[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 423 Reported in Senate (RS)]

                                                       Calendar No. 277

103d CONGRESS

  1st Session

                                 S. 423

                          [Report No. 103-177]

_______________________________________________________________________

                                 A BILL

   To provide for recovery of costs of supervision and regulation of 
   investment advisers and their activities, and for other purposes.

_______________________________________________________________________

            November 10 (legislative day, November 2), 1993

                        Reported with amendments





                                                       Calendar No. 277
103d CONGRESS
  1st Session
                                 S. 423

                          [Report No. 103-177]

   To provide for recovery of costs of supervision and regulation of 
   investment advisers and their activities, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

             February 24 (legislative day, January 5), 1993

Mr. Dodd (for himself, Mr. Riegle, Mr. D'Amato, Mr. Shelby, Mr. Kerry, 
 Mr. Bryan, and Mrs. Murray) introduced the following bill; which was 
read twice and referred to the Committee on Banking, Housing, and Urban 
                                Affairs

            November 10 (legislative day, November 2), 1993

                Reported by Mr. Riegle, with amendments
  [Omit the part struck through and insert the part printed in italic]

_______________________________________________________________________

                                 A BILL


 
   To provide for recovery of costs of supervision and regulation of 
   investment advisers and their activities, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Investment Adviser Oversight Act of 
1993''.

SEC. 2. FINDINGS.

    The Congress finds that--
            (1) the activities of investment advisers are of continuing 
        national concern;
            (2) increased supervision of investment advisers by the 
        Securities and Exchange Commission (hereafter in this Act 
        referred to as the ``Commission'') is necessary to protect 
        investors from fraud and other illegal conduct;
            (3) additional resources are necessary to recover the 
        Commission's costs of an enhanced program for the oversight of 
        investment advisers and their activities, including the costs 
        of registration and inspections; and
            (4) because the direct beneficiaries of these activities 
        are investment advisers, it is appropriate for investment 
        advisers to pay fees for such activities.

SEC. 3. REGISTERED INVESTMENT ADVISER FEES.

    (a) In General.--The Investment Advisers Act of 1940 (15 U.S.C. 
80b-1 et seq.) is amended by inserting after section 203 the following 
new section:

``SEC. 203A. FEES FOR REGISTRANTS AND APPLICANTS.

    ``(a) In General.--The Commission is authorized, in accordance with 
this section, to collect fees to recover the costs of enhanced efforts 
to register all persons required to be registered under this title and 
enhanced supervision and regulation of investment advisers and their 
activities. Such fees shall be collected and shall be made available 
only to the extent provided in advance in appropriations Acts. Such 
fees shall be deposited as an offsetting collection to the Commission's 
appropriation and shall remain available until expended. The costs 
covered by such fees shall be the costs of Commission expenses for the 
registration and inspection of investment advisers and related 
activities.
    ``(b) Time for Payment.--
            ``(1) Applicants.--At the time of filing an application for 
        registration under this title, the applicant shall pay to the 
        Commission the fee directed in advance in appropriations Acts 
        to be collected as specified in subsection (c). No part of such 
        fee shall be refunded to the applicant. The filing of an 
        application for registration under this title shall not be 
        deemed to have occurred unless the application is accompanied 
        by the fee required under this section.
            ``(2) Investment advisers.--Each investment adviser whose 
        registration is effective on the last day of its fiscal year 
        shall pay such fee to the Commission not later than 90 days 
        after the end of its fiscal year, or at such other time as the 
        Commission, by rule, shall determine, unless its registration 
        has been withdrawn, canceled, or revoked prior to that date. No 
        part of such fee shall be refunded to the investment adviser.
    ``(c) Schedule of Fees.--The amount of fees due from investment 
advisers in accordance with paragraphs (1) and (2) of subsection (b) 
shall be determined according to the following schedule:

``Assets under management                                      Fee due:
    Less than $10,000,000.........................                 $300
    $10,000,000 or more, but less than $25,000,000                 $500
    $25,000,000 or more, but less than $50,000,000               $1,000
    $50,000,000 or more, but less than                           $2,500
        $100,000,000.
    $100,000,000 or more, but less than                          $4,000
        $250,000,000.
    $250,000,000 or more, but less than                          $5,000
        $500,000,000.
    $500,000,000 or more..........................              $7,000.
    ``(d) Suspension for Failure To Pay.--The Commission, by order, may 
suspend the registration of any investment adviser if it finds (after 
notice) that such investment adviser has failed to pay when due any fee 
required by this section. The Commission shall reinstate such 
registration upon payment of the fee (and any penalties due), if such 
suspension was based solely on the failure to pay the fee.
    ``(e) Rulemaking.--The Commission may adopt such rules and 
regulations as are necessary to carry out this section.''.
    (b) Effective Date.--This section (and the amendment made by this 
section) shall become effective upon the adoption by the Commission of 
implementing rules and regulations, under section 203A(e) of the 
Investment Advisers Act of 1940, as added by subsection (a).

SEC. 4. FACILITIES FOR FILING RECORDS AND REPORTS.

    Section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
4) is amended--
            (1) by inserting ``(a)'' after ``Sec. 204.''; and
            (2) by adding at the end the following:
    ``(b) The Commission, by rule, may require any investment adviser--
            ``(1) to file with the Commission any fee, application, 
        report, or notice required by this title or by the rules issued 
        under this title through any person designated by the 
        Commission for that purpose; and
            ``(2) to pay the reasonable costs associated with such 
        filing.''.

SEC. 5. BOND REQUIREMENT.

    (a) In General.--Section 208 of the Investment Advisers Act of 1940 
(15 U.S.C. 80b-8) is amended by adding at the end the following:
    ``(e)(1) The Commission may require, by rules and regulations for 
the protection of investors, any investment adviser registered under 
section 203 that--
            ``(A) is authorized to exercise investment discretion, as 
        defined in section 3(a)(35) of the Securities Exchange Act of 
        1934, with respect to an account;
            ``(B) has access to the securities or funds of a client; or
            ``(C) is an investment adviser of an investment company, as 
        defined in section 2(a)(20) of the Investment Company Act of 
        1940,
to obtain a bond from a reputable fidelity insurance company against 
larceny and embezzlement in such reasonable amounts and covering such 
officers, partners, directors, and employees of the investment adviser 
as the Commission may prescribe.
    ``(2) In implementing paragraph (1), the Commission shall 
consider--
            ``(A) the degree of risk to client assets that is involved;
            ``(B) the cost and availability of fidelity bonds;
            ``(C) existing fidelity bonding requirements;
            ``(D) any alternative means to protect client assets; and
            ``(E) the results, findings, and conclusions of the study 
        required by paragraph (3).
    ``(3) Before implementing paragraph (1), the Commission shall study 
(and shall make such study and its conclusions and findings available 
to the public)--
            ``(A) the availability of fidelity bonds, both for large-
        scale and small-scale investment advisers, and also for 
        investment advisers not located in urban areas; and
            ``(B) the impact of the provisions of paragraph (1) on the 
        competitive position of small-scale investment advisers.-'-'-.
    ``(4) The Commission shall not require investment advisers to 
obtain a fidelity bond if--
            ``(A) fidelity bonds are not readily or reasonably 
        available in the urban or rural areas in which such investment 
        advisers are located; or
            ``(B) the cost of obtaining a fidelity bond would have a 
        substantial adverse impact on such investment advisers' 
        competitive positions.''.

-S-E-C-. -6-. -C-E-R-T-A-I-N -P-R-O-H-I-B-I-T-E-D 
              -T-R-A-N-S-A-C-T-I-O-N-S-.

    -S-e-c-t-i-o-n -1-1-(-a-)-(-1-) -o-f -t-h-e -S-e-c-u-r-i-t-i-e-s 
-E-x-c-h-a-n-g-e -A-c-t -o-f -1-9-3-4 -(-1-5 -U-.-S-.-C-. 
-7-8-k-(-a-)-(-1-)-) -i-s -a-m-e-n-d-e-d---
            -(-1-) -i-n -s-u-b-p-a-r-a-g-r-a-p-h -(-E-)-, -b-y 
        -s-t-r-i-k-i-n-g -`-`-(-o-t-h-e-r -t-h-a-n -a-n 
        -i-n-v-e-s-t-m-e-n-t -c-o-m-p-a-n-y-)-'-'-;
            -(-2-) -i-n -s-u-b-p-a-r-a-g-r-a-p-h -(-G-)-, -b-y 
        -s-t-r-i-k-i-n-g -`-`-a-n-d-'-' -a-t -t-h-e -e-n-d-;
            -(-3-) -b-y -r-e-d-e-s-i-g-n-a-t-i-n-g 
        -s-u-b-p-a-r-a-g-r-a-p-h -(-H-) -a-s -s-u-b-p-a-r-a-g-r-a-p-h 
        -(-I-)-; -a-n-d
            -(-4-) -b-y -i-n-s-e-r-t-i-n-g -a-f-t-e-r 
        -s-u-b-p-a-r-a-g-r-a-p-h -(-G-) -t-h-e -f-o-l-l-o-w-i-n-g 
        -n-e-w -s-u-b-p-a-r-a-g-r-a-p-h-:
            -`-`-(-H-) -a-n-y -t-r-a-n-s-a-c-t-i-o-n -f-o-r -a-n 
        -a-c-c-o-u-n-t -w-i-t-h -r-e-s-p-e-c-t -t-o -w-h-i-c-h -s-u-c-h 
        -m-e-m-b-e-r -o-r -a-n -a-s-s-o-c-i-a-t-e-d -p-e-r-s-o-n 
        -t-h-e-r-e-o-f -e-x-e-r-c-i-s-e-s -i-n-v-e-s-t-m-e-n-t 
        -d-i-s-c-r-e-t-i-o-n -i-f -s-u-c-h -m-e-m-b-e-r---
                    -`-`-(-i-) -h-a-s -o-b-t-a-i-n-e-d-, -f-r-o-m 
                -t-h-e -p-e-r-s-o-n -o-r -p-e-r-s-o-n-s 
                -a-u-t-h-o-r-i-z-e-d -t-o -t-r-a-n-s-a-c-t 
                -b-u-s-i-n-e-s-s -f-o-r -t-h-e -a-c-c-o-u-n-t-, 
                -e-x-p-r-e-s-s -a-u-t-h-o-r-i-z-a-t-i-o-n -f-o-r 
                -s-u-c-h -m-e-m-b-e-r -o-r -a-s-s-o-c-i-a-t-e-d 
                -p-e-r-s-o-n -t-o -e-f-f-e-c-t -s-u-c-h 
                -t-r-a-n-s-a-c-t-i-o-n-s -p-r-i-o-r -t-o 
                -e-n-g-a-g-i-n-g -i-n -t-h-e -p-r-a-c-t-i-c-e -o-f 
                -e-f-f-e-c-t-i-n-g -s-u-c-h -t-r-a-n-s-a-c-t-i-o-n-s-;
                    -`-`-(-i-i-) -f-u-r-n-i-s-h-e-s -t-h-e -p-e-r-s-o-n 
                -o-r -p-e-r-s-o-n-s -a-u-t-h-o-r-i-z-e-d -t-o 
                -t-r-a-n-s-a-c-t -b-u-s-i-n-e-s-s -f-o-r -t-h-e 
                -a-c-c-o-u-n-t -w-i-t-h -a -s-t-a-t-e-m-e-n-t -a-t 
                -l-e-a-s-t -a-n-n-u-a-l-l-y -d-i-s-c-l-o-s-i-n-g -t-h-e 
                -a-g-g-r-e-g-a-t-e -c-o-m-p-e-n-s-a-t-i-o-n 
                -r-e-c-e-i-v-e-d -b-y -t-h-e -e-x-c-h-a-n-g-e 
                -m-e-m-b-e-r -i-n -e-f-f-e-c-t-i-n-g -s-u-c-h 
                -t-r-a-n-s-a-c-t-i-o-n-s-; -a-n-d
                    -`-`-(-i-i-i-) -c-o-m-p-l-i-e-s -w-i-t-h -a-n-y 
                -r-u-l-e-s -t-h-e -C-o-m-m-i-s-s-i-o-n -h-a-s 
                -p-r-e-s-c-r-i-b-e-d -w-i-t-h -r-e-s-p-e-c-t -t-o 
                -t-h-e -r-e-q-u-i-r-e-m-e-n-t-s -o-f -c-l-a-u-s-e-s 
                -(-i-) -a-n-d -(-i-i-)-; -a-n-d-'-'-.