Short title

This Act may be cited as the

Modernizing and Strengthening Investor Protection Act of 2010

Strengthening enforcement by the Commission

(a)

Nationwide service of subpoenas

(1)

Securities Act of 1933

Section 22(a) of the Securities Act of 1933 (15 U.S.C. 77v(a)) is amended by inserting after the second sentence the following: In any action or proceeding instituted by the Commission under this title in a United States district court for any judicial district, a subpoena issued to compel the attendance of a witness or the production of documents or tangible things (or both) at a hearing or trial may be served at any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding sentence.. (2)

Securities Exchange Act of 1934

Section 27 of the Securities Exchange Act of 1934 (15 U.S.C. 78aa) is amended by inserting after the third sentence the following: In any action or proceeding instituted by the Commission under this title in a United States district court for any judicial district, a subpoena issued to compel the attendance of a witness or the production of documents or tangible things (or both) at a hearing or trial may be served at any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding sentence.. (3)

Investment Company Act of 1940

Section 44 of the Investment Company Act of 1940 (15 U.S.C. 80a–43) is amended by inserting after the fourth sentence the following: In any action or proceeding instituted by the Commission under this title in a United States district court for any judicial district, a subpoena issued to compel the attendance of a witness or the production of documents or tangible things (or both) at a hearing or trial may be served at any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding sentence.. (4)

Investment Advisers Act of 1940

Section 214 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–14) is amended by inserting after the third sentence the following: In any action or proceeding instituted by the Commission under this title in a United States district court for any judicial district, a subpoena issued to compel the attendance of a witness or the production of documents or tangible things (or both) at a hearing or trial may be served at any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding sentence.. (b)

Authority To impose civil penalties in cease-and-Desist proceedings

(1)

Under the Securities Act of 1933

Section 8A of the Securities Act of 1933 (15 U.S.C. 77h–1) is amended by adding at the end the following new subsection:

(g)

Authority To impose money penalties

(1)

Grounds

In any cease-and-desist proceeding under subsection (a), the Commission may impose a civil penalty on a person if the Commission finds, on the record, after notice and opportunity for hearing, that— (A)such person— (i)is violating or has violated any provision of this title, or any rule or regulation issued under this title; or (ii)is or was a cause of the violation of any provision of this title, or any rule or regulation thereunder; and (B)such penalty is in the public interest. (2)

Maximum amount of penalty

(A)

First tier

The maximum amount of a penalty for each act or omission described in paragraph (1) shall be $7,500 for a natural person or $75,000 for any other person. (B)

Second tier

Notwithstanding subparagraph (A), the maximum amount of penalty for each such act or omission shall be $75,000 for a natural person or $375,000 for any other person, if the act or omission described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement. (C)

Third tier

Notwithstanding subparagraphs (A) and (B), the maximum amount of penalty for each such act or omission shall be $150,000 for a natural person or $725,000 for any other person, if— (i)the act or omission described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and (ii)such act or omission directly or indirectly resulted in— (I)substantial losses or created a significant risk of substantial losses to other persons; or (II)substantial pecuniary gain to the person who committed the act or omission. (3)

Evidence concerning ability to pay

In any proceeding in which the Commission may impose a penalty under this section, a respondent may present evidence of the ability of the respondent to pay such penalty. The 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 the ability of the respondent to continue in business and the collectability of a penalty, taking into account any other claims of the United States or third parties upon the assets of the respondent and the amount of the assets of the respondent.

(2)

Under the Securities Exchange Act of 1934

Section 21B(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78u–2(a)) is amended— (A)by striking the matter immediately following paragraph (4); (B)in the matter preceding paragraph (1), by inserting after opportunity for hearing, the following: that such penalty is in the public interest and; (C)by redesignating paragraphs (1) through (4) as subparagraphs (A) through (D), respectively, and adjusting the subparagraph margins accordingly; (D)by striking In any proceeding and inserting the following:

(1)

In general

In any proceeding

; and

(E)by adding at the end the following:

(2)

Cease-and-desist proceedings

In any proceeding instituted under section 21C against any person, the Commission may impose a civil penalty, if the Commission finds, on the record after notice and opportunity for hearing, that such person— (A)is violating or has violated any provision of this title, or any rule or regulation issued under this title; or (B)is or was a cause of the violation of any provision of this title, or any rule or regulation issued under this title.

(3)

Under the Investment Company Act of 1940

Section 9(d)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a–9(d)(1)) is amended— (A)by striking the matter immediately following subparagraph (C); (B)in the matter preceding subparagraph (A), by inserting after opportunity for hearing, the following: that such penalty is in the public interest, and; (C)by redesignating subparagraphs (A) through (C) as clauses (i) through (iii), respectively, and adjusting the clause margins accordingly; (D)by striking In any proceeding and inserting the following:

(A)

In general

In any proceeding

; and

(E)by adding at the end the following:

(B)

Cease-and-desist proceedings

In any proceeding instituted pursuant to subsection (f) against any person, the Commission may impose a civil penalty if the Commission finds, on the record, after notice and opportunity for hearing, that such person— (i)is violating or has violated any provision of this title, or any rule or regulation issued under this title; or (ii)is or was a cause of the violation of any provision of this title, or any rule or regulation issued under this title.

(4)

Under the Investment Advisers Act of 1940

Section 203(i)(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–3(i)(1)) is amended— (A)by striking the undesignated matter immediately following subparagraph (D); (B)in the matter preceding subparagraph (A), by inserting after opportunity for hearing, the following: that such penalty is in the public interest and; (C)by redesignating subparagraphs (A) through (D) as clauses (i) through (iv), respectively, and adjusting the clause margins accordingly; (D)by striking In any proceeding and inserting the following:

(A)

In general

In any proceeding

; and

(E)by adding at the end the following new subparagraph:

(B)

Cease-and-desist proceedings

In any proceeding instituted pursuant to subsection (k) against any person, the Commission may impose a civil penalty if the Commission finds, on the record, after notice and opportunity for hearing, that such person— (i)is violating or has violated any provision of this title, or any rule or regulation issued under this title; or (ii)is or was a cause of the violation of any provision of this title, or any rule or regulation issued under this title.

(c)

Formerly associated persons

(1)

Member or employee of the municipal securities rulemaking board

Section 15B(c)(8) of the Securities Exchange Act of 1934 (15 U.S.C. 78o–4(c)(8)) is amended by striking any member or employee and inserting any person who is, or at the time of the alleged violation or abuse was, a member or employee. (2)

Person associated with a government securities broker or dealer

Section 15C(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78o–5(c)) is amended— (A)in paragraph (1)(C), by striking any person associated, or seeking to become associated, and inserting any person who is, or at the time of the alleged misconduct was, associated or seeking to become associated; and (B)in paragraph (2)— (i)in subparagraph (A), by inserting , seeking to become associated, or, at the time of the alleged misconduct, associated or seeking to become associated after any person associated; and (ii)in subparagraph (B), by inserting , seeking to become associated, or, at the time of the alleged misconduct, associated or seeking to become associated after any person associated. (3)

Person associated with a member of a national securities exchange or registered securities association

Section 21(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(a)(1)) is amended, in the first sentence, by inserting , or, as to any act or practice, or omission to act, while associated with a member, formerly associated after member or a person associated. (4)

Participant of a registered clearing agency

Section 21(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(a)(1)) is amended, in the first sentence, by inserting or, as to any act or practice, or omission to act, while a participant, was a participant, after in which such person is a participant,. (5)

Officer or director of a self-regulatory organization

Section 19(h)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(h)(4)) is amended— (A)by striking any officer or director and inserting any person who is, or at the time of the alleged misconduct was, an officer or director; and (B)by striking such officer or director and inserting such person. (6)

Officer or director of an investment company

Section 36(a) of the Investment Company Act of 1940 (15 U.S.C. 80a–35(a)) is amended— (A)by striking a person serving or acting and inserting a person who is, or at the time of the alleged misconduct was, serving or acting; and (B)by striking such person so serves or acts and inserting such person so serves or acts, or at the time of the alleged misconduct, so served or acted. (7)

Person associated with a public accounting firm

(A)

Sarbanes-Oxley Act of 2002 amendment

Section 2(a)(9) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(9)) is amended by adding at the end the following:

(C)

Investigative and enforcement authority

For purposes of sections 3(c), 101(c), 105, and 107(c) and the rules of the Board and Commission issued thereunder, except to the extent specifically excepted by such rules, the terms defined in subparagraph (A) shall include any person associated, seeking to become associated, or formerly associated with a public accounting firm, except that— (i)the authority to conduct an investigation of such person under section 105(b) shall apply only with respect to any act or practice, or omission to act, by the person while such person was associated or seeking to become associated with a registered public accounting firm; and (ii)the authority to commence a disciplinary proceeding under section 105(c)(1), or impose sanctions under section 105(c)(4), against such person shall apply only with respect to— (I)conduct occurring while such person was associated or seeking to become associated with a registered public accounting firm; or (II)non-cooperation, as described in section 105(b)(3), with respect to a demand in a Board investigation for testimony, documents, or other information relating to a period when such person was associated or seeking to become associated with a registered public accounting firm.

(B)

Securities Exchange Act of 1934 amendment

Section 21(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(a)(1)) is amended by striking or a person associated with such a firm and inserting “, a person associated with such a firm, or, as to any act, practice, or omission to act, while associated with such firm, a person formerly associated with such a firm”. (8)

Supervisory personnel of an audit firm

Section 105(c)(6) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7215(c)(6)) is amended— (A)in subparagraph (A), by striking the supervisory personnel and inserting any person who is, or at the time of the alleged failure reasonably to supervise was, a supervisory person; and (B)in subparagraph (B)— (i)by striking No associated person and inserting No current or former supervisory person; and (ii)by striking any other person and inserting any associated person. (9)

Member of the Public Company Accounting Oversight Board

Section 107(d)(3) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7217(d)(3)) is amended by striking any member and inserting any person who is, or at the time of the alleged misconduct was, a member. (d)

Extraterritorial jurisdiction of the antifraud provisions of the Federal securities laws

(1)

Under the Securities Act of 1933

Section 22 of the Securities Act of 1933 (15 U.S.C. 77v(a)) is amended by adding at the end the following new subsection:

(c)

Extraterritorial jurisdiction

The district courts of the United States and the United States courts of any Territory shall have jurisdiction of an action or proceeding brought or instituted by the Commission or the United States alleging a violation of section 17(a) involving— (1)conduct within the United States that constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors; or (2)conduct occurring outside the United States that has a foreseeable substantial effect within the United States.

(2)

Under the Securities Exchange Act of 1934

Section 27 of the Securities Exchange Act of 1934 (15 U.S.C. 78aa) is amended— (A)by striking The district and inserting the following:

(a)

In general

The district

; and

(B)by adding at the end the following new subsection:

(b)

Extraterritorial jurisdiction

The district courts of the United States and the United States courts of any Territory shall have jurisdiction of an action or proceeding brought or instituted by the Commission or the United States alleging a violation of the antifraud provisions of this title involving— (1)conduct within the United States that constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors; or (2)conduct occurring outside the United States that has a foreseeable substantial effect within the United States.

(3)

Under the Investment Advisers Act of 1940

Section 214 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–14) is amended— (A)by striking The district and inserting the following:

(a)

In general

The district

; and

(B)by adding at the end the following new subsection:

(b)

Extraterritorial jurisdiction

The district courts of the United States and the United States courts of any Territory shall have jurisdiction of an action or proceeding brought or instituted by the Commission or the United States alleging a violation of section 206 involving— (1)conduct within the United States that constitutes significant steps in furtherance of the violation, even if the violation is committed by a foreign adviser and involves only foreign investors; or (2)conduct occurring outside the United States that has a foreseeable substantial effect within the United States.

(e)

Control person liability under the Securities Exchange Act of 1934

Section 20(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78t(a)) is amended by inserting after controlled person is liable the following: (including to the Commission in any action brought under paragraph (1) or (3) of section 21(d)). (f)

Aiding and abetting under the securities laws

(1)

Under the Securities Act of 1933

Section 15 of the Securities Act of 1933 (15 U.S.C. 77o) is amended— (A)by striking Every person who and inserting (a) Controlling persons.—Every person who; and (B)by adding at the end the following:

(b)

Prosecution of persons who aid and abet violations

For purposes of any action brought by the Commission under subparagraph (b) or (d) of section 20, any person that knowingly or recklessly provides substantial assistance to another person in violation of a provision of this Act, or of any rule or regulation issued under this Act, shall be deemed to be in violation of such provision to the same extent as the person to whom such assistance is provided.

(2)

Under the Investment Company Act of 1940

Section 48 of the Investment Company Act of 1940 (15 U.S.C. 80a–48) is amended by redesignating subsection (b) as subsection (c) and inserting after subsection (a) the following:

(b)For purposes of any action brought by the Commission under subsection (d) or (e) of section 42, any person that knowingly or recklessly provides substantial assistance to another person in violation of a provision of this Act, or of any rule or regulation issued under this Act, shall be deemed to be in violation of such provision to the same extent as the person to whom such assistance is provided.

(3)

Under the Investment Advisers Act

Section 209 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–9) is amended by inserting at the end the following new subsection:

(f)

Aiding and abetting

For purposes of any action brought by the Commission under subsection (e), any person that knowingly or recklessly has aided, abetted, counseled, commanded, induced, or procured a violation of any provision of this Act, or of any rule, regulation, or order hereunder, shall be deemed to be in violation of such provision, rule, regulation, or order to the same extent as the person that committed such violation.

(4)

Under the Securities Exchange Act of 1934

Section 20(e) of the Securities Exchange Act of 1934 (15 U.S.C. 78t(e)) is amended by inserting or recklessly after knowingly.

Addressing issues revealed by the Madoff fraud

(a)

Revision to recordkeeping rule

(1)

Investment Company Act of 1940 amendments

Section 31 of the Investment Company Act of 1940 (15 U.S.C. 80a–30) is amended— (A)in subsection (a)(1), by adding at the end the following: Each person having custody or use of the securities, deposits, or credits of a registered investment company shall maintain and preserve all records that relate to the custody or use by such person of the securities, deposits, or credits of the registered investment company for such period or periods as the Commission, by rule or regulation, may prescribe, as necessary or appropriate in the public interest or for the protection of investors.; and (B)in subsection (b), by adding at the end the following:

(4)

Records of persons with custody or use

(A)

In general

Records of persons having custody or use of the securities, deposits, or credits of a registered investment company that relate to such custody or use, are subject at any time, or from time to time, to such reasonable periodic, special, or other examinations and other information and document requests by representatives of the Commission, as the Commission deems necessary or appropriate in the public interest or for the protection of investors. (B)

Certain persons subject to other regulation

Any person that is subject to regulation and examination by a Federal financial institution regulatory agency (as such term is defined under section 212(c)(2) of title 18, United States Code) may satisfy any examination request, information request, or document request described under subparagraph (A), by providing to the Commission a detailed listing, in writing, of the securities, deposits, or credits of the registered investment company within the custody or use of such person.

(2)

Investment Advisers Act of 1940 amendment

Section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–4) is amended by adding at the end the following new subsection:

(d)

Records of persons with custody or use

(1)

In general

Records of persons having custody or use of the securities, deposits, or credits of a client, that relate to such custody or use, are subject at any time, or from time to time, to such reasonable periodic, special, or other examinations and other information and document requests by representatives of the Commission, as the Commission deems necessary or appropriate in the public interest or for the protection of investors. (2)

Certain persons subject to other regulation

Any person that is subject to regulation and examination by a Federal financial institution regulatory agency (as such term is defined under section 212(c)(2) of title 18, United States Code) may satisfy any examination request, information request, or document request described under paragraph (1), by providing the Commission with a detailed listing, in writing, of the securities, deposits, or credits of the client within the custody or use of such person.

(b)

Streamlined hiring authority for market specialists

(1)

Appointment authority

Section 3114 of title 5, United States Code, is amended by striking the section heading and all that follows through the end of subsection (a) and inserting the following:

3114.

Appointment of candidates to certain positions in the competitive service by the Securities and Exchange Commission

(a)

Applicability

This section applies with respect to any position of accountant, economist, and securities compliance examiner at the Commission that is in the competitive service, and any position at the Commission in the competitive service that requires specialized knowledge of financial and capital market formation or regulation, financial market structures or surveillance, or information technology.

(2)

Clerical amendment

The table of sections for chapter 31 of title 5, United States Code, is amended by striking the item relating to section 3114 and inserting the following:

3114. Appointment of candidates to positions in the competitive service by the Securities and Exchange Commission.

(3)

Pay authority

The Commission may set the rate of pay for experts and consultants appointed under the authority of section 3109 of title 5, United States Code, in the same manner in which it sets the rate of pay for employees of the Commission. (c)

SIPC reforms

(1)

Removing the distinction between claims for cash and claims for securities

The Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) is amended— (A)in section 8(e)(4)(B) (15 U.S.C. 78fff–2(e)(4)(B)), by striking for cash or securities; (B)in section 9(a) (15 U.S.C. 78fff–3(a))— (i)by striking paragraph (1); and (ii)by redesignating paragraphs (2) through (5) as paragraphs (1) through (4), respectively; and (C)in section 16(2)(B) (15 U.S.C. 78lll(2)(B)), by striking for cash or securities. (2)

Liquidation of a carrying broker-dealer

Section 5(a)(3) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78eee(a)(3)) is amended— (A)by striking the undesignated matter immediately following subparagraph (B); (B)in subparagraph (A), by striking any member of SIPC and inserting the member; (C)in subparagraph (B), by striking the comma at the end and inserting a period; (D)by striking If SIPC and inserting the following:

(A)

In general

SIPC may, upon notice to a member of SIPC, file an application for a protective decree with any court of competent jurisdiction specified in section 21(e) or 27 of the Securities Exchange Act of 1934, except that no such application shall be filed with respect to a member, the only customers of which are persons whose claims could not be satisfied by SIPC advances pursuant to section 9, if SIPC

; and

(E)by adding at the end the following:

(B)

Consent required

No member of SIPC that has a customer may enter into an insolvency, receivership, or bankruptcy proceeding, under Federal or State law, without the specific consent of SIPC.

Enhanced ability of Commission to obtain needed information

(a)

Investment company examination

Section 31(b)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a–30(b)(1)) is amended to read as follows:

(1)

In general

The following records shall be subject, at any time, or from time to time, to such reasonable periodic, special, or other examinations by representatives of the Commission as the Commission deems necessary or appropriate in the public interest or for the protection of investors: (A)All records of a registered investment company. (B)All records of a underwriter, broker, dealer, or investment adviser that is a majority-owned subsidiary of a registered investment company. (C)All records required to be maintained and preserved by a investment adviser that is not a majority-owned subsidiary of a registered investment company. (D)All records required to be maintained and preserved by a depositor of a registered investment company. (E)All records required to be maintained and preserved by a principal underwriter for a registered investment company (other than a closed-end company).

(b)

Expanded access to grand jury information

Chapter 215 of title 18, United States Code, is amended by adding at the end the following:

3323.

Access to grand jury information

(a)

Disclosure

(1)

In general

Upon motion of an attorney for the government, a court may direct disclosure of matters occurring before a grand jury during an investigation of conduct that may constitute a violation of any provision of the securities laws to the Securities and Exchange Commission for use in relation to any matter within the jurisdiction of the Commission. (2)

Substantial need required

A court may issue an order under paragraph (1) only upon a finding of a substantial need in the public interest. (b)

Use of matter

A person to whom a matter has been disclosed under this section shall not use such matter, other than for the purpose for which such disclosure was authorized. (c)

Definitions

As used in this section— (1)the terms attorney for the government and grand jury information have the meanings given to those terms in section 3322 of title 18, United States Code; and (2)the term securities laws has the same meaning as in section 3(a)(47) of the Securities Exchange Act of 1934.

(c)

Enhanced authority of the Securities and Exchange Commission To conduct surveillance and risk assessment

(1)

Securities Exchange Act of 1934

Section 17(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78q(b)) is amended by adding at the end the following:

(5)

Surveillance and risk assessment

All persons described in subsection (a) are subject, at any time, or from time to time, to such reasonable periodic, special, or other information and document requests by representatives of the Commission as the Commission, by rule or order, deems necessary or appropriate to conduct surveillance or risk assessments of the securities markets, persons registered with the Commission under this title, or otherwise in furtherance of the purposes of this title.

(2)

Investment Company Act of 1940

Section 31(b) of the Investment Company Act of 1940 (15 U.S.C. 80a–30(b)) is amended by adding at the end the following:

(5)

Surveillance and risk assessment

All persons described in subsection (a) are subject at any time, or from time to time, to such reasonable periodic, special, or other information and document requests by representatives of the Commission as the Commission, by rule or order, deems necessary or appropriate to conduct surveillance or risk assessments of the securities markets, persons registered with the Commission under this title, or otherwise in furtherance of the purposes of this title.

(3)

Document requests

Section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–4) is amended by adding at the end the following:

(e)

Surveillance and risk assessment

(d)

Protecting confidentiality of materials submitted to the Commission

(1)

Securities Exchange Act of 1934

Section 24 of the Securities Exchange Act of 1934 (15 U.S.C. 78x) is amended— (A)in subsection (d), by striking subsection (e) and inserting subsection (f); (B)by redesignating subsection (e) as subsection (f); and (C)by inserting after subsection (d) the following:

(e)

Records obtained from registered persons

(1)

In general

Except as provided in subsection (f), the Commission shall not be compelled to disclose records or information obtained pursuant to section 17(b), or records or information based upon or derived from such records or information, if such records or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments, or other regulatory and oversight activities. (2)

Treatment of information

For purposes of section 552 of title 5, United States Code, this subsection shall be considered a statute described in subsection (b)(3)(B) of such section 552. Collection of information pursuant to section 17 shall be an administrative action involving an agency against specific individuals or agencies pursuant to section 3518(c)(1) of title 44, United States Code.

(2)

Investment Company Act of 1940

Section 31 of the Investment Company Act of 1940 (15 U.S.C. 80a–30) is amended— (A)by striking subsection (c) and inserting the following:

(c)

Limitations on disclosure by Commission

Notwithstanding any other provision of law, the Commission shall not be compelled to disclose any records or information provided to the Commission under this section, or records or information based upon or derived from such records or information, if such records or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments, or other regulatory and oversight activities. Nothing in this subsection authorizes the Commission to withhold information from the Congress or prevent the Commission from complying with a request for information from any other Federal department or agency requesting the information for purposes within the scope of jurisdiction of that department or agency, or complying with an order of a court of the United States in an action brought by the United States or the Commission. For purposes of section 552 of title 5, United States Code, this section shall be considered a statute described in subsection (b)(3)(B) of such section 552. Collection of information pursuant to section 31 shall be an administrative action involving an agency against specific individuals or agencies pursuant to section 3518(c)(1) of title 44, United States Code.

;

(B)by striking subsection (d); and (C)by redesignating subsections (e) and (f) as subsections (d) and (e), respectively. (3)

Investment Advisers Act of 1940

Section 210 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–10) is amended by adding at the end the following:

(d)

Limitations on disclosure by the Commission

(e)

Expansion of audit information To be produced and exchanged

Section 106 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7216) is amended— (1)by striking subsection (b) and inserting the following:

(b)

Production of documents

(1)

Production by foreign firms

If a foreign public accounting firm issues an audit report, performs audit work, conducts interim reviews, or performs material services upon which a registered public accounting firm relies in the conduct of an audit or interim review, the foreign public accounting firm shall— (A)produce its audit work papers and all other documents related to any such audit work or interim review to the Commission or the Board; and (B)be subject to the jurisdiction of the courts of the United States for purposes of enforcement of any request for such documents. (2)

Other production

Any registered public accounting firm that relies, in whole or in part, on the work of a foreign public accounting firm in issuing an audit report, performing audit work, or conducting an interim review, shall— (A)produce the audit work papers of the foreign public accounting firm and all other documents related to any such work in response to a request for production by the Commission or the Board; and (B)secure the agreement of any foreign public accounting firm to such production, as a condition of the reliance by the registered public accounting firm on the work of that foreign public accounting firm.

;

(2)by redesignating subsection (d) as subsection (g); and (3)by inserting after subsection (c) the following:

(d)

Service of requests or process

(1)

In general

Any foreign public accounting firm that performs work for a domestic registered public accounting firm shall furnish to the domestic registered public accounting firm a written irrevocable consent and power of attorney that designates the domestic registered public accounting firm as an agent upon whom may be served any process, pleadings, or other papers in any action brought to enforce this section. (2)

Specific audit work

Any foreign public accounting firm that issues an audit report, performs audit work, performs interim reviews, or performs material services upon which a registered public accounting firm relies in the conduct of an audit or interim review, shall designate to the Commission or the Board an agent in the United States upon whom may be served any process, pleading, or other papers in any action brought to enforce this section or any request by the Commission or the Board under this section. (e)

Sanctions

A willful refusal to comply, in whole in or in part, with any request by the Commission or the Board under this section, shall be deemed a violation of this Act. (f)

Other means of satisfying production obligations

Notwithstanding any other provisions of this section, the staff of the Commission or the Board may allow a foreign public accounting firm that is subject to this section to meet production obligations under this section through alternate means, such as through foreign counterparts of the Commission or the Board.

(f)

Sharing privileged information with other authorities

Section 24 of the Securities Exchange Act of 1934 (15 U.S.C. 78x) is amended— (1)in subsection (d), as amended by subsection (d)(1)(A), by striking subsection (f) and inserting subsection (g); (2)in subsection (e), as added by subsection (d)(1)(C), by striking subsection (f) and inserting subsection (g); (3)by redesignating subsection (f) as subsection (g); and (4)by inserting after subsection (e) the following:

(f)

Sharing privileged information with other authorities

(1)

Privileged information provided by the commission

The Commission shall not be deemed to have waived any privilege applicable to any information by transferring that information to or permitting that information to be used by— (A)any agency (as defined in section 6 of title 18, United States Code); (B)the Public Company Accounting Oversight Board; (C)any self-regulatory organization; (D)any foreign securities authority; (E)any foreign law enforcement authority; or (F)any State securities or law enforcement authority. (2)

Nondisclosure of privileged information provided to the commission

The Commission shall not be compelled to disclose privileged information obtained from any foreign securities authority, or foreign law enforcement authority, if the authority has in good faith determined and represented to the Commission that the information is privileged. (3)

Nonwaiver of privileged information provided to the commission

(A)

In general

Federal agencies, State securities and law enforcement authorities, self-regulatory organizations, and the Public Company Accounting Oversight Board shall not be deemed to have waived any privilege applicable to any information by transferring that information to or permitting that information to be used by the Commission. (B)

Exception

The provisions of subparagraph (A) shall not apply to a self-regulatory organization or the Public Company Accounting Oversight Board with respect to information used by the Commission in an action against such organization. (4)

Definitions

For purposes of this subsection— (A)the term privilege includes any work-product privilege, attorney-client privilege, governmental privilege, or other privilege recognized under Federal, State, or foreign law; (B)the term foreign law enforcement authority means any foreign authority that is empowered under foreign law to detect, investigate or prosecute potential violations of law; and (C)the term State securities or law enforcement authority means the authority of any State or territory that is empowered under State or territory law to detect, investigate, or prosecute potential violations of law.

Modernization of investor protections

(a)

Municipal securities

Section 15B of the Securities Exchange Act of 1934 (15 U.S.C. 78o–4) is amended— (1)by striking (b)(1) Not later and all that follows through succeed such initial members. and inserting the following:

(b)

Municipal Securities Rulemaking Board

(1)

Composition of the Municipal Securities Rulemaking Board

Not later than October 1, 2010, the Municipal Securities Rulemaking Board (hereinafter in this section referred to as the Board), shall— (A)be composed of members who shall perform the duties set forth in this section; and (B)shall consist of— (i)a majority of independent public representatives, at least 1 of whom shall be representative of investors in municipal securities and at least 1 of whom shall be representative of issuers of municipal securities (which members are hereinafter referred to as public representatives); (ii)at least 1 individual who is representative of municipal securities brokers and municipal securities dealers that are not banks or subsidiaries, departments or divisions of banks (which members are hereinafter referred to as broker-dealer representatives); and (iii)at least 1 individual who is representative of municipal securities dealers that are banks or subsidiaries, departments or divisions of banks (which members are hereinafter referred to as bank representatives).

; and

(2)in paragraph (2), by amending subparagraph (B) to read as follows:

(B)establish fair procedures for the nomination and election of members of the Board and assure fair representation in such nominations and elections of municipal securities brokers and municipal securities dealers. Such rules— (i)shall establish requirements regarding the independence of public representatives; (ii)shall provide that the number of public representatives of the Board shall at all times exceed the total number of broker-dealer representatives and bank representatives; (iii)shall establish minimum knowledge, experience, and other appropriate qualifications for individuals to serve as public representatives, which may include prior work experience in the securities, municipal finance, or municipal securities industries; (iv)shall specify the term members shall serve; and (v)may increase or decrease the number of members which shall constitute the whole Board, except that in no case may the number of members of the whole Board be an even number.

(b)

Beneficial ownership and short-Swing profit reporting

(1)

Beneficial ownership reporting

Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended— (A)in subsection (d)— (i)in paragraph (1)— (I)by inserting after within ten days after such acquisition, the following: “or within such shorter period as the Commission may establish, by rule,”; and (II)by striking send to the issuer of the security at its principal executive office, by registered or certified mail, send to each exchange on which the security is traded, and; and (ii)in paragraph (2)— (I)by striking in the statements to the issuer and the exchange, and; and (II)by striking shall be transmitted to the issuer and the exchange and; and (B)in subsection (g)— (i)in paragraph (1), by striking shall send to the issuer of the security and; and (ii)in paragraph (2)— (I)by striking sent to the issuer and; and (II)by striking shall be transmitted to the issuer and. (2)

Short-swing profit reporting

Section 16(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78p(a)) is amended— (A)in paragraph (1), by striking (and, if such security is registered on a national securities exchange, also with the exchange); and (B)in paragraph (2)(B), by inserting after officer the following: , or within such shorter period as the Commission may establish, by rule. (c)

Enhanced application of antifraud provisions

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended— (1)in section 9— (A)by striking registered on a national securities exchange each place that term appears and inserting other than a government security; (B)in subsection (b), by striking by use of any facility of a national securities exchange,; and (C)in subsection (c), by inserting after unlawful for any the following: broker, dealer, or; (2)in section 10(a)(1), by striking registered on a national securities exchange and inserting other than a government security; and (3)in section 15(c)(1)(A), by striking otherwise than on a national securities exchange of which it is a member. (d)

Definition of interested person

Section 2(a)(19)(A) of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a)(19)(A)) is amended— (1)by striking clause (v) and inserting the following:

(v)any natural person who is a member of a class of persons who the Commission, by rule or regulation, determines are unlikely to exercise an appropriate degree of independence as a result of— (I)a material business or professional relationship with such company or any affiliated person of such company; or (II)a close familial relationship with any natural person who is an affiliated person of such company,

;

(2)by striking clause (vi); (3)by redesignating clause (vii) as clause (vi); and (4)in clause (vi), as so redesignated, by striking two and inserting 5. (e)

Lost and stolen securities

Section 17(f)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78q(f)(1)) is amended— (1)in subparagraph (A), by striking missing, lost, counterfeit, or stolen securities and inserting securities that are missing, lost, counterfeit, stolen, cancelled, or any other category of securities as the Commission, by rule, may prescribe; and (2)in subparagraph (B), by striking or stolen and inserting stolen, cancelled, or reported in such other manner as the Commission, by rule, may prescribe. (f)

Fingerprinting

Section 17(f)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 78q(f)(2)) is amended— (1)in the first sentence, by striking and registered clearing agency, and inserting registered clearing agency, registered securities information processor, national securities exchange, and national securities association; and (2)in the second sentence, by striking or clearing agency, and inserting clearing agency, securities information processor, national securities exchange, or national securities association,.

Commission organizational study and reform

(a)

Study required

(1)

In general

Not later than 90 days after the date of the enactment of this Act, the Securities and Exchange Commission (in this section referred to as the Commission) shall hire an independent consultant of high caliber who has expertise in organizational restructuring and the operations of capital markets to examine the internal operations, structure, funding, and the need for comprehensive reform of the Commission, as well as the relationship of the Commission with and the reliance by the Commission on self-regulatory organizations and other entities relevant to the regulation of securities and the protection of securities investors that are under the oversight of the Commission. (2)

Specific areas for study

The study required under paragraph (1) shall, at a minimum, include the study of— (A)the possible elimination of unnecessary or redundant units at the Commission; (B)improving communications between offices and divisions of the Commission; (C)the need to put in place a clear chain-of-command structure, particularly for enforcement examinations and compliance inspections; (D)the effect of high-frequency trading and other technological advances on the market and what the Commission requires to monitor the effect of such trading and advances on the market; (E)the hiring authorities, workplace policies, and personal practices of the Commission, including— (i)whether there is a need to further streamline hiring authorities for those who are not lawyers, accountants, compliance examiners, or economists; (ii)whether there is a need for further pay reforms; (iii)the diversity of skill sets of Commission employees and whether the present skill set diversity efficiently and effectively fosters the mission of the Commission of investor protection; and (iv)the application of civil service laws by the Commission; (F)whether the oversight by the Commission of, and reliance by the Commission on, self-regulatory organizations promotes efficient and effective governance for the securities markets; and (G)whether adjusting the reliance by the Commission on self-regulatory organizations is necessary to promote more efficient and effective governance for the securities markets. (b)

Consultant report

Not later than 150 days after the independent consultant is retained under subsection (a), the independent consultant shall submit a report to the Commission and to Congress containing— (1)a detailed description of any findings and conclusions made while carrying out the study required under subsection (a)(1); and (2)recommendations for legislative, regulatory, or administrative action that the independent consultant determines appropriate to enable the Commission and other entities on which the independent consultant reports to perform the missions of the Commission, whether mandated by statute or otherwise. (c)

Commission report

Not later than 6 months after the date on which the consultant submits the report under subsection (b), and every 6 months thereafter during the 2-year period following the date on which the consultant submits the report under subsection (b), the Commission shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives describing the implementation by the Commission of the regulatory and administrative recommendations contained in the report of the independent consultant under subsection (b).