[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2550 Introduced in House (IH)]
111th CONGRESS
1st Session
H. R. 2550
To amend the Securities Exchange Act of 1934 to require the
registration of municipal financial advisers.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 21, 2009
Mr. Driehaus (for himself, Mr. Al Green of Texas, Mr. Frank of
Massachusetts, Mr. Baca, Mr. Cleaver, Mr. Moran of Virginia, Mr.
Andrews, and Mr. Connolly of Virginia) introduced the following bill;
which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To amend the Securities Exchange Act of 1934 to require the
registration of municipal financial advisers.
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 ``Municipal Advisers Regulation Act''.
SEC. 2. MUNICIPAL FINANCIAL ADVISER REGISTRATION REQUIREMENT.
(a) In General.--The Securities Exchange Act of 1934 is amended by
inserting after section 15E (15 U.S.C. 78o-7) the following new
section:
``SEC. 15F. MUNICIPAL FINANCIAL ADVISER REGISTRATION REQUIREMENT.
``(a)(1) It shall be unlawful for any person that is either a
person other than a natural person or a natural person not associated
with a municipal financial adviser which is a person other than a
natural person to make use of the mails or any means or instrumentality
of interstate commerce to act as a municipal financial adviser unless
such person is registered as a municipal financial adviser in
accordance with subsection (b).
``(2) The Commission, by rule or order, as it deems consistent with
the public interest and the protection of investors, may conditionally
or unconditionally exempt from paragraph (1) of this section any
municipal financial adviser or class of municipal financial advisers
specified in such rule or order.
``(b)(1) A municipal financial adviser may be registered by filing
with the Commission an application for registration in such form and
containing such information and documents concerning such municipal
financial adviser and any persons associated with such municipal
financial adviser as the Commission, by rule, may prescribe as
necessary or appropriate in the public interest or for the protection
of investors. Within 45 days of the date of the filing of such
application (or within such longer period as to which the applicant
consents), the Commission shall--
``(A) by order grant registration, or
``(B) institute proceedings to determine whether
registration should be denied. Such proceedings shall include
notice of the grounds for denial under consideration and
opportunity for hearing and shall be concluded within 120 days
of the date of the filing of the application for registration.
At the conclusion of such proceedings, the Commission, by
order, shall grant or deny such registration. The Commission
may extend the time for conclusion of such proceedings for up
to 90 days if it finds good cause for such extension and
publishes its reasons for so finding or for such longer period
as to which the applicant consents.
The Commission shall grant such registration if the Commission
finds that the requirements of this section are satisfied. The
Commission shall deny such registration if it does not make
such a finding or if it finds that if the applicant were so
registered, its registration would be subject to suspension or
revocation under paragraph (4).
``(2) An application for registration of a municipal financial
adviser to be formed or organized may be made by a municipal financial
adviser to which the municipal financial adviser to be formed or
organized is to be the successor. Such application, in such form as the
Commission, by rule, may prescribe, shall contain such information and
documents concerning the applicant, the successor, and any persons
associated with the applicant or the successor, as the Commission, by
rule, may prescribe as necessary or appropriate in the public interest
or for the protection of investors. The grant or denial of registration
to such an applicant shall be in accordance with the procedures set
forth in paragraph (1) of this subsection. If the Commission grants
such registration, the registration shall terminate on the 45th day
after the effective date thereof, unless prior thereto the successor
shall, in accordance with such rules and regulations as the Commission
may prescribe, adopt the application for registration as its own.
``(3) Any provision of this title (other than section 5 and
subsection (a) of this section) which prohibits any act, practice, or
course of business if the mails or any means or instrumentality of
interstate commerce is used in connection therewith shall also prohibit
any such act, practice, or course of business by any registered
municipal financial adviser or any person acting on behalf of such a
municipal financial adviser, irrespective of any use of the mails or
any means or instrumentality of interstate commerce in connection
therewith.
``(4) The Commission, by order, shall censure, place limitations on
the activities, functions, or operations of, suspend for a period not
exceeding 12 months, or revoke the registration of any municipal
financial adviser if it finds, on the record after notice and
opportunity for hearing, that such censure, placing of limitations,
suspension, or revocation is in the public interest and that such
municipal financial adviser, whether prior or subsequent to becoming
such, or any person associated with such municipal financial adviser,
whether prior or subsequent to becoming so associated--
``(A) has willfully made or caused to be made in any
application for registration or report required to be filed
with the Commission or with any other appropriate regulatory
agency under this title, or in any proceeding before the
Commission with respect to registration, any statement which
was at the time and in the light of the circumstances under
which it was made false or misleading with respect to any
material fact, or has omitted to state in any such application
or report any material fact which is required to be stated
therein;
``(B) has been convicted within 10 years preceding the
filing of any application for registration or at any time
thereafter of any felony or misdemeanor or of a substantially
equivalent crime by a foreign court of competent jurisdiction
which the Commission finds--
``(i) involves the purchase or sale of any
security, the taking of a false oath, the making of a
false report, bribery, perjury, burglary, any
substantially equivalent activity however denominated
by the laws of the relevant foreign government, or
conspiracy to commit any such offense;
``(ii) arises out of the conduct of the business of
a municipal financial adviser, broker, dealer,
municipal securities dealer, government securities
broker, government securities dealer, investment
adviser, bank, insurance company, fiduciary, transfer
agent, nationally recognized statistical rating
organization, foreign person performing a function
substantially equivalent to any of the above, or entity
or person required to be registered under the Commodity
Exchange Act (7 U.S.C. 1 et seq.) or any substantially
equivalent foreign statute or regulation;
``(iii) involves the larceny, theft, robbery,
extortion, forgery, counterfeiting, fraudulent
concealment, embezzlement, fraudulent conversion, or
misappropriation of funds, or securities, or
substantially equivalent activity however denominated
by the laws of the relevant foreign government; or
``(iv) involves the violation of section 152, 1341,
1342, or 1343 or chapter 25 or 47 of title 18, or a
violation of a substantially equivalent foreign
statute;
``(C) is permanently or temporarily enjoined by order,
judgment, or decree of any court of competent jurisdiction from
acting as a municipal financial adviser, investment adviser,
underwriter, broker, dealer, municipal securities dealer,
government securities broker, government securities dealer,
transfer agent, nationally recognized statistical rating
organization, foreign person performing a function
substantially equivalent to any of the above, or entity or
person required to be registered under the Commodity Exchange
Act or any substantially equivalent foreign statute or
regulation, or as an affiliated person or employee of any
investment company, bank, insurance company, foreign entity
substantially equivalent to any of the above, or entity or
person required to be registered under the Commodity Exchange
Act or any substantially equivalent foreign statute or
regulation or from engaging in or continuing any conduct or
practice in connection with any such activity, or in connection
with the purchase or sale of any security;
``(D) has willfully violated any provision of the
Securities Act of 1933, the Investment Advisers Act of 1940,
the Investment Company Act of 1940, the Commodity Exchange Act,
this title, the rules or regulations under any of such
statutes, or is unable to comply with any such provision;
``(E) has willfully aided, abetted, counseled, commanded,
induced, or procured the violation by any other person of any
provision of the Securities Act of 1933, the Investment
Advisers Act of 1940, the Investment Company Act of 1940, the
Commodity Exchange Act, this title, the rules or regulations
under any of such statutes, or has failed reasonably to
supervise, with a view to preventing violations of the
provisions of such statutes, rules, and regulations, another
person who commits such a violation, if such other person is
subject to his supervision. For the purposes of this
subparagraph, no person shall be deemed to have failed
reasonably to supervise any other person, if--
``(i) there have been established procedures, and a
system for applying such procedures, which would
reasonably be expected to prevent and detect, insofar
as practicable, any such violation by such other
person, and
``(ii) such person has reasonably discharged the
duties and obligations incumbent upon him by reason of
such procedures and system without reasonable cause to
believe that such procedures and system were not being
complied with;
``(F) is subject to any order of the Commission barring or
suspending the right of the person to be associated with a
municipal financial adviser;
``(G) has been found by a foreign financial regulatory
authority to have--
``(i) made or caused to be made in any application
for registration or report required to be filed with a
foreign financial regulatory authority, or in any
proceeding before a foreign financial regulatory
authority with respect to registration, any statement
that was at the time and in the light of the
circumstances under which it was made false or
misleading with respect to any material fact, or has
omitted to state in any application or report to the
foreign financial regulatory authority any material
fact that is required to be stated therein;
``(ii) violated any foreign statute or regulation
regarding transactions in securities, or contracts of
sale of a commodity for future delivery, traded on or
subject to the rules of a contract market or any board
of trade;
``(iii) aided, abetted, counseled, commanded,
induced, or procured the violation by any person of any
provision of any statutory provisions enacted by a
foreign government, or rules or regulations thereunder,
empowering a foreign financial regulatory authority
regarding transactions in securities, or contracts of
sale of a commodity for future delivery, traded on or
subject to the rules of a contract market or any board
of trade, or has been found, by a foreign financial
regulatory authority, to have failed reasonably to
supervise, with a view to preventing violations of such
statutory provisions, rules, and regulations, another
person who commits such a violation, if such other
person is subject to his supervision; or
``(H) is subject to any final order of a State securities
commission (or any agency or officer performing like
functions), State authority that supervises or examines banks,
savings associations, or credit unions, State insurance
commission (or any agency or office performing like functions),
an appropriate Federal banking agency (as defined in section 3
of the Federal Deposit Insurance Act (12 U.S.C. 1813(q))), or
the National Credit Union Administration, that--
``(i) bars such person from association with an
entity regulated by such commission, authority, agency,
or officer, or from engaging in the business of
securities, insurance, banking, savings association
activities, or credit union activities; or
``(ii) constitutes a final order based on
violations of any laws or regulations that prohibit
fraudulent, manipulative, or deceptive conduct.
``(5) Pending final determination whether any registration under
this subsection shall be revoked, the Commission, by order, may suspend
such registration, if such suspension appears to the Commission, after
notice and opportunity for hearing, to be necessary or appropriate in
the public interest or for the protection of investors. Any registered
municipal financial adviser may, upon such terms and conditions as the
Commission deems necessary or appropriate in the public interest or for
the protection of investors, withdraw from registration by filing a
written notice of withdrawal with the Commission. If the Commission
finds that any registered municipal financial adviser is no longer in
existence or has ceased to do business as a municipal financial
adviser, the Commission, by order, shall cancel the registration of
such municipal financial adviser.
``(6)(A) With respect to any person who is associated, who is
seeking to become associated, or, at the time of the alleged
misconduct, who was associated or was seeking to become associated with
a municipal financial adviser, the Commission, by order, shall censure,
place limitations on the activities or functions of such person, or
suspend for a period not exceeding 12 months, or bar such person from
being associated with a municipal financial adviser, if the Commission
finds, on the record after notice and opportunity for a hearing, that
such censure, placing of limitations, suspension, or bar is in the
public interest and that such person--
``(i) has committed or omitted any act, or is subject to an
order or finding, enumerated in subparagraph (A), (D), or (E)
of paragraph (4) of this subsection;
``(ii) has been convicted of any offense specified in
subparagraph (B) of such paragraph (4) within 10 years of the
commencement of the proceedings under this paragraph; or
``(iii) is enjoined from any action, conduct, or practice
specified in subparagraph (C) of such paragraph (4).
``(B) It shall be unlawful--
``(i) for any person as to whom an order under subparagraph
(A) is in effect, without the consent of the Commission,
willfully to become, or to be, associated with a municipal
financial adviser in contravention of such order; or
``(ii) for any municipal financial adviser to permit such a
person, without the consent of the Commission, to become or
remain, a person associated with the municipal financial
adviser in contravention of such order, if such municipal
financial adviser knew, or in the exercise of reasonable care
should have known, of such order.
``(7) No registered municipal financial adviser shall act as such
unless it meets such standards of operational capability and such
municipal financial adviser and all natural persons associated with
such municipal financial adviser meet such standards of training,
experience, competence, and such other qualifications as the Commission
finds necessary or appropriate in the public interest or for the
protection of investors. The Commission shall establish such standards
by rules and regulations, which may--
``(A) specify that all or any portion of such standards
shall be applicable to any class of municipal financial
advisers and persons associated with municipal financial
advisers;
``(B) require persons in any such class to pass tests
prescribed in accordance with such rules and regulations, which
tests shall, with respect to any class of partners, officers,
or supervisory employees (which latter term may be defined by
the Commission's rules and regulations) engaged in the
management of the municipal financial adviser, include
questions relating to bookkeeping, accounting, supervision of
employees, maintenance of records, and other appropriate
matters; and
``(C) provide that persons in any such class other than
municipal financial advisers and partners, officers, and
supervisory employees of municipal financial advisers, may be
qualified solely on the basis of compliance with such standards
of training and such other qualifications as the Commission
finds appropriate.
The Commission, by rule, may prescribe reasonable fees and charges to
defray its costs in carrying out this paragraph, including, but not
limited to, fees for any test administered by it or under its
direction.
``(c)(1)(A) No municipal financial adviser shall make use of the
mails or any means or instrumentality of interstate commerce in
connection with which such municipal financial adviser engages in any
fraudulent, deceptive, or manipulative act or practice or violates such
rules and regulations regarding conflicts of interest or fair
practices, including but not limited to rules and regulations related
to political contributions, as the Commission shall prescribe in the
public interest or for the protection of investors or to maintain fair
and orderly markets.
``(B) The Commission shall, for the purposes of this paragraph as
the Commission finds necessary or appropriate in the public interest or
for the protection of investors, by rules and regulations define, and
prescribe means reasonably designed to prevent, such acts and practices
as are fraudulent, deceptive, or manipulative.
``(2) If the Commission finds, after notice and opportunity for a
hearing, that any person subject to the provisions of this section or
any rule or regulation thereunder has failed to comply with any such
provision, rule, or regulation in any material respect, the Commission
may publish its findings and issue an order requiring such person, and
any person who was a cause of the failure to comply due to an act or
omission the person knew or should have known would contribute to the
failure to comply, to comply, or to take steps to effect compliance,
with such provision or such rule or regulation thereunder upon such
terms and conditions and within such time as the Commission may specify
in such order.
``(d) Every registered municipal financial adviser shall establish,
maintain, and enforce written policies and procedures reasonably
designed, taking into consideration the nature of such municipal
financial adviser's business, to prevent the misuse in violation of
this title, or the rules or regulations thereunder, of material,
nonpublic information by such municipal financial adviser or any person
associated with such municipal financial adviser. The Commission, as it
deems necessary or appropriate in the public interest or for the
protection of investors, shall adopt rules or regulations to require
specific policies or procedures reasonably designed to prevent misuse
in violation of this title (or the rules or regulations thereunder) of
material, nonpublic information.
``(e) A municipal financial adviser and any person associated with
such municipal financial adviser shall be deemed to have a fiduciary
duty to any municipal securities issuer for whom such municipal
financial adviser acts as a municipal financial adviser. A municipal
financial adviser may not engage in any act, practice, or course of
business which is not consistent with a municipal financial adviser's
fiduciary duty. The Commission shall, for the purposes of this
paragraph, by rules and regulations define, and prescribe means
reasonably designed to prevent, such acts, practices, and courses of
business as are not consistent with a municipal financial adviser's
fiduciary duty to its clients.''.
(b) Definition.--Section 3(a) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)) is amended by adding at the end the following
new paragraph:
``(65) Municipal financial adviser.--
``(A) The term `municipal financial adviser' means
a person who, for compensation, engages in the business
of--
``(i) providing advice to a municipal
securities issuer with respect to--
``(I) the issuance or proposed
issuance of securities, including any
remarketing of municipal securities
directly or indirectly by or on behalf
of a municipal securities issuer;
``(II) the investment of proceeds
from securities issued by such
municipal securities issuer;
``(III) the hedging of any risks
associated with subclauses (I) or (II),
including advice as to swap agreements
(as defined in section 206A of the
Gramm-Leach-Bliley Act regardless of
whether the counterparties constitute
eligible contract participants); or
``(IV) preparation of disclosure
documents in connection with the
issuance, proposed issuance, or
previous issuance of securities issued
by a municipal securities issuer,
including, without limitation, official
statements and documents prepared in
connection with a written agreement or
contract for the benefit of holders of
such securities described in section
240.15c2-12 of title 17, Code of
Federal Regulations; or
``(ii) assisting a municipal securities
issuer in selecting or negotiating guaranteed
investment contracts or other investment
products; or
``(iii) assisting any municipal securities
issuer in the primary offering of securities
not involving a public offering.
``(B) Such term does not include--
``(i) an attorney, if the attorney is
offering advice or providing services that are
of a traditional legal nature;
``(ii) a nationally recognized statistical
rating organization to the extent it is
involved in the process of developing credit
ratings;
``(iii) a registered broker-dealer when
acting as an underwriter, as such term is
defined in section 2(a)(11) of the Securities
Act of 1933 (15 U.S.C. section 77b(a)(11)); or
``(iv) a State or any political subdivision
thereof.
``(66) Municipal securities issuer.--The term `municipal
securities issuer' means--
``(A) any entity that has the ability to issue a
security the interest on which is excludable from gross
income under section 103 of the Internal Revenue Code
of 1986 and the regulations thereunder; or
``(B) any person who receives the proceeds
generated from the issuance of municipal securities.
``(67) Person associated with a municipal financial
adviser; associated person of a municipal financial adviser.--
The term `person associated with a municipal financial adviser'
or `associated person of a municipal financial adviser' means
any partner, officer, director, or branch manager of such
municipal financial adviser (or any person occupying a similar
status or performing similar functions), any person directly or
indirectly controlling, controlled by, or under common control
with such municipal financial adviser, or any employee of such
municipal financial adviser, except that any person associated
with a municipal financial adviser whose functions are solely
clerical or ministerial shall not be included in the meaning of
such term for purposes of section 15F(b) (other than paragraph
(6) thereof).''.
SEC. 3. CONFORMING AMENDMENTS.
(a) Securities Exchange Act of 1934 .--The Securities Exchange Act
of 1934 is amended--
(1) in section 15(b)(4)(B)(ii) (15 U.S.C.
78o(b)(4)(B)(ii)), by inserting ``municipal finance adviser,''
after ``nationally recognized statistical rating
organization,'';
(2) in section 15(b)(4)(C) (15 U.S.C. 78o(b)(4)(C)), by
inserting ``municipal finance adviser,'' after ``nationally
recognized statistical rating organization,''; and
(3) in section 17(a)(1) (15 U.S.C. 78q(a)(1)), by inserting
``registered municipal financial adviser,'' after ``nationally
recognized statistical rating organization,''.
(b) Investment Company Act of 1940.--The Investment Company Act of
1940 is amended--
(1) in section 2(a) (15 U.S.C. 80a-2(a)), by inserting the
following new paragraph:
``(54) The term `municipal finance adviser' has the same
meaning as in section 3 of the Securities Exchange Act of
1934.'';
(2) in section 9(a)(1) (15 U.S.C. 80a-9(a)(1), by inserting
``municipal finance adviser,'' after ``credit rating agency,'';
and
(3) in section 9(a)(2) (15 U.S.C. 80a-9(a)(2), by inserting
``municipal finance adviser,'' after ``credit rating agency,''.
(c) Investment Advisers Act of 1940.--The Investment Advisers Act
of 1940 is amended--
(1) in section 202(a) (15 U.S.C. 80b-2(a)), by inserting
the following new paragraph:
``(29) The term `municipal finance adviser' has the same
meaning as in Section 3 of the Securities Exchange Act of
1934.'';
(2) in section 203(e)(2)(B) (15 U.S.C. 80b-3(e)(2)(B)), by
inserting ``municipal finance adviser,'' after ``credit rating
agency,''; and
(3) in section 203(e)(4) (15 U.S.C. 80b-3(e)(4)) is amended
by inserting ``municipal finance adviser,'' after ``credit
rating agency,''.
SEC. 4. EFFECTIVE DATES.
(a) In General.--The amendments made by this Act shall take effect
30 days after the date of the enactment of this Act.
(b) Effective Date and Requirements for Regulations.--
Notwithstanding subsection (a), the Securities and Exchange Commission
shall, within 120 days after the date of the enactment of this Act,
publish for notice and public comment such regulations as are initially
required to implement this Act, and shall take final action with
respect to such regulations not later than 270 days after the date of
enactment of this Act.
(c) Registration Date.--No person may continue to act as a
municipal financial adviser, as such term is defined in section
3(a)(65) of the Securities Exchange Act of 1934, after 30 days after
the date the regulations described in subsection (b) become effective
unless such person has been registered as required by the amendment
made by section 2 of this Act.
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