Compliance, Examinations, and Inspections Restructuring Act of 2005 - Amends the Securities Exchange Act of 1934 to vest the inspections and examinations authority of the Securities and Exchange Commission (SEC) in those administrative divisions or offices to which the SEC has delegated its administrative responsibilities.
Requires the subject of an SEC inquiry or inspection to be notified in writing at least every 120 days regarding the status of an ongoing proceeding.
Requires an SEC administrative division or office to obtain permission to conduct a sweep examination in the same manner and subject to the same procedures as SEC enforcement divisions or offices must follow in conducting a formal investigation or inquiry of registered entities.
Instructs the Chairman of the SEC to appoint an Ombudsman with respect to any problems resulting from SEC regulatory activities.
Expresses the sense of Congress that the SEC should develop and publish guidelines setting forth explicitly the benefit to either an issuer of securities or a registered entity if it self-reports an apparent violation of law, and subsequently becomes the respondent in an SEC civil injunctive action or administrative proceeding regarding the matter that was self-reported.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4618 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 4618
To amend the Securities Exchange Act of 1934 to establish rules and
procedures for the delegation of compliance and inspections authority
to the operating divisions of the Securities and Exchange Commission,
and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
December 17, 2005
Mr. Fossella (for himself and Mr. Castle) introduced the following
bill; which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To amend the Securities Exchange Act of 1934 to establish rules and
procedures for the delegation of compliance and inspections authority
to the operating divisions of the Securities and Exchange Commission,
and for other purposes.
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 ``Compliance, Examinations, and
Inspections Restructuring Act of 2005''.
SEC. 2. ORGANIZATION AND CONDUCT OF THE DIVISIONS AND OFFICES OF THE
SECURITIES AND EXCHANGE COMMISSION.
Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d)
is amended by adding at the end the following new subsections:
``(g) Divisions and Offices of the Commission.--
``(1) Compliance, inspections, and examinations.--The
authority that the Commission has to conduct inspections and
examinations of registered brokers or dealers (15 U.S.C.
78q(b)), registered investment companies (15 U.S.C. 80a-30(b)),
and registered investment advisers (15 U.S.C. 80b-4) shall be
vested in the administrative divisions or offices to which the
Commission has delegated pursuant to section 4A of this Act the
authority to administer its responsibilities under this Act,
the Investment Company Act of 1940 (15 U.S.C. 80a), and the
Investment Advisers Act of 1940 (15 U.S.C. 80b). The Commission
shall report to Congress pursuant to section 21(a) of this Act
no less frequently than every 5 years from the enactment of
this subsection, and shall in that report state its views on
the continuing efficacy, effectiveness, and efficiency of
requiring the administrative divisions or offices to conduct
inspections and examinations of registered brokers or dealers,
registered investment companies, and registered investment
advisers.
``(2) Closure of open matters.--Not less frequently than
every 120 days during a period in which an enforcement division
or office of the Commission with respect to a formal or
informal inquiry, or an administrative division or office of
the Commission with respect to an inspection or examination, is
conducting an inquiry or inspection, that division or office
shall notify in writing the person who is the subject of that
inquiry or inspection to inform such person of the status of
the inquiry or inspection. When that division or office has
completed its inquiry or inspection, that division or office
shall, within 10 days of completing that inquiry or inspection,
notify in writing the person who was the subject of that
inquiry or inspection that the inquiry or inspection has been
completed.
``(3) Sweep examinations or inspections.--
``(A) Notice and approval.--Before an
administrative division or office of the Commission may
conduct an inspection of registered brokers or dealers,
registered investment companies, or registered
investment advisers, it shall provide written
notification in such form determined by the Chairman.
Before an administrative division or office of the
Commission may conduct a sweep examination of
registered brokers or dealers, registered investment
companies, or registered investment advisers, it shall
seek authority from the Commission to conduct such a
sweep examination or inspection in the same manner and
subject to the same procedures that the enforcement
divisions or offices of the Commission must follow in
seeking the authority to conduct a formal investigation
or inquiry regarding a registered brokers or dealer, a
registered investment company, or a registered
investment adviser.
``(B) Content.--An administrative division or
office of the Commission shall confine the content of a
sweep examination or inspection to those existing books
and records that the registered broker or dealer,
registered investment company, or registered investment
adviser is required to keep and maintain under
applicable rules and regulations, and may not require
the creation of a new document or the calculation or
presentation of data that is not required to be kept or
maintained under applicable rules and regulations.
``(4) Definitions.--For purposes of this subsection, the
following definitions shall apply:
``(A) Confidential communication.--The term
`confidential communication' shall mean any transfer of
information, regardless of the form or format in which
the information is communicated to an officer or
employee of a compliance and inspections office, about
a registered broker or dealer, registered investment
company, or registered investment adviser by an officer
or employee of a registered broker or dealer,
registered investment company, or registered investment
adviser regarding whether the broker or dealer,
investment company, or investment adviser is in
compliance with applicable provisions of this Act, the
Securities Act of 1933, the Investment Company Act of
1940, or the Investment Advisers Act of 1940, wherein
the officer or employee transferring such information
reasonably believes in good faith that the information
being communicated to an officer or employee of a
compliance and inspections office of the Commission--
``(i) is not information required to be
made publicly available by any applicable
Federal law or regulation; or
``(ii) is information regarding any book,
record, or other information in the possession
of, or maintained on behalf of, the registered
broker or dealer, registered investment
company, or registered investment adviser that
is subject to the examination and inspection
authority of the Commission.
``(B) Sweep examination.--Not later than 60 days
after the date of enactment of this subsection, the
Commission shall define the term `sweep examination'
for purposes of this subsection.
``(C) Enforcement division.--The term `enforcement
division' means the divisions or offices to which the
Commission has delegated pursuant to section 4A of this
Act the authority to investigate and to enforce the
provisions of this Act, the Investment Company Act of
1940 (15 U.S.C. 80a-41), and the Investment Advisers
Act of 1940 (15 U.S.C. 80b-9).
``(h) Ombudsman.--
``(1) Appointment.--Not later than 180 days after the date
of enactment of this section, the Chairman of the Securities
and Exchange Commission shall appoint an Ombudsman who shall
report directly to the Chairman.
``(2) Duties of ombudsman.--The Ombudsman appointed under
subsection (a) shall--
``(A) ensure safeguards exist to encourage persons
who are issuers registered brokers or dealers,
registered investment companies, or registered
investment advisers to present questions to the
Commission regarding compliance with the securities
laws;
``(B) maintain privilege of confidential
communications between such persons and the Ombudsman;
``(C) advise and guide such persons through the
process of self-reporting, ensuring appropriate and due
credit is given to the registrant upon self-reporting;
and
``(D) act as a liaison between the agency and such
persons with respect to any problem such registrant may
have in dealing with the agency resulting from the
regulatory activities of the agency.
``(3) Limitation.--In carrying out the duties under
paragraph (1), the Ombudsman shall utilize personnel of the
Commission to the extent practicable. Nothing in this section
is intended to replace, alter, or diminish the activities of
any ombudsman or similar office in any other agency.
``(4) Disclosure of confidential communications.--
Notwithstanding any other provision of this subsection, in
those circumstances where the most senior officer of the
enforcement division or office of the Commission has made a
formal recommendation in writing to the Commission that it
exercise its authority in section 21(d)(1) to seek an
injunction against a registered broker or dealer, its authority
in section 42(d) of the Investment Company Act of 1940 to seek
an injunction against a registered investment company, or its
authority in section 209(d) of the Investment Advisers Act of
1940 to seek an injunction against a registered investment
adviser, the Ombudsman or an employee of the Ombudsman shall
disclose to the officers and employees of any other division or
office any confidential communications received from an officer
or employee of a registered broker or dealer, a registered
investment company, or a registered investment adviser pursuant
to the provisions of Section 24(b).
``(5) Report.--Each year, the Ombudsman shall submit a
report to the Commission for inclusion in the annual report
that describes the activities, and evaluates the effectiveness
of the Ombudsman during the preceding year. In that report, the
Ombudsman shall include solicited comments and evaluations from
registrants in regards to the effectiveness of the
Ombudsman.''.
SEC. 3. SENSE OF CONGRESS.
It is the sense of Congress that the Securities and Exchange
Commission should develop and publish guidelines setting forth
explicitly the benefit that an issuer the securities of which are
registered under section 12 of the Securities Exchange Act of 1934, a
registered broker-dealer, a registered investment company, or a
registered investment adviser shall receive if it self-reports to an
administrative division or office of the Commission or to an
enforcement division or office of the Commission an apparent violation
of law, rules, or regulations applicable to it and is subsequently the
respondent in a civil injunctive action or administrative proceeding
brought by the Commission with respect to the matter that was self-
reported.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Referred to the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.
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