[Congressional Record (Bound Edition), Volume 151 (2005), Part 4]
[House]
[Pages 5716-5718]
[From the U.S. 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, and other information required by law, or 
     exchange or association rule, and the source and status of 
     such information.''.

[[Page 5717]]



     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

[[Page 5718]]

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 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.

                          ____________________