[Congressional Record Volume 151, Number 38 (Wednesday, April 6, 2005)]
[House]
[Pages H1788-H1790]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
REALTIME INVESTOR PROTECTION ACT
Mrs. KELLY. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 1077) to improve the access of investors to regulatory
records with respect to securities brokers, dealers, and investment
advisers, as amended.
The Clerk read as follows:
H.R. 1077
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Realtime Investor Protection
Act''.
SEC. 2. CONSTITUTIONAL AUTHORITY.
The constitutional authority on which this Act rests is the
power of Congress to regulate commerce as enumerated in
article I, section 8 of the United States Constitution.
SEC. 3. METHOD OF MAINTAINING BROKER/DEALER REGISTRATION,
DISCIPLINARY, AND OTHER DATA.
Subsection (i) of section 15A of the Securities Exchange
Act of 1934 (15 U.S.C. 78o-3(i)) is amended to read as
follows:
``(i) Obligation to Maintain Registration, Disciplinary,
and Other Data.--
``(1) Maintenance of system to respond to inquiries.--A
registered securities association shall--
``(A) establish and maintain a system for collecting and
retaining registration information;
``(B) establish and maintain a toll-free telephone listing,
and a readily accessible electronic or other process, to
receive and promptly respond to inquiries regarding--
``(i) registration information on its members and their
associated persons; and
``(ii) registration information on the members and their
associated persons of any registered national securities
exchange that uses the system described in subparagraph (A)
for the registration of its members and their associated
persons; and
``(C) adopt rules governing the process for making
inquiries and the type, scope, and presentation of
information to be provided in response to such inquiries in
consultation with any registered national securities exchange
providing information pursuant to subparagraph (B)(ii).
``(2) Recovery of costs.--Such an association may charge
persons making inquiries, other than individual investors,
reasonable fees for responses to such inquiries.
``(3) Process for disputed information.--Such an
association shall adopt rules establishing an administrative
process for disputing the accuracy of information provided in
response to inquiries under this subsection in consultation
with any registered national securities exchange providing
information pursuant to paragraph (1)(B)(ii).
``(4) Limitation of liability.--Such an association, or
exchange reporting information to such an association, shall
not have any liability to any person for any actions taken or
omitted in good faith under this subsection.
``(5) Definition.--For purposes of this subsection, the
term `registration information' means the information
reported in connection with the registration or licensing of
brokers and dealers and their associated persons, including
disciplinary actions, regulatory, judicial, and arbitration
proceedings,
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and other information required by law, or exchange or
association rule, and the source and status of such
information.''.
SEC. 4. FILING DEPOSITORIES FOR INVESTMENT ADVISERS.
(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 may, by rule,
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) to establish and maintain
a toll-free telephone listing, or a readily accessible
electronic or other process, to receive and promptly respond
to inquiries regarding information (including disciplinary
actions, regulatory, judicial, and arbitration proceedings,
and other information required by law or rule to be reported)
involving investment advisers and persons associated with
investment advisers. Such information shall include
information on an investment adviser (and the persons
associated with that adviser) whether the investment adviser
is registered with the Commission under section 203 or
regulated solely by a State as described in section 203A.
``(2) Recovery of costs.--An entity designated by the
Commission under subsection (b)(1) may charge persons making
inquiries, 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; Public Law
104-290; 110 Stat. 3439) is repealed.
The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from
New York (Mrs. Kelly) and the gentleman from Georgia (Mr. Scott) each
will control 20 minutes.
The Chair recognizes the gentlewoman from New York (Mrs. Kelly).
General Leave
Mrs. KELLY. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
and include extraneous material on this legislation.
The SPEAKER pro tempore. Is there objection to the request of the
gentlewoman from New York?
There was no objection.
Mrs. KELLY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, H.R. 1077 was introduced by the gentleman from Arizona
(Mr. Shadegg). It is a noncontroversial bill that will extend the
ability of American investors to access information about security
dealers.
In 1990, Congress ordered that the National Association of Securities
Dealers make this information available to all investors through a
toll-free number. Unfortunately, the authorization was not broad enough
to extend to Internet access.
H.R. 1077 corrects this problem while maintaining toll-free telephone
access to dealer information for those who prefer not to use the
Internet. I urge Members to join me in supporting this important
legislation.
Mr. Speaker, I reserve the balance of my time.
Mr. SCOTT of Georgia. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I rise in support of H.R. 1077, the Realtime Investor
Protection Act. This legislation will make it faster and easier for
investors to obtain information about the brokers with whom they
entrust their savings and retirement funds.
Since 1990, the NASD has been required to provide investors with
registration information on individual brokers by toll-free telephone
call or in writing. The system has provided valuable information on a
broker's disciplinary history, including customer complaints, that an
investor can use in selecting a broker.
While that system has worked well, the NASD would like to be able to
provide this information directly to investors over the Internet where
the information will be more accessible to investors and can be
provided in a manner that will make it easier for investors to
understand and compare among brokers.
Of the over 2.5 million plus inquiries the NASD received last year,
approximately 96 percent were through the Internet, and less than 4
percent were by telephone. Because of the narrow language of the
existing statute, however, NASD has not been able to put disclosure
information online. Rather, investors must request and wait for a
written disclosure report to be mailed or e-mailed to them.
Under the bill, the NASD would be required to make the information it
maintains on brokers available to investors over the Internet, as well
as by toll-free telephone call. The NASD would be held harmless for
information disclosed or withheld in good faith through the expanded
system, just as it is under the current statute for information
provided over the telephone or in writing.
Additionally, the bill would require the NASD to establish an
administrative process to address disputes over the accuracy of
information, ensuring procedural fairness and an opportunity for a
broker to correct errors or dispute information provided by a
securities firm to the NASD. The bill also authorizes the Securities
and Exchange Commission to designate the NASD to provide investor
access to registration information concerning investment advisers,
providing investors with another potentially valuable source of
information when shopping for a financial professional.
Mr. Speaker, given the extent to which consumers have come to rely on
the Internet for the information they need in making financial
decisions, it is clearly time to make this information more accessible
to investors. I urge support for H.R. 1077.
Mr. Speaker, I reserve the balance of my time.
Mrs. KELLY. Mr. Speaker, I yield such time as he may consume to the
gentleman from Arizona (Mr. Shadegg), the author of the bill.
Mr. SHADEGG. Mr. Speaker, I rise in strong support of H.R. 1077, the
Realtime Investor Protection Act.
As has already been indicated, this legislation will require the
National Association of Securities Dealers to make its databases of
complaints against broker-dealers publicly available on a secure
Internet site and is relatively straightforward.
Let me explain, however, this is indeed a serious problem. I
personally know of individuals whose entire wealth has been wiped out
by fraud which could have been detected had these investors taken the
time to research the broker-dealer they were dealing with in an
appropriate manner.
As has been explained, the current law requires the NASD to maintain
BrokerCheck. BrokerCheck is a system through which investors can
research their broker-dealer before entrusting with them their hard-
earned savings. But in light of Congress' increased focus on retirement
security, I believe we should encourage Americans to, in fact, take
advantage of BrokerCheck, and even go beyond that and to conduct their
own research before making any investment decision.
BrokerCheck, as has been indicated by my colleague on the other side,
provides these individuals with this information through a free check
that can be accessed either over the Internet or by telephone. But
because it is accessed over the Internet and by telephone, and requires
that an inquiry be submitted and then a response prepared and that
response sent back, the delay in getting this information can be
anywhere between 10 minutes and as much as 2 days. This legislation
goes at that problem and allows instantaneous access to this kind of
information.
Through the current system and through the enhanced system this
legislation will authorize, BrokerCheck will gather and make available
online on an instantaneous basis, and an investor can discover, whether
or not their broker has a criminal record, has been subjected to a
regulatory action by the Securities and Exchange Commission, and
whether or not their
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broker has had consumer complaints filed against them.
While the current system is a good idea, as I indicated, it has not
kept pace with technology. Today investors can only access the
information by placing a request through the NASD's toll-free phone
number or Website, and then must wait for a response. This legislation
will update the system by requiring the NASD to make this information
available through a secure Website on the Internet so investors can
search for this information instantaneously.
NASD statistics bear out the need to utilize the Internet for this
purpose. Let me give just a few statistics. Over 4.4 million requests
for information were submitted to the BrokerCheck program in 2004, and
99 percent of these were submitted on the Internet through e-mail. Only
1 percent were by telephone. Clearly investors have figured out that
the Internet is the proper mechanism for submitting this kind of
inquiry and checking out their broker-dealer before they invest. But by
having it require now a response from the NASD, rather than having the
check be instantaneous, we are exposing investors to that 10-minute to
2-day delay during which they cannot access this information.
By making information accessible online, as H.R. 1077 does, it will
be easier for individuals to research their broker-dealer and provide
themselves with the information they need before they make an
investment decision. I hope my colleagues share my interest in
encouraging individuals to become more informed investors, and I urge a
yes vote by all of my colleagues on the Realtime Investor Protection
Act.
I appreciate the comments of the gentleman on the other side in
support of the legislation, the comments of the gentlewoman from New
York (Mrs. Kelly), and the support of the Committee on Financial
Services.
Mr. OXLEY. Mr. Speaker, I rise in support of the Real-time Investor
Protection Act and would like to commend my good friend from Arizona,
Mr. Shadegg, for his excellent work on this important legislation.
Informed investors are critical to our Nation's markets. Ready access
to complete information about securities firms and brokers is critical
to informing investors and building investor confidence. NASD, the
self-regulatory organization for broker-dealers, has been providing
this information to the public since 1990 when Congress mandated that
NASD make relevant portions of the information available to the public
without charge through a toll-free telephone number.
At the time, the telephone was the easiest and most convenient
solution. However, investors today have embraced the Internet as their
preferred means of obtaining information. Therefore NASD seeks to use
the Internet to disseminate this information. Investors want and need
online access to disclosure of information to assist them in deciding
whether to do business with a securities firm or broker.
When Congress mandated that NASD release this information, it
accorded NASD immunity form liability for the release of such
information to the public--recognizing that the disclosure of key
information about securities firms and brokers is a critical part of
NASD's regulatory and investor protection mission.
I would like to clarify that under prevailing Federal case law there
is no private right of action against NASD for acts or omissions taken
pursuant to its regulatory responsibilities under the Federal
securities laws. I want to be clear that this legislation is not
intended to change existing law pertaining to private rights of action
under those laws. In addition, courts have historically granted NASD
absolute immunity for its regulatory actions. This legislation is not
intended to limit NASD's immunity for regulatory actions.
I urge all of my colleagues to support this bipartisan investor
protection bill.
Mr. SCOTT of Georgia. Mr. Speaker, I yield back the balance of my
time.
Mrs. KELLY. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentlewoman from New York (Mrs. Kelly) that the House suspend the rules
and pass the bill, H.R. 1077, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
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