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115th Congress } { Rept. 115-153
HOUSE OF REPRESENTATIVES
1st Session } { Part 1
_______________________________________________________________________
FINANCIAL CHOICE ACT OF 2010
----------
R E P O R T
of the
COMMITTEE ON FINANCIAL SERVICES
together with
MINORITY VIEWS
[to accompany H.R. 10]
BOOK 2 OF 2
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
May 25, 2017.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
FINANCIAL CHOICE ACT OF 2010
(Book 2 of 2)
115th Congress } { Rept. 115-153
HOUSE OF REPRESENTATIVES
1st Session } { Part 1
_______________________________________________________________________
FINANCIAL CHOICE ACT OF 2010
__________
R E P O R T
of the
COMMITTEE ON FINANCIAL SERVICES
together with
MINORITY VIEWS
[to accompany H.R. 10]
BOOK 2 OF 2
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
May 25, 2017.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_________
U.S. GOVERNMENT PUBLISHING OFFICE
26-562 WASHINGTON : 2017
SEC. 10D. RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION POLICY.
(a) Listing Standards.--The Commission shall, by rule, direct
the national securities exchanges and national securities
associations to prohibit the listing of any security of an
issuer that does not comply with the requirements of this
section.
(b) Recovery of Funds.--The rules of the Commission under
subsection (a) shall require each issuer to develop and
implement a policy providing--
(1) for disclosure of the policy of the issuer on
incentive-based compensation that is based on financial
information required to be reported under the
securities laws; and
(2) that, in the event that the issuer is required to
prepare an accounting restatement due to the material
noncompliance of the issuer with any financial
reporting requirement under the securities laws, the
issuer will recover from any current or former
executive officer of the issuer who received incentive-
based compensation (including stock options awarded as
compensation) during the 3-year period preceding the
date on which the issuer is required to prepare an
accounting restatement, based on the erroneous data, in
excess of what would have been paid to the executive
officer under the accounting restatement, where such
executive officer had control or authority over the
financial reporting that resulted in the accounting
restatement.
* * * * * * *
registration requirements for securities
Sec. 12. (a) It shall be unlawful for any member, broker, or
dealer to effect any transaction in any security (other than an
exempted security) on a national securities exchange unless a
registration is effective as to such security for such exchange
in accordance with the provisions of this title and the rules
and regulations thereunder. The provisions of this subsection
shall not apply in respect of a security futures product traded
on a national securities exchange.
(b) A security may be registered on a national securities
exchange by the issuer filing an application with the exchange
(and filing with the Commission such duplicate originals
thereof as the Commission may require), which application shall
contain--
(1) Such information, in such detail, as to the
issuer and any person directly or indirectly
controlling or controlled by, or under direct or
indirect common control with, the issuer, and any
guarantor of the security as to principal or interest
or both, as the Commission may by rules and regulations
require, as necessary or appropriate in the public
interest or for the protection of investors, in respect
of the following:
(A) the organization, financial structures,
and nature of the business;
(B) the terms, position, rights, and
privileges of the different classes of
securities outstanding;
(C) the terms on which their securities are
to be, and during the preceding three years
have been, offered to the public or otherwise;
(D) the directors, officers, and
underwriters, and each security holder of
record holding more than 10 per centum of any
class of any equity security of the issuer
(other than an exempted security), their
remuneration and their interests in the
securities of, and their material contracts
with, the issuer and any person directly or
indirectly controlling or controlled by, or
under direct or indirect common control with,
the issuer;
(E) remuneration to others than directors and
officers exceeding $20,000 per annum;
(F) bonus and profit-sharing arrangements;
(G) management and service contracts;
(H) options existing or to be created in
respect of their securities;
(I) material contracts, not made in the
ordinary course of business, which are to be
executed in whole or in part at or after the
filing of the application or which were made
not more than two years before such filing, and
every material patent or contract for a
material patent right shall be deemed a
material contract;
(J) balance sheets for not more than the
three preceding fiscal years, certified if
required by the rules and regulations of the
Commission by a registered public accounting
firm;
(K) profit and loss statements for not more
than the three preceding fiscal years,
certified if required by the rules and
regulations of the Commission by a registered
public accounting firm; and
(L) any further financial statements which
the Commission may deem necessary or
appropriate for the protection of investors.
(2) Such copies of articles of incorporation, bylaws,
trust indentures, or corresponding documents by
whatever name known, underwriting arrangements, and
other similar documents of, and voting trust agreements
with respect to, the issuer and any person directly or
indirectly controlling or controlled by, or under
direct or indirect common control with, the issuer as
the Commission may require as necessary or appropriate
for the proper protection of investors and to insure
fair dealing in the security.
(3) Such copies of material contracts, referred to in
paragraph (1)(I) above, as the Commission may require
as necessary or appropriate for the proper protection
of investors and to insure fair dealing in the
security.
(c) If in the judgment of the Commission any information
required under subsection (b) of this section is inapplicable
to any specified class or classes of issuers, the Commission
shall require in lieu thereof the submission of such other
information of comparable character as it may deem applicable
to such class of issuers.
(d) If the exchange authorities certify to the Commission
that the security has been approved by the exchange for listing
and registration, the registration shall become effective
thirty days after the receipt of such certification by the
Commission or within such shorter period of time as the
Commission may determine. A security registered with a national
securities exchange may be withdrawn or stricken from listing
and registration in accordance with the rules of the exchange
and, upon such terms as the Commission may deem necessary to
impose for the protection of investors, upon application by the
issuer or the exchange to the Commission; whereupon the issuer
shall be relieved from further compliance with the provisions
of this section and section 13 of this title and any rules or
regulations under such sections as to the securities so
withdrawn or stricken. An unissued security may be registered
only in accordance with such rules and regulations as the
Commission may prescribe as necessary or appropriate in the
public interest or for the protection of investors.
(e) Notwithstanding the foregoing provisions of this section,
the Commission may by such rules and regulations as it deems
necessary or appropriate in the public interest or for the
protection of investors permit securities listed on any
exchange at the time the registration of such exchange as a
national securities exchange becomes effective, to be
registered for a period ending not later than July 1, 1935,
without complying with the provisions of this section.
(f)(1)(A) Notwithstanding the preceding subsections of this
section, any national securities exchange, in accordance with
the requirements of this subsection and the rules hereunder,
may extend unlisted trading privileges to--
(i) any security that is listed and registered on a
national securities exchange, subject to subparagraph
(B); and
(ii) any security that is otherwise registered
pursuant to this section, or that would be required to
be so registered except for the exemption from
registration provided in subparagraph (B) or (G) of
subsection (g)(2), subject to subparagraph (E) of this
paragraph.
(B) A national securities exchange may not extend unlisted
trading privileges to a security described in subparagraph
(A)(i) during such interval, if any, after the commencement of
an initial public offering of such security, as is or may be
required pursuant to subparagraph (C).
(C) Not later than 180 days after the date of enactment of
the Unlisted Trading Privileges Act of 1994, the Commission
shall prescribe, by rule or regulation, the duration of the
interval referred to in subparagraph (B), if any, as the
Commission determines to be necessary or appropriate for the
maintenance of fair and orderly markets, the protection of
investors and the public interest, or otherwise in furtherance
of the purposes of this title. Until the earlier of the
effective date of such rule or regulation or 240 days after
such date of enactment, such interval shall begin at the
opening of trading on the day on which such security commences
trading on the national securities exchange with which such
security is registered and end at the conclusion of the next
day of trading.
(D) The Commission may prescribe, by rule or regulation such
additional procedures or requirements for extending unlisted
trading privileges to any security as the Commission deems
necessary or appropriate for the maintenance of fair and
orderly markets, the protection of investors and the public
interest, or otherwise in furtherance of the purposes of this
title.
(E) No extension of unlisted trading privileges to securities
described in subparagraph (A)(ii) may occur except pursuant to
a rule, regulation, or order of the Commission approving such
extension or extensions. In promulgating such rule or
regulation or in issuing such order, the Commission--
(i) shall find that such extension or extensions of
unlisted trading privileges is consistent with the
maintenance of fair and orderly markets, the protection
of investors and the public interest, and otherwise in
furtherance of the purposes of this title;
(ii) shall take account of the public trading
activity in such securities, the character of such
trading, the impact of such extension on the existing
markets for such securities, and the desirability of
removing impediments to and the progress that has been
made toward the development of a national market
system; and
(iii) shall not permit a national securities exchange
to extend unlisted trading privileges to such
securities if any rule of such national securities
exchange would unreasonably impair the ability of a
dealer to solicit or effect transactions in such
securities for its own account, or would unreasonably
restrict competition among dealers in such securities
or between such dealers acting in the capacity of
market makers who are specialists and such dealers who
are not specialists.
(F) An exchange may continue to extend unlisted trading
privileges in accordance with this paragraph only if the
exchange and the subject security continue to satisfy the
requirements for eligibility under this paragraph, including
any rules and regulations issued by the Commission pursuant to
this paragraph, except that unlisted trading privileges may
continue with regard to securities which had been admitted on
such exchange prior to July 1, 1964, notwithstanding the
failure to satisfy such requirements. If unlisted trading
privileges in a security are discontinued pursuant to this
subparagraph, the exchange shall cease trading in that
security, unless the exchange and the subject security
thereafter satisfy the requirements of this paragraph and the
rules issued hereunder.
(G) For purposes of this paragraph--
(i) a security is the subject of an initial public
offering if--
(I) the offering of the subject security is
registered under the Securities Act of 1933;
and
(II) the issuer of the security, immediately
prior to filing the registration statement with
respect to the offering, was not subject to the
reporting requirements of section 13 or 15(d)
of this title; and
(ii) an initial public offering of such security
commences at the opening of trading on the day on which
such security commences trading on the national
securities exchange with which such security is
registered.
(2)(A) At any time within 60 days of commencement of trading
on an exchange of a security pursuant to unlisted trading
privileges, the Commission may summarily suspend such unlisted
trading privileges on the exchange. Such suspension shall not
be reviewable under section 25 of this title and shall not be
deemed to be a final agency action for purposes of section 704
of title 5, United States Code. Upon such suspension--
(i) the exchange shall cease trading in the security
by the close of business on the date of such
suspension, or at such time as the Commission may
prescribe by rule or order for the maintenance of fair
and orderly markets, the protection of investors and
the public interest, or otherwise in furtherance of the
purposes of this title; and
(ii) if the exchange seeks to extend unlisted trading
privileges to the security, the exchange shall file an
application to reinstate its ability to do so with the
Commission pursuant to such procedures as the
Commission may prescribe by rule or order for the
maintenance of fair and orderly markets, the protection
of investors and the public interest, or otherwise in
furtherance of the purposes of this title.
(B) A suspension under subparagraph (A) shall remain in
effect until the Commission, by order, grants approval of an
application to reinstate, as described in subparagraph (A)(ii).
(C) A suspension under subparagraph (A) shall not affect the
validity or force of an extension of unlisted trading
privileges in effect prior to such suspension.
(D) The Commission shall not approve an application by a
national securities exchange to reinstate its ability to extend
unlisted trading privileges to a security unless the Commission
finds, after notice and opportunity for hearing, that the
extension of unlisted trading privileges pursuant to such
application is consistent with the maintenance of fair and
orderly markets, the protection of investors and the public
interest, and otherwise in furtherance of the purposes of this
title. If the application is made to reinstate unlisted trading
privileges to a security described in paragraph (1)(A)(ii), the
Commission--
(i) shall take account of the public trading activity
in such security, the character of such trading, the
impact of such extension on the existing markets for
such a security, and the desirability of removing
impediments to and the progress that has been made
toward the development of a national market system; and
(ii) shall not grant any such application if any rule
of the national securities exchange making application
under this subsection would unreasonably impair the
ability of a dealer to solicit or effect transactions
in such security for its own account, or would
unreasonably restrict competition among dealers in such
security or between such dealers acting in the capacity
of marketmakers who are specialists and such dealers
who are not specialists.
(3) Notwithstanding paragraph (2), the Commission shall by
rules and regulations suspend unlisted trading privileges in
whole or in part for any or all classes of securities for a
period not exceeding twelve months, if it deems such suspension
necessary or appropriate in the public interest or for the
protection of investors or to prevent evasion of the purposes
of this title.
(4) On the application of the issuer of any security for
which unlisted trading privileges on any exchange have been
continued or extended pursuant to this subsection, or of any
broker or dealer who makes or creates a market for such
security, or of any other person having a bona fide interest in
the question of termination or suspension of such unlisted
trading privileges, or on its own motion, the Commission shall
by order terminate, or suspend for a period not exceeding
twelve months, such unlisted trading privileges for such
security if the Commission finds, after appropriate notice and
opportunity for hearing, that such termination or suspension is
necessary or appropriate in the public interest or for the
protection of investors.
(5) In any proceeding under this subsection in which
appropriate notice and opportunity for hearing are required,
notice of not less than ten days to the applicant in such
proceeding, to the issuer of the security involved, to the
exchange which is seeking to continue or extend or has
continued or extended unlisted trading privileges for such
security, and to the exchange, if any, on which such security
is listed and registered, shall be deemed adequate notice, and
any broker or dealer who makes or creates a market for such
security, and any other person having a bona fide interest in
such proceeding, shall upon application be entitled to be
heard.
(6) Any security for which unlisted trading privileges are
continued or extended pursuant to this subsection shall be
deemed to be registered on a national securities exchange
within the meaning of this title. The powers and duties of the
Commission under this title shall be applicable to the rules of
an exchange in respect to any such security. The Commission
may, by such rules and regulations as it deems necessary or
appropriate in the public interest or for the protection of
investors, either unconditionally or upon specified terms and
conditions, or for stated periods, exempt such securities from
the operation of any provision of section 13, 14, or 16 of this
title.
(g)(1) Every issuer which is engaged in interstate commerce,
or in a business affecting interstate commerce, or whose
securities are traded by use of the mails or any means or
instrumentality of interstate commerce [shall--]
[(A) within 120 days after the last day of its first
fiscal year ended on which the issuer has total assets
exceeding $10,000,000 and a class of equity security
(other than an exempted security) held of record by
either--
[(i) 2,000 persons, or
[(ii) 500 persons who are not accredited investors
(as such term is defined by the Commission), and
[(B) in the case of an issuer that is a bank, a
savings and loan holding company (as defined in section
10 of the Home Owners' Loan Act), or a bank holding
company, as such term is defined in section 2 of the
Bank Holding Company Act of 1956 (12 U.S.C. 1841), not
later than 120 days after the last day of its first
fiscal year ended after the effective date of this
subsection, on which the issuer has total assets
exceeding $10,000,000 and a class of equity security
(other than an exempted security) held of record by
2,000 or more persons,
register such security] shall, not later than 120 days after
the last day of its first fiscal year ended after the effective
date of this subsection on which the issuer has total assets
exceeding $10,000,000 (or such greater amount of assets as the
Commission may establish by rule) and a class of equity
security (other than an exempted security) held of record by
2,000 or more persons (or such greater number of persons as the
Commission may establish by rule), register such security by
filing with the Commission a registration statement (and such
copies thereof as the Commission may require) with respect to
such security containing such information and documents as the
Commission may specify comparable to that which is required in
an application to register a security pursuant to subsection
(b) of this section. Each such registration statement shall
become effective sixty days after filing with the Commission or
within such shorter period as the Commission may direct. Until
such registration statement becomes effective it shall not be
deemed filed for the purposes of section 18 of this title. Any
issuer may register any class of equity security not required
to be registered by filing a registration statement pursuant to
the provisions of this paragraph. The Commission is authorized
to extend the date upon which any issuer or class of issuers is
required to register a security pursuant to the provisions of
this paragraph. The dollar figure in this paragraph shall be
indexed for inflation every 5 years by the Commission to
reflect the change in the Consumer Price Index for All Urban
Consumers published by the Bureau of Labor Statistics, rounded
to the nearest $100,000.
(2) The provisions of this subsection shall not apply in
respect of--
(A) any security listed and registered on a national
securities exchange.
(B) any security issued by an investment company
registered pursuant to section 8 of the Investment
Company Act of 1940.
(C) any security, other than permanent stock,
guaranty stock, permanent reserve stock, or any similar
certificate evidencing nonwithdrawable capital, issued
by a savings and loan association, building and loan
association, cooperative bank, homestead association,
or similar institution, which is supervised and
examined by State or Federal authority having
supervision over any such institution.
(D) any security of an issuer organized and operated
exclusively for religious, educational, benevolent,
fraternal, charitable, or reformatory purposes and not
for pecuniary profit, and no part of the net earnings
of which inures to the benefit of any private
shareholder or individual; or any security of a fund
that is excluded from the definition of an investment
company under section 3(c)(10)(B) of the Investment
Company Act of 1940.
(E) any security of an issuer which is a
``cooperative association'' as defined in the
Agricultural Marketing Act, approved June 15, 1929, as
amended, or a federation of such cooperative
associations, if such federation possesses no greater
powers or purposes than cooperative associations so
defined.
(F) any security issued by a mutual or cooperative
organization which supplies a commodity or service
primarily for the benefit of its members and operates
not for pecuniary profit, but only if the security is
part of a class issuable only to persons who purchase
commodities or services from the issuer, the security
is transferable only to a successor in interest or
occupancy of premises serviced or to be served by the
issuer, and no dividends are payable to the holder of
the security.
(G) any security issued by an insurance company if
all of the following conditions are met:
(i) Such insurance company is required to and
does file an annual statement with the
Commissioner of Insurance (or other officer or
agency performing a similar function) of its
domiciliary State, and such annual statement
conforms to that prescribed by the National
Association of Insurance Commissioners or in
the determination of such State commissioner,
officer or agency substantially conforms to
that so prescribed.
(ii) Such insurance company is subject to
regulation by its domiciliary State of proxies,
consents, or authorizations in respect of
securities issued by such company and such
regulation conforms to that prescribed by the
National Association of Insurance
Commissioners.
(iii) After July 1, 1966, the purchase and
sales of securities issued by such insurance
company by beneficial owners, directors, or
officers of such company are subject to
regulation (including reporting) by its
domiciliary State substantially in the manner
provided in section 16 of this title.
(H) any interest or participation in any collective
trust funds maintained by a bank or in a separate
account maintained by an insurance company which
interest or participation is issued in connection with
(i) a stock-bonus, pension, or profit-sharing plan
which meets the requirements for qualification under
section 401 of the Internal Revenue Code of 1954, (ii)
an annuity plan which meets the requirements for
deduction of the employer's contribution under section
404(a)(2) of such Code, or (iii) a church plan,
company, or account that is excluded from the
definition of an investment company under section
3(c)(14) of the Investment Company Act of 1940.
(3) The Commission may by rules or regulations or, on its own
motion, after notice and opportunity for hearing, by order,
exempt from this subsection any security of a foreign issuer,
including any certificate of deposit for such a security, if
the Commission finds that such exemption is in the public
interest and is consistent with the protection of investors.
(4) Registration of any class of security pursuant to this
subsection shall be terminated ninety days, or such shorter
period as the Commission may determine, after the issuer files
a certification with the Commission that the number of holders
of record of such class of security is reduced to less than
[300 persons, or, in the case of a bank, a savings and loan
holding company (as defined in section 10 of the Home Owners'
Loan Act), or a bank holding company, as such term is defined
in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C.
1841), 1,200 persons persons] 1,200 persons. The Commission
shall after notice and opportunity for hearing deny termination
of registration if it finds that the certification is untrue.
Termination of registration shall be deferred pending final
determination on the question of denial.
[(5)] [For the purposes]
(5) Definitions._
(A) In general._For the purposes of this subsection
the term ``class'' shall include all securities of an
issuer which are of substantially similar character and
the holders of which enjoy substantially similar rights
and privileges. The Commission may for the purpose of
this subsection define by rules and regulations the
terms ``total assets'' and ``held of record'' as it
deems necessary or appropriate in the public interest
or for the protection of investors in order to prevent
circumvention of the provisions of this subsection. For
purposes of this subsection, a security futures product
shall not be considered a class of equity security of
the issuer of the securities underlying the security
futures product. For purposes of determining whether an
issuer is required to register a security with the
Commission pursuant to paragraph (1), the definition of
``held of record'' shall not include securities held by
persons who received the securities pursuant to an
employee compensation plan in transactions exempted
from the registration requirements of section 5 of the
Securities Act of 1933.
(B) Exclusion for persons holding certain
securities.--For purposes of this subsection,
securities held by persons who purchase such securities
in transactions described under section 4(a)(6) of the
Securities Act of 1933 shall not be deemed to be ``held
of record''.
(6) Exclusion for persons holding certain
securities.--The Commission shall, by rule, exempt,
conditionally or unconditionally, securities acquired
pursuant to an offering made under section 4(6) of the
Securities Act of 1933 from the provisions of this
subsection.
(h) The Commission may by rules and regulations, or upon
application of an interested person, by order, after notice and
opportunity for hearing, exempt in whole or in part any issuer
or class of issuers from the provisions of subsection (g) of
this section or from section 13, 14, or 15(d) or may exempt
from section 16 any officer, director, or beneficial owner of
securities of any issuer, any security of which is required to
be registered pursuant to subsection (g) hereof, upon such
terms and conditions and for such period as it deems necessary
or appropriate, if the Commission finds, by reason of the
number of public investors, amount of trading interest in the
securities, the nature and extent of the activities of the
issuer, income or assets of the issuer, or otherwise, that such
action is not inconsistent with the public interest or the
protection of investors. The Commission may, for the purposes
of any of the above-mentioned sections or subsections of this
title, classify issuers and prescribe requirements appropriate
for each such class.
(i) In respect of any securities issued by banks and savings
associations the deposits of which are insured in accordance
with the Federal Deposit Insurance Act, the powers, functions,
and duties vested in the Commission to administer and enforce
sections 10A(m), 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of
this Act, and sections 302, 303, 304, 306, 401(b), 404, 406,
and 407 of the Sarbanes-Oxley Act of 2002, (1) with respect to
national banks and Federal savings associations, the accounts
of which are insured by the Federal Deposit Insurance
Corporation are vested in the Comptroller of the Currency, (2)
with respect to all other member banks of the Federal Reserve
System are vested in the Board of Governors of the Federal
Reserve System, and (3) with respect to all other insured banks
and State savings associations, the accounts of which are
insured by the Federal Deposit Insurance Corporation, are
vested in the Federal Deposit Insurance Corporation. The
Comptroller of the Currency, the Board of Governors of the
Federal Reserve System, and the Federal Deposit Insurance
Corporation shall have the power to make such rules and
regulations as may be necessary for the execution of the
functions vested in them as provided in this subsection. In
carrying out their responsibilities under this subsection, the
agencies named in the first sentence of this subsection shall
issue substantially similar regulations to regulations and
rules issued by the Commission under sections 10A(m), 12, 13,
14(a), 14(c), 14(d), 14(f) and 16 of this Act, and sections
302, 303, 304, 306, 401(b), 404, 406, and 407 of the Sarbanes-
Oxley Act of 2002, unless they find that implementation of
substantially similar regulations with respect to insured banks
and insured institutions are not necessary or appropriate in
the public interest or for protection of investors, and publish
such findings, and the detailed reasons therefor, in the
Federal Register. Such regulations of the above-named agencies,
or the reasons for failure to publish such substantially
similar regulations to those of the Commission, shall be
published in the Federal Register within 120 days of the date
of enactment of this subsection, and, thereafter, within 60
days of any changes made by the Commission in its relevant
regulations and rules.
(j) The Commission is authorized, by order, as it deems
necessary or appropriate for the protection of investors to
deny, to suspend the effective date of, to suspend for a period
not exceeding twelve months, or to revoke the registration of a
security, if the Commission finds, on the record after notice
and opportunity for hearing, that the issuer of such security
has failed to comply with any provision of this title or the
rules and regulations thereunder. No member of a national
securities exchange, broker, or dealer shall make use of the
mails or any means or instrumentality of interstate commerce to
effect any transaction in, or to induce the purchase or sale
of, any security the registration of which has been and is
suspended or revoked pursuant to the preceding sentence.
(k) Trading Suspensions; Emergency Authority.--
(1) Trading suspensions.--If in its opinion the
public interest and the protection of investors so
require, the Commission is authorized by order--
(A) summarily to suspend trading in any
security (other than an exempted security) for
a period not exceeding 10 business days, and
(B) summarily to suspend all trading on any
national securities exchange or otherwise, in
securities other than exempted securities, for
a period not exceeding 90 calendar days.
The action described in subparagraph (B) shall not take
effect unless the Commission notifies the President of
its decision and the President notifies the Commission
that the President does not disapprove of such
decision. If the actions described in subparagraph (A)
or (B) involve a security futures product, the
Commission shall consult with and consider the views of
the Commodity Futures Trading Commission.
(2) Emergency orders.--
(A) In general.--The Commission, in an
emergency, may by order summarily take such
action to alter, supplement, suspend, or impose
requirements or restrictions with respect to
any matter or action subject to regulation by
the Commission or a self-regulatory
organization under the securities laws, as the
Commission determines is necessary in the
public interest and for the protection of
investors--
(i) to maintain or restore fair and
orderly securities markets (other than
markets in exempted securities);
(ii) to ensure prompt, accurate, and
safe clearance and settlement of
transactions in securities (other than
exempted securities); or
(iii) to reduce, eliminate, or
prevent the substantial disruption by
the emergency of--
(I) securities markets (other
than markets in exempted
securities), investment
companies, or any other
significant portion or segment
of such markets; or
(II) the transmission or
processing of securities
transactions (other than
transactions in exempted
securities).
(B) Effective period.--An order of the
Commission under this paragraph shall continue
in effect for the period specified by the
Commission, and may be extended. Except as
provided in subparagraph (C), an order of the
Commission under this paragraph may not
continue in effect for more than 10 business
days, including extensions.
(C) Extension.--An order of the Commission
under this paragraph may be extended to
continue in effect for more than 10 business
days if, at the time of the extension, the
Commission finds that the emergency still
exists and determines that the continuation of
the order beyond 10 business days is necessary
in the public interest and for the protection
of investors to attain an objective described
in clause (i), (ii), or (iii) of subparagraph
(A). In no event shall an order of the
Commission under this paragraph continue in
effect for more than 30 calendar days.
(D) Security futures.--If the actions
described in subparagraph (A) involve a
security futures product, the Commission shall
consult with and consider the views of the
Commodity Futures Trading Commission.
(E) Exemption.--In exercising its authority
under this paragraph, the Commission shall not
be required to comply with the provisions of--
(i) section 19(c); or
(ii) section 553 of title 5, United
States Code.
(3) Termination of emergency actions by president.--
The President may direct that action taken by the
Commission under paragraph (1)(B) or paragraph (2) of
this subsection shall not continue in effect.
(4) Compliance with orders.--No member of a national
securities exchange, broker, or dealer shall make use
of the mails or any means or instrumentality of
interstate commerce to effect any transaction in, or to
induce the purchase or sale of, any security in
contravention of an order of the Commission under this
subsection unless such order has been stayed, modified,
or set aside as provided in paragraph (5) of this
subsection or has ceased to be effective upon direction
of the President as provided in paragraph (3).
(5) Limitations on review of orders.--An order of the
Commission pursuant to this subsection shall be subject
to review only as provided in section 25(a) of this
title. Review shall be based on an examination of all
the information before the Commission at the time such
order was issued. The reviewing court shall not enter a
stay, writ of mandamus, or similar relief unless the
court finds, after notice and hearing before a panel of
the court, that the Commission's action is arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law.
(6) Consultation.--Prior to taking any action
described in paragraph (1)(B), the Commission shall
consult with and consider the views of the Secretary of
the Treasury, the Board of Governors of the Federal
Reserve System, and the Commodity Futures Trading
Commission, unless such consultation is impracticable
in light of the emergency.
(7) Definition.--For purposes of this subsection, the
term ``emergency'' means--
(A) a major market disturbance characterized
by or constituting--
(i) sudden and excessive fluctuations
of securities prices generally, or a
substantial threat thereof, that
threaten fair and orderly markets; or
(ii) a substantial disruption of the
safe or efficient operation of the
national system for clearance and
settlement of transactions in
securities, or a substantial threat
thereof; or
(B) a major disturbance that substantially
disrupts, or threatens to substantially
disrupt--
(i) the functioning of securities
markets, investment companies, or any
other significant portion or segment of
the securities markets; or
(ii) the transmission or processing
of securities transactions.
(l) It shall be unlawful for an issuer, any class of whose
securities is registered pursuant to this section or would be
required to be so registered except for the exemption from
registration provided by subsection (g)(2)(B) or (g)(2)(G) of
this section, by the use of any means or instrumentality of
interstate commerce, or of the mails, to issue, either
originally or upon transfer, any of such securities in a form
or with a format which contravenes such rules and regulations
as the Commission may prescribe as necessary or appropriate for
the prompt and accurate clearance and settlement of
transactions in securities. The provisions of this subsection
shall not apply to variable annuity contracts or variable life
policies issued by an insurance company or its separate
accounts.
periodical and other reports
Sec. 13. (a) Every issuer of a security registered pursuant
to section 12 of this title shall file with the Commission, in
accordance with such rules and regulations as the Commission
may prescribe as necessary or appropriate for the proper
protection of investors and to insure fair dealing in the
security--
(1) such information and documents (and such copies
thereof) as the Commission shall require to keep
reasonably current the information and documents
required to be included in or filed with an application
or registration statement filed pursuant to section 12,
except that the Commission may not require the filing
of any material contract wholly executed before July 1,
1962.
(2) such annual reports (and such copies thereof),
certified if required by the rules and regulations of
the Commission by independent public accountants, and
such quarterly reports (and such copies thereof), as
the Commission may prescribe.
Every issuer of a security registered on a national securities
exchange shall also file a duplicate original of such
information, documents, and reports with the exchange. In any
registration statement, periodic report, or other reports to be
filed with the Commission, an emerging growth company need not
present selected financial data in accordance with section
229.301 of title 17, Code of Federal Regulations, for any
period prior to the earliest audited period presented in
connection with its first registration statement that became
effective under this Act or the Securities Act of 1933 and,
with respect to any such statement or reports, an emerging
growth company may not be required to comply with any new or
revised financial accounting standard until such date that a
company that is not an issuer (as defined under section 2(a) of
the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a))) is required
to comply with such new or revised accounting standard, if such
standard applies to companies that are not issuers.
(b)(1) The Commission may prescribe, in regard to reports
made pursuant to this title, the form or forms in which the
required information shall be set forth, the items or details
to be shown in the balance sheet and the earnings statement,
and the methods to be followed in the preparation of reports,
in the appraisal or valuation of assets and liabilities, in the
determination of depreciation and depletion, in the
differentiation of recurring and nonrecurring income, in the
differentiation of investment and operating income, and in the
preparation, where the Commission deems it necessary or
desirable, of separate and/or consolidated balance sheets or
income accounts of any person directly or indirectly
controlling or controlled by the issuer, or any person under
direct or indirect common control with the issuer; but in the
case of the reports of any person whose methods of accounting
are prescribed under the provisions of any law of the United
States, or any rule or regulation thereunder, the rules and
regulations of the Commission with respect to reports shall not
be inconsistent with the requirements imposed by such law or
rule or regulation in respect of the same subject matter
(except that such rules and regulations of the Commission may
be inconsistent with such requirements to the extent that the
Commission determines that the public interest or the
protection of investors so requires).
(2) Every issuer which has a class of securities registered
pursuant to section 12 of this title and every issuer which is
required to file reports pursuant to section 15(d) of this
title shall--
(A) make and keep books, records, and accounts,
which, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets
of the issuer;
(B) devise and maintain a system of internal
accounting controls sufficient to provide reasonable
assurances that--
(i) transactions are executed in accordance
with management's general or specific
authorization;
(ii) transactions are recorded as necessary
(I) to permit preparation of financial
statements in conformity with generally
accepted accounting principles or any other
criteria applicable to such statements, and
(II) to maintain accountability for assets;
(iii) access to assets is permitted only in
accordance with management's general or
specific authorization; and
(iv) the recorded accountability for assets
is compared with the existing assets at
reasonable intervals and appropriate action is
taken with respect to any differences; and
(C) notwithstanding any other provision of law, pay
the allocable share of such issuer of a reasonable
annual accounting support fee or fees, determined in
accordance with section 109 of the Sarbanes-Oxley Act
of 2002.
(3)(A) With respect to matters concerning the national
security of the United States, no duty or liability under
paragraph (2) of this subsection shall be imposed upon any
person acting in cooperation with the head of any Federal
department or agency responsible for such matters if such act
in cooperation with such head of a department or agency was
done upon the specific, written directive of the head of such
department or agency pursuant to Presidential authority to
issue such directives. Each directive issued under this
paragraph shall set forth the specific facts and circumstances
with respect to which the provisions of this paragraph are to
be invoked. Each such directive shall, unless renewed in
writing, expire one year after the date of issuance.
(B) Each head of a Federal department or agency of the United
States who issues a directive pursuant to this paragraph shall
maintain a complete file of all such directives and shall, on
October 1 of each year, transmit a summary of matters covered
by such directives in force at any time during the previous
year to the Permanent Select Committee on Intelligence of the
House of Representatives and the Select Committee on
Intelligence of the Senate.
(4) No criminal liability shall be imposed for failing to
comply with the requirements of paragraph (2) of this
subsection except as provided in paragraph (5) of this
subsection.
(5) No person shall knowingly circumvent or knowingly fail to
implement a system of internal accounting controls or knowingly
falsify any book, record, or account described in paragraph
(2).
(6) Where an issuer which has a class of securities
registered pursuant to section 12 of this title or an issuer
which is required to file reports pursuant to section 15(d) of
this title holds 50 per centum or less of the voting power with
respect to a domestic or foreign firm, the provisions of
paragraph (2) require only that the issuer proceed in good
faith to use its influence, to the extent reasonable under the
issuer's circumstances, to cause such domestic or foreign firm
to devise and maintain a system of internal accounting controls
consistent with paragraph (2). Such circumstances include the
relative degree of the issuer's ownership of the domestic or
foreign firm and the laws and practices governing the business
operations of the country in which such firm is located. An
issuer which demonstrates good faith efforts to use such
influence shall be conclusively presumed to have complied with
the requirements of paragraph (2).
(7) For the purpose of paragraph (2) of this subsection, the
terms ``reasonable assurances'' and ``reasonable detail'' mean
such level of detail and degree of assurance as would satisfy
prudent officials in the conduct of their own affairs.
(c) If in the judgment of the Commission any report required
under subsection (a) is inapplicable to any specified class or
classes of issuers, the Commission shall require in lieu
thereof the submission of such reports of comparable character
as it may deem applicable to such class or classes of issuers.
(d)(1) Any person who, after acquiring directly or indirectly
the beneficial ownership of any equity security of a class
which is registered pursuant to section 12 of this title, or
any equity security of an insurance company which would have
been required to be so registered except for the exemption
contained in section 12(g)(2)(G) of this title, or any equity
security issued by a closed-end investment company registered
under the Investment Company Act of 1940 or any equity security
issued by a Native Corporation pursuant to section 37(d)(6) of
the Alaska Native Claims Settlement Act, or otherwise becomes
or is deemed to become a beneficial owner of any of the
foregoing upon the purchase or sale of a security-based swap
that the Commission may define by rule, and is directly or
indirectly the beneficial owner of more than 5 per centum of
such class shall, within ten days after such acquisition or
within such shorter time as the Commission may establish by
rule, file with the Commission, a statement containing such of
the following information, and such additional information, as
the Commission may by rules and regulations, prescribe as
necessary or appropriate in the public interest or for the
protection of investors--
(A) the background, and identity, residence, and
citizenship of, and the nature of such beneficial
ownership by, such person and all other persons by whom
or on whose behalf the purchases have been or are to be
effected;
(B) the source and amount of the funds or other
consideration used or to be used in making the
purchases, and if any part of the purchase price is
represented or is to be represented by funds or other
consideration borrowed or otherwise obtained for the
purpose of acquiring, holding, or trading such
security, a description of the transaction and the
names of the parties thereto, except that where a
source of funds is a loan made in the ordinary course
of business by a bank, as defined in section 3(a)(6) of
this title, if the person filing such statement so
requests, the name of the bank shall not be made
available to the public;
(C) if the purpose of the purchases or prospective
purchases is to acquire control of the business of the
issuer of the securities any plans or proposals which
such persons may have to liquidate such issuer, to sell
its assets to or merge it with any other persons, or to
make any other major change in its business or
corporate structure;
(D) the number of shares of such security which are
beneficially owned, and the number of shares concerning
which there is a right to acquire, directly or
indirectly, by (i) such person, and (ii) by each
associate of such person, giving the background,
identity, residence, and citizenship of each such
associate; and
(E) information as to any contracts, arrangements, or
understandings with any person with respect to any
securities of the issuer, including but not limited to
transfer of any of the securities, joint ventures, loan
or option arrangements, puts or calls, guaranties of
loans, guaranties against loss or guaranties of
profits, division of losses or profits, or the giving
or withholding of proxies, naming the persons with whom
such contracts, arrangements, or understandings have
been entered into, and giving the details thereof.
(2) If any material change occurs in the facts set forth in
the statement filed with the Commission, an amendment shall be
filed with the Commission, in accordance with such rules and
regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of
investors.
(3) When two or more persons act as a partnership, limited
partnership, syndicate, or other group for the purpose of
acquiring, holding, or disposing of securities of an issuer,
such syndicate or group shall be deemed a ``person'' for the
purposes of this subsection.
(4) In determining, for purposes of this subsection, any
percentage of a class of any security, such class shall be
deemed to consist of the amount of the outstanding securities
of such class, exclusive of any securities of such class held
by or for the account of the issuer or a subsidiary of the
issuer.
(5) The Commission, by rule or regulation or by order, may
permit any person to file in lieu of the statement required by
paragraph (1) of this subsection or the rules and regulations
thereunder, a notice stating the name of such person, the
number of shares of any equity securities subject to paragraph
(1) which are owned by him, the date of their acquisition and
such other information as the Commission may specify, if it
appears to the Commission that such securities were acquired by
such person in the ordinary course of his business and were not
acquired for the purpose of and do not have the effect of
changing or influencing the control of the issuer nor in
connection with or as a participant in any transaction having
such purpose or effect.
(6) The provisions of this subsection shall not apply to--
(A) any acquisition or offer to acquire securities
made or proposed to be made by means of a registration
statement under the Securities Act of 1933;
(B) any acquisition of the beneficial ownership of a
security which, together with all other acquisitions by
the same person of securities of the same class during
the preceding twelve months, does not exceed 2 per
centum of that class;
(C) any acquisition of an equity security by the
issuer of such security;
(D) any acquisition or proposed acquisition of a
security which the Commission, by rules or regulations
or by order, shall exempt from the provisions of this
subsection as not entered into for the purpose of, and
not having the effect of, changing or influencing the
control of the issuer or otherwise as not comprehended
within the purposes of this subsection.
(e)(1) It shall be unlawful for an issuer which has a class
of equity securities registered pursuant to section 12 of this
title, or which is a closed-end investment company registered
under the Investment Company Act of 1940, to purchase any
equity security issued by it if such purchase is in
contravention of such rules and regulations as the Commission,
in the public interest or for the protection of investors, may
adopt (A) to define acts and practices which are fraudulent,
deceptive, or manipulative, and (B) to prescribe means
reasonably designed to prevent such acts and practices. Such
rules and regulations may require such issuer to provide
holders of equity securities of such class with such
information relating to the reasons for such purchase, the
source of funds, the number of shares to be purchased, the
price to be paid for such securities, the method of purchase,
and such additional information, as the Commission deems
necessary or appropriate in the public interest or for the
protection of investors, or which the Commission deems to be
material to a determination whether such security should be
sold.
(2) For the purpose of this subsection, a purchase by or for
the issuer or any person controlling, controlled by, or under
common control with the issuer, or a purchase subject to
control of the issuer or any such person, shall be deemed to be
a purchase by the issuer. The Commission shall have power to
make rules and regulations implementing this paragraph in the
public interest and for the protection of investors, including
exemptive rules and regulations covering situations in which
the Commission deems it unnecessary or inappropriate that a
purchase of the type described in this paragraph shall be
deemed to be a purchase by the issuer for purposes of some or
all of the provisions of paragraph (1) of this subsection.
(3) At the time of filing such statement as the Commission
may require by rule pursuant to paragraph (1) of this
subsection, the person making the filing shall pay to the
Commission a fee at a rate that, subject to paragraph (4), is
equal to $92 per $1,000,000 of the value of securities proposed
to be purchased. The fee shall be reduced with respect to
securities in an amount equal to any fee paid with respect to
any securities issued in connection with the proposed
transaction under section 6(b) of the Securities Act of 1933,
or the fee paid under that section shall be reduced in an
amount equal to the fee paid to the Commission in connection
with such transaction under this paragraph.
(4) Annual adjustment.--For each fiscal year, the
Commission shall by order adjust the rate required by
paragraph (3) for such fiscal year to a rate that is
equal to the rate (expressed in dollars per million)
that is applicable under section 6(b) of the Securities
Act of 1933 for such fiscal year.
[(5) Fee collections.--Fees collected pursuant to
this subsection for fiscal year 2012 and each fiscal
year thereafter shall be deposited and credited as
general revenue of the Treasury and shall not be
available for obligation.]
(5) Offsetting collections.--Fees collected pursuant
to this subsection for any fiscal year--
(A) except as provided in section 31(i)(2),
shall be deposited and credited as offsetting
collections to the account providing
appropriations to the Commission; and
(B) except as provided in paragraph (8),
shall not be collected for any fiscal year
except to the extent provided in advance in
appropriations Acts.
(6) Effective date; publication.--In exercising its
authority under this subsection, the Commission shall
not be required to comply with the provisions of
section 553 of title 5, United States Code. An adjusted
rate prescribed under paragraph (4) shall be published
and take effect in accordance with section 6(b) of the
Securities Act of 1933 (15 U.S.C. 77f(b)).
(7) Pro rata application.--The rates per $1,000,000
required by this subsection shall be applied pro rata
to amounts and balances of less than $1,000,000.
(8) Lapse of appropriation.--If on the first day of a
fiscal year a regular appropriation to the Commission
has not been enacted, the Commission shall continue to
collect fees (as offsetting collections) under this
subsection at the rate in effect during the preceding
fiscal year, until 5 days after the date such a regular
appropriation is enacted.
(f)(1) Every institutional investment manager which uses the
mails, or any means or instrumentality of interstate commerce
in the course of its business as an institutional investment
manager and which exercises investment discretion with respect
to accounts holding equity securities of a class described in
section 13(d)(1) of this title having an aggregate fair market
value on the last trading day in any of the preceding twelve
months of at least $100,000,000 or such lesser amount (but in
no case less than $10,000,000) as the Commission, by rule, may
determine, shall file reports with the Commission in such form,
for such periods, and at such times after the end of such
periods as the Commission, by rule, may prescribe, but in no
event shall such reports be filed for periods longer than one
year or shorter than one quarter. Such reports shall include
for each such equity security held on the last day of the
reporting period by accounts (in aggregate or by type as the
Commission, by rule, may prescribe) with respect to which the
institutional investment manager exercises investment
discretion (other than securities held in amounts which the
Commission, by rule, determines to be insignificant for
purposes of this subsection), the name of the issuer and the
title, class, CUSIP number, number of shares or principal
amount, and aggregate fair market value of each such security.
Such reports may also include for accounts (in aggregate or by
type) with respect to which the institutional investment
manager exercises investment discretion such of the following
information as the Commission, by rule, prescribes--
(A) the name of the issuer and the title, class,
CUSIP number, number of shares or principal amount, and
aggregate fair market value or cost or amortized cost
of each other security (other than an exempted
security) held on the last day of the reporting period
by such accounts;
(B) the aggregate fair market value or cost or
amortized cost of exempted securities (in aggregate or
by class) held on the last day of the reporting period
by such accounts;
(C) the number of shares of each equity security of a
class described in section 13(d)(1) of this title held
on the last day of the reporting period by such
accounts with respect to which the institutional
investment manager possesses sole or shared authority
to exercise the voting rights evidenced by such
securities;
(D) the aggregate purchases and aggregate sales
during the reporting period of each security (other
than an exempted security) effected by or for such
accounts; and
(E) with respect to any transaction or series of
transactions having a market value of at least $500,000
or such other amount as the Commission, by rule, may
determine, effected during the reporting period by or
for such accounts in any equity security of a class
described in section 13(d)(1) of this title--
(i) the name of the issuer and the title,
class, and CUSIP number of the security;
(ii) the number of shares or principal amount
of the security involved in the transaction;
(iii) whether the transaction was a purchase
or sale;
(iv) the per share price or prices at which
the transaction was effected;
(v) the date or dates of the transaction;
(vi) the date or dates of the settlement of
the transaction;
(vii) the broker or dealer through whom the
transaction was effected;
(viii) the market or markets in which the
transaction was effected; and
(ix) such other related information as the
Commission, by rule, may prescribe.
(2) The Commission shall prescribe rules providing
for the public disclosure of the name of the issuer and
the title, class, CUSIP number, aggregate amount of the
number of short sales of each security, and any
additional information determined by the Commission
following the end of the reporting period. At a
minimum, such public disclosure shall occur every
month.
(3) The Commission, by rule or order, may exempt,
conditionally or unconditionally, any institutional investment
manager or security or any class of institutional investment
managers or securities from any or all of the provisions of
this subsection or the rules thereunder.
(4) The Commission shall make available to the public for a
reasonable fee a list of all equity securities of a class
described in section 13(d)(1) of this title, updated no less
frequently than reports are required to be filed pursuant to
paragraph (1) of this subsection. The Commission shall tabulate
the information contained in any report filed pursuant to this
subsection in a manner which will, in the view of the
Commission, maximize the usefulness of the information to other
Federal and State authorities and the public. Promptly after
the filing of any such report, the Commission shall make the
information contained therein conveniently available to the
public for a reasonable fee in such form as the Commission, by
rule, may prescribe, except that the Commission, as it
determines to be necessary or appropriate in the public
interest or for the protection of investors, may delay or
prevent public disclosure of any such information in accordance
with section 552 of title 5, United States Code.
Notwithstanding the preceding sentence, any such information
identifying the securities held by the account of a natural
person or an estate or trust (other than a business trust or
investment company) shall not be disclosed to the public.
(5) In exercising its authority under this subsection, the
Commission shall determine (and so state) that its action is
necessary or appropriate in the public interest and for the
protection of investors or to maintain fair and orderly markets
or, in granting an exemption, that its action is consistent
with the protection of investors and the purposes of this
subsection. In exercising such authority the Commission shall
take such steps as are within its power, including consulting
with the Comptroller General of the United States, the Director
of the Office of Management and Budget, the appropriate
regulatory agencies, Federal and State authorities which,
directly or indirectly, require reports from institutional
investment managers of information substantially similar to
that called for by this subsection, national securities
exchanges, and registered securities associations, (A) to
achieve uniform, centralized reporting of information
concerning the securities holdings of and transactions by or
for accounts with respect to which institutional investment
managers exercise investment discretion, and (B) consistently
with the objective set forth in the preceding subparagraph, to
avoid unnecessarily duplicative reporting by, and minimize the
compliance burden on, institutional investment managers.
Federal authorities which, directly or indirectly, require
reports from institutional investment managers of information
substantially similar to that called for by this subsection
shall cooperate with the Commission in the performance of its
responsibilities under the preceding sentence. An institutional
investment manager which is a bank, the deposits of which are
insured in accordance with the Federal Deposit Insurance Act,
shall file with the appropriate regulatory agency a copy of
every report filed with the Commission pursuant to this
subsection.
(6)(A) For purposes of this subsection the term
``institutional investment manager'' includes any person, other
than a natural person, investing in or buying and selling
securities for its own account, and any person exercising
investment discretion with respect to the account of any other
person.
(B) The Commission shall adopt such rules as it deems
necessary or appropriate to prevent duplicative reporting
pursuant to this subsection by two or more institutional
investment managers exercising investment discretion with
respect to the same amount.
(g)(1) Any person who is directly or indirectly the
beneficial owner of more than 5 per centum of any security of a
class described in subsection (d)(1) of this section or
otherwise becomes or is deemed to become a beneficial owner of
any security of a class described in subsection (d)(1) upon the
purchase or sale of a security-based swap that the Commission
may define by ruleshall file with the Commission a statement
setting forth, in such form and at such time as the Commission
may, by rule, prescribe--
(A) such person's identity, residence, and
citizenship; and
(B) the number and description of the shares in which
such person has an interest and the nature of such
interest.
(2) If any material change occurs in the facts set forth in
the statement filed with the Commission, an amendment shall be
filed with the Commission, in accordance with such rules and
regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of
investors.
(3) When two or more persons act as a partnership, limited
partnership, syndicate, or other group for the purpose of
acquiring, holding, or disposing of securities of an issuer,
such syndicate or group shall be deemed a ``person'' for the
purposes of this subsection.
(4) In determining, for purposes of this subsection, any
percentage of a class of any security, such class shall be
deemed to consist of the amount of the outstanding securities
of such class, exclusive of any securities of such class held
by or for the account of the issuer or a subsidiary of the
issuer.
(5) In exercising its authority under this subsection, the
Commission shall take such steps as it deems necessary or
appropriate in the public interest or for the protection of
investors (A) to achieve centralized reporting of information
regarding ownership, (B) to avoid unnecessarily duplicative
reporting by and minimize the compliance burden on persons
required to report, and (C) to tabulate and promptly make
available the information contained in any report filed
pursuant to this subsection in a manner which will, in the view
of the Commission, maximize the usefulness of the information
to other Federal and State agencies and the public.
(6) The Commission may, by rule or order, exempt, in whole or
in part, any person or class of persons from any or all of the
reporting requirements of this subsection as it deems necessary
or appropriate in the public interest or for the protection of
investors.
(h) Large Trader Reporting.--
(1) Identification requirements for large traders.--
For the purpose of monitoring the impact on the
securities markets of securities transactions involving
a substantial volume or a large fair market value or
exercise value and for the purpose of otherwise
assisting the Commission in the enforcement of this
title, each large trader shall--
(A) provide such information to the
Commission as the Commission may by rule or
regulation prescribe as necessary or
appropriate, identifying such large trader and
all accounts in or through which such large
trader effects such transactions; and
(B) identify, in accordance with such rules
or regulations as the Commission may prescribe
as necessary or appropriate, to any registered
broker or dealer by or through whom such large
trader directly or indirectly effects
securities transactions, such large trader and
all accounts directly or indirectly maintained
with such broker or dealer by such large trader
in or through which such transactions are
effected.
(2) Recordkeeping and reporting requirements for
brokers and dealers.--Every registered broker or dealer
shall make and keep for prescribed periods such records
as the Commission by rule or regulation prescribes as
necessary or appropriate in the public interest, for
the protection of investors, or otherwise in
furtherance of the purposes of this title, with respect
to securities transactions that equal or exceed the
reporting activity level effected directly or
indirectly by or through such registered broker or
dealer of or for any person that such broker or dealer
knows is a large trader, or any person that such broker
or dealer has reason to know is a large trader on the
basis of transactions in securities effected by or
through such broker or dealer. Such records shall be
available for reporting to the Commission, or any self-
regulatory organization that the Commission shall
designate to receive such reports, on the morning of
the day following the day the transactions were
effected, and shall be reported to the Commission or a
self-regulatory organization designated by the
Commission immediately upon request by the Commission
or such a self-regulatory organization. Such records
and reports shall be in a format and transmitted in a
manner prescribed by the Commission (including, but not
limited to, machine readable form).
(3) Aggregation rules.--The Commission may prescribe
rules or regulations governing the manner in which
transactions and accounts shall be aggregated for the
purpose of this subsection, including aggregation on
the basis of common ownership or control.
(4) Examination of broker and dealer records.--All
records required to be made and kept by registered
brokers and dealers pursuant to this subsection with
respect to transactions effected by large traders are
subject at any time, or from time to time, to such
reasonable periodic, special, or other examinations by
representatives of the Commission as the Commission
deems necessary or appropriate in the public interest,
for the protection of investors, or otherwise in
furtherance of the purposes of this title.
(5) Factors to be considered in commission actions.--
In exercising its authority under this subsection, the
Commission shall take into account--
(A) existing reporting systems;
(B) the costs associated with maintaining
information with respect to transactions
effected by large traders and reporting such
information to the Commission or self-
regulatory organizations; and
(C) the relationship between the United
States and international securities markets.
(6) Exemptions.--The Commission, by rule, regulation,
or order, consistent with the purposes of this title,
may exempt any person or class of persons or any
transaction or class of transactions, either
conditionally or upon specified terms and conditions or
for stated periods, from the operation of this
subsection, and the rules and regulations thereunder.
(7) Authority of commission to limit disclosure of
information.--Notwithstanding any other provision of
law, the Commission shall not be compelled to disclose
any information required to be kept or reported under
this subsection. Nothing in this subsection shall
authorize the Commission to withhold information from
Congress, or prevent the Commission from complying with
a request for information from any other Federal
department or agency requesting information for
purposes within the scope of its jurisdiction, or
complying with an order of a court of the United States
in an action brought by the United States or the
Commission. For purposes of section 552 of title 5,
United States Code, this subsection shall be considered
a statute described in subsection (b)(3)(B) of such
section 552.
(8) Definitions.--For purposes of this subsection--
(A) the term ``large trader'' means every
person who, for his own account or an account
for which he exercises investment discretion,
effects transactions for the purchase or sale
of any publicly traded security or securities
by use of any means or instrumentality of
interstate commerce or of the mails, or of any
facility of a national securities exchange,
directly or indirectly by or through a
registered broker or dealer in an aggregate
amount equal to or in excess of the identifying
activity level;
(B) the term ``publicly traded security''
means any equity security (including an option
on individual equity securities, and an option
on a group or index of such securities) listed,
or admitted to unlisted trading privileges, on
a national securities exchange, or quoted in an
automated interdealer quotation system;
(C) the term ``identifying activity level''
means transactions in publicly traded
securities at or above a level of volume, fair
market value, or exercise value as shall be
fixed from time to time by the Commission by
rule or regulation, specifying the time
interval during which such transactions shall
be aggregated;
(D) the term ``reporting activity level''
means transactions in publicly traded
securities at or above a level of volume, fair
market value, or exercise value as shall be
fixed from time to time by the Commission by
rule, regulation, or order, specifying the time
interval during which such transactions shall
be aggregated; and
(E) the term ``person'' has the meaning given
in section 3(a)(9) of this title and also
includes two or more persons acting as a
partnership, limited partnership, syndicate, or
other group, but does not include a foreign
central bank.
(i) Accuracy of Financial Reports.--Each financial report
that contains financial statements, and that is required to be
prepared in accordance with (or reconciled to) generally
accepted accounting principles under this title and filed with
the Commission shall reflect all material correcting
adjustments that have been identified by a registered public
accounting firm in accordance with generally accepted
accounting principles and the rules and regulations of the
Commission.
(j) Off-Balance Sheet Transactions.--Not later than 180 days
after the date of enactment of the Sarbanes-Oxley Act of 2002,
the Commission shall issue final rules providing that each
annual and quarterly financial report required to be filed with
the Commission shall disclose all material off-balance sheet
transactions, arrangements, obligations (including contingent
obligations), and other relationships of the issuer with
unconsolidated entities or other persons, that may have a
material current or future effect on financial condition,
changes in financial condition, results of operations,
liquidity, capital expenditures, capital resources, or
significant components of revenues or expenses.
(k) Prohibition on Personal Loans to Executives.--
(1) In general.--It shall be unlawful for any issuer
(as defined in section 2 of the Sarbanes-Oxley Act of
2002), directly or indirectly, including through any
subsidiary, to extend or maintain credit, to arrange
for the extension of credit, or to renew an extension
of credit, in the form of a personal loan to or for any
director or executive officer (or equivalent thereof)
of that issuer. An extension of credit maintained by
the issuer on the date of enactment of this subsection
shall not be subject to the provisions of this
subsection, provided that there is no material
modification to any term of any such extension of
credit or any renewal of any such extension of credit
on or after that date of enactment.
(2) Limitation.--Paragraph (1) does not preclude any
home improvement and manufactured home loans (as that
term is defined in section 5 of the Home Owners' Loan
Act (12 U.S.C. 1464)), consumer credit (as defined in
section 103 of the Truth in Lending Act (15 U.S.C.
1602)), or any extension of credit under an open end
credit plan (as defined in section 103 of the Truth in
Lending Act (15 U.S.C. 1602)), or a charge card (as
defined in section 127(c)(4)(e) of the Truth in Lending
Act (15 U.S.C. 1637(c)(4)(e)), or any extension of
credit by a broker or dealer registered under section
15 of this title to an employee of that broker or
dealer to buy, trade, or carry securities, that is
permitted under rules or regulations of the Board of
Governors of the Federal Reserve System pursuant to
section 7 of this title (other than an extension of
credit that would be used to purchase the stock of that
issuer), that is--
(A) made or provided in the ordinary course
of the consumer credit business of such issuer;
(B) of a type that is generally made
available by such issuer to the public; and
(C) made by such issuer on market terms, or
terms that are no more favorable than those
offered by the issuer to the general public for
such extensions of credit.
(3) Rule of construction for certain loans.--
Paragraph (1) does not apply to any loan made or
maintained by an insured depository institution (as
defined in section 3 of the Federal Deposit Insurance
Act (12 U.S.C. 1813)), if the loan is subject to the
insider lending restrictions of section 22(h) of the
Federal Reserve Act (12 U.S.C. 375b).
(l) Real Time Issuer Disclosures.--Each issuer reporting
under section 13(a) or 15(d) shall disclose to the public on a
rapid and current basis such additional information concerning
material changes in the financial condition or operations of
the issuer, in plain English, which may include trend and
qualitative information and graphic presentations, as the
Commission determines, by rule, is necessary or useful for the
protection of investors and in the public interest.
(m) Public Availability of Security-based Swap Transaction
Data.--
(1) In general.--
(A) Definition of real-time public
reporting.--In this paragraph, the term ``real-
time public reporting'' means to report data
relating to a security-based swap transaction,
including price and volume, as soon as
technologically practicable after the time at
which the security-based swap transaction has
been executed.
(B) Purpose.--The purpose of this subsection
is to authorize the Commission to make
security-based swap transaction and pricing
data available to the public in such form and
at such times as the Commission determines
appropriate to enhance price discovery.
(C) General rule.--The Commission is
authorized to provide by rule for the public
availability of security-based swap
transaction, volume, and pricing data as
follows:
(i) With respect to those security-
based swaps that are subject to the
mandatory clearing requirement
described in section 3C(a)(1)
(including those security-based swaps
that are excepted from the requirement
pursuant to section 3C(g)), the
Commission shall require real-time
public reporting for such transactions.
(ii) With respect to those security-
based swaps that are not subject to the
mandatory clearing requirement
described in section 3C(a)(1), but are
cleared at a registered clearing
agency, the Commission shall require
real-time public reporting for such
transactions.
(iii) With respect to security-based
swaps that are not cleared at a
registered clearing agency and which
are reported to a security-based swap
data repository or the Commission under
section 3C(a)(6), the Commission shall
require real-time public reporting for
such transactions, in a manner that
does not disclose the business
transactions and market positions of
any person.
(iv) With respect to security-based
swaps that are determined to be
required to be cleared under section
3C(b) but are not cleared, the
Commission shall require real-time
public reporting for such transactions.
(D) Registered entities and public
reporting.--The Commission may require
registered entities to publicly disseminate the
security-based swap transaction and pricing
data required to be reported under this
paragraph.
(E) Rulemaking required.--With respect to the
rule providing for the public availability of
transaction and pricing data for security-based
swaps described in clauses (i) and (ii) of
subparagraph (C), the rule promulgated by the
Commission shall contain provisions--
(i) to ensure such information does
not identify the participants;
(ii) to specify the criteria for
determining what constitutes a large
notional security-based swap
transaction (block trade) for
particular markets and contracts;
(iii) to specify the appropriate time
delay for reporting large notional
security-based swap transactions (block
trades) to the public; and
(iv) that take into account whether
the public disclosure will materially
reduce market liquidity.
(F) Timeliness of reporting.--Parties to a
security-based swap (including agents of the
parties to a security-based swap) shall be
responsible for reporting security-based swap
transaction information to the appropriate
registered entity in a timely manner as may be
prescribed by the Commission.
(G) Reporting of swaps to registered
security-based swap data repositories.--Each
security-based swap (whether cleared or
uncleared) shall be reported to a registered
security-based swap data repository.
(H) Registration of clearing agencies.--A
clearing agency may register as a security-
based swap data repository.
(2) Semiannual and annual public reporting of
aggregate security-based swap data.--
(A) In general.--In accordance with
subparagraph (B), the Commission shall issue a
written report on a semiannual and annual basis
to make available to the public information
relating to--
(i) the trading and clearing in the
major security-based swap categories;
and
(ii) the market participants and
developments in new products.
(B) Use; consultation.--In preparing a report
under subparagraph (A), the Commission shall--
(i) use information from security-
based swap data repositories and
clearing agencies; and
(ii) consult with the Office of the
Comptroller of the Currency, the Bank
for International Settlements, and such
other regulatory bodies as may be
necessary.
(C) Authority of commission.--The Commission
may, by rule, regulation, or order, delegate
the public reporting responsibilities of the
Commission under this paragraph in accordance
with such terms and conditions as the
Commission determines to be appropriate and in
the public interest.
(n) Security-based Swap Data Repositories.--
(1) Registration requirement.--It shall be unlawful
for any person, unless registered with the Commission,
directly or indirectly, to make use of the mails or any
means or instrumentality of interstate commerce to
perform the functions of a security-based swap data
repository.
(2) Inspection and examination.--Each registered
security-based swap data repository shall be subject to
inspection and examination by any representative of the
Commission.
(3) Compliance with core principles.--
(A) In general.--To be registered, and
maintain registration, as a security-based swap
data repository, the security-based swap data
repository shall comply with--
(i) the requirements and core
principles described in this
subsection; and
(ii) any requirement that the
Commission may impose by rule or
regulation.
(B) Reasonable discretion of security-based
swap data repository.--Unless otherwise
determined by the Commission, by rule or
regulation, a security-based swap data
repository described in subparagraph (A) shall
have reasonable discretion in establishing the
manner in which the security-based swap data
repository complies with the core principles
described in this subsection.
(4) Standard setting.--
(A) Data identification.--
(i) In general.--In accordance with
clause (ii), the Commission shall
prescribe standards that specify the
data elements for each security-based
swap that shall be collected and
maintained by each registered security-
based swap data repository.
(ii) Requirement.--In carrying out
clause (i), the Commission shall
prescribe consistent data element
standards applicable to registered
entities and reporting counterparties.
(B) Data collection and maintenance.--The
Commission shall prescribe data collection and
data maintenance standards for security-based
swap data repositories.
(C) Comparability.--The standards prescribed
by the Commission under this subsection shall
be comparable to the data standards imposed by
the Commission on clearing agencies in
connection with their clearing of security-
based swaps.
(5) Duties.--A security-based swap data repository
shall--
(A) accept data prescribed by the Commission
for each security-based swap under subsection
(b);
(B) confirm with both counterparties to the
security-based swap the accuracy of the data
that was submitted;
(C) maintain the data described in
subparagraph (A) in such form, in such manner,
and for such period as may be required by the
Commission;
(D)(i) provide direct electronic access to
the Commission (or any designee of the
Commission, including another registered
entity); and
(ii) provide the information described in
subparagraph (A) in such form and at such
frequency as the Commission may require to
comply with the public reporting requirements
set forth in subsection (m);
(E) at the direction of the Commission,
establish automated systems for monitoring,
screening, and analyzing security-based swap
data;
(F) maintain the privacy of any and all
security-based swap transaction information
that the security-based swap data repository
receives from a security-based swap dealer,
counterparty, or any other registered entity;
and
(G) on a confidential basis pursuant to
section 24, upon request, and after notifying
the Commission of the request, make available
security-based swap data obtained by the
security-based swap data repository, including
individual counterparty trade and position
data, to--
(i) each appropriate prudential
regulator;
(ii) the Financial Stability
Oversight Council;
(iii) the Commodity Futures Trading
Commission;
(iv) the Department of Justice; and
(v) any other person that the
Commission determines to be
appropriate, including--
(I) foreign financial
supervisors (including foreign
futures authorities);
(II) foreign central banks;
(III) foreign ministries; and
(IV) other foreign
authorities.
(H) Confidentiality agreement.--Before the
security-based swap data repository may share
information with any entity described in
subparagraph (G), the security-based swap data
repository shall receive a written agreement
from each entity stating that the entity shall
abide by the confidentiality requirements
described in section 24 relating to the
information on security-based swap transactions
that is provided.
(6) Designation of chief compliance officer.--
(A) In general.--Each security-based swap
data repository shall designate an individual
to serve as a chief compliance officer.
(B) Duties.--The chief compliance officer
shall--
(i) report directly to the board or
to the senior officer of the security-
based swap data repository;
(ii) review the compliance of the
security-based swap data repository
with respect to the requirements and
core principles described in this
subsection;
(iii) in consultation with the board
of the security-based swap data
repository, a body performing a
function similar to the board of the
security-based swap data repository, or
the senior officer of the security-
based swap data repository, resolve any
conflicts of interest that may arise;
(iv) be responsible for administering
each policy and procedure that is
required to be established pursuant to
this section;
(v) ensure compliance with this title
(including regulations) relating to
agreements, contracts, or transactions,
including each rule prescribed by the
Commission under this section;
(vi) establish procedures for the
remediation of noncompliance issues
identified by the chief compliance
officer through any--
(I) compliance office review;
(II) look-back;
(III) internal or external
audit finding;
(IV) self-reported error; or
(V) validated complaint; and
(vii) establish and follow
appropriate procedures for the
handling, management response,
remediation, retesting, and closing of
noncompliance issues.
(C) Annual reports.--
(i) In general.--In accordance with
rules prescribed by the Commission, the
chief compliance officer shall annually
prepare and sign a report that contains
a description of--
(I) the compliance of the
security-based swap data
repository of the chief
compliance officer with respect
to this title (including
regulations); and
(II) each policy and
procedure of the security-based
swap data repository of the
chief compliance officer
(including the code of ethics
and conflict of interest
policies of the security-based
swap data repository).
(ii) Requirements.--A compliance
report under clause (i) shall--
(I) accompany each
appropriate financial report of
the security-based swap data
repository that is required to
be furnished to the Commission
pursuant to this section; and
(II) include a certification
that, under penalty of law, the
compliance report is accurate
and complete.
(7) Core principles applicable to security-based swap
data repositories.--
(A) Antitrust considerations.--Unless
necessary or appropriate to achieve the
purposes of this title, the swap data
repository shall not--
(i) adopt any rule or take any action
that results in any unreasonable
restraint of trade; or
(ii) impose any material
anticompetitive burden on the trading,
clearing, or reporting of transactions.
(B) Governance arrangements.--Each security-
based swap data repository shall establish
governance arrangements that are transparent--
(i) to fulfill public interest
requirements; and
(ii) to support the objectives of the
Federal Government, owners, and
participants.
(C) Conflicts of interest.--Each security-
based swap data repository shall--
(i) establish and enforce rules to
minimize conflicts of interest in the
decision-making process of the
security-based swap data repository;
and
(ii) establish a process for
resolving any conflicts of interest
described in clause (i).
(D) Additional duties developed by
commission.--
(i) In general.--The Commission may
develop 1 or more additional duties
applicable to security-based swap data
repositories.
(ii) Consideration of evolving
standards.--In developing additional
duties under subparagraph (A), the
Commission may take into consideration
any evolving standard of the United
States or the international community.
(iii) Additional duties for
commission designees.--The Commission
shall establish additional duties for
any registrant described in section
13(m)(2)(C) in order to minimize
conflicts of interest, protect data,
ensure compliance, and guarantee the
safety and security of the security-
based swap data repository.
(8) Required registration for security-based swap
data repositories.--Any person that is required to be
registered as a security-based swap data repository
under this subsection shall register with the
Commission, regardless of whether that person is also
licensed under the Commodity Exchange Act as a swap
data repository.
(9) Rules.--The Commission shall adopt rules
governing persons that are registered under this
subsection.
(o) Beneficial ownership.--For purposes ofthis section and
section 16, a person shall be deemed to acquire
beneficialownership of an equity security based on the purchase
or sale of asecurity-based swap, only to the extent that the
Commission, by rule,determines after consultation with the
prudential regulators and the Secretaryof the Treasury, that
the purchase or sale of the security-based swap, or classof
security-based swap, provides incidents of ownership comparable
to directownership of the equity security, and that it is
necessary to achieve thepurposes of this section that the
purchase or sale of the security-based swaps,or class of
security-based swap, be deemed the acquisition of
beneficialownership of the equitysecurity.
(p) Disclosures Relating to Conflict Minerals Originating in
the Democratic Republic of the Congo.--
(1) Regulations.--
(A) In general.--Not later than 270 days
after the date of the enactment of this
subsection, the Commission shall promulgate
regulations requiring any person described in
paragraph (2) to disclose annually, beginning
with the person's first full fiscal year that
begins after the date of promulgation of such
regulations, whether conflict minerals that are
necessary as described in paragraph (2)(B), in
the year for which such reporting is required,
did originate in the Democratic Republic of the
Congo or an adjoining country and, in cases in
which such conflict minerals did originate in
any such country, submit to the Commission a
report that includes, with respect to the
period covered by the report--
(i) a description of the measures
taken by the person to exercise due
diligence on the source and chain of
custody of such minerals, which
measures shall include an independent
private sector audit of such report
submitted through the Commission that
is conducted in accordance with
standards established by the
Comptroller General of the United
States, in accordance with rules
promulgated by the Commission, in
consultation with the Secretary of
State; and
(ii) a description of the products
manufactured or contracted to be
manufactured that are not DRC conflict
free (``DRC conflict free'' is defined
to mean the products that do not
contain minerals that directly or
indirectly finance or benefit armed
groups in the Democratic Republic of
the Congo or an adjoining country), the
entity that conducted the independent
private sector audit in accordance with
clause (i), the facilities used to
process the conflict minerals, the
country of origin of the conflict
minerals, and the efforts to determine
the mine or location of origin with the
greatest possible specificity.
(B) Certification.--The person submitting a
report under subparagraph (A) shall certify the
audit described in clause (i) of such
subparagraph that is included in such report.
Such a certified audit shall constitute a
critical component of due diligence in
establishing the source and chain of custody of
such minerals.
(C) Unreliable determination.--If a report
required to be submitted by a person under
subparagraph (A) relies on a determination of
an independent private sector audit, as
described under subparagraph (A)(i), or other
due diligence processes previously determined
by the Commission to be unreliable, the report
shall not satisfy the requirements of the
regulations promulgated under subparagraph
(A)(i).
(D) DRC conflict free.--For purposes of this
paragraph, a product may be labeled as ``DRC
conflict free'' if the product does not contain
conflict minerals that directly or indirectly
finance or benefit armed groups in the
Democratic Republic of the Congo or an
adjoining country.
(E) Information available to the public.--
Each person described under paragraph (2) shall
make available to the public on the Internet
website of such person the information
disclosed by such person under subparagraph
(A).
(2) Person described.--A person is described in this
paragraph if--
(A) the person is required to file reports
with the Commission pursuant to paragraph
(1)(A); and
(B) conflict minerals are necessary to the
functionality or production of a product
manufactured by such person.
(3) Revisions and waivers.--The Commission shall
revise or temporarily waive the requirements described
in paragraph (1) if the President transmits to the
Commission a determination that--
(A) such revision or waiver is in the
national security interest of the United States
and the President includes the reasons
therefor; and
(B) establishes a date, not later than 2
years after the initial publication of such
exemption, on which such exemption shall
expire.
(4) Termination of disclosure requirements.--The
requirements of paragraph (1) shall terminate on the
date on which the President determines and certifies to
the appropriate congressional committees, but in no
case earlier than the date that is one day after the
end of the 5-year period beginning on the date of the
enactment of this subsection, that no armed groups
continue to be directly involved and benefitting from
commercial activity involving conflict minerals.
(5) Definitions.--For purposes of this subsection,
the terms ``adjoining country'', ``appropriate
congressional committees'', ``armed group'', and
``conflict mineral'' have the meaning given those terms
under section 1502 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act.
(q) Disclosure of Payments by Resource Extraction Issuers.--
(1) Definitions.--In this subsection--
(A) the term ``commercial development of oil,
natural gas, or minerals'' includes
exploration, extraction, processing, export,
and other significant actions relating to oil,
natural gas, or minerals, or the acquisition of
a license for any such activity, as determined
by the Commission;
(B) the term ``foreign government'' means a
foreign government, a department, agency, or
instrumentality of a foreign government, or a
company owned by a foreign government, as
determined by the Commission;
(C) the term ``payment''--
(i) means a payment that is--
(I) made to further the
commercial development of oil,
natural gas, or minerals; and
(II) not de minimis; and
(ii) includes taxes, royalties, fees
(including license fees), production
entitlements, bonuses, and other
material benefits, that the Commission,
consistent with the guidelines of the
Extractive Industries Transparency
Initiative (to the extent practicable),
determines are part of the commonly
recognized revenue stream for the
commercial development of oil, natural
gas, or minerals;
(D) the term ``resource extraction issuer''
means an issuer that--
(i) is required to file an annual
report with the Commission; and
(ii) engages in the commercial
development of oil, natural gas, or
minerals;
(E) the term ``interactive data format''
means an electronic data format in which pieces
of information are identified using an
interactive data standard; and
(F) the term ``interactive data standard''
means standardized list of electronic tags that
mark information included in the annual report
of a resource extraction issuer.
(2) Disclosure.--
(A) Information required.--Not later than 270
days after the date of enactment of the Dodd-
Frank Wall Street Reform and Consumer
Protection Act, the Commission shall issue
final rules that require each resource
extraction issuer to include in an annual
report of the resource extraction issuer
information relating to any payment made by the
resource extraction issuer, a subsidiary of the
resource extraction issuer, or an entity under
the control of the resource extraction issuer
to a foreign government or the Federal
Government for the purpose of the commercial
development of oil, natural gas, or minerals,
including--
(i) the type and total amount of such
payments made for each project of the
resource extraction issuer relating to
the commercial development of oil,
natural gas, or minerals; and
(ii) the type and total amount of
such payments made to each government.
(B) Consultation in rulemaking.--In issuing
rules under subparagraph (A), the Commission
may consult with any agency or entity that the
Commission determines is relevant.
(C) Interactive data format.--The rules
issued under subparagraph (A) shall require
that the information included in the annual
report of a resource extraction issuer be
submitted in an interactive data format.
(D) Interactive data standard.--
(i) In general.--The rules issued
under subparagraph (A) shall establish
an interactive data standard for the
information included in the annual
report of a resource extraction issuer.
(ii) Electronic tags.--The
interactive data standard shall include
electronic tags that identify, for any
payments made by a resource extraction
issuer to a foreign government or the
Federal Government--
(I) the total amounts of the
payments, by category;
(II) the currency used to
make the payments;
(III) the financial period in
which the payments were made;
(IV) the business segment of
the resource extraction issuer
that made the payments;
(V) the government that
received the payments, and the
country in which the government
is located;
(VI) the project of the
resource extraction issuer to
which the payments relate; and
(VII) such other information
as the Commission may determine
is necessary or appropriate in
the public interest or for the
protection of investors.
(E) International transparency efforts.--To
the extent practicable, the rules issued under
subparagraph (A) shall support the commitment
of the Federal Government to international
transparency promotion efforts relating to the
commercial development of oil, natural gas, or
minerals.
(F) Effective date.--With respect to each
resource extraction issuer, the final rules
issued under subparagraph (A) shall take effect
on the date on which the resource extraction
issuer is required to submit an annual report
relating to the fiscal year of the resource
extraction issuer that ends not earlier than 1
year after the date on which the Commission
issues final rules under subparagraph (A).
(3) Public availability of information.--
(A) In general.--To the extent practicable,
the Commission shall make available online, to
the public, a compilation of the information
required to be submitted under the rules issued
under paragraph (2)(A).
(B) Other information.--Nothing in this
paragraph shall require the Commission to make
available online information other than the
information required to be submitted under the
rules issued under paragraph (2)(A).
(4) Authorization of appropriations.--There are
authorized to be appropriated to the Commission such
sums as may be necessary to carry out this subsection.
(r) Disclosure of Certain Activities Relating to Iran.--
(1) In general.--Each issuer required to file an
annual or quarterly report under subsection (a) shall
disclose in that report the information required by
paragraph (2) if, during the period covered by the
report, the issuer or any affiliate of the issuer--
(A) knowingly engaged in an activity
described in subsection (a) or (b) of section 5
of the Iran Sanctions Act of 1996 (Public Law
104-172; 50 U.S.C. 1701 note);
(B) knowingly engaged in an activity
described in subsection (c)(2) of section 104
of the Comprehensive Iran Sanctions,
Accountability, and Divestment Act of 2010 (22
U.S.C. 8513) or a transaction described in
subsection (d)(1) of that section;
(C) knowingly engaged in an activity
described in section 105A(b)(2) of that Act; or
(D) knowingly conducted any transaction or
dealing with--
(i) any person the property and
interests in property of which are
blocked pursuant to Executive Order No.
13224 (66 Fed. Reg. 49079; relating to
blocking property and prohibiting
transactions with persons who commit,
threaten to commit, or support
terrorism);
(ii) any person the property and
interests in property of which are
blocked pursuant to Executive Order No.
13382 (70 Fed. Reg. 38567; relating to
blocking of property of weapons of mass
destruction proliferators and their
supporters); or
(iii) any person or entity identified
under section 560.304 of title 31, Code
of Federal Regulations (relating to the
definition of the Government of Iran)
without the specific authorization of a
Federal department or agency.
(2) Information required.--If an issuer or an
affiliate of the issuer has engaged in any activity
described in paragraph (1), the issuer shall disclose a
detailed description of each such activity, including--
(A) the nature and extent of the activity;
(B) the gross revenues and net profits, if
any, attributable to the activity; and
(C) whether the issuer or the affiliate of
the issuer (as the case may be) intends to
continue the activity.
(3) Notice of disclosures.--If an issuer reports
under paragraph (1) that the issuer or an affiliate of
the issuer has knowingly engaged in any activity
described in that paragraph, the issuer shall
separately file with the Commission, concurrently with
the annual or quarterly report under subsection (a), a
notice that the disclosure of that activity has been
included in that annual or quarterly report that
identifies the issuer and contains the information
required by paragraph (2).
(4) Public disclosure of information.--Upon receiving
a notice under paragraph (3) that an annual or
quarterly report includes a disclosure of an activity
described in paragraph (1), the Commission shall
promptly--
(A) transmit the report to--
(i) the President;
(ii) the Committee on Foreign Affairs
and the Committee on Financial Services
of the House of Representatives; and
(iii) the Committee on Foreign
Relations and the Committee on Banking,
Housing, and Urban Affairs of the
Senate; and
(B) make the information provided in the
disclosure and the notice available to the
public by posting the information on the
Internet website of the Commission.
(5) Investigations.--Upon receiving a report under
paragraph (4) that includes a disclosure of an activity
described in paragraph (1) (other than an activity
described in subparagraph (D)(iii) of that paragraph),
the President shall--
(A) initiate an investigation into the
possible imposition of sanctions under the Iran
Sanctions Act of 1996 (Public Law 104-172; 50
U.S.C. 1701 note), section 104 or 105A of the
Comprehensive Iran Sanctions, Accountability,
and Divestment Act of 2010, an Executive order
specified in clause (i) or (ii) of paragraph
(1)(D), or any other provision of law relating
to the imposition of sanctions with respect to
Iran, as applicable; and
(B) not later than 180 days after initiating
such an investigation, make a determination
with respect to whether sanctions should be
imposed with respect to the issuer or the
affiliate of the issuer (as the case may be).
(6) Sunset.--The provisions of this subsection shall
terminate on the date that is 30 days after the date on
which the President makes the certification described
in section 401(a) of the Comprehensive Iran Sanctions,
Accountability, and Divestment Act of 2010 (22 U.S.C.
8551(a)).
* * * * * * *
proxies
Sec. 14. (a)(1) It shall be unlawful for any person, by the
use of the mails or by any means or instrumentality of
interstate commerce or of any facility of a national securities
exchange or otherwise, in contravention of such rules and
regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of
investors, to solicit or to permit the use of his name to
solicit any proxy or consent or authorization in respect of any
security (other than an exempted security) registered pursuant
to section 12 of this title.
(2) The rules and regulations prescribed by the Commission
under paragraph (1) may include--
(A) a requirement that a solicitation of proxy,
consent, or authorization by (or on behalf of) an
issuer include a nominee submitted by a shareholder to
serve on the board of directors of the issuer; and
(B) a requirement that an issuer follow a certain
procedure in relation to a solicitation described in
subparagraph (A).
(b)(1) It shall be unlawful for any member of a national
securities exchange, or any broker or dealer registered under
this title, or any bank, association, or other entity that
exercises fiduciary powers, in contravention of such rules and
regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of
investors, to give, or to refrain from giving a proxy, consent,
authorization, or information statement in respect of any
security registered pursuant to section 12 of this title, or
any security issued by an investment company registered under
the Investment Company Act of 1940, and carried for the account
of a customer.
(2) With respect to banks, the rules and regulations
prescribed by the Commission under paragraph (1) shall not
require the disclosure of the names of beneficial owners of
securities in an account held by the bank on the date of
enactment of this paragraph unless the beneficial owner
consents to the disclosure. The provisions of this paragraph
shall not apply in the case of a bank which the Commission
finds has not made a good faith effort to obtain such consent
from such beneficial owners.
(c) Unless proxies, consents, or authorizations in respect of
a security registered pursuant to section 12 of this title, or
a security issued by an investment company registered under the
Investment Company Act of 1940, are solicited by or on behalf
of the management of the issuer from the holders of record of
such security in accordance with the rules and regulations
prescribed under subsection (a) of this section, prior to any
annual or other meeting of the holders of such security, such
issuer shall, in accordance with rules and regulations
prescribed by the Commission, file with the Commission and
transmit to all holders of record of such security information
substantially equivalent to the information which would be
required to be transmitted if a solicitation were made, but no
information shall be required to be filed or transmitted
pursuant to this subsection before July 1, 1964.
(d)(1) It shall be unlawful for any person, directly or
indirectly, by use of the mails or by any means or
instrumentality of interstate commerce or of any facility of a
national securities exchange or otherwise, to make a tender
offer for, or a request or invitation for tenders of, any class
of any equity security which is registered pursuant to section
12 of this title, or any equity security of an insurance
company which would have been required to be so registered
except for the exemption contained in section 12(g)(2)(G) of
this title, or any equity security issued by a closed-end
investment company registered under the Investment Company Act
of 1940, if, after consummation thereof, such person would,
directly or indirectly, be the beneficial owner of more than 5
per centum of such class, unless at the time copies of the
offer or request or invitation are first published or sent or
given to security holders such person has filed with the
Commission a statement containing such of the information
specified in section 13(d) of this title, and such additional
information as the Commission may by rules and regulations
prescribe as necessary or appropriate in the public interest or
for the protection of investors. All requests or invitations
for tenders or advertisements making a tender offer or
requesting or inviting tenders, of such a security shall be
filed as a part of such statement and shall contain such of the
information contained in such statement as the Commission may
by rules and regulations prescribe. Copies of any additional
material soliciting or requesting such tender offers subsequent
to the initial solicitation or request shall contain such
information as the Commission may by rules and regulations
prescribe as necessary or appropriate in the public interest or
for the protection of investors, and shall be filed with the
Commission not later than the time copies of such material are
first published or sent or given to security holders. Copies of
all statements, in the form in which such material is furnished
to security holders and the Commission, shall be sent to the
issuer not later than the date such material is first published
or sent or given to any security holders.
(2) When two or more persons act as a partnership, limited
partnership, syndicate, or other group for the purpose of
acquiring, holding, or disposing of securities of an issuer,
such syndicate or group shall be deemed a ``person'' for
purposes of this subsection.
(3) In determining, for purposes of this subsection, any
percentage of a class of any security, such class shall be
deemed to consist of the amount of the outstanding securities
of such class, exclusive of any securities of such class held
by or for the account of the issuer or a subsidiary of the
issuer.
(4) Any solicitation or recommendation to the holders of such
a security to accept or reject a tender offer or request or
invitation for tenders shall be made in accordance with such
rules and regulations as the Commission may prescribe as
necessary or appropriate in the public interest or for the
protection of investors.
(5) Securities deposited pursuant to a tender offer or
request or invitation for tenders may be withdrawn by or on
behalf of the depositor at any time until the expiration of
seven days after the time definitive copies of the offer or
request or invitation are first published or sent or given to
security holders, and at any time after sixty days from the
date of the original tender offer or request or invitation,
except as the Commission may otherwise prescribe by rules,
regulations, or order as necessary or appropriate in the public
interest or for the protection of investors.
(6) Where any person makes a tender offer, or request or
invitation for tenders, for less than all the outstanding
equity securities of a class, and where a greater number of
securities is deposited pursuant thereto within ten days after
copies of the offer or request or invitation are first
published or sent or given to security holders than such person
is bound or willing to take up and pay for, the securities
taken up shall be taken up as nearly as may be pro rata,
disregarding fractions, according to the number of securities
deposited by each depositor. The provisions of this subsection
shall also apply to securities deposited within ten days after
notice of an increase in the consideration offered to security
holders, as described in paragraph (7), is first published or
sent or given to security holders.
(7) Where any person varies the terms of a tender offer or
request or invitation for tenders before the expiration thereof
by increasing the consideration offered to holders of such
securities, such person shall pay the increased consideration
to each security holder whose securities are taken up and paid
for pursuant to the tender offer or request or invitation for
tenders whether or not such securities have been taken up by
such person before the variation of the tender offer or request
or invitation.
(8) The provisions of this subsection shall not apply to any
offer for, or request or invitation for tenders of, any
security--
(A) if the acquisition of such security, together
with all other acquisitions by the same person of
securities of the same class during the preceding
twelve months, would not exceed 2 per centum of that
class;
(B) by the issuer of such security; or
(C) which the Commission, by rules or regulations or
by order, shall exempt from the provisions of this
subsection as not entered into for the purpose of, and
not having the effect of, changing or influencing the
control of the issuer or otherwise as not comprehended
within the purposes of this subsection.
(e) It shall be unlawful for any person to make any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made, in the light of
the circumstances under which they are made, not misleading, or
to engage in any fraudulent, deceptive, or manipulative acts or
practices, in connection with any tender offer or request or
invitation for tenders, or any solicitation of security holders
in opposition to or in favor of any such offer, request, or
invitation. The Commission shall, for the purposes of this
subsection, by rules and regulations define, and prescribe
means reasonably designed to prevent, such acts and practices
as are fraudulent, deceptive, or manipulative.
(f) If, pursuant to any arrangement or understanding with the
person or persons acquiring securities in a transaction subject
to subsection (d) of this section or subsection (d) of section
13 of this title, any persons are to be elected or designated
as directors of the issuer, otherwise than at a meeting of
security holders, and the persons so elected or designated will
constitute a majority of the directors of the issuer, then,
prior to the time any such person takes office as a director,
and in accordance with rules and regulations prescribed by the
Commission, the issuer shall file with the Commission, and
transmit to all holders of record of securities of the issuer
who would be entitled to vote at a meeting for election of
directors, information substantially equivalent to the
information which would be required by subsection (a) or (c) of
this section to be transmitted if such person or persons were
nominees for election as directors at a meeting of such
security holders.
(g)(1)(A) At the time of filing such preliminary proxy
solicitation material as the Commission may require by rule
pursuant to subsection (a) of this section that concerns an
acquisition, merger, consolidation, or proposed sale or other
disposition of substantially all the assets of a company, the
person making such filing, other than a company registered
under the Investment Company Act of 1940, shall pay to the
Commission the following fees:
(i) for preliminary proxy solicitation material
involving an acquisition, merger, or consolidation, if
there is a proposed payment of cash or transfer of
securities or property to shareholders, a fee at a rate
that, subject to paragraph (4), is equal to $92 per
$1,000,000 of such proposed payment, or of the value of
such securities or other property proposed to be
transferred; and
(ii) for preliminary proxy solicitation material
involving a proposed sale or other disposition of
substantially all of the assets of a company, a fee at
a rate that, subject to paragraph (4), is equal to $92
per $1,000,000 of the cash or of the value of any
securities or other property proposed to be received
upon such sale or disposition.
(B) The fee imposed under subparagraph (A) shall be reduced
with respect to securities in an amount equal to any fee paid
to the Commission with respect to such securities in connection
with the proposed transaction under section 6(b) of the
Securities Act of 1933 (15 U.S.C. 77f(b)), or the fee paid
under that section shall be reduced in an amount equal to the
fee paid to the Commission in connection with such transaction
under this subsection. Where two or more companies involved in
an acquisition, merger, consolidation, sale, or other
disposition of substantially all the assets of a company must
file such proxy material with the Commission, each shall pay a
proportionate share of such fee.
(2) At the time of filing such preliminary information
statement as the Commission may require by rule pursuant to
subsection (c) of this section, the issuer shall pay to the
Commission the same fee as required for preliminary proxy
solicitation material under paragraph (1) of this subsection.
(3) At the time of filing such statement as the Commission
may require by rule pursuant to subsection (d)(1) of this
section, the person making the filing shall pay to the
Commission a fee at a rate that, subject to paragraph (4), is
equal to $92 per $1,000,000 of the aggregate amount of cash or
of the value of securities or other property proposed to be
offered. The fee shall be reduced with respect to securities in
an amount equal to any fee paid with respect to such securities
in connection with the proposed transaction under section 6(b)
of the Securities Act of 1933 (15 U.S.C. 77f(b)), or the fee
paid under that section shall be reduced in an amount equal to
the fee paid to the Commission in connection with such
transaction under this subsection.
(4) Annual adjustment.--For each fiscal year, the
Commission shall by order adjust the rate required by
paragraphs (1) and (3) for such fiscal year to a rate
that is equal to the rate (expressed in dollars per
million) that is applicable under section 6(b) of the
Securities Act of 1933 (15 U.S.C. 77f(b)) for such
fiscal year.
[(5) Fee collection.--Fees collected pursuant to this
subsection for fiscal year 2012 and each fiscal year
thereafter shall be deposited and credited as general
revenue of the Treasury and shall not be available for
obligation.]
(5) Offsetting collections.--Fees collected pursuant
to this subsection for any fiscal year--
(A) except as provided in section 31(i)(2),
shall be deposited and credited as offsetting
collections to the account providing
appropriations to the Commission; and
(B) except as provided in paragraph (8),
shall not be collected for any fiscal year
except to the extent provided in advance in
appropriations Acts.
(6) Review; effective date; publication.--In
exercising its authority under this subsection, the
Commission shall not be required to comply with the
provisions of section 553 of title 5, United States
Code. An adjusted rate prescribed under paragraph (4)
shall be published and take effect in accordance with
section 6(b) of the Securities Act of 1933 (15 U.S.C.
77f(b)).
(7) Pro rata application.--The rates per $1,000,000
required by this subsection shall be applied pro rata
to amounts and balances of less than $1,000,000.
(8) Lapse of appropriation.--If on the first day of a
fiscal year a regular appropriation to the Commission
has not been enacted, the Commission shall continue to
collect fees (as offsetting collections) under this
subsection at the rate in effect during the preceding
fiscal year, until 5 days after the date such a regular
appropriation is enacted.
[(8)] (9) Notwithstanding any other provision of law, the
Commission may impose fees, charges, or prices for matters not
involving any acquisition, merger, consolidation, sale, or
other disposition of assets described in this subsection, as
authorized by section 9701 of title 31, United States Code, or
otherwise.
(h) Proxy Solicitations and Tender Offers in Connection With
Limited Partnership Rollup Transactions.--
(1) Proxy rules to contain special provisions.--It
shall be unlawful for any person to solicit any proxy,
consent, or authorization concerning a limited
partnership rollup transaction, or to make any tender
offer in furtherance of a limited partnership rollup
transaction, unless such transaction is conducted in
accordance with rules prescribed by the Commission
under subsections (a) and (d) as required by this
subsection. Such rules shall--
(A) permit any holder of a security that is
the subject of the proposed limited partnership
rollup transaction to engage in preliminary
communications for the purpose of determining
whether to solicit proxies, consents, or
authorizations in opposition to the proposed
limited partnership rollup transaction, without
regard to whether any such communication would
otherwise be considered a solicitation of
proxies, and without being required to file
soliciting material with the Commission prior
to making that determination, except that--
(i) nothing in this subparagraph
shall be construed to limit the
application of any provision of this
title prohibiting, or reasonably
designed to prevent, fraudulent,
deceptive, or manipulative acts or
practices under this title; and
(ii) any holder of not less than 5
percent of the outstanding securities
that are the subject of the proposed
limited partnership rollup transaction
who engages in the business of buying
and selling limited partnership
interests in the secondary market shall
be required to disclose such ownership
interests and any potential conflicts
of interests in such preliminary
communications;
(B) require the issuer to provide to holders
of the securities that are the subject of the
limited partnership rollup transaction such
list of the holders of the issuer's securities
as the Commission may determine in such form
and subject to such terms and conditions as the
Commission may specify;
(C) prohibit compensating any person
soliciting proxies, consents, or authorizations
directly from security holders concerning such
a limited partnership rollup transaction--
(i) on the basis of whether the
solicited proxy, consent, or
authorization either approves or
disapproves the proposed limited
partnership rollup transaction; or
(ii) contingent on the approval,
disapproval, or completion of the
limited partnership rollup transaction;
(D) set forth disclosure requirements for
soliciting material distributed in connection
with a limited partnership rollup transaction,
including requirements for clear, concise, and
comprehensible disclosure with respect to--
(i) any changes in the business plan,
voting rights, form of ownership
interest, or the compensation of the
general partner in the proposed limited
partnership rollup transaction from
each of the original limited
partnerships;
(ii) the conflicts of interest, if
any, of the general partner;
(iii) whether it is expected that
there will be a significant difference
between the exchange values of the
limited partnerships and the trading
price of the securities to be issued in
the limited partnership rollup
transaction;
(iv) the valuation of the limited
partnerships and the method used to
determine the value of the interests of
the limited partners to be exchanged
for the securities in the limited
partnership rollup transaction;
(v) the differing risks and effects
of the limited partnership rollup
transaction for investors in different
limited partnerships proposed to be
included, and the risks and effects of
completing the limited partnership
rollup transaction with less than all
limited partnerships;
(vi) the statement by the general
partner required under subparagraph
(E);
(vii) such other matters deemed
necessary or appropriate by the
Commission;
(E) require a statement by the general
partner as to whether the proposed limited
partnership rollup transaction is fair or
unfair to investors in each limited
partnership, a discussion of the basis for that
conclusion, and an evaluation and a description
by the general partner of alternatives to the
limited partnership rollup transaction, such as
liquidation;
(F) provide that, if the general partner or
sponsor has obtained any opinion (other than an
opinion of counsel), appraisal, or report that
is prepared by an outside party and that is
materially related to the limited partnership
rollup transaction, such soliciting materials
shall contain or be accompanied by clear,
concise, and comprehensible disclosure with
respect to--
(i) the analysis of the transaction,
scope of review, preparation of the
opinion, and basis for and methods of
arriving at conclusions, and any
representations and undertakings with
respect thereto;
(ii) the identity and qualifications
of the person who prepared the opinion,
the method of selection of such person,
and any material past, existing, or
contemplated relationships between the
person or any of its affiliates and the
general partner, sponsor, successor, or
any other affiliate;
(iii) any compensation of the
preparer of such opinion, appraisal, or
report that is contingent on the
transaction's approval or completion;
and
(iv) any limitations imposed by the
issuer on the access afforded to such
preparer to the issuer's personnel,
premises, and relevant books and
records;
(G) provide that, if the general partner or
sponsor has obtained any opinion, appraisal, or
report as described in subparagraph (F) from
any person whose compensation is contingent on
the transaction's approval or completion or who
has not been given access by the issuer to its
personnel and premises and relevant books and
records, the general partner or sponsor shall
state the reasons therefor;
(H) provide that, if the general partner or
sponsor has not obtained any opinion on the
fairness of the proposed limited partnership
rollup transaction to investors in each of the
affected partnerships, such soliciting
materials shall contain or be accompanied by a
statement of such partner's or sponsor's
reasons for concluding that such an opinion is
not necessary in order to permit the limited
partners to make an informed decision on the
proposed transaction;
(I) require that the soliciting material
include a clear, concise, and comprehensible
summary of the limited partnership rollup
transaction (including a summary of the matters
referred to in clauses (i) through (vii) of
subparagraph (D) and a summary of the matter
referred to in subparagraphs (F), (G), and
(H)), with the risks of the limited partnership
rollup transaction set forth prominently in the
fore part thereof;
(J) provide that any solicitation or offering
period with respect to any proxy solicitation,
tender offer, or information statement in a
limited partnership rollup transaction shall be
for not less than the lesser of 60 calendar
days or the maximum number of days permitted
under applicable State law; and
(K) contain such other provisions as the
Commission determines to be necessary or
appropriate for the protection of investors in
limited partnership rollup transactions.
(2) Exemptions.--The Commission may, consistent with
the public interest, the protection of investors, and
the purposes of this title, exempt by rule or order any
security or class of securities, any transaction or
class of transactions, or any person or class of
persons, in whole or in part, conditionally or
unconditionally, from the requirements imposed pursuant
to paragraph (1) or from the definition contained in
paragraph (4).
(3) Effect on commission authority.--Nothing in this
subsection limits the authority of the Commission under
subsection (a) or (d) or any other provision of this
title or precludes the Commission from imposing, under
subsection (a) or (d) or any other provision of this
title, a remedy or procedure required to be imposed
under this subsection.
(4) Definition of limited partnership rollup
transaction.--Except as provided in paragraph (5), as
used in this subsection, the term ``limited partnership
rollup transaction'' means a transaction involving the
combination or reorganization of one or more limited
partnerships, directly or indirectly, in which--
(A) some or all of the investors in any of
such limited partnerships will receive new
securities, or securities in another entity,
that will be reported under a transaction
reporting plan declared effective before the
date of enactment of this subsection by the
Commission under section 11A;
(B) any of the investors' limited partnership
securities are not, as of the date of filing,
reported under a transaction reporting plan
declared effective before the date of enactment
of this subsection by the Commission under
section 11A;
(C) investors in any of the limited
partnerships involved in the transaction are
subject to a significant adverse change with
respect to voting rights, the term of existence
of the entity, management compensation, or
investment objectives; and
(D) any of such investors are not provided an
option to receive or retain a security under
substantially the same terms and conditions as
the original issue.
(5) Exclusions from definition.--Notwithstanding
paragraph (4), the term ``limited partnership rollup
transaction'' does not include--
(A) a transaction that involves only a
limited partnership or partnerships having an
operating policy or practice of retaining cash
available for distribution and reinvesting
proceeds from the sale, financing, or
refinancing of assets in accordance with such
criteria as the Commission determines
appropriate;
(B) a transaction involving only limited
partnerships wherein the interests of the
limited partners are repurchased, recalled, or
exchanged in accordance with the terms of the
preexisting limited partnership agreements for
securities in an operating company specifically
identified at the time of the formation of the
original limited partnership;
(C) a transaction in which the securities to
be issued or exchanged are not required to be
and are not registered under the Securities Act
of 1933;
(D) a transaction that involves only issuers
that are not required to register or report
under section 12, both before and after the
transaction;
(E) a transaction, except as the Commission
may otherwise provide by rule for the
protection of investors, involving the
combination or reorganization of one or more
limited partnerships in which a non-affiliated
party succeeds to the interests of a general
partner or sponsor, if--
(i) such action is approved by not
less than 66\2/3\ percent of the
outstanding units of each of the
participating limited partnerships; and
(ii) as a result of the transaction,
the existing general partners will
receive only compensation to which they
are entitled as expressly provided for
in the preexisting limited partnership
agreements; or
(F) a transaction, except as the Commission
may otherwise provide by rule for the
protection of investors, in which the
securities offered to investors are securities
of another entity that are reported under a
transaction reporting plan declared effective
before the date of enactment of this subsection
by the Commission under section 11A, if--
(i) such other entity was formed, and
such class of securities was reported
and regularly traded, not less than 12
months before the date on which
soliciting material is mailed to
investors; and
(ii) the securities of that entity
issued to investors in the transaction
do not exceed 20 percent of the total
outstanding securities of the entity,
exclusive of any securities of such
class held by or for the account of the
entity or a subsidiary of the entity.
(i) Disclosure of Pay Versus Performance.--The Commission
shall, by rule, require each issuer to disclose in any proxy or
consent solicitation material for an annual meeting of the
shareholders of the issuer a clear description of any
compensation required to be disclosed by the issuer under
section 229.402 of title 17, Code of Federal Regulations (or
any successor thereto), including, for any issuer other than an
emerging growth company, information that shows the
relationship between executive compensation actually paid and
the financial performance of the issuer, taking into account
any change in the value of the shares of stock and dividends of
the issuer and any distributions. The disclosure under this
subsection may include a graphic representation of the
information required to be disclosed.
(j) Disclosure of Hedging by Employees and Directors.--The
Commission shall, by rule, require each issuer to disclose in
any proxy or consent solicitation material for an annual
meeting of the shareholders of the issuer whether any employee
or member of the board of directors of the issuer, or any
designee of such employee or member, is permitted to purchase
financial instruments (including prepaid variable forward
contracts, equity swaps, collars, and exchange funds) that are
designed to hedge or offset any decrease in the market value of
equity securities--
(1) granted to the employee or member of the board of
directors by the issuer as part of the compensation of
the employee or member of the board of directors; or
(2) held, directly or indirectly, by the employee or
member of the board of directors.
(j) Shareholder Proposals by Proxies Not Permitted.--An
issuer may not include in its proxy materials a shareholder
proposal submitted by a person in such person's capacity as a
proxy, representative, agent, or person otherwise acting on
behalf of a shareholder.
(k) Prohibition on Requiring a Single Ballot.--The Commission
may not require that a solicitation of a proxy, consent, or
authorization to vote a security of an issuer in an election of
members of the board of directors of the issuer be made using a
single ballot or card that lists both individuals nominated by
(or on behalf of) the issuer and individuals nominated by (or
on behalf of) other proponents and permits the person granting
the proxy, consent, or authorization to select from among
individuals in both groups.
SEC. 14A. SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION.
(a) Separate Resolution Required.--
(1) In general.--[Not less frequently than once every
3 years] Each year in which there has been a material
change to the compensation of executives of an issuer
from the previous year, a proxy or consent or
authorization for an annual or other meeting of the
shareholders for which the proxy solicitation rules of
the Commission require compensation disclosure shall
include a separate resolution subject to shareholder
vote to approve the compensation of executives, as
disclosed pursuant to section 229.402 of title 17, Code
of Federal Regulations, or any successor thereto.
[(2) Frequency of vote.--Not less frequently than
once every 6 years, a proxy or consent or authorization
for an annual or other meeting of the shareholders for
which the proxy solicitation rules of the Commission
require compensation disclosure shall include a
separate resolution subject to shareholder vote to
determine whether votes on the resolutions required
under paragraph (1) will occur every 1, 2, or 3 years.]
[(3)] (2) Effective date.--The proxy or consent or
authorization for the first annual or other meeting of
the shareholders occurring after the end of the 6-month
period beginning on the date of enactment of this
section shall include--
(A) the resolution described in paragraph
(1); and
(B) a separate resolution subject to
shareholder vote to determine whether votes on
the resolutions required under paragraph (1)
will occur every 1, 2, or 3 years.
(b) Shareholder Approval of Golden Parachute Compensation.--
(1) Disclosure.--In any proxy or consent solicitation
material (the solicitation of which is subject to the
rules of the Commission pursuant to subsection (a)) for
a meeting of the shareholders occurring after the end
of the 6-month period beginning on the date of
enactment of this section, at which shareholders are
asked to approve an acquisition, merger, consolidation,
or proposed sale or other disposition of all or
substantially all the assets of an issuer, the person
making such solicitation shall disclose in the proxy or
consent solicitation material, in a clear and simple
form in accordance with regulations to be promulgated
by the Commission, any agreements or understandings
that such person has with any named executive officers
of such issuer (or of the acquiring issuer, if such
issuer is not the acquiring issuer) concerning any type
of compensation (whether present, deferred, or
contingent) that is based on or otherwise relates to
the acquisition, merger, consolidation, sale, or other
disposition of all or substantially all of the assets
of the issuer and the aggregate total of all such
compensation that may (and the conditions upon which it
may) be paid or become payable to or on behalf of such
executive officer.
(2) Shareholder approval.--Any proxy or consent or
authorization relating to the proxy or consent
solicitation material containing the disclosure
required by paragraph (1) shall include a separate
resolution subject to shareholder vote to approve such
agreements or understandings and compensation as
disclosed, unless such agreements or understandings
have been subject to a shareholder vote under
subsection (a).
(c) Rule of Construction.--The shareholder vote referred to
in subsections (a) and (b) shall not be binding on the issuer
or the board of directors of an issuer, and may not be
construed--
(1) as overruling a decision by such issuer or board
of directors;
(2) to create or imply any change to the fiduciary
duties of such issuer or board of directors;
(3) to create or imply any additional fiduciary
duties for such issuer or board of directors; or
(4) to restrict or limit the ability of shareholders
to make proposals for inclusion in proxy materials
related to executive compensation.
(d) Disclosure of Votes.--Every institutional investment
manager subject to section 13(f) shall report at least annually
how it voted on any shareholder vote pursuant to subsections
(a) and (b), unless such vote is otherwise required to be
reported publicly by rule or regulation of the Commission.
(e) Exemption.--
(1) In general.--.--The Commission may, by rule or
order, exempt any other issuer or class of issuers from
the requirement under subsection (a) or (b). In
determining whether to make an exemption under this
subsection, the Commission shall take into account,
among other considerations, whether the requirements
under subsections (a) and (b) disproportionately
burdens small issuers.
(2) Treatment of emerging growth companies.--
(A) In general.--An emerging growth company
shall be exempt from the requirements of
subsections (a) and (b).
(B) Compliance after termination of emerging
growth company treatment.--An issuer that was
an emerging growth company but is no longer an
emerging growth company shall include the first
separate resolution described under subsection
(a)(1) not later than the end of--
(i) in the case of an issuer that was
an emerging growth company for less
than 2 years after the date of first
sale of common equity securities of the
issuer pursuant to an effective
registration statement under the
Securities Act of 1933, the 3-year
period beginning on such date; and
(ii) in the case of any other issuer,
the 1-year period beginning on the date
the issuer is no longer an emerging
growth company.
* * * * * * *
registration and regulation of brokers and dealers
Sec. 15. (a)(1) It shall be unlawful for any broker or dealer
which is either a person other than a natural person or a
natural person not associated with a broker or dealer which is
a person other than a natural person (other than such a broker
or dealer whose business is exclusively intrastate and who does
not make use of any facility of a national securities exchange)
to make use of the mails or any means or instrumentality of
interstate commerce to effect any transactions in, or to induce
or attempt to induce the purchase or sale of, any security
(other than an exempted security or commercial paper, bankers'
acceptances, or commercial bills) unless such broker or dealer
is registered in accordance with subsection (b) of this
section.
(2) The Commission, by rule or order, as it deems consistent
with the public interest and the protection of investors, may
conditionally or unconditionally exempt from paragraph (1) of
this subsection any broker or dealer or class of brokers or
dealers specified in such rule or order.
(b)(1) A broker or dealer may be registered by filing with
the Commission an application for registration in such form and
containing such information and documents concerning such
broker or dealer and any persons associated with such broker or
dealer as the Commission, by rule, may prescribe as necessary
or appropriate in the public interest or for the protection of
investors. Within forty-five days of the date of the filing of
such application (or within such longer period as to which the
applicant consents), the Commission shall--
(A) by order grant registration, or
(B) institute proceedings to determine whether
registration should be denied. Such proceedings shall
include notice of the grounds for denial under
consideration and opportunity for hearing and shall be
concluded within one hundred twenty days of the date of
the filing of the application for registration. At the
conclusion of such proceedings, the Commission, by
order, shall grant or deny such registration. The
Commission may extend the time for conclusion of such
proceedings for up to ninety days if it finds good
cause for such extension and publishes its reasons for
so finding or for such longer period as to which the
applicant consents.
The Commission shall grant such registration if the Commission
finds that the requirements of this section are satisfied. The
order granting registration shall not be effective until such
broker or dealer has become a member of a registered securities
association, or until such broker or dealer has become a member
of a national securities exchange, if such broker or dealer
effects transactions solely on that exchange, unless the
Commission has exempted such broker or dealer, by rule or
order, from such membership. The Commission shall deny such
registration if it does not make such a finding or if it finds
that if the applicant were so registered, its registration
would be subject to suspension or revocation under paragraph
(4) of this subsection.
(2)(A) An application for registration of a broker or dealer
to be formed or organized may be made by a broker or dealer to
which the broker or dealer to be formed or organized is to be
the successor. Such application, in such form as the
Commission, by rule, may prescribe, shall contain such
information and documents concerning the applicant, the
successor, and any persons associated with the applicant or the
successor, as the Commission, by rule, may prescribe as
necessary or appropriate in the public interest or for the
protection of investors. The grant or denial of registration to
such an applicant shall be in accordance with the procedures
set forth in paragraph (1) of this subsection. If the
Commission grants such registration, the registration shall
terminate on the forty-fifth day after the effective date
thereof, unless prior thereto the successor shall, in
accordance with such rules and regulations as the Commission
may prescribe, adopt the application for registration as its
own.
(B) Any person who is a broker or dealer solely by reason of
acting as a municipal securities dealer or municipal securities
broker, who so acts through a separately identifiable
department or division, and who so acted in such a manner on
the date of enactment of the Securities Acts Amendments of
1975, may, in accordance with such terms and conditions as the
Commission, by rule, prescribes as necessary and appropriate in
the public interest and for the protection of investors,
register such separately identifiable department or division in
accordance with this subsection. If any such department or
division is so registered, the department or division and not
such person himself shall be the broker or dealer for purposes
of this title.
(C) Within six months of the date of the granting of
registration to a broker or dealer, the Commission, or upon the
authorization and direction of the Commission, a registered
securities association or national securities exchange of which
such broker or dealer is a member, shall conduct an inspection
of the broker or dealer to determine whether it is operating in
conformity with the provisions of this title and the rules and
regulations thereunder: Provided, however, That the Commission
may delay such inspection of any class of brokers or dealers
for a period not to exceed six months.
(3) Any provision of this title (other than section 5 and
subsection (a) of this section) which prohibits any act,
practice, or course of business if the mails or any means or
instrumentality of interstate commerce is used in connection
therewith shall also prohibit any such act, practice, or course
of business by any registered broker or dealer or any person
acting on behalf of such a broker or dealer, irrespective of
any use of the mails or any means or instrumentality of
interstate commerce in connection therewith.
(4) The Commission, by order, shall censure, place
limitations on the activities, functions, or operations of,
suspend for a period not exceeding twelve months, or revoke the
registration of any broker or dealer if it finds, on the record
after notice and opportunity for hearing, that such censure,
placing of limitations, suspension, or revocation is in the
public interest and that such broker or dealer, whether prior
or subsequent to becoming such, or any person associated with
such broker or dealer, whether prior or subsequent to becoming
so associated--
(A) has willfully made or caused to be made in any
application for registration or report required to be
filed with the Commission or with any other appropriate
regulatory agency under this title, or in any
proceeding before the Commission with respect to
registration, any statement which was at the time and
in the light of the circumstances under which it was
made false or misleading with respect to any material
fact, or has omitted to state in any such application
or report any material fact which is required to be
stated therein.
(B) has been convicted within ten years preceding the
filing of any application for registration or at any
time thereafter of any felony or misdemeanor or of a
substantially equivalent crime by a foreign court of
competent jurisdiction which the Commission finds--
(i) involves the purchase or sale of any
security, the taking of a false oath, the
making of a false report, bribery, perjury,
burglary, any substantially equivalent activity
however denominated by the laws of the relevant
foreign government, or conspiracy to commit any
such offense;
(ii) arises out of the conduct of the
business of a broker, dealer, municipal
securities [dealer municipal advisor,,] dealer,
municipal advisor, government securities
broker, government securities dealer,
investment adviser, bank, insurance company,
fiduciary, transfer agent, nationally
recognized statistical rating organization,
foreign person performing a function
substantially equivalent to any of the above,
or entity or person required to be registered
under the Commodity Exchange Act (7 U.S.C. 1 et
seq.) or any substantially equivalent foreign
statute or regulation;
(iii) involves the larceny, theft, robbery,
extortion, forgery, counterfeiting, fraudulent
concealment, embezzlement, fraudulent
conversion, or misappropriation of funds, or
securities, or substantially equivalent
activity however denominated by the laws of the
relevant foreign government; or
(iv) involves the violation of section 152,
1341, 1342, or 1343 or chapter 25 or 47 of
title 18, United States Code, or a violation of
a substantially equivalent foreign statute.
(C) is permanently or temporarily enjoined by order,
judgment, or decree of any court of competent
jurisdiction from acting as an investment adviser,
underwriter, broker, dealer, municipal securities
[dealer municipal advisor,,] dealer, municipal advisor,
government securities broker, government securities
dealer, security-based swap dealer, major security-
based swap participant, transfer agent, nationally
recognized statistical rating organization, foreign
person performing a function substantially equivalent
to any of the above, or entity or person required to be
registered under the Commodity Exchange Act or any
substantially equivalent foreign statute or regulation,
or as an affiliated person or employee of any
investment company, bank, insurance company, foreign
entity substantially equivalent to any of the above, or
entity or person required to be registered under the
Commodity Exchange Act or any substantially equivalent
foreign statute or regulation, or from engaging in or
continuing any conduct or practice in connection with
any such activity, or in connection with the purchase
or sale of any security.
(D) has willfully violated any provision of the
Securities Act of 1933, the Investment Advisers Act of
1940, the Investment Company Act of 1940, the Commodity
Exchange Act, this title, the rules or regulations
under any of such statutes, or the rules of the
Municipal Securities Rulemaking Board, or is unable to
comply with any such provision.
(E) has willfully aided, abetted, counseled,
commanded, induced, or procured the violation by any
other person of any provision of the Securities Act of
1933, the Investment Advisers Act of 1940, the
Investment Company Act of 1940, the Commodity Exchange
Act, this title, the rules or regulations under any of
such statutes, or the rules of the Municipal Securities
Rulemaking Board, or has failed reasonably to
supervise, with a view to preventing violations of the
provisions of such statutes, rules, and regulations,
another person who commits such a violation, if such
other person is subject to his supervision. For the
purposes of this subparagraph (E) no person shall be
deemed to have failed reasonably to supervise any other
person, if--
(i) there have been established procedures,
and a system for applying such procedures,
which would reasonably be expected to prevent
and detect, insofar as practicable, any such
violation by such other person, and
(ii) such person has reasonably discharged
the duties and obligations incumbent upon him
by reason of such procedures and system without
reasonable cause to believe that such
procedures and system were not being complied
with.
(F) is subject to any order of the Commission barring
or suspending the right of the person to be associated
with a broker, dealer, security-based swap dealer, or a
major security-based swap participant;
(G) has been found by a foreign financial regulatory
authority to have--
(i) made or caused to be made in any
application for registration or report required
to be filed with a foreign financial regulatory
authority, or in any proceeding before a
foreign financial regulatory authority with
respect to registration, any statement that was
at the time and in the light of the
circumstances under which it was made false or
misleading with respect to any material fact,
or has omitted to state in any application or
report to the foreign financial regulatory
authority any material fact that is required to
be stated therein;
(ii) violated any foreign statute or
regulation regarding transactions in
securities, or contracts of sale of a commodity
for future delivery, traded on or subject to
the rules of a contract market or any board of
trade;
(iii) aided, abetted, counseled, commanded,
induced, or procured the violation by any
person of any provision of any statutory
provisions enacted by a foreign government, or
rules or regulations thereunder, empowering a
foreign financial regulatory authority
regarding transactions in securities, or
contracts of sale of a commodity for future
delivery, traded on or subject to the rules of
a contract market or any board of trade, or has
been found, by a foreign financial regulatory
authority, to have failed reasonably to
supervise, with a view to preventing violations
of such statutory provisions, rules, and
regulations, another person who commits such a
violation, if such other person is subject to
his supervision; or
(H) is subject to any final order of a State
securities commission (or any agency or officer
performing like functions), State authority that
supervises or examines banks, savings associations, or
credit unions, State insurance commission (or any
agency or office performing like functions), an
appropriate Federal banking agency (as defined in
section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813(q))), or the National Credit Union
Administration, that--
(i) bars such person from association with an
entity regulated by such commission, authority,
agency, or officer, or from engaging in the
business of securities, insurance, banking,
savings association activities, or credit union
activities; or
(ii) constitutes a final order based on
violations of any laws or regulations that
prohibit fraudulent, manipulative, or deceptive
conduct.
(5) Pending final determination whether any registration
under this subsection shall be revoked, the Commission, by
order, may suspend such registration, if such suspension
appears to the Commission, after notice and opportunity for
hearing, to be necessary or appropriate in the public interest
or for the protection of investors. Any registered broker or
dealer may, upon such terms and conditions as the Commission
deems necessary or appropriate in the public interest or for
the protection of investors, withdraw from registration by
filing a written notice of withdrawal with the Commission. If
the Commission finds that any registered broker or dealer is no
longer in existence or has ceased to do business as a broker or
dealer, the Commission, by order, shall cancel the registration
of such broker or dealer.
(6)(A) With respect to any person who is associated, who is
seeking to become associated, or, at the time of the alleged
misconduct, who was associated or was seeking to become
associated with a broker or dealer, or any person
participating, or, at the time of the alleged misconduct, who
was participating, in an offering of any penny stock, the
Commission, by order, shall censure, place limitations on the
activities or functions of such person, or suspend for a period
not exceeding 12 months, or bar any such person from being
associated with a broker, dealer, investment adviser, municipal
securities dealer, municipal advisor, transfer agent, or
nationally recognized statistical rating organization, or from
participating in an offering of penny stock, if the Commission
finds, on the record after notice and opportunity for a
hearing, that such censure, placing of limitations, suspension,
or bar is in the public interest and that such person--
(i) has committed or omitted any act, or is subject
to an order or finding, [enumerated in subparagraph
(A), (D), (E), (H), or (G) of paragraph (4) of this
subsection;] enumerated in subparagraph (A), (D), (E),
(G), or (H) of paragraph (4) of this subsection;
(ii) has been convicted of any offense specified in
subparagraph (B) of such paragraph (4) within 10 years
of the commencement of the proceedings under this
paragraph; or
(iii) is enjoined from any action, conduct, or
practice specified in subparagraph (C) of such
paragraph (4).
(B) It shall be unlawful--
(i) for any person as to whom an order under
subparagraph (A) is in effect, without the consent of
the Commission, willfully to become, or to be,
associated with a broker or dealer in contravention of
such order, or to participate in an offering of penny
stock in contravention of such order;
(ii) for any broker or dealer to permit such a
person, without the consent of the Commission, to
become or remain, a person associated with the broker
or dealer in contravention of such order, if such
broker or dealer knew, or in the exercise of reasonable
care should have known, of such order; or
(iii) for any broker or dealer to permit such a
person, without the consent of the Commission, to
participate in an offering of penny stock in
contravention of such order, if such broker or dealer
knew, or in the exercise of reasonable care should have
known, of such order and of such participation.
(C) For purposes of this paragraph, the term ``person
participating in an offering of penny stock'' includes any
person acting as any promoter, finder, consultant, agent, or
other person who engages in activities with a broker, dealer,
or issuer for purposes of the issuance or trading in any penny
stock, or inducing or attempting to induce the purchase or sale
of any penny stock. The Commission may, by rule or regulation,
define such term to include other activities, and may, by rule,
regulation, or order, exempt any person or class of persons, in
whole or in part, conditionally or unconditionally, from such
term.
(7) No registered broker or dealer or government securities
broker or government securities dealer registered (or required
to register) under section 15C(a)(1)(A) shall effect any
transaction in, or induce the purchase or sale of, any security
unless such broker or dealer meets such standards of
operational capability and such broker or dealer and all
natural persons associated with such broker or dealer meet such
standards of training, experience, competence, and such other
qualifications as the Commission finds necessary or appropriate
in the public interest or for the protection of investors. The
Commission shall establish such standards by rules and
regulations, which may--
(A) specify that all or any portion of such standards
shall be applicable to any class of brokers and dealers
and persons associated with brokers and dealers;
(B) require persons in any such class to pass tests
prescribed in accordance with such rules and
regulations, which tests shall, with respect to any
class of partners, officers, or supervisory employees
(which latter term may be defined by the Commission's
rules and regulations and as so defined shall include
branch managers of brokers or dealers) engaged in the
management of the broker or dealer, include questions
relating to bookkeeping, accounting, internal control
over cash and securities, supervision of employees,
maintenance of records, and other appropriate matters;
and
(C) provide that persons in any such class other than
brokers and dealers and partners, officers, and
supervisory employees of brokers or dealers, may be
qualified solely on the basis of compliance with such
standards of training and such other qualifications as
the Commission finds appropriate.
The Commission, by rule, may prescribe reasonable fees and
charges to defray its costs in carrying out this paragraph,
including, but not limited to, fees for any test administered
by it or under its direction. The Commission may cooperate with
registered securities associations and national securities
exchanges in devising and administering tests and may require
registered brokers and dealers and persons associated with such
brokers and dealers to pass tests administered by or on behalf
of any such association or exchange and to pay such association
or exchange reasonable fees or charges to defray the costs
incurred by such association or exchange in administering such
tests.
(8) It shall be unlawful for any registered broker or dealer
to effect any transaction in, or induce or attempt to induce
the purchase or sale of, any security (other than or commercial
paper, bankers' acceptances, or commercial bills), unless such
broker or dealer is a member of a securities association
registered pursuant to section 15A of this title or effects
transactions in securities solely on a national securities
exchange of which it is a member.
(9) The Commission by rule or order, as it deems consistent
with the public interest and the protection of investors, may
conditionally or unconditionally exempt from paragraph (8) of
this subsection any broker or dealer or class of brokers or
dealers specified in such rule or order.
(10) For the purposes of determining whether a person is
subject to a statutory disqualification under section 6(c)(2),
15A(g)(2), or 17A(b)(4)(A) of this title, the term
``Commission'' in paragraph (4)(B) of this subsection shall
mean ``exchange'', ``association'', or ``clearing agency'',
respectively.
(11) Broker/dealer registration with respect to
transactions in security futures products.--
(A) Notice registration.--
(i) Contents of notice.--
Notwithstanding paragraphs (1) and (2),
a broker or dealer required to register
only because it effects transactions in
security futures products on an
exchange registered pursuant to section
6(g) may register for purposes of this
section by filing with the Commission a
written notice in such form and
containing such information concerning
such broker or dealer and any persons
associated with such broker or dealer
as the Commission, by rule, may
prescribe as necessary or appropriate
in the public interest or for the
protection of investors. A broker or
dealer may not register under this
paragraph unless that broker or dealer
is a member of a national securities
association registered under section
15A(k).
(ii) Immediate effectiveness.--Such
registration shall be effective
contemporaneously with the submission
of notice, in written or electronic
form, to the Commission, except that
such registration shall not be
effective if the registration would be
subject to suspension or revocation
under paragraph (4).
(iii) Suspension.--Such registration
shall be suspended immediately if a
national securities association
registered pursuant to section 15A(k)
of this title suspends the membership
of that broker or dealer.
(iv) Termination.--Such registration
shall be terminated immediately if any
of the above stated conditions for
registration set forth in this
paragraph are no longer satisfied.
(B) Exemptions for registered brokers and
dealers.--A broker or dealer registered
pursuant to the requirements of subparagraph
(A) shall be exempt from the following
provisions of this title and the rules
thereunder with respect to transactions in
security futures products:
(i) Section 8.
(ii) Section 11.
(iii) Subsections (c)(3) and (c)(5)
of this section.
(iv) Section 15B.
(v) Section 15C.
(vi) Subsections (d), (e), (f), (g),
(h), and (i) of section 17.
(12) Exemption for security futures product exchange
members.--
(A) Registration exemption.--A natural person
shall be exempt from the registration
requirements of this section if such person--
(i) is a member of a designated
contract market registered with the
Commission as an exchange pursuant to
section 6(g);
(ii) effects transactions only in
securities on the exchange of which
such person is a member; and
(iii) does not directly accept or
solicit orders from public customers or
provide advice to public customers in
connection with the trading of security
futures products.
(B) Other exemptions.--A natural person
exempt from registration pursuant to
subparagraph (A) shall also be exempt from the
following provisions of this title and the
rules thereunder:
(i) Section 8.
(ii) Section 11.
(iii) Subsections (c)(3), (c)(5), and
(e) of this section.
(iv) Section 15B.
(v) Section 15C.
(vi) Subsections (d), (e), (f), (g),
(h), and (i) of section 17.
(13) Registration exemption for merger and
acquisition brokers.--
(A) In general.--Except as provided in
subparagraph (B), an M&A; broker shall be exempt
from registration under this section.
(B) Excluded activities.--An M&A; broker is
not exempt from registration under this
paragraph if such broker does any of the
following:
(i) Directly or indirectly, in
connection with the transfer of
ownership of an eligible privately held
company, receives, holds, transmits, or
has custody of the funds or securities
to be exchanged by the parties to the
transaction.
(ii) Engages on behalf of an issuer
in a public offering of any class of
securities that is registered, or is
required to be registered, with the
Commission under section 12 or with
respect to which the issuer files, or
is required to file, periodic
information, documents, and reports
under subsection (d).
(iii) Engages on behalf of any party
in a transaction involving a public
shell company.
(C) Disqualifications.--An M&A; broker is not
exempt from registration under this paragraph
if such broker is subject to--
(i) suspension or revocation of
registration under paragraph (4);
(ii) a statutory disqualification
described in section 3(a)(39);
(iii) a disqualification under the
rules adopted by the Commission under
section 926 of the Investor Protection
and Securities Reform Act of 2010 (15
U.S.C. 77d note); or
(iv) a final order described in
paragraph (4)(H).
(D) Rule of construction.--Nothing in this
paragraph shall be construed to limit any other
authority of the Commission to exempt any
person, or any class of persons, from any
provision of this title, or from any provision
of any rule or regulation thereunder.
(E) Definitions.--In this paragraph:
(i) Control.--The term ``control''
means the power, directly or
indirectly, to direct the management or
policies of a company, whether through
ownership of securities, by contract,
or otherwise. There is a presumption of
control for any person who--
(I) is a director, general
partner, member or manager of a
limited liability company, or
officer exercising executive
responsibility (or has similar
status or functions);
(II) has the right to vote 20
percent or more of a class of
voting securities or the power
to sell or direct the sale of
20 percent or more of a class
of voting securities; or
(III) in the case of a
partnership or limited
liability company, has the
right to receive upon
dissolution, or has
contributed, 20 percent or more
of the capital.
(ii) Eligible privately held
company.--The term ``eligible privately
held company'' means a privately held
company that meets both of the
following conditions:
(I) The company does not have
any class of securities
registered, or required to be
registered, with the Commission
under section 12 or with
respect to which the company
files, or is required to file,
periodic information,
documents, and reports under
subsection (d).
(II) In the fiscal year
ending immediately before the
fiscal year in which the
services of the M&A; broker are
initially engaged with respect
to the securities transaction,
the company meets either or
both of the following
conditions (determined in
accordance with the historical
financial accounting records of
the company):
(aa) The earnings of
the company before
interest, taxes,
depreciation, and
amortization are less
than $25,000,000.
(bb) The gross
revenues of the company
are less than
$250,000,000.
(iii) M&A; broker.--The term ``M&A;
broker'' means a broker, and any person
associated with a broker, engaged in
the business of effecting securities
transactions solely in connection with
the transfer of ownership of an
eligible privately held company,
regardless of whether the broker acts
on behalf of a seller or buyer, through
the purchase, sale, exchange, issuance,
repurchase, or redemption of, or a
business combination involving,
securities or assets of the eligible
privately held company, if the broker
reasonably believes that--
(I) upon consummation of the
transaction, any person
acquiring securities or assets
of the eligible privately held
company, acting alone or in
concert, will control and,
directly or indirectly, will be
active in the management of the
eligible privately held company
or the business conducted with
the assets of the eligible
privately held company; and
(II) if any person is offered
securities in exchange for
securities or assets of the
eligible privately held
company, such person will,
prior to becoming legally bound
to consummate the transaction,
receive or have reasonable
access to the most recent
fiscal year-end financial
statements of the issuer of the
securities as customarily
prepared by the management of
the issuer in the normal course
of operations and, if the
financial statements of the
issuer are audited, reviewed,
or compiled, any related
statement by the independent
accountant, a balance sheet
dated not more than 120 days
before the date of the offer,
and information pertaining to
the management, business,
results of operations for the
period covered by the foregoing
financial statements, and
material loss contingencies of
the issuer.
(iv) Public shell company.--The term
``public shell company'' is a company
that at the time of a transaction with
an eligible privately held company--
(I) has any class of
securities registered, or
required to be registered, with
the Commission under section 12
or that is required to file
reports pursuant to subsection
(d);
(II) has no or nominal
operations; and
(III) has--
(aa) no or nominal
assets;
(bb) assets
consisting solely of
cash and cash
equivalents; or
(cc) assets
consisting of any
amount of cash and cash
equivalents and nominal
other assets.
(F) Inflation adjustment.--
(i) In general.--On the date that is
5 years after the date of the enactment
of this paragraph, and every 5 years
thereafter, each dollar amount in
subparagraph (E)(ii)(II) shall be
adjusted by--
(I) dividing the annual value
of the Employment Cost Index
For Wages and Salaries, Private
Industry Workers (or any
successor index), as published
by the Bureau of Labor
Statistics, for the calendar
year preceding the calendar
year in which the adjustment is
being made by the annual value
of such index (or successor)
for the calendar year ending
December 31, 2012; and
(II) multiplying such dollar
amount by the quotient obtained
under subclause (I).
(ii) Rounding.--Each dollar amount
determined under clause (i) shall be
rounded to the nearest multiple of
$100,000.
(c)(1)(A) No broker or dealer shall make use of the mails or
any means or instrumentality of interstate commerce to effect
any transaction in, or to induce or attempt to induce the
purchase or sale of, any security (other than commercial paper,
bankers' acceptances, or commercial bills), or any security-
based swap agreement by means of any manipulative, deceptive,
or other fraudulent device or contrivance.
(B) No broker, dealer, or municipal securities dealer shall
make use of the mails or any means or instrumentality of
interstate commerce to effect any transaction in, or to induce
or attempt to induce the purchase or sale of, any municipal
security or any security-based swap agreement involving a
municipal security by means of any manipulative, deceptive, or
other fraudulent device or contrivance.
(C) No government securities broker or government securities
dealer shall make use of the mails or any means or
instrumentality of interstate commerce to effect any
transaction in, or to induce or to attempt to induce the
purchase or sale of, any government security or any security-
based swap agreement involving a government security by means
of any manipulative, deceptive, or other fraudulent device or
contrivance.
(2)(A) No broker or dealer shall make use of the mails or any
means or instrumentality of interstate commerce to effect any
transaction in, or to induce or attempt to induce the purchase
or sale of, any security (other than an exempted security or
commercial paper, bankers' acceptances, or commercial bills)
otherwise than on a national securities exchange of which it is
a member, in connection with which such broker or dealer
engages in any fraudulent, deceptive, or manipulative act or
practice, or makes any fictitious quotation.
(B) No broker, dealer, or municipal securities dealer shall
make use of the mails or any means or instrumentality of
interstate commerce to effect any transaction in, or to induce
or attempt to induce the purchase or sale of, any municipal
security in connection with which such broker, dealer, or
municipal securities dealer engages in any fraudulent,
deceptive, or manipulative act or practice, or makes any
fictitious quotation.
(C) No government securities broker or government securities
dealer shall make use of the mails or any means or
instrumentality of interstate commerce to effect any
transaction in, or induce or attempt to induce the purchase or
sale of, any government security in connection with which such
government securities broker or government securities dealer
engages in any fraudulent, deceptive, or manipulative act or
practice, or makes any fictitious quotation.
(D) The Commission shall, for the purposes of this paragraph,
by rules and regulations define, and prescribe means reasonably
designed to prevent, such acts and practices as are fraudulent,
deceptive, or manipulative and such quotations as are
fictitious.
(E) The Commission shall, prior to adopting any rule or
regulation under subparagraph (C), consult with and consider
the views of the Secretary of the Treasury and each appropriate
regulatory agency. If the Secretary of the Treasury or any
appropriate regulatory agency comments in writing on a proposed
rule or regulation of the Commission under such subparagraph
(C) that has been published for comment, the Commission shall
respond in writing to such written comment before adopting the
proposed rule. If the Secretary of the Treasury determines, and
notifies the Commission, that such rule or regulation, if
implemented, would, or as applied does (i) adversely affect the
liquidity or efficiency of the market for government
securities; or (ii) impose any burden on competition not
necessary or appropriate in furtherance of the purposes of this
section, the Commission shall, prior to adopting the proposed
rule or regulation, find that such rule or regulation is
necessary and appropriate in furtherance of the purposes of
this section notwithstanding the Secretary's determination.
(3)(A) No broker or dealer (other than a government
securities broker or government securities dealer, except a
registered broker or dealer) shall make use of the mails or any
means or instrumentality of interstate commerce to effect any
transaction in, or to induce or attempt to induce the purchase
or sale of, any security (other than an exempted security
(except a government security) or commercial paper, bankers'
acceptances, or commercial bills) in contravention of such
rules and regulations as the Commission shall prescribe as
necessary or appropriate in the public interest or for the
protection of investors to provide safeguards with respect to
the financial responsibility and related practices of brokers
and dealers including, but not limited to, the acceptance of
custody and use of customers' securities and the carrying and
use of customers' deposits or credit balances. Such rules and
regulations shall (A) require the maintenance of reserves with
respect to customers' deposits or credit balances, and (B) no
later than September 1, 1975, establish minimum financial
responsibility requirements for all brokers and dealers.
(B) Consistent with this title, the Commission, in
consultation with the Commodity Futures Trading Commission,
shall issue such rules, regulations, or orders as are necessary
to avoid duplicative or conflicting regulations applicable to
any broker or dealer registered with the Commission pursuant to
section 15(b) (except paragraph (11) thereof), that is also
registered with the Commodity Futures Trading Commission
pursuant to section 4f(a) of the Commodity Exchange Act (except
paragraph (2) thereof), with respect to the application of: (i)
the provisions of section 8, section 15(c)(3), and section 17
of this title and the rules and regulations thereunder related
to the treatment of customer funds, securities, or property,
maintenance of books and records, financial reporting, or other
financial responsibility rules, involving security futures
products; and (ii) similar provisions of the Commodity Exchange
Act and rules and regulations thereunder involving security
futures products.
(C) Notwithstanding any provision of sections
2(a)(1)(C)(i) or 4d(a)(2) of the Commodity Exchange Act
and the rules and regulations thereunder, and pursuant
to an exemption granted by the Commission under section
36 of this title or pursuant to a rule or regulation,
cash and securities may be held by a broker or dealer
registered pursuant to subsection (b)(1) and also
registered as a futures commission merchant pursuant to
section 4f(a)(1) of the Commodity Exchange Act, in a
portfolio margining account carried as a futures
account subject to section 4d of the Commodity Exchange
Act and the rules and regulations thereunder, pursuant
to a portfolio margining program approved by the
Commodity Futures Trading Commission, and subject to
subchapter IV of chapter 7 of title 11 of the United
States Code and the rules and regulations thereunder.
The Commission shall consult with the Commodity Futures
Trading Commission to adopt rules to ensure that such
transactions and accounts are subject to comparable
requirements to the extent practicable for similar
products.
(4) If the Commission finds, after notice and opportunity for
a hearing, that any person subject to the provisions of section
12, 13, 14, or subsection (d) of section 15 of this title or
any rule or regulation thereunder has failed to comply with any
such provision, rule, or regulation in any material respect,
the Commission may publish its findings and issue an order
requiring such person, and any person who was a cause of the
failure to comply due to an act or omission the person knew or
should have known would contribute to the failure to comply, to
comply, or to take steps to effect compliance, with such
provision or such rule or regulation thereunder upon such terms
and conditions and within such time as the Commission may
specify in such order.
(5) No dealer (other than a specialist registered on a
national securities exchange) acting in the capacity of market
maker or otherwise shall make use of the mails or any means or
instrumentality of interstate commerce to effect any
transaction in, or to induce or attempt to induce the purchase
or sale of, any security (other than an exempted security or a
municipal security) in contravention of such specified and
appropriate standards with respect to dealing as the
Commission, by rule, shall prescribe as necessary or
appropriate in the public interest and for the protection of
investors, to maintain fair and orderly markets, or to remove
impediments to and perfect the mechanism of a national market
system. Under the rules of the Commission a dealer in a
security may be prohibited from acting as broker in that
security.
(6) No broker or dealer shall make use of the mails or any
means or instrumentality of interstate commerce to effect any
transaction in, or to induce or attempt to induce the purchase
or sale of, any security (other than an exempted security,
municipal security, commercial paper, bankers' acceptances, or
commercial bills) in contravention of such rules and
regulations as the Commission shall prescribe as necessary or
appropriate in the public interest and for the protection of
investors or to perfect or remove impediments to a national
system for the prompt and accurate clearance and settlement of
securities transactions, with respect to the time and method
of, and the form and format of documents used in connection
with, making settlements of and payments for transactions in
securities, making transfers and deliveries of securities, and
closing accounts. Nothing in this paragraph shall be construed
(A) to affect the authority of the Board of Governors of the
Federal Reserve System, pursuant to section 7 of this title, to
prescribe rules and regulations for the purpose of preventing
the excessive use of credit for the purchase or carrying of
securities, or (B) to authorize the Commission to prescribe
rules or regulations for such purpose.
(7) In connection with any bid for or purchase of a
government security related to an offering of government
securities by or on behalf of an issuer, no government
securities broker, government securities dealer, or bidder for
or purchaser of securities in such offering shall knowingly or
willfully make any false or misleading written statement or
omit any fact necessary to make any written statement made not
misleading.
(8) Prohibition of referral fees.--No broker or dealer, or
person associated with a broker or dealer, may solicit or
accept, directly or indirectly, remuneration for assisting an
attorney in obtaining the representation of any person in any
private action arising under this title or under the Securities
Act of 1933.
(d) Supplementary and Periodic Information.--
(1) In general.--Each issuer which has filed a
registration statement containing an undertaking which
is or becomes operative under this subsection as in
effect prior to the date of enactment of the Securities
Acts Amendments of 1964, and each issuer which shall
after such date file a registration statement which has
become effective pursuant to the Securities Act of
1933, as amended, shall file with the Commission, in
accordance with such rules and regulations as the
Commission may prescribe as necessary or appropriate in
the public interest or for the protection of investors,
such supplementary and periodic information, documents,
and reports as may be required pursuant to section 13
of this title in respect of a security registered
pursuant to section 12 of this title. The duty to file
under this subsection shall be automatically suspended
if and so long as any issue of securities of such
issuer is registered pursuant to section 12 of this
title. The duty to file under this subsection shall
also be automatically suspended as to any fiscal year,
other than the fiscal year within which such
registration statement became effective, if, at the
beginning of such fiscal year, the securities of each
class, other than any class of asset-backed securities,
to which the registration statement relates are held of
record by less than [300 persons, or, in the case of a
bank, a savings and loan holding company (as defined in
section 10 of the Home Owners' Loan Act), or a bank
holding company, as such term is defined in section 2
of the Bank Holding Company Act of 1956 (12 U.S.C.
1841), 1,200 persons persons] 1,200 persons. For the
purposes of this subsection, the term ``class'' shall
be construed to include all securities of an issuer
which are of substantially similar character and the
holders of which enjoy substantially similar rights and
privileges. The Commission may, for the purpose of this
subsection, define by rules and regulations the term
``held of record'' as it deems necessary or appropriate
in the public interest or for the protection of
investors in order to prevent circumvention of the
provisions of this subsection. Nothing in this
subsection shall apply to securities issued by a
foreign government or political subdivision thereof.
(2) Asset-backed securities.--
(A) Suspension of duty to file.--The
Commission may, by rule or regulation, provide
for the suspension or termination of the duty
to file under this subsection for any class of
asset-backed security, on such terms and
conditions and for such period or periods as
the Commission deems necessary or appropriate
in the public interest or for the protection of
investors.
(B) Classification of issuers.--The
Commission may, for purposes of this
subsection, classify issuers and prescribe
requirements appropriate for each class of
issuers of asset-backed securities.
(e) Notices to Customers Regarding Securities Lending.--Every
registered broker or dealer shall provide notice to its
customers that they may elect not to allow their fully paid
securities to be used in connection with short sales. If a
broker or dealer uses a customer's securities in connection
with short sales, the broker or dealer shall provide notice to
its customer that the broker or dealer may receive compensation
in connection with lending the customer's securities. The
Commission, by rule, as it deems necessary or appropriate in
the public interest and for the protection of investors, may
prescribe the form, content, time, and manner of delivery of
any notice required under this paragraph.
(f) The Commission, by rule, as it deems necessary or
appropriate in the public interest and for the protection of
investors or to assure equal regulation, may require any member
of a national securities exchange not required to register
under section 15 of this title and any person associated with
any such member to comply with any provision of this title
(other than section 15(a)) or the rules or regulations
thereunder which by its terms regulates or prohibits any act,
practice, or course of business by a ``broker or dealer'' or
``registered broker or dealer'' or a ``person associated with a
broker or dealer,'' respectively.
(g) Every registered broker or dealer shall establish,
maintain, and enforce written policies and procedures
reasonably designed, taking into consideration the nature of
such broker's or dealer's business, to prevent the misuse in
violation of this title, or the rules or regulations
thereunder, of material, nonpublic information by such broker
or dealer or any person associated with such broker or dealer.
The Commission, as it deems necessary or appropriate in the
public interest or for the protection of investors, shall adopt
rules or regulations to require specific policies or procedures
reasonably designed to prevent misuse in violation of this
title (or the rules or regulations thereunder) of material,
nonpublic information.
(h) Requirements for Transactions in Penny Stocks.--
(1) In general.--No broker or dealer shall make use
of the mails or any means or instrumentality of
interstate commerce to effect any transaction in, or to
induce or attempt to induce the purchase or sale of,
any penny stock by any customer except in accordance
with the requirements of this subsection and the rules
and regulations prescribed under this subsection.
(2) Risk disclosure with respect to penny stocks.--
Prior to effecting any transaction in any penny stock,
a broker or dealer shall give the customer a risk
disclosure document that--
(A) contains a description of the nature and
level of risk in the market for penny stocks in
both public offerings and secondary trading;
(B) contains a description of the broker's or
dealer's duties to the customer and of the
rights and remedies available to the customer
with respect to violations of such duties or
other requirements of Federal securities laws;
(C) contains a brief, clear, narrative
description of a dealer market, including
``bid'' and ``ask'' prices for penny stocks and
the significance of the spread between the bid
and ask prices;
(D) contains the toll free telephone number
for inquiries on disciplinary actions
established pursuant to section 15A(i) of this
title;
(E) defines significant terms used in the
disclosure document or in the conduct of
trading in penny stocks; and
(F) contains such other information, and is
in such form (including language, type size,
and format), as the Commission shall require by
rule or regulation.
(3) Commission rules relating to disclosure.--The
Commission shall adopt rules setting forth additional
standards for the disclosure by brokers and dealers to
customers of information concerning transactions in
penny stocks. Such rules--
(A) shall require brokers and dealers to
disclose to each customer, prior to effecting
any transaction in, and at the time of
confirming any transaction with respect to any
penny stock, in accordance with such procedures
and methods as the Commission may require
consistent with the public interest and the
protection of investors--
(i) the bid and ask prices for penny
stock, or such other information as the
Commission may, by rule, require to
provide customers with more useful and
reliable information relating to the
price of such stock;
(ii) the number of shares to which
such bid and ask prices apply, or other
comparable information relating to the
depth and liquidity of the market for
such stock; and
(iii) the amount and a description of
any compensation that the broker or
dealer and the associated person
thereof will receive or has received in
connection with such transaction;
(B) shall require brokers and dealers to
provide, to each customer whose account with
the broker or dealer contains penny stocks, a
monthly statement indicating the market value
of the penny stocks in that account or
indicating that the market value of such stock
cannot be determined because of the
unavailability of firm quotes; and
(C) may, as the Commission finds necessary or
appropriate in the public interest or for the
protection of investors, require brokers and
dealers to disclose to customers additional
information concerning transactions in penny
stocks.
(4) Exemptions.--The Commission, as it determines
consistent with the public interest and the protection
of investors, may by rule, regulation, or order exempt
in whole or in part, conditionally or unconditionally,
any person or class of persons, or any transaction or
class of transactions, from the requirements of this
subsection. Such exemptions shall include an exemption
for brokers and dealers based on the minimal percentage
of the broker's or dealer's commissions, commission-
equivalents, and markups received from transactions in
penny stocks.
(5) Regulations.--It shall be unlawful for any person
to violate such rules and regulations as the Commission
shall prescribe in the public interest or for the
protection of investors or to maintain fair and orderly
markets--
(A) as necessary or appropriate to carry out
this subsection; or
(B) as reasonably designed to prevent
fraudulent, deceptive, or manipulative acts and
practices with respect to penny stocks.
(i) Limitations on State Law.--
(1) Capital, margin, books and records, bonding, and
reports.--No law, rule, regulation, or order, or other
administrative action of any State or political
subdivision thereof shall establish capital, custody,
margin, financial responsibility, making and keeping
records, bonding, or financial or operational reporting
requirements for brokers, dealers, municipal securities
dealers, government securities brokers, or government
securities dealers that differ from, or are in addition
to, the requirements in those areas established under
this title. The Commission shall consult periodically
the securities commissions (or any agency or office
performing like functions) of the States concerning the
adequacy of such requirements as established under this
title.
(2) Funding portals.--
(A) Limitation on state laws.--Except as
provided in subparagraph (B), no State or
political subdivision thereof may enforce any
law, rule, regulation, or other administrative
action against a registered funding portal with
respect to its business as such.
(B) Examination and enforcement authority.--
Subparagraph (A) does not apply with respect to
the examination and enforcement of any law,
rule, regulation, or administrative action of a
State or political subdivision thereof in which
the principal place of business of a registered
funding portal is located, provided that such
law, rule, regulation, or administrative action
is not in addition to or different from the
requirements for registered funding portals
established by the Commission.
(C) Definition.--For purposes of this
paragraph, the term ``State'' includes the
District of Columbia and the territories of the
United States.
(3) De minimis transactions by associated persons.--
No law, rule, regulation, or order, or other
administrative action of any State or political
subdivision thereof may prohibit an associated person
of a broker or dealer from effecting a transaction
described in paragraph (3) for a customer in such State
if--
(A) such associated person is not ineligible
to register with such State for any reason
other than such a transaction;
(B) such associated person is registered with
a registered securities association and at
least one State; and
(C) the broker or dealer with which such
person is associated is registered with such
State.
(4) Described transactions.--
(A) In general.--A transaction is described
in this paragraph if--
(i) such transaction is effected--
(I) on behalf of a customer
that, for 30 days prior to the
day of the transaction,
maintained an account with the
broker or dealer; and
(II) by an associated person
of the broker or dealer--
(aa) to which the
customer was assigned
for 14 days prior to
the day of the
transaction; and
(bb) who is
registered with a State
in which the customer
was a resident or was
present for at least 30
consecutive days during
the 1-year period prior
to the day of the
transaction; or
(ii) the transaction is effected--
(I) on behalf of a customer
that, for 30 days prior to the
day of the transaction,
maintained an account with the
broker or dealer; and
(II) during the period
beginning on the date on which
such associated person files an
application for registration
with the State in which the
transaction is effected and
ending on the earlier of--
(aa) 60 days after
the date on which the
application is filed;
or
(bb) the date on
which such State
notifies the associated
person that it has
denied the application
for registration or has
stayed the pendency of
the application for
cause.
(B) Rules of construction.--For purposes of
subparagraph (A)(i)(II)--
(i) each of up to 3 associated
persons of a broker or dealer who are
designated to effect transactions
during the absence or unavailability of
the principal associated person for a
customer may be treated as an
associated person to which such
customer is assigned; and
(ii) if the customer is present in
another State for 30 or more
consecutive days or has permanently
changed his or her residence to another
State, a transaction is not described
in this paragraph, unless the
associated person of the broker or
dealer files an application for
registration with such State not later
than 10 business days after the later
of the date of the transaction, or the
date of the discovery of the presence
of the customer in the other State for
30 or more consecutive days or the
change in the customer's residence.
(j) Rulemaking To Extend Requirements to New Hybrid
Products.--
(1) Consultation.--Prior to commencing a rulemaking
under this subsection, the Commission shall consult
with and seek the concurrence of the Board concerning
the imposition of broker or dealer registration
requirements with respect to any new hybrid product. In
developing and promulgating rules under this
subsection, the Commission shall consider the views of
the Board, including views with respect to the nature
of the new hybrid product; the history, purpose,
extent, and appropriateness of the regulation of the
new product under the Federal banking laws; and the
impact of the proposed rule on the banking industry.
(2) Limitation.--The Commission shall not--
(A) require a bank to register as a broker or
dealer under this section because the bank
engages in any transaction in, or buys or
sells, a new hybrid product; or
(B) bring an action against a bank for a
failure to comply with a requirement described
in subparagraph (A),
unless the Commission has imposed such requirement by
rule or regulation issued in accordance with this
section.
(3) Criteria for rulemaking.--The Commission shall
not impose a requirement under paragraph (2) of this
subsection with respect to any new hybrid product
unless the Commission determines that--
(A) the new hybrid product is a security; and
(B) imposing such requirement is necessary
and appropriate in the public interest and for
the protection of investors.
(4) Considerations.--In making a determination under
paragraph (3), the Commission shall consider--
(A) the nature of the new hybrid product; and
(B) the history, purpose, extent, and
appropriateness of the regulation of the new
hybrid product under the Federal securities
laws and under the Federal banking laws.
(5) Objection to commission regulation.--
(A) Filing of petition for review.--The Board
may obtain review of any final regulation
described in paragraph (2) in the United States
Court of Appeals for the District of Columbia
Circuit by filing in such court, not later than
60 days after the date of publication of the
final regulation, a written petition requesting
that the regulation be set aside. Any
proceeding to challenge any such rule shall be
expedited by the Court of Appeals.
(B) Transmittal of petition and record.--A
copy of a petition described in subparagraph
(A) shall be transmitted as soon as possible by
the Clerk of the Court to an officer or
employee of the Commission designated for that
purpose. Upon receipt of the petition, the
Commission shall file with the court the
regulation under review and any documents
referred to therein, and any other relevant
materials prescribed by the court.
(C) Exclusive jurisdiction.--On the date of
the filing of the petition under subparagraph
(A), the court has jurisdiction, which becomes
exclusive on the filing of the materials set
forth in subparagraph (B), to affirm and
enforce or to set aside the regulation at
issue.
(D) Standard of review.--The court shall
determine to affirm and enforce or set aside a
regulation of the Commission under this
subsection, based on the determination of the
court as to whether--
(i) the subject product is a new
hybrid product, as defined in this
subsection;
(ii) the subject product is a
security; and
(iii) imposing a requirement to
register as a broker or dealer for
banks engaging in transactions in such
product is appropriate in light of the
history, purpose, and extent of
regulation under the Federal securities
laws and under the Federal banking
laws, giving deference neither to the
views of the Commission nor the Board.
(E) Judicial stay.--The filing of a petition
by the Board pursuant to subparagraph (A) shall
operate as a judicial stay, until the date on
which the determination of the court is final
(including any appeal of such determination).
(F) Other authority to challenge.--Any
aggrieved party may seek judicial review of the
Commission's rulemaking under this subsection
pursuant to section 25 of this title.
(6) Definitions.--For purposes of this subsection:
(A) New hybrid product.--The term ``new
hybrid product'' means a product that--
(i) was not subjected to regulation
by the Commission as a security prior
to the date of the enactment of the
Gramm-Leach-Bliley Act;
(ii) is not an identified banking
product as such term is defined in
section 206 of such Act; and
(iii) is not an equity swap within
the meaning of section 206(a)(6) of
such Act.
(B) Board.--The term ``Board'' means the
Board of Governors of the Federal Reserve
System.
(k) Registration or Succession to a United States Broker or
Dealer.--In determining whether to permit a foreign person or
an affiliate of a foreign person to register as a United States
broker or dealer, or succeed to the registration of a United
States broker or dealer, the Commission may consider whether,
for a foreign person, or an affiliate of a foreign person that
presents a risk to the stability of the United States financial
system, the home country of the foreign person has adopted, or
made demonstrable progress toward adopting, an appropriate
system of financial regulation to mitigate such risk.
(l) Termination of a United States Broker or Dealer.--For a
foreign person or an affiliate of a foreign person that
presents such a risk to the stability of the United States
financial system, the Commission may determine to terminate the
registration of such foreign person or an affiliate of such
foreign person as a broker or dealer in the United States, if
the Commission determines that the home country of the foreign
person has not adopted, or made demonstrable progress toward
adopting, an appropriate system of financial regulation to
mitigate such risk.
(m) Harmonization of Enforcement.--The enforcement authority
of the Commission with respect to violations of the standard of
conduct applicable to a broker or dealer providing personalized
investment advice about securities to a retail customer shall
include--
(1) the enforcement authority of the Commission with
respect to such violations provided under this Act; and
(2) the enforcement authority of the Commission with
respect to violations of the standard of conduct
applicable to an investment adviser under the
Investment Advisers Act of 1940, including the
authority to impose sanctions for such violations, and
the Commission shall seek to prosecute and sanction violators
of the standard of conduct applicable to a broker or dealer
providing personalized investment advice about securities to a
retail customer under this Act to the same extent as the
Commission prosecutes and sanctions violators of the standard
of conduct applicable to an investment advisor under the
Investment Advisers Act of 1940.
(n) Disclosures to Retail Investors.--
(1) In general.--Notwithstanding any other provision
of the securities laws, the Commission may issue rules
designating documents or information that shall be
provided by a broker or dealer to a retail investor
before the purchase of an investment product or service
by the retail investor.
(2) Considerations.--In developing any rules under
paragraph (1), the Commission shall consider whether
the rules will promote investor protection, efficiency,
competition, and capital formation.
(3) Form and contents of documents and information.--
Any documents or information designated under a rule
promulgated under paragraph (1) shall--
(A) be in a summary format; and
(B) contain clear and concise information
about--
(i) investment objectives,
strategies, costs, and risks; and
(ii) any compensation or other
financial incentive received by a
broker, dealer, or other intermediary
in connection with the purchase of
retail investment products.
(o) Authority to Restrict Mandatory Pre-dispute
Arbitration.--The Commission, by rule, may prohibit, or impose
conditions or limitations on the use of, agreements that
require customers or clients of any broker, dealer, or
municipal securities dealer to arbitrate any future dispute
between them arising under the Federal securities laws, the
rules and regulations thereunder, or the rules of a self-
regulatory organization if it finds that such prohibition,
imposition of conditions, or limitations are in the public
interest and for the protection of investors.
[(k)] (q) Standard of Conduct.--
(1) In general.--Notwithstanding any other provision
of this Act or the Investment Advisers Act of 1940, the
Commission may promulgate rules to provide that, with
respect to a broker or dealer, when providing
personalized investment advice about securities to a
retail customer (and such other customers as the
Commission may by rule provide), the standard of
conduct for such broker or dealer with respect to such
customer shall be the same as the standard of conduct
applicable to an investment adviser under section 211
of the Investment Advisers Act of 1940. The receipt of
compensation based on commission or other standard
compensation for the sale of securities shall not, in
and of itself, be considered a violation of such
standard applied to a broker or dealer. Nothing in this
section shall require a broker or dealer or registered
representative to have a continuing duty of care or
loyalty to the customer after providing personalized
investment advice about securities.
(2) Disclosure of range of products offered.--Where a
broker or dealer sells only proprietary or other
limited range of products, as determined by the
Commission, the Commission may by rule require that
such broker or dealer provide notice to each retail
customer and obtain the consent or acknowledgment of
the customer. The sale of only proprietary or other
limited range of products by a broker or dealer shall
not, in and of itself, be considered a violation of the
standard set forth in paragraph (1).
(3) Requirements prior to rulemaking.--The Commission
shall not promulgate a rule pursuant to paragraph (1)
before providing a report to the Committee on Financial
Services of the House of Representatives and the
Committee on Banking, Housing, and Urban Affairs of the
Senate describing whether--
(A) retail investors (and such other
customers as the Commission may provide) are
being harmed due to brokers or dealers
operating under different standards of conduct
than those that apply to investment advisors
under section 211 of the Investment Advisers
Act of 1940 (15 U.S.C. 80b-11);
(B) alternative remedies will reduce any
confusion or harm to retail investors due to
brokers or dealers operating under different
standards of conduct than those standards that
apply to investment advisors under section 211
of the Investment Advisers Act of 1940 (15
U.S.C. 80b-11), including--
(i) simplifying the titles used by
brokers, dealers, and investment
advisers; and
(ii) enhancing disclosure surrounding
the different standards of conduct
currently applicable to brokers,
dealers, and investment advisers;
(C) the adoption of a uniform fiduciary
standard of conduct for brokers, dealers, and
investment advisors would adversely impact the
commissions of brokers and dealers, the
availability of proprietary products offered by
brokers and dealers, and the ability of brokers
and dealers to engage in principal transactions
with customers; and
(D) the adoption of a uniform fiduciary
standard of conduct for brokers or dealers and
investment advisors would adversely impact
retail investor access to personalized and
cost-effective investment advice,
recommendations about securities, or the
availability of such advice and
recommendations.
(4) Economic analysis.--The Commission's conclusions
contained in the report described in paragraph (3)
shall be supported by economic analysis.
(5) Requirements for promulgating a rule.--The
Commission shall publish in the Federal Register
alongside the rule promulgated pursuant to paragraph
(1) formal findings that such rule would reduce
confusion or harm to retail customers (and such other
customers as the Commission may by rule provide) due to
different standards of conduct applicable to brokers,
dealers, and investment advisors.
(6) Requirements under investment advisers act of
1940.--In proposing rules under paragraph (1) for
brokers or dealers, the Commission shall consider the
differences in the registration, supervision, and
examination requirements applicable to brokers,
dealers, and investment advisors.
[(l)] (r) Other Matters.--The Commission shall--
(1) facilitate the provision of simple and clear
disclosures to investors regarding the terms of their
relationships with brokers, dealers, and investment
advisers, including any material conflicts of interest;
and
(2) examine and, where appropriate, promulgate rules
prohibiting or restricting certain sales practices,
conflicts of interest, and compensation schemes for
brokers, dealers, and investment advisers that the
Commission deems contrary to the public interest and
the protection of investors.
[(j)] (p) The authority of the Commission under this section
with respect to security-based swap agreements shall be subject
to the restrictions and limitations of section 3A(b) of this
title.
* * * * * * *
municipal securities
Sec. 15B. (a)(1)(A) It shall be unlawful for any municipal
securities dealer (other than one registered as a broker or
dealer under section 15 of this title) to make use of the mails
or any means or instrumentality of interstate commerce to
effect any transaction in, or to induce or attempt to induce
the purchase or sale of, any municipal security unless such
municipal securities dealer is registered in accordance with
this subsection.
(B) It shall be unlawful for a municipal
advisor to provide advice to or on behalf of a
municipal entity or obligated person with
respect to municipal financial products or the
issuance of municipal securities, or to
undertake a solicitation of a municipal entity
or obligated person, unless the municipal
advisor is registered in accordance with this
subsection.
(2) A municipal securities dealer or municipal advisor may be
registered by filing with the Commission an application for
registration in such form and containing such information and
documents concerning such municipal securities dealer or
municipal advisor and any person associated with such municipal
securities dealer or municipal advisor as the Commission, by
rule, may prescribe as necessary or appropriate in the public
interest or for the protection of investors. Within forty-five
days of the date of the filing of such application (or within
such longer period as to which the applicant consents), the
Commission shall--
(A) by order grant registration, or
(B) institute proceedings to determine whether
registration should be denied. Such proceedings shall
include notice of the grounds for denial under
consideration and opportunity for hearing and shall be
concluded within one hundred twenty days of the date of
the filing of the application for registration. At the
conclusion of such proceedings the Commission, by
order, shall grant or deny such registration. The
Commission may extend the time for the conclusion of
such proceedings for up to ninety days if it finds good
cause for such extension and publishes its reasons for
so finding or for such longer period as to which the
applicant consents.
The Commission shall grant the registration of a municipal
securities dealer or municipal advisor if the Commission finds
that the requirements of this section are satisfied. The
Commission shall deny such registration if it does not make
such a finding or if it finds that if the applicant were so
registered, its registration would be subject to suspension or
revocation under subsection (c) of this section.
(3) Any provision of this title (other than section 5 or
paragraph (1) of this subsection) which prohibits any act,
practice, or course of business if the mails or any means or
instrumentality of interstate commerce is used in connection
therewith shall also prohibit any such act, practice, or course
of business by any registered municipal securities dealer or
municipal advisor or any person acting on behalf of such
municipal securities dealer or municipal advisor, irrespective
of any use of the mails or any means or instrumentality of
interstate commerce in connection therewith.
(4) The Commission, by rule or order, upon its own motion or
upon application, may conditionally or unconditionally exempt
any broker, dealer, municipal securities dealer, or municipal
advisor, or class of brokers, dealers, municipal securities
dealers, or municipal advisors from any provision of this
section or the rules or regulations thereunder, if the
Commission finds that such exemption is consistent with the
public interest, the protection of investors, and the purposes
of this section.
(5) No municipal advisor shall make use of the mails
or any means or instrumentality of interstate commerce
to provide advice to or on behalf of a municipal entity
or obligated person with respect to municipal financial
products, the issuance of municipal securities, or to
undertake a solicitation of a municipal entity or
obligated person, in connection with which such
municipal advisor engages in any fraudulent, deceptive,
or manipulative act or practice.
(b)(1) The Municipal Securities Rulemaking Board shall be
composed of 15 members, or such other number of members as
specified by rules of the Board pursuant to paragraph (2)(B),,
which shall perform the duties set forth in this section. The
members of the Board shall serve as members for a term of 3
years or for such other terms as specified by rules of the
Board pursuant to paragraph (2)(B), and shall consist of (A) 8
individuals who are independent of any municipal securities
broker, municipal securities dealer, or municipal advisor, at
least 1 of whom shall be representative of institutional or
retail investors in municipal securities, at least 1 of whom
shall be representative of municipal entities, and at least 1
of whom shall be a member of the public with knowledge of or
experience in the municipal industry (which members are
hereinafter referred to as ``public representatives''); and (B)
7 individuals who are associated with a broker, dealer,
municipal securities dealer, or municipal advisor, including at
least 1 individual who is associated with and representative of
brokers, dealers, or municipal securities dealers that are not
banks or subsidiaries or departments or divisions of banks
(which members are hereinafter referred to as ``broker-dealer
representatives''), at least 1 individual who is associated
with and representative of municipal securities dealers which
are banks or subsidiaries or departments or divisions of banks
(which members are hereinafter referred to as ``bank
representatives''), and at least 1 individual who is associated
with a municipal advisor (which members are hereinafter
referred to as ``advisor representatives'' and, together with
the broker-dealer representatives and the bank representatives,
are referred to as ``regulated representatives''). Each member
of the board shall be knowledgeable of matters related to the
municipal securities markets. Prior to the expiration of the
terms of office of the initial members of the Board, an
election shall be held under rules adopted by the Board
(pursuant to subsection (b)(2)(B) of this section) of the
members to succeed such initial members.
(2) The Board shall propose and adopt rules to effect the
purposes of this title with respect to transactions in
municipal securities effected by brokers, dealers, and
municipal securities dealers and advice provided to or on
behalf of municipal entities or obligated persons by brokers,
dealers, municipal securities dealers, and municipal advisors
with respect to municipal financial products, the issuance of
municipal securities, and solicitations of municipal entities
or obligated persons undertaken by brokers, dealers, municipal
securities dealers, and municipal advisors. The rules of the
Board, as a minimum, shall:
(A) provide that no municipal securities broker or
municipal securities dealer shall effect any
transaction in, or induce or attempt to induce the
purchase or sale of, any municipal security, and no
broker, dealer, municipal securities dealer, or
municipal advisor shall provide advice to or on behalf
of a municipal entity or obligated person with respect
to municipal financial products or the issuance of
municipal securities, unless such municipal securities
broker or municipal securities dealer meets such
standards of operational capability and such municipal
securities broker or municipal securities dealer and
every natural person associated with such municipal
securities broker or municipal securities dealer meets
such standards of training, experience, competence, and
such other qualifications as the Board finds necessary
or appropriate in the public interest or for the
protection of investors and municipal entities or
obligated persons. In connection with the definition
and application of such standards the Board may--
(i) appropriately classify municipal
securities brokers, municipal securities
dealers, and municipal advisors (taking into
account relevant matters, including types of
business done, nature of securities other than
municipal securities sold, and character of
business organization), and persons associated
with municipal securities brokers, municipal
securities dealers, and municipal advisors;
(ii) specify that all or any portion of such
standards shall be applicable to any such
class; and
(iii) require persons in any such class to
pass tests administered in accordance with
subsection (c)(7) of this section.
(B) establish fair procedures for the nomination and
election of members of the Board and assure fair
representation in such nominations and elections of
public representatives, broker dealer representatives,
bank representatives, and advisor representatives. Such
rules--
(i) shall provide that the number of public
representatives of the Board shall at all times
exceed the total number of regulated
representatives and that the membership shall
at all times be as evenly divided in number as
possible between public representatives and
regulated representatives;
(ii) shall specify the length or lengths of
terms members shall serve;
(iii) may increase the number of members
which shall constitute the whole Board,
provided that such number is an odd number; and
(iv) shall establish requirements regarding
the independence of public representatives.
(C) be designed to prevent fraudulent and
manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating,
clearing, settling, processing information with respect
to, and facilitating transactions in municipal
securities and municipal financial products, to remove
impediments to and perfect the mechanism of a free and
open market in municipal securities and municipal
financial products, and, in general, to protect
investors, municipal entities, obligated persons, and
the public interest; and not be designed to permit
unfair discrimination among customers, municipal
entities, obligated persons, municipal securities
brokers, municipal securities dealers, or municipal
advisors, to fix minimum profits, to impose any
schedule or fix rates of commissions, allowances,
discounts, or other fees to be charged by municipal
securities brokers, municipal securities dealers, or
municipal advisors, to regulate by virtue of any
authority conferred by this title matters not related
to the purpose of this title or the administration of
the Board, or to impose any burden on competition not
necessary or appropriate in furtherance of the purposes
of this title.
(D) if the Board deems appropriate, provide for the
arbitration of claims, disputes, and controversies
relating to transactions in municipal securities and
advice concerning municipal financial products:
Provided, however, that no person other than a
municipal securities broker, municipal securities
dealer, municipal advisor, or person associated with
such a municipal securities broker, municipal
securities dealer, or municipal advisor may be
compelled to submit to such arbitration except at his
instance and in accordance with section 29 of this
title.
(E) provide for the periodic examination in
accordance with subsection (c)(7) of this section of
municipal securities brokers, municipal securities
dealers, and municipal advisors to determine compliance
with applicable provisions of this title, the rules and
regulations thereunder, and the rules of the Board.
Such rules shall specify the minimum scope and
frequency of such examinations and shall be designed to
avoid unnecessary regulatory duplication or undue
regulatory burdens for any such municipal securities
broker, municipal securities dealer, or municipal
advisor.
(F) include provisions governing the form and content
of quotations relating to municipal securities which
may be distributed or published by any municipal
securities broker, municipal securities dealer, or
person associated with such a municipal securities
broker or municipal securities dealer, and the persons
to whom such quotations may be supplied. Such rules
relating to quotations shall be designed to produce
fair and informative quotations, to prevent fictitious
or misleading quotations, and to promote orderly
procedures for collecting, distributing, and publishing
quotations.
(G) prescribe records to be made and kept by
municipal securities brokers, municipal securities
dealers, and municipal advisors and the periods for
which such records shall be preserved.
(H) define the term ``separately identifiable
department or division'', as that term is used in
section 3(a)(30) of this title, in accordance with
specified and appropriate standards to assure that a
bank is not deemed to be engaged in the business of
buying and selling municipal securities through a
separately identifiable department or division unless
such department or division is organized and
administered so as to permit independent examination
and enforcement of applicable provisions of this title,
the rules and regulations thereunder, and the rules of
the Board. A separately identifiable department or
division of a bank may be engaged in activities other
than those relating to municipal securities.
(I) provide for the operation and administration of
the Board, including the selection of a Chairman from
among the members of the Board, the compensation of the
members of the Board, and the appointment and
compensation of such employees, attorneys, and
consultants as may be necessary or appropriate to carry
out the Board's functions under this section.
(J) provide that each municipal securities broker,
municipal securities dealer, and municipal advisor
shall pay to the Board such reasonable fees and charges
as may be necessary or appropriate to defray the costs
and expenses of operating and administering the Board.
Such rules shall specify the amount of such fees and
charges, which may include charges for failure to
submit to the Board, or to any information system
operated by the Board, within the prescribed
timeframes, any items of information or documents
required to be submitted under any rule issued by the
Board.
(K) establish the terms and conditions under which
any broker, dealer, or municipal securities dealer may
sell, or prohibit any broker, dealer, or municipal
securities dealer from selling, any part of a new issue
of municipal securities to a related account of a
broker, dealer, or municipal securities dealer during
the underwriting period.
(L) with respect to municipal advisors--
(i) prescribe means reasonably designed to
prevent acts, practices, and courses of
business as are not consistent with a municipal
advisor's fiduciary duty to its clients;
(ii) provide continuing education
requirements for municipal advisors;
(iii) provide professional standards; and
(iv) not impose a regulatory burden on small
municipal advisors that is not necessary or
appropriate in the public interest and for the
protection of investors, municipal entities,
and obligated persons, provided that there is
robust protection of investors against fraud.
(3) The Board, in conjunction with or on behalf of
any Federal financial regulator or self-regulatory
organization, may--
(A) establish information systems; and
(B) assess such reasonable fees and charges
for the submission of information to, or the
receipt of information from, such systems from
any persons which systems may be developed for
the purposes of serving as a repository of
information from municipal market participants
or otherwise in furtherance of the purposes of
the Board, a Federal financial regulator, or a
self-regulatory organization, except that the
Board--
(i) may not charge a fee to municipal
entities or obligated persons to submit
documents or other information to the
Board or charge a fee to any person to
obtain, directly from the Internet site
of the Board, documents or information
submitted by municipal entities,
obligated persons, brokers, dealers,
municipal securities dealers, or
municipal advisors, including documents
submitted under the rules of the Board
or the Commission; and
(ii) shall not be prohibited from
charging commercially reasonable fees
for automated subscription-based feeds
or similar services, or for charging
for other data or document-based
services customized upon request of any
person, made available to commercial
enterprises, municipal securities
market professionals, or the general
public, whether delivered through the
Internet or any other means, that
contain all or part of the documents or
information, subject to approval of the
fees by the Commission under section
19(b).
(4) The Board may provide guidance and assistance in
the enforcement of, and examination for, compliance
with the rules of the Board to the Commission, a
registered securities association under section 15A, or
any other appropriate regulatory agency, as applicable.
(5) The Board, the Commission, and a registered
securities association under section 15A, or the
designees of the Board, the Commission, or such
association, shall meet not less frequently than 2
times a year--
(A) to describe the work of the Board, the
Commission, and the registered securities
association involving the regulation of
municipal securities; and
(B) to share information about--
(i) the interpretation of the Board,
the Commission, and the registered
securities association of Board rules;
and
(ii) examination and enforcement of
compliance with Board rules.
(7) Nothing in this section shall be construed to impair or
limit the power of the Commission under this title.
(c)(1) No broker, dealer, or municipal securities dealer
shall make use of the mails or any means or instrumentality of
interstate commerce to effect any transaction in, or to induce
or attempt to induce the purchase or sale of, any municipal
security, and no broker, dealer, municipal securities dealer,
or municipal advisor shall make use of the mails or any means
or instrumentality of interstate commerce to provide advice to
or on behalf of a municipal entity or obligated person with
respect to municipal financial products, the issuance of
municipal securities, or to undertake a solicitation of a
municipal entity or obligated person, in contravention of any
rule of the Board. A municipal advisor and any person
associated with such municipal advisor shall be deemed to have
a fiduciary duty to any municipal entity for whom such
municipal advisor acts as a municipal advisor, and no municipal
advisor may engage in any act, practice, or course of business
which is not consistent with a municipal advisor's fiduciary
duty or that is in contravention of any rule of the Board.
(2) The Commission, by order, shall censure, place
limitations on the activities, functions, or operations,
suspend for a period not exceeding twelve months, or revoke the
registration of any municipal securities dealer or municipal
advisor, if it finds, on the record after notice and
opportunity for hearing, that such censure, placing of
limitations, denial, suspension, or revocation, is in the
public interest and that such municipal securities dealer or
municipal advisor has committed or omitted any act, or is
subject to an order or finding, enumerated in subparagraph (A),
(D), (E), (H), or (G) of paragraph (4) of section 15(b) of this
title, has been convicted of any offense specified in
subparagraph (B) of such paragraph (4) within ten years of the
commencement of the proceedings under this paragraph, or is
enjoined from any action, conduct, or practice specified in
subparagraph (C) or such paragraph (4).
(3) Pending final determination whether any registration
under this section shall be revoked, the Commission, by order,
may suspend such registration, if such suspension appears to
the Commission, after notice and opportunity for hearing, to be
necessary or appropriate in the public interest or for the
protection of investors or municipal entities or obligated
person. Any registered municipal securities dealer or municipal
advisor may, upon such terms and conditions as the Commission
may deem necessary in the public interest or for the protection
of investors or municipal entities or obligated person,
withdraw from registration by filing a written notice of
withdrawal with the Commission. If the Commission finds that
any registered municipal securities dealer or municipal advisor
is no longer in existence or has ceased to do business as a
municipal securities dealer or municipal advisor, the
Commission, by order, shall cancel the registration of such
municipal securities dealer or municipal advisor.
(4) The Commission, by order, shall censure or place
limitations on the activities or functions of any person
associated, seeking to become associated, or, at the time of
the alleged misconduct, associated or seeking to become
associated with a municipal securities dealer, or suspend for a
period not exceeding 12 months or bar any such person from
being associated with a broker, dealer, investment adviser,
municipal securities dealer, municipal advisor, transfer agent,
or nationally recognized statistical rating organization, if
the Commission finds, on the record after notice and
opportunity for hearing, that such censure, placing of
limitations, suspension, or bar is in the public interest and
that such person has committed any act, or is subject to an
order or finding, enumerated in subparagraph (A), (D), (E),
(H), or (G) of paragraph (4) of section 15(b) of this title,
has been convicted of any offense specified in subparagraph (B)
of such paragraph (4) within 10 years of the commencement of
the proceedings under this paragraph, or is enjoined from any
action, conduct, or practice specified in subparagraph (C) of
such paragraph (4). It shall be unlawful for any person as to
whom an order entered pursuant to this paragraph or paragraph
(5) of this subsection suspending or barring him from being
associated with a municipal securities dealer is in effect
willfully to become, or to be, associated with a municipal
securities dealer without the consent of the Commission, and it
shall be unlawful for any municipal securities dealer to permit
such a person to become, or remain, a person associated with
him without the consent of the Commission, if such municipal
securities dealer knew, or, in the exercise of reasonable care
should have known, of such order.
(5) With respect to any municipal securities dealer for which
the Commission is not the appropriate regulatory agency, the
appropriate regulatory agency for such municipal securities
dealer may sanction any such municipal securities dealer in the
manner and for the reasons specified in paragraph (2) of this
subsection and any person associated with such municipal
securities dealer in the manner and for the reasons specified
in paragraph (4) of this subsection. In addition, such
appropriate regulatory agency may, in accordance with section 8
of the Federal Deposit Insurance Act (12 U.S.C. 1818), enforce
compliance by such municipal securities dealer or any person
associated with such municipal securities dealer with the
provisions of this section, section 17 of this title, the rules
of the Board, and the rules of the Commission pertaining to
municipal securities dealers, persons associated with municipal
securities dealers, and transactions in municipal securities.
For purposes of the preceding sentence, any violation of any
such provision shall constitute adequate basis for the issuance
of any order under section 8(b) or 8(c) of the Federal Deposit
Insurance Act, and the customers of any such municipal
securities dealer shall be deemed to be ``depositors'' as that
term is used in section 8(c) of that Act. Nothing in this
paragraph shall be construed to affect in any way the powers of
such appropriate regulatory agency to proceed against such
municipal securities dealer under any other provision of law.
(6)(A) The Commission, prior to the entry of an order of
investigation, or commencement of any proceedings, against any
municipal securities dealer, or person associated with any
municipal securities dealer, for which the Commission is not
the appropriate regulatory agency, for violation of any
provision of this section, section 15(c)(1) or 15(c)(2) of this
title, any rule or regulation under any such section or any
rule of the Board, shall (i) give notice to the appropriate
regulatory agency for such municipal securities dealer of the
identity of such municipal securities dealer or person
associated with such municipal securities dealer, the nature of
and basis for such proposed action, and whether the Commission
is seeking a monetary penalty against such municipal securities
dealer or such associated person pursuant to section 21B of
this title; and (ii) consult with such appropriate regulatory
agency concerning the effect of such proposed action on sound
banking practices and the feasibility and desirability of
coordinating such action with any proceeding or proposed
proceeding by such appropriate regulatory agency against such
municipal securities dealer or associated person.
(B) The appropriate regulatory agency for a municipal
securities dealer (if other than the Commission), prior to the
entry of an order of investigation, or commencement of any
proceedings, against such municipal securities dealer or person
associated with such municipal securities dealer, for violation
of any provision of this section, the rules of the Board, or
the rules or regulations of the Commission pertaining to
municipal securities dealers, persons associated with municipal
securities dealers, or transactions in municipal securities
shall (i) give notice to the Commission of the identity of such
municipal securities dealer or person associated with such
municipal securities dealer and the nature of and basis for
such proposed action and (ii) consult with the Commission
concerning the effect of such proposed action on the protection
of investors or municipal entities or obligated person and the
feasibility and desirability of coordinating such action with
any proceeding or proposed proceeding by the Commission against
such municipal securities dealer or associated person.
(C) Nothing in this paragraph shall be construed to impair or
limit (other than by the requirement of prior consultation) the
power of the Commission or the appropriate regulatory agency
for a municipal securities dealer to initiate any action of a
class described in this paragraph or to affect in any way the
power of the Commission or such appropriate regulatory agency
to initiate any other action pursuant to this title or any
other provision of law.
(7)(A) Tests required pursuant to subsection (b)(2)(A)(iii)
of this section shall be administered by or on behalf of and
periodic examinations pursuant to subsection (b)(2)(E) of this
section shall be conducted by--
(i) a registered securities association, in the case
of municipal securities brokers and municipal
securities dealers who are members of such association;
(ii) the appropriate regulatory agency for any
municipal securities broker or municipal securities
dealer, in the case of all other municipal securities
brokers and municipal securities dealers; and
(iii) the Commission, or its designee, in the
case of municipal advisors.
(B) A registered securities association shall make a report
of any examination conducted pursuant to subsection (b)(2)(E)
of this section and promptly furnish the Commission a copy
thereof and any data supplied to it in connection with such
examination. Subject to such limitations as the Commission, by
rule, determines to be necessary or appropriate in the public
interest or for the protection of investors or municipal
entities or obligated person, the Commission shall, on request,
make available to the Board a copy of any report of an
examination of a municipal securities broker or municipal
securities dealer made by or furnished to the Commission
pursuant to this paragraph or section 17(c)(3) of this title.
(8) The Commission is authorized, by order, if in its opinion
such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise, in furtherance
of the purposes of this title, to remove from office or censure
any person who is, or at the time of the alleged violation or
abuse was, a member or employee of the Board, who, the
Commission finds, on the record after notice and opportunity
for hearing, has willfully (A) violated any provision of this
title, the rules and regulations thereunder, or the rules of
the Board or (B) abused his authority.
[(9)(A) Fines collected by the Commission for
violations of the rules of the Board shall be equally
divided between the Commission and the Board.
[(B) Fines collected by a registered securities
association under section 15A(7) with respect to
violations of the rules of the Board shall be accounted
for by such registered securities association
separately from other fines collected under section
15A(7) and shall be allocated between such registered
securities association and the Board, and such
allocation shall require the registered securities
association to pay to the Board \1/3\ of all fines
collected by the registered securities association
reasonably allocable to violations of the rules of the
Board, or such other portion of such fines as may be
directed by the Commission upon agreement between the
registered securities association and the Board.]
(9) Fines collected for violations of the rules of the Board
shall be deposited and credited as general revenue of the
Treasury, except as otherwise provided in section 308 of the
Sarbanes-Oxley Act of 2002 or section 21F of this title.
(d)(1) Neither the Commission nor the Board is authorized
under this title, by rule or regulation, to require any issuer
of municipal securities, directly or indirectly through a
purchaser or prospective purchaser of securities from the
issuer, to file with the Commission or the Board prior to the
sale of such securities by the issuer any application, report,
or document in connection with the issuance, sale, or
distribution of such securities.
(2) The Board is not authorized under this title to require
any issuer of municipal securities, directly or indirectly
through a municipal securities broker, municipal securities
dealer, municipal advisor, or otherwise, or municipal advisors
to furnish to the Board or to a purchaser or a prospective
purchaser of such securities any application, report, document,
or information with respect to such issuer: Provided, however,
That the Board may require municipal securities brokers and
municipal securities dealers to furnish to the Board or
purchasers or prospective purchasers of municipal securities
applications, reports, documents, and information with respect
to the issuer thereof which is generally available from a
source other than such issuer. Nothing in this paragraph shall
be construed to impair or limit the power of the Commission
under any provision of this title.
(3) An issuer of municipal securities shall not be required
to retain a municipal advisor prior to issuing any such
securities.
(e) Definitions.--For purposes of this section--
(1) the term ``Board'' means the Municipal Securities
Rulemaking Board established under subsection (b)(1);
(2) the term ``guaranteed investment contract''
includes any investment that has specified withdrawal
or reinvestment provisions and a specifically
negotiated or bid interest rate, and also includes any
agreement to supply investments on 2 or more future
dates, such as a forward supply contract;
(3) the term ``investment strategies'' includes plans
or programs for the investment of the proceeds of
municipal securities that are not municipal
derivatives, guaranteed investment contracts, and the
recommendation of and brokerage of municipal escrow
investments;
(4) the term ``municipal advisor''--
(A) means a person (who is not a municipal
entity or an employee of a municipal entity)
that--
(i) provides advice to or on behalf
of a municipal entity or obligated
person with respect to municipal
financial products or the issuance of
municipal securities, including advice
with respect to the structure, timing,
terms, and other similar matters
concerning such financial products or
issues; or
(ii) undertakes a solicitation of a
municipal entity;
(B) includes financial advisors, guaranteed
investment contract brokers, third-party
marketers, placement agents, solicitors,
finders, and swap advisors, if such persons are
described in any of clauses (i) through (iii)
of subparagraph (A); and
(C) does not include a broker, dealer, or
municipal securities dealer serving as an
underwriter (as defined in section 2(a)(11) of
the Securities Act of 1933) (15 U.S.C.
77b(a)(11)), any investment adviser registered
under the Investment Advisers Act of 1940, or
persons associated with such investment
advisers who are providing investment advice,
any commodity trading advisor registered under
the Commodity Exchange Act or persons
associated with a commodity trading advisor who
are providing advice related to swaps,
attorneys offering legal advice or providing
services that are of a traditional legal
nature, or engineers providing engineering
advice;
(5) the term ``municipal financial product'' means
municipal derivatives, guaranteed investment contracts,
and investment strategies;
(6) the term ``rules of the Board'' means the rules
proposed and adopted by the Board under subsection
(b)(2);
(7) the term ``person associated with a municipal
advisor'' or ``associated person of an advisor''
means--
(A) any partner, officer, director, or branch
manager of such municipal advisor (or any
person occupying a similar status or performing
similar functions);
(B) any other employee of such municipal
advisor who is engaged in the management,
direction, supervision, or performance of any
activities relating to the provision of advice
to or on behalf of a municipal entity or
obligated person with respect to municipal
financial products or the issuance of municipal
securities; and
(C) any person directly or indirectly
controlling, controlled by, or under common
control with such municipal advisor;
(8) the term ``municipal entity'' means any State,
political subdivision of a State, or municipal
corporate instrumentality of a State, including--
(A) any agency, authority, or instrumentality
of the State, political subdivision, or
municipal corporate instrumentality;
(B) any plan, program, or pool of assets
sponsored or established by the State,
political subdivision, or municipal corporate
instrumentality or any agency, authority, or
instrumentality thereof; and
(C) any other issuer of municipal securities;
(9) the term ``solicitation of a municipal entity or
obligated person'' means a direct or indirect
communication with a municipal entity or obligated
person made by a person, for direct or indirect
compensation, on behalf of a broker, dealer, municipal
securities dealer, municipal advisor, or investment
adviser (as defined in section 202 of the Investment
Advisers Act of 1940) that does not control, is not
controlled by, or is not under common control with the
person undertaking such solicitation for the purpose of
obtaining or retaining an engagement by a municipal
entity or obligated person of a broker, dealer,
municipal securities dealer, or municipal advisor for
or in connection with municipal financial products, the
issuance of municipal securities, or of an investment
adviser to provide investment advisory services to or
on behalf of a municipal entity; and
(10) the term ``obligated person'' means any person,
including an issuer of municipal securities, who is
either generally or through an enterprise, fund, or
account of such person, committed by contract or other
arrangement to support the payment of all or part of
the obligations on the municipal securities to be sold
in an offering of municipal securities.
* * * * * * *
SEC. 15E. REGISTRATION OF NATIONALLY RECOGNIZED STATISTICAL RATING
ORGANIZATIONS.
(a) Registration Procedures.--
(1) Application for registration.--
(A) In general.--A credit rating agency that
elects to be treated as a nationally recognized
statistical rating organization for purposes of
this title (in this section referred to as the
``applicant''), shall furnish to the Commission
an application for registration, in such form
as the Commission shall require, by rule or
regulation issued in accordance with subsection
(n), and containing the information described
in subparagraph (B).
(B) Required information.--An application for
registration under this section shall contain
information regarding--
(i) credit ratings performance
measurement statistics over short-term,
mid-term, and long-term periods (as
applicable) of the applicant;
(ii) the procedures and methodologies
that the applicant uses in determining
credit ratings;
(iii) policies or procedures adopted
and implemented by the applicant to
prevent the misuse, in violation of
this title (or the rules and
regulations hereunder), of material,
nonpublic information;
(iv) the organizational structure of
the applicant;
(v) whether or not the applicant has
in effect a code of ethics, and if not,
the reasons therefor;
(vi) any conflict of interest
relating to the issuance of credit
ratings by the applicant;
(vii) the categories described in any
of clauses (i) through (v) of section
3(a)(62)(B) with respect to which the
applicant intends to apply for
registration under this section;
(viii) on a confidential basis, a
list of the 20 largest issuers and
subscribers that use the credit rating
services of the applicant, by amount of
net revenues received therefrom in the
fiscal year immediately preceding the
date of submission of the application;
(ix) on a confidential basis, as to
each applicable category of obligor
described in any of clauses (i) through
(v) of section 3(a)(62)(B), written
certifications described in
subparagraph (C), except as provided in
subparagraph (D); and
(x) any other information and
documents concerning the applicant and
any person associated with such
applicant as the Commission, by rule,
may prescribe as necessary or
appropriate in the public interest or
for the protection of investors.
(C) Written certifications.--Written
certifications required by subparagraph
(B)(ix)--
(i) shall be provided from not fewer
than 10 qualified institutional buyers,
none of which is affiliated with the
applicant;
(ii) may address more than one
category of obligors described in any
of clauses (i) through (v) of section
3(a)(62)(B);
(iii) shall include not fewer than 2
certifications for each such category
of obligor; and
(iv) shall state that the qualified
institutional buyer--
(I) meets the definition of a
qualified institutional buyer
under section 3(a)(64); and
(II) has used the credit
ratings of the applicant for at
least the 3 years immediately
preceding the date of the
certification in the subject
category or categories of
obligors.
(D) Exemption from certification
requirement.--A written certification under
subparagraph (B)(ix) is not required with
respect to any credit rating agency which has
received, or been the subject of, a no-action
letter from the staff of the Commission prior
to August 2, 2006, stating that such staff
would not recommend enforcement action against
any broker or dealer that considers credit
ratings issued by such credit rating agency to
be ratings from a nationally recognized
statistical rating organization.
(E) Limitation on liability of qualified
institutional buyers.--No qualified
institutional buyer shall be liable in any
private right of action for any opinion or
statement expressed in a certification made
pursuant to subparagraph (B)(ix).
(2) Review of application.--
(A) Initial determination.--Not later than 90
days after the date on which the application
for registration is furnished to the Commission
under paragraph (1) (or within such longer
period as to which the applicant consents) the
Commission shall--
(i) by order, grant such registration
for ratings in the subject category or
categories of obligors, as described in
clauses (i) through (v) of section
3(a)(62)(B); or
(ii) institute proceedings to
determine whether registration should
be denied.
(B) Conduct of proceedings.--
(i) Content.--Proceedings referred to
in subparagraph (A)(ii) shall--
(I) include notice of the
grounds for denial under
consideration and an
opportunity for hearing; and
(II) be concluded not later
than 120 days after the date on
which the application for
registration is furnished to
the Commission under paragraph
(1).
(ii) Determination.--At the
conclusion of such proceedings, the
Commission, by order, shall grant or
deny such application for registration.
(iii) Extension authorized.--The
Commission may extend the time for
conclusion of such proceedings for not
longer than 90 days, if it finds good
cause for such extension and publishes
its reasons for so finding, or for such
longer period as to which the applicant
consents.
(C) Grounds for decision.--The Commission
shall grant registration under this
subsection--
(i) if the Commission finds that the
requirements of this section are
satisfied; and
(ii) unless the Commission finds (in
which case the Commission shall deny
such registration) that--
(I) the applicant does not
have adequate financial and
managerial resources to
consistently produce credit
ratings with integrity and to
materially comply with the
procedures and methodologies
disclosed under paragraph
(1)(B) and with subsections
(g), (h), (i), and (j); or
(II) if the applicant were so
registered, its registration
would be subject to suspension
or revocation under subsection
(d).
(3) Public availability of information.--Subject to
section 24, the Commission shall, by rule, require a
nationally recognized statistical rating organization,
upon the granting of registration under this section,
to make the information and documents submitted to the
Commission in its completed application for
registration, or in any amendment submitted under
paragraph (1) or (2) of subsection (b), publicly
available on its website, or through another
comparable, readily accessible means, except as
provided in clauses (viii) and (ix) of paragraph
(1)(B).
(b) Update of Registration.--
(1) Update.--Each nationally recognized statistical
rating organization shall promptly amend its
application for registration under this section if any
information or document provided therein becomes
materially inaccurate, except that a nationally
recognized statistical rating organization is not
required to amend--
(A) the information required to be filed
under subsection (a)(1)(B)(i) by filing
information under this paragraph, but shall
amend such information in the annual submission
of the organization under paragraph (2) of this
subsection; or
(B) the certifications required to be
provided under subsection (a)(1)(B)(ix) by
filing information under this paragraph.
(2) Certification.--Not later than 90 days after the
end of each calendar year, each nationally recognized
statistical rating organization shall file with the
Commission an amendment to its registration, in such
form as the Commission, by rule, may prescribe as
necessary or appropriate in the public interest or for
the protection of investors--
(A) certifying that the information and
documents in the application for registration
of such nationally recognized statistical
rating organization (other than the
certifications required under subsection
(a)(1)(B)(ix)) continue to be accurate; and
(B) listing any material change that occurred
to such information or documents during the
previous calendar year.
(c) Accountability for Ratings Procedures.--
(1) Authority.--The Commission shall have exclusive
authority to enforce the provisions of this section in
accordance with this title with respect to any
nationally recognized statistical rating organization,
if such nationally recognized statistical rating
organization issues credit ratings in material
contravention of those procedures relating to such
nationally recognized statistical rating organization,
including procedures relating to the prevention of
misuse of nonpublic information and conflicts of
interest, that such nationally recognized statistical
rating organization--
(A) includes in its application for
registration under subsection (a)(1)(B)(ii); or
(B) makes and disseminates in reports
pursuant to section 17(a) or the rules and
regulations thereunder.
(2) Limitation.--The rules and regulations that the
Commission may prescribe pursuant to this title, as
they apply to nationally recognized statistical rating
organizations, shall be narrowly tailored to meet the
requirements of this title applicable to nationally
recognized statistical rating organizations.
Notwithstanding any other provision of this section, or
any other provision of law, neither the Commission nor
any State (or political subdivision thereof) may
regulate the substance of credit ratings or the
procedures and methodologies by which any nationally
recognized statistical rating organization determines
credit ratings. Nothing in this paragraph may be
construed to afford a defense against any action or
proceeding brought by the Commission to enforce the
antifraud provisions of the securities laws.
(3) Internal controls over processes for determining
credit ratings.--
(A) In general.--Each nationally recognized
statistical rating organization shall
establish, maintain, enforce, and document an
effective internal control structure governing
the implementation of and adherence to
policies, procedures, and methodologies for
determining credit ratings, taking into
consideration such factors as the Commission
may prescribe, by rule.
(B) Attestation requirement.--The Commission
shall prescribe rules requiring each nationally
recognized statistical rating organization to
submit to the Commission an annual internal
controls report, which shall contain--
(i) a description of the
responsibility of the management of the
nationally recognized statistical
rating organization in establishing and
maintaining an effective internal
control structure under subparagraph
(A); and
(ii) an assessment of the
effectiveness of the internal control
structure of the nationally recognized
statistical rating organization[; and].
[(iii) the attestation of the chief
executive officer, or equivalent
individual, of the nationally
recognized statistical rating
organization.]
(d) Censure, Denial, or Suspension of Registration; Notice
and Hearing.--
(1) In general.--The Commission, by order, shall
censure, place limitations on the activities,
functions, or operations of, suspend for a period not
exceeding 12 months, or revoke the registration of any
nationally recognized statistical rating organization,
or with respect to any person who is associated with,
who is seeking to become associated with, or, at the
time of the alleged misconduct, who was associated or
was seeking to become associated with a nationally
recognized statistical rating organization, the
Commission, by order, shall censure, place limitations
on the activities or functions of such person, suspend
for a period not exceeding 1 year, or bar such person
from being associated with a nationally recognized
statistical rating organization, if the Commission
finds, on the record after notice and opportunity for
hearing, that such censure, placing of limitations,
suspension, bar or revocation is necessary for the
protection of investors and in the public interest and
that such nationally recognized statistical rating
organization, or any person associated with such an
organization, whether prior to or subsequent to
becoming so associated--
(A) has committed or omitted any act, or is
subject to an order or finding, enumerated in
subparagraph (A), (D), (E), (H), or (G) of
section 15(b)(4), has been convicted of any
offense specified in section 15(b)(4)(B), or is
enjoined from any action, conduct, or practice
specified in subparagraph (C) of section
15(b)(4), during the 10-year period preceding
the date of commencement of the proceedings
under this subsection, or at any time
thereafter;
(B) has been convicted during the 10-year
period preceding the date on which an
application for registration is filed with the
Commission under this section, or at any time
thereafter, of--
(i) any crime that is punishable by
imprisonment for 1 or more years, and
that is not described in section
15(b)(4)(B); or
(ii) a substantially equivalent crime
by a foreign court of competent
jurisdiction;
(C) is subject to any order of the Commission
barring or suspending the right of the person
to be associated with a nationally recognized
statistical rating organization;
(D) fails to file the certifications required
under subsection (b)(2);
(E) fails to maintain adequate financial and
managerial resources to consistently produce
credit ratings with integrity;
(F) has failed reasonably to supervise, with
a view to preventing a violation of the
securities laws, an individual who commits such
a violation, if the individual is subject to
the supervision of that person.
(2) Suspension or revocation for particular class of
securities.--
(A) In general.--The Commission may
temporarily suspend or permanently revoke the
registration of a nationally recognized
statistical rating organization with respect to
a particular class or subclass of securities,
if the Commission finds, on the record after
notice and opportunity for hearing, that the
nationally recognized statistical rating
organization does not have adequate financial
and managerial resources to consistently
produce credit ratings with integrity.
(B) Considerations.--In making any
determination under subparagraph (A), the
Commission shall consider--
(i) whether the nationally recognized
statistical rating organization has
failed over a sustained period of time,
as determined by the Commission, to
produce ratings that are accurate for
that class or subclass of securities;
and
(ii) such other factors as the
Commission may determine.
(e) Termination of Registration.--
(1) Voluntary withdrawal.--A nationally recognized
statistical rating organization may, upon such terms
and conditions as the Commission may establish as
necessary in the public interest or for the protection
of investors, withdraw from registration by furnishing
a written notice of withdrawal to the Commission.
(2) Commission authority.--In addition to any other
authority of the Commission under this title, if the
Commission finds that a nationally recognized
statistical rating organization is no longer in
existence or has ceased to do business as a credit
rating agency, the Commission, by order, shall cancel
the registration under this section of such nationally
recognized statistical rating organization.
(f) Representations.--
(1) Ban on representations of sponsorship by united
states or agency thereof.--It shall be unlawful for any
nationally recognized statistical rating organization
to represent or imply in any manner whatsoever that
such nationally recognized statistical rating
organization has been designated, sponsored,
recommended, or approved, or that the abilities or
qualifications thereof have in any respect been passed
upon, by the United States or any agency, officer, or
employee thereof.
(2) Ban on representation as nrsro of unregistered
credit rating agencies.--It shall be unlawful for any
credit rating agency that is not registered under this
section as a nationally recognized statistical rating
organization to state that such credit rating agency is
a nationally recognized statistical rating organization
registered under this title.
(3) Statement of registration under securities
exchange act of 1934 provisions.--No provision of
paragraph (1) shall be construed to prohibit a
statement that a nationally recognized statistical
rating organization is a nationally recognized
statistical rating organization under this title, if
such statement is true in fact and if the effect of
such registration is not misrepresented.
(g) Prevention of Misuse of Nonpublic Information.--
(1) Organization policies and procedures.--Each
nationally recognized statistical rating organization
shall establish, maintain, and enforce written policies
and procedures reasonably designed, taking into
consideration the nature of the business of such
nationally recognized statistical rating organization,
to prevent the misuse in violation of this title, or
the rules or regulations hereunder, of material,
nonpublic information by such nationally recognized
statistical rating organization or any person
associated with such nationally recognized statistical
rating organization.
(2) Commission authority.--The Commission shall issue
final rules in accordance with subsection (n) to
require specific policies or procedures that are
reasonably designed to prevent misuse in violation of
this title (or the rules or regulations hereunder) of
material, nonpublic information.
(h) Management of Conflicts of Interest.--
(1) Organization policies and procedures.--Each
nationally recognized statistical rating organization
shall establish, maintain, and enforce written policies
and procedures reasonably designed, taking into
consideration the nature of the business of such
nationally recognized statistical rating organization
and affiliated persons and affiliated companies
thereof, to address and manage any conflicts of
interest that can arise from such business.
(2) Commission authority.--The Commission shall issue
final rules in accordance with subsection (n) to
prohibit, or require the management and disclosure of,
any conflicts of interest relating to the issuance of
credit ratings by a nationally recognized statistical
rating organization, including, without limitation,
conflicts of interest relating to--
(A) the manner in which a nationally
recognized statistical rating organization is
compensated by the obligor, or any affiliate of
the obligor, for issuing credit ratings or
providing related services;
(B) the provision of consulting, advisory, or
other services by a nationally recognized
statistical rating organization, or any person
associated with such nationally recognized
statistical rating organization, to the
obligor, or any affiliate of the obligor;
(C) business relationships, ownership
interests, or any other financial or personal
interests between a nationally recognized
statistical rating organization, or any person
associated with such nationally recognized
statistical rating organization, and the
obligor, or any affiliate of the obligor;
(D) any affiliation of a nationally
recognized statistical rating organization, or
any person associated with such nationally
recognized statistical rating organization,
with any person that underwrites the securities
or money market instruments that are the
subject of a credit rating; and
(E) any other potential conflict of interest,
as the Commission deems necessary or
appropriate in the public interest or for the
protection of investors.
(3) Separation of ratings from sales and marketing.--
(A) Rules required.--The Commission shall
issue rules to prevent the sales and marketing
considerations of a nationally recognized
statistical rating organization from
influencing the production of ratings by the
nationally recognized statistical rating
organization.
(B) Contents of rules.--The rules issued
under subparagraph (A) shall provide for--
(i) exceptions for small nationally
recognized statistical rating
organizations with respect to which the
Commission determines that the
separation of the production of ratings
and sales and marketing activities is
not appropriate; and
(ii) suspension or revocation of the
registration of a nationally recognized
statistical rating organization, if the
Commission finds, on the record, after
notice and opportunity for a hearing,
that--
(I) the nationally recognized
statistical rating organization
has committed a violation of a
rule issued under this
subsection; and
(II) the violation of a rule
issued under this subsection
affected a rating.
(C) Exception for providing certain material
information.--Rules issued under this paragraph
may not prohibit a person who participates in
sales or marketing of a product or service of a
nationally recognized statistical rating
organization from providing material
information, or information believed in good
faith to be material, to the issuance or
maintenance of a credit rating to a person who
participates in determining or monitoring the
credit rating, or developing or approving
procedures or methodologies used for
determining the credit rating, so long as the
information provided is not intended to
influence the determination of a credit rating,
or the procedures or methodologies used to
determine credit ratings.
(4) Look-back requirement.--
(A) Review by the nationally recognized
statistical rating organization.--[Each
nationally]
(i) In general._Each nationally
recognized statistical rating
organization shall establish, maintain,
and enforce policies and procedures
reasonably designed to ensure that, in
any case in which an employee of a
person subject to a credit rating of
the nationally recognized statistical
rating organization or the issuer,
[underwriter] lead underwriter, or
sponsor of a security or money market
instrument subject to a credit rating
of the nationally recognized
statistical rating organization was
employed by the nationally recognized
statistical rating organization and
participated [in any capacity] in
determining credit ratings for the
person or the securities or money
market instruments [during the 1-year
period preceding the date an action was
taken with respect to the credit
rating], the nationally recognized
statistical rating organization shall--
[(i)] (I) conduct a review to
determine whether any conflicts
of interest of the employee
influenced the credit rating
during the 1-year period
preceding the departure of the
employee from the nationally
recognized statistical rating
organization; and
[(ii)] (II) take action to
revise the rating if
appropriate, in accordance with
such rules as the Commission
shall prescribe.
(ii) Maintenance of ratings
actions.--In the case of maintenance of
ratings actions, the requirement under
clause (i) shall only apply to
employees of a person subject to a
credit rating of the nationally
recognized statistical rating
organization or an issuer of a security
or money market instrument subject to a
credit rating of the nationally
recognized statistical rating
organization.
(B) Review by commission.--
(i) In general.--The Commission shall
conduct periodic reviews of the
policies described in subparagraph (A)
and the implementation of the policies
at each nationally recognized
statistical rating organization to
ensure they are reasonably designed and
implemented to most effectively
eliminate conflicts of interest.
(ii) Timing of reviews.--The
Commission shall review the code of
ethics and conflict of interest policy
of each nationally recognized
statistical rating organization--
(I) not less frequently than
annually; and
(II) whenever such policies
are materially modified or
amended.
(5) Report to commission on certain employment
transitions.--
(A) Report required.--Each nationally
recognized statistical rating organization
shall report to the Commission any case such
organization knows or can reasonably be
expected to know where a person associated with
such organization within the previous 5 years
obtains employment with any obligor, issuer,
underwriter, or sponsor of a security or money
market instrument for which the organization
issued a credit rating during the 12-month
period prior to such employment, if such
employee--
(i) was a senior officer of such
organization;
(ii) participated in any capacity in
determining credit ratings for such
obligor, issuer, underwriter, or
sponsor; or
(iii) supervised an employee
described in clause (ii).
(B) Public disclosure.--Upon receiving such a
report, the Commission shall make such
information publicly available.
(i) Prohibited Conduct.--
(1) Prohibited acts and practices.--The Commission
shall issue final rules in accordance with subsection
(n) to prohibit any act or practice relating to the
issuance of credit ratings by a nationally recognized
statistical rating organization that the Commission
determines to be unfair, coercive, or abusive,
including any act or practice relating to--
(A) conditioning or threatening to condition
the issuance of a credit rating on the purchase
by the obligor or an affiliate thereof of other
services or products, including pre-credit
rating assessment products, of the nationally
recognized statistical rating organization or
any person associated with such nationally
recognized statistical rating organization;
(B) lowering or threatening to lower a credit
rating on, or refusing to rate, securities or
money market instruments issued by an asset
pool or as part of any asset-backed or
mortgage-backed securities transaction, unless
a portion of the assets within such pool or
part of such transaction, as applicable, also
is rated by the nationally recognized
statistical rating organization; or
(C) modifying or threatening to modify a
credit rating or otherwise departing from its
adopted systematic procedures and methodologies
in determining credit ratings, based on whether
the obligor, or an affiliate of the obligor,
purchases or will purchase the credit rating or
any other service or product of the nationally
recognized statistical rating organization or
any person associated with such organization.
(2) Rule of construction.--Nothing in paragraph (1),
or in any rules or regulations adopted thereunder, may
be construed to modify, impair, or supersede the
operation of any of the antitrust laws (as defined in
the first section of the Clayton Act, except that such
term includes section 5 of the Federal Trade Commission
Act, to the extent that such section 5 applies to
unfair methods of competition).
(j) Designation of Compliance Officer.--
(1) In general.--Each nationally recognized
statistical rating organization shall designate an
individual responsible for administering the policies
and procedures that are required to be established
pursuant to subsections (g) and (h), and for ensuring
compliance with the securities laws and the rules and
regulations thereunder, including those promulgated by
the Commission pursuant to this section.
(2) Limitations.--
(A) In general.--Except as provided in
subparagraph (B), an individual designated
under paragraph (1) may not, while serving in
the designated capacity--
(i) perform credit ratings;
(ii) participate in the development
of ratings methodologies or models;
(iii) perform marketing or sales
functions; or
(iv) participate in establishing
compensation levels, other than for
employees working for that individual.
(B) Exception.--The Commission may exempt a
small nationally recognized statistical rating
organization from the limitations under this
paragraph, if the Commission finds that
compliance with such limitations would impose
an unreasonable burden on the nationally
recognized statistical rating organization.
(3) Other duties.--Each individual designated under
paragraph (1) shall establish procedures for the
receipt, retention, and treatment of--
(A) complaints regarding credit ratings,
models, methodologies, and compliance with the
securities laws and the policies and procedures
developed under this section; and
(B) confidential, anonymous complaints by
employees or users of credit ratings.
(4) Compensation.--The compensation of each
compliance officer appointed under paragraph (1) shall
not be linked to the financial performance of the
nationally recognized statistical rating organization
and shall be arranged so as to ensure the independence
of the officer's judgment.
(5) Annual reports required.--
(A) Annual reports required.--Each individual
designated under paragraph (1) shall submit to
the nationally recognized statistical rating
organization an annual report on the compliance
of the nationally recognized statistical rating
organization with the securities laws and the
policies and procedures of the nationally
recognized statistical rating organization that
includes--
(i) a description of any material
changes to the code of ethics and
conflict of interest policies of the
nationally recognized statistical
rating organization; and
(ii) a certification that the report
is accurate and complete.
(B) Submission of reports to the
commission.--Each nationally recognized
statistical rating organization shall file the
reports required under subparagraph (A)
together with the financial report that is
required to be submitted to the Commission
under this section.
(k) Statements of Financial Condition.--Each nationally
recognized statistical rating organization shall, on a
confidential basis, file with the Commission, at intervals
determined by the Commission, such financial statements,
certified (if required by the rules or regulations of the
Commission) by an independent public accountant, and
information concerning its financial condition, as the
Commission, by rule, may prescribe as necessary or appropriate
in the public interest or for the protection of investors.
(l) Sole Method of Registration.--
(1) In general.--On and after the effective date of
this section, a credit rating agency may only be
registered as a nationally recognized statistical
rating organization for any purpose in accordance with
this section.
(2) Prohibition on reliance on no-action relief.--On
and after the effective date of this section--
(A) an entity that, before that date,
received advice, approval, or a no-action
letter from the Commission or staff thereof to
be treated as a nationally recognized
statistical rating organization pursuant to the
Commission rule at section 240.15c3-1 of title
17, Code of Federal Regulations, may represent
itself or act as a nationally recognized
statistical rating organization only--
(i) during Commission consideration
of the application, if such entity has
filed an application for registration
under this section; and
(ii) on and after the date of
approval of its application for
registration under this section; and
(B) the advice, approval, or no-action letter
described in subparagraph (A) shall be void.
(3) Notice to other agencies.--Not later than 30 days
after the date of enactment of this section, the
Commission shall give notice of the actions undertaken
pursuant to this section to each Federal agency which
employs in its rules and regulations the term
``nationally recognized statistical rating
organization'' (as that term is used under Commission
rule 15c3-1 (17 C.F.R. 240.15c3-1), as in effect on the
date of enactment of this section).
(m) Accountability.--
(1) In general.--The enforcement and penalty
provisions of this title shall apply to statements made
by a credit rating agency in the same manner and to the
same extent as such provisions apply to statements made
by a registered public accounting firm or a securities
analyst under the securities laws, and such statements
shall not be deemed forward-looking statements for the
purposes of section 21E.
(2) Rulemaking.--The Commission shall issue such
rules as may be necessary to carry out this subsection.
(n) Regulations.--
(1) New provisions.--Such rules and regulations as
are required by this section or are otherwise necessary
to carry out this section, including the application
form required under subsection (a)--
(A) shall be issued by the Commission in
final form, not later than 270 days after the
date of enactment of this section; and
(B) shall become effective not later than 270
days after the date of enactment of this
section.
(2) Review of existing regulations.--Not later than
270 days after the date of enactment of this section,
the Commission shall--
(A) review its existing rules and regulations
which employ the term ``nationally recognized
statistical rating organization'' or ``NRSRO'';
and
(B) amend or revise such rules and
regulations in accordance with the purposes of
this section, as the Commission may prescribe
as necessary or appropriate in the public
interest or for the protection of investors.
(o) NRSROs Subject to Commission Authority.--
(1) In general.--No provision of the laws of any
State or political subdivision thereof requiring the
registration, licensing, or qualification as a credit
rating agency or a nationally recognized statistical
rating organization shall apply to any nationally
recognized statistical rating organization or person
employed by or working under the control of a
nationally recognized statistical rating organization.
(2) Limitation.--Nothing in this subsection prohibits
the securities commission (or any agency or office
performing like functions) of any State from
investigating and bringing an enforcement action with
respect to fraud or deceit against any nationally
recognized statistical rating organization or person
associated with a nationally recognized statistical
rating organization.
(p) Regulation of Nationally Recognized Statistical Rating
Organizations.--
(1) Establishment of office of credit ratings.--
(A) Office established.--The Commission shall
establish [within the Commission] within the
Division of Trading and Markets an Office of
Credit Ratings (referred to in this subsection
as the ``Office'') to administer the rules of
the Commission--
(i) with respect to the practices of
nationally recognized statistical
rating organizations in determining
ratings, for the protection of users of
credit ratings and in the public
interest;
(ii) to promote accuracy in credit
ratings issued by nationally recognized
statistical rating organizations; and
(iii) to ensure that such ratings are
not unduly influenced by conflicts of
interest.
(B) Director of the office.--The head of the
Office shall be the Director, who shall [report
to the Chairman] report to the head of the
Division of Trading and Markets.
(2) Staffing.--The Office established under this
subsection shall be staffed sufficiently to carry out
fully the requirements of this section. The staff shall
include persons with knowledge of and expertise in
corporate, municipal, and structured debt finance.
(3) Commission examinations.--
(A) [Annual] Risk-based examinations
required.--The Office shall conduct [an
examination] examinations of each nationally
recognized statistical rating organization [at
least annually].
(B) Conduct of examinations.--Each
examination under subparagraph (A) shall
include, as appropriate, a review of--
(i) whether the nationally recognized
statistical rating organization
conducts business in accordance with
the policies, procedures, and rating
methodologies of the nationally
recognized statistical rating
organization;
(ii) the management of conflicts of
interest by the nationally recognized
statistical rating organization;
(iii) implementation of ethics
policies by the nationally recognized
statistical rating organization;
(iv) the internal supervisory
controls of the nationally recognized
statistical rating organization;
(v) the governance of the nationally
recognized statistical rating
organization;
(vi) the activities of the individual
designated by the nationally recognized
statistical rating organization under
subsection (j)(1);
(vii) the processing of complaints by
the nationally recognized statistical
rating organization; and
(viii) the policies of the nationally
recognized statistical rating
organization governing the post-
employment activities of former staff
of the nationally recognized
statistical rating organization.
(C) Inspection reports.--The Commission shall
make available to the public, in an easily
understandable format, an annual report
summarizing--
(i) the essential findings of all
examinations conducted under
subparagraph (A), as deemed appropriate
by the Commission;
(ii) the responses by the nationally
recognized statistical rating
organizations to any material
regulatory deficiencies identified by
the Commission under clause (i); and
(iii) whether the nationally
recognized statistical rating
organizations have appropriately
addressed the recommendations of the
Commission contained in previous
reports under this subparagraph.
(4) Rulemaking authority.--The Commission shall--
(A) establish, by rule, fines, and other
penalties applicable to any nationally
recognized statistical rating organization that
violates the requirements of this section and
the rules thereunder; and
(B) issue such rules as may be necessary to
carry out this section.
(q) Transparency of Ratings Performance.--
(1) Rulemaking required.--The Commission shall, by
rule, require that each nationally recognized
statistical rating organization publicly disclose
information on the initial credit ratings determined by
the nationally recognized statistical rating
organization for each type of obligor, security, and
money market instrument, and any subsequent changes to
such credit ratings, for the purpose of allowing users
of credit ratings to evaluate the accuracy of ratings
and compare the performance of ratings by different
nationally recognized statistical rating organizations.
(2) Content.--The rules of the Commission under this
subsection shall require, at a minimum, disclosures
that--
(A) are comparable among nationally
recognized statistical rating organizations, to
allow users of credit ratings to compare the
performance of credit ratings across nationally
recognized statistical rating organizations;
(B) are clear and informative for investors
having a wide range of sophistication who use
or might use credit ratings;
(C) include performance information over a
range of years and for a variety of types of
credit ratings, including for credit ratings
withdrawn by the nationally recognized
statistical rating organization;
(D) are published and made freely available
by the nationally recognized statistical rating
organization, on an easily accessible portion
of its website, and in writing, when requested;
and
(E) are appropriate to the business model of
a nationally recognized statistical rating
organization[; and].
[(F) each nationally recognized statistical
rating organization include an attestation with
any credit rating it issues affirming that no
part of the rating was influenced by any other
business activities, that the rating was based
solely on the merits of the instruments being
rated, and that such rating was an independent
evaluation of the risks and merits of the
instrument.]
(r) Credit Ratings Methodologies.--The Commission shall
prescribe rules, for the protection of investors and in the
public interest, with respect to the procedures and
methodologies, including qualitative and quantitative data and
models, used by nationally recognized statistical rating
organizations that require each nationally recognized
statistical rating organization--
(1) to ensure that credit ratings are determined
using procedures and methodologies, including
qualitative and quantitative data and models, that
are--
(A) approved by the board of the nationally
recognized statistical rating organization, a
body performing a function similar to that of a
board, or the Chief Credit Officer; and
(B) in accordance with the policies and
procedures of the nationally recognized
statistical rating organization for the
development and modification of credit rating
procedures and methodologies;
(2) to ensure that when material changes to credit
rating procedures and methodologies (including changes
to qualitative and quantitative data and models) are
made, that--
(A) the changes are applied consistently to
all credit ratings to which the changed
procedures and methodologies apply;
(B) to the extent that changes are made to
credit rating surveillance procedures and
methodologies, the changes are applied to then-
current credit ratings by the nationally
recognized statistical rating organization
within a reasonable time period determined by
the Commission, by rule; and
(C) the nationally recognized statistical
rating organization publicly discloses the
reason for the change; and
(3) to notify users of credit ratings--
(A) of the version of a procedure or
methodology, including the qualitative
methodology or quantitative inputs, used with
respect to a particular credit rating;
(B) when a material change is made to a
procedure or methodology, including to a
qualitative model or quantitative inputs;
(C) when a significant error is identified in
a procedure or methodology, including a
qualitative or quantitative model, that may
result in credit rating actions; and
(D) of the likelihood of a material change
described in subparagraph (B) resulting in a
change in current credit ratings.
(s) Transparency of Credit Rating Methodologies and
Information Reviewed.--
(1) Form for disclosures.--The Commission shall
require, by rule, each nationally recognized
statistical rating organization to prescribe a form to
accompany the publication of each credit rating that
discloses--
(A) information relating to--
(i) the assumptions underlying the
credit rating procedures and
methodologies;
(ii) the data that was relied on to
determine the credit rating; and
(iii) if applicable, how the
nationally recognized statistical
rating organization used servicer or
remittance reports, and with what
frequency, to conduct surveillance of
the credit rating; and
(B) information that can be used by investors
and other users of credit ratings to better
understand credit ratings in each class of
credit rating issued by the nationally
recognized statistical rating organization.
(2) Format.--The form developed under paragraph (1)
shall--
(A) be easy to use and helpful for users of
credit ratings to understand the information
contained in the report;
(B) require the nationally recognized
statistical rating organization to provide the
content described in paragraph (3)(B) in a
manner that is directly comparable across types
of securities rated by the nationally
recognized statistical rating agency; and
(C) be made readily available to users of
credit ratings, in electronic or paper form, as
the Commission may, by rule, determine.
(3) Content of form.--
(A) Qualitative content.--Each nationally
recognized statistical rating organization
shall disclose on the form developed under
paragraph (1)--
(i) the credit ratings produced by
the nationally recognized statistical
rating organization;
(ii) the main assumptions and
principles used in constructing
procedures and methodologies, including
qualitative methodologies and
quantitative inputs and assumptions
about the correlation of defaults
across underlying assets used in rating
structured products;
(iii) the potential limitations of
the credit ratings, and the types of
risks excluded from the credit ratings
that the nationally recognized
statistical rating organization does
not comment on, including liquidity,
market, and other risks;
(iv) information on the uncertainty
of the credit rating, including--
(I) information on the
reliability, accuracy, and
quality of the data relied on
in determining the credit
rating; and
(II) a statement relating to
the extent to which data
essential to the determination
of the credit rating were
reliable or limited,
including--
(aa) any limits on
the scope of historical
data; and
(bb) any limits in
accessibility to
certain documents or
other types of
information that would
have better informed
the credit rating;
(v) whether and to what extent third
party due diligence services have been
used by the nationally recognized
statistical rating organization, a
description of the information that
such third party reviewed in conducting
due diligence services, and a
description of the findings or
conclusions of such third party;
(vi) a description of the data about
any obligor, issuer, security, or money
market instrument that were relied upon
for the purpose of determining the
credit rating;
(vii) a statement containing an
overall assessment of the quality of
information available and considered in
producing a rating for an obligor,
security, or money market instrument,
in relation to the quality of
information available to the nationally
recognized statistical rating
organization in rating similar
issuances;
(viii) information relating to
conflicts of interest of the nationally
recognized statistical rating
organization; and
(ix) such additional information as
the Commission may require, except that
the Commission may not require the
inclusion of references to statutory or
regulatory requirements or statutory
provision headings or enumerators for
any specific disclosure.
(B) Quantitative content.--Each nationally
recognized statistical rating organization
shall disclose on the form developed under this
subsection--
(i) an explanation or measure of the
potential volatility of the credit
rating, including--
(I) any factors that might
lead to a change in the credit
ratings; and
(II) the magnitude of the
change that a user can expect
under different market
conditions;
(ii) information on the content of
the rating, including--
(I) the historical
performance of the rating; and
(II) the expected probability
of default and the expected
loss in the event of default;
(iii) information on the sensitivity
of the rating to assumptions made by
the nationally recognized statistical
rating organization, including--
(I) 5 assumptions made in the
ratings process that, without
accounting for any other
factor, would have the greatest
impact on a rating if the
assumptions were proven false
or inaccurate; and
(II) an analysis, using
specific examples, of how each
of the 5 assumptions identified
under subclause (I) impacts a
rating;
(iv) such additional information as
may be required by the Commission,
except that the Commission may not
require the inclusion of references to
statutory or regulatory requirements or
statutory provision headings or
enumerators for any specific
disclosure.
(C) No mandate on the organization of
disclosures.--The Commission may not mandate
the specific organization of the disclosures
required under this paragraph.
(4) Due diligence services for asset-backed
securities.--
(A) Findings.--The issuer or underwriter of
any asset-backed security shall make publicly
available the findings and conclusions of any
third-party due diligence report obtained by
the issuer or underwriter.
(B) Certification required.--In any case in
which third-party due diligence services are
employed by a nationally recognized statistical
rating organization, an issuer, or an
underwriter, the person providing the due
diligence services shall provide to any
nationally recognized statistical rating
organization that produces a rating to which
such services relate, written certification, as
provided in subparagraph (C).
(C) Format and content.--The Commission shall
establish the appropriate format and content
for the written certifications required under
subparagraph (B), to ensure that providers of
due diligence services have conducted a
thorough review of data, documentation, and
other relevant information necessary for a
nationally recognized statistical rating
organization to provide an accurate rating.
(D) Disclosure of certification.--The
Commission shall adopt rules requiring a
nationally recognized statistical rating
organization, at the time at which the
nationally recognized statistical rating
organization produces a rating, to disclose the
certification described in subparagraph (B) to
the public in a manner that allows the public
to determine the adequacy and level of due
diligence services provided by a third party.
(t) Corporate Governance, Organization, and Management of
Conflicts of Interest.--
(1) Board of directors.--Each nationally recognized
statistical rating organization shall have a board of
directors.
(2) Independent directors.--
(A) In general.--At least \1/2\ of the board
of directors, but not fewer than 2 of the
members thereof, shall be independent of the
nationally recognized statistical rating
agency. A portion of the independent directors
shall include users of ratings from a
nationally recognized statistical rating
organization.
(B) Independence determination.--In order to
be considered independent for purposes of this
subsection, a member of the board of directors
of a nationally recognized statistical rating
organization--
(i) may not, other than in his or her
capacity as a member of the board of
directors or any committee thereof--
(I) accept any consulting,
advisory, or other compensatory
fee from the nationally
recognized statistical rating
organization; or
(II) be a person associated
with the nationally recognized
statistical rating organization
or with any affiliated company
thereof; and
(ii) shall be disqualified from any
deliberation involving a specific
rating in which the independent board
member has a financial interest in the
outcome of the rating.
(C) Compensation and term.--The compensation
of the independent members of the board of
directors of a nationally recognized
statistical rating organization shall not be
linked to the business performance of the
nationally recognized statistical rating
organization, and shall be arranged so as to
ensure the independence of their judgment. The
term of office of the independent directors
shall be for a pre-agreed fixed period, not to
exceed 5 years, and shall not be renewable.
(3) Duties of board of directors.--In addition to the
overall responsibilities of the board of directors, the
board shall oversee--
(A) the establishment, maintenance, and
enforcement of policies and procedures for
determining credit ratings;
(B) the establishment, maintenance, and
enforcement of policies and procedures to
address, manage, and disclose any conflicts of
interest;
(C) the effectiveness of the internal control
system with respect to policies and procedures
for determining credit ratings; and
(D) the compensation and promotion policies
and practices of the nationally recognized
statistical rating organization.
(4) Treatment of nrsro subsidiaries.--If a nationally
recognized statistical rating organization is a
subsidiary of a parent entity, the board of the
directors of the parent entity may satisfy the
requirements of this subsection by assigning to a
committee of such board of directors the duties under
paragraph (3), if--
(A) at least \1/2\ of the members of the
committee (including the chairperson of the
committee) are independent, as defined in this
section; and
(B) at least 1 member of the committee is a
user of ratings from a nationally recognized
statistical rating organization.
(5) Exception authority.--If the Commission finds
that compliance with the provisions of this subsection
present an unreasonable burden on a small nationally
recognized statistical rating organization, the
Commission may permit the nationally recognized
statistical rating organization to delegate such
responsibilities to a committee that includes at least
one individual who is a user of ratings of a nationally
recognized statistical rating organization.
(u) Duty To Report Tips Alleging Material Violations of
Law.--
(1) Duty to report.--Each nationally recognized
statistical rating organization shall refer to the
appropriate law enforcement or regulatory authorities
any information that the nationally recognized
statistical rating organization receives from a third
party and finds credible that alleges that an issuer of
securities rated by the nationally recognized
statistical rating organization has committed or is
committing a material violation of law that has not
been adjudicated by a Federal or State court.
(2) Rule of construction.--Nothing in paragraph (1)
may be construed to require a nationally recognized
statistical rating organization to verify the accuracy
of the information described in paragraph (1).
(v) Information From Sources Other Than the Issuer.--In
producing a credit rating, a nationally recognized statistical
rating organization shall consider information about an issuer
that the nationally recognized statistical rating organization
has, or receives from a source other than the issuer or
underwriter, that the nationally recognized statistical rating
organization finds credible and potentially significant to a
rating decision.
(w) Commission Exemptive Authority.--The Commission, by rules
and regulations upon its own motion, or by order upon
application, may conditionally or unconditionally exempt any
person from any provision or provisions of this title or of any
rule or regulation thereunder, if and to the extent it
determines that such rule, regulation, or requirement is
creating a barrier to entry into the market for nationally
recognized statistical rating organizations or impeding
competition among such organizations, or that such an exemption
is necessary or appropriate in the public interest and is
consistent with the protection of investors.
SEC. 15F. REGISTRATION AND REGULATION OF SECURITY-BASED SWAP DEALERS
AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.
(a) Registration.--
(1) Security-based swap dealers.--It shall be
unlawful for any person to act as a security-based swap
dealer unless the person is registered as a security-
based swap dealer with the Commission.
(2) Major security-based swap participants.--It shall
be unlawful for any person to act as a major security-
based swap participant unless the person is registered
as a major security-based swap participant with the
Commission.
(b) Requirements.--
(1) In general.--A person shall register as a
security-based swap dealer or major security-based swap
participant by filing a registration application with
the Commission.
(2) Contents.--
(A) In general.--The application shall be
made in such form and manner as prescribed by
the Commission, and shall contain such
information, as the Commission considers
necessary concerning the business in which the
applicant is or will be engaged.
(B) Continual reporting.--A person that is
registered as a security-based swap dealer or
major security-based swap participant shall
continue to submit to the Commission reports
that contain such information pertaining to the
business of the person as the Commission may
require.
(3) Expiration.--Each registration under this section
shall expire at such time as the Commission may
prescribe by rule or regulation.
(4) Rules.--Except as provided in subsections (d) and
(e), the Commission may prescribe rules applicable to
security-based swap dealers and major security-based
swap participants, including rules that limit the
activities of non-bank security-based swap dealers and
major security-based swap participants.
(5) Transition.--Not later than 1 year after the date
of enactment of the Wall Street Transparency and
Accountability Act of 2010, the Commission shall issue
rules under this section to provide for the
registration of security-based swap dealers and major
security-based swap participants.
(6) Statutory disqualification.--Except to the extent
otherwise specifically provided by rule, regulation, or
order of the Commission, it shall be unlawful for a
security-based swap dealer or a major security-based
swap participant to permit any person associated with a
security-based swap dealer or a major security-based
swap participant who is subject to a statutory
disqualification to effect or be involved in effecting
security-based swaps on behalf of the security-based
swap dealer or major security-based swap participant,
if the security-based swap dealer or major security-
based swap participant knew, or in the exercise of
reasonable care should have known, of the statutory
disqualification.
(c) Dual Registration.--
(1) Security-based swap dealer.--Any person that is
required to be registered as a security-based swap
dealer under this section shall register with the
Commission, regardless of whether the person also is
registered with the Commodity Futures Trading
Commission as a swap dealer.
(2) Major security-based swap participant.--Any
person that is required to be registered as a major
security-based swap participant under this section
shall register with the Commission, regardless of
whether the person also is registered with the
Commodity Futures Trading Commission as a major swap
participant.
(d) Rulemaking.--
(1) In general.--The Commission shall adopt rules for
persons that are registered as security-based swap
dealers or major security-based swap participants under
this section.
(2) Exception for prudential requirements.--
(A) In general.--The Commission may not
prescribe rules imposing prudential
requirements on security-based swap dealers or
major security-based swap participants for
which there is a prudential regulator.
(B) Applicability.--Subparagraph (A) does not
limit the authority of the Commission to
prescribe rules as directed under this section.
(e) Capital and Margin Requirements.--
(1) In general.--
(A) Security-based swap dealers and major
security-based swap participants that are
banks.--Each registered security-based swap
dealer and major security-based swap
participant for which there is not a prudential
regulator shall meet such minimum capital
requirements and minimum initial and variation
margin requirements as the prudential regulator
shall by rule or regulation prescribe under
paragraph (2)(A).
(B) Security-based swap dealers and major
security-based swap participants that are not
banks.--Each registered security-based swap
dealer and major security-based swap
participant for which there is not a prudential
regulator shall meet such minimum capital
requirements and minimum initial and variation
margin requirements as the Commission shall by
rule or regulation prescribe under paragraph
(2)(B).
(2) Rules.--
(A) Security-based swap dealers and major
security-based swap participants that are
banks.--The prudential regulators, in
consultation with the Commission and the
Commodity Futures Trading Commission, shall
adopt rules for security-based swap dealers and
major security-based swap participants, with
respect to their activities as a swap dealer or
major swap participant, for which there is a
prudential regulator imposing--
(i) capital requirements; and
(ii) both initial and variation
margin requirements on all security-
based swaps that are not cleared by a
registered clearing agency.
(B) Security-based swap dealers and major
security-based swap participants that are not
banks.--The Commission shall adopt rules for
security-based swap dealers and major security-
based swap participants, with respect to their
activities as a swap dealer or major swap
participant, for which there is not a
prudential regulator imposing--
(i) capital requirements; and
(ii) both initial and variation
margin requirements on all swaps that
are not cleared by a registered
clearing agency.
(C) Capital.--In setting capital requirements
for a person that is designated as a security-
based swap dealer or a major security-based
swap participant for a single type or single
class or category of security-based swap or
activities, the prudential regulator and the
Commission shall take into account the risks
associated with other types of security-based
swaps or classes of security-based swaps or
categories of security-based swaps engaged in
and the other activities conducted by that
person that are not otherwise subject to
regulation applicable to that person by virtue
of the status of the person.
(3) Standards for capital and margin.--
(A) In general.--To offset the greater risk
to the security-based swap dealer or major
security-based swap participant and the
financial system arising from the use of
security-based swaps that are not cleared, the
requirements imposed under paragraph (2) shall
--
(i) help ensure the safety and
soundness of the security-based swap
dealer or major security-based swap
participant; and
(ii) be appropriate for the risk
associated with the non-cleared
security-based swaps held as a
security-based swap dealer or major
security-based swap participant.
(B) Rule of construction.--
(i) In general.--Nothing in this
section shall limit, or be construed to
limit, the authority--
(I) of the Commission to set
financial responsibility rules
for a broker or dealer
registered pursuant to section
15(b) (except for section
15(b)(11) thereof) in
accordance with section
15(c)(3); or
(II) of the Commodity Futures
Trading Commission to set
financial responsibility rules
for a futures commission
merchant or introducing broker
registered pursuant to section
4f(a) of the Commodity Exchange
Act (except for section
4f(a)(3) thereof) in accordance
with section 4f(b) of the
Commodity Exchange Act.
(ii) Futures commission merchants and
other dealers.--A futures commission
merchant, introducing broker, broker,
or dealer shall maintain sufficient
capital to comply with the stricter of
any applicable capital requirements to
which such futures commission merchant,
introducing broker, broker, or dealer
is subject to under this title or the
Commodity Exchange Act.
(C) Margin requirements.--In prescribing
margin requirements under this subsection, the
prudential regulator with respect to security-
based swap dealers and major security-based
swap participants that are depository
institutions, and the Commission with respect
to security-based swap dealers and major
security-based swap participants that are not
depository institutions shall permit the use of
noncash collateral, as the regulator or the
Commission determines to be consistent with--
(i) preserving the financial
integrity of markets trading security-
based swaps; and
(ii) preserving the stability of the
United States financial system.
(D) Comparability of capital and margin
requirements.--
(i) In general.--The prudential
regulators, the Commission, and the
Securities and Exchange Commission
shall periodically (but not less
frequently than annually) consult on
minimum capital requirements and
minimum initial and variation margin
requirements.
(ii) Comparability.--The entities
described in clause (i) shall, to the
maximum extent practicable, establish
and maintain comparable minimum capital
requirements and minimum initial and
variation margin requirements,
including the use of noncash
collateral, for--
(I) security-based swap
dealers; and
(II) major security-based
swap participants.
(4) Applicability with respect to counterparties.--
The requirements of paragraphs (2)(A)(ii) and
(2)(B)(ii) shall not apply to a security-based swap in
which a counterparty qualifies for an exception under
section 3C(g)(1) or satisfies the criteria in section
3C(g)(4).
(f) Reporting and Recordkeeping.--
(1) In general.--Each registered security-based swap
dealer and major security-based swap participant--
(A) shall make such reports as are required
by the Commission, by rule or regulation,
regarding the transactions and positions and
financial condition of the registered security-
based swap dealer or major security-based swap
participant;
(B)(i) for which there is a prudential
regulator, shall keep books and records of all
activities related to the business as a
security-based swap dealer or major security-
based swap participant in such form and manner
and for such period as may be prescribed by the
Commission by rule or regulation; and
(ii) for which there is no prudential
regulator, shall keep books and records in such
form and manner and for such period as may be
prescribed by the Commission by rule or
regulation; and
(C) shall keep books and records described in
subparagraph (B) open to inspection and
examination by any representative of the
Commission.
(2) Rules.--The Commission shall adopt rules
governing reporting and recordkeeping for security-
based swap dealers and major security-based swap
participants.
(g) Daily Trading Records.--
(1) In general.--Each registered security-based swap
dealer and major security-based swap participant shall
maintain daily trading records of the security-based
swaps of the registered security-based swap dealer and
major security-based swap participant and all related
records (including related cash or forward
transactions) and recorded communications, including
electronic mail, instant messages, and recordings of
telephone calls, for such period as may be required by
the Commission by rule or regulation.
(2) Information requirements.--The daily trading
records shall include such information as the
Commission shall require by rule or regulation.
(3) Counterparty records.--Each registered security-
based swap dealer and major security-based swap
participant shall maintain daily trading records for
each counterparty in a manner and form that is
identifiable with each security-based swap transaction.
(4) Audit trail.--Each registered security-based swap
dealer and major security-based swap participant shall
maintain a complete audit trail for conducting
comprehensive and accurate trade reconstructions.
(5) Rules.--The Commission shall adopt rules
governing daily trading records for security-based swap
dealers and major security-based swap participants.
(h) Business Conduct Standards.--
(1) In general.--Each registered security-based swap
dealer and major security-based swap participant shall
conform with such business conduct standards as
prescribed in paragraph (3) and as may be prescribed by
the Commission by rule or regulation that relate to--
(A) fraud, manipulation, and other abusive
practices involving security-based swaps
(including security-based swaps that are
offered but not entered into);
(B) diligent supervision of the business of
the registered security-based swap dealer and
major security-based swap participant;
(C) adherence to all applicable position
limits; and
(D) such other matters as the Commission
determines to be appropriate.
(2) Responsibilities with respect to special
entities.--
(A) Advising special entities.--A security-
based swap dealer or major security-based swap
participant that acts as an advisor to a
special entity regarding a security-based swap
shall comply with the requirements of paragraph
(4) with respect to such special entity.
(B) Entering of security-based swaps with
respect to special entities.--A security-based
swap dealer that enters into or offers to enter
into a security-based swap with a special
entity shall comply with the requirements of
paragraph (5) with respect to such special
entity.
(C) Special entity defined.--For purposes of
this subsection, the term ``special entity''
means--
(i) a Federal agency;
(ii) a State, State agency, city,
county, municipality, or other
political subdivision of a State or;
(iii) any employee benefit plan, as
defined in section 3 of the Employee
Retirement Income Security Act of 1974
(29 U.S.C. 1002);
(iv) any governmental plan, as
defined in section 3 of the Employee
Retirement Income Security Act of 1974
(29 U.S.C. 1002); or
(v) any endowment, including an
endowment that is an organization
described in section 501(c)(3) of the
Internal Revenue Code of 1986.
(3) Business conduct requirements.--Business conduct
requirements adopted by the Commission shall--
(A) establish a duty for a security-based
swap dealer or major security-based swap
participant to verify that any counterparty
meets the eligibility standards for an eligible
contract participant;
(B) require disclosure by the security-based
swap dealer or major security-based swap
participant to any counterparty to the
transaction (other than a security-based swap
dealer, major security-based swap participant,
security-based swap dealer, or major security-
based swap participant) of--
(i) information about the material
risks and characteristics of the
security-based swap;
(ii) any material incentives or
conflicts of interest that the
security-based swap dealer or major
security-based swap participant may
have in connection with the security-
based swap; and
(iii)(I) for cleared security-based
swaps, upon the request of the
counterparty, receipt of the daily mark
of the transaction from the appropriate
derivatives clearing organization; and
(II) for uncleared security-based
swaps, receipt of the daily mark of the
transaction from the security-based
swap dealer or the major security-based
swap participant;
(C) establish a duty for a security-based
swap dealer or major security-based swap
participant to communicate in a fair and
balanced manner based on principles of fair
dealing and good faith; and
(D) establish such other standards and
requirements as the Commission may determine
are appropriate in the public interest, for the
protection of investors, or otherwise in
furtherance of the purposes of this Act.
(4) Special requirements for security-based swap
dealers acting as advisors.--
(A) In general.--It shall be unlawful for a
security-based swap dealer or major security-
based swap participant--
(i) to employ any device, scheme, or
artifice to defraud any special entity
or prospective customer who is a
special entity;
(ii) to engage in any transaction,
practice, or course of business that
operates as a fraud or deceit on any
special entity or prospective customer
who is a special entity; or
(iii) to engage in any act, practice,
or course of business that is
fraudulent, deceptive, or manipulative.
(B) Duty.--Any security-based swap dealer
that acts as an advisor to a special entity
shall have a duty to act in the best interests
of the special entity.
(C) Reasonable efforts.--Any security-based
swap dealer that acts as an advisor to a
special entity shall make reasonable efforts to
obtain such information as is necessary to make
a reasonable determination that any security-
based swap recommended by the security-based
swap dealer is in the best interests of the
special entity, including information relating
to--
(i) the financial status of the
special entity;
(ii) the tax status of the special
entity;
(iii) the investment or financing
objectives of the special entity; and
(iv) any other information that the
Commission may prescribe by rule or
regulation.
(5) Special requirements for security-based swap
dealers as counterparties to special entities.--
(A) In general.--Any security-based swap
dealer or major security-based swap participant
that offers to or enters into a security-based
swap with a special entity shall--
(i) comply with any duty established
by the Commission for a security-based
swap dealer or major security-based
swap participant, with respect to a
counterparty that is an eligible
contract participant within the meaning
of subclause (I) or (II) of clause
(vii) of section 1a(18)(A) of the
Commodity Exchange Act, that requires
the security-based swap dealer or major
security-based swap participant to have
a reasonable basis to believe that the
counterparty that is a special entity
has an independent representative
that--
(I) has sufficient knowledge
to evaluate the transaction and
risks;
(II) is not subject to a
statutory disqualification;
(III) is independent of the
security-based swap dealer or
major security-based swap
participant;
(IV) undertakes a duty to act
in the best interests of the
counterparty it represents;
(V) makes appropriate
disclosures;
(VI) will provide written
representations to the special
entity regarding fair pricing
and the appropriateness of the
transaction; and
(VII) in the case of employee
benefit plans subject to the
Employee Retirement Income
Security [act of] Act of 1974,
is a fiduciary as defined in
section 3 of that Act (29
U.S.C. 1002); and
(ii) before the initiation of the
transaction, disclose to the special
entity in writing the capacity in which
the security-based swap dealer is
acting.
(B) Commission authority.--The Commission may
establish such other standards and requirements
under this paragraph as the Commission may
determine are appropriate in the public
interest, for the protection of investors, or
otherwise in furtherance of the purposes of
this Act.
(6) Rules.--The Commission shall prescribe rules
under this subsection governing business conduct
standards for security-based swap dealers and major
security-based swap participants.
(7) Applicability.--This subsection shall not apply
with respect to a transaction that is--
(A) initiated by a special entity on an
exchange or security-based swaps execution
facility; and
(B) the security-based swap dealer or major
security-based swap participant does not know
the identity of the counterparty to the
transaction.''
(i) Documentation Standards.--
(1) In general.--Each registered security-based swap
dealer and major security-based swap participant shall
conform with such standards as may be prescribed by the
Commission, by rule or regulation, that relate to
timely and accurate confirmation, processing, netting,
documentation, and valuation of all security-based
swaps.
(2) Rules.--The Commission shall adopt rules
governing documentation standards for security-based
swap dealers and major security-based swap
participants.
(j) Duties.--Each registered security-based swap dealer and
major security-based swap participant shall, at all times,
comply with the following requirements:
(1) Monitoring of trading.--The security-based swap
dealer or major security-based swap participant shall
monitor its trading in security-based swaps to prevent
violations of applicable position limits.
(2) Risk management procedures.--The security-based
swap dealer or major security-based swap participant
shall establish robust and professional risk management
systems adequate for managing the day-to-day business
of the security-based swap dealer or major security-
based swap participant.
(3) Disclosure of general information.--The security-
based swap dealer or major security-based swap
participant shall disclose to the Commission and to the
prudential regulator for the security-based swap dealer
or major security-based swap participant, as
applicable, information concerning--
(A) terms and conditions of its security-
based swaps;
(B) security-based swap trading operations,
mechanisms, and practices;
(C) financial integrity protections relating
to security-based swaps; and
(D) other information relevant to its trading
in security-based swaps.
(4) Ability to obtain information.--The security-
based swap dealer or major security-based swap
participant shall--
(A) establish and enforce internal systems
and procedures to obtain any necessary
information to perform any of the functions
described in this section; and
(B) provide the information to the Commission
and to the prudential regulator for the
security-based swap dealer or major security-
based swap participant, as applicable, on
request.
(5) Conflicts of interest.--The security-based swap
dealer and major security-based swap participant shall
implement conflict-of-interest systems and procedures
that--
(A) establish structural and institutional
safeguards to ensure that the activities of any
person within the firm relating to research or
analysis of the price or market for any
security-based swap or acting in a role of
providing clearing activities or making
determinations as to accepting clearing
customers are separated by appropriate
informational partitions within the firm from
the review, pressure, or oversight of persons
whose involvement in pricing, trading, or
clearing activities might potentially bias
their judgment or supervision and contravene
the core principles of open access and the
business conduct standards described in this
title; and
(B) address such other issues as the
Commission determines to be appropriate.
(6) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this title, the
security-based swap dealer or major security-based swap
participant shall not--
(A) adopt any process or take any action that
results in any unreasonable restraint of trade;
or
(B) impose any material anticompetitive
burden on trading or clearing.
(7) Rules.--The Commission shall prescribe rules
under this subsection governing duties of security-
based swap dealers and major security-based swap
participants.
(k) Designation of Chief Compliance Officer.--
(1) In general.--Each security-based swap dealer and
major security-based swap participant shall designate
an individual to serve as a chief compliance officer.
(2) Duties.--The chief compliance officer shall--
(A) report directly to the board or to the
senior officer of the security-based swap
dealer or major security-based swap
participant;
(B) review the compliance of the security-
based swap dealer or major security-based swap
participant with respect to the security-based
swap dealer and major security-based swap
participant requirements described in this
section;
(C) in consultation with the board of
directors, a body performing a function similar
to the board, or the senior officer of the
organization, resolve any conflicts of interest
that may arise;
(D) be responsible for administering each
policy and procedure that is required to be
established pursuant to this section;
(E) ensure compliance with this title
(including regulations) relating to security-
based swaps, including each rule prescribed by
the Commission under this section;
(F) establish procedures for the remediation
of noncompliance issues identified by the chief
compliance officer through any--
(i) compliance office review;
(ii) look-back;
(iii) internal or external audit
finding;
(iv) self-reported error; or
(v) validated complaint; and
(G) establish and follow appropriate
procedures for the handling, management
response, remediation, retesting, and closing
of noncompliance issues.
(3) Annual reports.--
(A) In general.--In accordance with rules
prescribed by the Commission, the chief
compliance officer shall annually prepare and
sign a report that contains a description of--
(i) the compliance of the security-
based swap dealer or major swap
participant with respect to this title
(including regulations); and
(ii) each policy and procedure of the
security-based swap dealer or major
security-based swap participant of the
chief compliance officer (including the
code of ethics and conflict of interest
policies).
(B) Requirements.--A compliance report under
subparagraph (A) shall--
(i) accompany each appropriate
financial report of the security-based
swap dealer or major security-based
swap participant that is required to be
furnished to the Commission pursuant to
this section; and
(ii) include a certification that,
under penalty of law, the compliance
report is accurate and complete.
(l) Enforcement and Administrative Proceeding Authority.--
(1) Primary enforcement authority.--
(A) Securities and exchange commission.--
Except as provided in subparagraph (B), (C), or
(D), the Commission shall have primary
authority to enforce subtitle B, and the
amendments made by subtitle B of the Wall
Street Transparency and Accountability Act of
2010, with respect to any person.
(B) Prudential regulators.--The prudential
regulators shall have exclusive authority to
enforce the provisions of subsection (e) and
other prudential requirements of this title
(including risk management standards), with
respect to security-based swap dealers or major
security-based swap participants for which they
are the prudential regulator.
(C) Referral.--
(i) Violations of nonprudential
requirements.--If the appropriate
Federal banking agency for security-
based swap dealers or major security-
based swap participants that are
depository institutions has cause to
believe that such security-based swap
dealer or major security-based swap
participant may have engaged in conduct
that constitutes a violation of the
nonprudential requirements of this
section or rules adopted by the
Commission thereunder, the agency may
recommend in writing to the Commission
that the Commission initiate an
enforcement proceeding as authorized
under this title. The recommendation
shall be accompanied by a written
explanation of the concerns giving rise
to the recommendation.
(ii) Violations of prudential
requirements.--If the Commission has
cause to believe that a securities-
based swap dealer or major securities-
based swap participant that has a
prudential regulator may have engaged
in conduct that constitute a violation
of the prudential requirements of
subsection (e) or rules adopted
thereunder, the Commission may
recommend in writing to the prudential
regulator that the prudential regulator
initiate an enforcement proceeding as
authorized under this title. The
recommendation shall be accompanied by
a written explanation of the concerns
giving rise to the recommendation.
(D) Backstop enforcement authority.--
(i) Initiation of enforcement
proceeding by prudential regulator.--If
the Commission does not initiate an
enforcement proceeding before the end
of the 90-day period beginning on the
date on which the Commission receives a
written report under subsection (C)(i),
the prudential regulator may initiate
an enforcement proceeding.
(ii) Initiation of enforcement
proceeding by commission.--If the
prudential regulator does not initiate
an enforcement proceeding before the
end of the 90-day period beginning on
the date on which the prudential
regulator receives a written report
under subsection (C)(ii), the
Commission may initiate an enforcement
proceeding.
(2) Censure, denial, suspension; notice and
hearing.--The Commission, by order, shall censure,
place limitations on the activities, functions, or
operations of, or revoke the registration of any
security-based swap dealer or major security-based swap
participant that has registered with the Commission
pursuant to subsection (b) if the Commission finds, on
the record after notice and opportunity for hearing,
that such censure, placing of limitations, or
revocation is in the public interest and that such
security-based swap dealer or major security-based swap
participant, or any person associated with such
security-based swap dealer or major security-based swap
participant effecting or involved in effecting
transactions in security-based swaps on behalf of such
security-based swap dealer or major security-based swap
participant, whether prior or subsequent to becoming so
associated--
(A) has committed or omitted any act, or is
subject to an order or finding, enumerated in
subparagraph (A), (D), or (E) of paragraph (4)
of section 15(b);
(B) has been convicted of any offense
specified in subparagraph (B) of such paragraph
(4) within 10 years of the commencement of the
proceedings under this subsection;
(C) is enjoined from any action, conduct, or
practice specified in subparagraph (C) of such
paragraph (4);
(D) is subject to an order or a final order
specified in subparagraph (F) or (H),
respectively, of such paragraph (4); or
(E) has been found by a foreign financial
regulatory authority to have committed or
omitted any act, or violated any foreign
statute or regulation, enumerated in
subparagraph (G) of such paragraph (4).
(3) Associated persons.--With respect to any person
who is associated, who is seeking to become associated,
or, at the time of the alleged misconduct, who was
associated or was seeking to become associated with a
security-based swap dealer or major security-based swap
participant for the purpose of effecting or being
involved in effecting security-based swaps on behalf of
such security-based swap dealer or major security-based
swap participant, the Commission, by order, shall
censure, place limitations on the activities or
functions of such person, or suspend for a period not
exceeding 12 months, or bar such person from being
associated with a security-based swap dealer or major
security-based swap participant, if the Commission
finds, on the record after notice and opportunity for a
hearing, that such censure, placing of limitations,
suspension, or bar is in the public interest and that
such person--
(A) has committed or omitted any act, or is
subject to an order or finding, enumerated in
subparagraph (A), (D), or (E) of paragraph (4)
of section 15(b);
(B) has been convicted of any offense
specified in subparagraph (B) of such paragraph
(4) within 10 years of the commencement of the
proceedings under this subsection;
(C) is enjoined from any action, conduct, or
practice specified in subparagraph (C) of such
paragraph (4);
(D) is subject to an order or a final order
specified in subparagraph (F) or (H),
respectively, of such paragraph (4); or
(E) has been found by a foreign financial
regulatory authority to have committed or
omitted any act, or violated any foreign
statute or regulation, enumerated in
subparagraph (G) of such paragraph (4).
(4) Unlawful conduct.--It shall be unlawful--
(A) for any person as to whom an order under
paragraph (3) is in effect, without the consent
of the Commission, willfully to become, or to
be, associated with a security-based swap
dealer or major security-based swap participant
in contravention of such order; or
(B) for any security-based swap dealer or
major security-based swap participant to permit
such a person, without the consent of the
Commission, to become or remain a person
associated with the security-based swap dealer
or major security-based swap participant in
contravention of such order, if such security-
based swap dealer or major security-based swap
participant knew, or in the exercise of
reasonable care should have known, of such
order.
SEC. 15G. CREDIT RISK RETENTION.
(a) Definitions.--In this section--
(1) the term ``Federal banking agencies'' means the
Office of the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, and the
Federal Deposit Insurance Corporation;
(2) the term ``insured depository institution'' has
the same meaning as in section 3(c) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(c));
(3) the term ``securitizer'' means--
(A) an issuer of an asset-backed security; or
(B) a person who organizes and initiates an
asset-backed securities transaction by selling
or transferring assets, either directly or
indirectly, including through an affiliate, to
the issuer; [and]
(4) the term ``originator'' means a person who--
(A) through the extension of credit or
otherwise, creates a financial asset that
collateralizes an asset-backed security; and
(B) sells an asset directly or indirectly to
a securitizer[.]; and
(5) the term ``asset-backed security'' refers only to
an asset-backed security that is comprised wholly of
residential mortgages.
(b) Regulations Required.--
[(1) In general.--Not later than 270 days after the
date of enactment of this section, the Federal banking
agencies and the Commission shall jointly prescribe
regulations to require any securitizer to retain an
economic interest in a portion of the credit risk for
any asset that the securitizer, through the issuance of
an asset-backed security, transfers, sells, or conveys
to a third party.
[(2) Residential mortgages.--] Not later than 270
days after the date of the enactment of this section,
the Federal banking agencies, the Commission, the
Secretary of Housing and Urban Development, and the
Board of Directors of the Federal Housing Finance
Agency, shall jointly prescribe regulations to require
any securitizer to retain an economic interest in a
portion of the credit risk for any residential mortgage
asset that the securitizer, through the issuance of an
asset-backed security, transfers, sells, or conveys to
a third party.
(c) Standards for Regulations.--
(1) Standards.--The regulations prescribed under
subsection (b) shall--
(A) prohibit a securitizer from directly or
indirectly hedging or otherwise transferring
the credit risk that the securitizer is
required to retain with respect to an asset;
(B) require a securitizer to retain--
(i) not less than 5 percent of the
credit risk for any asset--
(I) that is not a qualified
residential mortgage that is
transferred, sold, or conveyed
through the issuance of an
asset-backed security by the
securitizer; or
(II) that is a qualified
residential mortgage that is
transferred, sold, or conveyed
through the issuance of an
asset-backed security by the
securitizer, if 1 or more of
the assets that collateralize
the asset-backed security are
not qualified residential
mortgages; or
(ii) less than 5 percent of the
credit risk for an asset that is not a
qualified residential mortgage that is
transferred, sold, or conveyed through
the issuance of an asset-backed
security by the securitizer, if the
originator of the asset meets the
underwriting standards prescribed under
paragraph (2)(B);
(C) specify--
(i) the permissible forms of risk
retention for purposes of this section;
(ii) the minimum duration of the risk
retention required under this section;
and
(iii) that a securitizer is not
required to retain any part of the
credit risk for an asset that is
transferred, sold or conveyed through
the issuance of an asset-backed
security by the securitizer, if all of
the assets that collateralize the
asset-backed security are qualified
residential mortgages;
(D) apply, regardless of whether the
securitizer is an insured depository
institution;
(E) with respect to a commercial mortgage,
specify the permissible types, forms, and
amounts of risk retention that would meet the
requirements of subparagraph (B), which in the
determination of the Federal banking agencies
and the Commission may include--
(i) retention of a specified amount
or percentage of the total credit risk
of the asset;
(ii) retention of the first-loss
position by a third-party purchaser
that specifically negotiates for the
purchase of such first loss position,
holds adequate financial resources to
back losses, provides due diligence on
all individual assets in the pool
before the issuance of the asset-backed
securities, and meets the same
standards for risk retention as the
Federal banking agencies and the
Commission require of the securitizer;
(iii) a determination by the Federal
banking agencies and the Commission
that the underwriting standards and
controls for the asset are adequate;
and
(iv) provision of adequate
representations and warranties and
related enforcement mechanisms; and
(F) establish appropriate standards for
retention of an economic interest with respect
to collateralized debt obligations, securities
collateralized by collateralized debt
obligations, and similar instruments
collateralized by other asset-backed
securities; and
(G) provide for--
(i) a total or partial exemption of
any securitization, as may be
appropriate in the public interest and
for the protection of investors;
(ii) a total or partial exemption for
the securitization of an asset issued
or guaranteed by the United States, or
an agency of the United States, as the
Federal banking agencies and the
Commission jointly determine
appropriate in the public interest and
for the protection of investors, except
that, for purposes of this clause, the
Federal National Mortgage Association
and the Federal Home Loan Mortgage
Corporation are not agencies of the
United States;
(iii) a total or partial exemption
for any asset-backed security that is a
security issued or guaranteed by any
State of the United States, or by any
political subdivision of a State or
territory, or by any public
instrumentality of a State or territory
that is exempt from the registration
requirements of the Securities Act of
1933 by reason of section 3(a)(2) of
that Act (15 U.S.C. 77c(a)(2)), or a
security defined as a qualified
scholarship funding bond in section
150(d)(2) of the Internal Revenue Code
of 1986, as may be appropriate in the
public interest and for the protection
of investors; and
(iv) the allocation of risk retention
obligations between a securitizer and
an originator in the case of a
securitizer that purchases assets from
an originator, as the Federal banking
agencies and the Commission jointly
determine appropriate.
(2) Asset classes.--
(A) Asset classes.--The regulations
prescribed under subsection (b) shall establish
asset classes with separate rules for
securitizers of different classes of assets,
including residential mortgages, commercial
mortgages, commercial loans, auto loans, and
any other class of assets that the Federal
banking agencies and the Commission deem
appropriate.
(B) Contents.--For each asset class
established under subparagraph (A), the
regulations prescribed under subsection (b)
shall include underwriting standards
established by the Federal banking agencies
that specify the terms, conditions, and
characteristics of a loan within the asset
class that indicate a low credit risk with
respect to the loan.
(d) Originators.--In determining how to allocate risk
retention obligations between a securitizer and an originator
under subsection (c)(1)(E)(iv), the Federal banking agencies
and the Commission shall--
(1) reduce the percentage of risk retention
obligations required of the securitizer by the
percentage of risk retention obligations required of
the originator; and
(2) consider--
(A) whether the assets sold to the
securitizer have terms, conditions, and
characteristics that reflect low credit risk;
(B) whether the form or volume of
transactions in securitization markets creates
incentives for imprudent origination of the
type of loan or asset to be sold to the
securitizer; and
(C) the potential impact of the risk
retention obligations on the access of
consumers and businesses to credit on
reasonable terms, which may not include the
transfer of credit risk to a third party.
(e) Exemptions, Exceptions, and Adjustments.--
(1) In general.--The Federal banking agencies and the
Commission may jointly adopt or issue exemptions,
exceptions, or adjustments to the rules issued under
this section, including exemptions, exceptions, or
adjustments for classes of institutions or assets
relating to the risk retention requirement and the
prohibition on hedging under subsection (c)(1).
(2) Applicable standards.--Any exemption, exception,
or adjustment adopted or issued by the Federal banking
agencies and the Commission under this paragraph
shall--
(A) help ensure high quality underwriting
standards for the securitizers and originators
of assets that are securitized or available for
securitization; and
(B) encourage appropriate risk management
practices by the securitizers and originators
of assets, improve the access of consumers and
businesses to credit on reasonable terms, or
otherwise be in the public interest and for the
protection of investors.
(3) Certain institutions and programs exempt.--
(A) Farm credit system institutions.--
Notwithstanding any other provision of this
section, the requirements of this section shall
not apply to any loan or other financial asset
made, insured, guaranteed, or purchased by any
institution that is subject to the supervision
of the Farm Credit Administration, including
the Federal Agricultural Mortgage Corporation.
(B) Other federal programs.--This section
shall not apply to any residential,
multifamily, or health care facility mortgage
loan asset, or securitization based directly or
indirectly on such an asset, which is insured
or guaranteed by the United States or an agency
of the United States. For purposes of this
subsection, the Federal National Mortgage
Association, the Federal Home Loan Mortgage
Corporation, and the Federal home loan banks
shall not be considered an agency of the United
States.
(4) Exemption for qualified residential mortgages.--
(A) In general.--The Federal banking
agencies, the Commission, the Secretary of
Housing and Urban Development, and the Director
of the Federal Housing Finance Agency shall
jointly issue regulations to exempt qualified
residential mortgages from the risk retention
requirements of this [subsection] section.
(B) Qualified residential mortgage.--The
Federal banking agencies, the Commission, the
Secretary of Housing and Urban Development, and
the Director of the Federal Housing Finance
Agency shall jointly define the term
``qualified residential mortgage'' for purposes
of this subsection, taking into consideration
underwriting and product features that
historical loan performance data indicate
result in a lower risk of default, such as--
(i) documentation and verification of
the financial resources relied upon to
qualify the mortgagor;
(ii) standards with respect to--
(I) the residual income of
the mortgagor after all monthly
obligations;
(II) the ratio of the housing
payments of the mortgagor to
the monthly income of the
mortgagor;
(III) the ratio of total
monthly installment payments of
the mortgagor to the income of
the mortgagor;
(iii) mitigating the potential for
payment shock on adjustable rate
mortgages through product features and
underwriting standards;
(iv) mortgage guarantee insurance or
other types of insurance or credit
enhancement obtained at the time of
origination, to the extent such
insurance or credit enhancement reduces
the risk of default; and
(v) prohibiting or restricting the
use of balloon payments, negative
amortization, prepayment penalties,
interest-only payments, and other
features that have been demonstrated to
exhibit a higher risk of borrower
default.
(C) Limitation on definition.--The Federal
banking agencies, the Commission, the Secretary
of Housing and Urban Development, and the
Director of the Federal Housing Finance Agency
in defining the term ``qualified residential
mortgage'', as required by subparagraph (B),
shall define that term to be no broader than
the definition ``qualified mortgage'' as the
term is defined under section [129C(c)(2)]
129C(b)(2)(A) of the Truth in Lending Act (15
U.S.C. 1639c(b)(2)(A)), as amended by the
Consumer Financial Protection Act of 2010, and
regulations adopted thereunder.
(5) Condition for qualified residential mortgage
exemption.--The regulations issued under paragraph (4)
shall provide that an asset-backed security that is
collateralized by tranches of other asset-backed
securities shall not be exempt from the risk retention
requirements of this [subsection] section.
(6) Certification.--The Commission shall require an
issuer to certify, for each issuance of an asset-backed
security collateralized exclusively by qualified
residential mortgages, that the issuer has evaluated
the effectiveness of the internal supervisory controls
of the issuer with respect to the process for ensuring
that all assets that collateralize the asset-backed
security are qualified residential mortgages.
(f) Enforcement.--The regulations issued under this section
shall be enforced by--
(1) the appropriate Federal banking agency, with
respect to any securitizer that is an insured
depository institution; and
(2) the Commission, with respect to any securitizer
that is not an insured depository institution.
(g) Authority of Commission.--The authority of the Commission
under this section shall be in addition to the authority of the
Commission to otherwise enforce the securities laws.
[(h) Authority to Coordinate on Rulemaking.--The Chairperson
of the Financial Stability Oversight Council shall coordinate
all joint rulemaking required under this section.]
[(i)] (h) Effective Date of Regulations.--The regulations
issued under this section shall become [effective--]
[(1)] [with respect to] effective with respect to
securitizers and originators of asset-backed securities
backed by residential mortgages, 1 year after the date
on which final rules under this section are published
in the Federal Register[; and].
[(2) with respect to securitizers and originators of
all other classes of asset-backed securities, 2 years
after the date on which final rules under this section
are published in the Federal Register.]
SEC. 15H. REGISTRATION OF PROXY ADVISORY FIRMS.
(a) Conduct Prohibited.--It shall be unlawful for a proxy
advisory firm to make use of the mails or any means or
instrumentality of interstate commerce to provide proxy voting
research, analysis, or recommendations to any client, unless
such proxy advisory firm is registered under this section.
(b) Registration Procedures.--
(1) Application for registration.--
(A) In general.--A proxy advisory firm must
file with the Commission an application for
registration, in such form as the Commission
shall require, by rule or regulation, and
containing the information described in
subparagraph (B).
(B) Required information.--An application for
registration under this section shall contain
information regarding--
(i) a certification that the
applicant has adequate financial and
managerial resources to consistently
provide proxy advice based on accurate
information;
(ii) the procedures and methodologies
that the applicant uses in developing
proxy voting recommendations, including
whether and how the applicant considers
the size of a company when making proxy
voting recommendations;
(iii) the organizational structure of
the applicant;
(iv) whether or not the applicant has
in effect a code of ethics, and if not,
the reasons therefor;
(v) any potential or actual conflict
of interest relating to the ownership
structure of the applicant or the
provision of proxy advisory services by
the applicant, including whether the
proxy advisory firm engages in services
ancillary to the provision of proxy
advisory services such as consulting
services for corporate issuers, and if
so the revenues derived therefrom;
(vi) the policies and procedures in
place to manage conflicts of interest
under subsection (f); and
(vii) any other information and
documents concerning the applicant and
any person associated with such
applicant as the Commission, by rule,
may prescribe as necessary or
appropriate in the public interest or
for the protection of investors.
(2) Review of application.--
(A) Initial determination.--Not later than 90
days after the date on which the application
for registration is filed with the Commission
under paragraph (1) (or within such longer
period as to which the applicant consents) the
Commission shall--
(i) by order, grant registration; or
(ii) institute proceedings to
determine whether registration should
be denied.
(B) Conduct of proceedings.--
(i) Content.--Proceedings referred to
in subparagraph (A)(ii) shall--
(I) include notice of the
grounds for denial under
consideration and an
opportunity for hearing; and
(II) be concluded not later
than 120 days after the date on
which the application for
registration is filed with the
Commission under paragraph (1).
(ii) Determination.--At the
conclusion of such proceedings, the
Commission, by order, shall grant or
deny such application for registration.
(iii) Extension authorized.--The
Commission may extend the time for
conclusion of such proceedings for not
longer than 90 days, if it finds good
cause for such extension and publishes
its reasons for so finding, or for such
longer period as to which the applicant
consents.
(C) Grounds for decision.--The Commission
shall grant registration under this
subsection--
(i) if the Commission finds that the
requirements of this section are
satisfied; and
(ii) unless the Commission finds (in
which case the Commission shall deny
such registration) that--
(I) the applicant has failed
to certify to the Commission's
satisfaction that it has
adequate financial and
managerial resources to
consistently provide proxy
advice based on accurate
information and to materially
comply with the procedures and
methodologies disclosed under
paragraph (1)(B) and with
subsections (f) and (g); or
(II) if the applicant were so
registered, its registration
would be subject to suspension
or revocation under subsection
(e).
(3) Public availability of information.--Subject to
section 24, the Commission shall make the information
and documents submitted to the Commission by a proxy
advisory firm in its completed application for
registration, or in any amendment submitted under
paragraph (1) or (2) of subsection (c), publicly
available on the Commission's website, or through
another comparable, readily accessible means.
(c) Update of Registration.--
(1) Update.--Each registered proxy advisory firm
shall promptly amend and update its application for
registration under this section if any information or
document provided therein becomes materially
inaccurate, except that a registered proxy advisory
firm is not required to amend the information required
to be filed under subsection (b)(1)(B)(i) by filing
information under this paragraph, but shall amend such
information in the annual submission of the
organization under paragraph (2) of this subsection.
(2) Certification.--Not later than 90 calendar days
after the end of each calendar year, each registered
proxy advisory firm shall file with the Commission an
amendment to its registration, in such form as the
Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the
protection of investors--
(A) certifying that the information and
documents in the application for registration
of such registered proxy advisory firm continue
to be accurate in all material respects; and
(B) listing any material change that occurred
to such information or documents during the
previous calendar year.
(d) Censure, Denial, or Suspension of Registration; Notice
and Hearing.--The Commission, by order, shall censure, place
limitations on the activities, functions, or operations of,
suspend for a period not exceeding 12 months, or revoke the
registration of any registered proxy advisory firm if the
Commission finds, on the record after notice and opportunity
for hearing, that such censure, placing of limitations,
suspension, or revocation is necessary for the protection of
investors and in the public interest and that such registered
proxy advisory firm, or any person associated with such an
organization, whether prior to or subsequent to becoming so
associated--
(1) has committed or omitted any act, or is subject
to an order or finding, enumerated in subparagraph (A),
(D), (E), (H), or (G) of section 15(b)(4), has been
convicted of any offense specified in section
15(b)(4)(B), or is enjoined from any action, conduct,
or practice specified in subparagraph (C) of section
15(b)(4), during the 10-year period preceding the date
of commencement of the proceedings under this
subsection, or at any time thereafter;
(2) has been convicted during the 10-year period
preceding the date on which an application for
registration is filed with the Commission under this
section, or at any time thereafter, of--
(A) any crime that is punishable by
imprisonment for one or more years, and that is
not described in section 15(b)(4)(B); or
(B) a substantially equivalent crime by a
foreign court of competent jurisdiction;
(3) is subject to any order of the Commission barring
or suspending the right of the person to be associated
with a registered proxy advisory firm;
(4) fails to furnish the certifications required
under subsections (b)(2)(C)(ii)(I) and (c)(2);
(5) has engaged in one or more prohibited acts
enumerated in paragraph (1); or
(6) fails to maintain adequate financial and
managerial resources to consistently offer advisory
services with integrity, including by failing to comply
with subsections (f) or (g).
(e) Termination of Registration.--
(1) Voluntary withdrawal.--A registered proxy
advisory firm may, upon such terms and conditions as
the Commission may establish as necessary in the public
interest or for the protection of investors, which
terms and conditions shall include at a minimum that
the registered proxy advisory firm will no longer
conduct such activities as to bring it within the
definition of proxy advisory firm in section 3(a)(83)
of the Securities Exchange Act of 1934, withdraw from
registration by filing a written notice of withdrawal
to the Commission.
(2) Commission authority.--In addition to any other
authority of the Commission under this title, if the
Commission finds that a registered proxy advisory firm
is no longer in existence or has ceased to do business
as a proxy advisory firm, the Commission, by order,
shall cancel the registration under this section of
such registered proxy advisory firm.
(f) Management of Conflicts of Interest.--
(1) Organization policies and procedures.--Each
registered proxy advisory firm shall establish,
maintain, and enforce written policies and procedures
reasonably designed, taking into consideration the
nature of the business of such registered proxy
advisory firm and associated persons, to address and
manage any conflicts of interest that can arise from
such business.
(2) Commission authority.--The Commission shall issue
final rules to prohibit, or require the management and
disclosure of, any conflicts of interest relating to
the offering of proxy advisory services by a registered
proxy advisory firm, including, without limitation,
conflicts of interest relating to--
(A) the manner in which a registered proxy
advisory firm is compensated by the client, or
any affiliate of the client, for providing
proxy advisory services;
(B) the provision of consulting, advisory, or
other services by a registered proxy advisory
firm, or any person associated with such
registered proxy advisory firm, to the client;
(C) business relationships, ownership
interests, or any other financial or personal
interests between a registered proxy advisory
firm, or any person associated with such
registered proxy advisory firm, and any client,
or any affiliate of such client;
(D) transparency around the formulation of
proxy voting policies;
(E) the execution of proxy votes if such
votes are based upon recommendations made by
the proxy advisory firm in which someone other
than the issuer is a proponent;
(F) issuing recommendations where proxy
advisory firms provide advisory services to a
company; and
(G) any other potential conflict of interest,
as the Commission deems necessary or
appropriate in the public interest or for the
protection of investors.
(g) Reliability of Proxy Advisory Firm Services.--
(1) In general.--Each registered proxy advisory firm
shall have staff sufficient to produce proxy voting
recommendations that are based on accurate and current
information. Each registered proxy advisory firm shall
detail procedures sufficient to permit companies
receiving proxy advisory firm recommendations access in
a reasonable time to the draft recommendations, with an
opportunity to provide meaningful comment thereon,
including the opportunity to present details to the
person responsible for developing the recommendation in
person or telephonically. Each registered proxy
advisory firm shall employ an ombudsman to receive
complaints about the accuracy of voting information
used in making recommendations from the subjects of the
proxy advisory firm's voting recommendations, and shall
resolve those complaints in a timely fashion and in any
event prior to voting on the matter to which the
recommendation relates.
(2) Draft recommendations defined.--For purposes of
this subsection, the term ``draft recommendations''--
(A) means the overall conclusions of proxy
voting recommendations prepared for the clients
of a proxy advisory firm, including any public
data cited therein, any company information or
substantive analysis impacting the
recommendation, and the specific voting
recommendations on individual proxy ballot
issues; and
(B) does not include the entirety of the
proxy advisory firm's final report to its
clients.
(h) Designation of Compliance Officer.--Each registered proxy
advisory firm shall designate an individual responsible for
administering the policies and procedures that are required to
be established pursuant to subsections (f) and (g), and for
ensuring compliance with the securities laws and the rules and
regulations thereunder, including those promulgated by the
Commission pursuant to this section.
(i) Prohibited Conduct.--
(1) Prohibited acts and practices.--The Commission
shall issue final rules to prohibit any act or practice
relating to the offering of proxy advisory services by
a registered proxy advisory firm that the Commission
determines to be unfair or coercive, including any act
or practice relating to--
(A) conditioning a voting recommendation or
other proxy advisory firm recommendation on the
purchase by an issuer or an affiliate thereof
of other services or products, of the
registered proxy advisory firm or any person
associated with such registered proxy advisory
firm; and
(B) modifying a voting recommendation or
otherwise departing from its adopted systematic
procedures and methodologies in the provision
of proxy advisory services, based on whether an
issuer, or affiliate thereof, subscribes or
will subscribe to other services or product of
the registered proxy advisory firm or any
person associated with such organization.
(2) Rule of construction.--Nothing in paragraph (1),
or in any rules or regulations adopted thereunder, may
be construed to modify, impair, or supersede the
operation of any of the antitrust laws (as defined in
the first section of the Clayton Act, except that such
term includes section 5 of the Federal Trade Commission
Act, to the extent that such section 5 applies to
unfair methods of competition).
(j) Statements of Financial Condition.--Each registered proxy
advisory firm shall, on a confidential basis, file with the
Commission, at intervals determined by the Commission, such
financial statements, certified (if required by the rules or
regulations of the Commission) by an independent public
auditor, and information concerning its financial condition, as
the Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the protection of
investors.
(k) Annual Report.--Each registered proxy advisory firm
shall, at the beginning of each fiscal year of such firm,
report to the Commission on the number of shareholder proposals
its staff reviewed in the prior fiscal year, the number of
recommendations made in the prior fiscal year, the number of
staff who reviewed and made recommendations on such proposals
in the prior fiscal year, and the number of recommendations
made in the prior fiscal year where the proponent of such
recommendation was a client of or received services from the
proxy advisory firm.
(l) Transparent Policies.--Each registered proxy advisory
firm shall file with the Commission and make publicly available
its methodology for the formulation of proxy voting policies
and voting recommendations.
(m) Rules of Construction.--
(1) No waiver of rights, privileges, or defenses.--
Registration under and compliance with this section
does not constitute a waiver of, or otherwise diminish,
any right, privilege, or defense that a registered
proxy advisory firm may otherwise have under any
provision of State or Federal law, including any rule,
regulation, or order thereunder.
(2) No private right of action.--Nothing in this
section may be construed as creating any private right
of action, and no report filed by a registered proxy
advisory firm in accordance with this section or
section 17 shall create a private right of action under
section 18 or any other provision of law.
(n) Regulations.--
(1) New provisions.--Such rules and regulations as
are required by this section or are otherwise necessary
to carry out this section, including the application
form required under subsection (a)--
(A) shall be issued by the Commission, not
later than 180 days after the date of enactment
of this section; and
(B) shall become effective not later than 1
year after the date of enactment of this
section.
(2) Review of existing regulations.--Not later than
270 days after the date of enactment of this section,
the Commission shall--
(A) review its existing rules and regulations
which affect the operations of proxy advisory
firms;
(B) amend or revise such rules and
regulations in accordance with the purposes of
this section, and issue such guidance, as the
Commission may prescribe as necessary or
appropriate in the public interest or for the
protection of investors; and
(C) direct Commission staff to withdraw the
Egan Jones Proxy Services (May 27, 2004) and
Institutional Shareholder Services, Inc.
(September 15, 2004) no-action letters.
(o) Applicability.--This section, other than subsection (n),
which shall apply on the date of enactment of this section,
shall apply on the earlier of--
(1) the date on which regulations are issued in final
form under subsection (n)(1); or
(2) 270 days after the date of enactment of this
section.
accounts and records, examinations of exchanges, members, and others
Sec. 17. (a)(1) Every national securities exchange, member
thereof, broker or dealer who transacts a business in
securities through the medium of any such member, registered
securities association, registered broker or dealer, registered
municipal securities dealer municipal advisor,, registered
securities information processor, registered transfer agent,
nationally recognized statistical rating organization, proxy
advisory firm, and registered clearing agency and the Municipal
Securities Rulemaking Board shall make and keep for prescribed
periods such records, furnish such copies thereof, and make and
disseminate such reports as the Commission, by rule, prescribes
as necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the
purposes of this title. Any report that a nationally recognized
statistical rating organization is required by Commission rules
under this paragraph to make and disseminate to the Commission
shall be deemed furnished to the Commission.
(2) Every registered clearing agency shall also make and keep
for prescribed periods such records, furnish such copies
thereof, and make and disseminate such reports, as the
appropriate regulatory agency for such clearing agency, by
rule, prescribes as necessary or appropriate for the
safeguarding of securities and funds in the custody or control
of such clearing agency or for which it is responsible.
(3) Every registered transfer agent shall also make and keep
for prescribed periods such records, furnish such copies
thereof, and make such reports as the appropriate regulatory
agency for such transfer agent, by rule, prescribes as
necessary or appropriate in furtherance of the purposes of
section 17A of this title.
(b) Records Subject to Examination.--
(1) Procedures for cooperation with other agencies.--
All records of persons described in subsection (a) of
this section are subject at any time, or from time to
time, to such reasonable periodic, special, or other
examinations by representatives of the Commission and
the appropriate regulatory agency for such persons as
the Commission or the appropriate regulatory agency for
such persons deems necessary or appropriate in the
public interest, for the protection of investors, or
otherwise in furtherance of the purposes of this title:
Provided, however, That the Commission shall, prior to
conducting any such examination of a--
(A) registered clearing agency, registered
transfer agent, or registered municipal
securities dealer for which it is not the
appropriate regulatory agency, give notice to
the appropriate regulatory agency for such
clearing agency, transfer agent, or municipal
securities dealer of such proposed examination
and consult with such appropriate regulatory
agency concerning the feasibility and
desirability of coordinating such examination
with examinations conducted by such appropriate
regulatory agency with a view to avoiding
unnecessary regulatory duplication or undue
regulatory burdens for such clearing agency,
transfer agent, or municipal securities dealer;
or
(B) broker or dealer registered pursuant to
section 15(b)(11), exchange registered pursuant
to section 6(g), or national securities
association registered pursuant to section
15A(k), give notice to the Commodity Futures
Trading Commission of such proposed examination
and consults with the Commodity Futures Trading
Commission concerning the feasibility and
desirability of coordinating such examination
with examinations conducted by the Commodity
Futures Trading Commission in order to avoid
unnecessary regulatory duplication or undue
regulatory burdens for such broker or dealer or
exchange.
(2) Furnishing data and reports to cftc.--The
Commission shall notify the Commodity Futures Trading
Commission of any examination conducted of any broker
or dealer registered pursuant to section 15(b)(11),
exchange registered pursuant to section 6(g), or
national securities association registered pursuant to
section 15A(k) and, upon request, furnish to the
Commodity Futures Trading Commission any examination
report and data supplied to, or prepared by, the
Commission in connection with such examination.
(3) Use of cftc reports.--Prior to conducting an
examination under paragraph (1), the Commission shall
use the reports of examinations, if the information
available therein is sufficient for the purposes of the
examination, of--
(A) any broker or dealer registered pursuant
to section 15(b)(11);
(B) exchange registered pursuant to section
6(g); or
(C) national securities association
registered pursuant to section 15A(k);
that is made by the Commodity Futures Trading
Commission, a national securities association
registered pursuant to section 15A(k), or an exchange
registered pursuant to section 6(g).
(4) Rules of construction.--
(A) Notwithstanding any other provision of
this subsection, the records of a broker or
dealer registered pursuant to section
15(b)(11), an exchange registered pursuant to
section 6(g), or a national securities
association registered pursuant to section
15A(k) described in this subparagraph shall not
be subject to routine periodic examinations by
the Commission.
(B) Any recordkeeping rules adopted under
this subsection for a broker or dealer
registered pursuant to section 15(b)(11), an
exchange registered pursuant to section 6(g),
or a national securities association registered
pursuant to section 15A(k) shall be limited to
records with respect to persons, accounts,
agreements, contracts, and transactions
involving security futures products.
(C) Nothing in the proviso in paragraph (1)
shall be construed to impair or limit (other
than by the requirement of prior consultation)
the power of the Commission under this
subsection to examine any clearing agency,
transfer agent, or municipal securities dealer
or to affect in any way the power of the
Commission under any other provision of this
title or otherwise to inspect, examine, or
investigate any such clearing agency, transfer
agent, or municipal securities dealer.
(c)(1) Every clearing agency, transfer agent, and municipal
securities dealer for which the Commission is not the
appropriate regulatory agency shall (A) file with the
appropriate regulatory agency for such clearing agency,
transfer agent, or municipal securities dealer a copy of any
application, notice, proposal, report, or document filed with
the Commission by reason of its being a clearing agency,
transfer agent, or municipal securities dealer and (B) file
with the Commission a copy of any application, notice,
proposal, report, or document filed with such appropriate
regulatory agency by reason of its being a clearing agency,
transfer agent, or municipal securities dealer. The Municipal
Securities Rulemaking Board shall file with each agency
enumerated in section 3(a)(34)(A) of this title copies of every
proposed rule change filed with the Commission pursuant to
section 19(b) of this title.
(2) The appropriate regulatory agency for a clearing agency,
transfer agent, or municipal securities dealer for which the
Commission is not the appropriate regulatory agency shall file
with the Commission notice of the commencement of any
proceeding and a copy of any order entered by such appropriate
regulatory agency against any clearing agency, transfer agent,
municipal securities dealer, or person associated with a
transfer agent or municipal securities dealer, and the
Commission shall file with such appropriate regulatory agency,
if any, notice of the commencement of any proceeding and a copy
of any order entered by the Commission against the clearing
agency, transfer agent, or municipal securities dealer, or
against any person associated with a transfer agent or
municipal securities dealer for which the agency is the
appropriate regulatory agency.
(3) The Commission and the appropriate regulatory agency for
a clearing agency, transfer agent, or municipal securities
dealer for which the Commission is not the appropriate
regulatory agency shall each notify the other and make a report
of any examination conducted by it of such clearing agency,
transfer agent, or municipal securities dealer, and, upon
request, furnish to the other a copy of such report and any
data supplied to it in connection with such examination.
(4) The Commission or the appropriate regulatory agency may
specify that documents required to be filed pursuant to this
subsection with the Commission or such agency, respectively,
may be retained by the originating clearing agency, transfer
agent, or municipal securities dealer, or filed with another
appropriate regulatory agency. The Commission or the
appropriate regulatory agency (as the case may be) making such
a specification shall continue to have access to the document
on request.
(d)(1) The Commission, by rule or order, as it deems
necessary or appropriate in the public interest and for the
protection of investors, to foster cooperation and coordination
among self-regulatory organizations, or to remove impediments
to and foster the development of a national market system and
national system for the clearance and settlement of securities
transactions, may--
(A) with respect to any person who is a member of or
participant in more than one self-regulatory
organization, relieve any such self-regulatory
organization of any responsibility under this title (i)
to receive regulatory reports from such person, (ii) to
examine such person for compliance, or to enforce
compliance by such person, with specified provisions of
this title, the rules and regulations thereunder, and
its own rules, or (iii) to carry out other specified
regulatory functions with respect to such person, and
(B) allocate among self-regulatory organizations the
authority to adopt rules with respect to matters as to
which, in the absence of such allocation, such self-
regulatory organizations share authority under this
title.
In making any such rule or entering any such order, the
Commission shall take into consideration the regulatory
capabilities and procedures of the self-regulatory
organizations, availability of staff, convenience of location,
unnecessary regulatory duplication, and such other factors as
the Commission may consider germane to the protection of
investors, cooperation and coordination among self-regulatory
organizations, and the development of a national market system
and a national system for the clearance and settlement of
securities transactions. The Commission, by rule or order, as
it deems necessary or appropriate in the public interest and
for the protection of investors, may require any self-
regulatory organization relieved of any responsibility pursuant
to this paragraph, and any person with respect to whom such
responsibility relates, to take such steps as are specified in
any such rule or order to notify customers of, and persons
doing business with, such person of the limited nature of such
self-regulatory organization's responsibility for such person's
acts, practices, and course of business.
(2) A self-regulatory organization shall furnish copies of
any report of examination of any person who is a member of or a
participant in such self-regulatory organization to any other
self-regulatory organization of which such person is a member
or in which such person is a participant upon the request of
such person, such other self-regulatory organization, or the
Commission.
(e)(1)(A) Every registered broker or dealer shall annually
file with the Commission a balance sheet and income statement
certified by a independent public accounting firm, or by a
registered public accounting firm if the firm is required to be
registered under the Sarbanes-Oxley Act of 2002,, prepared on a
calendar or fiscal year basis, and such other financial
statements (which shall, as the Commission specifies, be
certified) and information concerning its financial condition
as the Commission, by rule may prescribe as necessary or
appropriate in the public interest or for the protection of
investors.
(B) Every registered broker and dealer shall annually send to
its customers its certified balance sheet and such other
financial statements and information concerning its financial
condition as the Commission, by rule, may prescribe pursuant to
subsection (a) of this section.
(C) The Commission, by rule or order, may conditionally or
unconditionally exempt any registered broker or dealer, or
class of such brokers or dealers, from any provision of this
paragraph if the Commission determines that such exemption is
consistent with the public interest and the protection of
investors.
(2) The Commission, by rule, as it deems necessary or
appropriate in the public interest or for the protection of
investors, may prescribe the form and content of financial
statements filed pursuant to this title and the accounting
principles and accounting standards used in their preparation.
(f)(1) Every national securities exchange, member thereof,
registered securities association, broker, dealer, municipal
securities dealer, government securities broker, government
securities dealer, registered transfer agent, registered
clearing agency, participant therein, member of the Federal
Reserve System, and bank whose deposits are insured by the
Federal Deposit Insurance Corporation shall--
(A) report to the Commission or other person
designated by the Commission and, in the case of
securities issued pursuant to chapter 31 of title 31,
United States Code, to the Secretary of the Treasury
such information about securities that are missing,
lost, counterfeit, stolen, or cancelled, in such form
and within such time as the Commission, by rule,
determines is necessary or appropriate in the public
interest or for the protection of investors; such
information shall be available on request for a
reasonable fee, to any such exchange, member,
association, broker, dealer, municipal securities
dealer, transfer agent, clearing agency, participant,
member of the Federal Reserve System, or insured bank,
and such other persons as the Commission, by rule,
designates; and
(B) make such inquiry with respect to information
reported pursuant to this subsection as the Commission,
by rule, prescribes as necessary or appropriate in the
public interest or for the protection of investors, to
determine whether securities in their custody or
control, for which they are responsible, or in which
they are effecting, clearing, or settling a transaction
have been reported as missing, lost, counterfeit,
stolen, cancelled, or reported in such other manner as
the Commission, by rule, may prescribe.
(2) Every member of a national securities exchange, broker,
dealer, registered transfer agent, registered clearing agency,
registered securities information processor, national
securities exchange, and national securities association shall
require that each of its partners, directors, officers, and
employees be fingerprinted and shall submit such fingerprints,
or cause the same to be submitted, to the Attorney General of
the United States for identification and appropriate
processing. The Commission, by rule, may exempt from the
provisions of this paragraph upon specified terms, conditions,
and periods, any class of partners, directors, officers, or
employees of any such member, broker, dealer, transfer agent,
clearing agency, securities information processor, national
securities exchange, or national securities association, if the
Commission finds that such action is not inconsistent with the
public interest or the protection of investors. Notwithstanding
any other provision of law, in providing identification and
processing functions, the Attorney General shall provide the
Commission and self-regulatory organizations designated by the
Commission with access to all criminal history record
information.
(3)(A) In order to carry out the authority under paragraph
(1) above, the Commission or its designee may enter into
agreement with the Attorney General to use the facilities of
the National Crime Information Center (``NCIC'') to receive,
store, and disseminate information in regard to missing, lost,
counterfeit, or stolen securities and to permit direct inquiry
access to NCIC's file on such securities for the financial
community.
(B) In order to carry out the authority under paragraph (1)
of this subsection, the Commission or its designee and the
Secretary of the Treasury shall enter into an agreement whereby
the Commission or its designee will receive, store, and
disseminate information in the possession, and which comes into
the possession, of the Department of the Treasury in regard to
missing, lost, counterfeit, or stolen securities.
(4) In regard to paragraphs (1), (2), and (3), above insofar
as such paragraphs apply to any bank or member of the Federal
Reserve System, the Commission may delegate its authority to:
(A) the Comptroller of the Currency as to national
banks;
(B) the Federal Reserve Board in regard to any member
of the Federal Reserve System which is not a national
bank; and
(C) the Federal Deposit Insurance Corporation for any
State bank which is insured by the Federal Deposit
Insurance Corporation but which is not a member of the
Federal Reserve System.
(5) The Commission shall encourage the insurance industry to
require their insured to report expeditiously instances of
missing, lost, counterfeit, or stolen securities to the
Commission or to such other person as the Commission may, by
rule, designate to receive such information.
(g) Any broker, dealer, or other person extending credit who
is subject to the rules and regulations prescribed by the Board
of Governors of the Federal Reserve System pursuant to this
title shall make such reports to the Board as it may require as
necessary or appropriate to enable it to perform the functions
conferred upon it by this title. If any such broker, dealer, or
other person shall fail to make any such report or fail to
furnish full information therein, or, if in the judgment of the
Board it is otherwise necessary, such broker, dealer, or other
person shall permit such inspections to be made by the Board
with respect to the business operations of such broker, dealer,
or other person as the Board may deem necessary to enable it to
obtain the required information.
(h) Risk Assessment for Holding Company Systems.--
(1) Obligations to obtain, maintain, and report
information.--Every person who is (A) a registered
broker or dealer, or (B) a registered municipal
securities dealer for which the Commission is the
appropriate regulatory agency, shall obtain such
information and make and keep such records as the
Commission by rule prescribes concerning the registered
person's policies, procedures, or systems for
monitoring and controlling financial and operational
risks to it resulting from the activities of any of its
associated persons, other than a natural person. Such
records shall describe, in the aggregate, each of the
financial and securities activities conducted by, and
the customary sources of capital and funding of, those
of its associated persons whose business activities are
reasonably likely to have a material impact on the
financial or operational condition of such registered
person, including its net capital, its liquidity, or
its ability to conduct or finance its operations. The
Commission, by rule, may require summary reports of
such information to be filed with the Commission no
more frequently than quarterly.
(2) Authority to require additional information.--If,
as a result of adverse market conditions or based on
reports provided to the Commission pursuant to
paragraph (1) of this subsection or other available
information, the Commission reasonably concludes that
it has concerns regarding the financial or operational
condition of (A) any registered broker or dealer, or
(B) any registered municipal securities dealer,
government securities broker, or government securities
dealer for which the Commission is the appropriate
regulatory agency, the Commission may require the
registered person to make reports concerning the
financial and securities activities of any of such
person's associated persons, other than a natural
person, whose business activities are reasonably likely
to have a material impact on the financial or
operational condition of such registered person. The
Commission, in requiring reports pursuant to this
paragraph, shall specify the information required, the
period for which it is required, the time and date on
which the information must be furnished, and whether
the information is to be furnished directly to the
Commission or to a self-regulatory organization with
primary responsibility for examining the registered
person's financial and operational condition.
(3) Special provisions with respect to associated
persons subject to federal banking agency regulation.--
(A) Cooperation in implementation.--In
developing and implementing reporting
requirements pursuant to paragraph (1) of this
subsection with respect to associated persons
subject to examination by or reporting
requirements of a Federal banking agency, the
Commission shall consult with and consider the
views of each such Federal banking agency. If a
Federal banking agency comments in writing on a
proposed rule of the Commission under this
subsection that has been published for comment,
the Commission shall respond in writing to such
written comment before adopting the proposed
rule. The Commission shall, at the request of
the Federal banking agency, publish such
comment and response in the Federal Register at
the time of publishing the adopted rule.
(B) Use of banking agency reports.--A
registered broker, dealer, or municipal
securities dealer shall be in compliance with
any recordkeeping or reporting requirement
adopted pursuant to paragraph (1) of this
subsection concerning an associated person that
is subject to examination by or reporting
requirements of a Federal banking agency if
such broker, dealer, or municipal securities
dealer utilizes for such recordkeeping or
reporting requirement copies of reports filed
by the associated person with the Federal
banking agency pursuant to section 5211 of the
Revised Statutes, section 9 of the Federal
Reserve Act, section 7(a) of the Federal
Deposit Insurance Act, section 10(b) of the
Home Owners' Loan Act, or section 8 of the Bank
Holding Company Act of 1956. The Commission
may, however, by rule adopted pursuant to
paragraph (1), require any broker, dealer, or
municipal securities dealer filing such reports
with the Commission to obtain, maintain, or
report supplemental information if the
Commission makes an explicit finding that such
supplemental information is necessary to inform
the Commission regarding potential risks to
such broker, dealer, or municipal securities
dealer. Prior to requiring any such
supplemental information, the Commission shall
first request the Federal banking agency to
expand its reporting requirements to include
such information.
(C) Procedure for requiring additional
information.--Prior to making a request
pursuant to paragraph (2) of this subsection
for information with respect to an associated
person that is subject to examination by or
reporting requirements of a Federal banking
agency, the Commission shall--
(i) notify such agency of the
information required with respect to
such associated person; and
(ii) consult with such agency to
determine whether the information
required is available from such agency
and for other purposes, unless the
Commission determines that any delay
resulting from such consultation would
be inconsistent with ensuring the
financial and operational condition of
the broker, dealer, municipal
securities dealer, government
securities broker, or government
securities dealer or the stability or
integrity of the securities markets.
(D) Exclusion for examination reports.--
Nothing in this subsection shall be construed
to permit the Commission to require any
registered broker or dealer, or any registered
municipal securities dealer, government
securities broker, or government securities
dealer for which the Commission is the
appropriate regulatory agency, to obtain,
maintain, or furnish any examination report of
any Federal banking agency or any supervisory
recommendations or analysis contained therein.
(E) Confidentiality of information
provided.--No information provided to or
obtained by the Commission from any Federal
banking agency pursuant to a request by the
Commission under subparagraph (C) of this
paragraph regarding any associated person which
is subject to examination by or reporting
requirements of a Federal banking agency may be
disclosed to any other person (other than a
self-regulatory organization), without the
prior written approval of the Federal banking
agency. Nothing in this subsection shall
authorize the Commission to withhold
information from Congress, or prevent the
Commission from complying with a request for
information from any other Federal department
or agency requesting the information for
purposes within the scope of its jurisdiction,
or complying with an order of a court of the
United States in an action brought by the
United States or the Commission.
(F) Notice to banking agencies concerning
financial and operational condition concerns.--
The Commission shall notify the Federal banking
agency of any concerns of the Commission
regarding significant financial or operational
risks resulting from the activities of any
registered broker or dealer, or any registered
municipal securities dealer, government
securities broker, or government securities
dealer for which the Commission is the
appropriate regulatory agency, to any
associated person thereof which is subject to
examination by or reporting requirements of the
Federal banking agency.
(G) Definition.--For purposes of this
paragraph, the term ``Federal banking agency''
shall have the same meaning as the term
``appropriate Federal bank agency'' in section
3(q) of the Federal Deposit Insurance Act (12
U.S.C. 1813(q)).
(4) Exemptions.--The Commission by rule or order may
exempt any person or class of persons, under such terms
and conditions and for such periods as the Commission
shall provide in such rule or order, from the
provisions of this subsection, and the rules
thereunder. In granting such exemptions, the Commission
shall consider, among other factors--
(A) whether information of the type required
under this subsection is available from a
supervisory agency (as defined in section
1101(6) of the Right to Financial Privacy Act
of 1978 (12 U.S.C. 3401(6))), a State insurance
commission or similar State agency, the
Commodity Futures Trading Commission, or a
similar foreign regulator;
(B) the primary business of any associated
person;
(C) the nature and extent of domestic or
foreign regulation of the associated person's
activities;
(D) the nature and extent of the registered
person's securities activities; and
(E) with respect to the registered person and
its associated persons, on a consolidated
basis, the amount and proportion of assets
devoted to, and revenues derived from,
activities in the United States securities
markets.
(5) Authority to limit disclosure of information.--
Notwithstanding any other provision of law, the
Commission shall not be compelled to disclose any
information required to be reported under this
subsection, or any information supplied to the
Commission by any domestic or foreign regulatory agency
that relates to the financial or operational condition
of any associated person of a registered broker,
dealer, government securities broker, government
securities dealer, or municipal securities dealer.
Nothing in this subsection shall authorize the
Commission to withhold information from Congress, or
prevent the Commission from complying with a request
for information from any other Federal department or
agency requesting the information for purposes within
the scope of its jurisdiction, or complying with an
order of a court of the United States in an action
brought by the United States or the Commission. For
purposes of section 552 of title 5, United States Code,
this subsection shall be considered a statute described
in subsection (b)(3)(B) of such section 552. In
prescribing regulations to carry out the requirements
of this subsection, the Commission shall designate
information described in or obtained pursuant to
subparagraph (B) or (C) of paragraph (3) of this
subsection as confidential information for purposes of
section 24(b)(2) of this title.
(i) Authority To Limit Disclosure of Information.--
Notwithstanding any other provision of law, the Commission
shall not be compelled to disclose any information required to
be reported under subsection (h) or (i) or any information
supplied to the Commission by any domestic or foreign
regulatory agency that relates to the financial or operational
condition of any associated person of a broker or dealer,
investment bank holding company, or any affiliate of an
investment bank holding company. Nothing in this subsection
shall authorize the Commission to withhold information from
Congress, or prevent the Commission from complying with a
request for information from any other Federal department or
agency or any self-regulatory organization requesting the
information for purposes within the scope of its jurisdiction,
or complying with an order of a court of the United States in
an action brought by the United States or the Commission. For
purposes of section 552 of title 5, United States Code, this
subsection shall be considered a statute described in
subsection (b)(3)(B) of such section 552. In prescribing
regulations to carry out the requirements of this subsection,
the Commission shall designate information described in or
obtained pursuant to subparagraphs (A), (B), and (C) of
subsection (i)(5) as confidential information for purposes of
section 24(b)(2) of this title.
(j) Coordination of Examining Authorities.--
(1) Elimination of duplication.--The Commission and
the examining authorities, through cooperation and
coordination of examination and oversight activities,
shall eliminate any unnecessary and burdensome
duplication in the examination process.
(2) Coordination of examinations.--The Commission and
the examining authorities shall share such information,
including reports of examinations, customer complaint
information, and other nonpublic regulatory
information, as appropriate to foster a coordinated
approach to regulatory oversight of brokers and dealers
that are subject to examination by more than one
examining authority.
(3) Examinations for cause.--At any time, any
examining authority may conduct an examination for
cause of any broker or dealer subject to its
jurisdiction.
(4) Confidentiality.--
(A) In general.--Section 24 shall apply to
the sharing of information in accordance with
this subsection. The Commission shall take
appropriate action under section 24(c) to
ensure that such information is not
inappropriately disclosed.
(B) Appropriate disclosure not prohibited.--
Nothing in this paragraph authorizes the
Commission or any examining authority to
withhold information from the Congress, or
prevent the Commission or any examining
authority from complying with a request for
information from any other Federal department
or agency requesting the information for
purposes within the scope of its jurisdiction,
or complying with an order of a court of the
United States in an action brought by the
United States or the Commission.
(5) Definition.--For purposes of this subsection, the
term ``examining authority'' means a self-regulatory
organization registered with the Commission under this
title (other than a registered clearing agency) with
the authority to examine, inspect, and otherwise
oversee the activities of a registered broker or
dealer.
national system for clearance and settlement of securities transactions
Sec. 17A. (a)(1) The Congress finds that--
(A) The prompt and accurate clearance and settlement
of securities transactions, including the transfer of
record ownership and the safeguarding of securities and
funds related thereto, are necessary for the protection
of investors and persons facilitating transactions by
and acting on behalf of investors.
(B) Inefficient procedures for clearance and
settlement impose unnecessary costs on investors and
persons facilitating transactions by and acting on
behalf of investors.
(C) New data processing and communications techniques
create the opportunity for more efficient, effective,
and safe procedures for clearance and settlement.
(D) The linking of all clearance and settlement
facilities and the development of uniform standards and
procedures for clearance and settlement will reduce
unnecessary costs and increase the protection of
investors and persons facilitating transactions by and
acting on behalf of investors.
(2)(A) The Commission is directed, therefore, having due
regard for the public interest, the protection of investors,
the safeguarding of securities and funds, and maintenance of
fair competition among brokers and dealers, clearing agencies,
and transfer agents, to use its authority under this title--
(i) to facilitate the establishment of a national
system for the prompt and accurate clearance and
settlement of transactions in securities (other than
exempt securities); and
(ii) to facilitate the establishment of linked or
coordinated facilities for clearance and settlement of
transactions in securities, securities options,
contracts of sale for future delivery and options
thereon, and commodity options;
in accordance with the findings and to carry out the objectives
set forth in paragraph (1) of this subsection.
(B) The Commission shall use its authority under this title
to assure equal regulation under this title of registered
clearing agencies and registered transfer agents. In carrying
out its responsibilities set forth in subparagraph (A)(ii) of
this paragraph, the Commission shall coordinate with the
Commodity Futures Trading Commission and consult with the Board
of Governors of the Federal Reserve System.
(b)(1) Except as otherwise provided in this section, it shall
be unlawful for any clearing agency, unless registered in
accordance with this subsection, directly or indirectly, to
make use of the mails or any means or instrumentality of
interstate commerce to perform the functions of a clearing
agency with respect to any security (other than an exempted
security). The Commission, by rule or order, upon its own
motion or upon application, may conditionally or
unconditionally exempt any clearing agency or security or any
class of clearing agencies or securities from any provisions of
this section or the rules or regulations thereunder, if the
Commission finds that such exemption is consistent with the
public interest, the protection of investors, and the purposes
of this section, including the prompt and accurate clearance
and settlement of securities transactions and the safeguarding
of securities and funds. A clearing agency or transfer agent
shall not perform the functions of both a clearing agency and a
transfer agent unless such clearing agency or transfer agent is
registered in accordance with this subsection and subsection
(c) of this section.
(2) A clearing agency may be registered under the terms and
conditions hereinafter provided in this subsection and in
accordance with the provisions of section 19(a) of this title,
by filing with the Commission an application for registration
in such form as the Commission, by rule, may prescribe
containing the rules of the clearing agency and such other
information and documents as the Commission, by rule, may
prescribe as necessary or appropriate in the public interest or
for the prompt and accurate clearance and settlement of
securities transactions.
(3) A clearing agency shall not be registered unless the
Commission determines that--
(A) Such clearing agency is so organized and has the
capacity to be able to facilitate the prompt and
accurate clearance and settlement of securities
transactions and derivative agreements, contracts, and
transactions for which it is responsible, to safeguard
securities and funds in its custody or control or for
which it is responsible, to comply with the provisions
of this title and the rules and regulations thereunder,
to enforce (subject to any rule or order of the
Commission pursuant to section 17(d) or 19(g)(2) of
this title) compliance by its participants with the
rules of the clearing agency, and to carry out the
purposes of this section.
(B) Subject to the provisions of paragraph (4) of
this subsection, the rules of the clearing agency
provide that any (i) registered broker or dealer, (ii)
other registered clearing agency, (iii) registered
investment company, (iv) bank, (v) insurance company,
or (vi) other person or class of persons as the
Commission, by rule, may from time to time designate as
appropriate to the development of a national system or
the prompt and accurate clearance and settlement of
securities transactions may become a participant in
such clearing agency.
(C) The rules of the clearing agency assure a fair
representation of its shareholders (or members) and
participants in the selection of its directors and
administration of its affairs. (The Commission may
determine that the representation of participants is
fair if they are afforded a reasonable opportunity to
acquire voting stock of the clearing agency, directly
or indirectly, in reasonable proportion to their use of
such clearing agency.)
(D) The rules of the clearing agency provide for the
equitable allocation of reasonable dues, fees, and
other charges among its participants.
(E) The rules of the clearing agency do not impose
any schedule of prices, or fix rates or other fees, for
services rendered by its participants.
(F) The rules of the clearing agency are designed to
promote the prompt and accurate clearance and
settlement of securities transactions and, to the
extent applicable, derivative agreements, contracts,
and transactions, to assure the safeguarding of
securities and funds which are in the custody or
control of the clearing agency or for which it is
responsible, to foster cooperation and coordination
with persons engaged in the clearance and settlement of
securities transactions, to remove impediments to and
perfect the mechanism of a national system for the
prompt and accurate clearance and settlement of
securities transactions, and, in general, to protect
investors and the public interest; and are not designed
to permit unfair discrimination in the admission of
participants or among participants in the use of the
clearing agency, or to regulate by virtue of any
authority conferred by this title matters not related
to the purposes of this section or the administration
of the clearing agency.
(G) The rules of the clearing agency provide that
(subject to any rule or order of the Commission
pursuant to section 17(d) or 19(g)(2) of this title)
its participants shall be appropriately disciplined for
violation of any provision of the rules of the clearing
agency by expulsion, suspension, limitation of
activities, functions, and operations, fine, censure,
or any other fitting sanction.
(H) The rules of the clearing agency are in
accordance with the provisions of paragraph (5) of this
subsection, and, in general, provide a fair procedure
with respect to the disciplining of participants, the
denial of participation to any persons seeking
participation therein, and the prohibition or
limitation by the clearing agency of any person with
respect to access to services offered by the clearing
agency.
(I) The rules of the clearing agency do not impose
any burden on competition not necessary or appropriate
in furtherance of the purposes of this title.
(4)(A) A registered clearing agency may, and in cases in
which the Commission, by order, directs as appropriate in the
public interest shall, deny participation to any person subject
to a statutory disqualification. A registered clearing agency
shall file notice with the Commission not less than thirty days
prior to admitting any person to participation, if the clearing
agency knew, or in the exercise of reasonable care should have
known, that such person was subject to a statutory
disqualification. The notice shall be in such form and contain
such information as the Commission, by rule, may prescribe as
necessary or appropriate in the public interest or for the
protection of investors.
(B) A registered clearing agency may deny participation to,
or condition the participation of, any person if such person
does not meet such standards of financial responsibility,
operational capability, experience, and competence as are
prescribed by the rules of the clearing agency. A registered
clearing agency may examine and verify the qualifications of an
applicant to be a participant in accordance with procedures
established by the rules of the clearing agency.
(5)(A) In any proceeding by a registered clearing agency to
determine whether a participant should be disciplined (other
than a summary proceeding pursuant to subparagraph (C) of this
paragraph), the clearing agency shall bring specific charges,
notify such participant of, and give him an opportunity to
defend against such charges, and keep a record. A determination
by the clearing agency to impose a disciplinary sanction shall
be supported by a statement setting forth--
(i) any act or practice in which such participant has
been found to have engaged, or which such participant
has been found to have omitted;
(ii) the specific provisions of the rules of the
clearing agency which any such act or practice, or
omission to act, is deemed to violate; and
(iii) the sanction imposed and the reasons therefor.
(B) In any proceeding by a registered clearing agency to
determine whether a person shall be denied participation or
prohibited or limited with respect to access to services
offered by the clearing agency, the clearing agency shall
notify such person of, and give him an opportunity to be heard
upon, the specific grounds for denial or prohibition or
limitation under consideration and keep a record. A
determination by the clearing agency to deny participation or
prohibit or limit a person with respect to access to services
offered by the clearing agency shall be supported by a
statement setting forth the specific grounds on which the
denial or prohibition or limitation is based.
(C) A registered clearing agency may summarily suspend and
close the accounts of a participant who (i) has been and is
expelled or suspended from any self-regulatory organization,
(ii) is in default of any delivery of funds or securities to
the clearing agency, or (iii) is in such financial or operating
difficulty that the clearing agency determines and so notifies
the appropriate regulatory agency for such participant that
such suspension and closing of accounts are necessary for the
protection of the clearing agency, its participants, creditors,
or investors. A participant so summarily suspended shall be
promptly afforded an opportunity for a hearing by the clearing
agency in accordance with the provisions of subparagraph (A) of
this paragraph. The appropriate regulatory agency for such
participant, by order, may stay any such summary suspension on
its own motion or upon application by any person aggrieved
thereby, if such appropriate regulatory agency determines
summarily or after notice and opportunity for hearing (which
hearing may consist solely of the submission of affidavits or
presentation of oral arguments) that such stay is consistent
with the public interest and protection of investors.
(6) No registered clearing agency shall prohibit or limit
access by any person to services offered by any participant
therein.
(7)(A) A clearing agency that is regulated directly or
indirectly by the Commodity Futures Trading Commission through
its association with a designated contract market for security
futures products that is a national securities exchange
registered pursuant to section 6(g), and that would be required
to register pursuant to paragraph (1) of this subsection only
because it performs the functions of a clearing agency with
respect to security futures products effected pursuant to the
rules of the designated contract market with which such agency
is associated, is exempted from the provisions of this section
and the rules and regulations thereunder, except that if such a
clearing agency performs the functions of a clearing agency
with respect to a security futures product that is not cash
settled, it must have arrangements in place with a registered
clearing agency to effect the payment and delivery of the
securities underlying the security futures product.
(B) Any clearing agency that performs the functions of a
clearing agency with respect to security futures products must
coordinate with and develop fair and reasonable links with any
and all other clearing agencies that perform the functions of a
clearing agency with respect to security futures products, in
order to permit, as of the compliance date (as defined in
section 6(h)(6)(C)), security futures products to be purchased
on one market and offset on another market that trades such
products.
(8) A registered clearing agency shall be permitted to
provide facilities for the clearance and settlement of any
derivative agreements, contracts, or transactions that are
excluded from the Commodity Exchange Act, subject to the
requirements of this section and to such rules and regulations
as the Commission may prescribe as necessary or appropriate in
the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of this title.
(c)(1) Except as otherwise provided in this section, it shall
be unlawful for any transfer agent, unless registered in
accordance with this section, directly or indirectly, to make
use of the mails or any means or instrumentality of interstate
commerce to perform the function of a transfer agent with
respect to any security registered under section 12 of this
title or which would be required to be registered except for
the exemption from registration provided by subsection
(g)(2)(B) or (g)(2)(G) of that section. The appropriate
regulatory agency, by rule or order, upon its own motion or
upon application, may conditionally or unconditionally exempt
any person or security or class of persons or securities from
any provision of this section or any rule or regulation
prescribed under this section, if the appropriate regulatory
agency finds (A) that such exemption is in the public interest
and consistent with the protection of investors and the
purposes of this section, including the prompt and accurate
clearance and settlement of securities transactions and the
safeguarding of securities and funds, and (B) the Commission
does not object to such exemption.
(2) A transfer agent may be registered by filing with the
appropriate regulatory agency for such transfer agent an
application for registration in such form and containing such
information and documents concerning such transfer agent and
any persons associated with the transfer agent as such
appropriate regulatory agency may prescribe as necessary or
appropriate in furtherance of the purposes of this section.
Except as hereinafter provided, such registration shall become
effective 45 days after receipt of such application by such
appropriate regulatory agency or within such shorter period of
time as such appropriate regulatory agency may determine.
(3) The appropriate regulatory agency for a transfer agent,
by order, shall deny registration to, censure, place
limitations on the activities, functions, or operations of,
suspend for a period not exceeding 12 months, or revoke the
registration of such transfer agent, if such appropriate
regulatory agency finds, on the record after notice and
opportunity for hearing, that such denial, censure, placing of
limitations, suspension, or revocation is in the public
interest and that such transfer agent, whether prior or
subsequent to becoming such, or any person associated with such
transfer agent, whether prior or subsequent to becoming so
associated--
(A) has committed or omitted any act, or is subject
to an order or finding, enumerated in subparagraph (A),
(D), (E), (H), or (G) of paragraph (4) of section 15(b)
of this title, has been convicted of any offense
specified in subparagraph (B) of such paragraph (4)
within ten years of the commencement of the proceedings
under this paragraph, or is enjoined from any action,
conduct, or practice specified in subparagraph (C) of
such paragraph (4); or
(B) is subject to an order entered pursuant to
subparagraph (C) of paragraph (4) of this subsection
barring or suspending the right of such person to be
associated with a transfer agent.
(4)(A) Pending final determination whether any registration
by a transfer agent under this subsection shall be denied, the
appropriate regulatory agency for such transfer agent, by
order, may postpone the effective date of such registration for
a period not to exceed fifteen days, but if, after notice and
opportunity for hearing (which may consist solely of affidavits
and oral arguments), it shall appear to such appropriate
regulatory agency to be necessary or appropriate in the public
interest or for the protection of investors to postpone the
effective date of such registration until final determination,
such appropriate regulatory agency shall so order. Pending
final determination whether any registration under this
subsection shall be revoked, such appropriate regulatory
agency, by order, may suspend such registration, if such
suspension appears to such appropriate regulatory agency, after
notice and opportunity for hearing, to be necessary or
appropriate in the public interest or for the protection of
investors.
(B) A registered transfer agent may, upon such terms and
conditions as the appropriate regulatory agency for such
transfer agent deems necessary or appropriate in the public
interest, for the protection of investors, or in furtherance of
the purposes of this section, withdraw from registration by
filing a written notice of withdrawal with such appropriate
regulatory agency. If such appropriate regulatory agency finds
that any transfer agent for which it is the appropriate
regulatory agency, is no longer in existence or has ceased to
do business as a transfer agent, such appropriate regulatory
agency, by order, shall cancel or deny the registration.
(C) The appropriate regulatory agency for a transfer agent,
by order, shall censure or place limitations on the activities
or functions of any person associated, seeking to become
associated, or, at the time of the alleged misconduct,
associated or seeking to become associated with the transfer
agent, or suspend for a period not exceeding 12 months or bar
any such person from being associated with any transfer agent,
broker, dealer, investment adviser, municipal securities
dealer, municipal advisor, or nationally recognized statistical
rating organization, if the appropriate regulatory agency
finds, on the record after notice and opportunity for hearing,
that such censure, placing of limitations, suspension, or bar
is in the public interest and that such person has committed or
omitted any act, or is subject to an order or finding,
enumerated in subparagraph (A), (D), (E), (H), or (G) or
paragraph (4) of section 15(b) of this title, has been
convicted of any offense specified in subparagraph (B) of such
paragraph (4) within ten years of the commencement of the
proceedings under this paragraph, or is enjoined from any
action, conduct, or practice specified in subparagraph (C) of
such paragraph (4). It shall be unlawful for any person as to
whom such an order suspending or barring him from being
associated with a transfer agent is in effect willfully to
become, or to be, associated with a transfer agent without the
consent of the appropriate regulatory agency that entered the
order and the appropriate regulatory agency for that transfer
agent. It shall be unlawful for any transfer agent to permit
such a person to become, or remain, a person associated with it
without the consent of such appropriate regulatory agencies, if
the transfer agent knew, or in the exercise of reasonable care
should have known, of such order. The Commission may establish,
by rule, procedures by which a transfer agent reasonably can
determine whether a person associated or seeking to become
associated with it is subject to any such order, and may
require, by rule, that any transfer agent comply with such
procedures.
(d)(1) No registered clearing agency or registered transfer
agent shall, directly or indirectly, engage in any activity as
clearing agency or transfer agent in contravention of such
rules and regulations (A) as the Commission may prescribe as
necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the
purposes of this title, or (B) as the appropriate regulatory
agency for such clearing agency or transfer agent may prescribe
as necessary or appropriate for the safeguarding of securities
and funds.
(2) With respect to any clearing agency or transfer agent for
which the Commission is not the appropriate regulatory agency,
the appropriate regulatory agency for such clearing agency or
transfer agent may, in accordance with section 8 of the Federal
Deposit Insurance Act (12 U.S.C. 1818), enforce compliance by
such clearing agency or transfer agent with the provisions of
this section, sections 17 and 19 of this title, and the rules
and regulations thereunder. For purposes of the preceding
sentence, any violation of any such provision shall constitute
adequate basis for the issuance of an order under section 8(b)
or 8(c) of the Federal Deposit Insurance Act, and the
participants in any such clearing agency and the persons doing
business with any such transfer agent shall be deemed to be
``depositors'' as that term is used in section 8(c) of that
Act.
(3)(A) With respect to any clearing agency or transfer agent
for which the Commission is not the appropriate regulatory
agency, the Commission and the appropriate regulatory agency
for such clearing agency or transfer agent shall consult and
cooperate with each other, and, as may be appropriate, with
State banking authorities having supervision over such clearing
agency or transfer agent toward the end that, to the maximum
extent practicable, their respective regulatory
responsibilities may be fulfilled and the rules and regulations
applicable to such clearing agency or transfer agent may be in
accord with both sound banking practices and a national system
for the prompt and accurate clearance and settlement of
securities transactions. In accordance with this objective--
(i) the Commission and such appropriate regulatory
agency shall, at least fifteen days prior to the
issuance for public comment of any proposed rule or
regulation or adoption of any rule or regulation
concerning such clearing agency or transfer agent,
consult and request the views of the other; and
(ii) such appropriate regulatory agency shall assume
primary responsibility to examine and enforce
compliance by such clearing agency or transfer agent
with the provisions of this section and sections 17 and
19 of this title.
(B) Nothing in the preceding subparagraph or elsewhere in
this title shall be construed to impair or limit (other than by
the requirement of notification) the Commission's authority to
make rules under any provision of this title or to enforce
compliance pursuant to any provision of this title by any
clearing agency, transfer agent, or person associated with a
transfer agent with the provisions of this title and the rules
and regulations thereunder.
(4) Nothing in this section shall be construed to impair the
authority of any State banking authority or other State or
Federal regulatory authority having jurisdiction over a person
registered as a clearing agency, transfer agent, or person
associated with a transfer agent, to make and enforce rules
governing such person which are not inconsistent with this
title and the rules and regulations thereunder.
(5) A registered transfer agent may not, directly or
indirectly, engage in any activity in connection with the
guarantee of a signature of an endorser of a security,
including the acceptance or rejection of such guarantee, in
contravention of such rules and regulations as the Commission
may prescribe as necessary or appropriate in the public
interest, for the protection of investors, to facilitate the
equitable treatment of financial institutions which issue such
guarantees, or otherwise in furtherance of the purposes of this
title.
(e) The Commission shall use its authority under this title
to end the physical movement of securities certificates in
connection with the settlement among brokers and dealers of
transactions in securities consummated by means of the mails or
any means or instrumentalities of interstate commerce.
(f)(1) Notwithstanding any provision of State law, except as
provided in paragraph (3), if the Commission makes each of the
findings described in paragraph (2)(A), the Commission may
adopt rules concerning--
(A) the transfer of certificated or uncertificated
securities (other than government securities issued
pursuant to chapter 31 of title 31, United States Code,
or securities otherwise processed within a book-entry
system operated by the Federal Reserve banks pursuant
to a Federal book-entry regulation) or limited
interests (including security interests) therein; and
(B) rights and obligations of purchasers, sellers,
owners, lenders, borrowers, and financial
intermediaries (including brokers, dealers, banks, and
clearing agencies) involved in or affected by such
transfers, and the rights of third parties whose
interests in such securities devolve from such
transfers.
(2)(A) The findings described in this paragraph are findings
by the Commission that--
(i) such rule is necessary or appropriate for the
protection of investors or in the public interest and
is reasonably designed to promote the prompt, accurate,
and safe clearance and settlement of securities
transactions;
(ii) in the absence of a uniform rule, the safe and
efficient operation of the national system for
clearance and settlement of securities transactions
will be, or is, substantially impeded; and
(iii) to the extent such rule will impair or
diminish, directly or indirectly, rights of persons
specified in paragraph (1)(B) under State law
concerning transfers of securities (or limited
interests therein), the benefits of such rule outweigh
such impairment or diminution of rights.
(B) In making the findings described in subparagraph (A), the
Commission shall give consideration to the recommendations of
the Advisory Committee established under paragraph (4), and it
shall consult with and consider the views of the Secretary of
the Treasury and the Board of Governors of the Federal Reserve
System. If the Secretary of the Treasury objects, in writing,
to any proposed rule of the Commission on the basis of the
Secretary's view on the issues described in clauses (i), (ii),
and (iii) of subparagraph (A), the Commission shall consider
all feasible alternatives to the proposed rule, and it shall
not adopt any such rule unless the Commission makes an explicit
finding that the rule is the most practicable method for
achieving safe and efficient operation of the national
clearance and settlement system.
(3) Any State may, prior to the expiration of 2 years after
the Commission adopts a rule under this subsection, enact a
statute that specifically refers to this subsection and the
specific rule thereunder and establishes, prospectively from
the date of enactment of the State statute, a provision that
differs from that applicable under the Commission's rule.
(4)(A) Within 90 days after the date of enactment of this
subsection, the Commission shall (and at such times thereafter
as the Commission may determine, the Commission may), after
consultation with the Secretary of the Treasury and the Board
of Governors of the Federal Reserve System, establish an
advisory committee under the Federal Advisory Committee Act (5
U.S.C. App.). The Advisory Committee shall be directed to
consider and report to the Commission on such matters as the
Commission, after consultation with the Secretary of the
Treasury and the Board of Governors of the Federal Reserve
System, determines, including the areas, if any, in which State
commercial laws and related Federal laws concerning the
transfer of certificated or uncertificated securities, limited
interests (including security interests) in such securities, or
the creation or perfection of security interests in such
securities do not provide the necessary certainty, uniformity,
and clarity for purchasers, sellers, owners, lenders,
borrowers, and financial intermediaries concerning their
respective rights and obligations.
(B) The Advisory Committee shall consist of 15 members, of
which--
(i) 11 shall be designated by the Commission in
accordance with the Federal Advisory Committee Act; and
(ii) 2 each shall be designated by the Board of
Governors of the Federal Reserve System and the
Secretary of the Treasury.
(C) The Advisory Committee shall conduct its activities in
accordance with the Federal Advisory Committee Act. Within 6
months of its designation, or such longer time as the
Commission may designate, the Advisory Committee shall issue a
report to the Commission, and shall cause copies of that report
to be delivered to the Secretary of the Treasury and the
Chairman of the Board of Governors of the Federal Reserve
System.
(g) Registration Requirement.--It shall be unlawful for a
clearing agency, unless registered with the Commission,
directly or indirectly to make use of the mails or any means or
instrumentality of interstate commerce to perform the functions
of a clearing agency with respect to a security-based swap.
(h) Voluntary Registration.--A person that clears agreements,
contracts, or transactions that are not required to be cleared
under this title may register with the Commission as a clearing
agency.
(i) Standards for Clearing Agencies Clearing Security-based
Swap Transactions.--To be registered and to maintain
registration as a clearing agency that clears security-based
swap transactions, a clearing agency shall comply with such
standards as the Commission may establish by rule. In
establishing any such standards, and in the exercise of its
oversight of such a clearing agency pursuant to this title, the
Commission may conform such standards or oversight to reflect
evolving United States and international standards. Except
where the Commission determines otherwise by rule or
regulation, a clearing agency shall have reasonable discretion
in establishing the manner in which it complies with any such
standards.
(j) Rules.--The Commission shall adopt rules governing
persons that are registered as clearing agencies for security-
based swaps under this title.
(k) Exemptions.--The Commission may exempt, conditionally or
unconditionally, a clearing agency from registration under this
section for the clearing of security-based swaps if the
Commission determines that the clearing agency is subject to
comparable, comprehensive supervision and regulation by the
Commodity Futures Trading Commission or the appropriate
government authorities in the home country of the agency. Such
conditions may include, but are not limited to, requiring that
the clearing agency be available for inspection by the
Commission and make available all information requested by the
Commission.
(l) Existing Depository Institutions and Derivative Clearing
Organizations.--
(1) In general.--A depository institution or
derivative clearing organization registered with the
Commodity Futures Trading Commission under the
Commodity Exchange Act that is required to be
registered as a clearing agency under this section is
deemed to be registered under this section solely for
the purpose of clearing security-based swaps to the
extent that, before the date of enactment of this
subsection--
(A) the depository institution cleared swaps
as a multilateral clearing organization; or
(B) the derivative clearing organization
cleared swaps pursuant to an exemption from
registration as a clearing agency.
(2) Conversion of depository institutions.--A
depository institution to which this subsection applies
may, by the vote of the shareholders owning not less
than 51 percent of the voting interests of the
depository institution, be converted into a State
corporation, partnership, limited liability company, or
similar legal form pursuant to a plan of conversion, if
the conversion is not in contravention of applicable
State law.
(3) Sharing of information.--The Commodity Futures
Trading Commission shall make available to the
Commission, upon request, all information determined to
be relevant by the Commodity Futures Trading Commission
regarding a derivatives clearing organization deemed to
be registered with the Commission under paragraph (1).
(m) Modification of Core Principles.--The Commission may
conform the core principles established in this section to
reflect evolving United States and international standards.
[(g)] (n) Due Diligence for the Delivery of Dividends,
Interest, and Other Valuable Property Rights.--
(1) Revision of rules required.--The Commission shall
revise its regulations in section 240.17Ad-17 of title
17, Code of Federal Regulations, as in effect on
December 8, 1997, to extend the application of such
section to brokers and dealers and to provide for the
following:
(A) A requirement that the paying agent
provide a single written notification to each
missing security holder that the missing
security holder has been sent a check that has
not yet been negotiated. The written
notification may be sent along with a check or
other mailing subsequently sent to the missing
security holder but must be provided no later
than 7 months after the sending of the not yet
negotiated check.
(B) An exclusion for paying agents from the
notification requirements when the value of the
not yet negotiated check is less than $25.
(C) A provision clarifying that the
requirements described in subparagraph (A)
shall have no effect on State escheatment laws.
(D) For purposes of such revised
regulations--
(i) a security holder shall be
considered a ``missing security
holder'' if a check is sent to the
security holder and the check is not
negotiated before the earlier of the
paying agent sending the next regularly
scheduled check or the elapsing of 6
months after the sending of the not yet
negotiated check; and
(ii) the term ``paying agent''
includes any issuer, transfer agent,
broker, dealer, investment adviser,
indenture trustee, custodian, or any
other person that accepts payments from
the issuer of a security and
distributes the payments to the holders
of the security.
(2) Rulemaking.--The Commission shall adopt such
rules, regulations, and orders necessary to implement
this subsection no later than 1 year after the date of
enactment of this subsection. In proposing such rules,
the Commission shall seek to minimize disruptions to
current systems used by or on behalf of paying agents
to process payment to account holders and avoid
requiring multiple paying agents to send written
notification to a missing security holder regarding the
same not yet negotiated check.
* * * * * * *
investigations; injunctions and prosecution of offenses
Sec. 21. (a)(1) The Commission may, in its discretion, make
such investigations as it deems necessary to determine whether
any person has violated, is violating, or is about to violate
any provision of this title, the rules or regulations
thereunder, the rules of a national securities exchange or
registered securities association of which such person is a
member or a person associated, or, as to any act or practice,
or omission to act, while associated with a member, formerly
associated with a member, the rules of a registered clearing
agency in which such person is a participant, or, as to any act
or practice, or omission to act, while a participant, was a
participant, the rules of the Public Company Accounting
Oversight Board, of which such person is a registered public
accounting firm, a person associated with such a firm, or, as
to any act, practice, or omission to act, while associated with
such firm, a person formerly associated with such a firm, or
the rules of the Municipal Securities Rulemaking Board, and may
require or permit any person to file with it a statement in
writing, under oath or otherwise as the Commission shall
determine, as to all the facts and circumstances concerning the
matter to be investigated. The Commission is authorized in its
discretion, to publish information concerning any such
violations, and to investigate any facts, conditions,
practices, or matters which it may deem necessary or proper to
aid in the enforcement of such provisions, in the prescribing
of rules and regulations under this title, or in securing
information to serve as a basis for recommending further
legislation concerning the matters to which this title relates.
(2) On request from a foreign securities authority, the
Commission may provide assistance in accordance with this
paragraph if the requesting authority states that the
requesting authority is conducting an investigation which it
deems necessary to determine whether any person has violated,
is violating, or is about to violate any laws or rules relating
to securities matters that the requesting authority administers
or enforces. The Commission may, in its discretion, conduct
such investigation as the Commission deems necessary to collect
information and evidence pertinent to the request for
assistance. Such assistance may be provided without regard to
whether the facts stated in the request would also constitute a
violation of the laws of the United States. In deciding whether
to provide such assistance, the Commission shall consider
whether (A) the requesting authority has agreed to provide
reciprocal assistance in securities matters to the Commission;
and (B) compliance with the request would prejudice the public
interest of the United States.
(b) Supoena.--[For the purpose of]
(1) In general._For the purpose of any such
investigation, or any other proceeding under this
title, any member of the Commission or any officer
designated by it is empowered to administer oaths and
affirmations, subpoena witnesses, compel their
attendance, take evidence, and require the production
of any books, papers, correspondence, memoranda, or
other records which the Commission deems relevant or
material to the inquiry. Such attendance of witnesses
and the production of any such records may be required
from any place in the United States or any State at any
designated place of hearing.
(2) Omnibus orders of investigation.--
(A) Duration and renewal.--An omnibus order
of investigation shall not be for an indefinite
duration and may be renewed only by Commission
action.
(B) Definition.--In paragraph (A), the term
``omnibus order of investigation'' means an
order of the Commission authorizing 1 of more
members of the Commission or its staff to issue
subpoenas under paragraph (1) to multiple
persons in relation to a particular subject
matter area.
(c) In case of contumacy by, or refusal to obey a subpoena
issued to, any person, the Commission may invoke the aid of any
court of the United States within the jurisdiction of which
such investigation or proceeding is carried on, or where such
person resides or carries on business, in requiring the
attendance and testimony of witnesses and the production of
books, papers, correspondence, memoranda, and other records.
And such court may issue an order requiring such person to
appear before the Commission or member or officer designated by
the Commission, there to produce records, if so ordered, or to
give testimony touching the matter under investigation or in
question; and any failure to obey such order of the court may
be punished by such court as a contempt thereof. All process in
any such case may be served in the judicial district whereof
such person is an inhabitant or wherever he may be found. Any
person who shall, without just cause, fail or refuse to attend
and testify or to answer any lawful inquiry or to produce
books, papers, correspondence, memoranda, and other records, if
in his power so to do, in obedience to the subpoena of the
Commission, shall be guilty of a misdemeanor and, upon
conviction, shall be subject to a fine of not more than $1,000
or to imprisonment for a term of not more than one year, or
both.
(d)(1) Whenever it shall appear to the Commission that any
person is engaged or is about to engage in acts or practices
constituting a violation of any provision of this title, the
rules or regulations thereunder, the rules of a national
securities exchange or registered securities association of
which such person is a member or a person associated with a
member, the rules of a registered clearing agency in which such
person is a participant, the rules of the Public Company
Accounting Oversight Board, of which such person is a
registered public accounting firm or a person associated with
such a firm, or the rules of the Municipal Securities
Rulemaking Board, it may in its discretion bring an action in
the proper district court of the United States, the United
States District Court for the District of Columbia, or the
United States courts of any territory or other place subject to
the jurisdiction of the United States, to enjoin such acts or
practices, and upon a proper showing a permanent or temporary
injunction or restraining order shall be granted without bond.
The Commission may transmit such evidence as may be available
concerning such acts or practices as may constitute a violation
of any provision of this title or the rules or regulations
thereunder to the Attorney General, who may, in his discretion,
institute the necessary criminal proceedings under this title.
(2) Authority of a Court To Prohibit Persons From Serving as
Officers and Directors.--In any proceeding under paragraph (1)
of this subsection, the court may prohibit, conditionally or
unconditionally, and permanently or for such period of time as
it shall determine, any person who violated section 10(b) of
this title or the rules or regulations thereunder from acting
as an officer or director of any issuer that has a class of
securities registered pursuant to section 12 of this title or
that is required to file reports pursuant to section 15(d) of
this title if the person's conduct demonstrates unfitness to
serve as an officer or director of any such issuer.
(3) Money Penalties in Civil Actions.--
(A) Authority of commission.--Whenever it shall
appear to the Commission that any person has violated
any provision of this title, the rules or regulations
thereunder, a Federal court injunction or a bar
obtained or entered by the Commission under this title,
or a cease-and-desist order entered by the Commission
pursuant to section 21C of this title, other than by
committing a violation subject to a penalty pursuant to
section 21A, the Commission may bring an action in a
United States district court to seek, and the court
shall have jurisdiction to impose, upon a proper
showing, a civil penalty to be paid by the person who
committed such violation.
(B) Amount of penalty.--
(i) First tier.--The amount of the penalty
shall be determined by the court in light of
the facts and circumstances. For each
violation, the amount of the penalty shall not
exceed the greater of (I) [$5,000] $10,000 for
a natural person or [$50,000] $100,000 for any
other person, or (II) the gross amount of
pecuniary gain to such defendant as a result of
the violation.
(ii) Second tier.--Notwithstanding clause
(i), the amount of penalty for each such
violation shall not exceed the greater of (I)
[$50,000] $100,000 for a natural person or
[$250,000] $500,000 for any other person, or
(II) the gross amount of pecuniary gain to such
defendant as a result of the violation, if the
violation described in subparagraph (A)
involved fraud, deceit, manipulation, or
deliberate or reckless disregard of a
regulatory requirement.
[(iii) Third tier.--Notwithstanding clauses
(i) and (ii), the amount of penalty for each
such violation shall not exceed the greater of
(I) $100,000 for a natural person or $500,000
for any other person, or (II) the gross amount
of pecuniary gain to such defendant as a result
of the violation, if--
[(aa) the violation described in
subparagraph (A) involved fraud,
deceit, manipulation, or deliberate or
reckless disregard of a regulatory
requirement; and
[(bb) such violation directly or
indirectly resulted in substantial
losses or created a significant risk of
substantial losses to other persons.]
(iii) Third tier.--
(I) In general.--Notwithstanding
clauses (i) and (ii), the amount of
penalty for each such violation shall
not exceed the amount specified in
subclause (II) if--
(aa) the violation described
in subparagraph (A) involved
fraud, deceit, manipulation, or
deliberate or reckless
disregard of a regulatory
requirement; and
(bb) such violation directly
or indirectly resulted in
substantial losses or created a
significant risk of substantial
losses to other persons.
(II) Maximum amount of penalty.--The
amount referred to in subclause (I) is
the greatest of--
(aa) $300,000 for a natural
person or $1,450,000 for any
other person;
(bb) 3 times the gross amount
of pecuniary gain to such
defendant as a result of the
violation; or
(cc) the amount of losses
incurred by victims as a result
of the violation.
(iv) Fourth tier.--Notwithstanding clauses
(i), (ii), and (iii), the maximum amount of
penalty for each such violation shall be 3
times the otherwise applicable amount in such
clauses if, within the 5-year period preceding
such violation, the defendant was criminally
convicted for securities fraud or became
subject to a judgment or order imposing
monetary, equitable, or administrative relief
in any Commission action alleging fraud by that
defendant.
(C) Procedures for collection.--
(i) Payment of penalty to treasury.--A
penalty imposed under this section shall be
payable into the Treasury of the United States,
except as otherwise provided in section 308 of
the Sarbanes-Oxley Act of 2002 and section 21F
of this title.
(ii) Collection of penalties.--If a person
upon whom such a penalty is imposed shall fail
to pay such penalty within the time prescribed
in the court's order, the Commission may refer
the matter to the Attorney General who shall
recover such penalty by action in the
appropriate United States district court.
(iii) Remedy not exclusive.--The actions
authorized by this paragraph may be brought in
addition to any other action that the
Commission or the Attorney General is entitled
to bring.
(iv) Jurisdiction and venue.--For purposes of
section 27 of this title, actions under this
paragraph shall be actions to enforce a
liability or a duty created by this title.
[(D) Special provisions relating to a violation of a
cease-and-desist order.--In an action to enforce a
cease-and-desist order entered by the Commission
pursuant to section 21C, each separate violation of
such order shall be a separate offense, except that in
the case of a violation through a continuing failure to
comply with the order, each day of the failure to
comply shall be deemed a separate offense.]
(D) Special provisions relating to a violation of an
injunction or certain orders.--
(i) In general.--Each separate violation of
an injunction or order described in clause (ii)
shall be a separate offense, except that in the
case of a violation through a continuing
failure to comply with such injunction or
order, each day of the failure to comply with
the injunction or order shall be deemed a
separate offense.
(ii) Injunctions and orders.--Clause (i)
shall apply with respect to an action to
enforce--
(I) a Federal court injunction
obtained pursuant to this title;
(II) an order entered or obtained by
the Commission pursuant to this title
that bars, suspends, places limitations
on the activities or functions of, or
prohibits the activities of, a person;
or
(III) a cease-and-desist order
entered by the Commission pursuant to
section 21C.
(4) Prohibition of attorneys' fees paid from
commission disgorgement funds.--Except as otherwise
ordered by the court upon motion by the Commission, or,
in the case of an administrative action, as otherwise
ordered by the Commission, funds disgorged as the
result of an action brought by the Commission in
Federal court, or as a result of any Commission
administrative action, shall not be distributed as
payment for attorneys' fees or expenses incurred by
private parties seeking distribution of the disgorged
funds.
(5) Equitable Relief.--In any action or proceeding brought or
instituted by the Commission under any provision of the
securities laws, the Commission may seek, and any Federal court
may grant, any equitable relief that may be appropriate or
necessary for the benefit of investors.
(6) Authority of a court to prohibit persons from
participating in an offering of penny stock.--
(A) In general.--In any proceeding under paragraph
(1) against any person participating in, or, at the
time of the alleged misconduct who was participating
in, an offering of penny stock, the court may prohibit
that person from participating in an offering of penny
stock, conditionally or unconditionally, and
permanently or for such period of time as the court
shall determine.
(B) Definition.--For purposes of this paragraph, the
term ``person participating in an offering of penny
stock'' includes any person engaging in activities with
a broker, dealer, or issuer for purposes of issuing,
trading, or inducing or attempting to induce the
purchase or sale of, any penny stock. The Commission
may, by rule or regulation, define such term to include
other activities, and may, by rule, regulation, or
order, exempt any person or class of persons, in whole
or in part, conditionally or unconditionally, from
inclusion in such term.
(e) Upon application of the Commission the district courts of
the United States and the United States courts of any territory
or other place subject to the jurisdiction of the United States
shall have jurisdiction to issue writs of mandamus,
injunctions, and orders commanding (1) any person to comply
with the provisions of this title, the rules, regulations, and
orders thereunder, the rules of a national securities exchange
or registered securities association of which such person is a
member or person associated with a member, the rules of a
registered clearing agency in which such person is a
participant, the rules of the Public Company Accounting
Oversight Board, of which such person is a registered public
accounting firm or a person associated with such a firm, the
rules of the Municipal Securities Rulemaking Board, or any
undertaking contained in a registration statement as provided
in subsection (d) of section 15 of this title, (2) any national
securities exchange or registered securities association to
enforce compliance by its members and persons associated with
its members with the provisions of this title, the rules,
regulations, and orders thereunder, and the rules of such
exchange or association, or (3) any registered clearing agency
to enforce compliance by its participants with the provisions
of the rules of such clearing agency.
(f) Notwithstanding any other provision of this title, the
Commission shall not bring any action pursuant to subsection
(d) or (e) of this section against any person for violation of,
or to command compliance with, the rules of a self-regulatory
organization or the Public Company Accounting Oversight Board
unless it appears to the Commission that (1) such self-
regulatory organization or the Public Company Accounting
Oversight Board is unable or unwilling to take appropriate
action against such person in the public interest and for the
protection of investors, or (2) such action is otherwise
necessary or appropriate in the public interest or for the
protection of investors.
(g) Notwithstanding the provisions of section 1407(a) of
title 28, United States Code, or any other provision of law, no
action for equitable relief instituted by the Commission
pursuant to the securities laws shall be consolidated or
coordinated with other actions not brought by the Commission,
even though such other actions may involve common questions of
fact, unless such consolidation is consented to by the
Commission.
(h)(1) The Right to Financial Privacy Act of 1978 shall apply
with respect to the Commission, except as otherwise provided in
this subsection.
(2) Notwithstanding section 1105 or 1107 of the Right to
Financial Privacy Act of 1978, the Commission may have access
to and obtain copies of, or the information contained in
financial records of a customer from a financial institution
without prior notice to the customer upon an ex parte showing
to an appropriate United States district court that the
Commission seeks such financial records pursuant to a subpoena
issued in conformity with the requirements of section 19(b) of
the Securities Act of 1933, section 21(b) of the Securities
Exchange Act of 1934, section 42(b) of the Investment Company
Act of 1940, or section 209(b) of the Investment Advisers Act
of 1940, and that the Commission has reason to believe that--
(A) delay in obtaining access to such financial
records, or the required notice, will result in--
(i) flight from prosecution;
(ii) destruction of or tampering with
evidence;
(iii) transfer of assets or records outside
the territorial limits of the United States;
(iv) improper conversion of investor assets;
or
(v) impeding the ability of the Commission to
identify or trace the source or disposition of
funds involved in any securities transaction;
(B) such financial records are necessary to identify
or trace the record or beneficial ownership interest in
any security;
(C) the acts, practices or course of conduct under
investigation involve--
(i) the dissemination of materially false or
misleading information concerning any security,
issuer, or market, or the failure to make
disclosures required under the securities laws,
which remain uncorrected; or
(ii) a financial loss to investors or other
persons protected under the securities laws
which remains substantially uncompensated; or
(D) the acts, practices or course of conduct under
investigation--
(i) involve significant financial speculation
in securities; or
(ii) endanger the stability of any financial
or investment intermediary.
(3) Any application under paragraph (2) for a delay in notice
shall be made with reasonable specificity.
(4)(A) Upon a showing described in paragraph (2), the
presiding judge or magistrate shall enter an ex parte order
granting the requested delay for a period not to exceed ninety
days and an order prohibiting the financial institution
involved from disclosing that records have been obtained or
that a request for records has been made.
(B) Extensions of the period of delay of notice provided in
subparagraph (A) of up to ninety days each may be granted by
the court upon application, but only in accordance with this
subsection or section 1109(a), (b)(1), or (b)(2) of the Right
to Financial Privacy Act of 1978.
(C) Upon expiration of the period of delay of notification
ordered under subparagraph (A) or (B), the customer shall be
served with or mailed a copy of the subpena insofar as it
applies to the customer together with the following notice
which shall describe with reasonable specificity the nature of
the investigation for which the Commission sought the financial
records:``Records or information concerning your transactions
which are held by the financial institution named in the
attached subpena were supplied to the Securities and Exchange
Commission on (date). Notification was withheld pursuant to a
determination by the (title of court so ordering) under section
21(h) of the Securities Exchange Act of 1934 that (state
reason). The purpose of the investigation or official
proceeding was (state purpose).''
(5) Upon application by the Commission, all proceedings
pursuant to paragraphs (2) and (4) shall be held in camera and
the records thereof sealed until expiration of the period of
delay or such other date as the presiding judge or magistrate
may permit.
(7)(A) Following the expiration of the period of delay of
notification ordered by the court pursuant to paragraph (4) of
this subsection, the customer may, upon motion, reopen the
proceeding in the district court which issued the order. If the
presiding judge or magistrate finds that the movant is the
customer to whom the records obtained by the Commission
pertain, and that the Commission has obtained financial records
or information contained therein in violation of this
subsection, other than paragraph (1), it may order that the
customer be granted civil penalties against the Commission in
an amount equal to the sum of--
(i) $100 without regard to the volume of records
involved;
(ii) any out-of-pocket damages sustained by the
customer as a direct result of the disclosure; and
(iii) if the violation is found to have been willful,
intentional, and without good faith, such punitive
damages as the court may allow, together with the costs
of the action and reasonable attorney's fees as
determined by the court.
(B) Upon a finding that the Commission has obtained financial
records or information contained therein in violation of this
subsection, other than paragraph (1), the court, in its
discretion, may also or in the alternative issue injunctive
relief to require the Commission to comply with this subsection
with respect to any subpena which the Commission issues in the
future for financial records of such customer for purposes of
the same investigation.
(C) Whenever the court determines that the Commission has
failed to comply with this subsection, other than paragraph
(1), and the court finds that the circumstances raise questions
of whether an officer or employee of the Commission acted in a
willful and intentional manner and without good faith with
respect to the violation, the Office of Personnel Management
shall promptly initiate a proceeding to determine whether
disciplinary action is warranted against the agent or employee
who was primarily responsible for the violation. After
investigating and considering the evidence submitted, the
Office of Personnel Management shall submit its findings and
recommendations to the Commission and shall send copies of the
findings and recommendations to the officer or employee or his
representative. The Commission shall take the corrective action
that the Office of Personnel Management recommends.
(8) The relief described in paragraphs (7) and (10) shall be
the only remedies or sanctions available to a customer for a
violation of this subsection, other than paragraph (1), and
nothing herein or in the Right to Financial Privacy Act of 1978
shall be deemed to prohibit the use in any investigation or
proceeding of financial records, or the information contained
therein, obtained by a subpena issued by the Commission. In the
case of an unsuccessful action under paragraph (7), the court
shall award the costs of the action and attorney's fees to the
Commission if the presiding judge or magistrate finds that the
customer's claims were made in bad faith.
(9)(A) The Commission may transfer financial records or the
information contained therein to any government authority if
the Commission proceeds as a transferring agency in accordance
with section 1112 of the Right to Financial Privacy Act of
1978, except that the customer notice required under section
1112(b) or (c) of such Act may be delayed upon a showing by the
Commission, in accordance with the procedure set forth in
paragraphs (4) and (5), that one or more of subparagraphs (A)
through (D) of paragraph (2) apply.
(B) The Commission may, without notice to the customer
pursuant to section 1112 of the Right to Financial Privacy Act
of 1978, transfer financial records or the information
contained therein to a State securities agency or to the
Department of Justice. Financial records or information
transferred by the Commission to the Department of Justice or
to a State securities agency pursuant to the provisions of this
subparagraph may be disclosed or used only in an
administrative, civil, or criminal action or investigation by
the Department of Justice or the State securities agency which
arises out of or relates to the acts, practices, or courses of
conduct investigated by the Commission, except that if the
Department of Justice or the State securities agency determines
that the information should be disclosed or used for any other
purpose, it may do so if it notifies the customer, except as
otherwise provided in the Right to Financial Privacy Act of
1978, within 30 days of its determination, or complies with the
requirements of section 1109 of such Act regarding delay of
notice.
(10) Any government authority violating paragraph (9) shall
be subject to the procedures and penalties applicable to the
Commission under paragraph (7)(A) with respect to a violation
by the Commission in obtaining financial records.
(11) Notwithstanding the provisions of this subsection, the
Commission may obtain financial records from a financial
institution or transfer such records in accordance with
provisions of the Right to Financial Privacy Act of 1978.
(12) Nothing in this subsection shall enlarge or restrict any
rights of a financial institution to challenge requests for
records made by the Commission under existing law. Nothing in
this subsection shall entitle a customer to assert any rights
of a financial institution.
(13) Unless the context otherwise requires, all terms defined
in the Right to Financial Privacy Act of 1978 which are common
to this subsection shall have the same meaning as in such Act.
(i) Information to CFTC.--The Commission shall provide the
Commodity Futures Trading Commission with notice of the
commencement of any proceeding and a copy of any order entered
by the Commission against any broker or dealer registered
pursuant to section 15(b)(11), any exchange registered pursuant
to section 6(g), or any national securities association
registered pursuant to section 15A(k).
(k) Adequate Notice Required Before Bringing an Enforcement
Action.--
(1) In general.--No person shall be subject to an
enforcement action by the Commission for an alleged
violation of the securities laws or the rules and
regulations issued thereunder if such person did not
have adequate notice of such law, rule, or regulation.
(2) Publishing of interpretation deemed adequate
notice.--With respect to an enforcement action,
adequate notice of a securities law or a rule or
regulation issued thereunder shall be deemed to have
been provided to a person if the Commission approved a
statement or guidance, in accordance with Section 4I,
with respect to the conduct that is the subject of the
enforcement action, prior to the time that the person
engaged in the conduct that is the subject of the
enforcement action.
civil penalties for insider trading
Sec. 21A. (a) Authority To Impose Civil Penalties.--
(1) Judicial actions by commission authorized.--
Whenever it shall appear to the Commission that any
person has violated any provision of this title or the
rules or regulations thereunder by purchasing or
selling a security or security-based swap agreement
while in possession of material, nonpublic information
in, or has violated any such provision by communicating
such information in connection with, a transaction on
or through the facilities of a national securities
exchange or from or through a broker or dealer, and
which is not part of a public offering by an issuer of
securities other than standardized options or security
futures products, the Commission--
(A) may bring an action in a United States
district court to seek, and the court shall
have jurisdiction to impose, a civil penalty to
be paid by the person who committed such
violation; and
(B) may, subject to subsection (b)(1), bring
an action in a United States district court to
seek, and the court shall have jurisdiction to
impose, a civil penalty to be paid by a person
who, at the time of the violation, directly or
indirectly controlled the person who committed
such violation.
(2) Amount of penalty for person who committed
violation.--The amount of the penalty which may be
imposed on the person who committed such violation
shall be determined by the court in light of the facts
and circumstances, but shall not exceed three times the
profit gained or loss avoided as a result of such
unlawful purchase, sale, or communication.
(3) Amount of penalty for controlling person.--The
amount of the penalty which may be imposed on any
person who, at the time of the violation, directly or
indirectly controlled the person who committed such
violation, shall be determined by the court in light of
the facts and circumstances, but shall not exceed the
greater of [$1,000,000] $2,500,000, or three times the
amount of the profit gained or loss avoided as a result
of such controlled person's violation. If such
controlled person's violation was a violation by
communication, the profit gained or loss avoided as a
result of the violation shall, for purposes of this
paragraph only, be deemed to be limited to the profit
gained or loss avoided by the person or persons to whom
the controlled person directed such communication.
(b) Limitations on Liability.--
(1) Liability of controlling persons.--No controlling
person shall be subject to a penalty under subsection
(a)(1)(B) unless the Commission establishes that--
(A) such controlling person knew or
recklessly disregarded the fact that such
controlled person was likely to engage in the
act or acts constituting the violation and
failed to take appropriate steps to prevent
such act or acts before they occurred; or
(B) such controlling person knowingly or
recklessly failed to establish, maintain, or
enforce any policy or procedure required under
section 15(f) of this title or section 204A of
the Investment Advisers Act of 1940 and such
failure substantially contributed to or
permitted the occurrence of the act or acts
constituting the violation.
(2) Additional restrictions on liability.--No person
shall be subject to a penalty under subsection (a)
solely by reason of employing another person who is
subject to a penalty under such subsection, unless such
employing person is liable as a controlling person
under paragraph (1) of this subsection. Section 20(a)
of this title shall not apply to actions under
subsection (a) of this section.
(c) Authority of Commission.--the Commission, by such rules,
regulations, and orders as it considers necessary or
appropriate in the public interest or for the protection of
investors, may exempt, in whole or in part, either
unconditionally or upon specific terms and conditions, any
person or transaction or class of persons or transactions from
this section.
(d) Procedures for Collection.--
(1) Payment of penalty to treasury.--A penalty
imposed under this section shall be payable into the
Treasury of the United States, except as otherwise
provided in section 308 of the Sarbanes-Oxley Act of
2002 and section 21F of this title.
(2) Collection of penalties.--If a person upon whom
such a penalty is imposed shall fail to pay such
penalty within the time prescribed in the court's
order, the Commission may refer the matter to the
Attorney General who shall recover such penalty by
action in the appropriate United States district court.
(3) Remedy not exclusive.--The actions authorized by
this section may be brought in addition to any other
actions that the Commission or the Attorney General are
entitled to bring.
(4) Jurisdiction and venue.--For purposes of section
27 of this title, actions under this section shall be
actions to enforce a liability or a duty created by
this title.
(5) Statute of limitations.--No action may be brought
under this section more than 5 years after the date of
the purchase or sale. This section shall not be
construed to bar or limit in any manner any action by
the Commission or the Attorney General under any other
provision of this title, nor shall it bar or limit in
any manner any action to recover penalties, or to seek
any other order regarding penalties, imposed in an
action commenced within 5 years of such transaction.
(e) Definition.--For purposes of this section, ``profit
gained'' or ``loss avoided'' is the difference between the
purchase or sale price of the security and the value of that
security as measured by the trading price of the security a
reasonable period after public dissemination of the nonpublic
information.
(f) The authority of the Commission under this section with
respect to security-based swap agreements (as defined in
section 206B of the Gramm-Leach-Bliley Act) shall be subject to
the restrictions and limitations of section 3A(b) of this
title.
(g) Duty of Members and Employees of Congress.--
(1) In general.--Subject to the rule of construction
under section 10 of the STOCK Act and solely for
purposes of the insider trading prohibitions arising
under this Act, including section 10(b) and Rule 10b-5
thereunder, each Member of Congress or employee of
Congress owes a duty arising from a relationship of
trust and confidence to the Congress, the United States
Government, and the citizens of the United States with
respect to material, nonpublic information derived from
such person's position as a Member of Congress or
employee of Congress or gained from the performance of
such person's official responsibilities.
(2) Definitions.--In this subsection--
(A) the term ``Member of Congress'' means a
member of the Senate or House of
Representatives, a Delegate to the House of
Representatives, and the Resident Commissioner
from Puerto Rico; and
(B) the term ``employee of Congress'' means--
(i) any individual (other than a
Member of Congress), whose compensation
is disbursed by the Secretary of the
Senate or the Chief Administrative
Officer of the House of
Representatives; and
(ii) any other officer or employee of
the legislative branch (as defined in
section 109(11) of the Ethics in
Government Act of 1978 (5 U.S.C. App.
109(11))).
(3) Rule of construction.--Nothing in this subsection
shall be construed to impair or limit the construction
of the existing antifraud provisions of the securities
laws or the authority of the Commission under those
provisions.
(h) Duty of Other Federal Officials.--
(1) In general.--Subject to the rule of construction
under section 10 of the STOCK Act and solely for
purposes of the insider trading prohibitions arising
under this Act, including section 10(b), and Rule 10b-5
thereunder, each executive branch employee, each
judicial officer, and each judicial employee owes a
duty arising from a relationship of trust and
confidence to the United States Government and the
citizens of the United States with respect to material,
nonpublic information derived from such person's
position as an executive branch employee, judicial
officer, or judicial employee or gained from the
performance of such person's official responsibilities.
(2) Definitions.--In this subsection--
(A) the term ``executive branch employee''--
(i) has the meaning given the term
``employee'' under section 2105 of
title 5, United States Code;
(ii) includes--
(I) the President;
(II) the Vice President; and
(III) an employee of the
United States Postal Service or
the Postal Regulatory
Commission;
(B) the term ``judicial employee'' has the
meaning given that term in section 109(8) of
the Ethics in Government Act of 1978 (5 U.S.C.
App. 109(8)); and
(C) the term ``judicial officer'' has the
meaning given that term under section 109(10)
of the Ethics in Government Act of 1978 (5
U.S.C. App. 109(10)).
(3) Rule of construction.--Nothing in this subsection
shall be construed to impair or limit the construction
of the existing antifraud provisions of the securities
laws or the authority of the Commission under those
provisions.
(i) Participation in Initial Public Offerings.--An individual
described in section 101(f) of the Ethics in Government Act of
1978 may not purchase securities that are the subject of an
initial public offering (within the meaning given such term in
section 12(f)(1)(G)(i)) in any manner other than is available
to members of the public generally.
CIVIL REMEDIES IN ADMINISTRATIVE PROCEEDINGS
Sec. 21B. (a) Commission Authority To Assess Money
Penalties.--
(1) In general.--In any proceeding instituted
pursuant to sections 15(b)(4), 15(b)(6), 15D, 15B, 15C,
15E, or 17A of this title against any person, the
Commission or the appropriate regulatory agency may
impose a civil penalty if it finds, on the record after
notice and opportunity for hearing, that such penalty
is in the public interest and that such person--
(A) has willfully violated any provision of
the Securities Act of 1933, the Investment
Company Act of 1940, the Investment Advisers
Act of 1940, or this title, or the rules or
regulations thereunder, or the rules of the
Municipal Securities Rulemaking Board;
(B) has willfully aided, abetted, counseled,
commanded, induced, or procured such a
violation by any other person;
(C) has willfully made or caused to be made
in any application for registration or report
required to be filed with the Commission or
with any other appropriate regulatory agency
under this title, or in any proceeding before
the Commission with respect to registration,
any statement which was, at the time and in the
light of the circumstances under which it was
made, false or misleading with respect to any
material fact, or has omitted to state in any
such application or report any material fact
which is required to be stated therein; or
(D) has failed reasonably to supervise,
within the meaning of section 15(b)(4)(E) of
this title, with a view to preventing
violations of the provisions of such statutes,
rules and regulations, another person who
commits such a violation, if such other person
is subject to his supervision;
(2) Cease-and-desist proceedings.--In any proceeding
instituted under section 21C against any person, the
Commission may impose a civil penalty, if the
Commission finds, on the record after notice and
opportunity for hearing, that such person--
(A) is violating or has violated any
provision of this title, or any rule or
regulation issued under this title; or
(B) is or was a cause of the violation of any
provision of this title, or any rule or
regulation issued under this title.
(b) Maximum Amount of Penalty.--
(1) First tier.--The maximum amount of penalty for
each act or omission described in subsection (a) shall
be [$5,000] $10,000 for a natural person or [$50,000]
$100,000 for any other person.
(2) Second tier.--Notwithstanding paragraph (1), the
maximum amount of penalty for each such act or omission
shall be [$50,000] $100,000 for a natural person or
[$250,000] $500,000 for any other person if the act or
omission described in subsection (a) involved fraud,
deceit, manipulation, or deliberate or reckless
disregard of a regulatory requirement.
[(3) Third tier.--Notwithstanding paragraphs (1) and
(2), the maximum amount of penalty for each such act or
omission shall be $100,000 for a natural person or
$500,000 for any other person if--
[(A) the act or omission described in
subsection (a) involved fraud, deceit,
manipulation, or deliberate or reckless
disregard of a regulatory requirement; and
[(B) such act or omission directly or
indirectly resulted in substantial losses or
created a significant risk of substantial
losses to other persons or resulted in
substantial pecuniary gain to the person who
committed the act or omission.]
(3) Third tier.--
(A) In general.--Notwithstanding paragraphs
(1) and (2), the amount of penalty for each
such act or omission shall not exceed the
amount specified in subparagraph (B) if--
(i) the act or omission described in
subsection (a) involved fraud, deceit,
manipulation, or deliberate or reckless
disregard of a regulatory requirement;
and
(ii) such act or omission directly or
indirectly resulted in substantial
losses or created a significant risk of
substantial losses to other persons or
resulted in substantial pecuniary gain
to the person who committed the act or
omission.
(B) Maximum amount of penalty.--The amount
referred to in subparagraph (A) is the greatest
of--
(i) $300,000 for a natural person or
$1,450,000 for any other person;
(ii) 3 times the gross amount of
pecuniary gain to the person who
committed the act or omission; or
(iii) the amount of losses incurred
by victims as a result of the act or
omission.
(4) Fourth tier.--Notwithstanding paragraphs (1),
(2), and (3), the maximum amount of penalty for each
such act or omission shall be 3 times the otherwise
applicable amount in such paragraphs if, within the 5-
year period preceding such act or omission, the person
who committed the act or omission was criminally
convicted for securities fraud or became subject to a
judgment or order imposing monetary, equitable, or
administrative relief in any Commission action alleging
fraud by that person.
(c) Determination of Public Interest.--In considering under
this section whether a penalty is in the public interest, the
Commission or the appropriate regulatory agency may consider--
(1) whether the act or omission for which such
penalty is assessed involved fraud, deceit,
manipulation, or deliberate or reckless disregard of a
regulatory requirement;
(2) the harm to other persons resulting either
directly or indirectly from such act or omission;
(3) the extent to which any person was unjustly
enriched, taking into account any restitution made to
persons injured by such behavior;
(4) whether such person previously has been found by
the Commission, another appropriate regulatory agency,
or a self-regulatory organization to have violated the
Federal securities laws, State securities laws, or the
rules of a self-regulatory organization, has been
enjoined by a court of competent jurisdiction from
violations of such laws or rules, or has been convicted
by a court of competent jurisdiction of violations of
such laws or of any felony or misdemeanor described in
section 15(b)(4)(B) of this title;
(5) the need to deter such person and other persons
from committing such acts or omissions; and
(6) such other matters as justice may require.
(d) Evidence Concerning Ability To Pay.--In any proceeding in
which the Commission or the appropriate regulatory agency may
impose a penalty under this section, a respondent may present
evidence of the respondent's ability to pay such penalty. The
Commission or the appropriate regulatory agency may, in its
discretion, consider such evidence in determining whether such
penalty is in the public interest. Such evidence may relate to
the extent of such person's ability to continue in business and
the collectability of a penalty, taking into account any other
claims of the United States or third parties upon such person's
assets and the amount of such person's assets.
(e) Authority To Enter an Order Requiring an Accounting and
Disgorgement.--In any proceeding in which the Commission or the
appropriate regulatory agency may impose a penalty under this
section, the Commission or the appropriate regulatory agency
may enter an order requiring accounting and disgorgement,
including reasonable interest. The Commission is authorized to
adopt rules, regulations, and orders concerning payments to
investors, rates of interest, periods of accrual, and such
other matters as it deems appropriate to implement this
subsection.
(f) Security-based Swaps.--
(1) Clearing agency.--Any clearing agency that
knowingly or recklessly evades or participates in or
facilitates an evasion of the requirements of section
3C shall be liable for a civil money penalty in twice
the amount otherwise available for a violation of
section 3C.
(2) Security-based swap dealer or major security-
based swap participant.--Any security-based swap dealer
or major security-based swap participant that knowingly
or recklessly evades or participates in or facilitates
an evasion of the requirements of section 3C shall be
liable for a civil money penalty in twice the amount
otherwise available for a violation of section 3C.
CEASE-AND-DESIST PROCEEDINGS
Sec. 21C. (a) Authority of the Commission.--If the Commission
finds, after notice and opportunity for hearing, that any
person is violating, has violated, or is about to violate any
provision of this title, or any rule or regulation thereunder,
the Commission may publish its findings and enter an order
requiring such person, and any other person that is, was, or
would be a cause of the violation, due to an act or omission
the person knew or should have known would contribute to such
violation, to cease and desist from committing or causing such
violation and any future violation of the same provision, rule,
or regulation. Such order may, in addition to requiring a
person to cease and desist from committing or causing a
violation, require such person to comply, or to take steps to
effect compliance, with such provision, rule, or regulation,
upon such terms and conditions and within such time as the
Commission may specify in such order. Any such order may, as
the Commission deems appropriate, require future compliance or
steps to effect future compliance, either permanently or for
such period of time as the Commission may specify, with such
provision, rule, or regulation with respect to any security,
any issuer, or any other person.
(b) Hearing.--The notice instituting proceedings pursuant to
subsection (a) shall fix a hearing date not earlier than 30
days nor later than 60 days after service of the notice unless
an earlier or a later date is set by the Commission with the
consent of any respondent so served.
(c) Temporary Order.--
(1) In general.--Whenever the Commission determines
that the alleged violation or threatened violation
specified in the notice instituting proceedings
pursuant to subsection (a), or the continuation
thereof, is likely to result in significant dissipation
or conversion of assets, significant harm to investors,
or substantial harm to the public interest, including,
but not limited to, losses to the Securities Investor
Protection Corporation, prior to the completion of the
proceedings, the Commission may enter a temporary order
requiring the respondent to cease and desist from the
violation or threatened violation and to take such
action to prevent the violation or threatened violation
and to prevent dissipation or conversion of assets,
significant harm to investors, or substantial harm to
the public interest as the Commission deems appropriate
pending completion of such proceedings. Such an order
shall be entered only after notice and opportunity for
a hearing, unless the Commission determines that notice
and hearing prior to entry would be impracticable or
contrary to the public interest. A temporary order
shall become effective upon service upon the respondent
and, unless set aside, limited, or suspended by the
Commission or a court of competent jurisdiction, shall
remain effective and enforceable pending the completion
of the proceedings.
(2) Applicability.--Paragraph (1) shall apply only to
a respondent that acts, or, at the time of the alleged
misconduct acted, as a broker, dealer, investment
adviser, investment company, municipal securities
dealer, government securities broker, government
securities dealer, registered public accounting firm
(as defined in section 2 of the Sarbanes-Oxley Act of
2002), or transfer agent, or is, or was at the time of
the alleged misconduct, an associated person of, or a
person seeking to become associated with, any of the
foregoing.
(3) Temporary freeze.--
(A) In general.--
(i) Issuance of temporary order.--
Whenever, during the course of a lawful
investigation involving possible
violations of the Federal securities
laws by an issuer of publicly traded
securities or any of its directors,
officers, partners, controlling
persons, agents, or employees, it shall
appear to the Commission that it is
likely that the issuer will make
extraordinary payments (whether
compensation or otherwise) to any of
the foregoing persons, the Commission
may petition a Federal district court
for a temporary order requiring the
issuer to escrow, subject to court
supervision, those payments in an
interest-bearing account for 45 days.
(ii) Standard.--A temporary order
shall be entered under clause (i), only
after notice and opportunity for a
hearing, unless the court determines
that notice and hearing prior to entry
of the order would be impracticable or
contrary to the public interest.
(iii) Effective period.--A temporary
order issued under clause (i) shall--
(I) become effective
immediately;
(II) be served upon the
parties subject to it; and
(III) unless set aside,
limited or suspended by a court
of competent jurisdiction,
shall remain effective and
enforceable for 45 days.
(iv) Extensions authorized.--The
effective period of an order under this
subparagraph may be extended by the
court upon good cause shown for not
longer than 45 additional days,
provided that the combined period of
the order shall not exceed 90 days.
(B) Process on Determination of violations.--
(i) Violations charged.--If the
issuer or other person described in
subparagraph (A) is charged with any
violation of the Federal securities
laws before the expiration of the
effective period of a temporary order
under subparagraph (A) (including any
applicable extension period), the order
shall remain in effect, subject to
court approval, until the conclusion of
any legal proceedings related thereto,
and the affected issuer or other
person, shall have the right to
petition the court for review of the
order.
(ii) Violations not charged.--If the
issuer or other person described in
subparagraph (A) is not charged with
any violation of the Federal securities
laws before the expiration of the
effective period of a temporary order
under subparagraph (A) (including any
applicable extension period), the
escrow shall terminate at the
expiration of the 45-day effective
period (or the expiration of any
extension period, as applicable), and
the disputed payments (with accrued
interest) shall be returned to the
issuer or other affected person.
(d) Review of Temporary Orders.--
(1) Commission review.--At any time after the
respondent has been served with a temporary cease-and-
desist order pursuant to subsection (c), the respondent
may apply to the Commission to have the order set
aside, limited, or suspended. If the respondent has
been served with a temporary cease-and-desist order
entered without a prior Commission hearing, the
respondent may, within 10 days after the date on which
the order was served, request a hearing on such
application and the Commission shall hold a hearing and
render a decision on such application at the earliest
possible time.
(2) Judicial review.--Within--
(A) 10 days after the date the respondent was
served with a temporary cease-and-desist order
entered with a prior Commission hearing, or
(B) 10 days after the Commission renders a
decision on an application and hearing under
paragraph (1), with respect to any temporary
cease-and-desist order entered without a prior
Commission hearing,
the respondent may apply to the United States district
court for the district in which the respondent resides
or has its principal place of business, or for the
District of Columbia, for an order setting aside,
limiting, or suspending the effectiveness or
enforcement of the order, and the court shall have
jurisdiction to enter such an order. A respondent
served with a temporary cease-and-desist order entered
without a prior Commission hearing may not apply to the
court except after hearing and decision by the
Commission on the respondent's application under
paragraph (1) of this subsection.
(3) No automatic stay of temporary order.--The
commencement of proceedings under paragraph (2) of this
subsection shall not, unless specifically ordered by
the court, operate as a stay of the Commission's order.
(4) Exclusive review.--Section 25 of this title shall
not apply to a temporary order entered pursuant to this
section.
(e) Authority To Enter an Order Requiring an Accounting and
Disgorgement.--In any cease-and-desist proceeding under
subsection (a), the Commission may enter an order requiring
accounting and disgorgement, including reasonable interest. The
Commission is authorized to adopt rules, regulations, and
orders concerning payments to investors, rates of interest,
periods of accrual, and such other matters as it deems
appropriate to implement this subsection.
[(f) Authority of the Commission to Prohibit Persons From
Serving as Officers or Directors.--In any cease-and-desist
proceeding under subsection (a), the Commission may issue an
order to prohibit, conditionally or unconditionally, and
permanently or for such period of time as it shall determine,
any person who has violated section 10(b) or the rules or
regulations thereunder, from acting as an officer or director
of any issuer that has a class of securities registered
pursuant to section 12, or that is required to file reports
pursuant to section 15(d), if the conduct of that person
demonstrates unfitness to serve as an officer or director of
any such issuer.]
* * * * * * *
SEC. 21F. SECURITIES WHISTLEBLOWER INCENTIVES AND PROTECTION.
(a) Definitions.--In this section the following definitions
shall apply:
(1) Covered judicial or administrative action.--The
term ``covered judicial or administrative action''
means any judicial or administrative action brought by
the Commission under the securities laws that results
in monetary sanctions exceeding $1,000,000.
(2) Fund.--The term ``Fund'' means the Securities and
Exchange Commission Investor Protection Fund.
(3) Original information.--The term ``original
information'' means information that--
(A) is derived from the independent knowledge
or analysis of a whistleblower;
(B) is not known to the Commission from any
other source, unless the whistleblower is the
original source of the information; and
(C) is not exclusively derived from an
allegation made in a judicial or administrative
hearing, in a governmental report, hearing,
audit, or investigation, or from the news
media, unless the whistleblower is a source of
the information.
(4) Monetary sanctions.--The term ``monetary
sanctions'', when used with respect to any judicial or
administrative action, means--
(A) any monies, including penalties,
disgorgement, and interest, [ordered] required
to be paid; and
(B) any monies deposited into a disgorgement
fund or other fund pursuant to section 308(b)
of the Sarbanes-Oxley Act of 2002 (15 U.S.C.
7246(b)), as a result of such action or any
settlement of such action.
(5) Related action.--The term ``related action'',
when used with respect to any judicial or
administrative action brought by the Commission under
the securities laws, means any judicial or
administrative action brought by an entity described in
subclauses (I) through (IV) of subsection (h)(2)(D)(i)
that is based upon the original information provided by
a whistleblower pursuant to subsection (a) that led to
the successful enforcement of the Commission action.
(6) Whistleblower.--The term ``whistleblower'' means
any individual who provides, or 2 or more individuals
acting jointly who provide, information relating to a
violation of the securities laws to the Commission, in
a manner established, by rule or regulation, by the
Commission.
(b) Awards.--
(1) In general.--In any covered judicial or
administrative action, or related action, the
Commission, under regulations prescribed by the
Commission and subject to subsection (c), shall pay an
award or awards to 1 or more whistleblowers who
voluntarily provided original information to the
Commission that led to the successful enforcement of
the covered judicial or administrative action, or
related action, in an aggregate amount equal to--
(A) not less than 10 percent, in total, of
what has been collected of the monetary
sanctions imposed in the action or related
actions; and
(B) not more than 30 percent, in total, of
what has been collected of the monetary
sanctions imposed in the action or related
actions.
(2) Payment of awards.--Any amount paid under
paragraph (1) shall be paid from the Fund.
(c) Determination of Amount of Award; Denial of Award.--
(1) Determination of amount of award.--
(A) Discretion.--The determination of the
amount of an award made under subsection (b)
shall be in the discretion of the Commission.
(B) Criteria.--In determining the amount of
an award made under subsection (b), the
Commission--
(i) shall take into consideration--
(I) the significance of the
information provided by the
whistleblower to the success of
the covered judicial or
administrative action;
(II) the degree of assistance
provided by the whistleblower
and any legal representative of
the whistleblower in a covered
judicial or administrative
action;
(III) the programmatic
interest of the Commission in
deterring violations of the
securities laws by making
awards to whistleblowers who
provide information that lead
to the successful enforcement
of such laws; and
(IV) such additional relevant
factors as the Commission may
establish by rule or
regulation; and
(ii) shall not take into
consideration the balance of the Fund.
(2) Denial of award.--No award under subsection (b)
shall be made--
(A) to any whistleblower who is, or was at
the time the whistleblower acquired the
original information submitted to the
Commission, a member, officer, or employee of--
(i) an appropriate regulatory agency;
(ii) the Department of Justice;
(iii) a self-regulatory organization;
(iv) the Public Company Accounting
Oversight Board; or
(v) a law enforcement organization;
(B) to any whistleblower who is convicted of
a criminal violation related to the judicial or
administrative action for which the
whistleblower otherwise could receive an award
under this section;
(C) to any whistleblower who gains the
information through the performance of an audit
of financial statements required under the
securities laws and for whom such submission
would be contrary to the requirements of
section 10A of the Securities Exchange Act of
1934 (15 U.S.C. 78j-1); [or]
(D) to any whistleblower who fails to submit
information to the Commission in such form as
the Commission may, by rule, require[.]; or
(E) to any whistleblower who is responsible
for, or complicit in, the violation of the
securities laws for which the whistleblower
provided information to the Commission.
(3) Definition.--For purposes of paragraph (2)(E), a
person is responsible for, or complicit in, a violation
of the securities laws if, with the intent to promote
or assist the violation, the person--
(A) procures, induces, or causes another
person to commit the offense;
(B) aids or abets another person in
committing the offense; or
(C) having a duty to prevent the violation,
fails to make an effort the person is required
to make.
(d) Representation.--
(1) Permitted representation.--Any whistleblower who
makes a claim for an award under subsection (b) may be
represented by counsel.
(2) Required representation.--
(A) In general.--Any whistleblower who
anonymously makes a claim for an award under
subsection (b) shall be represented by counsel
if the whistleblower anonymously submits the
information upon which the claim is based.
(B) Disclosure of identity.--Prior to the
payment of an award, a whistleblower shall
disclose the identity of the whistleblower and
provide such other information as the
Commission may require, directly or through
counsel for the whistleblower.
(e) No Contract Necessary.--No contract with the Commission
is necessary for any whistleblower to receive an award under
subsection (b), unless otherwise required by the Commission by
rule or regulation.
(f) Appeals.--Any determination made under this section,
including whether, to whom, or in what amount to make awards,
shall be in the discretion of the Commission. Any such
determination, except the determination of the amount of an
award if the award was made in accordance with subsection (b),
may be appealed to the appropriate court of appeals of the
United States not more than 30 days after the determination is
issued by the Commission. The court shall review the
determination made by the Commission in accordance with section
706 of title 5, United States Code.
(g) Investor Protection Fund.--
(1) Fund established.--There is established in the
Treasury of the United States a fund to be known as the
``Securities and Exchange Commission Investor
Protection Fund''.
(2) Use of fund.--The Fund shall be available to the
Commission, without further appropriation or fiscal
year limitation, for--
(A) paying awards to whistleblowers as
provided in subsection (b); and
(B) funding the activities of the Inspector
General of the Commission under section 4(i).
(3) Deposits and credits.--
(A) In general.--There shall be deposited
into or credited to the Fund an amount equal
to--
(i) any monetary sanction collected
by the Commission in any judicial or
administrative action brought by the
Commission under the securities laws
that is not added to a disgorgement
fund or other fund under section 308 of
the Sarbanes-Oxley Act of 2002 (15
U.S.C. 7246) or otherwise distributed
to victims of a violation of the
securities laws, or the rules and
regulations thereunder, underlying such
action, unless the balance of the Fund
at the time the monetary sanction is
collected exceeds $300,000,000;
(ii) any monetary sanction added to a
disgorgement fund or other fund under
section 308 of the Sarbanes-Oxley Act
of 2002 (15 U.S.C. 7246) that is not
distributed to the victims for whom the
Fund was established, unless the
balance of the disgorgement fund at the
time the determination is made not to
distribute the monetary sanction to
such victims exceeds $200,000,000; and
(iii) all income from investments
made under paragraph (4).
(B) Additional amounts.--If the amounts
deposited into or credited to the Fund under
subparagraph (A) are not sufficient to satisfy
an award made under subsection (b), there shall
be deposited into or credited to the Fund an
amount equal to the unsatisfied portion of the
award from any monetary sanction collected by
the Commission in the covered judicial or
administrative action on which the award is
based.
(4) Investments.--
(A) Amounts in fund may be invested.--The
Commission may request the Secretary of the
Treasury to invest the portion of the Fund that
is not, in the discretion of the Commission,
required to meet the current needs of the Fund.
(B) Eligible investments.--Investments shall
be made by the Secretary of the Treasury in
obligations of the United States or obligations
that are guaranteed as to principal and
interest by the United States, with maturities
suitable to the needs of the Fund as determined
by the Commission on the record.
(C) Interest and proceeds credited.--The
interest on, and the proceeds from the sale or
redemption of, any obligations held in the Fund
shall be credited to the Fund.
(5) Reports to congress.--Not later than October 30
of each fiscal year beginning after the date of
enactment of this subsection, the Commission shall
submit to the Committee on Banking, Housing, and Urban
Affairs of the Senate, and the Committee on Financial
Services of the House of Representatives a report on--
(A) the whistleblower award program,
established under this section, including--
(i) a description of the number of
awards granted; and
(ii) the types of cases in which
awards were granted during the
preceding fiscal year;
(B) the balance of the Fund at the beginning
of the preceding fiscal year;
(C) the amounts deposited into or credited to
the Fund during the preceding fiscal year;
(D) the amount of earnings on investments
made under paragraph (4) during the preceding
fiscal year;
(E) the amount paid from the Fund during the
preceding fiscal year to whistleblowers
pursuant to subsection (b);
(F) the balance of the Fund at the end of the
preceding fiscal year; and
(G) a complete set of audited financial
statements, including--
(i) a balance sheet;
(ii) income statement; and
(iii) cash flow analysis.
(h) Protection of Whistleblowers.--
(1) Prohibition against retaliation.--
(A) In general.--No employer may discharge,
demote, suspend, threaten, harass, directly or
indirectly, or in any other manner discriminate
against, a whistleblower in the terms and
conditions of employment because of any lawful
act done by the whistleblower--
(i) in providing information to the
Commission in accordance with this
section;
(ii) in initiating, testifying in, or
assisting in any investigation or
judicial or administrative action of
the Commission based upon or related to
such information; or
(iii) in making disclosures that are
required or protected under the
Sarbanes-Oxley Act of 2002 (15 U.S.C.
7201 et seq.), the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.),
including section 10A(m) of such Act
(15 U.S.C. 78f(m)), section 1513(e) of
title 18, United States Code, and any
other law, rule, or regulation subject
to the jurisdiction of the Commission.
(B) Enforcement.--
(i) Cause of action.--An individual
who alleges discharge or other
discrimination in violation of
subparagraph (A) may bring an action
under this subsection in the
appropriate district court of the
United States for the relief provided
in subparagraph (C).
(ii) Subpoenas.--A subpoena requiring
the attendance of a witness at a trial
or hearing conducted under this section
may be served at any place in the
United States.
(iii) Statute of limitations.--
(I) In general.--An action
under this subsection may not
be brought--
(aa) more than 6
years after the date on
which the violation of
subparagraph (A)
occurred; or
(bb) more than 3
years after the date
when facts material to
the right of action are
known or reasonably
should have been known
by the employee
alleging a violation of
subparagraph (A).
(II) Required action within
10 years.--Notwithstanding
subclause (I), an action under
this subsection may not in any
circumstance be brought more
than 10 years after the date on
which the violation occurs.
(C) Relief.--Relief for an individual
prevailing in an action brought under
subparagraph (B) shall include--
(i) reinstatement with the same
seniority status that the individual
would have had, but for the
discrimination;
(ii) 2 times the amount of back pay
otherwise owed to the individual, with
interest; and
(iii) compensation for litigation
costs, expert witness fees, and
reasonable attorneys' fees.
(2) Confidentiality.--
(A) In general.--Except as provided in
subparagraphs (B) and (C), the Commission and
any officer or employee of the Commission shall
not disclose any information, including
information provided by a whistleblower to the
Commission, which could reasonably be expected
to reveal the identity of a whistleblower,
except in accordance with the provisions of
section 552a of title 5, United States Code,
unless and until required to be disclosed to a
defendant or respondent in connection with a
public proceeding instituted by the Commission
or any entity described in subparagraph (C).
For purposes of section 552 of title 5, United
States Code, this paragraph shall be considered
a statute described in subsection (b)(3)(B) of
such section.
(B) Exempted statute.--For purposes of
section 552 of title 5, United States Code,
this paragraph shall be considered a statute
described in subsection (b)(3)(B) of such
section 552.
(C) Rule of construction.--Nothing in this
section is intended to limit, or shall be
construed to limit, the ability of the Attorney
General to present such evidence to a grand
jury or to share such evidence with potential
witnesses or defendants in the course of an
ongoing criminal investigation.
(D) Availability to government agencies.--
(i) In general.--Without the loss of
its status as confidential in the hands
of the Commission, all information
referred to in subparagraph (A) may, in
the discretion of the Commission, when
determined by the Commission to be
necessary to accomplish the purposes of
this Act and to protect investors, be
made available to--
(I) the Attorney General of
the United States;
(II) an appropriate
regulatory authority;
(III) a self-regulatory
organization;
(IV) a State attorney general
in connection with any criminal
investigation;
(V) any appropriate State
regulatory authority;
(VI) the Public Company
Accounting Oversight Board;
(VII) a foreign securities
authority; and
(VIII) a foreign law
enforcement authority.
(ii) Confidentiality.--
(I) In general.--Each of the
entities described in
subclauses (I) through (VI) of
clause (i) shall maintain such
information as confidential in
accordance with the
requirements established under
subparagraph (A).
(II) Foreign authorities.--
Each of the entities described
in subclauses (VII) and (VIII)
of clause (i) shall maintain
such information in accordance
with such assurances of
confidentiality as the
Commission determines
appropriate.
(3) Rights retained.--Nothing in this section shall
be deemed to diminish the rights, privileges, or
remedies of any whistleblower under any Federal or
State law, or under any collective bargaining
agreement.
(i) Provision of False Information.--A whistleblower shall
not be entitled to an award under this section if the
whistleblower--
(1) knowingly and willfully makes any false,
fictitious, or fraudulent statement or representation;
or
(2) uses any false writing or document knowing the
writing or document contains any false, fictitious, or
fraudulent statement or entry.
(j) Rulemaking Authority.--The Commission shall have the
authority to issue such rules and regulations as may be
necessary or appropriate to implement the provisions of this
section consistent with the purposes of this section.
* * * * * * *
rules, regulations, and orders; annual reports
Sec. 23. (a)(1) The Commission, the Board of Governors of the
Federal Reserve System, and the other agencies enumerated in
section 3(a)(34) of this title shall each have power to make
such rules and regulations as may be necessary or appropriate
to implement the provisions of this title for which they are
responsible or for the execution of the functions vested in
them by this title, and may for such purposes classify persons,
securities, transactions, statements, applications, reports,
and other matters within their respective jurisdictions, and
prescribe greater, lesser, or different requirements for
different classes thereof. No provision of this title imposing
any liability shall apply to any act done or omitted in good
faith in conformity with a rule, regulation, or order of the
Commission, the Board of Governors of the Federal Reserve
System, other agency enumerated in section 3(a)(34) of this
title, or any self-regulatory organization, notwithstanding
that such rule, regulation, or order may thereafter be amended
or rescinded or determined by judicial or other authority to be
invalid for any reason.
(2) The Commission and the Secretary of the Treasury, in
making rules and regulations pursuant to any provisions of this
title, shall consider among other matters the impact any such
rule or regulation would have on competition. The Commission
and the Secretary of the Treasury shall not adopt any such rule
or regulation which would impose a burden on competition not
necessary or appropriate in furtherance of the purposes of this
title. The Commission and the Secretary of the Treasury shall
include in the statement of basis and purpose incorporated in
any rule or regulation adopted under this title, the reasons
for the Commission's or the Secretary's determination that any
burden on competition imposed by such rule or regulation is
necessary or appropriate in furtherance of the purposes of this
title.
(3) The Commission and the Secretary, in making rules and
regulations pursuant to any provision of this title,
considering any application for registration in accordance with
section 19(a) of this title, or reviewing any proposed rule
change of a self-regulatory organization in accordance with
section 19(b) of this title, shall keep in a public file and
make available for copying all written statements filed with
the Commission and the Secretary and all written communications
between the Commission or the Secretary and any person relating
to the proposed rule, regulation, application, or proposed rule
change: Provided, however, That the Commission and the
Secretary shall not be required to keep in a public file or
make available for copying any such statement or communication
which it may withhold from the public in accordance with the
provisions of section 552 of title 5, United States Code.
(b)(1) The Commission, the Board of Governors of the Federal
Reserve System, and the other agencies enumerated in section
3(a)(34) of this title shall each make an annual report to the
Congress on its work for the preceding year, and shall include
in each such report whatever information, data, and
recommendations for further legislation it considers advisable
with regard to matters within its respective jurisdiction under
this title.
(2) The appropriate regulatory agency for a self-regulatory
organization shall include in its annual report to the Congress
for each fiscal year, a summary of its oversight activities
under this title with respect to such self-regulatory
organization, including a description of any examination
conducted as part of such activities of any organization, any
material recommendation presented as part of such activities to
such organization for changes in its organization or rules, and
any such action by such organization in response to any such
recommendation.
(3) The appropriate regulatory agency for any class of
municipal securities dealers shall include in its annual report
to the Congress for each fiscal year a summary of its
regulatory activities pursuant to this title with respect to
such municipal securities dealers, including the nature of and
reason for any sanction imposed pursuant to this title against
any such municipal securities dealer.
(4) The Commission shall also include in its annual report to
the Congress for each fiscal year--
(A) a summary of the Commission's oversight
activities with respect to self-regulatory
organizations for which it is not the appropriate
regulatory agency, including a description of any
examination of any such organization, any material
recommendation presented to any such organization for
changes in its organization or rules, and any action by
any such organization in response to any such
recommendations;
(B) a statement and analysis of the expenses and
operations of each self-regulatory organization in
connection with the performance of its responsibilities
under this title, for which purpose data pertaining to
such expenses and operations shall be made available by
such organization to the Commission at its request;
(C) the steps the Commission has taken and the
progress it has made toward ending the physical
movement of the securities certificate in connection
with the settlement of securities transactions, and its
recommendations, if any, for legislation to eliminate
the securities certificate;
(D) the number of requests for exemptions from
provisions of this title received, the number granted,
and the basis upon which any such exemption was
granted;
(E) a summary of the Commission's regulatory
activities with respect to municipal securities dealers
for which it is not the appropriate regulatory agency,
including the nature of, and reason for, any sanction
imposed in proceedings against such municipal
securities dealers;
(F) a statement of the time elapsed between the
filing of reports pursuant to section 13(f) of this
title and the public availability of the information
contained therein, the costs involved in the
Commission's processing of such reports and tabulating
such information, the manner in which the Commission
uses such information, and the steps the Commission has
taken and the progress it has made toward requiring
such reports to be filed and such information to be
made available to the public in machine language;
(G) information concerning (i) the effects its rules
and regulations are having on the viability of small
brokers and dealers; (ii) its attempts to reduce any
unnecessary reporting burden on such brokers and
dealers; and (iii) its efforts to help to assure the
continued participation of small brokers and dealers in
the United States securities markets;
(H) a statement detailing its administration of the
Freedom of Information Act, section 552 of title 5,
United States Code, including a copy of the report
filed pursuant to subsection (d) of such section; and
(I) the steps that have been taken and the progress
that has been made in promoting the timely public
dissemination and availability for analytical purposes
(on a fair, reasonable, and nondiscriminatory basis) of
information concerning government securities
transactions and quotations, and its recommendations,
if any, for legislation to assure timely dissemination
of (i) information on transactions in regularly traded
government securities sufficient to permit the
determination of the prevailing market price for such
securities, and (ii) reports of the highest published
bids and lowest published offers for government
securities (including the size at which persons are
willing to trade with respect to such bids and offers).
(c) The Commission, by rule, shall prescribe the procedure
applicable to every case pursuant to this title of adjudication
(as defined in section 551 of title 5, United States Code) not
required to be determined on the record after notice and
opportunity for hearing. Such rules shall, as a minimum,
provide that prompt notice shall be given of any adverse action
or final disposition and that such notice and the entry of any
order shall be accompanied by a statement of written reasons.
(d) Cease-and-Desist Procedures.--Within 1 year after the
date of enactment of this subsection, the Commission shall
establish regulations providing for the expeditious conduct of
hearings and rendering of decisions under section 21C of this
title, section 8A of the Securities Act of 1933, section 9(f)
of the Investment Company Act of 1940, and section 203(k) of
the Investment Advisers Act of 1940.
(e) Report on Unobligated Appropriations.--If, at the end of
any fiscal year, there remain unobligated any funds that were
appropriated to the Commission for such fiscal year, the
Commission shall, not later than 30 days after the last day of
such fiscal year, submit to the Committee on Financial Services
and the Committee on Appropriations of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs and the Committee on Appropriations of the Senate
a report stating the amount of such unobligated funds. If there
is any material change in the amount stated in the report, the
Commission shall, not later than 7 days after determining the
amount of the change, submit to such committees a supplementary
report stating the amount of and reason for the change.
(e) Procedure for Obtaining Certain Intellectual Property.--
The Commission is not authorized to compel under this title a
person to produce or furnish source code, including algorithmic
trading source code or similar intellectual property, to the
Commission unless the Commission first issues a subpoena.
public availability of information
Sec. 24. (a) For purposes of section 552 of title 5, United
States Code, the term ``records'' includes all applications,
statements, reports, contracts, correspondence, notices, and
other documents filed with or otherwise obtained by the
Commission pursuant to this title or otherwise.
(b) It shall be unlawful for any member, officer, or employee
of the Commission to disclose to any person other than a
member, officer, or employee of the Commission, or to use for
personal benefit, any information contained in any application,
statement, report, contract, correspondence, notice, or other
document filed with or otherwise obtained by the Commission (1)
in contravention of the rules and regulations of the Commission
under section 552 of Title 5, United States Code, or (2) in
circumstances where the Commission has determined pursuant to
such rules to accord confidential treatment to such
information.
(c) Confidential Disclosures.--The Commission may, in its
discretion and upon a showing that such information is needed,
provide all ``records'' (as defined in subsection (a)) and
other information in its possession to such persons, both
domestic and foreign, as the Commission by rule deems
appropriate if the person receiving such records or information
provides such assurances of confidentiality as the Commission
deems appropriate.
[(d) Records Obtained from Foreign Securities Authorities.--
Except as provided in subsection (g), the Commission shall not
be compelled to disclose records obtained from a foreign
securities authority if (1) the foreign securities authority
has in good faith determined and represented to the Commission
that public disclosure of such records would violate the laws
applicable to that foreign securities authority, and (2) the
Commission obtains such records pursuant to (A) such procedure
as the Commission may authorize for use in connection with the
administration or enforcement of the securities laws, or (B) a
memorandum of understanding. For purposes of section 552 of
title 5, United States Code, this subsection shall be
considered a statute described in subsection (b)(3)(B) of such
section 552.]
(d) Records Obtained From Foreign Securities and Law
Enforcement Authorities.--Except as provided in subsection (g),
the Commission shall not be compelled to disclose records
obtained from a foreign securities authority, or from a foreign
law enforcement authority as defined in subsection (f)(4), if--
(1) the foreign securities authority or foreign law
enforcement authority has in good faith determined and
represented to the Commission that the records are
confidential under the laws of the country of such
authority; and
(2) the Commission obtains such records pursuant to--
(A) such procedure as the Commission may
authorize for use in connection with the
administration or enforcement of the securities
laws; or
(B) a memorandum of understanding.
For purposes of section 552 of title 5, United States Code,
this subsection shall be considered a statute described in
subsection (b)(3)(B) of such section 552.
(e) Freedom of Information Act.--For purposes of section
552(b)(8) of title 5, United States Code, (commonly referred to
as the Freedom of Information Act)--
(1) the Commission is an agency responsible for the
regulation or supervision of financial institutions;
and
(2) any entity for which the Commission is
responsible for regulating, supervising, or examining
under this title is a financial institution.
(f) Sharing Privileged Information With Other Authorities.--
(1) Privileged information provided by the
commission.--The Commission shall not be deemed to have
waived any privilege applicable to any information by
transferring that information to or permitting that
information to be used by--
(A) any agency (as defined in section 6 of
title 18, United States Code);
(B) the Public Company Accounting Oversight
Board;
(C) any self-regulatory organization;
(D) any foreign securities authority;
(E) any foreign law enforcement authority; or
(F) any State securities or law enforcement
authority.
(2) Nondisclosure of privileged information provided
to the commission.--The Commission shall not be
compelled to disclose privileged information obtained
from any foreign securities authority, or foreign law
enforcement authority, if the authority has in good
faith determined and represented to the Commission that
the information is privileged.
(3) Nonwaiver of privileged information provided to
the commission.--
(A) In general.--Federal agencies, State
securities and law enforcement authorities,
self-regulatory organizations, and the Public
Company Accounting Oversight Board shall not be
deemed to have waived any privilege applicable
to any information by transferring that
information to or permitting that information
to be used by the Commission.
(B) Exception.--The provisions of
subparagraph (A) shall not apply to a self-
regulatory organization or the Public Company
Accounting Oversight Board with respect to
information used by the Commission in an action
against such organization.
(4) Definitions.--For purposes of this subsection--
(A) the term ``privilege'' includes any work-
product privilege, attorney-client privilege,
governmental privilege, or other privilege
recognized under Federal, State, or foreign
law;
(B) the term ``foreign law enforcement
authority'' means any foreign authority that is
empowered under foreign law to detect,
investigate or prosecute potential violations
of law; and
(C) the term ``State securities or law
enforcement authority'' means the authority of
any State or territory that is empowered under
State or territory law to detect, investigate,
or prosecute potential violations of law.
(g) Savings Provisions.--Nothing in this section shall--
(1) alter the Commission's responsibilities under the
Right to Financial Privacy Act (12 U.S.C. 3401 et
seq.), as limited by section 21(h) of this Act, with
respect to transfers of records covered by such
statutes, or
(2) authorize the Commission to withhold information
from the Congress or prevent the Commission from
complying with an order of a court of the United States
in an action commenced by the United States or the
Commission.
* * * * * * *
SEC. 31. TRANSACTION FEES.
[(a) Recovery of Costs of Annual Appropriation.--The
Commission shall, in accordance with this section, collect
transaction fees and assessments that are designed to recover
the costs to the Government of the annual appropriation to the
Commission by Congress.
(a) Collection.--The Commission shall, in accordance with
this section, collect transaction fees and assessments.
(b) Exchange-Traded Securities.--Subject to subsection (j),
each national securities exchange shall pay to the Commission a
fee at a rate equal to $15 per $1,000,000 of the aggregate
dollar amount of sales of securities (other than bonds,
debentures, other evidences of indebtedness, security futures
products, and options on securities indexes (excluding a
narrow-based security index)) transacted on such national
securities exchange.
(c) Off-Exchange Trades of Exchange Registered and Last-Sale-
Reported Securities.--Subject to subsection (j), each national
securities association shall pay to the Commission a fee at a
rate equal to $15 per $1,000,000 of the aggregate dollar amount
of sales transacted by or through any member of such
association otherwise than on a national securities exchange of
securities (other than bonds, debentures, other evidences of
indebtedness, security futures products, and options on
securities indexes (excluding a narrow-based security index))
registered on a national securities exchange or subject to
prompt last sale reporting pursuant to the rules of the
Commission or a registered national securities association.
(d) Assessments on Security Futures Transactions.--Each
national securities exchange and national securities
association shall pay to the Commission an assessment equal to
$0.009 for each round turn transaction (treated as including
one purchase and one sale of a contract of sale for future
delivery) on a security future traded on such national
securities exchange or by or through any member of such
association otherwise than on a national securities exchange,
except that for fiscal year 2007 and each succeeding fiscal
year such assessment shall be equal to $0.0042 for each such
transaction.
(e) Dates for Payments.--The fees and assessments required by
subsections (b), (c), and (d) of this section shall be paid--
(1) on or before March 15, with respect to
transactions and sales occurring during the period
beginning on the preceding September 1 and ending at
the close of the preceding December 31; and
(2) on or before September 25, with respect to
transactions and sales occurring during the period
beginning on the preceding January 1 and ending at the
close of the preceding August 31.
(f) Exemptions.--The Commission, by rule, may exempt any sale
of securities or any class of sales of securities from any fee
or assessment imposed by this section, if the Commission finds
that such exemption is consistent with the public interest, the
equal regulation of markets and brokers and dealers, and the
development of a national market system.
(g) Publication.--The Commission shall publish in the Federal
Register notices of the fee or assessment rates applicable
under this section for each fiscal year not later than 30 days
after the date on which an Act making a regular appropriation
to the Commission for such fiscal year is enacted, together
with any estimates or projections on which such fees are based.
(h) Pro Rata Application.--The rates per $1,000,000 required
by this section shall be applied pro rata to amounts and
balances of less than $1,000,000.
(i) Deposit of Fees.--
(1) Offsetting collections.--Fees collected pursuant
to subsections (b), (c), and (d) for any fiscal year--
(A) except as provided in paragraph (2),
shall be deposited and credited as offsetting
collections to the account providing
appropriations to the Commission; and
(B) except as provided in subsection (k),
shall not be collected for any fiscal year
except to the extent provided in advance in
appropriation Acts.
[(2) General revenues prohibited.--No fees collected
pursuant to subsections (b), (c), and (d) for fiscal
year 2002 or any succeeding fiscal year shall be
deposited and credited as general revenue of the
Treasury.]
(2) General revenue.--Any fees collected for a fiscal
year pursuant to this section, sections 13(e) and 14(g)
of this title, and section 6(b) of the Securities Act
of 1933 in excess of the amount provided in
appropriation Acts for collection for such fiscal year
pursuant to such sections shall be deposited and
credited as general revenue of the Treasury.
(j) Adjustments to Fee Rates.--
(1) Annual adjustment.--Subject to subsections
(i)(1)(B) and (k), for each fiscal year, the Commission
shall by order adjust each of the rates applicable
under subsections (b) and (c) for such fiscal year to a
uniform adjusted rate that, when applied to the
baseline estimate of the aggregate dollar amount of
sales for such fiscal year, is reasonably likely to
produce aggregate fee collections under this section
(including assessments collected under subsection (d)
of this section) that are equal to [the regular
appropriation to the Commission by Congress for such
fiscal year] the target offsetting collection amount
for such fiscal year.
(2) Mid-year adjustment.--Subject to subsections
(i)(1)(B) and (k), for each fiscal year, the Commission
shall determine, by March 1 of such fiscal year,
whether, based on the actual aggregate dollar volume of
sales during the first 5 months of such fiscal year,
the baseline estimate of the aggregate dollar volume of
sales used under paragraph (1) for such fiscal year is
reasonably likely to be 10 percent (or more) greater or
less than the actual aggregate dollar volume of sales
for such fiscal year. If the Commission so determines,
the Commission shall by order, no later than March 1,
adjust each of the rates applicable under subsections
(b) and (c) for such fiscal year to a uniform adjusted
rate that, when applied to the revised estimate of the
aggregate dollar amount of sales for the remainder of
such fiscal year, is reasonably likely to produce
aggregate fee collections under this section (including
fees collected during such five-month period and
assessments collected under subsection (d) of this
section) that are equal to [the regular appropriation
to the Commission by Congress for such fiscal year] the
target offsetting collection amount for such fiscal
year. In making such revised estimate, the Commission
shall, after consultation with the Congressional Budget
Office and the Office of Management and Budget, use the
same methodology required by [subsection (l)]
subsection (l)(2).
(3) Review.--In exercising its authority under this
subsection, the Commission shall not be required to
comply with the provisions of section 553 of title 5,
United States Code. An adjusted rate prescribed under
paragraph (1) or (2) and published under subsection (g)
shall not be subject to judicial review.
(4) Effective date.--
(A) Annual adjustment.--Subject to
subsections (i)(1)(B) and (k), an adjusted rate
prescribed under paragraph (1) shall take
effect on the later of--
(i) the first day of the fiscal year
to which such rate applies; or
(ii) 60 days after the date on which
an Act making a regular appropriation
to the Commission for such fiscal year
is enacted.
(B) Mid-year adjustment.--An adjusted rate
prescribed under paragraph (2) shall take
effect on April 1 of the fiscal year to which
such rate applies.
(k) Lapse of Appropriation.--If on the first day of a fiscal
year a regular appropriation to the Commission has not been
enacted, the Commission shall continue to collect (as
offsetting collections) the fees and assessments under
subsections (b), (c), and (d) at the rate in effect during the
preceding fiscal year, until 60 days after the date such a
regular appropriation is enacted.
[(l) Baseline Estimate of the Aggregate Dollar Amount of
Sales.--The baseline estimate of the aggregate dollar amount of
sales for any fiscal year is the baseline estimate of the
aggregate dollar amount of sales of securities (other than
bonds, debentures, other evidences of indebtedness, security
futures products, and options on securities indexes (excluding
a narrow-based security index)) to be transacted on each
national securities exchange and by or through any member of
each national securities association (otherwise than on a
national securities exchange) during such fiscal year as
determined by the Commission, after consultation with the
Congressional Budget Office and the Office of Management and
Budget, using the methodology required for making projections
pursuant to section 257 of the Balanced Budget and Emergency
Deficit Control Act of 1985.
(l) Definitions.--For purposes of this section:
(1) Target offsetting collection amount.--The target
offsetting collection amount for a fiscal year is--
(A) for fiscal year 2017, $1,400,000,000; and
(B) for each succeeding fiscal year, the
target offsetting collection amount for the
prior fiscal year, adjusted by the rate of
inflation.
(2) Baseline estimate of the aggregate dollar amount
of sales.--The baseline estimate of the aggregate
dollar amount of sales for any fiscal year is the
baseline estimate of the aggregate dollar amount of
sales of securities (other than bonds, debentures,
other evidences of indebtedness, security futures
products, and options on securities indexes (excluding
a narrow-based security index)) to be transacted on
each national securities exchange and by or through any
member of each national securities association
(otherwise than on a national securities exchange)
during such fiscal year as determined by the
Commission, after consultation with the Congressional
Budget Office and the Office of Management and Budget,
using the methodology required for making projections
pursuant to section 257 of the Balanced Budget and
Emergency Deficit Control Act of 1985.
(m) Transmittal of Commission Budget Requests.--
(1) Budget required.--For fiscal year 2012, and each
fiscal year thereafter, the Commission shall prepare
and submit a budget to the President. Whenever the
Commission submits a budget estimate or request to the
President or the Office of Management and Budget, the
Commission shall concurrently transmit copies of the
estimate or request to the Committee on Appropriations
of the Senate, the Committee on Appropriations of the
House of Representatives, the Committee on Banking,
Housing, and Urban Affairs of the Senate, and the
Committee on Financial Services of the House of
Representatives.
(2) Submission to congress.--The President shall
submit each budget submitted under paragraph (1) to
Congress, in unaltered form, together with the annual
budget for the Administration submitted by the
President.
(3) Contents.--The Commission shall include in each
budget submitted under paragraph (1)--
(A) an itemization of the amount of funds
necessary to carry out the functions of the
Commission.
(B) an amount to be designated as contingency
funding to be used by the Commission to address
unanticipated needs; and
(C) a designation of any activities of the
Commission for which multi-year budget
authority would be suitable.
(n) Overpayment.--If a national securities exchange or
national securities association pays to the Commission an
amount in excess of fees and assessments due under this section
and informs the Commission of such amount paid in excess within
10 years of the date of the payment, the Commission shall
offset future fees and assessments due by such exchange or
association in an amount equal to such excess amount.
Sec. 32. (a) Any person who willfully violates any provision
of this title (other than section 30A), or any rule or
regulation thereunder the violation of which is made unlawful
or the observance of which is required under the terms of this
title, or any person who willfully and knowingly makes, or
causes to be made, any statement in any application, report, or
document required to be filed under this title or any rule or
regulation thereunder or undertaking contained in a
registration statement as provided in subsection (d) of section
15 of this title, or by any self-regulatory organization in
connection with an application for membership or participation
therein or to become associated with a member thereof, which
statement was false or misleading with respect to any material
fact, shall upon conviction be fined not more than [$5,000,000]
$7,000,000, or imprisoned not more than 20 years, or both,
except that when such person is a person other than a natural
person, a fine not exceeding $25,000,000 may be imposed; but no
person shall be subject to imprisonment under this section for
the violation of any rule or regulation if he proves that he
had no knowledge of such rule or regulation.
(b) Any issuer which fails to file information, documents, or
reports required to be filed under subsection (d) of section 15
of this title or any rule or regulation thereunder shall
forfeit to the United States the sum of $100 for each and every
day such failure to file shall continue. Such forfeiture, which
shall be in lieu of any criminal penalty for such failure to
file which might be deemed to arise under subsection (a) of
this section, shall be payable into the Treasury of the United
States and shall be recoverable in a civil suit in the name of
the United States.
(c)(1)(A) Any issuer that violates subsection (a) or (g) of
section 30A shall be fined not more than [$2,000,000]
$4,000,000.
(B) Any issuer that violates subsection (a) or (g) of section
30A shall be subject to a civil penalty of not more than
[$10,000] $50,000 imposed in an action brought by the
Commission.
(2)(A) Any officer, director, employee, or agent of an
issuer, or stockholder acting on behalf of such issuer, who
willfully violates subsection (a) or (g) of section 30A of this
title shall be fined not more than [$100,000] $250,000, or
imprisoned not more than 5 years, or both.
(B) Any officer, director, employee, or agent of an issuer,
or stockholder acting on behalf of such issuer, who violates
subsection (a) or (g) of section 30A of this title shall be
subject to a civil penalty of not more than [$10,000] $50,000
imposed in an action brought by the Commission.
(3) Whenever a fine is imposed under paragraph (2) upon any
officer, director, employee, agent, or stockholder of an
issuer, such fine may not be paid, directly or indirectly, by
such issuer.
* * * * * * *
SEC. 35. AUTHORIZATION OF APPROPRIATIONS.
In addition to any other funds authorized to be appropriated
to the Commission, there are authorized to be appropriated to
carry out the functions, powers, and duties of the Commission--
[(1) for fiscal year 2011, $1,300,000,000;
[(2) for fiscal year 2012, $1,500,000,000;
[(3) for fiscal year 2013, $1,750,000,000;
[(4) for fiscal year 2014, $2,000,000,000; and
[(5) for fiscal year 2015, $2,250,000,000.]
(1) for fiscal year 2017, $1,555,000,000;
(2) for fiscal year 2018, $1,605,000,000;
(3) for fiscal year 2019, $1,655,000,000;
(4) for fiscal year 2020, $1,705,000,000;
(5) for fiscal year 2021, $1,755,000,000; and
(6) for fiscal year 2022, $1,805,000,000.
* * * * * * *
SEC. 39. INVESTOR ADVISORY COMMITTEE.
(a) Establishment and Purpose.--
(1) Establishment.--There is established within the
Commission the Investor Advisory Committee (referred to
in this section as the ``Committee'').
(2) Purpose.--The Committee shall--
(A) advise and consult with the Commission
on--
(i) regulatory priorities of the
Commission;
(ii) issues relating to the
regulation of securities products,
trading strategies, and fee structures,
and the effectiveness of disclosure;
(iii) initiatives to protect investor
interest; and
(iv) initiatives to promote investor
confidence and the integrity of the
securities marketplace; and
(B) [submit] in consultation with the Small
Business Capital Formation Advisory Committee
established under section 40, submit to the
Commission such findings and recommendations as
the Committee determines are appropriate,
including recommendations for proposed
legislative changes.
(b) Membership.--
(1) In general.--The members of the Committee shall
be--
(A) the Investor Advocate;
(B) a representative of State securities
commissions;
(C) a representative of the interests of
senior citizens; [and]
(D) not fewer than 10, and not more than 20,
members appointed by the Commission, from among
individuals who--
(i) represent the interests of
individual equity and debt investors,
including investors in mutual funds;
(ii) represent the interests of
institutional investors, including the
interests of pension funds and
registered investment companies;
(iii) are knowledgeable about
investment issues and decisions; and
(iv) have reputations of
integrity[.]; and
(E) a member of the Small Business Capital
Formation Advisory Committee who shall be a
nonvoting member.
[(2) Term.--Each member of the Committee appointed
under paragraph (1)(B) shall serve for a term of 4
years.]
(2) Term.--
(A) Length of term for members of the
committee.--Each member of the Committee
appointed under paragraph (1), other than the
Investor Advocate, shall serve for a term of 4
years.
(B) Limitation on multiple terms.--A member
of the Committee may not serve for more than
one term, except for the Investor Advocate, a
representative of State securities commissions,
and the member of the Small Business Capital
Formation Advisory Committee.
(3) Members not commission employees.--Members
appointed under [paragraph (1)(B)] paragraph (1) shall
not be deemed to be employees or agents of the
Commission solely because of membership on the
Committee.
(c) Chairman; Vice Chairman; Secretary; Assistant
Secretary.--
(1) In general.--The members of the Committee shall
elect, from among the members of the Committee--
(A) a chairman, who may not be employed by an
issuer;
(B) a vice chairman, who may not be employed
by an issuer;
(C) a secretary; and
(D) an assistant secretary.
[(2) Term.--Each member elected under paragraph (1)
shall serve for a term of 3 years in the capacity for
which the member was elected under paragraph (1).]
(2) Term.--
(A) Length of term.--Each member elected
under paragraph (1) shall serve for a term of 3
years in the capacity for which the member was
elected under paragraph (1).
(B) Limitation on multiple terms.--A member
elected under paragraph (1) may not serve for
more than one term in the capacity for which
the member was elected under paragraph (1).
(d) Meetings.--
(1) Frequency of meetings.--The Committee shall
meet--
(A) not less frequently than twice annually,
at the call of the chairman of the Committee;
and
(B) from time to time, at the call of the
Commission.
(2) Notice.--The chairman of the Committee shall give
the members of the Committee written notice of each
meeting, not later than 2 weeks before the date of the
meeting.
(e) Compensation and Travel Expenses.--Each member of the
Committee who is not a full-time employee of the United States
shall--
(1) be entitled to receive compensation at a rate not
to exceed the daily equivalent of the annual rate of
basic pay in effect for a position at level V of the
Executive Schedule under section 5316 of title 5,
United States Code, for each day during which the
member is engaged in the actual performance of the
duties of the Committee; and
(2) while away from the home or regular place of
business of the member in the performance of services
for the Committee, be allowed travel expenses,
including per diem in lieu of subsistence, in the same
manner as persons employed intermittently in the
Government service are allowed expenses under section
5703(b) of title 5, United States Code.
(f) Staff.--The Commission shall make available to the
Committee such staff as the chairman of the Committee
determines are necessary to carry out this section.
(g) Review by Commission.--The Commission shall--
(1) review the findings and recommendations of the
Committee; and
(2) each time the Committee submits a finding or
recommendation to the Commission, promptly issue a
public statement--
(A) assessing the finding or recommendation
of the Committee; and
(B) disclosing the action, if any, the
Commission intends to take with respect to the
finding or recommendation.
(h) Committee Findings.--Nothing in this section shall
require the Commission to agree to or act upon any finding or
recommendation of the Committee.
[(i) Federal Advisory Committee Act.--The Federal Advisory
Committee Act (5 U.S.C. App.) shall not apply with respect to
the Committee and its activities.
[(j) Authorization of Appropriations.--There is authorized to
be appropriated to the Commission such sums as are necessary to
carry out this section.]
SEC. 40. SMALL BUSINESS CAPITAL FORMATION ADVISORY COMMITTEE.
(a) Establishment and Purpose.--
(1) Establishment.--There is established within the
Commission the Small Business Capital Formation
Advisory Committee (hereafter in this section referred
to as the ``Committee'').
(2) Functions.--
(A) In general.--The Committee shall provide
the Commission with advice on the Commission's
rules, regulations, and policies with regard to
the Commission's mission of protecting
investors, maintaining fair, orderly, and
efficient markets, and facilitating capital
formation, as such rules, regulations, and
policies relate to--
(i) capital raising by emerging,
privately held small businesses
(``emerging companies'') and publicly
traded companies with less than
$250,000,000 in public market
capitalization (``smaller public
companies'') through securities
offerings, including private and
limited offerings and initial and other
public offerings;
(ii) trading in the securities of
emerging companies and smaller public
companies; and
(iii) public reporting and corporate
governance requirements of emerging
companies and smaller public companies.
(B) Limitation.--The Committee shall not
provide any advice with respect to any
policies, practices, actions, or decisions
concerning the Commission's enforcement
program.
(b) Membership.--
(1) In general.--The members of the Committee shall
be--
(A) the Advocate for Small Business Capital
Formation;
(B) not fewer than 10, and not more than 20,
members appointed by the Commission, from among
individuals--
(i) who represent--
(I) emerging companies
engaging in private and limited
securities offerings or
considering initial public
offerings (``IPO'') (including
the companies' officers and
directors);
(II) the professional
advisors of such companies
(including attorneys,
accountants, investment
bankers, and financial
advisors); and
(III) the investors in such
companies (including angel
investors, venture capital
funds, and family offices);
(ii) who are officers or directors of
minority-owned small businesses or
women-owned small businesses;
(iii) who represent--
(I) smaller public companies
(including the companies'
officers and directors);
(II) the professional
advisors of such companies
(including attorneys, auditors,
underwriters, and financial
advisors); and
(III) the pre-IPO and post-
IPO investors in such companies
(both institutional, such as
venture capital funds, and
individual, such as angel
investors); and
(iv) who represent participants in
the marketplace for the securities of
emerging companies and smaller public
companies, such as securities
exchanges, alternative trading systems,
analysts, information processors, and
transfer agents; and
(C) three non-voting members--
(i) one of whom shall be appointed by
the Investor Advocate;
(ii) one of whom shall be appointed
by the North American Securities
Administrators Association; and
(iii) one of whom shall be appointed
by the Administrator of the Small
Business Administration.
(2) Term.--Each member of the Committee appointed
under subparagraph (B), (C)(ii), or (C)(iii) of
paragraph (1) shall serve for a term of 4 years.
(3) Members not commission employees.--Members
appointed under subparagraph (B), (C)(ii), or (C)(iii)
of paragraph (1) shall not be treated as employees or
agents of the Commission solely because of membership
on the Committee.
(c) Chairman; Vice Chairman; Secretary; Assistant
Secretary.--
(1) In general.--The members of the Committee shall
elect, from among the members of the Committee--
(A) a chairman;
(B) a vice chairman;
(C) a secretary; and
(D) an assistant secretary.
(2) Term.--Each member elected under paragraph (1)
shall serve for a term of 3 years in the capacity for
which the member was elected under paragraph (1).
(d) Meetings.--
(1) Frequency of meetings.--The Committee shall
meet--
(A) not less frequently than four times
annually, at the call of the chairman of the
Committee; and
(B) from time to time, at the call of the
Commission.
(2) Notice.--The chairman of the Committee shall give
the members of the Committee written notice of each
meeting, not later than 2 weeks before the date of the
meeting.
(e) Compensation and Travel Expenses.--Each member of the
Committee who is not a full-time employee of the United States
shall--
(1) be entitled to receive compensation at a rate not
to exceed the daily equivalent of the annual rate of
basic pay in effect for a position at level V of the
Executive Schedule under section 5316 of title 5,
United States Code, for each day during which the
member is engaged in the actual performance of the
duties of the Committee; and
(2) while away from the home or regular place of
business of the member in the performance of services
for the Committee, be allowed travel expenses,
including per diem in lieu of subsistence, in the same
manner as persons employed intermittently in the
Government service are allowed expenses under section
5703 of title 5, United States Code.
(f) Staff.--The Commission shall make available to the
Committee such staff as the chairman of the Committee
determines are necessary to carry out this section.
(g) Review by Commission.--The Commission shall--
(1) review the findings and recommendations of the
Committee; and
(2) each time the Committee submits a finding or
recommendation to the Commission, promptly issue a
public statement--
(A) assessing the finding or recommendation
of the Committee; and
(B) disclosing the action, if any, the
Commission intends to take with respect to the
finding or recommendation.
[(h) Federal Advisory Committee Act.--The Federal Advisory
Committee Act (5 U.S.C. App.) shall not apply with respect to
the Committee and its activities.]
SEC. 41. PRIVATE PARTIES AUTHORIZED TO COMPEL THE COMMISSION TO SEEK
SANCTIONS BY FILING CIVIL ACTIONS.
(a) Termination of Administrative Proceeding.--In the case of
any person who is a party to a proceeding brought by the
Commission under a securities law, to which section 554 of
title 5, United States Code, applies, and against whom an order
imposing a cease and desist order and a penalty may be issued
at the conclusion of the proceeding, that person may, not later
than 20 days after receiving notice of such proceeding, and at
that person's discretion, require the Commission to terminate
the proceeding.
(b) Civil Action Authorized.--If a person requires the
Commission to terminate a proceeding pursuant to subsection
(a), the Commission may bring a civil action against that
person for the same remedy that might be imposed.
(c) Standard of Proof in Administrative Proceeding.--
Notwithstanding any other provision of law, in the case of a
proceeding brought by the Commission under a securities law, to
which section 554 of title 5, United States Code, applies, a
legal or equitable remedy may be imposed on the person against
whom the proceeding was brought only on a showing by the
Commission of clear and convincing evidence that the person has
violated the relevant provision of law.
----------
INVESTMENT COMPANY ACT OF 1940
TITLE I--INVESTMENT COMPANIES
* * * * * * *
general definitions
Sec. 2. (a) When used in this title, unless the context
otherwise requires--
(1) ``Advisory board'' means a board, whether elected
or appointed, which is distinct from the board of
directors or board of trustees, of an investment
company, and which is composed solely of persons who do
not serve such company in any other capacity, whether
or not the functions of such board are such as to
render its members ``directors'' within the definition
of that term, which board has advisory functions as to
investments but has no power to determine that any
security or other investment shall be purchased or sold
by such company.
(2) ``Affiliated company'' means a company which is
an affiliated person.
(3) ``Affiliated person'' of another person means (A)
any person directly or indirectly owning, controlling,
or holding with power to vote, 5 per centum or more of
the outstanding voting securities of such other person;
(B) any person 5 per centum or more of whose
outstanding voting securities are directly or
indirectly owned, controlled, or held with power to
vote, by such other person; (C) any person directly or
indirectly controlling, controlled by, or under common
control with, such other person; (D) any officer,
director, partner, copartner, or employee of such other
person; (E) if such other person is an investment
company, any investment adviser thereof or any member
of an advisory board thereof; and (F) if such other
person is an unincorporated investment company not
having a board of directors, the depositor thereof.
(4) ``Assignment'' includes any direct or indirect
transfer or hypothecation of a contract or chose in
action by the assignor, or of a controlling block of
the assignor's outstanding voting securities by a
security holder of the assignor; but does not include
an assignment of partnership interests incidental to
the death or withdrawal of a minority of the members of
the partnership having only a minority interest in the
partnership business or to the admission to the
partnership of one or more members who, after such
admission, shall be only a minority of the members and
shall have only a minority interest in the business.
(5) ``Bank'' means (A) a depository institution (as
defined in section 3 of the Federal Deposit Insurance
Act) or a branch or agency of a foreign bank (as such
terms are defined in section 1(b) of the International
Banking Act of 1978), (B) a member bank of the Federal
Reserve System, (C) any other banking institution or
trust company, whether incorporated or not, doing
business under the laws of any State or of the United
States, a substantial portion of the business of which
consists of receiving deposits or exercising fiduciary
powers similar to those permitted to national banks
under the authority of the Comptroller of the Currency,
and which is supervised and examined by State or
Federal authority having supervision over banks, and
which is not operated for the purpose of evading the
provisions of this title, and (D) a receiver,
conservator, or other liquidating agent of any
institution or firm included in clause (A), (B), or (C)
of this paragraph.
(6) The term ``broker'' has the same meaning as given
in section 3 of the Securities Exchange Act of 1934,
except that such term does not include any person
solely by reason of the fact that such person is an
underwriter for one or more investment companies.
(7) ``Commission'' means the Securities and Exchange
Commission.
(8) ``Company'' means a corporation, a partnership,
an association, a joint-stock company, a trust, a fund,
or any organized group of persons whether incorporated
or not; or any receiver, trustee in a case under title
11 of the United States Code or similar official or any
liquidating agent for any of the foregoing, in his
capacity as such.
(9) ``Control'' means the power to exercise a
controlling influence over the management or policies
of a company, unless such power is solely the result of
an official position with such company.
Any person who owns beneficially, either directly or
through one or more controlled companies, more than 25
per centum of the voting securities of a company shall
be presumed to control such company. Any person who
does not so own more than 25 per centum of the voting
securities of any company shall be presumed not to
control such company. A natural person shall be
presumed not to be a controlled person within the
meaning of this title. Any such presumption may be
rebutted by evidence, but except as hereinafter
provided, shall continue until a determination to the
contrary made by the Commission by order either on its
own motion or on application by an interested person.
If an application filed hereunder is not granted or
denied by the Commission within sixty days after filing
thereof, the determination sought by the application
shall be deemed to have been temporarily granted
pending final determination of the Commission thereon.
The Commission, upon its own motion or upon
application, may by order revoke or modify any order
issued under this paragraph whenever it shall find that
the determination embraced in such original order is no
longer consistent with the facts.
(10) ``Convicted'' includes a verdict, judgment, or
plea of guilty, or a finding of guilt on a plea of nolo
contendere, if such verdict, judgment, plea, or finding
has not been reversed, set aside, or withdrawn, whether
or not sentence has been imposed.
(11) The term ``dealer'' has the same meaning as
given in the Securities Exchange Act of 1934, but does
not include an insurance company or investment company.
(12) ``Director'' means any director of a corporation
or any person performing similar functions with respect
to any organization, whether incorporated or
unincorporated, including any natural person who is a
member of a board of trustees of a management company
created as a common-law trust.
(13) ``Employees' securities company'' means any
investment company or similar issuer all of the
outstanding securities of which (other than short-term
paper) are beneficially owned (A) by the employees or
persons on retainer of a single employer or of two or
more employers each of which is an affiliated company
of the other, (B) by former employees of such employer
or employers, (C) by members of the immediate family of
such employees, persons on retainer, or former
employees, (D) by any two or more of the foregoing
classes of persons, or (E) by such employer or
employers together with any one or more of the
foregoing classes of persons.
(14) ``Exchange'' means any organization,
association, or group of persons, whether incorporated
or unincorporated, which constitutes, maintains, or
provides a market place or facilities for bringing
together purchasers and sellers of securities or for
otherwise performing with respect to securities the
functions commonly performed by a stock exchange as
that term is generally understood, and includes the
market place and the market facilities maintained by
such exchange.
(15) ``Face-amount certificate'' means any
certificate, investment contract, or other security
which represents an obligation on the part of its
issuer to pay a stated or determinable sum or sums at a
fixed or determinable date or dates more than twenty-
four months after the date of issuance, in
consideration of the payment of periodic installments
of a stated or determinable amount (which security
shall be known as a face-amount certificate of the
``installment type''); or any security which represents
a similar obligation on the part of a face-amount
certificate company, the consideration for which is the
payment of a single lump sum (which security shall be
known as a ``fully paid'' face-amount certificate).
(16) ``Government security'' means any security
issued or guaranteed as to principal or interest by the
United States, or by a person controlled or supervised
by and acting as an instrumentality of the Government
of the United States pursuant to authority granted by
the Congress of the United States; or any certificate
of deposit for any of the foregoing.
(17) ``Insurance company'' means a company which is
organized as an insurance company, whose primary and
predominant business activity is the writing of
insurance or the reinsuring of risks underwritten by
insurance companies, and which is subject to
supervision by the insurance commissioner or a similar
official or agency of a State; or any receiver or
similar official or any liquidating agent for such a
company, in his capacity as such.
(18) ``Interstate commerce'' means trade, commerce,
transportation, or communication among the several
States, or between any foreign country and any State,
or between any State and any place or ship outside
thereof.
(19) ``Interested person'' of another person means--
(A) when used with respect to an investment
company--
(i) any affiliated person of such
company,
(ii) any member of the immediate
family of any natural person who is an
affiliated person of such company,
(iii) any interested person of any
investment adviser of or principal
underwriter for such company,
(iv) any person or partner or
employee of any person who at any time
since the beginning of the last two
completed fiscal years of such company
has acted as legal counsel for such
company,
(v) any person or any affiliated
person of a person (other than a
registered investment company) that, at
any time during the 6-month period
preceding the date of the determination
of whether that person or affiliated
person is an interested person, has
executed any portfolio transactions
for, engaged in any principal
transactions with, or distributed
shares for--
(I) the investment company;
(II) any other investment
company having the same
investment adviser as such
investment company or holding
itself out to investors as a
related company for purposes of
investment or investor
services; or
(III) any account over which
the investment company's
investment adviser has
brokerage placement discretion,
(vi) any person or any affiliated
person of a person (other than a
registered investment company) that, at
any time during the 6-month period
preceding the date of the determination
of whether that person or affiliated
person is an interested person, has
loaned money or other property to--
(I) the investment company;
(II) any other investment
company having the same
investment adviser as such
investment company or holding
itself out to investors as a
related company for purposes of
investment or investor
services; or
(III) any account for which
the investment company's
investment adviser has
borrowing authority, and
(vii) any natural person whom the
Commission by order shall have
determined to be an interested person
by reason of having had, at any time
since the beginning of the last two
completed fiscal years of such company,
a material business or professional
relationship with such company or with
the principal executive officer of such
company or with any other investment
company having the same investment
adviser or principal underwriter or
with the principal executive officer of
such other investment company:
Provided, That no person shall be deemed to be
an interested person of an investment company
solely by reason of (aa) his being a member of
its board of directors or advisory board or an
owner of its securities, or (bb) his membership
in the immediate family of any person specified
in clause (aa) of this proviso; and
(B) when used with respect to an investment
adviser of or principal underwriter for any
investment company--
(i) any affiliated person of such
investment adviser or principal
underwriter,
(ii) any member of the immediate
family of any natural person who is an
affiliated person of such investment
advisor or principal underwiter,
(iii) any person who knowingly has
any direct or indirect beneficial
interest in, or who is designated as
trustee, executor, or guardian of any
legal interest in, any security issued
either by such investment adviser or
principal underwriter or by a
controlling person of such investment
adviser or principal underwriter,
(iv) any person or partner or
employee of any person who at any time
since the beginning of the last two
completed fiscal years of such
investment company has acted as legal
counsel for such investment adviser or
principal underwriter,
(v) any person or any affiliated
person of a person (other than a
registered investment company) that, at
any time during the 6-month period
preceding the date of the determination
of whether that person or affiliated
person is an interested person, has
executed any portfolio transactions
for, engaged in any principal
transactions with, or distributed
shares for--
(I) any investment company
for which the investment
adviser or principal
underwriter serves as such;
(II) any investment company
holding itself out to
investors, for purposes of
investment or investor
services, as a company related
to any investment company for
which the investment adviser or
principal underwriter serves as
such; or
(III) any account over which
the investment adviser has
brokerage placement discretion,
(vi) any person or any affiliated
person of a person (other than a
registered investment company) that, at
any time during the 6-month period
preceding the date of the determination
of whether that person or affiliated
person is an interested person, has
loaned money or other property to--
(I) any investment company
for which the investment
adviser or principal
underwriter serves as such;
(II) any investment company
holding itself out to
investors, for purposes of
investment or investor
services, as a company related
to any investment company for
which the investment adviser or
principal underwriter serves as
such; or
(III) any account for which
the investment adviser has
borrowing authority, and
(vii) any natural person whom the
Commission by order shall have
determined to be an interested person
by reason of having had at any time
since the beginning of the last two
completed fiscal years of such
investment company a material business
or professional relationship with such
investment adviser or principal
underwriter or with the principal
executive officer or any controlling
person of such investment adviser or
principal underwriter.
For the purposes of this paragraph (19),
``member of the immediate family'' means any
parent, spouse of a parent, child, spouse of a
child, spouse, brother, or sister, and includes
step and adoptive relationships. The Commission
may modify or revoke any order issued under
clause (vii) of subparagaph (A) or (B) of this
paragraph whenever it finds that such order is
no longer consistent with the facts. No order
issued pursuant to clause (vii) of subparagraph
(A) or (B) of this paragraph shall become
effective until at least sixty days after the
entry thereof, and no such order shall affect
the status of any person for the purposes of
this title or for any other purpose for any
period prior to the effective date of such
order.
(20) ``Investment adviser'' of an investment company
means (A) any person (other than a bona fide officer,
director, trustee, member of an advisory board, or
employee of such company, as such) who pursuant to
contract with such company regularly furnishes advice
to such company with respect to the desirability of
investing in, purchasing or selling securities or other
property, or is empowered to determine what securities
or other property shall be purchased or sold by such
company, and (B) any other person who pursuant to
contract with a person described in clause (A)
regularly performs substantially all of the duties
undertaken by such person described in clause (A); but
does not include (i) a person whose advice is furnished
solely through uniform publications distributed to
subscribers thereto, (ii) a person who furnishes only
statistical and other factual information, advice
regarding economic factors and trends, or advice as to
occasional transactions in specific securities, but
without generally furnishing advice or making
recommendations regarding the purchase or sale of
securities, (iii) a company furnishing such services at
cost to one or more investment companies, insurance
companies, or other financial institutions, (iv) any
person the character and amount of whose compensation
for such services must be approved by a court, or (v)
such other persons as the Commission may by rules and
regulations or order determine not to be within the
intent of this definition.
(21) ``Investment banker'' means any person engaged
in the business of underwriting securities issued by
other persons, but does not include an investment
company, any person who acts as an underwriter in
isolated transactions but not as a part of a regular
business, or any person solely by reason of the fact
that such person is an underwriter for one or more
investment companies.
(22) ``Issuer'' means every person who issues or
proposes to issue any security, or has outstanding any
security which it has issued.
(23) ``Lend'' includes a purchase coupled with an
agreement by the vendor to repurchase; ``borrow''
includes a sale coupled with a similar agreement.
(24) ``Majority-owned subsidiary'' of a person means
a company 50 per centum or more of the outstanding
voting securities of which are owned by such person, or
by a company which, within the meaning of this
paragraph, is a majority-owned subsidiary of such
person.
(25) ``Means or instrumentality of interstate
commerce'' includes any facility of a national
securities exchange.
(26) ``National securities exchange'' means an
exchange registered under section 6 of the Securities
Exchange Act of 1934.
(27) ``Periodic payment plan certificate'' means (A)
any certificate, investment contract, or other security
providing for a series of periodic payments by the
holder, and representing an undivided interest in
certain specified securities or in a unit or fund of
securities purchased wholly or partly with the proceeds
of such payments, and (B) any security the issuer of
which is also issuing securities of the character
described in clause (A) and the holder of which has
substantially the same rights and privileges as those
which holders of securities of the character described
in clause (A) have upon completing the periodic
payments for which such securities provide.
(28) ``Person'' means a natural person or a company.
(29) ``Principal underwriter'' of or for any
investment company other than a closed-end company, or
of any security issued by such a company, means any
underwriter who as principal purchases from such
company, or pursuant to contract has the right (whether
absolute or conditional) from time to time to purchase
from such company, any such security for distribution,
or who as agent for such company sells or has the right
to sell any such security to a dealer or to the public
or both, but does not include a dealer who purchases
from such company through a principal underwriter
acting as agent for such company. ``Principal
underwriter'' of or for a closed-end company or any
issuer which is not an investment company, or of any
security issued by such a company or issuer, means any
underwriter who, in connection with a primary
distribution of securities, (A) is in privity of
contract with the issuer or an affiliated person of the
issuer; (B) acting alone or in concert with one or more
other persons, initiates or directs the formation of an
underwriting syndicate; or (C) is allowed a rate of
gross commission, spread, or other profit greater than
the rate allowed another underwriter participating in
the distribution.
(30) ``Promoter'' of a company or a proposed company
means a person who, acting alone or in concert with
other persons, is initiating or directing, or has
within one year initiated or directed, the organization
of such company.
(31) ``Prospectus'', as used in section 22, means a
written prospectus intended to meet the requirements of
section 10(a) of the Securities Act of 1933 and
currently in use. As used elsewhere, ``prospectus''
means a prospectus as defined in the Securities Act of
1933.
(32) ``Redeemable security'' means any security,
other than short-term paper, under the terms of which
the holder, upon its presentation to the issuer or to a
person designated by the issuer, is entitled (whether
absolutely or only out of surplus) to receive
approximately his proportionate share of the issuer's
current net assets, or the cash equivalent thereof.
(33) ``Reorganization'' means (A) a reorganization
under the supervision of a court of competent
jurisdiction; (B) a merger or consolidation; (C) a sale
of 75 per centum or more in value of the assets of a
company; (D) a restatement of the capital of a company,
or an exchange of securities issued by a company for
any of its own outstanding securities; (E) a voluntary
dissolution or liquidation of a company; (F) a
recapitalization or other procedure or transaction
which has for its purpose the alteration, modification,
or elimination of any of the rights, preferences, or
privileges of any class of securities issued by a
company, as provided in its charter or other instrument
creating or defining such rights, preferences, and
privileges; (G) an exchange of securities issued by a
company for outstanding securities issued by another
company or companies, preliminary to and for the
purpose of effecting or consummating any of the
foregoing; or (H) any exchange of securities by a
company which is not an investment company for
securities issued by a registered investment company.
(34) ``Sale'', ``sell'', ``offer to sell'', or
``offer for sale'' includes every contract of sale or
disposition of, attempt or offer to dispose of, or
solicitation of an offer to buy, a security or interest
in a security, for value. Any security given or
delivered with, or as a bonus on account of, any
purchase of securities or any other thing, shall be
conclusively presumed to constitute a part of the
subject of such purchase and to have been sold for
value.
(35) ``Sales load'' means the difference between the
price of a security to the public and that portion of
the proceeds from its sale which is received and
invested or held for investment by the issuer (or in
the case of a unit investment trust, by the depositor
or trustee), less any portion of such difference
deducted for trustee's or custodian's fee, insurance
premiums, issue taxes, or administrative expenses or
fees which are not properly chargeable to sales or
promotional activities. In the case of a periodic
payment plan certificate, ``sales load'' includes the
sales load on any investment company securities in
which the payments made on such certificate are
invested, as well as the sales load on the certificate
itself.
(36) ``Security'' means any note, stock, treasury
stock, security future, bond, debenture, evidence of
indebtedness, certificate of interest or participation
in any profit-sharing agreement, collateral-trust
certificate, preorganization certificate or
subsciption, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a
security, fractional undivided interest in oil, gas, or
other mineral rights, any put, call, straddle, option,
or privilege on any security (including a certificate
of deposit) or on any group or index of securities
(including any interest therein or based on the value
thereof), or any put, call, straddle, option, or
privilege entered into on a national securities
exchange relating to foreign currency, or, in general,
any interest or instrument commonly known as a
``security'', or any certificate of interest or
participation in, temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to
subscribe to or purchase, any of the foregoing.
(37) ``Separate account'' means an account
established and maintained by an insurance company
pursuant to the laws of any State or territory of the
United States, or of Canada or any province thereof,
under which income, gains and losses, whether or not
realized, from assets allocated to such account, are,
in accordance with the applicable contract, credited to
or charged against such account without regard to other
income, gains, or losses of the insurance company.
(38) ``Short-term paper'' means any note, draft, bill
of exchange, or banker's acceptance payable on demand
or having a maturity at the time of issuance of not
exceeding nine months, exclusive of days of grace, or
any renewal thereof payable on demand or having a
maturity likewise limited; and such other classes of
securities, of a commercial rather than an investment
character, as the Commission may designate by rules and
regulations.
(39) ``State'' means any State of the United States,
the District of Columbia, Puerto Rico, the Virgin
Islands, or any other possession of the United States.
(40) ``Underwriter'' means any person who has
purchased from an issuer with a view to, or sells for
an issuer in connection with, the distribution of any
security, or participates or has a direct or indirect
participation in any such undertaking, or participates
or has a participation in the direct or indirect
underwriting of any such undertaking; but such term
shall not include a person whose interest is limited to
a commission from an underwriter or dealer not in
excess of the usual and customary distributor's or
seller's commission. As used in this paragraph the term
``issuer'' shall include, in addition to an issuer, any
person directly or indirectly controlling or controlled
by the issuer, or any person under direct or indirect
common control with the issuer. When the distribution
of the securities in respect of which any person is an
underwriter is completed such person shall cease to be
an underwriter in respect of such securities or the
issuer thereof.
(41) ``Value'', with respect to assets of registered
investment companies, except as provided in subsection
(b) of section 28 of this title, means--
(A) as used in sections 3, 5, and 12 of this
title, (i) with respect to securities owned at
the end of the last preceding fiscal quarter
for which market quotations are readily
available, the market value at the end of such
quarter; (ii) with respect to other securities
and assets owned at the end of the last
preceding fiscal quarter, fair value at the end
of such quarter, as determined in good faith by
the board of directors; and (iii) with respect
to securities and other assets acquired after
the end of the last preceding fiscal quarter,
the cost thereof; and
(B) as used elsewhere in this title, (i) with
respect to securities for which market
quotations are readily available, the market
value of such securities; and (ii) with respect
to other securities and assets, fair value as
determined in good faith by the board of
directors;
in each case as of such time or times as determined
pursuant to this title, and the rules and regulations
issued by the Commission hereunder. Notwithstanding the
fact that market quotations for securities issued by
controlled companies are available, the board of
directors may in good faith determine the value of such
securities: Provided, That the value so determined is
not in excess of the higher of market value or asset
value of such securities in the case of majority-owned
subsidiaries, and is not in excess of market value in
the case of other controlled companies.
For purposes of the valuation of those assets of a registered
diversified company which are not subject to the limitations
provided for in section 5(b)(1), the Commission may, by rules
and regulations or orders, permit any security to be carried at
cost, if it shall determine that such procedure is consistent
with the general intent and purposes of this title. For
purposes of sections 5 and 12, in lieu of values determined as
provided in clause (A) above, the Commission shall by rules and
regulations permit valuation of securities at cost or other
basis in cases where it may be more convenient for such company
to make its computations on such basis by reason of the
necessity or desirability of complying with the provisions of
any United States revenue laws or rules and regulations issued
thereunder, or the laws or the rules and regulations issued
thereunder of any State in which the securities of such company
may be qualified for sale.
The foregoing definition shall not derogate from the
authority of the Commission with respect to the reports,
information, and documents to be filed with the Commission by
any registered company, or with respect to the accounting
policies and principles to be following by any such company, as
provided in sections 8, 30, and 31.
(42) ``Voting security'' means any security presently
entitling the owner or holder thereof to vote for the
election of directors of a company. A specified
percentage of the outstanding voting securities of a
company means such amount of its outstanding voting
securities as entitles the holder or holders thereof to
cast said specified percentage of the aggregate votes
which the holders of all the outstanding voting
securities of such company are entitled to cast. The
vote of a majority of the outstanding voting securities
of a company means the vote, at the annual or a special
meeting of the security holders of such company duly
called, (A) of 67 per centum or more of the voting
securities present at such meeting, if the holders of
more than 50 per centum of the outstanding voting
securities of such company are present or represented
by proxy; or (B) of more than 50 per centum of the
outstanding voting securities of such company,
whichever is the less.
(43) ``Wholly-owned subsidiary'' of a person means a
company 95 per centum or more of the outstanding voting
securities of which are owned by such person, or by a
company which, within the meaning of this paragraph, is
a wholly-owned subsidiary of such person.
(44) ``Securities Act of 1933'', ``Securities
Exchange Act of 1934'', and ``Trust Indenture Act of
1939'' means those Acts, respectively, as heretofore or
hereafter amended.
(45) ``Savings and loan association'' means a savings
and loan association, building and loan association,
cooperative bank, homestead association, or similar
institution, which is supervised and examined by State
or Federal authority having supervision over any such
institution, and a receiver, conservator, or other
liquidating agent of any such institution.
(46) ``Eligible portfolio company'' means any issuer
which--
(A) is organized under the laws of, and has
its principal place of business in, any State
or States;
(B) is neither an investment company as
defined in section 3 (other than a small
business investment company which is licensed
by the Small Business Administration to operate
under the Small Business Investment Act of 1958
and which is a wholly-owned subsidiary of the
business development company) nor a company
which would be an investment company except for
the exclusion from the definition of investment
company in section 3(c) (unless it is described
in paragraph (2), (3), (4), (5), (6), or (9) of
such section); and
(C) satisfies one of the following:
(i) it does not have any class of
securities with respect to which a
member of a national securities
exchange, broker, or dealer may extend
or maintain credit to or for a customer
pursuant to rules or regulations
adopted by the Board of Governors of
the Federal Reserve System under
section 7 of the Securities Exchange
Act of 1934;
(ii) it is controlled by a business
development company, either alone or as
part of a group acting together, and
such business development company in
fact exercises a controlling influence
over the management or policies of such
eligible portfolio company and, as a
result of such control, has an
affiliated person who is a director of
such eligible portfolio company;
(iii) it has total assets of not more
than $4,000,000, and capital and
surplus (shareholders' equity less
retained earnings) of not less than
$2,000,000, except that the Commission
may adjust such amounts by rule,
regulation, or order to reflect changes
in 1 or more generally accepted indices
or other indicators for small
businesses; or
(iv) it meets such other criteria as
the Commission may, by rule, establish
as consistent with the public interest,
the protection of investors, and the
purposes fairly intended by the policy
and provisions of this title.
(47) ``Making available significant managerial
assistance'' by a business development company means--
(A) any arrangement whereby a business
development company, through its directors,
officers, employees, or general partners,
offers to provide, and, if accepted, does so
provide, significant guidance and counsel
concerning the management, operations, or
business objectives and policies of a portfolio
company;
(B) the exercise by a business development
company of a controlling influence over the
management or policies of a portfolio company
by the business development company acting
individually or as part of a group acting
together which controls such portfolio company;
or
(C) with respect to a small business
investment company licensed by the Small
Business Administration to operate under the
Small Business Investment Act of 1958, the
making of loans to a portfolio company.
For purposes of subparagraph (A), the requirement that
a business development company make available
significant managerial assistance shall be deemed to be
satisfied with respect to any particular portfolio
company where the business development company
purchases securities of such portfolio company in
conjunction with one or more other persons acting
together, and at least one of the persons in the group
makes available significant managerial assistance to
such portfolio company, except that such requirement
will not be deemed to be satisfied if the business
development company, in all cases, makes available
significant managerial assistance solely in the manner
described in this sentence.
(48) ``Business development company'' means any
closed-end company which--
(A) is organized under the laws of, and has
its principal place of business in, any State
or States;
(B) is operated for the purpose of making
investments in securities described in
paragraphs (1) through (3) of section 55(a),
and makes available significant managerial
assistance with respect to the issuers of such
securities, provided that a business
development company must make available
significant managerial assistance only with
respect to the companies which are treated by
such business development company as satisfying
the 70 per centum of the value of its total
assets condition of section 55; and provided
further that a business development company
need not make available significant managerial
assistance with respect to any company
described in paragraph (46)(C)(iii), or with
respect to any other company that meets such
criteria as the Commission may by rule,
regulation, or order permit, as consistent with
the public interest, the protection of
investors, and the purposes of this title; and
(C) has elected pursuant to section 54(a) to
be subject to the provisions of sections 55
through 65.
(49) ``Foreign securities authority'' means any
foreign government or any governmental body or
regulatory organization empowered by a foreign
government to administer or enforce its laws as they
relate to securities matters.
(50) ``Foreign financial regulatory authority'' means
any (A) foreign securities authority, (B) other
governmental body or foreign equivalent of a self-
regulatory organization empowered by a foreign
government to administer or enforce its laws relating
to the regulation of fiduciaries, trusts, commercial
lending, insurance, trading in contracts of sale of a
commodity for future delivery, or other instruments
traded on or subject to the rules of a contract market,
board of trade or foreign equivalent, or other
financial activities, or (C) membership organization a
function of which is to regulate the participation of
its members in activities listed above.
(51)(A) ``Qualified purchaser'' means--
(i) any natural person (including any person
who holds a joint, community property, or other
similar shared ownership interest in an issuer
that is excepted under section 3(c)(7) with
that person's qualified purchaser spouse) who
owns not less than $5,000,000 in investments,
as defined by the Commission;
(ii) any company that owns not less than
$5,000,000 in investments and that is owned
directly or indirectly by or for 2 or more
natural persons who are related as siblings or
spouse (including former spouses), or direct
lineal descendants by birth or adoption,
spouses of such persons, the estates of such
persons, or foundations, charitable
organizations, or trusts established by or for
the benefit of such persons;
(iii) any trust that is not covered by clause
(ii) and that was not formed for the specific
purpose of acquiring the securities offered, as
to which the trustee or other person authorized
to make decisions with respect to the trust,
and each settlor or other person who has
contributed assets to the trust, is a person
described in clause (i), (ii), or (iv); or
(iv) any person, acting for its own account
or the accounts of other qualified purchasers,
who in the aggregate owns and invests on a
discretionary basis, not less than $25,000,000
in investments.
(B) The Commission may adopt such rules and
regulations applicable to the persons and trusts
specified in clauses (i) through (iv) of subparagraph
(A) as it determines are necessary or appropriate in
the public interest or for the protection of investors.
(C) The term ``qualified purchaser'' does not include
a company that, but for the exceptions provided for in
paragraph (1) or (7) of section 3(c), would be an
investment company (hereafter in this paragraph
referred to as an ``excepted investment company''),
unless all beneficial owners of its outstanding
securities (other than short-term paper), determined in
accordance with section 3(c)(1)(A), that acquired such
securities on or before April 30, 1996 (hereafter in
this paragraph referred to as ``pre-amendment
beneficial owners''), and all pre-amendment beneficial
owners of the outstanding securities (other than short-
term paper) of any excepted investment company that,
directly or indirectly, owns any outstanding securities
of such excepted investment company, have consented to
its treatment as a qualified purchaser. Unanimous
consent of all trustees, directors, or general partners
of a company or trust referred to in clause (ii) or
(iii) of subparagraph (A) shall constitute consent for
purposes of this subparagraph.
(52) The terms ``security future'' and ``narrow-based
security index'' have the same meanings as provided in
section 3(a)(55) of the Securities Exchange Act of
1934.
(53) The term ``credit rating agency'' has the same
meaning as in section 3 of the Securities Exchange Act
of 1934.
(54) The terms ``commodity pool'', ``commodity pool
operator'', ``commodity trading advisor'', ``major swap
participant'', ``swap'', ``swap dealer'', and ``swap
execution facility'' have the same meanings as in
section 1a of the Commodity Exchange Act (7 U.S.C.
1a).''.
(b) No provision in this title shall apply to, or be deemed
to include, the United States, a State, or any political
subdivision of a State, or any agency, authority, or
instrumentality of any one or more of the foregoing, or any
corporation which is wholly owned directly or indirectly by any
one or more of the foregoing, or any officer, agent, or
employee of any of the foregoing acting as such in the course
of his official duty, unless such provision makes specific
reference thereto.
(c) Consideration of Promotion of Efficiency, Competition,
and Capital Formation.--Whenever pursuant to this title the
Commission is engaged in rulemaking and is required to consider
or determine whether an action is consistent with the public
interest, the Commission shall also consider, in addition to
the protection of investors, whether the action will promote
efficiency, competition, and capital formation.
definition of investment company
Sec. 3. (a)(1) When used in this title, ``investment
company'' means any issuer which--
(A) is or holds itself out as being engaged
primarily, or proposes to engage primarily, in the
business of investing, reinvesting, or trading in
securities;
(B) is engaged or proposes to engage in the business
of issuing face-amount certificates of the installment
type, or has been engaged in such business and has any
such certificate outstanding; or
(C) is engaged or proposes to engage in the business
of investing, reinvesting, owning, holding, or trading
in securities, and owns or proposes to acquire
investment securities having a value exceeding 40 per
centum of the value of such issuer's total assets
(exclusive of Government securities and cash items) on
an unconsolidated basis.
(2) As used in this section, ``investment securities''
includes all securities except (A) Government securities, (B)
securities issued by employees' securities companies, and (C)
securities issued by majority-owned subsidiaries of the owner
which (i) are not investment companies, and (ii) are not
relying on the exception from the definition of investment
company in paragraph (1) or (7) of subsection (c).
(b) Notwithstanding paragraph (1)(C) of subsection (a), none
of the following persons is an investment company within the
meaning of this title:
(1) Any issuer primarily engaged, directly or through
a wholly-owned subsidiary or subsidiaries, in a
business or businesses other than that of investing,
reinvesting, owning, holding, or trading in securities.
(2) Any issuer which the Commission, upon application
by such issuer, finds and by order declares to be
primarily engaged in a business or businesses other
than that of investing, reinvesting, owning, holding,
or trading in securities either directly or (A) through
majority-owned subsidiaries or (B) through controlled
companies conducting similar types of businesses. The
filing of an application under this paragraph in good
faith by an issuer other than a registered investment
company shall exempt the applicant for a period of
sixty days from all provisions of this title applicable
to investment companies as such. For cause shown, the
Commission by order may extend such period of exemption
for an additional period or periods. Whenever the
Commission, upon its own motion or upon application,
finds that the circumstances which gave rise to the
issuance of an order granting an application under this
paragraph no longer exist, the Commission shall by
order revoke such order.
(3) Any issuer all the outstanding securities of
which (other than short-term paper and directors'
qualifying shares) are directly or indirectly owned by
a company excepted from the definition of investment
company by paragraph (1) or (2) of this subsection.
(c) Notwithstanding subsection (a), none of the following
persons is an investment company within the meaning of this
title:
(1) Any issuer whose outstanding securities (other
than short-term paper) are beneficially owned by not
more than one hundred persons (or, with respect to a
qualifying venture capital fund, 500 persons) and which
is not making and does not presently propose to make a
public offering of its securities. Such issuer shall be
deemed to be an investment company for purposes of the
limitations set forth in subparagraphs (A)(i) and
(B)(i) of section 12(d)(1) governing the purchase or
other acquisition by such issuer of any security issued
by any registered investment company and the sale of
any security issued by any registered open-end
investment company to any such issuer. For purposes of
this paragraph:
(A) Beneficial ownership by a company shall
be deemed to be beneficial ownership by one
person, except that, if the company owns 10 per
centum or more of the outstanding voting
securities of the issuer, and is or, but for
the exception provided for in this paragraph or
paragraph (7), would be an investment company,
the beneficial ownership shall be deemed to be
that of the holders of such company's
outstanding securities (other than short-term
paper).
(B) Beneficial ownership by any person who
acquires securities or interests in securities
of an issuer described in the first sentence of
this paragraph shall be deemed to be beneficial
ownership by the person from whom such transfer
was made, pursuant to such rules and
regulations as the Commission shall prescribe
as necessary or appropriate in the public
interest and consistent with the protection of
investors and the purposes fairly intended by
the policy and provisions of this title, where
the transfer was caused by legal separation,
divorce, death, or other involuntary event.
(C) The term ``qualifying venture capital
fund'' means any venture capital fund (as
defined pursuant to section 203(l)(1) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-
3(l)(1)) with no more than $50,000,000 in
aggregate capital contributions and uncalled
committed capital, as such dollar amount is
annually adjusted by the Commission to reflect
the change in the Consumer Price Index for All
Urban Consumers published by the Bureau of
Labor Statistics of the Department of Labor.
(2)(A) Any person primarily engaged in the business
of underwriting and distributing securities issued by
other persons, selling securities to customers, acting
as broker, and acting as market intermediary, or any
one or more of such activities, whose gross income
normally is derived principally from such business and
related activities.
(B) For purposes of this paragraph--
(i) the term ``market intermediary'' means
any person that regularly holds itself out as
being willing contemporaneously to engage in,
and that is regularly engaged in, the business
of entering into transactions on both sides of
the market for a financial contract or one or
more such financial contracts; and
(ii) the term ``financial contract'' means
any arrangement that--
(I) takes the form of an individually
negotiated contract, agreement, or
option to buy, sell, lend, swap, or
repurchase, or other similar
individually negotiated transaction
commonly entered into by participants
in the financial markets;
(II) is in respect of securities,
commodities, currencies, interest or
other rates, other measures of value,
or any other financial or economic
interest similar in purpose or function
to any of the foregoing; and
(III) is entered into in response to
a request from a counter party for a
quotation, or is otherwise entered into
and structured to accommodate the
objectives of the counter party to such
arrangement.
(3) Any bank or insurance company; any savings and
loan association, building and loan association,
cooperative bank, homestead association, or similar
institution, or any receiver, conservator, liquidator,
liquidating agent, or similar official or person
thereof or therefor; or any common trust fund or
similar fund maintained by a bank exclusively for the
collective investment and reinvestment of moneys
contributed thereto by the bank in its capacity as a
trustee, executor, administrator, or guardian, if--
(A) such fund is employed by the bank solely
as an aid to the administration of trusts,
estates, or other accounts created and
maintained for a fiduciary purpose;
(B) except in connection with the ordinary
advertising of the bank's fiduciary services,
interests in such fund are not--
(i) advertised; or
(ii) offered for sale to the general
public; and
(C) fees and expenses charged by such fund
are not in contravention of fiduciary
principles established under applicable Federal
or State law.
(4) Any person substantially all of whose business is
confined to making small loans, industrial banking, or
similar businesses.
(5) Any person who is not engaged in the business of
issuing redeemable securities, face-amount certificates
of the installment type or periodic payment plan
certificates, and who is primarily engaged in one or
more of the following businesses: (A) Purchasing or
otherwise acquiring notes, drafts, acceptances, open
accounts receivable, and other obligations representing
part or all of the sales price of merchandise,
insurance, and services; (B) making loans to
manufacturers, wholesalers, and retailers of, and to
prospective purchasers of, specified merchandise,
insurance, and services; and (C) purchasing or
otherwise acquiring mortgages and other liens on and
interests in real estate.
(6) Any company primarily engaged, directly or
through majority-owned subsidiaries, in one or more of
the businesses described in paragraphs (3), (4), and
(5), or in one or more of such businesses (from which
not less than 25 centum of such company's gross income
during its last fiscal year was derived) together with
an additional business or businesses other than
investing, reinvesting, owning, holding, or trading in
securities.
(7)(A) Any issuer, the outstanding securities of
which are owned exclusively by persons who, at the time
of acquisition of such securities, are qualified
purchasers, and which is not making and does not at
that time propose to make a public offering of such
securities. Securities that are owned by persons who
received the securities from a qualified purchaser as a
gift or bequest, or in a case in which the transfer was
caused by legal separation, divorce, death, or other
involuntary event, shall be deemed to be owned by a
qualified purchaser, subject to such rules,
regulations, and orders as the Commission may prescribe
as necessary or appropriate in the public interest or
for the protection of investors.
(B) Notwithstanding subparagraph (A), an issuer is
within the exception provided by this paragraph if--
(i) in addition to qualified purchasers,
outstanding securities of that issuer are
beneficially owned by not more than 100 persons
who are not qualified purchasers, if--
(I) such persons acquired any portion
of the securities of such issuer on or
before September 1, 1996; and
(II) at the time at which such
persons initially acquired the
securities of such issuer, the issuer
was excepted by paragraph (1); and
(ii) prior to availing itself of the
exception provided by this paragraph--
(I) such issuer has disclosed to each
beneficial owner, as determined under
paragraph (1), that future investors
will be limited to qualified
purchasers, and that ownership in such
issuer is no longer limited to not more
than 100 persons; and
(II) concurrently with or after such
disclosure, such issuer has provided
each beneficial owner, as determined
under paragraph (1), with a reasonable
opportunity to redeem any part or all
of their interests in the issuer,
notwithstanding any agreement to the
contrary between the issuer and such
persons, for that person's
proportionate share of the issuer's net
assets.
(C) Each person that elects to redeem under
subparagraph (B)(ii)(II) shall receive an amount in
cash equal to that person's proportionate share of the
issuer's net assets, unless the issuer elects to
provide such person with the option of receiving, and
such person agrees to receive, all or a portion of such
person's share in assets of the issuer. If the issuer
elects to provide such persons with such an
opportunity, disclosure concerning such opportunity
shall be made in the disclosure required by
subparagraph (B)(ii)(I).
(D) An issuer that is excepted under this paragraph
shall nonetheless be deemed to be an investment company
for purposes of the limitations set forth in
subparagraphs (A)(i) and (B)(i) of section 12(d)(1)
relating to the purchase or other acquisition by such
issuer of any security issued by any registered
investment company and the sale of any security issued
by any registered open-end investment company to any
such issuer.
(E) For purposes of determining compliance with this
paragraph and paragraph (1), an issuer that is
otherwise excepted under this paragraph and an issuer
that is otherwise excepted under paragraph (1) shall
not be treated by the Commission as being a single
issuer for purposes of determining whether the
outstanding securities of the issuer excepted under
paragraph (1) are beneficially owned by not more than
100 persons or whether the outstanding securities of
the issuer excepted under this paragraph are owned by
persons that are not qualified purchasers. Nothing in
this subparagraph shall be construed to establish that
a person is a bona fide qualified purchaser for
purposes of this paragraph or a bona fide beneficial
owner for purposes of paragraph (1).
(9) Any person substantially all of whose business
consists of owning or holding oil, gas, or other
mineral royalties or leases, or fractional interests
therein, or certificates of interest or participation
in or investment contracts relative to such royalties,
leases, or fractional interests.
(10)(A) Any company organized and operated
exclusively for religious, educational, benevolent,
fraternal, charitable, or reformatory purposes--
(i) no part of the net earnings of which
inures to the benefit of any private
shareholder or individual; or
(ii) which is or maintains a fund described
in subparagraph (B).
(B) For the purposes of subparagraph (A)(ii), a fund
is described in this subparagraph if such fund is a
pooled income fund, collective trust fund, collective
investment fund, or similar fund maintained by a
charitable organization exclusively for the collective
investment and reinvestment of one or more of the
following:
(i) assets of the general endowment fund or
other funds of one or more charitable
organizations;
(ii) assets of a pooled income fund;
(iii) assets contributed to a charitable
organization in exchange for the issuance of
charitable gift annuities;
(iv) assets of a charitable remainder trust
or of any other trust, the remainder interests
of which are irrevocably dedicated to any
charitable organization;
(v) assets of a charitable lead trust;
(vi) assets of a trust, the remainder
interests of which are revocably dedicated to
or for the benefit of 1 or more charitable
organizations, if the ability to revoke the
dedication is limited to circumstances
involving--
(I) an adverse change in the
financial circumstances of a settlor or
an income beneficiary of the trust;
(II) a change in the identity of the
charitable organization or
organizations having the remainder
interest, provided that the new
beneficiary is also a charitable
organization; or
(III) both the changes described in
subclauses (I) and (II);
(vii) assets of a trust not described in
clauses (i) through (v), the remainder
interests of which are revocably dedicated to a
charitable organization, subject to
subparagraph (C); or
(viii) such assets as the Commission may
prescribe by rule, regulation, or order in
accordance with section 6(c).
(C) A fund that contains assets described in clause
(vii) of subparagraph (B) shall be excluded from the
definition of an investment company for a period of 3
years after the date of enactment of this subparagraph,
but only if--
(i) such assets were contributed before the
date which is 60 days after the date of
enactment of this subparagraph; and
(ii) such assets are commingled in the fund
with assets described in one or more of clauses
(i) through (vi) and (viii) of subparagraph
(B).
(D) For purposes of this paragraph--
(i) a trust or fund is ``maintained'' by a
charitable organization if the organization
serves as a trustee or administrator of the
trust or fund or has the power to remove the
trustees or administrators of the trust or fund
and to designate new trustees or
administrators;
(ii) the term ``pooled income fund'' has the
same meaning as in section 642(c)(5) of the
Internal Revenue Code of 1986;
(iii) the term ``charitable organization''
means an organization described in paragraphs
(1) through (5) of section 170(c) or section
501(c)(3) of the Internal Revenue Code of 1986;
(iv) the term ``charitable lead trust'' means
a trust described in section 170(f)(2)(B),
2055(e)(2)(B), or 2522(c)(2)(B) of the Internal
Revenue Code of 1986;
(v) the term ``charitable remainder trust''
means a charitable remainder annuity trust or a
charitable remainder unitrust, as those terms
are defined in section 664(d) of the Internal
Revenue Code of 1986; and
(vi) the term ``charitable gift annuity''
means an annuity issued by a charitable
organization that is described in section
501(m)(5) of the Internal Revenue Code of 1986.
(11) Any employee's stock bonus, pension, or profit-
sharing trust which meets the requirements for
qualification under section 401 of the Internal Revenue
Code of 1986; or any governmental plan described in
section 3(a)(2)(C) of the Securities Act of 1933; or
any collective trust fund maintained by a bank
consisting solely of assets of one or more of such
trusts, government plans, or church plans, companies or
accounts that are excluded from the definition of an
investment company under paragraph (14) of this
subsection; or any separate account the assets of which
are derived solely from (A) contributions under pension
or profit-sharing plans which meet the requirements of
section 401 of the Internal Revenue Code of 1986 or the
requirements for deduction of the employer's
contribution under section 404(a)(2) of such Code, (B)
contributions under governmental plans in connection
with which interests, participations, or securities are
exempted from the registration provisions of section 5
of the Securities Act of 1933 by section 3(a)(2)(C) of
such Act, and (C) advances made by an insurance company
in connection with the operation of such separate
account.
(12) Any voting trust the assets of which consist
exclusively of securities of a single issuer which is
not an investment company.
(13) Any security holders' protective committee or
similar issuer having outstanding and issuing no
securities other than certificates of deposit and
short-term paper.
(14) Any church plan described in section 414(e) of
the Internal Revenue Code of 1986, if, under any such
plan, no part of the assets may be used for, or
diverted to, purposes other than the exclusive benefit
of plan participants or beneficiaries, or any company
or account that is--
(A) established by a person that is eligible
to establish and maintain such a plan under
section 414(e) of the Internal Revenue Code of
1986; and
(B) substantially all of the activities of
which consist of--
(i) managing or holding assets
contributed to such church plans or
other assets which are permitted to be
commingled with the assets of church
plans under the Internal Revenue Code
of 1986; or
(ii) administering or providing
benefits pursuant to church plans.
* * * * * * *
exemptions
Sec. 6. (a) The following investment companies are exempt
from the provisions of this title:
(1) Any company organized or otherwise created under
the laws of and having its principal office and place
of business in Puerto Rico, the Virgin Islands, or any
other possession of the United States; but such
exemption shall terminate if any security of which such
company is the issuer is offered for sale or sold after
the effective date of this title, by such company or an
underwriter therefor, to a resident of any State other
than the State in which such company is organized.
(2) Any company which since the effective date of
this title or within five years prior to such date has
been reorganized under the supervision of a court of
competent jurisdiction, if (A) such company was not an
investment company at the commencement of such
reorganization proceedings, (B) at the conclusion of
such proceedings all outstanding securities of such
company were owned by creditors of such company or by
persons to whom such securities were issued on account
of creditors' claims, and (C) more than 50 per centum
of the voting securities of such company, and
securities representing more than 50 per centum of the
net asset value of such company, are currently owned
beneficially by not more than twenty-five persons; but
such exemption shall terminate if any security of which
such company is the issuer is offered for sale or sold
to the public after the conclusion of such proceedings
by the issuer or by or through any underwriter. For the
purposes of this paragraph, any new company organized
as part of the reorganization shall be deemed the same
company as its predecessor; and beneficial ownership
shall be determined in the manner provided in section
3(c)(1).
(3) Any issuer as to which there is outstanding a
writing filed with the Commission by the Federal
Savings and Loan Insurance Corporation stating that
exemption of such issuer from the provisions of this
title is consistent with the public interest and the
protection of investors and is necessary or appropriate
by reason of the fact that such issuer holds or
proposes to acquire any assets or any product of any
assets which have been segregated (A) from assets of
any company which at the filing of such writing is an
insured institution within the meaning of section
401(a) of the National Housing Act, as heretofore or
hereafter amended, or (B) as a part of or in connection
with any plan for or condition to the insurance of
accounts of any company by said corporation or the
conversion of any company into a Federal savings and
loan association. Any such writing shall expire when
canceled by a writing similarly filed or at the
expiration of two years after the date of its filing,
whichever first occurs; but said corporation may,
nevertheless, before, at, or after the expiration of
any such writing file another writing or writings with
respect to such issuer.
(4) Any company which prior to March 15, 1940, was
and now is a wholly-owned subsidiary of a registered
face-amount certificate company and was prior to said
date and now is organized and operating under the
insurance laws of any State and subject to supervision
and examination by the insurance commissioner thereof,
and which prior to March 15, 1940, was and now is
engaged, subject to such laws, in business
substantially all of which consists of issuing and
selling only to residents of such State and investing
the proceeds from, securities providing for or
representing participations or interests in intangible
assets consisting of mortgages or other liens on real
estate or notes or bonds secured thereby or in a fund
or deposit of mortgages or other liens on real estate
or notes or bonds secured thereby or having outstanding
such securities so issued and sold.
(5)(A) Any company that is not engaged in the
business of issuing redeemable securities, the
operations of which are subject to regulation by the
State in which the company is organized under a statute
governing entities that provide financial or managerial
assistance to enterprises doing business, or proposing
to do business, in that State if--
(i) the organizational documents of the
company state that the activities of the
company are limited to the promotion of
economic, business, or industrial development
in the State through the provision of financial
or managerial assistance to enterprises doing
business, or proposing to do business, in that
State, and such other activities that are
incidental or necessary to carry out that
purpose;
(ii) immediately following each sale of the
securities of the company by the company or any
underwriter for the company, not less than 80
percent of the securities of the company being
offered in such sale, on a class-by-class
basis, are held by persons who reside or who
have a substantial business presence in that
State;
(iii) the securities of the company are sold,
or proposed to be sold, by the company or by
any underwriter for the company, solely to
accredited investors, as that term is defined
in section 2(a)(15) of the Securities Act of
1933, or to such other persons that the
Commission, as necessary or appropriate in the
public interest and consistent with the
protection of investors, may permit by rule,
regulation, or order; and
(iv) the company does not purchase any
security issued by an investment company or by
any company that would be an investment company
except for the exclusions from the definition
of the term ``investment company'' under
paragraph (1) or (7) of section 3(c), other
than--
(I) any debt security that meets such
standards of credit-worthiness as the
Commission shall adopt; or
(II) any security issued by a
registered open-end investment company
that is required by its investment
policies to invest not less than 65
percent of its total assets in
securities described in subclause (I)
or securities that are determined by
such registered open-end investment
company to be comparable in quality to
securities described in subclause (I).
(B) Notwithstanding the exemption provided by this
paragraph, section 9 (and, to the extent necessary to
enforce section 9, sections 38 through 51) shall apply
to a company described in this paragraph as if the
company were an investment company registered under
this title.
(C) Any company proposing to rely on the exemption
provided by this paragraph shall file with the
Commission a notification stating that the company
intends to do so, in such form and manner as the
Commission may prescribe by rule.
(D) Any company meeting the requirements of this
paragraph may rely on the exemption provided by this
paragraph upon filing with the Commission the
notification required by subparagraph (C), until such
time as the Commission determines by order that such
reliance is not in the public interest or is not
consistent with the protection of investors.
(E) The exemption provided by this paragraph may be
subject to such additional terms and conditions as the
Commission may by rule, regulation, or order determine
are necessary or appropriate in the public interest or
for the protection of investors.
(b) Upon application by any employees' security company, the
Commission shall by order exempt such company from the
provisions of this title and of the rules and regulations
hereunder, if and to the extent that such exemption is
consistent with the protection of investors. In determining the
provisions to which such an order of exemption shall apply, the
Commission shall give due weight, among other things, to the
form of organization and the capital structure of such company,
the persons by whom its voting securities, evidences of
indebtedness, and other securities are owned and controlled,
the prices at which securities issued by such company are sold
and the sales load thereon, the disposition of the proceeds of
such sales, the character of the securities in which such
proceeds are invested, and any relationship between such
company and the issuer of any such security.
[(c)] [The Commission] (c) General Exemptive Authority._
(1) In general._The Commission, by rules and
regulations upon its own motion, or by order upon
application, may conditionally or unconditionally
exempt any person, security, or transaction, or any
class or classes of persons, securities, or
transactions, from any provision or provisions of this
title or of any rule or regulation thereunder, if and
to the extent that such exemption is necessary or
appropriate in the public interest and consistent with
the protection of investors and the purposes fairly
intended by the policy and provisions of this title.
(2) Application process.--
(A) In general.--A person who wishes to
receive an exemption from the Commission
pursuant to paragraph (1) shall file an
application with the Commission in such form
and manner and containing such information as
the Commission may require.
(B) Publication; rejection of invalid
applications.--
(i) In general.--Not later than the
end of the 5-day period beginning on
the date that the Commission receives
an application under subparagraph (A),
the Commission shall either--
(I) publish the application,
including by publication on the
website of the Commission; or
(II) if the Commission
determines that the application
does not comply with the proper
form, manner, or information
requirements described under
subparagraph (A), reject such
application and notify the
applicant of the specific
reasons the application was
rejected.
(ii) Failure to publish
application.--If the Commission does
not reject an application under clause
(i)(II), but fails to publish the
application by the end of the time
period specified under clause (i), such
application shall be deemed to have
been published on the date that is the
end of such time period.
(3) Determination by commission.--
(A) In general.--Not later than 45 days after
the date that the Commission publishes an
application pursuant to paragraph (2)(B), the
Commission shall, by order--
(i) approve the application;
(ii) if the Commission determines
that the application would have been
approved had the applicant provided
additional supporting documentation or
made certain amendments to the
application--
(I) provide the applicant
with the specific additional
supporting documentation or
amendments that the Commission
believes are necessary for the
applicant to provide in order
for the application to be
approved; and
(II) request that the
applicant withdraw the
application and re-submit the
application with such
additional supporting
documentation and amendments;
or
(iii) deny the application.
(B) Extension of time period.--The Commission
may extend the time period described under
subparagraph (A) by not more than an additional
45 days, if--
(i) the Commission determines that a
longer period is appropriate and
publishes the reasons for such
determination; or
(ii) the applicant consents to the
longer period.
(C) Time period for withdrawal.--If the
Commission makes a request under subparagraph
(A)(ii) for an applicant to withdraw an
application, such application shall be deemed
to be denied if the applicant informs the
Commission that the applicant will not withdraw
the application or if the applicant does not
withdraw the application before the end of the
30-day period beginning on the date the
Commission makes such request.
(4) Proceedings; notice and hearing.--If an
application is denied pursuant to paragraph (3), the
Commission shall provide the applicant with--
(A) a written explanation for why the
application was not approved; and
(B) an opportunity for hearing, if requested
by the applicant not later than 20 days after
the date of such denial, with such hearing to
be commenced not later than 30 days after the
date of such denial.
(5) Result of failure to institute or commence
proceedings.--An application shall be deemed to have
been approved by the Commission, if--
(A) the Commission fails to either approve,
request the withdrawal of, or deny the
application, as required under paragraph
(3)(A), within the time period required under
paragraph (3)(A), as such time period may have
been extended pursuant to paragraph (3)(B); or
(B) the applicant requests an opportunity for
hearing, pursuant to paragraph (4)(B), but the
Commission does not commence such hearing
within the time period required under paragraph
(4)(B).
(6) Rulemaking.--Not later than 180 days after the
date of enactment of this paragraph, the Commission
shall issue rules to carry out this subsection.
(d) The Commission, by rules and regulations or order, shall
exempt a closed-end investment company from any or all
provisions of this title, but subject to such terms and
conditions as may be necessary or appropriate in the public
interest or for the protection of investors, if--
(1) the aggregate sums received by such company from
the sale of all its outstanding securities, plus the
aggregate offering price of all securities of which
such company is the issuer and which it proposes to
offer for sale, do not exceed $10,000,000, or such
other amount as the Commission may set by rule,
regulation, or order;
(2) no security of which such company is the issuer
has been or is proposed to be sold by such company or
any underwriter therefor, in connection with a public
offering, to any person who is not a resident of the
State under the laws of which such company is organized
or otherwise created; and
(3) such exemption is not contrary to the public
interest or inconsistent with the protection of
investors.
(e) If, in connection with any rule, regulation, or order
under this section exempting any investment company from any
provision of section 7, the Commission deems it necessary or
appropriate in the public interest or for the protection of
investors that certain specified provisions of this title
pertaining to registered investment companies shall be
applicable in respect of such company, the provisions so
specified shall apply to such company, and to other persons in
their transactions and relations with such company, as though
such company were a registered investment company.
(f) Any closed-end company which--
(1) elects to be treated as a business development
company pursuant to section 54; or
(2) would be excluded from the definition of an
investment company by section 3(c)(1), except that it
presently proposes to make a public offering of its
securities as a business development company, and has
notified the Commission, in a form and manner which the
Commission may, by rule, prescribe, that it intends in
good faith to file, within 90 days, a notification of
election to become subject to the provisions of
sections 55 through 65,
shall be exempt from sections 1 through 53, except to the
extent provided in sections 59 through 65.
* * * * * * *
ineligibility of certain affiliated persons and underwriters
Sec. 9. (a) It shall be unlawful for any of the following
persons to serve or act in the capacity of employee, officer,
director, member of an advisory board, investment adviser, or
depositor of any registered investment company, or principal
underwriter for any registered open-end company, registered
unit investment trust, or registered face-amount certificate
company:
(1) any person who within 10 years has been convicted
of any felony or misdemeanor involving the purchase or
sale of any security or arising out of such person's
conduct as an underwriter, broker, dealer, investment
adviser, municipal securities dealer, government
securities broker, government securities dealer, bank,
transfer agent, credit rating agency, or entity or
person required to be registered under the Commodity
Exchange Act, or as an affiliated person, salesman, or
employee of any investment company, bank, insurance
company, or entity or person required to be registered
under the Commodity Exchange Act;
(2) any person who, by reason of any misconduct, is
permanently or temporarily enjoined by order, judgment,
or decree of any court of competent jurisdiction from
acting as an underwriter, broker, dealer, investment
adviser, municipal securities dealer, government
securities broker, government securities dealer, bank,
transfer agent, credit rating agency, or entity or
person required to be registered under the Commodity
Exchange Act, or as an affiliated person, salesman, or
employee of any investment company, bank, insurance
company, or entity or person required to be registered
under the Commodity Exchange Act, or from engaging in
or continuing any conduct or practice in connection
with any such activity or in connection with the
purchase or sale of any security; or
(3) a company any affiliated person of which is
ineligible, by reason of paragraph (1) or (2), to serve
or act in the foregoing capacities.
For the purposes of paragraphs (1), (2), and (3) of this
subsection, the term ``investment adviser'' shall include an
investment adviser as defined in title II of this Act.
(b) The Commission may, after notice and opportunity for
hearing, by order prohibit, conditionally or unconditionally,
either permanently or for such period of time as it in its
discretion shall deem appropriate in the public interest, any
person from serving or acting as an employee, officer,
director, member of an advisory board, investment adviser or
depositor of, or principal underwriter for, a registered
investment company or affiliated person of such investment
adviser, depositor, or principal underwriter, if such person--
(1) has willfully made or caused to be made in any
registration statement, application or report filed
with the Commission under this title any statement
which was at the time and in the light of the
circumstances under which it was made false or
misleading with respect to any material fact, or has
omitted to state in any such registration statement,
application, or report any material fact which was
required to be stated therein;
(2) has willfully violated any provision of the
Securities Act of 1933, or of the Securities Exchange
Act of 1934, or of title II of this Act, or of this
title, or of the Commodity Exchange Act, or of any rule
or regulation under any of such statutes;
(3) has willfully aided, abetted, counseled,
commanded, induced, or procured the violation by any
other person of the Securities Act of 1933, or of the
Securities Exchange Act of 1934, or of title II of this
Act, or of this title, or of the Commodity Exchange
Act, or of any rule or regulation under any of such
statutes;
(4) has been found by a foreign financial regulatory
authority to have--
(A) made or caused to be made in any
application for registration or report required
to be filed with a foreign securities
authority, or in any proceeding before a
foreign securities authority with respect to
registration, any statement that was at the
time and in light of the circumstances under
which it was made false or misleading with
respect to any material fact, or has omitted to
state in any application or report to a foreign
securities authority any material fact that is
required to be stated therein;
(B) violated any foreign statute or
regulation regarding transactions in securities
or contracts of sale of a commodity for future
delivery traded on or subject to the rules of a
contract market or any board of trade; or
(C) aided, abetted, counseled, commanded,
induced, or procured the violation by any other
person of any foreign statute or regulation
regarding transactions in securities or
contracts of sale of a commodity for future
delivery traded on or subject to the rules of a
contract market or any board of trade;
(5) within 10 years has been convicted by a foreign
court of competent jurisdiction of a crime, however
denominated by the laws of the relevant foreign
government, that is substantially equivalent to an
offense set forth in paragraph (1) of subsection (a);
or
(6) by reason of any misconduct, is temporarily or
permanently enjoined by any foreign court of competent
jurisdiction from acting in any of the capacities, set
forth in paragraph (2) of subsection (a), or a
substantially equivalent foreign capacity, or from
engaging in or continuing any conduct or practice in
connection with any such activity or in connection with
the purchase or sale of any security.
(c) Any person who is ineligible, by reason of subsection
(a), to serve or act in the capacities enumerated in that
subsection, may file with the Commission an application for an
exemption from the provisions of that subsection. The
Commission shall by order grant such application, either
unconditionally or on an appropriate temporary or other
conditional basis, if it is established that the prohibitions
of subsection (a), as applied to such person, are unduly or
disproportionately severe or that the conduct of such person
has been such as not to make it against the public interest or
protection of investors to grant such application.
(d) Money Penalties in Administrative Proceedings.--
(1) Authority of commission.--
(A) In general.--In any proceeding instituted
pursuant to subsection (b) against any person,
the Commission may impose a civil penalty if it
finds, on the record after notice and
opportunity for hearing, that such penalty is
in the public interest, and that such person--
(i) has willfully violated any
provision of the Securities Act of
1933, the Securities Exchange Act of
1934, the Investment Advisers Act of
1940, or this title, or the rules or
regulations thereunder;
(ii) has willfully aided, abetted,
counseled, commanded, induced, or
procured such a violation by any other
person; or
(iii) has willfully made or caused to
be made in any registration statement,
application, or report required to be
filed with the Commission under this
title, any statement which was, at the
time and in the light of the
circumstances under which it was made,
false or misleading with respect to any
material fact, or has omitted to state
in any such registration statement,
application, or report any material
fact which was required to be stated
therein;
(B) Cease-and-desist proceedings.--In any
proceeding instituted pursuant to subsection
(f) against any person, the Commission may
impose a civil penalty if the Commission finds,
on the record, after notice and opportunity for
hearing, that such person--
(i) is violating or has violated any
provision of this title, or any rule or
regulation issued under this title; or
(ii) is or was a cause of the
violation of any provision of this
title, or any rule or regulation issued
under this title.
(2) Maximum amount of penalty.--
(A) First tier.--The maximum amount of
penalty for each act or omission described in
paragraph (1) shall be [$5,000] $10,000 for a
natural person or [$50,000] $100,000 for any
other person.
(B) Second tier.--Notwithstanding
subparagraph (A), the maximum amount of penalty
for each such act or omission shall be
[$50,000] $100,000 for a natural person or
[$250,000] $500,000 for any other person if the
act or omission described in paragraph (1)
involved fraud, deceit, manipulation, or
deliberate or reckless disregard of a
regulatory requirement.
[(C) Third tier.--Notwithstanding
subparagraphs (A) and (B), the maximum amount
of penalty for each such act or omission shall
be $100,000 for a natural person or $500,000
for any other person if--
[(i) the act or omission described in
paragraph (1) involved fraud, deceit,
manipulation, or deliberate or reckless
disregard of a regulatory requirement;
and
[(ii) such act or omission directly
or indirectly resulted in substantial
losses or created a significant risk of
substantial losses to other persons or
resulted in substantial pecuniary gain
to the person who committed the act or
omission.]
(C) Third tier.--
(i) In general.--Notwithstanding
subparagraphs (A) and (B), the amount
of penalty for each such act or
omission shall not exceed the amount
specified in clause (ii) if--
(I) the act or omission
described in paragraph (1)
involved fraud, deceit,
manipulation, or deliberate or
reckless disregard of a
regulatory requirement; and
(II) such act or omission
directly or indirectly resulted
in substantial losses or
created a significant risk of
substantial losses to other
persons or resulted in
substantial pecuniary gain to
the person who committed the
act or omission.
(ii) Maximum amount of penalty.--The
amount referred to in clause (i) is the
greatest of--
(I) $300,000 for a natural
person or $1,450,000 for any
other person;
(II) 3 times the gross amount
of pecuniary gain to the person
who committed the act or
omission; or
(III) the amount of losses
incurred by victims as a result
of the act or omission.
(D) Fourth tier.--Notwithstanding
subparagraphs (A), (B), and (C), the maximum
amount of penalty for each such act or omission
shall be 3 times the otherwise applicable
amount in such subparagraphs if, within the 5-
year period preceding such act or omission, the
person who committed the act or omission was
criminally convicted for securities fraud or
became subject to a judgment or order imposing
monetary, equitable, or administrative relief
in any Commission action alleging fraud by that
person.
(3) Determination of public interest.--In considering
under this section whether a penalty is in the public
interest, the Commission may consider--
(A) whether the act or omission for which
such penalty is assessed involved fraud,
deceit, manipulation, or deliberate or reckless
disregard of a regulatory requirement;
(B) the harm to other persons resulting
either directly or indirectly from such act or
omission;
(C) the extent to which any person was
unjustly enriched, taking into account any
restitution made to persons injured by such
behavior;
(D) whether such person previously has been
found by the Commission, another appropriate
regulatory agency, or a self-regulatory
organization to have violated the Federal
securities laws, State securities laws, or the
rules of a self-regulatory organization, has
been enjoined by a court of competent
jurisdiction from violations of such laws or
rules, or has been convicted by a court of
competent jurisdiction of violations of such
laws or of any felony or misdemeanor described
in section 203(e)(2) of the Investment Advisers
Act of 1940;
(E) the need to deter such person and other
persons from committing such acts or omissions;
and
(F) such other matters as justice may
require.
(4) Evidence concerning ability to pay.--In any
proceeding in which the Commission may impose a penalty
under this section, a respondent may present evidence
of the respondent's ability to pay such penalty. The
Commission may, in its discretion, consider such
evidence in determining whether such penalty is in the
public interest. Such evidence may relate to the extent
of such person's ability to continue in business and
the collectability of a penalty, taking into account
any other claims of the United States or third parties
upon such person's assets and the amount of such
person's assets.
(e) Authority To Enter an Order Requiring an Accounting and
Disgorgement.--In any proceeding in which the Commission may
impose a penalty under this section, the Commission may enter
an order requiring accounting and disgorgement, including
reasonable interest. The Commission is authorized to adopt
rules, regulations, and orders concerning payments to
investors, rates of interest, periods of accrual, and such
other matters as it deems appropriate to implement this
subsection.
(f) Cease-and-Desist Proceedings.--
(1) Authority of the commission.--If the Commission
finds, after notice and opportunity for hearing, that
any person is violating, has violated, or is about to
violate any provision of this title, or any rule or
regulation thereunder, the Commission may publish its
findings and enter an order requiring such person, and
any other person that is, was, or would be a cause of
the violation, due to an act or omission the person
knew or should have known would contribute to such
violation, to cease and desist from committing or
causing such violation and any future violation of the
same provision, rule, or regulation. Such order may, in
addition to requiring a person to cease and desist from
committing or causing a violation, require such person
to comply, or to take steps to effect compliance, with
such provision, rule, or regulation, upon such terms
and conditions and within such time as the Commission
may specify in such order. Any such order may, as the
Commission deems appropriate, require future compliance
or steps to effect future compliance, either
permanently or for such period of time as the
Commission may specify, with such provision, rule, or
regulation with respect to any security, any issuer, or
any other person.
(2) Hearing.--The notice instituting proceedings
pursuant to paragraph (1) shall fix a hearing date not
earlier than 30 days nor later than 60 days after
service of the notice unless an earlier or a later date
is set by the Commission with the consent of any
respondent so served.
(3) Temporary order.--
(A) In general.--Whenever the Commission
determines that the alleged violation or
threatened violation specified in the notice
instituting proceedings pursuant to paragraph
(1), or the continuation thereof, is likely to
result in significant dissipation or conversion
of assets, significant harm to investors, or
substantial harm to the public interest,
including, but not limited to, losses to the
Securities Investor Protection Corporation,
prior to the completion of the proceeding, the
Commission may enter a temporary order
requiring the respondent to cease and desist
from the violation or threatened violation and
to take such action to prevent the violation or
threatened violation and to prevent dissipation
or conversion of assets, significant harm to
investors, or substantial harm to the public
interest as the Commission deems appropriate
pending completion of such proceedings. Such an
order shall be entered only after notice and
opportunity for a hearing, unless the
Commission, notwithstanding section 40(a) of
this title, determines that notice and hearing
prior to entry would be impracticable or
contrary to the public interest. A temporary
order shall become effective upon service upon
the respondent and, unless set aside, limited,
or suspended by the Commission or a court of
competent jurisdiction, shall remain effective
and enforceable pending the completion of the
proceedings.
(B) Applicability.--This paragraph shall
apply only to a respondent that acts, or, at
the time of the alleged misconduct acted, as a
broker, dealer, investment adviser, investment
company, municipal securities dealer,
government securities broker, government
securities dealer, or transfer agent, or is, or
was at the time of the alleged misconduct, an
associated person of, or a person seeking to
become associated with, any of the foregoing.
(4) Review of temporary orders.--
(A) Commission review.--At any time after the
respondent has been served with a temporary
cease-and-desist order pursuant to paragraph
(3), the respondent may apply to the Commission
to have the order set aside, limited, or
suspended. If the respondent has been served
with a temporary cease-and-desist order entered
without a prior Commission hearing, the
respondent may, within 10 days after the date
on which the order was served, request a
hearing on such application and the Commission
shall hold a hearing and render a decision on
such application at the earliest possible time.
(B) Judicial review.--Within--
(i) 10 days after the date the
respondent was served with a temporary
cease-and-desist order entered with a
prior Commission hearing, or
(ii) 10 days after the Commission
renders a decision on an application
and hearing under subparagraph (A),
with respect to any temporary cease-
and-desist order entered without a
prior Commission hearing,
the respondent may apply to the United States
district court for the district in which the
respondent resides or has its principal place
of business, or for the District of Columbia,
for an order setting aside, limiting, or
suspending the effectiveness or enforcement of
the order, and the court shall have
jurisdiction to enter such an order. A
respondent served with a temporary cease-and-
desist order entered without a prior Commission
hearing may not apply to the court except after
hearing and decision by the Commission on the
respondent's application under subparagraph (A)
of this paragraph.
(C) No automatic stay of temporary order.--
The commencement of proceedings under
subparagraph (B) of this paragraph shall not,
unless specifically ordered by the court,
operate as a stay of the Commission's order.
(D) Exclusive review.--Section 43 of this
title shall not apply to a temporary order
entered pursuant to this section.
(5) Authority to enter an order requiring an
accounting and disgorgement.--In any cease-and-desist
proceeding under subsection (f)(1), the Commission may
enter an order requiring accounting and disgorgement,
including reasonable interest. The Commission is
authorized to adopt rules, regulations, and orders
concerning payments to investors, rates of interest,
periods of accrual, and such other matters as it deems
appropriate to implement this subsection.
(g) For the purposes of this section, the term ``investment
adviser'' includes a corporate or other trustee performing the
functions of an investment adviser.
* * * * * * *
accounts and records
Sec. 31. (a) Maintenance of Records.--
(1) In general.--Each registered investment company,
and each underwriter, broker, dealer, or investment
adviser that is a majority-owned subsidiary of such a
company, shall maintain and preserve such records (as
defined in section 3(a)(37) of the Securities Exchange
Act of 1934) for such period or periods as the
Commission, by rules and regulations, may prescribe as
necessary or appropriate in the public interest or for
the protection of investors. Each investment adviser
that is not a majority-owned subsidiary of, and each
depositor of any registered investment company, and
each principal underwriter for any registered
investment company other than a closed-end company,
shall maintain and preserve for such period or periods
as the Commission shall prescribe by rules and
regulations, such records as are necessary or
appropriate to record such person's transactions with
such registered company. Each person having custody or
use of the securities, deposits, or credits of a
registered investment company shall maintain and
preserve all records that relate to the custody or use
by such person of the securities, deposits, or credits
of the registered investment company for such period or
periods as the Commission, by rule or regulation, may
prescribe, as necessary or appropriate in the public
interest or for the protection of investors.
(2) Minimizing compliance burden.--In exercising its
authority under this subsection, the Commission shall
take such steps as it deems necessary or appropriate,
consistent with the public interest and for the
protection of investors, to avoid unnecessary
recordkeeping by, and minimize the compliance burden
on, persons required to maintain records under this
subsection (hereafter in this section referred to as
``subject persons''). Such steps shall include
considering, and requesting public comment on--
(A) feasible alternatives that minimize the
recordkeeping burdens on subject persons;
(B) the necessity of such records in view of
the public benefits derived from the
independent scrutiny of such records through
Commission examination;
(C) the costs associated with maintaining the
information that would be required to be
reflected in such records; and
(D) the effects that a proposed recordkeeping
requirement would have on internal compliance
policies and procedures.
(b) Examinations of Records.--
(1) In general.--All records required to be
maintained and preserved in accordance with subsection
(a) shall be subject at any time and from time to time
to such reasonable periodic, special, and other
examinations by the Commission, or any member or
representative thereof, as the Commission may
prescribe.
(2) Availability.--For purposes of examinations
referred to in paragraph (1), any subject person shall
make available to the Commission or its representatives
any copies or extracts from such records as may be
prepared without undue effort, expense, or delay as the
Commission or its representatives may reasonably
request.
(3) Commission action.--The Commission shall exercise
its authority under this subsection with due regard for
the benefits of internal compliance policies and
procedures and the effective implementation and
operation thereof.
(4) Records of persons with custody or use.--
(A) In general.--Records of persons having
custody or use of the securities, deposits, or
credits of a registered investment company that
relate to such custody or use, are subject at
any time, or from time to time, to such
reasonable periodic, special, or other
examinations and other information and document
requests by representatives of the Commission,
as the Commission deems necessary or
appropriate in the public interest or for the
protection of investors.
(B) Certain persons subject to other
regulation.--Any person that is subject to
regulation and examination by a Federal
financial institution regulatory agency (as
such term is defined under section 212(c)(2) of
title 18, United States Code) may satisfy any
examination request, information request, or
document request described under subparagraph
(A), by providing to the Commission a detailed
listing, in writing, of the securities,
deposits, or credits of the registered
investment company within the custody or use of
such person.
(c) Regulatory Authority.--The Commission may, in the public
interest or for the protection of investors, issue rules and
regulations providing for a reasonable degree of uniformity in
the accounting policies and principles to be followed by
registered investment companies in maintaining their accounting
records and in preparing financial statements required pursuant
to this title.
(d) Exemption Authority.--The Commission, upon application
made by any registered investment company, may by order exempt
a specific transaction or transactions from the provisions of
any rule or regulation made pursuant to subsection (e), if the
Commission finds that such rule or regulation should not
reasonably be applied to such transaction.
(e) Procedure for Obtaining Certain Intellectual Property.--
The Commission is not authorized to compel under this title an
investment company to produce or furnish source code, including
algorithmic trading source code or similar intellectual
property, to the Commission unless the Commission first issues
a subpoena.
* * * * * * *
breach of fiduciary duty
Sec. 36. (a) The Commission is authorized to bring an action
in the proper district court of the United States, or in the
United States court of any territory or other place subject to
the jurisdiction of the United States, alleging that a person
who is, or at the time of the alleged misconduct was, serving
or acting in one or more of the following capacities has
engaged within five years of the commencement of the action or
is about to engage in any act or practice constituting a breach
of fiduciary duty involving personal misconduct in respect of
any registered investment company for which such person so
serves or acts, or at the time of the alleged misconduct, so
served or acted--
(1) as officer, director, member of any advisory
board, investment adviser, or depositor; or
(2) as principal underwriter, if such registered
company is an open-end company, unit investment trust,
or face-amount certificate company.
If such allegations are established, the court may enjoin such
persons from acting in any or all such capacities either
permanently or temporarily and award such injunctive or other
relief against such person as may be reasonable and appropriate
in the circumstances, having due regard to the protection of
investors and to the effectuation of the policies declared in
section 1(b) of this title.
(b) For the purposes of this subsection, the investment
adviser of a registered investment company shall be deemed to
have a fiduciary duty with respect to the receipt of
compensation for services, or of payments of a material nature,
paid by such registered investment company, or by the security
holders thereof, to such investment adviser or any affiliated
person of such investment adviser. An action may be brought
under this subsection by the Commission, or by a security
holder of such registered investment company on behalf of such
company, against such investment adviser, or any affiliated
person of such investment adviser, or any other person
enumerated in subsection (a) of this section who has a
fiduciary duty concerning such compensation or payments, for
breach of fiduciary duty in respect of such compensation or
payments paid by such registered investment company or by the
security holders thereof to such investment adviser or person.
With respect to any such action the following provisions shall
apply:
(1) It shall not be necessary to allege or prove that
any defendant engaged in personal misconduct, and the
plaintiff shall have the burden of proving a breach of
fiduciary duty.
(2) In any such action approval by the board of
directors of such investment company of such
compensation or payments, or of contracts or other
arrangements providing for such compensation or
payments, and ratification or approval of such
compensation or payments, or of contracts or other
arrangements providing for such compensation or
payments, by the shareholders of such investment
company, shall be given such consideration by the court
as is deemed appropriate under all the circumstances.
(3) No such action shall be brought or maintained
against any person other than the recipient of such
compensation or payments, and no damages or other
relief shall be granted against any person other than
the recipient of such compensation or payments. No
award of damages shall be recoverable for any period
prior to one year before the action was instituted. Any
award of damages against such recipient shall be
limited to the actual damages resulting from the breach
of fiduciary duty and shall in no event exceed the
amount of compensation or payments received from such
investment company, or the security holders thereof, by
such recipient.
(4) This subsection shall not apply to compensation
or payments made in connection with transactions
subject to section 17 of this title, or rules,
regulations, or orders thereunder, or to sales loads
for the acquisition of any security issued by a
registered investment company.
(5) Any action pursuant to this subsection may be
brought only in an appropriate district court of the
United States.
(6) No finding by a court with respect to a breach of
fiduciary duty under this subsection shall be made a
basis (A) for a finding of a violation of this title
for the purposes of sections 9 and 49 of this title,
section 15 of the Securities Exchange Act of 1934, or
section 203 of title II of this Act, or (B) for an
injunction to prohibit any person from serving in any
of the capacities enumerated in subsection (a) of this
section.
(7) In any such action brought by a security holder
of a registered investment company on behalf of such
company--
(A) the complaint shall state with
particularity all facts establishing a breach
of fiduciary duty, and, if an allegation of any
such facts is based on information and belief,
the complaint shall state with particularity
all facts on which that belief is formed; and
(B) such security holder shall have the
burden of proving a breach of fiduciary duty by
clear and convincing evidence.
(c) For the purposes of subsections (a) and (b) of this
section, the term ``investment adviser'' includes a corporate
or other trustee performing the functions of an investment
adviser.
* * * * * * *
enforcement of title
Sec. 42. (a) The Commission may make such investigations as
it deems necessary to determine whether any person has violated
or is about to violate any provision of this title or of any
rule, regulation, or order hereunder, or to determine whether
any action in any court or any proceeding before the Commission
shall be instituted under this title against a particular
person or persons, or with respect to a particular transaction
or transactions. The Commission shall permit any person to file
with it a statement in writing, under oath or otherwise as the
Commission shall determine, as to all the facts and
circumstances concerning the matter to be investigated.
(b) For the purpose of any investigation or any other
proceeding under this title, any member of the Commission, or
any officer thereof designated by it, is empowered to
administer oaths and affirmations, subpena witnesses, compel
their attendance, take evidence, and require the production of
any books, papers, correspondence, memoranda, contracts,
agreements, or other records which are relevant or material to
the inquiry. Such attendance of witnesses and the production of
any such records may be required from any place in any State or
in any Territory or other place subject to the jurisdiction of
the United States at any designated place of hearing.
(c) In case of contumacy by, or refusal to obey a subpena
issued to, any person, the Commission may invoke the aid of any
court of the United States within the jurisdiction of which
such investigation or proceeding is carried on, or where such
person resides or carries on business, in requiring the
attendance and testimony of witnesses and the production of
books, papers, correspondence, memoranda, contracts,
agreements, and other records. And such court may issue an
order requiring such person to appear before the Commission or
member or officer designated by the Commission, there to
produce records, if so ordered, or to give testimony touching
the matter under investigation or in question; any failure to
obey such order of the court may be punished by such court as a
contempt thereof. All process in any such case may be served in
the judicial district whereof such person is an inhabitant or
wherever he may be found. Any person who without just cause
shall fail or refuse to attend and testify or to answer any
lawful inquiry or to produce books, papers, correspondence,
memoranda, contracts, agreements, or other records, if in his
or its power so to do, in obedience to the subpena of the
Commission, shall be guilty of a misdemeanor, and upon
conviction shall be subject to a fine of not more than $1,000
or to imprisonment for a term of not more than one year, or
both.
(d) Whenever it shall appear to the Commission that any
person has engaged or is about to engage in any act or practice
constituting a violation of any provision of this title, or of
any rule, regulation, or order hereunder, it may in its
discretion bring an action in the proper district court of the
United States, or the proper United States court of any
Territory or other place subject to the jurisdiction of the
United States, to enjoin such acts or practices and to enforce
compliance with this title or any rule, regulation, or order
hereunder. Upon a showing that such person has engaged or is
about to engage in any such act or practice, a permanent or
temporary injunction or decree or restraining order shall be
granted without bond. In any proceeding under this subsection
to enforce compliance with section 7, the court as a court of
equity may, to the extent it deems necessary or appropriate,
take exclusive jurisdiction and possession of the investment
company or companies involved and the books, records, and
assets thereof, wherever located; and the court shall have
jurisdiction to appoint a trustee, who with the approval of the
court shall have power to dispose of any or all of such assets,
subject to such terms and conditions as the court may
prescribe. The Commission may transmit such evidence as may be
available concerning any violation of the provisions of this
title, or of any rule, regulation, or order thereunder, to the
Attorney General, who, in his discretion, may institute the
appropriate criminal proceedings under this title.
(e) Money Penalties in Civil Actions.--
(1) Authority of commission.--Whenever it shall
appear to the Commission that any person has violated
any provision of this title, the rules or regulations
thereunder, a Federal court injunction or a bar
obtained or entered by the Commission under this title,
or a cease-and-desist order entered by the Commission
pursuant to section 9(f) of this title, the Commission
may bring an action in a United States district court
to seek, and the court shall have jurisdiction to
impose, upon a proper showing, a civil penalty to be
paid by the person who committed such violation.
(2) Amount of penalty.--
(A) First tier.--The amount of the penalty
shall be determined by the court in light of
the facts and circumstances. For each
violation, the amount of the penalty shall not
exceed the greater of (i) [$5,000] $10,000 for
a natural person or [$50,000] $100,000 for any
other person, or (ii) the gross amount of
pecuniary gain to such defendant as a result of
the violation.
(B) Second tier.--Notwithstanding
subparagraph (A), the amount of penalty for
each such violation shall not exceed the
greater of (i) [$50,000] $100,000 for a natural
person or [$250,000] $500,000 for any other
person, or (ii) the gross amount of pecuniary
gain to such defendant as a result of the
violation, if the violation described in
paragraph (1) involved fraud, deceit,
manipulation, or deliberate or reckless
disregard of a regulatory requirement.
[(C) Third tier.--Notwithstanding
subparagraphs (A) and (B), the amount of
penalty for each such violation shall not
exceed the greater of (i) $100,000 for a
natural person or $500,000 for any other
person, or (ii) the gross amount of pecuniary
gain to such defendant as a result of the
violation, if--
[(I) the violation described in
paragraph (1) involved fraud, deceit,
manipulation, or deliberate or reckless
disregard of a regulatory requirement;
and
[(II) such violation directly or
indirectly resulted in substantial
losses or created a significant risk of
substantial losses to other persons.]
(C) Third tier.--
(i) In general.--Notwithstanding
subparagraphs (A) and (B), the amount
of penalty for each such violation
shall not exceed the amount specified
in clause (ii) if--
(I) the violation described
in paragraph (1) involved
fraud, deceit, manipulation, or
deliberate or reckless
disregard of a regulatory
requirement; and
(II) such violation directly
or indirectly resulted in
substantial losses or created a
significant risk of substantial
losses to other persons.
(ii) Maximum amount of penalty.--The
amount referred to in clause (i) is the
greatest of--
(I) $300,000 for a natural
person or $1,450,000 for any
other person;
(II) 3 times the gross amount
of pecuniary gain to such
defendant as a result of the
violation; or
(III) the amount of losses
incurred by victims as a result
of the violation.
(D) Fourth tier.--Notwithstanding
subparagraphs (A), (B), and (C), the maximum
amount of penalty for each such violation shall
be 3 times the otherwise applicable amount in
such subparagraphs if, within the 5-year period
preceding such violation, the defendant was
criminally convicted for securities fraud or
became subject to a judgment or order imposing
monetary, equitable, or administrative relief
in any Commission action alleging fraud by that
defendant.
(3) Procedures for collection.--
(A) Payment of penalty to treasury.--A
penalty imposed under this section shall be
payable into the Treasury of the United States,
except as otherwise provided in section 308 of
the Sarbanes-Oxley Act of 2002 and section 21F
of the Securities Exchange Act of 1934.
(B) Collection of penalties.--If a person
upon whom such a penalty is imposed shall fail
to pay such penalty within the time prescribed
in the court's order, the Commission may refer
the matter to the Attorney General who shall
recover such penalty by action in the
appropriate United States district court.
(C) Remedy not exclusive.--The actions
authorized by this subsection may be brought in
addition to any other action that the
Commission or the Attorney General is entitled
to bring.
(D) Jurisdiction and venue.--For purposes of
section 44 of this title, actions under this
paragraph shall be actions to enforce a
liability or a duty created by this title.
[(4) Special provisions relating to a violation of a
cease-and-desist order.--In an action to enforce a
cease-and-desist order entered by the Commission
pursuant to section 9(f), each separate violation of
such order shall be a separate offense, except that in
the case of a violation through a continuing failure to
comply with the order, each day of the failure to
comply shall be deemed a separate offense.]
(4) Special provisions relating to a violation of an
injunction or certain orders.--
(A) In general.--Each separate violation of
an injunction or order described in
subparagraph (B) shall be a separate offense,
except that in the case of a violation through
a continuing failure to comply with such
injunction or order, each day of the failure to
comply with the injunction or order shall be
deemed a separate offense.
(B) Injunctions and orders.--Subparagraph (A)
shall apply with respect to any action to
enforce--
(i) a Federal court injunction
obtained pursuant to this title;
(ii) an order entered or obtained by
the Commission pursuant to this title
that bars, suspends, places limitations
on the activities or functions of, or
prohibits the activities of, a person;
or
(iii) a cease-and-desist order
entered by the Commission pursuant to
section 9(f).
* * * * * * *
functions and activities of business development companies
Sec. 55. (a) It shall be unlawful for a business development
company to acquire any assets (other than those described in
paragraphs (1) through (7) of this subsection) unless, at the
time the acquisition is made, assets described in paragraphs
(1) through (6) below represent at least 70 per centum of the
value of its total assets (other than assets described in
paragraph (7) below), provided that no more 15 than 50 percent
of its total assets are assets described in section 3(c):
(1) securities purchased, in transactions not
involving any public offering or in such other
transactions as the Commission may, by rule, prescribe
if it finds that enforcement of this title and of the
Securities Act of 1933 with respect to such
transactions is not necessary in the public interest or
for the protection of investors by reason of the small
amount, or the limited nature of the public offering,
involved in such transactions--
(A) from the issuer of such securities, which
issuer is an eligible portfolio company, from
any person who is, or who within the preceding
thirteen months has been, an affiliated person
of such eligible portfolio company, or from any
other person, subject to such rules and
regulations as the Commission may prescribe as
necessary or appropriate in the public interest
or for the protection of investors; or
(B) from the issuer of such securities, which
issuer is described in section 2(a)(46) (A) and
(B) but is not an eligible portfolio company
because it has issued a class of securities
with respect to which a member of a national
securities exchange, broker, or dealer may
extend or maintain credit to or for a customer
pursuant to rules or regulations adopted by the
Board of Governors of the Federal Reserve
System under section 7 of the Securities
Exchange Act of 1934, or from any person who is
an officer or employee of such issuer, if--
(i) at the time of the purchase, the
business development company owns at
least 50 per centum of--
(I) the greatest number of
equity securities of such
issuer and securities
convertible into or
exchangeable for such
securities; and
(II) the greatest amount of
debt securities of such issuer,
held by such business development
company at any point in time during the
period when such issuer was an eligible
portfolio company, except that options,
warrants, and similar securities which
have by their terms expired and debt
securities which have been converted,
or repaid or prepaid in the ordinary
course of business or incident to a
public offering of securities of such
issuer, shall not be considered to have
been held by such business development
company for purposes of this
requirement; and
(ii) the business development company
is one of the 20 largest holders of
record of such issuer's outstanding
voting securities;
(2) securities of any eligible portfolio company with
respect to which the business development company
satisfies the requirements of section 2(a)(46)(C)(ii);
(3) securities purchased in transactions not
involving any public offering from an issuer described
in sections 2(a)(46) (A) and (B) or from a person who
is, or who within the preceding thirteen months has
been, an affiliated person of such issuer, or from any
person in transactions incident thereto, if such
securities were--
(A) issued by an issuer that is, or was
immediately prior to the purchase of its
securities by the business development company,
in bankruptcy proceedings, subject to
reorganization under the supervision of a court
of competent jurisdiction, or subject to a plan
or arrangement resulting from such bankruptcy
proceedings or reorganization;
(B) issued by an issuer pursuant to or in
consummation of such a plan or arrangement; or
(C) issued by an issuer that, immediately
prior to the purchase of such issuer's
securities by the business development company,
was not in bankruptcy proceedings but was
unable to meet its obligations as they came due
without material assistance other than
conventional lending or financing arrangements;
(4) securities of eligible portfolio companies
purchased from any person in transactions not involving
any public offering, if there is no ready market for
such securities and if immediately prior to such
purchase the business development company owns at least
60 per centum of the outstanding equity securities of
such issuer (giving effect to all securities presently
convertible into or exchangeable for equity securities
of such issuer as if such securities were so converted
or exchanged);
(5) securities received in exchange for or
distributed on or with respect to securities described
in paragraphs (1) through (4) of this subsection, or
pursuant to the exercise of options, warrants, or
rights relating to securities described in such
paragraphs;
(6) cash, cash items, Government securities, or high
quality debt securities maturing in one year or less
from the time of investment in such high quality debt
securities; and
(7) office furniture and equipment, interests in real
estate and leasehold improvements and facilities
maintained to conduct the business operations of the
business development company, deferred organization and
operating expenses, and other noninvestment assets
necessary and appropriate to its operations as a
business development company, including notes of
indebtedness of directors, officers, employees, and
general partners held by a business development company
as payment for securities of such company issued in
connection with an executive compensation plan
described in section 57(j).
(b) For purposes of this section, the value of a business
development company's assets shall be determined as of the date
of the most recent financial statements filed by such company
with the Commission pursuant to section 13 of the Securities
Exchange Act of 1934, and shall be determined no less
frequently than annually.
* * * * * * *
transactions with certain affiliates
Sec. 57. (a) It shall be unlawful for any person who is
related to a business development company in a manner described
in subsection (b) of this section, acting as principal--
(1) knowingly to sell any security or other property
to such business development company or to any company
controlled by such business development company, unless
such sale involves solely (A) securities of which the
buyer is the issuer, or (B) securities of which the
seller is the issuer and which are part of a general
offering to the holders of a class of its securities;
(2) knowingly to purchase from such business
development company or from any company controlled by
such business development company, any security or
other property (except securities of which the seller
is the issuer);
(3) knowingly to borrow money or other property from
such business development company or from any company
controlled by such business development company (unless
the borrower is controlled by the lender), except as
permitted in section 21(b) or section 62; or
(4) knowingly to effect any transaction in which such
business development company or a company controlled by
such business development company is a joint or a joint
and several participant with such person in
contravention of such rules and regulations as the
Commission may prescribe for the purpose of limiting or
preventing participation by such business development
company or controlled company on a basis less
advantageous than that of such person, except that
nothing contained in this paragraph shall be deemed to
preclude any person from acting as manager of any
underwriting syndicate or other group in which such
business development company or controlled company is a
participant and receiving compensation therefor.
(b) The provisions of subsection (a) of this section shall
apply to the following persons:
(1) Any director, officer, employee, or member of an
advisory board of a business development company or any
person (other than the business development company
itself) who is, within the meaning of section
2(a)(3)(C) of this title, an affiliated person of any
such person specified in this paragraph.
(2) Any investment adviser or promoter of, general
partner in, principal underwriter for, or person
directly or indirectly either controlling, controlled
by, or under common control with, a business
development company (except the business development
company itself and any person who, if it were not
directly or indirectly controlled by the business
development company, would not be directly or
indirectly under the control of a person who controls
the business development company), or any person who
is, within the meaning of section 2(a)(3) (C) or (D),
an affiliated person of any such person specified in
this paragraph.
(c) Notwithstanding paragraphs (1), (2), and (3) of
subsection (a), any person may file with the Commission an
application for an order exempting a proposed transaction of
the applicant from one or more provisions of such paragraphs.
The Commission shall grant such application and issue such
order of exemption if evidence establishes that--
(1) the terms of the proposed transaction, including
the consideration to be paid or received, are
reasonable and fair and do not involve overreaching of
the business development company or its shareholders or
partners on the part of any person concerned;
(2) the proposed transaction is consistent with the
policy of the business development company as recited
in the filings made by such company with the Commission
under the Securities Act of 1933, its registration
statement and reports filed under the Securities
Exchange Act of 1934, and its reports to shareholders
or partners; and
(3) the proposed transaction is consistent with the
general purposes of this title.
(d) It shall be unlawful for any person who is related to a
business development company in the manner described in
subsection (e) of this section and who is not subject to the
prohibitions of subsection (a) of this section, acting as
principal--
(1) knowingly to sell any security or other property
to such business development company or to any company
controlled by such business development company, unless
such sale involves solely (A) securities of which the
buyer is the issuer, or (B) securities of which the
seller is the issuer and which are part of a general
offering to the holders of a class of its securities;
(2) knowingly to purchase from such business
development company or from any company controlled by
such business development company, any security or
other property (except securities of which the seller
is the issuer);
(3) knowingly to borrow money or other property from
such business development company or from any company
controlled by such business development company (unless
the borrower is controlled by the lender), except as
permitted in section 21(b); or
(4) knowingly to effect any transaction in which such
business development company or a company controlled by
such business development company is a joint or a joint
and several participant with such affiliated person in
contravention of such rules and regulations as the
Commission may prescribe for the purpose of limiting or
preventing participation by such business development
company or controlled company on a basis less
advantageous than that of such affiliated person,
except that nothing contained in this paragraph shall
be deemed to preclude any person from acting as manager
of any underwriting syndicate or other group in which
such business development company or controlled company
is a participant and receiving compensation therefor.
(e) The provisions of subsection (d) of this section shall
apply to the following persons:
(1) Any person (A) who is, within the meaning of
section 2(a)(3)(A), an affiliated person of a business
development company, (B) who is an executive officer or
a director of, or general partner in, any such
affiliated person, or (C) who directly or indirectly
either controls, is controlled by, or is under common
control with, such affiliated person.
(2) Any person who is an affiliated person of a
director, officer, employee, investment adviser, member
of an advisory board or promoter of, principal
underwriter for, general partner in, or an affiliated
person of any person directly or indirectly either
controlling or under common control with a business
development company (except the business development
company itself and any person who, if it were not
directly or indirectly controlled by the business
development company, would not be directly or
indirectly under the control of a person who controls
the business development company).
For purposes of this subsection, the term ``executive officer''
means the president, secretary, treasurer, any vice president
in charge of a principal business function, and any other
person who performs similar policymaking functions.
(f) Notwithstanding subsection (d) of this section, a person
described in subsection (e) may engage in a proposed
transaction described in subsection (d) if such proposed
transaction is approved by the required majority (as defined in
subsection (o)) of the directors of or general partners in the
business development company on the basis that--
(1) the terms thereof, including the consideration to
be paid or received, are reasonable and fair to the
shareholders or partners of the business development
company and do not involve overreaching of such company
or its shareholders or partners on the part of any
person concerned;
(2) the proposed transaction is consistent with the
interests of the shareholders or partners of the
business development company and is consistent with the
policy of such company as recited in filings made by
such company with the Commission under the Securities
Act of 1933, its registration statement and reports
filed under the Securities Exchange Act of 1934, and
its reports to shareholders or partners; and
(3) the directors or general partners record in their
minutes and preserve in their records, for such periods
as if such records were required to be maintained
pursuant to section 31(a), a description of such
transaction, their findings, the information or
materials upon which their findings were based, and the
basis therefor.
(g) Notwithstanding subsection (a) or (d), a person may, in
the ordinary course of business, sell to or purchase from any
company merchandise or may enter into a lessor-lessee
relationship with any person and furnish the services incident
thereto.
(h) The directors of or general partners in any business
development company shall adopt, and periodically review and
update as appropriate, procedures reasonably designed to ensure
that reasonable inquiry is made, prior to the consummation of
any transaction in which such business development company or a
company controlled by such business development company
proposes to participate, with respect to the possible
involvement in the transaction of persons described in
subsections (b) and (e) of this section.
(i) Until the adoption by the Commission of rules or
regulations under subsections (a) and (d) of this section, the
rules and regulations of the Commission under subsections (a)
and (d) of section 17 applicable to registered closed-end
investment companies shall be deemed to apply to transactions
subject to subsections (a) and (d) of this section. Any rules
or regulations adopted by the Commission to implement this
section shall be no more restrictive than the rules or
regulations adopted by the Commission under subsections (a) and
(d) of section 17 that are applicable to all registered closed-
end investment companies.
(j) Notwithstanding subsections (a) and (d) of this section,
any director, officer, or employee of, or general partner in, a
business development company may--
(1) acquire warrants, options, and rights to purchase
voting securities of such business development company,
and securities issued upon the exercise or conversion
thereof, pursuant to an executive compensation plan
offered by such company which meets the requirements of
[section 61(a)(3)(B)] section 61(a)(4)(B); and
(2) borrow money from such business development
company for the purpose of purchasing securities issued
by such company pursuant to an executive compensation
plan, if each such loan--
(A) has a term of not more than ten years;
(B) becomes due within a reasonable time, not
to exceed sixty days, after the termination of
such person's employment or service;
(C) bears interest at no less than the
prevailing rate applicable to 90-day United
States Treasury bills at the time the loan is
made;
(D) at all times is fully collateralized
(such collateral may include any securities
issued by such business development company);
and
(E)(i) in the case of a loan to any officer
or employee of such business development
company (including any officer or employee who
is also a director of such company), is
approved by the required majority (as defined
in subsection (o)) of the directors of or
general partners in such company on the basis
that the loan is in the best interests of such
company and its shareholders or partners; or
(ii) in the case of a loan to any director of
such business development company who is not
also an officer or employee of such company, or
to any general partner in such company, is
approved by order of the Commission, upon
application, on the basis that the terms of the
loan are fair and reasonable and do not involve
overreaching of such company or its
shareholders or partners.
(k) It shall be unlawful for any person described in
subsection (l)--
(1) acting as agent, to accept from any source any
compensation (other than a regular salary or wages from
the business development company) for the purchase or
sale of any property to or for such business
development company or any controlled company thereof,
except in the course of such person's business as an
underwriter or broker; or
(2) acting as broker, in connection with the sale of
securities to or by the business development company or
any controlled company thereof, to receive from any
source a commission, fee, or other remuneration for
effecting such transaction which exceeds--
(A) the usual and customary broker's
commission if the sale is effected on a
securities exchange;
(B) 2 per centum of the sales price if the
sale is effected in connection with a secondary
distribution of such securities; or
(C) 1 per centum of the purchase or sale
price of such securities if the sale is
otherwise effected,
unless the Commission, by rules and regulations or order in the
public interest and consistent with the protection of
investors, permits a larger commission.
(l) The provisions of subsection (k) of this section shall
apply to the following persons:
(1) Any affiliated person of a business development
company.
(2)(A) Any person who is, within the meaning of
section 2(a)(3) (B), (C), or (D), an affiliated person
of any director, officer, employee, or member of an
advisory board of the business development company.
(B) Any person who is, within the meaning of section
2(a)(3) (A), (B), (C), or (D), an affiliated person of
any investment adviser of, general partner in, or
person directly or indirectly either controlling,
controlled by, or under common control with, the
business development company.
(C) Any person who is, within the meaning of section
2(a)(3)(C), an affiliated person of any person who is
an affiliated person of the business development
company within the meaning of section 2(a)(3)(A).
(m) For purposes of subsections (a) and (d), a person who is
a director, officer, or employee of a party to a transaction
and who receives his usual and ordinary fee or salary for usual
and customary services as a director, officer, or employee from
such party shall not be deemed to have a financial interest or
to participate in the transaction solely by reason of his
receipt of such fee or salary.
(n)(1) Notwithstanding subsection (a)(4) of this section, a
business development company may establish and maintain a
profit-sharing plan for its directors, officers, employees, and
general partners and such directors, officers, employees, and
general partners may participate in such profit-sharing plan,
if--
(A)(i) in the case of a profit-sharing plan for
officers and employees of the business development
company (including any officer or employee who is also
a director of such company), such profit-sharing plan
is approved by the required majority (as defined in
subsection (o)) of the directors of or general partners
in such company on the basis that such plan is
reasonable and fair to the shareholders or partners of
such company, does not involve overreaching of such
company or its shareholders or partners on the part of
any person concerned, and is consistent with the
interests of the shareholders or partners of such
company; or
(ii) in the case of a profit-sharing plan which
includes one or more directors of the business
development company who are not also officers or
employees of such company, or one or more general
partners in such company, such profit-sharing plan is
approved by order of the Commission, upon application,
on the basis that such plan is reasonable and fair to
the shareholders or partners of such company, does not
involve overreaching of such company or its
shareholders or partners on the part of any person
concerned, and is consistent with the interests of the
shareholders or partners of such company; and
(B) the aggregate amount of benefits which would be
paid or accrued under such plan shall not exceed 20 per
centum of the business development company's net income
after taxes in any fiscal year.
(2) This subsection may not be used where the business
development company has outstanding any stock option, warrant,
or right issued as part of an executive compensation plan,
including a plan pursuant to [section 61(a)(3)(B)] section
61(a)(4)(B), or has an investment adviser registered or
required to be registered under title II of this Act.
(o) The term ``required majority'', when used with respect to
the approval of a proposed transaction, plan, or arrangement,
means both a majority of a business development company's
directors or general partners who have no financial interest in
such transaction, plan, or arrangement and a majority of such
directors or general partners who are not interested persons of
such company.
* * * * * * *
functions and activities of business development companies
Sec. 60. [Notwithstanding] (a) Notwithstanding the exemption
set forth in section 6(f), section 12 shall apply to a business
development company to the same extent as if it were a
registered closed-end investment company, [except that the
Commission shall not] except that--
(1) section 12 shall not apply to the purchasing,
otherwise acquiring, or holding by a business
development company of any security issued by, or any
other interest in the business of, any person who is an
investment adviser registered under title II of this
Act, who is an investment adviser to an investment
company, or who is an eligible portfolio company; and
(2) the Commission shall not prescribe any rule,
regulation, or order pursuant to section 12(a)(1)
governing the circumstances in which a business
development company may borrow from a bank in order to
purchase any security.
(b) Nothing in this section shall prevent the Commission from
issuing rules to address potential conflicts of interest
between business development companies and investment advisers.
capital structure
Sec. 61. (a) Notwithstanding the exemption set forth in
section 6(f), section 18 shall apply to a business development
company to the same extent as if it were a registered closed-
end investment company, except as follows:
[(1) The asset coverage requirements of section
18(a)(1) (A) and (B) applicable to business development
companies shall be 200 per centum.]
(1) Except as provided in paragraph (2), the asset
coverage requirements of subparagraphs (A) and (B) of
section 18(a)(1) (and any related rule promulgated
under this Act) applicable to business development
companies shall be 200 percent.
(2) The asset coverage requirements of subparagraphs
(A) and (B) of section 18(a)(1) and of subparagraphs
(A) and (B) of section 18(a)(2) (and any related rule
promulgated under this Act) applicable to a business
development company shall be 150 percent if--
(A) within five business days of the approval
of the adoption of the asset coverage
requirements described in clause (ii), the
business development company discloses such
approval and the date of its effectiveness in a
Form 8-K filed with the Commission and in a
notice on its website and discloses in its
periodic filings made under section 13 of the
Securities and Exchange Act of 1934 (15 U.S.C.
78m)--
(i) the aggregate value of the senior
securities issued by such company and
the asset coverage percentage as of the
date of such company's most recent
financial statements; and
(ii) that such company has adopted
the asset coverage requirements of this
subparagraph and the effective date of
such requirements;
(B) with respect to a business development
company that issues equity securities that are
registered on a national securities exchange,
the periodic filings of the company under
section 13(a) of the Securities Exchange Act of
1934 (15 U.S.C. 78m) include disclosures
reasonably designed to ensure that shareholders
are informed of--
(i) the amount of indebtedness and
asset coverage ratio of the company,
determined as of the date of the
financial statements of the company
dated on or most recently before the
date of such filing; and
(ii) the principal risk factors
associated with such indebtedness, to
the extent such risk is incurred by the
company; and
(C)(i) the application of this paragraph to
the company is approved by the required
majority (as defined in section 57(o)) of the
directors of or general partners of such
company who are not interested persons of the
business development company, which application
shall become effective on the date that is 1
year after the date of the approval, and, with
respect to a business development company that
issues equity securities that are not
registered on a national securities exchange,
the company extends, to each person who is a
shareholder as of the date of the approval, an
offer to repurchase the equity securities held
by such person as of such approval date, with
25 percent of such securities to be repurchased
in each of the four quarters following such
approval date; or
(ii) the company obtains, at a special or
annual meeting of shareholders or partners at
which a quorum is present, the approval of more
than 50 percent of the votes cast of the
application of this paragraph to the company,
which application shall become effective on the
date immediately after the date of the
approval.
[(2)] (3) Notwithstanding section 18(c), a business
development company may issue more than one class of
senior security representing indebtedness or which is a
stock.
[(3)] (4) Notwithstanding section 18(d)--
(A) a business development company may issue
warrants, options, or rights to subscribe or
convert to [voting] securities of such company,
accompanied by securities, if--
(i) such warrants, options, or rights
expire by their terms within ten years;
(ii) such warrants, options, or
rights are not separately transferable
unless no class of such warrants,
options, or rights and the securities
accompanying them has been publicly
distributed;
[(iii) the exercise or conversion
price is not less than the current
market value at the date of issuance,
or if no such market value exists, the
current net asset value of such voting
securities; and]
(iii) the exercise or conversion
price at the date of issuance of such
warrants, options, or rights is not
less than--
(I) the market value of the
securities issuable upon the
exercise of such warrants,
options, or rights at the date
of issuance of such warrants,
options, or rights; or
(II) if no such market value
exists, the net asset value of
the securities issuable upon
the exercise of such warrants,
options, or rights at the date
of issuance of such warrants,
options, or rights; and
(iv) the proposal to issue such
securities is authorized by the
shareholders or partners of such
business development company, and such
issuance is approved by the required
majority (as defined in section 57(o))
of the directors of or general partners
in such company on the basis that such
issuance is in the best interests of
such company and its shareholders or
partners;
(B) a business development company may issue,
to its directors, officers, employees, and
general partners, warrants, options, and rights
to purchase voting securities of such company
pursuant to an executive compensation plan,
if--
(i)(I) in the case of warrants,
options, or rights issued to any
officer or employee of such business
development company (including any
officer or employee who is also a
director of such company), such
securities satisfy the conditions in
clauses (i), (iii), and (iv) of
subparagraph (A); or (II) in the case
of warrants, options, or rights issued
to any director of such business
development company who is not also an
officer or employee of such company, or
to any general partner in such company,
the proposal to issue such securities
satisfies the conditions in clauses (i)
and (iii) of subparagraph (A), is
authorized by the shareholders or
partners of such company, and is
approved by order of the Commission,
upon application, on the basis that the
terms of the proposal are fair and
reasonable and do not involve
overreaching of such company or its
shareholders or partners;
(ii) such securities are not
transferable except for disposition by
gift, will, or intestacy;
(iii) no investment adviser of such
business development company receives
any compensation described in section
205(a)(1) of title II of this Act,
except to the extent permitted by
paragraph (1) or (2) of section 205(b);
and
(iv) such business development
company does not have a profit-sharing
plan described in section 57(n); and
(C) a business development company may issue
warrants, options, or rights to subscribe to,
convert to, or purchase voting securities not
accompanied by securities, if--
(i) such warrants, options, or rights
satisfy the conditions in clauses (i)
and (iii) of subparagraph (A); and
(ii) the proposal to issue such
warrants, options, or rights is
authorized by the shareholders or
partners of such business development
company, and such issuance is approved
by the required majority (as defined in
section 57(o)) of the directors of or
general partners in such company on the
basis that such issuance is in the best
interests of the company and its
shareholders or partners.
Notwithstanding this paragraph, the amount of voting
securities that would result from the exercise of all
outstanding warrants, options, and rights at the time
of issuance shall not exceed 25 per centum of the
outstanding voting securities of the business
development company, except that if the amount of
voting securities that would result from the exercise
of all outstanding warrants, options, and rights issued
to such company's directors, officers, employees, and
general partners pursuant to any executive compensation
plan meeting the requirements of subparagraph (B) of
this paragraph would exceed 15 per centum of the
outstanding voting securities of such company, then the
total amount of voting securities that would result
from the exercise of all outstanding warrants, options,
and rights at the time of issuance shall not exceed 20
per centum of the outstanding voting securities of such
company.
[(4)] (5) For purposes of measuring the asset
coverage requirements of section 18(a), a senior
security created by the guarantee by a business
development company of indebtedness issued by another
company shall be the amount of the maximum potential
liability less the fair market value of the net
unencumbered assets (plus the indebtedness which has
been guaranteed) available in the borrowing company
whose debts have been guaranteed, except that a
guarantee issued by a business development company of
indebtedness issued by a company which is a wholly-
owned subsidiary of the business development company
and is licensed as a small business investment company
under the Small Business Investment Act of 1958 shall
not be deemed to be a senior security of such business
development company for purposes of section 18(a) if
the amount of the indebtedness at the time of its
issuance by the borrowing company is itself taken fully
into account as a liability by such business
development company, as if it were issued by such
business development company, in determining whether
such business development company, at that time,
satisfies the asset coverage requirements of section
18(a).
(6)(A) Except as provided in subparagraph (B), the
following shall not apply to a business development
company:
(i) Subparagraphs (C) and (D) of section
18(a)(2).
(ii) Subparagraph (E) of section 18(a)(2), to
the extent such subparagraph requires any
priority over any other class of stock as to
distribution of assets upon liquidation.
(iii) With respect to a senior security which
is a stock, subsections (c) and (i) of section
18.
(B) Subparagraph (A) shall not apply with respect to
preferred stock issued to a person who is not known by
the company to be a qualified institutional buyer (as
defined in section 3(a) of the Securities Exchange Act
of 1934).
(b) A business development company shall comply with the
provisions of this section at the time it becomes subject to
sections 55 through 65, as if it were issuing a security of
each class which it has outstanding at such time.
* * * * * * *
distribution and repurchase of securities
Sec. 63. Notwithstanding the exemption set forth in section
6(f), section 23 shall apply to a business development company
to the same extent as if it were a registered closed-end
investment company, except as follows:
(1) The prohibitions of section 23(a)(2) shall not
apply to any company which (A) is a wholly-owned
subsidiary of, or directly or indirectly controlled by,
a business development company, and (B) immediately
after the issuance of any of its securities for
property other than cash or securities, will not be an
investment company within the meaning of section 3(a).
(2) Notwithstanding the provisions of section 23(b),
a business development company may sell any common
stock of which it is the issuer at a price below the
current net asset value of such stock, and may sell
warrants, options, or rights to acquire any such common
stock at a price below the current net asset value of
such stock, if--
(A) the holders of a majority of such
business development company's outstanding
voting securities, and the holders of a
majority of such company's outstanding voting
securities that are not affiliated persons of
such company, approved such company's policy
and practice of making such sales of securities
at the last annual meeting of shareholders or
partners within one year immediately prior to
any such sale, except that the shareholder
approval requirements of this subparagraph
shall not apply to the initial public offering
by a business development company of its
securities;
(B) a required majority (as defined in
section 57(o)) of the directors of or general
partners in such business development company
have determined that any such sale would be in
the best interests of such company and its
shareholders or partners; and
(C) a required majority (as defined in
section 57(o)) of the directors of or general
partners in such business development company,
in consultation with the underwriter or
underwriters of the offering if it is to be
underwritten, have determined in good faith,
and as of a time immediately prior to the first
solicitation by or on behalf of such company of
firm commitments to purchase such securities or
immediately prior to the issuance of such
securities, that the price at which such
securities are to be sold is not less than a
price which closely approximates the market
value of those securities, less any
distributing commission or discount.
(3) A business development company may sell any
common stock of which it is the issuer at a price below
the current net asset value of such stock upon the
exercise of any warrant, option, or right issued in
accordance with [section 61(a)(3)] section 61(a)(4).
* * * * * * *
----------
INVESTMENT ADVISERS ACT OF 1940
TITLE II--INVESTMENT ADVISERS
* * * * * * *
registration of investment advisers
Sec. 203. (a) Except as provided in subsection (b) and
section 203A, it shall be unlawful for any investment adviser,
unless registered under this section, to make use of the mails
or any means or instrumentality of interstate commerce in
connection with his or its business as an investment adviser.
(b) The provisions of subsection (a) shall not apply to--
(1) any investment adviser, other than an investment
adviser who acts as an investment adviser to any
private fund, all of whose clients are residents of the
State within which such investment adviser maintains
his or its principal office and place of business, and
who does not furnish advice or issue analyses or
reports with respect to securities listed or admitted
to unlisted trading privileges on any national
securities exchange;
(2) any investment adviser whose only clients are
insurance companies;
(3) any investment adviser that is a foreign private
adviser;
(4) any investment adviser that is a charitable
organization, as defined in section 3(c)(10)(D) of the
Investment Company Act of 1940, or is a trustee,
director, officer, employee, or volunteer of such a
charitable organization acting within the scope of such
person's employment or duties with such organization,
whose advice, analyses, or reports are provided only to
one or more of the following:
(A) any such charitable organization;
(B) a fund that is excluded from the
definition of an investment company under
section 3(c)(10)(B) of the Investment Company
Act of 1940; or
(C) a trust or other donative instrument
described in section 3(c)(10)(B) of the
Investment Company Act of 1940, or the
trustees, administrators, settlors (or
potential settlors), or beneficiaries of any
such trust or other instrument;
(5) any plan described in section 414(e) of the
Internal Revenue Code of 1986, any person or entity
eligible to establish and maintain such a plan under
the Internal Revenue Code of 1986, or any trustee,
director, officer, or employee of or volunteer for any
such plan or person, if such person or entity, acting
in such capacity, provides investment advice
exclusively to, or with respect to, any plan, person,
or entity or any company, account, or fund that is
excluded from the definition of an investment company
under section 3(c)(14) of the Investment Company Act of
1940;
(6)(A) any investment adviser that is registered with
the Commodity Futures Trading Commission as a commodity
trading advisor whose business does not consist
primarily of acting as an investment adviser, as
defined in section 202(a)(11) of this title, and that
does not act as an investment adviser to--
(i) an investment company registered under
title I of this Act; or
(ii) a company which has elected to be a
business development company pursuant to
section 54 of title I of this Act and has not
withdrawn its election; or
(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.
(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.
(c)(1) An investment adviser, or any person who presently
contemplates becoming an investment adviser, may be registered
by filing with the Commission an application for registration
in such form and containing such of the following information
and documents as the Commission, by rule, may prescribe as
necessary or appropriate in the public interest or for the
protection of investors:
(A) the name and form of organization under which the
investment adviser engages or intends to engage in
business; the name of the State or other sovereign
power under which such investment adviser is organized;
the location of his or its principal office, principal
place of business, and branch offices, if any; the
names and addresses of his or its partners, officers,
directors, and persons performing similar functions or,
if such an investment adviser be an individual, of such
individual; and the number of his or its employees;
(B) the education, the business affiliations for the
past ten years, and the present business affiliations
of such investment adviser and of his or its partners,
officers, directors, and persons performing similar
functions and of any controlling person thereof;
(C) the nature of the business of such investment
adviser, including the manner of giving advice and
rendering analyses or reports;
(D) a balance sheet certified by an independent
public accountant and other financial statements (which
shall, as the Commission specifies, be certified);
(E) the nature and scope of the authority of such
investment adviser with respect to clients' funds and
accounts;
(F) the basis or bases upon which such investment
adviser is compensated;
(G) whether such investment adviser, or any person
associated with such investment adviser, is subject to
any disqualification which would be a basis for denial,
suspension, or revocation of registration of such
investment adviser under the provisions of subsection
(e) of this section; and
(H) a statement as to whether the principal business
of such investment adviser consists or is to consist of
acting as investment adviser and a statement as to
whether a substantial part of the business of such
investment adviser, consists or is to consist of
rendering investment supervisory services.
(2) Within forty-five days of the date of the filing of such
application (or within such longer period as to which the
applicant consents) the Commission shall--
(A) by order grant such registration; or
(B) institute proceedings to determine whether
registration should be denied. Such proceedings shall
include notice of the grounds for denial under
consideration and opportunity for hearing and shall be
concluded within one hundred twenty days of the date of
the filing of the application for registration. At the
conclusion of such proceedings the Commission, by
order, shall grant or deny such registration. The
Commission may extend the time for conclusion of such
proceedings for up to ninety days if it finds good
cause for such extension and publishes its reasons for
so finding or for such longer period as to which the
applicant consents.
The Commission shall grant such registration if the Commission
finds that the requirements of this section are satisfied and
that the applicant is not prohibited from registering as an
investment adviser under section 203A. The Commission shall
deny such registration if it does not make such a finding or if
it finds that if the applicant were so registered, its
registration would be subject to suspension or revocation under
subsection (e) of this section.
(d) Any provision of this title (other than subsection (a) of
this section) which prohibits any act, practice, or course of
business if the mails or any means or instrumentality of
interstate commerce are used in connection therewith shall also
prohibit any such act, practice, or course of business by any
investment adviser registered pursuant to this section or any
person acting on behalf of such an investment adviser,
irrespective of any use of the mails or any means or
instrumentality of interstate commerce in connection therewith.
(e) The Commission, by order, shall censure, place
limitations on the activities, functions, or operations of,
suspend for a period not exceeding twelve months, or revoke the
registration of any investment adviser if it finds, on the
record after notice and opportunity for hearing, that such
censure, placing of limitations, suspension, or revocation is
in the public interest and that such investment adviser, or any
person associated with such investment adviser, whether prior
to or subsequent to becoming so associated--
(1) has willfully made or caused to be made in any
application for registration or report required to be
filed with the Commission under this title, or in any
proceeding before the Commission with respect to
registration, any statement which was at the time and
in the light of the circumstances under which it was
made false or misleading with respect to any material
fact, or has omitted to state in any such application
or report any material fact which is required to be
stated therein.
(2) has been convicted within ten years preceding the
filing of any application for registration or at any
time thereafter of any felony or misdemeanor or of a
substantially equivalent crime by a foreign court of
competent jurisdiction which the Commission finds--
(A) involves the purchase or sale of any
security, the taking of a false oath, the
making of a false report, bribery, perjury,
burglary, any substantially equivalent activity
however denominated by the laws of the relevant
foreign government, or conspiracy to commit any
such offense;
(B) arises out of the conduct of the business
of a broker, dealer, municipal securities
dealer, investment adviser, bank, insurance
company, government securities broker,
government securities dealer, fiduciary,
transfer agent, credit rating agency, foreign
person performing a function substantially
equivalent to any of the above, or entity or
person required to be registered under the
Commodity Exchange Act or any substantially
equivalent statute or regulation;
(C) involves the larceny, theft, robbery,
extortion, forgery, counterfeiting, fraudulent
concealment, embezzlement, fraudulent
conversion, or misappropriation of funds or
securities or substantially equivalent activity
however denominated by the laws of the relevant
foreign government; or
(D) involves the violation of section 152,
1341, 1342, or 1343 or chapter 25 or 47 of
title 18, United States Code, or a violation of
substantially equivalent foreign statute.
(3) has been convicted during the 10-year period
preceding the date of filing of any application for
registration, or at any time thereafter, of--
(A) any crime that is punishable by
imprisonment for 1 or more years, and that is
not described in paragraph (2); or
(B) a substantially equivalent crime by a
foreign court of competent jurisdiction.
(4) is permanently or temporarily enjoined by order,
judgment, or decree of any court of competent
jurisdiction, including any foreign court of competent
jurisdiction, from acting as an investment adviser,
underwriter, broker, dealer, municipal securities
dealer, government securities broker, government
securities dealer, transfer agent, credit rating
agency, foreign person performing a function
substantially equivalent to any of the above, or entity
or person required to be registered under the Commodity
Exchange Act or any substantially equivalent statute or
regulation, or as an affiliated person or employee of
any investment company, bank, insurance company,
foreign entity substantially equivalent to any of the
above, or entity or person required to be registered
under the Commodity Exchange Act or any substantially
equivalent statute or regulation, or from engaging in
or continuing any conduct or practice in connection
with any such activity, or in connection with the
purchase or sale of any security.
(5) has willfully violated any provision of the
Securities Act of 1933, the Securities Exchange Act of
1934, the Investment Company Act of 1940, this title,
the Commodity Exchange Act, or the rules or regulations
under any such statutes or any rule of the Municipal
Securities Rulemaking Board, or is unable to comply
with any such provision.
(6) has willfully aided, abetted, counseled,
commanded, induced, or procured the violation by any
other person of any provision of the Securities Act of
1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, this title, the
Commodity Exchange Act, the rules or regulations under
any of such statutes, or the rules of the Municipal
Securities Rulemaking Board, or has failed reasonably
to supervise, with a view to preventing violations of
the provisions of such statutes, rules, and
regulations, another person who commits such a
violation, if such other person is subject to his
supervision. For the purposes of this paragraph no
person shall be deemed to have failed reasonably to
supervise any person, if--
(A) there have been established procedures,
and a system for applying such procedures,
which would reasonably be expected to prevent
and detect, insofar as practicable, any such
violation by such other person, and
(B) such person has reasonably discharged the
duties and obligations incumbent upon him by
reason of such procedures and system without
reasonable cause to believe that such
procedures and system were not being complied
with.
(7) is subject to any order of the Commission barring
or suspending the right of the person to be associated
with an investment adviser;
(8) has been found by a foreign financial regulatory
authority to have--
(A) made or caused to be made in any
application for registration or report required
to be filed with a foreign securities
authority, or in any proceeding before a
foreign securities authority with respect to
registration, any statement that was at the
time and in light of the circumstances under
which it was made false or misleading with
respect to any material fact, or has omitted to
state in any application or report to a foreign
securities authority any material fact that is
required to be stated therein;
(B) violated any foreign statute or
regulation regarding transactions in securities
or contracts of sale of a commodity for future
delivery traded on or subject to the rules of a
contract market or any board of trade; or
(C) aided, abetted, counseled, commanded,
induced, or procured the violation by any other
person of any foreign statute or regulation
regarding transactions in securities or
contracts of sale of a commodity for future
delivery traded on or subject to the rules of a
contract market or any board of trade, or has
been found, by the foreign finanical regulatory
authority, to have failed reasonably to
supervise, with a view to preventing violations
of statutory provisions, and rules and
regulations promulgated thereunder, another
person who commits such a violation, if such
other person is subject to his supervision; or
(9) is subject to any final order of a State
securities commission (or any agency or officer
performing like functions), State authority that
supervises or examines banks, savings associations, or
credit unions, State insurance commission (or any
agency or office performing like functions), an
appropriate Federal banking agency (as defined in
section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813(q))), or the National Credit Union
Administration, that--
(A) bars such person from association with an
entity regulated by such commission, authority,
agency, or officer, or from engaging in the
business of securities, insurance, banking,
savings association activities, or credit union
activities; or
(B) constitutes a final order based on
violations of any laws or regulations that
prohibit fraudulent, manipulative, or deceptive
conduct.
(f) The Commission, by order, shall censure or place
limitations on the activities of any person associated, seeking
to become associated, or, at the time of the alleged
misconduct, associated or seeking to become associated with an
investment adviser, or suspend for a period not exceeding 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, if the Commission
finds, on the record after notice and opportunity for hearing,
that such censure, placing of limitations, suspension, or bar
is in the public interest and that such person has committed or
omitted any act or omission enumerated in paragraph (1), (5),
(6), (8), or (9) of subsection (e) or has been convicted of any
offense specified in paragraph (2) or (3) of subsection (e)
within ten years of the commencement of the proceedings under
this subsection, or is enjoined from any action, conduct, or
practice specified in paragraph (4) of subsection (e). It shall
be unlawful for any person as to whom such an order suspending
or barring him from being associated with an investment adviser
is in effect willfully to become, or to be, associated with an
investment adviser without the consent of the Commission, and
it shall be unlawful for any investment adviser to permit such
a person to become, or remain, a person associated with him
without the consent of the Commission, if such investment
adviser knew, or in the exercise of reasonable care, should
have known, of such order.
(g) Any successor to the business of an investment adviser
registered under this section shall be deemed likewise
registered hereunder, if within thirty days from its succession
to such business it shall file an application for registration
under this section, unless and until the Commission, pursuant
to subsection (c) or subsection (e) of this section, shall deny
registration to or revoke or suspend the registration of such
successor.
(h) Any person registered under this section may, upon such
terms and conditions as the Commission finds necessary in the
public interest or for the protection of investors, withdraw
from registration by filing a written notice of withdrawal with
the Commission. If the Commission finds that any person
registered under this section, or who has pending an
application for registration filed under this section, is no
longer in existence, is not engaged in business as an
investment adviser, or is prohibited from registering as an
investment adviser under section 203A, the Commission shall by
order cancel the registration of such person.
(i) Money Penalties in Administrative Proceedings.--
(1) Authority of commission.--
(A) In general.--In any proceeding instituted
pursuant to subsection (e) or (f) against any
person, the Commission may impose a civil
penalty if it finds, on the record after notice
and opportunity for hearing, that such penalty
is in the public interest and that such
person--
(i) has willfully violated any
provision of the Securities Act of
1933, the Securities Exchange Act of
1934, the Investment Company Act of
1940, or this title, or the rules or
regulations thereunder;
(ii) has willfully aided, abetted,
counseled, commanded, induced, or
procured such a violation by any other
person;
(iii) has willfully made or caused to
be made in any application for
registration or report required to be
filed with the Commission under this
title, or in any proceeding before the
Commission with respect to
registration, any statement which was,
at the time and in the light of the
circumstances under which it was made,
false or misleading with respect to any
material fact, or has omitted to state
in any such application or report any
material fact which was required to be
stated therein; or
(iv) has failed reasonably to
supervise, within the meaning of
subsection (e)(6), with a view to
preventing violations of the provisions
of this title and the rules and
regulations thereunder, another person
who commits such a violation, if such
other person is subject to his
supervision;
(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.
(2) Maximum amount of penalty.--
(A) First tier.--The maximum amount of
penalty for each act or omission described in
paragraph (1) shall be [$5,000] $10,000 for a
natural person or [$50,000] $100,000 for any
other person.
(B) Second tier.--Notwithstanding
subparagraph (A), the maximum amount of penalty
for each such act or omission shall be
[$50,000] $100,000 for a natural person or
[$250,000] $500,000 for any other person if the
act or omission described in paragraph (1)
involved fraud, deceit, manipulation, or
deliberate or reckless disregard of a
regulatory requirement.
[(C) Third tier.--Notwithstanding
subparagraphs (A) and (B), the maximum amount
of penalty for each such act or omission shall
be $100,000 for a natural person or $500,000
for any other person if--
[(i) the act or omission described in
paragraph (1) involved fraud, deceit,
manipulation, or deliberate or reckless
disregard of a regulatory requirement;
and
[(ii) such act or omission directly
or indirectly resulted in substantial
losses or created a significant risk of
substantial losses to other persons or
resulted in substantial pecuniary gain
to the person who committed the act or
omission.]
(C) Third tier.--
(i) In general.--Notwithstanding
subparagraphs (A) and (B), the amount
of penalty for each such act or
omission shall not exceed the amount
specified in clause (ii) if--
(I) the act or omission
described in paragraph (1)
involved fraud, deceit,
manipulation, or deliberate or
reckless disregard of a
regulatory requirement; and
(II) such act or omission
directly or indirectly resulted
in substantial losses or
created a significant risk of
substantial losses to other
persons or resulted in
substantial pecuniary gain to
the person who committed the
act or omission.
(ii) Maximum amount of penalty.--The
amount referred to in clause (i) is the
greatest of--
(I) $300,000 for a natural
person or $1,450,000 for any
other person;
(II) 3 times the gross amount
of pecuniary gain to the person
who committed the act or
omission; or
(III) the amount of losses
incurred by victims as a result
of the act or omission.
(D) Fourth tier.--Notwithstanding
subparagraphs (A), (B), and (C), the maximum
amount of penalty for each such act or omission
shall be 3 times the otherwise applicable
amount in such subparagraphs if, within the 5-
year period preceding such act or omission, the
person who committed the act or omission was
criminally convicted for securities fraud or
became subject to a judgment or order imposing
monetary, equitable, or administrative relief
in any Commission action alleging fraud by that
person.
(3) Determination of public interest.--In considering
under this section whether a penalty is in the public
interest, the Commission may consider--
(A) whether the act or omission for which
such penalty is assessed involved fraud,
deceit, manipulation, or deliberate or reckless
disregard of a regulatory requirement;
(B) the harm to other persons resulting
either directly or indirectly from such act or
omission;
(C) the extent to which any person was
unjustly enriched, taking into account any
restitution made to persons injured by such
behavior;
(D) whether such person previously has been
found by the Commission, another appropriate
regulatory agency, or a self-regulatory
organization to have violated the Federal
securities laws, State securities laws, or the
rules of a self-regulatory organization, has
been enjoined by a court of competent
jurisdiction from violations of such laws or
rules, or has been convicted by a court of
competent jurisdiction of violations of such
laws or of any felony or misdemeanor described
in section 203(e)(2) of this title;
(E) the need to deter such person and other
persons from committing such acts or omissions;
and
(F) such other matters as justice may
require.
(4) Evidence concerning ability to pay.--In any
proceeding in which the Commission may impose a penalty
under this section, a respondent may present evidence
of the respondent's ability to pay such penalty. The
Commission may, in its discretion, consider such
evidence in determining whether such penalty is in the
public interest. Such evidence may relate to the extent
of such person's ability to continue in business and
the collectability of a penalty, taking into account
any other claims of the United States or third parties
upon such person's assets and the amount of such
person's assets.
(j) Authority To Enter an Order Requiring an Accounting and
Disgorgement.--In any proceeding in which the Commission may
impose a penalty under this section, the Commission may enter
an order requiring accounting and disgorgement, including
reasonable interest. The Commission is authorized to adopt
rules, regulations, and orders concerning payments to
investors, rates of interest, periods of accrual, and such
other matters as it deems appropriate to implement this
subsection.
(k) Cease-and-Desist Proceedings.--
(1) Authority of the commission.--If the Commission
finds, after notice and opportunity for hearing, that
any person is violating, has violated, or is about to
violate any provision of this title, or any rule or
regulation thereunder, the Commission may publish its
findings and enter an order requiring such person, and
any other person that is, was, or would be a cause of
the violation, due to an act or omission the person
knew or should have known would contribute to such
violation, to cease and desist from committing or
causing such violation and any future violation of the
same provision, rule, or regulation. Such order may, in
addition to requiring a person to cease and desist from
committing or causing a violation, require such person
to comply, or to take steps to effect compliance, with
such provision, rule, or regulation, upon such terms
and conditions and within such time as the Commission
may specify in such order. Any such order may, as the
Commission deems appropriate, require future compliance
or steps to effect future compliance, either
permanently or for such period of time as the
Commission may specify, with such provision, rule, or
regulation with respect to any security, any issuer, or
any other person.
(2) Hearing.--The notice instituting proceedings
pursuant to paragraph (1) shall fix a hearing date not
earlier than 30 days nor later than 60 days after
service of the notice unless an earlier or a later date
is set by the Commission with the consent of any
respondent so served.
(3) Temporary order.--
(A) In general.--Whenever the Commission
determines that the alleged violation or
threatened violation specified in the notice
instituting proceedings pursuant to paragraph
(1), or the continuation thereof, is likely to
result in significant dissipation or conversion
of assets, significant harm to investors, or
substantial harm to the public interest,
including, but not limited to, losses to the
Securities Investor Protection Corporation,
prior to the completion of the proceedings, the
Commission may enter a temporary order
requiring the respondent to cease and desist
from the violation or threatened violation and
to take such action to prevent the violation or
threatened violation and to prevent dissipation
or conversion of assets, significant harm to
investors, or substantial harm to the public
interest as the Commission deems appropriate
pending completion of such proceedings. Such an
order shall be entered only after notice and
opportunity for a hearing, unless the
Commission, notwithstanding section 211(c) of
this title, determines that notice and hearing
prior to entry would be impracticable or
contrary to the public interest. A temporary
order shall become effective upon service upon
the respondent and, unless set aside, limited,
or suspended by the Commission or a court of
competent jurisdiction, shall remain effective
and enforceable pending the completion of the
proceedings.
(B) Applicability.--This paragraph shall
apply only to a respondent that acts, or, at
the time of the alleged misconduct acted, as a
broker, dealer, investment adviser, investment
company, municipal securities dealer,
government securities broker, government
securities dealer, or transfer agent, or is, or
was at the time of the alleged misconduct, an
associated person of, or a person seeking to
become associated with, any of the foregoing.
(4) Review of temporary orders.--
(A) Commission review.--At any time after the
respondent has been served with a temporary
cease-and-desist order pursuant to paragraph
(3), the respondent may apply to the Commission
to have the order set aside, limited, or
suspended. If the respondent has been served
with a temporary cease-and-desist order entered
without a prior Commission hearing, the
respondent may, within 10 days after the date
on which the order was served, request a
hearing on such application and the Commission
shall hold a hearing and render a decision on
such application at the earliest possible time.
(B) Judicial review.--Within--
(i) 10 days after the date the
respondent was served with a temporary
cease-and-desist order entered with a
prior Commission hearing, or
(ii) 10 days after the Commission
renders a decision on an application
and hearing under subparagraph (A),
with respect to any temporary cease-
and-desist order entered without a
prior Commission hearing,
the respondent may apply to the United States
district court for the district in which the
respondent resides or has its principal office
or place of business, or for the District of
Columbia, for an order setting aside, limiting,
or suspending the effectiveness or enforcement
of the order, and the court shall have
jurisdiction to enter such an order. A
respondent served with a temporary cease-and-
desist order entered without a prior Commission
hearing may not apply to the court except after
hearing and decision by the Commission on the
respondent's application under subparagraph (A)
of this paragraph.
(C) No automatic stay of temporary order.--
The commencement of proceedings under
subparagraph (B) of this paragraph shall not,
unless specifically ordered by the court,
operate as a stay of the Commission's order.
(D) Exclusive review.--Section 213 of this
title shall not apply to a temporary order
entered pursuant to this section.
(5) Authority to enter an order requiring an
accounting and disgorgement.--In any cease-and-desist
proceeding under paragraph (1), the Commission may
enter an order requiring accounting and disgorgement,
including reasonable interest. The Commission is
authorized to adopt rules, regulations, and orders
concerning payments to investors, rates of interest,
periods of accrual, and such other matters as it deems
appropriate to implement this subsection.
(l) Exemption of Venture Capital Fund Advisers.--
(1) In general.--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.
(2) Advisers of sbics.--For purposes of this
subsection, a venture capital fund includes an entity
described in subparagraph (A), (B), or (C) of
subsection (b)(7) (other than an 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).
(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.
(3) Advisers of sbics.--For purposes of this
subsection, the assets under management of a private
fund that is an entity described in subparagraph (A),
(B), or (C) of subsection (b)(7) (other than an 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) shall be excluded
from the limit set forth in paragraph (1).
(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.
(o) Exemption of and Reporting by Private Equity Fund
Advisers.--
(1) In general.--Except as provided in this
subsection, no investment adviser shall be subject to
the registration or reporting requirements of this
title with respect to the provision of investment
advice relating to a private equity fund.
(2) Maintenance of records and access by
commission.--Not later than 6 months after the date of
enactment of this subsection, the Commission shall
issue final rules--
(A) to require investment advisers described
in paragraph (1) to maintain such records and
provide to the Commission such annual or other
reports as the Commission, taking into account
fund size, governance, investment strategy,
risk, and other factors, determines necessary
and appropriate in the public interest and for
the protection of investors; and
(B) to define the term ``private equity
fund'' for purposes of this subsection.
annual and other reports
Sec. 204. (a) In General.--Every investment adviser who makes
use of the mails or of any means or instrumentality of
interstate commerce in connection with his or its business as
an investment adviser (other than one specifically exempted
from registration pursuant to section 203(b) of this title),
shall make and keep for prescribed periods such records (as
defined in section 3(a)(37) of the Securities Exchange Act of
1934), furnish such copies thereof, and make and disseminate
such reports as the Commission, by rule, may prescribe as
necessary or appropriate in the public interest or for the
protection of investors. All records (as so defined) of such
investment advisers are subject at any time, or from time to
time, to such reasonable periodic, special, or other
examinations by representatives of the Commission as the
Commission deems necessary or appropriate in the public
interest or for the protection of investors.
(b) Records and Reports of Private Funds.--
(1) In general.--The Commission may require any
investment adviser registered under [this title--]
[(A) to maintain] this title 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] investors.
[(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)] (7) 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)] (8) 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)] paragraph (7).
[(10)] (9) 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)] (10) 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.
(c) Filing Depositories.--The Commission may, by rule,
require an investment adviser--
(1) to file with the Commission any fee, application,
report, or notice required to be filed by this title or
the rules issued under this title through any entity
designated by the Commission for that purpose; and
(2) to pay the reasonable costs associated with such
filing and the establishment and maintenance of the
systems required by subsection (c).
(d) Access to Disciplinary and Other Information.--
(1) Maintenance of system to respond to inquiries.--
(A) In general.--The Commission shall require
the entity designated by the Commission under
subsection (b)(1) to establish and maintain a
toll-free telephone listing, or a readily
accessible electronic or other process, to
receive and promptly respond to inquiries
regarding registration information (including
disciplinary actions, regulatory, judicial, and
arbitration proceedings, and other information
required by law or rule to be reported)
involving investment advisers and persons
associated with investment advisers.
(B) Applicability.--This subsection shall
apply to any investment adviser (and the
persons associated with that adviser), whether
the investment adviser is registered with the
Commission under section 203 or regulated
solely by a State, as described in section
203A.
(2) Recovery of costs.--An entity designated by the
Commission under subsection (b)(1) may charge persons
making inquiries, other than individual investors,
reasonable fees for responses to inquiries described in
paragraph (1).
(3) Limitation on liability.--An entity designated by
the Commission under subsection (b)(1) shall not have
any liability to any person for any actions taken or
omitted in good faith under this subsection.
[(d)] (e) 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.
(f) Procedure for Obtaining Certain Intellectual Property.--
The Commission is not authorized to compel under this title an
investment adviser to produce or furnish source code, including
algorithmic trading source code or similar intellectual
property, to the Commission unless the Commission first issues
a subpoena.
* * * * * * *
enforcement of title
Sec. 209. (a) Whenever it shall appear to the Commission,
either upon complaint or otherwise, that the provisions of this
title or of any rule or regulation prescribed under the
authority thereof, have been or are about to be violated by any
person, it may in its discretion require, and in any event
shall permit, such person to file with it a statement in
writing, under oath or otherwise, as to all the facts and
circumstances relevant to such violation, and may otherwise
investigate all such facts and circumstances.
(b) For the purposes of any investigation or any proceeding
under this title, any member of the Commission or any officer
thereof designated by it is empowered to administer oaths and
affirmations, subpena witnesses, compel their attendance, take
evidence, and require the production of any books, papers,
correspondence, memoranda, contracts, agreements, or other
records which are relevant or material to the inquiry. Such
attendance of witnesses and the production of any such records
may be required from any place in any State or in any Territory
or other place subject to the jurisdiction of the United States
at any designated place of hearing.
(c) In case of contumacy by, or refusal to obey a subpena
issued to, any person, the Commission may invoke the aid of any
court of the United States within the jurisdiction of which
such investigation or proceeding is carried on, or where such
person resides or carries on business, in requiring the
attendance and testimony of witnesses and the production of
books, papers, correspondence, memoranda, contracts,
agreements, and other records. And such court may issue an
order requiring such person to appear before the Commission or
member or officer designated by the Commission, there to
produce records, if so ordered or to give testimony touching
the matter under investigation or in question; and any failure
to obey such order of the court may be punished by such court
as a contempt thereof. All process in any such case may be
served in the judicial district whereof such person is an
inhabitant or wherever he may be found. Any person who without
just cause shall fail or refuse to attend and testify or to
answer any lawful inquiry or to produce books, papers,
correspondence, memoranda, contracts, agreements, or other
records, if in his or its power so to do, in obedience to the
subpena of the Commission, shall be guilty of a misdemeanor,
and upon conviction shall be subject to a fine of not more than
$1,000 or to imprisonment for a term of not more than one year,
or both.
(d) Whenever it shall appear to the Commission that any
person has engaged, is engaged, or is about to engage in any
act or practice constituting a violation of any provision of
this title, or of any rule, regulation, or order hereunder, or
that any person has aided, abetted, counseled, commanded,
induced, or procured, is aiding, abetting, counseling,
commanding, inducing, or procuring, or is about to aid, abet,
counsel, command, induce, or procure such a violation, it may
in its discretion bring an action in the proper district court
of the United States, or the proper United States court of any
Territory or other place subject to the jurisdiction of the
United States, to enjoin such acts or practices and to enforce
compliance with this title or any rule, regulation, or order
hereunder. Upon a showing that such person has engaged, is
engaged, or is about to engage in any such act or practice, or
in aiding, abetting, counseling, commanding, inducing, or
procuring any such act or practice, a permanent or temporary
injunction or decree or restraining order shall be granted
without bond. The Commission may transmit such evidence as may
be available concerning any violation of the provisions of this
title, or of any rule, regulation, or order thereunder, to the
Attorney General, who, in his discretion, may institute the
appropriate criminal proceedings under this title.
(e) Money Penalties in Civil Actions.--
(1) Authority of commission.--Whenever it shall
appear to the Commission that any person has violated
any provision of this title, the rules or regulations
thereunder, a Federal court injunction or a bar
obtained or entered by the Commission under this title,
or a cease-and-desist order entered by the Commission
pursuant to section 203(k) of this title, the
Commission may bring an action in a United States
district court to seek, and the court shall have
jurisdiction to impose, upon a proper showing, a civil
penalty to be paid by the person who committed such
violation.
(2) Amount of penalty.--
(A) First tier.--The amount of the penalty
shall be determined by the court in light of
the facts and circumstances. For each
violation, the amount of the penalty shall not
exceed the greater of (i) [$5,000] $10,000 for
a natural person or [$50,000] $100,000 for any
other person, or (ii) the gross amount of
pecuniary gain to such defendant as a result of
the violation.
(B) Second tier.--Notwithstanding
subparagraph (A), the amount of penalty for
each such violation shall not exceed the
greater of (i) [$50,000] $100,000 for a natural
person or [$250,000] $500,000 for any other
person, or (ii) the gross amount of pecuniary
gain to such defendant as a result of the
violation, if the violation described in
paragraph (1) involved fraud, deceit,
manipulation, or deliberate or reckless
disregard of a regulatory requirement.
[(C) Third tier.--Notwithstanding
subparagraphs (A) and (B), the amount of
penalty for each such violation shall not
exceed the greater of (i) $100,000 for a
natural person or $500,000 for any other
person, or (ii) the gross amount of pecuniary
gain to such defendant as a result of the
violation, if--
[(I) the violation described in
paragraph (1) involved fraud, deceit,
manipulation, or deliberate or reckless
disregard of a regulatory requirement;
and
[(II) such violation directly or
indirectly resulted in substantial
losses or created a significant risk of
substantial losses to other persons.]
(C) Third tier.--
(i) In general.--Notwithstanding
subparagraphs (A) and (B), the amount
of penalty for each such violation
shall not exceed the amount specified
in clause (ii) if--
(I) the violation described
in paragraph (1) involved
fraud, deceit, manipulation, or
deliberate or reckless
disregard of a regulatory
requirement; and
(II) such violation directly
or indirectly resulted in
substantial losses or created a
significant risk of substantial
losses to other persons.
(ii) Maximum amount of penalty.--The
amount referred to in clause (i) is the
greatest of--
(I) $300,000 for a natural
person or $1,450,000 for any
other person;
(II) 3 times the gross amount
of pecuniary gain to such
defendant as a result of the
violation; or
(III) the amount of losses
incurred by victims as a result
of the violation.
(D) Fourth tier.--Notwithstanding
subparagraphs (A), (B), and (C), the maximum
amount of penalty for each such violation shall
be 3 times the otherwise applicable amount in
such subparagraphs if, within the 5-year period
preceding such violation, the defendant was
criminally convicted for securities fraud or
became subject to a judgment or order imposing
monetary, equitable, or administrative relief
in any Commission action alleging fraud by that
defendant.
(3) Procedures for collection.--
(A) Payment of penalty to treasury.--A
penalty imposed under this section shall be
payable into the Treasury of the United States,
except as otherwise provided in section 308 of
the Sarbanes-Oxley Act of 2002 and section 21F
of the Securities Exchange Act of 1934.
(B) Collection of penalties.--If a person
upon whom such a penalty is imposed shall fail
to pay such penalty within the time prescribed
in the court's order, the Commission may refer
the matter to the Attorney General who shall
recover such penalty by action in the
appropriate United States district court.
(C) Remedy not exclusive.--The actions
authorized by this subsection may be brought in
addition to any other action that the
Commission or the Attorney General is entitled
to bring.
(D) Jurisdiction and venue.--For purposes of
section 214 of this title, actions under this
paragraph shall be actions to enforce a
liability or a duty created by this title.
[(4) Special provisions relating to a violation of a
cease-and-desist order.--In an action to enforce a
cease-and-desist order entered by the Commission
pursuant to section 203(k), each separate violation of
such order shall be a separate offense, except that in
the case of a violation through a continuing failure to
comply with the order, each day of the failure to
comply shall be deemed a separate offense.]
(4) Special provisions relating to a violation of an
injunction or certain orders.--
(A) In general.--Each separate violation of
an injunction or order described in
subparagraph (B) shall be a separate offense,
except that in the case of a violation through
a continuing failure to comply with such
injunction or order, each day of the failure to
comply with the injunction or order shall be
deemed a separate offense.
(B) Injunctions and orders.--Subparagraph (A)
shall apply with respect to any action to
enforce--
(i) a Federal court injunction
obtained pursuant to this title;
(ii) an order entered or obtained by
the Commission pursuant to this title
that bars, suspends, places limitations
on the activities or functions of, or
prohibits the activities of, a person;
or
(iii) a cease-and-desist order
entered by the Commission pursuant to
section 203(k).
(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.
* * * * * * *
rules, regulations, and orders
Sec. 211. (a) The Commission shall have authority from time
to time to make, issue, amend, and rescind such rules and
regulations and such orders as are necessary or appropriate to
the exercise of the functions and powers conferred upon the
Commission elsewhere in this title, 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. For the purposes of its
rules or regulations the Commission may classify persons and
matters within its jurisdiction and prescribe different
requirements for different classes of persons or matters.
(b) Subject to the provisions of chapter 15 of title 44,
United States Code, and regulations prescribed under the
authority thereof, the rules and regulations of the Commission
under this title, and amendments thereof, shall be effective
upon publication in the manner which the Commission shall
prescribe, or upon such later date as may be provided in such
rules and regulations.
(c) Orders of the Commission under this title shall be issued
only after appropriate notice and opportunity for hearing.
Notice to the parties to a proceeding before the Commission
shall be given by personal service upon each party or by
registered mail or certified mail or confirmed telegraphic
notice to the party's last known business address. Notice to
interested persons, if any, other than parties may be given in
the same manner or by publication in the Federal Register.
(d) No provision of this title imposing any liability shall
apply to any act done or omitted in good faith in conformity
with any rule, regulation, or order of the Commission,
notwithstanding that such rule, regulation, or order may, after
such act or omission, be amended or rescinded or be determined
by judicial or other authority to be invalid for any reason.
(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)] section
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.).
(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.
(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.
* * * * * * *
----------
SARBANES-OXLEY ACT OF 2002
* * * * * * *
TITLE I--PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD
* * * * * * *
SEC. 105. INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS.
(a) In General.--The Board shall establish, by rule, subject
to the requirements of this section, fair procedures for the
investigation and disciplining of registered public accounting
firms and associated persons of such firms.
(b) Investigations.--
(1) Authority.--In accordance with the rules of the
Board, the Board may conduct an investigation of any
act or practice, or omission to act, by a registered
public accounting firm, any associated person of such
firm, or both, that may violate any provision of this
Act, the rules of the Board, the provisions of the
securities laws relating to the preparation and
issuance of audit reports and the obligations and
liabilities of accountants with respect thereto,
including the rules of the Commission issued under this
Act, or professional standards, regardless of how the
act, practice, or omission is brought to the attention
of the Board.
(2) Testimony and document production.--In addition
to such other actions as the Board determines to be
necessary or appropriate, the rules of the Board may--
(A) require the testimony of the firm or of
any person associated with a registered public
accounting firm, with respect to any matter
that the Board considers relevant or material
to an investigation;
(B) require the production of audit work
papers and any other document or information in
the possession of a registered public
accounting firm or any associated person
thereof, wherever domiciled, that the Board
considers relevant or material to the
investigation, and may inspect the books and
records of such firm or associated person to
verify the accuracy of any documents or
information supplied;
(C) request the testimony of, and production
of any document in the possession of, any other
person, including any client of a registered
public accounting firm that the Board considers
relevant or material to an investigation under
this section, with appropriate notice, subject
to the needs of the investigation, as permitted
under the rules of the Board; and
(D) provide for procedures to seek issuance
by the Commission, in a manner established by
the Commission, of a subpoena to require the
testimony of, and production of any document in
the possession of, any person, including any
client of a registered public accounting firm,
that the Board considers relevant or material
to an investigation under this section.
(3) Noncooperation with investigations.--
(A) In general.--If a registered public
accounting firm or any associated person
thereof refuses to testify, produce documents,
or otherwise cooperate with the Board in
connection with an investigation under this
section, the Board may--
(i) suspend or bar such person from
being associated with a registered
public accounting firm, or require the
registered public accounting firm to
end such association;
(ii) suspend or revoke the
registration of the public accounting
firm; and
(iii) invoke such other lesser
sanctions as the Board considers
appropriate, and as specified by rule
of the Board.
(B) Procedure.--Any action taken by the Board
under this paragraph shall be subject to the
terms of section 107(c).
(4) Coordination and referral of investigations.--
(A) Coordination.--The Board shall notify the
Commission of any pending Board investigation
involving a potential violation of the
securities laws, and thereafter coordinate its
work with the work of the Commission's Division
of Enforcement, as necessary to protect an
ongoing Commission investigation.
(B) Referral.--The Board may refer an
investigation under this section--
(i) to the Commission;
(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;
(iii) to any other Federal functional
regulator (as defined in section 509 of
the Gramm-Leach-Bliley Act (15 U.S.C.
6809)), in the case of an investigation
that concerns an audit report for an
institution that is subject to the
jurisdiction of such regulator; and
(iv) at the direction of the
Commission, to--
(I) the Attorney General of
the United States;
(II) the attorney general of
1 or more States; and
(III) the appropriate State
regulatory authority.
(5) Use of documents.--
(A) Confidentiality.--Except as provided in
[subparagraphs (B) and (C)] subparagraphs (B),
(C) and (D), all documents and information
prepared or received by or specifically for the
Board, and deliberations of the Board and its
employees and agents, in connection with an
inspection under section 104 or with an
investigation under this section, shall be
confidential and privileged as an evidentiary
matter (and shall not be subject to civil
discovery or other legal process) in any
proceeding in any Federal or State court or
administrative agency, and shall be exempt from
disclosure, in the hands of an agency or
establishment of the Federal Government, under
the Freedom of Information Act (5 U.S.C. 552a),
or otherwise, unless and until presented in
connection with a public proceeding or released
in accordance with subsection (c).
(B) Availability to government agencies.--
Without the loss of its status as confidential
and privileged in the hands of the Board, all
information referred to in subparagraph (A)
may--
(i) be made available to the
Commission; and
(ii) in the discretion of the Board,
when determined by the Board to be
necessary to accomplish the purposes of
this Act or to protect investors, be
made available to--
(I) the Attorney General of
the United States;
(II) the appropriate Federal
functional regulator (as
defined in section 509 of the
Gramm-Leach-Bliley Act (15
U.S.C. 6809)), other than the
Commission, and the Director of
the Federal Housing Finance
Agency, with respect to an
audit report for an institution
subject to the jurisdiction of
such regulator;
(III) State attorneys general
in connection with any criminal
investigation;
(IV) any appropriate State
regulatory authority; and
(V) a self-regulatory
organization, with respect to
an audit report for a broker or
dealer that is under the
jurisdiction of such self-
regulatory organization,
each of which shall maintain such information
as confidential and privileged.
(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.
(D) Availability to the congressional
committees.--The Board shall make available to
the Committees specified under section 101(h)--
(i) such information as the
Committees shall request; and
(ii) with respect to any confidential
or privileged information provided in
response to a request under clause (i),
including any information subject to
section 104(g) and subparagraph (A), or
any confidential or privileged
information provided orally in response
to such a request, such information
shall maintain the protections provided
in subparagraph (A), and shall retain
its confidential and privileged status
in the hands of the Board and the
Committees.
(6) Immunity.--Any employee of the Board engaged in
carrying out an investigation under this Act shall be
immune from any civil liability arising out of such
investigation in the same manner and to the same extent
as an employee of the Federal Government in similar
circumstances.
(c) Disciplinary Procedures.--
(1) Notification; recordkeeping.--The rules of the
Board shall provide that in any proceeding by the Board
to determine whether a registered public accounting
firm, or an associated person thereof, should be
disciplined, the Board shall--
(A) bring specific charges with respect to
the firm or associated person;
(B) notify such firm or associated person of,
and provide to the firm or associated person an
opportunity to defend against, such charges;
and
(C) keep a record of the proceedings.
(2) Public hearings.--Hearings under this section
shall not be public, unless otherwise ordered by the
Board for good cause shown, with the consent of the
parties to such hearing.
(3) Supporting statement.--A determination by the
Board to impose a sanction under this subsection shall
be supported by a statement setting forth--
(A) each act or practice in which the
registered public accounting firm, or
associated person, has engaged (or omitted to
engage), or that forms a basis for all or a
part of such sanction;
(B) the specific provision of this Act, the
securities laws, the rules of the Board, or
professional standards which the Board
determines has been violated; and
(C) the sanction imposed, including a
justification for that sanction.
(4) Sanctions.--If the Board finds, based on all of
the facts and circumstances, that a registered public
accounting firm or associated person thereof has
engaged in any act or practice, or omitted to act, in
violation of this Act, the rules of the Board, the
provisions of the securities laws relating to the
preparation and issuance of audit reports and the
obligations and liabilities of accountants with respect
thereto, including the rules of the Commission issued
under this Act, or professional standards, the Board
may impose such disciplinary or remedial sanctions as
it determines appropriate, subject to applicable
limitations under paragraph (5), including--
(A) temporary suspension or permanent
revocation of registration under this title;
(B) temporary or permanent suspension or bar
of a person from further association with any
registered public accounting firm;
(C) temporary or permanent limitation on the
activities, functions, or operations of such
firm or person (other than in connection with
required additional professional education or
training);
(D) a civil money penalty for each such
violation, in an amount equal to--
(i) not more than [$100,000] $200,000
for a natural person or [$2,000,000]
$4,000,000 for any other person; and
(ii) in any case to which paragraph
(5) applies, not more than [$750,000]
$1,500,000 for a natural person or
[$15,000,000] $22,000,000 for any other
person;
(E) censure;
(F) required additional professional
education or training; or
(G) any other appropriate sanction provided
for in the rules of the Board.
(5) Intentional or other knowing conduct.--The
sanctions and penalties described in subparagraphs (A)
through (C) and (D)(ii) of paragraph (4) shall only
apply to--
(A) intentional or knowing conduct, including
reckless conduct, that results in violation of
the applicable statutory, regulatory, or
professional standard; or
(B) repeated instances of negligent conduct,
each resulting in a violation of the applicable
statutory, regulatory, or professional
standard.
(6) Failure to supervise.--
(A) In general.--The Board may impose
sanctions under this section on a registered
accounting firm or upon any person who is, or
at the time of the alleged failure reasonably
to supervise was, a supervisory person of such
firm, if the Board finds that--
(i) the firm has failed reasonably to
supervise an associated person, either
as required by the rules of the Board
relating to auditing or quality control
standards, or otherwise, with a view to
preventing violations of this Act, the
rules of the Board, the provisions of
the securities laws relating to the
preparation and issuance of audit
reports and the obligations and
liabilities of accountants with respect
thereto, including the rules of the
Commission under this Act, or
professional standards; and
(ii) such associated person commits a
violation of this Act, or any of such
rules, laws, or standards.
(B) Rule of construction.--No current or
former supervisory person of a registered
public accounting firm shall be deemed to have
failed reasonably to supervise any associated
person for purposes of subparagraph (A), if--
(i) there have been established in
and for that firm procedures, and a
system for applying such procedures,
that comply with applicable rules of
the Board and that would reasonably be
expected to prevent and detect any such
violation by such associated person;
and
(ii) such person has reasonably
discharged the duties and obligations
incumbent upon that person by reason of
such procedures and system, and had no
reasonable cause to believe that such
procedures and system were not being
complied with.
(7) Effect of suspension.--
(A) Association with a public accounting
firm.--It shall be unlawful for any person that
is suspended or barred from being associated
with a registered public accounting firm under
this subsection willfully to become or remain
associated with any registered public
accounting firm, or for any registered public
accounting firm that knew, or, in the exercise
of reasonable care should have known, of the
suspension or bar, to permit such an
association, without the consent of the Board
or the Commission.
(B) Association with an issuer, broker, or
dealer.--It shall be unlawful for any person
that is suspended or barred from being
associated with a registered public accounting
firm under this subsection willfully to become
or remain associated with any issuer, broker,
or dealer in an accountancy or a financial
management capacity, and for any issuer,
broker, or dealer that knew, or in the exercise
of reasonable care should have known, of such
suspension or bar, to permit such an
association, without the consent of the Board
or the Commission.
(d) Reporting of Sanctions.--
(1) Recipients.--If the Board imposes a disciplinary
sanction, in accordance with this section, the Board
shall report the sanction to--
(A) the Commission;
(B) any appropriate State regulatory
authority or any foreign accountancy licensing
board with which such firm or person is
licensed or certified; and
(C) the public (once any stay on the
imposition of such sanction has been lifted).
(2) Contents.--The information reported under
paragraph (1) shall include--
(A) the name of the sanctioned person;
(B) a description of the sanction and the
basis for its imposition; and
(C) such other information as the Board deems
appropriate.
(e) Stay of Sanctions.--
(1) In general.--Application to the Commission for
review, or the institution by the Commission of review,
of any disciplinary action of the Board shall operate
as a stay of any such disciplinary action, unless and
until the Commission orders (summarily or after notice
and opportunity for hearing on the question of a stay,
which hearing may consist solely of the submission of
affidavits or presentation of oral arguments) that no
such stay shall continue to operate.
(2) Expedited procedures.--The Commission shall
establish for appropriate cases an expedited procedure
for consideration and determination of the question of
the duration of a stay pending review of any
disciplinary action of the Board under this subsection.
* * * * * * *
SEC. 109. FUNDING.
(a) In General.--The Board, and the standard setting body
designated pursuant to section 19(b) of the Securities Act of
1933, as amended by section 108, shall be funded as provided in
this section.
(b) Annual Budgets.--The Board and the standard setting body
referred to in subsection (a) shall each establish a budget for
each fiscal year, which shall be reviewed and approved
according to their respective internal procedures not less than
1 month prior to the commencement of the fiscal year to which
the budget pertains (or at the beginning of the Board's first
fiscal year, which may be a short fiscal year). The budget of
the Board shall be subject to approval by the Commission. The
budget for the first fiscal year of the Board shall be prepared
and approved promptly following the appointment of the initial
five Board members, to permit action by the Board of the
organizational tasks contemplated by section 101(d).
(c) Sources and [Uses of Funds.--]
[(1) Recoverable budget expenses.--The budget] Uses
of Funds._The budget of the Board (reduced by any
registration or annual fees received under section
102(e) for the year preceding the year for which the
budget is being computed), and all of the budget of the
standard setting body referred to in subsection (a),
for each fiscal year of each of those 2 entities, shall
be payable from annual accounting support fees, in
accordance with subsections (d) and (e). Accounting
support fees and other receipts of the Board and of
such standard-setting body shall not be considered
public monies of the United States.
[(2) Funds generated from the collection of monetary
penalties.--Subject to the availability in advance in
an appropriations Act, and notwithstanding subsection
(j), all funds collected by the Board as a result of
the assessment of monetary penalties shall be used to
fund a merit scholarship program for undergraduate and
graduate students enrolled in accredited accounting
degree programs, which program is to be administered by
the Board or by an entity or agent identified by the
Board.]
(d) Annual Accounting Support Fee for the Board.--
(1) Establishment of fee.--The Board shall establish,
with the approval of the Commission, a reasonable
annual accounting support fee (or a formula for the
computation thereof), as may be necessary or
appropriate to establish and maintain the Board. Such
fee may also cover costs incurred in the Board's first
fiscal year (which may be a short fiscal year), or may
be levied separately with respect to such short fiscal
year.
(2) Assessments.--The rules of the Board under
paragraph (1) shall provide for the equitable
allocation, assessment, and collection by the Board (or
an agent appointed by the Board) of the fee established
under paragraph (1), among issuers, in accordance with
subsection (g), and among brokers and dealers, in
accordance with subsection (h), and allowing for
differentiation among classes of issuers, brokers and
dealers, as appropriate.
(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.
(e) Annual Accounting Support Fee for Standard Setting
Body.--The annual accounting support fee for the standard
setting body referred to in subsection (a)--
(1) shall be allocated in accordance with subsection
(g), and assessed and collected against each issuer, on
behalf of the standard setting body, by 1 or more
appropriate designated collection agents, as may be
necessary or appropriate to pay for the budget and
provide for the expenses of that standard setting body,
and to provide for an independent, stable source of
funding for such body, subject to review by the
Commission; and
(2) may differentiate among different classes of
issuers.
(f) Limitation on Fee.--The amount of fees collected under
this section for a fiscal year on behalf of the Board or the
standards setting body, as the case may be, shall not exceed
the recoverable budget expenses of the Board or body,
respectively (which may include operating, capital, and accrued
items), referred to in [subsection (c)(1)] subsection (c).
(g) Allocation of Accounting Support Fees Among Issuers.--Any
amount due from issuers (or a particular class of issuers)
under this section to fund the budget of the Board or the
standard setting body referred to in subsection (a) shall be
allocated among and payable by each issuer (or each issuer in a
particular class, as applicable) in an amount equal to the
total of such amount, multiplied by a fraction--
(1) the numerator of which is the average monthly
equity market capitalization of the issuer for the 12-
month period immediately preceding the beginning of the
fiscal year to which such budget relates; and
(2) the denominator of which is the average monthly
equity market capitalization of all such issuers for
such 12-month period.
(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) Conforming Amendments.--Section 13(b)(2) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m(b)(2)) is
amended--
(1) in subparagraph (A), by striking ``and'' at the
end; and
(2) in subparagraph (B), by striking the period at
the end and inserting the following: ``; and
``(C) notwithstanding any other provision of law, pay
the allocable share of such issuer of a reasonable
annual accounting support fee or fees, determined in
accordance with section 109 of the Sarbanes-Oxley Act
of 2002.''.
(j) Rule of Construction.--Nothing in this section shall be
construed to render either the Board, the standard setting body
referred to in subsection (a), or both, subject to procedures
in Congress to authorize or appropriate public funds, or to
prevent such organization from utilizing additional sources of
revenue for its activities, such as earnings from publication
sales, provided that each additional source of revenue shall
not jeopardize, in the judgment of the Commission, the actual
and perceived independence of such organization.
(k) Start-Up Expenses of the Board.--From the unexpended
balances of the appropriations to the Commission for fiscal
year 2003, the Secretary of the Treasury is authorized to
advance to the Board not to exceed the amount necessary to
cover the expenses of the Board during its first fiscal year
(which may be a short fiscal year).
* * * * * * *
TITLE III--CORPORATE RESPONSIBILITY
* * * * * * *
SEC. 308. FAIR FUNDS FOR INVESTORS.
[(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.]
(a) Monetary Sanctions to Be Used for the Relief of
Victims.--
(1) In general.--If, in any judicial or
administrative action brought by the Commission under
the securities laws, the Commission obtains a monetary
sanction (as defined in section 21F(a) of the
Securities Exchange Act of 1934) against any person for
a violation of such laws, or such person agrees, in
settlement of any such action, to such monetary
sanction, the amount of such monetary sanction 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) Definition of victim.--In this subsection, the
term ``victim'' has the meaning given the term ``crime
victim'' in section 3771(e) of title 18, United States
Code.
(b) Acceptance of Additional Donations.--The Commission is
authorized to accept, hold, administer, and utilize gifts,
bequests and devises of property, both real and personal, to
the United States for a disgorgement fund or other fund
described in subsection (a). Such gifts, bequests, and devises
of money and proceeds from sales of other property received as
gifts, bequests, or devises shall be deposited in such fund and
shall be available for allocation in accordance with subsection
(a).
(c) Study Required.--
(1) Subject of study.--The Commission shall review
and analyze--
(A) enforcement actions by the Commission
over the five years preceding the date of the
enactment of this Act that have included
proceedings to obtain civil penalties or
disgorgements to identify areas where such
proceedings may be utilized to efficiently,
effectively, and fairly provide restitution for
injured investors; and
(B) other methods to more efficiently,
effectively, and fairly provide restitution to
injured investors, including methods to improve
the collection rates for civil penalties and
disgorgements.
(2) 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 within 180
days after of the date of the enactment of this Act,
and shall use such findings to revise its rules and
regulations as necessary. The report shall include a
discussion of regulatory or legislative actions that
are recommended or that may be necessary to address
concerns identified in the study.
* * * * * * *
TITLE IV--ENHANCED FINANCIAL DISCLOSURES
* * * * * * *
SEC. 404. MANAGEMENT ASSESSMENT OF INTERNAL CONTROLS.
(a) Rules Required.--The Commission shall prescribe rules
requiring each annual report required by section 13(a) or 15(d)
of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)) to contain an internal control report, which shall--
(1) state the responsibility of management for
establishing and maintaining an adequate internal
control structure and procedures for financial
reporting; and
(2) contain an assessment, as of the end of the most
recent fiscal year of the issuer, of the effectiveness
of the internal control structure and procedures of the
issuer for financial reporting.
(b) Internal Control Evaluation and Reporting.--With respect
to the internal control assessment required by subsection (a),
each registered public accounting firm that prepares or issues
the audit report for the issuer, other than an issuer that is
an emerging growth company (as defined in section 3 of the
Securities Exchange Act of 1934), shall attest to, and report
on, the assessment made by the management of the issuer. An
attestation made under this subsection shall be made in
accordance with standards for attestation engagements issued or
adopted by the Board. Any such attestation shall not be the
subject of a separate engagement.
[(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).]
(c) Exemption for Smaller Issuers.--Subsection (b) shall not
apply with respect to any audit report prepared for an issuer
that has total market capitalization of less than $500,000,000,
nor to any issuer that is a depository institution with assets
of less than $1,000,000,000.
(d) Temporary Exemption for Low-Revenue Issuers.--
(1) Low-revenue exemption.--Subsection (b) shall not
apply with respect to an audit report prepared for an
issuer that--
(A) ceased to be an emerging growth company
on the last day of the fiscal year of the
issuer following the fifth anniversary of the
date of the first sale of common equity
securities of the issuer pursuant to an
effective registration statement under the
Securities Act of 1933;
(B) had average annual gross revenues of less
than $50,000,000 as of its most recently
completed fiscal year; and
(C) is not a large accelerated filer.
(2) Expiration of temporary exemption.--An issuer
ceases to be eligible for the exemption described under
paragraph (1) at the earliest of--
(A) the last day of the fiscal year of the
issuer following the tenth anniversary of the
date of the first sale of common equity
securities of the issuer pursuant to an
effective registration statement under the
Securities Act of 1933;
(B) the last day of the fiscal year of the
issuer during which the average annual gross
revenues of the issuer exceed $50,000,000; or
(C) the date on which the issuer becomes a
large accelerated filer.
(3) Definitions.--For purposes of this subsection:
(A) Average annual gross revenues.--The term
``average annual gross revenues'' means the
total gross revenues of an issuer over its most
recently completed three fiscal years divided
by three.
(B) Emerging growth company.--The term
``emerging growth company'' has the meaning
given such term under section 3 of the
Securities Exchange Act of 1934 (15 U.S.C.
78c).
(C) Large accelerated filer.--The term
``large accelerated filer'' has the meaning
given that term under section 240.12b-2 of
title 17, Code of Federal Regulations, or any
successor thereto.
* * * * * * *
----------
FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT OF 1989
* * * * * * *
TITLE IX--REGULATORY ENFORCEMENT AUTHORITY AND CRIMINAL ENHANCEMENTS
* * * * * * *
Subtitle E--Civil Penalties For Violations Involving Financial
Institutions
SEC. 951. CIVIL PENALTIES.
(a) In General.--Whoever violates any provision of law to
which this section is made applicable by subsection (c) shall
be subject to a civil penalty in an amount assessed by the
court in a civil action under this section.
(b) Maximum Amount of Penalty.--
(1) Generally.--The amount of the civil penalty shall
not exceed [$1,000,000] $1,500,000.
(2) Special rule for continuing violations.--In the
case of a continuing violation, the amount of the civil
penalty may exceed the amount described in paragraph
(1) but may not exceed the lesser of [$1,000,000 per
day or $5,000,000] $1,500,000 per day or $7,500,000.
(3) Special rule for violations creating gain or
loss.--(A) If any person derives pecuniary gain from
the violation, or if the violation results in pecuniary
loss to a person other than the violator, the amount of
the civil penalty may exceed the amounts described in
paragraphs (1) and (2) but may not exceed the amount of
such gain or loss.
(B) As used in this paragraph, the term ``person''
includes the Bank Insurance Fund, the Savings
Association Insurance Fund, and after the merger of
such funds, the Deposit Insurance Fund, and the
National Credit Union Share Insurance Fund.
(c) Violations to Which Penalty Is Applicable.--This section
applies to a violation of, or a conspiracy to violate--
(1) section 215, 656, 657, 1005, 1006, 1007, 1014, or
1344 of title 18, United States Code;
(2) section 287, 1001, 1032, 1341 or 1343 of title
18, United States Code, [affecting a federally insured
financial institution] against a federally insured
financial institution or by a federally insured
financial institution against an unaffiliated third
person; or
(3) section 16(a) of the Small Business Act (15
U.S.C. 645(a)).
(d) Effective Date.--This section shall apply to violations
occurring on or after August 10, 1984.
(e) Attorney General to Bring Action.--A civil action to
recover a civil penalty under this section shall be commenced
by the Attorney General.
(f) Burden of Proof.--In a civil action to recover a civil
penalty under this section, the Attorney General must establish
the right to recovery by a preponderance of the evidence.
(g) Administrative [Subpoenas] Investigations.--
(1) In general.--For the purpose of conducting a
civil investigation in contemplation of a civil
proceeding under this section, the Attorney General
may--
(A) administer oaths and affirmations;
(B) take evidence; and
[(C) by subpoena, summon witnesses and
require the production of any books, papers,
correspondence, memoranda, or other records
which the Attorney General deems relevant or
material to the inquiry. Such subpoena may
require the attendance of witnesses and the
production of any such records from any place
in the United States at any place in the United
States designated by the Attorney General.]
(C) summon witnesses and require the
production of any books, papers,
correspondence, memoranda, or other records
which the Attorney General deems relevant or
material to the inquiry, if the Attorney
General--
(i) requests a court order from a
court of competent jurisdiction for
such actions and offers specific and
articulable facts showing that there
are reasonable grounds to believe that
the information or testimony sought is
relevant and material for conducting an
investigation under this section; or
(ii) either personally or through
delegation no lower than the Deputy
Attorney General, issues and signs a
subpoena for such actions and such
subpoena is supported by specific and
articulable facts showing that there
are reasonable grounds to believe that
the information or testimony sought is
relevant for conducting an
investigation under this section.
(2) Procedures applicable.--The same procedures and
limitations as are provided with respect to civil
investigative demands in subsections (g), (h), and (j)
of section 1968 of title 18, United States Code, apply
with respect to a subpoena issued under this
subsection. Process required by such subsections to be
served upon the custodian shall be served on the
Attorney General. Failure to comply with an order of
the court to enforce such subpoena shall be punishable
as contempt.
(3) Limitation.--In the case of a subpoena for which
the return date is less than 5 days after the date of
service, no person shall be found in contempt for
failure to comply by the return date if such person
files a petition under paragraph (2) not later than 5
days after the date of service.
(h) Statute of Limitations.--A civil action under this
section may not be commenced later than 10 years after the
cause of action accrues.
* * * * * * *
TITLE XI--REAL ESTATE APPRAISAL REFORM AMENDMENTS
* * * * * * *
SEC. 1112. FUNCTIONS OF THE FEDERAL FINANCIAL INSTITUTIONS REGULATORY
AGENCIES RELATING TO APPRAISER QUALIFICATIONS.
(a) In General.--Each Federal financial institutions
regulatory agency and the Resolution Trust Corporation shall
prescribe, in accordance with sections 1113 and 1114 of this
title, which categories of federally related transactions
should be appraised by a State certified appraiser and which by
a State licensed appraiser under this title.
(b) Threshold Level.--Each Federal financial institutions
regulatory agency and the Resolution Trust Corporation may
establish a threshold level at or below which a certified or
licensed appraiser is not required to perform appraisals in
connection with federally related transactions, if such agency
determines in writing that such threshold level does not
represent a threat to the safety and soundness of financial
institutions, and receives concurrence from the [Bureau of
Consumer Financial Protection] Consumer Law Enforcement Agency
that such threshold level provides reasonable protection for
consumers who purchase 1-4 unit single-family residences.
(c) GAO Study of Appraisals in Connection With Real Estate
Related Financial Transactions Below the Threshold Level.--
(1) GAO studies.--The Comptroller General of the
United States may conduct, under such conditions as the
Comptroller General determines appropriate, studies on
the adequacy and quality of appraisals or evaluations
conducted in connection with real estate related
financial transactions below the threshold level
established under subsection (b), taking into account--
(A) the cost to any financial institution
involved in any such transaction;
(B) the possibility of losses to the Deposit
Insurance Fund or the National Credit Union
Share Insurance Fund;
(C) the cost to any customer involved in any
such transaction; and
(D) the effect on low-income housing.
(2) Reports to congress and the appropriate federal
financial institutions regulatory agencies.--Upon
completing each of the studies referred to in paragraph
(1), the Comptroller General shall submit a report on
the Comptroller General's findings and conclusions with
respect to such study to the Federal financial
institutions regulatory agencies, the Committee on
Banking, Finance and Urban Affairs of the House of
Representatives, and the Committee on Banking, Housing,
and Urban Affairs of the Senate, together with such
recommendations for legislative or administrative
action as the Comptroller General determines to be
appropriate.
* * * * * * *
SEC. 1121. DEFINITIONS.
For purposes of this title:
(1) State appraiser certifying and licensing
agency.--The term ``State appraiser certifying and
licensing agency'' means a State agency established in
compliance with this title.
(2) Appraisal subcommittee; subcommittee.--The terms
``Appraisal Subcommittee'' and ``subcommittee'' mean
the Appraisal Subcommittee of the Federal Financial
Institutions Examination Council.
(3) Council.--The term ``Council'' means the Federal
Financial Institutions Examinations Council.
(4) Federally related transaction.--The term
``federally related transaction'' means any real
estate-related financial transaction which--
(A) a federal financial institutions
regulatory agency or the Resolution Trust
Corporation engages in, contracts for, or
regulates; and
(B) requires the services of an appraiser.
(5) Real estate related financial transaction.--The
term ``real estate-related financial transaction''
means any transaction involving--
(A) the sale, lease, purchase, investment in
or exchange of real property, including
interests in property, or the financing
thereof;
(B) the refinancing of real property or
interests in real property; and
(C) the use of real property or interests in
property as security for a loan or investment,
including mortgage-backed securities.
(6) Federal financial institutions regulatory
agencies.--The term ``Federal financial institutions
regulatory agencies'' means the Board of Governors of
the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Office of the Comptroller of
the Currency, [the Office of Thrift Supervision,] and
the National Credit Union Administration.
(7) Financial institution.--The term ``financial
institution'' means an insured depository institution
as defined in section 3 of the Federal Deposit
Insurance Act or an insured credit union as defined in
section 101 of the Federal Credit Union Act.
(8) Chairperson.--The term ``Chairperson'' means the
Chairperson of the Appraisal Subcommittee selected by
the Council.
(9) Foundation.--The terms ``Appraisal Foundation''
and ``Foundation'' means the Appraisal Foundation
established on November 30, 1987, as a not for profit
corporation under the laws of Illinois.
(10) Written appraisal.--The term ``written
appraisal'' means a written statement used in
connection with a federally related transaction that is
independently and impartially prepared by a licensed or
certified appraiser setting forth an opinion of defined
value of an adequately described property as of a
specific date, supported by presentation and analysis
of relevant market information.
(11) Appraisal management company.--The term
``appraisal management company'' means, in connection
with valuing properties collateralizing mortgage loans
or mortgages incorporated into a securitization, any
external third party authorized either by a creditor of
a consumer credit transaction secured by a consumer's
principal dwelling or by an underwriter of or other
principal in the secondary mortgage markets, that
oversees a network or panel of more than 15 certified
or licensed appraisers in a State or 25 or more
nationally within a given year--
(A) to recruit, select, and retain
appraisers;
(B) to contract with licensed and certified
appraisers to perform appraisal assignments;
(C) to manage the process of having an
appraisal performed, including providing
administrative duties such as receiving
appraisal orders and appraisal reports,
submitting completed appraisal reports to
creditors and underwriters, collecting fees
from creditors and underwriters for services
provided, and reimbursing appraisers for
services performed; or
(D) to review and verify the work of
appraisers.
* * * * * * *
SEC. 1124. APPRAISAL MANAGEMENT COMPANY MINIMUM REQUIREMENTS.
(a) In General.--The Board of Governors of the Federal
Reserve System, the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the National Credit Union
Administration Board, the Federal Housing Finance Agency, and
the [Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency shall jointly, by rule, establish minimum
requirements to be applied by a State in the registration of
appraisal management companies. Such requirements shall include
a requirement that such companies--
(1) register with and be subject to supervision by a
State appraiser certifying and licensing agency in each
State in which such company operates;
(2) verify that only licensed or certified appraisers
are used for federally related transactions;
(3) require that appraisals coordinated by an
appraisal management company comply with the Uniform
Standards of Professional Appraisal Practice; and
(4) require that appraisals are conducted
independently and free from inappropriate influence and
coercion pursuant to the appraisal independence
standards established under section 129E of the Truth
in Lending Act.
(b) Relation to State Law.--Nothing in this section shall be
construed to prevent States from establishing requirements in
addition to any rules promulgated under subsection (a).
(c) Federally Regulated Financial Institutions.--The
requirements of subsection (a) shall apply to an appraisal
management company that is a subsidiary owned and controlled by
a financial institution and regulated by a Federal financial
institution regulatory agency. An appraisal management company
that is a subsidiary owned and controlled by a financial
institution regulated by a Federal financial institution
regulatory agency shall not be required to register with a
State.
(d) Registration Limitations.--An appraisal management
company shall not be registered by a State or included on the
national registry if such company, in whole or in part,
directly or indirectly, is owned by any person who has had an
appraiser license or certificate refused, denied, cancelled,
surrendered in lieu of revocation, or revoked in any State.
Additionally, each person that owns more than 10 percent of an
appraisal management company shall be of good moral character,
as determined by the State appraiser certifying and licensing
agency, and shall submit to a background investigation carried
out by the State appraiser certifying and licensing agency.
(e) Reporting.--The Board of Governors of the Federal Reserve
System, the Comptroller of the Currency, the Federal Deposit
Insurance Corporation, the National Credit Union Administration
Board, the Federal Housing Finance Agency, and the [Bureau of
Consumer Financial Protection] Consumer Law Enforcement Agency
shall jointly promulgate regulations for the reporting of the
activities of appraisal management companies to the Appraisal
Subcommittee in determining the payment of the annual registry
fee.
(f) Effective Date.--
(1) In general.--No appraisal management company may
perform services related to a federally related
transaction in a State after the date that is 36 months
after the date on which the regulations required to be
prescribed under subsection (a) are prescribed in final
form unless such company is registered with such State
or subject to oversight by a Federal financial
institutions regulatory agency.
(2) Extension of effective date.--Subject to the
approval of the Council, the Appraisal Subcommittee may
extend by an additional 12 months the requirements for
the registration and supervision of appraisal
management companies if it makes a written finding that
a State has made substantial progress in establishing a
State appraisal management company registration and
supervision system that appears to conform with the
provisions of this title.
SEC. 1125. AUTOMATED VALUATION MODELS USED TO ESTIMATE COLLATERAL VALUE
FOR MORTGAGE LENDING PURPOSES.
(a) In General.--Automated valuation models shall adhere to
quality control standards designed to--
(1) ensure a high level of confidence in the
estimates produced by automated valuation models;
(2) protect against the manipulation of data;
(3) seek to avoid conflicts of interest;
(4) require random sample testing and reviews; and
(5) account for any other such factor that the
agencies listed in subsection (b) determine to be
appropriate.
(b) Adoption of Regulations.--The Board, the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, the
National Credit Union Administration Board, the Federal Housing
Finance Agency, and the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency, in consultation
with the staff of the Appraisal Subcommittee and the Appraisal
Standards Board of the Appraisal Foundation, shall promulgate
regulations to implement the quality control standards required
under this section.
(c) Enforcement.--Compliance with regulations issued under
this subsection shall be enforced by--
(1) with respect to a financial institution, or
subsidiary owned and controlled by a financial
institution and regulated by a Federal financial
institution regulatory agency, the Federal financial
institution regulatory agency that acts as the primary
Federal supervisor of such financial institution or
subsidiary; and
(2) with respect to other participants in the market
for appraisals of 1-to-4 unit single family residential
real estate, the Federal Trade Commission, the [Bureau
of Consumer Financial Protection] Consumer Law
Enforcement Agency, and a State attorney general.
(d) Automated Valuation Model Defined.--For purposes of this
section, the term ``automated valuation model'' means any
computerized model used by mortgage originators and secondary
market issuers to determine the collateral worth of a mortgage
secured by a consumer's principal dwelling.
* * * * * * *
TITLE XII--MISCELLANEOUS PROVISIONS
* * * * * * *
SEC. 1206. COMPARABILITY IN COMPENSATION SCHEDULES.
(a) In General.--The Federal Deposit Insurance Corporation,
the Comptroller of the Currency, the National Credit Union
Administration Board, the [Federal Housing Finance Board, the
Office of Financial Research, and the Bureau of Consumer
Financial Protection the Oversight Board of the Resolution
Trust Corporation, the Farm Credit Administration] Federal
Housing Finance Board, the Consumer Law Enforcement Agency, and
the Farm Credit Administration, in establishing and adjusting
schedules of compensation and benefits which are to be
determined solely by each agency under applicable provisions of
law, shall inform the heads of the other agencies and the
Congress of such compensation and benefits and shall seek to
maintain comparability regarding compensation and benefits.
(b) Commodity Futures Trading Commission.--In establishing
and adjusting schedules of compensation and benefits for
employees of the Commodity Futures Trading Commission under
applicable provisions of law, the Commission shall--
(1) inform the heads of the agencies referred to in
subsection (a) and Congress of such compensation and
benefits; and
(2) seek to maintain comparability with those
agencies regarding compensation and benefits.
* * * * * * *
----------
HOME OWNERS' LOAN ACT
* * * * * * *
SEC. 4. SUPERVISION OF SAVINGS ASSOCIATIONS.
(a) Savings Associations.--
(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.
(3) Safe and sound housing credit to be encouraged.--
The Comptroller and the Corporation shall exercise all
powers granted to the Comptroller and the Corporation
under this Act so as to encourage savings associations
to provide credit for housing safely and soundly.
(b) Accounting and Disclosure.--
(1) In general.--The Comptroller shall, by
regulation, prescribe uniform accounting and disclosure
standards for savings associations, to be used in
determining savings associations' compliance with all
applicable regulations.
(2) Specific requirements for accounting standards.--
Subject to section 5(t), the uniform accounting
standards prescribed under paragraph (1) shall--
(A) incorporate generally accepted accounting
principles to the same degree that such
principles are used to determine compliance
with regulations prescribed by the Federal
banking agencies; and
(B) allow for no deviation from full
compliance with such standards as are in effect
after December 31, 1993.
(3) Authority to prescribe more stringent accounting
standards.--The Comptroller may at any time prescribe
accounting standards more stringent than required under
paragraph (2) if the Comptroller determines that the
more stringent standards are necessary to ensure the
safe and sound operation of savings associations.
(c) Stringency of Standards.--The regulations of the
Comptroller and the policies of the Comptroller and the
Corporation governing the safe and sound operation of savings
associations, including regulations and policies governing
asset classification and appraisals, shall be no less stringent
than those established by the Comptroller for national banks.
(d) Investment of Certain Funds in Accounts of Savings
Associations.--The savings accounts and share accounts of
savings associations insured by the Corporation shall be lawful
investments and may be accepted as security for all public
funds of the United States, fiduciary and trust funds under the
authority or control of the United States or any officer
thereof, and for the funds of all corporations organized under
the laws of the United States (subject to any regulatory
authority otherwise applicable), regardless of any limitation
of law upon the investment of any such funds or upon the
acceptance of security for the investment or deposit of any of
such funds.
(e) Participation by Savings Associations in Lotteries and
Related Activities.--
(1) Participation prohibited.--No savings association
may--
(A) deal in lottery tickets;
(B) deal in bets used as a means or
substitute for participation in a lottery;
(C) announce, advertise, or publicize the
existence of any lottery; or
(D) announce, advertise, or publicize the
existence or identity of any participant or
winner, as such, in a lottery.
(2) Use of facilities prohibited.--No savings
association may permit--
(A) the use of any part of any of its own
offices by any person for any purpose forbidden
to the institution under paragraph (1); or
(B) direct access by the public from any of
its own offices to any premises used by any
person for any purpose forbidden to the
institution under paragraph (1).
(3) Definitions.--For purposes of this subsection--
(A) Deal in.--The term ``deal in'' includes
making, taking, buying, selling, redeeming, or
collecting.
(B) Lottery.--The term ``lottery'' includes
any arrangement, other than a savings promotion
raffle, under which--
(i) 3 or more persons (hereafter in
this subparagraph referred to as the
``participants'') advance money or
credit to another in exchange for the
possibility or expectation that 1 or
more but not all of the participants
(hereafter in this paragraph referred
to as the ``winners'') will receive by
reason of those participants' advances
more than the amounts those
participants have advanced; and
(ii) the identity of the winners is
determined by any means which
includes--
(I) a random selection;
(II) a game, race, or
contest; or
(III) any record or
tabulation of the result of 1
or more events in which any
participant has no interest
except for the bearing that
event has on the possibility
that the participant may become
a winner.
(C) Lottery ticket.--The term ``lottery
ticket'' includes any right, privilege, or
possibility (and any ticket, receipt, record,
or other evidence of any such right, privilege,
or possibility) of becoming a winner in a
lottery.
(D) Savings promotion raffle.--The term
``savings promotion raffle'' means a contest in
which the sole consideration required for a
chance of winning designated prizes is obtained
by the deposit of a specified amount of money
in a savings account or other savings program,
where each ticket or entry has an equal chance
of being drawn, such contest being subject to
regulations that may from time to time be
promulgated by the appropriate prudential
regulator (as defined in section 1002 of the
Consumer Financial Protection Act of 2010 (12
U.S.C. 5481)).
(4) Exception for state lotteries.--Paragraphs (1)
and (2) shall not apply with respect to any savings
association accepting funds from, or performing any
lawful services for, any State operating a lottery, or
any officer or employee of such a State who is charged
with administering the lottery.
(5) Regulations.--The Comptroller shall prescribe
such regulations as may be necessary to provide for
enforcement of this subsection and to prevent any
evasion of any provision of this subsection.
(f) Federally Related Mortgage Loan Disclosures.--A savings
association may not make a federally related mortgage loan to
an agent, trustee, nominee, or other person acting in a
fiduciary capacity without requiring that the identity of the
person receiving the beneficial interest of such loan shall at
all times be revealed to the savings association. At the
request of the appropriate Federal banking agency, the savings
association shall report to the appropriate Federal banking
agency the identity of such person and the nature and amount of
the loan.
(g) Preemption of State Usury Laws.--(1) Notwithstanding any
State law, a savings association may charge interest on any
extension of credit at a rate of not more than 1 percent in
excess of the discount rate on 90-day commercial paper in
effect at the Federal Reserve bank in the Federal Reserve
district in which such savings association is located or at the
rate allowed by the laws of the State in which such savings
association is located, whichever is greater. A loan that is
valid when made as to its maximum rate of interest in
accordance with this subsection shall remain valid with respect
to such rate regardless of whether the loan is subsequently
sold, assigned, or otherwise transferred to a third party, and
may be enforced by such third party notwithstanding any State
law to the contrary.
(2) If the rate prescribed in paragraph (1) exceeds the rate
such savings association would be permitted to charge in the
absence of this subsection, the receiving or charging a greater
rate of interest than that prescribed by paragraph (1), when
knowingly done, shall be deemed a forfeiture of the entire
interest which the extension of credit carries with it, or
which has been agreed to be paid thereon. If such greater rate
of interest has been paid, the person who paid it may recover,
in a civil action commenced in a court of appropriate
jurisdiction not later than 2 years after the date of such
payment, an amount equal to twice the amount of the interest
paid from the savings association taking or receiving such
interest.
(h) Form and Maturity of Securities.--No savings association
shall--
(1) issue securities which guarantee a definite
maturity except with the specific approval of the
appropriate Federal banking agency, or
(2) issue any securities the form of which has not
been approved by the appropriate Federal banking
agency.
SEC. 5. FEDERAL SAVINGS ASSOCIATIONS.
(a) In General.--In order to provide thrift institutions for
the deposit of funds and for the extension of credit for homes
and other goods and services, the Comptroller of the Currency
is authorized, under such regulations as the Comptroller of the
Currency may prescribe--
(1) to provide for the organization, incorporation,
examination, operation, and regulation of associations
to be known as Federal savings associations (including
Federal savings banks), and
(2) to issue charters therefor,
giving primary consideration of the best practices of thrift
institutions in the United States. The lending and investment
powers conferred by this section are intended to encourage such
institutions to provide credit for housing safely and soundly.
(b) Deposits and Related Powers.--
(1) Deposit accounts.--
(A) Subject to the terms of its charter and
regulations of the Comptroller of the Currency,
a Federal savings association may--
(i) raise funds through such deposit,
share, or other accounts, including
demand deposit accounts (hereafter in
this section referred to as
``accounts''); and
(ii) issue passbooks, certificates,
or other evidence of accounts.
(B) A Federal savings association may not
permit any overdraft (including an intraday
overdraft) on behalf of an affiliate, or incur
any such overdraft in such savings
association's account at a Federal reserve bank
or Federal home loan bank on behalf of an
affiliate.
All savings accounts and demand accounts shall
have the same priority upon liquidation.
Holders of accounts and obligors of a Federal
savings association shall, to such extent as
may be provided by its charter or by
regulations of the Comptroller of the Currency,
be members of the savings association, and
shall have such voting rights and such other
rights as are thereby provided.
(C) A Federal savings association may require
not less than 14 days notice prior to payment
of savings accounts if the charter of the
savings association or the regulations of the
Comptroller of the Currency so provide.
(D) If a Federal savings association does not
pay all withdrawals in full (subject to the
right of the association, where applicable, to
require notice), the payment of withdrawals
from accounts shall be subject to such rules
and procedures as may be prescribed by the
savings association's charter or by regulation
of the Comptroller of the Currency. Except as
authorized in writing by the Comptroller of the
Currency, any Federal savings association that
fails to make full payment of any withdrawal
when due shall be deemed to be in an unsafe or
unsound condition.
(E) Accounts may be subject to check or to
withdrawal or transfer on negotiable or
transferable or other order or authorization to
the Federal savings association, as the
Comptroller of the Currency may by regulation
provide.
(F) A Federal savings association may
establish remote service units for the purpose
of crediting savings or demand accounts,
debiting such accounts, crediting payments on
loans, and the disposition of related financial
transactions, as provided in regulations
prescribed by the Comptroller of the Currency.
(2) Other liabilities.--To such extent as the
Comptroller of the Currency may authorize in writing, a
Federal savings association may borrow, may give
security, may be surety as defined by the Comptroller
of the Currency and may issue such notes, bonds,
debentures, or other obligations, or other securities,
including capital stock.
(3) Loans from state housing finance agencies.--
(A) In general.--Subject to regulation by the
Comptroller of the Currency but without regard
to any other provision of this subsection, any
Federal savings association that is in
compliance with the capital standards in effect
under subsection (t) may borrow funds from a
State mortgage finance agency of the State in
which the head office of such savings
association is situated to the same extent as
State law authorizes a savings association
organized under the laws of such State to
borrow from the State mortgage finance agency.
(B) Interest rate.--A Federal savings
association may not make any loan of funds
borrowed under subparagraph (A) at an interest
rate which exceeds by more than 1\3/4\ percent
per annum the interest rate paid to the State
mortgage finance agency on the obligations
issued to obtain the funds so borrowed.
(4) Mutual capital certificates.--In accordance with
regulations issued by the Comptroller of the Currency,
mutual capital certificates may be issued and sold
directly to subscribers or through underwriters. Such
certificates may be included in calculating capital for
the purpose of subsection (t) to the extent permitted
by the Comptroller of the Currency. The issuance of
certificates under this paragraph does not constitute a
change of control or ownership under this Act or any
other law unless there is in fact a change in control
or reorganization. Regulations relating to the issuance
and sale of mutual capital certificates shall provide
that such certificates--
(A) are subordinate to all savings accounts,
savings certificates, and debt obligations;
(B) constitute a claim in liquidation on the
general reserves, surplus, and undivided
profits of the Federal savings association
remaining after the payment in full of all
savings accounts, savings certificates, and
debt obligations;
(C) are entitled to the payment of dividends;
and
(D) may have a fixed or variable dividend
rate.
(c) Loans and Investments.--To the extent specified in
regulations of the Comptroller, a Federal savings association
may invest in, sell, or otherwise deal in the following loans
and other investments:
(1) Loans or investments without percentage of assets
limitation.--Without limitation as a percentage of
assets, the following are permitted:
(A) Account loans.--Loans on the security of
its savings accounts and loans specifically
related to transaction accounts.
(B) Residential real property loans.--Loans
on the security of liens upon residential real
property.
(C) United states government securities.--
Investments in obligations of, or fully
guaranteed as to principal and interest by, the
United States.
(D) Federal home loan bank and federal
national mortgage association securities.--
Investments in the stock or bonds of a Federal
home loan bank or in the stock of the Federal
National Mortgage Association.
(E) Federal home loan mortgage corporation
instruments.--Investments in mortgages,
obligations, or other securities which are or
have been sold by the Federal Home Loan
Mortgage Corporation pursuant to section 305 or
306 of the Federal Home Loan Mortgage
Corporation Act.
(F) Other government securities.--Investments
in obligations, participations, securities, or
other instruments issued by, or fully
guaranteed as to principal and interest by, the
Federal National Mortgage Association, the
Student Loan Marketing Association, the
Government National Mortgage Association, or
any agency of the United States. A savings
association may issue and sell securities which
are guaranteed pursuant to section 306(g) of
the National Housing Act.
(G) Deposits.--Investments in accounts of any
insured depository institution, as defined in
section 3 of the Federal Deposit Insurance Act.
(H) State securities.--Investments in
obligations issued by any State or political
subdivision thereof (including any agency,
corporation, or instrumentality of a State or
political subdivision). A Federal savings
association may not invest more than 10 percent
of its capital in obligations of any one
issuer, exclusive of investments in general
obligations of any issuer.
(I) Purchase of insured loans.--Purchase of
loans secured by liens on improved real estate
which are insured or guaranteed under the
National Housing Act, the Servicemen's
Readjustment Act of 1944, or chapter 37 of
title 38, United States Code.
(J) Home improvement and manufactured home
loans.--Loans made to repair, equip, alter, or
improve any residential real property, and
loans made for manufactured home financing.
(K) Insured loans to finance the purchase of
fee simple.--Loans insured under section 240 of
the National Housing Act.
(L) Loans to financial institutions, brokers,
and dealers.--Loans to--
(i) financial institutions with
respect to which the United States or
an agency or instrumentality thereof
has any function of examination or
supervision, or
(ii) any broker or dealer registered
with the Securities and Exchange
Commission,
which are secured by loans, obligations, or
investments in which the Federal savings
association has the statutory authority to
invest directly.
(M) Liquidity investments.--Investments
(other than equity investments), identified by
the Comptroller, for liquidity purposes,
including cash, funds on deposit at a Federal
reserve bank or a Federal home loan bank, or
bankers' acceptances.
(N) Investment in the national housing
partnership corporation, partnerships, and
joint ventures.--Investments in shares of stock
issued by a corporation authorized to be
created pursuant to title IX of the Housing and
Urban Development Act of 1968, and investments
in any partnership, limited partnership, or
joint venture formed pursuant to section 907(a)
or 907(c) of such Act.
(O) Certain hud insured or guaranteed
investments.--Loans that are secured by
mortgages--
(i) insured under title X of the
National Housing Act, or
(ii) guaranteed under title IV of the
Housing and Urban Development Act of
1968, under part B of the National
Urban Policy and New Community
Development Act of 1970, or under
section 802 of the Housing and
Community Development Act of 1974.
(P) State housing corporation investments.--
Obligations of and loans to any State housing
corporation, if--
(i) such obligations or loans are
secured directly, or indirectly through
an agent or fiduciary, by a first lien
on improved real estate which is
insured under the provisions of the
National Housing Act, and
(ii) in the event of default, the
holder of the obligations or loans has
the right directly, or indirectly
through an agent or fiduciary, to cause
to be subject to the satisfaction of
such obligations or loans the real
estate described in the first lien or
the insurance proceeds under the
National Housing Act.
(Q) Investment companies.--A Federal savings
association may invest in, redeem, or hold
shares or certificates issued by any open-end
management investment company which--
(i) is registered with the Securities
and Exchange Commission under the
Investment Company Act of 1940, and
(ii) the portfolio of which is
restricted by such management company's
investment policy (changeable only if
authorized by shareholder vote) solely
to investments that a Federal savings
association by law or regulation may,
without limitation as to percentage of
assets, invest in, sell, redeem, hold,
or otherwise deal in.
(R) Mortgage-backed securities.--Investments
in securities that--
(i) are offered and sold pursuant to
section 4(5) of the Securities Act of
1933; or
(ii) are mortgage related securities
(as defined in section 3(a)(41) of the
Securities Exchange Act of 1934),
subject to such regulations as the Comptroller
may prescribe, including regulations
prescribing minimum size of the issue (at the
time of initial distribution) or minimum
aggregate sales price, or both.
(S) Small business related securities.--
Investments in small business related
securities (as defined in section 3(a)(53) of
the Securities Exchange Act of 1934), subject
to such regulations as the Comptroller may
prescribe, including regulations concerning the
minimum size of the issue (at the time of the
initial distribution), the minimum aggregate
sales price, or both.
(T) Credit card loans.--Loans made through
credit cards or credit card accounts.
(U) Educational loans.--Loans made for the
payment of educational expenses.
(2) Loans or investments limited to a percentage of
assets or capital.--The following loans or investments
are permitted, but only to the extent specified:
(A) Commercial and other loans.--Secured or
unsecured loans for commercial, corporate,
business, or agricultural purposes. The
aggregate amount of loans made under this
subparagraph may not exceed 20 percent of the
total assets of the Federal savings
association, and amounts in excess of 10
percent of such total assets may be used under
this subparagraph only for small business
loans, as that term is defined by the
Comptroller.
(B) Nonresidential real property loans.--
(i) In general.--Loans on the
security of liens upon nonresidential
real property. Except as provided in
clause (ii), the aggregate amount of
such loans shall not exceed 400 percent
of the Federal savings association's
capital, as determined under subsection
(t).
(ii) Exception.--The Comptroller may
permit a savings association to exceed
the limitation set forth in clause (i)
if the Comptroller determines that the
increased authority--
(I) poses no significant risk
to the safe and sound operation
of the association, and
(II) is consistent with
prudent operating practices.
(iii) Monitoring.--If the Comptroller
permits any increased authority
pursuant to clause (ii), the
Comptroller shall closely monitor the
Federal savings association's condition
and lending activities to ensure that
the savings association carries out all
authority under this paragraph in a
safe and sound manner and complies with
this subparagraph and all relevant laws
and regulations.
(C) Investments in personal property.--
Investments in tangible personal property,
including vehicles, manufactured homes,
machinery, equipment, or furniture, for rental
or sale. Investments under this subparagraph
may not exceed 10 percent of the assets of the
Federal savings association.
(D) Consumer loans and certain securities.--A
Federal savings association may make loans for
personal, family, or household purposes,
including loans reasonably incident to
providing such credit, and may invest in, sell,
or hold commercial paper and corporate debt
securities, as defined and approved by the
Comptroller. Loans and other investments under
this subparagraph may not exceed 35 percent of
the assets of the Federal savings association,
except that amounts in excess of 30 percent of
the assets may be invested only in loans which
are made by the association directly to the
original obligor and with respect to which the
association does not pay any finder, referral,
or other fee, directly or indirectly, to any
third party.
(3) Loans or investments limited to 5 percent of
assets.--The following loans or investments are
permitted, but not to exceed 5 percent of assets of a
Federal savings association for each subparagraph:
(A) Community development investments.--
Investments in real property and obligations
secured by liens on real property located
within a geographic area or neighborhood
receiving concentrated development assistance
by a local government under title I of the
Housing and Community Development Act of 1974.
No investment under this subparagraph in such
real property may exceed an aggregate of 2
percent of the assets of the Federal savings
association.
(B) Nonconforming loans.--Loans upon the
security of or respecting real property or
interests therein used for primarily
residential or farm purposes that do not comply
with the limitations of this subsection.
(C) Construction loans without security.--
Loans--
(i) the principal purpose of which is
to provide financing with respect to
what is or is expected to become
primarily residential real estate; and
(ii) with respect to which the
association--
(I) relies substantially on
the borrower's general credit
standing and projected future
income for repayment, without
other security; or
(II) relies on other
assurances for repayment,
including a guarantee or
similar obligation of a third
party.
The aggregate amount of such investments shall
not exceed the greater of the Federal savings
association's capital or 5 percent of its
assets.
(4) Other loans and investments.--The following
additional loans and other investments to the extent
authorized below:
(A) Business development credit
corporations.--A Federal savings association
that is in compliance with the capital
standards prescribed under subsection (t) may
invest in, lend to, or to commit itself to lend
to, any business development credit corporation
incorporated in the State in which the home
office of the association is located in the
same manner and to the same extent as savings
associations chartered by such State are
authorized. The aggregate amount of such
investments, loans, and commitments of any such
Federal savings association shall not exceed
one-half of 1 percent of the association's
total outstanding loans or $250,000, whichever
is less.
(B) Service corporations.--Investments in the
capital stock, obligations, or other securities
of any corporation organized under the laws of
the State in which the Federal savings
association's home office is located, if such
corporation's entire capital stock is available
for purchase only by savings associations of
such State and by Federal associations having
their home offices in such State. No Federal
savings association may make any investment
under this subparagraph if the association's
aggregate outstanding investment under this
subparagraph would exceed 3 percent of the
association's assets. Not less than one-half of
the investment permitted under this
subparagraph which exceeds 1 percent of the
association's assets shall be used primarily
for community, inner-city, and community
development purposes.
(C) Foreign assistance investments.--
Investments in housing project loans having the
benefit of any guaranty under section 221 of
the Foreign Assistance Act of 1961 or loans
having the benefit of any guarantee under
section 224 of such Act, or any commitment or
agreement with respect to such loans made
pursuant to either of such sections and in the
share capital and capital reserve of the Inter-
American Savings and Loan Bank. This authority
extends to the acquisition, holding, and
disposition of loans guaranteed under section
221 or 222 of such Act. Investments under this
subparagraph shall not exceed 1 percent of the
Federal savings association's assets.
(D) Small business investment companies.--A
Federal savings association may invest in
stock, obligations, or other securities of any
small business investment company formed
pursuant to section 301(d) of the Small
Business Investment Act of 1958 for the purpose
of aiding members of a Federal home loan bank.
A Federal savings association may not make any
investment under this subparagraph if its
aggregate outstanding investment under this
subparagraph would exceed 1 percent of the
assets of such savings association.
(E) Bankers' banks.--A Federal savings
association may purchase for its own account
shares of stock of a bankers' bank, described
in Paragraph Seventh of section 5136 of the
Revised Statutes or in section 5169(b) of the
Revised Statutes, on the same terms and
conditions as a national bank may purchase such
shares.
(F) New markets venture capital companies.--A
Federal savings association may invest in
stock, obligations, or other securities of any
New Markets Venture Capital company as defined
in section 351 of the Small Business Investment
Act of 1958, except that a Federal savings
association may not make any investment under
this subparagraph if its aggregate outstanding
investment under this subparagraph would exceed
5 percent of the capital and surplus of such
savings association.
(5) Transition rule for savings associations
acquiring banks.--
(A) In general.--If, under section 5(d)(3) of
the Federal Deposit Insurance Act, a savings
association acquires all or substantially all
of the assets of a bank, the appropriate
Federal banking agency may permit the savings
association to retain any such asset during the
2-year period beginning on the date of the
acquisition.
(B) Extension.--The appropriate Federal
banking agency may extend the 2-year period
described in subparagraph (A) for not more than
1 year at a time and not more than 2 years in
the aggregate, if the appropriate Federal
banking agency determines that the extension is
consistent with the purposes of this Act.
(6) Definitions.--For purposes of this subsection,
the following definitions shall apply:
(A) Residential property.--The terms
``residential real property'' or ``residential
real estate'' mean leaseholds, homes (including
condominiums and cooperatives, except that in
connection with loans on individual cooperative
units, such loans shall be adequately secured
as defined by the Comptroller) and,
combinations of homes or dwelling units and
business property, involving only minor or
incidental business use, or property to be
improved by construction of such structures.
(B) Loans.--The term ``loans'' includes
obligations and extensions or advances of
credit; and any reference to a loan or
investment includes an interest in such a loan
or investment.
(d) Regulatory Authority.--
(1) In general.--
(A) Enforcement.--The appropriate Federal
banking agency shall have power to enforce this
section, section 8 of the Federal Deposit
Insurance Act, and regulations prescribed
hereunder. In enforcing any provision of this
section, regulations prescribed under this
section, or any other law or regulation, or in
any other action, suit, or proceeding to which
the appropriate Federal banking agency is a
party or in which the appropriate Federal
banking agency is interested, and in the
administration of conservatorships and
receiverships, the appropriate Federal banking
agency may act in the name of the appropriate
Federal banking agency and through the
attorneys of the appropriate Federal banking
agency. Except as otherwise provided, the
Comptroller shall be subject to suit (other
than suits on claims for money damages) by any
Federal savings association or director or
officer thereof with respect to any matter
under this section or any other applicable law,
or regulation thereunder, in the United States
district court for the judicial district in
which the savings association's home office is
located, or in the United States District Court
for the District of Columbia, and the
Comptroller may be served with process in the
manner prescribed by the Federal Rules of Civil
Procedure.
(B) Ancillary provisions.--(i) In making
examinations of savings associations, examiners
appointed by the appropriate Federal banking
agency shall have power to make such
examinations of the affairs of all affiliates
of such savings associations as shall be
necessary to disclose fully the relations
between such savings associations and their
affiliates and the effect of such relations
upon such savings associations. For purposes of
this subsection, the term ``affiliate'' has the
same meaning as in section 2(b) of the Banking
Act of 1933, except that the term ``member
bank'' in section 2(b) shall be deemed to refer
to a savings association.
(ii) In the course of any examination of any
savings association, upon request by the
appropriate Federal banking agency, prompt and
complete access shall be given to all savings
association officers, directors, employees, and
agents, and to all relevant books, records, or
documents of any type.
(iii) Upon request made in the course of
supervision or oversight of any savings
association, for the purpose of acting on any
application or determining the condition of any
savings association, including whether
operations are being conducted safely, soundly,
or in compliance with charters, laws,
regulations, directives, written agreements, or
conditions imposed in writing in connection
with the granting of an application or other
request, the appropriate Federal banking agency
shall be given prompt and complete access to
all savings association officers, directors,
employees, and agents, and to all relevant
books, records, or documents of any type.
(iv) If prompt and complete access upon
request is not given as required in this
subsection, the appropriate Federal banking
agency may apply to the United States district
court for the judicial district (or the United
States court in any territory) in which the
principal office of the institution is located,
or in which the person denying such access
resides or carries on business, for an order
requiring that such information be promptly
provided.
(v) In connection with examinations of
savings associations and affiliates thereof,
the appropriate Federal banking agency may--
(I) administer oaths and affirmations
and examine and to take and preserve
testimony under oath as to any matter
in respect of the affairs or ownership
of any such savings association or
affiliate, and
(II) issue subpoenas and, for the
enforcement thereof, apply to the
United States district court for the
judicial district (or the United States
court in any territory) in which the
principal office of the savings
association or affiliate is located, or
in which the witness resides or carries
on business.
Such courts shall have jurisdiction and power
to order and require compliance with any such
subpoena.
(vi) In any proceeding under this section,
the appropriate Federal banking agency may
administer oaths and affirmations, take
depositions, and issue subpenas. The
Comptroller may prescribe regulations with
respect to any such proceedings. The attendance
of witnesses and the production of documents
provided for in this subsection may be required
from any place in any State or in any territory
at any designated place where such proceeding
is being conducted.
(vii) Any party to a proceeding under this
section may apply to the United States District
Court for the District of Columbia, or the
United States district court for the judicial
district (or the United States court in any
territory) in which such proceeding is being
conducted, or where the witness resides or
carries on business, for enforcement of any
subpoena issued pursuant to this subsection or
section 10(c) of the Federal Deposit Insurance
Act, and such courts shall have jurisdiction
and power to order and require compliance
therewith. Witnesses subpoenaed under this
section shall be paid the same fees and mileage
that are paid witnesses in the district courts
of the United States. All expenses of the
appropriate Federal banking agency in
connection with this section shall be
considered as nonadministrative expenses. Any
court having jurisdiction of any proceeding
instituted under this section by a savings
association, or a director or officer thereof,
may allow to any such party reasonable expenses
and attorneys' fees. Such expenses and fees
shall be paid by the savings association.
(2) Conservatorships and receiverships.--
(A) Grounds for appointing conservator or
receiver for insured savings association.--The
appropriate Federal banking agency may appoint
a conservator or receiver for an insured
savings association if the appropriate Federal
banking agency determines, in the discretion of
the appropriate Federal banking agency, that 1
or more of the grounds specified in section
11(c)(5) of the Federal Deposit Insurance Act
exists.
(B) Power of appointment; judicial review.--
The appropriate Federal banking agency shall
have exclusive power and jurisdiction to
appoint a conservator or receiver for a Federal
savings association. If, in the opinion of the
appropriate Federal banking agency, a ground
for the appointment of a conservator or
receiver for a savings association exists, the
appropriate Federal banking agency is
authorized to appoint ex parte and without
notice a conservator or receiver for the
savings association. In the event of such
appointment, the association may, within 30
days thereafter, bring an action in the United
States district court for the judicial district
in which the home office of such association is
located, or in the United States District Court
for the District of Columbia, for an order
requiring the appropriate Federal banking
agency to remove such conservator or receiver,
and the court shall upon the merits dismiss
such action or direct the appropriate Federal
banking agency to remove such conservator or
receiver. Upon the commencement of such an
action, the court having jurisdiction of any
other action or proceeding authorized under
this subsection to which the association is a
party shall stay such action or proceeding
during the pendency of the action for removal
of the conservator or receiver.
(C) Replacement.--The appropriate Federal
banking agency may, without any prior notice,
hearing, or other action, replace a conservator
with another conservator or with a receiver,
but such replacement shall not affect any right
which the association may have to obtain
judicial review of the original appointment,
except that any removal under this subparagraph
shall be removal of the conservator or receiver
in office at the time of such removal.
(D) Court action.--Except as otherwise
provided in this subsection, no court may take
any action for or toward the removal of any
conservator or receiver or, except at the
request of the appropriate Federal banking
agency, to restrain or affect the exercise of
powers or functions of a conservator or
receiver.
(E) Powers.--
(i) In general.--A conservator shall
have all the powers of the members, the
stockholders, the directors, and the
officers of the association and shall
be authorized to operate the
association in its own name or to
conserve its assets in the manner and
to the extent authorized by the
appropriate Federal banking agency.
(ii) FDIC as conservator or
receiver.--[Except as provided in
section 21A of the Federal Home Loan
Bank Act, the] The appropriate Federal
banking agency[, at the Director's
discretion,] may appoint the Federal
Deposit Insurance Corporation as
conservator for a savings association.
The appropriate Federal banking agency
shall appoint only the Federal Deposit
Insurance Corporation as receiver for a
savings association for the purpose of
liquidation or winding up the affairs
of such savings association. The
conservator or receiver so appointed
shall, as such, have power to buy at
its own sale. The Federal Deposit
Insurance Corporation, as such
conservator or receiver, shall have all
the powers of a conservator or
receiver, as appropriate, granted under
the Federal Deposit Insurance Act, and
(when not inconsistent therewith) any
other rights, powers, and privileges
possessed by conservators or receivers,
as appropriate, of savings associations
under this Act and any other provisions
of law.
(F) Disclosure requirement for those acting
on behalf of conservator.--A conservator shall
require that any independent contractor,
consultant, or counsel employed by the
conservator in connection with the
conservatorship of a savings association
pursuant to this section shall fully disclose
to all parties with which such contractor,
consultant, or counsel is negotiating, any
limitation on the authority of such contractor,
consultant, or counsel to make legally binding
representations on behalf of the conservator.
(3) Regulations.--
(A) In general.--The Comptroller may
prescribe regulations for the reorganization,
consolidation, liquidation, and dissolution of
savings associations, for the merger of insured
savings associations with insured savings
associations, for savings associations in
conservatorship and receivership, and for the
conduct of conservatorships and receiverships.
The Comptroller may, by regulation or
otherwise, provide for the exercise of
functions by members, stockholders, directors,
or officers of a savings association during
conservatorship and receivership.
(B) FDIC as conservator or receiver.--In any
case where the Federal Deposit Insurance
Corporation is the conservator or receiver, any
regulations prescribed by the Comptroller shall
be consistent with any regulations prescribed
by the Federal Deposit Insurance Corporation
pursuant to the Federal Deposit Insurance Act.
(4) Refusal to comply with demand.--Whenever a
conservator or receiver appointed by the appropriate
Federal banking agency demands possession of the
property, business, and assets of any savings
association, or of any part thereof, the refusal by any
director, officer, employee, or agent of such
association to comply with the demand shall be
punishable by a fine of not more than $5,000 or
imprisonment for not more than one year, or both.
(5) Definitions.--As used in this subsection, the
term ``savings association'' includes any savings
association or former savings association that retains
deposits insured by the Corporation, notwithstanding
termination of its status as an institution insured by
the Corporation.
(6) Compliance with monetary transaction
recordkeeping and report requirements.--
(A) Compliance procedures required.--The
Comptroller shall prescribe regulations
requiring savings associations to establish and
maintain procedures reasonably designed to
assure and monitor the compliance of such
associations with the requirements of
subchapter II of chapter 53 of title 31, United
States Code.
(B) Examinations of savings associations to
include review of compliance procedures.--
(i) In general.--Each examination of
a savings association by the
appropriate Federal banking agency
shall include a review of the
procedures required to be established
and maintained under subparagraph (A).
(ii) Exam report requirement.--The
report of examination shall describe
any problem with the procedures
maintained by the association.
(C) Order to comply with requirements.--If
the appropriate Federal banking agency
determines that a savings association--
(i) has failed to establish and
maintain the procedures described in
subparagraph (A); or
(ii) has failed to correct any
problem with the procedures maintained
by such association which was
previously reported to the association
by the appropriate Federal banking
agency,
the appropriate Federal banking agency shall
issue an order under section 8 of the Federal
Deposit Insurance Act requiring such
association to cease and desist from its
violation of this paragraph or regulations
prescribed under this paragraph.
(7) Regulation and examination of savings association
service companies, subsidiaries, and service
providers.--
(A) General examination and regulatory
authority.--A service company or subsidiary
that is owned in whole or in part by a savings
association shall be subject to examination and
regulation by the appropriate Federal banking
agency to the same extent as that savings
association.
(B) Examination by other banking agencies.--
The appropriate Federal banking agency may
authorize any other Federal banking agency that
supervises any other owner of part of the
service company or subsidiary to perform an
examination described in subparagraph (A).
(C) Applicability of section 8 of the federal
deposit insurance act.--A service company or
subsidiary that is owned in whole or in part by
a saving association shall be subject to the
provisions of section 8 of the Federal Deposit
Insurance Act as if the service company or
subsidiary were an insured depository
institution. In any such case, the Federal
Deposit Insurance Corporation or the
Comptroller, as appropriate, shall be deemed to
be the appropriate Federal banking agency,
pursuant to section 3(q) of the Federal Deposit
Insurance Act.
(D) Service performed by contract or
otherwise.--Notwithstanding subparagraph (A),
if a savings association, a subsidiary thereof,
or any savings and loan affiliate or entity, as
identified by section 8(b)(9) of the Federal
Deposit Insurance Act, that is regularly
examined or subject to examination by the
appropriate Federal banking agency, causes to
be performed for itself, by contract or
otherwise, any service authorized under this
Act or, in the case of a State savings
association, any applicable State law, whether
on or off its premises--
(i) such performance shall be subject
to regulation and examination by the
appropriate Federal banking agency to
the same extent as if such services
were being performed by the savings
association on its own premises; and
(ii) the savings association shall
notify the appropriate Federal banking
agency of the existence of the service
relationship not later than 30 days
after the earlier of--
(I) the date on which the
contract is entered into; or
(II) the date on which the
performance of the service is
initiated.
(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.
(8) Definitions.--For purposes of this section--
(A) the term ``service company'' means--
(i) any corporation--
(I) that is organized to
perform services authorized by
this Act or, in the case of a
corporation owned in part by a
State savings association,
authorized by applicable State
law; and
(II) all of the capital stock
of which is owned by 1 or more
insured savings associations;
and
(ii) any limited liability company--
(I) that is organized to
perform services authorized by
this Act or, in the case of a
company, 1 of the members of
which is a State savings
association, authorized by
applicable State law; and
(II) all of the members of
which are 1 or more insured
savings associations;
(B) the term ``limited liability company''
means any company, partnership, trust, or
similar business entity organized under the law
of a State (as defined in section 3 of the
Federal Deposit Insurance Act) that provides
that a member or manager of such company is not
personally liable for a debt, obligation, or
liability of the company solely by reason of
being, or acting as, a member or manager of
such company; and
(C) the terms ``State savings association''
and ``subsidiary'' have the same meanings as in
section 3 of the Federal Deposit Insurance Act.
(e) Character and Responsibility.--A charter may be granted
only--
(1) to persons of good character and responsibility,
(2) if in the judgment of the Comptroller a necessity
exists for such an institution in the community to be
served,
(3) if there is a reasonable probability of its
usefulness and success, and
(4) if the association can be established without
undue injury to properly conducted existing local
thrift and home financing institutions.
(f) Federal Home Loan Bank Membership.--After the end of the
6-month period beginning on the date of the enactment of the
Federal Home Loan Bank System Modernization Act of 1999, a
Federal savings association may become a member of the Federal
Home Loan Bank System, and shall qualify for such membership in
the manner provided by the Federal Home Loan Bank Act.
(h) Discriminatory State and Local Taxation Prohibited.--No
State, county, municipal, or local taxing authority may impose
any tax on Federal savings associations or their franchise,
capital, reserves, surplus, loans, or income greater than that
imposed by such authority on other similar local mutual or
cooperative thrift and home financing institutions.
(i) Conversions.--
(1) In general.--Any savings association which is, or
is eligible to become, a member of a Federal home loan
bank may convert into a Federal savings association
(and in so doing may change directly from the mutual
form to the stock form, or from the stock form to the
mutual form). Such conversion shall be subject to such
regulations as the Comptroller shall prescribe.
Thereafter such Federal savings association shall be
entitled to all the benefits of this section and shall
be subject to examination and regulation to the same
extent as other associations incorporated pursuant to
this Act.
(2) Authority of Comptroller.--(A) No savings
association may convert from the mutual to the stock
form, or from the stock form to the mutual form, except
in accordance with the regulations of the Comptroller.
(B) Any aggrieved person may obtain review of a final
action of the Comptroller which approves or disapproves
a plan of conversion pursuant to this subsection only
by complying with the provisions of section 10(j) of
this Act within the time limit and in the manner
therein prescribed, which provisions shall apply in all
respects as if such final action were an order the
review of which is therein provided for, except that
such time limit shall commence upon publication of
notice of such final action in the Federal Register or
upon the giving of such general notice of such final
action as is required by or approved under regulations
of the Comptroller, whichever is later.
(C) Any Federal savings association may change its
designation from a Federal savings association to a
Federal savings bank, or the reverse.
(3) Conversion to state association.--(A) Any Federal
savings association may convert itself into a savings
association or savings bank organized pursuant to the
laws of the State in which the principal office of such
Federal savings association is located if--
(i) the State permits the conversion of any
savings association or savings bank of such
State into a Federal savings association;
(ii) such conversion of a Federal savings
association into such a State savings
association is determined--
(I) upon the vote in favor of such
conversion cast in person or by proxy
at a special meeting of members or
stockholders called to consider such
action, specified by the law of the
State in which the home office of the
Federal savings association is located,
as required by such law for a State-
chartered institution to convert itself
into a Federal savings association, but
in no event upon a vote of less than 51
percent of all the votes cast at such
meeting, and
(II) upon compliance with other
requirements reciprocally equivalent to
the requirements of such State law for
the conversion of a State-chartered
institution into a Federal savings
association;
(iii) notice of the meeting to vote on
conversion shall be given as herein provided
and no other notice thereof shall be necessary;
the notice shall expressly state that such
meeting is called to vote thereon, as well as
the time and place thereof; and such notice
shall be mailed, postage prepaid, at least 30
and not more than 60 days prior to the date of
the meeting, to the Comptroller and to each
member or stockholder of record of the Federal
savings association at the member's or
stockholder's last address as shown on the
books of the Federal savings association;
(iv) when a mutual savings association is
dissolved after conversion, the members or
shareholders of the savings association will
share on a mutual basis in the assets of the
association in exact proportion to their
relative share or account credits;
(v) when a stock savings association is
dissolved after conversion, the stockholders
will share on an equitable basis in the assets
of the association; and
(vi) such conversion shall be effective upon
the date that all the provisions of this Act
shall have been fully complied with and upon
the issuance of a new charter by the State
wherein the savings association is located.
(B)(i) The act of conversion constitutes consent by
the institution to be bound by all the requirements
that the Comptroller may impose under this Act.
(ii) The savings association shall upon conversion
and thereafter be authorized to issue securities in any
form currently approved at the time of issue by the
Comptroller for issuance by similar savings
associations in such State.
(iii) If the insurance of accounts is terminated in
connection with such conversion, the notice and other
action shall be taken as provided by law and
regulations for the termination of insurance of
accounts.
(4) Savings bank activities.--(A) To the extent
authorized by the Comptroller, but subject to section
18(m)(3) of the Federal Deposit Insurance Act--
(i) any Federal savings bank chartered as
such prior to October 15, 1982, may continue to
make any investment or engage in any activity
not otherwise authorized under this section, to
the degree it was permitted to do so as a
Federal savings bank prior to October 15, 1982;
and
(ii) any Federal savings bank in existence on
the date of the enactment of the Financial
Institutions Reform, Recovery, and Enforcement
Act of 1989 and formerly organized as a mutual
savings bank under State law may continue to
make any investment or engage in any activity
not otherwise authorized under this section, to
the degree it was authorized to do so as a
mutual savings bank under State law.
(B) The authority conferred by this paragraph may be
utilized by any Federal savings association that
acquires, by merger or consolidation, a Federal savings
bank enjoying grandfather rights hereunder.
(5) Conversion to national or state bank.--
(A) In general.--Any Federal savings
association chartered and in operation before
the date of enactment of the Gramm-Leach-Bliley
Act, with branches in operation before such
date of enactment in 1 or more States, may
convert, at its option, with the approval of
the Comptroller for each national bank, and
with the approval of the appropriate State bank
supervisor and the appropriate Federal banking
agency for each State bank, into 1 or more
national or State banks, each of which may
encompass 1 or more of the branches of the
Federal savings association in operation before
such date of enactment in 1 or more States
subject to subparagraph (B).
(B) Conditions of conversion.--The authority
in subparagraph (A) shall apply only if each
resulting national or State bank--
(i) will meet all financial,
management, and capital requirements
applicable to the resulting national or
State bank; and
(ii) if more than 1 national or State
bank results from a conversion under
this subparagraph, has received
approval from the Federal Deposit
Insurance Corporation under section
5(a) of the Federal Deposit Insurance
Act.
(C) No merger application under fdia
required.--No application under section 18(c)
of the Federal Deposit Insurance Act shall be
required for a conversion under this paragraph.
(D) Definitions.--For purposes of this
paragraph, the terms ``State bank'' and ``State
bank supervisor'' have the same meanings as in
section 3 of the Federal Deposit Insurance Act.
(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.
(j) Subscription for Shares.--
(k) Depository of Public Money.--When designated for that
purpose by the Secretary of the Treasury, a savings association
the deposits of which are insured by the Corporation shall be a
depository of public money and may be employed as fiscal agent
of the Government under such regulations as may be prescribed
by the Secretary and shall perform all such reasonable duties
as fiscal agent of the Government as may be required of it. A
savings association the deposits of which are insured by the
Corporation may act as agent for any other instrumentality of
the United States when designated for that purpose by such
instrumentality, including services in connection with the
collection of taxes and other obligations owed the United
States, and the Secretary of the Treasury may deposit public
money in any such savings association, and shall prescribe such
regulations as may be necessary to carry out the purposes of
this subsection.
(l) Retirement Accounts.--A Federal savings association is
authorized to act as trustee of any trust created or organized
in the United States and forming part of a stock bonus,
pension, or profit-sharing plan which qualifies or qualified
for specific tax treatment under section 401(d) of the Internal
Revenue Code of 1986 and to act as trustee or custodian of an
individual retirement account within the meaning of section 408
of such Code if the funds of such trust or account are invested
only in savings accounts or deposits in such Federal savings
association or in obligations or securities issued by such
Federal savings association. All funds held in such fiduciary
capacity by any Federal savings association may be commingled
for appropriate purposes of investment, but individual records
shall be kept by the fiduciary for each participant and shall
show in proper detail all transactions engaged in under this
paragraph.
(m) Branching.--
(1) In general.--
(A) No savings association incorporated under
the laws of the District of Columbia or
organized in the District or doing business in
the District shall establish any branch or move
its principal office or any branch without the
[Director's] appropriate Federal banking
agency's prior written approval.
(B) No savings association shall establish
any branch in the District of Columbia or move
its principal office or any branch in the
District without the [Director's] appropriate
Federal banking agency's prior written
approval.
(2) Definition.--For purposes of this subsection the
term ``branch'' means any office, place of business, or
facility, other than the principal office as defined by
the Comptroller, of a savings association at which
accounts are opened or payments are received or
withdrawals are made, or any other office, place of
business, or facility of a savings association defined
by the Comptroller as a branch within the meaning of
such sentence.
(n) Trusts.--
(1) Permits.--The Comptroller may grant by special
permit to a Federal savings association applying
therefor the right to act as trustee, executor,
administrator, guardian, or in any other fiduciary
capacity in which State banks, trust companies, or
other corporations which compete with Federal savings
associations are permitted to act under the laws of the
State in which the Federal savings association is
located. Subject to the regulations of the Comptroller,
service corporations may invest in State or federally
chartered corporations which are located in the State
in which the home office of the Federal savings
association is located and which are engaged in trust
activities.
(2) Segregation of assets.--A Federal savings
association exercising any or all of the powers
enumerated in this section shall segregate all assets
held in any fiduciary capacity from the general assets
of the association and shall keep a separate set of
books and records showing in proper detail all
transactions engaged in under this subsection. The
State banking authority involved may have access to
reports of examination made by the Comptroller insofar
as such reports relate to the trust department of such
association but nothing in this subsection shall be
construed as authorizing such State banking authority
to examine the books, records, and assets of such
associations.
(3) Prohibitions.--No Federal savings association
shall receive in its trust department deposits of
current funds subject to check or the deposit of
checks, drafts, bills of exchange, or other items for
collection or exchange purposes. Funds deposited or
held in trust by the association awaiting investment
shall be carried in a separate account and shall not be
used by the association in the conduct of its business
unless it shall first set aside in the trust department
United States bonds or other securities approved by the
Comptroller.
(4) Separate lien.--In the event of the failure of a
Federal savings association, the owners of the funds
held in trust for investment shall have a lien on the
bonds or other securities so set apart in addition to
their claim against the estate of the association.
(5) Deposits.--Whenever the laws of a State require
corporations acting in a fiduciary capacity to deposit
securities with the State authorities for the
protection of private or court trusts, Federal savings
associations so acting shall be required to make
similar deposits. Securities so deposited shall be held
for the protection of private or court trusts, as
provided by the State law. Federal savings associations
in such cases shall not be required to execute the bond
usually required of individuals if State corporations
under similar circumstances are exempt from this
requirement. Federal savings associations shall have
power to execute such bond when so required by the laws
of the State involved.
(6) Oaths and affidavits.--In any case in which the
laws of a State require that a corporation acting as
trustee, executor, administrator, or in any capacity
specified in this section, shall take an oath or make
an affidavit, the president, vice president, cashier,
or trust officer of such association may take the
necessary oath or execute the necessary affidavit.
(7) Certain loans prohibited.--It shall be unlawful
for any Federal savings association to lend any
officer, director, or employee any funds held in trust
under the powers conferred by this section. Any
officer, director, or employee making such loan, or to
whom such loan is made, may be fined not more than
$50,000 or twice the amount of that person's gain from
the loan, whichever is greater, or may be imprisoned
not more than 5 years, or may be both fined and
imprisoned, in the discretion of the court.
(8) Factors to be considered.--In reviewing
applications for permission to exercise the powers
enumerated in this section, the Comptroller may
consider--
(A) the amount of capital of the applying
Federal savings association,
(B) whether or not such capital is sufficient
under the circumstances of the case,
(C) the needs of the community to be served,
and
(D) any other facts and circumstances that
seem to it proper.
The Comptroller may grant or refuse the application
accordingly, except that no permit shall be issued to
any association having capital less than the capital
required by State law of State banks, trust companies,
and corporations exercising such powers.
(9) Surrender of charter.--(A) Any Federal savings
association may surrender its right to exercise the
powers granted under this subsection, and have returned
to it any securities which it may have deposited with
the State authorities, by filing with the Comptroller a
certified copy of a resolution of its board of
directors indicating its intention to surrender its
right.
(B) Upon receipt of such resolution, the Comptroller,
if satisfied that such Federal savings association has
been relieved in accordance with State law of all
duties as trustee, executor, administrator, guardian or
other fiduciary, may in the [Director's] Comptroller's
discretion, issue to such association a certificate
that such association is no longer authorized to
exercise the powers granted by this subsection.
(C) Upon the issuance of such a certificate by the
Comptroller, such Federal savings association (i) shall
no longer be subject to the provisions of this section
or the regulations of the Comptroller made pursuant
thereto, (ii) shall be entitled to have returned to it
any securities which it may have deposited with State
authorities, and (iii) shall not exercise thereafter
any of the powers granted by this section without first
applying for and obtaining a new permit to exercise
such powers pursuant to the provisions of this section.
(D) The Comptroller may prescribe regulations
necessary to enforce compliance with the provisions of
this subsection.
(10) Revocation.--(A) In addition to the authority
conferred by other law, if, in the opinion of the
Comptroller, a Federal savings association is
unlawfully or unsoundly exercising, or has unlawfully
or unsoundly exercised, or has failed for a period of 5
consecutive years to exercise, the powers granted by
this subsection or otherwise fails or has failed to
comply with the requirements of this subsection, the
Comptroller may issue and serve upon the association a
notice of intent to revoke the authority of the
association to exercise the powers granted by this
subsection. The notice shall contain a statement of the
facts constituting the alleged unlawful or unsound
exercise of powers, or failure to exercise powers, or
failure to comply, and shall fix a time and place at
which a hearing will be held to determine whether an
order revoking authority to exercise such powers should
issue against the association.
(B) Such hearing shall be conducted in accordance
with the provisions of subsection (d)(1)(B), and
subject to judicial review as therein provided, and
shall be fixed for a date not earlier than 30 days and
not later than 60 days after service of such notice
unless the Comptroller sets an earlier or later date at
the request of any Federal savings association so
served.
(C) Unless the Federal savings association so served
shall appear at the hearing by a duly authorized
representative, it shall be deemed to have consented to
the issuance of the revocation order. In the event of
such consent, or if upon the record made at any such
hearing, the Comptroller shall find that any allegation
specified in the notice of charges has been
established, the Comptroller may issue and serve upon
the association an order prohibiting it from accepting
any new or additional trust accounts and revoking
authority to exercise any and all powers granted by
this subsection, except that such order shall permit
the association to continue to service all previously
accepted trust accounts pending their expeditious
divestiture or termination.
(D) A revocation order shall become effective not
earlier than the expiration of 30 days after service of
such order upon the association so served (except in
the case of a revocation order issued upon consent,
which shall become effective at the time specified
therein), and shall remain effective and enforceable,
except to such extent as it is stayed, modified,
terminated, or set aside by action of the Comptroller
or a reviewing court.
(o) Conversion of State Savings Banks.--(1) Subject to the
provisions of this subsection and under regulations of the
Comptroller, the Comptroller may authorize the conversion of a
State-chartered savings bank into a Federal savings bank, if
such conversion is not in contravention of State law, and
provide for the organization, incorporation, operation,
examination, and regulation of such institution.
(2)(A) Any Federal savings bank chartered pursuant to this
subsection shall continue to be insured by the Deposit
Insurance Fund.
(B) The Comptroller shall notify the Corporation of any
application under this Act for conversion to a Federal charter
by an institution insured by the Corporation, shall consult
with the Corporation before disposing of the application, and
shall notify the Corporation of the determination of the
Comptroller with respect to such application.
(C) Notwithstanding any other provision of law, if the
Corporation determines that conversion into a Federal stock
savings bank or the chartering of a Federal stock savings bank
is necessary to prevent the default of a savings bank it
insures or to reopen a savings bank in default that it insured,
or if the Corporation determines, with the concurrence of the
Comptroller, that severe financial conditions exist that
threaten the stability of a savings bank insured by the
Corporation and that such a conversion or charter is likely to
improve the financial condition of such savings bank, the
Corporation shall provide the Comptroller with a certificate of
such determination, the reasons therefor in conformance with
the requirements of this Act, and the bank shall be converted
or chartered by the Comptroller, pursuant to the regulations
thereof, from the time the Corporation issues the certificate.
(D) A bank may be converted under subparagraph (C) only if
the board of trustees of the bank--
(i) has specified in writing that the bank is in
danger of closing or is closed, or that severe
financial conditions exist that threaten the stability
of the bank and a conversion is likely to improve the
financial condition of the bank; and
(ii) has requested in writing that the Corporation
use the authority of subparagraph (C).
(E)(i) Before making a determination under subparagraph (D),
the Corporation shall consult the State bank supervisor of the
State in which the bank in danger of closing is chartered. The
State bank supervisor shall be given a reasonable opportunity,
and in no event less than 48 hours, to object to the use of the
provisions of subparagraph (D).
(ii) If the State supervisor objects during such period, the
Corporation may use the authority of subparagraph (D) only by
an affirmative vote of three-fourths of the Board of Directors.
The Board of Directors shall provide the State supervisor, as
soon as practicable, with a written certification of its
determination.
(3) A Federal savings bank chartered under this subsection
shall have the same authority with respect to investments,
operations, and activities, and shall be subject to the same
restrictions, including those applicable to branching and
discrimination, as would apply to it if it were chartered as a
Federal savings bank under any other provision of this Act.
(p) Conversions.--(1) Notwithstanding any other provision of
law, and consistent with the purposes of this Act, the
Comptroller may authorize (or in the case of a Federal savings
association, require) the conversion of any mutual savings
association or Federal mutual savings bank that is insured by
the Corporation into a Federal stock savings association or
Federal stock savings bank, or charter a Federal stock savings
association or Federal stock savings bank to acquire the assets
of, or merge with such a mutual institution under the
regulations of the Comptroller.
(2) Authorizations under this subsection may be made only--
(A) if the Comptroller has determined that severe
financial conditions exist which threaten the stability
of an association and that such authorization is likely
to improve the financial condition of the association,
(B) when the Corporation has contracted to provide
assistance to such association under section 13 of the
Federal Deposit Insurance Act, or
(C) to assist an institution in receivership.
(3) A Federal savings bank chartered under this subsection
shall have the same authority with respect to investments,
operations and activities, and shall be subject to the same
restrictions, including those applicable to branching and
discrimination, as would apply to it if it were chartered as a
Federal savings bank under any other provision of this Act, and
may engage in any investment, activity, or operation that the
institution it acquired was engaged in if that institution was
a Federal savings bank, or would have been authorized to engage
in had that institution converted to a Federal charter.
(q) Tying Arrangements.--(1) A savings association may not in
any manner extend credit, lease, or sell property of any kind,
or furnish any service, or fix or vary the consideration for
any of the foregoing, on the condition or requirement--
(A) that the customer shall obtain additional credit,
property, or service from such savings association, or
from any service corporation or affiliate of such
association, other than a loan, discount, deposit, or
trust service;
(B) that the customer provide additional credit,
property, or service to such association, or to any
service corporation or affiliate of such association,
other than those related to and usually provided in
connection with a similar loan, discount, deposit, or
trust service; and
(C) that the customer shall not obtain some other
credit, property, or service from a competitor of such
association, or from a competitor of any service
corporation or affiliate of such association, other
than a condition or requirement that such association
shall reasonably impose in connection with credit
transactions to assure the soundness of credit.
(2)(A) Any person may sue for and have injunctive relief, in
any court of the United States having jurisdiction over the
parties, against threatened loss or damage by reason of a
violation of paragraph (1), under the same conditions and
principles as injunctive relief against threatened conduct that
will cause loss or damage is granted by courts of equity and
under the rules governing such proceedings.
(B) Upon the execution of proper bond against damages for an
injunction improvidently granted and a showing that the danger
of irreparable loss or damage is immediate, a preliminary
injunction may issue.
(3) Any person injured by a violation of paragraph (1) may
bring an action in any district court of the United States in
which the defendant resides or is found or has an agent,
without regard to the amount in controversy, or in any other
court of competent jurisdiction, and shall be entitled to
recover three times the amount of the damages sustained, and
the cost of suit, including a reasonable attorney's fee. Any
such action shall be brought within 4 years from the date of
the occurrence of the violation.
(4) Nothing contained in this subsection affects in any
manner the right of the United States or any other party to
bring an action under any other law of the United States or of
any State, including any right which may exist in addition to
specific statutory authority, challenging the legality of any
act or practice which may be proscribed by this subsection. No
regulation or order issued by the Board under this subsection
shall in any manner constitute a defense to such action.
(5) For purposes of this subsection, the term ``loan''
includes obligations and extensions or advances of credit.
(6) Exceptions.--The Board may, by regulation or
order, permit such exceptions to the prohibitions of
this subsection as the Board in consultation with the
Comptroller and the Corporation, considers will not be
contrary to the purposes of this subsection and which
conform to exceptions granted by the Board pursuant to
section 106(b) of the Bank Holding Company Act
Amendments of 1970.
(r) Out-of-State Branches.--(1) No Federal savings
association may establish, retain, or operate a branch outside
the State in which the Federal savings association has its home
office, unless the association qualifies as a domestic building
and loan association under section 7701(a)(19) of the Internal
Revenue Code of 1986 or meets the asset composition test
imposed by subparagraph (C) of that section on institutions
seeking so to qualify, or qualifies as a qualified thrift
lender, as determined under section 10(m) of this Act. No out-
of-State branch so established shall be retained or operated
unless the total assets of the Federal savings association
attributable to all branches of the Federal savings association
in that State would qualify the branches as a whole, were they
otherwise eligible, for treatment as a domestic building and
loan association under section 7701(a)(19) or as a qualified
thrift lender, as determined under section 10(m) of this Act,
as applicable.
(2) The limitations of paragraph (1) shall not apply if--
(A) the branch results from a transaction authorized
under section 13(k) of the Federal Deposit Insurance
Act;
(B) the branch was authorized for the Federal savings
association prior to October 15, 1982;
(C) the law of the State where the branch is located,
or is to be located, would permit establishment of the
branch if the association was a savings association or
savings bank chartered by the State in which its home
office is located; or
(D) the branch was operated lawfully as a branch
under State law prior to the association's conversion
to a Federal charter.
(3) The Comptroller of the Currency, for good cause shown,
may allow Federal savings associations up to 2 years to comply
with the requirements of this subsection.
(s) Minimum Capital Requirements.--
(1) In general.--Consistent with the purposes of
section 908 of the International Lending Supervision
Act of 1983 and the capital requirements established
pursuant to such section by the appropriate Federal
banking agencies (as defined in section 903(1) [of such
Act), the Comptroller of the Currency shall require] of
such Act), the appropriate Federal banking agency shall
require all savings associations to achieve and
maintain adequate capital by--
(A) establishing minimum levels of capital
for savings associations; and
(B) using such [other methods as the
Comptroller of the Currency determines] other
methods as the appropriate Federal banking
agency determines to be appropriate.
(2) Minimum capital levels may be [determined by
director case-by-case.--] [The Comptroller of the
Currency may, consistent] determined by appropriate
federal banking agency case-by-case._The appropriate
Federal banking agency may, consistent with subsection
(t), establish the minimum level of capital for a
savings association at such amount or at such ratio of
[capital-to-assets as the Comptroller of the Currency
determines to be necessary] capital-to-assets as the
appropriate Federal banking agency determines to be
necessary or appropriate for such association in light
of the particular circumstances of the association.
(3) Unsafe or unsound practice.--In the discretion of
the appropriate Federal banking agency, the appropriate
Federal banking agency, may treat the failure of any
savings association to maintain capital at or above the
minimum level required by the Comptroller under this
subsection or subsection (t) as an unsafe or unsound
practice.
(4) Directive to increase capital.--
(A) Plan may be required.--In addition to any
other action authorized by law, including
paragraph (3), the appropriate Federal banking
agency may issue a directive requiring any
savings association which fails to maintain
capital at or above the minimum level required
by the appropriate Federal banking agency to
submit and adhere to a plan for increasing
capital which is acceptable to the appropriate
Federal banking agency.
(B) Enforcement of plan.--Any directive
issued and plan approved under subparagraph (A)
shall be enforceable under section 8 of the
Federal Deposit Insurance Act to the same
extent and in the same manner as an outstanding
order which was issued under section 8 of the
Federal Deposit Insurance Act and has become
final.
(5) Plan taken into account in other proceedings.--
The appropriate Federal banking agency may--
(A) consider a savings association's progress
in adhering to any plan required under
paragraph (4) whenever such association or any
affiliate of such association (including any
company which controls such association) seeks
the approval of the appropriate Federal banking
agency for any proposal which would have the
effect of diverting earnings, diminishing
capital, or otherwise impeding such
association's progress in meeting the minimum
level of capital required by the appropriate
Federal banking agency; and
(B) disapprove any proposal referred to in
subparagraph (A) if the appropriate Federal
banking agency determines that the proposal
would adversely affect the ability of the
association to comply with such plan.
(t) Capital Standards.--
(1) In general.--
(A) Requirement for standards to be
prescribed.--The appropriate Federal banking
agency shall, by regulation, prescribe and
maintain uniformly applicable capital standards
for savings associations. Those standards shall
include--
(i) a leverage limit;
(ii) a tangible capital requirement;
and
(iii) a risk-based capital
requirement.
(B) Compliance.--A savings association is not
in compliance with capital standards for
purposes of this subsection unless it complies
with all capital standards prescribed under
this paragraph.
(C) Stringency.--The standards prescribed
under this paragraph shall be no less stringent
than the capital standards applicable to
national banks.
(2) Content of standards.--
(A) Leverage limit.--The leverage limit
prescribed under paragraph (1) shall require a
savings association to maintain core capital in
an amount not less than 3 percent of the
savings association's total assets.
(B) Tangible capital requirement.--The
tangible capital requirement prescribed under
paragraph (1) shall require a savings
association to maintain tangible capital in an
amount not less than 1.5 percent of the savings
association's total assets.
(C) Risk-based capital requirement.--
Notwithstanding paragraph (1)(C), the risk-
based capital requirement prescribed under
paragraph (1) may deviate from the risk-based
capital standards applicable to national banks
to reflect interest-rate risk or other risks,
but such deviations shall not, in the
aggregate, result in materially lower levels of
capital being required of savings associations
under the risk-based capital requirement than
would be required under the risk-based capital
standards applicable to national banks.
(5) Separate capitalization required for certain
subsidiaries.--
(A) In general.--In determining compliance
with capital standards prescribed under
paragraph (1), all of a savings association's
investments in and extensions of credit to any
subsidiary engaged in activities not
permissible for a national bank shall be
deducted from the savings association's
capital.
(B) Exception for agency activities.--
Subparagraph (A) shall not apply with respect
to a subsidiary engaged, solely as agent for
its customers, in activities not permissible
for a national bank unless the appropriate
Federal banking agency, in the sole discretion
of the appropriate Federal banking agency,
determines that, in the interests of safety and
soundness, this subparagraph should cease to
apply to that subsidiary.
(C) Other exceptions.--Subparagraph (A) shall
not apply with respect to any of the following:
(i) Mortgage banking subsidiaries.--A
savings association's investments in
and extensions of credit to a
subsidiary engaged solely in mortgage-
banking activities.
(ii) Subsidiary insured depository
institutions.--A savings association's
investments in and extensions of credit
to a subsidiary--
(I) that is itself an insured
depository institution or a
company the sole investment of
which is an insured depository
institution, and
(II) that was acquired by the
parent insured depository
institution prior to May 1,
1989.
(iii) Certain federal savings
banks.--Any Federal savings association
existing as a Federal savings
association on the date of enactment of
the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989--
(I) that was chartered prior
to October 15, 1982, as a
savings bank or a cooperative
bank under State law; or
(II) that acquired its
principal assets from an
association that was chartered
prior to October 15, 1982, as a
savings bank or a cooperative
bank under State law.
(E) Consolidation of subsidiaries not
separately capitalized.--In determining
compliance with capital standards prescribed
under paragraph (1), the assets and liabilities
of each of a savings association's subsidiaries
(other than any subsidiary described in
subparagraph (C)(ii)) shall be consolidated
with the savings association's assets and
liabilities, unless all of the savings
association's investments in and extensions of
credit to the subsidiary are deducted from the
savings association's capital pursuant to
subparagraph (A).
(6) Consequences of failing to comply with capital
standards.--
(A)
(B) On or after january 1, 1991.--On or after
January 1, 1991, the appropriate Federal
banking agency--
(i) shall prohibit any asset growth
by any savings association not in
compliance with capital standards,
except as provided in subparagraph (C);
and
(ii) shall require any savings
association not in compliance with
capital standards to comply with a
capital directive issued by the
appropriate Federal banking agency
(which may include such restrictions,
including restrictions on the payment
of dividends and on compensation, as
the appropriate Federal banking agency
determines to be appropriate).
(C) Limited growth exception.--The
appropriate Federal banking agency may permit
any savings association that is subject to
subparagraph (B) to increase its assets in an
amount not exceeding the amount of net interest
credited to the savings association's deposit
liabilities if--
(i) the savings association obtains
the prior approval of the appropriate
Federal banking agency;
(ii) any increase in assets is
accompanied by an increase in tangible
capital in an amount not less than 6
percent of the increase in assets (or,
in the discretion of the appropriate
Federal banking agency if the leverage
limit then applicable is less than 6
percent, in an amount equal to the
increase in assets multiplied by the
percentage amount of the leverage
limit);
(iii) any increase in assets is
accompanied by an increase in capital
not less in percentage amount than
required under the risk-based capital
standard then applicable;
(iv) any increase in assets is
invested in low-risk assets, such as
first mortgage loans secured by 1- to
4-family residences and fully secured
consumer loans; and
(v) the savings association's ratio
of core capital to total assets is not
less than the ratio existing on January
1, 1991.
(D) Additional restrictions in case of
excessive risks or rates.--The appropriate
Federal banking agency may restrict the asset
growth of any savings association that the
appropriate Federal banking agency determines
is taking excessive risks or paying excessive
rates for deposits.
(E) Failure to comply with plan, regulation,
or order.--The appropriate Federal banking
agency may treat as an unsafe and unsound
practice any material failure by a savings
association to comply with any plan,
regulation, or order under this paragraph.
(F) Effect on other regulatory authority.--
This paragraph does not limit any authority of
the appropriate Federal banking agency under
this Act or any other provision of law.
(7) Exemption from certain sanctions.--
(A) Application for exemption.--Any savings
association not in compliance with the capital
standards prescribed under paragraph (1) may
apply to the appropriate Federal banking agency
for an exemption from any applicable sanction
or penalty for noncompliance which the
appropriate Federal banking agency may impose
under this Act.
(B) Effect of grant of exemption.--If the
appropriate Federal banking agency approves any
savings association's application under
subparagraph (A), the only sanction or penalty
to be imposed by the appropriate Federal
banking agency under this Act for the savings
association's failure to comply with the
capital standards prescribed under paragraph
(1) is the growth limitation contained in
paragraph (6)(B) or paragraph (6)(C), whichever
is applicable.
(C) Standards for approval or disapproval.--
(i) Approval.--The appropriate
Federal banking agency may approve an
application for an exemption if the
appropriate Federal banking agency
determines that--
(I) such exemption would pose
no significant risk to the
Deposit Insurance Fund;
(II) the savings
association's management is
competent;
(III) the savings association
is in substantial compliance
with all applicable statutes,
regulations, orders, and
supervisory agreements and
directives; and
(IV) the savings
association's management has
not engaged in insider dealing,
speculative practices, or any
other activities that have
jeopardized the association's
safety and soundness or
contributed to impairing the
association's capital.
(ii) Denial or revocation of
approval.--The appropriate Federal
banking agency shall deny any
application submitted under clause (i)
and revoke any prior approval granted
with respect to any such application if
the appropriate Federal banking agency
determines that the association's
failure to meet any capital standards
prescribed under paragraph (1) is
accompanied by--
(I) a pattern of consistent
losses;
(II) substantial dissipation
of assets;
(III) evidence of imprudent
management or business
behavior;
(IV) a material violation of
any Federal law, any law of any
State to which such association
is subject, or any applicable
regulation; or
(V) any other unsafe or
unsound condition or activity,
other than the failure to meet
such capital standards.
(D) Submission of plan required.--Any
application submitted under subparagraph (A)
shall be accompanied by a plan which--
(i) meets the requirements of
paragraph (6)(A)(ii); and
(ii) is acceptable to the appropriate
Federal banking agency.
(E) Failure to comply with plan.--The
appropriate Federal banking agency shall treat
as an unsafe and unsound practice any material
failure by any savings association which has
been granted an exemption under this paragraph
to comply with the provisions of any plan
submitted by such association under
subparagraph (D).
(F) Exemption not available with respect to
unsafe or unsound practices.--This paragraph
does not limit any authority of the appropriate
Federal banking agency under any other
provision of law, including section 8 of the
Federal Deposit Insurance Act, to take any
appropriate action with respect to any unsafe
or unsound practice or condition of any savings
association, other than the failure of such
savings association to comply with the capital
standards prescribed under paragraph (1).
(8)
(9) Definitions.--For purposes of this subsection--
(A) Core capital.--Unless the Comptroller
prescribes a more stringent definition, the
term ``core capital'' means core capital as
defined by the Comptroller of the Currency for
national banks, less any unidentifiable
intangible assets.
(B) Tangible capital.--The term ``tangible
capital'' means core capital minus any
intangible assets (as intangible assets are
defined by the Comptroller for national banks).
(C) Total assets.--The term ``total assets''
means total assets (as total assets are defined
by the Comptroller of the Currency for national
banks) adjusted in the same manner as total
assets would be adjusted in determining
compliance with the leverage limit applicable
to national banks if the savings association
were a national bank.
(10) Use of comptroller's definitions.--
(A) In general.--The standards prescribed
under paragraph (1) shall include all relevant
substantive definitions established by the
Comptroller of the Currency for national banks.
(B) Special rule.--If the Comptroller of the
Currency has not made effective regulations
defining core capital or establishing a risk-
based capital standard, the appropriate Federal
banking agency shall use the definition and
standard contained in the Comptroller's most
recently published final regulations.
(u) Limits on Loans to One Borrower.--
(1) In general.--Section 5200 of the Revised Statutes
shall apply to savings associations in the same manner
and to the same extent as it applies to national banks.
(2) Special rules.--
(A) Notwithstanding paragraph (1), a savings
association may make loans to one borrower
under one of the following clauses:
(i) For any purpose, not to exceed
$500,000.
(ii) To develop domestic residential
housing units, not to exceed the lesser
of $30,000,000 or 30 percent of the
savings association's unimpaired
capital and unimpaired surplus, if--
(I) the savings association
is and continues to be in
compliance with the fully
phased-in capital standards
prescribed under subsection
(t);
(II) the appropriate Federal
banking agency, by order,
permits the savings association
to avail itself of the higher
limit provided by this clause;
(III) loans made under this
clause to all borrowers do not,
in aggregate, exceed 150
percent of the savings
association's unimpaired
capital and unimpaired surplus;
and
(IV) such loans comply with
all applicable loan-to-value
requirements.
(B) A savings association's loans to one
borrower to finance the sale of real property
acquired in satisfaction of debts previously
contracted in good faith shall not exceed 50
percent of the savings association's unimpaired
capital and unimpaired surplus.
(3) Authority to impose more stringent
restrictions.--The appropriate Federal banking agency
may impose more stringent restrictions on a savings
association's loans to one borrower if the appropriate
Federal banking agency determines that such
restrictions are necessary to protect the safety and
soundness of the savings association.
(v) Reports of Condition.--
(1) In general.--Each association shall make reports
of conditions to the appropriate Federal banking agency
which shall be in a form prescribed by the appropriate
Federal banking agency and shall contain--
(A) information sufficient to allow the
identification of potential interest rate and
credit risk;
(B) a description of any assistance being
received by the association, including the type
and monetary value of such assistance;
(C) the identity of all subsidiaries and
affiliates of the association;
(D) the identity, value, type, and sector of
investment of all equity investments of the
associations and subsidiaries; and
(E) other information that the appropriate
Federal banking agency may prescribe.
(2) Public disclosure.--
(A) Reports required under paragraph (1) and
all information contained therein shall be
available to the public upon request, unless
the appropriate Federal banking agency
determines--
(i) that a particular item or
classification of information should
not be made public in order to protect
the safety or soundness of the
institution concerned or institutions
concerned, or the Deposit Insurance
Fund; or
(ii) that public disclosure would not
otherwise be in the public interest.
(B) Any determination made by the appropriate
Federal banking agency under subparagraph (A)
not to permit the public disclosure of
information shall be made in writing, and if
the appropriate Federal banking agency
restricts any item of information for savings
institutions generally, the appropriate Federal
banking agency shall disclose the reason in
detail in the Federal Register.
(C) The determinations of the appropriate
Federal banking agency under subparagraph (A)
shall not be subject to judicial review.
(3) Access by certain parties.--
(A) Notwithstanding paragraph (2), the
persons described in subparagraph (B) shall not
be denied access to any information contained
in a report of condition, subject to reasonable
requirements of confidentiality. Those
requirements shall not prevent such information
from being transmitted to the Comptroller
General of the United States for analysis.
(B) The following persons are described in
this subparagraph for purposes of subparagraph
(A):
(i) the Chairman and ranking minority
member of the Committee on Banking,
Housing, and Urban Affairs of the
Senate and their designees; and
(ii) the Chairman and ranking
minority member of the Committee on
Banking, Finance and Urban Affairs of
the House of Representatives and their
designees.
(4) First tier penalties.--Any savings association
which--
(A) maintains procedures reasonably adapted
to avoid any inadvertent and unintentional
error and, as a result of such an error--
(i) fails to submit or publish any
report or information required by the
appropriate Federal banking agency
under paragraph (1) or (2), within the
period of time specified by the
appropriate Federal banking agency; or
(ii) submits or publishes any false
or misleading report or information; or
(B) inadvertently transmits or publishes any
report which is minimally late,
shall be subject to a penalty of not more than $2,000
for each day during which such failure continues or
such false or misleading information is not corrected.
The savings association shall have the burden of
proving by a preponderence of the evidence that an
error was inadvertent and unintentional and that a
report was inadvertently transmitted or published late.
(5) Second tier penalties.--Any savings association
which--
(A) fails to submit or publish any report or
information required by the appropriate Federal
banking agency under paragraph (1) or (2),
within the period of time specified by the
appropriate Federal banking agency; or
(B) submits or publishes any false or
misleading report or information,
in a manner not described in paragraph (4) shall be
subject to a penalty of not more than $20,000 for each
day during which such failure continues or such false
or misleading information is not corrected.
(6) Third tier penalties.--If any savings association
knowingly or with reckless disregard for the accuracy
of any information or report described in paragraph (5)
submits or publishes any false or misleading report or
information, the appropriate Federal banking agency may
assess a penalty of not more than [$1,000,000]
$1,500,000 or 1 percent of total assets, whichever is
less, per day for each day during which such failure
continues or such false or misleading information is
not corrected.
(7) Assessment.--Any penalty imposed under paragraph
(4), (5), or (6) shall be assessed and collected by the
appropriate Federal banking agency in the manner
provided in subparagraphs (E), (F), (G), and (I) of
section 8(i)(2) of the Federal Deposit Insurance Act
(for penalties imposed under such section), and any
such assessment (including the determination of the
amount of the penalty) shall be subject to the
provisions of such subsection.
(8) Hearing.--Any savings association against which
any penalty is assessed under this subsection shall be
afforded a hearing if such savings association submits
a request for such hearing within 20 days after the
issuance of the notice of assessment. Section 8(h) of
the Federal Deposit Insurance Act shall apply to any
proceeding under this subsection.
(w) Forfeiture of Franchise for Money Laundering or Cash
Transaction Reporting Offenses.--
(1) In general.--
(A) Conviction of title 18 offense.--
(I) Duty to notify.--If a Federal
savings association has been convicted
of any criminal offense under section
1956 or 1957 of title 18, United States
Code, the Attorney General shall
provide to the Comptroller a written
notification of the conviction and
shall include a certified copy of the
order of conviction from the court
rendering the decision.
(II) Notice of termination;
pretermination hearing.--After
receiving written notification from the
Attorney General of such a conviction,
the Comptroller shall issue to the
savings association a notice of the
intention of the Comptroller to
terminate all rights, privileges, and
franchises of the savings association
and schedule a pretermination hearing.
(B) Conviction of title 31 offenses.--If a
Federal savings association is convicted of any
criminal offense under section 5322 or 5324 of
title 31, United States Code, after receiving
written notification from the Attorney General,
the Comptroller may issue to the savings
association a notice of the intention of the
Comptroller to terminate all rights,
privileges, and franchises of the savings
association and schedule a pretermination
hearing.
(C) Judicial review.--Subsection
(d)(1)(B)(vii) shall apply to any proceeding
under this subsection.
(2) Factors to be considered.--In determining whether
a franchise shall be forfeited under paragraph (1), the
Comptroller shall take into account the following
factors:
(A) The extent to which directors or senior
executive officers of the savings association
knew of, were involved in, the commission of
the money laundering offense of which the
association was found guilty.
(B) The extent to which the offense occurred
despite the existence of policies and
procedures within the savings association which
were designed to prevent the occurrence of any
such offense.
(C) The extent to which the savings
association has fully cooperated with law
enforcement authorities with respect to the
investigation of the money laundering offense
of which the association was found guilty.
(D) The extent to which the savings
association has implemented additional internal
controls (since the commission of the offense
of which the savings association was found
guilty) to prevent the occurrence of any other
money laundering offense.
(E) The extent to which the interest of the
local community in having adequate deposit and
credit services available would be threatened
by the forfeiture of the franchise.
(3) Successor liability.--This subsection shall not
apply to a successor to the interests of, or a person
who acquires, a savings association that violated a
provision of law described in paragraph (1), if the
successor succeeds to the interests of the violator, or
the acquisition is made, in good faith and not for
purposes of evading this subsection or regulations
prescribed under this subsection.
(4) Definition.--The term ``senior executive
officer'' has the same meaning as in regulations
prescribed under section 32(f) of the Federal Deposit
Insurance Act.
(x) Home State Citizenship.--In determining whether a Federal
court has diversity jurisdiction over a case in which a Federal
savings association is a party, the Federal savings association
shall be considered to be a citizen only of the State in which
such savings association has its home office.
SEC. 5A. ELECTION TO OPERATE AS A COVERED SAVINGS ASSOCIATION.
(a) Definition.--In this section, the term ``covered savings
association'' means a Federal savings association that makes an
election approved under subsection (b).
(b) Election.--
(1) In general.--Upon issuance of the rules described
in subsection (f), a Federal savings association may
elect to operate as a covered savings association by
submitting a notice to the Comptroller of such
election.
(2) Approval.--A Federal savings association shall be
deemed to be approved to operate as a covered savings
association on the date that is 60 days after the date
on which the Comptroller receives the notice under
paragraph (1), unless the Comptroller notifies the
Federal savings association otherwise.
(c) Rights and Duties.--Notwithstanding any other provision
of law and except as otherwise provided in this section, a
covered savings association shall--
(1) have the same rights and privileges as a national
bank that has its main office situated in the same
location as the home office of the covered savings
association; and
(2) be subject to the same duties, restrictions,
penalties, liabilities, conditions, and limitations
that would apply to such a national bank.
(d) Treatment of Covered Savings Associations.--A covered
savings association shall be treated as a Federal savings
association for the purposes--
(1) of governance of the covered savings association,
including incorporation, bylaws, boards of directors,
shareholders, and distribution of dividends;
(2) of consolidation, merger, dissolution, conversion
(including conversion to a stock bank or to another
charter), conservatorship, and receivership; and
(3) determined by regulation of the Comptroller.
(e) Existing Branches.--A covered savings association may
continue to operate any branch or agency the covered savings
association operated on the date on which an election under
subsection (b) is approved.
(f) Rulemaking.--The Comptroller shall issue rules to carry
out this section--
(1) that establish streamlined standards and
procedures that clearly identify required documentation
or timelines for an election under subsection (b);
(2) that require a Federal savings association that
makes an election under subsection (b) to identify
specific assets and subsidiaries--
(A) that do not conform to the requirements
for assets and subsidiaries of a national bank;
and
(B) that are held by the Federal savings
association on the date on which the Federal
savings association submits a notice of such
election;
(3) that establish--
(A) a transition process for bringing such
assets and subsidiaries into conformance with
the requirements for a national bank; and
(B) procedures for allowing the Federal
savings association to provide a justification
for grandfathering such assets and subsidiaries
after electing to operate as a covered savings
association;
(4) that establish standards and procedures to allow
a covered savings association to terminate an election
under subsection (b) after an appropriate period of
time or to make a subsequent election;
(5) that clarify requirements for the treatment of
covered savings associations, including the provisions
of law that apply to covered savings associations; and
(6) as the Comptroller deems necessary and in the
interests of safety and soundness.
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.
(c) Visitorial Powers.--The provisions of [sections] section
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. 10. REGULATION OF HOLDING COMPANIES.
(a) Definitions.--
(1) In general.--As used in this section, unless the
context otherwise requires--
(A) Savings association.--The term ``savings
association'' includes a savings bank or
cooperative bank which is deemed by the
appropriate Federal banking agency to be a
savings association under subsection (l).
(B) Uninsured institution.--The term
``uninsured institution'' means any depository
institution the deposits of which are not
insured by the Federal Deposit Insurance
Corporation.
(C) Company.--The term ``company'' means any
corporation, partnership, trust, joint-stock
company, or similar organization, but does not
include the Federal Deposit Insurance
Corporation, the Resolution Trust Corporation,
any Federal home loan bank, or any company the
majority of the shares of which is owned by the
United States or any State, or by an
instrumentality of the United States or any
State.
(D) Savings and loan holding company.--
(i) In general.--Except as provided
in clause (ii), the term ``savings and
loan holding company'' means any
company that directly or indirectly
controls a savings association or that
controls any other company that is a
savings and loan holding company.
(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.
(E) Multiple savings and loan holding
company.--The term ``multiple savings and loan
holding company'' means any savings and loan
holding company which directly or indirectly
controls 2 or more savings associations.
(F) Diversified savings and loan holding
company.--The term ``diversified savings and
loan holding company'' means any savings and
loan holding company whose subsidiary savings
association and related activities as permitted
under paragraph (2) of subsection (c) of this
section represented, on either an actual or a
pro forma basis, less than 50 percent of its
consolidated net worth at the close of its
preceding fiscal year and of its consolidated
net earnings for such fiscal year, as
determined in accordance with regulations
issued by the appropriate Federal banking
agency.
(G) Subsidiary.--The term ``subsidiary'' has
the same meaning as in section 3 of the Federal
Deposit Insurance Act.
(H) Affiliate.--The term ``affiliate'' of a
savings association means any person which
controls, is controlled by, or is under common
control with, such savings association.
(I) Bank holding company.--The terms ``bank
holding company'' and ``bank'' have the
meanings given to such terms in section 2 of
the Bank Holding Company Act of 1956.
(J) Acquire.--The term ``acquire'' has the
meaning given to such term in section 13(f)(8)
of the Federal Deposit Insurance Act.
(2) Control.--For purposes of this section, a person
shall be deemed to have control of--
(A) a savings association if the person
directly or indirectly or acting in concert
with one or more other persons, or through one
or more subsidiaries, owns, controls, or holds
with power to vote, or holds proxies
representing, more than 25 percent of the
voting shares of such savings association, or
controls in any manner the election of a
majority of the directors of such association;
(B) any other company if the person directly
or indirectly or acting in concert with one or
more other persons, or through one or more
subsidiaries, owns, controls, or holds with
power to vote, or holds proxies representing,
more than 25 percent of the voting shares or
rights of such other company, or controls in
any manner the election or appointment of a
majority of the directors or trustees of such
other company, or is a general partner in or
has contributed more than 25 percent of the
capital of such other company;
(C) a trust if the person is a trustee
thereof; or
(D) a savings association or any other
company if the Board determines, after
reasonable notice and opportunity for hearing,
that such person directly or indirectly
exercises a controlling influence over the
management or policies of such association or
other company.
(3) Exclusions.--Notwithstanding any other provision
of this subsection, the term ``savings and loan holding
company'' does not include--
(A) any company by virtue of its ownership or
control of voting shares of a savings
association or a savings and loan holding
company acquired in connection with the
underwriting of securities if such shares are
held only for such period of time (not
exceeding 120 days unless extended by the
Board) as will permit the sale thereof on a
reasonable basis; and
(B) any trust (other than a pension, profit-
sharing, shareholders', voting, or business
trust) which controls a savings association or
a savings and loan holding company if such
trust by its terms must terminate within 25
years or not later than 21 years and 10 months
after the death of individuals living on the
effective date of the trust, and is (i) in
existence on June 26, 1967, or (ii) a
testamentary trust created on or after June 26,
1967.
(4) Special rule relating to qualified stock
issuance.--No savings and loan holding company shall be
deemed to control a savings association solely by
reason of the purchase by such savings and loan holding
company of shares issued by such savings association,
or issued by any savings and loan holding company
(other than a bank holding company) which controls such
savings association, in connection with a qualified
stock issuance if such purchase is approved by the
Board under subsection (q)(1)(D), unless the acquiring
savings and loan holding company, directly or
indirectly, or acting in concert with 1 or more other
persons, or through 1 or more subsidiaries, owns,
controls, or holds with power to vote, or holds proxies
representing, more than 15 percent of the voting shares
of such savings association or holding company.
(b) Registration and Examination.--
(1) In general.--Within 90 days after becoming a
savings and loan holding company, each savings and loan
holding company shall register with the Board on forms
prescribed by the Board, which shall include such
information, under oath or otherwise, with respect to
the financial condition, ownership, operations,
management, and intercompany relationships of such
holding company and its subsidiaries, and related
matters, as the Board may deem necessary or appropriate
to carry out the purposes of this section. Upon
application, the Board may extend the time within which
a savings and loan holding company shall register and
file the requisite information.
(2) Reports.--
(A) In general.--Each savings and loan
holding company and each subsidiary thereof,
other than a savings association, shall file
with the Board, such reports as may be required
by the Board. Such reports shall be made under
oath or otherwise, and shall be in such form
and for such periods, as the Board may
prescribe. Each report shall contain such
information concerning the operations of such
savings and loan holding company and its
subsidiaries as the Board may require.
(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).
(3) Books and records.--Each savings and loan holding
company shall maintain such books and records as may be
prescribed by the Board.
(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.
(5) Agent for service of process.--The Board may
require any savings and loan holding company, or
persons connected therewith if it is not a corporation,
to execute and file a prescribed form of irrevocable
appointment of agent for service of process.
(6) Release from registration.--The Board may at any
[time, upon the motion or application of the Board,
release] time, upon the motion or application of the
Board, release a registered savings and loan holding
company from any registration theretofore made by such
company, if the Board determines that such company no
longer has control of any savings association.
(c) Holding Company Activities.--
(1) Prohibited activities.--Except as otherwise
provided in this subsection, no savings and loan
holding company and no subsidiary which is not a
savings association shall--
(A) engage in any activity or render any
service for or on behalf of a savings
association subsidiary for the purpose or with
the effect of evading any law or regulation
applicable to such savings association;
(B) commence any business activity, other
than the activities described in paragraph (2);
or
(C) continue any business activity, other
than the activities described in paragraph (2),
after the end of the 2-year period beginning on
the date on which such company received
approval under subsection (e) of this section
to become a savings and loan holding company
subject to the limitations contained in this
subparagraph.
(2) Exempt activities.--The prohibitions of
subparagraphs (B) and (C) of paragraph (1) shall not
apply to the following business activities of any
savings and loan holding company or any subsidiary (of
such company) which is not a savings association:
(A) Furnishing or performing management
services for a savings association subsidiary
of such company.
(B) Conducting an insurance agency or escrow
business.
(C) Holding, managing, or liquidating assets
owned or acquired from a savings association
subsidiary of such company.
(D) Holding or managing properties used or
occupied by a savings association subsidiary of
such company.
(E) Acting as trustee under deed of trust.
(F) Any other activity--
(i) which the Board, by regulation,
has determined to be permissible for
bank holding companies under section
4(c) of the Bank Holding Company Act of
1956, unless the Board, by regulation,
prohibits or limits any such activity
for savings and loan holding companies;
or
(ii) in which multiple savings and
loan holding companies were authorized
(by regulation) to directly engage on
March 5, 1987.
(G) In the case of a savings and loan holding
company, purchasing, holding, or disposing of
stock acquired in connection with a qualified
stock issuance if the purchase of such stock by
such savings and loan holding company is
approved by the Board pursuant to subsection
(q)(1)(D).
(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))]
1841(p))) to conduct under section 4(k) of the
Bank Holding Company Act of 1956 (12 U.S.C.
1843(k)) 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 of 1956 (12 U.S.C. 1843(l) and (m))
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.
(3) Certain limitations on activities not applicable
to certain holding companies.--Notwithstanding
paragraphs (4) and (6) of this subsection, the
limitations contained in subparagraphs (B) and (C) of
paragraph (1) shall not apply to any savings and loan
holding company (or any subsidiary of such company)
which controls--
(A) only 1 savings association, if the
savings association subsidiary of such company
is a qualified thrift lender (as determined
under subsection (m)); or
(B) more than 1 savings association, if--
(i) all, or all but 1, of the savings
association subsidiaries of such
company were initially acquired by the
company or by an individual who would
be deemed to control such company if
such individual were a company--
(I) pursuant to an
acquisition under section 13(c)
or 13(k) of the Federal Deposit
Insurance Act or section 408(m)
of the National Housing Act; or
(II) pursuant to an
acquisition in which assistance
was continued to a savings
association under section 13(i)
of the Federal Deposit
Insurance Act; and
(ii) all of the savings association
subsidiaries of such company are
qualified thrift lenders (as determined
under subsection (m)).
(4) Prior approval of certain new activities
required.--
(A) In general.--No savings and loan holding
company and no subsidiary which is not a
savings association shall commence, either de
novo or by an acquisition (in whole or in part)
of a going concern, any activity described in
paragraph (2)(F)(i) of this subsection without
the prior approval of the Board.
(B) Factors to be considered.--In considering
any application under subparagraph (A) by any
savings and loan holding company or any
subsidiary of any such company which is not a
savings association, the Board shall consider--
(i) whether the performance of the
activity described in such application
by the company or the subsidiary can
reasonably be expected to produce
benefits to the public (such as greater
convenience, increased competition, or
gains in efficiency) that outweigh
possible adverse effects of such
activity (such as undue concentration
of resources, decreased or unfair
competition, conflicts of interest, or
unsound financial practices);
(ii) the managerial resources of the
companies involved; and
(iii) the adequacy of the financial
resources, including capital, of the
companies involved.
(C) Director may differentiate between new
and ongoing activities.--In prescribing any
regulation or considering any application under
this paragraph, the Board may differentiate
between activities commenced de novo and
activities commenced by the acquisition, in
whole or in part, of a going concern.
(D) Approval or disapproval by order.--The
approval or disapproval of any application
under this paragraph by the Board shall be made
in an order issued by the Board containing the
reasons for such approval or disapproval.
(5) Grace period to achieve compliance.--If any
savings association referred to in paragraph (3) fails
to maintain the status of such association as a
qualified thrift lender, the Board may allow, for good
cause shown, any company that controls such association
(or any subsidiary of such company which is not a
savings association) up to 3 years to comply with the
limitations contained in paragraph (1)(C).
(6) Special provisions relating to certain companies
affected by 1987 amendments.--
(A) Exception to 2-year grace period for
achieving compliance.--Notwithstanding
paragraph (1)(C), any company which received
approval under subsection (e) of this section
to acquire control of a savings association
between March 5, 1987, and August 10, 1987,
shall not continue any business activity other
than an activity described in paragraph (2)
after August 10, 1987.
(B) Exemption for activities lawfully engaged
in before march 5, 1987.--Notwithstanding
paragraph (1)(C) and subject to subparagraphs
(C) and (D), any savings and loan holding
company which received approval, before March
5, 1987, under subsection (e) of this section
to acquire control of a savings association may
engage, directly or through any subsidiary
(other than a savings association subsidiary of
such company), in any activity in which such
company or such subsidiary was lawfully engaged
on such date.
(C) Termination of subparagraph (b)
exemption.--The exemption provided under
subparagraph (B) for activities engaged in by
any savings and loan holding company or a
subsidiary of such company (which is not a
savings association) which would otherwise be
prohibited under paragraph (1)(C) shall
terminate with respect to such activities of
such company or subsidiary upon the occurrence
(after August 10, 1987) of any of the
following:
(i) The savings and loan holding
company acquires control of a bank or
an additional savings association
(other than a savings association
acquired pursuant to section 13(c) or
13(k) of the Federal Deposit Insurance
Act or section 406(f) or 408(m) of the
National Housing Act).
(ii) Any savings association
subsidiary of the savings and loan
holding company fails to qualify as a
domestic building and loan association
under section 7701(a)(19) of the
Internal Revenue Code of 1986.
(iii) The savings and loan holding
company engages in any business
activity--
(I) which is not described in
paragraph (2); and
(II) in which it was not
engaged on March 5, 1987.
(iv) Any savings association
subsidiary of the savings and loan
holding company increases the number of
locations from which such savings
association conducts business after
March 5, 1987 (other than an increase
which occurs in connection with a
transaction under section 13(c) or (k)
of the Federal Deposit Insurance Act or
section 408(m) of the National Housing
Act.
(v) Any savings association
subsidiary of the savings and loan
holding company permits any overdraft
(including an intraday overdraft), or
incurs any such overdraft in its
account at a Federal Reserve bank, on
behalf of an affiliate, unless such
overdraft is the result of an
inadvertent computer or accounting
error that is beyond the control of
both the savings association subsidiary
and the affiliate.
(D) Order to terminate subparagraph (b)
activity.--Any activity described in
subparagraph (B) may also be terminated by the
Board, after opportunity for hearing, if the
Board determines, having due regard for the
purposes of this Act, that such action is
necessary to prevent conflicts of interest or
unsound practices or is in the public interest.
(7) Foreign savings and loan holding company.--
Notwithstanding any other provision of this section,
any savings and loan holding company organized under
the laws of a foreign country as of June 1, 1984
(including any subsidiary thereof which is not a
savings association), which controls a single savings
association on August 10, 1987, shall not be subject to
this subsection with respect to any activities of such
holding company which are conducted exclusively in a
foreign country.
(8) Exemption for bank holding companies.--Except for
paragraph (1)(A), this subsection shall not apply to
any company that is treated as a bank holding company
for purposes of section 4 of the Bank Holding Company
Act of 1956, or any of its subsidiaries.
(9) Prevention of new affiliations between s&l;
holding companies and commercial firms.--
(A) In general.--Notwithstanding paragraph
(3), no company may directly or indirectly,
including through any merger, consolidation, or
other type of business combination, acquire
control of a savings association after May 4,
1999, unless the company is engaged, directly
or indirectly (including through a subsidiary
other than a savings association), only in
activities that are permitted--
(i) under paragraph (1)(C) or (2) of
this subsection; or
(ii) for financial holding companies
under section 4(k) of the Bank Holding
Company Act of 1956.
(B) Prevention of new commercial
affiliations.--Notwithstanding paragraph (3),
no savings and loan holding company may engage
directly or indirectly (including through a
subsidiary other than a savings association) in
any activity other than as described in clauses
(i) and (ii) of subparagraph (A).
(C) Preservation of authority of existing
unitary s&l; holding companies.--Subparagraphs
(A) and (B) do not apply with respect to any
company that was a savings and loan holding
company on May 4, 1999, or that becomes a
savings and loan holding company pursuant to an
application pending before the Office on or
before that date, and that--
(i) meets and continues to meet the
requirements of paragraph (3); and
(ii) continues to control not fewer
than 1 savings association that it
controlled on May 4, 1999, or that it
acquired pursuant to an application
pending before the Office on or before
that date, or the successor to such
savings association.
(D) Corporate reorganizations permitted.--
This paragraph does not prevent a transaction
that--
(i) involves solely a company under
common control with a savings and loan
holding company from acquiring,
directly or indirectly, control of the
savings and loan holding company or any
savings association that is already a
subsidiary of the savings and loan
holding company; or
(ii) involves solely a merger,
consolidation, or other type of
business combination as a result of
which a company under common control
with the savings and loan holding
company acquires, directly or
indirectly, control of the savings and
loan holding company or any savings
association that is already a
subsidiary of the savings and loan
holding company.
(E) Authority to prevent evasions.--The Board
may issue interpretations, regulations, or
orders that the Board determines necessary to
administer and carry out the purpose and
prevent evasions of this paragraph, including a
determination (in consultation with the
appropriate Federal banking agency) that,
notwithstanding the form of a transaction, the
transaction would in substance result in a
company acquiring control of a savings
association.
(F) Preservation of authority for family
trusts.--Subparagraphs (A) and (B) do not apply
with respect to any trust that becomes a
savings and loan holding company with respect
to a savings association, if--
(i) not less than 85 percent of the
beneficial ownership interests in the
trust are continuously owned, directly
or indirectly, by or for the benefit of
members of the same family, or their
spouses, who are lineal descendants of
common ancestors who controlled,
directly or indirectly, such savings
association on May 4, 1999, or a
subsequent date, pursuant to an
application pending before the Office
on or before May 4, 1999; and
(ii) at the time at which such trust
becomes a savings and loan holding
company, such ancestors or lineal
descendants, or spouses of such
descendants, have directly or
indirectly controlled the savings
association continuously since May 4,
1999, or a subsequent date, pursuant to
an application pending before the
Office on or before May 4, 1999.
(d) Transactions With Affiliates.--Transactions between any
subsidiary savings association of a savings and loan holding
company and any affiliate (of such savings association
subsidiary) shall be subject to the limitations and
prohibitions specified in section 11 of this Act.
(e) Acquisitions.--
(1) In general.--It shall be unlawful for--
(A) any savings and loan holding company
directly or indirectly, or through one or more
subsidiaries or through one or more
transactions--
(i) to acquire, except with the prior
written approval of the Board, the
control of a savings association or a
savings and loan holding company, or to
retain the control of such an
association or holding company acquired
or retained in violation of this
section as heretofore or hereafter in
effect;
(ii) to acquire, except with the
prior written approval of the Board, by
the process of merger, consolidation,
or purchase of assets, another savings
association or a savings and loan
holding company, or all or
substantially all of the assets of any
such association or holding company;
(iii) to acquire, by purchase or
otherwise, or to retain, except with
the prior written approval of the
Board, more than 5 percent of the
voting shares of a savings association
not a subsidiary, or of a savings and
loan holding company not a subsidiary,
or in the case of a multiple savings
and loan holding company (other than a
company described in subsection
(c)(8)), to acquire or retain, and the
Board may not authorize acquisition or
retention of, more than 5 percent of
the voting shares of any company not a
subsidiary which is engaged in any
business activity other than the
activities specified in subsection
(c)(2). This clause shall not apply to
shares of a savings association or of a
savings and loan holding company--
(I) held as a bona fide
fiduciary (whether with or
without the sole discretion to
vote such shares);
(II) held temporarily
pursuant to an underwriting
commitment in the normal course
of an underwriting business;
(III) held in an account
solely for trading purposes;
(IV) over which no control is
held other than control of
voting rights acquired in the
normal course of a proxy
solicitation;
(V) acquired in securing or
collecting a debt previously
contracted in good faith,
during the 2-year period
beginning on the date of such
acquisition or for such
additional time (not exceeding
3 years) as the Board may
permit if the Board determines
that such an extension will not
be detrimental to the public
interest;
(VI) acquired under section
408(m) of the National Housing
Act or section 13(k) of the
Federal Deposit Insurance Act;
(VII) held by any insurance
company, as defined in section
2(a)(17) of the Investment
Company Act of 1940, except as
provided in paragraph (6); or
(VIII) acquired pursuant to a
qualified stock issuance if
such purchase is approved by
the Board under subsection
(q)(1)(D);
except that the aggregate amount of
shares held under this clause (other
than under subclauses (I), (II), (III),
(IV), and (VI)) may not exceed 15
percent of all outstanding shares or of
the voting power of a savings
association or savings and loan holding
company; or
(iv) to acquire the control of an
uninsured institution, or to retain for
more than one year after February 14,
1968, or from the date on which such
control was acquired, whichever is
later, except that the Board may upon
application by such company extend such
one-year period from year to year, for
an additional period not exceeding 3
years, if the Board finds such
extension is warranted and is not
detrimental to the public interest; and
(B) any other company, without the prior
written approval of the Board, directly or
indirectly, or through one or more subsidiaries
or through one or more transactions, to acquire
the control of one or more savings
associations, except that such approval shall
not be required in connection with the control
of a savings association, (i) acquired by
devise under the terms of a will creating a
trust which is excluded from the definition of
``savings and loan holding company'' under
subsection (a) of this section, (ii) acquired
in connection with a reorganization in which a
person or group of persons, having had control
of a savings association for more than 3 years,
vests control of that association in a newly
formed holding company subject to the control
of the same person or group of persons, or
(iii) acquired by a bank holding company that
is registered under, and subject to, the Bank
Holding Company Act of 1956, or any company
controlled by such bank holding company. The
Board shall approve an acquisition of a savings
association under this subparagraph unless the
Board finds the financial and managerial
resources and future prospects of the company
and association involved to be such that the
acquisition would be detrimental to the
association or the insurance risk of the
Deposit Insurance Fund, and shall render a
decision within 90 days after submission to the
Board of the complete record on the
application.
Consideration of the managerial resources of a company
or savings association under subparagraph (B) shall
include consideration of the competence, experience,
and integrity of the officers, directors, and principal
shareholders of the company or association.
(2) Factors to be considered.--The Board shall not
approve any acquisition under subparagraph (A)(i) or
(A)(ii), or of more than one savings association under
subparagraph (B) of paragraph (1) of this subsection,
any acquisition of stock in connection with a qualified
stock issuance, any acquisition under paragraph (4)(A),
or any transaction under section 13(k) of the Federal
Deposit Insurance Act, except in accordance with this
paragraph. In every case, the Board shall take into
consideration the financial and managerial resources
and future prospects of the company and association
involved, the effect of the acquisition on the
association, the insurance risk to the Deposit
Insurance Fund, and the convenience and needs of the
community to be served, and shall render a decision
within 90 days after submission to the Board of the
complete record on the application. Consideration of
the managerial resources of a company or savings
association shall include consideration of the
competence, experience, and integrity of the officers,
directors, and principal shareholders of the company or
association. Before approving any such acquisition,
except a transaction under section 13(k) of the Federal
Deposit Insurance Act, the Board shall request from the
Attorney General and consider any report rendered
within 30 days on the competitive factors involved. The
Board shall not approve any proposed acquisition--
(A) which would result in a monopoly, or
which would be in furtherance of any
combination or conspiracy to monopolize or to
attempt to monopolize the savings and loan
business in any part of the United States,
(B) the effect of which in any section of the
country may be substantially to lessen
competition, or tend to create a monopoly, or
which in any other manner would be in restraint
of trade, unless it finds that the
anticompetitive effects of the proposed
acquisition are clearly outweighed in the
public interest by the probable effect of the
acquisition in meeting the convenience and
needs of the community to be served,
(C) if the company fails to provide adequate
assurances to the Board that the company will
make available to the Board such information on
the operations or activities of the company,
and any affiliate of the company, as the Board
determines to be appropriate to determine and
enforce compliance with this Act,
(D) in the case of an application involving a
foreign bank, if the foreign bank is not
subject to comprehensive supervision or
regulation on a consolidated basis by the
appropriate authorities in the bank's home
country, or
(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).
(3) Interstate Acquisitions.--No acquisition shall be
approved by the Board under this subsection which will
result in the formation by any company, through one or
more subsidiaries or through one or more transactions,
of a multiple savings and loan holding company
controlling savings associations in more than one
State, unless--
(A) such company, or a savings association
subsidiary of such company, is authorized to
acquire control of a savings association
subsidiary, or to operate a home or branch
office, in the additional State or States
pursuant to section 13(k) of the Federal
Deposit Insurance Act;
(B) such company controls a savings
association subsidiary which operated a home or
branch office in the additional State or States
as of March 5, 1987; or
(C) the statutes of the State in which the
savings association to be acquired is located
permit a savings association chartered by such
State to be acquired by a savings association
chartered by the State where the acquiring
savings association or savings and loan holding
company is located or by a holding company that
controls such a State chartered savings
association, and such statutes specifically
authorize such an acquisition by language to
that effect and not merely by implication.
(4) Acquisitions by certain individuals.--
(A) In general.--Notwithstanding subsection
(h)(2), any director or officer of a savings
and loan holding company, or any individual who
owns, controls, or holds with power to vote (or
holds proxies representing) more than 25
percent of the voting shares of such holding
company, may acquire control of any savings
association not a subsidiary of such savings
and loan holding company with the prior written
approval of the Board.
(B) Treatment of certain holding companies.--
If any individual referred to in subparagraph
(A) controls more than 1 savings and loan
holding company or more than 1 savings
association, any savings and loan holding
company controlled by such individual shall be
subject to the activities limitations contained
in subsection (c) to the same extent such
limitations apply to multiple savings and loan
holding companies, unless all or all but 1 of
the savings associations (including any
institution deemed to be a savings association
under subsection (l) of this section)
controlled directly or indirectly by such
individual was acquired pursuant to an
acquisition described in subclause (I) or (II)
of subsection (c)(3)(B)(i).
(5) Acquisitions pursuant to certain security
interests.--This subsection and subsection (c)(2) of
this section do not apply to any savings and loan
holding company which acquired the control of a savings
association or of a savings and loan holding company
pursuant to a pledge or hypothecation to secure a loan,
or in connection with the liquidation of a loan, made
in the ordinary course of business. It shall be
unlawful for any such company to retain such control
for more than one year after February 14, 1968, or from
the date on which such control was acquired, whichever
is later, except that the Board may upon application by
such company extend such one-year period from year to
year, for an additional period not exceeding 3 years,
if the Board finds such extension is warranted and
would not be detrimental to the public interest.
(6) Shares held by insurance affiliates.--Shares
described in clause (iii)(VII) of paragraph (1)(A)
shall not be excluded for purposes of clause (iii) of
such paragraph if--
(A) all shares held under such clause
(iii)(VII) by all insurance company affiliates
of such savings association or savings and loan
holding company in the aggregate exceed 5
percent of all outstanding shares or of the
voting power of the savings association or
savings and loan holding company; or
(B) such shares are acquired or retained with
a view to acquiring, exercising, or
transferring control of the savings association
or savings and loan holding company.
(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 [Board of the Office
of Thrift Supervision] Director of the
Office of Thrift Supervision, or, on
and after the transfer date, as defined
in section 2 of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (12 U.S.C. 5301), 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.
(f) Declaration of Dividend.--Every subsidiary savings
association of a savings and loan holding company shall give
the Board not less than 30 days' advance notice of the proposed
declaration by its directors of any dividend on its guaranty,
permanent, or other nonwithdrawable stock. Such notice period
shall commence to run from the date of receipt of such notice
by the Board. Any such dividend declared within such period, or
without the giving of such notice to the Board, shall be
invalid and shall confer no rights or benefits upon the holder
of any such stock.
(g) Administration and Enforcement.--
(1) In general.--The Board is authorized to issue
such regulations and orders, including regulations and
orders relating to capital requirements for savings and
loan holding companies, as the Board deems necessary or
appropriate to enable the Board to administer and carry
out the purposes of this section, and to require
compliance therewith and prevent evasions thereof. 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.
(2) Investigations.--The Board may make such
investigations as the Board deems necessary or
appropriate to determine whether the provisions of this
section, and regulations and orders thereunder, are
being and have been complied with by savings and loan
holding companies and subsidiaries and affiliates
thereof. For the purpose of any investigation under
this section, the Board may administer oaths and
affirmations, issue subpenas, take evidence, and
require the production of any books, papers,
correspondence, memorandums, or other records which may
be relevant or material to the inquiry. The attendance
of witnesses and the production of any such records may
be required from any place in any State. The Board may
apply to the United States district court for the
judicial district (or the United States court in any
territory) in which any witness or company subpenaed
resides or carries on business, for enforcement of any
subpena issued pursuant to this paragraph, and such
courts shall have jurisdiction and power to order and
require compliance.
(3) Proceedings.--(A) In any proceeding under
subsection (a)(2)(D) or under paragraph (5) of this
subsection, the Board may administer oaths and
affirmations, take or cause to be taken depositions,
and issue subpenas. The Board may make regulations with
respect to any such proceedings. The attendance of
witnesses and the production of documents provided for
in this paragraph may be required from any place in any
State or in any territory at any designated place where
such proceeding is being conducted. Any party to such
proceedings may apply to the United States District
Court for the District of Columbia, or the United
States district court for the judicial district or the
United States court in any territory in which such
proceeding is being conducted, or where the witness
resides or carries on business, for enforcement of any
subpena issued pursuant to this paragraph, and such
courts shall have jurisdiction and power to order and
require compliance therewith. Witnesses subpenaed under
this section shall be paid the same fees and mileage
that are paid witnesses in the district courts of the
United States.
(B) Any hearing provided for in subsection (a)(2)(D)
or under paragraph (5) of this section shall be held in
the Federal judicial district or in the territory in
which the principal office of the association or other
company is located unless the party afforded the
hearing consents to another place, and shall be
conducted in accordance with the provisions of chapter
5 of title 5, United States Code.
(4) Injunctions.--Whenever it appears to the Board
that any person is engaged or has engaged or is about
to engage in any acts or practices which constitute or
will constitute a violation of the provisions of this
section or of any regulation or order thereunder, the
Board may bring an action in the proper United States
district court, or the United States court of any
territory or other place subject to the jurisdiction of
the United States, to enjoin such acts or practices, to
enforce compliance with this section or any regulation
or order, or to require the divestiture of any
acquisition in violation of this section, or for any
combination of the foregoing, and such courts shall
have jurisdiction of such actions. Upon a proper
showing an injunction, decree, restraining order, order
of divestiture, or other appropriate order shall be
granted without bond.
(5) Cease and desist orders.--(A) Notwithstanding any
other provision of this section, the Board may,
whenever the Board has reasonable cause to believe that
the continuation by a savings and loan holding company
of any activity or of ownership or control of any of
its noninsured subsidiaries constitutes a serious risk
to the financial safety, soundness, or stability of a
savings and loan holding company's subsidiary savings
association and is inconsistent with the sound
operation of a savings association or with the purposes
of this section or section 8 of the Federal Deposit
Insurance Act, order the savings and loan holding
company or any of its subsidiaries, after due notice
and opportunity for hearing, to terminate such
activities or to terminate (within 120 days or such
longer period as the Board directs in unusual
circumstances) its ownership or control of any such
noninsured subsidiary either by sale or by distribution
of the shares of the subsidiary to the shareholders of
the savings and loan holding company. Such distribution
shall be pro rata with respect to all of the
shareholders of the distributing savings and loan
holding company, and the holding company shall not make
any charge to its shareholders arising out of such a
distribution.
(B) The Board may in the discretion of the Board
apply to the United States district court within the
jurisdiction of which the principal office of the
company is located, for the enforcement of any
effective and outstanding order issued under this
section, and such court shall have jurisdiction and
power to order and require compliance therewith. Except
as provided in subsection (j), no court shall have
jurisdiction to affect by injunction or otherwise the
issuance or enforcement of any notice or order under
this section, or to review, modify, suspend, terminate,
or set aside any such notice or order.
(h) Prohibited Acts.--It shall be unlawful for--
(1) any savings and loan holding company or
subsidiary thereof, or any director, officer, employee,
or person owning, controlling, or holding with power to
vote, or holding proxies representing, more than 25
percent of the voting shares, of such holding company
or subsidiary, to hold, solicit, or exercise any
proxies in respect of any voting rights in a savings
association which is a mutual association;
(2) any director or officer of a savings and loan
holding company, or any individual who owns, controls,
or holds with power to vote (or holds proxies
representing) more than 25 percent of the voting shares
of such holding company, to acquire control of any
savings association not a subsidiary of such savings
and loan holding company, unless such acquisition is
approved by the Board pursuant to subsection (e)(4); or
(3) any individual, except with the prior approval of
the Board, to serve or act as a director, officer, or
trustee of, or become a partner in, any savings and
loan holding company after having been convicted of any
criminal offense involving dishonesty or breach of
trust.
(i) Penalties.--
(1) Criminal penalty.--(A) Whoever knowingly violates
any provision of this section or being a company,
violates any regulation or order issued by the Board
under this section, shall be imprisoned not more than 1
year, fined not more than $100,000 per day for each day
during which the violation continues, or both.
(B) Whoever, with the intent to deceive, defraud, or
profit significantly, knowingly violates any provision
of this section shall be fined not more than
[$1,000,000] $1,500,000 per day for each day during
which the violation continues, imprisoned not more than
5 years, or both.
(2) Civil money penalty.--
(A) Penalty.--Any company which violates, and
any person who participates in a violation of,
any provision of this section, or any
regulation or order issued pursuant thereto,
shall forfeit and pay a civil penalty of not
more than $25,000 for each day during which
such violation continues.
(B) Assessment.--Any penalty imposed under
subparagraph (A) may be assessed and collected
by the Board in the manner provided in
subparagraphs (E), (F), (G), and (I) of section
8(i)(2) of the Federal Deposit Insurance Act
for penalties imposed (under such section) and
any such assessment shall be subject to the
provisions of such section.
(C) Hearing.--The company or other person
against whom any civil penalty is assessed
under this paragraph shall be afforded a
hearing if such company or person submits a
request for such hearing within 20 days after
the issuance of the notice of assessment.
Section 8(h) of the Federal Deposit Insurance
Act shall apply to any proceeding under this
paragraph.
(D) Disbursement.--All penalties collected
under authority of this paragraph shall be
deposited into the Treasury.
(E) Violate defined.--For purposes of this
section, the term ``violate'' includes any
action (alone or with another or others) for or
toward causing, bringing about, participating
in, counseling, or aiding or abetting a
violation.
(F) Regulations.--The Board shall prescribe
regulations establishing such procedures as may
be necessary to carry out this paragraph.
(3) Civil money penalty.--
(A) Penalty.--Any company which violates, and
any person who participates in a violation of,
any provision of this section, or any
regulation or order issued pursuant thereto,
shall forfeit and pay a civil penalty of not
more than $25,000 for each day during which
such violation continues.
(B) Assessment; etc.--Any penalty imposed
under subparagraph (A) may be assessed and
collected by the Board in the manner provided
in subparagraphs (E), (F), (G), and (I) of
section 8(i)(2) of the Federal Deposit
Insurance Act for penalties imposed (under such
section) and any such assessment shall be
subject to the provisions of such section.
(C) Hearing.--The company or other person
against whom any penalty is assessed under this
paragraph shall be afforded an agency hearing
if such company or person submits a request for
such hearing within 20 days after the issuance
of the notice of assessment. Section 8(h) of
the Federal Deposit Insurance Act shall apply
to any proceeding under this paragraph.
(D) Disbursement.--All penalties collected
under authority of this paragraph shall be
deposited into the Treasury.
(E) Violate defined.--For purposes of this
section, the term ``violate'' includes any
action (alone or with another or others) for or
toward causing, bringing about, participating
in, counseling, or aiding or abetting a
violation.
(F) Regulations.--The Board shall prescribe
regulations establishing such procedures as may
be necessary to carry out this paragraph.
(4) Notice under this section after separation from
service.--The resignation, termination of employment or
participation, or separation of an institution-
affiliated party (within the meaning of section 3(u) of
the Federal Deposit Insurance Act) with respect to a
savings and loan holding company or subsidiary thereof
(including a separation caused by the deregistration of
such a company or such a subsidiary) shall not affect
the jurisdiction and authority of the Board to issue
any notice and proceed under this section against any
such party, if such notice is served before the end of
the 6-year period beginning on the date such party
ceased to be such a party with respect to such holding
company or its subsidiary (whether such date occurs
before, on, or after the date of the enactment of this
paragraph).
(j) Judicial Review.--Any party aggrieved by an order of the
Board under this section may obtain a review of such order by
filing in the court of appeals of the United States for the
circuit in which the principal office of such party 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
Board be modified, terminated, or set aside. A copy of the
petition shall be forthwith transmitted by the clerk of the
court to the Board, and thereupon the Board shall file in the
court the record in the proceeding, as provided in section 2112
of title 28, United States Code. Upon the filing of such
petition, such court shall have jurisdiction, which upon the
filing of the record shall be exclusive, to affirm, modify,
terminate, or set aside, in whole or in part, the order of the
Board. Review of such proceedings shall be had as provided in
chapter 7 of title 5, 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 upon certiorari as
provided in section 1254 of title 28, United States Code.
(k) Savings Clause.--Nothing contained in this section, other
than any transaction approved under subsection (e)(2) of this
section or section 13 of the Federal Deposit Insurance Act,
shall be interpreted or construed as approving any act, action,
or conduct which is or has been or may be in violation of
existing law, nor shall anything herein contained constitute a
defense to any action, suit, or proceeding pending or hereafter
instituted on account of any act, action, or conduct in
violation of the antitrust laws.
(l) Treatment of FDIC Insured State Savings Banks and
Cooperative Banks as Savings Associations.--
(1) In general.--Notwithstanding any other provision
of law, a savings bank (as defined in section 3(g) of
the Federal Deposit Insurance Act) and a cooperative
bank that is an insured bank (as defined in section
3(h) of the Federal Deposit Insurance Act) upon
application shall be deemed to be a savings association
for the purpose of this section, if the appropriate
Federal banking agency determines that such bank is a
qualified thrift lender (as determined under subsection
(m)).
(2) Failure to maintain qualified thrift lender
status.--If any savings bank which is deemed to be a
savings association under paragraph (1) subsequently
fails to maintain its status as a qualified thrift
lender, as determined by the appropriate Federal
banking agency, such bank may not thereafter be a
qualified thrift lender for a period of 5 years.
(m) Qualified Thrift Lender Test.--
(1) In general.--Except as provided in paragraphs (2)
and (7), any savings association is a qualified thrift
lender if--
(A) the savings association qualifies as a
domestic building and loan association, as such
term is defined in section 7701(a)(19) of the
Internal Revenue Code of 1986; or
(B)(i) the savings association's qualified
thrift investments equal or exceed 65 percent
of the savings association's portfolio assets;
and
(ii) the savings association's qualified
thrift investments continue to equal or exceed
65 percent of the savings association's
portfolio assets on a monthly average basis in
9 out of every 12 months.
(2) Exceptions granted by director.--Notwithstanding
paragraph (1), the appropriate Federal banking agency
may grant such temporary and limited exceptions from
the minimum actual thrift investment percentage
requirement contained in such paragraph as the
appropriate Federal banking agency deems necessary if--
(A) the appropriate Federal banking agency
determines that extraordinary circumstances
exist, such as when the effects of high
interest rates reduce mortgage demand to such a
degree that an insufficient opportunity exists
for a savings association to meet such
investment requirements; or
(B) the appropriate Federal banking agency
determines that--
(i) the grant of any such exception
will significantly facilitate an
acquisition under section 13(c) or
13(k) of the Federal Deposit Insurance
Act;
(ii) the acquired association will
comply with the transition requirements
of paragraph (7)(B), as if the date of
the exemption were the starting date
for the transition period described in
that paragraph; and
(iii) the appropriate Federal banking
agency determines that the exemption
will not have an undue adverse effect
on competing savings associations in
the relevant market and will further
the purposes of this subsection.
(3) Failure to become and remain a qualified thrift
lender.--
(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).
(B) Restrictions applicable to savings
associations that are not qualified thrift
lenders.--
(i) Restrictions effective
immediately.--The following
restrictions shall apply to a savings
association beginning on the date on
which the savings association should
have become or ceases to be a qualified
thrift lender:
(I) Activities.--The savings
association shall not make any
new investment (including an
investment in a subsidiary) or
engage, directly or indirectly,
in any other new activity
unless that investment or
activity would be permissible
for the savings association if
it were a national bank, and is
also permissible for the
savings association as a
savings association.
(II) Branching.--The savings
association shall not establish
any new branch office at any
location at which a national
bank located in the savings
association's home State may
not establish a branch office.
For purposes of this subclause,
a savings association's home
State is the State in which the
savings association's total
deposits were largest on the
date on which the savings
association should have become
or ceased to be a qualified
thrift lender.
(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)).
(ii) Additional restrictions
effective after 3 years.--Beginning 3
years after the date on which a savings
association should have become a
qualified thrift lender, or the date on
which the savings association ceases to
be a qualified thrift lender, as
applicable, the savings association
shall not retain any investment
(including an investment in any
subsidiary) or engage, directly or
indirectly, in any activity, unless
that investment or activity--
(I) would be permissible for
the savings association if it
were a national bank; and
(II) is permissible for the
savings association as a
savings association.
(C) Holding company regulation.--Any company
that controls a savings association that is
subject to any provision of subparagraph (B)
shall, within one year after the date on which
the savings association should have become or
ceases to be a qualified thrift lender,
register as and be deemed to be a bank holding
company subject to all of the provisions of the
Bank Holding Company Act of 1956, section 8 of
the Federal Deposit Insurance Act, and other
statutes applicable to bank holding companies,
in the same manner and to the same extent as if
the company were a bank holding company and the
savings association were a bank, as those terms
are defined in the Bank Holding Company Act of
1956.
(D) Requalification.--A savings association
that should have become or ceases to be a
qualified thrift lender shall not be subject to
subparagraph (B) or (C) if the savings
association becomes a qualified thrift lender
by meeting the qualified thrift lender
requirement in paragraph (1) on a monthly
average basis in 9 out of the preceding 12
months and remains a qualified thrift lender.
If the savings association (or any savings
association that acquired all or substantially
all of its assets from that savings
association) at any time thereafter ceases to
be a qualified thrift lender, it shall
immediately be subject to all provisions of
subparagraphs (B) and (C) as if all the periods
described in subparagraphs (B)(ii) and (C) had
expired.
(E) Exemption for specialized savings
associations serving certain military
personnel.--Subparagraph (A) shall not apply to
a savings association subsidiary of a savings
and loan holding company if at least 90 percent
of the customers of the savings and loan
holding company and its subsidiaries and
affiliates are active or former members in the
United States military services or the widows,
widowers, divorced spouses, or current or
former dependents of such members.
(F) Exemption for certain federal savings
associations.--This paragraph shall not apply
to any Federal savings association in existence
as a Federal savings association on the date of
enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989--
(i) that was chartered before October
15, 1982, as a savings bank or a
cooperative bank under State law; or
(ii) that acquired its principal
assets from an association that was
chartered before October 15, 1982, as a
savings bank or a cooperative bank
under State law.
(G) No circumvention of exit moratorium.--
Subparagraph (A) of this paragraph shall not be
construed as permitting any insured depository
institution to engage in any conversion
transaction prohibited under section 5(d) of
the Federal Deposit Insurance Act.
(4) Definitions.--For purposes of this subsection,
the following definitions shall apply:
(A) Actual thrift investment percentage.--The
term ``actual thrift investment percentage''
means the percentage determined by dividing--
(i) the amount of a savings
association's qualified thrift
investments, by
(ii) the amount of the savings
association's portfolio assets.
(B) Portfolio assets.--The term ``portfolio
assets'' means, with respect to any savings
association, the total assets of the savings
association, minus the sum of--
(i) goodwill and other intangible
assets;
(ii) the value of property used by
the savings association to conduct its
business; and
(iii) liquid assets of the type
required to be maintained under section
6 of the Home Owners' Loan Act, as in
effect on the day before the date of
the enactment of the Financial
Regulatory Relief and Economic
Efficiency Act of 2000, in an amount
not exceeding the amount equal to 20
percent of the savings association's
total assets.
(C) Qualified thrift investments.--
(i) In general.--The term ``qualified
thrift investments'' means, with
respect to any savings association, the
assets of the savings association that
are described in clauses (ii) and
(iii).
(ii) Assets includible without
limit.--The following assets are
described in this clause for purposes
of clause (i):
(I) The aggregate amount of
loans held by the savings
association that were made to
purchase, refinance, construct,
improve, or repair domestic
residential housing or
manufactured housing.
(II) Home-equity loans.
(III) Securities backed by or
representing an interest in
mortgages on domestic
residential housing or
manufactured housing.
(IV) Existing obligations of
deposit insurance agencies.--
Direct or indirect obligations
of the Federal Deposit
Insurance Corporation or the
Federal Savings and Loan
Insurance Corporation issued in
accordance with the terms of
agreements entered into prior
to July 1, 1989, for the 10-
year period beginning on the
date of issuance of such
obligations.
(V) New obligations of
deposit insurance agencies.--
Obligations of the Federal
Deposit Insurance Corporation,
the Federal Savings and Loan
Insurance Corporation, the
FSLIC Resolution Fund, and the
Resolution Trust Corporation
issued in accordance with the
terms of agreements entered
into on or after July 1, 1989,
for the 5-year period beginning
on the date of issuance of such
obligations.
(VI) Shares of stock issued
by any Federal home loan bank.
(VII) Loans for educational
purposes, loans to small
businesses, and loans made
through credit cards or credit
card accounts.
(iii) Assets includible subject to
percentage restriction.--The following
assets are described in this clause for
purposes of clause (i):
(I) 50 percent of the dollar
amount of the residential
mortgage loans originated by
such savings association and
sold within 90 days of
origination.
(II) Investments in the
capital stock or obligations
of, and any other security
issued by, any service
corporation if such service
corporation derives at least 80
percent of its annual gross
revenues from activities
directly related to purchasing,
refinancing, constructing,
improving, or repairing
domestic residential real
estate or manufactured housing.
(III) 200 percent of the
dollar amount of loans and
investments made to acquire,
develop, and construct 1- to 4-
family residences the purchase
price of which is or is
guaranteed to be not greater
than 60 percent of the median
value of comparable newly
constructed 1- to 4-family
residences within the local
community in which such real
estate is located, except that
not more than 25 percent of the
amount included under this
subclause may consist of
commercial properties related
to the development if those
properties are directly related
to providing services to
residents of the development.
(IV) 200 percent of the
dollar amount of loans for the
acquisition or improvement of
residential real property,
churches, schools, and nursing
homes located within, and loans
for any other purpose to any
small businesses located within
any area which has been
identified by the appropriate
Federal banking agency, in
connection with any review or
examination of community
reinvestment practices, as a
geographic area or neighborhood
in which the credit needs of
the low- and moderate-income
residents of such area or
neighborhood are not being
adequately met.
(V) Loans for the purchase or
construction of churches,
schools, nursing homes, and
hospitals, other than those
qualifying under clause (IV),
and loans for the improvement
and upkeep of such properties.
(VI) Loans for personal,
family, or household purposes
(other than loans for personal,
family, or household purposes
described in clause (ii)(VII)).
(VII) Shares of stock issued
by the Federal Home Loan
Mortgage Corporation or the
Federal National Mortgage
Association.
(iv) Percentage restriction
applicable to certain assets.--The
aggregate amount of the assets
described in clause (iii) which may be
taken into account in determining the
amount of the qualified thrift
investments of any savings association
shall not exceed the amount which is
equal to 20 percent of a savings
association's portfolio assets.
(v) The term ``qualified thrift
investments'' excludes--
(I) except for home equity
loans, that portion of any loan
or investment that is used for
any purpose other than those
expressly qualifying under any
subparagraph of clause (ii) or
(iii); or
(II) goodwill or any other
intangible asset.
(D) Credit card.--The appropriate Federal
banking agency shall issue such regulations as
may be necessary to define the term ``credit
card''.
(E) Small business.--The appropriate Federal
banking agency shall issue such regulations as
may be necessary to define the term ``small
business''.
(5) Consistent accounting required.--
(A) In determining the amount of a savings
association's portfolio assets, the assets of
any subsidiary of the savings association shall
be consolidated with the assets of the savings
association if--
(i) Assets of the subsidiary are
consolidated with the assets of the
savings association in determining the
savings association's qualified thrift
investments; or
(ii) Residential mortgage loans
originated by the subsidiary are
included pursuant to paragraph
(4)(C)(iii)(I) in determining the
savings association's qualified thrift
investments.
(B) In determining the amount of a savings
association's portfolio assets and qualified
thrift investments, consistent accounting
principles shall be applied.
(6) Special rules for puerto rico and virgin islands
savings associations.--
(A) Puerto rico savings associations.--With
respect to any savings association
headquartered and operating primarily in Puerto
Rico--
(i) the term ``qualified thrift
investments'' includes, in addition to
the items specified in paragraph (4)--
(I) the aggregate amount of
loans for personal, family,
educational, or household
purposes made to persons
residing or domiciled in the
Commonwealth of Puerto Rico;
and
(II) the aggregate amount of
loans for the acquisition or
improvement of churches,
schools, or nursing homes, and
of loans to small businesses,
located within the Commonwealth
of Puerto Rico; and
(ii) the aggregate amount of loans
related to the purchase, acquisition,
development and construction of 1- to
4-family residential real estate--
(I) which is located within
the Commonwealth of Puerto
Rico; and
(II) the value of which (at
the time of acquisition or upon
completion of the development
and construction) is below the
median value of newly
constructed 1- to 4-family
residences in the Commonwealth
of Puerto Rico, which may be
taken into account in
determining the amount of the
qualified thrift investments
and of such savings association
shall be doubled.
(B) Virgin islands savings associations.--
With respect to any savings association
headquartered and operating primarily in the
Virgin Islands--
(i) the term ``qualified thrift
investments'' includes, in addition to
the items specified in paragraph (4)--
(I) the aggregate amount of
loans for personal, family,
educational, or household
purposes made to persons
residing or domiciled in the
Virgin Islands; and
(II) the aggregate amount of
loans for the acquisition or
improvement of churches,
schools, or nursing homes, and
of loans to small businesses,
located within the Virgin
Islands; and
(ii) the aggregate amount of loans
related to the purchase, acquisition,
development and construction of 1- to
4-family residential real estate--
(I) which is located within
the Virgin Islands; and
(II) the value of which (at
the time of acquisition or upon
completion of the development
and construction) is below the
median value of newly
constructed 1- to 4-family
residences in the Virgin
Islands, which may be taken
into account in determining the
amount of the qualified thrift
investments and of such savings
association shall be doubled.
(7) Transitional rule for certain savings
associations.--
(A) In general.--If any Federal savings
association in existence as a Federal savings
association on the date of enactment of the
Financial Institutions Reform, Recovery, and
Enforcement Act of 1989--
(i) that was chartered as a savings
bank or a cooperative bank under State
law before October 15, 1982; or
(ii) that acquired its principal
assets from an association that was
chartered before October 15, 1982, as a
savings bank or a cooperative bank
under State law,
meets the requirements of subparagraph (B),
such savings association shall be treated as a
qualified thrift lender during the period
ending on September 30, 1995.
(B) Subparagraph (b) requirements.--A savings
association meets the requirements of this
subparagraph if, in the determination of the
appropriate Federal banking agency--
(i) the actual thrift investment
percentage of such association does
not, after the date of enactment of the
Financial Institutions Reform,
Recovery, and Enforcement Act of 1989,
decrease below the actual thrift
investment percentage of such
association on July 15, 1989; and
(ii) the amount by which--
(I) the actual thrift
investment percentage of such
association at the end of each
period described in the
following table, exceeds
(II) the actual thrift
investment percentage of such
association on July 15, 1989,
is equal to or greater than the
applicable percentage (as determined
under the following table) of the
amount by which 70 percent exceeds the
actual thrift investment percentage of
such association on such date of
enactment:
For the following The applicable
period: percentage is:
July 1, 1991-September 30, 1992................. 25 percent
October 1, 1992-March 31, 1994.................. 50 percent
April 1, 1994-September 30, 1995................ 75 percent
Thereafter...................................... 100 percent
(C) For purposes of this paragraph, the
actual thrift investment percentage of an
association on July 15, 1989, shall be
determined by applying the definition of
``actual thrift investment percentage'' that
takes effect on July 1, 1991.
(n) Tying Restrictions.--A savings and loan holding company
and any of its affiliates shall be subject to section 5(q) and
regulations prescribed under such section, in connection with
transactions involving the products or services of such company
or affiliate and those of an affiliated savings association as
if such company or affiliate were a savings association.
(o) Mutual Holding Companies.--
(1) In general.--A savings association operating in
mutual form may reorganize so as to become a holding
company by--
(A) chartering an interim savings
association, the stock of which is to be wholly
owned, except as otherwise provided in this
section, by the mutual association; and
(B) transferring the substantial part of its
assets and liabilities, including all of its
insured liabilities, to the interim savings
association.
(2) Directors and certain account holders' approval
of plan required.--A reorganization is not authorized
under this subsection unless--
(A) a plan providing for such reorganization
has been approved by a majority of the board of
directors of the mutual savings association;
and
(B) in the case of an association in which
holders of accounts and obligors exercise
voting rights, such plan has been submitted to
and approved by a majority of such individuals
at a meeting held at the call of the directors
in accordance with the procedures prescribed by
the association's charter and bylaws.
(3) Notice to the director; disapproval period.--
(A) Notice required.--At least 60 days prior
to taking any action described in paragraph
(1), a savings association seeking to establish
a mutual holding company shall provide written
notice to the Board. The notice shall contain
such relevant information as the Board shall
require by regulation or by specific request in
connection with any particular notice.
(B) Transaction allowed if not disapproved.--
Unless the Board within such 60-day notice
period disapproves the proposed holding company
formation, or extends for another 30 days the
period during which such disapproval may be
issued, the savings association providing such
notice may proceed with the transaction, if the
requirements of paragraph (2) have been met.
(C) Grounds for disapproval.--The Board may
disapprove any proposed holding company
formation only if--
(i) such disapproval is necessary to
prevent unsafe or unsound practices;
(ii) the financial or management
resources of the savings association
involved warrant disapproval;
(iii) the savings association fails
to furnish the information required
under subparagraph (A); or
(iv) the savings association fails to
comply with the requirement of
paragraph (2).
(D) Retention of capital assets.--In
connection with the transaction described in
paragraph (1), a savings association may,
subject to the approval of the Board, retain
capital assets at the holding company level to
the extent that such capital exceeds the
association's capital requirement established
by the Board pursuant to subsections (s) and
(t) of section 5.
(4) Ownership.--
(A) In general.--Persons having ownership
rights in the mutual association pursuant to
section 5(b)(1)(B) of this Act or State law
shall have the same ownership rights with
respect to the mutual holding company.
(B) Holders of certain accounts.--Holders of
savings, demand or other accounts of--
(i) a savings association chartered
as part of a transaction described in
paragraph (1); or
(ii) a mutual savings association
acquired pursuant to paragraph (5)(B),
shall have the same ownership rights with
respect to the mutual holding company as
persons described in subparagraph (A) of this
paragraph.
(5) Permitted activities.--A mutual holding company
may engage only in the following activities:
(A) Investing in the stock of a savings
association.
(B) Acquiring a mutual association through
the merger of such association into a savings
association subsidiary of such holding company
or an interim savings association subsidiary of
such holding company.
(C) Subject to paragraph (6), merging with or
acquiring another holding company, one of whose
subsidiaries is a savings association.
(D) Investing in a corporation the capital
stock of which is available for purchase by a
savings association under Federal law or under
the law of any State where the subsidiary
savings association or associations have their
home offices.
(E) Engaging in the activities described in
subsection (c)(2) or (c)(9)(A)(ii).
(6) Limitations on certain activities of acquired
holding companies.--
(A) New activities.--If a mutual holding
company acquires or merges with another holding
company under paragraph (5)(C), the holding
company acquired or the holding company
resulting from such merger or acquisition may
only invest in assets and engage in activities
which are authorized under paragraph (5).
(B) Grace period for divesting prohibited
assets or discontinuing prohibited
activities.--Not later than 2 years following a
merger or acquisition described in paragraph
(5)(C), the acquired holding company or the
holding company resulting from such merger or
acquisition shall--
(i) dispose of any asset which is an
asset in which a mutual holding company
may not invest under paragraph (5); and
(ii) cease any activity which is an
activity in which a mutual holding
company may not engage under paragraph
(5).
(7) Regulation.--A mutual holding company shall be
chartered by the Board and shall be subject to such
regulations as the Board may prescribe. Unless the
context otherwise requires, a mutual holding company
shall be subject to the other requirements of this
section regarding regulation of holding companies.
(8) Capital improvement.--
(A) Pledge of stock of savings association
subsidiary.--This section shall not prohibit a
mutual holding company from pledging all or a
portion of the stock of a savings association
chartered as part of a transaction described in
paragraph (1) to raise capital for such savings
association.
(B) Issuance of nonvoting shares.--This
section shall not prohibit a savings
association chartered as part of a transaction
described in paragraph (1) from issuing any
nonvoting shares or less than 50 percent of the
voting shares of such association to any person
other than the mutual holding company.
(9) Insolvency and liquidation.--
(A) In general.--Notwithstanding any
provision of law, upon--
(i) the default of any savings
association--
(I) the stock of which is
owned by any mutual holding
company; and
(II) which was chartered in a
transaction described in
paragraph (1);
(ii) the default of a mutual holding
company; or
(iii) a foreclosure on a pledge by a
mutual holding company described in
paragraph (8)(A),
a trustee shall be appointed receiver of such
mutual holding company and such trustee shall
have the authority to liquidate the assets of,
and satisfy the liabilities of, such mutual
holding company pursuant to title 11, United
States Code.
(B) Distribution of net proceeds.--Except as
provided in subparagraph (C), the net proceeds
of any liquidation of any mutual holding
company pursuant to subparagraph (A) shall be
transferred to persons who hold ownership
interests in such mutual holding company.
(C) Recovery by corporation.--If the
Corporation incurs a loss as a result of the
default of any savings association subsidiary
of a mutual holding company which is liquidated
pursuant to subparagraph (A), the Corporation
shall succeed to the ownership interests of the
depositors of such savings association in the
mutual holding company, to the extent of the
Corporation's loss.
(10) Definitions.--For purposes of this subsection--
(A) Mutual holding company.--The term
``mutual holding company'' means a corporation
organized as a holding company under this
subsection.
(B) Mutual association.--The term ``mutual
association'' means a savings association which
is operating in mutual form.
(C) Default.--The term ``default'' means an
adjudication or other official determination of
a court of competent jurisdiction or other
public authority pursuant to which a
conservator, receiver, or other legal custodian
is appointed.
(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.
(p) Holding Company Activities Constituting Serious Risk to
Subsidiary Savings Association.--
(1) Determination and imposition of restrictions.--If
the Board or the appropriate Federal banking agency for
the savings association determines that there is
reasonable cause to believe that the continuation by a
savings and loan holding company of any activity
constitutes a serious risk to the financial safety,
soundness, or stability of a savings and loan holding
company's subsidiary savings association, the Board may
impose such restrictions as the Board, in consultation
with the appropriate Federal banking agency for the
savings association determines to be necessary to
address such risk. Such restrictions shall be issued in
the form of a directive to the holding company and any
of its subsidiaries, limiting--
(A) the payment of dividends by the savings
association;
(B) transactions between the savings
association, the holding company, and the
subsidiaries or affiliates of either; and
(C) any activities of the savings association
that might create a serious risk that the
liabilities of the holding company and its
other affiliates may be imposed on the savings
association.
Such directive shall be effective as a cease and desist
order that has become final.
(2) Review of directive.--
(A) Administrative review.--After a directive
referred to in paragraph (1) is issued, the
savings and loan holding company, or any
subsidiary of such holding company subject to
the directive, may object and present in
writing its reasons why the directive should be
modified or rescinded. Unless within 10 days
after receipt of such response the Board
affirms, modifies, or rescinds the directive,
such directive shall automatically lapse.
(B) Judicial review.--If the Board affirms or
modifies a directive pursuant to subparagraph
(A), any affected party may immediately
thereafter petition the United States district
court for the district in which the savings and
loan holding company has its main office or in
the United States District Court for the
District of Columbia to stay, modify, terminate
or set aside the directive. Upon a showing of
extraordinary cause, the savings and loan
holding company, or any subsidiary of such
holding company subject to a directive, may
petition a United States district court for
relief without first pursuing or exhausting the
administrative remedies set forth in this
paragraph.
(q) Qualified Stock Issuance by Undercapitalized Savings
Associations or Holding Companies.--
(1) In general.--For purposes of this section, any
issue of shares of stock shall be treated as a
qualified stock issuance if the following conditions
are met:
(A) The shares of stock are issued by--
(i) an undercapitalized savings
association; or
(ii) a savings and loan holding
company which is not a bank holding
company but which controls an
undercapitalized savings association
if, at the time of issuance, the
savings and loan holding company is
legally obligated to contribute the net
proceeds from the issuance of such
stock to the capital of an
undercapitalized savings association
subsidiary of such holding company.
(B) All shares of stock issued consist of
previously unissued stock or treasury shares.
(C) All shares of stock issued are purchased
by a savings and loan holding company that is
registered, as of the date of purchase, with
the Board in accordance with the provisions of
subsection (b)(1) of this section.
(D) Subject to paragraph (2), the Board
approved the purchase of the shares of stock by
the acquiring savings and loan holding company.
(E) The entire consideration for the stock
issued is paid in cash by the acquiring savings
and loan holding company.
(F) At the time of the stock issuance, each
savings association subsidiary of the acquiring
savings and loan holding company (other than an
association acquired in a transaction pursuant
to subsection (c) or (k) of section 13 of the
Federal Deposit Insurance Act or section 408(m)
of the National Housing Act) has capital (after
deducting any subordinated debt, intangible
assets, and deferred, unamortized gains or
losses) of not less than 6\1/2\ percent of the
total assets of such savings association.
(G) Immediately after the stock issuance, the
acquiring savings and loan holding company
holds not more than 15 percent of the
outstanding voting stock of the issuing
undercapitalized savings association or savings
and loan holding company.
(H) Not more than one of the directors of the
issuing association or company is an officer,
director, employee, or other representative of
the acquiring company or any of its affiliates.
(I) Transactions between the savings
association or savings and loan holding company
that issues the shares pursuant to this section
and the acquiring company and any of its
affiliates shall be subject to the provisions
of section 11.
(2) Approval of acquisitions.--
(A) Additional capital commitments not
required.--The Board shall not disapprove any
application for the purchase of stock in
connection with a qualified stock issuance on
the grounds that the acquiring savings and loan
holding company has failed to undertake to make
subsequent additional capital contributions to
maintain the capital of the undercapitalized
savings association at or above the minimum
level required by the Board or any other
Federal agency having jurisdiction.
(B) Other conditions.--Notwithstanding
subsection (a)(4), the Board may impose such
conditions on any approval of an application
for the purchase of stock in connection with a
qualified stock issuance as the Board
determines to be appropriate, including--
(i) a requirement that any savings
association subsidiary of the acquiring
savings and loan holding company limit
dividends paid to such holding company
for such period of time as the Board
may require; and
(ii) such other conditions as the
Board deems necessary or appropriate to
prevent evasions of this section.
(C) Application deemed approved if not
disapproved within 90 days.--An application for
approval of a purchase of stock in connection
with a qualified stock issuance shall be deemed
to have been approved by the Board if such
application has not been disapproved by the
Board before the end of the 90-day period
beginning on the date such application has been
deemed sufficient under regulations issued by
the Board.
(3) No limitation on class of stock issued.--The
shares of stock issued in connection with a qualified
stock issuance may be shares of any class.
(4) Undercapitalized savings association defined.--
For purposes of this subsection, the term
``undercapitalized savings association'' means any
savings association--
(A) the assets of which exceed the
liabilities of such association; and
(B) which does not comply with one or more of
the capital standards in effect under section
5(t).
(r) Penalty for Failure To Provide Timely and Accurate
Reports.--
(1) First tier.--Any savings and loan holding
company, and any subsidiary of such holding company,
which--
(A) maintains procedures reasonably adapted
to avoid any inadvertent and unintentional
error and, as a result of such an error--
(i) fails to submit or publish any
report or information required under
this section or regulations prescribed
by the Board or appropriate Federal
banking agency, within the period of
time specified by the Board or
appropriate Federal banking agency; or
(ii) submits or publishes any false
or misleading report or information; or
(B) inadvertently transmits or publishes any
report which is minimally late,
shall be subject to a penalty of not more than $2,000
for each day during which such failure continues or
such false or misleading information is not corrected.
Such holding company or subsidiary shall have the
burden of proving by a preponderence of the evidence
that an error was inadvertent and unintentional and
that a report was inadvertently transmitted or
published late.
(2) Second tier.--Any savings and loan holding
company, and any subsidiary of such holding company,
which--
(A) fails to submit or publish any report or
information required under this section or
under regulations prescribed by the Board or
appropriate Federal banking agency, within the
period of time specified by the Board or
appropriate Federal banking agency; or
(B) submits or publishes any false or
misleading report or information,
in a manner not described in paragraph (1) shall be
subject to a penalty of not more than $20,000 for each
day during which such failure continues or such false
or misleading information is not corrected.
(3) Third tier.--If any savings and loan holding
company or any subsidiary of such a holding company
knowingly or with reckless disregard for the accuracy
of any information or report described in paragraph (2)
submits or publishes any false or misleading report or
information, the Board or appropriate Federal banking
agency may assess a penalty of not more than
[$1,000,000] $1,500,000 or 1 percent of total assets of
such company or subsidiary, whichever is less, per day
for each day during which such failure continues or
such false or misleading information is not corrected.
(4) Assessment.--Any penalty imposed under paragraph
(1), (2), or (3) shall be assessed and collected by the
Board or appropriate Federal banking agency in the
manner provided in subparagraphs (E), (F), (G), and (I)
of section 8(i)(2) of the Federal Deposit Insurance Act
(for penalties imposed under such section) and any such
assessment (including the determination of the amount
of the penalty) shall be subject to the provisions of
such subsection.
(5) Hearing.--Any savings and loan holding company or
any subsidiary of such a holding company against which
any penalty is assessed under this subsection shall be
afforded a hearing if such savings and loan holding
company or such subsidiary, as the case may be, submits
a request for such hearing within 20 days after the
issuance of the notice of assessment. Section 8(h) of
the Federal Deposit Insurance Act shall apply to any
proceeding under this subsection.
(s) Mergers, Consolidations, and Other Acquisitions
Authorized.--
(1) In general.--Subject to sections 5(d)(3) and
18(c) of the Federal Deposit Insurance Act and all
other applicable laws, any Federal savings association
may acquire or be acquired by any insured depository
institution.
(2) Expedited approval of acquisitions.--
(A) In general.--Any application by a savings
association to acquire or be acquired by
another insured depository institution which is
required to be filed with the appropriate
Federal banking agency for the savings
association under any applicable law or
regulation shall be approved or disapproved in
writing by the appropriate Federal banking
agency for the savings association before the
end of the 60-day period beginning on the date
such application is filed with the agency.
(B) Extension of period.--The period for
approval or disapproval referred to in
subparagraph (A) may be extended for an
additional 30-day period if the appropriate
Federal banking agency for the savings
association determines that--
(i) an applicant has not furnished
all of the information required to be
submitted; or
(ii) in the judgment of the
appropriate Federal banking agency for
the savings association, any material
information submitted is substantially
inaccurate or incomplete.
(3) Acquire defined.--For purposes of this
subsection, the term ``acquire'' means to acquire,
directly or indirectly, ownership or control through a
merger or consolidation or an acquisition of assets or
assumption of liabilities, provided that following such
merger, consolidation, or acquisition, an acquiring
insured depository institution may not own the shares
of the acquired insured depository institution.
(4) Regulations.--
(A) Required.--The Comptroller shall
prescribe such regulations as may be necessary
to carry out paragraph (1).
(B) Effective date.--The regulations required
under subparagraph (A) shall--
(i) be prescribed in final form
before the end of the 90-day period
beginning on the date of the enactment
of this subsection; and
(ii) take effect before the end of
the 120-day period beginning on such
date.
(5) Limitation.--No provision of this section shall
be construed to authorize a national bank or any
subsidiary thereof to engage in any activity not
otherwise authorized under the National Bank Act or any
other law governing the powers of a national bank.
(t) Exemption for Bank Holding Companies.--This section shall
not apply to a bank holding company that is subject to the Bank
Holding Company Act of 1956, or any company controlled by such
bank holding company.
* * * * * * *
SEC. 13. POWERS OF EXAMINERS.
For the purposes of this Act, examiners appointed by [the a]
a Federal banking agency shall--
(1) be subject to the same requirements,
responsibilities, and penalties as are applicable to
examiners under the Federal Reserve Act and title LXII
of the Revised Statutes; and
(2) have, in the exercise of functions under this
Act, the same powers and privileges as are vested in
such examiners by law.
* * * * * * *
----------
FEDERAL CREDIT UNION ACT
* * * * * * *
TITLE I--FEDERAL CREDIT UNIONS
* * * * * * *
fees
Sec. 105. [(a) In accordance with rules prescribed by the
Board, each Federal credit union shall pay to the
Administration an annual operating fee which may be composed of
one or more charges identified as to the function or functions
for which assessed.
[(b) The fee assessed under this section shall be determined
according to a schedule, or schedules, or other method
determined by the Board to be appropriate, which gives due
consideration to the expenses of the Administration in carrying
out its responsibilities under this Act and to the ability of
Federal credit unions to pay the fee. The Board shall, among
other things, determine the periods for which the fee shall be
assessed and the date or dates for the payment of the fee or
increments thereof.]
(a) Payment by Federal Credit Unions to Administration.--Each
insured credit union shall pay to the Administration an annual
fee.
(b) Determinations of Assessment Periods and Payment Dates.--
The Board shall determine the periods for which the fee
referred to under subsection (a) shall be assessed and the date
for the payment of such fee or increments thereof.
(c) If the annual [operating] fee is composed of separate
charges, no supervision charge shall be payable by a Federal
credit union, and the Board may waive payment of any or all
other charges comprising the fee, with respect to the year in
which its charter is issued, or in which final distribution is
made in its liquidation or the charter is canceled.
[(d) All operating fees shall be deposited with the Treasurer
of the United States for the account of the Administration and
may be expended by the Board to defray the expenses incurred in
carrying out the provisions of this Act including the
examination and supervision of Federal credit unions.
[(e)(1) Upon request of the Board, the Secretary of the
Treasury shall invest and reinvest such portions of the annual
operating fees deposited under subsection (d) as the Board
determines are not needed for current operations.
[(2) Such investments may be made only in interest bearing
securities of the United States with maturities requested by
the Board bearing interest at rates determined by the Secretary
of the Treasury, taking into consideration current market
yields on outstanding marketable obligations of the United
States of comparable maturities.
[(3) All income derived from such investments and
reinvestments shall be deposited to the account of the
Administration described in subsection (d).]
(d) Appropriations Requirement.--
(1) Recovery of costs of annual appropriation The
Administration shall collect fees other than those fees
referred to under subsection (a) from each insured
credit union, as provided under this Act, in an amount
stated as a percentage of insured shares of each
insured credit union (which percentage shall be the
same for all insured credit unions). Such fees shall be
designed to recover the costs to the Government of the
annual appropriation to the Administration by Congress.
(2) Offsetting collections.--Fees described under
paragraph (1) for any fiscal year--
(A) shall be deposited and credited as
offsetting collections to the account providing
appropriations to the Administration; and
(B) except as provided in paragraph (3),
shall not be collected for any fiscal year
except to the extent provided in advance in
appropriation Acts.
(3) Lapse of appropriation.--If on the first day of a
fiscal year an appropriation to the Administration has
not been enacted, the Administration shall continue to
collect (as offsetting collections) the fees described
under paragraph (1) at the rate in effect during the
preceding fiscal year, until 60 days after the date
such an appropriation is enacted.
(4) Exception for insurance functions.--This
subsection shall not apply to the National Credit Union
Share Insurance Fund, including assessments and other
fees that are deposited into, and amounts paid from,
the National Credit Union Share Insurance Fund.
* * * * * * *
certain powers of board
Sec. 120. (a) The Board may prescribe rules and regulations
for the administration of this Act (including, but not by way
of limitation, the merger, consolidation, and dissolution of
corporations organized under this Act). Any central credit
union chartered by the Board shall be subject to such rules,
regulations, and orders as the Board deems appropriate and,
except as otherwise specifically provided in such rules,
regulations, or orders, shall be vested with or subject to the
same rights, privileges, duties, restrictions, penalties,
liabilities, conditions, and limitations that would apply to
all Federal credit unions under this Act.
(b)(1) The Board may suspend or revoke the charter of any
Federal credit union, or place the same in involuntary
liquidation and appoint a liquidating agent therefor, upon its
finding that the organization is bankrupt or insolvent, or has
violated any of the provisions of its charter, its bylaws, this
Act, or any regulations issued thereunder.
(2) The Board, through such persons as it shall designate,
may examine any Federal credit union in voluntary liquidation
and, upon its finding that such voluntary liquidation is not
being conducted in an orderly or efficient manner or in the
best interests of its members, may terminate such voluntary
liquidation and place such organization in involuntary
liquidation and appoint a liquidating agent therefor.
(3) Such liquidating agent shall have power and authority,
subject to the control and supervision of the Board and under
such rules and regulations as the Board may prescribe, (A) to
receive and take possession of the books, records, assets, and
property of every description of the Federal credit union in
liquidation, to sell, enforce collection of, and liquidate all
such assets and property, to compound all bad or doubtful
debts, and to sue in his own name or in the name of the Federal
credit union in liquidation, and defend such actions as may be
brought against him as liquidating agent or against the Federal
credit union; (B) to receive, examine, and pass upon all claims
against the Federal credit union in liquidation, including
claims of members on member accounts; (C) to make distribution
and payment to creditors and members as their interests may
appear; and (D) to execute such documents and papers and to do
such other acts and things which he may deem necessary or
desirable to discharge his duties hereunder.
(4) Subject to the control and supervision of the Board and
under such rules and regulations as the Board may prescribe,
the liquidating agent of a Federal credit union in involuntary
liquidation shall (A) cause notice to be given to creditors and
members to present their claims and make legal proof thereof,
which notice shall be published once a week in each of three
successive weeks in a newspaper of general circulation in each
county in which the Federal credit union in liquidation
maintained an office or branch for the transaction of business
on the date it ceased unrestricted operations; except that
whenever the aggregate book value of the assets and property of
a Federal credit union in involuntary liquidation is less than
$1,000, unless the Board shall find that its books and records
do not contain a true and accurate record of its liabilities,
he shall declare such Federal credit union in liquidation to be
a ``no publication'' liquidation, and publication of notice to
creditors and members shall not be required in such case; (B)
from time to time make a ratable dividend on all such claims as
may have been proved to his satisfaction or adjudicated in a
court of competent jurisdiction and, after the assets of such
organization have been liquidated, make further dividends on
all claims previously proved or adjudicated, and he may accept
in lieu of a formal proof of claim on behalf of any creditor or
member the statement of any amount due to such creditor or
member as shown on the books and records of the credit union;
but all claims not filed before payment of the final dividend
shall be barred and claims rejected or disallowed by the
liquidating agent shall be likewise barred unless suit be
instituted thereon within three months after notice of
rejection or disallowance; and (C) in a ``no publication''
liquidation, determine from all sources available to him, and
within the limits of available funds of the Federal credit
union, the amounts due to creditors and members, and after
sixty days shall have elapsed from the date of his appointment
distribute the funds of the Federal credit union to creditors
and members ratably and as their interests may appear.
(5) Upon certification by the liquidating agent in the case
of an involuntary liquidation, and upon such proof as shall be
satisfactory to the Board in the case of a voluntary
liquidation, that distribution has been made and that
liquidation has been completed, as provided herein, the Board
shall cancel the charter of such Federal credit union; but the
corporate existence of the Federal credit union shall continue
for a period of three years from the date of such cancellation
of its charter, during which period the liquidating agent, or
his duly appointed successor, or such persons as the Board
shall designate, may act on behalf of the Federal credit union
for the purpose of paying, satisfying, and discharging any
existing liabilities or obligations, collecting and
distributing its assets, and doing all other acts required to
adjust and wind up its business and affairs, and it may sue and
be sued in its corporate name.
(c) After the expiration of five years from the date of
cancellation of the charter of a Federal credit union the Board
may, in its discretion, destroy any or all books and records of
such Federal credit union in its possession or under its
control.
(d) The Board is authorized and empowered to execute any and
all functions and perform any and all duties vested in it
hereby, through such persons as it shall designate or employ;
and it may delegate to any person or persons, including any
institution operating under the general supervision of the
Administration, the performance and discharge of any authority,
power, or function vested in it by this Act.
(e) All books and records of Federal credit unions shall be
kept and reports shall be made in accordance with forms
approved by the Board.
(f)(1) The Board is authorized to make investigations and to
conduct researches and studies of the problems of persons of
small means in obtaining credit at reasonable rates of
interest, and of the methods and benefits of cooperative saving
and lending among such persons. It is further authorized to
make reports of such investigations and to publish and
disseminate the same.
(2)(A) The Board is authorized to conduct directly, or to
make grants to or contracts with colleges or universities,
State or local educational agencies, or other appropriate
public or private nonprofit organizations to conduct, programs
for the training of persons engaged, or preparing to engage, in
the operation of credit unions, and in related consumer
counseling programs, serving the poor. It is authorized to
establish a program of experimental, developmental,
demonstration, and pilot projects, either directly or by grants
to public or private nonprofit organizations, including credit
unions, or by contracts with such organizations or other
private organizations, designed to promote more effective
operation of credit unions, and related consumer counseling
programs, serving the poor.
(B) In carrying out its authority under this paragraph, the
Board shall consult with officials of the Office of Economic
Opportunity and other appropriate Federal agencies responsible
for the administration of projects or programs concerned with
problems of the poor. The development and operation of programs
and projects under this paragraph shall involve maximum
feasible participation of residents of the areas and members of
the groups served by such programs and projects, with community
action agencies established under the provisions of the
Economic Opportunity Act of 1964 serving, to the extent
feasible, as the means through which such participation is
achieved.
(C) In order to carry out the purposes of this paragraph,
there is authorized to be appropriated, as a supplement to any
funds that may be expended by the Board pursuant to sections
105 and 106 for such purposes, not to exceed $300,000 for the
fiscal year ending June 30, 1970, and not to exceed $1,000,000
for the fiscal year ending June 30, 1971.
(g) Any officer or employee of the Administration is
authorized, when designated for the purpose by the Board, to
administer oaths and affirmations and to take affidavits and
depositions touching upon any matter within the jurisdiction of
the Administration.
(h) The Board is authorized, empowered, and directed to
require that every person appointed or elected by any Federal
credit union to any position requiring the receipt, payment, or
custody of money or other personal property owned by a Federal
credit union, or in its custody or control as collateral or
otherwise, give bond in a corporate surety company holding a
certificate of authority from the Secretary of the Treasury
under chapter 93 of title 31, United States Code, as an
acceptable surety on Federal bonds. Any such bond or bonds
shall be in a form approved by the Board with a view to
providing surety coverage to the Federal credit union with
reference to loss by reason of acts of fraud or dishonesty
including forgery, theft, embezzlement, wrongful abstraction,
or misapplication on the part of the person, directly or
through connivance with others, and such other surety coverages
as the Board may determine to be reasonably appropriate or as
elsewhere required by this Act. Any such bond or bonds shall be
in such an amount in relation to the money or other personal
property involved or in relation to the assets of the Federal
credit union as the Board may from time to time prescribe by
regulation for the purpose of requiring reasonable coverage. In
lieu of individual bonds the Board may approve the use of a
form of schedule or blanket bond which covers all of the
officers and employees of a Federal credit union whose duties
include the receipt, payment, or custody of money or other
personal property for or on behalf of the Federal credit union.
The Board may also approve the use of a form of excess coverage
bond whereby a Federal credit union may obtain an amount of
coverage in excess of the basic surety coverage.
(i) In addition to the authority conferred upon them by other
sections of this Act, the Board is authorized in carrying out
its functions under this Act--
(1) to appoint such personnel as may be necessary to
enable the Administration to carry out its functions;
(2) to expend such funds, enter into such contracts
with public and private organizations and persons, make
such payments in advance or by way of reimbursement,
acquire and dispose of, by lease or purchase, real or
personal property, without regard to the provisions of
any other law applicable to executive or independent
agencies of the United States, and perform such other
functions or acts as it may deem necessary or
appropriate to carry out the provisions of this Act, in
accordance with the rules and regulations or policies
established by the Board not inconsistent with this
Act; and
(3) to pay stipends, including allowances for travel
to and from the place of residence, to any individual
to study in a program assisted under this Act upon a
determination by the Board that assistance to such
individual in such studies will be in furtherance of
the purposes of this Act.
(j) Staff.--
(1) Appointment and compensation.--The Board shall
fix the compensation and number of, and appoint and
direct, employees of the Board. Rates of basic pay for
employees of the Board may be set and adjusted by the
Board without regard to the provisions of chapter 51 or
subchapter III of chapter 53 of title 5, United States
Code.
(2) Additional compensation and benefits.--The Board
may provide additional compensation and benefits to
employees of the Board if the same type of compensation
or benefits are then being provided by any other
Federal bank regulatory agency or, if not then being
provided, could be provided by such an agency under
applicable provisions of law, rule, or regulation. In
setting and adjusting the total amount of compensation
and benefits for employees of the Board, the Board
shall seek to maintain comparability with other Federal
bank regulatory agencies.
[(3) Funding.--The salaries and expenses of the Board
and employees of the Board shall be paid from fees and
assessments (including income earned on insurance
deposits) levied on insured credit unions under this
Act.]
* * * * * * *
[SEC. 128. APPORTIONMENT.
[Notwithstanding any other provision of law, funds received
by the Board pursuant to any method provided by this Act, and
interest, dividend, or other income thereon, shall not be
subject to apportionment for the purpose of chapter 15 of title
31, United States Code, or under any other authority.]
SEC. 128. NATIONAL CREDIT UNION SHARE INSURANCE FUND EXEMPT FROM
APPORTIONMENT.
Notwithstanding any other provision of law, amounts received
pursuant to any assessments or other fees that are deposited
into the National Credit Union Share Insurance Fund or the
Temporary Corporate Credit Union Stabilization Fund shall not
be subject to apportionment for the purposes of chapter 15 of
title 31, United States Code, or under any other authority.
* * * * * * *
TITLE II--SHARE INSURANCE
* * * * * * *
reports of condition; certified statements; premiums for insurance
Sec. 202. (a)(1) Each insured credit union shall make reports
of condition to the Board upon dates which shall be selected by
them. Such reports of condition shall be in such form and shall
contain such information as the Board may require. The
reporting dates selected for reports of condition shall be the
same for all insured credit unions except that when any of said
reporting dates is a nonbusiness day for any credit union the
preceding business day shall be its reporting date. The total
amount of the member accounts of each insured credit union as
of each reporting date shall be reported in such reports of
condition in accordance with regulations prescribed by the
Board. Each report of condition shall contain a declaration by
the president, by a vice president, by the treasurer, or by any
other officer designated by the board of directors of the
reporting credit union to make such declaration, that the
report is true and correct to the best of such officer's
knowledge and belief. Unless such requirement is waived by the
Board, the correctness of each report of condition shall be
attested by the signatures of three of the officers of the
reporting credit union with the declaration that the report has
been examined by them and to the best of their knowledge and
belief is true and correct.
(2) The Board may call for such other reports as it may from
time to time require.
(3) The Board may require reports of condition to be
published in such manner, not inconsistent with any applicable
law, as it may direct. Any insured credit union which maintains
procedures reasonably adapted to avoid any inadvertent error
and, unintentionally and as a result of such an error, fails to
submit or publish any report required under this subsection or
section 106, within the period of time specified by the Board,
or submits or publishes any false or misleading report or
information, or inadvertently transmits or publishes any report
which is minimally late, shall be subject to a penalty of not
more than $2,000 for each day during which such failure
continues or such false or misleading information is not
corrected. The insured credit union shall have the burden of
proving that an error was inadvertent and that a report was
inadvertently transmitted or published late. Any insured credit
union which fails to submit or publish any report required
under this subsection or section 106, within the period of time
specified by the Board, or submits or publishes any false or
misleading report or information, in a manner not described in
the 2nd preceding sentence shall be subject to a penalty of not
more than $20,000 for each day during which such failure
continues or such false or misleading information is not
corrected. Notwithstanding the preceding sentence, if any
insured credit union knowingly or with reckless disregard for
the accuracy of any information or report described in such
sentence submits or publishes any false or misleading report or
information, the Board may assess a penalty of not more than
[$1,000,000] $1,500,000 or 1 percent of total assets of such
credit union, whichever is less, per day for each day during
which such failure continues or such false or misleading
information is not corrected. Any penalty imposed under any of
the 4 preceding sentences shall be assessed and collected by
the Board in the manner provided in section 206(k)(2) (for
penalties imposed under such section) and any such assessment
(including the determination of the amount of the penalty)
shall be subject to the provisions of such section. Any insured
credit union against which any penalty is assessed under this
subsection shall be afforded an agency hearing if such insured
credit union submits a request for such hearing within 20 days
after the issuance of the notice of assessment. Section 206(j)
shall apply to any proceeding under this subsection.
(4) The Board may accept any report of condition made to any
commission, board, or authority having supervision of a State-
chartered credit union and may furnish to any such commission,
board, or authority reports of condition made to the Board.
(5) Reports required under title I of this Act shall be so
prepared that they can be used for share insurance purposes. To
the maximum extent feasible, the Board shall use for insurance
purposes reports submitted to State regulatory agencies by
State-chartered credit unions.
(6) Audit requirement.--
(A) In general.--Before the end of the 120-
day period beginning on the date of the
enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 and
notwithstanding any other provision of Federal
or State law, the Board shall prescribe, by
regulation, audit standards which require an
outside, independent audit of any insured
credit union by a certified public accountant
for any fiscal year (of such credit union)--
(i) for which such credit union has
not conducted an annual supervisory
committee audit;
(ii) for which such credit union has
not received a complete and
satisfactory supervisory committee
audit; or
(iii) during which such credit union
has experienced persistent and serious
recordkeeping deficiencies, as
determined by the Board.
(B) Unsafe or unsound practice.--The Board
may treat the failure of any insured credit
union to obtain an outside, independent audit
for any fiscal year for which such audit is
required under subparagraph (A) or (D) as an
unsafe or unsound practice within the meaning
of section 206(b).
(C) Accounting principles.--
(i) In general.--Accounting
principles applicable to reports or
statements required to be filed with
the Board by each insured credit union
shall be uniform and consistent with
generally accepted accounting
principles.
(ii) Board determination.--If the
Board determines that the application
of any generally accepted accounting
principle to any insured credit union
is not appropriate, the Board may
prescribe an accounting principle for
application to the credit union that is
no less stringent than generally
accepted accounting principles.
(iii) De minimus exception.--This
subparagraph shall not apply to any
insured credit union, the total assets
of which are less than $10,000,000,
unless prescribed by the Board or an
appropriate State credit union
supervisor.
(D) Large credit union audit requirement.--
(i) In general.--Each insured credit
union having total assets of
$500,000,000 or more shall have an
annual independent audit of the
financial statements of the credit
union, performed in accordance with
generally accepted auditing standards
by an independent certified public
accountant or public accountant
licensed by the appropriate State or
jurisdiction to perform those services.
(ii) Voluntary audits.--If a Federal
credit union that is not required to
conduct an audit under clause (i), and
that has total assets of more than
$10,000,000 conducts such an audit for
any purpose, using an independent
auditor who is compensated for his or
her audit services with respect to that
audit, the audit shall be performed
consistent with the accountancy laws of
the appropriate State or jurisdiction,
including licensing requirements.
(7) Report to independent auditor.--
(A) In general.--Each insured credit union
which has engaged the services of an
independent auditor to audit such depository
institution within the past 2 years shall
transmit to such auditor a copy of the most
recent report of condition made by such credit
union (pursuant to this Act or any other
provision of law) and a copy of the most recent
report of examination received by such credit
union.
(B) Additional information.--In addition to
the copies of the reports required to be
provided to an auditor under subparagraph (A),
each insured credit union shall provide such
auditor with--
(i) a copy of any supervisory
memorandum of understanding with such
credit union and any written agreement
between the Board or a State regulatory
agency and the credit union which is in
effect during the period covered by the
audit; and
(ii) a report of any action initiated
or taken by the Board during such
period under subsection (e), (f), (g),
(i), (l), or (q) of section 206, or any
similar action taken by a State
regulatory dagency under State law, or
any other civil money penalty assessed
by the Board under this Act, with
respect to--
(I) the credit union; or
(II) any institution-
affiliated party.
(8) Data sharing with other agencies and persons.--In
addition to reports of examination, reports of
condition, and other reports required to be regularly
provided to the Board (with respect to all insured
credit unions, including a credit union for which the
Corporation has been appointed conservator or
liquidating agent) or an appropriate State commission,
board, or authority having supervision of a State-
chartered credit union, the Board may, in the
discretion of the Board, furnish any report of
examination or other confidential supervisory
information concerning any credit union or other entity
examined by the Board under authority of any Federal
law, to--
(A) any other Federal or State agency or
authority with supervisory or regulatory
authority over the credit union or other
entity;
(B) any officer, director, or receiver of
such credit union or entity; and
(C) any other person that the Board
determines to be appropriate.
(b) Certified Statement.--
(1) Statement required.--
(A) In general.--For each calendar year, in
the case of an insured credit union with total
assets of not more than $50,000,000, and for
each semi-annual period in the case of an
insured credit union with total assets of
$50,000,000 or more, an insured credit union
shall file with the Board, at such time as the
Board prescribes, a certified statement showing
the total amount of insured shares in the
credit union at the close of the relevant
period and both the amount of its deposit or
adjustment of deposit and the amount of the
insurance charge due to the Fund for that
period, both as computed under subsection (c).
(B) Exception for newly insured credit
union.--Subparagraph (A) shall not apply with
respect to a credit union that became insured
during the reporting period.
(2) Form.--The certified statements required to be
filed with the Board pursuant to this subsection shall
be in such form and shall set forth such supporting
information as the Board shall require.
(3) Certification.--The president of the credit union
or any officer designated by the board of directors
shall certify, with respect to each statement required
to be filed with the Board pursuant to this subsection,
that to the best of his or her knowledge and belief the
statement is true, correct, complete, and in accordance
with this title and the regulations issued under this
title.
(c)(1)(A)(i) Each insured credit union shall pay to and
maintain with the National Credit Union Share Insurance Fund a
deposit in an amount equaling 1 per centum of the credit
union's insured shares.
(ii) The Board may, in its discretion, authorize insured
credit unions to initially fund such deposit over a period of
time in excess of one year if necessary to avoid adverse
effects on the condition of insured credit unions.
(iii) Periodic adjustment.--The
amount of each insured credit union's
deposit shall be adjusted as follows,
in accordance with procedures
determined by the Board, to reflect
changes in the credit union's insured
shares:
(I) annually, in the case of
an insured credit union with
total assets of not more than
$50,000,000; and
(II) semi-annually, in the
case of an insured credit union
with total assets of
$50,000,000 or more.
(B)(i) The deposit shall be returned to an insured credit
union in the event that its insurance coverage is terminated,
it converts to insurance coverage from another source, or in
the event the operations of the fund are transferred from the
National Credit Union Administration Board.
(ii) The deposit shall be returned in accordance with
procedures and valuation methods determined by the Board, but
in no event shall the deposit be returned any later than one
year after the final date on which no shares of the credit
union are insured by the Board.
(iii) The deposit shall not be returned in the event of
liquidation on account of bankruptcy or insolvency.
(iv) The deposit funds may be used by the fund if necessary
to meet its expenses, in which case the amount so used shall be
expensed and shall be replenished by insured credit unions in
accordance with procedures established by the Board.
(2) Insurance premium charges.--
(A) In general.--Each insured credit union
shall, at such times as the Board prescribes
(but not more than twice in any calendar year),
pay to the Fund a premium charge for insurance
in an amount stated as a percentage of insured
shares (which shall be the same for all insured
credit unions).
(B) Relation of premium charge to equity
ratio of fund.--The Board may assess a premium
charge only if--
(i) the Fund's equity ratio is less
than 1.3 percent; and
(ii) the premium charge does not
exceed the amount necessary to restore
the equity ratio to 1.3 percent.
(C) Premium charge required if equity ratio
falls below 1.2 percent.--If the Fund's equity
ratio is less than 1.2 percent, the Board
shall, subject to subparagraph (B), assess a
premium charge in such an amount as the Board
determines to be necessary to restore the
equity ratio to, and maintain that ratio at,
1.2 percent.
(D) Fund restoration plans.--
(i) In general.--Whenever--
(I) the Board projects that
the equity ratio of the Fund
will, within 6 months of such
determination, fall below the
minimum amount specified in
subparagraph (C); or
(II) the equity ratio of the
Fund actually falls below the
minimum amount specified in
subparagraph (C) without any
determination under sub-clause
(I) having been made,
the Board shall establish and implement
a restoration plan within 90 days that
meets the requirements of clause (ii)
and such other conditions as the Board
determines to be appropriate.
(ii) Requirements of restoration
plan.--A restoration plan meets the
requirements of this clause if the plan
provides that the equity ratio of the
Fund will meet or exceed the minimum
amount specified in subparagraph (C)
before the end of the 8-year period
beginning upon the implementation of
the plan (or such longer period as the
Board may determine to be necessary due
to extraordinary circumstances).
(iii) Transparency.--Not more than 30
days after the Board establishes and
implements a restoration plan under
clause (i), the Board shall publish in
the Federal Register a detailed
analysis of the factors considered and
the basis for the actions taken with
regard to the plan.
(3) Distributions from fund required.--
(A) In general.--The Board shall, subject to
the requirements of section 217(e), effect a
pro rata distribution to insured credit unions
after each calendar year if, as of the end of
that calendar year--
(i) any loans to the Fund from the
Federal Government, and any interest on
those loans, have been repaid;
(ii) the Fund's equity ratio exceeds
the normal operating level; and
(iii) the Fund's available assets
ratio exceeds 1.0 percent.
(B) Amount of distribution.--The Board shall
distribute under subparagraph (A) the maximum
possible amount that--
(i) does not reduce the Fund's equity
ratio below the normal operating level;
and
(ii) does not reduce the Fund's
available assets ratio below 1.0
percent.
(C) Calculation based on certified
statements.--In calculating the Fund's equity
ratio and available assets ratio for purposes
of this paragraph, the Board shall determine
the aggregate amount of the insured shares in
all insured credit unions from insured credit
unions certified statements under subsection
(b) for the final reporting period of the
calendar year referred to in subparagraph (A).
(4) Timeliness and accuracy of data.--In calculating
the available assets ratio and equity ratio of the
Fund, the Board shall use the most current and accurate
data reasonably available.
(d)
(1) If, in the judgment of the Board, a loan to the
insurance fund, or to the stabilization fund described
in section 217 of this title, is required at any time
for purposes of this subchapter, the Secretary of the
Treasury shall make the loan, but loans under this
paragraph shall not exceed in the aggregate
$6,000,000,000 outstanding at any one time. Except as
otherwise provided in this subsection, section 217, and
in subsection (e) of this section, each loan under this
paragraph shall be made on such terms as may be fixed
by agreement between the Board and the Secretary of the
Treasury.
(2) Penalty for failure to make accurate certified
statement or to pay deposit or premium.--
(A) First tier.--Any insured credit union
which--
(i) maintains procedures reasonably
adapted to avoid any inadvertent error
and, unintentionally and as a result of
such an error, fails to submit any
certified statement under subsection
(b)(1) within the period of time
required or submits a false or
misleading certified statement under
such subsection; or
(ii) submits the statement at a time
which is minimally after the time
required,
shall be subject to a penalty of not more than
$2,000 for each day during which such failure
continues or such false and misleading
information is not corrected. The insured
credit union shall have the burden of proving
that an error was inadvertent or that a
statement was inadvertently submitted late.
(B) Second tier.--Any insured credit union
which--
(i) fails to submit any certified
statement under subsection (b)(1)
within the period of time required or
submits a false or misleading certified
statement in a manner not described in
subparagraph (A); or
(ii) fails or refuses to pay any
deposit or premium for insurance
required under this title,
shall be subject to a penalty of not more than
$20,000 for each day during which such failure
continues, such false and misleading
information is not corrected, or such deposit
or premium is not paid.
(C) Third tier.--Notwithstanding
subparagraphs (A) and (B), if any insured
credit union knowingly or with reckless
disregard for the accuracy of any certified
statement under subsection (b)(1) submits a
false or misleading certified statement under
such subsection, the Board may assess a penalty
of not more than $1,000,000 or not more than 1
percent of the total assets of the credit
union, whichever is less, per day for each day
during which the failure continues or the false
or misleading information in such statement is
not corrected.
(D) Assessment procedure.--Any penalty
imposed under this paragraph shall be assessed
and collected by the Board in the manner
provided in section 206(k)(2) (for penalties
imposed under such section) and any such
assessment (including the determination of the
amount of the penalty) shall be subject to the
provisions of such section.
(E) Hearing.--Any insured credit union
against which any penalty is assessed under
this paragraph shall be afforded an agency
hearing if the credit union submits a request
for such hearing within 20 days after the
issuance of the notice of the assessment.
Section 206(j) shall apply to any proceeding
under this subparagraph.
(F) Special rule for disputed payments.--No
penalty may be assessed for the failure of any
insured credit union to pay any deposit or
premium for insurance if--
(i) the failure is due to a dispute
between the credit union and the Board
over the amount of the deposit or
premium which is due from the credit
union; and
(ii) the credit union deposits
security satisfactory to the Board for
payment of the deposit or insurance
premium upon final determination of the
dispute.
(3) No insured credit union shall pay any dividends on its
insured shares or distribute any of its assets while it remains
in default in the payment of its deposit or any premium charge
for insurance due to the fund. Any director or officer of any
insured credit union who knowingly participates in the
declaration or payment of any such dividend or in any such
distribution shall, upon conviction, be fined not more than
$1,000 or imprisoned not more than one year, or both. The
provisions of this paragraph shall not be applicable in any
case in which the default is due to a dispute between the
credit union and the Board over the amount of its deposit or
the premium charge due to the fund if the credit union deposits
security satisfactory to the Board for payment of its deposit
or the premium charge upon final determination of the issue.
(4) Temporary increases authorized.--
(A) Recommendations for increase.--During the
period beginning on the date of enactment of
this paragraph and ending on December 31, 2010,
if, upon the written recommendation of the
Board (upon a vote of not less than two-thirds
of the members of the Board) and the Board of
Governors of the Federal Reserve System (upon a
vote of not less than two-thirds of the members
of such Board), the Secretary of the Treasury
(in consultation with the President) determines
that additional amounts above the
$6,000,000,000 amount specified in paragraph
(1) are necessary, such amount shall be
increased to the amount so determined to be
necessary, not to exceed $30,000,000,000.
(B) Report required.--If the borrowing
authority of the Board is increased above
$6,000,000,000 pursuant to subparagraph (A),
the Board shall promptly 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 reasons and need
for the additional borrowing authority and its
intended uses.
(e) The Board, in a suit brought at law or in equity in any
court of competent jurisdiction, shall be entitled to recover
from any insured credit union the amount of any unpaid deposit
or premium charge for insurance lawfully payable by the credit
union to the fund, whether or not such credit union shall have
made any report of condition under subsection (a) of this
section or filed any certified statement required under
subsection (b) of this section and whether or not suit shall
have been brought to compel the credit union to make any such
report or to file any such statement. No action or proceeding
shall be brought for the recovery of any deposit or premium
charge due to the fund, or for the recovery of any amount paid
to the fund in excess of the amount due it, unless such action
or proceeding shall have been brought within five years after
the right accrued for which the claim is made. Where the
insured credit union has made or filed with the Board a false
or fraudulent certified statement with the intent to evade, in
whole or in part, the payment of its deposit or any premium
charge, the claim shall not be deemed to have accrued until the
discovery by the Board of the fact that the certified statement
is false or fraudulent.
(f) Should any Federal credit union fail to make any report
of condition under subsection (a) of this section or to file
any certified statement required to be filed under subsection
(b) of this section or to pay its deposit or any premium charge
for insurance required to be paid under any provision of this
title, and should the credit union fail to correct such failure
within thirty days after written notice has been given by the
Board to an officer of the credit union, citing this subsection
and stating that the credit union has failed to make any such
report or file any such statement or pay any such deposit or
premium charge as required by law, all the rights, privileges,
and franchises of the credit union granted to it under title I
of this Act shall be thereby forfeited. Whether or not the
penalty provided in this subsection has been incurred shall be
determined and adjudged by any court of the United States of
competent jurisdiction in a suit brought for that purpose in
the district or territory in which the principal office of such
credit union is located, under direction of and by the Board in
its own name, before the credit union shall be declared
dissolved. The remedies provided in this subsection and in
subsections (d) and (e) of this section shall not be construed
as limiting any other remedies against any insured credit union
but shall be in addition thereto.
(g) Each insured credit union shall maintain such records as
will readily permit verification of the correctness of its
reports of condition, certified statements, and deposit and
premium charges for insurance. However, no insured credit union
shall be required to retain such records for such purpose for a
period in excess of five years from the date of the making of
any such report, the filing of any such statement, or the
payment of any deposit or adjustment thereof or any premium
charge, except that when there is a dispute between the insured
credit union and the Board over the amount of any deposit or
adjustment thereof or any premium charge for insurance the
credit union shall retain such records until final
determination of the issue.
(h) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Available assets ratio.--The term ``available
assets ratio'', when applied to the Fund, means the
ratio of--
(A) the amount determined by subtracting--
(i) direct liabilities of the Fund
and contingent liabilities for which no
provision for losses has been made,
from
(ii) the sum of cash and the market
value of unencumbered investments
authorized under section 203(c), to
(B) the aggregate amount of the insured
shares in all insured credit unions.
(2) Equity ratio.--The term ``equity ratio'', which
shall be calculated using the financial statements of
the Fund alone, without any consolidation or
combination with the financial statements of any other
fund or entity, means the ratio of--
(A) the amount of Fund capitalization,
including insured credit unions' 1 percent
capitalization deposits and the retained
earnings balance of the Fund (net of direct
liabilities of the Fund and contingent
liabilities for which no provision for losses
has been made); to
(B) the aggregate amount of the insured
shares in all insured credit unions.
(3) Insured shares.--The term ``insured shares'',
when applied to this section, includes share, share
draft, share certificate, and other similar accounts as
determined by the Board, but does not include amounts
exceeding the insured account limit set forth in
section 207(k)(1).
(4) Normal operating level.--The term ``normal
operating level'', when applied to the Fund, means an
equity ratio specified by the Board, which shall be not
less than 1.2 percent and not more than 1.5 percent.
national credit union share insurance fund
Sec. 203. (a) There is hereby created in the Treasury of the
United States a National Credit Union Share Insurance Fund
which shall be used by the Board as a revolving fund for
carrying out the purposes of this title. Money in the fund
shall be available upon requisition by the Board, without
fiscal year limitation, for making payments of insurance under
section 207 of this title, for providing assistance and making
expenditures under section 208 of this title in connection with
the liquidation or threatened liquidation of insured credit
unions, [and for such administrative and other expenses
incurred in carrying out the purposes of this title] as it may
determine to be proper.
(b) All deposit and premium charges for insurance paid
pursuant to the provisions of section 202 of this title and all
fees for examinations and all penalties collected by the Board
under any provision of this title shall be deposited in the
National Credit Union Share Insurance Fund. The Board shall
report annually to the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on Banking, Finance and
Urban Affairs of the House of Representatives with respect to
the operating level of the fund. Such report shall also include
the results of an independent audit of the fund.
(c) The Board may authorize the Secretary of the Treasury to
invest and reinvest such portions of the fund as the Board may
determine are not needed for current operations in any
interest-bearing securities of the United States or in any
securities guaranteed as to both principal and interest by the
United States or in bonds or other obligations which are lawful
investments for fiduciary, trust, and public funds of the
United States, and the income therefrom shall constitute a part
of the fund.
(d)(1) If, in the judgment of the Board, a loan to the fund
is required at any time for carrying out the purposes of this
title, the Secretary of the Treasury shall make the loan, but
loans under this paragraph shall not exceed in the aggregate
$100,000,000 outstanding at any one time. Except as otherwise
provided in this subsection and in subsection (e) of this
section, each loan under this paragraph shall be made on such
terms as may be fixed by agreement between the Board and the
Secretary of the Treasury.
(2) Interest shall accrue to the Treasury on the amount of
any outstanding loans made to the fund pursuant to paragraph
(1) of this subsection on the basis of the average daily amount
of such outstanding loans determined at the close of each
fiscal year with respect to such year, and the Board shall pay
the interest so accruing into the Treasury as miscellaneous
receipts annually from the fund. The Secretary of the Treasury
shall determine the applicable interest rate in advance by
calculating the average yield to maturity (on the basis of
daily closing market bid quotations during the month of June of
the preceding fiscal year) on outstanding marketable public
debt obligations of the United States having a maturity date of
five or less years from the first day of such month of June and
by adjusting such yield to the nearest one-eighth of 1 per
centum.
(3) For the purpose of making loans under paragraph (1) of
this subsection, the Secretary of the Treasury is authorized to
use as a public debt transaction the proceeds of the sale of
any securities issued under the Second Liberty Bond Act, as
amended, and the purposes for which securities may be issued
under the Second Liberty Bond Act, as amended, are hereby
extended to include such loans. All loans and repayments under
this section shall be treated as public debt transactions of
the United States.
(e) So long as any loans to the fund are outstanding, the
Board shall from time to time, not less often than annually,
determine whether the balance in the fund is in excess of the
amount which, in its judgment, is needed to meet the
requirements of the fund and shall pay such excess to the
Secretary of the Treasury, to be credited against the loans to
the fund.
(f) In addition to the authority to borrow from the Secretary
of the Treasury provided in subsection (d), if in the judgment
of the Board, a loan to the fund is required at any time for
carrying out the purposes of this title, the fund is authorized
to borrow from the National Credit Union Administration Central
Liquidity Facility.
(g) Fund Transparency.--
(1) In general.--The Board shall accompany each
annual budget submitted pursuant to section 209(b) with
a report containing--
(A) a detailed analysis of how the expenses
of the Administration are assigned between
prudential activities and insurance-related
activities and the extent to which those
expenses are paid from the fees collected
pursuant to section 105 or from the Fund; and
(B) the Board's supporting rationale for any
proposed use of amounts in the Fund contained
in such budget, including detailed breakdowns
and supporting rationales for any such proposed
use related to titles of this Act other than
this title.
(2) Public disclosure.--The Board shall make each
report described under paragraph (1) available to the
public.
* * * * * * *
requirements governing insured credit unions
Sec. 205. (a) Insurance Logo.--
(1) Insured credit unions.--
(A) In general.--Each insured credit union
shall display at each place of business
maintained by that credit union a sign or signs
relating to the insurance of the share accounts
of the institution, in accordance with
regulations to be prescribed by the Board.
(B) Statement to be included.--Each sign
required under subparagraph (A) shall include a
statement that insured share accounts are
backed by the full faith and credit of the
United States Government.
(2) Regulations.--The Board shall prescribe
regulations to carry out this subsection, including
regulations governing the substance of signs required
by paragraph (1) and the manner of display or use of
such signs.
(3) Penalties.--For each day that an insured credit
union continues to violate this subsection or any
regulation issued under this subsection, it shall be
subject to a penalty of not more than $100, which the
Board may recover for its use.
(b)(1) Except as provided in paragraph (2), no insured credit
union shall, without the prior approval of the Board--
(A) merge or consolidate with any noninsured credit
union or institution;
(B) assume liability to pay any member accounts in,
or similar liabilities of, any noninsured credit union
or institution;
(C) transfer assets to any noninsured credit union or
institution in consideration of the assumption of
liabilities for any portion of the member accounts in
such insured credit union; or
(D) convert into a noninsured credit union or
institution.
(2) Conversion of insured credit unions to mutual
savings banks.--
(A) In general.--Notwithstanding paragraph
(1), an insured credit union may convert to a
mutual savings bank or savings association (if
the savings association is in mutual form), as
those terms are defined in section 3 of the
Federal Deposit Insurance Act, without the
prior approval of the Board, subject to the
requirements and procedures set forth in the
laws and regulations governing mutual savings
banks and savings associations.
(B) Conversion proposal.--A proposal for a
conversion described in subparagraph (A) shall
first be approved, and a date set for a vote
thereon by the members (either at a meeting to
be held on that date or by written ballot to be
filed on or before that date), by a majority of
the directors of the insured credit union.
Approval of the proposal for conversion shall
be by the affirmative vote of a majority of the
members of the insured credit union who vote on
the proposal.
(C) Notice of proposal to members.--An
insured credit union that proposes to convert
to a mutual savings bank or savings association
under subparagraph (A) shall submit notice to
each of its members who is eligible to vote on
the matter of its intent to convert--
(i) 90 days before the date of the
member vote on the conversion;
(ii) 60 days before the date of the
member vote on the conversion; and
(iii) 30 days before the date of the
member vote on the conversion.
(D) Notice of proposal to board.--The Board
may require an insured credit union that
proposes to convert to a mutual savings bank or
savings association under subparagraph (A) to
submit a notice to the Board of its intent to
convert during the 90-day period preceding the
date of the completion of the conversion.
(E) Inapplicability of act upon conversion.--
Upon completion of a conversion described in
subparagraph (A), the credit union shall no
longer be subject to any of the provisions of
this Act.
(F) Limit on compensation of officials.--
(i) In general.--No director or
senior management official of an
insured credit union may receive any
economic benefit in connection with a
conversion of the credit union as
described in subparagraph (A), other
than--
(I) director fees; and
(II) compensation and other
benefits paid to directors or
senior management officials of
the converted institution in
the ordinary course of
business.
(ii) Senior management official.--For
purposes of this subparagraph, the term
``senior management official'' means a
chief executive officer, an assistant
chief executive officer, a chief
financial officer, and any other senior
executive officer (as defined by the
appropriate Federal banking agency
pursuant to section 32 (f) of the
Federal Deposit Insurance Act).
(G) Consistent rules.--
(i) In general.--Not later than 6
months after the date of enactment of
the Credit Union Membership Access Act,
the Administration shall promulgate
final rules applicable to charter
conversions described in this paragraph
that are consistent with rules
promulgated by other financial
regulators, including the Office of the
Comptroller of the Currency. The rules
required by this clause shall provide
that charter conversion by an insured
credit union shall be subject to
regulation that is no more or less
restrictive than that applicable to
charter conversions by other financial
institutions.
(ii) Oversight of member vote.--The
member vote concerning charter
conversion under this paragraph shall
be administered by the Administration,
and shall be verified by the Federal or
State regulatory agency that would have
jurisdiction over the institution after
the conversion. If either the
Administration or that regulatory
agency disapproves of the methods by
which the member vote was taken or
procedures applicable to the member
vote, the member vote shall be taken
again, as directed by the
Administration or the agency.
(3) Except with the prior written approval of the Board, no
insured credit union shall merge or consolidate with any other
insured credit union or, either directly or indirectly, acquire
the assets of, or assume liability to pay any member accounts
in, any other insured credit union.
(c) In granting or withholding approval or consent under
subsection (b) of this section, the Board shall consider--
(1) the history, financial condition, and management
policies of the credit union;
(2) the adequacy of the credit union's reserves;
(3) the economic advisability of the transaction;
(4) the general character and fitness of the credit
union's management;
(5) the convenience and needs of the members to be
served by the credit union; and
(6) whether the credit union is a cooperative
association organized for the purpose of promoting
thrift among its members and creating a source of
credit for provident or productive purposes.
(d) Prohibition.--
(1) In general.--Except with prior written consent of
the Board--
(A) any person who has been convicted of any
criminal offense involving dishonesty or a
breach of trust, or has agreed to enter into a
pretrial diversion or similar program in
connection with a prosecution for such offense,
may not--
(i) become, or continue as, an
institution-affiliated party with
respect to any insured credit union; or
(ii) otherwise participate, directly
or indirectly, in the conduct of the
affairs of any insured credit union;
and
(B) any insured credit union may not permit
any person referred to in subparagraph (A) to
engage in any conduct or continue any
relationship prohibited under such
subparagraph.
(2) Minimum 10-year prohibition period for certain
offenses.--
(A) In general.--If the offense referred to
in paragraph (1)(A) in connection with any
person referred to in such paragraph is--
(i) an offense under--
(I) section 215, 656, 657,
1005, 1006, 1007, 1008, 1014,
1032, 1344, 1517, 1956, or 1957
of title 18, United States
Code; or
(II) section 1341 or 1343 of
such title which affects any
financial institution (as
defined in section 20 of such
title); or
(ii) the offense of conspiring to
commit any such offense,
the Board may not consent to any exception to
the application of paragraph (1) to such person
during the 10-year period beginning on the date
the conviction or the agreement of the person
becomes final.
(B) Exception by order of sentencing court.--
(i) In general.--On motion of the
Board, the court in which the
conviction or the agreement of a person
referred to in subparagraph (A) has
been entered may grant an exception to
the application of paragraph (1) to
such person if granting the exception
is in the interest of justice.
(ii) Period for filing.--A motion may
be filed under clause (i) at any time
during the 10-year period described in
subparagraph (A) with regard to the
person on whose behalf such motion is
made.
(3) Penalty.--Whoever knowingly violates paragraph
(1) or (2) shall be fined not more than [$1,000,000]
$1,500,000 for each day such prohibition is violated or
imprisoned for not more than 5 years, or both.
(e)(1) The Board shall promulgate rules establishing minimum
standards with which each insured credit union must comply with
respect to the installation, maintenance, and operation of
security devices and procedures, reasonable in cost, to
discourage robberies, burglaries, and larcenies and to assist
in the identification and apprehension of persons who commit
such acts.
(2) The rules shall establish the time limits within which
insured credit unions shall comply with the standards and shall
require the submission of periodic reports with respect to the
installation, maintenance, and operation of security devices
and procedures.
(3) An insured credit union which violates a rule promulgated
pursuant to this subsection shall be subject to a civil penalty
which shall not exceed $100 for each day of the violation.
(f)(1) Every insured credit union is authorized to maintain,
and make loans with respect to, share draft accounts in
accordance with rules and regulations prescribed by the Board.
Except as provided in paragraph (2), an insured credit union
may pay dividends on share draft accounts and may permit the
owners of such share draft accounts to make withdrawals by
negotiable or transferable instruments or other orders for the
purpose of making transfers to third parties.
(2) Paragraph (1) shall apply only with respect to share
draft accounts in which the entire beneficial interest is held
by one or more individuals or members or by an organization
which is operated primarily for religious, philanthropic,
charitable, educational, or other similar purposes and which is
not operated for profit, and with respect to deposits of public
funds by an officer, employee, or agent of the United States,
any State, county, municipality, or political subdivision
thereof, the District of Columbia, the Commonwealth of Puerto
Rico, American Samoa, Guam, any territory or possession of the
United States, or any political subdivision thereof.
(g)(1) If the applicable rate prescribed in this subsection
exceeds the rate an insured credit union would be permitted to
charge in the absence of this subsection, such credit union
may, notwithstanding any State constitution or statute which is
hereby preempted for the purposes of this subsection, take,
receive, reserve, and charge on any loan, interest at a rate of
not more than 1 per centum in excess of the discount rate on
ninety-day commercial paper in effect at the Federal Reserve
bank in the Federal Reserve district where such insured credit
union is located or at the rate allowed by the laws of the
State, territory, or district where such credit union is
located, whichever may be greater. A loan that is valid when
made as to its maximum rate of interest in accordance with this
subsection shall remain valid with respect to such rate
regardless of whether the loan is subsequently sold, assigned,
or otherwise transferred to a third party, and may be enforced
by such third party notwithstanding any State law to the
contrary.
(2) If the rate prescribed in paragraph (1) exceeds the rate
such credit union would be permitted to charge in the absence
of this subsection, and such State fixed rate is thereby
preempted by the rate described in paragraph (1), the taking,
receiving, reserving, or charging a greater rate than is
allowed by paragraph (1), when knowingly done, shall be deemed
a forfeiture of the entire interest which the loan carries with
it, or which has been agreed to be paid thereon. If such
greater rate of interest has been paid, the person who paid it
may recover, in a civil action commenced in a court of
appropriate jurisdiction not later than two years after the
date of such payment, an amount equal to twice the amount of
interest paid from the credit union taking or receiving such
interest.
(h) Notwithstanding any other provision of law, the Board may
authorize a merger or consolidation of an insured credit union
which is insolvent or is in danger of insolvency with any other
insured credit union or may authorize an insured credit union
to purchase any of the assets of, or assume any of the
liabilities of, any other insured credit union which is
insolvent or in danger of insolvency if the Board is satisfied
that--
(1) an emergency requiring expeditious action exists
with respect to such other insured credit union;
(2) other alternatives are not reasonably available;
and
(3) the public interest would best be served by
approval of such merger, consolidation, purchase, or
assumption.
(i)(1) Notwithstanding any other provision of this Act or of
State law, the Board may authorize an institution whose
deposits or accounts are insured by the Federal Deposit
Insurance Corporation to purchase any of the assets of or
assume any of the liabilities of an insured credit union which
is insolvent or in danger of insolvency, except that prior to
exercising this authority the Board must attempt to effect the
merger or consolidation of an insured credit union which is
insolvent or in danger of insolvency with another insured
credit union, as provided in subsection (h).
(2) For purposes of the authority contained in paragraph (1),
insured accounts of the credit union may upon consummation of
the purchase and assumption be converted to insured deposits or
other comparable accounts in the acquiring institution, and the
Board and the National Credit Union Share Insurance Fund shall
be absolved of any liability to the credit union's members with
respect to those accounts.
(j) Privileges Not Affected by Disclosure to Banking Agency
or Supervisor.--
(1) In general.--The submission by any person of any
information to the Consumer Law Enforcement Agency, the
Administration, any State credit union supervisor, or
foreign banking authority for any purpose in the course
of any supervisory or regulatory process of such Board,
supervisor, or authority shall not be construed as
waiving, destroying, or otherwise affecting any
privilege such person may claim with respect to such
information under Federal or State law as to any person
or entity other than such Board, supervisor, or
authority.
(2) Rule of construction.--No provision of paragraph
(1) may be construed as implying or establishing that--
(A) any person waives any privilege
applicable to information that is submitted or
transferred under any circumstance to which
paragraph (1) does not apply; or
(B) any person would waive any privilege
applicable to any information by submitting the
information to the Consumer Law Enforcement
Agency, the Administration, any State credit
union supervisor, or foreign banking authority,
but for this subsection.
termination of insurance; cease-and-desist proceedings; suspension and/
or removal of directors, officers, and committee members; taking
possession of committee members
Sec. 206. (a)(1) Any insured credit union other than a
Federal credit union may, upon not less than ninety days'
written notice to the Board and upon the affirmative vote of a
majority of its members within one year prior to the giving of
such notice, terminate its status as an insured credit union.
(2) Any insured credit union, other than a Federal credit
union, which has obtained a new certificate of insurance from a
corporation authorized and duly licensed to insure member
accounts may upon not less than ninety days' written notice to
the Board convert from status as an insured credit union under
this Act: Provided, That at the time of giving notice to the
Board the provisions of paragraph (b)(1) of this section are
not being invoked against the credit union.
(b)(1) Whenever, in the opinion of the Board, any insured
credit union is engaging or has engaged in unsafe or unsound
practices in conducting the business of such credit union, or
is in an unsafe or unsound condition to continue operations as
an insured credit union, or is violating or has violated an
applicable law, rule, regulation, order, or any condition
imposed in writing by the Board in connection with any action
on any application, notice, or other request by the credit
union or institution-affiliated party,, or is violating or has
violated any written agreement entered into with the Board, the
Board shall serve upon the credit union a statement with
respect to such practices or conditions or violations for the
purpose of securing the correction thereof. In the case of an
insured State-chartered credit union, the Board shall send a
copy of such statement to the commission, board, or authority,
if any, having supervision of such credit union. Unless such
correction shall be made within one hundred and twenty days
after service of such statement, or within such shorter period
of not less than twenty days after such service as the Board
shall require in any case where it determines that the
insurance risk with respect to such credit union could be
unduly jeopardized by further delay in the correction of such
practices or conditions or violations, or as the commission,
board, or authority having supervision of such credit union, if
any, shall require in the case of an insured State-chartered
credit union, the Board, if it shall determine to proceed
further, shall give to the credit union not less than thirty
days' written notice of its intention to terminate the status
of the credit union as an insured credit union. Such notice
shall contain a statement of the facts constituting the alleged
unsafe and unsound practices or conditions or violations and
shall fix a time and place for a hearing thereon. Such hearing
shall be fixed for a date not earlier than thirty days nor
later than sixty days after service of such notice unless an
earlier or a later date is set by the Board at the request of
the credit union. Unless the credit union shall appear at the
hearing by a duly authorized representative, it shall be deemed
to have consented to the termination of its status as an
insured credit union. In the event of such consent, or if upon
the record made at any such hearing the Board shall find that
any unsafe or unsound practice or condition or violation
specified in the notice has been established and has not been
corrected within the time above-prescribed in which to make
such correction, the Board may issue and serve upon the credit
union an order terminating its status as an insured credit
union on a date subsequent to the date of such finding and
subsequent to the expiration of the time specified in the
notice.
(2) Any credit union whose insured status has been terminated
by order of the Board under this subsection shall have the
right of judicial review of such order only to the same extent
as provided for the review of orders under subsection (j) of
this section.
(c) In the event of the termination of a credit union's
status as an insured credit union as provided under subsection
(a)(2) or (b) of this section, the credit union shall give
prompt and reasonable notice to all of its members whose
accounts are insured that it has ceased to be an insured credit
union. It may include in such notice a statement of the fact
that member accounts insured on the effective date of such
termination, to the extent not withdrawn, remain insured for
one year from the date of such termination, but it shall not
further represent itself in any manner as an insured credit
union. In the event of failure to give the notice as herein
provided to members whose accounts are insured, the Board is
authorized to give reasonable notice.
(d)(1) After the termination of the insured status of any
credit union as provided under subsection (a)(1) or (b) of this
section, insurance of its member accounts to the extent that
they were insured on the effective date of such termination,
less any amounts thereafter withdrawn which reduce the accounts
below the amount covered by insurance on the effective date of
such termination, shall continue for a period of one year, but
no shares issued by the credit union or deposits made after the
date of such termination shall be insured by the Board. The
credit union shall continue to pay premiums to the Board during
such period as in the case of an insured credit union and the
Board shall have the right to examine such credit union from
time to time during the period during which such insurance
continues. Such credit union shall, in all other respects, be
subject to the duties and obligations of an insured credit
union for the period of one year from the date of such
termination. In the event that such credit union shall be
closed for liquidation within such period of one year, the
Board shall have the same powers and rights with respect to
such credit union as in the case of an insured credit union.
(2) No credit union shall convert from status as an insured
credit union under this Act as provided under subsection (a)(2)
of this section until the proposition for such conversion has
been approved by a majority of all the directors of the credit
union, and by affirmative vote of a majority of the members of
the credit union who vote on the proposition in a vote in which
at least 20 per centum of the total membership of the credit
union participates. Following approval by the directors,
written notice of the proposition and of the date set for the
membership vote shall be delivered in person to each member, or
mailed to each member at the address for such member appearing
on the records of the credit union, not more than thirty nor
less than seven days prior to such date. The membership shall
be given the opportunity to vote by mail ballot. If the
proposition is approved by the membership, prompt and
reasonable notice of insurance conversion shall be given to all
members.
(3) In the event of a conversion of a credit union from
status as an insured credit union under this Act as provided
under subection (a)(2) of this section, premium charges payable
under section 202(c) of this Act shall be reduced by an amount
proportionate to the number of calendar months for which the
converting credit union will no longer be insured under this
Act. As long as a converting credit union remains insured under
this Act, it shall remain subject to all of the provisions of
chapter II of this Act.
(e)(1) If, in the opinion of the Board, any insured credit
union, credit union which has insured accounts, or any
institution-affiliated party is engaging or has engaged, or the
Board has reasonable cause to believe that the credit union or
any institution-affiliated party is about to engage, in an
unsafe or unsound practice in conducting the business of such
credit union, or is violating or has violated, or the Board has
reasonable cause to believe that the credit union or any
institution-affiliated party is about to violate, a law, rule,
or regulation, or any condition imposed in writing by the Board
in connection with the granting of any application or other
request by the credit union or any written agreement entered
into with the Board, the Board may issue and serve upon the
credit union or such party a notice of charges in respect
thereof. The notice shall contain a statement of the facts
constituting the alleged violation or violations or the unsafe
or unsound practice or practices, and shall fix a time and
place at which a hearing will be held to determine whether an
order to cease and desist therefrom should issue against the
credit union or the institution-affiliated party. Such hearing
shall be fixed for a date not earlier than thirty days nor
later than sixty days after service of such notice unless an
earlier or a later date is set by the Board at the request of
any party so served. Unless the party or parties so served
shall appear at the hearing by a duly authorized
representative, they shall be deemed to have consented to the
issuance of the cease-and-desist order. In the event of such
consent, or if upon the record made at any such hearing, the
Board shall find that any violation or unsafe or unsound
practice specified in the notice of charges has been
established, the Board may issue and serve upon the credit
union or the institution-affiliated party an order to cease and
desist from any such violation or practice. Such order may, by
provisions which may be mandatory or otherwise, require the
credit union or its institution-affiliated parties to cease and
desist from the same, and, further, to take affirmative action
to correct the conditions resulting from any such violation or
practice.
(2) A cease-and-desist order shall become effective at the
expiration of thirty days after the service of such order upon
the credit union or other person 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 it is stayed, modified, terminated, or set aside
by action of the Board or a reviewing court.
(3) Affirmative action to correct conditions
resulting from violations or practices.--The authority
to issue an order under this subsection and subsection
(f) which requires an insured credit union or any
institution-affiliated party to take affirmative action
to correct any conditions resulting from any violation
or practice with respect to which such order is issued
includes the authority to require such insured credit
union or such party to--
(A) make restitution or provide
reimbursement, indemnification, or guarantee
against loss if--
(i) such credit union or such party
was unjustly enriched in connection
with such violation or practice; or
(ii) the violation or practice
involved a reckless disregard for the
law or any applicable regulations or
prior order of the Board;
(B) restrict the growth of the institution;
(C) rescind agreements or contracts;
(D) dispose of any loan or asset involved;
(E) employ qualified officers or employees
(who may be subject to approval by the Board at
the direction of such Board); and
(F) take such other action as the Board
determines to be appropriate.
(4) Authority to limit activities.--The authority to
issue an order under this subsection or subsection (f)
includes the authority to place limitations on the
activities or functions of an insured credit union or
any institution-affiliated party.
(f)(1) Whenever the Board shall determine that the violation
or threatened violation or the unsafe or unsound practice or
practices, specified in the notice of charges served upon the
credit union or any institution-affiliated party pursuant to
paragraph (1) of subsection (e) of this section, or the
continuation thereof, is likely to cause insolvency or
significant dissipation of assets or earnings of the credit
union, or is likely to weaken the condition of the credit union
or otherwise prejudice the interests of its insured members
prior to the completion of the proceedings conducted pursuant
to paragraph (1) of subsection (e) of this section, the Board
may issue a temporary order requiring the credit union or such
party to cease and desist from any such violation or practice
and to take affirmative action to prevent such insolvency,
dissipation, condition, or prejudice pending completion of such
proceedings. Such order may include any requirement authorized
under subsection (e)(3). Such order shall become effective upon
service upon the credit union or institution-affiliated party
and, unless set aside, limited, or suspended by a court in
proceedings authorized by paragraph (2) of this subsection,
shall remain effective and enforceable pending the completion
of the administrative proceedings pursuant to such notice and
until such time as the Administration shall dismiss the charges
specified in such notice, or if a cease-and-desist order is
issued against the credit union or such party, until the
effective date of such order.
(2) Within ten days after the credit union concerned or any
institution-affiliated party has been served with a temporary
cease-and-desist order, the credit union or such party may
apply to the United States district court for the judicial
district in which the home office of the credit union 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 credit union
or such party under paragraph (1) of subsection (e) of this
section, 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 (e)(1) specifies, on
the basis of particular facts and
circumstances, that an insured credit union's
books and records are so incomplete or
inaccurate that the Board is unable, through
the normal supervisory process, to determine
the financial condition of that insured credit
union or the details or purpose of any
transaction or transactions that may have a
material effect on the financial condition of
that insured credit union, the Board 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
(e)(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 (e)(1) in connection
with the notice of charges; or
(II) the date the Board
determines, by examination or
otherwise, that the insured
credit union's books and
records are accurate and
reflect the financial condition
of the credit union.
(4) In the case of violation or threatened violation of, or
failure to obey, a temporary cease-and-desist order, the Board
may apply to the United States district court, or the United
States court of any territory, within the jurisdiction of which
the principal office of the credit union is located for an
injunction to enforce such order, and, if the court shall
determine that there has been such violation or threatened
violation or failure to obey, it shall be the duty of the court
to issue such injunction.
(g) Removal and Prohibition Authority.--
(1) Authority to issue order.--Whenever the Board
determines that--
(A) any any institution-affiliated party has,
directly or indirectly--
(i) violated--
(I) any law or regulation;
(II) any cease-and-desist
order which has become final;
(III) any condition imposed
in writing by the Board in
connection with any action on
any application, notice, or
request by such credit union or
institution-affiliated party;
or
(IV) any written agreement
between such credit union and
the Board;
(ii) engaged or participated in any
unsafe or unsound practice in
connection with any insured credit
union or business institution; or
(iii) committed or engaged in any
act, omission, or practice which
constitutes a breach of such party's
fiduciary duty;
(B) by reason of the violation, practice, or
breach described in any clause of subparagraph
(A)--
(i) such insured credit union or
business institution has suffered or
will probably suffer financial loss or
other damage;
(ii) the interests of the insured
credit union's members have been or
could be prejudiced; or
(iii) such party has received
financial gain or other benefit by
reason of such violation, practice or
breach; and
(C) such violation, practice, or breach--
(i) involves personal dishonesty on
the part of such party; or
(ii) demonstrates such party's
unfitness to serve as a director or
officer of, or to otherwise participate
in the conduct of the affairs of, an
insured credit union,
the Board may serve upon such party a written notice of
the Board's intention to remove such party from office
or to prohibit any further participation, by such
party, in any manner in the conduct of the affairs of
any insured credit union.
(2) Specific violations.--
(A) In general.--Whenever the Board
determines that--
(i) an institution-affiliated party
has committed a violation of any
provision of subchapter II of chapter
53 of title 31, United States Code,
unless such violation was inadvertent
or unintentional;
(ii) an officer or director of an
insured credit union has knowledge that
an institution-affiliated party of the
insured credit union has violated any
such provision or any provision of law
referred to in subsection
(i)(1)(A)(ii); or
(iii) an officer or director of an
insured credit union has committed any
violation of the Depository Institution
Management Interlocks Act,
the Board may serve upon such party, officer,
or director a written notice of the Board's
intention to remove such officer or director
from office.
(B) Factors to be considered.--In determining
whether an officer or director should be
removed as a result of the application of
subparagraph (A)(ii), the Board shall consider
whether the officer or director took
appropriate action to stop, or to prevent the
recurrence of, a violation described in such
subparagraph.
(3) Suspension order.--
(A) Suspension or prohibition authorized.--If
the Board serves written notice under paragraph
(1) or (2) to any institution-affiliated party
of the Board's intention to issue an order
under such paragraph, the Board may suspend
such party from office or prohibit such party
from further participation in any manner in the
conduct of the affairs of the institution, if
the Board--
(i) determines that such action is
necessary for the protection of the
credit union or the interests of the
credit union's members; and
(ii) serves such person with written
notice of the suspension order.
(B) Effective period.--Any suspension order
issued under subparagraph (A)--
(i) shall become effective upon
service; and
(ii) unless a court issues a stay of
such order under paragraph (6), shall
remain in effect and enforceable
until--
(I) the date the Board
dismisses the charges contained
in the notice served under
paragraph (1) or (2) with
respect to such party; or
(II) the effective date of an
order issued by the Board to
such person under paragraph (1)
or (2).
(C) Copy of order.--If the Board issues a
suspension order under subparagraph (A) to any
institution-affiliated party, the Board shall
serve a copy of such order on any insured
credit union with which such party is
associated at the time such order is issued.
(4) A notice of intention to remove a director, committee
member, officer, or other person from office or to prohibit his
participation in the conduct of the affairs of an insured
credit union, shall contain a statement of the facts
constituting grounds therefor, and shall fix a time and place
at which a hearing will be held thereon. Such hearing shall be
fixed for a date not earlier than thirty days nor later than
sixty days after the date of service of such notice, unless an
earlier or a later date is set by the Board at the request of
(A) such director, committee member, or officer or other
person, and for good cause shown, or (B) the Attorney General
of the United States. Unless such director, committee member,
officer, or other person shall appear at the hearing in person
or by a duly authorized representative, he shall be deemed to
have consented to the issuance of an order of such removal or
prohibition. In the event of such consent, or if upon the
record made at any such hearing the Board shall find that any
of the grounds specified in such notice have been established,
the Board may issue such orders of suspension or removal from
office, or prohibition from participation in the conduct of the
affairs of the credit union, as it may deem appropriate. Any
such order shall become effective at the expiration of thirty
days after service upon such credit union and the director,
committee member, officer, or other person concerned (except in
the case of an order issued upon consent, which shall become
effective at the time specified therein). Such order shall
remain effective and enforceable except to such extent as it is
stayed, modified, terminated, or set aside by action of the
Board or a reviewing court.
(5) Prohibition of certain specific activities.--Any person
subject to an order issued under this subsection shall not--
(A) participate in any manner in the conduct of the
affairs of any institution or agency specified in
paragraph (7)(A);
(B) solicit, procure, transfer, attempt to transfer,
vote, or attempt to vote any proxy, consent, or
authorization with respect to any voting rights in any
institution described in subparagraph (A);
(C) violate any voting agreement previously approved
by the appropriate Federal banking agency; or
(D) vote for a director, or serve or act as an
institution-affiliated party.
(6) Within ten days after any director, officer, committee
member, or other person has been suspended from office and/or
prohibited from participation in the conduct of the affairs of
an insured credit union under paragraph (3) of this subsection,
such director, officer, committee member, or other person may
apply to the United States district court for the judicial
district in which the principal office of the credit union is
located, or the United States District Court for the District
of Columbia, for a stay of such suspension and/or prohibition
pending the completion of the administrative proceedings
pursuant to the notice served upon such director, officer,
committee member, or other person under paragraph (1) or (2) of
this subsection, and such court shall have jurisdiction to stay
such suspension and/or prohibition.
(7) Industrywide Prohibition.--
(A) In general.--Except as provided in subparagraph
(B), any person who, pursuant to an order issued under
this subsection or subsection (i), has been removed or
suspended from office in an insured credit union or
prohibited from participating in the conduct of the
affairs of an insured credit union may not, while such
order is in effect, continue or commence to hold any
office in, or participate in any manner in the conduct
of the affairs of--
(i) any insured depository institution;
(ii) any institution treated as an insured
bank under paragraph (3) or (4) of section 8(b)
of the Federal Deposit Insurance Act, or as a
savings association under section 8(b)(9) of
such Act;
(iii) any insured credit union;
(iv) any institution chartered under the Farm
Credit Act of 1971;
(v) any appropriate Federal financial
institution regulatory agency; and
(vi) the Federal Housing Finance Agency and
any Federal home loan bank.
(B) Exception if agency provides written consent.--
If, on or after the date an order is issued under this
subsection which removes or suspends from office any
institution-affiliated party or prohibits such party
from participating in the conduct of the affairs of an
insured credit union, such party receives the written
consent of--
(i) the Board; and
(ii) the appropriate Federal financial
institutions regulatory agency of the
institution described in any clause of
subparagraph (A) with respect to which such
party proposes to become an institution-
affiliated party,
subparagraph (A) shall, to the extent of such
consent, cease to apply to such party with
respect to the institution described in each
written consent. If any person receives such a
written consent from the Board, the Board shall
publicly disclose such consent. If the agency
referred to in clause (ii) grants such a
written consent, such agency shall report such
action to the Board and publicly disclose such
consent.
(C) Violation of paragraph treated as violation of
order.--Any violation of subparagraph (A) by any person
who is subject to an order described in such
subparagraph shall be treated as a violation of the
order.
(D) Appropriate federal financial institutions
regulatory agency defined.--For purposes of this
paragraph, the term ``appropriate Federal financial
institutions regulatory agency'' means--
(i) the appropriate Federal banking agency,
as provided in section 3(q) of the Federal
Deposit Insurance Act;
(ii) the Farm Credit Administration, in the
case of an institution chartered under the Farm
Credit Act of 1971;
(iii) the National Credit Union
Administration Board, in the case of an insured
credit union (as defined in section 101(7) of
the Federal Credit Union Act); and
(iv) the Secretary of the Treasury, in the
case of the Federal Housing Finance Agency and
any Federal home loan bank[;].
(E) Consultation between agencies.--The agencies
referred to in clauses (i) and (ii) of subparagraph (B)
shall consult with each other before providing any
written consent described in subparagraph (B).
(F) Applicability.--This paragraph shall only apply
to a person who is an individual, unless the Board
specifically finds that it should apply to a
corporation, firm, or other business enterprise.
(h)(1) The Board may, ex parte without notice, appoint itself
or another (including, in the case of a State-chartered insured
credit union, the State official having jurisdiction over the
credit union) as conservator and immediately take possession
and control of the business and assets of any insured credit
union in any case in which--
(A) the Board determines that such action is
necessary to conserve the assets of any insured credit
union or to protect the Fund or the interests of the
members of such insured credit union;
(B) an insured credit union, by a resolution of its
board of directors, consents to such an action by the
Board;
(C) the Attorney General notifies the Board
in writing that an insured credit union has
been found guilty of a criminal offense under
section 1956 or 1957 of title 18, United States
Code, or section 5322 or 5324 of title 31,
United States Code;
(D) there is a willful violation of a cease-and-
desist order which has become final;
(E) there is concealment of books, papers, records,
or assets of the credit union or refusal to submit
books, papers, records, or affairs of the credit union
for inspection to any examiner or to any lawful agent
of the Board;
(F) the credit union is significantly
undercapitalized, as defined in section 216, and has no
reasonable prospect of becoming adequately capitalized,
as defined in section 216; or
(G) the credit union is critically undercapitalized,
as defined in section 216.
(2)(A) Except as provided in subparagraph (C), in the case of
a State-chartered insured credit union, the authority conferred
by paragraph (1) shall not be exercised without the written
approval of the State official having jurisdiction over the
State-chartered credit union that the grounds specified for
such exercise exist.
(B) If such approval has not been received by the Board
within 30 days of receipt of notice by the State that the Board
has determined such grounds exist, and the Board has responded
in writing to the State's written reasons, if any, for
withholding approval, then the Board may proceed without State
approval only by a unanimous vote of the Board.
(C) In the case of a State-chartered insured credit
union, the authority conferred by subparagraphs (F) and
(G) of paragraph (1) may not be exercised unless the
Board has complied with section 216(l).
(3) Not later than ten days after the date on which the Board
takes possession and control of the business and assets of an
insured credit union pursuant to paragraph (1), such insured
credit union may apply to the United States district court for
the judicial district in which the principal office of such
insured credit union is located or the United States District
Court for the District of Columbia, for an order requiring the
Board to show cause why it should not be enjoined from
continuing such possession and control. Except as provided in
this paragraph, no court may take any action, except at the
request of the Board by regulation or order, to restrain or
affect the exercise of powers or functions of the Board as
conservator.
(4) Except as provided in paragraph (3), in the case of a
Federal credit union, the Board may maintain possession and
control of the business and assets of such credit union and may
operate such credit union until such time--
(A) as the Board shall permit such credit union to
continue business subject to such terms and conditions
as may be imposed by the Board; or
(B) as such credit union is liquidated in accordance
with the provisions of section 207.
(5) Except as provided in paragraph (3), in the case of an
insured State-chartered credit union, the Board may maintain
possession and control of the business and assets of such
credit union and may operate such credit union until such
time--
(A) as the Board shall permit such credit union to
continue business, subject to such terms and conditions
as may be imposed by the Board;
(B) as the Board shall permit the transfer of
possession and control of such credit union to any
commission, board, or authority which has supervisory
authority over such credit union and which is
authorized by State law to operate such credit union;
or
(C) as such credit union is liquidated in accordance
with the provisions of section 207.
(6) The Board may appoint such agents as it considers
necessary in order to assist the Board in carrying out its
duties as a conservator under this subsection.
(7) All expenses incurred by the Board in exercising its
authority under this subsection with respect to any credit
union shall be paid out of the assets of such credit union.
(8) The conservator shall have all the powers of the members,
the directors, the officers, and the committees of the credit
union and shall be authorized to operate the credit union in
its own name or to conserve its assets in the manner and to the
extent authorized by the Board.
(9) The authority granted by this subsection is in addition
to all other authority granted to the Board under this Act.
(i) Suspension, Removal, and Prohibition From Participation
Orders in the Case of Certain Criminal Offenses.--
(1) Suspension or prohibition authorized.--
(A) In general.--Whenever any institution-
affiliated party is charged in any information,
indictment, or complaint, with the commission
of or participation in--
(i) a crime involving dishonesty or
breach of trust which is punishable by
imprisonment for a term exceeding one
year under State or Federal law, or
(ii) a criminal violation of section
1956, 1957, or 1960 of title 18, United
States Code, or section 5322 or 5324 of
title 31, United States Code,
the Board may, if continued service or
participation by such party may pose a threat
to the interests of the credit union's members
or may threaten to impair public confidence in
any credit union, by written notice served upon
such party, suspend such party from office or
prohibit such party from further participation
in any manner in the conduct of the affairs of
any credit union.
(B) Provisions applicable to notice.--
(i) Copy.--A copy of any notice under
subparagraph (A) shall also be served
upon the credit union of which the
subject of the order is, or most
recently was, an institution-affiliated
party.
(ii) Effective period.--A suspension
or prohibition under subparagraph (A)
shall remain in effect until the
information, indictment, or complaint
referred to in such subparagraph is
finally disposed of or until terminated
by the Board.
(C) Removal or prohibition.--
(i) In general.--If a judgment of
conviction or an agreement to enter a
pretrial diversion or other similar
program is entered against an
institution-affiliated party in
connection with a crime described in
subparagraph (A)(i), at such time as
such judgment is not subject to further
appellate review, the Board may, if
continued service or participation by
such party may pose a threat to the
interests of any credit union's members
or may threaten to impair public
confidence in any credit union, issue
and serve upon such party an order
removing such party from office or
prohibiting such party from further
participation in any manner in the
conduct of the affairs of any credit
union without the prior written consent
of the Board.
(ii) Required for certain offenses--
In the case of a judgment of conviction
or agreement against an institution-
affiliated party in connection with a
violation described in subparagraph
(A)(ii), the Board shall issue and
serve upon such party an order removing
such party from office or prohibiting
such party from further participation
in any manner in the conduct of the
affairs of any credit union without the
prior written consent of the Board.
(D) Provisions applicable to order.--
(i) Copy.--A copy of any order under
subparagraph (C) shall also be served
upon the credit union of which the
subject of the order is, or most
recently was, an institution-affiliated
party, whereupon such party (if a
director or an officer) shall cease to
be a director or officer of such credit
union.
(ii) Effect of acquittal.--A finding
of not guilty or other disposition of
the charge shall not preclude the Board
from instituting proceedings after such
finding or disposition to remove such
party from office or to prohibit
further participation in credit union
affairs, pursuant to paragraph (1),
(2), or (3) of subsection (g) of this
section.
(iii) Effective period.--Any notice
of suspension or order of removal
issued under this paragraph shall
remain effective and outstanding until
the completion of any hearing or appeal
authorized under paragraph (3) unless
terminated by the Board.
(E) Continuation of authority.--The Board may
issue an order under this paragraph with
respect to an individual who is an institution-
affiliated party at a credit union at the time
of an offense described in subparagraph (A)
without regard to--
(i) whether such individual is an
institution-affiliated party at any
credit union at the time the order is
considered or issued by the Board; or
(ii) whether the credit union at
which the individual was an
institution-affiliated party at the
time of the offense remains in
existence at the time the order is
considered or issued by the Board.
(2) If at any time, because of the suspension of one or more
directors pursuant to this section, there shall be on the board
of directors of a Federal credit union less than a quorum of
directors not so suspended, all powers and functions vested in
or exercisable by such board shall vest in and be exercisable
by the director or directors on the board not so suspended,
until such time as there shall be a quorum of the board of
directors. In the event all of the directors of a Federal
credit union are suspended pursuant to this section, the Board
shall appoint persons to serve temporarily as directors in
their place and stead pending the termination of such
suspensions, or until such time as those who have been
suspended cease to be directors of the credit union and their
respective successors have been elected by the members at an
annual or special meeting and have taken office. Directors
appointed temporarily by the Board shall, within thirty days
following their appointment, call a special meeting for the
election of new directors, unless during the thirty-day period
(A) the regular annual meeting is scheduled, or (B) the
suspensions giving rise to the appointment of temporary
directors are terminated.
(3) Within thirty days from service of any notice of
suspension or order of removal issued pursuant to paragraph (1)
of this subsection, the institution-affiliated party concerned
may request in writing an opportunity to appear before the
Board to show that the continued service to or participation in
the conduct of the affairs of the credit union by such party
does not, or is not likely to, pose a threat to the interests
of the credit union's members or threaten to impair public
confidence in the credit union. Upon receipt of any such
request, the Board shall fix a time (not more than thirty days
after receipt of such request, unless extended at the request
of such party) and place at which such party may appear,
personally or through counsel, before the Board or its designee
to submit written materials (or, at the discretion of the
Board, oral testimony) and oral argument. Within sixty days of
such hearing, the Board shall notify such party whether the
suspension or prohibition from participation in any manner in
the conduct of the affairs of the credit union will be
continued, terminated or otherwise modified, or whether the
order removing such party from office or prohibiting such party
from further participation in any manner in the conduct of the
affairs of the credit union will be rescinded or otherwise
modified. Such notification shall contain a statement of the
basis for the Board's decision, if adverse to such party. The
Board is authorized to prescribe such rules as may be necessary
to effectuate the purposes of this subsection.
(j)(1) Any hearing provided for in this section (other than
the hearing provided for in subsection (i)(3) of this section)
shall be held in the Federal judicial district or in the
territory in which the principal office of the credit union is
located, unless the party afforded the hearing 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 ninety days after the Board has
notified the parties that the case has been submitted to them
for final decision, it 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 (j). Unless a petition for review
is timely filed in a court of appeals of the United States, as
provided in paragraph (2) of this subsection, and thereafter
until the record in the proceeding has been filed as so
provided, the Board may at any time, upon such notice and in
such manner as it may deem proper, modify, terminate, or set
aside any such order. Upon such filing of the record, the Board
may modify, terminate, or set aside any such order with
permission of the court.
(2) Any party to any proceeding under paragraph (1) may
obtain a review of any order served pursuant to paragraph (1)
of this subsection (other than an order issued with the consent
of the credit union or the institution-affiliated party
concerned or an order issued under subsection (i)(1) of this
section) by filing in the court of appeals of the United States
for the circuit in which the principal office of the credit
union is located, or in the United States Court of Appeals for
the District of Columbia Circuit, within thirty days after the
date of service of such order, a written petition praying that
the order of the Board be modified, terminated, or set aside. A
copy of such petition shall be forthwith transmitted by the
clerk of the court to the Board, and thereupon the Board shall
file in the court the record in the proceeding, as provided in
section 2112 of title 28, United States Code. Upon the filing
of such petition, such court shall have jurisdiction, which
upon the filing of the record shall, except as provided in the
last sentence of said paragraph (1), be exclusive, to affirm,
modify, terminate, or set aside, in whole or in part, the order
of the Board. Review of such proceedings shall be had as
provided in chapter 7 of title 5, 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 upon
certiorari, as provided in section 1254 of title 28, United
States Code.
(3) The commencement of proceedings for judicial review under
paragraph (2) of this subsection shall not, unless specifically
ordered by the court, operate as a stay of any order issued by
the Board.
(k)(1) The Board may in its discretion apply to the United
States district court, or the United States court of any
territory within the jurisdiction of which the principal office
of the credit union is located, for the enforcement of any
effective and outstanding notice or order issued under this
section or section 216, and such courts shall have jurisdiction
and power to order and require compliance therewith. However,
except as otherwise provided in this section or section 216, no
court shall have jurisdiction to affect by injunction or
otherwise the issuance or enforcement of any notice or order
under this section or section 216 or to review, modify,
suspend, terminate, or set aside any such notice or order.
(2) Civil money penalty.--
(A) First tier.--Any insured credit union
which, and any institution-affiliated party
who--
(i) violates any law or regulation;
(ii) violates any final order or
temporary order issued pursuant to
subsection (e), (f), (g), (i), or (q),
or any final order under section 216;
(iii) violates any condition imposed
in writing by the Board in connection
with any action on any application,
notice, or other request by the credit
union or institution-affiliated party;
or
(iv) violates any written agreement
between such credit union and such
agency,
shall forfeit and pay a civil penalty of not
more than $5,000 for each day during which such
violation continues.
(B) Second tier.--Notwithstanding
subparagraph (A), any insured credit union
which, and any institution-affiliated party
who--
(i)(I) commits any violation
described in any clause of subparagraph
(A);
(II) recklessly engages in an unsafe
or unsound practice in conducting the
affairs of such credit union; or
(III) breaches any fiduciary duty;
(ii) which violation, practice, or
breach--
(I) is part of a pattern of
misconduct;
(II) causes or is likely to
cause more than a minimal loss
to such credit union; or
(III) results in pecuniary
gain or other benefit to such
party,
shall forfeit and pay a civil penalty of not
more than $25,000 for each day during which
such violation, practice, or breach continues.
(C) Third tier.--Notwithstanding
subparagraphs (A) and (B), any insured credit
union which, and any institution-affiliated
party who--
(i) knowingly--
(I) commits any violation
described in any clause of
subparagraph (A);
(II) engages in any unsafe or
unsound practice in conducting
the affairs of such credit
union; or
(III) breaches any fiduciary
duty; and
(ii) knowingly or recklessly causes a
substantial loss to such credit union
or a substantial pecuniary gain or
other benefit to such party by reason
of such violation, practice, or breach,
shall forfeit and pay a civil penalty in an
amount not to exceed the applicable maximum
amount determined under subparagraph (D) for
each day during which such violation, practice,
or breach continues.
(D) Maximum amounts of penalties for any
violation described in subparagraph (c).--The
maximum daily amount of any civil penalty which
may be assessed pursuant to subparagraph (C)
for any violation, practice, or breach
described in such subparagraph is--
(i) in the case of any person other
than an insured credit union, an amount
to not exceed [$1,000,000] $1,500,000;
and
(ii) in the case of any insured
credit union, an amount not to exceed
the lesser of--
(I) [$1,000,000] $1,500,000;
or
(II) 1 percent of the total
assets of such credit union.
(E) Assessment.--
(i) Written notice.--Any penalty
imposed under subparagraph (A), (B), or
(C) may be assessed and collected by
the Board by written notice.
(ii) Finality of assessment.--If,
with respect to any assessment under
clause (i), a hearing is not requested
pursuant to subparagraph (H) within the
period of time allowed under such
subparagraph, the assessment shall
constitute a final and unappealable
order.
(F) Authority to modify or remit penalty.--
The Board may compromise, modify, or remit any
penalty which such agency may assess or had
already assessed under subparagraph (A), (B),
or (C).
(G) Mitigating factors.--In determining the
amount of any penalty imposed under
subparagraph (A), (B), or (C), the Board shall
take into account the appropriateness of the
penalty with respect to--
(i) the size of financial resources
and good faith of the insured credit
union or the person charged;
(ii) the gravity of the violation;
(iii) the history of previous
violations; and
(iv) such other matters as justice
may require.
(H) Hearing.--The insured credit union or
other person against whom any penalty is
assessed under this paragraph shall be afforded
an agency hearing if such institution or person
submits a request for such hearing within 20
days after the issuance of the notice of
assessment.
(I) Collection.--
(i) Referral.--If any insured credit
union or other person fails to pay an
assessment after any penalty assessed
under this paragraph has become final,
the Board shall recover the amount
assessed by action in the appropriate
United States district court.
(ii) Appropriateness of penalty not
reviewable.--In any civil action under
clause (i), the validity and
appropriateness of the penalty shall
not be subject to review.
(J) Disbursement.--All penalties collected
under authority of this paragraph shall be
deposited into the Treasury.
(K) Violate defined.--For purposes of this
section, the term ``violate'' includes any
action (alone or with another or others) for or
toward causing, bringing about, participating
in, counseling, or aiding or abetting a
violation.
(L) Regulations.--The Board shall prescribe
regulations establishing such procedures as may
be necessary to carry out this paragraph.
(3) Notice under this section after separation from
service.--The resignation, termination of employment or
participation, or separation of a institution-
affiliated party (including a separation caused by the
closing of an insured credit union) shall not affect
the jurisdiction and authority of the Board to issue
any notice or order and proceed under this section
against any such party, if such notice or order is
served before the end of the 6-year period beginning on
the date such party ceased to be such a party with
respect to such credit union (whether such date occurs
before, on, or after the date of the enactment of this
paragraph).
(l) Criminal Penalty for Violation of Certain Orders.--
Whoever--
(1) under this Act, is suspended or removed from, or
prohibited from participating in the affairs of any
credit union described in section 206(g)(5); and
(2) knowingly participates, directly or indirectly,
in any manner (including by engaging in an activity
specifically prohibited in such an order or in
subsection (g)(5)) in the conduct of the affairs of
such a credit union;
shall be fined not more than [$1,000,000] $1,500,000,
imprisoned for not more than 5 years, or both.
(m) As used in this section (1) the terms ``cease-and-desist
order which has become final'' and ``order which has become
final'' means a cease-and-desist order, or an order issued by
the Board with the consent of the credit union or the director,
officer, committee member, or other person concerned, or with
respect to which no petition for review of the action of the
Board has been filed and perfected in a court of appeals as
specified in paragraph (2) of subsection (j) of this section,
or with respect to which the action of the court in which said
petition is so filed is not subject to further review by the
Supreme Court of the United States in proceedings provided for
in said paragraph, or an order issued under subsection (i) of
this section, and (2) the term ``violation'' includes without
limitation any action (alone or with another or others) for or
toward causing, bringing about, participating in, counseling,
or aiding or abetting a violation.
(n) Any service required or authorized to be made by the
Board under this section may be made by registered mail or in
such other manner reasonably calculated to give actual notice
as the Board may by regulation or otherwise provide. Copies of
any notice or order served by the Board upon any State-
chartered credit union or any director, officer, or committee
member thereof or other person participating in the conduct of
its affairs, pursuant to the provisions of this section, shall
also be sent to the commission, board, or authority, if any,
having supervision of such credit union.
(o) In connection with any proceeding under subsection (e),
(f)(1), or (g) of this section involving an insured State-
chartered credit union or any institution-affiliated party, the
Board shall provide the commission, board, or authority, if
any, having supervision of such credit union, with notice of
its intent to institute such a proceeding and the grounds
thereof. Unless within such time as the Board deems appropriate
in the light of the circumstances of the case (which time must
be specified in the notice prescribed in the preceding
sentence) satisfactory corrective action is effectuated by
action of such commission, board, or authority, the Board may
proceed as provided in this section. No credit union or other
party who is the subject of any notice or order issued by the
Board under this section shall have standing to raise the
requirements of this subsection as ground for attacking the
validity of any such notice or order.
(p) In the course of or in connection with any proceeding
under this section or in connection with any claim for insured
deposits or any examination or investigation under section
204(b), the Board, in conducting the proceeding, examination,
or investigation or considering the claim for insured
deposits,, or any designated representative thereof, including
any person designated to conduct any hearing under this
section, shall have the power to administer oaths and
affirmations, to take or cause to be taken depositions, and to
issue, revoke, quash, or modify subpenas and subpenas duces
tecum, and the Board is empowered to make rules and regulations
with respect to any such proceedings, claims, examinations, or
investigations. The attendance of witnesses and the production
of documents provided for in this subsection may be required
from any place in any State or in any territory or other place
subject to the jurisdiction of the United States at any
designated place where such proceeding is being conducted. Any
party to proceedings under this section may apply to the United
States District Court for the District of Columbia, or the
United States district court for the judicial district or the
United States court in any territory in which such proceeding
is being conducted, or where the witness resides or carries on
business, for enforcement of any subpena or subpena duces tecum
issued pursuant to this subsection, and such courts shall have
jurisdiction and power to order and require compliance
therewith. Witnesses subpenaed under this section shall be paid
the same fees and mileage that are paid witnesses in the
district courts of the United States. Any court having
jurisdiction of any proceeding instituted under this section by
an insured credit union or a director, officer, or committee
member thereof may allow to any such party such reasonable
expenses and attorneys' fees as it deems just and proper, and
such expenses and fees shall be paid by the credit union or
from its assets.
(q) Compliance With Monetary Transaction Recordkeeping and
Report Requirements.--
(1) Compliance procedures required.--The Board shall
prescribe regulations requiring insured credit unions
to establish and maintain procedures reasonably
designed to assure and monitor the compliance of such
credit unions with the requirements of subchapter II of
chapter 53 of title 31, United States Code.
(2) Examinations of credit unions to include review
of compliance procedures.--
(A) In general.--Each examination of an
insured credit union by the Board shall include
a review of the procedures required to be
established and maintained under paragraph (1).
(B) Exam report requirement.--The report of
examination shall describe any problem with the
procedures maintained by the credit union.
(3) Order to comply with requirements.--If the Board
determines that an insured credit union--
(A) has failed to establish and maintain the
procedures described in paragraph (1); or
(B) has failed to correct any problem with
the procedures maintained by such credit union
which was previously reported to the credit
union by the Board,
the Board shall issue an order in the manner prescribed
in subsection (e) or (f) requiring such credit union to
cease and desist from its violation of this subsection
or regulations prescribed under this subsection.
(r) Institution-Affiliated Party Defined.--For purposes of
this Act, the term ``institution-affiliated party'' means--
(1) any committee member, director, officer, or
employee of, or agent for, an insured credit union;
(2) any consultant, joint venture partner, and any
other person as determined by the Board (by regulation
or on a case-by-case basis) who participates in the
conduct of the affairs of an insured credit union; and
(3) any independent contractor (including any
attorney, appraiser, or accountant) who knowingly or
recklessly participates in--
(A) any violation of any law or regulation;
(B) any breach of fiduciary duty; or
(C) any unsafe or unsound practice,
which caused or is likely to cause more than a minimal
financial loss to, or a significant adverse effect on,
the insured credit union.
(s) Public Disclosure of Agency Action.--
(1) In general.--The Board shall publish and make
available to the public on a monthly basis--
(A) any written agreement or other written
statement for which a violation may be enforced
by the Board, unless the Board, in its
discretion, determines that publication would
be contrary to the public interest;
(B) any final order issued with respect to
any administrative enforcement proceeding
initiated by the Board under this section or
any other law; and
(C) any modification to or termination of any
order or agreement made public pursuant to this
paragraph.
(2) Hearings.--All hearings on the record with
respect to any notice of charges issued by the Board
shall be open to the public, unless the agency, in its
discretion, determines that holding an open hearing
would be contrary to the public interest.
(3) Reports to congress.--A written report shall be
made part of a determination not to hold a public
hearing pursuant to paragraph (2) or not to publish a
document pursuant to paragraph (1)(A). At the end of
each calendar quarter, all such reports shall be
transmitted to the Congress.
(4) Transcript of hearing.--A transcript that
includes all testimony and other documentary evidence
shall be prepared for all hearings commenced pursuant
to subsection (k). A transcript of public hearings
shall be made available to the public pursuant to
section 552 of title 5, United States Code.
(5) Delay of publication under exceptional
circumstances.--If the Board makes a determination in
writing that the publication of a final order pursuant
to paragraph (1)(B) would seriously threaten the safety
and soundness of an insured depository institution, the
agency may delay the publication of the document for a
reasonable time.
(6) Documents filed under seal in public enforcement
hearings.--The Board may file any document or part of a
document under seal in any administrative enforcement
hearing commenced by the agency if disclosure of the
document would be contrary to the public interest. A
written report shall be made part of any determination
to withhold any part of a document from the transcript
of the hearing required by paragraph (2).
(7) Retention of documents.--The Board shall keep and
maintain a record, for a period of at least 6 years, of
all documents described in paragraph (1) and all
informal enforcement agreements and other supervisory
actions and supporting documents issued with respect to
or in connection with any administrative enforcement
proceeding initiated by such agency under this section
or any other laws.
(8) Disclosures to congress.--No provision of this
subsection may be construed to authorize the
withholding, or to prohibit the disclosure, of any
information to the Congress or any committee or
subcommittee of the Congress.
(9) Preservation of records.--
(A) In general.--The Board may cause any and
all records, papers, or documents kept by the
Administration or in the possession or custody
of the Administration to be--
(i) photographed or microphotographed
or otherwise reproduced upon film; or
(ii) preserved in any electronic
medium or format which is capable of--
(I) being read or scanned by
computer; and
(II) being reproduced from
such electronic medium or
format by printing or any other
form of reproduction of
electronically stored data.
(B) Treatment as original records.--Any
photographs, micrographs, or photographic film
or copies thereof described in subparagraph
(A)(i) or reproduction of electronically stored
data described in subparagraph (A)(ii) shall be
deemed to be an original record for all
purposes, including introduction in evidence in
all State and Federal courts or administrative
agencies, and shall be admissible to prove any
act, transaction, occurrence, or event therein
recorded.
(C) Authority of the administration.--Any
photographs, microphotographs, or photographic
film or copies thereof described in
subparagraph (A)(i) or reproduction of
electronically stored data described in
subparagraph (A)(ii) shall be preserved in such
manner as the Administration shall prescribe,
and the original records, papers, or documents
may be destroyed or otherwise disposed of as
the Administration may direct.
(t) Regulation of Certain Forms of Benefits to Institution-
Affiliated Parties.--
(1) Golden parachutes and indemnification payments.--
The Board may prohibit or limit, by regulation or
order, any golden parachute payment or indemnification
payment.
(2) Factors to be taken into account.--The Board
shall prescribe, by regulation, the factors to be
considered by the Board in taking any action pursuant
to paragraph (1) which may include such factors as the
following:
(A) Whether there is a reasonable basis to
believe that the institution-affiliated party
has committed any fraudulent act or omission,
breach of trust or fiduciary duty, or insider
abuse with regard to the credit union that has
had a material affect on the financial
condition of the credit union.
(B) Whether there is a reasonable basis to
believe that the institution-affiliated party
is substantially responsible for the insolvency
of the credit union, the appointment of a
conservator or liquidating agent for the credit
union, or the credit union's troubled condition
(as defined in regulations prescribed by the
Board pursuant to paragraph (4)(A)(ii)(III)).
(C) Whether there is a reasonable basis to
believe that the institution-affiliated party
has materially violated any applicable Federal
or State banking law or regulation that has had
a material effect on the financial condition of
the credit union.
(D) Whether there is a reasonable basis to
believe that the institution-affiliated party
has violated or conspired to violate--
(i) section 215, 656, 657, 1005,
1006, 1007, 1014, 1032, or 1344 of
title 18, United States Code; or
(ii) section 1341 or 1343 of such
title affecting a financial
institution.
(E) Whether the institution-affiliated party
was in a position of managerial or fiduciary
responsibility.
(F) The length of time the party was
affiliated with the credit union and the degree
to which--
(i) the payment reasonably reflects
compensation earned over the period of
employment; and
(ii) the compensation involved
represents a reasonable payment for
services rendered.
(3) Certain payments prohibited.--No credit union may
prepay the salary or any liability or legal expense of
any institution-affiliated party if such payment is
made--
(A) in contemplation of the insolvency of
such credit union or after the commission of an
act of insolvency; and
(B) with a view to, or has the result of--
(i) preventing the proper application
of the assets of the credit union; or
(ii) preferring one creditor over
another.
(4) Golden parachute payment defined.--For purposes
of this subsection--
(A) In general.--The term ``golden parachute
payment'' means any payment (or any agreement
to make any payment) in the nature of
compensation by any credit union for the
benefit of any institution-affiliated party
pursuant to an obligation of such credit union
that--
(i) is contingent on the termination
of such party's affiliation with the
credit union; and
(ii) is received on or after the date
on which--
(I) the credit union is
insolvent;
(II) any conservator or
liquidating agent is appointed
for such credit union;
(III) the Board determines
that the credit union is in a
troubled condition (as defined
in regulations which the Board
shall prescribe);
(IV) the credit union has
been assigned a composite
rating by the Board of 4 or 5
under the Uniform Financial
Institutions Rating System (as
applicable with respect to
credit unions); or
(V) the credit union is
subject to a proceeding
initiated by the Board to
terminate or suspend deposit
insurance for such credit
union.
(B) Certain payments in contemplation of an
event.--Any payment which would be a golden
parachute payment but for the fact that such
payment was made before the date referred to in
subparagraph (A)(ii) shall be treated as a
golden parachute payment if the payment was
made in contemplation of the occurrence of an
event described in any subclause of such
subparagraph.
(C) Certain payments not included.--The term
``golden parachute payment'' shall not
include--
(i) any payment made pursuant to a
retirement plan which is qualified (or
is intended to be qualified) under
section 401 of the Internal Revenue
Code of 1986 or other nondiscriminatory
retirement or severance benefit plan;
(ii) any payment made pursuant to a
bona fide deferred compensation plan or
arrangement which the Board determines,
by regulation or order, to be
permissible; or
(iii) any payment made by reason of
the death or disability of an
institution-affiliated party.
(5) Other definitions.--For purposes of this
subsection--
(A) Indemnification payment.--Subject to
paragraph (6), the term ``indemnification
payment'' means any payment (or any agreement
to make any payment) by any credit union for
the benefit of any person who is or was an
institution-affiliated party, to pay or
reimburse such person for any liability or
legal expense with regard to any administrative
proceeding or civil action instituted by the
Board which results in a final order under
which such person--
(i) is assessed a civil money
penalty;
(ii) is removed or prohibited from
participating in conduct of the affairs
of the credit union; or
(iii) is required to take any
affirmative action described in section
206(e)(3) with respect to such credit
union.
(B) Liability or legal expense.--The term
``liability or legal expense'' means--
(i) any legal or other professional
expense incurred in connection with any
claim, proceeding, or action;
(ii) the amount of, and any cost
incurred in connection with, any
settlement of any claim, proceeding, or
action; and
(iii) the amount of, and any cost
incurred in connection with, any
judgment or penalty imposed with
respect to any claim, proceeding, or
action.
(C) Payment.--The term ``payment'' includes--
(i) any direct or indirect transfer
of any funds or any asset; and
(ii) any segregation of any funds or
assets for the purpose of making, or
pursuant to an agreement to make, any
payment after the date on which such
funds or assets are segregated, without
regard to whether the obligation to
make such payment is contingent on--
(I) the determination, after
such date, of the liability for
the payment of such amount; or
(II) the liquidation, after
such date, of the amount of
such payment.
(6) Certain commercial insurance coverage not treated
as covered benefit payment.--No provision of this
subsection shall be construed as prohibiting any credit
union from purchasing any commercial insurance policy
or fidelity bond, except that, subject to any
requirement described in paragraph (5)(A)(iii), such
insurance policy or bond shall not cover any legal or
liability expense of the credit union which is
described in paragraph (5)(A).
(u) Foreign Investigations.--
(1) Requesting assistance from foreign banking
authorities.--In conducting any investigation,
examination, or enforcement action under this Act, the
Board may--
(A) request the assistance of any foreign
banking authority; and
(B) maintain an office outside the United
States.
(2) Providing assistance to foreign banking
authorities.--
(A) In general.--The Board may, at the
request of any foreign banking authority,
assist such authority if such authority states
that the requesting authority is conducting an
investigation to determine whether any person
has violated, is violating, or is about to
violate any law or regulation relating to
banking matters or currency transactions
administered or enforced by the requesting
authority.
(B) Investigation by federal banking
agency.--The Board may, in the Board's
discretion, investigate and collect information
and evidence pertinent to a request for
assistance under subparagraph (A). Any such
investigation shall comply with the laws of the
United States and the policies and procedures
of the Board.
(C) Factors to consider.--In deciding whether
to provide assistance under this paragraph, the
Board shall consider--
(i) whether the requesting authority
has agreed to provide reciprocal
assistance with respect to banking
matters within the jurisdiction of the
Board or any appropriate Federal
banking agency; and
(ii) whether compliance with the
request would prejudice the public
interest of the United States.
(D) Treatment of foreign banking authority.--
For purposes of any Federal law or Board
regulation relating to the collection or
transfer of information by the Board or any
appropriate Federal banking agency, the foreign
banking authority shall be treated as another
appropriate Federal banking agency.
(3) Rule of construction.--Paragraphs (1) and (2)
shall not be construed to limit the authority of the
Board or any other Federal agency to provide or receive
assistance or information to or from any foreign
authority with respect to any matter.
(v) Termination of Insurance for Money Laundering or Cash
Transaction Reporting Offenses.--
(1) In general.--
(A) Conviction of title 18 offenses.--
(i) Duty to notify.--If an insured
State credit union has been convicted
of any criminal offense under section
1956 or 1957 of title 18, United States
Code, the Attorney General shall
provide to the Board a written
notification of the conviction and
shall include a certified copy of the
order of conviction from the court
rendering the decision.
(ii) Notice of termination.--After
written notification from the Attorney
General to the Board of such a
conviction, the Board shall issue to
such insured credit union a notice of
its intention to terminate the insured
status of the insured credit union and
schedule a hearing on the matter, which
shall be conducted as a termination
hearing pursuant to subsection (b) of
this section, except that no period for
correction shall apply to a notice
issued under this subparagraph.
(B) Conviction of title 31 offenses.--If a
credit union is convicted of any criminal
offense under section 5322 or 5324 of title 31,
United States Code, after prior written
notification from the Attorney General, the
Board may initiate proceedings to terminate the
insured status of such credit union in the
manner described in subparagraph (A).
(C) Notice to state supervisor.--The Board
shall simultaneously transmit a copy of any
notice under this paragraph to the appropriate
State financial institutions supervisor.
(2) Factors to be considered.--In determining whether
to terminate insurance under paragraph (1), the Board
shall take into account the following factors:
(A) The extent to which directors, committee
members, or senior executive officers (as
defined by the Board in regulations which the
Board shall prescribe) of the credit union knew
of, or were involved in, the commission of the
money laundering offense of which the credit
union was found guilty.
(B) The extent to which the offense occurred
despite the existence of policies and
procedures within the credit union which were
designed to prevent the occurrence of any such
offense.
(C) The extent to which the credit union has
fully cooperated with law enforcement
authorities with respect to the investigation
of the money laundering offense of which the
credit union was found guilty.
(D) The extent to which the credit union has
implemented additional internal controls (since
the commission of the offense of which the
credit union was found guilty) to prevent the
occurrence of any other money laundering
offense.
(E) The extent to which the interest of the
local community in having adequate deposit and
credit services available would be threatened
by the termination of insurance.
(3) Notice to state credit union supervisor and
public.--When the order to terminate insured status
initiated pursuant to this subsection is final, the
Board shall--
(A) notify the commission, board, or
authority (if any) having supervision of the
credit union described in paragraph (1) at
least 10 days prior to the effective date of
the order of the termination of the insured
status of such credit union; and
(B) publish notice of the termination of the
insured status of the credit union.
(4) Temporary insurance of previously insured
deposits.--Upon termination of the insured status of
any State credit union pursuant to paragraph (1), the
deposits of such credit union shall be treated in
accordance with section 206(d)(2).
(5) Successor liability.--This subsection shall not
apply to a successor to the interests of, or a person
who acquires, an insured credit union that violated a
provision of law described in paragraph (1), if the
successor succeeds to the interests of the violator, or
the acquisition is made, in good faith and not for
purposes of evading this subsection or regulations
prescribed under this subsection.
(w) One-Year Restrictions on Federal Examiners of Insured
Credit Unions.--
(1) In general.--In addition to other applicable
restrictions set forth in title 18, United States Code,
the penalties set forth in paragraph (5) of this
subsection shall apply to any person who--
(A) was an officer or employee (including any
special Government employee) of the
Administration;
(B) served 2 or more months during the final
12 months of his or her employment with the
Administration as the senior examiner (or a
functionally equivalent position) of an insured
credit union with continuing, broad
responsibility for the examination (or
inspection) of that insured credit union on
behalf of the Administration; and
(C) within 1 year after the termination date
of his or her service or employment with the
Administration, knowingly accepts compensation
as an employee, officer, director, or
consultant from such insured credit union.
(2) Rule of construction.--For purposes of this
subsection, a person shall be deemed to act as a
consultant for an insured credit union only if such
person directly works on matters for, or on behalf of,
such insured credit union.
(3) Regulations.--
(A) In general.--The Board shall prescribe
rules or regulations to administer and carry
out this subsection, including rules,
regulations, or guidelines to define the scope
of persons referred to in paragraph (1)(B).
(B) Consultation.--In prescribing rules or
regulations under this paragraph, the Board
shall, to the extent it deems necessary,
consult with the Federal banking agencies (as
defined in section 3 of the Federal Deposit
Insurance Act) on regulations issued by such
agencies in carrying out section 10(k) of the
Federal Deposit Insurance Act.
(4) Waiver.--The Board may grant a waiver, on a case
by case basis, of the restriction imposed by this
subsection to any officer or employee (including any
special Government employee) of the Administration if
the Chairman certifies in writing that granting the
waiver would not affect the integrity of the
supervisory program of the Administration.
(5) Penalties.--
(A) In general.--In addition to any other
administrative, civil, or criminal remedy or
penalty that may otherwise apply, whenever the
Board determines that a person subject to
paragraph (1) has become associated, in the
manner described in paragraph (1)(C), with an
insured credit union, the Board shall impose
upon such person one or more of the following
penalties:
(i) Industry-wide prohibition
order.--The Board shall serve a written
notice or order in accordance with and
subject to the provisions of subsection
(g)(4) for written notices or orders
under paragraph (1) or (2) of
subsection (g), upon such person of the
intention of the Board--
(I) to remove such person
from office or to prohibit such
person from further
participation in the conduct of
the affairs of the insured
credit union for a period of up
to 5 years; and
(II) to prohibit any further
participation by such person,
in any manner, in the conduct
of the affairs of any insured
credit union for a period of up
to 5 years.
(ii) Civil monetary penalty.--The
Board may, in an administrative
proceeding or civil action in an
appropriate United States district
court, impose on such person a civil
monetary penalty of not more than
$250,000. Any administrative proceeding
under this clause shall be conducted in
accordance with subsection (k). In lieu
of an action by the Board under this
clause, the Attorney General of the
United States may bring a civil action
under this clause in the appropriate
United States district court.
(B) Scope of prohibition order.--Any person
subject to an order issued under this
subparagraph (A)(i) shall be subject to
paragraphs (5) and (7) of subsection (g) in the
same manner and to the same extent as a person
subject to an order issued under subsection
(g).
* * * * * * *
administrative provisions
Sec. 209. (a) In carrying out the purposes of this title, the
Board may--
(1) make contracts;
(2) sue and be sued, complain and defend, in any
court of law or equity, State or Federal. All suits of
a civil nature at common law or in equity to which the
Board shall be a party shall be deemed to arise under
the laws of the United States, and the United States
district courts shall have original jurisdiction
thereof, without regard to the amount in controversy.
The Board may, without bond or security, remove any
such action, suit, or proceeding from a State court to
the United States district court for the district or
division embracing the place where the same is pending
by following any procedure for removal now or hereafter
in effect, except that any such suit to which the Board
is a party in its capacity as liquidating agent of a
State-chartered credit union and which involves only
the rights or obligations of members, creditors, and
such State credit union under State law shall not be
deemed to arise under the laws of the United States. No
attachment or execution shall be issued against the
Board or its property before final judgment in any
suit, action, or proceeding in any State, county,
municipal, or United States court. The Board shall
designate an agent upon whom service of process may be
made in any State, territory, or jurisdiction in which
any insured credit union is located;
(3) pursue to final disposition by way of compromise
or otherwise claims both for and against the United
States (other than tort claims, claims involving
administrative expenses, and claims in excess of $5,000
arising out of contracts for construction, repairs, and
the purchase of supplies and materials) which are not
in litigation and have not been referred to the
Department of Justice;
(4) to appoint such officers and employees as are not
otherwise provided for in this Act, to define their
duties, fix their compensation, require bonds of them
and fix the penalty thereof, and to dismiss at pleasure
such officers or employees. Nothing in this or any
other Act shall be construed to prevent the appointment
and compensation as an officer or employee of the
Administration of any officer or employee of the United
States in any board, commission, independent
establishment, or executive department thereof;
(5) employ experts and consultants or organizations
thereof, as authorized by section 15 of the
Administrative Expenses Act of 1946 (5 U.S.C. 55a);
(6) prescribe the manner in which its general
business may be conducted and the privileges granted to
them by law may be exercised and enjoyed;
(7) exercise all powers specifically granted by the
provisions of this title and such incidental powers as
shall be necessary to carry out the powers so granted;
(8) make examinations of and require information and
reports from insured credit unions, as provided in this
title;
(9) act as liquidating agent;
(10) delegate to any officer or employee of the
Administration such of its functions as it deems
appropriate; and
(11) prescribe such rules and regulations as it may
deem necessary or appropriate to carry out the
provisions of this title.
(b) With respect to the financial operations arising by
reason of this title, the Board shall--
(1) on an annual basis and prior to the submission of
the detailed business-type budget required under
paragraph (2)--
(A) make publicly available and cause to be
printed in the Federal Register a draft of such
detailed business-type budget; and
(B) hold a public hearing, with public notice
provided of such hearing, wherein the public
can submit comments on the draft of such
detailed business-type budget;
[(1)] (2) prepare annually and submit a detailed
business-type budget as provided for wholly owned
Government corporations by the Government Corporation
Control Act, and where such budget shall address any
comments submitted by the public pursuant to paragraph
(1)(B); and
[(2)] (3) maintain an integral set of accounts, which
shall be audited annually by the General Accounting
Office in accordance with principles and procedures
applicable to commercial corporate transactions, as
provided by section 105 of the Government Corporation
Control Act.
* * * * * * *
----------
REVISED STATUTES OF THE UNITED STATES
* * * * * * *
TITLE LXII--NATIONAL BANKS.
* * * * * * *
CHAPTER ONE--ORGANIZATION AND POWERS.
Sec.
5133. Formation of national banking associations.
* * * * * * *
5156B. International processes.
* * * * * * *
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] Consumer Law
Enforcement Agency 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.
(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).
(i) Visitorial [Powers.--]
[(1) In general.--In accordance] Powers._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.
* * * * * * *
SEC. 5156B. INTERNATIONAL PROCESSES.
(a) Notice of Process; Consultation.--At least 30 calendar
days before the Comptroller of the Currency participates in a
process of setting financial standards as a part of any foreign
or multinational entity, the Board of Directors shall--
(1) issue a notice of the process, including the
subject matter, scope, and goals of the process, to the
Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing,
and Urban Affairs of the Senate;
(2) make such notice available to the public,
including on the website of the Office of the
Comptroller of the Currency; and
(3) solicit public comment, and consult with the
committees described under paragraph (1), with respect
to the subject matter, scope, and goals of the process.
(b) Public Reports on Process.--After the end of any process
described under subsection (a), the Board of Directors shall
issue a public report on the topics that were discussed at the
process and any new or revised rulemakings or policy changes
that the Board of Directors believes should be implemented as a
result of the process.
(c) Notice of Agreements; Consultation.--At least 90 calendar
days before the Board of Directors participates in a process of
setting financial standards as a part of any foreign or
multinational entity, the Board of Directors shall--
(1) issue a notice of agreement to the Committee on
Financial Services of the House of Representatives and
the Committee on Banking, Housing, and Urban Affairs of
the Senate;
(2) make such notice available to the public,
including on the website of the Office of the
Comptroller of the Currency; and
(3) consult with the committees described under
paragraph (1) with respect to the nature of the
agreement and any anticipated effects such agreement
will have on the economy.
(d) Definition.--For purposes of this section, the term
``process'' shall include any official proceeding or meeting on
financial regulation of a recognized international organization
with authority to set financial standards on a global or
regional level, including the Financial Stability Board, the
Basel Committee on Banking Supervision (or a similar
organization), and the International Association of Insurance
Supervisors (or a similar organization).
* * * * * * *
CHAPTER THREE--REGULATION OF THE BANKING BUSINESS.
* * * * * * *
Sec. 5197. Any association may take, receive, reserve, and
charge on any loan or discount made, or upon any notes, bills
of exchange, or other evidences of debt, interest at the rate
allowed by the laws of the State, Territory, or District where
the bank is located, or at a rate of 1 per centum in excess of
the discount rate on ninety-day commercial paper in effect at
the Federal reserve bank in the Federal reserve district where
the bank is located, whichever may be the greater, and no more,
except that where by the laws of any State a different rate is
limited for banks organized under State laws, the rate so
limited shall be allowed for associations organized or existing
in any such State under this title. When no rate is fixed by
the laws of the State, or Territory, or District, the bank may
take, receive, reserve, or charge a rate not exceeding 7 per
centum, or 1 per centum in excess of the discount rate on
ninety-day commercial paper in effect at the Federal reserve
bank in the Federal reserve district where the bank is located,
whichever may be the greater, and such interest may be taken in
advance, reckoning the days for which the note, bill, or other
evidence of debt has to run. The maximum amount of interest or
discount to be charged at a branch of an association located
outside of the States of the United States and the District of
Columbia shall be at the rate allowed by the laws of the
country, territory, dependency, province, dominion, insular
possession, or other political subdivision where the branch is
located. And the purchase, discount, or sale of a bona-fide
bill of exchange, payable at another place than the place of
such purchase, discount, or sale, at not more than the current
rate of exchange for sight-drafts in addition to the interest,
shall not be considered as taking or receiving a greater rate
of interest. A loan that is valid when made as to its maximum
rate of interest in accordance with this section shall remain
valid with respect to such rate regardless of whether the loan
is subsequently sold, assigned, or otherwise transferred to a
third party, and may be enforced by such third party
notwithstanding any State law to the contrary.
* * * * * * *
SEC. 5213. PENALTY FOR FAILURE TO MAKE REPORTS.
(a) First Tier.--Any association which--
(1) maintains procedures reasonably adapted to avoid
any inadvertent error and, unintentionally and as a
result of such an error--
(A) fails to make, obtain, transmit, or
publish any report or information required by
the Comptroller of the Currency under section
5211 of this chapter, within the period of time
specified by the Comptroller; or
(B) submits or publishes any false or
misleading report or information; or
(2) inadvertently transmits or publishes any report
which is minimally late,
shall be subject to a penalty of not more than $2,000 for each
day during which such failure continues or such false or
misleading information is not corrected. The association shall
have the burden of proving that an error was inadvertent and
that a report was inadvertently transmitted or published late.
(b) Second Tier.--Any association which--
(1) fails to make, obtain, transmit, or publish any
report or information required by the Comptroller of
the Currency under section 5211 of this chapter, within
the period of time specified by the Comptroller; or
(2) submits or publishes any false or misleading
report or information,
in a manner not described in subsection (a) shall be subject to
a penalty of not more than $20,000 for each day during which
such failure continues or such false or misleading information
is not corrected.
(c) Third Tier.--Notwithstanding subsections (a) and (b), if
any association knowingly or with reckless disregard for the
accuracy of any information or report described in subsection
(b) submits or publishes any false or misleading report or
information, the Comptroller may assess a penalty of not more
than [$1,000,000] $1,500,000 or 1 percent of total assets of
the association, whichever is less per day for each day during
which such failure continues or such false or misleading
information is not corrected.
(d) Assessment, etc.--Any penalty imposed under subsection
(a), (b), or (c) shall be assessed and collected by the
Comptroller of the Currency in the manner provided in
subparagraphs (E), (F), (G), and (I) of section 8(i)(2) of the
Federal Deposit Insurance Act (for penalties imposed under such
section) and any such assessment (including the determination
of the amount of the penalty) shall be subject to the
provisions of such section.
(e) Hearing.--Any association against which any penalty is
assessed under this subsection shall be afforded an agency
hearing if such association submits a request for such hearing
within 20 days after the issuance of the notice of assessment.
Section 8(h) of the Federal Deposit Insurance Act shall apply
to any proceeding under this section.
* * * * * * *
CHAPTER FOUR--DISSOLUTION AND RECEIVERSHIP.
* * * * * * *
Sec. 5239. (a) If the directors of any national banking
association shall knowingly violate, or knowingly permit any of
the officers, agents, or servants of the association to violate
any of the provisions of this Title, all the rights,
privileges, and franchises of the association shall be thereby
forfeited. Such violation shall, however, be determined and
adjudged by a proper circuit, district, or territorial court of
the United States, in a suit brought for that purpose by the
Comptroller of the Currency, in his own name, before the
association shall be declared dissolved. And in cases of such
violation, every director who participated in or assented to
the same shall be held liable in his personal and individual
capacity for all damages which the association, its
shareholders, or any other person, shall have sustained in
consequence of such violation.
(b) Civil Money Penalty.--
(1) First tier.--Any national banking association
which, and any institution-affiliated party (within the
meaning of section 3(u) of the Federal Deposit
Insurance Act) with respect to such association who,
violates any provision of this title or any of the
provisions of the first section of the Act of September
28, 1962, (76 Stat. 668; 12 U.S.C. 92a), or any
regulation issued pursuant thereto, shall forfeit and
pay a civil penalty of not more than $5,000 for each
day during which such violation continues.
(2) Second tier.--Notwithstanding paragraph (1), any
national banking association which, and any
institution-affiliated party within the meaning of
section 3(u) of the Federal Deposit Insurance Act) with
respect to such association who, commits any violation
described in paragraph (1) which--
(A)(i) commits any violation described in any
paragraph (1);
(ii) recklessly engages in an unsafe or
unsound practice in conducting the affairs of
such association; or
(iii) breaches any fiduciary duty;
(B) which violation, practice, or breach--
(i) is part of a pattern of
misconduct;
(ii) causes or is likely to cause
more than a minimal loss to such
association; or
(iii) results in pecuniary gain or
other benefit to such party.
shall forfeit and pay a civil penalty of not more than
$25,000 for each day during which such violation,
practice, or breach continues.
(3) Third tier.--Notwithstanding paragraphs (1) and
(2), any national banking association which, and any
institution-affiliated party (within the meaning of
section 3(u) of the Federal Deposit Insurance Act) with
respect to such association who--
(A) knowingly--
(i) commits any violation described
in paragraph (1);
(ii) engages in any unsafe or unsound
practice in conducting the affairs of
such association; or
(iii) breaches any fiduciary duty;
and
(B) knowingly or recklessly causes a
substantial loss to such association or a
substantial pecuniary gain or other benefit to
such party by reason of such violation,
practice, or breach,
shall forfeit and pay a civil penalty in an
amount not to exceed the applicable maximum
amount determined under paragraph (4) for each
day during which such violation, practice, or
breach continues.
(4) Maximum amounts of penalties for any violation
described in paragraph (3).--The maximum daily amount
of any civil penalty which may be assessed pursuant to
paragraph (3) for any violation, practice, or breach
described in such paragraph is--
(A) in the case of any person other than a
national banking association, an amount to not
exceed [$1,000,000] $1,500,000; and
(B) in the case of a national banking
association, an amount not to exceed the lesser
of--
(i) [$1,000,000] $1,500,000; or
(ii) 1 percent of the total assets of
such association.
(5) Assessment; etc.--Any penalty imposed under
paragraph (1), (2), or (3) shall be assessed and
collected by the Comptroller of the Currency in the
manner provided in subparagraphs (E), (F), (G), and (I)
of section 8(i)(2) of the Federal Deposit Insurance Act
for penalties imposed (under such section) and any such
assessment shall be subject to the provisions of such
section.
(6) Hearing.--The association or other person against
whom any penalty is assessed under this subsection
shall be afforded an agency hearing if such association
or person submits a request for such hearing within 20
days after the issuance of the notice of assessment.
Section 8(h) of the Federal Deposit Insurance Act shall
apply to any proceeding under this subsection.
(7) Disbursement.--All penalties collected under
authority of this subsection shall be deposited into
the Treasury.
(8) Violate defined.--For purposes of this section,
the term ``violate'' includes any action (alone or with
another or others) for or toward causing, bringing
about, participating in, counseling, or aiding or
abetting a violation.
(12) Regulations.--The Comptroller shall prescribe
regulations establishing such procedures as may be
necessary to carry out this subsection.
(c) Notice Under This Section After Separation From Service--
The resignation, termination of employment or participation, or
separation of an institution-affiliated party (within the
meaning of section 3(u) of the Federal Deposit Insurance Act)
with respect to such an association (including a separation
caused by the closing of such an association) shall not affect
the jurisdiction and authority of the Comptroller of the
Currency to issue any notice and proceed under this section
against any such party, if such notice is served before the end
of the 6-year period beginning on the date such party ceased to
be such a party with respect to such association (whether such
date occurs before, on, or after the date of the enactment of
this subsection).
(d) Forfeiture of Franchise for Money Laundering or Cash
Transaction Reporting Offenses.--
(1) In general.--
(A) Conviction of title 18 offenses.--
(i) Duty to notify.--If a national
bank, a Federal branch, or Federal
agency has been convicted of any
criminal offense under section 1956 or
1957 of title 18, United States Code,
the Attorney General shall provide to
the Comptroller of the Currency a
written notification of the conviction
and shall include a certified copy of
the order of conviction from the court
rendering the decision.
(ii) Notice of termination;
pretermination hearing.--After
receiving written notification from the
Attorney General of such a conviction,
the Comptroller of the Currency shall
issue to the national bank, Federal
branch, or Federal agency a notice of
the Comptroller's intention to
terminate all rights, privileges, and
franchises of the bank, Federal branch,
or Federal agency and schedule a
pretermination hearing.
(B) Conviction of title 31 offenses.--If a
national bank, a Federal branch, or a Federal
agency is convicted of any criminal offense
under section 5322 or 5324 of title 31, United
States Code, after receiving written
notification from the Attorney General, the
Comptroller of the Currency may issue to the
national bank, Federal branch, or Federal
agency a notice of the Comptroller's intention
to terminate all rights, privileges, and
franchises of the bank, Federal branch, or
Federal agency and schedule a pretermination
hearing.
(C) Judicial review.--Section 8(h) of the
Federal Deposit Insurance Act shall apply to
any proceeding under this subsection.
(2) Factors to be considered.--In determining whether
a franchise shall be forfeited under paragraph (1), the
Comptroller of the Currency shall take into account the
following factors:
(A) The extent to which directors or senior
executive officers of the national bank,
Federal branch, or Federal agency knew of, or
were involved in, the commission of the money
laundering offense of which the bank, Federal
branch, or Federal agency was found guilty.
(B) The extent to which the offense occurred
despite the existence of policies and
procedures within the national bank, Federal
branch, or Federal agency which were designed
to prevent the occurrence of any such offense.
(C) The extent to which the national bank,
Federal branch, or Federal agency has fully
cooperated with law enforcement authorities
with respect to the investigation of the money
laundering offense of which the bank, Federal
branch, or Federal agency was found guilty.
(D) The extent to which the national bank,
Federal branch, or Federal agency has
implemented additional internal controls (since
the commission of the offense of which the
bank, Federal branch, or Federal agency was
found guilty) to prevent the occurrence of any
other money laundering offense.
(E) The extent to which the interest of the
local community in having adequate deposit and
credit services available would be threatened
by the forfeiture of the franchise.
(3) Successor liability.--This subsection shall not
apply to a successor to the interests of, or a person
who acquires, a bank, a Federal branch, or a Federal
agency that violated a provision of law described in
paragraph (1), if the successor succeeds to the
interests of the violator, or the acquisition is made,
in good faith and not for purposes of evading this
subsection or regulations prescribed under this
subsection.
(4) Definition.--The term ``senior executive
officer'' has the same meaning as in regulations
prescribed under section 32(f) of the Federal Deposit
Insurance Act.
(d) Authority.--The Comptroller of the Currency may act in
the Comptroller's own name and through the Comptroller's own
attorneys in enforcing any provision of this title, regulations
thereunder, or any other law or regulation, or in any action,
suit, or proceeding to which the Comptroller of the Currency is
a party.
* * * * * * *
[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, 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).]
SEC. 5240A. COLLECTION OF FEES; APPROPRIATIONS REQUIREMENT.
(a) In General.--In establishing the amount of an assessment,
fee, or charge collected from an entity under subsection (b),
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.
(b) Appropriations Requirement.--
(1) Recovery of costs of annual appropriation.--The
Comptroller of the Currency shall impose and collect
assessments, fees, or other charges that are designed
to recover the costs to the Government of the annual
appropriation to the Office of the Comptroller of the
Currency by Congress.
(2) Offsetting collections.--Assessments and other
fees described under paragraph (1) for any fiscal
year--
(A) shall be deposited and credited as
offsetting collections to the account providing
appropriations to the Office of the Comptroller
of the Currency; and
(B) except as provided in paragraph (3),
shall not be collected for any fiscal year
except to the extent provided in advance in
appropriation Acts.
(3) Lapse of appropriation.--If on the first day of a
fiscal year an appropriation to the Office of the
Comptroller of the Currency has not been enacted, the
Comptroller of the Currency shall continue to collect
(as offsetting collections) the assessments and other
fees described under paragraph (1) at the rate in
effect during the preceding fiscal year, until 60 days
after the date such an appropriation is enacted.
* * * * * * *
----------
BANK HOLDING COMPANY ACT AMENDMENTS OF 1970
* * * * * * *
TITLE I--BANK HOLDING COMPANIES
* * * * * * *
Sec. 106. (a) As used in this section, the terms ``bank'',
``bank holding company'', ``subsidiary'', and ``Board'' have
the meaning ascribed to such terms in section 2 of the Bank
Holding Company Act of 1956. For purposes of this section only,
the term ``company'', as used in section 2 of the Bank Holding
Company Act of 1956, means any person, estate, trust,
partnership, corporation, association, or similar organization,
but does not include any corporation the majority of the shares
of which are owned by the United States or by any State. The
term ``trust service'' means any service customarily performed
by a bank trust department. For purposes of this section, a
financial subsidiary of a national bank engaging in activities
pursuant to section 5136A(a) of the Revised Statutes of the
United States shall be deemed to be a subsidiary of a bank
holding company, and not a subsidiary of a bank.
(b) (1) A bank shall not in any manner extend credit, lease
or sell property of any kind, or furnish any service, or fix or
vary the consideration for any of the foregoing, on the
condition or requirement--
(A) that the customer shall obtain some additional
credit, property, or service from such bank other than
a loan, discount, deposit, or trust service;
(B) that the customer shall obtain some additional
credit, property, or service from a bank holding
company of such bank, or from any other subsidiary of
such bank holding company;
(C) that the customer provide some additional credit,
property, or service to such bank, other than those
related to and usually provided in connection with a
loan, discount, deposit, or trust service;
(D) that the customer provide some additional credit,
property, or service to a bank holding company of such
bank, or to any other subsidiary of such bank holding
company; or
(E) that the customer shall not obtain some other
credit, property, or service from a competitor of such
bank, a bank holding company of such bank, or any
subsidiary of such bank holding company, other than a
condition or requirement that such bank shall
reasonably impose in a credit transaction to assure the
soundness of the credit.
The Board may 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]
Federal Deposit Insurance Corporation, may by regulation or
order permit such exceptions to the foregoing prohibition and
the prohibitions of section 4(f)(9) and 4(h)(2) of the Bank
Holding Company Act of 1956 as it considers will not be
contrary to the purposes of this section.
(2)(A) No bank which maintains a correspondent account in the
name of another bank shall make an extension of credit to an
executive officer or director of, or to any person who directly
or indirectly or acting through or in concert with one or more
persons owns, controls, or has the power to vote more than 10
per centum of any class of voting securities of, such other
bank or to any related interest of such person unless such
extension of credit is made on substantially the same terms,
including interest rates and collateral as those prevailing at
the time for comparable transactions with other persons and
does not involve more than the normal risk of repayment or
present other unfavorable features.
(B) No bank shall open a correspondent account at another
bank while such bank has outstanding an extension of credit to
an executive officer or director of, or other person who
directly or indirectly or acting through or in concert with one
or more persons owns, controls, or has the power to vote more
than 10 per centum of any class of voting securities of, the
bank desiring to open the account or to any related interest of
such person, unless such extension of credit was made on
substantially the same terms, including interest rates and
collateral as those prevailing at the time for comparable
transactions with other persons and does not involve more than
the normal risk of repayment or present other unfavorable
features.
(C) No bank which maintains a correspondent account at
another bank shall make an extension of credit to an executive
officer or director of, or to any person who directly or
indirectly acting through or in concert with one or more
persons owns, controls, or has the power to vote more than 10
per centum of any class of voting securities of, such other
bank or to any related interest of such person, unless such
extension of credit is made on substantially the same terms,
including interest rates and collateral as those prevailing at
the time for comparable transactions with other persons and
does not involve more than the normal risk of repayment or
present other unfavorable features.
(D) No bank which has outstanding an extension of credit to
an executive officer or director of, or to any person who
directly or indirectly or acting through or in concert with one
or more persons owns, controls, or has the power to vote more
than 10 per centum of any class of voting securities of,
another bank or to any related interest of such person shall
open a correspondent account at such other bank, unless such
extension of credit was made on substantially the same terms,
including interest rates and collateral as those prevailing at
the time for comparable transactions with other persons and
does not involve more than the normal risk of repayment or
present other unfavorable features.
(E) For purposes of this paragraph, the term ``extension of
credit'' shall have the meaning prescribed by the Board
pursuant to section 22(h) of the Federal Reserve Act (12 U.S.C.
375b), and the term ``executive officer'' shall have the same
meaning given it under section 22(g) of the Federal Reserve
Act.
(F) Civil money penalty.--
(i) First tier.--Any bank which, and any institution-
affiliated party (within the meaning of section 3(u) of
the Federal Deposit Insurance Act) with respect to such
bank who, violates any provision of this paragraph
shall forfeit and pay a civil penalty of not more than
$5,000 for each day during which such violation
continues.
(ii) Second tier.--Notwithstanding clause (i), any
bank which, and any institution-affiliated party
(within the meaning of section 3(u) of the Federal
Deposit Insurance Act) with respect to such bank who--
(I)(aa) commits any violation described in
clause (i);
(bb) recklessly engages in an unsafe or
unsound practice in conducting the affairs of
such bank; or
(cc) breaches any fiduciary duty;
(II) which violation, practice, or breach--
(aa) is part of a pattern of
misconduct;
(bb) causes or is likely to cause
more than a minimal loss to such bank;
or
(cc) results in pecuniary gain or
other benefit to such party,
shall forfeit and pay a civil penalty of not more than
$25,000 for each day during which such violation,
practice, or breach continues.
(iii) Third tier.--Notwithstanding clauses (i) and
(ii), any bank which, and any institution-affiliated
party (within the meaning of section 3(u) of the
Federal Deposit Insurance Act) with respect to such
bank who--
(I) knowingly--
(aa) commits any violation described
in clause (i);
(bb) engages in any unsafe or unsound
practice in conducting the affairs of
such bank; or
(cc) breaches any fiduciary duty; and
(II) knowingly or recklessly causes a
substantial loss to such bank or a substantial
pecuniary gain or other benefit to such party
by reason of such violation, practice, or
breach,
shall forfeit and pay a civil penalty in an amount not
to exceed the applicable maximum amount determined
under clause (iv) for each day during which such
violation, practice, or breach continues.
(iv) Maximum amounts of penalties for any violation
described in clause (iii).--The maximum daily amount of
any civil penalty which may be assessed pursuant to
clause (iii) for any violation, practice, or breach
described in such clause is--
(I) in the case of any person other than a
bank, an amount to not exceed [$1,000,000]
$1,500,000; and
(II) in the case of a bank, an amount not to
exceed the lesser of--
(aa) [$1,000,000] $1,500,000; or
(bb) 1 percent of the total assets of
such bank.
(v) Assessment; etc.--Any penalty imposed under
clause (i), (ii), or (iii) may be assessed and
collected--
(I) in the case of a national bank, by the
Comptroller of the Currency;
(II) in the case of a State member bank, by
the Board; and
(III) in the case of an insured nonmember
State bank, by the Federal Deposit Insurance
Corporation,
in the manner provided in subparagraphs (E), (F), (G), and (I)
of section 8(i)(2) of the Federal Deposit Insurance Act for
penalties imposed (under such section) and any such assessment
shall be subject to the provisions of such section.
(vi) Hearing.--The bank or other person against whom
any penalty is assessed under this subparagraph shall
be afforded an agency hearing if such bank or person
submits a request for such hearing within 20 days after
the issuance of the notice of assessment. Section 8(h)
of the Federal Deposit Insurance Act shall apply to any
proceeding under this subparagraph.
(vii) Disbursement.--All penalties collected under
authority of this subsection shall be deposited into
the Treasury.
(viii) Violate defined.--For purposes of this
paragraph, the term ``violate'' includes any action
(alone or with another or others) for or toward
causing, bringing about, participating in, counseling,
or aiding or abetting a violation.
(ix) Regulations.--The Comptroller of the Currency,
the Board, and the Federal Deposit Insurance
Corporation shall prescribe regulations establishing
such procedures as may be necessary to carry out this
subparagraph.
(G) For the purpose of this paragraph--
(i) the term ``bank'' includes a mutual savings bank,
a savings bank, and a savings association (as those
terms are defined in section 3 of the Federal Deposit
Insurance Act);
(ii) the term ``related interests of such persons''
includes any company controlled by such executive
officer, director, or person, or any political or
campaign committee the funds or services of which will
benefit such executive officer, director, or person or
which is controlled by such executive officer,
director, or person; and
(iii) the terms ``control of a company'' and
``company'' have the same meaning as under section
22(h) of the Federal Reserve Act (12 U.S.C. 375b).
(H) Notice Under This Section After Separation From
Service.--The resignation, termination of employment or
participation, or separation of an institution-affiliated party
(within the meaning of section 3(u) of the Federal Deposit
Insurance Act) with respect to such a bank (including a
separation caused by the closing of such a bank) shall not
affect the jurisdiction and authority of the appropriate
Federal banking agency to issue any notice and proceed under
this section against any such party, if such notice is served
before the end of the 6-year period beginning on the date such
party ceased to be such a party with respect to such bank
(whether such date occurs before, on, or after the date of the
enactment of this subparagraph).
(c) The district courts of the United States have
jurisdiction to prevent and restrain violations of subsection
(b) of this section and it is the duty of the United States
attorneys, under the direction of the Attorney General, to
institute proceedings in equity to prevent and restrain such
violations. The proceedings may be by way of a petition setting
forth the case and praying that the violation be enjoined or
otherwise prohibited. When the parties complained of have been
duly notified of the petition, the court shall proceed, as soon
as possible, to the hearing and determination of the case.
While the petition is pending, and before final decree, the
court may at any time make such temporary restraining order or
prohibition as it deems just. Whenever it appears to the court
that the ends of justice require that other parties be brought
before it, the court may cause them to be summoned whether or
not they reside in the district in which the court is held, and
subpenas to that end may be served in any district by the
marshal thereof.
(d) In any action brought by or on behalf of the United
States under subsection (b), subpenas for witnesses may run
into any district, but no writ of subpena may issue for
witnesses living out of the district in which the court is held
at a greater distance than one hundred miles from the place of
holding the same without the prior permission of the trial
court upon proper application and cause shown.
(e) Any person who is injured in his business or property by
reason of anything forbidden in subsection (b) may sue therefor
in any district court of the United States in which the
defendant resides or is found or has an agent, without regard
to the amount in controversy, and shall be entitled to recover
three times the amount of the damages sustained by him, and the
cost of suit, including a reasonable attorney's fee.
(f) Any person may sue for and have injunctive relief, in any
court of the United States having jurisdiction over the
parties, against threatened loss or damage by reason of a
violation of subsection (b), under the same conditions and
principles as injunctive relief against threatened conduct that
will cause loss or damage is granted by courts of equity and
under the rules governing such proceedings. Upon the execution
of proper bond against damages for an injunction improvidently
granted and a showing that the danger of irreparable loss or
damage is immediate, a preliminary injunction may issue.
(g)(1) Subject to paragraph (2), any action to enforce any
cause of action under this section shall be forever barred
unless commenced within four years after the cause of action
accrued.
(2) Whenever any enforcement action is instituted by or on
behalf of the United States with respect to any matter which is
or could be the subject of a private right of action under this
section, the running of the statute of limitations in respect
of every private right of action arising under this section and
based in whole or in part on such matter shall be suspended
during the pendency of the enforcement action so instituted and
for one year thereafter: Provided, That whenever the running of
the statute of limitations in respect of a cause of action
arising under this section is suspended under this paragraph,
any action to enforce such cause of action shall be forever
barred unless commenced either within the period of suspension
or within the four-year period referred to in paragraph (1).
(h) Nothing contained in this section shall be construed as
affecting in any manner the right of the United States or any
other party to bring an action under any other law of the
United States or of any State, including any right which may
exist in addition to specific statutory authority, challenging
the legality of any act or practice which may be proscribed by
this section. No regulation or order issued by the Board under
this section shall in any manner constitute a defense to such
action.
* * * * * * *
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TITLE 18, UNITED STATES CODE
* * * * * * *
PART I--CRIMES
* * * * * * *
CHAPTER 11--BRIBERY, GRAFT, AND CONFLICTS OF INTEREST
* * * * * * *
Sec. 215. Receipt of commissions or gifts for procuring loans
(a) Whoever--
(1) corruptly gives, offers, or promises anything of
value to any person, with intent to influence or reward
an officer, director, employee, agent, or attorney of a
financial institution in connection with any business
or transaction of such institution; or
(2) as an officer, director, employee, agent, or
attorney of a financial institution, corruptly solicits
or demands for the benefit of any person, or corruptly
accepts or agrees to accept, anything of value from any
person, intending to be influenced or rewarded in
connection with any business or transaction of such
institution;
shall be fined not more than [$1,000,000] $1,500,000 or three
times the value of the thing given, offered, promised,
solicited, demanded, accepted, or agreed to be accepted,
whichever is greater, or imprisoned not more than 30 years, or
both, but if the value of the thing given, offered, promised,
solicited, demanded, accepted, or agreed to be accepted does
not exceed $1000, shall be fined under this title or imprisoned
not more than one year, or both.
(c) This section shall not apply to bona fide salary, wages,
fees, or other compensation paid, or expenses paid or
reimbursed, in the usual course of business.
(d) Federal agencies with responsibility for regulating a
financial institution shall jointly establish such guidelines
as are appropriate to assist an officer, director, employee,
agent, or attorney of a financial institution to comply with
this section. Such agencies shall make such guidelines
available to the public.
* * * * * * *
CHAPTER 31--EMBEZZLEMENT AND THEFT
* * * * * * *
Sec. 656. Theft, embezzlement, or misapplication by bank officer or
employee
Whoever, being an officer, director, agent or employee of,
or connected in any capacity with any Federal Reserve bank,
member bank, depository institution holding company, national
bank, insured bank, branch or agency of a foreign bank, or
organization operating under section 25 or section 25(a) of the
Federal Reserve Act, or a receiver of a national bank, insured
bank, branch, agency, or organization or any agent or employee
of the receiver, or a Federal Reserve Agent, or an agent or
employee of a Federal Reserve Agent or of the Board of
Governors of the Federal Reserve System, embezzles, abstracts,
purloins or willfully misapplies any of the moneys, funds or
credits of such bank, branch, agency, or organization or
holding company or any moneys, funds, assets or securities
intrusted to the custody or care of such bank, branch, agency,
or organization, or holding company or to the custody or care
of any such agent, officer, director, employee or receiver,
shall be fined not more than [$1,000,000] $1,500,000 or
imprisoned not more than 30 years, or both; but if the amount
embezzled, abstracted, purloined or misapplied does not exceed
$1,000, he shall be fined under this title or imprisoned not
more than one year, or both.
As used in this section, the term ``national bank'' is
synonymous with ``national banking association''; ``member
bank'' means and includes any national bank, state bank, or
bank and trust company which has become a member of one of the
Federal Reserve banks; ``insured bank'' includes any bank,
banking association, trust company, savings bank, or other
banking institution, the deposits of which are insured by the
Federal Deposit Insurance Corporation; and the term ``branch or
agency of a foreign bank'' means a branch or agency described
in section 20(9) of this title. For purposes of this section,
the term ``depository institution holding company'' has the
meaning given such term in section 3 of the Federal Deposit
Insurance Act.
Sec. 657. Lending, credit and insurance institutions
Whoever, being an officer, agent or employee of or connected
in any capacity with the Federal Deposit Insurance Corporation,
National Credit Union Administration, any Federal home loan
bank, the Federal Housing Finance Agency, Farm Credit
Administration, Department of Housing and Urban Development,
Federal Crop Insurance Corporation, the Secretary of
Agriculture acting through the Farmers Home Administration or
successor agency, the Rural Development Administration or
successor agency, or the Farm Credit System Insurance
Corporation, a Farm Credit Bank, a bank for cooperatives or any
lending, mortgage, insurance, credit or savings and loan
corporation or association authorized or acting under the laws
of the United States or any institution, other than an insured
bank (as defined in section 656), the accounts of which are
insured by the Federal Deposit Insurance Corporation, or by the
National Credit Union Administration Board or any small
business investment company, or any community development
financial institution receiving financial assistance under the
Riegle Community Development and Regulatory Improvement Act of
1994, and whoever, being a receiver of any such institution, or
agent or employee of the receiver, embezzles, abstracts,
purloins or willfully misapplies any moneys, funds, credits,
securities or other things of value belonging to such
institution, or pledged or otherwise intrusted to its care,
shall be fined not more than [$1,000,000] $1,500,000 or
imprisoned not more than 30 years, or both; but if the amount
or value embezzled, abstracted, purloined or misapplied does
not exceed $1,000, he shall be fined under this title or
imprisoned not more than one year, or both.
* * * * * * *
CHAPTER 47--FRAUD AND FALSE STATEMENTS
* * * * * * *
Sec. 1005. Bank entries, reports and transactions
Whoever, being an officer, director, agent or employee of
any Federal Reserve bank, member bank, depository institution
holding company, national bank, insured bank, branch or agency
of a foreign bank, or organization operating under section 25
or section 25(a) of the Federal Reserve Act, without authority
from the directors of such bank, branch, agency, or
organization or company, issues or puts in circulation any
notes of such bank, branch, agency, or organization or company;
or
Whoever, without such authority, makes, draws, issues, puts
forth, or assigns any certificate of deposit, draft, order,
bill of exchange, acceptance, note, debenture, bond, or other
obligation, or mortgage, judgment or decree; or
Whoever makes any false entry in any book, report, or
statement of such bank, company, branch, agency, or
organization with intent to injure or defraud such bank,
company, branch, agency, or organization, or any other company,
body politic or corporate, or any individual person, or to
deceive any officer of such bank, company, branch, agency, or
organization, or the Comptroller of the Currency, or the
Federal Deposit Insurance Corporation, or any agent or examiner
appointed to examine the affairs of such bank, company, branch,
agency, or organization, or the Board of Governors of the
Federal Reserve System; or
Whoever with intent to defraud the United States or any
agency thereof, or any financial institution referred to in
this section, participates or shares in or receives (directly
or indirectly) any money, profit, property, or benefits through
any transaction, loan, commission, contract, or any other act
of any such financial institution--
Shall be fined not more than [$1,000,000] $1,500,000 or
imprisoned not more than 30 years, or both.
As used in this section, the term ``national bank'' is
synonymous with ``national banking association''; ``member
bank'' means and includes any national bank, state bank, or
bank or trust company, which has become a member of one of the
Federal Reserve banks; ``insured bank'' includes any state
bank, banking association, trust company, savings bank, or
other banking institution, the deposits of which are insured by
the Federal Deposit Insurance Corporation; and the term
``branch or agency of a foreign bank'' means a branch or agency
described in section 20(9) of this title. For purposes of this
section, the term ``depository institution holding company''
has the meaning given such term in section 3(w)(1) of the
Federal Deposit Insurance Act.
Sec. 1006. Federal credit institution entries, reports and transactions
Whoever, being an officer, agent or employee of or connected
in any capacity with the Federal Deposit Insurance Corporation,
National Credit Union Administration, any Federal home loan
bank, the Federal Housing Finance Agency, Farm Credit
Administration, Department of Housing and Urban Development,
Federal Crop Insurance Corporation, the Secretary of
Agriculture acting through the Farmers Home Administration or
successor agency, the Rural Development Administration or
successor agency, or the Farm Credit System Insurance
Corporation, a Farm Credit Bank, a bank for cooperatives or any
lending, mortgage, insurance, credit or savings and loan
corporation or association authorized or acting under the laws
of the United States or any institution, other than an insured
bank (as defined in section 656), the accounts of which are
insured by the Federal Deposit Insurance Corporation, or by the
National Credit Union Administration Board or any small
business investment company, with intent to defraud any such
institution or any other company, body politic or corporate, or
any individual, or to deceive any officer, auditor, examiner or
agent of any such institution or of department or agency of the
United States, makes any false entry in any book, report or
statement of or to any such institution, or without being duly
authorized, draws any order or bill of exchange, makes any
acceptance, or issues, puts forth or assigns any note,
debenture, bond or other obligation, or draft, bill of
exchange, mortgage, judgment, or decree, or, with intent to
defraud the United States or any agency thereof, or any
corporation, institution, or association referred to in this
section, participates or shares in or receives directly or
indirectly any money, profit, property, or benefits through any
transaction, loan, commission, contract, or any other act of
any such corporation, institution, or association, shall be
fined not more than [$1,000,000] $1,500,000 or imprisoned not
more than 30 years, or both.
Sec. 1007. Federal Deposit Insurance Corporation transactions
Whoever, for the purpose of influencing in any way the action
of the Federal Deposit Insurance Corporation, knowingly makes
or invites reliance on a false, forged, or counterfeit
statement, document, or thing shall be fined not more than
[$1,000,000] $1,500,000 or imprisoned not more than 30 years,
or both.
* * * * * * *
Sec. 1014. Loan and credit applications generally; renewals and
discounts; crop insurance
Whoever knowingly makes any false statement or report, or
willfully overvalues any land, property or security, for the
purpose of influencing in any way the action of the Federal
Housing Administration, the Farm Credit Administration, Federal
Crop Insurance Corporation or a company the Corporation
reinsures, the Secretary of Agriculture acting through the
Farmers Home Administration or successor agency, the Rural
Development Administration or successor agency, any Farm Credit
Bank, production credit association, agricultural credit
association, bank for cooperatives, or any division, officer,
or employee thereof, or of any regional agricultural credit
corporation established pursuant to law, or a Federal land
bank, a Federal land bank association, a Federal Reserve bank,
a small business investment company, as defined in section 103
of the Small Business Investment Act of 1958 (15 U.S.C. 662),
or the Small Business Administration in connection with any
provision of that Act, a Federal credit union, an insured
State-chartered credit union, any institution the accounts of
which are insured by the Federal Deposit Insurance
Corporation,, any Federal home loan bank, the Federal Housing
Finance Agency, the Federal Deposit Insurance Corporation, the
Farm Credit System Insurance Corporation, or the National
Credit Union Administration Board, a branch or agency of a
foreign bank (as such terms are defined in paragraphs (1) and
(3) of section 1(b) of the International Banking Act of 1978),
an organization operating under section 25 or section 25(a) of
the Federal Reserve Act, or a mortgage lending business, or any
person or entity that makes in whole or in part a federally
related mortgage loan as defined in section 3 of the Real
Estate Settlement Procedures Act of 1974, upon any application,
advance, discount, purchase, purchase agreement, repurchase
agreement, commitment, loan, or insurance agreement or
application for insurance or a guarantee, or any change or
extension of any of the same, by renewal, deferment of action
or otherwise, or the acceptance, release, or substitution of
security therefor, shall be fined not more than [$1,000,000]
$1,500,000 or imprisoned not more than 30 years, or both. The
term ``State-chartered credit union'' includes a credit union
chartered under the laws of a State of the United States, the
District of Columbia, or any commonwealth, territory, or
possession of the United States.
* * * * * * *
CHAPTER 63--MAIL FRAUD AND OTHER FRAUD OFFENSES
Sec. 1341. Frauds and swindles
Whoever, having devised or intending to devise any scheme or
artifice to defraud, or for obtaining money or property by
means of false or fraudulent pretenses, representations, or
promises, or to sell, dispose of, loan, exchange, alter, give
away, distribute, supply, or furnish or procure for unlawful
use any counterfeit or spurious coin, obligation, security, or
other article, or anything represented to be or intimated or
held out to be such counterfeit or spurious article, for the
purpose of executing such scheme or artifice or attempting so
to do, places in any post office or authorized depository for
mail matter, any matter or thing whatever to be sent or
delivered by the Postal Service, or deposits or causes to be
deposited any matter or thing whatever to be sent or delivered
by any private or commercial interstate carrier, or takes or
receives therefrom, any such matter or thing, or knowingly
causes to be delivered by mail or such carrier according to the
direction thereon, or at the place at which it is directed to
be delivered by the person to whom it is addressed, any such
matter or thing, shall be fined under this title or imprisoned
not more than 20 years, or both. If the violation occurs in
relation to, or involving any benefit authorized, transported,
transmitted, transferred, disbursed, or paid in connection
with, a presidentially declared major disaster or emergency (as
those terms are defined in section 102 of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act (42
U.S.C. 5122)), or affects a financial institution, such person
shall be fined not more than [$1,000,000] $1,500,000 or
imprisoned not more than 30 years, or both.
* * * * * * *
Sec. 1343. Fraud by wire, radio, or television
Whoever, having devised or intending to devise any scheme or
artifice to defraud, or for obtaining money or property by
means of false or fraudulent pretenses, representations, or
promises, transmits or causes to be transmitted by means of
wire, radio, or television communication in interstate or
foreign commerce, any writings, signs, signals, pictures, or
sounds for the purpose of executing such scheme or artifice,
shall be fined under this title or imprisoned not more than 20
years, or both. If the violation occurs in relation to, or
involving any benefit authorized, transported, transmitted,
transferred, disbursed, or paid in connection with, a
presidentially declared major disaster or emergency (as those
terms are defined in section 102 of the Robert T. Stafford
Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)),
or affects a financial institution, such person shall be fined
not more than [$1,000,000] $1,500,000 or imprisoned not more
than 30 years, or both.
Sec. 1344. Bank fraud
Whoever knowingly executes, or attempts to execute, a scheme
or artifice--
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits,
assets, securities, or other property owned by, or
under the custody or control of, a financial
institution, by means of false or fraudulent pretenses,
representations, or promises;
shall be fined not more than [$1,000,000] $1,500,000 or
imprisoned not more than 30 years, or both.
* * * * * * *
----------
COMMODITY EXCHANGE ACT
* * * * * * *
SEC. 1A. DEFINITIONS.
As used in this Act:
(1) Alternative trading system.--The term
``alternative trading system'' means an organization,
association, or group of persons that--
(A) is registered as a broker or dealer
pursuant to section 15(b) of the Securities
Exchange Act of 1934 (except paragraph (11)
thereof);
(B) performs the functions commonly performed
by an exchange (as defined in section 3(a)(1)
of the Securities Exchange Act of 1934);
(C) does not--
(i) set rules governing the conduct
of subscribers other than the conduct
of such subscribers' trading on the
alternative trading system; or
(ii) discipline subscribers other
than by exclusion from trading; and
(D) is exempt from the definition of the term
``exchange'' under such section 3(a)(1) by rule
or regulation of the Securities and Exchange
Commission on terms that require compliance
with regulations of its trading functions.
(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.
(6) Board of trade.--The term ``board of trade''
means any organized exchange or other trading facility.
(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.
(8) Commission.--The term ``Commission'' means the
Commodity Futures Trading Commission established under
section 2(a)(2).
(9) Commodity.--The term ``commodity'' means wheat,
cotton, rice, corn, oats, barley, rye, flaxseed, grain
sorghums, mill feeds, butter, eggs, Solanum tuberosum
(Irish potatoes), wool, wool tops, fats and oils
(including lard, tallow, cottonseed oil, peanut oil,
soybean oil, and all other fats and oils), cottonseed
meal, cottonseed, peanuts, soybeans, soybean meal,
livestock, livestock products, and frozen concentrated
orange juice, and all other goods and articles, 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.
(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.
(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.
(12) Commodity trading advisor.--
(A) In general.--Except as otherwise provided
in this paragraph, the term ``commodity trading
advisor'' means any person who--
(i) for compensation or profit,
engages in the business of advising
others, either directly or through
publications, writings, or electronic
media, as to the value of or the
advisability of trading in--
(I) any contract of sale of a
commodity for future delivery,
security futures product, or
swap;
(II) any agreement, contract,
or transaction described in
section 2(c)(2)(C)(i) or
section 2(c)(2)(D)(i)
(III) any commodity option
authorized under section 4c; or
(IV) any leverage transaction
authorized under section 19;
(ii) for compensation or profit, and
as part of a regular business, issues
or promulgates analyses or reports
concerning any of the activities
referred to in clause (i);
(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.
(B) Exclusions.--Subject to subparagraph (C),
the term ``commodity trading advisor'' does not
include--
(i) any bank or trust company or any
person acting as an employee thereof;
(ii) any news reporter, news
columnist, or news editor of the print
or electronic media, or any lawyer,
accountant, or teacher;
(iii) any floor broker or futures
commission merchant;
(iv) the publisher or producer of any
print or electronic data of general and
regular dissemination, including its
employees;
(v) the fiduciary of any defined
benefit plan that is subject to the
Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1001 et seq.);
(vi) any contract market or
derivatives transaction execution
facility; and
(vii) such other persons not within
the intent of this paragraph as the
Commission may specify by rule,
regulation, or order.
(C) Incidental services.--Subparagraph (B)
shall apply only if the furnishing of such
services by persons referred to in subparagraph
(B) is solely incidental to the conduct of
their business or profession.
(D) Advisors.--The Commission, by rule or
regulation, may include within the term
``commodity trading advisor'', any person
advising as to the value of commodities or
issuing reports or analyses concerning
commodities if the Commission determines that
the rule or regulation will effectuate the
purposes of this paragraph.
(13) Contract of sale.--The term ``contract of sale''
includes sales, agreements of sale, and agreements to
sell.
(14) Cooperative association of producers.--The term
``cooperative association of producers'' means any
cooperative association, corporate, or otherwise, not
less than 75 percent in good faith owned or controlled,
directly or indirectly, by producers of agricultural
products and otherwise complying with the Act of
February 18, 1922 (42 Stat. 388, chapter 57; 7 U.S.C.
291 and 292), including any organization acting for a
group of such associations and owned or controlled by
such associations, except that business done for or
with the United States, or any agency thereof, shall
not be considered either member or nonmember business
in determining the compliance of any such association
with this Act.
(15) Derivatives clearing organization.--
(A) In general.--The term ``derivatives
clearing organization'' means a clearinghouse,
clearing association, clearing corporation, or
similar entity, facility, system, or
organization that, with respect to an
agreement, contract, or transaction--
(i) enables each party to the
agreement, contract, or transaction to
substitute, through novation or
otherwise, the credit of the
derivatives clearing organization for
the credit of the parties;
(ii) arranges or provides, on a
multilateral basis, for the settlement
or netting of obligations resulting
from such agreements, contracts, or
transactions executed by participants
in the derivatives clearing
organization; or
(iii) otherwise provides clearing
services or arrangements that mutualize
or transfer among participants in the
derivatives clearing organization the
credit risk arising from such
agreements, contracts, or transactions
executed by the participants.
(B) Exclusions.--The term ``derivatives
clearing organization'' does not include an
entity, facility, system, or organization
solely because it arranges or provides for--
(i) settlement, netting, or novation
of obligations resulting from
agreements, contracts, or transactions,
on a bilateral basis and without a
central counterparty;
(ii) settlement or netting of cash
payments through an interbank payment
system; or
(iii) settlement, netting, or
novation of obligations resulting from
a sale of a commodity in a transaction
in the spot market for the commodity.
(16) Electronic trading facility.--The term
``electronic trading facility'' means a trading
facility that--
(A) operates by means of an electronic or
telecommunications network; and
(B) maintains an automated audit trail of
bids, offers, and the matching of orders or the
execution of transactions on the facility.
(17) Eligible commercial entity.--The term ``eligible
commercial entity'' means, with respect to an
agreement, contract or transaction in a commodity--
(A) an eligible contract participant
described in clause (i), (ii), (v), (vii),
(viii), or (ix) of paragraph (18)(A) that, in
connection with its business--
(i) has a demonstrable ability,
directly or through separate
contractual arrangements, to make or
take delivery of the underlying
commodity;
(ii) incurs risks, in addition to
price risk, related to the commodity;
or
(iii) is a dealer that regularly
provides risk management or hedging
services to, or engages in market-
making activities with, the foregoing
entities involving transactions to
purchase or sell the commodity or
derivative agreements, contracts, or
transactions in the commodity;
(B) an eligible contract participant, other
than a natural person or an instrumentality,
department, or agency of a State or local
governmental entity, that--
(i) regularly enters into
transactions to purchase or sell the
commodity or derivative agreements,
contracts, or transactions in the
commodity; and
(ii) either--
(I) in the case of a
collective investment vehicle
whose participants include
persons other than--
(aa) qualified
eligible persons, as
defined in Commission
rule 4.7(a) (17 CFR
4.7(a));
(bb) accredited
investors, as defined
in Regulation D of the
Securities and Exchange
Commission under the
Securities Act of 1933
(17 CFR 230.501(a)),
with total assets of
$2,000,000; or
(cc) qualified
purchasers, as defined
in section 2(a)(51)(A)
of the Investment
Company Act of 1940;
in each case as in effect on
the date of the enactment of
the Commodity Futures
Modernization Act of 2000, has,
or is one of a group of
vehicles under common control
or management having in the
aggregate, $1,000,000,000 in
total assets; or
(II) in the case of other
persons, has, or is one of a
group of persons under common
control or management having in
the aggregate, $100,000,000 in
total assets; or
(C) such other persons as the Commission
shall determine appropriate and shall designate
by rule, regulation, or order.
(18) Eligible contract participant.--The term
``eligible contract participant'' means--
(A) acting for its own account--
(i) a financial institution;
(ii) an insurance company that is
regulated by a State, or that is
regulated by a foreign government and
is subject to comparable regulation as
determined by the Commission, including
a regulated subsidiary or affiliate of
such an insurance company;
(iii) an investment company subject
to regulation under the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et
seq.) or a foreign person performing a
similar role or function subject as
such to foreign regulation (regardless
of whether each investor in the
investment company or the foreign
person is itself an eligible contract
participant);
(iv) a commodity pool that--
(I) has total assets
exceeding $5,000,000; and
(II) is formed and operated
by a person subject to
regulation under this Act or a
foreign person performing a
similar role or function
subject as such to foreign
regulation (regardless of
whether each investor in the
commodity pool or the foreign
person is itself an eligible
contract participant) 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;
(v) a corporation, partnership,
proprietorship, organization, trust, or
other entity--
(I) that has total assets
exceeding $10,000,000;
(II) the obligations of which
under an agreement, contract,
or transaction are guaranteed
or otherwise supported by a
letter of credit or keepwell,
support, or other agreement by
an entity described in
subclause (I), in clause (i),
(ii), (iii), (iv), or (vii), or
in subparagraph (C); or
(III) that--
(aa) has a net worth
exceeding $1,000,000;
and
(bb) enters into an
agreement, contract, or
transaction in
connection with the
conduct of the entity's
business or to manage
the risk associated
with an asset or
liability owned or
incurred or reasonably
likely to be owned or
incurred by the entity
in the conduct of the
entity's business;
(vi) an employee benefit plan subject
to the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1001 et
seq.), a governmental employee benefit
plan, or a foreign person performing a
similar role or function subject as
such to foreign regulation--
(I) that has total assets
exceeding $5,000,000; or
(II) the investment decisions
of which are made by--
(aa) an investment
adviser or commodity
trading advisor subject
to regulation under the
Investment Advisers Act
of 1940 (15 U.S.C. 80b-
1 et seq.) or this Act;
(bb) a foreign person
performing a similar
role or function
subject as such to
foreign regulation;
(cc) a financial
institution; or
(dd) an insurance
company described in
clause (ii), or a
regulated subsidiary or
affiliate of such an
insurance company;
(vii)(I) a governmental entity
(including the United States, a State,
or a foreign government) or political
subdivision of a governmental entity;
(II) a multinational or supranational
government entity; or
(III) an instrumentality, agency, or
department of an entity described in
subclause (I) or (II);
except that such term does not include
an entity, instrumentality, agency, or
department referred to in subclause (I)
or (III) of this clause unless (aa) the
entity, instrumentality, agency, or
department is a person described in
clause (i), (ii), or (iii) of paragraph
(17)(A); (bb) the entity,
instrumentality, agency, or department
owns and invests on a discretionary
basis $50,000,000 or more in
investments; or (cc) the agreement,
contract, or transaction is offered by,
and entered into with, an entity that
is listed in any of subclauses (I)
through (VI) of section 2(c)(2)(B)(ii);
(viii)(I) a broker or dealer subject
to regulation under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.) or a foreign person performing a
similar role or function subject as
such to foreign regulation, except
that, if the broker or dealer or
foreign person is a natural person or
proprietorship, the broker or dealer or
foreign person shall not be considered
to be an eligible contract participant
unless the broker or dealer or foreign
person also meets the requirements of
clause (v) or (xi);
(II) an associated person of a
registered broker or dealer concerning
the financial or securities activities
of which the registered person makes
and keeps records under section 15C(b)
or 17(h) of the Securities Exchange Act
of 1934 (15 U.S.C. 78o-5(b), 78q(h));
(III) an investment bank holding
company (as defined in section 17(i) of
the Securities Exchange Act of 1934 (15
U.S.C. 78q(i));
(ix) a futures commission merchant
subject to regulation under this Act or
a foreign person performing a similar
role or function subject as such to
foreign regulation, except that, if the
futures commission merchant or foreign
person is a natural person or
proprietorship, the futures commission
merchant or foreign person shall not be
considered to be an eligible contract
participant unless the futures
commission merchant or foreign person
also meets the requirements of clause
(v) or (xi);
(x) a floor broker or floor trader
subject to regulation under this Act in
connection with any transaction that
takes place on or through the
facilities of a registered entity
(other than an electronic trading
facility with respect to a significant
price discovery contract) or an exempt
board of trade, or any affiliate
thereof, on which such person regularly
trades; or
(xi) an individual who has amounts
invested on a discretionary basis, the
aggregate of which is in excess of--
(I) $10,000,000; or
(II) $5,000,000 and who
enters into the agreement,
contract, or transaction in
order to manage the risk
associated with an asset owned
or liability incurred, or
reasonably likely to be owned
or incurred, by the individual;
(B)(i) a person described in clause (i),
(ii), (iv), (v), (viii), (ix), or (x) of
subparagraph (A) or in subparagraph (C), acting
as broker or performing an equivalent agency
function on behalf of another person described
in subparagraph (A) or (C); or
(ii) an investment adviser subject to
regulation under the Investment Advisers Act of
1940, a commodity trading advisor subject to
regulation under this Act, a foreign person
performing a similar role or function subject
as such to foreign regulation, or a person
described in clause (i), (ii), (iv), (v),
(viii), (ix), or (x) of subparagraph (A) or in
subparagraph (C), in any such case acting as
investment manager or fiduciary (but excluding
a person acting as broker or performing an
equivalent agency function) for another person
described in subparagraph (A) or (C) and who is
authorized by such person to commit such person
to the transaction; or
(C) any other person that the Commission
determines to be eligible in light of the
financial or other qualifications of the
person.
(19) Excluded commodity.--The term ``excluded
commodity'' means--
(i) an interest rate, exchange rate,
currency, security, security index,
credit risk or measure, debt or equity
instrument, index or measure of
inflation, or other macroeconomic index
or measure;
(ii) any other rate, differential,
index, or measure of economic or
commercial risk, return, or value that
is--
(I) not based in substantial
part on the value of a narrow
group of commodities not
described in clause (i); or
(II) based solely on one or
more commodities that have no
cash market;
(iii) any economic or commercial
index based on prices, rates, values,
or levels that are not within the
control of any party to the relevant
contract, agreement, or transaction; or
(iv) an occurrence, extent of an
occurrence, or contingency (other than
a change in the price, rate, value, or
level of a commodity not described in
clause (i)) that is--
(I) beyond the control of the
parties to the relevant
contract, agreement, or
transaction; and
(II) associated with a
financial, commercial, or
economic consequence.
(20) Exempt commodity.--The term ``exempt commodity''
means a commodity that is not an excluded commodity or
an agricultural commodity.
(21) Financial institution.--The term ``financial
institution'' means--
(A) a corporation operating under the fifth
undesignated paragraph of section 25 of the
Federal Reserve Act (12 U.S.C. 603), commonly
known as ``an agreement corporation'';
(B) a corporation organized under section 25A
of the Federal Reserve Act (12 U.S.C. 611 et
seq.), commonly known as an ``Edge Act
corporation'';
(C) an institution that is regulated by the
Farm Credit Administration;
(D) a Federal credit union or State credit
union (as defined in section 101 of the Federal
Credit Union Act (12 U.S.C. 1752));
(E) a depository institution (as defined in
section 3 of the Federal Deposit Insurance Act
(12 U.S.C. 1813));
(F) a foreign bank or a branch or agency of a
foreign bank (each as defined in section 1(b)
of the International Banking Act of 1978 (12
U.S.C. 3101(b)));
(G) any financial holding company (as defined
in section 2 of the Bank Holding Company Act of
1956);
(H) a trust company; or
(I) a similarly regulated subsidiary or
affiliate of an entity described in any of
subparagraphs (A) through (H).
(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.
(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.
(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.
(26) Foreign futures authority.--The term ``foreign
futures authority'' means any foreign government, or
any department, agency, governmental body, or
regulatory organization empowered by a foreign
government to administer or enforce a law, rule, or
regulation as it relates to a futures or options
matter, or any department or agency of a political
subdivision of a foreign government empowered to
administer or enforce a law, rule, or regulation as it
relates to a futures or options matter.
(27) Future delivery.--The term ``future delivery''
does not include any sale of any cash commodity for
deferred shipment or delivery.
(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.
(29) Hybrid instrument.--The term ``hybrid
instrument'' means a security having one or more
payments indexed to the value, level, or rate of, or
providing for the delivery of, one or more commodities.
(30) Interstate commerce.--The term ``interstate
commerce'' means commerce--
(A) between any State, territory, or
possession, or the District of Columbia, and
any place outside thereof; or
(B) between points within the same State,
territory, or possession, or the District of
Columbia, but through any place outside
thereof, or within any territory or possession,
or the District of Columbia.
(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.
(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.
(34) Member of a registered entity; member of a
derivatives transaction execution facility.--The term
``member'' means, with respect to a registered entity
or derivatives transaction execution facility, an
individual, association, partnership, corporation, or
trust--
(A) owning or holding membership in, or
admitted to membership representation on, the
registered entity or derivatives transaction
execution facility; or
(B) having trading privileges on the
registered entity or derivatives transaction
execution facility.
A participant in an alternative trading system that is
designated as a contract market pursuant to section 5f
is deemed a member of the contract market for purposes
of transactions in security futures products through
the contract market.
(35) Narrow-based security index.--
(A) The term ``narrow-based security index''
means an index--
(i) that has 9 or fewer component
securities;
(ii) in which a component security
comprises more than 30 percent of the
index's weighting;
(iii) in which the five highest
weighted component securities in the
aggregate comprise more than 60 percent
of the index's weighting; or
(iv) in which the lowest weighted
component securities comprising, in the
aggregate, 25 percent of the index's
weighting have an aggregate dollar
value of average daily trading volume
of less than $50,000,000 (or in the
case of an index with 15 or more
component securities, $30,000,000),
except that if there are two or more
securities with equal weighting that
could be included in the calculation of
the lowest weighted component
securities comprising, in the
aggregate, 25 percent of the index's
weighting, such securities shall be
ranked from lowest to highest dollar
value of average daily trading volume
and shall be included in the
calculation based on their ranking
starting with the lowest ranked
security.
(B) Notwithstanding subparagraph (A), an
index is not a narrow-based security index if--
(i)(I) it has at least 9 component
securities;
(II) no component security comprises
more than 30 percent of the index's
weighting; and
(III) each component security is--
(aa) registered pursuant to
section 12 of the Securities
Exchange Act of 1934;
(bb) one of 750 securities
with the largest market
capitalization; and
(cc) one of 675 securities
with the largest dollar value
of average daily trading
volume;
(ii) a board of trade was designated
as a contract market by the Commodity
Futures Trading Commission with respect
to a contract of sale for future
delivery on the index, before the date
of the enactment of the Commodity
Futures Modernization Act of 2000;
(iii)(I) a contract of sale for
future delivery on the index traded on
a designated contract market or
registered derivatives transaction
execution facility for at least 30 days
as a contract of sale for future
delivery on an index that was not a
narrow-based security index; and
(II) it has been a narrow-based
security index for no more than 45
business days over 3 consecutive
calendar months;
(iv) a contract of sale for future
delivery on the index is traded on or
subject to the rules of a foreign board
of trade and meets such requirements as
are jointly established by rule or
regulation by the Commission and the
Securities and Exchange Commission;
(v) no more than 18 months have
passed since the date of the enactment
of the Commodity Futures Modernization
Act of 2000 and--
(I) it is traded on or
subject to the rules of a
foreign board of trade;
(II) the offer and sale in
the United States of a contract
of sale for future delivery on
the index was authorized before
the date of the enactment of
the Commodity Futures
Modernization Act of 2000; and
(III) the conditions of such
authorization continue to be
met; or
(vi) a contract of sale for future
delivery on the index is traded on or
subject to the rules of a board of
trade and meets such requirements as
are jointly established by rule,
regulation, or order by the Commission
and the Securities and Exchange
Commission.
(C) Within 1 year after the date of the
enactment of the Commodity Futures
Modernization Act of 2000, the Commission and
the Securities and Exchange Commission jointly
shall adopt rules or regulations that set forth
the requirements under subparagraph (B)(iv).
(D) An index that is a narrow-based security
index solely because it was a narrow-based
security index for more than 45 business days
over 3 consecutive calendar months pursuant to
clause (iii) of subparagraph (B) shall not be a
narrow-based security index for the 3 following
calendar months.
(E) For purposes of subparagraphs (A) and
(B)--
(i) the dollar value of average daily
trading volume and the market
capitalization shall be calculated as
of the preceding 6 full calendar
months; and
(ii) the Commission and the
Securities and Exchange Commission
shall, by rule or regulation, jointly
specify the method to be used to
determine market capitalization and
dollar value of average daily trading
volume.
(36) Option.--The term ``option'' means an agreement,
contract, or transaction that is of the character of,
or is commonly known to the trade as, an ``option'',
``privilege'', ``indemnity'', ``bid'', ``offer'',
``put'', ``call'', ``advance guaranty'', or ``decline
guaranty''.
(37) Organized exchange.--The term ``organized
exchange'' means a trading facility that--
(A) permits trading--
(i) by or on behalf of a person that
is not an eligible contract
participant; or
(ii) by persons other than on a
principal-to-principal basis; or
(B) has adopted (directly or through another
nongovernmental entity) rules that--
(i) govern the conduct of
participants, other than rules that
govern the submission of orders or
execution of transactions on the
trading facility; and
(ii) include disciplinary sanctions
other than the exclusion of
participants from trading.
(38) Person.--The term ``person'' imports the plural
or singular, and includes individuals, associations,
partnerships, corporations, and trusts.
(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).
(40) Registered entity.--The term ``registered
entity'' means--
(A) a board of trade designated as a contract
market under section 5;
(B) a derivatives clearing organization
registered under section 5b;
(C) a board of trade designated as a contract
market under section 5f;
(D) a swap execution facility registered
under section 5h;
(E) a swap data repository registered under
section 21; and
(F) with respect to a contract that the
Commission determines is a significant price
discovery contract, any electronic trading
facility on which the contract is executed or
traded.
(41) Security.--The term ``security'' means a
security as defined in section 2(a)(1) of the
Securities Act of 1933 (15 U.S.C. 77b(a)(1)) or section
3(a)(10) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(10)).
(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)).
(44) Security future.--The term ``security future''
means a contract of sale for future delivery of a
single security or of a narrow-based security index,
including any interest therein or based on the value
thereof, except an exempted security under section
3(a)(12) of the Securities Exchange Act of 1934 as in
effect on the date of the enactment of the Futures
Trading Act of 1982 (other than any municipal security
as defined in section 3(a)(29) of the Securities
Exchange Act of 1934 as in effect on the date of the
enactment of the Futures Trading Act of 1982). The term
``security future'' does not include any agreement,
contract, or transaction excluded from this Act under
section 2(c), 2(d), 2(f), or 2(g) of this Act (as in
effect on the date of the enactment of the Commodity
Futures Modernization Act of 2000) or title IV of the
Commodity Futures Modernization Act of 2000.
(45) Security futures product.--The term ``security
futures product'' means a security future or any put,
call, straddle, option, or privilege on any security
future.
(46) Significant price discovery contract.--The term
``significant price discovery contract'' means an
agreement, contract, or transaction subject to section
2(h)(5).
(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).
(G) Treatment of swap transactions between
affiliates.--
(i) Exemption from swap rules.--
Except as provided under clause (ii),
the Commission may not regulate a swap
under this Act if all of the following
apply to such swap:
(I) Affiliation.--One
counterparty, directly or
indirectly, holds a majority
ownership interest in the other
counterparty, or a third party,
directly or indirectly, holds a
majority ownership interest in
both counterparties.
(II) Financial statements.--
The affiliated counterparty
that holds the majority
interest in the other
counterparty or the third party
that, directly or indirectly,
holds the majority interests in
both affiliated counterparties,
reports its financial
statements on a consolidated
basis under generally accepted
accounting principles or
International Financial
Reporting Standards, or other
similar standards, and the
financial statements include
the financial results of the
majority-owned affiliated
counterparty or counterparties.
(ii) Requirements for exempted
swaps.--With respect to a swap
described under clause (i):
(I) Reporting requirement.--
If at least one counterparty is
a swap dealer or major swap
participant, that counterparty
shall report the swap pursuant
to section 4r, within such time
period as the Commission may by
rule or regulation prescribe--
(aa) to a swap data
repository; or
(bb) if there is no
swap data repository
that would accept the
agreement, contract or
transaction, to the
Commission.
(II) Risk management
requirement.--If at least one
counterparty is a swap dealer
or major swap participant, the
swap shall be subject to a
centralized risk management
program pursuant to section
4s(j) that is reasonably
designed to monitor and to
manage the risks associated
with the swap.
(III) Anti-evasion
requirement.--The swap shall
not be 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
such Act.
(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.
(51) Trading facility.--
(A) In general.--The term ``trading
facility'' means a person or group of persons
that constitutes, maintains, or provides a
physical or electronic facility or system in
which multiple participants have the ability to
execute or trade agreements, contracts, or
transactions--
(i) by accepting bids or offers made
by other participants that are open to
multiple partipants in the facility or
system; or
(ii) through the interaction of
multiple bids or multiple offers within
a system with a pre-determined non-
discretionary automated trade matching
and execution algorithm.
(B) Exclusions.--The term ``trading
facility'' does not include--
(i) a person or group of persons
solely because the person or group of
persons constitutes, maintains, or
provides an electronic facility or
system that enables participants to
negotiate the terms of and enter into
bilateral transactions as a result of
communications exchanged by the parties
and not from interaction of multiple
bids and multiple offers within a
predetermined, nondiscretionary
automated trade matching and execution
algorithm;
(ii) a government securities dealer
or government securities broker, to the
extent that the dealer or broker
executes or trades agreements,
contracts, or transactions in
government securities, or assists
persons in communicating about,
negotiating, entering into, executing,
or trading an agreement, contract, or
transaction in government securities
(as the terms ``government securities
dealer'', ``government securities
broker'', and ``government securities''
are defined in section 3(a) of the
Securities Exchange Act of 1934 (15
U.S.C. 78c(a))); or
(iii) facilities on which bids and
offers, and acceptances of bids and
offers effected on the facility, are
not binding.
Any person, group of persons, dealer, broker,
or facility described in clause (i) or (ii) is
excluded from the meaning of the term ``trading
facility'' for the purposes of this Act without
any prior specific approval, certification, or
other action by the Commission.
(C) Special rule.--A person or group of
persons that would not otherwise constitute a
trading facility shall not be considered to be
a trading facility solely as a result of the
submission to a derivatives clearing
organization of transactions executed on or
through the person or group of persons.
* * * * * * *
SEC. 2. JURISDICTION OF COMMISSION; LIABILITY OF PRINCIPAL FOR ACT OF
AGENT; COMMODITY FUTURES TRADING COMMISSION;
TRANSACTION IN INTERSTATE COMMERCE.
(a) Jurisdiction of Commission; Commodity Futures Trading
Commission.--
(1) Jurisdiction of commission.--
(A) In general.--The Commission shall have
exclusive jurisdiction, except to the extent
otherwise provided in the Wall Street
Transparency and Accountability Act of 2010
(including an amendment made by that Act) and
subparagraphs (C), (D), and (I) of this
paragraph and subsections (c) and (f), with
respect to accounts, agreements (including any
transaction which is of the character of, or is
commonly known to the trade as, an ``option'',
``privilege'', ``indemnity'', ``bid'',
``offer'', ``put'', ``call'', ``advance
guaranty'', or ``decline guaranty''), and
transactions involving swaps or contracts of
sale of a commodity for future delivery
(including significant price discovery
contracts), traded or executed on a contract
market designated pursuant to section 5 or a
swap execution facility pursuant to section 5h
or any other board of trade, exchange, or
market, and transactions subject to regulation
by the Commission pursuant to section 19 of
this Act. Except as hereinabove provided,
nothing contained in this section shall (I)
supersede or limit the jurisdiction at any time
conferred on the Securities and Exchange
Commission or other regulatory authorities
under the laws of the United States or of any
State, or (II) restrict the Securities and
Exchange Commission and such other authorities
from carrying out their duties and
responsibilities in accordance with such laws.
Nothing in this section shall supersede or
limit the jurisdiction conferred on courts of
the United States or any State.
(B) Liability of principal for act of
agent.--The act, omission, or failure of any
official, agent, or other person acting for any
individual, association, partnership,
corporation, or trust within the scope of his
employment or office shall be deemed the act,
omission, or failure of such individual,
association, partnership, corporation, or
trust, as well as of such official, agent, or
other person.
(C) Notwithstanding any other provision of law--
(i)(I) Except as provided in subclause (II), this Act
shall not apply to and the Commission shall have no
jurisdiction to designate a board of trade as a
contract market for any transaction whereby any party
to such transaction acquires any put, call, or other
option on one or more securities (as defined in section
2(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.
(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.
(ii) This Act shall apply to and the Commission shall
have exclusive jurisdiction with respect to accounts,
agreements (including any transaction which is of the
character of, or is commonly known to the trade as, an
``option'', ``privilege'', ``indemnity'', ``bid'',
``offer'', ``put'', ``call'', ``advance guaranty'', or
``decline guaranty'') and transactions involving, and
may designate a board of trade as a contract market in,
or register a derivatives transaction execution
facility that trades or executes, contracts of sale (or
options on such contracts) for future delivery of a
group or index of securities (or any interest therein
or based upon the value thereof): Provided, however,
That no board of trade shall be designated as a
contract market with respect to any such contracts of
sale (or options on such contracts) for future
delivery, and no derivatives transaction execution
facility shall trade or execute such contracts of sale
(or options on such contracts) for future delivery,
unless the board of trade or the derivatives
transaction execution facility, and the applicable
contract, meet the following minimum requirements:
(I) Settlement of or delivery on such
contract (or option on such contract) shall be
effected in cash or by means other than the
transfer or receipt of any security, except an
exempted security under section 3 of the
Securities Act of 1933 or section 3(a)(12) of
the Securities Exchange Act of 1934 as in
effect on the date of enactment of the Futures
Trading Act of 1982 (other than any municipal
security, as defined in section 3(a)(29) of the
Securities Exchange Act of 1934 on the date of
enactment of the Futures Trading Act of 1982);
(II) Trading in such contract (or option on
such contract) shall not be readily susceptible
to manipulation of the price of such contract
(or option on such contract), nor to causing or
being used in the manipulation of the price of
any underlying security, option on such
security or option on a group or index
including such securities; and
(III) Such group or index of securities shall
not constitute a narrow-based security index.
(iii) If, in its discretion, the Commission
determines that a stock index futures contract,
notwithstanding its conformance with the requirements
in clause (ii) of this subparagraph, can reasonably be
used as a surrogate for trading a security (including a
security futures product), it may, by order, require
such contract and any option thereon be traded and
regulated as security futures products as defined in
section 3(a)(56) of the Securities Exchange Act of 1934
and section 1a of this Act subject to all rules and
regulations applicable to security futures products
under this Act and the securities laws as defined in
section 3(a)(47) of the Securities Exchange Act of
1934.
(iv) No person shall offer to enter into, enter into,
or confirm the execution of any contract of sale (or
option on such contract) for future delivery of any
security, or interest therein or based on the value
thereof, except an exempted security under or section
3(a)(12) of the Securities Exchange Act of 1934 as in
effect on the date of enactment of the Futures Trading
Act of 1982 (other than any municipal security as
defined in section 3(a)(29) of the Securities Exchange
Act of 1934 on the date of enactment of the Futures
Trading Act of 1982), or except as provided in clause
(ii) of this subparagraph or subparagraph (D), any
group or index of such securities or any interest
therein or based on the value thereof.
(v)(I) Notwithstanding any other provision of this
Act, any contract market in a stock index futures
contract (or option thereon) other than a security
futures product, or any derivatives transaction
execution facility on which such contract or option is
traded, shall file with the Board of Governors of the
Federal Reserve System any rule establishing or
changing the levels of margin (initial and maintenance)
for such stock index futures contract (or option
thereon) other than security futures products.
(II) The Board may at any time request any contract
market or derivatives transaction execution facility to
set the margin for any stock index futures contract (or
option thereon), other than for any security futures
product, at such levels as the Board in its judgment
determines are appropriate to preserve the financial
integrity of the contract market or derivatives
transaction execution facility, or its clearing system,
or to prevent systemic risk. If the contract market or
derivatives transaction execution facility fails to do
so within the time specified by the Board in its
request, the Board may direct the contract market or
derivatives transaction execution facility to alter or
supplement the rules of the contract market or
derivatives transaction execution facility as specified
in the request.
(III) Subject to such conditions as the Board may
determine, the Board may delegate any or all of its
authority, relating to margin for any stock index
futures contract (or option thereon), other than
security futures products, under this clause to the
Commission.
(IV) It shall be unlawful for any futures commission
merchant to, directly or indirectly, extend or maintain
credit to or for, or collect margin from any customer
on any security futures product unless such activities
comply with the regulations prescribed pursuant to
section 7(c)(2)(B) of the Securities Exchange Act of
1934.
(V) Nothing in this clause shall supersede or limit
the authority granted to the Commission in section
8a(9) to direct a contract market or registered
derivatives transaction execution facility, on finding
an emergency to exist, to raise temporary margin levels
on any futures contract, or option on the contract
covered by this clause, or on any security futures
product.
(VI) Any action taken by the Board, or by the
Commission acting under the delegation of authority
under subclause III, under this clause directing a
contract market to alter or supplement a contract
market rule shall be subject to review only in the
Court of Appeals where the party seeking review resides
or has its principal place of business, or in the
United States Court of Appeals for the District of
Columbia Circuit. The review shall be based on the
examination of all information before the Board or the
Commission, as the case may be, at the time the
determination was made. The court reviewing the action
of the Board or the Commission shall not enter a stay
or order of mandamus unless the court has determined,
after notice and a hearing before a panel of the court,
that the agency action complained of was arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law.
(D)(i) Notwithstanding any other provision of this Act, the
Securities and Exchange Commission shall have jurisdiction and
authority over security futures as defined in section 3(a)(55)
of the Securities Exchange Act of 1934, section 2(a)(16) of the
Securities Act of 1933, section 2(a)(52) of the Investment
Company Act of 1940, and section 202(a)(27) of the Investment
Advisers Act of 1940, options on security futures, and persons
effecting transactions in security futures and options thereon,
and this Act shall apply to and the Commission shall have
jurisdiction with respect to accounts, agreements (including
any transaction which is of the character of, or is commonly
known to the trade as, an ``option'', ``privilege'',
``indemnity'', ``bid'', ``offer'', ``put'', ``call'', ``advance
guaranty'', or ``decline guaranty''), contracts, and
transactions involving, and may designate a board of trade as a
contract market in, or register a derivatives transaction
execution facility that trades or executes, a security futures
product as defined in section 1a of this Act: Provided,
however, That, except as provided in clause (vi) of this
subparagraph, no board of trade shall be designated as a
contract market with respect to, or registered as a derivatives
transaction execution facility for, any such contracts of sale
for future delivery unless the board of trade and the
applicable contract meet the following criteria:
(I) Except as otherwise provided in a rule,
regulation, or order issued pursuant to clause (v) of
this subparagraph, any security underlying the security
future, including each component security of a narrow-
based security index, is registered pursuant to section
12 of the Securities Exchange Act of 1934.
(II) If the security futures product is not cash
settled, the board of trade on which the security
futures product is traded has arrangements in place
with a clearing agency registered pursuant to section
17A of the Securities Exchange Act of 1934 for the
payment and delivery of the securities underlying the
security futures product.
(III) Except as otherwise provided in a rule,
regulation, or order issued pursuant to clause (v) of
this subparagraph, the security future is based upon
common stock and such other equity securities as the
Commission and the Securities and Exchange Commission
jointly determine appropriate.
(IV) The security futures product is cleared by a
clearing agency that has in place provisions for linked
and coordinated clearing with other clearing agencies
that clear security futures products, which permits the
security futures product to be purchased on a
designated contract market, registered derivatives
transaction execution facility, national securities
exchange registered under section 6(a) of the
Securities Exchange Act of 1934, or national securities
association registered pursuant to section 15A(a) of
the Securities Exchange Act of 1934 and offset on
another designated contract market, registered
derivatives transaction execution facility, national
securities exchange registered under section 6(a) of
the Securities Exchange Act of 1934, or national
securities association registered pursuant to section
15A(a) of the Securities Exchange Act of 1934.
(V) Only futures commission merchants, introducing
brokers, commodity trading advisors, commodity pool
operators or associated persons subject to suitability
rules comparable to those of a national securities
association registered pursuant to section 15A(a) of
the Securities Exchange Act of 1934 solicit, accept any
order for, or otherwise deal in any transaction in or
in connection with the security futures product.
(VI) The security futures product is subject to a
prohibition against dual trading in section 4j of this
Act and the rules and regulations thereunder or the
provisions of section 11(a) of the Securities Exchange
Act of 1934 and the rules and regulations thereunder,
except to the extent otherwise permitted under the
Securities Exchange Act of 1934 and the rules and
regulations thereunder.
(VII) Trading in the security futures product is not
readily susceptible to manipulation of the price of
such security futures product, nor to causing or being
used in the manipulation of the price of any underlying
security, option on such security, or option on a group
or index including such securities;
(VIII) The board of trade on which the security
futures product is traded has procedures in place for
coordinated surveillance among such board of trade, any
market on which any security underlying the security
futures product is traded, and other markets on which
any related security is traded to detect manipulation
and insider trading, except that, if the board of trade
is an alternative trading system, a national securities
association registered pursuant to section 15A(a) of
the Securities Exchange Act of 1934 or national
securities exchange registered pursuant to section 6(a)
of the Securities Exchange Act of 1934 of which such
alternative trading system is a member has in place
such procedures.
(IX) The board of trade on which the security futures
product is traded has in place audit trails necessary
or appropriate to facilitate the coordinated
surveillance required in subclause (VIII), except that,
if the board of trade is an alternative trading system,
a national securities association registered pursuant
to section 15A(a) of the Securities Exchange Act of
1934 or national securities exchange registered
pursuant to section 6(a) of the Securities Exchange Act
of 1934 of which such alternative trading system is a
member has rules to require such audit trails.
(X) The board of trade on which the security futures
product is traded has in place procedures to coordinate
trading halts between such board of trade and markets
on which any security underlying the security futures
product is traded and other markets on which any
related security is traded, except that, if the board
of trade is an alternative trading system, a national
securities association registered pursuant to section
15A(a) of the Securities Exchange Act of 1934 or
national securities exchange registered pursuant to
section 6(a) of the Securities Exchange Act of 1934 of
which such alternative trading system is a member has
rules to require such coordinated trading halts.
(XI) The margin requirements for a security futures
product comply with the regulations prescribed pursuant
to section 7(c)(2)(B) of the Securities Exchange Act of
1934, except that nothing in this subclause shall be
construed to prevent a board of trade from requiring
higher margin levels for a security futures product
when it deems such action to be necessary or
appropriate.
(ii) It shall be unlawful for any person to offer, to enter
into, to execute, to confirm the execution of, or to conduct
any office or business anywhere in the United States, its
territories or possessions, for the purpose of soliciting, or
accepting any order for, or otherwise dealing in, any
transaction in, or in connection with, a security futures
product unless--
(I) the transaction is conducted on or subject to the
rules of a board of trade that--
(aa) has been designated by the Commission as
a contract market in such security futures
product; or
(bb) is a registered derivatives transaction
execution facility for the security futures
product that has provided a certification with
respect to the security futures product
pursuant to clause (vii);
(II) the contract is executed or consummated by,
through, or with a member of the contract market or
registered derivatives transaction execution facility;
and
(III) the security futures product is evidenced by a
record in writing which shows the date, the parties to
such security futures product and their addresses, the
property covered, and its price, and each contract
market member or registered derivatives transaction
execution facility member shall keep the record for a
period of 3 years from the date of the transaction, or
for a longer period if the Commission so directs, which
record shall at all times be open to the inspection of
any duly authorized representative of the Commission.
(iii)(I) Except as provided in subclause (II) but
notwithstanding any other provision of this Act, no person
shall offer to enter into, enter into, or confirm the execution
of any option on a security future.
(II) After 3 years after the date of the enactment of the
Commodity Futures Modernization Act of 2000, the Commission and
the Securities and Exchange Commission may by order jointly
determine to permit trading of options on any security future
authorized to be traded under the provisions of this Act and
the Securities Exchange Act of 1934.
(iv)(I) All relevant records of a futures commission merchant
or introducing broker registered pursuant to section 4f(a)(2),
floor broker or floor trader exempt from registration pursuant
to section 4f(a)(3), associated person exempt from registration
pursuant to section 4k(6), or board of trade designated as a
contract market in a security futures product pursuant to
section 5f shall be subject to such reasonable periodic or
special examinations by representatives of the Commission as
the Commission deems necessary or appropriate in the public
interest, for the protection of investors, or otherwise in
furtherance of the purposes of this Act, and the Commission,
before conducting any such examination, shall give notice to
the Securities and Exchange Commission of the proposed
examination and consult with the Securities and Exchange
Commission concerning the feasibility and desirability of
coordinating the examination with examinations conducted by the
Securities and Exchange Commission in order to avoid
unnecessary regulatory duplication or undue regulatory burdens
for the registrant or board of trade.
(II) The Commission shall notify the Securities and Exchange
Commission of any examination conducted of any futures
commission merchant or introducing broker registered pursuant
to section 4f(a)(2), floor broker or floor trader exempt from
registration pursuant to section 4f(a)(3), associated person
exempt from registration pursuant to section 4k(6), or board of
trade designated as a contract market in a security futures
product pursuant to section 5f, and, upon request, furnish to
the Securities and Exchange Commission any examination report
and data supplied to or prepared by the Commission in
connection with the examination.
(III) Before conducting an examination under subclause (I),
the Commission shall use the reports of examinations, unless
the information sought is unavailable in the reports, of any
futures commission merchant or introducing broker registered
pursuant to section 4f(a)(2), floor broker or floor trader
exempt from registration pursuant to section 4f(a)(3),
associated person exempt from registration pursuant to section
4k(6), or board of trade designated as a contract market in a
security futures product pursuant to section 5f that is made by
the Securities and Exchange Commission, a national securities
association registered pursuant to section 15A(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o-3(a)), or a
national securities exchange registered pursuant to section
6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)).
(IV) Any records required under this subsection for a futures
commission merchant or introducing broker registered pursuant
to section 4f(a)(2), floor broker or floor trader exempt from
registration pursuant to section 4f(a)(3), associated person
exempt from registration pursuant to section 4k(6), or board of
trade designated as a contract market in a security futures
product pursuant to section 5f, shall be limited to records
with respect to accounts, agreements, contracts, and
transactions involving security futures products.
(v)(I) The Commission and the Securities and Exchange
Commission, by rule, regulation, or order, may jointly modify
the criteria specified in subclause (I) or (III) of clause (i),
including the trading of security futures based on securities
other than equity securities, to the extent such modification
fosters the development of fair and orderly markets in security
futures products, is necessary or appropriate in the public
interest, and is consistent with the protection of investors.
(II) The Commission and the Securities and Exchange
Commission, by order, may jointly exempt any person from
compliance with the criterion specified in clause (i)(IV) to
the extent such exemption fosters the development of fair and
orderly markets in security futures products, is necessary or
appropriate in the public interest, and is consistent with the
protection of investors.
(vi)(I) Notwithstanding clauses (i) and (vii), until the
compliance date, a board of trade shall not be required to meet
the criterion specified in clause (i)(IV).
(II) The Commission and the Securities and Exchange
Commission shall jointly publish in the Federal Register a
notice of the compliance date no later than 165 days before the
compliance date.
(III) For purposes of this clause, the term ``compliance
date'' means the later of--
(aa) 180 days after the end of the first full
calendar month period in which the average aggregate
comparable share volume for all security futures
products based on single equity securities traded on
all designated contract markets and registered
derivatives transaction execution facilities equals or
exceeds 10 percent of the average aggregate comparable
share volume of options on single equity securities
traded on all national securities exchanges registered
pursuant to section 6(a) of the Securities Exchange Act
of 1934 and any national securities associations
registered pursuant to section 15A(a) of such Act; or
(bb) 2 years after the date on which trading in any
security futures product commences under this Act.
(vii) It shall be unlawful for a board of trade to trade or
execute a security futures product unless the board of trade
has provided the Commission with a certification that the
specific security futures product and the board of trade, as
applicable, meet the criteria specified in subclauses (I)
through (XI) of clause (i), except as otherwise provided in
clause (vi).
(E)(i) To the extent necessary or appropriate in the public
interest, to promote fair competition, and consistent with
promotion of market efficiency, innovation, and expansion of
investment opportunities, the protection of investors, and the
maintenance of fair and orderly markets, the Commission and the
Securities and Exchange Commission shall jointly issue such
rules, regulations, or orders as are necessary and appropriate
to permit the offer and sale of a security futures product
traded on or subject to the rules of a foreign board of trade
to United States persons.
(ii) The rules, regulations, or orders adopted under clause
(i) shall take into account, as appropriate, the nature and
size of the markets that the securities underlying the security
futures product reflects.
(F)(i) Nothing in this Act is intended to prohibit a futures
commission merchant from carrying security futures products
traded on or subject to the rules of a foreign board of trade
in the accounts of persons located outside of the United
States.
(ii) Nothing in this Act is intended to prohibit any eligible
contract participant located in the United States from
purchasing or carrying securities futures products traded on or
subject to the rules of a foreign board of trade, exchange, or
market to the same extent such person may be authorized to
purchase or carry other securities traded on a foreign board of
trade, exchange, or market so long as any underlying security
for such security futures products is traded principally on,
by, or through any exchange or market located outside the
United States.
(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.
(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)).
(2)(A) There is hereby established, as an independent
agency of the United States Government, a Commodity
Futures Trading Commission. The Commission shall be
composed of five Commissioners who shall be appointed
by the President, by and with the advice and consent of
the Senate. In nominating persons for appointment, the
President shall--
(i) select persons who shall each have
demonstrated knowledge in futures trading or
its regulation, or the production,
merchandising, processing or distribution of
one or more of the commodities or other goods
and articles, services, rights, and interests
covered by this Act; and
(ii) seek to ensure that the demonstrated
knowledge of the Commissioners is balanced with
respect to such areas.
Not more than three of the members of the Commission
shall be members of the same political party. Each
Commissioner shall hold office for a term of five years
and until his successor is appointed and has qualified,
except that he shall not so continue to serve beyond
the expiration of the next session of Congress
subsequent to the expiration of said fixed term of
office, and except (i) any Commissioner appointed to
fill a vacancy occurring prior to the expiration of the
term for which his predecessor was appointed shall be
appointed for the remainder of such term, and (ii) the
terms of office of the Commissioners first taking
office after the enactment of this paragraph shall
expire as designated by the President at the time of
nomination, one at the end of one year, one at the end
of two years, one at the end of three years, one at the
end of four years, and one at the end of five years.
(B) The President shall appoint, by and with the
advice and consent of the Senate, a member of the
Commission as Chairman, who shall serve as Chairman at
the pleasure of the President. An individual may be
appointed as Chairman at the same time that person is
appointed as a Commissioner. The Chairman shall be the
chief administrative officer of the Commission and
shall preside at hearings before the Commission. At any
time, the President may appoint, by and with the advice
and consent of the Senate, a different Chairman, and
the Commissioner previously appointed as Chairman may
complete that Commissioner's term as a Commissioner.
(3) A vacancy in the Commission shall not impair the
right of the remaining Commissioners to exercise all
the powers of the Commission.
(4) The Commission shall have a General Counsel, who
shall be appointed by the Commission and serve at the
pleasure of the Commission. The General Counsel shall
report directly to the Commission and serve as its
legal advisor. The Commission shall appoint such other
attorneys as may be necessary, in the opinion of the
Commission, to assist the General Counsel, represent
the Commission in all disciplinary proceedings pending
before it, represent the Commission in courts of law
whenever appropriate, assist the Department of Justice
in handling litigation concerning the Commission in
courts of law, and perform such other legal duties and
functions as the Commission may direct.
(5) The Commission shall have an Executive Director,
who shall be appointed by the Commission and serve at
the pleasure of the Commission. The Executive Director
shall report directly to the Commission and perform
such functions and duties as the Commission may
prescribe.
(6)(A) Except as otherwise provided in this paragraph
and in paragraphs (4) and (5) of this subsection, the
executive and administrative functions of the
Commission, including functions of the Commission with
respect to the appointment and supervision of personnel
employed under the Commission, the distribution of
business among such personnel and among administrative
units of the Commission, and the use and expenditure of
funds, according to budget categories, plans, programs,
and priorities established and approved by the
Commission, shall be exercised solely by the Chairman.
(B) In carrying out any of his functions under the
provisions of this paragraph, the Chairman shall be
governed by general policies, plans, priorities, and
budgets approved by the Commission and by such
regulatory decisions, findings, and determinations as
the Commission may by law be authorized to make.
(C) The appointment by the Chairman of the heads of
major administrative units under the Commission shall
be subject to the approval of the Commission.
(D) Personnel employed regularly and full time in the
immediate offices of Commissioners other than the
Chairman shall not be affected by the provisions of
this paragraph.
(E) There are hereby reserved to the Commission its
functions with respect to revising budget estimates and
with respect to determining the distribution of
appropriated funds according to major programs and
purposes.
(F) The Chairman may from time to time make such
provisions as he shall deem appropriate authorizing the
performance by any officer, employee, or administrative
unit under his jurisdiction of any functions of the
Chairman under this paragraph.
(7) Appointment and compensation.--
(A) In general.--The Commission may appoint
and fix the compensation of such officers,
attorneys, economists, examiners, and other
employees as may be necessary for carrying out
the functions of the Commission under this Act.
(B) Rates of pay.--Rates of basic pay for all
employees of the Commission may be set and
adjusted by the Commission without regard to
chapter 51 or subchapter III of chapter 53 of
title 5, United States Code.
(C) Comparability.--
(i) In general.--The Commission may
provide additional compensation and
benefits to employees of the Commission
if the same type of compensation or
benefits are provided by any agency
referred to in section 1206(a) of the
Financial Institutions Reform,
Recovery, and Enforcement Act of 1989
(12 U.S.C. 1833b(a)) or could be
provided by such an agency under
applicable provisions of law (including
rules and regulations).
(ii) Consultation.--In setting and
adjusting the total amount of
compensation and benefits for
employees, the Commission shall consult
with, and seek to maintain
comparability with, the agencies
referred to in section 1206(a) of the
Financial Institutions Reform,
Recovery, and Enforcement Act of 1989
(12 U.S.C. 1833b(a)).
(8) No Commissioner or employee of the Commission
shall accept employment or compensation from any
person, exchange, or clearinghouse subject to
regulation by the Commission under this Act during his
term of office, nor shall he participate, directly or
indirectly, in any registered entity operations or
transactions of a character subject to regulation by
the Commission.
(9)(A) The Commission shall, in cooperation with the
Secretary of Agriculture, maintain a liaison between
the Commission and the Department of Agriculture. The
Secretary shall take such steps as may be necessary to
enable the Commission to obtain information and utilize
such services and facilities of the Department of
Agriculture as may be necessary in order to maintain
effectively such liaison. In addition, the Secretary
shall appoint a liaison officer, who shall be an
employee of the Office of the Secretary, for the
purpose of maintaining a liaison between the Department
of Agriculture and the Commission. The Commission shall
furnish such liaison officer appropriate office space
within the offices of the Commission and shall allow
such liaison officer to attend and observe all
deliberations and proceedings of the Commission.
(B)(i) The Commission shall maintain communications
with the Department of the Treasury, the Board of
Governors of the Federal Reserve System, and the
Securities and Exchange Commission for the purpose of
keeping such agencies fully informed of Commission
activities that relate to the responsibilities of those
agencies, for the purpose of seeking the views of those
agencies on such activities, and for considering the
relationships between the volume and nature of
investment and trading in contracts of sale of a
commodity for future delivery and in securities and
financial instruments under the jurisdiction of such
agencies.
(ii) When a board of trade applies for designation or
registration as a contract market or derivatives
transaction execution facility involving transactions
for future delivery of any security issued or
guaranteed by the United States or any agency thereof,
the Commission shall promptly deliver a copy of such
application to the Department of the Treasury and the
Board of Governors of the Federal Reserve System. The
Commission may not designate or register a board of
trade as a contract market or derivatives transaction
execution facility based on such application until
forty-five days after the date the Commission delivers
the application to such agencies or until the
Commission receives comments from each of such agencies
on the application, whichever period is shorter. Any
comments received by the Commission from such agencies
shall be included as part of the public record of the
Commission's designation proceeding. In designating,
registering, or refusing, suspending, or revoking the
designation or registration of, a board of trade as a
contract market or derivatives transaction execution
facility involving transactions for future delivery
referred to in this clause or in considering any
possible action under this Act (including without
limitation emergency action under section 8a(9)) with
respect to such transactions, the Commission shall take
into consideration all comments it receives from the
Department of the Treasury and the Board of Governors
of the Federal Reserve System and shall consider the
effect that any such designation, registration,
suspension, revocation, or action may have on the debt
financing requirements of the United States Government
and the continued efficiency and integrity of the
underlying market for government securities.
(iii) The provisions of this subparagraph shall not
create any rights, liabilities, or obligations upon
which actions may be brought against the Commission.
(10)(A) Whenever the Commission submits any budget
estimate or request to the President or the Office of
Management and Budget, it shall concurrently transmit
copies of that estimate or request to the House and
Senate Appropriations Committees and the House
Committee on Agriculture and the Senate Committee on
Agriculture, Nutrition, and Forestry.
(B) Whenever the Commission transmits any legislative
recommendations, or testimony, or comments on
legislation to the President or the Office of
Management and Budget, it shall concurrently transmit
copies thereof to the House Committee on Agriculture
and the Senate Committee on Agriculture, Nutrition, and
Forestry. No officer or agency of the United States
shall have any authority to require the Commission to
submit its 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. In instances in
which the Commission voluntarily seeks to obtain the
comments or review of any officer or agency of the
United States, the Commission shall include a
description of such actions in its legislative
recommendations, testimony, or comments on legislation
which it transmits to the Congress.
(C) Whenever the Commission issues for official
publication any opinion, release, rule, order,
interpretation, or other determination on a matter, the
Commission shall provide that any dissenting,
concurring, or separate opinion by any Commissioner on
the matter be published in full along with the
Commission opinion, release, rule, order,
interpretation, or determination.
(11) The Commission shall have an official seal, which shall
be judicially noticed.
(12) The Commission is authorized to promulgate such rules
and regulations as it deems necessary to govern the operating
procedures and conduct of the business of the Commission.
(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.
(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.).
(b) For the purposes of this Act (but not in any wise
limiting the foregoing definition of interstate commerce) a
transaction in respect to any article shall be considered to be
in interstate commerce if such article is part of that current
of commerce usual in the commodity trade whereby commodities
and commodity products and by-products thereof are sent from
one State with the expectation that they will end their
transit, after purchase, in another, including, in addition to
cases within the above general description, all cases where
purchase or sale is either for shipment to another State, or
for manufacture within the State and the shipment outside the
State of the products resulting from such manufacture. Articles
normally in such current of commerce shall not be considered
out of such commerce through resort being had to any means or
device intended to remove transactions in respect thereto from
the provisions of this Act. For the purpose of this paragraph
the word ``State'' includes Territory, the District of
Columbia, possession of the United States, and foreign nation.
(c) Agreements, Contracts, and Transactions in Foreign
Currency, Government Securities, and Certain Other
Commodities.--
(1) In general.--Except as provided in paragraph (2),
nothing in this Act (other than section, 5b, or
12(e)(2)(B)) governs or applies to an agreement,
contract, or transaction in--
(A) foreign currency;
(B) government securities;
(C) security warrants;
(D) security rights;
(E) resales of installment loan contracts;
(F) repurchase transactions in an excluded
commodity; or
(G) mortgages or mortgage purchase
commitments.
(2) Commission jurisdiction.--
(A) Agreements, contracts, and transactions
traded on an organized exchange.--This Act
applies to, and the Commission shall have
jurisdiction over, an agreement, contract, or
transaction described in paragraph (1) that
is--
(i) a contract of sale of a commodity
for future delivery (or an option on
such a contract), or an option on a
commodity (other than foreign currency
or a security or a group or index of
securities), that is executed or traded
on an organized exchange;
(ii) a swap; or
(iii) an option on foreign currency
executed or traded on an organized
exchange that is not a national
securities exchange registered pursuant
to section 6(a) of the Securities
Exchange Act of 1934.
(B) Agreements, contracts, and transactions
in retail foreign currency.--
(i) This Act applies to, and the
Commission shall have jurisdiction
over, an agreement, contract, or
transaction in foreign currency that--
(I) is a contract of sale of
a commodity for future delivery
(or an option on such a
contract) or 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))); and
(II) is offered to, or
entered into with, a person
that is not an eligible
contract participant, unless
the counterparty, or the person
offering to be the
counterparty, of the person
is--
(aa) a United States
financial institution;
(bb)(AA) a broker or
dealer registered under
section 15(b) (except
paragraph (11) thereof)
or 15C of the
Securities Exchange Act
of 1934 (15 U.S.C.
78o(b), 78o-5); or
(BB) an associated
person of a broker or
dealer registered under
section 15(b) (except
paragraph (11) thereof)
or 15C of the
Securities Exchange Act
of 1934 (15 U.S.C.
78o(b), 78o-5)
concerning the
financial or securities
activities of which the
broker or dealer makes
and keeps records under
section 15C(b) or 17(h)
of the Securities
Exchange Act of 1934
(15 U.S.C. 78o-5(b),
78q(h));
(cc)(AA) a futures
commission merchant
that is primarily or
substantially engaged
in the business
activities described in
section 1a of this Act,
is registered under
this Act, is not a
person described in
item (bb) of this
subclause, and
maintains adjusted net
capital equal to or in
excess of the dollar
amount that applies for
purposes of clause (ii)
of this subparagraph;
or
(BB) an affiliated
person of a futures
commission merchant
that is primarily or
substantially engaged
in the business
activities described in
section 1a of this Act,
is registered under
this Act, and is not a
person described in
item (bb) of this
subclause, if the
affiliated person
maintains adjusted net
capital equal to or in
excess of the dollar
amount that applies for
purposes of clause (ii)
of this subparagraph
and is not a person
described in such item
(bb), and the futures
commission merchant
makes and keeps records
under section
4f(c)(2)(B) of this Act
concerning the futures
and other financial
activities of the
affiliated person;
(dd) a financial
holding company (as
defined in section 2 of
the Bank Holding
Company Act of 1956);
or
(ff) a retail foreign
exchange dealer that
maintains adjusted net
capital equal to or in
excess of the dollar
amount that applies for
purposes of clause (ii)
of this subparagraph
and is registered in
such capacity with the
Commission, subject to
such terms and
conditions as the
Commission shall
prescribe, and is a
member of a futures
association registered
under section 17.
(ii) The dollar amount that applies
for purposes of this clause is--
(I) $10,000,000, beginning
120 days after the date of the
enactment of this clause;
(II) $15,000,000, beginning
240 days after such date of
enactment; and
(III) $20,000,000, beginning
360 days after such date of
enactment.
(iii) Notwithstanding items (cc) and
(gg) of clause (i)(II) of this
subparagraph, agreements, contracts, or
transactions described in clause (i) of
this subparagraph, and accounts or
pooled investment vehicles described in
clause (vi), shall be subject to
subsection (a)(1)(B) of this section
and sections 4(b), 4b, 4c(b), 4o, 6(c)
and 6(d) (except to the extent that
sections 6(c) and 6(d) prohibit
manipulation of the market price of any
commodity in interstate commerce, or
for future delivery on or subject to
the rules of any market), 6c, 6d, 8(a),
13(a), and 13(b) if the agreements,
contracts, or transactions are offered,
or entered into, by a person that is
registered as a futures commission
merchant or retail foreign exchange
dealer, or an affiliated person of a
futures commission merchant registered
under this Act that is not also a
person described in any of item (aa),
(bb), (ee), or (ff) of clause (i)(II)
of this subparagraph.
(iv)(I) Notwithstanding items (cc)
and (gg) of clause (i)(II), a person,
unless registered in such capacity as
the Commission by rule, regulation, or
order shall determine and a member of a
futures association registered under
section 17, shall not--
(aa) solicit or accept orders
from any person that is not an
eligible contract participant
in connection with agreements,
contracts, or transactions
described in clause (i) entered
into with or to be entered into
with a person who is not
described in item (aa), (bb),
(ee), or (ff) of clause
(i)(II);
(bb) exercise discretionary
trading authority or obtain
written authorization to
exercise discretionary trading
authority over any account for
or on behalf of any person that
is not an eligible contract
participant in connection with
agreements, contracts, or
transactions described in
clause (i) entered into with or
to be entered into with a
person who is not described in
item (aa), (bb), (ee), or (ff)
of clause (i)(II); or
(cc) operate or solicit
funds, securities, or property
for any pooled investment
vehicle that is not an eligible
contract participant in
connection with agreements,
contracts, or transactions
described in clause (i) entered
into with or to be entered into
with a person who is not
described in item (aa), (bb),
(ee), or (ff) of clause
(i)(II).
(II) Subclause (I) of this clause
shall not apply to--
(aa) any person described in
any of item (aa), (bb), (ee),
or (ff) of clause (i)(II);
(bb) any such person's
associated persons; or
(cc) any person who would be
exempt from registration if
engaging in the same activities
in connection with transactions
conducted on or subject to the
rules of a contract market or a
derivatives transaction
execution facility.
(III) Notwithstanding items (cc) and
(gg) of clause (i)(II), the Commission
may make, promulgate, and enforce such
rules and regulations as, in the
judgment of the Commission, are
reasonably necessary to effectuate any
of the provisions of, or to accomplish
any of the purposes of, this Act in
connection with the activities of
persons subject to subclause (I).
(IV) Subclause (III) of this clause
shall not apply to--
(aa) any person described in
any of item (aa) through (ff)
of clause (i)(II);
(bb) any such person's
associated persons; or
(cc) any person who would be
exempt from registration if
engaging in the same activities
in connection with transactions
conducted on or subject to the
rules of a contract market or a
derivatives transaction
execution facility.
(v) Notwithstanding items (cc) and
(gg) of clause (i)(II), the Commission
may make, promulgate, and enforce such
rules and regulations as, in the
judgment of the Commission, are
reasonably necessary to effectuate any
of the provisions of, or to accomplish
any of the purposes of, this Act in
connection with agreements, contracts,
or transactions described in clause (i)
which are offered, or entered into, by
a person described in item (cc) or (gg)
of clause (i)(II).
(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).
(C)(i)(I) This subparagraph shall apply to
any agreement, contract, or transaction in
foreign currency that is--
(aa) offered to, or entered
into with, a person that is not
an eligible contract
participant (except that this
subparagraph shall not apply if
the counterparty, or the person
offering to be the
counterparty, of the person
that is not an eligible
contract participant is a
person described in any of item
(aa), (bb), (ee), or (ff) of
subparagraph (B)(i)(II)); and
(bb) offered, or 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) Subclause (I) of this clause shall not
apply to--
(aa) a security that is not a
security futures product; or
(bb) a contract of sale that--
(AA) results in actual
delivery within 2 days; or
(BB) creates an enforceable
obligation to deliver between a
seller and buyer that have the
ability to deliver and accept
delivery, respectively, in
connection with their line of
business.
(ii)(I) Agreements, contracts, or
transactions described in clause (i) of this
subparagraph, and accounts or pooled investment
vehicles described in clause (vii), shall be
subject to subsection (a)(1)(B) of this section
and sections 4(b), 4b, 4c(b), 4o, 6(c) and 6(d)
(except to the extent that sections 6(c) and
6(d) prohibit manipulation of the market price
of any commodity in interstate commerce, or for
future delivery on or subject to the rules of
any market), 6c, 6d, 8(a), 13(a), and 13(b).
(II) Subclause (I) of this clause shall not
apply to--
(aa) any person described in any of
item (aa), (bb), (ee), or (ff) of
subparagraph (B)(i)(II); or
(bb) any such person's associated
persons.
(III) The Commission may make, promulgate,
and enforce such rules and regulations as, in
the judgment of the Commission, are reasonably
necessary to effectuate any of the provisions
of or to accomplish any of the purposes of this
Act in connection with agreements, contracts,
or transactions described in clause (i) of this
subparagraph if the agreements, contracts, or
transactions are offered, or entered into, by a
person that is not described in item (aa)
through (ff) of subparagraph (B)(i)(II).
(iii)(I) A person, unless registered in such
capacity as the Commission by rule, regulation,
or order shall determine and a member of a
futures association registered under section
17, shall not--
(aa) solicit or accept orders from
any person that is not an eligible
contract participant in connection with
agreements, contracts, or transactions
described in clause (i) of this
subparagraph entered into with or to be
entered into with a person who is not
described in item (aa), (bb), (ee), or
(ff) of subparagraph (B)(i)(II);
(bb) exercise discretionary trading
authority or obtain written
authorization to exercise written
trading authority over any account for
or on behalf of any person that is not
an eligible contract participant in
connection with agreements, contracts,
or transactions described in clause (i)
of this subparagraph entered into with
or to be entered into with a person who
is not described in item (aa), (bb),
(ee), or (ff) of subparagraph
(B)(i)(II); or
(cc) operate or solicit funds,
securities, or property for any pooled
investment vehicle that is not an
eligible contract participant in
connection with agreements, contracts,
or transactions described in clause (i)
of this subparagraph entered into with
or to be entered into with a person who
is not described in item (aa), (bb),
(ee), or (ff) of subparagraph
(B)(i)(II).
(II) Subclause (I) of this clause shall not
apply to--
(aa) any person described in item
(aa), (bb), (ee), or (ff) of
subparagraph (B)(i)(II);
(bb) any such person's associated
persons; or
(cc) any person who would be exempt
from registration if engaging in the
same activities in connection with
transactions conducted on or subject to
the rules of a contract market or a
derivatives transaction execution
facility.
(III) The Commission may make, promulgate,
and enforce such rules and regulations as, in
the judgment of the Commission, are reasonably
necessary to effectuate any of the provisions
of, or to accomplish any of the purposes of,
this Act in connection with the activities of
persons subject to subclause (I).
(IV) Subclause (III) of this clause shall not
apply to--
(aa) any person described in item
(aa) through (ff) of subparagraph
(B)(i)(II);
(bb) any such person's associated
persons; or
(cc) any person who would be exempt
from registration if engaging in the
same activities in connection with
transactions conducted on or subject to
the rules of a contract market or a
derivatives transaction execution
facility.
(iv) Sections 4(b) and 4b shall apply to any
agreement, contract, or transaction described
in clause (i) of this subparagraph as if the
agreement, contract, or transaction were a
contract of sale of a commodity for future
delivery.
(v) This subparagraph shall not be construed
to limit any jurisdiction that the Commission
may otherwise have under any other provision of
this Act over an agreement, contract, or
transaction that is a contract of sale of a
commodity for future delivery.
(vi) This subparagraph shall not be construed
to limit any jurisdiction that the Commission
or the Securities and Exchange Commission may
otherwise have under any other provision of
this Act with respect to security futures
products and persons effecting transactions in
security futures products.
(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).
(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.
(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.
(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.
(f) Exclusion for Qualifying Hybrid Instruments.--
(1) In general.--Nothing in this Act (other than
section 12(e)(2)(B)) governs or is applicable to a
hybrid instrument that is predominantly a security.
(2) Predominance.--A hybrid instrument shall be
considered to be predominantly a security if--
(A) the issuer of the hybrid instrument
receives payment in full of the purchase price
of the hybrid instrument, substantially
contemporaneously with delivery of the hybrid
instrument;
(B) the purchaser or holder of the hybrid
instrument is not required to make any payment
to the issuer in addition to the purchase price
paid under subparagraph (A), whether as margin,
settlement payment, or otherwise, during the
life of the hybrid instrument or at maturity;
(C) the issuer of the hybrid instrument is
not subject by the terms of the instrument to
mark-to-market margining requirements; and
(D) the hybrid instrument is not marketed as
a contract of sale of a commodity for future
delivery (or option on such a contract) subject
to this Act.
(3) Mark-to-market margining requirements.--For the
purposes of paragraph (2)(C), mark-to-market margining
requirements do not include the obligation of an issuer
of a secured debt instrument to increase the amount of
collateral held in pledge for the benefit of the
purchaser of the secured debt instrument to secure the
repayment obligations of the issuer under the secured
debt instrument.
(g) Application of Commodity Futures Laws.--
(1) No provision of this Act shall be construed as
implying or creating any presumption that--
(A) any agreement, contract, or transaction
that is excluded from this Act under section
2(c), 2(d), 2(e), 2(f), or 2(g) of this Act or
title IV of the Commodity Futures Modernization
Act of 2000, or exempted under section 2(h) or
4(c) of this Act; or
(B) any agreement, contract, or transaction,
not otherwise subject to this Act, that is not
so excluded or exempted,
is or would otherwise be subject to this Act.
(2) No provision of, or amendment made by, the
Commodity Futures Modernization Act of 2000 shall be
construed as conferring jurisdiction on the Commission
with respect to any such agreement, contract, or
transaction, except as expressly provided in section 5b
of this Act.
(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--
(I) enters into the swap to
hedge or mitigate the
commercial risk of the person
or other affiliate of the
person that is not a financial
entity, and the commercial risk
that the affiliate is hedging
or mitigating has been
transferred to the affiliate;
(II) is directly and wholly-
owned by another affiliate
qualified for the exception
under this subparagraph or an
entity that is not a financial
entity;
(III) is not indirectly
majority-owned by a financial
entity;
(IV) is not ultimately owned
by a parent company that is a
financial entity; and
(V) does not provide any
services, financial or
otherwise, to any affiliate
that is a nonbank financial
company supervised by the Board
of Governors (as defined under
section 102 of the Financial
Stability Act of 2010).
(ii) Limitation on qualifying
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) a commodity pool;
(VI) a bank holding company;
(VII) a private fund, as
defined in section 202(a) of
the Investment Advisers Act of
1940 (15 U.S.C. 80-b-2(a));
(VIII) an employee benefit
plan or government 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);
(IX) an insured depository
institution;
(X) a farm credit system
institution;
(XI) a credit union;
(XII) a nonbank financial
company supervised by the Board
of Governors (as defined under
section 102 of the Financial
Stability Act of 2010); or
(XIII) an entity engaged in
the business of insurance and
subject to capital requirements
established by an insurance
governmental authority of a
State, a territory of the
United States, the District of
Columbia, a country other than
the United States, or a
political subdivision of a
country other than the United
States that is engaged in the
supervision of insurance
companies under insurance law.
(iii) Limitation on affiliates'
affiliates.--Unless the Commission
determines, by order, rule, or
regulation, that it is in the public
interest, the exception in clause (i)
shall not apply with respect to an
affiliate if the affiliate is itself
affiliated with--
(I) a major security-based
swap participant;
(II) a security-based swap
dealer;
(III) a major swap
participant; or
(IV) a swap dealer.
(iv) Conditions on transactions.--
With respect to an affiliate that
qualifies for the exception in clause
(i)--
(I) the affiliate may not
enter into any swap other than
for the purpose of hedging or
mitigating commercial risk; and
(II) neither the affiliate
nor any person affiliated with
the affiliate that is not a
financial entity may enter into
a swap with or on behalf of any
affiliate that is a financial
entity or otherwise assume,
net, combine, or consolidate
the risk of swaps entered into
by any such financial entity,
except one that is an affiliate
that qualifies for the
exception under clause (i).
(v) 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.
(vi) Risk management program.--Any
swap entered into by an affiliate that
qualifies for the exception in clause
(i) shall be subject to a centralized
risk management program of the
affiliate, which is reasonably designed
both to monitor and manage the risks
associated with the swap and to
identify each of the affiliates on
whose behalf a swap was entered into.
(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).
(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.
(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.
(k) International Processes.--
(1) Notice of process; consultation.--At least 30
calendar days before the Commission participates in a
process of setting financial standards as a part of any
foreign or multinational entity, the Commission shall--
(A) issue a notice of the process, including
the subject matter, scope, and goals of the
process, to--
(i) the Committees on Financial
Services and Agriculture of the House
of Representatives; and
(ii) the Committees on Banking,
Housing, and Urban Affairs and
Agriculture, Nutrition, and Forestry of
the Senate;
(B) make such notice available to the public,
including on the website of the Commission; and
(C) solicit public comment, and consult with
the committees described under subparagraph
(A), with respect to the subject matter, scope,
and goals of the process.
(2) Public reports on process.--After the end of any
process described under paragraph (1), the Commission
shall issue a public report on the topics that were
discussed during the process and any new or revised
rulemakings or policy changes that the Commission
believes should be implemented as a result of the
process.
(3) Notice of agreements; consultation.--At least 90
calendar days before the Commission participates in a
process of setting financial standards as a part of any
foreign or multinational entity, the Commission shall--
(A) issue a notice of agreement to--
(i) the Committees on Financial
Services and Agriculture of the House
of Representatives; and
(ii) the Committees on Banking,
Housing, and Urban Affairs and
Agriculture, Nutrition, and Forestry of
the Senate;
(B) make such notice available to the public,
including on the website of the Commission; and
(C) consult with the committees described
under subparagraph (A) with respect to the
nature of the agreement and any anticipated
effects such agreement will have on the
economy.
(4) Definition.--For purposes of this subsection, the
term ``process'' shall include any official proceeding
or meeting on financial regulation of a recognized
international organization with authority to set
financial standards on a global or regional level,
including the Financial Stability Board, the Basel
Committee on Banking Supervision (or a similar
organization), and the International Association of
Insurance Supervisors (or a similar organization).
* * * * * * *
SEC. 15. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST LAWS.
(a) Costs and Benefits.--
[(1) In general.--Before promulgating a regulation
under this Act or issuing an order (except as provided
in paragraph (3)), the Commission shall consider the
costs and benefits of the action of the Commission.
[(2) Considerations.--The costs and benefits of the
proposed Commission action shall be evaluated in light
of--]
(1) Considerations._Before promulgating a regulation
under this chapter or issuing an order (except as
provided in paragraph (2)), the Commission shall take
into consideration--
(A) considerations of protection of market
participants and the public;
(B) considerations of the efficiency,
competitiveness, and financial integrity of
[futures] the relevant markets;
(C) considerations of price discovery; and
(D) considerations of sound risk management
practices[; and].
[(E) other public interest considerations.]
[(3)] (2) Applicability.--This subsection does not
apply to the following actions of the Commission:
(A) An order that initiates, is part of, or
is the result of an adjudicatory or
investigative process of the Commission.
(B) An emergency action.
(C) A finding of fact regarding compliance
with a requirement of the Commission.
(b) Antitrust Laws.--The Commission shall take into
consideration the public interest to be protected by the
antitrust laws and endeavor to take the least anticompetitive
means of achieving the objectives of this Act, as well as the
policies and purposes of this Act, in issuing any order or
adopting any Commission rule or regulation (including any
exemption under section 4(c) or 4c(b)), or in requiring or
approving any bylaw, rule, or regulation of a contract market
or registered futures association established pursuant to
section 17 of this Act.
* * * * * * *
----------
BALANCED BUDGET AND EMERGENCY DEFICIT CONTROL ACT OF 1985
PART C--EMERGENCY POWERS TO ELIMINATE DEFICITS IN EXCESS OF MAXIMUM
DEFICIT AMOUNT
* * * * * * *
SEC. 255. EXEMPT PROGRAMS AND ACTIVITIES.
(a) Social Security Benefits and Tier I Railroad Retirement
Benefits.--Benefits payable under the old-age, survivors, and
disability insurance program established under title II of the
Social Security Act (42 U.S.C. 401 et seq.), and benefits
payable under sections 3 and 4 of the Railroad Retirement Act
of 1937 (45 U.S.C. 231 et seq.), shall be exempt from reduction
under any order issued under this part.
(b) Veterans Programs.--The following programs shall be
exempt from reduction under any order issued under this part:
All programs administered by the Department of
Veterans Affairs.
Special Benefits for Certain World War II Veterans
(28-0401-0-1-701).
(c) Net Interest.--No reduction of payments for net interest
(all of major functional category 900) shall be made under any
order issued under this part.
(d) Refundable Income Tax Credits.--Payments to individuals
made pursuant to provisions of the Internal Revenue Code of
1986 establishing refundable tax credits shall be exempt from
reduction under any order issued under this part.
(e) Non-defense Unobligated Balances.--Unobligated balances
of budget authority carried over from prior fiscal years,
except balances in the defense category, shall be exempt from
reduction under any order issued under this part.
(f) Optional Exemption of Military Personnel.--
(1) In general.--The President may, with respect to
any military personnel account, exempt that account
from sequestration or provide for a lower uniform
percentage reduction than would otherwise apply.
(2) Limitation.--The President may not use the
authority provided by paragraph (1) unless the
President notifies the Congress of the manner in which
such authority will be exercised on or before the date
specified in section 254(a) for the budget year.
(g) Other Programs and Activities.--
(1)(A) The following budget accounts and activities
shall be exempt from reduction under any order issued
under this part:
Activities resulting from private donations,
bequests, or voluntary contributions to the
Government.
Activities financed by voluntary payments to
the Government for goods or services to be
provided for such payments.
Administration of Territories, Northern
Mariana Islands Covenant grants (14-0412-0-1-
808).
Advances to the Unemployment Trust Fund and
Other Funds (16-0327-0-1-600).
Black Lung Disability Trust Fund Refinancing
(16-0329-0-1-601).
Bonneville Power Administration Fund and
borrowing authority established pursuant to
section 13 of Public Law 93-454 (1974), as
amended (89-4045-0-3-271).
Claims, Judgments, and Relief Acts (20-1895-
0-1-808).
Compact of Free Association (14-0415-0-1-
808).
Compensation of the President (11-0209-01-1-
802).
Comptroller of the Currency, Assessment Funds
(20-8413-0-8-373).
Continuing Fund, Southeastern Power
Administration (89-5653-0-2-271).
Continuing Fund, Southwestern Power
Administration (89-5649-0-2-271).
Dual Benefits Payments Account (60-0111-0-1-
601).
Emergency Fund, Western Area Power
Administration (89-5069-0-2-271).
Exchange Stabilization Fund (20-4444-0-3-
155).
Farm Credit Administration Operating Expenses
Fund (78-4131-0-3-351).
Farm Credit System Insurance Corporation,
Farm Credit Insurance Fund (78-4171-0-3-351).
Federal Deposit Insurance Corporation,
Deposit Insurance Fund (51-4596-0-4-373).
Federal Deposit Insurance Corporation, FSLIC
Resolution Fund (51-4065-0-3-373).
Federal Deposit Insurance Corporation,
Noninterest Bearing Transaction Account
Guarantee (51-4458-0-3-373).
Federal Deposit Insurance Corporation, Senior
Unsecured Debt Guarantee (51-4457-0-3-373).
Federal Home Loan Mortgage Corporation
(Freddie Mac).
Federal Housing Finance Agency,
Administrative Expenses (95-5532-0-2-371).
Federal National Mortgage Corporation (Fannie
Mae).
Federal Payment to the District of Columbia
Judicial Retirement and Survivors Annuity Fund
(20-1713-0-1-752).
Federal Payment to the District of Columbia
Pension Fund (20-1714-0-1-601).
Federal Payments to the Railroad Retirement
Accounts (60-0113-0-1-601).
Federal Reserve Bank Reimbursement Fund (20-
1884-0-1-803).
Financial Agent Services (20-1802-0-1-803).
Foreign Military Sales Trust Fund (11-8242-0-
7-155).
Hazardous Waste Management, Conservation
Reserve Program (12-4336-0-3-999).
Host Nation Support Fund for Relocation (97-
8337-0-7-051).
Internal Revenue Collections for Puerto Rico
(20-5737-0-2-806).
Intragovernmental funds, including those from
which the outlays are derived primarily from
resources paid in from other government
accounts, except to the extent such funds are
augmented by direct appropriations for the
fiscal year during which an order is in effect.
Medical Facilities Guarantee and Loan Fund
(75-9931-0-3-551).
National Credit Union Administration, Central
Liquidity Facility (25-4470-0-3-373).
National Credit Union Administration,
Corporate Credit Union Share Guarantee Program
(25-4476-0-3-376).
National Credit Union Administration, Credit
Union Homeowners Affordability Relief Program
(25-4473-0-3-371).
National Credit Union Administration, Credit
Union Share Insurance Fund (25-4468-0-3-373).
National Credit Union Administration, Credit
Union System Investment Program (25-4474-0-3-
376).
National Credit Union Administration,
Operating fund (25-4056-0-3-373).
National Credit Union Administration, Share
Insurance Fund Corporate Debt Guarantee Program
(25-4469-0-3-376).
National Credit Union Administration, U.S.
Central Federal Credit Union Capital Program
(25-4475-0-3-376).
[Office of Thrift Supervision (20-4108-0-3-
373).]
Panama Canal Commission Compensation Fund
(16-5155-0-2-602).
Payment of Vietnam and USS Pueblo prisoner-
of-war claims within the Salaries and Expenses,
Foreign Claims Settlement account (15-0100-0-1-
153).
Payment to Civil Service Retirement and
Disability Fund (24-0200-0-1-805).
Payment to Department of Defense Medicare-
Eligible Retiree Health Care Fund (97-0850-0-1-
054).
Payment to Judiciary Trust Funds (10-0941-0-
1-752).
Payment to Military Retirement Fund (97-0040-
0-1-054).
Payment to the Foreign Service Retirement and
Disability Fund (19-0540-0-1-153).
Payments to Copyright Owners (03-5175-0-2-
376).
Payments to Health Care Trust Funds (75-0580-
0-1-571).
Payment to Radiation Exposure Compensation
Trust Fund (15-0333-0-1-054).
Payments to Social Security Trust Funds (28-
0404-0-1-651).
Payments to the United States Territories,
Fiscal Assistance (14-0418-0-1-806).
Payments to trust funds from excise taxes or
other receipts properly creditable to such
trust funds.
Payments to widows and heirs of deceased
Members of Congress (00-0215-0-1-801).
Postal Service Fund (18-4020-0-3-372).
Radiation Exposure Compensation Trust Fund
(15-8116-0-1-054).
Reimbursement to Federal Reserve Banks (20-
0562-0-1-803).
Salaries of Article III judges.
Soldiers and Airmen's Home, payment of claims
(84-8930-0-7-705).
Tennessee Valley Authority Fund, except
nonpower programs and activities (64-4110-0-3-
999).
Tribal and Indian trust accounts within the
Department of the Interior which fund prior
legal obligations of the Government or which
are established pursuant to Acts of Congress
regarding Federal management of tribal real
property or other fiduciary responsibilities,
including but not limited to Tribal Special
Fund (14-5265-0-2-452), Tribal Trust Fund (14-
8030-0-7-452), White Earth Settlement (14-2204-
0-1-452), and Indian Water Rights and Habitat
Acquisition (14-5505-0-2-303).
United Mine Workers of America 1992 Benefit
Plan (95-8260-0-7-551).
United Mine Workers of America 1993 Benefit
Plan (95-8535-0-7-551).
United Mine Workers of America Combined
Benefit Fund (95-8295-0-7-551).
United States Enrichment Corporation Fund
(95-4054-0-3-271).
Universal Service Fund (27-5183-0-2-376).
Vaccine Injury Compensation (75-0320-0-1-
551).
Vaccine Injury Compensation Program Trust
Fund (20-8175-0-7-551).
(B) The following Federal retirement and disability
accounts and activities shall be exempt from reduction
under any order issued under this part:
Black Lung Disability Trust Fund (20-8144-0-
7-601).
Central Intelligence Agency Retirement and
Disability System Fund (56-3400-0-1-054).
Civil Service Retirement and Disability Fund
(24-8135-0-7-602).
Comptrollers general retirement system (05-
0107-0-1-801).
Contributions to U.S. Park Police annuity
benefits, Other Permanent Appropriations (14-
9924-0-2-303).
Court of Appeals for Veterans Claims
Retirement Fund (95-8290-0-7-705).
Department of Defense Medicare-Eligible
Retiree Health Care Fund (97-5472-0-2-551).
District of Columbia Federal Pension Fund
(20-5511-0-2-601).
District of Columbia Judicial Retirement and
Survivors Annuity Fund (20-8212-0-7-602).
Energy Employees Occupational Illness
Compensation Fund (16-1523-0-1-053).
Foreign National Employees Separation Pay
(97-8165-0-7-051).
Foreign Service National Defined
Contributions Retirement Fund (19-5497-0-2-
602).
Foreign Service National Separation Liability
Trust Fund (19-8340-0-7-602).
Foreign Service Retirement and Disability
Fund (19-8186-0-7-602).
Government Payment for Annuitants, Employees
Health Benefits (24-0206-0-1-551).
Government Payment for Annuitants, Employee
Life Insurance (24-0500-0-1-602).
Judicial Officers' Retirement Fund (10-8122-
0-7-602).
Judicial Survivors' Annuities Fund (10-8110-
0-7-602).
Military Retirement Fund (97-8097-0-7-602).
National Railroad Retirement Investment Trust
(60-8118-0-7-601).
National Oceanic and Atmospheric
Administration retirement (13-1450-0-1-306).
Pensions for former Presidents (47-0105-0-1-
802).
Postal Service Retiree Health Benefits Fund
(24-5391-0-2-551).
Public Safety Officer Benefits (15-0403-0-1-
754).
Rail Industry Pension Fund (60-8011-0-7-601).
Retired Pay, Coast Guard (70-0602-0-1-403).
Retirement Pay and Medical Benefits for
Commissioned Officers, Public Health Service
(75-0379-0-1-551).
September 11th Victim Compensation Fund (15-
0340-0-1-754).
Special Benefits for Disabled Coal Miners
(16-0169-0-1-601).
Special Benefits, Federal Employees'
Compensation Act (16-1521-0-1-600).
Special Workers Compensation Expenses (16-
9971-0-7-601).
Tax Court Judges Survivors Annuity Fund (23-
8115-0-7-602).
United States Court of Federal Claims Judges'
Retirement Fund (10-8124-0-7-602).
United States Secret Service, DC Annuity (70-
0400-0-1-751).
Victims Compensation Fund established under
section 410 of the Air Transportation Safety
and System Stabilization Act (49 U.S.C. 40101
note).
United States Victims of State Sponsored
Terrorism Fund.
Voluntary Separation Incentive Fund (97-8335-
0-7-051).
World Trade Center Health Program Fund (75-
0946-0-1-551).
(2) Prior legal obligations of the Government in the
following budget accounts and activities shall be
exempt from any order issued under this part:
Biomass Energy Development (20-0114-0-1-271).
Check Forgery Insurance Fund (20-4109-0-3-
803).
Credit liquidating accounts.
Credit reestimates.
Employees Life Insurance Fund (24-8424-0-8-
602).
Federal Aviation Insurance Revolving Fund
(69-4120-0-3-402).
Federal Crop Insurance Corporation Fund (12-
4085-0-3-351).
Federal Emergency Management Agency, National
Flood Insurance Fund (58-4236-0-3-453).
Geothermal resources development fund (89-
0206-0-1-271).
Low-Rent Public Housing--Loans and Other
Expenses (86-4098-0-3-604).
Maritime Administration, War Risk Insurance
Revolving Fund (69-4302-0-3-403).
Natural Resource Damage Assessment Fund (14-
1618-0-1-302).
Overseas Private Investment Corporation,
Noncredit Account (71-4184-0-3-151).
Pension Benefit Guaranty Corporation Fund
(16-4204-0-3-601).
San Joaquin Restoration Fund (14-5537-0-2-
301).
Servicemembers' Group Life Insurance Fund
(36-4009-0-3-701).
Terrorism Insurance Program (20-0123-0-1-
376).
(h) Low-income Programs.--The following programs shall be
exempt from reduction under any order issued under this part:
Academic Competitiveness/Smart Grant Program (91-
0205-0-1-502).
Child Care Entitlement to States (75-1550-0-1-609).
Child Enrollment Contingency Fund (75-5551-0-2-551).
Child Nutrition Programs (with the exception of
special milk programs) (12-3539-0-1-605).
Children's Health Insurance Fund (75-0515-0-1-551).
Commodity Supplemental Food Program (12-3507-0-1-
605).
Contingency Fund (75-1522-0-1-609).
Family Support Programs (75-1501-0-1-609).
Federal Pell Grants under section 401 of title IV of
the Higher Education Act.
Grants to States for Medicaid (75-0512-0-1-551).
Payments for Foster Care and Permanency (75-1545-0-1-
609).
Supplemental Nutrition Assistance Program (12-3505-0-
1-605).
Supplemental Security Income Program (28-0406-0-1-
609).
Temporary Assistance for Needy Families (75-1552-0-1-
609).
(i) Economic Recovery Programs.--The following programs shall
be exempt from reduction under any order issued under this
part:
GSE Preferred Stock Purchase Agreements (20-0125-0-1-
371).
Office of Financial Stability (20-0128-0-1-376).
Special Inspector General for the Troubled Asset
Relief Program (20-0133-0-1-376).
(j) Split Treatment Programs.--Each of the following programs
shall be exempt from any order under this part to the extent
that the budgetary resources of such programs are subject to
obligation limitations in appropriations bills:
Federal-Aid Highways (69-8083-0-7-401).
Highway Traffic Safety Grants (69-8020-0-7-401).
Operations and Research NHTSA and National Driver Register
(69-8016-0-7-401).
Motor Carrier Safety Operations and Programs (69-8159-0-7-
401).
Motor Carrier Safety Grants (69-8158-0-7-401).
Formula and Bus Grants (69-8350-0-7-401).
Grants-In-Aid for Airports (69-8106-0-7-402).
(k) Identification of Programs.--For purposes of subsections
(b), (g), and (h), each account is identified by the designated
budget account identification code number set forth in the
Budget of the United States Government 2010-Appendix, and an
activity within an account is designated by the name of the
activity and the identification code number of the account.
* * * * * * *
SEC. 257. THE BASELINE.
(a) In General.--For any budget year, the baseline refers to
a projection of current-year levels of new budget authority,
outlays, revenues, and the surplus or deficit into the budget
year and the outyears based on laws enacted through the
applicable date.
(b) Direct Spending and Receipts.--For the budget year and
each outyear, the baseline shall be calculated using the
following assumptions:
(1) In general.--Laws providing or creating direct
spending and receipts are assumed to operate in the
manner specified in those laws for each such year and
funding for entitlement authority is assumed to be
adequate to make all payments required by those laws.
(2) Exceptions.--(A)(i) No program established by a
law enacted on or before the date of enactment of the
Balanced Budget Act of 1997 with estimated current year
outlays greater than $50,000,000 shall be assumed to
expire in the budget year or the outyears. The scoring
of new programs with estimated outlays greater than
$50,000,000 a year shall be based on scoring by the
Committees on Budget or OMB, as applicable. OMB, CBO,
and the Budget Committees shall consult on the scoring
of such programs where there are differences between
CBO and OMB.
(ii) On the expiration of the suspension of a
provision of law that is suspended under section 171 of
Public Law 104-127 and that authorizes a program with
estimated fiscal year outlays that are greater than
$50,000,000, for purposes of clause (i), the program
shall be assumed to continue to operate in the same
manner as the program operated immediately before the
expiration of the suspension.
(B) The increase for veterans' compensation for a
fiscal year is assumed to be the same as that required
by law for veterans' pensions unless otherwise provided
by law enacted in that session.
(C) Excise taxes dedicated to a trust fund, if
expiring, are assumed to be extended at current rates.
(D) If any law expires before the budget year or any
outyear, then any program with estimated current year
outlays greater than $50,000,000 that operates under
that law shall be assumed to continue to operate under
that law as in effect immediately before its
expiration.
(E) Budgetary effects of rules subject to section 332
of the financial choice act of 2017.--Any rules subject
to the congressional approval procedure set forth in
section 332 of the Financial CHOICE Act of 2017
affecting budget authority, outlays, or receipts shall
be assumed to be effective unless it is not approved in
accordance with such section.
(3) Hospital insurance trust fund.--Notwithstanding
any other provision of law, the receipts and
disbursements of the Hospital Insurance Trust Fund
shall be included in all calculations required by this
Act.
(c) Discretionary Appropriations.--For the budget year and
each outyear, the baseline shall be calculated using the
following assumptions regarding all amounts other than those
covered by subsection (b):
(1) Inflation of current-year appropriations.--
Budgetary resources other than unobligated balances
shall be at the level provided for the budget year in
full-year appropriation Acts. If for any account a
full-year appropriation has not yet been enacted,
budgetary resources other than unobligated balances
shall be at the level available in the current year,
adjusted sequentially and cumulatively for expiring
housing contracts as specified in paragraph (2), for
social insurance administrative expenses as specified
in paragraph (3), to offset pay absorption and for pay
annualization as specified in paragraph (4), for
inflation as specified in paragraph (5), and to account
for changes required by law in the level of agency
payments for personnel benefits other than pay.
(2) Expiring housing contracts.--New budget authority
to renew expiring multiyear subsidized housing
contracts shall be adjusted to reflect the difference
in the number of such contracts that are scheduled to
expire in that fiscal year and the number expiring in
the current year, with the per-contract renewal cost
equal to the average current-year cost of renewal
contracts.
(3) Social insurance administrative expenses.--
Budgetary resources for the administrative expenses of
the following trust funds shall be adjusted by the
percentage change in the beneficiary population from
the current year to that fiscal year: the Federal
Hospital Insurance Trust Fund, the Supplementary
Medical Insurance Trust Fund, the Unemployment Trust
Fund, and the railroad retirement account.
(4) Pay annualization; offset to pay absorption.--
Current-year new budget authority for Federal employees
shall be adjusted to reflect the full 12-month costs
(without absorption) of any pay adjustment that
occurred in that fiscal year.
(5) Inflators.--The inflator used in paragraph (1) to
adjust budgetary resources relating to personnel shall
be the percent by which the average of the Bureau of
Labor Statistics Employment Cost Index (wages and
salaries, private industry workers) for that fiscal
year differs from such index for the current year. The
inflator used in paragraph (1) to adjust all other
budgetary resources shall be the percent by which the
average of the estimated gross domestic product chain-
type price index for that fiscal year differs from the
average of such estimated index for the current year.
(6) Current-year appropriations.--If, for any
account, a continuing appropriation is in effect for
less than the entire current year, then the current-
year amount shall be assumed to equal the amount that
would be available if that continuing appropriation
covered the entire fiscal year. If law permits the
transfer of budget authority among budget accounts in
the current year, the current-year level for an account
shall reflect transfers accomplished by the submission
of, or assumed for the current year in, the President's
original budget for the budget year.
(d) Up-to-Date Concepts.--In deriving the baseline for any
budget year or outyear, current-year amounts shall be
calculated using the concepts and definitions that are required
for that budget year.
(e) Asset Sales.--Amounts realized from the sale of an asset
shall not be included in estimates under section 251, 252, or
253 if that sale would result in a financial cost to the
Federal Government as determined pursuant to scorekeeping
guidelines.
* * * * * * *
----------
FEDERAL HOUSING ENTERPRISES FINANCIAL SAFETY AND SOUNDNESS ACT OF 1992
* * * * * * *
TITLE XIII--GOVERNMENT SPONSORED ENTERPRISES
* * * * * * *
Subtitle A--Supervision and Regulation of Enterprises
PART 1--FINANCIAL SAFETY AND SOUNDNESS REGULATOR
* * * * * * *
SEC. 1312. DIRECTOR.
(a) Establishment of Position.--There is established the
position of the Director of the Agency, who shall be the head
of the Agency.
(b) Appointment; Term.--
(1) Appointment.--The Director shall be appointed by
the President, by and with the advice and consent of
the Senate, from among individuals who are citizens of
the United States, have a demonstrated understanding of
financial management or oversight, and have a
demonstrated understanding of capital markets,
including the mortgage securities markets and housing
finance.
(2) Term.--The Director shall be appointed for a term
of 5 years, unless removed before the end of such term
[for cause] by the President.
(3) Vacancy.--A vacancy in the position of Director
that occurs before the expiration of the term for which
a Director was appointed shall be filled in the manner
established under paragraph (1), and the Director
appointed to fill such vacancy shall be appointed only
for the remainder of such term.
(4) Service after end of term.--An individual may
serve as the Director after the expiration of the term
for which appointed until a successor has been
appointed.
(5) Transitional provision.--Notwithstanding
paragraphs (1) and (2), during the period beginning on
the effective date of the Federal Housing Finance
Regulatory Reform Act of 2008, and ending on the date
on which the Director is appointed and confirmed, the
person serving as the Director of the Office of Federal
Housing Enterprise Oversight of the Department of
Housing and Urban Development on that effective date
shall act for all purposes as, and with the full powers
of, the Director.
(c) Deputy Director of the Division of Enterprise
Regulation.--
(1) In general.--The Agency shall have a Deputy
Director of the Division of Enterprise Regulation, who
shall be designated by the Director from among
individuals who are citizens of the United States, have
a demonstrated understanding of financial management or
oversight, and have a demonstrated understanding of
mortgage securities markets and housing finance.
(2) Functions.--The Deputy Director of the Division
of Enterprise Regulation shall have such functions,
powers, and duties with respect to the oversight of the
enterprises as the Director shall prescribe.
(d) Deputy Director Of The Division Of Federal Home Loan Bank
Regulation.--
(1) In general.--The Agency shall have a Deputy
Director of the Division of Federal Home Loan Bank
Regulation, who shall be designated by the Director
from among individuals who are citizens of the United
States, have a demonstrated understanding of financial
management or oversight, and have a demonstrated
understanding of the Federal Home Loan Bank System and
housing finance.
(2) Functions.--The Deputy Director of the Division
of Federal Home Loan Bank Regulation shall have such
functions, powers, and duties with respect to the
oversight of the Federal Home Loan Banks as the
Director shall prescribe.
(e) Deputy Director for Housing Mission and Goals.--
(1) In general.--The Agency shall have a Deputy
Director for Housing Mission and Goals, who shall be
designated by the Director from among individuals who
are citizens of the United States, and have a
demonstrated understanding of the housing markets and
housing finance.
(2) Functions.--The Deputy Director for Housing
Mission and Goals shall have such functions, powers,
and duties with respect to the oversight of the housing
mission and goals of the enterprises, and with respect
to oversight of the housing finance and community and
economic development mission of the Federal Home Loan
Banks, as the Director shall prescribe.
(3) Considerations.--In exercising such functions,
powers, and duties, the Deputy Director for Housing
Mission and Goals shall consider the differences
between the enterprises and the Federal Home Loan
Banks, including those described in section 1313(d).
(f) Acting Director.--In the event of the death, resignation,
sickness, or absence of the Director, the President shall
designate either the Deputy Director of the Division of
Enterprise Regulation, the Deputy Director of the Division of
Federal Home Loan Bank Regulation, or the Deputy Director for
Housing Mission and Goals, to serve as acting Director until
the return of the Director, or the appointment of a successor
pursuant to subsection (b).
(g) Limitations.--The Director and each of the Deputy
Directors may not--
(1) have any direct or indirect financial interest in
any regulated entity or entity-affiliated party;
(2) hold any office, position, or employment in any
regulated entity or entity-affiliated party; or
(3) have served as an executive officer or director
of any regulated entity or entity-affiliated party at
any time during the 3-year period preceding the date of
appointment or designation of such individual as
Director or Deputy Director, as applicable.
* * * * * * *
----------
HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1992
* * * * * * *
TITLE XIII--GOVERNMENT SPONSORED ENTERPRISES
* * * * * * *
Subtitle A--Supervision and Regulation of Enterprises
PART 1--FINANCIAL SAFETY AND SOUNDNESS REGULATOR
* * * * * * *
SEC. 1316. FUNDING.
[(a) Annual Assessments.--The Director shall establish and
collect from the regulated entities annual assessments in an
amount not exceeding the amount sufficient to provide for
reasonable costs (including administrative costs) and expenses
of the Agency, including--
[(1) the expenses of any examinations under section
1317 of this Act and under section 20 of the Federal
Home Loan Bank Act;
[(2) the expenses of obtaining any reviews and credit
assessments under section 1319;
[(3) such amounts in excess of actual expenses for
any given year as deemed necessary by the Director to
maintain a working capital fund in accordance with
subsection (e); and
[(4) the windup of the affairs of the Office of
Federal Housing Enterprise Oversight and the Federal
Housing Finance Board under title III of the Federal
Housing Finance Regulatory Reform Act of 2008.]
(a) Appropriations Requirement.--
(1) Recovery of costs of annual appropriation.--The
Agency shall collect assessments and other fees that
are designed to recover the costs to the Government of
the annual appropriation to the Agency by Congress.
(2) Offsetting collections.--Assessments and other
fees described under paragraph (1) for any fiscal
year--
(A) shall be deposited and credited as
offsetting collections to the account providing
appropriations to the Agency; and
(B) except as provided in paragraph (3),
shall not be collected for any fiscal year
except to the extent provided in advance in
appropriation Acts.
(3) Lapse of appropriation.--If on the first day of a
fiscal year a regular appropriation to the Agency has
not been enacted, the Agency shall continue to collect
(as offsetting collections) the assessments and other
fees described under paragraph (1) at the rate in
effect during the preceding fiscal year, until 60 days
after the date such a regular appropriation is enacted.
(b) Allocation of Annual Assessment to Enterprises.--
(1) Amount of payment.--Each enterprise shall pay to
the Director a proportion of the annual assessment made
pursuant to subsection (a) that bears the same ratio to
the total annual assessment that the total assets of
each enterprise bears to the total assets of both
enterprises.
(2) Separate treatment of federal home loan bank and
enterprise assessments.--Assessments collected from the
enterprises shall not exceed the amounts sufficient to
provide for the costs and expenses described in
subsection (a) relating to the enterprises. Assessments
collected from the Federal Home Loan Banks shall not
exceed the amounts sufficient to provide for the costs
and expenses described in subsection (a) relating to
the Federal Home Loan Banks.
(3) Timing of payment.--The annual assessment shall
be payable semiannually for each fiscal year, on
October 1 and April 1.
(4) Definition.--For the purpose of this section, the
term ``total assets'' means, with respect to an
enterprise, the sum of--
(A) on-balance-sheet assets of the
enterprise, as determined in accordance with
generally accepted accounting principles;
(B) the unpaid principal balance of
outstanding mortgage-backed securities issued
or guaranteed by the enterprise that are not
included in subparagraph (A); and
(C) other off-balance-sheet obligations as
determined by the Director.
(c) Increased Costs of Regulation.--
(1) Increase for inadequate capitalization.--The
semiannual payments made pursuant to subsection (b) by
any regulated entity that is not classified (for
purposes of subtitle B) as adequately capitalized may
be increased, as necessary, in the discretion of the
Director to pay additional estimated costs of
regulation of the regulated entity.
(2) Adjustment for enforcement activities.--The
Director may adjust the amounts of any semiannual
payments for an assessment under subsection (a) that
are to be paid pursuant to subsection (b) by a
regulated entity, as necessary in the discretion of the
Director, to ensure that the costs of enforcement
activities under this Act for a regulated entity are
borne only by such regulated entity.
(3) Additional assessment for deficiencies.--If at
any time, as a result of increased costs of regulation
of a regulated entity that is not classified (for
purposes of subtitle B) as adequately capitalized or as
the result of supervisory or enforcement activities
under this Act for a regulated entity, the amount
available from any semiannual payment made by such
regulated entity pursuant to subsection (b) is
insufficient to cover the costs of the Agency with
respect to such entity, the Director may make and
collect from such regulated entity an immediate
assessment to cover the amount of such deficiency for
the semiannual period. If, at the end of any semiannual
period during which such an assessment is made, any
amount remains from such assessment, such remaining
amount shall be deducted from the assessment for such
regulated entity for the following semiannual period.
(d) Surplus.--Except with respect to amounts collected
pursuant to subsection (a)(3), if any amount from any annual
assessment collected from an enterprise remains unobligated at
the end of the year for which the assessment was collected,
such amount shall be credited to the assessment to be collected
from the enterprise for the following year.
(e) Working Capital Fund.--At the end of each year for which
an assessment under this section is made, the Director shall
remit to each regulated entity any amount of assessment
collected from such regulated entity that is attributable to
subsection (a)(3) and is in excess of the amount the Director
deems necessary to maintain a working capital fund.
[(f) Treatment of Assessments.--
[(1) Deposit.--Amounts received by the Director from
assessments under this section may be deposited by the
Director in the manner provided in section 5234 of the
Revised Statutes of the United States (12 U.S.C. 192)
for monies deposited by the Comptroller of the
Currency.
[(2) Not government funds.--The amounts received by
the Director from any assessment under this section
shall not be construed to be Government or public funds
or appropriated money.
[(3) No apportionment of funds.--Notwithstanding any
other provision of law, the amounts received by the
Director from any assessment under this section shall
not be subject to apportionment for the purpose of
chapter 15 of title 31, United States Code, or under
any other authority.
[(4) Use of funds.--The Director may use any amounts
received by the Director from assessments under this
section for compensation of the Director and other
employees of the Agency and for all other expenses of
the Director and the Agency.
[(5) Availability of oversight fund amounts.--
Notwithstanding any other provision of law, any amounts
remaining in the Federal Housing Enterprises Oversight
Fund established under this section (as in effect
before the effective date of the Federal Housing
Finance Regulatory Reform Act of 2008, and any amounts
remaining from assessments on the Federal Home Loan
Banks pursuant to section 18(b) of the Federal Home
Loan Bank Act (12 U.S.C. 1438(b)), shall, upon such
effective date, be treated for purposes of this
subsection as amounts received from assessments under
this section.
[(6) Treasury investments.--
[(A) Authority.--The Director may request the
Secretary of the Treasury to invest such
portions of amounts received by the Director
from assessments paid under this section that,
in the Director's discretion, are not required
to meet the current working needs of the
Agency.
[(B) Government obligations.--Pursuant to a
request under subparagraph (A), the Secretary
of the Treasury shall invest such amounts in
Government obligations guaranteed as to
principal and interest by the United States
with maturities suitable to the needs of the
Agency and bearing interest at a rate
determined by the Secretary of the Treasury
taking into consideration current market yields
on outstanding marketable obligations of the
United States of comparable maturity.]
(g) Budget and Financial Management.--
(1) Financial operating plans and forecasts.--The
Director shall provide to the Director of the Office of
Management and Budget copies of the Director's
financial operating plans and forecasts, as prepared by
the Director in the ordinary course of the Agency's
operations, and copies of the quarterly reports of the
Agency's financial condition and results of operations,
as prepared by the Director in the ordinary course of
the Agency's operations.
(2) Financial statements.--The Agency shall prepare
annually a statement of--
(A) assets and liabilities and surplus or
deficit;
(B) income and expenses; and
(C) sources and application of funds.
(3) Financial management systems.--The Agency shall
implement and maintain financial management systems
that--
(A) comply substantially with Federal
financial management systems requirements and
applicable Federal accounting standards; and
(B) use a general ledger system that accounts
for activity at the transaction level.
(4) 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 Agency, using the standards established in section
3512(c) of title 31, United States Code.
(5) 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 paragraph (1) or
any jurisdiction or oversight over the affairs or
operations of the Agency.
(h) Audit of Agency.--
(1) In general.--The Comptroller General shall
annually audit the financial transactions of the Agency
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 Agency 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
Agency 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 Agency shall remain
in possession and custody of the Agency. 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 Comptroller General's right of access to such
information shall be enforceable pursuant to section
716(c) of title 31, United States Code.
(2) 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 Agency, 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 Agency at the
time submitted to the Congress.
(3) 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
Agency 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.
* * * * * * *
----------
SMALL BUSINESS INVESTMENT INCENTIVE ACT OF 1980
* * * * * * *
TITLE V--CAPITAL FORMATION
* * * * * * *
ANNUAL GOVERNMENT-BUSINESS FORUM ON CAPITAL FORMATION
Sec. 503. (a) Pursuant to the consultation called for in
section 502,the Securities and Exchange Commission (acting
through the Office of the Advocate for Small Business Capital
Formation and in consultation with the Small Business Capital
Formation Advisory Committee) shall conduct an
annualGovernment-business forum to review the current status of
problems and programs relating to small business capital
formation.
(b) The Commission shall invite other Federal agencies, such
as theDepartment of the Treasury, the Board of Governors of the
FederalReserve System, the Small Business Administration,
organizations representing State securities commissioners, and
leading small businessand professional organizations concerned
with capital formation,to participate in the planning for such
forums.
(c) The Commission may request any of the Federal
departments, agencies, or organizations such as those specified
in subsection (b), orother groups or individuals, to prepare
statements and reports to bedelivered at such forums. Such
departments and agencies shallcooperate in this effort.
(d) A summary of the proceedings of such forums and any
findingsor recommendations thereof shall be prepared and
transmitted to theparticipants, appropriate committees of the
Congress, and others whomay be interested in the subject
matter.
(e) The Commission shall--
(1) review the findings and recommendations of the
forum; and
(2) each time the forum submits a finding or
recommendation to the Commission, promptly issue a
public statement--
(A) assessing the finding or recommendation
of the forum; and
(B) disclosing the action, if any, the
Commission intends to take with respect to the
finding or recommendation.
* * * * * * *
----------
TRUTH IN LENDING ACT
Sec. 1. Short title of entire Act
This Act may be cited as the Consumer Credit Protection Act.
TITLE I--CONSUMER CREDIT COST DISCLOSURE
CHAPTER 1--GENERAL PROVISIONS
Sec. 101. Short title
This title may be cited as the Truth in Lending Act.
* * * * * * *
Sec. 103. Definitions and rules of construction
(a) The definitions and rules of construction set forth in
this section are applicable for the purposes of this title.
[(b) Bureau.--The term ``Bureau '' means the Bureau of
Consumer Financial Protection.
[(c) The term ``Bureau '' refers to the Bureau of Governors
of the Federal Reserve System.
(b) Agency.--The term ``Agency'' means the Consumer Law
Enforcement Agency.
(c) Board.--The term ``Board'' means the Board of Governors
of the Federal Reserve System.
(d) The term ``organization'' means a corporation, government
or governmental subdivision or agency, trust, estate,
partnership, cooperative, or association.
(e) The term ``person'' means a natural person or an
organization.
(f) The term ``credit'' means the right granted by a creditor
to a debtor to defer payment of debt or to incur debt and defer
its payment.
(g) The term ``creditor'' refers only to a person who both
(1) regularly extends, whether in connection with loans, sales
of property or services, or otherwise, consumer credit which is
payable by agreement in more than four installments or for
which the payment of a finance charge is or may be required,
and (2) is the person to whom the debt arising from the
consumer credit transaction is initially payable on the face of
the evidence of indebtedness or, if there is no such evidence
of indebtedness, by agreement. Notwithstanding the preceding
sentence, in the case of an open-end credit plan involving a
credit card, the card issuer and any person who honors the
credit card and offers a discount which is a finance charge are
creditors. For the purpose of the requirements imposed under
chapter 4 and sections 127(a)(5), 127(a)(6), 127(a)(7),
127(b)(1), 127(b)(2), 127(b)(3), 127(b)(8), and 127(b)(10) of
chapter 2 of this title, the term ``creditor'' shall also
include card issuers whether or not the amount due is payable
by agreement in more than four installments or the payment of a
finance charge is or may be required, and the [Bureau] Agency
shall, by regulation, apply these requirements to such card
issuers, to the extent appropriate, even though the
requirements are by their terms applicable only to creditors
offering open-end credit plans. Any person who originates 2 or
more mortgages referred to in subsection (aa) in any 12-month
period or any person who originates 1 or more such mortgages
through a mortgage broker shall be considered to be a creditor
for purposes of this title. The term ``creditor'' includes a
private educational lender (as that term is defined in section
140) for purposes of this title.
(h) The term ``credit sale'' refers to any sale in which the
seller is a creditor. The term includes any contract in the
form of a bailment or lease if the bailee or lessee contracts
to pay as compensation for use a sum substantially equivalent
to or in excess of the aggregate value of the property and
services involved and it is agreed that the bailee or lessee
will become, or for no other or a nominal consideration has the
option to become, the owner of the property upon full
compliance with his obligations under the contract.
(i) The adjective ``consumer'', used with reference to a
credit transaction, characterizes the transaction as one in
which the party to whom credit is offered or extended is a
natural person, and the money, property, or services which are
the subject of the transaction are primarily for personal,
family, or household purposes.
(j) The terms ``open end credit plan'' and ``open end
consumer credit plan'' mean a plan under which the creditor
reasonably contemplates repeated transactions, which prescribes
the terms of such transactions, and which provides for a
finance charge which may be computed from time to time on the
outstanding unpaid balance. A credit plan or open end consumer
credit plan which is an open end credit plan or open end
consumer credit plan within the meaning of the preceding
sentence is an open end credit plan or open end consumer credit
plan even if credit information is verified from time to time.
(k) The term ``adequate notice'', as used in section 133,
means a printed notice to a cardholder which sets forth the
pertinent facts clearly and conspicuously so that a person
against whom it is to operate could reasonably be expected to
have noticed it and understood its meaning. Such notice may be
given to a cardholder by printing the notice on any credit
card, or on each periodic statement of account, issued to the
cardholder, or by any other means reasonably assuring the
receipt thereof by the cardholder.
(l) The term ``credit card'' means any card, plate, coupon
book or other credit device existing for the purpose of
obtaining money, property, labor, or services on credit.
(m) The term ``accepted credit card'' means any credit card
which the cardholder has requested and received or has signed
or has used, or authorized another to use, for the purpose of
obtaining money, property, labor, or services on credit.
(n) The term ``cardholder'' means any person to whom a credit
card is issued or any person who has agreed with the card
issuer to pay obligations arising from the issuance of a credit
card to another person.
(o) The term ``card issuer'' means any person who issues a
credit card, or the agent of such person with respect to such
card.
(p) The term ``unauthorized use'', as used in section 133,
means a use of a credit card by a person other than the
cardholder who does not have actual, implied, or apparent
authority for such use and from which the cardholder receives
no benefit.
(q) The term ``discount'' as used in section 167 means a
reduction made from the regular price. The term ``discount'' as
used in section 167 shall not mean a surcharge.
(r) The term ``surcharge'' as used in section 103 and section
167 means any means of increasing the regular price to a
cardholder which is not imposed upon customers paying by cash,
check, or similar means.
(s) The term ``State'' refers to any State, the Commonwealth
of Puerto Rico, the District of Columbia, and any territory or
possession of the United States.
(t) The term ``agricultural purposes'' includes the
production, harvest, exhibition, marketing, transportation,
processing, or manufacture of agricultural products by a
natural person who cultivates, plants, propagates, or nurtures
those agricultural products, including but not limited to the
acquisition of farmland, real property with a farm residence,
and personal property and services used primarily in farming.
(u) The term ``agricultural products'' includes agricultural,
horticultural, viticultural, and dairy products, livestock,
wildlife, poultry, bees, forest products, fish and shellfish,
and any products thereof, including processed and manufactured
products, and any and all products raised or produced on farms
and any processed or manufactured products thereof.
(v) The term ``material disclosures'' means the disclosure,
as required by this title, of the annual percentage rate, the
method of determining the finance charge and the balance upon
which a finance charge will be imposed, the amount of the
finance charge, the amount to be financed, the total of
payments, the number and amount of payments, the due dates or
periods of payments scheduled to repay the indebtedness, and
the disclosures required by section 129(a).
(w) The term ``dwelling'' means a residential structure or
mobile home which contains one to four family housing units, or
individual units of condominiums or cooperatives.
(x) The term ``residential mortgage transaction'' means a
transaction in which a mortgage, deed of trust, purchase money
security interest arising under an installment sales contract,
or equivalent consensual security interest is created or
retained against the consumer's dwelling to finance the
acquisition or initial construction of such dwelling.
(y) As used in this section and section 167, the term
``regular price'' means the tag or posted price charged for the
property or service if a single price is tagged or posted, or
the price charged for the property or service when payment is
made by use of an open-end credit plan or a credit card if
either (1) no price is tagged or posted, or (2) two prices are
tagged or posted, one of which is charged when payment is made
by use of an open-end credit plan or a credit card and the
other when payment is made by use of cash, check, or similar
means. For purposes of this definition, payment by check,
draft, or other negotiable instrument which may result in the
debiting of an open-end credit plan or a credit cardholder's
open-end account shall not be considered payment made by use of
the plan or the account.
(z) Any reference to any requirement imposed under this title
or any provision thereof includes reference to the regulations
of the [Bureau] Agency under this title or the provision
thereof in question.
[(bb)] (aa) High-cost Mortgage.--
(1) Definition.--
(A) In general.--The term ``high-cost
mortgage'', and a mortgage referred to in this
subsection, means a consumer credit transaction
that is secured by the consumer's principal
dwelling, other than a reverse mortgage
transaction, if--
(i) in the case of a credit
transaction secured--
(I) by a first mortgage on
the consumer's principal
dwelling, the annual percentage
rate at consummation of the
transaction will exceed by more
than 6.5 percentage points
[(8.5 percentage points, if the
dwelling is personal property
and the transaction is for less
than $50,000)] (10 percentage
points if the dwelling is
personal property or is a
transaction that does not
include the purchase of real
property on which a dwelling is
to be placed, and the
transaction is for less than
$75,000 (as such amount is
adjusted by the Consumer Law
Enforcement Agency to reflect
the change in the Consumer
Price Index)) the average prime
offer rate, as defined in
section 129C(b)(2)(B), for a
comparable transaction; or
(II) by a subordinate or
junior mortgage on the
consumer's principal dwelling,
the annual percentage rate at
consummation of the transaction
will exceed by more than 8.5
percentage points the average
prime offer rate, as defined in
section 129C(b)(2)(B), for a
comparable transaction;
(ii) the total points and fees
payable in connection with the
transaction, other than bona fide third
party charges not retained by the
mortgage originator, creditor, or an
affiliate of the creditor or mortgage
originator, exceed--
(I) in the case of a
transaction for $20,000 or
more, 5 percent of the total
transaction amount; [or]
(II) in the case of a
transaction for less than
$20,000, the lesser of 8
percent of the total
transaction amount or $1,000
(or such other dollar amount as
the [Bureau] Agency shall
prescribe by regulation); or
(III) in the case of a
transaction for less than
$75,000 (as such amount is
adjusted by the Consumer Law
Enforcement Agency to reflect
the change in the Consumer
Price Index) in which the
dwelling is personal property
(or is a consumer credit
transaction that does not
include the purchase of real
property on which a dwelling is
to be placed) the greater of 5
percent of the total
transaction amount or $3,000
(as such amount is adjusted by
the Consumer Law Enforcement
Agency to reflect the change in
the Consumer Price Index); or
(iii) the credit transaction
documents permit the creditor to charge
or collect prepayment fees or penalties
more than 36 months after the
transaction closing or such fees or
penalties exceed, in the aggregate,
more than 2 percent of the amount
prepaid.
(B) Introductory rates taken into account.--
For purposes of subparagraph (A)(i), the annual
percentage rate of interest shall be determined
based on the following interest rate:
(i) In the case of a fixed-rate
transaction in which the annual
percentage rate will not vary during
the term of the loan, the interest rate
in effect on the date of consummation
of the transaction.
(ii) In the case of a transaction in
which the rate of interest varies
solely in accordance with an index, the
interest rate determined by adding the
index rate in effect on the date of
consummation of the transaction to the
maximum margin permitted at any time
during the loan agreement.
(iii) In the case of any other
transaction in which the rate may vary
at any time during the term of the loan
for any reason, the interest charged on
the transaction at the maximum rate
that may be charged during the term of
the loan.
(C) Mortgage insurance.--For the purposes of
computing the total points and fees under
paragraph (4), the total points and fees shall
exclude--
(i) any premium provided by an agency
of the Federal Government or an agency
of a State;
(ii) any amount that is not in excess
of the amount payable under policies in
effect at the time of origination under
section 203(c)(2)(A) of the National
Housing Act (12 U.S.C. 1709(c)(2)(A)),
provided that the premium, charge, or
fee is required to be refundable on a
pro-rated basis and the refund is
automatically issued upon notification
of the satisfaction of the underlying
mortgage loan; and
(iii) any premium paid by the
consumer after closing.
(2)(A) After the 2-year period beginning on the effective
date of the regulations promulgated under section 155 of the
Riegle Community Development and Regulatory Improvement Act of
1994, and no more frequently than biennially after the first
increase or decrease under this subparagraph, the [Bureau]
Agency may by regulation increase or decrease the number of
percentage points specified in paragraph (1)(A), if the
[Bureau] Agency determines that the increase or decrease is--
(i) consistent with the consumer protections against
abusive lending provided by the amendments made by
subtitle B of title I of the Riegle Community
Development and Regulatory Improvement Act of 1994; and
(ii) warranted by the need for credit.
(B) An increase or decrease under subparagraph (A)--
(i) may not result in the number of
percentage points referred to in paragraph
(1)(A)(i)(I) being less than 6 percentage
points or greater than 10 percentage points;
and
(ii) may not result in the number of
percentage points referred to in paragraph
(1)(A)(i)(II) being less than 8 percentage
points or greater than 12 percentage points.
(C) In determining whether to increase or decrease the number
of percentage points referred to in subparagraph (A), the
[Bureau] Agency shall consult with representatives of
consumers, including low-income consumers, and lenders.
(3) The amount specified in paragraph (1)(B)(ii) shall be
adjusted annually on January 1 by the annual percentage change
in the Consumer Price Index, as reported on June 1 of the year
preceding such adjustment.
(4) For purposes of [paragraph (1)(B)] paragraph (1)(A) and
section 129C, points and fees shall include--
(A) all items included in the finance charge, except
interest or the time-price differential;
(B) all compensation paid directly or indirectly by a
consumer or creditor to a mortgage originator from any
source, including a mortgage originator that is also
the creditor in a table-funded transaction;
(C) each of the charges listed in section 106(e)
(except an escrow for future payment of taxes and
insurance), unless--
(i) the charge is reasonable;
(ii) the creditor receives no direct or
indirect compensation, except as retained by a
creditor or its affiliate as a result of their
participation in an affiliated business
arrangement (as defined in section 3(7) of the
Real Estate Settlement Procedures Act of 1974
(12 U.S.C. 2602(7)); and
[(iii) the charge is paid to a third party
unaffiliated with the creditor; and]
(iii) the charge is--
(I) a bona fide third-party charge
not retained by the mortgage
originator, creditor, or an affiliate
of the creditor or mortgage originator;
or
(II) a charge set forth in section
106(e)(1);
(D) premiums or other charges payable at or before
closing for any credit life, credit disability, credit
unemployment, or credit property insurance, or any
other [accident,] loss-of-income, life or health
insurance, [or any payments] and any payments directly
or indirectly for any debt cancellation or suspension
agreement or contract, except that insurance premiums
or debt cancellation or suspension fees calculated and
paid in full on a monthly basis shall not be considered
financed by the creditor;
(E) the maximum prepayment fees and penalties which
may be charged or collected under the terms of the
credit transaction;
(F) all prepayment fees or penalties that are
incurred by the consumer if the loan refinances a
previous loan made or currently held by the same
creditor or an affiliate of the creditor; and
(G) such other charges as the [Bureau] Agency
determines to be appropriate.
(5) Calculation of points and fees for open-end
consumer credit plans.--In the case of open-end
consumer credit plans, points and fees shall be
calculated, for purposes of this section and section
129, by adding the total points and fees known at or
before closing, including the maximum prepayment
penalties which may be charged or collected under the
terms of the credit transaction, plus the minimum
additional fees the consumer would be required to pay
to draw down an amount equal to the total credit line.
(6) This subsection shall not be construed to limit the rate
of interest or the finance charge that a person may charge a
consumer for any extension of credit.
[(aa)] (bb) The disclosure of an amount or percentage which
is greater than the amount or percentage required to be
disclosed under this title does not in itself constitute a
violation of this title.
(cc) The term ``reverse mortgage transaction'' means a
nonrecourse transaction in which a mortgage, deed of trust, or
equivalent consensual security interest is created against the
consumer's principal dwelling--
(1) securing one or more advances; and
(2) with respect to which the payment of any
principal, interest, and shared appreciation or equity
is due and payable (other than in the case of default)
only after--
(A) the transfer of the dwelling;
(B) the consumer ceases to occupy the
dwelling as a principal dwelling; or
(C) the death of the consumer.
[(cc)] (dd) Definitions Relating to Mortgage Origination and
Residential Mortgage Loans.--
(1) Commission.--Unless otherwise specified, the term
``Commission'' means the Federal Trade Commission.
(2) Mortgage originator.--The term ``mortgage
originator''--
(A) means any person who, for direct or
indirect compensation or gain, or in the
expectation of direct or indirect compensation
or gain--
(i) takes a residential mortgage loan
application;
(ii) assists a consumer in obtaining
or applying to obtain a residential
mortgage loan; or
(iii) offers or negotiates terms of a
residential mortgage loan;
(B) includes any person who represents to the
public, through advertising or other means of
communicating or providing information
(including the use of business cards,
stationery, brochures, signs, rate lists, or
other promotional items), that such person can
or will provide any of the services or perform
any of the activities described in subparagraph
(A);
(C) does not include any person who is (i)
not otherwise described in subparagraph (A) or
(B) and who performs purely administrative or
clerical tasks on behalf of a person who is
described in any such subparagraph, or (ii) [an
employee of a retailer of manufactured homes
who is not described in clause (i) or (iii) of
subparagraph (A) and who does not advise a
consumer on loan terms (including rates, fees,
and other costs)] a retailer of manufactured or
modular homes or its employees unless such
retailer or its employees receive compensation
or gain for engaging in activities described in
subparagraph (A) that is in excess of any
compensation or gain received in a comparable
cash transaction;
(D) does not include a person or entity that
only performs real estate brokerage activities
and is licensed or registered in accordance
with applicable State law, unless such person
or entity is compensated by a lender, a
mortgage broker, or other mortgage originator
or by any agent of such lender, mortgage
broker, or other mortgage originator;
(E) does not include, with respect to a
residential mortgage loan, a person, estate, or
trust that provides mortgage financing for the
sale of 3 properties in any 12-month period to
purchasers of such properties, each of which is
owned by such person, estate, or trust and
serves as security for the loan, provided that
such loan--
(i) is not made by a person, estate,
or trust that has constructed, or acted
as a contractor for the construction
of, a residence on the property in the
ordinary course of business of such
person, estate, or trust;
(ii) is fully amortizing;
(iii) is with respect to a sale for
which the seller determines in good
faith and documents that the buyer has
a reasonable ability to repay the loan;
(iv) has a fixed rate or an
adjustable rate that is adjustable
after 5 or more years, subject to
reasonable annual and lifetime
limitations on interest rate increases;
and
(v) meets any other criteria the
[Bureau] Agency may prescribe;
(F) does not include the creditor (except the
creditor in a table-funded transaction) under
paragraph (1), (2), or (4) of section 129B(c);
and
(G) does not include a servicer or servicer
employees, agents and contractors, including
but not limited to those who offer or negotiate
terms of a residential mortgage loan for
purposes of renegotiating, modifying, replacing
and subordinating principal of existing
mortgages where borrowers are behind in their
payments, in default or have a reasonable
likelihood of being in default or falling
behind.
(3) Nationwide mortgage licensing system and
registry.--The term ``Nationwide Mortgage Licensing
System and Registry'' has the same meaning as in the
Secure and Fair Enforcement for Mortgage Licensing Act
of 2008.
(4) Other definitions relating to mortgage
originator.--For purposes of this subsection, a person
``assists a consumer in obtaining or applying to obtain
a residential mortgage loan'' by, among other things,
advising on residential mortgage loan terms (including
rates, fees, and other costs), preparing residential
mortgage loan packages, or collecting information on
behalf of the consumer with regard to a residential
mortgage loan.
(5) Residential mortgage loan.--The term
``residential mortgage loan'' means any consumer credit
transaction that is secured by a mortgage, deed of
trust, or other equivalent consensual security interest
on a dwelling or on residential real property that
includes a dwelling, other than a consumer credit
transaction under an open end credit plan or, for
purposes of sections 129B and 129C and section 128(a)
(16), (17), (18), and (19), and sections 128(f) and
130(k), and any regulations promulgated thereunder, an
extension of credit relating to a plan described in
section 101(53D) of title 11, United States Code.
(6) Secretary.--The term ``Secretary'', when used in
connection with any transaction or person involved with
a residential mortgage loan, means the Secretary of
Housing and Urban Development.
(7) Servicer.--The term ``servicer'' has the same
meaning as in section 6(i)(2) of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C.
2605(i)(2)).
[(dd)] (ee) Bona Fide Discount Points and Prepayment
Penalties.--For the purposes of determining the amount of
points and fees for purposes of subsection (aa), either the
amounts described in paragraph (1) or (2) of the following
paragraphs, but not both, shall be excluded:
(1) Up to and including 2 bona fide discount points
payable by the consumer in connection with the
mortgage, but only if the interest rate from which the
mortgage's interest rate will be discounted does not
exceed by more than 1 percentage point--
(A) the average prime offer rate, as defined
in section 129C; or
(B) if secured by a personal property loan,
the average rate on a loan in connection with
which insurance is provided under title I of
the National Housing Act (12 U.S.C. 1702 et
seq.).
(2) Unless 2 bona fide discount points have been
excluded under paragraph (1), up to and including 1
bona fide discount point payable by the consumer in
connection with the mortgage, but only if the interest
rate from which the mortgage's interest rate will be
discounted does not exceed by more than 2 percentage
points--
(A) the average prime offer rate, as defined
in section 129C; or
(B) if secured by a personal property loan,
the average rate on a loan in connection with
which insurance is provided under title I of
the National Housing Act (12 U.S.C. 1702 et
seq.).
(3) For purposes of paragraph (1), the term ``bona
fide discount points'' means loan discount points which
are knowingly paid by the consumer for the purpose of
reducing, and which in fact result in a bona fide
reduction of, the interest rate or time-price
differential applicable to the mortgage.
(4) Paragraphs (1) and (2) shall not apply to
discount points used to purchase an interest rate
reduction unless the amount of the interest rate
reduction purchased is reasonably consistent with
established industry norms and practices for secondary
mortgage market transactions.
Sec. 104. Exempted transactions
This title does not apply to the following:
(1) Credit transactions involving extensions of
credit primarily for business, commercial, or
agricultural purposes, or to government or governmental
agencies or instrumentalities, or to organizations.
(2) Transactions in securities or commodities
accounts by a broker-dealer registered with the
Securities and Exchange Commission.
(3) Credit transactions, other than those in which a
security interest is or will be acquired in real
property, or in personal property used or expected to
be used as the principal dwelling of the consumer and
other than private education loans (as that term is
defined in section 140(a)), in which the total amount
financed exceeds $50,000.
(4) Transactions under public utility tariffs, if the
[Bureau] Agency determines that a State regulatory body
regulates the charges for the public utility services
involved, the charges for delayed payment, and any
discount allowed for early payment.
(5) Transactions for which the [Bureau] Agency, by
rule, determines that coverage under this title is not
necessary to carry out the purposes of this title.
(7) Loans made, insured, or guaranteed pursuant to a
program authorized by title IV of the Higher Education
Act of 1965 (20 U.S.C. 1070 et seq.).
Sec. 105. Regulations
(a) The [Bureau] Agency shall prescribe regulations to carry
out the purposes of this title. Except with respect to the
provisions of section 129 that apply to a mortgage referred to
in section 103(aa), such regulations may contain such
additional requirements, classifications, differentiations, or
other provisions, and may provide for such adjustments and
exceptions for all or any class of transactions, as in the
judgment of the [Bureau] Agency are necessary or proper to
effectuate the purposes of this title, to prevent circumvention
or evasion thereof, or to facilitate compliance therewith.
(b) The [Bureau] Agency shall publish a single, integrated
disclosure for mortgage loan transactions (including real
estate settlement cost statements) which includes the
disclosure requirements of this title in conjunction with the
disclosure requirements of the Real Estate Settlement
Procedures Act of 1974 that, taken together, may apply to a
transaction that is subject to both or either provisions of
law. The purpose of such model disclosure shall be to
facilitate compliance with the disclosure requirements of this
title and the Real Estate Settlement Procedures Act of 1974,
and to aid the borrower or lessee in understanding the
transaction by utilizing readily understandable language to
simplify the technical nature of the disclosures. In devising
such forms, the [Bureau] Agency shall consider the use by
creditors or lessors of data processing or similar automated
equipment. Nothing in this title may be construed to require a
creditor or lessor to use any such model form or clause
prescribed by the [Bureau] Agency under this section. A
creditor or lessor shall be deemed to be in compliance with the
disclosure provisions of this title with respect to other than
numerical disclosures if the creditor or lessor (1) uses any
appropriate model form or clause as published by the [Bureau]
Agency, or (2) uses any such model form or clause and changes
it by (A) deleting any information which is not required by
this title, or (B) rearranging the format, if in making such
deletion or rearranging the format, the creditor or lessor does
not affect the substance, clarity, or meaningful sequence of
the disclosure.
(c) Model disclosure forms and clauses shall be adopted by
the [Bureau] Agency after notice duly given in the Federal
Register and an opportunity for public comment in accordance
with section 553 of title 5, United States Code.
(d) Any regulation of the [Bureau] Agency, or any amendment
or interpretation thereof, requiring any disclosure which
differs from the disclosures previously required by this
chapter, chapter 4, or chapter 5, or by any regulation of the
[Bureau] Agency promulgated thereunder shall have an effective
date of that October 1 which follows by at least six months the
date of promulgation, except that the [Bureau] Agency may at
its discretion take interim action by regulation, amendment, or
interpretation to lengthen the period of time permitted for
creditors or lessors to adjust their forms to accommodate new
requirements or shorten the length of time for creditors or
lessors to make such adjustments when it makes a specific
finding that such action is necessary to comply with the
findings of a court or to prevent unfair or deceptive
disclosure practices. Notwithstanding the previous sentence,
any creditor or lessor may comply with any such newly
promulgated disclosure requirements prior to the effective date
of the requirements.
(f) Exemption Authority.--
(1) In general.--The [Bureau] Agency may exempt, by
regulation, from all or part of this title all or any
class of transactions, other than transactions
involving any mortgage described in section 103(aa),
for which, in the determination of the [Bureau] Agency,
coverage under all or part of this title does not
provide a meaningful benefit to consumers in the form
of useful information or protection.
(2) Factors for consideration.--In determining which
classes of transactions to exempt in whole or in part
under paragraph (1), the [Bureau] Agency shall consider
the following factors and publish its rationale at the
time a proposed exemption is published for comment:
(A) The amount of the loan and whether the
disclosures, right of rescission, and other
provisions provide a benefit to the consumers
who are parties to such transactions, as
determined by the [Bureau] Agency.
(B) The extent to which the requirements of
this title complicate, hinder, or make more
expensive the credit process for the class of
transactions.
(C) The status of the borrower, including--
(i) any related financial
arrangements of the borrower, as
determined by the [Bureau] Agency;
(ii) the financial sophistication of
the borrower relative to the type of
transaction; and
(iii) the importance to the borrower
of the credit, related supporting
property, and coverage under this
title, as determined by the [Bureau]
Agency;
(D) whether the loan is secured by the
principal residence of the consumer; and
(E) whether the goal of consumer protection
would be undermined by such an exemption.
(g) Waiver for Certain Borrowers.--
(1) In general.--The [Bureau] Agency, by regulation,
may exempt from the requirements of this title certain
credit transactions if--
(A) the transaction involves a consumer--
(i) with an annual earned income of
more than $200,000; or
(ii) having net assets in excess of
$1,000,000 at the time of the
transaction; and
(B) a waiver that is handwritten, signed, and
dated by the consumer is first obtained from
the consumer.
(2) Adjustments by the board.--The [Bureau] Agency,
at its discretion, may adjust the annual earned income
and net asset requirements of paragraph (1) for
inflation.
(i) Authority of the board to
prescribe rules.--Notwithstanding
subsection (a), the Board shall have
authority to prescribe rules under this
title with respect to a person
described in section 1029(a) of the
Consumer Financial Protection Act of
2010. Regulations prescribed under this
subsection may contain such
classifications, differentiations, or
other provisions, as in the judgment of
the Board are necessary or proper to
effectuate the purposes of this title,
to prevent circumvention or evasion
thereof, or to facilitate compliance
therewith.
(h) Deference.--Notwithstanding any power granted to any
Federal agency under this title, the deference that a court
affords to the [Bureau] Agency with respect to a determination
made by the [Bureau] Agency relating to the meaning or
interpretation of any provision of this title, other than
section 129E or 129H, shall be applied as if the [Bureau]
Agency were the only agency authorized to apply, enforce,
interpret, or administer the provisions of this title.
(i) Authority of the board to prescribe rules.--
Notwithstanding subsection (a), the Board shall have authority
to prescribe rules under this title with respect to a person
described in section 1029(a) of the Consumer Financial
Protection Act of 2010. Regulations prescribed under this
subsection may contain such classifications, differentiations,
or other provisions, as in the judgment of the Board are
necessary or proper to effectuate the purposes of this title,
to prevent circumvention or evasion thereof, or to facilitate
compliance therewith.
Sec. 106. Determination of finance charge
(a) Except as otherwise provided in this section, the amount
of the finance charge in connection with any consumer credit
transaction shall be determined as the sum of all charges,
payable directly or indirectly by the person to whom the credit
is extended, and imposed directly or indirectly by the creditor
as an incident to the extension of credit. The finance charge
does not include charges of a type payable in a comparable cash
transaction. The finance charge shall not include fees and
amounts imposed by third party closing agents (including
settlement agents, attorneys, and escrow and title companies)
if the creditor does not require the imposition of the charges
or the services provided and does not retain the charges.
Examples of charges which are included in the finance charge
include any of the following types of charges which are
applicable.
(1) Interest, time price differential, and any amount
payable under a point, discount, or other system of
additional charges.
(2) Service or carrying charge.
(3) Loan fee, finder's fee, or similar charge.
(4) Fee for an investigation or credit report.
(5) Premium or other charge for any guarantee or
insurance protecting the creditor against the obligor's
default or other credit loss.
(6) Borrower-paid mortgage broker fees, including
fees paid directly to the broker or the lender (for
delivery to the broker) whether such fees are paid in
cash or financed.
(b) Charges or premiums for credit life, accident, or health
insurance written in connection with any consumer credit
transaction shall be included in the finance charge unless:
(1) the coverage of the debtor by the insurance is
not a factor in the approval by the creditor of the
extension of credit, and this fact is clearly disclosed
in writing to the person applying for or obtaining the
extension of credit; and
(2) in order to obtain the insurance in connection
with the extension of credit, the person to whom the
credit is extended must give specific affirmative
written indication of his desire to do so after written
disclosure to him of the cost thereof.
(c) Charges or premiums for insurance, written in connection
with any consumer credit transaction, against loss of or damage
to property or against liability arising out of the ownership
or use of property, shall be included in the finance charge
unless a clear and specific statement in writing is furnished
by the creditor to the person to whom the credit is extended,
setting forth the cost of the insurance if obtained from or
through the creditor, and stating that the person to whom the
credit is extended may choose the person through which the
insurance is to be obtained.
(d) If any of the following items is itemized and disclosed
in accordance with the regulations of the [Bureau] Agency in
connection with any transaction, then the creditor need not
include that item in the computation of the finance charge with
respect to that transaction:
(1) Fees and charges prescribed by law which actually
are or will be paid to public officials for determining
the existence of or for perfecting or releasing or
satisfying any security related to the credit
transaction.
(2) The premium payable for any insurance in lieu of
perfecting any security interest otherwise required by
the creditor in connection with the transaction, if the
premium does not exceed the fees and charges described
in paragraph (1) which would otherwise be payable.
(3) Any tax levied on security instruments or on
documents evidencing indebtedness if the payment of
such taxes is a precondition for recording the
instrument securing the evidence of indebtedness.
(e) The following items, when charged in connection with any
extension of credit secured by an interest in real property,
shall not be included in the computation of the finance charge
with respect to that transaction:
(1) Fees or premiums for title examination, title
insurance, or similar purposes.
(2) Fees for preparation of loan-related documents.
(3) Escrows for future payments of taxes and
insurance.
(4) Fees for notarizing deeds and other documents.
(5) Appraisal fees, including fees related to any
pest infestation or flood hazard inspections conducted
prior to closing.
(6) Credit reports.
(f) Tolerances for Accuracy.--In connection with credit
transactions not under an open end credit plan that are secured
by real property or a dwelling, the disclosure of the finance
charge and other disclosures affected by any finance charge--
(1) shall be treated as being accurate for purposes
of this title if the amount disclosed as the finance
charge--
(A) does not vary from the actual finance
charge by more than $100; or
(B) is greater than the amount required to be
disclosed under this title; and
(2) shall be treated as being accurate for purposes
of section 125 if--
(A) except as provided in subparagraph (B),
the amount disclosed as the finance charge does
not vary from the actual finance charge by more
than an amount equal to one-half of one percent
of the total amount of credit extended; or
(B) in the case of a transaction, other than
a mortgage referred to in section 103(aa),
which--
(i) is a refinancing of the principal
balance then due and any accrued and
unpaid finance charges of a residential
mortgage transaction as defined in
section [103(w)] 103(x), or is any
subsequent refinancing of such a
transaction; and
(ii) does not provide any new
consolidation or new advance;
if the amount disclosed as the finance charge
does not vary from the actual finance charge by
more than an amount equal to one percent of the
total amount of credit extended.
Sec. 107. Determination of annual percentage rate
(a) The annual percentage rate applicable to any extension of
consumer credit shall be determined, in accordance with the
regulations of the [Bureau] Agency,
(1) in the case of any extension of credit other than
under an open end credit plan, as
(A) that nominal annual percentage rate which
will yield a sum equal to the amount of the
finance charge when it is applied to the unpaid
balances of the amount financed, calculated
according to the actuarial method of allocating
payments made on a debt between the amount
financed and the amount of the finance charge,
pursuant to which a payment is applied first to
the accumulated finance charge and the balance
is applied to the unpaid amount financed; or
(B) the rate determined by any method
prescribed by the [Bureau] Agency as a method
which materially simplifies computation while
retaining reasonable accuracy as compared with
the rate determined under subparagraph (A).
(2) in the case of any extension of credit under an
open end credit plan, as the quotient (expressed as a
percentage) of the total finance charge for the period
to which it relates divided by the amount upon which
the finance charge for that period is based, multiplied
by the number of such periods in a year.
(b) Where a creditor imposes the same finance charge for
balances within a specified range, the annual percentage rate
shall be computed on the median balance within the range,
except that if the [Bureau] Agency determines that a rate so
computed would not be meaningful, or would be materially
misleading, the annual percentage rate shall be computed on
such other basis as the [Bureau] Agency may by regulation
require.
(c) The disclosure of an annual percentage rate is accurate
for the purpose of this title if the rate disclosed is within a
tolerance not greater than one-eighth of 1 per centum more or
less than the actual rate or rounded to the nearest one-fourth
of 1 per centum. The [Bureau] Agency may allow a greater
tolerance to simplify compliance where irregular payments are
involved.
(d) The [Bureau] Agency may authorize the use of rate tables
or charts which may provide for the disclosure of annual
percentage rates which vary from the rate determined in
accordance with subsection (a)(1)(A) by not more than such
tolerances as the [Bureau] Agency may allow. The [Bureau]
Agency may not allow a tolerance greater than 8 per centum of
that rate except to simplify compliance where irregular
payments are involved.
(e) In the case of creditors determining the annual
percentage rate in a manner other than as described in
subsection (d), the [Bureau] Agency may authorize other
reasonable tolerances.
Sec. 108. Administrative enforcement
(a) Enforcing Agencies.--Subject to subtitle B of the
Consumer Financial Protection Act of 2010, compliance with the
requirements imposed under this title shall be enforced under--
(1) section 8 of the Federal Deposit Insurance Act,
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) national banks, Federal savings
associations, and Federal branches and Federal
agencies of foreign banks;
(B) member banks of the Federal Reserve
System (other than national banks), branches
and agencies of foreign banks (other than
Federal branches, Federal agencies, and insured
State branches of foreign banks), commercial
lending companies owned or controlled by
foreign banks, and organizations operating
under section 25 or 25A of the Federal Reserve
Act; and
(C) banks and State savings associations
insured by the Federal Deposit Insurance
Corporation (other than members of the Federal
Reserve System), and insured State branches of
foreign banks;
(2) the Federal Credit Union Act, by the Director of
the National Credit Union Administration, with respect
to any Federal credit union;
(3) the Federal Aviation Act of 1958, by the
Secretary of Transportation, with respect to any air
carrier or foreign air carrier subject to that Act;
(4) the Packers and Stockyards Act, 1921 (except as
provided in section 406 of that Act), by the Secretary
of Agriculture, with respect to any activities subject
to that Act;
(5) the Farm Credit Act of 1971, by the Farm Credit
Administration with respect to any Federal land bank,
Federal land bank association, Federal intermediate
credit bank, or production credit association; and
(6) subtitle E of the Consumer Financial Protection
Act of 2010, by the [Bureau] Agency, with respect to
any person subject to this title.
(7) sections 21B and 21C of the Securities Exchange
Act of 1934, in the case of a broker or dealer, other
than a depository institution, by the Securities and
Exchange Commission.
(b) For the purpose of the exercise by any agency referred to
in subsection (a) of its powers under any Act referred to in
that subsection, a violation of any requirement imposed under
this title shall be deemed to be a violation of a requirement
imposed under that Act. In addition to its powers under any
provision of law specifically referred to in subsection (a),
each of the agencies referred to in that subsection may
exercise, for the purpose of enforcing compliance with any
requirement imposed under this title, any other authority
conferred on it by law.
(c) Overall Enforcement Authority of the Federal Trade
Commission.--Except to the extent that enforcement of the
requirements imposed under this title is specifically committed
to some other Government agency under any of paragraphs (1)
through (5) of subsection (a), and subject to subtitle B of the
Consumer Financial Protection Act of 2010, the Federal Trade
Commission shall be authorized to enforce such requirements.
For the purpose of the exercise by the Federal Trade Commission
of its functions and powers under the Federal Trade Commission
Act, a violation of any requirement imposed under this title
shall be deemed a violation of a requirement imposed under that
Act. All of the functions and powers of the Federal Trade
Commission under the Federal Trade Commission Act are available
to the Federal Trade Commission to enforce compliance by any
person with the requirements under this title, irrespective of
whether that person is engaged in commerce or meets any other
jurisdictional tests under the Federal Trade Commission Act.
(d) The authority of the [Bureau] Agency to issue regulations
under this title does not impair the authority of any other
agency designated in this section to make rules respecting its
own procedures in enforcing compliance with requirements
imposed under this title.
(e)(1) In carrying out its enforcement activities under this
section, each agency referred to in subsection (a) or (c), in
cases where an annual percentage rate or finance charge was
inaccurately disclosed, shall notify the creditor of such
disclosure error and is authorized in accordance with the
provisions of this subsection to require the creditor to make
an adjustment to the account of the person to whom credit was
extended, to assure that such person will not be required to
pay a finance charge in excess of the finance charge actually
disclosed or the dollar equivalent of the annual percentage
rate actually disclosed, whichever is lower. For the purposes
of this subsection, except where such disclosure error resulted
from a willful violation which was intended to mislead the
person to whom credit was extended, in determining whether a
disclosure error has occurred and in calculating any
adjustment, (A) each agency shall apply (i) with respect to the
annual percentage rate, a tolerance of one-quarter of 1 percent
more or less than the actual rate, determined without regard to
section 107(c) of this title, and (ii) with respect to the
finance charge, a corresponding numerical tolerance as
generated by the tolerance provided under this subsection for
the annual percentage rate; except that (B) with respect to
transactions consummated after two years following the
effective date of section 608 of the Truth in Lending
Simplification and Reform Act, each agency shall apply (i) for
transactions that have a scheduled amortization of ten years or
less, with respect to the annual percentage rate, a tolerance
not to exceed one-quarter of 1 percent more or less than the
actual rate, determined without regard to section 107(c) of
this title, but in no event a tolerance of less than the
tolerances allowed under section 107(c), (ii) for transactions
that have a scheduled amortization of more than ten years, with
respect to the annual percentage rate, only such tolerances as
are allowed under section 107(c) of this title, and (iii) for
all transactions, with respect to the finance charge, a
corresponding numerical tolerance as generated by the
tolerances provided under this subsection for the annual
percentage rate.
(2) Each agency shall require such an adjustment when it
determines that such disclosure error resulted from (A) a clear
and consistent pattern or practice of violations, (B) gross
negligence, or (C) a willful violation which was intended to
mislead the person to whom the credit was extended.
Notwithstanding the preceding sentence, except where such
disclosure error resulted from a willful violation which was
intended to mislead the person to whom credit was extended, an
agency need not require such an adjustment if it determines
that such disclosure error--
(A) resulted from an error involving the disclosure
of a fee or charge that would otherwise be excludable
in computing the finance charge, including but not
limited to violations involving the disclosures
described in sections 106(b), (c) and (d) of this
title, in which event the agency may require such
remedial action as it determines to be equitable,
except that for transactions consummated after two
years after the effective date of section 608 of the
Truth in Lending Simplification and Reform Act, such an
adjustment shall be ordered for violations of section
106(b);
(B) involved a disclosed amount which was 10 per
centum or less of the amount that should have been
disclosed and (i) in cases where the error involved a
disclosed finance charge, the annual percentage rate
was disclosed correctly, and (ii) in cases where the
error involved a disclosed annual percentage rate, the
finance charge was disclosed correctly; in which event
the agency may require such adjustment as it determines
to be equitable;
(C) involved a total failure to disclose either the
annual percentage rate or the finance charge, in which
event the agency may require such adjustment as it
determines to be equitable; or
(D) resulted from any other unique circumstance
involving clearly technical and nonsubstantive
disclosure violations that do not adversely affect
information provided to the consumer and that have not
misled or otherwise deceived the consumer.
In the case of other such disclosure errors, each agency may
require such an adjustment.
(3) Notwithstanding paragraph (2), no adjustment shall be
ordered--
(A) if it would have a significantly adverse impact
upon the safety or soundness of the creditor, but in
any such case, the agency may--
(i) require a partial adjustment in an amount
which does not have such an impact; or
(ii) require the full adjustment, but permit
the creditor to make the required adjustment in
partial payments over an extended period of
time which the agency considers to be
reasonable, if (in the case of an agency
referred to in paragraph (1), (2), or (3) of
subsection (a)), the agency determines that a
partial adjustment or making partial payments
over an extended period is necessary to avoid
causing the creditor to become undercapitalized
pursuant to section 38 of the Federal Deposit
Insurance Act;
(B) the amount of the adjustment would be less that
$1, except that if more than one year has elapsed since
the date of the violation, the agency may require that
such amount be paid into the Treasury of the United
States, or
(C) except where such disclosure error resulted from
a willful violation which was intended to mislead the
person to whom credit was extended, in the case of an
open-end credit plan, more than two years after the
violation, or in the case of any other extension of
credit, as follows:
(i) with respect to creditors that are subject to
examination by the agencies referred to in paragraphs
(1) through (3) of section 108(a) of this title, except
in connection with violations arising from practices
identified in the current examination and only in
connection with transactions that are consummated after
the date of the immediately preceding examination,
except that where practices giving rise to violations
identified in earlier examinations have not been
corrected, adjustments for those violations shall be
required in connection with transactions consummated
after the date of the examination in which such
practices were first identified;
(ii) with respect to creditors that are not subject
to examination by such agencies, except in connection
with transactions that are consummated after May 10,
1978; and
(iii) in no event after the later of (I) the
expiration of the life of the credit extension, or (II)
two years after the agreement to extend credit was
consummated.
(4)(A) Notwithstanding any other provision of this section,
an adjustment under this subsection may be required by an
agency referred to in subsection (a) or (c) only by an order
issued in accordance with cease and desist procedures provided
by the provision of law referred to in such subsections.
(B) In the case of an agency which is not authorized to
conduct cease and desist proceedings, such an order may be
issued after an agency hearing on the record conducted at least
thirty but not more than sixty days after notice of the alleged
violation is served on the creditor. Such a hearing shall be
deemed to be a hearing which is subject to the provisions of
section 8(h) of the Federal Deposit Insurance Act and shall be
subject to judicial review as provided therein.
(5) Except as otherwise specifically provided in this
subsection and notwithstanding any provision of law referred to
in subsection (a) or (c), no agency referred to in subsection
(a) or (c) may require a creditor to make dollar adjustments
for errors in any requirements under this title, except with
regard to the requirements of section 165.
(6) A creditor shall not be subject to an order to make an
adjustment, if within sixty days after discovering a disclosure
error, whether pursuant to a final written examination report
or through the creditor's own procedures, the creditor notifies
the person concerned of the error and adjusts the account so as
to assure that such person will not be required to pay a
finance charge in excess of the finance charge actually
disclosed or the dollar equivalent of the annual percentage
rate actually disclosed, whichever is lower.
(7) Notwithstanding the second sentence of subsection (e)(1),
subsection (e)(3)(C)(i), and subsection (e)(3)(C)(ii), each
agency referred to in subsection (a) or (c) shall require an
adjustment for an annual percentage rate disclosure error that
exceeds a tolerance of one quarter of one percent less than the
actual rate, determined without regard to section 107(c) of
this title, with respect to any transaction consummated between
January 1, 1977, and the effective date of section 608 of the
Truth in Lending Simplification and Reform Act.
Sec. 109. Views of other agencies
In the exercise of its functions under this title, the
[Bureau] Agency may obtain upon request the views of any other
Federal agency which, in the judgment of the [Bureau] Agency,
exercises regulatory or supervisory functions with respect to
any class of creditors subject to this title.
Sec. 111. Effect on other laws
(a)(1) Except as provided in subsection (e), chapters 1, 2,
and 3 do not annul, alter, or affect the laws of any State
relating to the disclosure of information in connection with
credit transactions, except to the extent that those laws are
inconsistent with the provisions of this title, and then only
to the extent of the inconsistency. Upon its own motion or upon
the request of any creditor, State, or other interested party
which is submitted in accordance with procedures prescribed in
regulations of the [Bureau] Agency, the [Bureau] Agency shall
determine whether any such inconsistency exists. If the
[Bureau] Agency determines that a State-required disclosure is
inconsistent, creditors located in that State may not make
disclosures using the inconsistent term or form, and shall
incur no liability under the law of that State for failure to
use such term or form, notwithstanding that such determination
is subsequently amended, rescinded, or determined by judicial
or other authority to be invalid for any reason.
(2) Upon its own motion or upon the request of any creditor,
State, or other interested party which is submitted in
accordance with procedures prescribed in regulations of the
[Bureau] Agency, the [Bureau] Agency shall determine whether
any disclosure required under the law of any State is
substantially the same in meaning as a disclosure required
under this title. If the [Bureau] Agency determines that a
State-required disclosure is substantially the same in meaning
as a disclosure required by this title, then creditors located
in that State may make such disclosure in compliance with such
State law in lieu of the disclosure required by this title,
except that the annual percentage rate and finance charge shall
be disclosed as required by section 122, and such State-
required disclosure may not be made in lieu of the disclosures
applicable to certain mortgages under section 129.
(b) Except as provided in section 129, this title does not
otherwise annul, alter or affect in any manner the meaning,
scope or applicability of the laws of any State, including, but
not limited to, laws relating to the types, amounts or rates of
charges, or any element or elements of charges, permissible
under such laws in connection with the extension or use of
credit, nor does this title extend the applicability of those
laws to any class of persons or transactions to which they
would not otherwise apply. The provisions of section 129 do not
annul, alter, or affect the applicability of the laws of any
State or exempt any person subject to the provisions of section
129 from complying with the laws of any State, with respect to
the requirements for mortgages referred to in section 103(aa),
except to the extent that those State laws are inconsistent
with any provisions of section 129, and then only to the extent
of the inconsistency.
(c) In any action or proceeding in any court involving a
consumer credit sale, the disclosure of the annual percentage
rate as required under this title in connection with that sale
may not be received as evidence that the sale was a loan or any
type of transaction other than a credit sale.
(d) Except as specified in sections 125, 130, and 166, this
title and the regulations issued thereunder do not affect the
validity or enforceability of any contract or obligation under
State or Federal law.
(e) Certain Credit and Charge Card Application and
Solicitation Disclosure Provisions.--The provisions of
subsection (c) of section 122 and subsections (c), (d), (e),
and (f) of section 127 shall supersede any provision of the law
of any State relating to the disclosure of information in any
credit or charge card application or solicitation which is
subject to the requirements of section 127(c) or any renewal
notice which is subject to the requirements of section 127(d),
except that any State may employ or establish State laws for
the purpose of enforcing the requirements of such sections.
Sec. 112. Criminal liability for willful and knowing violation
Whoever willfully and knowingly
(1) gives false or inaccurate information or fails to
provide information which he is required to disclose
under the provisions of this title or any regulation
issued thereunder,
(2) uses any chart or table authorized by the
[Bureau] Agency under section 107 in such a manner as
to consistently understate the annual percentage rate
determined under section 107(a)(1)(A), or
(3) otherwise fails to comply with any requirement
imposed under this title,
shall be fined not more than $5,000 or imprisoned not more than
one year, or both.
Sec. 113. Effect on governmental agencies
(a) Any department or agency of the United States which
administers a credit program in which it extends, insures, or
guarantees consumer credit and in which it provides instruments
to a creditor which contain any disclosures required by this
title shall, prior to the issuance or continued use of such
instruments, consult with the [Bureau] Agency to assure that
such instruments comply with this title.
(b) No civil or criminal penalty provided under this title
for any violation thereof may be imposed upon the United States
or any department or agency thereof, or upon any State or
political subdivision thereof, or any agency of any State or
political subdivision.
(c) A creditor participating in a credit program
administered, insured, or guaranteed by any department or
agency of the United States shall not be held liable for a
civil or criminal penalty under this title in any case in which
the violation results from the use of an instrument required by
any such department or agency.
(d) A creditor participating in a credit program
administered, insured, or guaranteed by any department or
agency of the United States shall not be held liable for a
civil or criminal penalty under the laws of any State (other
than laws determined under section 111 to be inconsistent with
this title) for any technical procedural failure, such as a
failure to use a specific form, to make information available
at a specific place on an instrument, or to use a specific
typeface, as is required by State law, which is caused by the
use of an instrument required to be used by such department or
agency.
Sec. 114. Reports by Bureau and Attorney General
Each year the [Bureau] Agency shall make a report to the
Congress concerning the administration of its functions under
this title, including such recommendations as the [Bureau]
Agency deems necessary or appropriate. In addition, each report
of the [Bureau] Agency shall include its assessment of the
extent to which compliance with the requirements imposed under
this title is being achieved.
CHAPTER 2--CREDIT TRANSACTIONS
Sec. 121. General requirement of disclosure
(a) Subject to subsection (b), a creditor or lessor shall
disclose to the person who is obligated on a consumer lease or
a consumer credit transaction the information required under
this title. In a transaction involving more than one obligor, a
creditor or lessor, except in a transaction under section 125,
need not disclose to more than one of such obligors if the
obligor given disclosure is a primary obligor.
(b) If a transaction involves one creditor as defined in
section [103(f)] 103(g), or one lessor as defined in section
181(3), such creditor or lessor shall make the disclosures. If
a transaction involves more than one creditor or lessor, only
one creditor or lessor shall be required to make the
disclosures. The [Bureau] Agency shall by regulation specify
which creditor or lessor shall make the disclosures.
(c) The [Bureau] Agency may provide by regulation that any
portion of the information required to be disclosed by this
title may be given in the form of estimates where the provider
of such information is not in a position to know exact
information. In the case of any consumer credit transaction a
portion of the interest on which is determined on a per diem
basis and is to be collected upon the consummation of such
transaction, any disclosure with respect to such portion of
interest shall be deemed to be accurate for purposes of this
title if the disclosure is based on information actually known
to the creditor at the time that the disclosure documents are
being prepared for the consummation of the transaction.
(d) The [Bureau] Agency shall determine whether tolerances
for numerical disclosures other than the annual percentage rate
are necessary to facilitate compliance with this title, and if
it determines that such tolerances are necessary to facilitate
compliance, it shall by regulation permit disclosures within
such tolerances. The [Bureau] Agency shall exercise its
authority to permit tolerances for numerical disclosures other
than the annual percentage rate so that such tolerances are
narrow enough to prevent such tolerances from resulting in
misleading disclosures or disclosures that circumvent the
purposes of this title.
Sec. 122. Form of disclosures; additional information
(a) Information required by this title shall be disclosed
clearly and conspicuously, in accordance with regulations of
the [Bureau] Agency. The terms ``annual percentage rate'' and
``finance charge'' shall be disclosed more conspicuously than
other terms, data, or information provided in connection with a
transaction, except information relating to the identity of the
creditor. Except as provided in subsection (c), regulations of
the [Bureau] Agency need not require that disclosures pursuant
to this title be made in the order set forth in this title and,
except as otherwise provided, may permit the use of terminology
different from that employed in this title if it conveys
substantially the same meaning.
(b) Any creditor or lessor may supply additional information
or explanation with any disclosures required under chapters 4
and 5 and, except as provided in sections 127A(b)(3) and
128(b)(1), under this chapter.
(c) Tabular Format Required for Certain Disclosures Under
Section 127(c).--
(1) In general.--The information described in
paragraphs (1)(A), (3)(B)(i)(I), (4)(A), and
(4)(C)(i)(I) of section 127(c) shall be--
(A) disclosed in the form and manner which
the [Bureau] Agency shall prescribe by
regulations; and
(B) placed in a conspicuous and prominent
location on or with any written application,
solicitation, or other document or paper with
respect to which such disclosure is required.
(2) Tabular format.--
(A) Form of table to be prescribed.--In the
regulations prescribed under paragraph (1)(A)
of this subsection, the [Bureau] Agency shall
require that the disclosure of such information
shall, to the extent the [Bureau] Agency
determines to be practicable and appropriate,
be in the form of a table which--
(i) contains clear and concise
headings for each item of such
information; and
(ii) provides a clear and concise
form for stating each item of
information required to be disclosed
under each such heading.
(B) Bureau discretion in prescribing order
and wording of table.--In prescribing the form
of the table under subparagraph (A), the
[Bureau] Agency may--
(i) list the items required to be
included in the table in a different
order than the order in which such
items are set forth in paragraph (1)(A)
or (4)(A) of section 127(c); and
(ii) subject to subparagraph (C),
employ terminology which is different
than the terminology which is employed
in section 127(c) if such terminology
conveys substantially the same meaning.
(C) Grace period.--Either the heading or the
statement under the heading which relates to
the time period referred to in section
127(c)(1)(A)(iii) shall contain the term
``grace period''.
(d) Additional Electronic Disclosures.--
(1) Posting agreements.--Each creditor shall
establish and maintain an Internet site on which the
creditor shall post the written agreement between the
creditor and the consumer for each credit card account
under an open-end consumer credit plan.
(2) Creditor to provide contracts to the [bureau]
agency.--Each creditor shall provide to the [Bureau]
Agency, in electronic format, the consumer credit card
agreements that it publishes on its Internet site.
(3) Record repository.--The [Bureau] Agency shall
establish and maintain on its publicly available
Internet site a central repository of the consumer
credit card agreements received from creditors pursuant
to this subsection, and such agreements shall be easily
accessible and retrievable by the public.
(4) Exception.--This subsection shall not apply to
individually negotiated changes to contractual terms,
such as individually modified workouts or
renegotiations of amounts owed by a consumer under an
open end consumer credit plan.
(5) Regulations.--The [Bureau] Agency, in
consultation with the other Federal banking agencies
(as that term is defined in [section 603) and the
Bureau, may promulgate] section 603), may promulgate
regulations to implement this subsection, including
specifying the format for posting the agreements on the
Internet sites of creditors and establishing exceptions
to paragraphs (1) and (2), in any case in which the
administrative burden outweighs the benefit of
increased transparency, such as where a credit card
plan has a de minimis number of consumer account
holders.
Sec. 123. Exemption for State-regulated transactions
The [Bureau] Agency shall by regulation exempt from the
requirements of this chapter any class of credit transactions
within any State if it determines that under the law of that
State that class of transactions is subject to requirements
substantially similar to those imposed under this chapter, and
that there is adequate provision for enforcement.
* * * * * * *
Sec. 125. Right of rescission as to certain transactions
(a) Except as otherwise provided in this section, in the case
of any consumer credit transaction (including opening or
increasing the credit limit for an open end credit plan) in
which a security interest, including any such interest arising
by operation of law, is or will be retained or acquired in any
property which is used as the principal dwelling of the person
to whom credit is extended, the obligor shall have the right to
rescind the transaction until midnight of the third business
day following the consummation of the transaction or the
delivery of the information and rescission forms required under
this section together with a statement containing the material
disclosures required under this title, whichever is later, by
notifying the creditor, in accordance with regulations of the
[Bureau] Agency, of his intention to do so. The creditor shall
clearly and conspicuously disclose, in accordance with
regulations of the [Bureau] Agency, to any obligor in a
transaction subject to this section the rights of the obligor
under this section. The creditor shall also provide, in
accordance with regulations of the [Bureau] Agency, appropriate
forms for the obligor to exercise his right to rescind any
transaction subject to this section.
(b) When an obligor exercises his right to rescind under
subsection (a), he is not liable for any finance or other
charge, and any security interest given by the obligor,
including any such interest arising by operation of law,
becomes void upon such a rescission. Within 20 days after
receipt of a notice of rescission, the creditor shall return to
the obligor any money or property given as earnest money,
downpayment, or otherwise, and shall take any action necessary
or appropriate to reflect the termination of any security
interest created under the transaction. If the creditor has
delivered any property to the obligor, the obligor may retain
possession of it. Upon the performance of the creditor's
obligations under this section, the obligor shall tender the
property to the creditor, except that if return of the property
in kind would be impracticable or inequitable, the obligor
shall tender its reasonable value. Tender shall be made at the
location of the property or at the residence of the obligor, at
the option of the obligor. If the creditor does not take
possession of the property within 20 days after tender by the
obligor, ownership of the property vests in the obligor without
obligation on his part to pay for it. The procedures prescribed
by this subsection shall apply except when otherwise ordered by
a court.
(c) Notwithstanding any rule of evidence, written
acknowledgment of receipt of any disclosures required under
this title by a person to whom information, forms, and a
statement is required to be given pursuant to this section does
no more than create a rebuttable presumption of delivery
thereof.
(d) The [Bureau] Agency may, if it finds that such action is
necessary in order to permit homeowners to meet bona fide
personal financial emergencies, prescribe regulations
authorizing the modification or waiver of any rights created
under this section to the extent and under the circumstances
set forth in those regulations.
(e) This section does not apply to--
(1) a residential mortgage transaction as defined in
section [103(w)] 103(x);
(2) a transaction which constitutes a refinancing or
consolidation (with no new advances) of the principal
balance then due and any accrued and unpaid finance
charges of an existing extension of credit by the same
creditor secured by an interest in the same property;
(3) a transaction in which an agency of a State is
the creditor; or
(4) advances under a preexisting open end credit plan
if a security interest has already been retained or
acquired and such advances are in accordance with a
previously established credit limit for such plan.
(f) An obligor's right of rescission shall expire three years
after the date of consummation of the transaction or upon the
sale of the property, whichever occurs first, notwithstanding
the fact that the information and forms required under this
section or any other disclosures required under this chapter
have not been delivered to the obligor, except that if (1) any
agency empowered to enforce the provisions of this title
institutes a proceeding to enforce the provisions of this
section within three years after the date of consummation of
the transaction, (2) such agency finds a violation of section
125, and (3) the obligor's right to rescind is based in whole
or in part on any matter involved in such proceeding, then the
obligor's right of rescission shall expire three years after
the date of consummation of the transaction or upon the earlier
sale of the property, or upon the expiration of one year
following the conclusion of the proceeding, or any judicial
review or period for judicial review thereof, whichever is
later.
(g) In any action in which it is determined that a creditor
has violated this section, in addition to rescission the court
may award relief under section 130 for violations of this title
not relating to the right to rescind.
(h) Limitation on Rescission.--An obligor shall have no
rescission rights arising solely from the form of written
notice used by the creditor to inform the obligor of the rights
of the obligor under this section, if the creditor provided the
obligor the appropriate form of written notice published and
adopted by the [Bureau] Agency, or a comparable written notice
of the rights of the obligor, that was properly completed by
the creditor, and otherwise complied with all other
requirements of this section regarding notice.
(i) Rescission Rights in Foreclosure.--
(1) In general.--Notwithstanding section 139, and
subject to the time period provided in subsection (f),
in addition to any other right of rescission available
under this section for a transaction, after the
initiation of any judicial or nonjudicial foreclosure
process on the primary dwelling of an obligor securing
an extension of credit, the obligor shall have a right
to rescind the transaction equivalent to other
rescission rights provided by this section, if--
(A) a mortgage broker fee is not included in
the finance charge in accordance with the laws
and regulations in effect at the time the
consumer credit transaction was consummated; or
(B) the form of notice of rescission for the
transaction is not the appropriate form of
written notice published and adopted by the
[Bureau] Agency or a comparable written notice,
and otherwise complied with all the
requirements of this section regarding notice.
(2) Tolerance for disclosures.--Notwithstanding
section 106(f), and subject to the time period provided
in subsection (f), for the purposes of exercising any
rescission rights after the initiation of any judicial
or nonjudicial foreclosure process on the principal
dwelling of the obligor securing an extension of
credit, the disclosure of the finance charge and other
disclosures affected by any finance charge shall be
treated as being accurate for purposes of this section
if the amount disclosed as the finance charge does not
vary from the actual finance charge by more than $35 or
is greater than the amount required to be disclosed
under this title.
(3) Right of recoupment under state law.--Nothing in
this subsection affects a consumer's right of
rescission in recoupment under State law.
(4) Applicability.--This subsection shall apply to
all consumer credit transactions in existence or
consummated on or after the date of the enactment of
the Truth in Lending Act Amendments of 1995.
Sec. 127. Open end consumer credit plans
(a) Before opening any account under an open end consumer
credit plan, the creditor shall disclose to the person to whom
credit is to be extended each of the following items, to the
extent applicable:
(1) The conditions under which a finance charge may
be imposed, including the time period (if any) within
which any credit extended may be repaid without
incurring a finance charge, except that the creditor
may, at his election and without disclosure, impose no
such finance charge if payment is received after the
termination of such time period. If no such time period
is provided, the creditor shall disclose such fact.
(2) The method of determining the balance upon which
a finance charge will be imposed.
(3) The method of determining the amount of the
finance charge, including any minimum or fixed amount
imposed as a finance charge.
(4) Where one or more periodic rates may be used to
compute the finance charge, each such rate, the range
of balances to which it is applicable, and the
corresponding nominal annual percentage rate determined
by multiplying the periodic rate by the number of
periods in a year.
(5) Identification of other charges which may be
imposed as part of the plan, and their method of
computation, in accordance with regulations of the
[Bureau] Agency.
(6) In cases where the credit is or will be secured,
a statement that a security interest has been or will
be taken in (A) the property purchased as part of the
credit transaction, or (B) property not purchased as
part of the credit transaction identified by item or
type.
(7) A statement, in a form prescribed by regulations
of the [Bureau] Agency of the protection provided by
sections 161 and 170 to an obligor and the creditor's
responsibilities under sections 162 and 170. With
respect to one billing cycle per calendar year, at
intervals of not less than six months or more than
eighteen months, the creditor shall transmit such
statement to each obligor to whom the creditor is
required to transmit a statement pursuant to section
127(b) for such billing cycle.
(8) In the case of any account under an open end
consumer credit plan which provides for any extension
of credit which is secured by the consumer's principal
dwelling, any information which--
(A) is required to be disclosed under section
127A(a); and
(B) the [Bureau] Agency determines is not
described in any other paragraph of this
subsection.
(b) The creditor of any account under an open end consumer
credit plan shall transmit to the obligor, for each billing
cycle at the end of which there is an outstanding balance in
that account or with respect to which a finance charge is
imposed, a statement setting forth each of the following items
to the extent applicable:
(1) The outstanding balance in the account at the
beginning of the statement period.
(2) The amount and date of each extension of credit
during the period, and a brief identification, on or
accompanying the statement of each extension of credit
in a form prescribed by the [Bureau] Agency sufficient
to enable the obligor either to identify the
transaction or to relate it to copies of sales vouchers
or similar instruments previously furnished, except
that a creditor's failure to disclose such information
in accordance with this paragraph shall not be deemed a
failure to comply with this chapter or this title if
(A) the creditor maintains procedures reasonably
adapted to procure and provide such information, and
(B) the creditor responds to and treats any inquiry for
clarification or documentation as a billing error and
an erroneously billed amount under section 161. In lieu
of complying with the requirements of the previous
sentence, in the case of any transaction in which the
creditor and seller are the same person, as defined by
the [Bureau] Agency, and such person's open end credit
plan has fewer than 15,000 accounts, the creditor may
elect to provide only the amount and date of each
extension of credit during the period and the seller's
name and location where the transaction took place if
(A) a brief identification of the transaction has been
previously furnished, and (B) the creditor responds to
and treats any inquiry for clarification or
documentation as a billing error and an erroneously
billed amount under section 161.
(3) The total amount credited to the account during
the period.
(4) The amount of any finance charge added to the
account during the period, itemized to show the
amounts, if any, due to the application of percentage
rates and the amount, if any, imposed as a minimum or
fixed charge.
(5) Where one or more periodic rates may be used to
compute the finance charge, each such rate, the range
of balances to which it is applicable, and, unless the
annual percentage rate (determined under section
107(a)(2)) is required to be disclosed pursuant to
paragraph (6), the corresponding nominal annual
percentage rate determined by multiplying the periodic
rate by the number of periods in a year.
(6) Where the total finance charge exceeds 50 cents
for a monthly or longer billing cycle, or the pro rata
part of 50 cents for a billing cycle shorter than
monthly, the total finance charge expressed as an
annual percentage rate (determined under section
107(a)(2)), except that if the finance charge is the
sum of two or more products of a rate times a portion
of the balance, the creditor may, in lieu of disclosing
a single rate for the total charge, disclose each such
rate expressed as an annual percentage rate, and the
part of the balance to which it is applicable.
(7) The balance on which the finance charge was
computed and a statement of how the balance was
determined. If the balance is determined without first
deducting all credits during the period, that fact and
the amount of such payments shall also be disclosed.
(8) The outstanding balance in the account at the end
of the period.
(9) The date by which or the period (if any) within
which, payment must be made to avoid additional finance
charges, except that the creditor may, at his election
and without disclosure, impose no such additional
finance charge if payment is received after such date
or the termination of such period.
(10) The address to be used by the creditor for the
purpose of receiving billing inquiries from the
obligor.
(11)(A) A written statement in the following form:
``Minimum Payment Warning: Making only the minimum
payment will increase the amount of interest you pay
and the time it takes to repay your balance.'', or such
similar statement as is established by the [Bureau]
Agency pursuant to consumer testing.
(B) Repayment information that would apply to the
outstanding balance of the consumer under the credit
plan, including--
(i) the number of months (rounded to the
nearest month) that it would take to pay the
entire amount of that balance, if the consumer
pays only the required minimum monthly payments
and if no further advances are made;
(ii) the total cost to the consumer,
including interest and principal payments, of
paying that balance in full, if the consumer
pays only the required minimum monthly payments
and if no further advances are made;
(iii) the monthly payment amount that would
be required for the consumer to eliminate the
outstanding balance in 36 months, if no further
advances are made, and the total cost to the
consumer, including interest and principal
payments, of paying that balance in full if the
consumer pays the balance over 36 months; and
(iv) a toll-free telephone number at which
the consumer may receive information about
accessing credit counseling and debt management
services.
(C)(i) Subject to clause (ii), in making the
disclosures under subparagraph (B), the creditor shall
apply the interest rate or rates in effect on the date
on which the disclosure is made until the date on which
the balance would be paid in full.
(ii) If the interest rate in effect on the date on
which the disclosure is made is a temporary rate that
will change under a contractual provision applying an
index or formula for subsequent interest rate
adjustment, the creditor shall apply the interest rate
in effect on the date on which the disclosure is made
for as long as that interest rate will apply under that
contractual provision, and then apply an interest rate
based on the index or formula in effect on the
applicable billing date.
(D) All of the information described in subparagraph
(B) shall--
(i) be disclosed in the form and manner which
the [Bureau] Agency shall prescribe, by
regulation, and in a manner that avoids
duplication; and
(ii) be placed in a conspicuous and prominent
location on the billing statement.
(E) In the regulations prescribed under subparagraph
(D), the [Bureau] Agency shall require that the
disclosure of such information shall be in the form of
a table that--
(i) contains clear and concise headings for
each item of such information; and
(ii) provides a clear and concise form
stating each item of information required to be
disclosed under each such heading.
(F) In prescribing the form of the table under
subparagraph (E), the [Bureau] Agency shall require
that--
(i) all of the information in the table, and
not just a reference to the table, be placed on
the billing statement, as required by this
paragraph; and
(ii) the items required to be included in the
table shall be listed in the order in which
such items are set forth in subparagraph (B).
(G) In prescribing the form of the table under
subparagraph (D), the [Bureau] Agency shall employ
terminology which is different than the terminology
which is employed in subparagraph (B), if such
terminology is more easily understood and conveys
substantially the same meaning.
(12) Requirements relating to late payment deadlines
and penalties.--
(A) Late payment deadline required to be
disclosed.--In the case of a credit card
account under an open end consumer credit plan
under which a late fee or charge may be imposed
due to the failure of the obligor to make
payment on or before the due date for such
payment, the periodic statement required under
subsection (b) with respect to the account
shall include, in a conspicuous location on the
billing statement, the date on which the
payment is due or, if different, the date on
which a late payment fee will be charged,
together with the amount of the fee or charge
to be imposed if payment is made after that
date.
(B) Disclosure of increase in interest rates
for late payments.--If 1 or more late payments
under an open end consumer credit plan may
result in an increase in the annual percentage
rate applicable to the account, the statement
required under subsection (b) with respect to
the account shall include conspicuous notice of
such fact, together with the applicable penalty
annual percentage rate, in close proximity to
the disclosure required under subparagraph (A)
of the date on which payment is due under the
terms of the account.
(C) Payments at local branches.--If the
creditor, in the case of a credit card account
referred to in subparagraph (A), is a financial
institution which maintains branches or offices
at which payments on any such account are
accepted from the obligor in person, the date
on which the obligor makes a payment on the
account at such branch or office shall be
considered to be the date on which the payment
is made for purposes of determining whether a
late fee or charge may be imposed due to the
failure of the obligor to make payment on or
before the due date for such payment.
(c) Disclosure in Credit and Charge Card Applications and
Solicitations.--
(1) Direct mail applications and solicitations.--
(A) Information in tabular format.--Any
application to open a credit card account for
any person under an open end consumer credit
plan, or a solicitation to open such an account
without requiring an application, that is
mailed to consumers shall disclose the
following information, subject to subsection
(e) and section 122(c):
(i) Annual percentage rates.--
(I) Each annual percentage
rate applicable to extensions
of credit under such credit
plan.
(II) Where an extension of
credit is subject to a variable
rate, the fact that the rate is
variable, the annual percentage
rate in effect at the time of
the mailing, and how the rate
is determined.
(III) Where more than one
rate applies, the range of
balances to which each rate
applies.
(ii) Annual and other fees.--
(I) Any annual fee, other
periodic fee, or membership fee
imposed for the issuance or
availability of a credit card,
including any account
maintenance fee or other charge
imposed based on activity or
inactivity for the account
during the billing cycle.
(II) Any minimum finance
charge imposed for each period
during which any extension of
credit which is subject to a
finance charge is outstanding.
(III) Any transaction charge
imposed in connection with use
of the card to purchase goods
or services.
(iii) Grace period.--
(I) The date by which or the
period within which any credit
extended under such credit plan
for purchases of goods or
services must be repaid to
avoid incurring a finance
charge, and, if no such period
is offered, such fact shall be
clearly stated.
(II) If the length of such
``grace period'' varies, the
card issuer may disclose the
range of days in the grace
period, the minimum number of
days in the grace period, or
the average number of days in
the grace period, if the
disclosure is identified as
such.
(iv) Balance calculation method.--
(I) The name of the balance
calculation method used in
determining the balance on
which the finance charge is
computed if the method used has
been defined by the [Bureau]
Agency, or a detailed
explanation of the balance
calculation method used if the
method has not been so defined.
(II) In prescribing
regulations to carry out this
clause, the [Bureau] Agency
shall define and name not more
than the 5 balance calculation
methods determined by the
[Bureau] Agency to be the most
commonly used methods.
(B) Other information.--In addition to the
information required to be disclosed under
subparagraph (A), each application or
solicitation to which such subparagraph applies
shall disclose clearly and conspicuously the
following information, subject to subsections
(e) and (f):
(i) Cash advance fee.--Any fee
imposed for an extension of credit in
the form of cash.
(ii) Late fee.--Any fee imposed for a
late payment.
(iii) Over-the-limit fee.--Any fee
imposed in connection with an extension
of credit in excess of the amount of
credit authorized to be extended with
respect to such account.
(2) Telephone solicitations.--
(A) In general.--In any telephone
solicitation to open a credit card account for
any person under an open end consumer credit
plan, the person making the solicitation shall
orally disclose the information described in
paragraph (1)(A).
(B) Exception.--Subparagraph (A) shall not
apply to any telephone solicitation if--
(i) the credit card issuer--
(I) does not impose any fee
described in paragraph
(1)(A)(ii)(I); or
(II) does not impose any fee
in connection with telephone
solicitations unless the
consumer signifies acceptance
by using the card;
(ii) the card issuer discloses
clearly and conspicuously in writing
the information described in paragraph
(1) within 30 days after the consumer
requests the card, but in no event
later than the date of delivery of the
card; and
(iii) the card issuer discloses
clearly and conspicuously that the
consumer is not obligated to accept the
card or account and the consumer will
not be obligated to pay any of the fees
or charges disclosed unless the
consumer elects to accept the card or
account by using the card.
(3) Applications and solicitations by other means.--
(A) In general.--Any application to open a
credit card account for any person under an
open end consumer credit plan, and any
solicitation to open such an account without
requiring an application, that is made
available to the public or contained in
catalogs, magazines, or other publications
shall meet the disclosure requirements of
subparagraph (B), (C), or (D).
(B) Specific information.--An application or
solicitation described in subparagraph (A)
meets the requirement of this subparagraph if
such application or solicitation contains--
(i) the information--
(I) described in paragraph
(1)(A) in the form required
under section 122(c) of this
chapter, subject to subsection
(e), and
(II) described in paragraph
(1)(B) in a clear and
conspicuous form, subject to
subsections (e) and (f);
(ii) a statement, in a conspicuous
and prominent location on the
application or solicitation, that--
(I) the information is
accurate as of the date the
application or solicitation was
printed;
(II) the information
contained in the application or
solicitation is subject to
change after such date; and
(III) the applicant should
contact the creditor for
information on any change in
the information contained in
the application or solicitation
since it was printed;
(iii) a clear and conspicuous
disclosure of the date the application
or solicitation was printed; and
(iv) a disclosure, in a conspicuous
and prominent location on the
application or solicitation, of a toll
free telephone number or a mailing
address at which the applicant may
contact the creditor to obtain any
change in the information provided in
the application or solicitation since
it was printed.
(C) General information without any specific
term.--An application or solicitation described
in subparagraph (A) meets the requirement of
this subparagraph if such application or
solicitation--
(i) contains a statement, in a
conspicuous and prominent location on
the application or solicitation, that--
(I) there are costs
associated with the use of
credit cards; and
(II) the applicant may
contact the creditor to request
disclosure of specific
information of such costs by
calling a toll free telephone
number or by writing to an
address, specified in the
application;
(ii) contains a disclosure, in a
conspicuous and prominent location on
the application or solicitation, of a
toll free telephone number and a
mailing address at which the applicant
may contact the creditor to obtain such
information; and
(iii) does not contain any of the
items described in paragraph (1).
(D) Applications or solicitations containing
subsection (a) disclosures.--An application or
solicitation meets the requirement of this
subparagraph if it contains, or is accompanied
by--
(i) the disclosures required by
paragraphs (1) through (6) of
subsection (a);
(ii) the disclosures required by
subparagraphs (A) and (B) of paragraph
(1) of this subsection included clearly
and conspiciously (except that the
provisions of section 122(c) shall not
apply); and
(iii) a toll free telephone number or
a mailing address at which the
applicant may contact the creditor to
obtain any change in the information
provided.
(E) Prompt response to information
requests.--Upon receipt of a request for any of
the information referred to in subparagraph
(B), (C), or (D), the card issuer or the agent
of such issuer shall promptly disclose all of
the information described in paragraph (1).
(4) Charge card applications and solicitations.--
(A) In general.--Any application or
solicitation to open a charge card account
shall disclose clearly and conspicuously the
following information in the form required by
section 122(c) of this chapter, subject to
subsection (e):
(i) Any annual fee, other periodic
fee, or membership fee imposed for the
issuance or availability of the charge
card, including any account maintenance
fee or other charge imposed based on
activity or inactivity for the account
during the billing cycle.
(ii) Any transaction charge imposed
in connection with use of the card to
purchase goods or services.
(iii) A statement that charges
incurred by use of the charge card are
due and payable upon receipt of a
periodic statement rendered for such
charge card account.
(B) Other information.--In addition to the
information required to be disclosed under
subparagraph (A), each written application or
solicitation to which such subparagraph applies
shall disclose clearly and conspicuously the
following information, subject to subsections
(e) and (f):
(i) Cash advance fee.--Any fee
imposed for an extension of credit in
the form of cash.
(ii) Late fee.--Any fee imposed for a
late payment.
(iii) Over-the-limit fee.--Any fee
imposed in connection with an extension
of credit in excess of the amount of
credit authorized to be extended with
respect to such account.
(C) Applications and solicitations by other
means.--Any application to open a charge card
account, and any solicitation to open such an
account without requiring an application, that
is made available to the public or contained in
catalogs, magazines, or other publications
shall contain--
(i) the information--
(I) described in subparagraph
(A) in the form required under
section 122(c) of this chapter,
subject to subsection (e), and
(II) described in
subparagraph (B) in a clear and
conspicuous form, subject to
subsections (e) and (f);
(ii) a statement, in a conspicuous
and prominent location on the
application or solicitation, that--
(I) the information is
accurate as of the date the
application or solicitation was
printed;
(II) the information
contained in the application or
solicitation is subject to
change after such date; and
(III) the applicant should
contact the creditor for
information on any change in
the information contained in
the application or solicitation
since it was printed;
(iii) a clear and conspicuous
disclosure of the date the application
or solicitation was printed; and
(iv) a disclosure, in a conspicuous
and prominent location on the
application or solicitation, of a toll
free telephone number or a mailing
address at which the applicant may
contact the creditor to obtain any
change in the information provided in
the application or solicitation since
it was printed.
(D) Issuers of charge cards which provide
access to open end consumer credit plans.--If a
charge card permits the card holder to receive
an extension of credit under an open end
consumer credit plan, which is not maintained
by the charge card issuer, the charge card
issuer may provide the information described in
subparagraphs (A) and (B) in the form required
by such subparagraphs in lieu of the
information required to be provided under
paragraph (1), (2), or (3) with respect to any
credit extended under such plan, if the charge
card issuer discloses clearly and conspicuously
to the consumer in the application or
solicitation that--
(i) the charge card issuer will make
an independent decision as to whether
to issue the card;
(ii) the charge card may arrive
before the decision is made with
respect to an extension of credit under
an open end consumer credit plan; and
(iii) approval by the charge card
issuer does not constitute approval by
the issuer of the extension of credit.
The information required to be disclosed under
paragraph (1) shall be provided to the charge
card holder by the creditor which maintains
such open end consumer credit plan before the
first extension of credit under such plan.
(E) Charge card defined.--For the purposes of
this subsection, the term ``charge card'' means
a card, plate, or other single credit device
that may be used from time to time to obtain
credit which is not subject to a finance
charge.
(5) Regulatory authority of the [bureau] agency.--The
[Bureau] Agency may, by regulation, require the
disclosure of information in addition to that otherwise
required by this subsection or subsection (d), and
modify any disclosure of information required by this
subsection or subsection (d), in any application to
open a credit card account for any person under an open
end consumer credit plan or any application to open a
charge card account for any person, or a solicitation
to open any such account without requiring an
application, if the [Bureau] Agency determines that
such action is necessary to carry out the purposes of,
or prevent evasions of, any paragraph of this
subsection.
(6) Additional notice concerning ``introductory
rates''.--
(A) In general.--Except as provided in
subparagraph (B), an application or
solicitation to open a credit card account and
all promotional materials accompanying such
application or solicitation for which a
disclosure is required under paragraph (1), and
that offers a temporary annual percentage rate
of interest, shall--
(i) use the term ``introductory'' in
immediate proximity to each listing of
the temporary annual percentage rate
applicable to such account, which term
shall appear clearly and conspicuously;
(ii) if the annual percentage rate of
interest that will apply after the end
of the temporary rate period will be a
fixed rate, state in a clear and
conspicuous manner in a prominent
location closely proximate to the first
listing of the temporary annual
percentage rate (other than a listing
of the temporary annual percentage rate
in the tabular format described in
section 122(c)), the time period in
which the introductory period will end
and the annual percentage rate that
will apply after the end of the
introductory period; and
(iii) if the annual percentage rate
that will apply after the end of the
temporary rate period will vary in
accordance with an index, state in a
clear and conspicuous manner in a
prominent location closely proximate to
the first listing of the temporary
annual percentage rate (other than a
listing in the tabular format
prescribed by section 122(c)), the time
period in which the introductory period
will end and the rate that will apply
after that, based on an annual
percentage rate that was in effect
within 60 days before the date of
mailing the application or
solicitation.
(B) Exception.--Clauses (ii) and (iii) of
subparagraph (A) do not apply with respect to
any listing of a temporary annual percentage
rate on an envelope or other enclosure in which
an application or solicitation to open a credit
card account is mailed.
(C) Conditions for introductory rates.--An
application or solicitation to open a credit
card account for which a disclosure is required
under paragraph (1), and that offers a
temporary annual percentage rate of interest
shall, if that rate of interest is revocable
under any circumstance or upon any event,
clearly and conspicuously disclose, in a
prominent manner on or with such application or
solicitation--
(i) a general description of the
circumstances that may result in the
revocation of the temporary annual
percentage rate; and
(ii) if the annual percentage rate
that will apply upon the revocation of
the temporary annual percentage rate--
(I) will be a fixed rate, the
annual percentage rate that
will apply upon the revocation
of the temporary annual
percentage rate; or
(II) will vary in accordance
with an index, the rate that
will apply after the temporary
rate, based on an annual
percentage rate that was in
effect within 60 days before
the date of mailing the
application or solicitation.
(D) Definitions.--In this paragraph--
(i) the terms ``temporary annual
percentage rate of interest'' and
``temporary annual percentage rate''
mean any rate of interest applicable to
a credit card account for an
introductory period of less than 1
year, if that rate is less than an
annual percentage rate that was in
effect within 60 days before the date
of mailing the application or
solicitation; and
(ii) the term ``introductory period''
means the maximum time period for which
the temporary annual percentage rate
may be applicable.
(E) Relation to other disclosure
requirements.--Nothing in this paragraph may be
construed to supersede subsection (a) of
section 122, or any disclosure required by
paragraph (1) or any other provision of this
subsection.
(7) Internet-based solicitations.--
(A) In general.--In any solicitation to open
a credit card account for any person under an
open end consumer credit plan using the
Internet or other interactive computer service,
the person making the solicitation shall
clearly and conspicuously disclose--
(i) the information described in
subparagraphs (A) and (B) of paragraph
(1); and
(ii) the information described in
paragraph (6).
(B) Form of disclosure.--The disclosures
required by subparagraph (A) shall be--
(i) readily accessible to consumers
in close proximity to the solicitation
to open a credit card account; and
(ii) updated regularly to reflect the
current policies, terms, and fee
amounts applicable to the credit card
account.
(C) Definitions.--For purposes of this
paragraph--
(i) the term ``Internet'' means the
international computer network of both
Federal and non-Federal interoperable
packet switched data networks; and
(ii) the term ``interactive computer
service'' means any information
service, system, or access software
provider that provides or enables
computer access by multiple users to a
computer server, including specifically
a service or system that provides
access to the Internet and such systems
operated or services offered by
libraries or educational institutions.
(8) Applications from underage consumers.--
(A) Prohibition on issuance.--No credit card
may be issued to, or open end consumer credit
plan established by or on behalf of, a consumer
who has not attained the age of 21, unless the
consumer has submitted a written application to
the card issuer that meets the requirements of
subparagraph (B).
(B) Application requirements.--An application
to open a credit card account by a consumer who
has not attained the age of 21 as of the date
of submission of the application shall
require--
(i) the signature of a cosigner,
including the parent, legal guardian,
spouse, or any other individual who has
attained the age of 21 having a means
to repay debts incurred by the consumer
in connection with the account,
indicating joint liability for debts
incurred by the consumer in connection
with the account before the consumer
has attained the age of 21; or
(ii) submission by the consumer of
financial information, including
through an application, indicating an
independent means of repaying any
obligation arising from the proposed
extension of credit in connection with
the account.
(C) Safe harbor.--The [Bureau] Agency shall
promulgate regulations providing standards
that, if met, would satisfy the requirements of
subparagraph (B)(ii).
(d) Disclosure Prior to Renewal.--
(1) In general.--A card issuer that has changed or
amended any term of the account since the last renewal
that has not been previously disclosed or that imposes
any fee described in subsection (c)(1)(A)(ii)(I) or
(c)(4)(A)(i) shall transmit to a consumer at least 30
days prior to the scheduled renewal date of the
consumer's credit or charge card account a clear and
conspicuous disclosure of--
(A) the date by which, the month by which, or
the billing period at the close of which, the
account will expire if not renewed;
(B) the information described in subsection
(c)(1)(A) or (c)(4)(A) that would apply if the
account were renewed, subject to subsection
(e); and
(C) the method by which the consumer may
terminate continued credit availability under
the account.
(2) Short-term renewals.--The [Bureau] Agency may by
regulation provide for fewer disclosures than are
required by paragraph (1) in the case of an account
which is renewable for a period of less than 6 months.
(e) Other Rules for Disclosures Under Subsections (c) and
(d).--
(1) Fees determined on the basis of a percentage.--If
the amount of any fee required to be disclosed under
subsection (c) or (d) is determined on the basis of a
percentage of another amount, the percentage used in
making such determination and the identification of the
amount against which such percentage is applied shall
be disclosed in lieu of the amount of such fee.
(2) Disclosure only of fees actually imposed.--If a
credit or charge card issuer does not impose any fee
required to be disclosed under any provision of
subsection (c) or (d), such provision shall not apply
with respect to such issuer.
(f) Disclosure of Range of Certain Fees Which Vary by State
Allowed.--If the amount of any fee required to be disclosed by
a credit or charge card issuer under paragraph (1)(B),
(3)(B)(i)(II), (4)(B), or (4)(C)(i)(II) of subsection (c)
varies from State to State, the card issuer may disclose the
range of such fees for purposes of subsection (c) in lieu of
the amount for each applicable State, if such disclosure
includes a statement that the amount of such fee varies from
State to State.
(g) Insurance in Connection With Certain Open End Credit Card
Plans.--
(1) Change in insurance carrier.--Whenever a card
issuer that offers any guarantee or insurance for
repayment of all or part of the outstanding balance of
an open end credit card plan proposes to change the
person providing that guarantee or insurance, the card
issuer shall send each insured consumer written notice
of the proposed change not less than 30 days prior to
the change, including notice of any increase in the
rate or substantial decrease in coverage or service
which will result from such change. Such notice may be
included on or with the monthly statement provided to
the consumer prior to the month in which the proposed
change would take effect.
(2) Notice of new insurance coverage.--In any case in
which a proposed change described in paragraph (1)
occurs, the insured consumer shall be given the name
and address of the new guarantor or insurer and a copy
of the policy or group certificate containing the basic
terms and conditions, including the premium rate to be
charged.
(3) Right to discontinue guarantee or insurance.--The
notices required under paragraphs (1) and (2) shall
each include a statement that the consumer has the
option to discontinue the insurance or guarantee.
(4) No preemption of state law.--No provision of this
subsection shall be construed as superseding any
provision of State law which is applicable to the
regulation of insurance.
(5) Bureau definition of substantial decrease in
coverage or service.--The [Bureau] Agency shall define,
in regulations, what constitutes a ``substantial
decrease in coverage or service'' for purposes of
paragraph (1).
(h) Prohibition on Certain Actions for Failure To Incur
Finance Charges.--A creditor of an account under an open end
consumer credit plan may not terminate an account prior to its
expiration date solely because the consumer has not incurred
finance charges on the account. Nothing in this subsection
shall prohibit a creditor from terminating an account for
inactivity in 3 or more consecutive months.
(i) Advance Notice of Rate Increase and Other Changes
Required.--
(1) Advance notice of increase in interest rate
required.--In the case of any credit card account under
an open end consumer credit plan, a creditor shall
provide a written notice of an increase in an annual
percentage rate (except in the case of an increase
described in paragraph (1), (2), or (3) of section
171(b)) not later than 45 days prior to the effective
date of the increase.
(2) Advance notice of other significant changes
required.--In the case of any credit card account under
an open end consumer credit plan, a creditor shall
provide a written notice of any significant change, as
determined by rule of the [Bureau] Agency, in the terms
(including an increase in any fee or finance charge,
other than as provided in paragraph (1)) of the
cardholder agreement between the creditor and the
obligor, not later than 45 days prior to the effective
date of the change.
(3) Notice of right to cancel.--Each notice required
by paragraph (1) or (2) shall be made in a clear and
conspicuous manner, and shall contain a brief statement
of the right of the obligor to cancel the account
pursuant to rules established by the [Bureau] Agency
before the effective date of the subject rate increase
or other change.
(4) Rule of construction.--Closure or cancellation of
an account by the obligor shall not constitute a
default under an existing cardholder agreement, and
shall not trigger an obligation to immediately repay
the obligation in full or through a method that is less
beneficial to the obligor than one of the methods
described in section 171(c)(2), or the imposition of
any other penalty or fee.
(j) Prohibition on Penalties for On-Time Payments.--
(1) Prohibition on double-cycle billing and penalties
for on-time payments.--Except as provided in paragraph
(2), a creditor may not impose any finance charge on a
credit card account under an open end consumer credit
plan as a result of the loss of any time period
provided by the creditor within which the obligor may
repay any portion of the credit extended without
incurring a finance charge, with respect to--
(A) any balances for days in billing cycles
that precede the most recent billing cycle; or
(B) any balances or portions thereof in the
current billing cycle that were repaid within
such time period.
(2) Exceptions.--Paragraph (1) does not apply to--
(A) any adjustment to a finance charge as a
result of the resolution of a dispute; or
(B) any adjustment to a finance charge as a
result of the return of a payment for
insufficient funds.
(k) Opt-in Required for Over-the-Limit Transactions if Fees
Are Imposed.--
(1) In general.--In the case of any credit card
account under an open end consumer credit plan under
which an over-the-limit fee may be imposed by the
creditor for any extension of credit in excess of the
amount of credit authorized to be extended under such
account, no such fee shall be charged, unless the
consumer has expressly elected to permit the creditor,
with respect to such account, to complete transactions
involving the extension of credit under such account in
excess of the amount of credit authorized.
(2) Disclosure by creditor.--No election by a
consumer under paragraph (1) shall take effect unless
the consumer, before making such election, received a
notice from the creditor of any over-the-limit fee in
the form and manner, and at the time, determined by the
[Bureau] Agency. If the consumer makes the election
referred to in paragraph (1), the creditor shall
provide notice to the consumer of the right to revoke
the election, in the form prescribed by the [Bureau]
Agency, in any periodic statement that includes notice
of the imposition of an over-the-limit fee during the
period covered by the statement.
(3) Form of election.--A consumer may make or revoke
the election referred to in paragraph (1) orally,
electronically, or in writing, pursuant to regulations
prescribed by the [Bureau] Agency. The [Bureau] Agency
shall prescribe regulations to ensure that the same
options are available for both making and revoking such
election.
(4) Time of election.--A consumer may make the
election referred to in paragraph (1) at any time, and
such election shall be effective until the election is
revoked in the manner prescribed under paragraph (3).
(5) Regulations.--The [Bureau] Agency shall prescribe
regulations--
(A) governing disclosures under this
subsection; and
(B) that prevent unfair or deceptive acts or
practices in connection with the manipulation
of credit limits designed to increase over-the-
limit fees or other penalty fees.
(6) Rule of construction.--Nothing in this subsection
shall be construed to prohibit a creditor from
completing an over-the-limit transaction, provided that
a consumer who has not made a valid election under
paragraph (1) is not charged an over-the-limit fee for
such transaction.
(7) Restriction on fees charged for an over-the-limit
transaction.--With respect to a credit card account
under an open end consumer credit plan, an over-the-
limit fee may be imposed only once during a billing
cycle if the credit limit on the account is exceeded,
and an over-the-limit fee, with respect to such excess
credit, may be imposed only once in each of the 2
subsequent billing cycles, unless the consumer has
obtained an additional extension of credit in excess of
such credit limit during any such subsequent cycle or
the consumer reduces the outstanding balance below the
credit limit as of the end of such billing cycle.
(l) Limit on Fees Related to Method of Payment.--With respect
to a credit card account under an open end consumer credit
plan, the creditor may not impose a separate fee to allow the
obligor to repay an extension of credit or finance charge,
whether such repayment is made by mail, electronic transfer,
telephone authorization, or other means, unless such payment
involves an expedited service by a service representative of
the creditor.
(m) Use of Term ``Fixed Rate''.--With respect to the terms of
any credit card account under an open end consumer credit plan,
the term ``fixed'', when appearing in conjunction with a
reference to the annual percentage rate or interest rate
applicable with respect to such account, may only be used to
refer to an annual percentage rate or interest rate that will
not change or vary for any reason over the period specified
clearly and conspicuously in the terms of the account.
(n) Standards Applicable to Initial Issuance of Subprime or
``Fee Harvester'' Cards.--
(1) In general.--If the terms of a credit card
account under an open end consumer credit plan require
the payment of any fees (other than any late fee, over-
the-limit fee, or fee for a payment returned for
insufficient funds) by the consumer in the first year
during which the account is opened in an aggregate
amount in excess of 25 percent of the total amount of
credit authorized under the account when the account is
opened, no payment of any fees (other than any late
fee, over-the-limit fee, or fee for a payment returned
for insufficient funds) may be made from the credit
made available under the terms of the account.
(2) Rule of construction.--No provision of this
subsection may be construed as authorizing any
imposition or payment of advance fees otherwise
prohibited by any provision of law.
(o) Due Dates for Credit Card Accounts.--
(1) In general.--The payment due date for a credit
card account under an open end consumer credit plan
shall be the same day each month.
(2) Weekend or holiday due dates.--If the payment due
date for a credit card account under an open end
consumer credit plan is a day on which the creditor
does not receive or accept payments by mail (including
weekends and holidays), the creditor may not treat a
payment received on the next business day as late for
any purpose.
(p) Parental Approval Required To Increase Credit Lines for
Accounts for Which Parent Is Jointly Liable.--No increase may
be made in the amount of credit authorized to be extended under
a credit card account for which a parent, legal guardian, or
spouse of the consumer, or any other individual has assumed
joint liability for debts incurred by the consumer in
connection with the account before the consumer attains the age
of 21, unless that parent, guardian, or spouse approves in
writing, and assumes joint liability for, such increase.
(r) College Card Agreements.--
(1) Definitions.--For purposes of this subsection,
the following definitions shall apply:
(A) College affinity card.--The term
``college affinity card'' means a credit card
issued by a credit card issuer under an open
end consumer credit plan in conjunction with an
agreement between the issuer and an institution
of higher education, or an alumni organization
or foundation affiliated with or related to
such institution, under which such cards are
issued to college students who have an affinity
with such institution, organization and--
(i) the creditor has agreed to donate
a portion of the proceeds of the credit
card to the institution, organization,
or foundation (including a lump sum or
1-time payment of money for access);
(ii) the creditor has agreed to offer
discounted terms to the consumer; or
(iii) the credit card bears the name,
emblem, mascot, or logo of such
institution, organization, or
foundation, or other words, pictures,
or symbols readily identified with such
institution, organization, or
foundation.
(B) College student credit card account.--The
term ``college student credit card account''
means a credit card account under an open end
consumer credit plan established or maintained
for or on behalf of any college student.
(C) College student.--The term ``college
student'' means an individual who is a full-
time or a part-time student attending an
institution of higher education.
(D) Institution of higher education.--The
term ``institution of higher education'' has
the same meaning as in section 101 and 102 of
the Higher Education Act of 1965 (20 U.S.C.
1001 and 1002).
(2) Reports by creditors.--
(A) In general.--Each creditor shall submit
an annual report to the [Bureau] Agency
containing the terms and conditions of all
business, marketing, and promotional agreements
and college affinity card agreements with an
institution of higher education, or an alumni
organization or foundation affiliated with or
related to such institution, with respect to
any college student credit card issued to a
college student at such institution.
(B) Details of report.--The information
required to be reported under subparagraph (A)
includes--
(i) any memorandum of understanding
between or among a creditor, an
institution of higher education, an
alumni association, or foundation that
directly or indirectly relates to any
aspect of any agreement referred to in
such subparagraph or controls or
directs any obligations or distribution
of benefits between or among any such
entities;
(ii) the amount of any payments from
the creditor to the institution,
organization, or foundation during the
period covered by the report, and the
precise terms of any agreement under
which such amounts are determined; and
(iii) the number of credit card
accounts covered by any such agreement
that were opened during the period
covered by the report, and the total
number of credit card accounts covered
by the agreement that were outstanding
at the end of such period.
(C) Aggregation by institution.--The
information required to be reported under
subparagraph (A) shall be aggregated with
respect to each institution of higher education
or alumni organization or foundation affiliated
with or related to such institution.
(D) Initial report.--The initial report
required under subparagraph (A) shall be
submitted to the [Bureau] Agency before the end
of the 9-month period beginning on the date of
enactment of this subsection.
(3) Reports by [bureau] agency.--The [Bureau] Agency
shall submit to the Congress, and make available to the
public, an annual report that lists the information
concerning credit card agreements submitted to the
[Bureau] Agency under paragraph (2) by each institution
of higher education, alumni organization, or
foundation.
SEC. 127A. DISCLOSURE REQUIREMENTS FOR OPEN END CONSUMER CREDIT PLANS
SECURED BY THE CONSUMER'S PRINCIPAL DWELLING.
(a) Application Disclosures.--In the case of any open end
consumer credit plan which provides for any extension of credit
which is secured by the consumer's principal dwelling, the
creditor shall make the following disclosures in accordance
with subsection (b):
(1) Fixed annual percentage rate.--Each annual
percentage rate imposed in connection with extensions
of credit under the plan and a statement that such rate
does not include costs other than interest.
(2) Variable percentage rate.--In the case of a plan
which provides for variable rates of interest on credit
extended under the plan--
(A) a description of the manner in which such
rate will be computed and a statement that such
rate does not include costs other than
interest;
(B) a description of the manner in which any
changes in the annual percentage rate will be
made, including--
(i) any negative amortization and
interest rate carryover;
(ii) the timing of any such changes;
(iii) any index or margin to which
such changes in the rate are related;
and
(iv) a source of information about
any such index;
(C) if an initial annual percentage rate is
offered which is not based on an index--
(i) a statement of such rate and the
period of time such initial rate will
be in effect; and
(ii) a statement that such rate does
not include costs other than interest;
(D) a statement that the consumer should ask
about the current index value and interest
rate;
(E) a statement of the maximum amount by
which the annual percentage rate may change in
any 1-year period or a statement that no such
limit exists;
(F) a statement of the maximum annual
percentage rate that may be imposed at any time
under the plan;
(G) subject to subsection (b)(3), a table,
based on a $10,000 extension of credit, showing
how the annual percentage rate and the minimum
periodic payment amount under each repayment
option of the plan would have been affected
during the preceding 15-year period by changes
in any index used to compute such rate;
(H) a statement of--
(i) the maximum annual percentage
rate which may be imposed under each
repayment option of the plan;
(ii) the minimum amount of any
periodic payment which may be required,
based on a $10,000 outstanding balance,
under each such option when such
maximum annual percentage rate is in
effect; and
(iii) the earliest date by which such
maximum annual interest rate may be
imposed; and
(I) a statement that interest rate
information will be provided on or with each
periodic statement.
(3) Other fees imposed by the creditor.--An
itemization of any fees imposed by the creditor in
connection with the availability or use of credit under
such plan, including annual fees, application fees,
transaction fees, and closing costs (including costs
commonly described as ``points''), and the time when
such fees are payable.
(4) Estimates of fees which may be imposed by third
parties.--
(A) Aggregate amount.--An estimate, based on
the creditor's experience with such plans and
stated as a single amount or as a reasonable
range, of the aggregate amount of additional
fees that may be imposed by third parties (such
as governmental authorities, appraisers, and
attorneys) in connection with opening an
account under the plan.
(B) Statement of availability.--A statement
that the consumer may ask the creditor for a
good faith estimate by the creditor of the fees
that may be imposed by third parties.
(5) Statement of risk of loss of dwelling.--A
statement that--
(A) any extension of credit under the plan is
secured by the consumer's dwelling; and
(B) in the event of any default, the consumer
risks the loss of the dwelling.
(6) Conditions to which disclosed terms are
subject.--
(A) Period during which such terms are
available.--A clear and conspicuous statement--
(i) of the time by which an
application must be submitted to obtain
the terms disclosed; or
(ii) if applicable, that the terms
are subject to change.
(B) Right of refusal if certain terms
change.--A statement that--
(i) the consumer may elect not to
enter into an agreement to open an
account under the plan if any term
changes (other than a change
contemplated by a variable feature of
the plan) before any such agreement is
final; and
(ii) if the consumer makes an
election described in clause (i), the
consumer is entitled to a refund of all
fees paid in connection with the
application.
(C) Retention of information.--A statement
that the consumer should make or otherwise
retain a copy of information disclosed under
this subparagraph.
(7) Rights of creditor with respect to extensions of
credit.--A statement that--
(A) under certain conditions, the creditor
may terminate any account under the plan and
require immediate repayment of any outstanding
balance, prohibit any additional extension of
credit to the account, or reduce the credit
limit applicable to the account; and
(B) the consumer may receive, upon request,
more specific information about the conditions
under which the creditor may take any action
described in subparagraph (A).
(8) Repayment options and minimum periodic
payments.--The repayment options under the plan,
including--
(A) if applicable, any differences in
repayment options with regard to--
(i) any period during which
additional extensions of credit may be
obtained; and
(ii) any period during which
repayment is required to be made and no
additional extensions of credit may be
obtained;
(B) the length of any repayment period,
including any differences in the length of any
repayment period with regard to the periods
described in clauses (i) and (ii) of
subparagraph (A); and
(C) an explanation of how the amount of any
minimum monthly or periodic payment will be
determined under each such option, including
any differences in the determination of any
such amount with regard to the periods
described in clauses (i) and (ii) of
subparagraph (A).
(9) Example of minimum payments and maximum repayment
period.--An example, based on a $10,000 outstanding
balance and the interest rate (other than a rate not
based on the index under the plan) which is, or was
recently, in effect under such plan, showing the
minimum monthly or periodic payment, and the time it
would take to repay the entire $10,000 if the consumer
paid only the minimum periodic payments and obtained no
additional extensions of credit.
(10) Statement concerning balloon payments.--If,
under any repayment option of the plan, the payment of
not more than the minimum periodic payments required
under such option over the length of the repayment
period--
(A) would not repay any of the principal
balance; or
(B) would repay less than the outstanding
balance by the end of such period,
as the case may be, a statement of such fact, including
an explicit statement that at the end of such repayment
period a balloon payment (as defined in section 147(f))
would result which would be required to be paid in full
at that time.
(11) Negative amortization.--If applicable, a
statement that--
(A) any limitation in the plan on the amount
of any increase in the minimum payments may
result in negative amortization;
(B) negative amortization increases the
outstanding principal balance of the account;
and
(C) negative amortization reduces the
consumer's equity in the consumer's dwelling.
(12) Limitations and minimum amount requirements on
extensions of credit.--
(A) Number and dollar amount limitations.--
Any limitation contained in the plan on the
number of extensions of credit and the amount
of credit which may be obtained during any
month or other defined time period.
(B) Minimum balance and other transaction
amount requirements.--Any requirement which
establishes a minimum amount for--
(i) the initial extension of credit
to an account under the plan;
(ii) any subsequent extension of
credit to an account under the plan; or
(iii) any outstanding balance of an
account under the plan.
(13) Statement regarding tax deductibility.--A
statement that--
(A) the consumer should consult a tax advisor
regarding the deductibility of interest and
charges under the plan; and
(B) in any case in which the extension of
credit exceeds the fair market value (as
defined under the Internal Revenue Code of
1986) of the dwelling, the interest on the
portion of the credit extension that is greater
than the fair market value of the dwelling is
not tax deductible for Federal income tax
purposes.
(14) Disclosure requirements established by [bureau]
agency.--Any other term which the [Bureau] Agency
requires, in regulations, to be disclosed.
(b) Time and Form of Disclosures.--
(1) Time of disclosure.--
(A) In general.--The disclosures required
under subsection (a) with respect to any open
end consumer credit plan which provides for any
extension of credit which is secured by the
consumer's principal dwelling and the pamphlet
required under subsection (e) shall be provided
to any consumer at the time the creditor
distributes an application to establish an
account under such plan to such consumer.
(B) Telephone, publications, and 3d party
applications.--In the case of telephone
applications, applications contained in
magazines or other publications, or
applications provided by a third party, the
disclosures required under subsection (a) and
the pamphlet required under subsection (e)
shall be provided by the creditor before the
end of the 3-day period beginning on the date
the creditor receives a completed application
from a consumer.
(2) Form.--
(A) In general.--Except as provided in
paragraph (1)(B), the disclosures required
under subsection (a) shall be provided on or
with any application to establish an account
under an open end consumer credit plan which
provides for any extension of credit which is
secured by the consumer's principal dwelling.
(B) Segregation of required disclosures from
other information.--The disclosures required
under subsection (a) shall be conspicuously
segregated from all other terms, data, or
additional information provided in connection
with the application, either by grouping the
disclosures separately on the application form
or by providing the disclosures on a separate
form, in accordance with regulations of the
[Bureau] Agency.
(C) Precedence of certain information.--The
disclosures required by paragraphs (5), (6),
and (7) of subsection (a) shall precede all of
the other required disclosures.
(D) Special provision relating to variable
interest rate information.--Whether or not the
disclosures required under subsection (a) are
provided on the application form, the variable
rate information described in subsection (a)(2)
may be provided separately from the other
information required to be disclosed.
(3) Requirement for historical table.--In preparing
the table required under subsection (a)(2)(G), the
creditor shall consistently select one rate of interest
for each year and the manner of selecting the rate from
year to year shall be consistent with the plan.
(c) 3d Party Applications.--In the case of an application to
open an account under any open end consumer credit plan
described in subsection (a) which is provided to a consumer by
any person other than the creditor--
(1) such person shall provide such consumer with--
(A) the disclosures required under subsection
(a) with respect to such plan, in accordance
with subsection (b); and
(B) the pamphlet required under subsection
(e); or
(2) if such person cannot provide specific terms
about the plan because specific information about the
plan terms is not available, no nonrefundable fee may
be imposed in connection with such application before
the end of the 3-day period beginning on the date the
consumer receives the disclosures required under
subsection (a) with respect to the application.
(d) Principal Dwelling Defined.--For purposes of this section
and sections 137 and 147, the term ``principal dwelling''
includes any second or vacation home of the consumer.
(e) Pamphlet.--In addition to the disclosures required under
subsection (a) with respect to an application to open an
account under any open end consumer credit plan described in
such subsection, the creditor or other person providing such
disclosures to the consumer shall provide--
(1) a pamphlet published by the [Bureau] Agency
pursuant to section 4 of the Home Equity Consumer
Protection Act of 1988; or
(2) any pamphlet which provides substantially similar
information to the information described in such
section, as determined by the [Bureau] Agency.
Sec. 128. Consumer credit not under open end credit plans
(a) For each consumer credit transaction other than under an
open end credit plan, the creditor shall disclose each of the
following items, to the extent applicable:
(1) The identity of the creditor required to make
disclosure.
(2)(A) The ``amount financed'', using that term,
which shall be the amount of credit of which the
consumer has actual use. This amount shall be computed
as follows, but the computations need not be disclosed
and shall not be disclosed with the disclosures
conspicuously segregated in accordance with subsection
(b)(1):
(i) take the principal amount of the loan or
the cash price less downpayment and trade-in;
(ii) add any charges which are not part of
the finance charge or of the principal amount
of the loan and which are financed by the
consumer, including the cost of any items
excluded from the finance charge pursuant to
section 106; and
(iii) subtract any charges which are part of
the finance charge but which will be paid by
the consumer before or at the time of the
consummation of the transaction, or have been
withheld from the proceeds of the credit.
(B) In conjunction with the disclosure of the amount
financed, a creditor shall provide a statement of the
consumer's right to obtain, upon a written request, a
written itemization of the amount financed. The
statement shall include spaces for a ``yes'' and ``no''
indication to be initialed by the consumer to indicate
whether the consumer wants a written itemization of the
amount financed. Upon receiving an affirmative
indication, the creditor shall provide, at the time
other disclosures are required to be furnished, a
written itemization of the amount financed. For the
purposes of this subparagraph, ``itemization of the
amount financed'' means a disclosure of the following
items, to the extent applicable:
(i) the amount that is or will be paid
directly to the consumer;
(ii) the amount that is or will be credited
to the consumer's account to discharge
obligations owed to the creditor;
(iii) each amount that is or will be paid to
third persons by the creditor on the consumer's
behalf, together with an identification of or
reference to the third person; and
(iv) the total amount of any charges
described in the preceding subparagraph
(A)(iii).
(3) The ``finance charge'', not itemized, using that
term.
(4) The finance charge expressed as a ``annual
percentage rate'', using that term. This shall not be
required if the amount financed does not exceed $75 and
the finance charge does not exceed $5, or if the amount
financed exceeds $75 and the finance charge does not
exceed $7.50.
(5) The sum of the amount financed and the finance
charge, which shall be termed the ``total of
payments''.
(6) The number, amount, and due dates or period of
payments scheduled to repay the total of payments.
(7) In a sale of property or services in which the
seller is the creditor required to disclose pursuant to
section 121(b), the ``total sale price'', using that
term, which shall be the total of the cash price of the
property or services, additional charges, and the
finance charge.
(8) Descriptive explanations of the terms ``amount
financed'', ``finance charge'', ``annual percentage
rate'', ``total of payments'', and ``total sale price''
as specified by the [Bureau] Agency. The descriptive
explanation of ``total sale price'' shall include
reference to the amount of the downpayment.
(9) Where the credit is secured, a statement that a
security interest has been taken in (A) the property
which is purchased as part of the credit transaction,
or (B) property not purchased as part of the credit
transaction identified by item or type.
(10) Any dollar charge or percentage amount which may
be imposed by a creditor solely on account of a late
payment, other than a deferral or extension charge.
(11) A statement indicating whether or not the
consumer is entitled to a rebate of any finance charge
upon refinancing or prepayment in full pursuant to
acceleration or otherwise, if the obligation involves a
precomputed finance charge. A statement indicating
whether or not a penalty will be imposed in those same
circumstances if the obligation involves a finance
charge computed from time to time by application of a
rate to the unpaid principal balance.
(12) A statement that the consumer should refer to
the appropriate contract document for any information
such document provides about nonpayment, default, the
right to accelerate the maturity of the debt, and
prepayment rebates and penalties.
(13) In any residential mortgage transaction, a
statement indicating whether a subsequent purchaser or
assignee of the consumer may assume the debt obligation
on its original terms and conditions.
(14) In the case of any variable interest rate
residential mortgage transaction, in disclosures
provided at application as prescribed by the [Bureau]
Agency for a variable rate transaction secured by the
consumer's principal dwelling, at the option of the
creditor, a statement that the periodic payments may
increase or decrease substantially, and the maximum
interest rate and payment for a $10,000 loan originated
at a recent interest rate, as determined by the
[Bureau] Agency, assuming the maximum periodic
increases in rates and payments under the program, or a
historical example illustrating the effects of interest
rate changes implemented according to the loan program.
(15) In the case of a consumer credit transaction
that is secured by the principal dwelling of the
consumer, in which the extension of credit may exceed
the fair market value of the dwelling, a clear and
conspicuous statement that--
(A) the interest on the portion of the credit
extension that is greater than the fair market
value of the dwelling is not tax deductible for
Federal income tax purposes; and
(B) the consumer should consult a tax adviser
for further information regarding the
deductibility of interest and charges.
(16) In the case of a variable rate residential
mortgage loan for which an escrow or impound account
will be established for the payment of all applicable
taxes, insurance, and assessments--
(A) the amount of initial monthly payment due
under the loan for the payment of principal and
interest, and the amount of such initial
monthly payment including the monthly payment
deposited in the account for the payment of all
applicable taxes, insurance, and assessments;
and
(B) the amount of the fully indexed monthly
payment due under the loan for the payment of
principal and interest, and the amount of such
fully indexed monthly payment including the
monthly payment deposited in the account for
the payment of all applicable taxes, insurance,
and assessments.
(17) In the case of a residential mortgage loan, the
aggregate amount of settlement charges for all
settlement services provided in connection with the
loan, the amount of charges that are included in the
loan and the amount of such charges the borrower must
pay at closing, the approximate amount of the wholesale
rate of funds in connection with the loan, and the
aggregate amount of other fees or required payments in
connection with the loan.
(18) In the case of a residential mortgage loan, the
aggregate amount of fees paid to the mortgage
originator in connection with the loan, the amount of
such fees paid directly by the consumer, and any
additional amount received by the originator from the
creditor.
(19) In the case of a residential mortgage loan, the
total amount of interest that the consumer will pay
over the life of the loan as a percentage of the
principal of the loan. Such amount shall be computed
assuming the consumer makes each monthly payment in
full and on-time, and does not make any over-payments.
(b)(1) Except as otherwise provided in this chapter, the
disclosures required under subsection (a) shall be made before
the credit is extended. Except for the disclosures required by
subsection (a)(1) of this section, all disclosures required
under subsection (a) and any disclosure provided for in
subsection (b), (c), or (d) of section 106 shall be
conspicuously segregated from all other terms, data, or
information provided in connection with a transaction,
including any computations or itemization.
(2)(A) Except as provided in subparagraph (G), in the case of
any extension of credit that is secured by the dwelling of a
consumer, which is also subject to the Real Estate Settlement
Procedures Act, good faith estimates of the disclosures
required under subsection (a) shall be made in accordance with
regulations of the [Bureau] Agency under section 121(c) and
shall be delivered or placed in the mail not later than three
business days after the creditor receives the consumer's
written application, which shall be at least 7 business days
before consummation of the transaction.
(B) In the case of an extension of credit that is
secured by the dwelling of a consumer, the disclosures
provided under subparagraph (A), shall be in addition
to the other disclosures required by subsection (a),
and shall--
(i) state in conspicuous type size and
format, the following: ``You are not required
to complete this agreement merely because you
have received these disclosures or signed a
loan application.''; and
(ii) be provided in the form of final
disclosures at the time of consummation of the
transaction, in the form and manner prescribed
by this section.
(C) In the case of an extension of credit that is
secured by the dwelling of a consumer, under which the
annual rate of interest is variable, or with respect to
which the regular payments may otherwise be variable,
in addition to the other disclosures required by
subsection (a), the disclosures provided under this
subsection shall do the following:
(i) Label the payment schedule as follows:
``Payment Schedule: Payments Will Vary Based on
Interest Rate Changes''.
(ii) State in conspicuous type size and
format examples of adjustments to the regular
required payment on the extension of credit
based on the change in the interest rates
specified by the contract for such extension of
credit. Among the examples required to be
provided under this clause is an example that
reflects the maximum payment amount of the
regular required payments on the extension of
credit, based on the maximum interest rate
allowed under the contract, in accordance with
the rules of the [Bureau] Agency. Prior to
issuing any rules pursuant to this clause, the
[Bureau] Agency shall conduct consumer testing
to determine the appropriate format for
providing the disclosures required under this
subparagraph to consumers so that such
disclosures can be easily understood, including
the fact that the initial regular payments are
for a specific time period that will end on a
certain date, that payments will adjust
afterwards potentially to a higher amount, and
that there is no guarantee that the borrower
will be able to refinance to a lower amount.
(D) In any case in which the disclosure statement
under subparagraph (A) contains an annual percentage
rate of interest that is no longer accurate, as
determined under section 107(c), the creditor shall
furnish an additional, corrected statement to the
borrower, not later than 3 business days before the
date of consummation of the transaction.
(E) The consumer shall receive the disclosures
required under this paragraph before paying any fee to
the creditor or other person in connection with the
consumer's application for an extension of credit that
is secured by the dwelling of a consumer. If the
disclosures are mailed to the consumer, the consumer is
considered to have received them 3 business days after
they are mailed. A creditor or other person may impose
a fee for obtaining the consumer's credit report before
the consumer has received the disclosures under this
paragraph, provided the fee is bona fide and reasonable
in amount.
(F) Waiver of timeliness of disclosures.--To expedite
consummation of a transaction, if the consumer
determines that the extension of credit is needed to
meet a bona fide personal financial emergency, the
consumer may waive or modify the timing requirements
for disclosures under subparagraph (A), provided that--
(i) the term ``bona fide personal emergency''
may be further defined in regulations issued by
the [Bureau] Agency;
(ii) the consumer provides to the creditor a
dated, written statement describing the
emergency and specifically waiving or modifying
those timing requirements, which statement
shall bear the signature of all consumers
entitled to receive the disclosures required by
this paragraph; and
(iii) the creditor provides to the consumers
at or before the time of such waiver or
modification, the final disclosures required by
paragraph (1).
(G)(i) In the case of an extension of credit relating
to a plan described in section 101(53D) of title 11,
United States Code--
(I) the requirements of subparagraphs
(A) through (E) shall not apply; and
(II) a good faith estimate of the
disclosures required under subsection
(a) shall be made in accordance with
regulations of the [Bureau] Agency
under section 121(c) before such credit
is extended, or shall be delivered or
placed in the mail not later than 3
business days after the date on which
the creditor receives the written
application of the consumer for such
credit, whichever is earlier.
(ii) If a disclosure statement furnished
within 3 business days of the written
application (as provided under clause (i)(II))
contains an annual percentage rate which is
subsequently rendered inaccurate, within the
meaning of section 107(c), the creditor shall
furnish another disclosure statement at the
time of settlement or consummation of the
transaction.
(3) In the case of a credit transaction described in
paragraph (15) of subsection (a), disclosures required by that
paragraph shall be made to the consumer at the time of
application for such extension of credit.
(4) Repayment analysis required to include escrow
payments.--
(A) In general.--In the case of any consumer
credit transaction secured by a first mortgage
or lien on the principal dwelling of the
consumer, other than a consumer credit
transaction under an open end credit plan or a
reverse mortgage, for which an impound, trust,
or other type of account has been or will be
established in connection with the transaction
for the payment of property taxes, hazard and
flood (if any) insurance premiums, or other
periodic payments or premiums with respect to
the property, the information required to be
provided under subsection (a) with respect to
the number, amount, and due dates or period of
payments scheduled to repay the total of
payments shall take into account the amount of
any monthly payment to such account for each
such repayment in accordance with section
10(a)(2) of the Real Estate Settlement
Procedures Act of 1974.
(B) Assessment value.--The amount taken into
account under subparagraph (A) for the payment
of property taxes, hazard and flood (if any)
insurance premiums, or other periodic payments
or premiums with respect to the property shall
reflect the taxable assessed value of the real
property securing the transaction after the
consummation of the transaction, including the
value of any improvements on the property or to
be constructed on the property (whether or not
such construction will be financed from the
proceeds of the transaction), if known, and the
replacement costs of the property for hazard
insurance, in the initial year after the
transaction.
(c)(1) If a creditor receives a purchase order by mail or
telephone without personal solicitation, and the cash price and
the total sale price and the terms of financing, including the
annual percentage rate, are set forth in the creditor's catalog
or other printed material distributed to the public, then the
disclosures required under subsection (a) may be made at any
time not later than the date the first payment is due.
(2) If a creditor receives a request for a loan by mail or
telephone without personal solicitation and the terms of
financing, including the annual percentage rate for
representative amounts of credit, are set forth in the
creditor's printed material distributed to the public, or in
the contract of loan or other printed material delivered to the
obligor, then the disclosures required under subsection (a) may
be made at any time not later than the date the first payment
is due.
(d) If a consumer credit sale is one of a series of consumer
credit sales transactions made pursuant to an agreement
providing for the addition of the deferred payment price of
that sale to an existing outstanding balance, and the person to
whom the credit is extended has approved in writing both the
annual percentage rate or rates and the method of computing the
finance charge or charges, and the creditor retains no security
interest in any property as to which he has received payments
aggregating the amount of the sales price including any finance
charges attributable thereto, then the disclosure required
under subsection (a) for the particular sale may be made at any
time not later than the date the first payment for that sale is
due. For the purposes of this subsection, in the case of items
purchased on different dates, the first purchased shall be
deemed first paid for, and in the case of items purchased on
the same date, the lowest priced shall be deemed first paid
for.
(e) Terms and Disclosure with Respect to Private Education
Loans.--
(1) Disclosures required in private education loan
applications and solicitations.--In any application for
a private education loan, or a solicitation for a
private education loan without requiring an
application, the private educational lender shall
disclose to the borrower, clearly and conspicuously--
(A) the potential range of rates of interest
applicable to the private education loan;
(B) whether the rate of interest applicable
to the private education loan is fixed or
variable;
(C) limitations on interest rate adjustments,
both in terms of frequency and amount, or the
lack thereof, if applicable;
(D) requirements for a co-borrower, including
any changes in the applicable interest rates
without a co-borrower;
(E) potential finance charges, late fees,
penalties, and adjustments to principal, based
on defaults or late payments of the borrower;
(F) fees or range of fees applicable to the
private education loan;
(G) the term of the private education loan;
(H) whether interest will accrue while the
student to whom the private education loan
relates is enrolled at a covered educational
institution;
(I) payment deferral options;
(J) general eligibility criteria for the
private education loan;
(K) an example of the total cost of the
private education loan over the life of the
loan--
(i) which shall be calculated using
the principal amount and the maximum
rate of interest actually offered by
the private educational lender; and
(ii) calculated both with and without
capitalization of interest, if an
option exists for postponing interest
payments;
(L) that a covered educational institution
may have school-specific education loan
benefits and terms not detailed on the
disclosure form;
(M) that the borrower may qualify for Federal
student financial assistance through a program
under title IV of the Higher Education Act of
1965 (20 U.S.C. 1070 et seq.), in lieu of, or
in addition to, a loan from a non-Federal
source;
(N) the interest rates available with respect
to such Federal student financial assistance
through a program under title IV of the Higher
Education Act of 1965 (20 U.S.C. 1070 et seq.);
(O) that, as provided in paragraph (6)--
(i) the borrower shall have the right
to accept the terms of the loan and
consummate the transaction at any time
within 30 calendar days (or such longer
period as the private educational
lender may provide) following the date
on which the application for the
private education loan is approved and
the borrower receives the disclosure
documents required under this
subsection for the loan; and
(ii) except for changes based on
adjustments to the index used for a
loan, the rates and terms of the loan
may not be changed by the private
educational lender during the period
described in clause (i);
(P) that, before a private education loan may
be consummated, the borrower must obtain from
the relevant institution of higher education
the form required under paragraph (3), and
complete, sign, and return such form to the
private educational lender;
(Q) that the consumer may obtain additional
information concerning such Federal student
financial assistance from their institution of
higher education, or at the website of the
Department of Education; and
(R) such other information as the [Bureau]
Agency shall prescribe, by rule, as necessary
or appropriate for consumers to make informed
borrowing decisions.
(2) Disclosures at the time of private education loan
approval.--Contemporaneously with the approval of a
private education loan application, and before the loan
transaction is consummated, the private educational
lender shall disclose to the borrower, clearly and
conspicuously--
(A) the applicable rate of interest in effect
on the date of approval;
(B) whether the rate of interest applicable
to the private education loan is fixed or
variable;
(C) limitations on interest rate adjustments,
both in terms of frequency and amount, or the
lack thereof, if applicable;
(D) the initial approved principal amount;
(E) applicable finance charges, late fees,
penalties, and adjustments to principal, based
on borrower defaults or late payments,
including limitations on the discharge of a
private education loan in bankruptcy;
(F) fees or range of fees applicable to the
private education loan;
(G) the maximum term under the private
education loan program;
(H) an estimate of the total amount for
repayment, at both the interest rate in effect
on the date of approval and at the maximum
possible rate of interest offered by the
private educational lender and applicable to
the borrower, to the extent that such maximum
rate may be determined, or if not, a good faith
estimate thereof;
(I) any principal and interest payments
required while the student for whom the private
education loan is intended is enrolled at a
covered educational institution and unpaid
interest that will accrue during such
enrollment;
(J) payment deferral options applicable to
the borrower;
(K) whether monthly payments are graduated;
(L) that, as provided in paragraph (6)--
(i) the borrower shall have the right
to accept the terms of the loan and
consummate the transaction at any time
within 30 calendar days (or such longer
period as the private educational
lender may provide) following the date
on which the application for the
private education loan is approved and
the borrower receives the disclosure
documents required under this
subsection for the loan; and
(ii) except for changes based on
adjustments to the index used for a
loan, the rates and terms of the loan
may not be changed by the private
educational lender during the period
described in clause (i);
(M) that the borrower --
(i) may qualify for Federal financial
assistance through a program under
title IV of the Higher Education Act of
1965 (20 U.S.C. 1070 et seq.), in lieu
of, or in addition to, a loan from a
non-Federal source; and
(ii) may obtain additional
information concerning such assistance
from their institution of higher
education or the website of the
Department of Education;
(N) the interest rates available with respect
to such Federal financial assistance through a
program under title IV of the Higher Education
Act of 1965 (20 U.S.C. 1070 et seq.);
(O) the maximum monthly payment, calculated
using the maximum rate of interest actually
offered by the private educational lender and
applicable to the borrower, to the extent that
such maximum rate may be determined, or if not,
a good faith estimate thereof; and
(P) such other information as the [Bureau]
Agency shall prescribe, by rule, as necessary
or appropriate for consumers to make informed
borrowing decisions.
(3) Self-certification of information.--
(A) In general.--Before a private educational
lender may consummate a private education loan
with respect to a student attending an
institution of higher education, the lender
shall obtain from the applicant for the private
education loan the form developed by the
Secretary of Education under section 155 of the
Higher Education Act of 1965, signed by the
applicant, in written or electronic form.
(B) Rule of construction.--No other provision
of this subsection shall be construed to
require a private educational lender to perform
any additional duty under this paragraph, other
than collecting the form required under
subparagraph (A).
(4) Disclosures at the time of private education loan
consummation.--Contemporaneously with the consummation
of a private education loan, a private educational
lender shall make to the borrower each of the
disclosures described in--
(A) paragraph (2)(A) (adjusted, as necessary,
for the rate of interest in effect on the date
of consummation, based on the index used for
the loan);
(B) subparagraphs (B) through (K) and (M)
through (P) of paragraph (2); and
(C) paragraph (7).
(5) Format of disclosures.--
(A) Model form.--Not later than 2 years after
the date of enactment of this subsection, the
[Bureau] Agency shall, based on consumer
testing, and in consultation with the Secretary
of Education, develop and issue model forms
that may be used, at the option of the private
educational lender, for the provision of
disclosures required under this subsection.
(B) Format.--Model forms developed under this
paragraph shall--
(i) be comprehensible to borrowers,
with a clear format and design;
(ii) provide for clear and
conspicuous disclosures;
(iii) enable borrowers easily to
identify material terms of the loan and
to compare such terms among private
education loans; and
(iv) be succinct, and use an easily
readable type font.
(C) Safe harbor.--Any private educational
lender that elects to provide a model form
developed under this subsection that accurately
reflects the practices of the private
educational lender shall be deemed to be in
compliance with the disclosures required under
this subsection.
(6) Effective period of approved rate of interest and
loan terms.--
(A) In general.--With respect to a private
education loan, the borrower shall have the
right to accept the terms of the loan and
consummate the transaction at any time within
30 calendar days (or such longer period as the
private educational lender may provide)
following the date on which the application for
the private education loan is approved and the
borrower receives the disclosure documents
required under this subsection for the loan,
and the rates and terms of the loan may not be
changed by the private educational lender
during that period.
(B) Prohibition on changes.--Except for
changes based on adjustments to the index used
for a loan, the rates and terms of the loan may
not be changed by the private educational
lender prior to the earlier of--
(i) the date of acceptance of the
terms of the loan and consummation of
the transaction by the borrower, as
described in subparagraph (A); or
(ii) the expiration of the period
described in subparagraph (A).
(7) Right to cancel.--With respect to a private
education loan, the borrower may cancel the loan,
without penalty to the borrower, at any time within 3
business days of the date on which the loan is
consummated, and the private educational lender shall
disclose such right to the borrower in accordance with
paragraph (4).
(8) Prohibition on disbursement.--No funds may be
disbursed with respect to a private education loan
until the expiration of the 3-day period described in
paragraph (7).
(9) Bureau regulations.--In issuing regulations under
this subsection, the [Bureau] Agency shall prevent, to
the extent possible, duplicative disclosure
requirements for private educational lenders that are
otherwise required to make disclosures under this
title, except that in any case in which the disclosure
requirements of this subsection differ or conflict with
the disclosure requirements of any other provision of
this title, the requirements of this subsection shall
be controlling.
(10) Definitions.--For purposes of this subsection,
the terms ``covered educational institution'',
``private educational lender'', and ``private education
loan'' have the same meanings as in section 140.
(11) Duties of lenders participating in preferred
lender arrangements.--Each private educational lender
that has a preferred lender arrangement with a covered
educational institution shall annually, by a date
determined by the [Bureau] Agency, in consultation with
the Secretary of Education, provide to the covered
educational institution such information as the
[Bureau] Agency determines to include in the model form
developed under paragraph (5) for each type of private
education loan that the lender plans to offer to
students attending the covered educational institution,
or to the families of such students, for the next award
year (as that term is defined in section 481 of the
Higher Education Act of 1965).
(f) Periodic Statements for Residential Mortgage Loans.--
(1) In general.--The creditor, assignee, or servicer
with respect to any residential mortgage loan shall
transmit to the obligor, for each billing cycle, a
statement setting forth each of the following items, to
the extent applicable, in a conspicuous and prominent
manner:
(A) The amount of the principal obligation
under the mortgage.
(B) The current interest rate in effect for
the loan.
(C) The date on which the interest rate may
next reset or adjust.
(D) The amount of any prepayment fee to be
charged, if any.
(E) A description of any late payment fees.
(F) A telephone number and electronic mail
address that may be used by the obligor to
obtain information regarding the mortgage.
(G) The names, addresses, telephone numbers,
and Internet addresses of counseling agencies
or programs reasonably available to the
consumer that have been certified or approved
and made publicly available by the Secretary of
Housing and Urban Development or a State
housing finance authority (as defined in
section 1301 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989).
(H) Such other information as the [Board]
Agency may prescribe in regulations.
(2) Development and use of standard form.--The
[Board] Agency shall develop and prescribe a standard
form for the disclosure required under this subsection,
taking into account that the statements required may be
transmitted in writing or electronically.
(3) Exception.--Paragraph (1) shall not apply to any
fixed rate residential mortgage loan where the
creditor, assignee, or servicer provides the obligor
with a coupon book that provides the obligor with
substantially the same information as required in
paragraph (1).
* * * * * * *
SEC. 129. REQUIREMENTS FOR CERTAIN MORTGAGES.
(a) Disclosures.--
(1) Specific disclosures.--In addition to other
disclosures required under this title, for each
mortgage referred to in section 103(aa), the creditor
shall provide the following disclosures in conspicuous
type size:
(A) ``You are not required to complete this
agreement merely because you have received
these disclosures or have signed a loan
application.''.
(B) ``If you obtain this loan, the lender
will have a mortgage on your home. You could
lose your home, and any money you have put into
it, if you do not meet your obligations under
the loan.''.
(2) Annual percentage rate.--In addition to the
disclosures required under paragraph (1), the creditor
shall disclose--
(A) in the case of a credit transaction with
a fixed rate of interest, the annual percentage
rate and the amount of the regular monthly
payment; or
(B) in the case of any other credit
transaction, the annual percentage rate of the
loan, the amount of the regular monthly
payment, a statement that the interest rate and
monthly payment may increase, and the amount of
the maximum monthly payment, based on the
maximum interest rate allowed pursuant to
section 1204 of the Competitive Equality
Banking Act of 1987.
(b) Time of Disclosures.--
(1) In general.--The disclosures required by this
section shall be given not less than 3 business days
prior to consummation of the transaction.
(2) New disclosures required.--
(A) In general.--After providing the
disclosures required by this section, a
creditor may not change the terms of the
extension of credit if such changes make the
disclosures inaccurate, unless new disclosures
are provided that meet the requirements of this
section.
(B) Telephone disclosure.--A creditor may
provide new disclosures pursuant to
subparagraph (A) by telephone, if--
(i) the change is initiated by the
consumer; and
(ii) at the consummation of the
transaction under which the credit is
extended--
(I) the creditor provides to
the consumer the new
disclosures, in writing; and
(II) the creditor and
consumer certify in writing
that the new disclosures were
provided by telephone, by not
later than 3 days prior to the
date of consummation of the
transaction.
(3) Modifications.--The [Bureau] Agency may, if it
finds that such action is necessary to permit
homeowners to meet bona fide personal financial
emergencies, prescribe regulations authorizing the
modification or waiver of rights created under this
subsection, to the extent and under the circumstances
set forth in those regulations.
(c) No Prepayment Penalty.--
(1) In general.--
(A) Limitation on terms.--A mortgage referred
to in section 103(aa) may not contain terms
under which a consumer must pay a prepayment
penalty for paying all or part of the principal
before the date on which the principal is due.
(B) Construction.--For purposes of this
subsection, any method of computing a refund of
unearned scheduled interest is a prepayment
penalty if it is less favorable to the consumer
than the actuarial method (as that term is
defined in section 933(d) of the Housing and
Community Development Act of 1992).
(2)
(d) Limitations After Default.--A mortgage referred to in
section 103(aa) may not provide for an interest rate applicable
after default that is higher than the interest rate that
applies before default. If the date of maturity of a mortgage
referred to in subsection 103(aa) is accelerated due to default
and the consumer is entitled to a rebate of interest, that
rebate shall be computed by any method that is not less
favorable than the actuarial method (as that term is defined in
section 933(d) of the Housing and Community Development Act of
1992).
(e) No Balloon Payments.--No high-cost mortgage may contain a
scheduled payment that is more than twice as large as the
average of earlier scheduled payments. This subsection shall
not apply when the payment schedule is adjusted to the seasonal
or irregular income of the consumer.
(f) No Negative Amortization.--A mortgage referred to in
section 103(aa) may not include terms under which the
outstanding principal balance will increase at any time over
the course of the loan because the regular periodic payments do
not cover the full amount of interest due.
(g) No Prepaid Payments.--A mortgage referred to in section
103(aa) may not include terms under which more than 2 periodic
payments required under the loan are consolidated and paid in
advance from the loan proceeds provided to the consumer.
(h) Prohibition on Extending Credit Without Regard to Payment
Ability of Consumer.--A creditor shall not engage in a pattern
or practice of extending credit to consumers under mortgages
referred to in section 103(aa) based on the consumers'
collateral without regard to the consumers' repayment ability,
including the consumers' current and expected income, current
obligations, and employment.
(i) Requirements for Payments Under Home Improvement
Contracts.--A creditor shall not make a payment to a contractor
under a home improvement contract from amounts extended as
credit under a mortgage referred to in section 103(aa), other
than--
(1) in the form of an instrument that is payable to
the consumer or jointly to the consumer and the
contractor; or
(2) at the election of the consumer, by a third party
escrow agent in accordance with terms established in a
written agreement signed by the consumer, the creditor,
and the contractor before the date of payment.
(j) Recommended Default.--No creditor shall recommend or
encourage default on an existing loan or other debt prior to
and in connection with the closing or planned closing of a
high-cost mortgage that refinances all or any portion of such
existing loan or debt.
(k) Late Fees.--
(1) In general.--No creditor may impose a late
payment charge or fee in connection with a high-cost
mortgage--
(A) in an amount in excess of 4 percent of
the amount of the payment past due;
(B) unless the loan documents specifically
authorize the charge or fee;
(C) before the end of the 15-day period
beginning on the date the payment is due, or in
the case of a loan on which interest on each
installment is paid in advance, before the end
of the 30-day period beginning on the date the
payment is due; or
(D) more than once with respect to a single
late payment.
(2) Coordination with subsequent late fees.--If a
payment is otherwise a full payment for the applicable
period and is paid on its due date or within an
applicable grace period, and the only delinquency or
insufficiency of payment is attributable to any late
fee or delinquency charge assessed on any earlier
payment, no late fee or delinquency charge may be
imposed on such payment.
(3) Failure to make installment payment.--If, in the
case of a loan agreement the terms of which provide
that any payment shall first be applied to any past due
principal balance, the consumer fails to make an
installment payment and the consumer subsequently
resumes making installment payments but has not paid
all past due installments, the creditor may impose a
separate late payment charge or fee for any principal
due (without deduction due to late fees or related
fees) until the default is cured.
(l) Acceleration of Debt.--No high-cost mortgage may contain
a provision which permits the creditor to accelerate the
indebtedness, except when repayment of the loan has been
accelerated by default in payment, or pursuant to a due-on-sale
provision, or pursuant to a material violation of some other
provision of the loan document unrelated to payment schedule.
(m) Restriction on Financing Points and Fees.--No creditor
may directly or indirectly finance, in connection with any
high-cost mortgage, any of the following:
(1) Any prepayment fee or penalty payable by the
consumer in a refinancing transaction if the creditor
or an affiliate of the creditor is the noteholder of
the note being refinanced.
(2) Any points or fees.
(n) Consequence of Failure To Comply.--Any mortgage that
contains a provision prohibited by this section shall be deemed
a failure to deliver the material disclosures required under
this title, for the purpose of section 125.
(o) Definition.--For purposes of this section, the term
``affiliate'' has the same meaning as in section 2(k) of the
Bank Holding Company Act of 1956.
(p) Discretionary Regulatory Authority of Bureau.--
(1) Exemptions.--The [Bureau] Agency may, by
regulation or order, exempt specific mortgage products
or categories of mortgages from any or all of the
prohibitions specified in subsections (c) through (i),
if the [Bureau] Agency finds that the exemption--
(A) is in the interest of the borrowing
public; and
(B) will apply only to products that maintain
and strengthen home ownership and equity
protection.
(2) Prohibitions.--The [Bureau] Agency, by regulation
or order, shall prohibit acts or practices in
connection with--
(A) mortgage loans that the [Bureau] Agency
finds to be unfair, deceptive, or designed to
evade the provisions of this section; and
(B) refinancing of mortgage loans that the
[Bureau] Agency finds to be associated with
abusive lending practices, or that are
otherwise not in the interest of the borrower.
(q) Civil Penalties in Federal Trade Commission Enforcement
Actions.--For purposes of enforcement by the Federal Trade
Commission, any violation of a regulation issued by the
[Bureau] Agency pursuant to subsection [(l)(2)] (p)(2) shall be
treated as a violation of a rule promulgated under section 18
of the Federal Trade Commission Act (15 U.S.C. 57a) regarding
unfair or deceptive acts or practices.
(r) Prohibitions on Evasions, Structuring of Transactions,
and Reciprocal Arrangements.--A creditor may not take any
action in connection with a high-cost mortgage--
(1) to structure a loan transaction as an open-end
credit plan or another form of loan for the purpose and
with the intent of evading the provisions of this
title; or
(2) to divide any loan transaction into separate
parts for the purpose and with the intent of evading
provisions of this title.
(s) Modification and Deferral Fees Prohibited.--A creditor,
successor in interest, assignee, or any agent of any of the
above, may not charge a consumer any fee to modify, renew,
extend, or amend a high-cost mortgage, or to defer any payment
due under the terms of such mortgage.
(t) Payoff Statement.--
(1) Fees.--
(A) In general.--Except as provided in
subparagraph (B), no creditor or servicer may
charge a fee for informing or transmitting to
any person the balance due to pay off the
outstanding balance on a high-cost mortgage.
(B) Transaction fee.--When payoff information
referred to in subparagraph (A) is provided by
facsimile transmission or by a courier service,
a creditor or servicer may charge a processing
fee to cover the cost of such transmission or
service in an amount not to exceed an amount
that is comparable to fees imposed for similar
services provided in connection with consumer
credit transactions that are secured by the
consumer's principal dwelling and are not high-
cost mortgages.
(C) Fee disclosure.--Prior to charging a
transaction fee as provided in subparagraph
(B), a creditor or servicer shall disclose that
payoff balances are available for free pursuant
to subparagraph (A).
(D) Multiple requests.--If a creditor or
servicer has provided payoff information
referred to in subparagraph (A) without charge,
other than the transaction fee allowed by
subparagraph (B), on 4 occasions during a
calendar year, the creditor or servicer may
thereafter charge a reasonable fee for
providing such information during the remainder
of the calendar year.
(2) Prompt delivery.--Payoff balances shall be
provided within 5 business days after receiving a
request by a consumer or a person authorized by the
consumer to obtain such information.
(u) Pre-Loan Counseling.--
(1) In general.--A creditor may not extend credit to
a consumer under a high-cost mortgage without first
receiving certification from a counselor that is
approved by the Secretary of Housing and Urban
Development, or at the discretion of the Secretary, a
State housing finance authority, that the consumer has
received counseling on the advisability of the
mortgage. Such counselor shall not be employed by the
creditor or an affiliate of the creditor or be
affiliated with the creditor.
(2) Disclosures required prior to counseling.--No
counselor may certify that a consumer has received
counseling on the advisability of the high-cost
mortgage unless the counselor can verify that the
consumer has received each statement required (in
connection with such loan) by this section or the Real
Estate Settlement Procedures Act of 1974 with respect
to the transaction.
(3) Regulations.--The [Board] Agency may prescribe
such regulations as the [Board] Agency determines to be
appropriate to carry out the requirements of paragraph
(1).
(v) Corrections and Unintentional Violations.--A creditor or
assignee in a high-cost mortgage who, when acting in good
faith, fails to comply with any requirement under this section
will not be deemed to have violated such requirement if the
creditor or assignee establishes that either--
(1) within 30 days of the loan closing and prior to
the institution of any action, the consumer is notified
of or discovers the violation, appropriate restitution
is made, and whatever adjustments are necessary are
made to the loan to either, at the choice of the
consumer--
(A) make the loan satisfy the requirements of
this chapter; or
(B) in the case of a high-cost mortgage,
change the terms of the loan in a manner
beneficial to the consumer so that the loan
will no longer be a high-cost mortgage; or
(2) within 60 days of the creditor's discovery or
receipt of notification of an unintentional violation
or bona fide error and prior to the institution of any
action, the consumer is notified of the compliance
failure, appropriate restitution is made, and whatever
adjustments are necessary are made to the loan to
either, at the choice of the consumer--
(A) make the loan satisfy the requirements of
this chapter; or
(B) in the case of a high-cost mortgage,
change the terms of the loan in a manner
beneficial so that the loan will no longer be a
high-cost mortgage.
* * * * * * *
Sec. 129B. Residential mortgage loan origination
(a) Finding and Purpose.--
(1) Finding.--The Congress finds that economic
stabilization would be enhanced by the protection,
limitation, and regulation of the terms of residential
mortgage credit and the practices related to such
credit, while ensuring that responsible, affordable
mortgage credit remains available to consumers.
(2) Purpose.--It is the purpose of this section and
section 129C to assure that consumers are offered and
receive residential mortgage loans on terms that
reasonably reflect their ability to repay the loans and
that are understandable and not unfair, deceptive or
abusive.
(b) Duty of Care.--
(1) Standard.--Subject to regulations prescribed
under this subsection, each mortgage originator shall,
in addition to the duties imposed by otherwise
applicable provisions of State or Federal law--
(A) be qualified and, when required,
registered and licensed as a mortgage
originator in accordance with applicable State
or Federal law, including the Secure and Fair
Enforcement for Mortgage Licensing Act of 2008;
and
(B) include on all loan documents any unique
identifier of the mortgage originator provided
by the Nationwide Mortgage Licensing System and
Registry.
(2) Compliance procedures required.--The [Board]
Agency shall prescribe regulations requiring depository
institutions to establish and maintain procedures
reasonably designed to assure and monitor the
compliance of such depository institutions, the
subsidiaries of such institutions, and the employees of
such institutions or subsidiaries with the requirements
of this section and the registration procedures
established under section 1507 of the Secure and Fair
Enforcement for Mortgage Licensing Act of 2008.
(c) Prohibition on Steering Incentives.--
(1) In general.--For any residential mortgage loan,
no mortgage originator shall receive from any person
and no person shall pay to a mortgage originator,
directly or indirectly, compensation that varies based
on the terms of the loan (other than the amount of the
principal).
(2) Restructuring of financing origination fee.--
(A) In general.--For any mortgage loan, a
mortgage originator may not receive from any
person other than the consumer and no person,
other than the consumer, who knows or has
reason to know that a consumer has directly
compensated or will directly compensate a
mortgage originator may pay a mortgage
originator any origination fee or charge except
bona fide third party charges not retained by
the creditor, mortgage originator, or an
affiliate of the creditor or mortgage
originator.
(B) Exception.--Notwithstanding subparagraph
(A), a mortgage originator may receive from a
person other than the consumer an origination
fee or charge, and a person other than the
consumer may pay a mortgage originator an
origination fee or charge, if--
(i) the mortgage originator does not
receive any compensation directly from
the consumer; and
(ii) the consumer does not make an
upfront payment of discount points,
origination points, or fees, however
denominated (other than bona fide third
party charges not retained by the
mortgage originator, creditor, or an
affiliate of the creditor or
originator), except that the [Board]
Agency may, by rule, waive or provide
exemptions to this clause if the
[Board] Agency determines that such
waiver or exemption is in the interest
of consumers and in the public
interest.
(3) Regulations.--The [Board] Agency shall prescribe
regulations to prohibit--
(A) mortgage originators from steering any
consumer to a residential mortgage loan that--
(i) the consumer lacks a reasonable
ability to repay (in accordance with
regulations prescribed under section
129C(a)); or
(ii) has predatory characteristics or
effects (such as equity stripping,
excessive fees, or abusive terms);
(B) mortgage originators from steering any
consumer from a residential mortgage loan for
which the consumer is qualified that is a
qualified mortgage (as defined in section
129C(b)(2)) to a residential mortgage loan that
is not a qualified mortgage;
(C) abusive or unfair lending practices that
promote disparities among consumers of equal
credit worthiness but of different race,
ethnicity, gender, or age; and
(D) mortgage originators from--
(i) mischaracterizing the credit
history of a consumer or the
residential mortgage loans available to
a consumer;
(ii) mischaracterizing or suborning
the mischaracterization of the
appraised value of the property
securing the extension of credit; or
(iii) if unable to suggest, offer, or
recommend to a consumer a loan that is
not more expensive than a loan for
which the consumer qualifies,
discouraging a consumer from seeking a
residential mortgage loan secured by a
consumer's principal dwelling from
another mortgage originator.
(4) Rules of construction.--No provision of this
subsection shall be construed as--
(A) permitting any yield spread premium or
other similar compensation that would, for any
residential mortgage loan, permit the total
amount of direct and indirect compensation from
all sources permitted to a mortgage originator
to vary based on the terms of the loan (other
than the amount of the principal);
(B) limiting or affecting the amount of
compensation received by a creditor upon the
sale of a consummated loan to a subsequent
purchaser;
(C) restricting a consumer's ability to
finance, at the option of the consumer,
including through principal or rate, any
origination fees or costs permitted under this
subsection, or the mortgage originator's right
to receive such fees or costs (including
compensation) from any person, subject to
paragraph (2)(B), so long as such fees or costs
do not vary based on the terms of the loan
(other than the amount of the principal) or the
consumer's decision about whether to finance
such fees or costs; or
(D) prohibiting incentive payments to a
mortgage originator based on the number of
residential mortgage loans originated within a
specified period of time.
(d) Liability for Violations.--
(1) In general.--For purposes of providing a cause of
action for any failure by a mortgage originator, other
than a creditor, to comply with any requirement imposed
under this section and any regulation prescribed under
this section, section 130 shall be applied with respect
to any such failure by substituting ``mortgage
originator'' for ``creditor'' each place such term
appears in each such subsection.
(2) Maximum.--The maximum amount of any liability of
a mortgage originator under paragraph (1) to a consumer
for any violation of this section shall not exceed the
greater of actual damages or an amount equal to 3 times
the total amount of direct and indirect compensation or
gain accruing to the mortgage originator in connection
with the residential mortgage loan involved in the
violation, plus the costs to the consumer of the
action, including a reasonable attorney's fee.
(e) Discretionary Regulatory Authority.--
(1) In general.--The [Board] Agency shall, by
regulations, prohibit or condition terms, acts or
practices relating to residential mortgage loans that
the [Board] Agency finds to be abusive, unfair,
deceptive, predatory, necessary or proper to ensure
that responsible, affordable mortgage credit remains
available to consumers in a manner consistent with the
purposes of this section and section 129C, necessary or
proper to effectuate the purposes of this section and
section 129C, to prevent circumvention or evasion
thereof, or to facilitate compliance with such
sections, or are not in the interest of the borrower.
(2) Application.--The regulations prescribed under
paragraph (1) shall be applicable to all residential
mortgage loans and shall be applied in the same manner
as regulations prescribed under section 105.
(f) Section 129B and any regulations promulgated thereunder
do not apply to an extension of credit relating to a plan
described in section 101(53D) of title 11, United States Code.
Sec. 129C. Minimum standards for residential mortgage loans
(a) Ability To Repay.--
(1) In general.--In accordance with regulations
prescribed by the [Board] Agency, no creditor may make
a residential mortgage loan unless the creditor makes a
reasonable and good faith determination based on
verified and documented information that, at the time
the loan is consummated, the consumer has a reasonable
ability to repay the loan, according to its terms, and
all applicable taxes, insurance (including mortgage
guarantee insurance), and assessments.
(2) Multiple loans.--If the creditor knows, or has
reason to know, that 1 or more residential mortgage
loans secured by the same dwelling will be made to the
same consumer, the creditor shall make a reasonable and
good faith determination, based on verified and
documented information, that the consumer has a
reasonable ability to repay the combined payments of
all loans on the same dwelling according to the terms
of those loans and all applicable taxes, insurance
(including mortgage guarantee insurance), and
assessments.
(3) Basis for determination.--A determination under
this subsection of a consumer's ability to repay a
residential mortgage loan shall include consideration
of the consumer's credit history, current income,
expected income the consumer is reasonably assured of
receiving, current obligations, debt-to-income ratio or
the residual income the consumer will have after paying
non-mortgage debt and mortgage-related obligations,
employment status, and other financial resources other
than the consumer's equity in the dwelling or real
property that secures repayment of the loan. A creditor
shall determine the ability of the consumer to repay
using a payment schedule that fully amortizes the loan
over the term of the loan.
(4) Income verification.--A creditor making a
residential mortgage loan shall verify amounts of
income or assets that such creditor relies on to
determine repayment ability, including expected income
or assets, by reviewing the consumer's Internal Revenue
Service Form W-2, tax returns, payroll receipts,
financial institution records, or other third-party
documents that provide reasonably reliable evidence of
the consumer's income or assets. In order to safeguard
against fraudulent reporting, any consideration of a
consumer's income history in making a determination
under this subsection shall include the verification of
such income by the use of--
(A) Internal Revenue Service transcripts of
tax returns; or
(B) a method that quickly and effectively
verifies income documentation by a third party
subject to rules prescribed by the [Board]
Agency.
(5) Exemption.--With respect to loans made,
guaranteed, or insured by Federal departments or
agencies identified in subsection (b)(3)(B)(ii), such
departments or agencies may exempt refinancings under a
streamlined refinancing from this income verification
requirement as long as the following conditions are
met:
(A) The consumer is not 30 days or more past
due on the prior existing residential mortgage
loan.
(B) The refinancing does not increase the
principal balance outstanding on the prior
existing residential mortgage loan, except to
the extent of fees and charges allowed by the
department or agency making, guaranteeing, or
insuring the refinancing.
(C) Total points and fees (as defined in
section [103(aa)(4), other than bona fide third
party charges not retained by the mortgage
originator, creditor, or an affiliate of the
creditor or mortgage originator] 103(aa)(4))
payable in connection with the refinancing do
not exceed 3 percent of the total new loan
amount.
(D) The interest rate on the refinanced loan
is lower than the interest rate of the original
loan, unless the borrower is refinancing from
an adjustable rate to a fixed-rate loan, under
guidelines that the department or agency shall
establish for loans they make, guarantee, or
issue.
(E) The refinancing is subject to a payment
schedule that will fully amortize the
refinancing in accordance with the regulations
prescribed by the department or agency making,
guaranteeing, or insuring the refinancing.
(F) The terms of the refinancing do not
result in a balloon payment, as defined in
subsection (b)(2)(A)(ii).
(G) Both the residential mortgage loan being
refinanced and the refinancing satisfy all
requirements of the department or agency
making, guaranteeing, or insuring the
refinancing.
(6) Nonstandard loans.--
(A) Variable rate loans that defer repayment
of any principal or interest.--For purposes of
determining, under this subsection, a
consumer's ability to repay a variable rate
residential mortgage loan that allows or
requires the consumer to defer the repayment of
any principal or interest, the creditor shall
use a fully amortizing repayment schedule.
(B) Interest-only loans.--For purposes of
determining, under this subsection, a
consumer's ability to repay a residential
mortgage loan that permits or requires the
payment of interest only, the creditor shall
use the payment amount required to amortize the
loan by its final maturity.
(C) Calculation for negative amortization.--
In making any determination under this
subsection, a creditor shall also take into
consideration any balance increase that may
accrue from any negative amortization
provision.
(D) Calculation process.--For purposes of
making any determination under this subsection,
a creditor shall calculate the monthly payment
amount for principal and interest on any
residential mortgage loan by assuming--
(i) the loan proceeds are fully
disbursed on the date of the
consummation of the loan;
(ii) the loan is to be repaid in
substantially equal monthly amortizing
payments for principal and interest
over the entire term of the loan with
no balloon payment, unless the loan
contract requires more rapid repayment
(including balloon payment), in which
case the calculation shall be made (I)
in accordance with regulations
prescribed by the [Board] Agency, with
respect to any loan which has an annual
percentage rate that does not exceed
the average prime offer rate for a
comparable transaction, as of the date
the interest rate is set, by 1.5 or
more percentage points for a first lien
residential mortgage loan; and by 3.5
or more percentage points for a
subordinate lien residential mortgage
loan; or (II) using the contract's
repayment schedule, with respect to a
loan which has an annual percentage
rate, as of the date the interest rate
is set, that is at least 1.5 percentage
points above the average prime offer
rate for a first lien residential
mortgage loan; and 3.5 percentage
points above the average prime offer
rate for a subordinate lien residential
mortgage loan; and
(iii) the interest rate over the
entire term of the loan is a fixed rate
equal to the fully indexed rate at the
time of the loan closing, without
considering the introductory rate.
(E) Refinance of hybrid loans with current
lender.--In considering any application for
refinancing an existing hybrid loan by the
creditor into a standard loan to be made by the
same creditor in any case in which there would
be a reduction in monthly payment and the
mortgagor has not been delinquent on any
payment on the existing hybrid loan, the
creditor may--
(i) consider the mortgagor's good
standing on the existing mortgage;
(ii) consider if the extension of new
credit would prevent a likely default
should the original mortgage reset and
give such concerns a higher priority as
an acceptable underwriting practice;
and
(iii) offer rate discounts and other
favorable terms to such mortgagor that
would be available to new customers
with high credit ratings based on such
underwriting practice.
(7) Fully-indexed rate defined.--For purposes of this
subsection, the term ``fully indexed rate'' means the
index rate prevailing on a residential mortgage loan at
the time the loan is made plus the margin that will
apply after the expiration of any introductory interest
rates.
(8) Reverse mortgages and bridge loans.--This
subsection shall not apply with respect to any reverse
mortgage or temporary or bridge loan with a term of 12
months or less, including to any loan to purchase a new
dwelling where the consumer plans to sell a different
dwelling within 12 months.
(9) Seasonal income.--If documented income, including
income from a small business, is a repayment source for
a residential mortgage loan, a creditor may consider
the seasonality and irregularity of such income in the
underwriting of and scheduling of payments for such
credit.
(b) Presumption of Ability To Repay.--
(1) In general.--Any creditor with respect to any
residential mortgage loan, and any assignee of such
loan subject to liability under this title, may presume
that the loan has met the requirements of subsection
(a), if the loan is a qualified mortgage.
(2) Definitions.--For purposes of this subsection,
the following definitions shall apply:
(A) Qualified mortgage.--The term ``qualified
mortgage'' means any residential mortgage
loan--
(i) for which the regular periodic
payments for the loan may not--
(I) result in an increase of
the principal balance; or
(II) except as provided in
subparagraph (E), allow the
consumer to defer repayment of
principal;
(ii) except as provided in
subparagraph (E), the terms of which do
not result in a balloon payment, where
a ``balloon payment'' is a scheduled
payment that is more than twice as
large as the average of earlier
scheduled payments;
(iii) for which the income and
financial resources relied upon to
qualify the obligors on the loan are
verified and documented;
(iv) in the case of a fixed rate
loan, for which the underwriting
process is based on a payment schedule
that fully amortizes the loan over the
loan term and takes into account all
applicable taxes, insurance, and
assessments;
(v) in the case of an adjustable rate
loan, for which the underwriting is
based on the maximum rate permitted
under the loan during the first 5
years, and a payment schedule that
fully amortizes the loan over the loan
term and takes into account all
applicable taxes, insurance, and
assessments;
(vi) that complies with any
guidelines or regulations established
by the Board relating to ratios of
total monthly debt to monthly income or
alternative measures of ability to pay
regular expenses after payment of total
monthly debt, taking into account the
income levels of the borrower and such
other factors as the [Board] Agency may
determine relevant and consistent with
the purposes described in paragraph
(3)(B)(i);
(vii) for which the total points and
fees (as defined in subparagraph (C))
payable in connection with the loan do
not exceed 3 percent of the total loan
amount;
(viii) for which the term of the loan
does not exceed 30 years, except as
such term may be extended under
paragraph (3), such as in high-cost
areas; and
(ix) in the case of a reverse
mortgage (except for the purposes of
subsection (a) of section 129C, to the
extent that such mortgages are exempt
altogether from those requirements), a
reverse mortgage which meets the
standards for a qualified mortgage, as
set by the [Board] Agency in rules that
are consistent with the purposes of
this subsection.
(B) Average prime offer rate.--The term
``average prime offer rate'' means the average
prime offer rate for a comparable transaction
as of the date on which the interest rate for
the transaction is set, as published by the
[Board.] Agency.
(C) Points and fees.--
(i) In general.--For purposes of
subparagraph (A), the term ``points and
fees'' means points and fees as defined
by section [103(aa)(4) (other than bona
fide third party charges not retained
by the mortgage originator, creditor,
or an affiliate of the creditor or
mortgage originator)] 103(aa)(4).
(ii) Computation.--For purposes of
computing the total points and fees
under this subparagraph, the total
points and fees shall exclude either of
the amounts described in the following
subclauses, but not both:
(I) Up to and including 2
bona fide discount points
payable by the consumer in
connection with the mortgage,
but only if the interest rate
from which the mortgage's
interest rate will be
discounted does not exceed by
more than 1 percentage point
the average prime offer rate.
(II) Unless 2 bona fide
discount points have been
excluded under subclause (I),
up to and including 1 bona fide
discount point payable by the
consumer in connection with the
mortgage, but only if the
interest rate from which the
mortgage's interest rate will
be discounted does not exceed
by more than 2 percentage
points the average prime offer
rate.
(iii) Bona fide discount points
defined.--For purposes of clause (ii),
the term ``bona fide discount points''
means loan discount points which are
knowingly paid by the consumer for the
purpose of reducing, and which in fact
result in a bona fide reduction of, the
interest rate or time-price
differential applicable to the
mortgage.
(iv) Interest rate reduction.--
Subclauses (I) and (II) of clause (ii)
shall not apply to discount points used
to purchase an interest rate reduction
unless the amount of the interest rate
reduction purchased is reasonably
consistent with established industry
norms and practices for secondary
mortgage market transactions.
(D) Smaller loans.--The [Board] Agency shall
prescribe rules adjusting the criteria under
subparagraph (A)(vii) in order to permit
lenders that extend smaller loans to meet the
requirements of the presumption of compliance
under paragraph (1). In prescribing such rules,
the [Board] Agency shall consider the potential
impact of such rules on rural areas and other
areas where home values are lower.
(E) Balloon loans.--The [Board] Agency may,
by regulation, provide that the term
``qualified mortgage'' includes a balloon
loan--
(i) that meets all of the criteria
for a qualified mortgage under
subparagraph (A) (except clauses
(i)(II), (ii), (iv), and (v) of such
subparagraph);
(ii) for which the creditor makes a
determination that the consumer is able
to make all scheduled payments, except
the balloon payment, out of income or
assets other than the collateral;
(iii) for which the underwriting is
based on a payment schedule that fully
amortizes the loan over a period of not
more than 30 years and takes into
account all applicable taxes,
insurance, and assessments; and
(iv) that is extended by a creditor
that--
(I) operates in rural or
underserved areas;
(II) together with all
affiliates, has total annual
residential mortgage loan
originations that do not exceed
a limit set by the [Board]
Agency;
(III) retains the balloon
loans in portfolio; and
(IV) meets any asset size
threshold and any other
criteria as the [Board] Agency
may establish, consistent with
the purposes of this subtitle.
(3) Regulations.--
(A) In general.--The [Board] Agency shall
prescribe regulations to carry out the purposes
of this subsection.
(B) Revision of safe harbor criteria.--
(i) In general.--The [Board] Agency
may prescribe regulations that revise,
add to, or subtract from the criteria
that define a qualified mortgage upon a
finding that such regulations are
necessary or proper to ensure that
responsible, affordable mortgage credit
remains available to consumers in a
manner consistent with the purposes of
this section, necessary and appropriate
to effectuate the purposes of this
section and section 129B, to prevent
circumvention or evasion thereof, or to
facilitate compliance with such
sections.
(ii) Loan definition.--The following
agencies shall, in consultation with
the [Board] Agency, prescribe rules
defining the types of loans they
insure, guarantee, or administer, as
the case may be, that are qualified
mortgages for purposes of paragraph
(2)(A), and such rules may revise, add
to, or subtract from the criteria used
to define a qualified mortgage under
paragraph (2)(A), upon a finding that
such rules are consistent with the
purposes of this section and section
129B, to prevent circumvention or
evasion thereof, or to facilitate
compliance with such sections:
(I) The Department of Housing
and Urban Development, with
regard to mortgages insured
under the National Housing Act
(12 U.S.C. 1707 et seq.).
(II) The Department of
Veterans Affairs, with regard
to a loan made or guaranteed by
the Secretary of Veterans
Affairs.
(III) The Department of
Agriculture, with regard loans
guaranteed by the Secretary of
Agriculture pursuant to 42
U.S.C. 1472(h).
(IV) The Rural Housing
Service, with regard to loans
insured by the Rural Housing
Service.
(c) Prohibition on Certain Prepayment Penalties.--
(1) Prohibited on certain loans.--
(A) In general.--A residential mortgage loan
that is not a ``qualified mortgage'', as
defined under subsection (b)(2), may not
contain terms under which a consumer must pay a
prepayment penalty for paying all or part of
the principal after the loan is consummated.
(B) Exclusions.--For purposes of this
subsection, a ``qualified mortgage'' may not
include a residential mortgage loan that--
(i) has an adjustable rate; or
(ii) has an annual percentage rate
that exceeds the average prime offer
rate for a comparable transaction, as
of the date the interest rate is set--
(I) by 1.5 or more percentage
points, in the case of a first
lien residential mortgage loan
having [a original] an original
principal obligation amount
that is equal to or less than
the amount of the maximum
limitation on the original
principal obligation of
mortgage in effect for a
residence of the applicable
size, as of the date of such
interest rate set, pursuant to
the 6th sentence of section
305(a)(2) the Federal Home Loan
Mortgage Corporation Act (12
U.S.C. 1454(a)(2));
(II) by 2.5 or more
percentage points, in the case
of a first lien residential
mortgage loan having a original
principal obligation amount
that is more than the amount of
the maximum limitation on the
original principal obligation
of mortgage in effect for a
residence of the applicable
size, as of the date of such
interest rate set, pursuant to
the 6th sentence of section
305(a)(2) the Federal Home Loan
Mortgage Corporation Act (12
U.S.C. 1454(a)(2)); and
(III) by 3.5 or more
percentage points, in the case
of a subordinate lien
residential mortgage loan.
(2) Publication of average prime offer rate and apr
thresholds.--The [Board] Agency--
(A) shall publish, and update at least
weekly, average prime offer rates;
(B) may publish multiple rates based on
varying types of mortgage transactions; and
(C) shall adjust the thresholds established
under subclause (I), (II), and (III) of
paragraph (1)(B)(ii) as necessary to reflect
significant changes in market conditions and to
effectuate the purposes of the Mortgage Reform
and Anti-Predatory Lending Act.
(3) Phased-out penalties on qualified mortgages.--A
qualified mortgage (as defined in subsection (b)(2))
may not contain terms under which a consumer must pay a
prepayment penalty for paying all or part of the
principal after the loan is consummated in excess of
the following limitations:
(A) During the 1-year period beginning on the
date the loan is consummated, the prepayment
penalty shall not exceed an amount equal to 3
percent of the outstanding balance on the loan.
(B) During the 1-year period beginning after
the period described in subparagraph (A), the
prepayment penalty shall not exceed an amount
equal to 2 percent of the outstanding balance
on the loan.
(C) During the 1-year period beginning after
the 1-year period described in subparagraph
(B), the prepayment penalty shall not exceed an
amount equal to 1 percent of the outstanding
balance on the loan.
(D) After the end of the 3-year period
beginning on the date the loan is consummated,
no prepayment penalty may be imposed on a
qualified mortgage.
(4) Option for no prepayment penalty required.--A
creditor may not offer a consumer a residential
mortgage loan product that has a prepayment penalty for
paying all or part of the principal after the loan is
consummated as a term of the loan without offering the
consumer a residential mortgage loan product that does
not have a prepayment penalty as a term of the loan.
(d) Single Premium Credit Insurance Prohibited.--No creditor
may finance, directly or indirectly, in connection with any
residential mortgage loan or with any extension of credit under
an open end consumer credit plan secured by the principal
dwelling of the consumer, any credit life, credit disability,
credit unemployment, or credit property insurance, or any other
accident, loss-of-income, life, or health insurance, or any
payments directly or indirectly for any debt cancellation or
suspension agreement or contract, except that--
(1) insurance premiums or debt cancellation or
suspension fees calculated and paid in full on a
monthly basis shall not be considered financed by the
creditor; and
(2) this subsection shall not apply to credit
unemployment insurance for which the unemployment
insurance premiums are reasonable, the creditor
receives no direct or indirect compensation in
connection with the unemployment insurance premiums,
and the unemployment insurance premiums are paid
pursuant to another insurance contract and not paid to
an affiliate of the creditor.
(e) Arbitration.--
(1) In general.--No residential mortgage loan and no
extension of credit under an open end consumer credit
plan secured by the principal dwelling of the consumer
may include terms which require arbitration or any
other nonjudicial procedure as the method for resolving
any controversy or settling any claims arising out of
the transaction.
(2) Post-controversy agreements.--Subject to
paragraph (3), paragraph (1) shall not be construed as
limiting the right of the consumer and the creditor or
any assignee to agree to arbitration or any other
nonjudicial procedure as the method for resolving any
controversy at any time after a dispute or claim under
the transaction arises.
(3) No waiver of statutory cause of action.--No
provision of any residential mortgage loan or of any
extension of credit under an open end consumer credit
plan secured by the principal dwelling of the consumer,
and no other agreement between the consumer and the
creditor relating to the residential mortgage loan or
extension of credit referred to in paragraph (1), shall
be applied or interpreted so as to bar a consumer from
bringing an action in an appropriate district court of
the United States, or any other court of competent
jurisdiction, pursuant to section 130 or any other
provision of law, for damages or other relief in
connection with any alleged violation of this section,
any other provision of this title, or any other Federal
law.
(f) Mortgages With Negative Amortization.--No creditor may
extend credit to a borrower in connection with a consumer
credit transaction under an open or closed end consumer credit
plan secured by a dwelling or residential real property that
includes a dwelling, other than a reverse mortgage, that
provides or permits a payment plan that may, at any time over
the term of the extension of credit, result in negative
amortization unless, before such transaction is consummated--
(1) the creditor provides the consumer with a
statement that--
(A) the pending transaction will or may, as
the case may be, result in negative
amortization;
(B) describes negative amortization in such
manner as the [Board] Agency shall prescribe;
(C) negative amortization increases the
outstanding principal balance of the account;
and
(D) negative amortization reduces the
consumer's equity in the dwelling or real
property; and
(2) in the case of a first-time borrower with respect
to a residential mortgage loan that is not a qualified
mortgage, the first-time borrower provides the creditor
with sufficient documentation to demonstrate that the
consumer received homeownership counseling from
organizations or counselors certified by the Secretary
of Housing and Urban Development as competent to
provide such counseling.
(g) Protection Against Loss of Anti-deficiency Protection.--
(1) Definition.--For purposes of this subsection, the
term ``anti-deficiency law'' means the law of any State
which provides that, in the event of foreclosure on the
residential property of a consumer securing a mortgage,
the consumer is not liable, in accordance with the
terms and limitations of such State law, for any
deficiency between the sale price obtained on such
property through foreclosure and the outstanding
balance of the mortgage.
(2) Notice at time of consummation.--In the case of
any residential mortgage loan that is, or upon
consummation will be, subject to protection under an
anti-deficiency law, the creditor or mortgage
originator shall provide a written notice to the
consumer describing the protection provided by the
anti-deficiency law and the significance for the
consumer of the loss of such protection before such
loan is consummated.
(3) Notice before refinancing that would cause loss
of protection.--In the case of any residential mortgage
loan that is subject to protection under an anti-
deficiency law, if a creditor or mortgage originator
provides an application to a consumer, or receives an
application from a consumer, for any type of
refinancing for such loan that would cause the loan to
lose the protection of such anti-deficiency law, the
creditor or mortgage originator shall provide a written
notice to the consumer describing the protection
provided by the anti-deficiency law and the
significance for the consumer of the loss of such
protection before any agreement for any such
refinancing is consummated.
(h) Policy Regarding Acceptance of Partial Payment.--In the
case of any residential mortgage loan, a creditor shall
disclose prior to settlement or, in the case of a person
becoming a creditor with respect to an existing residential
mortgage loan, at the time such person becomes a creditor--
(1) the creditor's policy regarding the acceptance of
partial payments; and
(2) if partial payments are accepted, how such
payments will be applied to such mortgage and if such
payments will be placed in escrow.
(i) Timeshare Plans.--This section and any regulations
promulgated under this section do not apply to an extension of
credit relating to a plan described in section 101(53D) of
title 11, United States Code.
(j) Safe Harbor for Certain Loans Held on Portfolio.--
(1) Safe harbor for creditors that are depository
institutions.--
(A) In general.--A creditor that is a
depository institution shall not be subject to
suit for failure to comply with subsection (a),
(c)(1), or (f)(2) of this section or section
129H with respect to a residential mortgage
loan, and the banking regulators shall treat
such loan as a qualified mortgage, if--
(i) the creditor has, since the
origination of the loan, held the loan
on the balance sheet of the creditor;
and
(ii) all prepayment penalties with
respect to the loan comply with the
limitations described under subsection
(c)(3).
(B) Exception for certain transfers.--In the
case of a depository institution that transfers
a loan originated by that institution to
another depository institution by reason of the
bankruptcy or failure of the originating
depository institution or the purchase of the
originating depository institution, the
depository institution transferring such loan
shall be deemed to have complied with the
requirement under subparagraph (A)(i).
(2) Safe harbor for mortgage originators.--A mortgage
originator shall not be subject to suit for a violation
of section 129B(c)(3)(B) for steering a consumer to a
residential mortgage loan if--
(A) the creditor of such loan is a depository
institution and has informed the mortgage
originator that the creditor intends to hold
the loan on the balance sheet of the creditor
for the life of the loan; and
(B) the mortgage originator informs the
consumer that the creditor intends to hold the
loan on the balance sheet of the creditor for
the life of the loan.
(3) Definitions.--For purposes of this subsection:
(A) Banking regulators.--The term ``banking
regulators'' means the Federal banking
agencies, the Consumer Law Enforcement Agency,
and the National Credit Union Administration.
(B) Depository institution.--The term
``depository institution'' has the meaning
given that term under section 19(b)(1) of the
Federal Reserve Act (12 U.S.C. 505(b)(1)).
(C) Federal banking agencies.--The term
``Federal banking agencies'' has the meaning
given that term under section 3 of the Federal
Deposit Insurance Act.
Sec. 129D. Escrow or impound accounts relating to certain consumer
credit transactions
(a) In General.--Except as provided in subsection (b), (c),
(d), or (e), a creditor, in connection with the consummation of
a consumer credit transaction secured by a first lien on the
principal dwelling of the consumer, other than a consumer
credit transaction under an open end credit plan or a reverse
mortgage, shall establish, before the consummation of such
transaction, an escrow or impound account for the payment of
taxes and hazard insurance, and, if applicable, flood
insurance, mortgage insurance, ground rents, and any other
required periodic payments or premiums with respect to the
property or the loan terms, as provided in, and in accordance
with, this section.
(b) When Required.--No impound, trust, or other type of
account for the payment of property taxes, insurance premiums,
or other purposes relating to the property may be required as a
condition of a real property sale contract or a loan secured by
a first deed of trust or mortgage on the principal dwelling of
the consumer, other than a consumer credit transaction under an
open end credit plan or a reverse mortgage, except when--
(1) any such impound, trust, or other type of escrow
or impound account for such purposes is required by
Federal or State law;
(2) a loan is made, guaranteed, or insured by a State
or Federal governmental lending or insuring agency;
(3) the transaction is secured by a first mortgage or
lien on the consumer's principal dwelling having an
original principal obligation amount that--
(A) does not exceed the amount of the maximum
limitation on the original principal obligation
of mortgage in effect for a residence of the
applicable size, as of the date such interest
rate set, pursuant to the sixth sentence of
section 305(a)(2) the Federal Home Loan
Mortgage Corporation Act (12 U.S.C.
1454(a)(2)), and the annual percentage rate
will exceed the average prime offer rate as
defined in section 129C by 1.5 or more
percentage points; or
(B) exceeds the amount of the maximum
limitation on the original principal obligation
of mortgage in effect for a residence of the
applicable size, as of the date such interest
rate set, pursuant to the sixth sentence of
section 305(a)(2) the Federal Home Loan
Mortgage Corporation Act (12 U.S.C.
1454(a)(2)), and the annual percentage rate
will exceed the average prime offer rate as
defined in section 129C by 2.5 or more
percentage points; or
(4) so required pursuant to regulation.
(c) Exemptions.--The [Board] Consumer Law Enforcement Agency
may, by regulation, exempt from the requirements of subsection
(a) a creditor that--
(1) operates in rural or underserved areas;
(2) together with all affiliates, has total annual
mortgage loan originations that do not exceed a limit
set by the [Board] Consumer Law Enforcement Agency;
(3) retains its mortgage loan originations in
portfolio; and
(4) meets any asset size threshold and any other
criteria the [Board] Consumer Law Enforcement Agency
may establish, consistent with the purposes of this
subtitle.
(d) Duration of Mandatory Escrow or Impound Account.--An
escrow or impound account established pursuant to subsection
(b) shall remain in existence for a minimum period of 5 years,
beginning with the date of the consummation of the loan, unless
and until--
(1) such borrower has sufficient equity in the
dwelling securing the consumer credit transaction so as
to no longer be required to maintain private mortgage
insurance;
(2) such borrower is delinquent;
(3) such borrower otherwise has not complied with the
legal obligation, as established by rule; or
(4) the underlying mortgage establishing the account
is terminated.
(e) Limited Exemptions for Loans Secured by Shares in a
Cooperative or in Which an Association Must Maintain a Master
Insurance Policy.--Escrow accounts need not be established for
loans secured by shares in a cooperative. Insurance premiums
need not be included in escrow accounts for loans secured by
dwellings or units, where the borrower must join an association
as a condition of ownership, and that association has an
obligation to the dwelling or unit owners to maintain a master
policy insuring the dwellings or units.
(f) Clarification on Escrow Accounts for Loans Not Meeting
Statutory Test.--For mortgages not covered by the requirements
of subsection (b), no provision of this section shall be
construed as precluding the establishment of an impound, trust,
or other type of account for the payment of property taxes,
insurance premiums, or other purposes relating to the
property--
(1) on terms mutually agreeable to the parties to the
loan;
(2) at the discretion of the lender or servicer, as
provided by the contract between the lender or servicer
and the borrower; or
(3) pursuant to the requirements for the escrowing of
flood insurance payments for regulated lending
institutions in section 102(d) of the Flood Disaster
Protection Act of 1973.
(g) Administration of Mandatory Escrow or Impound Accounts.--
(1) In general.--Except as may otherwise be provided
for in this title or in regulations prescribed by the
[Board] Consumer Law Enforcement Agency, escrow or
impound accounts established pursuant to subsection (b)
shall be established in a federally insured depository
institution or credit union.
(2) Administration.--Except as provided in this
section or regulations prescribed under this section,
an escrow or impound account subject to this section
shall be administered in accordance with--
(A) the Real Estate Settlement Procedures Act
of 1974 and regulations prescribed under such
Act;
(B) the Flood Disaster Protection Act of 1973
and regulations prescribed under such Act; and
(C) the law of the State, if applicable,
where the real property securing the consumer
credit transaction is located.
(3) Applicability of payment of interest.--If
prescribed by applicable State or Federal law, each
creditor shall pay interest to the consumer on the
amount held in any impound, trust, or escrow account
that is subject to this section in the manner as
prescribed by that applicable State or Federal law.
(4) Penalty coordination with respa.--Any action or
omission on the part of any person which constitutes a
violation of the Real Estate Settlement Procedures Act
of 1974 or any regulation prescribed under such Act for
which the person has paid any fine, civil money
penalty, or other damages shall not give rise to any
additional fine, civil money penalty, or other damages
under this section, unless the action or omission also
constitutes a direct violation of this section.
(h) Disclosures Relating to Mandatory Escrow or Impound
Account.--In the case of any impound, trust, or escrow account
that is required under subsection (b), the creditor shall
disclose by written notice to the consumer at least 3 business
days before the consummation of the consumer credit transaction
giving rise to such account or in accordance with timeframes
established in prescribed regulations the following
information:
(1) The fact that an escrow or impound account will
be established at consummation of the transaction.
(2) The amount required at closing to initially fund
the escrow or impound account.
(3) The amount, in the initial year after the
consummation of the transaction, of the estimated taxes
and hazard insurance, including flood insurance, if
applicable, and any other required periodic payments or
premiums that reflects, as appropriate, either the
taxable assessed value of the real property securing
the transaction, including the value of any
improvements on the property or to be constructed on
the property (whether or not such construction will be
financed from the proceeds of the transaction) or the
replacement costs of the property.
(4) The estimated monthly amount payable to be
escrowed for taxes, hazard insurance (including flood
insurance, if applicable) and any other required
periodic payments or premiums.
(5) The fact that, if the consumer chooses to
terminate the account in the future, the consumer will
become responsible for the payment of all taxes, hazard
insurance, and flood insurance, if applicable, as well
as any other required periodic payments or premiums on
the property unless a new escrow or impound account is
established.
(6) Such other information as the [Board] Consumer
Law Enforcement Agency determines necessary for the
protection of the consumer.
(i) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Flood insurance.--The term ``flood insurance''
means flood insurance coverage provided under the
national flood insurance program pursuant to the
National Flood Insurance Act of 1968.
(2) Hazard insurance.--The term ``hazard insurance''
shall have the same meaning as provided for ``hazard
insurance'', ``casualty insurance'', ``homeowner's
insurance'', or other similar term under the law of the
State where the real property securing the consumer
credit transaction is located.
(j) Disclosure Notice Required for Consumers Who Waive Escrow
Services.--
(1) In general.--If--
(A) an impound, trust, or other type of
account for the payment of property taxes,
insurance premiums, or other purposes relating
to real property securing a consumer credit
transaction is not established in connection
with the transaction; or
(B) a consumer chooses, and provides written
notice to the creditor or servicer of such
choice, at any time after such an account is
established in connection with any such
transaction and in accordance with any statute,
regulation, or contractual agreement, to close
such account,
the creditor or servicer shall provide a timely and
clearly written disclosure to the consumer that advises
the consumer of the responsibilities of the consumer
and implications for the consumer in the absence of any
such account.
(2) Disclosure requirements.--Any disclosure provided
to a consumer under paragraph (1) shall include the
following:
(A) Information concerning any applicable
fees or costs associated with either the non-
establishment of any such account at the time
of the transaction, or any subsequent closure
of any such account.
(B) A clear and prominent statement that the
consumer is responsible for personally and
directly paying the non-escrowed items, in
addition to paying the mortgage loan payment,
in the absence of any such account, and the
fact that the costs for taxes, insurance, and
related fees can be substantial.
(C) A clear explanation of the consequences
of any failure to pay non-escrowed items,
including the possible requirement for the
forced placement of insurance by the creditor
or servicer and the potentially higher cost
(including any potential commission payments to
the servicer) or reduced coverage for the
consumer in the event of any such creditor-
placed insurance.
(D) Such other information as the [Board]
Consumer Law Enforcement Agency determines
necessary for the protection of the consumer.
(k) Safe Harbor for Loans Held by Smaller Creditors.--
(1) In general.--A creditor shall not be in violation
of subsection (a) with respect to a loan if--
(A) the creditor has consolidated assets of
$10,000,000,000 or less; and
(B) the creditor holds the loan on the
balance sheet of the creditor for the 3-year
period beginning on the date of the origination
of the loan.
(2) Exception for certain transfers.--In the case of
a creditor that transfers a loan to another person by
reason of the bankruptcy or failure of the creditor,
the purchase of the creditor, or a supervisory act or
recommendation from a State or Federal regulator, the
creditor shall be deemed to have complied with the
requirement under paragraph (1)(B).
Sec. 129E. Appraisal independence requirements
(a) In General.--It shall be unlawful, in extending credit or
in providing any services for a consumer credit transaction
secured by the principal dwelling of the consumer, to engage in
any act or practice that violates appraisal independence as
described in or pursuant to regulations prescribed under this
section.
(b) Appraisal Independence.--For purposes of subsection (a),
acts or practices that violate appraisal independence shall
include--
(1) any appraisal of a property offered as security
for repayment of the consumer credit transaction that
is conducted in connection with such transaction in
which a person with an interest in the underlying
transaction compensates, coerces, extorts, colludes,
instructs, induces, bribes, or intimidates a person,
appraisal management company, firm, or other entity
conducting or involved in an appraisal, or attempts, to
compensate, coerce, extort, collude, instruct, induce,
bribe, or intimidate such a person, for the purpose of
causing the appraised value assigned, under the
appraisal, to the property to be based on any factor
other than the independent judgment of the appraiser;
(2) mischaracterizing, or suborning any
mischaracterization of, the appraised value of the
property securing the extension of the credit;
(3) seeking to influence an appraiser or otherwise to
encourage a targeted value in order to facilitate the
making or pricing of the transaction; and
(4) withholding or threatening to withhold timely
payment for an appraisal report or for appraisal
services rendered when the appraisal report or services
are provided for in accordance with the contract
between the parties.
(c) Exceptions.--The requirements of subsection (b) shall not
be construed as prohibiting a mortgage lender, mortgage broker,
mortgage banker, real estate broker, appraisal management
company, employee of an appraisal management company, consumer,
or any other person with an interest in a real estate
transaction from asking an appraiser to undertake 1 or more of
the following:
(1) Consider additional, appropriate property
information, including the consideration of additional
comparable properties to make or support an appraisal.
(2) Provide further detail, substantiation, or
explanation for the appraiser's value conclusion.
(3) Correct errors in the appraisal report.
(d) Prohibitions on Conflicts of Interest.--No certified or
licensed appraiser conducting, and no appraisal management
company procuring or facilitating, an appraisal in connection
with a consumer credit transaction secured by the principal
dwelling of a consumer may have a direct or indirect interest,
financial or otherwise, in the property or transaction
involving the appraisal.
(e) Mandatory Reporting.--Any mortgage lender, mortgage
broker, mortgage banker, real estate broker, appraisal
management company, employee of an appraisal management
company, or any other person involved in a real estate
transaction involving an appraisal in connection with a
consumer credit transaction secured by the principal dwelling
of a consumer who has a reasonable basis to believe an
appraiser is failing to comply with the Uniform Standards of
Professional Appraisal Practice, is violating applicable laws,
or is otherwise engaging in unethical or unprofessional
conduct, shall refer the matter to the applicable State
appraiser certifying and licensing agency.
(f) No Extension of Credit.--In connection with a consumer
credit transaction secured by a consumer's principal dwelling,
a creditor who knows, at or before loan consummation, of a
violation of the appraisal independence standards established
in subsections (b) or (d) shall not extend credit based on such
appraisal unless the creditor documents that the creditor has
acted with reasonable diligence to determine that the appraisal
does not materially misstate or misrepresent the value of such
dwelling.
(g) Rules and Interpretive Guidelines.--
(1) In general.--Except as provided under paragraph
(2), the Board, the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, the National
Credit Union Administration Board, the Federal Housing
Finance Agency, and the [Bureau] Agency may jointly
issue rules, interpretive guidelines, and general
statements of policy with respect to acts or practices
that violate appraisal independence in the provision of
mortgage lending services for a consumer credit
transaction secured by the principal dwelling of the
consumer and mortgage brokerage services for such a
transaction, within the meaning of subsections (a),
(b), (c), (d), (e), (f), (h), and (i).
(2) Interim final regulations.--The Board shall, for
purposes of this section, prescribe interim final
regulations no later than 90 days after the date of
enactment of this section defining with specificity
acts or practices that violate appraisal independence
in the provision of mortgage lending services for a
consumer credit transaction secured by the principal
dwelling of the consumer or mortgage brokerage services
for such a transaction and defining any terms in this
section or such regulations. Rules prescribed by the
Board under this paragraph shall be deemed to be rules
prescribed by the agencies jointly under paragraph (1).
(h) Appraisal Report Portability.--Consistent with the
requirements of this section, the Board, the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, the
National Credit Union Administration Board, the Federal Housing
Finance Agency, and the [Bureau] Agency may jointly issue
regulations that address the issue of appraisal report
portability, including regulations that ensure the portability
of the appraisal report between lenders for a consumer credit
transaction secured by a 1-4 unit single family residence that
is the principal dwelling of the consumer, or mortgage
brokerage services for such a transaction.
(i) Customary and Reasonable Fee.--
(1) In general.--Lenders and their agents shall
compensate fee appraisers at a rate that is customary
and reasonable for appraisal services performed in the
market area of the property being appraised. Evidence
for such fees may be established by objective third-
party information, such as government agency fee
schedules, academic studies, and independent private
sector surveys. Fee studies shall exclude assignments
ordered by known appraisal management companies.
(2) Fee appraiser definition.--For purposes of this
section, the term ``fee appraiser'' means a person who
is not an employee of the mortgage loan originator or
appraisal management company engaging the appraiser and
is--
(A) a State licensed or certified appraiser
who receives a fee for performing an appraisal
and certifies that the appraisal has been
prepared in accordance with the Uniform
Standards of Professional Appraisal Practice;
or
(B) a company not subject to the requirements
of section 1124 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989
(12 U.S.C. 3331 et seq.) that utilizes the
services of State licensed or certified
appraisers and receives a fee for performing
appraisals in accordance with the Uniform
Standards of Professional Appraisal Practice.
(3) Exception for complex assignments.--In the case
of an appraisal involving a complex assignment, the
customary and reasonable fee may reflect the increased
time, difficulty, and scope of the work required for
such an appraisal and include an amount over and above
the customary and reasonable fee for non-complex
assignments.
(4) Rule of construction related to appraisal
donations.--For purposes of paragraph (1), if a fee
appraiser voluntarily donates appraisal services to an
organization described in section 170(c)(2) of the
Internal Revenue Code of 1986, such voluntary donation
shall be deemed customary and reasonable.
(j) Sunset.--Effective on the date the interim final
regulations are promulgated pursuant to subsection (g), the
Home Valuation Code of Conduct announced by the Federal Housing
Finance Agency on December 23, 2008, shall have no force or
effect.
(k) Penalties.--
(1) First violation.--In addition to the enforcement
provisions referred to in section 130, each person who
violates this section shall forfeit and pay a civil
penalty of not more than $10,000 for each day any such
violation continues.
(2) Subsequent violations.--In the case of any person
on whom a civil penalty has been imposed under
paragraph (1), paragraph (1) shall be applied by
substituting ``$20,000'' for ``$10,000'' with respect
to all subsequent violations.
(3) Assessment.--The agency referred to in subsection
(a) or (c) of section 108 with respect to any person
described in paragraph (1) shall assess any penalty
under this subsection to which such person is subject.
* * * * * * *
Sec. 129H. Property appraisal requirements
(a) In General.--A creditor may not extend credit in the form
of a higher-risk mortgage to any consumer without first
obtaining a written appraisal of the property to be mortgaged
prepared in accordance with the requirements of this section.
(b) Appraisal Requirements.--
(1) Physical property visit.--Subject to the rules
prescribed under paragraph (4), an appraisal of
property to be secured by a higher-risk mortgage does
not meet the requirement of this section unless it is
performed by a certified or licensed appraiser who
conducts a physical property visit of the interior of
the mortgaged property.
(2) Second appraisal under certain circumstances.--
(A) In general.--If the purpose of a higher-
risk mortgage is to finance the purchase or
acquisition of the mortgaged property from a
person within 180 days of the purchase or
acquisition of such property by that person at
a price that was lower than the current sale
price of the property, the creditor shall
obtain a second appraisal from a different
certified or licensed appraiser. The second
appraisal shall include an analysis of the
difference in sale prices, changes in market
conditions, and any improvements made to the
property between the date of the previous sale
and the current sale.
(B) No cost to applicant.--The cost of any
second appraisal required under subparagraph
(A) may not be charged to the applicant.
(3) Certified or licensed appraiser defined.--For
purposes of this section, the term ``certified or
licensed appraiser'' means a person who--
(A) is, at a minimum, certified or licensed
by the State in which the property to be
appraised is located; and
(B) performs each appraisal in conformity
with the Uniform Standards of Professional
Appraisal Practice and title XI of the
Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, and the regulations
prescribed under such title, as in effect on
the date of the appraisal.
(4) Regulations.--
(A) In general.--The Board, the Comptroller
of the Currency, the Federal Deposit Insurance
Corporation, the National Credit Union
Administration Board, the Federal Housing
Finance Agency, and the [Bureau] Agency shall
jointly prescribe regulations to implement this
section.
(B) Exemption.--The agencies listed in
subparagraph (A) may jointly exempt, by rule, a
class of loans from the requirements of this
subsection or subsection (a) if the agencies
determine that the exemption is in the public
interest and promotes the safety and soundness
of creditors.
(c) Free Copy of Appraisal.--A creditor shall provide 1 copy
of each appraisal conducted in accordance with this section in
connection with a higher-risk mortgage to the applicant without
charge, and at least 3 days prior to the transaction closing
date.
(d) Consumer Notification.--At the time of the initial
mortgage application, the applicant shall be provided with a
statement by the creditor that any appraisal prepared for the
mortgage is for the sole use of the creditor, and that the
applicant may choose to have a separate appraisal conducted at
the expense of the applicant.
(e) Violations.--In addition to any other liability to any
person under this title, a creditor found to have willfully
failed to obtain an appraisal as required in this section shall
be liable to the applicant or borrower for the sum of $2,000.
(f) Higher-risk Mortgage Defined.--For purposes of this
section, the term ``higher-risk mortgage'' means a residential
mortgage loan, other than a reverse mortgage loan that is a
qualified mortgage, as defined in section 129C, secured by a
principal dwelling--
(1) that is not a qualified mortgage, as defined in
section 129C; and
(2) with an annual percentage rate that exceeds the
average prime offer rate for a comparable transaction,
as defined in section 129C, as of the date the interest
rate is set--
(A) by 1.5 or more percentage points, in the
case of a first lien residential mortgage loan
having an original principal obligation amount
that does not exceed the amount of the maximum
limitation on the original principal obligation
of mortgage in effect for a residence of the
applicable size, as of the date of such
interest rate set, pursuant to the sixth
sentence of section 305(a)(2) the Federal Home
Loan Mortgage Corporation Act (12 U.S.C.
1454(a)(2));
(B) by 2.5 or more percentage points, in the
case of a first lien residential mortgage loan
having an original principal obligation amount
that exceeds the amount of the maximum
limitation on the original principal obligation
of mortgage in effect for a residence of the
applicable size, as of the date of such
interest rate set, pursuant to the sixth
sentence of section 305(a)(2) the Federal Home
Loan Mortgage Corporation Act (12 U.S.C.
1454(a)(2)); and
(C) by 3.5 or more percentage points for a
subordinate lien residential mortgage loan.
Sec. 130. Civil liability
(a) Except as otherwise provided in this section, any
creditor who fails to comply with any requirement imposed under
this chapter, including any requirement under section 125,
subsection (f) or (g) of section 131, or chapter 4 or 5 of this
title with respect to any person is liable to such person in an
amount equal to the sum of--
(1) any actual damage sustained by such person as a
result of the failure;
(2)(A)(i) in the case of an individual action twice
the amount of any finance charge in connection with the
transaction, (ii) in the case of an individual action
relating to a consumer lease under chapter 5 of this
title, 25 per centum of the total amount of monthly
payments under the lease, except that the liability
under this subparagraph shall not be less than $200 nor
greater than $2,000, (iii) in the case of an individual
action relating to an open end consumer credit plan
that is not secured by real property or a dwelling,
twice the amount of any finance charge in connection
with the transaction, with a minimum of $500 and a
maximum of $5,000, or such higher amount as may be
appropriate in the case of an established pattern or
practice of such failures; or (iv) in the case of an
individual action relating to a credit transaction not
under an open end credit plan that is secured by real
property or a dwelling, not less than $400 or greater
than $4,000; or
(B) in the case of a class action, such amount as the
court may allow, except that as to each member of the
class no minimum recovery shall be applicable, and the
total recovery under this subparagraph in any class
action or series of class actions arising out of the
same failure to comply by the same creditor shall not
be more than the lesser of $1,000,000 or 1 per centum
of the net worth of the creditor;
(3) in the case of any successful action to enforce
the foregoing liability or in any action in which a
person is determined to have a right of rescission
under section 125 or 128(e)(7), the costs of the
action, together with a reasonable attorney's fee as
determined by the court; and
(4) in the case of a failure to comply with any
requirement under section 129, paragraph (1) or (2) of
section 129B(c), or section 129C(a), an amount equal to
the sum of all finance charges and fees paid by the
consumer, unless the creditor demonstrates that the
failure to comply is not material.
In determining the amount of award in any class action, the
court shall consider, among other relevant factors, the amount
of any actual damages awarded, the frequency and persistence of
failures of compliance by the creditor, the resources of the
creditor, the number of persons adversely affected, and the
extent to which the creditor's failure of compliance was
intentional. In connection with the disclosures referred to in
subsections (a) and (b) of section 127, a creditor shall have a
liability determined under paragraph (2) only for failing to
comply with the requirements of section 125, 127(a), or any of
paragraphs (4) through (13) of section 127(b), or for failing
to comply with disclosure requirements under State law for any
term or item that the [Bureau] Agency has determined to be
substantially the same in meaning under section 111(a)(2) as
any of the terms or items referred to in section 127(a), or any
of paragraphs (4) through (13) of section 127(b). In connection
with the disclosures referred to in subsection (c) or (d) of
section 127, a card issuer shall have a liability under this
section only to a cardholder who pays a fee described in
section 127(c)(1)(A)(ii)(I) or section 127(c)(4)(A)(i) or who
uses the credit card or charge card. In connection with the
disclosures referred to in section 128, a creditor shall have a
liability determined under paragraph (2) only for failing to
comply with the requirements of section 125, of paragraph (2)
(insofar as it requires a disclosure of the ``amount
financed''), (3), (4), (5), (6), or (9) of section 128(a), or
section 128(b)(2)(C)(ii), of subparagraphs (A), (B), (D), (F),
or (J) of section 128(e)(2) (for purposes of paragraph (2) or
(4) of section 128(e)), or paragraph (4)(C), (6), (7), or (8)
of section 128(e), or for failing to comply with disclosure
requirements under State law for any term which the [Bureau]
Agency has determined to be substantially the same in meaning
under section 111(a)(2) as any of the terms referred to in any
of those paragraphs of section 128(a) or section
128(b)(2)(C)(ii). With respect to any failure to make
disclosures required under this chapter or chapter 4 or 5 of
this title, liability shall be imposed only upon the creditor
required to make disclosure, except as provided in section 131.
(b) A creditor or assignee has no liability under this
section or section 108 or section 112 for any failure to comply
with any requirement imposed under this chapter or chapter 5,
if within sixty days after discovering an error, whether
pursuant to a final written examination report or notice issued
under section 108(e)(1) or through the creditor's or assignee's
own procedures, and prior to the institution of an action under
this section or the receipt of written notice of the error from
the obligor, the creditor or assignee notifies the person
concerned of the error and makes whatever adjustments in the
appropriate account are necessary to assure that the person
will not be required to pay an amount in excess of the charge
actually disclosed, or the dollar equivalent of the annual
percentage rate actually disclosed, whichever is lower.
(c) A creditor or assignee may not be held liable in any
action brought under this section or section 125 for a
violation of this title if the creditor or assignee shows by a
preponderance of evidence that the violation was not
intentional and resulted from a bona fide error notwithstanding
the maintenance of procedures reasonably adapted to avoid any
such error. Examples of a bona fide error include, but are not
limited to, clerical, calculation, computer malfunction and
programing, and printing errors, except that an error of legal
judgment with respect to a person's obligations under this
title is not a bona fide error.
(d) When there are multiple obligors in a consumer credit
transaction or consumer lease, there shall be no more than one
recovery of damages under subsection (a)(2) for a violation of
this title.
(e) Except as provided in the subsequent sentence, any action
under this section may be brought in any United States district
court, or in any other court of competent jurisdiction, within
one year from the date of the occurrence of the violation or,
in the case of a violation involving a private education loan
(as that term is defined in section 140(a)), 1 year from the
date on which the first regular payment of principal is due
under the loan. Any action under this section with respect to
any violation of section 129, 129B, or 129C may be brought in
any United States district court, or in any other court of
competent jurisdiction, before the end of the 3-year period
beginning on the date of the occurrence of the violation. This
subsection does not bar a person from asserting a violation of
this title in an action to collect the debt which was brought
more than one year from the date of the occurrence of the
violation as a matter of defense by recoupment or set-off in
such action, except as otherwise provided by State law. An
action to enforce a violation of section 129, 129B, 129C, 129D,
129E, 129F, 129G, or 129H of this Act may also be brought by
the appropriate State attorney general in any appropriate
United States district court, or any other court of competent
jurisdiction, not later than 3 years after the date on which
the violation occurs. The State attorney general shall provide
prior written notice of any such civil action to the Federal
agency responsible for enforcement under section 108 and shall
provide the agency with a copy of the complaint. If prior
notice is not feasible, the State attorney general shall
provide notice to such agency immediately upon instituting the
action. The Federal agency may--
(1) intervene in the action;
(2) upon intervening--
(A) remove the action to the appropriate
United States district court, if it was not
originally brought there; and
(B) be heard on all matters arising in the
action; and
(3) file a petition for appeal.
(f) No provision of this section, section 108(b), section
108(c), section 108(e), or section 112 imposing any liability
shall apply to any act done or omitted in good faith in
conformity with any rule, regulation, or interpretation thereof
by the [Bureau] Agency or in conformity with any interpretation
or approval by an official or employee of the Federal Reserve
System duly authorized by the [Bureau] Agency to issue such
interpretations or approvals under such procedures as the
[Bureau] Agency may prescribe therefor, notwithstanding that
after such act or omission has occurred, such rule, regulation,
interpretation, or approval is amended, rescinded, or
determined by judicial or other authority to be invalid for any
reason.
(g) The multiple failure to disclose to any person any
information required under this chapter or chapter 4 or 5 of
this title to be disclosed in connection with a single account
under an open end consumer credit plan, other single consumer
credit sale, consumer loan, consumer lease, or other extension
of consumer credit, shall entitle the person to a single
recovery under this section but continued failure to disclose
after a recovery has been granted shall give rise to rights to
additional recoveries. This subsection does not bar any remedy
permitted by section 125.
(h) A person may not take any action to offset any amount for
which a creditor or assignee is potentially liable to such
person under subsection (a)(2) against any amount owed by such
person, unless the amount of the creditor's or assignee's
liability under this title has been determined by judgment of a
court of competent jurisdiction in an action of which such
person was a party. This subsection does not bar a consumer
then in default on the obligation from asserting a violation of
this title as an original action, or as a defense or
counterclaim to an action to collect amounts owed by the
consumer brought by a person liable under this title.
(i) Class Action Moratorium.--
(1) In general.--During the period beginning on the
date of the enactment of the Truth in Lending Class
Action Relief Act of 1995 and ending on October 1,
1995, no court may enter any order certifying any class
in any action under this title--
(A) which is brought in connection with any
credit transaction not under an open end credit
plan which is secured by a first lien on real
property or a dwelling and constitutes a
refinancing or consolidation of an existing
extension of credit; and
(B) which is based on the alleged failure of
a creditor--
(i) to include a charge actually
incurred (in connection with the
transaction) in the finance charge
disclosed pursuant to section 128;
(ii) to properly make any other
disclosure required under section 128
as a result of the failure described in
clause (i); or
(iii) to provide proper notice of
rescission rights under section 125(a)
due to the selection by the creditor of
the incorrect form from among the model
forms prescribed by the [Bureau] Agency
or from among forms based on such model
forms.
(2) Exceptions for certain alleged violations.--
Paragraph (1) shall not apply with respect to any
action--
(A) described in clause (i) or (ii) of
paragraph (1)(B), if the amount disclosed as
the finance charge results in an annual
percentage rate that exceeds the tolerance
provided in section 107(c); or
(B) described in paragraph (1)(B)(iii), if--
(i) no notice relating to rescission
rights under section 125(a) was
provided in any form; or
(ii) proper notice was not provided
for any reason other than the reason
described in such paragraph.
(j) Private Educational Lender.--A private educational lender
(as that term is defined in section 140(a)) has no liability
under this section for failure to comply with section
128(e)(3)).
(k) Defense to Foreclosure.--
(1) In general.--Notwithstanding any other provision
of law, when a creditor, assignee, or other holder of a
residential mortgage loan or anyone acting on behalf of
such creditor, assignee, or holder, initiates a
judicial or nonjudicial foreclosure of the residential
mortgage loan, or any other action to collect the debt
in connection with such loan, a consumer may assert a
violation by a creditor of paragraph (1) or (2) of
section 129B(c), or of section 129C(a), as a matter of
defense by recoupment or set off without regard for the
time limit on a private action for damages under
subsection (e).
(2) Amount of recoupment or setoff.--
(A) In general.--The amount of recoupment or
set-off under paragraph (1) shall equal the
amount to which the consumer would be entitled
under subsection (a) for damages for a valid
claim brought in an original action against the
creditor, plus the costs to the consumer of the
action, including a reasonable attorney's fee.
(B) Special rule.--Where such judgment is
rendered after the expiration of the applicable
time limit on a private action for damages
under subsection (e), the amount of recoupment
or set-off under paragraph (1) derived from
damages under subsection (a)(4) shall not
exceed the amount to which the consumer would
have been entitled under subsection (a)(4) for
damages computed up to the day preceding the
expiration of the applicable time limit.
(l) Exemption From Liability and Rescission in Case of
Borrower Fraud or Deception.--In addition to any other remedy
available by law or contract, no creditor or assignee shall be
liable to an obligor under this section, if such obligor, or
co-obligor has been convicted of obtaining by actual fraud such
residential mortgage loan.
Sec. 131. Liability of assignees
(a) Except as otherwise specifically provided in this title,
any civil action for a violation of this title or proceeding
under section 108 which may be brought against a creditor may
be maintained against any assignee of such creditor only if the
violation for which such action or proceeding is brought is
apparent on the face of the disclosure statement, except where
the assignment was involuntary. For the purpose of this
section, a violation apparent on the face of the disclosure
statement includes, but is not limited to (1) a disclosure
which can be determined to be incomplete or inaccurate from the
face of the disclosure statement or other documents assigned,
or (2) a disclosure which does not use the terms required to be
used by this title.
(b) Except as provided in section 125(c), in any action or
proceeding by or against any subsequent assignee of the
original creditor without knowledge to the contrary by the
assignee when he acquires the obligation, written
acknowledgement of receipt by a person to whom a statement is
required to be given pursuant to this title shall be conclusive
proof of the delivery thereof and, except as provided in
subsection (a), of compliance with this chapter. This section
does not affect the rights of the obligor in any action against
the original creditor.
(c) Any consumer who has the right to rescind a transaction
under section 125 may rescind the transaction as against any
assignee of the obligation.
(d) Rights Upon Assignment of Certain Mortgages.--
(1) In general.--Any person who purchases or is
otherwise assigned a mortgage referred to in section
103(aa) shall be subject to all claims and defenses
with respect to that mortgage that the consumer could
assert against the creditor of the mortgage, unless the
purchaser or assignee demonstrates, by a preponderance
of the evidence, that a reasonable person exercising
ordinary due diligence, could not determine, based on
the documentation required by this title, the
itemization of the amount financed, and other
disclosure of disbursements that the mortgage was a
mortgage referred to in section 103(aa). The preceding
sentence does not affect rights of a consumer under
subsection (a), (b), or (c) of this section or any
other provision of this title.
(2) Limitation on damages.--Notwithstanding any other
provision of law, relief provided as a result of any
action made permissible by paragraph (1) may not
exceed--
(A) with respect to actions based upon a
violation of this title, the amount specified
in section 130; and
(B) with respect to all other causes of
action, the sum of--
(i) the amount of all remaining
indebtedness; and
(ii) the total amount paid by the
consumer in connection with the
transaction.
(3) Offset.--The amount of damages that may be
awarded under paragraph (2)(B) shall be reduced by the
amount of any damages awarded under paragraph (2)(A).
(4) Notice.--Any person who sells or otherwise
assigns a mortgage referred to in section 103(aa) shall
include a prominent notice of the potential liability
under this subsection as determined by the [Bureau]
Agency.
(e) Liability of Assignee for Consumer Credit Transactions
Secured by Real Property.--
(1) In general.--Except as otherwise specifically
provided in this title, any civil action against a
creditor for a violation of this title, and any
proceeding under section 108 against a creditor, with
respect to a consumer credit transaction secured by
real property may be maintained against any assignee of
such creditor only if--
(A) the violation for which such action or
proceeding is brought is apparent on the face
of the disclosure statement provided in
connection with such transaction pursuant to
this title; and
(B) the assignment to the assignee was
voluntary.
(2) Violation apparent on the face of the disclosure
described.--For the purpose of this section, a
violation is apparent on the face of the disclosure
statement if--
(A) the disclosure can be determined to be
incomplete or inaccurate by a comparison among
the disclosure statement, any itemization of
the amount financed, the note, or any other
disclosure of disbursement; or
(B) the disclosure statement does not use the
terms or format required to be used by this
title.
(f) Treatment of Servicer.--
(1) In general.--A servicer of a consumer obligation
arising from a consumer credit transaction shall not be
treated as an assignee of such obligation for purposes
of this section unless the servicer is or was the owner
of the obligation.
(2) Servicer not treated as owner on basis of
assignment for administrative convenience.--A servicer
of a consumer obligation arising from a consumer credit
transaction shall not be treated as the owner of the
obligation for purposes of this section on the basis of
an assignment of the obligation from the creditor or
another assignee to the servicer solely for the
administrative convenience of the servicer in servicing
the obligation. Upon written request by the obligor,
the servicer shall provide the obligor, to the best
knowledge of the servicer, with the name, address, and
telephone number of the owner of the obligation or the
master servicer of the obligation.
(3) Servicer defined.--For purposes of this
subsection, the term ``servicer'' has the same meaning
as in section 6(i)(2) of the Real Estate Settlement
Procedures Act of 1974.
(4) Applicability.--This subsection shall apply to
all consumer credit transactions in existence or
consummated on or after the date of the enactment of
the Truth in Lending Act Amendments of 1995.
(g) Notice of New Creditor.--
(1) In general.--In addition to other disclosures
required by this title, not later than 30 days after
the date on which a mortgage loan is sold or otherwise
transferred or assigned to a third party, the creditor
that is the new owner or assignee of the debt shall
notify the borrower in writing of such transfer,
including--
(A) the identity, address, telephone number
of the new creditor;
(B) the date of transfer;
(C) how to reach an agent or party having
authority to act on behalf of the new creditor;
(D) the location of the place where transfer
of ownership of the debt is recorded; and
(E) any other relevant information regarding
the new creditor.
(2) Definition.--As used in this subsection, the term
``mortgage loan'' means any consumer credit transaction
that is secured by the principal dwelling of a
consumer.
* * * * * * *
Sec. 136. Dissemination of annual percentage rates
(a) The [Bureau] Agency shall collect, publish, and
disseminate to the public, on a demonstration basis in a number
of standard metropolitan statistical areas to be determined by
the [Bureau] Agency, the annual percentage rates charged for
representative types of nonsale credit by creditors in such
areas. For the purpose of this section, the [Bureau] Agency is
authorized to require creditors in such areas to furnish
information necessary for the [Bureau] Agency to collect,
publish, and disseminate such information.
(b) Credit Card Price and Availability Information.--
(1) Collection required.--The [Bureau] Agency shall
collect, on a semiannual basis, credit card price and
availability information, including the information
required to be disclosed under section 127(c) of this
chapter, from a broad sample of financial institutions
which offer credit card services.
(2) Sample requirements.--The broad sample of
financial institutions required under paragraph (1)
shall include--
(A) the 25 largest issuers of credit cards;
and
(B) not less than 125 additional financial
institutions selected by the [Bureau] Agency in
a manner that ensures--
(i) an equitable geographical
distribution within the sample; and
(ii) the representation of a wide
spectrum of institutions within the
sample.
(3) Report of information from sample.--Each
financial institution in the broad sample established
pursuant to paragraph (2) shall report the information
to the [Bureau] Agency in accordance with such
regulations or orders as the [Bureau] Agency may
prescribe.
(4) Public availability of collected information,
report to congress.--The [Bureau] Agency shall--
(A) make the information collected pursuant
to this subsection available to the public upon
request; and
(B) report such information semiannually to
Congress.
(c) The [Bureau] Agency is authorized to enter into contracts
or other arrangements with appropriate persons, organizations,
or State agencies to carry out its functions under subsections
(a) and (b) and to furnish financial assistance in support
thereof.
SEC. 137. HOME EQUITY PLANS.
(a) Index Requirement.--In the case of extensions of credit
under an open end consumer credit plan which are subject to a
variable rate and are secured by a consumer's principal
dwelling, the index or other rate of interest to which changes
in the annual percentage rate are related shall be based on an
index or rate of interest which is publicly available and is
not under the control of the creditor.
(b) Grounds for Acceleration of Outstanding Balance.--A
creditor may not unilaterally terminate any account under an
open end consumer credit plan under which extensions of credit
are secured by a consumer's principal dwelling and require the
immediate repayment of any outstanding balance at such time,
except in the case of--
(1) fraud or material misrepresentation on the part
of the consumer in connection with the account;
(2) failure by the consumer to meet the repayment
terms of the agreement for any outstanding balance; or
(3) any other action or failure to act by the
consumer which adversely affects the creditor's
security for the account or any right of the creditor
in such security.
This subsection does not apply to reverse mortgage
transactions.
(c) Change in Terms.--
(1) In general.--No open end consumer credit plan
under which extensions of credit are secured by a
consumer's principal dwelling may contain a provision
which permits a creditor to change unilaterally any
term required to be disclosed under section 127A(a) or
any other term, except a change in insignificant terms
such as the address of the creditor for billing
purposes.
(2) Certain changes not precluded.--Notwithstanding
the provisions of subsection (1), a creditor may make
any of the following changes:
(A) Change the index and margin applicable to
extensions of credit under such plan if the
index used by the creditor is no longer
available and the substitute index and margin
would result in a substantially similar
interest rate.
(B) Prohibit additional extensions of credit
or reduce the credit limit applicable to an
account under the plan during any period in
which the value of the consumer's principal
dwelling which secures any outstanding balance
is significantly less than the original
appraisal value of the dwelling.
(C) Prohibit additional extensions of credit
or reduce the credit limit applicable to the
account during any period in which the creditor
has reason to believe that the consumer will be
unable to comply with the repayment
requirements of the account due to a material
change in the consumer's financial
circumstances.
(D) Prohibit additional extensions of credit
or reduce the credit limit applicable to the
account during any period in which the consumer
is in default with respect to any material
obligation of the consumer under the agreement.
(E) Prohibit additional extensions of credit
or reduce the credit limit applicable to the
account during any period in which--
(i) the creditor is precluded by
government action from imposing the
annual percentage rate provided for in
the account agreement; or
(ii) any government action is in
effect which adversely affects the
priority of the creditor's security
interest in the account to the extent
that the value of the creditor's
secured interest in the property is
less than 120 percent of the amount of
the credit limit applicable to the
account.
(F) Any change that will benefit the
consumer.
(3) Material obligations.--Upon the request of the
consumer and at the time an agreement is entered into
by a consumer to open an account under an open end
consumer credit plan under which extensions of credit
are secured by the consumer's principal dwelling, the
consumer shall be given a list of the categories of
contract obligations which are deemed by the creditor
to be material obligations of the consumer under the
agreement for purposes of paragraph (2)(D).
(4) Consumer benefit.--
(A) In general.--For purposes of paragraph
(2)(F), a change shall be deemed to benefit the
consumer if the change is unequivocally
beneficial to the borrower and the change is
beneficial through the entire term of the
agreement.
(B) Board categorization.--The [Bureau]
Agency may, by regulation, determine categories
of changes that benefit the consumer.
(d) Terms Changed After Application.--If any term or
condition described in section 127A(a) which is disclosed to a
consumer in connection with an application to open an account
under an open end consumer credit plan described in such
section (other than a variable feature of the plan) changes
before the account is opened, and if, as a result of such
change, the consumer elects not to enter into the plan
agreement, the creditor shall refund all fees paid by the
consumer in connection with such application.
(e) Additional Requirements Relating to Refunds and
Imposition of Nonrefundable Fees.--
(1) In general.--No nonrefundable fee may be imposed
by a creditor or any other person in connection with
any application by a consumer to establish an account
under any open end consumer credit plan which provides
for extensions of credit which are secured by a
consumer's principal dwelling before the end of the 3-
day period beginning on the date such consumer receives
the disclosure required under section 127A(a) and the
pamphlet required under section 127A(e) with respect to
such application.
(2) Constructive receipt.--For purposes of
determining when a nonrefundable fee may be imposed in
accordance with this subsection if the disclosures and
pamphlet referred to in paragraph (1) are mailed to the
consumer, the date of the receipt of the disclosures by
such consumer shall be deemed to be 3 business days
after the date of mailing by the creditor.
SEC. 138. REVERSE MORTGAGES.
(a) In General.--In addition to the disclosures required
under this title, for each reverse mortgage, the creditor
shall, not less than 3 days prior to consummation of the
transaction, disclose to the consumer in conspicuous type a
good faith estimate of the projected total cost of the mortgage
to the consumer expressed as a table of annual interest rates.
Each annual interest rate shall be based on a projected total
future credit extension balance under a projected appreciation
rate for the dwelling and a term for the mortgage. The
disclosure shall include--
(1) statements of the annual interest rates for not
less than 3 projected appreciation rates and not less
than 3 credit transaction periods, as determined by the
[Bureau] Agency, including--
(A) a short-term reverse mortgage;
(B) a term equaling the actuarial life
expectancy of the consumer; and
(C) such longer term as the [Bureau] Agency
deems appropriate; and
(2) a statement that the consumer is not obligated to
complete the reverse mortgage transaction merely
because the consumer has received the disclosure
required under this section or has signed an
application for the reverse mortgage.
(b) Projected Total Cost.--In determining the projected total
cost of the mortgage to be disclosed to the consumer under
subsection (a), the creditor shall take into account--
(1) any shared appreciation or equity that the lender
will, by contract, be entitled to receive;
(2) all costs and charges to the consumer, including
the costs of any associated annuity that the consumer
elects or is required to purchase as part of the
reverse mortgage transaction;
(3) all payments to and for the benefit of the
consumer, including, in the case in which an associated
annuity is purchased (whether or not required by the
lender as a condition of making the reverse mortgage),
the annuity payments received by the consumer and
financed from the proceeds of the loan, instead of the
proceeds used to finance the annuity; and
(4) any limitation on the liability of the consumer
under reverse mortgage transactions (such as
nonrecourse limits and equity conservation agreements).
SEC. 139. CERTAIN LIMITATIONS ON LIABILITY.
(a) Limitations on Liability.--For any closed end consumer
credit transaction that is secured by real property or a
dwelling, that is subject to this title, and that is
consummated before the date of the enactment of the Truth in
Lending Act Amendments of 1995, a creditor or any assignee of a
creditor shall have no civil, administrative, or criminal
liability under this title for, and a consumer shall have no
extended rescission rights under section 125(f) with respect
to--
(1) the creditor's treatment, for disclosure
purposes, of--
(A) taxes described in section 106(d)(3);
(B) fees described in section 106(e)(2) and
(5);
(C) fees and amounts referred to in the 3rd
sentence of section 106(a); or
(D) borrower-paid mortgage broker fees
referred to in section 106(a)(6);
(2) the form of written notice used by the creditor
to inform the obligor of the rights of the obligor
under section 125 if the creditor provided the obligor
with a properly dated form of written notice published
and adopted by the [Bureau] Agency or a comparable
written notice, and otherwise complied with all the
requirements of this section regarding notice; or
(3) any disclosure relating to the finance charge
imposed with respect to the transaction if the amount
or percentage actually disclosed--
(A) may be treated as accurate for purposes
of this title if the amount disclosed as the
finance charge does not vary from the actual
finance charge by more than $200;
(B) may, under section 106(f)(2), be treated
as accurate for purposes of section 125; or
(C) is greater than the amount or percentage
required to be disclosed under this title.
(b) Exceptions.--Subsection (a) shall not apply to--
(1) any individual action or counterclaim brought
under this title which was filed before June 1, 1995;
(2) any class action brought under this title for
which a final order certifying a class was entered
before January 1, 1995;
(3) the named individual plaintiffs in any class
action brought under this title which was filed before
June 1, 1995; or
(4) any consumer credit transaction with respect to
which a timely notice of rescission was sent to the
creditor before June 1, 1995.
Sec. 140. Preventing unfair and deceptive private educational lending
practices and eliminating conflicts of interest
(a) Definitions.--As used in this section--
(1) the term ``covered educational institution''--
(A) means any educational institution that
offers a postsecondary educational degree,
certificate, or program of study (including any
institution of higher education); and
(B) includes an agent, officer, or employee
of the educational institution;
(2) the term ``gift''--
(A)(i) means any gratuity, favor, discount,
entertainment, hospitality, loan, or other item
having more than a de minimis monetary value,
including services, transportation, lodging, or
meals, whether provided in kind, by purchase of
a ticket, payment in advance, or reimbursement
after the expense has been incurred; and
(ii) includes an item described in clause (i)
provided to a family member of an officer,
employee, or agent of a covered educational
institution, or to any other individual based
on that individual's relationship with the
officer, employee, or agent, if--
(I) the item is provided with the
knowledge and acquiescence of the
officer, employee, or agent; and
(II) the officer, employee, or agent
has reason to believe the item was
provided because of the official
position of the officer, employee, or
agent; and
(B) does not include--
(i) standard informational material
related to a loan, default aversion,
default prevention, or financial
literacy;
(ii) food, refreshments, training, or
informational material furnished to an
officer, employee, or agent of a
covered educational institution, as an
integral part of a training session or
through participation in an advisory
council that is designed to improve the
service of the private educational
lender to the covered educational
institution, if such training or
participation contributes to the
professional development of the
officer, employee, or agent of the
covered educational institution;
(iii) favorable terms, conditions,
and borrower benefits on a private
education loan provided to a student
employed by the covered educational
institution, if such terms, conditions,
or benefits are not provided because of
the student's employment with the
covered educational institution;
(iv) the provision of financial
literacy counseling or services,
including counseling or services
provided in coordination with a covered
educational institution, to the extent
that such counseling or services are
not undertaken to secure--
(I) applications for private
education loans or private
education loan volume;
(II) applications or loan
volume for any loan made,
insured, or guaranteed under
title IV of the Higher
Education Act of 1965 (20
U.S.C. 1070 et seq.); or
(III) the purchase of a
product or service of a
specific private educational
lender;
(v) philanthropic contributions to a
covered educational institution from a
private educational lender that are
unrelated to private education loans
and are not made in exchange for any
advantage related to private education
loans; or
(vi) State education grants,
scholarships, or financial aid funds
administered by or on behalf of a
State;
(3) the term ``institution of higher education'' has
the same meaning as in section 102 of the Higher
Education Act of 1965 (20 U.S.C. 1002);
(4) the term ``postsecondary educational expenses''
means any of the expenses that are included as part of
the cost of attendance of a student, as defined under
section 472 of the Higher Education Act of 1965 (20
U.S.C. 1087ll);
(5) the term ``preferred lender arrangement'' has the
same meaning as in section 151 of the Higher Education
Act of 1965;
(6) the term ``private educational lender'' means--
(A) a financial institution, as defined in
section 3 of the Federal Deposit Insurance Act
(12 U.S.C. 1813) that solicits, makes, or
extends private education loans;
(B) a Federal credit union, as defined in
section 101 of the Federal Credit Union Act (12
U.S.C. 1752) that solicits, makes, or extends
private education loans; and
(C) any other person engaged in the business
of soliciting, making, or extending private
education loans;
(7) the term ``private education loan''--
(A) means a loan provided by a private
educational lender that--
(i) is not made, insured, or
guaranteed under of title IV of the
Higher Education Act of 1965 (20 U.S.C.
1070 et seq.); and
(ii) is issued expressly for
postsecondary educational expenses to a
borrower, regardless of whether the
loan is provided through the
educational institution that the
subject student attends or directly to
the borrower from the private
educational lender; and
(B) does not include an extension of credit
under an open end consumer credit plan, a
reverse mortgage transaction, a residential
mortgage transaction, or any other loan that is
secured by real property or a dwelling; and
(8) the term ``revenue sharing'' means an arrangement
between a covered educational institution and a private
educational lender under which--
(A) a private educational lender provides or
issues private education loans with respect to
students attending the covered educational
institution;
(B) the covered educational institution
recommends to students or others the private
educational lender or the private education
loans of the private educational lender; and
(C) the private educational lender pays a fee
or provides other material benefits, including
profit sharing, to the covered educational
institution in connection with the private
education loans provided to students attending
the covered educational institution or a
borrower acting on behalf of a student.
(b) Prohibition on Certain Gifts and Arrangements.--A private
educational lender may not, directly or indirectly--
(1) offer or provide any gift to a covered
educational institution in exchange for any advantage
or consideration provided to such private educational
lender related to its private education loan
activities; or
(2) engage in revenue sharing with a covered
educational institution.
(c) Prohibition on Co-Branding.--A private educational lender
may not use the name, emblem, mascot, or logo of the covered
educational institution, or other words, pictures, or symbols
readily identified with the covered educational institution, in
the marketing of private education loans in any way that
implies that the covered educational institution endorses the
private education loans offered by the private educational
lender.
(d) Advisory Board Compensation.--Any person who is employed
in the financial aid office of a covered educational
institution, or who otherwise has responsibilities with respect
to private education loans or other financial aid of the
institution, and who serves on an advisory board, commission,
or group established by a private educational lender or group
of such lenders shall be prohibited from receiving anything of
value from the private educational lender or group of lenders.
Nothing in this subsection prohibits the reimbursement of
reasonable expenses incurred by an employee of a covered
educational institution as part of their service on an advisory
board, commission, or group described in this subsection.
(e) Prohibition on Prepayment or Repayment Fees or Penalty.--
It shall be unlawful for any private educational lender to
impose a fee or penalty on a borrower for early repayment or
prepayment of any private education loan.
(f) Credit Card Protections for College Students.--
(1) Disclosure required.--An institution of higher
education shall publicly disclose any contract or other
agreement made with a card issuer or creditor for the
purpose of marketing a credit card.
(2) Inducements prohibited.--No card issuer or
creditor may offer to a student at an institution of
higher education any tangible item to induce such
student to apply for or participate in an open end
consumer credit plan offered by such card issuer or
creditor, if such offer is made--
(A) on the campus of an institution of higher
education;
(B) near the campus of an institution of
higher education, as determined by rule of the
[Bureau] Agency; or
(C) at an event sponsored by or related to an
institution of higher education.
(3) Sense of the congress.--It is the sense of the
Congress that each institution of higher education
should consider adopting the following policies
relating to credit cards:
(A) That any card issuer that markets a
credit card on the campus of such institution
notify the institution of the location at which
such marketing will take place.
(B) That the number of locations on the
campus of such institution at which the
marketing of credit cards takes place be
limited.
(C) That credit card and debt education and
counseling sessions be offered as a regular
part of any orientation program for new
students of such institution.
Sec. 140A. Procedure for timely settlement of estates of decedent
obligors
The [Bureau] Agency, [in consultation with the Bureau] in
consultation with the Federal Trade Commission and each other
agency referred to in section 108(a), shall prescribe
regulations to require any creditor, with respect to any credit
card account under an open end consumer credit plan, to
establish procedures to ensure that any administrator of an
estate of any deceased obligor with respect to such account can
resolve outstanding credit balances in a timely manner.
CHAPTER 3--CREDIT ADVERTISING AND LIMITS ON CREDIT CARD FEES
* * * * * * *
Sec. 143. Advertising of open end credit plans
No advertisement to aid, promote, or assist directly or
indirectly the extension of consumer credit under an open end
credit plan may set forth any of the specific terms of that
plan unless it also clearly and conspicuously sets forth all of
the following items:
(1) Any minimum or fixed amount which could be
imposed.
(2) In any case in which periodic rates may be used
to compute the finance charge, the periodic rates
expressed as annual percentage rates.
(3) Any other term that the [Bureau] Agency may by
regulation require to be disclosed.
Sec. 144. Advertising of credit other than open end plans
(a) Except as provided in subsection (b), this section
applies to any advertisement to aid, promote, or assist
directly or indirectly any consumer credit sale, loan, or other
extension of credit subject to the provisions of this title,
other than an open end credit plan.
(b) The provisions of this section do not apply to
advertisements of residential real estate except to the extent
that the [Bureau] Agency may by regulation require.
(c) If any advertisement to which this section applies states
the rate of a finance charge, the advertisement shall state the
rate of that charge expressed as an annual percentage rate.
(d) If any advertisement to which this section applies states
the amount of the downpayment, if any, the amount of any
installment payment, the dollar amount of any finance charge,
or the number of installments or the period of repayment, then
the advertisement shall state all of the following items:
(1) The downpayment, if any.
(2) The terms of repayment.
(3) The rate of the finance charge expressed as an
annual percentage rate.
(e) Each advertisement to which this section applies that
relates to a consumer credit transaction that is secured by the
principal dwelling of a consumer in which the extension of
credit may exceed the fair market value of the dwelling, and
which advertisement is disseminated in paper form to the public
or through the Internet, as opposed to by radio or television,
shall clearly and conspicuously state that--
(1) the interest on the portion of the credit
extension that is greater than the fair market value of
the dwelling is not tax deductible for Federal income
tax purposes; and
(2) the consumer should consult a tax adviser for
further information regarding the deductibility of
interest and charges.
* * * * * * *
Sec. 146. Use of annual percentage rate in oral disclosures
In responding orally to any inquiry about the cost of credit,
a creditor, regardless of the method used to compute finance
charges, shall state rates only in terms of the annual
percentage rate, except that in the case of an open end credit
plan, the periodic rate also may be stated and, in the case of
an other than open end credit plan where a major component of
the finance charge consists of interest computed at a simple
annual rate, the simple annual rate also may be stated. The
[Bureau] Agency may, by regulation, modify the requirements of
this section or provide an exception from this section for a
transaction or class of transactions for which the creditor
cannot determine in advance the applicable annual percentage
rate.
SEC. 147. ADVERTISING OF OPEN END CONSUMER CREDIT PLANS SECURED BY THE
CONSUMER'S PRINCIPAL DWELLING.
(a) In General.--If any advertisement to aid, promote, or
assist, directly or indirectly, the extension of consumer
credit through an open end consumer credit plan under which
extensions of credit are secured by the consumer's principal
dwelling states, affirmatively or negatively, any of the
specific terms of the plan, including any periodic payment
amount required under such plan, such advertisement shall also
clearly and conspicuously set forth the following information,
in such form and manner as the [Bureau] Agency may require:
(1) Loan fees and opening cost estimates.--Any loan
fee the amount of which is determined as a percentage
of the credit limit applicable to an account under the
plan and an estimate of the aggregate amount of other
fees for opening the account, based on the creditor's
experience with the plan and stated as a single amount
or as a reasonable range.
(2) Periodic rates.--In any case in which periodic
rates may be used to compute the finance charge, the
periodic rates expressed as an annual percentage rate.
(3) Highest annual percentage rate.--The highest
annual percentage rate which may be imposed under the
plan.
(4) Other information.--Any other information the
[Bureau] Agency may by regulation require.
(b) Tax Deductibility.--
(1) In general.--If any advertisement described in
subsection (a) contains a statement that any interest
expense incurred with respect to the plan is or may be
tax deductible, the advertisement shall not be
misleading with respect to such deductibility.
(2) Credit in excess of fair market value.--Each
advertisement described in subsection (a) that relates
to an extension of credit that may exceed the fair
market value of the dwelling, and which advertisement
is disseminated in paper form to the public or through
the Internet, as opposed to by radio or television,
shall include a clear and conspicuous statement that--
(A) the interest on the portion of the credit
extension that is greater than the fair market
value of the dwelling is not tax deductible for
Federal income tax purposes; and
(B) the consumer should consult a tax adviser
for further information regarding the
deductibility of interest and charges.
(c) Certain Terms Prohibited.--No advertisement described in
subsection (a) with respect to any home equity account may
refer to such loan as ``free money'' or use other terms
determined by the [Bureau] Agency by regulation to be
misleading.
(d) Discounted Initial Rate.--
(1) In general.--If any advertisement described in
subsection (a) includes an initial annual percentage
rate that is not determined by the index or formula
used to make later interest rate adjustments, the
advertisement shall also state with equal prominence
the current annual percentage rate that would have been
applied using the index or formula if such initial rate
had not been offered.
(2) Quoted rate must be reasonably current.--The
annual percentage rate required to be disclosed under
the paragraph (1) rate must be current as of a
reasonable time given the media involved.
(3) Period during which initial rate is in effect.--
Any advertisement to which paragraph (1) applies shall
also state the period of time during which the initial
annual percentage rate referred to in such paragraph
will be in effect.
(e) Balloon Payment.--If any advertisement described in
subsection (a) contains a statement regarding the minimum
monthly payment under the plan, the advertisement shall also
disclose, if applicable, the fact that the plan includes a
balloon payment.
(f) Balloon Payment Defined.--For purposes of this section
and section 127A, the term ``balloon payment'' means, with
respect to any open end consumer credit plan under which
extensions of credit are secured by the consumer's principal
dwelling, any repayment option under which--
(1) the account holder is required to repay the
entire amount of any outstanding balance as of a
specified date or at the end of a specified period of
time, as determined in accordance with the terms of the
agreement pursuant to which such credit is extended;
and
(2) the aggregate amount of the minimum periodic
payments required would not fully amortize such
outstanding balance by such date or at the end of such
period.
SEC. 148. INTEREST RATE REDUCTION ON OPEN END CONSUMER CREDIT PLANS.
(a) In General.--If a creditor increases the annual
percentage rate applicable to a credit card account under an
open end consumer credit plan, based on factors including the
credit risk of the obligor, market conditions, or other
factors, the creditor shall consider changes in such factors in
subsequently determining whether to reduce the annual
percentage rate for such obligor.
(b) Requirements.--With respect to any credit card account
under an open end consumer credit plan, the creditor shall--
(1) maintain reasonable methodologies for assessing
the factors described in subsection (a);
(2) not less frequently than once every 6 months,
review accounts as to which the annual percentage rate
has been increased since January 1, 2009, to assess
whether such factors have changed (including whether
any risk has declined);
(3) reduce the annual percentage rate previously
increased when a reduction is indicated by the review;
and
(4) in the event of an increase in the annual
percentage rate, provide in the written notice required
under section 127(i) a statement of the reasons for the
increase.
(c) Rule of Construction.--This section shall not be
construed to require a reduction in any specific amount.
(d) Rulemaking.--The [Bureau] Board shall issue final rules
not later than 9 months after the date of enactment of this
section to implement the requirements of and evaluate
compliance with this section, and subsections (a), (b), and (c)
shall become effective 15 months after that date of enactment.
SEC. 149. REASONABLE PENALTY FEES ON OPEN END CONSUMER CREDIT PLANS.
(a) In General.--The amount of any penalty fee or charge that
a card issuer may impose with respect to a credit card account
under an open end consumer credit plan in connection with any
omission with respect to, or violation of, the cardholder
agreement, including any late payment fee, over-the-limit fee,
or any other penalty fee or charge, shall be reasonable and
proportional to such omission or violation.
(b) Rulemaking Required.--The [Bureau] Agency, in
consultation with the Comptroller of the Currency, the [Bureau
of Directors of the Federal Deposit Insurance Corporation]
Board of Directors of the Federal Deposit Insurance
Corporation, [the Director of the Office of Thrift
Supervision,] and the [National Credit Union Administration
Bureau] National Credit Union Administration Board, shall issue
final rules not later than 9 months after the date of enactment
of this section, to establish standards for assessing whether
the amount of any penalty fee or charge described under
subsection (a) is reasonable and proportional to the omission
or violation to which the fee or charge relates. Subsection (a)
shall become effective 15 months after the date of enactment of
this section.
(c) Considerations.--In issuing rules required by this
section, the [Bureau] Agency shall consider--
(1) the cost incurred by the creditor from such
omission or violation;
(2) the deterrence of such omission or violation by
the cardholder;
(3) the conduct of the cardholder; and
(4) such other factors as the [Bureau] Agency may
deem necessary or appropriate.
(d) Differentiation Permitted.--In issuing rules required by
this subsection, the [Bureau] Agency may establish different
standards for different types of fees and charges, as
appropriate.
(e) Safe Harbor Rule Authorized.--The [Bureau] Agency, in
consultation with the Comptroller of the Currency, the [Bureau
of Directors of the Federal Deposit Insurance Corporation]
Board of Directors of the Federal Deposit Insurance
Corporation, [the Director of the Office of Thrift
Supervision,] and the [National Credit Union Administration
Bureau] National Credit Union Administration Board, may issue
rules to provide an amount for any penalty fee or charge
described under subsection (a) that is presumed to be
reasonable and proportional to the omission or violation to
which the fee or charge relates.
* * * * * * *
CHAPTER 4--CREDIT BILLING
Sec. 161. Correction of billing errors
(a) If a creditor, within sixty days after having transmitted
to an obligor a statement of the obligor's account in
connection with an extension of consumer credit, receives at
the address disclosed under section 127(b)(10) a written notice
(other than notice on a payment stub or other payment medium
supplied by the creditor if the creditor so stipulates with the
disclosure required under section 127(a)(7)) from the obligor
in which the obligor--
(1) sets forth or otherwise enables the creditor to
identify the name and account number (if any) of the
obligor,
(2) indicates the obligor's belief that the statement
contains a billing error and the amount of such billing
error, and
(3) sets forth the reasons for the obligor's belief
(to the extent applicable) that the statement contains
a billing error,
the creditor shall, unless the obligor has, after giving such
written notice and before the expiration of the time limits
herein specified, agreed that the statement was correct--
(A) not later than thirty days after the receipt of
the notice, send a written acknowledgement thereof to
the obligor, unless the action required in subparagraph
(B) is taken within such thirty-day period, and
(B) not later than two complete billing cycles of the
creditor (in no event later than ninety days) after the
receipt of the notice and prior to taking any action to
collect the amount, or any part thereof, indicated by
the obligor under paragraph (2) either--
(i) make appropriate corrections in the
account of the obligor, including the crediting
of any finance charges on amounts erroneously
billed, and transmit to the obligor a
notification of such corrections and the
creditor's explanation of any change in the
amount indicated by the obligor under paragraph
(2) and, if any such change is made and the
obligor so requests, copies of documentary
evidence of the obligor's indebtedness; or
(ii) send a written explanation or
clarification to the obligor, after having
conducted an investigation, setting forth to
the extent applicable the reasons why the
creditor believes the account of the obligor
was correctly shown in the statement and, upon
request of the obligor, provide copies of
documentary evidence of the obligor's
indebtedness. In the case of a billing error
where the obligor alleges that the creditor's
billing statement reflects goods not delivered
to the obligor or his designee in accordance
with the agreement made at the time of the
transaction, a creditor may not construe such
amount to be correctly shown unless he
determines that such goods were actually
delivered, mailed, or otherwise sent to the
obligor and provides the obligor with a
statement of such determination.
After complying with the provisions of this subsection with
respect to an alleged billing error, a creditor has no further
responsibility under this section if the obligor continues to
make substantially the same allegation with respect to such
error.
(b) For the purpose of this section, a ``billing error''
consists of any of the following:
(1) A reflection on a statement of an extension of
credit which was not made to the obligor or, if made,
was not in the amount reflected on such statement.
(2) A reflection on a statement of an extension of
credit for which the obligor requests additional
clarification including documentary evidence thereof.
(3) A reflection on a statement of goods or services
not accepted by the obligor or his designee or not
delivered to the obligor or his designee in accordance
with the agreement made at the time of a transaction.
(4) The creditor's failure to reflect properly on a
statement a payment made by the obligor or a credit
issued to the obligor.
(5) A computation error or similar error of an
accounting nature of the creditor on a statement.
(6) Failure to transmit the statement required under
section 127(b) of this Act to the last address of the
obligor which has been disclosed to the creditor,
unless that address was furnished less than twenty days
before the end of the billing cycle for which the
statement is required.
(7) Any other error described in regulations of the
[Bureau] Agency.
(c) For the purposes of this section, ``action to collect the
amount, or any part thereof, indicated by an obligor under
paragraph (2)'' does not include the sending of statements of
account, which may include finance charges on amounts in
dispute, to the obligor following written notice from the
obligor as specified under subsection (a), if--
(1) the obligor's account is not restricted or closed
because of the failure of the obligor to pay the amount
indicated under paragraph (2) of subsection (a), and
(2) the creditor indicates the payment of such amount
is not required pending the creditor's compliance with
this section.
Nothing in this section shall be construed to prohibit any
action by a creditor to collect any amount which has not been
indicated by the obligor to contain a billing error.
(d) Pursuant to regulations of the [Bureau] Agency, a
creditor operating an open end consumer credit plan may not,
prior to the sending of the written explanation or
clarification required under paragraph (B)(ii), restrict or
close an account with respect to which the obligor has
indicated pursuant to subsection (a) that he believes such
account to contain a billing error solely because of the
obligor's failure to pay the amount indicated to be in error.
Nothing in this subsection shall be deemed to prohibit a
creditor from applying against the credit limit on the
obligor's account the amount indicated to be in error.
(e) Any creditor who fails to comply with the requirements of
this section or section 162 forfeits any right to collect from
the obligor the amount indicated by the obligor under paragraph
(2) of subsection (a) of this section, and any finance charges
thereon, except that the amount required to be forfeited under
this subsection may not exceed $50.
* * * * * * *
Sec. 164. Prompt and fair crediting of payments
(a) In General.--Payments received from an obligor under an
open end consumer credit plan by the creditor shall be posted
promptly to the obligor's account as specified in regulations
of the [Bureau] Agency. Such regulations shall prevent a
finance charge from being imposed on any obligor if the
creditor has received the obligor's payment in readily
identifiable form, by 5:00 p.m. on the date on which such
payment is due, in the amount, manner, and location indicated
by the creditor to avoid the imposition thereof.
(b) Application of Payments.--
(1) In general.--Upon receipt of a payment from a
cardholder, the card issuer shall apply amounts in
excess of the minimum payment amount first to the card
balance bearing the highest rate of interest, and then
to each successive balance bearing the next highest
rate of interest, until the payment is exhausted.
(2) Clarification relating to certain deferred
interest arrangements.--A creditor shall allocate the
entire amount paid by the consumer in excess of the
minimum payment amount to a balance on which interest
is deferred during the last 2 billing cycles
immediately preceding the expiration of the period
during which interest is deferred.
(c) Changes by Card Issuer.--If a card issuer makes a
material change in the mailing address, office, or procedures
for handling cardholder payments, and such change causes a
material delay in the crediting of a cardholder payment made
during the 60-day period following the date on which such
change took effect, the card issuer may not impose any late fee
or finance charge for a late payment on the credit card account
to which such payment was credited.
* * * * * * *
SEC. 172. ADDITIONAL LIMITS ON INTEREST RATE INCREASES.
(a) Limitation on Increases Within First Year.--Except in the
case of an increase described in paragraph (1), (2), (3), or
(4) of section 171(b), no increase in any annual percentage
rate, fee, or finance charge on any credit card account under
an open end consumer credit plan shall be effective before the
end of the 1-year period beginning on the date on which the
account is opened.
(b) Promotional Rate Minimum Term.--No increase in any annual
percentage rate applicable to a credit card account under an
open end consumer credit plan that is a promotional rate (as
that term is defined by the [Bureau] Agency) shall be effective
before the end of the 6-month period beginning on the date on
which the promotional rate takes effect, subject to such
reasonable exceptions as the [Bureau] Agency may establish, by
rule.
Sec. 173. Relation to State laws
(a) This chapter does not annul, alter, or affect, or exempt
any person subject to the provisions of this chapter from
complying with, the laws of any State with respect to credit
billing practices, except to the extent that those laws are
inconsistent with any provision of this chapter, and then only
to the extent of the inconsistency. The [Bureau] Agency is
authorized to determine whether such inconsistencies exist. The
[Bureau] Agency may not determine that any State law is
inconsistent with any provision of this chapter if the [Bureau]
Agency determines that such law gives greater protection to the
consumer.
(b) The [Bureau] Agency shall by regulation exempt from the
requirements of this chapter any class of credit transactions
within any State if it determines that under the law of that
State that class of transactions is subject to requirements
substantially similar to those imposed under this chapter or
that such law gives greater protection to the consumer, and
that there is adequate provision for enforcement.
(c) Notwithstanding any other provisions of this title, any
discount offered under section 167(b) of this title shall not
be considered a finance charge or other charge for credit under
the usury laws of any State or under the laws of any State
relating to disclosure of information in connection with credit
transactions, or relating to the types, amounts or rates of
charges, or to any element or elements of charges permissible
under such laws in connection with the extension or use of
credit.
CHAPTER 5--CONSUMER LEASES
Sec. 181. Definitions
For purposes of this chapter--
(1) The term ``consumer lease'' means a contract in
the form of a lease or bailment for the use of personal
property by a natural person for a period of time
exceeding four months, and for a total contractual
obligation not exceeding $50,000, primarily for
personal, family, or household purposes, whether or not
the lessee has the option to purchase or otherwise
become the owner of the property at the expiration of
the lease, except that such term shall not include any
credit sale as defined in section [103(g)] 103(h). Such
term does not include a lease for agricultural,
business, or commercial purposes, or to a government or
governmental agency or instrumentality, or to an
organization.
(2) The term ``lessee'' means a natural person who
leases or is offered a consumer lease.
(3) The term ``lessor'' means a person who is
regularly engaged in leasing, offering to lease, or
arranging to lease under a consumer lease.
(4) The term ``personal property'' means any property
which is not real property under the laws of the State
where situated at the time offered or otherwise made
available for lease.
(5) The terms ``security'' and ``security interest''
mean any interest in property which secures payment or
performance of an obligation.
Sec. 182. Consumer lease disclosures
Each lessor shall give a lessee prior to the consummation of
the lease a dated written statement on which the lessor and
lessee are identified setting out accurately and in a clear and
conspicuous manner the following information with respect to
that lease, as applicable:
(1) A brief description or identification of the
leased property;
(2) The amount of any payment by the lessee required
at the inception of the lease;
(3) The amount paid or payable by the lessee for
official fees, registration, certificate of title, or
license fees or taxes;
(4) The amount of other charges payable by the lessee
not included in the periodic payments, a description of
the charges and that the lessee shall be liable for the
differential, if any, between the anticipated fair
market value of the leased property and its appraised
actual value at the termination of the lease, if the
lessee has such liability;
(5) A statement of the amount or method of
determining the amount of any liabilities the lease
imposes upon the lessee at the end of the term and
whether or not the lessee has the option to purchase
the leased property and at what price and time;
(6) A statement identifying all express warranties
and guarantees made by the manufacturer or lessor with
respect to the leased property, and identifying the
party responsible for maintaining or servicing the
leased property together with a description of the
responsibility;
(7) A brief description of insurance provided or paid
for by the lessor or required of the lessee, including
the types and amounts of the coverages and costs;
(8) A description of any security interest held or to
be retained by the lessor in connection with the lease
and a clear identification of the property to which the
security interest relates;
(9) The number, amount, and due dates or periods of
payments under the lease and the total amount of such
periodic payments;
(10) Where the lease provides that the lessee shall
be liable for the anticipated fair market value of the
property on expiration of the lease, the fair market
value of the property at the inception of the lease,
the aggregate cost of the lease on expiration, and the
differential between them; and
(11) A statement of the conditions under which the
lessee or lessor may terminate the lease prior to the
end of the term and the amount or method of determining
any penalty or other charge for delinquency, default,
late payments, or early termination.
The disclosures required under this section may be made in the
lease contract to be signed by the lessee. The [Bureau] Agency
may provide by regulation that any portion of the information
required to be disclosed under this section may be given in the
form of estimates where the lessor is not in a position to know
exact information.
* * * * * * *
Sec. 184. Consumer lease advertising
(a) In General.--If an advertisement for a consumer lease
includes a statement of the amount of any payment or a
statement that any or no initial payment is required, the
advertisement shall clearly and conspicuously state, as
applicable--
(1) the transaction advertised is a lease;
(2) the total amount of any initial payments required
on or before consummation of the lease or delivery of
the property, whichever is later;
(3) that a security deposit is required;
(4) the number, amount, and timing of scheduled
payments; and
(5) with respect to a lease in which the liability of
the consumer at the end of the lease term is based on
the anticipated residual value of the property, that an
extra charge may be imposed at the end of the lease
term.
(b) Advertising Medium Not Liable.--No owner or employee of
any entity that serves as a medium in which an advertisement
appears or through which an advertisement is disseminated,
shall be liable under this section.
(c) Radio Advertisements.--
(1) In general.--An advertisement by radio broadcast
to aid, promote, or assist, directly or indirectly, any
consumer lease shall be deemed to be in compliance with
the requirements of subsection (a) if such
advertisement clearly and conspicuously--
(A) states the information required by
paragraphs (1) and (2) of subsection (a);
(B) states the number, amounts, due dates or
periods of scheduled payments, and the total of
such payments under the lease;
(C) includes--
(i) a referral to--
(I) a toll-free telephone
number established in
accordance with paragraph (2)
that may be used by consumers
to obtain the information
required under subsection (a);
or
(II) a written advertisement
that--
(aa) appears in a
publication in general
circulation in the
community served by the
radio station on which
such advertisement is
broadcast during the
period beginning 3 days
before any such
broadcast and ending 10
days after such
broadcast; and
(bb) includes the
information required to
be disclosed under
subsection (a); and
(ii) the name and dates of any
publication referred to in clause
(i)(II); and
(D) includes any other information which the
[Bureau] Agency determines necessary to carry
out this chapter.
(2) Establishment of toll-free number.--
(A) In general.--In the case of a radio
broadcast advertisement described in paragraph
(1) that includes a referral to a toll-free
telephone number, the lessor who offers the
consumer lease shall--
(i) establish such a toll-free
telephone number not later than the
date on which the advertisement
including the referral is broadcast;
(ii) maintain such telephone number
for a period of not less than 10 days,
beginning on the date of any such
broadcast; and
(iii) provide the information
required under subsection (a) with
respect to the lease to any person who
calls such number.
(B) Form of information.--The information
required to be provided under subparagraph
(A)(iii) shall be provided verbally or, if
requested by the consumer, in written form.
(3) No effect on other law.--Nothing in this
subsection shall affect the requirements of Federal law
as such requirements apply to advertisement by any
medium other than radio broadcast.
* * * * * * *
Sec. 186. Relation to State laws
(a) This chapter does not annul, alter, or affect, or exempt
any person subject to the provisions of this chapter from
complying with, the laws of any State with respect to consumer
leases, except to the extent that those laws are inconsistent
with any provision of this chapter, and then only to the extent
of the inconsistency. The [Bureau] Agency is authorized to
determine whether such inconsistencies exist. The [Bureau]
Agency may not determine that any State law is inconsistent
with any provision of this chapter if the [Bureau] Agency
determines that such law gives greater protection and benefit
to the consumer.
(b) The [Bureau] Agency shall by regulation exempt from the
requirements of this chapter any class of lease transactions
within any State if it determines that under the law of that
State that class of transactions is subject to requirements
substantially similar to those imposed under this chapter or
that such law gives greater protection and benefit to the
consumer, and that there is adequate provision for enforcement.
SEC. 187. REGULATIONS.
(a) Regulations Authorized.--
(1) In general.--The [Bureau] Agency shall prescribe
regulations to update and clarify the requirements and
definitions applicable to lease disclosures and
contracts, and any other issues specifically related to
consumer leasing, to the extent that the [Bureau]
Agency determines such action to be necessary--
(A) to carry out this chapter;
(B) to prevent any circumvention of this
chapter; or
(C) to facilitate compliance with the
requirements of the chapter.
(2) Classifications, adjustments.--Any regulations
prescribed under paragraph (1) may contain
classifications and differentiations, and may provide
for adjustments and exceptions for any class of
transactions, as the [Bureau] Agency considers
appropriate.
(b) Model Disclosure.--
(1) Publication.--The [Bureau] Agency shall establish
and publish model disclosure forms to facilitate
compliance with the disclosure requirements of this
chapter and to aid the consumer in understanding the
transaction to which the subject disclosure form
relates.
(2) Use of automated equipment.--In establishing
model forms under this subsection, the [Bureau] Agency
shall consider the use by lessors of data processing or
similar automated equipment.
(3) Use optional.--A lessor may utilize a model
disclosure form established by the [Bureau] Agency
under this subsection for purposes of compliance with
this chapter, at the discretion of the lessor.
(4) Effect of use.--Any lessor who properly uses the
material aspects of any model disclosure form
established by the [Bureau] Agency under this
subsection shall be deemed to be in compliance with the
disclosure requirements to which the form relates.
* * * * * * *
----------
EXPEDITED FUNDS AVAILABILITY ACT
* * * * * * *
TITLE VI--EXPEDITED FUNDS AVAILABILITY
SEC. 601. SHORT TITLE.
This title may be cited as the ``Expedited Funds Availability
Act''.
SEC. 602. DEFINITIONS.
For purposes of this title--
(1) Account.--The term ``account'' means a demand
deposit account or other similar transaction account at
a depository institution.
(2) Board.--The term ``Board'' means the Board of
Governors of the Federal Reserve System.
(3) Business day.--The term ``business day'' means
any day other than a Saturday, Sunday, or legal
holiday.
(4) Cash.--The term ``cash'' means United States
coins and currency, including Federal Reserve notes.
(5) Cashier's check.--The term ``cashier's check''
means any check which--
(A) is drawn on a depository institution;
(B) is signed by an officer or employee of
such depository institution; and
(C) is a direct obligation of such depository
institution.
(6) Certified check.--The term ``certified check''
means any check with respect to which a depository
institution certifies that--
(A) the signature on the check is genuine;
and
(B) such depository institution has set aside
funds which--
(i) are equal to the amount of the
check; and
(ii) will be used only to pay such
check.
(7) Check.--The term ``check'' means any negotiable
demand draft drawn on or payable through an office of a
depository institution located in the United States.
Such term does not include noncash items.
(8) Check clearinghouse association.--The term
``check clearinghouse association'' means any
arrangement by which participant depository
institutions exchange deposited checks on a local
basis, including an entire metropolitan area, without
using the check processing facilities of the Federal
Reserve System.
(9) Check processing region.--The term ``check
processing region'' means the geographical area served
by a Federal Reserve bank check processing center or
such larger area as the Board may prescribe by
regulations.
(10) Consumer account.--The term ``consumer account''
means any account used primarily for personal, family,
or household purposes.
(11) Depository check.--The term ``depository check''
means any cashier's check, certified check, teller's
check, and any other functionally equivalent instrument
as determined by the Board.
(12) Depository institution.--The term ``depository
institution'' has the meaning given such term in
clauses (i) through (vi) of section 19(b)(1)(A) of the
Federal Reserve Act. Such term also includes an office,
branch, or agency of a foreign bank located in the
United States.
(13) Local originating depository institution.--The
term ``local originating depository institution'' means
any originating depository institution which is located
in the same check processing region as the receiving
depository institution.
(14) Noncash item.--The term ``noncash item'' means--
(A) a check or other demand item to which a
passbook, certificate, or other document is
attached;
(B) a check or other demand item which is
accompanied by special instructions, such as a
request for special advise of payment or
dishonor; or
(C) any similar item which is otherwise
classified as a noncash item in regulations of
the Board.
(15) Nonlocal originating depository institution.--
The term ``nonlocal originating depository
institution'' means any originating depository
institution which is not a local depository
institution.
(16) Proprietary atm.--The term ``proprietary ATM''
means an automated teller machine which is--
(A) located--
(i) at or adjacent to a branch of the
receiving depository institution; or
(ii) in close proximity, as defined
by the Board, to a branch of the
receiving depository institution; or
(B) owned by, operated exclusively for, or
operated by the receiving depository
institution.
(17) Originating depository institution.--The term
``originating depository institution'' means the branch
of a depository institution on which a check is drawn.
(18) Nonproprietary atm.--The term ``nonproprietary
ATM'' means an automated teller machine which is not a
proprietary ATM.
(19) Participant.--The term ``participant'' means a
depository institution which--
(A) is located in the same geographic area as
that served by a check clearinghouse
association; and
(B) exchanges checks through the check
clearinghouse association, either directly or
through an intermediary.
(20) Receiving depository institution.--The term
``receiving depository institution'' means the branch
of a depository institution or the proprietary ATM,
located in the United States, in which a check is first
deposited.
(21) State.--The term ``State'' means any State, the
District of Columbia, the Commonwealth of Puerto Rico,
American Samoa, the Commonwealth of the Northern
Mariana Islands, or the Virgin Islands.
(22) Teller's check.--The term ``teller's check''
means any check issued by a depository institution and
drawn on another depository institution.
(23) United states.--The term ``United States'' means
the several States, the District of Columbia, the
Commonwealth of Puerto Rico, American Samoa, the
Commonwealth of the Northern Mariana Islands, and the
Virgin Islands.
(24) Unit of general local government.--The term
``unit of general local government'' means any city,
county, town, township, parish, village, or other
general purpose political subdivision of a State.
(25) Wire transfer.--The term ``wire transfer'' has
such meaning as the Board shall prescribe by
regulations.
SEC. 603. EXPEDITED FUNDS AVAILABILITY SCHEDULES.
(a) Next Business Day Availability For Certain Deposits.--
(1) Cash deposits; wire transfers.--Except as
provided in subsection (e) and in section 604, in any
case in which--
(A) any cash is deposited in an account at a
receiving depository institution staffed by
individuals employed by such institution, or
(B) funds are received by a depository
institution by wire transfer for deposit in an
account at such institution,
such cash or funds shall be available for withdrawal
not later than the business day after the business day
on which such cash is deposited or such funds are
received for deposit.
(2) Government checks; certain other checks.--Funds
deposited in an account at a depository institution by
check shall be available for withdrawal not later than
the business day after the business day on which such
funds are deposited in the case of--
(A) a check which--
(i) is drawn on the Treasury of the
United States; and
(ii) is endorsed only by the person
to whom it was issued.
(B) a check which--
(i) is drawn by a State;
(ii) is deposited in a receiving
depository institution which is located
in such State and is staffed by
individuals employed by such
institution;
(iii) is deposited with a special
deposit slip which indicates it is a
check drawn by a State; and
(iv) is endorsed only by the person
to whom it was issued;
(C) a check which--
(i) is drawn by a unit of general
local government;
(ii) is deposited in a receiving
depository institution which is located
in the same State as such unit of
general local government and is staffed
by individuals employed by such
institution;
(iii) is deposited with a special
deposit slip which indicates it is a
check drawn by a unit of general local
government; and
(iv) is endorsed only by the person
to whom it was issued;
(D) the first $200 deposited by check or
checks on any one business day;
(E) a check deposited in a branch of a
depository institution and drawn on the same or
another branch of the same depository
institution if both such branches are located
in the same State or the same check processing
region;
(F) a cashier's check, certified check,
teller's check, or depository check which--
(i) is deposited in a receiving
depository institution which is staffed
by individuals employed by such
institution;
(ii) is deposited with a special
deposit slip which indicates it is a
cashier's check, certified check,
teller's check, or depository check, as
the case may be; and
(iii) is endorsed only by the person
to whom it was issued.
(b) Permanent Schedule.--
(1) Availability of funds deposited by local
checks.--Subject to paragraph (3) of this subsection,
subsections (a)(2), (d), and (e) of this section, and
section 604, not more than 1 business day shall
intervene between the business day on which funds are
deposited in an account at a depository institution by
a check drawn on a local originating depository
institution and the business day on which the funds
involved are available for withdrawal.
(2) Availability of funds deposited by nonlocal
checks.--Subject to paragraph (3) of this subsection,
subsections (a)(2), (d), and (e) of this section, and
section 604, not more than 4 business days shall
intervene between the business day on which funds are
deposited in an account at a depository institution by
a check drawn on a nonlocal originating depository
institution and the business day on which such funds
are available for withdrawal.
(3) Time period adjustments for cash withdrawal of
certain checks.--
(A) In general.--Except as provided in
subparagraph (B), funds deposited in an account
in a depository institution by check (other
than a check described in subsection (a)(2))
shall be available for cash withdrawal not
later than the business day after the business
day on which such funds otherwise are available
under paragraph (1) or (2).
(B) 5 p.m. cash availability.--Not more than
$400 (or the maximum amount allowable in the
case of a withdrawal from an automated teller
machine but not more than $400) of funds
deposited by one or more checks to which this
paragraph applies shall be available for cash
withdrawal not later than 5 o'clock post
meridian of the business day on which such
funds are available under paragraph (1) or (2).
If funds deposited by checks described in both
paragraph (1) and paragraph (2) become
available for cash withdrawal under this
paragraph on the same business day, the
limitation contained in this subparagraph shall
apply to the aggregate amount of such funds.
(C) $200 availability.--Any amount available
for withdrawal under this paragraph shall be in
addition to the amount available under
subsection (a)(2)(D).
(4) Applicability.--This subsection shall apply with
respect to funds deposited by check in an account at a
depository institution on or after September 1, 1990,
except that the Board may, by regulation, make this
subsection or any part of this subsection applicable
earlier than September 1, 1990.
(c) Temporary Schedule.--
(1) Availability of local checks.--
(A) In general.--Subject to subparagraph (B)
of this paragraph, subsections (a)(2), (d), and
(e) of this section, and section 604, not more
than 2 business days shall intervene between
the business day on which funds are deposited
in an account at a depository institution by a
check drawn on a local originating depository
institution and the business day on which such
funds are available for withdrawal.
(B) Time period adjustment for cash
withdrawal of certain checks.--
(i) In general.--Except as provided
in clause (ii), funds deposited in an
account in a depository institution by
check drawn on a local depository
institution that is not a participant
in the same check clearinghouse
association as the receiving depository
institution (other than a check
described in subsection (a)(2)) shall
be available for cash withdrawal not
later than the business day after the
business day on which such funds
otherwise are available under
subparagraph (A).
(ii) 5 p.m. cash availability.--Not
more than $400 (or the maximum amount
allowable in the case of a withdrawal
from an automated teller machine but
not more than $400) of funds deposited
by one or more checks to which this
subparagraph applies shall be available
for cash withdrawal not later than 5
o'clock post meridian of the business
day on which such funds are available
under subparagraph (A).
(iii) $200 availability.--Any amount
available for withdrawal under this
subparagraph shall be in addition to the amount
available under subsection (a)(2)(D).
(2) Availability of nonlocal checks.--Subject to
subsections (a)(2), (d), and (e) of this section and
section 604, not more than 6 business days shall
intervene between the business day on which funds are
deposited in an account at a depository institution by
a check drawn on a nonlocal originating depository
institution and the business day on which such funds
are available for withdrawal.
(3) Applicability.--This subsection shall apply with
respect to funds deposited by check in an account at a
depository institution after August 31, 1988, and
before September 1, 1990, except as may be otherwise
provided under subsection (b)(4).
(d) Time Period Adjustments.--
(1) Reduction generally.--Notwithstanding any other
provision of law, the Board, jointly with the Director
of the [Bureau of Consumer Financial Protection]
Consumer Law Enforcement Agency, shall, by regulation,
reduce the time periods established under subsections
(b), (c), and (e) to as short a time as possible and
equal to the period of time achievable under the
improved check clearing system for a receiving
depository institution to reasonably expect to learn of
the nonpayment of most items for each category of
checks.
(2) Extension for certain deposits in noncontiguous
states or territories.--Notwithstanding any other
provision of law, any time period established under
subsection (b), (c), or (e) shall be extended by 1
business day in the case of any deposit which is both--
(A) deposited in an account at a depository
institution which is located in Alaska, Hawaii,
Puerto Rico, American Samoa, the Commonwealth
of the Northern Mariana Islands, or the Virgin
Islands; and
(B) deposited by a check drawn on an
originating depository institution which is not
located in the same State, commonwealth, or
territory as the receiving depository
institution.
(e) Deposits at an ATM.--
(1) Nonproprietary atm.--
(A) In general.--Not more than 4 business
days shall intervene between the business day a
deposit described in subparagraph (B) is made
at a nonproprietary automated teller machine
(for deposit in an account at a depository
institution) and the business day on which
funds from such deposit are available for
withdrawal.
(B) Deposits described in this paragraph.--A
deposit is described in this subparagraph if it
is--
(i) a cash deposit;
(ii) a deposit made by a check
described in subsection (a)(2);
(iii) a deposit made by a check drawn
on a local originating depository
institution (other than a check
described in subsection (a)(2)); or
(iv) a deposit made by a check drawn
on a nonlocal originating depository
institution (other than a check
described in subsection (a)(2)).
(2) Proprietary atm--temporary and permanent
schedules.--The provisions of subsections (a), (b), and
(c) shall apply with respect to any funds deposited at
a proprietary auto- mated teller machine for deposit in
an account at a depository institution.
(3) Study and report on atm's.--The Board shall,
either directly or through the Consumer Advisory
Council, establish and maintain a dialogue with
depository institutions and their suppliers on the
computer software and hardware available for use by
automated teller machines, and shall, not later than
September 1 of each of the first 3 calendar years
beginning after the date of the enactment of this
title, report to the Congress regarding such software
and hardware and regarding the potential for improving
the processing of automated teller machine deposits.
(f) Check Return; Notice of Nonpayment.--No provision of this
section shall be construed as requiring that, with respect to
all checks deposited in a receiving depository institution--
(1) such checks be physically returned to such
depository institution; or
(2) any notice of nonpayment of any such check be
given to such depository institution within the times
set forth in subsection (a), (b), (c), or (e) or in the
regulations issued under any such subsection.
SEC. 604. SAFEGUARD EXCEPTIONS.
(a) New Accounts.--Notwithstanding section 603, in the case
of any account established at a depository institution by a new
depositor, the following provisions shall apply with respect to
any deposit in such account during the 30-day period (or such
shorter period as the Board, jointly with the Director of the
[Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency, may establish) beginning on the date such
account is established--
(1) Next business day availability of cash and
certain items.--Except as provided in paragraph (3), in
the case of--
(A) any cash deposited in such account;
(B) any funds received by such depository
institution by wire transfer for deposit in
such account;
(C) any funds deposited in such account by
cashier's check, certified check, teller's
check, depository check, or traveler's check;
and
(D) any funds deposited by a government check
which is described in subparagraph (A), (B), or
(C) of section 603(a)(2),
such cash or funds shall be available for withdrawal on
the business day after the business day on which such
cash or funds are deposited or, in the case of a wire
transfer, on the business day after the business day on
which such funds are received for deposit.
(2) Availability of other items.--In the case of any
funds deposited in such account by a check (other than
a check described in subparagraph (C) or (D) of
paragraph (1)), the availability for withdrawal of such
funds shall not be subject to the provisions of section
603(b), 603(c), or paragraphs (1) of section 603(e).
(3) Limitation relating to certain checks in excess
of $5,000.--In the case of funds deposited in such
account during such period by checks described in
subparagraph (C) or (D) of paragraph (1) the aggregate
amount of which exceeds $5,000--
(A) paragraph (1) shall apply only with
respect to the first $5,000 of such aggregate
amount; and
(B) not more than 8 business days shall
intervene between the business day on which any
such funds are deposited and the business day
on which such excess amount shall be available
for withdrawal.
(b) Large or Redeposited Checks; Repeated Overdrafts.--The
Board, jointly with the Director of the [Bureau of Consumer
Financial Protection] Consumer Law Enforcement Agency, may, by
regulation, establish reasonable exceptions to any time
limitation established under subsection (a)(2), (b), (c), or
(e) of section 603 for--
(1) the amount of deposits by one or more checks that
exceeds the amount of $5,000 in any one day;
(2) checks that have been returned unpaid and
redeposited; and
(3) deposit accounts which have been overdrawn
repeatedly.
(c) Reasonable Cause Exception.--
(1) In general.--In accordance with regulations which
the Board, jointly with the Director of the [Bureau of
Consumer Financial Protection] Consumer Law Enforcement
Agency, shall prescribe, subsections (a)(2), (b), (c),
and (e) of section 603 shall not apply with respect to
any check deposited in an account at a depository
institution if the receiving depository institution has
reasonable cause to believe that the check is
uncollectible from the originating depository
institution. For purposes of the preceding sentence,
reasonable cause to believe requires the existence of
facts which would cause a well-grounded belief in the
mind of a reasonable person. Such reasons shall be
included in the notice required under sub- section (f).
(2) Basis for determination.--No determination under
this subsection may be based on any class of checks or
persons.
(3) Overdraft fees.--If the receiving depository
institution determines that a check deposited in an
account is a check described in paragraph (1), the
receiving depository institution shall not assess any
fee for any subsequent overdraft with respect to such
account, if--
(A) the depositor was not provided with the
written notice required under subsection (f)
(with respect to such determination) at the
time the deposit was made;
(B) the overdraft would not have occurred but
for the fact that the funds so deposited are
not available; and
(C) the amount of the check is collected from
the originating depository institution.
(4) Compliance.--Each agency referred to in section
610(a) shall monitor compliance with the requirements
of this subsection in each regular examination of a
depository institution and shall describe in each
report to the Congress the extent to which this
subsection is being complied with. For the purpose of
this paragraph, each depository institution shall
retain a record of each notice provided under
subsection (f) as a result of the application of this
subsection.
(d) Emergency Conditions.--Subject to such regulations as the
Board, jointly with the Director of the [Bureau of Consumer
Financial Protection] Consumer Law Enforcement Agency, may
prescribe, subsections (a)(2), (b), (c), and (e) of section 603
shall not apply to funds deposited by check in any receiving
depository institution in the case of--
(1) any interruption of communication facilities;
(2) suspension of payments by another depository
institution;
(3) any war; or
(4) any emergency condition beyond the control of the
receiving depository institution,
if the receiving depository institution exercises such
diligence as the circumstances require.
(e) Prevention of Fraud Losses.--
(1) In general.--The Board, jointly with the Director
of the [Bureau of Consumer Financial Protection]
Consumer Law Enforcement Agency, may, by regulation or
order, suspend the applicability of this title, or any
portion thereof, to any classification of checks if the
Board, jointly with the Director of the [Bureau of
Consumer Financial Protection] Consumer Law Enforcement
Agency, determines that--
(A) depository institutions are experiencing
an unacceptable level of losses due to check-
related fraud, and
(B) suspension of this title, or such portion
of this title, with regard to the
classification of checks involved in such fraud
is necessary to diminish the volume of such
fraud.
(2) Sunset provision.--No regulation prescribed or
order issued under paragraph (1) shall remain in effect
for more than 45 days (excluding Saturdays, Sundays,
legal holidays, or any day either House of Congress is
not in session).
(3) Report to congress.--
(A) Notice of each suspension.--Within 10
days of prescribing any regulation or issuing
any order under paragraph (1), the Board,
jointly with the Director of the [Bureau of
Consumer Financial Protection] Consumer Law
Enforcement Agency, shall transmit a report of
such action to the Committee on Banking,
Finance and Urban Affairs of the House of
Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate.
(B) Contents of report.--Each report under
subparagraph (A) shall contain--
(i) the specific reason for
prescribing the regulation or issuing
the order;
(ii) evidence considered by the
Board, jointly with the Director of the
[Bureau of Consumer Financial
Protection] Consumer Law Enforcement
Agency, in making the determination
under paragraph (1) with respect to
such regulation or order; and
(iii) specific examples of the check-
related fraud giving rise to such
regulation or order.
(f) Notice of Exception; Availability Within Reasonable
Time.--
(1) In general.--If any exception contained in this
section (other than subsection (a)) applies with
respect to funds deposited in an account at a
depository institution--
(A) the depository institution shall provide
notice in the manner provided in paragraph (2)
of--
(i) the time period within which the
funds shall be made available for
withdrawal; and
(ii) the reason the exception was
invoked; and
(B) except where other time periods are
specifically provided in this title, the
availability of the funds deposited shall be
governed by the policy of the receiving
depository institution, but shall not exceed a
reasonable period of time as determined by the
Board, jointly with the Director of the [Bureau
of Consumer Financial Protection] Consumer Law
Enforcement Agency.
(2) Time for notice.--The notice required under
paragraph (1)(A) with respect to a deposit to which an
exception contained in this section applies shall be
made by the time provided in the following
subparagraphs:
(A) In the case of a deposit made in person
by the depositor at the receiving depository
institution, the depository institution shall
immediately provide such notice in writing to
the depositor.
(B) In the case of any other deposit (other
than a deposit described in subparagraph (C)),
the receiving depository institution shall mail
the notice to the depositor not later than the
close of the next business day following the
business day on which the deposit is received.
(C) In the case of a deposit to which
subsection (d) or (e) applies, notice shall be
provided by the depository institution in
accordance with regulations of the Board,
jointly with the Director of the [Bureau of
Consumer Financial Protection] Consumer Law
Enforcement Agency.
(D) In the case of a deposit to which
subsection (b)(1) or (b)(2) applies, the
depository institution may, for nonconsumer
accounts and other classes of accounts, as
defined by the Board, that generally have a
large number of such deposits, provide notice
at or before the time it first determines that
the subsection applies.
(E) In the case of a deposit to which
subsection (b)(3) applies, the depository
institution may, subject to regulations of the
Board, provide notice at the beginning of each
time period it determines that the subsection
applies. In addition to the requirements
contained in paragraph (1)(A), the notice shall
specify the time period for which the exception
will apply.
(3) Subsequent determinations.--If the facts upon
which the determination of the applicability of an
exception contained in subsection (b) or (c) to any
deposit only become known to the receiving depository
institution after the time notice is required under
paragraph (2) with respect to such deposit, the
depository institution shall mail such notice to the
depositor as soon as practicable, but not later than
the first business day following the day such facts
become known to the depository institution.
SEC. 605. DISCLOSURE OF FUNDS AVAILABILITY POLICIES.
(a) Notice for New Accounts.--Before an account is opened at
a depository institution, the depository institution shall
provide written notice to the potential customer of the
specific policy of such depository institution with respect to
when a customer may withdraw funds deposited into the
customer's account.
(b) Preprinted Deposit Slips.--All preprinted deposit slips
that a depository institution furnishes to its customers shall
contain a summary notice, as prescribed by the Board, jointly
with the Director of the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency, in regulations,
that deposited items may not be available for immediate
withdrawal.
(c) Mailing of Notice.--
(1) First mailing after enactment.--In the first
regularly scheduled mailing to customers occurring
after the effective date of this section, but not more
than 60 days after such effective date, each depository
institution shall send a written notice containing the
specific policy of such depository institution with
respect to when a customer may withdraw funds deposited
into such customer's account, unless the depository
institution has provided a disclosure which meets the
requirements of this section before such effective
date.
(2) Subsequent changes.--A depository institution
shall send a written notice to customers at least 30
days before implementing any change to the depository
institution's policy with respect to when customers may
withdraw funds deposited into consumer accounts, except
that any change which expedites the availability of
such funds shall be disclosed not later than 30 days
after implementation.
(3) Upon request.--Upon the request of any person, a
depository institution shall provide or send such
person a written notice containing the specific policy
of such depository institution with respect to when a
customer may withdraw funds deposited into a customer's
account.
(d) Posting of Notice.--
(1) Specific notice at manned teller stations.--Each
depository institution shall post, in a conspicuous
place in each location where deposits are accepted by
individuals employed by such depository institution, a
specific notice which describes the time periods
applicable to the availability of funds deposited in a
consumer account.
(2) General notice at automated teller machines.--In
the case of any automated teller machine at which any
funds are received for deposit in an account at any
depository institution, the Board, jointly with the
Director of the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency, shall
prescribe, by regulations, that the owner or operator
of such automated teller machine shall post or provide
a general notice that funds deposited in such machine
may not be immediately available for withdrawal.
(e) Notice of Interest Payment Policy.--If a depository
institution described in section 606(b) begins the accrual of
interest or dividends at a later date than the date described
in section 606(a) with respect to all funds, including cash,
deposited in an interest-bearing account at such depository
institution, any notice required to be provided under
subsections (a) and (c) shall contain a written description of
the time at which such depository institution begins to accrue
interest or dividends on such funds.
(f) Model Disclosure Forms.--
(1) Prepared by [board and bureau] board and
agency.--The Board, jointly with the Director of the
[Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency, shall publish model disclosure
forms and clauses for common transactions to facilitate
compliance with the disclosure requirements of this
section and to aid customers by utilizing readily
understandable language.
(2) Use of forms to achieve compliance.--A depository
institution shall be deemed to be in compliance with
the requirements of this section if such institution--
(A) uses any appropriate model form or clause
as published by the Board, jointly with the
Director of the Bureau of Consumer Financial
Protection[,,]; or
(B) uses any such model form or clause and
changes such form or clause by--
(i) deleting any information which is
not required by this title; or
(ii) rearranging the format.
(3) Voluntary use.--Nothing in this title requires
the use of any such model form or clause prescribed by
the Board, jointly with the Director of the [Bureau of
Consumer Financial Protection] Consumer Law Enforcement
Agency, under this subsection.
(4) Notice and comment.--Model disclosure forms and
clauses shall be adopted by the Board, jointly with the
Director of the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency, only after
notice duly given in the Federal Register and an
opportunity for public comment in accordance with
section 553 of title 5, United States Code.
* * * * * * *
SEC. 609. REGULATIONS AND REPORTS BY BOARD.
(a) In General.--After notice and opportunity to submit
comment in accordance with section 553(c) of title 5, United
States Code, the Board, jointly with the Director of the
[Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency, shall prescribe regulations--
(1) to carry out the provisions of this title;
(2) to prevent the circumvention or evasion of such
provisions; and
(3) to facilitate compliance with such provisions.
(b) Regulations Relating to Improvement of Check Processing
System.--In order to improve the check processing system, the
Board shall consider (among other proposals) requiring, by
regulation, that--
(1) depository institutions be charged based upon
notification that a check or similar instrument will be
presented for payment;
(2) the Federal Reserve banks and depository
institutions provide for check truncation;
(3) depository institutions be provided incentives to
return items promptly to the depository institution of
first deposit;
(4) the Federal Reserve banks and depository
institutions take such actions as are necessary to
automate the process of returning unpaid checks,
(5) each depository institution and Federal Reserve
bank--
(A) place its endorsement, and other
notations specified in regulations of the
Board, on checks in the positions specified in
such regulations; and
(B) take such actions as are necessary to--
(i) automate the process of reading
endorsements; and
(ii) eliminate unnecessary
endorsements;
(6) within one business day after an originating
depository institution is presented a check (for more
than such minimum amount as the Board may prescribe)--
(A) such originating depository institution
determine whether it will pay such check; and
(B) if such originating depository
institution determines that it will not pay
such check, such originating depository
institution directly notify the receiving
depository institution of such determination;
(7) regardless of where a check is cleared initially,
all returned checks be eligible to be returned through
the Federal Reserve System;
(8) Federal Reserve banks and depository institutions
participate in the development and implementation of an
electronic clearinghouse process to the extent the
Board determines, pursuant to the study under
subsection (f), that such a process is feasible; and
(9) originating depository institutions be permitted
to return unpaid checks directly to, and obtain
reimbursement for such checks directly from, the
receiving depository institution.
(c) Regulatory Responsibility of Board for Payment System.--
(1) Responsibility for payment system.--In order to
carry out the provisions of this title, the Board of
Governors of the Federal Reserve System shall have the
responsibility to regulate--
(A) any aspect of the payment system,
including the receipt, payment, collection, or
clearing of checks; and
(B) any related function of the payment
system with respect to checks.
(2) Regulations.--The Board shall prescribe such
regulations as it may determine to be appropriate to
carry out its responsibility under paragraph (1).
(d) Reports.--
(1) Implementation progress reports.--
(A) Required reports.--The Board shall
transmit a report to both Houses of the
Congress not later than 18, 30, and 48 months
after the date of the enactment of this title.
(B) Contents of report.--Each such report
shall describe--
(i) the actions taken and progress
made by the Board to implement the
schedules established in section 603,
and
(ii) the impact of this title on
consumers and depository institutions.
(2) Evaluation of temporary schedule report.--
(A) Report required.--The Board shall
transmit a report to both Houses of the
Congress not later than 2 years after the date
of the enactment of this title regarding the
effects the temporary schedule established
under section 603(c) have had on depository
institutions and the public.
(B) Contents of report.--Such report shall
also assess the potential impact the
implementation of the schedule established in
section 603(b) will have on depository
institutions and the public, including an
estimate of the risks to and losses of
depository institutions and the benefits to
consumers. Such report shall also contain such
recommendations for legislative or
administrative action as the Board may
determine to be necessary.
(3) Comptroller general evaluation report.--Not later
than 6 months after section 603(b) takes effect, the
Comptroller General of the United States shall transmit
a report to the Congress evaluating the implementation
and administration of this title.
(e) Consultations.--In prescribing regulations under
subsections (a) and (b), the Board and the Director of the
[Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency, in the case of subsection (a), and the
Board, in the case of subsection (b), shall consult with the
Comptroller of the Currency, the Board of Directors of the
Federal Deposit Insurance Corporation, and the National Credit
Union Administration Board.
(f) Electronic Clearinghouse Study.--
(1) Study required.--The Board shall study the
feasibility of modernizing and accelerating the check
payment system through the development of an electronic
clearinghouse process utilizing existing
telecommunications technology to avoid the necessity of
actual presentment of the paper instrument to a payor
institution before such institution is charged for the
item.
(2) Consultation; factors to be studied.--In
connection with the study required under paragraph (1),
the Board shall--
(A) consult with appropriate experts in
telecommunications technology; and
(B) consider all practical and legal
impediments to the development of an electronic
clearinghouse process.
(3) Report required.--The Board shall report its
conclusions to the Congress within 9 months of the date
of the enactment of this title.
SEC. 610. ADMINISTRATIVE ENFORCEMENT.
(a) Administrative Enforcement.--Compliance with the
requirements imposed under this title, including regulations
prescribed by and orders issued by the Board of Governors of
the Federal Reserve System under this title, shall be enforced
under--
(1) section 8 of the Federal Deposit Insurance Act in
the case of--
(A) national banks, and Federal branches and
Federal agencies of foreign banks, by the
Office of the Comptroller of the Currency;
(B) member banks of the Federal Reserve
System (other than national banks), and
offices, branches, and agencies of foreign
banks located in the United States (other than
Federal branches, Federal agencies, and insured
State branches of foreign banks), by the Board
of Governors of the Federal Reserve System; and
(C) banks insured by the Federal Deposit
Insurance Corporation (other than members of
the Federal Reserve System) and insured State
branches of foreign banks, by the Board of
Directors of the Federal Deposit Insurance
Corporation;
(2) section 8 of the Federal Deposit Insurance Act,
by the [Director of the Office of Thrift Supervision]
Comptroller of the Currency and the Board of Directors
of the Federal Deposit Insurance Corporation, as
appropriate, in the case of savings associations the
deposits of which are insured by the Federal Deposit
Insurance Corporation; and
(3) the Federal Credit Union Act, by the National
Credit Union Administration Board with respect to any
Federal credit union or insured credit union.
The terms used in paragraph (1) that are not defined in this
title or otherwise defined in section 3(s) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the
meaning given to them in section 1(b) of the International
Banking Act of 1978 (12 U.S.C. 3101).
(b) Additional Powers.--
(1) Violation of this title treated as violation of
other acts.--For purposes of the exercise by any agency
referred to in subsection (a) of this section of its
powers under any Act referred to in that subsection, a
violation of any requirement imposed under this title
shall be deemed to be a violation of a requirement
imposed under that Act.
(2) Enforcement authority under other acts.--In
addition to its powers under any provision of law
specifically referred to in subsection (a) of this
section, each of the agencies referred to in such
subsection may exercise, for purposes of enforcing
compliance with any requirement imposed under this
title, any other authority conferred on it by law.
(c) Enforcement by the Board.--
(1) In general.--Except to the extent that
enforcement of the requirements imposed under this
title is specifically committed to some other
Government agency under subsection (a) of this section,
the Board of Governors of the Federal Reserve System
shall enforce such requirements.
(2) Additional remedy.--If the Board determines
that--
(A) any depository institution which is not a
depository institution described in subsection
(a), or
(B) any other person subject to the authority
of the Board under this title, including any
person subject to the authority of the Board
under section 605(d)(2) or 609(c),
has failed to comply with any requirement imposed by
this title or by the Board under this title, the Board
may issue an order prohibiting any depository
institution, any Federal Reserve bank, or any other
person subject to the authority of the Board from
engaging in any activity or transaction which directly
or indirectly involves such noncomplying depository
institution or person (including any activity or
transaction involving the receipt, payment, collection,
and clearing of checks and any related function of the
payment system with respect to checks).
(d) Procedural Rules.--The authority of the Board to
prescribe regulations under this title does not impair the
authority of any other agency designated in this section to
make rules regarding its own procedures in enforcing compliance
with requirements imposed under this title.
* * * * * * *
----------
REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974
short title
Section 1. This Act may be cited as the ``Real Estate
Settlement Procedures Act of 1974''.
* * * * * * *
definitions
Sec. 3. For purposes of this Act--
(1) the term ``federally related mortgage loan''
includes any loan (other than temporary financing such
as a construction loan) which--
(A) is secured by a first or subordinate lien
on residential real property (including
individual units of condominiums and
cooperatives) designed principally for the
occupancy of from one to four families,
including any such secured loan, the proceeds
of which are used to prepay or pay off an
existing loan secured by the same property; and
(B)(i) is made in whole or in part by any
lender the deposits or accounts of which are
insured by any agency of the Federal
Government, or is made in whole or in part by
any lender which is regulated by any agency of
the Federal Government; or
(ii) is made in whole or in part, or insured,
guaranteed, supplemented, or assisted in any
way, by the Secretary or any other officer or
agency of the Federal Government or under or in
connection with a housing or urban development
program administered by the Secretary or a
housing or related program administered by any
other such officer or agency; or
(iii) is intended to be sold by the
originating lender to the Federal National
Mortgage Association, the Government National
Mortgage Association, the Federal Home Loan
Mortgage Corporation, or a financial
institution from which it is to be purchased by
the Federal Home Loan Mortgage Corporation; or
(iv) is made in whole or in part by any
``creditor'', as defined in section 103(f) of
the Consumer Credit Protection Act (15 U.S.C.
1602(f)), who makes or invests in residential
real estate loans aggregating more than
$1,000,000 per year, except that for the
purpose of this Act, the term ``creditor'' does
not include any agency or instrumentality of
any state;
(2) the term ``thing of value'' includes any payment,
advance, funds, loan, service, or other consideration;
(3) the term ``settlement services'' includes any
service provided in connection with a real estate
settlement including, but not limited to, the
following: title searchers, title examinations, the
provision of title certificates, title insurance,
services rendered by an attorney, the preparation of
documents, property surveys, the rendering of credit
reports or appraisals, pest and fungus inspections,
services rendered by a real estate agent or broker, the
origination of a federally related mortgage loan
(including, but not limited to, the taking of loan
applications, loan processing, and the underwriting and
funding of loans), and the handling of the processing,
and closing or settlement;
(4) the term ``title company'' means any institution
which is qualified to issue title insurance, directly
or through its agents, and also refers to any duly
authorized agent of a title company;
(5) the term ``person'' includes individuals,
corporations, associations, partnerships, and trusts;
(6) the term ``Secretary'' means the Secretary of
Housing and Urban Development;
(7) the term ``affiliated business arrangement''
means an arrangement in which (A) a person who is in a
position to refer business incident to or a part of a
real estate settlement service involving a federally
related mortgage loan, or an associate of such person,
has either an affiliate relationship with or a direct
or beneficial ownership interest of more than 1 percent
in a provider of settlement services; and (B) either of
such persons directly or indirectly refers such
business to that provider or affirmately influences the
selection of that provider;
(8) the term ``associate'' means one who has one or
more of the following relationships with a person in a
position to refer settlement business: (A) a spouse,
parent, or child of such person; (B) a corporation or
business entity that controls, is controlled by, or is
under common control with such person; (C) an employer,
officer, director, partner, franchisor, or franchisee
of such person; or (D) anyone who has an agreement,
arrangement, or understanding, with such person, the
purpose or substantial effect of which is to enable the
person in a position to refer settlement business to
benefit financially from the referals of such business;
and
[(9) the term ``Bureau '' means the Bureau of
Consumer Financial Protection.]
(9) the term ``Agency'' means the Consumer Law
Enforcement Agency.
uniform settlement statement
Sec. 4. (a) The [Bureau] Agency shall publish a single,
integrated disclosure for mortgage loan transactions (including
real estate settlement cost statements) which includes the
disclosure requirements of this section and section 5, in
conjunction with the disclosure requirements of the Truth in
Lending Act that, taken together, may apply to a transaction
that is subject to both or either provisions of law. The
purpose of such model disclosure shall be to facilitate
compliance with the disclosure requirements of this title and
the Truth in Lending Act, and to aid the borrower or lessee in
understanding the transaction by utilizing readily
understandable language to simplify the technical nature of the
disclosures. Such forms shall conspicuously and clearly itemize
all charges imposed upon the borrower and all charges imposed
upon the seller in connection with the settlement and shall
indicate whether any title insurance premium included in such
charges covers or insures the lender's interest in the
property, the borrower's interest, or both. The [Bureau] Agency
may, by regulation, permit the deletion from the forms
prescribed under this section of items which are not, under
local laws or customs, applicable in any locality, except that
such regulation shall require that the numerical code
prescribed by the [Bureau] Agency be retained in forms to be
used in all localities. Nothing in this section may be
construed to require that that part of the standard forms which
relates to the borrower's transaction to be furnished to the
seller, or to require that that part of the standard forms
which relates to the seller be furnished to the borrower.
(b) The forms prescribed under this section shall be
completed and made available for inspection by the borrower at
or before settlement by the person conducting the settlement,
except that (1) the [Bureau] Agency may exempt from the
requirements of this section settlements occurring in
localities where the final settlement statement is not
customarily provided at or before the date of settlement, or
settlements where such requirements are impractical and (2) the
borrower may, in accordance with regulations of the [Bureau]
Agency, waive his right to have the forms made available at
such time. Upon the request of the borrower to inspect the
forms prescribed under this section during the business day
immediately preceding the day of settlement, the person who
will conduct the settlement shall permit the borrower to
inspect those items which are known to such person during such
preceding day.
(c) The standard form described in subsection (a) may
include, in the case of an appraisal coordinated by an
appraisal management company (as such term is defined in
section 1121(11) of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (12 U.S.C. 3350(11))), a
clear disclosure of--
(1) the fee paid directly to the appraiser by such
company; and
(2) the administration fee charged by such company.
home buying information booklets
Sec. 5. (a) Preparation and Distribution.--The Director of
the [Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency (hereafter in this section referred to as
the ``Director'') shall prepare, at least once every 5 years, a
booklet to help consumers applying for federally related
mortgage loans to understand the nature and costs of real
estate settlement services. The Director shall prepare the
booklet in various languages and cultural styles, as the
Director determines to be appropriate, so that the booklet is
understandable and accessible to homebuyers of different ethnic
and cultural backgrounds. The Director shall distribute such
booklets to all lenders that make federally related mortgage
loans. The Director shall also distribute to such lenders
lists, organized by location, of homeownership counselors
certified under section 106(e) of the Housing and Urban
Development Act of 1968 (12 U.S.C. 1701x(e)) for use in
complying with the requirement under subsection (c) of this
section.
(b) Contents.--Each booklet shall be in such form and detail
as the Director shall prescribe and, in addition to such other
information as the Director may provide, shall include in plain
and understandable language the following information:
(1) A description and explanation of the nature and
purpose of the costs incident to a real estate
settlement or a federally related mortgage loan. The
description and explanation shall provide general
information about the mortgage process as well as
specific information concerning, at a minimum--
(A) balloon payments;
(B) prepayment penalties;
(C) the advantages of prepayment; and
(D) the trade-off between closing costs and
the interest rate over the life of the loan.
(2) An explanation and sample of the uniform
settlement statement required by section 4.
(3) A list and explanation of lending practices,
including those prohibited by the Truth in Lending Act
or other applicable Federal law, and of other unfair
practices and unreasonable or unnecessary charges to be
avoided by the prospective buyer with respect to a real
estate settlement.
(4) A list and explanation of questions a consumer
obtaining a federally related mortgage loan should ask
regarding the loan, including whether the consumer will
have the ability to repay the loan, whether the
consumer sufficiently shopped for the loan, whether the
loan terms include prepayment penalties or balloon
payments, and whether the loan will benefit the
borrower.
(5) An explanation of the right of rescission as to
certain transactions provided by sections 125 and 129
of the Truth in Lending Act.
(6) A brief explanation of the nature of a variable
rate mortgage and a reference to the booklet entitled
``Consumer Handbook on Adjustable Rate Mortgages'',
published by the Director, or to any suitable
substitute of such booklet that the Director may
subsequently adopt pursuant to such section.
(7) A brief explanation of the nature of a home
equity line of credit and a reference to the pamphlet
required to be provided under section 127A of the Truth
in Lending Act.
(8) Information about homeownership counseling
services made available pursuant to section 106(a)(4)
of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701x(a)(4)), a recommendation that the consumer
use such services, and notification that a list of
certified providers of homeownership counseling in the
area, and their contact information, is available.
(9) An explanation of the nature and purpose of
escrow accounts when used in connection with loans
secured by residential real estate and the requirements
under section 10 of this Act regarding such accounts.
(10) An explanation of the choices available to
buyers of residential real estate in selecting persons
to provide necessary services incidental to a real
estate settlement.
(11) An explanation of a consumer's responsibilities,
liabilities, and obligations in a mortgage transaction.
(12) An explanation of the nature and purpose of real
estate appraisals, including the difference between an
appraisal and a home inspection.
(13) Notice that the Office of Housing of the [Bureau
of Consumer Financial Protection] Consumer Law
Enforcement Agency has made publicly available a
brochure regarding loan fraud and a World Wide Web
address and toll-free telephone number for obtaining
the brochure.
(14) An explanation of flood insurance and the
availability of flood insurance under the National
Flood Insurance Program or from a private insurance
company, whether or not the real estate is located in
an area having special flood hazards, and the following
statement: ``Although you may not be required to
maintain flood insurance on all structures, you may
still wish to do so, and your mortgage lender may still
require you to do so to protect the collateral securing
the mortgage. If you choose to not maintain flood
insurance on a structure, and it floods, you are
responsible for all flood losses relating to that
structure.''.
The booklet prepared pursuant to this section shall take into
consideration differences in real estate settlement procedures
that may exist among the several States and territories of the
United States and among separate political subdivisions within
the same State and territory.
(c) Each lender shall include with the booklet a good faith
estimate of the amount or range of charges for specific
settlement services the borrower is likely to incur in
connection with the settlement as prescribed by the [Bureau]
Agency. Each lender shall also include with the booklet a
reasonably complete or updated list of homeownership counselors
who are certified pursuant to section 106(e) of the Housing and
Urban Development Act of 1968 (12 U.S.C. 1701x(e)) and located
in the area of the lender.
(d) Each lender referred to in subsection (a) shall provide
the booklet described in such subsection to each person from
whom it receives or for whom it prepares a written application
to borrow money to finance the purchase of residential real
estate. The lender shall provide the booklet in the version
that is most appropriate for the person receiving it. Such
booklet shall be provided by delivering it or placing it in the
mail not later than 3 business days after the lender receives
the application, but no booklet need be provided if the lender
denies the application for credit before the end of the 3-day
period.
(e) Booklets may be printed and distributed by lenders if
their form and content are approved by the [Bureau] Agency as
meeting the requirements of subsection (b) of this section.
servicing of mortgage loans and administration of escrow accounts
Sec. 6. (a) Disclosure to Applicant Relating to Assignment,
Sale, or Transfer of Loan Servicing.--Each person who makes a
federally related mortgage loan shall disclose to each person
who applies for the loan, at the time of application for the
loan, whether the servicing of the loan may be assigned, sold,
or transferred to any other person at any time while the loan
is outstanding.
(b) Notice by Transferor or Loan Servicing at Time of
Transfer.--
(1) Notice requirement.--Each servicer of any
federally related mortgage loan shall notify the
borrower in writing of any assignment, sale, or
transfer of the servicing of the loan to any other
person.
(2) Time of notice.--
(A) In general.--Except as provided under
subparagraphs (B) and (C), the notice required
under paragraph (1) shall be made to the
borrower not less than 15 days before the
effective date of transfer of the servicing of
the mortgage loan (with respect to which such
notice is made).
(B) Exception for certain proceedings.--The
notice required under paragraph (1) shall be
made to the borrower not more than 30 days
after the effective date of assignment, sale,
or transfer of the servicing of the mortgage
loan (with respect to which such notice is
made) in any case in which the assignment,
sale, or transfer of the servicing of the
mortgage loan is preceded by--
(i) termination of the contract for
servicing the loan for cause;
(ii) commencement of proceedings for
bankruptcy of the servicer; or
(iii) commencement of proceedings by
the Federal Deposit Insurance
Corporation or the Resolution Trust
Corporation for conservatorship or
receivership of the servicer (or an
entity by which the servicer is owned
or controlled).
(C) Exception for notice provided at
closing.--The provisions of subparagraphs (A)
and (B) shall not apply to any assignment,
sale, or transfer of the servicing of any
mortgage loan if the person who makes the loan
provides to the borrower, at settlement (with
respect to the property for which the mortgage
loan is made), written notice under paragraph
(3) of such transfer.
(3) Contents of notice.--The notice required under
paragraph (1) shall include the following information:
(A) The effective date of transfer of the
servicing described in such paragraph.
(B) The name, address, and toll-free or
collect call telephone number of the transferee
servicer.
(C) A toll-free or collect call telephone
number for (i) an individual employed by the
transferor servicer, or (ii) the department of
the transferor servicer, that can be contacted
by the borrower to answer inquiries relating to
the transfer of servicing.
(D) The name and toll-free or collect call
telephone number for (i) an individual employed
by the transferee servicer, or (ii) the
department of the transferee servicer, that can
be contacted by the borrower to answer
inquiries relating to the transfer of
servicing.
(E) The date on which the transferor servicer
who is servicing the mortgage loan before the
assignment, sale, or transfer will cease to
accept payments relating to the loan and the
date on which the transferee servicer will
begin to accept such payments.
(F) Any information concerning the effect the
transfer may have, if any, on the terms of or
the continued availability of mortgage life or
disability insurance or any other type of
optional insurance and what action, if any, the
borrower must take to maintain coverage.
(G) A statement that the assignment, sale, or
transfer of the servicing of the mortgage loan
does not affect any term or condition of the
security instruments other than terms directly
related to the servicing of such loan.
(c) Notice by Transferee of Loan Servicing at Time of
Transfer.--
(1) Notice requirement.--Each transferee servicer to
whom the servicing of any federally related mortgage
loan is assigned, sold, or transferred shall notify the
borrower of any such assignment, sale, or transfer.
(2) Time of notice.--
(A) In general.--Except as provided in
subparagraphs (B) and (C), the notice required
under paragraph (1) shall be made to the
borrower not more than 15 days after the
effective date of transfer of the servicing of
the mortgage loan (with respect to which such
notice is made).
(B) Exception for certain proceedings.--The
notice required under paragraph (1) shall be
made to the borrower not more than 30 days
after the effective date of assignment, sale,
or transfer of the servicing of the mortgage
loan (with respect to which such notice is
made) in any case in which the assignment,
sale, or transfer of the servicing of the
mortgage loan is preceded by--
(i) termination of the contract for
servicing the loan for cause;
(ii) commencement of proceedings for
bankruptcy of the servicer; or
(iii) commencement of proceedings by
the Federal Deposit Insurance
Corporation or the Resolution Trust
Corporation for conservatorship or
receivership of the servicer (or an
entity by which the servicer is owned
or controlled).
(C) Exception for notice provided at
closing.--The provisions of subparagraphs (A)
and (B) shall not apply to any assignment,
sale, or transfer of the servicing of any
mortgage loan if the person who makes the loan
provides to the borrower, at settlement (with
respect to the property for which the mortgage
loan is made), written notice under paragraph
(3) of such transfer.
(3) Contents of notice.--Any notice required under
paragraph (1) shall include the information described
in subsection (b)(3).
(d) Treatment of Loan Payments During Transfer Period.--
During the 60-day period beginning on the effective date of
transfer of the servicing of any federally related mortgage
loan, a late fee may not be imposed on the borrower with
respect to any payment on such loan and no such payment may be
treated as late for any other purposes, if the payment is
received by the transferor servicer (rather than the transferee
servicer who should properly receive payment) before the due
date applicable to such payment.
(e) Duty of Loan Servicer To Respond to Borrower Inquiries.--
(1) Notice of receipt of inquiry.--
(A) In general.--If any servicer of a
federally related mortgage loan receives a
qualified written request from the borrower (or
an agent of the borrower) for information
relating to the servicing of such loan, the
servicer shall provide a written response
acknowledging receipt of the correspondence
within 5 days (excluding legal public holidays,
Saturdays, and Sundays) unless the action
requested is taken within such period.
(B) Qualified written request.--For purposes
of this subsection, a qualified written request
shall be a written correspondence, other than
notice on a payment coupon or other payment
medium supplied by the servicer, that--
(i) includes, or otherwise enables
the servicer to identify, the name and
account of the borrower; and
(ii) includes a statement of the
reasons for the belief of the borrower,
to the extent applicable, that the
account is in error or provides
sufficient detail to the servicer
regarding other information sought by
the borrower.
(2) Action with respect to inquiry.--Not later than
30 days (excluding legal public holidays, Saturdays,
and Sundays) after the receipt from any borrower of any
qualified written request under paragraph (1) and, if
applicable, before taking any action with respect to
the inquiry of the borrower, the servicer shall--
(A) make appropriate corrections in the
account of the borrower, including the
crediting of any late charges or penalties, and
transmit to the borrower a written notification
of such correction (which shall include the
name and telephone number of a representative
of the servicer who can provide assistance to
the borrower);
(B) after conducting an investigation,
provide the borrower with a written explanation
or clarification that includes--
(i) to the extent applicable, a
statement of the reasons for which the
servicer believes the account of the
borrower is correct as determined by
the servicer; and
(ii) the name and telephone number of
an individual employed by, or the
office or department of, the servicer
who can provide assistance to the
borrower; or
(C) after conducting an investigation,
provide the borrower with a written explanation
or clarification that includes--
(i) information requested by the
borrower or an explanation of why the
information requested is unavailable or
cannot be obtained by the servicer; and
(ii) the name and telephone number of
an individual employed by, or the
office or department of, the servicer
who can provide assistance to the
borrower.
(3) Protection of credit rating.--During the 60-day
period beginning on the date of the servicer's receipt
from any borrower of a qualified written request
relating to a dispute regarding the borrower's
payments, a servicer may not provide information
regarding any overdue payment, owed by such borrower
and relating to such period or qualified written
request, to any consumer reporting agency (as such term
is defined under section 603 of the Fair Credit
Reporting Act).
(4) Limited extension of response time.--The 30-day
period described in paragraph (2) may be extended for
not more than 15 days if, before the end of such 30-day
period, the servicer notifies the borrower of the
extension and the reasons for the delay in responding.
(f) Damages and Costs.--Whoever fails to comply with any
provision of this section shall be liable to the borrower for
each such failure in the following amounts:
(1) Individuals.--In the case of any action by an
individual, an amount equal to the sum of--
(A) any actual damages to the borrower as a
result of the failure; and
(B) any additional damages, as the court may
allow, in the case of a pattern or practice of
noncompliance with the requirements of this
section, in an amount not to exceed $2,000.
(2) Class actions.--In the case of a class action, an
amount equal to the sum of--
(A) any actual damages to each of the
borrowers in the class as a result of the
failure; and
(B) any additional damages, as the court may
allow, in the case of a pattern or practice of
noncompliance with the requirements of this
section, in an amount not greater than $2,000
for each member of the class, except that the
total amount of damages under this subparagraph
in any class action may not exceed the lesser
of--
(i) $1,000,000; or
(ii) 1 percent of the net worth of
the servicer.
(3) Costs.--In addition to the amounts under
paragraph (1) or (2), in the case of any successful
action under this section, the costs of the action,
together with any attorneys fees incurred in connection
with such action as the court may determine to be
reasonable under the circumstances.
(4) Nonliability.--A transferor or transferee
servicer shall not be liable under this subsection for
any failure to comply with any requirement under this
section if, within 60 days after discovering an error
(whether pursuant to a final written examination report
or the servicer's own procedures) and before the
commencement of an action under this subsection and the
receipt of written notice of the error from the
borrower, the servicer notifies the person concerned of
the error and makes whatever adjustments are necessary
in the appropriate account to ensure that the person
will not be required to pay an amount in excess of any
amount that the person otherwise would have paid.
(g) Administration of Escrow Accounts.--If the terms of any
federally related mortgage loan require the borrower to make
payments to the servicer of the loan for deposit into an escrow
account for the purpose of assuring payment of taxes, insurance
premiums, and other charges with respect to the property, the
servicer shall make payments from the escrow account for such
taxes, insurance premiums, and other charges in a timely manner
as such payments become due. Any balance in any such account
that is within the servicer's control at the time the loan is
paid off shall be promptly returned to the borrower within 20
business days or credited to a similar account for a new
mortgage loan to the borrower with the same lender.
(h) Preemption of Conflicting State Laws.--Notwithstanding
any provision of any law or regulation of any State, a person
who makes a federally related mortgage loan or a servicer shall
be considered to have complied with the provisions of any such
State law or regulation requiring notice to a borrower at the
time of application for a loan or transfer of the servicing of
a loan if such person or servicer complies with the
requirements under this section regarding timing, content, and
procedures for notification of the borrower.
(i) Definitions.--For purposes of this section:
(1) Effective date of transfer.--The term ``effective
date of transfer'' means the date on which the mortgage
payment of a borrower is first due to the transferee
servicer of a mortgage loan pursuant to the assignment,
sale, or transfer of the servicing of the mortgage
loan.
(2) Servicer.--The term ``servicer'' means the person
responsible for servicing of a loan (including the
person who makes or holds a loan if such person also
services the loan). The term does not include--
(A) the Federal Deposit Insurance Corporation
or the Resolution Trust Corporation, in
connection with assets acquired, assigned,
sold, or transferred pursuant to section 13(c)
of the Federal Deposit Insurance Act or as
receiver or conservator of an insured
depository institution; and
(B) the Government National Mortgage
Association, the Federal National Mortgage
Association, the Federal Home Loan Mortgage
Corporation, the Resolution Trust Corporation,
or the Federal Deposit Insurance Corporation,
in any case in which the assignment, sale, or
transfer of the servicing of the mortgage loan
is preceded by--
(i) termination of the contract for
servicing the loan for cause;
(ii) commencement of proceedings for
bankruptcy of the servicer; or
(iii) commencement of proceedings by
the Federal Deposit Insurance
Corporation or the Resolution Trust
Corporation for conservatorship or
receivership of the servicer (or an
entity by which the servicer is owned
or controlled).
(3) Servicing.--The term ``servicing'' means
receiving any scheduled periodic payments from a
borrower pursuant to the terms of any loan, including
amounts for escrow accounts described in section 10,
and making the payments of principal and interest and
such other payments with respect to the amounts
received from the borrower as may be required pursuant
to the terms of the loan.
(j) Transition.--
(1) Originator liability.--A person who makes a
federally related mortgage loan shall not be liable to
a borrower because of a failure of such person to
comply with subsection (a) with respect to an
application for a loan made by the borrower before the
regulations referred to in paragraph (3) take effect.
(2) Servicer liability.--A servicer of a federally
related mortgage loan shall not be liable to a borrower
because of a failure of the servicer to perform any
duty under subsection (b), (c), (d), or (e) that arises
before the regulations referred to in paragraph (3)
take effect.
(3) Regulations and effective date.--The [Bureau]
Agency shall establish any requirements necessary to
carry out this section. Such regulations shall include
the model disclosure statement required under
subsection (a)(2).
(k) Servicer Prohibitions.--
(1) In general.--A servicer of a federally related
mortgage shall not--
(A) obtain force-placed hazard insurance
unless there is a reasonable basis to believe
the borrower has failed to comply with the loan
contract's requirements to maintain property
insurance;
(B) charge fees for responding to valid
qualified written requests (as defined in
regulations which the [Bureau of Consumer
Financial Protection] Consumer Law Enforcement
Agency shall prescribe) under this section;
(C) fail to take timely action to respond to
a borrower's requests to correct errors
relating to allocation of payments, final
balances for purposes of paying off the loan,
or avoiding foreclosure, or other standard
servicer's duties;
(D) fail to respond within 10 business days
to a request from a borrower to provide the
identity, address, and other relevant contact
information about the owner or assignee of the
loan; or
(E) fail to comply with any other obligation
found by the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency, by
regulation, to be appropriate to carry out the
consumer protection purposes of this Act.
(2) Force-placed insurance defined.--For purposes of
this subsection and subsections (l) and (m), the term
``force-placed insurance'' means hazard insurance
coverage obtained by a servicer of a federally related
mortgage when the borrower has failed to maintain or
renew hazard insurance on such property as required of
the borrower under the terms of the mortgage.
(l) Requirements for Force-placed Insurance.--A servicer of a
federally related mortgage shall not be construed as having a
reasonable basis for obtaining force-placed insurance unless
the requirements of this subsection have been met.
(1) Written notices to borrower.--A servicer may not
impose any charge on any borrower for force-placed
insurance with respect to any property securing a
federally related mortgage unless--
(A) the servicer has sent, by first-class
mail, a written notice to the borrower
containing--
(i) a reminder of the borrower's
obligation to maintain hazard insurance
on the property securing the federally
related mortgage;
(ii) a statement that the servicer
does not have evidence of insurance
coverage of such property;
(iii) a clear and conspicuous
statement of the procedures by which
the borrower may demonstrate that the
borrower already has insurance
coverage; and
(iv) a statement that the servicer
may obtain such coverage at the
borrower's expense if the borrower does
not provide such demonstration of the
borrower's existing coverage in a
timely manner;
(B) the servicer has sent, by first-class
mail, a second written notice, at least 30 days
after the mailing of the notice under
subparagraph (A) that contains all the
information described in each clause of such
subparagraph; and
(C) the servicer has not received from the
borrower any demonstration of hazard insurance
coverage for the property securing the mortgage
by the end of the 15-day period beginning on
the date the notice under subparagraph (B) was
sent by the servicer.
(2) Sufficiency of demonstration.--A servicer of a
federally related mortgage shall accept any reasonable
form of written confirmation from a borrower of
existing insurance coverage, which shall include the
existing insurance policy number along with the
identity of, and contact information for, the insurance
company or agent, or as otherwise required by the
[Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency.
(3) Termination of force-placed insurance.--Within 15
days of the receipt by a servicer of confirmation of a
borrower's existing insurance coverage, the servicer
shall--
(A) terminate the force-placed insurance; and
(B) refund to the consumer all force-placed
insurance premiums paid by the borrower during
any period during which the borrower's
insurance coverage and the force-placed
insurance coverage were each in effect, and any
related fees charged to the consumer's account
with respect to the force-placed insurance
during such period.
(4) Clarification with respect to flood disaster
protection act.--No provision of this section shall be
construed as prohibiting a servicer from providing
simultaneous or concurrent notice of a lack of flood
insurance pursuant to section 102(e) of the Flood
Disaster Protection Act of 1973.
(m) Limitations on Force-placed Insurance Charges.--All
charges, apart from charges subject to State regulation as the
business of insurance, related to force-placed insurance
imposed on the borrower by or through the servicer shall be
bona fide and reasonable.
(n) Small Servicer Exemption.--The Consumer Law Enforcement
Agency shall, by regulation, provide exemptions to, or
adjustments for, the provisions of this section for a servicer
that annually services 20,000 or fewer mortgage loans, in order
to reduce regulatory burdens while appropriately balancing
consumer protections.
SEC. 7. EXEMPTED TRANSACTIONS.
(a) In General.--This Act does not apply to credit
transactions involving extensions of credit--
(1) primarily for business, commercial, or
agricultural purposes; or
(2) to government or governmental agencies or
instrumentalities.
(b) Interpretation.--In prescribing regulations under section
19(a), the [Bureau] Agency shall ensure that, with respect to
subsection (a) of this section, the exemption for credit
transactions involving extensions of credit primarily for
business, commercial, or agricultural purposes, as provided in
section 7(1) of the Real Estate Settlement Procedures Act of
1974 shall be the same as the exemption for such credit
transactions under section 104(1) of the Truth in Lending Act.
prohibition against kickbacks and unearned fees
Sec. 8. (a) No person shall give and no person shall accept
any fee, kickback, or thing of value pursuant to any agreement
or understanding, oral or otherwise, that business incident to
or a part of a real estate settlement service involving a
federally related mortgage loan shall be referred to any
person.
(b) No person shall give and no person shall accept any
portion, split, or percentage of any charge made or received
for the rendering of a real estate settlement service in
connection with a transaction involving a federally related
mortgage loan other than for services actually performed.
(c) Nothing in this section shall be construed as prohibiting
(1) the payment of a fee (A) to attorneys at law for services
actually rendered or (B) by a title company to its duly
appointed agent for services actually performed in the issuance
of a policy of title insurance or (C) by a lender to its duly
appointed agent for services actually performed in the making
of a loan, (2) the payment to any person of a bona fide salary
or compensation or other payment for goods or facilities
actually furnished or for services actually performed, (3)
payments pursuant to cooperative brokerage and referral
arrangements or agreements between real estate agents and
brokers, (4) affiliated business arrangements so long as (A) a
disclosure is made of the existence of such an arrangement to
the person being referred and, in connection with such
referral, such person is provided a written estimate of the
charge or range of charges generally made by the provider to
which the person is referred (i) in the case of a face-to-face
referral or a referral made in writing or by electronic media,
at or before the time of the referral (and compliance with this
requirement in such case may be evidenced by a notation in a
written, electronic, or similar system of records maintained in
the regular course of business); (ii) in the case of a referral
made by telephone, within 3 business days after the referral by
telephone, (and in such case an abbreviated verbal disclosure
of the existence of the arrangement and the fact that a written
disclosure will be provided within 3 business days shall be
made to the person being referred during the telephone
referral); or (iii) in the case of a referral by a lender
(including a referral by a lender to an affiliated lender), at
the time the estimates required under section 5(c) are provided
(notwithstanding clause (i) or (ii)); and any required written
receipt of such disclosure (without regard to the manner of the
disclosure under clause (i), (ii), or (iii)) may be obtained at
the closing or settlement (except that a person making a face-
to-face referral who provides the written disclosure at or
before the time of the referral shall attempt to obtain any
required written receipt of such disclosure at such time and if
the person being referred chooses not to acknowledge the
receipt of the disclosure at that time, that fact shall be
noted in the written, electronic, or similar system of records
maintained in the regular course of business by the person
making the referral), (B) such person is not required to use
any particular provider of settlement services, and (C) the
only thing of value that is received from the arrangement,
other than the payments permitted under this subsection, is a
return on the ownership interest or franchise relationship, or
(5) such other payments or classes of payments or other
transfers as are specified in regulations prescribed by the
Secretary, after consultation with the Attorney General, the
Secretary of Veterans Affairs, the Federal Home Loan Bank
Board, the Federal Deposit Insurance Corporation, the Board of
Governors of the Federal Reserve System, and the Secretary of
Agriculture. For purposes of the preceding sentence, the
following shall not be considered a violation of clause (4)(B):
(i) any arrangement that requires a buyer, borrower, or seller
to pay for the services of an attorney, credit reporting
agency, or real estate appraiser chosen by the lender to
represent the lender's interest in a real estate transaction,
or (ii) any arrangement where an attorney or law firm
represents a client in a real estate transaction issues or
arranges for the issuance of a policy of title insurance in the
transaction directly as agent or through a separate corporate
title insurance agency that may be established by that attorney
or law firm and operated as an adjunct to his or its law
practice.
(d)(1) Any person or persons who violate the provisions of
this section shall be fined not more than $10,000 or imprisoned
for not more than one year, or both.
(2) Any person or persons who violate the prohibitions or
limitations of this section shall be jointly and severally
liable to the person or persons charged for the settlement
service involved in the violation in an amount equal to three
times the amount of any charge paid for such settlement
service.
(3) No person or persons shall be liable for a violation of
the provisions of section 8(c)(4)(A) if such person or persons
proves by a preponderance of the evidence that such violation
was not intentional and resulted from a bona fide error
notwithstanding maintenance of procedures that are reasonably
adapted to avoid such error.
(4) The [Bureau] Agency, the Secretary, or the
attorney general or the insurance commissioner of any
State may bring an action to enjoin violations of this
section. Except, to the extent that a person is subject
to the jurisdiction of the [Bureau] Agency, the
Secretary, or the attorney general or the insurance
commissioner of any State, the [Bureau] Agency shall
have primary authority to enforce or administer this
section, subject to subtitle B of the Consumer
Financial Protection Act of 2010.
(5) In any private action brought pursuant to this
subsection, the court may award to the prevailing party the
court costs of the action together with reasonable attorneys
fees.
(6) No provision of State law or regulation that imposes more
stringent limitations on affiliated business arrangements shall
be construed as being inconsistent with this section.
* * * * * * *
escrow accounts
Sec. 10. (a) In General.--A lender, in connection with a
federally related mortgage loan, may not require the borrower
or prospective borrower--
(1) to deposit in any escrow account which may be
established in connection with such loan for the
purpose of assuring payment of taxes, insurance
premiums, or other charges with respect to the
property, in connection with the settlement, an
aggregate sum (for such purpose) in excess of a sum
that will be sufficient to pay such taxes, insurance
premiums and other charges attributable to the period
beginning on the last date on which each such charge
would have been paid under the normal lending practice
of the lender and local custom, provided that the
selection of each such date constitutes prudent lending
practice, and ending on the due date of its first full
installment payment under the mortgage, plus one-sixth
of the estimated total amount of such taxes, insurance
premiums and other charges to be paid on dates, as
provided above, during the ensuing twelve-month period;
or
(2) to deposit in any such escrow account in any
month beginning with the first full installment payment
under the mortgage a sum (for the purpose of assuring
payment of taxes, insurance premiums and other charges
with respect to the property) in excess of the sum of
(A) one-twelfth of the total amount of the estimated
taxes, insurance premiums and other charges which are
reasonably anticipated to be paid on dates during the
ensuing twelve months which dates are in accordance
with the normal lending practice of the lender and
local custom, provided that the selection of each such
date constitutes prudent lending practice, plus (B)
such amount as is necessary to maintain an additional
balance in such escrow account not to exceed one-sixth
of the estimated total amount of such taxes, insurance
premiums and other charges to be paid on dates, as
provided above, during the ensuing twelve-month period:
Provided, however, That in the event the lender
determines there will be or is a deficiency he shall
not be prohibited from requiring additional monthly
deposits in such escrow account to avoid or eliminate
such deficiency.
(b) Notification of Shortage in Escrow Account.--If the terms
of any federally related mortgage loan require the borrower to
make payments to the servicer (as the term is defined in
section 6(i)) of the loan for deposit into an escrow account
for the purpose of assuring payment of taxes, insurance
premiums, and other charges with respect to the property, the
servicer shall notify the borrower not less than annually of
any shortage of funds in the escrow account.
(c) Escrow Account Statements.--
(1) Initial statement.--
(A) In general.--Any servicer that has
established an escrow account in connection
with a federally related mortgage loan shall
submit to the borrower for which the escrow
account has been established a statement
clearly itemizing the estimated taxes,
insurance premiums, and other charges that are
reasonably anticipated to be paid from the
escrow account during the first 12 months after
the establishment of the account and the
anticipated dates of such payments.
(B) Time of submission.--The statement
required under subparagraph (A) shall be
submitted to the borrower at closing with
respect to the property for which the mortgage
loan is made or not later than the expiration
of the 45-day period beginning on the date of
the establishment of the escrow account.
(C) Initial statement at closing.--Any
servicer may submit the statement required
under subparagraph (A) to the borrower at
closing and may incorporate such statement in
the uniform settlement statement required under
section 4. The [Bureau] Agency shall issue
regulations prescribing any changes necessary
to the uniform settlement statement under
section 4 that specify how the statement
required under subparagraph (A) of this section
shall be incorporated in the uniform settlement
statement.
(2) Annual statement.--
(A) In general.--Any servicer that has
established or continued an escrow account in
connection with a federally related mortgage
loan shall submit to the borrower for which the
escrow account has been established or
continued a statement clearly itemizing, for
each period described in subparagraph (B)
(during which the servicer services the escrow
account), the amount of the borrower's current
monthly payment, the portion of the monthly
payment being placed in the escrow account, the
total amount paid into the escrow account
during the period, the total amount paid out of
the escrow account during the period for taxes,
insurance premiums, and other charges (as
separately identified), and the balance in the
escrow account at the conclusion of the period.
(B) Time of submission.--The statement
required under subparagraph (A) shall be
submitted to the borrower not less than once
for each 12-month period, the first such period
beginning on the first January 1st that occurs
after the date of the enactment of the
Cranston-Gonzalez National Affordable Housing
Act, and shall be submitted not more than 30
days after the conclusion of each such 1-year
period.
(d) Penalties.--
(1) In general.--In the case of each failure to
submit a statement to a borrower as required under
subsection (c), the Secretary shall assess to the
lender or escrow servicer failing to submit the
statement a civil penalty of $50 for each such failure,
but the total amount imposed on such lender or escrow
servicer for all such failures during any 12-month
period referred to in subsection (b) may not exceed
$100,000.
(2) Intentional violations.--If any failure to which
paragraph (1) applies is due to intentional disregard
of the requirement to submit the statement, then, with
respect to such failure--
(A) the penalty imposed under paragraph (1)
shall be $100; and
(B) in the case of any penalty determined
under subparagraph (A), the $100,000 limitation
under paragraph (1) shall not apply.
* * * * * * *
jurisdiction of courts
Sec. 16. Any action pursuant to the provisions of section 6,
8, or 9 may be brought in the United States district court or
in any other court of competent jurisdiction, for the district
in which the property involved is located, or where the
violation is alleged to have occurred, within 3 years in the
case of a violation of section 6 and 1 year in the case of a
violation of section 8 or 9 from the date of the occurrence of
the violation, except that actions brought by the the [Bureau]
Agency, Secretary, the Attorney General of any State, or the
insurance commissioner of any State may be brought within 3
years from the date of the occurrence of the violation.
* * * * * * *
relation to state laws
Sec. 18. This Act does not annul, alter, or affect, or exempt
any person subject to the provisions of this Act from complying
with, the laws of any State with respect to settlement
practices, except to the extent that those laws are
inconsistent with any provision of this Act, and then only to
the extent of the inconsistency. The [Bureau] Agency is
authorized to determine whether such inconsistencies exist. The
[Bureau] Agency may not determine that any State law is
inconsistent with any provision of this Act if the [Bureau]
Agency determines that such laws gives greater protection to
the consumer. In making these determinations the [Bureau]
Agency shall consult with the appropriate Federal agencies.
authority of the bureau
Sec. 19. (a) The [Bureau] Agency is authorized to prescribe
such rules and regulations, to make such interpretations, and
to grant such reasonable exemptions for classes of
transactions, as may be necessary to achieve the purposes of
this Act.
(b) No provision of this Act or the laws of any State
imposing any liability shall apply to any act done or omitted
in good faith in conformity with any rule, regulation, or
interpretation thereof by the [Bureau] Agency or the Attorney
General, notwithstanding that after such act or omission has
occurred, such rule, regulation, or interpretation is amended,
rescinded, or determined by judicial or other authority to be
invalid for any reason.
(c)(1) The Secretary may investigate any facts, conditions,
practices, or matters that may be deemed necessary or proper to
aid in the enforcement of the provisions of this Act, in
prescribing of rules and regulations thereunder, or in securing
information to serve as a basis for recommending further
legislation concerning real estate settlement practices. To aid
in the investigations, the [Bureau] Agency is authorized to
hold such hearings, administer such oaths, and require by
subpena the attendance and testimony of such witnesses and
production of such documents as the [Bureau] Agency deems
advisable.
(2) Any district court of the United States within the
jurisdiction of which an inquiry is carried on may, in the case
of contumacy or refusal to obey a subpena of the [Bureau]
Agency issued under this section, issue an order requiring
compliance therewith; and any failure to obey such order of the
court may be punished by such court as a contempt thereof.
(d) Delay of Effectiveness of Recent Final Regulation
Relating to Payments to Employees.--
(1) In general.--The amendment to part 3500 of title
24 of the Code of Federal Regulations contained in the
final regulation prescribed by the Secretary and
published in the Federal Register on June 7, 1996,
which will, as of the effective date of such
amendment--
(A) eliminate the exemption for payments by
an employer to employees of such employer for
referral activities which is currently codified
as section 3500.14(g)(1)(vii) of such title 24;
and
(B) replace such exemption with a more
limited exemption in new clauses (vii), (viii),
and (ix) of section 3500.14 of such title 24,
shall not take effect before July 31, 1997.
(2) Continuation of prior rule.--The regulation
codified as section 3500.14(g)(1)(vii) of title 24 of
the Code of Federal Regulations, relating to employer-
employee payments, as in effect on May 1, 1996, shall
remain in effect until the date the amendment referred
to in paragraph (1) takes effect in accordance with
such paragraph.
(3) Public notice of effective date.--The Secretary
shall provide public notice of the date on which the
amendment referred to in paragraph (1) will take effect
in accordance with such paragraph not less than 90 days
and not more than 180 days before such effective date.
* * * * * * *
----------
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL ACT OF 1978
* * * * * * *
TITLE X--FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
* * * * * * *
definitions
Sec. 1003. As used in this title--
[(1) the term ``Federal financial institutions
regulatory agencies'' means the Office of the
Comptroller of the Currency, the Board of Governors of
the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Office of Thrift
Supervision, and the National Credit Union
Administration;]
(1) the term ``Federal financial institutions
regulatory agencies''--
(A) means the Office of the Comptroller of
the Currency, the Board of Governors of the
Federal Reserve System, the Federal Deposit
Insurance Corporation, and the National Credit
Union Administration; and
(B) for purposes of sections 1012, 1013,
1014, and 1015, includes the Consumer Law
Enforcement Agency;
(2) the term ``Council'' means the Financial
Institutions Examination Council; and
(3) the term ``financial institution'' means a
commercial bank, a savings bank, a trust company, a
savings association, a building and loan association, a
homestead association, a cooperative bank, or a credit
union;
establishment of the council
Sec. 1004. (a) There is established the Financial
Institutions Examination Council which shall consist of--
(1) the Comptroller of the Currency,
(2) the Chairman of the Board of Directors of the
Federal Deposit Insurance Corporation,
(3) a Governor of the Board of Governors of the
Federal Reserve System designated by the Chairman of
the Board,
(4) the Director of the [Consumer Financial
Protection Bureau] Consumer Law Enforcement Agency,
(5) the Chairman of the National Credit Union
Administration Board, and
(6) the Chairman of the State Liaison Committee.
(b) The members of the Council shall select the first
chairman of the Council. Thereafter the chairmanship shall
rotate among the members of the Council.
(c) The term of the Chairman of the Council shall be two
years.
(d) The members of the Council may, from time to time,
designate other officers or employees of their respective
agencies to carry out their duties on the Council.
(e) Each member of the Council shall serve without additional
compensation but shall be entitled to reasonable expenses
incurred in carrying out his official duties a such a member.
expenses of the council
Sec. 1005. [One-fifth] One-fourth of the costs and expenses
of the Council, including the salaries of its employees, shall
be paid by each of the Federal financial institutions
regulatory agencies. Annual assessments for such share shall be
levied by the Council based upon its projected budget for the
year, and additional assessments may be made during the year if
necessary.
* * * * * * *
SEC. 1011. ESTABLISHMENT OF APPRAISAL SUBCOMMITTEE.
There shall be within the Council a subcommittee to be known
as the ``Appraisal Subcommittee'', which shall consist of the
designees of the heads of the Federal financial institutions
regulatory agencies, the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency, and the Federal
Housing Finance Agency. Each such designee shall be a person
who has demonstrated knowledge and competence concerning the
appraisal profession. At all times at least one member of the
Appraisal Subcommittee shall have demonstrated knowledge and
competence through licensure, certification, or professional
designation within the appraisal profession.
SEC. 1012. TIMELINESS OF EXAMINATION REPORTS.
(a) In General.--
(1) Final examination report.--A Federal financial
institutions regulatory agency shall provide a final
examination report to a financial institution not later
than 60 days after the later of--
(A) the exit interview for an examination of
the institution; or
(B) the provision of additional information
by the institution relating to the examination.
(2) Exit interview.--If a financial institution is
not subject to a resident examiner program, the exit
interview shall occur not later than the end of the 9-
month period beginning on the commencement of the
examination, except that such period may be extended by
the Federal financial institutions regulatory agency by
providing written notice to the institution and the
Independent Examination Review Director describing with
particularity the reasons that a longer period is
needed to complete the examination.
(b) Examination Materials.--Upon the request of a financial
institution, the Federal financial institutions regulatory
agency shall include with the final report an appendix listing
all examination or other factual information relied upon by the
agency in support of a material supervisory determination.
SEC. 1013. EXAMINATION STANDARDS.
(a) In General.--In the examination of a financial
institution--
(1) a commercial loan shall not be placed in non-
accrual status solely because the collateral for such
loan has deteriorated in value;
(2) a modified or restructured commercial loan shall
be removed from non-accrual status if the borrower
demonstrates the ability to perform on such loan over a
maximum period of 6 months, except that with respect to
loans on a quarterly, semiannual, or longer repayment
schedule such period shall be a maximum of 3
consecutive repayment periods;
(3) a new appraisal on a performing commercial loan
shall not be required unless an advance of new funds is
involved; and
(4) in classifying a commercial loan in which there
has been deterioration in collateral value, the amount
to be classified shall be the portion of the deficiency
relating to the decline in collateral value and
repayment capacity of the borrower.
(b) Well Capitalized Institutions.--The Federal financial
institutions regulatory agencies may not require a financial
institution that is well capitalized to raise additional
capital in lieu of an action prohibited under subsection (a).
(c) Consistent Loan Classifications.--The Federal financial
institutions regulatory agencies shall develop and apply
identical definitions and reporting requirements for non-
accrual loans.
SEC. 1014. OFFICE OF INDEPENDENT EXAMINATION REVIEW.
(a) Establishment.--There is established in the Council an
Office of Independent Examination Review (the ``Office'').
(b) Head of Office.--There is established the position of the
Independent Examination Review Director (the ``Director''), as
the head of the Office. The Director shall be appointed by the
Council and shall be independent from any member agency of the
Council.
(c) Staffing.--The Director is authorized to hire staff to
support the activities of the Office.
(d) Duties.--The Director shall--
(1) receive and, at the Director's discretion,
investigate complaints from financial institutions,
their representatives, or another entity acting on
behalf of such institutions, concerning examinations,
examination practices, or examination reports;
(2) hold meetings, at least once every three months
and in locations designed to encourage participation
from all sections of the United States, with financial
institutions, their representatives, or another entity
acting on behalf of such institutions, to discuss
examination procedures, examination practices, or
examination policies;
(3) review examination procedures of the Federal
financial institutions regulatory agencies to ensure
that the written examination policies of those agencies
are being followed in practice and adhere to the
standards for consistency established by the Council;
(4) conduct a continuing and regular review of
examination quality assurance for all examination types
conducted by the Federal financial institutions
regulatory agencies;
(5) adjudicate any supervisory appeal initiated under
section 1015; and
(6) report annually to the Committee on Financial
Services of the House of Representatives, the Committee
on Banking, Housing, and Urban Affairs of the Senate,
and the Council, on the reviews carried out pursuant to
paragraphs (3) and (4), including compliance with the
requirements set forth in section 1012 regarding
timeliness of examination reports, and the Council's
recommendations for improvements in examination
procedures, practices, and policies.
(e) Confidentiality.--The Director shall keep confidential
all meetings with, discussions with, and information provided
by financial institutions.
SEC. 1015. RIGHT TO INDEPENDENT REVIEW OF MATERIAL SUPERVISORY
DETERMINATIONS.
(a) In General.--A financial institution shall have the right
to obtain an independent review of a material supervisory
determination contained in a final report of examination.
(b) Notice.--
(1) Timing.--A financial institution seeking review
of a material supervisory determination under this
section shall file a written notice with the
Independent Examination Review Director (the
``Director'') within 60 days after receiving the final
report of examination that is the subject of such
review.
(2) Identification of determination.--The written
notice shall identify the material supervisory
determination that is the subject of the independent
examination review, and a statement of the reasons why
the institution believes that the determination is
incorrect or should otherwise be modified.
(3) Information to be provided to institution.--Any
information relied upon by the agency in the final
report that is not in the possession of the financial
institution may be requested by the financial
institution and shall be delivered promptly by the
agency to the financial institution.
(c) Right to Hearing.--
(1) In general.--The Director shall determine the
merits of the appeal on the record or, at the financial
institution's election, shall refer the appeal to an
Administrative Law Judge to conduct a confidential
hearing pursuant to the procedures set forth under
sections 556 and 557 of title 5, United States Code,
which hearing shall take place not later than 60 days
after the petition for review was received by the
Director, and to issue a proposed decision to the
Director based upon the record established at such
hearing.
(2) Standard of review.--In rendering a determination
or recommendation under this subsection, neither the
Administrative Law Judge nor the Director shall defer
to the opinions of the examiner or agency, but shall
conduct a de novo review to independently determine the
appropriateness of the agency's decision based upon the
relevant statutes, regulations, and other appropriate
guidance, as well as evidence adduced at any hearing.
(d) Final Decision.--A decision by the Director on an
independent review under this section shall--
(1) be made not later than 60 days after the record
has been closed; and
(2) be deemed final agency action and shall bind the
agency whose supervisory determination was the subject
of the review and the financial institution requesting
the review.
(e) Right to Judicial Review.--A financial institution shall
have the right to petition for review of final agency action
under this section by filing a Petition for Review within 60
days of the Director's decision in the United States Court of
Appeals for the District of Columbia Circuit or the Circuit in
which the financial institution is located.
(f) Report.--The Director shall report annually to the
Committee on Financial Services of the House of Representatives
and the Committee on Banking, Housing, and Urban Affairs of the
Senate on actions taken under this section, including the types
of issues that the Director has reviewed and the results of
those reviews. In no case shall such a report contain
information about individual financial institutions or any
confidential or privileged information shared by financial
institutions.
(g) Retaliation Prohibited.--A Federal financial institutions
regulatory agency may not--
(1) retaliate against a financial institution,
including service providers, or any institution-
affiliated party (as defined under section 3 of the
Federal Deposit Insurance Act), for exercising
appellate rights under this section; or
(2) delay or deny any agency action that would
benefit a financial institution or any institution-
affiliated party on the basis that an appeal under this
section is pending under this section.
(h) Rule of Construction.--Nothing in this section may be
construed--
(1) to affect the right of a Federal financial
institutions regulatory agency to take enforcement or
other supervisory actions related to a material
supervisory determination under review under this
section; or
(2) to prohibit the review under this section of a
material supervisory determination with respect to
which there is an ongoing enforcement or other
supervisory action.
* * * * * * *
----------
RIEGLE COMMUNITY DEVELOPMENT AND REGULATORY IMPROVEMENT ACT OF 1994
* * * * * * *
TITLE I--COMMUNITY DEVELOPMENT AND CONSUMER PROTECTION
Subtitle A--Community Development Banking and Financial Institutions
Act
* * * * * * *
SEC. 117. STUDIES AND REPORTS; EXAMINATION AND AUDIT.
(a) Annual Report by the Fund.--The Fund shall conduct an
annual evaluation of the activities carried out by the Fund and
the community development financial institutions and other
organizations assisted pursuant to this subtitle, and shall
submit a report of its findings to the President and the
Congress not later than 120 days after the end of each fiscal
year of the Fund. The report shall include financial statements
audited in accordance with subsection (f).
(b) Optional Studies.--The Fund may conduct such studies as
the Fund determines necessary to further the purpose of this
subtitle and to facilitate investment in distressed
communities. The findings of any studies conducted pursuant to
this subsection shall be included in the report required by
subsection (a).
(c) Native American Lending Study.--
(1) In general.--The Fund shall conduct a study on
lending and investment practices on Indian reservations
and other land held in trust by the United States. Such
study shall--
(A) identify barriers to private financing on
such lands; and
(B) identify the impact of such barriers on
access to capital and credit for Native
American populations.
(2) Report.--Not later than 12 months after the date
on which the Administrator is appointed, the Fund shall
submit a report to the President and the Congress
that--
(A) contains the findings of the study
conducted under paragraph (1);
(B) recommends any necessary statutory and
regulatory changes to existing Federal
programs; and
(C) makes policy recommendations for
community development financial institutions,
insured depository institutions, secondary
market institutions, and other private sector
capital institutions to better serve such
populations.
(d) Investment, Governance, and Role of Fund.--Thirty months
after the appointment and qualification of the Administrator,
the Comptroller General of the United States shall submit to
the President and the Congress a study evaluating the
structure, governance, and performance of the Fund.
(e) Consultation.--In the conduct of the studies required
under this section, the Fund shall consult, as appropriate,
with the Comptroller of the Currency, the Federal Deposit
Insurance Corporation, the Board of Governors of the Federal
Reserve System, the Federal Housing Finance Agency, the Farm
Credit Administration, [the Director of the Office of Thrift
Supervision,] the National Credit Union Administration Board,
Indian tribal governments, community reinvestment
organizations, civil rights organizations, consumer
organizations, financial organizations, and such
representatives of agencies or other persons, at the discretion
of the Fund.
(f) Examination and Audit.--The financial statements of the
Fund shall be audited in accordance with section 9105 of title
31, United States Code, except that audits required by section
9105(a) of such title shall be performed annually.
* * * * * * *
TITLE III--PAPERWORK REDUCTION AND REGULATORY IMPROVEMENT
* * * * * * *
SEC. 309. REGULATORY APPEALS PROCESS, OMBUDSMAN, AND ALTERNATIVE
DISPUTE RESOLUTION.
(a) In General.--Not later than 180 days after the date of
enactment of this Act, each appropriate Federal banking agency,
the Consumer Law Enforcement Agency, and the National Credit
Union Administration Board shall establish an independent
intra-agency appellate process. The process shall be available
to review material supervisory determinations made at insured
depository institutions or at insured credit unions that the
agency supervises.
(b) Review Process.--In establishing the independent
appellate process under subsection (a), each agency shall
ensure that--
(1) any appeal of a material supervisory
determination by an insured depository institution or
insured credit union is heard and decided
expeditiously; and
(2) appropriate safeguards exist for protecting [the
appellant from retaliation by agency examiners] the
insured depository institution or insured credit union
from retaliation by the agencies referred to in
subsection (a).
For purposes of this subsection and subsection (e), retaliation
includes delaying consideration of, or withholding approval of,
any request, notice, or application that otherwise would have
been approved, but for the exercise of the institution's or
credit union's rights under this section.
(c) Comment Period.--Not later than 90 days after the date of
enactment of this Act, each appropriate Federal banking agency
and the National Credit Union Administration Board shall
provide public notice and opportunity for comment on proposed
guidelines for the establishment of an appellate process under
this section.
(d) Agency Ombudsman.--
(1) Establishment required.--Not later than 180 days
after the date of enactment of this Act, each Federal
banking agency and the National Credit Union
Administration Board shall appoint an ombudsman.
(2) Duties of ombudsman.--The ombudsman appointed in
accordance with paragraph (1) for any agency shall--
(A) act as a liaison between the agency and
any affected person with respect to any problem
such party may have in dealing with the agency
resulting from the regulatory activities of the
agency; and
(B) assure that safeguards exist to encourage
complainants to come forward and preserve
confidentiality.
(e) Alternative Dispute Resolution Pilot Program.--
(1) In general.--Not later than 18 months after the
date of enactment of this Act, each Federal banking
agency and the National Credit Union Administration
Board shall develop and implement a pilot program for
using alternative means of dispute resolution of issues
in controversy (hereafter in this section referred to
as the ``alternative dispute resolution program'') that
is consistent with the requirements of subchapter IV of
chapter 5 of title 5, United States Code, if the
parties to the dispute, including the agency, agree to
such proceeding.
(2) Standards.--An alternative dispute resolution
pilot program developed under paragraph (1) shall--
(A) be fair to all interested parties to a
dispute;
(B) resolve disputes expeditiously; [and]
(C) be less costly than traditional means of
dispute resolution, including litigation[.];
and
(D) ensure that appropriate safeguards exist
for protecting the insured depository
institution or insured credit union from
retaliation by any agency referred to in
subsection (a) for exercising its rights under
this subsection.
(3) Independent evaluation.--Not later than 18 months
after the date on which a pilot program is implemented
under paragraph (1), the Administrative Conference of
the United States shall submit to the Congress a report
containing--
(A) an evaluation of that pilot program;
(B) the extent to which the pilot programs
meet the standards established under paragraph
(2);
(C) the extent to which parties to disputes
were offered alternative means of dispute
resolution and the frequency with which the
parties, including the agencies, accepted or
declined to use such means; and
(D) any recommendations of the Conference to
improve the alternative dispute resolution
procedures of the Federal banking agencies and
the National Credit Union Administration Board.
(4) Implementation of program.--At any time after
completion of the evaluation under paragraph (3)(A),
any Federal banking agency and the National Credit
Union Administration Board may implement an alternative
dispute resolution program throughout the agency,
taking into account the results of that evaluation.
(5) Coordination with existing agency adr programs.--
(A) Evaluation required.--If any Federal
banking agency or the National Credit Union
Administration maintains an alternative dispute
resolution program as of the date of enactment
of this Act under any other provision of law,
the Administrative Conference of the United
States shall include such program in the
evaluation conducted under paragraph (3)(A).
(B) Multiple adr programs.--No provision of
this section shall be construed as precluding
any Federal banking agency or the National
Credit Union Administration Board from
establishing more than 1 alternative means of
dispute resolution.
(f) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Material supervisory determinations.--The term
``material supervisory determinations''--
(A) includes determinations relating to--
(i) examination ratings;
(ii) the adequacy of loan loss
reserve provisions; [and]
(iii) loan classifications on loans
that are significant to an institution;
[and]
(iv) any issue specifically listed in
an exam report as a matter requiring
attention by the institution's
management or board of directors; and
(v) any suspension or removal of an
institution's status as eligible for
expedited processing of applications,
requests, notices, or filings on the
grounds of a supervisory or compliance
concern, regardless of whether that
concern has been cited as a basis for
another material supervisory
determination or matter requiring
attention in an examination report,
provided that the conduct at issue did
not involve violation of any criminal
law; and
(B) does not include a determination by a
Federal banking agency or the National Credit
Union Administration Board 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
or section 212 of the Federal Credit Union Act,
as appropriate.
(2) Independent appellate process.--The term
``independent appellate process'' means a review by an
agency official who does not directly or indirectly
report to the agency official who made the material
supervisory determination under review.
(3) Alternative means of dispute resolution.--The
term ``alternative means of dispute resolution'' has
the meaning given to such term in section 571 of title
5, United States Code.
(4) Issues in controversy.--The term ``issues in
controversy'' means--
(A) any final agency decision involving any
claim against an insured depository institution
or insured credit union for which the agency
has been appointed conservator or receiver or
for which a liquidating agent has been
appointed, as the case may be;
(B) any final action taken by an agency in
the agency's capacity as conservator or
receiver for an insured depository institution
or by the liquidating agent appointed for an
insured credit union; and
(C) any other issue for which the appropriate
Federal banking agency or the National Credit
Union Administration Board determines that
alternative means of dispute resolution would
be appropriate.
(g) Effect on Other Authority.--Nothing in this section shall
affect the authority of an appropriate Federal banking agency
or the National Credit Union Administration Board to take
enforcement or supervisory action.
* * * * * * *
----------
S.A.F.E. MORTGAGE LICENSING ACT OF 2008
DIVISION A--HOUSING FINANCE REFORM
* * * * * * *
TITLE V--S.A.F.E. MORTGAGE LICENSING ACT
SEC. 1501. SHORT TITLE.
This title may be cited as the ``Secure and Fair Enforcement
for Mortgage Licensing Act of 2008'' or ``S.A.F.E. Mortgage
Licensing Act of 2008''.
* * * * * * *
SEC. 1503. DEFINITIONS.
For purposes of this title, the following definitions shall
apply:
[(1) Bureau.--The term ``Bureau '' means the Bureau
of Consumer Financial Protection.]
(1) Agency.--The term ``Agency'' means the Consumer
Law Enforcement Agency.
(2) Federal banking agency.--The term ``Federal
banking agency'' means the Board of Governors of the
Federal Reserve System, the Office of the Comptroller
of the Currency, the National Credit Union
Administration, and the Federal Deposit Insurance
Corporation.
(3) Depository institution.--The term ``depository
institution'' has the same meaning as in section 3 of
the Federal Deposit Insurance Act, and includes any
credit union.
(4) Loan originator.--
(A) In general.--The term ``loan
originator''--
(i) means an individual who--
(I) takes a residential
mortgage loan application; and
(II) offers or negotiates
terms of a residential mortgage
loan for compensation or gain;
(ii) does not include any individual
who is not otherwise described in
clause (i) and who performs purely
administrative or clerical tasks on
behalf of a person who is described in
any such clause;
(iii) does not include a person or
entity that only performs real estate
brokerage activities and is licensed or
registered in accordance with
applicable State law, unless the person
or entity is compensated by a lender, a
mortgage broker, or other loan
originator or by any agent of such
lender, mortgage broker, or other loan
originator; and
(iv) does not include a person or
entity solely involved in extensions of
credit relating to timeshare plans, as
that term is defined in section
101(53D) of title 11, United States
Code.
(B) Other definitions relating to loan
originator.--For purposes of this subsection,
an individual ``assists a consumer in obtaining
or applying to obtain a residential mortgage
loan'' by, among other things, advising on loan
terms (including rates, fees, other costs),
preparing loan packages, or collecting
information on behalf of the consumer with
regard to a residential mortgage loan.
(C) Administrative or clerical tasks.--The
term ``administrative or clerical tasks'' means
the receipt, collection, and distribution of
information common for the processing or
underwriting of a loan in the mortgage industry
and communication with a consumer to obtain
information necessary for the processing or
underwriting of a residential mortgage loan.
(D) Real estate brokerage activity defined.--
The term ``real estate brokerage activity''
means any activity that involves offering or
providing real estate brokerage services to the
public, including--
(i) acting as a real estate agent or
real estate broker for a buyer, seller,
lessor, or lessee of real property;
(ii) bringing together parties
interested in the sale, purchase,
lease, rental, or exchange of real
property;
(iii) negotiating, 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
providing financing with respect to any
such transaction);
(iv) engaging in any activity for
which a person engaged in the activity
is required to be registered or
licensed as a real estate agent or real
estate broker under any applicable law;
and
(v) offering to engage in any
activity, or act in any capacity,
described in clause (i), (ii), (iii),
or (iv).
(5) Loan processor or underwriter.--
(A) In general.--The term ``loan processor or
underwriter'' means an individual who performs
clerical or support duties at the direction of
and subject to the supervision and instruction
of--
(i) a State-licensed loan originator;
or
(ii) a registered loan originator.
(B) Clerical or support duties.--For purposes
of subparagraph (A), the term ``clerical or
support duties'' may include--
(i) the receipt, collection,
distribution, and analysis of
information common for the processing
or underwriting of a residential
mortgage loan; and
(ii) communicating with a consumer to
obtain the information necessary for
the processing or underwriting of a
loan, to the extent that such
communication does not include offering
or negotiating loan rates or terms, or
counseling consumers about residential
mortgage loan rates or terms.
(6) Nationwide mortgage licensing system and
registry.--The term ``Nationwide Mortgage Licensing
System and Registry'' means a mortgage licensing system
developed and maintained by the Conference of State
Bank Supervisors and the American Association of
Residential Mortgage Regulators for the State licensing
and registration of State-licensed loan originators and
the registration of registered loan originators or any
system established by the Director under section 1509.
(7) Nontraditional mortgage product.--The term
``nontraditional mortgage product'' means any mortgage
product other than a 30-year fixed rate mortgage.
(8) Registered loan originator.--The term
``registered loan originator'' means any individual
who--
(A) meets the definition of loan originator
and is an employee of--
(i) a depository institution;
(ii) a subsidiary that is--
(I) owned and controlled by a
depository institution; and
(II) regulated by a Federal
banking agency; or
(iii) an institution regulated by the
Farm Credit Administration; and
(B) is registered with, and maintains a
unique identifier through, the Nationwide
Mortgage Licensing System and Registry.
(9) Residential mortgage loan.--The term
``residential mortgage loan'' means any loan primarily
for personal, family, or household use that is secured
by a mortgage, deed of trust, or other equivalent
consensual security interest on a dwelling (as defined
in section 103(v) of the Truth in Lending Act) or
residential real estate upon which is constructed or
intended to be constructed a dwelling (as so defined).
(10) Director.--The term ``Director'' means the
Director of the [Bureau] Agency of Consumer Financial
Protection.
(11) State.--The term ``State'' means any State of
the United States, the District of Columbia, any
territory of the United States, Puerto Rico, Guam,
American Samoa, the Trust Territory of the Pacific
Islands, the Virgin Islands, and the Northern Mariana
Islands.
(12) State-licensed loan originator.--The term
``State-licensed loan originator'' means any individual
who--
(A) is a loan originator;
(B) is not an employee of--
(i) a depository institution;
(ii) a subsidiary that is--
(I) owned and controlled by a
depository institution; and
(II) regulated by a Federal
banking agency; or
(iii) an institution regulated by the
Farm Credit Administration; and
(C) is licensed by a State or by the Director
under section 1508 and registered as a loan
originator with, and maintains a unique
identifier through, the Nationwide Mortgage
Licensing System and Registry.
(13) Unique identifier.--
(A) In general.--The term ``unique
identifier'' means a number or other identifier
that--
(i) permanently identifies a loan
originator;
(ii) is assigned by protocols
established by the Nationwide Mortgage
Licensing System and Registry and the
[Bureau] Agency to facilitate
electronic tracking of loan originators
and uniform identification of, and
public access to, the employment
history of and the publicly adjudicated
disciplinary and enforcement actions
against loan originators; and
(iii) shall not be used for purposes
other than those set forth under this
title.
(B) Responsibility of states.--To the
greatest extent possible and to accomplish the
purpose of this title, States shall use unique
identifiers in lieu of social security numbers.
* * * * * * *
SEC. 1507. SYSTEM OF REGISTRATION ADMINISTRATION BY FEDERAL AGENCIES.
(a) Development.--
(1) In general.--The [Bureau] Agency shall develop
and maintain a system for registering employees of a
depository institution, employees of a subsidiary that
is owned and controlled by a depository institution and
regulated by a Federal banking agency, or employees of
an institution regulated by the Farm Credit
Administration, as registered loan originators with the
Nationwide Mortgage Licensing System and Registry. The
system shall be implemented before the end of the 1-
year period beginning on the date of enactment of the
Consumer Financial Protection Act of 2010.
(2) Registration requirements.--In connection with
the registration of any loan originator under this
subsection, the [Bureau] Agency shall, at a minimum,
furnish or cause to be furnished to the Nationwide
Mortgage Licensing System and Registry information
concerning the identity of the employee, including--
(A) fingerprints for submission to the
Federal Bureau of Investigation, and any
governmental agency or entity authorized to
receive such information for a State and
national criminal history background check; and
(B) personal history and experience,
including authorization for the Nationwide
Mortgage Licensing System and Registry to
obtain information related to any
administrative, civil or criminal findings by
any governmental jurisdiction.
(b) Coordination.--
(1) Unique identifier.--The [Bureau, and the Bureau
of Consumer Financial Protection] Consumer Law
Enforcement Agency shall coordinate with the Nationwide
Mortgage Licensing System and Registry to establish
protocols for assigning a unique identifier to each
registered loan originator that will facilitate
electronic tracking and uniform identification of, and
public access to, the employment history of and
publicly adjudicated disciplinary and enforcement
actions against loan originators.
(2) Nationwide mortgage licensing system and registry
development.--To facilitate the transfer of information
required by subsection (a)(2), the Nationwide Mortgage
Licensing System and Registry shall coordinate with the
[Bureau, and the Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency concerning
the development and operation, by such System and
Registry, of the registration functionality and data
requirements for loan originators.
(c) Consideration of Factors and Procedures.--In establishing
the registration procedures under subsection (a) and the
protocols for assigning a unique identifier to a registered
loan originator, the [Bureau] Agency shall make such de minimis
exceptions as may be appropriate to paragraphs (1)(A) and (2)
of section 1504(a), shall make reasonable efforts to utilize
existing information to minimize the burden of registering loan
originators, and shall consider methods for automating the
process to the greatest extent practicable consistent with the
purposes of this title.
SEC. 1508. [BUREAU OF CONSUMER FINANCIAL PROTECTION] CONSUMER LAW
ENFORCEMENT AGENCY BACKUP AUTHORITY TO ESTABLISH
LOAN ORIGINATOR LICENSING SYSTEM.
(a) Backup Licensing System.--If, by the end of the 1-year
period, or the 2-year period in the case of a State whose
legislature meets only biennially, beginning on the date of the
enactment of this title or at any time thereafter, the Director
determines that a State does not have in place by law or
regulation a system for licensing and registering loan
originators that meets the requirements of sections 1505 and
1506 and subsection (d) of this section, or does not
participate in the Nationwide Mortgage Licensing System and
Registry, the Director shall provide for the establishment and
maintenance of a system for the licensing and registration by
the Director of loan originators operating in such State as
State-licensed loan originators.
(b) Licensing and Registration Requirements.--The system
established by the Director under subsection (a) for any State
shall meet the requirements of sections 1505 and 1506 for
State-licensed loan originators.
(c) Unique Identifier.--The Director shall coordinate with
the Nationwide Mortgage Licensing System and Registry to
establish protocols for assigning a unique identifier to each
loan originator licensed by the Director as a State-licensed
loan originator that will facilitate electronic tracking and
uniform identification of, and public access to, the employment
history of and the publicly adjudicated disciplinary and
enforcement actions against loan originators.
(d) State Licensing Law Requirements.--For purposes of this
section, the law in effect in a State meets the requirements of
this subsection if the Director determines the law satisfies
the following minimum requirements:
(1) A State loan originator supervisory authority is
maintained to provide effective supervision and
enforcement of such law, including the suspension,
termination, or nonrenewal of a license for a violation
of State or Federal law.
(2) The State loan originator supervisory authority
ensures that all State-licensed loan originators
operating in the State are registered with Nationwide
Mortgage Licensing System and Registry.
(3) The State loan originator supervisory authority
is required to regularly report violations of such law,
as well as enforcement actions and other relevant
information, to the Nationwide Mortgage Licensing
System and Registry.
(4) The State loan originator supervisory authority
has a process in place for challenging information
contained in the Nationwide Mortgage Licensing System
and Registry.
(5) The State loan originator supervisory authority
has established a mechanism to assess civil money
penalties for individuals acting as mortgage
originators in their State without a valid license or
registration.
(6) The State loan originator supervisory authority
has established minimum net worth or surety bonding
requirements that reflect the dollar amount of loans
originated by a residential mortgage loan originator,
or has established a recovery fund paid into by the
loan originators.
(e) Temporary Extension of Period.--The Director may extend,
by not more than 24 months, the 1-year or 2-year period, as the
case may be, referred to in subsection (a) for the licensing of
loan originators in any State under a State licensing law that
meets the requirements of sections 1505 and 1506 and subsection
(d) if the Director determines that such State is making a good
faith effort to establish a State licensing law that meets such
requirements, license mortgage originators under such law, and
register such originators with the Nationwide Mortgage
Licensing System and Registry.
(f) Regulation Authority.--
(1) In general.--The [Bureau] Agency is authorized to
promulgate regulations setting minimum net worth or
surety bond requirements for residential mortgage loan
originators and minimum requirements for recovery funds
paid into by loan originators.
(2) Considerations.--In issuing regulations under
paragraph (1), the [Bureau] Agency shall take into
account the need to provide originators adequate
incentives to originate affordable and sustainable
mortgage loans, as well as the need to ensure a
competitive origination market that maximizes consumer
access to affordable and sustainable mortgage loans.
* * * * * * *
SEC. 1510. FEES.
The [Bureau] Agency, the Farm Credit Administration, and the
Nationwide Mortgage Licensing System and Registry may charge
reasonable fees to cover the costs of maintaining and providing
access to information from the Nationwide Mortgage Licensing
System and Registry, to the extent that such fees are not
charged to consumers for access to such system and registry.
* * * * * * *
SEC. 1513. LIABILITY PROVISIONS.
The [Bureau] Agency, any State official or agency, or any
organization serving as the administrator of the Nationwide
Mortgage Licensing System and Registry or a system established
by the Director under section 1509, or any officer or employee
of any such entity, shall not be subject to any civil action or
proceeding for monetary damages by reason of the good faith
action or omission of any officer or employee of any such
entity, while acting within the scope of office or employment,
relating to the collection, furnishing, or dissemination of
information concerning persons who [are loan originators or are
applying for licensing or registration as loan originators] are
applying for licensing or registration using the Nationwide
Mortgage Licensing System and Registry.
SEC. 1514. ENFORCEMENT BY THE [BUREAU] AGENCY.
(a) Summons Authority.--The Director may--
(1) examine any books, papers, records, or other data
of any loan originator operating in any State which is
subject to a licensing system established by the
Director under section 1508; and
(2) summon any loan originator referred to in
paragraph (1) or any person having possession, custody,
or care of the reports and records relating to such
loan originator, to appear before the Director or any
delegate of the Director at a time and place named in
the summons and to produce such books, papers, records,
or other data, and to give testimony, under oath, as
may be relevant or material to an investigation of such
loan originator for compliance with the requirements of
this title.
(b) Examination Authority.--
(1) In general.--If the Director establishes a
licensing system under section 1508 for any State, the
Director shall appoint examiners for the purposes of
administering such section.
(2) Power to examine.--Any examiner appointed under
paragraph (1) shall have power, on behalf of the
Director, to make any examination of any loan
originator operating in any State which is subject to a
licensing system established by the Director under
section 1508 whenever the Director determines an
examination of any loan originator is necessary to
determine the compliance by the originator with this
title.
(3) Report of examination.--Each examiner appointed
under paragraph (1) shall make a full and detailed
report of examination of any loan originator examined
to the Director.
(4) Administration of oaths and affirmations;
evidence.--In connection with examinations of loan
originators operating in any State which is subject to
a licensing system established by the Director under
section 1508, or with other types of investigations to
determine compliance with applicable law and
regulations, the Director and examiners appointed by
the Director may administer oaths and affirmations and
examine and take and preserve testimony under oath as
to any matter in respect to the affairs of any such
loan originator.
(5) Assessments.--The cost of conducting any
examination of any loan originator operating in any
State which is subject to a licensing system
established by the Director under section 1508 shall be
assessed by the Director against the loan originator to
meet the [Secretary's] Director's expenses in carrying
out such examination.
(c) Cease and Desist Proceeding.--
(1) Authority of director.--If the Director finds,
after notice and opportunity for hearing, that any
person is violating, has violated, or is about to
violate any provision of this title, or any regulation
thereunder, with respect to a State which is subject to
a licensing system established by the Director under
section 1508, the Director may publish such findings
and enter an order requiring such person, and any other
person that is, was, or would be a cause of the
violation, due to an act or omission the person knew or
should have known would contribute to such violation,
to cease and desist from committing or causing such
violation and any future violation of the same
provision, rule, or regulation. Such order may, in
addition to requiring a person to cease and desist from
committing or causing a violation, require such person
to comply, or to take steps to effect compliance, with
such provision or regulation, upon such terms and
conditions and within such time as the Director may
specify in such order. Any such order may, as the
Director deems appropriate, require future compliance
or steps to effect future compliance, either
permanently or for such period of time as the Director
may specify, with such provision or regulation with
respect to any loan originator.
(2) Hearing.--The notice instituting proceedings
pursuant to paragraph (1) shall fix a hearing date not
earlier than 30 days nor later than 60 days after
service of the notice unless an earlier or a later date
is set by the Director with the consent of any
respondent so served.
(3) Temporary order.--Whenever the Director
determines that the alleged violation or threatened
violation specified in the notice instituting
proceedings pursuant to paragraph (1), or the
continuation thereof, is likely to result in
significant dissipation or conversion of assets,
significant harm to consumers, or substantial harm to
the public interest prior to the completion of the
proceedings, the Director may enter a temporary order
requiring the respondent to cease and desist from the
violation or threatened violation and to take such
action to prevent the violation or threatened violation
and to prevent dissipation or conversion of assets,
significant harm to consumers, or substantial harm to
the public interest as the Director deems appropriate
pending completion of such proceedings. Such an order
shall be entered only after notice and opportunity for
a hearing, unless the Director determines that notice
and hearing prior to entry would be impracticable or
contrary to the public interest. A temporary order
shall become effective upon service upon the respondent
and, unless set aside, limited, or suspended by the
Director or a court of competent jurisdiction, shall
remain effective and enforceable pending the completion
of the proceedings.
(4) Review of temporary orders.--
(A) Review by director.--At any time after
the respondent has been served with a temporary
cease and desist order pursuant to paragraph
(3), the respondent may apply to the Director
to have the order set aside, limited, or
suspended. If the respondent has been served
with a temporary cease and desist order entered
without a prior hearing before the Director,
the respondent may, within 10 days after the
date on which the order was served, request a
hearing on such application and the Director
shall hold a hearing and render a decision on
such application at the earliest possible time.
(B) Judicial review.--Within--
(i) 10 days after the date the
respondent was served with a temporary
cease and desist order entered with a
prior hearing before the Director; or
(ii) 10 days after the Director
renders a decision on an application
and hearing under paragraph (1), with
respect to any temporary cease and
desist order entered without a prior
hearing before the Director,
the respondent may apply to the United States
district court for the district in which the
respondent resides or has its principal place
of business, or for the District of Columbia,
for an order setting aside, limiting, or
suspending the effectiveness or enforcement of
the order, and the court shall have
jurisdiction to enter such an order. A
respondent served with a temporary cease and
desist order entered without a prior hearing
before the Director may not apply to the court
except after hearing and decision by the
Director on the respondent's application under
subparagraph (A).
(C) No automatic stay of temporary order.--
The commencement of proceedings under
subparagraph (B) shall not, unless specifically
ordered by the court, operate as a stay of the
[Secretary's] Director's order.
(5) Authority of the director to prohibit persons
from serving as loan originators.--In any cease and
desist proceeding under paragraph (1), the Director may
issue an order to prohibit, conditionally or
unconditionally, and permanently or for such period of
time as the Director shall determine, any person who
has violated this title or regulations thereunder, from
acting as a loan originator if the conduct of that
person demonstrates unfitness to serve as a loan
originator.
(d) Authority of the Director To Assess Money Penalties.--
(1) In general.--The Director may impose a civil
penalty on a loan originator operating in any State
which is subject to a licensing system established by
the Director under section 1508, if the Director finds,
on the record after notice and opportunity for hearing,
that such loan originator has violated or failed to
comply with any requirement of this title or any
regulation prescribed by the Director under this title
or order issued under subsection (c).
(2) Maximum amount of penalty.--The maximum amount of
penalty for each act or omission described in paragraph
(1) shall be $25,000.
* * * * * * *
SEC. 1518. EMPLOYMENT TRANSITION OF LOAN ORIGINATORS.
(a) Temporary Authority to Originate Loans for Loan
Originators Moving From a Depository Institution to a Non-
depository Institution.--
(1) In general.--Upon employment by a State-licensed
mortgage company, an individual who is a registered
loan originator shall be deemed to have temporary
authority to act as a loan originator in an application
State for the period described in paragraph (2) if the
individual--
(A) has not had an application for a loan
originator license denied, or had such a
license revoked or suspended in any
governmental jurisdiction;
(B) has not been subject to or served with a
cease and desist order in any governmental
jurisdiction or as described in section
1514(c);
(C) has not been convicted of a felony that
would preclude licensure under the law of the
application State;
(D) has submitted an application to be a
State-licensed loan originator in the
application State; and
(E) was registered in the Nationwide Mortgage
Licensing System and Registry as a loan
originator during the 12-month period preceding
the date of submission of the information
required under section 1505(a).
(2) Period.--The period described in paragraph (1)
shall begin on the date that the individual submits the
information required under section 1505(a) and shall
end on the earliest of--
(A) the date that the individual withdraws
the application to be a State-licensed loan
originator in the application State;
(B) the date that the application State
denies, or issues a notice of intent to deny,
the application;
(C) the date that the application State
grants a State license; or
(D) the date that is 120 days after the date
on which the individual submits the
application, if the application is listed on
the Nationwide Mortgage Licensing System and
Registry as incomplete.
(b) Temporary Authority to Originate Loans for State-licensed
Loan Originators Moving Interstate.--
(1) In general.--A State-licensed loan originator
shall be deemed to have temporary authority to act as a
loan originator in an application State for the period
described in paragraph (2) if the State-licensed loan
originator--
(A) meets the requirements of subparagraphs
(A), (B), (C), and (D) of subsection (a)(1);
(B) is employed by a State-licensed mortgage
company in the application State; and
(C) was licensed in a State that is not the
application State during the 30-day period
preceding the date of submission of the
information required under section 1505(a) in
connection with the application submitted to
the application State.
(2) Period.--The period described in paragraph (1)
shall begin on the date that the State-licensed loan
originator submits the information required under
section 1505(a) in connection with the application
submitted to the application State and end on the
earliest of--
(A) the date that the State-licensed loan
originator withdraws the application to be a
State-licensed loan originator in the
application State;
(B) the date that the application State
denies, or issues a notice of intent to deny,
the application;
(C) the date that the application State
grants a State license; or
(D) the date that is 120 days after the date
on which the State-licensed loan originator
submits the application, if the application is
listed on the Nationwide Mortgage Licensing
System and Registry as incomplete.
(c) Applicability.--
(1) Any person employing an individual who is deemed
to have temporary authority to act as a loan originator
in an application State pursuant to this section shall
be subject to the requirements of this title and to
applicable State law to the same extent as if such
individual was a State-licensed loan originator
licensed by the application State.
(2) Any individual who is deemed to have temporary
authority to act as a loan originator in an application
State pursuant to this section and who engages in
residential mortgage loan origination activities shall
be subject to the requirements of this title and to
applicable State law to the same extent as if such
individual was a State-licensed loan originator
licensed by the application State.
(d) Definitions.--In this section, the following definitions
shall apply:
(1) State-licensed mortgage company.--The term
``State-licensed mortgage company'' means an entity
licensed or registered under the law of any State to
engage in residential mortgage loan origination and
processing activities.
(2) Application state.--The term ``application
State'' means a State in which a registered loan
originator or a State-licensed loan originator seeks to
be licensed.
* * * * * * *
----------
HOUSING AND ECONOMIC RECOVERY ACT OF 2008
SEC. 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Housing and
Economic Recovery Act of 2008''.
(b) Table of Content.--The table of contents for this Act is
as follows:
* * * * * * *
DIVISION A--HOUSING FINANCE REFORM
* * * * * * *
TITLE V--S.A.F.E. MORTGAGE LICENSING ACT
* * * * * * *
Sec. 1518. Employment transition of loan originators.
* * * * * * *
----------
EQUAL CREDIT OPPORTUNITY ACT
* * * * * * *
TITLE VII--EQUAL CREDIT OPPORTUNITY
Sec. 701. Prohibited discrimination; reasons for adverse action
(a) It shall be unlawful for any creditor to discriminate
against any applicant, with respect to any aspect of a credit
transaction--
(1) on the basis of race, color, religion, national
origin, sex or marital status, or age (provided the
applicant has the capacity to contract);
(2) because all or part of the applicant's income
derives from any public assistance program; or
(3) because the applicant has in good faith exercised
any right under the Consumer Credit Protection Act.
(b) It shall not constitute discrimination for purposes of
this title for a creditor--
(1) to make an inquiry of marital status if such
inquiry is for the purpose of ascertaining the
creditor's rights and remedies applicable to the
particular extension of credit and not to discriminate
in a determination of credit-worthiness;
(2) to make an inquiry of the applicant's age or of
whether the applicant's income derives from any public
assistance program if such inquiry is for the purpose
of determining the amount and probable continuance of
income levels, credit history, or other pertinent
element of credit-worthiness as provided in regulations
of the Board;
(3) to use any empirically derived credit system
which considers age if such system is demonstrably and
statistically sound in accordance with regulations of
the [Bureau] Agency, except that in the operation of
such system the age of an elderly applicant may not be
assigned a negative factor or value; or
(4) to make an inquiry or to consider the age of an
elderly applicant when the age of such applicant is to
be used by the creditor in the extension of credit in
favor of such applicant[; or].
[(5) to make an inquiry under section 704B, in
accordance with the requirements of that section.]
(c) It is not a violation of this section for a creditor to
refuse to extend credit offered pursuant to--
(1) any credit assistance program expressly
authorized by law for an economically disadvantaged
class of persons;
(2) any credit assistance program administered by a
nonprofit organization for its members or an
economically disadvantaged class of persons; or
(3) any special purpose credit program offered by a
profit-making organization to meet special social needs
which meets standards prescribed in regulations by the
Board;
if such refusal is required by or made pursuant to such
program.
(d)(1) Within thirty days (or such longer reasonable time as
specified in regulations of the [Bureau] Agency for any class
of credit transaction) after receipt of a completed application
for credit, a creditor shall notify the applicant of its action
on the application.
(2) Each applicant against whom adverse action is taken shall
be entitled to a statement of reasons for such action from the
creditor. A creditor satisfies this obligation by--
(A) providing statements of reasons in writing as a
matter of course to applicants against whom adverse
action is taken; or
(B) giving written notification of adverse action
which discloses (i) the applicant's right to a
statement of reasons within thirty days after receipt
by the creditor of a request made within sixty days
after such notification, and (ii) the identity of the
person or office from which such statement may be
obtained. Such statement may be given orally, if the
written notification advises the applicant of his right
to have the statement of reasons confirmed in writing
on written request.
(3) A statement of reasons meets the requirements of this
section only if it contains the specific reasons for the
adverse action taken.
(4) Where a creditor has been requested by a third party to
make a specific extension of credit directly or indirectly to
an applicant, the notification and statement of reasons
required by this subsection may be made directly by such
creditor, or indirectly through the third party, provided in
either case that the identity of the creditor is disclosed.
(5) The requirements of paragraphs (2), (3), or (4) may be
satisfied by verbal statements or notifications in the case of
any creditor who did not act on more than one hundred and fifty
applications during the calendar year preceding the calendar
year in which the adverse action is taken, as determined under
regulations of the Board.
(6) For purposes of this subsection, the term ``adverse
action'' means a denial or revocation of credit, a change in
the terms of an existing credit arrangement, or a refusal to
grant credit in substantially the amount or on substantially
the terms requested. Such term does not include a refusal to
extend additional credit under an existing credit arrangement
where the applicant is delinquent or otherwise in default, or
where such additional credit would exceed a previously
established credit limit.
(e) Copies Furnished to Applicants.--
(1) In general.--Each creditor shall furnish to an
applicant a copy of any and all written appraisals and
valuations developed in connection with the applicant's
application for a loan that is secured or would have
been secured by a first lien on a dwelling promptly
upon completion, but in no case later than 3 days prior
to the closing of the loan, whether the creditor grants
or denies the applicant's request for credit or the
application is incomplete or withdrawn.
(2) Waiver.--The applicant may waive the 3 day
requirement provided for in paragraph (1), except where
otherwise required in law.
(3) Reimbursement.--The applicant may be required to
pay a reasonable fee to reimburse the creditor for the
cost of the appraisal, except where otherwise required
in law.
(4) Free copy.--Notwithstanding paragraph (3), the
creditor shall provide a copy of each written appraisal
or valuation at no additional cost to the applicant.
(5) Notification to applicants.--At the time of
application, the creditor shall notify an applicant in
writing of the right to receive a copy of each written
appraisal and valuation under this subsection.
(6) Valuation defined.--For purposes of this
subsection, the term ``valuation'' shall include any
estimate of the value of a dwelling developed in
connection with a creditor's decision to provide
credit, including those values developed pursuant to a
policy of a government sponsored enterprise or by an
automated valuation model, a broker price opinion, or
other methodology or mechanism.
Sec. 702. Definitions
(a) The definitions and rules of construction set forth in
this section are applicable for the purposes of this title.
(b) The term ``applicant'' means any person who applies to a
creditor directly for an extension, renewal, or continuation of
credit, or applies to a creditor indirectly by use of an
existing credit plan for an amount exceeding a previously
established credit limit.
[(c) The term ``Bureau'' means the Bureau of Consumer
Financial Protection.]
(c) The term ``Agency'' means the Consumer Law Enforcement
Agency.
(d) The term ``credit'' means the right granted by a creditor
to a debtor to defer payment of debt or to incur debts and
defer its payment or to purchase property or services and defer
payment therefor.
(e) The term ``creditor'' means any person who regularly
extends, renews, or continues credit; any person who regularly
arranges for the extension, renewal, or continuation of credit;
or any assignee of an original creditor who participates in the
decision to extend, renew, or continue credit.
(f) The term ``person'' means a natural person, a
corporation, government or governmental subdivision or agency,
trust, estate, partnership, cooperative, or association.
(g) Any reference to any requirement imposed under this title
or any provision thereof includes reference to the regulations
of the [Bureau] Agency under this title or the provision
thereof in question.
SEC. 703. PROMULGATION OF REGULATIONS BY THE [BUREAU] AGENCY.
(a) The [Bureau] Agency shall prescribe regulations to carry
out the purposes of this title. These regulations may contain
but are not limited to such classifications, differentiation,
or other provision, and may provide for such adjustments and
exceptions for any class of transactions, as in the judgment of
the [Bureau] Agency are necessary or proper to effectuate the
purposes of this title, to prevent circumvention or evasion
thereof, or to facilitate or substantiate compliance therewith.
(b) Such regulations may exempt from the provisions of this
title any class of transactions that are not primarily for
personal, family, or household purposes, or business or
commercial loans made available by a financial institution,
except that a particular type within a class of such
transactions may be exempted if the [Bureau] Agency determines,
after making an express finding that the application of this
title or of any provision of this title of such transaction
would not contribute substantially to effecting the purposes of
this title.
(c) An exemption granted pursuant to subsection (b) shall be
for no longer than five years and shall be extended only if the
[Bureau] Agency makes a subsequent determination, in the manner
described by such [paragraph] subsection, that such exemption
remains appropriate.
(d) Pursuant to [Bureau] Agency regulations, entities making
business or commercial loans shall maintain such records or
other data relating to such loans as may be necessary to
evidence compliance with this subsection or enforce any action
pursuant to the authority of this Act. In no event shall such
records or data be maintained for a period of less than one
year. The [Bureau] Agency shall promulgate regulations to
implement this [paragraph] subsection in the manner prescribed
by chapter 5 of title 5, United States Code.
(e) The [Bureau] Agency shall provide in regulations that an
applicant for a business or commercial loan shall be provided a
written notice of such applicant's right to receive a written
statement of the reasons for the denial of such loan.
(f) Board Authority.--Notwithstanding subsection (a), the
Board shall prescribe regulations to carry out the purposes of
this title with respect to a person described in section
1029(a) of the Consumer Financial Protection Act of 2010. These
regulations may contain but are not limited to such
classifications, differentiation, or other provision, and may
provide for such adjustments and exceptions for any class of
transactions, as in the judgment of the Board are necessary or
proper to effectuate the purposes of this title, to prevent
circumvention or evasion thereof, or to facilitate or
substantiate compliance therewith.
(g) Deference.--Notwithstanding any power granted to any
Federal agency under this title, the deference that a court
affords to a Federal agency with respect to a determination
made by such agency relating to the meaning or interpretation
of any provision of this title that is subject to the
jurisdiction of such agency shall be applied as if that agency
were the only agency authorized to apply, enforce, interpret,
or administer the provisions of this title.
Sec. 704. Administrative enforcement
(a) Subject to subtitle B of the [Consumer Protection
Financial Protection Act of 2010 with] Consumer Financial
Protection Act of 2010, compliance with the requirements
imposed under this title shall be enforced under:
(1) [section 8] Section 8 of the Federal Deposit
Insurance Act, 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) national banks, Federal savings
associations, and Federal branches and Federal
agencies of foreign banks;
(B) member banks of the Federal Reserve
System (other than national banks), branches
and agencies of foreign banks (other than
Federal branches, Federal agencies, and insured
State branches of foreign banks), commercial
lending companies owned or controlled by
foreign banks, and organizations operating
under section 25 or 25A of the Federal Reserve
Act; and
(C) banks and State savings associations
insured by the Federal Deposit Insurance
Corporation (other than members of the Federal
Reserve System), and insured State branches of
foreign [banks;] banks.
(2) The Federal Credit Union Act, by the
Administrator of the National Credit Union
Administration with respect to any Federal Credit
Union.
(3) The Acts to regulate commerce, by the Secretary
of Transportation, with respect to all carriers subject
to the jurisdiction of the Surface Transportation
Board.
(4) The Federal Aviation Act of 1958, by the
Secretary of Transportation with respect to any air
carrier or foreign air carrier subject to that Act.
(5) The Packers and Stockyards Act, 1921 (except as
provided in section 406 of that Act), by the Secretary
of Agriculture with respect to any activities subject
to that Act.
(6) The Farm Credit Act of 1971, by the Farm Credit
Administration with respect to any Federal land bank,
Federal land bank association, Federal intermediate
credit bank, and production credit association[;].
(7) The Securities Exchange Act of 1934, by the
Securities and Exchange Commission with respect to
brokers and dealers[;].
(8) The Small Business Investment Act of 1958, by the
Small Business Administration, with respect to small
business investment companies[; and].
(9) Subtitle E of the Consumer Financial Protection
Act of 2010, by the [Bureau] Agency, with respect to
any person subject to this title.
The terms used in paragraph (1) that are not defined in this
title or otherwise defined in section 3(s) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the
meaning given to them in section 1(b) of the International
Banking Act of 1978 (12 U.S.C. 3101).
(b) For the purpose of the exercise by any agency referred to
in subsection (a) of its powers under any Act referred to in
that subsection, a violation of any requirement imposed under
this title shall be deemed to be a violation of a requirement
imposed under that Act. In addition to its powers under any
provision of law specifically referred to in subsection (a),
each of the agencies referred to in that subsection may
exercise for the purpose of enforcing compliance with any
requirement imposed under this title, any other authority
conferred on it by law. The exercise of the authorities of any
of the agencies referred to in subsection (a) for the purpose
of enforcing compliance with any requirement imposed under this
title shall in no way preclude the exercise of such authorities
for the purpose of enforcing compliance with any other
provision of law not relating to the prohibition of
discrimination on the basis of sex or marital status with
respect to any aspect of a credit transaction.
(c) Overall Enforcement Authority of Federal Trade
Commission.--Except to the extent that enforcement of the
requirements imposed under this title is specifically committed
to some other Government agency under any of paragraphs (1)
through (8) of subsection (a), and subject to subtitle B of the
Consumer Financial Protection Act of 2010, the Federal Trade
Commission shall be authorized to enforce such requirements.
For the purpose of the exercise by the Federal Trade Commission
of its functions and powers under the Federal Trade Commission
Act (15 U.S.C. 41 et seq.), a violation of any requirement
imposed under this [subchapter] title shall be deemed a
violation of a requirement imposed under that Act. All of the
functions and powers of the Federal Trade Commission under the
Federal Trade Commission Act are available to the Federal Trade
Commission to enforce compliance by any person with the
requirements imposed under this title, irrespective of whether
that person is engaged in commerce or meets any other
jurisdictional tests under the Federal Trade Commission Act,
including the power to enforce any rule prescribed by the
[Bureau] Agency under this title in the same manner as if the
violation had been a violation of a Federal Trade Commission
trade regulation rule.
(d) The authority of the [Bureau] Agency to issue regulations
under this title does not impair the authority of any other
agency designated in this section to make rules respecting its
own procedures in enforcing compliance with requirements
imposed under this title.
* * * * * * *
[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.]
Sec. 705. Relation to State laws
(a) A request for the signature of both parties to a marriage
for the purpose of creating a valid lien, passing clear title,
waiving inchoate rights to property, or assigning earnings,
shall not constitute discrimination under this title: Provided,
however, That this provision shall not be construed to permit a
creditor to take sex or marital status into account in
connection with the evaluation of creditworthiness of any
applicant.
(b) Consideration or application of State property laws
directly or indirectly affecting creditworthiness shall not
constitute discrimination for purposes of this title.
(c) Any provision of State law which prohibits the separate
extension of consumer credit to each party to a marriage shall
not apply in any case where each party to a marriage
voluntarily applies for separate credit from the same creditor:
Provided, That in any case where such a State law is so
preempted, each party to the marriage shall be solely
responsible for the debt so contracted.
(d) When each party to a marriage separately and voluntarily
applies for and obtains separate credit accounts with the same
creditor, those accounts shall not be aggregated or otherwise
combined for purposes of determining permissible finance
charges or permissible loan ceilings under the laws of any
State or of the United States.
(e) Where the same act or omission constitutes a violation of
this title and of applicable State law, a person aggrieved by
such conduct may bring a legal action to recover monetary
damages either under this title or under such State law, but
not both. This election of remedies shall not apply to court
actions in which the relief sought does not include monetary
damages or to administrative actions.
(f) This title does not annul, alter, or affect, or exempt
any person subject to the provisions of this title from
complying with, the laws of any State with respect to credit
discrimination, except to the extent that those laws are
inconsistent with any provision of this title, and then only to
the extent of the inconsistency. The [Bureau] Agency is
authorized to determine whether such inconsistencies exist. The
[Bureau] Agency may not determine that any State law is
inconsistent with any provision of this title if the [Bureau]
Agency determines that such law gives greater protection to the
applicant.
(g) The [Bureau] Agency shall by regulation exempt from the
requirements of sections 701 and 702 of this title any class of
credit transactions within any State if it determines that
under the law of that State that class of transactions is
subject to requirements substantially similar to those imposed
under this title or that such law gives greater protection to
the applicant, and that there is adequate provision for
enforcement. Failure to comply with any requirement of such
State law in any transaction so exempted shall constitute a
violation of this title for the purposes of section 706.
Sec. 706. Civil liability
(a) Any creditor who fails to comply with any requirement
imposed under this title shall be liable to the aggrieved
applicant for any actual damages sustained by such applicant
acting either in an individual capacity or as a member of a
class.
(b) Any creditor, other than a government or governmental
subdivision or agency, who fails to comply with any requirement
imposed under this title shall be liable to the aggrieved
applicant for punitive damages in an amount not greater than
$10,000, in addition to any actual damages provided in
subsection (a), except that in the case of a class action the
total recovery under this subsection shall not exceed the
lesser of $500,000 or 1 per centum of the net worth of the
creditor. In determining the amount of such damages in any
action, the court shall consider, among other relevant factors,
the amount of any actual damages awarded, the frequency and
persistence of failures of compliance by the creditor, the
resources of the creditor, the number of persons adversely
affected, and the extent to which the creditor's failure of
compliance was intentional.
(c) Upon application by an aggrieved applicant, the
appropriate United States district court or any other court of
competent jurisdiction may grant such equitable and declaratory
relief as is necessary to enforce the requirements imposed
under this title.
(d) In the case of any successful action under subsection
(a), (b), or (c), the costs of the action, together with a
reasonable attorney's fee as determined by the court, shall be
added to any damages awarded by the court under such
subsection.
(e) No provision of this title imposing liability shall apply
to any act done or omitted in good faith in conformity with any
official rule, regulation, or interpretation thereof by the
[Bureau] Agency or in conformity with any interpretation or
approval by an official or employee of the [Bureau] Agency of
Consumer Financial Protection duly authorized by the [Bureau]
Agency to issue such interpretations or approvals under such
procedures as the [Bureau] Agency may prescribe therefor,
notwithstanding that after such act or omission has occurred,
such rule, regulation, interpretation, or approval is amended,
rescinded, or determined by judicial or other authority to be
invalid for any reason.
(f) Any action under this section may be brought in the
appropriate United States district court without regard to the
amount in controversy, or in any other court of competent
jurisdiction. No such action shall be brought later than 5
years after the date of the occurrence of the violation, except
that--
(1) whenever any agency having responsibility for
administrative enforcement under section 704 commences
an enforcement proceeding within 5 years after the date
of the occurrence of the violation,
(2) whenever the Attorney General commences a civil
action under this section within 5 years after the date
of the occurrence of the violation,
then any applicant who has been a victim of the discrimination
which is the subject of such proceeding or civil action may
bring an action under this section not later than one year
after the commencement of that proceeding or action.
(g) The agencies having responsibility for administrative
enforcement under section 704, if unable to obtain compliance
with section 701, are authorized to refer the matter to the
Attorney General with a recommendation that an appropriate
civil action be instituted. Each agency referred to in
paragraphs (1), (2), and (9) of section 704(a) shall refer the
matter to the Attorney General whenever the agency has reason
to believe that 1 or more creditors has engaged in a pattern or
practice of discouraging or denying applications for credit in
violation of section 701(a). Each such agency may refer the
matter to the Attorney General whenever the agency has reason
to believe that 1 or more creditors has violated section
701(a).
(h) When a matter is referred to the Attorney General
pursuant to subsection (g), or whenever he has reason to
believe that one or more creditors are engaged in a pattern or
practice in violation of this title, the Attorney General may
bring a civil action in any appropriate United States district
court for such relief as may be appropriate, including actual
and punitive damages and injunctive relief.
(i) No person aggrieved by a violation of this title and by a
violation of section 805 of the Civil Rights Act of 1968 shall
recover under this title and section 812 of the Civil Rights
Act of 1968, if such violation is based on the same
transaction.
(j) Nothing in this title shall be construed to prohibit the
discovery of a creditor's credit granting standards under
appropriate discovery procedures in the court or agency in
which an action or proceeding is brought.
(k) Notice to HUD of Violations.--Whenever an agency referred
to in paragraph (1)[, (2), or (3)] or (2) of section 704(a)--
(1) has reason to believe, as a result of receiving a
consumer complaint, conducting a consumer compliance
examination, or otherwise, that a violation of this
title has occurred;
(2) has reason to believe that the alleged violation
would be a violation of the Fair Housing Act; and
(3) does not refer the matter to the Attorney General
pursuant to subsection (g),
the agency shall notify the Secretary of Housing and Urban
Development of the violation, and shall notify the applicant
that the Secretary of Housing and Urban Development has been
notified of the alleged violation and that remedies for the
violation may be available under the Fair Housing Act.
Sec. 707. Annual reports to Congress
Each year, the [Bureau] Agency and the Attorney General
shall, respectively, make reports to the Congress concerning
the administration of their functions under this title,
including such recommendations as the [Bureau] Agency and the
Attorney General, respectively, deem necessary or appropriate.
In addition, each report of the [Bureau] Agency shall include
its assessment of the extent to which compliance with the
requirements of this title is being achieved, and a summary of
the enforcement actions taken by each of the agencies assigned
administrative enforcement responsibilities under section 704.
* * * * * * *
Sec. 709. Short title
This title may be cited as the ``Equal Credit Opportunity
Act''.
----------
CONSUMER CREDIT PROTECTION ACT
* * * * * * *
TITLE VII--EQUAL CREDIT OPPORTUNITY
Sec.
701. Prohibited discrimination.
* * * * * * *
[704B. Small business loan data collection.]
* * * * * * *
----------
HOME MORTGAGE DISCLOSURE ACT OF 1975
TITLE III--HOME MORTGAGE DISCLOSURE
short title
Sec. 301. This title may be cited as the ``Home Mortgage
Disclosure Act of 1975''.
findings and purposes
Sec. 302. (a) The Congress finds that some depository
institutions have sometimes contributed to the decline of
certain geographic areas by their failure pursuant to their
chartering responsibilities to provide adequate home financing
to qualified applicants on reasonable terms and conditions.
(b) The purpose of this title is to provide the citizens and
public officials of the United States with sufficient
information to enable them to determine whether depository
institutions are filling their obligations to serve the housing
needs of the communities and neighborhoods in which they are
located and to assist public officials in their determination
of the distribution of public sector investments in a manner
designed to improve the private investment environment.
(c) Nothing in this title is intended to, nor shall it be
construed to, encourage unsound lending practices or the
allocation of credit.
definitions
Sec. 303. For purposes of this title--
[(1) the term ``Bureau'' means the Bureau of Consumer
Financial Protection;]
(1) the term ``Agency'' means the Consumer Law
Enforcement Agency;
(2) the term ``mortgage loan'' means a loan which is
secured by residential real property or a home
improvement loan;
(3) the term ``depository institution''--
(A) means--
(i) any bank (as defined in section
3(a)(1) of the Federal Deposit
Insurance Act);
(ii) any savings association (as
defined in section 3(b)(1) of the
Federal Deposit Insurance Act); and
(iii) any credit union,
which makes federally related mortgage
loans as determined by the Board; and
(B) includes any other lending institution
(as defined in paragraph (4)) other than any
institution described in subparagraph (A);
(4) the term ``completed application'' means an
application in which the creditor has received the
information that is regularly obtained in evaluating
applications for the amount and type of credit
requested;
(5) the term ``other lending institutions'' means any
person engaged for profit in the business of mortgage
lending;
(6) the term ``Board'' means the Board of Governors
of the Federal Reserve System; and
(7) the term ``Secretary'' means the Secretary of
Housing and Urban Development.
maintenance of records and public disclosure
Sec. 304. (a)(1) Each depository institution which has a home
office or branch office located within a primary metropolitan
statistical area, metropolitan statistical area, or
consolidated metropolitan statistical area that is not
comprised of designated primary metropolitan statistical areas,
as defined by the Department of Commerce shall compile and make
available, in accordance with regulations of the Board, to the
public for inspection and copying at the home office, and at
least one branch office within each primary metropolitan
statistical area, metropolitan statistical area, or
consolidated metropolitan statistical area that is not
comprised of designated primary metropolitan statistical areas
in which the depository institution has an office the number
and total dollar amount of mortgage loans which were (A)
originated (or for which the institution received completed
applications), or (B) purchased by that institution during each
fiscal year (beginning with the last full fiscal year of that
institution which immediately preceded the effective date of
this title).
(2) The information required to be maintained and made
available under paragraph (1) shall also be itemized in order
to clearly and conspicuously disclose the following:
(A) The number and dollar amount for each item
referred to in paragraph (1), by census tracts for
mortgage loans secured by property located within any
county with a population of more than 30,000, within
that primary metropolitan statistical area,
metropolitan statistical area, or consolidated
metropolitan statistical area that is not comprised of
designated primary metropolitan statistical areas,
otherwise, by county, for mortgage loans secured by
property located within any other county within that
standard metropolitan statistical area.
(B) The number and dollar amount for each item
referred to in paragraph (1) for all such mortgage
loans which are secured by property located outside
that primary metropolitan statistical area,
metropolitan statistical area, or consolidated
metropolitan statistical area that is not comprised of
designated primary metropolitan statistical areas.
For the purpose of this paragraph, a depository institution
which maintains offices in more than one primary metropolitan
statistical area, metropolitan statistical area, or
consolidated metropolitan statistical area that is not
comprised of designated primary metropolitan statistical areas
shall be required to make the information required by this
paragraph available at any such office only to the extent that
such information relates to mortgage loans which were
originated or purchased (or for which completed applications
were received) by an office of that depository institution
located in the primary metropolitan statistical area,
metropolitan statistical area, or consolidated metropolitan
statistical area that is not comprised of designated primary
metropolitan statistical areas in which the office making such
information available is located. For purposes of this
paragraph, other lending institutions shall be deemed to have a
home office or branch office within a primary metropolitan
statistical area, metropolitan statistical area, or
consolidated metropolitan statistical area that is not
comprised of designated primary metropolitan statistical areas
if such institutions have originated or purchased or received
completed applications for at least 5 mortgage loans in such
area in the preceding calendar year.
(b) Any item of information relating to mortgage loans
required to be maintained under subsection (a) shall be further
itemized in order to disclose for each such item--
(1) the number and dollar amount of mortgage loans
which are insured under title II of the National
Housing Act or under title V of the Housing Act of 1949
or which are guaranteed under chapter 37 of title 38,
United States Code;
(2) the number and dollar amount of mortgage loans
made to mortgagors who did not, at the time of
execution of the mortgage, intend to reside in the
property securing the mortgage loan;
(3) the number and dollar amount of home improvement
loans;
(4) the number and dollar amount of mortgage loans
and completed applications involving mortgagors or
mortgage applicants grouped according to census tract,
income level, racial characteristics, age, and gender;
(5) the number and dollar amount of mortgage loans
grouped according to measurements of--
(A) the total points and fees payable at
origination in connection with the mortgage as
determined by the [Bureau] Agency, taking into
account [15 U.S.C. 1602(aa)(4)] section
103(aa)(4) of the Truth in Lending Act;
(B) the difference between the annual
percentage rate associated with the loan and a
benchmark rate or rates for all loans;
(C) the term in months of any prepayment
penalty or other fee or charge payable on
repayment of some portion of principal or the
entire principal in advance of scheduled
payments; and
(D) such other information as the [Bureau]
Agency may require; and
(6) the number and dollar amount of mortgage loans
and completed applications grouped according to
measurements of--
(A) the value of the real property pledged or
proposed to be pledged as collateral;
(B) the actual or proposed term in months of
any introductory period after which the rate of
interest may change;
(C) the presence of contractual terms or
proposed contractual terms that would allow the
mortgagor or applicant to make payments other
than fully amortizing payments during any
portion of the loan term;
(D) the actual or proposed term in months of
the mortgage loan;
(E) the channel through which application was
made, including retail, broker, and other
relevant categories;
(F) as the [Bureau] Agency may determine to
be appropriate, a unique identifier that
identifies the loan originator as set forth in
section 1503 of the S.A.F.E. Mortgage Licensing
Act of 2008;
(G) as the [Bureau] Agency may determine to
be appropriate, a universal loan identifier;
(H) as the [Bureau] Agency may determine to
be appropriate, the parcel number that
corresponds to the real property pledged or
proposed to be pledged as collateral;
(I) the credit score of mortgage applicants
and mortgagors, in such form as the [Bureau]
Agency may prescribe; and
(J) such other information as the [Bureau]
Agency may require.
(c) Any information required to be compiled and made
available under this section, other than loan application
register information under subsection (j), shall be maintained
and made available for a period of five years after the close
of the first year during which such information is required to
be maintained and made available.
(d) Notwithstanding the provisions of subsection (a)(1), data
required to be disclosed under this section for 1980 and
thereafter shall be disclosed for each calendar year. Any
depository institution which is required to make disclosures
under this section but which has been making disclosures on
some basis other than a calendar year basis shall make
available a separate disclosure statement containing data for
any period prior to calendar year 1980 which is not covered by
the last full year report prior to the 1980 calendar year
report.
(e) Subject to subsection (h), the [Bureau] Agency shall
prescribe a standard format for the disclosures required under
this section.
(f) The Federal Financial Institutions Examination Council,
in consultation with the Secretary, shall implement a system to
facilitate access to data required to be disclosed under this
section. Such system shall include arrangements for a central
depository of data in each primary metropolitan statistical
area, metropolitan statistical area, or consolidated
metropolitan statistical area that is not comprised of
designated primary metropolitan statistical areas. Disclosure
statements shall be made available to the public for inspection
and copying at such central depository of data for all
depository institutions which are required to disclose
information under this section (or which are exempted pursuant
to section 306(b)) and which have a home office or branch
office within such primary metropolitan statistical area,
metropolitan statistical area, or consolidated metropolitan
statistical area that is not comprised of designated primary
metropolitan statistical areas.
(g) The requirements of subsections (a) and (b) shall not
apply with respect to mortgage loans that are--
(1) made (or for which completed applications are
received) by any mortgage banking subsidiary of a bank
holding company or savings and loan holding company or
by any savings and loan service corporation that
originates or purchases mortgage loans; and
(2) approved (or for which completed applications are
received) by the Secretary for insurance under title I
or II of the National Housing Act.
(h) Submission to Agencies.--
(1) In general.--The data required to be disclosed
under subsection (b) shall be submitted to the [Bureau]
Agency or to the appropriate agency for the institution
reporting under this title, in accordance with rules
prescribed by the [Bureau] Agency. Notwithstanding the
requirement of subsection (a)(2)(A) for disclosure by
census tract, the [Bureau] Agency, in consultation with
other appropriate agencies described in paragraph (2)
and, after notice and comment, shall develop
regulations that--
(A) prescribe the format for such
disclosures, the method for submission of the
data to the appropriate agency, and the
procedures for disclosing the information to
the public;
(B) require the collection of data required
to be disclosed under subsection (b) with
respect to loans sold by each institution
reporting under this title;
(C) require disclosure of the class of the
purchaser of such loans;
(D) permit any reporting institution to
submit in writing to the [Bureau] Agency or to
the appropriate agency such additional data or
explanations as it deems relevant to the
decision to originate or purchase mortgage
loans; and
(E) modify or require modification of
itemized information, for the purpose of
protecting the privacy interests of the
mortgage applicants or mortgagors, that is or
will be available to the public.
(2) Other appropriate agencies.--The appropriate
agencies described in this paragraph are--
(A) the appropriate Federal banking agencies,
as defined in section 3(q) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(q)), with
respect to the entities that are subject to the
jurisdiction of each such agency, respectively;
(B) the Federal Deposit Insurance Corporation
for banks insured by the Federal Deposit
Insurance Corporation (other than members of
the Federal Reserve System), mutual savings
banks, insured State branches of foreign banks,
and any other depository institution described
in section 303(2)(A) which is not otherwise
referred to in this paragraph;
(C) the National Credit Union Administration
Board with respect to credit unions; and
(D) the Secretary of Housing and Urban
Development with respect to other lending
institutions not regulated by the agencies
referred to in subparagraph (A) or (B).
(3) Rules for modifications under paragraph (1).--
(A) Application.--A modification under
paragraph (1)(E) shall apply to information
concerning--
(i) credit score data described in
subsection (b)(6)(I), in a manner that
is consistent with the purpose
described in paragraph (1)(E); and
(ii) age or any other category of
data described in paragraph (5) or (6)
of subsection (b), as the [Bureau]
Agency determines to be necessary to
satisfy the purpose described in
paragraph (1)(E), and in a manner
consistent with that purpose.
(B) Standards.--The [Bureau] Agency shall
prescribe standards for any modification under
paragraph (1)(E) to effectuate the purposes of
this title, in light of the privacy interests
of mortgage applicants or mortgagors. Where
necessary to protect the privacy interests of
mortgage applicants or mortgagors, the [Bureau]
Agency shall provide for the disclosure of
information described in subparagraph (A) in
aggregate or other reasonably modified form, in
order to effectuate the purposes of this title.
(i) Exemptions.--
(1) In general.--With respect to a depository
institution, the requirements of subsections (a) and
(b) shall not apply--
(A) with respect to closed-end mortgage
loans, if such depository institution
originated less than 100 closed-end mortgage
loans in each of the two preceding calendar
years; and
(B) with respect to open-end lines of credit,
if such depository institution originated less
than 200 open-end lines of credit in each of
the two preceding calendar years.
[(i)] (2) Exemption from certain disclosure
requirements.--The requirements of subsections (b)(4),
(b)(5), and (b)(6) shall not apply with respect to any
depository institution described in [section 303(2)(A)]
section 303(3)(A) which has total assets, as of the
most recent full fiscal year of such institution, of
$30,000,000 or less.
(j) Loan Application Register Information.--
(1) In general.--In addition to the information
required to be disclosed under subsections (a) and (b),
any depository institution which is required to make
disclosures under this section shall make available to
the public, upon request, loan application register
information (as defined by the [Bureau] Agency by
regulation) in the form required under regulations
prescribed by the Board.
(2) Format of disclosure.--
(A) Unedited format.--Subject to subparagraph
(B), the loan application register information
described in paragraph (1) may be disclosed by
a depository institution without editing or
compilation and in such formats as the [Bureau]
Agency may require.
(B) Protection of applicant's privacy
interest.--The [Bureau] Agency shall require,
by regulation, such deletions as the [Bureau]
Agency may determine to be appropriate to
protect--
(i) any privacy interest of any
applicant, including the deletion of
the applicant's name and identification
number, the date of the application,
and the date of any determination by
the institution with respect to such
application; and
(ii) a depository institution from
liability under any Federal or State
privacy law.
(C) Census tract format encouraged.--It is
the sense of the Congress that a depository
institution should provide loan register
information under this section in a format
based on the census tract in which the property
is located.
(3) Change of form not required.--A depository
institution meets the disclosure requirement of
paragraph (1) if the institution provides the
information required under such paragraph in such
formats as the [Bureau] Agency may require.
(4) Reasonable charge for information.--Any
depository institution which provides information under
this subsection may impose a reasonable fee for any
cost incurred in reproducing such information.
(5) Time of disclosure.--The disclosure of the loan
application register information described in paragraph
(1) for any year pursuant to a request under paragraph
(1) shall be made--
(A) in the case of a request made on or
before March 1 of the succeeding year, before
April 1 of the succeeding year; and
(B) in the case of a request made after March
1 of the succeeding year, before the end of the
30-day period beginning on the date the request
is made.
(6) Retention of information.--Notwithstanding
subsection (c), the loan application register
information described in paragraph (1) for any year
shall be maintained and made available, upon request,
for 3 years after the close of the 1st year during
which such information is required to be maintained and
made available.
(7) Minimizing compliance costs.--In prescribing
regulations under this subsection, the [Bureau] Agency
shall make every effort to minimize the costs incurred
by a depository institution in complying with this
subsection and such regulations.
(k) Disclosure of Statements by Depository Institutions.--
(1) In general.--In accordance with procedures
established by the [Bureau] Agency pursuant to this
section, any depository institution required to make
disclosures under this section--
(A) shall make a disclosure statement
available, upon request, to the public no later
than 3 business days after the institution
receives the statement from the Federal
Financial Institutions Examination Council; and
(B) may make such statement available on a
floppy disc which may be used with a personal
computer or in any other media which is not
prohibited under regulations prescribed by the
Board.
(2) Notice that data is subject to correction after
final review.--Any disclosure statement provided
pursuant to paragraph (1) shall be accompanied by a
clear and conspicuous notice that the statement is
subject to final review and revision, if necessary.
(3) Reasonable charge for information.--Any
depository institution which provides a disclosure
statement pursuant to paragraph (1) may impose a
reasonable fee for any cost incurred in providing or
reproducing such statement.
(l) Prompt Disclosures.--
(1) In general.--Any disclosure of information
pursuant to this section or section 310 shall be made
as promptly as possible.
(2) Maximum disclosure period.--
(A) 6- and 9-month maximum periods.--Except
as provided in subsections (j)(5) and (k)(1)
and regulations prescribed by the [Bureau]
Agency and subject to subparagraph (B), any
information required to be disclosed for any
year beginning after December 31, 1992, under--
(i) this section shall be made
available to the public before
September 1 of the succeeding year; and
(ii) section 310 shall be made
available to the public before December
1 of the succeeding year.
(B) Shorter periods encouraged after 1994.--
With respect to disclosures of information
under this section or section 310 for any year
beginning after December 31, 1993, every effort
shall be made--
(i) to make information disclosed
under this section available to the
public before July 1 of the succeeding
year; and
(ii) to make information required to
be disclosed under section 310
available to the public before
September 1 of the succeeding year.
(3) Improved procedure.--The Federal Financial
Institutions Examination Council shall make such
changes in the system established pursuant to
subsection (f) as may be necessary to carry out the
requirements of this subsection.
(m) Opportunity To Reduce Compliance Burden.--
(1) In general.--
(A) Satisfaction of public availability
requirements.--A depository institution shall
be deemed to have satisfied the public
availability requirements of subsection (a) if
the institution compiles the information
required under that subsection at the home
office of the institution and provides notice
at the branch locations specified in subsection
(a) that such information is available from the
home office of the institution upon written
request.
(B) Provision of information upon request.--
Not later than 15 days after the receipt of a
written request for any information required to
be compiled under subsection (a), the home
office of the depository institution receiving
the request shall provide the information
pertinent to the location of the branch in
question to the person requesting the
information.
(2) Form of information.--In complying with paragraph
(1), a depository institution shall provide the person
requesting the information with a copy of the
information requested in such formats as the [Bureau]
Agency may require.
(n) Timing of Certain Disclosures.--The data required to be
disclosed under subsection (b) shall be submitted to the
[Bureau] Agency or to the appropriate agency for any
institution reporting under this title, in accordance with
regulations prescribed by the [Bureau] Agency. Institutions
shall not be required to report new data under paragraph (5) or
(6) of subsection (b) before the first January 1 that occurs
after the end of the 9-month period beginning on the date on
which regulations are issued by the [Bureau] Agency in final
form with respect to such disclosures.
enforcement
Sec. 305. (a) The [Bureau] Agency shall prescribe such
regulations as may be necessary to carry out the purposes of
this title. These regulations may contain such classifications,
differentiations, or other provisions, and may provide for such
adjustments and exceptions for any class of transactions, as in
the judgment of the [Bureau] Agency are necessary and proper to
effectuate the purposes of this title, and prevent
circumvention or evasion thereof, or to facilitate compliance
therewith.
(b) Powers of Certain Other Agencies.--
(1) In general.--Subject to subtitle B of the
Consumer Financial Protection Act of 2010, compliance
with the requirements of this title shall be enforced--
(A) under section 8 of the Federal Deposit
Insurance Act, 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--
(i) any national bank or Federal
savings association, and any Federal
branch or Federal agency of a foreign
bank;
(ii) any member bank of the Federal
Reserve System (other than a national
bank), branch or agency of a foreign
bank (other than a Federal branch,
Federal agency, and insured State
branch of a foreign bank), commercial
lending company owned or controlled by
a foreign bank, and any organization
operating under section 25 or 25A of
the Federal Reserve Act; and
(iii) any bank or State savings
association insured by the Federal
Deposit Insurance Corporation (other
than a member of the Federal Reserve
System), any mutual savings [bank as,]
bank, as defined in section 3(f) of the
Federal Deposit Insurance Act (12
U.S.C. 1813(f)), any insured State
branch of a foreign bank, and any other
depository institution not referred to
in this paragraph or subparagraph (B)
or (C);
(B) under subtitle E of the Consumer
Financial Protection Act of 2010, by the
[Bureau] Agency, with respect to any person
subject to this subtitle;
(C) under the Federal Credit Union Act, by
the Administrator of the National Credit Union
Administration with respect to any insured
credit union; and
(D) with respect to other lending
institutions, by the Secretary of Housing and
Urban Development.
(2) Incorporated definitions.--The terms used in
paragraph (1) that are not defined in this title or
otherwise defined in section 3(s) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(s)) shall have
the same meanings as in section 1(b) of the
International Banking Act of 1978 (12 U.S.C. 3101).
(c) For the purpose of the exercise by any agency referred to
in subsection (b) of its powers under any Act referred to in
that subsection, a violation of any requirement imposed under
this title shall be deemed to be a violation of a requirement
imposed under that Act. In addition to its powers under any
provision of law specifically referred to in subsection (b),
each of the agencies referred to in that subsection may
exercise, for the purpose of enforcing compliance with any
requirement imposed under this title, any other authority
conferred on it by law.
(d) Overall Enforcement Authority of the Bureau of Consumer
Financial Protection.--Subject to subtitle B of the Consumer
Financial Protection Act of 2010, enforcement of the
requirements imposed under this title is committed to each of
the agencies under subsection (b). To facilitate research,
examinations, and enforcement, all data collected pursuant to
section 304 shall be available to the entities listed under
subsection (b). The [Bureau] Agency may exercise its
authorities under the Consumer Financial Protection Act of 2010
to exercise principal authority to [examine and] enforce
compliance by any person with the requirements of this title.
relation to state laws
Sec. 306. (a) This title does not annul, alter, or affect, or
exempt any State chartered depository institution subject to
the provisions of this title from complying with the laws of
any State or subdivision thereof with respect to public
disclosure and recordkeeping by depositor institutions, except
to the extent that those laws are inconsistent with any
provision of this title, and then only to the extent of the
inconsistency. The [Bureau] Agency is authorized to determine
whether such inconsistencies exist. The [Bureau] Agency may not
determine that any such law is inconsistent with any provision
of this title if the [Bureau] Agency determines that such law
requires the maintenance of records with greater geographic or
other detail than is required under this title, or that such
law otherwise provides greater disclosure than is required
under this title.
(b) Exemption Authority.--The [Bureau] Agency may, by
regulation, exempt from the requirements of this title any
State-chartered depository institution within any State or
subdivision thereof, if the agency determines that, under the
law of such State or subdivision, that institution is subject
to requirements that are substantially similar to those imposed
under this title, and that such law contains adequate
provisions for enforcement. Notwithstanding any other provision
of this subsection, compliance with the requirements imposed
under this subsection shall be enforced by the Office of the
Comptroller of the Currency under section 8 of the Federal
Deposit Insurance Act, in the case of national banks and
Federal savings associations, the deposits of which are insured
by the Federal Deposit Insurance Corporation.
SEC. 307. COMPLIANCE IMPROVEMENT METHODS.
(a) In General.--
(1) Consultation required.--The Director of the
[Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency, with the assistance of the
Secretary, the Director of the [Bureau] Agency of the
Census, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, and
such other persons as the [Bureau] Agency deems
appropriate, shall develop or assist in the improvement
of, methods of matching addresses and census tracts to
facilitate compliance by depository institutions in as
economical a manner as possible with the requirements
of this title.
(2) Authorization of appropriations.--There are
authorized to be appropriated, such sums as may be
necessary to carry out this subsection.
(3) Contracting authority.--The Director of the
[Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency is authorized to utilize, contract
with, act through, or compensate any person or agency
in order to carry out this subsection.
(b) Recommendations to Congress.--The Director of the [Bureau
of Consumer Financial Protection] Consumer Law Enforcement
Agency shall recommend to the Committee on Banking, Housing,
and Urban Affairs of the Senate and the Committee on Financial
Services of the House of Representatives, such additional
legislation as the Director of the [Bureau of Consumer
Financial Protection] Consumer Law Enforcement Agency deems
appropriate to carry out the purpose of this title.
* * * * * * *
effective date
Sec. 309. (a) In General.--This title shall take effect on
the one hundred and eightieth day beginning after the date of
its enactment. Any institution specified in section 303(2)(A)
which has total assets as of its last full fiscal year of
$10,000,000 or less is exempt from the provisions of this
title. The Board, in consultation with the Secretary, may
exempt institutions described in section 303(2)(B) that are
comparable within their respective industries to institutions
that are exempt under the preceding sentence (as determined
without regard to the adjustment made by subsection (b)).
(b) CPI Adjustments.--
(1) In general.--Subject to paragraph (2), the dollar
amount applicable with respect to institutions
described in section 303(2)(A) under the 2d sentence of
subsection (a) shall be adjusted annually after
December 31, 1996, by the annual percentage increase in
the Consumer Price Index for Urban Wage Earners and
Clerical Workers published by the [Bureau] Agency of
Labor Statistics.
(2) 1-time adjustment for prior inflation.--The
first adjustment made under paragraph (1) after the
date of the enactment of the Economic Growth and
Regulatory Paperwork Reduction Act of 1996 shall be the
percentage by which--
(A) the Consumer Price Index described in
such paragraph for the calendar year 1996,
exceeds
(B) such Consumer Price Index for the
calendar year 1975.
(3) Rounding.--The dollar amount applicable under
paragraph (1) for any calendar year shall be the amount
determined in accordance with subparagraphs (A) and (B)
of paragraph (2) and rounded to the nearest multiple of
$1,000,000.
compilation of aggregate data
Sec. 310. (a) Beginning with data for calendar year 1980, the
Federal Financial Institutions Examination Council shall
compile each year, for each primary metropolitan statistical
area, metropolitan statistical area, or consolidated
metropolitan statistical area that is not comprised of
designated primary metropolitan statistical areas, aggregate
data by census tract for all depository institutions which are
required to disclose data under section 304 or which are exempt
pursuant to section 306(b). The Council shall also produce
tables indicating, for each primary metropolitan statistical
area, metropolitan statistical area, or consolidated
metropolitan statistical area that is not comprised of
designated primary metropolitan statistical areas, aggregate
lending patterns for various categories of census tracts
grouped according to location, age of housing stock, income
level, and racial characteristics.
(b) The [Bureau] Agency shall provide staff and data
processing resources to the Council to enable it to carry out
the provisions of subsection (a).
(c) The data and tables required pursuant to subsection (a)
shall be made available to the public by no later than December
31 of the year following the calendar year on which the data is
based.
* * * * * * *
----------
ALTERNATIVE MORTGAGE TRANSACTION PARITY ACT OF 1982
TITLE VIII--ALTERNATIVE MORTGAGE TRANSACTIONS
short title
Sec. 801. This title may be cited as the ``Alternative
Mortgage Transaction Parity Act of 1982''.
findings and purpose.
Sec. 802. (a) The Congress hereby finds that--
(1) increasingly volatile and dynamic changes in
interest rates have seriously impaired the ability of
housing creditors to provide consumers with fixed-term,
fixed-rate credit secured by interests in real
property, cooperative housing, manufactured homes, and
other dwellings;
(2) alternative mortgage transactions are essential
to the provision of an adequate supply of credit
secured by residential property necessary to meet the
demand expected during the 1980's; and
(3) the Comptroller of the Currency, the National
Credit Union Administration, and [the Director of the
Office of Thrift Supervision] the Consumer Law
Enforcement Agency have recognized the importance of
alternative mortgage transactions and have adopted
regulations authorizing federally chartered depository
institutions to engage in alternative mortgage
financing.
(b) It is the purpose of this title to eliminate the
discriminatory impact that those regulations have upon
nonfederally chartered housing creditors and provide them with
parity with federally chartered institutions by authorizing all
housing creditors to make, purchase, and enforce alternative
mortgage transactions so long as the transactions are in
conformity with the regulations issued by the Federal agencies.
* * * * * * *
alternative mortgage authority.
Sec. 804. (a) In order to prevent discrimination against
State-chartered depository institutions, and other nonfederally
chartered housing creditors, with respect to making,
purchasing, and enforcing alternative mortgage transactions,
housing creditors may make, purchase, and enforce alternative
mortgage transactions, except that this section shall apply--
(1) with respect to banks, only to transactions made
on or before the designated transfer date, as
determined under section 1062 of the Consumer Financial
Protection Act of 2010 in accordance with regulations
governing alternative mortgage transactions as issued
by the Comptroller of the Currency for national banks,
to the extent that such regulations are authorized by
rulemaking authority granted to the Comptroller of the
Currency with regard to national banks under laws other
than this section;
(2) with respect to credit unions, only to
transactions made on or before the designated transfer
date, as determined under section 1062 of the Consumer
Financial Protection Act of 2010 in accordance with
regulations governing alternative mortgage transactions
as issued by the National Credit Union Administration
Board for Federal credit unions, to the extent that
such regulations are authorized by rulemaking authority
granted to the National Credit Union Administration
with regard to Federal credit unions under laws other
than this section;
(3) with respect to all other housing creditors,
including without limitation, savings and loan
associations, mutual savings banks, and savings banks,
only to transactions made on or before the designated
transfer date, as determined under section 1062 of the
Consumer Financial Protection Act of 2010, in
accordance with regulations governing alternative
mortgage transactions as issued by [the Director of the
Office of Thrift Supervision] the Comptroller of the
Currency for federally charter savings and loan
associations, to the extent that such regulations are
authorized by rulemaking authority granted to [the
Director of the Office of Thrift Supervision] the
Comptroller of the Currency with regard to federally
chartered savings and loan associations under laws
other than this section; and
(4) with respect to transactions made after the
designated transfer date, only in accordance with
regulations governing alternative mortgage
transactions, as issued by the [Bureau of Consumer
Financial Protection] Consumer Law Enforcement Agency
for federally chartered housing creditors, in
accordance with the rulemaking authority granted to the
[Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency with regard to federally chartered
housing creditors under provisions of law other than
this section.
(b) For the purpose of determining the applicability of this
section, an alternative mortgage transaction shall be deemed to
be made in accordance with the applicable regulation
notwithstanding the housing creditor's failure to comply with
the regulations, if--
(1) the transaction is in substantial compliance with
the regulation; and
(2) within 60 days of discovering any error, the
housing credit correct such error, including making
appropriate adjustments, if any, to the account.
(c) Preemption of State Law.--An alternative mortgage
transaction may be made by a housing creditor in accordance
with this section, notwithstanding any State constitution, law,
or regulation that prohibits an alternative mortgage
transaction. For purposes of this subsection, a State
constitution, law, or regulation that prohibits an alternative
mortgage transaction does not include any State constitution,
law, or regulation that regulates mortgage transactions
generally, including any restriction on prepayment penalties or
late charges.
(d) [Bureau] Agency Actions.--The [Bureau of Consumer
Financial Protection] Consumer Law Enforcement Agency shall--
(1) review the regulations identified by the
Comptroller of the Currency and the National Credit
Union Administration[,] (as those rules exist on the
designated transfer date), as applicable under
paragraphs (1) through (3) of subsection (a);
(2) determine whether such regulations are fair and
not deceptive and otherwise meet the objectives of the
Consumer Financial Protection Act of 2010; and
(3) promulgate regulations under subsection (a)(4)
after the designated transfer date.
(e) Designated Transfer Date.--As used in this section, the
term ``designated transfer date'' means the date determined
under section 1062 of the Consumer Financial Protection Act of
2010.
* * * * * * *
----------
ELECTRONIC FUND TRANSFER ACT
TITLE IX--ELECTRONIC FUND TRANSFERS
Sec. 901. Short title
This title may be cited as the ``Electronic Fund Transfer
Act''.
* * * * * * *
Sec. 903. Definitions
As used in this title--
(1) the term ``accepted card or other means of
access'' means a card, code, or other means of access
to a consumer's account for the purpose of initiating
electronic fund transfers when the person to whom such
card or other means of access was issued has requested
and received or has signed or has used, or authorized
another to use, such card or other means of access for
the purpose of transferring money between accounts or
obtaining money, property, labor, or services;
(2) the term ``account'' means a demand deposit,
savings deposit, or other asset account (other than an
occasional or incidental credit balance in an open end
credit plan as defined in section [103(i)] 103(j) of
this Act), as described in regulations of the [Bureau]
Agency, established primarily for personal, family, or
household purposes, but such term does not include an
account held by a financial institution pursuant to a
bona fide trust agreement;
[(4)] (3) the term ``Board'' means the Board of
Governors of the Federal Reserve System;
[(4) the term ``Bureau '' means the Bureau of
Consumer Financial Protection;]
(4) the term ``Agency'' means the Consumer Law
Enforcement Agency;
(5) the term ``business day'' means any day on which
the offices of the consumer's financial institution
involved in an electronic fund transfer are open to the
public for carrying on substantially all of its
business functions;
(6) the term ``consumer'' means a natural person;
(7) the term ``electronic fund transfer'' means any
transfer of funds, other than a transaction originated
by check, draft, or similar paper instrument, which is
initiated through an electronic terminal, telephonic
instrument, or computer or magnetic tape so as to
order, instruct, or authorize a financial institution
to debit or credit an account. Such term includes, but
is not limited to, point-of-sale transfers, automated
teller machine transactions, direct deposits or
withdrawals of funds, and transfers initiated by
telephone. Such term does not include--
(A) any check guarantee or authorization
service which does not directly result in a
debit or credit to a consumer's account:
(B) any transfer of funds, other than those
processed by automated clearinghouse, made by a
financial institution on behalf of a consumer
by means of a service that transfers funds held
at either Federal Reserve banks or other
depository institutions and which is not
designed primarily to transfer funds on behalf
of a consumer;
(C) any transaction the primary purpose of
which is the purchase or sale of securities or
commodities through a broker-dealer registered
with or regulated by the Securities and
Exchange Commission;
(D) any automatic transfer from a savings
account to a demand deposit account pursuant to
an agreement between a consumer and a financial
institution for the purpose of covering an
overdraft or maintaining an agreed upon minimum
balance in the consumer's demand deposit
account; or
(E) any transfer of funds which is initiated
by a telephone conversation between a consumer
and an officer or employee of a financial
institution which is not pursuant to a
prearranged plan and under which periodic or
recurring transfers are not contemplated;
as determined under regulations of the [Bureau] Agency;
(8) the term ``electronic terminal'' means an
electronic device, other than a telephone operated by a
consumer, through which a consumer may initiate an
electronic fund transfer. Such term includes, but is
not limited to, point-of-sale terminals, automated
teller machines, and cash dispensing machines;
(9) the term ``financial institution'' means a State
or National bank, a State or Federal savings and loan
association, a mutual savings bank, a State or Federal
credit union, or any other person who, directly or
indirectly, holds an account belonging to a consumer;
(10) the term ``preauthorized electronic fund
transfer'' means an electronic fund transfer authorized
in advance to recur at substantially regular intervals;
(11) the term ``State'' means any State, territory,
or possession of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, or any
political subdivision of any of the foregoing; and
(12) the term ``unauthorized electronic fund
transfer'' means an electronic fund transfer from a
consumer's account initiated by a person other than the
consumer without actual authority to initiate such
transfer and from which the consumer receives no
benefit, but the term does not include any electronic
fund transfer (A) initiated by a person other than the
consumer who was furnished with the card, code, or
other means of access to such consumer's account by
such consumer, unless the consumer has notified the
financial institution involved that transfers by such
other person are no longer authorized, (B) initiated
with fraudulent intent by the consumer or any person
acting in concert with the consumer, or (C) which
constitutes an error committed by a financial
institution.
Sec. 904. Regulations
(a) Prescription by the Bureau and the Board.--
(1) In general.--Except as provided in paragraph (2),
the [Bureau] Agency shall prescribe rules to carry out
the purposes of this title.
(2) Authority of the board.--The Board shall have
sole authority to prescribe rules--
(A) to carry out the purposes of this title
with respect to a person described in section
1029(a) of the Consumer Financial Protection
Act of 2010; and
(B) to carry out the purposes of section 920.
[In prescribing such regulations, the Board
shall:]
(3) Regulations.--In prescribing regulations under
this subsection, the Agency and the Board shall--
[(1)] (A) consult with the other agencies
referred to in section 917 and take into
account, and allow for, the continuing
evolution of electronic banking services and
the technology utilized in such services,
[(2)] (B) prepare an analysis of economic
impact which considers the costs and benefits
to financial institutions, consumers, and other
users of electronic fund transfers, including
the extent to which additional documentation,
reports, records, or other paper work would be
required, and the effects upon competition in
the provision of electronic banking services
among large and small financial institutions
and the availability of such services to
different classes of consumers, particularly
low income consumers,
[(3)] (C) to the extent practicable, the
Board shall demonstrate that the consumer
protections of the proposed regulations
outweigh the compliance costs imposed upon
consumers and financial institutions, and
[(4)] (D) any proposed regulations and
accompanying analyses shall be sent promptly to
Congress by the Board.
(b) The [Bureau] Agency shall issue model clauses for
optional use by financial institutions to facilitate compliance
with the disclosure requirements of section 905 and to aid
consumers in understanding the rights and responsibilities of
participants in electronic fund transfers by utilizing readily
understandable language. Such model clauses shall be adopted
after notice duly given in the Federal Register and opportunity
for public comment in accordance with section 553 of title 5,
United States Code. With respect to the disclosures required by
section 905(a) (3) and (4), the [Bureau] Agency shall take
account of variations in the services and charges under
different electronic fund transfer systems and, as appropriate,
shall issue alternative model clauses for disclosure of these
differing account terms.
(c) Regulations prescribed hereunder may contain such
classifications, differentiations, or other provisions, and may
provide for such adjustments and exceptions for any class of
electronic fund transfers or remittance transfers, as in the
judgment of the [Bureau] Agency are necessary or proper to
effectuate the purposes of this title, to prevent circumvention
or evasion thereof, or to facilitate compliance therewith. The
[Bureau] Agency shall by regulation modify the requirements
imposed by this title on small financial institutions if the
[Bureau] Agency determines that such modifications are
necessary to alleviate any undue compliance burden on small
financial institutions and such modifications are consistent
with the purpose and objective of this title.
(d) Applicability to Service Providers Other Than Certain
Financial Institutions.--
(1) In general.--If electronic fund transfer services
are made available to consumers by a person other than
a financial institution holding a consumer's account,
the [Bureau] Agency shall by regulation assure that the
disclosures, protections, responsibilities, and
remedies created by this title are made applicable to
such persons and services.
(2) State and local government electronic benefit
transfer systems.--
(A) Definition of electronic benefit transfer
system.--In this paragraph, the term
``electronic benefit transfer system''--
(i) means a system under which a
government agency distributes needs-
tested benefits by establishing
accounts that may be accessed by
recipients electronically, such as
through automated teller machines or
point-of-sale terminals; and
(ii) does not include employment-
related payments, including salaries
and pension, retirement, or
unemployment benefits established by a
Federal, State, or local government
agency.
(B) Exemption generally.--The disclosures,
protections, responsibilities, and remedies
established under this title, and any
regulation prescribed or order issued by the
[Bureau] Agency in accordance with this title,
shall not apply to any electronic benefit
transfer system established under State or
local law or administered by a State or local
government.
(C) Exception for direct deposit into
recipient's account.--Subparagraph (B) shall
not apply with respect to any electronic funds
transfer under an electronic benefit transfer
system for a deposit directly into a consumer
account held by the recipient of the benefit.
(D) Rule of construction.--No provision of
this paragraph--
(i) affects or alters the protections
otherwise applicable with respect to
benefits established by any other
provision Federal, State, or local law;
or
(ii) otherwise supersedes the
application of any State or local law.
(3) Fee disclosures at automated teller machines.--
(A) In general.--The regulations prescribed
under paragraph (1) shall require any automated
teller machine operator who imposes a fee on
any consumer for providing host transfer
services to such consumer to provide notice in
accordance with subparagraph (B) to the
consumer (at the time the service is provided)
of--
(i) the fact that a fee is imposed by
such operator for providing the
service; and
(ii) the amount of any such fee.
(B) Notice requirement.--The notice required
under clauses (i) and (ii) of subparagraph (A)
with respect to any fee described in such
subparagraph shall appear on the screen of the
automated teller machine, or on a paper notice
issued from such machine, after the transaction
is initiated and before the consumer is
irrevocably committed to completing the
transaction.
(C) Prohibition on fees not properly
disclosed and explicitly assumed by consumer.--
No fee may be imposed by any automated teller
machine operator in connection with any
electronic fund transfer initiated by a
consumer for which a notice is required under
subparagraph (A), unless--
(i) the consumer receives such notice
in accordance with subparagraph (B);
and
(ii) the consumer elects to continue
in the manner necessary to effect the
transaction after receiving such
notice.
(D) Definitions.--For purposes of this
paragraph, the following definitions shall
apply:
(i) Automated teller machine
operator.--The term ``automated teller
machine operator'' means any person
who--
(I) operates an automated
teller machine at which
consumers initiate electronic
fund transfers; and
(II) is not the financial
institution that holds the
account of such consumer from
which the transfer is made.
(ii) Electronic fund transfer.--The
term ``electronic fund transfer''
includes a transaction that involves a
balance inquiry initiated by a consumer
in the same manner as an electronic
fund transfer, whether or not the
consumer initiates a transfer of funds
in the course of the transaction.
(iii) Host transfer services.--The
term ``host transfer services'' means
any electronic fund transfer made by an
automated teller machine operator in
connection with a transaction initiated
by a consumer at an automated teller
machine operated by such operator.
(e) Deference.--No provision of this title may be construed
as altering, limiting, or otherwise affecting the deference
that a court affords to--
(1) the [Bureau] Agency in making determinations
regarding the meaning or interpretation of any
provision of this title for which the [Bureau] Agency
has authority to prescribe regulations; or
(2) the Board in making determinations regarding the
meaning or interpretation of section 920.
Sec. 905. Terms and conditions of transfers
(a) The terms and conditions of electronic fund transfers
involving a consumer's account shall be disclosed at the time
the consumer contracts for an electronic fund transfer service,
in accordance with regulations of the [Bureau] Agency. Such
disclosures shall be in readily understandable language and
shall include, to the extent applicable--
(1) the consumer's liability for unauthorized
electronic fund transfers and, at the financial
institution's option, notice of the advisability of
prompt reporting of any loss, theft, or unauthorized
use of a card, code, or other means of access;
(2) the telephone number and address of the person or
office to be notified in the event the consumer
believes than an unauthorized electronic fund transfer
has been or may be effected;
(3) the type and nature of electronic fund transfers
which the consumer may initiate, including any
limitations on the frequency or dollar amount of such
transfers, except that the details of such limitations
need not be disclosed if their confidentiality is
necessary to maintain the security of an electronic
fund transfer system, as determined by the [Bureau]
Agency;
(4) any charges for electronic fund transfers or for
the right to make such transfers;
(5) the consumer's right to stop payment of a
preauthorized electronic fund transfer and the
procedure to initiate such a stop payment order;
(6) the consumer's right to receive documentation of
electronic fund transfers under section 906;
(7) a summary, in a form prescribed by regulations of
the [Bureau] Agency, of the error resolution provisions
of section 908 and the consumer's rights thereunder.
The financial institution shall thereafter transmit
such summary at least once per calendar year;
(8) the financial institution's liability to the
consumer under section 910;
(9) under what circumstances the financial
institution will in the ordinary course of business
disclose information concerning the consumer's account
to third persons; and
(10) a notice to the consumer that a fee may be
imposed by--
(A) an automated teller machine operator (as
defined in section 904(d)(3)(D)(i)) if the
consumer initiates a transfer from an automated
teller machine that is not operated by the
person issuing the card or other means of
access; and
(B) any national, regional, or local network
utilized to effect the transaction.
(b) A financial institution shall notify a consumer in
writing at least twenty-one days prior to the effective date of
any change in any term or condition of the consumer's account
required to be disclosed under subsection (a) if such change
would result in greater cost or liability for such consumer or
decreased access to the consumer's account. A financial
institution may, however, implement a change in the terms or
conditions of an account without prior notice when such change
is immediately necessary to maintain or restore the security of
an electronic fund transfer system or a consumer's account.
Subject to subsection (a)(3), the [Bureau] Agency shall require
subsequent notification if such a change is made permanent.
(c) For any account of a consumer made accessible to
electronic fund transfer prior to the effective date of this
title, the information required to be disclosed to the consumer
under subsection (a) shall be disclosed not later than the
earlier of--
(1) the first periodic statement required by section
906(c) after the effective date of this title; or
(2) thirty days after the effective date of this
title.
Sec. 906. Documentation of tranfers; periodic statements
(a) For each electronic fund transfer initiated by a consumer
from an electronic terminal, the financial institution holding
such consumer's account shall, directly or indirectly, at the
time the transfer is initiated, make available to the consumer
written documentation of such transfer. The documentation shall
clearly set forth to the extent applicable--
(1) the amount involved and date the transfer is
initiated;
(2) the type of transfer;
(3) the identity of the consumer's account with the
financial institution from which or to which funds are
transferred;
(4) the identity of any third party to whom or from
whom funds are transferred; and
(5) the location or identification of the electronic
terminal involved.
(b) For a consumer's account which is scheduled to be
credited by a preauthorized electronic fund transfer from the
same payor at least once in each successive sixty-day period,
except where the payor provides positive notice of the transfer
to the consumer, the financial institution shall elect to
provide promptly either positive notice to the consumer when
the credit is made as scheduled, or negative notice to the
consumer when the credit is not made as scheduled, in
accordance with regulations of the [Bureau] Agency. The means
of notice elected shall be disclosed to the consumer in
accordance with section 905.
(c) A financial institution shall provide each consumer with
a periodic statement for each account of such consumer that may
be accessed by means of an electronic fund transfer. Except as
provided in subsections (d) and (e), such statement shall be
provided at least monthly for each monthly or shorter cycle in
which an electronic fund transfer affecting the account has
occurred, or every three months, whichever is more frequent.
The statement, which may include information regarding
transactions other than electronic fund transfers, shall
clearly set forth--
(1) with regard to each electronic fund transfer
during the period, the information described in
subsection (a), which may be provided on an
accompanying document;
(2) the amount of any fee or charge assessed by the
financial institution during the period for electronic
fund transfers or for account maintenance;
(3) the balances in the consumer's account at the
beginning of the period and at the close of the period;
and
(4) the address and telephone number to be used by
the financial institution for the purpose of receiving
any statement inquiry or notice of account error from
the consumer. Such address and telephone number shall
be preceded by the caption ``Direct Inquires To:'' or
other similar language indicating that the address and
number are to be used for such inquiries or notices.
(d) In the case of a consumer's passbook account which may
not be accessed by electronic fund transfers other than
preauthorized electronic fund transfers crediting the account,
a financial institution may, in lieu of complying with the
requirements of subsection (c), upon presentation of the
passbook provide the consumer in writing with the amount and
date of each such transfer involving the account since the
passbook was last presented.
(e) In the case of a consumer's account, other than a
passbook account, which may not be accessed by electronic fund
transfers other than preauthorized electronic fund transfers
crediting the account, the financial institution may provide a
periodic statement on a quarterly basis which otherwise
complies with the requirements of subsection (c).
(f) In any action involving a consumer, any documentation
required by this section to be given to the consumer which
indicates that an electronic fund transfer was made to another
person shall be admissible as evidence of such transfer and
shall constitute prima facie proof that such transfer was made.
Sec. 907. Preauthorized transfers
(a) A preauthorized electronic fund transfer from a
consumer's account may be authorized by the consumer only in
writing, and a copy of such authorization shall be provided to
the consumer when made. A consumer may stop payment of a
preauthorized electronic fund transfer by notifying the
financial institution orally or in writing at any time up to
three business days preceding the scheduled date of such
transfer. The financial institution may require written
confirmation to be provided to it within fourteen days of an
oral notification if, when the oral notification is made, the
consumer is advised of such requirement and the address to
which such confirmation should be sent.
(b) In the case of preauthorized transfers from a consumer's
account to the same person which may vary in amount, the
financial institution or designated payee shall, prior to each
transfer, provide reasonable advance notice to the consumer, in
accordance with regulations of the [Bureau] Agency, of the
amount to be transferred and the scheduled date of the
transfer.
Sec. 908. Error resolution
(a) If a financial institution, within sixty days after
having transmitted to a consumer documentation pursuant to
section 906 (a), (c), or (d) or notification pursuant to
section 906(b), receives oral or written notice in which the
consumer--
(1) sets forth or otherwise enables the financial
institution to identify the name and account number of
the consumer;
(2) indicates the consumer's belief that the
documentation, or, in the case of notification pursuant
to section 906(b), the consumer's account, contains an
error and the amount of such error; and
(3) sets forth the reasons for the consumer's belief
(where applicable) that an error has occurred,
the financial institution shall investigate the alleged error,
determine whether an error has occurred, and report or mail the
results of such investigation and determination to the consumer
within ten business days. The financial institution may require
written confirmation to be provided to it within ten business
days of an oral notification of error if, when the oral
notification is made, the consumer is advised of such
requirement and the address to which such confirmation should
be sent. A financial institution which requires written
confirmation in accordance with the previous sentence need not
provisionally recredit a consumer's account in accordance with
subsection (c), nor shall the financial institution be liable
under subsection (e) if the written confirmation is not
received within the ten-day period referred to in the previous
sentence.
(b) If the financial institution determines that an error did
occur, it shall promptly, but in no event more than one
business day after such determination, correct the error,
subject to section 909, including the crediting of interest
where applicable.
(c) If a financial institution receives notice of an error in
the manner and within the time period specified in subsection
(a), it may, in lieu of the requirements of subsections (a) and
(b), within ten business days after receiving such notice
provisionally recredit the consumer's account for the amount
alleged to be in error, subject to section 909, including
interest where applicable, pending the conclusion of its
investigation and its determination of whether an error has
occurred. Such investigation shall be concluded not later than
forty-five days after receipt of notice of the error. During
the pendency of the investigation, the consumer shall have full
use of the funds provisionally recredited.
(d) If the financial institution determines after its
investigation pursuant to subsection (a) or (c) that an error
did not occur, it shall deliver or mail to the consumer an
explanation of its findings within 3 business days after the
conclusion of its investigation, and upon request of the
consumer promptly deliver or mail to the consumer reproductions
of all documents which the financial institution relied on to
conclude that such error did not occur. The financial
institution shall include notice of the right to request
reproductions with the explanation of its findings.
(e) If in any action under section 915, the court finds
that--
(1) the financial institution did not provisionally
recredit a consumer's account within the ten-day period
specified in subsection (c), and the financial
institution (A) did not make a good faith investigation
of the alleged error, or (B) did not have a reasonable
basis for believing that the consumer's account was not
in error; or
(2) the financial institution knowingly and willfully
concluded that the consumer's account was not in error
when such conclusion could not reasonably have been
drawn from the evidence available to the financial
institution at the time of its investigation,
then the consumer shall be entitled to treble damages
determined under section 915(a)(1).
(f) For the purpose of this section, an error consists of--
(1) an unauthorized electronic fund transfer;
(2) an incorrect electronic fund transfer from or to
the consumer's account;
(3) the omission from a periodic statement of an
electronic fund transfer affecting the consumer's
account which should have been included;
(4) a computational error by the financial
institution;
(5) the consumer's receipt of an incorrect amount of
money from an electronic terminal;
(6) a consumer's request for additional information
or clarification concerning an electronic fund transfer
or any documentation required by this title; or
(7) any other error described in regulations of the
[Bureau] Agency.
Sec. 909. Consumer liability for unauthorized transfers
(a) A consumer shall be liable for any unauthorized
electronic fund transfer involving the account of such consumer
only if the card or other means of access utilized for such
transfer was an accepted card or other means of access and if
the issuer of such card, code, or other means of access has
provided a means whereby the user of such card, code, or other
meana of access can be identified as the person authorized to
use it, such as by signature, photograph, or fingerprint or by
electronic or mechanical confirmation. In no event, however,
shall a consumer's liability for an unauthorized transfer
exceed the lesser of--
(1) $50; or
(2) the amount of money or value of property or
services obtained in such unauthorized electronic fund
transfer prior to the time the financial institution is
notified of, or otherwise becomes aware of,
circumstances which lead to the reasonable belief that
an unauthorized electronic fund transfer involving the
consumer's account has been or may be effected. Notice
under this paragraph is sufficient when such steps have
been taken as may be reasonably required in the
ordinary course of business to provide the financial
institution with the pertinent information, whether or
not any particular officer, employee, or agent of the
financial institution does in fact receive such
information.
Notwithstanding the foregoing, reimbursement need not be made
to the consumer for losses the financial institution
establishes would not have occurred but for the failure of the
consumer to report within sixty days of transmittal of the
statement (or in extenuating circumstances such as extended
travel or hospitalization, within a reasonable time under the
circumstances) any unauthorized electronic fund transfer or
account error which appears on the periodic statement provided
to the consumer under section 906. In addition, reimbursement
need not be made to the consumer for losses which the financial
institution establishes would not have occurred but for the
failure of the consumer to report any loss or theft of a card
or other means of access within two business days after the
consumer learns of the loss or theft (or in extenuating
circumstances such as extended travel or hospitalization,
within a longer period which is reasonable under the
circumstances), but the consumer's liability under this
subsection in any such case may not exceed a total of $500, or
the amount of unauthorized electronic fund transfers which
occur following the close of two business days (or such longer
period) after the consumer learns of the loss or theft but
prior to notice to the financial institution under this
subsection, whichever is less.
(b) In any action which involves a consumer's liability for
an unauthorized electronic fund transfer, the burden of proof
is upon the financial institution to show that the electronic
fund transfer was authorized or, if the electronic fund
transfer was unauthorized, then the burden of proof is upon the
financial institution to establish that the conditions of
liability set forth in subsection (a) have been met, and, if
the transfer was initiated after the effective date of section
905, that the disclosures required to be made to the consumer
under section 905(a) (1) and (2) were in fact made in
accordance with such section.
(c) In the event of a transaction which involves both an
unauthorized electronic fund transfer and an extension of
credit as defined in section [103(e)] 103(f) of this Act
pursuant to an agreement between the consumer and the financial
institution to extend such credit to the consumer in the event
the consumer's account is overdrawn, the limitation on the
consumer's liability for such transaction shall be determined
solely in accordance with this section.
(d) Nothing in this section imposes liability upon a consumer
for an unauthorized electronic fund transfer in excess of his
liability for such a transfer under other applicable law or
under any agreement with the consumer's financial institution.
(e) Except as provided in this section, a consumer incurs no
liability from an unauthorized electronic fund transfer.
Sec. 910. Liability of financial institutions
(a) Subject to subsections (b) and (c), a financial
institution shall be liable to a consumer for all damages
proximately caused by--
(1) the financial institution's failure to make an
electronic fund transfer, in accordance with the terms
and conditions of an account, in the correct amount or
in a timely manner when properly instructed to do so by
the consumer, except where--
(A) the consumer's account has insufficient
funds;
(B) the funds are subject to legal process or
other encumbrance restricting such transfer;
(C) such transfer would exceed an established
credit limit;
(D) an electronic terminal has insufficient
cash to complete the transaction; or
(E) as otherwise provided in regulations of
the [Bureau] Agency;
(2) the financial institution's failure to make an
electronic fund transfer due to insufficient funds when
the financal institution failed to credit, in
accordance with the terms and conditions of an account,
a deposit of funds to the consumer's account which
would have provided sufficient funds to make the
transfer, and
(3) the financial institution's failure to stop
payment of a preauthorized transfer from a consumer's
account when instructed to do so in accordance with the
terms and conditions of the account.
(b) A financial institution shall not be liable under
subsection (a)(1) or (2) if the financial institution shows by
a preponderance of the evidence that its action or failure to
act resulted from--
(1) an act of God or other circumstance beyond its
control, that it exercised reasonable care to prevent
such an occurrence, and that it exercised such
diligence as the circumstances required; or
(2) a technical malfunction which was known to the
consumer at the time he attempted to initiate an
electronic fund transfer or, in the case of a
preauthorized transfer, at the time such transfer
should have occurred.
(c) In the case of a failure described in subsection (a)
which was not intentional and which resulted from a bona fide
error, notwithstanding the maintenance of procedures reasonably
adapted to avoid any such error, the financial institution
shall be liable for actual damages proved.
(d) Exception for Damaged Notices.--If the notice required to
be posted pursuant to section 904(d)(3)(B)(i) by an automated
teller machine operator has been posted by such operator in
compliance with such section and the notice is subsequently
removed, damaged, or altered by any person other than the
operator of the automated teller machine, the operator shall
have no liability under this section for failure to comply with
section 904(d)(3)(B)(i).
Sec. 911. Issuance of cards or other means of access
(a) No person may issue to a consumer any card, code, or
other means of access to such consumer's account for the
purpose of initiating an electronic fund transfer other than--
(1) in response to a request or application therefor;
or
(2) as a renewal of, or in substitution for, an
accepted card, code, or other means of access, whether
issued by the initial issuer or a successor.
(b) Notwithstanding the provisions of subsection (a), a
person may distribute to a consumer on an unsolicited basis a
card, code, or other means of access for use in initiating an
electronic fund transfer from such consumer's account, if--
(1) such card, code, or other means of access is not
validated;
(2) such distribution is accompanied by a complete
disclosure, in accordance with section 905, of the
consumer's rights and liabilities which will apply if
such card, code, or other means of access is validated;
(3) such distribution is accompanied by a clear
explanation, in accordance with regulations of the
[Bureau] Agency, that such card, code, or other means
of access is not validated and how the consumer may
dispose of such code, card, or other means of access if
validation is not desired; and
(4) such card, code, or other means of access is
validated only in response to a request or application
from the consumer, upon verification of the consumer's
identity.
(c) For the purpose of subsection (b), a card, code, or other
means of access is validated when it may be used to initiate an
electronic fund transfer.
* * * * * * *
SEC. 915. GENERAL-USE PREPAID CARDS, GIFT CERTIFICATES, AND STORE GIFT
CARDS.
(a) Definitions.--In this section, the following definitions
shall apply:
(1) Dormancy fee; inactivity charge or fee.--The
terms ``dormancy fee'' and ``inactivity charge or fee''
mean a fee, charge, or penalty for non-use or
inactivity of a gift certificate, store gift card, or
general-use prepaid card.
(2) General use prepaid card, gift certificate, and
store gift card.--
(A) General-use prepaid card.--The term
``general-use prepaid card'' means a card or
other payment code or device issued by any
person that is--
(i) redeemable at multiple,
unaffiliated merchants or service
providers, or automated teller
machines;
(ii) issued in a requested amount,
whether or not that amount may, at the
option of the issuer, be increased in
value or reloaded if requested by the
holder;
(iii) purchased or loaded on a
prepaid basis; and
(iv) honored, upon presentation, by
merchants for goods or services, or at
automated teller machines.
(B) Gift certificate.--The term ``gift
certificate'' means an electronic promise that
is--
(i) redeemable at a single merchant
or an affiliated group of merchants
that share the same name, mark, or
logo;
(ii) issued in a specified amount
that may not be increased or reloaded;
(iii) purchased on a prepaid basis in
exchange for payment; and
(iv) honored upon presentation by
such single merchant or affiliated
group of merchants for goods or
services.
(C) Store gift card.--The term ``store gift
card'' means an electronic promise, plastic
card, or other payment code or device that is--
(i) redeemable at a single merchant
or an affiliated group of merchants
that share the same name, mark, or
logo;
(ii) issued in a specified amount,
whether or not that amount may be
increased in value or reloaded at the
request of the holder;
(iii) purchased on a prepaid basis in
exchange for payment; and
(iv) honored upon presentation by
such single merchant or affiliated
group of merchants for goods or
services.
(D) Exclusions.--The terms ``general-use
prepaid card'', ``gift certificate'', and
``store gift card'' do not include an
electronic promise, plastic card, or payment
code or device that is--
(i) used solely for telephone
services;
(ii) reloadable and not marketed or
labeled as a gift card or gift
certificate;
(iii) a loyalty, award, or
promotional gift card, as defined by
the [Bureau] Agency;
(iv) not marketed to the general
public;
(v) issued in paper form only
(including for tickets and events); or
(vi) redeemable solely for admission
to events or venues at a particular
location or group of affiliated
locations, which may also include
services or goods obtainable--
(I) at the event or venue
after admission; or
(II) in conjunction with
admission to such events or
venues, at specific locations
affiliated with and in
geographic proximity to the
event or venue.
(3) Service fee.--
(A) In general.--The term ``service fee''
means a periodic fee, charge, or penalty for
holding or use of a gift certificate, store
gift card, or general-use prepaid card.
(B) Exclusion.--With respect to a general-use
prepaid card, the term ``service fee'' does not
include a one-time initial issuance fee.
(b) Prohibition on Imposition of Fees or Charges.--
(1) In general.--Except as provided under paragraphs
(2) through (4), it shall be unlawful for any person to
impose a dormancy fee, an inactivity charge or fee, or
a service fee with respect to a gift certificate, store
gift card, or general-use prepaid card.
(2) Exceptions.--A dormancy fee, inactivity charge or
fee, or service fee may be charged with respect to a
gift certificate, store gift card, or general-use
prepaid card, if--
(A) there has been no activity with respect
to the certificate or card in the 12-month
period ending on the date on which the charge
or fee is imposed;
(B) the disclosure requirements of paragraph
(3) have been met;
(C) not more than one fee may be charged in
any given month; and
(D) any additional requirements that the
[Bureau] Agency may establish through
rulemaking under subsection (d) have been met.
(3) Disclosure requirements.--The disclosure
requirements of this paragraph are met if--
(A) the gift certificate, store gift card, or
general-use prepaid card clearly and
conspicuously states--
(i) that a dormancy fee, inactivity
charge or fee, or service fee may be
charged;
(ii) the amount of such fee or
charge;
(iii) how often such fee or charge
may be assessed; and
(iv) that such fee or charge may be
assessed for inactivity; and
(B) the issuer or vendor of such certificate
or card informs the purchaser of such charge or
fee before such certificate or card is
purchased, regardless of whether the
certificate or card is purchased in person,
over the Internet, or by telephone.
(4) Exclusion.--The prohibition under paragraph (1)
shall not apply to any gift certificate--
(A) that is distributed pursuant to an award,
loyalty, or promotional program, as defined by
the [Bureau] Agency; and
(B) with respect to which, there is no money
or other value exchanged.
(c) Prohibition on Sale of Gift Cards With Expiration
Dates.--
(1) In general.--Except as provided under paragraph
(2), it shall be unlawful for any person to sell or
issue a gift certificate, store gift card, or general-
use prepaid card that is subject to an expiration date.
(2) Exceptions.--A gift certificate, store gift card,
or general-use prepaid card may contain an expiration
date if--
(A) the expiration date is not earlier than 5
years after the date on which the gift
certificate was issued, or the date on which
card funds were last loaded to a store gift
card or general-use prepaid card; and
(B) the terms of expiration are clearly and
conspicuously stated.
(d) Additional Rulemaking.--
(1) In general.--The [Bureau] Agency shall--
(A) prescribe regulations to carry out this
section, in addition to any other rules or
regulations required by this title, including
such additional requirements as appropriate
relating to the amount of dormancy fees,
inactivity charges or fees, or service fees
that may be assessed and the amount of
remaining value of a gift certificate, store
gift card, or general-use prepaid card below
which such charges or fees may be assessed; and
(B) shall determine the extent to which the
individual definitions and provisions of the
Electronic Fund Transfer Act or Regulation E
should apply to general-use prepaid cards, gift
certificates, and store gift cards.
(2) Consultation.--In prescribing regulations under
this subsection, the [Bureau] Agency shall consult with
the Federal Trade Commission.
(3) Timing; effective date.--The regulations required
by this subsection shall be issued in final form not
later than 9 months after the date of enactment of the
Credit CARD Act of 2009.
Sec. 916. Civil liability
(a) Except as otherwise provided by this section and section
910, any person who fails to comply with any provision of this
title with respect to any consumer, except for an error
resolved in accordance with section 908, is liable to such
consumer in an amount equal to the sum of--
(1) any actual damage sustained by such consumer as a
result of such failure;
(2)(A) in the case of an individual action, an amount
not less than $100 nor greater than $1,000; or
(B) in the case of a class action, such amount as the
court may allow, except that (i) as to each member of
the class no minimum recovery shall be applicable, and
(ii) the total recovery under this subparagraph in any
class action or series of class actions arising out of
the same failure to comply by the same person shall not
be more than the lesser of $500,000 or 1 per centum of
the net worth of the defendant; and
(3) in the case of any successful action to enforce
the foregoing liability, the costs of the action,
together with a reasonable attorney's fee as determined
by the court.
(b) In determining the amount of liability in any action
under subsection (a), the court shall consider, among other
relevant factors--
(1) in any individual action under subsection
(a)(2)(A), the frequency and persistence of
noncompliance, the nature of such noncompliance, and
the extent to which the noncompliance was intentional;
or
(2) in any class action under subsection (a)(2)(B),
the frequency and persistence of noncompliance, the
nature of such noncompliance, the resources of the
defendant, the number of persons adversely affected,
and the extent to which the noncompliance was
intentional.
(c) Except as provided in section 910, a person may not be
held liable in any action brought under this section for a
violation of this title if the person shows by a preponderance
of evidence that the violation was not intentional and resulted
from a bona fide error notwithstanding the maintenance of
procedures reasonably adapted to avoid any such error.
(d) No provision of this section or section 916 imposing any
liability shall apply to--
(1) any act done or omitted in good faith in
conformity with any rule, regulation, or interpretation
thereof by the [Bureau] Agency or the Board or in
conformity with any interpretation or approval by an
official or employee of the [Bureau of Consumer
Financial Protection] Consumer Law Enforcement Agency
or the Federal Reserve System duly authorized by the
[Bureau] Agency or the Board to issue such
interpretations or approvals under such procedures as
the [Bureau] Agency or the Board may prescribe
therefor; or
(2) any failure to make disclosure in proper form if
a financial institution utilized an appropriate model
clause issued by the [Bureau] Agency or the Board,
notwithstanding that after such act, omission, or failure has
occurred, such rule, regulation, approval, or model clause is
amended, rescinded, or determined by judicial or other
authority to be invalid for any reason.
(e) A person has no liability under this section for any
failure to comply with any requirement under this title if,
prior to the institution of an action under this section, the
person notifies the consumer concerned of the failure, complies
with the requirements of this title, and makes an appropriate
adjustment to the consumer's account and pays actual damages
or, where applicable, damages in accordance with section 910.
(f) On a finding by the court that an unsuccessful action
under this section was brought in bad faith or for purposes of
harassment, the court shall award to the defendant attorney's
fees reasonable in relation to the work expended and costs.
(g) Without regard to the amount in controversy, any action
under this section may be brought in any United States district
court, or in any other court of competent jurisdiction, within
one year from the date of the occurrence of the violation.
Sec. 917. Criminal liability
(a) Whoever knowingly and willfully--
(1) gives false or inaccurate information or fails to
provide information which he is required to disclose by
this title or any regulation issued thereunder; or
(2) otherwise fails to comply with any provision of
this title;
shall be fined not more than $5,000 or imprisoned not more than
one year, or both.
(b) Whoever--
(1) knowingly, in a transaction affecting interstate
or foreign commerce, uses or attempts or conspires to
use any counterfeit, fictitious, altered, forged, lost,
stolen, or fraudulently obtained debit instrument to
obtain money, goods, services, or anything else of
value which within any one-year period has a value
aggregating $1,000 or more; or
(2) with unlawful or fraudulent intent, transports or
attempts or conspires to transport in interstate or
foreign commerce a counterfeit, fictitious, altered,
forged, lost, stolen, or fraudulently obtained debit
instrument knowing the same to be counterfeit,
fictitious, altered, forged, lost, stolen, or
fraudulently obtained; or
(3) with unlawful or fraudulent intent, uses any
instrumentality of interstate or foreign commerce to
sell or transport a counterfeit, fictitious, altered,
forged, lost, stolen, or fraudulently obtained debit
instrument knowing the same to be counterfeit,
fictitious, altered, forged, lost, stolen, or
fraudulently obtained; or
(4) knowingly receives, conceals, uses, or
transports, money, goods, services, or anything else of
value (except tickets for interstate or foreign
transportation) which (A) within any one-year period
has a value aggregating $1,000 or more, (B) has moved
in or is part of, or which constitutes interstate or
foreign commerce, and (C) has been obtained with a
counterfeit, fictitious, altered, forged, lost, stolen,
or fraudulently obtained debit instrument; or
(5) knowingly receives, conceals, uses, sells, or
transports in interstate or foreign commerce one or
more tickets for interstate or foreign transportation,
which (A) within any one-year period have a value
aggregating $500 or more, and (B) have been purchased
or obtained with one or more counterfeit, fictitious,
altered, forged, lost, stolen, or fraudulently obtained
debit instrument; or
(6) in a transaction affecting interstate or foreign
commerce, furnishes money, property, services, or
anything else of value, which within any one-year
period has a value aggregating $1,000 or more, through
the use of any counterfeit, fictitious, altered,
forged, lost, stolen, or fraudulently obtained debit
instrument knowingly the same to be counterfeit,
fictitious, altered, forged, lost, stolen, or
fraudulently obtained--
shall be fined not more than $10,000 or imprisoned not more
than ten years, or both.
(c) As used in this section, the term ``debit instrument''
means a card, code, or other device, other than a check, draft,
or similar paper instrument, by the use of which a person may
initiate an electronic fund transfer.
Sec. 918. Administrative enforcement
(a) Subject to subtitle B of the Consumer Financial
Protection Act of 2010, compliance with the requirements
imposed under this title shall be enforced under--
(1) section 8 of the Federal Deposit Insurance Act,
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) national banks, Federal savings
associations, and Federal branches and Federal
agencies of foreign banks;
(B) member banks of the Federal Reserve
System (other than national banks), branches
and agencies of foreign banks (other than
Federal branches, Federal agencies, and insured
State branches of foreign banks), commercial
lending companies owned or controlled by
foreign banks, and organizations operating
under section 25 or 25A of the Federal Reserve
Act; and
(C) banks and State savings associations
insured by the Federal Deposit Insurance
Corporation (other than members of the Federal
Reserve System), and insured State branches of
foreign banks;
(2) the Federal Credit Union Act, by the
Administrator of the National Credit Union
Administration with respect to any Federal credit
union;
(3) the Federal Aviation Act of 1958, by the
Secretary of Transportation, with respect to any air
carrier or foreign air carrier subject to that Act;
(4) the Securities Exchange Act of 1934, by the
Securities and Exchange Commission, with respect to any
broker or dealer subject to that [Act and] Act; and
(5) subtitle E of the Consumer Financial Protection
Act of 2010, by the [Bureau] Agency, with respect to
any person subject to this title, except that the
[Bureau] Agency shall not have authority to enforce the
requirements of section 920 or any regulations
prescribed by the Board under section 920.
The terms used in paragraph (1) that are not defined in this
title or otherwise defined in section 3(s) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the
meaning given to them in section 1(b) of the International
Banking Act of 1978 (12 U.S.C. 3101).
(b) For the purpose of the exercise by any agency referred to
in any of paragraphs (1) through (4) of subsection (a) of its
powers under any Act referred to in that subsection, a
violation of any requirement imposed under this title shall be
deemed to be a violation of a requirement imposed under that
Act. In addition to its powers under any provision of law
specifically referred to in any of paragraphs (1) through (4)
of subsection (a), each of the agencies referred to in that
subsection may exercise, for the purpose of enforcing
compliance with any requirement imposed under this title, any
other authority conferred on it by law.
(c) Overall Enforcement Authority of the Federal Trade
Commission.--Except to the extent that enforcement of the
requirements imposed under this title is specifically committed
to some other Government agency under any of paragraphs (1)
through (4) of subsection (a), and subject to subtitle B of the
Consumer Financial Protection Act of 2010, the Federal Trade
Commission shall be authorized to enforce such requirements.
For the purpose of the exercise by the Federal Trade Commission
of its functions and powers under the Federal Trade Commission
Act, a violation of any requirement imposed under this title
shall be deemed a violation of a requirement imposed under that
Act. All of the functions and powers of the Federal Trade
Commission under the Federal Trade Commission Act are available
to the Federal Trade Commission to enforce compliance by any
person subject to the jurisdiction of the Federal Trade
Commission with the requirements imposed under this title,
irrespective of whether that person is engaged in commerce or
meets any other jurisdictional tests under the Federal Trade
Commission Act.
Sec. 919. Reports to Congress
(a) Not later than twelve months after the effective date of
this title and at one-year intervals thereafter, the [Bureau]
Agency shall make reports to the Congress concerning the
administration of its functions under this title, including
such recommendations as the [Bureau] Agency deems necessary and
appropriate. In addition, each report of the [Bureau] Agency
shall include its assessment of the extent to which compliance
with this title is being achieved, and a summary of the
enforcement actions taken under section 917 of this title. In
such report, the [Bureau] Agency shall particularly address the
effects of this title on the costs and benefits to financial
institutions and consumers, on competition, on the introduction
of new technology, on the operations of financial institutions,
and on the adequacy of consumer protection.
(b) In the exercise of its functions under this title, the
[Bureau] Agency may obtain upon request the views of any other
Federal agency which, in the judgment of the [Bureau] Agency,
exercises regulatory or supervisory functions with respect to
any class of persons subject to this title.
SEC. 920. 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.
SEC. 921. 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] Agency 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 customers are informed is the regular
price; and
(B) does not include any means of increasing
the price that customers are informed is the
regular price.
(5) Electronic debit transaction.--The term
``electronic debit transaction'' means a transaction in
which a person uses a debit card.
(6) Federal agency.--The term ``Federal agency''
means--
(A) an agency (as defined in section 101 of
title 31, United States Code); and
(B) a Government corporation (as defined in
section 103 of title 5, United States Code).
(7) Institution of higher education.--The term
``institution of higher education'' has the same
meaning as in 101 and 102 of the Higher Education Act
of 1965 (20 U.S.C. 1001, 1002).
(8) Interchange transaction fee.--The term
``interchange transaction fee'' means any fee
established, charged or received by a payment card
network for the purpose of compensating an issuer for
its involvement in an electronic debit transaction.
(9) Issuer.--The term ``issuer'' means any person who
issues a debit card, or credit card, or the agent of
such person with respect to such card.
(10) Network fee.--The term ``network fee'' means any
fee charged and received by a payment card network with
respect to an electronic debit transaction, other than
an interchange transaction fee.
(11) Payment card network.--The term ``payment card
network'' means an entity that directly, or through
licensed members, processors, or agents, provides the
proprietary services, infrastructure, and software that
route information and data to conduct debit card or
credit card transaction authorization, clearance, and
settlement, and that a person uses in order to accept
as a form of payment a brand of debit card, credit card
or other device that may be used to carry out debit or
credit transactions.
(d) Enforcement.--
(1) In general.--Compliance with the requirements
imposed under this section shall be enforced under
section 918.
(2) Exception.--Sections 916 and 917 shall not apply
with respect to this section or the requirements
imposed pursuant to this section.
Sec. [922.] 921. Relation to State laws
This title does not annul, alter, or affect the laws of any
State relating to electronic fund transfers, except to the
extent that those laws are inconsistent with the provisions of
this title, and then only to the extent of the inconsistency. A
State law is not inconsistent with this title if the protection
such law affords any consumer is greater than the protection
afforded by this title. The [Bureau] Agency shall, upon its own
motion or upon the request of any financial institution, State,
or other interested party, submitted in accordance with
procedures prescribed in regulations of the [Bureau] Agency,
determine whether a State requirement is inconsistent or
affords greater protection. If the [Bureau] Agency determines
that a State requirement is inconsistent, financial
institutions shall incur no liability under the law of the
State for a good faith failure to comply with that law,
notwithstanding that such determination is subsequently
amended, rescinded, or determined by judicial or other
authority to be invalid for any reason. This title does not
extend the applicability of any such law to any class of
persons or transactions to which it would not otherwise apply.
Sec. 922. Exemption for State regulation
The [Bureau] Agency shall by regulation exempt from the
requirements of this title any class of electronic fund
transfers within any State if the [Bureau] Agency determines
that under the law of that State that class of electronic fund
transfers is subject to requirements substantially similar to
those imposed by this title, and that there is adequate
provision for enforcement.
Sec. [922.] 923. Effective date
This title takes effect upon the expiration of eighteen
months from the date of its enactment, except that sections 909
and 911 take effect upon the expiration of ninety days after
the date of enactment.
----------
FAIR AND ACCURATE CREDIT TRANSACTIONS ACT OF 2003
* * * * * * *
TITLE V--FINANCIAL LITERACY AND EDUCATION IMPROVEMENT
SEC. 511. SHORT TITLE.
This title may be cited as the ``Financial Literacy and
Education Improvement Act''.
* * * * * * *
SEC. 513. ESTABLISHMENT OF FINANCIAL LITERACY AND EDUCATION COMMISSION.
(a) In General.--There is established a commission to be
known as the ``Financial Literacy and Education Commission''.
(b) Purpose.--The Commission shall serve to improve the
financial literacy and education of persons in the United
States through development of a national strategy to promote
financial literacy and education.
(c) Membership.--
(1) Composition.--The Commission shall be composed
of--
(A) the Secretary of the Treasury;
(B) the respective head of each of the
Federal banking agencies (as defined in section
3 of the Federal Deposit Insurance Act), the
National Credit Union Administration, the
Securities and Exchange Commission, each of the
Departments of Education, Agriculture, Defense,
Health and Human Services, Housing and Urban
Development, Labor, and Veterans Affairs, the
Federal Trade Commission, the General Services
Administration, the Small Business
Administration, the Social Security
Administration, the Commodity Futures Trading
Commission, and the Office of Personnel
Management;
(C) the Director of the [Bureau] Agency of
Consumer Financial Protection; and
(D) at the discretion of the President, not
more than 5 individuals appointed by the
President from among the administrative heads
of any other Federal agencies, departments, or
other Federal Government entities, whom the
President determines to be engaged in a serious
effort to improve financial literacy and
education.
(2) Alternates.--Each member of the Commission may
designate an alternate if the member is unable to
attend a meeting of the Commission. Such alternate
shall be an individual who exercises significant
decisionmaking authority.
(d) Chairperson.--The Secretary of the Treasury shall serve
as the Chairperson. The Director of the [Bureau] Agency of
Consumer Financial Protection shall serve as the Vice Chairman.
(e) Meetings.--The Commission shall hold, at the call of the
Chairperson, at least 1 meeting every 4 months. All such
meetings shall be open to the public. The Commission may hold,
at the call of the Chairperson, such other meetings as the
Chairperson sees fit to carry out this title.
(f) Quorum.--A majority of the members of the Commission
shall constitute a quorum, but a lesser number of members may
hold hearings.
(g) Initial Meeting.--The Commission shall hold its first
meeting not later than 60 days after the date of enactment of
this Act.
* * * * * * *
----------
FAIR CREDIT REPORTING ACT
* * * * * * *
TITLE VI--CONSUMER CREDIT REPORTING
* * * * * * *
Sec. 603. Definitions and rules of construction
(a) Definitions and rules of construction set forth in this
section are applicable for the purposes of this title.
(b) The term ``person'' means any individual, partnership,
corporation, trust, estate, cooperative, association,
government or governmental subdivision or agency, or other
entity.
(c) The term ``consumer'' means an individual.
(d) Consumer Report.--
(1) In general.--The term ``consumer report'' means
any written, oral, or other communication of any
information by a consumer reporting agency bearing on a
consumer's credit worthiness, credit standing, credit
capacity, character, general reputation, personal
characteristics, or mode of living which is used or
expected to be used or collected in whole or in part
for the purpose of serving as a factor in establishing
the consumer's eligibility for--
(A) credit or insurance to be used primarily
for personal, family, or household purposes;
(B) employment purposes; or
(C) any other purpose authorized under
section 604.
(2) Exclusions.--Except as provided in paragraph (3),
the term ``consumer report'' does not include--
(A) subject to section 624, any--
(i) report containing information
solely as to transactions or
experiences between the consumer and
the person making the report;
(ii) communication of that
information among persons related by
common ownership or affiliated by
corporate control; or
(iii) communication of other
information among persons related by
common ownership or affiliated by
corporate control, if it is clearly and
conspicuously disclosed to the consumer
that the information may be
communicated among such persons and the
consumer is given the opportunity,
before the time that the information is
initially communicated, to direct that
such information not be communicated
among such persons;
(B) any authorization or approval of a
specific extension of credit directly or
indirectly by the issuer of a credit card or
similar device;
(C) any report in which a person who has been
requested by a third party to make a specific
extension of credit directly or indirectly to a
consumer conveys his or her decision with
respect to such request, if the third party
advises the consumer of the name and address of
the person to whom the request was made, and
such person makes the disclosures to the
consumer required under section 615; or
(D) a communication described in subsection
(o) or [(x)] (y).
(3) Restriction on sharing of medical information.--
Except for information or any communication of
information disclosed as provided in section 604(g)(3),
the exclusions in paragraph (2) shall not apply with
respect to information disclosed to any person related
by common ownership or affiliated by corporate control,
if the information is--
(A) medical information;
(B) an individualized list or description
based on the payment transactions of the
consumer for medical products or services; or
(C) an aggregate list of identified consumers
based on payment transactions for medical
products or services.
(e) The term ``investigative consumer report'' means a
consumer report or portion thereof in which information on a
consumer's character, general reputation, personal
characteristics, or mode of living is obtained through personal
interviews with neighbors, friends, or associates of the
consumer reported on or with others with whom he is acquainted
or who may have knowledge concerning any such items of
information. However, such information shall not include
specific factual information on a consumer's credit record
obtained directly from a creditor of the consumer or from a
consumer reporting agency when such information was obtained
directly from a creditor of the consumer or from the consumer.
(f) The term ``consumer reporting agency'' means any person
which, for monetary fees, dues, or on a cooperative nonprofit
basis, regularly engages in whole or in part in the practice of
assembling or evaluating consumer credit information or other
information on consumers for the purpose of furnishing consumer
reports to third parties, and which uses any means or facility
of interstate commerce for the purpose of preparing or
furnishing consumer reports.
(g) The term ``file'', when used in connection with
information on any consumer, means all of the information on
that consumer recorded and retained by a consumer reporting
agency regardless of how the information is stored.
(h) The term ``employment purposes'' when used in connection
with a consumer report means a report used for the purpose of
evaluating a consumer for employment, promotion, reassignment
or retention as an employee.
(i) Medical Information.--The term ``medical information''--
(1) means information or data, whether oral or
recorded, in any form or medium, created by or derived
from a health care provider or the consumer, that
relates to--
(A) the past, present, or future physical,
mental, or behavioral health or condition of an
individual;
(B) the provision of health care to an
individual; or
(C) the payment for the provision of health
care to an individual.
(2) does not include the age or gender of a consumer,
demographic information about the consumer, including a
consumer's residence address or e-mail address, or any
other information about a consumer that does not relate
to the physical, mental, or behavioral health or
condition of a consumer, including the existence or
value of any insurance policy.
(j) Definitions Relating to Child Support Obligations.--
(1) Overdue support.--The term ``overdue support''
has the meaning given to such term in section 466(e) of
the Social Security Act.
(2) State or local child support enforcement
agency.--The term ``State or local child support
enforcement agency'' means a State or local agency
which administers a State or local program for
establishing and enforcing child support obligations.
(k) Adverse Action.--
(1) Actions included.--The term ``adverse action''--
(A) has the same meaning as in section
701(d)(6) of the Equal Credit Opportunity Act;
and
(B) means--
(i) a denial or cancellation of, an
increase in any charge for, or a
reduction or other adverse or
unfavorable change in the terms of
coverage or amount of, any insurance,
existing or applied for, in connection
with the underwriting of insurance;
(ii) a denial of employment or any
other decision for employment purposes
that adversely affects any current or
prospective employee;
(iii) a denial or cancellation of, an
increase in any charge for, or any
other adverse or unfavorable change in
the terms of, any license or benefit
described in section 604(a)(3)(D); and
(iv) an action taken or determination
that is--
(I) made in connection with
an application that was made
by, or a transaction that was
initiated by, any consumer, or
in connection with a review of
an account under section
604(a)(3)(F)(ii); and
(II) adverse to the interests
of the consumer.
(2) Applicable findings, decisions, commentary, and
orders.--For purposes of any determination of whether
an action is an adverse action under paragraph (1)(A),
all appropriate final findings, decisions, commentary,
and orders issued under section 701(d)(6) of the Equal
Credit Opportunity Act by the [Bureau] Agency or any
court shall apply.
(l) Firm Offer of Credit or Insurance.--The term ``firm offer
of credit or insurance'' means any offer of credit or insurance
to a consumer that will be honored if the consumer is
determined, based on information in a consumer report on the
consumer, to meet the specific criteria used to select the
consumer for the offer, except that the offer may be further
conditioned on one or more of the following:
(1) The consumer being determined, based on
information in the consumer's application for the
credit or insurance, to meet specific criteria bearing
on credit worthiness or insurability, as applicable,
that are established--
(A) before selection of the consumer for the
offer; and
(B) for the purpose of determining whether to
extend credit or insurance pursuant to the
offer.
(2) Verification--
(A) that the consumer continues to meet the
specific criteria used to select the consumer
for the offer, by using information in a
consumer report on the consumer, information in
the consumer's application for the credit or
insurance, or other information bearing on the
credit worthiness or insurability of the
consumer; or
(B) of the information in the consumer's
application for the credit or insurance, to
determine that the consumer meets the specific
criteria bearing on credit worthiness or
insurability.
(3) The consumer furnishing any collateral that is a
requirement for the extension of the credit or
insurance that was--
(A) established before selection of the
consumer for the offer of credit or insurance;
and
(B) disclosed to the consumer in the offer of
credit or insurance.
(m) Credit or Insurance Transaction That Is Not Initiated by
the Consumer.--The term ``credit or insurance transaction that
is not initiated by the consumer'' does not include the use of
a consumer report by a person with which the consumer has an
account or insurance policy, for purposes of--
(1) reviewing the account or insurance policy; or
(2) collecting the account.
(n) State.--The term ``State'' means any State, the
Commonwealth of Puerto Rico, the District of Columbia, and any
territory or possession of the United States.
(o) Excluded Communications.--A communication is described in
this subsection if it is a communication--
(1) that, but for subsection (d)(2)(D), would be an
investigative consumer report;
(2) that is made to a prospective employer for the
purpose of--
(A) procuring an employee for the employer;
or
(B) procuring an opportunity for a natural
person to work for the employer;
(3) that is made by a person who regularly performs
such procurement;
(4) that is not used by any person for any purpose
other than a purpose described in subparagraph (A) or
(B) of paragraph (2); and
(5) with respect to which--
(A) the consumer who is the subject of the
communication--
(i) consents orally or in writing to
the nature and scope of the
communication, before the collection of
any information for the purpose of
making the communication;
(ii) consents orally or in writing to
the making of the communication to a
prospective employer, before the making
of the communication; and
(iii) in the case of consent under
clause (i) or (ii) given orally, is
provided written confirmation of that
consent by the person making the
communication, not later than 3
business days after the receipt of the
consent by that person;
(B) the person who makes the communication
does not, for the purpose of making the
communication, make any inquiry that if made by
a prospective employer of the consumer who is
the subject of the communication would violate
any applicable Federal or State equal
employment opportunity law or regulation; and
(C) the person who makes the communication--
(i) discloses in writing to the
consumer who is the subject of the
communication, not later than 5
business days after receiving any
request from the consumer for such
disclosure, the nature and substance of
all information in the consumer's file
at the time of the request, except that
the sources of any information that is
acquired solely for use in making the
communication and is actually used for
no other purpose, need not be disclosed
other than under appropriate discovery
procedures in any court of competent
jurisdiction in which an action is
brought; and
(ii) notifies the consumer who is the
subject of the communication, in
writing, of the consumer's right to
request the information described in
clause (i).
(p) Consumer Reporting Agency That Compiles and Maintains
Files on Consumers on a Nationwide Basis.--The term ``consumer
reporting agency that compiles and maintains files on consumers
on a nationwide basis'' means a consumer reporting agency that
regularly engages in the practice of assembling or evaluating,
and maintaining, for the purpose of furnishing consumer reports
to third parties bearing on a consumer's credit worthiness,
credit standing, or credit capacity, each of the following
regarding consumers residing nationwide:
(1) Public record information.
(2) Credit account information from persons who
furnish that information regularly and in the ordinary
course of business.
(q) Definitions Relating to Fraud Alerts.--
(1) Active duty military consumer.--The term ``active
duty military consumer'' means a consumer in military
service who--
(A) is on active duty (as defined in section
101(d)(1) of title 10, United States Code) or
is a reservist performing duty under a call or
order to active duty under a provision of law
referred to in section 101(a)(13) of title 10,
United States Code; and
(B) is assigned to service away from the
usual duty station of the consumer.
(2) Fraud alert; active duty alert.--The terms
``fraud alert'' and ``active duty alert'' mean a
statement in the file of a consumer that--
(A) notifies all prospective users of a
consumer report relating to the consumer that
the consumer may be a victim of fraud,
including identity theft, or is an active duty
military consumer, as applicable; and
(B) is presented in a manner that facilitates
a clear and conspicuous view of the statement
described in subparagraph (A) by any person
requesting such consumer report.
(3) Identity theft.--The term ``identity theft''
means a fraud committed using the identifying
information of another person, subject to such further
definition as the [Bureau] Agency may prescribe, by
regulation.
(4) Identity theft report.--The term ``identity theft
report'' has the meaning given that term by rule of the
[Bureau] Agency, and means, at a minimum, a report--
(A) that alleges an identity theft;
(B) that is a copy of an official, valid
report filed by a consumer with an appropriate
Federal, State, or local law enforcement
agency, including the United States Postal
Inspection Service, or such other government
agency deemed appropriate by the [Bureau]
Agency; and
(C) the filing of which subjects the person
filing the report to criminal penalties
relating to the filing of false information if,
in fact, the information in the report is
false.
(5) New credit plan.--The term ``new credit plan''
means a new account under an open end credit plan (as
defined in section [103(i)] 103(j) of the Truth in
Lending Act) or a new credit transaction not under an
open end credit plan.
(r) Credit and Debit Related Terms--
(1) Card issuer.--The term ``card issuer'' means--
(A) a credit card issuer, in the case of a
credit card; and
(B) a debit card issuer, in the case of a
debit card.
(2) Credit card.--The term ``credit card'' has the
same meaning as in section 103 of the Truth in Lending
Act.
(3) Debit card.--The term ``debit card'' means any
card issued by a financial institution to a consumer
for use in initiating an electronic fund transfer from
the account of the consumer at such financial
institution, for the purpose of transferring money
between accounts or obtaining money, property, labor,
or services.
(4) Account and electronic fund transfer.--The terms
``account'' and ``electronic fund transfer'' have the
same meanings as in section 903 of the Electronic Fund
Transfer Act.
(5) Credit and creditor.--The terms ``credit'' and
``creditor'' have the same meanings as in section 702
of the Equal Credit Opportunity Act.
(s) Federal Banking Agency.--The term ``Federal banking
agency'' has the same meaning as in section 3 of the Federal
Deposit Insurance Act.
(t) Financial Institution.--The term ``financial
institution'' means a State or National bank, a State or
Federal savings and loan association, a mutual savings bank, a
State or Federal credit union, or any other person that,
directly or indirectly, holds a transaction account (as defined
in section 19(b) of the Federal Reserve Act) belonging to a
consumer.
(u) Reseller.--The term ``reseller'' means a consumer
reporting agency that--
(1) assembles and merges information contained in the
database of another consumer reporting agency or
multiple consumer reporting agencies concerning any
consumer for purposes of furnishing such information to
any third party, to the extent of such activities; and
(2) does not maintain a database of the assembled or
merged information from which new consumer reports are
produced.
(v) Commission.--The term ``Commission'' means the [Bureau]
Federal Trade Commission.
[(w) The term ``Bureau'' means the Bureau of Consumer
Financial Protection.]
(w) Agency.--The term ``Agency'' means the Consumer Law
Enforcement Agency.
(x) Nationwide Specialty Consumer Reporting Agency.--The term
``nationwide specialty consumer reporting agency'' means a
consumer reporting agency that compiles and maintains files on
consumers on a nationwide basis relating to--
(1) medical records or payments;
(2) residential or tenant history;
(3) check writing history;
(4) employment history; or
(5) insurance claims.
(y) Exclusion of Certain Communications for Employee
Investigations.--
(1) Communications described in this subsection.--A
communication is described in this subsection if--
(A) but for subsection (d)(2)(D), the
communication would be a consumer report;
(B) the communication is made to an employer
in connection with an investigation of--
(i) suspected misconduct relating to
employment; or
(ii) compliance with Federal, State,
or local laws and regulations, the
rules of a self-regulatory
organization, or any preexisting
written policies of the employer;
(C) the communication is not made for the
purpose of investigating a consumer's credit
worthiness, credit standing, or credit
capacity; and
(D) the communication is not provided to any
person except--
(i) to the employer or an agent of
the employer;
(ii) to any Federal or State officer,
agency, or department, or any officer,
agency, or department of a unit of
general local government;
(iii) to any self-regulatory
organization with regulatory authority
over the activities of the employer or
employee;
(iv) as otherwise required by law; or
(v) pursuant to section 608.
(2) Subsequent disclosure.--After taking any adverse
action based in whole or in part on a communication
described in paragraph (1), the employer shall disclose
to the consumer a summary containing the nature and
substance of the communication upon which the adverse
action is based, except that the sources of information
acquired solely for use in preparing what would be but
for subsection (d)(2)(D) an investigative consumer
report need not be disclosed.
(3) Self-regulatory organization defined.--For
purposes of this subsection, the term ``self-regulatory
organization'' includes any self-regulatory
organization (as defined in section 3(a)(26) of the
Securities Exchange Act of 1934), any entity
established under title I of the Sarbanes-Oxley Act of
2002, any board of trade designated by the Commodity
Futures Trading Commission, and any futures association
registered with such Commission.
Sec. 604. Permissible purposes of reports
(a) In General.--Subject to subsection (c), any consumer
reporting agency may furnish a consumer report under the
following circumstances and no other:
(1) In response to the order of a court having
jurisdiction to issue such an order, or a subpoena
issued in connection with proceedings before a Federal
grand jury.
(2) In accordance with the written instructions of
the consumer to whom it relates.
(3) To a person which it has reason to believe--
(A) intends to use the information in
connection with a credit transaction involving
the consumer on whom the information is to be
furnished and involving the extension of credit
to, or review or collection of an account of,
the consumer; or
(B) intends to use the information for
employment purposes; or
(C) intends to use the information in
connection with the underwriting of insurance
involving the consumer; or
(D) intends to use the information in
connection with a determination of the
consumer's eligibility for a license or other
benefit granted by a governmental
instrumentality required by law to consider an
applicant's financial responsibility or status;
or
(E) intends to use the information, as a
potential investor or servicer, or current
insurer, in connection with a valuation of, or
an assessment of the credit or prepayment risks
associated with, an existing credit obligation;
or
(F) otherwise has a legitimate business need
for the information--
(i) in connection with a business
transaction that is initiated by the
consumer; or
(ii) to review an account to
determine whether the consumer
continues to meet the terms of the
account.
(G) executive departments and agencies in
connection with the issuance of government-
sponsored individually-billed travel charge
cards.
(4) In response to a request by the head of a State
or local child support enforcement agency (or a State
or local government official authorized by the head of
such an agency), if the person making the request
certifies to the consumer reporting agency that--
(A) the consumer report is needed for the
purpose of establishing an individual's
capacity to make child support payments,
determining the appropriate level of such
payments, or enforcing a child support order,
award, agreement, or judgment;
(B) the parentage of the consumer for the
child to which the obligation relates has been
established or acknowledged by the consumer in
accordance with State laws under which the
obligation arises (if required by those laws);
and
(C) the consumer report will be kept
confidential, will be used solely for a purpose
described in subparagraph (A), and will not be
used in connection with any other civil,
administrative, or criminal proceeding, or for
any other purpose.
(5) To an agency administering a State plan under
section 454 of the Social Security Act (42 U.S.C. 654)
for use to set an initial or modified child support
award.
(6) To the Federal Deposit Insurance Corporation or
the National Credit Union Administration as part of its
preparation for its appointment or as part of its
exercise of powers, as conservator, receiver, or
liquidating agent for an insured depository institution
or insured credit union under the Federal Deposit
Insurance Act or the Federal Credit Union Act, or other
applicable Federal or State law, or in connection with
the resolution or liquidation of a failed or failing
insured depository institution or insured credit union,
as applicable.
(b) Conditions for Furnishing and Using Consumer Reports for
Employment Purposes.--
(1) Certification from user.--A consumer reporting
agency may furnish a consumer report for employment
purposes only if--
(A) the person who obtains such report from
the agency certifies to the agency that--
(i) the person has complied with
paragraph (2) with respect to the
consumer report, and the person will
comply with paragraph (3) with respect
to the consumer report if paragraph (3)
becomes applicable; and
(ii) information from the consumer
report will not be used in violation of
any applicable Federal or State equal
employment opportunity law or
regulation; and
(B) the consumer reporting agency provides
with the report, or has previously provided, a
summary of the consumer's rights under this
title, as prescribed by the [Bureau] Agency
under [section 609(c)(3)] section 609(c).
(2) Disclosure to consumer.--
(A) In general.--Except as provided in
subparagraph (B), a person may not procure a
consumer report, or cause a consumer report to
be procured, for employment purposes with
respect to any consumer, unless--
(i) a clear and conspicuous
disclosure has been made in writing to
the consumer at any time before the
report is procured or caused to be
procured, in a document that consists
solely of the disclosure, that a
consumer report may be obtained for
employment purposes; and
(ii) the consumer has authorized in
writing (which authorization may be
made on the document referred to in
clause (i)) the procurement of the
report by that person.
(B) Application by mail, telephone, computer,
or other similar means.--If a consumer
described in subparagraph (C) applies for
employment by mail, telephone, computer, or
other similar means, at any time before a
consumer report is procured or caused to be
procured in connection with that application--
(i) the person who procures the
consumer report on the consumer for
employment purposes shall provide to
the consumer, by oral, written, or
electronic means, notice that a
consumer report may be obtained for
employment purposes, and a summary of
the consumer's rights under [section
615(a)(3)] section 615(a)(4); and
(ii) the consumer shall have
consented, orally, in writing, or
electronically to the procurement of
the report by that person.
(C) Scope.--Subparagraph (B) shall apply to a
person procuring a consumer report on a
consumer in connection with the consumer's
application for employment only if--
(i) the consumer is applying for a
position over which the Secretary of
Transportation has the power to
establish qualifications and maximum
hours of service pursuant to the
provisions of section 31502 of title
49, or a position subject to safety
regulation by a State transportation
agency; and
(ii) as of the time at which the
person procures the report or causes
the report to be procured the only
interaction between the consumer and
the person in connection with that
employment application has been by
mail, telephone, computer, or other
similar means.
(3) Conditions on use for adverse actions.--
(A) In general.--Except as provided in
subparagraph (B), in using a consumer report
for employment purposes, before taking any
adverse action based in whole or in part on the
report, the person intending to take such
adverse action shall provide to the consumer to
whom the report relates--
(i) a copy of the report; and
(ii) a description in writing of the
rights of the consumer under this
title, as prescribed by the [Bureau]
Agency under [section 609(c)(3)]
section 609(c).
(B) Application by mail, telephone, computer,
or other similar means.--
(i) If a consumer described in
subparagraph (C) applies for employment
by mail, telephone, computer, or other
similar means, and if a person who has
procured a consumer report on the
consumer for employment purposes takes
adverse action on the employment
application based in whole or in part
on the report, then the person must
provide to the consumer to whom the
report relates, in lieu of the notices
required under subparagraph (A) of this
section and under section 615(a),
within 3 business days of taking such
action, an oral, written or electronic
notification--
(I) that adverse action has
been taken based in whole or in
part on a consumer report
received from a consumer
reporting agency;
(II) of the name, address and
telephone number of the
consumer reporting agency that
furnished the consumer report
(including a toll-free
telephone number established by
the agency if the agency
compiles and maintains files on
consumers on a nationwide
basis);
(III) that the consumer
reporting agency did not make
the decision to take the
adverse action and is unable to
provide to the consumer the
specific reasons why the
adverse action was taken; and
(IV) that the consumer may,
upon providing proper
identification, request a free
copy of a report and may
dispute with the consumer
reporting agency the accuracy
or completeness of any
information in a report.
(ii) If, under [clause (B)(i)(IV)]
clause (i)(IV), the consumer requests a
copy of a consumer report from the
person who procured the report, then,
within 3 business days of receiving the
consumer's request, together with
proper identification, the person must
send or provide to the consumer a copy
of a report and a copy of the
consumer's rights as prescribed by the
[Bureau] Agency under [section
609(c)(3)] section 609(c).
(C) Scope.--Subparagraph (B) shall apply to a
person procuring a consumer report on a
consumer in connection with the consumer's
application for employment only if--
(i) the consumer is applying for a
position over which the Secretary of
Transportation has the power to
establish qualifications and maximum
hours of service pursuant to the
provisions of section 31502 of title
49, or a position subject to safety
regulation by a State transportation
agency; and
(ii) as of the time at which the
person procures the report or causes
the report to be procured the only
interaction between the consumer and
the person in connection with that
employment application has been by
mail, telephone, computer, or other
similar means.
(4) Exception for national security investigations.--
(A) In general.--In the case of an agency or
department of the United States Government
which seeks to obtain and use a consumer report
for employment purposes, paragraph (3) shall
not apply to any adverse action by such agency
or department which is based in part on such
consumer report, if the head of such agency or
department makes a written finding that--
(i) the consumer report is relevant
to a national security investigation of
such agency or department;
(ii) the investigation is within the
jurisdiction of such agency or
department; and
(iii) there is reason to believe that
compliance with paragraph (3) will--
(I) endanger the life or
physical safety of any person;
(II) result in flight from
prosecution;
(III) result in the
destruction of, or tampering
with, evidence relevant to the
investigation;
(IV) result in the
intimidation of a potential
witness relevant to the
investigation;
(V) result in the compromise
of classified information; or
(VI) otherwise seriously
jeopardize or unduly delay the
investigation or another
official proceeding.
(B) Notification of consumer upon conclusion
of investigation.--Upon the conclusion of a
national security investigation described in
subparagraph (A), or upon the determination
that the exception under subparagraph (A) is no
longer required for the reasons set forth in
such subparagraph, the official exercising the
authority in such subparagraph shall provide to
the consumer who is the subject of the consumer
report with regard to which such finding was
made--
(i) a copy of such consumer report
with any classified information
redacted as necessary;
(ii) notice of any adverse action
which is based, in part, on the
consumer report; and
(iii) the identification with
reasonable specificity of the nature of
the investigation for which the
consumer report was sought.
(C) Delegation by head of agency or
department.--For purposes of subparagraphs (A)
and (B), the head of any agency or department
of the United States Government may delegate
his or her authorities under this paragraph to
an official of such agency or department who
has personnel security responsibilities and is
a member of the Senior Executive Service or
equivalent civilian or military rank.
(D) Definitions.--For purposes of this
paragraph, the following definitions shall
apply:
(i) Classified information.--The term
``classified information'' means
information that is protected from
unauthorized disclosure under Executive
Order No. 12958 or successor orders.
(ii) National security
investigation.--The term ``national
security investigation'' means any
official inquiry by an agency or
department of the United States
Government to determine the eligibility
of a consumer to receive access or
continued access to classified
information or to determine whether
classified information has been lost or
compromised.
(c) Furnishing Reports in Connection With Credit or Insurance
Transactions That Are Not Initiated by the Consumer.--
(1) In general.--A consumer reporting agency may
furnish a consumer report relating to any consumer
pursuant to subparagraph (A) or (C) of subsection
(a)(3) in connection with any credit or insurance
transaction that is not initiated by the consumer only
if--
(A) the consumer authorizes the agency to
provide such report to such person; or
(B)(i) the transaction consists of a firm
offer of credit or insurance;
(ii) the consumer reporting agency has
complied with subsection (e);
(iii) there is not in effect an election by
the consumer, made in accordance with
subsection (e), to have the consumer's name and
address excluded from lists of names provided
by the agency pursuant to this paragraph; and
(iv) the consumer report does not contain a
date of birth that shows that the consumer has
not attained the age of 21, or, if the date of
birth on the consumer report shows that the
consumer has not attained the age of 21, such
consumer consents to the consumer reporting
agency to such furnishing.
(2) Limits on information received under paragraph
(1)(b).--A person may receive pursuant to paragraph
(1)(B) only--
(A) the name and address of a consumer;
(B) an identifier that is not unique to the
consumer and that is used by the person solely
for the purpose of verifying the identity of
the consumer; and
(C) other information pertaining to a
consumer that does not identify the
relationship or experience of the consumer with
respect to a particular creditor or other
entity.
(3) Information regarding inquiries.--Except as
provided in section 609(a)(5), a consumer reporting
agency shall not furnish to any person a record of
inquiries in connection with a credit or insurance
transaction that is not initiated by a consumer.
(d) Reserved.--
(e) Election of Consumer To Be Excluded From Lists.--
(1) In general.--A consumer may elect to have the
consumer's name and address excluded from any list
provided by a consumer reporting agency under
subsection (c)(1)(B) in connection with a credit or
insurance transaction that is not initiated by the
consumer by notifying the agency in accordance with
paragraph (2) that the consumer does not consent to any
use of a consumer report relating to the consumer in
connection with any credit or insurance transaction
that is not initiated by the consumer.
(2) Manner of notification.--A consumer shall notify
a consumer reporting agency under paragraph (1)--
(A) through the notification system
maintained by the agency under paragraph (5);
or
(B) by submitting to the agency a signed
notice of election form issued by the agency
for purposes of this subparagraph.
(3) Response of agency after notification through
system.--Upon receipt of notification of the election
of a consumer under paragraph (1) through the
notification system maintained by the agency under
paragraph (5), a consumer reporting agency shall--
(A) inform the consumer that the election is
effective only for the 5-year period following
the election if the consumer does not submit to
the agency a signed notice of election form
issued by the agency for purposes of paragraph
(2)(B); and
(B) provide to the consumer a notice of
election form, if requested by the consumer,
not later than 5 business days after receipt of
the notification of the election through the
system established under paragraph (5), in the
case of a request made at the time the consumer
provides notification through the system.
(4) Effectiveness of election.--An election of a
consumer under paragraph (1)--
(A) shall be effective with respect to a
consumer reporting agency beginning 5 business
days after the date on which the consumer
notifies the agency in accordance with
paragraph (2);
(B) shall be effective with respect to a
consumer reporting agency--
(i) subject to subparagraph (C),
during the 5-year period beginning 5
business days after the date on which
the consumer notifies the agency of the
election, in the case of an election
for which a consumer notifies the
agency only in accordance with
paragraph (2)(A); or
(ii) until the consumer notifies the
agency under subparagraph (C), in the
case of an election for which a
consumer notifies the agency in
accordance with paragraph (2)(B);
(C) shall not be effective after the date on
which the consumer notifies the agency, through
the notification system established by the
agency under paragraph (5), that the election
is no longer effective; and
(D) shall be effective with respect to each
affiliate of the agency.
(5) Notification system.--
(A) In general.--Each consumer reporting
agency that, under subsection (c)(1)(B),
furnishes a consumer report in connection with
a credit or insurance transaction that is not
initiated by a consumer shall--
(i) establish and maintain a
notification system, including a toll-
free telephone number, which permits
any consumer whose consumer report is
maintained by the agency to notify the
agency, with appropriate
identification, of the consumer's
election to have the consumer's name
and address excluded from any such list
of names and addresses provided by the
agency for such a transaction; and
(ii) publish by not later than 365
days after the date of enactment of the
Consumer Credit Reporting Reform Act of
1996, and not less than annually
thereafter, in a publication of general
circulation in the area served by the
agency--
(I) a notification that
information in consumer files
maintained by the agency may be
used in connection with such
transactions; and
(II) the address and toll-
free telephone number for
consumers to use to notify the
agency of the consumer's
election under clause (i).
(B) Establishment and maintenance as
compliance.--Establishment and maintenance of a
notification system (including a toll-free
telephone number) and publication by a consumer
reporting agency on the agency's own behalf and
on behalf of any of its affiliates in
accordance with this paragraph is deemed to be
compliance with this paragraph by each of those
affiliates.
(6) Notification system by agencies that operate
nationwide.--Each consumer reporting agency that
compiles and maintains files on consumers on a
nationwide basis shall establish and maintain a
notification system for purposes of paragraph (5)
jointly with other such consumer reporting agencies.
(f) Certain Use or Obtaining of Information Prohibited.--A
person shall not use or obtain a consumer report for any
purpose unless--
(1) the consumer report is obtained for a purpose for
which the consumer report is authorized to be furnished
under this section; and
(2) the purpose is certified in accordance with
section 607 by a prospective user of the report through
a general or specific certification.
(g) Protection of Medical Information.--
(1) Limitation on consumer reporting agencies.--A
consumer reporting agency shall not furnish for
employment purposes, or in connection with a credit or
insurance transaction, a consumer report that contains
medical information (other than medical contact
information treated in the manner required under
section 605(a)(6)) about a consumer, unless--
(A) if furnished in connection with an
insurance transaction, the consumer
affirmatively consents to the furnishing of the
report;
(B) if furnished for employment purposes or
in connection with a credit transaction--
(i) the information to be furnished
is relevant to process or effect the
employment or credit transaction; and
(ii) the consumer provides specific
written consent for the furnishing of
the report that describes in clear and
conspicuous language the use for which
the information will be furnished; or
(C) the information to be furnished pertains
solely to transactions, accounts, or balances
relating to debts arising from the receipt of
medical services, products, or devises, where
such information, other than account status or
amounts, is restricted or reported using codes
that do not identify, or do not provide
information sufficient to infer, the specific
provider or the nature of such services,
products, or devices, as provided in section
605(a)(6).
(2) Limitation on creditors.--Except as permitted
pursuant to paragraph (3)(C) or regulations prescribed
under paragraph (5)(A), a creditor shall not obtain or
use medical information (other than medical information
treated in the manner required under section 605(a)(6))
pertaining to a consumer in connection with any
determination of the consumer's eligibility, or
continued eligibility, for credit.
(3) Actions authorized by federal law, insurance
activities and regulatory determinations.--Section
603(d)(3) shall not be construed so as to treat
information or any communication of information as a
consumer report if the information or communication is
disclosed--
(A) in connection with the business of
insurance or annuities, including the
activities described in section 18B of the
model Privacy of Consumer Financial and Health
Information Regulation issued by the National
Association of Insurance Commissioners (as in
effect on January 1, 2003);
(B) for any purpose permitted without
authorization under the Standards for
Individually Identifiable Health Information
promulgated by the Department of Health and
Human Services pursuant to the Health Insurance
Portability and Accountability Act of 1996, or
referred to under section 1179 of such Act, or
described in section 502(e) of Public Law 106-
102; or
(C) as otherwise determined to be necessary
and appropriate, by regulation or order, by the
[Bureau] Agency or the applicable State
insurance authority (with respect to any person
engaged in providing insurance or annuities).
(4) Limitation on redisclosure of medical
information.--Any person that receives medical
information pursuant to paragraph (1) or (3) shall not
disclose such information to any other person, except
as necessary to carry out the purpose for which the
information was initially disclosed, or as otherwise
permitted by statute, regulation, or order.
(5) Regulations and effective date for [paragraph
(2).--]
[(A) Regulations required.--The Bureau]
paragraph (2)._The Agency may, after notice and
opportunity for comment, prescribe regulations
that permit transactions under paragraph (2)
that are determined to be necessary and
appropriate to protect legitimate operational,
transactional, risk, consumer, and other needs
(and which shall include permitting actions
necessary for administrative verification
purposes), consistent with the intent of
paragraph (2) to restrict the use of medical
information for inappropriate purposes.
(6) Coordination with other laws.--No provision of
this subsection shall be construed as altering,
affecting, or superseding the applicability of any
other provision of Federal law relating to medical
confidentiality.
Sec. 605. Requirements relating to information contained in consumer
reports
(a) Information Excluded From Consumer Reports.--Except as
authorized under subsection (b), no consumer reporting agency
may make any consumer report containing any of the following
items of information:
(1) Cases under title 11 of the United States Code or under
the Bankruptcy Act that, from the date of entry of the order
for relief or the date of adjudication, as the case may be,
antedate the report by more than 10 years.
(2) Civil suits, civil judgments, and records of arrest that,
from date of entry, antedate the report by more than seven
years or until the governing statute of limitations has
expired, whichever is the longer period.
(3) Paid tax liens which, from date of payment, antedate the
report by more than seven years.
(4) Accounts placed for collection or charged to profit and
loss which antedate the report by more than seven years.
(5) Any other adverse item of information, other than records
of convictions of crimes which antedates the report by more
than seven years.
(6) The name, address, and telephone number of any
medical information furnisher that has notified the
agency of its status, unless--
(A) such name, address, and telephone number
are restricted or reported using codes that do
not identify, or provide information sufficient
to infer, the specific provider or the nature
of such services, products, or devices to a
person other than the consumer; or
(B) the report is being provided to an
insurance company for a purpose relating to
engaging in the business of insurance other
than property and casualty insurance.
(b) The provisions of paragraphs (1) through (5) of
subsection (a) are not applicable in the case of any consumer
credit report to be used in connection with--
(1) a credit transaction involving, or which may
reasonably be expected to involve, a principal amount
of $150,000 or more;
(2) the underwriting of life insurance involving, or
which may reasonably be expected to involve, a face
amount of $150,000 or more; or
(3) the employment of any individual at an annual
salary which equals, or which may reasonably be
expected to equal $75,000, or more.
(c) Running of Reporting Period.--
(1) In general.--The 7-year period referred to in
paragraphs (4) and (6) of subsection (a) shall begin,
with respect to any delinquent account that is placed
for collection (internally or by referral to a third
party, whichever is earlier), charged to profit and
loss, or subjected to any similar action, upon the
expiration of the 180-day period beginning on the date
of the commencement of the delinquency which
immediately preceded the collection activity, charge to
profit and loss, or similar action.
(2) Effective date.--Paragraph (1) shall apply only
to items of information added to the file of a consumer
on or after the date that is 455 days after the date of
enactment of the Consumer Credit Reporting Reform Act
of 1996.
(d) Information Required To Be Disclosed.--
(1) Title 11 information.--Any consumer reporting
agency that furnishes a consumer report that contains
information regarding any case involving the consumer
that arises under title 11, United States Code, shall
include in the report an identification of the chapter
of such title 11 under which such case arises if
provided by the source of the information. If any case
arising or filed under title 11, United States Code, is
withdrawn by the consumer before a final judgment, the
consumer reporting agency shall include in the report
that such case or filing was withdrawn upon receipt of
documentation certifying such withdrawal.
(2) Key factor in credit score information.--Any
consumer reporting agency that furnishes a consumer
report that contains any credit score or any other risk
score or predictor on any consumer shall include in the
report a clear and conspicuous statement that a key
factor (as defined in section 609(f)(2)(B)) that
adversely affected such score or predictor was the
number of enquiries, if such a predictor was in fact a
key factor that adversely affected such score. This
paragraph shall not apply to a check services company,
acting as such, which issues authorizations for the
purpose of approving or processing negotiable
instruments, electronic fund transfers, or similar
methods of payments, but only to the extent that such
company is engaged in such activities.
(e) Indication of Closure of Account by Consumer.--If a
consumer reporting agency is notified pursuant to section
623(a)(4) that a credit account of a consumer was voluntarily
closed by the consumer, the agency shall indicate that fact in
any consumer report that includes information related to the
account.
(f) Indication of Dispute by Consumer.--If a consumer
reporting agency is notified pursuant to section 623(a)(3) that
information regarding a consumer [who] which was furnished to
the agency is disputed by the consumer, the agency shall
indicate that fact in each consumer report that includes the
disputed information.
(g) Truncation of Credit Card and Debit Card Numbers.--
(1) In general.--Except as otherwise provided in this
subsection, no person that accepts credit cards or
debit cards for the transaction of business shall print
more than the last 5 digits of the card number or the
expiration date upon any receipt provided to the
cardholder at the point of the sale or transaction.
(2) Limitation.--This subsection shall apply only to
receipts that are electronically printed, and shall not
apply to transactions in which the sole means of
recording a credit card or debit card account number is
by handwriting or by an imprint or copy of the card.
(3) Effective date.--This subsection shall become
effective--
(A) 3 years after the date of enactment of
this subsection, with respect to any cash
register or other machine or device that
electronically prints receipts for credit card
or debit card transactions that is in use
before January 1, 2005; and
(B) 1 year after the date of enactment of
this subsection, with respect to any cash
register or other machine or device that
electronically prints receipts for credit card
or debit card transactions that is first put
into use on or after January 1, 2005.
(h) Notice of Discrepancy in Address.--
(1) In general.--If a person has requested a consumer
report relating to a consumer from a consumer reporting
agency described in section 603(p), the request
includes an address for the consumer that substantially
differs from the addresses in the file of the consumer,
and the agency provides a consumer report in response
to the request, the consumer reporting agency shall
notify the requester of the existence of the
discrepancy.
(2) Regulations.--
(A) Regulations required.--The [Bureau]
Agency [shall,,] shall, in consultation with
the Federal banking agencies, the National
Credit Union Administration, and the Federal
Trade [Commission,,] Commission, prescribe
regulations providing guidance regarding
reasonable policies and procedures that a user
of a consumer report should employ when such
user has received a notice of discrepancy under
paragraph (1).
(B) Policies and procedures to be included.--
The regulations prescribed under subparagraph
(A) shall describe reasonable policies and
procedures for use by a user of a consumer
report--
(i) to form a reasonable belief that
the user knows the identity of the
person to whom the consumer report
pertains; and
(ii) if the user establishes a
continuing relationship with the
consumer, and the user regularly and in
the ordinary course of business
furnishes information to the consumer
reporting agency from which the notice
of discrepancy pertaining to the
consumer was obtained, to reconcile the
address of the consumer with the
consumer reporting agency by furnishing
such address to such consumer reporting
agency as part of information regularly
furnished by the user for the period in
which the relationship is established.
Sec. 605A. Identity theft prevention; fraud alerts and active duty
alerts
(a) One-Call Fraud Alerts.--
(1) Initial alerts.--Upon the direct request of a
consumer, or an individual acting on behalf of or as a
personal representative of a consumer, who asserts in
good faith a suspicion that the consumer has been or is
about to become a victim of fraud or related crime,
including identity theft, a consumer reporting agency
described in section 603(p) that maintains a file on
the consumer and has received appropriate proof of the
identity of the requester shall--
(A) include a fraud alert in the file of that
consumer, and also provide that alert along
with any credit score generated in using that
file, for a period of not less than 90 days,
beginning on the date of such request, unless
the consumer or such representative requests
that such fraud alert be removed before the end
of such period, and the agency has received
appropriate proof of the identity of the
requester for such purpose; and
(B) refer the information regarding the fraud
alert under this paragraph to each of the other
consumer reporting agencies described in
section 603(p), in accordance with procedures
developed under section 621(f).
(2) Access to free reports.--In any case in which a
consumer reporting agency includes a fraud alert in the
file of a consumer pursuant to this subsection, the
consumer reporting agency shall--
(A) disclose to the consumer that the
consumer may request a free copy of the file of
the consumer pursuant to section 612(d); and
(B) provide to the consumer all disclosures
required to be made under section 609, without
charge to the consumer, not later than 3
business days after any request described in
subparagraph (A).
(b) Extended Alerts.--
(1) In general.--Upon the direct request of a
consumer, or an individual acting on behalf of or as a
personal representative of a consumer, who submits an
identity theft report to a consumer reporting agency
described in section 603(p) that maintains a file on
the consumer, if the agency has received appropriate
proof of the identity of the requester, the agency
shall--
(A) include a fraud alert in the file of that
consumer, and also provide that alert along
with any credit score generated in using that
file, during the 7-year period beginning on the
date of such request, unless the consumer or
such representative requests that such fraud
alert be removed before the end of such period
and the agency has received appropriate proof
of the identity of the requester for such
purpose;
(B) during the 5-year period beginning on the
date of such request, exclude the consumer from
any list of consumers prepared by the consumer
reporting agency and provided to any third
party to offer credit or insurance to the
consumer as part of a transaction that was not
initiated by the consumer, unless the consumer
or such representative requests that such
exclusion be rescinded before the end of such
period; and
(C) refer the information regarding the
extended fraud alert under this paragraph to
each of the other consumer reporting agencies
described in section 603(p), in accordance with
procedures developed under section 621(f).
(2) Access to free reports.--In any case in which a
consumer reporting agency includes a fraud alert in the
file of a consumer pursuant to this subsection, the
consumer reporting agency shall--
(A) disclose to the consumer that the
consumer may request 2 free copies of the file
of the consumer pursuant to section 612(d)
during the 12-month period beginning on the
date on which the fraud alert was included in
the file; and
(B) provide to the consumer all disclosures
required to be made under section 609, without
charge to the consumer, not later than 3
business days after any request described in
subparagraph (A).
(c) Active Duty Alerts.--Upon the direct request of an active
duty military consumer, or an individual acting on behalf of or
as a personal representative of an active duty military
consumer, a consumer reporting agency described in section
603(p) that maintains a file on the active duty military
consumer and has received appropriate proof of the identity of
the requester shall--
(1) include an active duty alert in the file of that
active duty military consumer, and also provide that
alert along with any credit score generated in using
that file, during a period of not less than 12 months,
or such longer period as the [Bureau] Agency shall
determine, by regulation, beginning on the date of the
request, unless the active duty military consumer or
such representative requests that such fraud alert be
removed before the end of such period, and the agency
has received appropriate proof of the identity of the
requester for such purpose;
(2) during the 2-year period beginning on the date of
such request, exclude the active duty military consumer
from any list of consumers prepared by the consumer
reporting agency and provided to any third party to
offer credit or insurance to the consumer as part of a
transaction that was not initiated by the consumer,
unless the consumer requests that such exclusion be
rescinded before the end of such period; and
(3) refer the information regarding the active duty
alert to each of the other consumer reporting agencies
described in section 603(p), in accordance with
procedures developed under section 621(f).
(d) Procedures.--Each consumer reporting agency described in
section 603(p) shall establish policies and procedures to
comply with this section, including procedures that inform
consumers of the availability of initial, extended, and active
duty alerts and procedures that allow consumers and active duty
military consumers to request initial, extended, or active duty
alerts (as applicable) in a simple and easy manner, including
by telephone.
(e) Referrals of Alerts.--Each consumer reporting agency
described in section 603(p) that receives a referral of a fraud
alert or active duty alert from another consumer reporting
agency pursuant to this section shall, as though the agency
received the request from the consumer directly, follow the
procedures required under--
(1) paragraphs (1)(A) and (2) of subsection (a), in
the case of a referral under subsection (a)(1)(B);
(2) paragraphs (1)(A), (1)(B), and (2) of subsection
(b), in the case of a referral under subsection
(b)(1)(C); and
(3) paragraphs (1) and (2) of subsection (c), in the
case of a referral under subsection (c)(3).
(f) Duty of Reseller To Reconvey Alert.--A reseller shall
include in its report any fraud alert or active duty alert
placed in the file of a consumer pursuant to this section by
another consumer reporting agency.
(g) Duty of Other Consumer Reporting Agencies To Provide
Contact Information.--If a consumer contacts any consumer
reporting agency that is not described in section 603(p) to
communicate a suspicion that the consumer has been or is about
to become a victim of fraud or related crime, including
identity theft, the agency shall provide information to the
consumer on how to contact the [Bureau] Agency and the consumer
reporting agencies described in section 603(p) to obtain more
detailed information and request alerts under this section.
(h) Limitations on Use of Information for Credit
Extensions.--
(1) Requirements for initial and active duty
alerts.--
(A) Notification.--Each initial fraud alert
and active duty alert under this section shall
include information that notifies all
prospective users of a consumer report on the
consumer to which the alert relates that the
consumer does not authorize the establishment
of any new credit plan or extension of credit,
other than under an open-end credit plan (as
defined in section [103(i)] 103(j)), in the
name of the consumer, or issuance of an
additional card on an existing credit account
requested by a consumer, or any increase in
credit limit on an existing credit account
requested by a consumer, except in accordance
with subparagraph (B).
(B) Limitation on users.--
(i) In general.--No prospective user
of a consumer report that includes an
initial fraud alert or an active duty
alert in accordance with this section
may establish a new credit plan or
extension of credit, other than under
an open-end credit plan (as defined in
section 103(i)), in the name of the
consumer, or issue an additional card
on an existing credit account requested
by a consumer, or grant any increase in
credit limit on an existing credit
account requested by a consumer, unless
the user utilizes reasonable policies
and procedures to form a reasonable
belief that the user knows the identity
of the person making the request.
(ii) Verification.--If a consumer
requesting the alert has specified a
telephone number to be used for
identity verification purposes, before
authorizing any new credit plan or
extension described in clause (i) in
the name of such consumer, a user of
such consumer report shall contact the
consumer using that telephone number or
take reasonable steps to verify the
consumer's identity and confirm that
the application for a new credit plan
is not the result of identity theft.
(2) Requirements for extended alerts.--
(A) Notification.--Each extended alert under
this section shall include information that
provides all prospective users of a consumer
report relating to a consumer with--
(i) notification that the consumer
does not authorize the establishment of
any new credit plan or extension of
credit described in clause (i), other
than under an open-end credit plan (as
defined in section 103(i)), in the name
of the consumer, or issuance of an
additional card on an existing credit
account requested by a consumer, or any
increase in credit limit on an existing
credit account requested by a consumer,
except in accordance with subparagraph
(B); and
(ii) a telephone number or other
reasonable contact method designated by
the consumer.
(B) Limitation on users.--No prospective user
of a consumer report or of a credit score
generated using the information in the file of
a consumer that includes an extended fraud
alert in accordance with this section may
establish a new credit plan or extension of
credit, other than under an open-end credit
plan (as defined in section 103(i)), in the
name of the consumer, or issue an additional
card on an existing credit account requested by
a consumer, or any increase in credit limit on
an existing credit account requested by a
consumer, unless the user contacts the consumer
in person or using the contact method described
in subparagraph (A)(ii) to confirm that the
application for a new credit plan or increase
in credit limit, or request for an additional
card is not the result of identity theft.
Sec. 605B. Block of information resulting from identity theft
(a) Block.--Except as otherwise provided in this section, a
consumer reporting agency shall block the reporting of any
information in the file of a consumer that the consumer
identifies as information that resulted from an alleged
identity theft, not later than 4 business days after the date
of receipt by such agency of--
(1) appropriate proof of the identity of the
consumer;
(2) a copy of an identity theft report;
(3) the identification of such information by the
consumer; and
(4) a statement by the consumer that the information
is not information relating to any transaction by the
consumer.
(b) Notification.--A consumer reporting agency shall promptly
notify the furnisher of information identified by the consumer
under subsection (a)--
(1) that the information may be a result of identity
theft;
(2) that an identity theft report has been filed;
(3) that a block has been requested under this
section; and
(4) of the effective dates of the block.
(c) Authority To Decline or Rescind.--
(1) In general.--A consumer reporting agency may
decline to block, or may rescind any block, of
information relating to a consumer under this section,
if the consumer reporting agency reasonably determines
that--
(A) the information was blocked in error or a
block was requested by the consumer in error;
(B) the information was blocked, or a block
was requested by the consumer, on the basis of
a material misrepresentation of fact by the
consumer relevant to the request to block; or
(C) the consumer obtained possession of
goods, services, or money as a result of the
blocked transaction or transactions.
(2) Notification to consumer.--If a block of
information is declined or rescinded under this
subsection, the affected consumer shall be notified
promptly, in the same manner as consumers are notified
of the reinsertion of information under section
611(a)(5)(B).
(3) Significance of block.--For purposes of this
subsection, if a consumer reporting agency rescinds a
block, the presence of information in the file of a
consumer prior to the blocking of such information is
not evidence of whether the consumer knew or should
have known that the consumer obtained possession of any
goods, services, or money as a result of the block.
(d) Exception for Resellers.--
(1) No reseller file.--This section shall not apply
to a consumer reporting agency, if the consumer
reporting agency--
(A) is a reseller;
(B) is not, at the time of the request of the
consumer under subsection (a), otherwise
furnishing or reselling a consumer report
concerning the information identified by the
consumer; and
(C) informs the consumer, by any means, that
the consumer may report the identity theft to
the [Bureau] Agency to obtain consumer
information regarding identity theft.
(2) Reseller with file.--The sole obligation of the
consumer reporting agency under this section, with
regard to any request of a consumer under this section,
shall be to block the consumer report maintained by the
consumer reporting agency from any subsequent use, if--
(A) the consumer, in accordance with the
provisions of subsection (a), identifies, to a
consumer reporting agency, information in the
file of the consumer that resulted from
identity theft; and
(B) the consumer reporting agency is a
reseller of the identified information.
(3) Notice.--In carrying out its obligation under
paragraph (2), the reseller shall promptly provide a
notice to the consumer of the decision to block the
file. Such notice shall contain the name, address, and
telephone number of each consumer reporting agency from
which the consumer information was obtained for resale.
(e) Exception for Verification Companies.--The provisions of
this section do not apply to a check services company, acting
as such, which issues authorizations for the purpose of
approving or processing negotiable instruments, electronic fund
transfers, or similar methods of payments, except that,
beginning 4 business days after receipt of information
described in paragraphs (1) through (3) of subsection (a), a
check services company shall not report to a national consumer
reporting agency described in section 603(p), any information
identified in the subject identity theft report as resulting
from identity theft.
(f) Access to Blocked Information by Law Enforcement
Agencies.--No provision of this section shall be construed as
requiring a consumer reporting agency to prevent a Federal,
State, or local law enforcement agency from accessing blocked
information in a consumer file to which the agency could
otherwise obtain access under this title.
* * * * * * *
Sec. 607. Compliance procedures
(a) Every consumer reporting agency shall maintain reasonable
procedures designed to avoid violations of section 605 and to
limit the furnishing of consumer reports to the purposes listed
under section 604. These procedures shall require that
prospective users of the information identify themselves,
certify the purposes for which the information is sought, and
certify that the information will be used for no other purpose.
Every consumer reporting agency shall make a reasonable effort
to verify the identity of a new prospective user and the uses
certified by such prospective user prior to furnishing such
user a consumer report. No consumer reporting agency may
furnish a consumer report to any person if it has reasonable
grounds for believing that the consumer report will not be used
for a purpose listed in section 604.
(b) Whenever a consumer reporting agency prepares a consumer
report it shall follow reasonable procedures to assure maximum
possible accuracy of the information concerning the individual
about whom the report relates.
(c) Disclosure of Consumer Reports by Users Allowed.--A
consumer reporting agency may not prohibit a user of a consumer
report furnished by the agency on a consumer from disclosing
the contents of the report to the consumer, if adverse action
against the consumer has been taken by the user based in whole
or in part on the report.
(d) Notice to Users and Furnishers of Information.--
(1) Notice requirement.--A consumer reporting agency
shall provide to any person--
(A) who regularly and in the ordinary course
of business furnishes information to the agency
with respect to any consumer; or
(B) to whom a consumer report is provided by
the agency;
a notice of such person's responsibilities under this
title.
(2) Content of notice.--The [Bureau] Agency shall
prescribe the content of notices under paragraph (1),
and a consumer reporting agency shall be in compliance
with this subsection if it provides a notice under
paragraph (1) that is substantially similar to the
[Bureau] Agency prescription under this paragraph.
(e) Procurement of Consumer Report for Resale.--
(1) Disclosure.--A person may not procure a consumer
report for purposes of reselling the report (or any
information in the report) unless the person discloses
to the consumer reporting agency that originally
furnishes the report--
(A) the identity of the end-user of the
report (or information); and
(B) each permissible purpose under section
604 for which the report is furnished to the
end-user of the report (or information).
(2) Responsibilities of procurers for resale.--A
person who procures a consumer report for purposes of
reselling the report (or any information in the report)
shall--
(A) establish and comply with reasonable
procedures designed to ensure that the report
(or information) is resold by the person only
for a purpose for which the report may be
furnished under section 604, including by
requiring that each person to which the report
(or information) is resold and that resells or
provides the report (or information) to any
other person--
(i) identifies each end user of the
resold report (or information);
(ii) certifies each purpose for which
the report (or information) will be
used; and
(iii) certifies that the report (or
information) will be used for no other
purpose; and
(B) before reselling the report, make
reasonable efforts to verify the
identifications and certifications made under
subparagraph (A).
(3) Resale of consumer report to a federal agency or
department.--Notwithstanding paragraph (1) or (2), a
person who procures a consumer report for purposes of
reselling the report (or any information in the report)
shall not disclose the identity of the end-user of the
report under paragraph (1) or (2) if--
(A) the end user is an agency or department
of the United States Government which procures
the report from the person for purposes of
determining the eligibility of the consumer
concerned to receive access or continued access
to classified information (as defined in
[section 604(b)(4)(E)(i)] section
604(b)(4)(D)(i)); and
(B) the agency or department certifies in
writing to the person reselling the report that
nondisclosure is necessary to protect
classified information or the safety of persons
employed by or contracting with, or undergoing
investigation for work or contracting with the
agency or department.
* * * * * * *
Sec. 609. Disclosures to consumers
(a) Every consumer reporting agency shall, upon request, and
subject to section 610(a)(1), clearly and accurately disclose
to the consumer:
(1) All information in the consumer's file at the
time of the request, except that--
(A) if the consumer to whom the file relates
requests that the first 5 digits of the social
security number (or similar identification
number) of the consumer not be included in the
disclosure and the consumer reporting agency
has received appropriate proof of the identity
of the requester, the consumer reporting agency
shall so truncate such number in such
disclosure; and
(B) nothing in this paragraph shall be
construed to require a consumer reporting
agency to disclose to a consumer any
information concerning credit scores or any
other risk scores or predictors relating to the
consumer.
(2) The sources of the information; except that the
sources of information acquired solely for use in
preparing an investigative consumer report and actually
used for no other purpose need not be disclosed:
Provided, That in the event an action is brought under
this title, such sources shall be available to the
plaintiff under appropriate discovery procedures in the
court in which the action is brought.
(3)(A) Identification of each person (including each
end-user identified under section 607(e)(1)) that
procured a consumer report--
(i) for employment purposes, during the 2-
year period preceding the date on which the
request is made; or
(ii) for any other purpose, during the 1-year
period preceding the date on which the request
is made.
(B) An identification of a person under subparagraph
(A) shall include--
(i) the name of the person or, if applicable,
the trade name (written in full) under which
such person conducts business; and
(ii) upon request of the consumer, the
address and telephone number of the person.
(C) Subparagraph (A) does not apply if--
(i) the end user is an agency or department
of the United States Government that procures
the report from the person for purposes of
determining the eligibility of the consumer to
whom the report relates to receive access or
continued access to classified information (as
defined in [section 604(b)(4)(E)(i)] section
604(b)(4)(D)(i)); and
(ii) the head of the agency or department
makes a written finding as prescribed under
section 604(b)(4)(A).
(4) The dates, original payees, and amounts of any
checks upon which is based any adverse characterization
of the consumer, included in the file at the time of
the disclosure.
(5) A record of all inquiries received by the agency
during the 1-year period preceding the request that
identified the consumer in connection with a credit or
insurance transaction that was not initiated by the
consumer.
(6) If the consumer requests the credit file and not
the credit score, a statement that the consumer may
request and obtain a credit score.
(b) The requirements of subsection (a) respecting the
disclosure of sources of information and the recipients of
consumer reports do not apply to information received or
consumer reports furnished prior to the effective date of this
title except to the extent that the matter involved is
contained in the files of the consumer reporting agency on that
date.
(c) Summary of Rights To Obtain and Dispute Information in
Consumer Reports and To Obtain Credit Scores.--
(1) [Commission] Bureau summary of rights
required.--
(A) In general.--[The Commission] The Bureau
shall prepare a model summary of the rights of
consumers under this title.
(B) Content of summary.--The summary of
rights prepared under subparagraph (A) shall
include a description of--
(i) the right of a consumer to obtain
a copy of a consumer report under
subsection (a) from each consumer
reporting agency;
(ii) the frequency and circumstances
under which a consumer is entitled to
receive a consumer report without
charge under section 612;
(iii) the right of a consumer to
dispute information in the file of the
consumer under section 611;
(iv) the right of a consumer to
obtain a credit score from a consumer
reporting agency, and a description of
how to obtain a credit score;
(v) the method by which a consumer
can contact, and obtain a consumer
report from, a consumer reporting
agency without charge, as provided in
the regulations of the [Bureau] Agency
prescribed under section 211(c) of the
Fair and Accurate Credit Transactions
Act of 2003; and
(vi) the method by which a consumer
can contact, and obtain a consumer
report from, a consumer reporting
agency described in section [603(w)]
603(x), as provided in the regulations
of the [Bureau] Agency prescribed under
section 612(a)(1)(C).
(C) Availability of summary of rights.--[The
Commission] The Bureau shall--
(i) actively publicize the
availability of the summary of rights
prepared under this paragraph;
(ii) conspicuously post on its
Internet website the availability of
such summary of rights; and
(iii) promptly make such summary of
rights available to consumers, on
request.
(2) Summary of rights required to be included with
agency disclosures.--A consumer reporting agency shall
provide to a consumer, with each written disclosure by
the agency to the consumer under this section--
(A) the summary of rights prepared by the
[Bureau] Agency under paragraph (1);
(B) in the case of a consumer reporting
agency described in section 603(p), a toll-free
telephone number established by the agency, at
which personnel are accessible to consumers
during normal business hours;
(C) a list of all Federal agencies
responsible for enforcing any provision of this
title, and the address and any appropriate
phone number of each such agency, in a form
that will assist the consumer in selecting the
appropriate agency;
(D) a statement that the consumer may have
additional rights under State law, and that the
consumer may wish to contact a State or local
consumer protection agency or a State attorney
general (or the equivalent thereof) to learn of
those rights; and
(E) a statement that a consumer reporting
agency is not required to remove accurate
derogatory information from the file of a
consumer, unless the information is outdated
under section 605 or cannot be verified.
(d) Summary of Rights of Identity Theft Victims.--
(1) In general.--[The Commission] The Bureau, in
consultation with the Federal banking agencies and the
National Credit Union Administration, shall prepare a
model summary of the rights of consumers under this
title with respect to the procedures for remedying the
effects of fraud or identity theft involving credit, an
electronic fund transfer, or an account or transaction
at or with a financial institution or other creditor.
(2) Summary of rights and contact information.--
Beginning 60 days after the date on which the model
summary of rights is prescribed in final form by the
[Bureau] Agency pursuant to paragraph (1), if any
consumer contacts a consumer reporting agency and
expresses a belief that the consumer is a victim of
fraud or identity theft involving credit, an electronic
fund transfer, or an account or transaction at or with
a financial institution or other creditor, the consumer
reporting agency shall, in addition to any other action
that the agency may take, provide the consumer with a
summary of rights that contains all of the information
required by the [Bureau] Agency under paragraph (1),
and information on how to contact the [Bureau] Agency
to obtain more detailed information.
(e) Information Available to Victims.--
(1) In general.--For the purpose of documenting
fraudulent transactions resulting from identity theft,
not later than 30 days after the date of receipt of a
request from a victim in accordance with paragraph (3),
and subject to verification of the identity of the
victim and the claim of identity theft in accordance
with paragraph (2), a business entity that has provided
credit to, provided for consideration products, goods,
or services to, accepted payment from, or otherwise
entered into a commercial transaction for consideration
with, a person who has allegedly made unauthorized use
of the means of identification of the victim, shall
provide a copy of application and business transaction
records in the control of the business entity, whether
maintained by the business entity or by another person
on behalf of the business entity, evidencing any
transaction alleged to be a result of identity theft
to--
(A) the victim;
(B) any Federal, State, or local government
law enforcement agency or officer specified by
the victim in such a request; or
(C) any law enforcement agency investigating
the identity theft and authorized by the victim
to take receipt of records provided under this
subsection.
(2) Verification of identity and claim.--Before a
business entity provides any information under
paragraph (1), unless the business entity, at its
discretion, otherwise has a high degree of confidence
that it knows the identity of the victim making a
request under paragraph (1), the victim shall provide
to the business entity--
(A) as proof of positive identification of
the victim, at the election of the business
entity--
(i) the presentation of a government-
issued identification card;
(ii) personally identifying
information of the same type as was
provided to the business entity by the
unauthorized person; or
(iii) personally identifying
information that the business entity
typically requests from new applicants
or for new transactions, at the time of
the victim's request for information,
including any documentation described
in clauses (i) and (ii); and
(B) as proof of a claim of identity theft, at
the election of the business entity--
(i) a copy of a police report
evidencing the claim of the victim of
identity theft; and
(ii) a properly completed--
(I) copy of a standardized
affidavit of identity theft
developed and made available by
the [Bureau] Agency; or
(II) [an] affidavit of fact
that is acceptable to the
business entity for that
purpose.
(3) Procedures.--The request of a victim under
paragraph (1) shall--
(A) be in writing;
(B) be mailed to an address specified by the
business entity, if any; and
(C) if asked by the business entity, include
relevant information about any transaction
alleged to be a result of identity theft to
facilitate compliance with this section
including--
(i) if known by the victim (or if
readily obtainable by the victim), the
date of the application or transaction;
and
(ii) if known by the victim (or if
readily obtainable by the victim), any
other identifying information such as
an account or transaction number.
(4) No charge to victim.--Information required to be
provided under paragraph (1) shall be so provided
without charge.
(5) Authority to decline to provide information.--A
business entity may decline to provide information
under paragraph (1) if, in the exercise of good faith,
the business entity determines that--
(A) this subsection does not require
disclosure of the information;
(B) after reviewing the information provided
pursuant to paragraph (2), the business entity
does not have a high degree of confidence in
knowing the true identity of the individual
requesting the information;
(C) the request for the information is based
on a misrepresentation of fact by the
individual requesting the information relevant
to the request for information; or
(D) the information requested is Internet
navigational data or similar information about
a person's visit to a website or online
service.
(6) Limitation on liability.--Except as provided in
section 621, sections 616 and 617 do not apply to any
violation of this subsection.
(7) Limitation on civil liability.--No business
entity may be held civilly liable under any provision
of Federal, State, or other law for disclosure, made in
good faith pursuant to this subsection.
(8) No new recordkeeping obligation.--Nothing in this
subsection creates an obligation on the part of a
business entity to obtain, retain, or maintain
information or records that are not otherwise required
to be obtained, retained, or maintained in the ordinary
course of its business or under other applicable law.
(9) Rule of construction.--
(A) In general.--No provision of subtitle A
of title V of Public Law 106-102, prohibiting
the disclosure of financial information by a
business entity to third parties shall be used
to deny disclosure of information to the victim
under this subsection.
(B) Limitation.--Except as provided in
subparagraph (A), nothing in this subsection
permits a business entity to disclose
information, including information to law
enforcement under subparagraphs (B) and (C) of
paragraph (1), that the business entity is
otherwise prohibited from disclosing under any
other applicable provision of Federal or State
law.
(10) Affirmative defense.--In any civil action
brought to enforce this subsection, it is an
affirmative defense (which the defendant must establish
by a preponderance of the evidence) for a business
entity to file an affidavit or answer stating that--
(A) the business entity has made a reasonably
diligent search of its available business
records; and
(B) the records requested under this
subsection do not exist or are not reasonably
available.
(11) Definition of victim.--For purposes of this
subsection, the term ``victim'' means a consumer whose
means of identification or financial information has
been used or transferred (or has been alleged to have
been used or transferred) without the authority of that
consumer, with the intent to commit, or to aid or abet,
an identity theft or a similar crime.
(12) Effective date.--This subsection shall become
effective 180 days after the date of enactment of this
subsection.
(13) Effectiveness study.--Not later than 18 months
after the date of enactment of this subsection, the
Comptroller General of the United States shall submit a
report to Congress assessing the effectiveness of this
provision.
(f) Disclosure of Credit Scores.--
(1) In general.--Upon the request of a consumer for a
credit score, a consumer reporting agency shall supply
to the consumer a statement indicating that the
information and credit scoring model may be different
than the credit score that may be used by the lender,
and a notice which shall include--
(A) the current credit score of the consumer
or the most recent credit score of the consumer
that was previously calculated by the credit
reporting agency for a purpose related to the
extension of credit;
(B) the range of possible credit scores under
the model used;
(C) all of the key factors that adversely
affected the credit score of the consumer in
the model used, the total number of which shall
not exceed 4, subject to paragraph (9);
(D) the date on which the credit score was
created; and
(E) the name of the person or entity that
provided the credit score or credit file upon
which the credit score was created.
(2) Definitions.--For purposes of this subsection,
the following definitions shall apply:
(A) Credit score.--The term ``credit
score''--
(i) means a numerical value or a
categorization derived from a
statistical tool or modeling system
used by a person who makes or arranges
a loan to predict the likelihood of
certain credit behaviors, including
default (and the numerical value or the
categorization derived from such
analysis may also be referred to as a
``risk predictor'' or ``risk score'');
and
(ii) does not include--
(I) any mortgage score or
rating of an automated
underwriting system that
considers one or more factors
in addition to credit
information, including the loan
to value ratio, the amount of
down payment, or the financial
assets of a consumer; or
(II) any other elements of
the underwriting process or
underwriting decision.
(B) Key factors.--The term ``key factors''
means all relevant elements or reasons
adversely affecting the credit score for the
particular individual, listed in the order of
their importance based on their effect on the
credit score.
(3) Timeframe and manner of disclosure.--The
information required by this subsection shall be
provided in the same timeframe and manner as the
information described in subsection (a).
(4) Applicability to certain uses.--This subsection
shall not be construed so as to compel a consumer
reporting agency to develop or disclose a score if the
agency does not--
(A) distribute scores that are used in
connection with residential real property
loans; or
(B) develop scores that assist credit
providers in understanding the general credit
behavior of a consumer and predicting the
future credit behavior of the consumer.
(5) Applicability to credit scores developed by
another person.--
(A) In general.--This subsection shall not be
construed to require a consumer reporting
agency that distributes credit scores developed
by another person or entity to provide a
further explanation of them, or to process a
dispute arising pursuant to section 611, except
that the consumer reporting agency shall
provide the consumer with the name and address
and website for contacting the person or entity
who developed the score or developed the
methodology of the score.
(B) Exception.--This paragraph shall not
apply to a consumer reporting agency that
develops or modifies scores that are developed
by another person or entity.
(6) Maintenance of credit scores not required.--This
subsection shall not be construed to require a consumer
reporting agency to maintain credit scores in its
files.
(7) Compliance in certain cases.--In complying with
this subsection, a consumer reporting agency shall--
(A) supply the consumer with a credit score
that is derived from a credit scoring model
that is widely distributed to users by that
consumer reporting agency in connection with
residential real property loans or with a
credit score that assists the consumer in
understanding the credit scoring assessment of
the credit behavior of the consumer and
predictions about the future credit behavior of
the consumer; and
(B) a statement indicating that the
information and credit scoring model may be
different than that used by the lender.
(8) Fair and reasonable fee.--A consumer reporting
agency may charge a fair and reasonable fee, as
determined by the [Bureau] Agency, for providing the
information required under this subsection.
(9) Use of enquiries as a key factor.--If a key
factor that adversely affects the credit score of a
consumer consists of the number of enquiries made with
respect to a consumer report, that factor shall be
included in the disclosure pursuant to paragraph (1)(C)
without regard to the numerical limitation in such
paragraph.
(g) Disclosure of Credit Scores by Certain Mortgage
Lenders.--
(1) In general.--Any person who makes or arranges
loans and who uses a consumer credit score, as defined
in subsection (f), in connection with an application
initiated or sought by a consumer for a closed end loan
or the establishment of an open end loan for a consumer
purpose that is secured by 1 to 4 units of residential
real property (hereafter in this subsection referred to
as the ``lender'') shall provide the following to the
consumer as soon as reasonably practicable:
(A) Information required under subsection
(f).--
(i) In general.--A copy of the
information identified in subsection
(f) that was obtained from a consumer
reporting agency or was developed and
used by the user of the information.
(ii) Notice under subparagraph (d).--
In addition to the information provided
to it by a third party that provided
the credit score or scores, a lender is
only required to provide the notice
contained in subparagraph (D).
(B) Disclosures in case of automated
underwriting system.--
(i) In general.--If a person that is
subject to this subsection uses an
automated underwriting system to
underwrite a loan, that person may
satisfy the obligation to provide a
credit score by disclosing a credit
score and associated key factors
supplied by a consumer reporting
agency.
(ii) Numerical credit score.--
However, if a numerical credit score is
generated by an automated underwriting
system used by an enterprise, and that
score is disclosed to the person, the
score shall be disclosed to the
consumer consistent with subparagraph
(C).
(iii) Enterprise defined.--For
purposes of this subparagraph, the term
``enterprise'' has the same meaning as
in paragraph (6) of section 1303 of the
Federal Housing Enterprises Financial
Safety and Soundness Act of 1992.
(C) Disclosures of credit scores not obtained
from a consumer reporting agency.--A person
that is subject to the provisions of this
subsection and that uses a credit score, other
than a credit score provided by a consumer
reporting agency, may satisfy the obligation to
provide a credit score by disclosing a credit
score and associated key factors supplied by a
consumer reporting agency.
(D) Notice to home loan applicants.--A copy
of the following notice, which shall include
the name, address, and telephone number of each
consumer reporting agency providing a credit
score that was used:
``notice to the home loan applicant
``In connection with your application for a home loan, the
lender must disclose to you the score that a consumer reporting
agency distributed to users and the lender used in connection
with your home loan, and the key factors affecting your credit
scores.
``The credit score is a computer generated summary
calculated at the time of the request and based on information
that a consumer reporting agency or lender has on file. The
scores are based on data about your credit history and payment
patterns. Credit scores are important because they are used to
assist the lender in determining whether you will obtain a
loan. They may also be used to determine what interest rate you
may be offered on the mortgage. Credit scores can change over
time, depending on your conduct, how your credit history and
payment patterns change, and how credit scoring technologies
change.
``Because the score is based on information in your credit
history, it is very important that you review the credit-
related information that is being furnished to make sure it is
accurate. Credit records may vary from one company to another.
``If you have questions about your credit score or the
credit information that is furnished to you, contact the
consumer reporting agency at the address and telephone number
provided with this notice, or contact the lender, if the lender
developed or generated the credit score. The consumer reporting
agency plays no part in the decision to take any action on the
loan application and is unable to provide you with specific
reasons for the decision on a loan application.
``If you have questions concerning the terms of the loan,
contact the lender.''.
(E) Actions not required under this
subsection.--This subsection shall not require
any person to--
(i) explain the information provided
pursuant to subsection (f);
(ii) disclose any information other
than a credit score or key factors, as
defined in subsection (f);
(iii) disclose any credit score or
related information obtained by the
user after a loan has closed;
(iv) provide more than 1 disclosure
per loan transaction; or
(v) provide the disclosure required
by this subsection when another person
has made the disclosure to the consumer
for that loan transaction.
(F) No obligation for content.--
(i) In general.--The obligation of
any person pursuant to this subsection
shall be limited solely to providing a
copy of the information that was
received from the consumer reporting
agency.
(ii) Limit on liability.--No person
has liability under this subsection for
the content of that information or for
the omission of any information within
the report provided by the consumer
reporting agency.
(G) Person defined as excluding enterprise.--
As used in this subsection, the term ``person''
does not include an enterprise (as defined in
paragraph (6) of section 1303 of the Federal
Housing Enterprises Financial Safety and
Soundness Act of 1992).
(2) Prohibition on disclosure clauses null and
void.--
(A) In general.--Any provision in a contract
that prohibits the disclosure of a credit score
by a person who makes or arranges loans or a
consumer reporting agency is void.
(B) No liability for disclosure under this
subsection.--A lender shall not have liability
under any contractual provision for disclosure
of a credit score pursuant to this subsection.
Sec. 610. Conditions and form of disclosure to consumers
(a) In General.--
(1) Proper identification.--A consumer reporting
agency shall require, as a condition of making the
disclosures required under section 609, that the
consumer furnish proper identification.
(2) Disclosure in writing.--Except as provided in
subsection (b), the disclosures required to be made
under section 609 shall be provided under that section
in writing.
(b) Other Forms of Disclosure.--
(1) In general.--If authorized by a consumer, a
consumer reporting agency may make the disclosures
required under section 609--
(A) other than in writing; and
(B) in such form as may be--
(i) specified by the consumer in
accordance with paragraph (2); and
(ii) available from the agency.
(2) Form.--A consumer may specify pursuant to
paragraph (1) that disclosures under section 609 shall
be made--
(A) in person, upon the appearance of the
consumer at the place of business of the
consumer reporting agency where disclosures are
regularly provided, during normal business
hours, and on reasonable notice;
(B) by telephone, if the consumer has made a
written request for disclosure by telephone;
(C) by electronic means, if available from
the agency; or
(D) by any other reasonable means that is
available from the agency.
(c) Any consumer reporting agency shall provide trained
personnel to explain to the consumer any information furnished
to him pursuant to section 609.
(d) The consumer shall be permitted to be accompanied by one
other person of his choosing, who shall furnish reasonable
identification. A consumer reporting agency may require the
consumer to furnish a written statement granting permission to
the consumer reporting agency to discuss the consumer's file in
such person's presence.
(e) Except as provided in sections 616 and 617, no consumer
may bring any action or proceeding in the nature of defamation,
invasion of privacy, or negligence with respect to the
reporting of information against any consumer reporting agency,
any user of information, or any person who furnishes
information to a consumer reporting agency, based on
information disclosed pursuant to section 609, 610, or 615, or
based on information disclosed by a user of a consumer report
to or for a consumer against whom the user has taken adverse
action, based in whole or in part on the report, except as to
false information furnished with malice or willful intent to
injure such consumer.
Sec. 611. Procedure in case of disputed
accuracy
(a) Reinvestigations of Disputed Information.--
(1) Reinvestigation required.--
(A) In general.--Subject to subsection (f),
if the completeness or accuracy of any item of
information contained in a consumer's file at a
consumer reporting agency is disputed by the
consumer and the consumer notifies the agency
directly, or indirectly through a reseller, of
such dispute, the agency shall, free of charge,
conduct a reasonable reinvestigation to
determine whether the disputed information is
inaccurate and record the current status of the
disputed information, or delete the item from
the file in accordance with paragraph (5),
before the end of the 30-day period beginning
on the date on which the agency receives the
notice of the dispute from the consumer or
reseller.
(B) Extension of period to reinvestigate.--
Except as provided in subparagraph (C), the 30-
day period described in subparagraph (A) may be
extended for not more than 15 additional days
if the consumer reporting agency receives
information from the consumer during that 30-
day period that is relevant to the
reinvestigation.
(C) Limitations on extension of period to
reinvestigate.--Subparagraph (B) shall not
apply to any reinvestigation in which, during
the 30-day period described in subparagraph
(A), the information that is the subject of the
reinvestigation is found to be inaccurate or
incomplete or the consumer reporting agency
determines that the information cannot be
verified.
(2) Prompt notice of dispute to furnisher of
information.--
(A) In general.--Before the expiration of the
5-business-day period beginning on the date on
which a consumer reporting agency receives
notice of a dispute from any consumer or a
reseller in accordance with paragraph (1), the
agency shall provide notification of the
dispute to any person who provided any item of
information in dispute, at the address and in
the manner established with the person. The
notice shall include all relevant information
regarding the dispute that the agency has
received from the consumer or reseller.
(B) Provision of other information.--The
consumer reporting agency shall promptly
provide to the person who provided the
information in dispute all relevant information
regarding the dispute that is received by the
agency from the consumer or the reseller after
the period referred to in subparagraph (A) and
before the end of the period referred to in
paragraph (1)(A).
(3) Determination that dispute is frivolous or
irrelevant.--
(A) In general.--Notwithstanding paragraph
(1), a consumer reporting agency may terminate
a reinvestigation of information disputed by a
consumer under that paragraph if the agency
reasonably determines that the dispute by the
consumer is frivolous or irrelevant, including
by reason of a failure by a consumer to provide
sufficient information to investigate the
disputed information.
(B) Notice of determination.--Upon making any
determination in accordance with subparagraph
(A) that a dispute is frivolous or irrelevant,
a consumer reporting agency shall notify the
consumer of such determination not later than 5
business days after making such determination,
by mail or, if authorized by the consumer for
that purpose, by any other means available to
the agency.
(C) Contents of notice.--A notice under
subparagraph (B) shall include--
(i) the reasons for the determination
under subparagraph (A); and
(ii) identification of any
information required to investigate the
disputed information, which may consist
of a standardized form describing the
general nature of such information.
(4) Consideration of consumer information.--In
conducting any reinvestigation under paragraph (1) with
respect to disputed information in the file of any
consumer, the consumer reporting agency shall review
and consider all relevant information submitted by the
consumer in the period described in paragraph (1)(A)
with respect to such disputed information.
(5) Treatment of inaccurate or unverifiable
information.--
(A) In general.--If, after any
reinvestigation under paragraph (1) of any
information disputed by a consumer, an item of
the information is found to be inaccurate or
incomplete or cannot be verified, the consumer
reporting agency shall--
(i) promptly delete that item of
information from the file of the
consumer, or modify that item of
information, as appropriate, based on
the results of the reinvestigation; and
(ii) promptly notify the furnisher of
that information that the information
has been modified or deleted from the
file of the consumer.
(B) Requirements relating to reinsertion of
previously deleted material.--
(i) Certification of accuracy of
information.--If any information is
deleted from a consumer's file pursuant
to subparagraph (A), the information
may not be reinserted in the file by
the consumer reporting agency unless
the person who furnishes the
information certifies that the
information is complete and accurate.
(ii) Notice to consumer.--If any
information that has been deleted from
a consumer's file pursuant to
subparagraph (A) is reinserted in the
file, the consumer reporting agency
shall notify the consumer of the
reinsertion in writing not later than 5
business days after the reinsertion or,
if authorized by the consumer for that
purpose, by any other means available
to the agency.
(iii) Additional information.--As
part of, or in addition to, the notice
under clause (ii), a consumer reporting
agency shall provide to a consumer in
writing not later than 5 business days
after the date of the reinsertion--
(I) a statement that the
disputed information has been
reinserted;
(II) the business name and
address of any furnisher of
information contacted and the
telephone number of such
furnisher, if reasonably
available, or of any furnisher
of information that contacted
the consumer reporting agency,
in connection with the
reinsertion of such
information; and
(III) a notice that the
consumer has the right to add a
statement to the consumer's
file disputing the accuracy or
completeness of the disputed
information.
(C) Procedures to prevent reappearance.--A
consumer reporting agency shall maintain
reasonable procedures designed to prevent the
reappearance in a consumer's file, and in
consumer reports on the consumer, of
information that is deleted pursuant to this
paragraph (other than information that is
reinserted in accordance with subparagraph
(B)(i)).
(D) Automated reinvestigation system.--Any
consumer reporting agency that compiles and
maintains files on consumers on a nationwide
basis shall implement an automated system
through which furnishers of information to that
consumer reporting agency may report the
results of a reinvestigation that finds
incomplete or inaccurate information in a
consumer's file to other such consumer
reporting agencies.
(6) Notice of results of reinvestigation.--
(A) In general.--A consumer reporting agency
shall provide written notice to a consumer of
the results of a reinvestigation under this
subsection not later than 5 business days after
the completion of the reinvestigation, by mail
or, if authorized by the consumer for that
purpose, by other means available to the
agency.
(B) Contents.--As part of, or in addition to,
the notice under subparagraph (A), a consumer
reporting agency shall provide to a consumer in
writing before the expiration of the 5-day
period referred to in subparagraph (A)--
(i) a statement that the
reinvestigation is completed;
(ii) a consumer report that is based
upon the consumer's file as that file
is revised as a result of the
reinvestigation;
(iii) a notice that, if requested by
the consumer, a description of the
procedure used to determine the
accuracy and completeness of the
information shall be provided to the
consumer by the agency, including the
business name and address of any
furnisher of information contacted in
connection with such information and
the telephone number of such furnisher,
if reasonably available;
(iv) a notice that the consumer has
the right to add a statement to the
consumer's file disputing the accuracy
or completeness of the information; and
(v) a notice that the consumer has
the right to request under subsection
(d) that the consumer reporting agency
furnish notifications under that
subsection.
(7) Description of reinvestigation procedure.--A
consumer reporting agency shall provide to a consumer a
description referred to in paragraph (6)(B)(iii) by not
later than 15 days after receiving a request from the
consumer for that description.
(8) Expedited dispute resolution.--If a dispute
regarding an item of information in a consumer's file
at a consumer reporting agency is resolved in
accordance with paragraph (5)(A) by the deletion of the
disputed information by not later than 3 business days
after the date on which the agency receives notice of
the dispute from the consumer in accordance with
paragraph (1)(A), then the agency shall not be required
to comply with paragraphs (2), (6), and (7) with
respect to that dispute if the agency--
(A) provides prompt notice of the deletion to
the consumer by telephone;
(B) includes in that notice, or in a written
notice that accompanies a confirmation and
consumer report provided in accordance with
subparagraph (C), a statement of the consumer's
right to request under subsection (d) that the
agency furnish notifications under that
subsection; and
(C) provides written confirmation of the
deletion and a copy of a consumer report on the
consumer that is based on the consumer's file
after the deletion, not later than 5 business
days after making the deletion.
(b) If the reinvestigation does not resolve the dispute, the
consumer may file a brief statement setting forth the nature of
the dispute. The consumer reporting agency may limit such
statements to not more than one hundred words if it provides
the consumer with assistance in writing a clear summary of the
dispute.
(c) Whenever a statement of a dispute is filed, unless there
is reasonable grounds to believe that it is frivolous or
irrevelant, the consumer reporting agency shall, in any
subsequent consumer report containing the information in
question, clearly note that it is disputed by the consumer and
provide either the consumer's statement or a clear and accurate
codification or summary thereof.
(d) Following any deletion of information which is found to
be inaccurate or whose accuracy can no longer be verified or
any notation as to disputed information, the consumer reporting
agency shall, at the request of the consumer, furnish
notification that the item has been deleted or the statement,
codification or summary pursuant to subsection (b) or (c) to
any person specifically designated by the consumer who has
within two years prior thereto received a consumer report for
employment purposes, or within six months prior thereto
received a consumer report for any other purpose, which
contained the deleted or disputed information.
(e) Treatment of Complaints and Report to Congress.--
(1) In general.--[The Commission] The Agency shall--
(A) compile all complaints that it receives
that a file of a consumer that is maintained by
a consumer reporting agency described in
section 603(p) contains incomplete or
inaccurate information, with respect to which,
the consumer appears to have disputed the
completeness or accuracy with the consumer
reporting agency or otherwise utilized the
procedures provided by subsection (a); and
(B) transmit each such complaint to each
consumer reporting agency involved.
(2) Exclusion.--Complaints received or obtained by
the [Bureau] Agency pursuant to its investigative
authority under the Consumer Financial Protection Act
of 2010 shall not be subject to paragraph (1).
(3) Agency responsibilities.--Each consumer reporting
agency described in section 603(p) that receives a
complaint transmitted by the [Bureau] Agency pursuant
to paragraph (1) shall--
(A) review each such complaint to determine
whether all legal obligations imposed on the
consumer reporting agency under this title
(including any obligation imposed by an
applicable court or administrative order) have
been met with respect to the subject matter of
the complaint;
(B) provide reports on a regular basis to the
[Bureau] Agency regarding the determinations of
and actions taken by the consumer reporting
agency, if any, in connection with its review
of such complaints; and
(C) maintain, for a reasonable time period,
records regarding the disposition of each such
complaint that is sufficient to demonstrate
compliance with this subsection.
(4) Rulemaking authority.--The [Bureau] Agency may
prescribe regulations, as appropriate to implement this
subsection.
(5) Annual report.--The [Bureau] Agency 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 an annual report
regarding information gathered by the [Bureau] Agency
under this subsection.
(f) Reinvestigation Requirement Applicable to Resellers.--
(1) Exemption from general reinvestigation
requirement.--Except as provided in paragraph (2), a
reseller shall be exempt from the requirements of this
section.
(2) Action required upon receiving notice of a
dispute.--If a reseller receives a notice from a
consumer of a dispute concerning the completeness or
accuracy of any item of information contained in a
consumer report on such consumer produced by the
reseller, the reseller shall, within 5 business days of
receiving the notice, and free of charge--
(A) determine whether the item of information
is incomplete or inaccurate as a result of an
act or omission of the reseller; and
(B) if--
(i) the reseller determines that the
item of information is incomplete or
inaccurate as a result of an act or
omission of the reseller, not later
than 20 days after receiving the
notice, correct the information in the
consumer report or delete it; or
(ii) if the reseller determines that
the item of information is not
incomplete or inaccurate as a result of
an act or omission of the reseller,
convey the notice of the dispute,
together with all relevant information
provided by the consumer, to each
consumer reporting agency that provided
the reseller with the information that
is the subject of the dispute, using an
address or a notification mechanism
specified by the consumer reporting
agency for such notices.
(3) Responsibility of consumer reporting agency to
notify consumer through reseller.--Upon the completion
of a reinvestigation under this section of a dispute
concerning the completeness or accuracy of any
information in the file of a consumer by a consumer
reporting agency that received notice of the dispute
from a reseller under paragraph (2)--
(A) the notice by the consumer reporting
agency under paragraph (6), (7), or (8) of
subsection (a) shall be provided to the
reseller in lieu of the consumer; and
(B) the reseller shall immediately reconvey
such notice to the consumer, including any
notice of a deletion by telephone in the manner
required under paragraph (8)(A).
(4) Reseller reinvestigations.--No provision of this
subsection shall be construed as prohibiting a reseller
from conducting a reinvestigation of a consumer dispute
directly.
SEC. 612. CHARGES FOR CERTAIN DISCLOSURES.
(a) Free Annual Disclosure.--
(1) Nationwide consumer reporting agencies.--
(A) In general.--All consumer reporting
agencies described in subsections (p) and [(w)]
(x) of section 603 shall make all disclosures
pursuant to section 609 once during any 12-
month period upon request of the consumer and
without charge to the consumer.
(B) Centralized source.--Subparagraph (A)
shall apply with respect to a consumer
reporting agency described in section 603(p)
only if the request from the consumer is made
using the centralized source established for
such purpose in accordance with section 211(c)
of the Fair and Accurate Credit Transactions
Act of 2003.
(C) Nationwide specialty consumer reporting
agency.--
(i) In general.--[The Commission] The
Bureau shall prescribe regulations
applicable to each consumer reporting
agency described in section [603(w)]
603(x) to require the establishment of
a streamlined process for consumers to
request consumer reports under
subparagraph (A), which shall include,
at a minimum, the establishment by each
such agency of a toll-free telephone
number for such requests.
(ii) Considerations.--In prescribing
regulations under clause (i), the
[Bureau] Agency shall consider--
(I) the significant demands
that may be placed on consumer
reporting agencies in providing
such consumer reports;
(II) appropriate means to
ensure that consumer reporting
agencies can satisfactorily
meet those demands, including
the efficacy of a system of
staggering the availability to
consumers of such consumer
reports; and
(III) the ease by which
consumers should be able to
contact consumer reporting
agencies with respect to access
to such consumer reports.
(iii) Date of issuance.--[The
Commission] The Bureau shall issue the
regulations required by this
subparagraph in final form not later
than 6 months after the date of
enactment of the Fair and Accurate
Credit Transactions Act of 2003.
(iv) Consideration of ability to
comply.--The regulations of the
[Bureau] Agency under this subparagraph
shall establish an effective date by
which each nationwide specialty
consumer reporting agency (as defined
in section [603(w)] 603(x)) shall be
required to comply with subsection (a),
which effective date--
(I) shall be established
after consideration of the
ability of each nationwide
specialty consumer reporting
agency to comply with
subsection (a); and
(II) shall be not later than
6 months after the date on
which such regulations are
issued in final form (or such
additional period not to exceed
3 months, as the [Bureau]
Agency determines appropriate).
(2) Timing.--A consumer reporting agency shall
provide a consumer report under paragraph (1) not later
than 15 days after the date on which the request is
received under paragraph (1).
(3) Reinvestigations.--Notwithstanding the time
periods specified in section 611(a)(1), a
reinvestigation under that section by a consumer
reporting agency upon a request of a consumer that is
made after receiving a consumer report under this
subsection shall be completed not later than 45 days
after the date on which the request is received.
(4) Exception for first 12 months of operation.--This
subsection shall not apply to a consumer reporting
agency that has not been furnishing consumer reports to
third parties on a continuing basis during the 12-month
period preceding a request under paragraph (1), with
respect to consumers residing nationwide.
(b) Free Disclosure After Adverse Notice to Consumer.--Each
consumer reporting agency that maintains a file on a consumer
shall make all disclosures pursuant to section 609 without
charge to the consumer if, not later than 60 days after receipt
by such consumer of a notification pursuant to section 615, or
of a notification from a debt collection agency affiliated with
that consumer reporting agency stating that the consumer's
credit rating may be or has been adversely affected, the
consumer makes a request under section 609.
(c) Free Disclosure Under Certain Other Circumstances.--Upon
the request of the consumer, a consumer reporting agency shall
make all disclosures pursuant to section 609 once during any
12-month period without charge to that consumer if the consumer
certifies in writing that the consumer--
(1) is unemployed and intends to apply for employment
in the 60-day period beginning on the date on which the
certification is made;
(2) is a recipient of public welfare assistance; or
(3) has reason to believe that the file on the
consumer at the agency contains inaccurate information
due to fraud.
(d) Free Disclosures in Connection With Fraud Alerts.--Upon
the request of a consumer, a consumer reporting agency
described in section 603(p) shall make all disclosures pursuant
to section 609 without charge to the consumer, as provided in
subsections (a)(2) and (b)(2) of section 605A, as applicable.
(e) Other Charges Prohibited.--A consumer reporting agency
shall not impose any charge on a consumer for providing any
notification required by this title or making any disclosure
required by this title, except as authorized by subsection (f).
(f) Reasonable Charges Allowed for Certain Disclosures.--
(1) In general.--In the case of a request from a
consumer other than a request that is covered by any of
subsections (a) through (d), a consumer reporting
agency may impose a reasonable charge on a consumer--
(A) for making a disclosure to the consumer
pursuant to section 609, which charge--
(i) shall not exceed $8; and
(ii) shall be indicated to the
consumer before making the disclosure;
and
(B) for furnishing, pursuant to section
611(d), following a reinvestigation under
section 611(a), a statement, codification, or
summary to a person designated by the consumer
under that section after the 30-day period
beginning on the date of notification of the
consumer under paragraph (6) or (8) of section
611(a) with respect to the reinvestigation,
which charge--
(i) shall not exceed the charge that
the agency would impose on each
designated recipient for a consumer
report; and
(ii) shall be indicated to the
consumer before furnishing such
information.
(2) Modification of amount.--The [Bureau] Agency
shall increase the amount referred to in paragraph
(1)(A)(i) on January 1 of each year, based
proportionally on changes in the Consumer Price Index,
with fractional changes rounded to the nearest fifty
cents.
(g) Prevention of Deceptive Marketing of Credit Reports.--
(1) In general.--Subject to rulemaking pursuant to
section 205(b) of the Credit CARD Act of 2009, any
advertisement for a free credit report in any medium
shall prominently disclose in such advertisement that
free credit reports are available under Federal law at:
``AnnualCreditReport.com'' (or such other source as may
be authorized under Federal law).
(2) Television and radio advertisement.--In the case
of an advertisement broadcast by television, the
disclosures required under paragraph (1) shall be
included in the audio and visual part of such
advertisement. In the case of an advertisement
broadcast by [televison] television or radio, the
disclosure required under paragraph (1) shall consist
only of the following: ``This is not the free credit
report provided for by Federal law''.
* * * * * * *
Sec. 615. Requirements on users of consumer reports
(a) Duties of Users Taking Adverse Actions on the Basis of
Information Contained in Consumer Reports.--If any person takes
any adverse action with respect to any consumer that is based
in whole or in part on any information contained in a consumer
report, the person shall--
(1) provide oral, written, or electronic notice of
the adverse action to the consumer;
(2) provide to the consumer written or electronic
disclosure--
(A) of a numerical credit score as defined in
section 609(f)(2)(A) used by such person in
taking any adverse action based in whole or in
part on any information in a consumer report;
and
(B) of the information set forth in
subparagraphs (B) through (E) of section
609(f)(1);
(3) provide to the consumer orally, in writing, or
electronically--
(A) the name, address, and telephone number
of the consumer reporting agency (including a
toll-free telephone number established by the
agency if the agency compiles and maintains
files on consumers on a nationwide basis) that
furnished the report to the person; and
(B) a statement that the consumer reporting
agency did not make the decision to take the
adverse action and is unable to provide the
consumer the specific reasons why the adverse
action was taken; and
(4) provide to the consumer an oral, written, or
electronic notice of the consumer's right--
(A) to obtain, under section 612, a free copy
of a consumer report on the consumer from the
consumer reporting agency referred to in
paragraph (3), which notice shall include an
indication of the 60-day period under that
section for obtaining such a copy; and
(B) to dispute, under section 611, with a
consumer reporting agency the accuracy or
completeness of any information in a consumer
report furnished by the agency.
(b) Adverse Action Based on Information Obtained From Third
Parties Other Than Consumer Reporting Agencies.--
(1) In general.--Whenever credit for personal,
family, or household purposes involving a consumer is
denied or the charge for such credit is increased
either wholly or partly because of information obtained
from a person other than a consumer reporting agency
bearing upon the consumer's credit worthiness, credit
standing, credit capacity, character, general
reputation, personal characteristics, or mode of
living, the user of such information shall, within a
reasonable period of time, upon the consumer's written
request for the reasons for such adverse action
received within sixty days after learning of such
adverse action, disclose the nature of the information
to the consumer. The user of such information shall
clearly and accurately disclose to the consumer his
right to make such written request at the time such
adverse action is communicated to the consumer.
(2) Duties of person taking certain actions based on
information provided by affiliate.--
(A) Duties, generally.--If a person takes an
action described in subparagraph (B) with
respect to a consumer, based in whole or in
part on information described in subparagraph
(C), the person shall--
(i) notify the consumer of the
action, including a statement that the
consumer may obtain the information in
accordance with clause (ii); and
(ii) upon a written request from the
consumer received within 60 days after
transmittal of the notice required by
clause (i), disclose to the consumer
the nature of the information upon
which the action is based by not later
than 30 days after receipt of the
request.
(B) Action described.--An action referred to
in subparagraph (A) is an adverse action
described in section 603(k)(1)(A), taken in
connection with a transaction initiated by the
consumer, or any adverse action described in
clause (i) or (ii) of section 603(k)(1)(B).
(C) Information described.--Information
referred to in subparagraph (A)--
(i) except as provided in clause
(ii), is information that--
(I) is furnished to the
person taking the action by a
person related by common
ownership or affiliated by
common corporate control to the
person taking the action; and
(II) bears on the credit
worthiness, credit standing,
credit capacity, character,
general reputation, personal
characteristics, or mode of
living of the consumer; and
(ii) does not include--
(I) information solely as to
transactions or experiences
between the consumer and the
person furnishing the
information; or
(II) information in a
consumer report.
(c) No person shall be held liable for any violation of this
section if he shows by a preponderance of the evidence that at
the time of the alleged violation he maintained reasonable
procedures to assure compliance with the provisions of this
section.
(d) Duties of Users Making Written Credit or Insurance
Solicitations on the Basis of Information Contained in Consumer
Files.--
(1) In general.--Any person who uses a consumer
report on any consumer in connection with any credit or
insurance transaction that is not initiated by the
consumer, that is provided to that person under section
604(c)(1)(B), shall provide with each written
solicitation made to the consumer regarding the
transaction a clear and conspicuous statement that--
(A) information contained in the consumer's
consumer report was used in connection with the
transaction;
(B) the consumer received the offer of credit
or insurance because the consumer satisfied the
criteria for credit worthiness or insurability
under which the consumer was selected for the
offer;
(C) if applicable, the credit or insurance
may not be extended if, after the consumer
responds to the offer, the consumer does not
meet the criteria used to select the consumer
for the offer or any applicable criteria
bearing on credit worthiness or insurability or
does not furnish any required collateral;
(D) the consumer has a right to prohibit
information contained in the consumer's file
with any consumer reporting agency from being
used in connection with any credit or insurance
transaction that is not initiated by the
consumer; and
(E) the consumer may exercise the right
referred to in subparagraph (D) by notifying a
notification system established under section
604(e).
(2) Disclosure of address and telephone number;
format.--A statement under paragraph (1) shall--
(A) include the address and toll-free
telephone number of the appropriate
notification system established under section
604(e); and
(B) be presented in such format and in such
type size and manner as to be simple and easy
to understand, as established by the [Bureau]
Agency, by rule, in consultation with the
Federal Trade Commission, the Federal banking
agencies, and the National Credit Union
Administration.
(3) Maintaining criteria on file.--A person who makes
an offer of credit or insurance to a consumer under a
credit or insurance transaction described in paragraph
(1) shall maintain on file the criteria used to select
the consumer to receive the offer, all criteria bearing
on credit worthiness or insurability, as applicable,
that are the basis for determining whether or not to
extend credit or insurance pursuant to the offer, and
any requirement for the furnishing of collateral as a
condition of the extension of credit or insurance,
until the expiration of the 3-year period beginning on
the date on which the offer is made to the consumer.
(4) Authority of federal agencies regarding unfair or
deceptive acts or practices not affected.--This section
is not intended to affect the authority of any Federal
or State agency to enforce a prohibition against unfair
or deceptive acts or practices, including the making of
false or misleading statements in connection with a
credit or insurance transaction that is not initiated
by the consumer.
(e) Red Flag Guidelines and Regulations Required.--
(1) Guidelines.--The Federal banking agencies, the
National Credit Union Administration, the Federal Trade
Commission, the Commodity Futures Trading Commission,
and the Securities and Exchange Commission shall
jointly, with respect to the entities that are subject
to their respective enforcement authority under section
621--
(A) establish and maintain guidelines for use
by each financial institution and each creditor
regarding identity theft with respect to
account holders at, or customers of, such
entities, and update such guidelines as often
as necessary;
(B) prescribe regulations requiring each
financial institution and each creditor to
establish reasonable policies and procedures
for implementing the guidelines established
pursuant to subparagraph (A), to identify
possible risks to account holders or customers
or to the safety and soundness of the
institution or customers; and
(C) prescribe regulations applicable to card
issuers to ensure that, if a card issuer
receives notification of a change of address
for an existing account, and within a short
period of time (during at least the first 30
days after such notification is received)
receives a request for an additional or
replacement card for the same account, the card
issuer may not issue the additional or
replacement card, unless the card issuer, in
accordance with reasonable policies and
procedures--
(i) notifies the cardholder of the
request at the former address of the
cardholder and provides to the
cardholder a means of promptly
reporting incorrect address changes;
(ii) notifies the cardholder of the
request by such other means of
communication as the cardholder and the
card issuer previously agreed to; or
(iii) uses other means of assessing
the validity of the change of address,
in accordance with reasonable policies
and procedures established by the card
issuer in accordance with the
regulations prescribed under
subparagraph (B).
(2) Criteria.--
(A) In general.--In developing the guidelines
required by paragraph (1)(A), the agencies
described in paragraph (1) shall identify
patterns, practices, and specific forms of
activity that indicate the possible existence
of identity theft.
(B) Inactive accounts.--In developing the
guidelines required by paragraph (1)(A), the
agencies described in paragraph (1) shall
consider including reasonable guidelines
providing that when a transaction occurs with
respect to a credit or deposit account that has
been inactive for more than 2 years, the
creditor or financial institution shall follow
reasonable policies and procedures that provide
for notice to be given to a consumer in a
manner reasonably designed to reduce the
likelihood of identity theft with respect to
such account.
(3) Consistency with verification requirements.--
Guidelines established pursuant to paragraph (1) shall
not be inconsistent with the policies and procedures
required under section 5318(l) of title 31, United
States Code.
(4) Definitions.--As used in this subsection, the
term ``creditor''--
(A) means a creditor, as defined in section
702 of the Equal Credit Opportunity Act (15
U.S.C. 1691a), that regularly and in the
ordinary course of business--
(i) obtains or uses consumer reports,
directly or indirectly, in connection
with a credit transaction;
(ii) furnishes information to
consumer reporting agencies, as
described in section 623, in connection
with a credit transaction; or
(iii) advances funds to or on behalf
of a person, based on an obligation of
the person to repay the funds or
repayable from specific property
pledged by or on behalf of the person;
(B) does not include a creditor described in
subparagraph (A)(iii) that advances funds on
behalf of a person for expenses incidental to a
service provided by the creditor to that
person; and
(C) includes any other type of creditor, as
defined in that section 702, as the agency
described in paragraph (1) having authority
over that creditor may determine appropriate by
rule promulgated by that agency, based on a
determination that such creditor offers or
maintains accounts that are subject to a
reasonably foreseeable risk of identity theft.
(f) Prohibition on Sale or Transfer of Debt Caused by
Identity Theft.--
(1) In general.--No person shall sell, transfer for
consideration, or place for collection a debt that such
person has been notified under section 605B has
resulted from identity theft.
(2) Applicability.--The prohibitions of this
subsection shall apply to all persons collecting a debt
described in paragraph (1) after the date of a
notification under paragraph (1).
(3) Rule of construction.--Nothing in this subsection
shall be construed to prohibit--
(A) the repurchase of a debt in any case in
which the assignee of the debt requires such
repurchase because the debt has resulted from
identity theft;
(B) the securitization of a debt or the
pledging of a portfolio of debt as collateral
in connection with a borrowing; or
(C) the transfer of debt as a result of a
merger, acquisition, purchase and assumption
transaction, or transfer of substantially all
of the assets of an entity.
(g) Debt Collector Communications Concerning Identity
Theft.--If a person acting as a debt collector (as that term is
defined in title VIII) on behalf of a third party that is a
creditor or other user of a consumer report is notified that
any information relating to a debt that the person is
attempting to collect may be fraudulent or may be the result of
identity theft, that person shall--
(1) notify the third party that the information may
be fraudulent or may be the result of identity theft;
and
(2) upon request of the consumer to whom the debt
purportedly relates, provide to the consumer all
information to which the consumer would otherwise be
entitled if the consumer were not a victim of identity
theft, but wished to dispute the debt under provisions
of law applicable to that person.
(h) Duties of Users in Certain Credit Transactions.--
(1) In general.--Subject to rules prescribed as
provided in paragraph (6), if any person uses a
consumer report in connection with an application for,
or a grant, extension, or other provision of, credit on
material terms that are materially less favorable than
the most favorable terms available to a substantial
proportion of consumers from or through that person,
based in whole or in part on a consumer report, the
person shall provide an oral, written, or electronic
notice to the consumer in the form and manner required
by regulations prescribed in accordance with this
subsection.
(2) Timing.--The notice required under paragraph (1)
may be provided at the time of an application for, or a
grant, extension, or other provision of, credit or the
time of communication of an approval of an application
for, or grant, extension, or other provision of,
credit, except as provided in the regulations
prescribed under paragraph (6).
(3) Exceptions.--No notice shall be required from a
person under this subsection if--
(A) the consumer applied for specific
material terms and was granted those terms,
unless those terms were initially specified by
the person after the transaction was initiated
by the consumer and after the person obtained a
consumer report; or
(B) the person has provided or will provide a
notice to the consumer under subsection (a) in
connection with the transaction.
(4) Other notice not sufficient.--A person that is
required to provide a notice under subsection (a)
cannot meet that requirement by providing a notice
under this subsection.
(5) Content and delivery of notice.--A notice under
this subsection shall, at a minimum--
(A) include a statement informing the
consumer that the terms offered to the consumer
are set based on information from a consumer
report;
(B) identify the consumer reporting agency
furnishing the report;
(C) include a statement informing the
consumer that the consumer may obtain a copy of
a consumer report from that consumer reporting
agency without charge;
(D) include the contact information specified
by that consumer reporting agency for obtaining
such consumer reports (including a toll-free
telephone number established by the agency in
the case of a consumer reporting agency
described in section 603(p)); and
(E) include a statement informing the
consumer of--
(i) a numerical credit score as
defined in section 609(f)(2)(A), used
by such person in making the credit
decision described in paragraph (1)
based in whole or in part on any
information in a consumer report; and
(ii) the information set forth in
subparagraphs (B) through (E) of
section 609(f)(1).
(6) Rulemaking.--
(A) Rules required.--The [Bureau] Agency
shall prescribe rules to carry out this
subsection.
(B) Content.--Rules required by subparagraph
(A) shall address, but are not limited to--
(i) the form, content, time, and
manner of delivery of any notice under
this subsection;
(ii) clarification of the meaning of
terms used in this subsection,
including what credit terms are
material, and when credit terms are
materially less favorable;
(iii) exceptions to the notice
requirement under this subsection for
classes of persons or transactions
regarding which the agencies determine
that notice would not significantly
benefit consumers;
(iv) a model notice that may be used
to comply with this subsection; and
(v) the timing of the notice required
under paragraph (1), including the
circumstances under which the notice
must be provided after the terms
offered to the consumer were set based
on information from a consumer report.
(7) Compliance.--A person shall not be liable for
failure to perform the duties required by this section
if, at the time of the failure, the person maintained
reasonable policies and procedures to comply with this
section.
(8) Enforcement.--
(A) No civil actions.--Sections 616 and 617
shall not apply to any failure by any person to
comply with this section.
(B) Administrative enforcement.--This section
shall be enforced exclusively under section 621
by the Federal agencies and officials
identified in that section.
* * * * * * *
Sec. 621. Administrative enforcement
(a) Enforcement by Federal Trade Commission.--
(1) In general.--The Federal Trade Commission shall
be authorized to enforce compliance with the
requirements imposed by this title under the Federal
Trade Commission Act (15 U.S.C. 41 et seq.), with
respect to consumer reporting agencies and all other
persons subject thereto, except to the extent that
enforcement of the requirements imposed under this
title is specifically committed to some other
Government agency under any of subparagraphs (A)
through (G) of subsection (b)(1), and subject to
subtitle B of the Consumer Financial Protection Act of
2010[, subsection (b)]. For the purpose of the exercise
by the Federal Trade Commission of its functions and
powers under the Federal Trade Commission Act, a
violation of any requirement or prohibition imposed
under this title shall constitute an unfair or
deceptive act or practice in commerce, in violation of
section 5(a) of the Federal Trade Commission Act (15
U.S.C. 45(a)), and shall be subject to enforcement by
the Federal Trade Commission under section 5(b) of that
Act with respect to any consumer reporting agency or
person that is subject to enforcement by the Federal
Trade Commission pursuant to this subsection,
irrespective of whether that person is engaged in
commerce or meets any other jurisdictional tests under
the Federal Trade Commission Act. The Federal Trade
Commission shall have such procedural, investigative,
and enforcement powers, including the power to issue
procedural rules in enforcing compliance with the
requirements imposed under this title and to require
the filing of reports, the production of documents, and
the appearance of witnesses, as though the applicable
terms and conditions of the Federal Trade Commission
Act were part of this title. Any person violating any
of the provisions of this title shall be subject to the
penalties and entitled to the privileges and immunities
provided in the Federal Trade Commission Act as though
the applicable terms and provisions of such Act are
part of this title.
(2) Penalties.--
(A) Knowing violations.--Except as otherwise
provided by subtitle B of the Consumer
Financial Protection Act of 2010, in the event
of a knowing violation, which constitutes a
pattern or practice of violations of this
title, the Federal Trade Commission may
commence a civil action to recover a civil
penalty in a district court of the United
States against any person that violates this
title. In such action, such person shall be
liable for a civil penalty of not more than
$2,500 per violation.
(B) Determining penalty amount.--In
determining the amount of a civil penalty under
subparagraph (A), the court shall take into
account the degree of culpability, any history
of such prior conduct, ability to pay, effect
on ability to continue to do business, and such
other matters as justice may require.
(C) Limitation.--Notwithstanding paragraph
(2), a court may not impose any civil penalty
on a person for a violation of section
623(a)(1), unless the person has been enjoined
from committing the violation, or ordered not
to commit the violation, in an action or
proceeding brought by or on behalf of the
Federal Trade Commission, and has violated the
injunction or order, and the court may not
impose any civil penalty for any violation
occurring before the date of the violation of
the injunction or order.
(b) Enforcement by Other Agencies.--
(1) In general.--Subject to subtitle B of the
Consumer Financial Protection Act of 2010, compliance
with the requirements imposed under this title with
respect to consumer reporting agencies, persons who use
consumer reports from such agencies, persons who
furnish information to such agencies, and users of
information that are subject to section 615(d) shall be
enforced under--
(A) 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--
(i) any national bank or State
savings association, and any Federal
branch or Federal agency of a foreign
bank;
(ii) any member bank of the Federal
Reserve System (other than a national
bank), a branch or agency of a foreign
bank (other than a Federal branch,
Federal agency, or insured State branch
of a foreign bank), a commercial
lending company owned or controlled by
a foreign bank, and any organization
operating under section 25 or 25A of
the Federal Reserve Act; and
(iii) any bank or Federal savings
association insured by the Federal
Deposit Insurance Corporation (other
than a member of the Federal Reserve
System) and any insured State branch of
a foreign bank;
(B) the Federal Credit Union Act (12 U.S.C.
1751 et seq.), by the Administrator of the
National Credit Union Administration with
respect to any Federal credit union;
(C) subtitle IV of title 49, United States
Code, by the Secretary of Transportation, with
respect to all carriers subject to the
jurisdiction of the Surface Transportation
Board;
(D) the Federal Aviation Act of 1958 (49
U.S.C. App. 1301 et seq.), by the Secretary of
Transportation, with respect to any air carrier
or foreign air carrier subject to that Act;
(E) the Packers and Stockyards Act, 1921 (7
U.S.C. 181 et seq.) (except as provided in
section 406 of that Act), by the Secretary of
Agriculture, with respect to any activities
subject to that Act;
(F) the Commodity Exchange Act, with respect
to a person subject to the jurisdiction of the
Commodity Futures Trading Commission;
(G) the Federal securities laws, and any
other laws that are subject to the jurisdiction
of the Securities and Exchange Commission, with
respect to a person that is subject to the
jurisdiction of the Securities and Exchange
Commission; and
(H) subtitle E of the Consumer Financial
Protection Act of 2010, by the [Bureau] Agency,
with respect to any person subject to this
title.
(2) Incorporated definitions.--The terms used in
paragraph (1) that are not defined in this title or
otherwise defined in section 3(s) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(s)) have the same
meanings as in section 1(b) of the International
Banking Act of 1978 (12 U.S.C. 3101).
(c) State Action for Violations.--
(1) Authority of states.--In addition to such other
remedies as are provided under State law, if the chief
law enforcement officer of a State, or an official or
agency designated by a State, has reason to believe
that any person has violated or is violating this
title, the State--
(A) may bring an action to enjoin such
violation in any appropriate United States
district court or in any other court of
competent jurisdiction;
(B) subject to paragraph (5), may bring an
action on behalf of the residents of the State
to recover--
(i) damages for which the person is
liable to such residents under sections
616 and 617 as a result of the
violation;
(ii) in the case of a violation
described in any of paragraphs (1)
through (3) of section 623(c), damages
for which the person would, but for
section 623(c), be liable to such
residents as a result of the violation;
or
(iii) damages of not more than $1,000
for each willful or negligent
violation; and
(C) in the case of any successful action
under subparagraph (A) or (B), shall be awarded
the costs of the action and reasonable attorney
fees as determined by the court.
(2) Rights of federal regulators.--The State shall
serve prior written notice of any action under
paragraph (1) upon the [Bureau] Agency and the Federal
Trade Commission or the appropriate Federal regulator
determined under subsection (b) and provide the
[Bureau] Agency and the Federal Trade Commission or
appropriate Federal regulator with a copy of its
complaint, except in any case in which such prior
notice is not feasible, in which case the State shall
serve such notice immediately upon instituting such
action. The [Bureau] Agency and the Federal Trade
Commission or appropriate Federal regulator shall have
the right--
(A) to intervene in the action;
(B) upon so intervening, to be heard on all
matters arising therein;
(C) to remove the action to the appropriate
United States district court; and
(D) to file petitions for appeal.
(3) Investigatory powers.--For purposes of bringing
any action under this subsection, nothing in this
subsection shall prevent the chief law enforcement
officer, or an official or agency designated by a
State, from exercising the powers conferred on the
chief law enforcement officer or such official by the
laws of such State to conduct investigations or to
administer oaths or affirmations or to compel the
attendance of witnesses or the production of
documentary and other evidence.
(4) Limitation on state action while federal action
pending.--If the [Bureau] Agency, the Federal Trade
Commission, or the appropriate Federal regulator has
instituted a civil action or an administrative action
under section 8 of the Federal Deposit Insurance Act
for a violation of this title, no State may, during the
pendency of such action, bring an action under this
section against any defendant named in the complaint of
the [Bureau] Agency, the Federal Trade Commission, or
the appropriate Federal regulator for any violation of
this title that is alleged in that complaint.
(5) Limitations on state actions for certain
violations.--
(A) Violation of injunction required.--A
State may not bring an action against a person
under paragraph (1)(B) for a violation
described in any of paragraphs (1) through (3)
of section 623(c), unless--
(i) the person has been enjoined from
committing the violation, in an action
brought by the State under paragraph
(1)(A); and
(ii) the person has violated the
injunction.
(B) Limitation on damages recoverable.--In an
action against a person under paragraph (1)(B)
for a violation described in any of paragraphs
(1) through (3) of section 623(c), a State may
not recover any damages incurred before the
date of the violation of an injunction on which
the action is based.
(d) For the purpose of the exercise by any agency referred to
in subsection (b) of its powers under any Act referred to in
that subsection, a violation of any requirement imposed under
this title shall be deemed to be a violation of a requirement
imposed under that Act. In addition to its powers under any
provision of law specifically referred to in subsection (b),
each of the agencies referred to in that subsection may
exercise, for the purpose of enforcing compliance with any
requirement imposed under this title any other authority
conferred on it by law.
(e) Regulatory Authority.--
(1) In general.--The [Bureau] Agency shall prescribe
such regulations as are necessary to carry out the
purposes of this title, except with respect to sections
615(e) and 628. The [Bureau] Agency may prescribe
regulations as may be necessary or appropriate to
administer and carry out the purposes and objectives of
this title, and to prevent evasions thereof or to
facilitate compliance therewith. Except as provided in
section 1029(a) of the Consumer Financial Protection
Act of 2010, the regulations prescribed by the [Bureau]
Agency under this title shall apply to any person that
is subject to this title, notwithstanding the
enforcement authorities granted to other agencies under
this section.
(2) Deference.--Notwithstanding any power granted to
any Federal agency under this title, the deference that
a court affords to a Federal agency with respect to a
determination made by such agency relating to the
meaning or interpretation of any provision of this
title that is subject to the jurisdiction of such
agency shall be applied as if that agency were the only
agency authorized to apply, enforce, interpret, or
administer the provisions of this title. The
regulations prescribed by the [Bureau] Agency under
this title shall apply to any person that is subject to
this title, notwithstanding the enforcement authorities
granted to other agencies under this section.
(f) Coordination of Consumer Complaint Investigations.--
(1) In general.--Each consumer reporting agency
described in section 603(p) shall develop and maintain
procedures for the referral to each other such agency
of any consumer complaint received by the agency
alleging identity theft, or requesting a fraud alert
under section 605A or a block under section 605B.
(2) Model form and procedure for reporting identity
theft.--[The Commission] The Agency, in consultation
with the Federal Trade Commission, the Federal banking
agencies, and the National Credit Union Administration,
shall develop a model form and model procedures to be
used by consumers who are victims of identity theft for
contacting and informing creditors and consumer
reporting agencies of the fraud.
(3) Annual summary reports.--Each consumer reporting
agency described in section 603(p) shall submit an
annual summary report to the [Bureau] Agency on
consumer complaints received by the agency on identity
theft or fraud alerts.
(g) Bureau Regulation of Coding of Trade Names.--If the
[Bureau] Agency determines that a person described in paragraph
(9) of section 623(a) has not met the requirements of such
paragraph, the [Bureau] Agency shall take action to ensure the
person's compliance with such paragraph, which may include
issuing model guidance or prescribing reasonable policies and
procedures, as necessary to ensure that such person complies
with such paragraph.
* * * * * * *
SEC. 623. RESPONSIBILITIES OF FURNISHERS OF INFORMATION TO CONSUMER
REPORTING AGENCIES.
(a) Duty of Furnishers of Information To Provide Accurate
Information.--
(1) Prohibition.--
(A) Reporting information with actual
knowledge of errors.--A person shall not
furnish any information relating to a consumer
to any consumer reporting agency if the person
knows or has reasonable cause to believe that
the information is inaccurate.
(B) Reporting information after notice and
confirmation of errors.--A person shall not
furnish information relating to a consumer to
any consumer reporting agency if--
(i) the person has been notified by
the consumer, at the address specified
by the person for such notices, that
specific information is inaccurate; and
(ii) the information is, in fact,
inaccurate.
(C) No address requirement.--A person who
clearly and conspicuously specifies to the
consumer an address for notices referred to in
subparagraph (B) shall not be subject to
subparagraph (A); however, nothing in
subparagraph (B) shall require a person to
specify such an address.
(D) Definition.--For purposes of subparagraph
(A), the term ``reasonable cause to believe
that the information is inaccurate'' means
having specific knowledge, other than solely
allegations by the consumer, that would cause a
reasonable person to have substantial doubts
about the accuracy of the information.
(2) Duty to correct and update information.--A person
who--
(A) regularly and in the ordinary course of
business furnishes information to one or more
consumer reporting agencies about the person's
transactions or experiences with any consumer;
and
(B) has furnished to a consumer reporting
agency information that the person determines
is not complete or accurate,
shall promptly notify the consumer reporting agency of
that determination and provide to the agency any
corrections to that information, or any additional
information, that is necessary to make the information
provided by the person to the agency complete and
accurate, and shall not thereafter furnish to the
agency any of the information that remains not complete
or accurate.
(3) Duty to provide notice of dispute.--If the
completeness or accuracy of any information furnished
by any person to any consumer reporting agency is
disputed to such person by a consumer, the person may
not furnish the information to any consumer reporting
agency without notice that such information is disputed
by the consumer.
(4) Duty to provide notice of closed accounts.--A
person who regularly and in the ordinary course of
business furnishes information to a consumer reporting
agency regarding a consumer who has a credit account
with that person shall notify the agency of the
voluntary closure of the account by the consumer, in
information regularly furnished for the period in which
the account is closed.
(5) Duty to provide notice of delinquency [of
accounts.--][(A) In general.--A person] Of accounts._
(A) In general._A person who furnishes
information to a consumer reporting agency
regarding a delinquent account being placed for
collection, charged to profit or loss, or
subjected to any similar action shall, not
later than 90 days after furnishing the
information, notify the agency of the date of
delinquency on the account, which shall be the
month and year of the commencement of the
delinquency on the account that immediately
preceded the action.
(B) Rule of construction.--For purposes of
this paragraph only, and provided that the
consumer does not dispute the information, a
person that furnishes information on a
delinquent account that is placed for
collection, charged for profit or loss, or
subjected to any similar action, complies with
this paragraph, if--
(i) the person reports the same date
of delinquency as that provided by the
creditor to which the account was owed
at the time at which the commencement
of the delinquency occurred, if the
creditor previously reported that date
of delinquency to a consumer reporting
agency;
(ii) the creditor did not previously
report the date of delinquency to a
consumer reporting agency, and the
person establishes and follows
reasonable procedures to obtain the
date of delinquency from the creditor
or another reliable source and reports
that date to a consumer reporting
agency as the date of delinquency; or
(iii) the creditor did not previously
report the date of delinquency to a
consumer reporting agency and the date
of delinquency cannot be reasonably
obtained as provided in clause (ii),
the person establishes and follows
reasonable procedures to ensure the
date reported as the date of
delinquency precedes the date on which
the account is placed for collection,
charged to profit or loss, or subjected
to any similar action, and reports such
date to the credit reporting agency.
(6) Duties of furnishers upon notice of identity
theft-related information.--
(A) Reasonable procedures.--A person that
furnishes information to any consumer reporting
agency shall have in place reasonable
procedures to respond to any notification that
it receives from a consumer reporting agency
under section 605B relating to information
resulting from identity theft, to prevent that
person from refurnishing such blocked
information.
(B) Information alleged to result from
identity theft.--If a consumer submits an
identity theft report to a person who furnishes
information to a consumer reporting agency at
the address specified by that person for
receiving such reports stating that information
maintained by such person that purports to
relate to the consumer resulted from identity
theft, the person may not furnish such
information that purports to relate to the
consumer to any consumer reporting agency,
unless the person subsequently knows or is
informed by the consumer that the information
is correct.
(7) Negative information.--
(A) Notice to consumer required.--
(i) In general.--If any financial
institution that extends credit and
regularly and in the ordinary course of
business furnishes information to a
consumer reporting agency described in
section 603(p) furnishes negative
information to such an agency regarding
credit extended to a customer, the
financial institution shall provide a
notice of such furnishing of negative
information, in writing, to the
customer.
(ii) Notice effective for subsequent
submissions.--After providing such
notice, the financial institution may
submit additional negative information
to a consumer reporting agency
described in section 603(p) with
respect to the same transaction,
extension of credit, account, or
customer without providing additional
notice to the customer.
(B) Time of notice.--
(i) In general.--The notice required
under subparagraph (A) shall be
provided to the customer prior to, or
no later than 30 days after, furnishing
the negative information to a consumer
reporting agency described in section
603(p).
(ii) Coordination with new account
disclosures.--If the notice is provided
to the customer prior to furnishing the
negative information to a consumer
reporting agency, the notice may not be
included in the initial disclosures
provided under section 127(a) of the
Truth in Lending Act.
(C) Coordination with other disclosures.--The
notice required under subparagraph (A)--
(i) may be included on or with any
notice of default, any billing
statement, or any other materials
provided to the customer; and
(ii) must be clear and conspicuous.
(D) Model disclosure.--
(i) Duty of bureau.--The [Bureau]
Agency shall prescribe a brief model
disclosure that a financial institution
may use to comply with subparagraph
(A), which shall not exceed 30 words.
(ii) Use of model not required.--No
provision of this paragraph may be
construed to require a financial
institution to use any such model form
prescribed by the [Bureau] Agency.
(iii) Compliance using model.--A
financial institution shall be deemed
to be in compliance with subparagraph
(A) if the financial institution uses
any model form prescribed by the
[Bureau] Agency under this
subparagraph, or the financial
institution uses any such model form
and rearranges its format.
(E) Use of notice without submitting negative
information.--No provision of this paragraph
shall be construed as requiring a financial
institution that has provided a customer with a
notice described in subparagraph (A) to furnish
negative information about the customer to a
consumer reporting agency.
(F) Safe harbor.--A financial institution
shall not be liable for failure to perform the
duties required by this paragraph if, at the
time of the failure, the financial institution
maintained reasonable policies and procedures
to comply with this paragraph or the financial
institution reasonably believed that the
institution is prohibited, by law, from
contacting the consumer.
(G) Definitions.--For purposes of this
paragraph, the following definitions shall
apply:
(i) Negative information.--The term
``negative information'' means
information concerning a customer's
delinquencies, late payments,
insolvency, or any form of default.
(ii) Customer; financial
institution.--The terms ``customer''and
``financial institution'' have the same
meanings as in section 509 Public Law
106-102.
(8) Ability of consumer to dispute information
directly with furnisher.--
(A) In general.--The [Bureau] Agency shall,
in consultation with the Federal Trade
Commission, the Federal banking agencies, and
the National Credit Union Administration,
prescribe regulations that shall identify the
circumstances under which a furnisher shall be
required to reinvestigate a dispute concerning
the accuracy of information contained in a
consumer report on the consumer, based on a
direct request of a consumer.
(B) Considerations.--In prescribing
regulations under subparagraph (A), the
agencies shall weigh--
(i) the benefits to consumers with
the costs on furnishers and the credit
reporting system;
(ii) the impact on the overall
accuracy and integrity of consumer
reports of any such requirements;
(iii) whether direct contact by the
consumer with the furnisher would
likely result in the most expeditious
resolution of any such dispute; and
(iv) the potential impact on the
credit reporting process if credit
repair organizations, as defined in
section 403(3), including entities that
would be a credit repair organization,
but for section 403(3)(B)(i), are able
to circumvent the prohibition in
subparagraph (G).
(C) Applicability.--Subparagraphs (D) through
(G) shall apply in any circumstance identified
under the regulations promulgated under
subparagraph (A).
(D) Submitting a notice of dispute.--A
consumer who seeks to dispute the accuracy of
information shall provide a dispute notice
directly to such person at the address
specified by the person for such notices that--
(i) identifies the specific
information that is being disputed;
(ii) explains the basis for the
dispute; and
(iii) includes all supporting
documentation required by the furnisher
to substantiate the basis of the
dispute.
(E) Duty of person after receiving notice of
dispute.--After receiving a notice of dispute
from a consumer pursuant to subparagraph (D),
the person that provided the information in
dispute to a consumer reporting agency shall--
(i) conduct an investigation with
respect to the disputed information;
(ii) review all relevant information
provided by the consumer with the
notice;
(iii) complete such person's
investigation of the dispute and report
the results of the investigation to the
consumer before the expiration of the
period under section 611(a)(1) within
which a consumer reporting agency would
be required to complete its action if
the consumer had elected to dispute the
information under that section; and
(iv) if the investigation finds that
the information reported was
inaccurate, promptly notify each
consumer reporting agency to which the
person furnished the inaccurate
information of that determination and
provide to the agency any correction to
that information that is necessary to
make the information provided by the
person accurate.
(F) Frivolous or irrelevant dispute.--
(i) In general.--This paragraph shall
not apply if the person receiving a
notice of a dispute from a consumer
reasonably determines that the dispute
is frivolous or irrelevant, including--
(I) by reason of the failure
of a consumer to provide
sufficient information to
investigate the disputed
information; or
(II) the submission by a
consumer of a dispute that is
substantially the same as a
dispute previously submitted by
or for the consumer, either
directly to the person or
through a consumer reporting
agency under subsection (b),
with respect to which the
person has already performed
the person's duties under this
paragraph or subsection (b), as
applicable.
(ii) Notice of determination.--Upon
making any determination under clause
(i) that a dispute is frivolous or
irrelevant, the person shall notify the
consumer of such determination not
later than 5 business days after making
such determination, by mail or, if
authorized by the consumer for that
purpose, by any other means available
to the person.
(iii) Contents of notice.--A notice
under clause (ii) shall include--
(I) the reasons for the
determination under clause (i);
and
(II) identification of any
information required to
investigate the disputed
information, which may consist
of a standardized form
describing the general nature
of such information.
(G) Exclusion of credit repair
organizations.--This paragraph shall not apply
if the notice of the dispute is submitted by,
is prepared on behalf of the consumer by, or is
submitted on a form supplied to the consumer
by, a credit repair organization, as defined in
section 403(3), or an entity that would be a
credit repair organization, but for section
403(3)(B)(i).
(9) Duty to provide notice of status as medical
information furnisher.--A person whose primary business
is providing medical services, products, or devices, or
the person's agent or assignee, who furnishes
information to a consumer reporting agency on a
consumer shall be considered a medical information
furnisher for purposes of this title, and shall notify
the agency of such status.
(b) Duties of Furnishers of Information Upon Notice of
Dispute.--
(1) In general.--After receiving notice pursuant to
section 611(a)(2) of a dispute with regard to the
completeness or accuracy of any information provided by
a person to a consumer reporting agency, the person
shall--
(A) conduct an investigation with respect to
the disputed information;
(B) review all relevant information provided
by the consumer reporting agency pursuant to
section 611(a)(2);
(C) report the results of the investigation
to the consumer reporting agency;
(D) if the investigation finds that the
information is incomplete or inaccurate, report
those results to all other consumer reporting
agencies to which the person furnished the
information and that compile and maintain files
on consumers on a nationwide basis; and
(E) if an item of information disputed by a
consumer is found to be inaccurate or
incomplete or cannot be verified after any
reinvestigation under paragraph (1), for
purposes of reporting to a consumer reporting
agency only, as appropriate, based on the
results of the reinvestigation promptly--
(i) modify that item of information;
(ii) delete that item of information;
or
(iii) permanently block the reporting
of that item of information.
(2) Deadline.--A person shall complete all
investigations, reviews, and reports required under
paragraph (1) regarding information provided by the
person to a consumer reporting agency, before the
expiration of the period under section 611(a)(1) within
which the consumer reporting agency is required to
complete actions required by that section regarding
that information.
(c) Limitation on Liability.--Except as provided in section
621(c)(1)(B), sections 616 and 617 do not apply to any
violation of--
(1) subsection (a) of this section, including any
regulations issued thereunder;
(2) subsection (e) of this section, except that
nothing in this paragraph shall limit, expand, or
otherwise affect liability under section 616 or 617, as
applicable, for violations of subsection (b) of this
section; or
(3) subsection (e) of section 615.
(d) Limitation on Enforcement.--The provisions of law
described in paragraphs (1) through (3) of subsection (c)
(other than with respect to the exception described in
paragraph (2) of subsection (c)) shall be enforced exclusively
as provided under section 621 by the Federal agencies and
officials and the State officials identified in section 621.
(e) Accuracy Guidelines and Regulations Required.--
(1) Guidelines.--The [Bureau] Agency shall, with
respect to persons or entities that are subject to the
enforcement authority of the [Bureau] Agency under
section 621--
(A) establish and maintain guidelines for use
by each person that furnishes information to a
consumer reporting agency regarding the
accuracy and integrity of the information
relating to consumers that such entities
furnish to consumer reporting agencies, and
update such guidelines as often as necessary;
and
(B) prescribe regulations requiring each
person that furnishes information to a consumer
reporting agency to establish reasonable
policies and procedures for implementing the
guidelines established pursuant to subparagraph
(A).
(2) Criteria.--In developing the guidelines required
by paragraph (1)(A), the [Bureau] Agency shall--
(A) identify patterns, practices, and
specific forms of activity that can compromise
the accuracy and integrity of information
furnished to consumer reporting agencies;
(B) review the methods (including
technological means) used to furnish
information relating to consumers to consumer
reporting agencies;
(C) determine whether persons that furnish
information to consumer reporting agencies
maintain and enforce policies to ensure the
accuracy and integrity of information furnished
to consumer reporting agencies; and
(D) examine the policies and processes that
persons that furnish information to consumer
reporting agencies employ to conduct
reinvestigations and correct inaccurate
information relating to consumers that has been
furnished to consumer reporting agencies.
* * * * * * *
----------
FAIR DEBT COLLECTION PRACTICES ACT
* * * * * * *
TITLE VIII--DEBT COLLECTION PRACTICES
* * * * * * *
Sec. 803. Definitions
As used in this title--
[(1) The term ``Bureau'' means the Bureau of Consumer
Financial Protection.]
(1) The term ``Agency'' means the Consumer Law
Enforcement Agency.
(2) The term ``communication'' means the conveying of
information regarding a debt directly or indirectly to
any person through any medium.
(3) The term ``consumer'' means any natural person
obligated or allegedly obligated to pay any debt.
(4) The term ``creditor'' means any person who offers
or extends credit creating a debt or to whom a debt is
owed, but such term does not include any person to the
extent that he receives an assignment or transfer of a
debt in default solely for the purpose of facilitating
collection of such debt for another.
(5) The term ``debt'' means any obligation or alleged
obligation of a consumer to pay money arising out of a
transaction in which the money, property, insurance, or
services which are the subject of the transaction are
primarily for personal, family, or household purposes,
whether or not such obligation has been reduced to
judgment.
(6) The term ``debt collector'' means any person who
uses any instrumentality of interstate commerce or the
mails in any business the principal purpose of which is
the collection of any debts, or who regularly collects
or attempts to collect, directly or indirectly, debts
owed or due or asserted to be owed or due another.
Notwithstanding the exclusion provided by clause (F) of
the last sentence of this paragraph, the term includes
any creditor who, in the process of collecting his own
debts, uses any name other than his own which would
indicate that a third person is collecting or
attempting to collect such debts. For the purpose of
section 808(6), such term also includes any person who
uses any instrumentality of interstate commerce or the
mails in any business the principal purpose of which is
the enforcement of security interests. The term does
not include--
(A) any officer or employee of a creditor
while, in the name of the creditor, collecting
debts for such creditor;
(B) any person while acting as a debt
collector for another person, both of whom are
related by common ownership or affiliated by
corporate control, if the person acting as a
debt collector does so only for persons to whom
it is so related or affilated and if the
principal business of such person is not the
collection of debts;
(C) any officer or employee of the United
States or any State to the extent that
collecting or attempting to collect any debt is
in the performance of his official duties;
(D) any person while serving or attempting to
serve legal process on any other person in
connection with the judicial enforcement of any
debt;
(E) any nonprofit organization which, at the
request of consumers, performs bona fide
consumer credit counseling and assists
consumers in the liquidation of their debts by
receiving payments from such consumers and
distributing such amounts to creditors;
(F) any person collecting or attempting to
collect any debt owed or due or asserted to be
owed or due another to the extent such activity
(i) is incidental to a bona fide fiduciary
obligation or a bona fide escrow arrangement;
(ii) concerns a debt which was originated by
such person; (iii) concerns a debt which was
not in default at the time it was obtained by
such person; or (iv) concerns a debt obtained
by such person as a secured party in a
commercial credit transaction involving the
creditor.
(7) The term ``location information'' means a
consumer's place of abode and his telephone number at
such place, or his place of employment.
(8) The term ``State'' means any State, territory, or
possession of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, or any
political subdivision of any of the foregoing.
* * * * * * *
Sec. 813. Civil liability
(a) Except as otherwise provided by this section, any debt
collector who fails to comply with any provision of this title
with respect to any person is liable to such person in an
amount equal to the sum of--
(1) any actual damage sustained by such person as a
result of such failure;
(2)(A) in the case of any action by an individual,
such additional damages as the court may allow, but not
exceeding $1,000; or
(B) in the case of a class action, (i) such amount
for each named plaintiff as could be recovered under
subparagraph (A), and (ii) such amount as the court may
allow for all other class members, without regard to a
minimum individual recovery, not to exceed the lesser
of $500,000 or 1 per centum of the net worth of the
debt collector; and
(3) in the case of any successful action to enforce
the foregoing liability, the costs of the action,
together with a reasonable attorney's fee as determined
by the court. On a finding by the court that an action
under this section was brought in bad faith and for the
purpose of harassment, the court may award to the
defendant attorney's fees reasonable in relation to the
work expended and costs.
(b) In determining the amount of liability in any action
under subsection (a), the court shall consider, among other
relevant factors--
(1) in any individual action under subsection
(a)(2)(A), the frequency and persistence of
noncompliance by the debt collector, the nature of such
noncompliance, and the extent to which such
noncompliance was intentional; or
(2) in any class action under subsection (a)(2)(B),
the frequency and persistence of noncompliance by the
debt collector, the nature of such noncompliance, the
resources of the debt collector, the number of persons
adversely affected, and the extent to which the debt
collector's noncompliance was intentional.
(c) A debt collector may not be held liable in any action
brought under this title if the debt collector shows by a
preponderance of evidence that the violation was not
intentional and resulted from a bona fide error notwithstanding
the maintenance of procedures reasonably adapted to avoid any
such error.
(d) An action to enforce any liability created by this title
may be brought in any appropriate United States district court
without regard to the amount in controversy, or in any other
court of competent jurisdiction, within one year from the date
on which the violation occurs.
(e) No provision of this section imposing any liability shall
apply to any act done or omitted in good faith in conformity
with any advisory opinion of the [Bureau] Agency,
notwithstanding that after such act or omission has occurred,
such opinion is amended, rescinded, or determined by judicial
or other authority to be invalid for any reason.
Sec. 814. Administrative enforcement
(a) Federal Trade Commission.--The Federal Trade Commission
shall be authorized to enforce compliance with this title,
except to the extent that enforcement of the requirements
imposed under this title is specifically committed to another
Government agency under any of paragraphs (1) through (5) of
subsection (b), subject to subtitle B of the Consumer Financial
Protection Act of 2010. For purpose of the exercise by the
Federal Trade Commission of its functions and powers under the
Federal Trade Commission Act (15 U.S.C. 41 et seq.), a
violation of this title shall be deemed an unfair or deceptive
act or practice in violation of that Act. All of the functions
and powers of the Federal Trade Commission under the Federal
Trade Commission Act are available to the Federal Trade
Commission to enforce compliance by any person with this title,
irrespective of whether that person is engaged in commerce or
meets any other jurisdictional tests under the Federal Trade
Commission Act, including the power to enforce the provisions
of this title, in the same manner as if the violation had been
a violation of a Federal Trade Commission trade regulation
rule.
(b) Subject to subtitle B of the Consumer Financial
Protection Act of 2010, compliance with any requirements
imposed under this title shall be enforced under--
(1) section 8 of the Federal Deposit Insurance Act,
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) national banks, Federal savings
associations, and Federal branches and Federal
agencies of foreign banks;
(B) member banks of the Federal Reserve
System (other than national banks), branches
and agencies of foreign banks (other than
Federal branches, Federal agencies, and insured
State branches of foreign banks), commercial
lending companies owned or controlled by
foreign banks, and organizations operating
under section 25 or 25A of the Federal Reserve
Act; and
(C) banks and State savings associations
insured by the Federal Deposit Insurance
Corporation (other than members of the Federal
Reserve System), and insured State branches of
foreign banks;
(2) the Federal Credit Union Act, by the
Administrator of the National Credit Union
Administration with respect to any Federal credit
union;
(3) the Acts to regulate commerce, by the Secretary
of Transportation, with respect to all carriers subject
to the jurisdiction of the Surface Transportation
Board;
(4) the Federal Aviation Act of 1958, by the
Secretary of Transportation with respect to any air
carrier or any foreign air carrier subject to that Act;
(5) the Packers and Stockyards Act, 1921 (except as
provided in section 406 of that Act), by the Secretary
of Agriculture with respect to any activities subject
to that Act; and
(6) subtitle E of the Consumer Financial Protection
Act of 2010, by the [Bureau] Agency, with respect to
any person subject to this title.
The terms used in paragraph (1) that are not defined in this
title or otherwise defined in section 3(s) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the
meaning given to them in section 1(b) of the International
Banking Act of 1978 (12 U.S.C. 3101).
(c) For the purpose of the exercise by any agency referred to
in subsection (b) of its powers under any Act referred to in
that subsection, a violation of any requirement imposed under
this title shall be deemed to be a violation of a requirement
imposed under that Act. In addition to its powers under any
provision of law specifically referred to in subsection (b),
each of the agencies referred to in that subsection may
exercise, for the purpose of enforcing compliance with any
requirement imposed under this title any other authority
conferred on it by law, except as provided in subsection (d).
(d) Except as provided in section 1029(a) of the Consumer
Financial Protection Act of 2010, the [Bureau] Agency may
prescribe rules with respect to the collection of debts by debt
collectors, as defined in this title.
Sec. 815. Reports to Congress by the [Bureau] Agency
(a) Not later than one year after the effective date of this
title and at one-year intervals thereafter, the [Bureau] Agency
shall make reports to the Congress concerning the
administration of its functions under this title, including
such recommendations as the [Bureau] Agency deems necessary or
appropriate. In addition, each report of the [Bureau] Agency
shall include its assessment of the extent to which compliance
with this title is being achieved and a summary of the
enforcement actions taken by the [Bureau] Agency under section
814 of this title.
(b) In the exercise of its functions under this title, the
[Bureau] Agency may obtain upon request the views of any other
Federal agency which exercises enforcement functions under
section 814 of this title.
* * * * * * *
Sec. 817. Exemption for State regulation
The [Bureau] Agency shall by regulation exempt from the
requirements of this title any class of debt collection
practices within any State if the [Bureau] Agency determines
that under the law of that State that class of debt collection
practices is subject to requirements substantially similar to
those imposed by this title, and that there is adequate
provision for enforcement.
* * * * * * *
----------
FINANCIAL LITERACY AND EDUCATION IMPROVEMENT ACT
* * * * * * *
TITLE V--FINANCIAL LITERACY AND EDUCATION IMPROVEMENT
* * * * * * *
SEC. 513. ESTABLISHMENT OF FINANCIAL LITERACY AND EDUCATION COMMISSION.
(a) In General.--There is established a commission to be
known as the ``Financial Literacy and Education Commission''.
(b) Purpose.--The Commission shall serve to improve the
financial literacy and education of persons in the United
States through development of a national strategy to promote
financial literacy and education.
(c) Membership.--
(1) Composition.--The Commission shall be composed
of--
(A) the Secretary of the Treasury;
(B) the respective head of each of the
Federal banking agencies (as defined in section
3 of the Federal Deposit Insurance Act), the
National Credit Union Administration, the
Securities and Exchange Commission, each of the
Departments of Education, Agriculture, Defense,
Health and Human Services, Housing and Urban
Development, Labor, and Veterans Affairs, the
Federal Trade Commission, the General Services
Administration, the Small Business
Administration, the Social Security
Administration, the Commodity Futures Trading
Commission, and the Office of Personnel
Management;
(C) the Director of the [Bureau of Consumer
Financial Protection] Consumer Law Enforcement
Agency; and
(D) at the discretion of the President, not
more than 5 individuals appointed by the
President from among the administrative heads
of any other Federal agencies, departments, or
other Federal Government entities, whom the
President determines to be engaged in a serious
effort to improve financial literacy and
education.
(2) Alternates.--Each member of the Commission may
designate an alternate if the member is unable to
attend a meeting of the Commission. Such alternate
shall be an individual who exercises significant
decisionmaking authority.
(d) Chairperson.--The Secretary of the Treasury shall serve
as the Chairperson. The Director of the [Bureau of Consumer
Financial Protection] Consumer Law Enforcement Agency shall
serve as the Vice Chairman.
(e) Meetings.--The Commission shall hold, at the call of the
Chairperson, at least 1 meeting every 4 months. All such
meetings shall be open to the public. The Commission may hold,
at the call of the Chairperson, such other meetings as the
Chairperson sees fit to carry out this title.
(f) Quorum.--A majority of the members of the Commission
shall constitute a quorum, but a lesser number of members may
hold hearings.
(g) Initial Meeting.--The Commission shall hold its first
meeting not later than 60 days after the date of enactment of
this Act.
* * * * * * *
----------
GRAMM-LEACH-BLILEY ACT
* * * * * * *
TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND
INSURANCE COMPANIES
* * * * * * *
Subtitle D--Preservation of FTC Authority
* * * * * * *
SEC. 132. INTERAGENCY DATA SHARING.
(a) In General.--To the extent not prohibited by other law,
the Comptroller of the Currency, [the Director of the Office of
Thrift Supervision,] the Federal Deposit Insurance Corporation,
and the Board of Governors of the Federal Reserve System shall
make available to the Attorney General and the Federal Trade
Commission any data in the possession of any such banking
agency that the antitrust agency deems necessary for antitrust
review of any transaction requiring notice to any such
antitrust agency or the approval of such agency under section 3
or 4 of the Bank Holding Company Act of 1956, section 18(c) of
the Federal Deposit Insurance Act, the National Bank
Consolidation and Merger Act, section 10 of the Home Owners'
Loan Act, or the antitrust laws.
(b) Confidentiality Requirements.--
(1) In general.--Any information or material obtained
by any agency pursuant to subsection (a) shall be
treated as confidential.
(2) Procedures for disclosure.--If any information or
material obtained by any agency pursuant to subsection
(a) is proposed to be disclosed to a third party,
written notice of such disclosure shall first be
provided to the agency from which such information or
material was obtained and an opportunity shall be given
to such agency to oppose or limit the proposed
disclosure.
(3) Other privileges not waived by disclosure under
this section.--The provision by any Federal agency of
any information or material pursuant to subsection (a)
to another agency shall not constitute a waiver, or
otherwise affect, any privilege any agency or person
may claim with respect to such information under
Federal or State law.
(4) Exception.--No provision of this section shall be
construed as preventing or limiting access to any
information by any duly authorized committee of the
Congress or the Comptroller General of the United
States.
(c) Banking Agency Information Sharing.--The provisions of
subsection (b) shall apply to--
(1) any information or material obtained by any
Federal banking agency (as defined in section 3(z) of
the Federal Deposit Insurance Act) from any other
Federal banking agency; and
(2) any report of examination or other confidential
supervisory information obtained by any State agency or
authority, or any other person, from a Federal banking
agency.
* * * * * * *
TITLE II--FUNCTIONAL REGULATION
* * * * * * *
Subtitle A--Brokers and Dealers
* * * * * * *
SEC. 206. DEFINITION OF IDENTIFIED BANKING PRODUCT.
(a) Definition of Identified Banking Product.--[Except as
provided in subsection (e), for] For purposes of paragraphs (4)
and (5) of section 3(a) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a) (4), (5)), the term ``identified banking
product'' means--
(1) a deposit account, savings account, certificate
of deposit, or other deposit instrument issued by a
bank;
(2) a banker's acceptance;
(3) a letter of credit issued or loan made by a bank;
(4) a debit account at a bank arising from a credit
card or similar arrangement;
(5) a participation in a loan which the bank or an
affiliate of the bank (other than a broker or dealer)
funds, participates in, or owns that is sold--
(A) to qualified investors; or
(B) to other persons that--
(i) have the opportunity to review
and assess any material information,
including information regarding the
borrower's creditworthiness; and
(ii) based on such factors as
financial sophistication, net worth,
and knowledge and experience in
financial matters, have the capability
to evaluate the information available,
as determined under generally
applicable banking standards or
guidelines; or
(6) any swap agreement, including credit and equity
swaps, except that an equity swap that is sold directly
to any person other than a qualified investor (as
defined in section 3(a)(54) of the Securities Act of
1934) shall not be treated as an identified banking
product.
(b) Definition of Swap Agreement.--For purposes of subsection
(a)(6), the term ``swap agreement'' means any individually
negotiated contract, agreement, 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, but does not
include any other identified banking product, as defined in
paragraphs (1) through (5) of subsection (a).
(c) Classification Limited.--Classification of a particular
product as an identified banking product pursuant to this
section shall not be construed as finding or implying that such
product is or is not a security for any purpose under the
securities laws, or is or is not an account, agreement,
contract, or transaction for any purpose under the Commodity
Exchange Act.
(d) Incorporated Definitions.--For purposes of this section,
the terms ``bank'' and ``qualified investor'' have the same
meanings as given in section 3(a) of the Securities Exchange
Act of 1934, as amended by this Act.
* * * * * * *
TITLE V--PRIVACY
Subtitle A--Disclosure of Nonpublic Personal Information
SEC. 501. PROTECTION OF NONPUBLIC PERSONAL INFORMATION.
(a) Privacy Obligation Policy.--It is the policy of the
Congress that each financial institution has an affirmative and
continuing obligation to respect the privacy of its customers
and to protect the security and confidentiality of those
customers' nonpublic personal information.
(b) Financial Institutions Safeguards.--In furtherance of the
policy in subsection (a), each agency or authority described in
section 505(a), other than the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency, shall establish
appropriate standards for the financial institutions subject to
their jurisdiction relating to administrative, technical, and
physical safeguards--
(1) to insure the security and confidentiality of
customer records and information;
(2) to protect against any anticipated threats or
hazards to the security or integrity of such records;
and
(3) to protect against unauthorized access to or use
of such records or information which could result in
substantial harm or inconvenience to any customer.
SEC. 502. OBLIGATIONS WITH RESPECT TO DISCLOSURES OF PERSONAL
INFORMATION.
(a) Notice Requirements.--Except as otherwise provided in
this subtitle, a financial institution may not, directly or
through any affiliate, disclose to a nonaffiliated third party
any nonpublic personal information, unless such financial
institution provides or has provided to the consumer a notice
that complies with section 503.
(b) Opt Out.--
(1) In general.--A financial institution may not
disclose nonpublic personal information to a
nonaffiliated third party unless--
(A) such financial institution clearly and
conspicuously discloses to the consumer, in
writing or in electronic form or other form
permitted by the regulations prescribed under
section 504, that such information may be
disclosed to such third party;
(B) the consumer is given the opportunity,
before the time that such information is
initially disclosed, to direct that such
information not be disclosed to such third
party; and
(C) the consumer is given an explanation of
how the consumer can exercise that
nondisclosure option.
(2) Exception.--This subsection shall not prevent a
financial institution from providing nonpublic personal
information to a nonaffiliated third party to perform
services for or functions on behalf of the financial
institution, including marketing of the financial
institution's own products or services, or financial
products or services offered pursuant to joint
agreements between two or more financial institutions
that comply with the requirements imposed by the
regulations prescribed under section 504, if the
financial institution fully discloses the providing of
such information and enters into a contractual
agreement with the third party that requires the third
party to maintain the confidentiality of such
information.
(c) Limits on Reuse of Information.--Except as otherwise
provided in this subtitle, a nonaffiliated third party that
receives from a financial institution nonpublic personal
information under this section shall not, directly or through
an affiliate of such receiving third party, disclose such
information to any other person that is a nonaffiliated third
party of both the financial institution and such receiving
third party, unless such disclosure would be lawful if made
directly to such other person by the financial institution.
(d) Limitations on the Sharing of Account Number Information
for Marketing Purposes.--A financial institution shall not
disclose, other than to a consumer reporting agency, an account
number or similar form of access number or access code for a
credit card account, deposit account, or transaction account of
a consumer to any nonaffiliated third party for use in
telemarketing, direct mail marketing, or other marketing
through electronic mail to the consumer.
(e) General Exceptions.--Subsections (a) and (b) shall not
prohibit the disclosure of nonpublic personal information--
(1) as necessary to effect, administer, or enforce a
transaction requested or authorized by the consumer, or
in connection with--
(A) servicing or processing a financial
product or service requested or authorized by
the consumer;
(B) maintaining or servicing the consumer's
account with the financial institution, or with
another entity as part of a private label
credit card program or other extension of
credit on behalf of such entity; or
(C) a proposed or actual securitization,
secondary market sale (including sales of
servicing rights), or similar transaction
related to a transaction of the consumer;
(2) with the consent or at the direction of the
consumer;
(3)(A) to protect the confidentiality or security of
the financial institution's records pertaining to the
consumer, the service or product, or the transaction
therein; (B) to protect against or prevent actual or
potential fraud, unauthorized transactions, claims, or
other liability; (C) for required institutional risk
control, or for resolving customer disputes or
inquiries; (D) to persons holding a legal or beneficial
interest relating to the consumer; or (E) to persons
acting in a fiduciary or representative capacity on
behalf of the consumer;
(4) to provide information to insurance rate advisory
organizations, guaranty funds or agencies, applicable
rating agencies of the financial institution, persons
assessing the institution's compliance with industry
standards, and the institution's attorneys,
accountants, and auditors;
(5) to the extent specifically permitted or required
under other provisions of law and in accordance with
the Right to Financial Privacy Act of 1978, to law
enforcement agencies (including the [Bureau of Consumer
Financial Protection] Consumer Law Enforcement Agency
[a Federal], a Federal functional regulator, the
Secretary of the Treasury with respect to subchapter II
of chapter 53 of title 31, United States Code, and
chapter 2 of title I of Public Law 91-508 (12 U.S.C.
1951-1959), a State insurance authority, or the Federal
Trade Commission), self-regulatory organizations, or
for an investigation on a matter related to public
safety;
(6)(A) to a consumer reporting agency in accordance
with the Fair Credit Reporting Act, or (B) from a
consumer report reported by a consumer reporting
agency;
(7) in connection with a proposed or actual sale,
merger, transfer, or exchange of all or a portion of a
business or operating unit if the disclosure of
nonpublic personal information concerns solely
consumers of such business or unit; or
(8) to comply with Federal, State, or local laws,
rules, and other applicable legal requirements; to
comply with a properly authorized civil, criminal, or
regulatory investigation or subpoena or summons by
Federal, State, or local authorities; or to respond to
judicial process or government regulatory authorities
having jurisdiction over the financial institution for
examination, compliance, or other purposes as
authorized by law.
* * * * * * *
SEC. 504. RULEMAKING.
(a) Regulatory Authority.--
(1) Rulemaking.--
(A) In general.--Except as provided in
subparagraph (C), the [Bureau of Consumer
Financial Protection] Consumer Law Enforcement
Agency and the Securities and Exchange
Commission shall have authority to prescribe
such regulations as may be necessary to carry
out the purposes of this subtitle with respect
to financial institutions and other persons
subject to their respective jurisdiction under
section 505 (and notwithstanding subtitle B of
the Consumer Financial Protection Act of 2010),
except that the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency
shall not have authority to prescribe
regulations with respect to the standards under
section 501.
(B) CFTC.--The Commodity Futures Trading
Commission shall have authority to prescribe
such regulations as may be necessary to carry
out the purposes of this subtitle with respect
to financial institutions and other persons
subject to the jurisdiction of the Commodity
Futures Trading Commission under section 5g of
the Commodity Exchange Act.
(C) Federal trade commission authority.--
Notwithstanding the authority of the [Bureau of
Consumer Financial Protection] Consumer Law
Enforcement Agency under subparagraph (A), the
Federal Trade Commission shall have authority
to prescribe such regulations as may be
necessary to carry out the purposes of this
subtitle with respect to any financial
institution that is a person described in
section 1029(a) of the Consumer Financial
Protection Act of 2010.
(D) Rule of construction.--Nothing in this
paragraph shall be construed to alter, affect,
or otherwise limit the authority of a State
insurance authority to adopt regulations to
carry out this subtitle.
(2) Coordination, consistency, and comparability.--
Each of the agencies authorized under paragraph (1) to
prescribe regulations shall consult and coordinate with
the other such agencies [and, as appropriate, and with]
and, as appropriate, with representatives of State
insurance authorities designated by the National
Association of Insurance Commissioners, for the purpose
of assuring, to the extent possible, that the
regulations prescribed by each such agency are
consistent and comparable with the regulations
prescribed by the other such agencies.
(3) Procedures and deadline.--Such regulations shall
be prescribed in accordance with applicable
requirements of title 5, United States Code.
(b) Authority To Grant Exceptions.--The regulations
prescribed under subsection (a) may include such additional
exceptions to subsections (a) through (d) of section 502 as are
deemed consistent with the purposes of this subtitle.
SEC. 505. ENFORCEMENT.
(a) In General.--Subject to subtitle B of the Consumer
Financial Protection Act of 2010, this subtitle and the
regulations prescribed thereunder shall be enforced by the
[Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency, the Federal functional regulators, the
State insurance authorities, and the Federal Trade Commission
with respect to financial institutions and other persons
subject to their jurisdiction under applicable law, as follows:
(1) Under section 8 of the Federal Deposit Insurance
Act, by the appropriate Federal banking agency, as
defined in section 3(q) of the Federal Deposit
Insurance Act, in the case of--
(A) national banks, Federal branches and
Federal agencies of foreign banks, and any
subsidiaries of such entities (except brokers,
dealers, persons providing insurance,
investment companies, and investment advisers);
(B) member banks of the Federal Reserve
System (other than national banks), branches
and agencies of foreign banks (other than
Federal branches, Federal agencies, and insured
State branches of foreign banks), commercial
lending companies owned or controlled by
foreign banks, organizations operating under
section 25 or 25A of the Federal Reserve Act,
and bank holding companies and their nonbank
subsidiaries or affiliates (except brokers,
dealers, persons providing insurance,
investment companies, and investment advisers);
(C) banks insured by the Federal Deposit
Insurance Corporation (other than members of
the Federal Reserve System), insured State
branches of foreign banks, and any subsidiaries
of such entities (except brokers, dealers,
persons providing insurance, investment
companies, and investment advisers); and
(D) savings associations the deposits of
which are insured by the Federal Deposit
Insurance Corporation, and any subsidiaries of
such savings associations (except brokers,
dealers, persons providing insurance,
investment companies, and investment advisers).
(2) Under the Federal Credit Union Act, by the Board
of the National Credit Union Administration with
respect to any federally insured credit union, and any
subsidiaries of such an entity.
(3) Under the Securities Exchange Act of 1934, by the
Securities and Exchange Commission with respect to any
broker or dealer.
(4) Under the Investment Company Act of 1940, by the
Securities and Exchange Commission with respect to
investment companies.
(5) Under the Investment Advisers Act of 1940, by the
Securities and Exchange Commission with respect to
investment advisers registered with the Commission
under such Act.
(6) Under State insurance law, in the case of any
person engaged in providing insurance, by the
applicable State insurance authority of the State in
which the person is domiciled, subject to section 104
of this Act.
(7) Under the Federal Trade Commission Act, by the
Federal Trade Commission for any other financial
institution or other person that is not subject to the
jurisdiction of any agency or authority under
paragraphs (1) through (6) of this subsection.
(8) Under subtitle E of the Consumer Financial
Protection Act of 2010, by the [Bureau of Consumer
Financial Protection] Consumer Law Enforcement Agency,
in the case of any financial institution and other
covered person or service provider that is subject to
the jurisdiction of the [Bureau] Agency and any person
subject to this subtitle, but not with respect to the
standards under section 501.
(b) Enforcement of Section 501.--
(1) In general.--Except as provided in paragraph (2),
the agencies and authorities described in subsection
(a), other than the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency, shall
implement the standards prescribed under section 501(b)
in the same manner, to the extent practicable, as
standards prescribed pursuant to section 39(a) of the
Federal Deposit Insurance Act are implemented pursuant
to such section.
(2) Exception.--The agencies and authorities
described in paragraphs (3), (4), (5), (6), and (7) of
subsection (a) shall implement the standards prescribed
under section 501(b) by rule with respect to the
financial institutions and other persons subject to
their respective jurisdictions under subsection (a).
(c) Absence of State Action.--If a State insurance authority
fails to adopt regulations to carry out this subtitle, such
State shall not be eligible to override, pursuant to section
47(g)(2)(B)(iii) of the Federal Deposit Insurance Act, the
insurance customer protection regulations prescribed by a
Federal banking agency under section 47(a) of such Act.
(d) Definitions.--The terms used in subsection (a)(1) that
are not defined in this subtitle or otherwise defined in
section 3(s) of the Federal Deposit Insurance Act shall have
the same meaning as given in section 1(b) of the International
Banking Act of 1978.
* * * * * * *
SEC. 507. RELATION TO STATE LAWS.
(a) In General.--This subtitle and the amendments made by
this subtitle shall not be construed as superseding, altering,
or affecting any statute, regulation, order, or interpretation
in effect in any State, except to the extent that such statute,
regulation, order, or interpretation is inconsistent with the
provisions of this subtitle, and then only to the extent of the
inconsistency.
(b) Greater Protection Under State Law.--For purposes of this
section, a State statute, regulation, order, or interpretation
is not inconsistent with the provisions of this subtitle if the
protection such statute, regulation, order, or interpretation
affords any person is greater than the protection provided
under this subtitle and the amendments made by this subtitle,
as determined by the [Bureau of Consumer Financial Protection]
Consumer Law Enforcement Agency, after consultation with the
agency or authority with jurisdiction under section 505(a) of
either the person that initiated the complaint or that is the
subject of the complaint, on its own motion or upon the
petition of any interested party.
* * * * * * *
SEC. 509. DEFINITIONS.
As used in this subtitle:
(1) Federal banking agency.--The term ``Federal
banking agency'' has the same meaning as given in
section 3 of the Federal Deposit Insurance Act.
(2) Federal functional regulator.--The term ``Federal
functional regulator'' means--
(A) the Board of Governors of the Federal
Reserve System;
(B) the Office of the Comptroller of the
Currency;
(C) the Board of Directors of the Federal
Deposit Insurance Corporation;
[(D) the Director of the Office of Thrift
Supervision;]
[(E)] (D) the National Credit Union
Administration Board; and
[(F)] (E) the Securities and Exchange
Commission.
(3) Financial institution.--
(A) In general.--The term ``financial
institution'' means any institution the
business of which is engaging in financial
activities as described in section 4(k) of the
Bank Holding Company Act of 1956.
(B) Persons subject to cftc regulation.--
Notwithstanding subparagraph (A), the term
``financial institution'' does not include any
person or entity with respect to any financial
activity that is subject to the jurisdiction of
the Commodity Futures Trading Commission under
the Commodity Exchange Act.
(C) Farm credit institutions.--
Notwithstanding subparagraph (A), the term
``financial institution'' does not include the
Federal Agricultural Mortgage Corporation or
any entity chartered and operating under the
Farm Credit Act of 1971.
(D) Other secondary market institutions.--
Notwithstanding subparagraph (A), the term
``financial institution'' does not include
institutions chartered by Congress specifically
to engage in transactions described in section
502(e)(1)(C), as long as such institutions do
not sell or transfer nonpublic personal
information to a nonaffiliated third party.
(4) Nonpublic personal information.--
(A) The term ``nonpublic personal
information'' means personally identifiable
financial information--
(i) provided by a consumer to a
financial institution;
(ii) resulting from any transaction
with the consumer or any service
performed for the consumer; or
(iii) otherwise obtained by the
financial institution.
(B) Such term does not include publicly
available information, as such term is defined
by the regulations prescribed under section
504.
(C) Notwithstanding subparagraph (B), such
term--
(i) shall include any list,
description, or other grouping of
consumers (and publicly available
information pertaining to them) that is
derived using any nonpublic personal
information other than publicly
available information; but
(ii) shall not include any list,
description, or other grouping of
consumers (and publicly available
information pertaining to them) that is
derived without using any nonpublic
personal information.
(5) Nonaffiliated third party.--The term
``nonaffiliated third party'' means any entity that is
not an affiliate of, or related by common ownership or
affiliated by corporate control with, the financial
institution, but does not include a joint employee of
such institution.
(6) Affiliate.--The term ``affiliate'' means any
company that controls, is controlled by, or is under
common control with another company.
(7) Necessary to effect, administer, or enforce.--The
term ``as necessary to effect, administer, or enforce
the transaction'' means--
(A) the disclosure is required, or is a
usual, appropriate, or acceptable method, to
carry out the transaction or the product or
service business of which the transaction is a
part, and record or service or maintain the
consumer's account in the ordinary course of
providing the financial service or financial
product, or to administer or service benefits
or claims relating to the transaction or the
product or service business of which it is a
part, and includes--
(i) providing the consumer or the
consumer's agent or broker with a
confirmation, statement, or other
record of the transaction, or
information on the status or value of
the financial service or financial
product; and
(ii) the accrual or recognition of
incentives or bonuses associated with
the transaction that are provided by
the financial institution or any other
party;
(B) the disclosure is required, or is one of
the lawful or appropriate methods, to enforce
the rights of the financial institution or of
other persons engaged in carrying out the
financial transaction, or providing the product
or service;
(C) the disclosure is required, or is a
usual, appropriate, or acceptable method, for
insurance underwriting at the consumer's
request or for reinsurance purposes, or for any
of the following purposes as they relate to a
consumer's insurance: Account administration,
reporting, investigating, or preventing fraud
or material misrepresentation, processing
premium payments, processing insurance claims,
administering insurance benefits (including
utilization review activities), participating
in research projects, or as otherwise required
or specifically permitted by Federal or State
law; or
(D) the disclosure is required, or is a
usual, appropriate or acceptable method, in
connection with--
(i) the authorization, settlement,
billing, processing, clearing,
transferring, reconciling, or
collection of amounts charged, debited,
or otherwise paid using a debit, credit
or other payment card, check, or
account number, or by other payment
means;
(ii) the transfer of receivables,
accounts or interests therein; or
(iii) the audit of debit, credit or
other payment information.
(8) State insurance authority.--The term ``State
insurance authority'' means, in the case of any person
engaged in providing insurance, the State insurance
authority of the State in which the person is
domiciled.
(9) Consumer.--The term ``consumer'' means an
individual who obtains, from a financial institution,
financial products or services which are to be used
primarily for personal, family, or household purposes,
and also means the legal representative of such an
individual.
(10) Joint agreement.--The term ``joint agreement''
means a formal written contract pursuant to which two
or more financial institutions jointly offer, endorse,
or sponsor a financial product or service, and as may
be further defined in the regulations prescribed under
section 504.
(11) Customer relationship.--The term ``time of
establishing a customer relationship'' shall be defined
by the regulations prescribed under section 504, and
shall, in the case of a financial institution engaged
in extending credit directly to consumers to finance
purchases of goods or services, mean the time of
establishing the credit relationship with the consumer.
* * * * * * *
Subtitle B--Fraudulent Access to Financial Information
* * * * * * *
SEC. 522. ADMINISTRATIVE ENFORCEMENT.
(a) Enforcement by Federal Trade Commission.--Except as
provided in subsection (b), compliance with this subtitle shall
be enforced by the Federal Trade Commission in the same manner
and with the same power and authority as the Commission has
under the Fair Debt Collection Practices Act to enforce
compliance with such Act.
(b) Enforcement by Other Agencies in Certain Cases.--
(1) In general.--Compliance with this subtitle shall
be enforced under--
(A) section 8 of the Federal Deposit
Insurance Act, in the case of--
(i) national banks, and Federal
branches and Federal agencies of
foreign banks, by the Office of the
Comptroller of the Currency;
(ii) member banks of the Federal
Reserve System (other than national
banks), branches and agencies of
foreign banks (other than Federal
branches, Federal agencies, and insured
State branches of foreign banks),
commercial lending companies owned or
controlled by foreign banks, and
organizations operating under section
25 or 25A of the Federal Reserve Act,
by the Board;
(iii) banks insured by the Federal
Deposit Insurance Corporation (other
than members of the Federal Reserve
System and national nonmember banks)
and insured State branches of foreign
banks, by the Board of Directors of the
Federal Deposit Insurance Corporation;
and
(iv) savings associations the
deposits of which are insured by the
Federal Deposit Insurance Corporation,
by the [Director of the Office of
Thrift Supervision] Comptroller of the
Currency and the Board of Directors of
the Federal Deposit Insurance
Corporation, as appropriate; and
(B) the Federal Credit Union Act, by the
Administrator of the National Credit Union
Administration with respect to any Federal
credit union.
(2) Violations of this subtitle treated as violations
of other laws.--For the purpose of the exercise by any
agency referred to in paragraph (1) of its powers under
any Act referred to in that paragraph, a violation of
this subtitle shall be deemed to be a violation of a
requirement imposed under that Act. In addition to its
powers under any provision of law specifically referred
to in paragraph (1), each of the agencies referred to
in that paragraph may exercise, for the purpose of
enforcing compliance with this subtitle, any other
authority conferred on such agency by law.
* * * * * * *
----------
HOMEOWNERS PROTECTION ACT OF 1998
* * * * * * *
SEC. 10. ENFORCEMENT.
(a) In General.--Subject to subtitle B of the Consumer
Financial Protection Act of 2010, compliance with the
requirements imposed under this Act shall be enforced under--
(1) section 8 of the Federal Deposit Insurance Act,
by the appropriate Federal banking agency (as defined
in section 3(q) of that Act), with respect to--
(A) insured depository institutions (as
defined in section 3(c)(2) of that Act);
(B) depository institutions described in
clause (i), (ii), or (iii) of section
19(b)(1)(A) of the Federal Reserve Act which
are not insured depository institutions (as
defined in section 3(c)(2) of the Federal
Deposit Insurance Act); and
(C) depository institutions described in
clause (v) or (vi) of section 19(b)(1)(A) of
the Federal Reserve Act which are not insured
depository institutions (as defined in section
3(c)(2) of the Federal Deposit Insurance Act);
(2) the Federal Credit Union Act, by the National
Credit Union Administration Board in the case of
depository institutions described in clause (iv) of
section 19(b)(1)(A) of the Federal Reserve Act;
(3) part C of title V of the Farm Credit Act of 1971
(12 U.S.C. 2261 et seq.), by the Farm Credit
Administration in the case of an institution that is a
member of the Farm Credit System; and
(4) subtitle E of the Consumer Financial Protection
Act of 2010, by the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency, with
respect to any person subject to this Act.
(b) Additional Enforcement Powers.--
(1) Violation of this act treated as violation of
other acts.--For purposes of the exercise by any agency
referred to in subsection (a) of such agency's powers
under any Act referred to in such subsection, a
violation of a requirement imposed under this Act shall
be deemed to be a violation of a requirement imposed
under that Act.
(2) Enforcement authority under other acts.--In
addition to the powers of any agency referred to in
subsection (a) under any provision of law specifically
referred to in such subsection, each such agency may
exercise, for purposes of enforcing compliance with any
requirement imposed under this Act, any other authority
conferred on such agency by law.
(c) Enforcement and Reimbursement.--In carrying out its
enforcement activities under this section, each agency referred
toin subsection (a) shall--
(1) notify the mortgagee or servicer of any failure
of the mortgagee or servicer to comply with 1 or more
provisions of this Act;
(2) with respect to each such failure to comply,
require the mortgagee or servicer, as applicable, to
correct the account of the mortgagor to reflect the
date on which the mortgage insurance should have been
canceled or terminated under this Act; and
(3) require the mortgagee or servicer, as applicable,
to reimburse the mortgagor in an amount equal to the
total unearned premiums paid by the mortgagor after the
date on which the obligation to pay those premiums
ceased under this Act.
* * * * * * *
----------
HOME OWNERSHIP AND EQUITY PROTECTION ACT OF 1994
* * * * * * *
TITLE I--COMMUNITY DEVELOPMENT AND CONSUMER PROTECTION
* * * * * * *
Subtitle B--Home Ownership and Equity Protection
* * * * * * *
SEC. 158. HEARINGS ON HOME EQUITY LENDING.
(a) Hearings.--Not less than once during the 3-year period
beginning on the date of enactment of this Act, and regularly
thereafter, the [Bureau] Consumer Law Enforcement Agency, in
consultation with the Advisory Board to the Bureau, shall
conduct a public hearing to examine the home equity loan market
and the adequacy of existing regulatory and legislative
provisions and the provisions of this subtitle in protecting
the interests of consumers, and low-income consumers in
particular.
(b) Participation.--In conducting hearings required by
subsection (a), the Bureau shall solicit participation from
consumers, representatives of consumers, lenders, and other
interested parties.
* * * * * * *
----------
INTERSTATE LAND SALES FULL DISCLOSURE ACT
* * * * * * *
TITLE XIV--INTERSTATE LAND SALES
* * * * * * *
definitions
Sec. 1402. For the purposes of this title, the term--
(1) ``Director'' means the Director of the [Bureau of
Consumer Financial Protection] Agency;
(2) ``person'' means an individual, or an
unincorporated organization, partnership, association,
corporation, trust, or estate;
(3) ``subdivision'' means any land which is located
in any State or in a foreign country and is divided or
is proposed to be divided into lots, whether contiguous
or not, for the purpose of sale or lease as part of a
common promotional plan;
(4) ``common promotional plan'' means a plan,
undertaken by a single developer or a group of
developers acting in concert, to offer lots for sale or
lease; where such land is offered for sale by such a
developer or group of developers acting in concert, and
such land is contiguous or is known, designated, or
advertised as a common unit or by a common name, such
land shall be presumed, without regard to the number of
lots covered by each individual offering, as being
offered for sale or lease as part of a common
promotional plan;
(5) ``developer'' means any person who, directly or
indirectly, sells or leases, or offers to sell or
lease, or advertises for sale or lease any lots in a
subdivision;
(6) ``agent'' means any person who represents, or
acts for or on behalf of, a developer in selling or
leasing, or offering to sell or lease, any lot or lots
in a subdivision; but shall not include an attorney at
law whose representation or another person consists
solely of rendering legal services;
(7) ``blanket encumbrance'' means a trust deed,
mortgage, judgment, or any other lien or encumbrance,
including an option or contract to sell or a trust
agreement, affecting a subdivision or affecting more
than one lot offered within a subdivision, except that
such term shall not include any lien or other
encumbrance arising as the result of the imposition of
any tax assessment by any public authority;
(8) ``interstate commerce'' means trade or commerce
among the several states or between any foreign country
and any state;
(9) ``State'' includes the several States, the
District of Columbia, the Commonwealth of Puerto Rico,
and the territories and possessions of the United
States;
(10) ``purchaser'' means an actual or prospective
purchaser or lessee of any lot in a subdivision;
(11) ``offer'' includes any inducement, solicitation,
or attempt to encourage a person to acquire a lot in a
subdivision; and
[(12) ``Bureau'' means the Bureau of Consumer
Financial Protection.]
(12) ``Agency'' means the Consumer Law Enforcement
Agency.
* * * * * * *
court review of orders
Sec. 1411. (a) Any person, aggrieved by an order or
determination of the Director issued after a hearing, may
obtain a review of such order or determination in the court of
appeals of the United States, within any circuit wherein such
person resides or has his principal place of business, or in
the United States Court of Appeals for the District of
Columbia, by filing in such court, within sixty days after the
entry of such order or determination, a written petition
praying that the order or determination of the Director be
modified or be set aside in whole or in part. A copy of such
petition shall be forthwith transmitted by the clerk of the
court to the Director, and thereupon the Director shall file in
the court the record upon which the order or determination
complained of was entered, as provided in section 2112 of title
28, United States Code. No objection to an order or
determination of the Director shall be considered by the court
unless such objection shall have been urged before the
Director. The finding of the Director as to the facts, if
supported by substantial evidence, shall be conclusive. If
either party shall apply to the court for leave to adduce
additional evidence, and shall show to the satisfaction of the
court that such additional evidence is material and that there
were reasonable grounds for failure to adduce such evidence in
the hearing before the Director, the court may order such
additional evidence to be taken before the Director and to be
adduced upon a hearing in such manner and upon such terms and
conditions as to the court may seem proper. The Director may
modify his findings as to the facts by reason of the additional
evidence so taken, and shall file such modified or new
findings, which, if supported by substantial evidence, shall be
conclusive, and his recommendation, if any, for the
modification or setting aside of the original order. Upon the
filing of such petition, the jurisdiction of the court shall be
exclusive and its judgment and decree, affirming, modifying, or
setting aside, in whole or in part, any order of the Director,
shall be final, subject to review by the Supreme Court of the
United States upon certiorari or certification as provided in
section 1254 of title 28, United States Code.
(b) The commencement of proceedings under subsection (a)
shall not, unless specifically ordered by the court, operate as
a stay of the [Secretary's] Director's order.
* * * * * * *
administration
Sec. 1416. (a) The authority and responsibility for
administering this title shall be in the Director of the
[Bureau] Agency of Consumer Financial Protection who may
delegate any of his functions, duties, and powers to employees
of the [Bureau] Agency of Consumer Financial Protection or to
boards of such employees including functions, duties, and
powers with respect to investigating, hearing, determining,
ordering, or otherwise acting as to any work, business, or
matter under this title. The persons to whom such delegations
are made with respect to hearing functions, duties, and powers
shall be appointed and shall serve in the [Bureau] Agency in
compliance with sections 3105, 3344, 5372, and 7521 of title 5
of the United States Code. The Director shall by rule
prescribed such rights of appeal from the decisions of his
administrative law judges to other administrative law judges or
to other officers in the [Bureau] Agency, to boards of officers
or to himself, as shall be apropriate and in accordance with
law.
(b) All hearings shall be public and appropriate records
thereof shall be kept, and any order issued after such hearing
shall be based on the record made in such hearing which shall
be conducted in accordance with provisions of subchapter II of
chapter 5, and chapter 7, of title 5, United States Code.
(c) The Director shall conduct all actions with respect to
rulemaking or adjudication under this title in accordance with
the provisions of chapter 5 of title 5, United States Code.
Notice shall be given of any adverse action or final
disposition and such notice and the entry of any order shall be
accompanied by a written statement of supporting facts and
legal authority.
* * * * * * *
civil money penalties
Sec. 1418a. (a) In General.--
(1) Authority.--Whenever any person knowingly and
materially violates any of the provisions of this title
or any rule, regulation, or order issued under this
title, the Director may impose a civil money penalty on
such person in accordance with the provisions of this
section. The penalty shall be in addition to any other
available civil remedy or any available criminal
penalty, and may be imposed whether or not the Director
imposes other administrative sanctions.
(2) Amount of penalty.--The amount of the penalty, as
determined by the Director, may not exceed $1,000 for
each violation, except that the maximum penalty for all
violations by a particular person during any 1-year
period shall not exceed $1,000,000. Each violation of
this title, or any rule, regulation, or order issued
under this title, shall constitute a separate violation
with respect to each sale or lease or offer to sell or
lease. In the case of a continuing violation, as
determined by the Director, each day shall constitute a
separate violation.
(b) Agency Procedures.--
(1) Establishment.--The Director shall establish
standards and procedures governing the imposition of
civil money penalties under subsection (a). The
standards and procedures--
(A) shall provide for the imposition of a
penalty only after a person has been given an
opportunity for a hearing on the record; and
(B) may provide for review by the Director of
any determination or order, or interlocutory
ruling, arising from a hearing.
(2) Final orders.--If no hearing is requested within
15 days of receipt of the notice of opportunity for
hearing, the imposition of the penalty shall constitute
a final and unappealable determination. If the Director
reviews the determination or order, the Director may
affirm, modify, or reverse that determination or order.
If the Director does not review the determination or
order within 90 days of the issuance of the
determination or order, the determination or order
shall be final.
(3) Factors in determining amount of penalty.--In
determining the amount of a penalty under subsection
(a), consideration shall be given to such factors as
the gravity of the offense, any history of prior
offenses (including offenses occurring before enactment
of this section), ability to pay the penalty, injury to
the public, benefits received, deterrence of future
violations, and such other factors as the Director may
determine in regulations to be appropriate.
(4) Reviewability of imposition of penalty.--The
[Secretary's] Director's determination or order
imposing a penalty under subsection (a) shall not be
subject to review, except as provided in subsection
(c).
(c) Judicial Review of Agency Determination.--
(1) In General.--After exhausting all administrative
remedies established by the Director under subsection
(b)(1), a person aggrieved by a final order of the
Director assessing a penalty under this section may
seek judicial review pursuant to section 1411.
(2) Order to pay penalty.--Notwithstanding any other
provision of law, in any such review, the court shall
have the power to order payment of the penalty imposed
by the Director.
(d) Action to Collect Penalty.--If any person fails to comply
with the determination or order of the Director imposing a
civil money penalty under subsection (a), after the
determination or order is no longer subject to review as
provided by subsections (b) and (c), the Director may request
the Attorney General of the United States to bring an action in
any appropriate United States district court to obtain a
monetary judgment against the person and such other relief as
may be available. The monetary judgment may, in the discretion
of the court, include any attorneys fees and other expenses
incurred by the United States in connection with the action. In
an action under this subsection, the validity and
appropriateness of the [Secretary's] Director's determination
or order imposing the penalty shall not be subject to review.
(e) Settlement by Director.--The Director may compromise,
modify, or remit any civil money penalty which may be, or has
been, imposed under this section.
(f) Definition of Knowingly.--The term ``knowingly'' means
having actual knowledge of or acting with deliberate ignorance
of or reckless disregard for the prohibitions under this
section.
(g) Regulations.--The Director shall issue such regulations
as the Director deems appropriate to implement this section.
(h) Use of Penalties for Administration.--Civil money
penalties collected under this section shall be paid to the
Director and, upon approval in an appropriation Act, may be
used by the Director to cover all or part of the cost of
rendering services under this title.
* * * * * * *
----------
RIGHT TO FINANCIAL PRIVACY ACT OF 1978
* * * * * * *
TITLE XI--RIGHT TO FINANCIAL PRIVACY
* * * * * * *
definitions
Sec. 1101. For the purpose of this title, the term--
(1) ``financial institution'', except as provided in
section 1114, means any office of a bank, savings bank,
card issuer as defined in section 103 of the Consumers
Credit Protection Act (15 U.S.C. 1602(n)), industrial
loan company, trust company, savings association,
building and loan, or homestead association (including
cooperative banks), credit union, or consumer finance
institution, located in any State or territory of the
United States, the District of Columbia, Puerto Rico,
Guam, American Samoa, or the Virgin Islands;
(2) ``financial record'' means an original of, a copy
of, or information known to have been derived from, any
record held by a financial institution pertaining to a
customer's relationship with the financial institution;
(3) ``Government authority'' means any agency or
department of the United States, or any officer,
employee, or agent thereof;
(4) ``person'' means an individual or a partnership
of five or fewer individuals;
(5) ``customer'' means any person or authorized
representative of that person who utilized or is
utilizing any service of a financial institution, or
for whom a financial institution is acting or has acted
as a fiduciary, in relation to an account maintained in
the person's name;
(6) ``holding company'' means--
(A) any bank holding company (as defined in
section 2 of the Bank Holding Company Act of
1956); and
(B) any company described in section 4(f)(1)
of the Bank Holding Company Act of 1956;
(7) ``supervisory agency'' means with respect to any
particular financial institution, holding company, or
any subsidiary of a financial institution or holding
company, any of the following which has statutory
authority to examine the financial condition, business
operations, or records or transactions of that
institution, holding company, or subsidiary--
(A) the Federal Deposit Insurance
Corporation;
[(B) the Bureau of Consumer Financial
Protection;]
(B) the Consumer Law Enforcement Agency;
(C) the National Credit Union Administration;
(D) the Board of Governors of the Federal
Reserve System;
(E) the Comptroller of the Currency;
(F) the Securities and Exchange Commission;
(G) the Commodity Futures Trading Commission;
(H) the Secretary of the Treasury, with
respect to the Bank Secrecy Act and the
Currency and Foreign Transactions Reporting Act
(Public Law 91-508, title I and II); or
(I) any State banking or securities
department or agency; and
(8) ``law enforcement inquiry'' means a lawful
investigation or official proceeding inquiring into a
violation of, or failure to comply with, any criminal
or civil statute or any regulation, rule, or order
issued pursuant thereto.
* * * * * * *
use of information
Sec. 1112. (a) Financial records originally obtained pursuant
to this title shall not be transferred to another agency or
department unless the transferring agency or department
certifies in writing that there is reason to believe that the
records are relevant to a legitimate law enforcement inquiry,
or intelligence or counterintelligence activity, investigation
or analysis related to international terrorism within the
jurisdiction of the receiving agency or department.
(b) When financial records subject to this title are
tranferred pursuant to subsection (a), the transferring agency
or department shall, within fourteen days, send to the customer
a copy of the certification made pursuant to subsection (a) and
the following notice, which shall state the nature of the law
enforcement inquiry with reasonable specificity: ``Copies of,
or information contained in, your financial records lawfully in
possession of have been furnished to pursuant to the Right of
Financial Privacy Act of 1978 for the following purpose:. If
you believe that this transfer has not been made to further a
legitimate law enforcement inquiry, you may have legal rights
under the Financial Privacy Act of 1978 or the Privacy Act of
1974.''
(c) Notwithstanding subsection (b), notice to the customer
may be delayed if the transferring agency or department has
obtained a court order delaying notice pursuant to section 1109
(a) and (b) and that order is still in effect, of if the
receiving agency or department obtains a court order
authorizing a delay in notice pursuant to section 1109 (a) and
(b). Upon the expiration of any such period of delay, the
transferring agency or department shall serve to the customer
the notice specified in subsection (b) above and the agency or
department that obtained the court order authorizing a delay in
notice pursuant to section 1109 (a) and (b) shall serve to the
customer the notice specified in section 1109 (b).
(d) Nothing in this title prohibits any supervisory agency
from exchanging examination reports or other information with
another supervisory agency. Nothing in this title prohibits the
transfer of a customer's financial records needed by counsel
for a Government authority to defend an action brought by the
customer. Nothing in this title shall authorize the withholding
of information by any officer or employee of a supervisory
agency from a duly authorized committee or subcommittee of the
Congress.
(e) Notwithstanding section 1101(6) or any other provision of
law, the exchange of financial records, examination reports or
other information with respect to a financial institution,
holding company, or a subsidiary of a depository institution or
holding company, among and between the five member supervisory
agencies of the Federal Financial Institutions Examination
Council, the Securities and Exchange Commission, the Federal
Trade Commission, the Commodity Futures Trading Commission, and
the [Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency is permitted.
(f) Transfer to Attorney General.--
(1) In general.--Nothing in this title shall apply
when financial records obtained by an agency or
department of the United States are disclosed or
transferred to the Attorney General or the Secretary of
the Treasury upon the certification by a supervisory
level official of the transferring agency or department
that--
(A) there is reason to believe that the
records may be relevant to a violation of
Federal criminal law; and
(B) the records were obtained in the exercise
of the agency's or department's supervisory or
regulatory functions.
(2) Limitation on use.--Records so transferred shall
be used only for criminal investigative or prosecutive
purposes, for civil actions under section 951 of the
Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, or for forfeiture under
sections 981 or 982 of title 18, United States Code, by
the Department of Justice and only for criminal
investigative purposes relating to money laundering and
other financial crimes by the Department of the
Treasury and shall, upon completion of the
investigation or prosecution (including any appeal), be
returned only to the transferring agency or department.
No agency or department so transferring such records
shall be deemed to have waived any privilege applicable
to those records under law.
exceptions
Sec. 1113. (a) Nothing in this title prohibits the disclosure
of any financial records or information which is not identified
with or identifiable as being derived from the financial
records of a particular customer.
(b) This chapter shall not apply to the examination by or
disclosure to any supervisory agency of financial records or
information in the exercise of its supervisory, regulatory, or
monetary functions, including conservatorship or receivership
functions, with respect to any financial institution, holding
company, subsidiary of a financial institution or holding
company, institution-affiliated party (within the meaning of
section 3(u) of the Federal Deposit Insurance Act) with respect
to a financial institution, holding company, or subsidiary, or
other person participating in the conduct of the affairs
thereof.
(c) Nothing in this title prohibits the disclosure of
financial records in accordance with procedures authorized by
the Internal Revenue Code.
(d) Nothing in this title shall authorize the withholding of
financial records or information required to be reported in
accordance with any Federal statute or rule promulgated
thereunder.
(e) Nothing in this title shall apply when financial records
are sought by a Government authority under the Federal Rules of
Civil or Criminal Procedure or comparable rules of other courts
in connection with litigation to which the Government authority
and the customer are parties.
(f) Nothing in this title shall apply when financial records
are sought by a Government authority pursuant to an
administrative subpena issued by an administrative law judge in
an adjudicatory proceeding subject to section 554 of title 5,
United States Code, and to which the Government authority and
the customer are parties.
(g) The notice requirements of this title and sections 1110
and 1112 shall not apply when a Government authority by a means
described in section 1102 and for a legitimate law enforcement
inquiry is seeking only the name, address, account number, and
type of account of any customer or ascertainable group of
customers associated (1) with a financial transaction or class
of financial transactions, or (2) with a foreign country or
subdivision thereof in the case of a Government authority
exercising financial controls over foreign accounts in the
United States under section 5(b) of the Trading with the Enemy
Act (50 U.S.C. App. 5(b)); the International Emergency Economic
Powers Act (title II, Public Law 95-223); or section 5 of the
United Nations Participation Act (22 U.S.C. 287(c)).
(h)(1) Nothing in this title (except sections 1103, 1117 and
1118) shall apply when financial records are sought by a
Government authority--
(A) in connection with a lawful proceeding,
investigation, examination, or inspection directed at a
financial institution (whether or not such proceeding,
investigation, examination, or inspection is also
directed at a customer) or at a legal entity which is
not a customer; or
(B) in connection with the authority's consideration
or administration of assistance to the customer in the
form of a Government loan, loan guaranty, or loan
insurance program.
(2) When financial records are sought pursuant to this
subsection, the Government authority shall submit to the
financial institution the certificate required by section
1103(b). For access pursuant to paragraph (1)(B), no further
certification shall be required for subsequent access by the
certifying Government authority during the term of the loan,
loan guaranty, or loan insurance agreement.
(3) After the effective date of this title, whenever a
customer applies for participation in a Government loan, loan
guaranty, or loan insurance program, the Government authority
administering such program shall give the customer written
notice of the authority's access rights under this subsection.
No further notification shall be required for subsequent access
by that authority during the term of the loan, loan guaranty,
or loan insurance agreement.
(4) Financial records obtained pursuant to this subsection
may be used only for the purpose for which they were originally
obtained, and may be transferred to another agency or
department only when the transfer is to facilitate a lawful
proceeding, investigation, examination, or inspection directed
at a financial institution (whether or not such proceeding,
investigation, examination, or inspection is also directed at a
customer), or at a legal entity which is not a customer, except
that--
(A) nothing in this paragraph prohibits the use or
transfer of a customer's financial records needed by
counsel representing a Government authority in a civil
action arising from a Government loan, loan guaranty,
or loan insurance agreement; and
(B) nothing in this paragraph prohibits a Government
authority providing assistance to a customer in the
form of a loan, loan guaranty, or loan insurance
agreement from using or transferring financial records
necessary to process, service or foreclose a loan, or
to collect on an indebtedness to the Government
resulting from a customer's default.
(5) Notification that financial records obtained pursuant to
this subsection may relate to a potential civil, criminal, or
regulatory violation by a customer may be given to an agency or
department with jurisdiction over the violation, and such
agency or department may than seek access to the records
pursuant to the provisions of this title.
(6) Each financial institution shall keep a notation of each
disclosure made pursuant to paragraph (1)(B) of this
subsection, including the date of such disclosure and the
Government authority to which it was made. The customer shall
be entitled to inspect this information.
(i) Nothing in this title (except sections 1115 and 1120)
shall apply to any subpena or court order issued in connection
with proceedings before a grand jury, except that a court shall
have authority to order a financial institution, on which a
grand jury subpena for customer records has been served, not to
notify the customer of the existence of the subpena or
information that has been furnished to the grand jury, under
the circumstances and for the period specified and pursuant to
the procedures established in section 1109 of the Right to
Financial Privacy Act of 1978 (12 U.S.C. 3409).
(j) This title shall not apply when financial records are
sought by the General Accounting Office pursuant to an
authorized proceeding, investigation, examination or audit
directed at a government authority.
(k) Disclosure Necessary for Proper Administration of
Programs of Certain Government Authorities.--(1) Nothing in
this title shall apply to the disclosure by the financial
institution of the name and address of any customer to the
Department of the Treasury, the Social Security Administration,
or the Railroad Retirement Board, where the disclosure of such
information is necessary to, and such information is used
solely for the purpose of, the proper administration of section
1441 of the Internal Revenue Code of 1954, title II of the
Social Security Act, or the Railroad Retirement Act of 1974.
(2) Nothing in this title shall apply to the
disclosure by the financial institution of information
contained in the financial records of any customer to
any Government authority that certifies, disburses, or
collects payments, where the disclosure of such
information is necessary to, and such information is
used solely for the purpose of--
(A) verification of the identity of any
person or proper routing and delivery of funds
in connection with the issuance of a Federal
payment or collection of funds by a Government
authority; or
(B) the investigation or recovery of an
improper Federal payment or collection of funds
or an improperly negotiated Treasury check.
(3) Notwithstanding any other provision of law, a
request authorized by paragraph (1) or (2) (and the
information contained therein) may be used by the
financial institution or its agents solely for the
purpose of providing information contained in the
financial records of the customer to the Government
authority requesting the information, and the financial
institution and its agents shall be barred from
redisclosure of such information. Any Government
authority receiving information pursuant to paragraph
(1) or (2) may not disclose or use the information,
except for the purposes set forth in such paragraph.
(l) Crimes Against Financial Institutions by Insiders.--
Nothing in this title shall apply when any financial
institution or supervisory agency provides any financial record
of any officer, director, employee, or controlling shareholder
(within the meaning of subparagraph (A) or (B) of section
2(a)(2) of the Bank Holding Company Act of 1956 or subparagraph
(A) or (B) of section 408(a)(2) of the National Housing Act) of
such institution, or of any major borrower from such
institution who there is reason to believe may be acting in
concert with any such officer, director, employee, or
controlling shareholder, to the Attorney General of the United
States, to a State law enforcement agency, or, in the case of a
possible violation of subchapter II of chapter 53 of title 31,
United States Code, to the Secretary of the Treasury if there
is reason to believe that such record is relevant to a possible
violation by such person of--
(1) any law relating to crimes against financial
institutions or supervisory agencies by directors,
officers, employees, or controlling shareholders of, or
by borrowers from, financial institutions; or
(2) any provision of subchapter II of chapter 53 of
title 31, United States Code or of section 1956 or 1957
of title 18, United States Code.
No supervisory agency which transfers any such record under
this subsection shall be deemed to have waived any privilege
applicable to that record under law.
(m) This title shall not apply to the examination by or
disclosure to employees or agents of the Board of Governors of
the Federal Reserve System or any Federal Reserve Bank of
financial records or information in the exercise of the Federal
Reserve System's authority to extend credit to the financial
institutions or others.
(n) This title shall not apply to the examination by or
disclosure to the Resolution Trust Corporation or its employees
or agents of financial records or information in the exercise
of its conservatorship, receivership, or liquidation functions
with respect to a financial institution.
(o) This title shall not apply to the examination by or
disclosure to the Federal Housing Finance Agency or any of the
Federal home loan banks of financial records or information in
the exercise of the Federal Housing Finance Agency's authority
to extend credit (either directly or through a Federal home
loan bank) to financial institutions or others.
(p)(1) Nothing in this title shall apply to the disclosure by
the financial institution of the name and address of any
customer to the Department of Veterans Affairs where the
disclosure of such information is necessary to, and such
information is used solely for the purposes of, the proper
administration of benefits programs under laws administered by
the Secretary.
(2) Notwithstanding any other provision of law, any request
authorized by paragraph (1) (and the information contained
therein) may be used by the financial institution or its agents
solely for the purpose of providing the customer's name and
address to the Department of Veterans Affairs and shall be
barred from redisclosure by the financial institution or its
agents.
(q) Nothing in this title shall apply to the disclosure of
any financial record or information to a Government authority
in conjunction with a Federal contractor-issued travel charge
card issued for official Government travel.
[(r) Disclosure to the Bureau of Consumer Financial
Protection.--Nothing in this title shall apply to the
examination by or disclosure to the Bureau of Consumer
Financial Protection of financial records or information in the
exercise of its authority with respect to a financial
institution.]
* * * * * * *
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TELEMARKETING AND CONSUMER FRAUD AND ABUSE PREVENTION ACT
* * * * * * *
SEC. 3. TELEMARKETING RULES.
(a) In General.--
(1) The Commission shall prescribe rules prohibiting
deceptive telemarketing acts or practices and other
abusive telemarketing acts or practices.
(2) The Commission shall include in such rules
respecting deceptive telemarketing acts or practices a
definition of deceptive telemarketing acts or practices
which shall include fraudulent charitable
solicitations, and which may include acts or practices
of entities or individuals that assist or facilitate
deceptive telemarketing, including credit card
laundering.
(3) The Commission shall include in such rules
respecting other abusive telemarketing acts or
practices--
(A) a requirement that telemarketers may not
undertake a pattern of unsolicited telephone
calls which the reasonable consumer would
consider coercive or abusive of such consumer's
right to privacy,
(B) restrictions on the hours of the day and
night when unsolicited telephone calls can be
made to consumers,
(C) a requirement that any person engaged in
telemarketing for the sale of goods or services
shall promptly and clearly disclose to the
person receiving the call that the purpose of
the call is to sell goods or services and make
such other disclosures as the Commission deems
appropriate, including the nature and price of
the goods and services; and
(D) a requirement that any person engaged in
telemarketing for the solicitation of
charitable contributions, donations, or gifts
of money or any other thing of value, shall
promptly and clearly disclose to the person
receiving the call that the purpose of the call
is to solicit charitable contributions,
donations, or gifts, and make such other
disclosures as the Commission considers
appropriate, including the name and mailing
address of the charitable organization on
behalf of which the solicitation is made.
In prescribing the rules described in this paragraph,
the Commission shall also consider recordkeeping
requirements.
(b) Rulemaking Authority.--The Commission shall have
authority to prescribe rules under subsection (a), in
accordance with section 553 of title 5, United States Code. In
prescribing a rule under this section that relates to the
provision of a consumer financial product or service that is
subject to the Consumer Financial Protection Act of 2010,
including any enumerated consumer law thereunder, the
Commission shall consult with the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency regarding the
consistency of a proposed rule with standards, purposes, or
objectives administered by the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency, provided, however,
nothing in this section shall conflict with or supersede
section 6 of the Federal Trade Commission Act (15 U.S.C. 46).
(c) Violations.--Any violation of any rule prescribed under
[subsection (a)--]
[(1) shall] subsection (a) shall be treated as a
violation of a rule under section 18 of the Federal
Trade Commission Act regarding unfair or deceptive acts
or practices[; and].
[(2) that is committed by a person subject to the
Consumer Financial Protection Act of 2010 shall be
treated as a violation of a rule under section 1031 of
that Act regarding unfair, deceptive, or abusive acts
or practices.]
(d) Securities and Exchange Commission Rules.--
(1) Promulgation.--
(A) In general.--Except as provided in
subparagraph (B), not later than 6 months after
the effective date of rules promulgated by the
Federal Trade Commission under subsection (a),
the Securities and Exchange Commission shall
promulgate, or require any national securities
exchange or registered securities association
to promulgate, rules substantially similar to
such rules to prohibit deceptive and other
abusive telemarketing acts or practices by
persons described in paragraph (2).
(B) Exception.--The Securities and Exchange
Commission is not required to promulgate a rule
under subparagraph (A) if it determines that--
(i) Federal securities laws or rules
adopted by the Securities and Exchange
Commission thereunder provide
protection from deceptive and other
abusive telemarketing by persons
described in paragraph (2)
substantially similar to that provided
by rules promulgated by the Federal
Trade Commission under subsection (a);
or
(ii) such a rule promulgated by the
Securities and Exchange Commission is
not necessary or appropriate in the
public interest, or for the protection
of investors, or would be inconsistent
with the maintenance of fair and
orderly markets.
If the Securities and Exchange Commission
determines that an exception described in
clause (i) or (ii) applies, the Securities and
Exchange Commission shall publish in the
Federal Register its determination with the
reasons for it.
(2) Application.--
(A) In general.--The rules promulgated by the
Securities and Exchange Commission under
paragraph (1)(A) shall apply to a broker,
dealer, transfer agent, municipal securities
dealer, municipal securities broker, government
securities broker, government securities
dealer, investment adviser or investment
company, or any individual asso- ciated with a
broker, dealer, transfer agent, municipal
securities dealer, municipal securities broker,
government securities broker, government
securities dealer, investment adviser or
investment company. The rules promulgated by
the Federal Trade Commission under subsection
(a) shall not apply to persons described in the
preceding sentence.
(B) Definitions.--For purposes of
subparagraph (A)--
(i) the terms ``broker'', ``dealer'',
``transfer agent'', ``municipal
securities dealer'', ``municipal
securities broker'', ``government
securities broker'', and ``government
securities dealer'' have the meanings
given such terms by paragraphs (4),
(5), (25), (30), (31), (43), and (44)
of section 3(a) of the Securities and
Exchange Act of 1934 (15 U.S.C.
78c(a)(4), (5), (25), (30), (31), (43),
and (44));
(ii) the term ``investment adviser''
has the meaning given such term by
section 202(a)(11) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-
2(a)(11)); and
(iii) the term ``investment company''
has the meaning given such term by
section 3(a) of the Investment Company
Act of 1940 (15 U.S.C. 80a-3(a)).
(e) Commodity Futures Trading Commission Rules.--
(1) Application.--The rules promulgated by the
Federal Trade Commission under subsection (a) shall not
apply to persons described in subsection (f)(1) of
section 6 of the Commodity Exchange Act (7 U.S.C. 8, 9,
15, 13b, 9a).
(2) Promulgation.--Section 6 of the Commodity
Exchange Act (7 U.S.C. 8, 9, 15, 13b, 9a) is amended by
adding at the end the following new subsection:
``(f)(1) Except as provided in paragraph (2), not later than
six months after the effective date of rules promulgated by the
Federal Trade Commission under section 3(a) of the
Telemarketing and Consumer Fraud and Abuse Prevention Act, the
Commission shall promulgate, or require each registered futures
association to promulgate, rules substantially similar to such
rules to prohibit deceptive and other abusive telemarketing
acts or practices by any person registered or exempt from
registration under this Act in connection with such person's
business as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, leverage
transaction merchant, floor broker, or floor trader, or a
person associated with any such person.
``(2) The Commission is not required to promulgate rules
under paragraph (1) if it determines that--
``(A) rules adopted by the Commission under this Act
provide protection from deceptive and abusive
telemarketing by persons described under paragraph (1)
substantially similar to that provided by rules
promulgated by the Federal Trade Commission under
section 3(a) of the Telemarketing and Consumer Fraud
and Abuse Prevention Act; or
``(B) such a rule promulgated by the Commission is
not necessary or appropriate in the public interest, or
for the pro- tection of customers in the futures and
options markets, or would be inconsistent with the
maintenance of fair and orderly markets.
If the Commission determines that an exception described in
subparagraph (A) or (B) applies, the Commission shall publish
in the Federal Register its determination with the reasons for
it.''.
SEC. 4. ACTIONS BY STATES.
(a) In General.--Whenever an attorney general of any State
has reason to believe that the interests of the residents of
that State have been or are being threatened or adversely
affected because any person has engaged or is engaging in a
pattern or practice of telemarketing which violates any rule of
the Commission under section 3, the State, as parens patriae,
may bring a civil action on behalf of its residents in an
appropriate district court of the United States to enjoin such
telemarketing, to enforce compliance with such rule of the
Commission, to obtain damages, restitution, or other
compensation on behalf of residents of such State, or to obtain
such further and other relief as the court may deem
appropriate.
(b) Notice.--The State shall serve prior written notice of
any civil action under subsection (a) or (f)(2) upon the
Commission and provide the Commission with a copy of its
complaint, except that if it is not feasible for the State to
provide such prior notice, the State shall serve such notice
immediately upon instituting such action. Upon receiving a
notice respecting a civil action, the Commission shall have the
right (1) to intervene in such action, (2) upon so intervening,
to be heard on all matters arising therein, and (3) to file
petitions for appeal.
(c) Construction.--For purposes of bringing any civil action
under subsection (a), nothing in this Act shall prevent an
attorney general from exercising the powers conferred on the
attorney general by the laws of such State to conduct
investigations or to administer oaths or affirmations or to
compel the attendance of witnesses or the production of
documentary and other evidence.
(d) Actions by the Commission.--Whenever a civil action has
been instituted by or on behalf of the Commission or the
[Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency for violation of any rule prescribed under
section 3, no State may, during the pendency of such action
instituted by or on behalf of the Commission or the [Bureau of
Consumer Financial Protection] Consumer Law Enforcement Agency,
institute a civil action under subsection (a) or (f)(2) against
any defendant named in the complaint in such action for
violation of any rule as alleged in such complaint.
(e) Venue; Service of Process.--Any civil action brought
under subsection (a) in a district court of the United States
may be brought in the district in which the defendant is found,
is an inhabitant, or transacts business or wherever venue is
proper under section 1391 of title 28, United States Code.
Process in such an action may be served in any district in
which the defendant is an inhabitant or in which the defendant
may be found.
(f) Actions by Other State Officials.--
(1) Nothing contained in this section shall prohibit
an authorized State official from proceeding in State
court on the basis of an alleged violation of any civil
or criminal statute of such State.
(2) In addition to actions brought by an attorney
general of a State under subsection (a), such an action
may be brought by officers of such State who are
authorized by the State to bring actions in such State
on behalf of its residents.
SEC. 5. ACTIONS BY PRIVATE PERSONS.
(a) In General.--Any person adversely affected by any pattern
or practice of telemarketing which violates any rule of the
Commission under section 3, or an authorized person acting on
such person's behalf, may, within 3 years after discovery of
the violation, bring a civil action in an appropriate district
court of the United States against a person who has engaged or
is engaging in such pattern or practice of telemarketing if the
amount in controversy exceeds the sum or value of $50,000 in
actual damages for each person adversely affected by such
telemarketing. Such an action may be brought to enjoin such
telemarketing, to enforce compliance with any rule of the
Commission under section 3, to obtain damages, or to obtain
such further and other relief as the court may deem
appropriate.
(b) Notice.--The plaintiff shall serve prior written notice
of the action upon the Commission and provide the Commission
with a copy of its complaint, except in any case where such
prior notice is not feasible, in which case the person shall
serve such notice immediately upon instituting such action. The
Commission shall have the right (A) to intervene in the action,
(B) upon so intervening, to be heard on all matters arising
therein, and (C) to file petitions for appeal.
(c) Action by the Commission.--Whenever a civil action has
been instituted by or on behalf of the Commission or the
[Bureau of Consumer Financial Protection] Consumer Law
Enforcement Agency for violation of any rule prescribed under
section 3, no person may, during the pendency of such action
instituted by or on behalf of the Commission or the [Bureau of
Consumer Financial Protection] Consumer Law Enforcement Agency,
institute a civil action against any defendant named in the
complaint in such action for violation of any rule as alleged
in such complaint.
(d) Cost and Fees.--The court, in issuing any final order in
any action brought under subsection (a), may award costs of
suit and reasonable fees for attorneys and expert witnesses to
the prevailing party.
(e) Construction.--Nothing in this section shall restrict any
right which any person may have under any statute or common
law.
(f) Venue; Service of Process.--Any civil action brought
under subsection (a) in a district court of the United States
may be brought in the district in which the defendant is found,
is an inhabitant, or transacts business or wherever venue is
proper under section 1391 of title 28, United States Code.
Process in such an action may be served in any district in
which the defendant is an inhabitant or in which the defendant
may be found.
SEC. 6. ADMINISTRATION AND APPLICABILITY OF ACT.
(a) In General.--Except as otherwise provided in sections
3(d), 3(e), 4, and 5, this Act shall be enforced by the
Commission under the Federal Trade Commission Act (15 U.S.C. 41
et seq.). Consequently, no activity which is outside the
jurisdiction of that Act shall be affected by this Act.
(b) Actions by the Commission.--The Commission shall prevent
any person from violating a rule of the Commission under
section 3 in the same manner, by the same means, and with the
same jurisdiction, powers, and duties as though all applicable
terms and provisions of the Federal Trade Commission Act (15
U.S.C. 41 et seq.) were incorporated into and made a part of
this Act. Any person who violates such rule shall be subject to
the penalties and entitled to the privileges and immunities
provided in the Federal Trade Commission Act in the same
manner, by the same means, and with the same jurisdiction,
power, and duties as though all applicable terms and provisions
of the Federal Trade Commission Act were incorporated into and
made a part of this Act.
(c) Effect on Other Laws.--Nothing contained in this Act
shall be construed to limit the authority of the Commission
under any other provision of law.
(d) Enforcement by [Bureau of Consumer Financial Protection]
Consumer Law Enforcement Agency.--Except as otherwise provided
in sections 3(d), 3(e), 4, and 5, and subject to subtitle B of
the Consumer Financial Protection Act of 2010, this Act shall
be enforced by the [Bureau of Consumer Financial Protection]
Consumer Law Enforcement Agency under subtitle E of the
Consumer Financial Protection Act of 2010, with respect to the
offering or provision of a consumer financial product or
service subject to that Act.
* * * * * * *
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TITLE 5, UNITED STATES CODE
* * * * * * *
PART I--THE AGENCIES GENERALLY
* * * * * * *
CHAPTER 5--ADMINISTRATIVE PROCEDURE
* * * * * * *
SUBCHAPTER II--ADMINISTRATIVE PROCEDURE
* * * * * * *
Sec. 552a. Records maintained on individuals
(a) Definitions.--For purposes of this section--
(1) the term ``agency'' means agency as defined in
section 552(e) of this title;
(2) the term ``individual'' means a citizen of the
United States or an alien lawfully admitted for
permanent residence;
(3) the term ``maintain'' includes maintain, collect,
use, or disseminate;
(4) the term ``record'' means any item, collection,
or grouping of information about an individual that is
maintained by an agency, including, but not limited to,
his education, financial transactions, medical history,
and criminal or employment history and that contains
his name, or the identifying number, symbol, or other
identifying particular assigned to the individual, such
as a finger or voice print or a photograph;
(5) the term ``system of records'' means a group of
any records under the control of any agency from which
information is retrieved by the name of the individual
or by some identifying number, symbol, or other
identifying particular assigned to the individual;
(6) the term ``statistical record'' means a record in
a system of records maintained for statistical research
or reporting purposes only and not used in whole or in
part in making any determination about an identifiable
individual, except as provided by section 8 of title
13;
(7) the term ``routine use'' means, with respect to
the disclosure of a record, the use of such record for
a purpose which is compatible with the purpose for
which it was collected;
(8) the term ``matching program''--
(A) means any computerized comparison of--
(i) two or more automated systems of
records or a system of records with
non-Federal records for the purpose
of--
(I) establishing or verifying
the eligibility of, or
continuing compliance with
statutory and regulatory
requirements by, applicants
for, recipients or
beneficiaries of, participants
in, or providers of services
with respect to, cash or in-
kind assistance or payments
under Federal benefit programs,
or
(II) recouping payments or
delinquent debts under such
Federal benefit programs, or
(ii) two or more automated Federal
personnel or payroll systems of records
or a system of Federal personnel or
payroll records with non-Federal
records,
(B) but does not include--
(i) matches performed to produce
aggregate statistical data without any
personal identifiers;
(ii) matches performed to support any
research or statistical project, the
specific data of which may not be used
to make decisions concerning the
rights, benefits, or privileges of
specific individuals;
(iii) matches performed, by an agency
(or component thereof) which performs
as its principal function any activity
pertaining to the enforcement of
criminal laws, subsequent to the
initiation of a specific criminal or
civil law enforcement investigation of
a named person or persons for the
purpose of gathering evidence against
such person or persons;
(iv) matches of tax information (I)
pursuant to section 6103(d) of the
Internal Revenue Code of 1986, (II) for
purposes of tax administration as
defined in section 6103(b)(4) of such
Code, (III) for the purpose of
intercepting a tax refund due an
individual under authority granted by
section 404(e), 464, or 1137 of the
Social Security Act; or (IV) for the
purpose of intercepting a tax refund
due an individual under any other tax
refund intercept program authorized by
statute which has been determined by
the Director of the Office of
Management and Budget to contain
verification, notice, and hearing
requirements that are substantially
similar to the procedures in section
1137 of the Social Security Act;
(v) matches--
(I) using records
predominantly relating to
Federal personnel, that are
performed for routine
administrative purposes
(subject to guidance provided
by the Director of the Office
of Management and Budget
pursuant to subsection (v)); or
(II) conducted by an agency
using only records from systems
of records maintained by that
agency;
if the purpose of the match is not to
take any adverse financial, personnel,
disciplinary, or other adverse action
against Federal personnel;
(vi) matches performed for foreign
counterintelligence purposes or to
produce background checks for security
clearances of Federal personnel or
Federal contractor personnel;
(vii) matches performed incident to a
levy described in section 6103(k)(8) of
the Internal Revenue Code of 1986;
(viii) matches performed pursuant to
section 202(x)(3) or 1611(e)(1) of the
Social Security Act (42 U.S.C.
402(x)(3), 1382(e)(1));
(ix) matches performed by the
Secretary of Health and Human Services
or the Inspector General of the
Department of Health and Human Services
with respect to potential fraud, waste,
and abuse, including matches of a
system of records with non-Federal
records; or
(x) matches performed pursuant to
section 3(d)(4) of the Achieving a
Better Life Experience Act of 2014;
(9) the term ``recipient agency'' means any agency,
or contractor thereof, receiving records contained in a
system of records from a source agency for use in a
matching program;
(10) the term ``non-Federal agency'' means any State
or local government, or agency thereof, which receives
records contained in a system of records from a source
agency for use in a matching program;
(11) the term ``source agency'' means any agency
which discloses records contained in a system of
records to be used in a matching program, or any State
or local government, or agency thereof, which discloses
records to be used in a matching program;
(12) the term ``Federal benefit program'' means any
program administered or funded by the Federal
Government, or by any agent or State on behalf of the
Federal Government, providing cash or in-kind
assistance in the form of payments, grants, loans, or
loan guarantees to individuals; and
(13) the term ``Federal personnel'' means officers
and employees of the Government of the United States,
members of the uniformed services (including members of
the Reserve Components), individuals entitled to
receive immediate or deferred retirement benefits under
any retirement program of the Government of the United
States (including survivor benefits).
(b) Conditions of Disclosure.--No agency shall disclose any
record which is contained in a system of records by any means
of communication to any person, or to another agency, except
pursuant to a written request by, or with the prior written
consent of, the individual to whom the record pertains, unless
disclosure of the record would be--
(1) to those officers and employees of the agency
which maintains the record who have a need for the
record in the performance of their duties;
(2) required under section 552 of this title;
(3) for a routine use as defined in subsection (a)(7)
of this section and described under subsection
(e)(4)(D) of this section;
(4) to the Bureau of the Census for purposes of
planning or carrying out a census or survey or related
activity pursuant to the provisions of title 13;
(5) to a recipient who has provided the agency with
advance adequate written assurance that the record will
be used solely as a statistical research or reporting
record, and the record is to be transferred in a form
that is not individually identifiable;
(6) to the National Archives and Records
Administration as a record which has sufficient
historical or other value to warrant its continued
preservation by the United States Government, or for
evaluation by the Archivist of the United States or the
designee of the Archivist to determine whether the
record has such value;
(7) to another agency or to an instrumentality of any
governmental jurisdiction within or under the control
of the United States for a civil or criminal law
enforcement activity if the activity is authorized by
law, and if the head of the agency or instrumentality
has made a written request to the agency which
maintains the record specifying the particular portion
desired and the law enforcement activity for which the
record is sought;
(8) to a person pursuant to a showing of compelling
circumstances affecting the health or safety of an
individual if upon such disclosure notification is
transmitted to the last known address of such
individual;
(9) to either House of Congress, or, to the extent of
matter within its jurisdiction, any committee or
subcommittee thereof, any joint committee of Congress
or subcommittee of any such joint committee;
(10) to the Comptroller General, or any of his
authorized representatives, in the course of the
performance of the duties of the Government
Accountability Office;
(11) pursuant to the order of a court of competent
jurisdiction; or
(12) to a consumer reporting agency in accordance
with section 3711(e) of title 31.
(c) Accounting of Certain Disclosures.--Each agency, with
respect to each system of records under its control, shall--
(1) except for disclosures made under subsections
(b)(1) or (b)(2) of this section, keep an accurate
accounting of--
(A) the date, nature, and purpose of each
disclosure of a record to any person or to
another agency made under subsection (b) of
this section; and
(B) the name and address of the person or
agency to whom the disclosure is made;
(2) retain the accounting made under paragraph (1) of
this subsection for at least five years or the life of
the record, whichever is longer, after the disclosure
for which the accounting is made;
(3) except for disclosures made under subsection
(b)(7) of this section, make the accounting made under
paragraph (1) of this subsection available to the
individual named in the record at his request; and
(4) inform any person or other agency about any
correction or notation of dispute made by the agency in
accordance with subsection (d) of this section of any
record that has been disclosed to the person or agency
if an accounting of the disclosure was made.
(d) Access to Records.--Each agency that maintains a system
of records shall--
(1) upon request by any individual to gain access to
his record or to any information pertaining to him
which is contained in the system, permit him and upon
his request, a person of his own choosing to accompany
him, to review the record and have a copy made of all
or any portion thereof in a form comprehensible to him,
except that the agency may require the individual to
furnish a written statement authorizing discussion of
that individual's record in the accompanying person's
presence;
(2) permit the individual to request amendment of a
record pertaining to him and--
(A) not later than 10 days (excluding
Saturdays, Sundays, and legal public holidays)
after the date of receipt of such request,
acknowledge in writing such receipt; and
(B) promptly, either--
(i) make any correction of any
portion thereof which the individual
believes is not accurate, relevant,
timely, or complete; or
(ii) inform the individual of its
refusal to amend the record in
accordance with his request, the reason
for the refusal, the procedures
established by the agency for the
individual to request a review of that
refusal by the head of the agency or an
officer designated by the head of the
agency, and the name and business
address of that official;
(3) permit the individual who disagrees with the
refusal of the agency to amend his record to request a
review of such refusal, and not later than 30 days
(excluding Saturdays, Sundays, and legal public
holidays) from the date on which the individual
requests such review, complete such review and make a
final determination unless, for good cause shown, the
head of the agency extends such 30-day period; and if,
after his review, the reviewing official also refuses
to amend the record in accordance with the request,
permit the individual to file with the agency a concise
statement setting forth the reasons for his
disagreement with the refusal of the agency, and notify
the individual of the provisions for judicial review of
the reviewing official's determination under subsection
(g)(1)(A) of this section;
(4) in any disclosure, containing information about
which the individual has filed a statement of
disagreement, occurring after the filing of the
statement under paragraph (3) of this subsection,
clearly note any portion of the record which is
disputed and provide copies of the statement and, if
the agency deems it appropriate, copies of a concise
statement of the reasons of the agency for not making
the amendments requested, to persons or other agencies
to whom the disputed record has been disclosed; and
(5) nothing in this section shall allow an individual
access to any information compiled in reasonable
anticipation of a civil action or proceeding.
(e) Agency Requirements.--Each agency that maintains a system
of records shall--
(1) maintain in its records only such information
about an individual as is relevant and necessary to
accomplish a purpose of the agency required to be
accomplished by statute or by executive order of the
President;
(2) collect information to the greatest extent
practicable directly from the subject individual when
the information may result in adverse determinations
about an individual's rights, benefits, and privileges
under Federal programs;
(3) inform each individual whom it asks to supply
information, on the form which it uses to collect the
information or on a separate form that can be retained
by the individual--
(A) the authority (whether granted by
statute, or by executive order of the
President) which authorizes the solicitation of
the information and whether disclosure of such
information is mandatory or voluntary;
(B) the principal purpose or purposes for
which the information is intended to be used;
(C) the routine uses which may be made of the
information, as published pursuant to paragraph
(4)(D) of this subsection; and
(D) the effects on him, if any, of not
providing all or any part of the requested
information;
(4) subject to the provisions of paragraph (11) of
this subsection, publish in the Federal Register upon
establishment or revision a notice of the existence and
character of the system of records, which notice shall
include--
(A) the name and location of the system;
(B) the categories of individuals on whom
records are maintained in the system;
(C) the categories of records maintained in
the system;
(D) each routine use of the records contained
in the system, including the categories of
users and the purpose of such use;
(E) the policies and practices of the agency
regarding storage, retrievability, access
controls, retention, and disposal of the
records;
(F) the title and business address of the
agency official who is responsible for the
system of records;
(G) the agency procedures whereby an
individual can be notified at his request if
the system of records contains a record
pertaining to him;
(H) the agency procedures whereby an
individual can be notified at his request how
he can gain access to any record pertaining to
him contained in the system of records, and how
he can contest its content; and
(I) the categories of sources of records in
the system;
(5) maintain all records which are used by the agency
in making any determination about any individual with
such accuracy, relevance, timeliness, and completeness
as is reasonably necessary to assure fairness to the
individual in the determination;
(6) prior to disseminating any record about an
individual to any person other than an agency, unless
the dissemination is made pursuant to subsection (b)(2)
of this section, make reasonable efforts to assure that
such records are accurate, complete, timely, and
relevant for agency purposes;
(7) maintain no record describing how any individual
exercises rights guaranteed by the First Amendment
unless expressly authorized by statute or by the
individual about whom the record is maintained or
unless pertinent to and within the scope of an
authorized law enforcement activity;
(8) make reasonable efforts to serve notice on an
individual when any record on such individual is made
available to any person under compulsory legal process
when such process becomes a matter of public record;
(9) establish rules of conduct for persons involved
in the design, development, operation, or maintenance
of any system of records, or in maintaining any record,
and instruct each such person with respect to such
rules and the requirements of this section, including
any other rules and procedures adopted pursuant to this
section and the penalties for noncompliance;
(10) establish appropriate administrative, technical,
and physical safeguards to insure the security and
confidentiality of records and to protect against any
anticipated threats or hazards to their security or
integrity which could result in substantial harm,
embarrassment, inconvenience, or unfairness to any
individual on whom information is maintained;
(11) at least 30 days prior to publication of
information under paragraph (4)(D) of this subsection,
publish in the Federal Register notice of any new use
or intended use of the information in the system, and
provide an opportunity for interested persons to submit
written data, views, or arguments to the agency; and
(12) if such agency is a recipient agency or a source
agency in a matching program with a non-Federal agency,
with respect to any establishment or revision of a
matching program, at least 30 days prior to conducting
such program, publish in the Federal Register notice of
such establishment or revision.
(f) Agency Rules.--In order to carry out the provisions of
this section, each agency that maintains a system of records
shall promulgate rules, in accordance with the requirements
(including general notice) of section 553 of this title, which
shall--
(1) establish procedures whereby an individual can be
notified in response to his request if any system of
records named by the individual contains a record
pertaining to him;
(2) define reasonable times, places, and requirements
for identifying an individual who requests his record
or information pertaining to him before the agency
shall make the record or information available to the
individual;
(3) establish procedures for the disclosure to an
individual upon his request of his record or
information pertaining to him, including special
procedure, if deemed necessary, for the disclosure to
an individual of medical records, including
psychological records, pertaining to him;
(4) establish procedures for reviewing a request from
an individual concerning the amendment of any record or
information pertaining to the individual, for making a
determination on the request, for an appeal within the
agency of an initial adverse agency determination, and
for whatever additional means may be necessary for each
individual to be able to exercise fully his rights
under this section; and
(5) establish fees to be charged, if any, to any
individual for making copies of his record, excluding
the cost of any search for and review of the record.
The Office of the Federal Register shall biennially compile and
publish the rules promulgated under this subsection and agency
notices published under subsection (e)(4) of this section in a
form available to the public at low cost.
(g)(1) Civil Remedies.--Whenever any agency
(A) makes a determination under subsection (d)(3) of
this section not to amend an individual's record in
accordance with his request, or fails to make such
review in conformity with that subsection;
(B) refuses to comply with an individual request
under subsection (d)(1) of this section;
(C) fails to maintain any record concerning any
individual with such accuracy, relevance, timeliness,
and completeness as is necessary to assure fairness in
any determination relating to the qualifications,
character, rights, or opportunities of, or benefits to
the individual that may be made on the basis of such
record, and consequently a determination is made which
is adverse to the individual; or
(D) fails to comply with any other provision of this
section, or any rule promulgated thereunder, in such a
way as to have an adverse effect on an individual,
the individual may bring a civil action against the agency, and
the district courts of the United States shall have
jurisdiction in the matters under the provisions of this
subsection.
(2)(A) In any suit brought under the provisions of subsection
(g)(1)(A) of this section, the court may order the agency to
amend the individual's record in accordance with his request or
in such other way as the court may direct. In such a case the
court shall determine the matter de novo.
(B) The court may assess against the United States reasonable
attorney fees and other litigation costs reasonably incurred in
any case under this paragraph in which the complainant has
substantially prevailed.
(3)(A) In any suit brought under the provisions of subsection
(g)(1)(B) of this section, the court may enjoin the agency from
withholding the records and order the production to the
complainant of any agency records improperly withheld from him.
In such a case the court shall determine the matter de novo,
and may examine the contents of any agency records in camera to
determine whether the records or any portion thereof may be
withheld under any of the exemptions set forth in subsection
(k) of this section, and the burden is on the agency to sustain
its action.
(B) The court may assess against the United States reasonable
attorney fees and other litigation costs reasonably incurred in
any case under this paragraph in which the complainant has
substantially prevailed.
(4) In any suit brought under the provisions of subsection
(g)(1)(C) or (D) of this section in which the court determines
that the agency acted in a manner which was intentional or
willful, the United States shall be liable to the individual in
an amount equal to the sum of--
(A) actual damages sustained by the individual as a
result of the refusal or failure, but in no case shall
a person entitled to recovery receive less than the sum
of $1,000; and
(B) the costs of the action together with reasonable
attorney fees as determined by the court.
(5) An action to enforce any liability created under this
section may be brought in the district court of the United
States in the district in which the complainant resides, or has
his principal place of business, or in which the agency records
are situated, or in the District of Columbia, without regard to
the amount in controversy, within two years from the date on
which the cause of action arises, except that where an agency
has materially and willfully misrepresented any information
required under this section to be disclosed to an individual
and the information so misrepresented is material to
establishment of the liability of the agency to the individual
under this section, the action may be brought at any time
within two years after discovery by the individual of the
misrepresentation. Nothing in this section shall be construed
to authorize any civil action by reason of any injury sustained
as the result of a disclosure of a record prior to September
27, 1975.
(h) Rights of Legal Guardians.--For the purposes of this
section, the parent of any minor, or the legal guardian of any
individual who has been declared to be incompetent due to
physical or mental incapacity or age by a court of competent
jurisdiction, may act on behalf of the individual.
(i)(1) Criminal Penalties.--Any officer or employee of an
agency, who by virtue of his employment or official position,
has possession of, or access to, agency records which contain
individually identifiable information the disclosure of which
is prohibited by this section or by rules or regulations
established thereunder, and who knowing that disclosure of the
specific material is so prohibited, willfully discloses the
material in any manner to any person or agency not entitled to
receive it, shall be guilty of a misdemeanor and fined not more
than $5,000.
(2) Any officer or employee of any agency who willfully
maintains a system of records without meeting the notice
requirements of subsection (e)(4) of this section shall be
guilty of a misdemeanor and fined not more than $5,000.
(3) Any person who knowingly and willfully requests or
obtains any record concerning an individual from an agency
under false pretenses shall be guilty of a misdemeanor and
fined not more than $5,000.
(j) General Exemptions.--The head of any agency may
promulgate rules, in accordance with the requirements
(including general notice) of sections 553(b)(1), (2), and (3),
(c), and (e) of this title, to exempt any system of records
within the agency from any part of this section except
subsections (b), (c)(1) and (2), (e)(4)(A) through (F), (e)(6),
(7), (9), (10), and (11), and (i) if the system of records is--
(1) maintained by the Central Intelligence Agency; or
(2) maintained by an agency or component thereof
which performs as its principal function any activity
pertaining to the enforcement of criminal laws,
including police efforts to prevent, control, or reduce
crime or to apprehend criminals, and the activities of
prosecutors, courts, correctional, probation, pardon,
or parole authorities, and which consists of (A)
information compiled for the purpose of identifying
individual criminal offenders and alleged offenders and
consisting only of identifying data and notations of
arrests, the nature and disposition of criminal
charges, sentencing, confinement, release, and parole
and probation status; (B) information compiled for the
purpose of a criminal investigation, including reports
of informants and investigators, and associated with an
identifiable individual; or (C) reports identifiable to
an individual compiled at any stage of the process of
enforcement of the criminal laws from arrest or
indictment through release from supervision.
At the time rules are adopted under this subsection, the agency
shall include in the statement required under section 553(c) of
this title, the reasons why the system of records is to be
exempted from a provision of this section.
(k) Specific Exemptions.--The head of any agency may
promulgate rules, in accordance with the requirements
(including general notice) of sections 553(b)(1), (2), and (3),
(c), and (e) of this title, to exempt any system of records
within the agency from subsections (c)(3), (d), (e)(1),
(e)(4)(G), (H), and (I) and (f) of this section if the system
of records is--
(1) subject to the provisions of section 552(b)(1) of
this title;
(2) investigatory material compiled for law
enforcement purposes, other than material within the
scope of subsection (j)(2) of this section: Provided,
however, That if any individual is denied any right,
privilege, or benefit that he would otherwise be
entitled by Federal law, or for which he would
otherwise be eligible, as a result of the maintenance
of such material, such material shall be provided to
such individual, except to the extent that the
disclosure of such material would reveal the identity
of a source who furnished information to the Government
under an express promise that the identity of the
source would be held in confidence, or, prior to the
effective date of this section, under an implied
promise that the identity of the source would be held
in confidence;
(3) maintained in connection with providing
protective services to the President of the United
States or other individuals pursuant to section 3056 of
title 18;
(4) required by statute to be maintained and used
solely as statistical records;
(5) investigatory material compiled solely for the
purpose of determining suitability, eligibility, or
qualifications for Federal civilian employment,
military service, Federal contracts, or access to
classified information, but only to the extent that the
disclosure of such material would reveal the identity
of a source who furnished information to the Government
under an express promise that the identity of the
source would be held in confidence, or, prior to the
effective date of this section, under an implied
promise that the identity of the source would be held
in confidence;
(6) testing or examination material used solely to
determine individual qualifications for appointment or
promotion in the Federal service the disclosure of
which would compromise the objectivity or fairness of
the testing or examination process; or
(7) evaluation material used to determine potential
for promotion in the armed services, but only to the
extent that the disclosure of such material would
reveal the identity of a source who furnished
information to the Government under an express promise
that the identity of the source would be held in
confidence, or, prior to the effective date of this
section, under an implied promise that the identity of
the source would be held in confidence.
At the time rules are adopted under this subsection, the agency
shall include in the statement required under section 553(c) of
this title, the reasons why the system of records is to be
exempted from a provision of this section.
(l)(1) Archival Records.--Each agency record which is
accepted by the Archivist of the United States for storage,
processing, and servicing in accordance with section 3103 of
title 44 shall, for the purposes of this section, be considered
to be maintained by the agency which deposited the record and
shall be subject to the provisions of this section. The
Archivist of the United States shall not disclose the record
except to the agency which maintains the record, or under rules
established by that agency which are not inconsistent with the
provisions of this section.
(2) Each agency record pertaining to an identifiable
individual which was transferred to the National Archives of
the United States as a record which has sufficient historical
or other value to warrant its continued preservation by the
United States Government, prior to the effective date of this
section, shall, for the purposes of this section, be considered
to be maintained by the National Archives and shall not be
subject to the provisions of this section, except that a
statement generally describing such records (modeled after the
requirements relating to records subject to subsections
(e)(4)(A) through (G) of this section) shall be published in
the Federal Register.
(3) Each agency record pertaining to an identifiable
individual which is transferred to the National Archives of the
United States as a record which has sufficient historical or
other value to warrant its continued preservation by the United
States Government, on or after the effective date of this
section, shall, for the purposes of this section, be considered
to be maintained by the National Archives and shall be exempt
from the requirements of this section except subsections
(e)(4)(A) through (G) and (e)(9) of this section.
(m)(1) Government Contractors.--When an agency provides by a
contract for the operation by or on behalf of the agency of a
system of records to accomplish an agency function, the agency
shall, consistent with its authority, cause the requirements of
this section to be applied to such system. For purposes of
subsection (i) of this section any such contractor and any
employee of such contractor, if such contract is agreed to on
or after the effective date of this section, shall be
considered to be an employee of an agency.
(2) A consumer reporting agency to which a record is
disclosed under section 3711(e) of title 31 shall not be
considered a contractor for the purposes of this section.
(n) Mailing Lists.--An individual's name and address may not
be sold or rented by an agency unless such action is
specifically authorized by law. This provision shall not be
construed to require the withholding of names and addresses
otherwise permitted to be made public.
(o) Matching Agreements.--(1) No record which is contained in
a system of records may be disclosed to a recipient agency or
non-Federal agency for use in a computer matching program
except pursuant to a written agreement between the source
agency and the recipient agency or non-Federal agency
specifying--
(A) the purpose and legal authority for conducting
the program;
(B) the justification for the program and the
anticipated results, including a specific estimate of
any savings;
(C) a description of the records that will be
matched, including each data element that will be used,
the approximate number of records that will be matched,
and the projected starting and completion dates of the
matching program;
(D) procedures for providing individualized notice at
the time of application, and notice periodically
thereafter as directed by the Data Integrity Board of
such agency (subject to guidance provided by the
Director of the Office of Management and Budget
pursuant to subsection (v)), to--
(i) applicants for and recipients of
financial assistance or payments under Federal
benefit programs, and
(ii) applicants for and holders of positions
as Federal personnel,
that any information provided by such applicants,
recipients, holders, and individuals may be subject to
verification through matching programs;
(E) procedures for verifying information produced in
such matching program as required by subsection (p);
(F) procedures for the retention and timely
destruction of identifiable records created by a
recipient agency or non-Federal agency in such matching
program;
(G) procedures for ensuring the administrative,
technical, and physical security of the records matched
and the results of such programs;
(H) prohibitions on duplication and redisclosure of
records provided by the source agency within or outside
the recipient agency or the non-Federal agency, except
where required by law or essential to the conduct of
the matching program;
(I) procedures governing the use by a recipient
agency or non-Federal agency of records provided in a
matching program by a source agency, including
procedures governing return of the records to the
source agency or destruction of records used in such
program;
(J) information on assessments that have been made on
the accuracy of the records that will be used in such
matching program; and
(K) that the Comptroller General may have access to
all records of a recipient agency or a non-Federal
agency that the Comptroller General deems necessary in
order to monitor or verify compliance with the
agreement.
(2)(A) A copy of each agreement entered into pursuant to
paragraph (1) shall--
(i) be transmitted to the Committee on Governmental
Affairs of the Senate and the Committee on Government
Operations of the House of Representatives; and
(ii) be available upon request to the public.
(B) No such agreement shall be effective until 30 days after
the date on which such a copy is transmitted pursuant to
subparagraph (A)(i).
(C) Such an agreement shall remain in effect only for such
period, not to exceed 18 months, as the Data Integrity Board of
the agency determines is appropriate in light of the purposes,
and length of time necessary for the conduct, of the matching
program.
(D) Within 3 months prior to the expiration of such an
agreement pursuant to subparagraph (C), the Data Integrity
Board of the agency may, without additional review, renew the
matching agreement for a current, ongoing matching program for
not more than one additional year if--
(i) such program will be conducted without any
change; and
(ii) each party to the agreement certifies to the
Board in writing that the program has been conducted in
compliance with the agreement.
(p) Verification and Opportunity to Contest Findings.--(1) In
order to protect any individual whose records are used in a
matching program, no recipient agency, non-Federal agency, or
source agency may suspend, terminate, reduce, or make a final
denial of any financial assistance or payment under a Federal
benefit program to such individual, or take other adverse
action against such individual, as a result of information
produced by such matching program, until--
(A)(i) the agency has independently verified the
information; or
(ii) the Data Integrity Board of the agency, or in
the case of a non-Federal agency the Data Integrity
Board of the source agency, determines in accordance
with guidance issued by the Director of the Office of
Management and Budget that--
(I) the information is limited to
identification and amount of benefits paid by
the source agency under a Federal benefit
program; and
(II) there is a high degree of confidence
that the information provided to the recipient
agency is accurate;
(B) the individual receives a notice from the agency
containing a statement of its findings and informing
the individual of the opportunity to contest such
findings; and
(C)(i) the expiration of any time period established
for the program by statute or regulation for the
individual to respond to that notice; or
(ii) in the case of a program for which no such
period is established, the end of the 30-day period
beginning on the date on which notice under
subparagraph (B) is mailed or otherwise provided to the
individual.
(2) Independent verification referred to in paragraph (1)
requires investigation and confirmation of specific information
relating to an individual that is used as a basis for an
adverse action against the individual, including where
applicable investigation and confirmation of--
(A) the amount of any asset or income involved;
(B) whether such individual actually has or had
access to such asset or income for such individual's
own use; and
(C) the period or periods when the individual
actually had such asset or income.
(3) Notwithstanding paragraph (1), an agency may take any
appropriate action otherwise prohibited by such paragraph if
the agency determines that the public health or public safety
may be adversely affected or significantly threatened during
any notice period required by such paragraph.
(q) Sanctions.--(1) Notwithstanding any other provision of
law, no source agency may disclose any record which is
contained in a system of records to a recipient agency or non-
Federal agency for a matching program if such source agency has
reason to believe that the requirements of subsection (p), or
any matching agreement entered into pursuant to subsection (o),
or both, are not being met by such recipient agency.
(2) No source agency may renew a matching agreement unless--
(A) the recipient agency or non-Federal agency has
certified that it has complied with the provisions of
that agreement; and
(B) the source agency has no reason to believe that
the certification is inaccurate.
(r) Report on New Systems and Matching Programs.--Each agency
that proposes to establish or make a significant change in a
system of records or a matching program shall provide adequate
advance notice of any such proposal (in duplicate) to the
Committee on Government Operations of the House of
Representatives, the Committee on Governmental Affairs of the
Senate, and the Office of Management and Budget in order to
permit an evaluation of the probable or potential effect of
such proposal on the privacy or other rights of individuals.
(s) Biennial Report.--The President shall biennially submit
to the Speaker of the House of Representatives and the
President pro tempore of the Senate a report--
(1) describing the actions of the Director of the
Office of Management and Budget pursuant to section 6
of the Privacy Act of 1974 during the preceding 2
years;
(2) describing the exercise of individual rights of
access and amendment under this section during such
years;
(3) identifying changes in or additions to systems of
records;
(4) containing such other information concerning
administration of this section as may be necessary or
useful to the Congress in reviewing the effectiveness
of this section in carrying out the purposes of the
Privacy Act of 1974.
(t)(1) Effect of Other Laws.--No agency shall rely on any
exemption contained in section 552 of this title to withhold
from an individual any record which is otherwise accessible to
such individual under the provisions of this section.
(2) No agency shall rely on any exemption in this section to
withhold from an individual any record which is otherwise
accessible to such individual under the provisions of section
552 of this title.
(u) Data Integrity Boards.--(1) Every agency conducting or
participating in a matching program shall establish a Data
Integrity Board to oversee and coordinate among the various
components of such agency the agency's implementation of this
section.
(2) Each Data Integrity Board shall consist of senior
officials designated by the head of the agency, and shall
include any senior official designated by the head of the
agency as responsible for implementation of this section, and
the inspector general of the agency, if any. The inspector
general shall not serve as chairman of the Data Integrity
Board.
(3) Each Data Integrity Board--
(A) shall review, approve, and maintain all written
agreements for receipt or disclosure of agency records
for matching programs to ensure compliance with
subsection (o), and all relevant statutes, regulations,
and guidelines;
(B) shall review all matching programs in which the
agency has participated during the year, either as a
source agency or recipient agency, determine compliance
with applicable laws, regulations, guidelines, and
agency agreements, and assess the costs and benefits of
such programs;
(C) shall review all recurring matching programs in
which the agency has participated during the year,
either as a source agency or recipient agency, for
continued justification for such disclosures;
(D) shall compile an annual report, which shall be
submitted to the head of the agency and the Office of
Management and Budget and made available to the public
on request, describing the matching activities of the
agency, including--
(i) matching programs in which the agency has
participated as a source agency or recipient
agency;
(ii) matching agreements proposed under
subsection (o) that were disapproved by the
Board;
(iii) any changes in membership or structure
of the Board in the preceding year;
(iv) the reasons for any waiver of the
requirement in paragraph (4) of this section
for completion and submission of a cost-benefit
analysis prior to the approval of a matching
program;
(v) any violations of matching agreements
that have been alleged or identified and any
corrective action taken; and
(vi) any other information required by the
Director of the Office of Management and Budget
to be included in such report;
(E) shall serve as a clearinghouse for receiving and
providing information on the accuracy, completeness,
and reliability of records used in matching programs;
(F) shall provide interpretation and guidance to
agency components and personnel on the requirements of
this section for matching programs;
(G) shall review agency recordkeeping and disposal
policies and practices for matching programs to assure
compliance with this section; and
(H) may review and report on any agency matching
activities that are not matching programs.
(4)(A) Except as provided in subparagraphs (B) and (C), a
Data Integrity Board shall not approve any written agreement
for a matching program unless the agency has completed and
submitted to such Board a cost-benefit analysis of the proposed
program and such analysis demonstrates that the program is
likely to be cost effective.
(B) The Board may waive the requirements of subparagraph (A)
of this paragraph if it determines in writing, in accordance
with guidelines prescribed by the Director of the Office of
Management and Budget, that a cost-benefit analysis is not
required.
(C) A cost-benefit analysis shall not be required under
subparagraph (A) prior to the initial approval of a written
agreement for a matching program that is specifically required
by statute. Any subsequent written agreement for such a program
shall not be approved by the Data Integrity Board unless the
agency has submitted a cost-benefit analysis of the program as
conducted under the preceding approval of such agreement.
(5)(A) If a matching agreement is disapproved by a Data
Integrity Board, any party to such agreement may appeal the
disapproval to the Director of the Office of Management and
Budget. Timely notice of the filing of such an appeal shall be
provided by the Director of the Office of Management and Budget
to the Committee on Governmental Affairs of the Senate and the
Committee on Government Operations of the House of
Representatives.
(B) The Director of the Office of Management and Budget may
approve a matching agreement notwithstanding the disapproval of
a Data Integrity Board if the Director determines that--
(i) the matching program will be consistent with all
applicable legal, regulatory, and policy requirements;
(ii) there is adequate evidence that the matching
agreement will be cost-effective; and
(iii) the matching program is in the public interest.
(C) The decision of the Director to approve a matching
agreement shall not take effect until 30 days after it is
reported to committees described in subparagraph (A).
(D) If the Data Integrity Board and the Director of the
Office of Management and Budget disapprove a matching program
proposed by the inspector general of an agency, the inspector
general may report the disapproval to the head of the agency
and to the Congress.
(6) In the reports required by paragraph (3)(D), agency
matching activities that are not matching programs may be
reported on an aggregate basis, if and to the extent necessary
to protect ongoing law enforcement or counterintelligence
investigations.
(v) Office of Management and Budget Responsibilities.--The
Director of the Office of Management and Budget shall--
(1) develop and, after notice and opportunity for
public comment, prescribe guidelines and regulations
for the use of agencies in implementing the provisions
of this section; and
(2) provide continuing assistance to and oversight of
the implementation of this section by agencies.
(w) Applicability to [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency._Except as provided
in the Consumer Financial Protection Act of 2010, this section
shall apply with respect to the [Bureau of Consumer Financial
Protection] Consumer Law Enforcement Agency.
* * * * * * *
CHAPTER 6--THE ANALYSIS OF REGULATORY FUNCTIONS
* * * * * * *
Sec. 609. Procedures for gathering comments
(a) When any rule is promulgated which will have a
significant economic impact on a substantial number of small
entities, the head of the agency promulgating the rule or the
official of the agency with statutory responsibility for the
promulgation of the rule shall assure that small entities have
been given an opportunity to participate in the rulemaking for
the rule through the reasonable use of techniques such as--
(1) the inclusion in an advanced notice of proposed
rulemaking, if issued, of a statement that the proposed
rule may have a significant economic effect on a
substantial number of small entities;
(2) the publication of general notice of proposed
rulemaking in publications likely to be obtained by
small entities;
(3) the direct notification of interested small
entities;
(4) the conduct of open conferences or public
hearings concerning the rule for small entities
including soliciting and receiving comments over
computer networks; and
(5) the adoption or modification of agency procedural
rules to reduce the cost or complexity of participation
in the rulemaking by small entities.
(b) Prior to publication of an initial regulatory flexibility
analysis which a covered agency is required to conduct by this
chapter--
(1) a covered agency shall notify the Chief Counsel
for Advocacy of the Small Business Administration and
provide the Chief Counsel with information on the
potential impacts of the proposed rule on small
entities and the type of small entities that might be
affected;
(2) not later than 15 days after the date of receipt
of the materials described in paragraph (1), the Chief
Counsel shall identify individuals representative of
affected small entities for the purpose of obtaining
advice and recommendations from those individuals about
the potential impacts of the proposed rule;
(3) the agency shall convene a review panel for such
rule consisting wholly of full time Federal employees
of the office within the agency responsible for
carrying out the proposed rule, the Office of
Information and Regulatory Affairs within the Office of
Management and Budget, and the Chief Counsel;
(4) the panel shall review any material the agency
has prepared in connection with this chapter, including
any draft proposed rule, collect advice and
recommendations of each individual small entity
representative identified by the agency after
consultation with the Chief Counsel, on issues related
to subsections 603(b), paragraphs (3), (4) and (5) and
603(c);
(5) not later than 60 days after the date a covered
agency convenes a review panel pursuant to paragraph
(3), the review panel shall report on the comments of
the small entity representatives and its findings as to
issues related to subsections 603(b), paragraphs (3),
(4) and (5) and 603(c), provided that such report shall
be made public as part of the rulemaking record; and
(6) where appropriate, the agency shall modify the
proposed rule, the initial regulatory flexibility
analysis or the decision on whether an initial
regulatory flexibility analysis is required.
(c) An agency may in its discretion apply subsection (b) to
rules that the agency intends to certify under subsection
605(b), but the agency believes may have a greater than de
minimis impact on a substantial number of small entities.
(d) For purposes of this section, the term ``covered agency''
means--
(1) the Environmental Protection Agency;
(2) the [Consumer Financial Protection Bureau of the
Federal Reserve System] Consumer Law Enforcement
Agency; and
(3) the Occupational Safety and Health Administration
of the Department of Labor.
(e) The Chief Counsel for Advocacy, in consultation with the
individuals identified in subsection (b)(2), and with the
Administrator of the Office of Information and Regulatory
Affairs within the Office of Management and Budget, may waive
the requirements of subsections (b)(3), (b)(4), and (b)(5) by
including in the rulemaking record a written finding, with
reasons therefor, that those requirements would not advance the
effective participation of small entities in the rulemaking
process. For purposes of this subsection, the factors to be
considered in making such a finding are as follows:
(1) In developing a proposed rule, the extent to
which the covered agency consulted with individuals
representative of affected small entities with respect
to the potential impacts of the rule and took such
concerns into consideration.
(2) Special circumstances requiring prompt issuance
of the rule.
(3) Whether the requirements of subsection (b) would
provide the individuals identified in subsection (b)(2)
with a competitive advantage relative to other small
entities.
* * * * * * *
PART III--EMPLOYEES
* * * * * * *
SUBPART B--EMPLOYMENT AND RETENTION
* * * * * * *
CHAPTER 31--AUTHORITY FOR EMPLOYMENT
* * * * * * *
SUBCHAPTER II--THE SENIOR EXECUTIVE SERVICE
* * * * * * *
Sec. 3132. Definitions and exclusions
(a) For the purpose of this subchapter--
(1) ``agency'' means an Executive agency, except a
Government corporation and the Government
Accountability Office, but does not include--
(A) any agency or unit thereof excluded from
coverage by the President under subsection (c)
of this section; or
(B) the Federal Bureau of Investigation, the
Drug Enforcement Administration, the Central
Intelligence Agency, the Office of the Director
of National Intelligence, the Defense
Intelligence Agency, the National Geospatial-
Intelligence Agency, the National Security
Agency, Department of Defense intelligence
activities the civilian employees of which are
subject to section 1590 of title 10, and, as
determined by the President, an Executive
agency, or unit thereof, whose principal
function is the conduct of foreign intelligence
or counterintelligence activities;
(C) the Federal Election Commission or the
Election Assistance Commission;
(D) the Office of the Comptroller of the
Currency, [the Office of Thrift Supervision,,
the Resolution Trust Corporation,] the Farm
Credit Administration, the Federal Housing
Finance Agency, the Office of the Independent
Insurance Advocate of the Department of the
Treasury, the National Credit Union
Administration, the Bureau of Consumer
Financial Protection, and the Office of
Financial Research;
(E) the Securities and Exchange Commission;
or
(F) the Commodity Futures Trading Commission;
(2) ``Senior Executive Service position'' means any
position in an agency which is classified above GS-15
pursuant to section 5108 or in level IV or V of the
Executive Schedule, or an equivalent position, which is
not required to be filled by an appointment by the
President by and with the advice and consent of the
Senate, and in which an employee--
(A) directs the work of an organizational
unit;
(B) is held accountable for the success of
one or more specific programs or projects;
(C) monitors progress toward organizational
goals and periodically evaluates and makes
appropriate adjustments to such goals;
(D) supervises the work of employees other
than personal assistants; or
(E) otherwise exercises important policy-
making, policy-determining, or other executive
functions;
but does not include--
(i) any position in the Foreign Service of
the United States;
(ii) an administrative law judge position
under section 3105 of this title;
(iii) any position established as a qualified
position in the excepted service by the
Secretary of Homeland Security under section
226 of the Homeland Security Act of 2002; or
(iv) any position established as a qualified
position in the excepted service by the
Secretary of Defense under section 1599f of
title 10;
(3) ``senior executive'' means a member of the Senior
Executive Service;
(4) ``career appointee'' means an individual in a
Senior Executive Service position whose appointment to
the position or previous appointment to another Senior
Executive Service position was based on approval by the
Office of Personnel Management of the executive
qualifications of such individual;
(5) ``limited term appointee'' means an individual
appointed under a nonrenewable appointment for a term
of 3 years or less to a Senior Executive Service
position the duties of which will expire at the end of
such term;
(6) ``limited emergency appointee'' means an
individual appointed under a nonrenewable appointment,
not to exceed 18 months, to a Senior Executive Service
position established to meet a bona fide,
unanticipated, urgent need;
(7) ``noncareer appointee'' means an individual in a
Senior Executive Service position who is not a career
appointee, a limited term appointee, or a limited
emergency appointee;
(8) ``career reserved position'' means a position
which is required to be filled by a career appointee
and which is designated under subsection (b) of this
section; and
(9) ``general position'' means any position, other
than a career reserved position, which may be filled by
either a career appointee, noncareer appointee, limited
emergency appointee, or limited term appointee.
(b)(1) For the purpose of paragraph (8) of subsection (a) of
this section, the Office shall prescribe the criteria and
regulations governing the designation of career reserved
positions. The criteria and regulations shall provide that a
position shall be designated as a career reserved position only
if the filling of the position by a career appointee is
necessary to ensure impartiality, or the public's confidence in
the impartiality, of the Government. The head of each agency
shall be responsible for designating career reserved positions
in such agency in accordance with such criteria and
regulations.
(2) The Office shall periodically review general positions to
determine whether the positions should be designated as career
reserved. If the Office determines that any such position
should be so designated, it shall order the agency to make the
designation.
(3) Notwithstanding the provisions of any other law, any
position to be designated as a Senior Executive Service
position (except a position in the Executive Office of the
President) which--
(A) is under the Executive Schedule, or for which the
rate of basic pay is determined by reference to the
Executive Schedule, and
(B) on the day before the date of the enactment of
the Civil Service Reform Act of 1978 was specifically
required under section 2102 of this title or otherwise
required by law to be in the competitive service,
shall be designated as a career reserved position if the
position entails direct responsibility to the public for the
management or operation of particular government programs or
functions.
(4) Not later than March 1 of each year, the head of each
agency shall publish in the Federal Register a list of
positions in the agency which were career reserved positions
during the preceding calendar year.
(c) An agency may file an application with the Office setting
forth reasons why it, or a unit thereof, should be excluded
from the coverage of this subchapter. The Office shall--
(1) review the application and stated reasons,
(2) undertake a review to determine whether the
agency or unit should be excluded from the coverage of
this subchapter, and
(3) upon completion of its review, recommend to the
President whether the agency or unit should be excluded
from the coverage of this subchapter.
If the Office recommends that an agency or unit thereof be
excluded from the coverage of this subchapter, the President
may, on written determination, make the exclusion for the
period determined by the President to be appropriate.
(d) Any agency or unit which is excluded from coverage under
subsection (c) of this section shall make a sustained effort to
bring its personnel system into conformity with the Senior
Executive Service to the extent practicable.
(e) The Office may at any time recommend to the President
that any exclusion previously granted to an agency or unit
thereof under subsection (c) of this section be revoked. Upon
recommendation of the Office, the President may revoke, by
written determination, any exclusion made under subsection (c)
of this section.
(f) If--
(1) any agency is excluded under subsection (c) of
this section, or
(2) any exclusion is revoked under subsection (e) of
this section,
the Office shall, within 30 days after the action, transmit to
the Congress written notice of the exclusion or revocation.
* * * * * * *
SUBPART D--PAY AND ALLOWANCES
* * * * * * *
CHAPTER 53--PAY RATES AND SYSTEMS
* * * * * * *
SUBCHAPTER II--EXECUTIVE SCHEDULE PAY RATES
* * * * * * *
Sec. 5314. Positions at level III
Level III of the Executive Schedule applies to the following
positions, for which the annual rate of basic pay shall be the
rate determined with respect to such level under chapter 11 of
title 2, as adjusted by section 5318 of this title:
Solicitor General of the United States.
Under Secretary of Commerce, Under Secretary of
Commerce for Economic Affairs, Under Secretary of
Commerce for Export Administration, and Under Secretary
of Commerce for Travel and Tourism.
Under Secretaries of State (6).
Under Secretaries of the Treasury (3).
Administrator of General Services.
Administrator of the Small Business Administration.
Deputy Administrator, Agency for International
Development.
Chairman of the Merit Systems Protection Board.
Chairman, Federal Communications Commission.
Chairman, Board of Directors, Federal Deposit
Insurance Corporation.
Chairman, Federal Energy Regulatory Commission.
Chairman, Federal Trade Commission.
Chairman, Surface Transportation Board.
Chairman, National Labor Relations Board.
Chairman, Securities and Exchange Commission.
Chairman, National Mediation Board.
Chairman, Railroad Retirement Board.
Chairman, Federal Maritime Commission.
Comptroller of the Currency.
Commissioner of Internal Revenue.
Under Secretary of Defense for Policy.
Under Secretary of Defense (Comptroller).
Under Secretary of Defense for Personnel and
Readiness.
Under Secretary of Defense for Intelligence.
Under Secretary of the Air Force.
Under Secretary of the Army.
Under Secretary of the Navy.
Deputy Administrator of the National Aeronautics and
Space Administration.
Deputy Director of the Central Intelligence Agency.
Director of the Office of Emergency Planning.
Director of the Peace Corps.
Deputy Director, National Science Foundation.
President of the Export-Import Bank of Washington.
Members, Nuclear Regulatory Commission.
Members, Defense Nuclear Facilities Safety Board.
Director of the Federal Bureau of Investigation,
Department of Justice.
Administrator of the National Highway Traffic Safety
Administration.
Administrator of the Federal Motor Carrier Safety
Administration.
Administrator, Federal Railroad Administration.
Chairman, National Transportation Safety Board.
Chairman of the National Endowment for the Arts the
incumbent of which also serves as Chairman of the
National Council on the Arts.
Chairman of the National Endowment for the
Humanities.
Director of the Federal Mediation and Conciliation
Service.
President, Overseas Private Investment Corporation.
Chairman, Postal Regulatory Commission.
Chairman, Occupational Safety and Health Review
Commission.
Governor of the Farm Credit Administration.
Chairman, Equal Employment Opportunity Commission.
Chairman, Consumer Product Safety Commission.
Under Secretaries of Energy (3).
Chairman, Commodity Futures Trading Commission.
Deputy United States Trade Representatives (3).
Chief Agricultural Negotiator, Office of the United
States Trade Representative.
Chief Innovation and Intellectual Property
Negotiator, Office of the United States Trade
Representative.
Chairman, United States International Trade
Commission.
Under Secretary of Commerce for Oceans and
Atmosphere, the incumbent of which also serves as
Administrator of the National Oceanic and Atmospheric
Administration.
Under Secretary of Commerce for Standards and
Technology, who also serves as Director of the National
Institute of Standards and Technology.
Associate Attorney General.
Chairman, Federal Mine Safety and Health Review
Commission.
Chairman, National Credit Union Administration Board.
Deputy Director of the Office of Personnel
Management.
Under Secretary of Agriculture for Farm and Foreign
Agricultural Services.
Under Secretary of Agriculture for Food, Nutrition,
and Consumer Services.
Under Secretary of Agriculture for Natural Resources
and Environment.
Under Secretary of Agriculture for Research,
Education, and Economics.
Under Secretary of Agriculture for Food Safety.
Under Secretary of Agriculture for Marketing and
Regulatory Programs.
Director, Institute for Scientific and Technological
Cooperation.
Under Secretary of Agriculture for Rural Development.
Administrator, Maritime Administration.
Executive Director Property Review Board.
Deputy Administrator of the Environmental Protection
Agency.
Archivist of the United States.
Executive Director, Federal Retirement Thrift
Investment Board.
Principal Deputy Under Secretary of Defense for
Acquisition, Technology, and Logistics.
Director, Trade and Development Agency.
Under Secretary for Health, Department of Veterans
Affairs.
Under Secretary for Benefits, Department of Veterans
Affairs.
Under Secretary for Memorial Affairs, Department of
Veterans Affairs.
Under Secretaries, Department of Homeland Security.
Director of the Bureau of Citizenship and Immigration
Services.
Director of the Office of Government Ethics.
Administrator for Federal Procurement Policy.
Administrator, Office of Information and Regulatory
Affairs, Office of Management and Budget.
[Director of the Office of Thrift Supervision.]
Chairperson of the Federal Housing Finance Board.
Executive Secretary, National Space Council.
Controller, Office of Federal Financial Management,
Office of Management and Budget.
Administrator, Office of the Assistant Secretary for
Research and Technology of the Department of
Transportation.
Deputy Director for Demand Reduction, Office of
National Drug Control Policy.
Deputy Director for Supply Reduction, Office of
National Drug Control Policy.
Deputy Director for State and Local Affairs, Office
of National Drug Control Policy.
Under Secretary of Commerce for Intellectual Property
and Director of the United States Patent and Trademark
Office.
Register of Copyrights.
Commissioner of U.S. Customs and Border Protection,
Department of Homeland Security
Under Secretary of Education
Administrator of the Centers for Medicare & Medicaid
Services.
Administrator of the Office of Electronic Government.
Administrator, Pipeline and Hazardous Materials
Safety Administration.
Director, Pension Benefit Guaranty Corporation.
Deputy Administrators, Federal Emergency Management
Agency.
Chief Executive Officer, International Clean Energy
Foundation.
Independent Member of the Financial Stability
Oversight Council (1).
Director of the Office of Financial Research.
Independent Insurance Advocate, Department of the
Treasury.
* * * * * * *
----------
TITLE 10, UNITED STATES CODE
* * * * * * *
SUBTITLE A--GENERAL MILITARY LAW
* * * * * * *
PART II--PERSONNEL
* * * * * * *
CHAPTER 49--MISCELLANEOUS PROHIBITIONS AND PENALTIES
* * * * * * *
Sec. 987. Terms of consumer credit extended to members and dependents:
limitations
(a) Interest.--A creditor who extends consumer credit to a
covered member of the armed forces or a dependent of such a
member shall not require the member or dependent to pay
interest with respect to the extension of such credit, except
as--
(1) agreed to under the terms of the credit agreement
or promissory note;
(2) authorized by applicable State or Federal law;
and
(3) not specifically prohibited by this section.
(b) Annual Percentage Rate.--A creditor described in
subsection (a) may not impose an annual percentage rate of
interest greater than 36 percent with respect to the consumer
credit extended to a covered member or a dependent of a covered
member.
(c) Mandatory Loan Disclosures.--
(1) Information required.--With respect to any
extension of consumer credit (including any consumer
credit originated or extended through the internet) to
a covered member or a dependent of a covered member, a
creditor shall provide to the member or dependent the
following information orally and in writing before the
issuance of the credit:
(A) A statement of the annual percentage rate
of interest applicable to the extension of
credit.
(B) Any disclosures required under the Truth
in Lending Act (15 U.S.C. 1601 et seq.).
(C) A clear description of the payment
obligations of the member or dependent, as
applicable.
(2) Terms.--Such disclosures shall be presented in
accordance with terms prescribed by the regulations
issued by the Board of Governors of the Federal Reserve
System to implement the Truth in Lending Act (15 U.S.C.
1601 et seq.).
(d) Preemption.--
(1) Inconsistent laws.--Except as provided in
subsection (f)(2), this section preempts any State or
Federal law, rule, or regulation, including any State
usury law, to the extent that such law, rule, or
regulation is inconsistent with this section, except
that this section shall not preempt any such law, rule,
or regulation that provides protection to a covered
member or a dependent of such a member in addition to
the protection provided by this section.
(2) Different treatment under State law of members
and dependents prohibited.--States shall not--
(A) authorize creditors to charge covered
members and their dependents annual percentage
rates of interest for any consumer credit or
loans higher than the legal limit for residents
of the State; or
(B) permit violation or waiver of any State
consumer lending protections covering consumer
credit for the benefit of residents of the
State on the basis of nonresident or military
status of a covered member or dependent of such
a member, regardless of the member's or
dependent's domicile or permanent home of
record.
(e) Limitations.--It shall be unlawful for any creditor to
extend consumer credit to a covered member or a dependent of
such a member with respect to which--
(1) the creditor rolls over, renews, repays,
refinances, or consolidates any consumer credit
extended to the borrower by the same creditor with the
proceeds of other credit extended to the same covered
member or a dependent;
(2) the borrower is required to waive the borrower's
right to legal recourse under any otherwise applicable
provision of State or Federal law, including any
provision of the Servicemembers Civil Relief Act (50
U.S.C. 3901 et seq.);
(3) the creditor requires the borrower to submit to
arbitration or imposes onerous legal notice provisions
in the case of a dispute;
(4) the creditor demands unreasonable notice from the
borrower as a condition for legal action;
(5) the creditor uses a check or other method of
access to a deposit, savings, or other financial
account maintained by the borrower, or the title of a
vehicle as security for the obligation;
(6) the creditor requires as a condition for the
extension of credit that the borrower establish an
allotment to repay an obligation; or
(7) the borrower is prohibited from prepaying the
loan or is charged a penalty or fee for prepaying all
or part of the loan.
(f) Penalties and Remedies.--
(1) Misdemeanor.--A creditor who knowingly violates
this section shall be fined as provided in title 18, or
imprisoned for not more than one year, or both.
(2) Preservation of other remedies.--The remedies and
rights provided under this section are in addition to
and do not preclude any remedy otherwise available
under law to the person claiming relief under this
section, including any award for consequential and
punitive damages.
(3) Contract void.--Any credit agreement, promissory
note, or other contract prohibited under this section
is void from the inception of such contract.
(4) Arbitration.--Notwithstanding section 2 of title
9, or any other Federal or State law, rule, or
regulation, no agreement to arbitrate any dispute
involving the extension of consumer credit shall be
enforceable against any covered member or dependent of
such a member, or any person who was a covered member
or dependent of that member when the agreement was
made.
(5) Civil liability.--
(A) In general.--A person who violates this
section with respect to any person is civilly
liable to such person for--
(i) any actual damage sustained as a
result, but not less than $500 for each
violation;
(ii) appropriate punitive damages;
(iii) appropriate equitable or
declaratory relief; and
(iv) any other relief provided by
law.
(B) Costs of the action.--In any successful
action to enforce the civil liability described
in subparagraph (A), the person who violated
this section is also liable for the costs of
the action, together with reasonable attorney
fees as determined by the court.
(C) Effect of finding of bad faith and
harassment.--In any successful action by a
defendant under this section, if the court
finds the action was brought in bad faith and
for the purpose of harassment, the plaintiff is
liable for the attorney fees of the defendant
as determined by the court to be reasonable in
relation to the work expended and costs
incurred.
(D) Defenses.--A person may not be held
liable for civil liability under this paragraph
if the person shows by a preponderance of
evidence that the violation was not intentional
and resulted from a bona fide error
notwithstanding the maintenance of procedures
reasonably adapted to avoid any such error.
Examples of a bona fide error include clerical,
calculation, computer malfunction and
programming, and printing errors, except that
an error of legal judgment with respect to a
person's obligations under this section is not
a bona fide error.
(E) Jurisdiction, venue, and statute of
limitations.--An action for civil liability
under this paragraph may be brought in any
appropriate United States district court,
without regard to the amount in controversy, or
in any other court of competent jurisdiction,
not later than the earlier of--
(i) two years after the date of
discovery by the plaintiff of the
violation that is the basis for such
liability; or
(ii) five years after the date on
which the violation that is the basis
for such liability occurs.
(6) Administrative enforcement.--The provisions of
this section (other than paragraph (1) of this
subsection) shall be enforced by the agencies specified
in section 108 of the Truth in Lending Act (15 U.S.C.
1607) in the manner set forth in that section or under
any other applicable authorities available to such
agencies by law.
(g) Servicemembers Civil Relief Act Protections Unaffected.--
Nothing in this section may be construed to limit or otherwise
affect the applicability of section 207 of the Servicemembers
Civil Relief Act (50 U.S.C. 3937).
(h) Regulations.--(1) The Secretary of Defense shall
prescribe regulations to carry out this section.
(2) Such regulations shall establish the following:
(A) Disclosures required of any creditor that extends
consumer credit to a covered member or dependent of
such a member.
(B) The method for calculating the applicable annual
percentage rate of interest on such obligations, in
accordance with the limit established under this
section.
(C) A maximum allowable amount of all fees, and the
types of fees, associated with any such extension of
credit, to be expressed and disclosed to the borrower
as a total amount and as a percentage of the principal
amount of the obligation, at the time at which the
transaction is entered into.
(D) Definitions of ``creditor'' under paragraph (5)
and ``consumer credit'' under paragraph (6) of
subsection (i), consistent with the provisions of this
section.
(E) Such other criteria or limitations as the
Secretary of Defense determines appropriate, consistent
with the provisions of this section.
(3) In prescribing regulations under this subsection, and not
less often than once every two years thereafter, the Secretary
of Defense shall consult with the following:
(A) The Federal Trade Commission.
(B) The Board of Governors of the Federal Reserve
System.
(C) The Office of the Comptroller of the Currency.
(D) The Federal Deposit Insurance Corporation.
(E) The [Bureau of Consumer Financial Protection]
Consumer Law Enforcement Agency.
(F) The National Credit Union Administration.
(G) The Treasury Department.
(i) Definitions.--In this section:
(1) Covered member.--The term ``covered member''
means a member of the armed forces who is--
(A) on active duty under a call or order that
does not specify a period of 30 days or less;
or
(B) on active Guard and Reserve Duty.
(2) Dependent.--The term ``dependent'', with respect
to a covered member, means a person described in
subparagraph (A), (D), (E), or (I) of section 1072(2)
of this title.
(3) Interest.--The term ``interest'' includes all
cost elements associated with the extension of credit,
including fees, service charges, renewal charges,
credit insurance premiums, any ancillary product sold
with any extension of credit to a servicemember or the
servicemember's dependent, as applicable, and any other
charge or premium with respect to the extension of
consumer credit.
(4) Annual percentage rate.--The term ``annual
percentage rate'' has the same meaning as in section
107 of the Truth and Lending Act (15 U.S.C. 1606), as
implemented by regulations of the Board of Governors of
the Federal Reserve System. For purposes of this
section, such term includes all fees and charges,
including charges and fees for single premium credit
insurance and other ancillary products sold in
connection with the credit transaction, and such fees
and charges shall be included in the calculation of the
annual percentage rate.
(5) Creditor.--The term ``creditor'' means a person--
(A) who--
(i) is engaged in the business of
extending consumer credit; and
(ii) meets such additional criteria
as are specified for such purpose in
regulations prescribed under this
section; or
(B) who is an assignee of a person described
in subparagraph (A) with respect to any
consumer credit extended.
(6) Consumer credit.--The term ``consumer credit''
has the meaning provided for such term in regulations
prescribed under this section, except that such term
does not include (A) a residential mortgage, or (B) a
loan procured in the course of purchasing a car or
other personal property, when that loan is offered for
the express purpose of financing the purchase and is
secured by the car or personal property procured.
* * * * * * *
----------
CARL LEVIN AND HOWARD P. BUCK MCKEON NATIONAL DEFENSE AUTHORIZATION ACT
FOR FISCAL YEAR 2015
* * * * * * *
DIVISION A--DEPARTMENT OF DEFENSE AUTHORIZATIONS
* * * * * * *
TITLE V--MILITARY PERSONNEL POLICY
* * * * * * *
Subtitle E--Member Education, Training, and Transition
* * * * * * *
SEC. 557. ENHANCEMENT OF INFORMATION PROVIDED TO MEMBERS OF THE ARMED
FORCES AND VETERANS REGARDING USE OF POST-9/11
EDUCATIONAL ASSISTANCE AND FEDERAL FINANCIAL AID
THROUGH TRANSITION ASSISTANCE PROGRAM.
(a) Additional Information Required.--
(1) In general.--Not later than one year after the
date of the enactment of this Act, the Secretary of
Defense shall enhance the higher education component of
the Transition Assistance Program (TAP) of the
Department of Defense by providing additional
information that is more complete and accurate than the
information provided as of the day before the date of
the enactment of this Act to individuals who apply for
educational assistance under chapter 30 or 33 of title
38, United States Code, to pursue a program of
education at an institution of higher learning.
(2) Elements.--The additional information required by
paragraph (1) shall include the following:
(A) Information provided by the Secretary of
Education that is publically available and
addresses--
(i) to the extent practicable,
differences between types of
institutions of higher learning in such
matters as tuition and fees, admission
requirements, accreditation,
transferability of credits, credit for
qualifying military training, time
required to complete a degree, and
retention and job placement rates; and
(ii) how Federal educational
assistance provided under title IV of
the Higher Education Act of 1965 (20
U.S.C. 1070 et seq.) may be used in
conjunction with educational assistance
provided under chapters 30 and 33 of
title 38, United States Code.
(B) Information about the Postsecondary
Education Complaint System of the Department of
Defense, the Department of Veterans Affairs,
the Department of Education, and the [Consumer
Financial Protection Bureau] Consumer Law
Enforcement Agency.
(C) Information about the GI Bill Comparison
Tool of the Department of Veterans Affairs.
(D) Information about each of the Principles
of Excellence established by the Secretary of
Defense, the Secretary of Veterans Affairs, and
the Secretary of Education pursuant to
Executive Order 13607 of April 27, 2012 (77
Fed. Reg. 25861), including how to recognize
whether an institution of higher learning may
be violating any of such principles.
(E) Information to enable individuals
described in paragraph (1) to develop a post-
secondary education plan appropriate and
compatible with their educational goals.
(F) Such other information as the Secretary
of Education considers appropriate.
(3) Consultation.--In carrying out this subsection,
the Secretary of Defense shall consult with the
Secretary of Veterans Affairs, the Secretary of
Education, and the Director of the [Consumer Financial
Protection Bureau] Consumer Law Enforcement Agency.
(b) Availability of Higher Education Component Online.--Not
later than one year after the date of the enactment of this
Act, the Secretary of Defense shall ensure that the higher
education component of the Transition Assistance Program is
available to members of the Armed Forces on an Internet website
of the Department of Defense so that members have an option to
complete such component electronically and remotely.
(c) Definitions.--In this section:
(1) The term ``institution of higher learning'' has
the meaning given such term in section 3452 of title
38, United States Code.
(2) The term ``types of institutions of higher
learning'' means the following:
(A) An educational institution described in
section 101(a) of the Higher Education Act of
1965 (20 U.S.C. 1001(a)).
(B) An educational institution described in
subsection (b) or (c) of section 102 of such
Act (20 U.S.C. 1002).
* * * * * * *
----------
TRUTH IN SAVINGS ACT
* * * * * * *
TITLE II--REGULATORY IMPROVEMENT
* * * * * * *
Subtitle C--Bank Enterprise Act
* * * * * * *
SEC. 233. ASSESSMENT CREDITS FOR QUALIFYING ACTIVITIES RELATING TO
DISTRESSED COMMUNITIES.
(a) Determination of Credits for Increases in Community
Enterprise Activities.--
(1) In general.--The Community Enterprise Assessment
Credit Board established under subsection (d) shall
issue guidelines for insured depository institutions
eligible under this subsection for any community
enterprise assessment credit with respect to any
semiannual period. Such guidelines shall--
(A) designate the eligibility requirements
for any institution meeting applicable capital
standards to receive an assessment credit under
section 7(b)(7) of the Federal Deposit
Insurance Act; and
(B) determine the community enterprise
assessment credit available to any eligible
institution under paragraph (3).
(2) Qualifying activities.--An insured depository
institution may apply for for any community enterprise
assessment credit for any semiannual period for--
(A) the amount, during such period, of new
originations of qualified loans and other
assistance provided for low- and moderate-
income persons in distressed communities, or
enterprises integrally involved with such
neighborhoods, which the Board determines are
qualified to be taken into account for purposes
of this subsection;
(B) the amount, during such period, of
deposits accepted from persons domiciled in the
distressed community, at any office of the
institution (including any branch) located in
any qualified distressed community, and new
originations of any loans and other financial
assistance made within that community, except
that in no case shall the credit for deposits
at any institution or branch exceed the credit
for loans and other financial assistance by the
bank or branch in the distressed community; and
(C) any increase during the period in the
amount of new equity investments in community
development financial institutions.
(3) Amount of assessment credit.--The amount of any
community enterprise assessment credit available under
section 7(b)(7) of the Federal Deposit Insurance Act
for any insured depository institution, or a qualified
portion thereof, shall be the amount which is equal to
5 percent, in the case of an institution which does not
meet the community development organization
requirements under section 234, and 15 percent, in the
case of an institution, or a qualified portion thereof,
which meets such requirements (or any percentage
designated under paragraph (5)) of--
(A) for the first full semiannual period in
which community enterprise assessment credits
are available, the sum of--
(i) the amounts of assets described
in paragraph (2)(A); and
(ii) the amounts of deposits, loans,
and other financial assistance
described in paragraph (2)(B); and
(B) for any subsequent semiannual period, the
sum of--
(i) any increase during such period
in the amount of assets described in
paragraph (2)(A) that has been deemed
eligible for credit by the Board; and
(ii) any increase during such period
in the amounts of deposits, loans, and
other financial assistance described in
paragraph (2)(B) that has been deemed
eligible for credit by the Board.
(4) Determination of qualified loans and other
financial assistance.--Except as provided in paragraph
(6), the types of loans and other assistance which the
Board may determine to be qualified to be taken into
account under paragraph (2)(A) for purposes of the
community enterprise assessment credit, may include the
following:
(A) Loans insured or guaranteed by the
Secretary of Housing and Urban Development, the
Secretary of the Department of Veterans
Affairs, the Administrator of the Small
Business Administration, and the Secretary of
Agriculture.
(B) Loans or financing provided in connection
with activities assisted by the Administrator
of the Small Business Administration or any
small business investment company and
investments in small business investment
companies.
(C) Loans or financing provided in connection
with any neighborhood housing service program
assisted under the Neighborhood Reinvestment
Corporation Act.
(D) Loans or financing provided in connection
with any activities assisted under the
community development block grant program under
title I of the Housing and Community
Development Act of 1974.
(E) Loans or financing provided in connection
with activities assisted under title II of the
Cranston-Gonzalez National Affordable Housing
Act.
(F) Loans or financing provided in connection
with a homeownership program assisted under
title III of the United States Housing Act of
1937 or subtitle B or C of title IV of the
Cranston-Gonzalez National Affordable Housing
Act.
(G) Financial assistance provided through
community development corporations.
(H) Federal and State programs providing
interest rate assistance for homeowners.
(I) Extensions of credit to nonprofit
developers or purchasers of low-income housing
and small business developments.
(J) In the case of members of any Federal
home loan bank, participation in the community
investment fund program established by the
Federal home loan banks.
(K) Conventional mortgages targeted to low-
or moderate-income persons.
(L) Loans made for the purpose of developing
or supporting--
(i) commercial facilities that
enhance revitalization, community
stability, or job creation and
retention efforts;
(ii) business creation and expansion
efforts that--
(I) create or retain jobs for
low-income people;
(II) enhance the availability
of products and services to
low-income people; or
(III) create or retain
businesses owned by low-income
people or residents of a
targeted area;
(iii) community facilities that
provide benefits to low-income people
or enhance community stability;
(iv) home ownership opportunities
that are affordable to low-income
households;
(v) rental housing that is
principally affordable to low-income
households; and
(vi) other activities deemed
appropriate by the Board.
(M) The provision of technical assistance to
residents of qualified distressed communities
in managing their personal finances through
consumer education programs either sponsored or
offered by insured depository institutions.
(N) The provision of technical assistance and
consulting services to newly formed small
businesses located in qualified distressed
communities.
(O) The provision of technical assistance to,
or servicing the loans of low- or moderate-
income homeowners and homeowners located in
qualified distressed communities.
(5) Adjustment of percentage.--The Board may increase
or decrease the percentage referred to in paragraph
(3)(A) for determining the amount of any community
enterprise assessment credit pursuant to such
paragraph, except that the percentage established for
insured depository institutions which meet the
community development organization requirements under
section 234 shall not be less than 3 times the amount
of the percentage applicable for insured depository
institutions which do not meet such requirements.
(6) Certain investments not eligible to be taken into
account.--Loans, financial assistance, and equity
investments made by any insured depository institution
that are not the result of originations by the
institution shall not be taken into account for
purposes of determining the amount of any credit
pursuant to this subsection.
(7) Quantitative analysis of technical assistance.--
The Board may establish guidelines for analyzing the
technical assistance described in subparagraphs (M),
(N), and (O) of paragraph (4) for the purpose of
quantifying the results of such assistance in
determining the amount of any community assessment
credit under this subsection.
(b) Qualified Distressed Community Defined.--
(1) In general.--For purposes of this section, the
term ``qualified distressed community'' means any
neighborhood or community which--
(A) meets the minimum area requirements under
paragraph (3) and the eligibility requirements
of paragraph (4); and
(B) is designated as a distressed community
by any insured depository institution in
accordance with paragraph (2) and such
designation is not disapproved under such
paragraph.
(2) Designation requirements.--
(A) Notice of designation.--
(i) Notice to agency.--Upon
designating an area as a qualified
distressed community, an insured
depository institution shall notify the
appropriate Federal banking agency of
the designation.
(ii) Public notice.--Upon the
effective date of any designation of an
area as a qualified distressed
community, an insured depository
institution shall publish a notice of
such designation in major newspapers
and other community publications which
serve such area.
(B) Agency duties relating to designations.--
(i) Providing information.--At the
request of any insured depository
institution, the appropriate Federal
banking agency shall provide to the
institution appropriate information to
assist the institution to identify and
designate a qualified distressed
community.
(ii) Period for disapproval.--Any
notice received by the appropriate
Federal banking agency from any insured
depository institution under
subparagraph (A)(i) shall take effect
at the end of the 90-day period
beginning on the date such notice is
received unless written notice of the
approval or disapproval of the
application by the agency is provided
to the institution before the end of
such period.
(3) Minimum area requirements.--For purposes of this
subsection, an area meets the requirements of this
paragraph if--
(A) the area is within the jurisdiction of 1
unit of general local government;
(B) the boundary of the area is contiguous;
and
(C) the area--
(i) has a population, as determined
by the most recent census data
available, of not less than--
(I) 4,000, if any portion of
such area is located within a
metropolitan statistical area
(as designated by the Director
of the Office of Management and
Budget) with a population of
50,000 or more; or
(II) 1,000, in any other
case; or
(ii) is entirely within an Indian
reservation (as determined by the
Secretary of the Interior).
(4) Eligibility requirements.--For purposes of this
subsection, an area meets the requirements of this
paragraph if the following criteria are met:
(A) At least 30 percent of the residents
residing in the area have incomes which are
less than the national poverty level.
(B) The unemployment rate for the area is
1\1/2\ times greater than the national average
(as determined by the [Bureau] Agency of Labor
Statistics' most recent figures).
(C) Such additional eligibility requirements
as the Board may, in its discretion, deem
necessary to carry out the provisions of this
subtitle.
(c)
(d) Community Enterprise Assessment Credit Board.--
(1) Establishment.--There is hereby established the
``Community Enterprise Assessment Credit Board''.
(2) Number and appointment.--The Board shall be
composed of 5 members as follows:
(A) The Secretary of the Treasury or a
designee of the Secretary.
(B) The Secretary of Housing and Urban
Development or a designee of the Secretary.
(C) The Chairperson of the Federal Deposit
Insurance Corporation or a designee of the
Chairperson.
(D) 2 individuals appointed by the President
from among individuals who represent community
organizations.
(3) Terms.--
(A) Appointed members.--Each appointed member
shall be appointed for a term of 5 years.
(B) Interim appointment.--Any member
appointed to fill a vacancy occurring before
the expiration of the term to which such
member's predecessor was appointed shall be
appointed only for the remainder of such term.
(C) Continuation of service.--Each appointed
member may continue to serve after the
expiration of the period to which such member
was appointed until a successor has been
appointed.
(4) Chairperson.--The Secretary of the Treasury shall
serve as the Chairperson of the Board.
(5) No pay.--No members of the Commission may receive
any pay for service on the Board.
(6) Travel expenses.--Each member shall receive
travel expenses, including per diem in lieu of
subsistence, in accordance with sections 5702 and 5703
of title 5, United States Code.
(7) Meetings.--The Board shall meet at the call of
the Chairperson or a majority of the Board's members.
(e) Duties of the Board.--
(1) Procedure for determining community enterprise
assessment credits.--The Board shall establish
procedures for accepting and considering applications
by insured depository institutions under subsection
(a)(1) for community enterprise assessment credits and
making determinations with respect to such
applications.
(2) Notice to fdic.--The Board shall notify the
applicant and the Federal Deposit Insurance Corporation
of any determination of the Board with respect to any
application referred to in paragraph (1) in sufficient
time for the Corporation to include the amount of such
credit in the computation of the semiannual assessment
to which such credit is applicable.
(f) Availability of Funds.--The provisions of this section
shall not take effect until appropriations are specifically
provided in advance. There are hereby authorized to be
appropriated such sums as may be necessary to carry out the
provisions of this section.
(g) Prohibition on Double Funding for Same Activities.--No
community development financial institution may receive a
community enterprise assessment credit if such institution,
either directly or through a community partnership--
(1) has received assistance within the preceding 12-
month period, or has an application for assistance
pending, under section 105 of the Community Development
Banking and Financial Institutions Act of 1994; or
(2) has ever received assistance, under section 108
of the Community Development Banking and Financial
Institutions Act of 1994, for the same activity during
the same semiannual period for which the institution
seeks a community enterprise assessment credit under
this section.
(h) Priority of Awards.--
(1) Qualifying loans and services.--
(A) In general.--If the amount of funds
appropriated for purposes of carrying out this
section for any fiscal year are insufficient to
award the amount of assessment credits for
which insured depository institutions have
applied and are eligible under this section,
the Board shall, in awarding community
enterprise assessment credits for qualifying
activities under subparagraphs (A) and (B) of
subsection (a)(2) for any semiannual period for
which such appropriation is available,
determine which institutions shall receive an
award.
(B) Priority for support of efforts of
cdfi.--The Board shall give priority to
institutions that have supported the efforts of
community development financial institutions in
the qualified distressed community.
(C) Other factors.--The Board may also
consider the following factors:
(i) Degree of difficulty.--The degree
of difficulty in carrying out the
activities that form the basis for the
institution's application.
(ii) Community impact.--The extent to
which the activities that form the
basis for the institution's application
have benefited the qualified distressed
community.
(iii) Innovation.--The degree to
which the activities that form the
basis for the institution's application
have incorporated innovative methods
for meeting community needs.
(iv) Leverage.--The leverage ratio
between the dollar amount of the
activities that form the basis for the
institution's application and the
amount of the assessment credit
calculated in accordance with this
section for such activities.
(v) Size.--The amount of total assets
of the institution.
(vi) New entry.--Whether the
institution had provided financial
services in the designated distressed
community before such semiannual
period.
(vii) Need for subsidy.--The degree
to which the qualified activity which
forms the basis for the application
needs enhancement through an assessment
credit.
(viii) Extent of distress in
community.--The degree of poverty and
unemployment in the designated
distressed community, the proportion of
the total population of the community
which are low-income families and
unrelated individuals, and the extent
of other adverse economic conditions in
such community.
(2) Qualifying investments.--If the amount of funds
appropriated for purposes of carrying out this section
for any fiscal year are insufficient to award the
amount of assessment credits for which insured
depository institutions have applied and are eligible
under this section, the Board shall, in awarding
community enterprise assessment credits for qualifying
activities under subsection (a)(2)(C) for any
semiannual period for which such appropriation is
available, determine which institutions shall receive
an award based on the leverage ratio between the dollar
amount of the activities that form the basis for the
institution's application and the amount of the
assessment credit calculated in accordance with this
section for such
activities.
(i) Determination of Amount of Assessment Credit.--
Notwithstanding any other provision of this section, the
determination of the amount of any community enterprise
assessment credit under subsection (a)(3) for any insured
depository institution for any semiannual period shall be made
solely at the discretion of the Board. No insured depository
institution shall be awarded community enterprise assessment
credits for any semiannual period in excess of an amount
determined by the Board.
(j) Definitions.--For purposes of this section--
(1) Appropriate federal banking agency.--The term
``appropriate Federal banking agency'' has the meaning
given to such term in section 3(q) of the Federal
Deposit Insurance Act.
(2) Board.--The term ``Board'' means the Community
Enterprise Assessment Credit Board established under
the amendment made by subsection (d).
(3) Insured depository institution.--The term
``insured depository institution'' has the meaning
given to such term in section 3(c)(2) of the Federal
Deposit Insurance Act.
(4) Community development financial institution.--The
term ``community development financial institution''
has the same meaning as in section 103(5) of the
Community Development Banking and Financial
Institutions Act of 1994.
(5) Affiliate.--The term ``affiliate'' has the same
meaning as in section 2 of the Bank Holding Company Act
of 1956.
* * * * * * *
Subtitle F--Truth in Savings
* * * * * * *
SEC. 263. DISCLOSURE OF INTEREST RATES AND TERMS OF ACCOUNTS.
(a) In General.--Except as provided in subsections (b) and
(c), each advertisement, announcement, or solicitation
initiated by any depository institution or deposit broker
relating to any demand or interest-bearing account offered by
an insured depository institution which includes any reference
to a specific rate of interest payable on amounts deposited in
such account, or to a specific yield or rate of earnings on
amounts so deposited, shall state the following information, to
the extent applicable, in a clear and conspicuous manner:
(1) The annual percentage yield.
(2) The period during which such annual percentage
yield is in effect.
(3) All minimum account balance and time requirements
which must be met in order to earn the advertised yield
(and, in the case of accounts for which more than 1
yield is stated, each annual percentage yield and the
account minimum balance requirement associated with
each such yield shall be in close proximity and have
equal prominence).
(4) The minimum amount of the initial deposit which
is required to open the account in order to obtain the
yield advertised, if such minimum amount is greater
than the minimum balance necessary to earn the
advertised yield.
(5) A statement that regular fees or other conditions
could reduce the yield.
(6) A statement that an interest penalty is required
for early withdrawal.
(b) Broadcast and Electronic Media and Outdoor Advertising
Exception.--The [Bureau] Agency may, by regulation, exempt
advertisements, announcements, or solicitations made by any
broadcast or electronic medium or outdoor advertising display
not on the premises of the depository institution from any
disclosure requirements described in paragraph (4) or (5) of
subsection (a) if the [Bureau] Agency finds that any such
disclosure would be unnecessarily burdensome.
(c) Disclosure Required for On-Premises Displays.--
The disclosure requirements contained in this section
shall not apply to any sign (including a rate board)
disclosing a rate or rates of interest which is
displayed on the premises of the depository institution
if such sign contains--
(1) the accompanying annual percentage yield; and
(2) a statement that the consumer should request
further information from an employee of the depository
institution concerning the fees and terms applicable to
the advertised account.
(d) Misleading Descriptions of Free or No-Cost Accounts
Prohibited.--No advertisement, announcement, or solicitation
made by any depository institution or deposit broker may refer
to or describe an account as a free or no-cost account (or
words of similar meaning) if--
(1) in order to avoid fees or service charges for any
period--
(A) a minimum balance must be maintained in
the account during such period; or
(B) the number of transactions during such
period may not exceed a maximum number; or
(2) any regular service or transaction fee is
imposed.
(e) Misleading or Inaccurate Advertisements, Etc.,
Prohibited.--No depository institution or deposit broker shall
make any advertisement, announcement, or solicitation relating
to a deposit account that is inaccurate or misleading or that
misrepresents its deposit contracts.
SEC. 264. ACCOUNT SCHEDULE.
(a) In General.--Each depository institution shall maintain a
schedule of fees, charges, interest rates, and terms and
conditions applicable to each class of accounts offered by the
depository institution, in accordance with the requirements of
this section and regulations which the [Bureau] Agency shall
prescribe. The [Bureau] Agency shall specify, in regulations,
which fees, charges, penalties, terms, conditions, and account
restrictions must be included in a schedule required under this
subsection. A depository institution need not include in such
schedule any information not specified in such regulation.
(b) Information on Fees and Charges.--The schedule required
under subsection (a) with respect to any account shall contain
the following information:
(1) A description of all fees, periodic service
charges, and penalties which may be charged or assessed
against the account (or against the account holder in
connection with such account), the amount of any such
fees, charge, or penalty (or the method by which such
amount will be calculated), and the conditions under
which any such amount will be assessed.
(2) All minimum balance requirements that affect
fees, charges, and penalties, including a clear
description of how each such minimum balance is
calculated.
(3) Any minimum amount required with respect to the
initial deposit in order to open the account.
(c) Information on Interest Rates.--The schedule required
under subsection (a) with respect to any account shall include
the following information:
(1) Any annual percentage yield.
(2) The period during which any such annual
percentage yield will be in effect.
(3) Any annual rate of simple interest.
(4) The frequency with which interest will be
compounded and credited.
(5) A clear description of the method used to
determine the balance on which interest is paid.
(6) The information described in paragraphs (1)
through (4) with respect to any period after the end of
the period referred to in paragraph (2) (or the method
for computing any information described in any such
paragraph), if applicable.
(7) Any minimum balance which must be maintained to
earn the rates and obtain the yields disclosed pursuant
to this subsection and a clear description of how any
such minimum balance is calculated.
(8) A clear description of any minimum time
requirement which must be met in order to obtain the
yields disclosed pursuant to this subsection and any
information described in paragraph (1), (2), (3), or
(4) that will apply if any time requirement is not met.
(9) A statement, if applicable, that any interest
which has accrued but has not been credited to an
account at the time of a withdrawal from the account
will not be paid by the depository institution or
credited to the account by reason of such withdrawal.
(10) Any provision or requirement relating to
nonpayment of interest, including any charge or penalty
for early withdrawal, and the conditions under which
any such charge or penalty may be assessed.
(d) Other Information.--The schedule required under
subsection (a) shall include such other disclosures as the
[Bureau] Agency may determine to be necessary to allow
consumers to understand and compare accounts, including
frequency of interest rate adjustments, account restrictions,
and renewal policies for time accounts.
(e) Style and Format.--Schedules required under subsection
(a) shall be written in clear and plain language and be
presented in a format designed to allow consumers to readily
understand the terms of the accounts offered.
SEC. 265. DISCLOSURE REQUIREMENTS FOR CERTAIN ACCOUNTS.
The [Bureau] Agency shall require, in regulations which the
[Bureau] Agency shall prescribe, such modification in the
disclosure requirements under this subtitle relating to annual
percentage yield as may be necessary to carry out the purposes
of this subtitle in the case of--
(1) accounts with respect to which determination of
annual percentage yield is based on an annual rate of
interest that is guaranteed for a period of less than 1
year;
(2) variable rate accounts;
(3) accounts which, pursuant to law, do not guarantee
payment of a stated rate;
(4) multiple rate accounts; and
(5) accounts with respect to which determination of
annual percentage yield is based on an annual rate of
interest that is guaranteed for a stated term.
SEC. 266. DISTRIBUTION OF SCHEDULES.
(a) In General.--A schedule required under section 264 for an
appropriate account shall be--
(1) made available to any person upon request;
(2) provided to any potential customer before an
account is opened or a service is rendered; and
(3) provided to the depositor, in the case of any
time deposit which has a maturity of more than 30 days
is renewable at maturity without notice from the
depositor, at least 30 days before the date of
maturity.
(b) Distribution in Case of Certain Initial Deposits.--If--
(1) a depositor is not physically present at an
office of a depository institution at the time an
initial deposit is accepted with respect to an account
established by or for such person; and
(2) the schedule required under section 264(a) has
not been furnished previously to such depositor,
the depository institution shall mail the schedule to the
depositor at the address shown on the records of the depository
institution for such account no later than 10 days after the
date of the initial deposit.
(c) Distribution of Notice of Certain Changes.--If--
(1) any change is made in any term or condition which
is required to be disclosed in the schedule required
under section 264(a) with respect to any account; and
(2) the change may reduce the yield or adversely
affect any holder of the account,
all account holders who may be affected by such change shall be
notified and provided with a description of the change by mail
at least 30 days before the change takes effect.
(d) Distribution in Case of Accounts Established by More Than
1 Individual or by a Group.--If an account is established by
more than 1 individual or for a person other than an
individual, any distribution described in this section with
respect to such account meets the requirements of this section
if the distribution is made to 1 of the individuals who
established the account or 1 individual representative of the
person on whose behalf such account was established.
(e) Notice to Account Holders as of the Effective Date of
Regulations.--For any account for which the depository
institution delivers an account statement on a quarterly or
more frequent basis, the depository institution shall include
on or with the first regularly scheduled mailing sent after the
end of the 6-month period beginning on the date of publication
of regulations issued by the [Bureau] Agency in final form, a
statement that the account holder has the right to request an
account schedule containing the terms, charges, and interest
rates of the account, and that the account holder may wish to
request such an account schedule.
* * * * * * *
SEC. 269. REGULATIONS.
(a) In General.--
(1) Regulations required.--Before the end of the 9-
month period beginning on the date of the enactment of
this subtitle, the [Bureau] Agency, after consultation
with each agency referred to in section 270(a) and
public notice and opportunity for comment, shall
prescribe regulations to carry out the purpose and
provisions of this subtitle.
(2) Effective date of regulations.--The regulations
prescribed under paragraph (1) shall take effect not
later than 9 months after publication in final form.
(3) Contents of regulations.--The regulations
prescribed under paragraph (1) may contain such
classifications, differentiations, or other provisions,
and may provide for such adjustments and exceptions for
any class of accounts as, in the judgment of the
[Bureau] Agency, are necessary or proper to carry out
the purposes of this subtitle, to prevent circumvention
or evasion of the requirements of this subtitle, or to
facilitate compliance with the requirements of this
subtitle.
(4) Date of applicability.--The provisions of this
subtitle shall not apply with respect to any depository
institution before the effective date of regulations
prescribed by the [Bureau] Agency under this subsection
(or by the National Credit Union [Administration
Bureau] Administration Board under section 12(b), in
the case of any depository institution described in
clause (iv) of section 19(b)(1)(A) of the Federal
Reserve Act).
(b) Model Forms and Clauses.--
(1) In general.--The [Bureau] Agency shall publish
model forms and clauses for common disclosures to
facilitate compliance with this subtitle. In devising
such forms, the [Bureau] Agency shall consider the use
by depository institutions of data processing or
similar automated machines.
(2) Use of forms and clauses deemed in compliance.--
Nothing in this subtitle may be construed to require a
depository institution to use any such model form or
clause prescribed by the [Bureau] Agency under this
subsection. A depository institution shall be deemed to
be in compliance with the disclosure provisions of this
subtitle if the depository institution--
(A) uses any appropriate model form or clause
as published by the [Bureau] Agency; or
(B) uses any such model form or clause and
changes it by--
(i) deleting any information which is
not required by this subtitle; or
(ii) rearranging the format,
if in making such deletion or rearranging the
format, the depository institution does not
affect the substance, clarity, or meaningful
sequence of the disclosure.
(3) Public notice and opportunity for comment.--Model
disclosure forms and clauses shall be adopted by the
[Bureau] Agency after duly given notice in the Federal
Register and an opportunity for public comment in
accordance with section 553 of title 5, United States
Code.
SEC. 270. ADMINISTRATIVE ENFORCEMENT.
(a) In General.--Subject to subtitle B of the Consumer
Financial Protection Act of 2010, compliance with the
requirements imposed under this subtitle shall be enforced
under--
(1) section 8 of the Federal Deposit Insurance Act by
the appropriate Federal banking agency (as defined in
section 3(q) of that Act), with respect to--
(A) insured depository institutions (as
defined in section 3(c)(2) of that Act);
(B) depository institutions described in
clause (i), (ii), or (iii) of section
19(b)(1)(A) of the Federal Reserve Act which
are not insured depository institutions (as
defined in section 3(c)(2) of the Federal
Deposit Insurance Act); and
(C) depository institutions described in
clause (v) or (vi) of section 19(b)(1)(A) of
the Federal Reserve Act which are not insured
depository institutions (as defined in section
3(c)(2) of the Federal Deposit Insurance Act);
(2) the Federal Credit Union Act, by the National
Credit Union [Administration Bureau] Administration
Board in the case of depository institutions described
in clause (iv) of section 19(b)(1)(A) of the Federal
Reserve Act; and
(3) subtitle E of the Consumer Financial Protection
Act of 2010, by the [Bureau] Agency, with respect to
any person subject to this subtitle.
(b) Additional Enforcement Powers.--
(1) Violation of this subtitle treated as violation
of other acts.--For purposes of the exercise by any
agency referred to in subsection (a) of such agency's
powers under any Act referred to in such subsection, a
violation of a requirement imposed under this subtitle
shall be deemed to be a violation of a requirement
imposed under that Act.
(2) Enforcement authority under other acts.--In
addition to the powers of any agency referred to in
subsection (a) under any provision of law specifically
referred to in such subsection, each such agency may
exercise, for purposes of enforcing compliance with any
requirement imposed under this subtitle, any other
authority conferred on such agency by law.
(c) Regulations by Agencies Other Than the [Bureau] Agency.--
The authority of the [Bureau] Agency to issue regulations under
this subtitle does not impair the authority of any other agency
referred to in subsection (a) to make rules regarding its own
procedures in enforcing compliance with the requirements
imposed under this subtitle.
SEC. 272. CREDIT UNIONS.
(a) In General.--No regulation prescribed by the [Bureau]
Agency under this subtitle shall apply directly with respect to
any depository institution described in clause (iv) of section
19(b)(1)(A) of the Federal Reserve Act.
(b) Regulations Prescribed by the NCUA.--Within 90 days of
the effective date of any regulation prescribed by the [Bureau]
Agency under this subtitle, the National Credit Union
Administration Board shall prescribe a regulation substantially
similar to the regulation prescribed by the [Bureau] Agency
taking into account the unique nature of credit unions and the
limitations under which they may pay dividends on member
accounts.
SEC. 273. EFFECT ON STATE LAW.
The provisions of this subtitle do not supersede any
provisions of the law of any State relating to the disclosure
of yields payable or terms for accounts to the extent such
State law requires the disclosure of such yields or terms for
accounts, except to the extent that those laws are inconsistent
with the provisions of this subtitle, and then only to the
extent of the inconsistency. The [Bureau] Agency may determine
whether such inconsistencies exist.
SEC. 274. DEFINITIONS.
For the purposes of this subtitle--
(1) Account.--The term ``account'' means any account
intended for use by and generally used by consumers
primarily for personal, family, or household purposes
that is offered by a depository institution into which
a consumer deposits funds, including demand accounts,
time accounts, negotiable order of withdrawal accounts,
and share draft accounts.
(2) Annual percentage yield.--The term ``annual
percentage yield'' means the total amount of interest
that would be received on a $100 deposit, based on the
annual rate of simple interest and the frequency of
compounding for a 365-day period, expressed as a
percentage calculated by a method which shall be
prescribed by the [Bureau] Agency in regulations.
(3) Annual rate of simple interest.--The term
``annual rate of simple interest''--
(A) means the annualized rate of interest
paid with respect to each compounding period,
expressed as a percentage; and
(B) may be referred to as the ``annual
percentage rate''.
[(4) Bureau.--The term ``Bureau '' means the Bureau
of Consumer Financial Protection.]
(4) Agency.--The term ``Agency'' means the Consumer
Law Enforcement Agency.
(5) Deposit broker.--The term ``deposit broker''--
(A) has the meaning given to such term in
section 29(f)(1) of the Federal Deposit
Insurance Act; and
(B) includes any person who solicits any
amount from any other person for deposit in an
insured depository institution.
(6) Depository institution.--The term ``depository
institution'' has the meaning given such term in
clauses (i) through (vi) of section 19(b)(1)(A) of the
Federal Reserve Act, but does not include any
nonautomated credit union that was not required to
comply with the requirements of this title as of the
date of enactment of the Economic Growth and Regulatory
Paperwork Reduction Act of 1996, pursuant to the
determination of the National Credit Union
Administration [Bureau] Board.
(7) Interest.--The term ``interest'' includes
dividends paid with respect to share draft accounts
which are accounts within the meaning of paragraph (3).
(8) Multiple rate account.--The term ``multiple rate
account'' means any account that has 2 or more annual
rates of simple interest which take effect at the same
time or in succeeding periods and which are known at
the time of disclosure.
* * * * * * *
----------
INSPECTOR GENERAL ACT OF 1978
* * * * * * *
requirements for federal entities and designated federal entities
Sec. 8G. (a) Notwithstanding section 12 of this Act, as used
in this section--
(1) the term ``Federal entity'' means any Government
corporation (within the meaning of section 103(1) of
title 5, United States Code), any Government controlled
corporation (within the meaning of section 103(2) of
such title), or any other entity in the Executive
branch of the Government, or any independent regulatory
agency, but does not include--
(A) an establishment (as defined under
section 12(2) of this Act) or part of an
establishment;
(B) a designated Federal entity (as defined
under paragraph (2) of this subsection) or part
of a designated Federal entity;
(C) the Executive Office of the President;
(D) the Central Intelligence Agency;
(E) the General Accounting Office; or
(F) any entity in the judicial or legislative
branches of the Government, including the
Administrative Office of the United States
Courts and the Architect of the Capitol and any
activities under the direction of the Architect
of the Capitol;
(2) the term ``designated Federal entity'' means
Amtrak, the Appalachian Regional Commission, the Board
of Governors of the Federal Reserve System [and the
Bureau of Consumer Financial Protection], the Board for
International Broadcasting, the Committee for Purchase
From People Who Are Blind or Severely Disabled, the
Commodity Futures Trading Commission, the Consumer
Product Safety Commission, the Corporation for Public
Broadcasting, the Defense Intelligence Agency, the
Equal Employment Opportunity Commission, the Farm
Credit Administration, the Federal Communications
Commission, the Federal Deposit Insurance Corporation,
the Federal Election Commission, the Election
Assistance Commission, the Federal Housing Finance
Board, the Federal Labor Relations Authority, the
Federal Maritime Commission, the Federal Trade
Commission, the Legal Services Corporation, the
National Archives and Records Administration, the
National Credit Union Administration, the National
Endowment for the Arts, the National Endowment for the
Humanities, the National Geospatial-Intelligence
Agency, the National Labor Relations Board, the
National Science Foundation, the Panama Canal
Commission, the Peace Corps, the Pension Benefit
Guaranty Corporation, the Securities and Exchange
Commission, the Smithsonian Institution, the United
States International Trade Commission, the Postal
Regulatory Commission, and the United States Postal
Service;
(3) the term ``head of the Federal entity'' means any
person or persons designated by statute as the head of
a Federal entity, and if no such designation exists,
the chief policymaking officer or board of a Federal
entity as identified in the list published pursuant to
subsection (h)(1) of this section;
(4) the term ``head of the designated Federal
entity'' means the board or commission of the
designated Federal entity, or in the event the
designated Federal entity does not have a board or
commission, any person or persons designated by statute
as the head of a designated Federal entity and if no
such designation exists, the chief policymaking officer
or board of a designated Federal entity as identified
in the list published pursuant to subsection (h)(1) of
this section, except that--
(A) with respect to the National Science
Foundation, such term means the National
Science Board;
(B) with respect to the United States Postal
Service, such term means the Governors (within
the meaning of section 102(3) of title 39,
United States Code);
(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 Committee for
Purchase From People Who Are Blind or Severely
Disabled, such term means the Chairman of the
Committee for Purchase From People Who Are
Blind or Severely Disabled;
(E) with respect to the National Archives and
Records Administration, such term means the
Archivist of the United States;
(F) 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);
(G) with respect to the National Endowment of
the Arts, such term means the National Council
on the Arts;
(H) with respect to the National Endowment
for the Humanities, such term means the
National Council on the Humanities; and
(I) with respect to the Peace Corps, such
term means the Director of the Peace Corps;
(5) the term ``Office of Inspector General'' means an
Office of Inspector General of a designated Federal
entity; and
(6) the term ``Inspector General'' means an Inspector
General of a designated Federal entity.
(b) No later than 180 days after the date of the enactment of
this section, there shall be established and maintained in each
designated Federal entity an Office of Inspector General. The
head of the designated Federal entity shall transfer to such
office the offices, units, or other components, and the
functions, powers, or duties thereof, that such head determines
are properly related to the functions of the Office of
Inspector General and would, if so transferred, further the
purposes of this section. There shall not be transferred to
such office any program operating responsibilities.
(c) Except as provided under subsection (f) of this section,
the Inspector General shall be appointed by the head of the
designated Federal entity in accordance with the applicable
laws and regulations governing appointments within the
designated Federal entity. Each Inspector General shall be
appointed without regard to political affiliation and solely on
the basis of integrity and demonstrated ability in accounting,
auditing, financial analysis, law, management analysis, public
administration, or investigations. [For purposes of
implementing this section, the Chairman of the Board of
Governors of the Federal Reserve System shall appoint the
Inspector General of the Board of Governors of the Federal
Reserve System and the Bureau of Consumer Financial Protection.
The Inspector General of the Board of Governors of the Federal
Reserve System and the Bureau of Consumer Financial Protection
shall have all of the authorities and responsibilities provided
by this Act with respect to the Bureau of Consumer Financial
Protection, as if the Bureau were part of the Board of
Governors of the Federal Reserve System.]
(d)(1) Each Inspector General shall report to and be under
the general supervision of the head of the designated Federal
entity, but shall not report to, or be subject to supervision
by, any other officer or employee of such designated Federal
entity. Except as provided in paragraph (2), the head of the
designated Federal entity shall not prevent or prohibit the
Inspector General from initiating, carrying out, or completing
any audit or investigation, or from issuing any subpoena during
the course of any audit or investigation.
(2)(A) The Secretary of Defense, in consultation with the
Director of National Intelligence, may prohibit the inspector
general of an element of the intelligence community specified
in subparagraph (D) from initiating, carrying out, or
completing any audit or investigation, or from accessing
information available to an element of the intelligence
community specified in subparagraph (D),, or from accessing
information available to an element of the intelligence
community specified in subparagraph (D), if the Secretary
determines that the prohibition is necessary to protect vital
national security interests of the United States.
(B) If the Secretary exercises the authority under
subparagraph (A), the Secretary shall submit to the committees
of Congress specified in subparagraph (E) an appropriately
classified statement of the reasons for the exercise of such
authority not later than 7 days after the exercise of such
authority.
(C) At the same time the Secretary submits under subparagraph
(B) a statement on the exercise of the authority in
subparagraph (A) to the committees of Congress specified in
subparagraph (E), the Secretary shall notify the inspector
general of such element of the submittal of such statement and,
to the extent consistent with the protection of intelligence
sources and methods, provide such inspector general with a copy
of such statement. Such inspector general may submit to such
committees of Congress any comments on a notice or statement
received by the inspector general under this subparagraph that
the inspector general considers appropriate.
(D) The elements of the intelligence community specified in
this subparagraph are as follows:
(i) The Defense Intelligence Agency.
(ii) The National Geospatial-Intelligence Agency.
(iii) The National Reconnaissance Office.
(iv) The National Security Agency.
(E) The committees of Congress specified in this subparagraph
are--
(i) the Committee on Armed Services and the Select
Committee on Intelligence of the Senate; and
(ii) the Committee on Armed Services and the
Permanent Select Committee on Intelligence of the House
of Representatives.
(e)(1) In the case of a designated Federal entity for which a
board, chairman of a committee, 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, committee, or commission.''.
(2) If an Inspector General is removed from office or is
transferred to another position or location within a designated
Federal entity, the head of the designated Federal entity shall
communicate in writing the reasons for any such removal or
transfer to both Houses of Congress, not later than 30 days
before the removal or transfer. Nothing in this subsection
shall prohibit a personnel action otherwise authorized by law,
other than transfer or removal.
(f)(1) For purposes of carrying out subsection (c) with
respect to the United States Postal Service, the appointment
provisions of section 202(e) of title 39, United States Code,
shall be applied.
(2) In carrying out the duties and responsibilities specified
in this Act, the Inspector General of the United States Postal
Service (hereinafter in this subsection referred to as the
``Inspector General'') shall have oversight responsibility for
all activities of the Postal Inspection Service, including any
internal investigation performed by the Postal Inspection
Service. The Chief Postal Inspector shall promptly report the
significant activities being carried out by the Postal
Inspection Service to such Inspector General.
(3)(A)(i) Notwithstanding subsection (d), the Inspector
General shall be under the authority, direction, and control of
the Governors with respect to audits or investigations, or the
issuance of subpoenas, which require access to sensitive
information concerning--
(I) ongoing civil or criminal investigations or
proceedings;
(II) undercover operations;
(III) the identity of confidential sources, including
protected witnesses;
(IV) intelligence or counterintelligence matters; or
(V) other matters the disclosure of which would
constitute a serious threat to national security.
(ii) With respect to the information described under clause
(i), the Governors may prohibit the Inspector General from
carrying out or completing any audit or investigation, or from
issuing any subpoena, after such Inspector General has decided
to initiate, carry out, or complete such audit or investigation
or to issue such subpoena, if the Governors determine that such
prohibition is necessary to prevent the disclosure of any
information described under clause (i) or to prevent the
significant impairment to the national interests of the United
States.
(iii) If the Governors exercise any power under clause (i) or
(ii), the Governors shall notify the Inspector General in
writing stating the reasons for such exercise. Within 30 days
after receipt of any such notice, the Inspector General shall
transmit a copy of such notice to the Committee on Governmental
Affairs of the Senate and the Committee on Government Reform
and Oversight of the House of Representatives, and to other
appropriate committees or subcommittees of the Congress.
(B) In carrying out the duties and responsibilities specified
in this Act, the Inspector General--
(i) may initiate, conduct and supervise such audits
and investigations in the United States Postal Service
as the Inspector General considers appropriate; and
(ii) shall give particular regard to the activities
of the Postal Inspection Service with a view toward
avoiding duplication and insuring effective
coordination and cooperation.
(C) Any report required to be transmitted by the Governors to
the appropriate committees or subcommittees of the Congress
under section 5(d) shall also be transmitted, within the seven-
day period specified under such section, to the Committee on
Governmental Affairs of the Senate and the Committee on
Government Reform and Oversight of the House of
Representatives.
(4) Nothing in this Act shall restrict, eliminate, or
otherwise adversely affect any of the rights, privileges, or
benefits of either employees of the United States Postal
Service, or labor organizations representing employees of the
United States Postal Service, under chapter 12 of title 39,
United States Code, the National Labor Relations Act, any
handbook or manual affecting employee labor relations with the
United States Postal Service, or any collective bargaining
agreement.
(5) As used in this subsection, the term ``Governors'' has
the meaning given such term by section 102(3) of title 39,
United States Code.
(6) There are authorized to be appropriated, out of
the Postal Service Fund, such sums as may be necessary
for the Office of Inspector General of the United
States Postal Service.
(g)(1) Sections 4, 5, 6 (other than subsections (a)(7) and
(a)(8) thereof), and 7 of this Act shall apply to each
Inspector General and Office of Inspector General of a
designated Federal entity and such sections shall be applied to
each designated Federal entity and head of the designated
Federal entity (as defined under subsection (a)) by
substituting--
(A) ``designated Federal entity'' for
``establishment''; and
(B) ``head of the designated Federal entity'' for
``head of the establishment''.
(2) In addition to the other authorities specified in this
Act, an Inspector General is authorized to select, appoint, and
employ such officers and employees as may be necessary for
carrying out the functions, powers, and duties of the Office of
Inspector General and to obtain the temporary or intermittent
services of experts or consultants or an organization thereof,
subject to the applicable laws and regulations that govern such
selections, appointments, and employment, and the obtaining of
such services, within the designated Federal entity.
(3) Notwithstanding the last sentence of subsection (d) of
this section, the provisions of subsection (a) of section 8D
(other than the provisions of subparagraphs (A), (B), (C), and
(E) of subsection (a)(1)) shall apply to the Inspector General
of the Board of Governors of the Federal Reserve System [and
the Bureau of Consumer Financial Protection] and the Chairman
of the Board of Governors of the Federal Reserve System in the
same manner as such provisions apply to the Inspector General
of the Department of the Treasury and the Secretary of the
Treasury, respectively.
(4) Each Inspector General shall--
(A) in accordance with applicable laws and regulations
governing appointments within the designated Federal entity,
appoint a Counsel to the Inspector General who shall report to
the Inspector General;
(B) obtain the services of a counsel appointed by and
directly reporting to another Inspector General on a
reimbursable basis; or
(C) obtain the services of appropriate staff of the Council
of the Inspectors General on Integrity and Efficiency on a
reimbursable basis.
(h)(1) No later than April 30, 1989, and annually thereafter,
the Director of the Office of Management and Budget, after
consultation with the Comptroller General of the United States,
shall publish in the Federal Register a list of the Federal
entities and designated Federal entities and if the designated
Federal entity is not a board or commission, include the head
of each such entity (as defined under subsection (a) of this
section).
(2) Beginning on October 31, 1989, and on October 31 of each
succeeding calendar year, the head of each Federal entity (as
defined under subsection (a) of this section) shall prepare and
transmit to the Director of the Office of Management and Budget
and to each House of the Congress a report which--
(A) states whether there has been established in the
Federal entity an office that meets the requirements of
this section;
(B) specifies the actions taken by the Federal entity
otherwise to ensure that audits are conducted of its
programs and operations in accordance with the
standards for audit of governmental organizations,
programs, activities, and functions issued by the
Comptroller General of the United States, and includes
a list of each audit report completed by a Federal or
non-Federal auditor during the reporting period and a
summary of any particularly significant findings; and
(C) summarizes any matters relating to the personnel,
programs, and operations of the Federal entity referred
to prosecutive authorities, including a summary
description of any preliminary investigation conducted
by or at the request of the Federal entity concerning
these matters, and the prosecutions and convictions
which have resulted.
* * * * * * *
definitions
Sec. 12. As used in this Act--
(1) the term ``head of the establishment'' means the
Secretary of Agriculture, Commerce, Defense, Education,
Energy, Health and Human Services, Housing and Urban
Development, the Interior, Labor, State,
Transportation, Homeland Security, or the Treasury; the
Attorney General; the Administrator of the Agency for
International Development, Environmental Protection,
General Services, National Aeronautics and Space, or
Small Business, or Veterans' Affairs; the Director of
the Federal Emergency Management Agency, or the Office
of Personnel Management; the Chairman of the Nuclear
Regulatory Commission or the Railroad Retirement Board;
the Chairperson of the Thrift Depositor Protection
Oversight Board; the Chief Executive Officer of the
Corporation for National and Community Service; the
Administrator of the Community Development Financial
Institutions Fund; the chief executive officer of the
Resolution Trust Corporation; the Chairperson of the
Federal Deposit Insurance Corporation; the Commissioner
of Social Security, Social Security Administration; the
Director of the Federal Housing Finance Agency; the
Board of Directors of the Tennessee Valley Authority;
the President of the Export-Import Bank; the Consumer
Law Enforcement Agency; the Federal Cochairpersons of
the Commissions established under section 15301 of
title 40, United States Code; the Director of the
National Security Agency;or the Director of the
National Reconnaissance Office; as the case may be;
(2) the term ``establishment'' means the Department
of Agriculture, Commerce, Defense, Education, Energy,
Health and Human Services, Housing and Urban
Development, the Interior, Justice, Labor, State,
Transportation, Homeland Security, or the Treasury; the
Agency for International Development, the Community
Development Financial Institutions Fund, the
Environmental Protection Agency, the Federal Emergency
Management Agency, the General Services Administration,
the National Aeronautics and Space Administration, the
Nuclear Regulatory Commission, the Office of Personnel
Management, the Railroad Retirement Board, the
Resolution Trust Corporation, the Federal Deposit
Insurance Corporation, the Small Business
Administration, the Corporation for National and
Community Service, or the Veterans' Administration, the
Social Security Administration, the Federal Housing
Finance Agency, the Tennessee Valley Authority, the
Export-Import Bank, the Consumer Law Enforcement
Agency, the Commissions established under section 15301
of title 40, United States Code, the National Security
Agency,or the National Reconnaissance Office, as the
case may be;
(3) the term ``Inspector General'' means the
Inspector General of an establishment;
(4) the term ``Office'' means the Office of Inspector
General of an establishment; and
(5) the term ``Federal agency'' means an agency as
defined in section 552(f) of title 5 (including an
establishment as defined in paragraph (2)), United
States Code, but shall not be construed to include the
General Accounting Office.
* * * * * * *
----------
OMNIBUS APPROPRIATIONS ACT, 2009
* * * * * * *
DIVISION D--FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS
ACT, 2009
* * * * * * *
TITLE VI--GENERAL PROVISIONS--THIS ACT
* * * * * * *
[Sec. 626. (a)(1) The Bureau of Consumer Financial Protection
shall have authority to prescribe rules with respect to
mortgage loans in accordance with section 553 of title 5,
United States Code. Such rulemaking shall relate to unfair or
deceptive acts or practices regarding mortgage loans, which may
include unfair or deceptive acts or practices involving loan
modification and foreclosure rescue services. Any violation of
a rule prescribed under this paragraph shall be treated as a
violation of a rule prohibiting unfair, deceptive, or abusive
acts or practices under the Consumer Financial Protection Act
of 2010 and a violation of a rule under section 18 of the
Federal Trade Commission Act (15 U.S.C. 57a) regarding unfair
or deceptive acts or practices.
[(2) The Bureau of Consumer Financial Protection shall
enforce the rules issued under paragraph (1) in the same
manner, by the same means, and with the same jurisdiction,
powers, and duties, as though all applicable terms and
provisions of the Consumer Financial Protection Act of 2010
were incorporated into and made part of this subsection.
[(3) Subject to subtitle B of the Consumer Financial
Protection Act of 2010, the Federal Trade Commission shall
enforce the rules issued under paragraph (1), in the same
manner, by the same means, and with the same jurisdiction, as
though all applicable terms and provisions of the Federal Trade
Commission Act were incorporated into and made part of this
section.
[(b)
[(1) Except as provided in paragraph (6), in any case
in which the attorney general of a State has reason to
believe that an interest of the residents of the State
has been or is threatened or adversely affected by the
engagement of any person subject to a rule prescribed
under subsection (a) in practices that violate such
rule, the State, as parens patriae, may bring a civil
action on behalf of its residents in an appropriate
district court of the United States or other court of
competent jurisdiction--
[(A) to enjoin that practice;
[(B) to enforce compliance with the rule;
[(C) to obtain damages, restitution, or other
compensation on behalf of the residents of the
State; or
[(D) to obtain penalties and relief provided
under the Consumer Financial Protection Act of
2010, the Federal Trade Commission Act, and
such other relief as the court deems
appropriate.
[(2) The State shall serve written notice to the Bureau of
Consumer Financial Protection or the Commission, as appropriate
of any civil action under paragraph (1) at least 60 days prior
to initiating such civil action. The notice shall include a
copy of the complaint to be filed to initiate such civil
action, except that if it is not feasible for the State to
provide such prior notice, the State shall provide notice
immediately upon instituting such civil action.
[(3) Upon receiving the notice required by paragraph (2) and
subject to subtitle B of the Consumer Financial Protection Act
of 2010 the Bureau of Consumer Financial Protection or the
Commission, as appropriate may intervene in such civil action
and upon intervening--
[(A) be heard on all matters arising in such civil
action;
[(B) remove the action to the appropriate United
States district court; and
[(C) file petitions for appeal of a decision in such
civil action.
[(4) Nothing in this subsection shall prevent the attorney
general of a State from exercising the powers conferred on the
attorney general by the laws of such State to conduct
investigations or to administer oaths or affirmations or to
compel the attendance of witnesses or the production of
documentary and other evidence. Nothing in this section shall
prohibit the attorney general of a State, or other authorized
State officer, from proceeding in State or Federal court on the
basis of an alleged violation of any civil or criminal statute
of that State.
[(5) In a civil action brought under paragraph (1)--
[(A) the venue shall be a judicial district in which
the defendant is found, is an inhabitant, or transacts
business or wherever venue is proper under section 1391
of title 28, United States Code; and
[(B) process may be served without regard to the
territorial limits of the district or of the State in
which the civil action is instituted.
[(6) Whenever a civil action or an administrative action has
been instituted by or on behalf of the Bureau of Consumer
Financial Protection or the Commission for violation of any
provision of law or rule described in paragraph (1), no State
may, during the pendency of such action instituted by or on
behalf of the Bureau of Consumer Financial Protection or the
Commission, institute a civil action under that paragraph
against any defendant named in the complaint in such action for
violation of any law or rule as alleged in such complaint.
[(7) If the attorney general of a State prevails in any civil
action under paragraph (1), the State can recover reasonable
costs and attorney fees from the lender or related party.]
* * * * * * *
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FEDERAL TRADE COMMISSION ACT
* * * * * * *
Sec. 4. The words defined in this section shall have the
following meaning when found in this Act, to wit:
``Commerce'' means commerce among the several States or
with foreign nations, or in any Territory of the United States
or in the District of Columbia, or between any such Territory
and another, or between any such Territory and any State or
foreign nation, or between the District of Columbia and any
State or Territory or foreign nation.
``Corporation'' shall be deemed to include any company,
trust, so-called Massachusetts trust, or association,
incorporated or unincorporated, which is organized to carry on
business for its own profit or that of its members, and has
shares of capital or capital stock or certificates of interest,
and any company, trust, so-called Massachusetts trust, or
association, incorporated or unincorporated, without shares of
capital or capital stock or certificates of interest, except
partnerships, which is organized to carry on business for its
own profit or that of its members.
``Documentary evidence'' includes all documents, papers,
correspondence, books of account, and financial and corporate
records.
``Acts to regulate commerce'' means the Act entitled ``An
Act to regulate commerce,'' approved February 14, 1887, and all
Acts amendatory thereof and supplementary thereto and the
Communications Act of 1934 and all Acts amendatory thereof and
supplementary thereto.
``Antitrust Acts'' means the Act entitled ``An Act to
protect trade and commerce against unlawful restraints and
monopolies,'' approved July 2, 1890; also sections 73 to 76,
inclusive, of an Act entitled ``An Act to reduce taxation, to
provide revenue for the Government, and for other purposes,''
approved August 27, 1894; also the Act entitled ``An Act to
amend sections 73 and 76 of the Act of August 27, 1894,
entitled `An Act to reduce taxation, to provide revenue for the
Government, and for other purposes,''' approved February 12,
1913; and also the Act entitled ``An Act to supplement existing
laws against unlawful restraints and monopolies, and for other
purposes,'' approved October 15, 1914.
``Banks'' means the types of banks and other
financial institutions referred to in [section
18(f)(2)] section 18(f).
``Foreign law enforcement agency'' means--
(1) any agency or judicial authority of a foreign
government, including a foreign state, a political
subdivision of a foreign state, or a multinational
organization constituted by and comprised of foreign
states, that is vested with law enforcement or
investigative authority in civil, criminal, or
administrative matters; and
(2) any multinational organization, to the extent
that it is acting on behalf of an entity described in
paragraph (1).
Sec. 5. (a)(1) Unfair methods of competition in or affecting
commerce, and unfair or deceptive acts or practices in or
affecting commerce, are hereby declared unlawful.
(2) The Commission is hereby empowered and directed to
prevent persons, partnerships, or corporations, except banks,
savings and loan institutions described in [section 18(f)(3)]
section 18(f), Federal credit unions described in [section
18(f)(4)] section 18(f), common carriers subject to the Acts to
regulate commerce, air carriers and foreign air carriers
subject to the Federal Aviation Act of 1958, and persons,
partnerships, or corporations insofar as they are subject to
the Packers and Stockyards Act, 1921, as amended, except as
provided in section 406(b) of said Act, from using unfair
methods of competition in or affecting commerce and unfair or
deceptive acts or practices in or affecting commerce.
(3) This subsection shall not apply to unfair methods of
competition involving commerce with foreign nations (other than
import commerce) unless--
(A) such methods of competition have a direct,
substantial, and reasonably foreseeable effect--
(i) on commerce which is not commerce with
foreign nations, or on import commerce with
foreign nations; or
(ii) on export commerce with foreign nations,
of a person engaged in such commerce in the
United States; and
(B) such effect gives rise to a claim under the
provisions of this subsection, other than this
paragraph.
If this subsection applies to such methods of competition only
because of the operation of subparagraph (A)(ii), this
subsection shall apply to such conduct only for injury to
export business in the United States.
(4)(A) For purposes of subsection (a), the term
``unfair or deceptive acts or practices'' includes such
acts or practices involving foreign commerce that--
(i) cause or are likely to cause reasonably
foreseeable injury within the United States; or
(ii) involve material conduct occurring
within the United States.
(B) All remedies available to the Commission with
respect to unfair and deceptive acts or practices shall
be available for acts and practices described in this
paragraph, including restitution to domestic or foreign
victims.
(b) Whenever the Commission shall have reason to believe that
any such person, partnership, or corporation has been or is
using any unfair method of competition or unfair or deceptive
act or practice in or affecting commerce, and if it shall
appear to the Commission that a proceeding by it in respect
thereof would be to the interest of the public, it shall issue
and serve upon such person, partnership, or corporation a
complaint stating its charges in that respect and containing a
notice of a hearing upon a day and at a place therein fixed at
least thirty days after the service of said complaint. The
person, partnership, or corporation so complained of shall have
the right to appear at the place and time so fixed and show
cause why an order should not be entered by the Commission
requiring such person, partnership, or corporation to cease and
desist from the violation of the law so charged in said
complaint. Any person, partnership, or corporation may make
application, and upon good cause shown may be allowed by the
Commission to intervene and appear in said proceeding by
counsel or in person. The testimony in any such proceeding
shall be reduced to writing and filed in the office of the
Commission. If upon such hearing the Commission shall be of the
opinion that the method of competition or the act or practice
in question is prohibited by this Act, it shall make a report
in writing in which it shall state its findings as to the facts
and shall issue and cause to be served on such person,
partnership, or corporation an order requiring such person,
partnership, or corporation to cease and desist from using such
method of competition or such act or practice. Until the
expiration of the time allowed for filing a petition for
review, if no such petition has been duly filed within such
time, or, if a petition for review has been filed within such
time then until the record in the proceeding has been filed in
a court of appeals of the United States, as hereinafter
provided, the Commission may at any time, upon such notice and
in such manner as it shall deem proper, modify or set aside, in
whole or in part, any report or any order made or issued by it
under this section. After the expiration of the time allowed
for filing a petition for review, if no such petition has been
duly filed within such time, the Commission may at any time,
after notice and opportunity for hearing, reopen and alter,
modify, or set aside, in whole or in part, any report or order
made or issued by it under this section, whenever in the
opinion of the Commission conditions of fact or of law have so
changed as to require such action or if the public interest
shall so require, except that (1) the said person, partnership,
or corporation may, within sixty days after service upon him or
it of said report or order entered after such a reopening,
obtain a review thereof in the appropriate circuit court of
appeals of the United States, in the manner provided in
subsection (c) of this section; and (2) in the case of an
order, the Commission shall reopen any such order to consider
whether such order (including any affirmative relief provision
contained in such order) should be altered, modified, or set
aside, in whole or in part, if the person, partnership, or
corporation involved files a request with the Commission which
makes a satisfactory showing that changed conditions of law or
fact require such order to be altered, modified, or set aside,
in whole or in part. The Commission shall determine whether to
alter, modify, or set aside any order of the Commission in
response to a request made by a person, partnership, or
corporation under paragraph (2) not later than 120 days after
the date of the filing of such request.
(c) Any person, partnership, or corporation required by an
order of the Commission to cease and desist from using any
method of competition or act or practice may obtain a review of
such order in the circuit court of appeals of the United
States, within any circuit where the method of competition or
the act or practice in question was used or where such person,
partnership, or corporation resides or carries on business, by
filing in the court, within sixty days from the date of the
service of such order, a written petition praying that the
order of the Commission be set aside. A copy of such petition
shall be forthwith transmitted by the clerk of the court to the
Commission, and thereupon the Commission shall file in the
court the record in the proceeding, as provided in section 2112
of title 28, United States Code. Upon such filing of the
petition the court shall have jurisdiction of the proceeding
and of the question determined therein concurrently with the
Commission until the filing of the record and shall have power
to make and enter a decree affirming, modifying, or setting
aside the order of the Commission, and enforcing the same to
the extent that such order is affirmed and to issue such writs
as are ancillary to its jurisdiction or are necessary in its
judgment to prevent injury to the public or to competitors
pendente lite. The findings of the Commission as to the facts,
if supported by evidence, shall be conclusive. To the extent
that the order of the Commission is affirmed, the court shall
thereupon issue its own order commanding obedience to the terms
of such order of the Commission. If either party shall apply to
the court for leave to adduce additional evidence, and shall
show to the satisfaction of the court that such additional
evidence is material and that there were reasonable grounds for
the failure to adduce such evidence in the proceeding before
the Commission, the court may order such additional evidence to
be taken before the Commission and to be adduced upon the
hearing in such manner and upon such terms and conditions as to
the court may seem proper. The Commission may modify its
findings as to the facts, or make new findings, by reason of
the additional evidence so taken, and it shall file such
modified or new findings, which if supported by evidence, shall
be conclusive, and its recommendation, if any, for the
modification or setting aside of its original order, with the
return of such additional evidence. The judgment and decree of
the court shall be final, except that the same shall be subject
to review by the Supreme Court upon certiorari, as provided in
section 240 of the Judicial Code.
(d) Upon the filing of the record with it the jurisdiction of
the court of appeals of the United States to affirm, enforce,
modify, or set aside orders of the Commission shall be
exclusive.
(e) No order of the Commission or judgment of court to
enforce the same shall in anywise relieve or absolve any
person, partnership, or corporation from any liability under
the Antitrust Acts.
(f) Complaints, orders, and other processes of the Commission
under this section may be served by anyone duly authorized by
the Commission, either (a) by delivering a copy thereof to the
person to be served, or to a member of the partnership to be
served, or the president, secretary, or other executive officer
or a director of the corporation to be served; or (b) by
leaving a copy thereof at the residence or the principal office
or place of business of such person, partnership, or
corporation; or (c) by mailing a copy thereof by registered
mail or by certified mail addressed to such person,
partnership, or corporation at his or its residence or
principal office or place of business. The verified return by
the person so serving said complaint, order, or other process
setting forth the manner of said service shall be proof of the
same, and the return post office receipt for said complaint,
order, or other process mailed by registered mail or certified
mail as aforesaid shall be proof of the service of the same.
(g) An order of the Commission to cease and desist shall
become final--
(1) Upon the expiration of the time allowed for
filing a petition for review, if no such petition has
been duly filed within such time; but the Commission
may thereafter modify or set aside its order to the
extent provided in the last sentence of subsection (b).
(2) Except as to any order provision subject to
paragraph (4), upon the sixtieth day after such order
is served, if a petition for review has been duly
filed; except that any such order may be stayed, in
whole or in part and subject to such conditions as may
be appropriate, by--
(A) the Commission;
(B) an appropriate court of appeals of the
United States, if (i) a petition for review of
such order is pending in such court, and (ii)
an application for such a stay was previously
submitted to the Commission and the Commission,
within the 30-day period beginning on the date
the application was received by the Commission,
either denied the application or did not grant
or deny the application; or
(C) the Supreme Court, if an applicable
petition for certiorari is pending.
(3) For purposes of subsection (m)(1)(B) and of
section 19(a)(2), if a petition for review of the order
of the Commission has been filed--
(A) upon the expiration of the time allowed
for filing a petition for certiorari, if the
order of the Commission has been affirmed or
the petition for review has been dismissed by
the court of appeals and no petition for
certiorari has been duly filed;
(B) upon the denial of a petition for
certiorari, if the order of the Commission has
been affirmed or the petition for review has
been dismissed by the court of appeals; or
(C) upon the expiration of 30 days from the
date of issuance of a mandate of the Supreme
Court directing that the order of the
Commission be affirmed or the petition for
review be dismissed.
(4) In the case of an order provision requiring a
person, partnership, or corporation to divest itself of
stock, other share capital, or assets, if a petition
for review of such order of the Commission has been
filed--
(A) upon the expiration of the time allowed
for filing a petition for certiorari, if the
order of the Commission has been affirmed or
the petition for review has been dismissed by
the court of appeals and no petition for
certiorari has been duly filed;
(B) upon the denial of a petition for
certiorari, if the order of the Commission has
been affirmed or the petition for review has
been dismissed by the court of appeals; or
(C) upon the expiration of 30 days from the
date of issuance of a mandate of the Supreme
Court directing that the order of the
Commission be affirmed or the petition for
review be dismissed.
(h) If the Supreme Court directs that the order of the
Commission be modified or set aside, the order of the
Commission rendered in accordance with the mandate of the
Supreme Court shall become final upon the expiration of thirty
days from the time it was rendered, unless within such thirty
days either party has instituted proceedings to have such order
corrected to accord with the mandate, in which event the order
of the Commission shall become final when so corrected.
(i) If the order of the Commission is modified or set aside
by the circuit court of appeals, and if (1) the time allowed
for filing a petition for certiorari has expired and no such
petition has been duly filed, or (2) the petition for
certiorari has been denied, or (3) the decision of the court
has been affirmed by the Supreme Court, then the order of the
Commission rendered in accordance with the mandate of the
circuit court of appeals shall become final on the expiration
of thirty days from the time such order of the Commission was
rendered, unless within such thirty days either party has
instituted proceedings to have such order corrected so that it
will accord with the mandate, in which event the order of the
Commission shall become final when so corrected.
(j) If the Supreme Court orders a rehearing; or if the case
is remanded by the circuit court of appeals to the Commission
for a rehearing, and if (1) the time allowed for filing a
petition for certiorari has expired, and no such petition has
been duly filed, or (2) the petition for certiorari has been
denied, or (3) the decision of the court has been affirmed by
the Supreme Court, then the order of the Commission rendered
upon such rehearing shall become final in the same manner as
though no prior order of the Commission had been rendered.
(k) As used in this section the term ``mandate'', in case a
mandate has been recalled prior to the expiration of thirty
days from the date of issuance thereof, means the final
mandate.
(l) Any person, partnership, or corporation who violates an
order of the Commission after it has become final, and while
such order is in effect, shall forfeit and pay to the United
States a civil penalty of not more than $10,000 for each
violation, which shall accrue to the United States and may be
recovered in a civil action brought by the Attorney General of
the United States. Each separate violation of such an order
shall be a separate offense, except that in the case of a
violation through continuing failure to obey or neglect to obey
a final order of the Commission, each day of continuance of
such failure or neglect shall be deemed a separate offense. In
such actions, the United States district courts are empowered
to grant mandatory injunctions and such other and further
equitable relief as they deem appropriate in the enforcement of
such final orders of the Commission.
(m)(1)(A) The Commission may commence a civil action to
recover a civil penalty in a district court of the United
States against any person, partnership, or corporation which
violates any rule under this Act respecting unfair or deceptive
acts or practices (other than an interpretive rule or a rule
violation of which the Commission has provided is not an unfair
or deceptive act or practice in violation of subsection (a)(1))
with actual knowledge or knowledge fairly implied on the basis
of objective circumstances that such act is unfair or deceptive
and is prohibited by such rule. In such action, such person,
partnership, or corporation shall be liable for a civil penalty
of not more than $10,000 for each violation.
(B) If the Commission determines in a proceeding under
subsection (b) that any act or practice is unfair or deceptive,
and issues a final cease and desist order, other than a consent
order, with respect to such act or practice, then the
Commission may commence a civil action to obtain a civil
penalty in a district court of the United States against any
person, partnership, or corporation which engages in such act
or practice--
(1) after such cease and desist order becomes final
(whether or not such person, partnership, or
corporation was subject to such cease and desist
order), and
(2) with actual knowledge that such act or practice
is unfair or deceptive and is unlawful under subsection
(a)(1) of this section.
In such action, such person, partnership, or
corporation shall be liable for a civil penalty
of not more than $10,000 for each violation.
(C)(1) In the case of a violation through continuing failure
to comply with a rule or with section 5(a)(1), each day of
continuance of such failure shall be treated as a separate
violation, for purposes of subparagraphs (A) and (B). In
determining the amount of such a civil penalty, the court shall
take into account the degree of culpability, any history of
prior such conduct, ability to pay, effect on ability to
continue to do business, and such other matters as justice may
require.
(2) If the cease and desist order establishing that the act
or practice is unfair or deceptive was not issued against the
defendant in a civil penalty action under paragraph (1)(B) the
issues of fact in such action against such defendant shall be
tried de novo. Upon request of any party to such an action
against such defendant, the court shall also review the
determination of law made by the Commission in the proceeding
under subsection (b) that the act or practice which was the
subject of such proceeding constituted an unfair or deceptive
act or practice in violation of subsection (a).
(3) The Commission may compromise or settle any action for a
civil penalty if such compromise or settlement is accompanied
by a public statement of its reasons and is approved by the
court.
(n) The Commission shall have no authority under this section
or section 18 to declare unlawful an act or practice on the
grounds that such act or practice is unfair unless the act or
practice causes or is likely to cause substantial injury to
consumers which is not reasonably avoidable by consumers
themselves and not outweighed by countervailing benefits to
consumers or to competition. In determining whether an act or
practice is unfair, the Commission 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.
Sec. 6. That the commission shall also have power--
(a) To gather and compile information concerning, and to
investigate from time to time the organization, business,
conduct, practices, and management of any person, partnership,
or corporation engaged in or whose business affects commerce,
excepting banks, savings and loan institutions described in
[section 18(f)(3)] section 18(f), Federal credit unions
described in [section 18(f)(4)] section 18(f), and common
carriers subject to the Act to regulate commerce, and its
relation to other persons, partnerships, and corporations.
(b) To require, by general or special orders, persons,
partnerships, and corporations engaged in or whose business
affects commerce, excepting banks, savings and loan
institutions described in [section 18(f)(3)] section 18(f),
Federal credit unions described in [section 18(f)(4)] section
18(f), and common carriers subject to the Act to regulate
commerce, or any class of them, or any of them, respectively,
to file with the commission in such form as the commission may
prescribe annual or special, or both annual and special,
reports or answers in writing to specific questions, furnishing
to the commission such information as it may require as to the
organization, business, conduct, practices, management, and
relation to other corporations, partnerships, and individuals
of the respective persons, partnerships, and corporations
filing such reports or answers in writing. Such reports and
answers shall be made under oath, or otherwise, as the
commission may prescribe, and shall be filed with the
commission within such reasonable period as the commission may
prescribe, unless additional time be granted in any case by the
commission.
(c) Whenever a final decree has been entered against any
defendant corporation in any suit brought by the United States
to prevent and restrain any violation of the antitrust Acts, to
make investigation, upon its own initiative, of the manner in
which the decree has been or is being carried out, and upon the
application of the Attorney General it shall be its duty to
make such investigation. It shall transmit to the Attorney
General a report embodying its findings and recommendations as
a result of any such investigation, and the report shall be
made public in the discretion of the commission.
(d) Upon the direction of the President or either House of
Congress to investigate and report the facts relating to any
alleged violations of the antitrust Acts by any corporation.
(e) Upon the application of the Attorney General to
investigate and make recommendations for the readjustment of
the business of any corporation alleged to be violating the
antitrust Acts in order that the corporation may thereafter
maintain its organization, management, and conduct of business
in accordance with law.
(f) To make public from time to time such portions of the
information obtained by it hereunder as are in the public
interest; and to make annual and special reports to the
Congress and to submit therewith recommendations for additional
legislation; and to provide for the publication of its reports
and decisions in such form and manner as may be best adapted
for public information and use: Provided, That the Commission
shall not have any authority to make public any trade secret or
any commercial or financial information which is obtained from
any person and which is privileged or confidential, except that
the Commission may disclose such information (1) to officers
and employees of appropriate Federal law enforcement agencies
or to any officer or employee of any State law enforcement
agency upon the prior certification of an officer of any such
Federal or State law enforcement agency that such information
will be maintained in confidence and will be used only for
official law enforcement purposes, and (2) to any officer or
employee of any foreign law enforcement agency under the same
circumstances that making material available to foreign law
enforcement agencies is permitted under section 21(b).
(g) From time to time to classify corporations and (except as
provided in section 18(a)(2) of this Act) to make rules and
regulations for the purpose of carrying out the provisions of
this Act.
(h) To investigate, from time to time, trade conditions in
and with foreign countries where associations, combinations, or
practices of manufacturers, merchants, or traders, or other
conditions, may affect the foreign trade of the United States,
and to report to Congress thereon, with such recommendations as
it deems advisable.
(i) With respect to the International Antitrust Enforcement
Assistance Act of 1994, to conduct investigations of possible
violations of foreign antitrust laws (as defined in section 12
of such Act).
(j) Investigative Assistance for Foreign Law Enforcement
Agencies.--
(1) In general.--Upon a written request from a
foreign law enforcement agency to provide assistance in
accordance with this subsection, if the requesting
agency states that it is investigating, or engaging in
enforcement proceedings against, possible violations of
laws prohibiting fraudulent or deceptive commercial
practices, or other practices substantially similar to
practices prohibited by any provision of the laws
administered by the Commission, other than Federal
antitrust laws (as defined in section 12(5) of the
International Antitrust Enforcement Assistance Act of
1994 (15 U.S.C. 6211(5))), to provide the assistance
described in paragraph (2) without requiring that the
conduct identified in the request constitute a
violation of the laws of the United States.
(2) Type of assistance.--In providing assistance to a
foreign law enforcement agency under this subsection,
the Commission may--
(A) conduct such investigation as the
Commission deems necessary to collect
information and evidence pertinent to the
request for assistance, using all investigative
powers authorized by this Act; and
(B) when the request is from an agency acting
to investigate or pursue the enforcement of
civil laws, or when the Attorney General refers
a request to the Commission from an agency
acting to investigate or pursue the enforcement
of criminal laws, seek and accept appointment
by a United States district court of Commission
attorneys to provide assistance to foreign and
international tribunals and to litigants before
such tribunals on behalf of a foreign law
enforcement agency pursuant to section 1782 of
title 28, United States Code.
(3) Criteria for determination.--In deciding whether
to provide such assistance, the Commission shall
consider all relevant factors, including--
(A) whether the requesting agency has agreed
to provide or will provide reciprocal
assistance to the Commission;
(B) whether compliance with the request would
prejudice the public interest of the United
States; and
(C) whether the requesting agency's
investigation or enforcement proceeding
concerns acts or practices that cause or are
likely to cause injury to a significant number
of persons.
(4) International agreements.--If a foreign law
enforcement agency has set forth a legal basis for
requiring execution of an international agreement as a
condition for reciprocal assistance, or as a condition
for provision of materials or information to the
Commission, the Commission, with prior approval and
ongoing oversight of the Secretary of State, and with
final approval of the agreement by the Secretary of
State, may negotiate and conclude an international
agreement, in the name of either the United States or
the Commission, for the purpose of obtaining such
assistance, materials, or information. The Commission
may undertake in such an international agreement to--
(A) provide assistance using the powers set
forth in this subsection;
(B) disclose materials and information in
accordance with subsection (f) and section
21(b); and
(C) engage in further cooperation, and
protect materials and information received from
disclosure, as authorized by this Act.
(5) Additional authority.--The authority provided by
this subsection is in addition to, and not in lieu of,
any other authority vested in the Commission or any
other officer of the United States.
(6) Limitation.--The authority granted by this
subsection shall not authorize the Commission to take
any action or exercise any power with respect to a
bank, a savings and loan institution described in
[section 18(f)(3) (15 U.S.C. 57a(f)(3)), a Federal
credit union described in section 18(f)(4) (15 U.S.C.
57a(f)(4))] section 18(f), a Federal credit union
described in section 18(f), or a common carrier subject
to the Act to regulate commerce, except in accordance
with the undesignated proviso following the last
designated subsection of section 6 (15 U.S.C. 46).
(7) Assistance to certain countries.--The Commission
may not provide investigative assistance under this
subsection to a foreign law enforcement agency from a
foreign state that the Secretary of State has
determined, in accordance with section 6(j) of the
Export Administration Act of 1979 (50 U.S.C. App.
2405(j)), has repeatedly provided support for acts of
international terrorism, unless and until such
determination is rescinded pursuant to section 6(j)(4)
of that Act (50 U.S.C. App. 2405(j)(4)).
(k) Referral of Evidence for Criminal Proceedings.--
(1) In general.--Whenever the Commission obtains
evidence that any person, partnership, or corporation,
either domestic or foreign, has engaged in conduct that
may constitute a violation of Federal criminal law, to
transmit such evidence to the Attorney General, who may
institute criminal proceedings under appropriate
statutes. Nothing in this paragraph affects any other
authority of the Commission to disclose information.
(2) International information.--The Commission shall
endeavor to ensure, with respect to memoranda of
understanding and international agreements it may
conclude, that material it has obtained from foreign
law enforcement agencies acting to investigate or
pursue the enforcement of foreign criminal laws may be
used for the purpose of investigation, prosecution, or
prevention of violations of United States criminal
laws.
(l) Expenditures for Cooperative Arrangements.--To expend
appropriated funds for--
(1) operating expenses and other costs of bilateral
and multilateral cooperative law enforcement groups
conducting activities of interest to the Commission and
in which the Commission participates; and
(2) expenses for consultations and meetings hosted by
the Commission with foreign government agency
officials, members of their delegations, appropriate
representatives and staff to exchange views concerning
developments relating to the Commission's mission,
development and implementation of cooperation
agreements, and provision of technical assistance for
the development of foreign consumer protection or
competition regimes, such expenses to include necessary
administrative and logistic expenses and the expenses
of Commission staff and foreign invitees in attendance
at such consultations and meetings including--
(A) such incidental expenses as meals taken
in the course of such attendance;
(B) any travel and transportation to or from
such meetings; and
(C) any other related lodging or subsistence.
Provided, That the exception of ``banks, savings and loan
institutions described in [section 18(f)(3)] section 18(f),
Federal credit unions described in [section 18(f)(4)] section
18(f), and common carriers subject to the Act to regulate
commerce'' from the Commission's powers defined in subsections
(a), (b), and (j) of this section, shall not be construed to
limit the Commission's authority to gather and compile
information to investigate, or to require reports or answers
from, any person, partnership, or corporation to the extent
that such action is necessary to the investigation of any
person, partnership, or corporation, group of persons,
partnerships, or corporations, or industry which is not
engaged, or is engaged only incidentally in banking, in
business as a savings and loan institution, in business as a
Federal credit union, or in business as a common carrier
subject to the Act to regulate commerce.
The Commission shall establish a plan designed to
substantially reduce burdens imposed upon small businesses as a
result of requirements established by the Commission under
clause (b) relating to the filing of quarterly financial
reports. Such plan shall (1) be established after consultation
with small businesses and persons who use the information
contained in such quarterly financial reports; (2) provide for
a reduction of the number of small businesses required to file
such quarterly financial reports; and (3) make revisions in the
forms used for such quarterly financial reports for the purpose
of reducing the complexity of such forms. The Commission, not
later than December 31, 1980, shall submit such plan to the
Committee on Commerce, Science, and Transportation of the
Senate and to the Committee on Energy and Commerce of the House
of Representatives. Such plan shall take effect not later than
October 31, 1981.
No officer or employee of the Commission or any Commissioner
may publish or disclose information to the public, or to any
Federal agency, whereby any line-of-business data furnished by
a particular establishment or individual can be identified. No
one other than designated sworn officers and employees of the
Commission may examine the line-of-business reports from
individual firms, and information provided in the line-of-
business program administered by the Commission shall be used
only for statistical purposes. Information for carrying out
specific law enforcement responsibilities of the Commission
shall be obtained under practices and procedures in effect on
the date of the enactment of the Federal Trade Commission
Improvements Act of 1980, or as changed by law.
Nothing in this section (other than the provisions of clause
(c) and clause (d)) shall apply to the business of insurance,
except that the Commission shall have authority to conduct
studies and prepare reports relating to the business of
insurance. The Commission may exercise such authority only upon
receiving a request which is agreed to by a majority of the
members of the Committee on Commerce, Science, and
Transportation of the Senate or the Committee on Energy and
Commerce of the House of Representatives. The authority to
conduct any such study shall expire at the end of the Congress
during which the request for such study was made.
* * * * * * *
Sec. 18. (a)(1) Except as provided in subsection (h), the
Commission may prescribe--
(A) interpretive rules and general statements of
policy with respect to unfair or deceptive acts or
practices in or affecting commerce (within the meaning
of section 5(a)(1) of this Act), and
(B) rules which define with specificity acts or
practices which are unfair or deceptive acts or
practices in or affecting commerce (within the meaning
of such section 5(a)(1)), except that the Commission
shall not develop or promulgate any trade rule or
regulation with regard to the regulation of the
development and utilization of the standards and
certification activities pursuant to this section.
Rules under this subparagraph may include requirements
prescribed for the purpose of preventing such acts or
practices.
(2) The Commission shall have no authority under this Act,
other than its authority under this section, to prescribe any
rule with respect to unfair or deceptive acts or practices in
or affecting commerce (within the meaning of section 5(a)(1)).
The preceding sentence shall not affect any authority of the
Commission to prescribe rules (including interpretive rules),
and general statements of policy, with respect to unfair
methods of competition in or affecting commerce.
(b)(1) When prescribing a rule under subsection (a)(1)(B) of
this section, the Commission shall proceed in accordance with
section 553 of title 5, United States Code (without regard to
any reference in such section to sections 556 and 557 of such
title), and shall also (A) publish a notice of proposed
rulemaking stating with particularity the text of the rule,
including any alternatives, which the Commission proposes to
promulgate, and the reason for the proposed rule; (B) allow
interested persons to submit written data, views, and
arguments, and make all such submissions publicly available;
(C) provide an opportunity for an informal hearing in
accordance with subsection (c); and (D) promulgate, if
appropriate, a final rule based on the matter in the rule-
making record (as defined in subsection (e)(1)(B)), together
with a statement of basis and purpose.
(2)(A) Prior to the publication of any notice of proposed
rulemaking pursuant to paragraph (1)(A), the Commission shall
publish an advance notice of proposed rulemaking in the Federal
Register. Such advance notice shall--
(i) contain a brief description of the area of
inquiry under consideration, the objectives which the
Commission seeks to achieve, and possible regulatory
alternatives under consideration by the Commission; and
(ii) invite the response of interested parties with
respect to such proposed rulemaking, including any
suggestions or alternative methods for achieving such
objectives.
(B) The Commission shall submit such advance notice of
proposed rulemaking to the Committee on Commerce, Science, and
Transportation of the Senate and to the Committee on Energy and
Commerce of the House of Representatives. The Commission may
use such additional mechanisms as the Commission considers
useful to obtain suggestions regarding the content of the area
of inquiry before the publication of a general notice of
proposed rulemaking under paragraph (1)(A).
(C) The Commission shall, 30 days before the publication of a
notice of proposed rulemaking pursuant to paragraph (1)(A),
submit such notice to the Committee on Commerce, Science, and
Transportation of the Senate and to the Committee on Energy and
Commerce of the House of Representatives.
(3) The Commission shall issue a notice of proposed
rulemaking pursuant to paragraph (1)(A) only where it has
reason to believe that the unfair or deceptive acts or
practices which are the subject of the proposed rulemaking are
prevalent. The Commission shall make a determination that
unfair or deceptive acts or practices are prevalent under this
paragraph only if--
(A) it has issued cease and desist orders regarding
such acts or practices, or
(B) any other information available to the Commission
indicates a widespread pattern of unfair or deceptive
acts or practices.
(c) The Commission shall conduct any informal hearings
required by subsection (b)(1)(c) of this section in accordance
with the following procedure:
(1)(A) The Commission shall provide for the conduct of
proceedings under this subsection by hearing officers who shall
perform their functions in accordance with the requirements of
this subsection.
(B) The officer who presides over the rulemaking proceedings
shall be responsible to a chief presiding officer who shall not
be responsible to any other officer or employee of the
Commission. The officer who presides over the rulemaking
proceeding shall make a recommended decision based upon the
findings and conclusions of such officer as to all relevant and
material evidence, except that such recommended decision may be
made by another officer if the officer who presided over the
proceeding is no longer available to the Commission.
(C) Except as required for the disposition of ex parte
matters as authorized by law, no presiding officer shall
consult any person or party with respect to any fact in issue
unless such officer gives notice and opportunity for all
parties to participate.
(2) Subject to paragraph (3) of this subsection, an
interested person is entitled--
(A) to present his position orally or by documentary
submissions (or both), and
(B) if the Commission determines that there are
disputed issues of material fact it is necessary to
resolve, to present such rebuttal submissions and to
conduct (or have conducted under paragraph (3)(B)) such
cross-examination of persons as the Commission
determines (i) to be appropriate, and (ii) to be
required for a full and true disclosure with respect to
such issues.
(3) The Commission may prescribe such rules and make such
rulings concerning proceedings in such hearings as may tend to
avoid unnecessary costs or delay. Such rules or rulings may
include (A) imposition of reasonable time limits on each
interested person's oral presentations, and (B) requirements
that any cross-examination to which a person may be entitled
under paragraph (2) be conducted by the Commission on behalf of
that person in such manner as the Commission determines (i) to
be appropriate, and (ii) to be required for a full and true
disclosure with respect to disputed issues of material fact.
(4)(A) Except as provided in subparagraph (B), if a group of
persons each of whom under paragraphs (2) and (3) would be
entitled to conduct (or have conducted) cross-examination and
who are determined by the Commission to have the same or
similar interests in the proceeding cannot agree upon a single
representative of such interests for purposes of cross-
examination, the Commission may make rules and rulings (i)
limiting the representation of such interest, for such
purposes, and (ii) governing the manner in which such cross-
examination shall be limited.
(B) When any person who is a member of a group with respect
to which the Commission has made a determination under
subparagraph (A) is unable to agree upon group representation
with the other members of the group, then such person shall not
be denied under the authority of subparagraph (A) the
opportunity to conduct (or have conducted) cross-examination as
to issues affecting his particular interests if (i) he
satisfies the Commission that he has made a reasonable and good
faith effort to reach agreement upon group representation with
the other members of the group and (ii) the Commission
determines that there are substantial and relevant issues which
are not adequately presented by the group representative.
(5) A verbatim transcript shall be taken of any oral
presentation, and cross-examination, in an informal hearing to
which this subsection applies. Such transcript shall be
available to the public.
(d)(1) The Commission's statement of basis and purpose to
accompany a rule promulgated under subsection (a)(1)(B) shall
include (A) a statement as to the prevalence of the acts or
practices treated by the rule; (B) a statement as to the manner
and context in which such acts or practices are unfair or
deceptive; and (C) a statement as to the economic effect of the
rule, taking into account the effect on small business and
consumers.
(2)(A) The term ``Commission'' as used in this subsection and
subsections (b) and (c) includes any person authorized to act
in behalf of the Commission in any part of the rulemaking
proceeding.
(B) A substantive amendment to, or repeal of, a rule
promulgated under subsection (a)(1)(B) shall be prescribed, and
subject to judicial review, in the same manner as a rule
prescribed under such subsection. An exemption under subsection
(g) shall not be treated as an amendment or repeal of a rule.
(3) When any rule under subsection (a)(1)(B) takes effect a
subsequent violation thereof shall constitute an unfair or
deceptive act or practice in violation of section 5(a)(1) of
this Act, unless the Commission otherwise expressly provides in
such rule.
(e)(1)(A) Not later than 60 days after a rule is promulgated
under subsection (a)(1)(B) by the Commission, any interested
person (including a consumer or consumer organization) may file
a petition, in the United States Court of Appeals for the
District of Columbia circuit or for the circuit in which such
person resides or has his principal place of business, for
judicial review of such rule. Copies of the petition shall be
forthwith transmitted by the clerk of the court to the
Commission or other officer designated by it for that purpose.
The provisions of section 2112 of title 28, United States Code,
shall apply to the filing of the rulemaking record of
proceedings on which the Commission based its rule and to the
transfer of proceedings in the courts of appeals.
(B) For purposes of this section, the term ``rulemaking
record'' means the rule, its statement of basis and purpose,
the transcript required by subsection (c)(5), any written
submissions, and any other information which the Commission
considers relevant to such rule.
(2) If the petitioner or the Commission applies to the court
for leave to make additional oral submissions or written
presentations and shows to the satisfaction of the court that
such submissions and presentations would be material and that
there were reasonable grounds for the submissions and failure
to make such submissions and presentations in the proceeding
before the Commission, the court may order the Commission to
provide additional opportunity to make such submissions and
presentations. The Commission may modify or set aside its rule
or make a new rule by reason of the additional submissions and
presentations and shall file such modified or new rule, and the
rule's statement of basis of purpose, with the return of such
submissions and presentations. The court shall thereafter
review such new or modified rule.
(3) Upon the filing of the petition under paragraph (1) of
this subsection, the court shall have jurisdiction to review
the rule in accordance with chapter 7 of title 5, United States
Code, and to grant appropriate relief, including interim
relief, as provided in such chapter. The court shall hold
unlawful and set aside the rule on any ground specified in
subparagraphs (A), (B), (C), or (D) of section 706(2) of title
5, United States Code (taking due account of the rule of
prejudicial error), or if--
(A) the court finds that the Commission's action is
not supported by substantial evidence in the rulemaking
record (as defined in paragraph (1)(B) of this
subsection) taken as a whole, or
(B) the court finds that--
(i) a Commission determination under
subsection (c) that the petitioner is not
entitled to conduct cross-examination or make
rebuttal submissions, or
(ii) a Commission rule or ruling under
subsection (c) limiting the petitioner's cross-
examination or rebuttal submissions,
has precluded disclosure of disputed material facts
which was necessary for fair determination by the
Commission of the rulemaking proceeding taken as a
whole.
The term ``evidence,'' as used in this paragraph, means any
matter in the rulemaking record.
(4) The judgment of the court affirming or setting aside, in
whole or in part, any such rule shall be final, subject to
review by the Supreme Court of the United States upon
certiorari or certification, as provided in section 1254 of
title 28, United States Code.
(5)(A) Remedies under the preceding paragraphs of this
subsection are in addition to and not in lieu of any other
remedies provided by law.
(B) The United States Courts of Appeals shall have exclusive
jurisdiction of any action to obtain judicial review (other
than in an enforcement proceeding) of a rule prescribed under
subsection (a)(1)(B), if any district court of the United
States would have had jurisdiction of such action but for this
subparagraph. Any such action shall be brought in the United
States Court of Appeals for the District of Columbia circuit,
or for any circuit which includes a judicial district in which
the action could have been brought but for this subparagraph.
(C) A determination, rule, or ruling of the Commission
described in paragraph (3)(B) (i) or (ii) may be reviewed only
in a proceeding under this subsection and only in accordance
with paragraph (3)(B). Section 706(2)(E) of title 5, United
States Code, shall not apply to any rule promulgated under
subsection (a)(1)(B). The contents and adequacy of any
statement required by subsection (b)(1)(D) shall not be subject
to judicial review in any respect.
[(f) Definitions of Banks, Savings and Loan Institutions, and
Federal Credit Unions.--
[(1)
[(2) Definition.--For purposes of this Act, the term
``bank'' means--
[(A) national banks and Federal branches and
Federal agencies of foreign banks;
[(B) member banks of the Federal Reserve
System (other than national banks), branches
and agencies of foreign banks (other than
Federal branches, Federal agencies, and insured
State branches of foreign banks), commercial
lending companies owned or controlled by
foreign banks, and organizations operating
under section 25 or 25A of the Federal Reserve
Act; and
[(C) banks insured by the Federal Deposit
Insurance Corporation (other than banks
referred to in subparagraph (A) or (B)) and
insured State branches of foreign banks.
[(3) For purposes of this Act, the term ``savings and loan
institution'' has the same meaning as in section 3 of the
Federal Deposit Insurance Act.
[(4) For purposes of this Act, the term ``Federal credit
union'' has the same meaning as in sections 120 and 206 of the
Federal Credit Union Act (12 U.S.C. 1766 and 1786).
The terms used in this paragraph that are not defined
in the Federal Trade Commission Act or otherwise
defined in section 3(s) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(s)) shall have the
meaning given to them in section 1(b) of the
International Banking Act of 1978 (12 U.S.C. 3101).]
(f) Unfair or Deceptive Acts or Practices by Depository
Institutions.--
(1) In general.-- In order to prevent unfair or
deceptive acts or practices in or affecting commerce
(including acts or practices which are unfair or
deceptive to consumers) by depository institutions,
each Federal banking regulator shall prescribe
regulations to carry out the purposes of this section,
including regulations defining with specificity such
unfair or deceptive acts or practices, and containing
requirements prescribed for the purpose of preventing
such acts or practices.
(2) Promulgating substantially similar regulations.--
Whenever the Commission prescribes a rule under
subsection (a)(1)(B), then within 60 days after such
rule takes effect each Federal banking regulator shall
promulgate substantially similar regulations
prohibiting acts or practices of depository
institutions which are substantially similar to those
prohibited by rules of the Commission and which impose
substantially similar requirements, unless--
(A) the Federal banking regulator finds that
such acts or practices of depository
institutions are not unfair or deceptive; or
(B) the Board of Governors of the Federal
Reserve System finds that implementation of
similar regulations with respect to depository
institutions would seriously conflict with
essential monetary and payments systems
policies of such Board, and publishes any such
finding, and the reasons therefor, in the
Federal Register.
(3) Enforcement.--
(A) In general.--Compliance with regulations
prescribed under this subsection shall be
enforced--
(i) under section 8 of the Federal
Deposit Insurance Act, with respect to
a depository institution other than a
Federal credit union; and
(ii) under sections 120 and 206 of
the Federal Credit Union Act, with
respect to a Federal credit union.
(B) Deeming of violation.--For the purpose of
the exercise by a Federal banking regulator of
the regulator's powers under any Act referred
to in subparagraph (A), a violation of any
regulation prescribed under this subsection
shall be deemed to be a violation of a
requirement imposed under that Act.
(C) Enforcement through any existing
authority.--In addition to its powers under any
provision of law specifically referred to in
subparagraph (A), each Federal banking
regulator may exercise, for the purpose of
enforcing compliance with any regulation
prescribed under this subsection, any other
authority conferred on the regulator by law.
(4) Rule of construction.--The authority of the Board
of Governors of the Federal Reserve System to issue
regulations under this subsection does not impair the
authority of any other Federal banking regulator to
make rules respecting the regulator's own procedures in
enforcing compliance with regulations prescribed under
this subsection.
(5) Report to congress.--Each Federal banking
regulator exercising authority under this subsection
shall transmit to the Congress each year a detailed
report on its activities under this subsection during
the preceding calendar year.
(6) Definitions.--For purposes of this Act:
(A) Bank.--The term ``bank'' means--
(i) national banks and Federal
branches and Federal agencies of
foreign banks;
(ii) member banks of the Federal
Reserve System (other than national
banks), branches and agencies of
foreign banks (other than Federal
branches, Federal agencies, and insured
State branches of foreign banks),
commercial lending companies owned or
controlled by foreign banks, and
organizations operating under section
25 or 25A of the Federal Reserve Act;
and
(iii) banks insured by the Federal
Deposit Insurance Corporation (other
than banks referred to in clause (i) or
(ii) and insured State branches of
foreign banks.
(B) Depository institution.--The term
``depository institution'' means a bank, a
savings and loan institution, or a Federal
credit union.
(C) Federal banking regulator.--The term
``Federal banking regulator''--
(i) has the meaning given the term
``appropriate Federal banking agency''
under section 3 of the Federal Deposit
Insurance Act; and
(ii) means the National Credit Union
Administration, in the case of a
Federal credit union.
(D) Federal credit union.--The term ``Federal
credit union'' has the same meaning as in
section 101 of the Federal Credit Union Act.
(E) Savings and loan institution.--The term
``savings and loan institution'' has the same
meaning as in section 3 of the Federal Deposit
Insurance Act.
(F) Other terms.--The terms used in this
paragraph that are not defined in this Act or
otherwise defined in section 3(s) of the
Federal Deposit Insurance Act shall have the
meaning given to them in section 1(b) of the
International Banking Act of 1978.
(g)(1) Any person to whom a rule under subsection (a)(1)(B)
of this section applies may petition the Commission for an
exemption from such rule.
(2) If, on its own motion or on the basis of a petition under
paragraph (1), the Commission finds that the application of a
rule prescribed under subsection (a)(1)(B) to any person or
class or persons is not necessary to prevent the unfair or
deceptive act or practice to which the rule relates, the
Commission may exempt such person or class from all or part of
such rule. Section 553 of title 5, United States Code, shall
apply to action under this paragraph.
(3) Neither the pendency of a proceeding under this
subsection respecting an exemption from a rule, nor the
pendency of judicial proceedings to review the Commission's
action or failure to act under this subsection, shall stay the
applicability of such rule under subsection (a)(1)(B).
(h) The Commission shall not have any authority to promulgate
any rule in the children's advertising proceeding pending on
the date of the enactment of the Federal Trade Commission
Improvements Act of 1980 or in any substantially similar
proceeding on the basis of a determination by the Commission
that such advertising constitutes an unfair act or practice in
or affecting commerce.
(i)(1) For purposes of this subsection, the term ``outside
party'' means any person other than (A) a Commissioner; (B) an
officer or employee of the Commission; or (C) any person who
has entered into a contract or any other agreement or
arrangement with the Commission to provide any goods or
services (including consulting services) to the Commission.
(2) Not later than 60 days after the date of the enactment of
the Federal Trade Commission Improvements Act of 1980, the
Commission shall publish a proposed rule, and not later than
180 days after such date of enactment the Commission shall
promulgate a final rule, which shall authorize the Commission
or any Commissioner to meet with any outside party concerning
any rulemaking proceeding of the Commission. Such rule shall
provide that--
(A) notice of any such meeting shall be included in
any weekly calendar prepared by the Commission; and
(B) a verbatim record or a summary of any such
meeting, or of any communication relating to any such
meeting, shall be kept, made available to the public,
and included in the rulemaking record.
(j) Not later than 60 days after the date of the enactment of
the Federal Trade Commission Improvements Act of 1980, the
Commission shall publish a proposed rule, and not later than
180 days after such date of enactment the Commission shall
promulgate a final rule, which shall prohibit any officer,
employee, or agent of the Commission with any investigative
responsibility or other responsibility relating to any
rulemaking proceeding within any operating bureau of the
Commission, from communicating or causing to be communicated to
any Commissioner or to the personal staff of any Commissioner
any fact which is relevant to the merits of such proceeding and
which is not on the rulemaking record of such proceeding,
unless such communication is made available to the public and
is included in the rulemaking record. The provisions of this
subsection shall not apply to any communication to the extent
such communication is required for the disposition of ex parte
matters as authorized by law.
* * * * * * *
Sec. 21. (a) For purposes of this section:
(1) The term ``material'' means documentary material,
tangible things, written reports or answers to
questions, and transcripts of oral testimony.
(2) The term ``Federal agency'' has the meaning given
it in section 552(e) of title 5, United States Code.
(b)(1) With respect to any document, tangible thing, or
transcript of oral testimony received by the Commission
pursuant to compulsory process in an investigation, a purpose
of which is to determine whether any person may have violated
any provision of the laws administered by the Commission, the
procedures established in paragraph (2) through paragraph (7)
shall apply.
(2)(A) The Commission shall designate a duly authorized agent
to serve as custodian of documentary material, tangible things,
or written reports or answers to questions, and transcripts of
oral testimony, and such additional duly authorized agents as
the Commission shall determine from time to time to be
necessary to serve as deputies to the custodian.
(B) Any person upon whom any demand for the production of
documentary material has been duly served shall make such
material available for inspection and copying or reproduction
to the custodian designated in such demand at the principal
place of business of such person (or at such other place as
such custodian and such person thereafter may agree and
prescribe in writing or as the court may direct pursuant to
section 20(h)) on the return date specified in such demand (or
on such later date as such custodian may prescribe in writing).
Such person may upon written agreement between such person and
the custodian substitute copies for originals of all or any
part of such material.
(3)(A) The custodian to whom any documentary material,
tangible things, written reports or answers to questions, and
transcripts of oral testimony are delivered shall take physical
possession of such material, reports or answers, and
transcripts, and shall be responsible for the use made of such
material, reports or answers, and transcripts, and for the
return of material, pursuant to the requirements of this
section.
(B) The custodian may prepare such copies of the documentary
material, written reports or answers to questions, and
transcripts of oral testimony, and may make tangible things
available, as may be required for official use by any duly
authorized officer or employee of the Commission under
regulations which shall be promulgated by the Commission.
Notwithstanding subparagraph (C), such material, things, and
transcripts may be used by any such officer or employee in
connection with the taking of oral testimony under this
section.
(C) Except as otherwise provided in this section, while in
the possession of the custodian, no documentary material,
tangible things, reports or answers to questions, and
transcripts of oral testimony shall be available for
examination by any individual other than a duly authorized
officer or employee of the Commission without the consent of
the person who produced the material, things, or transcripts.
Nothing in this section is intended to prevent disclosure to
either House of the Congress or to any committee or
subcommittee of the Congress, except that the Commission
immediately shall notify the owner or provider of any such
information of a request for information designated as
confidential by the owner or provider.
(D) While in the possession of the custodian and under such
reasonable terms and conditions as the Commission shall
prescribe--
(i) documentary material, tangible things, or written
reports shall be available for examination by the
person who produced the material, or by any duly
authorized representative of such person; and
(ii) answers to questions in writing and transcripts
of oral testimony shall be available for examination by
the person who produced the testimony or by his
attorney.
(4) Whenever the Commission has instituted a proceeding
against a person, partnership, or corporation, the custodian
may deliver to any officer or employee of the Commission
documentary material, tangible things, written reports or
answers to questions, and transcripts of oral testimony for
official use in connection with such proceeding. Upon the
completion of the proceeding, the officer or employee shall
return to the custodian any such material so delivered which
has not been received into the record of the proceeding.
(5) If any documentary material, tangible things, written
reports or answers to questions, and transcripts of oral
testimony have been produced in the course of any investigation
by any person pursuant to compulsory process and--
(A) any proceeding arising out of the investigation
has been completed; or
(B) no proceeding in which the material may be used
has been commenced within a reasonable time after
completion of the examination and analysis of all such
material and other information assembled in the course
of the investigation;
then the custodian shall, upon written request of the person
who produced the material, return to the person any such
material which has not been received into the record of any
such proceeding (other than copies of such material made by the
custodian pursuant to paragraph (3)(B)).
(6) The custodian of any documentary material, written
reports or answers to questions, and transcripts of oral
testimony may deliver to any officers or employees of
appropriate Federal law enforcement agencies, in response to a
written request, copies of such material for use in connection
with an investigation or proceeding under the jurisdiction of
any such agency. The custodian of any tangible things may make
such things available for inspection to such persons on the
same basis. Such materials shall not be made available to any
such agency until the custodian receives certification of any
officer of such agency that such information will be maintained
in confidence and will be used only for official law
enforcement purposes. Such documentary material, results of
inspections of tangible things, written reports or answers to
questions, and transcripts of oral testimony may be used by any
officer or employee of such agency only in such manner and
subject to such conditions as apply to the Commission under
this section. The custodian may make such materials available
to any State law enforcement agency upon the prior
certification of any officer of such agency that such
information will be maintained in confidence and will be used
only for official law enforcement purposes. The custodian may
make such material available to any foreign law enforcement
agency upon the prior certification of an appropriate official
of any such foreign law enforcement agency, either by a prior
agreement or memorandum of understanding with the Commission or
by other written certification, that such material will be
maintained in confidence and will be used only for official law
enforcement purposes, if--
(A) the foreign law enforcement agency has set forth
a bona fide legal basis for its authority to maintain
the material in confidence;
(B) the materials are to be used for purposes of
investigating, or engaging in enforcement proceedings
related to, possible violations of--
(i) foreign laws prohibiting fraudulent or
deceptive commercial practices, or other
practices substantially similar to practices
prohibited by any law administered by the
Commission;
(ii) a law administered by the Commission, if
disclosure of the material would further a
Commission investigation or enforcement
proceeding; or
(iii) with the approval of the Attorney
General, other foreign criminal laws, if such
foreign criminal laws are offenses defined in
or covered by a criminal mutual legal
assistance treaty in force between the
government of the United States and the foreign
law enforcement agency's government;
(C) the appropriate Federal banking agency (as
defined in section 3(q) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(q)) or, in the case of a
Federal credit union, the National Credit Union
Administration, has given its prior approval if the
materials to be provided under subparagraph (B) are
requested by the foreign law enforcement agency for the
purpose of investigating, or engaging in enforcement
proceedings based on, possible violations of law by a
bank, a savings and loan institution described in
[section 18(f)(3) of the Federal Trade Commission Act
(15 U.S.C. 57a(f)(3)), or a Federal credit union
described in section 18(f)(4) of the Federal Trade
Commission Act (15 U.S.C. 57a(f)(4))] 18(f), or a
Federal credit union described in section 18(f); and
(D) the foreign law enforcement agency is not from a
foreign state that the Secretary of State has
determined, in accordance with section 6(j) of the
Export Administration Act of 1979 (50 U.S.C. App.
2405(j)), has repeatedly provided support for acts of
international terrorism, unless and until such
determination is rescinded pursuant to section 6(j)(4)
of that Act (50 U.S.C. App. 2405(j)(4)).
Nothing in the preceding sentence authorizes the disclosure of
material obtained in connection with the administration of the
Federal antitrust laws or foreign antitrust laws (as defined in
paragraphs (5) and (7), respectively, of section 12 of the
International Antitrust Enforcement Assistance Act of 1994 (15
U.S.C. 6211)) to any officer or employee of a foreign law
enforcement agency.
(7) In the event of the death, disability, or separation from
service in the Commission of the custodian of any documentary
material, tangible things, written reports or answers to
questions, and transcripts of oral testimony produced under any
demand issued under this Act, or the official relief of the
custodian from responsibility for the custody and control of
such material, the Commission promptly shall--
(A) designate under paragraph (2)(A) another duly
authorized agent to serve as custodian of such
material; and
(B) transmit in writing to the person who produced
the material or testimony notice as to the identity and
address of the successor so designated.
Any successor designated under paragraph (2)(A) as a result of
the requirements of this paragraph shall have (with regard to
the material involved) all duties and responsibilities imposed
by this section upon his predecessor in office with regard to
such material, except that he shall not be held responsible for
any default or dereliction which occurred before his
designation.
(c)(1) All information reported to or otherwise obtained by
the Commission which is not subject to the requirements of
subsection (b) shall be considered confidential when so marked
by the person supplying the information and shall not be
disclosed, except in accordance with the procedures established
in paragraph (2) and paragraph (3).
(2) If the Commission determines that a document marked
confidential by the person supplying it may be disclosed
because it is not a trade secret or commercial or financial
information which is obtained from any person and which is
privileged or confidential, within the meaning of section 6(f),
then the Commission shall notify such person in writing that
the Commission intends to disclose the document at a date not
less than 10 days after the date of receipt of notification.
(3) Any person receiving such notification may, if he
believes disclosure of the document would cause disclosure of a
trade secret, or commercial or financial information which is
obtained from any person and which is privileged or
confidential, within the meaning of section 6(f), before the
date set for release of the document, bring an action in the
district court of the United States for the district within
which the documents are located or in the United States
District Court for the District of Columbia to restrain
disclosure of the document. Any person receiving such
notification may file with the appropriate district court or
court of appeals of the United States, as appropriate, an
application for a stay of disclosure. The documents shall not
be disclosed until the court has ruled on the application for a
stay.
(d)(1) The provisions of subsection (c) shall not be
construed to prohibit--
(A) the disclosure of information to either House of
the Congress or to any committee or subcommittee of the
Congress, except that the Commission immediately shall
notify the owner or provider of any such information of
a request for information designated as confidential by
the owner or provider;
(B) the disclosure of the results of any
investigation or study carried out or prepared by the
Commission, except that no information shall be
identified nor shall information be disclosed in such a
manner as to disclose a trade secret of any person
supplying the trade secret, or to disclose any
commercial or financial information which is obtained
from any person and which is privileged or
confidential;
(C) the disclosure of relevant and material
information in Commission adjudicative proceedings or
in judicial proceedings to which the Commission is a
party; or
(D) the disclosure to a Federal agency of
disaggregated information obtained in accordance with
section 3512 of title 44, United States Code, except
that the recipient agency shall use such disaggregated
information for economic, statistical, or policymaking
purposes only, and shall not disclose such information
in an individually identifiable form.
(2) Any disclosure of relevant and material information in
Commission adjudicative proceedings or in judicial proceedings
to which the Commission is a party shall be governed by the
rules of the Commission for adjudicative proceedings or by
court rules or orders, except that the rules of the Commission
shall not be amended in a manner inconsistent with the purposes
of this section.
(e) Nothing in this section shall supersede any statutory
provision which expressly prohibits or limits particular
disclosures by the Commission, or which authorizes disclosures
to any other Federal agency.
(f) Exemption From Public Disclosure.--
(1) In general.--Any material which is received by
the Commission in any investigation, a purpose of which
is to determine whether any person may have violated
any provision of the laws administered by the
Commission, and which is provided pursuant to any
compulsory process under this Act or which is provided
voluntarily in place of such compulsory process shall
not be required to be disclosed under section 552 of
title 5, United States Code, or any other provision of
law, except as provided in paragraph (2)(B) of this
section.
(2) Material obtained from a foreign source.--
(A) In general.--Except as provided in
subparagraph (B) of this paragraph, the
Commission shall not be required to disclose
under section 552 of title 5, United States
Code, or any other provision of law--
(i) any material obtained from a
foreign law enforcement agency or other
foreign government agency, if the
foreign law enforcement agency or other
foreign government agency has requested
confidential treatment, or has
precluded such disclosure under other
use limitations, as a condition of
providing the material;
(ii) any material reflecting a
consumer complaint obtained from any
other foreign source, if that foreign
source supplying the material has
requested confidential treatment as a
condition of providing the material; or
(iii) any material reflecting a
consumer complaint submitted to a
Commission reporting mechanism
sponsored in part by foreign law
enforcement agencies or other foreign
government agencies.
(B) Savings provision.--Nothing in this
subsection shall authorize the Commission to
withhold information from the Congress or
prevent the Commission from complying with an
order of a court of the United States in an
action commenced by the United States or the
Commission.
* * * * * * *
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PUBLIC LAW 93-495
AN ACT To increase deposit insurance from $20,000 to $40,000, to
provide full insurance for public unit deposits of $100,000 per
account, to establish a National Commission on Electronic Fund
Transfers, and for other purposes.
TITLE I--AMENDMENTS TO AND EXTENSIONS OF PROVISIONS OF LAW RELATING TO
FEDERAL REGULATION OF DEPOSITORY INSTITUTIONS
* * * * * * *
independence of financial regulatory agencies
Sec. 111. No officer or agency of the United States shall
have any authority to require the Securities and Exchange
Commission, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, the
Comptroller of the Currency, [the Director of the Office of
Thrift Supervision,] the Director of the Federal Housing
Finance Agency, the Independent Insurance Advocate of the
Department of the Treasury, or the National Credit Union
Administration 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 agency or official
submitting them and do not necessarily represent the views of
the President.
* * * * * * *
----------
BRETTON WOODS AGREEMENTS ACT
* * * * * * *
SEC. 68. RESTRICTIONS ON USE OF UNITED STATES FUNDS FOR FOREIGN
GOVERNMENTS; PROTECTION OF AMERICAN TAXPAYERS.
(a) In General.--The Secretary of the Treasury shall instruct
the United States Executive Director at the International
Monetary Fund--
(1) to evaluate, prior to consideration by the Board
of Executive Directors of the [Fund,] Fund, any
proposal submitted to the Board for the Fund to make a
loan to a country if--
(A) the amount of the public debt of the
country exceeds the gross domestic product of
the country as of the most recent year for
which such information is available; and
(B) the country is not eligible for
assistance from the International Development
Association.
(2) Opposition to loans unlikely to be repaid in
full.--If any such evaluation indicates that the
proposed loan is not likely to be repaid in full, the
Secretary of the Treasury shall instruct the United
States Executive Director at the Fund to use the voice
and vote of the United States to oppose the proposal.
(b) Reports to Congress.--Within 30 days after the Board of
Executive Directors of the Fund approves a proposal described
in subsection (a), and annually thereafter by June 30, for the
duration of any program approved under such proposals, the
Secretary of the Treasury shall report in writing to the
Committee on Financial Services of the House of Representatives
and the Committee on Foreign Relations and the Committee on
Banking, Housing, and Urban Affairs of the Senate assessing the
likelihood that loans made pursuant to such proposals will be
repaid in full, including--
(1) the borrowing country's current debt status,
including, to the extent possible, its maturity
structure, whether it has fixed or floating rates,
whether it is indexed, and by whom it is held;
(2) the borrowing country's external and internal
vulnerabilities that could potentially affect its
ability to repay; and
(3) the borrowing country's debt management strategy.
* * * * * * *
----------
CAN-SPAM ACT OF 2003
* * * * * * *
SEC. 7. ENFORCEMENT GENERALLY.
(a) Violation Is Unfair or Deceptive Act or Practice.--Except
as provided in subsection (b), this Act shall be enforced by
the Commission as if the violation of this Act were an unfair
or deceptive act or practice proscribed under section
18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C.
57a(a)(1)(B)).
(b) Enforcement by Certain Other Agencies.--Compliance with
this Act shall be enforced--
(1) under section 8 of the Federal Deposit Insurance
Act (12 U.S.C. 1818), in the case of--
(A) national banks, and Federal branches and
Federal agencies of foreign banks, by the
Office of the Comptroller of the Currency;
(B) member banks of the Federal Reserve
System (other than national banks), branches
and agencies of foreign banks (other than
Federal branches, Federal agencies, and insured
State branches of foreign banks), commercial
lending companies owned or controlled by
foreign banks, organizations operating under
section 25 or 25A of the Federal Reserve Act
(12 U.S.C. 601 and 611), and bank holding
companies, by the Board;
(C) banks insured by the Federal Deposit
Insurance Corporation (other than members of
the Federal Reserve System) and insured State
branches of foreign banks, by the Board of
Directors of the Federal Deposit Insurance
Corporation; and
(D) savings associations the deposits of
which are insured by the Federal Deposit
Insurance Corporation, by the [Director of the
Office of Thrift Supervision] Comptroller of
the Currency or the Board of Directors of
Federal Deposit Insurance Corporation, as
applicable,;
(2) under the Federal Credit Union Act (12 U.S.C.
1751 et seq.) by the Board of the National Credit Union
Administration with respect to any Federally insured
credit union;
(3) under the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.) by the Securities and Exchange
Commission with respect to any broker or dealer;
(4) under the Investment Company Act of 1940 (15
U.S.C. 80a-1 et seq.) by the Securities and Exchange
Commission with respect to investment companies;
(5) under the Investment Advisers Act of 1940 (15
U.S.C. 80b-1 et seq.) by the Securities and Exchange
Commission with respect to investment advisers
registered under that Act;
(6) under State insurance law in the case of any
person engaged in providing insurance, by the
applicable State insurance authority of the State in
which the person is domiciled, subject to section 104
of the Gramm-Bliley-Leach Act (15 U.S.C. 6701), except
that in any State in which the State insurance
authority elects not to exercise this power, the
enforcement authority pursuant to this Act shall be
exercised by the Commission in accordance with
subsection (a);
(7) under part A of subtitle VII of title 49, United
States Code, by the Secretary of Transportation with
respect to any air carrier or foreign air carrier
subject to that part;
(8) under the Packers and Stockyards Act, 1921 (7
U.S.C. 181 et seq.) (except as provided in section 406
of that Act (7 U.S.C. 226, 227)), by the Secretary of
Agriculture with respect to any activities subject to
that Act;
(9) under the Farm Credit Act of 1971 (12 U.S.C. 2001
et seq.) by the Farm Credit Administration with respect
to any Federal land bank, Federal land bank
association, Federal intermediate credit bank, or
production credit association; and
(10) under the Communications Act of 1934 (47 U.S.C.
151 et seq.) by the Federal Communications Commission
with respect to any person subject to the provisions of
that Act.
(c) Exercise of Certain Powers.--For the purpose of the
exercise by any agency referred to in subsection (b) of its
powers under any Act referred to in that subsection, a
violation of this Act is deemed to be a violation of a Federal
Trade Commission trade regulation rule. In addition to its
powers under any provision of law specifically referred to in
subsection (b), each of the agencies referred to in that
subsection may exercise, for the purpose of enforcing
compliance with any requirement imposed under this Act, any
other authority conferred on it by law.
(d) Actions by the Commission.--The Commission shall prevent
any person from violating this Act in the same manner, by the
same means, and with the same jurisdiction, powers, and duties
as though all applicable terms and provisions of the Federal
Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated
into and made a part of this Act. Any entity that violates any
provision of that subtitle is subject to the penalties and
entitled to the privileges and immunities provided in the
Federal Trade Commission Act in the same manner, by the same
means, and with the same jurisdiction, power, and duties as
though all applicable terms and provisions of the Federal Trade
Commission Act were incorporated into and made a part of that
subtitle.
(e) Availability of Cease-and-Desist Orders and Injunctive
Relief Without Showing of Knowledge.--Notwithstanding any other
provision of this Act, in any proceeding or action pursuant to
subsection (a), (b), (c), or (d) of this section to enforce
compliance, through an order to cease and desist or an
injunction, with section 5(a)(1)(C), section 5(a)(2), clause
(ii), (iii), or (iv) of section 5(a)(4)(A), section 5(b)(1)(A),
or section 5(b)(3), neither the Commission nor the Federal
Communications Commission shall be required to allege or prove
the state of mind required by such section or subparagraph.
(f) Enforcement by States.--
(1) Civil action.--In any case in which the attorney
general of a State, or an official or agency of a
State, has reason to believe that an interest of the
residents of that State has been or is threatened or
adversely affected by any person who violates paragraph
(1) or (2) of section 5(a), who violates section 5(d),
or who engages in a pattern or practice that violates
paragraph (3), (4), or (5) of section 5(a), of this
Act, the attorney general, official, or agency of the
State, as parens patriae, may bring a civil action on
behalf of the residents of the State in a district
court of the United States of appropriate
jurisdiction--
(A) to enjoin further violation of section 5
of this Act by the defendant; or
(B) to obtain damages on behalf of residents
of the State, in an amount equal to the greater
of--
(i) the actual monetary loss suffered
by such residents; or
(ii) the amount determined under
paragraph (3).
(2) Availability of injunctive relief without showing
of knowledge.--Notwithstanding any other provision of
this Act, in a civil action under paragraph (1)(A) of
this subsection, the attorney general, official, or
agency of the State shall not be required to allege or
prove the state of mind required by section 5(a)(1)(C),
section 5(a)(2), clause (ii), (iii), or (iv) of section
5(a)(4)(A), section 5(b)(1)(A), or section 5(b)(3).
(3) Statutory damages.--
(A) In general.--For purposes of paragraph
(1)(B)(ii), the amount determined under this
paragraph is the amount calculated by
multiplying the number of violations (with each
separately addressed unlawful message received
by or addressed to such residents treated as a
separate violation) by up to $250.
(B) Limitation.--For any violation of section
5 (other than section 5(a)(1)), the amount
determined under subparagraph (A) may not
exceed $2,000,000.
(C) Aggravated damages.--The court may
increase a damage award to an amount equal to
not more than three times the amount otherwise
available under this paragraph if--
(i) the court determines that the
defendant committed the violation
willfully and knowingly; or
(ii) the defendant's unlawful
activity included one or more of the
aggravating violations set forth in
section 5(b).
(D) Reduction of damages.--In assessing
damages under subparagraph (A), the court may
consider whether--
(i) the defendant has established and
implemented, with due care,
commercially reasonable practices and
procedures designed to effectively
prevent such violations; or
(ii) the violation occurred despite
commercially reasonable efforts to
maintain compliance the practices and
procedures to which reference is made
in clause (i).
(4) Attorney fees.--In the case of any successful
action under paragraph (1), the court, in its
discretion, may award the costs of the action and
reasonable attorney fees to the State.
(5) Rights of federal regulators.--The State shall
serve prior written notice of any action under
paragraph (1) upon the Federal Trade Commission or the
appropriate Federal regulator determined under
subsection (b) and provide the Commission or
appropriate Federal regulator with a copy of its
complaint, except in any case in which such prior
notice is not feasible, in which case the State shall
serve such notice immediately upon instituting such
action. The Federal Trade Commission or appropriate
Federal regulator shall have the right--
(A) to intervene in the action;
(B) upon so intervening, to be heard on all
matters arising therein;
(C) to remove the action to the appropriate
United States district court; and
(D) to file petitions for appeal.
(6) Construction.--For purposes of bringing any civil
action under paragraph (1), nothing in this Act shall
be construed to prevent an attorney general of a State
from exercising the powers conferred on the attorney
general by the laws of that State to--
(A) conduct investigations;
(B) administer oaths or affirmations; or
(C) compel the attendance of witnesses or the
production of documentary and other evidence.
(7) Venue; service of process.--
(A) Venue.--Any action brought under
paragraph (1) may be brought in the district
court of the United States that meets
applicable requirements relating to venue under
section 1391 of title 28, United States Code.
(B) Service of process.--In an action brought
under paragraph (1), process may be served in
any district in which the defendant--
(i) is an inhabitant; or
(ii) maintains a physical place of
business.
(8) Limitation on state action while federal action
is pending.--If the Commission, or other appropriate
Federal agency under subsection (b), has instituted a
civil action or an administrative action for violation
of this Act, no State attorney general, or official or
agency of a State, may bring an action under this
subsection during the pendency of that action against
any defendant named in the complaint of the Commission
or the other agency for any violation of this Act
alleged in the complaint.
(9) Requisite scienter for certain civil actions.--
Except as provided in section 5(a)(1)(C), section
5(a)(2), clause (ii), (iii), or (iv) of section
5(a)(4)(A), section 5(b)(1)(A), or section 5(b)(3), in
a civil action brought by a State attorney general, or
an official or agency of a State, to recover monetary
damages for a violation of this Act, the court shall
not grant the relief sought unless the attorney
general, official, or agency establishes that the
defendant acted with actual knowledge, or knowledge
fairly implied on the basis of objective circumstances,
of the act or omission that constitutes the violation.
(g) Action by Provider of Internet Access Service.--
(1) Action authorized.--A provider of Internet access
service adversely affected by a violation of section
5(a)(1), 5(b), or 5(d), or a pattern or practice that
violates paragraph (2), (3), (4), or (5) of section
5(a), may bring a civil action in any district court of
the United States with jurisdiction over the
defendant--
(A) to enjoin further violation by the
defendant; or
(B) to recover damages in an amount equal to
the greater of--
(i) actual monetary loss incurred by
the provider of Internet access service
as a result of such violation; or
(ii) the amount determined under
paragraph (3).
(2) Special definition of ``procure''.--In any action
brought under paragraph (1), this Act shall be applied
as if the definition of the term ``procure'' in section
3(12) contained, after ``behalf'' the words ``with
actual knowledge, or by consciously avoiding knowing,
whether such person is engaging, or will engage, in a
pattern or practice that violates this Act''.
(3) Statutory damages.--
(A) In general.--For purposes of paragraph
(1)(B)(ii), the amount determined under this
paragraph is the amount calculated by
multiplying the number of violations (with each
separately addressed unlawful message that is
transmitted or attempted to be transmitted over
the facilities of the provider of Internet
access service, or that is transmitted or
attempted to be transmitted to an electronic
mail address obtained from the provider of
Internet access service in violation of section
5(b)(1)(A)(i), treated as a separate violation)
by--
(i) up to $100, in the case of a
violation of section 5(a)(1); or
(ii) up to $25, in the case of any
other violation of section 5.
(B) Limitation.--For any violation of section
5 (other than section 5(a)(1)), the amount
determined under subparagraph (A) may not
exceed $1,000,000.
(C) Aggravated damages.--The court may
increase a damage award to an amount equal to
not more than three times the amount otherwise
available under this paragraph if--
(i) the court determines that the
defendant committed the violation
willfully and knowingly; or
(ii) the defendant's unlawful
activity included one or more of the
aggravated violations set forth in
section 5(b).
(D) Reduction of damages.--In assessing
damages under subparagraph (A), the court may
consider whether--
(i) the defendant has established and
implemented, with due care,
commercially reasonable practices and
procedures designed to effectively
prevent such violations; or
(ii) the violation occurred despite
commercially reasonable efforts to
maintain compliance with the practices
and procedures to which reference is
made in clause (i).
(4) Attorney fees.--In any action brought pursuant to
paragraph (1), the court may, in its discretion,
require an undertaking for the payment of the costs of
such action, and assess reasonable costs, including
reasonable attorneys' fees, against any party.
* * * * * * *
----------
CHILDREN'S ONLINE PRIVACY PROTECTION ACT OF 1998
DIVISION C--OTHER MATTERS
* * * * * * *
TITLE XIII--CHILDREN'S ONLINE PRIVACY PROTECTION
* * * * * * *
SEC. 1306. ADMINISTRATION AND APPLICABILITY OF ACT.
(a) In General.--Except as otherwise provided, this title
shall be enforced by the Commission under the Federal Trade
Commission Act (15 U.S.C. 41 et seq.).
(b) Provisions.--Compliance with the requirements imposed
under this title shall be enforced under--
(1) section 8 of the Federal Deposit Insurance Act
(12 U.S.C. 1818), in the case of--
(A) national banks, and Federal branches and
Federal agencies of foreign banks, by the
Office of the Comptroller of the Currency;
(B) member banks of the Federal Reserve
System (other than national banks), branches
and agencies of foreign banks (other than
Federal branches, Federal agencies, and insured
State branches of foreign banks), commercial
lending companies owned or controlled by
foreign banks, and organizations operating
under section 25 or 25(a) of the Federal
Reserve Act (12 U.S.C. 601 et seq. and 611 et
seq.), by the Board; and
(C) banks insured by the Federal Deposit
Insurance Corporation (other than members of
the Federal Reserve System) and insured State
branches of foreign banks, by the Board of
Directors of the Federal Deposit Insurance
Corporation;
(2) section 8 of the Federal Deposit Insurance Act
(12 U.S.C. 1818), by the [Director of the Office of
Thrift Supervision] Comptroller of the Currency and the
Board of Directors of Federal Deposit Insurance
Corporation, as applicable,, in the case of a savings
association the deposits of which are insured by the
Federal Deposit Insurance Corporation;
(3) the Federal Credit Union Act (12 U.S.C. 1751 et
seq.) by the National Credit Union Administration Board
with respect to any Federal credit union;
(4) part A of subtitle VII of title 49, United States
Code, by the Secretary of Transportation with respect
to any air carrier or foreign air carrier subject to
that part;
(5) the Packers and Stockyards Act, 1921 (7 U.S.C.
181 et seq.) (except as provided in section 406 of that
Act (7 U.S.C. 226, 227)), by the Secretary of
Agriculture with respect to any activities subject to
that Act; and
(6) the Farm Credit Act of 1971 (12 U.S.C. 2001 et
seq.) by the Farm Credit Administration with respect to
any Federal land bank, Federal land bank association,
Federal intermediate credit bank, or production credit
association.
(c) Exercise of Certain Powers.--For the purpose of the
exercise by any agency referred to in subsection (a) of its
powers under any Act referred to in that subsection, a
violation of any requirement imposed under this title shall be
deemed to be a violation of a requirement imposed under that
Act. In addition to its powers under any provision of law
specifically referred to in subsection (a), each of the
agencies referred to in that subsection may exercise, for the
purpose of enforcing compliance with any requirement imposed
under this title, any other authority conferred on it by law.
(d) Actions by the Commission.--The Commission shall prevent
any person from violating a rule of the Commission under
section 1303 in the same manner, by the same means, and with
the same jurisdiction, powers, and duties as though all
applicable terms and provisions of the Federal Trade Commission
Act (15 U.S.C. 41 et seq.) were incorporated into and made a
part of this title. Any entity that violates such rule shall be
subject to the penalties and entitled to the privileges and
immunities provided in the Federal Trade Commission Act in the
same manner, by the same means, and with the same jurisdiction,
power, and duties as though all applicable terms and provisions
of the Federal Trade Commission Act were incorporated into and
made a part of this title.
(e) Effect on Other Laws.--Nothing contained in the Act shall
be construed to limit the authority of the Commission under any
other provisions of law.
* * * * * * *
----------
COMMUNITY REINVESTMENT ACT OF 1977
TITLE VIII--COMMUNITY REINVESTMENT
* * * * * * *
Sec. 803. For the purposes of this title--
(1) the term ``appropriate Federal financial
supervisory agency'' means--
(A) the Comptroller of the Currency with
respect to national banks and Federal savings
associations (the deposits of which are insured
by the Federal Deposit Insurance Corporation);
(B) the Board of Governors of the Federal
Reserve System with respect to State chartered
banks which are members of the Federal Reserve
System, bank holding companies, and savings and
loan holding companies;
(C) the Federal Deposit Insurance Corporation
with respect to State chartered banks and
savings banks which are not members of the
Federal Reserve System and the deposits of
which are insured by the Corporation, and State
savings associations (the deposits of which are
insured by the Federal Deposit Insurance
Corporation)[.];
(2) the term ``regulated financial institution''
means an insured depository institution (as defined in
section 3 of the Federal Deposit Insurance Act); and
(3) the term ``application for a deposit facility''
means an application to the appropriate Federal
financial supervisory agency otherwise required under
Federal law or regulations thereunder for--
(A) a charter for a national bank or Federal
savings and loan association;
(B) deposit insurance in connection with a
newly chartered State bank, savings bank,
savings and loan association or similar
institution;
(C) the establishment of a domestic branch or
other facility with the ability to accept
deposits of a regulated financial institution;
(D) the relocation of the home office or a
branch office of a regulated financial
institution;
(E) the merger or consolidation with, or the
acquisition of the assets, or the assumption of
the liabilities of a regulated financial
institution requiring approval under section
18(c) of the Federal Deposit Insurance Act or
under regulations issued under the authority of
title IV of the National Housing Act; or
(F) the acquisition of shares in, or the
assets of, a regulated financial institution
requiring approval under section 3 of the Bank
Holding Company Act of 1956 or section 408 (e)
of the National Housing Act.
(4) A financial institution whose business
predominately consists of serving the needs of military
personnel who are not located within a defined
geographic area may define its ``entire community'' to
include its entire deposit customer base without regard
to geographic proximity.
* * * * * * *
Sec. 806. Regulations to carry out the purposes of this title
shall be published by each appropriate Federal financial
supervisory agency, 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,,] companies,
and shall take effect no later than 390 days after the date of
enactment of this title.
* * * * * * *
----------
CREDIT REPAIR ORGANIZATIONS ACT
* * * * * * *
TITLE IV--CREDIT REPAIR ORGANIZATIONS
* * * * * * *
SEC. 403. DEFINITIONS.
For purposes of this title, the following definitions apply:
(1) Consumer.--The term ``consumer'' means an
individual.
(2) Consumer credit transaction.--The term ``consumer
credit transaction'' means any transaction in which
credit is offered or extended to an individual for
personal, family, or household purposes.
(3) Credit repair organization.--The term ``credit
repair organization''--
(A) means any person who uses any
instrumentality of interstate commerce or the
mails to sell, provide, or perform (or
represent that such person can or will sell,
provide, or perform) any service, in return for
the payment of money or other valuable
consideration, for the express or implied
purpose of--
(i) improving any consumer's credit
record, credit history, or credit
rating; or
(ii) providing advice or assistance
to any consumer with regard to any
activity or service described in clause
(i); and
(B) does not include--
(i) any nonprofit organization which
is exempt from taxation under section
501(c)(3) of the Internal Revenue Code
of 1986;
(ii) any creditor (as defined in
section 103 of the Truth in Lending
Act), with respect to any consumer, to
the extent the creditor is assisting
the consumer to restructure any debt
owed by the consumer to the creditor;
or
(iii) any depository institution (as
that term is defined in section 3 of
the Federal Deposit Insurance Act) or
any Federal or State credit union (as
those terms are defined in section 101
of the Federal Credit Union Act), or
any affiliate or subsidiary of such a
depository institution or credit union.
(4) Credit.--The term ``credit'' has the meaning
given to such term in section [103(e)] 103(f) of this
Act.
* * * * * * *
----------
DEPOSITORY INSTITUTION MANAGEMENT INTERLOCKS ACT
* * * * * * *
TITLE II--INTERLOCKING DIRECTORS
* * * * * * *
Sec. 205. The prohibitions contained in sections 203 and 204
shall not apply in the case of any one or more of the following
or subsidiary thereof:
(1) A depository institution or depository holding
company which has been placed formally in liquidation,
or which is in the hands of a receiver, conservator, or
other official exercising a similar function.
(2) A corporation operating under section 25 or 25(a)
of the Federal Reserve Act.
(3) a credit union being served by a management
official of another credit union.
(4) A depository institution or depository holding
company which does not do business within any State of
the United States, the District of Columbia, any
territory of the United States, Puerto Rico, Guam,
American Samoa, or the Virgin Islands except as in
incident to its activities outside the United States.
(5) A State-chartered savings and loan guaranty
corporation.
(6) A Federal Home Loan Bank or any other bank
organized specifically to serve depository
institutions.
(7) A depository institution or a depository holding
company which--
(A) is closed or is in danger of closing, as
determined by the appropriate Federal
depository institutions regulatory agency in
accordance with regulations prescribed by such
agency; and
(B) is acquired by another depository
institution or depository holding company,
during the 5-year period beginning on the date of the
acquisition of the depository institution or depository
holding company described in subparagraph (A).
(8)(A) A diversified savings and loan holding company
(as defined in section 408(a)(1)(F) of the National
Housing Act) with respect to the service of a director
of such company who is also a director of any
nonaffiliated depository institution or depository
holding company (including a savings and loan holding
company) if--
(i) notice of the proposed dual service is
given by such diversified savings and loan
holding company to--
(I) the appropriate Federal
depository institutions regulatory
agency for such company; and
(II) the appropriate Federal
depository institutions regulatory
agency for the nonaffiliated depository
institution or depository holding
company of which such person is also a
director,
not less than 60 days before such dual service
is proposed to begin; and
(ii) the proposed dual service is not
disapproved by any such appropriate Federal
depository institutions regulatory agency
before the end of such 60-day period.
(B) Any appropriate Federal depository institutions
regulatory agency may disapprove, under subparagraph
(A)(ii), a notice of proposed dual service by any
individual if such agency finds that--
(i) the dual service cannot be structured or
limited so as to preclude the dual service's
resulting in a monopoly or substantial
lessening of competition in financial services
in any part of the United States;
(ii) the dual service would lead to
substantial conflicts of interest or unsafe or
unsound practices; or
(iii) the diversified savings and loan
holding company has neglected, failed, or
refused to furnish all the information required
by such agency.
(C) Any appropriate Federal depository institutions
regulatory agency may, at any time after the end of the
60-day period referred to in subparagraph (A), require
that any dual service by any individual which was not
disapproved by such agency during such period be
terminated if a change in circumstances occurs with
respect to any depository institution or depository
holding company of which such individual is a director
that would have provided a basis for disapproval of the
dual service during such period.
(9) Any savings association (as defined in section
10(a)(1)(A) of the Home Owners' Loan Act or any savings
and loan holding company (as defined in section
10(a)(1)(D) of such Act) which has issued stock in
connection with a qualified stock issuance pursuant to
section 10(q) of such Act, except that this paragraph
shall apply only with respect to service as a single
management official of such savings association or
holding company, or any subsidiary of such savings
association or holding company, by a single management
official of the savings and loan holding company which
purchased the stock issued in connection with such
qualified stock issuance, and shall apply only when the
[Director of the Office of Thrift Supervision]
appropriate Federal banking agency has determined that
such service is consistent with the purposes of this
Act and the Home Owners' Loan Act.
* * * * * * *
----------
SECTION 2227 OF THE ECONOMIC GROWTH AND REGULATORY PAPERWORK REDUCTION
ACT OF 1996
SEC. 2227. CREDIT AVAILABILITY ASSESSMENT.
(a) Study.--
(1) In general.--Not later than 12 months after
September 30, 1996, and once every 60 months
thereafter, the Board, in consultation with [the
Director of the Office of Thrift Supervision,] the
Comptroller of the Currency, the Board of Directors of
the Corporation, the Administrator of the National
Credit Union Administration, the Administrator of the
Small Business Administration, and the Secretary of
Commerce, shall conduct a study and submit a report to
the Congress detailing the extent of small business
lending by all creditors.
(2) Contents of Study.--The study required under
paragraph (1) shall identify, to the extent
practicable, those factors which provide policymakers
with insights into the small business credit market,
including--
(A) the demand for small business credit,
including consideration of the impact of
economic cycles on the levels of such demand;
(B) the availability of credit to small
businesses;
(C) the range of credit options available to
small businesses, such as those available from
insured depository institutions and other
providers of credit;
(D) the types of credit products used to
finance small business operations, including
the use of traditional loans, leases, lines of
credit, home equity loans, credit cards, and
other sources of financing;
(E) the credit needs of small businesses,
including, if appropriate, the extent to which
such needs differ, based upon product type,
size of business, cash flow requirements,
characteristics of ownership or investors, or
other aspects of such business;
(F) the types of risks to creditors in
providing credit to small businesses; and
(G) such other factors as the Board deems
appropriate.
(b) Use Of Existing Data.--The studies required by this
section shall not increase the regulatory or paperwork burden
on regulated financial institutions, other sources of small
business credit, or small businesses.
----------
FEDERAL FIRE PREVENTION AND CONTROL ACT OF 1974
* * * * * * *
SEC. 31. FIRE SAFETY SYSTEMS IN FEDERALLY ASSISTED BUILDINGS.
(a) Definitions.--For purposes of this section, the following
definitions apply:
(1) The term ``affordable cost'' means the cost to a
Federal agency of leasing office space in a building
that is protected by an automatic sprinkler system or
equivalent level of safety, which cost is no more than
10 percent greater than the cost of leasing available
comparable office space in a building that is not so
protected.
(2) The term ``automatic sprinkler system'' means an
electronically supervised, integrated system of piping
to which sprinklers are attached in a systematic
pattern, and which, when activated by heat from a
fire--
(A) will protect human lives by discharging
water over the fire area, in accordance with
the National Fire Protection Association
Standard 13, 13D, or 13R, whichever is
appropriate for the type of building and
occupancy being protected, or any successor
standard thereto; and
(B) includes an alarm signaling system with
appropriate warning signals (to the extent such
alarm systems and warning signals are required
by Federal, State, or local laws or
regulations) installed in accordance with the
National Fire Protection Association Standard
72, or any successor standard thereto.
(3) The term ``equivalent level of safety'' means an
alternative design or system (which may include
automatic sprinkler systems), based upon fire
protection engineering analysis, which achieves a level
of safety equal to or greater than that provided by
automatic sprinkler systems.
(4) The term ``Federal employee office building''
means any office building in the United States, whether
owned or leased by the Federal Government, that is
regularly occupied by more than 25 full-time Federal
employees in the course of their employment.
(5) The term ``housing assistance''--
(A) means assistance provided by the Federal
Government to be used in connection with the
provision of housing, that is provided in the
form of a grant, contract, loan, loan
guarantee, cooperative agreement, interest
subsidy, insurance, or direct appropriation;
and
(B) does not include assistance provided by
the Secretary of Veterans Affairs; the Federal
Emergency Management Agency; the Secretary of
Housing and Urban Development under the single
family mortgage insurance programs under the
National Housing Act or the homeownership
assistance program under section 235 of such
Act; the National Homeownership Trust; [the
Federal Deposit Insurance Corporation under the
affordable housing program under section 40 of
the Federal Deposit Insurance Act; or the
Resolution Trust Corporation under the
affordable housing program under section 21A(c)
of the Federal Home Loan Bank Act.] or the
Federal Deposit Insurance Corporation under the
affordable housing program under section 40 of
the Federal Deposit Insurance Act.
(6) The term ``hazardous areas'' means those areas in
a building referred to as hazardous areas in National
Fire Protection Association Standard 101, known as the
Life Safety Code, or any successor standard thereto.
(7) The term ``multifamily property'' means--
(A) in the case of housing for Federal
employees or their dependents, a residential
building consisting of more than 2 residential
units that are under one roof; and
(B) in any other case, a residential building
consisting of more than 4 residential units
that are under one roof.
(8) The term ``prefire plan'' means specific plans
for fire fighting activities at a property or location.
(9) The term ``rebuilding'' means the repairing or
reconstructing of portions of a multifamily property
where the cost of the alterations is 70 percent or more
of the replacement cost of the completed multifamily
property, not including the value of the land on which
the multifamily property is located.
(10) The term ``renovated'' means the repairing or
reconstructing of 50 percent or more of the current
value of a Federal employee office building, not
including the value of the land on which the Federal
employee office building is located.
(11) The term ``smoke detectors'' means single or
multiple station, self-contained alarm devices designed
to respond to the presence of visible or invisible
particles of combustion, installed in accordance with
the National Fire Protection Association Standard 74 or
any successor standard thereto.
(12) The term ``United States'' means the States
collectively.
(b) Federal Employee Office Buildings.--(1)(A) No Federal
funds may be used for the construction or purchase of a Federal
employee office building of 6 or more stories unless during the
period of occupancy by Federal employees the building is
protected by an automatic sprinkler system or equivalent level
of safety. No Federal funds may be used for the construction or
purchase of any other Federal employee office building unless
during the period of occupancy by Federal employees the
hazardous areas of the building are protected by automatic
sprinkler systems or an equivalent level of safety.
(B)(i) Except as provided in clause (ii), no Federal funds
may be used for the lease of a Federal employee office building
of 6 or more stories, where at least some portion of the
federally leased space is on the sixth floor or above and at
least 35,000 square feet of space is federally occupied, unless
during the period of occupancy by Federal employees the entire
Federal employee office building is protected by an automatic
sprinkler system or equivalent level of safety. No Federal
funds may be used for the lease of any other Federal employee
office building unless during the period of occupancy by
Federal employees the hazardous areas of the entire Federal
employee office building are protected by automatic sprinkler
systems or an equivalent level of safety.
(ii) The first sentence of clause (i) shall not apply to the
lease of a building the construction of which is completed
before the date of enactment of this section if the leasing
agency certifies that no suitable building with automatic
sprinkler systems or an equivalent level of safety is available
at an affordable cost.
(2) Paragraph (1) shall not apply to--
(A) a Federal employee office building that was owned
by the Federal Government before the date of enactment
of this section;
(B) space leased in a Federal employee office
building if the space was leased by the Federal
Government before such date of enactment;
(C) space leased on a temporary basis for not longer
than 6 months;
(D) a Federal employee office building that becomes a
Federal employee office building pursuant to a
commitment to move Federal employees into the building
that is made prior to such date of enactment; or
(E) a Federal employee office building that is owned
or managed by the Resolution Trust Corporation.
Nothing in this subsection shall require the installation of an
automatic sprinkler system or equivalent level of safety by
reason of the leasing, after such date of enactment, of space
below the sixth floor in a Federal employee office building.
(3) No Federal funds may be used for the renovation of a
Federal employee office building of 6 or more stories that is
owned by the Federal Government unless after that renovation
the Federal employee office building is protected by an
automatic sprinkler system or equivalent level of safety. No
Federal funds may be used for the renovation of any other
Federal employee office building that is owned by the Federal
Government unless after that renovation the hazardous areas of
the Federal employee office building are protected by automatic
sprinkler systems or an equivalent level of safety.
(4) No Federal funds may be used for entering into or
renewing a lease of a Federal employee office building of 6 or
more stories that is renovated after the date of enactment of
this section, where at least some portion of the federally
leased space is on the sixth floor or above and at least 35,000
square feet of space is federally occupied, unless after that
renovation the Federal employee office building is protected by
an automatic sprinkler system or equivalent level of safety. No
Federal funds may be used for entering into or renewing a lease
of any other Federal employee office building that is renovated
after such date of enactment of this section, unless after that
renovation the hazardous areas of the Federal employee office
building are protected by automatic sprinkler systems or an
equivalent level of safety.
(c) Housing.--(1)(A) Except as otherwise provided in this
paragraph, no Federal funds may be used for the construction,
purchase, lease, or operation by the Federal Government of
housing in the United States for Federal employees or their
dependents unless--
(i) in the case of a multifamily property acquired or
rebuilt by the Federal Government after the date of
enactment of this section, the housing is protected,
before occupancy by Federal employees or their
dependents, by an automatic sprinkler system (or
equivalent level of safety) and hard-wired smoke
detectors; and
(ii) in the case of any other housing, the housing,
before--
(I) occupancy by the first Federal employees
(or their dependents) who do not occupy such
housing as of such date of enactment; or
(II) the expiration of 3 years after such
date of enactment,
whichever occurs first, is protected by hard-wired
smoke detectors.
(B) Nothing in this paragraph shall be construed to supersede
any guidelines or requirements applicable to housing for
Federal employees that call for a higher level of fire safety
protection than is required under this paragraph.
(C) Housing covered by this paragraph that does not have an
adequate and reliable electrical system shall not be subject to
the requirement under subparagraph (A) for protection by hard-
wired smoke detectors, but shall be protected by battery
operated smoke detectors.
(D) If funding has been programmed or designated for the
demolition of housing covered by this paragraph, such housing
shall not be subject to the fire protection requirements of
subparagraph (A), but shall be protected by battery operated
smoke detectors.
(2)(A)(i) Housing assistance may not be used in connection
with any newly constructed multifamily property, unless after
the new construction the multifamily property is protected by
an automatic sprinkler system and hard-wired smoke detectors.
(ii) For purposes of clause (i), the term ``newly constructed
multifamily property'' means a multifamily property of 4 or
more stories above ground level--
(I) that is newly constructed after the date of
enactment of this section; and
(II) for which (a) housing assistance is used for
such new construction, or (b) a binding commitment is
made, before commencement of such construction, to
provide housing assistance for the newly constructed
property.
(iii) Clause (i) shall not apply to any multifamily property
for which, before such date of enactment, a binding commitment
is made to provide housing assistance for the new construction
of the property or for the newly constructed property.
(B)(i) Except as provided in clause (ii), housing assistance
may not be used in connection with any rebuilt multifamily
property, unless after the rebuilding the multifamily property
complies with the chapter on existing apartment buildings of
National Fire Protection Association Standard 101 (known as the
Life Safety Code) or any successor standard to that standard,
as in effect at the earlier of (I) the time of any approval by
the Department of Housing and Urban Development of the specific
plan or budget for rebuilding, or (II) the time that a binding
commitment is made to provide housing assistance for the
rebuilt property.
(ii) If any rebuilt multifamily property is subject to, and
in compliance with, any provision of a State or local fire
safety standard or code that prevents compliance with a
specific provision of National Fire Protection Association
Standard 101 or any successor standard to that standard, the
requirement under clause (i) shall not apply with respect to
such specific provision.
(iii) For purposes of this subparagraph, the term ``rebuilt
multifamily property'' means a multifamily property of 4 or
more stories above ground level--
(I) that is rebuilt after the last day of the second
fiscal year that ends after the date of enactment of
this section; and
(II) for which (a) housing assistance is used for
such rebuilding, or (b) a binding commitment is made,
before commencement of such rebuilding, to provide
housing assistance for the rebuilt property.
(C) After the expiration of the 180-day period beginning on
the date of enactment of this section, housing assistance may
not be used in connection with any other dwelling unit, unless
the unit is protected by a hard-wired or battery-operated smoke
detector. For purposes of this subparagraph, housing assistance
shall be considered to be used in connection with a particular
dwelling unit only if such assistance is provided (i) for the
particular unit, in the case of assistance provided on a unit-
by-unit basis, or (ii) for the multifamily property in which
the unit is located, in the case of assistance provided on a
structure-by-structure basis.
(d) Regulations.--The Administrator of General Services, in
cooperation with the United States Fire Administration, the
National Institute of Standards and Technology, and the
Department of Defense, within 2 years after the date of
enactment of this section, shall promulgate regulations to
further define the term ``equivalent level of safety'', and
shall, to the extent practicable, base those regulations on
nationally recognized codes.
(e) State and Local Authority Not Limited.--Nothing in this
section shall be construed to limit the power of any State or
political subdivision thereof to implement or enforce any law,
rule, regulation, or standard that establishes requirements
concerning fire prevention and control. Nothing in this section
shall be construed to reduce fire resistance requirements which
otherwise would have been required.
(f) Prefire Plan.--The head of any Federal agency that owns,
leases, or operates a building or housing unit with Federal
funds shall invite the local agency or voluntary organization
having responsibility for fire protection in the jurisdiction
where the building or housing unit is located to prepare, and
biennially review, a prefire plan for the building or housing
unit.
(g) Reports to Congress.--(1) Within 3 years after the date
of enactment of this section, and every 3 years thereafter, the
Administrator of General Services shall transmit to Congress a
report on the level of fire safety in Federal employee office
buildings subject to fire safety requirements under this
section. Such report shall contain a description of such
buildings for each Federal agency.
(2) Within 10 years after the date of enactment of this
section, each Federal agency providing housing to Federal
employees or housing assistance shall submit a report to
Congress on the progress of that agency in implementing
subsection (c) and on plans for continuing such implementation.
(3)(A) The National Institute of Standards and Technology
shall conduct a study and submit a report to Congress on the
use, in combination, of fire detection systems, fire
suppression systems, and compartmentation. Such study shall--
(i) quantify performance and reliability for fire
detection systems, fire suppression systems, and
compartmentation, including a field assessment of
performance and determination of conditions under which
a reduction or elimination of 1 or more of those
systems would result in an unacceptable risk of fire
loss; and
(ii) include a comparative analysis and
compartmentation using fire resistive materials and
compartmentation using noncombustible materials.
(B) The National Institute of Standards and Technology shall
obtain funding from non-Federal sources in an amount equal to
25 percent of the cost of the study required by subparagraph
(A). Funding for the National Institute of Standards and
Technology for carrying out such study shall be derived from
amounts otherwise authorized to be appropriated, for the
Building and Fire Research Center at the National Institute of
Standards and Technology, not to exceed $750,000. The study
shall commence until receipt of all matching funds from non-
Federal sources. The scope and extent of the study shall be
determined by the level of project funding. The Institute shall
submit a report to Congress on the study within 30 months after
the date of enactment of this section.
(h) Relation to Other Requirements.--In the implementation of
this section, the process for meeting space needs in urban
areas shall continue to give first consideration to a
centralized community business area and adjacent areas of
similar character to the extent of any Federal requirement
therefor.
* * * * * * *
----------
FEDERAL HOME LOAN BANK ACT
* * * * * * *
SEC. 10. ADVANCES TO MEMBERS.
(a) In General.--
(1) All advances.--Each Federal Home Loan Bank is
authorized to make secured advances to its members upon
collateral sufficient, in the judgment of the Bank, to
fully secure advances obtained from the Bank under this
section or section 11(g) of this Act.
(2) Purposes of advances.--A long-term advance may
only be made for the purposes of--
(A) providing funds to any member for
residential housing finance; and
(B) providing funds to any community
financial institution for small businesses,
small farms, small agri-businesses, and
community development activities.
(3) Collateral.--A Bank, at the time of origination
or renewal of a loan or advance, shall obtain and
maintain a security interest in collateral eligible
pursuant to one or more of the following categories:
(A) Fully disbursed, whole first mortgages on
improved residential property (not more than 90
days delinquent), or securities representing a
whole interest in such mortgages.
(B) Securities issued, insured, or guaranteed
by the United States Government or any agency
thereof (including without limitation,
mortgage-backed securities issued or guaranteed
by the Federal Home Loan Mortgage Corporation,
the Federal National Mortgage Corporation, and
the Government National Mortgage Association).
(C) Cash or deposits of a Federal Home Loan
Bank.
(D) Other real estate related collateral
acceptable to the Bank if such collateral has a
readily ascertainable value and the Bank can
perfect its interest in the collateral.
(E) Secured loans for small business,
agriculture, or community development
activities or securities representing a whole
interest in such secured loans, in the case of
any community financial institution.
(4) Additional bank authority.--Subparagraphs (A)
through (E) of paragraph (3) shall not affect the
ability of any Federal Home Loan Bank to take such
steps as it deems necessary to protect its security
position with respect to outstanding advances,
including requiring deposits of additional collateral
security, whether or not such additional security would
be eligible to originate an advance. If an advance
existing on the date of enactment of the Financial
Institutions Reform, Recovery, and Enforcement Act of
1989 matures and the member does not have sufficient
eligible collateral to fully secure a renewal of such
advance, a Bank may renew such advance secured by such
collateral as the Bank determines is appropriate. A
member that has an advance secured by such insufficient
eligible collateral must reduce its level of
outstanding advances promptly and prudently in
accordance with a schedule determined by the Federal
home loan bank.
(5) Review of certain collateral standards.--The
Director may review the collateral standards applicable
to each Federal home loan bank for the classes of
collateral described in subparagraphs (D) and (E) of
paragraph (3), and may, if necessary for safety and
soundness purposes, require an increase in the
collateral standards for any or all of those classes of
collateral.
(6) Definitions.--For purposes of this subsection,
the terms ``small business'', ``agriculture'', ``small
farm'', ``small agri-business'', and ``community
development activities'' shall have the meanings given
those terms by regulation of the Director.
(b) For the purposes of this section, each Federal Home Loan
Bank shall have power to make, or to cause or require to be
made, such appraisals and other investigations as it may deem
necessary. No home mortgage otherwise eligible to be accepted
as collateral security for an advance by a Federal Home Loan
Bank shall be accepted if any director, officer, employee,
attorney, or agent of the Federal Home Loan Bank or of the
borrowing institution is personally liable theron, unless the
Director has specifically approved such acceptance.
(c) Such advances shall be made upon the note or obligation
of the member secured as provided in this section, bearing such
rate of interest as the Federal home loan bank may approve or
determine, and the Federal Home Loan Bank shall have a lien
upon and shall hold the stock of such member as further
collateral security for all indebtedness of the member to the
Federal Home Loan Bank.
(d) The institution applying for an advance shall enter into
a primary and unconditional obligation to pay off all advances,
together with interest and any unpaid costs and expenses in
connection therewith according to the terms under which they
were made, in such form as shall meet the requirements of the
bank. The bank shall reserve the right to require at any time,
when deemed necessary for its protection, deposits of
additional collateral security or substitutions of security by
the borrowing institution, and each borrowing institution shall
assign additional or substituted security when and as so
required. Any Federal Home Loan Bank shall have power to sell
to any other Federal Home Loan Bank, with or without recourse,
any advance made under the provisions of this Act, or to allow
to such bank a participation therein, and any other Federal
Home Loan Bank shall have power to purchase such advance or to
accept a participation therein, together with an appropriate
assignment of security therefor.
(e) Priority of Certain Secured Interests.--Notwithstanding
any other provision of law, any security interest granted to a
Federal Home Loan Bank by any member of any Federal Home Loan
Bank or any affiliate of any such member shall be entitled to
priority over the claims and rights of any party (including any
receiver, conservator, trustee, or similar party having rights
of a lien creditor) other than claims and rights that--
(1) would be entitled to priority under otherwise
applicable law; and
(2) are held by actual bona fide purchasers for value
or by actual secured parties that are secured by actual
perfected security interests.
(g) Community Support Requirements.--
(1) In general.--Before the end of the 2-year period
beginning on the date of enactment of the Financial
Institutions Reform, Recovery, and Enforcement Act of
1989, the Director shall adopt regulations establishing
standards of community investment or service for
members of Banks to maintain continued access to long-
term advances.
(2) Factors to be included.--The regulations
promulgated pursuant to paragraph (1) shall take into
account factors such as a member's performance under
the Community Reinvestment Act of 1977 and the member's
record of lending to first-time homebuyers.
(h) Special Liquidity Advances.--
(1) In general.--Subject to paragraph (2), the
Federal Home Loan Banks may, upon the request of the
[Director of the Office of Thrift Supervision]
Comptroller of the Currency or the Board of Directors
of the Federal Deposit Insurance Corporation, as
applicable, make short-term liquidity advances to a
savings association that--
(A) is solvent but presents a supervisory
concern because of such association's poor
financial condition; and
(B) has reasonable and demonstrable prospects
of returning to a satisfactory financial
condition.
(2) Interest on and security for special liquidity
advances.--Any loan by a Federal Home Loan Bank
pursuant to paragraph (1) shall be subject to all
applicable collateral requirements, including the
requirements of section 10(a) of this Act, and shall be
at an interest rate no less favorable than those made
available for similar short-term liquidity advances to
savings associations that do not present such
supervisory concern.
(i) Community Investment Program.--
(1) In general.--Each Bank shall establish a program
to provide funding for members to undertake community-
oriented mortgage lending. Each Bank shall designate a
community investment officer to implement community
lending and affordable housing advance programs of the
Banks under this subsection and subsection (j) and
provide technical assistance and outreach to promote
such programs. Advances under this program shall be
priced at the cost of consolidated Federal Home Loan
Bank obligations of comparable maturities, taking into
account reasonable administrative costs.
(2) Community-oriented mortgage lending.--For
purposes of this subsection, the term ``community-
oriented mortgage lending'' means providing loans--
(A) to finance home purchases by families
whose income does not exceed 115 percent of the
median income for the area,
(B) to finance purchase or rehabilitation of
housing for occupancy by families whose income
does not exceed 115 percent of median income
for the area,
(C) to finance commercial and economic
development activities that benefit low- and
moderate-income families or activities that are
located in low- and moderate-income
neighborhoods, and
(D) to finance projects that further a
combination of the purposes described in
subparagraphs (A) through (C).
(j) Affordable Housing Program.--
(1) In general.--Pursuant to regulations promulgated
by the Director, each Bank shall establish an
Affordable Housing Program to subsidize the interest
rate on advances to members engaged in lending for long
term, low- and moderate-income, owner-occupied and
affordable rental housing at subsidized interest rates.
(2) Standards.--The Board's regulations shall permit
Bank members to use subsidized advances received from
the Banks to--
(A) finance homeownership by families with
incomes at or below 80 percent of the median
income for the area;
(B) finance the purchase, construction, or
rehabilitation of rental housing, at least 20
percent of the units of which will be occupied
by and affordable for very low-income
households for the remaining useful life of
such housing or the mortgage term; or
(C) during the 2-year period beginning on the
date of enactment of this subparagraph, use
such percentage as the Director may by
regulation establish of any subsidized advances
set aside to finance homeownership under
subparagraph (A) to refinance loans that are
secured by a first mortgage on a primary
residence of any family having an income at or
below 80 percent of the median income for the
area.
(3) Priorities for making advances.--In using
advances authorized under paragraph (1), each Bank
member shall give priority to qualified projects such
as the following:
(A) purchase of homes by families whose
income is 80 percent or less of the median
income for the area,
(B) purchase or rehabilitation of housing
owned or held by the United States Government
or any agency or instrumentality of the United
States; and
(C) purchase or rehabilitation of housing
sponsored by any nonprofit organization, any
State or political subdivision of any State,
any local housing authority or State housing
finance agency.
(4) Report.--Each member receiving advances under
this program shall report annually to the Bank making
such advances concerning the member's use of advances
received under this program.
(5) Contribution to program.--Each Bank shall
annually contribute the percentage of its annual net
earnings prescribed in the following subparagraphs to
support subsidized advances through the Affordable
Housing Program:
(A) In 1990, 1991, 1992, and 1993, 5 percent
of the preceding year's net income, or such
prorated sums as may be required to assure that
the aggregate contribution of all the Banks
shall not be less than $50,000,000 for each
such year.
(B) In 1994, 6 percent of the preceding
year's net income, or such prorated sum as may
be required to assure that the aggregate
contribution of the Banks shall not be less
than $75,000,000 for such year.
(C) In 1995, and subsequent years, 10 percent
of the preceding year's net income, or such
prorated sums as may be required to assure that
the aggregate contribution of the Banks shall
not be less than $100,000,000 for each such
year.
(6) Grounds for Suspending Contributions.--
(A) In general.--If a Bank finds that the
payments required under this paragraph are
contributing to the financial instability of
such Bank, it may apply to the Director for a
temporary suspension of such payments.
(B) Financial instability.--In determining
the financial instability of a Bank, the
Director shall consider such factors as (i)
whether the Bank's earnings are severely
depressed, (ii) whether there has been a
substantial decline in membership capital, and
(iii) whether there has been a substantial
reduction in advances outstanding.
(C) Review.--The Director shall review the
application and any supporting financial data
and issue a written decision approving or
disapproving such application. The Board's
decision shall be accompanied by specific
findings and reasons for its action.
(D) Monitoring suspension.--If the Director
grants a suspension, it shall specify the
period of time such suspension shall remain in
effect and shall continue to monitor the Bank's
financial condition during such suspension.
(E) Limitations on grounds for suspension.--
The Director shall not suspend payments to the
Affordable Housing Program if the Bank's
reduction in earnings is a result of (i) a
change in the terms for advances to members
which is not justified by market conditions,
(ii) inordinate operating and administrative
expenses, or (iii) mismanagement.
(F) The Director shall notify the Committee
on Banking, Finance and Urban Affairs of the
House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the
Senate not less than 60 days before such
suspension takes effect. Such suspension shall
become effective unless a joint resolution is
enacted disapproving such suspension.
(7) Failure to use amounts for affordable housing.--
If any Bank fails to utilize or commit the full amount
provided in this subsection in any year, 90 percent of
the amount that has not been utilized or committed in
that year shall be deposited by the Bank in an
Affordable Housing Reserve Fund administered by the
Director. The 10 percent of the unutilized and
uncommitted amount retained by a Bank should be fully
utilized or committed by that Bank during the following
year and any remaining portion must be deposited in the
Affordable Housing Reserve Fund. Under regulations
established by the Director, funds from the Affordable
Housing Reserve Fund may be made available to any Bank
to meet additional affordable housing needs in such
Bank's district pursuant to this section.
(8) Net earnings.--The net earnings of any Federal
Home Loan Bank shall be determined for purposes of this
paragraph--
(A) after reduction for any payment required
under section 21 or 21B of this Act; and
(B) before declaring any dividend under
section 16.
(9) Regulations.--The Director shall promulgate
regulations to implement this subsection. Such
regulations shall, at a minimum--
(A) specify activities eligible to receive
subsidized advances from the Banks under this
program;
(B) specify priorities for the use of such
advances;
(C) ensure that advances made under this
program will be used only to assist projects
for which adequate long-term monitoring is
available to guarantee that affordability
standards and other requirements of this
subsection are satisfied;
(D) ensure that a preponderance of assistance
provided under this subsection is ultimately
received by low- and moderate-income
households;
(E) ensure that subsidies provided by Banks
to member institutions under this program are
passed on to the ultimate borrower;
(F) establish uniform standards for
subsidized advances under this program and
subsidized lending by member institutions
supported by such advances, including maximum
subsidy and risk limitations for different
categories of loans made under this subsection;
and
(G) coordinate activities under this
subsection with other Federal or federally-
subsidized affordable housing activities to the
maximum extent possible.
(10) Other programs.--No provision of this subsection
or subsection (i) shall preclude any Bank from
establishing additional community investment cash
advance programs or contributing additional sums to the
Affordable Housing Reserve Fund.
(11) Advisory council.--Each Bank shall appoint an
Advisory Council of 7 to 15 persons drawn from
community and nonprofit organizations actively involved
in providing or promoting low- and moderate-income
housing in its district. The Advisory Council shall
meet with representatives of the board of directors of
the Bank quarterly to advise the Bank on low- and
moderate-income housing programs and needs in the
district and on the utilization of the advances for
these purposes. Each Advisory Council established under
this paragraph shall submit to the Director at least
annually its analysis of the low-income housing
activity of the Bank by which it is appointed.
(12) Reports to congress.--
(A) The Director shall monitor and report
annually to the Congress and the Advisory
Council for each Bank the support of low-income
housing and community development by the Banks
and the utilization of advances for these
purposes.
(B) The analyses submitted by the Advisory
Councils to the Director under paragraph (11)
shall be included as part of the report
required by this paragraph.
(C) Reports.--The Director shall annually
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 collateral pledged to
the Banks, including an analysis of collateral
by type and by Bank district.
(D) Submission to congress.--The Director
shall submit the reports under subparagraphs
(A) and (C) 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 180
days after the date of enactment of the Federal
Housing Finance Regulatory Reform Act of 2008.
(13) Definitions.--For purposes of this subsection--
(A) Low- or moderate-income household.--The
term ``low- or moderate-income household''
means any household which has an income of 80
percent or less of the area median.
(B) Very low-income household.--The term
``very low-income household'' means any
household that has an income of 50 percent or
less of the area median.
(C) Low- or moderate-income neighborhood.--
The term ``low- or moderate-income
neighborhood'' means any neighborhood in which
51 percent or more of the households are low-
or moderate-income households.
(D) Affordable for very-low income
households.--For purposes of paragraph (2)(B)
the term ``affordable for very-low income
households'' means that rents charged to
tenants for units made available for occupancy
by low-income families shall not exceed 30
percent of the adjusted income of a family
whose income equals 50 percent of the income
for the area (as determined by the Secretary of
Housing and Urban Development) with adjustment
for family size.
(k) Public Use Database.--
(1) Data.--Each Federal Home Loan Bank shall provide
to the Director, in a form determined by the Director,
census tract level data relating to mortgages
purchased, if any, including--
(A) data consistent with that reported under
section 1323 of the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992;
(B) data elements required to be reported
under the Home Mortgage Disclosure Act of 1975;
and
(C) any other data elements that the Director
considers appropriate.
(2) Public use database.--
(A) In general.--The Director shall make
available to the public, in a form that is
useful to the public (including forms
accessible electronically), and to the extent
practicable, the data provided to the Director
under paragraph (1).
(B) Proprietary information.--Not
withstanding subparagraph (A), the Director may
not provide public access to, or disclose to
the public, any information required to be
submitted under this subsection that the
Director determines is proprietary or that
would provide personally identifiable
information and that is not otherwise publicly
accessible through other forms, unless the
Director determines that it is in the public
interest to provide such information.
* * * * * * *
SEC. 22. MEMBER FINANCIAL INFORMATION.
(a) In General.--In order to enable the Federal Home Loan
Banks to carry out the provisions of this Act, the Secretary of
the Treasury, the [Comptroller of the Currency, the Chairman of
the Director of Governors of the Federal Reserve System, the
Chairperson of the Federal Deposit Insurance Corporation, the
Chairperson of the National Credit Union Administration, and
the Director of the Office of Thrift Supervision] Comptroller
of the Currency, the Chairman of the Board of Governors of the
Federal Reserve System, the Chairperson of the Federal Deposit
Insurance Corporation, and the Chairman of the National Credit
Union Administration, upon request by any Federal Home Loan
Bank--
(1) shall make available in confidence to any Federal
Home Loan Bank, such reports, records, or other
information as may be available, relating to the
condition of any member of any Federal Home Loan Bank
or any institution with respect to which any such Bank
has had or contemplates having transactions under this
Act; and
(2) may perform through their examiners or other
employees or agents, for the confidential use of the
Federal Home Loan Bank, examinations of institutions
for which such agency is the appropriate Federal
banking regulatory agency.
In addition, the [Comptroller of the Currency, the Chairman of
the Director of Governors of the Federal Reserve System, the
Chairperson of the National Credit Union Administration, and
the Director of the Office of Thrift Supervision] Comptroller
of the Currency, the Chairman of the Board of Governors of the
Federal Reserve System, and the Chairman of the National Credit
Union Administration shall make available to the Director or
any Federal Home Loan Bank the financial reports filed by
members of any Bank to enable the Director or a Bank to compile
and publish cost of funds indices or other financial or
statistical reports.
(b) Consent by Members.--Every member of a Federal Home Loan
Bank shall, as a condition precedent thereto, be deemed--
(1) to consent to such examinations as the Bank or
the Director may require for the purposes of this Act;
(2) to agree that reports of examinations by local,
State, or Federal agencies or institutions may be
furnished by such authorities to the Bank or the
Director upon request; and
(3) to agree to give the Bank or the Federal agency,
upon request, such information as they may need to
compile and publish cost of funds indices and to
publish other reports or statistical summaries
pertaining to the activities of Bank members.
* * * * * * *
----------
HELPING FAMILIES SAVE THEIR HOMES ACT OF 2009
DIVISION A--PREVENTING MORTGAGE FORECLOSURES
* * * * * * *
TITLE I--PREVENTION OF MORTGAGE FORECLOSURES
* * * * * * *
SEC. 104. MORTGAGE MODIFICATION DATA COLLECTING AND REPORTING.
(a) Reporting Requirements.--Not later than 120 days after
the date of the enactment of this Act, and quarterly
thereafter, the Comptroller of the Currency [and the Director
of the Office of Thrift Supervision, shall jointly] shall
submit a report to the Committee on Banking, Housing, and Urban
Affairs of the Senate, the Committee on Financial Services of
the House of Representatives on the volume of mortgage
modifications reported to the Office of the Comptroller of the
Currency [and the Office of Thrift Supervision], under the
mortgage metrics program of [each such] such Office, during the
previous quarter, including the following:
(1) A copy of the data collection instrument
currently used by the Office of the Comptroller of the
Currency and the Office of Thrift Supervision to
collect data on loan modifications.
(2) The total number of mortgage modifications in
each State with that result in each of the following:
(A) Additions of delinquent payments and fees
to loan balances.
(B) Interest rate reductions and freezes.
(C) Term extensions.
(D) Reductions of principal.
(E) Deferrals of principal.
(F) Combinations of modifications described
in subparagraph (A), (B), (C), (D), or (E).
(3) The total number of mortgage modifications in
each State for which the total monthly principal and
interest payment resulted in the following:
(A) An increase.
(B) Remained the same.
(C) Decreased less than 10 percent.
(D) Decreased between 10 percent and 20
percent.
(E) Decreased 20 percent or more.
(4) The total number of loans in each State that have
been modified and then entered into default, where the
loan modification resulted in--
(A) higher monthly payments by the homeowner;
(B) equivalent monthly payments by the
homeowner;
(C) lower monthly payments by the homeowner
of up to 10 percent;
(D) lower monthly payments by the homeowner
of between 10 percent to 20 percent; or
(E) lower monthly payments by the homeowner
of more than 20 percent.
(b) Data Collection.--
(1) Required.--
(A) In General.--Not later than 60 days after
the date of the enactment of this Act, the
Comptroller of the Currency [and the Director
of the Office of Thrift Supervision,] shall
issue mortgage modification data collection and
reporting requirements to institutions covered
under the reporting requirement of the mortgage
metrics program of the Comptroller [or the
Director]. Not later than 60 days after the
date of the enactment of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, the
Comptroller of the Currency [and the Director
of the Office of Thrift Supervision] shall
update such requirements to reflect amendments
made to this section by such Act.
(B) Inclusiveness of collections.--The
requirements under subparagraph (A) shall
provide for the collection of all mortgage
modification data needed by the Comptroller of
the Currency [and the Director of the Office of
Thrift Supervision] to fulfill the reporting
requirements under subsection (a).
(2) Report.--The Comptroller of the Currency shall
report all requirements established under paragraph (1)
to each committee receiving the report required under
subsection (a).
* * * * * * *
----------
HOUSING ACT OF 1948
TITLE V--ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS
administrative provisions
* * * * * * *
Sec. 502. In carrying out their respective functions, powers,
and duties--
(a) The Secretary of Housing and Urban Development may
appoint such officers and employees as he may find necessary,
which appointments shall be subject to the civil service laws
and chapter 51 and subchapter III of chapter 53 of title 5,
United States Code. The Secretary may make such expenditures as
may be necessary to carry out his functions, powers, and
duties, and there are hereby authorized to be appropriated to
the Secretary, out of any moneys in the Treasury not otherwise
appropriated, such sums as may be necessary to carry out such
functions, powers, and duties and for administrative expenses
in connection therewith. The Secretary, without in any way
relieving himself from final responsibility, may delegate any
of his functions and powers to such officers, agents, or
employees as he may designate, may authorize such successive
redelegations of such functions and powers, as he may deem
desirable, and may make such rules and regulations as may be
necessary to carry out his functions, powers, and duties.
(b) The Secretary of Housing and Urban Development may sue
and be sued only with respect to its functions under the United
States Housing Act of 1937, as amended, and title II of Public
Law 671, Seventy-sixth Congress, approved June 28, 1940, as
amended. Funds made available for carrying out the functions,
powers, and duties of the Secretary of Housing and Urban
Development (including appropriations therefor, which are
hereby authorized) shall be available in such amounts as may
from year to year be authorized by the Congress, for the
administrative expenses of the Secretary of Housing and Urban
Development. Notwithstanding any other provisions of law except
provisions of law hereafter enacted expressly in limitation
hereof, the Secretary of Housing and Urban Development, or any
State, or local public agency administering a low-rent housing
project assisted pursuant to the United States Housing Act of
1937 or title II of Public Law 671, Seventy-sixth Congress,
approved June 28, 1940, shall continue to have the right to
maintain an action or proceeding to recover possession of any
housing accommodations operated by it where such action is
authorized by the statute or regulations under which such
housing accommodations are administered, and, in determining
net income for the purposes of tenant eligibility with respect
to low-rent housing projects assisted pursuant to said Acts,
the Secretary of Housing and Urban Development is authorized,
where it finds such action equitable and in the public
interest, to exclude amounts or portions thereof paid by the
United States Government for disability or death occurring in
connection with military service.
(c) The Secretary of Housing and Urban Development, the
Comptroller of the Currency, and the Federal Deposit Insurance
Corporation, respectively, may, in addition to and not in
derogation of any powers and authorities conferred elsewhere in
this Act--
(1) with the consent of the agency or organization
concerned, accept and utilize equipment, facilities, or
the services of employees of any Federal, State, or
local public agency or instrumentality, educational
institution, or nonprofit agency or organization and,
in connection with the utilization of such services,
may make payments for transportation while away from
their homes or regular places of business and per diem
in lieu of subsistence en route and at place of such
service, in accordance with the provisions of section
5703 of title 5, United States Code;
(2) utilize, contract with, and act through, without
regard to section 3709 of the Revised Statutes, any
Federal, State, or local public agency or
instrumentality, educational institution or nonprofit
agency or organization with the consent of the agency
or organization concerned, and any funds available to
said officers for carrying out their respective
functions, powers, and duties shall be available to
reimburse or pay any such agency or organization; and,
whenever in the judgment of any such officer necessary,
he may make advance, progress, or other payments with
respect to such contracts without regard to the
provisions of subsections (a) and (b) of section 3324
of title 31, United States Code; and
(3) make expenditures for all necessary expenses,
including preparation, mounting, shipping, and
installation of exhibits; purchase and exchange of
technical apparatus; and such other expenses as may,
from time to time, be found necessary in carrying out
their respective functions, powers, and duties:
Provided, That funds made available for administrative
expenses in carrying out the functions, powers, and
duties imposed upon the Secretary of Housing and Urban
Development and the [Federal Home Loan Bank Agency]
Federal Housing Finance Agency, respectively, by or
pursuant to law may at their option be consolidated
into single administrative expense fund accounts of
such officer or agency for expenditure by them,
respectively, in accordance with the provisions hereof.
(d) The Secretary of Housing and Urban Development may
utilize funds made available to him for salaries and expenses
for payment in advance for dues or fees for library memberships
in organizations (or for membership of the individual
librarians in organizations which will not accept library
membership) whose publications are available to members only,
or to members at a price lower than to the general public, and
for payment in advance for publications available only upon
that basis or available at a reduced price on prepublication
order.
----------
HOUSING AND URBAN DEVELOPMENT ACT OF 1968
* * * * * * *
TITLE I--LOWER INCOME HOUSING
* * * * * * *
technical assistance, counseling to tenants and homeowners, and loans
to sponsors of low- and moderate-income housing
Sec. 106. (a)(1) The Secretary is authorized to provide, or
contract with public or private organizations to provide,
information, advice, and technical assistance, including but
not limited to--
(i) the assembly, correlation, publication, and
dissemination of information with respect to the
construction, rehabilitation, and operation of low- and
moderate-income housing;
(ii) the provision of advice and technical assistance
to public bodies or to nonprofit or cooperative
organizations with respect to the construction,
rehabilitation, and operation of low- and moderate-
income housing, including assistance with respect to
self-help and mutual self-help programs;
(iii) counseling and advice to tenants and homeowners
with respect to property maintenance, financial
management, and such other matters as may be
appropriate to assist them in improving their housing
conditions and in meeting the responsibilities of
tenancy or homeownership; and
(iv) the provision of technical assistance to
communities, particularly smaller communities, to
assist such communities in planning, developing, and
administering Community Development Programs pursuant
to title I of the Housing and Community Development Act
of 1974.
(2) The Secretary (A) shall provide the services described in
clause (iii) of paragraph (1) for homeowners assisted under
section 235 of the National Housing Act; (B) shall, in
consultation with the Secretary of Agriculture, provide such
services for borrowers who are first-time homebuyers with
guaranteed loans under section 502(h) of the Housing Act of
1949; and (C) may provide such services for other owners of
single family dwelling units insured under title II of the
National Housing Act or guaranteed or insured under chapter 37
of title 38, United States Code. For purposes of this paragraph
and clause (iii) of paragraph (1), the Secretary may provide
the services described in such clause directly or may enter
into contracts with, make grants to, and provide other types of
assistance to private or public organizations with special
competence and knowledge in counseling low- and moderate-income
families to provide such services.
(3) There is authorized to be appropriated for the purposes
of this subsection, without fiscal year limitation, such sums
as may be necessary, except that for such purposes there are
authorized to be appropriated $6,025,000 for fiscal year 1993
and $6,278,050 for fiscal year 1994. Of the amounts
appropriated for each of fiscal years 1993 and 1994, up to
$500,000 shall be available for use for counseling and other
activities in connection with the demonstration program under
section 152 of the Housing and Community Development Act of
1992. Any amounts so appropriated shall remain available until
expended.
(4) Homeownership and Rental Counseling Assistance.--
(A) In general.--The Secretary shall make financial
assistance available under this paragraph to HUD-
approved housing counseling agencies and State housing
finance agencies.
(B) Qualified entities.--The Secretary shall
establish standards and guidelines for eligibility of
organizations (including governmental and nonprofit
organizations) to receive assistance under this
paragraph, in accordance with subparagraph (D).
(C) Distribution.--Assistance made available under
this paragraph shall be distributed in a manner that
encourages efficient and successful counseling programs
and that ensures adequate distribution of amounts for
rural areas having traditionally low levels of access
to such counseling services, including areas with
insufficient access to the Internet. In distributing
such assistance, the Secretary may give priority
consideration to entities serving areas with the
highest home foreclosure rates.
(D) Limitation on distribution of assistance.--
(i) In general.--None of the amounts made
available under this paragraph shall be
distributed to--
(I) any organization which has been
convicted for a violation under Federal
law relating to an election for Federal
office; or
(II) any organization which employs
applicable individuals.
(ii) Definition of applicable individuals.--
In this subparagraph, the term ``applicable
individual'' means an individual who--
(I) is--
(aa) employed by the
organization in a permanent or
temporary capacity;
(bb) contracted or retained
by the organization; or
(cc) acting on behalf of, or
with the express or apparent
authority of, the organization;
and
(II) has been convicted for a
violation under Federal law relating to
an election for Federal office.
(E) Grantmaking process.--In making assistance
available under this paragraph, the Secretary shall
consider appropriate ways of streamlining and improving
the processes for grant application, review, approval,
and award.
(F) Authorization of appropriations.--There are
authorized to be appropriated $45,000,000 for each of
fiscal years 2009 through 2012 for--
(i) the operations of the Office of Housing
Counseling of the Department of Housing and
Urban Development;
(ii) the responsibilities of the Director of
Housing Counseling under paragraphs (2) through
(5) of subsection (g); and
(iii) assistance pursuant to this paragraph
for entities providing homeownership and rental
counseling.
(b)(1) The Secretary is authorized to make loans to nonprofit
organizations or public housing agencies for the necessary
expenses, prior to construction, in planning, and obtaining
financing for, the rehabilitation or construction of housing
for low- or moderate-income families under section 235 of the
National Housing Act or any other federally assisted program.
Such loans shall be made without interest and shall not exceed
80 per centum of the reasonable costs expected to be incurred
in planning, and in obtaining financing for, such housing prior
to the availability of financing, including, but not limited
to, preliminary surveys and analyses of market needs,
preliminary site engineering and architectural fees, site
acquisition, application, and mortgage commitment fees, and
construction loan fees and discounts. The Secretary shall
require repayment of loans made under this subsection, under
such terms and conditions as he may require, upon completion of
the project or sooner, and may cancel any part or all of a loan
if he determines that it cannot be recovered from the proceeds
of any permanent loan made to finance the rehabilitation or
construction of the housing.
(2) The Secretary shall determine prior to the making of any
loan that the nonprofit organization or public housing agency
meets such requirements with respect to financial
responsibility and stability as he may prescribe.
(3) There are authorized to be appropriated for the purposes
of this subsection not to exceed $7,500,000, for the fiscal
year ending June 30, 1969, and not to exceed $10,000,000 for
the fiscal year ending June 30, 1970. Any amounts so
appropriated shall remain available until expended, and any
amounts authorized for any fiscal year under this paragraph but
not appropriated may be appropriated for any succeeding fiscal
year.
(4) All funds appropriated for the purposes of this
subsection shall be deposited in a fund which shall be known as
the Low and Moderate Income Sponsor Fund, and which shall be
available without fiscal year limitation and be administered by
the Secretary as a revolving fund for carrying out the purposes
of this subsection. Sums received in repayment of loans made
under this subsection shall be deposited in such fund.
(c) Grants for Homeownership Counseling Organizations.--
(1) In general.--The Secretary of Housing and Urban
Development may make grants--
(A) to nonprofit organizations experienced in
the provision of homeownership counseling to
enable the organizations to provide
homeownership counseling to eligible
homeowners; and
(B) to assist in the establishment of
nonprofit homeownership counseling
organizations.
(2) Program requirements.--
(A) Applications for grants under this
subsection shall be submitted in the form, and
in accordance with the procedures, that the
Secretary requires.
(B) The homeownership counseling
organizations receiving assistance under this
subsection shall use the assistance only to
provide homeownership counseling to eligible
homeowners.
(C) The homeownership counseling provided by
homeownership counseling organizations
receiving assistance under this subsection
shall include counseling with respect to--
(i) financial management;
(ii) available community resources,
including public assistance programs,
mortgage assistance programs, home
repair assistance programs, utility
assistance programs, food programs, and
social services; and
(iii) employment training and
placement.
(3) Availability of homeownership counseling.--The
Secretary shall take any action that is necessary--
(A) to ensure the availability throughout the
United States of homeownership counseling from
homeownership counseling organizations
receiving assistance under this subsection,
with priority to areas that--
(i) are experiencing high rates of
home foreclosure and any other
indicators of homeowner distress
determined by the Secretary to be
appropriate;
(ii) are not already adequately
served by homeownership counseling
organizations; and
(iii) have a high incidence of
mortgages involving principal
obligations (including such initial
service charges, appraisal, inspection,
and other fees as the Secretary shall
approve) in excess of 97 percent of the
appraised value of the properties that
are insured pursuant to section 203 of
the National Housing Act; and
(B) to inform the public of the availability
of the homeownership counseling.
(4) Eligibility for counseling.--A homeowner shall be
eligible for homeownership counseling under this
subsection if--
(A) the home loan is secured by property that
is the principal residence (as defined by the
Secretary) of the homeowner;
(B) the home loan is not assisted under title
V of the Housing Act of 1949; and
(C) the homeowner is, or is expected to be,
unable to make payments, correct a home loan
delinquency within a reasonable time, or resume
full home loan payments due to a reduction in
the income of the homeowner because of--
(i) an involuntary loss of, or
reduction in, the employment of the
homeowner, the self-employment of the
homeowner, or income from the pursuit
of the occupation of the homeowner;
(ii) any similar loss or reduction
experienced by any person who
contributes to the income of the
homeowner;
(iii) a significant reduction in the
income of the household due to divorce
or death; or
(iv) a significant increase in basic
expenses of the homeowner or an
immediate family member of the
homeowner (including the spouse, child,
or parent for whom the homeowner
provides substantial care or financial
assistance) due to--
(I) an unexpected or
significant increase in medical
expenses;
(II) a divorce;
(III) unexpected and
significant damage to the
property, the repair of which
will not be covered by private
or public insurance; or
(IV) a large property-tax
increase; or
(D) the Secretary of Housing and Urban
Development determines that the annual income
of the homeowner is no greater than the annual
income established by the Secretary as being of
low- or moderate-income.
(5) Notification of availability of homeownership
counseling.--
(A) Notification of availability of
homeownership counseling.--
(i) Requirement.--Except as provided
in subparagraph (C), the creditor of a
loan (or proposed creditor) shall
provide notice under clause (ii) to (I)
any eligible homeowner who fails to pay
any amount by the date the amount is
due under a home loan, and (II) any
applicant for a mortgage described in
paragraph (4).
(ii) Content.--Notification under
this subparagraph shall--
(I) notify the homeowner or
mortgage applicant of the
availability of any
homeownership counseling
offered by the creditor (or
proposed creditor);
(II) if provided to an
eligible mortgage applicant,
state that completion of a
counseling program is required
for insurance pursuant to
section 203 of the National
Housing Act;
(III) notify the homeowner or
mortgage applicant of the
availability of homeownership
counseling provided by
nonprofit organizations
approved by the Secretary and
experienced in the provision of
homeownership counseling, or
provide the toll-free telephone
number described in
subparagraph (D)(i);
(IV) notify the homeowner by
a statement or notice, written
in plain English by the
Secretary of Housing and Urban
Development, in consultation
with the Secretary of Defense
and the Secretary of the
Treasury, explaining the
mortgage and foreclosure rights
of servicemembers, and the
dependents of such
servicemembers, under the
Servicemembers Civil Relief Act
(50 U.S.C. App. 501 et seq.),
including the toll-free
military one source number to
call if servicemembers, or the
dependents of such
servicemembers, require further
assistance; and
(V) notify the housing or
mortgage applicant of the
availability of mortgage
software systems provided
pursuant to subsection (g)(3).
(B) Deadline for notification.--The
notification required in subparagraph (A) shall
be made--
(i) in a manner approved by the
Secretary; and
(ii) before the expiration of the 45-
day period beginning on the date on
which the failure referred to in such
subparagraph occurs.
(C) Notification.--Notification under
subparagraph (A) shall not be required with
respect to any loan for which the eligible
homeowner pays the amount overdue before the
expiration of the 45-day period under
subparagraph (B)(ii).
(D) Administration and compliance.--The
Secretary shall, to the extent of amounts
approved in appropriation Acts, enter into an
agreement with an appropriate private entity
under which the entity will--
(i) operate a toll-free telephone
number through which any eligible
homeowner can obtain a list of
nonprofit organizations, which shall be
updated annually, that--
(I) are approved by the
Secretary and experienced in
the provision of homeownership
counseling; and
(II) serve the area in which
the residential property of the
homeowner is located;
(ii) monitor the compliance of
creditors with the requirements of
subparagraphs (A) and (B); and
(iii) report to the Secretary not
less than annually regarding the extent
of compliance of creditors with the
requirements of subparagraphs (A) and
(B).
(E) Report.--The Secretary shall submit a
report to the Congress not less than annually
regarding the extent of compliance of creditors
with the requirements of subparagraphs (A) and
(B) and the effectiveness of the entity
monitoring such compliance. The Secretary shall
also include in the report any recommendations
for legislative action to increase the
authority of the Secretary to penalize
creditors who do not comply with such
requirements.
(6) Definitions.--For purposes of this subsection:
(A) The term ``creditor'' means a person or
entity that is servicing a home loan on behalf
of itself or another person or entity.
(B) The term ``eligible homeowner'' means a
homeowner eligible for counseling under
paragraph (4).
(C) The term ``home loan'' means a loan
secured by a mortgage or lien on residential
property.
(D) The term ``homeowner'' means a person who
is obligated under a home loan.
(E) The term ``residential property'' means a
1-family residence, including a 1-family unit
in a condominium project, a membership interest
and occupancy agreement in a cooperative
housing project, and a manufactured home and
the lot on which the home is situated.
(7) Regulations.--The Secretary shall issue any
regulations that are necessary to carry out this
subsection.
(8) Authorization of appropriations.--There are
authorized to be appropriated to carry out this section
$7,000,000 for fiscal year 1993 and $7,294,000 for
fiscal year 1994, of which amounts $1,000,000 shall be
available in each such fiscal year to carry out
paragraph (5)(D). Any amount appropriated under this
subsection shall remain available until expended.
(d) Prepurchase and Foreclosure-Prevention Counseling
Demonstration.--
(1) Purposes.--The purpose of this subsection is--
(A) to reduce defaults and foreclosures on
mortgage loans insured under the Federal
Housing Administration single family mortgage
insurance program;
(B) to encourage responsible and prudent use
of such federally insured home mortgages;
(C) to assist homeowners with such federally
insured mortgages to retain the homes they have
purchased pursuant to such mortgages; and
(D) to encourage the availability and
expansion of housing opportunities in
connection with such federally insured home
mortgages.
(2) Authority.--The Secretary of Housing and Urban
Development shall carry out a program to demonstrate
the effectiveness of providing coordinated prepurchase
counseling and foreclosure-prevention counseling to
first-time homebuyers and homeowners in avoiding
defaults and foreclosures on mortgages insured under
the Federal Housing Administration single family home
mortgage insurance program.
(3) Grants.--Under the demonstration program under
this subsection, the Secretary shall make grants to
qualified nonprofit organizations under paragraph (4)
to enable the organizations to provide prepurchase
counseling services to eligible homebuyers and
foreclosure-prevention counseling services to eligible
homeowners, in counseling target areas.
(4) Qualified nonprofit organizations.--The Secretary
shall select nonprofit organizations to receive
assistance under the demonstration program under this
subsection based on the experience and ability of the
organizations in providing homeownership counseling and
their ability to provide community-based prepurchase
and foreclosure-prevention counseling under paragraphs
(5) and (6) in a counseling target area. To be eligible
for selection under this paragraph, a nonprofit
organization shall submit an application containing a
proposal for providing counseling services in the form
and manner required by the Secretary.
(5) Prepurchase counseling.--
(A) Mandatory participation.--Under the
demonstration program, the Secretary shall
require any eligible homebuyer who intends to
purchase a home located in a counseling target
area and who has applied for (as determined by
the Secretary) a qualified mortgage (as such
term is defined in paragraph (9)) on such home
that involves a downpayment of less than 10
percent of the principal obligation of the
mortgage, to receive counseling prior to
signing of a contract to purchase the home. The
counseling shall include counseling with
respect to--
(i) financial management and the
responsibilities involved in
homeownership;
(ii) fair housing laws and
requirements;
(iii) the maximum mortgage amount
that the homebuyer can afford; and
(iv) options, programs, and actions
available to the homebuyer in the event
of actual or potential delinquency or
default.
(B) Eligibility for counseling.--A homebuyer
shall be eligible for prepurchase counseling
under this paragraph if--
(i) the homebuyer has applied for a
qualified mortgage;
(ii) the homebuyer is a first-time
homebuyer; and
(iii) the home to be purchased under
the qualified mortgage is located in a
counseling target area.
(6) Foreclosure-prevention counseling.--
(A) Availability.--Under the demonstration
program, the Secretary shall make counseling
available for eligible homeowners who are 60 or
more days delinquent with respect to a payment
under a qualified mortgage on a home located
within a counseling target area. The counseling
shall include counseling with respect to
options, programs, and actions available to the
homeowner for resolving the delinquency or
default.
(B) Notification of delinquency.--Under the
demonstration program, the Secretary shall
require the creditor of any eligible homeowner
who is delinquent (as described in subparagraph
(A)) to send written notice by registered or
certified mail within 5 days (excluding
Saturdays, Sundays, and legal public holidays)
after the occurrence of such delinquency--
(i) notifying the homeowner of the
delinquency and the name, address, and
phone number of the counseling
organization for the counseling target
area; and
(ii) notifying any counseling
organization for the counseling target
area of the delinquency and the name,
address, and phone number of the
delinquent homeowner.
(C) Coordination with emergency homeownership
counseling program.--The Secretary may
coordinate the provision of assistance under
subsection (c) with the demonstration program
under this subsection.
(D) Eligibility for counseling.--A homeowner
shall be eligible for foreclosure-prevention
counseling under this paragraph if--
(i) the home owned by the homeowner
is subject to a qualified mortgage; and
(ii) such home is located in a
counseling target area.
(7) Scope of demonstration program.--
(A) Designation of counseling target areas.--
The Secretary shall designate 3 counseling
target areas (as provided in subparagraph (B)),
which shall be located in not less than 2
separate metropolitan areas. The Secretary
shall provide for counseling under the
demonstration program under this subsection
with respect to only such counseling target
areas.
(B) Counseling target areas.--Each counseling
target area shall consist of a group of
contiguous census tracts--
(i) the population of which is
greater than 50,000;
(ii) which together constitute an
identifiable neighborhood, area,
borough, district, or region within a
metropolitan area (except that this
clause may not be construed to exclude
a group of census tracts containing
areas not wholly contained within a
single town, city, or other political
subdivision of a State);
(iii) in which the average age of
existing housing is greater than 20
years; and
(iv) for which (I) the percentage of
qualified mortgages on homes within the
area that are foreclosed exceeds 5
percent for the calendar year preceding
the year in which the area is selected
as a counseling target area, or (II)
the number of qualified mortgages
originated on homes in such area in the
calendar year preceding the calendar
year in which the area is selected as a
counseling target area exceeds 20
percent of the total number of
mortgages originated on residences in
the area during such year.
(C) Mortgage characteristics.--In designating
counseling target areas under subparagraph (A),
the Secretary shall designate at least 1 such
area that meets the requirements of
subparagraph (B)(iv)(I) and at least 1 such
area that meets the requirements of
subparagraph (B)(iv)(II).
(D) Expansion of target areas.--The Secretary
may expand any counseling target area during
the term of the demonstration program, if the
Secretary determines that counseling can be
adequately provided within such expanded area
and the purposes of this subsection will be
furthered by such expansion. Any such expansion
shall include only groups of census tracts that
are contiguous to the counseling target area
expanded and such census tract groups shall not
be subject to the provisions of subparagraph
(B).
(E) Designation of control areas.--For
purposes of determining the effectiveness of
counseling under the demonstration program, the
Secretary shall designate 3 control areas, each
of which shall correspond to 1 of the
counseling target areas designated under
subparagraph (A). Each control area shall be
located in the metropolitan area in which the
corresponding counseling target area is
located, shall meet the requirements of
subparagraph (B), and shall be similar to such
area with respect to size, age of housing
stock, median income, and racial makeup of the
population. Each control area shall also comply
with the requirements of subclause (I) or (II)
of subparagraph (B)(iv), according to the
subclause with which the corresponding
counseling target area complies.
(8) Evaluation.--Each organization providing
counseling under the demonstration program under this
subsection shall maintain records with respect to each
eligible homebuyer and eligible homeowner counseled and
shall provide information with respect to such
counseling as the Secretary or the Comptroller General
may require.
(9) Definitions.--For purposes of this subsection:
(A) The term ``control area'' means an area
designated by the Secretary under paragraph
(7)(E).
(B) The term ``counseling target area'' means
an area designated by the Secretary under
paragraph (7)(A).
(C) The term ``creditor'' means a person or
entity that is servicing a loan secured by a
qualified mortgage on behalf of itself or
another person or entity.
(D) The term ``displaced homemaker'' means an
individual who--
(i) is an adult;
(ii) has not worked full-time, full-
year in the labor force for a number of
years, but has during such years,
worked primarily without remuneration
to care for the home and family; and
(iii) is unemployed or underemployed
and is experiencing difficulty in
obtaining or upgrading employment.
(E) The term ``downpayment'' means the amount
of purchase price of home required to be paid
at or before the time of purchase.
(F) The term ``eligible homebuyer'' means a
homebuyer that meets the requirements under
paragraph (5)(B).
(G) The term ``eligible homeowner'' means a
homeowner that meets the requirements under
paragraph (6)(D).
(H) The term ``first-time homebuyer'' means
an individual who--
(i) (and whose spouse) has had no
ownership in a principal residence
during the 3-year period ending on the
date of purchase of the home pursuant
to which counseling is provided under
this subsection;
(ii) is a displaced homemaker who,
except for owning a residence with his
or her spouse or residing in a
residence owned by the spouse, meets
the requirements of clause (i); or
(iii) is a single parent who, except
for owning a residence with his or her
spouse or residing in a residence owned
by the spouse while married, meets the
requirements of clause (i).
(I) The term ``home'' includes any dwelling
or dwelling unit eligible for a qualified
mortgage, and includes a unit in a condominium
project, a membership interest and occupancy
agreement in a cooperative housing project, and
a manufactured home and the lot on which the
home is situated.
(J) The term ``metropolitan area'' means a
standard metropolitan statistical area as
designated by the Director of the Office of
Management and Budget.
(K) The term ``qualified mortgage'' means a
mortgage on a 1- to 4-family home that is
insured under title II of the National Housing
Act.
(L) The term ``Secretary'' means the
Secretary of Housing and Urban Development.
(M) The term ``single parent'' means an
individual who--
(i) is unmarried or legally separated
from a spouse; and
(ii)(I) has 1 or more minor children
for whom the individual has custody or
joint custody; or
(II) is pregnant.
(10) Regulations.--The Secretary may issue any
regulations necessary to carry out this subsection.
(11) Authorization of appropriations.--There are
authorized to be appropriated to carry out this
subsection $365,000 for fiscal year 1993 and $380,330
for fiscal year 1994.
(12) Termination.--The demonstration program under
this subsection shall terminate at the end of fiscal
year 1994.
(e) Certification.--
(1) Requirement for assistance.--An organization may
not receive assistance for counseling activities under
subsection (a)(1)(iii), (a)(2), (a)(4), (c), or (d) of
this section, or under section 101(e), unless the
organization, or the individuals through which the
organization provides such counseling, has been
certified by the Secretary under this subsection as
competent to provide such counseling.
(2) Standards and examination.--The Secretary shall,
by regulation, establish standards and procedures for
testing and certifying counselors and for certifying
organizations. Such standards and procedures shall
require, for certification of an organization, that
each individual through which the organization provides
counseling shall demonstrate, and, for certification of
an individual, that the individual shall demonstrate,
by written examination (as provided under subsection
(f)(4)), competence to provide counseling in each of
the following areas:
(A) Financial management.
(B) Property maintenance.
(C) Responsibilities of homeownership and
tenancy.
(D) Fair housing laws and requirements.
(E) Housing affordability.
(F) Avoidance of, and responses to, rental
and mortgage delinquency and avoidance of
eviction and mortgage default.
(3) Requirement under hud programs.--Any
homeownership counseling or rental housing counseling
(as such terms are defined in subsection (g)(1))
required under, or provided in connection with, any
program administered by the Department of Housing and
Urban Development shall be provided only by
organizations or counselors certified by the Secretary
under this subsection as competent to provide such
counseling.
(4) Outreach.--The Secretary shall take such actions
as the Secretary considers appropriate to ensure that
individuals and organizations providing homeownership
or rental housing counseling are aware of the
certification requirements and standards of this
subsection and of the training and certification
programs under subsection (f).
(5) Encouragement.--The Secretary shall encourage
organizations engaged in providing homeownership and
rental counseling that do not receive assistance under
this section to employ organizations and individuals to
provide such counseling who are certified under this
subsection or meet the certification standards
established under this subsection.
(f) Homeownership and Rental Counselor Training and
Certification Programs.--
(1) Establishment.--To the extent amounts are
provided in appropriations Acts under paragraph (7),
the Secretary shall contract with an appropriate entity
(which may be a nonprofit organization) to carry out a
program under this subsection to train individuals to
provide homeownership and rental counseling and to
administer the examination under subsection (e)(2) and
certify individuals under such subsection.
(2) Eligibility and selection.--
(A) Eligibility.--To be eligible to provide
the training and certification program under
this subsection, an entity shall have
demonstrated experience in training
homeownership and rental counselors.
(B) Selection.--The Secretary shall provide
for entities meeting the requirements of
subparagraph (A) to submit applications to
provide the training and certification program
under this subsection. The Secretary shall
select an application based on the ability of
the entity to--
(i) establish the program as soon as
possible on a national basis, but not
later than the date under paragraph
(6);
(ii) minimize the costs involved in
establishing the program; and
(iii) effectively and efficiently
carry out the program.
(3) Training.--The Secretary shall require that
training of counselors under the program under this
subsection be designed and coordinated to prepare
individuals for successful completion of the
examination for certification under subsection (e)(2).
The Secretary, in consultation with the entity selected
under paragraph (2)(B), shall establish the curriculum
and standards for training counselors under the
program.
(4) Certification.--The entity selected under
paragraph (2)(B) shall administer the examination under
subsection (e)(2) and, on behalf of the Secretary,
certify individuals successfully completing the
examination. The Secretary, in consultation with such
entity, shall establish the content and format of the
examination.
(5) Fees.--Subject to the approval of the Secretary,
the entity selected under paragraph (2)(B) may
establish and impose reasonable fees for participation
in the training provided under the program and for
examination and certification under subsection (e)(2),
in an amount sufficient to cover any costs of such
activities not covered with amounts provided under
paragraph (7).
(6) Timing.--The entity selected under paragraph
(2)(B) to carry out the training and certification
program shall establish the program as soon as possible
after such selection, and shall make training and
certification available under the program on a national
basis not later than the expiration of the 1-year
period beginning upon such selection.
(7) Authorization of appropriations.--There are
authorized to be appropriated to carry out this
subsection $2,000,000 for fiscal year 1993 and
$2,084,000 for 1994.
(g) Procedures and Activities.--
(1) Counseling procedures.--
(A) In general.--The Secretary shall
establish, coordinate, and monitor the
administration by the Department of Housing and
Urban Development of the counseling procedures
for homeownership counseling and rental housing
counseling provided in connection with any
program of the Department, including all
requirements, standards, and performance
measures that relate to homeownership and
rental housing counseling.
(B) Homeownership counseling.--For purposes
of this subsection and as used in the
provisions referred to in this subparagraph,
the term ``homeownership counseling'' means
counseling related to homeownership and
residential mortgage loans. Such term includes
counseling related to homeownership and
residential mortgage loans that is provided
pursuant to--
(i) section 105(a)(20) of the Housing
and Community Development Act of 1974
(42 U.S.C. 5305(a)(20));
(ii) in the United States Housing Act
of 1937--
(I) section 9(e) (42 U.S.C.
1437g(e));
(II) section 8(y)(1)(D) (42
U.S.C. 1437f(y)(1)(D));
(III) section 18(a)(4)(D) (42
U.S.C. 1437p(a)(4)(D));
(IV) section 23(c)(4) (42
U.S.C. 1437u(c)(4));
(V) section 32(e)(4) (42
U.S.C. 1437z-4(e)(4));
(VI) section 33(d)(2)(B) (42
U.S.C. 1437z-5(d)(2)(B));
(VII) sections 302(b)(6) and
303(b)(7) (42 U.S.C. 1437aaa-
1(b)(6), 1437aaa-2(b)(7)); and
(VIII) section 304(c)(4) (42
U.S.C. 1437aaa-3(c)(4));
(iii) section 302(a)(4) of the
American Homeownership and Economic
Opportunity Act of 2000 (42 U.S.C.
1437f note);
(iv) sections 233(b)(2) and 258(b) of
the Cranston-Gonzalez National
Affordable Housing Act (42 U.S.C.
12773(b)(2), 12808(b));
(v) this section and section 101(e)
of the Housing and Urban Development
Act of 1968 (12 U.S.C. 1701x,
1701w(e));
(vi) section 220(d)(2)(G) of the Low-
Income Housing Preservation and
Resident Homeownership Act of 1990 (12
U.S.C. 4110(d)(2)(G));
(vii) sections 422(b)(6), 423(b)(7),
424(c)(4), 442(b)(6), and 443(b)(6) of
the Cranston-Gonzalez National
Affordable Housing Act (42 U.S.C.
12872(b)(6), 12873(b)(7), 12874(c)(4),
12892(b)(6), and 12893(b)(6));
(viii) section 491(b)(1)(F)(iii) of
the McKinney-Vento Homeless Assistance
Act (42 U.S.C. 11408(b)(1)(F)(iii));
(ix) sections 202(3) and 810(b)(2)(A)
of the Native American Housing and
Self-Determination Act of 1996 (25
U.S.C. 4132(3), 4229(b)(2)(A));
(x) in the National Housing Act--
(I) in section 203 (12 U.S.C.
1709), the penultimate
undesignated paragraph of
paragraph (2) of subsection
(b), subsection (c)(2)(A), and
subsection (r)(4);
(II) subsections (a) and
(c)(3) of section 237 (12
U.S.C. 1715z-2); and
(III) subsections (d)(2)(B)
and (m)(1) of section 255 (12
U.S.C. 1715z-20);
(xi) section 502(h)(4)(B) of the
Housing Act of 1949 (42 U.S.C.
1472(h)(4)(B));
(xii) section 508 of the Housing and
Urban Development Act of 1970 (12
U.S.C. 1701z-7); and
(xiii) section 106 of the Energy
Policy Act of 1992 (42 U.S.C. 12712
note).
(C) Rental housing counseling.--For purposes
of this subsection, the term ``rental housing
counseling'' means counseling related to rental
of residential property, which may include
counseling regarding future homeownership
opportunities and providing referrals for
renters and prospective renters to entities
providing counseling and shall include
counseling related to such topics that is
provided pursuant to--
(i) section 105(a)(20) of the Housing
and Community Development Act of 1974
(42 U.S.C. 5305(a)(20));
(ii) in the United States Housing Act
of 1937--
(I) section 9(e) (42 U.S.C.
1437g(e));
(II) section 18(a)(4)(D) (42
U.S.C. 1437p(a)(4)(D));
(III) section 23(c)(4) (42
U.S.C. 1437u(c)(4));
(IV) section 32(e)(4) (42
U.S.C. 1437z-4(e)(4));
(V) section 33(d)(2)(B) (42
U.S.C. 1437z-5(d)(2)(B)); and
(VI) section 302(b)(6) (42
U.S.C. 1437aaa-1(b)(6));
(iii) section 233(b)(2) of the
Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 12773(b)(2));
(iv) section 106 of the Housing and
Urban Development Act of 1968 (12
U.S.C. 1701x);
(v) section 422(b)(6) of the
Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 12872(b)(6));
(vi) section 491(b)(1)(F)(iii) of the
McKinney-Vento Homeless Assistance Act
(42 U.S.C. 11408(b)(1)(F)(iii));
(vii) sections 202(3) and
810(b)(2)(A) of the Native American
Housing and Self-Determination Act of
1996 (25 U.S.C. 4132(3),
4229(b)(2)(A)); and
(viii) the rental assistance program
under section 8 of the United States
Housing Act of 1937 (42 U.S.C. 1437f).
(2) Standards for materials.--The Secretary, in
consultation with the advisory committee established
under subsection (g)(4) of the Department of Housing
and Urban Development Act, shall establish standards
for materials and forms to be used, as appropriate, by
organizations providing homeownership counseling
services, including any recipients of assistance
pursuant to subsection (a)(4).
(3) Mortgage software systems.--
(A) Certification.--The Secretary shall
provide for the certification of various
computer software programs for consumers to use
in evaluating different residential mortgage
loan proposals. The Secretary shall require,
for such certification, that the mortgage
software systems take into account--
(i) the consumer's financial
situation and the cost of maintaining a
home, including insurance, taxes, and
utilities;
(ii) the amount of time the consumer
expects to remain in the home or
expected time to maturity of the loan;
and
(iii) such other factors as the
Secretary considers appropriate to
assist the consumer in evaluating
whether to pay points, to lock in an
interest rate, to select an adjustable
or fixed rate loan, to select a
conventional or government-insured or
guaranteed loan and to make other
choices during the loan application
process.
If the Secretary determines that available
existing software is inadequate to assist
consumers during the residential mortgage loan
application process, the Secretary shall
arrange for the development by private sector
software companies of new mortgage software
systems that meet the Secretary's
specifications.
(B) Use and initial availability.--Such
certified computer software programs shall be
used to supplement, not replace, housing
counseling. The Secretary shall provide that
such programs are initially used only in
connection with the assistance of housing
counselors certified pursuant to subsection
(e).
(C) Availability.--After a period of initial
availability under subparagraph (B) as the
Secretary considers appropriate, the Secretary
shall take reasonable steps to make mortgage
software systems certified pursuant to this
paragraph widely available through the Internet
and at public locations, including public
libraries, senior-citizen centers, public
housing sites, offices of public housing
agencies that administer rental housing
assistance vouchers, and housing counseling
centers.
(D) Budget compliance.--This paragraph shall
be effective only to the extent that amounts to
carry out this paragraph are made available in
advance in appropriations Acts.
(4) National public service multimedia campaigns to
promote housing counseling.--
(A) In general.--The Director of Housing
Counseling shall develop, implement, and
conduct national public service multimedia
campaigns designed to make persons facing
mortgage foreclosure, persons considering a
subprime mortgage loan to purchase a home,
elderly persons, persons who face language
barriers, low-income persons, minorities, and
other potentially vulnerable consumers aware
that it is advisable, before seeking or
maintaining a residential mortgage loan, to
obtain homeownership counseling from an
unbiased and reliable sources and that such
homeownership counseling is available,
including through programs sponsored by the
Secretary of Housing and Urban Development.
(B) Contact information.--Each segment of the
multimedia campaign under subparagraph (A)
shall publicize the toll-free telephone number
and website of the Department of Housing and
Urban Development through which persons seeking
housing counseling can locate a housing
counseling agency in their State that is
certified by the Secretary of Housing and Urban
Development and can provide advice on buying a
home, renting, defaults, foreclosures, credit
issues, and reverse mortgages.
(C) Authorization of appropriations.--There
are authorized to be appropriated to the
Secretary, not to exceed $3,000,000 for fiscal
years 2009, 2010, and 2011, for the
development, implementation, and conduct of
national public service multimedia campaigns
under this paragraph.
(D) Foreclosure rescue education programs.--
(i) In general.--Ten percent of any
funds appropriated pursuant to the
authorization under subparagraph (C)
shall be used by the Director of
Housing Counseling to conduct an
education program in areas that have a
high density of foreclosure. Such
program shall involve direct mailings
to persons living in such areas
describing--
(I) tips on avoiding
foreclosure rescue scams;
(II) tips on avoiding
predatory lending mortgage
agreements;
(III) tips on avoiding for-
profit foreclosure counseling
services; and
(IV) local counseling
resources that are approved by
the Department of Housing and
Urban Development.
(ii) Program emphasis.--In conducting
the education program described under
clause (i), the Director of Housing
Counseling shall also place an emphasis
on serving communities that have a high
percentage of retirement communities or
a high percentage of low-income
minority communities.
(iii) Terms defined.--For purposes of
this subparagraph:
(I) High density of
foreclosures.--An area has a
``high density of
foreclosures'' if such area is
one of the metropolitan
statistical areas (as that term
is defined by the Director of
the Office of Management and
Budget) with the highest home
foreclosure rates.
(II) High percentage of
retirement communities.--An
area has a ``high percentage of
retirement communities'' if
such area is one of the
metropolitan statistical areas
(as that term is defined by the
Director of the Office of
Management and Budget) with the
highest percentage of residents
aged 65 or older.
(III) High percentage of low-
income minority communities.--
An area has a ``high percentage
of low-income minority
communities'' if such area
contains a higher-than-normal
percentage of residents who are
both minorities and low-income,
as defined by the Director of
Housing Counseling.
(5) Education programs.--The Secretary shall provide
advice and technical assistance to States, units of
general local government, and nonprofit organizations
regarding the establishment and operation of, including
assistance with the development of content and
materials for, educational programs to inform and
educate consumers, particularly those most vulnerable
with respect to residential mortgage loans (such as
elderly persons, persons facing language barriers, low-
income persons, minorities, and other potentially
vulnerable consumers), regarding home mortgages,
mortgage refinancing, home equity loans, home repair
loans, and where appropriate by region, any
requirements and costs associated with obtaining flood
or other disaster-specific insurance coverage.
(h) Definitions.--For purposes of this section:
(1) Nonprofit organization.--The term ``nonprofit
organization'' has the meaning given such term in
section 104(5) of the Cranston-Gonzalez National
Affordable Housing Act (42 U.S.C. 12704(5)), except
that subparagraph (D) of such section shall not apply
for purposes of this section.
(2) State.--The term ``State'' means each of the
several States, the Commonwealth of Puerto Rico, the
District of Columbia, the Commonwealth of the Northern
Mariana Islands, Guam, the Virgin Islands, American
Samoa, the Trust Territories of the Pacific, or any
other possession of the United States.
(3) Unit of general local government.--The term
``unit of general local government'' means any city,
county, parish, town, township, borough, village, or
other general purpose political subdivision of a State.
(4) HUD-approved counseling agency.--The term ``HUD-
approved counseling agency'' means a private or public
nonprofit organization that is--
(A) exempt from taxation under section 501(c)
of the Internal Revenue Code of 1986; and
(B) certified by the Secretary to provide
housing counseling services.
(5) State housing finance agency.--The term ``State
housing finance agency'' means any public body, agency,
or instrumentality specifically created under State
statute that is [authorised] authorized to finance
activities designed to provide housing and related
facilities throughout an entire State through land
acquisition, construction, or rehabilitation.
(i) Accountability for Recipients of Covered Assistance.--
(1) Tracking of funds.--The Secretary shall--
(A) develop and maintain a system to ensure
that any organization or entity that receives
any covered assistance uses all amounts of
covered assistance in accordance with this
section, the regulations issued under this
section, and any requirements or conditions
under which such amounts were provided; and
(B) require any organization or entity, as a
condition of receipt of any covered assistance,
to agree to comply with such requirements
regarding covered assistance as the Secretary
shall establish, which shall include--
(i) appropriate periodic financial
and grant activity reporting, record
retention, and audit requirements for
the duration of the covered assistance
to the organization or entity to ensure
compliance with the limitations and
requirements of this section, the
regulations under this section, and any
requirements or conditions under which
such amounts were provided; and
(ii) any other requirements that the
Secretary determines are necessary to
ensure appropriate administration and
compliance.
(2) Misuse of funds.--If any organization or entity
that receives any covered assistance is determined by
the Secretary to have used any covered assistance in a
manner that is materially in violation of this section,
the regulations issued under this section, or any
requirements or conditions under which such assistance
was provided--
(A) the Secretary shall require that, within
12 months after the determination of such
misuse, the organization or entity shall
reimburse the Secretary for such misused
amounts and return to the Secretary any such
amounts that remain unused or uncommitted for
use; and
(B) such organization or entity shall be
ineligible, at any time after such
determination, to apply for or receive any
further covered assistance.
The remedies under this paragraph are in addition to
any other remedies that may be available under law.
(3) Covered assistance.--For purposes of this
subsection, the term ``covered assistance'' means any
grant or other financial assistance provided under this
section.
* * * * * * *
----------
INTERNATIONAL BANKING ACT OF 1978
* * * * * * *
SEC. 15. COOPERATION WITH FOREIGN SUPERVISORS.
(a) Disclosure of Supervisory Information to Foreign
Supervisors.--Notwithstanding any other provision of law, the
Board, Comptroller of the Currency, and Federal Deposit
Insurance Corporation[, and Director of the Office of Thrift
Supervision] may disclose information obtained in the course of
exercising supervisory or examination authority to any foreign
bank regulatory or supervisory authority if the Board,
[Comptroller, Corporation, or Director] Comptroller of the
Currency, or Corporation determines that such disclosure is
appropriate and will not prejudice the interests of the United
States.
(b) Requirement of Confidentiality.--Before making any
disclosure of any information to a foreign authority, the
Board, Comptroller of the Currency, and Federal Deposit
Insurance Corporation[, and Director of the Office of Thrift
Supervision] shall obtain, to the extent necessary, the
agreement of such foreign authority to maintain the
confidentiality of such information to the extent possible
under applicable law.
(c) Confidential Information Received From Foreign
Supervisors.--
(1) In general.--Except as provided in paragraph (3),
a Federal banking agency may not be compelled to
disclose information received from a foreign regulatory
or supervisory authority if--
(A) the Federal banking agency determines
that the foreign regulatory or supervisory
authority has, in good faith, determined and
represented in writing to such Federal banking
agency that public disclosure of the
information would violate the laws applicable
to that foreign regulatory or supervisory
authority; and
(B) the relevant Federal banking agency
obtained such information pursuant to--
(i) such procedures as the Federal
banking agency may establish for use in
connection with the administration and
enforcement of Federal banking laws; or
(ii) a memorandum of understanding or
other similar arrangement between the
Federal banking agency and the foreign
regulatory or supervisory authority.
(2) Treatment under title 5, united states code.--For
purposes of section 552 of title 5, United States Code,
this subsection shall be treated as a statute described
in subsection (b)(3)(B) of such section.
(3) Savings provision.--No provision of this section
shall be construed as--
(A) authorizing any Federal banking agency to
withhold any information from any duly
authorized committee of the House of
Representatives or the Senate; or
(B) preventing any Federal banking agency
from complying with an order of a court of the
United States in an action commenced by the
United States or such agency.
(4) Federal banking agency defined.--For purposes of
this subsection, the term ``Federal banking agency''
means the Board, the Comptroller of the Currency, and
the Federal Deposit Insurance Corporation[, and the
Director of the Office of Thrift Supervision].
* * * * * * *
----------
INTERNATIONAL LENDING SUPERVISION ACT OF 1983
* * * * * * *
TITLE IX--INTERNATIONAL LENDING SUPERVISION
* * * * * * *
[EQUAL REPRESENTATION FOR THE FEDERAL DEPOSIT INSURANCE CORPORATION AND
THE OFFICE OF THRIFT SUPERVISION] EQUAL REPRESENTATION FOR FEDERAL
DEPOSIT INSURANCE CORPORATION
Sec. 912.
[(a) In General.--] As one of the 4 Federal bank regulatory
and supervisory agencies, and as the insurer of the United
States banks involved in international lending, the Federal
Deposit Insurance Corporation shall be given equal
representation with the Board of Governors of the Federal
Reserve System and the Office of the Comptroller of the
Currency on the Committee on Banking Regulations and
Supervisory Practices of the Group of Ten Countries and
Switzerland.
[(b) As one of the 4 Federal bank regulatory and supervisory
agencies, the Office of Thrift Supervision shall be given equal
representation with the Board of Governors of the Federal
Reserve System, the Office of the Comptroller of the Currency,
and the Federal Deposit Insurance Corporation on the Committee
on Banking Regulations and Supervisory Practices of the Group
of Ten Countries and Switzerland.]
* * * * * * *
----------
SECTION 403 OF THE LEGAL CERTAINTY FOR BANK PRODUCTS ACT OF 2000
* * * * * * *
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]
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.).
MINORITY VIEWS
H.R. 10, the ``Financial CHOICE Act'' (herein called the
``Wrong Choice Act''), will eliminate several of the most
important aspects of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (``Wall Street Reform'').
Wall Street Reform effectively addressed failures in the
fragmented Federal regulatory scheme that contributed to the
worst financial crisis in our country since the Great
Depression, which resulted in a loss of about 8 million jobs
and reduced the overall wealth of American families by 28.5
percent. Because the law restored responsibility and
accountability to our country's financial system, it boosted
confidence among American consumers and helped to stabilize our
economy.
Despite the reform law's successes, Congressional
Republicans and President Trump are eager to, in the words of
the President, do ``a big number'' on Wall Street Reform. The
Wrong Choice Act is that ``big number'' to help out large
financial institutions on Wall Street at the expense of
consumers, investors, and small businesses located on Main
Street. If H.R. 10 becomes law, shoddy financial actors will be
free once again to employ unfair, abusive, and deceptive acts
and practices that harm vulnerable consumers and engage in
excessive risk-taking activities that jeopardize our economy.
Fortunately, Democratic Members do not suffer from the
same economic amnesia as their Republican colleagues.
Democratic Members still remember the causes that triggered,
and the devastating effects of, the 2008 financial crisis and
the incalculable stories of human suffering that the
unemployment rate skyrocketed to 10 percent; that many young
people were unable to secure jobs; and that at least 11million
people lost their homes through foreclosures.
Despite Republican Members' attempts to use ``alternative
facts'' to confuse the American public about the benefits of
Wall Street Reform, the numbers tell the true story. Since
enactment of the law, our economy has had a record 85
consecutive months of private-sector job growth, creating more
than 16 million jobs. The labor market continues to improve
with the unemployment rate now at 4.5 percent and wages on the
rise. Business lending by banks has increased by 75 percent,
and the banking industry set an all-time record for profits of
$171.3 billion in 2016. Community banks' loan growth has been
even faster than at bigger banks, which have supported more
residential, commercial, industrial, and small business loans.
In the face of this evidence that Wall Street Reform is
working for consumers, investors, businesses, and the economy,
Republican Members are hastily pushing the Wrong Choice Act to
advance Trump's agenda. The Committee, under Chairman
Hensarling's leadership, only intended to hold a single hearing
to review his nearly 600-page bill, before rushing to schedule
a markup of it. In contrast, the Committee, Democrats convened
41 hearings relating to regulatory reform matters before Wall
Street Reform was considered.
Democratic Members could not let this brazen Republican
attempt to jam a bad bill through Congress go unchallenged.
Accordingly, Democratic Members exercised their right to compel
a second hearing, known as a ``Minority Day hearing,'' to
ensure the American public had an opportunity to hear from
those who are not carrying Trump's water. At this hearing, 11
experts and community advocates, along with Senator Elizabeth
Warren, testified for several hours about the dangers of the
bill. Notably absent from this hearing was Chairman Hensarling
and virtually all of the Republican Members who largely
boycotted it, willfully choosing to ignore the many concerns
raised by these witnesses, and countless letters of opposition
from Americans across the country.
Democrats have named the bill the Wrong Choice Act for
several reasons. First, it effectively guts the Consumer
Financial Protection Bureau (``Consumer Bureau''). It does this
by ending the Consumer Bureau's authority to protect consumers
from the unfair, deceptive, or abusive acts or practices of
shoddy financial actors, which to date, has helped 29 million
consumers receive nearly $12 billion in relief. It eliminates
the Consumer Bureau's supervisory and enforcement authority to
oversee the largest financial firms, thereby thwarting the
Consumer Bureau's ability to provide redress to those harmed by
Wells Fargo's fake account scandal. It changes the Consumer
Bureau's independent funding mechanism and instead subjects it
to the broken Congressional appropriations process that
Republicans have recklessly abused for partisan purposes. It
obscures the public's access to the Consumer Bureau's
nationwide consumer complaint database, even though 97 percent
of complaints submitted to companies have received timely
responses. It allows the President to fire the head of the
Consumer Bureau without reason. The effect of these provisions
is clear. Republican Members want to undermine the Consumer
Bureau's ability to serve as a strong, independent consumer
``cop on the beat.''
Second, the Wrong Choice Act re-creates the problem of
regulatory arbitrage by repealing Wall Street Reform
safeguards. It creates ``off-ramps'' for mega-banks to avoid
enhanced capital, liquidity, and risk management standards, in
exchange for an insufficient leverage requirement of 10
percent, which would encourage large banks to take the same
kinds of risks that crashed the economy in 2008. In addition,
the Wrong Choice Act repeals the ``Volcker Rule,'' which stops
banks from gambling with taxpayer money. Even President Trump's
Treasury Secretary, Steven Mnuchin, supports the Volcker Rule.
Third, the Wrong Choice Act repeals the emergency, back-up
authority of our financial regulators to ensure that very
large, complex, and interconnected companies can fail without
triggering a global economic financial crisis. This authority,
known as the Orderly Liquidation Authority (``OLA''), is
replaced in the Wrong Choice Act with superficial changes to
the Bankruptcy Code that fail to address the shortcomings
exposed by Lehman Brothers' chaotic collapse.
Fourth, the Wrong Choice Act makes it harder for our
regulators to identify and oversee new risks to our financial
system, including risks posed by non-bank entities.
Specifically, it repeals the ability of the Financial Stability
Oversight Council (``FSOC'') to designate non-bank financial
firms, like AIG, as systemically important financial
institutions (``SIFIs'') for enhanced supervision and
regulation. The Wrong Choice Act also abolishes the Office of
Financial Research (``OFR''), which collects data and provides
valuable research and analysis to help the FSOC identify and
combat activities that could risk our country's economic
stability.
Fifth, as discussed above with the Wrong Choice Act's
changes to the funding mechanism of the Consumer Bureau, it
hamstrings all of our Federal financial services regulators by
imprudently subjecting them to the politicized, annual
Congressional appropriations process. It also requires each of
these agencies to conduct time-consuming, onerous analysis of
their rules, guidance, and statements in an effort to slow or
outright block the issuance of any new protections for
consumers, investors, and vulnerable populations. The Wrong
Choice Act also provides a two year window for Trump-appointed
regulators to rollback guardrails before creating a heightened
litigation standard that makes it easier for industry to block
any future effort by regulators to restore or strengthen
existing consumer and investor protections.
Sixth, the Wrong Choice Act puts millions of American jobs
at risk by curtailing the Federal Reserve's discretion to
consider a wide range of dynamic economic data to determine
interest rates and makes monetary policy decisions vulnerable
to short-term political pressure. The bill would also establish
a partisan Commission with twice as many Republicans as
Democrats which would open the door to eliminating the full
employment aspect of the Fed's mandate, and curtailing the
Federal Reserve's ability to support the economy.
Seventh, the Wrong Choice Act hurts investors by silencing
shareholders and repealing their fundamental rights as owners
of the company, encouraging corporate executives to engage in
excessive risk-taking for big bonuses, and letting Wall Street
fraudsters of the hook. For example, the Wrong Choice Act makes
it harder for the Securities and Exchange Commission (``SEC'')
to initiate enforcement actions and eliminates its authority to
ban officers and directors from the industry.
Eighth, the Wrong Choice Act hurts seniors and workers
saving for retirement by repealing the requirement that
financial advisers act in the best interests of their clients.
This change bolsters the Trump Administration's efforts to
rollback the Department of Labor's fiduciary rule, to the
benefit of unscrupulous financial advisers but to the detriment
of senior savers.
Finally, the Wrong Choice Act undermines the bipartisan
compromises Republican and Democratic Members achieved in bills
and laws from the past three congressional terms, thereby
removing important investor protections and creating potential
loopholes in securities laws.
The Wrong Choice Act is the vehicle to enable President
Trump to repeal Wall Street Reform, and it must be defeated at
all costs.
Maxine Waters.
Nydia M. Velazquez.
Denny Heck.
Keith Ellison.
Ruben J. Kihuen.
Brad Sherman.
Al Green.
Carolyn B. Maloney.
Michael E. Capuano.
Daniel T. Kildee.
Gregory W. Meeks.
Charlie Crist.
Gwen Moore.
Bill Foster.
Emanuel Cleaver.
James A. Himes.
Juan Vargas.
Stephen F. Lynch.
Vicente Gonzalez.
Joyce Beatty.
Wm. Lacy Clay.
Ed Permutter.
MINORITY VIEWS
In addition to concurring with the Minority Views, we
strongly oppose provisions in H.R. 10, the ``Financial CHOICE
Act'' (herein called the ``Wrong Choice Act''), that roll back
the rules governing the credit rating agencies.
During the years leading up to the financial crisis, the
credit rating agencies were responsible for providing investors
with assessments of the risks of their securities, but failed
miserably in this task. Specifically, the three main credit
rating agencies--Moody's Investors Service, Standard & Poor's
Financial Services, and Fitch Ratings--failed to properly
assess the credit risk in mortgage securities when they
assigned high grades to toxic securities that rapidly
collapsed.
In the aftermath of the financial crisis, the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010 imposed
heightened accountability measures on credit rating agencies.
Regrettably, the Wrong Choice Act removes these provisions.
Additionally, the Wrong Choice Act repeals the authority of
the Securities and Exchange Commission under the Wall Street
Reform law to remedy the conflict of interests that still
remain in the credit rating agencies' business model.
Currently, the agencies are still allowed to be paid and
selected by the issuer of the debt instrument being analyzed
for the grade it receives. As long as this structure is
permissible, the credit rating agencies have an incentive to
cater to issuers' demands.
For these additional reasons, we strongly oppose H.R. 10.
Stephen F. Lynch.
Maxine Waters.
