I 111th CONGRESS 1st Session H. R. 2798 IN THE HOUSE OF REPRESENTATIVES June 10, 2009 Mr. Arcuri (for himself and Mr. Maffei) introduced the following bill; which was referred to the Committee on Financial Services A BILL To increase securities protection coverage in the event of stolen or missing assets, and for other purposes.

1.

Short title

This Act may be cited as the Support Investment Protection for Customers Reform Act of 2009.

2.

Increasing Securities Investor Protection Corporation Cash Coverage

(a)

Increasing the cash limit of protection from $100,000 to $250,000

Section 9 of the Securities Investor Protection Act (15 U.S.C. 78fff–3) is amended— (1)in subsection (a)(1), by striking $100,000 for each such customer and inserting the standard maximum cash advance amount for each such customer, as determined in accordance with subsection (d); and (2)by adding at the end the following new subsections: (d)

Standard maximum cash advance amount

For purposes of this Act, the term standard maximum cash advance amount means $250,000, adjusted as provided under subsection (e) after March 31, 2010. (e)

Inflation adjustment

(1)

In general

Not later than April 1, 2010, and the first day of each 5-year period thereafter, and subject to the approval of the Commission, the Board of Directors of SIPC shall consider the factors set forth under paragraph (5), and, upon determining that an inflation adjustment is appropriate, shall prescribe the amount by which the standard maximum cash advance amount applicable to a customer claim shall be increased by calculating the product of— (A)$250,000; and (B)the ratio of the annual value of the Personal Consumption Expenditures Chain-Type Price Index (or any successor index thereto), published by the Department of Commerce, for the calendar year preceding the year in which the adjustment is calculated under this paragraph, to the published annual value of such index for the calendar year preceding the date this subparagraph takes effect. The values used in such calculation shall be the applicable values most recently published by the Department of Commerce. (2)

Rounding

If the amount determined under paragraph (1) for any period is not a multiple of $10,000, the amount so determined shall be rounded down to the nearest $10,000. (3)

Publication and report to Congress

Not later than April 5 of any calendar year in which an adjustment is required to be calculated under paragraph (1) to the standard maximum cash advance amount— (A)the Commission shall publish in the Federal Register the standard maximum cash advance amount, as so calculated; and (B)the Board of Directors of SIPC shall submit a report to the Congress containing the amount described in subparagraph (A). (4)

6-month implementation period

Any increase in the standard maximum cash advance amount shall take effect on January 1 of the year immediately succeeding the calendar year in which such increase is made. (5)

Inflation adjustment consideration

In making any determination under paragraph (1) to increase the standard maximum cash advance amount, the Board of Directors of SIPC shall consider, among other factors— (A)the overall state of the fund; (B)the economic conditions affecting members of SIPC; and (C)potential problems affecting members of SIPC. . (b)

Increasing SIPC line of credit with the Department of Treasury

Section 4(h) of the Securities Investor Protection Act (15 U.S.C. 78ddd(h)) is amended by striking out $1,000,000,000 and inserting the lesser of $2,500,000,000 or the target amount of the SIPC Fund specified in the bylaws of SIPC.

3.

Amendments to the Securities Investor Protection Act

(a)

Increasing the minimum assessment paid by SIPC members

Section 4(d)(1)(C) of the Securities Investor Protection Act (15 U.S.C. 78ddd(d)(1)(C)) is amended by striking $150 and inserting $1,000. (b)

SIPC as trustee in SIPA liquidation proceedings

Section 5(b)(3) of the Securities Investor Protection Act (15 U.S.C. 78eee(b)(3)) is amended— (1)by striking SIPC has determined that the liabilities of the debtor to unsecured general creditors and to subordinated lenders appear to aggregate less than $750,000 and that; and (2)by striking five hundred and inserting 5,000. (c)

Insiders ineligible for SIPC advance

(1)

In general

Section 9(a)(4) of the Securities Investor Protection Act (15 U.S.C. 78fff–3(a)(4)) is amended by inserting an insider, after or net profits of the debtor,. (2)

Insider defined

Section 16 of the Securities Investor Protection Act (15 U.S.C. 78lll) is amended by adding at the end the following new paragraph: (15)

Insider

The term insider shall have the same meaning as in section 101(31) of title 11, United States Code. . (d)

Eligibility for direct payment procedure

Section 10(a)(4) of the Securities Investor Protection Act (15 U.S.C. 78fff–4(a)(4)) is amended by striking out $250,000 and inserting $850,000. (e)

Increasing the fine for prohibited acts under SIPA

Section 14(c) of the Securities Investor Protection Act (15 U.S.C. 78jjj(c)) is amended by striking $50,000 each place it appears and inserting $250,000. (f)

Penalty for misrepresentation of SIPC membership or protection

Section 14 of the Securities Investor Protection Act (15 U.S.C. 78jjj) is amended by inserting at the end the following new subsection: (d)

Misrepresentation of SIPC membership or protection

(1)Any person who falsely represents by any means (including through the Internet or any other medium of mass communication), with actual knowledge of the falsity of the representation and with an intent to deceive or cause injury to another, that such person, or another person, is a member of SIPC or that any person or account is protected or is eligible for protection by SIPC, shall be— (A)civilly liable for any damages caused thereby; and (B)fined not more than $250,000 or imprisoned for not more than 5 years. (2)Any Internet service provider who, on or through a system or network controlled or operated by the service provider, transmits, routes, provides connection for, or stores any material containing any misrepresentation described in paragraph (1) shall be civilly liable for any damages caused by such misrepresentation, including damages suffered by SIPC, if such Internet service provider— (A)has actual knowledge that the material contains a misrepresentation described in paragraph (1), or (B)in the absence of actual knowledge, is aware of facts or circumstances from which it is apparent that such material contains a misrepresentation described in paragraph (1), and upon obtaining such knowledge or awareness, fails to act expeditiously to remove, or disable access to, such material.(3)Any court having jurisdiction of a civil action arising under this Act may grant temporary and final injunctions on such terms as it deems reasonable to prevent or restrain any violation of paragraph (1) or (2). Any such injunction may be served anywhere in the United States on the person enjoined, shall be operative throughout the United States, and shall be enforceable, by proceedings in contempt or otherwise, by any United States court having jurisdiction over that person. The clerk of the court granting the injunction shall, when requested by any other court in which enforcement of the injunction is sought, transmit promptly to the other court a certified copy of all papers in the case on file in such clerk’s office. .

4.

Commission Study on International Financial Cooperation

(a)

Sense of congress regarding necessity of an international effort To investigate and thwart global investment fraud

It is the sense of Congress that— (1)international commerce and global investment have grown exponentially since World War II, creating a marketplace without borders; (2)investors of all sizes deserve assurances that their financial assets are protected from theft, and their transactions are legitimate and accounted for; and (3)the case against Bernard L. Madoff Investment Securities, Inc. represents one of the worst and most devastating instances of financial fraud and deception in this Nation’s history, resulting in untold billions of dollars in missing assets and affecting thousands of investors in this Nation and around the globe. (b)

Federal Commission on International Financial Fraud

(1)

Establishment

There is hereby established within the Office of Inspector General of the Securities and Exchange Commission a Commission on International Financial Fraud (hereinafter in this subsection referred to as the Commission). (2)

Membership

The Commission shall be composed of the following members: (A)The Chairman of the Board of Directors of the Securities Investor Protection Corporation. (B)The Chairman of the Securities Exchange Commission. (C)The Secretary of the Treasury. (D)The Chairman of the Board of Governors of the Federal Reserve System. (E)The Secretary of State. (F)The Director of the Federal Bureau of Investigation. (G)One or more additional individuals, at the discretion of the Inspector General of the Securities and Exchange Commission, where each such individual is the heads of a State, local, private, or not-for-profit entity demonstrating research and academic expertise on issues pertaining to international investment and financial fraud. (3)

Duties

The Commission shall— (A)study potential relevance, structure, and long-term benefit of— (i)an international financial court; and (ii)establishing an international process for the adjudication of cases of financial fraud; (B)establish partnerships with State, local, private, and not-for-profit entities demonstrating research and academic expertise on issues pertaining to international investment and financial fraud; (C)subject to the approval of the Inspector General of the Securities and Exchange Commission, facilitate communication and information sharing with international public, private, and not-for-private entities relating to— (i)the creation of an international financial court; and (ii)establishing an international process for the adjudication of cases of financial fraud; and (D)study investigative and insurance protection frameworks for international United States investments. (4)

Reports

Not later than 3 months after the date of the enactment of this Act, and quarterly thereafter, the Commission shall issue a report to the Congress containing— (A)the Commission’s recommendations on how an international financial court could be structured; (B)the Commission’s recommendation on how a process for the international adjudication of claims of financial fraud could be structured; and (C)any additional recommendations of the Commission. (5)

Termination

The Commission shall terminate on the date that is 1 year after the date of the enactment of this Act. (6)

Funding

The cost of funding the Commission shall be divided equally among each Federal agency or department which is represented by a Member of the Commission. Notwithstanding the previous sentence, any State, local, private, or not-for-profit entity that chooses to may also contribute funds to pay for the cost of funding the Commission.