I 111th CONGRESS 1st Session H. R. 3300 IN THE HOUSE OF REPRESENTATIVES July 22, 2009 Mr. McMahon (for himself, Ms. Bean, Mr. Moore of Kansas, Mr. Himes, Mr. Crowley, Mr. Kind, Mr. Smith of Washington, Mrs. McCarthy of New York, Ms. Schwartz, Mr. Adler of New Jersey, Ms. Kosmas, Mr. Peters, and Mr. Murphy of New York) introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Agriculture, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To provide increased transparency and regulatory requirements for the trading of certain derivative financial instruments.

1.

Short title; findings

(a)

Short title

This Act may be cited as the Derivative Trading Accountability and Disclosure Act. (b)

Findings

Congress finds the following: (1)Derivatives are financial instruments used by companies to manage and mitigate risk and are widely used by American companies. (2)Derivatives are bilateral contracts that exchange financial risk. Over the counter (OTC) derivatives are customized to a particular company’s or investor’s situation and needs. (3)Many exchange traded products are not customizable, and as a result, companies are unable to match their risks to the products that are offered on exchanges, which are, by necessity, highly standardized. (4)Clearinghouses require that participants pledge only liquid collateral, such as cash or short-term government securities, to support their positions in the market without regard to the credit quality of the company. However, companies need their most liquid assets for their working capital and investment purposes. Requiring a company to post cash as collateral means removing cash from the company’s core business, which hurts the company and its employees, as well as the overall economy of the United States. (5)Lack of transparency, inadequate margin and capital requirements, and poor coordination of regulatory agencies to identify risks in the trading of derivatives, have all led to intense and unexpected pressure on individual financial service companies, and the American financial system as a whole. (6)The lack of oversight over the mortgage-backed credit default swap (CDS) market and the challenge corporate executives, business partners, investors and regulators had in identifying the value of and risks associated with various derivative markets played a central role in the near collapse of global financial and insurance giant American International Group, Inc. in late 2008. (7)Increased regulation and oversight of the derivatives market is critical to achieving the goals of— (A)lowering systemic risk to the financial system as a whole; (B)promoting the efficiency and transparency of derivative markets; (C)promoting market integrity by preventing fraud, manipulation, and other market abuses; and (D)protecting the public from improper marketing practices.

2.

Definitions

As used in this Act— (1)the term clearinghouse means a derivatives clearing organization as such term is defined in section 1a(9) of the Commodity Exchange Act (7 U.S.C. 1a(9) and a clearing agency as such term is defined in section 3(a)(23) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(23)); (2)the term derivative means any financial instrument, traded on or off an exchange, the price of which, at least in part, is directly dependent upon the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed upon pricing index or arrangement; (3)the term derivatives trader means any person engaged in the business of buying and selling any type of derivative as part of its market making activity but does not include a person who buys or sells any type of derivative primarily for purposes of hedging an exposure or making an investment; (4)the term exchange has the meaning given such term in section 3(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(1)) and includes a board of trade as such term is defined in section 1a(2) of the Commodity Exchange Act (7 U.S.C. 1a(2)); (5)the term major market participant means any entity which engages in not fewer than such number of such kinds of transactions, or trades not fewer than such number of such kinds of derivatives, as the Commodities Future Trading Commission or the Securities and Exchange Commission, as appropriate, determines to qualify such entity as a financial institution (or other entity) of significant relevance to the national financial system as a whole, including all subsidiaries or affiliates of such entity whose activities fall under the jurisdiction of the Commodities Future Trading Commission or the Securities and Exchange Commission, as appropriate; (6)the term the Office means the Office of Derivatives Supervision established in the Department of the Treasury under section 3; and (7)the term over-the-counter derivatives trade depository means any person who acts as a custodian for the primary record of an over-the-counter derivative transaction or who provides facilities for central processing and reconciliation of transaction information relating to over-the-counter derivative transactions.

3.

Office of Derivatives Supervision in the Treasury

(a)

Establishment

There is hereby established within the Department of the Treasury an office to be known as the Office of Derivatives Supervision. (b)

Duties

(1)

Oversight of registration of derivatives traders

The Office shall oversee the registration of derivatives traders as required under section 4 and issue such rules or regulations as required to implement the requirements of such section. (2)

Coordination on derivatives regulations

The Office shall provide support and coordination to the Securities and Exchange Commission and the Commodity Futures Trading Commission in developing a comprehensive and standardized set of regulations for the sale, purchase, exchange, or trade of derivatives. In particular, the Office shall harmonize substantive futures and securities regulation for economically equivalent instruments and require the development of consistent procedures for reviewing and approving proposals for new products and rulemakings by self-regulatory organizations. (3)

Information facilitation

The Office shall facilitate the exchange of information related to the development of derivatives regulations described in paragraph (1) between— (A)the Securities and Exchange Commission; (B)the Commodity Futures Trading Commission; (C)the Office of the Comptroller of the Currency; (D)the Office of Thrift Supervision; (E)the Federal Reserve System; and (F)such other Federal agencies or departments as the Office may prescribe. (4)

Disapproval power over derivatives regulations

(A)

In general

If, within 30 days of the prescription of a rule or regulation with respect to the sale, purchase, exchange, or trade of derivatives prescribed by the Securities and Exchange Commission or the Commodity Futures Trading Commission, the Secretary of the Treasury, acting through the Office, determines that such rule or regulation does not harmonize substantive commodities and securities regulation for economically equivalent instruments between the Securities and Exchange Commission and the Commodity Futures Trading Commission, such rule or regulation shall not take effect. (B)

Exception

Subparagraph (A) shall not apply to a rule or regulation if such rule or regulation is expressly required to be prescribed by law. (c)

Report

Not later than June 30, 2010, and each year thereafter, the Office shall transmit a report to Congress that— (1)identifies and details the rules promulgated under this Act; (2)evaluates the number, percentage, volume or notional size, and economic exposure of derivative instruments that are— (A)traded on exchanges; (B)cleared through clearinghouses; and (C)traded on the over-the-counter market; and (3)assesses the effect of changes in mark-to-market fair value accounting rules, hedge accounting rules, and other related regulations on the derivatives market.

4.

Registration of Derivatives Traders

(a)

Unlawful conduct

(1)

In general

It shall be unlawful for any derivatives trader 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 type of derivative unless such derivatives trader is registered in accordance with subsection (b). (2)

Exemption

The Secretary of the Treasury, acting through the Office (referred to in this section as the Secretary), by rule or order, after consultation with the Securities and Exchange Commission and the Commodities Futures Trading Commission, as applicable, may conditionally or unconditionally exempt from paragraph (1) any derivatives trader or class of derivatives traders specified in such rule or order. (b)

Registration

(1)

In general

A derivatives trader may be registered by filing with the Secretary an application for registration in such form and containing such information and documents concerning such derivatives trader and any persons associated with such derivatives trader as the Secretary, 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 Secretary shall— (A)by order grant registration, or (B)institute proceedings to determine whether registration should be denied. (2)

Determination

The Secretary shall grant such registration if the Secretary finds that the requirements of this section are satisfied. The Secretary shall deny such registration if the Secretary does not make such a finding or if the Secretary finds that if the applicant were so registered, its registration would be subject to suspension or revocation under paragraph (4). If the Secretary institutes proceedings under paragraph (1)(B), 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 Secretary, by order, shall grant or deny such registration. The Secretary may extend the time for conclusion of such proceedings for up to 90 days if the Secretary finds good cause for such extension and publishes its reasons for so finding or for such longer period as to which the applicant consents. (3)

Application

An application for registration of a derivatives trader to be formed or organized may be made by a derivatives trader to which the derivatives trader to be formed or organized is to be the successor. Such application, in such form as the Secretary, 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 Secretary, 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). If the Secretary 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 Secretary may prescribe, adopt the application for registration as its own. (4)

Censure, suspension, revocation

The Secretary, 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 derivatives trader if the Secretary 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 derivatives trader, whether prior or subsequent to becoming such, or any person associated with such derivatives trader, 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 Secretary under this Act, or in any proceeding before the Secretary 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 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 Secretary finds— (i)involves the purchase or sale of any security or derivative, 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 derivatives trader, 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 derivatives, 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 a derivatives trader, 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 or derivative; (D)has willfully violated any provision of the securities laws (as such term is defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), the Commodity Exchange Act (7 U.S.C. 1a et seq.), any rule or regulation issued under this Act or under any of such Acts, 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 laws (as such term is defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), the Commodity Exchange Act (7 U.S.C. 1a et seq.), any rule or regulation issued under this Act or under any of such Acts, the rules or regulations under this Act or any of such Acts, or has failed reasonably to supervise, with a view to preventing violations of the provisions of such Acts, 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 Secretary barring or suspending the right of the person to be associated with a derivatives trader; (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)), 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)

Temporary suspension

Pending final determination whether any registration under this subsection shall be revoked, the Secretary, by order, may suspend such registration, if such suspension appears to the Secretary, after notice and opportunity for hearing, to be necessary or appropriate in the public interest or for the protection of investors. Any registered derivatives trader may, upon such terms and conditions as the Secretary 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 Secretary. If the Secretary finds that any registered derivatives trader is no longer in existence or has ceased to do business as a derivatives trader, the Secretary, by order, shall cancel the registration of such derivatives trader. (6)

Standards of competence

No registered derivatives trader shall act as such unless it meets such standards of operational capability and such derivatives trader and all natural persons associated with such derivatives trader meet such standards of training, experience, competence, and such other qualifications as the Secretary finds necessary or appropriate in the public interest or for the protection of investors. The Secretary 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 derivatives traders and persons associated with derivatives traders; (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 Secretary’s rules and regulations) engaged in the management of the derivatives trader, 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 derivatives traders and partners, officers, and supervisory employees of derivatives traders, may be qualified solely on the basis of compliance with such standards of training and such other qualifications as the Secretary finds appropriate. The Secretary, 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 the Secretary or under its direction.(c)

Additional prohibitions

(1)

fraudulent, deceptive, or manipulative acts or practices

(A)No derivatives trader shall make use of the mails or any means or instrumentality of interstate commerce in connection with which such derivatives trader 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 Secretary shall prescribe in the public interest or for the protection of investors or to maintain fair and orderly markets. (B)The Secretary shall, for the purposes of this paragraph as the Secretary 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)

Enforcement

If the Secretary 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 Secretary 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 Secretary may specify in such order. (d)

Policies and procedures

Every registered derivatives trader shall establish, maintain, and enforce written policies and procedures reasonably designed, taking into consideration the nature of such derivatives trader’s business, to prevent the misuse in violation of this Act, or the rules or regulations thereunder, of material, nonpublic information by such derivatives trader or any person associated with such derivatives trader. The Secretary, as the Secretary 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 Act (or the rules or regulations thereunder) of material, nonpublic information.

5.

Rulemaking authority related to derivatives

(a)

Issuance of proposed regulations

Not later than 120 days after the date of the enactment of this Act, the Commodity Futures Trading Commission and the Securities and Exchange Commission shall each issue separate proposed regulations imposing the following kinds of requirements with respect to trading in the derivative instruments over which each Commission has jurisdiction as of such date of enactment: (1)Requirements governing the disclosure to the respective Commission of information about the positions and trading in the instruments, and transparency, including an audit trail of the record of trading information identifying, for the derivatives traders participating in each transaction, the firms clearing the trade, the terms and time or sequence of the trade, the order receipt and execution time, as applicable and, ultimately, and as applicable, the customers involved. (2)Anti-fraud and truth-in-marketing requirements. (3)Mandatory minimum initial margin requirements. (4)Mandatory minimum variation margin requirements. (5)Acceptable or permissible types of collateral. (b)

Factors To be considered

The proposed regulations that impose the requirements referred to in paragraphs (3) through (5) of subsection (a) with respect to trading in a derivative shall be based on an evaluation of the following: (1)The potential systemic risk posed by the sale, purchase, exchange, or trade of the derivative, determined after reviewing whether the trade is being made by a major market participant. (2)The extent to which the instrument has been customized, determined after reviewing the following: (A)The volume of transactions involving the derivative. (B)The similarity of the terms of the derivative to the terms in derivatives that are more standardized in the industry. (C)Whether the differences between the terms of the derivative and the terms of such standardized derivatives are of economic significance. (D)The extent to which any of the terms in the derivative are disseminated to third parties. (c)

Final regulations

Within 180 days after the date of the enactment of this Act, the Commodity Futures Trading Commission and the Securities and Exchange Commission shall each promulgate in final form, with the approval of the Secretary, the regulations developed under this section.

6.

Regulations Regarding the Trading and Clearing of Derivatives

(a)

In general

The Securities and Exchange Commission and the Commodities Futures Trading Commission shall jointly determine, in coordination with the Office, which derivatives or class of derivatives shall be— (1)required to be traded on an exchange; (2)required to be cleared through a clearinghouse; and (3)permitted to be traded through the over-the-counter market. (b)

Guidelines

Such determinations shall be made in accordance with the following guidelines: (1)All standardized derivatives shall be permitted to be traded on an exchange, including those derivatives excluded or exempt from such trading on Organized Exchanges under the Commodities and Exchange Act. (2)Standardized derivatives sold, purchased, traded, or exchanged between major market participants shall be cleared through clearinghouses. (3)Derivatives that continue to be traded in the over-the-counter market that are not cleared through a clearinghouse shall be processed through an over-the-counter derivatives trade depository. (c)

Uniform regulations

Regardless of whether a transaction is made on an exchange, through a clearinghouse, or through the over-the-counter market, all trades shall be subject to the disclosure, transparency, anti-fraud, truth-in-marketing, and reporting requirements set jointly by the Securities and Exchange Commission, the Commodities Futures Trading Commission, and the Office. (d)

Additional requirements

Regulations issued under this section shall require that— (1)derivatives that are not traded on exchanges or cleared through clearinghouses and are made by major market participants be subject to higher total capital requirements (either through higher initial margin, higher variation margin, or other higher collateral positions) than those derivatives traded on exchanges or through clearinghouses; and (2)derivatives that are sold, purchased, traded, or exchanged between a major market participant and a non-major market participant that is able to borrow funds in the debt markets on an uncollateralized basis, or is able to obtain other sources of credit without posting cash or cash equivalents to secure funds borrowed, shall be permitted to be sold, purchased, traded, or exchanged with limited or no required initial margin, variation margin or other capital or collateral positions. (e)

Subsequent determinations

Nothing in this Act shall prevent the Securities and Exchange Commission, the Commodities Futures Trading Commission, or the Office from making a subsequent determination, or amendment of, an initial determination of which class of derivatives may be traded on an exchange, cleared through a clearinghouse, or permitted to be traded through the over-the-counter market. (f)

Report

Not later than 45 days following the date of enactment of this Act, the Securities and Exchange Commission and the Commodities Futures Trading Commission shall jointly prepare and transmit a report to Congress that identifies all conflicts in statutes and regulations with respect to similar types of financial instruments and either explains why those differences are essential to achieve underlying policy objectives with respect to investor protection, market integrity, and price transparency or makes recommendations for changes to statutes and regulations that would eliminate the differences.

7.

Civil Penalty Authority of the SEC and CFTC

(a)

Authority To assess civil penalties

The Securities and Exchange Commission or the Commodity Futures Trading Commission, as appropriate, may impose a civil penalty on any person over which each respective Commission has jurisdiction under this Act and the regulations issued under this Act, if it finds, on the record after notice and opportunity for hearing, that such person— (1)has violated any requirement of this Act and the regulations issued under this Act with respect to derivatives trading, (2)has willfully aided, abetted, counseled, commanded, induced, or procured such a violation by any other person, (3)has willfully made or caused to be made in any application for registration or report required to be filed with the Office or with each respective Commission, or (4)has failed reasonably to supervise another person who commits such a violation, if such other person is subject to such supervision, and that such penalty is in the public interest.(b)

Maximum amount of penalty

(1)

First tier

The maximum amount of penalty for each act or omission described in subsection (a) of this section shall be $15,000 for a natural person or $150,000 for any other person. (2)

Second tier

Notwithstanding paragraph (1), the maximum amount of penalty for each such act or omission shall be $150,000 for a natural person or $750,000 for any other person if the act or omission described in subsection (a) of this section 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 $300,000 for a natural person or $1,500,000 for any other person if— (A)the act or omission described in subsection (a) of this section 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. (c)

Determination of public interest

In considering under this section whether a penalty is in the public interest, the appropriate Commission 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 appropriate Commission to have violated any provision of the Federal securities laws, State securities laws, or the Commodities Futures Trading Act, 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; (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 a Commission may impose a penalty under this section, a respondent may present evidence of the respondent's ability to pay such penalty. The appropriate 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 order requiring accounting and disgorgement

In any proceeding in which a Commission may impose a penalty under this section, the appropriate Commission may enter an order requiring accounting and disgorgement, including reasonable interest. Each Commission is authorized to adopt rules, regulations, and orders concerning payments to investors, rates of interest, periods of accrual, and such other matters with respect to those derivatives over which each respective Commission has jurisdiction under this Act and the regulations issued under this Act, as the appropriate Commission deems appropriate to implement this subsection.

8.

Cease-and-Desist Proceedings

(a)

Authority of Commission

If the Securities and Exchange Commission or the Commodity Futures Trading Commission, as appropriate, finds that any person over which each respective Commission has jurisdiction under this Act is violating, has violated, or is about to violate any provision of this Act, or any rule or regulation thereunder, the appropriate 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 appropriate Commission may specify in such order. Any such order may, as such Commission deems appropriate, require future compliance or steps to effect future compliance, either permanently or for such period of time as such 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 not later than 60 days after service of the notice unless an earlier or a later date is set by the appropriate Commission with the consent of any respondent so served. (c)

Temporary order

Whenever the appropriate Commission determines that the alleged violation or threatened violation specified in the notice instituting proceedings pursuant to subsection (a) is likely to result in significant dissipation or conversion of assets, significant harm to investors, or substantial harm to the public interest, such 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 such 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 appropriate Commission or a court of competent jurisdiction, shall remain effective and enforceable pending the completion of the proceedings. (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 serving the order 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 such 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).(3)

No automatic stay of temporary order

The commencement of proceedings under paragraph (2) shall not, unless specifically ordered by the court, operate as a stay of the Commission’s order. (e)

Authority To enter order requiring 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. Each 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.

9.

Expedited rulemaking procedures

The Office, the Commodities Futures Trading Commission, and the Securities and Exchange Commission may issue the rules required under this Act through expedited rulemaking procedures.

10.

Working group of international regulators

(a)

In general

Not later than 90 days after the date of the enactment of this Act, the Office shall invite representatives of the Securities and Exchange Commission, the Commodity Futures Trading Commission, regulators of domestic and foreign boards of trade, and other experts, to participate in a working group of international regulators to review international reporting and regulatory standards to evaluate international regulations regarding the harmonization of substantive commodities and securities regulation for economically equivalent instruments. (b)

Representation of the united states

The representation of the United States in discussions among and negotiations with other nations relating to the international regulation of derivatives shall be composed of the following: (1)One individual appointed by the Secretary of the Treasury acting through the Office. (2)One individual appointed by the Chairman of the Securities and Exchange Commission. (3)One individual appointed by the Chairman of the Commodity Futures Trading Commission.

11.

Authorization of appropriations

There is authorized to be appropriated to each of the Secretary of the Treasury, the Commodities Futures Trading Commission, and the Securities and Exchange Commission, such sums as may be necessary to carry out this Act.