[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3519 Introduced in House (IH)]

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115th CONGRESS
  1st Session
                                H. R. 3519

 To increase accountability of the Securities and Exchange Commission 
and to require the Commission to implement a rigorous, fair, and public 
process for waiving bad actor disqualifications in the securities laws.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 27, 2017

 Ms. Maxine Waters of California introduced the following bill; which 
          was referred to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
 To increase accountability of the Securities and Exchange Commission 
and to require the Commission to implement a rigorous, fair, and public 
process for waiving bad actor disqualifications in the securities laws.

    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 ``Bad Actor Disqualification Act of 
2017''.

SEC. 2. SENSE OF CONGRESS.

    It is the sense of Congress that:
            (1) The automatic disqualification provisions in the 
        securities laws are valuable tools that protect investors, the 
        markets, and the public by deterring misconduct, reducing 
        recidivism, promoting market integrity, and removing bad actors 
        from the market.
            (2) These tools are inappropriately underutilized and 
        waivers of the automatic disqualification provisions are 
        disproportionately granted to the largest financial 
        institutions on Wall Street, many of which are recidivists. 
        Between July, 2003, and December, 2014, large financial firms 
        received the vast majority of waivers of sanctions, about 82 
        percent of 201 total waivers.
            (3) Waivers of these automatic sanctions should be granted 
        sparingly and only through an open and transparent process.

SEC. 3. INCREASING TRANSPARENCY AND ACCOUNTABILITY IN WAIVING BAD ACTOR 
              DISQUALIFICATIONS.

    Section 36 of the Securities Exchange Act of 1934 (15 U.S.C. 78mm) 
is amended by adding at the end the following:
    ``(c) Waiver Procedure and Identification of Bad Actors.--
            ``(1) Waiver procedure.--
                    ``(A) Temporary waiver.--
                            ``(i) Petition for waiver.--A person may 
                        petition the Commission for a temporary waiver 
                        of a disqualification or pending 
                        disqualification described under subparagraphs 
                        (A) through (G) of paragraph (3).
                            ``(ii) Grant of waiver.--With respect to a 
                        petition made by a person under clause (i), 
                        when such person becomes an ineligible person, 
                        the Commission may vote to provide such person 
                        with a single 180-day temporary waiver, by 
                        order, if the Commission determines that such 
                        person has demonstrated immediate irreparable 
                        injury.
                            ``(iii) Publication of petition.--The 
                        Commission shall publish any petition for a 
                        temporary waiver along with the order 
                        containing an explanation for any Commission 
                        determination immediately following the related 
                        vote under clause (ii).
                    ``(B) General waiver.--Following the 180-day period 
                provided under subparagraph (A), the Commission, by 
                vote during a meeting open to the public, may not waive 
                any disqualification described under subparagraphs (A) 
                through (G) of paragraph (3), unless the Commission 
                determines, without regard to the direct costs to the 
                ineligible person associated with a denial, that such 
                waiver--
                            ``(i) is in the public interest;
                            ``(ii) is necessary for the protection of 
                        investors; and
                            ``(iii) promotes market integrity.
                    ``(C) Federal register notice; public hearing.--
                Before making a determination under subparagraph (B), 
                the Commission shall publish adequate notice in the 
                Federal Register of the pendency of the waiver 
                determination and shall afford the public and 
                interested persons an opportunity to present their 
                views, including at a public hearing.
                    ``(D) Prohibition on advance advice.--Commission 
                staff may not advise any person of the recommendation 
                of staff to the Commission or on the likelihood of a 
                waiver being granted or denied under this paragraph for 
                such person.
                    ``(E) Recordkeeping requirement.--The Commission 
                shall keep a public record of all requests for a waiver 
                under this paragraph that are later withdrawn.
            ``(2) Database of ineligible persons.--The Commission shall 
        establish, and maintain, a public database of all ineligible 
        persons that the Commission has voted against providing a 
        waiver under this subsection or that have indicated their 
        ineligibility in any disclosure to the Commission.
            ``(3) Ineligible person defined.--For purposes of this 
        subsection, the term `ineligible person' means any person 
        that--
                    ``(A) is an ineligible issuer and not eligible to 
                qualify as a well-known seasoned issuer (as such terms 
                are defined under section 230.405 of title 17, Code of 
                Federal Regulations);
                    ``(B) is not eligible to make use of an exemption 
                provided for certain Regulation D private offerings 
                under section 230.505 or 230.506 of title 17, Code of 
                Federal Regulations;
                    ``(C) is not eligible for any safe harbor for 
                forward-looking statements provided for under section 
                27A(c) of the Securities Act of 1933;
                    ``(D) is not eligible for any safe harbor for 
                forward-looking statements provided for under section 
                21E(c) of the Securities Exchange Act of 1934;
                    ``(E) is disqualified from receiving a cash fee, 
                directly or indirectly, from an investment adviser with 
                respect to solicitation activities, as described under 
                section 275.206(4)-3 of title 17, Code of Federal 
                Regulations;
                    ``(F) is not eligible to make use of an exemption 
                provided for certain Regulation A offerings under 
                section 230.262 of title 17, Code of Federal 
                Regulations; or
                    ``(G) is not eligible to make use of an exemption 
                provided for certain Regulation E offerings under 
                section 230.602 of title 17, Code of Federal 
                Regulations.''.

SEC. 4. GAO STUDY.

    (a) Study.--The Comptroller General of the United States shall 
carry out a study of the Securities and Exchange Commission's existing 
waiver process, and the standard used by the Commission in granting an 
application for an exemption, under section 9(c) of the Investment 
Company Act of 1940.
    (b) Report.--Not later than the end of the 180-day period beginning 
on the date of the enactment of this Act, the Comptroller General shall 
issue a report to the Congress containing--
            (1) all findings and determinations made in carrying out 
        the study required under subsection (a);
            (2) a comparison of the Commission's standard used in 
        granting an application for an exemption under section 9(c) of 
        the Investment Company Act of 1940 with the standard used to 
        grant a waiver under section 36(c) of the Securities Exchange 
        Act of 1934, as added by this Act; and
            (3) recommendations on how to increase transparency and 
        opportunity for public participation in the waiver process 
        under section 9(c) of the Investment Company Act of 1940 and 
        ensure that the disqualification and waiver process used by the 
        Commission under such section 9(c) is protective of investors, 
        the markets, and the public and deters misconduct, reduces 
        recidivism, promotes market integrity, and removes bad actors 
        from the market.
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