[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4624 Introduced in House (IH)]

112th CONGRESS
  2d Session
                                H. R. 4624

    To amend the Investment Advisers Act of 1940 to provide for the 
registration and oversight of national investment adviser associations.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 25, 2012

 Mr. Bachus (for himself and Mrs. McCarthy of New York) introduced the 
   following bill; which was referred to the Committee on Financial 
                                Services

_______________________________________________________________________

                                 A BILL


 
    To amend the Investment Advisers Act of 1940 to provide for the 
registration and oversight of national investment adviser associations.

    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 ``Investment Adviser Oversight Act of 
2012''.

SEC. 2. REGISTRATION AND OVERSIGHT OF NATIONAL INVESTMENT ADVISER 
              ASSOCIATIONS.

    The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) is 
amended by inserting after section 203A the following new sections:

``SEC. 203B. REGISTRATION OF NATIONAL INVESTMENT ADVISER ASSOCIATIONS.

    ``(a) Registration Requirement.--Except as provided in subsection 
(b), it shall be unlawful for any investment adviser registered under 
section 203 or that is regulated or required to be regulated as an 
investment adviser in a State in which it maintains its principal 
office and place of business to make use of the mails or any means or 
instrumentality of interstate commerce in connection with the person's 
business as an investment adviser unless the investment adviser has 
applied to be a member of a registered national investment adviser 
association registered in accordance with this section and section 203C 
within the time period provided by the Commission under subsection (f). 
No investment adviser shall be required to be a member of more than one 
registered national investment adviser association.
    ``(b) Exemptions.--The provisions of subsection (a) shall not apply 
to the following investment advisers:
            ``(1) Any investment adviser one or more of whose clients 
        is an investment company registered under the Investment 
        Company Act of 1940.
            ``(2) Any investment adviser that has total assets under 
        management 90 percent or more of which are attributable 
        individually or in the aggregate to one or more of the 
        following persons with which the investment adviser has entered 
        into a written investment advisory agreement:
                    ``(A) A client that is not `in the United States' 
                in accordance with the definitions in section 202.
                    ``(B) A qualified purchaser as defined in section 
                2(a)(51) of the Investment Company Act of 1940.
                    ``(C) An issuer that would be an investment 
                company, as defined in section 3 of the Investment 
                Company Act of 1940, but for section 3(c)(10) of that 
                Act.
                    ``(D) An issuer that would be an investment 
                company, as defined in section 3 of the Investment 
                Company Act of 1940, but for section 3(c)(11) of that 
                Act.
                    ``(E) A private fund.
                    ``(F) An issuer that would be an investment 
                company, as defined in section 3 of the Investment 
                Company Act of 1940, but for section 3(c)(5)(C) of that 
                Act.
                    ``(G) An issuer that would be an investment 
                company, as defined in section 3 of the Investment 
                Company Act of 1940, but for Rule 3a-7 issued under 
                that Act (17 C.F.R. 270.3a-7).
                    ``(H) A company that has elected to be a business 
                development company pursuant to section 54 of the 
                Investment Company Act of 1940 and has not withdrawn 
                its election.
                    ``(I) An investment adviser registered under 
                section 203 or that is regulated or required to be 
                regulated as an investment adviser in a State in which 
                it maintains its principal office and place of 
                business.
                    ``(J) A broker or dealer registered under section 
                15 of the Securities Exchange Act of 1934; and
                    ``(K) An employees' securities company that has 
                been granted an exemption under section 6(b) of the 
                Investment Company Act of 1940 and any such company 
                that has filed an application for an exemption under 
                that section and that, under Commission rule, is exempt 
                pending final determination of such application by the 
                Commission.
            ``(3) Any investment adviser that is controlling, 
        controlled by, or under common control with one or more 
        investment advisers described in paragraph (1) or (2) 
        (hereafter referred to as `affiliated investment advisers') if 
        the affiliated investment advisers and all such investment 
        advisers described in such paragraph, have combined assets 
        under management 90 percent or more of which are attributable 
        to one or more of the types of clients described in paragraph 
        (1) and subparagraphs (A) through (K) of paragraph (2), unless 
        the Commission, by order, determines that such affiliated 
        investment adviser is an independent affiliate.
            ``(4) Any investment adviser that is a member of any other 
        national investment adviser association registered with the 
        Commission.
            ``(5) Any other investment adviser or class of investment 
        advisers that the Commission may exempt by rule or regulation 
        consistent with section 206A.
    ``(c) Independent Affiliate Definition and Determination.--
            ``(1) Definition.--For purposes of subsection (b)(3), the 
        term `independent affiliate' means any affiliated investment 
        adviser with compliance programs, operations, and businesses 
        that are sufficiently independent from those of the investment 
        advisers described in subsection (b)(1) or (2) that membership 
        by any such affiliated investment adviser in a registered 
        national investment adviser association is necessary in the 
        public interest and for the protection of investors or in 
        furtherance of the purposes of this title.
            ``(2) Determination.--The Commission's determination under 
        such subsection (b)(3) shall be made by order at the earlier of 
        180 days from receipt by the Commission of a request from any 
        national investment adviser association or investment adviser 
        for such a determination, or the date of the first on-site 
        examination of such affiliated investment adviser conducted by 
        the Commission after the date of enactment of this section. The 
        Commission may, by order, determine that an investment adviser 
        that the Commission had previously determined to be an 
        independent affiliate is no longer an independent affiliate due 
        to changes in its compliance programs, operations, or 
        businesses.
            ``(3) Notification.--The Commission shall promptly notify 
        all national investment adviser associations of any 
        determination that an investment adviser is an independent 
        affiliate. In addition to the authority to determine by order 
        that a particular investment adviser is an independent 
        affiliate, the Commission shall have authority from time to 
        time to exempt by rule, regulation or order, any class of 
        investment advisers that the Commission determines are 
        independent affiliates.
    ``(d) Procedure for Registration.--An association of investment 
advisers may be registered as a national investment adviser association 
by filing with the Commission an application for registration in such 
form, and containing the rules of the association and such other 
information and documents, as the Commission, by rule, may prescribe as 
necessary or appropriate in the public interest or for the protection 
of investors or otherwise in furtherance of the provisions of this 
title.
    ``(e) Requirements for Registration.--An association of investment 
advisers shall not be registered as a national investment adviser 
association unless the Commission determines that--
            ``(1) such association is so organized and has the capacity 
        to be able to carry out the purposes of this title and to 
        enforce compliance by its members and persons associated with 
        its members with the provisions of this title, the rules and 
        regulations thereunder, and the rules of the association; and
            ``(2) the rules of the association--
                    ``(A) assure a fair representation of the public 
                interest and the association's members in the selection 
                of the association's board of directors and the 
                administration of its affairs and provide that a 
                majority of its directors shall not be associated with 
                any member of the association or other self-regulatory 
                organization registered under the Securities Exchange 
                Act of 1934, or any investment adviser, broker, or 
                dealer;
                    ``(B) are designed to prevent fraudulent and 
                manipulative acts and practices, to protect investors 
                and the public interest, and to promote business 
                conduct standards for its members consistent with their 
                obligations to investors under this title and the rules 
                thereunder and are not designed to impose any schedule 
                or fixed rates of fees to be charged by its members or 
                to regulate by virtue of any authority conferred by 
                this title matters not related to the purposes of this 
                title or the administration of the association;
                    ``(C) are necessary in furtherance of, and are 
                consistent with, the principles and provisions of this 
                title and the rules thereunder, and the fiduciary 
                standards applicable to investment advisers under this 
                title or State law, and do not unnecessarily duplicate, 
                overlap, or conflict with any existing provision of 
                this title or the rules thereunder;
                    ``(D) are necessary or appropriate in light of the 
                business of registered investment advisers and do not 
                impose any burden on the ability of members to compete 
                in the market for financial services that is not 
                necessary or appropriate in the public interest or for 
                the protection of investors or otherwise in furtherance 
                of the provisions of this title;
                    ``(E) provide for periodic examinations of its 
                members and persons associated with its members to 
                determine compliance with the applicable provisions of 
                this title, the rules and regulations thereunder, and 
                the rules of the association, and for consultation with 
                the Commission in the development of such an 
                examination program, except that the association--
                            ``(i) shall not conduct periodic 
                        examinations of any investment adviser in a 
                        State--
                                    ``(I) in which the investment 
                                adviser is regulated or required to be 
                                regulated and maintains its principal 
                                office and place of business; and
                                    ``(II) that has adopted a plan to 
                                conduct an on-site examination of all 
                                such investment advisers on average at 
                                least once every four years (hereafter 
                                referred to as a `State examination 
                                plan'); and
                            ``(ii) may conduct examinations for cause 
                        of any such investment adviser that is a member 
                        of the association and may conduct a periodic 
                        examinations of any such investment adviser 
                        that is a member of the association and that is 
                        also registered as a broker or dealer under 
                        section 15 of the Securities Exchange Act of 
                        1934 or that is controlling, controlled by, or 
                        under common control with such a broker or 
                        dealer;
                    ``(F) provide for the equitable allocation of 
                reasonable dues, fees, and other charges among members 
                and other persons using any facility or system that the 
                association operates or controls;
                    ``(G) provide for the issuance by the association 
                of an annual report on the operations, performance, and 
                financial condition of the association and any 
                financial arrangement between the association and any 
                company directly controlling, controlled by, or under 
                common control with the association, and for the 
                submission of the report to the Commission and for the 
                publication of the report;
                    ``(H) establish appropriate procedures and criteria 
                for investment advisers to become members of the 
                association;
                    ``(I) establish appropriate procedures to register 
                persons associated with members, to require supervisory 
                systems for members and persons associated with 
                members, and to discipline its members and persons 
                associated with its members for violations of the 
                provisions of this title or the rules and regulations 
                thereunder, and the rules of the association;
                    ``(J) provide for substantively equivalent 
                regulation and oversight of members and associated 
                persons of members, including with respect to business 
                conduct requirements and examinations, as provided 
                under the rules of any other national investment 
                adviser association registered with the Commission; and
                    ``(K) require the association to--
                            ``(i) implement and maintain a 
                        comprehensive information security program that 
                        meets administrative, technical, and physical 
                        safeguards as the Commission shall by rule 
                        determine, and that contains strong and risk-
                        based information security controls to protect 
                        all information that the association is 
                        required to protect from unauthorized internal 
                        or external disclosure or dissemination 
                        (including, without limitation, a member's 
                        confidential or proprietary information, or 
                        examination or inspection reports and documents 
                        prepared by the association or other regulatory 
                        authority);
                            ``(ii) obtain, every 3 years, a 
                        comprehensive, independent review of the 
                        association's information security program and 
                        the association's compliance with its 
                        information security policies and procedures 
                        conducted by an independent reviewer who is 
                        qualified data security professional;
                            ``(iii) within 45 days after the receipt of 
                        such independent reviewer's report on the 
                        association's information security program and 
                        the association's compliance with its security 
                        policies and procedures, submit the annual 
                        report to the Commission together with the 
                        independent reviewer's attestation in writing 
                        that addresses--
                                    ``(I) whether the association's 
                                information security policies and 
                                procedures conform to the Commission's 
                                information security standards;
                                    ``(II) whether the strength of the 
                                association's information security 
                                controls meet recognized industry 
                                standards;
                                    ``(III) whether the independent 
                                reviewer's tests revealed any material 
                                weaknesses in the association's 
                                information security controls;
                                    ``(IV) whether the association 
                                complies with its information security 
                                policy and procedures; and
                                    ``(V) any other requirements as the 
                                Commission may by rule determine; and
                            ``(iv) provide notice promptly to the 
                        Commission, any affected member, or any 
                        affected person associated with any member of 
                        any unauthorized access to--
                                    ``(I) the association's information 
                                systems; or
                                    ``(II) the confidential or 
                                proprietary information of the member 
                                or associated person.
    ``(f) Time Period for Membership Application.--A Commission 
determination to permit the registration of a national investment 
adviser association shall establish a reasonable period of time 
following the effective date of such registration for investment 
advisers to apply for membership in accordance with the rules of the 
association.
    ``(g) Rules of Construction.--
            ``(1) Non-preemption of state authority.--Nothing in this 
        section shall be construed to limit or detract from or 
        otherwise preempt the authority of any State securities 
        commission (or any agency or office performing similar 
        functions) to adopt rules, investigate possible violations of 
        State law, initiate enforcement proceedings, or otherwise 
        regulate any investment adviser that is subject to State 
        authority under section 203A(a).
            ``(2) Information sharing.--Nothing in this Act shall be 
        construed to limit the authority of any national investment 
        adviser association, whether or not it is also a self-
        regulatory organization registered under the Securities 
        Exchange Act of 1934, to share any information in its 
        possession with a Federal, State, or local governmental agency, 
        nor shall the sharing of information be construed to be the 
        action of such an agency.
    ``(h) Annual Conference.--
            ``(1) Requirement.--In order to foster cooperation between 
        national investment adviser associations and any association 
        composed of duly constituted representatives of State 
        governments one of whose primary assignment is the regulation 
        of investment advisers within those States (hereafter referred 
        to as `State securities administrators association'), each 
        national investment adviser association shall conduct an annual 
        conference as well as such other meetings as are determined 
        necessary, to which representatives from the State securities 
        administrators association and the Commission shall be invited 
        to participate.
            ``(2) Purpose.--One purpose of the conference shall be the 
        discussion by the State securities administrators association, 
        each national investment adviser association and the 
        Commission, concerning those States that have adopted a State 
        examination plan under subsection (e)(2)(E)(i) and the proposed 
        methodology of those State examinations.
            ``(3) Report.--Promptly following each conference, each 
        national investment adviser association shall submit a report 
        to Congress, describing those States that the State securities 
        administrators association has identified as having adopted a 
        State examination plan, and providing any information available 
        to the national investment adviser association concerning the 
        States' proposed methodology of their examinations and the 
        extent to which those States have been able to meet their 
        previously submitted State examination plans.

``SEC. 203C. OVERSIGHT OF NATIONAL INVESTMENT ADVISER ASSOCIATIONS.

    ``(a) Procedures for Approval of Registration.--
            ``(1) In general.--The Commission shall, upon the filing of 
        an application for registration as a national investment 
        adviser association pursuant to section 203B, publish notice of 
        the filing and afford interested persons an opportunity to 
        submit written data, views, and arguments concerning such 
        application. Within 90 days of the date of publication of such 
        notice (or within such longer period as to which the applicant 
        consents), the Commission shall--
                    ``(A) by order, grant such registration; or
                    ``(B) institute proceedings to determine whether 
                registration should be denied.
            ``(2) Proceedings for denial.--The proceedings to determine 
        whether registration should be denied shall include notice of 
        the grounds for denial under consideration and opportunity for 
        hearing and shall be concluded within 180 days of the date of 
        publication of notice of the filing of the application for 
        registration. At the conclusion of such proceedings, the 
        Commission, by order, shall grant or deny registration. The 
        Commission may extend the time for conclusion of such 
        proceedings for up to 90 days if it finds good cause for such 
        extension and publishes its reasons for so finding or for such 
        longer period as to which the applicant consents.
            ``(3) Basis for approval.--The Commission shall grant such 
        registration if it finds that the requirements of this title 
        and the rules and regulations thereunder with respect to the 
        applicant are satisfied. The Commission shall deny such 
        registration if it does not make such finding.
            ``(4) Withdrawal.--A national investment adviser 
        association may, upon such terms and conditions as the 
        Commission, by rule, considers necessary or appropriate in the 
        public interest and for the protection of investors or 
        otherwise in furtherance of the purposes of this title, 
        withdraw from registration by filing a written notice of 
        withdrawal with the Commission. If the Commission finds that 
        any national investment adviser association is no longer in 
        existence or has ceased to do business in the capacity 
        specified in its application for registration, the Commission, 
        by order, shall cancel its registration.
    ``(b) Procedures for Approval of Rules and Rule Changes.--
            ``(1) Filing and publication by commission.--
                    ``(A) Filing.--Each national investment adviser 
                association shall file with the Commission, in 
                accordance with such rules as the Commission may 
                prescribe, any proposed rule or any proposed change in, 
                addition to, or deletion from the rules of the 
                association (in this paragraph collectively referred to 
                as a `proposed rule change') accompanied by a concise 
                statement of the basis and purpose of, and the terms of 
                substance of, or a description of the subjects and 
                issues involved with, the proposed rule change.
                    ``(B) Explanation and comments.--The national 
                investment adviser association shall explain in its 
                public filing with the Commission the nature of 
                comments that it received, including those from the 
                industry or consumer groups, concerning the potential 
                costs or benefits of the proposed rule or proposed rule 
                change, and shall provide a response to those comments 
                in its public filing with the Commission, including an 
                explanation of any amendments to the proposed rule or 
                proposed rule change that were made in response to 
                those comments and a description of significant 
                alternatives to the proposed rule change that were 
                suggested in those comments and the reasons that the 
                national investment adviser association did not any 
                propose them.
                    ``(C) Publication.--The Commission shall, as soon 
                as practicable upon the filing of any proposed rule 
                change, publish notice thereof together with the terms 
                of substance of the proposed rule change or a 
                description of the subjects and issues involved. The 
                Commission shall give interested persons an opportunity 
                to submit written data, views, and arguments concerning 
                such proposed rule change.
            ``(2) Determination.--Not later than 35 days after the date 
        of publication of notice of the filing of a proposed rule 
        change in accordance with paragraph (1), or within such longer 
        period as the Commission may designate if it finds a longer 
        period to be appropriate and publishes its reasons for so 
        finding or as to which the national investment adviser 
        association consents, the Commission shall--
                    ``(A) by order, approve the proposed rule change; 
                or
                    ``(B) institute proceedings to determine whether 
                the proposed rule change should be disapproved.
            ``(3) Proceedings for disapproval.--The proceedings to 
        determine whether the proposed rule change should be 
        disapproved shall include notice of the grounds for disapproval 
        under consideration and opportunity for hearing and shall be 
        concluded within 180 days of the date of publication of notice 
        of the filing of the proposed rule change. At the conclusion of 
        the proceedings, the Commission, by order, shall approve or 
        disapprove the proposed rule change. The Commission may extend 
        the time for conclusion of the proceedings for up to 60 days if 
        it finds good cause for the extension and publishes its reasons 
        for so finding or for such longer period to which the national 
        investment adviser association consents.
            ``(4) Basis for approval.--The Commission shall approve a 
        proposed rule change of a national investment adviser 
        association if it finds that the proposed rule change is 
        consistent with the requirements of this title, the rules 
        thereunder, and the rules and regulations applicable to the 
        national investment adviser association. The Commission shall 
        disapprove a proposed rule change of a national investment 
        adviser association if it does not make this finding. The 
        Commission shall not approve any proposed rule change before 
        the 30th day after the date of publication of notice of its 
        filing, unless the Commission finds good cause for so doing and 
        publishes its reasons for so finding.
            ``(5) Stay pending approval.--No proposed rule of any 
        national investment adviser association, and no proposed rule 
        change of such an association, including any rule or proposed 
        rule change concerning any assessment, fee, or other charge 
        imposed by the association, shall take effect unless approved 
        by the Commission after public notice and opportunity for 
        comment.
            ``(6) Effective date.--Notwithstanding paragraph (5), no 
        proposed rule of any national investment adviser association 
        shall take effect within 1 year after the date of enactment of 
        this section, unless the Commission determines that an earlier 
        effective date is appropriate to facilitate the effective 
        operation of the association's examination or enforcement 
        programs, the organization and management of the association, 
        or the Commission's oversight of the association.
            ``(7) Summary effectiveness.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this subsection, a proposed rule change 
                may be put into effect summarily if it appears to the 
                Commission that such action is necessary for the 
                protection of investors or the safeguarding of 
                securities or funds. Any proposed rule change so put 
                into effect shall be filed promptly thereafter in 
                accordance with the provisions of paragraph (1).
                    ``(B) Amendments.--Any proposed rule change of a 
                national investment adviser association which has taken 
                effect under subparagraph (A) may be enforced by the 
                national investment adviser association to the extent 
                it is not inconsistent with the provisions of this 
                title, the rules and regulations thereunder, and 
                applicable Federal law. The Commission, by rule, may 
                abrogate, add to, and delete from (in this subsection 
                collectively referred to as `amend') the rules of an 
                association as the Commission considers necessary or 
                appropriate to ensure the fair administration of the 
                national investment adviser association, to conform its 
                rules to requirements of this title and the rules and 
                regulations applicable to such national investment 
                adviser association, or otherwise in furtherance of the 
                purposes of this title, in the manner provided for 
                herein.
            ``(8) Notification and opportunity to comment.--The 
        Commission shall notify the national investment adviser 
        association and publish notice of any proposed rulemaking in 
        the Federal Register. The notice shall include the text of the 
        proposed amendment to the rules of the association and a 
        statement of the Commission's reasons, including any pertinent 
        facts, for commencing the proposed rulemaking. The Commission 
        shall give interested persons an opportunity for a hearing.
            ``(9) Statement of basis for determination.--A rule adopted 
        under this subsection shall incorporate the text of the 
        amendment to the rules of the association and a statement of 
        the Commission's basis for and purpose in amending such rules. 
        This statement shall include an identification of any facts on 
        which the Commission considers its determination to amend the 
        rules of the association to be based, including the reasons for 
        the Commission's conclusions as to any of such facts which were 
        disputed in the rulemaking.
            ``(10) APA rulemaking procedures.--
                    ``(A) Except where a hearing is provided in 
                paragraphs (1) through (9), rulemaking under this 
                subsection shall be in accordance with the procedures 
                specified in section 553 of title 5, United States 
                Code, for notice-and-comment rulemaking.
                    ``(B) Nothing in this subsection shall be construed 
                to impair or limit the Commission's power to make, or 
                to modify or alter the procedures the Commission may 
                follow in making rules and regulations pursuant to any 
                other authority under this title.
                    ``(C) Any amendment to the rules of a national 
                investment adviser association made by the Commission 
                under this subsection shall be considered for all 
                purposes of this title to be part of the rules of the 
                association and shall not be considered to be a rule of 
                the Commission.
    ``(c) Discipline of Members.--
            ``(1) In general.--In any proceeding by a national 
        investment adviser association to determine whether a member or 
        person associated with a member should be disciplined (other 
        than a summary proceeding pursuant to paragraph (3)), the 
        national investment adviser association shall bring specific 
        charges, notify the member or person associated with a member 
        of, and give the member or person an opportunity to defend 
        against, such charges, and keep a record. A determination by 
        the national investment adviser association to impose a 
        disciplinary sanction shall be supported by a statement setting 
        forth--
                    ``(A) any act or practice in which the member or 
                person associated with a member has been found to have 
                engaged, or which the member or person associated with 
                a member has been found to have omitted;
                    ``(B) the specific provision of this title, the 
                rules or regulations thereunder, or the rules of the 
                association which any such act or practice, or omission 
                to act, violates; and
                    ``(C) the sanction imposed and the reason for it.
            ``(2) Procedures and determination.--In any proceeding by a 
        national investment adviser association to determine whether a 
        person shall be denied membership, barred from becoming 
        associated with a member, or prohibited or limited with respect 
        to access to services offered by the national investment 
        adviser association, the national investment adviser 
        association shall notify the person of, and give such person an 
        opportunity to be heard on, the specific grounds for denial, 
        bar, prohibition, or limitation under consideration, and keep a 
        record. A determination by the national investment adviser 
        association to deny membership, bar a person from becoming 
        associated with a member, or prohibit or limit a person with 
        respect to access to services offered by the national 
        investment adviser association shall be supported by a 
        statement setting forth the specific grounds on which the 
        denial, bar, prohibition, or limitation is based.
            ``(3) Summary suspension and subsequent procedures.--A 
        national investment adviser association may summarily--
                    ``(A) suspend a member or person associated with a 
                member who has been and is expelled or suspended from 
                any self-regulatory organization or barred or suspended 
                from being associated with a member of any self-
                regulatory organization;
                    ``(B) suspend a member who is in such financial or 
                operating difficulty that the national investment 
                adviser association determines and so notifies the 
                Commission that the member cannot be permitted to 
                continue to do business as a member and serve the 
                interest of investors, creditors, other members, or the 
                national investment adviser association; or
                    ``(C) limit or prohibit any person with respect to 
                access to services offered by the national investment 
                adviser association if subparagraph (A) or (B) is 
                applicable to such person or, in the case of a person 
                who is not a member, if the national investment adviser 
                association determines that such person does not meet 
                the qualification requirements or other prerequisites 
                for such access and such person cannot be permitted to 
                continue to have such access and serve the interest of 
                investors, creditors, members, or the national 
                investment adviser association. Any person aggrieved by 
                any such summary action shall be promptly afforded an 
                opportunity for a hearing by the national investment 
                adviser association in accordance with the provisions 
                of paragraph (1) or (2). The Commission, by order, may 
                stay any such summary action on its own motion or upon 
                application by any person aggrieved thereby, if the 
                Commission determines summarily or after notice and 
                opportunity for hearing (which hearing may consist 
                solely of the submission of affidavits or presentation 
                of oral arguments) that such stay is consistent with 
                the public interest and the protection of investors.
    ``(d) Final Disciplinary Sanction.--
            ``(1) Notice.--If any national investment adviser 
        association imposes any final disciplinary sanction on any 
        member, denies membership to any applicant, or prohibits or 
        limits any person in respect to access to services offered by 
        the national investment adviser association, or if any national 
        investment adviser association imposes any final disciplinary 
        sanction on any person associated with a member, or bars any 
        person from becoming associated with a member, the national 
        investment adviser association shall promptly file notice 
        thereof with the Commission and publish the notice. The notice 
        shall be in such form and contain such information as the 
        Commission, by rule, may prescribe as necessary or appropriate 
        in furtherance of the purposes of this title.
            ``(2) Review.--Any action with respect to which a national 
        investment adviser association is required by paragraph (1) to 
        file notice shall be subject to review by the Commission, on 
        its own motion, or upon application by any person aggrieved 
        thereby filed within 30 days after the date such notice was 
        both filed with the Commission and received by such aggrieved 
        person, or within such longer period as the Commission may 
        determine. Application to the Commission for review, or the 
        institution of review by the Commission on its own motion, 
        shall not operate as a stay of the action unless the Commission 
        otherwise orders, summarily or after notice and opportunity for 
        hearing on the question of a stay (which hearing may consist 
        solely of the submission of affidavits or presentation of oral 
        arguments). The Commission may establish for appropriate cases 
        an expedited procedure for consideration and determination of 
        the question of a stay.
    ``(e) Review of Final Sanction.--
            ``(1) In general.--In any proceeding to review a final 
        disciplinary sanction imposed by a national investment adviser 
        association on a member or a person associated with a member, 
        after notice and opportunity for hearing (which hearing may 
        consist solely of consideration of the record before the 
        national investment adviser association and opportunity for the 
        presentation of supporting reasons to affirm, modify, or set 
        aside the sanction)--
                    ``(A) if the Commission finds that such member or 
                person associated with a member has engaged in such 
                acts or practices, or has omitted such acts, as the 
                national investment adviser association has found him 
                or her to have engaged in or omitted that such acts or 
                practices, or omissions to act, are in violation of 
                such provisions of this title, the rules or regulations 
                thereunder, or the rules of the association, as have 
                been specified in the determination of the national 
                investment adviser association, and that such 
                provisions are, and were applied in a manner, 
                consistent with the purposes of this title, the 
                Commission, by order, shall so declare and, as 
                appropriate, affirm the sanction imposed by the 
                national investment adviser association, modify the 
                sanction in accordance with paragraph (2), or remand to 
                the national investment adviser association for further 
                proceedings; or
                    ``(B) if the Commission does not make any such 
                finding it shall, by order, set aside the sanction 
                imposed by the national investment adviser association 
                and, if consistent with the purposes of this title, 
                remand to the national investment adviser association 
                for further proceedings.
            ``(2) Reduction or revocation of sanction.--If the 
        Commission, having due regard for the public interest, the 
        protection of investors, and the policies and purposes of this 
        title, finds after a proceeding in accordance with paragraph 
        (1) that a sanction imposed by a national investment adviser 
        association on a member or person associated with a member 
        imposes any burden on competition not necessary or appropriate 
        in furtherance of the purposes of this title or is excessive or 
        oppressive, the Commission may cancel, reduce, or require the 
        revocation of such sanction.
    ``(f) Review of Denial of Membership.--In any proceeding to review 
the denial of membership in a national investment adviser association 
to any applicant, the barring of any person from becoming associated 
with a member, or the prohibition or limitation by a national 
investment adviser association of any person with respect to access to 
services offered by the national investment adviser association--
            ``(1) if the Commission, after notice and opportunity for 
        hearing (which hearing may consist solely of consideration of 
        the record before the national investment adviser association 
        and opportunity for the presentation of supporting reasons to 
        dismiss the proceeding or set aside the action of the national 
        investment adviser association) finds that the specific grounds 
        on which the denial, bar, prohibition or limitation is based 
        exist in fact, that the denial, bar, prohibition, or limitation 
        is in accordance with the rules of the association, and that 
        the rules are and were applied in a manner consistent with the 
        purposes of this title, the Commission, by order, shall dismiss 
        the proceeding; or
            ``(2) if the Commission does not make any such finding or 
        it finds that the denial, bar, prohibition or limitation 
        imposes any burden on competition not necessary or appropriate 
        in furtherance of the purposes of this title, the Commission, 
        by order, shall set aside the action of the national investment 
        adviser association and require it to admit the applicant to 
        membership or participation, permit the person to become 
        associated with a member, or grant the person access to 
        services offered by the national investment adviser 
        association.
    ``(g) Compliance.--
            ``(1) In general.--Every registered national investment 
        adviser association shall comply with the provisions of this 
        title, the rules and regulations thereunder, and its own rules, 
        and (subject to the provisions of paragraph (2) and the rules 
        thereunder) absent reasonable justification or excuse, enforce 
        compliance with such provisions by its members and persons 
        associated with a member. The Commission shall conduct regular 
        and routine inspections, at least annually, of the registered 
        national investment adviser association, to ensure that the 
        association complies with the provisions of this title and the 
        rules and regulations thereunder.
            ``(2) Relief of responsibility.--The Commission, by rule, 
        consistent with the public interest and the protection of 
        investors, and the other policies and purposes of this title, 
        may relieve any national investment adviser association of any 
        responsibility under this title to enforce compliance with any 
        provision of this title or the rules or regulations thereunder 
        by any member of the national investment adviser association or 
        any class of such members or persons associated with a member.
    ``(h) Enforcement Authority of the Commission.--
            ``(1) Suspension, censure and limitation on associations.--
        If in its opinion such action is necessary or appropriate in 
        the public interest, for the protection of investors, or 
        otherwise in furtherance of the purposes of this title, the 
        Commission may, by order, suspend for a period not exceeding 12 
        months or revoke the registration of a national investment 
        adviser association, or to censure or impose limitations upon 
        the activities, functions, and operations of the national 
        investment adviser association, if the Commission finds, on the 
        record after notice and opportunity for hearing, that the 
        national investment adviser association has violated or is 
        unable to comply with any provision of this title, the rules or 
        regulations thereunder, or its own rules, or without reasonable 
        justification or excuse has failed to enforce compliance with 
        any such provision by a member or a person associated with a 
        member.
            ``(2) Suspension and expulsion of members.--If in its 
        opinion such action is necessary or appropriate in the public 
        interest, for the protection of investors, or otherwise in 
        furtherance of the purposes of this title, the Commission may, 
        by order, suspend for a period not exceeding 12 months or expel 
        from a national investment adviser association any member, if 
        the member is subject to an order of the Commission pursuant to 
        section 203(e) or if the Commission finds, on the record after 
        notice and opportunity for hearing, that the member has 
        willfully violated, or has participated in any transaction with 
        or for any other person who the member had reason to believe 
        was violating with respect to such transaction, any provision 
        of the Securities Act of 1933, the Securities Exchange Act of 
        1934, the Investment Company Act of 1940, this title, the 
        Commodity Exchange Act, or the rules or regulations under any 
        of such statutes, or the rules of the Municipal Securities 
        Rulemaking Board.
            ``(3) Other bars.--If in its opinion, such action is 
        necessary or appropriate in the public interest, for the 
        protection of investors, or otherwise in furtherance of the 
        purposes of this title, the Commission may, by order, suspend 
        for a period not exceeding 12 months or bar any person from 
        being associated with a member of a national investment adviser 
        association, if the person is subject to an order of the 
        Commission under section 203(f) or if the Commission finds, on 
        the record after notice and opportunity for hearing, that the 
        person has willfully violated, or has participated in any 
        transaction with any other person who the person associated 
        with a member had reason to believe was violating with respect 
        to the transaction, any provision of the Securities Act of 
        1933, the Securities Exchange Act of 1934, the Investment 
        Company Act of 1940, this title, or the rules or regulations 
        under any of those statutes, or the rules of the Municipal 
        Securities Rulemaking Board.
            ``(4) Removal or censure of officers and directors.--If in 
        its opinion such action is necessary or appropriate in the 
        public interest, for the protection of investors, or otherwise 
        in furtherance of the purposes of this title, the Commission 
        may, by order, remove from office or censure any officer, 
        director or any person performing similar functions of a 
        national investment adviser association, if the Commission 
        finds, on the record after notice and opportunity for hearing, 
        that such person has willfully violated any provision of this 
        title, the rules or regulations thereunder, or the rules of the 
        national investment adviser association, willfully abused his 
        authority, or without reasonable justification or excuse has 
        failed to enforce compliance with any such provision by any 
        member or person associated with a member.''.
                                 <all>