Thursday, June 17, 2010

Senate Agrees to a Number of House Proposals on Financial Reform

At the House-Senate conference commitee yesterday on financial reform legislation, theSenate agreed with the House proposals below and these provisions are now part of the conference bill

Add the House provision requiring the SEC to study the need for enhanced examination and enforcement resources for investment advisers. (House § 7107)

Amend the Senate whistleblower provision so that the confidentiality provision is more narrow, covering just information that could reasonably be expected to reveal the identity of the whistleblower, not all information provided to the SEC by the whistleblower (Senate § 922)

Amend the Senate provision on production of documents by foreign auditing firms to broaden and clarify the type of work that triggers the obligation to produce work papers, and to ensure that foreign firms appoint an agent not only for service of process, but also for SEC document requests. (Senate § 929J


Amend the Senate provisions to make clear that recklessness satisfies the intent standard for aiding and abetting liability in SEC enforcement actions under the Securities Act of 1933 and the Investment Company Act. (Senate § 929M).

Add the House provision clarifying that recklessness satisfies the intent standard for aiding and abetting liability in SEC enforcement actions under the Securities Exchange Act of 1934. (House § 7215)

Amend the Senate provisions to make clear that recklessness satisfies the intent standard for aiding and abetting liability in SEC enforcement actions seeking penalties under the Investment Advisers Act. (Senate § 929N,


Add the House provision, as drafted in the Reed amendment, authorizing the SEC to seek civil penalties in cease and desist proceedings against any person, not only registrants. (House § 7211, p. 1317; Reed § 922(b))

Add the House provision, as drafted in the Reed amendment, extending the SEC’s enforcement jurisdiction to cover significant steps in furtherance of a violation, even if the securities transactions occur outside the U.S., and to cover foreign conduct that has a foreseeable substantial effect with the U.S. (House § 7216, p. 1332; Reed § 922(d))

Add the House provision, as drafted in the Reed amendment, clarifying that control person liability under the Section 20(a) of the Securities Exchange Act applies in SEC enforcement actions, not only in private actions. (House § 7220, p. 7220; Reed § 922(e))

Add the House provision, as drafted in the Reed amendment, expanding recordkeeping and examination requirements for custodians who hold property of clients of investment companies or investment advisers. (House § 7106, p. 1287; Reed 993(a))

Add the House provision, as drafted in the Reed amendment, giving the SEC authority to adopt rules that would require more timely reporting when a person acquires more than 5% ownership interest in an issuer. (House § 7105, p. 1285; Reed § 995(a))


Add the House provision, as drafted in the Reed amendment, extending the fingerprinting requirement to personnel of national securities exchanges and national securities associations. (House § 7403, p. 1350; Reed 995(e))

Add the House provision that invalidates any contractual provision requiring persons to waive compliance with any self-regulatory organization rules. (House § 7404)

Add the House provision requiring the SEC to complete investigations and examinations within certain time frames, subject to exceptions for complex cases. (House § 7209)

Add the House provision increasing the assessments on SIPC members from $150 annually to .02% of the member’s gross revenues derived from the securities business. (House § 7501)

Add the House provision increasing penalties for fraud under SIPA from $50,000 to $250,000. (House § 7507)

Add the House provision establishing civil and criminal penalties against any person who misrepresents membership in SIPC or who falsely claims that an account is protected under SIPA. (House § 7508)

Add the House provision enhancing notice to missing security holders. (House § 7421

Add the House provision requiring the SEC to hire a consultant to study the SEC’s operations and the possible need for comprehensive reform of the agency. (House § 7304,)

Add the House provision requiring GAO to study issues surrounding employees who leave the SEC and become employed in the securities industry. (House § 7414,)

Strike the Senate provision deferring by 180 days the effective date of the PCAOB’s right to assess fees on broker-dealers, to reflect the PCAOB’s calendar fiscal year. (Senate § 982,)


Add a provision requiring agency heads, including the Chair of the SEC, to address deficiencies identified in any Inspector General report, or certify to both Houses of Congress that no action is necessary. (House § 3303)

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