[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1958 Introduced in Senate (IS)]
108th CONGRESS
1st Session
S. 1958
To prevent the practice of late trading by mutual funds, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
November 25, 2003
Mr. Daschle (for himself, Mr. Kerry, and Mr. Kennedy) introduced the
following bill; which was read twice and referred to the Committee on
Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To prevent the practice of late trading by mutual funds, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SEC. 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Mutual Fund
Investor Protection Act of 2003''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
TITLE I--REGULATORY IMPROVEMENTS.
Sec. 101. Regulatory improvements.
TITLE II--MUTUAL FUND OVERSIGHT BOARD.
Sec. 201. Establishment; administrative provisions.
Sec. 202. Registration with the board.
Sec. 203. Auditing, quality control, and independence standards and
rules.
Sec. 204. Inspections of registered mutual funds.
Sec. 205. Investigations and disciplinary proceedings.
Sec. 206. Commission oversight of the board.
Sec. 207. Funding.
Sec. 208. No preemption of State securities actions.
Sec. 209. Arbitration of investor claims in independent forum.
SEC. 2. DEFINITIONS.
In this Act, the following definitions shall apply:
(1) Board.--The term ``Board'' means the Mutual Fund
Oversight Board established under section 201.
(2) Commission.--The term ``Commission means the Security
and Exchange Commission.
(3) Mutual fund.--The term ``mutual fund'' means such
entities designated as mutual funds by regulation of the Mutual
Fund Oversight Board established under title II of this Act.
(4) Registered mutual fund.----The term ``registered mutual
fund'' has the same meaning as in section 5 of the Investment
Company Act of 1940.
(5) Securities laws.--The term ``securities laws'' has the
same meaning as in section 3 of the Securities Exchange Act of
1934.
TITLE I--REGULATORY IMPROVEMENTS
SEC. 101. REGULATORY IMPROVEMENTS.
(a) Pricing of Shares.--The Investment Company Act of 1940 (15
U.S.C. 80a-1 et seq.) is amended by inserting after section 11 the
following:
``SEC. 11A. PRICING OF SECURITIES.
``On any calendar day, the purchaser of the securities of a
registered open-end company shall be required to place an order to
purchase such securities prior to the time at which the registered
open-end company sets the price of the securities for that day in order
to purchase the securities at that price.''.
(b) Penalties.--
(1) Securities act of 1933.--Section 24 of the Securities
Act of 1933 (15 U.S.C. 77x) is amended--
(A) by striking ``Any person'' and inserting the
following:
``(a) In General.--Except as provided under subsection (b), any
person''; and
(B) by adding at the end the following:
``(b) Open-End Companies.--Any person who willfully violates
section 17(a) with respect to the offer or sale of any security of a
registered open-end company (as that term is defined under section 5 of
the Investment Company Act of 1940) shall, upon conviction, be fined
not more than $1,000,000, imprisoned for not more than 20 years, or
both.''.
(2) Securities exchange act of 1934.--Section 32(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78ff(a)) is
amended--
(A) by striking ``(a) Any person'' and inserting
the following:
``(a) Willful Violations.--
``(1) In general.--Except as provided under paragraphs (2)
and (3), any person''; and
(B) by adding at the end the following:
``(2) Open-end companies; brokerage transactions.--
``(A) In general.--A person shall, upon conviction,
be subject to the penalties in subparagraph (B) if such
person willfully violates--
``(i) section 10(b), with respect to the
purchase or sale of the securities of a
registered open-end company (as that term is
defined under section 5 of the Investment
Company Act of 1940); or
``(ii) section 17(a) of the Securities Act
of 1933.
``(B) Penalties.--Any person convicted of a
violation described in subparagraph (A) shall be fined
not more than $10,000,000, imprisoned for not more than
25 years, or both, or, if the person is not a natural
person, fined not more than $50,000,000.
``(3) Lifetime ban.--Any natural person who engages in a
violation described in paragraph (2) shall be prohibited from
participating in any sale or offer to sell securities for the
life of such person.''.
(3) Investment company act of 1940.--Section 49 of the
Investment Company Act of 1940 (15 U.S.C. 80a-48) is amended--
(A) by striking ``Any person'' and inserting the
following:
``(a) In General.--Except as provided under subsection (b), any
person''; and
(B) by adding at the end the following:
``(b) Open-End Companies.--Any person who willfully violates
section 22(a) with respect to the securities of a registered open-end
company shall, upon conviction, be fined not more than $1,000,000,
imprisoned not more than 20 years, or both.''.
(c) RICO Enforcement.--Section 1961(1) of title 18, United States
Code, is amended--
(1) in subparagraph (E), by striking ``or'' at the end; and
(2) by striking the semicolon at the end and inserting ``,
(G) any act that violates section 17(a) of the Securities Act
of 1933, with respect to the sale of or an offer to sell
securities of a registered open-end company (as that term is
defined under section 5 of the Investment Company Act of 1940),
(H) section 10(b) or 17(a) of the Securities Exchange Act of
1934, with respect to the purchase or sale of the securities of
such a registered open-end company, or (I) section 22(c) of the
Investment Company Act of 1940, with respect to the valuation
of the securities of such a registered open-end company;''.
(d) Disclosure of Market Timing Policies.--Section 24 of the
Investment Company Act of 1940 (15 U.S.C. 80a-24) is amended by adding
at the end the following:
``(h) Market Timing Policies.--Each prospectus distributed by a
registered open-end company shall disclose--
``(1) the policies of the registered open-end company with
respect to the timing of the pricing of its shares; and
``(2) the steps taken by the registered open-end company to
prevent the abuse of such pricing policies.''.
(e) Director and Chairman Independence.--Section 10(a) of the
Investment Company Act of 1940 (15 U.S.C. 80a-10) is amended--
(1) by striking ``60 per centum'' and inserting ``one-
fourth''; and
(2) by adding at the end the following:
``(i) Chairman.--No registered investment company have as chairman
of such board an interested person of such registered company. Such
chairman shall have access to all information, including but not
limited to any outside advisory, management, marketing, or investment
service fees paid by the investment company.''.
(f) Definition of Interested Person.--Section 2(a)(19) of the
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)) is amended--
(1) in subparagraph (A)--
(A) by striking clauses (v) and (vi) and inserting
the following:
``(v) any natural person who is a member of
a class of persons who the Commission, by rule
or regulation, determines are unlikely to
exercise an appropriate degree of independence
as a result of--
``(I) a material business or
professional relationship with the
company or any affiliated person of the
company; or
``(II) a close familial
relationship with any natural person
who is an affiliated person of the
company,''; and
(B) by redesignating clause (vii) as clause (vi);
and
(2) in subparagraph (B)--
(A) by striking clauses (v) and (vi) and inserting
the following:
``(v) any natural person who is a member of
a class of persons who the Commission, by rule
or regulation, determines are unlikely to
exercise an appropriate degree of independence
as a result of--
``(I) a material business or
professional relationship with such
investment adviser or principal
underwriter (or affiliated person
thereof); or
``(II) a close familial
relationship with a natural person who
is such investment adviser or principal
underwriter (or affiliated person
thereof),''; and
(B) by redesignating clause (v) as clause (vi).
(g) Fiduciary Duty of Board of Directors.--
(1) In general.--Not later than 270 days after enactment of
this Act, the Securities and Exchange Commission shall publish
regulations to require that the board of directors of a
registered investment company shall have a fiduciary duty--
(A) to demonstrate that the negotiated advisory,
management, marketing, and investment service fees that
are reasonable and are in the best interest of their
shareholders. This may be accomplished by obtaining
multiple bids, an independent evaluation or appraisal,
including a provision in all fee contracts preventing
contractors from charging rates in excess of those paid
by other clients, and any other means practicable to ensure that
shareholders are not overcharged for any services provided to the
registered investment company; and
(B) to provide a report to the Commission, which
shall also be disclosed in any prospectus delivered to
shareholders of the company, on any significant or
material business or professional relationship with any
advisory, management, marketing, investment, or other
service provided to the registered investment company
to ensure that such services are provided in the best
interest of their shareholders.
(h) Improved Transparency of Mutual Fund Costs.--
(1) Regulation revision required.--Not later than 270 days
after the date of enactment of this Act, the Securities and
Exchange Commission shall revise regulation under the
Securities Act of 1933, the Securities Exchange Act of 1934, or
the Investment Company Act of 1940, or any combination thereof,
to require, consistent with the protection of investors and the
public interest, improved disclosure with respect to any
registered investment company, in the quarterly statement or
other periodic report to shareholders or other appropriate
disclosure document, of--
(A) the estimated amount, in dollars, of the
operating expenses of the company, including any
advisory, management, marketing, and investment service
fees, that are born by the shareholders, and the amount
born by each shareholder of the company, based on the
investment of each shareholder in the company;
(B) the structure of, or method used to determine,
the compensation of individuals employed by the
investment adviser of the company to manage the
portfolio of the company, and the ownership interest of
such individuals in the securities of the company;
(C) the portfolio turnover rate of the company, set
forth in a manner that facilitates comparison among
investment companies, and a description of the
implications of a high turnover rate for portfolio
transaction costs and performance;
(D) information concerning any payments of
commissions for effecting securities transactions to a
member of an exchange, broker, or dealer who--
(i) furnishes advice, either directly or
through publications or writings, as to the
value of securities, the advisability of
investing in, purchasing, or selling
securities, and the availability of securities
or purchasers or sellers of securities;
(ii) furnishes analyses and reports
concerning issuers, industries, securities,
economic factors and trends, portfolio
strategy, and the performance of accounts; and
(iii) facilitates the sale or distribution
of the shares of the company;
(E) information concerning payments by any person
other than the company that are intended to facilitate
the sale and distribution of the shares of the company;
and
(F) information concerning discounts on front-end
sales loads for which investors may be eligible
including the minimum purchase amounts required for
such discounts.
(2) Appropriate disclosure document.--
(A) In general.--For the purposes of paragraph (1),
a disclosure shall not be considered to be made in an
appropriate disclosure document if the disclosure is
made exclusively in a prospectus or statement of
additional information, or both such documents.
(B) Exceptions.--Notwithstanding subparagraph (A),
the disclosures required by subparagraphs (B) and (D)
of paragraph (1) may be considered to be made in an
appropriate disclosure document if the disclosure is
made exclusively in a prospectus or statement of
additional information, or both such documents.
(3) Concept release required.--
(A) In general.--The Commission shall issue a
concept release examining the issue of portfolio
transaction costs incurred by investment companies
including commission, spread, opportunity, and market
impact costs, with respect to trading of portfolio
securities and any advisory, management, marketing, and
investment service fees paid by investment companies
and how such costs may be disclosed to mutual fund
investors in a manner that will enable investors to
compare such costs among funds.
(B) Report and recommendations required.--Not later
than 270 days after the date of enactment of this Act,
the Commission shall submit a report on the findings
from the concept release required under subparagraph
(A), as well as any legislative and regulatory
recommendations, if any, to the Committee on Banking,
Housing, and Urban Affairs of the Senate and the
Committee on Financial Services of the House of
Representatives.
(4) Additional requirement for fee statement.--
(A) In general.--Not later than 270 days after the
date of enactment of this Act, the Commission shall
prescribe a rule to require, with respect to any
registered investment company, in the quarterly
statement or other periodic report, or other
appropriate disclosure document, a statement informing
shareholders of what amount of fees they have paid on
each $1,000 of their investments over the past 365
days, that such fees have been deducted from the
amounts shown on the statements, and where such
shareholders may find additional information regarding
the amount of these fees.
(B) Appropriate disclosure document.--The statement
required by subparagraph (A) shall not be considered to
be made in an appropriate disclosure document unless
such statement is--
(i) made in each periodic statement to a
shareholder that discloses the value of the
holdings of the shareholder in the securities
of the company; and
(ii) prominently displayed, in a location
in close proximity to the statement of the
shares account value.
(5) Reducing burdens on small funds.--In prescribing rules
under this subsection, the Commission shall give consideration
to methods for reducing for small investment companies the
burdens of making disclosures by requiring such rules,
consistent with the public interest and the protection of
investors.
(i) Short-Term Trading by Interested Persons Prohibited.--
(1) Short-term trading prohibited.--Section 17 of the
Investment Company Act of 1940 (15 U.S.C. 80a-17) is amended by
adding at the end the following:
``(k) Short-Term Trading Prohibited.--It shall be unlawful for any
officer, director, partner, or employee of a registered investment
company, any affiliated person, investment adviser, or principal
underwriter of such company, or any officer, director, partner, or
employee of such affiliated person, investment adviser, or principal
underwriter, to engage in short-term transactions, as such term is
defined by the Commission by rule, in any securities of which such
company, or any affiliate of such company, is the issuer, except that
this subsection shall not prohibit transactions in money market funds,
or other funds the investment policy of which expressly permits short-
term transactions, or such other categories of registered investment
companies as the Commission shall specify by rule.''.
(j) Mutual Fund Compliance Officer.--Not later than 270 days after
the date of enactment of this Act, the Commission shall, by rule,
require each registered investment company to appoint a compliance
officer to ensure that such company is complying with all relevant
rules and regulations, consistent with the protection of investors and
the public interest. Each compliance officer of a registered investment
company shall report only to directors that are not interested persons
of the company, as such term is defined in section 2(a)(19) of the
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)).
TITLE II--MUTUAL FUND OVERSIGHT BOARD
SEC. 201. ESTABLISHMENT; ADMINISTRATIVE PROVISIONS.
(a) Establishment of Board.--There is established the Mutual Fund
Oversight Board, to oversee the conduct of mutual funds and related
matters, in order to protect the interests of investors. The Board
shall be a body corporate, operate as a nonprofit corporation, and have
succession until dissolved by an Act of Congress.
(b) Status.--The Board shall not be an agency or establishment of
the United States Government, and, except as otherwise provided in this
title, shall be subject to, and have all of the powers conferred upon a
nonprofit corporation by the District of Columbia Nonprofit Corporation
Act. Each member and person employed by the Board shall be deemed to be
an officer or employee of, or agent for, the Federal Government by
reason of such service.
(c) Duties of the Board.--The Board shall, subject to action by the
Commission under section 206, and once a determination is made by the
Commission under subsection (d) of this section--
(1) register mutual funds in accordance with section 202;
(2) establish or adopt, or both, by rule, internal
auditing, quality control, ethics, independence, and other
standards relating to the conduct of mutual funds, in
accordance with section 203;
(3) conduct inspections of mutual funds, in accordance with
section 204 and the rules of the Board;
(4) conduct investigations and disciplinary proceedings
concerning, and impose appropriate sanctions where justified
upon, mutual funds and associated persons of such mutual funds,
in accordance with section 205;
(5) perform such other duties and functions as the Board
determines are necessary or appropriate to promote high
professional standards among, and improve the quality of
services offered by, mutual funds, in order to protect
investors, or to further the public interest;
(6) enforce compliance with this title, the rules of the
Board, professional standards, and the securities laws relating
to mutual funds and associated persons thereof; and
(7) set the budget and manage the operations of the Board
and the staff of the Board.
(d) Commission Determination.--The members of the Board shall take
such action (including hiring of staff, proposal of rules, and adoption
of initial and transitional auditing and other professional standards)
as may be necessary or appropriate to enable the Commission to
determine, not later than 270 days after the date of enactment of this
Act, that the Board is so organized and has the capacity to carry out
the requirements of this title, and to enforce compliance with this
title by registered mutual funds and associated persons thereof.
(e) Board Membership.--
(1) Composition.--The Board shall have 5 members, appointed
in accordance with paragraph (3), from among prominent
individuals of integrity and reputation who have a demonstrated
commitment to the interests of investors and the public, and an
understanding of the responsibilities for and nature of the
financial services offered by registered mutual funds.
(2) Full-time independent service.--Each member of the
Board shall serve on a full-time basis, and may not, concurrent
with service on the Board, be employed by any other person or
engage in any other professional or business activity. No
member of the Board may share in any of the profits of, or
receive payments from, a mutual fund (or any other person, as
determined by rule of the Commission), other than fixed continuing
payments, subject to such conditions as the Commission may impose,
under standard arrangements for the retirement of employees of mutual
funds.
(3) Appointment of board members.--
(A) Initial board.--Not later than 90 days after
the date of enactment of this Act, the Commission,
after consultation with the Chairman of the Board of
Governors of the Federal Reserve System and the
Secretary of the Treasury, shall appoint the
chairperson and other initial members of the Board.
(B) Vacancies.--A vacancy on the Board shall not
affect the powers of the Board, but shall be filled in
the same manner as provided for appointments under this
section.
(4) Term of service.--
(A) In general.--The term of service of each Board
member shall be 5 years, and until a successor is
appointed, except that--
(i) the terms of office of the initial
Board members (other than the chairperson)
shall expire in annual increments, 1 on each of
the first 4 anniversaries of the initial date
of appointment; and
(ii) any Board member appointed to fill a
vacancy occurring before the expiration of the
term for which the predecessor was appointed
shall be appointed only for the remainder of
that term.
(B) Term limitation.--No person may serve as a
member of the Board, or as chairperson of the Board,
for more than 2 terms, whether or not such terms of
service are consecutive.
(5) Removal from office.--A member of the Board may be
removed by the Commission from office, in accordance with
section 206(d)(3), for good cause shown before the expiration
of the term of that member.
(f) Powers of the Board.--In addition to any authority granted to
the Board under this title, the Board shall have the power, subject to
section 206--
(1) to sue and be sued, complain and defend, in its
corporate name and through its own counsel, with the approval
of the Commission, in any Federal, State, or other court;
(2) to conduct its operations and maintain offices, and to
exercise all other rights and powers authorized by this title,
in any State, without regard to any qualification, licensing,
or other provision of law in effect in such State (or a
political subdivision thereof);
(3) to lease, purchase, accept gifts or donations of, or
otherwise acquire, improve, use, sell, exchange, or convey, all
of or an interest in any property, wherever situated;
(4) to appoint such employees, accountants, attorneys, and
other agents as may be necessary or appropriate, and to
determine their qualifications, define their duties, and fix
their salaries or other compensation (at a level that is
comparable to private sector self-regulatory, accounting,
technical, supervisory, or other staff or management
positions);
(5) to allocate, assess, and collect support fees
established pursuant to section 209, for the Board, and other
fees and charges imposed under this title; and
(6) to enter into contracts, execute instruments, incur
liabilities, and do any and all other acts and things
necessary, appropriate, or incidental to the conduct of its
operations and the exercise of its obligations, rights, and
powers imposed or granted by this title.
(g) Rules of the Board.--The rules of the Board shall, subject to
the approval of the Commission--
(1) provide for the operation and administration of the
Board, the exercise of its authority, and the performance of
its responsibilities under this title;
(2) permit, as the Board determines necessary or
appropriate, delegation by the Board of any of its functions to
an individual member or employee of the Board, or to a division
of the Board, including functions with respect to hearing,
determining, ordering, certifying, reporting, or otherwise
acting as to any matter, except that--
(A) the Board shall retain a discretionary right to
review any action pursuant to any such delegated
function, upon its own motion;
(B) a person shall be entitled to a review by the
Board with respect to any matter so delegated, and the
decision of the Board upon such review shall be deemed
to be the action of the Board for all purposes
(including appeal or review thereof); and
(C) if the right to exercise a review described in
subparagraph (A) is declined, or if no such review is
sought within the time stated in the rules of the
Board, then the action taken by the holder of such
delegation shall for all purposes, including appeal or
review thereof, be deemed to be the action of the
Board;
(3) establish ethics rules and standards of conduct for
Board members and staff, including a bar on practice before the
Board (and the Commission, with respect to Board-related
matters) of 1 year for former members of the Board, and
appropriate periods (not to exceed 1 year) for former staff of
the Board; and
(4) provide as otherwise required by this title.
(h) Annual Report to the Commission.--
(1) In general.--The Board shall submit an annual report
(including its audited financial statements) to the Commission.
(2) Submission to congress.--Not later than 30 days after
the date of receipt of a report under paragraph (1), the
Commission shall transmit a copy of that report to--
(A) the Committee on Banking, Housing, and Urban
Affairs of the Senate; and
(B) the Committee on Financial Services of the
House of Representatives.
SEC. 202. REGISTRATION WITH THE BOARD.
(a) Mandatory Registration.--Beginning 180 days after the date of
the determination of the Commission under section 201(d), it shall be
unlawful for any mutual fund to conduct business if that mutual fund is
not registered with the Board under this section.
(b) Applications for Registration.--
(1) Form of application.--A mutual fund shall use such form
as the Board may prescribe, by rule, to apply for registration
under this section.
(2) Contents of applications.--Each mutual fund shall
submit, as part of its application for registration, in such
detail as the Board shall specify--
(A) the policies of each mutual fund regarding, and
efforts taken by that mutual fund to eliminate, market
timing practices;
(B) the annual fees received by the mutual fund;
(C) such other current financial information for
the most recently completed fiscal year of the mutual
fund as the Board may reasonably request;
(D) a statement of the quality control policies of
the mutual fund;
(E) the policies of each mutual fund regarding, and
efforts taken by that mutual fund to eliminate, late
trading practices; and
(F) information relating to criminal, civil, or
administrative actions or disciplinary proceedings
pending against the mutual fund or any associated
person of the mutual fund in connection with the
conduct of the mutual fund; and
(G) such other information as the rules of the
Board or the Commission shall specify as necessary or
appropriate in the public interest or for the
protection of investors.
(3) Consents.--Each application for registration under this
subsection shall include--
(A) a consent executed by the mutual fund to
cooperation in and compliance with any request for
testimony or the production of documents made by the
Board in the furtherance of its authority and
responsibilities under this title (and an agreement to
secure and enforce similar consents from each of the
associated persons of the mutual fund as a condition of
their continued employment by or other association with
such mutual fund); and
(B) a statement that such mutual fund understands
and agrees that cooperation and compliance, as
described in the consent required by subparagraph (A),
and the securing and enforcement of such consents from
its associated persons, in accordance with the rules of
the Board, shall be a condition to the continuing
effectiveness of the registration of the mutual fund
with the Board.
(c) Action on Applications.--
(1) Timing.--The Board shall approve a completed
application for registration not later than 45 days after the
date of receipt of the application, in accordance with the
rules of the Board, unless the Board, prior to such date,
issues a written notice of disapproval to, or requests more
information from, the prospective registrant.
(2) Treatment.--A written notice of disapproval of a
completed application under paragraph (1) for registration
shall be treated as a disciplinary sanction for purposes of
sections 205(d) and 206(c).
(d) Periodic Reports.--Each registered mutual fund shall submit an
annual report to the Board, and may be required to report more
frequently, as necessary to update the information contained in its
application for registration under this section, and to provide to the
Board such additional information as the Board or the Commission may
specify, in accordance with subsection (b)(2).
(e) Public Availability.--Registration applications and annual
reports required by this subsection, or such portions of such
applications or reports as may be designated under rules of the Board,
shall be made available for public inspection, subject to rules of the
Board or the Commission, and to applicable laws relating to the
confidentiality of proprietary, personal, or other information
contained in such applications or reports, provided that, in all
events, the Board shall protect from public disclosure information
reasonably identified by the subject mutual fund as proprietary
information.
(f) Registration and Annual Fees.--The Board shall assess and
collect a registration fee and an annual fee from each registered
mutual fund, in amounts that are sufficient to recover the costs of
processing and reviewing applications and annual reports.
SEC. 203. AUDITING, QUALITY CONTROL, AND INDEPENDENCE STANDARDS AND
RULES.
(a) Auditing, Quality Control, and Ethics Standards.--
(1) In general.--The Board shall, by rule, establish such
internal auditing and quality control standards, and such
ethics standards to be used by registered mutual funds in
conducting their business, as required by this title or the
rules of the Commission, or as may be necessary or appropriate
in the public interest or for the protection of investors.
(2) Rule requirements.--In carrying out paragraph (1), the
Board--
(A) shall include in the internal auditing
standards that it adopts, requirements that each
registered mutual fund shall--
(i) prepare, and maintain for a period of
not less than 7 years, audit work papers, and
other information related to any internal audit
report, in sufficient detail to support the
conclusions reached in such report; and
(ii) provide a concurring or second
executive officer review and approval of such
audit report (and other related information),
and concurring approval in its issuance, by a
qualified person (as prescribed by the Board)
associated with the mutual fund, other than the
person in charge of the audit, or by an
independent reviewer (as prescribed by the Board); and
(B) shall include in the quality control standards
that it adopts with respect to the issuance of audit
reports, requirements applicable to every registered
mutual fund relating to--
(i) monitoring of professional ethics and
quality standards;
(ii) consultation within such mutual fund
on auditing questions;
(iii) supervision of internal audit work;
(iv) hiring, professional development, and
advancement of audit personnel;
(v) internal inspection; and
(vi) such other requirements as the Board
may prescribe, subject to paragraph (1).
(3) Authority to adopt other standards.--
(A) In general.--The Board--
(i) may adopt as its rules, subject to
section 206, any portion of any statement of
professional standards that the Board
determines satisfy the requirements of
paragraph (1), and that were proposed by 1 or
more professional groups that shall be
designated or recognized by the Board, by rule,
for such purpose, pursuant to this paragraph or
1 or more advisory groups convened pursuant to
paragraph (4); and
(ii) notwithstanding clause (i), shall
retain full authority to modify, supplement,
revise, or subsequently amend, modify, or
repeal, in whole or in part, any portion of any
statement described in clause (i).
(B) Initial and transitional standards.--The Board
shall adopt standards described in subparagraph (A)(i)
as initial or transitional standards, to the extent the
Board determines necessary, prior to a determination of
the Commission under section 201(d), and such standards
shall be separately approved by the Commission at the
time of that determination, without regard to the
procedures required by section 206 that otherwise would
apply to the approval of rules of the Board.
(4) Advisory groups.--The Board shall convene, or authorize
its staff to convene, such expert advisory groups as may be
appropriate, which may include representatives of the mutual
fund industry and other experts, as well as representatives of
other interested groups, subject to such rules as the Board may
prescribe to prevent conflicts of interest, to make
recommendations concerning the content (including proposed
drafts) of auditing, quality control, ethics, independence, or
other standards required to be established under this section.
(b) Independence Standards and Rules.--The Board shall establish
such rules ensuring compliance with section 10 of the Investment
Company Act of 1940, as may be necessary or appropriate in the public
interest or for the protection of investors.
(c) Cooperation With Designated Professional Groups of Mutual Funds
and Advisory Groups.--
(1) In general.--The Board shall--
(A) cooperate on an ongoing basis with professional
groups designated under subsection (a)(3)(A) and
advisory groups convened under subsection (a)(4) in the
examination of the need for changes in any standards
subject to its authority under subsection (a);
(B) recommend issues for inclusion on the agendas
of such designated professional groups or advisory
groups; and
(C) take such other steps as it deems appropriate
to increase the effectiveness of the standard setting
process.
(2) Board responses.--The Board shall respond in a timely
fashion to requests from designated professional groups and
advisory groups referred to in paragraph (1) for any changes in
standards over which the Board has authority.
(d) Evaluation of Standard Setting Process.--The Board shall
include in the annual report required by section 201(h) the results of
its standard setting responsibilities during the period to which the
report relates, including a discussion of the work of the Board with
any designated professional groups and advisory groups described in
paragraphs (3)(A) and (4) of subsection (a), and its pending issues
agenda for future standard setting projects.
SEC. 204. INSPECTIONS OF REGISTERED MUTUAL FUNDS.
(a) In General.--The Board shall conduct a continuing program of
inspections, at such intervals as are established under the rules of
the Board to assess the degree of compliance of each registered mutual
fund and associated persons of that mutual fund with this title, the
rules of the Board, the rules of the Commission, or professional
standards.
(b) Inspection Frequency.--
(1) In general.--Subject to paragraph (2), inspections
required by this section shall be conducted annually with
respect to each registered mutual fund that is the basis for
any difference between these 2 standards.
(2) Adjustments to schedules.--The Board may, by rule,
adjust the inspection schedules set under paragraph (1) if the
Board finds that different inspection schedules are consistent
with the purposes of this title, the public interest, and the
protection of investors.
(c) Procedures.--The Board shall, in each inspection under this
section, and in accordance with its rules for such inspections--
(1) identify any act or practice or omission to act by the
registered mutual fund, or by any associated person thereof,
revealed by such inspection that may be in violation of this
title, the rules of the Board, the rules of the Commission, the
quality control policies of the mutual fund, or professional
standards;
(2) report any such act, practice, or omission, if
appropriate, to the Commission and each appropriate State
regulatory authority; and
(3) begin a formal investigation or take appropriate
disciplinary action, if any, with respect to any such
violation, in accordance with this title and the rules of the
Board.
(d) Conduct of Inspections.--In conducting an inspection of a
registered mutual fund under this section, the Board shall--
(1) inspect and review internal audits performed by the
mutual fund;
(2) evaluate the sufficiency of the quality control system
of the mutual fund, and the manner of the documentation and
communication of that system by the mutual fund; and
(3) perform such other testing of the internal audit,
supervisory, and quality control procedures of the mutual fund
as are necessary or appropriate in light of the purpose of the
inspection and the responsibilities of the Board.
(e) Record Retention.--The rules of the Board may require the
retention by registered mutual funds for inspection purposes of
records, the retention of which is not otherwise required by section
203 or the rules issued thereunder.
(f) Procedures for Review.--
(1) Review and response.--The rules of the Board shall
provide a procedure for the review of and response to a draft
inspection report by the registered mutual fund under
inspection.
(2) Action on response.--The Board shall take such action
with respect to such response as it considers appropriate
(including revising the draft report or continuing or
supplementing its inspection activities before issuing a final
report, as appropriate). The text of any such response,
appropriately redacted to protect information reasonably
identified by the mutual fund as confidential, shall be
attached to and made part of the inspection report.
(g) Report.--A written report of the findings of the Board for each
inspection under this section, subject to subsection (h), shall be--
(1) transmitted, in appropriate detail, to the Commission
and each appropriate State regulatory authority, accompanied by
any letter or comments by the Board or the inspector, and any
letter of response from the registered mutual fund; and
(2) made available in appropriate detail to the public
(subject to section 205(b)(5)(A), and to the protection of such
confidential and proprietary information as the Board may
determine to be appropriate, or as may be required by law),
except that no portion of the inspection report that deals with
criticisms of or potential defects in the quality control
systems of the mutual fund under inspection shall be made
public if those criticisms or defects are addressed by the
mutual fund, to the satisfaction of the Board, not later than
12 months after the date of the inspection report.
(h) Interim Commission Review.--
(1) Reviewable matters.--A registered mutual fund may seek
review by the Commission, pursuant to such rules as the
Commission shall promulgate, if the mutual fund--
(A) has provided the Board with a response,
pursuant to rules issued by the Board under subsection
(f), to the substance of particular items in a draft
inspection report, and disagrees with the assessments
contained in any final report prepared by the Board
following such response; or
(B) disagrees with the determination of the Board
that criticisms or defects identified in an inspection
report have not been addressed to the satisfaction of
the Board within 12 months after the date of the
inspection report, for purposes of subsection (g)(2).
(2) Treatment of review.--Any decision of the Commission
with respect to a review under paragraph (1) shall not be
reviewable under section 25 of the Securities Exchange Act of
1934 (15 U.S.C. 78y), or deemed to be ``final agency action''
for purposes of section 704 of title 5, United States Code.
(3) Timing.--Review under paragraph (1) may be sought
during the 30-day period following the date of the event giving
rise to the review under subparagraph (A) or (B) of paragraph
(1).
SEC. 205. INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS.
(a) In General.--The Board shall establish, by rule, subject to the
requirements of this section, fair procedures for the investigation and
disciplining of registered mutual funds and associated persons of such
mutual funds.
(b) Investigations.--
(1) Authority.--In accordance with the rules of the Board,
the Board may conduct an investigation of any act or practice,
or omission to act, by a registered mutual fund, any associated
person of such mutual fund, or both, that may violate any
provision of this title, the rules of the Board, the provisions
of the securities laws relating to mutual funds, or
professional standards, regardless of how the act, practice, or
omission is brought to the attention of the Board.
(2) Testimony and document production.--In addition to such
other actions as the Board determines to be necessary, the
rules of the Board may--
(A) require the testimony of the registered mutual
fund or of any person associated with a registered
mutual fund, with respect to any matter that the Board
considers relevant or material to an investigation;
(B) require the production of audit work papers and
any other document or information in the possession of
a registered mutual fund or any associated person
thereof, wherever domiciled, that the Board considers
relevant or material to the investigation, and may
inspect the books and records of such mutual fund or
associated person to verify the accuracy of any documents or
information supplied;
(C) request the testimony of, and production of any
document in the possession of, any other person,
including any client of a registered mutual fund that
the Board considers relevant or material to an
investigation under this section, with appropriate
notice, subject to the needs of the investigation, as
permitted under the rules of the Board; and
(D) provide for procedures to seek issuance by the
Commission, in a manner established by the Commission,
of a subpoena to require the testimony of, and
production of any document in the possession of, any
person, including any client of a registered mutual
fund, that the Board considers relevant or material to
an investigation under this section.
(3) Noncooperation with investigations.--
(A) In general.--If a registered mutual fund or any
associated person thereof refuses to testify, produce
documents, or otherwise cooperate with the Board in
connection with an investigation under this section,
the Board may--
(i) suspend or bar such person from being
associated with a registered mutual fund, or
require the registered mutual fund to end such
association;
(ii) suspend or revoke the registration of
the mutual fund; and
(iii) invoke such other lesser sanctions as
the Board considers appropriate, and as
specified by rule of the Board.
(B) Procedure.--Any action taken by the Board under
this paragraph shall be subject to the terms of section
206(c).
(4) Referral.--The Board may refer an investigation under
this section--
(A) to the Commission; and
(B) at the direction of the Commission, to--
(i) the Attorney General of the United
States;
(ii) the attorney general of 1 or more
States; and
(iii) the appropriate State regulatory
authority.
(5) Use of documents.--
(A) Confidentiality.--Except as provided in
subparagraph (B), all documents and information
prepared or received by or specifically for the Board,
and deliberations of the Board and its employees and
agents, in connection with an inspection under section
204 or with an investigation under this section, shall
be confidential and privileged as an evidentiary matter
(and shall not be subject to civil discovery or other
legal process) in any proceeding in any Federal or
State court or administrative agency, and shall be
exempt from disclosure, in the hands of an agency or
establishment of the Federal Government, under the
Freedom of Information Act (5 U.S.C. 552a), or
otherwise, unless and until presented in connection
with a public proceeding or released in accordance with
subsection (c).
(B) Availability to government agencies.--All
information referred to in subparagraph (A) may, in the
discretion of the Board, when determined by the Board
to be necessary to accomplish the purposes of this
title or to protect investors, and without the loss of
its status as confidential and privileged in the hands
of the Board, be made available to the Commission, the
Attorney General of the United States, to State
attorneys general in connection with any criminal
investigation, and to any appropriate State regulatory
authority, which shall maintain such information as
confidential and privileged.
(6) Immunity.--Any employee of the Board engaged in
carrying out an investigation under this title shall be immune
from any civil liability arising out of such investigation in
the same manner and to the same extent as an employee of the
Federal Government in similar circumstances.
(c) Disciplinary Procedures.--
(1) Notification; recordkeeping.--The rules of the Board
shall provide that in any proceeding by the Board to determine
whether a registered mutual fund, or an associated person
thereof, should be disciplined, the Board shall--
(A) bring specific charges with respect to the
mutual fund or associated person;
(B) notify such mutual fund or associated person
of, and provide to the mutual fund or associated person
an opportunity to defend against, such charges; and
(C) keep a record of the proceedings.
(2) Public hearings.--Hearings under this section shall be
open to the public, unless otherwise ordered by the Board for
good cause shown.
(3) Supporting statement.--A determination by the Board to
impose a sanction under this subsection shall be supported by a
statement setting forth--
(A) each act or practice in which the registered
mutual fund, or associated person, has engaged (or
omitted to engage), or that forms a basis for all or a
part of such sanction;
(B) the specific provision of this title, the
securities laws, the rules of the Board, or
professional standards which the Board determines has
been violated; and
(C) the sanction imposed, including a justification
for that sanction.
(4) Sanctions.--If the Board finds, based on all of the
facts and circumstances, that a registered mutual fund or
associated person thereof has engaged in any act or practice,
or omitted to act, in violation of this title, the rules of the
Board, the provisions of the securities laws relating to the
preparation and issuance of audit reports and the obligations and
liabilities of accountants with respect thereto, including the rules of
the Commission issued under this title, or professional standards, the
Board may impose such disciplinary or remedial sanctions as it
determines appropriate, subject to applicable limitations under
paragraph (5), including--
(A) temporary suspension or permanent revocation of
registration under this title;
(B) temporary or permanent suspension or bar of a
person from further association with any registered
mutual fund;
(C) temporary or permanent limitation on the
activities, functions, or operations of such mutual
fund or person (other than in connection with required
additional professional education or training);
(D) a civil money penalty for each such violation,
in an amount equal to--
(i) not more than $100,000 for a natural
person or $2,000,000 for any other person; and
(ii) in any case to which paragraph (5)
applies, not more than $750,000 for a natural
person or $15,000,000 for any other person;
(E) censure;
(F) required additional professional education or
training; or
(G) any other appropriate sanction provided for in
the rules of the Board.
(5) Intentional or other knowing conduct.--The sanctions
and penalties described in subparagraphs (A) through (C) and
(D)(ii) of paragraph (4) shall only apply to--
(A) intentional or knowing conduct, including
reckless conduct, that results in violation of the
applicable statutory, regulatory, or professional
standard; or
(B) repeated instances of negligent conduct, each
resulting in a violation of the applicable statutory,
regulatory, or professional standard.
(6) Failure to supervise.--
(A) In general.--The Board may impose sanctions
under this section on a registered mutual fund or upon
the supervisory personnel of such mutual fund, if the
Board finds that--
(i) the mutual fund has failed reasonably
to supervise an associated person, either as
required by the rules of the Board relating to
auditing or quality control standards, or
otherwise, with a view to preventing violations
of this Act, the rules of the Board, the
provisions of the securities laws relating to
mutual funds, including the rules of the
Commission under this title, or professional
standards; and
(ii) such associated person commits a
violation of this title, or any of such rules,
laws, or standards.
(B) Rule of construction.--No associated person of
a registered mutual fund shall be deemed to have failed
to reasonably supervise any other person for purposes
of subparagraph (A), if--
(i) there have been established in and for
that mutual fund procedures, and a system for
applying such procedures, that comply with
applicable rules of the Board and that would
reasonably be expected to prevent and detect
any such violation by such associated person;
and
(ii) such person has reasonably discharged
the duties and obligations incumbent upon that
person by reason of such procedures and system,
and had no reasonable cause to believe that
such procedures and system were not being
complied with.
(7) Effect of suspension.--It shall be unlawful for any
person that is suspended or barred from being associated with a
registered mutual fund under this subsection willfully to
become or remain associated with any registered mutual fund, or
for any registered mutual fund that knew, or, in the exercise
of reasonable care should have known, of the suspension or bar,
to permit such an association, without the consent of the Board
or the Commission.
(d) Reporting of Sanctions.--
(1) Recipients.--If the Board imposes a disciplinary
sanction, in accordance with this section, the Board shall
report the sanction to--
(A) the Commission;
(B) any appropriate State regulatory authorities;
and
(C) the public (once any stay on the imposition of
such sanction has been lifted).
(2) Contents.--The information reported under paragraph (1)
shall include--
(A) the name of the sanctioned person;
(B) a description of the sanction and the basis for
its imposition; and
(C) such other information as the Board deems
appropriate.
(e) Stay of Sanctions.--
(1) In general.--Application to the Commission for review,
or the institution by the Commission of review, of any
disciplinary action of the Board shall operate as a stay of any
such disciplinary action, unless and until the Commission
orders (summarily or after notice and opportunity for hearing
on the question of a stay, which hearing may consist solely of
the submission of affidavits or presentation of oral arguments)
that no such stay shall continue to operate.
(2) Expedited procedures.--The Commission shall establish
for appropriate cases an expedited procedure for consideration
and determination of the question of the duration of a stay
pending review of any disciplinary action of the Board under
this subsection.
SEC. 206. COMMISSION OVERSIGHT OF THE BOARD.
(a) General Oversight Responsibility.--The Commission shall have
oversight and enforcement authority over the Board, as provided in this
title.
(b) Rules of the Board.--
(1) Definition.--In this section, the term ``proposed
rule'' means any proposed rule of the Board, and any
modification of any such rule.
(2) Prior approval required.--No rule of the Board shall
become effective without prior approval of the Commission in
accordance with this section, other than as provided in section
203(a)(3)(B) with respect to initial or transitional standards.
(3) Approval criteria.--The Commission shall approve a
proposed rule, if it finds that the rule is consistent with the
requirements of this title and the securities laws, or is
necessary in the public interest or for the protection of
investors.
(4) Proposed rule procedures.--The provisions of paragraphs
(1) through (3) of section 19(b) of the Securities Exchange Act
of 1934 (15 U.S.C. 78s(b)) shall govern the proposed rules of
the Board, as fully as if the Board were a ``registered
securities association'' for purposes of that section 19(b),
except that, for purposes of this paragraph--
(A) the phrase ``consistent with the requirements
of this title and the rules and regulations thereunder
applicable to such organization'' in section 19(b)(2)
of that Act shall be deemed to read ``consistent with
the requirements of title II of the Mutual Fund
Investor Protection Act of 2003, and the rules and
regulations issued thereunder applicable to such
organization, or as necessary in the public interest or
for the protection of investors''; and
(B) the phrase ``otherwise in furtherance of the
purposes of this title'' in section 19(b)(3)(C) of that
Act shall be deemed to read ``otherwise in furtherance
of the purposes of title II of the Mutual Fund Investor
Protection Act of 2003''.
(5) Commission authority to amend rules of the board.--The
provisions of section 19(c) of the Securities Exchange Act of
1934 (15 U.S.C. 78s(c)) shall govern the abrogation, deletion,
or addition to portions of the rules of the Board by the
Commission as fully as if the Board were a ``registered
securities association'' for purposes of that section 19(c),
except that the phrase ``to conform its rules to the
requirements of this title and the rules and regulations
thereunder applicable to such organization, or otherwise in
furtherance of the purposes of this title'' in section 19(c) of
that Act shall, for purposes of this paragraph, be deemed to
read ``to assure the fair administration of the Mutual Fund
Oversight Board, conform the rules promulgated by that Board to
the requirements of title II of the Mutual Fund Investor
Protection Act of 2002, or otherwise further the purposes of
that Act, the securities laws, and the rules and regulations
thereunder applicable to that Board''.
(c) Commission Review of Disciplinary Action Taken by the Board.--
(1) Notice of sanction.--The Board shall promptly file
notice with the Commission of any final sanction on any
registered mutual fund or on any associated person thereof, in
such form and containing such information as the Commission, by
rule, may prescribe.
(2) Review of sanctions.--The provisions of sections
19(d)(2) and 19(e)(1) of the Securities Exchange Act of 1934
(15 U.S.C. 78s (d)(2) and (e)(1)) shall govern the review by
the Commission of final disciplinary sanctions imposed by the
Board (including sanctions imposed under section 205(b)(3) of
this title for noncooperation in an investigation of the
Board), as fully as if the Board were a self-regulatory
organization and the Commission were the appropriate regulatory
agency for such organization for purposes of those sections
19(d)(2) and 19(e)(1), except that, for purposes of this
paragraph--
(A) section 205(e) of this title (rather than that
section 19(d)(2)) shall govern the extent to which
application for, or institution by the Commission on
its own motion of, review of any disciplinary action of
the Board operates as a stay of such action;
(B) references in that section 19(e)(1) to
``members'' of such an organization shall be deemed to
be references to registered mutual funds;
(C) the phrase ``consistent with the purposes of
this title'' in that section 19(e)(1) shall be deemed
to read ``consistent with the purposes of this title
and title II of the Mutual Fund Investor Protection Act
of 2002'';
(D) references to rules of the Municipal Securities
Rulemaking Board in that section 19(e)(1) shall not
apply; and
(E) the reference to section 19(e)(2) of the
Securities Exchange Act of 1934 shall refer instead to
section 206(c)(3) of this title.
(3) Commission modification authority.--The Commission may
enhance, modify, cancel, reduce, or require the remission of a
sanction imposed by the Board upon a registered mutual fund or
associated person thereof, if the Commission, having due regard
for the public interest and the protection of investors, finds,
after a proceeding in accordance with this subsection, that the
sanction--
(A) is not necessary or appropriate in furtherance
of this title or the securities laws; or
(B) is excessive, oppressive, inadequate, or
otherwise not appropriate to the finding or the basis
on which the sanction was imposed.
(d) Censure of the Board; Other Sanctions.--
(1) Rescission of board authority.--The Commission, by
rule, consistent with the public interest, the protection of
investors, and the other purposes of this title and the
securities laws, may relieve the Board of any responsibility to
enforce compliance with any provision of this title, the
securities laws, the rules of the Board, or professional
standards.
(2) Censure of the board; limitations.--The Commission may,
by order, as it determines necessary or appropriate in the
public interest, for the protection of investors, or otherwise
in furtherance of the purposes of this title or the securities
laws, censure or impose limitations upon the activities,
functions, and operations of the Board, if the Commission
finds, on the record, after notice and opportunity for a
hearing, that the Board--
(A) has violated or is unable to comply with any
provision of this title, the rules of the Board, or the
securities laws; or
(B) without reasonable justification or excuse, has
failed to enforce compliance with any such provision or
rule, or any professional standard by a registered
mutual fund or an associated person thereof.
(3) Censure of board members; removal from office.--The
Commission may, as necessary or appropriate in the public
interest, for the protection of investors, or otherwise in
furtherance of the purposes of this title or the securities
laws, remove from office or censure any member of the Board, if
the Commission finds, on the record, after notice and
opportunity for a hearing, that such member--
(A) has willfully violated any provision of this
title, the rules of the Board, or the securities laws;
(B) has willfully abused the authority of that
member; or
(C) without reasonable justification or excuse, has
failed to enforce compliance with any such provision or
rule, or any professional standard by any registered
mutual fund or any associated person thereof.
SEC. 207. FUNDING.
(a) In General.--The Board shall be funded as provided in this
section.
(b) Annual Budgets.--The Board shall establish a budget for each
fiscal year, which shall be reviewed and approved according to
procedures established by the Board, not less than 1 month prior to the
commencement of the fiscal year to which the budget pertains. The
budget of the Board shall be subject to approval by the Commission.
(c) Sources and Uses of Funds.--The budget of the Board (reduced by
any registration or annual fees received under section 202(e) for the
year preceding the year for which the budget is being computed), for
each fiscal year shall be payable from annual support fees, in
accordance with subsection (d).
(d) Annual Support Fee for the Board.--
(1) Establishment of fee.--The Board shall establish, with
the approval of the Commission, a reasonable annual support fee
(or a formula for the computation thereof), as may be necessary
or appropriate to establish and maintain the Board.
(2) Assessments.--The rules of the Board under paragraph
(1) shall provide for the equitable allocation, assessment, and
collection by the Board (or an agent appointed by the Board) of
the fee established under paragraph (1), among mutual funds, in
accordance with subsection (f), allowing for differentiation
among classes of mutual funds, as appropriate.
(e) Allocation of Support Fees Among Mutual Funds.--Any amount due
from mutual funds (or a particular class of mutual funds) under this
section to fund the budget of the Board shall be allocated among and
payable by each mutual fund (or each mutual fund in a particular class,
as applicable) in an amount equal to the total of such amount,
multiplied by a fraction--
(1) the numerator of which is the average monthly equity
market capitalization of the mutual fund for the 12-month
period immediately preceding the beginning of the fiscal year
to which such budget relates; and
(2) the denominator of which is the average monthly equity
market capitalization of all such mutual funds for such 12-
month period.
(f) Rule of Construction.--Nothing in this section shall be
construed to render the Board subject to procedures in Congress to
authorize or appropriate public funds, or to prevent such organization
from utilizing additional sources of revenue for its activities, such
as earnings from publication sales, provided that each additional
source of revenue shall not jeopardize, in the judgment of the
Commission, the actual and perceived independence of such organization.
SEC. 208. NO PREEMPTION OF STATE SECURITIES ACTIONS.
No action taken by the Mutual Fund Oversight Board shall preempt
any State securities investigation or enforcement action, or any State
law, regulation, order, interpretation, or other action related to
corporate governance or antitrust, provided such corporate governance
or antitrust law, regulation, order, interpretation, or other action is
of general applicability.
SEC. 209. ARBITRATION OF INVESTOR CLAIMS IN AN INDEPENDENT FORUM.
Not later than 270 days after the date of enactment of this Act,
the Commission shall prescribe rules under the Securities Act of 1933,
the Securities Exchange Act of 1934, the Investment Company Act of
1940, and the Investment Advisers Act of 1940, as appropriate, to be
adopted by the Commission, any self-regulatory organization, or both,
requiring that complainants who bring claims under such Acts shall have
the option, at the time the complaint is filed, to have any arbitration
of that complaint held in an independent arbitration forum the
complainant chooses.
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