[Congressional Record Volume 147, Number 152 (Tuesday, November 6, 2001)]
[House]
[Pages H7732-H7745]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FINANCIAL SERVICES ANTIFRAUD NETWORK ACT OF 2001
Mr. BACHUS. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 1408) to safeguard the public from fraud in the financial
services industry, to streamline and facilitate the antifraud
information-sharing efforts of Federal and State regulators, and for
other purposes, as amended.
The Clerk read as follows:
H.R. 1408
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Financial
Services Antifraud Network Act of 2001''.
(b) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Purposes.
TITLE I--ANTIFRAUD NETWORK
Subtitle A--Direction to Financial Regulators
Sec. 100. Creation and operation of the network.
Subtitle B--Potential Establishment of Antifraud Subcommittee
Sec. 101. Establishment.
Sec. 102. Purposes of the Subcommittee.
Sec. 103. Chairperson; term of chairperson; meetings; officers and
staff.
Sec. 104. Nonagency status.
Sec. 105. Powers of the Subcommittee.
Sec. 106. Agreement on cost structure.
Subtitle C--Regulatory Provisions
Sec. 111. Agency supervisory privilege.
Sec. 112. Confidentiality of information.
Sec. 113. Liability provisions.
Sec. 114. Authorization for identification and criminal background
check.
Sec. 115. Definitions.
Sec. 116. Technical and conforming amendments to other acts.
Sec. 117. Audit of State insurance regulators.
Subtitle D--Anti-Terrorism
Sec. 121. Preventing international terrorism.
TITLE II--SECURITIES INDUSTRY COORDINATION
Subtitle A--Disciplinary Information
Sec. 201. Investment Advisers Act of 1940.
Sec. 202. Securities Exchange Act of 1934.
Subtitle B--Preventing Migration of Rogue Financial Professionals to
the Securities Industry
Sec. 211. Securities Exchange Act of 1934.
Sec. 212. Investment Advisers Act of 1940.
SEC. 2. PURPOSES.
The purposes of this Act are--
(1) to safeguard the public from fraud in the financial
services industry;
(2) to streamline the antifraud coordination efforts of
Federal and State regulators and prevent failure to
communicate essential information;
(3) to reduce duplicative information requests and other
inefficiencies of financial services regulation;
(4) to assist financial regulators in detecting patterns of
fraud, particularly patterns that only become apparent when
viewed across the full spectrum of the financial services
industry; and
(5) to take advantage of Internet technology and other
advanced data-sharing technology to modernize the fight
against fraud in all of its evolving manifestations and
permutations.
TITLE I--ANTIFRAUD NETWORK
Subtitle A--Direction to Financial Regulators
SEC. 100. CREATION AND OPERATION OF THE NETWORK.
(a) Sharing of Public Information.--The financial
regulators shall, to the extent practicable and appropriate
and in consultation with other relevant and appropriate
agencies and parties--
(1) develop procedures to provide for a network for the
sharing of antifraud information; and
(2) coordinate to further improve upon the antifraud
efforts of the participants in the network as such
participants deem appropriate over time.
(b) Minimum Requirements.--The procedures described in
subsection (a) shall--
(1) provide for the sharing of public final disciplinary
and formal enforcement actions taken by the financial
regulators that are accessible electronically relating to the
conduct of persons engaged in the business of conducting
financial activities that is fraudulent, dishonest, or
involves a breach of trust or relates to the failure to
register with the appropriate financial regulator as required
by law;
(2) include a plan for considering the sharing among the
participants of other relevant and useful antifraud
information relating to companies and other persons engaged
in conducting financial activities, to the extent practicable
and appropriate when adequate privacy, confidentiality, and
security safeguards governing access to, and the use of, such
information have been developed that--
(A) is accessible by the public; or
(B) consists of information, that does not include
personally identifiable information on consumers, on--
(i) licenses and applications, financial affiliations and
name-relationships, aggregate trend data, appraisals, or
reports filed by a regulated entity with a participant; or
(ii) similar information generated by or for a participant
if--
(I) such information is being shared for the purpose of
verifying an application or other report filed by a regulated
entity; and
(II) the participant determines such information is factual
and substantiated; and
(3) provide that, if a financial regulator takes an adverse
action against a person engaged in the business of conducting
financial activities on the basis of information described in
paragraph (1) or (2) that was received from another
participant through the network, the regulator shall--
(A) notify the person of the identity of the participant
from whom such information was received;
(B) provide the person with a specific and detailed
description of the information that was received from the
other participant through the network and would be relied on
in taking the adverse action; and
[[Page H7733]]
(C) notify the person of the right to a reasonable
opportunity to respond to such information.
(c) Provisions Relating to Requirements.--
(1) Time of notice.--The notice to any person, and the
opportunity to respond, under subsection (b)(3) shall be
provided to the person a reasonable period of time before any
final action against the person which is based on information
referred to in such paragraph is completed, unless the
financial regulator determines that such advance notice and
opportunity to respond is impracticable or inappropriate, in
which case the notice and opportunity to respond shall be
provided at the time of such final action.
(2) Verification or substantiation of information.--With
respect to subsection (b)(3), a delay in the consideration of
a license, application, report, or other request for the
purpose of verifying or substantiating information relating
to such license, application, report, or other request shall
not be treated as an adverse action if the verification or
substantiation of such information is completed within a
reasonable time.
(d) Implementation.--
(1) Submission of plan.--Before the end of the 6-month
period beginning on the date of the enactment of this Act,
the Federal financial regulators shall submit to Congress a
plan detailing how the financial regulators (and any
association representing financial regulators) expect to meet
the requirements of subsections (a) and (b).
(2) Deadline for implementation.--Before the end of the 2-
year period beginning on the date of the enactment of this
Act, the financial regulators shall establish the network
described in subsections (a) and (b).
(e) Financial Regulators Defined.--For the purposes of this
section, the term ``financial regulators'' means the
financial regulators described in subparagraphs (A) through
(Q) of section 115(3).
(f) Determination of Implementation of Subtitle B.--
(1) In general.--The provisions of subtitle B shall take
effect only if the Secretary of the Treasury, or a designee
of the Secretary, before the end of the 30-day period
beginning at the end of the period referred to in--
(A) subsection (d)(1), does not determine that the Federal
financial regulators have submitted a plan which
substantially meets the requirements of such subsection; or
(B) subsection (d)(2), does not determine that the
financial regulators have established a network that
substantially complies with the requirements of subsections
(a) and (b).
(2) Scope of application.--This subtitle shall cease to
apply as of the date subtitle B takes effect.
(g) Use of Centralized Databases.--
(1) In general.--A financial regulator shall be deemed to
have met the requirements of subsection (b)(1) if--
(A) the participants have access to a centralized database
that contains information on public final disciplinary or
formal enforcement actions similar to that described in such
subsection; or
(B) the financial regulator makes the information described
in such subsection available to the public over the Internet.
(2) State supervisors.--It is the sense of the Congress
that the National Association of Insurance Commissioners, the
Conference of State Bank Supervisors, the American Council of
State Savings Supervisors, the National Association of State
Credit Union Supervisors, and the North American Securities
Administrators Association should develop model guidelines
for regulators in their respective regulated financial
industries, where appropriate, to promote uniform standards
for sharing information with the network under this section.
(h) Financial Regulator Control of Access.--
(1) In general.--Except as provided in paragraph (4), each
participant that allows access to its databases or
information by other participants through the network may
establish parameters for controlling or limiting such access,
including the regulation of--
(A) the type or category of information that may be
accessed by other participants and the extent to which any
such type or category of information may be accessed;
(B) the participants that may have access to the database
or any specific type or category of information in the
database (whether for reasons of cost reimbursement, data
security, efficiency, or otherwise); and
(C) the disclosure by any other participant of any type or
category of information that may be accessed by the
participant.
(2) Procedures.--A participant may establish the parameters
described in paragraph (1) by regulation, order, or guideline
or on a case-by-case basis.
(3) Disclaimer.--
(A) In general.--Each participant shall ensure that any
transfer of information through the network under this
section, other than information described in subsection
(b)(1), from such participant to another participant is
subject to a disclaimer that the information accessed may be
unsubstantiated and may not be relied on as the basis for
denying any application or license.
(B) Regulatory flexibility.--Each financial regulator may
develop guidelines, as the regulator determines to be
appropriate, governing the location, wording, and frequency
of disclaimers under this paragraph and the manner in which
any such disclaimer shall be made.
(4) Final disciplinary and formal enforcement actions not
subject to limitation.--This subsection, and standards or
procedures adopted by any participant under this subsection,
shall not apply with respect to information described in
subsection (b)(1).
(5) No effect on public or company access.--No provision of
this section shall replace, supersede, or otherwise affect
access to any databases maintained by any Federal or State
regulator, or any entity representing any such regulator,
which are accessible by the public or persons engaged in the
business of conducting financial activities.
(i) Eligibility Requirements for State Securities
Administrators.--
(1) In general.--No State securities administrator shall be
eligible to be a participant and access the network unless--
(A) such State securities administrator participates in a
centralized database for broker-dealers, broker-dealer
agents, investment advisers, and investment advisor
representatives, registered or required to be registered, as
designated by the North American Securities Administrators
Association; and
(B) such State securities administrator requires the
broker-dealer, broker-dealer agent, investment adviser, or
investment adviser representative, currently registered or
required to be registered, to file any application, amendment
to an application, or a renewal of an application through the
centralized registration database.
(2) Time delay for participation in databases.--The
provisions of paragraph (1) shall not become effective until
3 years after the date of enactment of this Act.
(j) Eligibility Requirements for State Insurance
Commissioners.--
(1) Participation in databases.--No State insurance
commissioner shall be eligible to access the network unless
such commissioner participates with other State insurance
commissioners--
(A) in a centralized database addressing disciplinary or
enforcement actions taken against persons engaged in the
business of insurance, such as the Regulatory Information
Retrieval System maintained by the National Association of
Insurance Commissioners or any network or database designated
by such Association as a successor to such System; and
(B) in centralized databases addressing, with respect to
persons engaged in the business of insurance--
(i) corporate and other business affiliations or
relationships, such as the Producer Database maintained by
the National Association of Insurance Commissioners or any
network or database designated by such Association as a
successor to such Database; and
(ii) consumer complaints, such as the Complaints Database
maintained by the National Association of Insurance
Commissioners or any network or database designated by such
Association as a successor to such Database.
(2) Time delay for participation in databases.--The
provisions of subparagraph (1)(B) of this section shall not
become effective until 3 years after the date of enactment of
this Act.
(3) Accreditation.--No State insurance commissioner shall
be eligible to access the network unless the State insurance
department which such commissioner represents meets 1 of the
following accreditation requirements at the time of access to
the network:
(A) Is accredited by the National Association of Insurance
Commissioners.
(B) Has an application for accredited status pending with
the National Association of Insurance Commissioners.
(k) Standards.--Each financial regulator shall consider
developing guidelines on--
(1) how to denote which types of information are to receive
different levels of confidentiality protection; and
(2) how entities or associations that act as agents for
financial regulators should denote such agency status when
acting in that capacity.
(l) Other Sharing Arrangements Not Affected.--No provision
of this section shall be construed as limiting or otherwise
affecting the authority of a financial regulator to provide
any person, including another participant, access to any
information in accordance with any provision of law other
than this Act.
Subtitle B--Potential Establishment of Antifraud Subcommittee
SEC. 101. ESTABLISHMENT.
(a) In General.--Unless the determinations described in
section 100(f) are made, after the applicable date described
in such section there shall be established within the
President's Working Group on Financial Markets (as
established by Executive Order No. 12631) a subcommittee to
be known as the ``Antifraud Subcommittee'' (hereafter in this
title referred to as the ``Subcommittee'') which shall
consist of the following members:
(1) The Secretary of the Treasury, or a designee of the
Secretary.
(2) The Chairman of the Securities and Exchange Commission
or a designee of the Chairman.
(3) A State insurance commissioner designated by the
National Association of Insurance Commissioners, or a
designee of such commissioner.
(4) The Chairman of the Commodity Futures Trading
Commission or a designee of such Chairman.
[[Page H7734]]
(5) A designee of the Chairman of the Federal Financial
Institutions Examination Council.
(b) Financial Liaisons.--The following shall serve as
liaisons between the Subcommittee and the agencies
represented by each such liaison:
(1) A representative of each Federal banking agency
appointed by the head of each such agency.
(2) A representative of the National Credit Union
Administration appointed by the National Credit Union
Administration Board.
(3) A representative of the Farm Credit Administration,
appointed by the Farm Credit Administration Board.
(4) A representative of the Federal Housing Finance Board,
appointed by such Board.
(5) A representative of the Office of Federal Housing
Enterprise Oversight of the Department of Housing and Urban
Development appointed by the Director of such Office.
(6) A representative of the Appraisal Subcommittee of the
Financial Institutions Examination Council designated by the
Chairperson of the Appraisal Subcommittee.
(7) A representative of State bank supervisors designated
by the Conference of State Bank Supervisors.
(8) A representative of State savings association
supervisors designated by the American Council of State
Savings Supervisors.
(9) A representative of State credit union supervisors
designated by the National Association of State Credit Union
Supervisors.
(10) A representative of State securities administrators
designated by the North American Securities Administrators
Association.
(11) A representative of the National Association of
Securities Dealers appointed by the National Association of
Securities Dealers.
(12) A representative of the National Futures Association
appointed by the National Futures Association.
(13) Any other financial liaison as the Subcommittee may
provide to represent any other financial regulator or foreign
financial regulator, including self-regulatory agencies or
organizations that maintain databases on persons engaged in
the business of conducting financial activities, designated
in the manner provided by the Subcommittee.
(c) Other Liaisons.--
(1) Law enforcement liaisons.--The following shall serve as
liaisons between the Subcommittee and the agencies
represented by each such liaison:
(A) A representative of the Department of Justice appointed
by the Attorney General.
(B) A representative of the Federal Bureau of Investigation
appointed by the Director of such Bureau.
(C) A representative of the United States Secret Service
appointed by the Director of such Service.
(D) A representative of the Financial Crimes Enforcement
Network (as established by the Secretary of the Treasury)
appointed by the Secretary of the Treasury.
(2) Subcommittee appointed liaisons.--The Subcommittee may
provide for any other liaison to represent any other
regulator, including self-regulatory agencies or
organizations that maintain databases on persons engaged in
the business of conducting financial activities, designated
in the manner provided by the Subcommittee.
(d) Vacancy.--If, for any reason, the position of any
member of or liaison to the Subcommittee is not filled within
a reasonable period of time after being created or becoming
vacant, the President shall appoint an individual to fill the
position after consulting the agency or entity to be
represented by such member or liaison, and to the extent
possible, shall appoint such individual from a list of
possible representatives submitted by such agency or entity.
(e) Reorganization Authority.--
(1) In general.--If the President disbands or otherwise
significantly modifies the Working Group referred to in
subsection (a), the President shall provide for the
continuation of the Subcommittee's coordination functions.
(2) Member and liaison withdrawal.--If the President
materially alters the structure or duties of the
Subcommittee, any member of or liaison to the Subcommittee
may withdraw from the Subcommittee.
SEC. 102. PURPOSES OF THE SUBCOMMITTEE.
(a) In General.--The purposes of the Subcommittee are as
follows:
(1) Coordinate access by the participants to antifraud
databases of various regulators, by facilitating the
establishment, maintenance, and use of a network of existing
antifraud information maintained by such regulators with
respect to persons engaged in the business of conducting
financial activities.
(2) Coordinate access by each participant to such network
in a manner that allows the participant to review, at a
minimal cost, existing information in the databases of other
regulators, as a part of licensure, change of control, or
investigation, concerning any person engaged in the business
of conducting financial activities.
(3) Coordinate information sharing, where appropriate,
among State, Federal, and foreign financial regulators, and
law enforcement agencies, where sufficient privacy and
confidentiality safeguards exist.
(4) Consider coordinating development by participants of a
networked name-relationship index for persons engaged in the
business of conducting financial activities using information
from the databases of regulators, to the extent such
information is available.
(5) Advise participants on coordinating their antifraud
databases with the network.
(6) Coordinate development of guidelines by participants
for ensuring appropriate privacy, confidentiality, and
security of shared information, including tracking systems or
testing audits, as appropriate.
(b) Criteria for Network With Respect to Any Person Engaged
in the Business of Conducting Financial Activities.--
(1) Final disciplinary and formal enforcement actions.--
Each financial regulator that is represented by a member of
the Subcommittee under section 101(a) or by a financial
liaison to the Subcommittee under section 101(b) shall allow
any participant access, through the network, to any public
final disciplinary or formal enforcement action by such
regulator which is accessible electronically relating to the
conduct of persons engaged in the business of conducting
financial activities that is fraudulent or dishonest,
involves a breach of trust, or relates to the failure to
register with the appropriate financial regulator as required
by law.
(2) Sense of the congress on other information.--It is the
sense of the Congress that the financial regulators should
consider sharing through the network other relevant and
useful antifraud information relating to companies and other
persons engaged in conducting financial activities, to the
extent practicable and appropriate when adequate privacy,
confidentiality, and security safeguards governing access to
and the use of such information have been developed that--
(A) is accessible by the public; or
(B) consists of information, that does not include
personally identifiable information on consumers, on--
(i) licenses and applications, financial affiliations and
name-relationships, aggregate trend data, or reports filed by
a regulated entity with the participant; or
(ii) similar information generated by or for a participant
if--
(I) such information is being shared for the purpose of
verifying an application or other report filed by a regulated
entity; and
(II) the participant determines such information is factual
and substantiated.
(3) Notice and response.--If a financial regulator takes an
adverse action against a person engaged in the business of
conducting financial activities on the basis of information
described in paragraph (1) or (2) that was received from
another participant through the network, the regulator
shall--
(A) notify the person of the identity of the participant
from whom such information was received;
(B) provide the person with a specific and detailed
description of the information that was received from the
other participant through the network and would be relied on
in taking the adverse action; and
(C) notify the person of the right to a reasonable
opportunity to respond to such information.
(4) Provisions relating to requirements.--
(A) Time of notice.--Any notice to any person, and an
opportunity to respond, under paragraph (3) shall be provided
to the person a reasonable period of time before any final
action against the person which is based on information
referred to in such paragraph is completed, unless the
financial regulator determines that such advance notice and
opportunity to respond is impracticable or inappropriate, in
which case the notice and opportunity to respond shall be
provided at the time of such final action.
(B) Verification or substantiation of information.--With
respect to paragraph (3), a delay in the consideration of a
license, application, report, or other request for the
purpose of verifying or substantiating information relating
to such license, application, report, or other request shall
not be treated as an adverse action if the verification or
substantiation of such information is completed within a
reasonable time.
(5) Use of centralized databases.--
(A) In general.--A financial regulator shall be deemed to
have met the requirements of paragraph (1) if the
Subcommittee determines that the participants have access to
a centralized database that contains information on public
final disciplinary or formal enforcement actions similar to
that described in paragraph (1) or if the financial regulator
makes the information described in paragraph (1) available to
the public over the Internet.
(B) Factors for determination.--The Subcommittee shall make
the determination under subparagraph (A) on an ongoing basis,
considering both short-term costs and technological
limitations, as well as the need for long-term comprehensive
coverage, and other appropriate factors.
(C) State supervisors.--It is the sense of the Congress
that the National Association of Insurance Commissioners, the
Conference of State Bank Supervisors, the American Council of
State Savings Supervisors, the National Association of State
Credit Union Supervisors, and the North American Securities
Administrators Association should develop model guidelines
for regulators in their respective regulated financial
industries, where appropriate, to promote uniform standards
for sharing information with the network under this section.
(c) Financial Regulator Control of Access.--
(1) In general.--Except as provided in paragraph (4), each
participant that allows access to its databases or
information by other participants through the network may
[[Page H7735]]
establish parameters for controlling or limiting such access,
including the regulation of--
(A) the type or category of information that may be
accessed by other participants and the extent to which any
such type or category of information may be accessed;
(B) the participants that may have access to the database
or any specific type or category of information in the
database (whether for reasons of cost reimbursement, data
security, efficiency, or otherwise); and
(C) the disclosure by any other participant of any type or
category of information that may be accessed by the
participant.
(2) Procedures.--A participant may establish the parameters
described in paragraph (1) by regulation, order, or guideline
or on a case-by-case basis.
(3) Disclaimer.--
(A) In general.--Each participant shall ensure that any
transfer of information through the network under this
section, other than information described in paragraph (1) of
subsection (b), from such participant to another participant
is subject to a disclaimer that the information accessed may
be unsubstantiated and may not be relied on as the basis for
denying any application or license.
(B) Subcommittee flexibility.--The Subcommittee may
prescribe such guidelines as the Subcommittee determines to
be appropriate governing the location, wording, and frequency
of disclaimers under this paragraph and the manner in which
any such disclaimer shall be made.
(4) Final disciplinary and formal enforcement actions not
subject to limitation.--This subsection, and standards or
procedures adopted by any participant under this subsection,
shall not apply with respect to information described in
paragraph (1) of subsection (b).
(5) No effect on public or company access.--No provision of
this section shall replace, supersede, or otherwise affect
access to any databases maintained by any Federal or State
regulator, or any entity representing any such regulator,
which are accessible by the public or persons engaged in the
business of conducting financial activities.
(d) Eligibility Requirements for State Securities
Administrators.--
(1) In general.--No State securities administrator shall be
eligible to be a participant and access the network unless--
(A) such State securities administrator participates in a
centralized database for broker-dealers, broker-dealer
agents, investment advisers, and investment advisor
representatives, registered or required to be registered, as
designated by the North American Securities Administrators
Association; and
(B) such State securities administrator requires the
broker-dealer, broker-dealer agent, investment adviser, or
investment adviser representative, currently registered or
required to be registered, to file any application, amendment
to an application, or a renewal of an application through the
centralized registration database.
(2) Time delay for participation in databases.--The
provisions of paragraph (1) shall not become effective until
3 years after the date of enactment of this Act.
(e) Eligibility Requirements for State Insurance
Commissioners.--
(1) Participation in databases.--No State insurance
commissioner shall be eligible to access the network unless
such commissioner participates with other State insurance
commissioners--
(A) in a centralized database addressing disciplinary or
enforcement actions taken against persons engaged in the
business of insurance, such as the Regulatory Information
Retrieval System maintained by the National Association of
Insurance Commissioners or any network or database designated
by such Association as a successor to such System; and
(B) in centralized databases addressing, with respect to
persons engaged in the business of insurance--
(i) corporate and other business affiliations or
relationships, such as the Producer Database maintained by
the National Association of Insurance Commissioners or any
network or database designated by such Association as a
successor to such Database; and
(ii) consumer complaints, such as the Complaints Database
maintained by the National Association of Insurance
Commissioners or any network or database designated by such
Association as a successor to such Database.
(2) Time delay for participation in databases.--The
provisions of subparagraph (1)(B) of this section shall not
become effective until 3 years after the date of enactment of
this Act.
(3) Accreditation.--No State insurance commissioner shall
be eligible to access the network unless the State insurance
department which such commissioner represents meets 1 of the
following accreditation requirements at the time of access to
the network:
(A) Is accredited by the National Association of Insurance
Commissioners.
(B) Has an application for accredited status pending with
the National Association of Insurance Commissioners.
(C) Has a determination by the Subcommittee in effect that
such State insurance department meets or exceeds the
standards established by the National Association of
Insurance Commissioners for accreditation.
(f) Subcommittee Standards.--The Subcommittee shall
consider developing guidelines for participants on--
(1) how to denote which types of information are to receive
different levels of confidentiality protection; and
(2) how entities or associations that act as agents for
financial regulators should denote such agency status when
acting in that capacity.
(g) Reporting and Feasibility Requirements and Review of
Optimal Networking Methods.--
(1) Report.--Before the end of the 180-day period beginning
on the date this subtitle takes effect in accordance with
section 101(a), and again before the end of the 2-year period
beginning on such date, the Subcommittee shall submit a
report to the Congress regarding the methods the regulators
plan to use to network information, and a description of any
impediments to (or recommended additional legislation for)
facilitating the appropriate sharing of such information.
(2) Timeframe for networking.--
(A) In general.--The networking of information required
under subsection (b)(1) shall be established before the end
of the 2-year period beginning on the date this subtitle
takes effect, unless the Subcommittee determines, in
conjunction with the liaisons, that such a network cannot be
established within such time period in a practicable and
cost-effective manner.
(B) Reports on efforts if timeframe is not met.--If the
Subcommittee makes such a determination, the Subcommittee
shall report annually to the Congress on its efforts to
coordinate the sharing of appropriate information among the
regulators until the networking requirements are fulfilled.
(h) Other Sharing Arrangements Not Affected.--No provision
of this section shall be construed as limiting or otherwise
affecting the authority of a financial regulator or other
member or liaison of the Subcommittee to provide any person,
including another participant, access to any information in
accordance with any provision of law other than this Act.
(i) No New Databases or Expenditures Mandated.--In
implementing this Act, the Subcommittee shall not have any
authority to require a member or liaison to create a new
database or otherwise incur significant costs in modifying
existing databases for the networking of information.
SEC. 103. CHAIRPERSON; TERM OF CHAIRPERSON; MEETINGS;
OFFICERS AND STAFF.
(a) Chairperson.--
(1) Selection.--The members of the Subcommittee shall
select the Chairperson from among the members of the
Subcommittee.
(2) Term.--The term of the Chairperson shall be 2 years.
(b) Meetings.--The Subcommittee shall meet at the call of
the Chairperson or a majority of the members when there is
business to be conducted.
(c) Quorum.--A majority of members of the Subcommittee
shall constitute a quorum.
(d) Majority Vote.--Decisions of the Subcommittee shall be
made by the vote of a majority of the members of the
Subcommittee.
(e) Officers and Staff.--The Chairperson of the
Subcommittee may appoint such officers and staff as may be
necessary to carry out the purposes of the Subcommittee.
SEC. 104. NONAGENCY STATUS.
The Subcommittee shall not be considered an advisory
committee for purposes of the Federal Advisory Committee Act
or as an agency for purposes of subchapter II of chapter 5 of
title 5, United States Code.
SEC. 105. POWERS OF THE SUBCOMMITTEE.
(a) In General.--The Subcommittee shall have such powers as
are necessary to carry out the purposes of the Subcommittee
under this title.
(b) Information To Facilitate Coordination.--Each agency
and entity represented by a member or liaison shall, to the
extent permitted by law, provide the Subcommittee with a
description of the types of databases maintained by the
agency or entity to assist the Subcommittee in carrying out
the purposes described in section 102(a).
(c) Service of Members and Liaisons.--Members of and
liaisons to the Subcommittee shall serve without additional
compensation for their work on the Subcommittee.
(d) Administrative and Technical Support.--The Subcommittee
may request that any agency or entity represented by a member
or liaison provide the Subcommittee with any administrative,
technical, or other support service that the Subcommittee
determines is necessary or appropriate for it to carry out
the purposes described in section 102(a).
SEC. 106. AGREEMENT ON COST STRUCTURE.
(a) In General.--The Subcommittee shall determine, after
consultation with the affected participants or their
representatives, the means for providing for any costs the
Subcommittee may incur in carrying out the purposes of this
subtitle.
(b) Consultation and Agreement on Fees and Contributions.--
Notwithstanding any other provision of this subtitle, the
Subcommittee may not impose any fee or assessment on, or
apportion any contribution against, any member or liaison
under this section unless--
(1) the Subcommittee consults with such member or liaison;
and
(2) the member or liaison consents to the amounts, or to a
schedule, of such fees, assessments, or contributions.
[[Page H7736]]
(c) Reimbursement of Participant Costs.--Before allowing
access by the Subcommittee or a participant to any
information described in section 102, other than access
described in subsection (b)(1) of such section, a member or
liaison may request the reimbursement of reasonable costs for
providing such access.
Subtitle C--Regulatory Provisions
SEC. 111. AGENCY SUPERVISORY PRIVILEGE.
(a) Definitions.--For purposes of this section, the
following definitions shall apply:
(1) Supervisory process.--The term ``supervisory process''
means any activity engaged in by a financial regulator to
carry out the official responsibilities of the financial
regulator with regard to the regulation or supervision of
persons engaged in the business of conducting financial
activities, including examinations, inspections, visitations,
investigations, consumer complaints, or any other regulatory
or supervisory activities.
(2) Confidential supervisory information.--Subject to
paragraph (3), the term ``confidential supervisory
information'' means any of the following information which is
treated as, or considered to be, confidential information by
a financial regulator, regardless of the form or format in
which the information is created, conveyed, or maintained:
(A) Any report of examination, inspection, visitation, or
investigation, and information prepared or collected by the
financial regulator in connection with the supervisory
process, including--
(i) any file, work paper, or similar information;
(ii) any correspondence, communication, or information
exchanged, in connection with the supervisory process,
between a financial regulator and a person engaged in the
business of conducting financial activities; and
(iii) any information, including any report, created by or
on behalf of a person engaged in the business of conducting
financial activities that is required by, or is prepared at
the request of, a financial regulator in connection with the
supervisory process.
(B) Any record to the extent it contains information
derived from any report, correspondence, communication or
other information described in subparagraph (A).
(C) Any consumer complaints filed with the financial
regulator by a consumer with respect to a person engaged in
the business of conducting financial activities that have
been identified by the financial regulator as requiring
confidential treatment to protect the integrity of an
investigation or the safety of an individual.
(3) Exclusions.--The term ``confidential supervisory
information'' shall not include--
(A) any book, record, or other information, in the
possession of, or maintained on behalf of, the person engaged
in the business of conducting financial activities that--
(i) is not a report required by, or prepared at the request
of, a financial regulator; and
(ii) is not, and is not derived from, confidential
supervisory information that was created or prepared by a
financial regulator; or
(B) any information required to be made publicly available
by--
(i) any applicable Federal law or regulation; or
(ii) in the case of confidential supervisory information
created by a State financial regulator or requested from a
person engaged in the business of conducting financial
activities by a State financial regulator, any applicable
State law or regulation that specifically refers to such type
of information.
(b) Sharing of Reports.--
(1) In general.--No provision of this section shall be
construed as preventing--
(A) a person engaged in the business of conducting
financial activities from providing a report that is required
by, or prepared at the request of, a financial regulator (the
originating financial regulator) to another financial
regulator that has the authority to obtain the information
from the person under any other provision of law;
(B) a financial regulator that obtains a report described
in subparagraph (A) from a person engaged in the business of
conducting financial activities from using or disclosing such
report to the extent otherwise permitted by law; or
(C) a person engaged in the business of conducting
financial activities from sharing confidential supervisory
information with the person's attorneys, accountants, and
auditors, solely for the purpose of providing legal,
accounting, or auditing services, respectively, for such
person, except that--
(i) such sharing shall not be considered a disclosure for
any other purpose;
(ii) the attorneys, accountants, or auditors may not
further disclose such information; and
(iii) such sharing shall be conducted in accordance with
any other applicable governing laws and regulations.
(2) Privilege preserved.--If a person provides a report
referred to in paragraph (1) to a financial regulator other
than the originating financial regulator, such action shall
not affect the ability of the originating financial regulator
to assert any privilege that such financial regulator may
claim with respect to the report against any person that is
not a financial regulator.
(c) Financial Regulator Supervisory Privilege.--
(1) Privilege established.--
(A) In general.--All confidential supervisory information
shall be privileged from disclosure to any person except as
provided in this section.
(B) Prohibition on unauthorized disclosures.--No person in
possession of confidential supervisory information may
disclose such information, in whole or in part, without the
prior authorization of the financial regulator that created
the information, or requested the information from a person
engaged in the business of conducting financial activities,
except for a disclosure made in published statistical
material that does not disclose, either directly or when used
in conjunction with publicly available information, the
affairs of any person or other personally identifiable
information.
(C) Agency waiver.--The financial regulator that created
the confidential supervisory information, or requested the
confidential supervisory information from a person engaged in
the business of conducting financial activities, may waive,
in whole or in part, in the discretion of the regulator, any
privilege established under this paragraph with respect to
such information.
(2) Exceptions.--
(A) Access by governmental bodies.--
(i) Congress and general accounting office.--No provision
of paragraph (1) shall be construed as preventing access to
confidential supervisory information by duly authorized
committees of the Congress or the Comptroller General of the
United States.
(ii) Financial regulator oversight.--No financial regulator
which is described in subparagraph (P), (Q), or (R) of
section 115(3) and is subject to the oversight of a Federal
financial regulator may assert the privilege described in
paragraph (1) to prevent access to confidential supervisory
information by such Federal financial regulator.
(B) Privilege not waived.--If a financial regulator
provides access to confidential supervisory information to
the Congress, the Comptroller General, or another financial
regulator, such action shall not affect the ability of the
financial regulator to assert any privilege associated with
such information against any other person.
(d) Treatment of Foreign Supervisory Information.--In any
proceeding before a Federal or State court of the United
States, in which a person seeks to compel production or
disclosure by a financial regulator of information or
documents prepared or collected by a foreign financial
regulator that would, had the information or document been
prepared or collected by a financial regulator, be
confidential supervisory information for purposes of this
section, the information or document shall be privileged to
the same extent that the information and documents of
financial regulators are privileged under this title.
(e) Other Privileges Not Waived by Disclosure to Financial
Regulator.--The submission by a person engaged in the
business of conducting financial activities of any
information to a financial regulator or a foreign financial
regulator in connection with the supervisory process of such
financial regulator or foreign financial regulator shall not
waive, destroy, or otherwise affect any privilege such person
may claim with respect to such information under Federal or
State law as to a party other than such financial regulator
or foreign financial regulator.
(f) Discovery and Disclosure of Information.--
(1) Information available only from financial regulator.--
(A) In general.--No person (other than the financial
regulator that created the information or requested the
information from a person engaged in the business of
conducting financial activities) may disclose, in whole or in
part, any confidential supervisory information to any person
who seeks such information through subpoena, discovery
procedures, or otherwise.
(B) Procedure for requests submitted to financial
regulator.--
(i) In general.--Any request for discovery or disclosure of
confidential supervisory information shall be made to the
financial regulator that created the information, or
requested the information from a person engaged in the
business of conducting financial activities.
(ii) Procedure.--Upon receiving a request for confidential
supervisory information, the financial regulator shall
determine within a reasonable time period whether to disclose
such information pursuant to procedures and criteria
established by the financial regulator.
(C) Notification.--
(i) In general.--Before any financial regulator releases
confidential supervisory information that was requested from
a person engaged in the business of conducting financial
activities to a person under subparagraph (B), notice and a
reasonable time for comment shall be provided to the person
from whom such information was requested unless such
information--
(I) is being provided to another financial regulator, an
agency or entity represented by a liaison to the
Subcommittee, or a Federal, State, or foreign government (or
any agency or instrumentality of any such government acting
in any capacity);
(II) is being sought for use in a criminal proceeding or
investigation, or a regulatory, supervisory, enforcement, or
disciplinary administrative proceeding, civil action, or
investigation; or
(III) was originally created, or included in information
created, by the financial regulator.
[[Page H7737]]
(ii) Procedures and requirements.--A financial regulator
may prescribe regulations, or issue orders, guidelines, or
procedures, governing the notice and time period required by
clause (i).
(2) Federal court jurisdiction over disputes.--
(A) Declaratory judgment.--If a party seeks in any action
or proceeding to compel disclosure of confidential
supervisory information, a financial regulator may in a civil
action for a declaratory judgment seek to prevent such
disclosure.
(B) Judicial review.--Judicial review of the final action
of a financial regulator with regard to the disposition of a
request for confidential supervisory information shall be
before a district court of the United States of competent
jurisdiction, subject to chapter 7 of part I of title 5,
United States Code.
(g) Authority To Intervene.--In the case of any action or
proceeding to compel compliance with a subpoena, order,
discovery request, or other judicial or administrative
process with respect to any confidential supervisory
information of a financial regulator concerning any person
engaged in the business of conducting financial activities,
the financial regulator may intervene in such action or
proceeding, and such person may intervene with such
regulator, for the purpose of--
(1) enforcing the limitations established in paragraph (1)
of subsections (c) and (f);
(2) seeking the withdrawal of any compulsory process with
respect to such information; and
(3) registering appropriate objections with respect to the
action or proceeding to the extent the action or proceeding
relates to or involves such information.
(h) Right To Appeal.--Any court order that compels
production of confidential supervisory information may be
immediately appealed by the financial regulator and the order
compelling production shall be automatically stayed, pending
the outcome of such appeal.
(i) Regulations.--
(1) Authority to prescribe.--Each financial regulator may
prescribe such regulations as the regulator considers to be
appropriate, after consultation with the other financial
regulators (to the extent the prescribing financial regulator
considers appropriate and feasible), to carry out the
purposes of this section.
(2) Authority to require notice.--Any regulations
prescribed by a financial regulator under paragraph (1) may
require any person in possession of confidential supervisory
information to notify the financial regulator whenever the
person is served with a subpoena, order, discovery request,
or other judicial or administrative process requiring the
personal attendance of such person as a witness or requiring
the production of such information in any proceeding.
(j) Ability To Partially Waive Privilege Where No Other
Privilege Applies.--A financial regulator may, to the extent
permitted by applicable law governing the disclosure of
information by the regulator, authorize a waiver of the
privilege established by this section to allow access by a
person to confidential supervisory information created by
such regulator (or requested by such regulator from any
person engaged in the business of conducting financial
activities), except that--
(1) the regulator may place appropriate limits on the use
and disclosure of the information shared, and may continue to
assert the privilege with respect to any other person that
seeks access to the information; and
(2) such waiver shall not affect any other privilege or
confidentiality protection that any party may assert against
any person other than such financial regulator.
(k) Sharing of Confidential Supervisory Information Among
Federal Functional Regulators.--A Federal functional
regulator (as defined in section 509 of the Gramm-Leach-
Bliley Act) shall freely share, upon request, any
confidential supervisory information created by it with
another Federal functional regulator subject only to any
existing legal restrictions on the regulator's authority to
share or disclose information and to the following
paragraphs:
(1) Requests directed to regulator.--A Federal functional
regulator may seek information described in this subsection
solely from the Federal functional regulator that created the
information (hereafter in this subsection referred to as the
``originating regulator''), and not from any other person
(unless authorized by the originating regulator).
(2) Review of requests.--Notwithstanding any other
provision of law, in response to a request for such
information, the originating regulator may decline to provide
any portion of the information if the originating regulator,
in consultation with the requesting regulator and after
giving due consideration to the request, determines that
withholding the information is appropriate in the public
interest.
(3) Use within agency permitted.--Any confidential
supervisory information received by a requesting regulator
under this subsection may be shared freely among personnel
within the requesting regulator.
(4) Approval required for other uses.--The requesting
regulator shall obtain the approval of the originating
regulator before any information described in this subsection
is--
(A) made public;
(B) provided to any third person or agency; or
(C) cited or made a part of the record in the course of any
enforcement action.
(l) Access to Information of Regulated Entity Preserved.--
No provision of this section shall be construed as preventing
a Federal functional regulator (as defined in section 509 of
the Gramm-Leach-Bliley Act) from obtaining from any person,
other than a Federal functional regulator, any book, record
or information (other than confidential supervisory
information created by a Federal functional regulator),
including any book, record or other information referred to
in, or constituting the underlying data for, any confidential
supervisory information created by another Federal functional
regulator.
(m) No Grant of Authority.--No provision of this section
shall be construed as providing any financial regulator any
new authority to request or obtain information.
(n) No Waiver of Any Privilege of Any Other Party.--No
provision of this Act shall be construed as providing a
financial regulator with any new authority to disclose
information in contravention of applicable law governing
disclosure of information.
SEC. 112. CONFIDENTIALITY OF INFORMATION.
(a) In General.--
(1) Financial regulators.--Except as otherwise provided in
this section or section 111, any requirement under Federal or
State law regarding the privacy or confidentiality of any
information or material in the possession of any participant,
and any privilege arising under Federal or State law
(including the rules of any Federal or State court) with
respect to such information or material, shall continue to
apply to such information or material after the information
or material has been disclosed through the network to another
participant or, if subtitle B has taken effect, the
Subcommittee.
(2) Certain insurance information.--Except as otherwise
provided in this section or section 111, any requirement
under Federal or State law regarding the privacy or
confidentiality of any information or material in the
possession of the National Association of Insurance
Commissioners, or any member or affiliate of the Association,
and any privilege arising under Federal or State law
(including the rules of any Federal or State court) with
respect to such information or material, shall continue to
apply to such information or material after the information
has been disclosed to the Association, or any other member or
affiliate of the Association, through the computer databases
maintained by the Association.
(3) Nonapplicability of certain requirements.--Information
or material that is subject to a privilege or confidentiality
under any other paragraph of this subsection shall not be
subject to--
(A) disclosure under any Federal or State law governing the
disclosure to the public of information held by an officer or
an agency of the Federal Government or the respective State;
or
(B) subpoena or discovery, or admission into evidence, in
any private civil action or administrative process,
unless with respect to any privilege held by a participant
with respect to such information or material, the participant
waives, in whole or in part, in the discretion of the
participant, such privilege.
(b) Preemption of State Law.--Any State law, including any
State open record law, relating to the disclosure of
confidential supervisory information or any information or
material described in subsection (a) that is inconsistent
with any provision of section 111 or subsection (a) of this
section shall be superseded by the requirements of such
provision to the extent State law provides less
confidentiality or a weaker privilege.
(c) Duty of Financial Regulator To Maintain
Confidentiality.--A participant may not receive, download,
copy, or otherwise maintain any information or material from
any other member of or liaison to the Subcommittee through
the network unless--
(1) the participant maintains a system that enables the
participant to maintain full compliance with the requirements
of sections 100, 102, and 111 and this section, with respect
to such information and material; and
(2) if and to the extent required by the guidelines
established under sections 100 and 102, a record is
maintained of each attempt to access such information and
material, and the identity of the person making the attempt,
in order to prevent evasions of such requirements.
SEC. 113. LIABILITY PROVISIONS.
(a) No Liability for Good Faith Disclosures.--Any financial
regulator, and any officer or employee of any financial
regulator, shall not be subject to any civil action or
proceeding for monetary damages by reason of the good faith
action or omission of any officer or employee, while acting
within the scope of office or employment, relating to
collecting, furnishing, or disseminating regulatory or
supervisory information concerning persons engaged in the
business of conducting financial activities, to or from
another financial regulator, whether directly or through the
network.
(b) Criminal Liability for Intentional Unlawful
Disclosures.--
(1) In general.--It shall be unlawful to willfully disclose
to any person any information concerning any person engaged
in the business of conducting financial activities knowing
the disclosure to be in violation of any provision of this
title--
(A) requiring the confidentiality of such information; or
[[Page H7738]]
(B) establishing a privilege from disclosure for such
information that has not been waived by the relevant
financial regulator.
(2) Penalty.--Notwithstanding section 3571 of title 18,
United States Code, any person who violates paragraph (1)
shall be fined an amount not to exceed the greater of
$100,000 or the amount of the actual damages sustained by any
person as a result of such violation, or imprisoned not more
than 5 years, or both.
(c) Full, Continued Protection Under the So-Called
``Federal Tort Claims Act''.--No provision of this Act shall
be construed as reducing or limiting any protection provided
for any Federal agency, or any officer or employee of any
Federal agency, under section 2679 of title 28, United States
Code.
(d) Protection Applied to the Subcommittee.--For the
purposes of this section, the term ``financial regulator''
includes the Subcommittee after subtitle B has taken effect.
SEC. 114. AUTHORIZATION FOR IDENTIFICATION AND CRIMINAL
BACKGROUND CHECK.
(a) Sharing of Criminal Records.--
(1) Attorney general authorization.--Upon receiving a
request from a financial regulator, the Attorney General
shall--
(A) search the records of the Criminal Justice Information
Services Division of the Federal Bureau of Investigation, and
any other similar database over which the Attorney General
has authority and deems appropriate, for any criminal
background records (including wanted persons information)
corresponding to the identification information provided
under subsection (b); and
(B) either--
(i) shall provide any such records to any authorized agent
of the financial regulator, which shall provide the relevant
information to such regulator; or
(ii) may provide such records directly to the financial
regulator if the Attorney General limits such provision of
records to relevant information.
(2) Authorized agent defined.--For purposes of this
section, the term ``authorized agent'' means--
(A) any agent which has been recognized by the Attorney
General for such purpose and authorized by at least 3 other
financial regulators to receive such records and perform the
information sharing requirements of paragraph (3);
(B) the State attorney general for the State in which the
regulator is primarily located; and
(C) any law enforcement designee of the Attorney General or
such State attorney general.
(3) Information shared.--
(A) In general.--The authorized agent shall provide to the
requesting financial regulator only any records that are
relevant information.
(B) Relevant information defined.--For purposes of this
section, the term ``relevant information'' means any of the
following records:
(i) All felony convictions.
(ii) All misdemeanor convictions involving--
(I) violation of a law involving financial activities;
(II) dishonesty or breach of trust, within the meaning of
section 1033 of title 18, United States Code, including
taking, withholding, misappropriating, or converting money or
property;
(III) failure to comply with child support obligations;
(IV) failure to pay taxes; and
(V) domestic violence, child abuse, or a crime of violence.
(C) Crime of violence defined.--For purposes of
subparagraph (B)(ii)(V), the term ``crime of violence'' means
a burglary of a dwelling and a criminal offense that has as
an element the use or attempted use of physical force, or
threat of great bodily harm, or the use, attempted use, or
threatened use of a deadly weapon, against an individual,
including committing or attempting to commit murder,
manslaughter, kidnapping, aggravated assault, forcible sex
offenses, robbery, arson, extortion, and extortionate
extension of credit.
(4) State uniform or reciprocity laws requirement.--
(A) In general.--The Attorney General may not provide any
records under this subsection to an insurance regulator of a
State, or agent of such regulator, if such State does not
have in effect uniform or reciprocity laws and regulations
governing the licensure of individuals and entities
authorized to sell and solicit the purchase of insurance
within the State as set forth in section 321 of P.L. 106-102.
(B) Determination of reciprocity.--The determination of
whether or not a State has uniform or reciprocity laws or
regulations in effect for purposes of subparagraph (A) shall
be made by the Attorney General, with the advice and counsel
of the National Association of Insurance Commissioners.
(C) Exception under certain circumstances.--Notwithstanding
subparagraph (B), the Attorney General may provide records
under this section to an insurance regulator of a State, or
agent of such regulator, on the basis of a specific
determination by the National Association of Insurance
Commissioners that such State has in effect uniform or
reciprocity laws and regulations referred to in subparagraph
(A) if--
(i) a determination by the Attorney General under
subparagraph (B) is pending; or
(ii) the Attorney General considers whether such State has
in effect such uniform or reciprocity laws or regulations and
fails to make a determination, unless the Attorney General
subsequently determines that such State does not have in
effect uniform or reciprocity laws or regulations.
(b) Form of Request.--A request under subsection (a) shall
include a copy of any necessary identification information
required by the Attorney General, such as the name and
fingerprints of the person about whom the record is requested
and a statement signed by the person acknowledging that the
regulator (or such regulator's designated agent under
subsection (g)(1)) may request the search.
(c) Limitation on Permissible Uses of Information.--
Information obtained under this section may--
(1) be used only for regulatory or law enforcement
purposes; and
(2) be disclosed--
(A) only to other financial regulators or Federal or State
law enforcement agencies; and
(B) only if the recipient agrees to--
(i) maintain the confidentiality of such information; and
(ii) limit the use of such information to appropriate
regulatory and law enforcement purposes.
(d) Penalty for Improper Use.--
(1) In general.--Whoever uses any information obtained
under this section knowingly and willfully for an
unauthorized purpose shall be fined under title 18, United
States Code, imprisoned for not more than 2 years, or both.
(2) Additional penalties and waivers.--
(A) In general.--Any authorized agent who violates
paragraph (1), or any individual who directs such agent to
violate such paragraph, shall be barred from engaging in or
regulating any activities related to the business of
insurance.
(B) Waiver authorized.--The Attorney General, in the
discretion of the Attorney General, may waive the bar in
subparagraph (A), as appropriate.
(e) Reliance on Information.--A financial regulator (or
such regulator's designated agent under subsection (g)(1))
who reasonably relies on information provided under this
section shall not be liable in any action for using
information as permitted under this section in good faith.
(f) Clarification of Section 1033.--With respect to any
action brought under section 1033(e)(1)(B) of title 18,
United States Code, no person engaged in the business of
conducting financial activities shall be subject to any
penalty resulting from such section if the individual who the
person permitted to engage in the business of insurance is
licensed, or approved (as part of an application or
otherwise), by a State insurance regulator that performs
criminal background checks under this section, unless such
person knows that the individual is in violation of section
1033(e)(1)(A) of such title.
(g) Designation of Agent.--
(1) In general.--A financial regulator may designate an
agent for facilitating requests and exchanges of information
under this section between or among the financial regulator,
the Attorney General, and any other authorized agent.
(2) Sense of congress regarding agents of insurance
regulators.--It is the sense of the Congress that--
(A) each State insurance commissioner should designate the
National Association of Insurance Commissioners as an agent
under paragraph (1);
(B) persons engaged in the business of insurance should be
able to use the National Association of Insurance
Commissioners to facilitate obtaining fingerprints and
supplying identification information for use in background
checks under this section on a multijurisdictional basis;
(C) the National Association of Insurance Commissioners
should maintain a database to obtain records under this
section for use by State insurance commissioners to reduce
multiple or duplicative fingerprinting requirements and
criminal background checks, except that any such record shall
not be maintained for more than 1 year without performing a
new background check to determine if the criminal background
record has changed;
(D) other financial regulators that require fingerprints
and criminal background checks should similarly coordinate
efforts to reduce duplication for persons engaged in the
business of conducting multiple types of financial
activities; and
(E) the National Association of Insurance Commissioners,
and other financial regulators that use this section, should
consult with the Attorney General to consider the feasibility
of developing an on-going notification system that would
allow the Attorney General to notify such Association when a
licensed or approved insurance professional is convicted of a
relevant crime.
(h) Fees.--The Attorney General may charge a reasonable fee
for the provision of information under this section.
(i) Rule of Construction.--This section shall not--
(1) provide independent authorization for a financial
regulator to require fingerprinting as a part of a licensure
or other application;
(2) require a financial regulator to perform criminal
background checks under this section; or
(3) supersede or otherwise limit any other authority that
allows access to criminal background records.
[[Page H7739]]
(j) Regulations.--The Attorney General may prescribe
regulations to carry out this section.
SEC. 115. DEFINITIONS.
For purposes of this title, the following definitions shall
apply:
(1) Federal banking agency.--The term ``Federal banking
agency'' has the same meaning as given in section 3(z) of the
Federal Deposit Insurance Act.
(2) Financial activities.--
(A) In general.--The term ``financial activities''--
(i) means banking activities (including the ownership of a
bank), securities activities, insurance activities, or
commodities activities; and
(ii) includes all activities that are financial in nature
or are incidental to a financial activity (as defined under
section 4(k) of the Bank Holding Company Act of 1956).
(B) Rule of construction.--Subparagraph (A) shall not be
construed as creating any inference, including any negative
inference, concerning the types or extent of activities that
are appropriately recognized as activities that are financial
in nature, or are incidental to a financial activity, for
purposes of section 4 of the Bank Holding Company Act of
1956.
(3) Financial regulator.--The term ``financial regulator''
means--
(A) each Federal banking agency;
(B) the Securities and Exchange Commission;
(C) the Commodity Futures Trading Commission;
(D) the National Credit Union Administration;
(E) the Farm Credit Administration;
(F) the Federal Housing Finance Board;
(G) the Federal Trade Commission, to the extent the
Commission has jurisdiction over financial activities being
conducted by a person engaged in the business of conducting
financial activities;
(H) the Secretary of the Treasury, to the extent the
Secretary has jurisdiction over financial activities being
conducted by a person engaged in the business of conducting
financial activities;
(I) the Office of Federal Housing Enterprise Oversight of
the Department of Housing and Urban Development;
(J) the Appraisal Subcommittee of the Financial
Institutions Examination Council;
(K) any State bank supervisor (as defined in section 3(r)
of the Federal Deposit Insurance Act), including the
Conference of State Bank Supervisors only to the extent such
conference is acting as an agent of, and is subject to the
oversight of, any such State bank supervisor;
(L) any State savings association supervisor, including the
American Council of State Savings Supervisors only to the
extent such conference is acting as an agent of, and is
subject to the oversight of, any such State savings
association supervisor;
(M) any State insurance commissioner, including the
National Association of Insurance Commissioners only to the
extent such association is acting as the agent of, and is
subject to the oversight of, any such insurance commissioner;
(N) any State securities administrator, including the North
American Securities Administrators Association only to the
extent such association is acting as the agent of, and is
subject to the oversight of, any such securities
administrator;
(O) any State credit union supervisor, including the
National Association of State Credit Union Supervisors only
to the extent such association is acting as the agent of, and
is subject to the oversight of, any such credit union
supervisor;
(P) the National Association of Securities Dealers, only to
the extent that--
(i) such association is acting in connection with the
financial services industry; and
(ii) the association and the relevant actions are subject
to the oversight of the Securities and Exchange Commission;
(Q) the National Futures Association, only to the extent
that--
(i) such association is acting in connection with the
financial services industry; and
(ii) the association and the relevant actions are subject
to the oversight of the Commodity Futures Trading Commission
or the Securities and Exchange Commission; and
(R) any other self-regulatory organization that engages in
or coordinates regulatory and supervisory activities, with
respect to any person engaged in the business of conducting
financial activities, and is subject to the oversight of the
Securities and Exchange Commission or the Commodity Futures
Trading Commission, but only to the extent that the
organization engages in such activities and is subject to
such oversight.
(4) Foreign financial regulator.--The term ``foreign
financial regulator'' means any agency, entity, or body
(including a self-regulatory organization) that is empowered
by the laws of a foreign country to supervise and regulate
persons engaged in the business of conducting financial
activities, but only to the extent of such supervisory and
regulatory activities.
(5) Participant.--The term ``participant'' means any entity
described in section 101 as being represented by a member of,
or a liaison to, the Subcommittee (regardless of whether
subtitle B has taken effect) but only to the extent the
regulator provides or obtains access to information through
the network.
(6) Person.--The term ``person'' includes any financial
regulator.
(7) Person engaged in the business of conducting financial
activities.--The term ``person engaged in the business of
conducting financial activities'' includes, to the extent
appropriate under the laws applicable to the jurisdiction of
a financial regulator over such person--
(A) any director, officer, employee, or controlling
stockholder of, or agent for, any such person;
(B) any other person who has filed or is required to file a
change-in-control notice with the appropriate financial
regulator before acquiring control of such person; and
(C) any person who has sought approval from a financial
regulator to engage in the business of conducting financial
activities, or that was engaged in such business and subject
to the jurisdiction of a financial regulator; and
(D) any shareholder, consultant, joint venture partner, and
any other person, including an independent contractor, as
determined by the appropriate financial regulator (by
regulation or case-by-case) who participates in the conduct
of the affairs of such person.
(8) State insurance commissioner.--The term ``State
insurance commissioner'' means any officer, agency, or other
entity of any State which has primary regulatory authority
over the business of insurance and over any person engaged in
the business of insurance to the extent of such activities,
in such State.
(9) State securities administrator.--The term ``State
securities administrator'' means the securities commission
(or any agency or office performing like functions) of any
State.
SEC. 116. TECHNICAL AND CONFORMING AMENDMENTS TO OTHER ACTS.
(a) Subsection (b) of section 552a of title 5, United
States Code, is amended--
(1) by striking ``and'' at the end of paragraph (11);
(2) by striking the period at the end of paragraph (12) and
inserting ``; or''; and
(3) by inserting after paragraph (12) the following new
paragraph:
``(13) for recordkeeping, licensing, and other regulatory
and law enforcement purposes in accordance with title I of
the Financial Services Antifraud Network Act of 2001--
``(A) through a network or name-relationship index
maintained under such title; or
``(B) to a multistate database maintained by the National
Association of Insurance Commissioners and any subsidiary or
affiliate of such association, subject to the requirements of
such title.''.
(b) Section 1113 of the Financial Institutions Regulatory
and Interest Rate Control Act of 1978 (12 U.S.C. 3413) is
amended by adding at the end the following new subsection:
``(r) This title shall not apply to disclosure by a
financial regulator of information pursuant to subtitle A or
B of title I of the Financial Services Antifraud Network Act
of 2001 to the extent the disclosure is made in accordance
with the requirements of such Act.''.
(c) Section 602 of the Consumer Credit Protection Act (15
U.S.C. 1681) is amended by adding at the end the following
new subsection:
``(c) This title shall not apply to a communication between
participants, as defined in the Financial Services Antifraud
Network Act of 2001, to the extent the communication is made
in accordance with such Act.''.
SEC. 117. AUDIT OF STATE INSURANCE REGULATORS.
(a) In General.--At the request of the Congress, the
Comptroller General shall audit a State insurance regulator
or any person who maintains information on behalf of such
regulator.
(b) Limitations on Disclosure of Information.--Except as
provided in this subsection, an officer or employee of the
General Accounting Office may not disclose information
identifying an open insurance company or a customer of an
open or closed insurance company. The Comptroller General may
disclose information related to the affairs of a closed
insurance company only if the Comptroller General believes
the customer had a controlling influence in the management of
the closed insurance company or was related to or affiliated
with a person or group having a controlling influence.
(c) Coordination With State Regulator.--An officer or
employee of the General Accounting Office may discuss a
customer or insurance company with an official of a State
insurance regulator and may report an apparent criminal
violation to an appropriate law enforcement authority of the
United States Government or a State.
(d) Congressional Oversight.--This subsection shall not be
construed as authorizing an officer or employee of a State
insurance regulator to withhold information from a committee
of the Congress authorized to have the information.
(e) Administrative Aspects of Audit.--
(1) In general.--To carry out this section, all records and
property of or used by a State insurance regulator, including
samples of reports of examinations of an insurance company
the Comptroller General considers statistically meaningful
and workpapers and correspondence related to the reports
shall be made available to the Comptroller General. The
Comptroller General shall give a State insurance regulator a
current list of officers and employees to whom, with proper
identification, records and property may be made available,
and who may make notes or copies necessary to carry out an
audit.
[[Page H7740]]
(2) Prevention of unauthorized access.--The Comptroller
General shall prevent unauthorized access to records or
property of or used by a State insurance regulator that the
Comptroller General obtains during an audit.
(f) Confidentiality.--
(1) In general.--The Comptroller General shall maintain the
same level of confidentiality for a record made available
under this section as is required of the head of the State
insurance regulator from which it is obtained.
(2) Prevention of invasion of personal privacy.--The
Comptroller General shall keep information described in
section 552(b)(6) of title 5, United States Code, that the
Comptroller General obtains in a way that prevents
unwarranted invasions of personal privacy.
(3) Availability of information.--Except as provided in
subsection (b), no provision of this section shall be
construed as authorizing any information to be withheld from
the Congress.
(g) Availability of Information and Inspection of
Records.--The right of access of the Comptroller General to
information under this section shall be enforceable under
section 716 of title 31, United States Code.
(h) Definitions.--For purposes of this section, the
following definitions shall apply:
(1) State insurance regulator defined.--The term ``State
insurance regulator'' means the principal insurance
regulatory authority of a State, the District of Columbia,
any territory of the United States, Puerto Rico, Guam,
American Samoa, the Trust Territory of the Pacific Islands,
the Virgin Islands, and the Northern Mariana Islands.
(2) Insurance company.--The term ``insurance company''
includes any person engaged in the business of insurance to
the extent of such activities.
Subtitle D--Anti-Terrorism
SEC. 121. PREVENTING INTERNATIONAL TERRORISM.
(a) In General.--The financial regulators shall coordinate
the network established under sections 100 and 101 with their
foreign counterparts, to the extent the regulators deem
possible, practicable, and appropriate, to help uncover,
hinder, and prosecute the financial activities of terrorists.
(b) Report Required.--The entities described in section
101(a) shall report to the Congress by the end of the 6-month
period beginning on the date of the enactment of this Act
their further recommendations to the Congress for achieving
the goals of subsection (a).
TITLE II--SECURITIES INDUSTRY COORDINATION
Subtitle A--Disciplinary Information
SEC. 201. INVESTMENT ADVISERS ACT OF 1940.
(a) Amendment.--Section 204 of the Investment Advisers Act
of 1940 (15 U.S.C. 80b-4) is amended--
(1) by striking ``Every investment'' and inserting the
following:
``(a) In General.--Every investment''; and
(2) by adding at the end the following:
``(b) Filing Depositories.--The Commission, by rule, may
require an investment adviser--
``(1) to file with the Commission any fee, application,
report, or notice required to be filed by this title or the
rules issued under this title through any entity designated
by the Commission for that purpose; and
``(2) to pay the reasonable costs associated with such
filing and the establishment and maintenance of the systems
required by subsection (c).
``(c) Access to Disciplinary and Other Information.--
``(1) Maintenance of system to respond to inquiries.--The
Commission shall require the entity designated by the
Commission under subsection (b)(1)--
``(A) to establish and maintain a toll-free telephone
listing or other readily accessible electronic process to
receive inquiries regarding disciplinary actions and
proceedings and other information involving investment
advisers and persons associated with investment advisers; and
``(B) to respond promptly to such inquiries.
``(2) Recovery of costs.--An entity designated by the
Commission under subsection (b)(1) may charge persons, other
than individual investors, reasonable fees for responses to
inquiries made under paragraph (1).
``(3) Limitation on liability.--An entity designated by the
Commission under subsection (b)(1) shall not have any
liability to any person for any actions taken or omitted in
good faith under this subsection.''.
(b) Conforming Amendments.--
(1) Section 203A of the Investment Advisers Act of 1940 (15
U.S.C. 80b-3a) is amended--
(A) by striking subsection (d); and
(B) by redesignating subsection (e) as subsection (d).
(2) Section 306 of the National Securities Markets
Improvement Act of 1996 (15 U.S.C. 80b-10, note; P.L. 104-
290; 110 Stat. 3439) is repealed.
SEC. 202. SECURITIES EXCHANGE ACT OF 1934.
Subsection (i) of section 15A of the Securities Exchange
Act of 1934 (15 U.S.C. 78o-3) is amended to read as follows:
``(i) Obligation To Maintain Disciplinary and Other Data.--
``(1) Maintenance of system to respond to inquiries.--A
registered securities association shall--
``(A) establish and maintain a toll-free telephone listing
or other readily accessible electronic process to receive
inquiries regarding disciplinary actions and proceedings and
other information involving its members and their associated
persons and regarding disciplinary actions and proceedings
and other information that has been reported to the Central
Registration Depository by any registered national securities
exchange involving its members and their associated persons;
and
``(B) promptly respond to such inquiries.
``(2) Recovery of costs.--Such association may charge
persons, other than individual investors, reasonable fees for
responses to such inquiries.
``(3) Limitation on liability.--Such an association or
exchange shall not have any liability to any person for any
actions taken or omitted in good faith under this
subsection.''.
Subtitle B--Preventing Migration of Rogue Financial Professionals to
the Securities Industry
SEC. 211. SECURITIES EXCHANGE ACT OF 1934.
(a) Brokers and Dealers.--Section 15(b) of the Securities
Exchange Act of 1934 (15 U.S.C. 78o(b)) is amended--
(1) in paragraph (4), by striking subparagraphs (F) and (G)
and inserting the following:
``(F) is subject to any order of the Commission barring or
suspending the right of the person to be associated with a
broker or dealer.
``(G) has been found by a foreign financial regulatory
authority to have--
``(i) made or caused to be made in any application for
registration or report required to be filed with a foreign
financial regulatory authority, or in any proceeding before a
foreign financial regulatory authority with respect to
registration, any statement that was at the time and in the
light of the circumstances under which it was made false or
misleading with respect to any material fact, or omitted to
state in any such application, report, or proceeding any
material fact that is required to be stated therein;
``(ii) violated any foreign statute or regulation regarding
securities, banking, thrift activities, credit union
activities, insurance, or contracts of sale of a commodity
for future delivery, traded on or subject to the rules of a
contract market or any board of trade; or
``(iii) aided, abetted, counseled, commanded, induced, or
procured the violation by any other person of any provision
of any statutory provisions enacted by a foreign government,
or rules or regulations thereunder, regarding securities,
banking, thrift activities, credit union activities,
insurance, or contracts of sale of a commodity for future
delivery traded on or subject to the rules of a contract
market or any board of trade, or to have failed reasonably to
supervise, with a view to preventing violations of such
statutory provisions, rules, and regulations, another person
who commits such a violation, if such other person is subject
to his supervision.
``(H) is subject to any final order of a State securities
commission (or any agency or officer performing like
functions), State authority that supervises or examines
banks, thrifts, or credit unions, State insurance commission
(or any agency or office performing like functions), an
appropriate Federal banking agency (as defined in section 3
of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), or
the National Credit Union Administration, that--
``(i) bars such person from association with an entity
regulated by such commission, authority, agency, or officer,
or from engaging in the business of securities, insurance,
banking, thrift activities, or credit union activities; or
``(ii) constitutes a final order based on violations of any
laws or regulations that prohibit fraudulent, manipulative,
or deceptive conduct.''; and
(2) in paragraph (6)(A)(i), by striking ``or omission
enumerated in subparagraph (A), (D), (E), or (G)'' and
inserting ``, or is subject to an order or finding,
enumerated in subparagraph (A), (D), (E), (G), or (H)''.
(b) Municipal Securities Brokers and Dealers.--Section
15B(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
4(c)) is amended--
(1) in paragraph (2)--
(A) by striking ``or omission enumerated in subparagraph
(A), (D), (E), or (G)'' and inserting ``, or is subject to an
order or finding, enumerated in subparagraph (A), (D), (E),
(G), or (H)''; and
(B) by striking ``ten'' and inserting ``10''; and
(2) in paragraph (4) by striking ``or omission enumerated
in subparagraph (A), (D), (E), or (G)'' and inserting ``, or
is subject to an order or finding, enumerated in subparagraph
(A), (D), (E), (G), or (H)''.
(c) Government Securities Brokers and Dealers.--Section
15C(c)(1) of the Securities Exchange Act of 1934 (15 U.S.C.
78o-5(c)(1)) is amended--
(1) in subparagraph (A), by striking ``or omission
enumerated in subparagraph (A), (D), (E), or (G)'' and
inserting ``, or is subject to an order or finding,
enumerated in subparagraph (A), (D), (E), (G), or (H)''; and
(2) in subparagraph (C), by striking ``or omission
enumerated in subparagraph (A), (D), (E), or (G)'' and
inserting ``, or is subject to an order or finding,
enumerated in subparagraph (A), (D), (E), (G), or (H)''.
(d) Clearance and Settlement.--Section 17A(c) of the
Securities Exchange Act of 1934 (15 U.S.C. 78q-1(c)) is
amended--
(1) in paragraph (3)(A), by striking ``enumerated in
subparagraph (A), (D), (E), or (G)'' and inserting ``, or is
subject to an order
[[Page H7741]]
or finding, enumerated in subparagraph (A), (D), (E), (G), or
(H)''; and
(2) in paragraph (4)(C)--
(A) by striking ``enumerated in subparagraph (A), (D), (E),
or (G)'' and inserting ``, or is subject to an order or
finding, enumerated in subparagraph (A), (D), (E), (G), or
(H)''; and
(B) by striking ``ten years'' and inserting ``10 years''.
(e) Definition of Statutory Disqualification.--Section
3(a)(39)(F) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(39)(F)) is amended by striking ``has committed or
omitted any act enumerated in subparagraph (D), (E), or (G)''
and inserting ``has committed or omitted any act, or is
subject to an order or finding, enumerated in subparagraph
(D), (E), (G), or (H)''.
SEC. 212. INVESTMENT ADVISERS ACT OF 1940.
(a) Authority To Deny or Revoke Registration Based on State
(and Other Governmental) Administrative Actions.--Section
203(e) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
3(e)) is amended by striking paragraphs (7) and (8) and
inserting the following:
``(7) is subject to any order of the Commission barring or
suspending the right of the person to be associated with an
investment adviser.
``(8) has been found by a foreign financial regulatory
authority to have--
``(A) made or caused to be made in any application for
registration or report required to be filed with a foreign
securities authority, or in any proceeding before a foreign
securities authority with respect to registration, any
statement that was at the time and in light of the
circumstances under which it was made false or misleading
with respect to any material fact, or has omitted to state in
any such application, report, or proceeding any material fact
that is required to be stated therein;
``(B) violated any foreign statute or regulation regarding
securities, banking, thrift activities, credit union
activities, insurance, or contracts of sale of a commodity
for future delivery traded on or subject to the rules of a
contract market or any board of trade;
``(C) aided, abetted, counseled, commanded, induced, or
procured the violation by any other person of any foreign
statute or regulation regarding securities, banking, thrift
activities, credit union activities, insurance, or contracts
of sale of a commodity for future delivery traded on or
subject to the rules of a contract market or any board of
trade, or to have failed reasonably to supervise, with a view
to preventing violations of statutory provisions, and rules
and regulations promulgated thereunder, another person who
commits such a violation, if such other person is subject to
his supervision.
``(9) is subject to any final order of a State securities
commission (or any agency or officer performing like
functions), State authority that supervises or examines
banks, thrifts, or credit unions, State insurance commission
(or any agency or office performing like functions), an
appropriate Federal banking agency (as defined in section 3
of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), or
the National Credit Union Administration, that--
``(A) bars such person from association with an entity
regulated by such commission, authority, agency, or officer,
or from engaging in the business of securities, insurance,
banking, thrift activities, or credit union activities; or
``(B) constitutes a final order based on violations of any
laws or regulations that prohibit fraudulent, manipulative,
or deceptive conduct.''.
(b) Bars on Felons Associated With Investment Advisers.--
Section 203(f) of the Investment Advisers Act of 1940 (15
U.S.C. 80b-3(f)) is amended--
(A) by striking ``or (8)'' and inserting ``(8), or (9)'';
and
(B) by inserting ``or (3)'' after ``paragraph (2)''.
{time} 1430
The SPEAKER pro tempore (Mr. Culberson). Pursuant to the rule, the
gentleman from Alabama (Mr. Bachus) and the gentleman from Mississippi
(Mr. Shows) each will control 20 minutes.
The Chair recognizes the gentleman from Alabama (Mr. Bachus).
General Leave
Mr. BACHUS. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
on this legislation, and to include extraneous material in the Record.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Alabama?
There was no objection.
Mr. BACHUS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise in strong support of H.R. 1408, the Financial
Services Antifraud Network Act of 2001. This bill is the product of
long and careful deliberations in the Committee on Financial Services
and the Subcommittee on Financial Institutions and Consumer Credit,
which I have the honor of chairing.
I want to thank the subcommittee's ranking member, the gentlewoman
from California (Ms. Waters), for working with me in the spirit of
bipartisanship to develop legislation that commands the broad consensus
in the committee and deserves similar support on the House floor today.
Let me also commend the chairman of the full committee, the gentleman
from Ohio (Mr. Oxley), who made this bill one of the committee's
highest priorities upon assuming his chairmanship at the beginning of
this year, and then fought tenaciously to see it through to completion.
The gentleman from Michigan (Mr. Rogers), more than anyone in this
House, deserves enormous credit as both the principal architect of the
legislation and its most forceful advocate in the committee.
As former FBI special agents who have investigated at the street
level, both the gentleman from Ohio (Chairman Oxley) and the gentleman
from Michigan (Mr. Rogers) are as well qualified as anyone in this body
to lead an effort to shore up the antifraud capabilities of our
Federal, State, and local authorities.
Mr. Speaker, I yield such time as he may consume to the gentleman
from Michigan (Mr. Rogers), the chief architect and chief sponsor of
this legislation.
Mr. ROGERS of Michigan. Mr. Speaker, I thank the gentleman for
yielding time to me.
I want to thank the gentleman from Alabama (Chairman Bachus) and the
gentleman from Ohio (Chairman Oxley) for their quick and decisive role
in moving this bill, and for working with me and many others to get
this bill to the floor today.
I also want to thank the ranking member, the gentleman from New York
(Mr. LaFalce) and the gentlewoman from California (Ms. Waters) for
sitting down and working through the differences that we had on this
bill, and for coming up with what I think is a very, very good product
that is going to do great things to protect senior citizens and those
who are most at risk of losing their financial savings and investments
around the country.
Mr. Speaker, the chairman of the Committee on the Judiciary, the
gentleman from Wisconsin (Mr. Sensenbrenner), also was very gracious. I
had a good conversation with him this morning, and I thank him for
working with us and allowing us to get this bill to the floor of the
House.
We have spent some time here, Mr. Speaker, working on terrorism and
focusing the energies and resources of this great body on making sure
that the President and this country had all the resources necessary to
fight, defend, track down, and stop terrorism, both in the United
States and abroad very important issues.
However, Mr. Speaker, there is that other person who is lying in the
weeds, that other dangerous character who is, as we unfortunately know,
in every community in America, who is just waiting for the opportunity
to contact a senior citizen or someone who is not quite paying
attention and bilk them out of the very precious savings that they have
to get them through their golden years or get their kids through
college or get that house payment made at the end of the month.
What we found in this financial services community that we have that
is as different and diverse as it has ever been, and coming together
with the Gramm-Leach-Bliley Act that has been passed in the past
Congress, the lines have been blurred, but for the better.
One place where we had not caught up was the fact that we could drive
a truck through the loopholes we have created between the different
regulators of the different industries: the insurance industry, the
securities industry, and the banking industry.
They are all different regulators having a horrible time
communicating together to catch individuals who might steal from the
securities field, and then move to the insurance field with no catch in
the system that would stop them from doing that, and then again move to
the banking and financial services realm and do it again.
Nothing under the current system would allow them to get caught or
stop them from getting a license in each of those three, even if they
had been barred from those other industries or from serving in that
particular industry.
Mr. Speaker, I say this because there are two cases in Michigan which
are
[[Page H7742]]
happening today which are extremely important.
We had a case in Michigan where an individual from Flint sold
securities in the form of promissory notes on a casino company, LTD,
went to these elderly individuals and sold them the idea of riches in a
hurry, and if they invest in this key company they would reap the
benefits of all the casino gaming industries in Michigan.
We soon found out, much to the peril of those investing, many of whom
were senior citizens, that that money in fact was being used to pay his
expenses and pay the expenses of his other companies, and paying off
other loans that he had made throughout time, better known in the
criminal world as a Ponzi scheme. He would take the money in to pay the
others off, and continue doing this, to live off of those savings of so
many individuals.
There is nothing in the law today to stop these individuals, even if
they were barred from the securities industry forevermore, from going
into the insurance products industry and doing something equally as
dastardly with a license.
So what we have said is this. We said, we are not going to create a
new database. There is no new information that is going to be sent
here, Mr. Speaker. The Federal Government is not going to collect
information on consumers or regulators all around the country. That is
simply not going to happen.
But we are going to set up a system. We are going to be the traffic
cop that allows these 250 regulators of securities and banking and
insurance to talk to each other; to say that, hey, the gentleman from
Michigan (Mr. Rogers) is applying in Ohio and Michigan to get involved
in the insurance industry. He is also applying in Ohio and Illinois for
the securities industry. What do we know about him? If we know that the
securities industry has barred him, we can also stop him from getting
in the insurance industry.
Mr. Speaker, this is simple but extremely important because we are in
a time when so many resources are being diverted away from white-collar
crime, and rightly so, as our country demands it; yet this is a great
opportunity for those who are of a scheming mind, those who will rob,
again, those precious resources from so many around the country in a
way that is white-collar oriented, sneaky. They can pack up in the
middle of the night and be gone and have half of the town's savings are
in their pocket.
This is extremely important legislation, Mr. Speaker, and there are
some safeguards. I just want to cover them quickly.
The information cannot include, in this system, personally
identifiable information on consumers. The consumers are protected in
this law.
There is due process notice. The bill creates a new due process right
for persons to receive notice when any regulator uses information from
the antifraud network to take action against them. This includes a
description of the information used, where the information came from,
and a reasonable opportunity to respond.
In the privacy sector, Mr. Speaker, to protect information shared
between regulators, the bill establishes certain confidentiality and
liability provisions of regulatory information.
Insurance regulators were given increased information when performing
criminal background checks on financial professionals.
Further safeguards were also added governing the use of such
information, as well as strong penalties for the misuse of an
individual's criminal records.
Again, I want to say this clearly, because there was some concern as
this went through all of the committees that this would not create a
new database on this type of information to be held in the custody of
the Federal Government.
It simply does not do that. It allows banking regulators to talk to
insurance regulators to talk to security regulators so we can all be on
the same sheet of music. When we find that bad apple, that scam artist
who is going after Grandma, this bill and this ability will allow us to
say no and protect those very, very precious savings.
Mr. Speaker, today the House will consider H.R. 1408, the Financial
Services Antifraud Network Act, which is legislation that will help
safeguard the American public from fraud in the financial services
industry.
While the technology needed to create this network may be technical
and complex, the purpose of this legislation is not: protecting
consumers from financial scams.
As a former special agent for the Federal Bureau of Investigation, I
know firsthand that criminals come in all shapes and sizes. Advances in
modern technology and the internet have created a new frontier for
criminals, allowing them to defraud consumers with a mere click of a
computer mouse. Our regulators need the same technological tools.
Electronically linking regulators and law enforcement closes a loophole
and averts schemes aimed at the American public.
In fact, following the events of September 11 and the efforts to
crack worldwide terrorism cells, it is even more important that we give
our law enforcement officials and regulators the tools they need to
prevent fraud and potential abuses in the United States financial
services system.
The need for this common-sense legislation is clear. Currently, there
are over 250 Federal and State financial regulators and self-regulating
financial organizations, each with their own separate filing systems
for antifraud records. Most regulators have already computerized their
records and have been working on efforts to coordinate databases within
their industries. Recently, some of the larger regulators have begun
developing individual information sharing agreements with other
regulators across the financial industry.
Unfortunately, effectuating individual coordination among all these
regulators would require tens of thousands of separate agreements. At a
March 6, 2001 Financial Services Committee hearing, several regulators
testified that federal legislation is necessary to establish
confidentiality and liability protections so that financial regulators
do not compromise existing legal privileges when sharing supervisory
data with other regulators and law enforcement agencies. Also, the
Financial Services Roundtable testified that financial fraud costs
consumers and the industry about $100 billion annually, and that
greater information sharing will significantly reduce this fraud.
The primary focus of H.R. 1408 is to help the financial regulators
coordinate their antifraud efforts, particularly by coordinating
computer protocols so that their systems can seamlessly communicate and
share critical information. It is important to point out that this
network will not be a database; instead, it directs the regulators to
establish computer connections allowing regulators' existing databases
to exchange data.
The regulators themselves will have the initial opportunity to
establish the mechanics of the network. H.R. 1408 gives the regulators
six months to develop a proposal and two years to implement it. If the
regulators fail to do this on their own, H.R. 1408 then creates a
Subcommittee with representative regulators from each of the financial
industries to make decisions regarding network protocols. This
Subcommittee would then have a similar time-frame to plan and establish
the network in conjunction with the other regulators, unless they
determine that it is impracticable or not cost efficient.
The bill provides critical safeguards to govern information sharing
among regulators. The measure prohibits information from being shared
through the network unless the regulators determine that adequate
privacy and confidentiality safeguards exist. The regulators are only
directed to share public final disciplinary and formal enforcement
actions taken against financial companies and professionals.
Additionally, H.R. 1408 expresses a sense of the Congress that the
regulators should consider sharing additional anti-fraud information
that is publicly accessible, as well as information from financial
reports, affiliations, and applications, which are factual and
substantiated and do not include personally identifiable information on
consumers. The measure also creates a new due process right for persons
to receive notice when any regulator uses information from the anti-
fraud network to take an action against them. This includes a
description of the type of information used, where the information came
from, and a reasonable opportunity to respond.
To protect information shared between regulators, the measure
establishes certain limited legal privileges and confidentiality and
liability protections for regulatory and supervisory information. H.R.
1408 also allows state insurance regulators to perform FBI fingerprint
background checks on insurance applicants to obtain relevant criminal
records, subject to certain protections against misuse. The
fingerprinting section also clarifies that employers relying on a state
insurance regulator's background approval of an insurance agent are not
subject to liability for failing to conduct additional background
checks.
I believe the Financial Services Antifraud Network Act is carefully
crafted bipartisan legislation that is a positive step toward
preventing fraud across financial service industry sectors. I would
like to thank Financial Services Committee Chairman Mike Oxley and
Financial Institutions Subcommittee Chairman
[[Page H7743]]
Spencer Bachus for their leadership on this issue, as well as Committee
Ranking Member John LaFalce and Subcommittee Ranking Member Maxine
Waters for their willingness to work together on this much-needed
legislation. I would also like to thank Judiciary Committee Chairman
Jim Sensenbrenner and Agriculture Committee Chairman Larry Combest,
whose committees shared jurisdiction over H.R. 1408.
Finally, many thanks to staff for the hard work and long hours of
negotiation that produced the final product. Among House Financial
Service Committee staff that deserve special recognition are Robert
Gordon, Charles Symington, Tom McCrocklin, Jim Clinger, Bob Foster, and
Terry Haines, as well as Matt Strawn from my personal office.
Again, we need to catch financial perpetrators before they strike. I
believe H.R. 1408 is a positive step in that direction and urge my
colleagues to support its adoption.
Mr. SHOWS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I was an original cosponsor of H.R. 1408, the Financial
Services Antifraud Network Act of 2001. I rise in support of this
adoption today by the full House.
Mr. Speaker, this legislation will enhance cooperation among a vast
array of Federal and State financial agencies and self-regulatory
organizations, fight against those who defraud the consumer of
financial services, and ensure that criminals like Martin Frankel are
not able to slip into one financial services industry after being
booted out of another.
The bill envisions the creation of a technological link between
Federal and State banking, securities, insurance, and other financial
regulators so they can easily share the information that is a product
of final adjudication in disciplinary proceedings brought against
financial companies and professionals.
The bill makes common-sense changes to the securities laws by
allowing security regulators to bar persons from the security industry
when they have been barred from the banking or insurance industries by
appropriate regulators.
Finally, the bill promotes effective regulation of financial
companies by providing judicial protection for examination reports
under appropriate circumstances.
In the beginning, many Democratic members of the Committee on
Financial Services had serious concerns about early versions of the
Financial Services Antifraud Network Act of 2001.
Most of these concerns have been substantially diminished through a
bipartisan negotiation initiated by the leaders of the Subcommittee on
Financial Institutions and Consumer Credit, the gentleman from Alabama
(Mr. Bachus) and the ranking member, the gentlewoman from California
(Ms. Waters), supported by the gentleman from Ohio (Chairman Oxley) and
the ranking member, the gentleman from New York (Mr. LaFalce).
We on our side raised legitimate questions about the reliability of
the information that could be disseminated over the network envisioned
by prior versions of the legislation, and the ability of individuals to
correct information about themselves that was to be carried out over
the network.
These concerns were apparently shared by the administration and the
financial services industry. The bill we adopt today goes a long way
toward ensuring that unsubstantiated rumors and unfounded allegations
will not be broadcast throughout the regulatory community over the
antifraud network.
Most significantly, as a result of concerns raised by Democratic
members, the compromise bill makes clear that participants in the
network are required to give an individual notice of any adverse
information obtained from the network and to afford the individual an
opportunity to respond to such adverse information.
Many Democratic members raised concerns that prior versions of the
legislation needlessly created a new bureaucracy. In response to this
concern, the bill provides the financial regulators an opportunity to
develop an antifraud network without the assistance of an antifraud
committee, which is a potential new mechanism contemplated by the bill.
If the regulators do not meet the deadlines for establishing that
network, then a fraud subcommittee will be created.
The current version has improved provisions allowing insurance
commissioners access to the criminal history data of current and
potential insurance professionals, while addressing legitimate privacy
concerns raised by insurance agents. These provisions have the
potential of providing the insurance commissioners the tools needed to
ensure that criminals are not operating within the insurance industry.
I urge the adoption of the bill.
Mr. Speaker, I have no further requests for time, and I yield back
the balance of my time.
Mr. BACHUS. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, better coordination of the antifraud efforts of the more
than 250 Federal, State, and local agencies that regulate the banking,
securities, and insurance industry is long overdue. As my colleagues
know, it is often society's most vulnerable members, including our
senior citizens, older veterans, and the terminally ill that are the
targets of financial scam artists. In fact, they fashion their pitch
towards these groups. They also feed on charitable schemes where they
misrepresent that they are raising money for charity.
In light of what happened September 11, I think this country has no
toleration for those who go out as a financial scam and take advantage
of tragedies such as September 11 to raise money with no intention of
giving that money to help in the cause. The cost of these outrageous
scams is estimated to exceed $100 billion annually in this country.
By breaking down the barriers to information exchange that have
hampered antifraud initiatives at the national level and among State
regulators, H.R. 1408 will go a long way in reducing the risk to
average American consumers and investors of losing their life savings
due to financial fraud.
As I mentioned at the onset, this legislation was the subject of
extensive consideration over a 4-month period by the Subcommittee on
Financial Institutions and Consumer Credit. In addition, the Committee
on the Judiciary, on which I serve, marked up the legislation after it
was reported by the Committee on Financial Services.
The gentleman from Wisconsin (Chairman Sensenbrenner) is entitled to
praise. He was committed to bringing this bill to the floor. It would
not be on the floor today if we did not have a commitment and the
cooperation of the Committee on the Judiciary. I thank the Committee on
the Judiciary and its staff, as well as the staff of the Committee on
Financial Services.
What emerged from this cooperative effort, both between committees
and between the minority and the majority, is a bill that enhances the
capability of regulators to put financial defrauders out of business,
while at the same time guaranteeing, as the gentleman from Michigan
(Mr. Rogers) said, due process rights of the accused, and safeguarding
the information shared by regulators against improper disclosure or
other misuse.
{time} 1445
Evidence has emerged in the wake of the September 11 attacks on the
World Trade Center and the Pentagon that terrorist cells in this
country may be financing their operations in part through financial
crimes possibly and specifically involving stolen or false identities.
Facilitating the exchange of information on these activities,
shutting down funding for terrorists not only protects American
consumers but it may also help regulators and law enforcement
authorities identify and apprehend potential terrorists and those who
provide them with the financial support they need before further acts
of mass murder can be committed against innocent U.S. citizens.
As I mentioned before, at the State, Federal and local level there
are more than 20 different agencies charged with regulating banks,
security firms, and insurance companies. However, to date, there has
been little coordination among them. This lack of coordination was
evidenced when recently indicted financier Martin Frankel, after being
barred from securities activities, slid over to insurance where he
proceeded to bilk the industry of some $200 million over 8 years.
Frankel's ability to move from securities to insurance and from State
to State and ease with which he flaunted
[[Page H7744]]
financial regulators may have been deterred. In fact, we had testimony
before our committee that it was handicapped because of lack of
communication among State regulators and between agencies, both local,
State, and Federal.
The antifraud network established by this legislation will help level
the playing field between the Martin Frankels of this world and the
financial regulators charged with policing fraud and protecting
consumers.
We also had testimony, Mr. Speaker, of situations where someone would
start a financial or insurance or securities game in the State of Iowa.
They would then be barred from the State of Iowa from further activity.
The State of Iowa would understand the scheme; they would move against
it; they would bring criminal charges against this person or this group
of people. What also happens is even though there is a conviction
against one person, another person sort of takes up the mantle and they
would move to another State. They would start this all over. There
would be another round of fraud.
Mr. Speaker, I yield such time as he may consume to the gentleman
from Ohio (Mr. Oxley), the chairman of the full committee.
(Mr. OXLEY asked and was given permission to revise and extend his
remarks.)
Mr. OXLEY. Mr. Speaker, let me thank the gentleman from Alabama (Mr.
Bachus) for his good work, the chairman of the subcommittee, along with
the gentleman from Michigan (Mr. Rogers), my good friend, who worked
very hard on this issue; and we are finally reaching a point now where
we can pass this antifraud legislation.
As I am sure other speakers have said, we had numerous hearings on
this issue. All of us are painfully aware of the Martin Frankel
situation that resulted in such a terrible outcome for numerous people
who invested their savings, only to be defrauded and losing millions,
first in the securities industry and then as he artfully moved to the
insurance side of thing, the same thing happened.
This bill, of course, was designed to allow for information-sharing
among the various regulators and to focus in on people like Martin
Frankel who would take advantage of innocent people and their life
savings. So this is a wonderful step forward that all of us can be
very, very pleased about.
I want to thank the gentleman from Mississippi (Mr. Shows) for
carrying the bill today for his side of the aisle, also the gentleman
from New York (Mr. LaFalce), the ranking member, and other members of
our committee, as well as the Members on the Republican side. This is a
truly bipartisan effort. Indeed, without the help also of the Committee
on the Judiciary and the gentleman from Wisconsin (Mr. Sensenbrenner),
we would not be able to bring this bill to the floor today.
My congratulations to all those concerned, and we hope and trust that
the other body will take this up with some degree of swiftness so that
we can get this legislation signed by the President and on the books,
therefore protecting the American consumer from these con artists.
On September 11, 2001, the forces of terror struck the first blow in
a cowardly attack against our nation. President Bush has now struck
back to defend America, using the might of our armed forces to drive
the terrorists back into hiding. But to clear our skies for freedom, we
need to defend against not only the planes and bombs of the enemy, but
also the reach of their financial empire.
Osama bin Laden and the al Qaeda network survive and thrive on an
illegal network of financial crime and corruption. To end terrorism, we
need to go beyond the training camps and drive a stake through the
heart of their financial network.
The Antifraud Network Act was originally conceived as a consumer
protection solution. Our financial regulators currently do not have any
system in place for the comprehensive inter-industry oversight of
company's financial activities. Instead, government agencies are
currently sharing information on financial companies and professionals
on an ad-hoc basis without any standards for disclosure or recourse
when information is used against someone.
This bill creates consumer protection standards for the sharing of
information among agencies, while giving our regulators additional
tools to help integrate the regulation of our financial markets. It
also significantly increases the information available to each
regulator when tracking down fraud and corruption across industries. We
are thus not only protecting our American consumers from domestic fraud
artists, but also strengthening the ability of our government to track
down and break apart the financial network of international terrorists.
Financial fraud costs our nation over 100 billion dollars a year,
hurting the lives of millions of Americans and their families. Now with
the war on terrorism, the stakes are even higher. The Rogers bill
protects consumers and protects our nation. It was passed out by a new
unanimous bipartisan vote in both the Financial Services and Judiciary
Committee after having been reviewed by hundreds of lawyers from all
spectrums of the financial services and law enforcement systems.
Mr. Speaker, I am also including for the Record an exchange of
correspondence between Chairman Combest and myself regarding the
jurisdiction of the Committee on Agriculture on this legislation. I
thank him for his assistance in bringing this legislation forward and
appreciate his cooperation. I also want to thank the Chairman of the
Judiciary Committee, Mr. Sensenbrenner for his ongoing commitment to
bring this legislation to the floor. Finally, I want to thank the
members of the Committee on Financial Services, including Chairman
Bachus, Ranking Member LaFalce, and Subcommittee Ranking Member Waters
for their cooperation and hard work on this legislation. And of course,
much of the credit for this goes to a Committee freshman and FBI alum,
Mike Rogers from Michigan
It is the right bill for the right time to protect consumers and stop
terrorism. I urge your support for Mr. Rogers' Antifraud legislation.
House of Representatives,
Committee on Agriculture,
Washington, DC, July 31, 2001.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services, Rayburn House
Office Building, Washington, DC.
Dear Chairman Oxley: I understand that the Committee on
Financial Services recently ordered reported H.R. 1408, the
Financial Services Antifraud Network Act of 2001. As you
know, the legislation contains provisions which fall within
the jurisdiction of the Committee on Agriculture pursuant to
clause 1(a) of Rule X of the Rules of the House of
Representatives.
Beacuse of your willingness to consult with the Committee
on Agriculture regarding this matter and the need to move
this legislation expeditiously, I will waive consideration of
the bill by the Committee on Agriculture. By agreeing to
waive its consideration of the bill, the Agriculture
Committee does not waive its jurisdiction over H.R. 1408. In
addition, the Committee reserves its authority to seek
conferees on any provisions of the bill that are within the
Agriculture Committee's jurisdiction during any House-Senate
conference that may be convened on this legislation.
I request that you include this letter and your response as
part of your committee's report on the bill and the
Congressional Record during consideration of the legislation
on the House floor.
Thank you for your attention to these matters,
Sincerely,
Larry Combest,
Chairman.
____
House of Representatives,
Committee on Financial Services,
Washington, DC, August 1, 2001.
Hon. Larry Combest,
Chairman, Committee on Agriculture, Longworth House Office
Building, Washington, DC.
Dear Chairman Combest: Thank you for your letter regarding
your Committee's jurisdictional interest in H.R. 1408, the
Financial Services Antifraud Network Act of 2001.
I acknowledge your committee's jurisdictional interest in
this legislation and appreciate your cooperation in moving
the bill to the House floor expeditiously. I agree that your
decision to forego further action on the bill will not
prejudice the Committee on Agriculture with respect to its
jurisdictional prerogatives on this or similar legislation. I
will include a copy of your letter and this response in the
Committee's report on the bill and the Congressional Record
when the legislation is considered by the House.
Additionally, I will support any request you might make for
conferees, should a conference be necessary.
Thank you again for your cooperation
Sincerely,
Michael G. Oxley,
Chairman.
Mr. BACHUS. Mr. Speaker, I yield myself such time as I may consume.
I do not know that we have any other speakers wishing to be heard. I
want to again second what the gentleman from Ohio (Mr. Oxley), the
chairman of the full committee, said.
The cooperation that we have received from the gentleman from
Mississippi (Mr. Shows), from the gentleman from New York (Mr.
LaFalce), from the gentlewoman from California (Ms. Waters) has been
tremendous. The gentleman from Mississippi (Mr. Shows) was an original
cosponsor of
[[Page H7745]]
this legislation. This truly is a bipartisan, or nonpartisan, effort;
and I think it shows what this Congress can do when they put aside
their petty differences on many occasions and work for the common good
of the people, and they have done that.
Ms. WATERS. Mr. Speaker, I am very pleased to proceed with floor
consideration of H.R. 1408, the Financial Services Antifraud Network
Act of 2001. When we initially considered marking up this legislation
in the Financial Institutions subcommittee, there were a number of
problems with the structure and the content of that version. I want to
thank my colleague, Mr. Bachus for his willingness to postpone that
markup so that we could work together to improve this bill. A number of
improvements have been made to this legislation since it was
introduced. The structure for information sharing among the regulators
has been greatly simplified. The categories of information to be shared
among the regulators have been narrowed, and safeguards have been put
in place to protect individuals. In addition, certain due process
protections have been added to the bill, which grant individuals the
right to receive notice and respond when information from the network
is used to take action against them. Finally, this bill provides
insurance regulators with increased access to information when
conducting criminal background checks on financial professionals.
Additional safeguards are provided governing the use of this
information.
I want to thank my colleagues Chairman Bachus, Congressman Rogers,
Congressman Moore, Congressman Gonzalez, Ranking Member LaFalce and
Chairman Oxley as well as their staffs for working cooperatively to
improve this legislation. I am pleased that the process went so well
and has resulted in a better bill, and that agreement has been reached
on the final outstanding issue regarding financial regulators' access
to confidential supervisory information. This issue is not a partisan
one. We all want to combat fraud and protect consumers. In light of the
events of September 11, it has become even more crucial to ensure that
criminals do not evade detection merely by varying their methodology.
I think that once we began working together, in a bipartisan manner,
on this legislation, we realized that common ground was not an elusive
goal. I would hope that we can continue to work together across the
aisle on other issues of mutual concern as this Congress continues.
Once again, I thank my colleagues for their hard work.
Mr. BACHUS. Mr. Speaker, there being no further requests for time, I
yield back the balance of my time.
The SPEAKER pro tempore (Mr. Culberson). The question is on the
motion offered by the gentleman from Alabama (Mr. Bachus) that the
House suspend the rules and pass the bill, H.R. 1408, as amended.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of
those present have voted in the affirmative.
Mr. BACHUS. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
____________________