[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 2813 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                S. 2813

     To increase corporate responsibility, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 20, 2009

 Mr. Menendez introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
     To increase corporate responsibility, 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 ``Investors Rights and Corporate 
Accountability Act of 2009''.

SEC. 2. FIDUCIARY STANDARD FOR BROKER-DEALERS.

    Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) 
is amended--
            (1) by redesignating subsection (i), as added by section 
        303(f) of the Commodity Futures Modernization Act of 2000 (114 
        Stat. 2763A-455), and as enacted into law by section 1(a)(5) of 
        Public Law 106-554, as subsection (j); and
            (2) by adding at the end the following:
    ``(k) Standard of Care.--Notwithstanding any other provision of 
this title or the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et 
seq.), the Commission shall promulgate rules, not later than 1 year 
after the date of enactment of this subsection, to provide that the 
standard of care for all brokers and dealers in providing investment 
advice to retail customers or clients (and any other customers or 
clients as the Commission may by rule provide) shall be the fiduciary 
duty established under the Investment Advisers Act of 1940 (15 U.S.C. 
80b-1 et seq.), including the duty to act solely in the best interest 
of the customer or client, without regard to the financial or other 
interest of the broker or dealer providing the advice.''.

SEC. 3. CLAWBACK OF INCENTIVE COMPENSATION AND BONUSES.

    (a) Securities Exchange Act of 1934.--Section 21D(f)(2)(A) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78u-4(f)(2)(A)) is amended--
            (1) by striking ``Joint and several liability.--Any'' and 
        inserting the following: ``Knowing violations.--
                            ``(i) Joint and several liability.--Any''; 
                        and
            (2) by adding at the end the following:
                            ``(ii) Incentive compensation and 
                        bonuses.--If the trier of fact specifically 
                        determines that a covered person knowingly 
                        committed a violation of the securities laws, 
                        the covered person shall be ordered to 
                        reimburse an issuer for--
                                    ``(I) any bonus or other incentive-
                                based or equity-based compensation 
                                received by the covered person from the 
                                issuer during the period of the 
                                violation of the securities laws; and
                                    ``(II) any profits realized by the 
                                covered person from the sale of 
                                securities of the issuer during the 
                                period of the violation of the 
                                securities laws.''.
    (b) Sarbanes-Oxley Act of 2002.--Section 304 of the Sarbanes-Oxley 
Act of 2002 (15 U.S.C. 7243) is amended--
            (1) in subsection (a)--
                    (A) in the matter preceding paragraph (1), by 
                striking ``, as a result of misconduct,'';
                    (B) in paragraph (1), by striking ``or filing with 
                the Commission (whichever first occurs)''; and
                    (C) in paragraph (2), by striking ``during that 12-
                month period''; and
            (2) by adding at the end the following:
    ``(c) Commencement of Action.--A shareholder of an issuer may 
commence an action on behalf of the issuer under this section if the 
chief executive officer or the chief financial officer of the issuer 
has not made a reimbursement required under this section before the 
expiration of the 90-day period beginning on the date on which the 
accounting restatement occurs.''.

SEC. 4. PROTECTING THE CONFIDENTIALITY OF WHISTLEBLOWERS.

    Section 21D(b)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 
78u-4(b)(2)) is amended--
            (1) by striking ``In any private action'' and inserting the 
        following:
                    ``(A) In general.--In any private action''; and
            (2) by adding at the end the following:
                    ``(B) Confidential sources.--
                            ``(i) In general.--Allegations by a 
                        confidential source shall be considered to give 
                        rise to a strong inference that the defendant 
                        acted with the required state of mind, if the 
                        source is described in the complaint with 
                        sufficient particularity to support the 
                        probability that a person in the situation of 
                        the source would possess the information 
                        alleged.
                            ``(ii) Considerations.--The weight accorded 
                        allegations by a confidential source shall 
                        depend on the level of detail provided by the 
                        source, the corroborative nature of the other 
                        facts alleged (including from other sources), 
                        the coherence and plausibility of the 
                        allegations, the number of sources, the 
                        reliability of the sources, and similar 
                        indicia.
                            ``(iii) Protection.--A confidential source 
                        described in a complaint shall be accorded the 
                        same protection received by a confidential 
                        source who provides comparable information to 
                        the Commission.
                            ``(iv) Nondisclosure requirements.--Upon 
                        motion, a court shall enter an order reasonably 
                        limiting the scope of nondisclosure required by 
                        a post-employment agreement. An order under 
                        this clause may not impair a legitimate 
                        interest of a former employer in the 
                        confidentiality of documents and information 
                        subject to the order.''.

SEC. 5. PROHIBITION ON CERTAIN VOTING BY BROKERS.

    Section 6(b) of the Securities Exchange Act of 1934 (15 U.S.C. 
78f(b)) is amended by adding at the end the following:
            ``(10) The rules of the exchange prohibit any member from 
        granting any proxy to vote any security in connection with an 
        election for membership to the board of directors or analogous 
        governing body of any issuer of a listed security, in the 
        absence of instructions from the beneficial owner of the 
        security regarding the specific election.''.

SEC. 6. INDEPENDENCE OF COMPENSATION ADVISERS.

    Section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78p) 
is amended by adding at the end the following:
    ``(h) Independent Compensation Advisers.--Not later than 1 year 
after the date of enactment of this subsection, the Commission shall, 
by rule--
            ``(1) require any adviser retained by the board of 
        directors or a committee of the board of directors of an issuer 
        in conjunction with the negotiation of an employment contract 
        or a compensation agreement with an executive of the issuer--
                    ``(A) to be independent of the issuer and the 
                executives and directors of the issuer; and
                    ``(B) to report solely to the board of directors or 
                the committee of the board of directors responsible for 
                executive compensation; and
            ``(2) prohibit an issuer from agreeing to indemnify or 
        limit the liability of an adviser described in paragraph 
        (1).''.

SEC. 7. AIDING AND ABETTING LIABILITY.

    (a) Securities Exchange Act of 1934.--Section 21D of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u-4) is amended by adding at the end 
the following:
    ``(g) Persons That Aid or Abet Violations.--Any person that 
provides substantial assistance to another person, with reckless 
disregard for whether the substantial assistance is in violation of 
this title, or of any rule or regulation issued under this title, shall 
be liable in a private action brought under this title, to the same 
extent as the person to whom the substantial assistance is provided.''.
    (b) Investment Advisers Act.--Section 209 of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-9) is amended by adding at the end 
the following:
    ``(f) Aiding and Abetting.--For purposes of any action brought by 
the Commission under subsection (e), any person that provides 
substantial assistance to another person, with reckless disregard for 
whether the substantial assistance is in violation of this Act, or of 
any rule, regulation, or order issued under this Act, shall be liable, 
to the same extent as the person to whom the substantial assistance is 
provided.''.

SEC. 8. SHAREHOLDER APPROVAL OF GOLDEN PARACHUTE COMPENSATION.

    Section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78p), 
as amended by this Act, is amended by adding at the end the following:
    ``(i) Severance Agreements Tied to Performance.--
            ``(1) Commission rules.--
                    ``(A) In general.--Not later than 270 days after 
                the date of enactment of this subsection, 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 is not in compliance with the 
                requirements of any portion of paragraph (2).
                    ``(B) Opportunity to cure.--The rules issued under 
                subparagraph (A) shall provide for appropriate 
                procedures for an issuer to have an opportunity to cure 
                any defects that would be the basis for such a 
                prohibition before the imposition of such prohibition.
                    ``(C) Considerations.--The rules issued under 
                subparagraph (A) shall be implemented with due regard 
                for contracts in existence on the date of enactment of 
                this subsection.
            ``(2) Severance agreements tied to performance.--The board 
        of directors of an issuer, or a committee of such board of 
        directors, may not enter into an agreement providing for 
        severance payments to a senior executive officer who is 
        terminated because of poor performance as an executive, as 
        determined by the board of directors. To the extent that an 
        issuer is able to terminate a senior executive officer for 
        cause, poor performance by the executive, as determined by the 
        board of directors, shall be considered as one such cause.''.
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