) Filing Procedures- Section 19(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended by striking paragraph (2) (including the undesignated matter immediately following subparagraph (B)) and inserting the following:
‘(2) APPROVAL PROCESS-
‘(A) APPROVAL PROCESS ESTABLISHED-
‘(i) IN GENERAL- Except as provided in clause (ii), not later than 45 days after the date of publication of a proposed rule change under paragraph (1), the Commission shall--
‘(I) by order, approve or disapprove the proposed rule change; or
‘(II) institute proceedings under subparagraph (B) to determine whether the proposed rule change should be disapproved.
‘(ii) EXTENSION OF TIME PERIOD- The Commission may extend the period established under clause (i) 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 self-regulatory organization that filed the proposed rule change consents to the longer period.
‘(B) PROCEEDINGS-
‘(i) NOTICE AND HEARING- If the Commission does not approve or disapprove a proposed rule change under subparagraph (A), the Commission shall provide to the self-regulatory organization that filed the proposed rule change--
‘(I) notice of the grounds for disapproval under consideration; and
‘(II) opportunity for hearing, to be concluded not later than 180 days after the date of publication of notice of the filing of the proposed rule change.
‘(ii) ORDER OF APPROVAL OR DISAPPROVAL-
‘(I) IN GENERAL- Except as provided in subclause (II), not later than 180 days after the date of publication under paragraph (1), the Commission shall issue an order approving or disapproving the proposed rule change.
‘(II) EXTENSION OF TIME PERIOD- The Commission may extend the period for issuance under clause (I) by not more than 60 days, if--
‘(aa) the Commission determines that a longer period is appropriate and publishes the reasons for such determination; or
‘(bb) the self-regulatory organization that filed the proposed rule change consents to the longer period.
‘(C) STANDARDS FOR APPROVAL AND DISAPPROVAL-
‘(i) APPROVAL- The Commission shall approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of this title and the rules and regulations issued under this title that are applicable to such organization.
‘(ii) DISAPPROVAL- The Commission shall disapprove a proposed rule change of a self-regulatory organization if it does not make a finding described in clause (i).
‘(iii) TIME FOR APPROVAL- The Commission may not approve a proposed rule change earlier than 30 days after the date of publication under paragraph (1), unless the Commission finds good cause for so doing and publishes the reason for the finding.
‘(D) RESULT OF FAILURE TO INSTITUTE OR CONCLUDE PROCEEDINGS- A proposed rule change shall be deemed to have been approved by the Commission, if--
‘(i) the Commission does not approve or disapprove the proposed rule change or begin proceedings under subparagraph (B) within the period described in subparagraph (A); or
‘(ii) the Commission does not issue an order approving or disapproving the proposed rule change under subparagraph (B) within the period described in subparagraph (B)(ii).
‘(E) PUBLICATION DATE BASED ON FEDERAL REGISTER PUBLISHING- For purposes of this paragraph, if, after filing a proposed rule change with the Commission pursuant to paragraph (1), a self-regulatory organization publishes a notice of the filing of such proposed rule change, together with the substantive terms of such proposed rule change, on a publicly accessible website, the Commission shall thereafter send the notice to the Federal Register for publication thereof under paragraph (1) within 15 days of the date on which such website publication is made. If the Commission fails to send the notice for publication thereof within such 15 day period, then the date of publication shall be deemed to be the date on which such website publication was made.
‘(F) RULEMAKING-
‘(i) IN GENERAL- Not later than 180 days after the date of enactment of the Investor Protection and Securities Reform Act of 2010, after consultation with other regulatory agencies, the Commission shall promulgate rules setting forth the procedural requirements of the proceedings required under this paragraph.
‘(ii) NOTICE AND COMMENT NOT REQUIRED- The rules promulgated by the Commission under clause (i) are not required to include republication of proposed rule changes or solicitation of public comment.’.
(b) Clarification of Filing Date-
(1) RULE OF CONSTRUCTION- Section 19(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended by adding at the end the following:
‘(10) RULE OF CONSTRUCTION RELATING TO FILING DATE OF PROPOSED RULE CHANGES-
‘(A) IN GENERAL- For purposes of this subsection, the date of filing of a proposed rule change shall be deemed to be the date on which the Commission receives the proposed rule change.
‘(B) EXCEPTION- A proposed rule change has not been received by the Commission for purposes of subparagraph (A) if, not later than 7 business days after the date of receipt by the Commission, the Commission notifies the self-regulatory organization that such proposed rule change does not comply with the rules of the Commission relating to the required form of a proposed rule change, except that if the Commission determines that the proposed rule change is unusually lengthy and is complex or raises novel regulatory issues, the Commission shall inform the self-regulatory organization of such determination not later than 7 business days after the date of receipt by the Commission and, for the purposes of subparagraph (A), a proposed rule change has not been received by the Commission, if, not later than 21 days after the date of receipt by the Commission, the Commission notifies the self-regulatory organization that such proposed rule change does not comply with the rules of the Commission relating to the required form of a proposed rule change.’.
(2) PUBLICATION- Section 19(b)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)(1)) is amended by striking ‘upon’ and inserting ‘as soon as practicable after the date of’.
(c) Effective Date of Proposed Rules- Section 19(b)(3) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)(3)) is amended--
(1) in subparagraph (A)--
(A) by striking ‘may take effect’ and inserting ‘shall take effect’; and
(B) by inserting ‘on any person, whether or not the person is a member of the self-regulatory organization’ after ‘charge imposed by the self-regulatory organization’; and
(2) in subparagraph (C)--
(A) by amending the second sentence to read as follows: ‘At any time within the 60-day period beginning on the date of filing of such a proposed rule change in accordance with the provisions of paragraph (1), the Commission summarily may temporarily suspend the change in the rules of the self-regulatory organization made thereby, if it appears to the Commission that 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.’;
(B) by inserting after the second sentence the following: ‘If the Commission takes such action, the Commission shall institute proceedings under paragraph (2)(B) to determine whether the proposed rule should be approved or disapproved.’; and
(C) in the third sentence, by striking ‘the preceding sentence’ and inserting ‘this subparagraph’.
(d) Conforming Change- Section 19(b)(4)(D) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)(4)(D)) is amended to read as follows:
‘(D)(i) The Commission shall order the temporary suspension of any change in the rules of a clearing agency made by a proposed rule change that has taken effect under paragraph (3), if the appropriate regulatory agency for the clearing agency notifies the Commission not later than 30 days after the date on which the proposed rule change was filed of--
‘(I) the determination by the appropriate regulatory agency that the rules of such clearing agency, as so changed, may be inconsistent with the safeguarding of securities or funds in the custody or control of such clearing agency or for which it is responsible; and
‘(II) the reasons for the determination described in subclause (I).
‘(ii) If the Commission takes action under clause (i), the Commission shall institute proceedings under paragraph (2)(B) to determine if the proposed rule change should be approved or disapproved.’.
SEC. 917. STUDY REGARDING FINANCIAL LITERACY AMONG INVESTORS.
(a) In General- The Commission shall conduct a study to identify--
(1) the existing level of financial literacy among retail investors, including subgroups of investors identified by the Commission;
(2) methods to improve the timing, content, and format of disclosures to investors with respect to financial intermediaries, investment products, and investment services;
(3) the most useful and understandable relevant information that retail investors need to make informed financial decisions before engaging a financial intermediary or purchasing an investment product or service that is typically sold to retail investors, including shares of open-end companies, as that term is defined in section 5 of the Investment Company Act of 1940 (15 U.S.C. 80a-5) that are registered under section 8 of that Act;
(4) methods to increase the transparency of expenses and conflicts of interests in transactions involving investment services and products, including shares of open-end companies described in paragraph (3);
(5) the most effective existing private and public efforts to educate investors; and
(6) in consultation with the Financial Literacy and Education Commission, a strategy (including, to the extent practicable, measurable goals and objectives) to increase the financial literacy of investors in order to bring about a positive change in investor behavior.
(b) Report- Not later than 2 years after the date of enactment of this Act, the Commission shall submit a report on the study required under subsection (a) to--
(1) the Committee on Banking, Housing, and Urban Affairs of the Senate; and
(2) the Committee on Financial Services of the House of Representatives.
SEC. 918. STUDY REGARDING MUTUAL FUND ADVERTISING.
(a) In General- The Comptroller General of the United States shall conduct a study on mutual fund advertising to identify--
(1) existing and proposed regulatory requirements for open-end investment company advertisements;
(2) current marketing practices for the sale of open-end investment company shares, including the use of past performance data, funds that have merged, and incubator funds;
(3) the impact of such advertising on consumers; and
(4) recommendations to improve investor protections in mutual fund advertising and additional information necessary to ensure that investors can make informed financial decisions when purchasing shares.
(b) Report- Not later than 18 months after the date of enactment of this Act, the Comptroller General of the United States shall submit a report on the results of the study conducted under subsection (a) to--
(1) the Committee on Banking, Housing, and Urban Affairs of the United States Senate; and
(2) the Committee on Financial Services of the House of Representatives.
SEC. 919. CLARIFICATION OF COMMISSION AUTHORITY TO REQUIRE INVESTOR DISCLOSURES BEFORE PURCHASE OF INVESTMENT PRODUCTS AND SERVICES.
Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended by adding at the end the following:
‘(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.’.
SEC. 919A. STUDY ON CONFLICTS OF INTEREST.
(a) In General- The Comptroller General of the United States shall conduct a study--
(1) to identify and examine potential conflicts of interest that exist between the staffs of the investment banking and equity and fixed income securities analyst functions within the same firm; and
(2) to make recommendations to Congress designed to protect investors in light of such conflicts.
(b) Considerations- In conducting the study under subsection (a), the Comptroller General shall--
(1) consider--
(A) the potential for investor harm resulting from conflicts, including consideration of the forms of misconduct engaged in by the several securities firms and individuals that entered into the Global Analyst Research Settlements in 2003 (also known as the ‘Global Settlement’);
(B) the nature and benefits of the undertakings to which those firms agreed in enforcement proceedings, including firewalls between research and investment banking, separate reporting lines, dedicated legal and compliance staffs, allocation of budget, physical separation, compensation, employee performance evaluations, coverage decisions, limitations on soliciting investment banking business, disclosures, transparency, and other measures;
(C) whether any such undertakings should be codified and applied permanently to securities firms, or whether the Commission should adopt rules applying any such undertakings to securities firms; and
(D) whether to recommend regulatory or legislative measures designed to mitigate possible adverse consequences to investors arising from the conflicts of interest or to enhance investor protection or confidence in the integrity of the securities markets; and
(2) consult with State attorneys general, State securities officials, the Commission, the Financial Industry Regulatory Authority (‘FINRA’), NYSE Regulation, investor advocates, brokers, dealers, retail investors, institutional investors, and academics.
(c) Report- The Comptroller General shall submit a report on the results of the study required by this section to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives, not later than 18 months after the date of enactment of this Act.
SEC. 919B. STUDY ON IMPROVED INVESTOR ACCESS TO INFORMATION ON INVESTMENT ADVISERS AND BROKER-DEALERS.
(a) Study-
(1) IN GENERAL- Not later than 6 months after the date of enactment of this Act, the Commission shall complete a study, including recommendations, of ways to improve the access of investors to registration information (including disciplinary actions, regulatory, judicial, and arbitration proceedings, and other information) about registered and previously registered investment advisers, associated persons of investment advisers, brokers and dealers and their associated persons on the existing Central Registration Depository and Investment Adviser Registration Depository systems, as well as identify additional information that should be made publicly available.
(2) CONTENTS- The study required by subsection (a) shall include an analysis of the advantages and disadvantages of further centralizing access to the information contained in the 2 systems, including--
(A) identification of those data pertinent to investors; and
(B) the identification of the method and format for displaying and publishing such data to enhance accessibility by and utility to investors.
(b) Implementation- Not later than 18 months after the date of completion of the study required by subsection (a), the Commission shall implement any recommendations of the study.
SEC. 919C. STUDY ON FINANCIAL PLANNERS AND THE USE OF FINANCIAL DESIGNATIONS.
(a) In General- The Comptroller General of the United States shall conduct a study to evaluate--
(1) the effectiveness of State and Federal regulations to protect investors and other consumers from individuals who hold themselves out as financial planners through the use of misleading titles, designations, or marketing materials;
(2) current State and Federal oversight structure and regulations for financial planners; and
(3) legal or regulatory gaps in the regulation of financial planners and other individuals who provide or offer to provide financial planning services to consumers.
(b) Considerations- In conducting the study required under subsection (a), the Comptroller General shall consider--
(1) the role of financial planners in providing advice regarding the management of financial resources, including investment planning, income tax planning, education planning, retirement planning, estate planning, and risk management;
(2) whether current regulations at the State and Federal level provide adequate ethical and professional standards for financial planners;
(3) the possible risk posed to investors and other consumers by individuals who hold themselves out as financial planners or as otherwise providing financial planning services in connection with the sale of financial products, including insurance and securities;
(4) the possible risk posed to investors and other consumers by individuals who otherwise use titles, designations, or marketing materials in a misleading way in connection with the delivery of financial advice;
(6) the ability of investors and other consumers to understand licensing requirements and standards of care that apply to individuals who hold themselves out as financial planners or as otherwise providing financial planning services;
(7) the possible benefits to investors and other consumers of regulation and professional oversight of financial planners; and
(8) any other consideration that the Comptroller General deems necessary or appropriate to effectively execute the study required under subsection (a).
(c) Recommendations- In providing recommendations for the appropriate regulation of financial planners and other individuals who provide or offer to provide financial planning services, in order to protect investors and other consumers of financial planning services, the Comptroller General shall consider--
(1) the appropriate structure for regulation of financial planners and individuals providing financial planning services; and
(2) the appropriate scope of the regulations needed to protect investors and other consumers, including but not limited to the need to establish competency standards, practice standards, ethical guidelines, disciplinary authority, and transparency to investors and other consumers.
(d) Report-
(1) IN GENERAL- Not later than 180 days after the date of enactment of this Act, the Comptroller General shall submit a report on the study required under subsection (a) to--
(A) the Committee on Banking, Housing, and Urban Affairs of the Senate;
(B) the Special Committee on Aging of the Senate; and
(C) the Committee on Financial Services of the House of Representatives.
(2) CONTENT REQUIREMENTS- The report required under paragraph (1) shall describe the findings and determinations made by the Comptroller General in carrying out the study required under subsection (a), including a description of the considerations, analysis, and government, public, industry, nonprofit and consumer input that the Comptroller General considered to make such findings, conclusions, and legislative, regulatory, or other recommendations.
SEC. 919D. OMBUDSMAN.
Section 4(g) of the Securities Exchange Act of 1934, as added by section 914, is amended by adding at the end the following:
‘(8) OMBUDSMAN-
‘(A) APPOINTMENT- Not later than 180 days after the date on which the first Investor Advocate is appointed under paragraph (2)(A)(i), the Investor Advocate shall appoint an Ombudsman, who shall report directly to the Investor Advocate.
‘(B) DUTIES- The Ombudsman appointed under subparagraph (A) shall--
‘(i) act as a liaison between the Commission and any retail investor in resolving problems that retail investors may have with the Commission or with self-regulatory organizations;
‘(ii) review and make recommendations regarding policies and procedures to encourage persons to present questions to the Investor Advocate regarding compliance with the securities laws; and
‘(iii) establish safeguards to maintain the confidentiality of communications between the persons described in clause (ii) and the Ombudsman.
‘(C) LIMITATION- In carrying out the duties of the Ombudsman under subparagraph (B), the Ombudsman shall utilize personnel of the Commission to the extent practicable. Nothing in this paragraph shall be construed as replacing, altering, or diminishing the activities of any ombudsman or similar office of any other agency.
‘(D) REPORT- The Ombudsman shall submit a semiannual report to the Investor Advocate that describes the activities and evaluates the effectiveness of the Ombudsman during the preceding year. The Investor Advocate shall include the reports required under this section in the reports required to be submitted by the Inspector Advocate under paragraph (6).’.
Subtitle B--Increasing Regulatory Enforcement and Remedies
SEC. 921. AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.
(a) Amendment to Securities Exchange Act of 1934- Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o), as amended by this title, is further amended by adding at the end the following new subsection:
‘(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.’.
(b) Amendment to Investment Advisers Act of 1940- Section 205 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-5) is amended by adding at the end the following new subsection:
‘(f) Authority to Restrict Mandatory Pre-dispute Arbitration- The Commission, by rule, may prohibit, or impose conditions or limitations on the use of, agreements that require customers or clients of any investment adviser to arbitrate any future dispute between them arising under the Federal securities laws, the rules and regulations thereunder, or the rules of a self-regulatory organization if it finds that such prohibition, imposition of conditions, or limitations are in the public interest and for the protection of investors.’.
SEC. 922. WHISTLEBLOWER PROTECTION.
(a) In General- The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 21E the following:
‘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 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.
‘(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.’.
(b) Protection for Employees of Nationally Recognized Statistical Rating Organizations- Section 1514A(a) of title 18, United States Code, is amended--
(1) by inserting ‘or nationally recognized statistical rating organization (as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c),’ after ‘78o(d)),’; and
(2) by inserting ‘or nationally recognized statistical rating organization’ after ‘such company’.
(c) Section 1514A of Title 18, United States Code-
(1) STATUTE OF LIMITATIONS; JURY TRIAL- Section 1514A(b)(2) of title 18, United States Code, is amended--
(A) in subparagraph (D)--
(i) by striking ‘90’ and inserting ‘180’; and
(ii) by striking the period at the end and inserting ‘, or after the date on which the employee became aware of the violation.’; and
(B) by adding at the end the following:
‘(E) JURY TRIAL- A party to an action brought under paragraph (1)(B) shall be entitled to trial by jury.’.
(2) PRIVATE SECURITIES LITIGATION WITNESSES; NONENFORCEABILITY; INFORMATION- Section 1514A of title 18, United States Code, is amended by adding at the end the following:
‘(e) Nonenforceability of Certain Provisions Waiving Rights and Remedies or Requiring Arbitration of Disputes-
‘(1) WAIVER OF RIGHTS AND REMEDIES- The rights and remedies provided for in this section may not be waived by any agreement, policy form, or condition of employment, including by a predispute arbitration agreement.
‘(2) PREDISPUTE ARBITRATION AGREEMENTS- No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.’.
(d) Study of Whistleblower Protection Program-
(1) STUDY- The Inspector General of the Commission shall conduct a study of the whistleblower protections established under the amendments made by this section, including--
(A) whether the final rules and regulation issued under the amendments made by this section have made the whistleblower protection program (referred to in this subsection as the ‘program’) clearly defined and user-friendly;
(B) whether the program is promoted on the website of the Commission and has been widely publicized;
(C) whether the Commission is prompt in--
(i) responding to--
(I) information provided by whistleblowers; and
(II) applications for awards filed by whistleblowers;
(ii) updating whistleblowers about the status of their applications; and
(iii) otherwise communicating with the interested parties;
(D) whether the minimum and maximum reward levels are adequate to entice whistleblowers to come forward with information and whether the reward levels are so high as to encourage illegitimate whistleblower claims;
(E) whether the appeals process has been unduly burdensome for the Commission;
(F) whether the funding mechanism for the Investor Protection Fund is adequate;
(G) whether, in the interest of protecting investors and identifying and preventing fraud, it would be useful for Congress to consider empowering whistleblowers or other individuals, who have already attempted to pursue the case through the Commission, to have a private right of action to bring suit based on the facts of the same case, on behalf of the Government and themselves, against persons who have committee securities fraud;
(H)(i) whether the exemption under section 552(b)(3) of title 5 (known as the Freedom of Information Act) established in section 21F(h)(2)(A) of the Securities Exchange Act of 1934, as added by this Act, aids whistleblowers in disclosing information to the Commission;
(ii) what impact the exemption described in clause (i) has had on the ability of the public to access information about the regulation and enforcement by the Commission of securities; and
(iii) any recommendations on whether the exemption described in clause (i) should remain in effect; and
(I) such other matters as the Inspector General deems appropriate.
(2) REPORT- Not later than 30 months after the date of enactment of this Act, the Inspector General shall--
(A) submit a report on the findings of the study required under paragraph (1) to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House; and
(B) make the report described in subparagraph (A) available to the public through publication of the report on the website of the Commission.
SEC. 923. CONFORMING AMENDMENTS FOR WHISTLEBLOWER PROTECTION.
(a) In General-
(1) SECURITIES ACT OF 1933- Section 20(d)(3)(A) of the Securities Act of 1933 (15 U.S.C. 77t(d)(3)(A)) is amended by inserting ‘and section 21F of the Securities Exchange Act of 1934’ after ‘the Sarbanes-Oxley Act of 2002’.
(2) INVESTMENT COMPANY ACT OF 1940- Section 42(e)(3)(A) of the Investment Company Act of 1940 (15 U.S.C. 80a-41(e)(3)(A)) is amended by inserting ‘and section 21F of the Securities Exchange Act of 1934’ after ‘the Sarbanes-Oxley Act of 2002’.
(3) INVESTMENT ADVISERS ACT OF 1940- Section 209(e)(3)(A) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-9(e)(3)(A)) is amended by inserting ‘and section 21F of the Securities Exchange Act of 1934’ after ‘the Sarbanes-Oxley Act of 2002’.
(b) Securities Exchange Act-
(1) SECTION 21- Section 21(d)(3)(C)(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(C)(i)) is amended by inserting ‘and section 21F of this title’ after ‘the Sarbanes-Oxley Act of 2002’.
(2) SECTION 21A- Section 21A of the Securities Exchange Act of 1934 (15 U.S.C. 78u-1) is amended--
(A) in subsection (d)(1) by--
(i) striking ‘(subject to subsection (e))’; and
(ii) inserting ‘and section 21F of this title’ after ‘the Sarbanes-Oxley Act of 2002’;
(B) by striking subsection (e); and
(C) by redesignating subsections (f) and (g) as subsections (e) and (f), respectively.
SEC. 924. IMPLEMENTATION AND TRANSITION PROVISIONS FOR WHISTLEBLOWER PROTECTION.
(a) Implementing Rules- The Commission shall issue final regulations implementing the provisions of section 21F of the Securities Exchange Act of 1934, as added by this subtitle, not later than 270 days after the date of enactment of this Act.
(b) Original Information- Information provided to the Commission in writing by a whistleblower shall not lose the status of original information (as defined in section 21F(a)(3) of the Securities Exchange Act of 1934, as added by this subtitle) solely because the whistleblower provided the information prior to the effective date of the regulations, if the information is provided by the whistleblower after the date of enactment of this subtitle.
(c) Awards- A whistleblower may receive an award pursuant to section 21F of the Securities Exchange Act of 1934, as added by this subtitle, regardless of whether any violation of a provision of the securities laws, or a rule or regulation thereunder, underlying the judicial or administrative action upon which the award is based, occurred prior to the date of enactment of this subtitle.
(d) Administration and Enforcement- The Securities and Exchange Commission shall establish a separate office within the Commission to administer and enforce the provisions of section 21F of the Securities Exchange Act of 1934 (as add by section 922(a)). Such office shall report annually to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on its activities, whistleblower complaints, and the response of the Commission to such complaints.
SEC. 925. COLLATERAL BARS.
(a) Securities Exchange Act of 1934-
(1) SECTION 15- Section 15(b)(6)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)(6)(A)) is amended by striking ‘12 months, or bar such person from being associated with a broker or dealer,’ and inserting ‘12 months, or bar any such person from being associated with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization,’.
(2) SECTION 15B- Section 15B(c)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-4(c)(4)) is amended by striking ‘twelve months or bar any such person from being associated with a municipal securities dealer,’ and inserting ‘12 months or bar any such person from being associated with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization,’.
(3) SECTION 17A- Section 17A(c)(4)(C) of the Securities Exchange Act of 1934 (15 U.S.C. 78q-1(c)(4)(C)) is amended by striking ‘twelve months or bar any such person from being associated with the transfer agent,’ and inserting ‘12 months or bar any such person from being associated with any transfer agent, broker, dealer, investment adviser, municipal securities dealer, municipal advisor, or nationally recognized statistical rating organization,’.
(b) Investment Advisers Act of 1940- Section 203(f) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(f)) is amended by striking ‘twelve months or bar any such person from being associated with an investment adviser,’ and inserting ‘12 months or bar any such person from being associated with an investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization,’.
SEC. 926. DISQUALIFYING FELONS AND OTHER ‘BAD ACTORS’ FROM REGULATION D OFFERINGS.
Not later than 1 year after the date of enactment of this Act, the Commission shall issue rules for the disqualification of offerings and sales of securities made under section 230.506 of title 17, Code of Federal Regulations, that--
(1) are substantially similar to the provisions of section 230.262 of title 17, Code of Federal Regulations, or any successor thereto; and
(2) disqualify any offering or sale of securities by a person that--
(A) is subject to a final order of a State securities commission (or an agency or officer of a State performing like functions), a State authority that supervises or examines banks, savings associations, or credit unions, a State insurance commission (or an agency or officer of a State performing like functions), an appropriate Federal banking agency, or the National Credit Union Administration, that--
(i) bars the person from--
(I) association with an entity regulated by such commission, authority, agency, or officer;
(II) engaging in the business of securities, insurance, or banking; or
(III) engaging in savings association or credit union activities; or
(ii) constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct within the 10-year period ending on the date of the filing of the offer or sale; or
(B) has been convicted of any felony or misdemeanor in connection with the purchase or sale of any security or involving the making of any false filing with the Commission.
SEC. 927. EQUAL TREATMENT OF SELF-REGULATORY ORGANIZATION RULES.
Section 29(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78cc(a)) is amended by striking ‘an exchange required thereby’ and inserting ‘a self-regulatory organization,’.
SEC. 928. CLARIFICATION THAT SECTION 205 OF THE INVESTMENT ADVISERS ACT OF 1940 DOES NOT APPLY TO STATE-REGISTERED ADVISERS.
Section 205(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-5(a)) is amended, in the matter preceding paragraph (1)--
(1) by striking ‘, unless exempt from registration pursuant to section 203(b),’ and inserting ‘registered or required to be registered with the Commission’;
(2) by striking ‘make use of the mails or any means or instrumentality of interstate commerce, directly or indirectly, to’; and
(3) by striking ‘to’ after ‘in any way’.
SEC. 929. UNLAWFUL MARGIN LENDING.
Section 7(c)(1)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78g(c)(1)(A)) is amended by striking ‘; and’ and inserting ‘; or’.
SEC. 929A. PROTECTION FOR EMPLOYEES OF SUBSIDIARIES AND AFFILIATES OF PUBLICLY TRADED COMPANIES.
Section 1514A of title 18, United States Code, is amended by inserting ‘including any subsidiary or affiliate whose financial information is included in the consolidated financial statements of such company’ after ‘the Securities Exchange Act of 1934 (15 U.S.C. 78o(d))’.
SEC. 929B. FAIR FUND AMENDMENTS.
Section 308 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246(a)) is amended--
(1) by striking subsection (a) and inserting the following:
‘(a) Civil Penalties to Be Used for the Relief of Victims- If, in any judicial or administrative action brought by the Commission under the securities laws, the Commission obtains a civil penalty against any person for a violation of such laws, or such person agrees, in settlement of any such action, to such civil penalty, the amount of such civil penalty shall, on the motion or at the direction of the Commission, be added to and become part of a disgorgement fund or other fund established for the benefit of the victims of such violation.’;
(2) in subsection (b)--
(A) by striking ‘for a disgorgement fund described in subsection (a)’ and inserting ‘for a disgorgement fund or other fund described in subsection (a)’; and
(B) by striking ‘in the disgorgement fund’ and inserting ‘in such fund’; and
(3) by striking subsection (e).
SEC. 929C. INCREASING THE BORROWING LIMIT ON TREASURY LOANS.
Section 4(h) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78ddd(h)) is amended in the first sentence, by striking ‘$1,000,000,000’ and inserting ‘$2,500,000,000’.
SEC. 929D. LOST AND STOLEN SECURITIES.
Section 17(f)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78q(f)(1)) is amended--
(1) in subparagraph (A), by striking ‘missing, lost, counterfeit, or stolen securities’ and inserting ‘securities that are missing, lost, counterfeit, stolen, or cancelled’; and
(2) in subparagraph (B), by striking ‘or stolen’ and inserting ‘stolen, cancelled, or reported in such other manner as the Commission, by rule, may prescribe’.
SEC. 929E. NATIONWIDE SERVICE OF SUBPOENAS.
(a) Securities Act of 1933- Section 22(a) of the Securities Act of 1933 (15 U.S.C. 77v(a)) is amended by inserting after the second sentence the following: ‘In any action or proceeding instituted by the Commission under this title in a United States district court for any judicial district, a subpoena issued to compel the attendance of a witness or the production of documents or tangible things (or both) at a hearing or trial may be served at any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding sentence.’.
(b) Securities Exchange Act of 1934- Section 27 of the Securities Exchange Act of 1934 (15 U.S.C. 78aa) is amended by inserting after the third sentence the following: ‘In any action or proceeding instituted by the Commission under this title in a United States district court for any judicial district, a subpoena issued to compel the attendance of a witness or the production of documents or tangible things (or both) at a hearing or trial may be served at any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding sentence.’.
(c) Investment Company Act of 1940- Section 44 of the Investment Company Act of 1940 (15 U.S.C. 80a-43) is amended by inserting after the fourth sentence the following: ‘In any action or proceeding instituted by the Commission under this title in a United States district court for any judicial district, a subpoena issued to compel the attendance of a witness or the production of documents or tangible things (or both) at a hearing or trial may be served at any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding sentence.’.
(d) Investment Advisers Act of 1940- Section 214 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-14) is amended by inserting after the third sentence the following: ‘In any action or proceeding instituted by the Commission under this title in a United States district court for any judicial district, a subpoena issued to compel the attendance of a witness or the production of documents or tangible things (or both) at a hearing or trial may be served at any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding sentence.’.
SEC. 929F. FORMERLY ASSOCIATED PERSONS.
(a) Member or Employee of the Municipal Securities Rulemaking Board- Section 15B(c)(8) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-4(c)(8)) is amended by striking ‘any member or employee’ and inserting ‘any person who is, or at the time of the alleged violation or abuse was, a member or employee’.
(b) Person Associated With a Government Securities Broker or Dealer- Section 15C(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-5(c)) is amended--
(1) in paragraph (1)(C), by striking ‘any person associated, or seeking to become associated,’ and inserting ‘any person who is, or at the time of the alleged misconduct was, associated or seeking to become associated’; and
(2) in paragraph (2)--
(A) in subparagraph (A), by inserting ‘, seeking to become associated, or, at the time of the alleged misconduct, associated or seeking to become associated’ after ‘any person associated’; and
(B) in subparagraph (B), by inserting ‘, seeking to become associated, or, at the time of the alleged misconduct, associated or seeking to become associated’ after ‘any person associated’.
(c) Person Associated With a Member of a National Securities Exchange or Registered Securities Association- Section 21(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(a)(1)) is amended, in the first sentence, by inserting ‘, or, as to any act or practice, or omission to act, while associated with a member, formerly associated’ after ‘member or a person associated’.
(d) Participant of a Registered Clearing Agency- Section 21(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(a)(1)) is amended, in the first sentence, by inserting ‘or, as to any act or practice, or omission to act, while a participant, was a participant,’ after ‘in which such person is a participant,’.
(e) Officer or Director of a Self-regulatory Organization- Section 19(h)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(h)(4)) is amended--
(1) by striking ‘any officer or director’ and inserting ‘any person who is, or at the time of the alleged misconduct was, an officer or director’; and
(2) by striking ‘such officer or director’ and inserting ‘such person’.
(f) Officer or Director of an Investment Company- Section 36(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-35(a)) is amended--
(1) by striking ‘a person serving or acting’ and inserting ‘a person who is, or at the time of the alleged misconduct was, serving or acting’; and
(2) by striking ‘such person so serves or acts’ and inserting ‘such person so serves or acts, or at the time of the alleged misconduct, so served or acted’.
(g) Person Associated With a Public Accounting Firm-
(1) SARBANES-OXLEY ACT OF 2002 AMENDMENT- Section 2(a)(9) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(9)) is amended by adding at the end the following:
‘(C) INVESTIGATIVE AND ENFORCEMENT AUTHORITY- For purposes of sections 3(c), 101(c), 105, and 107(c) and the rules of the Board and Commission issued thereunder, except to the extent specifically excepted by such rules, the terms defined in subparagraph (A) shall include any person associated, seeking to become associated, or formerly associated with a public accounting firm, except that--
‘(i) the authority to conduct an investigation of such person under section 105(b) shall apply only with respect to any act or practice, or omission to act, by the person while such person was associated or seeking to become associated with a registered public accounting firm; and
‘(ii) the authority to commence a disciplinary proceeding under section 105(c)(1), or impose sanctions under section 105(c)(4), against such person shall apply only with respect to--
‘(I) conduct occurring while such person was associated or seeking to become associated with a registered public accounting firm; or
‘(II) non-cooperation, as described in section 105(b)(3), with respect to a demand in a Board investigation for testimony, documents, or other information relating to a period when such person was associated or seeking to become associated with a registered public accounting firm.’.
(2) SECURITIES EXCHANGE ACT OF 1934 AMENDMENT- Section 21(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(a)(1)) is amended by striking ‘or a person associated with such a firm’ and inserting ‘, a person associated with such a firm, or, as to any act, practice, or omission to act, while associated with such firm, a person formerly associated with such a firm’.
(h) Supervisory Personnel of an Audit Firm- Section 105(c)(6) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7215(c)(6)) is amended--
(1) in subparagraph (A), by striking ‘the supervisory personnel’ and inserting ‘any person who is, or at the time of the alleged failure reasonably to supervise was, a supervisory person’; and
(2) in subparagraph (B)--
(A) by striking ‘No associated person’ and inserting ‘No current or former supervisory person’; and
(B) by striking ‘any other person’ and inserting ‘any associated person’.
(i) Member of the Public Company Accounting Oversight Board- Section 107(d)(3) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7217(d)(3)) is amended by striking ‘any member’ and inserting ‘any person who is, or at the time of the alleged misconduct was, a member’.
SEC. 929G. STREAMLINED HIRING AUTHORITY FOR MARKET SPECIALISTS.
(a) Appointment Authority- Section 3114 of title 5, United States Code, is amended by striking the section heading and all that follows through the end of subsection (a) and inserting the following:
-‘Sec. 3114. Appointment of candidates to certain positions in the competitive service by the Securities and Exchange Commission
‘(a) Applicability- This section applies with respect to any position of accountant, economist, and securities compliance examiner at the Commission that is in the competitive service, and any position at the Commission in the competitive service that requires specialized knowledge of financial and capital market formation or regulation, financial market structures or surveillance, or information technology.’.
(b) Clerical Amendment- The table of sections for chapter 31 of title 5, United States Code, is amended by striking the item relating to section 3114 and inserting the following:
‘3114. Appointment of candidates to positions in the competitive service by the Securities and Exchange Commission.’.
(c) Pay Authority- The Commission may set the rate of pay for experts and consultants appointed under the authority of section 3109 of title 5, United States Code, in the same manner in which it sets the rate of pay for employees of the Commission.
SEC. 929H. SIPC REFORMS.
(a) Increasing the Cash Limit of Protection- Section 9 of the Securities Investor Protection Act of 1970 (15 U.S.C. 78fff-3) is amended--
(1) in subsection (a)(1), by striking ‘$100,000 for each such customer’ and inserting ‘the standard maximum cash advance amount for each such customer, as determined in accordance with subsection (d)’; and
(2) by adding the following new subsections:
‘(d) Standard Maximum Cash Advance Amount Defined- For purposes of this section, the term ‘standard maximum cash advance amount’ means $250,000, as such amount may be adjusted after December 31, 2010, as provided under subsection (e).
‘(e) Inflation Adjustment-
‘(1) IN GENERAL- Not later than January 1, 2011, and every 5 years thereafter, and subject to the approval of the Commission as provided under section 3(e)(2), the Board of Directors of SIPC shall determine whether an inflation adjustment to the standard maximum cash advance amount is appropriate. If the Board of Directors of SIPC determines such an adjustment is appropriate, then the standard maximum cash advance amount shall be an amount equal to--
‘(A) $250,000 multiplied by--
‘(B) the ratio of the annual value of the Personal Consumption Expenditures Chain-Type Price Index (or any successor index thereto), published by the Department of Commerce, for the calendar year preceding the year in which such determination is made, to the published annual value of such index for the calendar year preceding the year in which this subsection was enacted.
The index values used in calculations under this paragraph shall be, as of the date of the calculation, the values most recently published by the Department of Commerce.
‘(2) ROUNDING- If the standard maximum cash advance amount determined under paragraph (1) for any period is not a multiple of $10,000, the amount so determined shall be rounded down to the nearest $10,000.
‘(3) PUBLICATION AND REPORT TO THE CONGRESS- Not later than April 5 of any calendar year in which a determination is required to be made under paragraph (1)--
‘(A) the Commission shall publish in the Federal Register the standard maximum cash advance amount; and
‘(B) the Board of Directors of SIPC shall submit a report to the Congress stating the standard maximum cash advance amount.
‘(4) IMPLEMENTATION PERIOD- Any adjustment to the standard maximum cash advance amount shall take effect on January 1 of the year immediately succeeding the calendar year in which such adjustment is made.
‘(5) INFLATION ADJUSTMENT CONSIDERATIONS- In making any determination under paragraph (1) to increase the standard maximum cash advance amount, the Board of Directors of SIPC shall consider--
‘(A) the overall state of the fund and the economic conditions affecting members of SIPC;
‘(B) the potential problems affecting members of SIPC; and
‘(C) such other factors as the Board of Directors of SIPC may determine appropriate.’.
(b) Liquidation of a Carrying Broker-dealer- Section 5(a)(3) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78eee(a)(3)) is amended--
(1) by striking the undesignated matter immediately following subparagraph (B);
(2) in subparagraph (A), by striking ‘any member of SIPC’ and inserting ‘the member’;
(3) in subparagraph (B), by striking the comma at the end and inserting a period;
(4) by striking ‘If SIPC’ and inserting the following:
‘(A) IN GENERAL- SIPC may, upon notice to a member of SIPC, file an application for a protective decree with any court of competent jurisdiction specified in section 21(e) or 27 of the Securities Exchange Act of 1934, except that no such application shall be filed with respect to a member, the only customers of which are persons whose claims could not be satisfied by SIPC advances pursuant to section 9, if SIPC’; and
(5) by adding at the end the following:
‘(B) CONSENT REQUIRED- No member of SIPC that has a customer may enter into an insolvency, receivership, or bankruptcy proceeding, under Federal or State law, without the specific consent of SIPC, except as provided in title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act.’.
SEC. 929I. PROTECTING CONFIDENTIALITY OF MATERIALS SUBMITTED TO THE COMMISSION.
(a) Securities Exchange Act of 1934- Section 24 of the Securities Exchange Act of 1934 (15 U.S.C. 78x) is amended--
(1) in subsection (d), by striking ‘subsection (e)’ and inserting ‘subsection (f)’;
(2) by redesignating subsection (e) as subsection (f); and
(3) by inserting after subsection (d) the following:
‘(e) Records Obtained From Registered Persons-
‘(1) IN GENERAL- Except as provided in subsection (f), the Commission shall not be compelled to disclose records or information obtained pursuant to section 17(b), or records or information based upon or derived from such records or information, if such records or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments, or other regulatory and oversight activities.
‘(2) TREATMENT OF INFORMATION- 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. Collection of information pursuant to section 17 shall be an administrative action involving an agency against specific individuals or agencies pursuant to section 3518(c)(1) of title 44, United States Code.’.
(b) Investment Company Act of 1940- Section 31 of the Investment Company Act of 1940 (15 U.S.C. 80a-30) is amended--
(1) by striking subsection (c) and inserting the following:
‘(c) Limitations on Disclosure by Commission- Notwithstanding any other provision of law, the Commission shall not be compelled to disclose any records or information provided to the Commission under this section, or records or information based upon or derived from such records or information, if such records or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments, or other regulatory and oversight activities. Nothing in this subsection authorizes the Commission to withhold information from the 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 jurisdiction of that department or agency, 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 section shall be considered a statute described in subsection (b)(3)(B) of such section 552. Collection of information pursuant to section 31 shall be an administrative action involving an agency against specific individuals or agencies pursuant to section 3518(c)(1) of title 44, United States Code.’;
(2) by striking subsection (d); and
(3) by redesignating subsections (e) and (f) as subsections (d) and (e), respectively.
(c) Investment Advisers Act of 1940- Section 210 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-10) is amended by adding at the end the following:
‘(d) Limitations on Disclosure by the Commission- Notwithstanding any other provision of law, the Commission shall not be compelled to disclose any records or information provided to the Commission under section 204, or records or information based upon or derived from such records or information, if such records or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments, or other regulatory and oversight activities. Nothing in this subsection authorizes the Commission to withhold information from the 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 jurisdiction of that department or agency, 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. Collection of information pursuant to section 204 shall be an administrative action involving an agency against specific individuals or agencies pursuant to section 3518(c)(1) of title 44, United States Code.’.
SEC. 929J. EXPANSION OF AUDIT INFORMATION TO BE PRODUCED AND EXCHANGED.
Section 106 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7216) is amended--
(1) by striking subsection (b) and inserting the following:
‘(b) Production of Documents-
‘(1) PRODUCTION BY FOREIGN FIRMS- If a foreign public accounting firm performs material services upon which a registered public accounting firm relies in the conduct of an audit or interim review, issues an audit report, performs audit work, or conducts interim reviews, the foreign public accounting firm shall--
‘(A) produce the audit work papers of the foreign public accounting firm and all other documents of the firm related to any such audit work or interim review to the Commission or the Board, upon request of the Commission or the Board; and
‘(B) be subject to the jurisdiction of the courts of the United States for purposes of enforcement of any request for such documents.
‘(2) OTHER PRODUCTION- Any registered public accounting firm that relies, in whole or in part, on the work of a foreign public accounting firm in issuing an audit report, performing audit work, or conducting an interim review, shall--
‘(A) produce the audit work papers of the foreign public accounting firm and all other documents related to any such work in response to a request for production by the Commission or the Board; and
‘(B) secure the agreement of any foreign public accounting firm to such production, as a condition of the reliance by the registered public accounting firm on the work of that foreign public accounting firm.’;
(2) by redesignating subsection (d) as subsection (g); and
(3) by inserting after subsection (c) the following:
‘(d) Service of Requests or Process-
‘(1) IN GENERAL- Any foreign public accounting firm that performs work for a domestic registered public accounting firm shall furnish to the domestic registered public accounting firm a written irrevocable consent and power of attorney that designates the domestic registered public accounting firm as an agent upon whom may be served any request by the Commission or the Board under this section or upon whom may be served any process, pleadings, or other papers in any action brought to enforce this section.
‘(2) SPECIFIC AUDIT WORK- Any foreign public accounting firm that performs material services upon which a registered public accounting firm relies in the conduct of an audit or interim review, issues an audit report, performs audit work, or, performs interim reviews, shall designate to the Commission or the Board an agent in the United States upon whom may be served any request by the Commission or the Board under this section or upon whom may be served any process, pleading, or other papers in any action brought to enforce this section.
‘(e) Sanctions- A willful refusal to comply, in whole in or in part, with any request by the Commission or the Board under this section, shall be deemed a violation of this Act.
‘(f) Other Means of Satisfying Production Obligations- Notwithstanding any other provisions of this section, the staff of the Commission or the Board may allow a foreign public accounting firm that is subject to this section to meet production obligations under this section through alternate means, such as through foreign counterparts of the Commission or the Board.’.
SEC. 929K. SHARING PRIVILEGED INFORMATION WITH OTHER AUTHORITIES.
Section 24 of the Securities Exchange Act of 1934 (15 U.S.C. 78x) is amended--
(1) in subsection (d), as amended by subsection (d)(1)(A), by striking ‘subsection (f)’ and inserting ‘subsection (g)’;
(2) in subsection (e), as added by subsection (d)(1)(C), by striking ‘subsection (f)’ and inserting ‘subsection (g)’;
(3) by redesignating subsection (f) as subsection (g); and
(4) by inserting after subsection (e) the following:
‘(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.’.
SEC. 929L. ENHANCED APPLICATION OF ANTIFRAUD PROVISIONS.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended--
(1) in section 9--
(A) by striking ‘registered on a national securities exchange’ each place that term appears and inserting ‘other than a government security’;
(B) in subsection (b), by striking ‘by use of any facility of a national securities exchange,’; and
(C) in subsection (c), by inserting after ‘unlawful for any’ the following: ‘broker, dealer, or’;
(2) in section 10(a)(1), by striking ‘registered on a national securities exchange’ and inserting ‘other than a government security’; and
(3) in section 15(c)(1)(A), by striking ‘otherwise than on a national securities exchange of which it is a member’.
SEC. 929M. AIDING AND ABETTING AUTHORITY UNDER THE SECURITIES ACT AND THE INVESTMENT COMPANY ACT.
(a) Under the Securities Act of 1933- Section 15 of the Securities Act of 1933 (15 U.S.C. 77o) is amended--
(1) by striking ‘Every person who’ and inserting ‘(a) Controlling Persons- Every person who’; and
(2) by adding at the end the following:
‘(b) Prosecution of Persons Who Aid and Abet Violations- For purposes of any action brought by the Commission under subparagraph (b) or (d) of section 20, any person that knowingly or recklessly provides substantial assistance to another person in violation of a provision of this Act, or of any rule or regulation issued under this Act, shall be deemed to be in violation of such provision to the same extent as the person to whom such assistance is provided.’.
(b) Under the Investment Company Act of 1940- Section 48 of the Investment Company Act of 1940 (15 U.S.C. 80a-48) is amended by redesignating subsection (b) as subsection (c) and inserting after subsection (a) the following:
‘(b) For purposes of any action brought by the Commission under subsection (d) or (e) of section 42, any person that knowingly or recklessly provides substantial assistance to another person in violation of a provision of this Act, or of any rule or regulation issued under this Act, shall be deemed to be in violation of such provision to the same extent as the person to whom such assistance is provided.’.
SEC. 929N. AUTHORITY TO IMPOSE PENALTIES FOR AIDING AND ABETTING VIOLATIONS OF THE INVESTMENT ADVISERS ACT.
Section 209 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-9) is amended by inserting at the end the following new subsection:
‘(f) Aiding and Abetting- For purposes of any action brought by the Commission under subsection (e), any person that knowingly or recklessly has aided, abetted, counseled, commanded, induced, or procured a violation of any provision of this Act, or of any rule, regulation, or order hereunder, shall be deemed to be in violation of such provision, rule, regulation, or order to the same extent as the person that committed such violation.’.
SEC. 929O. AIDING AND ABETTING STANDARD OF KNOWLEDGE SATISFIED BY RECKLESSNESS.
Section 20(e) of the Securities Exchange Act of 1934 (15 U.S.C. 78t(e)) is amended by inserting ‘or recklessly’ after ‘knowingly’.
SEC. 929P. STRENGTHENING ENFORCEMENT BY THE COMMISSION.
(a) Authority to Impose Civil Penalties in Cease and Desist Proceedings-
(1) UNDER THE SECURITIES ACT OF 1933- Section 8A of the Securities Act of 1933 (15 U.S.C. 77h-1) is amended by adding at the end the following new subsection:
‘(g) Authority to Impose Money Penalties-
‘(1) GROUNDS- In any cease-and-desist proceeding under subsection (a), the Commission may impose a civil penalty on a person if the Commission finds, on the record, after notice and opportunity for hearing, that--
‘(A) such person--
‘(i) is violating or has violated any provision of this title, or any rule or regulation 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 thereunder; and
‘(B) such penalty is in the public interest.
‘(2) MAXIMUM AMOUNT OF PENALTY-
‘(A) FIRST TIER- The maximum amount of a penalty for each act or omission described in paragraph (1) shall be $7,500 for a natural person or $75,000 for any other person.
‘(B) SECOND TIER- Notwithstanding subparagraph (A), the maximum amount of penalty for each such act or omission shall be $75,000 for a natural person or $375,000 for any other person, if the act or omission described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement.
‘(C) THIRD TIER- Notwithstanding subparagraphs (A) and (B), the maximum amount of penalty for each such act or omission shall be $150,000 for a natural person or $725,000 for any other person, if--
‘(i) the act or omission described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and
‘(ii) such act or omission directly or indirectly resulted in--
‘(I) substantial losses or created a significant risk of substantial losses to other persons; or
‘(II) substantial pecuniary gain to the person who committed the act or omission.
‘(3) EVIDENCE CONCERNING ABILITY TO PAY- In any proceeding in which the Commission may impose a penalty under this section, a respondent may present evidence of the ability of the respondent 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 the ability of the respondent to continue in business and the collectability of a penalty, taking into account any other claims of the United States or third parties upon the assets of the respondent and the amount of the assets of the respondent.’.
(2) UNDER THE SECURITIES EXCHANGE ACT OF 1934- Section 21B(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78u-2(a)) is amended--
(A) by striking the matter following paragraph (4);
(B) in the matter preceding paragraph (1), by inserting after ‘opportunity for hearing,’ the following: ‘that such penalty is in the public interest and’;
(C) by redesignating paragraphs (1) through (4) as subparagraphs (A) through (D), respectively, and adjusting the margins accordingly;
(D) by striking ‘In any proceeding’ and inserting the following:
‘(1) IN GENERAL- In any proceeding’; and
(E) by adding at the end the following:
‘(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.’.
(3) UNDER THE INVESTMENT COMPANY ACT OF 1940- Section 9(d)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-9(d)(1)) is amended--
(A) by striking the matter following subparagraph (C);
(B) in the matter preceding subparagraph (A), by inserting after ‘opportunity for hearing,’ the following: ‘that such penalty is in the public interest, and’;
(C) by redesignating subparagraphs (A) through (C) as clauses (i) through (iii), respectively, and adjusting the margins accordingly;
(D) by striking ‘In any proceeding’ and inserting the following:
‘(A) IN GENERAL- In any proceeding’; and
(E) by adding at the end the following:
‘(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.’.
(4) UNDER THE INVESTMENT ADVISERS ACT OF 1940- Section 203(i)(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(i)(1)) is amended--
(A) by striking the matter following subparagraph (D);
(B) in the matter preceding subparagraph (A), by inserting after ‘opportunity for hearing,’ the following: ‘that such penalty is in the public interest and’;
(C) by redesignating subparagraphs (A) through (D) as clauses (i) through (iv), respectively, and adjusting the margins accordingly;
(D) by striking ‘In any proceeding’ and inserting the following:
‘(A) IN GENERAL- In any proceeding’; and
(E) by adding at the end the following new subparagraph:
‘(B) CEASE-AND-DESIST PROCEEDINGS- In any proceeding instituted pursuant to subsection (k) against any person, the Commission may impose a civil penalty if 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.’.
(b) Extraterritorial Jurisdiction of the Antifraud Provisions of the Federal Securities Laws-
(1) UNDER THE SECURITIES ACT OF 1933- Section 22 of the Securities Act of 1933 (15 U.S.C. 77v(a)) is amended by adding at the end the following new subsection:
‘(c) Extraterritorial Jurisdiction- The district courts of the United States and the United States courts of any Territory shall have jurisdiction of an action or proceeding brought or instituted by the Commission or the United States alleging a violation of section 17(a) involving--
‘(1) conduct within the United States that constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors; or
‘(2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States.’.
(2) UNDER THE SECURITIES EXCHANGE ACT OF 1934- Section 27 of the Securities Exchange Act of 1934 (15 U.S.C. 78aa) is amended--
(A) by striking ‘The district’ and inserting the following:
‘(a) In General- The district’; and
(B) by adding at the end the following new subsection:
‘(b) Extraterritorial Jurisdiction- The district courts of the United States and the United States courts of any Territory shall have jurisdiction of an action or proceeding brought or instituted by the Commission or the United States alleging a violation of the antifraud provisions of this title involving--
‘(1) conduct within the United States that constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors; or
‘(2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States.’.
(3) UNDER THE INVESTMENT ADVISERS ACT OF 1940- Section 214 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-14) is amended--
(A) by striking ‘The district’ and inserting the following:
‘(a) In General- The district’; and
(B) by adding at the end the following new subsection:
‘(b) Extraterritorial Jurisdiction- The district courts of the United States and the United States courts of any Territory shall have jurisdiction of an action or proceeding brought or instituted by the Commission or the United States alleging a violation of section 206 involving--
‘(1) conduct within the United States that constitutes significant steps in furtherance of the violation, even if the violation is committed by a foreign adviser and involves only foreign investors; or
‘(2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States.’.
(c) Control Person Liability Under the Securities Exchange Act of 1934- Section 20(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78t(a)) is amended by inserting after ‘controlled person is liable’ the following: ‘(including to the Commission in any action brought under paragraph (1) or (3) of section 21(d))’.
SEC. 929Q. REVISION TO RECORDKEEPING RULE.
(a) Investment Company Act of 1940 Amendments- Section 31 of the Investment Company Act of 1940 (15 U.S.C. 80a-30) is amended--
(1) in subsection (a)(1), by adding at the end the following: ‘Each person 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.’; and
(2) in subsection (b), by adding at the end the following:
‘(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.’.
(b) Investment Advisers Act of 1940 Amendment- Section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-4) is amended by adding at the end the following new subsection:
‘(d) Records of Persons With Custody or Use-
‘(1) IN GENERAL- Records of persons having custody or use of the securities, deposits, or credits of a client, that relate to such custody or use, are subject at any time, or from time to time, to such reasonable periodic, special, or other examinations and other information and document requests by representatives of the Commission, as the Commission deems necessary or appropriate in the public interest or for the protection of investors.
‘(2) CERTAIN PERSONS SUBJECT TO OTHER REGULATION- 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 paragraph (1), by providing the Commission with a detailed listing, in writing, of the securities, deposits, or credits of the client within the custody or use of such person.’.
SEC. 929R. BENEFICIAL OWNERSHIP AND SHORT-SWING PROFIT REPORTING.
(a) Beneficial Ownership Reporting- Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended--
(1) in subsection (d)(1)--
(A) by inserting after ‘within ten days after such acquisition’ the following: ‘or within such shorter time as the Commission may establish by rule’; and
(B) by striking ‘send to the issuer of the security at its principal executive office, by registered or certified mail, send to each exchange where the security is traded, and’;
(2) in subsection (d)(2)--
(A) by striking ‘in the statements to the issuer and the exchange, and’; and
(B) by striking ‘shall be transmitted to the issuer and the exchange and’;
(3) in subsection (g)(1), by striking ‘shall send to the issuer of the security and’; and
(4) in subsection (g)(2)--
(A) by striking ‘sent to the issuer and’; and
(B) by striking ‘shall be transmitted to the issuer and’.
(b) Short-swing Profit Reporting- Section 16(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78p(a)) is amended--
(1) in paragraph (1), by striking ‘(and, if such security is registered on a national securities exchange, also with the exchange)’; and
(2) in paragraph (2)(B), by inserting after ‘officer’ the following: ‘, or within such shorter time as the Commission may establish by rule’.
SEC. 929S. FINGERPRINTING.
Section 17(f)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 78q(f)(2)) is amended--
(1) in the first sentence, by striking ‘and registered clearing agency,’ and inserting ‘registered clearing agency, registered securities information processor, national securities exchange, and national securities association’; and
(2) in the second sentence, by striking ‘or clearing agency,’ and inserting ‘clearing agency, securities information processor, national securities exchange, or national securities association,’.
SEC. 929T. EQUAL TREATMENT OF SELF-REGULATORY ORGANIZATION RULES.
Section 29(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78cc(a)) is amended by striking ‘an exchange required thereby’ and inserting ‘a self-regulatory organization,’.
SEC. 929U. DEADLINE FOR COMPLETING EXAMINATIONS, INSPECTIONS AND ENFORCEMENT ACTIONS.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 4D the following new section:
‘SEC. 4E. DEADLINE FOR COMPLETING ENFORCEMENT INVESTIGATIONS AND COMPLIANCE EXAMINATIONS AND INSPECTIONS.
‘(a) Enforcement Investigations-
‘(1) IN GENERAL- Not later than 180 days after the date on which Commission staff provide a written Wells notification to any person, the Commission staff shall either file an action against such person or provide notice to the Director of the Division of Enforcement of its intent to not file an action.
‘(2) EXCEPTIONS FOR CERTAIN COMPLEX ACTIONS- Notwithstanding paragraph (1), if the Director of the Division of Enforcement of the Commission or the Director’s designee determines that a particular enforcement investigation is sufficiently complex such that a determination regarding the filing of an action against a person cannot be completed within the deadline specified in paragraph (1), the Director of the Division of Enforcement of the Commission or the Director’s designee may, after providing notice to the Chairman of the Commission, extend such deadline as needed for one additional 180-day period. If after the additional 180-day period the Director of the Division of Enforcement of the Commission or the Director’s designee determines that a particular enforcement investigation is sufficiently complex such that a determination regarding the filing of an action against a person cannot be completed within the additional 180-day period, the Director of the Division of Enforcement of the Commission or the Director’s designee may, after providing notice to and receiving approval of the Commission, extend such deadline as needed for one or more additional successive 180-day periods.
‘(b) Compliance Examinations and Inspections-
‘(1) IN GENERAL- Not later than 180 days after the date on which Commission staff completes the on-site portion of its compliance examination or inspection or receives all records requested from the entity being examined or inspected, whichever is later, Commission staff shall provide the entity being examined or inspected with written notification indicating either that the examination or inspection has concluded, has concluded without findings, or that the staff requests the entity undertake corrective action.
‘(2) EXCEPTION FOR CERTAIN COMPLEX ACTIONS- Notwithstanding paragraph (1), if the head of any division or office within the Commission responsible for compliance examinations and inspections or his designee determines that a particular compliance examination or inspection is sufficiently complex such that a determination regarding concluding the examination or inspection, or regarding the staff requests the entity undertake corrective action, cannot be completed within the deadline specified in paragraph (1), the head of any division or office within the Commission responsible for compliance examinations and inspections or his designee may, after providing notice to the Chairman of the Commission, extend such deadline as needed for one additional 180-day period.’.
SEC. 929V. SECURITY INVESTOR PROTECTION ACT AMENDMENTS.
(a) Increasing the Minimum Assessment Paid by SIPC Members- Section 4(d)(1)(C) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78ddd(d)(1)(C)) is amended by striking ‘$150 per annum’ and inserting the following: ‘0.02 percent of the gross revenues from the securities business of such member of SIPC’.
(b) Increasing the Fine for Prohibited Acts Under SIPA- Section 14(c) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78jjj(c)) is amended--
(1) in paragraph (1), by striking ‘$50,000’ and inserting ‘$250,000’; and
(2) in paragraph (2), by striking ‘$50,000’ and inserting ‘$250,000’.
(c) Penalty for Misrepresentation of SIPC Membership or Protection- Section 14 of the Securities Investor Protection Act of 1970 (15 U.S.C. 78jjj) is amended by adding at the end the following new subsection:
‘(d) Misrepresentation of SIPC Membership or Protection-
‘(1) IN GENERAL- Any person who falsely represents by any means (including, without limitation, through the Internet or any other medium of mass communication), with actual knowledge of the falsity of the representation and with an intent to deceive or cause injury to another, that such person, or another person, is a member of SIPC or that any person or account is protected or is eligible for protection under this Act or by SIPC, shall be liable for any damages caused thereby and shall be fined not more than $250,000 or imprisoned for not more than 5 years.
‘(2) INJUNCTIONS- Any court having jurisdiction of a civil action arising under this Act may grant temporary injunctions and final injunctions on such terms as the court deems reasonable to prevent or restrain any violation of paragraph (1). Any such injunction may be served anywhere in the United States on the person enjoined, shall be operative throughout the United States, and shall be enforceable, by proceedings in contempt or otherwise, by any United States court having jurisdiction over that person. The clerk of the court granting the injunction shall, when requested by any other court in which enforcement of the injunction is sought, transmit promptly to the other court a certified copy of all papers in the case on file in such clerk’s office.’.
SEC. 929W. NOTICE TO MISSING SECURITY HOLDERS.
Section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q-1) is amended by adding at the end the following new subsection:
‘(g) Due Diligence for the Delivery of 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.’.
SEC. 929X. SHORT SALE REFORMS.
(a) Short Sale Disclosure- Section 13(f) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(f)) is amended by redesignating paragraphs (2), (3), (4), and (5) as paragraphs (3), (4), (5), and (6), respectively, and inserting after paragraph (1) the following:
‘(2) 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.’.
(b) Short Selling Enforcement- Section 9 of the Securities Exchange Act of 1934 (15 U.S.C. 78i) is amended--
(1) by redesignating subsections (d), (e), (f), (g), (h), and (i) as subsections (e), (f), (g), (h), (i), and (j), respectively; and
(2) inserting after subsection (c), the following new subsection:
‘(d) Transactions Relating to Short Sales of Securities- It shall be unlawful for any person, directly or indirectly, by the use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities exchange, or for any member of a national securities exchange to effect, alone or with one or more other persons, a manipulative short sale of any security. The Commission shall issue such other rules as are necessary or appropriate to ensure that the appropriate enforcement options and remedies are available for violations of this subsection in the public interest or for the protection of investors.’.
(c) Investor Notification- Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended--
(1) by redesignating subsections (e), (f), (g), (h), and (i) as subsections (f), (g), (h), (i), and (j), respectively; and
(2) inserting after subsection (d) the following new subsection:
‘(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.’.
SEC. 929Y. STUDY ON EXTRATERRITORIAL PRIVATE RIGHTS OF ACTION.
(a) In General- The Securities and Exchange Commission of the United States shall solicit public comment and thereafter conduct a study to determine the extent to which private rights of action under the antifraud provisions of the Securities and Exchange Act of 1934 (15 U.S.C. 78u-4) should be extended to cover--
(1) conduct within the United States that constitutes a significant step in the furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors; and
(2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States.
(b) Contents- The study shall consider and analyze, among other things--
(1) the scope of such a private right of action, including whether it should extend to all private actors or whether it should be more limited to extend just to institutional investors or otherwise;
(2) what implications such a private right of action would have on international comity;
(3) the economic costs and benefits of extending a private right of action for transnational securities frauds; and
(4) whether a narrower extraterritorial standard should be adopted.
(c) Report- A report of the study shall be submitted and recommendations made to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House not later than 18 months after the date of enactment of this Act.
SEC. 929Z. GAO STUDY ON SECURITIES LITIGATION.
(a) Study- The Comptroller General of the United States shall conduct a study on the impact of authorizing a private right of action against any person who aids or abets another person in violation of the securities laws. To the extent feasible, this study shall include--
(1) a review of the role of secondary actors in companies issuance of securities;
(2) the courts interpretation of the scope of liability for secondary actors under Federal securities laws after January 14, 2008; and
(3) the types of lawsuits decided under the Private Securities Litigation Act of 1995.
(b) Report- Not later than 1 year after the date of enactment of this Act, the Comptroller General shall submit a report to Congress on the findings of the study required under subsection (a).
Subtitle C--Improvements to the Regulation of Credit Rating Agencies
SEC. 931. FINDINGS.
Congress finds the following:
(1) Because of the systemic importance of credit ratings and the reliance placed on credit ratings by individual and institutional investors and financial regulators, the activities and performances of credit rating agencies, including nationally recognized statistical rating organizations, are matters of national public interest, as credit rating agencies are central to capital formation, investor confidence, and the efficient performance of the United States economy.
(2) Credit rating agencies, including nationally recognized statistical rating organizations, play a critical ‘gatekeeper’ role in the debt market that is functionally similar to that of securities analysts, who evaluate the quality of securities in the equity market, and auditors, who review the financial statements of firms. Such role justifies a similar level of public oversight and accountability.
(3) Because credit rating agencies perform evaluative and analytical services on behalf of clients, much as other financial ‘gatekeepers’ do, the activities of credit rating agencies are fundamentally commercial in character and should be subject to the same standards of liability and oversight as apply to auditors, securities analysts, and investment bankers.
(4) In certain activities, particularly in advising arrangers of structured financial products on potential ratings of such products, credit rating agencies face conflicts of interest that need to be carefully monitored and that therefore should be addressed explicitly in legislation in order to give clearer authority to the Securities and Exchange Commission.
(5) In the recent financial crisis, the ratings on structured financial products have proven to be inaccurate. This inaccuracy contributed significantly to the mismanagement of risks by financial institutions and investors, which in turn adversely impacted the health of the economy in the United States and around the world. Such inaccuracy necessitates increased accountability on the part of credit rating agencies.
SEC. 932. ENHANCED REGULATION, ACCOUNTABILITY, AND TRANSPARENCY OF NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS.
(a) In General- Section 15E of the Securities Exchange Act of 1934 (15 U.S.C. 78o-7) is amended--
(1) in subsection (b)--
(A) in paragraph (1)(A), by striking ‘furnished’ and inserting ‘filed’ and by striking ‘furnishing’ and inserting ‘filing’;
(B) in paragraph (1)(B), by striking ‘furnishing’ and inserting ‘filing’; and
(C) in the first sentence of paragraph (2), by striking ‘furnish to’ and inserting ‘file with’;
(2) in subsection (c)--
(A) in paragraph (2)--
(i) in the second sentence, by inserting ‘any other provision of this section, or’ after ‘Notwithstanding’; and
(ii) by inserting after the period at the end the following: ‘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.’; and
(B) by adding at the end the following:
‘(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);
‘(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.’;
(3) in subsection (d)--
(A) by inserting after ‘or revoke the registration of any nationally recognized statistical rating organization’ the following: ‘, 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,’;
(B) by inserting ‘bar’ after ‘placing of limitations, suspension,’;
(C) in paragraph (2), by striking ‘furnished to’ and inserting ‘filed with’;
(D) in paragraph (2), by redesignating subparagraphs (A) and (B) as clauses (i) and (ii), respectively, and adjusting the clause margins accordingly;
(E) by redesignating paragraphs (1) through (5) as subparagraphs (A) through (E), respectively, and adjusting the subparagraph margins accordingly;
(F) in the matter preceding subparagraph (A), as so redesignated, by striking ‘The Commission’ and inserting the following:
‘(1) IN GENERAL- The Commission’;
(G) in subparagraph (D), as so redesignated--
(i) by striking ‘furnish’ and inserting ‘file’; and
(ii) by striking ‘or’ at the end.
(H) in subparagraph (E), as so redesignated, by striking the period at the end and inserting a semicolon; and
(I) by adding at the end the following:
‘(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.’;
(4) in subsection (h), by adding at the end the following:
‘(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.
‘(4) LOOK-BACK REQUIREMENT-
‘(A) REVIEW BY THE NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION- 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, 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) conduct a review to determine whether any conflicts of interest of the employee influenced the credit rating; and
‘(ii) take action to revise the rating if appropriate, in accordance with such rules as the Commission shall prescribe.
‘(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.’;
(5) in subsection (j)--
(A) by striking ‘Each’ and inserting the following:
‘(1) IN GENERAL- Each’; and
(B) by adding at the end the following:
‘(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.’;
(6) in subsection (k), by striking ‘furnish to’ and inserting ‘file with’;
(7) in subsection (l)(2)(A)(i), by striking ‘furnished’ and inserting ‘filed’; and
(8) by striking subsection (p) and inserting the following:
‘(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 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.
‘(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 EXAMINATIONS REQUIRED- The Office shall conduct an examination of each nationally recognized statistical rating organization at least annually.
‘(B) CONDUCT OF EXAMINATIONS- Each examination under subparagraph (A) shall include 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;
‘(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; 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; 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.
‘(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.
‘(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.’.
(b) Conforming Amendment- Section 3(a)(62) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(62)) is amended by striking subparagraph (A) and redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively.
SEC. 933. STATE OF MIND IN PRIVATE ACTIONS.
(a) Accountability- Section 15E(m) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-7(m)) is amended to read as follows:
‘(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.’.
(b) State of Mind- Section 21D(b)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 78u-4(b)(2)) is amended--
(1) by striking ‘In any’ and inserting the following:
‘(A) IN GENERAL- Except as provided in subparagraph (B), in any’; and
(2) by adding at the end the following:
‘(B) EXCEPTION- In the case of an action for money damages brought against a credit rating agency or a controlling person under this title, it shall be sufficient, for purposes of pleading any required state of mind in relation to such action, that the complaint state with particularity facts giving rise to a strong inference that the credit rating agency knowingly or recklessly failed--
‘(i) to conduct a reasonable investigation of the rated security with respect to the factual elements relied upon by its own methodology for evaluating credit risk; or
‘(ii) to obtain reasonable verification of such factual elements (which verification may be based on a sampling technique that does not amount to an audit) from other sources that the credit rating agency considered to be competent and that were independent of the issuer and underwriter.’.
SEC. 934. REFERRING TIPS TO LAW ENFORCEMENT OR REGULATORY AUTHORITIES.
Section 15E of the Securities Exchange Act of 1934 (15 U.S.C. 78o-7), as amended by this subtitle, is amended by adding at the end the following:
‘(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).’.
SEC. 935. CONSIDERATION OF INFORMATION FROM SOURCES OTHER THAN THE ISSUER IN RATING DECISIONS.
Section 15E of the Securities Exchange Act of 1934 (15 U.S.C. 78o-7), as amended by this subtitle, is amended by adding at the end the following:
‘(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.’.
SEC. 936. QUALIFICATION STANDARDS FOR CREDIT RATING ANALYSTS.
Not later than 1 year after the date of enactment of this Act, the Commission shall issue rules that are reasonably designed to ensure that any person employed by a nationally recognized statistical rating organization to perform credit ratings--
(1) meets standards of training, experience, and competence necessary to produce accurate ratings for the categories of issuers whose securities the person rates; and
(2) is tested for knowledge of the credit rating process.
SEC. 937. TIMING OF REGULATIONS.
Unless otherwise specifically provided in this subtitle, the Commission shall issue final regulations, as required by this subtitle and the amendments made by this subtitle, not later than 1 year after the date of enactment of this Act.
SEC. 938. UNIVERSAL RATINGS SYMBOLS.
(a) Rulemaking- The Commission shall require, by rule, each nationally recognized statistical rating organization to establish, maintain, and enforce written policies and procedures that--
(1) assess the probability that an issuer of a security or money market instrument will default, fail to make timely payments, or otherwise not make payments to investors in accordance with the terms of the security or money market instrument;
(2) clearly define and disclose the meaning of any symbol used by the nationally recognized statistical rating organization to denote a credit rating; and
(3) apply any symbol described in paragraph (2) in a manner that is consistent for all types of securities and money market instruments for which the symbol is used.
(b) Rule of Construction- Nothing in this section shall prohibit a nationally recognized statistical rating organization from using distinct sets of symbols to denote credit ratings for different types of securities or money market instruments.
SEC. 939. REMOVAL OF STATUTORY REFERENCES TO CREDIT RATINGS.
(a) Federal Deposit Insurance Act- The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended--
(1) in section 7(b)(1)(E)(i), by striking ‘credit rating entities, and other private economic’ and insert ‘private economic, credit,’;
(2) in section 28(d)--
(A) in the subsection heading, by striking ‘Not of Investment Grade’;
(B) in paragraph (1), by striking ‘not of investment grade’ and inserting ‘that does not meet standards of credit-worthiness as established by the Corporation’;
(C) in paragraph (2), by striking ‘not of investment grade’;
(D) by striking paragraph (3);
(E) by redesignating paragraph (4) as paragraph (3); and
(F) in paragraph (3), as so redesignated--
(i) by striking subparagraph (A);
(ii) by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively; and
(iii) in subparagraph (B), as so redesignated, by striking ‘not of investment grade’ and inserting ‘that does not meet standards of credit-worthiness as established by the Corporation’; and
(3) in section 28(e)--
(A) in the subsection heading, by striking ‘Not of Investment Grade’;
(B) in paragraph (1), by striking ‘not of investment grade’ and inserting ‘that does not meet standards of credit-worthiness as established by the Corporation’; and
(C) in paragraphs (2) and (3), by striking ‘not of investment grade’ each place that it appears and inserting ‘that does not meet standards of credit-worthiness established by the Corporation’.
(b) Federal Housing Enterprises Financial Safety and Soundness Act of 1992- Section 1319 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4519) is amended by striking ‘that is a nationally recognized statistical rating organization, as such term is defined in section 3(a) of the Securities Exchange Act of 1934,’.
(c) Investment Company Act of 1940- Section 6(a)(5)(A)(iv)(I) Investment Company Act of 1940 (15 U.S.C. 80a-6(a)(5)(A)(iv)(I)) is amended by striking ‘is rated investment grade by not less than 1 nationally recognized statistical rating organization’ and inserting ‘meets such standards of credit-worthiness as the Commission shall adopt’.
(d) Revised Statutes- Section 5136A of title LXII of the Revised Statutes of the United States (12 U.S.C. 24a) is amended--
(1) in subsection (a)(2)(E), by striking ‘any applicable rating’ and inserting ‘standards of credit-worthiness established by the Comptroller of the Currency’;
(2) in the heading for subsection (a)(3) by striking ‘Rating or Comparable Requirement’ and inserting ‘Requirement’;
(3) subsection (a)(3), by amending subparagraph (A) to read as follows:
‘(A) IN GENERAL- A national bank meets the requirements of this paragraph if the bank is one of the 100 largest insured banks and has not fewer than 1 issue of outstanding debt that meets standards of credit-worthiness or other criteria as the Secretary of the Treasury and the Board of Governors of the Federal Reserve System may jointly establish.’.
(4) in the heading for subsection (f), by striking ‘Maintain Public Rating or’ and inserting ‘Meet Standards of Credit-worthiness’; and
(5) in subsection (f)(1), by striking ‘any applicable rating’ and inserting ‘standards of credit-worthiness established by the Comptroller of the Currency’.
(e) Securities Exchange Act of 1934- Section 3(a) Securities Exchange Act of 1934 (15 U.S.C. 78a(3)(a)) is amended--
(1) in paragraph (41), by striking ‘is rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization’ and inserting ‘meets standards of credit-worthiness as established by the Commission’; and
(2) in paragraph (53)(A), by striking ‘is rated in 1 of the 4 highest rating categories by at least 1 nationally recognized statistical rating organization’ and inserting ‘meets standards of credit-worthiness as established by the Commission’.
(f) World Bank Discussions- Section 3(a)(6) of the amendment in the nature of a substitute to the text of H.R. 4645, as ordered reported from the Committee on Banking, Finance and Urban Affairs on September 22, 1988, as enacted into law by section 555 of Public Law 100-461, (22 U.S.C. 286hh(a)(6)), is amended by striking ‘credit rating’ and inserting ‘credit-worthiness’.
(g) Effective Date- The amendments made by this section shall take effect 2 years after the date of enactment of this Act.
(h) Study and Report-
(1) IN GENERAL- Commission shall undertake a study on the feasability and desirability of--
(A) standardizing credit ratings terminology, so that all credit rating agencies issue credit ratings using identical terms;
(B) standardizing the market stress conditions under which ratings are evaluated;
(C) requiring a quantitative correspondence between credit ratings and a range of default probabilities and loss expectations under standardized conditions of economic stress; and
(D) standardizing credit rating terminology across asset classes, so that named ratings correspond to a standard range of default probabilities and expected losses independent of asset class and issuing entity.
(2) REPORT- Not later than 1 year after the date of enactment of this Act, the Commission shall submit to Congress a report containing the findings of the study under paragraph (1) and the recommendations, if any, of the Commission with respect to the study.
SEC. 939A. REVIEW OF RELIANCE ON RATINGS.
(a) Agency Review- Not later than 1 year after the date of the enactment of this subtitle, each Federal agency shall, to the extent applicable, review--
(1) any regulation issued by such agency that requires the use of an assessment of the credit-worthiness of a security or money market instrument; and
(2) any references to or requirements in such regulations regarding credit ratings.
(b) Modifications Required- Each such agency shall modify any such regulations identified by the review conducted under subsection (a) to remove any reference to or requirement of reliance on credit ratings and to substitute in such regulations such standard of credit-worthiness as each respective agency shall determine as appropriate for such regulations. In making such determination, such agencies shall seek to establish, to the extent feasible, uniform standards of credit-worthiness for use by each such agency, taking into account the entities regulated by each such agency and the purposes for which such entities would rely on such standards of credit-worthiness.
(c) Report- Upon conclusion of the review required under subsection (a), each Federal agency shall transmit a report to Congress containing a description of any modification of any regulation such agency made pursuant to subsection (b).
SEC. 939B. ELIMINATION OF EXEMPTION FROM FAIR DISCLOSURE RULE.
Not later than 90 days after the date of enactment of this subtitle, the Securities Exchange Commission shall revise Regulation FD (17 C.F.R. 243.100) to remove from such regulation the exemption for entities whose primary business is the issuance of credit ratings (17 C.F.R. 243.100(b)(2)(iii)).
SEC. 939C. SECURITIES AND EXCHANGE COMMISSION STUDY ON STRENGTHENING CREDIT RATING AGENCY INDEPENDENCE.
(a) Study- The Commission shall conduct a study of--
(1) the independence of nationally recognized statistical rating organizations; and
(2) how the independence of nationally recognized statistical rating organizations affects the ratings issued by the nationally recognized statistical rating organizations.
(b) Subjects for Evaluation- In conducting the study under subsection (a), the Commission shall evaluate--
(1) the management of conflicts of interest raised by a nationally recognized statistical rating organization providing other services, including risk management advisory services, ancillary assistance, or consulting services;
(2) the potential impact of rules prohibiting a nationally recognized statistical rating organization that provides a rating to an issuer from providing other services to the issuer; and
(3) any other issue relating to nationally recognized statistical rating organizations, as the Chairman of the Commission determines is appropriate.
(c) Report- Not later than 3 years after the date of enactment of this Act, the Chairman of 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 the results of the study conducted under subsection (a), including recommendations, if any, for improving the integrity of ratings issued by nationally recognized statistical rating organizations.
SEC. 939D. GOVERNMENT ACCOUNTABILITY OFFICE STUDY ON ALTERNATIVE BUSINESS MODELS.
(a) Study- The Comptroller General of the United States shall conduct a study on alternative means for compensating nationally recognized statistical rating organizations in order to create incentives for nationally recognized statistical rating organizations to provide more accurate credit ratings, including any statutory changes that would be required to facilitate the use of an alternative means of compensation.
(b) Report- Not later than 18 months after the date of enactment of this Act, the Comptroller General 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 the results of the study conducted under subsection (a), including recommendations, if any, for providing incentives to credit rating agencies to improve the credit rating process.
SEC. 939E. GOVERNMENT ACCOUNTABILITY OFFICE STUDY ON THE CREATION OF AN INDEPENDENT PROFESSIONAL ANALYST ORGANIZATION.
(a) Study- The Comptroller General of the United States shall conduct a study on the feasibility and merits of creating an independent professional organization for rating analysts employed by nationally recognized statistical rating organizations that would be responsible for--
(1) establishing independent standards for governing the profession of rating analysts;
(2) establishing a code of ethical conduct; and
(3) overseeing the profession of rating analysts.
(b) Report- Not later than 1 year after the date of publication of the rules issued by the Commission pursuant to section 936, the Comptroller General 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 the results of the study conducted under subsection (a).
SEC. 939F. STUDY AND RULEMAKING ON ASSIGNED CREDIT RATINGS.
(a) Definition- In this section, the term ‘structured finance product’ means an asset-backed security, as defined in section 3(a)(77) of the Securities Exchange Act of 1934, as added by section 941, and any structured product based on an asset-backed security, as determined by the Commission, by rule.
(b) Study- The Commission shall carry out a study of--
(1) the credit rating process for structured finance products and the conflicts of interest associated with the issuer-pay and the subscriber-pay models;
(2) the feasibility of establishing a system in which a public or private utility or a self-regulatory organization assigns nationally recognized statistical rating organizations to determine the credit ratings of structured finance products, including--
(A) an assessment of potential mechanisms for determining fees for the nationally recognized statistical rating organizations;
(B) appropriate methods for paying fees to the nationally recognized statistical rating organizations;
(C) the extent to which the creation of such a system would be viewed as the creation of moral hazard by the Federal Government; and
(D) any constitutional or other issues concerning the establishment of such a system;
(3) the range of metrics that could be used to determine the accuracy of credit ratings; and
(4) alternative means for compensating nationally recognized statistical rating organizations that would create incentives for accurate credit ratings.
(c) Report and Recommendation- Not later than 24 months after the date of enactment of this Act, 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 that contains--
(1) the findings of the study required under subsection (b); and
(2) any recommendations for regulatory or statutory changes that the Commission determines should be made to implement the findings of the study required under subsection (b).
(d) Rulemaking-
(1) RULEMAKING- After submission of the report under subsection (c), the Commission shall, by rule, as the Commission determines is necessary or appropriate in the public interest or for the protection of investors, establish a system for the assignment of nationally recognized statistical rating organizations to determine the initial credit ratings of structured finance products, in a manner that prevents the issuer, sponsor, or underwriter of the structured finance product from selecting the nationally recognized statistical rating organization that will determine the initial credit ratings and monitor such credit ratings. In issuing any rule under this paragraph, the Commission shall give thorough consideration to the provisions of section 15E(w) of the Securities Exchange Act of 1934, as that provision would have been added by section 939D of H.R. 4173 (111th Congress), as passed by the Senate on May 20, 2010, and shall implement the system described in such section 939D unless the Commission determines that an alternative system would better serve the public interest and the protection of investors.
(2) RULE OF CONSTRUCTION- Nothing in this subsection may be construed to limit or suspend any other rulemaking authority of the Commission.
SEC. 939G. EFFECT OF RULE 436(G).
Rule 436(g), promulgated by the Securities and Exchange Commission under the Securities Act of 1933, shall have no force or effect.
SEC. 939H. SENSE OF CONGRESS.
It is the sense of Congress that the Securities and Exchange Commission should exercise the rulemaking authority of the Commission under section 15E(h)(2)(B) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-7(h)(2)(B)) to prevent improper conflicts of interest arising from employees of nationally recognized statistical rating organizations providing services to issuers of securities that are unrelated to the issuance of credit ratings, including consulting, advisory, and other services.
Subtitle D--Improvements to the Asset-Backed Securitization Process
SEC. 941. REGULATION OF CREDIT RISK RETENTION.
(a) Definition of Asset-backed Security- Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended by adding at the end the following:
‘(77) ASSET-BACKED SECURITY- The term ‘asset-backed security’--
‘(A) means a fixed-income or other security collateralized by any type of self-liquidating financial asset (including a loan, a lease, a mortgage, or a secured or unsecured receivable) that allows the holder of the security to receive payments that depend primarily on cash flow from the asset, including--
‘(i) a collateralized mortgage obligation;
‘(ii) a collateralized debt obligation;
‘(iii) a collateralized bond obligation;
‘(iv) a collateralized debt obligation of asset-backed securities;
‘(v) a collateralized debt obligation of collateralized debt obligations; and
‘(vi) a security that the Commission, by rule, determines to be an asset-backed security for purposes of this section; and
‘(B) does not include a security issued by a finance subsidiary held by the parent company or a company controlled by the parent company, if none of the securities issued by the finance subsidiary are held by an entity that is not controlled by the parent company.’.
(b) Credit Risk Retention- The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 15F, as added by this Act, the following:
‘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.
‘(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 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.
‘(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) of the Truth in Lending Act, 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.
‘(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) Effective Date of Regulations- The regulations issued under this section shall become effective--
‘(1) 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.’.
(c) Study on Risk Retention-
(1) STUDY- The Board of Governors of the Federal Reserve System, in coordination and consultation with the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Chairperson of the Federal Deposit Insurance Corporation, and the Securities and Exchange Commission shall conduct a study of the combined impact on each individual class of asset-backed security established under section 15G(c)(2) of the Securities Exchange Act of 1934, as added by subsection (b), of--
(A) the new credit risk retention requirements contained in the amendment made by subsection (b), including the effect credit risk retention requirements have on increasing the market for Federally subsidized loans; and
(B) the Financial Accounting Statements 166 and 167 issued by the Financial Accounting Standards Board.
(2) REPORT- Not later than 90 days after the date of enactment of this Act, the Board of Governors of the Federal Reserve System shall submit to Congress a report on the study conducted under paragraph (1). Such report shall include statutory and regulatory recommendations for eliminating any negative impacts on the continued viability of the asset-backed securitization markets and on the availability of credit for new lending identified by the study conducted under paragraph (1).
SEC. 942. DISCLOSURES AND REPORTING FOR ASSET-BACKED SECURITIES.
(a) Securities Exchange Act of 1934- Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)) is amended--
(1) by striking ‘(d) Each’ and inserting the following:
‘(d) Supplementary and Periodic Information-
‘(1) IN GENERAL- Each’;
(2) in the third sentence, by inserting after ‘securities of each class’ the following: ‘, other than any class of asset-backed securities,’; and
(3) by adding at the end the following:
‘(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.’.
(b) Securities Act of 1933- Section 7 of the Securities Act of 1933 (15 U.S.C. 77g) is amended by adding at the end the following:
‘(c) Disclosure Requirements-
‘(1) IN GENERAL- The Commission shall adopt regulations under this subsection requiring each issuer of an asset-backed security to disclose, for each tranche or class of security, information regarding the assets backing that security.
‘(2) CONTENT OF REGULATIONS- In adopting regulations under this subsection, the Commission shall--
‘(A) set standards for the format of the data provided by issuers of an asset-backed security, which shall, to the extent feasible, facilitate comparison of such data across securities in similar types of asset classes; and
‘(B) require issuers of asset-backed securities, at a minimum, to disclose asset-level or loan-level data, if such data are necessary for investors to independently perform due diligence, including--
‘(i) data having unique identifiers relating to loan brokers or originators;
‘(ii) the nature and extent of the compensation of the broker or originator of the assets backing the security; and
‘(iii) the amount of risk retention by the originator and the securitizer of such assets.’.
SEC. 943. REPRESENTATIONS AND WARRANTIES IN ASSET-BACKED OFFERINGS.
Not later than 180 days after the date of enactment of this Act, the Securities and Exchange Commission shall prescribe regulations on the use of representations and warranties in the market for asset-backed securities (as that term is defined in section 3(a)(77) of the Securities Exchange Act of 1934, as added by this subtitle) that--
(1) require each national recognized statistical rating organization to include in any report accompanying a credit rating a description of--
(A) the representations, warranties, and enforcement mechanisms available to investors; and
(B) how they differ from the representations, warranties, and enforcement mechanisms in issuances of similar securities; and
(2) require any securitizer (as that term is defined in section 15G(a) of the Securities Exchange Act of 1934, as added by this subtitle) to disclose fulfilled and unfulfilled repurchase requests across all trusts aggregated by the securitizer, so that investors may identify asset originators with clear underwriting deficiencies.
SEC. 944. EXEMPTED TRANSACTIONS UNDER THE SECURITIES ACT OF 1933.
(a) Exemption Eliminated- Section 4 of the Securities Act of 1933 (15 U.S.C. 77d) is amended--
(1) by striking paragraph (5); and
(2) by striking ‘(6) transactions’ and inserting the following:
‘(5) transactions’.
(b) Conforming Amendment- Section 3(a)(4)(B)(vii)(I) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)(B)(vii)(I)) is amended by striking ‘4(6)’ and inserting ‘4(5)’.
SEC. 945. DUE DILIGENCE ANALYSIS AND DISCLOSURE IN ASSET-BACKED SECURITIES ISSUES.
Section 7 of the Securities Act of 1933 (15 U.S.C. 77g), as amended by this subtitle, is amended by adding at the end the following:
‘(d) Registration Statement for Asset-backed Securities- Not later than 180 days after the date of enactment of this subsection, the Commission shall issue rules relating to the registration statement required to be filed by any issuer of an asset-backed security (as that term is defined in section 3(a)(77) of the Securities Exchange Act of 1934) that require any issuer of an asset-backed security--
‘(1) to perform a review of the assets underlying the asset-backed security; and
‘(2) to disclose the nature of the review under paragraph (1).’.
SEC. 946. STUDY ON THE MACROECONOMIC EFFECTS OF RISK RETENTION REQUIREMENTS.
(a) Study Required- The Chairman of the Financial Services Oversight Council shall carry out a study on the macroeconomic effects of the risk retention requirements under this subtitle, and the amendments made by this subtitle, with emphasis placed on potential beneficial effects with respect to stabilizing the real estate market. Such study shall include--
(1) an analysis of the effects of risk retention on real estate asset price bubbles, including a retrospective estimate of what fraction of real estate losses may have been averted had such requirements been in force in recent years;
(2) an analysis of the feasibility of minimizing real estate price bubbles by proactively adjusting the percentage of risk retention that must be borne by creditors and securitizers of real estate debt, as a function of regional or national market conditions;
(3) a comparable analysis for proactively adjusting mortgage origination requirements;
(4) an assessment of whether such proactive adjustments should be made by an independent regulator, or in a formulaic and transparent manner;
(5) an assessment of whether such adjustments should take place independently or in concert with monetary policy; and
(6) recommendations for implementation and enabling legislation.
(b) Report- Not later than the end of the 180-day period beginning on the date of the enactment of this title, the Chairman of the Financial Services Oversight Council shall issue a report to the Congress containing any findings and determinations made in carrying out the study required under subsection (a).
Subtitle E--Accountability and Executive Compensation
SEC. 951. SHAREHOLDER VOTE ON EXECUTIVE COMPENSATION DISCLOSURES.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 14 (15 U.S.C. 78n) the following:
‘SEC. 14A. SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION.
‘(a) Separate Resolution Required-
‘(1) IN GENERAL- Not less frequently than once every 3 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 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) 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- The Commission may, by rule or order, exempt an 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.’.
SEC. 952. COMPENSATION COMMITTEE INDEPENDENCE.
(a) In General- The Securities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is amended by inserting after section 10B, as added by section 753, the following:
‘SEC. 10C. COMPENSATION COMMITTEES.
‘(a) Independence of Compensation Committees-
‘(1) LISTING STANDARDS- The Commission shall, by rule, direct the national securities exchanges and national securities associations to prohibit the listing of any equity security of an issuer, other than an issuer that is a controlled company, limited partnership, company in bankruptcy proceedings, open-ended management investment company that is registered under the Investment Company Act of 1940, or a foreign private issuer that provides annual disclosures to shareholders of the reasons that the foreign private issuer does not have an independent compensation committee, that does not comply with the requirements of this subsection.
‘(2) INDEPENDENCE OF COMPENSATION COMMITTEES- The rules of the Commission under paragraph (1) shall require that each member of the compensation committee of the board of directors of an issuer be--
‘(A) a member of the board of directors of the issuer; and
‘(B) independent.
‘(3) INDEPENDENCE- The rules of the Commission under paragraph (1) shall require that, in determining the definition of the term ‘independence’ for purposes of paragraph (2), the national securities exchanges and the national securities associations shall consider relevant factors, including--
‘(A) the source of compensation of a member of the board of directors of an issuer, including any consulting, advisory, or other compensatory fee paid by the issuer to such member of the board of directors; and
‘(B) whether a member of the board of directors of an issuer is affiliated with the issuer, a subsidiary of the issuer, or an affiliate of a subsidiary of the issuer.
‘(4) EXEMPTION AUTHORITY- The rules of the Commission under paragraph (1) shall permit a national securities exchange or a national securities association to exempt a particular relationship from the requirements of paragraph (2), with respect to the members of a compensation committee, as the national securities exchange or national securities association determines is appropriate, taking into consideration the size of an issuer and any other relevant factors.
‘(b) Independence of Compensation Consultants and Other Compensation Committee Advisers-
‘(1) IN GENERAL- The compensation committee of an issuer may only select a compensation consultant, legal counsel, or other adviser to the compensation committee after taking into consideration the factors identified by the Commission under paragraph (2).
‘(2) RULES- The Commission shall identify factors that affect the independence of a compensation consultant, legal counsel, or other adviser to a compensation committee of an issuer. Such factors shall be competitively neutral among categories of consultants, legal counsel, or other advisers and preserve the ability of compensation committees to retain the services of members of any such category, and shall include--
‘(A) the provision of other services to the issuer by the person that employs the compensation consultant, legal counsel, or other adviser;
‘(B) the amount of fees received from the issuer by the person that employs the compensation consultant, legal counsel, or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel, or other adviser;
‘(C) the policies and procedures of the person that employs the compensation consultant, legal counsel, or other adviser that are designed to prevent conflicts of interest;
‘(D) any business or personal relationship of the compensation consultant, legal counsel, or other adviser with a member of the compensation committee; and
‘(E) any stock of the issuer owned by the compensation consultant, legal counsel, or other adviser.
‘(c) Compensation Committee Authority Relating to Compensation Consultants-
‘(1) AUTHORITY TO RETAIN COMPENSATION CONSULTANT-
‘(A) IN GENERAL- The compensation committee of an issuer, in its capacity as a committee of the board of directors, may, in its sole discretion, retain or obtain the advice of a compensation consultant.
‘(B) DIRECT RESPONSIBILITY OF COMPENSATION COMMITTEE- The compensation committee of an issuer shall be directly responsible for the appointment, compensation, and oversight of the work of a compensation consultant.
‘(C) RULE OF CONSTRUCTION- This paragraph may not be construed--
‘(i) to require the compensation committee to implement or act consistently with the advice or recommendations of the compensation consultant; or
‘(ii) to affect the ability or obligation of a compensation committee to exercise its own judgment in fulfillment of the duties of the compensation committee.
‘(2) DISCLOSURE- In any proxy or consent solicitation material for an annual meeting of the shareholders (or a special meeting in lieu of the annual meeting) occurring on or after the date that is 1 year after the date of enactment of this section, each issuer shall disclose in the proxy or consent material, in accordance with regulations of the Commission, whether--
‘(A) the compensation committee of the issuer retained or obtained the advice of a compensation consultant; and
‘(B) the work of the compensation consultant has raised any conflict of interest and, if so, the nature of the conflict and how the conflict is being addressed.
‘(d) Authority To Engage Independent Legal Counsel and Other Advisers-
‘(1) IN GENERAL- The compensation committee of an issuer, in its capacity as a committee of the board of directors, may, in its sole discretion, retain and obtain the advice of independent legal counsel and other advisers.
‘(2) DIRECT RESPONSIBILITY OF COMPENSATION COMMITTEE- The compensation committee of an issuer shall be directly responsible for the appointment, compensation, and oversight of the work of independent legal counsel and other advisers.
‘(3) RULE OF CONSTRUCTION- This subsection may not be construed--
‘(A) to require a compensation committee to implement or act consistently with the advice or recommendations of independent legal counsel or other advisers under this subsection; or
‘(B) to affect the ability or obligation of a compensation committee to exercise its own judgment in fulfillment of the duties of the compensation committee.
‘(e) Compensation of Compensation Consultants, Independent Legal Counsel, and Other Advisers- Each issuer shall provide for appropriate funding, as determined by the compensation committee in its capacity as a committee of the board of directors, for payment of reasonable compensation--
‘(1) to a compensation consultant; and
‘(2) to independent legal counsel or any other adviser to the compensation committee.
‘(f) Commission Rules-
‘(1) IN GENERAL- Not later than 360 days after the date of enactment of this section, 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 is not in compliance with the requirements of this section.
‘(2) OPPORTUNITY TO CURE DEFECTS- The rules of the Commission under paragraph (1) shall provide for appropriate procedures for an issuer to have a reasonable opportunity to cure any defects that would be the basis for the prohibition under paragraph (1), before the imposition of such prohibition.
‘(3) EXEMPTION AUTHORITY-
‘(A) IN GENERAL- The rules of the Commission under paragraph (1) shall permit a national securities exchange or a national securities association to exempt a category of issuers from the requirements under this section, as the national securities exchange or the national securities association determines is appropriate.
‘(B) CONSIDERATIONS- In determining appropriate exemptions under subparagraph (A), the national securities exchange or the national securities association shall take into account the potential impact of the requirements of this section on smaller reporting issuers.
‘(g) Controlled Company Exemption-
‘(1) IN GENERAL- This section shall not apply to any controlled company.
‘(2) DEFINITION- For purposes of this section, the term ‘controlled company’ means an issuer--
‘(A) that is listed on a national securities exchange or by a national securities association; and
‘(B) that holds an election for the board of directors of the issuer in which more than 50 percent of the voting power is held by an individual, a group, or another issuer.’.
(b) Study and Report-
(1) STUDY- The Securities and Exchange Commission shall conduct a study and review of the use of compensation consultants and the effects of such use.
(2) REPORT- Not later than 2 years after the date of the enactment of this Act, the Commission shall submit a report to Congress on the results of the study and review required by this subsection.
SEC. 953. EXECUTIVE COMPENSATION DISCLOSURES.
(a) Disclosure of Pay Versus Performance- Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n), as amended by this title, is amended by adding at the end the following:
‘(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 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.’.
(b) Additional Disclosure Requirements-
(1) IN GENERAL- The Commission shall amend section 229.402 of title 17, Code of Federal Regulations, to require each issuer to disclose in any filing of the issuer described in section 229.10(a) of title 17, Code of Federal Regulations (or any successor thereto)--
(A) the median of the annual total compensation of all employees of the issuer, except the chief executive officer (or any equivalent position) of the issuer;
(B) the annual total compensation of the chief executive officer (or any equivalent position) of the issuer; and
(C) the ratio of the amount described in subparagraph (A) to the amount described in subparagraph (B).
(2) TOTAL COMPENSATION- For purposes of this subsection, the total compensation of an employee of an issuer shall be determined in accordance with section 229.402(c)(2)(x) of title 17, Code of Federal Regulations, as in effect on the day before the date of enactment of this Act.
SEC. 954. RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION.
The Securities Exchange Act of 1934 is amended by inserting after section 10C, as added by section 952, the following:
‘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.’.
SEC. 955. DISCLOSURE REGARDING EMPLOYEE AND DIRECTOR HEDGING.
Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n), as amended by this title, is amended by adding at the end the following:
‘(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.’.
SEC. 956. ENHANCED COMPENSATION STRUCTURE REPORTING.
(a) Enhanced Disclosure and Reporting of Compensation Arrangements-
(1) IN GENERAL- Not later than 9 months after the date of enactment of this title, the appropriate Federal regulators jointly shall prescribe regulations or guidelines to require each covered financial institution to disclose to the appropriate Federal regulator the structures of all incentive-based compensation arrangements offered by such covered financial institutions sufficient to determine whether the compensation structure--
(A) provides an executive officer, employee, director, or principal shareholder of the covered financial institution with excessive compensation, fees, or benefits; or
(B) could lead to material financial loss to the covered financial institution.
(2) RULES OF CONSTRUCTION- Nothing in this section shall be construed as requiring the reporting of the actual compensation of particular individuals. Nothing in this section shall be construed to require a covered financial institution that does not have an incentive-based payment arrangement to make the disclosures required under this subsection.
(b) Prohibition on Certain Compensation Arrangements- Not later than 9 months after the date of enactment of this title, the appropriate Federal regulators shall jointly prescribe regulations or guidelines that prohibit any types of incentive-based payment arrangement, or any feature of any such arrangement, that the regulators determine encourages inappropriate risks by covered financial institutions--
(1) by providing an executive officer, employee, director, or principal shareholder of the covered financial institution with excessive compensation, fees, or benefits; or
(2) that could lead to material financial loss to the covered financial institution.
(c) Standards- The appropriate Federal regulators shall--
(1) ensure that any standards for compensation established under subsections (a) or (b) are comparable to the standards established under section of the Federal Deposit Insurance Act (12 U.S.C. 2 1831p-1) for insured depository institutions; and
(2) in establishing such standards under such subsections, take into consideration the compensation standards described in section 39(c) of the Federal Deposit Insurance Act (12 U.S.C. 1831p- 9 1(c)).
(d) Enforcement- The provisions of this section and the regulations issued under this section shall be enforced under section 505 of the Gramm-Leach-Bliley Act and, for purposes of such section, a violation of this section or such regulations shall be treated as a violation of subtitle A of title V of such Act.
(e) Definitions- As used in this section--
(1) the term ‘appropriate Federal regulator’ means the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Board of Directors of the Federal Deposit Insurance Corporation, the Director of the Office of Thrift Supervision, the National Credit Union Administration Board, the Securities and Exchange Commission, the Federal Housing Finance Agency; and
(2) the term ‘covered financial institution’ means--
(A) a depository institution or depository institution holding company, as such terms are defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);
(B) a broker-dealer registered under section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o);
(C) a credit union, as described in section 19(b)(1)(A)(iv) of the Federal Reserve Act;
(D) an investment advisor, as such term is defined in section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11));
(E) the Federal National Mortgage Association;
(F) the Federal Home Loan Mortgage Corporation; and
(G) any other financial institution that the appropriate Federal regulators, jointly, by rule, determine should be treated as a covered financial institution for purposes of this section.
(f) Exemption for Certain Financial Institutions- The requirements of this section shall not apply to covered financial institutions with assets of less than $1,000,000,000.
SEC. 957. VOTING BY BROKERS.
Section 6(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(b)) is amended--
(1) in paragraph (9)--
(A) in subparagraph (A), by redesignating clauses (i) through (v) as subclauses (I) through (V), respectively, and adjusting the margins accordingly;
(B) by redesignating subparagraphs (A) through (D) as clauses (i) through (iv), respectively, and adjusting the margins accordingly;
(C) by inserting ‘(A)’ after ‘(9)’; and
(D) in the matter immediately following clause (iv), as so redesignated, by striking ‘As used’ and inserting the following:
‘(B) As used’.
(2) by adding at the end the following:
‘(10)(A) The rules of the exchange prohibit any member that is not the beneficial owner of a security registered under section 12 from granting a proxy to vote the security in connection with a shareholder vote described in subparagraph (B), unless the beneficial owner of the security has instructed the member to vote the proxy in accordance with the voting instructions of the beneficial owner.
‘(B) A shareholder vote described in this subparagraph is a shareholder vote with respect to the election of a member of the board of directors of an issuer, executive compensation, or any other significant matter, as determined by the Commission, by rule, and does not include a vote with respect to the uncontested election of a member of the board of directors of any investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80b-1 et seq.).
‘(C) Nothing in this paragraph shall be construed to prohibit a national securities exchange from prohibiting a member that is not the beneficial owner of a security registered under section 12 from granting a proxy to vote the security in connection with a shareholder vote not described in subparagraph (A).’.
Subtitle F--Improvements to the Management of the Securities and Exchange Commission
SEC. 961. REPORT AND CERTIFICATION OF INTERNAL SUPERVISORY CONTROLS.
(a) Annual Reports and Certification- Not later than 90 days after the end of each fiscal year, the Commission shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the conduct by the Commission of examinations of registered entities, enforcement investigations, and review of corporate financial securities filings.
(b) Contents of Reports- Each report under subsection (a) shall contain--
(1) an assessment, as of the end of the most recent fiscal year, of the effectiveness of--
(A) the internal supervisory controls of the Commission; and
(B) the procedures of the Commission applicable to the staff of the Commission who perform examinations of registered entities, enforcement investigations, and reviews of corporate financial securities filings;
(2) a certification that the Commission has adequate internal supervisory controls to carry out the duties of the Commission described in paragraph (1)(B); and
(3) a summary by the Comptroller General of the United States of the review carried out under subsection (d).
(c) Certification-
(1) SIGNATURE- The certification under subsection (b)(2) shall be signed by the Director of the Division of Enforcement, the Director of the Division of Corporation Finance, and the Director of the Office of Compliance Inspections and Examinations (or the head of any successor division or office).
(2) CONTENT OF CERTIFICATION- Each individual described in paragraph (1) shall certify that the individual--
(A) is directly responsible for establishing and maintaining the internal supervisory controls of the Division or Office of which the individual is the head;
(B) is knowledgeable about the internal supervisory controls of the Division or Office of which the individual is the head;
(C) has evaluated the effectiveness of the internal supervisory controls during the 90-day period ending on the final day of the fiscal year to which the report relates; and
(D) has disclosed to the Commission any significant deficiencies in the design or operation of internal supervisory controls that could adversely affect the ability of the Division or Office to consistently conduct inspections, or investigations, or reviews of filings with professional competence and integrity.
(d) New Director or Acting Director- Notwithstanding subsection (a), if the Director of the Division of Enforcement, the Director of the Division of Corporate Finance, or the Director of the Office of Compliance Inspections and Examinations has served as Director of the Division or Office for less than 90 days on the date on which a report is required to be submitted under subsection (a), the Commission may submit the report on the date on which the Director has served as Director for 90 days. If there is no Director of the Division of Enforcement, the Division of Corporate Finance, or the Office of Compliance Inspections and Examinations, on the date on which a report is required to be submitted under subsection (a), the Acting Director of the Division or Office may make the certification required under subsection (c).
(e) Review by the Comptroller General-
(1) REPORT- The Comptroller General of the United States 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 that contains a review of the adequacy and effectiveness of the internal supervisory control structure and procedures described in subsection (b)(1), not less frequently than once every 3 years, at a time to coincide with the publication of the reports of the Commission under this section.
(2) AUTHORITY TO HIRE EXPERTS- The Comptroller General of the United States may hire independent consultants with specialized expertise in any area relevant to the duties of the Comptroller General described in this section, in order to assist the Comptroller General in carrying out such duties.
SEC. 962. TRIENNIAL REPORT ON PERSONNEL MANAGEMENT.
(a) Triennial Report Required- Once every 3 years, the Comptroller General of the United States shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the quality of personnel management by the Commission.
(b) Contents of Report- Each report under subsection (a) shall include--
(1) an evaluation of--
(A) the effectiveness of supervisors in using the skills, talents, and motivation of the employees of the Commission to achieve the goals of the Commission;
(B) the criteria for promoting employees of the Commission to supervisory positions;
(C) the fairness of the application of the promotion criteria to the decisions of the Commission;
(D) the competence of the professional staff of the Commission;
(E) the efficiency of communication between the units of the Commission regarding the work of the Commission (including communication between divisions and between subunits of a division) and the efforts by the Commission to promote such communication;
(F) the turnover within subunits of the Commission, including the consideration of supervisors whose subordinates have an unusually high rate of turnover;
(G) whether there are excessive numbers of low-level, mid-level, or senior-level managers;
(H) any initiatives of the Commission that increase the competence of the staff of the Commission;
(I) the actions taken by the Commission regarding employees of the Commission who have failed to perform their duties and circumstances under which the Commission has issued to employees a notice of termination; and
(J) such other factors relating to the management of the Commission as the Comptroller General determines are appropriate;
(2) an evaluation of any improvements made with respect to the areas described in paragraph (1) since the date of submission of the previous report; and
(3) recommendations for how the Commission can use the human resources of the Commission more effectively and efficiently to carry out the mission of the Commission.
(c) Consultation- In preparing the report under subsection (a), the Comptroller General shall consult with current employees of the Commission, retired employees and other former employees of the Commission, the Inspector General of the Commission, persons that have business before the Commission, any union representing the employees of the Commission, private management consultants, academics, and any other source that the Comptroller General deems appropriate.
(d) Report by Commission- Not later than 90 days after the date on which the Comptroller General submits each report under subsection (a), 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 describing the actions taken by the Commission in response to the recommendations contained in the report under subsection (a).
(e) Reimbursements for Cost of Reports-
(1) REIMBURSEMENTS REQUIRED- The Commission shall reimburse the Government Accountability Office for the full cost of making the reports under this section, as billed therefor by the Comptroller General.
(2) CREDITING AND USE OF REIMBURSEMENTS- Such reimbursements shall--
(A) be credited to the appropriation account ‘Salaries and Expenses, Government Accountability Office’ current when the payment is received; and
(B) remain available until expended.
(f) Authority to Hire Experts- The Comptroller General of the United States may hire independent consultants with specialized expertise in any area relevant to the duties of the Comptroller General described in this section, in order to assist the Comptroller General in carrying out such duties.
SEC. 963. ANNUAL FINANCIAL CONTROLS AUDIT.
(a) Reports of Commission-
(1) ANNUAL REPORTS REQUIRED- Not later than 6 months after the end of each fiscal year, the Commission shall publish and submit to Congress a report that--
(A) describes the responsibility of the management of the Commission for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and
(B) contains an assessment of the effectiveness of the internal control structure and procedures for financial reporting of the Commission during that fiscal year.
(2) ATTESTATION- The reports required under paragraph (1) shall be attested to by the Chairman and chief financial officer of the Commission.
(b) Report by Comptroller General-
(1) REPORT REQUIRED- Not later than 6 months after the end of the first fiscal year after the date of enactment of this Act, the Comptroller General of the United States shall submit a report to Congress that assesses--
(A) the effectiveness of the internal control structure and procedures of the Commission for financial reporting; and
(B) the assessment of the Commission under subsection (a)(1)(B).
(2) ATTESTATION- The Comptroller General shall attest to, and report on, the assessment made by the Commission under subsection (a).
(c) Reimbursements for Cost of Reports-
(1) REIMBURSEMENTS REQUIRED- The Commission shall reimburse the Government Accountability Office for the full cost of making the reports under subsection (b), as billed therefor by the Comptroller General.
(2) CREDITING AND USE OF REIMBURSEMENTS- Such reimbursements shall--
(A) be credited to the appropriation account ‘Salaries and Expenses, Government Accountability Office’ current when the payment is received; and
(B) remain available until expended.
SEC. 964. REPORT ON OVERSIGHT OF NATIONAL SECURITIES ASSOCIATIONS.
(a) Report Required- Not later than 2 years after the date of enactment of this Act, and every 3 years thereafter, the Comptroller General of the United States 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 that includes an evaluation of the oversight by the Commission of national securities associations registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3) with respect to--
(1) the governance of such national securities associations, including the identification and management of conflicts of interest by such national securities associations, together with an analysis of the impact of any conflicts of interest on the regulatory enforcement or rulemaking by such national securities associations;
(2) the examinations carried out by the national securities associations, including the expertise of the examiners;
(3) the executive compensation practices of such national securities associations;
(4) the arbitration services provided by the national securities associations;
(5) the review performed by national securities associations of advertising by the members of the national securities associations;
(6) the cooperation with and assistance to State securities administrators by the national securities associations to promote investor protection;
(7) how the funding of national securities associations is used to support the mission of the national securities associations, including--
(A) the methods of funding;
(B) the sufficiency of funds;
(C) how funds are invested by the national securities association pending use; and
(D) the impact of the methods, sufficiency, and investment of funds on regulatory enforcement by the national securities associations;
(8) the policies regarding the employment of former employees of national securities associations by regulated entities;
(9) the ongoing effectiveness of the rules of the national securities associations in achieving the goals of the rules;
(10) the transparency of governance and activities of the national securities associations; and
(11) any other issue that has an impact, as determined by the Comptroller General, on the effectiveness of such national securities associations in performing their mission and in dealing fairly with investors and members;
(b) Reimbursements for Cost of Reports-
(1) REIMBURSEMENTS REQUIRED- The Commission shall reimburse the Government Accountability Office for the full cost of making the reports under subsection (a), as billed therefor by the Comptroller General.
(2) CREDITING AND USE OF REIMBURSEMENTS- Such reimbursements shall--
(A) be credited to the appropriation account ‘Salaries and Expenses, Government Accountability Office’ current when the payment is received; and
(B) remain available until expended.
SEC. 965. COMPLIANCE EXAMINERS.
Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d) is amended by adding at the end the following:
‘(h) Examiners-
‘(1) DIVISION OF TRADING AND MARKETS- The Division of Trading and Markets of the Commission, or any successor organizational unit, shall have a staff of examiners who shall--
‘(A) perform compliance inspections and examinations of entities under the jurisdiction of that Division; and
‘(B) report to the Director of that Division.
‘(2) DIVISION OF INVESTMENT MANAGEMENT- The Division of Investment Management of the Commission, or any successor organizational unit, shall have a staff of examiners who shall--
‘(A) perform compliance inspections and examinations of entities under the jurisdiction of that Division; and
‘(B) report to the Director of that Division.’.
SEC. 966. SUGGESTION PROGRAM FOR EMPLOYEES OF THE COMMISSION.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 4C (15 U.S.C. 78d-3) the following:
‘SEC. 4D. ADDITIONAL DUTIES OF INSPECTOR GENERAL.
‘(a) Suggestion Submissions by Commission Employees-
‘(1) HOTLINE ESTABLISHED- The Inspector General of the Commission shall establish and maintain a telephone hotline or other electronic means for the receipt of--
‘(A) suggestions by employees of the Commission for improvements in the work efficiency, effectiveness, and productivity, and the use of the resources, of the Commission; and
‘(B) allegations by employees of the Commission of waste, abuse, misconduct, or mismanagement within the Commission.
‘(2) CONFIDENTIALITY- The Inspector General shall maintain as confidential--
‘(A) the identity of any individual who provides information by the means established under paragraph (1), unless the individual requests otherwise, in writing; and
‘(B) at the request of any such individual, any specific information provided by the individual.
‘(b) Consideration of Reports- The Inspector General shall consider any suggestions or allegations received by the means established under subsection (a)(1), and shall recommend appropriate action in relation to such suggestions or allegations.
‘(c) Recognition- The Inspector General may recognize any employee who makes a suggestion under subsection (a)(1) (or by other means) that would or does--
‘(1) increase the work efficiency, effectiveness, or productivity of the Commission; or
‘(2) reduce waste, abuse, misconduct, or mismanagement within the Commission.
‘(d) Report- The Inspector General of the Commission shall submit to Congress an annual report containing a description of--
‘(1) the nature, number, and potential benefits of any suggestions received under subsection (a);
‘(2) the nature, number, and seriousness of any allegations received under subsection (a);
‘(3) any recommendations made or actions taken by the Inspector General in response to substantiated allegations received under subsection (a); and
‘(4) any action the Commission has taken in response to suggestions or allegations received under subsection (a).
‘(e) Funding- The activities of the Inspector General under this subsection shall be funded by the Securities and Exchange Commission Investor Protection Fund established under section 21F.’.
SEC. 967. COMMISSION ORGANIZATIONAL STUDY AND REFORM.
(a) Study Required-
(1) IN GENERAL- Not later than the end of the 90-day period beginning on the date of the enactment of this subtitle, the Securities and Exchange Commission (hereinafter in this section referred to as the ‘SEC’) shall hire an independent consultant of high caliber and with expertise in organizational restructuring and the operations of capital markets to examine the internal operations, structure, funding, and the need for comprehensive reform of the SEC, as well as the SEC’s relationship with and the reliance on self-regulatory organizations and other entities relevant to the regulation of securities and the protection of securities investors that are under the SEC’s oversight.
(2) SPECIFIC AREAS FOR STUDY- The study required under paragraph (1) shall, at a minimum, include the study of--
(A) the possible elimination of unnecessary or redundant units at the SEC;
(B) improving communications between SEC offices and divisions;
(C) the need to put in place a clear chain-of-command structure, particularly for enforcement examinations and compliance inspections;
(D) the effect of high-frequency trading and other technological advances on the market and what the SEC requires to monitor the effect of such trading and advances on the market;
(E) the SEC’s hiring authorities, workplace policies, and personal practices, including--
(i) whether there is a need to further streamline hiring authorities for those who are not lawyers, accountants, compliance examiners, or economists;
(ii) whether there is a need for further pay reforms;
(iii) the diversity of skill sets of SEC employees and whether the present skill set diversity efficiently and effectively fosters the SEC’s mission of investor protection; and
(iv) the application of civil service laws by the SEC;
(F) whether the SEC’s oversight and reliance on self-regulatory organizations promotes efficient and effective governance for the securities markets; and
(G) whether adjusting the SEC’s reliance on self-regulatory organizations is necessary to promote more efficient and effective governance for the securities markets.
(b) Consultant Report- Not later than the end of the 150-day period after being retained, the independent consultant hired pursuant to subsection (a)(1) shall issue a report to the SEC and the Congress containing--
(1) a detailed description of any findings and conclusions made while carrying out the study required under subsection (a)(1); and
(2) recommendations for legislative, regulatory, or administrative action that the consultant determines appropriate to enable the SEC and other entities on which the consultant reports to perform their statutorily or otherwise mandated missions.
(c) SEC Report- Not later than the end of the 6-month period beginning on the date the consultant issues the report under subsection (b), and every 6-months thereafter during the 2-year period following the date on which the consultant issues such report, the SEC shall issue a report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate describing the SEC’s implementation of the regulatory and administrative recommendations contained in the consultant’s report.
SEC. 968. STUDY ON SEC REVOLVING DOOR.
(a) Government Accountability Office Study- The Comptroller General of the United States shall conduct a study that will--
(1) review the number of employees who leave the Securities and Exchange Commission to work for financial institutions regulated by such Commission;
(2) determine how many employees who leave the Securities and Exchange Commission worked on cases that involved financial institutions regulated by such Commission;
(3) review the length of time employees work for the Securities and Exchange Commission before leaving to be employed by financial institutions regulated by such Commission;
(4) review existing internal controls and make recommendations on strengthening such controls to ensure that employees of the Securities and Exchange Commission who are later employed by financial institutions did not assist such institutions in violating any rules or regulations of the Commission during the course of their employment with such Commission;
(5) determine if greater post-employment restrictions are necessary to prevent employees of the Securities and Exchange Commission from being employed by financial institutions after employment with such Commission;
(6) determine if the volume of employees of the Securities and Exchange Commission who are later employed by financial institutions has led to inefficiencies in enforcement;
(7) determine if employees of the Securities and Exchange Commission who are later employed by financial institutions assisted such institutions in circumventing Federal rules and regulations while employed by such Commission;
(8) review any information that may address the volume of employees of the Securities and Exchange Commission who are later employed by financial institutions, and make recommendations to Congress; and
(9) review other additional issues as may be raised during the course of the study conducted under this subsection.
(b) Report- Not later than 1 year after the date of the enactment of this subtitle, the Comptroller General of the United States shall submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate a report on the results of the study required by subsection (a).
Subtitle G--Strengthening Corporate Governance
SEC. 971. PROXY ACCESS.
(a) Proxy Access- Section 14(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78n(a)) is amended--
(1) by inserting ‘(1)’ after ‘(a)’; and
(2) by adding at the end the following:
‘(2) The 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) Regulations- The Commission may issue rules permitting the use by a shareholder of proxy solicitation materials supplied by an issuer of securities for the purpose of nominating individuals to membership on the board of directors of the issuer, under such terms and conditions as the Commission determines are in the interests of shareholders and for the protection of investors.
(c) Exemptions- The Commission may, by rule or order, exempt an issuer or class of issuers from the requirement made by this section or an amendment made by this section. In determining whether to make an exemption under this subsection, the Commission shall take into account, among other considerations, whether the requirement in the amendment made by subsection (a) disproportionately burdens small issuers.
SEC. 972. DISCLOSURES REGARDING CHAIRMAN AND CEO STRUCTURES.
The Securities Exchange Act of 1934 (15 U.S. C. 78a et seq.) is amended by inserting after section 14A, as added by this title, the following:
‘SEC. 14B. CORPORATE GOVERNANCE.
‘Not later than 180 days after the date of enactment of this subsection, the Commission shall issue rules that require an issuer to disclose in the annual proxy sent to investors the reasons why the issuer has chosen--
‘(1) the same person to serve as chairman of the board of directors and chief executive officer (or in equivalent positions); or
‘(2) different individuals to serve as chairman of the board of directors and chief executive officer (or in equivalent positions of the issuer).’.
Subtitle H--Municipal Securities
SEC. 975. REGULATION OF MUNICIPAL SECURITIES AND CHANGES TO THE BOARD OF THE MSRB.
(a) Registration of Municipal Securities Dealers and Municipal Advisors- Section 15B(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-4(a)) is amended--
(1) in paragraph (1)--
(A) by inserting ‘(A)’ after ‘(1)’; and
(B) by adding at the end the following:
‘(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) in paragraph (2), by inserting ‘or municipal advisor’ after ‘municipal securities dealer’ each place that term appears;
(3) in paragraph (3), by inserting ‘or municipal advisor’ after ‘municipal securities dealer’ each place that term appears;
(4) in paragraph (4), by striking ‘dealer, or municipal securities dealer or class of brokers, dealers, or municipal securities dealers’ and inserting ‘dealer, municipal securities dealer, or municipal advisor, or class of brokers, dealers, municipal securities dealers, or municipal advisors’; and
(5) by adding at the end the following:
‘(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) Municipal Securities Rulemaking Board- Section 15B(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-4(b)) is amended--
(1) in paragraph (1)--
(A) in the first sentence, by striking ‘Not later than’ and all that follows through ‘appointed by the Commission’ and inserting ‘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),’;
(B) by striking the second sentence and inserting the following: ‘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.’; and
(C) in the third sentence, by striking ‘initial’;
(2) in paragraph (2)--
(A) in the matter preceding subparagraph (A)--
(i) by inserting before the period at the end of the first sentence the following: ‘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’; and
(ii) by striking the second sentence;
(B) in subparagraph (A)--
(i) in the matter preceding clause (i)--
(I) by inserting ‘, 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,’ after ‘sale of, any municipal security’; and
(II) by inserting ‘and municipal entities or obligated persons’ after ‘protection of investors’;
(ii) in clause (i), by striking ‘municipal securities brokers and municipal securities dealers’ each place that term appears and inserting ‘municipal securities brokers, municipal securities dealers, and municipal advisors’;
(iii) in clause (ii), by adding ‘and’ at the end;
(iv) in clause (iii), by striking ‘; and’ and inserting a period; and
(v) by striking clause (iv);
(C) by amending subparagraph (B) to read as follows:
‘(B) establish fair procedures for the nomination and election of members of the Board and assure fair representation in such nominations and elections of 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.’.
(D) in subparagraph (C)--
(i) by inserting ‘and municipal financial products’ after ‘municipal securities’ the first two times that term appears;
(ii) by inserting ‘, municipal entities, obligated persons,’ before ‘and the public interest’;
(iii) by striking ‘between’ and inserting ‘among’;
(iv) by striking ‘issuers, municipal securities brokers, or municipal securities dealers, to fix’ and inserting ‘municipal entities, obligated persons, municipal securities brokers, municipal securities dealers, or municipal advisors, to fix’; and
(v) by striking ‘brokers or municipal securities dealers, to regulate’ and inserting ‘brokers, municipal securities dealers, or municipal advisors, to regulate’;
(E) in subparagraph (D)--
(i) by inserting ‘and advice concerning municipal financial products’ after ‘transactions in municipal securities’;
(ii) by striking ‘That no’ and inserting ‘that no’;
(iii) by inserting ‘municipal advisor,’ before ‘or person associated’; and
(iv) by striking ‘a municipal securities broker or municipal securities dealer may be compelled’ and inserting ‘a municipal securities broker, municipal securities dealer, or municipal advisor may be compelled’;
(F) in subparagraph (E)--
(i) by striking ‘municipal securities brokers and municipal securities dealers’ and inserting ‘municipal securities brokers, municipal securities dealers, and municipal advisors’; and
(ii) by striking ‘municipal securities broker or municipal securities dealer’ and inserting ‘municipal securities broker, municipal securities dealer, or municipal advisor’;
(G) in subparagraph (G), by striking ‘municipal securities brokers and municipal securities dealers’ and inserting ‘municipal securities brokers, municipal securities dealers, and municipal advisors’;
(H) in subparagraph (J)--
(i) by striking ‘municipal securities broker and each municipal securities dealer’ and inserting ‘municipal securities broker, municipal securities dealer, and municipal advisor’; and
(ii) by striking the period at the end of the second sentence and inserting ‘, 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.’;
(I) in subparagraph (K)--
(i) by inserting ‘broker, dealer, or’ before ‘municipal securities dealer’ each place that term appears; and
(ii) by striking ‘municipal securities investment portfolio’ and inserting ‘related account of a broker, dealer, or municipal securities dealer’; and
(J) by adding at the end the following:
‘(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) by redesignating paragraph (3) as paragraph (7); and
(4) by inserting after paragraph (2) the following:
‘(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.’.
(c) Discipline of Brokers, Dealers, Municipal Securities Dealers and Municipal Advisors; Fiduciary Duty of Municipal Advisors- Section 15B(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-4(c)) is amended--
(1) in paragraph (1), by inserting ‘, 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,’ after ‘any municipal security’;
(2) by adding at the end of paragraph (1) the following: ‘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.’.
(3) in paragraph (2), by inserting ‘or municipal advisor’ after ‘municipal securities dealer’ each place that term appears;
(4) in paragraph (3)--
(A) by inserting ‘or municipal entities or obligated person’ after ‘protection of investors’ each place that term appears; and
(B) by inserting ‘or municipal advisor’ after ‘municipal securities dealer’ each place that term appears;
(5) in paragraph (4), by inserting ‘or municipal advisor’ after ‘municipal securities dealer or obligated person’ each place that term appears;
(6) in paragraph (6)(B), by inserting ‘or municipal entities or obligated person’ after ‘protection of investors’;
(7) in paragraph (7)--
(A) in subparagraph (A)--
(i) in clause (i), by striking ‘; and’ and inserting a semicolon;
(ii) in clause (ii), by striking the period and inserting ‘; and’; and
(iii) by adding at the end the following:
‘(iii) the Commission, or its designee, in the case of municipal advisors.’.
(B) in subparagraph (B), by inserting ‘or municipal entities or obligated person’ after ‘protection of investors’; and
(8) by adding at the end the following:
‘(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.’.
(d) Issuance of Municipal Securities- Section 15B(d)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-4(d)) is amended--
(1) by striking ‘through a municipal securities broker or municipal securities dealer or otherwise’ and inserting ‘through a municipal securities broker, municipal securities dealer, municipal advisor, or otherwise’; and
(2) by inserting ‘or municipal advisors’ before ‘to furnish’.
(e) Definitions- Section 15B of the Securities Exchange Act of 1934 (15 U.S.C. 78o-4) is amended by adding at the end the following:
‘(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.’.
(f) Registered Securities Association- Section 15A(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3(b)) is amended by adding at the end the following:
‘(15) The rules of the association provide that the association shall--
‘(A) request guidance from the Municipal Securities Rulemaking Board in interpretation of the rules of the Municipal Securities Rulemaking Board; and
‘(B) provide information to the Municipal Securities Rulemaking Board about the enforcement actions and examinations of the association under section 15B(b)(2)(E), so that the Municipal Securities Rulemaking Board may--
‘(i) assist in such enforcement actions and examinations; and
‘(ii) evaluate the ongoing effectiveness of the rules of the Board.’.
(g) Registration and Regulation of Brokers and Dealers- Section 15 of the Securities Exchange Act of 1934 is amended--
(1) in subsection (b)(4), by inserting ‘municipal advisor,’ after ‘municipal securities dealer’ each place that term appears; and
(2) in subsection (c), by inserting ‘broker, dealer, or’ before ‘municipal securities dealer’ each place that term appears.
(h) Accounts and Records, Reports, Examinations of Exchanges, Members, and Others- Section 17(a)(1) of the Securities Exchange Act of 1934 is amended by inserting ‘municipal advisor,’ after ‘municipal securities dealer’.
(i) Effective Date- This section, and the amendments made by this section, shall take effect on October 1, 2010.
SEC. 976. GOVERNMENT ACCOUNTABILITY OFFICE STUDY OF INCREASED DISCLOSURE TO INVESTORS.
(a) Study- The Comptroller General of the United States shall conduct a study and review of the disclosure required to be made by issuers of municipal securities.
(b) Subjects for Evaluation- In conducting the study under subsection (a), the Comptroller General of the United States shall--
(1) broadly describe--
(A) the size of the municipal securities markets and the issuers and investors; and
(B) the disclosures provided by issuers to investors;
(2) compare the amount, frequency, and quality of disclosures that issuers of municipal securities are required by law to provide for the benefit of municipal securities holders, including the amount of and frequency of disclosures actually provided by issuers of municipal securities, with the amount of and frequency of disclosures that issuers of corporate securities provide for the benefit of corporate securities holders, taking into account the differences between issuers of municipal securities and issuers of corporate securities;
(3) evaluate the costs and benefits to various types of issuers of municipal securities of requiring issuers of municipal bonds to provide additional financial disclosures for the benefit of investors;
(4) evaluate the potential benefit to investors from additional financial disclosures by issuers of municipal bonds; and
(5) make recommendations relating to disclosure requirements for municipal issuers, including the advisability of the repeal or retention of section 15B(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-4(d)) (commonly known as the ‘Tower Amendment’).
(c) Report- Not later than 24 months after the date of enactment of this Act, the Comptroller General of the United States shall submit a report to Congress on the results of the study conducted under subsection (a), including recommendations for how to improve disclosure by issuers of municipal securities.
SEC. 977. GOVERNMENT ACCOUNTABILITY OFFICE STUDY ON THE MUNICIPAL SECURITIES MARKETS.
(a) Study- The Comptroller General of the United States shall conduct a study of the municipal securities markets.
(b) Report- Not later than 18 months after the date of enactment of this Act, the Comptroller General of the United States shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives, with copies to the Special Committee on Aging of the Senate and the Commission, on the results of the study conducted under subsection (a), including--
(1) an analysis of the mechanisms for trading, quality of trade executions, market transparency, trade reporting, price discovery, settlement clearing, and credit enhancements;
(2) the needs of the markets and investors and the impact of recent innovations;
(3) recommendations for how to improve the transparency, efficiency, fairness, and liquidity of trading in the municipal securities markets, including with reference to items listed in paragraph (1); and
(4) potential uses of derivatives in the municipal securities markets.
(c) Responses- Not later than 180 days after receipt of the report required under subsection (b), the Commission shall submit a response to the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives, with a copy to the Special Committee on Aging of the Senate, stating the actions the Commission has taken in response to the recommendations contained in such report.
SEC. 978. FUNDING FOR GOVERNMENTAL ACCOUNTING STANDARDS BOARD.
(a) Amendment to the Securities Act of 1933- Section 19 of the Securities Act of 1933 (15 U.S.C. 77s), as amended by section 912, is further amended by adding at the end the following:
‘(g) Funding for the GASB-
‘(1) IN GENERAL- The Commission may, subject to the limitations imposed by section 15B of the Securities Exchange Act of 1934 (15 U.S.C. 78o-4), require a national securities association registered under the Securities Exchange Act of 1934 to establish--
‘(A) a reasonable annual accounting support fee to adequately fund the annual budget of the Governmental Accounting Standards Board (referred to in this subsection as the ‘GASB’); and
‘(B) rules and procedures, in consultation with the principal organizations representing State governors, legislators, local elected officials, and State and local finance officers, to provide for the equitable allocation, assessment, and collection of the accounting support fee established under subparagraph (A) from the members of the association, and the remittance of all such accounting support fees to the Financial Accounting Foundation.
‘(2) ANNUAL BUDGET- For purposes of this subsection, the annual budget of the GASB is the annual budget reviewed and approved according to the internal procedures of the Financial Accounting Foundation.
‘(3) USE OF FUNDS- Any fees or funds collected under this subsection shall be used to support the efforts of the GASB to establish standards of financial accounting and reporting recognized as generally accepted accounting principles applicable to State and local governments of the United States.
‘(4) LIMITATION ON FEE- The annual accounting support fees collected under this subsection for a fiscal year shall not exceed the recoverable annual budgeted expenses of the GASB (which may include operating expenses, capital, and accrued items).
‘(5) RULES OF CONSTRUCTION-
‘(A) FEES NOT PUBLIC MONIES- Accounting support fees collected under this subsection and other receipts of the GASB shall not be considered public monies of the United States.
‘(B) LIMITATION ON AUTHORITY OF THE COMMISSION- Nothing in this subsection shall be construed to--
‘(i) provide the Commission or any national securities association direct or indirect oversight of the budget or technical agenda of the GASB; or
‘(ii) affect the setting of generally accepted accounting principles by the GASB.
‘(C) NONINTERFERENCE WITH STATES- Nothing in this subsection shall be construed to impair or limit the authority of a State or local government to establish accounting and financial reporting standards.’.
(b) Study of Funding for Governmental Accounting Standards Board-
(1) STUDY- The Comptroller General of the United States shall conduct a study that evaluates--
(A) the role and importance of the Governmental Accounting Standards Board in the municipal securities markets; and
(B) the manner and the level at which the Governmental Accounting Standards Board has been funded.
(2) CONSULTATION- In conducting the study required under paragraph (1), the Comptroller General shall consult with the principal organizations representing State governors, legislators, local elected officials, and State and local finance officers.
(3) REPORT- Not later than 180 days after the date of enactment of this Act, the Comptroller General 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 the study required under paragraph (1).
SEC. 979. COMMISSION OFFICE OF MUNICIPAL SECURITIES.
(a) In General- There shall be in the Commission an Office of Municipal Securities, which shall--
(1) administer the rules of the Commission with respect to the practices of municipal securities brokers and dealers, municipal securities advisors, municipal securities investors, and municipal securities issuers; and
(2) coordinate with the Municipal Securities Rulemaking Board for rulemaking and enforcement actions as required by law.
(b) Director of the Office- The head of the Office of Municipal Securities shall be the Director, who shall report to the Chairman.
(c) Staffing-
(1) IN GENERAL- The Office of Municipal Securities shall be staffed sufficiently to carry out the requirements of this section.
(2) REQUIREMENT- The staff of the Office of Municipal Securities shall include individuals with knowledge of and expertise in municipal finance.
Subtitle I--Public Company Accounting Oversight Board, Portfolio Margining, and Other Matters
SEC. 981. AUTHORITY TO SHARE CERTAIN INFORMATION WITH FOREIGN AUTHORITIES.
(a) Definition- Section 2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a)) is amended by adding at the end the following:
‘(17) FOREIGN AUDITOR OVERSIGHT AUTHORITY- The term ‘foreign auditor oversight authority’ means any governmental body or other entity empowered by a foreign government to conduct inspections of public accounting firms or otherwise to administer or enforce laws related to the regulation of public accounting firms.’.
(b) Availability to Share Information- Section 105(b)(5) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7215(b)(5)) is amended by adding at the end the following:
‘(C) AVAILABILITY TO FOREIGN OVERSIGHT AUTHORITIES- Without the loss of its status as confidential and privileged in the hands of the Board, all information referred to in subparagraph (A) that relates to a public accounting firm that a foreign government has empowered a foreign auditor oversight authority to inspect or otherwise enforce laws with respect to, may, at the discretion of the Board, be made available to the foreign auditor oversight authority, if--
‘(i) the Board finds that it is necessary to accomplish the purposes of this Act or to protect investors;
‘(ii) the foreign auditor oversight authority provides--
‘(I) such assurances of confidentiality as the Board may request;
‘(II) a description of the applicable information systems and controls of the foreign auditor oversight authority; and
‘(III) a description of the laws and regulations of the foreign government of the foreign auditor oversight authority that are relevant to information access; and
‘(iii) the Board determines that it is appropriate to share such information.’.
(c) Conforming Amendment- Section 105(b)(5)(A) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7215(b)(5)(A)) is amended by striking ‘subparagraph (B)’ and inserting ‘subparagraphs (B) and (C)’.
SEC. 982. OVERSIGHT OF BROKERS AND DEALERS.
(a) Definitions-
(1) DEFINITIONS AMENDED- Title I of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.) is amended by adding at the end the following new section:
‘SEC. 110. DEFINITIONS.
‘For the purposes of this title, the following definitions shall apply:
‘(1) AUDIT- The term ‘audit’ means an examination of the financial statements, reports, documents, procedures, controls, or notices of any issuer, broker, or dealer by an independent public accounting firm in accordance with the rules of the Board or the Commission, for the purpose of expressing an opinion on the financial statements or providing an audit report.
‘(2) AUDIT REPORT- The term ‘audit report’ means a document, report, notice, or other record--
‘(A) prepared following an audit performed for purposes of compliance by an issuer, broker, or dealer with the requirements of the securities laws; and
‘(B) in which a public accounting firm either--
‘(i) sets forth the opinion of that firm regarding a financial statement, report, notice, or other document, procedures, or controls; or
‘(ii) asserts that no such opinion can be expressed.
‘(3) BROKER- The term ‘broker’ means a broker (as such term is defined in section 3(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4))) that is required to file a balance sheet, income statement, or other financial statement under section 17(e)(1)(A) of such Act (15 U.S.C. 78q(e)(1)(A)), where such balance sheet, income statement, or financial statement is required to be certified by a registered public accounting firm.
‘(4) DEALER- The term ‘dealer’ means a dealer (as such term is defined in section 3(a)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(5))) that is required to file a balance sheet, income statement, or other financial statement under section 17(e)(1)(A) of such Act (15 U.S.C. 78q(e)(1)(A)), where such balance sheet, income statement, or financial statement is required to be certified by a registered public accounting firm.
‘(5) PROFESSIONAL STANDARDS- The term ‘professional standards’ means--
‘(A) accounting principles that are--
‘(i) established by the standard setting body described in section 19(b) of the Securities Act of 1933, as amended by this Act, or prescribed by the Commission under section 19(a) of that Act (15 U.S.C. 17a(s)) or section 13(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78a(m)); and
‘(ii) relevant to audit reports for particular issuers, brokers, or dealers, or dealt with in the quality control system of a particular registered public accounting firm; and
‘(B) auditing standards, standards for attestation engagements, quality control policies and procedures, ethical and competency standards, and independence standards (including rules implementing title II) that the Board or the Commission determines--
‘(i) relate to the preparation or issuance of audit reports for issuers, brokers, or dealers; and
‘(ii) are established or adopted by the Board under section 103(a), or are promulgated as rules of the Commission.
‘(6) SELF-REGULATORY ORGANIZATION- The term ‘self-regulatory organization’ has the same meaning as in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).’.
(2) CONFORMING AMENDMENT- Section 2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a)) is amended in the matter preceding paragraph (1), by striking ‘In this’ and inserting ‘Except as otherwise specifically provided in this Act, in this’.
(b) Establishment and Administration of the Public Company Accounting Oversight Board- Section 101 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7211) is amended--
(1) by striking ‘issuers’ each place that term appears and inserting ‘issuers, brokers, and dealers’; and
(2) in subsection (a)--
(A) by striking ‘public companies’ and inserting ‘companies’; and
(B) by striking ‘for companies the securities of which are sold to, and held by and for, public investors’.
(c) Registration With the Board- Section 102 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7212) is amended--
(1) in subsection (a)--
(A) by striking ‘Beginning 180’ and all that follows through ‘101(d), it’ and inserting ‘It’; and
(B) by striking ‘issuer’ and inserting ‘issuer, broker, or dealer’;
(2) in subsection (b)--
(A) in paragraph (2)(A), by striking ‘issuers’ and inserting ‘issuers, brokers, and dealers’; and
(B) by striking ‘issuer’ each place that term appears and inserting ‘issuer, broker, or dealer’.
(d) Auditing and Independence- Section 103(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7213(a)) is amended--
(1) in paragraph (1), by striking ‘and such ethics standards’ and inserting ‘such ethics standards, and such independence standards’;
(2) in paragraph (2)(A)(iii), by striking ‘describe in each audit report’ and inserting ‘in each audit report for an issuer, describe’; and
(3) in paragraph (2)(B)(i), by striking ‘issuers’ and inserting ‘issuers, brokers, and dealers’.
(e) Inspections of Registered Public Accounting Firms-
(1) AMENDMENTS- Section 104(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7214(a)) is amended--
(A) by striking ‘The Board shall’ and inserting the following:
‘(1) INSPECTIONS GENERALLY- The Board shall’; and
(B) by adding at the end the following:
‘(2) INSPECTIONS OF AUDIT REPORTS FOR BROKERS AND DEALERS-
‘(A) The Board may, by rule, conduct and require a program of inspection in accordance with paragraph (1), on a basis to be determined by the Board, of registered public accounting firms that provide one or more audit reports for a broker or dealer. The Board, in establishing such a program, may allow for differentiation among classes of brokers and dealers, as appropriate.
‘(B) If the Board determines to establish a program of inspection pursuant to subparagraph (A), the Board shall consider in establishing any inspection schedules whether differing schedules would be appropriate with respect to registered public accounting firms that issue audit reports only for one or more brokers or dealers that do not receive, handle, or hold customer securities or cash or are not a member of the Securities Investor Protection Corporation.
‘(C) Any rules of the Board pursuant to this paragraph shall be subject to prior approval by the Commission pursuant to section 107(b) before the rules become effective, including an opportunity for public notice and comment.
‘(D) Notwithstanding anything to the contrary in section 102 of this Act, a public accounting firm shall not be required to register with the Board if the public accounting firm is exempt from the inspection program which may be established by the Board under subparagraph (A).’.
(2) CONFORMING AMENDMENT- Section 17(e)(1)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78q(e)(1)(A)) is amended by striking ‘registered public accounting firm’ and inserting ‘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,’.
(f) Investigations and Disciplinary Proceedings- Section 105(c)(7)(B) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7215(c)(7)(B)) is amended--
(1) in the subparagraph heading, by inserting ‘, BROKER, OR DEALER’ after ‘ISSUER’;
(2) by striking ‘any issuer’ each place that term appears and inserting ‘any issuer, broker, or dealer’; and
(3) by striking ‘an issuer under this subsection’ and inserting ‘a registered public accounting firm under this subsection’.
(g) Foreign Public Accounting Firms- Section 106(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7216(a)) is amended--
(1) in paragraph (1), by striking ‘issuer’ and inserting ‘issuer, broker, or dealer’; and
(2) in paragraph (2), by striking ‘issuers’ and inserting ‘issuers, brokers, or dealers’.
(h) Funding- Section 109 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7219) is amended--
(1) in subsection (c)(2), by striking ‘subsection (i)’ and inserting ‘subsection (j)’;
(2) in subsection (d)--
(A) in paragraph (2), by striking ‘allowing for differentiation among classes of issuers, as appropriate’ and inserting ‘and among brokers and dealers, in accordance with subsection (h), and allowing for differentiation among classes of issuers, brokers and dealers, as appropriate’; and
(B) by adding at the end the following:
‘(3) BROKERS AND DEALERS- The Board shall begin the allocation, assessment, and collection of fees under paragraph (2) with respect to brokers and dealers with the payment of support fees to fund the first full fiscal year beginning after the date of enactment of the Investor Protection and Securities Reform Act of 2010.’;
(3) by redesignating subsections (h), (i), and (j) as subsections (i), (j), and (k), respectively; and
(4) by inserting after subsection (g) the following:
‘(h) Allocation of Accounting Support Fees Among Brokers and Dealers-
‘(1) OBLIGATION TO PAY- Each broker or dealer shall pay to the Board the annual accounting support fee allocated to such broker or dealer under this section.
‘(2) ALLOCATION- Any amount due from a broker or dealer (or from a particular class of brokers and dealers) under this section shall be allocated among brokers and dealers and payable by the broker or dealer (or the brokers and dealers in the particular class, as applicable).
‘(3) PROPORTIONALITY- The amount due from a broker or dealer shall be in proportion to the net capital of the broker or dealer (before or after any adjustments), compared to the total net capital of all brokers and dealers (before or after any adjustments), in accordance with rules issued by the Board.’.
(i) Referral of Investigations to a Self-regulatory Organization- Section 105(b)(4)(B) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7215(b)(4)(B)) is amended--
(1) by redesignating clauses (ii) and (iii) as clauses (iii) and (iv), respectively; and
(2) by inserting after clause (i) the following:
‘(ii) to a self-regulatory organization, in the case of an investigation that concerns an audit report for a broker or dealer that is under the jurisdiction of such self-regulatory organization;’.
(j) Use of Documents Related to an Inspection or Investigation- Section 105(b)(5)(B)(ii) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7215(b)(5)(B)(ii)) is amended--
(1) in subclause (III), by striking ‘and’ at the end;
(2) in subclause (IV), by striking the comma and inserting ‘; and’; and
(3) by inserting after subclause (IV) the following:
‘(V) a self-regulatory organization, with respect to an audit report for a broker or dealer that is under the jurisdiction of such self-regulatory organization,’.
SEC. 983. PORTFOLIO MARGINING.
(a) Advances- Section 9(a)(1) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78fff3(a)(1)) is amended by inserting ‘or options on commodity futures contracts’ after ‘claim for securities’.
(b) Definitions- Section 16 of the Securities Investor Protection Act of 1970 (15 U.S.C. 78lll) is amended--
(1) by striking paragraph (2) and inserting the following:
‘(2) CUSTOMER-
‘(A) IN GENERAL- The term ‘customer’ of a debtor means any person (including any person with whom the debtor deals as principal or agent) who has a claim on account of securities received, acquired, or held by the debtor in the ordinary course of its business as a broker or dealer from or for the securities accounts of such person for safekeeping, with a view to sale, to cover consummated sales, pursuant to purchases, as collateral, security, or for purposes of effecting transfer.
‘(B) INCLUDED PERSONS- The term ‘customer’ includes--
‘(i) any person who has deposited cash with the debtor for the purpose of purchasing securities;
‘(ii) any person who has a claim against the debtor for cash, securities, futures contracts, or options on futures contracts received, acquired, or held in a portfolio margining account carried as a securities account pursuant to a portfolio margining program approved by the Commission; and
‘(iii) any person who has a claim against the debtor arising out of sales or conversions of such securities.
‘(C) EXCLUDED PERSONS- The term ‘customer’ does not include any person, to the extent that--
‘(i) the claim of such person arises out of transactions with a foreign subsidiary of a member of SIPC; or
‘(ii) such person has a claim for cash or securities which by contract, agreement, or understanding, or by operation of law, is part of the capital of the debtor, or is subordinated to the claims of any or all creditors of the debtor, notwithstanding that some ground exists for declaring such contract, agreement, or understanding void or voidable in a suit between the claimant and the debtor.’;
(2) in paragraph (4)--
(A) in subparagraph (C), by striking ‘and’ at the end;
(B) by redesignating subparagraph (D) as subparagraph (E); and
(C) by inserting after subparagraph (C) the following:
‘(D) in the case of a portfolio margining account of a customer that is carried as a securities account pursuant to a portfolio margining program approved by the Commission, a futures contract or an option on a futures contract received, acquired, or held by or for the account of a debtor from or for such portfolio margining account, and the proceeds thereof; and’;
(3) in paragraph (9), in the matter following subparagraph (L), by inserting after ‘Such term’ the following: ‘includes revenues earned by a broker or dealer in connection with a transaction in the portfolio margining account of a customer carried as securities accounts pursuant to a portfolio margining program approved by the Commission. Such term’; and
(4) in paragraph (11)--
(A) in subparagraph (A)--
(i) by striking ‘filing date, all’ and all that follows through the end of the subparagraph and inserting the following: ‘filing date--
‘(i) all securities positions of such customer (other than customer name securities reclaimed by such customer); and
‘(ii) all positions in futures contracts and options on futures contracts held in a portfolio margining account carried as a securities account pursuant to a portfolio margining program approved by the Commission, including all property collateralizing such positions, to the extent that such property is not otherwise included herein; minus’; and
(B) in the matter following subparagraph (C), by striking ‘In determining’ and inserting the following: ‘A claim for a commodity futures contract received, acquired, or held in a portfolio margining account pursuant to a portfolio margining program approved by the Commission or a claim for a security futures contract, shall be deemed to be a claim with respect to such contract as of the filing date, and such claim shall be treated as a claim for cash. In determining’.
SEC. 984. LOAN OR BORROWING OF SECURITIES.
(a) Rulemaking Authority- Section 10 of the Securities Exchange Act of 1934 (15 U.S.C. 78j) is amended by adding at the end the following:
‘(c)(1) To effect, accept, or facilitate a transaction involving the loan or borrowing of securities in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
‘(2) Nothing in paragraph (1) may be construed to limit the authority of the appropriate Federal banking agency (as defined in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q))), the National Credit Union Administration, or any other Federal department or agency having a responsibility under Federal law to prescribe rules or regulations restricting transactions involving the loan or borrowing of securities in order to protect the safety and soundness of a financial institution or to protect the financial system from systemic risk.’.
(b) Rulemaking Required- Not later than 2 years after the date of enactment of this Act, the Commission shall promulgate rules that are designed to increase the transparency of information available to brokers, dealers, and investors, with respect to the loan or borrowing of securities.
SEC. 985. TECHNICAL CORRECTIONS TO FEDERAL SECURITIES LAWS.
(a) Securities Act of 1933- The Securities Act of 1933 (15 U.S.C. 77a et seq.) is amended--
(1) in section 3(a)(4) (15 U.S.C. 77c(a)(4)), by striking ‘individual;’ and inserting ‘individual,’;
(2) in section 18 (15 U.S.C. 77r)--
(A) in subsection (b)(1)(C), by striking ‘is a security’ and inserting ‘a security’; and
(B) in subsection (c)(2)(B)(i), by striking ‘State, or’ and inserting ‘State or’;
(3) in section 19(d)(6)(A) (15 U.S.C. 77s(d)(6)(A)), by striking ‘in paragraph (1) of (3)’ and inserting ‘in paragraph (1) or (3)’; and
(4) in section 27A(c)(1)(B)(ii) (15 U.S.C. 77z-2(c)(1)(B)(ii)), by striking ‘business entity;’ and inserting ‘business entity,’.
(b) Securities Exchange Act of 1934- The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended--
(1) in section 2 (15 U.S.C. 78b), by striking ‘affected’ and inserting ‘effected’;
(2) in section 3 (15 U.S.C. 78c)--
(A) in subsection (a)(55)(A), by striking ‘section 3(a)(12) of the Securities Exchange Act of 1934’ and inserting ‘section 3(a)(12) of this title’; and
(B) in subsection (g), by striking ‘company, account person, or entity’ and inserting ‘company, account, person, or entity’;
(3) in section 10A(i)(1)(B) (15 U.S.C. 78j-1(i)(1)(B))--
(A) in the subparagraph heading, by striking ‘MINIMUS’ and inserting ‘MINIMIS’; and
(B) in clause (i), by striking ‘nonaudit’ and inserting ‘non-audit’;
(4) in section 13(b)(1) (15 U.S.C. 78m(b)(1)), by striking ‘earning statement’ and inserting ‘earnings statement’;
(5) in section 15 (15 U.S.C. 78o)--
(A) in subsection (b)(1)--
(i) in subparagraph (B), by striking ‘The order granting’ and all that follows through ‘from such membership.’; and
(ii) in the undesignated matter immediately following subparagraph (B), by inserting after the first sentence the following: ‘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.’;
(6) in section 15C(a)(2) (15 U.S.C. 78o-5(a)(2))--
(A) by redesignating clauses (i) and (ii) as subparagraphs (A) and (B), respectively, and adjusting the subparagraph margins accordingly;
(B) in subparagraph (B), as so redesignated, by striking ‘The order granting’ and all that follows through ‘from such membership.’; and
(C) in the matter following subparagraph (B), as so redesignated, by inserting after the first sentence the following: ‘The order granting registration shall not be effective until such government securities broker or government securities dealer has become a member of a national securities exchange registered under section 6 of this title, or a securities association registered under section 15A of this title, unless the Commission has exempted such government securities broker or government securities dealer, by rule or order, from such membership.’;
(7) in section 17(b)(1)(B) (15 U.S.C. 78q(b)(1)(B)), by striking ‘15A(k) gives’ and inserting ‘15A(k), give’; and
(8) in section 21C(c)(2) (15 U.S.C. 78u-3(c)(2)), by striking ‘paragraph (1) subsection’ and inserting ‘Paragraph (1)’.
(c) Trust Indenture Act of 1939- The Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.) is amended--
(1) in section 304(b) (15 U.S.C. 77ddd(b)), by striking ‘section 2 of such Act’ and inserting ‘section 2(a) of such Act’; and
(2) in section 317(a)(1) (15 U.S.C. 77qqq(a)(1)), by striking ‘, in the’ and inserting ‘in the’.
(d) Investment Company Act of 1940- The Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) is amended--
(1) in section 2(a)(19) (15 U.S.C. 80a-2(a)(19)), in the matter following subparagraph (B)(vii)--
(A) by striking ‘clause (vi)’ each place that term appears and inserting ‘clause (vii)’; and
(B) in each of subparagraphs (A)(vi) and (B)(vi), by adding ‘and’ at the end of subclause (III);
(2) in section 9(b)(4)(B) (15 U.S.C. 80a-9(b)(4)(B)), by adding ‘or’ after the semicolon at the end;
(3) in section 12(d)(1)(J) (15 U.S.C. 80a-12(d)(1)(J)), by striking ‘any provision of this subsection’ and inserting ‘any provision of this paragraph’;
(4) in section 17(f) (15 U.S.C. 80a-17(f))--
(A) in paragraph (4), by striking ‘No such member’ and inserting ‘No member of a national securities exchange’; and
(B) in paragraph (6), by striking ‘company may serve’ and inserting ‘company, may serve’; and
(5) in section 61(a)(3)(B)(iii) (15 U.S.C. 80a-60(a)(3)(B)(iii))--
(A) by striking ‘paragraph (1) of section 205’ and inserting ‘section 205(a)(1)’; and
(B) by striking ‘clause (A) or (B) of that section’ and inserting ‘paragraph (1) or (2) of section 205(b)’.
(e) Investment Advisers Act of 1940- The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) is amended--
(1) in section 203 (15 U.S.C. 80b-3)--
(A) in subsection (c)(1)(A), by striking ‘principal business office and’ and inserting ‘principal office, principal place of business, and’; and
(B) in subsection (k)(4)(B), in the matter following clause (ii), by striking ‘principal place of business’ and inserting ‘principal office or place of business’;
(2) in section 206(3) (15 U.S.C. 80b-6(3)), by adding ‘or’ after the semicolon at the end;
(3) in section 213(a) (15 U.S.C. 80b-13(a)), by striking ‘principal place of business’ and inserting ‘principal office or place of business’; and
(4) in section 222 (15 U.S.C. 80b-18a), by striking ‘principal place of business’ each place that term appears and inserting ‘principal office and place of business’.
SEC. 986. CONFORMING AMENDMENTS RELATING TO REPEAL OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935.
(a) Securities Exchange Act of 1934- The Securities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is amended--
(1) in section 3(a)(47) (15 U.S.C. 78c(a)(47)), by striking ‘the Public Utility Holding Company Act of 1935 (15 U.S.C. 79a et seq.),’;
(2) in section 12(k) (15 U.S.C. 78l(k)), by amending paragraph (7) to read as follows:
‘(7) DEFINITION- For purposes of this subsection, the term ‘emergency’ means--
‘(A) a major market disturbance characterized by or constituting--
‘(i) sudden and excessive fluctuations of securities prices generally, or a substantial threat thereof, that threaten fair and orderly markets; or
‘(ii) a substantial disruption of the safe or efficient operation of the national system for clearance and settlement of transactions in securities, or a substantial threat thereof; or
‘(B) a major disturbance that substantially disrupts, or threatens to substantially disrupt--
‘(i) the functioning of securities markets, investment companies, or any other significant portion or segment of the securities markets; or
‘(ii) the transmission or processing of securities transactions.’; and
(3) in section 21(h)(2) (15 U.S.C. 78u(h)(2)), by striking ‘section 18(c) of the Public Utility Holding Company Act of 1935,’.
(b) Trust Indenture Act of 1939- The Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.) is amended--
(1) in section 303 (15 U.S.C. 77ccc), by striking paragraph (17) and inserting the following:
‘(17) The terms ‘Securities Act of 1933’ and ‘Securities Exchange Act of 1934’ shall be deemed to refer, respectively, to such Acts, as amended, whether amended prior to or after the enactment of this title.’;
(2) in section 308 (15 U.S.C. 77hhh), by striking ‘Securities Act of 1933, the Securities Exchange Act of 1934, or the Public Utility Holding Company Act of 1935’ each place that term appears and inserting ‘Securities Act of 1933 or the Securities Exchange Act of 1934’;
(3) in section 310 (15 U.S.C. 77jjj), by striking subsection (c);
(4) in section 311 (15 U.S.C. 77kkk), by striking subsection (c);
(5) in section 323(b) (15 U.S.C. 77www(b)), by striking ‘Securities Act of 1933, or the Securities Exchange Act of 1934, or the Public Utility Holding Company Act of 1935’ and inserting ‘Securities Act of 1933 or the Securities Exchange Act of 1934’; and
(6) in section 326 (15 U.S.C. 77zzz), by striking ‘Securities Act of 1933, or the Securities Exchange Act of 1934, or the Public Utility Holding Company Act of 1935,’ and inserting ‘Securities Act of 1933 or the Securities Exchange Act of 1934’.
(c) Investment Company Act of 1940- The Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) is amended--
(1) in section 2(a)(44) (15 U.S.C. 80a-2(a)(44)), by striking ‘Public Utility Holding Company Act of 1935’,’;
(2) in section 3(c) (15 U.S.C. 80a-3(c)), by striking paragraph (8) and inserting the following:
‘(8) [Repealed]’;
(3) in section 38(b) (15 U.S.C. 80a-37(b)), by striking ‘the Public Utility Holding Company Act of 1935,’; and
(4) in section 50 (15 U.S.C. 80a-49), by striking ‘the Public Utility Holding Company Act of 1935,’.
(d) Investment Advisers Act of 1940- Section 202(a)(21) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(21)) is amended by striking ‘Public Utility Holding Company Act of 1935’,’.
SEC. 987. AMENDMENT TO DEFINITION OF MATERIAL LOSS AND NONMATERIAL LOSSES TO THE DEPOSIT INSURANCE FUND FOR PURPOSES OF INSPECTOR GENERAL REVIEWS.
(a) In General- Section 38(k) of the Federal Deposit Insurance Act (U.S.C. 1831o(k)) is amended--
(1) in paragraph (2), by striking subparagraph (B) and inserting the following:
‘(B) MATERIAL LOSS DEFINED- The term ‘material loss’ means any estimated loss in excess of--
‘(i) $200,000,000, if the loss occurs during the period beginning on January 1, 2010, and ending on December 31, 2011;
‘(ii) $150,000,000, if the loss occurs during the period beginning on January 1, 2012, and ending on December 31, 2013; and
‘(iii) $50,000,000, if the loss occurs on or after January 1, 2014, provided that if the inspector general of a Federal banking agency certifies to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives that the number of projected failures of depository institutions that would require material loss reviews for the following 12 months will be greater than 30 and would hinder the effectiveness of its oversight functions, then the definition of ‘material loss’ shall be $75,000,000 for a duration of 1 year from the date of the certification.’;
(2) in paragraph (4)(A) by striking ‘the report’ and inserting ‘any report on losses required under this subsection,’;
(3) by striking paragraph (6);
(4) by redesignating paragraph (5) as paragraph (6); and
(5) by inserting after paragraph (4) the following:
‘(5) LOSSES THAT ARE NOT MATERIAL-
‘(A) SEMIANNUAL REPORT- For the 6-month period ending on March 31, 2010, and each 6-month period thereafter, the Inspector General of each Federal banking agency shall--
‘(i) identify losses that the Inspector General estimates have been incurred by the Deposit Insurance Fund during that 6-month period, with respect to the insured depository institutions supervised by the Federal banking agency;
‘(ii) for each loss incurred by the Deposit Insurance Fund that is not a material loss, determine--
‘(I) the grounds identified by the Federal banking agency or State bank supervisor for appointing the Corporation as receiver under section 11(c)(5); and
‘(II) whether any unusual circumstances exist that might warrant an in-depth review of the loss; and
‘(iii) prepare and submit a written report to the appropriate Federal banking agency and to Congress on the results of any determination by the Inspector General, including--
‘(I) an identification of any loss that warrants an in-depth review, together with the reasons why such review is warranted, or, if the Inspector General determines that no review is warranted, an explanation of such determination; and
‘(II) for each loss identified under subclause (I) that warrants an in-depth review, the date by which such review, and a report on such review prepared in a manner consistent with reports under paragraph (1)(A), will be completed and submitted to the Federal banking agency and Congress.
‘(B) DEADLINE FOR SEMIANNUAL REPORT- The Inspector General of each Federal banking agency shall--
‘(i) submit each report required under paragraph (A) expeditiously, and not later than 90 days after the end of the 6-month period covered by the report; and
‘(ii) provide a copy of the report required under paragraph (A) to any Member of Congress, upon request.’.
(b) Technical and Conforming Amendment- The heading for subsection (k) of section 38 of the Federal Deposit Insurance Act (U.S.C. 1831o(k)) is amended to read as follows:
‘(k) Reviews Required When Deposit Insurance Fund Incurs Losses- ’.
SEC. 988. AMENDMENT TO DEFINITION OF MATERIAL LOSS AND NONMATERIAL LOSSES TO THE NATIONAL CREDIT UNION SHARE INSURANCE FUND FOR PURPOSES OF INSPECTOR GENERAL REVIEWS.
(a) In General- Section 216(j) of the Federal Credit Union Act (12 U.S.C. 1790d(j)) is amended to read as follows:
‘(j) Reviews Required When Share Insurance Fund Experiences Losses-
‘(1) IN GENERAL- If the Fund incurs a material loss with respect to an insured credit union, the Inspector General of the Board shall--
‘(A) submit to the Board a written report reviewing the supervision of the credit union by the Administration (including the implementation of this section by the Administration), which shall include--
‘(i) a description of the reasons why the problems of the credit union resulted in a material loss to the Fund; and
‘(ii) recommendations for preventing any such loss in the future; and
‘(B) submit a copy of the report under subparagraph (A) to--
‘(i) the Comptroller General of the United States;
‘(ii) the Corporation;
‘(iii) in the case of a report relating to a State credit union, the appropriate State supervisor; and
‘(iv) to any Member of Congress, upon request.
‘(2) MATERIAL LOSS DEFINED- For purposes of determining whether the Fund has incurred a material loss with respect to an insured credit union, a loss is material if it exceeds the sum of--
‘(A) $25,000,000; and
‘(B) an amount equal to 10 percent of the total assets of the credit union on the date on which the Board initiated assistance under section 208 or was appointed liquidating agent.
‘(3) PUBLIC DISCLOSURE REQUIRED-
‘(A) IN GENERAL- The Board shall disclose a report under this subsection, upon request under section 552 of title 5, United States Code, without excising--
‘(i) any portion under section 552(b)(5) of title 5, United States Code; or
‘(ii) any information about the insured credit union (other than trade secrets) under section 552(b)(8) of title 5, United States Code.
‘(B) RULE OF CONSTRUCTION- Subparagraph (A) may not be construed as requiring the agency to disclose the name of any customer of the insured credit union (other than an institution-affiliated party), or information from which the identity of such customer could reasonably be ascertained.
‘(4) LOSSES THAT ARE NOT MATERIAL-
‘(A) SEMIANNUAL REPORT- For the 6-month period ending on March 31, 2010, and each 6-month period thereafter, the Inspector General of the Board shall--
‘(i) identify any losses that the Inspector General estimates were incurred by the Fund during such 6-month period, with respect to insured credit unions;
‘(ii) for each loss to the Fund that is not a material loss, determine--
‘(I) the grounds identified by the Board or the State official having jurisdiction over a State credit union for appointing the Board as the liquidating agent for any Federal or State credit union; and
‘(II) whether any unusual circumstances exist that might warrant an in-depth review of the loss; and
‘(iii) prepare and submit a written report to the Board and to Congress on the results of the determinations of the Inspector General that includes--
‘(I) an identification of any loss that warrants an in-depth review, and the reasons such review is warranted, or if the Inspector General determines that no review is warranted, an explanation of such determination; and
‘(II) for each loss identified in subclause (I) that warrants an in-depth review, the date by which such review, and a report on the review prepared in a manner consistent with reports under paragraph (1)(A), will be completed.
‘(B) DEADLINE FOR SEMIANNUAL REPORT- The Inspector General of the Board shall--
‘(i) submit each report required under subparagraph (A) expeditiously, and not later than 90 days after the end of the 6-month period covered by the report; and
‘(ii) provide a copy of the report required under subparagraph (A) to any Member of Congress, upon request.
‘(5) GAO REVIEW- The Comptroller General of the United States shall, under such conditions as the Comptroller General determines to be appropriate--
‘(A) review each report made under paragraph (1), including the extent to which the Inspector General of the Board complied with the requirements under section 8L of the Inspector General Act of 1978 (5 U.S.C. App.) with respect to each such report; and
‘(B) recommend improvements to the supervision of insured credit unions (including improvements relating to the implementation of this section).’.
SEC. 989. GOVERNMENT ACCOUNTABILITY OFFICE STUDY ON PROPRIETARY TRADING.
(a) Definitions- In this section--
(1) the term ‘covered entity’ means--
(A) an insured depository institution, an affiliate of an insured depository institution, a bank holding company, a financial holding company, or a subsidiary of a bank holding company or a financial holding company, as those terms are defined in the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.); and
(B) any other entity, as the Comptroller General of the United States may determine; and
(2) the term ‘proprietary trading’ means the act of a covered entity investing as a principal in securities, commodities, derivatives, hedge funds, private equity firms, or such other financial products or entities as the Comptroller General may determine.
(b) Study-
(1) IN GENERAL- The Comptroller General of the United States shall conduct a study regarding the risks and conflicts associated with proprietary trading by and within covered entities, including an evaluation of--
(A) whether proprietary trading presents a material systemic risk to the stability of the United States financial system, and if so, the costs and benefits of options for mitigating such systemic risk;
(B) whether proprietary trading presents material risks to the safety and soundness of the covered entities that engage in such activities, and if so, the costs and benefits of options for mitigating such risks;
(C) whether proprietary trading presents material conflicts of interest between covered entities that engage in proprietary trading and the clients of the institutions who use the firm to execute trades or who rely on the firm to manage assets, and if so, the costs and benefits of options for mitigating such conflicts of interest;
(D) whether adequate disclosure regarding the risks and conflicts of proprietary trading is provided to the depositors, trading and asset management clients, and investors of covered entities that engage in proprietary trading, and if not, the costs and benefits of options for the improvement of such disclosure; and
(E) whether the banking, securities, and commodities regulators of institutions that engage in proprietary trading have in place adequate systems and controls to monitor and contain any risks and conflicts of interest related to proprietary trading, and if not, the costs and benefits of options for the improvement of such systems and controls.
(2) CONSIDERATIONS- In carrying out the study required under paragraph (1), the Comptroller General shall consider--
(A) current practice relating to proprietary trading;
(B) the advisability of a complete ban on proprietary trading;
(C) limitations on the scope of activities that covered entities may engage in with respect to proprietary trading;
(D) the advisability of additional capital requirements for covered entities that engage in proprietary trading;
(E) enhanced restrictions on transactions between affiliates related to proprietary trading;
(F) enhanced accounting disclosures relating to proprietary trading;
(G) enhanced public disclosure relating to proprietary trading; and
(H) any other options the Comptroller General deems appropriate.
(c) Report to Congress- Not later than 15 months after the date of enactment of this Act, the Comptroller General shall submit a report to Congress on the results of the study conducted under subsection (b).
(d) Access by Comptroller General- For purposes of conducting the study required under subsection (b), the Comptroller General shall have access, upon request, to any information, data, schedules, books, accounts, financial records, reports, files, electronic communications, or other papers, things, or property belonging to or in use by a covered entity that engages in proprietary trading, and to the officers, directors, employees, independent public accountants, financial advisors, staff, and agents and representatives of a covered entity (as related to the activities of the agent or representative on behalf of the covered entity), at such reasonable times as the Comptroller General may request. The Comptroller General may make and retain copies of books, records, accounts, and other records, as the Comptroller General deems appropriate.
(e) Confidentiality of Reports-
(1) IN GENERAL- Except as provided in paragraph (2), the Comptroller General may not disclose information regarding--
(A) any proprietary trading activity of a covered entity, unless such information is disclosed at a level of generality that does not reveal the investment or trading position or strategy of the covered entity for any specific security, commodity, derivative, or other investment or financial product; or
(B) any individual interviewed by the Comptroller General for purposes of the study under subsection (b), unless such information is disclosed at a level of generality that does not reveal--
(i) the name of or identifying details relating to such individual; or
(ii) in the case of an individual who is an employee of a third party that provides professional services to a covered entity believed to be engaged in proprietary trading, the name of or any identifying details relating to such third party.
(2) EXCEPTIONS- The Comptroller General may disclose the information described in paragraph (1)--
(A) to a department, agency, or official of the Federal Government, for official use, upon request;
(B) to a committee of Congress, upon request; and
(C) to a court, upon an order of such court.
SEC. 989A. SENIOR INVESTOR PROTECTIONS.
(a) Definitions- As used in this section--
(1) the term ‘eligible entity’ means--
(A) a securities commission (or any agency or office performing like functions) of a State that the Office determines has adopted rules on the appropriate use of designations in the offer or sale of securities or the provision of investment advice that meet or exceed the minimum requirements of the NASAA Model Rule on the Use of Senior-Specific Certifications and Professional Designations (or any successor thereto);
(B) the insurance commission (or any agency or office performing like functions) of any State that the Office determines has--
(i) adopted rules on the appropriate use of designations in the sale of insurance products that, to the extent practicable, conform to the minimum requirements of the National Association of Insurance Commissioners Model Regulation on the Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities (or any successor thereto); and
(ii) adopted rules with respect to fiduciary or suitability requirements in the sale of annuities that meet or exceed the minimum requirements established by the Suitability in Annuity Transactions Model Regulation of the National Association of Insurance Commissioners (or any successor thereto); or
(C) a consumer protection agency of any State, if--
(i) the securities commission (or any agency or office performing like functions) of the State is eligible under subparagraph (A); or
(ii) the insurance commission (or any agency or office performing like functions) of the State is eligible under subparagraph (B);
(2) the term ‘financial product’ means a security, an insurance product (including an insurance product that pays a return, whether fixed or variable), a bank product, and a loan product;
(3) the term ‘misleading designation’--
(A) means a certification, professional designation, or other purported credential that indicates or implies that a salesperson or adviser has special certification or training in advising or servicing seniors; and
(B) does not include a certification, professional designation, license, or other credential that--
(i) was issued by or obtained from an academic institution having regional accreditation;
(ii) meets the standards for certifications and professional designations outlined by the NASAA Model Rule on the Use of Senior-Specific Certifications and Professional Designations (or any successor thereto) or by the Model Regulations on the Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities, adopted by the National Association of Insurance Commissioners (or any successor thereto); or
(iii) was issued by or obtained from a State;
(4) the term ‘misleading or fraudulent marketing’ means the use of a misleading designation by a person that sells to or advises a senior in connection with the sale of a financial product;
(5) the term ‘NASAA’ means the North American Securities Administrators Association;
(6) the term ‘Office’ means the Office of Financial Literacy of the Bureau;
(7) the term ‘senior’ means any individual who has attained the age of 62 years or older; and
(8) the term ‘State’ has the same meaning as in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).
(b) Grants to States for Enhanced Protection of Seniors From Being Misled by False Designations- The Office shall establish a program under which the Office may make grants to States or eligible entities--
(1) to hire staff to identify, investigate, and prosecute (through civil, administrative, or criminal enforcement actions) cases involving misleading or fraudulent marketing;
(2) to fund technology, equipment, and training for regulators, prosecutors, and law enforcement officers, in order to identify salespersons and advisers who target seniors through the use of misleading designations;
(3) to fund technology, equipment, and training for prosecutors to increase the successful prosecution of salespersons and advisers who target seniors with the use of misleading designations;
(4) to provide educational materials and training to regulators on the appropriateness of the use of designations by salespersons and advisers in connection with the sale and marketing of financial products;
(5) to provide educational materials and training to seniors to increase awareness and understanding of misleading or fraudulent marketing;
(6) to develop comprehensive plans to combat misleading or fraudulent marketing of financial products to seniors; and
(7) to enhance provisions of State law to provide protection for seniors against misleading or fraudulent marketing.
(c) Applications- A State or eligible entity desiring a grant under this section shall submit an application to the Office, in such form and in such a manner as the Office may determine, that includes--
(1) a proposal for activities to protect seniors from misleading or fraudulent marketing that are proposed to be funded using a grant under this section, including--
(A) an identification of the scope of the problem of misleading or fraudulent marketing in the State;
(B) a description of how the proposed activities would--
(i) protect seniors from misleading or fraudulent marketing in the sale of financial products, including by proactively identifying victims of misleading and fraudulent marketing who are seniors;
(ii) assist in the investigation and prosecution of those using misleading or fraudulent marketing; and
(iii) discourage and reduce cases of misleading or fraudulent marketing; and
(C) a description of how the proposed activities would be coordinated with other State efforts; and
(2) any other information, as the Office determines is appropriate.
(d) Performance Objectives and Reporting Requirements- The Office may establish such performance objectives and reporting requirements for States and eligible entities receiving a grant under this section as the Office determines are necessary to carry out and assess the effectiveness of the program under this section.
(e) Maximum Amount- The amount of a grant under this section may not exceed--
(1) $500,000 for each of 3 consecutive fiscal years, if the recipient is a State, or an eligible entity of a State, that has adopted rules--
(A) on the appropriate use of designations in the offer or sale of securities or investment advice that meet or exceed the minimum requirements of the NASAA Model Rule on the Use of Senior-Specific Certifications and Professional Designations (or any successor thereto);
(B) on the appropriate use of designations in the sale of insurance products that, to the extent practicable, conform to the minimum requirements of the National Association of Insurance Commissioners Model Regulation on the Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities (or any successor thereto); and
(C) with respect to fiduciary or suitability requirements in the sale of annuities that meet or exceed the minimum requirements established by the Suitability in Annuity Transactions Model Regulation of the National Association of Insurance Commissioners (or any successor thereto); and
(2) $100,000 for each of 3 consecutive fiscal years, if the recipient is a State, or an eligible entity of a State, that has adopted--
(A) rules on the appropriate use of designations in the offer or sale of securities or investment advice that meet or exceed the minimum requirements of the NASAA Model Rule on the Use of Senior-Specific Certifications and Professional Designations (or any successor thereto); or
(B) rules--
(i) on the appropriate use of designations in the sale of insurance products that, to the extent practicable, conform to the minimum requirements of the National Association of Insurance Commissioners Model Regulation on the Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities (or any successor thereto); and
(ii) with respect to fiduciary or suitability requirements in the sale of annuities that meet or exceed the minimum requirements established by the Suitability in Annuity Transactions Model Regulation of the National Association of Insurance Commissioners (or any successor thereto).
(f) Subgrants- A State or eligible entity that receives a grant under this section may make a subgrant, as the State or eligible entity determines is necessary to carry out the activities funded using a grant under this section.
(g) Reapplication- A State or eligible entity that receives a grant under this section may reapply for a grant under this section, notwithstanding the limitations on grant amounts under subsection (e).
(h) Authorization of Appropriations- There are authorized to be appropriated to carry out this section, $8,000,000 for each of fiscal years 2011 through 2015.
SEC. 989B. DESIGNATED FEDERAL ENTITY INSPECTORS GENERAL INDEPENDENCE.
Section 8G of the Inspector General Act of 1978 (5 U.S.C. App.) is amended--
(1) in subsection (a)(4)--
(A) in the matter preceding subparagraph (A), by inserting ‘the board or commission of the designated Federal entity, or in the event the designated Federal entity does not have a board or commission,’ after ‘means’;
(B) in subparagraph (A), by striking ‘and’ after the semicolon; and
(C) by adding after subparagraph (B) the following:
‘(C) with respect to the Federal Labor Relations Authority, such term means the members of the Authority (described under section 7104 of title 5, United States Code);
‘(D) with respect to the National Archives and Records Administration, such term means the Archivist of the United States;
‘(E) with respect to the National Credit Union Administration, such term means the National Credit Union Administration Board (described under section 102 of the Federal Credit Union Act (12 U.S.C. 1752a);
‘(F) with respect to the National Endowment of the Arts, such term means the National Council on the Arts;
‘(G) with respect to the National Endowment for the Humanities, such term means the National Council on the Humanities; and
‘(H) with respect to the Peace Corps, such term means the Director of the Peace Corps;’; and
(2) in subsection (h), by inserting ‘if the designated Federal entity is not a board or commission, include’ after ‘designated Federal entities and’.
SEC. 989C. STRENGTHENING INSPECTOR GENERAL ACCOUNTABILITY.
Section 5(a) of the Inspector General Act of 1978 (5 U.S.C. App.) is amended--
(1) in paragraph (12), by striking ‘and’ after the semicolon;
(2) in paragraph (13), by striking the period and inserting a semicolon; and
(3) by adding at the end the following:
‘(14)(A) an appendix containing the results of any peer review conducted by another Office of Inspector General during the reporting period; or
‘(B) if no peer review was conducted within that reporting period, a statement identifying the date of the last peer review conducted by another Office of Inspector General;
‘(15) a list of any outstanding recommendations from any peer review conducted by another Office of Inspector General that have not been fully implemented, including a statement describing the status of the implementation and why implementation is not complete; and
‘(16) a list of any peer reviews conducted by the Inspector General of another Office of the Inspector General during the reporting period, including a list of any outstanding recommendations made from any previous peer review (including any peer review conducted before the reporting period) that remain outstanding or have not been fully implemented.’.
SEC. 989D. REMOVAL OF INSPECTORS GENERAL OF DESIGNATED FEDERAL ENTITIES.
Section 8G(e) of the Inspector General Act of 1978 (5 U.S.C. App.) is amended--
(1) by redesignating the sentences following ‘(e)’ as paragraph (2); and
(2) by striking ‘(e)’ and inserting the following:
‘(e)(1) In the case of a designated Federal entity for which a board or commission is the head of the designated Federal entity, a removal under this subsection may only be made upon the written concurrence of a 2/3 majority of the board or commission.’.
SEC. 989E. ADDITIONAL OVERSIGHT OF FINANCIAL REGULATORY SYSTEM.
(a) Council of Inspectors General on Financial Oversight-
(1) ESTABLISHMENT AND MEMBERSHIP- There is established a Council of Inspectors General on Financial Oversight (in this section referred to as the ‘Council of Inspectors General’) chaired by the Inspector General of the Department of the Treasury and composed of the inspectors general of the following:
(A) The Board of Governors of the Federal Reserve System.
(B) The Commodity Futures Trading Commission.
(C) The Department of Housing and Urban Development.
(D) The Department of the Treasury.
(E) The Federal Deposit Insurance Corporation.
(F) The Federal Housing Finance Agency.
(G) The National Credit Union Administration.
(H) The Securities and Exchange Commission.
(I) The Troubled Asset Relief Program (until the termination of the authority of the Special Inspector General for such program under section 121(k) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5231(k))).
(2) DUTIES-
(A) MEETINGS- The Council of Inspectors General shall meet not less than once each quarter, or more frequently if the chair considers it appropriate, to facilitate the sharing of information among inspectors general and to discuss the ongoing work of each inspector general who is a member of the Council of Inspectors General, with a focus on concerns that may apply to the broader financial sector and ways to improve financial oversight.
(B) ANNUAL REPORT- Each year the Council of Inspectors General shall submit to the Council and to Congress a report including--
(i) for each inspector general who is a member of the Council of Inspectors General, a section within the exclusive editorial control of such inspector general that highlights the concerns and recommendations of such inspector general in such inspector general’s ongoing and completed work, with a focus on issues that may apply to the broader financial sector; and
(ii) a summary of the general observations of the Council of Inspectors General based on the views expressed by each inspector general as required by clause (i), with a focus on measures that should be taken to improve financial oversight.
(3) WORKING GROUPS TO EVALUATE COUNCIL-
(A) CONVENING A WORKING GROUP- The Council of Inspectors General may, by majority vote, convene a Council of Inspectors General Working Group to evaluate the effectiveness and internal operations of the Council.
(B) PERSONNEL AND RESOURCES- The inspectors general who are members of the Council of Inspectors General may detail staff and resources to a Council of Inspectors General Working Group established under this paragraph to enable it to carry out its duties.
(C) REPORTS- A Council of Inspectors General Working Group established under this paragraph shall submit regular reports to the Council and to Congress on its evaluations pursuant to this paragraph.
(b) Response to Report by Council- The Council shall respond to the concerns raised in the report of the Council of Inspectors General under subsection (a)(2)(B) for such year.
SEC. 989F. GAO STUDY OF PERSON TO PERSON LENDING.
(a) Study-
(1) IN GENERAL- The Comptroller General of the United States shall conduct a study of person to person lending to determine the optimal Federal regulatory structure.
(2) CONSULTATION- In conducting the study required under paragraph (1), the Comptroller General shall consult with Federal banking agencies, the Commission, consumer groups, outside experts, and the person to person lending industry.
(3) CONTENT OF STUDY- The study required under paragraph (1) shall include an examination of--
(A) the regulatory structure as it exists on the date of enactment of this Act, as determined by the Commission, with particular attention to--
(i) the application of the Securities Act of 1933 to person to person lending platforms;
(ii) the posting of consumer loan information on the EDGAR database of the Commission; and
(iii) the treatment of privately held person to person lending platforms as public companies;
(B) the State and other Federal regulators responsible for the oversight and regulation of person to person lending markets;
(C) any Federal, State, or local government or private studies of person to person lending completed or in progress on the date of enactment of this Act;
(D) consumer privacy and data protections, minimum credit standards, anti-money laundering and risk management in the regulatory structure as it exists on the date of enactment of this Act, and whether additional or alternative safeguards are needed; and
(E) the uses of person to person lending.
(b) Report-
(1) IN GENERAL- Not later than 1 year after the date of enactment of this Act, the Comptroller General shall submit a report on the study required under subsection (a) to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives.
(2) CONTENT OF REPORT- The report required under paragraph (1) shall include alternative regulatory options, including--
(A) the involvement of other Federal agencies; and
(B) alternative approaches by the Commission and recommendations on whether the alternative approaches are effective.
SEC. 989G. EXEMPTION FOR NONACCELERATED FILERS.
(a) Exemption- Section 404 of the Sarbanes-Oxley Act of 2002 is amended by adding at the end the following:
‘(c) Exemption for Smaller Issuers- Subsection (b) shall not apply with respect to any audit report prepared for an issuer that is neither a ‘large accelerated filer’ nor an ‘accelerated filer’ as those terms are defined in Rule 12b-2 of the Commission (17 C.F.R. 240.12b-2).’.
(b) Study- The Securities and Exchange Commission shall conduct a study to determine how the Commission could reduce the burden of complying with section 404(b) of the Sarbanes-Oxley Act of 2002 for companies whose market capitalization is between $75,000,000 and $250,000,000 for the relevant reporting period while maintaining investor protections for such companies. The study shall also consider whether any such methods of reducing the compliance burden or a complete exemption for such companies from compliance with such section would encourage companies to list on exchanges in the United States in their initial public offerings. Not later than 9 months after the date of the enactment of this subtitle, the Commission shall transmit a report of such study to Congress.
SEC. 989H. CORRECTIVE RESPONSES BY HEADS OF CERTAIN ESTABLISHMENTS TO DEFICIENCIES IDENTIFIED BY INSPECTORS GENERAL.
The Chairman of the Board of Governors of the Federal Reserve System, the Chairman of the Commodity Futures Trading Commission, the Chairman of the National Credit Union Administration, the Director of the Pension Benefit Guaranty Corporation, and the Chairman of the Securities and Exchange Commission shall each--
(1) take action to address deficiencies identified by a report or investigation of the Inspector General of the establishment concerned; or
(2) certify to both Houses of Congress that no action is necessary or appropriate in connection with a deficiency described in paragraph (1).
SEC. 989I. GAO STUDY REGARDING EXEMPTION FOR SMALLER ISSUERS.
(a) Study Regarding Exemption for Smaller Issuers- The Comptroller General of the United States shall carry out a study on the impact of the amendments made by this Act to section 404(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262(b)), which shall include an analysis of--
(1) whether issuers that are exempt from such section 404(b) have fewer or more restatements of published accounting statements than issuers that are required to comply with such section 404(b);
(2) the cost of capital for issuers that are exempt from such section 404(b) compared to the cost of capital for issuers that are required to comply with such section 404(b);
(3) whether there is any difference in the confidence of investors in the integrity of financial statements of issuers that comply with such section 404(b) and issuers that are exempt from compliance with such section 404(b);
(4) whether issuers that do not receive the attestation for internal controls required under such section 404(b) should be required to disclose the lack of such attestation to investors; and
(5) the costs and benefits to issuers that are exempt from such section 404(b) that voluntarily have obtained the attestation of an independent auditor.
(b) Report- Not later than 3 years after the date of enactment of this Act, the Comptroller General 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 the results of the study required under subsection (a).
SEC. 989J. FURTHER PROMOTING THE ADOPTION OF THE NAIC MODEL REGULATIONS THAT ENHANCE PROTECTION OF SENIORS AND OTHER CONSUMERS.
(a) In General- The Commission shall treat as exempt securities described under section 3(a)(8) of the Securities Act of 1933 (15 U.S.C. 77c(a)(8)) any insurance or endowment policy or annuity contract or optional annuity contract--
(1) the value of which does not vary according to the performance of a separate account;
(2) that--
(A) satisfies standard nonforfeiture laws or similar requirements of the applicable State at the time of issue; or
(B) in the absence of applicable standard nonforfeiture laws or requirements, satisfies the Model Standard Nonforfeiture Law for Life Insurance or Model Standard Nonforfeiture Law for Individual Deferred Annuities, or any successor model law, as published by the National Association of Insurance Commissioners; and
(3) that is issued--
(A) on and after June 16, 2013, in a State, or issued by an insurance company that is domiciled in a State, that--
(i) adopts rules that govern suitability requirements in the sale of an insurance or endowment policy or annuity contract or optional annuity contract, which shall substantially meet or exceed the minimum requirements established by the Suitability in Annuity Transactions Model Regulation adopted by the National Association of Insurance Commissioners in March 2010; and
(ii) adopts rules that substantially meet or exceed the minimum requirements of any successor modifications to the model regulations described in subparagraph (A) within 5 years of the adoption by the Association of any further successors thereto; or
(B) by an insurance company that adopts and implements practices on a nationwide basis for the sale of any insurance or endowment policy or annuity contract or optional annuity contract that meet or exceed the minimum requirements established by the National Association of Insurance Commissioners Suitability in Annuity Transactions Model Regulation (Model 275), and any successor thereto, and is therefore subject to examination by the State of domicile of the insurance company, or by any other State where the insurance company conducts sales of such products, for the purpose of monitoring compliance under this section.
(b) Rule of Construction- Nothing in this section shall be construed to affect whether any insurance or endowment policy or annuity contract or optional annuity contract that is not described in this section is or is not an exempt security under section 3(a)(8) of the Securities Act of 1933 (15 U.S.C. 77c(a)(8)).
Subtitle J--Securities and Exchange Commission Match Funding
SEC. 991. SECURITIES AND EXCHANGE COMMISSION MATCH FUNDING.
(a) Match Funding Authority-
(1) AMENDMENTS- Section 31 of the Securities Exchange Act of 1934 (15 U.S.C. 78ee) is amended--
(A) by striking subsection (a) and inserting the following:
‘(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.’;
(B) in subsection (e)(2), by striking ‘September 30’ and inserting ‘September 25’;
(C) in subsection (g), by striking ‘April 30 of the fiscal year preceding the fiscal year to which such rate applies’ and inserting ‘30 days after the date on which an Act making a regular appropriation to the Commission for such fiscal year is enacted’;
(D) by striking subsection (j) and inserting the following:
‘(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.
‘(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. 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).
‘(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.’;
(E) in subsection (k), by striking ‘30 days’ and inserting ‘60 days’; and
(F) in subsection (l), by striking ‘Definitions- ’ and all that follows through ‘SALES- The baseline’ and inserting ‘Baseline Estimate of the Aggregate Dollar Amount of Sales- The baseline’.
(2) EFFECTIVE DATE- The amendments made by this subsection shall take effect on the later of--
(A) October 1, 2011; or
(B) the date of enactment of an Act making a regular appropriation to the Commission for fiscal year 2012.
(b) Amendments to Registration Fee Provisions-
(1) SECTION 6(b) OF THE SECURITIES ACT OF 1933- Section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) is amended--
(A) by striking ‘offsetting’ each place that term appears and inserting ‘fee’;
(B) by striking paragraphs (1), (3), (4), (6), (8), and (9);
(C) by redesignating paragraph (2) as paragraph (1);
(D) by redesignating paragraph (5) as paragraph (2);
(E) by redesignating paragraph (7) as paragraph (3);
(F) by redesignating paragraph (10) as paragraph (5);
(G) by redesignating paragraph (11) as paragraph (6);
(H) in paragraph (1), as so redesignated, by striking ‘paragraph (5) or (6).’ and inserting ‘paragraph (2).’;
(I) in paragraph (2), as so redesignated--
(i) by striking ‘of the fiscal years 2003 through 2011’ and inserting ‘fiscal year’; and
(ii) by striking ‘paragraph (2)’ and inserting ‘paragraph (1)’;
(J) by inserting after paragraph (3), as so redesignated, the following:
‘(4) REVIEW AND EFFECTIVE DATE- 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 (2) and published under paragraph (5) shall not be subject to judicial review. An adjusted rate prescribed under paragraph (2) shall take effect on the first day of the fiscal year to which such rate applies.’;
(K) in paragraph (5), as redesignated, by striking ‘April 30’ and inserting ‘August 31’;
(L) in paragraph (6), as so redesignated--
(i) by striking ‘of the fiscal years 2002 through 2011’ and inserting ‘fiscal year’; and
(ii) by inserting at the end of the table in subparagraph (A) the following:
‘2012
$425,000,000
2013
$455,000,000
2014
$485,000,000
2015
$515,000,000
2016
$550,000,000
2017
$585,000,000
2018
$620,000,000
2019
$660,000,000
2020
$705,000,000
2021 and each fiscal year thereafter
An amount that is equal to the target fee collection amount for the prior fiscal year, adjusted by the rate of inflation.’.
(2) SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934- Section 13(e) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(e)) is amended--
(A) in paragraph (3), by striking ‘paragraphs (5) and (6)’ and inserting ‘paragraph (4)’;
(B) by striking paragraphs (4), (5), and (6);
(C) by inserting after paragraph (3) the following:
‘(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.
‘(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)).’; and
(D) by striking paragraphs (8), (9), and (10).
(3) SECTION 14(g) OF THE SECURITIES EXCHANGE ACT OF 1934- Section 14(g) of the Securities Exchange Act of 1934 (15 U.S.C. 78n(g)) is amended--
(A) in paragraph (1), by striking ‘paragraphs (5) and (6)’ each time that term appears and inserting ‘paragraph (4)’;
(B) in paragraph (3), by striking ‘paragraphs (5) and (6)’ and inserting ‘paragraph (4)’;
(C) by striking paragraphs (4), (5), and (6);
(D) by inserting after paragraph (3) the following:
‘(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.
‘(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)).’;
(E) by striking paragraphs (8), (9), and (10); and
(F) by redesignating paragraph (11) as paragraph (8).
(4) EFFECTIVE DATE- The amendments made by this subsection shall take effect on October 1, 2011, except that for fiscal year 2012, the Commission shall publish the rate established under section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)), as amended by this Act, on August 31, 2011.
(c) Authorization of Appropriations- Section 35 of the Securities Exchange Act of 1934 (15 U.S.C. 78kk) is amended to read as follows:
‘SEC. 35. AUTHORIZATION OF APPROPRIATIONS.
‘In addition to any other funds authorized to be appropriated to the Commission, there are authorized to be appropriated to carry out the functions, powers, and duties of the Commission--
‘(1) for fiscal year 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.’.
(d) Transmittal of Budget Requests-
(1) AMENDMENT- Section 31 of the Securities Exchange Act of 1934 (15 U.S.C. 78ee) is amended by adding at the end the following:
‘(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.’.
(2) BUDGET OF THE PRESIDENT- For fiscal year 2012, and each fiscal year thereafter, the annual budget for the Administration submitted by the President to Congress shall reflect the amendments made by this section.
(e) Securities and Exchange Commission Reserve Fund-
(1) AMENDMENT- Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d), as amended by this Act, is amended by adding at the end the following:
‘(i) Securities and Exchange Commission Reserve Fund-
‘(1) RESERVE FUND ESTABLISHED- There is established in the Treasury of the United States a separate fund, to be known as the ‘Securities and Exchange Commission Reserve Fund’ (referred to in this subsection as the ‘Reserve Fund’).
‘(2) RESERVE FUND AMOUNTS-
‘(A) IN GENERAL- Except as provided in subparagraph (B), any registration fees collected by the Commission under section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) or section 24(f) of the Investment Company Act of 1940 (15 U.S.C. 80a-24(f)) shall be deposited into the Reserve Fund.
‘(B) LIMITATIONS- For any 1 fiscal year--
‘(i) the amount deposited in the Fund may not exceed $50,000,000; and
‘(ii) the balance in the Fund may not exceed $100,000,000.
‘(C) EXCESS FEES- Any amounts in excess of the limitations described in subparagraph (B) that the Commission collects from registration fees under section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) or section 24(f) of the Investment Company Act of 1940 (15 U.S.C. 80a-24(f)) shall be deposited in the General Fund of the Treasury of the United States and shall not be available for obligation by the Commission.
‘(3) USE OF AMOUNTS IN RESERVE FUND- The Commission may obligate amounts in the Reserve Fund, not to exceed a total of $100,000,000 in any 1 fiscal year, as the Commission determines is necessary to carry out the functions of the Commission. Any amounts in the reserve fund shall remain available until expended. Not later than 10 days after the date on which the Commission obligates amounts under this paragraph, the Commission shall notify Congress of the date, amount, and purpose of the obligation.
‘(4) RULE OF CONSTRUCTION- Amounts collected and deposited in the Reserve Fund shall not be construed to be Government funds or appropriated monies and shall not be subject to apportionment for the purpose of chapter 15 of title 31, United States Code, or under any other authority.’.
(2) EFFECTIVE DATE- The amendment made by this subsection shall take effect on October 1, 2011.
TITLE X--BUREAU OF CONSUMER FINANCIAL PROTECTION
SEC. 1001. SHORT TITLE.
This title may be cited as the ‘Consumer Financial Protection Act of 2010’.
SEC. 1002. DEFINITIONS.
Except as otherwise provided in this title, for purposes of this title, the following definitions shall apply:
(1) AFFILIATE- The term ‘affiliate’ means any person that controls, is controlled by, or is under common control with another person.
(2) BUREAU- The term ‘Bureau’ means the Bureau of Consumer Financial Protection.
(3) BUSINESS OF INSURANCE- The term ‘business of insurance’ means the writing of insurance or the reinsuring of risks by an insurer, including all acts necessary to such writing or reinsuring and the activities relating to the writing of insurance or the reinsuring of risks conducted by persons who act as, or are, officers, directors, agents, or employees of insurers or who are other persons authorized to act on behalf of such persons.
(4) CONSUMER- The term ‘consumer’ means an individual or an agent, trustee, or representative acting on behalf of an individual.
(5) CONSUMER FINANCIAL PRODUCT OR SERVICE- The term ‘consumer financial product or service’ means any financial product or service that is described in one or more categories under--
(A) paragraph (15) and is offered or provided for use by consumers primarily for personal, family, or household purposes; or
(B) clause (i), (iii), (ix), or (x) of paragraph (15)(A), and is delivered, offered, or provided in connection with a consumer financial product or service referred to in subparagraph (A).
(6) COVERED PERSON- The term ‘covered person’ means--
(A) any person that engages in offering or providing a consumer financial product or service; and
(B) any affiliate of a person described in subparagraph (A) if such affiliate acts as a service provider to such person.
(7) CREDIT- The term ‘credit’ means the right granted by a person to a consumer to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment for such purchase.
(8) DEPOSIT-TAKING ACTIVITY- The term ‘deposit-taking activity’ means--
(A) the acceptance of deposits, maintenance of deposit accounts, or the provision of services related to the acceptance of deposits or the maintenance of deposit accounts;
(B) the acceptance of funds, the provision of other services related to the acceptance of funds, or the maintenance of member share accounts by a credit union; or
(C) the receipt of funds or the equivalent thereof, as the Bureau may determine by rule or order, received or held by a covered person (or an agent for a covered person) for the purpose of facilitating a payment or transferring funds or value of funds between a consumer and a third party.
(9) DESIGNATED TRANSFER DATE- The term ‘designated transfer date’ means the date established under section 1062.
(10) DIRECTOR- The term ‘Director’ means the Director of the Bureau.
(11) ELECTRONIC CONDUIT SERVICES- The term ‘electronic conduit services’--
(A) means the provision, by a person, of electronic data transmission, routing, intermediate or transient storage, or connections to a telecommunications system or network; and
(B) does not include a person that provides electronic conduit services if, when providing such services, the person--
(i) selects or modifies the content of the electronic data;
(ii) transmits, routes, stores, or provides connections for electronic data, including financial data, in a manner that such financial data is differentiated from other types of data of the same form that such person transmits, routes, or stores, or with respect to which, provides connections; or
(iii) is a payee, payor, correspondent, or similar party to a payment transaction with a consumer.
(12) ENUMERATED CONSUMER LAWS- Except as otherwise specifically provided in section 1029, subtitle G or subtitle H, the term ‘enumerated consumer laws’ means--
(A) the Alternative Mortgage Transaction Parity Act of 1982 (12 U.S.C. 3801 et seq.);
(B) the Consumer Leasing Act of 1976 (15 U.S.C. 1667 et seq.);
(C) the Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.), except with respect to section 920 of that Act;
(D) the Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.);
(E) the Fair Credit Billing Act (15 U.S.C. 1666 et seq.);
(F) the Fair Credit Reporting Act (15 U.S.C. 1681 et seq.), except with respect to sections 615(e) and 628 of that Act (15 U.S.C. 1681m(e), 1681w);
(G) the Home Owners Protection Act of 1998 (12 U.S.C. 4901 et seq.);
(H) the Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq.);
(I) subsections (b) through (f) of section 43 of the Federal Deposit Insurance Act (12 U.S.C. 1831t(c)-(f));
(J) sections 502 through 509 of the Gramm-Leach-Bliley Act (15 U.S.C. 6802-6809) except for section 505 as it applies to section 501(b);
(K) the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2801 et seq.);
(L) the Home Ownership and Equity Protection Act of 1994 (15 U.S.C. 1601 note);
(M) the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 et seq.);
(N) the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.);
(O) the Truth in Lending Act (15 U.S.C. 1601 et seq.);
(P) the Truth in Savings Act (12 U.S.C. 4301 et seq.);
(Q) section 626 of the Omnibus Appropriations Act, 2009 (Public Law 111-8); and
(R) the Interstate Land Sales Full Disclosure Act (15 U.S.C. 1701).
(13) FAIR LENDING- The term ‘fair lending’ means fair, equitable, and nondiscriminatory access to credit for consumers.
(14) FEDERAL CONSUMER FINANCIAL LAW- The term ‘Federal consumer financial law’ means the provisions of this title, the enumerated consumer laws, the laws for which authorities are transferred under subtitles F and H, and any rule or order prescribed by the Bureau under this title, an enumerated consumer law, or pursuant to the authorities transferred under subtitles F and H. The term does not include the Federal Trade Commission Act.
(15) FINANCIAL PRODUCT OR SERVICE-
(A) IN GENERAL- The term ‘financial product or service’ means--
(i) extending credit and servicing loans, including acquiring, purchasing, selling, brokering, or other extensions of credit (other than solely extending commercial credit to a person who originates consumer credit transactions);
(ii) extending or brokering leases of personal or real property that are the functional equivalent of purchase finance arrangements, if--
(I) the lease is on a non-operating basis;
(II) the initial term of the lease is at least 90 days; and
(III) in the case of a lease involving real property, at the inception of the initial lease, the transaction is intended to result in ownership of the leased property to be transferred to the lessee, subject to standards prescribed by the Bureau;
(iii) providing real estate settlement services, except such services excluded under subparagraph (C), or performing appraisals of real estate or personal property;
(iv) engaging in deposit-taking activities, transmitting or exchanging funds, or otherwise acting as a custodian of funds or any financial instrument for use by or on behalf of a consumer;
(v) selling, providing, or issuing stored value or payment instruments, except that, in the case of a sale of, or transaction to reload, stored value, only if the seller exercises substantial control over the terms or conditions of the stored value provided to the consumer where, for purposes of this clause--
(I) a seller shall not be found to exercise substantial control over the terms or conditions of the stored value if the seller is not a party to the contract with the consumer for the stored value product, and another person is principally responsible for establishing the terms or conditions of the stored value; and
(II) advertising the nonfinancial goods or services of the seller on the stored value card or device is not in itself an exercise of substantial control over the terms or conditions;
(vi) providing check cashing, check collection, or check guaranty services;
(vii) providing payments or other financial data processing products or services to a consumer by any technological means, including processing or storing financial or banking data for any payment instrument, or through any payments systems or network used for processing payments data, including payments made through an online banking system or mobile telecommunications network, except that a person shall not be deemed to be a covered person with respect to financial data processing solely because the person--
(I) is a merchant, retailer, or seller of any nonfinancial good or service who engages in financial data processing by transmitting or storing payments data about a consumer exclusively for purpose of initiating payments instructions by the consumer to pay such person for the purchase of, or to complete a commercial transaction for, such nonfinancial good or service sold directly by such person to the consumer; or
(II) provides access to a host server to a person for purposes of enabling that person to establish and maintain a website;
(viii) providing financial advisory services (other than services relating to securities provided by a person regulated by the Commission or a person regulated by a State securities Commission, but only to the extent that such person acts in a regulated capacity) to consumers on individual financial matters or relating to proprietary financial products or services (other than by publishing any bona fide newspaper, news magazine, or business or financial publication of general and regular circulation, including publishing market data, news, or data analytics or investment information or recommendations that are not tailored to the individual needs of a particular consumer), including--
(I) providing credit counseling to any consumer; and
(II) providing services to assist a consumer with debt management or debt settlement, modifying the terms of any extension of credit, or avoiding foreclosure;
(ix) collecting, analyzing, maintaining, or providing consumer report information or other account information, including information relating to the credit history of consumers, used or expected to be used in connection with any decision regarding the offering or provision of a consumer financial product or service, except to the extent that--
(I) a person--
(aa) collects, analyzes, or maintains information that relates solely to the transactions between a consumer and such person;
(bb) provides the information described in item (aa) to an affiliate of such person; or
(cc) provides information that is used or expected to be used solely in any decision regarding the offering or provision of a product or service that is not a consumer financial product or service, including a decision for employment, government licensing, or a residential lease or tenancy involving a consumer; and
(II) the information described in subclause (I)(aa) is not used by such person or affiliate in connection with any decision regarding the offering or provision of a consumer financial product or service to the consumer, other than credit described in section 1027(a)(2)(A);
(x) collecting debt related to any consumer financial product or service; and
(xi) such other financial product or service as may be defined by the Bureau, by regulation, for purposes of this title, if the Bureau finds that such financial product or service is--
(I) entered into or conducted as a subterfuge or with a purpose to evade any Federal consumer financial law; or
(II) permissible for a bank or for a financial holding company to offer or to provide under any provision of a Federal law or regulation applicable to a bank or a financial holding company, and has, or likely will have, a material impact on consumers.
(B) RULE OF CONSTRUCTION-
(i) IN GENERAL- For purposes of subparagraph (A)(xi)(II), and subject to clause (ii) of this subparagraph, the following activities provided to a covered person shall not, for purposes of this title, be considered incidental or complementary to a financial activity permissible for a financial holding company to engage in under any provision of a Federal law or regulation applicable to a financial holding company:
(I) Providing information products or services to a covered person for identity authentication.
(II) Providing information products or services for fraud or identify theft detection, prevention, or investigation.
(III) Providing document retrieval or delivery services.
(IV) Providing public records information retrieval.
(V) Providing information products or services for anti-money laundering activities.
(ii) LIMITATION- Nothing in clause (i) may be construed as modifying or limiting the authority of the Bureau to exercise any--
(I) examination or enforcement powers authority under this title with respect to a covered person or service provider engaging in an activity described in subparagraph (A)(ix); or
(II) powers authorized by this title to prescribe rules, issue orders, or take other actions under any enumerated consumer law or law for which the authorities are transferred under subtitle F or H.
(C) EXCLUSIONS- The term ‘financial product or service’ does not include--
(i) the business of insurance; or
(ii) electronic conduit services.
(16) FOREIGN EXCHANGE- The term ‘foreign exchange’ means the exchange, for compensation, of currency of the United States or of a foreign government for currency of another government.
(17) INSURED CREDIT UNION- The term ‘insured credit union’ has the same meaning as in section 101 of the Federal Credit Union Act (12 U.S.C. 1752).
(18) PAYMENT INSTRUMENT- The term ‘payment instrument’ means a check, draft, warrant, money order, traveler’s check, electronic instrument, or other instrument, payment of funds, or monetary value (other than currency).
(19) PERSON- The term ‘person’ means an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity.
(20) PERSON REGULATED BY THE COMMODITY FUTURES TRADING COMMISSION- The term ‘person regulated by the Commodity Futures Trading Commission’ means any person that is registered, or required by statute or regulation to be registered, with the Commodity Futures Trading Commission, but only to the extent that the activities of such person are subject to the jurisdiction of the Commodity Futures Trading Commission under the Commodity Exchange Act.
(21) PERSON REGULATED BY THE COMMISSION- The term ‘person regulated by the Commission’ means a person who is--
(A) a broker or dealer that is required to be registered under the Securities Exchange Act of 1934;
(B) an investment adviser that is registered under the Investment Advisers Act of 1940;
(C) an investment company that is required to be registered under the Investment Company Act of 1940, and any company that has elected to be regulated as a business development company under that Act;
(D) a national securities exchange that is required to be registered under the Securities Exchange Act of 1934;
(E) a transfer agent that is required to be registered under the Securities Exchange Act of 1934;
(F) a clearing corporation that is required to be registered under the Securities Exchange Act of 1934;
(G) any self-regulatory organization that is required to be registered with the Commission;
(H) any nationally recognized statistical rating organization that is required to be registered with the Commission;
(I) any securities information processor that is required to be registered with the Commission;
(J) any municipal securities dealer that is required to be registered with the Commission;
(K) any other person that is required to be registered with the Commission under the Securities Exchange Act of 1934; and
(L) any employee, agent, or contractor acting on behalf of, registered with, or providing services to, any person described in any of subparagraphs (A) through (K), but only to the extent that any person described in any of subparagraphs (A) through (K), or the employee, agent, or contractor of such person, acts in a regulated capacity.
(22) PERSON REGULATED BY A STATE INSURANCE REGULATOR- The term ‘person regulated by a State insurance regulator’ means any person that is engaged in the business of insurance and subject to regulation by any State insurance regulator, but only to the extent that such person acts in such capacity.
(23) PERSON THAT PERFORMS INCOME TAX PREPARATION ACTIVITIES FOR CONSUMERS- The term ‘person that performs income tax preparation activities for consumers’ means--
(A) any tax return preparer (as defined in section 7701(a)(36) of the Internal Revenue Code of 1986), regardless of whether compensated, but only to the extent that the person acts in such capacity;
(B) any person regulated by the Secretary under section 330 of title 31, United States Code, but only to the extent that the person acts in such capacity; and
(C) any authorized IRS e-file Providers (as defined for purposes of section 7216 of the Internal Revenue Code of 1986), but only to the extent that the person acts in such capacity.
(24) PRUDENTIAL REGULATOR- The term ‘prudential regulator’ means--
(A) in the case of an insured depository institution or depository institution holding company (as defined in section 3 of the Federal Deposit Insurance Act), or subsidiary of such institution or company, the appropriate Federal banking agency, as that term is defined in section 3 of the Federal Deposit Insurance Act; and
(B) in the case of an insured credit union, the National Credit Union Administration.
(25) RELATED PERSON- The term ‘related person’--
(A) shall apply only with respect to a covered person that is not a bank holding company (as that term is defined in section 2 of the Bank Holding Company Act of 1956), credit union, or depository institution;
(B) shall be deemed to mean a covered person for all purposes of any provision of Federal consumer financial law; and
(C) means--
(i) any director, officer, or employee charged with managerial responsibility for, or controlling shareholder of, or agent for, such covered person;
(ii) any shareholder, consultant, joint venture partner, or other person, as determined by the Bureau (by rule or on a case-by-case basis) who materially participates in the conduct of the affairs of such covered person; and
(iii) any independent contractor (including any attorney, appraiser, or accountant) who knowingly or recklessly participates in any--
(I) violation of any provision of law or regulation; or
(II) breach of a fiduciary duty.
(26) SERVICE PROVIDER-
(A) IN GENERAL- The term ‘service provider’ means any person that provides a material service to a covered person in connection with the offering or provision by such covered person of a consumer financial product or service, including a person that--
(i) participates in designing, operating, or maintaining the consumer financial product or service; or
(ii) processes transactions relating to the consumer financial product or service (other than unknowingly or incidentally transmitting or processing financial data in a manner that such data is undifferentiated from other types of data of the same form as the person transmits or processes).
(B) EXCEPTIONS- The term ‘service provider’ does not include a person solely by virtue of such person offering or providing to a covered person--
(i) a support service of a type provided to businesses generally or a similar ministerial service; or
(ii) time or space for an advertisement for a consumer financial product or service through print, newspaper, or electronic media.
(C) RULE OF CONSTRUCTION- A person that is a service provider shall be deemed to be a covered person to the extent that such person engages in the offering or provision of its own consumer financial product or service.
(27) STATE- The term ‘State’ means any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, American Samoa, or the United States Virgin Islands or any federally recognized Indian tribe, as defined by the Secretary of the Interior under section 104(a) of the Federally Recognized Indian Tribe List Act of 1994 (25 U.S.C. 479a-1(a)).
(28) STORED VALUE-
(A) IN GENERAL- The term ‘stored value’ means funds or monetary value represented in any electronic format, whether or not specially encrypted, and stored or capable of storage on electronic media in such a way as to be retrievable and transferred electronically, and includes a prepaid debit card or product, or any other similar product, regardless of whether the amount of the funds or monetary value may be increased or reloaded.
(B) EXCLUSION- Notwithstanding subparagraph (A), the term ‘stored value’ does not include a special purpose card or certificate, which shall be defined for purposes of this paragraph as funds or monetary value represented in any electronic format, whether or not specially encrypted, that is--
(i) issued by a merchant, retailer, or other seller of nonfinancial goods or services;
(ii) redeemable only for transactions with the merchant, retailer, or seller of nonfinancial goods or services or with an affiliate of such person, which affiliate itself is a merchant, retailer, or seller of nonfinancial goods or services;
(iii) issued in a specified amount that, except in the case of a card or product used solely for telephone services, may not be increased or reloaded;
(iv) purchased on a prepaid basis in exchange for payment; and
(v) honored upon presentation to such merchant, retailer, or seller of nonfinancial goods or services or an affiliate of such person, which affiliate itself is a merchant, retailer, or seller of nonfinancial goods or services, only for any nonfinancial goods or services.
(29) TRANSMITTING OR EXCHANGING FUNDS- The term ‘transmitting or exchanging funds’ means receiving currency, monetary value, or payment instruments from a consumer for the purpose of exchanging or transmitting the same by any means, including transmission by wire, facsimile, electronic transfer, courier, the Internet, or through bill payment services or through other businesses that facilitate third-party transfers within the United States or to or from the United States.
Subtitle A--Bureau of Consumer Financial Protection
SEC. 1011. ESTABLISHMENT OF THE BUREAU OF CONSUMER FINANCIAL PROTECTION.
(a) Bureau Established- There is established in the Federal Reserve System, an independent bureau to be known as the ‘Bureau of Consumer Financial Protection’, which shall regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws. The Bureau shall be considered an Executive agency, as defined in section 105 of title 5, United States Code. Except as otherwise provided expressly by law, all Federal laws dealing with public or Federal contracts, property, works, officers, employees, budgets, or funds, including the provisions of chapters 5 and 7 of title 5, shall apply to the exercise of the powers of the Bureau.
(b) Director and Deputy Director-
(1) IN GENERAL- There is established the position of the Director, who shall serve as the head of the Bureau.
(2) APPOINTMENT- Subject to paragraph (3), the Director shall be appointed by the President, by and with the advice and consent of the Senate.
(3) QUALIFICATION- The President shall nominate the Director from among individuals who are citizens of the United States.
(4) COMPENSATION- The Director shall be compensated at the rate prescribed for level II of the Executive Schedule under section 5313 of title 5, United States Code.
(5) DEPUTY DIRECTOR- There is established the position of Deputy Director, who shall--
(A) be appointed by the Director; and
(B) serve as acting Director in the absence or unavailability of the Director.
(c) Term-
(1) IN GENERAL- The Director shall serve for a term of 5 years.
(2) EXPIRATION OF TERM- An individual may serve as Director after the expiration of the term for which appointed, until a successor has been appointed and qualified.
(3) REMOVAL FOR CAUSE- The President may remove the Director for inefficiency, neglect of duty, or malfeasance in office.
(d) Service Restriction- No Director or Deputy Director may hold any office, position, or employment in any Federal reserve bank, Federal home loan bank, covered person, or service provider during the period of service of such person as Director or Deputy Director.
(e) Offices- The principal office of the Bureau shall be in the District of Columbia. The Director may establish regional offices of the Bureau, including in cities in which the Federal reserve banks, or branches of such banks, are located, in order to carry out the responsibilities assigned to the Bureau under the Federal consumer financial laws.
SEC. 1012. EXECUTIVE AND ADMINISTRATIVE POWERS.
(a) Powers of the Bureau- The Bureau is authorized to establish the general policies of the Bureau with respect to all executive and administrative functions, including--
(1) the establishment of rules for conducting the general business of the Bureau, in a manner not inconsistent with this title;
(2) to bind the Bureau and enter into contracts;
(3) directing the establishment and maintenance of divisions or other offices within the Bureau, in order to carry out the responsibilities under the Federal consumer financial laws, and to satisfy the requirements of other applicable law;
(4) to coordinate and oversee the operation of all administrative, enforcement, and research activities of the Bureau;
(5) to adopt and use a seal;
(6) to determine the character of and the necessity for the obligations and expenditures of the Bureau;
(7) the appointment and supervision of personnel employed by the Bureau;
(8) the distribution of business among personnel appointed and supervised by the Director and among administrative units of the Bureau;
(9) the use and expenditure of funds;
(10) implementing the Federal consumer financial laws through rules, orders, guidance, interpretations, statements of policy, examinations, and enforcement actions; and
(11) performing such other functions as may be authorized or required by law.
(b) Delegation of Authority- The Director of the Bureau may delegate to any duly authorized employee, representative, or agent any power vested in the Bureau by law.
(c) Autonomy of the Bureau-
(1) COORDINATION WITH THE BOARD OF GOVERNORS- Notwithstanding any other provision of law applicable to the supervision or examination of persons with respect to Federal consumer financial laws, the Board of Governors may delegate to the Bureau the authorities to examine persons subject to the jurisdiction of the Board of Governors for compliance with the Federal consumer financial laws.
(2) AUTONOMY- Notwithstanding the authorities granted to the Board of Governors under the Federal Reserve Act, the Board of Governors may not--
(A) intervene in any matter or proceeding before the Director, including examinations or enforcement actions, unless otherwise specifically provided by law;
(B) appoint, direct, or remove any officer or employee of the Bureau; or
(C) merge or consolidate the Bureau, or any of the functions or responsibilities of the Bureau, with any division or office of the Board of Governors or the Federal reserve banks.
(3) RULES AND ORDERS- No rule or order of the Bureau shall be subject to approval or review by the Board of Governors. The Board of Governors may not delay or prevent the issuance of any rule or order of the Bureau.
(4) RECOMMENDATIONS AND TESTIMONY- No officer or agency of the United States shall have any authority to require the Director or any other officer of the Bureau to submit legislative recommendations, or testimony or comments on legislation, to any officer or agency of the United States for approval, comments, or review prior to the submission of such recommendations, testimony, or comments to the Congress, if such recommendations, testimony, or comments to the Congress include a statement indicating that the views expressed therein are those of the Director or such officer, and do not necessarily reflect the views of the Board of Governors or the President.
(5) CLARIFICATION OF AUTONOMY OF THE BUREAU IN LEGAL PROCEEDINGS- The Bureau shall not be liable under any provision of law for any action or inaction of the Board of Governors, and the Board of Governors shall not be liable under any provision of law for any action or inaction of the Bureau.
SEC. 1013. ADMINISTRATION.
(a) Personnel-
(1) APPOINTMENT-
(A) IN GENERAL- The Director may fix the number of, and appoint and direct, all employees of the Bureau, in accordance with the applicable provisions of title 5, United States Code.
(B) EMPLOYEES OF THE BUREAU- The Director is authorized to employ attorneys, compliance examiners, compliance supervision analysts, economists, statisticians, and other employees as may be deemed necessary to conduct the business of the Bureau. Unless otherwise provided expressly by law, any individual appointed under this section shall be an employee as defined in section 2105 of title 5, United States Code, and subject to the provisions of such title and other laws generally applicable to the employees of an Executive agency.
(C) WAIVER AUTHORITY-
(i) IN GENERAL- In making any appointment under subparagraph (A), the Director may waive the requirements of chapter 33 of title 5, United States Code, and the regulations implementing such chapter, to the extent necessary to appoint employees on terms and conditions that are consistent with those set forth in section 11(1) of the Federal Reserve Act (12 U.S.C. 248(1)), while providing for--
(I) fair, credible, and transparent methods of establishing qualification requirements for, recruitment for, and appointments to positions;
(II) fair and open competition and equitable treatment in the consideration and selection of individuals to positions;
(III) fair, credible, and transparent methods of assigning, reassigning, detailing, transferring, and promoting employees.
(ii) VETERANS PREFERENCES- In implementing this subparagraph, the Director shall comply with the provisions of section 2302(b)(11), regarding veterans’ preference requirements, in a manner consistent with that in which such provisions are applied under chapter 33 of title 5, United States Code. The authority under this subparagraph to waive the requirements of that chapter 33 shall expire 5 years after the date of enactment of this Act.
(2) COMPENSATION- Notwithstanding any otherwise applicable provision of title 5, United States Code, concerning compensation, including the provisions of chapter 51 and chapter 53, the following provisions shall apply with respect to employees of the Bureau:
(A) The rates of basic pay for all employees of the Bureau may be set and adjusted by the Director.
(B) The Director shall at all times provide compensation (including benefits) to each class of employees that, at a minimum, are comparable to the compensation and benefits then being provided by the Board of Governors for the corresponding class of employees.
(C) All such employees shall be compensated (including benefits) on terms and conditions that are consistent with the terms and conditions set forth in section 11(l) of the Federal Reserve Act (12 U.S.C. 248(l)).
(3) BUREAU PARTICIPATION IN FEDERAL RESERVE SYSTEM RETIREMENT PLAN AND FEDERAL RESERVE SYSTEM THRIFT PLAN-
(A) EMPLOYEE ELECTION- Employees appointed to the Bureau may elect to participate in either--
(i) both the Federal Reserve System Retirement Plan and the Federal Reserve System Thrift Plan, under the same terms on which such participation is offered to employees of the Board of Governors who participate in such plans and under the terms and conditions specified under section 1064(i)(1)(C); or
(ii) the Civil Service Retirement System under chapter 83 of title 5, United States Code, or the Federal Employees Retirement System under chapter 84 of title 5, United States Code, if previously covered under one of those Federal employee retirement systems.
(B) ELECTION PERIOD- Bureau employees shall make an election under this paragraph not later than 1 year after the date of appointment by, or transfer under subtitle F to, the Bureau. Participation in, and benefit accruals under, any other retirement plan established or maintained by the Federal Government shall end not later than the date on which participation in, and benefit accruals under, the Federal Reserve System Retirement Plan and Federal Reserve System Thrift Plan begin.
(C) EMPLOYER CONTRIBUTION- The Bureau shall pay an employer contribution to the Federal Reserve System Retirement Plan, in the amount established as an employer contribution under the Federal Employees Retirement System, as established under chapter 84 of title 5, United States Code, for each Bureau employee who elects to participate in the Federal Reserve System Retirement Plan. The Bureau shall pay an employer contribution to the Federal Reserve System Thrift Plan for each Bureau employee who elects to participate in such plan, as required under the terms of such plan.
(D) CONTROLLED GROUP STATUS- The Bureau is the same employer as the Federal Reserve System (as comprised of the Board of Governors and each of the 12 Federal reserve banks prior to the date of enactment of this Act) for purposes of subsections (b), (c), (m), and (o) of section 414 of the Internal Revenue Code of 1986, (26 U.S.C. 414).
(4) LABOR-MANAGEMENT RELATIONS- Chapter 71 of title 5, United States Code, shall apply to the Bureau and the employees of the Bureau.
(5) AGENCY OMBUDSMAN-
(A) ESTABLISHMENT REQUIRED- Not later than 180 days after the designated transfer date, the Bureau shall appoint an ombudsman.
(B) DUTIES OF OMBUDSMAN- The ombudsman appointed in accordance with subparagraph (A) shall--
(i) act as a liaison between the Bureau and any affected person with respect to any problem that such party may have in dealing with the Bureau, resulting from the regulatory activities of the Bureau; and
(ii) assure that safeguards exist to encourage complainants to come forward and preserve confidentiality.
(b) Specific Functional Units-
(1) RESEARCH- The Director shall establish a unit whose functions shall include researching, analyzing, and reporting on--
(A) developments in markets for consumer financial products or services, including market areas of alternative consumer financial products or services with high growth rates and areas of risk to consumers;
(B) access to fair and affordable credit for traditionally underserved communities;
(C) consumer awareness, understanding, and use of disclosures and communications regarding consumer financial products or services;
(D) consumer awareness and understanding of costs, risks, and benefits of consumer financial products or services;
(E) consumer behavior with respect to consumer financial products or services, including performance on mortgage loans; and
(F) experiences of traditionally underserved consumers, including un-banked and under-banked consumers.
(2) COMMUNITY AFFAIRS- The Director shall establish a unit whose functions shall include providing information, guidance, and technical assistance regarding the offering and provision of consumer financial products or services to traditionally underserved consumers and communities.
(3) COLLECTING AND TRACKING COMPLAINTS-
(A) IN GENERAL- The Director shall establish a unit whose functions shall include establishing a single, toll-free telephone number, a website, and a database or utilizing an existing database to facilitate the centralized collection of, monitoring of, and response to consumer complaints regarding consumer financial products or services. The Director shall coordinate with the Federal Trade Commission or other Federal agencies to route complaints to such agencies, where appropriate.
(B) ROUTING CALLS TO STATES- To the extent practicable, State agencies may receive appropriate complaints from the systems established under subparagraph (A), if--
(i) the State agency system has the functional capacity to receive calls or electronic reports routed by the Bureau systems;
(ii) the State agency has satisfied any conditions of participation in the system that the Bureau may establish, including treatment of personally identifiable information and sharing of information on complaint resolution or related compliance procedures and resources; and
(iii) participation by the State agency includes measures necessary to provide for protection of personally identifiable information that conform to the standards for protection of the confidentiality of personally identifiable information and for data integrity and security that apply to the Federal agencies described in subparagraph (D).
(C) REPORTS TO THE CONGRESS- The Director shall present an annual report to Congress not later than March 31 of each year on the complaints received by the Bureau in the prior year regarding consumer financial products and services. Such report shall include information and analysis about complaint numbers, complaint types, and, where applicable, information about resolution of complaints.
(D) DATA SHARING REQUIRED- To facilitate preparation of the reports required under subparagraph (C), supervision and enforcement activities, and monitoring of the market for consumer financial products and services, the Bureau shall share consumer complaint information with prudential regulators, the Federal Trade Commission, other Federal agencies, and State agencies, subject to the standards applicable to Federal agencies for protection of the confidentiality of personally identifiable information and for data security and integrity. The prudential regulators, the Federal Trade Commission, and other Federal agencies shall share data relating to consumer complaints regarding consumer financial products and services with the Bureau, subject to the standards applicable to Federal agencies for protection of confidentiality of personally identifiable information and for data security and integrity.
(c) Office of Fair Lending and Equal Opportunity-
(1) ESTABLISHMENT- The Director shall establish within the Bureau the Office of Fair Lending and Equal Opportunity.
(2) FUNCTIONS- The Office of Fair Lending and Equal Opportunity shall have such powers and duties as the Director may delegate to the Office, including--
(A) providing oversight and enforcement of Federal laws intended to ensure the fair, equitable, and nondiscriminatory access to credit for both individuals and communities that are enforced by the Bureau, including the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act;
(B) coordinating fair lending efforts of the Bureau with other Federal agencies and State regulators, as appropriate, to promote consistent, efficient, and effective enforcement of Federal fair lending laws;
(C) working with private industry, fair lending, civil rights, consumer and community advocates on the promotion of fair lending compliance and education; and
(D) providing annual reports to Congress on the efforts of the Bureau to fulfill its fair lending mandate.
(3) ADMINISTRATION OF OFFICE- There is established the position of Assistant Director of the Bureau for Fair Lending and Equal Opportunity, who--
(A) shall be appointed by the Director; and
(B) shall carry out such duties as the Director may delegate to such Assistant Director.
(d) Office of Financial Education-
(1) ESTABLISHMENT- The Director shall establish an Office of Financial Education, which shall be responsible for developing and implementing initiatives intended to educate and empower consumers to make better informed financial decisions.
(2) OTHER DUTIES- The Office of Financial Education shall develop and implement a strategy to improve the financial literacy of consumers that includes measurable goals and objectives, in consultation with the Financial Literacy and Education Commission, consistent with the National Strategy for Financial Literacy, through activities including providing opportunities for consumers to access--
(A) financial counseling, including community-based financial counseling, where practicable;
(B) information to assist with the evaluation of credit products and the understanding of credit histories and scores;
(C) savings, borrowing, and other services found at mainstream financial institutions;
(D) activities intended to--
(i) prepare the consumer for educational expenses and the submission of financial aid applications, and other major purchases;
(ii) reduce debt; and
(iii) improve the financial situation of the consumer;
(E) assistance in developing long-term savings strategies; and
(F) wealth building and financial services during the preparation process to claim earned income tax credits and Federal benefits.
(3) COORDINATION- The Office of Financial Education shall coordinate with other units within the Bureau in carrying out its functions, including--
(A) working with the Community Affairs Office to implement the strategy to improve financial literacy of consumers; and
(B) working with the research unit established by the Director to conduct research related to consumer financial education and counseling.
(4) REPORT- Not later than 24 months after the designated transfer date, and annually thereafter, the Director shall submit a report on its financial literacy activities and strategy to improve financial literacy of consumers to--
(A) the Committee on Banking, Housing, and Urban Affairs of the Senate; and
(B) the Committee on Financial Services of the House of Representatives.
(5) MEMBERSHIP IN FINANCIAL LITERACY AND EDUCATION COMMISSION- Section 513(c)(1) of the Financial Literacy and Education Improvement Act (20 U.S.C. 9702(c)(1)) is amended--
(A) in subparagraph (B), by striking ‘and’ at the end;
(B) by redesignating subparagraph (C) as subparagraph (D); and
(C) by inserting after subparagraph (B) the following new subparagraph:
‘(C) the Director of the Bureau of Consumer Financial Protection; and’.
(6) CONFORMING AMENDMENT- Section 513(d) of the Financial Literacy and Education Improvement Act (20 U.S.C. 9702(d)) is amended by adding at the end the following: ‘The Director of the Bureau of Consumer Financial Protection shall serve as the Vice Chairman.’.
(7) STUDY AND REPORT ON FINANCIAL LITERACY PROGRAM-
(A) IN GENERAL- The Comptroller General of the United States shall conduct a study to identify--
(i) the feasibility of certification of persons providing the programs or performing the activities described in paragraph (2), including recognizing outstanding programs, and developing guidelines and resources for community-based practitioners, including--
(I) a potential certification process and standards for certification;
(II) appropriate certifying entities;
(III) resources required for funding such a process; and
(IV) a cost-benefit analysis of such certification;
(ii) technological resources intended to collect, analyze, evaluate, or promote financial literacy and counseling programs;
(iii) effective methods, tools, and strategies intended to educate and empower consumers about personal finance management; and
(iv) recommendations intended to encourage the development of programs that effectively improve financial education outcomes and empower consumers to make better informed financial decisions based on findings.
(B) REPORT- Not later than 1 year after the date of enactment of this Act, the Comptroller General of the United States shall submit a report on the results of the study conducted under this paragraph to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives.
(e) Office of Service Member Affairs-
(1) IN GENERAL- The Director shall establish an Office of Service Member Affairs, which shall be responsible for developing and implementing initiatives for service members and their families intended to--
(A) educate and empower service members and their families to make better informed decisions regarding consumer financial products and services;
(B) coordinate with the unit of the Bureau established under subsection (b)(3), in order to monitor complaints by service members and their families and responses to those complaints by the Bureau or other appropriate Federal or State agency; and
(C) coordinate efforts among Federal and State agencies, as appropriate, regarding consumer protection measures relating to consumer financial products and services offered to, or used by, service members and their families.
(2) COORDINATION-
(A) REGIONAL SERVICES- The Director is authorized to assign employees of the Bureau as may be deemed necessary to conduct the business of the Office of Service Member Affairs, including by establishing and maintaining the functions of the Office in regional offices of the Bureau located near military bases, military treatment facilities, or other similar military facilities.
(B) AGREEMENTS- The Director is authorized to enter into memoranda of understanding and similar agreements with the Department of Defense, including any branch or agency as authorized by the department, in order to carry out the business of the Office of Service Member Affairs.
(3) DEFINITION- As used in this subsection, the term ‘service member’ means any member of the United States Armed Forces and any member of the National Guard or Reserves.
(f) Timing- The Office of Fair Lending and Equal Opportunity, the Office of Financial Education, and the Office of Service Member Affairs shall each be established not later than 1 year after the designated transfer date.
(g) Office of Financial Protection for Older Americans-
(1) ESTABLISHMENT- Before the end of the 180-day period beginning on the designated transfer date, the Director shall establish the Office of Financial Protection for Older Americans, the functions of which shall include activities designed to facilitate the financial literacy of individuals who have attained the age of 62 years or more (in this subsection, referred to as ‘seniors’) on protection from unfair, deceptive, and abusive practices and on current and future financial choices, including through the dissemination of materials to seniors on such topics.
(2) ASSISTANT DIRECTOR- The Office of Financial Protection for Older Americans (in this subsection referred to as the ‘Office’) shall be headed by an assistant director.
(3) DUTIES- The Office shall--
(A) develop goals for programs that provide seniors financial literacy and counseling, including programs that--
(i) help seniors recognize warning signs of unfair, deceptive, or abusive practices, protect themselves from such practices;
(ii) provide one-on-one financial counseling on issues including long-term savings and later-life economic security; and
(iii) provide personal consumer credit advocacy to respond to consumer problems caused by unfair, deceptive, or abusive practices;
(B) monitor certifications or designations of financial advisors who advise seniors and alert the Commission and State regulators of certifications or designations that are identified as unfair, deceptive, or abusive;
(C) not later than 18 months after the date of the establishment of the Office, submit to Congress and the Commission any legislative and regulatory recommendations on the best practices for--
(i) disseminating information regarding the legitimacy of certifications of financial advisers who advise seniors;
(ii) methods in which a senior can identify the financial advisor most appropriate for the senior’s needs; and
(iii) methods in which a senior can verify a financial advisor’s credentials;
(D) conduct research to identify best practices and effective methods, tools, technology and strategies to educate and counsel seniors about personal finance management with a focus on--
(i) protecting themselves from unfair, deceptive, and abusive practices;
(ii) long-term savings; and
(iii) planning for retirement and long-term care;
(E) coordinate consumer protection efforts of seniors with other Federal agencies and State regulators, as appropriate, to promote consistent, effective, and efficient enforcement; and
(F) work with community organizations, non-profit organizations, and other entities that are involved with educating or assisting seniors (including the National Education and Resource Center on Women and Retirement Planning).
SEC. 1014. CONSUMER ADVISORY BOARD.
(a) Establishment Required- The Director shall establish a Consumer Advisory Board to advise and consult with the Bureau in the exercise of its functions under the Federal consumer financial laws, and to provide information on emerging practices in the consumer financial products or services industry, including regional trends, concerns, and other relevant information.
(b) Membership- In appointing the members of the Consumer Advisory Board, the Director shall seek to assemble experts in consumer protection, financial services, community development, fair lending and civil rights, and consumer financial products or services and representatives of depository institutions that primarily serve underserved communities, and representatives of communities that have been significantly impacted by higher-priced mortgage loans, and seek representation of the interests of covered persons and consumers, without regard to party affiliation. Not fewer than 6 members shall be appointed upon the recommendation of the regional Federal Reserve Bank Presidents, on a rotating basis.
(c) Meetings- The Consumer Advisory Board shall meet from time to time at the call of the Director, but, at a minimum, shall meet at least twice in each year.
(d) Compensation and Travel Expenses- Members of the Consumer Advisory Board who are not full-time employees of the United States shall--
(1) be entitled to receive compensation at a rate fixed by the Director while attending meetings of the Consumer Advisory Board, including travel time; and
(2) be allowed travel expenses, including transportation and subsistence, while away from their homes or regular places of business.
SEC. 1015. COORDINATION.
The Bureau shall coordinate with the Commission, the Commodity Futures Trading Commission, the Federal Trade Commission, and other Federal agencies and State regulators, as appropriate, to promote consistent regulatory treatment of consumer financial and investment products and services.
SEC. 1016. APPEARANCES BEFORE AND REPORTS TO CONGRESS.
(a) Appearances Before Congress- The Director of the Bureau shall appear before the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services and the Committee on Energy and Commerce of the House of Representatives at semi-annual hearings regarding the reports required under subsection (b).
(b) Reports Required- The Bureau shall, concurrent with each semi-annual hearing referred to in subsection (a), prepare and submit to the President and to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services and the Committee on Energy and Commerce of the House of Representatives, a report, beginning with the session following the designated transfer date. The Bureau may also submit such report to the Committee on Commerce, Science, and Transportation of the Senate.
(c) Contents- The reports required by subsection (b) shall include--
(1) a discussion of the significant problems faced by consumers in shopping for or obtaining consumer financial products or services;
(2) a justification of the budget request of the previous year;
(3) a list of the significant rules and orders adopted by the Bureau, as well as other significant initiatives conducted by the Bureau, during the preceding year and the plan of the Bureau for rules, orders, or other initiatives to be undertaken during the upcoming period;
(4) an analysis of complaints about consumer financial products or services that the Bureau has received and collected in its central database on complaints during the preceding year;
(5) a list, with a brief statement of the issues, of the public supervisory and enforcement actions to which the Bureau was a party during the preceding year;
(6) the actions taken regarding rules, orders, and supervisory actions with respect to covered persons which are not credit unions or depository institutions;
(7) an assessment of significant actions by State attorneys general or State regulators relating to Federal consumer financial law;
(8) an analysis of the efforts of the Bureau to fulfill the fair lending mission of the Bureau; and
(9) an analysis of the efforts of the Bureau to increase workforce and contracting diversity consistent with the procedures established by the Office of Minority and Women Inclusion.
SEC. 1017. FUNDING; PENALTIES AND FINES.
(a) Transfer of Funds From Board Of Governors-
(1) IN GENERAL- Each year (or quarter of such year), beginning on the designated transfer date, and each quarter thereafter, the Board of Governors shall transfer to the Bureau from the combined earnings of the Federal Reserve System, the amount determined by the Director to be reasonably necessary to carry out the authorities of the Bureau under Federal consumer financial law, taking into account such other sums made available to the Bureau from the preceding year (or quarter of such year).
(2) FUNDING CAP-
(A) IN GENERAL- Notwithstanding paragraph (1), and in accordance with this paragraph, the amount that shall be transferred to the Bureau in each fiscal year shall not exceed a fixed percentage of the total operating expenses of the Federal Reserve System, as reported in the Annual Report, 2009, of the Board of Governors, equal to--
(i) 10 percent of such expenses in fiscal year 2011;
(ii) 11 percent of such expenses in fiscal year 2012; and
(iii) 12 percent of such expenses in fiscal year 2013, and in each year thereafter.
(B) ADJUSTMENT OF AMOUNT- The dollar amount referred to in subparagraph (A)(iii) shall be adjusted annually, using the percent increase, if any, in the employment cost index for total compensation for State and local government workers published by the Federal Government, or the successor index thereto, for the 12-month period ending on September 30 of the year preceding the transfer.
(C) REVIEWABILITY- Notwithstanding any other provision in this title, the funds derived from the Federal Reserve System pursuant to this subsection shall not be subject to review by the Committees on Appropriations of the House of Representatives and the Senate.
(3) TRANSITION PERIOD- Beginning on the date of enactment of this Act and until the designated transfer date, the Board of Governors shall transfer to the Bureau the amount estimated by the Secretary needed to carry out the authorities granted to the Bureau under Federal consumer financial law, from the date of enactment of this Act until the designated transfer date.
(4) BUDGET AND FINANCIAL MANAGEMENT-
(A) FINANCIAL OPERATING PLANS AND FORECASTS- The Director shall provide to the Director of the Office of Management and Budget copies of the financial operating plans and forecasts of the Director, as prepared by the Director in the ordinary course of the operations of the Bureau, and copies of the quarterly reports of the financial condition and results of operations of the Bureau, as prepared by the Director in the ordinary course of the operations of the Bureau.
(B) FINANCIAL STATEMENTS- The Bureau shall prepare annually a statement of--
(i) assets and liabilities and surplus or deficit;
(ii) income and expenses; and
(iii) sources and application of funds.
(C) FINANCIAL MANAGEMENT SYSTEMS- The Bureau shall implement and maintain financial management systems that comply substantially with Federal financial management systems requirements and applicable Federal accounting standards.
(D) ASSERTION OF INTERNAL CONTROLS- The Director shall provide to the Comptroller General of the United States an assertion as to the effectiveness of the internal controls that apply to financial reporting by the Bureau, using the standards established in section 3512(c) of title 31, United States Code.
(E) RULE OF CONSTRUCTION- This subsection may not be construed as implying any obligation on the part of the Director to consult with or obtain the consent or approval of the Director of the Office of Management and Budget with respect to any report, plan, forecast, or other information referred to in subparagraph (A) or any jurisdiction or oversight over the affairs or operations of the Bureau.
(F) FINANCIAL STATEMENTS- The financial statements of the Bureau shall not be consolidated with the financial statements of either the Board of Governors or the Federal Reserve System.
(5) AUDIT OF THE BUREAU-
(A) IN GENERAL- The Comptroller General shall annually audit the financial transactions of the Bureau in accordance with the United States generally accepted government auditing standards, as may be prescribed by the Comptroller General of the United States. The audit shall be conducted at the place or places where accounts of the Bureau are normally kept. The representatives of the Government Accountability Office shall have access to the personnel and to all books, accounts, documents, papers, records (including electronic records), reports, files, and all other papers, automated data, things, or property belonging to or under the control of or used or employed by the Bureau pertaining to its financial transactions and necessary to facilitate the audit, and such representatives shall be afforded full facilities for verifying transactions with the balances or securities held by depositories, fiscal agents, and custodians. All such books, accounts, documents, records, reports, files, papers, and property of the Bureau shall remain in possession and custody of the Bureau. The Comptroller General may obtain and duplicate any such books, accounts, documents, records, working papers, automated data and files, or other information relevant to such audit without cost to the Comptroller General, and the right of access of the Comptroller General to such information shall be enforceable pursuant to section 716(c) of title 31, United States Code.
(B) REPORT- The Comptroller General shall submit to the Congress a report of each annual audit conducted under this subsection. The report to the Congress shall set forth the scope of the audit and shall include the statement of assets and liabilities and surplus or deficit, the statement of income and expenses, the statement of sources and application of funds, and such comments and information as may be deemed necessary to inform Congress of the financial operations and condition of the Bureau, together with such recommendations with respect thereto as the Comptroller General may deem advisable. A copy of each report shall be furnished to the President and to the Bureau at the time submitted to the Congress.
(C) ASSISTANCE AND COSTS- For the purpose of conducting an audit under this subsection, the Comptroller General may, in the discretion of the Comptroller General, employ by contract, without regard to section 3709 of the Revised Statutes of the United States (41 U.S.C. 5), professional services of firms and organizations of certified public accountants for temporary periods or for special purposes. Upon the request of the Comptroller General, the Director of the Bureau shall transfer to the Government Accountability Office from funds available, the amount requested by the Comptroller General to cover the full costs of any audit and report conducted by the Comptroller General. The Comptroller General shall credit funds transferred to the account established for salaries and expenses of the Government Accountability Office, and such amount shall be available upon receipt and without fiscal year limitation to cover the full costs of the audit and report.
(b) Consumer Financial Protection Fund-
(1) SEPARATE FUND IN FEDERAL RESERVE ESTABLISHED- There is established in the Federal Reserve a separate fund, to be known as the ‘Bureau of Consumer Financial Protection Fund’ (referred to in this section as the ‘Bureau Fund’). The Bureau Fund shall be maintained and established at a Federal reserve bank, in accordance with such requirements as the Board of Governors may impose.
(2) FUND RECEIPTS- All amounts transferred to the Bureau under subsection (a) shall be deposited into the Bureau Fund.
(3) INVESTMENT AUTHORITY-
(A) AMOUNTS IN BUREAU FUND MAY BE INVESTED- The Bureau may request the Board of Governors to direct the investment of the portion of the Bureau Fund that is not, in the judgment of the Bureau, required to meet the current needs of the Bureau.
(B) ELIGIBLE INVESTMENTS- Investments authorized by this paragraph shall be made 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 Bureau Fund, as determined by the Bureau.
(C) INTEREST AND PROCEEDS CREDITED- The interest on, and the proceeds from the sale or redemption of, any obligations held in the Bureau Fund shall be credited to the Bureau Fund.
(c) Use of Funds-
(1) IN GENERAL- Funds obtained by, transferred to, or credited to the Bureau Fund shall be immediately available to the Bureau and under the control of the Director, and shall remain available until expended, to pay the expenses of the Bureau in carrying out its duties and responsibilities. The compensation of the Director and other employees of the Bureau and all other expenses thereof may be paid from, obtained by, transferred to, or credited to the Bureau Fund under this section.
(2) FUNDS THAT ARE NOT GOVERNMENT FUNDS- Funds obtained by or transferred to the Bureau Fund shall not be construed to be Government funds or appropriated monies.
(3) AMOUNTS NOT SUBJECT TO APPORTIONMENT- Notwithstanding any other provision of law, amounts in the Bureau Fund and in the Civil Penalty Fund established under subsection (d) shall not be subject to apportionment for purposes of chapter 15 of title 31, United States Code, or under any other authority.
(d) Penalties and Fines-
(1) ESTABLISHMENT OF VICTIMS RELIEF FUND- There is established in the Federal Reserve a separate fund, to be known as the ‘Consumer Financial Civil Penalty Fund’ (referred to in this section as the ‘Civil Penalty Fund’). The Civil Penalty Fund shall be maintained and established at a Federal reserve bank, in accordance with such requirements as the Board of Governors may impose. If the Bureau obtains a civil penalty against any person in any judicial or administrative action under Federal consumer financial laws, the Bureau shall deposit into the Civil Penalty Fund, the amount of the penalty collected.
(2) PAYMENT TO VICTIMS- Amounts in the Civil Penalty Fund shall be available to the Bureau, without fiscal year limitation, for payments to the victims of activities for which civil penalties have been imposed under the Federal consumer financial laws. To the extent that such victims cannot be located or such payments are otherwise not practicable, the Bureau may use such funds for the purpose of consumer education and financial literacy programs.
(e) Authorization of Appropriations; Annual Report-
(1) DETERMINATION REGARDING NEED FOR APPROPRIATED FUNDS-
(A) IN GENERAL- The Director is authorized to determine that sums available to the Bureau under this section will not be sufficient to carry out the authorities of the Bureau under Federal consumer financial law for the upcoming year.
(B) REPORT REQUIRED- When making a determination under subparagraph (A), the Director shall prepare a report regarding the funding of the Bureau, including the assets and liabilities of the Bureau, and the extent to which the funding needs of the Bureau are anticipated to exceed the level of the amount set forth in subsection (a)(2). The Director shall submit the report to the President and to the Committee on Appropriations of the Senate and the Committee on Appropriations of the House of Representatives.
(2) AUTHORIZATION OF APPROPRIATIONS- If the Director makes the determination and submits the report pursuant to paragraph (1), there are hereby authorized to be appropriated to the Bureau, for the purposes of carrying out the authorities granted in Federal consumer financial law, $200,000,000 for each of fiscal years 2010, 2011, 2012, 2013, and 2014.
(3) APPORTIONMENT- Notwithstanding any other provision of law, the amounts in paragraph (2) shall be subject to apportionment under section 1517 of title 31, United States Code, and restrictions that generally apply to the use of appropriated funds in title 31, United States Code, and other laws.
(4) ANNUAL REPORT- The Director shall prepare and submit a report, on an annual basis, to the Committee on Appropriations of the Senate and the Committee on Appropriations of the House of Representatives regarding the financial operating plans and forecasts of the Director, the financial condition and results of operations of the Bureau, and the sources and application of funds of the Bureau, including any funds appropriated in accordance with this subsection.
SEC. 1018. EFFECTIVE DATE.
This subtitle shall become effective on the date of enactment of this Act.
Subtitle B--General Powers of the Bureau
SEC. 1021. PURPOSE, OBJECTIVES, AND FUNCTIONS.
(a) Purpose- The Bureau shall seek to implement and, where applicable, enforce Federal consumer financial law consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive.
(b) Objectives- The Bureau is authorized to exercise its authorities under Federal consumer financial law for the purposes of ensuring that, with respect to consumer financial products and services--
(1) consumers are provided with timely and understandable information to make responsible decisions about financial transactions;
(2) consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination;
(3) outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens;
(4) Federal consumer financial law is enforced consistently, without regard to the status of a person as a depository institution, in order to promote fair competition; and
(5) markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.
(c) Functions- The primary functions of the Bureau are--
(1) conducting financial education programs;
(2) collecting, investigating, and responding to consumer complaints;
(3) collecting, researching, monitoring, and publishing information relevant to the functioning of markets for consumer financial products and services to identify risks to consumers and the proper functioning of such markets;
(4) subject to sections 1024 through 1026, supervising covered persons for compliance with Federal consumer financial law, and taking appropriate enforcement action to address violations of Federal consumer financial law;
(5) issuing rules, orders, and guidance implementing Federal consumer financial law; and
(6) performing such support activities as may be necessary or useful to facilitate the other functions of the Bureau.
SEC. 1022. RULEMAKING AUTHORITY.
(a) In General- The Bureau is authorized to exercise its authorities under Federal consumer financial law to administer, enforce, and otherwise implement the provisions of Federal consumer financial law.
(b) Rulemaking, Orders, and Guidance-
(1) GENERAL AUTHORITY- The Director may prescribe rules and issue orders and guidance, as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof.
(2) STANDARDS FOR RULEMAKING- In prescribing a rule under the Federal consumer financial laws--
(A) the Bureau shall consider--
(i) the potential benefits and costs to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services resulting from such rule; and
(ii) the impact of proposed rules on covered persons, as described in section 1026, and the impact on consumers in rural areas;
(B) the Bureau shall consult with the appropriate prudential regulators or other Federal agencies prior to proposing a rule and during the comment process regarding consistency with prudential, market, or systemic objectives administered by such agencies; and
(C) if, during the consultation process described in subparagraph (B), a prudential regulator provides the Bureau with a written objection to the proposed rule of the Bureau or a portion thereof, the Bureau shall include in the adopting release a description of the objection and the basis for the Bureau decision, if any, regarding such objection, except that nothing in this clause shall be construed as altering or limiting the procedures under section 1023 that may apply to any rule prescribed by the Bureau.
(3) EXEMPTIONS-
(A) IN GENERAL- The Bureau, by rule, may conditionally or unconditionally exempt any class of covered persons, service providers, or consumer financial products or services, from any provision of this title, or from any rule issued under this title, as the Bureau determines necessary or appropriate to carry out the purposes and objectives of this title, taking into consideration the factors in subparagraph (B).
(B) FACTORS- In issuing an exemption, as permitted under subparagraph (A), the Bureau shall, as appropriate, take into consideration--
(i) the total assets of the class of covered persons;
(ii) the volume of transactions involving consumer financial products or services in which the class of covered persons engages; and
(iii) existing provisions of law which are applicable to the consumer financial product or service and the extent to which such provisions provide consumers with adequate protections.
(4) EXCLUSIVE RULEMAKING AUTHORITY-
(A) IN GENERAL- Notwithstanding any other provisions of Federal law and except as provided in section 1061(b)(5), to the extent that a provision of Federal consumer financial law authorizes the Bureau and another Federal agency to issue regulations under that provision of law for purposes of assuring compliance with Federal consumer financial law and any regulations thereunder, the Bureau shall have the exclusive authority to prescribe rules subject to those provisions of law.
(B) DEFERENCE- Notwithstanding any power granted to any Federal agency or to the Council under this title, and subject to section 1061(b)(5)(E), the deference that a court affords to the Bureau with respect to a determination by the Bureau regarding the meaning or interpretation of any provision of a Federal consumer financial law shall be applied as if the Bureau were the only agency authorized to apply, enforce, interpret, or administer the provisions of such Federal consumer financial law.
(c) Monitoring-
(1) IN GENERAL- In order to support its rulemaking and other functions, the Bureau shall monitor for risks to consumers in the offering or provision of consumer financial products or services, including developments in markets for such products or services.
(2) CONSIDERATIONS- In allocating its resources to perform the monitoring required by this section, the Bureau may consider, among other factors--
(A) likely risks and costs to consumers associated with buying or using a type of consumer financial product or service;
(B) understanding by consumers of the risks of a type of consumer financial product or service;
(C) the legal protections applicable to the offering or provision of a consumer financial product or service, including the extent to which the law is likely to adequately protect consumers;
(D) rates of growth in the offering or provision of a consumer financial product or service;
(E) the extent, if any, to which the risks of a consumer financial product or service may disproportionately affect traditionally underserved consumers; or
(F) the types, number, and other pertinent characteristics of covered persons that offer or provide the consumer financial product or service.
(3) SIGNIFICANT FINDINGS-
(A) IN GENERAL- The Bureau shall publish not fewer than 1 report of significant findings of its monitoring required by this subsection in each calendar year, beginning with the first calendar year that begins at least 1 year after the designated transfer date.
(B) CONFIDENTIAL INFORMATION- The Bureau may make public such information obtained by the Bureau under this section as is in the public interest, through aggregated reports or other appropriate formats designed to protect confidential information in accordance with paragraphs (4), (6), (8), and (9).
(4) COLLECTION OF INFORMATION-
(A) IN GENERAL- In conducting any monitoring or assessment required by this section, the Bureau shall have the authority to gather information from time to time regarding the organization, business conduct, markets, and activities of covered persons and service providers.
(B) METHODOLOGY- In order to gather information described in subparagraph (A), the Bureau may--
(i) gather and compile information from a variety of sources, including examination reports concerning covered persons or service providers, consumer complaints, voluntary surveys and voluntary interviews of consumers, surveys and interviews with covered persons and service providers, and review of available databases; and
(ii) require covered persons and service providers participating in consumer financial services markets to file with the Bureau, under oath or otherwise, in such form and within such reasonable period of time as the Bureau may prescribe by rule or order, annual or special reports, or answers in writing to specific questions, furnishing information described in paragraph (4), as necessary for the Bureau to fulfill the monitoring, assessment, and reporting responsibilities imposed by Congress.
(C) LIMITATION- The Bureau may not use its authorities under this paragraph to obtain records from covered persons and service providers participating in consumer financial services markets for purposes of gathering or analyzing the personally identifiable financial information of consumers.
(5) LIMITED INFORMATION GATHERING- In order to assess whether a nondepository is a covered person, as defined in section 1002, the Bureau may require such nondepository to file with the Bureau, under oath or otherwise, in such form and within such reasonable period of time as the Bureau may prescribe by rule or order, annual or special reports, or answers in writing to specific questions.
(6) CONFIDENTIALITY RULES-
(A) RULEMAKING- The Bureau shall prescribe rules regarding the confidential treatment of information obtained from persons in connection with the exercise of its authorities under Federal consumer financial law.
(B) ACCESS BY THE BUREAU TO REPORTS OF OTHER REGULATORS-
(i) EXAMINATION AND FINANCIAL CONDITION REPORTS- Upon providing reasonable assurances of confidentiality, the Bureau shall have access to any report of examination or financial condition made by a prudential regulator or other Federal agency having jurisdiction over a covered person or service provider, and to all revisions made to any such report.
(ii) PROVISION OF OTHER REPORTS TO THE BUREAU- In addition to the reports described in clause (i), a prudential regulator or other Federal agency having jurisdiction over a covered person or service provider may, in its discretion, furnish to the Bureau any other report or other confidential supervisory information concerning any insured depository institution, credit union, or other entity examined by such agency under authority of any provision of Federal law.
(C) ACCESS BY OTHER REGULATORS TO REPORTS OF THE BUREAU-
(i) EXAMINATION REPORTS- Upon providing reasonable assurances of confidentiality, a prudential regulator, a State regulator, or any other Federal agency having jurisdiction over a covered person or service provider shall have access to any report of examination made by the Bureau with respect to such person, and to all revisions made to any such report.
(ii) PROVISION OF OTHER REPORTS TO OTHER REGULATORS- In addition to the reports described in clause (i), the Bureau may, in its discretion, furnish to a prudential regulator or other agency having jurisdiction over a covered person or service provider any other report or other confidential supervisory information concerning such person examined by the Bureau under the authority of any other provision of Federal law.
(7) REGISTRATION-
(A) IN GENERAL- The Bureau may prescribe rules regarding registration requirements applicable to a covered person, other than an insured depository institution, insured credit union, or related person.
(B) REGISTRATION INFORMATION- Subject to rules prescribed by the Bureau, the Bureau may publicly disclose registration information to facilitate the ability of consumers to identify covered persons that are registered with the Bureau.
(C) CONSULTATION WITH STATE AGENCIES- In developing and implementing registration requirements under this paragraph, the Bureau shall consult with State agencies regarding requirements or systems (including coordinated or combined systems for registration), where appropriate.
(8) PRIVACY CONSIDERATIONS- In collecting information from any person, publicly releasing information held by the Bureau, or requiring covered persons to publicly report information, the Bureau shall take steps to ensure that proprietary, personal, or confidential consumer information that is protected from public disclosure under section 552(b) or 552a of title 5, United States Code, or any other provision of law, is not made public under this title.
(9) CONSUMER PRIVACY-
(A) IN GENERAL- The Bureau may not obtain from a covered person or service provider any personally identifiable financial information about a consumer from the financial records of the covered person or service provider, except--
(i) if the financial records are reasonably described in a request by the Bureau and the consumer provides written permission for the disclosure of such information by the covered person or service provider to the Bureau; or
(ii) as may be specifically permitted or required under other applicable provisions of law and in accordance with the Right to Financial Privacy Act of 1978 (12 U.S.C. 3401 et seq.).
(B) TREATMENT OF COVERED PERSON OR SERVICE PROVIDER- With respect to the application of any provision of the Right to Financial Privacy Act of 1978, to a disclosure by a covered person or service provider subject to this subsection, the covered person or service provider shall be treated as if it were a ‘financial institution’, as defined in section 1101 of that Act (12 U.S.C. 3401).
(d) Assessment of Significant Rules-
(1) IN GENERAL- The Bureau shall conduct an assessment of each significant rule or order adopted by the Bureau under Federal consumer financial law. The assessment shall address, among other relevant factors, the effectiveness of the rule or order in meeting the purposes and objectives of this title and the specific goals stated by the Bureau. The assessment shall reflect available evidence and any data that the Bureau reasonably may collect.
(2) REPORTS- The Bureau shall publish a report of its assessment under this subsection not later than 5 years after the effective date of the subject rule or order.
(3) PUBLIC COMMENT REQUIRED- Before publishing a report of its assessment, the Bureau shall invite public comment on recommendations for modifying, expanding, or eliminating the newly adopted significant rule or order.
SEC. 1023. REVIEW OF BUREAU REGULATIONS.
(a) Review of Bureau Regulations- On the petition of a member agency of the Council, the Council may set aside a final regulation prescribed by the Bureau, or any provision thereof, if the Council decides, in accordance with subsection (c), that the regulation or provision would put the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk.
(b) Petition-
(1) PROCEDURE- An agency represented by a member of the Council may petition the Council, in writing, and in accordance with rules prescribed pursuant to subsection (f), to stay the effectiveness of, or set aside, a regulation if the member agency filing the petition--
(A) has in good faith attempted to work with the Bureau to resolve concerns regarding the effect of the rule on the safety and soundness of the United States banking system or the stability of the financial system of the United States; and
(B) files the petition with the Council not later than 10 days after the date on which the regulation has been published in the Federal Register.
(2) PUBLICATION- Any petition filed with the Council under this section shall be published in the Federal Register and transmitted contemporaneously with filing to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives.
(c) Stays and Set Asides-
(1) STAY-
(A) IN GENERAL- Upon the request of any member agency, the Chairperson of the Council may stay the effectiveness of a regulation for the purpose of allowing appropriate consideration of the petition by the Council.
(B) EXPIRATION- A stay issued under this paragraph shall expire on the earlier of--
(i) 90 days after the date of filing of the petition under subsection (b); or
(ii) the date on which the Council makes a decision under paragraph (3).
(2) NO ADVERSE INFERENCE- After the expiration of any stay imposed under this section, no inference shall be drawn regarding the validity or enforceability of a regulation which was the subject of the petition.
(3) VOTE-
(A) IN GENERAL- The decision to issue a stay of, or set aside, any regulation under this section shall be made only with the affirmative vote in accordance with subparagraph (B) of 2/3 of the members of the Council then serving.
(B) AUTHORIZATION TO VOTE- A member of the Council may vote to stay the effectiveness of, or set aside, a final regulation prescribed by the Bureau only if the agency or department represented by that member has--
(i) considered any relevant information provided by the agency submitting the petition and by the Bureau; and
(ii) made an official determination, at a public meeting where applicable, that the regulation which is the subject of the petition would put the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk.
(4) DECISIONS TO SET ASIDE-
(A) EFFECT OF DECISION- A decision by the Council to set aside a regulation prescribed by the Bureau, or provision thereof, shall render such regulation, or provision thereof, unenforceable.
(B) TIMELY ACTION REQUIRED- The Council may not issue a decision to set aside a regulation, or provision thereof, which is the subject of a petition under this section after the expiration of the later of--
(i) 45 days following the date of filing of the petition, unless a stay is issued under paragraph (1); or
(ii) the expiration of a stay issued by the Council under this section.
(C) SEPARATE AUTHORITY- The issuance of a stay under this section does not affect the authority of the Council to set aside a regulation.
(5) DISMISSAL DUE TO INACTION- A petition under this section shall be deemed dismissed if the Council has not issued a decision to set aside a regulation, or provision thereof, within the period for timely action under paragraph (4)(B).
(6) PUBLICATION OF DECISION- Any decision under this subsection to issue a stay of, or set aside, a regulation or provision thereof shall be published by the Council in the Federal Register as soon as practicable after the decision is made, with an explanation of the reasons for the decision.
(7) RULEMAKING PROCEDURES INAPPLICABLE- The notice and comment procedures under section 553 of title 5, United States Code, shall not apply to any decision under this section of the Council to issue a stay of, or set aside, a regulation.
(8) JUDICIAL REVIEW OF DECISIONS BY THE COUNCIL- A decision by the Council to set aside a regulation prescribed by the Bureau, or provision thereof, shall be subject to review under chapter 7 of title 5, United States Code.
(d) Application of Other Law- Nothing in this section shall be construed as altering, limiting, or restricting the application of any other provision of law, except as otherwise specifically provided in this section, including chapter 5 and chapter 7 of title 5, United States Code, to a regulation which is the subject of a petition filed under this section.
(e) Savings Clause- Nothing in this section shall be construed as limiting or restricting the Bureau from engaging in a rulemaking in accordance with applicable law.
(f) Implementing Rules- The Council shall prescribe procedural rules to implement this section.
SEC. 1024. SUPERVISION OF NONDEPOSITORY COVERED PERSONS.
(a) Scope of Coverage-
(1) APPLICABILITY- Notwithstanding any other provision of this title, and except as provided in paragraph (3), this section shall apply to any covered person who--
(A) offers or provides origination, brokerage, or servicing of loans secured by real estate for use by consumers primarily for personal, family, or household purposes, or loan modification or foreclosure relief services in connection with such loans;
(B) is a larger participant of a market for other consumer financial products or services, as defined by rule in accordance with paragraph (2);
(C) the Bureau has reasonable cause to determine, by order, after notice to the covered person and a reasonable opportunity for such covered person to respond, based on complaints collected through the system under section 1013(b)(3) or information from other sources, that such covered person is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services;
(D) offers or provides to a consumer any private education loan, as defined in section 140 of the Truth in Lending Act (15 U.S.C. 1650), notwithstanding section 1027(a)(2)(A) and subject to section 1027(a)(2)(C); or
(E) offers or provides to a consumer a payday loan.
(2) RULEMAKING TO DEFINE COVERED PERSONS SUBJECT TO THIS SECTION- The Bureau shall consult with the Federal Trade Commission prior to issuing a rule, in accordance with paragraph (1)(B), to define covered persons subject to this section. The Bureau shall issue its initial rule not later than 1 year after the designated transfer date.
(3) RULES OF CONSTRUCTION-
(A) CERTAIN PERSONS EXCLUDED- This section shall not apply to persons described in section 1025(a) or 1026(a).
(B) ACTIVITY LEVELS- For purposes of computing activity levels under paragraph (1) or rules issued thereunder, activities of affiliated companies (other than insured depository institutions or insured credit unions) shall be aggregated.
(b) Supervision-
(1) IN GENERAL- The Bureau shall require reports and conduct examinations on a periodic basis of persons described in subsection (a)(1) for purposes of--
(A) assessing compliance with the requirements of Federal consumer financial law;
(B) obtaining information about the activities and compliance systems or procedures of such person; and
(C) detecting and assessing risks to consumers and to markets for consumer financial products and services.
(2) RISK-BASED SUPERVISION PROGRAM- The Bureau shall exercise its authority under paragraph (1) in a manner designed to ensure that such exercise, with respect to persons described in subsection (a)(1), is based on the assessment by the Bureau of the risks posed to consumers in the relevant product markets and geographic markets, and taking into consideration, as applicable--
(A) the asset size of the covered person;
(B) the volume of transactions involving consumer financial products or services in which the covered person engages;
(C) the risks to consumers created by the provision of such consumer financial products or services;
(D) the extent to which such institutions are subject to oversight by State authorities for consumer protection; and
(E) any other factors that the Bureau determines to be relevant to a class of covered persons.
(3) COORDINATION- To minimize regulatory burden, the Bureau shall coordinate its supervisory activities with the supervisory activities conducted by prudential regulators and the State bank regulatory authorities, including establishing their respective schedules for examining persons described in subsection (a)(1) and requirements regarding reports to be submitted by such persons.
(4) USE OF EXISTING REPORTS- The Bureau shall, to the fullest extent possible, use--
(A) reports pertaining to persons described in subsection (a)(1) that have been provided or required to have been provided to a Federal or State agency; and
(B) information that has been reported publicly.
(5) PRESERVATION OF AUTHORITY- Nothing in this title may be construed as limiting the authority of the Director to require reports from persons described in subsection (a)(1), as permitted under paragraph (1), regarding information owned or under the control of such person, regardless of whether such information is maintained, stored, or processed by another person.
(6) REPORTS OF TAX LAW NONCOMPLIANCE- The Bureau shall provide the Commissioner of Internal Revenue with any report of examination or related information identifying possible tax law noncompliance.
(7) REGISTRATION, RECORDKEEPING AND OTHER REQUIREMENTS FOR CERTAIN PERSONS-
(A) IN GENERAL- The Bureau shall prescribe rules to facilitate supervision of persons described in subsection (a)(1) and assessment and detection of risks to consumers.
(B) RECORDKEEPING- The Bureau may require a person described in subsection (a)(1), to generate, provide, or retain records for the purposes of facilitating supervision of such persons and assessing and detecting risks to consumers.
(C) REQUIREMENTS CONCERNING OBLIGATIONS- The Bureau may prescribe rules regarding a person described in subsection (a)(1), to ensure that such persons are legitimate entities and are able to perform their obligations to consumers. Such requirements may include background checks for principals, officers, directors, or key personnel and bonding or other appropriate financial requirements.
(D) CONSULTATION WITH STATE AGENCIES- In developing and implementing requirements under this paragraph, the Bureau shall consult with State agencies regarding requirements or systems (including coordinated or combined systems for registration), where appropriate.
(c) Enforcement Authority-
(1) THE BUREAU TO HAVE ENFORCEMENT AUTHORITY- Except as provided in paragraph (3) and section 1061, with respect to any person described in subsection (a)(1), to the extent that Federal law authorizes the Bureau and another Federal agency to enforce Federal consumer financial law, the Bureau shall have exclusive authority to enforce that Federal consumer financial law.
(2) REFERRAL- Any Federal agency authorized to enforce a Federal consumer financial law described in paragraph (1) may recommend in writing to the Bureau that the Bureau initiate an enforcement proceeding, as the Bureau is authorized by that Federal law or by this title.
(3) COORDINATION WITH THE FEDERAL TRADE COMMISSION-
(A) IN GENERAL- The Bureau and the Federal Trade Commission shall negotiate an agreement for coordinating with respect to enforcement actions by each agency regarding the offering or provision of consumer financial products or services by any covered person that is described in subsection (a)(1), or service providers thereto. The agreement shall include procedures for notice to the other agency, where feasible, prior to initiating a civil action to enforce any Federal law regarding the offering or provision of consumer financial products or services.
(B) CIVIL ACTIONS- Whenever a civil action has been filed by, or on behalf of, the Bureau or the Federal Trade Commission for any violation of any provision of Federal law described in subparagraph (A), or any regulation prescribed under such provision of law--
(i) the other agency may not, during the pendency of that action, institute a civil action under such provision of law against any defendant named in the complaint in such pending action for any violation alleged in the complaint; and
(ii) the Bureau or the Federal Trade Commission may intervene as a party in any such action brought by the other agency, and, upon intervening--
(I) be heard on all matters arising in such enforcement action; and
(II) file petitions for appeal in such actions.
(C) AGREEMENT TERMS- The terms of any agreement negotiated under subparagraph (A) may modify or supersede the provisions of subparagraph (B).
(D) DEADLINE- The agencies shall reach the agreement required under subparagraph (A) not later than 6 months after the designated transfer date.
(d) Exclusive Rulemaking and Examination Authority- Notwithstanding any other provision of Federal law and except as provided in section 1061, to the extent that Federal law authorizes the Bureau and another Federal agency to issue regulations or guidance, conduct examinations, or require reports from a person described in subsection (a)(1) under such law for purposes of assuring compliance with Federal consumer financial law and any regulations thereunder, the Bureau shall have the exclusive authority to prescribe rules, issue guidance, conduct examinations, require reports, or issue exemptions with regard to a person described in subsection (a)(1), subject to those provisions of law.
(e) Service Providers- A service provider to a person described in subsection (a)(1) shall be subject to the authority of the Bureau under this section, to the same extent as if such service provider were engaged in a service relationship with a bank, and the Bureau were an appropriate Federal banking agency under section 7(c) of the Bank Service Company Act (12 U.S.C. 1867(c)). In conducting any examination or requiring any report from a service provider subject to this subsection, the Bureau shall coordinate with the appropriate prudential regulator, as applicable.
(f) Preservation of Farm Credit Administration Authority- No provision of this title may be construed as modifying, limiting, or otherwise affecting the authority of the Farm Credit Administration.
SEC. 1025. SUPERVISION OF VERY LARGE BANKS, SAVINGS ASSOCIATIONS, AND CREDIT UNIONS.
(a) Scope of Coverage- This section shall apply to any covered person that is--
(1) an insured depository institution with total assets of more than $10,000,000,000 and any affiliate thereof; or
(2) an insured credit union with total assets of more than $10,000,000,000 and any affiliate thereof.
(b) Supervision-
(1) IN GENERAL- The Bureau shall have exclusive authority to require reports and conduct examinations on a periodic basis of persons described in subsection (a) for purposes of--
(A) assessing compliance with the requirements of Federal consumer financial laws;
(B) obtaining information about the activities subject to such laws and the associated compliance systems or procedures of such persons; and
(C) detecting and assessing associated risks to consumers and to markets for consumer financial products and services.
(2) COORDINATION- To minimize regulatory burden, the Bureau shall coordinate its supervisory activities with the supervisory activities conducted by prudential regulators and the State bank regulatory authorities, including consultation regarding their respective schedules for examining such persons described in subsection (a) and requirements regarding reports to be submitted by such persons.
(3) USE OF EXISTING REPORTS- The Bureau shall, to the fullest extent possible, use--
(A) reports pertaining to a person described in subsection (a) that have been provided or required to have been provided to a Federal or State agency; and
(B) information that has been reported publicly.
(4) PRESERVATION OF AUTHORITY- Nothing in this title may be construed as limiting the authority of the Director to require reports from a person described in subsection (a), as permitted under paragraph (1), regarding information owned or under the control of such person, regardless of whether such information is maintained, stored, or processed by another person.
(5) REPORTS OF TAX LAW NONCOMPLIANCE- The Bureau shall provide the Commissioner of Internal Revenue with any report of examination or related information identifying possible tax law noncompliance.
(c) Primary Enforcement Authority-
(1) THE BUREAU TO HAVE PRIMARY ENFORCEMENT AUTHORITY- To the extent that the Bureau and another Federal agency are authorized to enforce a Federal consumer financial law, the Bureau shall have primary authority to enforce that Federal consumer financial law with respect to any person described in subsection (a).
(2) REFERRAL- Any Federal agency, other than the Federal Trade Commission, that is authorized to enforce a Federal consumer financial law may recommend, in writing, to the Bureau that the Bureau initiate an enforcement proceeding with respect to a person described in subsection (a), as the Bureau is authorized to do by that Federal consumer financial law.
(3) BACKUP ENFORCEMENT AUTHORITY OF OTHER FEDERAL AGENCY- If the Bureau does not, before the end of the 120-day period beginning on the date on which the Bureau receives a recommendation under paragraph (2), initiate an enforcement proceeding, the other agency referred to in paragraph (2) may initiate an enforcement proceeding, including performing follow up supervisory and support functions incidental thereto, to assure compliance with such proceeding.
(d) Service Providers- A service provider to a person described in subsection (a) shall be subject to the authority of the Bureau under this section, to the same extent as if the Bureau were an appropriate Federal banking agency under section 7(c) of the Bank Service Company Act 12 U.S.C. 1867(c). In conducting any examination or requiring any report from a service provider subject to this subsection, the Bureau shall coordinate with the appropriate prudential regulator.
(e) Simultaneous and Coordinated Supervisory Action-
(1) EXAMINATIONS- A prudential regulator and the Bureau shall, with respect to each insured depository institution, insured credit union, or other covered person described in subsection (a) that is supervised by the prudential regulator and the Bureau, respectively--
(A) coordinate the scheduling of examinations of the insured depository institution, insured credit union, or other covered person described in subsection (a);
(B) conduct simultaneous examinations of each insured depository institution or insured credit union, unless such institution requests examinations to be conducted separately;
(C) share each draft report of examination with the other agency and permit the receiving agency a reasonable opportunity (which shall not be less than a period of 30 days after the date of receipt) to comment on the draft report before such report is made final; and
(D) prior to issuing a final report of examination or taking supervisory action, take into consideration concerns, if any, raised in the comments made by the other agency.
(2) COORDINATION WITH STATE BANK SUPERVISORS- The Bureau shall pursue arrangements and agreements with State bank supervisors to coordinate examinations, consistent with paragraph (1).
(3) AVOIDANCE OF CONFLICT IN SUPERVISION-
(A) REQUEST- If the proposed supervisory determinations of the Bureau and a prudential regulator (in this section referred to collectively as the ‘agencies’) are conflicting, an insured depository institution, insured credit union, or other covered person described in subsection (a) may request the agencies to coordinate and present a joint statement of coordinated supervisory action.
(B) JOINT STATEMENT- The agencies shall provide a joint statement under subparagraph (A), not later than 30 days after the date of receipt of the request of the insured depository institution, credit union, or covered person described in subsection (a).
(4) APPEALS TO GOVERNING PANEL-
(A) IN GENERAL- If the agencies do not resolve the conflict or issue a joint statement required by subparagraph (B), or if either of the agencies takes or attempts to take any supervisory action relating to the request for the joint statement without the consent of the other agency, an insured depository institution, insured credit union, or other covered person described in subsection (a) may institute an appeal to a governing panel, as provided in this subsection, not later than 30 days after the expiration of the period during which a joint statement is required to be filed under paragraph (3)(B).
(B) COMPOSITION OF GOVERNING PANEL- The governing panel for an appeal under this paragraph shall be composed of--
(i) a representative from the Bureau and a representative of the prudential regulator, both of whom--
(I) have not participated in the material supervisory determinations under appeal; and
(II) do not directly or indirectly report to the person who participated materially in the supervisory determinations under appeal; and
(ii) one individual representative, to be determined on a rotating basis, from among the Board of Governors, the Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency, other than any agency involved in the subject dispute.
(C) CONDUCT OF APPEAL- In an appeal under this paragraph--
(i) the insured depository institution, insured credit union, or other covered person described in subsection (a)--
(I) shall include in its appeal all the facts and legal arguments pertaining to the matter; and
(II) may, through counsel, employees, or representatives, appear before the governing panel in person or by telephone; and
(ii) the governing panel--
(I) may request the insured depository institution, insured credit union, or other covered person described in subsection (a), the Bureau, or the prudential regulator to produce additional information relevant to the appeal; and
(II) by a majority vote of its members, shall provide a final determination, in writing, not later than 30 days after the date of filing of an informationally complete appeal, or such longer period as the panel and the insured depository institution, insured credit union, or other covered person described in subsection (a) may jointly agree.
(D) PUBLIC AVAILABILITY OF DETERMINATIONS- A governing panel shall publish all information contained in a determination by the governing panel, with appropriate redactions of information that would be subject to an exemption from disclosure under section 552 of title 5, United States Code.
(E) PROHIBITION AGAINST RETALIATION- The Bureau and the prudential regulators shall prescribe rules to provide safeguards from retaliation against the insured depository institution, insured credit union, or other covered person described in subsection (a) instituting an appeal under this paragraph, as well as their officers and employees.
(F) LIMITATION- The process provided in this paragraph shall not apply to a determination by a prudential regulator to appoint a conservator or receiver for an insured depository institution or a liquidating agent for an insured credit union, as the case may be, or a decision to take action pursuant to section 38 of the Federal Deposit Insurance Act (12 U.S.C. 1831o) or section 212 of the Federal Credit Union Act (112 U.S.C. 1790a), as applicable.
(G) EFFECT ON OTHER AUTHORITY- Nothing in this section shall modify or limit the authority of the Bureau to interpret, or take enforcement action under, any Federal consumer financial law, or the authority of a prudential regulator to interpret or take enforcement action under any other provision of Federal law for safety and soundness purposes.
SEC. 1026. OTHER BANKS, SAVINGS ASSOCIATIONS, AND CREDIT UNIONS.
(a) Scope of Coverage- This section shall apply to any covered person that is--
(1) an insured depository institution with total assets of $10,000,000,000 or less; or
(2) an insured credit union with total assets of $10,000,000,000 or less.
(b) Reports- The Director may require reports from a person described in subsection (a), as necessary to support the role of the Bureau in implementing Federal consumer financial law, to support its examination activities under subsection (c), and to assess and detect risks to consumers and consumer financial markets.
(1) USE OF EXISTING REPORTS- The Bureau shall, to the fullest extent possible, use--
(A) reports pertaining to a person described in subsection (a) that have been provided or required to have been provided to a Federal or State agency; and
(B) information that has been reported publicly.
(2) PRESERVATION OF AUTHORITY- Nothing in this subsection may be construed as limiting the authority of the Director from requiring from a person described in subsection (a), as permitted under paragraph (1), information owned or under the control of such person, regardless of whether such information is maintained, stored, or processed by another person.
(3) REPORTS OF TAX LAW NONCOMPLIANCE- The Bureau shall provide the Commissioner of Internal Revenue with any report of examination or related information identifying possible tax law noncompliance.
(c) Examinations-
(1) IN GENERAL- The Bureau may, at its discretion, include examiners on a sampling basis of the examinations performed by the prudential regulator to assess compliance with the requirements of Federal consumer financial law of persons described in subsection (a).
(2) AGENCY COORDINATION- The prudential regulator shall--
(A) provide all reports, records, and documentation related to the examination process for any institution included in the sample referred to in paragraph (1) to the Bureau on a timely and continual basis;
(B) involve such Bureau examiner in the entire examination process for such person; and
(C) consider input of the Bureau concerning the scope of an examination, conduct of the examination, the contents of the examination report, the designation of matters requiring attention, and examination ratings.
(d) Enforcement-
(1) IN GENERAL- Except for requiring reports under subsection (b), the prudential regulator is authorized to enforce the requirements of Federal consumer financial laws and, with respect to a covered person described in subsection (a), shall have exclusive authority (relative to the Bureau) to enforce such laws .
(2) COORDINATION WITH PRUDENTIAL REGULATOR-
(A) REFERRAL- When the Bureau has reason to believe that a person described in subsection (a) has engaged in a material violation of a Federal consumer financial law, the Bureau shall notify the prudential regulator in writing and recommend appropriate action to respond.
(B) RESPONSE- Upon receiving a recommendation under subparagraph (A), the prudential regulator shall provide a written response to the Bureau not later than 60 days thereafter.
(e) Service Providers- A service provider to a substantial number of persons described in subsection (a) shall be subject to the authority of the Bureau under section 1025 to the same extent as if the Bureau were an appropriate Federal bank agency under section 7(c) of the Bank Service Company Act (12 U.S.C. 1867(c)). When conducting any examination or requiring any report from a service provider subject to this subsection, the Bureau shall coordinate with the appropriate prudential regulator.
SEC. 1027. LIMITATIONS ON AUTHORITIES OF THE BUREAU; PRESERVATION OF AUTHORITIES.
(a) Exclusion for Merchants, Retailers, and Other Sellers of Nonfinancial Goods or Services-
(1) SALE OR BROKERAGE OF NONFINANCIAL GOOD OR SERVICE- The Bureau may not exercise any rulemaking, supervisory, enforcement or other authority under this title with respect to a person who is a merchant, retailer, or seller of any nonfinancial good or service and is engaged in the sale or brokerage of such nonfinancial good or service, except to the extent that such person is engaged in offering or providing any consumer financial product or service, or is otherwise subject to any enumerated consumer law or any law for which authorities are transferred under subtitle F or H.
(2) OFFERING OR PROVISION OF CERTAIN CONSUMER FINANCIAL PRODUCTS OR SERVICES IN CONNECTION WITH THE SALE OR BROKERAGE OF NONFINANCIAL GOOD OR SERVICE-
(A) IN GENERAL- Except as provided in subparagraph (B), and subject to subparagraph (C), the Bureau may not exercise any rulemaking, supervisory, enforcement, or other authority under this title with respect to a merchant, retailer, or seller of nonfinancial goods or services, but only to the extent that such person--
(i) extends credit directly to a consumer, in a case in which the good or service being provided is not itself a consumer financial product or service (other than credit described in this subparagraph), exclusively for the purpose of enabling that consumer to purchase such nonfinancial good or service directly from the merchant, retailer, or seller;
(ii) directly, or through an agreement with another person, collects debt arising from credit extended as described in clause (i); or
(iii) sells or conveys debt described in clause (i) that is delinquent or otherwise in default.
(B) APPLICABILITY- Subparagraph (A) does not apply to any credit transaction or collection of debt, other than as described in subparagraph (C)(i), arising from a transaction described in subparagraph (A)--
(i) in which the merchant, retailer, or seller of nonfinancial goods or services assigns, sells or otherwise conveys to another person such debt owed by the consumer (except for a sale of debt that is delinquent or otherwise in default, as described in subparagraph (A)(iii));
(ii) in which the credit extended significantly exceeds the market value of the nonfinancial good or service provided, or the Bureau otherwise finds that the sale of the nonfinancial good or service is done as a subterfuge, so as to evade or circumvent the provisions of this title; or
(iii) in which the merchant, retailer, or seller of nonfinancial goods or services regularly extends credit and the credit is subject to a finance charge.
(C) LIMITATIONS-
(i) IN GENERAL- Notwithstanding subparagraph (B), subparagraph (A) shall apply with respect to a merchant, retailer, or seller of nonfinancial goods or services that is not engaged significantly in offering or providing consumer financial products or services.
(ii) EXCEPTION- Subparagraph (A) and clause (i) of this subparagraph do not apply to any merchant, retailer, or seller of nonfinancial goods or services--
(I) if such merchant, retailer, or seller of nonfinancial goods or services is engaged in a transaction described in subparagraph (B)(i) or (B)(ii); or
(II) to the extent that such merchant, retailer, or seller is subject to any enumerated consumer law or any law for which authorities are transferred under subtitle F or H, but the Bureau may exercise such authority only with respect to that law.
(D) RULES-
(i) AUTHORITY OF OTHER AGENCIES- No provision of this title shall be construed as modifying, limiting, or superseding the supervisory or enforcement authority of the Federal Trade Commission or any other agency (other than the Bureau) with respect to credit extended, or the collection of debt arising from such extension, directly by a merchant or retailer to a consumer exclusively for the purpose of enabling that consumer to purchase nonfinancial goods or services directly from the merchant or retailer.
(ii) SMALL BUSINESSES- A merchant, retailer, or seller of nonfinancial goods or services that would otherwise be subject to the authority of the Bureau solely by virtue of the application of subparagraph (B)(iii) shall be deemed not to be engaged significantly in offering or providing consumer financial products or services under subparagraph (C)(i), if such person--
(I) only extends credit for the sale of nonfinancial goods or services, as described in subparagraph (A)(i);
(II) retains such credit on its own accounts (except to sell or convey such debt that is delinquent or otherwise in default); and
(III) meets the relevant industry size threshold to be a small business concern, based on annual receipts, pursuant to section 3 of the Small Business Act (15 U.S.C. 632) and the implementing rules thereunder.
(iii) INITIAL YEAR- A merchant, retailer, or seller of nonfinancial goods or services shall be deemed to meet the relevant industry size threshold described in clause (ii)(III) during the first year of operations of that business concern if, during that year, the receipts of that business concern reasonably are expected to meet that size threshold.
(iv) OTHER STANDARDS FOR SMALL BUSINESS- With respect to a merchant, retailer, or seller of nonfinancial goods or services that is a classified on a basis other than annual receipts for the purposes of section 3 of the Small Business Act (15 U.S.C. 632) and the implementing rules thereunder, such merchant, retailer, or seller shall be deemed to meet the relevant industry size threshold described in clause (ii)(III) if such merchant, retailer, or seller meets the relevant industry size threshold to be a small business concern based on the number of employees, or other such applicable measure, established under that Act.
(E) EXCEPTION FROM STATE ENFORCEMENT- To the extent that the Bureau may not exercise authority under this subsection with respect to a merchant, retailer, or seller of nonfinancial goods or services, no action by a State attorney general or State regulator with respect to a claim made under this title may be brought under subsection 1042(a), with respect to an activity described in any of clauses (i) through (iii) of subparagraph (A) by such merchant, retailer, or seller of nonfinancial goods or services.
(b) Exclusion for Real Estate Brokerage Activities-
(1) REAL ESTATE BROKERAGE ACTIVITIES EXCLUDED- Without limiting subsection (a), and except as permitted in paragraph (2), the Bureau may not exercise any rulemaking, supervisory, enforcement, or other authority under this title with respect to a person that is licensed or registered as a real estate broker or real estate agent, in accordance with State law, to the extent that such person--
(A) acts as a real estate agent or broker for a buyer, seller, lessor, or lessee of real property;
(B) brings together parties interested in the sale, purchase, lease, rental, or exchange of real property;
(C) negotiates, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property (other than in connection with the provision of financing with respect to any such transaction); or
(D) offers to engage in any activity, or act in any capacity, described in subparagraph (A), (B), or (C).
(2) DESCRIPTION OF ACTIVITIES- The Bureau may exercise rulemaking, supervisory, enforcement, or other authority under this title with respect to a person described in paragraph (1) when such person is--
(A) engaged in an activity of offering or providing any consumer financial product or service, except that the Bureau may exercise such authority only with respect to that activity; or
(B) otherwise subject to any enumerated consumer law or any law for which authorities are transferred under subtitle F or H, but the Bureau may exercise such authority only with respect to that law.
(c) Exclusion for Manufactured Home Retailers and Modular Home Retailers-
(1) IN GENERAL- The Director may not exercise any rulemaking, supervisory, enforcement, or other authority over a person to the extent that--
(A) such person is not described in paragraph (2); and
(B) such person--
(i) acts as an agent or broker for a buyer or seller of a manufactured home or a modular home;
(ii) facilitates the purchase by a consumer of a manufactured home or modular home, by negotiating the purchase price or terms of the sales contract (other than providing financing with respect to such transaction); or
(iii) offers to engage in any activity described in clause (i) or (ii).
(2) DESCRIPTION OF ACTIVITIES- A person is described in this paragraph to the extent that such person is engaged in the offering or provision of any consumer financial product or service or is otherwise subject to any enumerated consumer law or any law for which authorities are transferred under subtitle F or H.
(3) DEFINITIONS- For purposes of this subsection, the following definitions shall apply:
(A) MANUFACTURED HOME- The term ‘manufactured home’ has the same meaning as in section 603 of the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C. 5402).
(B) MODULAR HOME- The term ‘modular home’ means a house built in a factory in 2 or more modules that meet the State or local building codes where the house will be located, and where such modules are transported to the building site, installed on foundations, and completed.
(d) Exclusion for Accountants and Tax Preparers-
(1) IN GENERAL- Except as permitted in paragraph (2), the Bureau may not exercise any rulemaking, supervisory, enforcement, or other authority over--
(A) any person that is a certified public accountant, permitted to practice as a certified public accounting firm, or certified or licensed for such purpose by a State, or any individual who is employed by or holds an ownership interest with respect to a person described in this subparagraph, when such person is performing or offering to perform--
(i) customary and usual accounting activities, including the provision of accounting, tax, advisory, or other services that are subject to the regulatory authority of a State board of accountancy or a Federal authority; or
(ii) other services that are incidental to such customary and usual accounting activities, to the extent that such incidental services are not offered or provided--
(I) by the person separate and apart from such customary and usual accounting activities; or
(II) to consumers who are not receiving such customary and usual accounting activities; or
(B) any person, other than a person described in subparagraph (A) that performs income tax preparation activities for consumers.
(2) DESCRIPTION OF ACTIVITIES-
(A) IN GENERAL- Paragraph (1) shall not apply to any person described in paragraph (1)(A) or (1)(B) to the extent that such person is engaged in any activity which is not a customary and usual accounting activity described in paragraph (1)(A) or incidental thereto but which is the offering or provision of any consumer financial product or service, except to the extent that a person described in paragraph (1)(A) is engaged in an activity which is a customary and usual accounting activity described in paragraph (1)(A), or incidental thereto.
(B) NOT A CUSTOMARY AND USUAL ACCOUNTING ACTIVITY- For purposes of this subsection, extending or brokering credit is not a customary and usual accounting activity, or incidental thereto.
(C) RULE OF CONSTRUCTION- For purposes of subparagraphs (A) and (B), a person described in paragraph (1)(A) shall not be deemed to be extending credit, if such person is only extending credit directly to a consumer, exclusively for the purpose of enabling such consumer to purchase services described in clause (i) or (ii) of paragraph (1)(A) directly from such person, and such credit is--
(i) not subject to a finance charge; and
(ii) not payable by written agreement in more than 4 installments.
(D) OTHER LIMITATIONS- Paragraph (1) does not apply to any person described in paragraph (1)(A) or (1)(B) that is otherwise subject to any enumerated consumer law or any law for which authorities are transferred under subtitle F or H.
(e) Exclusion for Practice of Law-
(1) IN GENERAL- Except as provided under paragraph (2), the Bureau may not exercise any supervisory or enforcement authority with respect to an activity engaged in by an attorney as part of the practice of law under the laws of a State in which the attorney is licensed to practice law.
(2) RULE OF CONSTRUCTION- Paragraph (1) shall not be construed so as to limit the exercise by the Bureau of any supervisory, enforcement, or other authority regarding the offering or provision of a consumer financial product or service described in any subparagraph of section 1002(5)--
(A) that is not offered or provided as part of, or incidental to, the practice of law, occurring exclusively within the scope of the attorney-client relationship; or
(B) that is otherwise offered or provided by the attorney in question with respect to any consumer who is not receiving legal advice or services from the attorney in connection with such financial product or service.
(3) EXISTING AUTHORITY- Paragraph (1) shall not be construed so as to limit the authority of the Bureau with respect to any attorney, to the extent that such attorney is otherwise subject to any of the enumerated consumer laws or the authorities transferred under subtitle F or H.
(f) Exclusion for Persons Regulated by a State Insurance Regulator-
(1) IN GENERAL- No provision of this title shall be construed as altering, amending, or affecting the authority of any State insurance regulator to adopt rules, initiate enforcement proceedings, or take any other action with respect to a person regulated by a State insurance regulator. Except as provided in paragraph (2), the Bureau shall have no authority to exercise any power to enforce this title with respect to a person regulated by a State insurance regulator.
(2) DESCRIPTION OF ACTIVITIES- Paragraph (1) does not apply to any person described in such paragraph to the extent that such person is engaged in the offering or provision of any consumer financial product or service or is otherwise subject to any enumerated consumer law or any law for which authorities are transferred under subtitle F or H.
(3) STATE INSURANCE AUTHORITY UNDER GRAMM-LEACH-BLILEY- Notwithstanding paragraph (2), the Bureau shall not exercise any authorities that are granted a State insurance authority under section 505(a)(6) of the Gramm-Leach-Bliley Act with respect to a person regulated by a State insurance authority.
(g) Exclusion for Employee Benefit and Compensation Plans and Certain Other Arrangements Under the Internal Revenue Code of 1986-
(1) PRESERVATION OF AUTHORITY OF OTHER AGENCIES- No provision of this title shall be construed as altering, amending, or affecting the authority of the Secretary of the Treasury, the Secretary of Labor, or the Commissioner of Internal Revenue to adopt regulations, initiate enforcement proceedings, or take any actions with respect to any specified plan or arrangement.
(2) ACTIVITIES NOT CONSTITUTING THE OFFERING OR PROVISION OF ANY CONSUMER FINANCIAL PRODUCT OR SERVICE- For purposes of this title, a person shall not be treated as having engaged in the offering or provision of any consumer financial product or service solely because such person is--
(A) a specified plan or arrangement;
(B) engaged in the activity of establishing or maintaining, for the benefit of employees of such person (or for members of an employee organization), any specified plan or arrangement; or
(C) engaged in the activity of establishing or maintaining a qualified tuition program under section 529(b)(1) of the Internal Revenue Code of 1986 offered by a State or other prepaid tuition program offered by a State.
(3) LIMITATION ON BUREAU AUTHORITY-
(A) IN GENERAL- Except as provided under subparagraphs (B) and (C), the Bureau may not exercise any rulemaking or enforcement authority with respect to products or services that relate to any specified plan or arrangement.
(B) BUREAU ACTION PURSUANT TO AGENCY REQUEST-
(i) AGENCY REQUEST- The Secretary and the Secretary of Labor may jointly issue a written request to the Bureau regarding implementation of appropriate consumer protection standards under this title with respect to the provision of services relating to any specified plan or arrangement.
(ii) AGENCY RESPONSE- In response to a request by the Bureau, the Secretary and the Secretary of Labor shall jointly issue a written response, not later than 90 days after receipt of such request, to grant or deny the request of the Bureau regarding implementation of appropriate consumer protection standards under this title with respect to the provision of services relating to any specified plan or arrangement.
(iii) SCOPE OF BUREAU ACTION- Subject to a request or response pursuant to clause (i) or clause (ii) by the agencies made under this subparagraph, the Bureau may exercise rulemaking authority, and may act to enforce a rule prescribed pursuant to such request or response, in accordance with the provisions of this title. A request or response made by the Secretary and the Secretary of Labor under this subparagraph shall describe the basis for, and scope of, appropriate consumer protection standards to be implemented under this title with respect to the provision of services relating to any specified plan or arrangement.
(C) DESCRIPTION OF PRODUCTS OR SERVICES- To the extent that a person engaged in providing products or services relating to any specified plan or arrangement is subject to any enumerated consumer law or any law for which authorities are transferred under subtitle F or H, subparagraph (A) shall not apply with respect to that law.
(4) SPECIFIED PLAN OR ARRANGEMENT- For purposes of this subsection, the term ‘specified plan or arrangement’ means any plan, account, or arrangement described in section 220, 223, 401(a), 403(a), 403(b), 408, 408A, 529, or 530 of the Internal Revenue Code of 1986, or any employee benefit or compensation plan or arrangement, including a plan that is subject to title I of the Employee Retirement Income Security Act of 1974, or any prepaid tuition program offered by a State.
(h) Persons Regulated by a State Securities Commission-
(1) IN GENERAL- No provision of this title shall be construed as altering, amending, or affecting the authority of any securities commission (or any agency or office performing like functions) of any State to adopt rules, initiate enforcement proceedings, or take any other action with respect to a person regulated by any securities commission (or any agency or office performing like functions) of any State. Except as permitted in paragraph (2) and subsection (f), the Bureau shall have no authority to exercise any power to enforce this title with respect to a person regulated by any securities commission (or any agency or office performing like functions) of any State, but only to the extent that the person acts in such regulated capacity.
(2) DESCRIPTION OF ACTIVITIES- Paragraph (1) shall not apply to any person to the extent such person is engaged in the offering or provision of any consumer financial product or service, or is otherwise subject to any enumerated consumer law or any law for which authorities are transferred under subtitle F or H.
(i) Exclusion for Persons Regulated by the Commission-
(1) IN GENERAL- No provision of this title may be construed as altering, amending, or affecting the authority of the Commission to adopt rules, initiate enforcement proceedings, or take any other action with respect to a person regulated by the Commission. The Bureau shall have no authority to exercise any power to enforce this title with respect to a person regulated by the Commission.
(2) CONSULTATION AND COORDINATION- Notwithstanding paragraph (1), the Commission shall consult and coordinate, where feasible, with the Bureau with respect to any rule (including any advance notice of proposed rulemaking) regarding an investment product or service that is the same type of product as, or that competes directly with, a consumer financial product or service that is subject to the jurisdiction of the Bureau under this title or under any other law. In carrying out this paragraph, the agencies shall negotiate an agreement to establish procedures for such coordination, including procedures for providing advance notice to the Bureau when the Commission is initiating a rulemaking.
(j) Exclusion for Persons Regulated by the Commodity Futures Trading Commission-
(1) IN GENERAL- No provision of this title shall be construed as altering, amending, or affecting the authority of the Commodity Futures Trading Commission to adopt rules, initiate enforcement proceedings, or take any other action with respect to a person regulated by the Commodity Futures Trading Commission. The Bureau shall have no authority to exercise any power to enforce this title with respect to a person regulated by the Commodity Futures Trading Commission.
(2) CONSULTATION AND COORDINATION- Notwithstanding paragraph (1), the Commodity Futures Trading Commission shall consult and coordinate with the Bureau with respect to any rule (including any advance notice of proposed rulemaking) regarding a product or service that is the same type of product as, or that competes directly with, a consumer financial product or service that is subject to the jurisdiction of the Bureau under this title or under any other law.
(k) Exclusion for Persons Regulated by the Farm Credit Administration-
(1) IN GENERAL- No provision of this title shall be construed as altering, amending, or affecting the authority of the Farm Credit Administration to adopt rules, initiate enforcement proceedings, or take any other action with respect to a person regulated by the Farm Credit Administration. The Bureau shall have no authority to exercise any power to enforce this title with respect to a person regulated by the Farm Credit Administration.
(2) DEFINITION- For purposes of this subsection, the term ‘person regulated by the Farm Credit Administration’ means any Farm Credit System institution that is chartered and subject to the provisions of the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.).
(l) Exclusion for Activities Relating to Charitable Contributions-
(1) IN GENERAL- The Director and the Bureau may not exercise any rulemaking, supervisory, enforcement, or other authority, including authority to order penalties, over any activities related to the solicitation or making of voluntary contributions to a tax-exempt organization as recognized by the Internal Revenue Service, by any agent, volunteer, or representative of such organizations to the extent the organization, agent, volunteer, or representative thereof is soliciting or providing advice, information, education, or instruction to any donor or potential donor relating to a contribution to the organization.
(2) LIMITATION- The exclusion in paragraph (1) does not apply to other activities not described in paragraph (1) that are the offering or provision of any consumer financial product or service, or are otherwise subject to any enumerated consumer law or any law for which authorities are transferred under subtitle F or H.
(m) Insurance- The Bureau may not define as a financial product or service, by regulation or otherwise, engaging in the business of insurance.
(n) Limited Authority of the Bureau- Notwithstanding subsections (a) through (h) and (l), a person subject to or described in one or more of such provisions--
(1) may be a service provider; and
(2) may be subject to requests from, or requirements imposed by, the Bureau regarding information in order to carry out the responsibilities and functions of the Bureau and in accordance with section 1022, 1052, or 1053.
(o) No Authority To Impose Usury Limit- No provision of this title shall be construed as conferring authority on the Bureau to establish a usury limit applicable to an extension of credit offered or made by a covered person to a consumer, unless explicitly authorized by law.
(p) Attorney General- No provision of this title, including section 1024(c)(1), shall affect the authorities of the Attorney General under otherwise applicable provisions of law.
(q) Secretary of the Treasury- No provision of this title shall affect the authorities of the Secretary, including with respect to prescribing rules, initiating enforcement proceedings, or taking other actions with respect to a person that performs income tax preparation activities for consumers.
(r) Deposit Insurance and Share Insurance- Nothing in this title shall affect the authority of the Corporation under the Federal Deposit Insurance Act or the National Credit Union Administration Board under the Federal Credit Union Act as to matters related to deposit insurance and share insurance, respectively.
(s) Fair Housing Act- No provision of this title shall be construed as affecting any authority arising under the Fair Housing Act.
SEC. 1028. AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.
(a) Study and Report- The Bureau shall conduct a study of, and shall provide a report to Congress concerning, the use of agreements providing for arbitration of any future dispute between covered persons and consumers in connection with the offering or providing of consumer financial products or services.
(b) Further Authority- The Bureau, by regulation, may prohibit or impose conditions or limitations on the use of an agreement between a covered person and a consumer for a consumer financial product or service providing for arbitration of any future dispute between the parties, if the Bureau finds that such a prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers. The findings in such rule shall be consistent with the study conducted under subsection (a).
(c) Limitation- The authority described in subsection (b) may not be construed to prohibit or restrict a consumer from entering into a voluntary arbitration agreement with a covered person after a dispute has arisen.
(d) Effective Date- Notwithstanding any other provision of law, any regulation prescribed by the Bureau under subsection (b) shall apply, consistent with the terms of the regulation, to any agreement between a consumer and a covered person entered into after the end of the 180-day period beginning on the effective date of the regulation, as established by the Bureau.
SEC. 1029. EXCLUSION FOR AUTO DEALERS.
(a) Sale, Servicing, and Leasing of Motor Vehicles Excluded- Except as permitted in subsection (b), the Bureau may not exercise any rulemaking, supervisory, enforcement or any other authority, including any authority to order assessments, over a motor vehicle dealer that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both.
(b) Certain Functions Excepted- Subsection (a) shall not apply to any person, to the extent that such person--
(1) provides consumers with any services related to residential or commercial mortgages or self-financing transactions involving real property;
(2) operates a line of business--
(A) that involves the extension of retail credit or retail leases involving motor vehicles; and
(B) in which--
(i) the extension of retail credit or retail leases are provided directly to consumers; and
(ii) the contract governing such extension of retail credit or retail leases is not routinely assigned to an unaffiliated third party finance or leasing source; or
(3) offers or provides a consumer financial product or service not involving or related to the sale, financing, leasing, rental, repair, refurbishment, maintenance, or other servicing of motor vehicles, motor vehicle parts, or any related or ancillary product or service.
(c) Preservation of Authorities of Other Agencies- Except as provided in subsections (b) and (d), nothing in this title, including subtitle F, shall be construed as modifying, limiting, or superseding the operation of any provision of Federal law, or otherwise affecting the authority of the Board of Governors, the Federal Trade Commission, or any other Federal agency, with respect to a person described in subsection (a).
(d) Federal Trade Commission Authority- Notwithstanding section 18 of the Federal Trade Commission Act, the Federal Trade Commission is authorized to prescribe rules under sections 5 and 18(a)(1)(B) of the Federal Trade Commission Act. in accordance with section 553 of title 5, United States Code, with respect to a person described in subsection (a).
(e) Coordination With Office Of Service Member Affairs- The Board of Governors and the Federal Trade Commission shall coordinate with the Office of Service Member Affairs, to ensure that--
(1) service members and their families are educated and empowered to make better informed decisions regarding consumer financial products and services offered by motor vehicle dealers, with a focus on motor vehicle dealers in the proximity of military installations; and
(2) complaints by service members and their families concerning such motor vehicle dealers are effectively monitored and responded to, and where appropriate, enforcement action is pursued by the authorized agencies.
(f) Definitions- For purposes of this section, the following definitions shall apply:
(1) MOTOR VEHICLE- The term ‘motor vehicle’ means--
(A) any self-propelled vehicle designed for transporting persons or property on a street, highway, or other road;
(B) recreational boats and marine equipment;
(C) motorcycles;
(D) motor homes, recreational vehicle trailers, and slide-in campers, as those terms are defined in sections 571.3 and 575.103 (d) of title 49, Code of Federal Regulations, or any successor thereto; and
(E) other vehicles that are titled and sold through dealers.
(2) MOTOR VEHICLE DEALER- The term ‘motor vehicle dealer’ means any person or resident in the United States, or any territory of the United States, who--
(A) is licensed by a State, a territory of the United States, or the District of Columbia to engage in the sale of motor vehicles; and
(B) takes title to, holds an ownership in, or takes physical custody of motor vehicles.
SEC. 1029A. EFFECTIVE DATE.
This subtitle shall become effective on the designated transfer date, except that sections 1022, 1024, and 1025(e) shall become effective on the date of enactment of this Act.
Subtitle C--Specific Bureau Authorities
SEC. 1031. PROHIBITING UNFAIR, DECEPTIVE, OR ABUSIVE ACTS OR PRACTICES.
(a) In General- The Bureau may take any action authorized under subtitle E to prevent a covered person or service provider from committing or engaging in an unfair, deceptive, or abusive act or practice under Federal law in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.
(b) Rulemaking- The Bureau may prescribe rules applicable to a covered person or service provider identifying as unlawful unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. Rules under this section may include requirements for the purpose of preventing such acts or practices.
(c) Unfairness-
(1) IN GENERAL- The Bureau shall have no authority under this section to declare an act or practice in connection with a transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service, to be unlawful on the grounds that such act or practice is unfair, unless the Bureau has a reasonable basis to conclude that--
(A) the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers; and
(B) such substantial injury is not outweighed by countervailing benefits to consumers or to competition.
(2) CONSIDERATION OF PUBLIC POLICIES- In determining whether an act or practice is unfair, the Bureau may consider established public policies as evidence to be considered with all other evidence. Such public policy considerations may not serve as a primary basis for such determination.
(d) Abusive- The Bureau shall have no authority under this section to declare an act or practice abusive in connection with the provision of a consumer financial product or service, unless the act or practice--
(1) materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or
(2) takes unreasonable advantage of--
(A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service;
(B) the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service; or
(C) the reasonable reliance by the consumer on a covered person to act in the interests of the consumer.
(e) Consultation- In prescribing rules under this section, the Bureau shall consult with the Federal banking agencies, or other Federal agencies, as appropriate, concerning the consistency of the proposed rule with prudential, market, or systemic objectives administered by such agencies.
(f) Consideration of Seasonal Income- The rules of the Bureau under this section shall provide, with respect to an extension of credit secured by residential real estate or a dwelling, if documented income of the borrower, including income from a small business, is a repayment source for an extension of credit secured by residential real estate or a dwelling, the creditor may consider the seasonality and irregularity of such income in the underwriting of and scheduling of payments for such credit.
SEC. 1032. DISCLOSURES.
(a) In General- The Bureau may prescribe rules to ensure that the features of any consumer financial product or service, both initially and over the term of the product or service, are fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service, in light of the facts and circumstances.
(b) Model Disclosures-
(1) IN GENERAL- Any final rule prescribed by the Bureau under this section requiring disclosures may include a model form that may be used at the option of the covered person for provision of the required disclosures.
(2) FORMAT- A model form issued pursuant to paragraph (1) shall contain a clear and conspicuous disclosure that, at a minimum--
(A) uses plain language comprehensible to consumers;
(B) contains a clear format and design, such as an easily readable type font; and
(C) succinctly explains the information that must be communicated to the consumer.
(3) CONSUMER TESTING- Any model form issued pursuant to this subsection shall be validated through consumer testing.
(c) Basis for Rulemaking- In prescribing rules under this section, the Bureau shall consider available evidence about consumer awareness, understanding of, and responses to disclosures or communications about the risks, costs, and benefits of consumer financial products or services.
(d) Safe Harbor- Any covered person that uses a model form included with a rule issued under this section shall be deemed to be in compliance with the disclosure requirements of this section with respect to such model form.
(e) Trial Disclosure Programs-
(1) IN GENERAL- The Bureau may permit a covered person to conduct a trial program that is limited in time and scope, subject to specified standards and procedures, for the purpose of providing trial disclosures to consumers that are designed to improve upon any model form issued pursuant to subsection (b)(1), or any other model form issued to implement an enumerated statute, as applicable.
(2) SAFE HARBOR- The standards and procedures issued by the Bureau shall be designed to encourage covered persons to conduct trial disclosure programs. For the purposes of administering this subsection, the Bureau may establish a limited period during which a covered person conducting a trial disclosure program shall be deemed to be in compliance with, or may be exempted from, a requirement of a rule or an enumerated consumer law.
(3) PUBLIC DISCLOSURE- The rules of the Bureau shall provide for public disclosure of trial disclosure programs, which public disclosure may be limited, to the extent necessary to encourage covered persons to conduct effective trials.
(f) Combined Mortgage Loan Disclosure- Not later than 1 year after the designated transfer date, the Bureau shall propose for public comment rules and model disclosures that combine the disclosures required under the Truth in Lending Act and sections 4 and 5 of the Real Estate Settlement Procedures Act of 1974, into a single, integrated disclosure for mortgage loan transactions covered by those laws, unless the Bureau determines that any proposal issued by the Board of Governors and the Secretary of Housing and Urban Development carries out the same purpose.
SEC. 1033. CONSUMER RIGHTS TO ACCESS INFORMATION.
(a) In General- Subject to rules prescribed by the Bureau, a covered person shall make available to a consumer, upon request, information in the control or possession of the covered person concerning the consumer financial product or service that the consumer obtained from such covered person, including information relating to any transaction, series of transactions, or to the account including costs, charges and usage data. The information shall be made available in an electronic form usable by consumers.
(b) Exceptions- A covered person may not be required by this section to make available to the consumer--
(1) any confidential commercial information, including an algorithm used to derive credit scores or other risk scores or predictors;
(2) any information collected by the covered person for the purpose of preventing fraud or money laundering, or detecting, or making any report regarding other unlawful or potentially unlawful conduct;
(3) any information required to be kept confidential by any other provision of law; or
(4) any information that the covered person cannot retrieve in the ordinary course of its business with respect to that information.
(c) No Duty To Maintain Records- Nothing in this section shall be construed to impose any duty on a covered person to maintain or keep any information about a consumer.
(d) Standardized Formats for Data- The Bureau, by rule, shall prescribe standards applicable to covered persons to promote the development and use of standardized formats for information, including through the use of machine readable files, to be made available to consumers under this section.
(e) Consultation- The Bureau shall, when prescribing any rule under this section, consult with the Federal banking agencies and the Federal Trade Commission to ensure, to the extent appropriate, that the rules--
(1) impose substantively similar requirements on covered persons;
(2) take into account conditions under which covered persons do business both in the United States and in other countries; and
(3) do not require or promote the use of any particular technology in order to develop systems for compliance.
SEC. 1034. RESPONSE TO CONSUMER COMPLAINTS AND INQUIRIES.
(a) Timely Regulator Response to Consumers- The Bureau shall establish, in consultation with the appropriate Federal regulatory agencies, reasonable procedures to provide a timely response to consumers, in writing where appropriate, to complaints against, or inquiries concerning, a covered person, including--
(1) steps that have been taken by the regulator in response to the complaint or inquiry of the consumer;
(2) any responses received by the regulator from the covered person; and
(3) any follow-up actions or planned follow-up actions by the regulator in response to the complaint or inquiry of the consumer.
(b) Timely Response to Regulator by Covered Person- A covered person subject to supervision and primary enforcement by the Bureau pursuant to section 1025 shall provide a timely response, in writing where appropriate, to the Bureau, the prudential regulators, and any other agency having jurisdiction over such covered person concerning a consumer complaint or inquiry, including--
(1) steps that have been taken by the covered person to respond to the complaint or inquiry of the consumer;
(2) responses received by the covered person from the consumer; and
(3) follow-up actions or planned follow-up actions by the covered person to respond to the complaint or inquiry of the consumer.
(c) Provision of Information to Consumers-
(1) IN GENERAL- A covered person subject to supervision and primary enforcement by the Bureau pursuant to section 1025 shall, in a timely manner, comply with a consumer request for information in the control or possession of such covered person concerning the consumer financial product or service that the consumer obtained from such covered person, including supporting written documentation, concerning the account of the consumer.
(2) EXCEPTIONS- A covered person subject to supervision and primary enforcement by the Bureau pursuant to section 1025, a prudential regulator, and any other agency having jurisdiction over a covered person subject to supervision and primary enforcement by the Bureau pursuant to section 1025 may not be required by this section to make available to the consumer--
(A) any confidential commercial information, including an algorithm used to derive credit scores or other risk scores or predictors;
(B) any information collected by the covered person for the purpose of preventing fraud or money laundering, or detecting or making any report regarding other unlawful or potentially unlawful conduct;
(C) any information required to be kept confidential by any other provision of law; or
(D) any nonpublic or confidential information, including confidential supervisory information.
(d) Agreements With Other Agencies- The Bureau shall enter into a memorandum of understanding with any affected Federal regulatory agency regarding procedures by which any covered person, and the prudential regulators, and any other agency having jurisdiction over a covered person, including the Secretary of the Department of Housing and Urban Development and the Secretary of Education, shall comply with this section.
SEC. 1035. PRIVATE EDUCATION LOAN OMBUDSMAN.
(a) Establishment- The Secretary, in consultation with the Director, shall designate a Private Education Loan Ombudsman (in this section referred to as the ‘Ombudsman’) within the Bureau, to provide timely assistance to borrowers of private education loans.
(b) Public Information- The Secretary and the Director shall disseminate information about the availability and functions of the Ombudsman to borrowers and potential borrowers, as well as institutions of higher education, lenders, guaranty agencies, loan servicers, and other participants in private education student loan programs.
(c) Functions of Ombudsman- The Ombudsman designated under this subsection shall--
(1) in accordance with regulations of the Director, receive, review, and attempt to resolve informally complaints from borrowers of loans described in subsection (a), including, as appropriate, attempts to resolve such complaints in collaboration with the Department of Education and with institutions of higher education, lenders, guaranty agencies, loan servicers, and other participants in private education loan programs;
(2) not later than 90 days after the designated transfer date, establish a memorandum of understanding with the student loan ombudsman established under section 141(f) of the Higher Education Act of 1965 (20 U.S.C. 1018(f)), to ensure coordination in providing assistance to and serving borrowers seeking to resolve complaints related to their private education or Federal student loans;
(3) compile and analyze data on borrower complaints regarding private education loans; and
(4) make appropriate recommendations to the Director, the Secretary, the Secretary of Education, the Committee on Banking, Housing, and Urban Affairs and the Committee on Health, Education, Labor, and Pensions of the Senate and the Committee on Financial Services and the Committee on Education and Labor of the House of Representatives.
(d) Annual Reports-
(1) IN GENERAL- The Ombudsman shall prepare an annual report that describes the activities, and evaluates the effectiveness of the Ombudsman during the preceding year.
(2) SUBMISSION- The report required by paragraph (1) shall be submitted on the same date annually to the Secretary, the Secretary of Education, the Committee on Banking, Housing, and Urban Affairs and the Committee on Health, Education, Labor, and Pensions of the Senate and the Committee on Financial Services and the Committee on Education and Labor of the House of Representatives.
(e) Definitions- For purposes of this section, the terms ‘private education loan’ and ‘institution of higher education’ have the same meanings as in section 140 of the Truth in Lending Act (15 U.S.C. 1650).
SEC. 1036. PROHIBITED ACTS.
(a) In General- It shall be unlawful for--
(1) any covered person or service provider--
(A) to offer or provide to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law; or
(B) to engage in any unfair, deceptive, or abusive act or practice;
(2) any covered person or service provider to fail or refuse, as required by Federal consumer financial law, or any rule or order issued by the Bureau thereunder--
(A) to permit access to or copying of records;
(B) to establish or maintain records; or
(C) to make reports or provide information to the Bureau; or
(3) any person to knowingly or recklessly provide substantial assistance to a covered person or service provider in violation of the provisions of section 1031, or any rule or order issued thereunder, and notwithstanding any provision of this title, the provider of such substantial assistance shall be deemed to be in violation of that section to the same extent as the person to whom such assistance is provided.
(b) Exception- No person shall be held to have violated subsection (a)(1) solely by virtue of providing or selling time or space to a covered person or service provider placing an advertisement.
SEC. 1037. EFFECTIVE DATE.
This subtitle shall take effect on the designated transfer date.
Subtitle D--Preservation of State Law
SEC. 1041. RELATION TO STATE LAW.
(a) In General-
(1) RULE OF CONSTRUCTION- This title, other than sections 1044 through 1048, may not be construed as annulling, altering, or affecting, or exempting any person subject to the provisions of this title from complying with, the statutes, regulations, orders, or interpretations in effect in any State, except to the extent that any such provision of law is inconsistent with the provisions of this title, and then only to the extent of the inconsistency.
(2) GREATER PROTECTION UNDER STATE LAW- For purposes of this subsection, a statute, regulation, order, or interpretation in effect in any State is not inconsistent with the provisions of this title if the protection that such statute, regulation, order, or interpretation affords to consumers is greater than the protection provided under this title. A determination regarding whether a statute, regulation, order, or interpretation in effect in any State is inconsistent with the provisions of this title may be made by the Bureau on its own motion or in response to a nonfrivolous petition initiated by any interested person.
(b) Relation to Other Provisions of Enumerated Consumer Laws That Relate to State Law- No provision of this title, except as provided in section 1083, shall be construed as modifying, limiting, or superseding the operation of any provision of an enumerated consumer law that relates to the application of a law in effect in any State with respect to such Federal law.
(c) Additional Consumer Protection Regulations in Response to State Action-
(1) NOTICE OF PROPOSED RULE REQUIRED- The Bureau shall issue a notice of proposed rulemaking whenever a majority of the States has enacted a resolution in support of the establishment or modification of a consumer protection regulation by the Bureau.
(2) BUREAU CONSIDERATIONS REQUIRED FOR ISSUANCE OF FINAL REGULATION- Before prescribing a final regulation based upon a notice issued pursuant to paragraph (1), the Bureau shall take into account whether--
(A) the proposed regulation would afford greater protection to consumers than any existing regulation;
(B) the intended benefits of the proposed regulation for consumers would outweigh any increased costs or inconveniences for consumers, and would not discriminate unfairly against any category or class of consumers; and
(C) a Federal banking agency has advised that the proposed regulation is likely to present an unacceptable safety and soundness risk to insured depository institutions.
(3) EXPLANATION OF CONSIDERATIONS- The Bureau--
(A) shall include a discussion of the considerations required in paragraph (2) in the Federal Register notice of a final regulation prescribed pursuant to this subsection; and
(B) whenever the Bureau determines not to prescribe a final regulation, shall publish an explanation of such determination in the Federal Register, and provide a copy of such explanation to each State that enacted a resolution in support of the proposed regulation, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives.
(4) RESERVATION OF AUTHORITY- No provision of this subsection shall be construed as limiting or restricting the authority of the Bureau to enhance consumer protection standards established pursuant to this title in response to its own motion or in response to a request by any other interested person.
(5) RULE OF CONSTRUCTION- No provision of this subsection shall be construed as exempting the Bureau from complying with subchapter II of chapter 5 of title 5, United States Code.
(6) DEFINITION- For purposes of this subsection, the term ‘consumer protection regulation’ means a regulation that the Bureau is authorized to prescribe under the Federal consumer financial laws.
SEC. 1042. PRESERVATION OF ENFORCEMENT POWERS OF STATES.
(a) In General-
(1) ACTION BY STATE- Except as provided in paragraph (2), the attorney general (or the equivalent thereof) of any State may bring a civil action in the name of such State in any district court of the United States in that State or in State court that is located in that State and that has jurisdiction over the defendant, to enforce provisions of this title or regulations issued under this title, and to secure remedies under provisions of this title or remedies otherwise provided under other law. A State regulator may bring a civil action or other appropriate proceeding to enforce the provisions of this title or regulations issued under this title with respect to any entity that is State-chartered, incorporated, licensed, or otherwise authorized to do business under State law (except as provided in paragraph (2)), and to secure remedies under provisions of this title or remedies otherwise provided under other provisions of law with respect to such an entity.
(2) ACTION BY STATE AGAINST NATIONAL BANK OR FEDERAL SAVINGS ASSOCIATION TO ENFORCE RULES-
(A) IN GENERAL- Except as permitted under subparagraph (B), the attorney general (or equivalent thereof) of any State may not bring a civil action in the name of such State against a national bank or Federal savings association to enforce a provision of this title.
(B) ENFORCEMENT OF RULES PERMITTED- The attorney general (or the equivalent thereof) of any State may bring a civil action in the name of such State against a national bank or Federal savings association in any district court of the United States in the State or in State court that is located in that State and that has jurisdiction over the defendant to enforce a regulation prescribed by the Bureau under a provision of this title and to secure remedies under provisions of this title or remedies otherwise provided under other law.
(3) RULE OF CONSTRUCTION- No provision of this title shall be construed as modifying, limiting, or superseding the operation of any provision of an enumerated consumer law that relates to the authority of a State attorney general or State regulator to enforce such Federal law.
(b) Consultation Required-
(1) NOTICE-
(A) IN GENERAL- Before initiating any action in a court or other administrative or regulatory proceeding against any covered person as authorized by subsection (a) to enforce any provision of this title, including any regulation prescribed by the Bureau under this title, a State attorney general or State regulator shall timely provide a copy of the complete complaint to be filed and written notice describing such action or proceeding to the Bureau and the prudential regulator, if any, or the designee thereof.
(B) EMERGENCY ACTION- If prior notice is not practicable, the State attorney general or State regulator shall provide a copy of the complete complaint and the notice to the Bureau and the prudential regulator, if any, immediately upon instituting the action or proceeding.
(C) CONTENTS OF NOTICE- The notification required under this paragraph shall, at a minimum, describe--
(i) the identity of the parties;
(ii) the alleged facts underlying the proceeding; and
(iii) whether there may be a need to coordinate the prosecution of the proceeding so as not to interfere with any action, including any rulemaking, undertaken by the Bureau, a prudential regulator, or another Federal agency.
(2) BUREAU RESPONSE- In any action described in paragraph (1), the Bureau may--
(A) intervene in the action as a party;
(B) upon intervening--
(i) remove the action to the appropriate United States district court, if the action was not originally brought there; and
(ii) be heard on all matters arising in the action; and
(C) appeal any order or judgment, to the same extent as any other party in the proceeding may.
(c) Regulations- The Bureau shall prescribe regulations to implement the requirements of this section and, from time to time, provide guidance in order to further coordinate actions with the State attorneys general and other regulators.
(d) Preservation of State Authority-
(1) STATE CLAIMS- No provision of this section shall be construed as altering, limiting, or affecting the authority of a State attorney general or any other regulatory or enforcement agency or authority to bring an action or other regulatory proceeding arising solely under the law in effect in that State.
(2) STATE SECURITIES REGULATORS- No provision of this title shall be construed as altering, limiting, or affecting the authority of a State securities commission (or any agency or office performing like functions) under State law to adopt rules, initiate enforcement proceedings, or take any other action with respect to a person regulated by such commission or authority.
(3) STATE INSURANCE REGULATORS- No provision of this title shall be construed as altering, limiting, or affecting the authority of a State insurance commission or State insurance regulator under State law to adopt rules, initiate enforcement proceedings, or take any other action with respect to a person regulated by such commission or regulator.
SEC. 1043. PRESERVATION OF EXISTING CONTRACTS.
This title, and regulations, orders, guidance, and interpretations prescribed, issued, or established by the Bureau, shall not be construed to alter or affect the applicability of any regulation, order, guidance, or interpretation prescribed, issued, and established by the Comptroller of the Currency or the Director of the Office of Thrift Supervision regarding the applicability of State law under Federal banking law to any contract entered into on or before the date of enactment of this Act, by national banks, Federal savings associations, or subsidiaries thereof that are regulated and supervised by the Comptroller of the Currency or the Director of the Office of Thrift Supervision, respectively.
SEC. 1044. STATE LAW PREEMPTION STANDARDS FOR NATIONAL BANKS AND SUBSIDIARIES CLARIFIED.
(a) In General- Chapter one of title LXII of the Revised Statutes of the United States (12 U.S.C. 21 et seq.) is amended by inserting after section 5136B the following new section:
‘SEC. 5136C. STATE LAW PREEMPTION STANDARDS FOR NATIONAL BANKS AND SUBSIDIARIES CLARIFIED.
‘(a) Definitions- For purposes of this section, the following definitions shall apply:
‘(1) NATIONAL BANK- The term ‘national bank’ includes--
‘(A) any bank organized under the laws of the United States; and
‘(B) any Federal branch established in accordance with the International Banking Act of 1978.
‘(2) STATE CONSUMER FINANCIAL LAWS- The term ‘State consumer financial law’ means a State law that does not directly or indirectly discriminate against national banks and that directly and specifically regulates the manner, content, or terms and conditions of any financial transaction (as may be authorized for national banks to engage in), or any account related thereto, with respect to a consumer.
‘(3) OTHER DEFINITIONS- The terms ‘affiliate’, ‘subsidiary’, ‘includes’, and ‘including’ have the same meanings as in section 3 of the Federal Deposit Insurance Act.
‘(b) Preemption Standard-
‘(1) IN GENERAL- State consumer financial laws are preempted, only if--
‘(A) application of a State consumer financial law would have a discriminatory effect on national banks, in comparison with the effect of the law on a bank chartered by that State;
‘(B) in accordance with the legal standard for preemption in the decision of the Supreme Court of the United States in Barnett Bank of Marion County, N. A. v. Nelson, Florida Insurance Commissioner, et al., 517 U.S. 25 (1996), the State consumer financial law prevents or significantly interferes with the exercise by the national bank of its powers; and any preemption determination under this subparagraph may be made by a court, or by regulation or order of the Comptroller of the Currency on a case-by-case basis, in accordance with applicable law; or
‘(C) the State consumer financial law is preempted by a provision of Federal law other than this title.
‘(2) SAVINGS CLAUSE- This title and section 24 of the Federal Reserve Act (12 U.S.C. 371) do not preempt, annul, or affect the applicability of any State law to any subsidiary or affiliate of a national bank (other than a subsidiary or affiliate that is chartered as a national bank).
‘(3) CASE-BY-CASE BASIS-
‘(A) DEFINITION- As used in this section the term ‘case-by-case basis’ refers to a determination pursuant to this section made by the Comptroller concerning the impact of a particular State consumer financial law on any national bank that is subject to that law, or the law of any other State with substantively equivalent terms.
‘(B) CONSULTATION- When making a determination on a case-by-case basis that a State consumer financial law of another State has substantively equivalent terms as one that the Comptroller is preempting, the Comptroller shall first consult with the Bureau of Consumer Financial Protection and shall take the views of the Bureau into account when making the determination.
‘(4) RULE OF CONSTRUCTION- This title does not occupy the field in any area of State law.
‘(5) STANDARDS OF REVIEW-
‘(A) PREEMPTION- A court reviewing any determinations made by the Comptroller regarding preemption of a State law by this title or section 24 of the Federal Reserve Act (12 U.S.C. 371) shall assess the validity of such determinations, depending upon the thoroughness evident in the consideration of the agency, the validity of the reasoning of the agency, the consistency with other valid determinations made by the agency, and other factors which the court finds persuasive and relevant to its decision.
‘(B) SAVINGS CLAUSE- Except as provided in subparagraph (A), nothing in this section shall affect the deference that a court may afford to the Comptroller in making determinations regarding the meaning or interpretation of title LXII of the Revised Statutes of the United States or other Federal laws.
‘(6) COMPTROLLER DETERMINATION NOT DELEGABLE- Any regulation, order, or determination made by the Comptroller of the Currency under paragraph (1)(B) shall be made by the Comptroller, and shall not be delegable to another officer or employee of the Comptroller of the Currency.
‘(c) Substantial Evidence- No regulation or order of the Comptroller of the Currency prescribed under subsection (b)(1)(B), shall be interpreted or applied so as to invalidate, or otherwise declare inapplicable to a national bank, the provision of the State consumer financial law, unless substantial evidence, made on the record of the proceeding, supports the specific finding regarding the preemption of such provision in accordance with the legal standard of the decision of the Supreme Court of the United States in Barnett Bank of Marion County, N.A. v. Nelson, Florida Insurance Commissioner, et al., 517 U.S. 25 (1996).
‘(d) Periodic Review of Preemption Determinations-
‘(1) IN GENERAL- The Comptroller of the Currency shall periodically conduct a review, through notice and public comment, of each determination that a provision of Federal law preempts a State consumer financial law. The agency shall conduct such review within the 5-year period after prescribing or otherwise issuing such determination, and at least once during each 5-year period thereafter. After conducting the review of, and inspecting the comments made on, the determination, the agency shall publish a notice in the Federal Register announcing the decision to continue or rescind the determination or a proposal to amend the determination. Any such notice of a proposal to amend a determination and the subsequent resolution of such proposal shall comply with the procedures set forth in subsections (a) and (b) of section 5244 of the Revised Statutes of the United States (12 U.S.C. 43 (a), (b)).
‘(2) REPORTS TO CONGRESS- At the time of issuing a review conducted under paragraph (1), the Comptroller of the Currency shall submit a report regarding such review to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate. The report submitted to the respective committees shall address whether the agency intends to continue, rescind, or propose to amend any determination that a provision of Federal law preempts a State consumer financial law, and the reasons therefor.
‘(e) Application of State Consumer Financial Law to Subsidiaries and Affiliates- Notwithstanding any provision of this title or section 24 of Federal Reserve Act (12 U.S.C. 371), a State consumer financial law shall apply to a subsidiary or affiliate of a national bank (other than a subsidiary or affiliate that is chartered as a national bank) to the same extent that the State consumer financial law applies to any person, corporation, or other entity subject to such State law.
‘(f) Preservation of Powers Related to Charging Interest- No provision of this title shall be construed as altering or otherwise affecting the authority conferred by section 5197 of the Revised Statutes of the United States (12 U.S.C. 85) for the charging of interest by a national bank at the rate allowed by the laws of the State, territory, or district where the bank is located, including with respect to the meaning of ‘interest’ under such provision.
‘(g) Transparency of OCC Preemption Determinations- The Comptroller of the Currency shall publish and update no less frequently than quarterly, a list of preemption determinations by the Comptroller of the Currency then in effect that identifies the activities and practices covered by each determination and the requirements and constraints determined to be preempted.’.
(b) Clerical Amendment- The table of sections for chapter one of title LXII of the Revised Statutes of the United States is amended by inserting after the item relating to section 5136B the following new item:
‘Sec. 5136C. State law preemption standards for national banks and subsidiaries clarified.’.
SEC. 1045. CLARIFICATION OF LAW APPLICABLE TO NONDEPOSITORY INSTITUTION SUBSIDIARIES.
Section 5136C of the Revised Statutes of the United States (as added by this subtitle) is amended by adding at the end the following:
‘(h) Clarification of Law Applicable to Nondepository Institution Subsidiaries and Affiliates of National Banks-
‘(1) DEFINITIONS- For purposes of this subsection, the terms ‘depository institution’, ‘subsidiary’, and ‘affiliate’ have the same meanings as in section 3 of the Federal Deposit Insurance Act.
‘(2) RULE OF CONSTRUCTION- No provision of this title or section 24 of the Federal Reserve Act (12 U.S.C. 371) shall be construed as preempting, annulling, or affecting the applicability of State law to any subsidiary, affiliate, or agent of a national bank (other than a subsidiary, affiliate, or agent that is chartered as a national bank).’.
SEC. 1046. STATE LAW PREEMPTION STANDARDS FOR FEDERAL SAVINGS ASSOCIATIONS AND SUBSIDIARIES CLARIFIED.
(a) In General- The Home Owners’ Loan Act (12 U.S.C. 1461 et seq.) is amended by inserting after section 5 the following new section:
‘SEC. 6. STATE LAW PREEMPTION STANDARDS FOR FEDERAL SAVINGS ASSOCIATIONS CLARIFIED.
‘(a) In General- Any determination by a court or by the Director or any successor officer or agency regarding the relation of State law to a provision of this Act or any regulation or order prescribed under this Act shall be made in accordance with the laws and legal standards applicable to national banks regarding the preemption of State law.
‘(b) Principles of Conflict Preemption Applicable- Notwithstanding the authorities granted under sections 4 and 5, this Act does not occupy the field in any area of State law.’.
(b) Clerical Amendment- The table of sections for the Home Owners’ Loan Act (12 U.S.C. 1461 et seq.) is amended by striking the item relating to section 6 and inserting the following new item:
‘Sec. 6. State law preemption standards for Federal savings associations and subsidiaries clarified.’.
SEC. 1047. VISITORIAL STANDARDS FOR NATIONAL BANKS AND SAVINGS ASSOCIATIONS.
(a) National Banks- Section 5136C of the Revised Statutes of the United States (as added by this subtitle) is amended by adding at the end the following:
‘(i) Visitorial Powers-
‘(1) IN GENERAL- In accordance with the decision of the Supreme Court of the United States in Cuomo v. Clearing House Assn., L. L. C. (129 S. Ct. 2710 (2009)), no provision of this title which relates to visitorial powers or otherwise limits or restricts the visitorial authority to which any national bank is subject shall be construed as limiting or restricting the authority of any attorney general (or other chief law enforcement officer) of any State to bring an action against a national bank in a court of appropriate jurisdiction to enforce an applicable law and to seek relief as authorized by such law.
‘(j) Enforcement Actions- The ability of the Comptroller of the Currency to bring an enforcement action under this title or section 5 of the Federal Trade Commission Act does not preclude any private party from enforcing rights granted under Federal or State law in the courts.’.
(b) Savings Associations- Section 6 of the Home Owners’ Loan Act (as added by this title) is amended by adding at the end the following:
‘(c) Visitorial Powers- The provisions of sections 5136C(i) of the Revised Statutes of the United States shall apply to Federal savings associations, and any subsidiary thereof, to the same extent and in the same manner as if such savings associations, or subsidiaries thereof, were national banks or subsidiaries of national banks, respectively.’
‘(d) Enforcement Actions- The ability of the Comptroller of the Currency to bring an enforcement action under this Act or section 5 of the Federal Trade Commission Act does not preclude any private party from enforcing rights granted under Federal or State law in the courts.’.
SEC. 1048. EFFECTIVE DATE.
This subtitle shall become effective on the designated transfer date.
Subtitle E--Enforcement Powers
SEC. 1051. DEFINITIONS.
For purposes of this subtitle, the following definitions shall apply:
(1) BUREAU INVESTIGATION- The term ‘Bureau investigation’ means any inquiry conducted by a Bureau investigator for the purpose of ascertaining whether any person is or has been engaged in any conduct that is a violation, as defined in this section.
(2) BUREAU INVESTIGATOR- The term ‘Bureau investigator’ means any attorney or investigator employed by the Bureau who is charged with the duty of enforcing or carrying into effect any Federal consumer financial law.
(3) CUSTODIAN- The term ‘custodian’ means the custodian or any deputy custodian designated by the Bureau.
(4) DOCUMENTARY MATERIAL- The term ‘documentary material’ includes the original or any copy of any book, document, record, report, memorandum, paper, communication, tabulation, chart, logs, electronic files, or other data or data compilations stored in any medium.
(5) VIOLATION- The term ‘violation’ means any act or omission that, if proved, would constitute a violation of any provision of Federal consumer financial law.
SEC. 1052. INVESTIGATIONS AND ADMINISTRATIVE DISCOVERY.
(a) Joint Investigations-
(1) IN GENERAL- The Bureau or, where appropriate, a Bureau investigator, may engage in joint investigations and requests for information, as authorized under this title.
(2) FAIR LENDING- The authority under paragraph (1) includes matters relating to fair lending, and where appropriate, joint investigations with, and requests for information from, the Secretary of Housing and Urban Development, the Attorney General of the United States, or both.
(b) Subpoenas-
(1) IN GENERAL- The Bureau or a Bureau investigator may issue subpoenas for the attendance and testimony of witnesses and the production of relevant papers, books, documents, or other material in connection with hearings under this title.
(2) FAILURE TO OBEY- In the case of contumacy or refusal to obey a subpoena issued pursuant to this paragraph and served upon any person, the district court of the United States for any district in which such person is found, resides, or transacts business, upon application by the Bureau or a Bureau investigator and after notice to such person, may issue an order requiring such person to appear and give testimony or to appear and produce documents or other material.
(3) CONTEMPT- Any failure to obey an order of the court under this subsection may be punished by the court as a contempt thereof.
(c) Demands-
(1) IN GENERAL- Whenever the Bureau has reason to believe that any person may be in possession, custody, or control of any documentary material or tangible things, or may have any information, relevant to a violation, the Bureau may, before the institution of any proceedings under the Federal consumer financial law, issue in writing, and cause to be served upon such person, a civil investigative demand requiring such person to--
(A) produce such documentary material for inspection and copying or reproduction in the form or medium requested by the Bureau;
(B) submit such tangible things;
(C) file written reports or answers to questions;
(D) give oral testimony concerning documentary material, tangible things, or other information; or
(E) furnish any combination of such material, answers, or testimony.
(2) REQUIREMENTS- Each civil investigative demand shall state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation.
(3) PRODUCTION OF DOCUMENTS- Each civil investigative demand for the production of documentary material shall--
(A) describe each class of documentary material to be produced under the demand with such definiteness and certainty as to permit such material to be fairly identified;
(B) prescribe a return date or dates which will provide a reasonable period of time within which the material so demanded may be assembled and made available for inspection and copying or reproduction; and
(C) identify the custodian to whom such material shall be made available.
(4) PRODUCTION OF THINGS- Each civil investigative demand for the submission of tangible things shall--
(A) describe each class of tangible things to be submitted under the demand with such definiteness and certainty as to permit such things to be fairly identified;
(B) prescribe a return date or dates which will provide a reasonable period of time within which the things so demanded may be assembled and submitted; and
(C) identify the custodian to whom such things shall be submitted.
(5) DEMAND FOR WRITTEN REPORTS OR ANSWERS- Each civil investigative demand for written reports or answers to questions shall--
(A) propound with definiteness and certainty the reports to be produced or the questions to be answered;
(B) prescribe a date or dates at which time written reports or answers to questions shall be submitted; and
(C) identify the custodian to whom such reports or answers shall be submitted.
(6) ORAL TESTIMONY- Each civil investigative demand for the giving of oral testimony shall--
(A) prescribe a date, time, and place at which oral testimony shall be commenced; and
(B) identify a Bureau investigator who shall conduct the investigation and the custodian to whom the transcript of such investigation shall be submitted.
(7) SERVICE- Any civil investigative demand issued, and any enforcement petition filed, under this section may be served--
(A) by any Bureau investigator at any place within the territorial jurisdiction of any court of the United States; and
(B) upon any person who is not found within the territorial jurisdiction of any court of the United States--
(i) in such manner as the Federal Rules of Civil Procedure prescribe for service in a foreign nation; and
(ii) to the extent that the courts of the United States have authority to assert jurisdiction over such person, consistent with due process, the United States District Court for the District of Columbia shall have the same jurisdiction to take any action respecting compliance with this section by such person that such district court would have if such person were personally within the jurisdiction of such district court.
(8) METHOD OF SERVICE- Service of any civil investigative demand or any enforcement petition filed under this section may be made upon a person, including any legal entity, by--
(A) delivering a duly executed copy of such demand or petition to the individual or to any partner, executive officer, managing agent, or general agent of such person, or to any agent of such person authorized by appointment or by law to receive service of process on behalf of such person;
(B) delivering a duly executed copy of such demand or petition to the principal office or place of business of the person to be served; or
(C) depositing a duly executed copy in the United States mails, by registered or certified mail, return receipt requested, duly addressed to such person at the principal office or place of business of such person.
(9) PROOF OF SERVICE-
(A) IN GENERAL- A verified return by the individual serving any civil investigative demand or any enforcement petition filed under this section setting forth the manner of such service shall be proof of such service.
(B) RETURN RECEIPTS- In the case of service by registered or certified mail, such return shall be accompanied by the return post office receipt of delivery of such demand or enforcement petition.
(10) PRODUCTION OF DOCUMENTARY MATERIAL- The production of documentary material in response to a civil investigative demand shall be made under a sworn certificate, in such form as the demand designates, by the person, if a natural person, to whom the demand is directed or, if not a natural person, by any person having knowledge of the facts and circumstances relating to such production, to the effect that all of the documentary material required by the demand and in the possession, custody, or control of the person to whom the demand is directed has been produced and made available to the custodian.
(11) SUBMISSION OF TANGIBLE THINGS- The submission of tangible things in response to a civil investigative demand shall be made under a sworn certificate, in such form as the demand designates, by the person to whom the demand is directed or, if not a natural person, by any person having knowledge of the facts and circumstances relating to such production, to the effect that all of the tangible things required by the demand and in the possession, custody, or control of the person to whom the demand is directed have been submitted to the custodian.
(12) SEPARATE ANSWERS- Each reporting requirement or question in a civil investigative demand shall be answered separately and fully in writing under oath, unless it is objected to, in which event the reasons for the objection shall be stated in lieu of an answer, and it shall be submitted under a sworn certificate, in such form as the demand designates, by the person, if a natural person, to whom the demand is directed or, if not a natural person, by any person responsible for answering each reporting requirement or question, to the effect that all information required by the demand and in the possession, custody, control, or knowledge of the person to whom the demand is directed has been submitted.
(13) TESTIMONY-
(A) IN GENERAL-
(i) OATH AND RECORDATION- The examination of any person pursuant to a demand for oral testimony served under this subsection shall be taken before an officer authorized to administer oaths and affirmations by the laws of the United States or of the place at which the examination is held. The officer before whom oral testimony is to be taken shall put the witness on oath or affirmation and shall personally, or by any individual acting under the direction of and in the presence of the officer, record the testimony of the witness.
(ii) TRANSCRIPTION- The testimony shall be taken stenographically and transcribed.
(iii) TRANSMISSION TO CUSTODIAN- After the testimony is fully transcribed, the officer investigator before whom the testimony is taken shall promptly transmit a copy of the transcript of the testimony to the custodian.
(B) PARTIES PRESENT- Any Bureau investigator before whom oral testimony is to be taken shall exclude from the place where the testimony is to be taken all other persons, except the person giving the testimony, the attorney for that person, the officer before whom the testimony is to be taken, an investigator or representative of an agency with which the Bureau is engaged in a joint investigation, and any stenographer taking such testimony.
(C) LOCATION- The oral testimony of any person taken pursuant to a civil investigative demand shall be taken in the judicial district of the United States in which such person resides, is found, or transacts business, or in such other place as may be agreed upon by the Bureau investigator before whom the oral testimony of such person is to be taken and such person.
(D) ATTORNEY REPRESENTATION-
(i) IN GENERAL- Any person compelled to appear under a civil investigative demand for oral testimony pursuant to this section may be accompanied, represented, and advised by an attorney.
(ii) AUTHORITY- The attorney may advise a person described in clause (i), in confidence, either upon the request of such person or upon the initiative of the attorney, with respect to any question asked of such person.
(iii) OBJECTIONS- A person described in clause (i), or the attorney for that person, may object on the record to any question, in whole or in part, and such person shall briefly state for the record the reason for the objection. An objection may properly be made, received, and entered upon the record when it is claimed that such person is entitled to refuse to answer the question on grounds of any constitutional or other legal right or privilege, including the privilege against self-incrimination, but such person shall not otherwise object to or refuse to answer any question, and such person or attorney shall not otherwise interrupt the oral examination.
(iv) REFUSAL TO ANSWER- If a person described in clause (i) refuses to answer any question--
(I) the Bureau may petition the district court of the United States pursuant to this section for an order compelling such person to answer such question; and
(II) if the refusal is on grounds of the privilege against self-incrimination, the testimony of such person may be compelled in accordance with the provisions of section 6004 of title 18, United States Code.
(E) TRANSCRIPTS- For purposes of this subsection--
(i) after the testimony of any witness is fully transcribed, the Bureau investigator shall afford the witness (who may be accompanied by an attorney) a reasonable opportunity to examine the transcript;
(ii) the transcript shall be read to or by the witness, unless such examination and reading are waived by the witness;
(iii) any changes in form or substance which the witness desires to make shall be entered and identified upon the transcript by the Bureau investigator, with a statement of the reasons given by the witness for making such changes;
(iv) the transcript shall be signed by the witness, unless the witness in writing waives the signing, is ill, cannot be found, or refuses to sign; and
(v) if the transcript is not signed by the witness during the 30-day period following the date on which the witness is first afforded a reasonable opportunity to examine the transcript, the Bureau investigator shall sign the transcript and state on the record the fact of the waiver, illness, absence of the witness, or the refusal to sign, together with any reasons given for the failure to sign.
(F) CERTIFICATION BY INVESTIGATOR- The Bureau investigator shall certify on the transcript that the witness was duly sworn by him or her and that the transcript is a true record of the testimony given by the witness, and the Bureau investigator shall promptly deliver the transcript or send it by registered or certified mail to the custodian.
(G) COPY OF TRANSCRIPT- The Bureau investigator shall furnish a copy of the transcript (upon payment of reasonable charges for the transcript) to the witness only, except that the Bureau may for good cause limit such witness to inspection of the official transcript of his testimony.
(H) WITNESS FEES- Any witness appearing for the taking of oral testimony pursuant to a civil investigative demand shall be entitled to the same fees and mileage which are paid to witnesses in the district courts of the United States.
(d) Confidential Treatment of Demand Material-
(1) IN GENERAL- Documentary materials and tangible things received as a result of a civil investigative demand shall be subject to requirements and procedures regarding confidentiality, in accordance with rules established by the Bureau.
(2) DISCLOSURE TO CONGRESS- No rule established by the Bureau regarding the confidentiality of materials submitted to, or otherwise obtained by, the Bureau shall be intended to prevent disclosure to either House of Congress or to an appropriate committee of the Congress, except that the Bureau is permitted to adopt rules allowing prior notice to any party that owns or otherwise provided the material to the Bureau and had designated such material as confidential.
(e) Petition for Enforcement-
(1) IN GENERAL- Whenever any person fails to comply with any civil investigative demand duly served upon him under this section, or whenever satisfactory copying or reproduction of material requested pursuant to the demand cannot be accomplished and such person refuses to surrender such material, the Bureau, through such officers or attorneys as it may designate, may file, in the district court of the United States for any judicial district in which such person resides, is found, or transacts business, and serve upon such person, a petition for an order of such court for the enforcement of this section.
(2) SERVICE OF PROCESS- All process of any court to which application may be made as provided in this subsection may be served in any judicial district.
(f) Petition for Order Modifying or Setting Aside Demand-
(1) IN GENERAL- Not later than 20 days after the service of any civil investigative demand upon any person under subsection (b), or at any time before the return date specified in the demand, whichever period is shorter, or within such period exceeding 20 days after service or in excess of such return date as may be prescribed in writing, subsequent to service, by any Bureau investigator named in the demand, such person may file with the Bureau a petition for an order by the Bureau modifying or setting aside the demand.
(2) COMPLIANCE DURING PENDENCY- The time permitted for compliance with the demand in whole or in part, as determined proper and ordered by the Bureau, shall not run during the pendency of a petition under paragraph (1) at the Bureau, except that such person shall comply with any portions of the demand not sought to be modified or set aside.
(3) SPECIFIC GROUNDS- A petition under paragraph (1) shall specify each ground upon which the petitioner relies in seeking relief, and may be based upon any failure of the demand to comply with the provisions of this section, or upon any constitutional or other legal right or privilege of such person.
(g) Custodial Control- At any time during which any custodian is in custody or control of any documentary material, tangible things, reports, answers to questions, or transcripts of oral testimony given by any person in compliance with any civil investigative demand, such person may file, in the district court of the United States for the judicial district within which the office of such custodian is situated, and serve upon such custodian, a petition for an order of such court requiring the performance by such custodian of any duty imposed upon him by this section or rule promulgated by the Bureau.
(h) Jurisdiction of Court-
(1) IN GENERAL- Whenever any petition is filed in any district court of the United States under this section, such court shall have jurisdiction to hear and determine the matter so presented, and to enter such order or orders as may be required to carry out the provisions of this section.
(2) APPEAL- Any final order entered as described in paragraph (1) shall be subject to appeal pursuant to section 1291 of title 28, United States Code.
SEC. 1053. HEARINGS AND ADJUDICATION PROCEEDINGS.
(a) In General- The Bureau is authorized to conduct hearings and adjudication proceedings with respect to any person in the manner prescribed by chapter 5 of title 5, United States Code in order to ensure or enforce compliance with--
(1) the provisions of this title, including any rules prescribed by the Bureau under this title; and
(2) any other Federal law that the Bureau is authorized to enforce, including an enumerated consumer law, and any regulations or order prescribed thereunder, unless such Federal law specifically limits the Bureau from conducting a hearing or adjudication proceeding and only to the extent of such limitation.
(b) Special Rules for Cease-and-desist Proceedings-
(1) ORDERS AUTHORIZED-
(A) IN GENERAL- If, in the opinion of the Bureau, any covered person or service provider is engaging or has engaged in an activity that violates a law, rule, or any condition imposed in writing on the person by the Bureau, the Bureau may, subject to sections 1024, 1025, and 1026, issue and serve upon the covered person or service provider a notice of charges in respect thereof.
(B) CONTENT OF NOTICE- The notice under subparagraph (A) shall contain a statement of the facts constituting the alleged violation or violations, and shall fix a time and place at which a hearing will be held to determine whether an order to cease and desist should issue against the covered person or service provider, such hearing to be held not earlier than 30 days nor later than 60 days after the date of service of such notice, unless an earlier or a later date is set by the Bureau, at the request of any party so served.
(C) CONSENT- Unless the party or parties served under subparagraph (B) appear at the hearing personally or by a duly authorized representative, such person shall be deemed to have consented to the issuance of the cease-and-desist order.
(D) PROCEDURE- In the event of consent under subparagraph (C), or if, upon the record, made at any such hearing, the Bureau finds that any violation specified in the notice of charges has been established, the Bureau may issue and serve upon the covered person or service provider an order to cease and desist from the violation or practice. Such order may, by provisions which may be mandatory or otherwise, require the covered person or service provider to cease and desist from the subject activity, and to take affirmative action to correct the conditions resulting from any such violation.
(2) EFFECTIVENESS OF ORDER- A cease-and-desist order shall become effective at the expiration of 30 days after the date of service of an order under paragraph (1) upon the covered person or service provider concerned (except in the case of a cease-and-desist order issued upon consent, which shall become effective at the time specified therein), and shall remain effective and enforceable as provided therein, except to such extent as the order is stayed, modified, terminated, or set aside by action of the Bureau or a reviewing court.
(3) DECISION AND APPEAL- Any hearing provided for in this subsection shall be held in the Federal judicial district or in the territory in which the residence or principal office or place of business of the person is located unless the person consents to another place, and shall be conducted in accordance with the provisions of chapter 5 of title 5 of the United States Code. After such hearing, and within 90 days after the Bureau has notified the parties that the case has been submitted to the Bureau for final decision, the Bureau shall render its decision (which shall include findings of fact upon which its decision is predicated) and shall issue and serve upon each party to the proceeding an order or orders consistent with the provisions of this section. Judicial review of any such order shall be exclusively as provided in this subsection. Unless a petition for review is timely filed in a court of appeals of the United States, as provided in paragraph (4), and thereafter until the record in the proceeding has been filed as provided in paragraph (4), the Bureau may at any time, upon such notice and in such manner as the Bureau shall determine proper, modify, terminate, or set aside any such order. Upon filing of the record as provided, the Bureau may modify, terminate, or set aside any such order with permission of the court.
(4) APPEAL TO COURT OF APPEALS- Any party to any proceeding under this subsection may obtain a review of any order served pursuant to this subsection (other than an order issued with the consent of the person concerned) by the filing in the court of appeals of the United States for the circuit in which the principal office of the covered person is located, or in the United States Court of Appeals for the District of Columbia Circuit, within 30 days after the date of service of such order, a written petition praying that the order of the Bureau be modified, terminated, or set aside. A copy of such petition shall be forthwith transmitted by the clerk of the court to the Bureau, and thereupon the Bureau shall file in the court the record in the proceeding, as provided in section 2112 of title 28 of the United States Code. Upon the filing of such petition, such court shall have jurisdiction, which upon the filing of the record shall except as provided in the last sentence of paragraph (3) be exclusive, to affirm, modify, terminate, or set aside, in whole or in part, the order of the Bureau. Review of such proceedings shall be had as provided in chapter 7 of title 5 of the United States Code. The judgment and decree of the court shall be final, except that the same shall be subject to review by the Supreme Court of the United States, upon certiorari, as provided in section 1254 of title 28 of the United States Code.
(5) NO STAY- The commencement of proceedings for judicial review under paragraph (4) shall not, unless specifically ordered by the court, operate as a stay of any order issued by the Bureau.
(c) Special Rules for Temporary Cease-and-desist Proceedings-
(1) IN GENERAL- Whenever the Bureau determines that the violation specified in the notice of charges served upon a person, including a service provider, pursuant to subsection (b), or the continuation thereof, is likely to cause the person to be insolvent or otherwise prejudice the interests of consumers before the completion of the proceedings conducted pursuant to subsection (b), the Bureau may issue a temporary order requiring the person to cease and desist from any such violation or practice and to take affirmative action to prevent or remedy such insolvency or other condition pending completion of such proceedings. Such order may include any requirement authorized under this subtitle. Such order shall become effective upon service upon the person and, unless set aside, limited, or suspended by a court in proceedings authorized by paragraph (2), shall remain effective and enforceable pending the completion of the administrative proceedings pursuant to such notice and until such time as the Bureau shall dismiss the charges specified in such notice, or if a cease-and-desist order is issued against the person, until the effective date of such order.
(2) APPEAL- Not later than 10 days after the covered person or service provider concerned has been served with a temporary cease-and-desist order, the person may apply to the United States district court for the judicial district in which the residence or principal office or place of business of the person is located, or the United States District Court for the District of Columbia, for an injunction setting aside, limiting, or suspending the enforcement, operation, or effectiveness of such order pending the completion of the administrative proceedings pursuant to the notice of charges served upon the person under subsection (b), and such court shall have jurisdiction to issue such injunction.
(3) INCOMPLETE OR INACCURATE RECORDS-
(A) TEMPORARY ORDER- If a notice of charges served under subsection (b) specifies, on the basis of particular facts and circumstances, that the books and records of a covered person or service provider are so incomplete or inaccurate that the Bureau is unable to determine the financial condition of that person or the details or purpose of any transaction or transactions that may have a material effect on the financial condition of that person, the Bureau may issue a temporary order requiring--
(i) the cessation of any activity or practice which gave rise, whether in whole or in part, to the incomplete or inaccurate state of the books or records; or
(ii) affirmative action to restore such books or records to a complete and accurate state, until the completion of the proceedings under subsection (b)(1).
(B) EFFECTIVE PERIOD- Any temporary order issued under subparagraph (A)--
(i) shall become effective upon service; and
(ii) unless set aside, limited, or suspended by a court in proceedings under paragraph (2), shall remain in effect and enforceable until the earlier of--
(I) the completion of the proceeding initiated under subsection (b) in connection with the notice of charges; or
(II) the date the Bureau determines, by examination or otherwise, that the books and records of the covered person or service provider are accurate and reflect the financial condition thereof.
(d) Special Rules for Enforcement of Orders-
(1) IN GENERAL- The Bureau may in its discretion apply to the United States district court within the jurisdiction of which the principal office or place of business of the person is located, for the enforcement of any effective and outstanding notice or order issued under this section, and such court shall have jurisdiction and power to order and require compliance herewith.
(2) EXCEPTION- Except as otherwise provided in this subsection, no court shall have jurisdiction to affect by injunction or otherwise the issuance or enforcement of any notice or order or to review, modify, suspend, terminate, or set aside any such notice or order.
(e) Rules- The Bureau shall prescribe rules establishing such procedures as may be necessary to carry out this section.
SEC. 1054. LITIGATION AUTHORITY.
(a) In General- If any person violates a Federal consumer financial law, the Bureau may, subject to sections 1024, 1025, and 1026, commence a civil action against such person to impose a civil penalty or to seek all appropriate legal and equitable relief including a permanent or temporary injunction as permitted by law.
(b) Representation- The Bureau may act in its own name and through its own attorneys in enforcing any provision of this title, rules thereunder, or any other law or regulation, or in any action, suit, or proceeding to which the Bureau is a party.
(c) Compromise of Actions- The Bureau may compromise or settle any action if such compromise is approved by the court.
(d) Notice to the Attorney General-
(1) IN GENERAL- When commencing a civil action under Federal consumer financial law, or any rule thereunder, the Bureau shall notify the Attorney General and, with respect to a civil action against an insured depository institution or insured credit union, the appropriate prudential regulator.
(2) NOTICE AND COORDINATION-
(A) NOTICE OF OTHER ACTIONS- In addition to any notice required under paragraph (1), the Bureau shall notify the Attorney General concerning any action, suit, or proceeding to which the Bureau is a party, except an action, suit, or proceeding that involves the offering or provision of consumer financial products or services.
(B) COORDINATION- In order to avoid conflicts and promote consistency regarding litigation of matters under Federal law, the Attorney General and the Bureau shall consult regarding the coordination of investigations and proceedings, including by negotiating an agreement for coordination by not later than 180 days after the designated transfer date. The agreement under this subparagraph shall include provisions to ensure that parallel investigations and proceedings involving the Federal consumer financial laws are conducted in a manner that avoids conflicts and does not impede the ability of the Attorney General to prosecute violations of Federal criminal laws.
(C) RULE OF CONSTRUCTION- Nothing in this paragraph shall be construed to limit the authority of the Bureau under this title, including the authority to interpret Federal consumer financial law.
(e) Appearance Before the Supreme Court- The Bureau may represent itself in its own name before the Supreme Court of the United States, provided that the Bureau makes a written request to the Attorney General within the 10-day period which begins on the date of entry of the judgment which would permit any party to file a petition for writ of certiorari, and the Attorney General concurs with such request or fails to take action within 60 days of the request of the Bureau.
(f) Forum- Any civil action brought under this title may be brought in a United States district court or in any court of competent jurisdiction of a state in a district in which the defendant is located or resides or is doing business, and such court shall have jurisdiction to enjoin such person and to require compliance with any Federal consumer financial law.
(g) Time for Bringing Action-
(1) IN GENERAL- Except as otherwise permitted by law or equity, no action may be brought under this title more than 3 years after the date of discovery of the violation to which an action relates.
(2) LIMITATIONS UNDER OTHER FEDERAL LAWS-
(A) IN GENERAL- An action arising under this title does not include claims arising solely under enumerated consumer laws.
(B) BUREAU AUTHORITY- In any action arising solely under an enumerated consumer law, the Bureau may commence, defend, or intervene in the action in accordance with the requirements of that provision of law, as applicable.
(C) TRANSFERRED AUTHORITY- In any action arising solely under laws for which authorities were transferred under subtitles F and H, the Bureau may commence, defend, or intervene in the action in accordance with the requirements of that provision of law, as applicable.
SEC. 1055. RELIEF AVAILABLE.
(a) Administrative Proceedings or Court Actions-
(1) JURISDICTION- The court (or the Bureau, as the case may be) in an action or adjudication proceeding brought under Federal consumer financial law, shall have jurisdiction to grant any appropriate legal or equitable relief with respect to a violation of Federal consumer financial law, including a violation of a rule or order prescribed under a Federal consumer financial law.
(2) RELIEF- Relief under this section may include, without limitation--
(A) rescission or reformation of contracts;
(B) refund of moneys or return of real property;
(C) restitution;
(D) disgorgement or compensation for unjust enrichment;
(E) payment of damages or other monetary relief;
(F) public notification regarding the violation, including the costs of notification;
(G) limits on the activities or functions of the person; and
(H) civil money penalties, as set forth more fully in subsection (c).
(3) NO EXEMPLARY OR PUNITIVE DAMAGES- Nothing in this subsection shall be construed as authorizing the imposition of exemplary or punitive damages.
(b) Recovery of Costs- In any action brought by the Bureau, a State attorney general, or any State regulator to enforce any Federal consumer financial law, the Bureau, the State attorney general, or the State regulator may recover its costs in connection with prosecuting such action if the Bureau, the State attorney general, or the State regulator is the prevailing party in the action.
(c) Civil Money Penalty in Court and Administrative Actions-
(1) IN GENERAL- Any person that violates, through any act or omission, any provision of Federal consumer financial law shall forfeit and pay a civil penalty pursuant to this subsection.
(2) PENALTY AMOUNTS-
(A) FIRST TIER- For any violation of a law, rule, or final order or condition imposed in writing by the Bureau, a civil penalty may not exceed $5,000 for each day during which such violation or failure to pay continues.
(B) SECOND TIER- Notwithstanding paragraph (A), for any person that recklessly engages in a violation of a Federal consumer financial law, a civil penalty may not exceed $25,000 for each day during which such violation continues.
(C) THIRD TIER- Notwithstanding subparagraphs (A) and (B), for any person that knowingly violates a Federal consumer financial law, a civil penalty may not exceed $1,000,000 for each day during which such violation continues.
(3) MITIGATING FACTORS- In determining the amount of any penalty assessed under paragraph (2), the Bureau or the court shall take into account the appropriateness of the penalty with respect to--
(A) the size of financial resources and good faith of the person charged;
(B) the gravity of the violation or failure to pay;
(C) the severity of the risks to or losses of the consumer, which may take into account the number of products or services sold or provided;
(D) the history of previous violations; and
(E) such other matters as justice may require.
(4) AUTHORITY TO MODIFY OR REMIT PENALTY- The Bureau may compromise, modify, or remit any penalty which may be assessed or had already been assessed under paragraph (2). The amount of such penalty, when finally determined, shall be exclusive of any sums owed by the person to the United States in connection with the costs of the proceeding, and may be deducted from any sums owing by the United States to the person charged.
(5) NOTICE AND HEARING- No civil penalty may be assessed under this subsection with respect to a violation of any Federal consumer financial law, unless--
(A) the Bureau gives notice and an opportunity for a hearing to the person accused of the violation; or
(B) the appropriate court has ordered such assessment and entered judgment in favor of the Bureau.
SEC. 1056. REFERRALS FOR CRIMINAL PROCEEDINGS.
If the Bureau obtains evidence that any person, domestic or foreign, has engaged in conduct that may constitute a violation of Federal criminal law, the Bureau shall transmit such evidence to the Attorney General of the United States, who may institute criminal proceedings under appropriate law. Nothing in this section affects any other authority of the Bureau to disclose information.
SEC. 1057. EMPLOYEE PROTECTION.
(a) In General- No covered person or service provider shall terminate or in any other way discriminate against, or cause to be terminated or discriminated against, any covered employee or any authorized representative of covered employees by reason of the fact that such employee or representative, whether at the initiative of the employee or in the ordinary course of the duties of the employee (or any person acting pursuant to a request of the employee), has--
(1) provided, caused to be provided, or is about to provide or cause to be provided, information to the employer, the Bureau, or any other State, local, or Federal, government authority or law enforcement agency relating to any violation of, or any act or omission that the employee reasonably believes to be a violation of, any provision of this title or any other provision of law that is subject to the jurisdiction of the Bureau, or any rule, order, standard, or prohibition prescribed by the Bureau;
(2) testified or will testify in any proceeding resulting from the administration or enforcement of any provision of this title or any other provision of law that is subject to the jurisdiction of the Bureau, or any rule, order, standard, or prohibition prescribed by the Bureau;
(3) filed, instituted, or caused to be filed or instituted any proceeding under any Federal consumer financial law; or
(4) objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any law, rule, order, standard, or prohibition, subject to the jurisdiction of, or enforceable by, the Bureau.
(b) Definition of Covered Employee- For the purposes of this section, the term ‘covered employee’ means any individual performing tasks related to the offering or provision of a consumer financial product or service.
(c) Procedures and Timetables-
(1) COMPLAINT-
(A) IN GENERAL- A person who believes that he or she has been discharged or otherwise discriminated against by any person in violation of subsection (a) may, not later than 180 days after the date on which such alleged violation occurs, file (or have any person file on his or her behalf) a complaint with the Secretary of Labor alleging such discharge or discrimination and identifying the person responsible for such act.
(B) ACTIONS OF SECRETARY OF LABOR- Upon receipt of such a complaint, the Secretary of Labor shall notify, in writing, the person named in the complaint who is alleged to have committed the violation, of--
(i) the filing of the complaint;
(ii) the allegations contained in the complaint;
(iii) the substance of evidence supporting the complaint; and
(iv) opportunities that will be afforded to such person under paragraph (2).
(2) INVESTIGATION BY SECRETARY OF LABOR-
(A) IN GENERAL- Not later than 60 days after the date of receipt of a complaint filed under paragraph (1), and after affording the complainant and the person named in the complaint who is alleged to have committed the violation that is the basis for the complaint an opportunity to submit to the Secretary of Labor a written response to the complaint and an opportunity to meet with a representative of the Secretary of Labor to present statements from witnesses, the Secretary of Labor shall--
(i) initiate an investigation and determine whether there is reasonable cause to believe that the complaint has merit; and
(ii) notify the complainant and the person alleged to have committed the violation of subsection (a), in writing, of such determination.
(B) NOTICE OF RELIEF AVAILABLE- If the Secretary of Labor concludes that there is reasonable cause to believe that a violation of subsection (a) has occurred, the Secretary of Labor shall, together with the notice under subparagraph (A)(ii), issue a preliminary order providing the relief prescribed by paragraph (4)(B).
(C) REQUEST FOR HEARING- Not later than 30 days after the date of receipt of notification of a determination of the Secretary of Labor under this paragraph, either the person alleged to have committed the violation or the complainant may file objections to the findings or preliminary order, or both, and request a hearing on the record. The filing of such objections shall not operate to stay any reinstatement remedy contained in the preliminary order. Any such hearing shall be conducted expeditiously, and if a hearing is not requested in such 30-day period, the preliminary order shall be deemed a final order that is not subject to judicial review.
(3) GROUNDS FOR DETERMINATION OF COMPLAINTS-
(A) IN GENERAL- The Secretary of Labor shall dismiss a complaint filed under this subsection, and shall not conduct an investigation otherwise required under paragraph (2), unless the complainant makes a prima facie showing that any behavior described in paragraphs (1) through (4) of subsection (a) was a contributing factor in the unfavorable personnel action alleged in the complaint.
(B) REBUTTAL EVIDENCE- Notwithstanding a finding by the Secretary of Labor that the complainant has made the showing required under subparagraph (A), no investigation otherwise required under paragraph (2) shall be conducted, if the employer demonstrates, by clear and convincing evidence, that the employer would have taken the same unfavorable personnel action in the absence of that behavior.
(C) EVIDENTIARY STANDARDS- The Secretary of Labor may determine that a violation of subsection (a) has occurred only if the complainant demonstrates that any behavior described in paragraphs (1) through (4) of subsection (a) was a contributing factor in the unfavorable personnel action alleged in the complaint. Relief may not be ordered under subparagraph (A) if the employer demonstrates by clear and convincing evidence that the employer would have taken the same unfavorable personnel action in the absence of that behavior.
(4) ISSUANCE OF FINAL ORDERS; REVIEW PROCEDURES-
(A) TIMING- Not later than 120 days after the date of conclusion of any hearing under paragraph (2), the Secretary of Labor shall issue a final order providing the relief prescribed by this paragraph or denying the complaint. At any time before issuance of a final order, a proceeding under this subsection may be terminated on the basis of a settlement agreement entered into by the Secretary of Labor, the complainant, and the person alleged to have committed the violation.
(B) PENALTIES-
(i) ORDER OF SECRETARY OF LABOR- If, in response to a complaint filed under paragraph (1), the Secretary of Labor determines that a violation of subsection (a) has occurred, the Secretary of Labor shall order the person who committed such violation--
(I) to take affirmative action to abate the violation;
(II) to reinstate the complainant to his or her former position, together with compensation (including back pay) and restore the terms, conditions, and privileges associated with his or her employment; and
(III) to provide compensatory damages to the complainant.
(ii) PENALTY- If an order is issued under clause (i), the Secretary of Labor, at the request of the complainant, shall assess against the person against whom the order is issued, a sum equal to the aggregate amount of all costs and expenses (including attorney fees and expert witness fees) reasonably incurred, as determined by the Secretary of Labor, by the complainant for, or in connection with, the bringing of the complaint upon which the order was issued.
(C) PENALTY FOR FRIVOLOUS CLAIMS- If the Secretary of Labor finds that a complaint under paragraph (1) is frivolous or has been brought in bad faith, the Secretary of Labor may award to the prevailing employer a reasonable attorney fee, not exceeding $1,000, to be paid by the complainant.
(D) DE NOVO REVIEW-
(i) FAILURE OF THE SECRETARY TO ACT- If the Secretary of Labor has not issued a final order within 210 days after the date of filing of a complaint under this subsection, or within 90 days after the date of receipt of a written determination, the complainant may bring an action at law or equity for de novo review in the appropriate district court of the United States having jurisdiction, which shall have jurisdiction over such an action without regard to the amount in controversy, and which action shall, at the request of either party to such action, be tried by the court with a jury.
(ii) PROCEDURES- A proceeding under clause (i) shall be governed by the same legal burdens of proof specified in paragraph (3). The court shall have jurisdiction to grant all relief necessary to make the employee whole, including injunctive relief and compensatory damages, including--
(I) reinstatement with the same seniority status that the employee would have had, but for the discharge or discrimination;
(II) the amount of back pay, with interest; and
(III) compensation for any special damages sustained as a result of the discharge or discrimination, including litigation costs, expert witness fees, and reasonable attorney fees.
(E) OTHER APPEALS- Unless the complainant brings an action under subparagraph (D), any person adversely affected or aggrieved by a final order issued under subparagraph (A) may file a petition for review of the order in the United States Court of Appeals for the circuit in which the violation with respect to which the order was issued, allegedly occurred or the circuit in which the complainant resided on the date of such violation, not later than 60 days after the date of the issuance of the final order of the Secretary of Labor under subparagraph (A). Review shall conform to chapter 7 of title 5, United States Code. The commencement of proceedings under this subparagraph shall not, unless ordered by the court, operate as a stay of the order. An order of the Secretary of Labor with respect to which review could have been obtained under this subparagraph shall not be subject to judicial review in any criminal or other civil proceeding.
(5) FAILURE TO COMPLY WITH ORDER-
(A) ACTIONS BY THE SECRETARY- If any person has failed to comply with a final order issued under paragraph (4), the Secretary of Labor may file a civil action in the United States district court for the district in which the violation was found to have occurred, or in the United States district court for the District of Columbia, to enforce such order. In actions brought under this paragraph, the district courts shall have jurisdiction to grant all appropriate relief including injunctive relief and compensatory damages.
(B) CIVIL ACTIONS TO COMPEL COMPLIANCE- A person on whose behalf an order was issued under paragraph (4) may commence a civil action against the person to whom such order was issued to require compliance with such order. The appropriate United States district court shall have jurisdiction, without regard to the amount in controversy or the citizenship of the parties, to enforce such order.
(C) AWARD OF COSTS AUTHORIZED- The court, in issuing any final order under this paragraph, may award costs of litigation (including reasonable attorney and expert witness fees) to any party, whenever the court determines such award is appropriate.
(D) MANDAMUS PROCEEDINGS- Any nondiscretionary duty imposed by this section shall be enforceable in a mandamus proceeding brought under section 1361 of title 28, United States Code.
(d) Unenforceability of Certain Agreements-
(1) NO WAIVER OF RIGHTS AND REMEDIES- Except as provided under paragraph (3), and notwithstanding any other provision of law, the rights and remedies provided for in this section may not be waived by any agreement, policy, form, or condition of employment, including by any predispute arbitration agreement.
(2) NO PREDISPUTE ARBITRATION AGREEMENTS- Except as provided under paragraph (3), and notwithstanding any other provision of law, no predispute arbitration agreement shall be valid or enforceable to the extent that it requires arbitration of a dispute arising under this section.
(3) EXCEPTION- Notwithstanding paragraphs (1) and (2), an arbitration provision in a collective bargaining agreement shall be enforceable as to disputes arising under subsection (a)(4), unless the Bureau determines, by rule, that such provision is inconsistent with the purposes of this title.
SEC. 1058. EFFECTIVE DATE.
This subtitle shall become effective on the designated transfer date.
Subtitle F--Transfer of Functions and Personnel; Transitional Provisions
SEC. 1061. TRANSFER OF CONSUMER FINANCIAL PROTECTION FUNCTIONS.
(a) Defined Terms- For purposes of this subtitle--
(1) the term ‘consumer financial protection functions’ means--
(A) all authority to prescribe rules or issue orders or guidelines pursuant to any Federal consumer financial law, including performing appropriate functions to promulgate and review such rules, orders, and guidelines; and
(B) the examination authority described in subsection (c)(1), with respect to a person described in subsection 1025(a); and
(2) the terms ‘transferor agency’ and ‘transferor agencies’ mean, respectively--
(A) the Board of Governors (and any Federal reserve bank, as the context requires), the Federal Deposit Insurance Corporation, the Federal Trade Commission, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Department of Housing and Urban Development, and the heads of those agencies; and
(B) the agencies listed in subparagraph (A), collectively.
(b) In General- Except as provided in subsection (c), consumer financial protection functions are transferred as follows:
(1) BOARD OF GOVERNORS-
(A) TRANSFER OF FUNCTIONS- All consumer financial protection functions of the Board of Governors are transferred to the Bureau.
(B) BOARD OF GOVERNORS AUTHORITY- The Bureau shall have all powers and duties that were vested in the Board of Governors, relating to consumer financial protection functions, on the day before the designated transfer date.
(2) COMPTROLLER OF THE CURRENCY-
(A) TRANSFER OF FUNCTIONS- All consumer financial protection functions of the Comptroller of the Currency are transferred to the Bureau.
(B) COMPTROLLER AUTHORITY- The Bureau shall have all powers and duties that were vested in the Comptroller of the Currency, relating to consumer financial protection functions, on the day before the designated transfer date.
(3) DIRECTOR OF THE OFFICE OF THRIFT SUPERVISION-
(A) TRANSFER OF FUNCTIONS- All consumer financial protection functions of the Director of the Office of Thrift Supervision are transferred to the Bureau.
(B) DIRECTOR AUTHORITY- The Bureau shall have all powers and duties that were vested in the Director of the Office of Thrift Supervision, relating to consumer financial protection functions, on the day before the designated transfer date.
(4) FEDERAL DEPOSIT INSURANCE CORPORATION-
(A) TRANSFER OF FUNCTIONS- All consumer financial protection functions of the Federal Deposit Insurance Corporation are transferred to the Bureau.
(B) CORPORATION AUTHORITY- The Bureau shall have all powers and duties that were vested in the Federal Deposit Insurance Corporation, relating to consumer financial protection functions, on the day before the designated transfer date.
(5) FEDERAL TRADE COMMISSION-
(A) TRANSFER OF FUNCTIONS- The authority of the Federal Trade Commission under an enumerated consumer law to prescribe rules, issue guidelines, or conduct a study or issue a report mandated under such law shall be transferred to the Bureau on the designated transfer date. Nothing in this title shall be construed to require a mandatory transfer of any employee of the Federal Trade Commission.
(B) BUREAU AUTHORITY-
(i) IN GENERAL- The Bureau shall have all powers and duties under the enumerated consumer laws to prescribe rules, issue guidelines, or to conduct studies or issue reports mandated by such laws, that were vested in the Federal Trade Commission on the day before the designated transfer date.
(ii) FEDERAL TRADE COMMISSION ACT- Subject to subtitle B, the Bureau may enforce a rule prescribed under the Federal Trade Commission Act by the Federal Trade Commission with respect to an unfair or deceptive act or practice to the extent that such rule applies to a covered person or service provider with respect to the offering or provision of a consumer financial product or service as if it were a rule prescribed under section 1031 of this title.
(C) AUTHORITY OF THE FEDERAL TRADE COMMISSION-
(i) IN GENERAL- No provision of this title shall be construed as modifying, limiting, or otherwise affecting the authority of the Federal Trade Commission (including its authority with respect to affiliates described in section 1025(a)(1)) under the Federal Trade Commission Act or any other law, other than the authority under an enumerated consumer law to prescribe rules, issue official guidelines, or conduct a study or issue a report mandated under such law.
(ii) COMMISSION AUTHORITY RELATING TO RULES PRESCRIBED BY THE BUREAU- Subject to subtitle B, the Federal Trade Commission shall have authority to enforce under the Federal Trade Commission Act (15 U.S.C. 41 et seq.) a rule prescribed by the Bureau under this title with respect to a covered person subject to the jurisdiction of the Federal Trade Commission under that Act, and a violation of such a rule by such a person shall be treated as a violation of a rule issued under section 18 of that Act (15 U.S.C. 57a) with respect to unfair or deceptive acts or practices.
(D) COORDINATION- To avoid duplication of or conflict between rules prescribed by the Bureau under section 1031 of this title and the Federal Trade Commission under section 18(a)(1)(B) of the Federal Trade Commission Act that apply to a covered person or service provider with respect to the offering or provision of consumer financial products or services, the agencies shall negotiate an agreement with respect to rulemaking by each agency, including consultation with the other agency prior to proposing a rule and during the comment period.
(E) DEFERENCE- No provision of this title shall be construed as altering, limiting, expanding, or otherwise affecting the deference that a court affords to the--
(i) Federal Trade Commission in making determinations regarding the meaning or interpretation of any provision of the Federal Trade Commission Act, or of any other Federal law for which the Commission has authority to prescribe rules; or
(ii) Bureau in making determinations regarding the meaning or interpretation of any provision of a Federal consumer financial law (other than any law described in clause (i)).
(6) NATIONAL CREDIT UNION ADMINISTRATION-
(A) TRANSFER OF FUNCTIONS- All consumer financial protection functions of the National Credit Union Administration are transferred to the Bureau.
(B) NATIONAL CREDIT UNION ADMINISTRATION AUTHORITY- The Bureau shall have all powers and duties that were vested in the National Credit Union Administration, relating to consumer financial protection functions, on the day before the designated transfer date.
(7) DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT-
(A) TRANSFER OF FUNCTIONS- All consumer protection functions of the Secretary of the Department of Housing and Urban Development relating to the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 et seq.), the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. 5102 et seq.), and the Interstate Land Sales Full Disclosure Act (15 U.S.C. 1701 et seq.) are transferred to the Bureau.
(B) AUTHORITY OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT- The Bureau shall have all powers and duties that were vested in the Secretary of the Department of Housing and Urban Development relating to the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 et seq.), the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.), and the Interstate Land Sales Full Disclosure Act (15 U.S.C. 1701 et seq.), on the day before the designated transfer date.
(c) Authorities of the Prudential Regulators-
(1) EXAMINATION- A transferor agency that is a prudential regulator shall have--
(A) authority to require reports from and conduct examinations for compliance with Federal consumer financial laws with respect to a person described in section 1025(a), that is incidental to the backup and enforcement procedures provided to the regulator under section 1025(c); and
(B) exclusive authority (relative to the Bureau) to require reports from and conduct examinations for compliance with Federal consumer financial laws with respect to a person described in section 1026(a), except as provided to the Bureau under subsections (b) and (c) of section 1026.
(2) ENFORCEMENT-
(A) LIMITATION- The authority of a transferor agency that is a prudential regulator to enforce compliance with Federal consumer financial laws with respect to a person described in section 1025(a), shall be limited to the backup and enforcement procedures in described in section 1025(c).
(B) EXCLUSIVE AUTHORITY- A transferor agency that is a prudential regulator shall have exclusive authority (relative to the Bureau) to enforce compliance with Federal consumer financial laws with respect to a person described in section 1026(a), except as provided to the Bureau under subsections (b) and (c) of section 1026.
(C) STATUTORY ENFORCEMENT- For purposes of carrying out the authorities under, and subject to the limitations of, subtitle B, each prudential regulator may enforce compliance with the requirements imposed under this title, and any rule or order prescribed by the Bureau under this title, under--
(i) the Federal Credit Union Act (12 U.S.C. 1751 et seq.), by the National Credit Union Administration Board with respect to any covered person or service provider that is an insured credit union, or service provider thereto, or any affiliate of an insured credit union, who is subject to the jurisdiction of the Board under that Act; and
(ii) section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818), by the appropriate Federal banking agency, as defined in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), with respect to a covered person or service provider that is a person described in section 3(q) of that Act and who is subject to the jurisdiction of that agency, as set forth in sections 3(q) and 8 of the Federal Deposit Insurance Act; or
(iii) the Bank Service Company Act (12 U.S.C. 1861 et seq.).
(d) Effective Date- Subsections (b) and (c) shall become effective on the designated transfer date.
SEC. 1062. DESIGNATED TRANSFER DATE.
(a) In General- Not later than 60 days after the date of enactment of this Act, the Secretary shall--
(1) in consultation with the Chairman of the Board of Governors, the Chairperson of the Corporation, the Chairman of the Federal Trade Commission, the Chairman of the National Credit Union Administration Board, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Secretary of the Department of Housing and Urban Development, and the Director of the Office of Management and Budget, designate a single calendar date for the transfer of functions to the Bureau under section 1061; and
(2) publish notice of that designated date in the Federal Register.
(b) Changing Designation- The Secretary--
(1) may, in consultation with the Chairman of the Board of Governors, the Chairperson of the Federal Deposit Insurance Corporation, the Chairman of the Federal Trade Commission, the Chairman of the National Credit Union Administration Board, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Secretary of the Department of Housing and Urban Development, and the Director of the Office of Management and Budget, change the date designated under subsection (a); and
(2) shall publish notice of any changed designated date in the Federal Register.
(c) Permissible Dates-
(1) IN GENERAL- Except as provided in paragraph (2), any date designated under this section shall be not earlier than 180 days, nor later than 12 months, after the date of enactment of this Act.
(2) EXTENSION OF TIME- The Secretary may designate a date that is later than 12 months after the date of enactment of this Act if the Secretary transmits to appropriate committees of Congress--
(A) a written determination that orderly implementation of this title is not feasible before the date that is 12 months after the date of enactment of this Act;
(B) an explanation of why an extension is necessary for the orderly implementation of this title; and
(C) a description of the steps that will be taken to effect an orderly and timely implementation of this title within the extended time period.
(3) EXTENSION LIMITED- In no case may any date designated under this section be later than 18 months after the date of enactment of this Act.
SEC. 1063. SAVINGS PROVISIONS.
(a) Board of Governors-
(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED- Section 1061(b)(1) does not affect the validity of any right, duty, or obligation of the United States, the Board of Governors (or any Federal reserve bank), or any other person that--
(A) arises under any provision of law relating to any consumer financial protection function of the Board of Governors transferred to the Bureau by this title; and
(B) existed on the day before the designated transfer date.
(2) CONTINUATION OF SUITS- No provision of this Act shall abate any proceeding commenced by or against the Board of Governors (or any Federal reserve bank) before the designated transfer date with respect to any consumer financial protection function of the Board of Governors (or any Federal reserve bank) transferred to the Bureau by this title, except that the Bureau, subject to sections 1024, 1025, and 1026, shall be substituted for the Board of Governors (or Federal reserve bank) as a party to any such proceeding as of the designated transfer date.
(b) Federal Deposit Insurance Corporation-
(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED- Section 1061(b)(4) does not affect the validity of any right, duty, or obligation of the United States, the Federal Deposit Insurance Corporation, the Board of Directors of that Corporation, or any other person, that--
(A) arises under any provision of law relating to any consumer financial protection function of the Federal Deposit Insurance Corporation transferred to the Bureau by this title; and
(B) existed on the day before the designated transfer date.
(2) CONTINUATION OF SUITS- No provision of this Act shall abate any proceeding commenced by or against the Federal Deposit Insurance Corporation (or the Board of Directors of that Corporation) before the designated transfer date with respect to any consumer financial protection function of the Federal Deposit Insurance Corporation transferred to the Bureau by this title, except that the Bureau, subject to sections 1024, 1025, and 1026, shall be substituted for the Federal Deposit Insurance Corporation (or Board of Directors) as a party to any such proceeding as of the designated transfer date.
(c) Federal Trade Commission- Section 1061(b)(5) does not affect the validity of any right, duty, or obligation of the United States, the Federal Trade Commission, or any other person, that--
(1) arises under any provision of law relating to any consumer financial protection function of the Federal Trade Commission transferred to the Bureau by this title; and
(2) existed on the day before the designated transfer date.
(d) National Credit Union Administration-
(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED- Section 1061(b)(6) does not affect the validity of any right, duty, or obligation of the United States, the National Credit Union Administration, the National Credit Union Administration Board, or any other person, that--
(A) arises under any provision of law relating to any consumer financial protection function of the National Credit Union Administration transferred to the Bureau by this title; and
(B) existed on the day before the designated transfer date.
(2) CONTINUATION OF SUITS- No provision of this Act shall abate any proceeding commenced by or against the National Credit Union Administration (or the National Credit Union Administration Board) before the designated transfer date with respect to any consumer financial protection function of the National Credit Union Administration transferred to the Bureau by this title, except that the Bureau, subject to sections 1024, 1025, and 1026, shall be substituted for the National Credit Union Administration (or National Credit Union Administration Board) as a party to any such proceeding as of the designated transfer date.
(e) Office of the Comptroller of the Currency-
(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED- Section 1061(b)(2) does not affect the validity of any right, duty, or obligation of the United States, the Comptroller of the Currency, the Office of the Comptroller of the Currency, or any other person, that--
(A) arises under any provision of law relating to any consumer financial protection function of the Comptroller of the Currency transferred to the Bureau by this title; and
(B) existed on the day before the designated transfer date.
(2) CONTINUATION OF SUITS- No provision of this Act shall abate any proceeding commenced by or against the Comptroller of the Currency (or the Office of the Comptroller of the Currency) with respect to any consumer financial protection function of the Comptroller of the Currency transferred to the Bureau by this title before the designated transfer date, except that the Bureau, subject to sections 1024, 1025, and 1026, shall be substituted for the Comptroller of the Currency (or the Office of the Comptroller of the Currency) as a party to any such proceeding as of the designated transfer date.
(f) Office of Thrift Supervision-
(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED- Section 1061(b)(3) does not affect the validity of any right, duty, or obligation of the United States, the Director of the Office of Thrift Supervision, the Office of Thrift Supervision, or any other person, that--
(A) arises under any provision of law relating to any consumer financial protection function of the Director of the Office of Thrift Supervision transferred to the Bureau by this title; and
(B) that existed on the day before the designated transfer date.
(2) CONTINUATION OF SUITS- No provision of this Act shall abate any proceeding commenced by or against the Director of the Office of Thrift Supervision (or the Office of Thrift Supervision) with respect to any consumer financial protection function of the Director of the Office of Thrift Supervision transferred to the Bureau by this title before the designated transfer date, except that the Bureau, subject to sections 1024, 1025, and 1026, shall be substituted for the Director (or the Office of Thrift Supervision) as a party to any such proceeding as of the designated transfer date.
(g) Department of Housing and Urban Development-
(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED- Section 1061(b)(7) shall not affect the validity of any right, duty, or obligation of the United States, the Secretary of the Department of Housing and Urban Development (or the Department of Housing and Urban Development), or any other person, that--
(A) arises under any provision of law relating to any function of the Secretary of the Department of Housing and Urban Development with respect to the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 et seq.), the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. 5102 et seq.), or the Interstate Land Sales Full Disclosure Act (15 U.S.C. 1701 et seq) transferred to the Bureau by this title; and
(B) existed on the day before the designated transfer date.
(2) CONTINUATION OF SUITS- This title shall not abate any proceeding commenced by or against the Secretary of the Department of Housing and Urban Development (or the Department of Housing and Urban Development) with respect to any consumer financial protection function of the Secretary of the Department of Housing and Urban Development transferred to the Bureau by this title before the designated transfer date, except that the Bureau, subject to sections 1024, 1025, and 1026, shall be substituted for the Secretary of the Department of Housing and Urban Development (or the Department of Housing and Urban Development) as a party to any such proceeding as of the designated transfer date.
(h) Continuation of Existing Orders, Rulings, Determinations, Agreements, and Resolutions-
(1) IN GENERAL- Except as provided in paragraph (2) and under subsection (i), all orders, resolutions, determinations, agreements, and rulings that have been issued, made, prescribed, or allowed to become effective by any transferor agency or by a court of competent jurisdiction, in the performance of consumer financial protection functions that are transferred by this title and that are in effect on the day before the designated transfer date, shall continue in effect, and shall continue to be enforceable by the appropriate transferor agency, according to the terms of those orders, resolutions, determinations, agreements, and rulings, and shall not be enforceable by or against the Bureau.
(2) EXCEPTION FOR ORDERS APPLICABLE TO PERSONS DESCRIBED IN SECTION 1025(a)- All orders, resolutions, determinations, agreements, and rulings that have been issued, made, prescribed, or allowed to become effective by any transferor agency or by a court of competent jurisdiction, in the performance of consumer financial protection functions that are transferred by this title and that are in effect on the day before the designated transfer date with respect to any person described in section 1025(a), shall continue in effect, according to the terms of those orders, resolutions, determinations, agreements, and rulings, and shall be enforceable by or against the Bureau or transferor agency.
(i) Identification of Rules and Orders Continued- Not later than the designated transfer date, the Bureau--
(1) shall, after consultation with the head of each transferor agency, identify the rules and orders that will be enforced by the Bureau; and
(2) shall publish a list of such rules and orders in the Federal Register.
(j) Status of Rules Proposed or Not Yet Effective-
(1) PROPOSED RULES- Any proposed rule of a transferor agency which that agency, in performing consumer financial protection functions transferred by this title, has proposed before the designated transfer date, but has not been published as a final rule before that date, shall be deemed to be a proposed rule of the Bureau.
(2) RULES NOT YET EFFECTIVE- Any interim or final rule of a transferor agency which that agency, in performing consumer financial protection functions transferred by this title, has published before the designated transfer date, but which has not become effective before that date, shall become effective as a rule of the Bureau according to its terms.
SEC. 1064. TRANSFER OF CERTAIN PERSONNEL.
(a) In General-
(1) CERTAIN FEDERAL RESERVE SYSTEM EMPLOYEES TRANSFERRED-
(A) IDENTIFYING EMPLOYEES FOR TRANSFER- The Bureau and the Board of Governors shall--
(i) jointly determine the number of employees of the Board of Governors necessary to perform or support the consumer financial protection functions of the Board of Governors that are transferred to the Bureau by this title; and
(ii) consistent with the number determined under clause (i), jointly identify employees of the Board of Governors for transfer to the Bureau, in a manner that the Bureau and the Board of Governors, in their sole discretion, determine equitable.
(B) IDENTIFIED EMPLOYEES TRANSFERRED- All employees of the Board of Governors identified under subparagraph (A)(ii) shall be transferred to the Bureau for employment.
(C) FEDERAL RESERVE BANK EMPLOYEES- Employees of any Federal reserve bank who are performing consumer financial protection functions on behalf of the Board of Governors shall be treated as employees of the Board of Governors for purposes of subparagraphs (A) and (B).
(2) CERTAIN FDIC EMPLOYEES TRANSFERRED-
(A) IDENTIFYING EMPLOYEES FOR TRANSFER- The Bureau and the Board of Directors of the Federal Deposit Insurance Corporation shall--
(i) jointly determine the number of employees of that Corporation necessary to perform or support the consumer financial protection functions of the Corporation that are transferred to the Bureau by this title; and
(ii) consistent with the number determined under clause (i), jointly identify employees of the Corporation for transfer to the Bureau, in a manner that the Bureau and the Board of Directors of the Corporation, in their sole discretion, determine equitable.
(B) IDENTIFIED EMPLOYEES TRANSFERRED- All employees of the Corporation identified under subparagraph (A)(ii) shall be transferred to the Bureau for employment.
(3) CERTAIN NCUA EMPLOYEES TRANSFERRED-
(A) IDENTIFYING EMPLOYEES FOR TRANSFER- The Bureau and the National Credit Union Administration Board shall--
(i) jointly determine the number of employees of the National Credit Union Administration necessary to perform or support the consumer financial protection functions of the National Credit Union Administration that are transferred to the Bureau by this title; and
(ii) consistent with the number determined under clause (i), jointly identify employees of the National Credit Union Administration for transfer to the Bureau, in a manner that the Bureau and the National Credit Union Administration Board, in their sole discretion, determine equitable.
(B) IDENTIFIED EMPLOYEES TRANSFERRED- All employees of the National Credit Union Administration identified under subparagraph (A)(ii) shall be transferred to the Bureau for employment.
(4) CERTAIN OFFICE OF THE COMPTROLLER OF THE CURRENCY EMPLOYEES TRANSFERRED-
(A) IDENTIFYING EMPLOYEES FOR TRANSFER- The Bureau and the Comptroller of the Currency shall--
(i) jointly determine the number of employees of the Office of the Comptroller of the Currency necessary to perform or support the consumer financial protection functions of the Office of the Comptroller of the Currency that are transferred to the Bureau by this title; and
(ii) consistent with the number determined under clause (i), jointly identify employees of the Office of the Comptroller of the Currency for transfer to the Bureau, in a manner that the Bureau and the Office of the Comptroller of the Currency, in their sole discretion, determine equitable.
(B) IDENTIFIED EMPLOYEES TRANSFERRED- All employees of the Office of the Comptroller of the Currency identified under subparagraph (A)(ii) shall be transferred to the Bureau for employment.
(5) CERTAIN OFFICE OF THRIFT SUPERVISION EMPLOYEES TRANSFERRED-
(A) IDENTIFYING EMPLOYEES FOR TRANSFER- The Bureau and the Director of the Office of Thrift Supervision shall--
(i) jointly determine the number of employees of the Office of Thrift Supervision necessary to perform or support the consumer financial protection functions of the Office of Thrift Supervision that are transferred to the Bureau by this title; and
(ii) consistent with the number determined under clause (i), jointly identify employees of the Office of Thrift Supervision for transfer to the Bureau, in a manner that the Bureau and the Office of Thrift Supervision, in their sole discretion, determine equitable.
(B) IDENTIFIED EMPLOYEES TRANSFERRED- All employees of the Office of Thrift Supervision identified under subparagraph (A)(ii) shall be transferred to the Bureau for employment.
(6) CERTAIN EMPLOYEES OF DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT TRANSFERRED-
(A) IDENTIFYING EMPLOYEES FOR TRANSFER- The Bureau and the Secretary of the Department of Housing and Urban Development shall--
(i) jointly determine the number of employees of the Department of Housing and Urban Development necessary to perform or support the consumer protection functions of the Department that are transferred to the Bureau by this title; and
(ii) consistent with the number determined under clause (i), jointly identify employees of the Department of Housing and Urban Development for transfer to the Bureau in a manner that the Bureau and the Secretary of the Department of Housing and Urban Development, in their sole discretion, deem equitable.
(B) IDENTIFIED EMPLOYEES TRANSFERRED- All employees of the Department of Housing and Urban Development identified under subparagraph (A)(ii) shall be transferred to the Bureau for employment.
(7) CONSUMER EDUCATION, FINANCIAL LITERACY, CONSUMER COMPLAINTS, AND RESEARCH FUNCTIONS- The Bureau and each of the transferor agencies (except the Federal Trade Commission) shall jointly determine the number of employees and the types and grades of employees necessary to perform the functions of the Bureau under subtitle A, including consumer education, financial literacy, policy analysis, responses to consumer complaints and inquiries, research, and similar functions. All employees jointly identified under this paragraph shall be transferred to the Bureau for employment.
(8) AUTHORITY OF THE PRESIDENT TO RESOLVE DISPUTES-
(A) ACTION AUTHORIZED- In the event that the Bureau and a transferor agency are unable to reach an agreement under paragraphs (1) through (7) by the designated transfer date, the President, or the designee thereof, may issue an order or directive to the transferor agency to effect the transfer of personnel and property under this subtitle.
(B) TRANSMITTAL TO CONGRESS REQUIRED- If an order or directive is issued under subparagraph (A), the President shall transmit a copy of the written determination made with respect to such order or directive, including an explanation for the need for the order or directive, to the Committee on Banking, Housing, and Urban Affairs and the Committee on Appropriations of the Senate and the Committee on Financial Services and the Committee on Appropriations of the House of Representatives.
(C) SUNSET- The authority provided in this paragraph shall terminate 3 years after the designated transfer date.
(9) APPOINTMENT AUTHORITY FOR EXCEPTED SERVICE AND SENIOR EXECUTIVE SERVICE TRANSFERRED-
(A) IN GENERAL- In the case of an employee occupying a position in the excepted service or the Senior Executive Service, any appointment authority established pursuant to law or regulations of the Office of Personnel Management for filling such positions shall be transferred, subject to subparagraph (B).
(B) DECLINING TRANSFERS ALLOWED- An agency or entity may decline to make a transfer of authority under subparagraph (A) (and the employees appointed pursuant thereto) to the extent that such authority relates to positions excepted from the competitive service because of their confidential, policy-making, policy-determining, or policy-advocating character, and non-career positions in the Senior Executive Service (within the meaning of section 3132(a)(7) of title 5, United States Code).
(b) Timing of Transfers and Position Assignments- Each employee to be transferred under this section shall--
(1) be transferred not later than 90 days after the designated transfer date; and
(2) receive notice of a position assignment not later than 120 days after the effective date of his or her transfer.
(c) Transfer of Function-
(1) IN GENERAL- Notwithstanding any other provision of law, the transfer of employees shall be deemed a transfer of functions for the purpose of section 3503 of title 5, United States Code.
(2) PRIORITY OF THIS TITLE- If any provisions of this title conflict with any protection provided to transferred employees under section 3503 of title 5, United States Code, the provisions of this title shall control.
(d) Equal Status and Tenure Positions-
(1) EMPLOYEES TRANSFERRED FROM THE FEDERAL RESERVE SYSTEM, FDIC, HUD, NCUA, OCC, AND OTS- Each employee transferred to the Bureau from the Board of Governors, a Federal reserve bank, the Federal Deposit Insurance Corporation, the Department of Housing and Urban Development, the National Credit Union Administration, the Office of the Comptroller of the Currency, or the Office of Thrift Supervision shall be placed in a position at the Bureau with the same status and tenure as that employee held on the day before the designated transfer date.
(2) EMPLOYEES TRANSFERRED FROM THE FEDERAL RESERVE SYSTEM- For purposes of determining the status and position placement of a transferred employee, any period of service with the Board of Governors or a Federal reserve bank shall be credited as a period of service with a Federal agency.
(e) Additional Certification Requirements Limited- Examiners transferred to the Bureau are not subject to any additional certification requirements before being placed in a comparable examiner position at the Bureau examining the same types of institutions as they examined before they were transferred.
(f) Personnel Actions Limited-
(1) 2-year PROTECTION- Except as provided in paragraph (2), each transferred employee holding a permanent position on the day before the designated transfer date may not, during the 2-year period beginning on the designated transfer date, be involuntarily separated, or involuntarily reassigned outside his or her locality pay area.
(2) EXCEPTIONS- Paragraph (1) does not limit the right of the Bureau--
(A) to separate an employee for cause or for unacceptable performance;
(B) to terminate an appointment to a position excepted from the competitive service because of its confidential policy-making, policy-determining, or policy-advocating character; or
(C) to reassign a supervisory employee outside of his or her locality pay area when the Bureau determines that the reassignment is necessary for the efficient operation of the Bureau.
(g) Pay-
(1) 2-year PROTECTION-
(A) IN GENERAL- Except as provided in paragraph (2), each transferred employee shall, during the 2-year period beginning on the designated transfer date, receive pay at a rate equal to not less than the basic rate of pay (including any geographic differential) that the employee received during the pay period immediately preceding the date of transfer.
(B) LIMITATION- Notwithstanding subparagraph (A), if the employee was receiving a higher rate of basic pay on a temporary basis (because of a temporary assignment, temporary promotion, or other temporary action) immediately before the date of transfer, the Bureau may reduce the rate of basic pay on the date on which the rate would have been reduced but for the transfer, and the protected rate for the remainder of the 2-year period shall be the reduced rate that would have applied, but for the transfer.
(2) EXCEPTIONS- Paragraph (1) does not limit the right of the Bureau to reduce the rate of basic pay of a transferred employee--
(A) for cause;
(B) for unacceptable performance; or
(C) with the consent of the employee.
(3) PROTECTION ONLY WHILE EMPLOYED- Paragraph (1) applies to a transferred employee only while that employee remains employed by the Bureau.
(4) PAY INCREASES PERMITTED- Paragraph (1) does not limit the authority of the Bureau to increase the pay of a transferred employee.
(h) Reorganization-
(1) BETWEEN 1ST AND 3RD YEAR-
(A) IN GENERAL- If the Bureau determines, during the 2-year period beginning 1 year after the designated transfer date, that a reorganization of the staff of the Bureau is required--
(i) that reorganization shall be deemed a ‘substantial reorganization’ for purposes of affording affected employees retirement under section 8336(d)(2) or 8414(b)(1)(B) of title 5, United States Code;
(ii) before the reorganization occurs, all employees in the same locality pay area as defined by the Office of Personnel Management shall be placed in a uniform position classification system; and
(iii) any resulting reduction in force shall be governed by the provisions of chapter 35 of title 5, United States Code, except that the Bureau shall--
(I) establish competitive areas (as that term is defined in regulations issued by the Office of Personnel Management) to include at a minimum all employees in the same locality pay area as defined by the Office of Personnel Management;
(II) establish competitive levels (as that term is defined in regulations issued by the Office of Personnel Management) without regard to whether the particular employees have been appointed to positions in the competitive service or the excepted service; and
(III) afford employees appointed to positions in the excepted service (other than to a position excepted from the competitive service because of its confidential policy-making, policy-determining, or policy-advocating character) the same assignment rights to positions within the Bureau as employees appointed to positions in the competitive service.
(B) SERVICE CREDIT FOR REDUCTIONS IN FORCE- For purposes of this paragraph, periods of service with a Federal home loan bank, a joint office of the Federal home loan banks, the Board of Governors, a Federal reserve bank, the Federal Deposit Insurance Corporation, or the National Credit Union Administration shall be credited as periods of service with a Federal agency.
(2) AFTER 3RD YEAR-
(A) IN GENERAL- If the Bureau determines, at any time after the 3-year period beginning on the designated transfer date, that a reorganization of the staff of the Bureau is required, any resulting reduction in force shall be governed by the provisions of chapter 35 of title 5, United States Code, except that the Bureau shall establish competitive levels (as that term is defined in regulations issued by the Office of Personnel Management) without regard to types of appointment held by particular employees transferred under this section.
(B) SERVICE CREDIT FOR REDUCTIONS IN FORCE- For purposes of this paragraph, periods of service with a Federal home loan bank, a joint office of the Federal home loan banks, the Board of Governors, a Federal reserve bank, the Federal Deposit Insurance Corporation, or the National Credit Union Administration shall be credited as periods of service with a Federal agency.
(i) Benefits-
(1) RETIREMENT BENEFITS FOR TRANSFERRED EMPLOYEES-
(A) IN GENERAL-
(i) CONTINUATION OF EXISTING RETIREMENT PLAN- Unless an election is made under clause (iii) or subparagraph (B), each employee transferred pursuant to this subtitle shall remain enrolled in the existing retirement plan of that employee as of the date of transfer, through any period of continuous employment with the Bureau.
(ii) EMPLOYER CONTRIBUTION- The Bureau shall pay any employer contributions to the existing retirement plan of each transferred employee, as required under that plan.
(iii) OPTION TO ELECT INTO THE FEDERAL RESERVE SYSTEM RETIREMENT PLAN AND FEDERAL RESERVE SYSTEM THRIFT PLAN- Any employee transferred pursuant to this subtitle may, during the 1-year period beginning 6 months after the designated transfer date, elect to end their participation and benefit accruals under their existing retirement plan or plans and elect to participate in both the Federal Reserve System Retirement Plan and the Federal Reserve System Thrift Plan, through any period of continuous employment with the Bureau, under the same terms as are applicable to Federal Reserve System transferred employees, as provided in subparagraph (C). An election of coverage by the Federal Reserve System Retirement Plan and the Federal Reserve System Thrift Plan shall begin on the day following the end of the 18-month period beginning on the designated transfer date, and benefit accruals under the existing retirement plan of the transferred employee shall end on the last day of the 18-month period beginning on the designated transfer date If an employee elects to participate in the Federal Reserve System Retirement Plan and the Federal Reserve System Thrift Plan, all of the service of the employee that was creditable under their existing retirement plan shall be transferred to the Federal Reserve System Retirement Plan on the day following the end of the 18-month period beginning on the designated transfer date.
(iv) BUREAU CONTRIBUTION- The Bureau shall pay an employer contribution to the Federal Reserve System Retirement Plan, in the amount established as an employer contribution under the Federal Employees Retirement System, as established under chapter 84 of title 5, United States Code, for each Bureau employee who elects to participate in the Federal Reserve System Retirement Plan under this subparagraph. The Bureau shall pay an employer contribution to the Federal Reserve System Thrift Plan for each Bureau employee who elects to participate in such plan, as required under the terms of the Federal Reserve System Thrift Plan.
(v) ADDITIONAL FUNDING- The Bureau shall transfer to the Federal Reserve System Retirement Plan an amount determined by the Board of Governors, in consultation with the Bureau, to be necessary to reimburse the Federal Reserve System Retirement Plan for the costs to such plan of providing benefits to employees electing coverage under the Federal Reserve System Retirement Plan under subparagraph (iii), and who were transferred to the Bureau from outside of the Federal Reserve System.
(vi) OPTION TO ELECT INTO THRIFT PLAN CREATED BY THE BUREAU- If the Bureau chooses to establish a thrift plan, the employees transferred pursuant to this subtitle shall have the option to elect, under such terms and conditions as the Bureau may establish, coverage under such a thrift plan established by the Bureau. Transferred employees may not remain in the thrift plan of the agency from which the employee transferred under this subtitle, if the employee elects to participate in a thrift plan established by the Bureau.
(B) OPTION FOR EMPLOYEES TRANSFERRED FROM FEDERAL RESERVE SYSTEM TO BE SUBJECT TO THE FEDERAL EMPLOYEE RETIREMENT PROGRAM-
(i) ELECTION- Any Federal Reserve System transferred employee who was enrolled in the Federal Reserve System Retirement Plan on the day before the date of his or her transfer to the Bureau may, during the 1-year period beginning 6 months after the designated transfer date, elect to be subject to the Federal Employee Retirement Program.
(ii) EFFECTIVE DATE OF COVERAGE- An election of coverage by the Federal Employee Retirement Program under this subparagraph shall begin on the day following the end of the 18-month period beginning on the designated transfer date, and benefit accruals under the existing retirement plan of the Federal Reserve System transferred employee shall end on the last day of the 18-month period beginning on the designated transfer date.
(C) BUREAU PARTICIPATION IN FEDERAL RESERVE SYSTEM RETIREMENT PLAN-
(i) BENEFITS PROVIDED- Federal Reserve System employees transferred pursuant to this subtitle shall continue to be eligible to participate in the Federal Reserve System Retirement Plan and Federal Reserve System Thrift Plan through any period of continuous employment with the Bureau, unless the employee makes an election under subparagraph (A)(vi) or (B). The retirement benefits, formulas, and features offered to the Federal Reserve System transferred employees shall be the same as those offered to employees of the Board of Governors who participate in the Federal Reserve System Retirement Plan and the Federal Reserve System Thrift Plan, as amended from time to time.
(ii) LIMITATION- The Bureau shall not have responsibility or authority--
(I) to amend an existing retirement plan (including the Federal Reserve System Retirement Plan or Federal Reserve System Thrift Plan);
(II) for administering an existing retirement plan (including the Federal Reserve System Retirement Plan or Federal Reserve System Thrift Plan); or
(III) for ensuring the plans comply with applicable laws, fiduciary rules, and related responsibilities.
(iii) TAX QUALIFIED STATUS- Notwithstanding any other provision of law, providing benefits to Federal Reserve System employees transferred to the Bureau pursuant to this subtitle, and to employees who elect coverage pursuant to subparagraph (A)(iii) or under section 1013(a)(2)(B), shall not cause any existing retirement plan (including the Federal Reserve System Retirement Plan and the Federal Reserve System Thrift Plan) to lose its tax-qualified status under sections 401(a) and 501(a) of the Internal Revenue Code of 1986.
(iv) BUREAU CONTRIBUTION- The Bureau shall pay any employer contributions to the existing retirement plan (including the Federal Reserve System Retirement Plan and the Federal Reserve System Thrift Plan) for each Federal Reserve System transferred employee participating in those plans, as required under the plan, after the designated transfer date.
(v) CONTROLLED GROUP STATUS- The Bureau is the same employer as the Federal Reserve System (as comprised of the Board of Governors and each of the 12 Federal reserve banks prior to the date of enactment of this Act) for purposes of subsections (b), (c), (m), and (o) of section 414 of the Internal Revenue Code of 1986 (26 U.S.C. 414).
(D) DEFINITIONS- For purposes of this paragraph--
(i) the term ‘existing retirement plan’ means, with respect to an employee transferred pursuant to this subtitle, the retirement plan (including the Financial Institutions Retirement Fund) and any associated thrift savings plan, of the agency from which the employee was transferred under this subtitle, in which the employee was enrolled on the day before the date on which the employee was transferred;
(ii) the term ‘Federal Employee Retirement Program’ means either the Civil Service Retirement System established under chapter 83 of title 5, United States Code, or the Federal Employees Retirement System established under chapter 84 of title 5, United States Code, depending upon the service history of the individual;
(iii) the term ‘Federal Reserve System transferred employee’ means a transferred employee who is an employee of the Board of Governors or a Federal reserve bank on the day before the designated transfer date, and who is transferred to the Bureau on the designated transfer date pursuant to this subtitle;
(iv) the term ‘Federal Reserve System Retirement Plan’ means the Retirement Plan for Employees of the Federal Reserve System; and
(v) the term ‘Federal Reserve System Thrift Plan’ means the Thrift Plan for Employees of the Federal Reserve System.
(2) BENEFITS OTHER THAN RETIREMENT BENEFITS FOR TRANSFERRED EMPLOYEES-
(A) DURING 1ST YEAR-
(i) EXISTING PLANS CONTINUE- Each employee transferred pursuant to this subtitle may, for 1 year after the designated transfer date, retain membership in any other employee benefit program of the agency or bank from which the employee transferred, including a medical, dental, vision, long term care, or life insurance program, to which the employee belonged on the day before the designated transfer date.
(ii) EMPLOYER CONTRIBUTION- The Bureau shall reimburse the agency or bank from which an employee was transferred for any cost incurred by that agency or bank in continuing to extend coverage in the benefit program to the employee, as required under that program or negotiated agreements.
(B) MEDICAL, DENTAL, VISION, OR LIFE INSURANCE AFTER FIRST YEAR- If, at the end of the 1-year period beginning on the designated transfer date, the Bureau has not established its own, or arranged for participation in another entity’s, medical, dental, vision, or life insurance program, an employee transferred pursuant to this subtitle who was a member of such a program at the agency or Federal reserve bank from which the employee transferred may, before the coverage of that employee ends under subparagraph (A)(i), elect to enroll, without regard to any regularly scheduled open season, in--
(i) the enhanced dental benefits program established under chapter 89A of title 5, United States Code;
(ii) the enhanced vision benefits established under chapter 89B of title 5, United States Code;
(iii) the Federal Employees Group Life Insurance Program established under chapter 87 of title 5, United States Code, without regard to any requirement of insurability; and
(iv) the Federal Employees Health Benefits Program established under chapter 89 of title 5, United States Code.
(C) LONG TERM CARE INSURANCE AFTER 1ST YEAR- If, at the end of the 1-year period beginning on the designated transfer date, the Bureau has not established its own, or arranged for participation in another entity’s, long term care insurance program, an employee transferred pursuant to this subtitle who was a member of such a program at the agency or Federal reserve bank from which the employee transferred may, before the coverage of that employee ends under subparagraph (A)(i), elect to apply for coverage under the Federal Long Term Care Insurance Program established under chapter 90 of title 5, United States Code, under the underwriting requirements applicable to a new active workforce member (as defined in part 875 of title 5, Code of Federal Regulations).
(D) EMPLOYEE CONTRIBUTION- An individual enrolled in the Federal Employees Health Benefits program shall pay any employee contribution required by the plan.
(E) ADDITIONAL FUNDING- The Bureau shall transfer to the Federal Employees Health Benefits Fund established under section 8909 of title 5, United States Code, an amount determined by the Director of the Office of Personnel Management, after consultation with the Bureau and the Office of Management and Budget, to be necessary to reimburse the Fund for the cost to the Fund of providing benefits under this paragraph.
(F) CREDIT FOR TIME ENROLLED IN OTHER PLANS- For employees transferred under this title, enrollment in a health benefits plan administered by a transferor agency or a Federal reserve bank, as the case may be, immediately before enrollment in a health benefits plan under chapter 89 of title 5, United States Code, shall be considered as enrollment in a health benefits plan under that chapter for purposes of section 8905(b)(1)(A) of title 5, United States Code.
(G) SPECIAL PROVISIONS TO ENSURE CONTINUATION OF LIFE INSURANCE BENEFITS-
(i) IN GENERAL- An annuitant (as defined in section 8901(3) of title 5, United States Code) who is enrolled in a life insurance plan administered by a transferor agency on the day before the designated transfer date shall be eligible for coverage by a life insurance plan under sections 8706(b), 8714a, 8714b, and 8714c of title 5, United States Code, or in a life insurance plan established by the Bureau, without regard to any regularly scheduled open season and requirement of insurability.
(ii) EMPLOYEE CONTRIBUTION- An individual enrolled in a life insurance plan under this subparagraph shall pay any employee contribution required by the plan.
(iii) ADDITIONAL FUNDING- The Bureau shall transfer to the Employees’ Life Insurance Fund established under section 8714 of title 5, United States Code, an amount determined by the Director of the Office of Personnel Management, after consultation with the Bureau and the Office of Management and Budget, to be necessary to reimburse the Fund for the cost to the Fund of providing benefits under this subparagraph not otherwise paid for by the employee under clause (ii).
(iv) CREDIT FOR TIME ENROLLED IN OTHER PLANS- For employees transferred under this title, enrollment in a life insurance plan administered by a transferor agency immediately before enrollment in a life insurance plan under chapter 87 of title 5, United States Code, shall be considered as enrollment in a life insurance plan under that chapter for purposes of section 8706(b)(1)(A) of title 5, United States Code.
(3) OPM RULES- The Office of Personnel Management shall issue such rules as are necessary to carry out this subsection.
(j) Implementation of Uniform Pay and Classification System- Not later than 2 years after the designated transfer date, the Bureau shall implement a uniform pay and classification system for all employees transferred under this title.
(k) Equitable Treatment- In administering the provisions of this section, the Bureau--
(1) shall take no action that would unfairly disadvantage transferred employees relative to each other based on their prior employment by the Board of Governors, the Federal Deposit Insurance Corporation, the Department of Housing and Urban Development, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, a Federal reserve bank, a Federal home loan bank, or a joint office of the Federal home loan banks; and
(2) may take such action as is appropriate in individual cases so that employees transferred under this section receive equitable treatment, with respect to the status, tenure, pay, benefits (other than benefits under programs administered by the Office of Personnel Management), and accrued leave or vacation time of those employees, for prior periods of service with any Federal agency, including the Board of Governors, the Corporation, the Department of Housing and Urban Development, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, a Federal reserve bank, a Federal home loan bank, or a joint office of the Federal home loan banks.
(l) Implementation- In implementing the provisions of this section, the Bureau shall coordinate with the Office of Personnel Management and other entities having expertise in matters related to employment to ensure a fair and orderly transition for affected employees.
SEC. 1065. INCIDENTAL TRANSFERS.
(a) Incidental Transfers Authorized- The Director of the Office of Management and Budget, in consultation with the Secretary, shall make such additional incidental transfers and dispositions of assets and liabilities held, used, arising from, available, or to be made available, in connection with the functions transferred by this title, as the Director may determine necessary to accomplish the purposes of this title.
(b) Sunset- The authority provided in this section shall terminate 5 years after the date of enactment of this Act.
SEC. 1066. INTERIM AUTHORITY OF THE SECRETARY.
(a) In General- The Secretary is authorized to perform the functions of the Bureau under this subtitle until the Director of the Bureau is confirmed by the Senate in accordance with section 1011.
(b) Interim Administrative Services by the Department of the Treasury- The Department of the Treasury may provide administrative services necessary to support the Bureau before the designated transfer date.
SEC. 1067. TRANSITION OVERSIGHT.
(a) Purpose- The purpose of this section is to ensure that the Bureau--
(1) has an orderly and organized startup;
(2) attracts and retains a qualified workforce; and
(3) establishes comprehensive employee training and benefits programs.
(b) Reporting Requirement-
(1) IN GENERAL- The Bureau shall submit an annual report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives that includes the plans described in paragraph (2).
(2) PLANS- The plans described in this paragraph are as follows:
(A) TRAINING AND WORKFORCE DEVELOPMENT PLAN- The Bureau shall submit a training and workforce development plan that includes, to the extent practicable--
(i) identification of skill and technical expertise needs and actions taken to meet those requirements;
(ii) steps taken to foster innovation and creativity;
(iii) leadership development and succession planning; and
(iv) effective use of technology by employees.
(B) WORKPLACE FLEXIBILITIES PLAN- The Bureau shall submit a workforce flexibility plan that includes, to the extent practicable--
(i) telework;
(ii) flexible work schedules;
(iii) phased retirement;
(iv) reemployed annuitants;
(v) part-time work;
(vi) job sharing;
(vii) parental leave benefits and childcare assistance;
(viii) domestic partner benefits;
(ix) other workplace flexibilities; or
(x) any combination of the items described in clauses (i) through (ix).
(C) RECRUITMENT AND RETENTION PLAN- The Bureau shall submit a recruitment and retention plan that includes, to the extent practicable, provisions relating to--
(i) the steps necessary to target highly qualified applicant pools with diverse backgrounds;
(ii) streamlined employment application processes;
(iii) the provision of timely notification of the status of employment applications to applicants; and
(iv) the collection of information to measure indicators of hiring effectiveness.
(c) Expiration- The reporting requirement under subsection (b) shall terminate 5 years after the date of enactment of this Act.
(d) Rule of Construction- Nothing in this section may be construed to affect--
(1) a collective bargaining agreement, as that term is defined in section 7103(a)(8) of title 5, United States Code, that is in effect on the date of enactment of this Act; or
(2) the rights of employees under chapter 71 of title 5, United States Code.
(e) Participation in Examinations- In order to prepare the Bureau to conduct examinations under section 1025 upon the designated transfer date, the Bureau and the applicable prudential regulator may agree to include, on a sampling basis, examiners on examinations of the compliance with Federal consumer financial law of institutions described in section 1025(a) conducted by the prudential regulators prior to the designated transfer date.
Subtitle G--Regulatory Improvements
SEC. 1071. SMALL BUSINESS DATA COLLECTION.
(a) In General- The Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.) is amended by inserting after section 704A the following:
‘SEC. 704B. SMALL BUSINESS LOAN DATA COLLECTION.
‘(a) Purpose- The purpose of this section is to facilitate enforcement of fair lending laws and enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses.
‘(b) Information Gathering- Subject to the requirements of this section, in the case of any application to a financial institution for credit for women-owned, minority-owned, or small business, the financial institution shall--
‘(1) inquire whether the business is a women-owned, minority-owned, or small business, without regard to whether such application is received in person, by mail, by telephone, by electronic mail or other form of electronic transmission, or by any other means, and whether or not such application is in response to a solicitation by the financial institution; and
‘(2) maintain a record of the responses to such inquiry, separate from the application and accompanying information.
‘(c) Right To Refuse- Any applicant for credit may refuse to provide any information requested pursuant to subsection (b) in connection with any application for credit.
‘(d) No Access by Underwriters-
‘(1) LIMITATION- Where feasible, no loan underwriter or other officer or employee of a financial institution, or any affiliate of a financial institution, involved in making any determination concerning an application for credit shall have access to any information provided by the applicant pursuant to a request under subsection (b) in connection with such application.
‘(2) LIMITED ACCESS- If a financial institution determines that a loan underwriter or other officer or employee of a financial institution, or any affiliate of a financial institution, involved in making any determination concerning an application for credit should have access to any information provided by the applicant pursuant to a request under subsection (b), the financial institution shall provide notice to the applicant of the access of the underwriter to such information, along with notice that the financial institution may not discriminate on the basis of such information.
‘(e) Form and Manner of Information-
‘(1) IN GENERAL- Each financial institution shall compile and maintain, in accordance with regulations of the Bureau, a record of the information provided by any loan applicant pursuant to a request under subsection (b).
‘(2) ITEMIZATION- Information compiled and maintained under paragraph (1) shall be itemized in order to clearly and conspicuously disclose--
‘(A) the number of the application and the date on which the application was received;
‘(B) the type and purpose of the loan or other credit being applied for;
‘(C) the amount of the credit or credit limit applied for, and the amount of the credit transaction or the credit limit approved for such applicant;
‘(D) the type of action taken with respect to such application, and the date of such action;
‘(E) the census tract in which is located the principal place of business of the women-owned, minority-owned, or small business loan applicant;
‘(F) the gross annual revenue of the business in the last fiscal year of the women-owned, minority-owned, or small business loan applicant preceding the date of the application;
‘(G) the race, sex, and ethnicity of the principal owners of the business; and
‘(H) any additional data that the Bureau determines would aid in fulfilling the purposes of this section.
‘(3) NO PERSONALLY IDENTIFIABLE INFORMATION- In compiling and maintaining any record of information under this section, a financial institution may not include in such record the name, specific address (other than the census tract required under paragraph (1)(E)), telephone number, electronic mail address, or any other personally identifiable information concerning any individual who is, or is connected with, the women-owned, minority-owned, or small business loan applicant.
‘(4) DISCRETION TO DELETE OR MODIFY PUBLICLY AVAILABLE DATA- The Bureau may, at its discretion, delete or modify data collected under this section which is or will be available to the public, if the Bureau determines that the deletion or modification of the data would advance a privacy interest.
‘(f) Availability of Information-
‘(1) SUBMISSION TO BUREAU- The data required to be compiled and maintained under this section by any financial institution shall be submitted annually to the Bureau.
‘(2) AVAILABILITY OF INFORMATION- Information compiled and maintained under this section shall be--
‘(A) retained for not less than 3 years after the date of preparation;
‘(B) made available to any member of the public, upon request, in the form required under regulations prescribed by the Bureau;
‘(C) annually made available to the public generally by the Bureau, in such form and in such manner as is determined by the Bureau, by regulation.
‘(3) COMPILATION OF AGGREGATE DATA- The Bureau may, at its discretion--
‘(A) compile and aggregate data collected under this section for its own use; and
‘(B) make public such compilations of aggregate data.
‘(g) Bureau Action-
‘(1) IN GENERAL- The Bureau shall prescribe such rules and issue such guidance as may be necessary to carry out, enforce, and compile data pursuant to this section.
‘(2) EXCEPTIONS- The Bureau, by rule or order, may adopt exceptions to any requirement of this section and may, conditionally or unconditionally, exempt any financial institution or class of financial institutions from the requirements of this section, as the Bureau deems necessary or appropriate to carry out the purposes of this section.
‘(3) GUIDANCE- The Bureau shall issue guidance designed to facilitate compliance with the requirements of this section, including assisting financial institutions in working with applicants to determine whether the applicants are women-owned, minority-owned, or small businesses for purposes of this section.
‘(h) Definitions- For purposes of this section, the following definitions shall apply:
‘(1) FINANCIAL INSTITUTION- The term ‘financial institution’ means any partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity that engages in any financial activity.
‘(2) SMALL BUSINESS- The term ‘small business’ has the same meaning as the term ‘small business concern’ in section 3 of the Small Business Act (15 U.S.C. 632).
‘(3) SMALL BUSINESS LOAN- The term ‘small business loan’ means a loan made to a small business.
‘(4) MINORITY- The term ‘minority’ has the same meaning as in section 1204(c)(3) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
‘(5) MINORITY-OWNED BUSINESS- The term ‘minority-owned business’ means a business--
‘(A) more than 50 percent of the ownership or control of which is held by 1 or more minority individuals; and
‘(B) more than 50 percent of the net profit or loss of which accrues to 1 or more minority individuals.
‘(6) WOMEN-OWNED BUSINESS- The term ‘women-owned business’ means a business--
‘(A) more than 50 percent of the ownership or control of which is held by 1 or more women; and
‘(B) more than 50 percent of the net profit or loss of which accrues to 1 or more women.’.
(b) Technical and Conforming Amendments- Section 701(b) of the Equal Credit Opportunity Act (15 U.S.C. 1691(b)) is amended--
(1) in paragraph (3), by striking ‘or’ at the end;
(2) in paragraph (4), by striking the period at the end and inserting ‘; or’; and
(3) by inserting after paragraph (4), the following:
‘(5) to make an inquiry under section 704B, in accordance with the requirements of that section.’.
(c) Clerical Amendment- The table of sections for title VII of the Consumer Credit Protection Act is amended by inserting after the item relating to section 704A the following new item:
‘704B. Small business loan data collection.’.
(d) Effective Date- This section shall become effective on the designated transfer date.
SEC. 1072. ASSISTANCE FOR ECONOMICALLY VULNERABLE INDIVIDUALS AND FAMILIES.
(a) HERA Amendments- Section 1132 of the Housing and Economic Recovery Act of 2008 (12 U.S.C. 1701x note) is amended--
(1) in subsection (a), by inserting in each of paragraphs (1), (2), (3), and (4) ‘or economically vulnerable individuals and families’ after ‘homebuyers’ each place that term appears;
(2) in subsection (b)(1), by inserting ‘or economically vulnerable individuals and families’ after ‘homebuyers’;
(3) in subsection (c)(1)--
(A) in subparagraph (A), by striking ‘or’ at the end;
(B) in subparagraph (B), by striking the period at the end and inserting ‘; or’; and
(C) by adding at the end the following:
‘(C) a nonprofit corporation that--
‘(i) is exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986; and
‘(ii) specializes or has expertise in working with economically vulnerable individuals and families, but whose primary purpose is not provision of credit counseling services.’; and
(4) in subsection (d)(1), by striking ‘not more than 5’.
(b) Applicability- Amendments made by subsection (a) shall not apply to programs authorized by section 1132 of the Housing and Economic Recovery Act of 2008 (12 U.S.C. 1701x note) that are funded with appropriations prior to fiscal year 2011.
SEC. 1073. REMITTANCE TRANSFERS.
(a) Treatment of Remittance Transfers- The Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.) is amended--
(1) in section 902(b) (15 U.S.C. 1693(b)), by inserting ‘and remittance’ after ‘electronic fund’;
(2) in section 904(c) (15 U.S.C. 1693b(c)), in the first sentence, by inserting ‘or remittance transfers’ after ‘electronic fund transfers’;
(3) by redesignating sections 919, 920, 921, and 922 as sections 920, 921, 922, and 923, respectively; and
(4) by inserting after section 918 the following:
‘SEC. 919. REMITTANCE TRANSFERS.
‘(a) Disclosures Required for Remittance Transfers-
‘(1) IN GENERAL- Each remittance transfer provider shall make disclosures as required under this section and in accordance with rules prescribed by the Board. Disclosures required under this section shall be in addition to any other disclosures applicable under this title.
‘(2) DISCLOSURES- Subject to rules prescribed by the Board, a remittance transfer provider shall provide, in writing and in a form that the sender may keep, to each sender requesting a remittance transfer, as applicable to the transaction--
‘(A) at the time at which the sender requests a remittance transfer to be initiated, and prior to the sender making any payment in connection with the remittance transfer, a disclosure describing--
‘(i) the amount of currency that will be received by the designated recipient, using the values of the currency into which the funds will be exchanged;
‘(ii) the amount of transfer and any other fees charged by the remittance transfer provider for the remittance transfer; and
‘(iii) any exchange rate to be used by the remittance transfer provider for the remittance transfer, to the nearest 1/100th of a point; and
‘(B) at the time at which the sender makes payment in connection with the remittance transfer--
‘(i) a receipt showing--
‘(I) the information described in subparagraph (A);
‘(II) the promised date of delivery to the designated recipient; and
‘(III) the name and either the telephone number or the address of the designated recipient, if either the telephone number or the address of the designated recipient is provided by the sender; and
‘(ii) a statement containing--
‘(I) information about the rights of the sender under this section regarding the resolution of errors; and
‘(II) appropriate contact information for--
‘(aa) the remittance transfer provider; and
‘(bb) the State agency that regulates the remittance transfer provider and the Board, including the toll-free telephone number established under section 1013 of the Consumer Financial Protection Act of 2010.
‘(3) REQUIREMENTS RELATING TO DISCLOSURES- With respect to each disclosure required to be provided under paragraph (2) a remittance transfer provider shall--
‘(A) provide an initial notice and receipt, as required by subparagraphs (A) and (B) of paragraph (2), and an error resolution statement, as required by subsection (d), that clearly and conspicuously describe the information required to be disclosed therein; and
‘(B) with respect to any transaction that a sender conducts electronically, comply with the Electronic Signatures in Global and National Commerce Act (15 U.S.C. 7001 et seq.).
‘(4) EXCEPTION FOR DISCLOSURES OF AMOUNT RECEIVED-
‘(A) IN GENERAL- Subject to the rules prescribed by the Board, and except as provided under subparagraph (B), the disclosures required regarding the amount of currency that will be received by the designated recipient shall be deemed to be accurate, so long as the disclosures provide a reasonably accurate estimate of the foreign currency to be received. This paragraph shall apply only to a remittance transfer provider who is an insured depository institution, as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813), or an insured credit union, as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752), and if--
‘(i) a remittance transfer is conducted through a demand deposit, savings deposit, or other asset account that the sender holds with such remittance transfer provider; and
‘(ii) at the time at which the sender requests the transaction, the remittance transfer provider is unable to know, for reasons beyond its control, the amount of currency that will be made available to the designated recipient.
‘(B) DEADLINE- The application of subparagraph (A) shall terminate 5 years after the date of enactment of the Consumer Financial Protection Act of 2010, unless the Board determines that termination of such provision would negatively affect the ability of remittance transfer providers described in subparagraph (A) to send remittances to locations in foreign countries, in which case, the Board may, by rule, extend the application of subparagraph (A) to not longer than 10 years after the date of enactment of the Consumer Financial Protection Act of 2010.
‘(5) EXEMPTION AUTHORITY- The Board may, by rule, permit a remittance transfer provider to satisfy the requirements of--
‘(A) paragraph (2)(A) orally, if the transaction is conducted entirely by telephone;
‘(B) paragraph (2)(B), in the case of a transaction conducted entirely by telephone, by mailing the disclosures required under such subparagraph to the sender, not later than 1 business day after the date on which the transaction is conducted, or by including such documents in the next periodic statement, if the telephone transaction is conducted through a demand deposit, savings deposit, or other asset account that the sender holds with the remittance transfer provider;
‘(C) subparagraphs (A) and (B) of paragraph (2) together in one written disclosure, but only to the extent that the information provided in accordance with paragraph (3)(A) is accurate at the time at which payment is made in connection with the subject remittance transfer; and
‘(D) paragraph (2)(A), without compliance with section 101(c) of the Electronic Signatures in Global Commerce Act, if a sender initiates the transaction electronically and the information is displayed electronically in a manner that the sender can keep.
‘(6) STOREFRONT AND INTERNET NOTICES-
‘(A) IN GENERAL-
‘(i) PROMINENT POSTING- Subject to subparagraph (B), the Board may prescribe rules to require a remittance transfer provider to prominently post, and timely update, a notice describing a model remittance transfer for one or more amounts, as the Board may determine, which notice shall show the amount of currency that will be received by the designated recipient, using the values of the currency into which the funds will be exchanged.
‘(ii) ONSITE DISPLAYS- The Board may require the notice prescribed under this subparagraph to be displayed in every physical storefront location owned or controlled by the remittance transfer provider.
‘(iii) INTERNET NOTICES- Subject to paragraph (3), the Board shall prescribe rules to require a remittance transfer provider that provides remittance transfers via the Internet to provide a notice, comparable to a storefront notice described in this subparagraph, located on the home page or landing page (with respect to such remittance transfer services) owned or controlled by the remittance transfer provider.
‘(iv) RULEMAKING AUTHORITY- In prescribing rules under this subparagraph, the Board may impose standards or requirements regarding the provision of the storefront and Internet notices required under this subparagraph and the provision of the disclosures required under paragraphs (2) and (3).
‘(B) STUDY AND ANALYSIS- Prior to proposing rules under subparagraph (A), the Board shall undertake appropriate studies and analyses, which shall be consistent with section 904(a)(2), and may include an advanced notice of proposed rulemaking, to determine whether a storefront notice or Internet notice facilitates the ability of a consumer--
‘(i) to compare prices for remittance transfers; and
‘(ii) to understand the types and amounts of any fees or costs imposed on remittance transfers.
‘(b) Foreign Language Disclosures- The disclosures required under this section shall be made in English and in each of the foreign languages principally used by the remittance transfer provider, or any of its agents, to advertise, solicit, or market, either orally or in writing, at that office.
‘(c) Regulations Regarding Transfers to Certain Nations- If the Board determines that a recipient nation does not legally allow, or the method by which transactions are made in the recipient country do not allow, a remittance transfer provider to know the amount of currency that will be received by the designated recipient, the Board may prescribe rules (not later than 18 months after the date of enactment of the Consumer Financial Protection Act of 2010) addressing the issue, which rules shall include standards for a remittance transfer provider to provide--
‘(1) a receipt that is consistent with subsections (a) and (b); and
‘(2) a reasonably accurate estimate of the foreign currency to be received, based on the rate provided to the sender by the remittance transfer provider at the time at which the transaction was initiated by the sender.
‘(d) Remittance Transfer Errors-
‘(1) ERROR RESOLUTION-
‘(A) IN GENERAL- If a remittance transfer provider receives oral or written notice from the sender within 180 days of the promised date of delivery that an error occurred with respect to a remittance transfer, including the amount of currency designated in subsection (a)(3)(A) that was to be sent to the designated recipient of the remittance transfer, using the values of the currency into which the funds should have been exchanged, but was not made available to the designated recipient in the foreign country, the remittance transfer provider shall resolve the error pursuant to this subsection and investigate the reason for the error.
‘(B) REMEDIES- Not later than 90 days after the date of receipt of a notice from the sender pursuant to subparagraph (A), the remittance transfer provider shall, as applicable to the error and as designated by the sender--
‘(i) refund to the sender the total amount of funds tendered by the sender in connection with the remittance transfer which was not properly transmitted;
‘(ii) make available to the designated recipient, without additional cost to the designated recipient or to the sender, the amount appropriate to resolve the error;
‘(iii) provide such other remedy, as determined appropriate by rule of the Board for the protection of senders; or
‘(iv) provide written notice to the sender that there was no error with an explanation responding to the specific complaint of the sender.
‘(2) RULES- The Board shall establish, by rule issued not later than 18 months after the date of enactment of the Consumer Financial Protection Act of 2010, clear and appropriate standards for remittance transfer providers with respect to error resolution relating to remittance transfers, to protect senders from such errors. Standards prescribed under this paragraph shall include appropriate standards regarding record keeping, as required, including documentation--
‘(A) of the complaint of the sender;
‘(B) that the sender provides the remittance transfer provider with respect to the alleged error; and
‘(C) of the findings of the remittance transfer provider regarding the investigation of the alleged error that the sender brought to their attention.
‘(3) CANCELLATION AND REFUND POLICY RULES- Not later than 18 months after the date of enactment of the Consumer Financial Protection Act of 2010, the Board shall issue final rules regarding appropriate remittance transfer cancellation and refund policies for consumers.
‘(e) Applicability of This Title-
‘(1) IN GENERAL- A remittance transfer that is not an electronic fund transfer, as defined in section 903, shall not be subject to any of the provisions of sections 905 through 913. A remittance transfer that is an electronic fund transfer, as defined in section 903, shall be subject to all provisions of this title, except for section 908, that are otherwise applicable to electronic fund transfers under this title.
‘(2) RULE OF CONSTRUCTION- Nothing in this section shall be construed--
‘(A) to affect the application to any transaction, to any remittance provider, or to any other person of any of the provisions of subchapter II of chapter 53 of title 31, United States Code, section 21 of the Federal Deposit Insurance Act (12 U.S.C. 1829b), or chapter 2 of title I of Public Law 91-508 (12 U.S.C. 1951-1959), or any regulations promulgated thereunder; or
‘(B) to cause any fund transfer that would not otherwise be treated as such under paragraph (1) to be treated as an electronic fund transfer, or as otherwise subject to this title, for the purposes of any of the provisions referred to in subparagraph (A) or any regulations promulgated thereunder.
‘(f) Acts of Agents-
‘(1) IN GENERAL- A remittance transfer provider shall be liable for any violation of this section by any agent, authorized delegate, or person affiliated with such provider, when such agent, authorized delegate, or affiliate acts for that remittance transfer provider.
‘(2) OBLIGATIONS OF REMITTANCE TRANSFER PROVIDERS- The Board shall prescribe rules to implement appropriate standards or conditions of, liability of a remittance transfer provider, including a provider who acts through an agent or authorized delegate. An agency charged with enforcing the requirements of this section, or rules prescribed by the Board under this section, may consider, in any action or other proceeding against a remittance transfer provider, the extent to which the provider had established and maintained policies or procedures for compliance, including policies, procedures, or other appropriate oversight measures designed to assure compliance by an agent or authorized delegate acting for such provider.
‘(g) Definitions- As used in this section--
‘(1) the term ‘designated recipient’ means any person located in a foreign country and identified by the sender as the authorized recipient of a remittance transfer to be made by a remittance transfer provider, except that a designated recipient shall not be deemed to be a consumer for purposes of this Act;
‘(2) the term ‘remittance transfer’--
‘(A) means the electronic (as defined in section 106(2) of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. 7006(2))) transfer of funds requested by a sender located in any State to a designated recipient that is initiated by a remittance transfer provider, whether or not the sender holds an account with the remittance transfer provider or whether or not the remittance transfer is also an electronic fund transfer, as defined in section 903; and
‘(B) does not include a transfer described in subparagraph (A) in an amount that is equal to or lesser than the amount of a small-value transaction determined, by rule, to be excluded from the requirements under section 906(a);
‘(3) the term ‘remittance transfer provider’ means any person or financial institution that provides remittance transfers for a consumer in the normal course of its business, whether or not the consumer holds an account with such person or financial institution; and
‘(4) the term ‘sender’ means a consumer who requests a remittance provider to send a remittance transfer for the consumer to a designated recipient.’.
(b) Automated Clearinghouse System-
(1) EXPANSION OF SYSTEM- The Board of Governors shall work with the Federal reserve banks and the Department of the Treasury to expand the use of the automated clearinghouse system and other payment mechanisms for remittance transfers to foreign countries, with a focus on countries that receive significant remittance transfers from the United States, based on--
(A) the number, volume, and size of such transfers;
(B) the significance of the volume of such transfers relative to the external financial flows of the receiving country, including--
(i) the total amount transferred; and
(ii) the total volume of payments made by United States Government agencies to beneficiaries and retirees living abroad;
(C) the feasibility of such an expansion; and
(D) the ability of the Federal Reserve System to establish payment gateways in different geographic regions and currency zones to receive remittance transfers and route them through the payments systems in the destination countries.
(2) REPORT TO CONGRESS- Not later than one calendar year after the date of enactment of this Act, and on April 30 biennially thereafter during the 10-year period beginning on that date of enactment, the Board of Governors shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the status of the automated clearinghouse system and its progress in complying with the requirements of this subsection. The report shall include an analysis of adoption rates of International ACH Transactions rules and formats, the efficacy of increasing adoption rates, and potential recommendations to increase adoption.
(c) Expansion of Financial Institution Provision of Remittance Transfers-
(1) PROVISION OF GUIDELINES TO INSTITUTIONS- Each of the Federal banking agencies and the National Credit Union Administration shall provide guidelines to financial institutions under the jurisdiction of the agency regarding the offering of low-cost remittance transfers and no-cost or low-cost basic consumer accounts, as well as agency services to remittance transfer providers.
(2) ASSISTANCE TO FINANCIAL LITERACY COMMISSION- As part of its duties as members of the Financial Literacy and Education Commission, the Bureau, the Federal banking agencies, and the National Credit Union Administration shall assist the Financial Literacy and Education Commission in executing the Strategy for Assuring Financial Empowerment (or the ‘SAFE Strategy’), as it relates to remittances.
(d) Federal Credit Union Act Conforming Amendment- Paragraph (12) of section 107 of the Federal Credit Union Act (12 U.S.C. 1757) is amended to read as follows:
‘(12) in accordance with regulations prescribed by the Board--
‘(A) to sell, to persons in the field of membership, negotiable checks (including travelers checks), money orders, and other similar money transfer instruments (including international and domestic electronic fund transfers and remittance transfers, as defined in section 919 of the Electronic Fund Transfer Act); and
‘(B) to cash checks and money orders for persons in the field of membership for a fee;’.
(e) Report on Feasibility of and Impediments to Use of Remittance History in Calculation of Credit Score- Before the end of the 365-day period beginning on the date of enactment of this Act, the Director shall submit a report to the President, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives regarding--
(1) the manner in which the remittance history of a consumer could be used to enhance the credit score of the consumer;
(2) the current legal and business model barriers and impediments that impede the use of the remittance history of the consumer to enhance the credit score of the consumer; and
(3) recommendations on the manner in which maximum transparency and disclosure to consumers of exchange rates for remittance transfers subject to this title and the amendments made by this title may be accomplished, whether or not such exchange rates are known at the time of origination or payment by the consumer for the remittance transfer, including disclosure to the sender of the actual exchange rate used and the amount of currency that the recipient of the remittance transfer received, using the values of the currency into which the funds were exchanged, as contained in sections 919(a)(2)(D) and 919(a)(3) of the Electronic Fund Transfer Act (as amended by this section).
SEC. 1074. DEPARTMENT OF THE TREASURY STUDY ON ENDING THE CONSERVATORSHIP OF FANNIE MAE, FREDDIE MAC, AND REFORMING THE HOUSING FINANCE SYSTEM.
(a) Study Required-
(1) IN GENERAL- The Secretary of the Treasury shall conduct a study of and develop recommendations regarding the options for ending the conservatorship of the Federal National Mortgage Association (in this section referred to as ‘Fannie Mae’) and the Federal Home Loan Mortgage Corporation (in this section referred to as ‘Freddie Mac’), while minimizing the cost to taxpayers, including such options as--
(A) the gradual wind-down and liquidation of such entities;
(B) the privatization of such entities;
(C) the incorporation of the functions of such entities into a Federal agency;
(D) the dissolution of Fannie Mae and Freddie Mac into smaller companies; or
(E) any other measures the Secretary determines appropriate.
(2) ANALYSES- The study required under paragraph (1) shall include an analysis of--
(A) the role of the Federal Government in supporting a stable, well-functioning housing finance system, and whether and to what extent the Federal Government should bear risks in meeting Federal housing finance objectives;
(B) how the current structure of the housing finance system can be improved;
(C) how the housing finance system should support the continued availability of mortgage credit to all segments of the market;
(D) how the housing finance system should be structured to ensure that consumers continue to have access to 30-year, fixed rate, pre-payable mortgages and other mortgage products that have simple terms that can be easily understood;
(E) the role of the Federal Housing Administration and the Department of Veterans Affairs in a future housing system;
(F) the impact of reforms of the housing finance system on the financing of rental housing;
(G) the impact of reforms of the housing finance system on secondary market liquidity;
(H) the role of standardization in the housing finance system;
(I) how housing finance systems in other countries offer insights that can help inform options for reform in the United States; and
(J) the options for transition to a reformed housing finance system.
(b) Report and Recommendations- Not later than January 31, 2011, the Secretary of the Treasury shall submit the report and recommendations required under subsection (a) to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives.
SEC. 1075. REASONABLE FEES AND RULES FOR PAYMENT CARD TRANSACTIONS.
(a) In General- The Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.) is amended--
(1) by redesignating sections 920 and 921 as sections 921 and 922, respectively; and
(2) by inserting after section 919 the following:
‘SEC. 920. REASONABLE FEES AND RULES FOR PAYMENT CARD TRANSACTIONS.
‘(a) Reasonable Interchange Transaction Fees for Electronic Debit Transactions-
‘(1) REGULATORY AUTHORITY OVER INTERCHANGE TRANSACTION FEES- The Board may prescribe regulations, pursuant to section 553 of title 5, United States Code, regarding any interchange transaction fee that an issuer may receive or charge with respect to an electronic debit transaction, to implement this subsection (including related definitions), and to prevent circumvention or evasion of this subsection.
‘(2) REASONABLE INTERCHANGE TRANSACTION FEES- The amount of any interchange transaction fee that an issuer may receive or charge with respect to an electronic debit transaction shall be reasonable and proportional to the cost incurred by the issuer with respect to the transaction.
‘(3) RULEMAKING REQUIRED-
‘(A) IN GENERAL- The Board shall prescribe regulations in final form not later than 9 months after the date of enactment of the Consumer Financial Protection Act of 2010, to establish standards for assessing whether the amount of any interchange transaction fee described in paragraph (2) is reasonable and proportional to the cost incurred by the issuer with respect to the transaction.
‘(B) INFORMATION COLLECTION- The Board may require any issuer (or agent of an issuer) or payment card network to provide the Board with such information as may be necessary to carry out the provisions of this subsection and the Board, in issuing rules under subparagraph (A) and on at least a bi-annual basis thereafter, shall disclose such aggregate or summary information concerning the costs incurred, and interchange transaction fees charged or received, by issuers or payment card networks in connection with the authorization, clearance or settlement of electronic debit transactions as the Board considers appropriate and in the public interest.
‘(4) CONSIDERATIONS; CONSULTATION- In prescribing regulations under paragraph (3)(A), the Board shall--
‘(A) consider the functional similarity between--
‘(i) electronic debit transactions; and
‘(ii) checking transactions that are required within the Federal Reserve bank system to clear at par;
‘(B) distinguish between--
‘(i) the incremental cost incurred by an issuer for the role of the issuer in the authorization, clearance, or settlement of a particular electronic debit transaction, which cost shall be considered under paragraph (2); and
‘(ii) other costs incurred by an issuer which are not specific to a particular electronic debit transaction, which costs shall not be considered under paragraph (2); and
‘(C) consult, as appropriate, with the Comptroller of the Currency, the Board of Directors of the Federal Deposit Insurance Corporation, the Director of the Office of Thrift Supervision, the National Credit Union Administration Board, the Administrator of the Small Business Administration, and the Director of the Bureau of Consumer Financial Protection.
‘(5) ADJUSTMENTS TO INTERCHANGE TRANSACTION FEES FOR FRAUD PREVENTION COSTS-
‘(A) ADJUSTMENTS- The Board may allow for an adjustment to the fee amount received or charged by an issuer under paragraph (2), if--
‘(i) such adjustment is reasonably necessary to make allowance for costs incurred by the issuer in preventing fraud in relation to electronic debit transactions involving that issuer; and
‘(ii) the issuer complies with the fraud-related standards established by the Board under subparagraph (B), which standards shall--
‘(I) be designed to ensure that any fraud-related adjustment of the issuer is limited to the amount described in clause (i) and takes into account any fraud-related reimbursements (including amounts from charge-backs) received from consumers, merchants, or payment card networks in relation to electronic debit transactions involving the issuer; and
‘(II) require issuers to take effective steps to reduce the occurrence of, and costs from, fraud in relation to electronic debit transactions, including through the development and implementation of cost-effective fraud prevention technology.
‘(B) RULEMAKING REQUIRED-
‘(i) IN GENERAL- The Board shall prescribe regulations in final form not later than 9 months after the date of enactment of the Consumer Financial Protection Act of 2010, to establish standards for making adjustments under this paragraph.
‘(ii) FACTORS FOR CONSIDERATION- In issuing the standards and prescribing regulations under this paragraph, the Board shall consider--
‘(I) the nature, type, and occurrence of fraud in electronic debit transactions;
‘(II) the extent to which the occurrence of fraud depends on whether authorization in an electronic debit transaction is based on signature, PIN, or other means;
‘(III) the available and economical means by which fraud on electronic debit transactions may be reduced;
‘(IV) the fraud prevention and data security costs expended by each party involved in electronic debit transactions (including consumers, persons who accept debit cards as a form of payment, financial institutions, retailers and payment card networks);
‘(V) the costs of fraudulent transactions absorbed by each party involved in such transactions (including consumers, persons who accept debit cards as a form of payment, financial institutions, retailers and payment card networks);
‘(VI) the extent to which interchange transaction fees have in the past reduced or increased incentives for parties involved in electronic debit transactions to reduce fraud on such transactions; and
‘(VII) such other factors as the Board considers appropriate.
‘(6) EXEMPTION FOR SMALL ISSUERS-
‘(A) IN GENERAL- This subsection shall not apply to any issuer that, together with its affiliates, has assets of less than $10,000,000,000, and the Board shall exempt such issuers from regulations prescribed under paragraph (3)(A).
‘(B) DEFINITION- For purposes of this paragraph, the term ‘issuer’ shall be limited to the person holding the asset account that is debited through an electronic debit transaction.
‘(7) EXEMPTION FOR GOVERNMENT-ADMINISTERED PAYMENT PROGRAMS AND RELOADABLE PREPAID CARDS-
‘(A) IN GENERAL- This subsection shall not apply to an interchange transaction fee charged or received with respect to an electronic debit transaction in which a person uses--
‘(i) a debit card or general-use prepaid card that has been provided to a person pursuant to a Federal, State or local government-administered payment program, in which the person may only use the debit card or general-use prepaid card to transfer or debit funds, monetary value, or other assets that have been provided pursuant to such program; or
‘(ii) a plastic card, payment code, or device that is--
‘(I) linked to funds, monetary value, or assets which are purchased or loaded on a prepaid basis;
‘(II) not issued or approved for use to access or debit any account held by or for the benefit of the card holder (other than a subaccount or other method of recording or tracking funds purchased or loaded on the card on a prepaid basis);
‘(III) redeemable at multiple, unaffiliated merchants or service providers, or automated teller machines;
‘(IV) used to transfer or debit funds, monetary value, or other assets; and
‘(V) reloadable and not marketed or labeled as a gift card or gift certificate.
‘(B) EXCEPTION- Notwithstanding subparagraph (A), after the end of the 1-year period beginning on the effective date provided in paragraph (9), this subsection shall apply to an interchange transaction fee charged or received with respect to an electronic debit transaction described in subparagraph (A)(i) in which a person uses a general-use prepaid card, or an electronic debit transaction described in subparagraph (A)(ii), if any of the following fees may be charged to a person with respect to the card:
‘(i) A fee for an overdraft, including a shortage of funds or a transaction processed for an amount exceeding the account balance.
‘(ii) A fee imposed by the issuer for the first withdrawal per month from an automated teller machine that is part of the issuer’s designated automated teller machine network.
‘(C) DEFINITION- For purposes of subparagraph (B), the term ‘designated automated teller machine network’ means either--
‘(i) all automated teller machines identified in the name of the issuer; or
‘(ii) any network of automated teller machines identified by the issuer that provides reasonable and convenient access to the issuer’s customers.
‘(D) REPORTING- Beginning 12 months after the date of enactment of the Consumer Financial Protection Act of 2010, the Board shall annually provide a report to the Congress regarding --
‘(i) the prevalence of the use of general-use prepaid cards in Federal, State or local government-administered payment programs; and
‘(ii) the interchange transaction fees and cardholder fees charged with respect to the use of such general-use prepaid cards.
‘(8) REGULATORY AUTHORITY OVER NETWORK FEES-
‘(A) IN GENERAL- The Board may prescribe regulations, pursuant to section 553 of title 5, United States Code, regarding any network fee.
‘(B) LIMITATION- The authority under subparagraph (A) to prescribe regulations shall be limited to regulations to ensure that--
‘(i) a network fee is not used to directly or indirectly compensate an issuer with respect to an electronic debit transaction; and
‘(ii) a network fee is not used to circumvent or evade the restrictions of this subsection and regulations prescribed under such subsection.
‘(C) RULEMAKING REQUIRED- The Board shall prescribe regulations in final form before the end of the 9-month period beginning on the date of the enactment of the Consumer Financial Protection Act of 2010, to carry out the authorities provided under subparagraph (A).
‘(9) EFFECTIVE DATE- This subsection shall take effect at the end of the 12-month period beginning on the date of the enactment of the Consumer Financial Protection Act of 2010.
‘(b) Limitation on Payment Card Network Restrictions-
‘(1) PROHIBITIONS AGAINST EXCLUSIVITY ARRANGEMENTS-
‘(A) NO EXCLUSIVE NETWORK- The Board shall, before the end of the 1-year period beginning on the date of the enactment of the Consumer Financial Protection Act of 2010, prescribe regulations providing that an issuer or payment card network shall not directly or through any agent, processor, or licensed member of a payment card network, by contract, requirement, condition, penalty, or otherwise, restrict the number of payment card networks on which an electronic debit transaction may be processed to--
‘(i) 1 such network; or
‘(ii) 2 or more such networks which are owned, controlled, or otherwise operated by --
‘(I) affiliated persons; or
‘(II) networks affiliated with such issuer.
‘(B) NO ROUTING RESTRICTIONS- The Board shall, before the end of the 1-year period beginning on the date of the enactment of the Consumer Financial Protection Act of 2010, prescribe regulations providing that an issuer or payment card network shall not, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability of any person who accepts debit cards for payments to direct the routing of electronic debit transactions for processing over any payment card network that may process such transactions.
‘(2) LIMITATION ON RESTRICTIONS ON OFFERING DISCOUNTS FOR USE OF A FORM OF PAYMENT-
‘(A) IN GENERAL- A payment card network shall not, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability of any person to provide a discount or in-kind incentive for payment by the use of cash, checks, debit cards, or credit cards to the extent that--
‘(i) in the case of a discount or in-kind incentive for payment by the use of debit cards, the discount or in-kind incentive does not differentiate on the basis of the issuer or the payment card network;
‘(ii) in the case of a discount or in-kind incentive for payment by the use of credit cards, the discount or in-kind incentive does not differentiate on the basis of the issuer or the payment card network; and
‘(iii) to the extent required by Federal law and applicable State law, such discount or in-kind incentive is offered to all prospective buyers and disclosed clearly and conspicuously.
‘(B) LAWFUL DISCOUNTS- For purposes of this paragraph, the network may not penalize any person for the providing of a discount that is in compliance with Federal law and applicable State law.
‘(3) LIMITATION ON RESTRICTIONS ON SETTING TRANSACTION MINIMUMS OR MAXIMUMS-
‘(A) IN GENERAL- A payment card network shall not, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability--
‘(i) of any person to set a minimum dollar value for the acceptance by that person of credit cards, to the extent that --
‘(I) such minimum dollar value does not differentiate between issuers or between payment card networks; and
‘(II) such minimum dollar value does not exceed $10.00; or
‘(ii) of any Federal agency or institution of higher education to set a maximum dollar value for the acceptance by that Federal agency or institution of higher education of credit cards, to the extent that such maximum dollar value does not differentiate between issuers or between payment card networks.
‘(B) INCREASE IN MINIMUM DOLLAR AMOUNT- The Board may, by regulation prescribed pursuant to section 553 of title 5, United States Code, increase the amount of the dollar value listed in subparagraph (A)(i)(II).
‘(4) RULE OF CONSTRUCTION:- No provision of this subsection shall be construed to authorize any person--
‘(A) to discriminate between debit cards within a payment card network on the basis of the issuer that issued the debit card; or
‘(B) to discriminate between credit cards within a payment card network on the basis of the issuer that issued the credit card.
‘(c) Definitions- For purposes of this section, the following definitions shall apply:
‘(1) AFFILIATE- The term ‘affiliate’ means any company that controls, is controlled by, or is under common control with another company.
‘(2) DEBIT CARD- The term ‘debit card’--
‘(A) means any card, or other payment code or device, issued or approved for use through a payment card network to debit an asset account (regardless of the purpose for which the account is established), whether authorization is based on signature, PIN, or other means;
‘(B) includes a general-use prepaid card, as that term is defined in section 915(a)(2)(A); and
‘(C) does not include paper checks.
‘(3) CREDIT CARD- The term ‘credit card’ has the same meaning as in section 103 of the Truth in Lending Act.
‘(4) DISCOUNT- The term ‘discount’--
‘(A) means a reduction made from the price that custo